response from that effort-in which the Chairman joined that Department of Energy and Commerce group in China-was extraordinary both with respect to wanting to be working with us and recognizing the value of transferring technology from the United States. All of those kinds of meetings provide opportunity for us to enter into this dialogue and be helpful both to developing and developed countries.

I could spend time walking through other portions of my testimony, but I think I will not. I will simply leave you with a clear understanding that we in the administration understand that we have a great foundation on this effort which has been provided by the National Energy Policy Act. The struggle to reach the goal for the 21st century I think must be vigorous. The timetable we have selected and adopted for ourselves is short. Much remains to be done in the time left, but my clear sense is that we can come up with a plan that makes sense and, more important, position the United States so that when we go to Geneva in August, we are in a position to be leaders as we will have a plan ready to discuss and will be involved in discussing the details of that plan and, more importantly, how you book the results from that plan.

With that, I am finished and I am happy to relax and allow my colleague the opportunity.

[The prepared statement of Secretary O'Leary follows:]

PREPARED STATEMENT OF HON. HAZEL R. O'LEARY, SECRETARY, DEPARTMENT OF

ENERGY

Mr. Chairman, and members of the committee, it is a pleasure to appear before you today to present my views on global climate change.

Global climate change is a tough issue with important implications for both industry and the environmental community. Our challenge is to tackle this issue without doing damage to values and concerns that these groups hold dear. And our challenge is to make the most of the new opportunities at hand.

Tackling the issues in global climate change will be a top priority for the Department of Energy. The Department is playing an active role in developing the cost-effective climate change mitigation plan of the President. Part of our role is to identify the energy programs that will reduce emissions; yet, we must do more and do better.

In particular, I want to emphasize the vital role that collaboration between the Federal Government and the private sector can play in promoting voluntary and other emissions reduction actions in the United States and throughout the world, and how that collaboration can develop and commercialize environmentally sound, energy-efficient technologies that will deliver cost-effective reductions in greenhouse gas emissions.

THE NATIONAL COMMITMENT TO ACT

In his Earth Day remarks, President Clinton reaffirmed his personal commitment, and announced our Nation's commitment to reduce emissions of greenhouse gases to their 1990 levels by the year 2000. This statement changes direction from the policy of previous Administrations. Further, the President stated that the United States would provide leadership in addressing global climate change.

The President's commitment recognizes that, while we must continue a strong program of research to resolve scientific uncertainties, it is time for us to take nearterm actions to reduce our emissions—to begin to provide insurance for ourselves, our neighbors and our children against the potential adverse effects of global climate change. At the June 10-11, 1993, White House Conference on Global Climate Change, Dr. Robert Watson pointed out all climate models predict that changes in concentrations of greenhouse gases will cause both global and regional changes in climate. Further, if substantial global warming does occur, reversal of the changes will take many decades or even centuries. This long timeframe is due to the long atmospheric lifetimes of many greenhouse gases and the climate system's thermal inertia.

THE MITIGATION PLAN WILL PROVIDE NEW OPPORTUNITIES

The President instructed us to design an emission mitigation plan by August to fulfill the National commitment. He emphasized that the plan should be cost effective and have both near-term and long-term benefits. Further, the plan must be feasible and provide rapid action. The President wants an unmistakable call— a clarion call—for American creativity and ingenuity in devising solutions so we can avoid unnecessary costs, regulations, or bureaucracy. The President's commitment offers us great opportunities for:

Promoting use of energy-efficient technologies, thus creating the jobs and economic growth associated with the birth of new markets, both domestically and abroad;

Improving collaboration between the public and private sectors in implementing cost-effective, innovative choices in the United States; and

Building partnerships between the United States and other nations so that we all do well, economically, by doing good, environmentally.

The President recently extended the challenge of tackling the tough environmental and development issues beyond global climate change. Over 150 countries last June supported a long set of actions to promote environmental protection and economic development the Agenda 21 report of the Rio Earth Summit. On the first anniversary of this general approval, the President named a President's Council on Sustainable Development that includes private U.S. leaders plus five Federal agency heads associated with environmental protection and natural resources development. I am delighted to be one of the Council members charged with developing a blueprint for action on sustainable development issues, due by the end of the year. Certainly, the climate change mitigation plan will provide important elements of the Council's agenda.

