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Frank E. Loy Under Secretary for Global Affairs U.S. Department of State Remarks to Chatham House Conference on "Implementing the Kyoto Protocol," London, United Kingdom, June 14, 1999

Hot Air: Some Myths Hindering Progress
in the Climate Change Negotiations

Thank you, and good morning ladies and gentlemen.

About thirty-seven years ago, President John F. Kennedy warned the graduates of Yale University, "the great enemy of the truth is very often not the lie -- deliberate, contrived and dishonest -- but the myth -- persistent, persuasive and unrealistic." By obscuring truth, myth inhibits progress. I would like to use my time today to highlight eight harmful myths blocking progress in the multilateral climate change negotiations.

Myth #1: The United States lacks a serious domestic program to reduce greenhouse gas emissions.

The United States pursues strong domestic actions to reduce greenhouse gas emissions, and does not consider the Kyoto mechanisms a substitute for such actions. In 1993, President Clinton unveiled a five-year, $6.3 billion package of tax incentives and investments designed both to save energy and reduce emissions. The Climate Change Technology Initiative, as it is known, focuses on energy efficiency and new technologies, such as the next generation of high-tech automobiles, electric power generation and clean industries. In fiscal 1999, President Clinton and Vice President Gore secured more than $1 billion in funding for the CCTI. And they have requested an even larger appropriation for fiscal 2000.

Taken together, these actions will reduce significantly the growth of U.S. emissions. We must acknowledge that, as in most industrialized countries, overall our emissions continue to rise. More actions will be required to meet our Kyoto commitment, including the domestic emissions trading program envisioned by the President for the period 2008-2012. Our Kyoto target requires us to reduce emissions by over 30% from business-as-usual forecasts. That is in contrast to a 12% reduction from business-as-usual for all of Annex B. But make no mistake: the United States remains committed to its Kyoto target and further domestic action.

Myth #2: What made the Kyoto Protocol historic are its quantitative emissions reduction targets.

The Kyoto Protocol was an historic step toward the protection of the earth's climate system. As we know, developed countries agreed to ambitious greenhouse gas reduction targets. Meeting these commitments will require persistence, creativity and dedication. The Kyoto targets are significant milestones on the path toward more sustainable global economic growth.

Yet, standing alone, the Kyoto targets would represent little more than a momentary pause along a steep path of rising global emissions. The importance of the Kyoto Protocol, therefore, lies not in the emission reduction numbers, but in the structural elements of its climate control regime. I refer to the decision to include a basket of gases rather than just carbon, a multi-year commitment period, various forms of carbon sinks and, most importantly, the Kyoto mechanisms, which were designed to harness market forces to determine how and where to reduce greenhouse gas emissions. In sum, the greatest achievement at Kyoto was the creation of an architectural blueprint for sustained, broad-based, and cost effective international action on climate change.

The Kyoto Protocol, in particular the Kyoto mechanisms, allows countries the flexibility to achieve real emission reductions cost-effectively. The mechanisms also create incentives for the transfer of advanced technologies and capital to developing countries when they take steps to reduce their own greenhouse gas emissions.

Myth #3: So called 'hot air' represents the greatest threat to significant international action on climate change.

Yes, 'hot air,' to the extent that means false emission reductions, could undermine the credibility and environmental effectiveness of the system. The international community, naturally, should guard against false reductions.

The search for 'hot air,' however, can be somewhat quixotic and paralyzing. Which of the following sources of emission reductions produced 'hot air': The economic collapse of East Germany? The UK's pre-Kyoto economic, rather than climate-related, decision to transfer from coal to natural gas power generation? Slower than expected economic growth in France? Every nation's emission profile has been altered by events unrelated to climate change.

For this reason, every Annex B target was negotiated at Kyoto. Compromises were made and they, by their nature, depart from the ideal. Yet, unless one wishes to unravel Kyoto completely, one must accept all the Kyoto numbers.

The obsession with 'hot air,' furthermore, misses the forest for the trees. Climate change is a one hundred-year problem that may require a one hundred-year solution. We must create an environmentally and politically viable global system that produces rapid, sustained and significant global emissions reductions. We need to bring as many countries as possible into the system as soon as possible. In racing to extinguish the fires of climate change, we must not make the search for small leaks in our bucket our primary obsession.

