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Climate Change: What Next for American Policy?

Author: Christine Todd Whitman
June 14, 2004
Council on Foreign Relations

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Speaker: Christine Todd Whitman, former Administrator, Environmental Protection Agency
Moderator: David G. Victor, Stanford University

Council on Foreign Relations
New York, N.Y.
June 14, 2004


DAVID VICTOR: Why don't the last folks grab a seat, and we'll get started here. Just before we get started, two points of reminder. The first is that today's session is on the record; it's not off the record. And the second is, [a portrait of] David Rockefeller is looking down at everyone, and you'll see a raised eyebrow, and that's for all of you who have not turned off your cell phones. [Laughter.] So please turn off your cell phones and fax machines and other paraphernalia that you may have with you.

I am really delighted to preside over this first that will be a series of meetings that the Council on Foreign Relations is hosting on the issue of climate change over the course of the next few months. We're holding these meetings to mark the publication, over the next couple of weeks, of what's called a Council Policy Initiative. All of you have copies of page proofs in front of you. This is something that is a slightly unusual format in that it takes the form of three presidential speeches and, as you know, in Washington, most major policy decisions ultimately come down to a speech, and the idea here is to take the question of climate change and to articulate three very different strategies on dealing with the problem in the form of presidential speeches. I won't belabor the point about what those three different speeches argue, but they span the whole range of what we think is responsible opinion from, "This issue is an important issue— it's happening, but we can adapt to climate change in stride and therefore we don't need to adopt much in the way of urgent policies to reduce emissions [of greenhouse gases, such as carbon dioxide, which trap heat in the atmosphere]," all the way, perhaps, to another extreme, which is, "We need to re-engage immediately with the Kyoto process [negotiations on an international agreement which places limits on countries' emissions] and apply something like the Kyoto Protocol or a successor to the Kyoto Protocol to the United States economy." The speeches envision [both] top-down regulatory instruments that are organized around international law like the Kyoto Protocol as well as bottom-up instruments, where each individual country does its own thing and then an international system emerges from the bottom up.

I urge you to take a look at the three speeches, and if you'd like more detail— to look at this very long cover memo on the top of the speeches that works in much more detail on the major issues that will be, that are discussed in the report.

We have the great pleasure of having Christine Todd Whitman here for the first of these series of meetings on the climate change issue. Governor Whitman has a long and very distinguished record in public service. You have, in the back of the rosters for today's meeting, a fuller description of her biography. I'd just like to bring out a couple of very important points. The first is, Governor Whitman served in the president's cabinet as administrator of the Environmental Protection Agency [EPA] for more than two years; [she] left it just about a year ago from today. Previous to that, she was governor of New Jersey and served a long and distinguished career there working on many issues including reform of environmental regulations with demonstrable on-the-ground improvement in environmental quality as well as was very active in tax reform including in eliminating taxes for 380,000 low-income families. She sits on numerous boards, including the Board of the Chicago Climate Exchange, and she is in the process right now of writing a book called "It's My Party, Too," which is about the place of moderates in American politics. Governor Whitman, welcome to Council on Foreign Relations.

CHRISTINE TODD WHITMAN: Thank you very much, my pleasure.

[Applause.]

VICTOR: We're going to talk for about 20 minutes here. Most of you are familiar with this format— we're going to talk for about 20 minutes, and then we'll put the floor up for general questions. Let's begin and talk about the climate change issue in the [presidential] campaign right now. It seems as though Iraq has sucked the air out of the debate on foreign policy questions to the point where issues such as climate change don't seem to be appearing in the campaign; neither candidate is talking that much about it. I spent this morning going to the websites of the two campaigns. [Presumptive Democratic candidate John] Kerry's website has 10 buttons on the right-hand side. Issue Number 9 is "Energy and Environment." Issue Number 10 is "Other." The president's website has seven buttons across the top of it. The issue on the far right side, which I assume is of the lowest importance of those seven but has ranked, are environmental issues. Help us understand a little bit about the scenario by which environmental issues and the climate change issue, in particular, may become part of the campaign.

WHITMAN: Well, it's very interesting, because, as you look at campaigns traditionally, environment is always low. When you ask people to rate it, if you give them a wide-open, no subjects, sometimes they don't mention it at all. If you give them 10 subjects and say, "Rate them," environment will be 9 or 10.

It has always been the case that in campaigns, what you focus on are those major issues that you are going to be talking about, and any campaign has maybe four at the most that you talk about over and over and over again. You have positions on absolutely everything under the sun, but there may be four that you really try to drive home to the American people when you're running a campaign, because there are so many— with 24/7 news coverage, so much going on, the public just doesn't absorb issues. And so environment is a terribly complicated one. It's one that people don't fully understand and don't feel they have any control over. They feel they have more control— and the people that they elect can have more control over economic policy, over education, over welfare reform or Medicare and drug benefits, and those are going to be the issues that they really push on all the time and, for this campaign, we do have a group— Carol Browner, my predecessor at EPA, is heading a group of, a sort of truth squad, that's going around to a number of states where environment does pull high— when you mention it, people will say, "Oh, yeah, I care about the environment." When you say, "Do you want clean air, clean water, that kind of thing?" "Oh, yeah." I mean, people will then say it's very important. But if you just give them a clean slate and say, "Rate what you think is the most important things [sic]," those are way down.

One, because they think they really have [a clean environment], even though they know there are high ozone days, and they know some problems, but people generally think their water is pretty clean, and their air is pretty clean. Even when you tell them that they live in really bad areas or are drinking really bad stuff, they'll always point out someone who lived to 110 down the street and drank the water or breathed the air for all those years and so why should they suddenly have to pay more money for what's worked for all this time.

