is the opportunity for companies and countries to trade emissions permits using the free-market system. In this way, companies or countries can purchase less expensive emissions permits from companies or countries that have more permits than they need, which is not only economically sensible, but environmentally sound. One of the members of the committee just said that things always seem to cost more. That's not the case. Indeed, we have a very positive experience with permit trading in our Acid Rain program. And, as a result, costs are 50 percent less than what was anticipated when that program was first proposed because we're using a market-based mechanism, and this is a figure confirmed by a number of experts and a recent Wall Street Journal article. So, the inclusion of these market-based mechanisms and the right to trade in the open market was a signal victory for the United States. Let me be very clear: The commitment we made in Kyoto would not have been made, and could not have been made, were it not for the flexibility that these mechanisms give us. Until we are satisfied with the rules and procedures, the promise of Kyoto will never be realized. Our third objective was to secure meaningful participation of key developing countries. This is, obviously, a concern that the Congress shares. Global warming is, after all, a global problem. It requires a global solution and not only from developed, but also from key developing countries. By 2025, the developed world will be emitting less greenhouse gases and the developing world will be emitting more than the total of the developed world. We clearly encountered significant resistance in Kyoto by some developing countries, and Mr. Dingell and Chairman Schaefer indicated that. Still, developing countries may, as a prerequisite for engaging an emissions trading, voluntarily assume emissions targets through amendments to the Annex of the Protocol and, as I'll indicate, we also got a significant down payment. Kyoto does not meet our requirements for developing country participation, but that significant down payment shouldn't be ignored. It was made in the form of a provision advocated by Brazil and strongly backed by the United States. It is a clean developing mechanism which fully embraces our concept of joint implementation with credits. This joint implementation with credits will build a bridge, with incentives in the free market, between developed countries and developing nations. It will allow companies in the United States and elsewhere in the developed world to invest in projects abroad and get credits against their targets at home, again, lowering the burden on U.S. industry by allowing this kind of participation. It's good for the developing countries. It will engage them. And, it's good for the developed world. Our companies can either invest or they can simply purchase the permits. In determining what developing countries ought to do, of course, we need to be aware that their circumstances may vary. Any onesize-fits-all approach to meaningful participation is unlikely to prevail. A third broad point is to correct misperceptions. I'll deal with two of those, although there are many, and perhaps in the question period, I can deal with others. The first is that the Protocol somehow will imperil the ability of our military to meet its worldwide responsibilities. This is absolutely, totally untrue. We took special pains working with the Defense Department and with our uniformed military, who were present with me in Kyoto, both before and in Kyoto, to fully protect the unique position of the United States as the world's only superpower with global military responsibilities. We achieved everything they outlined as necessary to protect operations. At Kyoto, the parties, for example, took a decision to exempt key overseas military activities from any emissions targets, including exemptions from bunker fuels used in international aviation and maritime transport, and from emissions resulting from multilateral operations, including self-defense, peacekeeping and humanitarian relief. This exempts from our national targets, not only multilateral operations expressly authorized by the security counsel of the United Nations, such as Desert Storm or Bosnia, but importantly, also exempts multilateral operations that the United States initiates pursuant to the charter, but without express authorization, such as Grenada. Secretary of Defense Cohen wrote in a recent letter to Congressperson Bauchus that "based on achieving our international objectives, the Department is fully satisfied with the Kyoto results." A second misconception is somehow this Protocol will create a super-U.N.