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Natural Capital: Are Resources Scarce or Sustainable?

Speakers: Blake Clayton, Fellow for Energy and National Security, Council on Foreign Relations, Geoff Dabelko, Director of Environmental Studies, Voinovich School of Leadership and Public Affairs, Ohio University; Senior Adviser, Environmental Change and Security Program, Woodrow Wilson International Center for Scholars, and Greg Stone, Executive Vice President, Global Marine and Betty and Gordon Moore Center for Ecosystem Science and Economics, Conservation International
Presider: Juliet Eilperin, White House Correspondent; former Environmental Staff Writer, Washington Post
March 22, 2013

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JULIET EILPERIN: Could people please take their seats? That would be now. Take your seats. Stop talking. Thank you.

Excellent. Thanks so much. Wanted to welcome everyone to the second session of today's Council on Foreign Relations Conservation International symposium. As a reminder, this is on the record. And so we're really interested in having a discussion, but we're going to do brief opening remarks. We're just going to go down the line and introduce our panelists and let them talk a little about this session, and then -- and then we'll take it from there.

So immediately to my right, we have Greg Stone, who's senior vice president for marine conservation and chief scientist for oceans with Conservation International. Since 2000 Dr. Stone has led the effort to create the world's largest marine protected area around the Phoenix Islands in the country of Kiribati and was named one of the National Geographic Society's hero of 2007 for this accomplishment. I also want to note that he is the author of a new book -- why is the title not on here? "Underwater Eden" --

GREG STONE: Right.

EILPERIN: -- which is -- I don't know the subtitle by heart, but anyway, it's a fantastic book, if you don't have it, looking at, of course, the effort to basically protect the area around Kiribati, which in many ways is leading the world in terms of valuing its marine resources. Also, while I'm already biased towards marine biologists, Greg Stone is one of my favorite marine biologists of all time -- (laughter) -- although just don't tell all those other marine scientists because then they won't talk to me again. But that's where we stand.

Then next to him is Geoff Dabelko, who is director of environmental studies at Ohio University's Voinovich School of Leadership and Public Affairs. He joined the school in August 2012, and before that he was based here in D.C. at the Woodrow Wilson Center's Environmental Change and Security Program. He remains a senior adviser to the Environmental Change and Security Program and is also an adjunct professor at the Monterey Institute of International Studies, presumably because sometimes he wants to leave Ohio to go to Monterey. And Geoff is someone who I always call up when I need to know the intersection between resource scarcity and international security, so we're lucky to have him on the panel.

And then all the way at the end, we have Blake Clayton, who's a fellow for energy and national security here at CFR, but -- although in New York. Dr. Clayton is the author of "Commodity Markets and the Global Economy," which is coming out in 2014. And because that's not enough and because he needed to balance the Cambridge University Press with the Oxford University Press, the same year he will have "Fear, Greed and Oil: A Century of Panics in the World Oil Market", and so obviously someone who's deeply immersed in these issues as well.

So we're going to start -- Greg's going to give us kind of the broad sense of what's going on, and then we'll talk about how that's playing out across the world in terms of resources.

STONE: Thank you, Juliet. And you're my favorite journalist of all time. (Laughter.)

EILPERIN: (Inaudible.) This is on the record, so that's -- (inaudible) --

STONE: This is on the record. This is on the record. (Laughter.)

Yeah, I really enjoy the discussion format. And thank you, all the organizers of this very important dialogue.

So I don't want to talk too long, but I -- just to lay the -- sort of set the table a little bit, to think about this from the -- you know, the supplies that we have on the Earth. I mean, I remember Buckmister Fuller's great metaphor, Spaceship Earth. But he said, importantly, it didn't come with a manual. (Chuckles.) And I think we're at that point in human history now where we're actually having to write that manual, to figure out, you know, how long the supplies are going to last, because we actually did kind of wake up one day, I would say in recent history, and realize that we were on an endless journey without any chance of resupply and that the population is growing, as we heard earlier.

So we're in a situation where we need to figure out the supplies and regulate them. We need dashboards. We need to -- we need quick references so that decision-makers can make the right decisions, so that all the plurilateral discussions we heard about earlier can be informed. It's my belief that if -- decision-makers want to make the right decision, if only they knew what it was. And it's a very complex field out there to understand carbon storage, to understand oceans, to understand farm and agricultural practices.

So to me, the challenge is understanding our supplies, getting dashboards and metrics so that we can operate within the boundaries of sustainability as we go forward and that we're at an incredibly important moment in history and a very exciting moment in history, and the key is that we need to accelerate all these actions. We can't just be trending in the right direction anymore. We really have to find out what the acceleration pieces are.

EILPERIN: Geoff.

GEOFF DABELKO: Terrific. Well, again, thanks to the organizers bringing these worlds together. It's one that I've been trying to make sense of for kind of 20-some years, and it continues to be a challenge, especially if you want to do it briefly -- (laughter) -- which we need to do.

But in many respects, it is -- I kind of start from a premise that natural resource management is conflict management. We can do it well -- (chuckles) -- and it doesn't result in real conflict, or it can be done poorly, and it can become a problem in the context that we're talking about today with security. But in that context, there are all sorts of opportunities where these issues connect in ways that aren't just about painting just the challenges but some real solution sets.

And so from a bottom-up perspective, in the unstable states that Richard was introducing us to kind of focus on, places like Nepal, you will have these kind of inspiring participation and democracy quotes. You know, the first time I voted for anything was part of my forest user group, and so in natural resource management being a place that's actually introducing participation and democracy.

From a top-down perspective, instead of treating resources as a luxury item that we worry about once we're rich and democratic, you know, I think it's a meaningful illustration of how it matters to states when the U.N. Security Council puts a moratorium on logging from Liberia, coming out of its period where logging and minerals were part of what created that West African stability, or facilitated it, to give the country breathing space to figure out that over a hundred percent of the countries had been promised in concessions and set up some of the institutions so that the value of those resources could actually, in part, come to the state and be part of building a capable and stable state. And they have a long way to go, but nevertheless, it's those kinds of opportunities that I think we can -- we can really build on.

I think there's a lot of concern, and rightful concern, in terms of some of the resource availability and traditional conflict or stability questions, although those are often, I think, unfortunately, too simplified when we kind of say, well, they're scarce, and therefore when folks have no choice, they'll fight -- a lot more complex. Often it's not absolute scarcity; it's scarcity that we create, in part by access and pricing and such, but nevertheless very real issues, but that we also shouldn't just stop at the -- what precipitates conflict or precipitates instability and look at how resources can actually be very helpful in getting out of conflict once you're in it or at least being a bridge for dialogue.

