Statement of Kathleen A. McGinty, Chair
Council on Environmental Quality
Executive Office of the President
Before the
House Science Committee
February 4, 1998

Mr. Chairman, and Members of the Committee:

I am pleased to be here today to describe the agreement reached in Kyoto and our activities, both at home and abroad, to follow-up on the substantial progress achieved in these negotiations. The Kyoto Protocol is an enormous step forward in what will undoubtedly be a long term global effort to safeguard our earth's climate system from unprecedented human-induced harm and to protect our children and grandchildren from the dangerous consequences that could unfold if we fail to heed the warnings from the world's leading scientific experts.

I am very pleased to report that we made tremendous progress in putting into place most of the key building blocks for a sustainable, market-based system for achieving reductions in greenhouse gases. All Americans can be proud of our achievement: U.S. leadership made the difference; the power and integrity of U.S. ideas won the day. On behalf of the President and Vice-President, I would like to commend the skills, perseverance, and dedication of the United States delegation at Kyoto. Nine agencies were represented in Kyoto. Led by our very able State Department team and Under Secretary Eizenstat, the U.S. delegation served our country well and honorably.

Our efforts following up on Kyoto are directed at achieving further progress in obtaining meaningful participation by developing countries and in implementing the President's plan to harness market forces at home and abroad to enhance energy efficiency, environmental quality, and economic prosperity.

Because this committee's jurisdiction focuses on science, I thought it would be useful, before discussing the outcome in Kyoto, to focus briefly on two noteworthy scientific developments that occurred at the end of last year. Based on extensive ground-based measurements, the National Oceanic and Atmospheric Administration (NOAA) -- our lead national agency for collecting weather statistics -- reported that 1997 was the warmest year based on records that date back over a century. While the temperature in any one year cannot prove or disprove anything about global warming, this year's statistics, further confirmed by two other sources of information about global surface temperatures (the Goddard Institute for Space Studies/NASA and the researchers at East Anglia University in the U.K.), follow a clearly emerging pattern. The nine warmest years of the century have occurred in the past 11 years. This pattern of warm years led one of NOAA's leading climate scientists to issue a statement that reaffirms a key conclusion contained in the latest international scientific assessment prepared by the Intergovernmental Panel on Climate Change -- that "the balance of evidence suggests a discernible human influence on global climate." Put another way, in the view of the vast majority of U.S. and international climate scientists, it is highly unlikely that the trends in global temperatures we have experienced are the result of the natural variability inherent to our climate system.

A second development relates to a study published in November in the medical journal Lancet. Most studies have examined the impacts of climate change on human health in terms of increased fatalities due to heat stress or the spread of infectious diseases. While by themselves, these areas represent considerable human health risks, this new study by the Working Group on Public Health and Fossil Fuel Combustion looked at the short-term impacts on mortality from air-borne particulate matter assuming no changes in estimates of energy use from fossil fuels. The analysis found that an estimated 8 million deaths globally due to exposure to fine particulates could be avoided between 2000 and 2020 if substantial steps were taken to limit greenhouse gas emissions from burning fossil fuels. In the United States alone, the study reports that thousands of deaths annually could be avoided during the 2000-2020 period. This study presents an important near-term benefit from actions to reduce greenhouse gas emissions that must be considered in addition to the long-term benefits of avoiding climatic disruptions. EPA's recently promulgated fine particulate standard begins to address this public health concern and should result in both some reductions in greenhouse gas emissions along with reducing the number of deaths associated with exposure to fine particulates.

THE KYOTO PROTOCOL

Although the agreement reached in Kyoto will not reverse the build-up of greenhouse gases in the atmosphere, it will begin slowing the rate of increase. Equally important, it puts in place a solid foundation upon which the global marketplace can increasingly be engaged in reducing greenhouse gas emissions. The agreement draws heavily from the proposals advanced by the United States and effectively rejects alternatives proposed by others that would have substantially increased the costs of action.

In October of last year, the President outlined a number of elements critical to achieving an effective agreement. He underscored that any agreement had to contain: 1) realistic medium-term, legally binding targets for developed countries; 2) flexible, market-based implementation mechanisms; and 3) measures to secure the meaningful participation of key developing countries. I am pleased to report that we fully achieved our first two objectives, and through the innovative clean development mechanism made a down payment on the third. Next steps must include further work on operational details of international emissions trading, compliance mechanisms, and developing country participation. The President has made it clear that he does not intend to send the Kyoto Protocol to the Senate for ratification until we have achieved meaningful participation by key developing countries.

Even with the complexities of climate science and the challenge of crafting policy solutions, we found in Kyoto a new spirit of resolve, a new openness to market-based approaches, and a new hope for global cooperation.

