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CFR Press Briefing: Confronting Climate Change: A Strategy for U.S. Foreign Policy [Rush Transcript; Federal News Service]

Speakers: George E. Pataki, Counsel, Chadbourne & Parke LLP and Former Governor, State of New York, Task Force Co-Chair, and Thomas J. Vilsack, Counsel, Dorsey & Whitney LLP and Former Governor, State of Iowa, Task Force Co-Chair
Presider: Michael A. Levi, David M. Rubenstein Senior Fellow for Energy and Environment, Council on Foreign Relations, Task Force Director
June 13, 2008
Council on Foreign Relations


THOMAS J. VILSACK: (In progress) -- technologies. So, the council has recommended a cap-and-trade system be established in the United States and that it be complimented by a series of additional steps and tools that will encourage greater efficiencies, that will continue to see an expansion of renewable fuels and energy, and new clean technologies that will make the abundant resources in this country better able to meet our energy and fuel needs.

Those incentives would include, obviously, tax incentives and an aggressive effort to recommit to a public investment and research and development -- the funding of demonstration projects particularly as it relates to carbon capture and sequestration, which is a critical component to clean technology, and a recognition and understanding that as this carbon cap-and-trade system is established and as we move to less reliance on fossil fuel and fossil-based -- carbon-based energy that there will be winners, but there will also be losers and that it is important that the domestic policies are developed that we recognize the losers and that we basically provide for a softer landing than we have in the past.

We also believe that it's important and necessary for this domestic policy to work that there be presidential and vice presidential leadership that this be a signature of the next administration, and that it will require a personal commitment on the part of the president or vice president working in concert with congressional leaders to formulate a plan. And once that domestic policy is established and once it's clear that we have a strong domestic effort, then I think we are in a position to reclaim moral leadership on the foreign policy standpoint. And, George, you may want to talk a little bit about our work with the United Nations.

GEORGE E. PATAKI: Tom, I think, outlined the fact that if we have a good strong domestic policy it helps our credibility internationally to be able to engage with the global community. And we have to do that. The Kyoto compact is expiring in 2012. The U.N. and Bali began the process of looking for a successor document by 2009. And with strong domestic leadership and leading by example, we think we can engage with the global community in a way where we can bring all the countries into dealing in an effective, verifiable way with the issue of greenhouse gas emissions into the atmosphere.

It's going to be very difficult because we shouldn't accept something that is words without verification and we shouldn't be a part of something that doesn't require rapidly-developing nations like China and India to be a part of the solution. And to reach that is going to be very difficult, but we should engage in the process, we should try and do our best to see that a global successor that can work for the United States and the rest of the world can be enacted.

But at the same time, we shouldn't just rely on that U.N. global process. We should begin working with other developed nations that have put in place similar policies, like the E.U., which currently has a cap-and-trade program, to work cooperatively in a way that will allow to both from the standpoint of climate to achieve the maximum benefit from the domestic policies and from the standpoint of the economy to look to integrate whether it's cap-and-trade systems between the U.S. and other nations that have put those in place so that we will begin as a part of the global U.N. process, participate in that in the hopes that we can achieve a consensus among the 193 members. That will be very difficult, but the effort should be made. But at the same time, engage with the other developed countries to look to have agreements with them where we have similar and compatible goals and policies.

VILSACK: And I might just point out that at the core of this effort in the United Nations is a recognition that globally and domestically there has to be a serious commitment to reducing greenhouse gases and it needs to be quantified in some way. That will be difficult to establish on a global basis and we believe that paralleling that process and perhaps informing the process and working to improve that U.N. process we could work with a number of nations -- a smaller number of nations -- the major emitters and a number of the developing countries that are obviously key players in all of this to develop not commitments from them on specific target reductions, but, as importantly for the process, commitments on specific programs and policies that would result potentially in reductions in greenhouse gases.

We believe that a smaller group of say 10, 12 countries working together would result in national leaders -- not just folks at the lower levels negotiating, but presidents and prime ministers making commitments with one another, paralleling the U.N. process, learning from the agreements that can be reached, what works and doesn't work.

We think it's important and necessary to have a wide range of flexible tools that would be available to this partnership to take a look at: export assistance; providing technical assistance to countries; working on a climate fund, which would provide resources to purchase new technologies; working hand-in-hand to encourage the development of infrastructure -- important infrastructure; using diplomacy where it may be difficult to secure that infrastructure without the cooperation of a number of other nations; using the power of the United States and other major countries to basically get this done.

And so, that partnership is not designed to be in lieu of the U.N effort, it is designed to compliment the U.N effort and to essentially perhaps accelerate progress while discussions and negotiations are taking place.

MICHAEL LEVI: And I'd just add for clarity on that because there is a major emitter's economies process going on right now under this president. We distinguish what we're talking about on this partnership for climate cooperation in a couple key ways. One is that it's on the -- it would be pursued on the basis of different domestic action by the United States. But more importantly, or at least as importantly, it would be focused on specific actions from countries, whether to cut emissions or to provide incentives or support for cutting emissions, rather than on prenegotiating a global deal, which is the very useful goal that the economies' meetings process has set up. So, very different about developing experience, developing confidence in the ability to reduce emissions so that countries can be ultimately more confident in being part of a big global deal.

