Office of the Press Secretary

For Immediate Release December 11, 1997

(1:15 p.m. EST)


BY GENE SPERLING, Assistant to the President for Economic Policy JIM STEINBERG, Deputy Assistant to the President for National Security Affairs, AND LEON FUERTH, National Security Advisor for the Vice President

Room 450 OEOB

MR. STEINBERG: Gene will speak and we'll try to focus most of our time on answering your questions. I think you all know, yesterday in Kyoto more than 160 countries who gathered for the Conference of the Parties on Climate Change reached an historic agreement that will mark a very important first step in trying to address this critical question of climate change and global warming.

The negotiations, as you know, have been extraordinarily complex and intensive. The final session of the negotiations came together in Kyoto about a week ago. Beginning on Sunday night, they moved into a ministerial session. As you know, the Vice President joined them on Sunday and gave what I think by all parties there recognized was a real impetus to taking what was a negotiation that was in serious difficulty and creating the kind of environment in which it became possible after 72 hours of extremely hard and difficult negotiations to reach an agreement.

The agreement that was reached in Kyoto is largely, but not exclusively, focused on the developed countries. It is a framework for the developed countries to take on binding limitations. That follows very much the approach advocated by the President and the Vice President. It's an aggressive but realistic set of targets. It depends on market-based strategies to achieve the most cost-effective ways of achieving reductions in carbon emissions, and it will give the U.S. business a chance to compete on a level playing field.

It adopted the basic framework that we had proposed, particularly by allowing firms to use both emissions trading and joint implementation to achieve reductions. And we believe that it is an important basis for us to go forward.

Kyoto is not the end of the process as we've said from the beginning, that because the greenhouse gas problem is a global problem, it requires a global solution, and that to have such a solution it would be important to have meaningful participation by developing. Although there is an important first step in that respect, by the inclusion of joint implementation, we believe that there are still further steps that are needed to involve developing countries in the climate change regime.

There are a number of activities associated with these negotiations that will be coming up in the coming months, including a next Conference of the Parties in Buenos Aires next November. So there are opportunities, and I think that there is a strong feeling by our negotiating team and by the President and the Vice President that the kind of progress that we made in having developing countries become more and more involved through the last several months, including in the negotiations in Kyoto, provides a good basis for us to try to go forward to address the developing country issue in the coming months.

MR. SPERLING: I'd just emphasize that the agreement that was reached was very, very close to the position -- the United States position going in, and we thought stayed -- kept its faith with realistic and achievable and market-based approach that the United States had. As Jim stated, most of the -- many of the elements in terms of the timetable, in terms of the focus on the six gases, et cetera reflected positions the United States went in.

A couple points that I would just make is, one, that the seven percent in an apples-to-apples comparison is actually very close to our going in position. The way that it is -- our position was that we wanted to be at 1990 levels by an average of the 2008-2012 period. And what we focused on was how the negotiations affected the real efforts that we had. And to the extent that there was different ways of accounting that might change the number, that was not as important to us as what the impact -- the real impact, the real effort was.

And so by having in the agreement three of the gases have a 1995 baseline and by the fact that there is a more generous accounting for the use of (sinks), this made our number -- the position we had seem more below zero than reflected the real effort.

In terms of how it would affect on an apples -- if the question is, how does the minus seven in kind of an apples-to-apples basis affect ours, we think it would be about exactly where ours is, but it could be up to, at most, three percent below what we had suggested. So there's some ambiguity as to how the (sinks) would be scored or accounted for, but I think it's safe to say that it's basically in our range, though with the flexibility shown, it could end up being two or three percent below in apples-to-apples real effort terms, where we started out.

And in terms of what our goals were, in terms of the degree of flexibility that I think the Vice President and the President instructed Stu Eizenstat to have was very, very consistent with that. Secondly, the market-based approaches that are taken, the focus on joint implementation, the focus on emissions trading, we think are very essential in two ways: one, in ensuring that we are reducing greenhouse gas emissions in the most efficient, best bang for the buck manner.

Secondly, these type of market mechanisms encourage a better market dynamic -- more innovation, more market-based reasons for people to be innovative, not just out of their concern for the environment, but primarily because it creates profit incentives and market-based incentives in a way that's geared toward reducing greenhouse gas emissions.