And so we have Friends of the Earth Middle East bringing folks together on a very local level around water issues and ecosystem services, not because it's going to solve the Palestinian-Israeli problem, but it's going to be some lifelines for dialogue. And then in the post-conflict setting, after the conflict's ended, again not treating these issues like luxury items, but understanding they're critical to getting economies started, agriculture started, the livelihoods that are so commonly connected to natural resources in big parts of the world again in some of these states that we're concerned about in terms of stability, that these are places where we can make a real difference. We need to focus on them, we need to be concerned about them, but they offer some ways forward that merges these worlds of natural resources, economy and security.

EILPERIN: Excellent. And Blake.

BLAKE CLAYTON: Thank you, Juliet. It's an honor to be here this morning. I appreciate this event being put together and to have a chance to share some remarks.

I think that natural resource scarcity is a topic that's been so much in the news over the last decade, and not surprisingly so. We've seen emerging-market nations with really huge appetite for natural resource consumption push up prices around the world. This was a trend that was largely unforeseen by the natural resource industry in the late '80s and '90s, which led to a prolonged period of under-investment during that time. And that simply caught up with the world when nations like India, China, these so-called BRIC nations, started to require more and more of a host of resources, whether it's oil, natural gas, food, agricultural products, what have you.

I think we're only really in the second or third inning of this structural change in commodity markets worldwide, but I think as easy as it is to know the reality of scarcity in some of these areas, I think the lesson of history is also that where you have markets in place and where you have the rule of law, then technology can unleash bounty when it comes to natural resource supply that simply would have surprised people a decade before.

I think the best example of that right now is in the North American natural gas landscape. If you had asked almost any energy expert a decade ago where natural gas prices would be today, they would have guessed, you know, five, six, 10 times higher than they actually are. The truth is there's been, thanks to high prices and revolutionary new technologies, abundant new natural gas reserves being tapped right now in the United States. Production's increased something like 30 percent since 2006.

Many of the sources of this new natural gas production from shale have caused their own regulatory and environmental questions, and rightfully so. But I also think they've called into question some of the conventional wisdom about scarcity that you might have heard five or 10 years ago. So I think that the lesson of history is that when it comes to those commodities where there is a good market -- oil, coal, base metals, food -- I think there's a tremendous amount to be optimistic about. These are cyclical industries. We've been in one part of that cycle, the upswing part, but I don't think it's the end of history, by any means. I think that through good public policy and through an active private-sector engagement, that some of these resource constraints can be managed and solved.

EILPERIN: OK. So we're going to try to start on an optimistic note because inevitably we will get into pessimism. But so let's -- we'll make our attempt. And obviously, Blake, you were talking about, obviously, some of the traditional resources that we think of, whether you're talking about fossil fuels and food and things like that. Obviously, part of what has -- there's been an effort to kind of redefine natural resources in terms of healthy fisheries, standing forests, things like that.

So I'm just wondering, broadly speaking, since Greg, you talked about the idea of kind of identifying what's out there, you've obviously worked on the Global Ocean Index, can you all speak to how right now you think countries, both developing countries and developed countries, are seeking to define the value of the natural resources that they have? You know, where do we stand in that process, before we get on to some of the policy questions?

Greg, I'll put you on the spot.

STONE: Sure. Well, I think that -- you know, it's very interesting the data systems and the data -- the awareness of, for example, the financial sectors in the world. I've talked to some hedge fund managers. And these guys and these analysts, they know all the currency exchange rates, all the stock market indices, all the real estate -- for every second of the day. Then they make decisions based on that to enhance and increase their returns. Same thing in the medical area. We've -- we're able to manage the information in the medical area extremely well so that when you go to the doctors and you have a -- get a blood sample, it's compared against millions of other blood samples.

In the environmental natural resource base, unless there is an incentive like there is with natural gas or something like that, we are still around with notebooks. And we need to -- we need to accelerate our data, synthesis and analysis of these natural resources into your question. We sense a very strong hunger in the countries that we work with through Conservation International where we engage with them -- a lot of these are developing countries -- they want to know what's out there. They want to have the accounting. They want to get the natural capital of their countries' resources on the books, and they want to start working with it. So I sense a very strong incentive and a very strong hunger, and we need to step up and satisfy that.

DABELKO: Yeah, you know, to start introducing some of those -- the glass half-empty side of things, I would -- I would say that there is the recognition in some quarters, and it's a matter of then integrating it across the concerns and with people who are making a -- have broader portfolios. And so I think still too often we will run into folks that say, no, you know, no, don't talk to me about that, that's the environment ministry, that -- it's not my problem, right? I'm the finance ministry or I'm development. Or equally challenging, I'm the water ministry; why are you talking to me about forests?

And so in that set, some of these -- some of the data may be gathered, may be appreciated but not in kind of how we're talking about here, how they connect. And it's not just a conservation issue, it's critical to -- national economy critical to security. And so getting that integration across portfolios where it doesn't say environmental for resources on the -- on the door, so to speak, is where we have to go.

EILPERIN: And Blake, I know, again, you're talking to a lot of people about kind of the traditional commodities. Can you give a sense of what sense -- you know, to what extent they are thinking about these others issues? Or again, is that kind of off their radar?

CLAYTON: Well, I think that you can look at natural resources as part of two different classes. There are some that are readily tradable -- natural gas or some of these other -- where there are these global commodity markets. I think those tend -- supply and demand discrepancies in those types of markets tend to be resolved more easily. A lot of what we heard, I think, in the panel before this was about issues like the Law of the Sea or forests where there can be this problem of the tragedy of the commons, right, where there are poorly delineated or contested property issues that make it very hard to set up the kind of self-regulating market that I think exists for some other goods.

I think the only point I would add is that I think it's tempting and sometimes easy to focus only on the below-ground part of the scarcity or sustainability -- you know, how much oil do we have on the ground, how much natural capital in that sense do countries have. But I would argue that so much, perhaps even the majority of the sustainability issue, as I see it, is really about these -- the above-ground factors, so getting property law right, getting regulation right, getting international cooperation right. If we can make strides on those fronts, I tend to believe that the perceived scarcity when it comes to the underground stuff will actually take care of itself.

EILPERIN: OK. And so then following up on that, we're -- again, obviously, we have kind of a patchwork of approaches across the world on these issues. Could you give examples of where you feel like it's really going right, where you have countries that are absolutely tackling this in kind of a way that makes sense, and, of course, at the same time, you know, where are you seeing it going the wrong way at this point, particularly with some of these peoples and, you know, traditional commodity resources?

STONE: Yeah. First of all, I'd like to -- you mentioned earlier the global Ocean Health Index. And I'm going to connect that with a place where this is going well. There is some literature out there about this, but we just published a paper in Nature -- we being about 60 other scientists, including myself, an effort to -- collaborative effort to measure ocean health through a metric, a very rigorous metric, a composite index including about 180 data sets. But the really important thing about this metric is that it includes humanity in the measure. And there was a moment when we -- when we developed this -- there was a desire to measure progress in ocean conservation, thus come up with a metric. So we got a group of scientists together internationally.