VICTOR: Now, how shall we then think about this issue, because this issue has all of those attributes— climate changes— those attributes— and, in addition, is a truly intergenerational problem. Things we do today affect several generations down the road; investments we make today, the benefits of those investments in the form of less global warming [caused by increased greenhouse gases in the atmosphere], aren't going to be recovered for generations. Does that— shall we despair that this issue is not higher on the radar screen, or is this just one of these things that comes around periodically, and we make policy then, and then we forget about it for a while?

WHITMAN: It's frustrating that it's not higher. I don't think we should despair, but what it calls for is a real education process, and let's just take an area where people really can have some control. I happen to think water is going to be the number-one environmental issue for the 21st century— quantity and quality of water here and around the world. And here, in this country, our biggest problem with water is non-point source pollution [caused by pollutants collecting in water as it passes over land]--things that all of us do every day at home. We put too much fertilizer on the lawn, the farmer puts too much pesticide on, [you] change the oil in your car in the driveway or you wash your car in the driveway, and when you wash it, everything that's on that driveway washes down, gets into the storm sewers, goes out through the streams, and ends up along the ocean.

There is as much oil deposited along the coastal United States every eight months as was released during the [March 1989] Exxon Valdez spill [of 11 million gallons of oil off the coast of Alaska], our largest natural— not natural disaster in the sense that it was caused by a ship breaking apart. If we can't educate people to understand that what they do makes a difference, we're going to have a very hard time solving this problem. So when you start talking about global climate change, you're talking about a whole host of things, because we now know that land use decisions impacts climate change. We certainly know that emissions impact climate change. We know carbon is one of the worst because of the longevity in the atmosphere, but there are six greenhouse gases, there are a lot of things we can do about it, and that's just so beyond the average person's realm of understanding and the feeling that they can do much about it. I mean, I don't know how many people here drive SUVs [sport utility vehicles], but I suspect there are one or two SUVs out there that people know about or have had access to and, you know, emissions— mobile emissions— are a big problem for us in this country.

VICTOR: I'd like to talk a little bit about the foreign policy issues, but before we do that, on this question of mobilizing political action, how do you see the space in the Senate? Last fall Senator [John] McCain [R-Ariz.] and Senator [Joseph] Lieberman [D-Conn.] sponsored a bill on climate change issues. It got 43 positive votes [from senators]. Some people say those were free votes; that this law was never going to come into force and therefore people could vote for it. Other people say that's the beginning of a growing interest in the Senate on some kind of a binding measure to deal with carbon dioxide, which is the main cause of global warming. How do you see the possibilities for getting some kind of legislation through the Hill [Congress]?

WHITMAN: I think we will. I think we will see a cap on [the emission of] carbon [caused by the burning of fossil fuels and deforestation] sometime in the future.

VICTOR: In a couple of years or—

WHITMAN: The key is going to be how it's set up, how fast you have to get to the cap and what the cap is. I mean, remember, this is not just a partisan issue. There is a certain senator from West Virginia called [Robert] Byrd [D-W. Va.] who happens to be the longest-serving senator in the United States Senate, who will do everything in his power— and he has a lot of it— to stop any kind of cap on carbon, because he comes from a coal-producing state. So it's very much a political [question] of where— geographical, where you're from. It's not a partisan issue in the truest sense of the word.

But I can see it coming for a couple of reasons. I think a lot of it will be driven by multinational corporations as other nations around the world ratify [the] Kyoto [Protocol] and continue their interest in doing something about greenhouse gases. Companies that play in the international field are going to find that they are going to need to show that they are taking some steps to reduce greenhouse gases, because you can see, at some point, there will be some squeezes on trade. It may not be up front, it may not be something that's negotiated at the next round of trade talks, but it's something that's going to be there, and they are going to— they have a concern, and they want to see a mechanism that is standardized, and they want to see the ability to get credit for early action.

So I think they will drive it. I think, on climate change, one of the drivers is going to be insurance companies, if, for no other reason, than we are seeing more extreme storms now. You can't make the absolute link back to climate change, and people will say, "You've seen these cycles in the past." But there's starting to be a bigger understanding, and when it affects people's pocketbooks, that's when they tend to take action. But I can see a movement forward toward a cap on carbon. Even the president's proposal on the 18-percent reduction on greenhouse gases and on Clear Skies, recognizes that if those things weren't working, we would take another look in 10 or 12 years, depending on which program you're looking at, and decide what more we needed to do, and that might well include some kind of a cap on carbon.

VICTOR: Just to make sure everybody's on the same page here, the two proposals concern for the case of carbon dioxide, a reduction in what's called the "carbon intensity"--the emissions of carbon dioxide per unit of economic activity in the American economy, and the vision in the president's plan is to reduce that by about 18 percent over a decade, and that has been heralded by some because it is going to continue the process of decoupling the economy from emitting carbon dioxide, where many other people have criticized it for saying, "Well, that still allows carbon dioxide emissions to rise by something like 10 percent or 12 percent over the course of the next 10 years."

Let's talk a little bit about Kyoto, because that was, until March of 2001, that was— at least some element— central element of the U.S. policy. It was negotiated under the Clinton administration. The treaty itself was not completed in 1997, so there was a long process of spend that went over several years to try and finish the details of Kyoto. When the Bush administration came in, and you were administrator at the EPA at the time, one of the decisions that caught a lot of attention internationally was the decision to, in essence, leave the Kyoto Protocol, a decision that took place at the same time that we were leaving the International Criminal Court and other kinds of international forums.

Tell us a little bit about your experience at the time and what you saw the— the effects that you saw on U.S. reputation and whether we should be worried.