And these two mechanisms are very much the product of the United States' position and the emphasis that the United States brought to it, and that the President and Vice President have stressed in repeated bilateral discussions over the last six months, and then finally, what we are very excited about and the President is excited about, when Jim and I -- to get a sense of his enthusiasm when we spoke to him about the agreement, he spent about three minutes feeling good about the agreement, and then was into ordering us to have a Cabinet-level meeting before Christmas on putting together a strong team to make sure that we were implementing all of the win-win technology-oriented solutions that we talked about or that he talked about in his National Geographic speech.

I think first of all as we've said, when we announce our budget in the State of the Union, there will be a package of at least $5 billion in combined tax incentives and federal R&D that will be designed to encourage improvements in climate change and reduction of greenhouse gas emissions. We will be looking for ways of doing industry-by-industry consultations.

There was one going on even in the last couple of days with Secretary Pena and Secretary Cuomo and some people in the housing industry, encouraging the use of energy-efficient products, a focus on our own federal procurement efforts. When we get into the beginning of the year, we will be having a proposal on electricity restructuring, which we think will be a double win in terms of reducing energy costs for American consumers, but also having a significant effect on reducing greenhouse gas emissions, and that we are -- the President -- these are the efforts that we can do at home. They are not mandatory efforts, they are win-win efforts, they are things that this President and Vice President can do by mobilizing the country, and I think on many of these, when you look at the R&D and the tax incentives, you will see some of the parties domestically now that are at odds come together to support them. So even some of the industry groups and the environmental groups who are often on opposing sides over the exact targets and timetables I think will join together with us in pushing for an active R&D and tax incentive policy.

And I think the President understands this is a long-term effort, and that his ability to mobilize the country, make the country more conscious of this problem and change behavior through both incentives and greater awareness and greater technology development is a lot of the progress that we can make during the remainder of his term.

MR. TOIV: Leon's going to speak, and then with your first questions, could you direct them to Jim, because Jim is going to be leaving very shortly after Leon's remarks.

MR. FUERTH: You should know I just received a beeper message from my secretary and associates saying, wake up, you're on camera. So I hope this is looking sufficiently alert. From the Vice President's -- from the Vice President's point of view, this agreement represents many different kinds of accomplishments, but I'd like to stress one in particular, and that is the coming of age of this issue in time for the world to properly consider what to do and to set in motion responses to it that are timely and potentially in scale with the size of the challenge.

It was not too many years ago when these issues were exclusively a matter of debate among environmental scientists and environmentally active groups. There has been a very rapid shift of consciousness among publics around the world and among political leaders around the world, but even though he and President Clinton have been directly involved in promoting that shift of consciousness, it is still surprising to see how far up the curve world opinion has gone in recognizing that this is an issue that faces everyone and that requires serious action in good time.

And the results at Kyoto are good news in that they indicate that the world understands and is reacting to the message.

MR. STEINBERG: For those of you in Miami who didn't hear it, I will repeat Barry's little caution that the reason -- if you turn your dial you're not seeing us on camera is because we're not, in fact, on camera.

Q When do you think the administration will submit this to Congress? What will it take to submit it? If you get China, Brazil and India, would that be sufficient? When do you think you might get them -- by Buenos Aires or -- after?

MR. STEINBERG: I don't want to put any artificial litmus test either on time or the precise configuration that we would think would be sufficient to meet the President's test, which is meaningful participation by key developing countries.

I think substantively, what we're going to be looking for is the fact that no matter how much effort the developed countries make, if there isn't a structure that also assures that developing countries are going to participate, then within 20 or 30 years, we'll find that rather than stabilizing concentrations of greenhouse gases, once again we'll be seeing greenhouse gas concentrations going up.

So you have to look at the package as a whole. There's no single way of getting there. But the test that will apply is to make sure that, taken as a whole, that there really is a global solution to this and that the steps we've put in place will deal with the underlying problem, which is the problem of climate change and global warming.

Q But, Jim, to answer his question, when exactly would you -- getting this to Congress, and would it be without these developing -- the promise that you're going to get

MR. STEINBERG: No. We've been very clear from the beginning; the Vice President reiterated again this afternoon that we will not submit this to Congress for ratification until we have a package which meets that test. That is, a good agreement on developed countries that we achieved in Kyoto, plus meaningful participation by developing countries.

The reason it's hard to project on the specific date is that we made real progress in Kyoto. We got joint implementation three months ago when the President began to discuss this in detail with other heads of state in developing countries. I think there was a strong concern that we couldn't even get joint implementation, but we made enormous progress and got joint implementation into this agreement. For those of you who were with the President in Bariloche, the commitment by President Menem was really a turning point. It was the first time we got another leader in the developing world to come out and support that.