And at one moment in time, there was a division. Half the scientists wanted to measure an ocean of a thousand years ago and how healthy would that have been. The other half realized that we have now become part of the ocean ecosystem, humanity has become part of it. We are essentially gardening the Earth, right? We can no longer go back to a point where you've got wilderness over there, and you've got humanity here. We're integrated, and we rely on it entirely.

So this ocean health index was sort of a breakthrough idea in that we're measuring the human-ocean coupled system, and really we have to do that globally. We have to measure the human global coupled system. So that's an example of this data synthesis that I was talking about earlier.

Now, where is it going right? There's an initiative in the South Pacific I'd like to highlight called the Pacific Oceanscape. And 15 nations that are -- that are unified in something called the Pacific Island Leaders Forum have banded together and adopted a framework called the Oceanscape, which essentially recognizes that they -- the ocean between their countries is much like the atmosphere: it flows through them, and they share it, and they need to manage it.

Now, this is a region of the planet that covers 8 percent of the planet's surface or 10 percent of the oceans. And this is conservation, this is commodity markets, this is natural resource management at scale.

And interestingly, Peter Seligmann and I were at the Pacific Island Leaders Forum meeting in August in the Cook Islands, right? This is this remote little island-nation in the South Pacific. And you can drive around it in about, you know, one and a half hours. And guess who was there? Hillary Clinton was there, the Russian government was there, the -- everybody was there at this meeting because they were interested in the natural resources of this part of the planet. So, you know, the planet's small --

EILPERIN: And the strategic resources as well -- (inaudible).

STONE: Well, there's also this pivot to the Pacific -- (laughter) -- the strategic resources, yes. But --

EILPERIN: But yes, they care about them.

STONE: -- it's fish, it's strategic access, it's deep-sea minerals. You know, the -- because of the geological history of the Earth, there's a lot of rare earth minerals on the sea floor, and there's been an exponential uptick in deep-sea mineral exploration over the last six months. So -- and there's -- most of them are in this part of the world. So there's an example where, you know, there's awareness at scale, conservation at scale, and I -- and I think it's working.

EILPERIN: (Inaudible.)

DABELKO: Perhaps instead of a country, an institution that has evolved in positive ways. So I see Richard Matthew from UC Irvine, and he and I have the pleasure of working for a number of years with the U.N. Environment Program, the folks who are focusing on resources and conflict.

And in -- early on in conversation with other parts of the U.N. the more traditional security, Peacebuilding Commission, DPKO, the blue helmets folks, the dialogue was, why are you talking to us about these resources and conflict links? You know, prove to us that they're connected. And what has happened, in part because of dialogue and because of research that then came before them, it became, OK, so we're now convinced; what do you want us to do?

And so in some of the toughest spots in the -- in the world where natural resources are part of the challenge but also the opportunity, there's a greater willingness to bring those things in and see them as part of the threat but also the opportunity. And so that's progress, not there yet, but that's progress.

A negative example -- and this perhaps would be a counterpoint to Blake's on the -- on the food market, anyway -- is the folks who are water-poor and food-insecure, the wealthy countries. This whole notion of land grab and securing food security in third countries is something that kind of remains to be seen how it plays. But, you know, at least anecdotally, places like Madagascar, where the proposed South Korea deal was part of what people brought people into the streets and was part of the coup. And so the prospect for these land deals that are essentially driven by resource scarcity and other parts by countries that have a lot of money to me puts additional set of dynamics that we have to start paying attention to, and we're only starting to do so.

EILPERIN: Thank you -- (off mic) -- OK. Then -- so I want to also raise an issue where you might have resource -- two different resources in conflict. And so one that comes to mind, which is something I've certainly started talking to people recently about, are grasslands and energy exploration.

And one of the interesting things is, you know, grasslands are just as sexy as, say, the rainforest, something like that. And my understanding is it's the most imperiled type of ecosystem in the world. There are only three large intact grasslands left: in the northern great plains and in Canada, connected; Patagonia; and Mongolia. And certainly with at least two of those, the northern Great Plains, slash, you know, in Canada, and then also Mongolia, you have some real resource extraction opportunities as well as, at least in the -- you know, in terms of here in North America, you also have the farming opportunities, with crop prices being what they are.

And I'm real interested to see -- you know, it's -- there are obviously groups that are trying to work on, for example, keeping these ecosystems intact, but it's pretty hard to do that when, you know, corn prices are where they are and natural gas and shale oil is where it is. So I just would be curious of, you know, if any of you have looked at that or have a sense of, again, when you're talking about trying to have a dialogue and make people think about, for example, a few of these things at the same time, how do you -- how do you work that out? Talk on that quick.

CLAYTON: Sure, I think that's a great point. And I think the point about there being conflicting concerns or priorities certainly is relevant.

And I think, to your point, it's always easy to look abroad -- (inaudible) -- you know, to see examples of what's either going right or maybe wrong on some of these issues. But as you say, the North American example, U.S. example when it comes to how to handle some of these issues, with regard to shale gas and shale oil, for example, is a great illustration of some of these tensions. And I would argue it's kind of a microcosm of larger issues that, if they're not taking place already on the energy side when it comes to other parts of the world, they soon will be in the decades to come.

So when it comes to fracking, for example, there have been a host of environmental concerns raised about this process. I think there are two of those that, in my mind, are especially important.

The first is wastewater disposal and access to water. Fracking is a very water-intensive process. It takes as much as 5 million gallons of desalinated water to drill a single -- to frack a single well. And when you're talking about fracking in hundreds or thousands of wells in a given region or country, that's a lot of water -- so getting access to that water, making sure it isn't taken from other areas that arguably need it more, but also what to do with that water when it comes back out of the well.

Most of that water will come back out to the surface, and it comes out with a lot of either other substances that were pumped down into the well along with it or other materials from under the ground. So wastewater disposal is absolutely huge. I think the technology is still playing catchup to a large extent in that area.

And I think the third critical question is about methane releases. That's one that's gotten a lot of attention in the press recently, and I think rightfully so. But I'd also point out that the International Energy Agency, or IEA, released a very interesting document awhile back called "Golden Rules for a Golden Age of Gas." And basically, it was a road map to best practice when it comes to shale gas development. And what the IEA argued was that all -- if you look at all of what the industry really should be doing when it comes to best practices for upstream shale development, if they were to implement all of those best practices, it would only increase the cost of fracking a well and developing a well by 7 percent.

So that's not an insurmountable extra price tag for the industry to bear. And if that's what needs to and can indeed happen for shale gas to be developed cleanly, I think it's absolutely worth it. I think we're only in the very early stages of this so-called shale boom being transported to other countries around the world. You'll see China, you'll see Russia, the Middle East, the U.K. and others in Europe also using these same methods. So getting them right and having the U.S. be an example in that regard is crucial.

