• Implementation or the interpretation of the Protocol; • The substance of future decisions by the Conference of the Parties, which the United States would support, regarding rules or guidelines elaborating the Protocol; or concerning the timing of any Party's signature or ratification of the Protocol. Answer. As you know, the Vice President came to Kyoto not to negotiate, but to demonstrate U.S. support for the Kyoto Conference, and to explain to other governments the strength of the U.S. proposal. Neither the President nor the Vice President nor I entered into any understandings or made any commitments with other countries regarding implementation of the Protocol, future decisions by the Conference of the Parties, or the timing of any Party's signature or ratification of the Protocol. Question 33. Article 16 bis. Will you please tell us what "modalities" would be, as distinguished from the “principles,” “rules,” and “guidelines” referred to in that Article? Answer. The term "modalities" is generally used to refer to the mechanics of how a regime will work, as opposed to the substantive "rules" that will apply. Question 33.1. Do you believe that, until the Conference of the Parties makes all of the decisions that it is empowered to make under those Articles of the Kyoto Protocol, it will be impossible for either the Administration or the Congress to know the extent to which those Articles-in reality-would or could reduce the nation's cost of complying with the emissions-reduction requirement set forth in the Protocol? Answer. The Kyoto Protocol establishes international trading of emissions rights among Annex I countries. The Administration's policy is to secure rules that ensure an effective international market for emissions rights. It is impossible to know exactly the magnitude of the cost reduction associated with international trading, because of many uncertainties. Some of these uncertainties will be addressed in subsequent negotiations; however, many uncertainties are associated with the inability precisely to predict the state of the U.S. and global economies a decade or more from now. It is possible to draw from the economic literature on trading, and descriptive statistics of Annex I economies, and to use the results from modeling exercises to illustrate the substantial gains possible through international trading. The finding that effective international trading can significantly reduce compliance costs is quite robust and consistent with actual experience in our domestic SO2 trading regime. Question 34. Do you believe that under Article 16 bis, Annex B Parties can begin engaging in emissions trading now? Answer. The Kyoto Protocol established a right to trade, and we believe Parties can begin to trade at anytime. In order to ensure that emissions trading is fully and effectively utilized, however, rules and guidelines will be needed as they are to facilitate the integrity of any market. In the coming months leading to Buenos Aires, the Parties to the FCCC will continue their work to define the "relevant principles, modalities, rules and guidelines" for emissions trading. We anticipate this process to be complex, but the Administration will build upon and share with other Parties our experience with the successful SO2 emissions trading program in developing verifiable domestic and international trading regimes. We are hopeful that significant progress on the structure of a functioning trading system can be made by Buenos Aires. Question 34.1. Do you have any reason to believe that other Parties to the Convention, specifically including the European Union, agree that, under Article 16 bis, Annex B Parties can begin engaging in emissions trading before the Conference of the Parties defines what it regards as the "relevant principles, modalities, rules and guidelines" for emissions trading, as provided for in the first sentence of Article 16 bis? Answer. Yes. Other parties, however, generally share our view that rules and guidelines are needed to facilitate a comprehensive and effective market for emissions trading. Question 34.2. Will you please explain to the Committee, in summary form at this time, all of the issues that will have to be decided by the Conference of the Parties in order to enable emissions trading under Article 16 bis be a viable and effective mechanism for reducing the costs of complying with the emissions-reduction commitment of the United States under the Kyoto Protocol? Answer. We are currently working on a strategy to address the as-yet undefined issues in the design of the emissions trading system. Among the issues likely to be addressed are questions of who can trade; systems for monitoring and verification; rules for compliance and enforcement; and coordination with domestic trading regimes. The rules and procedures for the international emissions trading regime are to be considered at the Fourth Conference of the Parties (COP-4) in Buenos Aires, Argentina this coming November. Until COP-4, we will work hard to build a consensus on the structure of an emissions trading regime which provides the greatest flexibility for our private sector and domestic implementation. Question 35. Regarding the Clean Development Mechanism, particularly Article 12.8, which states: "The Conference of the Parties serving as the meeting of the Parties to this Protocol shall ensure that a share of the proceeds from certified project activities is used to cover administrative expenses as well as to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation." Who are those countries that will be entitled to receive funding to meet the costs of adaptation? • Are they limited to the groups of countries referred to in Article 4.8 of the Convention? • Will the share of proceeds to be used to meet the costs of adaptation be allocated among deserving nations in accordance with some currently unknown, decision making process to be established by the Conference of the Parties? • Please identify all countries that would be excluded from receiving any portion of such funding. Answer. The Conference of Parties will determine which countries are particularly vulnerable to the adverse effects of climate change. The U.S. believes that this category should