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Barriers to Energy Efficiency

Q2.

Your testimony says that the Administration is "committed to working to remove barriers to expanded markets for existing energy-efficient technologies.” Please specify the barriers that prevent application of energyefficient technologies.

A2.

Barriers to expanding markets for existing technologies to their fullest potential can exist because of a lack of information or education on the part of the purchaser, insufficiently strong price signals, and monopolistic or anti-competitive conditions. Consumers especially may overlook cost saving innovations because they do not have readily available information and time to thoroughly investigate the energy efficiency of every purchase item. This appears to be the problem, for example, in appliance purchases where the emphasis is often on replacing the broken equipment as quickly as possible. Even firms which pay close attention to their "bottom-lines” may fail to adopt more efficient technologies if the prices of less efficient technological alternatives do not fully reflect the social or external costs they impose in the form of higher levels of emissions. Finally, a new technology may fail to succeed because the market power of the dominant firms is great enough to prevent its adoption.

What Will an Agreement Accomplish for the Environment?

Q3.

We have received testimony that the Administration's proposal , if adopted, would have only a marginal impact on reducing global warming, even assuming the models are correct. Given that Administration officials have made remarkable claims about the deleterious effects of global warming, why didn't the Administration propose deeper cuts in emissions? Is the Administration trying to have it both ways?

A3.

Global warming is a long-term problem that requires a long-term response. As suggested by your question, a further response that involves all countries of the world will be required over time to address the challenge of global warming absent a change in the balance of scientific opinion regarding the impact of anthropogenic greenhouse gases on the climate system. We believe that our current proposal represents an appropriate response that can be re-evaluated in the light of evolving science.

We are not trying to have it both ways. We believe that our approach represents a reasonable step that is superior to either a do nothing strategy or one of drastic and expensive short-run emissions reductions.

Participation of Developing Countries in Kyoto Agreement

Q4.

Kathleen McGinty recently was quoted in the press as saying: "Under no scenario are we suggesting the developing countries assume the same responsibilities” as the developed countries. However, your testimony and the President's speech to the National Geographic Society call for developing countries to play a meaningful role.

04.1. For the record, by the phrase "meaningful role," does the

Administration mean that it will require key developing countries such as China, India, Mexico, and other big emitters to agree to binding emission reduction targets in Kyoto?

Q4.2. If not, then what does the phrase "meaningful participation" mean?

A4.

The Vice President has indicated that involvement of key developing countries is very important, and that the Administration will not forward the Kyoto Protocol for Senate ratification until key developing countries have agreed to reduce their greenhouse gas emissions.

Administering, Monitoring, and Enforcing a UN Treaty

Q5.

Your testimony ignores some very big concerns that Congress has about any UN treaty. Your testimony—and , it must be said, Administration pronouncements in general have not addressed how an agreement would be implemented, administered, monitored, and enforced. Concerning these issues:

Q5.1. Has the Administration discussed how any UN treaty emerging from

of Kyoto will be administered, and if so, what will be the role of the United Nations?

A5.1. Many of the rules and guidelines for a compliance system will be worked

out in the post-Kyoto process. However, we do know that the Secretariat of the U.N. Framework Convention on Climate Change will continue to play a coordinating role in the administration and monitoring of the Kyoto Protocol.

Q5.2. Can the Administration guarantee that it will not enter into any UN

agreement that would infringe on U.S. sovereignty?

A5.2. The Administration has no intention of entering any UN agreement that Q5.3. What is the Administration's position on an enforcement mechanism

for a UN global climate treaty?

A5.3. The Administration believes that the enforcement mechanism under the

Kyoto Protocol must be stringent enough to motivate compliance but not so stringent that it deters participation. The details of the U.S. position on compliance and enforcement are still being worked out.

Q5.4. How will greenhouse gas emissions be monitored and how will

cheating of any agreement be detected?

A5.4. Under Article 5 of the Kyoto Protocol, each Party must have in place by

2007 a national system for estimating anthropogenic greenhouse gas emissions. Emissions will be reported annually and in national communications, which will be reviewed by expert review teams. Any questions regarding implementation will be forwarded to the Conference of the Parties. There are also likely to be third parties, such as nongovernmental organizations, that will track countries' emissions and make public any discrepancies they see.

Q5.5. How will breaches of the treaty be enforced and by whom?

A5.5. The ultimate decision makers regarding enforcement will be the Parties to

the Protocol. Specific compliance and enforcement provisions will be worked out in the post-Kyoto process.

Q5.6. How can monitoring be accomplished without a large government

intrusion into the economy?

A5.6. Section 1605(a) of the Energy Policy Act of 1992 already requires the

Secretary of Energy, through the Energy Information Administration (EIA), to develop an inventory of national aggregate emissions of each greenhouse gas and to update this inventory annually. Pursuant to this provision, EIA has issued a series of inventory reports. The most recent report, Emissions of Greenhouse Gases in the United States, 1996 (DOE/EIA 0573(96)) was issued in October 1997. We are not aware of any complaints that these inventories, which are developed without any new data collection authority, are intrusive. Beyond the provisions of U.S. law, our existing obligations under the Framework Convention on Climate Change also already require greenhouse emissions inventories. Developed countries currently must provide annual reports on their greenhouse emissions. In the United States, this is a very transparent and non-intrusive process.

Future Emissions Targets

Q6.

The Administration's proposal calls for further cuts in emissions after 2012. For the record, what are the emissions targets the Administration is considering for beyond 2012?

Q7.

Is it the Administration's goal to include emissions targets beyond 2012 us part of a UN agreement in Kyoto and if so, when will the American people be informed of such a proposal?

A6-7. The Kyoto Protocol includes one commitment period only, from 2008 to 2012.

Economic Costs

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The Administration promised that it would provide the Congress with an economic analysis. Congress still haven't seen it. Don't you think the American public deserve to be informed of the economic costs of a global change agreement?

A8.

Chairman Yellen of the Council of Economic Advisers discussed the economics of global climate change at length in her testimony before the House Commerce Subcommittee on Energy and Power on July 15, 1997 (attached). The Administration's strategy to achieve necessary reductions in greenhouse gas emissions in a cost-effective and flexible manner has a firm economic foundation.

EXECUTIVE OFFICE OF THE PRESIDENT

COUNCIL OF ECONOMIC ADVISERS

WASHINGTON, D.C. 20500

THE CHAIRMAN

Statement before the House Commerce Subcommittee on Energy and Power

Dr. Janet Yellen

Chair, Council of Economic Advisers

Tuesday, July 15,1997

Good afternoon, Mr. Chairman and members of the Subcommittee. I appreciate the

opportunity to discuss with you today the economics of global climate change.

Introduction

In his speech to the United Nations Special Session on Environment and Development in

June, President Clinton emphasized that the risks posed by global climate change are real and

that sensible preventive steps are justified. This assessment accords with the views of the more

than 2300 economists, including 8 Nobel laureates, who signed a statement supporting measures

to reduce the threat of climate change. The economists endorsed the conclusions from last year's

report by the Intergovernmental Panel on Climate Change (IPCC), which said that goverments

should take steps to reduce the threat of damage from global warming, and went on to argue that

market-based policies can slow climate change without harming the American economy.

At this time the Administration has not settled on a particular set of new policies to

reduce greenhouse gas emissions. Instead, the President indicated in his U.N. speech that he

intends to engage in a discussion with all interested parties about the problems posed by

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