DABELKO: Well, I would second that excellent answer as -- having just moved back to my home state of Ohio, I've moved into the middle of this. My county has four injection wells. We're not -- we're not fracking yet. But -- and interestingly, I think Ohio has 98 percent of last year's Pennsylvania waste water. So it doesn't even go necessarily where -- you know, it's not disposed where it was extracted. So, you know, if you -- we apparently have a policy of "bring it on" in terms of this water, and -- but for all the reasons that Blake's just talked about, I wouldn't be -- I'd get in trouble with my colleagues at home if I didn't mention how important these questions are to look at.

I guess I would say also, a water energy nexus in another part of the world where -- my colleague at the Wilson Center, Jennifer Turner, and folks have looked at some of the, for example, Chinese plans on coal up north, and there just -- the water that's necessary is just not there, given the projections and expectations. And so that may be a positive thing in some respects but nevertheless not necessarily considered.

And then in some ways, to talk about some of the integration, even within you could say an environment or a conservation, communities having different and sometimes conflictual -- if we look at biofuels and growing energy and trying to move away from carbon, could see that potentially as a positive thing. But I think some of our experience where European biofuels targets led to rapidly accelerated deforestation, monoculture around palm oil to source that in parts of the world with CI is very active, creates some real challenges in terms of what it means for forestry and biodiversity that are, again, geographically remote but highly relevant and ones that there has been learning in terms of kind of sourcing some of the biofuels in ways where we're learning, but it's still along way to go to even understand within various conservation efforts that we can run amok of the different sectors.

STONE: You know, I think it's -- you know, it's really very simple, and that is that the ecosystem services, the natural resources of the planet are worth a lot. That's where we came up with this natural capital. All we have to do is do the math and accept and embrace a longer time frame to the -- to the -- to the equation, to the -- to the business model, to the proposition.

EILPERIN: And how long is that time frame? Is it 30 years, 40 years, 50? What do you think is likely?

STONE: Well, that's the problem. The time frame generally stretches beyond political elections.

EILPERIN: Yes, certainly.

STONE: And we as a -- we as a nation kind of get swept up into the political election time frame. So it goes further than that.

And then the second thing we need to do is to find those strategic actions -- I would call them, you know, sweet spots that involve -- that get the business community to go along with this because the business sector, of course, globally, is where most of all the human endeavor happens, it's where most of the money flows, and it's where, if you're going to effect change, you know, that's where you got to focus.

Let me give you an example. I heard this morning the undersecretary was talking about illegal fishing and unregulated fishing. We know that fisheries are collapsing. We know there are certain solution sets to this. OK, here's one action that could -- that if we -- that if we took it globally would help, and that's traceability. OK.

Right now, when you go to the grocery store and you buy your hamburger, there is a -- there is a very long and detailed supply chain custody trail of that. Everybody knows exactly where it came from. They know the temperature that it was at throughout its supply chain. They know everything. When you buy seafood, you have no idea. There is no traceability in seafood. And this something that industry wants to quality control purposes, the environmental community wants it for stopping unregulated and illegal fishing, and nations want it in order to increase the value of their fish. And remember, one out of every four people in the world every day gets their animal protein from fish. This is a huge food security issue.

So if we were able to imagine the fish comes onboard the boat, and immediately there's a chip put in the crate, and the chip would tell you where it was cut, ideally what depth it was caught at, then the chip records the temperature and the location of this fish right up to your plate, that would solve, you know, a large percentage of the overfishing problems in the world. And everybody wants it, so let's just do it.

EILPERIN: All right, although I have to say, I've written about this subject. And when I bring it up with, say, officials at the National Oceanic and Atmospheric Administration, they were not -- they're not super gung-ho about it. So -- but it -- but it -- but you're right that, obviously, it could increase the value in the chain, and I could see an interest in it. And clearly Target is, I think, the only real -- the major real retailer that's committed to trade stability by 2015. And obviously, I imagine that other businesses are going to join onto it. But it's just been interesting that there hasn't been as much uptick given that governments are worried about (global oceans ?).

STONE: Well, I'm surprised that Noah (sp) had that opinion. I co-chair the oceans council for the World Economic Forum, and this has become our number one --

EILPERIN: Interesting.

STONE: -- initiative. And we've got some of the biggest seafood suppliers in the world behind it.

EILPERIN: And are there -- and are there countries that you think are really embracing it? Or maybe again, maybe the government's divided on it.

STONE: Well, if the -- if the retailers --

EILPERIN: How would you have to broker that? Would that -- would you basically try to do something through the U.N. to do it or no? It's -- private -- private -- OK, right.

STONE: No, you want to -- you want to get the stores that are selling the product to demand it, and then it'll happen naturally through the free market economy. You know, we know that from experience.

EILPERIN: To just drive it (out ?). OK. Excellent.

At this point we're going to move to questions, because I'm sure there are plenty of smart questions. So you're supposed to -- so I will recognize you, and then you wait for the microphone. I'm going to start with this gentleman right here. Please stand, state your name, affiliation, avoid speeches, ask real questions, and go. (Laughter.)

QUESTIONER: William Hauser, Inter-University Seminar. From what we read in the press, the Chinese are about to launch one of the greatest engineering projects in the history of man, that is, the transporting of excess water from their south to their water-deprived north. And my question would be, how reliable are the water resources, particularly the tributaries of the Yangzi Jiang (ph)?

EILPERIN: Can anyone take a stab at that or speak more broadly about the issue -- (inaudible)?

DABELKO: I can tell you a few things that my colleagues have tried to teach me --

EILPERIN: There you go.

DABELKO: -- which are that very question about the -- there are the -- the comment I made about the water scarcity in the north makes these tens of billions of dollars of engineering projects then suddenly seem slightly more rational, at least from that engineering perspective. And so I think that is behind some of this.

I think there's a lot of concern for a variety of reasons about that, particularly its sustainability, but maybe taking a step back from that specific project and say again, this is one other dimension where these issues become security questions. And so in China, whether it's scarcity or often quality, the pollution of waters -- you're seeing even by government-reported statistics tens of thousands of protests and ones that reach a higher level than kind of a few people waving placard; are attributed to some combination of pollution slash corruption slash land-taking that is part of this rapid industrialization and capitalism that's going on that gets the center's attention, because it is often a critique, then, of the party and becomes then a very political question in terms of stability.

And so some of the -- some of these discussions in terms of how resources are connected to security come in -- this issue comes into question in place like China that, obviously, as some pretty high stakes whether -- you know, no matter what area you're looking at. So it's a very good question.

EILPERIN: OK. Other questions? Yes, Nancy (sp). Wait for the microphone. Microphone's going to come right here.