And we've seen lots of countries come on board and by the time of Kyoto, got all of the parties to accept that, but we need more. And we will be working with countries both bilaterally and in the Conference of Parties format that is contemplated through the climate change process. There is an important meeting in Buenos Aries that will provide us another opportunity. There may be things that we can get done before then. It may be that we will not be able to complete it by the time of Buenos Aires. There is no artificial deadline on this.

Remember that the framework that was agreed by the parties in Kyoto was that the binding limits, even if adopted by countries, would not kick in until the year 2008. That's a decade away. So we want to get a good package. We're not going to ask the Senate to assume binding obligations through the ratification process until we have a package that makes sure that we have a global solution to this.

Q Will you have trouble implementing legislation on a deal that has not been ratified?

MR. STEINBERG: I think if you listen to the points that Gene made, what we want to do, and the present strategy in the beginning are things that are in the interest of the United States, whether or not we have a global climate change treaty. They are measures to improve the efficiency of our economy. They are measures that we would want to take whether or not there is a global regime.

They are things such as investing in energy research, in tax credits for the adoption of more energy efficient structures. So these are steps that we can move forward on now. They will be as part of the President's legislative and budget proposals for next year, and we absolutely want to move forward with them, but the nature of this is to take these kinds of strategies, these market-based strategies, in the early years to get good momentum going, and meanwhile we will continue to work with the developing countries.

Q The Vice President said he was prepared to walk away if we didn't get what he thought would be good for the American people or the United States. Notwithstanding Gene's explanation of how 7 equals zero, which I still don't understand -- why did he stay?

MR. STEINBERG: Well I think this is a remarkable achievement for the goals and the approach to this problem that the United States has wanted. I mean, all of you have seen some of the proposals that other of the developed countries have put out, which we thought were unrealistic, were not achievable, would have enormously negative impacts on the economy.

A lot of the proposals did not have the kind of market mechanisms that would allow us to reduce the cost. What you see here, particularly with respect to the developed countries, in every key respect the strategy we proposed was adopted: 6 gases, market-based mechanisms. I think it is very important to recognize that the timetable, too, was a very important part of our proposal.

Some of the countries proposed that the limits would kick in much sooner. We felt that that was very inefficient because the kinds -- of trying to make those changes too quickly would have caused enormous cost with very little environmental benefit.

So by picking the same -- what we call the budget period, that window of 2008 to 2012 as the first time that these binding obligations kicked in, we think that is a much better glide path for getting real effect on the climate but not trying to do it in ways that are very inefficient from the perspective of the economy.

Then on the overall level of effort, what we thought was appropriate, given both the nature of the environmental problem and the economic impact, this is, as Gene said, very, very close to what we proposed. It has all of the hallmarks of what we sought. And it's very important to recognize that all the developed countries who reached this agreement came in from very different perspectives. They had different proposals. They each have very different national circumstances.

The fact that we were able to drive a consensus and get them to come to closure on that is something, I think many people, even a few weeks ago, would have had serious reservations. This is a tremendous achievement, but it is only a first step. Now we are going to move on to the second.

I also think that in terms of thinking about getting developing country participation, there is no doubt some of the developing countries wanted to see whether we could really get a consensus among the developed countries. I believe the fact that we now have a framework for the developed countries to take on these obligations will help us in trying to get developing countries to participate.

Q Would you expand on what happens now in terms of what trying to negotiate and get the developing countries on? Is there any structure to the process, and do you think this will assume top priority when the President goes to both India and China next year?

MR. STEINBERG: In all the President's meetings, both with developed and developing countries, these environmental issues have had a very high priority. The President has had two opportunities, for example, to meet with the President of China over the last several months. This was very much at the center of the discussions. I'm sure in all of our discussions with Chinese officials, both at the President's level and below, this will continue to be an important issue.

These, as I said before, need to be worked both bilaterally and multilaterally. So will be working with key developing countries to engage with them -- certainly with India which is an important country in that respect. And this Conference of the Parties process -- you know, some of you may know this is technically COP-3 that took place in Kyoto. It will be COP-4 in Buenos Aries -- provides a framework for multilateral negotiations as well.

I think what we will be doing over the coming days is working to see what we've got out of Kyoto, see what we think we still need to get, and be developing our strategy to take advantage of our upcoming meetings, which don't necessarily have to be environmental meetings, but other multilateral settings. Just as we use the APEC meetings, for example, for the President to get his message across. It was a very great opportunity to talk to a very large group of countries.

Let me just take one or two more.