-secretariat threatening our sovereignty and decisionmaking through alleged intrusive verification procedures and prior approval of individual emissions trades. That's also not true. The review process and the Protocol largely codifies already existing practices under the 1992 Rio Convention. The review process is not by a secretariat, it's intergovernmental with experts nominated by governments. The review teams meet with government officials and others by invitation. Site visits takes place only, and I underscore only, if approved by the host country, including, of course, the United States, and only if the private sector involved agrees to it. The notion that, somehow, people are going to be swooping down on U.S. private property is utterly, completely and totally false. Let me be unmistakably clear, in addition, we will not accept, nor do we anticipate an approach, that would require prior approval of individual emissions trades by any international body. Trading will be done between interested nations and their companies based on market principle. Last, where do we go from here. First, rules and procedures must be adopted to assure that trading rights, joint implementation, and the clean development mechanism operate smoothly and efficiently, and we will be working, as we're already doing, with our industries to be sure they're satisfied for they are the ones who will have to make this operate. We'll also have to work to secure the meaningful participation of key developing countries. We will put on a full court diplomatic press to bring developing nations into a meaningful role. We'll accept nothing less, nor do we expect the U.S. Congress to do so. As the President has said, the U.S. should not assume, and we will not assume, binding obligations under the Protocol until key developing countries meaningfully participate in meeting the challenge of climate change. More progress is clearly necessary. It would, obviously, be premature to submit something to the Senate when the Senate itself has asked for this kind of participation and we haven't yet achieved it. That's the great obligation we have to assume over the coming months, and if necessary, years. Let me further say, however, that to lock in the progress we've made thus far with the developed countries, we anticipate signing the Protocol within the 1 year period provided in the agreement. We have not, as yet, determined the precise timing due to tactical considerations. We'll sign at a time that makes the most sense in terms of the overall diplomatic situation. The President outlined, last October, an approach. The first part of which involves, as he said in his State of Union, a $6.3 billion climate change technology over 5 years to cut greenhouse gas emissions. This will mean tax cuts and R&D incentives to take practical, cost-effective steps to position ourselves to meet the challenge we will face early in the next century. In closing, we're committed to work with you and the Congress to realize the potential of the Climate Change Technology Initiative and the craft our ongoing approach. But, we cannot ignore what the science is telling us. We would do so at our peril. What we're looking for, again, is a kind of insurance policy that we can afford. One that is prudent. But one in which if we failed to act, if we failed to recognize what science is telling us, will be infinitely more costly to do in the future. Thank you. [The prepared statement of Stuart E. Eizenstat follows:] PREPARED STATEMENT OF STUART E. EIZENSTAT, UNDER SECRETARY OF STATE FOR ECONOMIC, BUSINESS AND AGRICULTURAL AFFAIRS Thank you, Mr. Chairman. At the outset, let me thank those members of Congress, in this chamber and in the House of Representatives, who participated with us in the Kyoto Conference and who lent their advice and support to our efforts there. Rarely has there been an environmental issue more important or complex than global warming, and rarely has there been a greater need for the Executive Branch and the Congress to work closely together. It is with great pleasure that I appear here today to explain the Administration's position on global warming. To this end, I will divide my testimony into four parts: (1) a short discussion of the science the driving force for all the efforts we have taken to date to mitigate a significant and growing global environmental problem; (2) a discussion of the results of the recent Kyoto Conference and key features of the Kyoto Protocol; (3) an effort to correct misperceptions; and (4) a brief review of the President's Climate Change Technology Initiative. I hope to leave you with a clear understanding of why we believe that it is necessary to act, of how we intend to proceed internationally, and of what the President plans to do here at home. The Science Human beings are changing the climate by increasing the global concentrations of greenhouse gases such as carbon dioxide, methane and nitrous oxide. Burning coal, oil and natural gas to heat our homes, power our cars and illuminate our cities produces carbon dioxide and other greenhouse gases as by-products-more than 6 billion metric tons worth of carbon in the form of carbon dioxide annually. Similarly, deforestation and land clearing also release significant quantities of such gases-another 1 to 2 billion tons a year. Over the last century, greenhouse gases have been released to the atmosphere faster than natural processes can remove