Stuart E. Eizenstat, Under Secretary for Economic, Business, and Agricultural Affairs, U.S. Department of State, Speech at the Center for National Policy, "Fighting Global Warming: From Kyoto to Buenos Aires and Beyond," Washington, DC, October 28, 1998


"Fighting Global Warming: From Kyoto to Buenos Aires and Beyond"

As Prepared For Delivery

Good morning. I am especially pleased to be at the Center for
National Policy. I was present at its creation and involved in
its initiation, served on its Board for many years, and became a
great admirer of Mo Steinbruner, the Center's talented President.
I want to talk about the progress the Administration has made on
climate change, and what we hope to accomplish at the upcoming
negotiations in Buenos Aires. I had the privilege of heading the
U.S. team in Kyoto, and will do so again in Buenos Aires. We have
a fine team of experts working on this issue. It shows in the
tremendous progress we have made towards achieving an
international approach that can insure at a reasonable cost
against the potential damage of climate change.

In just under a year since some 160 countries reached the
historic Kyoto agreement on climate change at the third
Conference of the Parties (COP3), we have made significant
progress on multiple fronts. We look to COP4 in Buenos Aires not
as a place for spectacular diplomatic breakthroughs as we
accomplished in Kyoto, but as a significant milestone in efforts
to consolidate our gains and to make concrete and operational our
Kyoto achievements.

Kyoto Accomplishments

Kyoto was a genuine breakthrough. For the first time markets will
be put to work to help international efforts to address an
environmental problem -- climate change, the most profound
environmental challenge of the 21st century. International action
was taken in response to powerful scientific consensus that
global warming is indeed occurring, and that the cause is
greenhouse gas emissions related to human activity. In Kyoto,
industrialized countries took on binding targets to cut aggregate
emissions by 5.2% below 1990 levels.

The Protocol reflects the environmentally and economically sound
approach of the United States. It is strong and realistic; it is
market-based and flexible. As the U.S. called for, the Protocol
established a commitment period of 2008 to 2012, which gives us
start-up time to adjust and a five-year period over which to
achieve our emissions reduction goal. As we wanted, the Kyoto
agreement also provided similar but differentiated targets among
developed countries to allow for varying economic profiles and
levels of industrialization. We achieved the inclusion of all six
gases that contribute to the problem, over the objections of the
European Union and Japan. The United States also pressed
successfully for coverage of carbon "sinks" in the Protocol,
knowing that agriculture and forestry practices can help reduce
carbon in the atmosphere and should be recognized as a tool in
fighting global warming.

Perhaps the greatest achievement at Kyoto was the inclusion of
the market-based, flexibility mechanisms we championed to
supplement domestic measures to reduce greenhouse gas emissions.
These mechanisms provide the flexibility and incentives to help
us find the least-cost reductions worldwide to achieve Kyoto's
overall emissions target. The flexibility mechanisms include
international emissions trading, the Clean Development Mechanism
(CDM), and Joint Implementation (JI).

Emissions trading enables those countries with binding emissions
targets to participate in an international market that for the
first time gives explicit value to emissions reductions. If the
cost of abatement in a given country is low by world standards,
and that country is therefore able to get below its emissions
target, it would have allowances to sell to those countries where
abatement costs are relatively high. Both a seller and a buyer
willing to pay for the allowance would have to play by the rules.

Kyoto's Clean Development Mechanism involves voluntary, project-
based investments by developed countries and their firms in
developing countries. These would be win-win investments.
Countries with binding emissions targets would get credit toward
their targets for making beneficial investments in developing
countries that  provide capital and clean technology. Developing
countries would get world-class technology as developed countries
act to meet their targets. Joint Implementation allows developed
country investors to share efforts on environment-friendly
projects that limit emissions, and to share credit for the
results against their emissions targets.

The Administration's economic analysis underscores the importance
of trading in achieving emissions reductions agreed at Kyoto
cost-effectively. It shows that an effective international market
for trading emissions allowances among industrialized countries
alone could dramatically lower the resource cost to the United
States. At the same time, making agreed reductions in greenhouse
gases would help the United States avoid the damage of climate
change, which some estimates place in the billions of dollars
annually, and enjoy related health and other benefits. Moderate
estimates of the economic cost of meeting the Kyoto targets
assume implementation of the very flexibility mechanisms for
which we fought at Kyoto, and now work to make a reality.