Q You talk about the glide path. We're talking not going from zero down to 7, but from plus 34 down to minus 7 by 2010. It seems to me a long way to go when there is no guarantee now that the market mechanisms -- in other words. Are industries going to behave any differently today than they would have three days ago, seeing that there is still no market mechanism assured, no joint trading definitely going to happen? How are you going to go down 40 points or whatever.

MR. STEINBERG: I think it would probably be better for Gene to address that. Let me just see if there are any more questions for me and thin I'll turn it over to Gene.

Q I guess Gene can answer this, it is more on the technology and the cost of clean technology.

MR. STEINBERG: Is there any more on the --

Q Yes. What level will the Buenos Aires conference be? Is a repeat of Kyoto, or --

MR. STEINBERG: I think it is administerial level, but I'd have to double check on that. My expectation is it would be sort of -- again, I mean, I think part of it is that there is -- the meeting is scheduled. I think the parties now, the Conference of Parties allows them all to come together. I think we'll be working with them now to try to shape the Buenos Aires agenda to make sure that we take the maximum advantage and understanding what has been done in Kyoto and what has not been completed at Kyoto, how we would like to use that meeting to go forward.

Q But, Jim, you -- this issue of how soon you have to get to the Senate. Are you saying that because if the mandatory targets don't kick in for a decade that essentially you guys have a decade to get ratification -- or, what's the window?

MS. STEINBERG: I don't think, Karen, there's any specific window. I think that we would like -- I mean, I think everybody would like to get to the point where we have a comprehensive agreement that involves all of the parties sooner rather than later. The more that people have confidence in what the framework is, that they know what the obligations are, the more they can take advantage of a longer time frame to get ready. We would like to move as quickly as possible.

But I don't -- what I'm saying is that there is no specific moment that, somehow, if you don't get it done by x-date, then it's no longer relevant. We're not trying to put an artificial limit on it, but we're also going to go as quickly as we can because we think the sooner we can get an understanding -- the sooner people move, the easier it will be to try to address these problems. The longer we wait, the harder it will be.

Q But will the U.S. sign it in the one-year window?

MR. STEINBERG: I expect that the United States, when the treaty is offered for signature, that the United States will sign the treaty. But we will do is, as a way of locking in the commitments of the developed countries with the understanding that before we take on the full set of obligations, we need to get meaningful commitments from the developing countries.

Q Does Gore have any specific trips set up to deal with this?

MR. FUERTH: It's a little too soon to have programmed specific trips to deal with this, but he will have opportunities in the near future to talk about this at a very high level. For example, there will be a meeting of the U.S. Binational Commission with South Africa tentatively scheduled in February that covers many different subjects, but this one is certain to come up for further discussion.

There will be a meeting of --

Q Will that be here, or --

MR. FUERTH: That will be in South Africa.

Q And Gore would go to that?

MR. FUERTH: Oh, yes. This is a normal, six-month rotational arrangement. But this subject will certainly be one that he would be interested in discussing with his opposite number there. And then there will be a meeting of the U.S.-Russia Binational Commission, otherwise known as Gore-Chernomyrdin. We're still discussing the precise dates with the Russians, but that could be in February or March. And once again, I think he would be very interested to discuss the outcome of the conference with the Russians.

Q And that's in Russia or here?

MR. FUERTH: That one will be in Washington.

In answer to your question, first of all, you can't -- as I said, maybe I should explain this a little more -- they are using a slightly different baseline than we did, so that minus seven is probably more like somewhere zero to minus two or three. I'll explain that.

First of all, when we looked at our six, all six gases, we had all of them having a baseline of 1990. They agreed -- internationally, it was decided that three of the gases would have a baseline of 1995. So that just took ours just as it was and made it from zero to minus one, just by counting a different baseline.

So, then, they count the sinks, which is the notion of things that absorb greenhouse gas emissions, and they decided to count not land management, because they thought that was too hard to figure out, but forestation things where forests will absorb -- that was counted. So that essentially just took our proposal, which was at zero, and the first thing made it minus one, and that adds somewhere from three to six to our proposal.

So if it only makes three percent, then we would -- then our proposal would have -- the exact same proposal with the exact same policies would have just been the same. If it ends up -- I'm sorry, I apologize -- it would have been minus three, because you had one from changing the baseline from three gases, and then you're getting somewhere between three to six from changing the sinks. If you got a full six, then this policy would simply be our policy.

It may -- our experts who are out there thought that it could actually only subtract three from ours, in which case we would have made a real effort of minus three. So the question is, our zero is equivalent to somewhere between zero and minus three percent if you're doing an apples-to-apples comparison.

