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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, Thomas J. Vilsack, Counsel, Dorsey & Whitney LLP and Former Governor, State of Iowa, Task Force Co-Chair, and Michael A. Levi, David M. Rubenstein Senior Fellow for Energy and Environment, Council on Foreign Relations, Task Force Director
Presider: Terry Moran, Anchor, Nightline, ABC News
June 13, 2008
Council on Foreign Relations

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TERRY MORAN: So good morning, everyone.

I'm Terry Moran with ABC News. On behalf of the Council on Foreign Relations, I'd like to welcome you all to this event, which marks the release of this extraordinary report of an independent task force confronting climate change -- a strategy for U.S. foreign policy.

And let me get a couple of the ground rules out of the way, please. If you have a cell phone, you can turn it off or turn it on vibrate so that we can -- I've already done it with mine -- and just remind everyone that this is on the record. Gentlemen, this is on the record. And I'll try to remember that too, which is sometimes difficult.

As we enter the swing of another presidential campaign, it seems that there has been some genuine progress on the issue of climate change. Both major presidential candidates believe in the reality of climate change and the human factor in it and have some serious proposals to deal with it, which is a new thing.

The American public attitude has shifted dramatically. Polls show that people -- Americans have embraced the science to a significant degree and want to get after the problem. The president of the United States, I think, has engaged with this problem in a way that would have surprised people back in 2001. And two of the three cable news channels seem to be onboard. (Laughter.) That's a joke.

I was in the Rose Garden back in 2001 when President Bush announced his policy on Kyoto and it was an extraordinary moment. It was a jaw-dropping moment, really -- not so much for the substance of what was said there. Kyoto, the United States Senate had demonstrated, was a dead letter politically in America. It was really the tone. It was this striking moment and one of President Bush's early assertions of the character of his presidency that we've come to understand.

And it was -- you know, he's a president who has said over the years and demonstrated that he doesn't do gestures. His is not a gestural presidency, he has made clear and his people have made clear. He doesn't do peace talks for the sake of peace talks; or introducing a bill just to get a headline. He aims the presidency at results is the, I think, self-image. The executive philosophy, if you will, of this president.

But that was a gestural moment. I think people around the world, some, saw it as an obscene gesture, which it was not -- although Vice President Cheney was in attendance there, but he behaved himself. But it was a declaration of independence, really, on this issue by the United States under the leadership of George Bush. And he wanted to take it in a different direction -- take the policy in a different direction. And as I said, I think his administration has shifted some -- somewhat -- but what this report is, it strikes me, is a declaration of interdependence.

And it is, as I say, an extraordinary piece of work and I'm honored to introduce the co-chairs and executive director of this independent task force now: The former governor of the state of New York, George Pataki; the former governor of the state of Iowa, Tom Vilsack; and Michael Levi, who is the executive director of this project.

Gentlemen, congratulations!

And let me just begin with Governor Pataki: On the need for such a task force, a strategy for U.S. policy, why now? What were you trying to achieve?

GEORGE E. PATAKI: Well, Terry, first: Thank you for moderating this morning and for being here with us.

And before I try to answer that question, let me just thank all the members of the task force. I know we have a lot of them present here -- 29 very strong willed individuals from across the spectrum from industry and academia and the advocacy and other groups.

And I have to thank my co-chairs. First, Governor Warner, who served as co-chair the first few months before resigning as he took up a race for the U.S. Senate; and Governor Vilsack, who's been just a pleasure to work with as co-chair of the task force. And to Michael Levi -- I think this report, whether you agree with all of it or not, is an extraordinary report. It represents a consensus, a strong consensus from this broad, diverse group of individuals and that's a tremendous tribute to the effort and work that Michael Levi has put into it.

So Michael, thank you very much for that.

I think the reason relates back to, Terry, when you started about that Rose Garden press conference in 2001. The Senate had overwhelmingly rejected -- I think it was 98-to-nothing -- rejected Kyoto. And the president said that we're going to do our own thing.

Now, eight years later, if you were to do a national poll and say, where is climate change? It's not going to be at the top. It's not going to be in the top 10. But if you did a national poll and asked about energy, it would be right at the top. And when unemployment goes up by half a point, when gasoline in New York is $4.50, when there are so many pressing issues, one of the concerns I have is that if people look at changing the energy paradigm, they might not realize the importance of considering climate change and the consequences that steps we will be taking today are going to have for centuries on the globe.

So this lays out, in the context of where we are today, a domestic policy and an international strategy so that the United States can become an aggressive part of the solution, instead of sitting aside while other nations try to deal with a very important issue.

MORAN: An aggressive part of the solution, and Governor Vilsack, it seems to begin -- the linchpin in some ways -- is a domestic policy, an aggressive domestic policy. And I'd like to draw, as you discuss that, on your political experience -- on both your political experience.

I mean, the question -- and Governor Pataki, you touched on it -- is the country ready for such an aggressive policy, for such an ambitious policy?

THOMAS J. VILSACK: Well, let me also join in thanking Michael for the work he did and the Council on Foreign Relations task staff. They did a terrific job in supporting Governor Pataki and myself. And it has been equally a joy working with you, George, on this.

And thank you all for spending time from busy schedules to visit with us today about this.

You known, this is an opportunity for the country that we have not seen in some time. When you discuss climate change and talk about the domestic side of climate change, it really says to every single person in the country: You have a role and a responsibility and an opportunity.

This is a chance for us to build an economy that truly does rebuild the middleclass, but to do this -- to have this national unity and to build the middleclass -- is going to require a lot from us.

The task force recognized that and suggested that first and foremost, if we're really serious about climate change, we have to figure out how, in some way shape or form, how to price carbon so that we all understand and appreciate when we use fossil-fuels, when we used carbon-based energy, that there is a cost associated with it in terms of the environment.

