TECHNOLOGY COSTING MODELS

The Coalition believes that technology costing models, such as those used by the National Academy of Sciences study, are fundamentally flawed. Their conclusions— that the introduction of new energy efficient technologies would have net economic benefits are diametrically opposed to the unanimous conclusion of the economic models which illustrate that reductions in carbon emissions can only come at significant cost. The Coalition-endorsed Charles River Associates study addresses this issue in depth.

In general, technology models offer no means of identifying policy measures that would achieve energy efficiency improvements and they generally underestimate technology costs. For example, costs of changing_over existing stocks of capital equipment are commonly ignored in these models. Because many American companies are under severe economic pressure and are short of capital, they must have extremely short payback periods for new investment projects. These companies have a variety of investment priorities which compete for limited capital investment dollars. In addition, they certainly cannot afford the risk involved in trying new technologies. These short payback periods and capital limitations are costs which the academic proponents of conservation measures do not recognize. To enact conservation mandates assumes that the free market will fail and that consumers do not make choices that are in their own economic self-interest.

The Coalition is seriously concerned about suggestions that government-mandated standards by the Federal or state government requiring more efficient use of fossil fuels are appropriate public policy. Such suggestions are strongly reminiscent of the failed energy policies of the past. Our members are already engaging in activities that make sense in their own right-sound business practices that will lead to more efficient use of energy and will also reduce greenhouse gas emissions. During these difficult economic times when many of our members have faced unprecedented losses the private sector is seeking to reduce costs, including our energy costs, of doing business. Especially during difficult times such as these, it makes no sense to impose additional costs on American business. This undermines both our competitiveness and our ability to introduce the ever more efficient technology which will reduce greenhouse gas emissions.

TECHNOLOGY COOPERATION

The Global Climate Coalition has an active program to address national and international issues and to assist U.S. government activities related to technology cooperation. The Coalition has participated in numerous policy meetings with representatives of Congress and federal agencies such as the Environmental Protection Agency, Department of Commerce, Department of State, Department of Energy, and the Council on Environmental Quality; addressed technology cooperation issues before the INC; and cosponsored a conference with the U.S. Department of Commerce on technology transfer to Eastern Europe.

Even more significantly, U.S. industry has an extensive program of environmental technology programs overseas. Many companies that are members of the Coalition have joint ventures or other mechanisms in which they engage in technology cooperation projects in developing countries and countries with economies in transition. In addition, the U.S. Government is expanding and refocusing its technology and research and development programs to facilitate technology cooperation between the government and private industry to enhance the international competitiveness of U.S. industry.

The Coalition urges the United States to continue its leadership role in such international forums as the INC and IPCC. Technology cooperation has been a major issue through the negotiations of the INC and is expected to be a major issue of the United Nations Conference on Environment and Development (UNCED) in June 1992. In this regard, the Coalition strongly endorses the plan by the Administration to provide a $75 million fund to assist developing nations in reducing their emissions of greenhouse gases.

The Coalition is however, concerned that many foreign countries view technology cooperation as a form and means of obtaining U.S. foreign aid. The INC has stated that the developing countries have requested that the "best available, environmentally sound technologies" be transferred to them on a "most favorable basis" and with the developed countries providing "adequate and additional financial resources" to assure the transfer occurs expeditiously.

Importantly, inadequate protection of intellectual property rights creates substantial barriers to technology transfer technology. Without guaranteed protection for patents, trademarks and copyrights, U.S. companies have a strong disincentive to

pursue the costly work of technological and industrial innovation and to transfer that technology overseas. To facilitate technology transfer, the U.S. must demand that foreign governments and firms protect U.S. technology, and property rights and that any transfer occur on a commercial basis.

For the past two decades the U.S. has been at the forefront among the nations of the world on environmental policy and technology development and implementation. This leadership position, combined with private and public research and development capabilities in the U.S. gives us the edge in providing technology, training, operation, maintenance and management assistance to developing countries and economies in transition, including Eastern Europe, as those countries focus on the dual objectives of environmental improvement and economic development. Specifically, the Federal Government could assist U.S. technology transfer activities by:

(1) Helping countries prepare accurate and detailed needs assessments.

(2) Providing additional analysis and information on environmental technology needs and market opportunities to U.S. business through the embassy and consulate staff as well as through the Commerce Department's International Trade Administration staffs.

(3) Identifying and eliminating impediments to technology transfer.

(4) Facilitating the entry and acceptance of new technologies where appropri

ate.

(5) Promoting U.S. businesses as sources of environmental technology to meet the needs to developing countries and their industries.

(6) Supporting research, development, demonstration and commercialization programs. Finally the U.S. Government should work with U.S., regional and international financing and economic development agencies to provide information on U.S. environmental technology capabilities and assist U.S. technology suppliers to meet the environmental needs identified in the national reports.