WHITMAN: Well, first of all, I think it's important to remember that when the Clinton administration had first talked to the Congress about the Kyoto compact, the protocol, the Senate had taken a vote and voted it down 95-0. They then, every single year, subsequent to that, put riders [appended clauses] on appropriation bills that said that no department or agency in the federal government could spend any money implementing anything that looked like [the] Kyoto [Protocol]. So while the treaty itself had never been sent to the Senate, because the Clinton administration, after that, never went near it, there clearly wasn't a whole lot of sentiment for it, because it required the United States to reduce its emissions significantly below 1990 levels, and there's an awful lot that's happened in this country since 1990 as far as economic growth and access to vehicles and all that kind of thing that would have to change.

So there was a lot of sentiment that was not supportive of Kyoto and, at the time that we disengaged from it, the only country that had ratified Kyoto was Romania, and I think that's somewhat significant because it also shows where the rest of the European countries, in particular, were on Kyoto. Once we disengaged, and the way we disengaged, that sent— it was a rifle shot across the bows, because basically instead of putting the entire package together saying, "Look, Kyoto is not going to be the answer. It's not going to go after [global atmospheric] concentrations [of greenhouse gases], which is what you need to do. It's only got a six-year horizon, so it's not going to be forever, and you're going to have to renegotiate the budgets [the quotas of emission levels allocated to each country] or the targets" --they call them "budgets" in the Protocol— and that we are going to engage with the international community to go forward to address this issue. We think it's important, but we can't ratify this." We just said, "We're out of here. We're not going to ratify Kyoto, and there's no point bringing it up."

And so that, to the rest of the world, sounded as if we were saying, "We don't care that you all think this is important, that people have been working on this for 10 years. We're just going to give it up and walk away." And since we are the largest per capita emitter [of greenhouse gases], that really rocked everyone, and it spurred, I think, the push to ratify, and what's going to be interesting is to watch a lot of these countries, particularly the European countries, as they get close to having to meet their budgets to see whether they're going to meet them at all, because many of them are having real trouble on getting to that level.

What the [Bush] administration has subsequently done is engaged in a lot of multilateral and bilateral agreements with countries to enhance research and development on climate change issues, to promote technology. I mean, we're spending— the last budget proposal was $4.2 billion for climate change research and development. It's the largest that's ever been proposed and more than all the developed nations combined.

VICTOR: How are we going to engage with other countries? If they have, because, in part, because of our decision to leave [the negotiations in] Kyoto, they rushed in and ratified Kyoto— I think— I don't know what the latest tally is, but something like 100 countries are ratified, all of the European Union. They're in the process now of putting into place an emissions trading system [whereby countries are allocated credits to emit certain amounts of carbon and may trade those credits to other countries in order to regulate worldwide emissions] that will begin operation on January 1 next year. It's real. In fact, it will happen whether or not Kyoto enters into force as a treaty. So they're doing that. How are we going to engage with these other countries, or should we be worried about engaging with these other countries? Because the language they're speaking is Kyoto, and the language we're speaking is not Kyoto, but it doesn't seem to involve much outside that framework.

WHITMAN: Well, but what's interesting is how many nations. I mean, we now are involved in a couple of the programs. It's not on climate leaders— I m trying to remember which of them— but we have 70 percent— we have— the countries that are engaged emit 70 percent of the current emissions of greenhouse gases. I mean, we are not involved internationally, and we have done it with a series of side agreements that we've come to with a host of other countries, because they have to play with us, because we are such a big emitter. They want us—

VICTOR: China, India, and—

WHITMAN: China, India, we— Canada, Mexico, Italy, Spain, Australia, depending on the issue. For instance, on the Congo Basin Forest Initiative [an August 2002 United States Agency for International Development (USAID) initiative which encourages economic development, poverty relief and resource conservation in the Congo Basin], all of the sub-Sahara numbers—

VICTOR: This is the initiative in Western Africa to protect the forests.

WHITMAN: Protect the rainforest for carbon sequestration, and we are very, very engaged internationally, which most people don't know because it's not under the umbrella of Kyoto, and many of these countries— I mean, certainly, it had a huge impact on us. I mean, I went to a number of international— the first thing, actually, I did was to go over and engage us in the Persistent Organic Pollutants Treaty in Stockholm, which we are a part of, and we haven't walked away from everything internationally.

VICTOR: This is a treaty that's— for most applications, stands about 12 particularly nasty pollutants like DDT [dichlorodiphenyl-trichloroethane] and PCBs [polychlorinated biphenyls] and a few others that build up in the environment.

WHITMAN: We've done that, but there was clearly, I believe, the problem we set ourselves up for was that, for countries for whom climate change is a major issue, who have been very involved in the Kyoto process, the way we disengaged caused real problems at home for some of those leaders and their relation with the United States was how they—

VICTOR: What could we have done? If it's an issue more of perception than of reality, what could we have done differently at the time?

WHITMAN: Oh, well, first of all, you have to remember the way it was done. It was in a letter to [Senator Chuck] Hagel [R-Neb.] on the Hill [that] was sent up, and it also backed away from the president's initial commitment during the campaign to regulate carbon. And those two things were in the same letter, and so that really made the world think we didn't care about greenhouse gases, and it didn't talk about the fact we were going to continue to engage with the world; that we did care about it; that we were going to put more money to it than we've ever put before; and that we were going to— while we didn't think the science was complete, we couldn't wait for complete science, and you needed to take action now.

So it would have been great if we could have put that whole package together. We didn't, and that's the problem. That, I think, has caused a lot of –I mean certainly, we are not on the same page as Kyoto. Kyoto would require much more in the way of reductions [of emissions] here; a greater change in our lifestyles in order to reach those targets, and so for other countries that are starting to take steps toward that, they resent it. Even if – Kyoto doesn't go into effect until you have signed up countries representing 50 percent of the world's greenhouse gas emissions. Until Russia ratifies, it is not in effect.