So the council took a look at a number of different options and concluded politically that probably the most likely way of creating a price on carbon was to establish a cap-in-trade system. And that is a linchpin, if you will, to the domestic policy.

Surrounding the cap-in-trade system is a series of suggestions that we really need to be aggressive as a government in helping the private sector and the university sector assist us in creating ways to develop new forms of energy and new forms of power, new forms of ways of doing things. So there's a series of proposals relating to incentives and tax credits, public research and development.

One of the great things that this country has done in the past, when called to meet a crisis, is to unlock the innovation and creativity of the country. And you do that by providing resources to encourage research and development.

The other thing that this report does is that it recognizes -- and it's important from the politics of this, Terry -- is to recognize that while there are going to be winners from this, there will also be those who will be adjusted and who may potentially have a tougher time. People with fixed incomes, people who are working in industries that likely will be impacted and affected by carbon pricing. So we need to be sensitive as we structure our domestic plan not only to elevate the winners, but to make sure that losers are not -- are not too far behind.

And it is essential -- and part of what this report does is it is essential that we have this aggressive domestic policy, because really what we need to do is to be able to send a message internationally that we're serious about this, and that we're ready, able and prepared to claim the moral leadership that this country should have exercised on the foreign policy side.

MORAN: To do that will take a significant domestic political accomplishment. Why is this the moment that we're ready to do it, do you think?

PATAKI: Well, Terry, let me just say that Governor Vilsack is right, is that yes, we're going to have to make changes. But those changes will create opportunities.

And I think it's clear the political will among the American people is there.

MORAN: You do?

PATAKI: As you said, both presidential candidates support a price in carbon, as Governor Vilsack put it.

But I think more importantly, right now cap-in-trade programs are the laws in many states in this country. We had the regional greenhouse gas initiative in the northeast. Ten states, beginning at the end of this year, are going to put in place a program to reduce carbon emissions.

You had the California initiative, Florida, other states so that you are seeing states take the lead in creating a climate policy that should, in fact, be a national policy and a rational one instead of a regional one. So when you see the states so out in front, and when you see the presidential candidates both calling for it, I think it shows that the American people are ready. The political will is there. We just need to make sure that, in fact, the policies are enacted.

MORAN: So the United States can get this done.

Let's turn to the international forum. One of the things that, it seems to me, undergirds this report to some degree, Governor Pataki is a -- well, I'll say it: It's a U.N. pessimism. It's a kind of a pessimism about the prospect of the kind of coordinated international actions necessary to tackle this problem happening at the United Nations. Is that fair?

PATAKI: Well, Terry, I don't want to use your words, but I think it lays out alternative paths in case one is not as successful as we would hope.

It does call for our participation -- the United States' participation in a very active way in the U.N. process.

Kyoto expires in 2012. The goal of the United Nations is by 2009 to have a subsequent agreement in place. The process began in Bali earlier this year. But that is a difficult thing to achieve, because you're talking about bringing in 193 nations now -- members of the U.N. -- with very different positions, very different status's of their economy or ability to deliver political action and asking them to come to a treaty or a global compact.

We think we should participate and try to achieve that. We should have clear goals where the U.N. would look to have a global emission in carbon by 50 percent by 2050 -- not just the developing nations, but you have to have countries like China and India and Brazil and others take concrete actions as a part of this process.

And as Governor Vilsack said, we can't expect to have the respect that the United States deserves as we enter into that process unless we can lead by example. And that's why having a domestic law -- a good domestic law -- allows us, I believe, to have greater influence when we become a part of that U.N. process.

At the same time, we should talk to the EU, talk to Japan, talk to Canada, talk to other countries that -- developed countries with strong economies that either have taken action on their own or as part of the EU agreement to limit carbon -- and look to have a strong agreement among the developed nations, so that in the event the United Nations process results in something not as strong as we would like, we will know that we're a part of a global system. Like, for example, if we enact cap-in-trade -- the EU already has cap-in-trade. Take steps to try to integrate the goals and integrate the processes so we can make it both economically more efficient and environmentally more effective to move forward on that front as well.

MORAN: And President Bush is addressing that, engaging major emitters, at this point, as I say, in a way that probably would have surprised people.

PATAKI: I think the major emitters program, the group that has been brought together, is a very positive step.

But one of the differences we've talked about is that we will lead by example. And I think that gives us greater credibility as part of that process.

MORAN: And Governor Vilsack, what about major emitters who are not developed countries -- that really have been the sticking point in some of these discussions over the years -- China, India, Brazil, Indonesia?

What is the proposal in the task force report to integrate those nations into this process?

VILSACK: Well, one of the unique features of this task force is to suggest that while we are strongly committed to the U.N. process, we think that there ought to be consideration to a parallel process that could help inform and be integrated into the U.N. process by taking a smaller group of nations -- major emitters, major economies -- together with some of the developed nations and developing nations who have to be at the table in order for us to be serious about this as a global community.

And so what we're suggesting is the development of a climate partnership. And rather than focusing on specific commitments in terms of certain percentages of reduction, this partnership would focus on policies and programs and commitments by the United States and other developed nations to implement aggressive policies and programs that we could learn from, that we could utilize in the discussions and formation of the U.N. agreement.

Our hope is that what we would be able to do is to create a series of steps that we could sort of try. For example, we're proposing a climate fund. Resources that could be made available from developed nations to purchase technology, to incent the use of cleaner technologies in developing nations. Ways in which we can incent Brazil and Indonesia, for example, to avoid cutting down the rain forest that is so vital for us to maintain equilibrium

Creative and innovative ways a smaller group of nations, at a level where national leaders -- not necessarily staff people, but prime ministers and presidents are in the room making commitments, informing the rest of the global community, if you will, about what works and maybe even what doesn't work.