them. There is no ambiguity in the data; since 1860, concentrations of carbon dioxide have risen 30 percent, from 280 parts per million (ppm) to 365 ppm. In December 1995, the authoritative Intergovernmental Panel on Climate Change (IPCC), representing the work of more than 2,000 of the world's leading climate change scientists from more than 50 countries, concluded that "the balance of evidence suggests that there is a discernible human influence on global climate." The IPCC Assessment represents the best synthesis of the science of climate change. It concludes: • Concentrations of greenhouse gases could exceed 700 ppm by 2100 under "business as usual”-levels not seen on the planet for 50 million years. The projected temperature increase of 2 to 6.5 degrees Fahrenheit over the next 100 years, could exceed rates of change for the last 10,000 years. For perspective, while there is some uncertainty, tropical sea surface temperatures in the last ice age were anywhere from 2 to 9 degrees Fahrenheit cooler than today. • Increased temperatures are expected to speed up the global water cycle and exacerbate weather extremes. Faster evaporation will lead to a drying of soils and in some areas increased drought. Overall, however, due to the faster global cycling of water, there will be an increase in precipitation. Sea levels are expected to rise between 6 and 37 inches over the next century. A 20 inch sea level rise could double the global population at risk from storm surges from roughly 45 million to over 90 million, even if coastal populations do not increase. Low-lying areas are particularly vulnerable (e.g., much of coastal Louisiana and the Florida Everglades). Human health is likely to be affected. Warmer temperatures will increase the chances of heat waves (like the Chicago event in 1995 that killed over 400 people) and can exacerbate air quality problems such as smog, and lead to an increase in allergic disorders. Diseases that thrive in warmer climates, such as dengue fever, malaria, yellow fever, encephalitis, and cholera are likely to spread due to the expansion of the range of disease carrying organisms. By 2100, there could be an additional 50-80 million cases of malaria each year. • Agriculture, forests, and natural ecosystems are also likely to be affected. The poorest countries, already subject to food production and distribution problems, will likely suffer the greatest agricultural impacts. Doubling current carbon dioxide concentrations could lead to a dramatic change in the geographic distribution of one-third of the Earth's forests. (For example, the ideal range of some North American forest species would shift by as much as 300 miles to the north in the next 100 years-far faster than their ability to migrate on their own.) Such changes could have profound effects on parks and wildlife refuges, and lead to a reduction in species diversity. What Changes Have We Seen to Date? The earth's temperature is increasing: Scientists from our National Oceanic and Atmospheric Administration (NOAA), the U.K. Meteorological Office and the National Aeronautics and Space Administration (NASA) all recently announced that 1997 was the warmest year on record. In fact, nine of the last 11 years are among the warmest ever recorded. The water cycle of the planet may be speeding up: Since the beginning of the century, NOAA estimates that precipitation in the United States has increased by about 5-10 percent, while the frequency of heavy downpours (where more than 2 inches fall in a day) has increased by about 20 percent. The United States has had many recent reminders of how costly extreme events can be: the Mississippi flooding of 1993 led to damages of between $10 and $20 billion; the Southern Plains drought of 1996 was estimated to cost $4 billion; and the Northwest floods of 1996-97 about $3 billion. We have yet to learn what the current floods in California will cost. While no single event can be attributed to global warming, increases in floods and droughts are expected as global warming occurs. Action Needed Now Some have argued that we can wait to act until all the details of the climate system have been fully understood. The science tells us that this is a recipe for disaster. We will only fully confirm predictions when we experience them. At that point it will be too late. The concentrations of greenhouse gases in the atmosphere continue to rise each year, and because these gases will persist for many decades to centuries, this problem is only slowly reversed. The earth will continue to warm and the seas continue to rise as long as we continue to load the entire atmosphere of the earth with greenhouse gases. The problem has developed over the course of a century and it will take many decades to solve. Already, we have another 1.0 degree Fahrenheit of warming in the pipeline from emissions that have previously occurred, so some impacts will happen no matter what actions we take. Nevertheless, we can still forestall many others if we begin taking cost-effective actions now. We should look at the