Now, interestingly enough, The Financial Times had on, was it two weeks ago, I guess, on Monday or Tuesday, it had Russia wasn't going to ratify, and the next day [Russian president Vladimir] Putin said, "No, we're going to fast track." So I don't know where they are.

VICTOR: But just wait— that could change quite a lot.

WHITMAN: It changes all the time. The question there, which will also be interesting to see— the European countries agreed not to use Russian sinks [credits for emission]. Countries will get credit, obviously, for reduction in greenhouse gases. The easiest way to reduce your greenhouse gas emissions [is] if you're economy is in the tank. Russia's economy has not been great, and so they're not producing much in the way of greenhouse gases. They've got a lot of credit for that, plus they have the open spaces that absorb greenhouse gases, and they get credit for sinks.

Conceivably, the European countries can buy some of those credits and not have to take much action themselves in order to meet their [emissions level] targets. They've said they weren't going to do that because that didn't really change overall greenhouse gas emissions, but they're not terribly close to their budgets at the moment. They may have to.

VICTOR: The environmental community still looks at this and says, "Okay, maybe Kyoto was beyond our reach," but the president still doesn't have a binding system of limits. The president has this voluntary program and has this goal to reduce this intensity measure that we talked about earlier, but that still results in total emissions rising and therefore firms in this country don't have an incentive to cut their emissions of carbon dioxide. For example, there are electric power utilities today that are now looking at [building] new coal-fired power plants –coal emits roughly twice as much CO2 [carbon dioxide] per unit of electricity generated as a natural gas, and nuclear power emits no CO2. And these companies are building these things because, in part, they think they're going to a regulatory buy.

WHITMAN: They're also doing it in response to consumer demand for low-cost power, and we do have this problem. We were discussing this at the table a little bit in this country— we don't want coal because it's dirty. Nobody wants a natural gas pipeline anywhere near them because they might explode. We don't want to explore for oil, because you have to explore, and we don't want to do that in pristine regions. We won't talk about nuclear in this country. Hydro [electric] power [generated by turbines operated by running water] has its limits when there are droughts, as we saw a couple of years ago in the West, and [when] you take the water to make power, the fish can't get upstream to spawn. A nice battle going on right now in Massachusetts [is] on wind power. Solar [power]--we still haven't quite figured out how to store it. It's peak shaving, but we may get there with that.

So we keep saying, "No," to everything, and yet we all want our power, and we want it to be instantaneous, and we want it to be good, and we want it to be affordable. So what we're going to have to do is really push for the new technology that allows us to say the wet method of coal [combustion, wherein the exhaust is sprayed with a solution that removes its impurities] and underground injection of the carbon [dioxide to prevent it from escaping into the atmosphere]--there are fluid-based coal processes, as you well know, that can vastly reduce the amount of harmful emissions you get from using coal. We're going to have to do that. We're going to have to recognize that there's a next generation of nuclear technology that is a whole lot safer than in the past. But, again, it's going to rely on a big education of the public.

VICTOR: One last question from me, and then we'll put it out to everyone here. Help us understand the decision between being inside the administration and being outside the administration. For people outside, who look at this, [I'm] 3,000 miles away in Stanford, California, which is about as outside as you can get— [who] look outside and, at your tenure as the head of EPA, and you were there fighting the good fight on the issue of climate change right up to the decision by the president to leave— in essence, leave Kyoto and to back away from the campaign pledge. There was an enormous amount of attention in the news about these decisions to remove these parts and edit these parts of various EPA reports and so on. Help us understand the— your thinking about how influential one can be inside an administration where there is clearly an administration line and, I suspect, part of your book is to talk about the role of moderates and including moderate environmentalists in the Republican Party, versus being outside the administration, where there may not be as much influence, but life may be easier.

WHITMAN: Well, it's interesting that you bring up the removal of climate from the report. The report— actually, it was just one report— it was, for the first time ever, the [Environmental Protection] Agency published a report card on the environment. It is something that the National Academy of Sciences and various other outside groups had urged the Agency to do for its 32-year history. They had wanted just a 34-year history. They felt, as I do, that if you don't know where you are, it's pretty hard to judge where you're going and whether you're getting there at all.

And so for, literally, 30 years anyway, people have been trying to develop the standards in order to be able to produce a report card on the environment and could not get scientific agreement as to what you measured and how you measured on the water, air, and human health— just those— and land use— those four things. It took 30 years. When we came in, one of the things I felt very strongly about is [that] we had to have this. I said, "We're going to do it, damn it," and so we went at it, and we finally— and when I say "scientific agreement," it's not just scientists within the EPA, and it's not just the scientists within an administration. It was all of those plus the National Academy, various learning institutions, colleges and universities. I mean, we had scientists from all over looking at these reports and agreeing on what was going to go in it.

The fact that we couldn't get that kind of agreement out of scientists on climate change, which in the big scope of things is relatively new as far as hard science is concerned, is not a surprise, and I didn't want to include anything in that report that wasn't up to the standard of the rest of the science, and I couldn't get agreement. It wasn't just the White House saying, "You can't put this in because we don't want it in," it was [that] I couldn't get agreement from the scientists. The only language that I could get agreement on was so vanilla-like that it was— would have undermined the credibility of the entire report, and I felt [we] we're much better off just putting a line in [saying,] "Climate change is an issue and here are three or four places to go to see the latest work that's being done on it," and then just go at the rest of the report, which is what we did.