And that may lead to agreements between countries to have demonstration projects. One of the things we know is that if we're serious about this we've got to figure out how to sequester and store carbon. And we don't know how to do that necessarily today, but with international cooperation, we might have demonstration projects all over the globe trying to figure out precisely how to do that.

There's an opportunity for us to use aggressive diplomacy. Many of these countries are concerned about their energy security as we are. And we need to recognize that. And maybe we can help through diplomatic channels to open up new opportunities to use cleaner burning fuels than to rely on coal that obviously is going to pollute the air. So there are many ways that smaller groups of countries working together can sort of advance this agenda.

Bottom line -- and I think George would agree with me -- the key to all of this -- not just the domestic policy, but the foreign policy -- the key is a recognition by the next administration that this is a priority issue and that either the president or vice president provides daily leadership on this issue.

And I think the opportunities here for restructuring the economy, rebuilding the middleclass, reclaiming moral leadership and protecting the environment are substantial enough to merit that kind of call.

MORAN: High-level leadership involved in this partnership for climate change among -- climate cooperation among the major emitters to be more flexible and leverage some of these solutions.

Now, Michael, we were talking about this the other day when we spoke, about precedence. This is a big global challenge that the world community is not all that great sometimes at tackling big global challenges.

What looks like the kinds of proposals that the task force has set out? Is there any kind of precedence for this kind of coordinated and flexible global action?

MICHAEL LEVI: Well, let me first also take my opportunity to thank my two co-chairs on this task force, who have been absolutely fantastic; the members of the task force, some of which are here today; and the staff at the council in a variety of programs --

in particular Anya Schmemann, who's the executive director of the task force program, for really moving this along smoothly. It's really been an interesting and very productive experience, I think.

There is no single precedent that I think we can look to here, but there are a number of precedents for different dimensions of it that I think we can learn from. One is the G-8 experience.

The G-8 doesn't have a secretariat. It does not have big binding deals, necessarily, within it. But it is a place where people meet at the highest levels to make political decisions that stick, to try different things. And they can have spillover effects in all sorts of other areas. But it's not about any one particular thing. Everyone comes with a variety of different pieces to the table.

And we actually talked, when it comes to this partnership with climate cooperation, that it could grow out of the G8+5 process. We have some concerns about this G8+5, G-8 and a few of the biggest emerging economies. There's some concerns about doing that, but that is one possibility.

Another precedent to learn from is the evolution of the global trade review. I mean, that precedent teaches us that when you have very complicated issues -- and especially ones that go at the heart of the economy -- you sometimes have to start smaller if you want to succeed at a bigger scale.

And if you look -- you can look at the situation in global trade negotiations now, but you have to remember: We're a long way from the beginning there. We're a lot further from the beginning than we are in the climate area. And if you look at the beginning of the GATT, you had numbers in the 20s. And those numbers of countries did not grow all that quickly and you could find more solutions with a smaller group. And ultimately, that enables you to do things at a much broader and deeper level.

MORAN: The economy and trade are opportunities. Climate change is something of a challenge -- even a problem.

I'd like to ask Governor Pataki about a moral dimension here, and the report raises this -- the obligation of developed economies like the United States to less-developed countries as the world goes through the process of warming, to whatever extent that might be, and of mitigation.

What do we owe --

(Cross talk.)

PATAKI: Well, I don't know if I would say so much that we owe smaller countries, but we have a responsibility to the globe, in addition to our own citizens, to try to work in a cooperative way that allows them to both deal with the issue of adaptation, which is something that is going to have to happen, as climate change does occur; as areas become drier; as sea levels become higher.

And I think it is not just the United States, but I think it's the global community's obligation to take a look at steps that can be taken to help with adaptation. You don't want this to replace the traditional aid that is so important for health and education and other resources like that, but the advanced countries of the world are going to have to look to see what we can do to help countries that are being adversely impacted by the change in atmosphere that they are primarily not responsible for.

On the same time, there's opportunity there. And as you look at things -- I'll just give a couple examples. If you go through Malaysia, the Philippines, there are all these two-stroke vehicles out there that pollute the atmosphere, and the greatest impact is on the people who live in a city like Manila.

There's technology that United States universities have developed that will allow those to operate with less than 10 percent as much emissions and get greater mileage, which helps their economy.

We should be looking to find ways like that where we can help them deal with the issue in a way that improves their health, improves their economy, and lets us be a part not just of a solution domestically but a solution globally. And in that way I think we will recognize some of the obligation we have to be a part of that global community.

MORAN: You mentioned adaptation, and that raises a question, a broader question on the debate and where it stands now that I'd like to put to Governor Vilsack and all of you.

This sense that the debate has shifted in some ways, from it's not happening to it is happening, but don't worry; be happy. There'll be dairy farming in Greenland and a real estate boom in Alaska and the world has endured all kinds of climate shifts. You're asking, or suggesting, a foreign policy that is -- that takes the lead in very aggressive ways. Maybe that's not necessary.

VILSACK: Well, I think one of the interesting challenges in this area is that we're really not certain as to the degree to which the globe will, in fact, warm. It could be a couple of degrees; it could be as much as 10 degrees.

And I think what we're suggesting is that whatever we do, we ought to be minimizing the risk and the consequences. And so mitigation is an important consideration; it's just not simply waiting until something happens and then adapting to it.

My state today is -- has been inundated with very adverse weather, and it is a horrible thing. It's cost lives; it's destroyed communities and cities. I don't think we necessarily want to risk the possibility that we could have wide-scale chaos and turmoil because we waited until we knew precisely what the problem was going to be.

We know the world is getting warmer and we know that there are adverse consequences. So why not take steps today to mitigate and to minimize the warming? We know by virtue of what we've done for the last 150 years that there will be some impact, some change. Let's lessen the risk.

