Page images

Many of the views expressed in the testimonies are encouraging. They show that the Administration has thought a great deal about this very complex and difficult subject and is searching for sound and cost-effective approaches. However, the Coalition is concerned that some testimony also reflects a lack of adequate descriptions of the current state of the science of climate change, a lack of understanding of the breadth and impact of industry climate change initiatives—particularly in energy efficiency improvements—and a lack of analysis of the economic impacts of climate change policy proposals.

Counselor Timothy E. Wirth of the Department of State articulated a number of key concepts that he believed should comprise the basis for U.S. actions, policies and strategies for climate change. They include the following principles:

1. The United States cannot address the climate change issue solely by itself.

2. The United States needs to both demonstrate its own resolve and leverage its example to encourage efforts to reduce emissions overseas.

3. The intent of the Framework Convention on Climate Change to allow countries to work together to address greenhouse gas emissions—to implement the Convention jointly—is very important.

4. As stated in his pre-Earth Day address, the President is not calling for more bureaucracy or regulation or unnecessary costs, but is seeking a cost-effective plan.

The Coalition strongly supports these four principles.

Serious and credible action is needed to demonstrate to other countries that the United States resolves to address climate change concerns effectively. However, there is legitimate concern about the adoption of a political commitment to reduce emissions to 1990 levels by the year 2000 before the actions needed to achieve such a commitment are identified and evaluated and, therefore, before their impacts on economic growth, jobs, international trade and competitiveness are understood. Difficulties with such a commitment are:

1. Too often in the recent past, such political commitments from other countries have been mere rhetorical promises, not based upon specific programs evaluated and selected as being cost effective and environmentally effective. As long as Organization for Economic Cooperation and Development (OECD) countries take such an approach, countries with economies in transition and developing countries are encouraged not to take these commitments seriously and not to undertake serious actions themselves.

2. United States resolve can only be demonstrated by a program of actions that clearly have been carefully chosen in the light of their costs, their environmental effects and their relationship to national circumstances. By showing that the process for responding to climate change concerns is a rational, deliberative process based upon costs and benefits, the United States demonstrates that it is prepared for a strategy of serious response rather than mere rhetoric. This will encourage other countries to do the same.

3. Reducing emissions to 1990 levels by 2000 is a goal that is scientifically and economically arbitrary: The costs and benefits of reducing emissions are both functions of the timing and rate of reduction, and the optimum timing and rate of reductions are unknown.

4. While the President's commitment is political in character rather than legally binding, some may attempt to turn it into a binding requirement in domestic or intemational law. Given the scientific and economic uncertainties of the global climate change issue and the need for flexibility in the U.S. response, that would be a serious mistake.

The United States must support its announcements of major climate initiatives and revisions to its National Action Plan with frill analyses of the impacts on economic growth, jobs, international trade and competitiveness. The degree to which U.S. emission reductions in energy-intensive industry are offset by increases in emissions in developing countries and countries with economies in transition that supply energy-intensive products to meet U.S. demand must also be addressed. For example, one study has shown that 70 percent of the emission reductions from a unilateral OECD-wide carbon tax would be offset by emission increases in the rest of the world because of a shift in producing energy-intensive products from OECD nations to other countries, 1

International Energy Efficiency Comparisons Should Be Carefully Drawn. Wirth referred to the comments contained in the President's pre-Earth Day speech that the U.S. economy is less energy efficient than "every other advanced nation" and specifically that the German economy “uses half the energy we do to produce the same amount of goods."

1J. Pezzey, “Analysis of Unilateral CO2 Control in the European Community and OECD,” 13 Energy Journal 159-71 (1992).

This statement must be carefully examined, since it implies that the United States could or should reach the same level of energy consumption as Germany. This is not feasible, nor does it make economic sense. It also fails to account for sig. nificant improvements in U.S. energy efficiency,

For example, over the past two decades the United States has achieved a 30 percent improvement in the use of energy per unit of gross domestic product (GDP), significantly better than improvements in energy intensities in Germany and most other industrialized countries and comparable to changes in Japan. Moreover, the rate of improvement in new car fuel economy in the United States has been about twice as high as other major industrialized countries.

Current U.S. levels of energy use generally are higher than the other major industrialized countries. For example, U.S. residential energy use per capita is 1.5 times as high as that of Germany and 3 times as high as that of Japan. However, energy use per capita presents a misleading picture of energy efficiency, because it does not adequately distinguish among the particular geographic, demographic, socioeconomic and other national circumstances in each country that affect energy consumption. As indicated above and explained below, where adequate data are available to permit a more detailed and consistent comparison of unit energy-efficiency levels, the United States is in fact a leader or among the leaders in energy efficiency.