QUESTIONER: I'm Nancy Warzon (sp) with the Naval Postgraduate School. I wanted to find out why the wastewater ended up in a different place. Can you sort of -- I just couldn't understand that flow.

STONE: Yeah, I think it's because Ohio's paid 5 cents a gallon. It's interstate commerce. So those who are trying to oppose it are told that its like, you know, trade in garbage across states. And so Ohio's adopted a policy that that's going to be an import that pays. We'll see what the price tag is later on, but --

EILPERIN: Sorry. Just another great -- (off mic).

QUESTIONER: Thanks very much. Adam Wolfensohn, Wolfensohn & Company. I think one of the scarcest resources we haven't spoken about too much is that of the atmosphere to absorb all the carbon from the very plentiful fossil fuels below.

And Dr. Stone, my question is, we have so much data on energy use, on climate, and that data has not translated into meaningful policies, so how will we keep data projects like the ocean health index from suffering a similar fate of ineffectiveness when it actually comes to policy? So I'm less optimistic than you are, perhaps, about data in policy.

STONE: Well -- (laughter) -- I take -- I take your point, but I would -- I would say that while we in the -- in the scientific community and perhaps even in the policy communities, you know, are aware of the data that the UNCCC, et cetera -- and it doesn't seem to be moving the needle -- I would say that we are still so far behind other sectors of humanity and civilization in the use of data and the presence of it, that we just haven't gotten there yet, and we have to do more, is my -- is my take on it.

For example, I don't think we have, on that topic in particular -- we do know the numbers for CO2 in the atmosphere. We understand the thermodynamics of the Earth. We can make all that. But we've not yet done the math on or made the case entirely for the economic impact, the degradation of all the ecosystems, what that's going to cost the business community, what's that going to cost countries. I mean, I think that side of it, you know, we need to -- if we had that out on the table and were able to get it to the finance ministers, then I think we might be moving the needle.

EILPERIN: And in fact there really hasn't been any update since the Stern report came out, basically. What was that, like 2008, '09, something like that?

STONE: Yeah.

EILPERIN: So yeah. OK, all the way in the back, that gentleman right there.

QUESTIONER: Curtis Valentine with MarylandCAN. My question is more to the microlevel, how we frame the effect of deforestation, of lack of access of water, to education in a lot of these countries, where a lot of children wake up in the morning, have to go very, very far distances to gather water, have to go very, very far to gather wood for burning wood, and in many cases are not going to school; and how you frame these economic issues to local governments.

The second question is around the impact of education in America and people being more environmentally friendly if they're more educated, and whether that data is something you're all looking at.

EILPERIN: Geoff, can you take a stab?

DABELKO: Yeah, well, I can certainly try. I mean, I think -- I think the kids realize some of the value of the resources, as do their parents. It's, as you say, the local governments that aren't making investments. You know, there are -- what is it -- (Rich would ?) know -- whether it's 900 million or 1.1 billion, the figures for the lack of access to adequate drinking water, this is criminal, in part because much of that could be done by actually deciding to prioritize and spend on it. It's not like HIV or something else where we need to invest in new research and discoveries. We know how to address some of these issues.

And so in that respect, I think there are certainly challenges associated with -- water infrastructure can be expensive. It doesn't have to be expensive. But that it's a matter of engaging with the public sector. Sometimes, you know, there are a whole bunch of questions about private sector and the pricing, and that can lead us back to some of these security questions, unfortunately.

I know that's not a -- I know that's not a great answer. I think there are processes where things are getting better in that regard. You know, whether we'll meet the targets or whether we like targets as a mechanism, but the Millennium Development Goals around that have focused attention and have, in fact, given those local people a way to advocate with their national governments for greater expenditure because there are kind of numbers behind them.

So I think there is some progress, but nevertheless, unfortunately, kids under 5 dying of diarrhea is not sexy and it's not very economic in terms of putting money into it, and so it doesn't happen as much as it should.

EILPERIN: And Blake.

CLAYTON: I would just add that I think that on the energy side, you raise a great point. And that's that there's a whole generation rising right now of people who are so attuned to and interested in renewable energy and climate change and aware -- are deeply aware of how important these issues are. But you know what I think would be really powerful would be to combine that expertise among young people in renewable energy, for example, with a deeper understanding of some of the traditional energy sources.

I think too often those who are passionate about renewables or climate, young people, I mean, don't have an understanding of the whole mix of energy. If they could also speak to coal, could speak to gas, could speak to oil, how these resources should be developed, how the trade-offs between these competing energy sources should be managed, I think that would be so effective at really informing public debate in this country and elsewhere in terms of how we should get our energy mix right. And all too often you see people siloed in their particular part of the natural resource question. The more broadly I think young people can be speaking to these issues, and really deeply informed about them, the better the national debate will be.

EILPERIN: (Off mic) -- right here, this gentleman.

QUESTIONER: Hi, Stewart Patrick from the council. I just wanted to pick up on Blake's thought that with proper use of markets, proper regulation and the rule of law, that some of these problems can be dealt with. And sort of a two-part question.

The first is can you, any of the three of you, talk about the best examples, in your mind, of putting a price on ecosystem services so that the externalities of private behavior are actually internalized in the cost? Have there actually been any examples of that?

And then the second is really this issue of -- I could see how using markets could work, and market discipline, in, you know, catch shares with fisheries, for instance, conceivably forests. But I wonder about food and water, where, you know, the -- according to National Intelligence Council, 40 percent of the Earth's population are going to be living in water-stressed environments by 2030, and at that same time food is going to have to be 35 percent -- there's going to have to be 35 percent more food production, given population growth but also changing dietary preferences, not least an affinity for meat. How do you bring those sorts of things into sort of market discipline?

EILPERIN: Who wants to -- Blake, you care about --

CLAYTON: I'll speak to the second question.

MR. : But it was -- there was a question -- (inaudible) --

CLAYTON: With regard to the food question, so how do you increase food supply? Let's set aside the water for a second. But you look at yield, and you also look at arable land, right, or increasing acreage.

So in terms of increasing yield, the Green Revolution in the 20th century was absolutely huge in terms of helping to achieve that goal. But a lot of the funding behind those types of ventures has simply petered out in recent decades, and that's too bad because the same amount of primary research that was really needed to dramatically increase crop yields, which you did see in the mid and late 20th century -- that plateaued, largely, during the late '90s and 2000s, one of the reasons why food prices did rise so much over the last 10 years.

But I think an important part of the -- that question is also recognizing the interrelationship among natural resource prices and markets. So the food question is not just about water or land; it's also about oil. The cost of oil makes a tremendous difference in how much food costs. It matters because it affects how much it costs to transport the stuff, to produce it and also to pay for fertilizer and other inputs. So I think that the food question will inevitably, I think, for policymakers, not just be about food, water, land, but also dealing with subsidies and other issues with regards to oil prices.