And I would say that when 60 percent of the world's population live on coastal areas, and the reality is that as sea levels warm, they expand; as ice melts, it expands, those coastal areas could potentially by threatened. And that would force a massive migration of people all over the world.

I think it's much wiser and much safer and much better for all of us if we take steps now to avoid that. And I think the United States has a unique responsibility and, I think, a great opportunity.

When we were in Europe I was struck by a comment that a British official made to us when he said we can't innovate enough in the E.U. We are expecting and anticipating the United States to innovate. We're looking to you for those new technologies, and that means a whole new wave of opportunity for those who construct and manufacture and make -- which, again, rebuild that middle class that we're concerned about this country.

So -- (chuckles) -- I think there are tremendous opportunities here. And it's not going to be easy, but if we don't lead, I'm deeply concerned that no one will.

MORAN: Governor Pataki, what's your sense of the urgency of the problem? What do you say to your friends on the conservative side of the equation, the Republican Party, who are, some of them, advocating a -- the-sky's-not-falling approach?

PATAKI: Right. And I think you can't say the sky is falling, but you can say that the atmosphere is changing. And I'm probably one of the more conservative persons in the room this morning, and my view is when you look at this from a conservative standpoint, we know for a fact that human activity is changing the amount of carbon -- CO2 and CO2 equivalents -- in the atmosphere. That is unequivocal.

There are those who say it's going to have catastrophic consequences. There are those who will say it'll have very minimal consequences. The point is, no one can say with absolute certainty that it will have no consequence.

And for us to sit around and say, well, maybe it won't be that serious, and then 50 years from now when what Tom was talking about happens, we're going to go, Whoops! We blew it.

The conservative thing, it seems to me, is to say we have the possibility of very real risk here. We have the ability by putting in place intelligent national policies and working to achieve intelligent global solutions to create opportunity -- opportunity where you can you have clean power generation, where you can have vehicles that don't rely on oil, where you can have the protection of the rain forests in a cooperative agreement with the more developed states that aren't going to limit the ability of Americans to achieve the American dream going forward.

In fact, I think they will help us to be able to achieve the American dream. If we can get off foreign oil, if we don't have to pay $4.50 a gallon and send however billions it is a year -- it's probably a half-trillion (dollars) -- to unfriendly governments like Ahmadinejad or Hugo Chavez, we're all ahead of the game.

And when it comes to climate change, by the way, we will have dramatically reduced the amount of CO2 that we're putting into the atmosphere and limited the risk that human activity could cause something that our children or grandchildren look back at us and ask what were they up to?

VILSACK (?): Governor Pataki's comments point out the fact that this is a multi-faceted opportunity for the country. It's about energy security, it's about national security, it's about economic security, in addition to climate security. So these are four major securities that are served significantly by aggressive action by the United States.

To me, this is the right time and the best time to do this. And I think the world is looking; they are expecting the next administration to be far more aggressive than the current administration. And certainly from the comments of the two candidates, one would indicate that they are prepared to be that way. We want to inform that debate and that decision.

MORAN: It certainly looks as if there is a shift, a political shift in this report. And as your comments indicate, to try and shift the public sensibility on this from one of a problem to be tackled to an -- opportunities to be grasped.

And with that, on that note, I'd like to invite Council members to join our discussion. We have some microphones that I guess are coming around. Please wait for the microphone and when you do get a chance to ask the panel some questions, just stand up and state your name and affiliation, please.

I guess we'll start right up here.

QUESTIONER: Thanks very much. My name is Hattie Babbitt (sp) and I'm here, I guess, with my World Resources Institute hat on.

I want to pick up on Terry's question, in the sense that this issue of going from denial to -- Terry talked about going from denial to what worry, be happy. But I'm worried more about people going from denial to despair, just sort of looking at all that needs to be done and finding it too complicated. So I want to thank you all for making it, in an international context, less complicated.

And in that line, I want to ask the two governors how is it that the -- politically, how is -- if we need to act nationally in order to be leaders internationally, how is it that governors and mayors and New England states and Governor Schwarzenegger and the governors of the western states said, oh, cap-and-trade. It's complicated, but we can do it, we've got to have a low-carbon economy. And the Senate has acted so irresponsibly in considering a cap-and-trade bill? How do we use your skills as governors to move that leadership nationally?

VILSACK (?): Well, I think it's a fair statement to say that states today are really the laboratories in which experiments on policy are taking place. It started with welfare reform; it has extended into renewable energy production and into establishing the cap-and-trade system that George talked about.

And so states are basically moving in an effort to try to say to the national government in the absence that you've -- in the void that you've created, we are going to do something. And our hope is that if enough of us do something, that you will realize that it's not a good idea to have 50 different something's out there, that you have one national policy.

I was in Arizona on Monday at the Arizona State Global Institute of Sustainability. And to your point of despair, if each one of us would recognize that we have a role to play and if we became, for example -- there's a lot of discussion about those funny-looking light bulbs and having us screw them into our light sockets.

Maybe what we should ask folks to do is not just screw them into the light socket, but understand why we're doing that -- precisely what benefit will accrue to the environment and to the economy by doing that, and become an expert in that one little slice. Because if you do, then you're going to be able to see the intersections in so many other parts of your life, and you're going to be able to create a culture.

When we were over in Europe, one of the fellows said to us, you Americans have it all wrong. You think the politics forms the policy. He says, over here, we think it's the culture that informs the economy and the economy informs the politics and the politics informs the policy. So really what has to happen is there has to be a culture change.

And I think what state leaders are doing is trying to accelerate that process.

PATAKI (?): I'm an optimist, and obviously the Senate didn't pass any meaningful climate change legislation this year. But it's not an easy task, and I'm not going to sit here and bash the Senate. They were able to do it in the past.

