April 6, 2011

I am very pleased to be here and want to thank Michael and the Bloomberg team for the gracious invitation. I am particularly pleased to be able to spend some time with people who focus on action rather than talk.

I do talk for a living, and I’m the first to say that words matter. But in many respects the front lines of the climate fight are in the labs and board rooms, factories and venture firms, of those bringing clean energy to market, not in the negotiating rooms of Copenhagen, Cancun or Durban.

We know that clean energy serves several critical purposes – enhancing energy security and national security by reducing our dependence on oil; boosting economic growth; creating jobs; and protecting our health against conventional pollution. But it is also the essential means of combating climate change.

Today, I am going to talk about three things: the scientific underpinning of the global clean energy project; the different roles of national and international action in meeting the climate challenge; and where we stand in the global negotiations.

The Science. So first, a few words about the science. Pursuing a clean energy future would make sense for the reasons I’ve just noted even if there were no climate change. But let’s not mince words: we would not be here today – not like this, not with this sense of urgency and opportunity – if we didn’t know that a singular reliance on fossil fuels was full of peril.

The evidence of global warming is extraordinarily strong, the threat of dangerous climate impacts is high, and the risk of catastrophe is real. These are conclusions shared by the best and brightest of the global scientific community, including our own National Academy of Sciences. Whether we look at the rise in global temperature; the drumbeat of warmest-ever years and decades; the clear shift in precipitation patterns; the dramatic shrinking of both mountain glaciers and Arctic sea ice; the accelerating rise in sea level; the acidification of the oceans; or the rapid increase in forest fires, the tale told by the evidence is the same.

These things matter. They warn of droughts and floods and extreme storms. They warn of water shortages and food shortages. They warn of a world that 11 retired generals and admirals wrote about in 2007, in which climate change becomes a "force multiplier for instability in some of the most volatile regions of the world." Think of the killing heat wave, drought and fires in Russia last summer. Think of the monumental floods in Pakistan. Think of New Orleans. These are the kinds of disruptions global warming is predicted to bring. 2

Yet, an odd phenomenon has taken hold in our culture. Public questioning of the science of climate change is on the rise even as the scientific evidence grows stronger by the day. Public concern has decreased, per Gallup – from 67% of Americans who worried a great deal or fair amount about climate change in 2008 to 51% now. It is important to understand why that is, though this is not a subject for today. But public officials who need to know better have also spurned the evidence in greater and greater numbers, and this needs to be challenged.

There is surely much to do to deepen our understanding of climate phenomena and sharpen our projections, but what we know already should impel us to act – not only for our own sake, but for the sake of our children and grandchildren. "Drill baby drill" is an inadequate response. As Senator Moynihan used to say, we are all entitled to our own opinions, but not to our own facts. In short, it is time for us to inhabit the same factual universe. After that, we can debate solutions.

Taking action. So if we stipulate that climate change presents a serious threat, what should we be doing to address it? Some might say, "negotiate a treaty!" But the primary answer is that we need to take action on the ground. We need consumers and businesses to use energy more efficiently in their cars, homes, offices and factories. We need windmills and solar panels to be installed and next-generation biofuels to be developed. We need natural gas to substitute for coal and coal emissions to be captured and buried. We need to deploy what we have and invent what we don’t.

This kind of action – which transforms economies, cuts emissions and creates jobs – happens only when innovators and engineers, producers and investors do what they do best, supported by the right kind of government policy and investment at the national and state level, where it can make a difference.

Over and over again through our history, government engagement has paved the way for the technological breakthroughs that have driven American growth and prosperity. It happened with railroads and the interstate highway system, with aviation, computing, telecommunications and the Internet. We need to support clean technologies vigorously, so the day comes soon when they are competitive with fossil fuels on a truly level playing field.

That is why President Obama has focused so squarely on clean energy RD&D, starting with the stimulus package in 2009 and continuing through to the State of the Union two months ago and the robust energy speech he gave last week at Georgetown.

Under the Recovery Act, the U.S. is investing more than $90 billion in clean energy, including energy efficiency, renewables, the smart grid, and advanced vehicles and fuels, among other things. When supplemented by private capital, that $90B is supporting more than $150B in thousands of clean-energy projects. 3

One example: two years ago, the U.S. had just 2 percent of global manufacturing capacity for advanced electric car batteries; by the end of 2012, that number will be around 20 percent, thanks to Recovery Act investments of over $2 billion, leveraging billions in private investment.

At the same time, R&D support isn’t enough; there must be a market for new technologies. That’s the impetus behind the President’s proposal for a new Clean Energy Standard, which will double the percentage of electricity we get from clean sources to 80% by 2035, and in the process create an enormous market for clean energy technologies. Among many other things, the President has also set goals – backed up by policy – to put a million electric cars on the road by 2015; and to increase the efficiency of commercial buildings (20% of our total energy use) by 20% within a decade.

Of course, these are tough fiscal times. But as the President said last week, it makes no sense to sacrifice the investments that will allow us to compete in the multi-trillion clean energy market. This is high stakes stuff and it’s not ideological. No one should want the U.S. on the sidelines as our competitors race for global economic leadership. The transformation of the energy base of the global economy is the great game of at least the next several decades. We need to be in it with both feet.

International. Let me turn now to the international front. If the key to meeting the climate challenge is national action, what is international engagement for? This is not a trivial question, because I think some of the conventional wisdom on this subject has been wrong.

That wisdom for years, including through the overheated and over-hyped lead-up to Copenhagen in 2009, was that we need a new treaty assigning countries legally binding international obligations to reduce emissions.