Let me also make one quick comment before I open to the floor. Just to remind you, this is an independent task force sponsored by the Council on Foreign Relations.

So, the positions are the positions of the task force, the 29 of us, not positions that the council takes. The council takes no positions on anything at all. (Laughter.)

Why don't I open it to the floor and if you'll please identify yourself before you ask a question, I'd appreciate that, please.

QUESTIONER: Thanks. I'm Lisa Friedman. I'm with ClimateWire.

This is a question for Governor Vilsack, I asked Governor Pataki upstairs, but I'm curious about your opinion on border tariffs. You know, you -- (inaudible) -- in the report that the U.S. should be careful about using these, but most -- pardon me -- analysts say that no U.S. legislation is going to pass without some kind of border tax, carbon tariffs. What are your thoughts on that?

VILSACK: Well, I think, first of all, we can send a fairly strong message to developing nations in particular based on another recommendation in the report, which is to reduce subsidies for some of the more mature bio-based fuels and to eliminate some tariffs over time on some of the bio-based fuels that are being produced outside the United States. So, that sends a message that we are really interested in international cooperation.

I think that there was a concern on the part of the commission that if you made a commitment to border adjustments or tariffs that you would essentially get yourself into a death spiral, if you will, that you never get out of. While we recognize that that is something that we shouldn't say never under no circumstance will ever happen, we don't think that's a good way to start the conversation. We think a better way is to suggest, as we've pointed out, the partnership, working on specific commitments and policies that we know may make a difference, developing relationships. And should it ever occur or should it be required, our view is that if there are border adjustments to take place, it ought to be done in the context of an international understanding and agreement to the extent allowed by WTO, that type of thing. It would be far more powerful, far more beneficial, and far more effective.

LEVI: I'd only add to that that we also talk about the possibility of developing countries imposing their own prices on their own exports.

If you're facing potentially even far down the road the possibility of having someone else charge you for your experts, better bet to keep the money for yourself and levy these tariffs at your own border. And China, for example, is already heading in that direction having taken steps in the last year that by calculations from folks I trust amount to about a $50 a ton tax on steel exports.

VILSACK: And let me also say that that kind of conversation stems from the concern that someone's going to have a competitive advantage or that jobs are going to be lost.

I think George would agree with me -- we see that there is obviously some challenges with this effort, but there is tremendous opportunity to remake and reconstruct the American economy. With the infrastructure, the innovation, the new technologies, manufacturing opportunities can be created with this program that might lessen some of the stress and concern that leads to conversations about border adjustments and tariffs.

PATAKI: And I do agree with that.

LEVI: Sir?

QUESTIONER: I'm Stew Magnuson with National Defense magazine.

There have been a couple reports last year about climate change and how it fits into national security, both homeland security and overseas, possibility of instability and so on. I know Senator Warner got on the bandwagon, he said as a result of what the military is telling them about their concerns. So, my question is can these concerns be leveraged to build a consensus in Congress, amongst the public, and internationally to -- they say build consensus?

PATAKI: My answer to that would be unequivocally yes. I think you need to build a broad, across-the-political-spectrum consensus in order to achieve legislation that is going to be meaningful.

And it's not simply a question of climate, it's a question of national security where, as you pointed out, some of those most involved in the defense industry are concerned about disruptions and risks as a result of climate change. And when you look at national security, as well, there's no question in my mind that one of our greatest risks is our overreliance on foreign oil, where we send over a billion dollars a day often to unfriendly regimes. And if we had alternatives like plug-in electric hybrids or fuel cell-powered or natural gas-powered vehicles, not only would we be cleaning the atmosphere or putting less greenhouse gases into the atmosphere, we'd be helping from a national security standpoint.

And also economically because that billion-and-a-half dollars a day for foreign oil represents the largest drag on our economy in terms of balance of trade of any particular element.

So, this is one area where it's not simply about climate, it's about national security and it's about economic opportunity as we create domestic industries to replace our overreliance on things like foreign oil. So, to build that across-the-political-spectrum consensus, which I think we can do, I think you have to look at it beyond just the simple issue of greenhouse gas emissions into the atmosphere.

VILSACK: I would say I'd add one other point, and that is, especially as it relates to the climate partnership proposal, if a partnership of this nature is formulated then part of what will happen is a recognition on the part of the United States that there are countries who have deep concerns about their own energy security needs. And if a recognition by the United States of that fact and using the diplomatic resources that we have available, we could potentially steer those countries away from alignments or alliances that might not necessarily be in our long-term best interest from a national security standpoint and more towards a more cooperative understanding. So, I don't think there's any question that national security, economic security, climate security, as well as energy security are all part of this program.