When the first President Bush was in office and the Clean Air Act was passed, they put in place a cap-and-trade program for acid rain emissions, SOx, primarily, and it's worked very well. So they are able to do it, but it requires bipartisan effort with presidential leadership, and I'm hopeful that we will see that.

I think the public is there. As Tom pointed out, the states have been there for some time and are leading the way. But I don't underestimate the effort, the task it is to draft a bill, because it's not simply putting in place cap-and-trade.

If you look at the report, we're talking about, on the opportunity side, things like steps that should be taken nationally, like a commitment to a national electric grid system, so you can access solar power from the Southwest and wind power from the Great Plains in an economic way.

So that my view is that any such legislation, if you put in place the opportunity side while you also looked at the fact that we were going to cap CO2 and greenhouse gas emissions, I think you could get that legislation passed.

MORAN: Don't despair. I'm reminded of Winston Churchill's line that the United States always does the right thing -- after trying everything else first. (Laughter.)

Actually, let's go to the back there for a minute.

QUESTIONER: Thanks. I'm Ana Enrue-Cohen (sp); I'm with the House Select Committee on Energy Independence and Global Warming. And first I just want to thank you all for your leadership in putting together this great report. I think it will be very helpful.

I wanted to ask one question that maybe gets into the weeds a little bit, but I think is very important, since we're here at the Council on Foreign Relations, and that is your suggestion that we pursue an international climate agreement as a congressional executive agreement, rather than a treaty -- which, looking at domestic politics, is very attractive, from my view.

But I know that our international allies are very much invested in the U.N. framework convention and the Kyoto Protocol and a treaty system. And so I wondered if, in your discussions with international colleagues how -- if you talked about that issue and how that was received.

MORAN: Michael, do you --

LEVI: Want me to take this one?

MORAN: Yeah.

LEVI: I mean, this does get into the weeds a bit, so I won't get too far into it, but there is a distinction here. So the proposal being referred to is one where Congress would treat some climate deals the way they treat trade deals, where it's passed by both parts of Congress.

At an international legal level, it's essentially the same thing. So you still are doing a treaty at the international level. This has to do with how you move it through Congress.

I actually have had people from other key governments come and ask me whether the United States might be willing to do this sort of thing, not just because of the politics, but because if you increase the odds that Congress will deliver and implement whatever it is that the president agreed to, you strengthen the president's negotiating hand, and people are going to be more willing to engage in serious negotiations. That's a real driver there.

It's not trying to lower bars in any sort of way; it's trying to really build that strong congressional-executive cooperation that's absolutely essential if we're going to have credible negotiation and if we're credibly going to be able to follow through and deliver on what we promise to do.

PATAKI (?): And as an addition to that, it sends a message of the necessity of recognizing that Congress has a significant role to play in this, and they need to be informed and brought along and need to be part of the process as it unfolds, as opposed to being given a product at the end of the day wihtout any involvement, any input, and said, here, pass this.

We think it's important and vital in terms of leadership that there be cooperation and communication between the executive and legislative branches, and that's -- frankly, that's what governors do. And it's one of the reasons why I think things happen at the state level that don't necessarily happen here.

VILSACK (?): And I think it also provides some greater flexibility going forward. And if you look at the report again, it talks about revisiting the goals and revisiting the steps that are taken periodically to make sure that it is, in fact, practical and working, given the tension between economic growth and making sure we limit greenhouse gas emissions. And by having a law that periodic revision comes easier than if it were a treaty, I believe.

MORAN: I think on this issue and on the agenda in this report is essentially a kind of a challenge to the political culture here in Washington. And it may be a sign that that culture's ready for a shift that both parties have nominated candidates who, in one form or another, take on some of the nature of that culture.

Let's move on. (Off mike.) Actually, behind you, I believe --

QUESTIONER: Thank you. My name's Juliana Glover (sp). I'm with the Ashcroft Group.

I just -- there's been a lot of talk about what happens in Congress, and I just wanted to ask if you all could just expand a little bit on what types of coalitions you all would see come together. Because it's going to be very clear that no matter who wins the White House, there's likely to be some sort of cap-and-trade plan put forward by the president. And there's certainly going to be some shifting of support once that becomes a very -- sort of reality. And I think that there's a lot of confusion as to how you make that into a signing ceremony. So, please --

MR. : Let me begin by ducking it completely. (Laughter.) I am the ultimate Washington outsider, and I would leave it to more seasoned hands like the Ashcroft Group that have been here for some time to figure out how you put together the coalition.

All I can say is I have talked to some Republican senators about this issue and I think what we need to do is have a dialogue and reach legislation that has broad appeal, as opposed to trying to get 51 or 61 votes. And I think that's feasible.

MR. : Smartly done. (Scattered laughter.)

MR. : And I would say on this particular issue there are reasons why those on the right are interested in this. Certainly we've seen from the evangelical communities a reaction and a need for recognizing the important role of stewardship and protecting the environment. And I think certainly on the left that is also a philosophy of basically protecting the environment.

So I think you're basically seeing an understanding of the basics on both sides of the political spectrum. Obviously the details matter, and how those details are shaped obviously will lead to coalitions being formed.

I would also say just one other thing, and that is that we cannot forget, as we are crafting this and shaping this, the impact it's going to have on low-income Americans and on those Americans who are working in high energy-intensive industries that might be negatively impacted over the long haul by this.

I think one of the mistakes that maybe we failed to take to into consideration with trade agreements was that impact. And I think if we can learn from that experience, it might be a little easier to put those coalitions together.

MR. : I'd only add to that that I think we learned some lessons from the experience of putting together the coalition for this task force report. It's a very broad set of people, if you look at the membership here.