It wasn't that the administration told us we couldn't put it in. It wasn't because they didn't want to do science. It's because we couldn't get the agreement from the scientists on language that really had any meaning that offered the kind of depth that the overall report card does. And so that— it's very hard, because if you just look at what's coming from the outside— if you look at it from the outside, all you see is what's in the papers, and that would lead you to believe that the administration had come to the EPA and said, "That's it. You've got to take climate out of here because we don't believe in climate." That's not what happened, but I went out and talked about it, as we were talking a little earlier about arsenic [poisonous chemical used in pesticides]. I did a lot of talking about arsenic, but you couldn't get over that hurdle [inaudible] to believe that it was a different way.

And it becomes very difficult. What I tell people to do is, "Look, when you see something that really upsets you, whatever the issue is, look at it in the paper you're reading it and then go get another paper that may take a different point and look at that, and then if you really want to get interested in it, you go to the website or whatever agency or department it is— try to get both sides so you can figure it out, because the truth is usually somewhere in the middle.

VICTOR: Okay, thank you very much. And let's now open the floor to questions. When I call on you, please stand up, state your name and your affiliation, and make your question as concise as possible so we have as many as possible. Right here.

QUESTIONER: Thank you, Governor Whitman, for your leadership inside the Agency and outside the Agency, and my name is Myra Frazier, and I'm at EPA and working in sort of issues that Governor Whitman just described. My question has to do with broader foreign policy issues and how we can further the climate change debate and specifically the Millennium Challenge Account is something that has been given a lot of thought, and there has been a real discussion about how the specific criteria that have been identified can advance a whole set of development objectives. How can climate change— the issue of the climate change refer [to] that in the context of the Millennium Challenge Account and specifically how can that discussion be broadened to look at issues of water security, health, and the like. Thank you.

VICTOR: Let me, before you answer, just remind folks— the Millennium Challenge Account is part of the— the Millennium Challenge Corporation is part of the president's pledge to add eventually $5 billion per year of new money to developing countries but to make them accountable to certain performance indicators and to reward countries that do better on these indicators than those that don't.

WHITMAN: I'll be better able to answer you in another month or so if I get through the Senate confirmation, because the president has put my name forward to be a member of the Millennium Challenge Corporation. It's made up of four members of the administration, and then there will be four outside regular people, but it is certainly my intent, and I think absolutely appropriate to have environment be one of the criteria for the Millennium Challenge Account. I suspect, however, it will be energy for clean air and energy sources, and it's one— remember, we went to the [2002] World Summit on Sustainable Development [in Johannesburg]. There were a number of bilateral agreements that were reached— or not bilateral, because they included more than just two parties, but they were very focused. They were on providing clean energy for the developing countries, particularly India.

We entered into one with India because so much of the fuel that's used there is biomass [organic energy resource, for example, wood, which releases carbon when burned], particularly for— it [affects] the health of women and children because they use it for fuels in the house. We're trying to come up with a cheaper, affordable form of energy that could be easily gotten to the communities that are way out and not on any kind of a[n electrical] grid, although their system is a little— a grid, I think, is a little too formalized for what happens there on their energy. But it will be on that kind of energy, which will help with climate change. It will obviously be something that would support things like the deforestation programs that we are currently involved with— and water issues— will be the way the environment will go. The ones that will impact climate change will be the energy and will be the land use practices. And those certainly are appropriate criteria. I just don't know at this point how well they've worked those out.

VICTOR: Andy?

QUESTIONER: Andy Revkin, The New York Times, good to hear from you. I wrote the story–I broke that story about the report on the environment whenever that was— two years ago— and my impression of the debate over the language that I saw wasn't between scientists. It was [that] the scientists and others at EPA were handed revisions from the White House.

WHITMAN: So what happened—

QUESTIONER: Let me complete my statement— which said, at the bottom, "No further changes," and that's when they said, "Screw it, we just need to pull this completely because we can't accept the language coming from the White House."

WHITMAN: What it was— and, you're right, I mean, it was White House in the form of the Council on Environmental Quality [CEQ], but you've got to understand what the role of the CEQ is. The role of the CEQ is to—

VICTOR: The Council on Environmental Quality, which is part of the White House.

WHITMAN: That's in the White House, and their role is to make sure that the administration— that all the different factions of the administration that have an interest in an issue, because environment isn't just at the Environmental Protection Agency, it's almost in every department in the federal government that they all agree, that they're sort of one voice.

QUESTIONER: What I'm trying to say is it was policy language not science language that was—

WHITMAN: No, no, it was policy— no, it was a science language. It was what we could say about— if you looked at the whole report, there's a lot of science in there. I mean, that is a very good— I am very proud of that report card. It really is a learning tool. It's something that should be the basis, I hope, for teaching environmental science in a lot of places— a lot of good science in it. We couldn't get enough agreement— they couldn't get enough agreement in bringing scientists together on what kind of language. So the language we fought back and forth on was how specific could we get, and it was pablum. It wasn't so much that they— when they say no further changes, I guess some people pay attention to that. It's just sort of like they say, you know, vet everything with us before you go out and say it, and you don't do it.

VICTOR: Were there further changes here? We'll come back if you have another question. Another question here— one sign that the environment is rising in importance almost to the level of national security is the number of acronyms now almost rivals the Pentagon. So we have to keep track of these acronyms— a question here.

QUESTIONER: Thank you. Nick Nicholas, retired, Time, Inc. My affiliation is with environmental defense, and in [the administration of George] Bush One [Senior], I was a member of PCEQ [Presidential Council on Environmental Quality – also "CEQ"]. My question for the governor is, if [the environmental bill proposed by senators McCain and Lieberman passes, and Russia approves Kyoto, let's say, this summer, does that change the political calculus with respect to this issue? And for Mr. Victor, would you rewrite either— any of the three speeches or perhaps write a fourth speech if that were to occur? Thank you.