Key elements of the U.S. proposals that were adopted as elements of the Kyoto Protocol include the following:

-- Legally binding emission targets: The agreement establishes legally binding targets for developed countries. By advancing from the existing non-binding aim contained in the Framework Convention to a binding target, we believe efforts to address global warming will take on greater significance and commitment. Moreover, our insistence on a legally binding regime encouraged other countries to think more soberly about their reduction proposals. Ultimately, the U.S. agreed to a target of a 7% reduction from baseline levels. Given the changes in the definition of the baseline for the three long-lived chemical compounds (HFCs, PFCs and SF6) from 1990 to 1995 combined with a change in the way sinks are accounted for in the baseline, the actual reduction required in the U.S. is no more than 2-3% more than the President originally proposed as the U.S. negotiating position.

-- Budget periods spanning five years: The U.S. proposal for a five-year budget period was adopted rather than the single-year target proposed by others. Allowing nations to average over five years increases flexibility and lowers costs by smoothing out any short-term variations in emissions based on fluctuations in energy prices, economic activity, business cycles, or weather.

-- First budget period beginning in 2008 and ending in 2012: The U.S. proposal for a budget period beginning in 2008 was accepted. This provides a full decade for redirecting efforts toward greater energy efficiency, allowing for substantial changes in investment decisions and turnover in capital stock. Other proposals calling for reductions to begin as early as 2003 were rejected. Action during this time period appears critical to redirecting emissions toward a pathway that allows for stabilization of greenhouse gases at a doubling of prehistoric levels.

-- Market-basket approach including all 6 gases: The U.S. proposal held sway on including all 6 major greenhouse gases in the calculation of a target. Moreover, we secured trading among these gases so that the lowest cost reductions can be secured.

-- Inclusion of sinks: The U.S. also urged, and the Parties agreed, to allow actions that capture and sequester greenhouse gases (sinks) to be included as part of meeting the target. Carbon sequestration, through activities such as reforestation programs, offers potentially attractive low cost opportunities to reduce net greenhouse gas emissions.

-- International Emissions Trading: The U.S. secured acceptance of emissions trading as a flexible, market-based approach to lowering the costs of meeting a target. While the U.S. has experience with emissions trading in the acid rain and lead phase-out programs, it was a new concept to the international community and incorporated for the first time in the Kyoto agreement. A number of studies have suggested that the costs of compliance can be significantly reduced if flexible implementation is permitted.

-- Clean Development Mechanism: Under this innovative provision, developed countries will be able to use certified reductions from project activities in developing countries to contribute to compliance with greenhouse gas reduction targets. This provides both a mechanism to secure low cost reductions throughout the world and a powerful economic incentive to lead developing countries toward more climate-friendly technologies. This represents an important avenue for developing country actions to reduce emissions in cooperation with U.S. private sector firms that have the technology, resources and know-how to make such reductions in ways that save energy, reduce emissions and improve performance. This provision effectively embodies the U.S. proposal for joint implementation with credit for activities in developing countries. It also provides, again at U.S. insistence, an incentive for early action by permitting credit for reductions that occur beginning in the year 2000.

-- Emissions from the Military: The U.S. obtained agreement on its proposal for an exemption for emissions from multilateral operations pursuant to the United Nations charter. This decision will ensure that nations do not hold back from participating in humanitarian, peacekeeping and other operations due to concerns about greenhouse gas emissions.

NEXT STEPS -- INTERNATIONAL ACTIVITY

While the Kyoto agreement secures major elements that the U.S. sought to ensure such as flexible, market-based mechanisms for addressing concerns about global warming, future negotiations will still need to address several important issues. The Parties now move forward with working group meetings scheduled for June and the next meeting of the Parties to the Climate Convention scheduled for November in Buenos Aires. Issues that will be addressed at that and subsequent meetings include the following:

-- guidelines for implementing the international emissions trading provisions included in the Protocol;

-- guidelines for implementing the clean development mechanism;

-- further refinement of how sinks will be treated;

-- participation of developing countries; and

-- additional provisions related to compliance and enforcement.

NEXT STEPS -- DOMESTIC ACTIONS

In his State of the Union message, and just last Saturday in his radio address, the President described his proposed tax cut and technology initiative aimed at jump-starting efforts to enhance our nation's energy efficiency and economic competitiveness. This program was laid out in detail on Monday with the release of the President's Budget. It targeted $6.3 billion over the next five years -- will provide incentives for our industry, businesses and consumers to make and purchase more energy efficient products. It challenges the innovative abilities of the private sector and helps ensure that those firms that succeed in developing energy saving products will have a substantial market in which to sell those products. For consumers, it provides a double bonus. First it helps reduce the initial costs of purchasing energy saving products. Second, throughout the lifetime of the product, consumers will benefit from reduced energy costs. The President's 1999 Budget includes $3.6 billion over five years in tax credits aimed at encouraging broader use of existing energy saving technologies and spurring further innovations. It also includes $2.7 billion in new research and development investments to ensure that innovative

greenhouse gas reducing products continue to flow through the pipeline and into the market-place in the coming years.