Examples of U.S. leadership in energy efficiency include the following:

1. United States has not only made the largest improvement in new car fuel economy, it also is the only major industrialized country that has improved overall passenger automobile unit energy efficiency (measured as automobile energy consumption per passenger-mile traveled) over the past two decades. Overall passenger automobile unit energy efficiency in other major industrialized countries actually declined, because increases in the number of vehicles, size of engines and cars, and passenger miles traveled have more than offset gains in new car fuel economy in those countries. Total U.S. automobile energy consumption is higher than other countries because of greater travel distances and more extensive highway infrastructure, which in turn results in greater passenger-miles traveled and a preference for larger automobiles for reasons of safety and comfort.

2. The energy efficiency of residential heating in the United States (adjusted for climate and dwelling size) is better than that of most other major industrialized countries. Overall residential energy consumption in the United States is higher because of larger dwelling size and greater use of central heating and air-conditioning systems. U.S. appliance energy consumption is higher than that of other countries because of the increased use of appliances rather than lower appliance energy efficiency.

3. The United States improved its manufacturing energy intensity (the amount of energy used to manufacture a dollar value of product) by 50 percent from 19701988, the largest improvement among industrialized countries. United States, Japanese, German and French manufacturing energy intensity levels have been converging for all but the most energy-intensive industries. The slightly higher levels of manufacturing energy intensity in the United States appear to be due to differences in industry structure, greater use of raw materials, lower levels of capital investment and other factors. 2

It is critical for the U.S. National Action Plan and supporting analyses to take into account explicitly the unique national circumstances of the United States, especially where such circumstances call for the United States either to take actions that other nations are not taking or not to take actions that others choose to take.

Joint implementation is one of the most important aspects of an effective strategy of response to climate change. The United States should seek out opportunities for low-cost emission reductions that can be achieved in cooperation with other countries. It should also count its contributions to these reductions.

In addition, the United States should make it clear that it treats joint implementation reductions in a voluntary, non-legally binding manner. Specific reductions or target levels are not required either internationally by the Framework Convention or domestically by U.S. law. Such requirements are undesirable as a matter of economics and unnecessary as a matter of policy.

The testimony refers in general terms to modifying or strengthening the Framework Convention without specifying what kind of changes are anticipated.

The Coalition strongly believes that it is premature to consider changes in the Convention. Institutions, procedures, objectives and means of pursuing those objectives have been established in the Convention to provide a framework for a longterm international effort to address climate change. How much this framework can achieve will only be known as we work together in implementing it. Any attempt to change the Convention now could have serious repercussions in two areas:

2 See EOP Group, Inc., Leadership in Energy Efficiency: A Comparison of the United States Versus the Other Major Industrialized Countries (March 1993).

1. Any strengthening of the Convention would probably only impose new obligations that would be legally binding on OECD countries, despite the fact that they cannot address the issue of ever-increasing greenhouse gas emissions without the help of developing countries and countries with economies in transition. The negotiation of such changes would divert attention from the serious issue of reconciling the need for economic growth in developing countries and countries with economies in transition with the desire to avoid drastic increases in emissions.

2. A number of very contentious issues relating to such matters as financial assistance and technology cooperation would be reopened.

The Current State of the Science of Global Climate Change Should Be Accurately Reflected.

Deputy Administrator Robert M. Sussman of the Environmental Protection Agency gave a summary listing of some of the conclusions of the 1989 EPA report, The Potential Effects of Global Climate Change on the United States, as reasons for action now. However, his testimony is based largely on older EPA reports that do not reflect the current state of the science of climate change. In addition, the testimony does not adequately describe the degree of uncertainty in the current state of knowledge about potential changes in climate, potential impacts of climate changes and potential economic effects of climate change impacts.

For example, the February 1992 Supplement to the Intergovernmental Panel on Climate Change Scientific Assessment stated (at 30):

Since the 1990 report there has been a greater appreciation of many of the uncertainties which affect our predictions of the timing, magnitude and regional patterns of climate change. These continue to be rooted in our inadequate understanding of: sources and sinks of greenhouse gases and aerosols(,) . . . clouds[,) . . . oceans,) .. polar ice sheets . . . (and) land surface processes and feedbacks .