And what I'll say is that the divisions and the debates were not right-left for the most part. It's a much more complicated issue than that. I think if you try to set it up as a right-left Democrat-Republican thing, you'll will either fail or you'll get 51 votes or whatever it is. You have -- I think, people need to be looking at it in a much broader sense because there are far more than two perspectives coming at this.

MORAN: Next question.

QUESTIONER: Thank you. Amy Christiansen, a member of the task force. Thank you very much.

I wanted to just get to the issue of the politics question. I think that we've an incredible opportunity with Senators McCain and Obama to call on the public to be part of something greater than themselves. I think both of them can speak to that and to offer that moral leadership. And I worked on environment in the political context in 2004 a great deal, and what I found was that this is a values issue. And people see it as that, and they expect America to be a leadership -- a leader on environmental issues.

And I think we have two challenges. We need better information for people to understand not with just what the costs are and what the threats are, but what the opportunities are that Governor Vilsack particularly spoke to. And we need new voices in Washington from the clean energy sector. They're far too few in Washington, and bringing those voices forward was critical, especially in California. I lobbied for 8032, the California Global Warming Bill, on behalf of Google as part of a clean-tech consortium. And we provided that voice to say this isn't just business versus environment; this is about creating new opportunities for innovation and business leadership in California for California to save money, create new jobs. So I just think that in Washington we don't have a strong enough voice from that sector. So I think those are two critical pieces. Thanks.

VILSACK: Thank you.

PATAKI: Thank you.

MORAN: Okay, we'll go right here.

QUESTIONER: I'm Mitzi Wertheim. I run something called the Energy Conversation, which has -- we're now into year three.

Are you guys going to take this show on the road? Because it seems to me -- (laughter) -- no, I'm really quite serious. It's getting it out to the middle of the country where they start screaming back and saying, "Washington needs to pay attention."

VILSACK: Well, you know, one of the interesting things about the middle of the country: Whenever there's -- (laughter) -- conversation about this there's always a discussion about what's happening in the Northeast and what's happening in California. But in fact, renewable energy has become a fairly significant aspect of the Midwest economy.

My state, Iowa, is now the number-one state for wind energy on the grid. And my state, because of our embracing of wind, has actually seen an increase -- a net increase in manufacturing jobs in the last four years, which is the reason why in the last 18 months state revenues have grown by 20 percent. Now that's not true of a lot of other states; they're cutting budgets now. So there is a lesson to be learned from the middle of the country, at least as it relates to the economic opportunity of renewables and what has to happen in order to make that happen.

I'm happy to travel with George wherever he wants to go. (Laughter.) I come to his city and his state a lot. I don't know. (Laughter.) He came to my state for a while and then he kind of forgot about it. (Laughter.)

PATAKI: I'll be back, then. (Laughter.)

VILSACK: Is that a story?

PATAKI: No. (Laughter.) I have a lot of friends there. And I want to see some of the windmills that Tom's talking about.

LEVI: I didn't know it was that windy in Iowa.

VILSACK: It's the fourth-windiest state in the country. And it's not just every four years, either. (Laughter.)

MORAN: These are chestnuts but they're good. Next please, yes, right over here. And then we'll move in the back there.

QUESTIONER: This is Stephan Beltrama (ph) with the Embassy of Italy. I have to say that we really appreciate yesterday President Bush in Rome mentioning the major economy initiative. But if I have to take out an impression of this debate, should I say back to my capital that we are not seeing America taking leadership back till next year?

What we saw in the Senate -- I'm sorry to come back to that -- was a bit disappointing. In Europe we crossed the bridge to think that there might be a limit to energy consumption, to reduce the footprint. Maybe tomorrow there will be technology to reduce footprint still have growing energy consumption, but so far we don't see that. And I see that there is a, I would say, a cultural gap between the two sides of the ocean. And how fast do you think that might be closed down? Thank you.

MORAN: You spoke to the cultural priority, that you got to change our cultural attitudes in some way, Governor Vilsack. How fast are we on that track?

VILSACK: Well, here's the unfortunate thing about this debate. If you take a look at the U.S. Energy Department's report that came out just a week or so ago, our energy use actually increased by 3 percent last year. So the whole notion of efficiency and conserving and using less; we actually saw an expansion by 3 percent. The percentage of our energy from renewable sources actually declined last year, which is not necessarily a good trend.

I think a part of it has to do with making it a national priority. I mean, I think it's important and necessary for the next administration to say, "We see the benefits to the environment, the economy, to national security and energy security by making this one of our signature issues." I don't believe, with due respect to President Bush, that that's been the case. I think he's been pretty late to the party. And I think -- and my hope is that the major economies meetings and discussions are not some process of just running out the clock. I hope that there is a true interest in trying to get some kind of cooperative agreement.

But, number one, there's got to be leadership. And number two, each American has to be called to the service of their country in some way as part of this. And I think this is the one issue where we have enormous opportunity for unity that we've been longing for in this country.

PATAKI: Let me just add a couple of comments.

I think the major emitters is real. I think it has had some very productive dialogue and is aimed at achieving very real solutions. I don't know; I doubt if it can be done by January 20th of next year. But I do believe that it has created a dialogue among those 17 major emitters that the next administration can build on and seek to create actual agreements among those countries as we look at a global agreement as well.

And the question was, how long? I think it's going to be a lot quicker than some of the people in Europe might think because I think there is this understanding among the American people. I think there has been this leadership at the state level. We have seen the major emitters process and the United States finally engaging in a dialogue with a broader global community. Maybe it's seven years later than it should be, but at least it's happening now. And you have that commitment from both presidential candidates to act.

So I'm very hopeful that we can see a change, certainly within the next two years, that will allow the United States not just to be a broader part of the global dialogue, but to show leadership in the global initiative.