EILPERIN: Great. And for the first part of the question, an example where natural capital has been properly valued, or at least there's been an effort to quantify it and what kind of response there's been to that? (Inaudible) -- Greg.

STONE: Well, there's been -- there's been plenty of examples where it's been -- where it's been valued. We've worked in the freshwater systems in Africa. We've worked in marine systems. But I think your question was has the value made a difference to a policymaker. And you know, I think we're at that -- we're at that point where the answer to that is not very often. But we -- I think we're at -- I'm an optimist, as you can tell. (Laughs.) I think we're really at that turning point, though, where those values, the pollinators, the fresh water inputs, the ocean economics, the values to smaller coastal states -- we know what the values are now, and decisions are beginning to turn in that direction.

EILPERIN: And part of the question is basically -- I mean, is the market question of how you put it in money, right, like, in other words, the leaders of Botswana, the leaders of -- they're willing to say this is how much this resource is worth, but then they're dependent on, essentially, whether it's nonprofits or other governments, to help supply the money to put it off limits, right? I mean --

STONE: Yeah, and -- yeah, and there's also -- there's a lot of pressures in these countries for -- again, we're getting back to that short time horizon. If you've got a -- if you've got a child that's, you know, dying of a disease, do you put your money into curing that -- helping that child, or do you put your money into saving an ecosystem because you were just convinced that it needed to be saved? First you've got to get the health care systems, you know, up and running, you've got to get people fed, then you can turn your attention to these other things, although the health care and the food, long-term, are related to the health of the ecosystem. So it's a complex field.

EILPERIN: Although -- and then just one point on fracking, though. Isn't the best of example of it happening, you know, the -- kind of the example they teach in textbooks here is that -- the resources of the Catskills, right, as the drinking water supply for New York City, and basically, that's loomed incredibly large in Governor Cuomo's decision to continue to keep delaying fracking activity in New York, which is that essentially, economists made the case decades ago, and it was acknowledged that essentially, this was so important as a drinking water supply for, you know, one of the most important cities in the world that it's actually -- that's part of the argument he makes in basically -- (inaudible) --

DABELKO: And it's even cheaper than -- cheaper than building the hard water --

EILPERIN: Hard infrastructure.

DABELKO: Yeah, water infrastructure.

EILPERIN: Exactly.

In the red jacket right there, yeah.

QUESTIONER: Jessica Mathews, the Carnegie Endowment for International Peace. I'm going to be a bit provocative here. I think you all are kind of ducking the tough questions. There is too much, if we only get the policy right, if we only get the international cooperation right, if we only get the time scale right, then these issues are OK. Well, those are the three things that we haven't been able to get right for 40 years since we started talking about the security aspects of the environment.

And there are good reasons, obviously, why we haven't, right? One is getting the time scale right. Bringing the future into the present means you've got to cope with issues where the only way you get the right answer is to use a 0 percent discount rate. And you ask an economist to use a 0 percent discount rate, and they say that's nonsense because in economic terms, it is.

The other problems, of course, have to do with relative urgency, of security issues. If you were secretary of defense right now, I guarantee you're not thinking about climate change, right? You're thinking about Syria, Iran, budget cuts, making a 21st-century force posture, right?

And so I -- you know, and having kind of starting on this issues (sic) in the late '70s, early '80s, I'm sitting here thinking, what's changed? Not a whole hell of a lot, I think.

And I -- so I'm -- I'd like to -- I'd like you to kind of grapple with this postulate a bit. Tell me I'm wrong; it'd be great. But I -- you know, I think we should take it as a given that if we get the policy right, we don't have a problem, and if we can get the time scale right, we don't have -- you know, for policymakers, we don't have a problem, and let's go on from there, because I think we do have a big problem.

EILPERIN: OK. Go ahead, Greg.

STONE: No, I -- it's a great question. And I would -- I would argue back that from the -- yeah, for the inside baseball, yes, it's been 40 years. But I would say from the external optics of the world, it's only been about five or eight or 10 years. I think that the world is at a different place.

Also, back to my first point, which I really want to underscore, I think that the information systems are at a different place right now. And we talked about sensors and a few other things this morning. The world has changed exponentially over the last few years.

So I sense a different moment. I really do. I sense that governments are open -- the example I gave you in the South Pacific. There's other examples that we could go into in Africa and elsewhere. So I don't know what my fellow panelists think, but I understand your frustration. I've been in this business a similar length of time. But I feel a bounce right now.

EILPERIN: Yeah. Thoughts?

DABELKO: Well, I mean, I cut my teeth in getting into this field by reading things like Jessica's -- I think, 25-year anniversary of her "Redefining Security" piece in Foreign Affairs. It was instrumental in getting people to focus on these issues together.

And so I guess I was uncharacteristically optimistic and rosy then in my presentations to this point, in that I share a lot of these fundamental concerns. They come in kind of a -- for example, a daily fashion where on the one hand, I'm trying to add context to those who will say, well, because there's no more of this, then by definition, people are going to start fighting, when it's a lot more complex.

And the flip side is you don't even have to be scarce in a place like water issues between India and Pakistan; you just have to have the perception that India is taking more than its share on the industry, the -- for that to be a really provocative way for those who want to, say, deal with Kashmir to stir up trouble and kind of demagogue on the issue.

So even where we have real scarcities and real challenges, we -- it's even worse than that because it can just even be the perception. And it's obviously a neighborhood that really matters on a lot of -- in a lot of ways. And I would suggest that some of our traditional security institutions are paying very close attention to questions like that, even if they're not having at the top of the list an issue like climate.

So I agree it's -- a lot of things haven't changed. One that I wish we would have in the macro is start asking questions, not just so to speak on how do we increase supply but on demand, and so -- and ask some of these tougher questions about the logic of just ever more consumption and -- as a positive thing and start to say, well, how do we meet some of these needs with fewer material, less material throughput, and have that be part of the conservation, say, on -- American energy policy, for example, would be -- would be one area. So I guess share some of that pessimism, but at the same time try to make -- have some optimism in individual circumstances.

EILPERIN: Right here. Yes, right -- wait for -- the microphone's going to come. Right there.

QUESTIONER: Frank Loy from The Nature Conservancy. Following up on Geoff's point about demand, one of the ways to regulate demand is by price. And energy and food are priced. We buy them. In a lot of places in the world, water is free. The question is whether there is any outlook that one could price water in -- particularly in developing countries in a way that wouldn't topple the government and cause the kind of dislocation that people worry about.

EILPERIN: (Inaudible) -- we have a hard time doing that in this country. Is there -- is there an opportunity to do that overseas, do you think? (Chuckles.)

STONE: I'm not sure I really understood the question. I mean, yes. (Chuckles.) Fresh water can be valued and integrated. We're doing that with small shareholder firms right now in parts of Africa by showing the relationship. And -- but in terms of -- I'm not sure what you meant by priced. I would use the word value is think is the -- is the --

EILPERIN: You mean, like, force people to pay for it in a way that they don't pay for it now?