QUESTIONER: Did you get any -- I mean, I know there were some members of the defense community or former members on your task force. Did you seek any input from the Defense Department or do you feel there's any alarm in the Defense Department on this topic?

LEVI: Well, we certainly -- the most prominent report out there on the national security consequence was directed by Sherri Goodman, who is a member of our task force. My sense is that in the U.S. military the biggest concern in the energy space is supply and supply and being able to get, you know, fuel to where they need it and reliance on increasingly expensive oil. So, there is that concern. I mean, is there alarm across the defense establishment about the effects of climate change? I don't think that that kind of long-term planning is done widely across the Defense Department, but it's certainly in their thinking.

I mean, the other feature of the defense community is that they can be quite risk adverse, and that's a good attitude when you're thinking about these sorts of issues. They don't love playing dice.

If you look at that Center for Naval Analyses report, one of the most striking things in it -- I forget which general saying -- in the military if we wait for 100 percent certainty, we're dead. So, it's a striking comment.

You had your hand up.

QUESTIONER: My name is -- (inaudible) -- with -- (inaudible) -- a Japanese newspaper.

Next month, Japan will be chair of G-8 summit meeting and the main agenda is climate change. And they are discussing how to define the long-term global target -- (inaudible) -- by 2050 and how to deal with the individual mid-term goals. What is the expectation of G-8 summit and, more in general, what do you think is the role of G-8 in this climate process? Does that make sense to discuss these topics -- (inaudible) --

VILSACK: Well, I guess our view is that that meeting acts as a foundation for what our report suggests, which is a continuation and an expansion of that concept with the partnership idea. Again, it is difficult for the United States to make significant headway with foreign governments without making a commitment here at home that says and sends a strong signal to other governments that we are really serious about this, which would include a commitment on the part of the United States to reduce its greenhouse gases and specific strategies to accomplish that. You know, I think obviously the G-8 are important, but I think it's also necessary to recognize that there are other countries who have a very integral role in climate change, particularly in deforestation issues that may not necessarily be at the table at the particular meeting, but need to be part of a partnership and part of the U.N. process.

LEVI: The next question is the G-8 -- (inaudible) -- component of all this, and there are some themes that are building that are consistent with what we look at in the report. There's this international partnership for energy efficiency cooperation, which has sort of floated in different guises. I think the way it was released it's a fairly modest proposal. But, again, looking at a wide variety of different approaches.

It's not about moving away from one particular approach to dealing with climate change internationally and putting all your eggs in another basket, it's about a proliferation of approaches. There are other things that will be discussed like climate funds, which we discuss at some length in here. Also reducing or removing trade barriers to trade in clean technology products, which we are supportive of. There will be discussion about international cooperation on demonstration of carbon capture and storage. It's obviously a signature that Japan is interested in promoting.

I mean, there are a varieties of things that couldn't be discussed. I'm sure the major economies meetings alongside folks will be talking about what a new U.N. deal should be looking at. They'll be looking not only at long-term targets, but at things like financing mechanisms, what to do about the clean development mechanisms, all these sorts of things.

On long-term targets, I should say -- we say that an agreement should have a mid-century goal halving global emissions. We don't put out a peaking year or -- as Japan would be after or the European Union is looking at a mid-term target with a slightly different approach. But on long-term goals, we think it's important. It gives you a reality check because you can then add up the efforts of different countries and say are we coming anywhere close to what we're trying to get to.

QUESTIONER: (Inaudible) -- Washington Times.

If a year passes and domestic action is still stalled maybe in the Senate or in Congress, again, what options will be open for the U.S. to deal with this on foreign policy? I mean, is it a prerequisite to get some kind of deal done here before any significant change can be done for the U.S. to take any kind of leadership in furthering the Bali road map or going to Copenhagen?

VILSACK: I think it's extremely difficult to say to the rest of the world and we're not. Part of what this report suggests is it will require strong executive leadership from the president and the vice president working with Congress to establish this program. And I don't think we have a moment to lose. I don't think we have a moment to lose on energy security issues, I don't think we have a moment to lose on the economic impact of all of this, and I just don't see how we can possibly say to the rest of the world, "get your house in order," when we're not prepared to do the same.

Governor Pataki?

PATAKI: Well, the report is clear that it indicates that it's best for the United States to lead by example by passing quickly a good law. But having -- and obviously, that's what I support and I think it would be in our interests and certainly enhance our ability to engage in a global dialogue. And I don't want to speculate on what might happen if that doesn't pass, but I don't in any way that it's going to prohibit our ability to continue in an international dialogue, and we certainly should continue to do that. It started with the major emitters in the absence of our having a national law, and I think that process is a positive process that raises the possibility of some real progress. But I do think, as Governor Vilsack said, that if we had a strong national law, it would certainly enhance our ability to ask more of others and help to achieve a better global agreement.