MR. : Let me add just one other point to that, and that is that there's litigation going through the process against the EPA by a number of states in the Northeast that may require faster action on this. And I think that's another piece of the pressure that's building for action in the United States.

LEVI (?): Another tiny thing here. When you talk of the relationship between the United States and Europe, a lot of the focus here is on how do we directly with the biggest developing country emitters. But one the piece of this report that we look at is also how to work cooperatively with our partners in Europe, in Japan, so that at a minimum we're not working at cross purposes, and ideally we're actually reinforcing each other. And that's often a neglected piece of our strategic thinking.

MORAN: Okay, let's go to the back in the middle here.

QUESTIONER: Hello. I'm Veronique Bishop from the World Bank.

First, I want to thank you very much for your leadership on this issue. I think it's really critical.

And I have a question about financing. The cultural questions I agree are very important, but the question is about financing. We're working on climate change and carbon finance at the World Bank. In our consultations with the public and the private sector and with project developers, we're finding the same problem again and again: it's not the lack of technology, it's not the lack of ideas, it's not the lack of interest; it's the lack of financing. So there's liquidity in the financial markets, but the banks aren't prepared to lend to small households, to municipalities, even to big industrial consumers. What is it going to take to persuade that to change?

I see you mentioned climate funds. I'm wondering about the scope for either direct investment or loan guarantees to help persuade those local investors or local financial markets to provide that kind of financing. Thank you.

MORAN: Michael, do you want? This is your --

LEVI: Sure. I mean, there are a variety of ways we can approach it. We talk about a reformed offset system that is both expanded to include other opportunities like land use and forestry, but is also targeted and more robust. We talk about climate funds as you say and also about export promotion using tax policy to promote exports.

We also talk about things that -- developing -- steps developing countries can take themselves where their own financing restrictions get in the way of them taking win-win steps that would be economically advantageous. You know, one example that people talk about is restrictions in China on financing for energy intensive industries make it difficult to finance upgrades in energy-intensive industries that make them more efficient and reduce pollution. So there are steps -- these aren't grand diplomatic steps but they are critical steps that can unlock local capital and also capital from abroad to make things happen where it's not a handout from one country to another. So, you know, fitting with the broad theme, it's a whole set of different things rather than finding one magic bullet that's going to solve this problem.

MR. : And domestically, in the United States, when you establish a cap and trade system, of course, that erases the issue of what happens to the resources that are generated from the sale of these credits. Who gets it? How is it distributed? That's something that obviously will have to be discussed.

I think the commercial banking world is beginning to be sensitive to this. You're seeing some mortgage financing where people get a discounted mortgage rate -- interest rate -- if they create or have efficiencies that they can point to. There's a tremendous push for lead certified buildings, for lead certified furnishings in office and commercial enterprises. And there are cities like New York City working to sort of show the public what needs to be done by taking an effort to retrofit public buildings and working with contractors who will guarantee energy savings as a result of their work and using that savings to pay for bond financing or loans that you use to put the infrastructure in. So there are a number of creative ways that are currently being used and it's just a matter of showcasing them and ramping them up.

MR. : Globally, under Kyoto, the main system to create funds for this is the CDM, the Claim Development Mechanism, and it has not worked at all. And I'll be a little more aggressive than the report. We went, Michael and I went over to China. And China has an entire agency with dozens of people simply figuring out ways China can get money under the CDM. So they'll get a grant from an EU nation to retrofit a coal plant and then use the money to build a new coal plant that doesn't have any particular environmental protection. That is a funding source that if it were targeted intelligently to protect rainforests, to invest in things that can help very poor countries with the technology that they can utilize to help clean their atmosphere, I think it could be effective but it has to be scrapped in its current system and reformed in a way where you can calculate it that it actually does some good as opposed to helping people feel good.

MORAN: What do you really think? (Laughter.) Yes, sir.

QUESTIONER: Hi. I'm Jack Rifkin, chief investment officer at Neuberger Berman. Our parent is a member of the Council. I have to respond a little bit to the CDM issue, having just come back from China. There are occasional projects like that, but 60 percent of the CDM projects in the world are taking place in China. Last year, in spite of what happened in Iowa, they installed more wind capacity than the rest of the world combined. They effectively introduced a $50 time carbon tax on their biggest carbon-intensive industry, the steel industry. And technologically, they're doing some things particularly in solar that are way ahead of us. I think a risk here, and there's one statement in here that says we're not going to sign on to an emissions cap as a part of any deal that doesn't include strong commitments from the developing world. They're doing things. I just think we run the risk here of actually falling behind. And it'd be kind of embarrassing if it was falling behind one of the developing nations.

MR. : Let me just briefly respond that the report also says that one of the things we have to do is make sure that under the CDM or under any offset program, we have clear verifiable ability to make sure that representations that countries make are in fact being met. And I think that is a very real problem. One of the things we found out in China is they have virtually no ability to price energy. No ability to tell how much energy is being produced at a particular facility, how much carbon is being produced at that facility or to put in place a pricing system for energy that would make it a cost, so that you have an incentive to reduce energy usable and emission. So you need to have not just a demonstration project, as good as that could be or technological project, you need to have a systemic approach as we're advocating for the United States that is verifiable so that you can't just point to the one good thing while you're continuing to do dozens and dozens of things that result in significant climate degradation.

MR. : And I think it's fair to say the EU is very sensitive about this. I think they recognize in our discussions that the CDM process needs to be significantly reformed and tightened.

MR. : Let me also make a clarification on that bit that you read out there. That's a specific reference to what you're willing to do in a global U.N. deal, whether the United States will be willing to sign up to caps under a global deal without specific commitments or specific actions from developing countries. I think the next sentence says that this does not qualify -- it does in several places, this does not qualify our recommendation for U.S. action domestically, okay, so we need to really distinguish between those two pieces and we do make a strong distinction between those pieces. So that's not a matter of the United States falling behind in its own action. It's a matter of what we're willing to do as part of one particular deal within a whole suite of things that we're pursuing internationally.

