U.S. Options for Copenhagen
This session was part of a CFR symposium, Countdown to Copenhagen: What's Next for Climate Change?, which was made possible through generous support from the Doris Duke Charitable Foundation, the Alcoa Foundation, and the Robina Foundation.
JULIET EILPERIN: Thanks so much. We have a fabulous panel here, so I'm just going to do brief introductions and then we're going to get started.
Frank Loy has kindly offered to pinch-hit because Eileen Claussen had an emergency. So we first want to thank him for joining us. He's the chair of PSI's board of directors and a member of the board and executive committee of Resources for the Future. He served as undersecretary of State for Global Affairs between 1998 and 2001, under Bill Clinton. He was responsible for, among other things, U.S. international policy and negotiations regarding the environment, human rights, the promotion of democracy, refugees and humanitarian affairs, counternarcotics and international law enforcement. And he also served as the chief U.S. negotiator for a number of treaties, including those on climate change, on trade in genetically modified agricultural products, and an international convention to combat organized crime.
And then, sitting next to him, we have Daniel Price, who is senior partner for global issues at Sidley Austin LLP and a member of the firm's executive committee. And he advises clients on a wide range of international regulatory, transactional and policy matters, including climate change. And he rejoined Sidley after serving as assistant to the president and deputy national security adviser for international economic affairs in George W. Bush's administration, where I pestered him, trying to get him to disclose secrets about the administration's strategy, and, you know, didn't have as much success as I'm hoping to have today. And he worked on a number of -- he was his -- Bush's personal representative to the G-8, the G-20 financial summit and the Asia-Pacific Economic Cooperation forum, and served on a number of Cabinet-level bilateral economic dialogues.
And then we have, sitting next to him, Michael Levi, who's the David M. Rubenstein senior fellow for energy and the environment at the Council on Foreign Relations. And he's director of the council's program on energy security and climate change and was project director for the CFR-sponsored Independent Task Force on Climate Change. I could give you many things about him, but we clearly know his most important thing is that he served as as technical consultant to the critically acclaimed television series "24." (Laughter.) So that, you know, no more needs to be said.
So, moving on, what I thought would be helpful is we'd set the stage, and obviously, Congressman Markey's comments gave his perception of what got us to where we are today, and I think it would be helpful, when everyone's looking towards Copenhagen and obviously seeing it as not offering the resolution that people had anticipated maybe a year or two ago, to talk about how we got to where we are today and how many of the stumbling blocks that, frankly, have bedeviled these negotiations for years remain in place even as we're left at a month away from the U.N.-sponsored talks.
So in succession, Frank, if you could begin with kind of, you know, what do you think brought us to the point we are today, where it's difficult to get the definitive agreement that people had anticipated?
FRANK LOY: Well, from the United States point of view, the most difficult problem is the fact that we do not have a domestic law that permits us to make commitments that we know we could keep. We did make commitments at Kyoto which, it turns out, we couldn't keep, and I think the general feeling is that we don't want to repeat that.
And so in a sense, for the United States the big problem is whether -- I mean, I would say the big problem for the United States is that Kyoto -- that Copenhagen comes at the wrong damn time. In my opinion, it would be a lot better if Copenhagen had been scheduled for June of next year, or something like that, to give this president and this Congress an opportunity to see whether they can craft a law that actually does give us some assurance that we can meet international obligations.
But, Copenhagen is when it is, and so the question -- the option, one option for the United States is to what extent its positions at Copenhagen are really designed or really have a major eye on the effect of those positions on the U.S. Congress and the law that we hope will be passed and to what extent they have the eye on meeting the international expectations.
And those are not the same, and sometimes they may actually be contrary.
So one of the big questions for the United States is, for example, the issue of numbers. If the -- can the United States agree on any number, either a number of greenhouse gas emission reductions or a number of dollars that it would commit to aid developing countries meet their adaptation and technological requirements. And I mean, my answer would be, I'd rather not. But as soon as you say, if you have the United States appear on the international scene, everybody is looking for numbers, whether they be from a 2005 base or whether they be a 1990 base, whatever. If we are reluctant to talk about U.S. numbers, I think, some people will be very critical. But my sense is that that's -- not only would we be in a sense repeating Kyoto if we agreed to greenhouse gas emissions without knowing how the hell we're going achieve that -- and without a climate bill, I think we won't know how to achieve it, mostly -- or the numbers will be so tepid, so weak, that they will not be very helpful.
So that's just one of the issues that brings this -- there are a lot of others, but that's one issue that I -- and I would hope that others would understand that difficulty and maybe one more point, Juliet. Seems to me we need to bring climate issues to a boil and actually end up with a -- with some sort of global understanding. But we are in a -- we're in a long-term process, and we have to recognize that Copenhagen comes at a time for the United States that's very difficult, and we -- it would not -- it would be a huge mistake on the part of the world to act in Copenhagen and expect in Copenhagen matters that actually set back the American ability to participate through domestic legislation.
And that's a possibility, if Copenhagen doesn't turn out right.
EILPERIN: Excellent.
Dan, can you give us your insight, having been -- having firsthand knowledge of being involved as -- you know --
DANIEL PRICE: I'll try. And Juliet, let me say --
EILPERIN: Feel free to blame the Bush administration for everything, if you'd like. (Laughter.)
PRICE: Yeah, right. It's a popular thing to do.
LOY: If you don't, somebody will.
PRICE: I know. I know. And just as you are hoping to coax more information out of me in this new environment --
EILPERIN: Yes.
PRICE: -- so, too, I'm hoping to communicate better with you.
I recall well when the Bush administration launched the major economies process as a way of gathering the 17 nations who are responsible for 80 percent of emissions, to try and make progress in the UN negotiations through this group. We were pilloried -- including by publications such as yours -- for circumventing the United Nations, hijacking this -- da-da-da-da. When the new administration, having renamed it the Major Economies Forum, quote, "launched" this initiative, it was welcomed as evidence of the new multilateralism, so --
EILPERIN: I was channeling the Europeans. It was just quoting Sigmar Gabriel. (Laughs.)
PRICE: Got it. Got it. (Laughter.) Well, you know, that's a very good place to start to respond to your question.
Because I think, Frank, if Waxman-Markey was today law, the obstacles to Copenhagen would remain 99 percent what they are in the absence of that. Why do I say that? One, when you reduce Waxman- Markey to 1990 levels, the year of talismanic significance for the Europeans, we have a 7-percent reduction -- or, as the representative from the Chinese Embassy suggested, a 3-percent reduction. So let's say it's somewhere between 3 (percent) and 7 (percent). The Europeans have said legitimacy and morality consists of 25- to 40-percent reductions below 1990 levels by 2020.
So part of the obstacle in these negotiations all along has been, I think, the European insistence on a target. Whether or not it's achievable for Europe remains to be seen.
It was certainly never politically achievable or realistic for the United States under the prior or under the present administration.
And yet the insistence on this number and the focus of political energy by the Europeans on the United States and the focus on the U.S. number and a lack of willingness until very recently to engage the major emerging markets and actually say, "You know what, this won't work unless there are commitments by the major emerging markets" has been one of the principal obstacles.
And if you look at the G-8 language from Hokkaido in 2008, where the United States, Canada, Japan, Russia wanted very strong language on commitments by major emerging markets, the Europeans opposed it, and so we have relatively weak language. Yet when Chancellor Merkel was recently here talking to our Congress, we see an evolution, and she said, "No doubt about it, in December the world will look to us, to Europe and America. It is true that there can be no agreement without China and India accepting obligations."
This is a real sea change for the Europeans, because it had been the position of the last administration and this administration that a new agreement will require binding commitments by all major economies, developed and developing; those commitments may be differentiated; some may be a fixed number, some may be to slow the growth, et cetera. But commitments there must be.
The major emerging markets have not yet accepted, even in principle, that there must be a binding commitment by them. So two obstacles that remain, even if Waxman-Markey were law, were the assessment of the adequacy of the U.S. commitment in the minds of the international community and, two, the willingness of the major emerging markets themselves to make binding commitments, without which approval of any climate treaty, I think, is quite doubtful in the United States.
The third obstacle, and then I'll stop. The third principal obstacle, I would say, is the absence of agreement on either quantum or mechanisms for financing the incremental costs of clean versus traditional development.
We're still having this dialogue of the deaf between those who have the money, saying, "We would actually like to set the conditions under which you have access to the money," and those without the money saying, "No, that's illegitimate for you to set conditions." And the -- I would say a final obstacle is the recent articulation by Prime Minister Singh of India expressly, but this has been developing some -- for some time -- the conceptualization of clean technology as a public good and thus a good to be either transferred without cost, compulsorily licensed, or treated in some way which will undermine the incentive to innovate.
EILPERIN: Excellent. More -- Mike, want to throw more obstacles out there?
MICHAEL LEVI: I'm not sure there are any obstacles left. (Laughter.)
EILPERIN: (Laughs.)
LEVI: Let me throw -- because I agree with the various obstacles that have been laid out here, let me talk about one conceptual obstacle and then try to give my take on where U.S. action fits into this.
EILPERIN : Sure.
LEVI: I think conceptually we've had this problem where we're looking for very -- a very definite set of outcomes to be promised by countries in an area where we have very little experience of delivering. We don't know how to move to a low-carbon economy. We know a lot of principles. We know a lot of pieces. We know all sorts of things that we can try. But it's very difficult for us to predict the outcomes in 2020 or 2030.
And the way we've negotiated traditionally, particularly through the U.N. process in the past, doesn't reflect that. It focuses on certainty. It focuses on prescribing very detailed mechanisms that we know in advance will work. And that's why I think a lot of these bilateral efforts, mini-lateral efforts, the Major Economies Meetings, the Major Economies Forum, have been useful, because they provide a more flexible setting where we can really look at how we are going to experiment our way forward when it comes to developing policy. So I think that mind-set is very -- a very important piece.
On the role of U.S. legislation, I'd say U.S. legislation is essential. It is not going to fundamentally transform everything, because there are all other pieces that need to be put in place. But the reality seems to be that until U.S. legislation is there, we are going to spend 90 percent of our time talking about what the U.S. is or isn't doing. And as much as a lot of us understand that we need serious, careful international discussions on technology, on finance, on developing country commitments, we aren't going to have that level of seriousness. We aren't going to have the level of focus that's necessary to deal with those until the U.S. domestic piece is out of the way.
Does that mean that we will solve all those problems once U.S. legislation is in place? I don't know. But I don't think we'll find out the answer until we get to that point.
EILPERIN: So, given that we've now laid out the formidable obstacles to reaching agreement, I think it would be helpful to talk about what would be a, quote-unquote, good outcome in Copenhagen, or a not good outcome, when you look at the universe of what's possible under a political agreement, given that no one at this point is expecting a legally binding agreement. Could you talk a little about both, you know, what you see as the continuum of options that we might be looking at and how -- to what extent does 2010 become the definitive year for climate change, or in fact is there no definitive year in the way that people had been thinking 2009 would be?
LOY: Well, on the very last point, I would say there is no definitive year. What there is and what there has to be and what has to be reinforced are a sense of urgency and a sense of scale. That is, you've got to move reasonably quickly and you've got to be prepared to move at a scale; but is there a particular year? I don't know. My guess is the year will always be a little bit ahead.
What would be a good outcome? I reiterate, I think focusing on numbers is not -- if you think that's a good outcome, it's not going to be very successful, partly because of what I said, partly because of what Daniel said. There is a big gap, even if you had a law today, between what is realistic for us to agree to and what is expected by or at least said to be expected by others. Dan is quite right.
I will say this, that if you take as a base year something like 2005, which recognizes that for a large part of the -- you know, for many years we didn't do anything, or you take a more recent base year and you talk about going forward, I think we can come up with numbers that are quite respectable that are parallel to the numbers going forward of other countries, even though if you -- but we have to recognize that some other countries -- Europe I'm speaking of -- have made progress in the years 2000 to now that we haven't. So we have to recognize that.
So what's a good outcome? Architecture of an agreement, by which I mean an agreement that requires all major emitters to make commitments that are verifiable and that are -- and in some sense where there are consequences for not meeting them.
They don't have to be the same kind of commitments. Generally, I would say the industrialized countries ought to take absolute commitments. The architecture should provide that, some number. And the major economies that are developing should take whatever policy measures work and whatever policy measures can be negotiated, but they ought to be binding in some sense of the word and they ought to be commitments that have consequences for not meeting them. That would be a huge step.
And in that respect, I would say it would be extremely useful if, for once, Europe and the United States would have a similar posture vis-a-vis the major economies like China and India and others, rather than have differing views, which, in the past, have resulted in very little commitment on the part of those countries. So that would be a good outcome.
And last point I would say is: I think there has to be recognition of the point that Mr. Goldemberg made, and others, of the role of tropical forests. It's such a big part of the deal. It is -- without addressing that aggressively -- and an international agreement can do something about addressing it aggressively and make it possible for industrialized countries to help Brazil and Indonesia and the Congo and others to achieve reduction of deforestation -- without that, I don't think we're going to get any of the numbers that we say we need.
Those would be some elements of a deal that I would consider success.
EILPERIN: Okay. And, Dan, I want to -- when you -- when you give your sense of both maybe like a good and bad case scenario, I'd also hope that you could put it in the context of to what extent does it reflect what you and Jim Connaughton and others in the Bush administration were pushing for in terms of an international outcome, and help draw those parallels, perhaps. Go ahead.
PRICE: Thanks. I actually -- I mean, if you were here and you heard Congressman Markey, you would find the statement I'm about to make unbelievable, but I think there's very little difference between the negotiating objectives of the United States that were put forward by the Bush administration and those now put forward by the Obama administration.
There is very little difference.
I think what would be a -- and I'll explain those objectives in a moment, because I think a document embodying a negotiating path to achieving those objectives is a -- would be a good outcome in Copenhagen. I don't think it is likely that we will reach agreement on anything other than those items on which we must agree.
And I would actually consider it a success if the parties left Copenhagen with a document that said, "Here are the five issues on which we will negotiate." And I would list those issues as follows: the nature of the commitments to be made by all parties -- sorry, the nature of the binding, legal commitments to be made by all parties. And, Frank, you're right; it may be that there is an acceptable range of commitments. Some countries may choose to just pick an economy- wide number. Some countries may aggregate their domestic measures and say, "We estimate that these measures taken together will achieve an ‘X'-percent reduction, but we put those measures on an annex, and we commit to faithfully implement those measures."
By the way, this was something that was proposed during the last administration; considered unacceptable at the time. It's now been resurfaced as the Australian and South Korean compromise proposal. In any event, I do think that's one possibility. So, one, what is the nature of the commitments?
Two, under what terms will financing be made available to beneficiaries? In other words, should the loan criteria themselves have a renewable-fuels mandate? Right? So, to begin to discuss the terms under which financing will be made available.
Three, achievement of common regulatory principles for the recognition and validation of credits and offsets, so that, to the extent parties have cap-and-trade mechanisms, the regulatory principles are common, leading to interoperable markets, rather than the next subprime crisis market.