LEVI: I'd only add to that that we talk about the real challenge of achieving an agreement in Copenhagen in 2009, but we also said that even if you don't get an agreement in Copenhagen in 2009, that's not the end of things and you should still continue to seek an agreement. And I think there is a growing understanding out there that it may not -- and this an observation I here to talk with people not on what the report exactly says. But there is a growing feeling in Europe that perhaps some of those deadlines might slide a bit. There is an understanding that it takes a while to staff an administration and it's challenging.

PATAKI: Let me just follow-up again. I think one of the worst things that could happen is if we pass a bad law. I mean, Kyoto at the time had great global support, but when it came -- when people took a hard look at it in the United States, the Senate voted it down 98 to nothing.

And I think we need to understand that as we pass the law to put in place a cap on greenhouse gas emissions that we have to revisit it periodically to see what the economic impact is, revisit it periodically to see what other nations in the world are doing, engage in that global process, and also, I believe, put in place as part of that law programs that are going to incentivize the American economy to create strong domestic opportunities for job growth in the United States.

We talk about a national infrastructure system -- electric infrastructure system -- so we can access solar power from the Southwest and wind power from the Great Plains. We talk about nuclear power, encouraging the use of nuclear power, carbon capture and sequestration so that coal can be a part of the solution and continue to be a part of our economy. So, I think that the law has to be a good law. That's the most important thing. And if we can in fact pass a good law it would certainly enhance our ability to engage more effectively in the global dialogue.

VILSACK: And one of the reasons we proposed the partnership concept was that it would give us a forum and a vehicle for more immediate action without necessarily having to reach a consensus among 193 countries. If you get the major emitters, you get the major economies, you get some of the developing nations that have to be at the table to commit to specific programs and policies and those are implemented immediately, relationships are formed, information is provided, and all the sudden you've informed that U.N. effort and you might more quickly get to U.N resolution. So, the partnership concept is important, but I think critical to the partnership is the fact that the United States is in a position to make specific commitments on policies and programs, but you can't do that unless you've got legislation that's been passed.

QUESTIONER: Hi, Jon Ward from the Washington Times.

I'm really no expert on this. I'm here to learn and kind of bone up on the science a little bit. But it does seem like to me that the main Gordian knot you're trying to cut through -- I'm looking at the release you just put out -- is how to, as you talk about, set the example for the international community and take action here at home without putting ourselves at a disadvantage to China and India. Is that accurate?

And Governor Pataki, I was just wondering what your main criticisms of the Bush administration's policies in the last eight years would be -- whether it be primarily substantive or primarily political or both?

PATAKI: Well, I think the Bush administration was absolutely correct in rejecting the Kyoto treaty. It essentially exempted China, India, other countries from any requirements. It set up the clean development mechanism where 60 percent of the money has gone to China, and I don't think that has been particularly productive in helping fight the fight against climate change. But where I think we could have done better is not just to simply say Kyoto is wrong, but to then say we can do it better and engage in a dialogue with the countries of the world and with Congress to look at a domestic policy and an international policy that could have worked, as opposed to Kyoto, that I think would not have worked.

And the administration began doing that with the major emitters -- (inaudible) -- and I think that is a significant step forward and I think the global community appreciates it. But if something like that had been engaged earlier, it's not inconceivable we could be significantly further along the road both domestically and internationally at this point.

VILSACK: I think we have to be clear-eyed about this, and that is that we have to understand the politics here at home. And the reality is that what we're proposing is a transformation of the economy of the country. And a what we're proposing is assistance to developing nations that will allow them to do the right thing from an environment standpoint that if it's not done properly could give them competitive edge on industries here.

So, that's one of the reasons why we, A, recognize that there are winners and losers in this process and that the losers need to be assisted and helped, and we also recognize that on an international basis when we say there are going to be countries that are going to have to adapt, they aren't going to be in a position to mitigate, but they're going to have to adapt and they're not going to have the resources and it's up to the developed nations to help those countries that are poor properly adapt. And it's also up to us to make sure that we identify who may be at risk here at home and provide an appropriate transition to these new opportunities that we're going to create.

It is not impossible, it's obviously difficult, but it's not impossible. But the upside of all of this is enormously beneficial to the country because it allows us to once again be a country that makes, manufactures, constructs, innovates, and creates, and that is what creates a middle class. When you've got a strong middle class, then you've revenues for all the other needs of the people of your country. And at the same time it provides for national security, energy security, and climate security.

QUESTIONER: You -- (inaudible) -- energy security in the report, coal, nuclear all that stuff?

VILSACK: I'm sorry?

QUESTIONER: In the report, do you get into coal and --

VILSACK: Well, we --

PATAKI: The CFR task force did something on energy security earlier, I believe.

LEVI: Right. So there was an earlier -- sorry.

VILSACK: Well, I understood your question -- is there something about coal and something about nuclear -- is that -- was that your question?

QUESTIONER: Yeah, I just wondered if the report addresses those things --

VILSACK: It does, in the sense that it recognizes that efficiency is obviously a strategy, renewable energy and fuel is a strategy, but you also have to have clean technologies, and you have to recognize that there is a role that coal must play, should play, but only if we can figure out the appropriate technologies to do it properly, and that we have to be realistic about nuclear energy as a clean technology.