Similar uncertainties and inadequacies of understanding exist with respect to the impacts from climate change on natural and human systems, and with respect to economic considerations. Research is underway in all of these areas. In many areas the 1989 EPA report has been superseded by a greater recognition of these uncertainties and the inadequacies of our knowledge.

The National Action Plan should fully describe the status of the U.S. Global Change Research Program and its implications for national actions.

The National Action Plan Should Be Expanded To Include the Full Panoply of Voluntary Actions by U.S. Industry.

Sussman's testimony describes, in some detail, the voluntary programs initiated by EPA, the so-called green programs. However, the testimony does not provide an adequate description of the many voluntary actions by industry and others in the private sector that will result in reductions of greenhouse gas emissions. The U.S. National Action Plan should contain a full description of these efforts.

Voluntary programs have been and should continue to be one of most important parts of the U.S. National Action Plan. Actions must be economically sound. Many believe that there are very large potential reductions in emissions that can be made at low cost that are not now made because of the costs of individually developing information about the actions or because of other market failures. A Government role in overcoming those market failures and then allowing industry and customers make their own sound decisions is likely to be one of the most cost-effective ways to reduce emissions. The National Action Plan should include a vigorous, coordinated strategy for overcoming market failures and encouraging voluntary actions.

The Administration Should Make Full Implementation of the Energy Policy Act of 1992 a Cornerstone of its Climate Change Policy.

Assistant Secretary Susan F. Tierney of the Department of Energy (DOE) noted that many of the provisions of the Energy Policy Act of 1992 (EPAct) will reduce U.S. greenhouse gas emissions, but did not provide a comprehensive statement on this matter. The National Action Plan should be based upon full implementation of EPAct, and it should include a detailed assessment of the reductions that can be achieved as a result of such implementation.

EPAct contains a number of provisions that, when fully implemented, will have a significant impact on greenhouse gas emissions in the years and decades ahead. In its report on H.R. 776, the House Energy and Commerce Committee stated:

The committee expects that, if fully implemented(,) H.R. 776 will result in a substantial reduction in U.S. greenhouse gas emissions relative to forecasted levels. The bulk of these reductions result from the programs that will demonstrate and transfer advance clean coal and renewable technologies abroad, and from the domestic energy efficiency and renewable energy initiatives. The provisions on electric utilities, alternative fuels and coal bed methane are also significant.3 The Coalition has undertaken a special analysis of EPAct

. This analysis identifies almost 100 specific provisions in 18 separate titles affecting greenhouse gas emissions. Many of these provisions appear to be new or expanded when compared to the National Energy Strategy proposals that formed the basis for the original National Action Plan.

Section 1601(1) of EPAct requires a report to Congress that includes an assessment of the feasibility and economic, energy, social, environmental, and competitive implications, including implication for jobs, of stabilizing the generation of greenhouse gases in the United States by the year 2005.” This section also requires assessments of a number of other climate change related matters, including recommendations made by the National Academy of Sciences. The National Action Plan should address the requirements of section 1601 as well as other study and assessment provisions, such as sections 1602 and 1604.

The administration should conduct a Comprehensive Economic Analysis of the National Action Plan.

None of the testimony of the three witness discusses the economic impacts of the National Action Plan. The Coalition believes that this is a glaring omission.

The National Action Plan must be explicitly based on a comprehensive analysis of its impacts on economic growth, jobs, international trade and competitiveness. It is important that this analysis be explicitly and fully described in the Plan so that assumptions and methodologies are clear, and both domestic and international readers can understand and judge the credibility of what the United States is proposing and the reasons for proposing those actions instead of others. A full-blown presentation will also give the Plan credibility and encourage others to present their actions for review and critique. The presentation should include:

1. A detailed baseline economic assessment.

2. An assessment of the economic impacts of proposed actions, including the impacts on economic growth, jobs and international trade and competitiveness—issues of great significance to the Coalition and this country.

3. An economic assessment of alternative strategies.

4. The impacts of proposed actions on greenhouse gas emissions in the United States and, where offsetting emission increases elsewhere are likely to arise due to economic responses to U.S. actions, the net impacts on global greenhouse emissions.

5. The impacts of other economic policies on emissions. For example, in recent years the United States has consistently invested a smaller proportion of GDP than other countries, possibly due to tax and monetary policies that do not encourage investment. This lower rate of investment slows up the introduction of emission reducing technologies that would otherwise be economic.

Technology Cooperation Activities Should Be Strengthened and Expanded.

The testimonies acknowledge a number of considerations relating to technology cooperation and the role that such activities should play in a U.S. National Action Plan. However, the administration's statements do not provide a comprehensive statement on technology cooperation or present a strategy for its implementation.