QUESTIONER: (Off mic) -- especially in the agriculture area, as opposed to just having it and therefore the amount of waste -- (off mic).

DABELKO: Yeah. I mean, it's a -- it's a terrific question, and I wish there were easy answers, but I think whether it's water or food or fuel, these kinds of subsidies where countries are many times overpaying to keep it cheaper, essentially, are really a big part of the problem. But as you say -- and the one that we always hear about is Cochabamba where -- kind of doubling of prices, and -- brings folks into the street, and it's about that water doubling of prices with -- through privatization, but it's also about other things, and you do have two successive governments fall in Bolivia in the late '90s in part because of those protests. So it's not that there are imagined security issues associated with them.

But nevertheless, it -- just to make it a little worse, you can even see really negative outcomes -- say, in India, the fact that the fuel for the pumps for the farmer is free means that there's no incentive to save water in terms of irrigation, so you do flood irrigation in a place -- from groundwater, so -- you know, so kind of really crazy use of that water in part because the pricing in another sector is so counterproductive. And so some of the conversations are about how to do that. But, of course, again, the unrest -- (chuckles) -- that is immediately induced by some changes in those -- in those subsidies are -- is really a challenge.

EILPERIN: Right there -- (inaudible). Go ahead. Let's see if there's -- (inaudible) --

QUESTIONER: Thank you. I'm Paula Stern, The Stern Group. And I -- glad you brought up the issue of subsidies. And building on some of the other conversations and questions, I'm very interested in your tackling the questions of the rules of the -- rules of the road, rules of law, the WTO, the World Trade Organization, the fact that energy has really never -- oil's never been covered in the WTO. I would like to ask you to kind of stretch your imagination as to how the WTO could be better utilized to deal with subsidies that are very distorting, as you said, in a -- in a variety of these resources. Is there a role there? They have resolved disputes in other environmental-related matters in the fisheries areas. I'd like to get your views on that.

EILPERIN: Blake, you're going to answer that question and maybe tackle this issue. I mean, the administration --

CLAYTON: That's all right. I mean, I --

EILPERIN: The administration has also, right, tried to push through the G-20 this idea of phasing out fossil fuel subsidies, which, again, the Obama administration can't even do here in the United States, but they've tried to make it a -- (off mic).

CLAYTON: Yeah, I mean, it's an enormously complicated and difficult issue. I think there are many analysts, as you know, who cited the subsidies question and the removal of those subsidies in the Middle East and North Africa as a primary cause of what happened, or at least a related cause of the uprisings there recently.

Part of why I think the subsidies question is such a hard one is because the very people that are most affected by the removal of those subsidies are the poorest. And -- but I think that, you know, I wouldn't be surprised to see many countries starting to grapple more seriously with their own subsidy regimes, not from outside pressure but actually from fiscal pressure internally. It's simply so expensive to maintain fuel subsidies with global oil prices where they are right now, the highest, really, whether in nominal or inflation-adjusted terms in the history of the industry.

So I was recently in India, for example, a couple weeks ago talking to government officials there. And on the energy side, almost all of them named subsidies as -- and doing something about subsidies as a top priority. It's not from outside pressure, but again, it's from their own bottom line.

I think that the IMF, the World Bank and others have written lots of good things when it comes to kind of thinking strategically and tactically about how to deal with those, but I think it varies so much country by country it would be hard to give kind of a general road map from where I'm sitting in terms of how any one country should deal with their own subsidy distortions.

EILPERIN: Great, and the table back -- the gentleman right there has a question. Right there. There we go. Yeah. Microphone's coming.

QUESTIONER: Gise Marie Khartouz (ph) of -- (inaudible) -- International. I'd like to make a point that I agree with your point that the right policies are not enough, and we know that. But for me, the most important thing is first -- the right policy is only the first step. You need to have the right institutions, the right capacity and resource to implement this policy. And that's the problem in most of the developing countries. They don't have that.

We saw, for example, from the presentation of the Assistant Secretary Jonas (ph) that it's really hard to implement some of the basic policies in the U.S. U.S. has money that can grow capacity, some of the best scientists around the world, and they -- in this -- in the -- (inaudible) -- could not implement some of the basic policies. Imagine this situation in a country that's -- that doesn't have scientists, doesn't have a research institute, that doesn't have money to do that.

So I think in terms of contributions to the global discussion, I think the developing countries have already doing a lot of things. For example, if you go to the Convention of Biological Diversity, we have 20 targets, great targets. If all the countries followed these targets, we are going to move the world into a sustainable path. But how these countries can implement, how these countries can achieve these targets if they don't have the basic things to implement the right policies?

So this is the kind of question that I would like to propose to you, so I'd like to get your reflection about that, this capacity gap to implement the right policies.

STONE: Well, he's my colleague, so we can have this conversation any day of the week. I'll let one of my -- one of my panelists -- (laughter).

EILPERIN: All right, Geoff, you're going to be in the hot seat. Can you take a stab at it?

DABELKO: Sure. No, I mean, I completely agree. And I think one of the ways that would be helpful for us to recognize that need is to have a more realistic timeline and sense of the resources it takes to build those capacities and partnerships with the -- so for example, when our common, not all, but a common U.S. Agency for International Development program to build capacity on -- pick your environmental issue -- unfortunately, not because they think a one- or two-year time frame is a great idea but because the dictates of their portfolio demand that -- they don't know that they have money past that -- then there becomes this expectation that you're going to solve capacity problem X in two years and say, thank you, we'll move on to the next. I mean, it's just crazy.

And you know, so the way that we structure our support mechanisms by, of course, insufficient funds, a really short timeline, lack of ability to cooperate even among issue areas where there should be, because it's different portfolios, different streams of money, and then just to really pile on, that so many of these issues are across borders, but we organize our embassies and our missions on a bilateral basis. And so it may be a priority for -- you know, water may be a priority for country X, and next door -- it's a transnational issue, a transboundary issue, but it's not a priority there, and somebody's not interested in water, so you don't deal with it because we just organize ourselves poorly to reflect the reality that these things happen to ignore political boundaries often.

STONE: I'd like to make a comment just in general to say -- and also that -- the other comment about 40 years ago. I mean, I think that what's really important is discussions like this where we can create new knowledge amongst ourselves. These are really, really critical.

And I also think that in a general trend, you know, we have to -- the United Nations conventions, like we've talked about today -- I don't think they've yielded the kind of results that we all kind of want. And there is a general, not abandonment of those conventions by any means, but looking elsewhere. I think the private sector is even looking elsewhere. They're -- they've looked to the United Nations for guidance, but they're not -- they're not getting it from these conventions. So they're beginning to organize on their own. They're beginning to look to the NGO community. They're looking to the Council on Foreign Relations.