WHITMAN: I think the chances of McCain-Lieberman passing are pretty slim.

QUESTIONER: [Off mike.]

WHITMAN: Oh, okay. Clearly, if they did, and you had a ratification of Kyoto, that would change things, because you would have a sea change in the laws in this country and if Russia ratifies and Kyoto goes on on itself, that, in and of itself, won't change things. If we have a change with a cap and the kind of [emissions] standards that McCain-Lieberman calls for— a timetable and emissions standards, then that would have an enormous impact.

QUESTIONER: [Off mike.]

WHITMAN: If it passes the Senate, yes, that's very different, then, because getting something like that through the House [of Representatives] is going to be nigh onto impossible, and I don't know that will change it enough. I would look at— of all the bills, if you look at all that legislation, [Senator] Tom Carper [D-Del.]'s bill is probably the one that stands the best chance.

VICTOR: Could you say a couple of words about what that is?

WHITMAN: Yes, Tom Carper has written what he— actually not so much on climate change. His is more on multi-emissions [which focuses on reducing the emission of sulphur dioxide, nitrogen oxides and mercury], but it captures carbon. He has a multi-emissions bill that's a response to the president's Clear Skies, but he does call for a cap on carbon. It's further out, it's got some time before you get there, and the numbers are such that it's probably in the doable range, and that stands a better chance, I think, of passage than almost anything that we're looking at today.

VICTOR: Well, let me briefly answer it. The third speech that's in here, which is about this bottom-up evolution of an international approach to climate change, is written with that in mind. If— imagine— wave a wand— McCain-Lieberman were to pass and somehow that were to become part of American law, the major advance would be that we would finally have some incentive on firms to do something about carbon dioxide emissions, but those are different targets and timetables and different costs from what was envisioned in Kyoto.

And so I think what's going to happen is we'll have our approach; the Europeans already are developing their approach; the Canadians are working on something different; and New Zealand is working on something different; Japan is working on something different. But all of these, to different degrees, have emissions trading as the core, and what will happen is that, over time, as we gain confidence the European system has integrity, and they gain confidence in our system, that emission trading is going to emerge from the bottom up with these limited forms of international trade.

And there are also private initiatives— the Chicago Climate Exchange is working with, I think, 19 companies to trade emission credits, and so that's the vision in the third speech of the Council Policy Initiative.

WHITMAN: A lot of this will be ground up. I mean, it will— it's already coming from the bottom up. You see a lot of states already taking action on greenhouse gas emissions and trying to work out trading mechanisms, and that's another— I mean— it's interesting, and just sort of a sidebar on the Chicago Climate Exchange, which is also working with the International Petroleum Association. The Chicago Climate Exchange is purely voluntary. Businesses come in, they will benchmark the— the Exchange works them to benchmark emissions; they agree to reductions, they can trade on those reductions. It's something that's working its way through. I think it's going to be very important and form the basis for trading in this country and maybe help inform— certainly [it is] working very closely with the international community.

Now, both Maine and Houston were very interested in joining the Chicago Climate Exchange when that was— became known. An environmental group called both the governor [of Maine] and the mayor [of Houston] and said that they would come after them, hammer and tongs, if they joined the Chicago Climate Exchange, the theory being that [if] they join something voluntary, that might stop the environmental organizations' ability to get a mandatory cap on carbon through. That's the kind of mindset we've got to get over, because we can do both.

VICTOR: David and then back.

QUESTIONER: Hi, Governor, or either of you, could you put—

VICTOR: Could you introduce yourself?

QUESTIONER: I'm David Malpass, chief economist at Bear Stearns. Could you put carbon emissions into perspective— how much is autos [automobiles] and how much is industry? And then relate it to a gasoline tax. Would that be a meaningful change in output of carbon?

VICTOR: Let me just say, roughly, a third, a third, a third. So, roughly, a third is transportation, which includes not just automobiles, which are about 20 percent, but also freight and aircraft are a rapidly growing source of CO2 emissions, because we are using airplanes more and more as incomes rise. And then, roughly, a third is from industry including electric power, and then, roughly, a third is [from] inside buildings, including industrial buildings, and there are different ways of—

WHITMAN: Houses are one of the largest— they call this the most emission because of the power they use and a whole lot of other things in homes, and there's a lot that we can do. I mean, the Environmental Protection Agency runs the Energy Star program [which helps businesses and individuals use energy efficiently], and there are enormous savings that can be made. Last year the savings— and Energy Star is a program whereby the agency certifies various different appliances, buildings, even— they now benchmark schools, hospitals, office buildings, and homes as well as, as they say, appliances, and from the purchase of Energy Star materials— last year consumers saved $20 billion, which was enough to fuel 18 million homes and remove the greenhouse equivalent of 19 million cars. I mean, people don't think that homes have much to do with it, or that we, personally, can control things at all, but we can.

VICTOR: Do you want to talk about the gas tax?

WHITMAN: Yes, the gas tax— I don't think we're ever going to get one. What I think would be far better and would be more achievable was— first of all, Congress is the one that controls whether the Department of Transportation can raise the gas mileage [standard]. As you know, the administration pushed and did last year— we got it from 20.7 miles per gallon on light trucks to 22.2 miles per gallon. Now, there are lots of people who say, "We could get a 50 percent improvement in gas mileage without sacrificing safety." But the thing that recognizes, that's the first time that we had raised the gas mileage standard since 1996, and it represented— what was the number— about a two-thirds increase of any increase between '86 and '96, which is the last time it had happened. I mean, we can do better than that.