DEVELOPING THE MITIGATION PLAN USING PUBLIC-PRIVATE COLLABORATION

The Department of Energy is helping develop a greenhouse gases emissions mitigation plan that is workable and broadly acceptable, as well as cost-effectivea plan that reflects and builds on experiences of the private sector, those individuals and groups that must implement its actions and respond to the incentives it will create. To do this, we are fostering an atmosphere of open and ongoing dialogue among all those contributing to the climate change debate: other government entities, U.S. industry, environmental organizations, labor organizations, academia, and the public.

THE WHITE HOUSE CONFERENCE: A VALUED DIALOGUE

I echo President Clinton in stressing that we must tap American creativity and ingenuity—and we have begun. The White House Conference on Global Climate Change, which was held on June 10-11, was expected to include about 250 panelists and observers. Nearly 800 people attended. I spoke to a group in a packed room with many listeners standing and sitting on stairs in the back of the large ballroom. The enthusiasm and the thoughtful discussions continued in the 10 workshops of the Conference, workshops where the participants shared experiences and discussed suggestions for mitigation options. We continue to get ideas for consideration plus strong support to continue this dialogue from many of the participants and observers.

It was enlightening to hear the interests most likely to be affected by the mitigation plan provide views on which approaches they thought could be successful and to learn which have proven unworkable. Dozens of proposals were presented— many traditional actions, some new, some variations on more familiar options and some that may not be workable-but, as I had stated in my remarks at the Conference, all suggestions are on the table for consideration.

And we will continue the open dialogue. We expect to consult with conference participants, observers and other interested parties as we develop the mitigation plan. We will also consult with Congressional staff and legislative support agencies so that our efforts benefit from their expertise.

As Secretary of Energy, I have already seen the benefits of this approach firsthand. A recent International Energy Agency ministerial meeting that I attended began like so many meetings that we all have attended. As each senior delegate read a script, the other delegates passively waited to read theirs. It was only after the delegates began to share views and information on the best practices for global emissions mitigation that we moved to a new spirit of openness and cooperation.

INCORPORATING THE DIALOGUE INTO THE MITIGATION PLAN

Our present challenge is to evaluate the individual suggestions and develop a set of options that will comprise the mitigation plan. We, of course, have been working to set out and apply criteria to assess the options. Many of the criteria are provided in the President's charge:

⚫ be cost-effective,

• ensure ease and speed of implementation,

• provide near-term benefits,

• stimulate use of improved, energy efficient technologies for long-term benefit, and

• hold down unnecessary costs, regulations and increased bureaucracy. Other criteria also have merit. For example:

• encourage private investment,

• produce measurable change, and

⚫ be credible to the involved interests.

Presently, six working groups are defining and assessing the options for reducing greenhouse gases in their specific areas. The options and assessments developed in the working groups will be forwarded to the interagency Climate Change Mitigation Group (CCMG) chaired by the White House Office on Environmental Policy, through an interagency analysis team which will analyze the interactions among options and provide quality assurance for the analysis.

DESIGN CRITERIA FOR THE OVERALL PLAN

Actions to reduce greenhouse gas emissions, actions to increase sinks that absorb greenhouse gases from the atmosphere, and public and private initiatives that provide both domestic and international emission reductions are all being considered as options by the working groups. The eventual mitigation plan could include voluntary private sector actions, administrative policy changes, and/or legislative proposals.

In designing a plan to reduce emissions, several other program criteria merit

attention:

Consider All Opportunities-The Administration is examining policies to address both sources and sinks of all greenhouse gases. The Administration will examine all identified cost-effective reduction opportunities in the process of developing the U.S. Mitigation Plan.

Develop a Diversified Set of Actions Just as the diversified energy mix fostered by the 1992 Energy Policy Act will enhance energy security and give cost-effective choices for U.S. consumers, a diverse set of greenhouse gas reduction options will deliver cost-effective results while reducing risks to the economy and to the environment. A balanced set of actions that avoids putting "all of our eggs" in a very small number of baskets will reduce uncertainty. It would also develop experience that could prove invaluable in structuring more far-reaching mitigation efforts should such efforts prove necessary in the future. Effectively Involve All Developed Countries-Since greenhouse gas emissions reductions are needed worldwide, our plan should provide leadership and stimulate other industrialized countries to follow through on their own greenhouse gas reduction commitments.