Examples of specific provisions contained in the President's budget include the following:

-- Tax credits for highly fuel efficient vehicles: This credit would be $4,000 for each vehicle that gets three times the base fuel economy for its class beginning in 2003. A credit of $3,000 would be available beginning in 2000 for vehicles that get double the base fuel economy for its class. These credits would be available to jump start these markets and would be phased out over time.

-- Tax credits for energy efficient equipment: These credits (all of which are subject to caps) would include a 20% credit (subject to a cap) for purchasing certain types of highly efficient building equipment, a 15% credit for the purchase of solar rooftop systems, and a 10% credit for the purchase of highly efficient combined heat and power systems.

-- Research and development support: Additional resources are provided for key areas of renewable energy and for carbon sequestration. Activities related to the Partnership for a New Generation of Vehicles include expanded research in fuel cells, batteries and ultra-clean combustion engines. Two new partnerships are proposed for heavy trucks and light trucks, including sport-utility vehicles.

These budget proposals implement one of the key commitments made by the President in his October 22nd speech at the National Geographic Society. In that speech the President also pledged: that the federal government, as the largest user of energy, would take the lead in enhancing our efforts at improving energy efficiency; that we would work closely with the private sector in developing voluntary programs to reduce emissions; that we would grant early credit for reductions that occur prior to a binding target; and that we would help shape utility restructuring in ways that contribute to reductions in greenhouse gas reductions. We are working today to make all of these commitments real.

Beyond the President's budget proposals, a number of encouraging developments have taken place in both the public and private sectors in the short time since Kyoto. Let me briefly mention four of them today.

1. Fuel Efficient Vehicles: At the recent automobile show in Detroit, General Motors (GM) announced four passenger hybrid electric and fuel cell vehicles that can achieve fuel efficiency of up to 80 miles per gallon -- production prototypes of which could be available in 2001 and 2004. Ford also unveiled a prototype of a mid-size high efficiency sedan that achieves 63 miles per gallon using an advanced diesel engine. Ford also plans to develop hybrid electric and fuel cell versions of this prototype. Chrysler unveiled its full-size experimental hybrid electric vehicle with a projected 70 miles per gallon fuel economy. These technological advances were made possible through the efforts of the Partnership for a New Generation of Vehicles between the Administration, U.S. auto companies, and their suppliers.

2. Compressed Air Challenge: Air compressors represents about 3% of total industrial electricity use and 1% of total U.S. electricity consumption. In mid-January, DOE and major equipment manufacturers announced a new agreement aimed at significantly enhancing efficiency in this sector. Under the agreement, changes in equipment and operating practices are anticipated to reduce energy use in this category by 10% by 2010 at a cost savings of $150 million per year while reducing greenhouse gases by 700,000 metric tones of carbon.

3. BP Solar Opening: Last Friday, BP Solar opened its first manufacturing plant in the United States. Located outside San Francisco, the Vice President flipped a switch to start the plant. This facility will produce a new generation of thin film photovoltaic cells. Spurred by DOE's recently announced Million Solar Roof Initiative, planned plant expansions and openings by other solar cell manufacturers, as well as the President's budget request for enhanced funding for renewable technologies, demonstrate that efforts to increase market penetration based on harnessing the sun's energy are now making significant advances. In fact, the Vice President was able to announce that the private partners in the Million Solar Roofs Initiative have already announced plans for well over half the solar panels needed to get to our goal--a full ten years early.

4. VCR/TV Energy Star Program: TV and VCRs represent one of the fastest growing sources of electricity demand. Consumers spend over $1 billion annually to power VCRs and TVS that are switched off. In early January the Vice President announced a pathbreaking partnership between EPA and the major manufacturers of these electronic goods. The program is quite ambitious with a goal of achieving up to a 70% reduction in energy use when the equipment is turned off without sacrificing product quality, utility or increasing costs. The average household could cut its energy bills by 30% or $400 per year by switching to the full line of Energy Star products.

These examples further underscore the potential for energy and cost saving opportunities to reduce our emissions of greenhouse gases. The Administration is working on a more detailed economic analysis of the impact of the targets reached in Kyoto. Council of Economic Advisers Chair Janet Yellen will be prepared to discuss the analysis at a hearing next week before the Senate Foreign Relations Committee.

In sum, the Kyoto Protocol represents a significant diplomatic achievement for the United States and a key contribution to the critical effort to safeguard our children from the effects of potentially severe climatic disruption. At the same time, this effort is a work in progress. Much remains to be done if we are fully to seize the environmental and economic benefits of action on this pressing issue. We in the Administration look forward to working with Congress in the months and years ahead to further our efforts to address the risks associated with global warming in a way that enhances our environmental and economic well being.

I welcome the opportunity to visit with you today and look forward to our continued dialogue and exchange.

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