While international research proceeds, the Coalition encourages its members to contribute to better scientific understanding both through in-house research and through financial support to others conducting research. The Coalition also supports activities to reduce greenhouse gas emissions that make economic sense in their own right-continuing sound business practices that will lead to more efficient use of energy.

INTERNATIONAL CONCERNS

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. Any action on the global climate change issue must take into account the negotiations of the United Nations Intergovernmental Negotiating Committee for a Framework Convention on Climate Change (INC) and the work of the Intergovernmental Panel on Climate Change (IPCC). Proceeding on a unilateral basis to stabilize or reduce greenhouse gas emissions, in the absence of an international agreement applicable to all nations, would place U.S. industry at a competitive disadvantage in world markets and would harm our nation's economy. The Coalition believes that any international agreement dealing with greenhouse gases should (1) be based on sound science (2) be comprehensive, addressing the several principal greenhouse gases, not just carbon dioxide or any single gas; (3) require that all countries bear their fair share in undertaking climate change policies; and (4) emphasize flexibility in policies to allow countries and private markets the ability to respond as economically and efficiently as possible. In addition, U.S. industry firmly believes that a crucial element not only of any international agreement on global climate change, but also of this country's response to the issue, must be technology cooperation in the international community.

The Coalition believes that any policy designed to deal with greenhouse gases should be scientifically and economically justified and should be undertaken through a multilateral approach. We should emphasize flexibility in our energy, agricultural, foreign assistance, trade and research policies so that we can adjust our programs and our investments as our understanding of the global climate change phenomenon increases and as our multilateral discussions mature.

PROPOSAL OF OTHER COUNTRIES

Although many countries have announced substantial "commitments" to curb carbon dioxide, very few, if any, of the statements have been supported by binding obligations under the laws and regulations of those countries—as such, these soiled "Commitments" are not particularly meaningful. However, any commitments made by the U.S., whether as unilateral U.S. action or in the context of a treaty, would be binding under U.S. laws and regulations that would be vigorously enforced by our own regulatory authorities. Many of the lesser developed countries and countries with economies in transition, including China, the Commonwealth of Independent States (CIS) and India, have not made commitments to reduce their emissions of carbon dioxide or greenhouse gases. Because these developing countries have expanding populations, and indigenous fossil fuel resources, and are planning significant economic growth in the future, they will be responsible for a majority of the greenhouse gas emissions growth in the near future. For example, China, with approximately 20 percent of the world's population, plans to double its electricity generation in the next ten years, and about 75 percent of that will be coal-fired. Comparable generation growth will occur in populous India, Africa and Latin America. Many of these countries are calling on the developed countries of the world to bear vastly more than their share of greenhouse gas reductions in order to allow for increases in greenhouse gas emissions in the developing world. Or, unfortunately, many of these countries are using the carbon dioxide issue as a lever to obtain additional development funds from the industrial countries.

Further, several industrialized countries have suggested that policies address only carbon dioxide, and thus ignore methane and other greenhouse gases. To focus solely on carbon dioxide emissions is to ignore up to half of the potential impact of greenhouse gas emissions. Inevitably, this approach would require substantially greater overall costs to control greenhouse gases. As previously stated, the Coalition believes that any international agreement dealing with greenhouse gases should be comprehensive, addressing all primary greenhouse gases, not just carbon dioxide or another single gas.

Moreover, even if the other industrialized countries made real commitments to reducing greenhouse gases, their goals may not make sense for the United States. Energy demand in industrialized countries is determined by widely disparate and

largely non-energy characteristics: climate, geography, population density, personal incomes, life styles, resource availability, building stocks, transportation systems, industry structure, and so forth. Only a relatively small part of country-to-country differences can be reasonably ascribed to different levels of energy utilization. The international statistics on energy end-uses are too general to adjust for all of these factors. As the International Energy Agency observes, it is "impossible to develop uniform statistical measures [of energy efficiency] for whole economies or even sectors."

The United States requires more energy than many other countries for heating and cooling (our summers and winters are more extreme), and for transportation (our land mass is larger and our population more geographically dispersed). Since 1973, the U.S. has reduced energy usage almost 40% per dollar of GNP.

COSTS OF ARTIFICIAL RESTRICTIONS

Although every national economy would be affected by the imposition of artificial carbon emissions restriction, the effect would vary greatly. The impact on China, and the rest of the nations with emerging economies or nations with economies in transition, would clearly exceed the ability of these fragile economies to cope with this international carbon reduction. China's losses alone from such restrictions would exceed 10 percent of its annual Gross Domestic Product (GDP) by the latter half of the 21st century.

The effect of artificial carbon restrictions necessary to achieve the stabilization or reduction of greenhouse gas emissions would be devastating on the U.S. economy. A recent study conducted by Charles River Associates and endorsed by the Coalition, found that stabilizing carbon dioxide emissions at 20 percent below current levels would produce annual losses of 1.7 percent of the GNP in 2020, increasing to 2.4 percent in 2100, a loss to the GNP of over $95 billion per year. Another study released by the Department of Energy also concluded that the total cost for capping carbon dioxide at 20 percent below 1990 levels could cost $95 billion a year. In addition, the United States would suffer a significant loss in employment averaging 600,000 per year over a 25-year period.

A proposal gaining momentum in the House to stabilize CO2 emissions at 1990 levels would have similar negative competitive and economic impacts. The proposal, sponsored by Congressman Waxman, would actually require reductions of projected carbon emissions of almost 20% by the year 2000 and could, in effect, substantially curb the growth of jobs and of our economy. An identical proposal was recently introduced in the Senate.

A recent study by the Department of Commerce indicates that a tax on fossil fuels designed to obtain a 20 percent reduction in emissions of carbon dioxide by the year 2020 would lower output among major OECD nations by 1 to 3.5 percent. The United States and other nations that are heavy users of fossil fuels would experience the greatest loss in output (as measured by gross domestic product or gross national product). The study stated that the U.S. economic output would be 3.1 percent lower. By contrast, France, which uses nuclear power for a large amount of its electricity, would have its GDP reduced by only 1.7 percent over the quarter-century. Our trade competitors know that carbon dioxide stabilization would be disproportionately costly for the United States and would give them increased trade competitive advantage. In order for the U.S. to stabilize its carbon dioxide emissions at current levels by 2000 a tax of $120 per ton of carbon is required; in order to achieve a 10 percent reduction by 2010 a tax of $384 per ton is required; and in order to achieve a 20 percent reduction by 2020 a tax of $720 per ton is required. In the United States a tax per $100 per ton of carbon would equate to a tax of $70 per short ton of coal, $11 per barrel of oil, $1.66 per MCF of natural gas and $0.27 per gallon of gasoline.

Developed countries and developing countries are economically interdependent. Trade, interest rates, capital flows and commodity prices are the common denominator of this interdependence. The linkage is so intimate that a 1991 World Bank report estimated that a 1 percent per annum change in OECD growth could affect the growth rate of developing countries by an average of 0.7 percent. Lower economic growth rates in industrialized countries could result in a deteriorating balance of trade for developing countries and for countries with economies in transition. The business community emphasizes that an integrated assessment of the possible economic consequences of reduced growth in developed countries on the economies of developing countries and countries in transition is urgently required as a basis for policy decisions.

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 appropriate.

(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