Four, again I come back to the intellectual property point. And it's -- it broadens out to an investment climate point. What is it, what regimes can be put in place by those who wish the more rapid deployment of clean technologies, that will create enabling environments for that deployment, whether that's a limitation of tariffs, whether that's an elimination of limitations on how much of an affiliate a foreigner can own, or whether that's enhancing protections for intellectual property.
So I would say if there could be an agreed negotiating agenda within a timetable of those four points, I would consider that a success.
EILPERIN: Okay. There's no fifth. Initially you said fifth point. Is there a fifth point?
PRICE: Well, the fifth point --
EILPERIN: Or a half a point?
PRICE: No, there is a fifth point. I mean, I would like to see agreement reached that trade sanctions will form no part of the new international climate regime, whether as a matter of the international agreement or as domestic implementing measures, because I think the potential for a carbon trade war and going down that path is very dangerous and destabilizing. And I think if the contours of the international agreement are done right, it's also wholly unnecessary to address carbon leakage.
EILPERIN: Michael, picking up on that, can you maybe look forward and both get a sense of, you know, if they have the kind of outcome that's being discussed what do you think are the ramifications of that? And certainly I think while a lot of us would accept what's being said about, you know, the similarity on the international front, clearly there is a big domestic difference between this administration and the past administration, and how does that play into all this? We're talking about it as an obstacle, but moving forward, what does it mean?
LEVI: Right. And we haven't talked much about the worst case. I --
EILPERIN: Yes. And I would like you to spell out the worst case --
LEVI: -- which is important - which is important--
EILPERIN: -- which I feel like could even -- yes. Exactly.
LEVI: -- to get at.
I do see a lot of continuity in the international. positions between this administration and the last couple years of the previous administration.
There are big differences on the domestic front, and those affect the ability of the United States to work internationally through the -- the agenda that each administration has worked through.
But when it comes to the bottom lines internationally, there is far more in common, as far as I can tell, than there is different between the two.
Let me say something about the sort of high-end objective. I think if we could follow the agenda that you lay out, Dan, and successfully conclude negotiations on all of those, that would be tremendous. I'm skeptical that we can conclude with 192 countries meaningful negotiations on all of those different tracks. I think those are the right issues that need to be dealt with in a variety of different forums. But it's not obvious to me that we can get a global deal on all of those, particularly because there are idiosyncrasies with each country that need to be addressed -- the technology transfer issue, the question of what's the right enabling environment, what are the right tariff structures, ownership rules, whatnot - are very different for China from, let's say, a country in Sub- Saharan Africa, and frankly different for China and India and Brazil.
So it's not clear that we can -- we can take care of all these things within one global international piece.
What I think is very important to have included in whatever the outcome is -- and we're talking about the sort of substance of it -- is to get the process right. It is very important that we have transparency from the countries involved. Regardless of whether they have binding commitments or domestic commitments, whatever you want, they need to be transparent, so that we can build confidence amongst countries that things are moving in the right direction. That means proactive reporting from the individual countries and then international verification.
I'd also like to see a regular international peer review process that helps focus attention on where countries are succeeding and where they're falling short. And that includes even whatever countries step up with specific emissions targets and not just policies and measures. You can have emission targets and never come close to meeting them. We need to know well in advance whether countries are on the right course, and we need to expose that. And there are a lot of lessons to be learned from other -- from other regimes where a peer review plays a significant part of -- is a significant part of the regime, whether it's through the IMF or the World Trade Organization, the OECD. We have a lot of experience to work on that we're not taking advantage of properly.
The --
EILPERIN: Can you give the worst-case --
LEVI: Sure. Yeah, let me -- let me give the worst case.
I think there are two related worst cases, and they both have to do with how the international negotiations impact U.S. domestic policy.
There needs to be a sense, I think, on the Hill that the United States can contribute positively to an effort and that it will be recognized for doing that internationally. If there's a sense on the Hill that, even if people make politically tough choices to move ahead with legislation, even if they do that, they will be criticized roundly by the world and blamed for falling short, that lessens their motivation and incentive to really step up to the plate. So there has to be a clear message that the way we compare countries' efforts will mean that, if the U.S. does deliver on the sorts of things that are being talked about, that will be accepted.
The other piece -- and I think Frank hinted at this, and this is a real possibility -- is that there is a scramble at the end in Copenhagen to do something that looks like Kyoto II, that the Europeans show up, and that some elements in Europe and perhaps in Japan decide that we need something that looks like a big deal, and they decide to put together something that maybe the United States can come into later.
I think that would be very dangerous. It's very important that the United States be a constructive part of putting together whatever happens internationally. And I know it's difficult to tell people in the rest of the world, "Just hold on another moment; we'll deliver soon." But it's really essential here.
EILPERIN: And. sorry--to move on --
LOY: Can I just make a comment about two things Daniel said? One, the fifth point -- that is, that he would like to see a provision in the international agreement that says "no trade measures in Country X" -- my sense is that that would be a really bad idea, because I cannot imagine anything that would infuriate the members of Congress more than an international mandate not to adopt a domestic measure that they might adopt and might not adopt. The president has made it very clear he doesn't want a really harmful trade measure. But my sense is that that's exactly the kind of thing I have in mind that I think would be a step backward, if the international community adopted that.
The second thing is a quite different point. He alluded to the -- what he called the Australian-Korean proposal now.
EILPERIN: Yup.
LOY: And I think it's just important to say what I think that means and the choices that have to be made on that.
That is basically a series of parallel commitments that have -- that, if I understand it correctly, really have no consequences for not meeting them. And that may be good enough -- may be all you get. But the question we have to ask ourselves, who care about this issue, and the question the nations have to ask themselves, is whether in fact a system that has -- it may have reporting, but it has no enforcement or no consequences -- whether that is good enough. And without answering that at the moment, that is certainly an issue that you could imagine Copenhagen having to deal with.
PRICE: If I could just respond to two factual points, one, with respect to the last point, at least the architecture that I understood -- certainly, that we had proposed, and what I understood others are now considering -- is legally binding. That is to say, you make a treaty promise to implement those laws set forth on Annex A. And if you don't do it, you are breaching the treaty to the same extent as if you had promised to achieve a number and you didn't achieve it. We have experience in international agreements where the commitment is essentially to effectively enforce and implement your domestic law, and there's a review mechanism and consequences if you don't. That's point number one.
Point number two, you said that it would antagonize the U.S. Congress if the resulting treaty some months or a year from now were to say no trade sanctions. But as I understood Congress -- and I take Congress at its word -- the only reason that that's in the domestic legislation is the concern that the commitments on carbon reduction by competitor developing countries will be inadequate. By the time we have a treaty, we will know the adequacy of those commitments. If they're inadequate, we don't approve the treaty. If they're adequate, we can approve the treaty and we don't need trade sanctions.
EILPERIN: Okay. And I'm going to open it up for questions, but Michael, do you have any point to add to this?
LEVI: Well, there is this question of consequences. We use the word "consequences." I haven't heard any significant proposals for what those consequences would be, at least if they were punitive consequences. I think the bulk of the sticks we have involve removing carrots. And that's how things are likely to evolve going forward.
And it's not -- it's not obvious to me that that has to be part of an international deal. If one country steps up with a particular set of promises for what to do domestically, another steps up with a set of promises for how they are going to support that action through financial assistance, through provision of technology, whatever you'd like, and the first country isn't delivering on its steps to reduce emissions domestically, well, then the consequence is that the other country doesn't deliver the support. And that doesn't -- if that was in an international deal, that would be useful, but it doesn't have to be. That kind of enforcement can happen without being spelled out. What you need is the transparency and the review to make it clear to everyone in the world what that linkage is and to be able to facilitate that.
EILPERIN: And just briefly, to play referee, I think the fact that there, frankly, is some confusion about -- when you're talking about the Australian schedule and the South Korean registry, I think one of the real debates -- and we will certainly see this in Copenhagen if that becomes the primary vehicle for any sort of agreement -- is that there is real concern about how verifiable this is and how binding it is. And so I think that it makes sense that there is even debate up here, because that is in fact the debate that right now we're facing in the international community.
I have tons of questions more, but I'd love to get questions from what I know is a smart audience. So, go ahead. I'm sorry, just wait for the microphone.
QUESTIONER: Stephen Kass from Carter Ledyard. I'm going to put this just as diplomatically as I can. It is undoubtedly true that there are some some similarities between U.S. negotiating position in this administration and the previous one, though it strikes me that the current one would like to reach an agreement and the previous one didn't.
But in view of the fact that, even if enacted, Waxman-Markey or Kerry-Boxer will contain emission reductions far short of what not just the Europeans but IPCC and most informed observers believe is necessary to avoid very serious consequences, most of which will be felt in the developing world and many of which are now inevitable, what do we say -- I'm actually quite troubled by this.
What do we say -- and I'd ask this to Frank -- to the rest of the world and the citizens of the world who say, look, your previous administration didn't want this; your current one does; you still can't get it through in your democratic process. What does this say about the attitude of the American people toward the consequences for the lives of millions or billions of people around the world? And what is the answer we give ourselves to that question?
LOY: Well, any United States negotiator today is facing serious handicaps. The first one is very basic, and that is that the American people do not support action for climate change at a level that is the same as for most other countries. That happens to be, you know, a fact, and it is a politically important fact when you see the votes and the character of the debate in the Congress.
Now, why that is so is may be beyond our ability to address in this. But it certainly has not been helped by much of the rhetoric and by some of the actions that occurred in the Bush administration, where the whole concept of international movement was dissed and only -- and, you know, five, six, seven years later sort of resurrected.
So whatever -- maybe that's -- that certainly isn't the whole cause. The whole cause goes much deeper than that. But it's a fact. We have to deal with that fact, and we have to work around it.
And the way to work around it, I think, is the way the administration is trying to do so, which is to develop a really strong domestic capability of reducing emissions through some of the measures that Congressman Markey talked about, including the very major stimulus bill, including the new CAFE standards, including giving California the waiver so that it could adopt more stringent rules, and so forth -- whatever is possible. That's one of the ways to deal with it.
And the other way at some stage to deal with it is to have a cap- and-trade system which will, if it's done right, produce funds -- produce funds that are not appropriated funds, but funds through the market process that actually will begin to finance some of the needs of the developing countries.
So the answer is, we start with a handicap, but we have tools that I've just described.
EILPERIN: Yeah, Dan.
PRICE: Yeah. I'm sorry, I don't know who you are or what you do for a living, but it's just --
QUESTIONER: I practice environmental law.
PRICE: Great. It's just not true --
QUESTIONER: And I teach it.
PRICE: Wonderful. Congratulations. It is just not true that the last administration did not want to reach an international agreement. It's just not true. There are too many people from the Department of Energy, from the Department of State, from CEQ, from EPA, from the White House, running around the world for that very purpose for me to sit here and not contradict the assertion that they didn't want to reach an agreement. They did.
We are handicapped, but we're not handicapped because of the Bush administration. We are handicapped because if the litmus test of seriousness about climate change is the number, the U.S. will always lose that contest, because our polity will not produce a number that looks like the European number.
The focus on the U.S. contribution, I would say, should rather be on what are we doing to fund alternative technologies? There was both stimulus money; there was money in the last administration in terms of DOE grant and loan-guarantee programs of significant size.
So I think that you will find U.S. leadership not by focusing on the number that comes out of a bicameral process, in terms of emissions reductions, but what are we doing to drive technology development? What are we doing cooperative internationally to solve those key problems which Chairman Markey identified as being coal and nuclear?
LEVI: Let me speak to the numbers --
EILPERIN: Yeah.
LEVI: -- quickly, because I think that the numbers in the bills are actually quite good.
Here are a few basic points. The bills lay out numbers, not just for 2020 but through 2030 and 2050. If you were trying globally to hit a goal of staying under about -- what did we say -- about 450 parts per million of carbon dioxide in the atmosphere, we're currently at about 380. Four hundred fifty is the goal we're trying to stay under. We're on track to hit about a thousand. Okay?
Now, take that bill that lays out 2020, 2030 and 2050 targets. Take that 2020 target and ratchet it down to what everyone's demanding -- 25 percent below 1990 levels. But leave the rest in place, because everyone seems to actually agree that those are pretty good -- 80 percent cut in 2050.
That makes a difference of somewhere between one and two parts per million in the atmosphere. Okay, so 380, 450, 1,000; we're arguing over a difference of one or two parts per million. That is not the make or break environmentally.
What matters between now and 2020 is getting us on the right course so we can hit those 2030 and 2050 goals at reasonable cost, in a sustainable way that works for American society, that develops the right technologies. That should be the focus of how we're moving in the next 10 years, not this one or two parts per million, which is not the difference between success and failure environmentally.
EILPERIN: Okay, I will go -- (inaudible) -- but I'm going to go to this question.
QUESTIONER: Frank, could you elaborate on the meaning of "binding commitments"? Because the usual interpretation is that you involve yourself in an international deal. Then that goes to the Senate of the country. It becomes internal law. You seemed to indicate that there were other, more sophisticated binding arrangements. Could you elaborate on that? Because, you know, the discussion that we've been witnessing reminds me of the Broadway play, "Promises, Promises." You know, I mean, how do you make them binding except through, you know, ratification by the Senate and all that?
EILPERIN: And then, just to broaden that out, I would say, for the whole panel, I think also what's implicit in that question is also the difference between the Obama administration knows how hard it is to get to 60 votes on a climate-change bill and does not have the votes now, and it's entirely unclear whether they will get the votes in the near term. And obviously, for a treaty, we're talking about 67 votes.
So to what extent is kind of this dance that we're going through not a reflection of the fact that there simply is not the support in the U.S. Congress, in the U.S. Senate, for ratification of the treaty? And if everyone could speak to that.
LOY: I'm going to disappoint you and not really define "binding," because one of the beauties of "binding" is that it is a little imprecise. (Laughter.)
EILPERIN: Spoken like a true negotiator.
LOY: (Laughs.) But -- and I also am very aware of the dictum of a well-known international legal scholar who said that, after all, when all is said and done, most countries comply with most agreements most of the time, without reference, really, to binding. So I'm quite prepared to leave binding a little imprecise for the moment.
What I mean, though, is that I think what -- after all, the 1992 agreement had commitments by people to do things, and they were sort of in the air, if you will. What I want is, I think, a commitment to each other in some meaningful fashion so that country X believes that it may act and should act because country Y is acting. I think the power of commitments is the reciprocity in there, and that's quite important.
I want to comment on Juliet's point, because it, I think, is very insightful. One of the issues I think this administration has is: are you going to give up, at the outset, on getting a treaty? The official line is "No, we're going to go for a treaty." But with Democratic defections and not much help from the Republicans, 67 votes may be impossible.