The Kyoto framework reflects the view that climate change is a
serious, global environmental problem which must be addressed at
the lowest cost to the world economy, and experience that it can
be done without a large bureaucracy, overly-intrusive regulation,
or high taxes. The trading system used in our domestic SO2
program to reduce acid rain, for example, has achieved our
environmental goals at just 50 percent of initial cost estimates.
Despite the complexity of making Kyoto's provisions operational,
and of building confidence in the international community that we
can make them work to the benefit of all, much has happened in
the last year to make this task all the more urgent.

It is becoming harder for skeptics to contest the science.
Significant new findings over the past year reinforce the broad,
scientific consensus that human activities are disrupting the
Earth's climate. New analyses of tree ring, ice melt, borehole,
and satellite data provide further evidence that global
temperatures are rising as a result of increasing concentrations
of greenhouse gases. Following 1997, the hottest year on record,
the first nine months of 1998 have been even hotter. This year's
extreme weather events have been of historic proportion and
devastating cost -- from raging fires in Indonesia, the Amazon,
Florida, and Mexico, to drought in Texas followed by life-
threatening floods, and floods in China and Bangladesh that left
tens of thousands homeless, hungry, and sick. These events are a
window on what the Earth may be like with global warming.

Progress This Year

The past year has also seen tremendous progress in our fight
against global warming. First, we have stepped up our domestic
efforts. Since ratifying the original climate change treaty in
1992, the United States has put more than 50 domestic programs in
place to help address the problem. There should be no doubt about
our commitment to aggressive, domestic action. In just-completed
budget negotiations, the Clinton Administration secured a 25
percent increase in investments against climate change -- in
energy efficiency, renewables, and R&D -- with resources now
totaling some $1 billion for FY1999. These funds will go to a
wide array of programs such as the Partnership for the Next
Generation Vehicle, where we expect to see new U.S. cars in
production early in the next decade with triple the gas mileage
of today's cars, and the Partnership for Advancing Technology in
Housing, or PATH, which will make new housing up to 50 percent
more energy efficient. In addition, the Administration's
electricity restructuring plan will increase efficiency, spur
renewables, and help cut emissions as well.

The Administration will come back with a request for more in the
FY2000 budget, including added emphasis on incentives for farmers
and others to explore opportunities in biofuels and to identify
how land use practices can help clean carbon from the air. These
are promising areas through which our agriculture and forestry
sectors may well benefit from our efforts against global warming.

Second, the Administration has undertaken intensive consultations
and mutual education efforts with business, agriculture, and
other citizens groups. We have successful discussions with
industry groups to improve energy efficiency and cut emissions.
Credit for early action on climate change is high on their list
of priorities and on ours, so we welcome the bipartisan
legislation on this issue recently introduced by Senators
Chaffee, Liebermann, and Mack. Industry is taking active steps
already. Important companies such as IBM, Sunoco, British
Petroleum, Shell, United Technologies, and Intel have recently
committed to reduce significantly their greenhouse gas emissions.
BP is putting in place an internal trading system designed to
keep the cost of meeting this goal as low as possible. A number
of these firms plan to start trading emissions amongst themselves
as well to cut the cost of planned reductions. We will be very
interested in the results of these innovative efforts.

Third, over the last year, we have also mounted a comprehensive
diplomatic effort to encourage developing countries to become
meaningfully involved in limiting the increase in their
emissions, consistent with needed growth. While we intend to sign
the Protocol to help lock in the gains made at Kyoto, the
President has indicated he will not submit the Kyoto Protocol for
advice and consent by the Senate without meaningful participation
by key developing countries. Many developing countries remain
resistant to emissions targets, and mistrust the flexibility
mechanisms. But our discussions with them have become more
regular, substantive, and detailed, and they are becoming aware
of their potential vulnerability to climate change and of the
benefits of taking action.

We are engaged with dozens of developing countries through our
bilateral assistance programs to encourage them to take steps
toward sustainable development. With $193 million appropriated
for the Global Environmental Facility in this year's budget talks
to cover U.S. arrears, the Facility should be able to complement
some of these efforts through their climate-related programs.