Such a strategy must recognize the following points:

1. New technologies and technological practices will have to be developed to make it possible to address climate change issues effectively.

2. Overtime, the existing capital structure of the developed world will absorb technologies that are both economically sound and environmentally beneficial. At the same time, economic growth in the developing world must attempt to utilize costeffective and available technologies while leap-frogging over those technologies that are not environmentally benign. Since global climate change is result of all countries' greenhouse gas emissions and since the vast majority of future emission increases will originate from developing nations and countries with economies in transition, failure to apply new technologies in those countries will doom efforts to control emissions.

3. With a well-considered and systematic strategy, the U.S. Government and private industry working together can develop technologies and practices and assure that they are implemented in developing countries and countries with economies in transition as well as developed nations.

The National Action Plan should include a systematic and coordinated strategy to develop new technologies and practices and to cooperate with developing countries to assess, adapt to and implement the best of available and new technologies. Government and the private sector should have joint roles in the U.S. strategy.

3 H.R. Rep. No. 474, 102d Cong., 2d Sess. 152 (1992).

U.S. industry has proposed the Technology Cooperation Corps as a mechanism to promote U.S. industry-led technology cooperation efforts. While there appears to be general support for this concept, to date there have been little or no concrete steps taken by the Clinton Administration to develop the Corps. Administration technology cooperation efforts, including implementation of the new provisions of EPAct, can be greatly leveraged through greater coordination with industry efforts. For example, industry-led technology cooperation would be greatly assisted by better access to Government information and opportunities for technology transfer, and by a fully coordinated Administration effort to provide appropriate financing for the transfer of such technology.

Programs partially or fully supported by the United States at the Agency for International Development, the Export-Import Bank, the World Bank and regional development banks should be reassessed to facilitate transfer of U.S. technology and improve the competitive position of the United States in this arena. U.S. foreign aid programs should also be reexamined to determine how technology cooperation programs can be promoted. In addition, the Department of Commerce, DOE and EPA all have important resources and programs that could provide needed information to industry. The DOE program of Assisting Deployment of Energy Practices and Technologies (ADEPT) is a good example of technology cooperation. ADEPT will assist developing countries and countries with economies in transition in their choice and application of new energy technologies. These programs should be better coordinated among the agencies, and private sector interaction should increase.

Other issues that need to be addressed in the development of the administration's technology cooperation strategy are protection of intellectual property rights and barriers to collaboration among private sector firms. Inadequate protection of intellectual property rights creates substantial barriers to technology transfer. 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 continue to demand that foreign governments and firms protect U.S technology and property rights.

The uncertainty related to the antitrust implications of private firm collaboration also poses a barrier to technology cooperation. Private firms frequently are reluctant to establish joint research and technology development programs with other firms. Yet, because of the prohibitive costs and highly speculative nature of technology development programs, private companies are hesitant to sustain the costs alone. Thus, rapid development and diffusion of technology may suffer. If the uncertainties related to antitrust enforcement were reduced, private companies could form joint ventures, merge their resources, and develop and introduce new products more quickly.

The Coalition continues to believe that U.S. global climate change policies must be based on sound scientific and economic assessments. Specifically, the administration should undertake a comprehensive economic analysis of the U.S. National Action Plan, in accordance with our specific recommendations.

The Coalition further believes that command and control measures, such as targets and timetables, are unnecessary and should be avoided in any National Action Plan. The United States is the world leader in the global climate arena, as exemplified by the country's quick ratification of the Framework Convention and early release of the Plan, and by passage of the Clean Air Act Amendments of 1990 and the EPAct. The Coalition believes that the administration should make full implementation of EPAct a cornerstone of its climate change policy, and that strengthening or modification of the Convention would be premature. In addition, the myriad of voluntary actions being pursued by the private sector should be encouraged and expanded by the Government before further costly, Government programs are imposed on U.S. industry. Finally, technology cooperation activities should be strengthened and expanded, and both the Government and the private sector have joint roles to play in this area.


DEFENSE COUNCIL On behalf of the Natural Resources Defense Council, I appreciate the opportunity to contribute to the hearing record on the administration's new policy on global climate change. NRDC is a non-profit environmental protection organization, founded in 1970 and supported by 170,000 members. NRDC participated as an observer throughout the process of negotiating the United Nations Framework Convention on Climate Change as well as in the deliberations of the Intergovernmental Panel on

« PreviousContinue »