If you have a very -- if you have a certain kind of strong compliance agreement in the international agreement, you can't really do that without a treaty, probably. If you have something less than that, you might end up in the Australian kind of method, which is short of a treaty -- and I'm not sure I'm reading it correctly -- where there's simply a group of commitments made to the world that we will do this, we will do this, we will do that, and without a compliance mechanism, and that may be more easily done -- may be more easily complied with by the United States without the benefit of a treaty.
And I think that is actually one of the issues that is being bandied about as we speak as to whether it makes sense for the U.S. to go full out for an agreement that is only implementable and only meaningful if it is a formal treaty of the United States, given the numerical problem that we have.
EILPERIN: Dan, Michael, do you have any thoughts on that, or should we go to the next?
PRICE: Yeah. I think it is certainly possible for a new climate treaty to garner 67 votes. I don't think that's, you know, a stretch at all if it is a good treaty, right? If it has the same flaws as the Kyoto protocol, it will meet the same fate, which is bipartisan rejection, right? If there is a treaty that kind of tracks and resolves the negotiating points that we've been discussing in a reasonable manner, I think it'll garner the support in the Senate.
LEVI: I would just say that most countries meet most commitments most of the time because when they start off in the beginning wondering about what those commitments will be, they set them up in a way to make sure that they are confident they will meet them. It is not a process that necessarily produces ambition. And we have to be very careful about that.
We tend to confuse effectiveness with compliance when we think about international regimes. The two often do not go together. Some of the most successful regimes are ones in which actual formal compliance is relatively low. Okay, so we need to be careful not to confuse the two pieces.
Now, ultimately lawmakers here seem to attach great importance to the words "binding commitment" in unlocking their own action, and so that has its own reality in itself that we have to deal with.
EILPERIN: Okay --
LOY: That really is the point about the slipperiness. I think American legislatures -- I would not want to be sitting before a committee of Congress unless I could say that China has made a binding commitment of X and Y. I don't care what X and Y is, but I'd like to be able to use those two words in order to get the kind of support that Michael was talking about.
EILPERIN: Let's go to the back of the room; there, that gentleman. Yeah, right there. Thanks. Right behind you, you've got a microphone.
QUESTIONER: I'm Welby Leaman from the Treasury Department.
What would be the economic effect of an international agreement that used, let's say, the House bill numbers and those commitments were actually kept? And what would be the change in that economic effect if it were just the developing countries, not China and India and others?
EILPERIN: Can you specify? The economic effect on, like, the carbon markets, the world, the U.S.?
QUESTIONER: On the U.S. economy. Sorry, I should have said that. And one sort of part of that; at CFR we've heard both -- in the last year we've heard two billionaires, both George Soros and T. Boone Pickens, say that transition to a green economy would be a great engine for growth for the U.S. economy. So that may be part of the answer. How would that work? And is that a sustainable effect?
LEVI: I can say something about the economics of an international agreement. I think it's a bit murky. We tend to focus on the fact that if other countries take action, we will have a more level competitive playing field, and that's useful for the United States. And that's true. And so there are huge advantages of international action. I don't want to argue against it. But we have to be serious about it.
But if you look at the models of the bills, you get all sorts of strange effects when other countries participate in the agreement. In particular, our modeling is very dependent on purchases of offsets. To the extent that we're successful in getting other countries to do things for themselves, rather than because of offset purchases that has a peculiar impact on the cost estimates over here. Now, I don't think that would be determinative in a domestic policy discussion, but the impacts can go either way, depending on the nature of the international commitments.
EILPERIN: Yeah, and it's fair to say the EPA in its modeling has estimated that, for example, Waxman-Markey would be 89 percent more expensive if it did not have the 2 billion tons of CO2 in international offsets that are provided for right now.
LEVI: An international deal --
EILPERIN: There's some question --
LEVI: An international deal can take that either way. It can provide a stable framework that allows you to generate very large quantities of offsets that hold down prices. It can also essentially eat up offsets, like I said, through domestic action in other countries. And the way that all balances out completely depends on the details. We tend to go at 40,000 feet in all these things. The details of these arrangements matter a lot.
PRICE: And I would just say it's one thing to have offsets and credits at the 40,000-foot level. It's another to develop the regulatory infrastructure around the world to achieve the accounting and verification you need to ensure that a certificate that says a ton of carbon avoided has any integrity.
EILPERIN: If we could just go to the gentleman in the front row.
QUESTIONER: Lane Greene -- from The Economist.
Dan's reminded us of the fate of Kyoto, which was a 95-to-zero rejection by the Senate. And Frank has agreed that binding seems like it might be a sort of toxic word in the sense that it would make Congress balk at a deal.
Meanwhile, we have people saying that China should make binding commitments or Congress will make no agreement or ratify no treaty, and India and others. And it seems like we're perilously close to saying that a deal should not be binding on the United States, but it should be binding on China. And I will bet a large sum of money that my colleague --
MR. : (whispers) I think you were saying the opposite.
QUESTIONER: Maybe I misunderstood you, but it sounded like -- it seems like "binding" is a very toxic word, because the American Congress -- the media and the American Congressperson is still extremely balky about the idea of signing up to anything that has the word "binding" in it that maybe hints at penalties for the United States for not complying. Or maybe I misunderstood.
EILPERIN: Go ahead.
LOY: Well, I think I wasn't as clear as I might have been. I think the reason I'm interested in binding commitments is not because I think that's necessarily going to be a hell of a lot more effective than some of the other measures that Michael was talking about, but because I do believe that the reason of the 97-to-nothing vote -- what that vote was, it said, "Don't bring back an agreement" -- that was before Kyoto, that was before Kyoto -- "Don't bring back an agreement unless the developing countries take the same obligations in the same time frame, and don't bring back an agreement that screws up the American economy." Those are the two things it says. Hard to argue with that, hard to argue with that.
Therefore, I think that sentiment on the first part, just the developing economies, still exists. And that's why I said -- that's why I like something that has "binding" so that a member of Congress who is concerned about the same issue as he was at the time of the 97- to-zero vote can say, "These developing countries have made a binding commitment. It's different from ours. The numbers are different. The methods are different. But it's a binding commitment, and therefore I can count on it."
In that case, I think we would then be more willing to make ourselves a binding commitment, and that's the point of my -- that's what I was trying to say.
EILPERIN: Okay, we only have time for one more question. So, if it's okay, I'm just going to go to the gentleman right there. Yes.
QUESTIONER: Thanks. Steve Eule with the Institute for 21st Century Energy.
There are two negotiating tracks here. We have the Kyoto track and then we have the framework convention track. And I was just wondering what the panelists think -- how these tracks might merge. Will they merge? Will they stay split? Where do you see the outcome of these two negotiating tracks?
EILPERIN: (laughs) Michael --
LEVI: I think everyone has a -- a lot of people have known for a while that these two tracks were not going to live indefinitely. So what the set-up is is that you have Kyoto protocol. Contrary to widespread belief, the Kyoto protocol does not end in 2012. You're supposed to negotiate a new set of commitments.
Alongside that, we're having an international negotiation about an entire regime to deal with climate change. And these two have been going on in parallel as if they weren't particularly related.
We had a sort of blow-up in Bangkok, the negotiations about a month ago, where not only did the United States start saying what it's been saying before, which is that the Kyoto track isn't going to work, but our friends in Europe started saying that as well. And that was a big, big step. They said there are a lot of important pieces in the Kyoto protocol. We need to put them in a new agreement. But we do not see a way of crafting a legal agreement that just tweaks the Kyoto protocol and comes into something new that is satisfactory to everyone.
And this point is to Frank's comment earlier about the importance of unity between the United States and Europe on key issues. As soon as the United States and Europe were speaking from the same page on that, this became a real discussion. It was no longer "The United States thinks this; the United States thinks this." It was, "Wow, this might actually happen." And there's been a lot of fighting over it.
I think ultimately what the Europeans have said at a technical level is right. There is no way to take the Kyoto protocol and modify it in a way that's inclusive and that brings in the developing countries in a way that will be acceptable to the United States, and frankly, in a way that will be acceptable to how a lot of European governments have evolved in their position.
So ultimately, if there is something that comes out, it's going to have to come out of this long-term cooperative action track. It's going to have to be something distinct. There's going to have to be a way to satisfy everyone that this isn't a trashing of past achievements. But I think that can be done politically.
EILPERIN: And then, just beyond that, Dan and Frank, do you have any closing thoughts you want to share, since we're going to wrap up and keep this thing going on time? So is there anything else that you wanted to share with the audience?
PRICE: Yes. I noted that I was actually optimistic about the possibility of the Senate approving a treaty --
EILPERIN: Yeah.
PRICE: -- if it's a good treaty.
EILPERIN: Right.
PRICE: I am also -- I also remain optimistic that we will be able to reach some agreement; obviously not at Copenhagen, but that we will be able to reach some agreement on key points. And it may not be of the scale and scope that the most ambitious would like, but I think there is a shared sense of urgency, a shared sense of the need to tackle this problem from various angles -- from a regulatory angle, from a market angle, from a technology-development angle. And I sensed and still sense a commitment among the major economies to pursue such an agreement.
EILPERIN: Okay.
And Frank, any last thoughts?
LOY: Yeah. I think the things to fear at Copenhagen are: one, a loss of momentum -- I think we need momentum -- and two, specific steps that make it harder for the U.S. to move forward. And I think if we can avoid those two things, we can actually move forward. And I believe that, just as Dan said, it probably won't be as ambitious as it ought to be and won't be as precise as it ought to be, but it will provide the momentum. It will provide the momentum that we need.
And if we can use the stage of -- you know, Copenhagen is going to be a huge stage. If we can use that stage to educate and motivate publics around the world, including the U.S., that would be a huge step. And if we can do that by actually moving forward, even if adequately, I think that would be an adequate step.
EILPERIN: Okay. And I would say that I think one conclusion you can have from this discussion on what we're facing is that actually, in many ways, many of the toughest decisions may be faced by politicians 20 years from now, so we could all convene in 2029 and they will be blaming the previous administrations for the mess that they are in. (Laughter.)
So, with that, thanks very much. And there's lunch to follow. (Applause.)
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THIS IS A RUSH TRANSCRIPT.
This session was part of a CFR symposium, Countdown to Copenhagen: What's Next for Climate Change?, which was made possible through generous support from the Doris Duke Charitable Foundation, the Alcoa Foundation, and the Robina Foundation.
JULIET EILPERIN: Thanks so much. We have a fabulous panel here, so I'm just going to do brief introductions and then we're going to get started.
Frank Loy has kindly offered to pinch-hit because Eileen Claussen had an emergency. So we first want to thank him for joining us. He's the chair of PSI's board of directors and a member of the board and executive committee of Resources for the Future. He served as undersecretary of State for Global Affairs between 1998 and 2001, under Bill Clinton. He was responsible for, among other things, U.S. international policy and negotiations regarding the environment, human rights, the promotion of democracy, refugees and humanitarian affairs, counternarcotics and international law enforcement. And he also served as the chief U.S. negotiator for a number of treaties, including those on climate change, on trade in genetically modified agricultural products, and an international convention to combat organized crime.
And then, sitting next to him, we have Daniel Price, who is senior partner for global issues at Sidley Austin LLP and a member of the firm's executive committee. And he advises clients on a wide range of international regulatory, transactional and policy matters, including climate change. And he rejoined Sidley after serving as assistant to the president and deputy national security adviser for international economic affairs in George W. Bush's administration, where I pestered him, trying to get him to disclose secrets about the administration's strategy, and, you know, didn't have as much success as I'm hoping to have today. And he worked on a number of -- he was his -- Bush's personal representative to the G-8, the G-20 financial summit and the Asia-Pacific Economic Cooperation forum, and served on a number of Cabinet-level bilateral economic dialogues.
And then we have, sitting next to him, Michael Levi, who's the David M. Rubenstein senior fellow for energy and the environment at the Council on Foreign Relations. And he's director of the council's program on energy security and climate change and was project director for the CFR-sponsored Independent Task Force on Climate Change. I could give you many things about him, but we clearly know his most important thing is that he served as as technical consultant to the critically acclaimed television series "24." (Laughter.) So that, you know, no more needs to be said.
So, moving on, what I thought would be helpful is we'd set the stage, and obviously, Congressman Markey's comments gave his perception of what got us to where we are today, and I think it would be helpful, when everyone's looking towards Copenhagen and obviously seeing it as not offering the resolution that people had anticipated maybe a year or two ago, to talk about how we got to where we are today and how many of the stumbling blocks that, frankly, have bedeviled these negotiations for years remain in place even as we're left at a month away from the U.N.-sponsored talks.
So in succession, Frank, if you could begin with kind of, you know, what do you think brought us to the point we are today, where it's difficult to get the definitive agreement that people had anticipated?
FRANK LOY: Well, from the United States point of view, the most difficult problem is the fact that we do not have a domestic law that permits us to make commitments that we know we could keep. We did make commitments at Kyoto which, it turns out, we couldn't keep, and I think the general feeling is that we don't want to repeat that.
And so in a sense, for the United States the big problem is whether -- I mean, I would say the big problem for the United States is that Kyoto -- that Copenhagen comes at the wrong damn time. In my opinion, it would be a lot better if Copenhagen had been scheduled for June of next year, or something like that, to give this president and this Congress an opportunity to see whether they can craft a law that actually does give us some assurance that we can meet international obligations.
But, Copenhagen is when it is, and so the question -- the option, one option for the United States is to what extent its positions at Copenhagen are really designed or really have a major eye on the effect of those positions on the U.S. Congress and the law that we hope will be passed and to what extent they have the eye on meeting the international expectations.
And those are not the same, and sometimes they may actually be contrary.
So one of the big questions for the United States is, for example, the issue of numbers. If the -- can the United States agree on any number, either a number of greenhouse gas emission reductions or a number of dollars that it would commit to aid developing countries meet their adaptation and technological requirements. And I mean, my answer would be, I'd rather not. But as soon as you say, if you have the United States appear on the international scene, everybody is looking for numbers, whether they be from a 2005 base or whether they be a 1990 base, whatever. If we are reluctant to talk about U.S. numbers, I think, some people will be very critical. But my sense is that that's -- not only would we be in a sense repeating Kyoto if we agreed to greenhouse gas emissions without knowing how the hell we're going achieve that -- and without a climate bill, I think we won't know how to achieve it, mostly -- or the numbers will be so tepid, so weak, that they will not be very helpful.
So that's just one of the issues that brings this -- there are a lot of others, but that's one issue that I -- and I would hope that others would understand that difficulty and maybe one more point, Juliet. Seems to me we need to bring climate issues to a boil and actually end up with a -- with some sort of global understanding. But we are in a -- we're in a long-term process, and we have to recognize that Copenhagen comes at a time for the United States that's very difficult, and we -- it would not -- it would be a huge mistake on the part of the world to act in Copenhagen and expect in Copenhagen matters that actually set back the American ability to participate through domestic legislation.
And that's a possibility, if Copenhagen doesn't turn out right.
EILPERIN: Excellent.