MORAN: Okay, let's go right in the back here, this gentleman right there. Yes sir.

QUESTIONER: Bill Cline from the Peterson Institute. I'd like to follow up on a hint that Governor Vilsack floated which is what you do with the resources. I mean, I think the attraction of the cap and trade is first of all that it avoids the tax word, which in some sense is kind of something we ought to be able to get over through education. But more fundamentally it's a question of huge rent to vested interest, you're talking about something like 100 (billion dollars) to $300 billion. If you take $200 per ton of carbon, we've got one-and-a-half billion tons of carbon a year. So my question is did the report suggest a process of eventual transition to the auctioning of these quotas because there's lots of good things you could do with revenue, but in particular, where you get revenue to bring along some of the developing countries, the poor developing countries, at some point seems to me an issue and point. So I wonder it you could tell us little bit more about the auction process.

MR. : We really didn't get into the specifics of what the cap and trade system should look like. That might be a whole 'nother report. What we wanted to do was develop a framework. We wanted to basically suggest that the time had come for there to be a mechanism to put a price on carbon in some form so that it would create a market that, in turn, would hopefully incent and direct people's activities. We will certainly work with folks as they -- as this thing unfolds but we decided not to go into the weeds on what that that cap and trade system should precisely look like. There were members of the Council who felt very strongly about the carbon tax, and what we tried to do was basically reach a consensus that focused on the tax might not be politically acceptable. It looks like a cap and trade system might be, and it also -- the rest of the world has already made that decision. Certainly from the EU they decided to go with a cap and trade system as opposed to a tax. And we thought whatever we do at some point in time may have to be integrated in an international effort.

MORAN: Okay, we have time for one more question. I'd like to remind everyone that this meeting has been on the record for better or worse. And so one more right up here.

QUESTIONER: Paula Stern. And thank you for your leadership. My question goes back to the tax word and to my experience in international trade looking at the volatility of oil prices, particularly gasoline prices and how it's impacted the individual consumer in the United States, the individual public and the decisions to buy automobiles, big or small.

We went through, 20 years ago, 25 years ago, a period where we had a huge shift in demand, after the Arab oil embargoes, to Japanese cars and other cars imported because the Big Three auto makers didn't have those cars available at that time. Then we had a wonderful period of time when prices were very low for gasoline, and we got into the SUV mode. Now we're back into another situation with the, you know, oil prices being so dramatic. This seems to be a major political moment. And I am wondering whether there is something that you would recommend or the (JOG ?) dealt with, with regards to, if you will, a floor on the price of gasoline that your individual consumer has to so that you have some clear signals to your manufacturers regarding what kind of products in 10, 20 years out in the automotive area will really sell. There is volatility here. Cheap gasoline sends a wonderfully clear signal, and I think what we're talking about here is trying to put some economic value on conservation.

MR. : Again, we decided not to actually get into the details of what a cap and trade system would look like. Your question actually goes into the details of that system in terms of what mechanisms, if any, you put into that system to avoid massive disruptions to the economy or to guarantee that you aren't undercut by someone coming in at the -- seeing that oil is priced too high and drop the price of oil and we'd go back to our old habits. I think what will happen is when you get a cap and trade system, if you structure it properly, those extremes ought to be factored into the formula that you use. How that's done, there are lots of different options and we didn't get into that.

MR. : Right. And we do clearly urge policymakers to pay careful attention to mechanisms that would stabilize price and improve the predictability of prices without getting into the fine details --

MR. : As well as providing incentives to make the right choices from a conservation and efficiency standpoint, whether it's appliances or vehicles or buildings.

MR. : I could talk about this for the next three days because I think it's one of the areas where we have the greatest opportunity to both reindustrialize and help consumers and the atmosphere. Ninety-seven percent of transportation in the United States is fueled by petroleum and we send more than $1 billion, now it's close to $2 billion a day overseas. We buy oil, we burn it, we pollute the atmosphere, and we have to do it again the next day. I think we should have a sweeping government program, not to pick winners or losers but to incentivize both the consumer and the manufacturer to have automobiles that get breakthrough mileage using breakthrough technology.

And I could go on forever, but Amy and I were talking last night about plug-in electric hybrids, about fuel-cell hydrogen cars, about natural gas-powered vehicles, all of which are out there looming somewhere on the horizon. If I were czar of the United States, I would pass a law -- and it's on the record so I shouldn't use that word -- but if I had the ability to influence federal policy here, I'd pass a law tomorrow saying the first 5 million vehicles, regardless of the technology, that get more than 80 miles a gallon of petroleum fuel, the manufacturers on the profits pay zero. They keep it all. The next 5 million cars you sell in the United States, they pay a 5 percent profit rate. The next 10 million they pay a 10 percent rate.

We don't have any money out of Detroit anyway because they're always losing money and laying off workers -- (laughter) -- so this would create an incentive where the government would say, "go do it." And consumers would buy the vehicles, manufactures would make the vehicles, and I think you're going to see it anyway over next five to 10 years this breakthrough technology. But if we had an incentive program like this, I think you could see it on a large scale in two to three years.

MR. : And just so you know, the fact that we're proposing incentives, incentives, incentives -- the report also talks about the fact that there need to be changes in some of the subsidies and incentives that we're currently providing. As industries mature, as they get their sea legs, it's time to wean them off their support and redirect those resources into those new technologies, those new combustion systems, whatever. So there is a balance in the report.

MORAN: That is a hopeful and ambitious note and that is really the note that is right through this report. I want to thank you all for joining us this morning and once again thank and congratulate the co-chairs Governor Pataki, Governor Vilsack. (Applause.)

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