So there is some flex -- I'm not saying it's exactly the same; there is some flexibility there. This standard could end up meaning that we'd be three percent below.

In terms of what you're trying --

Q -- before you go on to the next question, do I understand correctly that they are counting existing stands of forest as a credit toward emission reduction?

MR. FUERTH: They would be counting -- Peter? This is Peter Orszag, he's Special Assistant to NSC.

MR. ORSZAG: The way the agreement is now phrased is that sinks will not be included in the base period, so in the 1990 year forests that are currently growing and that continue to grow into the budget period, would be counted as a sink in the budget period. So basically, it's difficult to answer your question directly because currently we're neither in the base period nor in the budget period.

But forests that are growing or are being tended in the budget period would count as a reduction in that period.

MR. FUERTH: I mean, the main point is that it's a more generous scoring of forests than we had in ours, and so it made ours -- it made it easier for us to hit that. So in terms of when Stu left, and in terms of the instructions that the President and Vice President gave, they wanted to show flexibility. But what we were focused on was what would be the real effort difference, not how it was scored or counted. And this was in the two or three percent that the President and the Vice President had authorized Eizenstat to go as necessary.

Obviously, we were in constant conversation, so this was -- something was being discussed several times a day.

This goes, also -- let me go to your general question on the kind of environment you're trying to create. You are trying to change behavior in a way that will make the country less dependent on energy that results in high greenhouse gas emissions. One way that you're trying to do that is through positive price incentives, such as a tax incentive or making R&D cheaper, or mechanisms that might make it easier for people to use existing technologies that are underused.

The Department of Energy has a study that talks about the significant amount of progress that can be made even without further technological development if people were just using what was available now. So, first of all, you want to have positive incentives. Second of all, the greater consciousness that the President and the Vice President help the country have, makes more people interested in buying products and using things that would be efficient, and that creates a greater market and greater market incentives for people who have products that would be efficient.

The third is by having the joint implementation, what we've called the "clean development mechanism." That also creates market incentives in which, through partnerships with other countries, there's opportunities to have, you know, win-win situations where you would be helping retool aspects of another country's economy, but in ways that would profit to American companies and make it easier for us to hit our targets.

Now, fourth is to the degree that there is certainty that we will have a binding target from 2008 to 2012, that provides incentives for companies and industries to want to be more efficient in terms of their energy use, in terms of their carbon-intensive energy use.

So what you're trying to do through the combination of these things is create an incentive, a market incentive for people to adopt behaviors that will reduce greenhouse gas emissions.

Now, going to Karen's question, to the degree that that would make one want to come to the point where you are having the world locked into these targets because that creates the certainty that would make companies and industries to long-term planning and start finding ways with a 10-year lead or as long a lead as possible, to become more energy-efficient, so that when the binding period happens they've had a lot of lead time to make the adjustments. And that it can be done in a way that is not disruptive.

Now, the other positive thing, and the positive dynamic out there is that if there a certainty that people have to move in this direction it creates, and this is the Vice President's point, it creates very significant market opportunities. And we definitely have at least one major leader in the auto industry talk about the tremendous gains that could be out there for those who could kind of get there first with cars or other products that would be positive in terms of reducing greenhouse gas emissions.

But we have put down principles that we would have before we would bind ourselves. And that's what the President said in his National Geographic speech. And one of them was meaningful participation by key developing countries. So that is a prerequisite for us sending it to the Senate for ratification. So why we would obviously like to come to a point as soon as possible of getting developing countries to meaningfully participate -- that has to happen first. And that is a principle we're going to hold to.

And to just give you one example of why that is important: In 1995, if you looked at the amount of metric million tons of greenhouse gas emissions the United States was at 1424 and China was at 821. By 2015 the United States is projected to be at 1798 and China is projected to be at 1838. The point is that by 2015 on the existing path China would be a greater emitter than the United States. So, if you're serious about this as a global problem that requires a global solution from a policy perspective, not just a political senatorial perspective, but from a policy perspective you need the key developing countries to be meaningfully participating.

In terms of our agenda, the immediate agenda we have domestically we think is one that should be able to draw a lot of support. Clearly, when you get to the period 2008 to 2012 where you would have a binding emissions and trading obviously that would be a subject of great policy debate when that happens.

But if you remember the way we laid this out, we said that for the first five years we would be focussing on the types of R&D tax incentives, industry-by-industry consultation, electrical restructuring, those avenues -- that we would have a five year period of review. So the period when we would actually be trying to implement and pass a binding trading target is still a ways away.