be limited to countries which are vulnerable to changes in climate, and that it should not include countries demanding compensation for loss of income resulting from international efforts to mitigate climate change (e.g., through reductions in oil exports). This definition will be one of the details worked out in the development of rules for the Clean Development Mechanism (CDM). The Protocol does not specify that this provision refer only to the groups of countries referred to in Article 4.8, though that Article does describe some of the vulnerabilities faced by nations who might be eligible for adaptation assistance. Nor does the Protocol specify any countries that would be excluded from receiving any portion of such funding. As with other decisions regarding rules for the CDM, any proposals to specify vulnerable countries who would be entitled to assistance in meeting their costs of adaptation would have to meet the approval of all the Parties. Question 35.1. Does the United States have an understanding with Brazil, or with any other nations, as to a limit, or potential limit, on the amount of money derived from projects under the Clean Development Mechanism that will be diverted to developing nations for adaptation purposes? Answer. No. Question 36. My understanding is that the fourth session of the Conference of the Parties in November will review the adequacy of Articles 4.2(a) and (b) of the Convention. Given that the Conference of the Parties adopted the Kyoto Protocol and that Articles 4.2(a) and (b) of the Convention have nothing to do with commitments of developing nations, will you assure this Committee that the position of the United States at the November session will be that Articles 4.2(a) and (b) of the Convention are "adequate?" Answer. We agree that the objectives of the Framework Convention on Climate Change cannot be fully met unless developing countries assume some of the commitments assigned only to developed countries in the Convention. In that respect, Articles 4.2(a) and (b) are inadequate because they do not include developing countries. Question 37. The Kyoto Protocol contains no provisions that describe what the procedures and consequences will be if a Party is not in compliance with its commitments under the Protocol. Article 17 of the Protocol does not itself provide deterrence to non-compliance; yet we know that, for any number of reasons, the United States would comply with its commitments if the Protocol ever received the advice and consent of the Senate. What specific proposals did the U.S. delegation make during the negotiations that concluded with the Kyoto Protocol that detailed the procedures to determine whether a Party was in non-compliance, and, in case of non-compliance, what specific consequences would ensue in different situations? Answer. U.S. proposals regarding non-compliance procedures and consequences are contained in the January 1997 protocol framework submitted to the Secretariat, as elaborated in June 1997. U.S. proposals did not detail procedures to determine non-compliance; this was to be left to the Parties for elaboration. U.S. proposals did, however, specify consequences for certain situations. For example, in the U.S. pro posal, a Party would not have been able to participate in emissions trading if it was not in compliance with its obligations related to measurement of emissions or its obligations to report resulting data. A Party would also not have been able to participate in trading if it did not have in place a national mechanism for certification and verification of trades. Finally, a Party that exceeded its budget would also not be permitted to sell its allowances in that budget period. Although it did not, strictly speaking, address the issue of "non-compliance," the U.S. proposal also included a provision that would have set forth the consequences for a Party that exceeded its emissions budget in a budget period, namely it would have had to reduce, by a specified ratio (at a penalty rate) of greater than 1:1, the amount of its budget for the subsequent budget period. The proposal assumed acceptance of the principle of "borrowing" from a later period for use in an earlier period-a concept that was not included in the final Protocol-but which may nevertheless be relevant to drafting rules for operation of the future regime. Question 37.1. Does the Administration favor use of trade sanctions, such as embargoes, in case of certain types of non-compliance; and, if so, please tell us what the Administration is considering in that regard? Answer. The Administration does not currently have a position on the use of trade sanctions in case of certain types of non-compliance. Question 38. Is the Administration contemplating submitting to Congress any other legislative proposals, or is it contemplating proposing any new or amended regulations, any of which are intended to reduce U.S. greenhouse gas emissions, prior to the President's signing the Kyoto Protocol and submitting it to the Senate for its advice and consent? If so, will you please describe the substance of any such legislative or regulatory proposals that are being contemplated? Answer. President Clinton has chosen to emphasize those domestic measures that are more voluntary and incentive-based in nature. The President has laid out a comprehensive plan for cutting U.S. emissions of greenhouse gases that will enhance, not diminish, our economic growth and competitiveness. The President's plan includes $6.3 billion in tax incentives and R&D spending over five years on energy efficient and low carbon-emitting technologies, restructuring of the electricity industry that will both cut emissions and save taxpayer dollars, overhauling of Federal energy use and procurement practices, and industry-by-industry consultations to develop specific voluntary plans for reducing emissions. Such actions have other benefits not directly related to climate change, including definition of clean, efficient technologies; higher energy efficiency; cleaner air; and reduced health costs. Some of these initiatives will require legislative approval and we look to the Congress for support in these endeavors. In the President's October 22nd policy speech, he