LEVI: At an international level, when we talk about nuclear, we make a fairly clear distinction. The task force says that it strongly supports the growth of nuclear -- to the extent that it's economically viable, we strongly support the growth of nuclear energy in countries that already have nuclear energy. And that's where most of the potential growth is going to occur. We are much more cautious on the growth of nuclear energy in countries that do not have it, for concerns about proliferation in particular, but for other ones too. That's not a reason to not do anything. It's a reason to have active efforts to improve security, supplies, to deal with waste, to deal with also some other things.

The other important point is not just looking at our energy security incentives. As you mentioned before, there's been a bit of a habit in thinking about climate -- diplomacy, climate deals as what do we need a country to do, and how much do we need to pay them to do it? Well, there is a lot more in the way of leverage that you've got out there, and one of the big ways is trying to align energy security and climate change incentives in countries out there, either in coal -- I'm sorry -- either nuclear or in gas, a variety of different possibilities.

You've been waiting patiently.

QUESTIONER: I was wondering if you could comment on the bill on the Senate floor last week, and what its failure to advance might have said to the rest of the world, and if we were better off not having voted on any amendments.

PATAKI: I think the goal here is to talk about a prospective U.S. policy domestically and from a foreign policy standpoint. And I don't think it's particularly productive to get into the pros and cons of a specific bill or what Congress may or may not have done with that bill. I'm sure we all have very strong feelings one way or the other, but we have a consensus report looking forward as to the steps we think should be taken, and that's a polite way to try to completely duck your question.

VILSACK: Well, and from a -- I mean, obviously, I'd have to put myself in the shoes of someone outside this country, but I think there's a recognition outside this country that we have a presidential election taking place, and I think our foreign friends might be more interested in what Senator Obama and Senator McCain have been saying on this issue. And both presidential campaigns have indicated an understanding and appreciation for the importance of this issue. And I would -- if I were someone from a foreign country, I would take a good deal of stock in that.

This report, I will think, would put them at ease that there are thinking people in this country that -- from all political persuasions --that have come to a consensus on a structure and framework that could help inform those policies of the next administration and that these -- the committee members, commission members are calling upon whoever wins the election to take a real leadership role personally in this issue. So I think there's some very strong signals, notwithstanding what may have taken place in the Senate.

LEVI: There is a genuine danger of what happened in the Senate being misinterpreted internationally, and there needs to be a deliberate effort to make sure that it is not misinterpreted.

It was what happened with one particular bill at a particular time, but not a broad-based projection of these concepts. You both spoke this morning about the evidence well beyond there, not just about the presidential campaigns but about what's happening in the states, Governor Vilsack.

VILSACK: Right. Right. I mean, there's a tremendous amount of pressure to have this happen. There's pressure from the states. George led an effort in the Northeast to establish a cap-and-trade system, which is in effect and we'll begin to see the benefits of that soon. In my state and in my part of the country, we've really aggressively seen an expansion of renewable energy and fuel. The Western states have been very aggressive, California obviously extremely aggressive. That's one pressure.

The other pressure is that the EPA is under enormous pressure as a result of the Supreme Court case in Massachusetts versus EPA to make a decision about precisely what they're going to do with tailpipe emissions in vehicles. And if they make the decision that the court is asking them to make, they're going to be put in a box where they're not only going to have to regulate vehicles, but they're also potentially going to have to regulate every stationary emitter, which means every -- virtually every industry in the country. So there's a tremendous pressure here to get something done.

PATAKI: I think that's a very important point. Cap-and- trade is happening in the United States. It is the law in the 10 Northeastern states. It is the law in California. It is the law in a number of other states. But it is far better to have a national unified policy than to have a regional or individual state policy. So that is another reason why we think it's important that there be strong federal legislation.


QUESTIONER: (Name inaudible) -- with Bloomberg News. I wanted to jump back to something Michael mentioned earlier with the climate funds. I wanted to ask where you see that money coming from, where you see it going to, and how it could potentially fix whatever flaws are in the clean development mechanism.

VILSACK: You establish a cap-and-trade system. Depending upon how you establish it and set it up, there may be revenues and resources identified from that system. If it is a priority of an administration, obviously you fund your priorities in one form or another through the budget process. I think first and foremost, you have to make it a priority.

Secondly, in terms of how those resources could be used, you could have, just as an example, a circumstance in which those funds could be used to purchase U.S. technology at a fair-market price that would benefit and create jobs here in America, and then provide that technology that's been purchased through the climate funds at a discounted price through either a third entity or directly with an industry or government of a developing country that would allow them to obtain the technology at a price that they could afford, with appropriate intellectual property protections.

I mean, there's a million different ways it could be used.