What we'd like to do is have the certainty that that is going to happen as soon as possible because that is the type of thing that will start to encourage energy efficient behavior, energy efficient in the way that reduces greenhouse gas emissions.

Q Gene, can we just -- the implication of that is that, at that period they will face the certainty that energy prices will go up. That will be the long-term incentive that they see coming that they should be adapting toward now, and prices will not go up necessarily before then, but once you get to that period they have to go up; is that correct?

MR. SPERLING: At that point there would start to become a greater price differential between carbon intensive energy and less carbon intensive energy. It is important to note that does not necessarily mean energy prices would go up. Let me give you an example. If you want to look 14 or 13 years back, in 1984, gas prices per gallon in real terms were $1.74. Today it is $1.24.

So in other words -- through -- all sorts of things will effect -- including what is done -- electricity restructuring. All sorts of things will effect overall energy prices. The goal would be to have a type of policy that would not raise the average American's overall energy price, but just have -- but you would have in that binding period a greater differential between the price of more carbon-intensive energy and less carbon-intensive energy.

So if you are a company, and you know that's going to happen, if you can start making adjustments in a way over the next ten years, then you can have a completely painless transition. So it rewards early action, and it provides an incentive.

The reason why we laid out clearly that we would start, then, 2008-2012 is we wanted certainty in that target, but we also wanted to give the participants in the American economy a full decade to be able to make those kind of adjustments. That's why it was very important for us that we were able to successfully get the 2008-2012 budget period, even though at the end, the EU had been pressing for 2006-2010; and many of the other countries had been at a shorter time table.

Q Gene, so beyond the tax credits already mentioned for energy efficient structures, then you envision this proposal next year in the budget also calling for, say, R&D credits for developing a fleet of energy efficient fuels?

MR. SPERLING: I'm not going to announce what our exact tax credits is because -- I mean, I can't get into the details. I'll be honest: I know what the list of candidates are. But we really haven't gotten to the final decision making with the President, where I know exactly which ones he's going to choose and exactly how much, how large they will be at this point.

Q The PCAST report, which you said would be reflected in the budget, does call for -- not necessarily tax incentives, it could go R&D, as well -- but it does look into renewable energy sources, alternative energy sources, more fuel-efficient vehicles.

MR. SPERLING: Sure. I think there's no question that many of the things we do will come from the PCAST, which is the President's Advisory Commission on Science and Technology, from their recommendations. It probably won't be all of them.

And I think it's safe to say that some of the things we do will be affecting the transportation sector. Between the transportation sector, the building and the industry sector, it is the transportation sector where the growth is at the highest rate. So if we want to attack this issue, we obviously have to have some strategies that go at all three parts of those industries.

Let me just -- a couple of people beforehand had asked a couple of questions on just kind of what had gone right up. Let me just mention one or two of them. I can take some questions.

I thought that if you were looking for kind of a couple of key moments that we had here, I think probably at least two of them certainly involved the Vice President.

I think that while, clearly, Stu Eizenstat would have had the instructions to do as he did, I think having the Vice President come at that critical moment and be the person to state the commitment of the United States, and then to make clear that he and the President were instructing our negotiators to show the flexibility needed to get there was a critical moment.

I think a second critical moment was around midnight or so Tuesday night, Stuart Eizenstat had called back, feeling that they were very close to the agreement. In fact, actually the 8-7-6 formulation, where the EU would reduce by 8 percent, we would reduce by 7 percent, and Japan would reduce by 6 percent, as our negotiators thought, and as it turned out to be, that was a formulation that could close the deal.

However, at that point, Japan was unwilling to move from 5 percent to 6 percent. So at 2:00 a.m. that Wednesday morning, the Vice President called Prime Minister Hashimoto and had a very good conversation to him; and basically praised them for the leadership they'd shown at hosting the conference, and really reminded them of how far -- how remarkably far -- we had come, considering the differences between the EU, the United States and Japan at the beginning, and that we did not want to -- that the last thing anyone would want is for someone to say that the thing that prevented a deal from coming together was the host country not moving a final percentage point.

And it really was only moments after that that Japan did agree to go to the 8-7-6, which ended up holding over the next 15 hours. So I think that was a very critical moment.

When we woke up Wednesday morning, there was a slight setback at that moment, in that some of the developing countries had been objecting to the trading among developed countries, which we found to be surprising, since it was emissions trading among the developed countries themselves. That improved over the course of the day to a situation that we thought, while not complete, was far closer than where we wanted to be.