Kyoto Protocol as an insurance policy against the potentially devastating and irreversible impacts of global warming. This insurance policy is fully justified today, based solely on our current understanding of the science. If we act now the premium will be far more reasonable than if we delay and hope the problem created by greenhouse gases will go away. It is like a life insurance policy whose costs grow significantly if we delay year after year insuring ourselves. But there is a critical difference in the case of the climate system. In most insurance policies, the loser can be made whole-restitution is possible; the building can be rebuilt, the stolen car replaced, the fire or flood damage repaired. In the case of global warming, we will not have a second chance-failure to act will lead to irreversible consequences. We will be committing ourselves, our children and our grandchildren to a very different planet, and they will never forgive us. But the premium for this insurance policy must be reasonable. For this reason we rejected unrealistic targets in Kyoto; we insisted on full recourse to marketmechanisms; and we opposed mandatory policies and measures like carbon taxes. The totality of our scientific information, including that on vulnerability and impacts of global warming, provides a compelling reason to act. Let me now turn to the recent Kyoto Conference. Kyoto Protocol Last December in Kyoto, Japan, the nations of the world reached agreement on an historic step to control greenhouse gas emissions which cause global warming. No sooner had the negotiating session ended, however, than some critics on both ends of the political spectrum, without a full examination of the results achieved, denounced the agreement as either too little too late or too much too soon. In fact, the Kyoto Protocol, reached only through the exercise of vigorous American leadership, represents an important achievement in the best interests of the United States. But it is a framework for action, a work in progress, not a finished product ready for Senate consideration. U.S. Negotiating Objectives In order to secure an effective agreement that is environmentally strong and economically sound, while protecting the unique worldwide interests of the U.S. military, President Clinton and Vice President Gore established three major objectives. As a result of the Kyoto negotiations, we achieved the first two-realistic targets and timetables for reducing greenhouse gas emissions among the world's major industrial nations, which fully protect the unique role of our military in its global reach; and flexible market-based mechanisms for achieving those targets cost-effectively. The third, meaningful participation of developing countries, will be the focus of our work in the coming months and years, but with the Kyoto Protocol we have made an important down payment. Elements of the Kyoto Protocol and Related Decisions Our first objective-realistic targets and timetables among developed countries— had to be a credible step in reducing the dangerous buildup of greenhouse gases, yet measured enough to safeguard U.S. prosperity at home and competitiveness abroad. In the end, we secured the key elements of the President's proposal on targets and timetables, often over the initial objections of the European Union and other developed countries. The agreement and related decisions include: • The U.S. concept of a multi-year time frame for emissions reductions rather than a fixed, single-year target. The multi-year time frame will allow the United States, other nations and our industries greater flexibility in meeting our targets. Averaging over five years, instead of requiring countries to meet a specific target each year, can lower costs, especially given an uncertain future. The averaging can smooth out the effects of short-term events such as fluctuations in the business cycle and energy demand, or hard winters and hot summers that would increase energy use and emissions. • The U.S. specific time frame of 2008-2012, rather than earlier periods preferred by the European Union and others, giving us more time to phase in change gradually and deploy new technologies cost-effectively, and thereby to cushion the effects on our businesses and workers. • Differentiated targets for the key industrial powers ranging from 6% to 8% below baseline levels (1990 and 1995) of greenhouse gas emissions, with the United States agreeing to a 7% reduction. When changes in the accounting rules for certain gases and offsets for activities that absorb carbon dioxide are factored in, the level of effort required of the United States is quite close to the President's original proposal to return emissions to 1990 levels by 2008-2012, representing at most a 3 percent real reduction below that proposal, and perhaps less. • An innovative proposal shaped in part by the United States, allowing certain activities, such as planting trees, that absorb carbon dioxide called "sinks"- to be offset against emissions targets. This will both promote cost-effective solu |