PATAKI: Yeah, the clean development mechanism, I think it is fairly clear, has not achieved goal that was set out for it. It's one thing to fund a windmill or a retrofit of a coal power plant in China, but when they use the funds to build additional coal plants that don't have those types of protection, you're really not achieving anything from the standpoint of global climate protection. So you need something that is verifiable and quantifiable. And as Tom said, some of it can be support for domestic technology that we could export to help countries. Others could be targeted at things where we know it is going to be effective, such as protecting the rain forests in Indonesia or other countries.

So I believe, as part of Bali, the Bush administration called for a climate fund to be created. And if it's done in an intelligent way, it can have a positive impact on climate change and help our economy at the same time.

LEVI: The only thing I'd add to that is, I don't think we should think of this as the clean development mechanism was going to be THE solution; it hasn't worked, so now climate funds will be THE solution. These are all -- these are two of a wide set of tools that need to be brought to the table. You know, scientists talk about how we have no silver-bullet technology for dealing with the climate problem. There's no silver-bullet diplomatic tool either. We need to try a lot of different things. And we can't know exactly how each of those will work, and that's why we need -- while pursuing formal agreements, like a post-Kyoto deal, also flexible approaches, where we can try ambitious things and correct course and learn from our experience.

VILSACK: Correcting the course is important. I mean, this is -- you know, once you make a commitment, it doesn't mean that you've made that commitment and you can never change. There needs to be periodic review and reassessment of what is working and what isn't working, what's realistic and what isn't.

QUESTIONER: Is there any concern that by creating a smaller group of major emitters or whatever you want to call it, that you would threaten the U.N. process at all?

I mean, obviously that was one of the things that was raised, after President Bush announced his group.

VILSACK: I think it's very clear that this is a complementary approach, as opposed to in lieu of a U.N. effort. It's designed to inform the U.N. effort. Obviously the U.N. effort is going to take time.

It is very conceivable that you get a smaller group of nations, with the heads of those nations in a room, that you can make commitments and agreements that can be carried out in a much quicker way. And you can learn from those decisions.

Secondly, you know, I think the domestic commitment that the United States makes: We can sort of show our true intentions through this mechanism while we're negotiating in good faith in the U.N. process. We can show that we're actually taking specific, proactive steps.

LEVI: Governor Pataki, did you want to add anything to that?

PATAKI: No. I think Tom hit it.

QUESTIONER: My name is Dayo Olopade. I'm with The New Republic. I have a question about framing.

I think, you know, the discussion of whether or not we sort of have our house in order has sort of been taken as a starting-off point. And at the same time, we're mentioning that municipalities, cities, mayors, governors -- like yourselves, Crist, Granholm, Schwarzenegger -- are doing good work on this.

How do you -- talked about the regulation, right, sort of the regional cap-and-trade systems and that sort of work, which are regulatory measures. How is it that the investment sort of arm of what's going on, in terms of taking energy action, can be brought to scale here?

I know that working with -- Nordhaus and Shellenberger have written this thing about how we should scrap Kyoto. And the pollution regulation control mechanism could be supplanted by a focus on investment.

How do you get, for example, a national portfolio standard or pension reinvestment or anything like that or ways in which venture capitalists and the private sector can put their thumb on the scale for some of the newer energy technologies? And how do you make that a part of an economic message about climate change?

PATAKI: I think that is a very important question, because the capital is there. The investment community wants to find opportunities to invest and they are investing. But we need to do and should do more to encourage those opportunities.

And while this is not in the report, but speaking for myself, just one example is right now with the credits -- the tax credits that exist for solar and wind power production. They expire every year or two. And when you're looking to invest long term in a manufacturing plant or in a facility that might take a few years to get permitted, you can't do it because you don't know whether or not the tax credits will continue to be there. And if instead of having a one- or two-year tax credit program, we had a 10- or 12-year tax credit program, you could access the capital to build those manufacturing facilities and to make the commitment.

The report talks about infrastructure. The same thing. There are venture capitalists out there who want to build transmission systems to hook up the wind power from the Midwest, but the permitting process is so difficult absent a federal law that it could take years and you might never get there, whereas for things right now, like natural gas, there's a federal permitting system where you can get a pipeline approved without having to go through each local jurisdiction.

With respect to the renewable portfolio standard, as much as I support a national program on cap-and-trade, each state has different capabilities to produce renewable power. New York State is one of the most aggressive in the country, 25 percent by I think it's 20015. But we have Niagara Falls, which generates an enormous amount of renewable power. So I think that when you come to renewable portfolios, you almost have to look state by state. So that you can't just say this is a federal issue. This is something where you have to take each piece and look at whether or not it's appropriate.

But on a regulatory standpoint as well -- one last point. When I deregulated the utility monopolies in New York State more than 10 years ago now, we said that you can't be a transmission and distribution company and a manufacturer of traditional fossil fuel power. The regulators now are saying, well, you can't be a generator at all. Regulation can play a part, where you can say, okay, you can be a generator if it's a renewable system, so that utilities could invest in solar, they can invest in hydro, they can invest in wind, because that is something that is in the best interest of us as a country.