But this conventional wisdom always had at least two flaws running through it. The first was the assumption that a viable agreement of that kind was achievable. The truth is that it was never in the cards for Copenhagen to conclude an agreement in which all the major players – including developing countries like China, India and Brazil, among others – would agree to accept internationally binding legal obligations to limit their emissions.

What the developing countries meant when they said they wanted a new treaty was that they wanted developed countries to be bound by new treaty obligations to limit their emissions. This accorded with the long prevailing paradigm of climate negotiations, asserting that there is a firewall between developed and developing countries as they were defined in the 1992 Framework Convention, with all specific obligations to address climate change assigned to developed countries.

Now, in our considered view, this paradigm is flatly wrong as a matter of legal analysis. But, more important, the paradigm is unworkable. You cannot address the climate challenge by focusing only on developed countries when developing countries account 4

for around 55% of global emissions now and will account for some 65% by 2030. You cannot build a system that treats China like Chad when China is now the world’s second largest economy, largest emitter, second largest historic emitter, will be 60% largest than the U.S. by 2020, and has even surpassed France in per capita emissions. Instead, you need to start with all the major emitters, both developed and developing, accounting for some 85% of global emissions and build out from there.

In short, focusing negotiations on legally binding international obligations to reduce emissions never made sense. It was not doable.

On the other hand, this fact need not be a cause for despair, which brings us to the second flaw in the conventional wisdom: legally binding international obligations to cut emissions are not necessary. Don’t get me wrong, we are not opposed to such obligations if they genuinely apply to all the major players. But they are not really necessary; it is the national plans of countries, written into law and regulations, that count and that bind. That is the level at which any enforcement worth its salt takes place.

Some countries, particularly in Europe, argue that you need a legal treaty with international limits to give confidence to the markets. But I don’t think that’s true. What markets need most is stability, predictability and steadiness. That, I would argue, flows most of all from national law and regulation, because that’s what nations can control, back up and enforce.

At any rate, recognizing the flaws in the conventional wisdom, we favored a different approach – a bottom-up agreement in which countries would submit their national plans. Australia first gave voice to this so-called "schedules" approach in the spring of 2009. Under this approach, developed countries were expected to submit broad targets to reduce emissions on an absolute basis, below a stated baseline, while developing countries would submit planned actions to reduce their emissions on a relative basis. Thus, the content of the commitment would differ. But not the character of the commitment. It was not to be mandatory on one side and voluntary on the other.

As the Danes outlined their ideas in the fall of 2009, these submissions would not be international legal obligations; they would be what the Danes described as politically binding at the international level.

Copenhagen and then Cancun largely adopted this "schedules" approach. The approach was designed to allow countries to see what others were undertaking to do and to serve as a prod, goading countries to do more than they would have in isolation. This is important because climate change presents a classic problem of the global commons; no single country will want to take action if its competitors don’t.

Beyond the issue of targets or actions to limit emissions, international negotiations can also focus usefully on a number of other issues, which were captured in the Cancun agreement. For example, Cancun included important provisions on transparency and accountability. They go by an alphabet soup of acronyms like MRV, ICA and IAR, but 5

the point is simple enough: countries need to report clearly on what they are doing to implement their mitigation commitments, and there needs to be appropriate, though not intrusive, international review, both so that all countries have confidence that others are acting and so that the international community can see the level and the trajectory of global emissions.

Cancun also included provisions designed to provide financial and technology assistance to poor countries to help them develop on a low-carbon path, preserve forests and adapt to the impacts of climate change that are already unavoidable.

Going forward. So where do we stand now in the negotiations and what is the outlook?

The first priority for the work leading up to this year’s conference in Durban, S. Africa, should be to implement the key agreements reached in Cancun – to draft guidelines establishing a transparency and accountability system; to establish a new Green Fund; to set up a Climate Technology Center and Network; and to create a new Adaptation Committee. If we did this, building the new institutions needed for a pragmatic international regime, this year could mark a notable step forward.

Whether we will manage this, however, is by no means clear. This week, as we speak, the year’s first negotiator-level meeting is taking place in Bangkok for all 192 countries, and the early going has been marked by struggles over the agenda. Not as bad as bickering over the shape of the negotiating table, but not a lot better. The long-existing tensions running through these negotiations may have abated a bit, but they are still very much with us.

Most fundamentally, many developing countries, including large ones, continue to be fixated on preserving the firewall between developed and developing countries. As I have explained, we see this as both unjustified and incompatible with solving the problem. As I have said repeatedly, we are not going to be part of a new agreement with a fixed, bright-line, 1992-vintage firewall.

There are also ideas floating around that are more likely to divert and divide than to produce results. For example, some would propose to apportion the "carbon space" in the atmosphere and parcel it out based on so-called "historical responsibility." This is a non-starter in the real world for many reasons.

There is also the ongoing puzzle of the Kyoto Protocol, which still exists, though the United States is not a party, and still threatens to capsize the entire negotiation. In a word, developing countries insist on a second Kyoto period starting in 2013, while many developed countries refuse, since the U.S. isn’t in Kyoto and the emerging economies have no obligations. I will spare you the gory details, but this is a difficult negotiating issue which, at base, goes back to that old firewall problem. 6

The question for the UN climate negotiations, at the end of the day, is what parties want. The UNFCCC has the potential to be a cooperative, mutually beneficial platform – though not the sole platform – for combating climate change. It also has the potential to be a platform focused mostly on rhetorical thrust and parry, with a thick overlay of accusation and blame. The one vision is useful. The other is not.

We will continue working to support that first vision, always bearing in mind that the central mission of our discussions must be to meet the climate challenge, not to trade jibes or settle old scores. The ongoing challenge for the UNFCCC is to be the kind of body that remains relevant to that mission.