Around 9:00, Jim Steinberg and I and others spoke with Stu Eizenstat and Todd Stern and Katie McGinty in Kyoto. They were looking for what Stu called the "end-end" instructions, which was the final deal instructions.

We then had a conference call in Erskine's office with the -- the Vice President, himself, was there, along with Erskine and Jim Steinberg, Dan Tarullo, myself, Leon Fuerth. We had the President on the speaker phone, just before his event in the Bronx, the South Bronx, and basically went over the 8-7-6 formulation; what our position would be in terms of saying that we would agree to this, because we wanted to lock in this historic progress; but that we would not be able to send to the Senate for ratification until we had more meaningful developing country participation.

The President and Vice President both basically came together and were -- signed off on the final negotiating instructions that then went back to Stu.

At that point, even thought it didn't close for another ten hours, Stu never really had to come back after that. He was able to work within those guidelines, and we were able to have a deal, agreement by 7:00 or 8:00 our time. We were able to notify the President probably around 10:00 p.m. last night. And then he made, as you know, a departure statement yesterday evening I think around 10:30 or 11:00.

Q I have a question on clean technology. The Energy Department is saying that the savings from this clean technology is going to be equal or greater to the cost of -- let's say, the implementation of it on a life-cycle basis.

MR. SPERLING: I'm sorry, which is this that you're talking about?

Q The Energy Department has said that the savings from these clean technologies -- basically the cost is going to be equal or greater than the cost of implementation on a life-cycle basis. Isn't this taking into the assumption that let's say the average American family is going to put out the $200, $300, $400 to invest in a washing machine that cuts down on this or to change over to natural gas?

MR. SPERLING: I don't know exactly what the technologies are --- have been talking about, but let me tell you the logic of why we insisted on 10 years. If you put in a target that was like two years from now, then a lot of Americans who would -- or companies, would have to do sudden changes, before they would naturally be kind of in the life-cycle of their products.

The longer you wait the more somebody has to -- the more life-cycles you go through of different products -- and so the less disruption. So in terms of the economic logic of making sure you had some period of adjustment, if you were to tell somebody that they -- that this would be -- we could do better if they had a certain type of appliance, refrigerator or washing machine and you said you'd have to do it in two years, well you'd cause a lot of disruption because most people would hold onto those appliances for a long time.

If it's over a 12 or 14 year period, a lot of people, like a lot of companies, would be replacing those technologies anyway. Since you have to buy a new technology anyway, or something, it is very little -- it's not very costly at all. So that's one of the important reasons why we fought for the 2008 to 2012 period because it allows more people to make adjustments naturally, as they would be replacing products, whether at a consumer level or at a company level. I think that is very important to our position.

Q Has the NEC or the CEA done any modeling on what this seven number would actually do to economic growth between -- you know -- not only just the budget time but in running up to the budget time? And then there is one of the figures that some of the critics have bounced around -- is a $2,000 per person figure that they'd be paying more in energy costs by 2008 -- can you debunk that figure? Do you have the models to do that?

MR. SPERLING: You know, this is nothing -- this is nothing unusual when people what to criticize a proposal. They take a static model and they throw any disruption on it and you do an econometric model and since the assumption of any econometric model is things we're kind of working on an efficient basis, any disruption basically has a negative impact. The problem is I don't think most of us think the world works like that. And I think that you could do -- you could battle -- we could have a battle of kind of 15-year econometric model versus a 15-year econometric model and you would probably say to us, "But weren't you the same guys who told us that you couldn't have unemployment lower than 5 percent without inflation?"

I think the reality is that -- the way that we looked on it -- we did significant economic analysis -- we went through. But our feeling was that the econometric analysis kind of begs the question of all the inputs that you put in which is where the real policy issues are. So, if you put in that you think there will be tremendous amounts of technological innovation, if you put in the cost of not acting on what that does -- you can put things in that will help you come out to almost any position.

But what we were trying to do was not create a PR modeling device to battle for. We're trying to look at -- like policy makers have to do in any situation like this -- you have a lot of knowledge and you have a certain amount of uncertainty. And the question is what is the best way to act with that knowledge and uncertainty. And our view was that, first of all, the science was compelling enough that there was a discernable human impact, that there was a compelling and certain reason to justify action going forward.