VILSACK: I would say just one other point. If the national government were to make a commitment of a reduction of a certain percentage of greenhouse gases by a year certain or a time period, that's going to drive a great deal of innovation. It's going to drive -- and pressure business, government, to look for ways to meet that goal.

A good example is in the biofuels area with the energy bill passed last year that says we're going to get to 36 billion gallons of renewable fuel by -- I think it's 2016 -- and at 2012 we can no longer have corn-based ethanol facilities being built. That sends a pretty strong message to the market of where you put your money today and where you're going to have to put your money in the future, which is accelerating cellulosic ethanol production programs. A project just started in Louisiana. There's one in Iowa. There are several other demonstration projects where resources are going into trying to figure out how can we speed up the process of producing ethanol so it becomes more energy-efficient.

QUESTIONER: Hi. I'm Diana Marrero with the Milwaukee Journal Sentinel. And I was curious to hear both of you talk about how you would characterize the success or failure of the cap-and-trade system in the EU at this point. And why not just propose a flat tax upon carbon?

VILSACK: When -- I've had an opportunity to go to Brussels and to Britain to talk about their attitudes about the program, and I think that they would -- I would say that they've made a good beginning, but that there are many things that need to be changed about the system. And we've already talked about the CDM program. I think there's a genuine understanding and appreciation that there needs to be significant reform in that area in order for it to work.

Secondly, I think that there is the hope that whatever the United States does, that at some point in time in the future, whatever the U.S. does can be integrated into whatever the EU is doing, so that you actually have an international effort, as opposed to separate countries or separate regions.

The EU basically went through this and made the decision that a tax was probably not politically available or possible. And I think it's fair to say that it would be, I think, easier to establish a cap- and-trade system in this country than it would be to establish a carbon tax. So you look to see what's politically feasible and what you can potentially integrate into what already exists.

PATAKI: As the resident Republican in the room, let me just talk a little bit about cap-and-trade versus tax. I agree with Tom. One of the important elements is that the EU already has cap-and- trade, and the goal down the road is to see if we can have a more integrated system.

But also, with respect to a tax, you put in place the tax, you don't know what in fact the actual accomplishment -- when you put a tax on carbon, you're not sure what level of tax is necessary to achieve, for example, a 50 percent reduction by 2050.

When you set, in fact, that goal, then the market will determine what technology is most efficient to achieve that. And the second is, if you put in place a tax, the government gets the money.

LEVI: Let me add a couple of things just from the report. And what we say is that at a broad level, the theoretical benefits -- a lot of people oversell the theoretical benefits either of a cap-and- trade system or of a tax system, and that the details really matter. So if the country is trending toward cap-and-trade, as is happening in a lot of states, as we've talked about, let's focus on getting that right -- okay? -- including learning lessons from the Europeans like the need to have good emissions data. You know, some of the problems in the European system are problems you'll have in a cap-and-trade system. A lot of the problems are (teething ?) problems, and let's hope we learn from that.

If you look at the California Advisory Board, for creating their system, one of the guys -- it's all Americans except for one guy who is the EU -- or European Community cap-and-trade guru, the guy who is in charge of the system over there. So they are making sure that they learn from that process, and that's something that we need to do.

The other -- just to expand on this point about linking systems over time, I mean I was struck in our travels in Europe about how important that is to a lot of European leaders. And if something is that important to them, that gives you significant leverage in shaping a common approach much more broadly, including to the rapidly emerging economies. So the ability to -- the potential for linking systems does give you leverage in a wide variety of areas.

One simple example, if you're going to link systems, you don't want yours to be polluted with international -- (inaudible) -- that lack integrity. That gives you leverage to steer Europe in a direction where it's engaging with developing countries in a more constructive manner. So there are a lot of opportunities there for working together.

QUESTIONER: Several nations, including Japan, have talked about -- if you're moving towards an approach that would look at sectoral emissions, look at -- from industrial sectors versus just nation by nation. Maybe you could comment on that at all, whether that's a possible opening, whether that would confuse the matter more?

VILSACK: Well, the report mentions that and refers to it. And I think one of the things, again, that the partnership concept creates is an opportunity for that type of discussion to take place. Again, the notion of the partnership is, and I think Michael alluded to this, there are many, many tools, and the more tools you have, the better the opportunities are for trying things out. And some things will work, and some things will work better than others. And at the end of the day, I think it helps to inform the larger conversation that's taking place within the U.N. framework.

LEVI: There are a lot of ways to think -- I'd just add to that. There are a lot of ways to think about sectoral agreements. And the Japanese approach is a very distinct approach to sectoral -- to a sectoral look. In the report we talk about it as parts of these commitments to actions from rapidly emerging economies. Some of those could be commitments to actions focused on specific sectors. That could also happen within the partnership. You have to be careful that the thing isn't gamed, because there's a lot of gaming that can happen, how you draw the boundaries around different sectors, so that can be quite tricky.