Dan, can you give us your insight, having been -- having firsthand knowledge of being involved as -- you know --
DANIEL PRICE: I'll try. And Juliet, let me say --
EILPERIN: Feel free to blame the Bush administration for everything, if you'd like. (Laughter.)
PRICE: Yeah, right. It's a popular thing to do.
LOY: If you don't, somebody will.
PRICE: I know. I know. And just as you are hoping to coax more information out of me in this new environment --
EILPERIN: Yes.
PRICE: -- so, too, I'm hoping to communicate better with you.
I recall well when the Bush administration launched the major economies process as a way of gathering the 17 nations who are responsible for 80 percent of emissions, to try and make progress in the UN negotiations through this group. We were pilloried -- including by publications such as yours -- for circumventing the United Nations, hijacking this -- da-da-da-da. When the new administration, having renamed it the Major Economies Forum, quote, "launched" this initiative, it was welcomed as evidence of the new multilateralism, so --
EILPERIN: I was channeling the Europeans. It was just quoting Sigmar Gabriel. (Laughs.)
PRICE: Got it. Got it. (Laughter.) Well, you know, that's a very good place to start to respond to your question.
Because I think, Frank, if Waxman-Markey was today law, the obstacles to Copenhagen would remain 99 percent what they are in the absence of that. Why do I say that? One, when you reduce Waxman- Markey to 1990 levels, the year of talismanic significance for the Europeans, we have a 7-percent reduction -- or, as the representative from the Chinese Embassy suggested, a 3-percent reduction. So let's say it's somewhere between 3 (percent) and 7 (percent). The Europeans have said legitimacy and morality consists of 25- to 40-percent reductions below 1990 levels by 2020.
So part of the obstacle in these negotiations all along has been, I think, the European insistence on a target. Whether or not it's achievable for Europe remains to be seen.
It was certainly never politically achievable or realistic for the United States under the prior or under the present administration.
And yet the insistence on this number and the focus of political energy by the Europeans on the United States and the focus on the U.S. number and a lack of willingness until very recently to engage the major emerging markets and actually say, "You know what, this won't work unless there are commitments by the major emerging markets" has been one of the principal obstacles.
And if you look at the G-8 language from Hokkaido in 2008, where the United States, Canada, Japan, Russia wanted very strong language on commitments by major emerging markets, the Europeans opposed it, and so we have relatively weak language. Yet when Chancellor Merkel was recently here talking to our Congress, we see an evolution, and she said, "No doubt about it, in December the world will look to us, to Europe and America. It is true that there can be no agreement without China and India accepting obligations."
This is a real sea change for the Europeans, because it had been the position of the last administration and this administration that a new agreement will require binding commitments by all major economies, developed and developing; those commitments may be differentiated; some may be a fixed number, some may be to slow the growth, et cetera. But commitments there must be.
The major emerging markets have not yet accepted, even in principle, that there must be a binding commitment by them. So two obstacles that remain, even if Waxman-Markey were law, were the assessment of the adequacy of the U.S. commitment in the minds of the international community and, two, the willingness of the major emerging markets themselves to make binding commitments, without which approval of any climate treaty, I think, is quite doubtful in the United States.
The third obstacle, and then I'll stop. The third principal obstacle, I would say, is the absence of agreement on either quantum or mechanisms for financing the incremental costs of clean versus traditional development.
We're still having this dialogue of the deaf between those who have the money, saying, "We would actually like to set the conditions under which you have access to the money," and those without the money saying, "No, that's illegitimate for you to set conditions." And the -- I would say a final obstacle is the recent articulation by Prime Minister Singh of India expressly, but this has been developing some -- for some time -- the conceptualization of clean technology as a public good and thus a good to be either transferred without cost, compulsorily licensed, or treated in some way which will undermine the incentive to innovate.
EILPERIN: Excellent. More -- Mike, want to throw more obstacles out there?
MICHAEL LEVI: I'm not sure there are any obstacles left. (Laughter.)
EILPERIN: (Laughs.)
LEVI: Let me throw -- because I agree with the various obstacles that have been laid out here, let me talk about one conceptual obstacle and then try to give my take on where U.S. action fits into this.
EILPERIN : Sure.
LEVI: I think conceptually we've had this problem where we're looking for very -- a very definite set of outcomes to be promised by countries in an area where we have very little experience of delivering. We don't know how to move to a low-carbon economy. We know a lot of principles. We know a lot of pieces. We know all sorts of things that we can try. But it's very difficult for us to predict the outcomes in 2020 or 2030.
And the way we've negotiated traditionally, particularly through the U.N. process in the past, doesn't reflect that. It focuses on certainty. It focuses on prescribing very detailed mechanisms that we know in advance will work. And that's why I think a lot of these bilateral efforts, mini-lateral efforts, the Major Economies Meetings, the Major Economies Forum, have been useful, because they provide a more flexible setting where we can really look at how we are going to experiment our way forward when it comes to developing policy. So I think that mind-set is very -- a very important piece.
On the role of U.S. legislation, I'd say U.S. legislation is essential. It is not going to fundamentally transform everything, because there are all other pieces that need to be put in place. But the reality seems to be that until U.S. legislation is there, we are going to spend 90 percent of our time talking about what the U.S. is or isn't doing. And as much as a lot of us understand that we need serious, careful international discussions on technology, on finance, on developing country commitments, we aren't going to have that level of seriousness. We aren't going to have the level of focus that's necessary to deal with those until the U.S. domestic piece is out of the way.
Does that mean that we will solve all those problems once U.S. legislation is in place? I don't know. But I don't think we'll find out the answer until we get to that point.
EILPERIN: So, given that we've now laid out the formidable obstacles to reaching agreement, I think it would be helpful to talk about what would be a, quote-unquote, good outcome in Copenhagen, or a not good outcome, when you look at the universe of what's possible under a political agreement, given that no one at this point is expecting a legally binding agreement. Could you talk a little about both, you know, what you see as the continuum of options that we might be looking at and how -- to what extent does 2010 become the definitive year for climate change, or in fact is there no definitive year in the way that people had been thinking 2009 would be?
LOY: Well, on the very last point, I would say there is no definitive year. What there is and what there has to be and what has to be reinforced are a sense of urgency and a sense of scale. That is, you've got to move reasonably quickly and you've got to be prepared to move at a scale; but is there a particular year? I don't know. My guess is the year will always be a little bit ahead.
What would be a good outcome? I reiterate, I think focusing on numbers is not -- if you think that's a good outcome, it's not going to be very successful, partly because of what I said, partly because of what Daniel said. There is a big gap, even if you had a law today, between what is realistic for us to agree to and what is expected by or at least said to be expected by others. Dan is quite right.
I will say this, that if you take as a base year something like 2005, which recognizes that for a large part of the -- you know, for many years we didn't do anything, or you take a more recent base year and you talk about going forward, I think we can come up with numbers that are quite respectable that are parallel to the numbers going forward of other countries, even though if you -- but we have to recognize that some other countries -- Europe I'm speaking of -- have made progress in the years 2000 to now that we haven't. So we have to recognize that.
So what's a good outcome? Architecture of an agreement, by which I mean an agreement that requires all major emitters to make commitments that are verifiable and that are -- and in some sense where there are consequences for not meeting them.
They don't have to be the same kind of commitments. Generally, I would say the industrialized countries ought to take absolute commitments. The architecture should provide that, some number. And the major economies that are developing should take whatever policy measures work and whatever policy measures can be negotiated, but they ought to be binding in some sense of the word and they ought to be commitments that have consequences for not meeting them. That would be a huge step.
And in that respect, I would say it would be extremely useful if, for once, Europe and the United States would have a similar posture vis-a-vis the major economies like China and India and others, rather than have differing views, which, in the past, have resulted in very little commitment on the part of those countries. So that would be a good outcome.
And last point I would say is: I think there has to be recognition of the point that Mr. Goldemberg made, and others, of the role of tropical forests. It's such a big part of the deal. It is -- without addressing that aggressively -- and an international agreement can do something about addressing it aggressively and make it possible for industrialized countries to help Brazil and Indonesia and the Congo and others to achieve reduction of deforestation -- without that, I don't think we're going to get any of the numbers that we say we need.
Those would be some elements of a deal that I would consider success.
EILPERIN: Okay. And, Dan, I want to -- when you -- when you give your sense of both maybe like a good and bad case scenario, I'd also hope that you could put it in the context of to what extent does it reflect what you and Jim Connaughton and others in the Bush administration were pushing for in terms of an international outcome, and help draw those parallels, perhaps. Go ahead.
PRICE: Thanks. I actually -- I mean, if you were here and you heard Congressman Markey, you would find the statement I'm about to make unbelievable, but I think there's very little difference between the negotiating objectives of the United States that were put forward by the Bush administration and those now put forward by the Obama administration.
There is very little difference.
I think what would be a -- and I'll explain those objectives in a moment, because I think a document embodying a negotiating path to achieving those objectives is a -- would be a good outcome in Copenhagen. I don't think it is likely that we will reach agreement on anything other than those items on which we must agree.
And I would actually consider it a success if the parties left Copenhagen with a document that said, "Here are the five issues on which we will negotiate." And I would list those issues as follows: the nature of the commitments to be made by all parties -- sorry, the nature of the binding, legal commitments to be made by all parties. And, Frank, you're right; it may be that there is an acceptable range of commitments. Some countries may choose to just pick an economy- wide number. Some countries may aggregate their domestic measures and say, "We estimate that these measures taken together will achieve an ‘X'-percent reduction, but we put those measures on an annex, and we commit to faithfully implement those measures."
By the way, this was something that was proposed during the last administration; considered unacceptable at the time. It's now been resurfaced as the Australian and South Korean compromise proposal. In any event, I do think that's one possibility. So, one, what is the nature of the commitments?
Two, under what terms will financing be made available to beneficiaries? In other words, should the loan criteria themselves have a renewable-fuels mandate? Right? So, to begin to discuss the terms under which financing will be made available.
Three, achievement of common regulatory principles for the recognition and validation of credits and offsets, so that, to the extent parties have cap-and-trade mechanisms, the regulatory principles are common, leading to interoperable markets, rather than the next subprime crisis market.
Four, again I come back to the intellectual property point. And it's -- it broadens out to an investment climate point. What is it, what regimes can be put in place by those who wish the more rapid deployment of clean technologies, that will create enabling environments for that deployment, whether that's a limitation of tariffs, whether that's an elimination of limitations on how much of an affiliate a foreigner can own, or whether that's enhancing protections for intellectual property.
So I would say if there could be an agreed negotiating agenda within a timetable of those four points, I would consider that a success.
EILPERIN: Okay. There's no fifth. Initially you said fifth point. Is there a fifth point?
PRICE: Well, the fifth point --
EILPERIN: Or a half a point?
PRICE: No, there is a fifth point. I mean, I would like to see agreement reached that trade sanctions will form no part of the new international climate regime, whether as a matter of the international agreement or as domestic implementing measures, because I think the potential for a carbon trade war and going down that path is very dangerous and destabilizing. And I think if the contours of the international agreement are done right, it's also wholly unnecessary to address carbon leakage.
EILPERIN: Michael, picking up on that, can you maybe look forward and both get a sense of, you know, if they have the kind of outcome that's being discussed what do you think are the ramifications of that? And certainly I think while a lot of us would accept what's being said about, you know, the similarity on the international front, clearly there is a big domestic difference between this administration and the past administration, and how does that play into all this? We're talking about it as an obstacle, but moving forward, what does it mean?
LEVI: Right. And we haven't talked much about the worst case. I --
EILPERIN: Yes. And I would like you to spell out the worst case --
LEVI: -- which is important - which is important--
EILPERIN: -- which I feel like could even -- yes. Exactly.
LEVI: -- to get at.
I do see a lot of continuity in the international. positions between this administration and the last couple years of the previous administration.
There are big differences on the domestic front, and those affect the ability of the United States to work internationally through the -- the agenda that each administration has worked through.
But when it comes to the bottom lines internationally, there is far more in common, as far as I can tell, than there is different between the two.
Let me say something about the sort of high-end objective. I think if we could follow the agenda that you lay out, Dan, and successfully conclude negotiations on all of those, that would be tremendous. I'm skeptical that we can conclude with 192 countries meaningful negotiations on all of those different tracks. I think those are the right issues that need to be dealt with in a variety of different forums. But it's not obvious to me that we can get a global deal on all of those, particularly because there are idiosyncrasies with each country that need to be addressed -- the technology transfer issue, the question of what's the right enabling environment, what are the right tariff structures, ownership rules, whatnot - are very different for China from, let's say, a country in Sub- Saharan Africa, and frankly different for China and India and Brazil.
So it's not clear that we can -- we can take care of all these things within one global international piece.
What I think is very important to have included in whatever the outcome is -- and we're talking about the sort of substance of it -- is to get the process right. It is very important that we have transparency from the countries involved. Regardless of whether they have binding commitments or domestic commitments, whatever you want, they need to be transparent, so that we can build confidence amongst countries that things are moving in the right direction. That means proactive reporting from the individual countries and then international verification.
I'd also like to see a regular international peer review process that helps focus attention on where countries are succeeding and where they're falling short. And that includes even whatever countries step up with specific emissions targets and not just policies and measures. You can have emission targets and never come close to meeting them. We need to know well in advance whether countries are on the right course, and we need to expose that. And there are a lot of lessons to be learned from other -- from other regimes where a peer review plays a significant part of -- is a significant part of the regime, whether it's through the IMF or the World Trade Organization, the OECD. We have a lot of experience to work on that we're not taking advantage of properly.
The --
EILPERIN: Can you give the worst-case --
LEVI: Sure. Yeah, let me -- let me give the worst case.
I think there are two related worst cases, and they both have to do with how the international negotiations impact U.S. domestic policy.
There needs to be a sense, I think, on the Hill that the United States can contribute positively to an effort and that it will be recognized for doing that internationally. If there's a sense on the Hill that, even if people make politically tough choices to move ahead with legislation, even if they do that, they will be criticized roundly by the world and blamed for falling short, that lessens their motivation and incentive to really step up to the plate. So there has to be a clear message that the way we compare countries' efforts will mean that, if the U.S. does deliver on the sorts of things that are being talked about, that will be accepted.
The other piece -- and I think Frank hinted at this, and this is a real possibility -- is that there is a scramble at the end in Copenhagen to do something that looks like Kyoto II, that the Europeans show up, and that some elements in Europe and perhaps in Japan decide that we need something that looks like a big deal, and they decide to put together something that maybe the United States can come into later.
I think that would be very dangerous. It's very important that the United States be a constructive part of putting together whatever happens internationally. And I know it's difficult to tell people in the rest of the world, "Just hold on another moment; we'll deliver soon." But it's really essential here.
EILPERIN: And. sorry--to move on --
LOY: Can I just make a comment about two things Daniel said? One, the fifth point -- that is, that he would like to see a provision in the international agreement that says "no trade measures in Country X" -- my sense is that that would be a really bad idea, because I cannot imagine anything that would infuriate the members of Congress more than an international mandate not to adopt a domestic measure that they might adopt and might not adopt. The president has made it very clear he doesn't want a really harmful trade measure. But my sense is that that's exactly the kind of thing I have in mind that I think would be a step backward, if the international community adopted that.