Plus the fact that right now in the tax code, there is a write-off. If you get an SUV or a light truck for a business, you can write that off in a year, and I have known businesses, I've talked to small businesses that were intent on buying a car. That's all they needed -- or maybe even a station wagon. That's all they needed, and their accountant said, "You're crazy, get an SUV because you can write that off in a year." We can change that. I don't think you're ever going to get a gas tax through. It's going to be hard. I mean, I tried in New Jersey— we have the lowest gas tax in the region [14.5 cents per gallon as of January 2003]. I tried to raise it in order to be able to preserve open space— to put it directly to open space— something that people in New Jersey overwhelmingly support. No way— no way I could get the legislature to begin to think about it.

VICTOR: Back there.

QUESTIONER: Governor, Andrew Shapiro, I run a consulting firm called Green Order. [I'm] intrigued by your idea that multinational [corporations] can help to drive the push towards reducing carbon emissions, and I guess I want to push you on that and ask is that without regard to whether there's a cap at some point, as you predicted? Will the multinationals actually be involved in that effort? And then a second question: I see a sort of paradox in the current landscape. We're talking about how environment and energy issues and climate change don't seem to be on the forefront of people's— sort of— the public imagination and political views. At the same time, there was an article this weekend about the huge growth and interest in hybrid cars, Toyota Prius can't keep up with the orders, and so on. You have celebrities like [actor] Leonardo DiCaprio, who just [inaudible] making it climate neutral. Where is the consumer demand driving all this and how does that play with the multinationals?

WHITMAN: You know, if you give consumers the ability to make the choice, i.e., with an Energy Star thing, they will do it, if it doesn't cost them too much more. I mean, basically, it gets back to that pocketbook issue, because that really does drive people. Now, fortunately, with Energy Star, there are, oh, gosh, there are now some 1,200 manufacturers that are producing 18,000 different Energy Star products. So you've got a range of choice within each category, and people are buying. They're making the right choices, but they still— I'm glad Leonardo DiCaprio is seeing energy— he is in the minority. If you go out to Hollywood, and you look at the number of SUVs driving around, there are a whole lot of them. It sounds good, but they don't always apply it to their daily lives, and that's part of the problem, because they are the ones that are so highly visible and do as I say, not as I do, but people see through that.

But, in general, I believe the American public wants to do the right thing and will do it if they can do it in a way that doesn't too adversely affect their income. It's interesting, we always polled— there's been sort of a standard question that's been asked over the years about whether the American public would accept a cut or reduction in economic growth for an improvement in the environment. Would they pay more for things and put more restrictions on businesses? Up until last year, they always overwhelmingly said yes, they'd be willing to pay a little bit more, yes, they'd be willing to see some reduction in growth for benefits to the environment. That changed last year. And now—

VICTOR: Because the economy was weak and—

WHITMAN: But the economy has been weak before, and they still said it. I mean, during the last recession in the '90s, they still said— in the late '80s— they still said that they'd be willing to pay more and see a slower growth in the economy to see more environmental protection. I hope what that means and what that's coming from is a feeling that we don't have to have this either/or discussion; that we, in fact, can and must have economic growth and a clean and healthy environment, and that's what people are seeing. That's what my belief is and my hope is.

The reason I say I think the multinationals will do it— I look at the number. There are now 50-some-odd companies that have joined the Environmental Protection's Climate Leaders program, which is, again, they come into the agency, they benchmark their greenhouse gases, they pledge, they make a commitment to reduce their emissions by a certain amount depending on what the industry is so it fits their needs so they can stay competitive, and then they report on an annual basis. They will be able to go to the Department of Energy and benchmark that so they'll get credit for early action, and it will all be recorded. So if there ever is an international exchange, they will get some credit, because both the Department of Energy and the EPA and everyone who is working on this is looking very closely at what's happening in Europe. There's a lot of discussion going on, so we're talking the same language as to what you measure and how you measure it, and that's going to be very important.

VICTOR: And let me just say that on that issue, on the 24th of June, John Brown, the head of BP [British Petroleum] will be here speaking about an article in the next issue of Foreign Affairs on this question of the role of multinationals and the problems of the different regulatory approaches in Europe and here in the United States. Next question— Herb.

QUESTIONER: Herbert Levin, one question, two parts— we are used to the United States being singular— different from the other developed democracies. Health care, health insurance, is one thing. But could you explain to us the politics of why we are so different on this issue than Canada, Japan, and the Europeans? Why are politics so different that we don't make the same moves as the other developed democracies? And the other sub-part of this question is that when one receives, from the automobile manufacturers or the chemical association, their position, they seem to be saying, "Pass a law, and we'll all obey it. We don't like this voluntary stuff; we don't like this state-by-state stuff, because our stockholders think we will be disadvantaging ourselves compared to the competition." Could you let us know your thoughts on these?

WHITMAN: Yes, a lot of them say that in the letters to individuals, and they say the exact opposite to the members on the Hill. I mean, if they were out there saying that to the members on the Hill, we'd get something done.

For instance, there is just no question in my mind that we should pass a bill like Clear Skies. Now, you may argue over whether Clear Skies sets the right target at a 70 percent mandatory reduction of SO2 [sulphur dioxide], nitrogen oxide, and mercury over 10 years— whether that's enough, deep enough, fast enough— fine, let's have that argument. But let's talk about a protocol that sets a standard for everybody so they know what it is, they know now what those standards are going to be, they know that they're going to be in place, and you don't have this constant changing. The Clean Air Act is a wonderful thing, but it sets these standards, different standards— this year we'll be doing mercury, two years from now we'll have another review of the nitrogen oxide standards. If you're making a major capital investment, you need to know what you have to get to in order to be able to get the loans from the bank and to justify it to your stockholders, the money you're going to be spending, because you're going to be capturing everything and taking care of the problem, and we're not set up like that now.