The Japanese approach, especially for the advanced industrial countries, is somewhat different. The sectoral discussion is a stepping stone to something broader. I mean, what they're talking about is having sector-by-sector discussions about standards, what can be achieved, and then aggregating that, and a deal would actually have that aggregated piece, at least for the advanced industrial countries. There's a lot more behind that that I won't go into, but I do not see -- I don't think that what Japan is actually pushing for is a huge set of sectoral agreements for the advanced countries.



LEVI: You haven't had a chance in here yet.

QUESTIONER: Dean Scott. I'm for BNA. My question goes to, I guess, the major emitters process. The report makes recommendations of having a smaller group to focus on some of these issues, but ties that recommendation in with more aggressive leadership from the U.S. versus what's been done in the current process, but by a smaller number. I wonder who does that leave out from the current group of nations that participate, because it suggests that the number of participants is either unwieldy or that some of those aren't necessarily needed to be in that group of leaders.

LEVI: Which current process? Are you referring to leaving out -- the MEN process or leaving out of the U.N. --

QUESTIONER: The MEN process versus the -- (inaudible) -- process. You call it something else --

LEVI: Yes. MEN has the -- 17 or 13, depending on how you count these things. And that's actually one of the challenges there. We don't come with a specific number. This is doomed, all these -- E- 8, E-9, whatever it is, because there's always this extra one there. It's going to be a matter of negotiation and discussion.

I mean, that's the bottom line.

What it isn't is a matter of the United States putting out a press release saying, we're creating this, and here's who's invited, and sorry, guys, you're not coming to the party. This has to be a collaborative effort, to create this, so that there is buy-in from everyone.

And it doesn't and it shouldn't be strictly inward-looking. We talk about this in the report, where the group should be looking for opportunities to reach out to other groups.

They'll be -- to the extent for example that the Chinese government takes strong action on climate, they're going to have a very direct interest in engaging the South Koreans, regardless of whether they're in a particular room, because of their own regional competitive concerns.

So those sorts of things matter. Another example is the possibility of coming up with a common approach -- the rainforest nations -- to deal with deforestation.

So just because you're trying to focus and get the high-level people, with a small group in a room, does not mean that you should be strictly inward-looking.

VILSACK: And as you try certain programs and so forth, and they become successful, you're obviously going to see others want to join. At that point, the numbers could expand. Again the whole key of this is flexibility and more immediacy to try things, to help inform the U.N. process.

QUESTIONER: Going back to the rapidly developing economies, I wanted to get your sense of what the U.S. or the international community should expect of these countries on emissions.

I mean, you know, you take a country like India which is, you know, the economy is growing by leaps and bounds. But they still have millions of people without electricity in, you know, crippling poverty. Bringing electricity and alleviating poverty in this country is going to take energy.

What should we be expecting of these countries?

VILSACK: Let me just say that first and foremost, I think, before we can expect anything of them, we've got to send a message, that we've got our act together and we're willing to make a commitment.

And then secondly I think we ought to expect -- from a nation like India, China -- a willingness to consider any one or all of these tools, that we've talked about earlier; a willingness to try and to participate in the process.

LEVI: Governor Pataki, do you want to --

PATAKI: Yeah. And in fact I think it is fair for us to expect them to take concrete action, measurable action, in specific areas, as part of a global commitment to dealing with this issue, maybe not precisely the same actions as the more advanced economies. I think in fact the report refers to that we shouldn't expect them to pass a hard cap on their emissions because they are going to be growing, but it does call for them to take concrete and very real steps as part of being a global partner.

LEVI: We focused on factoring -- trying to factor economic growth out of the equation. So what we'd like to see is similar reductions in -- relative to some appropriate measures of growth. No one, including the United States, should be penalized for economic growth in this process.

The other thing I should say is that there are a couple ways to parse "expect," and I think this is important. We can expect different things as hard deals, as opposed to unilateral domestic actions, from some of these countries. There may be things that the Chinese government or Indian government are quite willing to do and to pursue on a more informal basis that they may not be willing to put down in blood in a deal. And I think that's an important distinction to make. The last thing you want is to force countries to scale back their ambition because they're afraid that they're going to have to put too much down in something that they can't get out of later.

VILSACK: And I would also add to that that if these countries want to be considered a major player on the international scene, that carries with it the responsibility to be serious about this and not simply to say: Well, look, we didn't have much to do with the current problem, because our economies weren't industrialized for a long period of time. So when you guys take care of the problem you created, then you can come to us.

I think there has to be a -- I think we can expect of them that they recognize the opportunity they have to step up and be a major player, but that is going to require, as Governor Pataki suggested, some kind of commitment from them that is real and that is definable.

LEVI: We're just about out of time. Do you want to add anything to that?

Well, in that case, thank you all so much for joining us here. Please follow up if you have any other questions. We'll look forward to being in touch.

MS. : Yes, thank you all. Do be in touch if you have any questions, and we'll also have a transcript of this event and also the earlier public event available on our website. The report is also on the website as well. So thank you all.















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