The second thing is a quite different point. He alluded to the -- what he called the Australian-Korean proposal now.
EILPERIN: Yup.
LOY: And I think it's just important to say what I think that means and the choices that have to be made on that.
That is basically a series of parallel commitments that have -- that, if I understand it correctly, really have no consequences for not meeting them. And that may be good enough -- may be all you get. But the question we have to ask ourselves, who care about this issue, and the question the nations have to ask themselves, is whether in fact a system that has -- it may have reporting, but it has no enforcement or no consequences -- whether that is good enough. And without answering that at the moment, that is certainly an issue that you could imagine Copenhagen having to deal with.
PRICE: If I could just respond to two factual points, one, with respect to the last point, at least the architecture that I understood -- certainly, that we had proposed, and what I understood others are now considering -- is legally binding. That is to say, you make a treaty promise to implement those laws set forth on Annex A. And if you don't do it, you are breaching the treaty to the same extent as if you had promised to achieve a number and you didn't achieve it. We have experience in international agreements where the commitment is essentially to effectively enforce and implement your domestic law, and there's a review mechanism and consequences if you don't. That's point number one.
Point number two, you said that it would antagonize the U.S. Congress if the resulting treaty some months or a year from now were to say no trade sanctions. But as I understood Congress -- and I take Congress at its word -- the only reason that that's in the domestic legislation is the concern that the commitments on carbon reduction by competitor developing countries will be inadequate. By the time we have a treaty, we will know the adequacy of those commitments. If they're inadequate, we don't approve the treaty. If they're adequate, we can approve the treaty and we don't need trade sanctions.
EILPERIN: Okay. And I'm going to open it up for questions, but Michael, do you have any point to add to this?
LEVI: Well, there is this question of consequences. We use the word "consequences." I haven't heard any significant proposals for what those consequences would be, at least if they were punitive consequences. I think the bulk of the sticks we have involve removing carrots. And that's how things are likely to evolve going forward.
And it's not -- it's not obvious to me that that has to be part of an international deal. If one country steps up with a particular set of promises for what to do domestically, another steps up with a set of promises for how they are going to support that action through financial assistance, through provision of technology, whatever you'd like, and the first country isn't delivering on its steps to reduce emissions domestically, well, then the consequence is that the other country doesn't deliver the support. And that doesn't -- if that was in an international deal, that would be useful, but it doesn't have to be. That kind of enforcement can happen without being spelled out. What you need is the transparency and the review to make it clear to everyone in the world what that linkage is and to be able to facilitate that.
EILPERIN: And just briefly, to play referee, I think the fact that there, frankly, is some confusion about -- when you're talking about the Australian schedule and the South Korean registry, I think one of the real debates -- and we will certainly see this in Copenhagen if that becomes the primary vehicle for any sort of agreement -- is that there is real concern about how verifiable this is and how binding it is. And so I think that it makes sense that there is even debate up here, because that is in fact the debate that right now we're facing in the international community.
I have tons of questions more, but I'd love to get questions from what I know is a smart audience. So, go ahead. I'm sorry, just wait for the microphone.
QUESTIONER: Stephen Kass from Carter Ledyard. I'm going to put this just as diplomatically as I can. It is undoubtedly true that there are some some similarities between U.S. negotiating position in this administration and the previous one, though it strikes me that the current one would like to reach an agreement and the previous one didn't.
But in view of the fact that, even if enacted, Waxman-Markey or Kerry-Boxer will contain emission reductions far short of what not just the Europeans but IPCC and most informed observers believe is necessary to avoid very serious consequences, most of which will be felt in the developing world and many of which are now inevitable, what do we say -- I'm actually quite troubled by this.
What do we say -- and I'd ask this to Frank -- to the rest of the world and the citizens of the world who say, look, your previous administration didn't want this; your current one does; you still can't get it through in your democratic process. What does this say about the attitude of the American people toward the consequences for the lives of millions or billions of people around the world? And what is the answer we give ourselves to that question?
LOY: Well, any United States negotiator today is facing serious handicaps. The first one is very basic, and that is that the American people do not support action for climate change at a level that is the same as for most other countries. That happens to be, you know, a fact, and it is a politically important fact when you see the votes and the character of the debate in the Congress.
Now, why that is so is may be beyond our ability to address in this. But it certainly has not been helped by much of the rhetoric and by some of the actions that occurred in the Bush administration, where the whole concept of international movement was dissed and only -- and, you know, five, six, seven years later sort of resurrected.
So whatever -- maybe that's -- that certainly isn't the whole cause. The whole cause goes much deeper than that. But it's a fact. We have to deal with that fact, and we have to work around it.
And the way to work around it, I think, is the way the administration is trying to do so, which is to develop a really strong domestic capability of reducing emissions through some of the measures that Congressman Markey talked about, including the very major stimulus bill, including the new CAFE standards, including giving California the waiver so that it could adopt more stringent rules, and so forth -- whatever is possible. That's one of the ways to deal with it.
And the other way at some stage to deal with it is to have a cap- and-trade system which will, if it's done right, produce funds -- produce funds that are not appropriated funds, but funds through the market process that actually will begin to finance some of the needs of the developing countries.
So the answer is, we start with a handicap, but we have tools that I've just described.
EILPERIN: Yeah, Dan.
PRICE: Yeah. I'm sorry, I don't know who you are or what you do for a living, but it's just --
QUESTIONER: I practice environmental law.
PRICE: Great. It's just not true --
QUESTIONER: And I teach it.
PRICE: Wonderful. Congratulations. It is just not true that the last administration did not want to reach an international agreement. It's just not true. There are too many people from the Department of Energy, from the Department of State, from CEQ, from EPA, from the White House, running around the world for that very purpose for me to sit here and not contradict the assertion that they didn't want to reach an agreement. They did.
We are handicapped, but we're not handicapped because of the Bush administration. We are handicapped because if the litmus test of seriousness about climate change is the number, the U.S. will always lose that contest, because our polity will not produce a number that looks like the European number.
The focus on the U.S. contribution, I would say, should rather be on what are we doing to fund alternative technologies? There was both stimulus money; there was money in the last administration in terms of DOE grant and loan-guarantee programs of significant size.
So I think that you will find U.S. leadership not by focusing on the number that comes out of a bicameral process, in terms of emissions reductions, but what are we doing to drive technology development? What are we doing cooperative internationally to solve those key problems which Chairman Markey identified as being coal and nuclear?
LEVI: Let me speak to the numbers --
EILPERIN: Yeah.
LEVI: -- quickly, because I think that the numbers in the bills are actually quite good.
Here are a few basic points. The bills lay out numbers, not just for 2020 but through 2030 and 2050. If you were trying globally to hit a goal of staying under about -- what did we say -- about 450 parts per million of carbon dioxide in the atmosphere, we're currently at about 380. Four hundred fifty is the goal we're trying to stay under. We're on track to hit about a thousand. Okay?
Now, take that bill that lays out 2020, 2030 and 2050 targets. Take that 2020 target and ratchet it down to what everyone's demanding -- 25 percent below 1990 levels. But leave the rest in place, because everyone seems to actually agree that those are pretty good -- 80 percent cut in 2050.
That makes a difference of somewhere between one and two parts per million in the atmosphere. Okay, so 380, 450, 1,000; we're arguing over a difference of one or two parts per million. That is not the make or break environmentally.
What matters between now and 2020 is getting us on the right course so we can hit those 2030 and 2050 goals at reasonable cost, in a sustainable way that works for American society, that develops the right technologies. That should be the focus of how we're moving in the next 10 years, not this one or two parts per million, which is not the difference between success and failure environmentally.
EILPERIN: Okay, I will go -- (inaudible) -- but I'm going to go to this question.
QUESTIONER: Frank, could you elaborate on the meaning of "binding commitments"? Because the usual interpretation is that you involve yourself in an international deal. Then that goes to the Senate of the country. It becomes internal law. You seemed to indicate that there were other, more sophisticated binding arrangements. Could you elaborate on that? Because, you know, the discussion that we've been witnessing reminds me of the Broadway play, "Promises, Promises." You know, I mean, how do you make them binding except through, you know, ratification by the Senate and all that?
EILPERIN: And then, just to broaden that out, I would say, for the whole panel, I think also what's implicit in that question is also the difference between the Obama administration knows how hard it is to get to 60 votes on a climate-change bill and does not have the votes now, and it's entirely unclear whether they will get the votes in the near term. And obviously, for a treaty, we're talking about 67 votes.
So to what extent is kind of this dance that we're going through not a reflection of the fact that there simply is not the support in the U.S. Congress, in the U.S. Senate, for ratification of the treaty? And if everyone could speak to that.
LOY: I'm going to disappoint you and not really define "binding," because one of the beauties of "binding" is that it is a little imprecise. (Laughter.)
EILPERIN: Spoken like a true negotiator.
LOY: (Laughs.) But -- and I also am very aware of the dictum of a well-known international legal scholar who said that, after all, when all is said and done, most countries comply with most agreements most of the time, without reference, really, to binding. So I'm quite prepared to leave binding a little imprecise for the moment.
What I mean, though, is that I think what -- after all, the 1992 agreement had commitments by people to do things, and they were sort of in the air, if you will. What I want is, I think, a commitment to each other in some meaningful fashion so that country X believes that it may act and should act because country Y is acting. I think the power of commitments is the reciprocity in there, and that's quite important.
I want to comment on Juliet's point, because it, I think, is very insightful. One of the issues I think this administration has is: are you going to give up, at the outset, on getting a treaty? The official line is "No, we're going to go for a treaty." But with Democratic defections and not much help from the Republicans, 67 votes may be impossible.
If you have a very -- if you have a certain kind of strong compliance agreement in the international agreement, you can't really do that without a treaty, probably. If you have something less than that, you might end up in the Australian kind of method, which is short of a treaty -- and I'm not sure I'm reading it correctly -- where there's simply a group of commitments made to the world that we will do this, we will do this, we will do that, and without a compliance mechanism, and that may be more easily done -- may be more easily complied with by the United States without the benefit of a treaty.
And I think that is actually one of the issues that is being bandied about as we speak as to whether it makes sense for the U.S. to go full out for an agreement that is only implementable and only meaningful if it is a formal treaty of the United States, given the numerical problem that we have.
EILPERIN: Dan, Michael, do you have any thoughts on that, or should we go to the next?
PRICE: Yeah. I think it is certainly possible for a new climate treaty to garner 67 votes. I don't think that's, you know, a stretch at all if it is a good treaty, right? If it has the same flaws as the Kyoto protocol, it will meet the same fate, which is bipartisan rejection, right? If there is a treaty that kind of tracks and resolves the negotiating points that we've been discussing in a reasonable manner, I think it'll garner the support in the Senate.
LEVI: I would just say that most countries meet most commitments most of the time because when they start off in the beginning wondering about what those commitments will be, they set them up in a way to make sure that they are confident they will meet them. It is not a process that necessarily produces ambition. And we have to be very careful about that.
We tend to confuse effectiveness with compliance when we think about international regimes. The two often do not go together. Some of the most successful regimes are ones in which actual formal compliance is relatively low. Okay, so we need to be careful not to confuse the two pieces.
Now, ultimately lawmakers here seem to attach great importance to the words "binding commitment" in unlocking their own action, and so that has its own reality in itself that we have to deal with.
EILPERIN: Okay --
LOY: That really is the point about the slipperiness. I think American legislatures -- I would not want to be sitting before a committee of Congress unless I could say that China has made a binding commitment of X and Y. I don't care what X and Y is, but I'd like to be able to use those two words in order to get the kind of support that Michael was talking about.
EILPERIN: Let's go to the back of the room; there, that gentleman. Yeah, right there. Thanks. Right behind you, you've got a microphone.
QUESTIONER: I'm Welby Leaman from the Treasury Department.
What would be the economic effect of an international agreement that used, let's say, the House bill numbers and those commitments were actually kept? And what would be the change in that economic effect if it were just the developing countries, not China and India and others?
EILPERIN: Can you specify? The economic effect on, like, the carbon markets, the world, the U.S.?
QUESTIONER: On the U.S. economy. Sorry, I should have said that. And one sort of part of that; at CFR we've heard both -- in the last year we've heard two billionaires, both George Soros and T. Boone Pickens, say that transition to a green economy would be a great engine for growth for the U.S. economy. So that may be part of the answer. How would that work? And is that a sustainable effect?
LEVI: I can say something about the economics of an international agreement. I think it's a bit murky. We tend to focus on the fact that if other countries take action, we will have a more level competitive playing field, and that's useful for the United States. And that's true. And so there are huge advantages of international action. I don't want to argue against it. But we have to be serious about it.
But if you look at the models of the bills, you get all sorts of strange effects when other countries participate in the agreement. In particular, our modeling is very dependent on purchases of offsets. To the extent that we're successful in getting other countries to do things for themselves, rather than because of offset purchases that has a peculiar impact on the cost estimates over here. Now, I don't think that would be determinative in a domestic policy discussion, but the impacts can go either way, depending on the nature of the international commitments.
EILPERIN: Yeah, and it's fair to say the EPA in its modeling has estimated that, for example, Waxman-Markey would be 89 percent more expensive if it did not have the 2 billion tons of CO2 in international offsets that are provided for right now.
LEVI: An international deal --
EILPERIN: There's some question --
LEVI: An international deal can take that either way. It can provide a stable framework that allows you to generate very large quantities of offsets that hold down prices. It can also essentially eat up offsets, like I said, through domestic action in other countries. And the way that all balances out completely depends on the details. We tend to go at 40,000 feet in all these things. The details of these arrangements matter a lot.
PRICE: And I would just say it's one thing to have offsets and credits at the 40,000-foot level. It's another to develop the regulatory infrastructure around the world to achieve the accounting and verification you need to ensure that a certificate that says a ton of carbon avoided has any integrity.
EILPERIN: If we could just go to the gentleman in the front row.
QUESTIONER: Lane Greene -- from The Economist.
Dan's reminded us of the fate of Kyoto, which was a 95-to-zero rejection by the Senate. And Frank has agreed that binding seems like it might be a sort of toxic word in the sense that it would make Congress balk at a deal.
Meanwhile, we have people saying that China should make binding commitments or Congress will make no agreement or ratify no treaty, and India and others. And it seems like we're perilously close to saying that a deal should not be binding on the United States, but it should be binding on China. And I will bet a large sum of money that my colleague --
MR. : (whispers) I think you were saying the opposite.
QUESTIONER: Maybe I misunderstood you, but it sounded like -- it seems like "binding" is a very toxic word, because the American Congress -- the media and the American Congressperson is still extremely balky about the idea of signing up to anything that has the word "binding" in it that maybe hints at penalties for the United States for not complying. Or maybe I misunderstood.
EILPERIN: Go ahead.