CONCLUSION

The Coalition believes that any policy response to the climate change issue must take into account impacts on industrial competitiveness. Ill-considered policy responses to issues such as climate change that adversely impact the competitiveness of our nation's industries would ultimately hamstring our ability to respond to other pressing energy and environmental challenges. The Coalition believes that sciencenot emotional or political reactions-must serve as the foundation for global climate policy decisions. The Coalition supports a comprehensive and international approach to global climate change based on cost-effective, scientifically sound policies that are independently justifiable in their own right. Through a strong program of technology cooperation the U.S. can assist developing nations and those with economies in transition to expand their economies in an environmentally sound manner. The CHAIRMAN. Thank you, Mr. Baroody. Mr. Hellman.

STATEMENT OF RICHARD A. HELLMAN, CHAIRMAN AND PRESIDENT, UNITED STATES COMMITTEE FOR THE UNITED NATIONS ENVIRONMENT PROGRAMME

Mr. HELLMAN. Thank you, Mr. Chairman. Good morning. I am Richard A. Hellman, the Chairman and President of the United States Committee for the United Nations Environment Programme, US/UNEP for short.

I am pleased to appear before you today to present testimony concerning the need for sound institutional and organizational measures, especially as regards financing mechanisms for climate change controls to be considered at UNCED. We are pleased and proud to support and encourage UNEP, earth's environmental agency, as it performs a variety of tasks which individual nations, including the United States, through regional and bilateral action alone cannot perform or cannot accomplish as effectively and efficiently as UNEP can do.

Over the last 20 years, UNEP's achievements have included the Global Environment Monitoring System, GEMS that is, and the Global Resource Information Database, GRID, which provided much of the seminal data on alterations in atmospheric chemistry ranging from global warming to acid rain and threats to the ozone layer from CFC's. In this, UNEP has worked in conjunction with the U.S. agencies, NASA, NOAA, and EPA.

UNEP also has brokered a convention on long-range transboundary air pollution signed by 17 European nations, in addition to the Vienna Convention, the Montreal Protocol, and the London Protocol for the Protection of the Ozone Layer, these the first worldwide preventative environmental agreements.

UNEP also manages trust funds and provides administrative support for 39 separate secretariats, including such key environmental efforts as CIDIE, the Committee on International Development Institutions and the Environment, which includes the World Bank and other multilateral development banks.

There are a number of other contributions of UNEP over the past almost 2 decades which I detail in my written statement for the record.

Now, UNEP, as it continues to coordinate the environmental cleanup of the aftermath of the Gulf War and to help the UNCED Secretariat prepare for UNCED, is emphasizing the following six priority areas: atmospheric issues, fresh water resources, oceans and coastal areas, land degradation, biological diversity, and hazardous waste and toxic chemicals.

As a catalytic agent, UNEP has been the source of the action which produced the Vienna Convention and the other protocols, as I have noted, and in addition, UNEP is the single-most effective force in taking persistent careful action to bring developing countries into a full range of environmental activity, without which the actions of the United States and other developed nations might well be negated, including in the areas of climate change and protection of the ozone layer. A persistent and perplexing problem has been the continuing failure of nations to provide sufficient resources commensurate with UNEP's daunting mandate.

Even in this year of unprecedented challenges to the earth's ozone layer and climate generally with UNCED on the horizon, the U.S. Congress only voted $17,193,000 as the United States voluntary contribution to UNEP. While an increase over last year, this does not constitute a real increase in constant dollars over the initial $10 million the United States contributed to UNEP in 1973, and it does not match the staunch requirements that UNEP must meet.

With respect to the specific financing mechanisms for global climate change and other matters to be considered at UNCED that we envision resulting from that conference, a clear choice was presented: to build upon existing mechanisms, such as the Global Environmental Facility, or to undertake a new and separate fund. We are pleased to see that there is an intent to build upon the existing pilot global environmental facility which is administered jointly by UNEP, the U.N. Development Program, and the World Bank.

Based on experience to date with the pilot GEF and the anticipated results from UNCED, the following changes in the GEF are

expected based in part on the May 4 Statement by Participants on the Future Evolution of the Global Environment Facility. I will provide these and other materials from the GEF for possible inclusion in the record of this hearing.

In this statement by participants, we see that the present scope of activities which has been limited to four areas, basically global warming, biological diversity, protection of international waters, and protection of the ozone layer, is slated for expansion, for example, to include land degradation issues, primarily desertification and deforestation.

The size of the Global Environmental Facility or similar mechanism undoubtedly will grow, and I would estimate, and I would say this is only an estimate, that the increase will probably be at least 10-fold, into the $10 billion to $15 million range. Now, the United States has not contributed specifically to the GEF to date, but I would expect that it would do so if we are to continue to exercise credible leadership in this area.