Developing Countries

In our approach to developing countries, we find it helpful to
group them into several categories. This recognizes the
substantial differences among them in terms of emissions
profiles, levels of development, capacity for effective action,
and economic and political conditions. One category of developing
countries combines relatively high-income developing and newly
industrialized countries. This includes new members of the OECD
and those nations that aspire to OECD membership. We have not
only pressed hard bilaterally for their participation, but have
achieved the backing of other countries to urge them to take on
binding growth targets to limit the rate of increase in their
emissions.

In another category are large emitters with low incomes. None of
these countries to date has indicated a willingness to take on
quantitative targets. We have engaged vigorously with them at the
highest levels and will continue to do so. The United States now
has in place a high-level dialogue with China, for example,
through which we have stressed the potential impacts of climate
change on China as well as the health, energy efficiency, and
other benefits of early action.

There is another, mixed category of middle-income countries of
varying sizes and emissions levels. We see particular
opportunities in Latin American and the Caribbean. Argentina, as
chair of the COP4 meeting, is an important leader in this
process. Brazil introduced the Clean Development Mechanism at
Kyoto, and has led on renewable energy and alternative fuel
strategies in the region. We have had setbacks in our progress
with other middle-income countries in Asia due to recent economic
events, but we continue to work with them bilaterally and
multilaterally.

Finally, there is a sizeable category of poor countries with low
emissions and low incomes. Although climate change often poses
serious potential threats to them, they have limited capacity to
undertake the kinds of actions and commitments that we expect of
countries with more advanced economies. These include, for
example, most of sub-Saharan Africa. We are working with such
countries to build their capacity to participate in solving the
global problem of climate change. The small island states that
are uniquely vulnerable to climate change also offer
opportunities for cooperative activities.

Buenos Aires and Beyond

At Kyoto we created the architectural structure of international
efforts to address climate change. We hope Buenos Aires will
create a process for installing the interior plumbing and
circuitry to make Kyoto a reality.

First, in Buenos Aires we will oppose any backsliding on the
grand bargain that was struck in Kyoto. At Kyoto, we joined
others in taking on a strong emissions reduction target. We did
it with the clear understanding that, like the European countries
have done with their Bubble, we would be able to use the
flexible, market-based Kyoto mechanisms without arbitrary limits
to meet our obligations cost-effectively. That agreement must
hold.

We have formed a successful alliance since Kyoto with eight other
like-minded countries -- (including Canada, Japan and Russia) the
"Umbrella Group" -- to develop common positions on Kyoto's
flexibility mechanisms. With us they strongly oppose efforts by
the EU countries to restrict the legitimate use of emissions
trading and the other agreed flexibility mechanisms.

There should be no limit on how much the United States can do at
home -- and we are making aggressive efforts -- but neither can
there be a limit on what we can accomplish through agreed
flexible mechanisms. We will resolutely oppose efforts to set
arbitrary limits on trading. They would impose unsustainable
costs on the U.S. economy and actually discourage deeper
reductions in greenhouse gas emissions.

Second, we will stress that Buenos Aires should avoid divisive
polemics regarding caps on the flexibility mechanisms and
concentrate instead on Buenos Aires initiatives to develop a work
plan and a working group process, with clear timetables for
elaborating the rules for trading and the other market
mechanisms. This is urgent if we are to make sufficient progress
to have the CDM up and running by 2000 as the Protocol provides.
At the same time, the rules must not entail too much red tape or
excessive bureaucracy. The Buenos Aires work plan must also
recognize the need to develop appropriate mechanisms for
measurement, reporting, and compliance in a system with high
standards.

Third, progress on developing country participation must also be
made at Buenos Aires; we cannot solve the problem without them.
We will hold intensive bilateral and multilateral discussions
directly with developing countries and work to build the momentum
for action. We will encourage discussion of these issues among
the Parties in Buenos Aires.

November's international negotiations on climate change in Buenos
Aires will not have the glamour and novelty of Kyoto. But they
can advance the tough work needed to make Kyoto's remarkable
promise a reality. We hope to get beyond rhetoric and ideology
and shape the tools needed to get the job done for the benefit of
all.

Thank you.


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