Secondly, what we looked at was the basic principles that we talked about. What are the type of lead times that help people adjust. What are the kind of market mechanisms that are likely to spur industries to hopefully get into competitive battles for producing most carbon efficient products. You know, we looked at the models both that had been done -- both that had analysis internally -- I think there is a Stanford energy model, a World Bank analysis that talked -- showed that there were tremendous efficiencies if you had the potential for international trading.

So, when we were in there fighting so hard for joint implementation, and we were in there fighting so hard for missions trading that is based on our economic analysis that the more you -- the greater -- the more you allow people to search for the most efficient reduction of greenhouse gas emissions the more you will lower the cost.

But the real question is: We've gone in five-year periods so that at each five-year period we can look and evaluate what is working, what is not working and proceed in a common sense point of view. Because that is the only way -- you can model anything you want but ultimately you have to make judgments and you have to make judgments about what the impact will be.

I will say the following: There is a long history of dire predictions about environmental changes. If you were to look 25 years ago at people who opposed the Clean Air and Clean Water Act -- it was not part of their analysis that you could do those type of things and have 14 million jobs created over five years, 4.6 percent unemployment and 2.1 percent inflation. There were dire, dire predictions. But what's tended to happen is when you give the American economy enough time to adjust and incentives, market incentives, the power of the market, the power of technological innovation has tended to dominate and we've been able to do these type of things and still have a strong economy.

Q Gene, the President said --

Q -- Sport utility vehicles, Gene, what's the power of the market or technological innovation mean five years down the road for Ford Explorers and stuff? Are people going to find the price tag out of range or do you expect technology to make it more efficient?

MR. SPERLING: I don't want to comment on a specific thing. We will have a package that will come out and address that. I think it is the case that in the period I said between 2008 and 2012 there would be a price differential between more carbon intensive uses of energy and less carbon intensive energies. That may, and should have an effect on people's behavior. But I don't want to try to predict on, you know, whether a specific form of car that's -- I'm not going to try to predict here what the movement of the industry would be.

But again, I will say that there are many potentials out there with electricity restructuring as a perfect example of where there are way that we could lower the price of energy for consumers and at the same time create incentives for people to prevent the waste of two out of three units of electricity that could have a positive climate change effect.

Q Gene, the President said that because the US economic growth has been so strong since 1990 that therefore it would be a far greater burden for us to make similar cuts to the Europeans who have not had the same kind of economic growth and yet the agreement has us cutting it almost the same percentage as the Europeans whether it's 7 percent or 3 percent of whatever it actually is, it's a similar percentage. What happened to that principle? Why was that abandoned?

MR. SPERLING: The President was talking in a situation where the EU was asking for a 15 percent greater cut than we were. And he was explaining why we thought that the target we had was achievable and realistic which was basically to have 1990 levels by 2010 or the budget period of 2008 to 2012. In real terms that is basically where this agreement came out.

So, I don't know how to respond to what you're saying other than the argument -- the President was making an argument not about that somehow the EU had to have a different target than us but as to why our target was more realistic and achievable. And as you saw the agreement ended up having our timetable exactly, our target almost exactly and the joint implementation and emissions trading and the U6 gases that were very close to what we had. So, I think that's a relative vindication of the President's argument.

Q But just to follow up then, isn't it then therefore a far greater burden, what's been agreed to on the US then it is on the European community?

MR. SPERLING: The European community has a bubble which will -- I'm sure there will be quite a bit of analysis over many years over what the impact will be on different countries within the bubble. I don't want to try to give you an off-the-cuff prediction of what those differential impacts would be. The important thing for us was to have an achievable and realistic target that we thought would keep the US economy sound and strong. And I -- we could not realistically have come much closer to our goals going in then we did.

Q A lot of people in Congress want to kill this treaty and a lot of them say these measures are not necessarily win-win. Do you expect a tough fight over these?

MR. SPERLING: Well, I think that when this first happened -- when this first happened I think that some members of Congress had two misunderstandings. One, I think they didn't understand that the minus 7 they heard was actually far closer to the initial proposal. And secondly, what many of them said was that they would not ratify this treaty as it is which is our position as well. So, I think that as people understand that what we did was lock in historic progress -- that all of you who are covering this probably were not necessarily betting that there would be an agreement here and that the differences between the EU and the US would be able to be worked out.

When you have that type of historic progress among so many countries coming together and you make clear that what we were doing is locking in that progress and locking in that agreement and that we were going to go back and work to bring on meaningful participation by developing countries and that only then would we send the treaty to the Senate for ratification, then I think you can see that our position is very close to the position of some of the people who may have initially criticized it when they didn't understand what our posture was.

Thank you.

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