We've always been a pretty profligate nation. We've had so much in natural resources that it's hard for us to believe that they're finite; that there is a problem. We're beginning to understand that now. Most people today, if they go to national parks, I don't think realize what they should be seeing. You go to the Smokies [Smoky Mountains which border Tennessee and North Carolina], and you should be able to see for 100 miles. If you can see 15 on a good day— that's a good day. But it's happened gradually, and a lot of people who are now seeing the environment don't really get it yet. They're beginning to.

VICTOR: Next question— we have time for a few more questions— brief questions, please. I'm going to count that as two questions.

QUESTIONER: Cheryl Gage, lawyer. You spoke initially about the insurance companies [inaudible]. I'd like to have you say some more about that. Well, I've been driving around for the last three years in southern states and Long Island, and there are very few solar on roofs of houses. Now, this is ridiculous. I saw one in 100 yesterday on Long Island. This is not an expensive way to heat houses. Houses, you say, are one of the big users. Why haven't we done something to— tax rebate— something— to encourage people to put these on?

WHITMAN: Well, if we can get an energy bill through the Congress, I think you'd see that. Again, whether you agree with the president's energy bill or not, of the 106 or 107 recommendations and that 47 of them go toward tax incentives for conservation and new money to help with— and new focus on— in tax policy that would encourage research and development on alternative fuels. I mean, we should be doing more of that. We should be being more creative. There are, obviously, other problems, depending on how old your house is and stuff and changing over the system, but we still don't have the right set of incentives, because we haven't had a national energy policy in decades, and we need to have one.

VICTOR: Just look at pork [legislatives appropriation designed to ingratiate legislators with their constituents] for solar, just look at pork the coal companies and pork for this and that, shouldn't we just stop it all?

WHITMAN: What, stop solar?

VICTOR: No, stop all these subsidies and let these fuels just compete directly.

WHITMAN: You try that one. [Laughter.] There was a real effort— to give the administration credit— there was a real effort in the 2000 Ag[riculture, Rural Development, Food and Drug Administration, and Related Agencies] bill to push back against some of farm subsidies, and there is a lot of new money in that for the first time ever that encourages good husbandry and good use and, in fact, the Department of Agriculture is now giving priority to some new management techniques for carbon sinks to try to get at these as part of an overall response to what's going on with climate change. I want to tell you, if you try to fight those farmers, forget it. And the other groups are that strong. I think it would be very hard to be able to reduce— I mean— should you just get rid of them all— it would probably be wonderful if you could, but you'd have too many people's livelihoods going under.

VICTOR: A couple more questions— one right here.

WHITMAN: Oh, about the insurance companies? I think you're seeing it because— I'm starting to hear more from insurance companies about their concerns on the payouts. This year, for instance, you usually have 10 hurricanes a year that you name. They expect at least 15— it will rise to that level. You look at the tornadoes and the type of devastation you're seeing, they're having to make bigger and bigger payment because of natural disasters, and that affects the way they think about the world.

VICTOR: A question here?

QUESTIONER: Keith Abell, GSC Partners. How fundamental does growth in [the] middle class in China and India and the possibility that there will be tens, if not hundreds, of millions of middle class people that can afford cars affect this process?

WHITMAN: It's incredible, actually. The latest figures, and you probably know better than I, that it's going to be a 90— China will be producing— we'll see the greatest— close to 70 percent of the increases in greenhouse gas— they'll see a 70 percent increase in greenhouse gas emissions over the next 10 years, and that's an enormous amount. They're going to be better than 50 percent of the output of greenhouse gases soon.

VICTOR: They may overtake us in the next 15 years or so as the world's largest emitter. But still, per capita, it's still about one-tenth the U.S. level.

WHITMAN: Right, because they don't all drive cars, and they don't all have homes with electricity and with air conditioning and everything. They do along the—

VICTOR: To the center of the question— how should we think about our engagement with those countries? Because we have these partnerships that involve people going to Washington and Beijing and having meetings, and so on, but is there something more aggressive we should be doing? Should we be trying to put riders to trade bills? Should we be trying to somehow coerce these countries to do more on this? Or is that not feasible?

WHITMAN: Well, actually, we tried introducing some environmental standards into some of our trades, our WTO [World Trade Organization] negotiations, and there's a lot of pushback on that, particularly from the developing countries, because they say, "Hey, look, you're trying to penalize us in the way we want to grow because you didn't have to adhere to all these standards when you were growing. So if we're going to try to reach the same economic level as you, you can't hold us back like this." And they're not wrong, except that totally overlooks all the technological advances that we have had over the last decade. What we ought to be figuring out is how do we provide them with the technological support to allow them to leapfrog the mistakes we made during the industrial revolution, to keep their economies growing and yet not allow them to deforest in the same way that you see happening in Brazil. You have to substitute— they have to live, they have to earn livings, you have to be able to provide substitutes for what you're taking away, but we ought to be able to do that. This world is smart enough now to be able to do it.

Interestingly enough, I was just on a videoconference between Hong Kong and Guangzhou because Hong Kong has that air quality. A lot of that is coming from the development of Guangzhou on the mainland, and they wanted to find out about emissions trading, and we had Richard Sandor [chairman and CEO of Environmental Financial Products, LLC] on that call, and he and I did it to help them try to set up to see whether trading of greenhouse gases was a feasible way to go forward— or, actually, emissions.

VICTOR: Time for the absolute briefest of questions— right here. It has to be brief.

QUESTIONER: Lyndsay Howard, Howard Communications— there have been true technological scientific revolutions in some of the other alternative energy sources. GE [General Electric] is producing unbelievable wind turbines, which have done away with the intermittency problems. There's a big wind farm going to be built off the coast of Long Island. Also, hydrogen—

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