stated that the Administration would pursue these initiatives whether or not any agreement was reached in Kyoto. Question 39. Has any Department or agency of the Executive Branch, or any interagency body, been given the responsibility to develop potential proposals for legislation or regulations that would be intended to facilitate compliance by the United States with the Kyoto Protocol if the Protocol ever were to become binding on this nation? If so, will you please identify the Departments, agencies, or interagency body; and, if it is an interagency body, who is the head of it? Answer. To date, no agency or interagency body has been given responsibility to develop potential proposals for legislation or regulation that would be intended to comply with the Kyoto Protocol if it were to become binding on the U.S. There is a great deal of work to be done between now and then to flesh out some of the mechanisms and methodologies in the Protocol, and to ensure that we have greater developing country participation in the global solution. If we are successful in getting the additional elements we need and the Kyoto Protocol is ratified by the Senate and enters into force, the Administration will work closely with Congress to consider and develop means by which the U.S. can comply with our resulting commitments. ATTACHMENT #1 Report to Congress on Federal Climate Change Prepared by the Office of Management and Budget, March 1998 The State Department supports the work of the UN Framework Convention on Climate Change Secretariat and the Intergovernmental Panel on Climate Change (IPCC) the single, most authoritative, international scientific and technical assessment body with respect to climate change. Many nations rely on the IPCC for information and assessment advice on climate change. Indirectly Related Programs Several Federal agencies conduct programs that are indirectly related to global climate change. For example, the Department of Defense conducts research to improve energy efficiency of military aircraft as a means of improving defense capability. The Department of Transportation conducts research that can lead to improved vehicular traffic flow and reduced fuel consumption. By promoting energy efficiency, these programs can also help reduce the Nation's emissions of greenhouse gases. Nevertheless, since the primary focus of these programs is not on climate change, the Administration does not consider them to be "climate change programs and activities," as stipulated in Section 580 of the Foreign Operations bill. ATTACHMENT #2 Climate Change Technology Initiative So while we recognize that the challenge we take on today is larger than any environmental mission we have accepted in the past, climate change can bring us together around what America does best-we innovate, we compete, we find solutions to problems, and we do it in a way that promotes entrepreneurship and strengthens the American economy. If we do it right, protecting the climate will yield not costs, but profits; not burdens, but benefits; not sacrifice, but a higher standard of living. President Clinton, October 22, 1997 Introduction Climate Change Technology Initiative Last October the President outlined the three-stage approach the U.S. will take in addressing climate change. The first stage consists of immediate actions to stimulate development and use of technologies that can minimize the cost of meeting U.S. goals in reducing greenhouse gas emissions. Stage two will review options created through ongoing technology development and lead to detailed plans for a marketbased permit trading system for carbon emissions. Stage three will begin to implement a market-based emissions-trading system. The President's 1999 budget includes $2.7 billion over five years for increased R&D and deployment of energy efficiency, renewable energy, and carbon-reduction technologies, and an additional $3.6 billion over five years in tax incentives. These provide a total initiative of $6.3 billion in new funding and tax expenditures over five years to stimulate adoption of more efficient technologies in buildings, industrial processes, vehicles, and power generation. During the coming year, federal agencies will supplement these activities with three other actions outlined in the President's plan: • Active support for industry-by-industry consultations with all major business sectors. • Changes in federal procurement policy to ensure that Federal agencies make all cost-effective energy investments and take advantage of energy savings performance contracts and other service available from private investors. • Introduction of utility restructuring proposals that will reduce carbon emissions while saving customers billions of dollars in electric bills. Section 1 below shows several summary tables that provide a variety of views or perspectives on the Climate Change Technology Initiative (CCTI) by agency, by type of activity, direct spending, and tax incentives. Following that, in Section 2, are programmatic details organized by the sector or technical topic on which they are focused. Table 2.-Two Views of the Climate Change Technology Initiative Principal Technical Areas Major Types of Federal Activity Efficient buildings, heating and cooling, and appli- Cost-shared R&D partnerships with industry. ances Efficient transportation (automobiles, trucks, and Supporting research n materials, combustion, and transportation planning) Efficient industrial processes and technologies biotechnology. Limited-duration tax incentives to promote adoption of major technical innovations. Low-carbon generation of electricity using renewable Labeling and information programs to stimulate energy, and markets for highly efficient products. Techniques for permanently capturing and sequester- Policy studies and market incentives. ing greenhouse gases The Climate Change Technology Initiative encompasses programs in five agencies, and most of the participating agencies are expected to make contributions in several sectors, so coordination is important. Table 3 shows the total multi-agency funding applied to climate change issues in the key end-use sectors and technical topics that form the basis for interagency coordination in the CCTI. |