Assist Developing Countries in Improving Markets-Finally, current global emissions projections show that the developing countries will account for an ever-increasing fraction of the global greenhouse gas emissions. By 2025, they will account for the majority of global emissions. We need to work with these countries to address their emissions as we reduce our own.

We should refocus available multilateral financial assistance to encourage greater consideration of the environmental impacts of development projects. We should restructure our bilateral programs to promote energy efficiency and to improve access to our better energy technologies and practices in order to support growth and environmental protection needs of developing countries. Nevertheless, we must acknowledge that the amount of funding currently available is orders of magnitude below the level of funding that the developing countries believe they need to both develop their economies and minimize their annual emissions. In every international meeting on climate change, including the Earth Summit last year, the developing countries emphasize they need added financial assistance and technology access if they are to meet environmental commitments.

While government financial assistance has a role to play, limiting emissions in developing countries on a long-term basis requires that market conditions in these countries be improved so as to attract greater investment for emission

reduction by private interests—-U.S. businesses as well as private interests from all of the industrialized and developing countries. We must assist these countries in building appropriate mechanisms to facilitate the ultimate cooperative mechanism-the development of infrastructure for private markets and the reduction of current barriers in these countries that retard imports of private technology and practices. Developing these markets will provide U.S. industry with significant new opportunities-resulting in jobs and economic growth in the United States, as well as providing comparable opportunities in the developing countries. This truly presents us with opportunities to do well by doing good.

COST-EFFECTIVE INTERNATIONAL ACTIVITIES SHOULD BE CONSIDERED

Because greenhouse gases mix globally in the atmosphere, emissions_reductions achieved anywhere in the world are of equal global significance. Some have suggested that the United States may be able to do more to protect the world's and our own climate, at lower cost, by investing in some activities abroad in addition to reducing domestic emissions. In the White House workshop discussions on this topic, some of the early examples of international cooperation appear to have very low cost per ton of CO2 reductions although some factors underlying these estimates need to be examined. Some analytic studies of cooperation across borders done by the Organization for Economic and Cooperative Development suggest total cost reductions of 50 percent or more might be achieved by broadening our horizons to include international actions.

In order to ensure the multinational projects provide real net emission reductions, the United Nations Framework Convention on Climate Change establishes the concept of countries entering into "joint implementation" agreements. These agreements would permit a country (or a private firm) to obtain cost-effective greenhouse gas reductions in another country. While internationally accepted rules for allocating emission reduction credit need to be worked out, the prospects for cost-effective global emission reductions and expanded trade opportunities have made joint implementation a priority for the State Department negotiators in the eighth plenary session on the Intergovernmental Negotiating Committee in August. It will take some time before a full-blown joint implementation framework can be negotiated. Nevertheless, some U.S. companies are beginning to make investments in other countries in order to offset their U.S. emissions. Although the ultimate role of joint implementation in the U.S. mitigation plan remains to be decided, these early efforts deserve support and encouragement.

Economic growth rates for the developing countries are projected to be much higher than for the industrialized countries. Such growth in these countries, if coupled with their present technology choices, will result in rapidly growing greenhouse gas emissions. Stimulating introduction of improved energy technologies through international cooperation provides the opportunity to improve the environment in countries where greenhouse gas emissions would be increasing most rapidly. It is also an opportunity to greatly expand the scope of international market opportunities for U.S. businesses that provide energy-efficient technologies and environmental services. The world market for energy-efficient technologies exceeds $300 billion by the turn of the century. It is a market opportunity that can be seized by our active participation or be lost to foreign competitors.

Not only are the economic stakes high, but the environmental stakes are high as well. Take the situation in China, for example. Coal accounts for almost three quarters of China's electrical generation and China's coal-fired powerplants are relatively inefficient. By 2025, China's energy-related carbon emissions are projected to grow from a present level of about 300 million to 1.3 billion metric tons per year if no energy efficiency improvements are implemented. With assistance in making efficiency improvements, the expected increase could be cut in half.