So I think 40 years ago, you know, I don't think we -- I don't think we knew -- we knew -- we knew the problems, but I don't think we actually knew what to do. I think today we know the problems really well and we know what to do, so that we can move forward with it, especially with discussions like this.

EILPERIN: OK, and we have a couple questions -- yes, there we go -- (off mic) -- and then we'll go -- (off mic) -- yeah.

QUESTIONER: Hi, Harrison Gale with Georgetown University. I wanted to ask about the issue of energy scarcity, or in our case, abundance. You talked about the explosive growth of domestic gas production here in the U.S., and oil is the same way. We've increased oil production by 40 percent in the last three years alone. We're on track to become a net exporter of oil sometime next year. My question is, is with everybody seeing -- this is undoubtedly responsible for hundreds of thousands of new jobs in America and a key component of our economic recovery. But with everyone seeing dollar signs, how can we remind key decision-makers that the true cost of this carbon dioxide, putting it into the atmosphere, and if we achieve 5 degrees global average temperature rise, the world becomes ungovernable -- so how are we -- keep this in the conversation with energy prices going to plummet in the next couple years?

EILPERIN: Yeah, Blake.

CLAYTON: I think it's a great question. First of all, some of the points you made -- I think, for one thing, the U.S. will remain a large oil importer for the foreseeable future. So we already are exporting -- we're the second-largest crude product exporter, so diesel, jet fuel, gasoline, that type of thing. But we're also the second-biggest crude oil importer, after China.

And that's not going to change anytime soon. I think there are many people, including the IEA, who think that it will change in 10, 20, 30 years. But for the foreseeable future, we -- our economy still has a lot of the same challenges posed by high oil prices that it did a few years ago. And that's not going to change anytime soon.

And I think certainly the debate over energy scarcity and energy security in the United States has changed. With natural gas prices at historic lows as a result of this shale gas abundance, with oil production and gas production being a major, now, source of economic growth not just in the oil patch but also, as you mentioned, in places like, potentially, in New York, Ohio, Pennsylvania, states that, for the last 150 years, at least, really haven't been producing any of this stuff -- they're now seeing tremendous gains in growth, employment, incomes, on the back of this newfound hydrocarbon wealth.

So I think that the national debate over climate, which in no small part is related to the, you know, source of our own energy supplies and our own energy security outlook, has to change. But I think that the case for taking steps towards renewable energy and doing something about climate remains solid, but it has to be made a little bit differently.

As I see it, there were two real pillars to the argument for doing something about climate change and embracing renewable energy 10 years ago, or five years ago, and they were that we were running out of oil and gas and that we were changing the atmosphere, changing the environment in a way that was irreparable and harmful. I think the first of those, that we were running out of oil and gas, it just really doesn't apply in the same way anymore. I think there are people who wish it did, but I don't think it does. And I think that in five or 10 or 20 years, you'll see even more than you can today that it really doesn't, that there are vast reserves of oil and gas that can be produced at today's prices, that have simply changed the game when it comes to global energy supply.

But the second pillar -- that's the case for renewable and climate as a means of, you know, keeping the planet clean, ensuring economic development, humanitarian concerns, all of those reasons -- that hasn't changed. So I think that there's still a very solid case to be made, but it has to be made in a different way. And I think the internal kind of policy debate in the United States will have to reflect that.

EILPERIN: OK. We have time for one last question, so I guess we'll go to this gentleman in the back.

QUESTIONER: Jan Smith --

EILPERIN: OK, wait one sec to get a microphone. There you go.

QUESTIONER: My name is Jan Smith Donaldson. I have many associations, but I'm here basically as a concerned citizen. And I want to follow up on you saying we know what to do. It seems like we don't know how to do -- and I want you to bring us up to date on exactly what to do and how to do -- to clean this waste disposal water from fracking. Where are we? How can we lead the world in this, since it's obviously such a great opportunity.

EILPERIN: Blake is the one who, if anyone has an answer, he's going to have it.

CLAYTON: Sure. Well, I think there are some simple and some complex solutions. Some simple ones first. A lot of the problems with wastewater -- I shouldn't say -- I guess disposal, when it comes to fracking fluid has been that in some cases the fluid has simply ended up in open pits, uncovered, right, after it comes back out of the well. That's a problem for wildlife. And so I think there are some very simple remedies, some very simple regulations when it comes to putting laws in place to prevent that kind of open air fracking fluid disposal or storage or whatever you want to call it from happening. It shouldn't happen that way.

I think that to the point you made about disposing the stuff in Ohio -- (laughs) -- (inaudible) --

DABELKO: They also want to ship it to Texas, right? Isn't it the desire to get permits to put it on barges so you can take it all the way down and do it in Texas as well.

CLAYTON: Right. I mean, and so far as those reflect, you know, democratically elected officials making decisions about how they want to do it, it's a question, then, of mobilizing people and really creating change in people's attitudes towards how they want to manage that stuff.

QUESTIONER (?): Really hard.

EILPERIN: OK. We'll just take -- this gentleman had a question earlier, so let's just take -- be very brief. Let's run and get you a microphone, and we'll do that and then we're going to wrap up.

QUESTIONER: Thanks. Will Turner with Conservation International. Picking up on the same point but maybe expanding a bit, so there's this idea that we've just been -- you know, the last 10 years there's been an absolute transformation in the North American energy sector because of shale gas and shale oil, and the observation that that, you know, potentially can go worldwide in the near future. Enormous consumer of water. It was pointed out earlier that 40 percent of the world --

EILPERIN: Ask a question. We --

QUESTIONER: -- 40 percent of the people are going to be in water-stressed areas in the near future. Put those together and it's a train wreck with the expansion of this. So what is the one thing that we can do to ensure that -- not sort of looking backwards trying to fix problems after they've happened, but to ensure that countries and the international community is able to respond to these things? Because I have prediction that is not going to be the last time we're surprised by a transformation, so we need to be prepared for it. What's the one thing we can do?

EILPERIN: Would be adopt the golden rules? What would it be?

CLAYTON: I think there are a host of things that need to happen. But I think, as you said, the water issue is huge. I think there are other concerns as well: infrastructure; the fact that many of these shale basins lie also underneath some of the most -- you know, biggest cities in the world, unlike here in the United States, where the population density tends to be lower in those areas, is important.

So I don't think there's any one kind of silver-bullet answer when it comes to how to deal with it. I wish there were. But certainly I think kind of bearing in mind the water issue, finding some way to inject, you know, market competition or at least price or value that water in a way that's truly reflective of the trade-offs involved in using it for producing energy is crucial.

EILPERIN: OK. And by the way, just a reminder, this was on the record. Please join me in thanking our panelist for -- (inaudible). (Applause.)

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