LOY: Well, I think I wasn't as clear as I might have been. I think the reason I'm interested in binding commitments is not because I think that's necessarily going to be a hell of a lot more effective than some of the other measures that Michael was talking about, but because I do believe that the reason of the 97-to-nothing vote -- what that vote was, it said, "Don't bring back an agreement" -- that was before Kyoto, that was before Kyoto -- "Don't bring back an agreement unless the developing countries take the same obligations in the same time frame, and don't bring back an agreement that screws up the American economy." Those are the two things it says. Hard to argue with that, hard to argue with that.
Therefore, I think that sentiment on the first part, just the developing economies, still exists. And that's why I said -- that's why I like something that has "binding" so that a member of Congress who is concerned about the same issue as he was at the time of the 97- to-zero vote can say, "These developing countries have made a binding commitment. It's different from ours. The numbers are different. The methods are different. But it's a binding commitment, and therefore I can count on it."
In that case, I think we would then be more willing to make ourselves a binding commitment, and that's the point of my -- that's what I was trying to say.
EILPERIN: Okay, we only have time for one more question. So, if it's okay, I'm just going to go to the gentleman right there. Yes.
QUESTIONER: Thanks. Steve Eule with the Institute for 21st Century Energy.
There are two negotiating tracks here. We have the Kyoto track and then we have the framework convention track. And I was just wondering what the panelists think -- how these tracks might merge. Will they merge? Will they stay split? Where do you see the outcome of these two negotiating tracks?
EILPERIN: (laughs) Michael --
LEVI: I think everyone has a -- a lot of people have known for a while that these two tracks were not going to live indefinitely. So what the set-up is is that you have Kyoto protocol. Contrary to widespread belief, the Kyoto protocol does not end in 2012. You're supposed to negotiate a new set of commitments.
Alongside that, we're having an international negotiation about an entire regime to deal with climate change. And these two have been going on in parallel as if they weren't particularly related.
We had a sort of blow-up in Bangkok, the negotiations about a month ago, where not only did the United States start saying what it's been saying before, which is that the Kyoto track isn't going to work, but our friends in Europe started saying that as well. And that was a big, big step. They said there are a lot of important pieces in the Kyoto protocol. We need to put them in a new agreement. But we do not see a way of crafting a legal agreement that just tweaks the Kyoto protocol and comes into something new that is satisfactory to everyone.
And this point is to Frank's comment earlier about the importance of unity between the United States and Europe on key issues. As soon as the United States and Europe were speaking from the same page on that, this became a real discussion. It was no longer "The United States thinks this; the United States thinks this." It was, "Wow, this might actually happen." And there's been a lot of fighting over it.
I think ultimately what the Europeans have said at a technical level is right. There is no way to take the Kyoto protocol and modify it in a way that's inclusive and that brings in the developing countries in a way that will be acceptable to the United States, and frankly, in a way that will be acceptable to how a lot of European governments have evolved in their position.
So ultimately, if there is something that comes out, it's going to have to come out of this long-term cooperative action track. It's going to have to be something distinct. There's going to have to be a way to satisfy everyone that this isn't a trashing of past achievements. But I think that can be done politically.
EILPERIN: And then, just beyond that, Dan and Frank, do you have any closing thoughts you want to share, since we're going to wrap up and keep this thing going on time? So is there anything else that you wanted to share with the audience?
PRICE: Yes. I noted that I was actually optimistic about the possibility of the Senate approving a treaty --
EILPERIN: Yeah.
PRICE: -- if it's a good treaty.
EILPERIN: Right.
PRICE: I am also -- I also remain optimistic that we will be able to reach some agreement; obviously not at Copenhagen, but that we will be able to reach some agreement on key points. And it may not be of the scale and scope that the most ambitious would like, but I think there is a shared sense of urgency, a shared sense of the need to tackle this problem from various angles -- from a regulatory angle, from a market angle, from a technology-development angle. And I sensed and still sense a commitment among the major economies to pursue such an agreement.
EILPERIN: Okay.
And Frank, any last thoughts?
LOY: Yeah. I think the things to fear at Copenhagen are: one, a loss of momentum -- I think we need momentum -- and two, specific steps that make it harder for the U.S. to move forward. And I think if we can avoid those two things, we can actually move forward. And I believe that, just as Dan said, it probably won't be as ambitious as it ought to be and won't be as precise as it ought to be, but it will provide the momentum. It will provide the momentum that we need.
And if we can use the stage of -- you know, Copenhagen is going to be a huge stage. If we can use that stage to educate and motivate publics around the world, including the U.S., that would be a huge step. And if we can do that by actually moving forward, even if adequately, I think that would be an adequate step.
EILPERIN: Okay. And I would say that I think one conclusion you can have from this discussion on what we're facing is that actually, in many ways, many of the toughest decisions may be faced by politicians 20 years from now, so we could all convene in 2029 and they will be blaming the previous administrations for the mess that they are in. (Laughter.)
So, with that, thanks very much. And there's lunch to follow. (Applause.)
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THIS IS A RUSH TRANSCRIPT.
This session was part of a CFR symposium, Countdown to Copenhagen: What's Next for Climate Change?, which was made possible through generous support from the Doris Duke Charitable Foundation, the Alcoa Foundation, and the Robina Foundation.
JULIET EILPERIN: Thanks so much. We have a fabulous panel here, so I'm just going to do brief introductions and then we're going to get started.
Frank Loy has kindly offered to pinch-hit because Eileen Claussen had an emergency. So we first want to thank him for joining us. He's the chair of PSI's board of directors and a member of the board and executive committee of Resources for the Future. He served as undersecretary of State for Global Affairs between 1998 and 2001, under Bill Clinton. He was responsible for, among other things, U.S. international policy and negotiations regarding the environment, human rights, the promotion of democracy, refugees and humanitarian affairs, counternarcotics and international law enforcement. And he also served as the chief U.S. negotiator for a number of treaties, including those on climate change, on trade in genetically modified agricultural products, and an international convention to combat organized crime.
And then, sitting next to him, we have Daniel Price, who is senior partner for global issues at Sidley Austin LLP and a member of the firm's executive committee. And he advises clients on a wide range of international regulatory, transactional and policy matters, including climate change. And he rejoined Sidley after serving as assistant to the president and deputy national security adviser for international economic affairs in George W. Bush's administration, where I pestered him, trying to get him to disclose secrets about the administration's strategy, and, you know, didn't have as much success as I'm hoping to have today. And he worked on a number of -- he was his -- Bush's personal representative to the G-8, the G-20 financial summit and the Asia-Pacific Economic Cooperation forum, and served on a number of Cabinet-level bilateral economic dialogues.
And then we have, sitting next to him, Michael Levi, who's the David M. Rubenstein senior fellow for energy and the environment at the Council on Foreign Relations. And he's director of the council's program on energy security and climate change and was project director for the CFR-sponsored Independent Task Force on Climate Change. I could give you many things about him, but we clearly know his most important thing is that he served as as technical consultant to the critically acclaimed television series "24." (Laughter.) So that, you know, no more needs to be said.
So, moving on, what I thought would be helpful is we'd set the stage, and obviously, Congressman Markey's comments gave his perception of what got us to where we are today, and I think it would be helpful, when everyone's looking towards Copenhagen and obviously seeing it as not offering the resolution that people had anticipated maybe a year or two ago, to talk about how we got to where we are today and how many of the stumbling blocks that, frankly, have bedeviled these negotiations for years remain in place even as we're left at a month away from the U.N.-sponsored talks.
So in succession, Frank, if you could begin with kind of, you know, what do you think brought us to the point we are today, where it's difficult to get the definitive agreement that people had anticipated?
FRANK LOY: Well, from the United States point of view, the most difficult problem is the fact that we do not have a domestic law that permits us to make commitments that we know we could keep. We did make commitments at Kyoto which, it turns out, we couldn't keep, and I think the general feeling is that we don't want to repeat that.
And so in a sense, for the United States the big problem is whether -- I mean, I would say the big problem for the United States is that Kyoto -- that Copenhagen comes at the wrong damn time. In my opinion, it would be a lot better if Copenhagen had been scheduled for June of next year, or something like that, to give this president and this Congress an opportunity to see whether they can craft a law that actually does give us some assurance that we can meet international obligations.
But, Copenhagen is when it is, and so the question -- the option, one option for the United States is to what extent its positions at Copenhagen are really designed or really have a major eye on the effect of those positions on the U.S. Congress and the law that we hope will be passed and to what extent they have the eye on meeting the international expectations.
And those are not the same, and sometimes they may actually be contrary.
So one of the big questions for the United States is, for example, the issue of numbers. If the -- can the United States agree on any number, either a number of greenhouse gas emission reductions or a number of dollars that it would commit to aid developing countries meet their adaptation and technological requirements. And I mean, my answer would be, I'd rather not. But as soon as you say, if you have the United States appear on the international scene, everybody is looking for numbers, whether they be from a 2005 base or whether they be a 1990 base, whatever. If we are reluctant to talk about U.S. numbers, I think, some people will be very critical. But my sense is that that's -- not only would we be in a sense repeating Kyoto if we agreed to greenhouse gas emissions without knowing how the hell we're going achieve that -- and without a climate bill, I think we won't know how to achieve it, mostly -- or the numbers will be so tepid, so weak, that they will not be very helpful.
So that's just one of the issues that brings this -- there are a lot of others, but that's one issue that I -- and I would hope that others would understand that difficulty and maybe one more point, Juliet. Seems to me we need to bring climate issues to a boil and actually end up with a -- with some sort of global understanding. But we are in a -- we're in a long-term process, and we have to recognize that Copenhagen comes at a time for the United States that's very difficult, and we -- it would not -- it would be a huge mistake on the part of the world to act in Copenhagen and expect in Copenhagen matters that actually set back the American ability to participate through domestic legislation.
And that's a possibility, if Copenhagen doesn't turn out right.
EILPERIN: Excellent.
Dan, can you give us your insight, having been -- having firsthand knowledge of being involved as -- you know --
DANIEL PRICE: I'll try. And Juliet, let me say --
EILPERIN: Feel free to blame the Bush administration for everything, if you'd like. (Laughter.)
PRICE: Yeah, right. It's a popular thing to do.
LOY: If you don't, somebody will.
PRICE: I know. I know. And just as you are hoping to coax more information out of me in this new environment --
EILPERIN: Yes.
PRICE: -- so, too, I'm hoping to communicate better with you.
I recall well when the Bush administration launched the major economies process as a way of gathering the 17 nations who are responsible for 80 percent of emissions, to try and make progress in the UN negotiations through this group. We were pilloried -- including by publications such as yours -- for circumventing the United Nations, hijacking this -- da-da-da-da. When the new administration, having renamed it the Major Economies Forum, quote, "launched" this initiative, it was welcomed as evidence of the new multilateralism, so --
EILPERIN: I was channeling the Europeans. It was just quoting Sigmar Gabriel. (Laughs.)
PRICE: Got it. Got it. (Laughter.) Well, you know, that's a very good place to start to respond to your question.
Because I think, Frank, if Waxman-Markey was today law, the obstacles to Copenhagen would remain 99 percent what they are in the absence of that. Why do I say that? One, when you reduce Waxman- Markey to 1990 levels, the year of talismanic significance for the Europeans, we have a 7-percent reduction -- or, as the representative from the Chinese Embassy suggested, a 3-percent reduction. So let's say it's somewhere between 3 (percent) and 7 (percent). The Europeans have said legitimacy and morality consists of 25- to 40-percent reductions below 1990 levels by 2020.
So part of the obstacle in these negotiations all along has been, I think, the European insistence on a target. Whether or not it's achievable for Europe remains to be seen.
It was certainly never politically achievable or realistic for the United States under the prior or under the present administration.
And yet the insistence on this number and the focus of political energy by the Europeans on the United States and the focus on the U.S. number and a lack of willingness until very recently to engage the major emerging markets and actually say, "You know what, this won't work unless there are commitments by the major emerging markets" has been one of the principal obstacles.
And if you look at the G-8 language from Hokkaido in 2008, where the United States, Canada, Japan, Russia wanted very strong language on commitments by major emerging markets, the Europeans opposed it, and so we have relatively weak language. Yet when Chancellor Merkel was recently here talking to our Congress, we see an evolution, and she said, "No doubt about it, in December the world will look to us, to Europe and America. It is true that there can be no agreement without China and India accepting obligations."
This is a real sea change for the Europeans, because it had been the position of the last administration and this administration that a new agreement will require binding commitments by all major economies, developed and developing; those commitments may be differentiated; some may be a fixed number, some may be to slow the growth, et cetera. But commitments there must be.
The major emerging markets have not yet accepted, even in principle, that there must be a binding commitment by them. So two obstacles that remain, even if Waxman-Markey were law, were the assessment of the adequacy of the U.S. commitment in the minds of the international community and, two, the willingness of the major emerging markets themselves to make binding commitments, without which approval of any climate treaty, I think, is quite doubtful in the United States.
The third obstacle, and then I'll stop. The third principal obstacle, I would say, is the absence of agreement on either quantum or mechanisms for financing the incremental costs of clean versus traditional development.
We're still having this dialogue of the deaf between those who have the money, saying, "We would actually like to set the conditions under which you have access to the money," and those without the money saying, "No, that's illegitimate for you to set conditions." And the -- I would say a final obstacle is the recent articulation by Prime Minister Singh of India expressly, but this has been developing some -- for some time -- the conceptualization of clean technology as a public good and thus a good to be either transferred without cost, compulsorily licensed, or treated in some way which will undermine the incentive to innovate.
EILPERIN: Excellent. More -- Mike, want to throw more obstacles out there?
MICHAEL LEVI: I'm not sure there are any obstacles left. (Laughter.)
EILPERIN: (Laughs.)
LEVI: Let me throw -- because I agree with the various obstacles that have been laid out here, let me talk about one conceptual obstacle and then try to give my take on where U.S. action fits into this.
EILPERIN : Sure.
LEVI: I think conceptually we've had this problem where we're looking for very -- a very definite set of outcomes to be promised by countries in an area where we have very little experience of delivering. We don't know how to move to a low-carbon economy. We know a lot of principles. We know a lot of pieces. We know all sorts of things that we can try. But it's very difficult for us to predict the outcomes in 2020 or 2030.
And the way we've negotiated traditionally, particularly through the U.N. process in the past, doesn't reflect that. It focuses on certainty. It focuses on prescribing very detailed mechanisms that we know in advance will work. And that's why I think a lot of these bilateral efforts, mini-lateral efforts, the Major Economies Meetings, the Major Economies Forum, have been useful, because they provide a more flexible setting where we can really look at how we are going to experiment our way forward when it comes to developing policy. So I think that mind-set is very -- a very important piece.
On the role of U.S. legislation, I'd say U.S. legislation is essential. It is not going to fundamentally transform everything, because there are all other pieces that need to be put in place. But the reality seems to be that until U.S. legislation is there, we are going to spend 90 percent of our time talking about what the U.S. is or isn't doing. And as much as a lot of us understand that we need serious, careful international discussions on technology, on finance, on developing country commitments, we aren't going to have that level of seriousness. We aren't going to have the level of focus that's necessary to deal with those until the U.S. domestic piece is out of the way.