The goal of the participants in the GEF is universal participation, and we believe that all nations that are signatories to the conventions or who contribute to the GEF should, indeed, participate fully.

In terms of participation by nongovernmental organizations, this has been enhanced greatly in recent months to reach beyond usual experts from developed countries, and today we see a much winder range of NGO representatives, including those from developing countries coming into the process. Some modest funding has been found to facilitate this process through seed money grants presently administered by the UNDP.

In terms of openness, the GEF is moving toward what they call greater transparency in all of its processes including providing copies of documents to NGO's, as well as to governments. We would recommend that the World Bank and other multilateral development banks, that is MDB's, should follow these same precepts of transparency and openness in their operations so as to lend in the open or in the sunshine, not behind closed doors, on all projects related to the GEF process. In addition, the functional equivalent of the U.S. Freedom of Information Act would be a worthy addition to their processes.

In addition to these points, which bear upon some of the GEF participants' discussion, I would recommend that environmental impact assessments be considered for the processes of the GEF even though these projects are primarily for environmental enhancement of a global nature.

An example of a working process which we have seen is the experience in Israel where environmental standards and criteria are imported into physical plans under the national planning and building law by including sections on environmental standards for air, water, and other factors in those actual plans. I can testify from personal experience that this is an expeditious process which is not weighted down with paper or bureaucracy, and it works well. If these steps were taken throughout the MDB and U.N. processes, far fewer specific GEF grants would be needed since environmental aspects will be integrated from the start of the plans for the projects, and we would hope in the era of huge budget deficits

and domestic resistance to any foreign assistance, we would achieve economic efficiency from the outset of the project rather than attempt to remedy mistakes after the fact.

As the principal U.N. mechanism for environmental advice and assistance, UNEP is consulted by the World Bank and UNDP. We would recommend that this smallest of the agencies in the governance of the GEF, which must broaden and expand its capabilities, would receive greater resources in these days ahead. Specifically UNEP needs to enhance its regional response capability and it also may need resident representatives, as UNDP uses, in a limited number of countries.

To achieve this needed growth in capability, UNEP will require funding for the coming fiscal year for fiscal year 1993, I would expect, at no less than $100 million with America likely contributing about a third of that in a voluntary contribution. This would probably have to grow to a total of $175 million for fiscal year 1994 and $250 million for fiscal year 1995, again with the United States probably contributing, hopefully contributing on the order of onethird of this amount.

Now, not all of these steps can be explored fully and mandated by UNCED. Some are not formally on the UNCED agenda, but a start can be made. We believe that these are some of the ways in which UNEP can contribute more fully and which the GEF can fully contribute to the process.

I thank you for the opportunity to appear today and present these materials, and I will be pleased to answer any questions. [The prepared statement of Mr. Hellman follows:]

PREPARED STAtement of Richard A. Hellman, Chairman and President, UNITED STATES COMMITTEE for the UNITED NATIONS ENVIRONMENT PROGRAMME

Mr. Chairman and Members of the Committee:

Good morning. I am Richard A. Hellman, the Chairman and President of the United States Committee for the United Nations Environment Programme (US/ UNEP). It is an honor and a pleasure to appear before you today to present testimony concerning the need for sound institutional and organizational measures, especially as regards financing mechanisms for climate change controls, from the upcoming UN Conference on Environment and Development scheduled for June 4-13, in Rio de Janeiro, Brazil (UNCED).

By way of preamble, my experience as an environmental lawyer and manager has included service as the Legislative Counsel of the Environmental Protection Agency under Administrator William D. Ruckelshaus, and later as the Executive Director of the U.S. Preparatory Committee for the Stockholm UN Conference on the Environment, as an Advisor to the U.S. Delegation at Stockholm; and as the Minority Counsel of the Senate Public Works Committee (in the last three roles as staff for Senator Howard Baker of Tennessee). Thus, the arguments by various interests in preparation for UNCED, bring to mind the adage that "There is nothing new under the sun".

Seven years ago, I was among a small nucleus that founded the U.S. Committee for UNEP (then the Friends of UNEP) as the principal US private, not-for-profit organization dedicated to supporting and encouraging UNEP and helping to inform the US public concerning its work.

Our overriding objective has been to make UNEP as well-known, positively regarded and fully supported in the US as, for example, the UN Children's Emergency Fund (UNICEF). We do this by publishing a newsletter and other materials and organizing public events, including receptions and seminars on Capitol Hill, in national embassies, universities, and other locations, to publicize UNEP's activities. Much of this activity revolves around June 5, annually celebrated as international World Environment Day to commemorate the 1972 Stockholm Conference on the Human Environment. We present a number of awards annually including the US/