As the nations move collectively to respond to the environmental threat, joint implementation will offer the potential for additional reductions of greenhouse gases, cost reductions or both.

Some U.S. companies have already begun to undertake cooperative projects that reduce greenhouse gas emissions with partners in other countries and,_in considering joint implementation options, we are drawing on their experience. For example, the forest management activities of New England Electric System, part of a larger "NEESPlan" strategy that meets both environmental and economic needs, provides an interesting project to protect forests in Malaysia. The independent power producer, AES, has funded three international projects in Guatemala, the Amazon, and Paraguay to increase forest sequestration of carbon partially offsetting

emissions due to their increased power generation. Other U.S. companies are participating as partners in projects to:

• reduce natural gas pipeline leakage in Russia,

• capture coal-related methane emissions in Poland,

• install photovoltaic systems in Latin America, and

• demonstrate clean coal technologies in the Asia-Pacific region and in Eastern Europe.

The Department of Energy and Brazil are collaborating to install U.S.manufactured solar energy systems in isolated rural Brazilian communities.

Other industrialized countries are carrying out projects that include reducing emissions internationally as well:

• Norway has projects in Poland and in Mexico that are reducing energy related emissions.

• The Netherlands Electrical Generating Board is investing $10 million in forest projects in Asia and Eastern Europe.

RECORDING VOLUNTARY ACTIONS TAKEN HERE AND ABROAD TO REDUCE EMISSIONS

Section 1605 of the Energy Policy Act, enacted through the diligence of this Chairman and the Ranking Minority Member, requires that DOE issue guidelines for the voluntary reporting of greenhouse gas emissions reductions by companies and interests. The Administration is committed to taking the lead in developing appropriate measurement and verification methods as part of this program. believe the Congress provided a far-sighted program to stimulate both domestic and international emission reductions. The system we develop for voluntarily reporting of emission reductions under Section 1605 should also provide a useful first step in developing an international system. At the International Energy Agency meeting, I found great interest in this topic and support for the U.S. efforts.

EMISSION OFFSETS BY SEQUESTERING CARBON IN FORESTS

One activity that may be utilized both internationally and in the United States is increasing forest carbon sinks. Tree planting and forest conservation and management programs hold great potential for reducing atmospheric greenhouse gas concentrations. They can also provide other valuable benefits, such as protecting biodiversity. Forest conservation groups like the Nature Conservatory and the Nature Rainforest Alliance are advocates for and active participants in carbon sink enhancement projects. In the Department activities, the winning bidder on a 240 MW plant for the Department of Energy's Bonneville Power Administration agreed to invest $1 million in sink enhancement to partially offset the power plant's added emissions. Our interest in these and other existing examples of sink enhancement as cost-effective greenhouse gas sequestration measures led us to convene workshops to look at how American ingenuity and creativity could be used in this sector. It is clear that the President's charge to use American ingenuity and creativity to produce a cost-effective plan-would suggest that tree planting and forest conservation and management programs will receive careful consideration in the selection of actions for the mitigation plan.

PRODUCING A DIVERSIFIED PORTFOLIO OF INITIATIVES

To summarize, international cooperation projects and initiatives to enhance forest sinks are approaches that provide a variety of opportunities: cost-effective emissions reductions, cooperation with developing countries, and expanded markets for U.S. business. I want to stress, however, we need a diversified portfolio of emissions reduction options; in this portfolio, we expect United States energy sources will play a prominent role in achieving domestic emissions reductions.

LIMITING PROJECTED GREENHOUSE GAS EMISSIONS BY ENERGY RELATED PROGRAMS

The initiatives to be included in the mitigation plan will supplement actions being taken to implement the Energy Policy Act of 1992, which—thanks in large part to members of this Committee-plays a critical role in achieving emissions reductions by the year 2000 and beyond. Energy-related activities are largely responsible for the current trend of growth in U.S. greenhouse gas emissions since carbon dioxide is emitted when fossil fuels are burned in motor vehicles, powerplants, buildings, and industrial processes.

THE ENERGY POLICY ACT PROGRAMS THE FOUNDATION FOR EMISSION REDUCTIONS

The emissions reductions from Energy Policy Act implementation are predicated on a combination of provisions for energy efficiency standards, energy market