Does that mean that we will solve all those problems once U.S. legislation is in place? I don't know. But I don't think we'll find out the answer until we get to that point.
EILPERIN: So, given that we've now laid out the formidable obstacles to reaching agreement, I think it would be helpful to talk about what would be a, quote-unquote, good outcome in Copenhagen, or a not good outcome, when you look at the universe of what's possible under a political agreement, given that no one at this point is expecting a legally binding agreement. Could you talk a little about both, you know, what you see as the continuum of options that we might be looking at and how -- to what extent does 2010 become the definitive year for climate change, or in fact is there no definitive year in the way that people had been thinking 2009 would be?
LOY: Well, on the very last point, I would say there is no definitive year. What there is and what there has to be and what has to be reinforced are a sense of urgency and a sense of scale. That is, you've got to move reasonably quickly and you've got to be prepared to move at a scale; but is there a particular year? I don't know. My guess is the year will always be a little bit ahead.
What would be a good outcome? I reiterate, I think focusing on numbers is not -- if you think that's a good outcome, it's not going to be very successful, partly because of what I said, partly because of what Daniel said. There is a big gap, even if you had a law today, between what is realistic for us to agree to and what is expected by or at least said to be expected by others. Dan is quite right.
I will say this, that if you take as a base year something like 2005, which recognizes that for a large part of the -- you know, for many years we didn't do anything, or you take a more recent base year and you talk about going forward, I think we can come up with numbers that are quite respectable that are parallel to the numbers going forward of other countries, even though if you -- but we have to recognize that some other countries -- Europe I'm speaking of -- have made progress in the years 2000 to now that we haven't. So we have to recognize that.
So what's a good outcome? Architecture of an agreement, by which I mean an agreement that requires all major emitters to make commitments that are verifiable and that are -- and in some sense where there are consequences for not meeting them.
They don't have to be the same kind of commitments. Generally, I would say the industrialized countries ought to take absolute commitments. The architecture should provide that, some number. And the major economies that are developing should take whatever policy measures work and whatever policy measures can be negotiated, but they ought to be binding in some sense of the word and they ought to be commitments that have consequences for not meeting them. That would be a huge step.
And in that respect, I would say it would be extremely useful if, for once, Europe and the United States would have a similar posture vis-a-vis the major economies like China and India and others, rather than have differing views, which, in the past, have resulted in very little commitment on the part of those countries. So that would be a good outcome.
And last point I would say is: I think there has to be recognition of the point that Mr. Goldemberg made, and others, of the role of tropical forests. It's such a big part of the deal. It is -- without addressing that aggressively -- and an international agreement can do something about addressing it aggressively and make it possible for industrialized countries to help Brazil and Indonesia and the Congo and others to achieve reduction of deforestation -- without that, I don't think we're going to get any of the numbers that we say we need.
Those would be some elements of a deal that I would consider success.
EILPERIN: Okay. And, Dan, I want to -- when you -- when you give your sense of both maybe like a good and bad case scenario, I'd also hope that you could put it in the context of to what extent does it reflect what you and Jim Connaughton and others in the Bush administration were pushing for in terms of an international outcome, and help draw those parallels, perhaps. Go ahead.
PRICE: Thanks. I actually -- I mean, if you were here and you heard Congressman Markey, you would find the statement I'm about to make unbelievable, but I think there's very little difference between the negotiating objectives of the United States that were put forward by the Bush administration and those now put forward by the Obama administration.
There is very little difference.
I think what would be a -- and I'll explain those objectives in a moment, because I think a document embodying a negotiating path to achieving those objectives is a -- would be a good outcome in Copenhagen. I don't think it is likely that we will reach agreement on anything other than those items on which we must agree.
And I would actually consider it a success if the parties left Copenhagen with a document that said, "Here are the five issues on which we will negotiate." And I would list those issues as follows: the nature of the commitments to be made by all parties -- sorry, the nature of the binding, legal commitments to be made by all parties. And, Frank, you're right; it may be that there is an acceptable range of commitments. Some countries may choose to just pick an economy- wide number. Some countries may aggregate their domestic measures and say, "We estimate that these measures taken together will achieve an ‘X'-percent reduction, but we put those measures on an annex, and we commit to faithfully implement those measures."
By the way, this was something that was proposed during the last administration; considered unacceptable at the time. It's now been resurfaced as the Australian and South Korean compromise proposal. In any event, I do think that's one possibility. So, one, what is the nature of the commitments?
Two, under what terms will financing be made available to beneficiaries? In other words, should the loan criteria themselves have a renewable-fuels mandate? Right? So, to begin to discuss the terms under which financing will be made available.
Three, achievement of common regulatory principles for the recognition and validation of credits and offsets, so that, to the extent parties have cap-and-trade mechanisms, the regulatory principles are common, leading to interoperable markets, rather than the next subprime crisis market.
Four, again I come back to the intellectual property point. And it's -- it broadens out to an investment climate point. What is it, what regimes can be put in place by those who wish the more rapid deployment of clean technologies, that will create enabling environments for that deployment, whether that's a limitation of tariffs, whether that's an elimination of limitations on how much of an affiliate a foreigner can own, or whether that's enhancing protections for intellectual property.
So I would say if there could be an agreed negotiating agenda within a timetable of those four points, I would consider that a success.
EILPERIN: Okay. There's no fifth. Initially you said fifth point. Is there a fifth point?
PRICE: Well, the fifth point --
EILPERIN: Or a half a point?
PRICE: No, there is a fifth point. I mean, I would like to see agreement reached that trade sanctions will form no part of the new international climate regime, whether as a matter of the international agreement or as domestic implementing measures, because I think the potential for a carbon trade war and going down that path is very dangerous and destabilizing. And I think if the contours of the international agreement are done right, it's also wholly unnecessary to address carbon leakage.
EILPERIN: Michael, picking up on that, can you maybe look forward and both get a sense of, you know, if they have the kind of outcome that's being discussed what do you think are the ramifications of that? And certainly I think while a lot of us would accept what's being said about, you know, the similarity on the international front, clearly there is a big domestic difference between this administration and the past administration, and how does that play into all this? We're talking about it as an obstacle, but moving forward, what does it mean?
LEVI: Right. And we haven't talked much about the worst case. I --
EILPERIN: Yes. And I would like you to spell out the worst case --
LEVI: -- which is important - which is important--
EILPERIN: -- which I feel like could even -- yes. Exactly.
LEVI: -- to get at.
I do see a lot of continuity in the international. positions between this administration and the last couple years of the previous administration.
There are big differences on the domestic front, and those affect the ability of the United States to work internationally through the -- the agenda that each administration has worked through.
But when it comes to the bottom lines internationally, there is far more in common, as far as I can tell, than there is different between the two.
Let me say something about the sort of high-end objective. I think if we could follow the agenda that you lay out, Dan, and successfully conclude negotiations on all of those, that would be tremendous. I'm skeptical that we can conclude with 192 countries meaningful negotiations on all of those different tracks. I think those are the right issues that need to be dealt with in a variety of different forums. But it's not obvious to me that we can get a global deal on all of those, particularly because there are idiosyncrasies with each country that need to be addressed -- the technology transfer issue, the question of what's the right enabling environment, what are the right tariff structures, ownership rules, whatnot - are very different for China from, let's say, a country in Sub- Saharan Africa, and frankly different for China and India and Brazil.
So it's not clear that we can -- we can take care of all these things within one global international piece.
What I think is very important to have included in whatever the outcome is -- and we're talking about the sort of substance of it -- is to get the process right. It is very important that we have transparency from the countries involved. Regardless of whether they have binding commitments or domestic commitments, whatever you want, they need to be transparent, so that we can build confidence amongst countries that things are moving in the right direction. That means proactive reporting from the individual countries and then international verification.
I'd also like to see a regular international peer review process that helps focus attention on where countries are succeeding and where they're falling short. And that includes even whatever countries step up with specific emissions targets and not just policies and measures. You can have emission targets and never come close to meeting them. We need to know well in advance whether countries are on the right course, and we need to expose that. And there are a lot of lessons to be learned from other -- from other regimes where a peer review plays a significant part of -- is a significant part of the regime, whether it's through the IMF or the World Trade Organization, the OECD. We have a lot of experience to work on that we're not taking advantage of properly.
The --
EILPERIN: Can you give the worst-case --
LEVI: Sure. Yeah, let me -- let me give the worst case.
I think there are two related worst cases, and they both have to do with how the international negotiations impact U.S. domestic policy.
There needs to be a sense, I think, on the Hill that the United States can contribute positively to an effort and that it will be recognized for doing that internationally. If there's a sense on the Hill that, even if people make politically tough choices to move ahead with legislation, even if they do that, they will be criticized roundly by the world and blamed for falling short, that lessens their motivation and incentive to really step up to the plate. So there has to be a clear message that the way we compare countries' efforts will mean that, if the U.S. does deliver on the sorts of things that are being talked about, that will be accepted.
The other piece -- and I think Frank hinted at this, and this is a real possibility -- is that there is a scramble at the end in Copenhagen to do something that looks like Kyoto II, that the Europeans show up, and that some elements in Europe and perhaps in Japan decide that we need something that looks like a big deal, and they decide to put together something that maybe the United States can come into later.
I think that would be very dangerous. It's very important that the United States be a constructive part of putting together whatever happens internationally. And I know it's difficult to tell people in the rest of the world, "Just hold on another moment; we'll deliver soon." But it's really essential here.
EILPERIN: And. sorry--to move on --
LOY: Can I just make a comment about two things Daniel said? One, the fifth point -- that is, that he would like to see a provision in the international agreement that says "no trade measures in Country X" -- my sense is that that would be a really bad idea, because I cannot imagine anything that would infuriate the members of Congress more than an international mandate not to adopt a domestic measure that they might adopt and might not adopt. The president has made it very clear he doesn't want a really harmful trade measure. But my sense is that that's exactly the kind of thing I have in mind that I think would be a step backward, if the international community adopted that.
The second thing is a quite different point. He alluded to the -- what he called the Australian-Korean proposal now.
EILPERIN: Yup.
LOY: And I think it's just important to say what I think that means and the choices that have to be made on that.
That is basically a series of parallel commitments that have -- that, if I understand it correctly, really have no consequences for not meeting them. And that may be good enough -- may be all you get. But the question we have to ask ourselves, who care about this issue, and the question the nations have to ask themselves, is whether in fact a system that has -- it may have reporting, but it has no enforcement or no consequences -- whether that is good enough. And without answering that at the moment, that is certainly an issue that you could imagine Copenhagen having to deal with.
PRICE: If I could just respond to two factual points, one, with respect to the last point, at least the architecture that I understood -- certainly, that we had proposed, and what I understood others are now considering -- is legally binding. That is to say, you make a treaty promise to implement those laws set forth on Annex A. And if you don't do it, you are breaching the treaty to the same extent as if you had promised to achieve a number and you didn't achieve it. We have experience in international agreements where the commitment is essentially to effectively enforce and implement your domestic law, and there's a review mechanism and consequences if you don't. That's point number one.
Point number two, you said that it would antagonize the U.S. Congress if the resulting treaty some months or a year from now were to say no trade sanctions. But as I understood Congress -- and I take Congress at its word -- the only reason that that's in the domestic legislation is the concern that the commitments on carbon reduction by competitor developing countries will be inadequate. By the time we have a treaty, we will know the adequacy of those commitments. If they're inadequate, we don't approve the treaty. If they're adequate, we can approve the treaty and we don't need trade sanctions.
EILPERIN: Okay. And I'm going to open it up for questions, but Michael, do you have any point to add to this?
LEVI: Well, there is this question of consequences. We use the word "consequences." I haven't heard any significant proposals for what those consequences would be, at least if they were punitive consequences. I think the bulk of the sticks we have involve removing carrots. And that's how things are likely to evolve going forward.
And it's not -- it's not obvious to me that that has to be part of an international deal. If one country steps up with a particular set of promises for what to do domestically, another steps up with a set of promises for how they are going to support that action through financial assistance, through provision of technology, whatever you'd like, and the first country isn't delivering on its steps to reduce emissions domestically, well, then the consequence is that the other country doesn't deliver the support. And that doesn't -- if that was in an international deal, that would be useful, but it doesn't have to be. That kind of enforcement can happen without being spelled out. What you need is the transparency and the review to make it clear to everyone in the world what that linkage is and to be able to facilitate that.
EILPERIN: And just briefly, to play referee, I think the fact that there, frankly, is some confusion about -- when you're talking about the Australian schedule and the South Korean registry, I think one of the real debates -- and we will certainly see this in Copenhagen if that becomes the primary vehicle for any sort of agreement -- is that there is real concern about how verifiable this is and how binding it is. And so I think that it makes sense that there is even debate up here, because that is in fact the debate that right now we're facing in the international community.
I have tons of questions more, but I'd love to get questions from what I know is a smart audience. So, go ahead. I'm sorry, just wait for the microphone.
QUESTIONER: Stephen Kass from Carter Ledyard. I'm going to put this just as diplomatically as I can. It is undoubtedly true that there are some some similarities between U.S. negotiating position in this administration and the previous one, though it strikes me that the current one would like to reach an agreement and the previous one didn't.
But in view of the fact that, even if enacted, Waxman-Markey or Kerry-Boxer will contain emission reductions far short of what not just the Europeans but IPCC and most informed observers believe is necessary to avoid very serious consequences, most of which will be felt in the developing world and many of which are now inevitable, what do we say -- I'm actually quite troubled by this.
What do we say -- and I'd ask this to Frank -- to the rest of the world and the citizens of the world who say, look, your previous administration didn't want this; your current one does; you still can't get it through in your democratic process. What does this say about the attitude of the American people toward the consequences for the lives of millions or billions of people around the world? And what is the answer we give ourselves to that question?
LOY: Well, any United States negotiator today is facing serious handicaps. The first one is very basic, and that is that the American people do not support action for climate change at a level that is the same as for most other countries. That happens to be, you know, a fact, and it is a politically important fact when you see the votes and the character of the debate in the Congress.
Now, why that is so is may be beyond our ability to address in this. But it certainly has not been helped by much of the rhetoric and by some of the actions that occurred in the Bush administration, where the whole concept of international movement was dissed and only -- and, you know, five, six, seven years later sort of resurrected.
So whatever -- maybe that's -- that certainly isn't the whole cause. The whole cause goes much deeper than that. But it's a fact. We have to deal with that fact, and we have to work around it.
And the way to work around it, I think, is the way the administration is trying to do so, which is to develop a really strong domestic capability of reducing emissions through some of the measures that Congressman Markey talked about, including the very major stimulus bill, including the new CAFE standards, including giving California the waiver so that it could adopt more stringent rules, and so forth -- whatever is possible. That's one of the ways to deal with it.
And the other way at some stage to deal with it is to have a cap- and-trade system which will, if it's done right, produce funds -- produce funds that are not appropriated funds, but funds through the market process that actually will begin to finance some of the needs of the developing countries.
So the answer is, we start with a handicap, but we have tools that I've just described.
EILPERIN: Yeah, Dan.
PRICE: Yeah. I'm sorry, I don't know who you are or what you do for a living, but it's just --
QUESTIONER: I practice environmental law.
PRICE: Great. It's just not true --
QUESTIONER: And I teach it.
PRICE: Wonderful. Congratulations. It is just not true that the last administration did not want to reach an international agreement. It's just not true. There are too many people from the Department of Energy, from the Department of State, from CEQ, from EPA, from the White House, running around the world for that very purpose for me to sit here and not contradict the assertion that they didn't want to reach an agreement. They did.
We are handicapped, but we're not handicapped because of the Bush administration. We are handicapped because if the litmus test of seriousness about climate change is the number, the U.S. will always lose that contest, because our polity will not produce a number that looks like the European number.
The focus on the U.S. contribution, I would say, should rather be on what are we doing to fund alternative technologies? There was both stimulus money; there was money in the last administration in terms of DOE grant and loan-guarantee programs of significant size.
So I think that you will find U.S. leadership not by focusing on the number that comes out of a bicameral process, in terms of emissions reductions, but what are we doing to drive technology development? What are we doing cooperative internationally to solve those key problems which Chairman Markey identified as being coal and nuclear?
LEVI: Let me speak to the numbers --
EILPERIN: Yeah.
LEVI: -- quickly, because I think that the numbers in the bills are actually quite good.
Here are a few basic points. The bills lay out numbers, not just for 2020 but through 2030 and 2050. If you were trying globally to hit a goal of staying under about -- what did we say -- about 450 parts per million of carbon dioxide in the atmosphere, we're currently at about 380. Four hundred fifty is the goal we're trying to stay under. We're on track to hit about a thousand. Okay?
Now, take that bill that lays out 2020, 2030 and 2050 targets. Take that 2020 target and ratchet it down to what everyone's demanding -- 25 percent below 1990 levels. But leave the rest in place, because everyone seems to actually agree that those are pretty good -- 80 percent cut in 2050.
That makes a difference of somewhere between one and two parts per million in the atmosphere. Okay, so 380, 450, 1,000; we're arguing over a difference of one or two parts per million. That is not the make or break environmentally.
What matters between now and 2020 is getting us on the right course so we can hit those 2030 and 2050 goals at reasonable cost, in a sustainable way that works for American society, that develops the right technologies. That should be the focus of how we're moving in the next 10 years, not this one or two parts per million, which is not the difference between success and failure environmentally.
EILPERIN: Okay, I will go -- (inaudible) -- but I'm going to go to this question.
QUESTIONER: Frank, could you elaborate on the meaning of "binding commitments"? Because the usual interpretation is that you involve yourself in an international deal. Then that goes to the Senate of the country. It becomes internal law. You seemed to indicate that there were other, more sophisticated binding arrangements. Could you elaborate on that? Because, you know, the discussion that we've been witnessing reminds me of the Broadway play, "Promises, Promises." You know, I mean, how do you make them binding except through, you know, ratification by the Senate and all that?
EILPERIN: And then, just to broaden that out, I would say, for the whole panel, I think also what's implicit in that question is also the difference between the Obama administration knows how hard it is to get to 60 votes on a climate-change bill and does not have the votes now, and it's entirely unclear whether they will get the votes in the near term. And obviously, for a treaty, we're talking about 67 votes.
So to what extent is kind of this dance that we're going through not a reflection of the fact that there simply is not the support in the U.S. Congress, in the U.S. Senate, for ratification of the treaty? And if everyone could speak to that.
LOY: I'm going to disappoint you and not really define "binding," because one of the beauties of "binding" is that it is a little imprecise. (Laughter.)
EILPERIN: Spoken like a true negotiator.
LOY: (Laughs.) But -- and I also am very aware of the dictum of a well-known international legal scholar who said that, after all, when all is said and done, most countries comply with most agreements most of the time, without reference, really, to binding. So I'm quite prepared to leave binding a little imprecise for the moment.
What I mean, though, is that I think what -- after all, the 1992 agreement had commitments by people to do things, and they were sort of in the air, if you will. What I want is, I think, a commitment to each other in some meaningful fashion so that country X believes that it may act and should act because country Y is acting. I think the power of commitments is the reciprocity in there, and that's quite important.
I want to comment on Juliet's point, because it, I think, is very insightful. One of the issues I think this administration has is: are you going to give up, at the outset, on getting a treaty? The official line is "No, we're going to go for a treaty." But with Democratic defections and not much help from the Republicans, 67 votes may be impossible.
If you have a very -- if you have a certain kind of strong compliance agreement in the international agreement, you can't really do that without a treaty, probably. If you have something less than that, you might end up in the Australian kind of method, which is short of a treaty -- and I'm not sure I'm reading it correctly -- where there's simply a group of commitments made to the world that we will do this, we will do this, we will do that, and without a compliance mechanism, and that may be more easily done -- may be more easily complied with by the United States without the benefit of a treaty.
And I think that is actually one of the issues that is being bandied about as we speak as to whether it makes sense for the U.S. to go full out for an agreement that is only implementable and only meaningful if it is a formal treaty of the United States, given the numerical problem that we have.
EILPERIN: Dan, Michael, do you have any thoughts on that, or should we go to the next?
PRICE: Yeah. I think it is certainly possible for a new climate treaty to garner 67 votes. I don't think that's, you know, a stretch at all if it is a good treaty, right? If it has the same flaws as the Kyoto protocol, it will meet the same fate, which is bipartisan rejection, right? If there is a treaty that kind of tracks and resolves the negotiating points that we've been discussing in a reasonable manner, I think it'll garner the support in the Senate.
LEVI: I would just say that most countries meet most commitments most of the time because when they start off in the beginning wondering about what those commitments will be, they set them up in a way to make sure that they are confident they will meet them. It is not a process that necessarily produces ambition. And we have to be very careful about that.
We tend to confuse effectiveness with compliance when we think about international regimes. The two often do not go together. Some of the most successful regimes are ones in which actual formal compliance is relatively low. Okay, so we need to be careful not to confuse the two pieces.
Now, ultimately lawmakers here seem to attach great importance to the words "binding commitment" in unlocking their own action, and so that has its own reality in itself that we have to deal with.
EILPERIN: Okay --
LOY: That really is the point about the slipperiness. I think American legislatures -- I would not want to be sitting before a committee of Congress unless I could say that China has made a binding commitment of X and Y. I don't care what X and Y is, but I'd like to be able to use those two words in order to get the kind of support that Michael was talking about.
EILPERIN: Let's go to the back of the room; there, that gentleman. Yeah, right there. Thanks. Right behind you, you've got a microphone.
QUESTIONER: I'm Welby Leaman from the Treasury Department.
What would be the economic effect of an international agreement that used, let's say, the House bill numbers and those commitments were actually kept? And what would be the change in that economic effect if it were just the developing countries, not China and India and others?
EILPERIN: Can you specify? The economic effect on, like, the carbon markets, the world, the U.S.?
QUESTIONER: On the U.S. economy. Sorry, I should have said that. And one sort of part of that; at CFR we've heard both -- in the last year we've heard two billionaires, both George Soros and T. Boone Pickens, say that transition to a green economy would be a great engine for growth for the U.S. economy. So that may be part of the answer. How would that work? And is that a sustainable effect?
LEVI: I can say something about the economics of an international agreement. I think it's a bit murky. We tend to focus on the fact that if other countries take action, we will have a more level competitive playing field, and that's useful for the United States. And that's true. And so there are huge advantages of international action. I don't want to argue against it. But we have to be serious about it.
But if you look at the models of the bills, you get all sorts of strange effects when other countries participate in the agreement. In particular, our modeling is very dependent on purchases of offsets. To the extent that we're successful in getting other countries to do things for themselves, rather than because of offset purchases that has a peculiar impact on the cost estimates over here. Now, I don't think that would be determinative in a domestic policy discussion, but the impacts can go either way, depending on the nature of the international commitments.
EILPERIN: Yeah, and it's fair to say the EPA in its modeling has estimated that, for example, Waxman-Markey would be 89 percent more expensive if it did not have the 2 billion tons of CO2 in international offsets that are provided for right now.
LEVI: An international deal --
EILPERIN: There's some question --
LEVI: An international deal can take that either way. It can provide a stable framework that allows you to generate very large quantities of offsets that hold down prices. It can also essentially eat up offsets, like I said, through domestic action in other countries. And the way that all balances out completely depends on the details. We tend to go at 40,000 feet in all these things. The details of these arrangements matter a lot.
PRICE: And I would just say it's one thing to have offsets and credits at the 40,000-foot level. It's another to develop the regulatory infrastructure around the world to achieve the accounting and verification you need to ensure that a certificate that says a ton of carbon avoided has any integrity.
EILPERIN: If we could just go to the gentleman in the front row.
QUESTIONER: Lane Greene -- from The Economist.
Dan's reminded us of the fate of Kyoto, which was a 95-to-zero rejection by the Senate. And Frank has agreed that binding seems like it might be a sort of toxic word in the sense that it would make Congress balk at a deal.
Meanwhile, we have people saying that China should make binding commitments or Congress will make no agreement or ratify no treaty, and India and others. And it seems like we're perilously close to saying that a deal should not be binding on the United States, but it should be binding on China. And I will bet a large sum of money that my colleague --
MR. : (whispers) I think you were saying the opposite.
QUESTIONER: Maybe I misunderstood you, but it sounded like -- it seems like "binding" is a very toxic word, because the American Congress -- the media and the American Congressperson is still extremely balky about the idea of signing up to anything that has the word "binding" in it that maybe hints at penalties for the United States for not complying. Or maybe I misunderstood.
EILPERIN: Go ahead.
LOY: Well, I think I wasn't as clear as I might have been. I think the reason I'm interested in binding commitments is not because I think that's necessarily going to be a hell of a lot more effective than some of the other measures that Michael was talking about, but because I do believe that the reason of the 97-to-nothing vote -- what that vote was, it said, "Don't bring back an agreement" -- that was before Kyoto, that was before Kyoto -- "Don't bring back an agreement unless the developing countries take the same obligations in the same time frame, and don't bring back an agreement that screws up the American economy." Those are the two things it says. Hard to argue with that, hard to argue with that.
Therefore, I think that sentiment on the first part, just the developing economies, still exists. And that's why I said -- that's why I like something that has "binding" so that a member of Congress who is concerned about the same issue as he was at the time of the 97- to-zero vote can say, "These developing countries have made a binding commitment. It's different from ours. The numbers are different. The methods are different. But it's a binding commitment, and therefore I can count on it."
In that case, I think we would then be more willing to make ourselves a binding commitment, and that's the point of my -- that's what I was trying to say.
EILPERIN: Okay, we only have time for one more question. So, if it's okay, I'm just going to go to the gentleman right there. Yes.
QUESTIONER: Thanks. Steve Eule with the Institute for 21st Century Energy.
There are two negotiating tracks here. We have the Kyoto track and then we have the framework convention track. And I was just wondering what the panelists think -- how these tracks might merge. Will they merge? Will they stay split? Where do you see the outcome of these two negotiating tracks?
EILPERIN: (laughs) Michael --
LEVI: I think everyone has a -- a lot of people have known for a while that these two tracks were not going to live indefinitely. So what the set-up is is that you have Kyoto protocol. Contrary to widespread belief, the Kyoto protocol does not end in 2012. You're supposed to negotiate a new set of commitments.
Alongside that, we're having an international negotiation about an entire regime to deal with climate change. And these two have been going on in parallel as if they weren't particularly related.
We had a sort of blow-up in Bangkok, the negotiations about a month ago, where not only did the United States start saying what it's been saying before, which is that the Kyoto track isn't going to work, but our friends in Europe started saying that as well. And that was a big, big step. They said there are a lot of important pieces in the Kyoto protocol. We need to put them in a new agreement. But we do not see a way of crafting a legal agreement that just tweaks the Kyoto protocol and comes into something new that is satisfactory to everyone.
And this point is to Frank's comment earlier about the importance of unity between the United States and Europe on key issues. As soon as the United States and Europe were speaking from the same page on that, this became a real discussion. It was no longer "The United States thinks this; the United States thinks this." It was, "Wow, this might actually happen." And there's been a lot of fighting over it.
I think ultimately what the Europeans have said at a technical level is right. There is no way to take the Kyoto protocol and modify it in a way that's inclusive and that brings in the developing countries in a way that will be acceptable to the United States, and frankly, in a way that will be acceptable to how a lot of European governments have evolved in their position.
So ultimately, if there is something that comes out, it's going to have to come out of this long-term cooperative action track. It's going to have to be something distinct. There's going to have to be a way to satisfy everyone that this isn't a trashing of past achievements. But I think that can be done politically.
EILPERIN: And then, just beyond that, Dan and Frank, do you have any closing thoughts you want to share, since we're going to wrap up and keep this thing going on time? So is there anything else that you wanted to share with the audience?
PRICE: Yes. I noted that I was actually optimistic about the possibility of the Senate approving a treaty --
EILPERIN: Yeah.
PRICE: -- if it's a good treaty.
EILPERIN: Right.
PRICE: I am also -- I also remain optimistic that we will be able to reach some agreement; obviously not at Copenhagen, but that we will be able to reach some agreement on key points. And it may not be of the scale and scope that the most ambitious would like, but I think there is a shared sense of urgency, a shared sense of the need to tackle this problem from various angles -- from a regulatory angle, from a market angle, from a technology-development angle. And I sensed and still sense a commitment among the major economies to pursue such an agreement.
EILPERIN: Okay.
And Frank, any last thoughts?
LOY: Yeah. I think the things to fear at Copenhagen are: one, a loss of momentum -- I think we need momentum -- and two, specific steps that make it harder for the U.S. to move forward. And I think if we can avoid those two things, we can actually move forward. And I believe that, just as Dan said, it probably won't be as ambitious as it ought to be and won't be as precise as it ought to be, but it will provide the momentum. It will provide the momentum that we need.
And if we can use the stage of -- you know, Copenhagen is going to be a huge stage. If we can use that stage to educate and motivate publics around the world, including the U.S., that would be a huge step. And if we can do that by actually moving forward, even if adequately, I think that would be an adequate step.
EILPERIN: Okay. And I would say that I think one conclusion you can have from this discussion on what we're facing is that actually, in many ways, many of the toughest decisions may be faced by politicians 20 years from now, so we could all convene in 2029 and they will be blaming the previous administrations for the mess that they are in. (Laughter.)
So, with that, thanks very much. And there's lunch to follow. (Applause.)
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THIS IS A RUSH TRANSCRIPT.
Event
with Frank E. Loy, Daniel M. Price, Michael Levi and Juliet Eilperin
November 10, 2009
Council of Councils
Think Global Health
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