Myth #4: Capping reliance on the Kyoto mechanisms is good for the environment and will stimulate 'domestic action' in the United States and elsewhere.

Restricting use of the Kyoto mechanisms would increase dramatically the cost of fighting global warming, thus wasting scarce capital that could be used to better protect the environment. A large body of economic analysis, including by the OECD, shows that the Kyoto mechanisms will deliver significant environmental gains at the lowest possible cost. Capping reliance on the mechanisms would gut these market approaches of their power and effectiveness. When U.S. firms pay to install energy efficient technology in another country through the purchase of emission credits that action reduces emissions just as much as more expensive investments made at home.

It is politically naive, furthermore, to believe that raising the cost of implementing the Kyoto Protocol would lead the United States to act more swiftly to limit its domestic emissions. Quite the contrary, an unnecessarily costly treaty stands little chance of U.S. ratification and, unless the United States ratifies the Kyoto Protocol and the Protocol enters into force, I believe the United States will not meet its stiff Kyoto emission reduction targets.

While we, in the United States, know from experience that market-based approaches to environmental protection work, we recognize concern about the difficulties of monitoring and measuring reductions. The United States is working to address these concerns by ensuring, for example, that the Kyoto regime has strong reporting and compliance provisions.

Those who advocate a 'concrete ceiling' on some of the Kyoto mechanisms, as a practical matter, seek to reopen the Protocol. Annex B nations accepted ambitious, legally binding, greenhouse gas reduction targets in exchange for the flexibility to achieve them via the Kyoto mechanisms, such as the "EU bubble" and international emissions trading. The issue of whether market mechanisms, especially emissions trading, should be capped was explicitly debated and rejected at Kyoto. Supporters of the caps attempt, in effect, to pocket the aspects of the Kyoto agreement they like and renegotiate the rest.

Myth #5: It would be unfair to ask developing countries to assume new international commitments.

Climate change is a global problem that requires a global solution. Developing country populations, unfortunately, have the least capacity to adapt to climate change. The longer we wait, the harder it will be to stabilize greenhouse gas concentrations at acceptable levels and the harder these countries will be hit.

To be sure, industrialization in OECD countries contributed enormously to increased greenhouse gas concentrations. These countries, including the United States, must take significant steps.

Acting alone, however, developed countries cannot stabilize global greenhouse gas concentrations, much less return them to pre-industrial levels. Scientifically, meaningful participation by developing countries is a necessity. Several large developing countries will soon become the world's leading emitters. Developing countries already produce 44% of global fossil fuel emissions. Deforestation and land use practices in the developing world have raised carbon concentrations too. Per capita energy intensity ratios in some, but not all, developing countries continue to rise briskly, despite the existence of clean technology. In the immediate future, 80% of new electric power generation projects will occur in developing countries. All of us should want those projects to use the latest cutting edge technologies.

Bickering about past responsibility, or about which countries should act first, detracts from our common cause of halting global warming. Each nation should take national and international steps commensurate with its capacity to contribute to the global solution. We should strive for common, but differentiated, action.

Myth #6: By taking on emissions targets developing countries would jeopardize their economic development.

As President Clinton has said, the United States believes that key developing countries should participate meaningfully in efforts to reduce greenhouse gas emissions. Primarily, this means that each developed country should assume obligations or undertake actions appropriate to its national circumstances.

For many countries, quantitative emissions commitments would help the climate and would aid their development. Emissions in these developing countries should be permitted to grow to meet their development needs, even under a binding emissions target. Developing countries with concerns about whether they could accurately predict their economic growth may wish to propose 'indexed growth targets' that would take economic uncertainty into account, such as by indexing emission targets to GDP growth rates or carbon intensity ratios.

We recognize that some developing countries, including many of the least developed countries, may lack the capacity to assume and implement legally binding emissions targets. For these countries, other types of action would be appropriate. All developing countries should explore opportunities under the Clean Development Mechanism, adopt sound national policies on energy and land use, and pursue other climate-friendly measures under the Framework Convention.

The negotiating histories of both the Framework Convention and Kyoto Protocol demonstrate general agreement on the need to mitigate climate change while allowing for continued economic growth. The United States believes this formula remains the key to securing developing country action.

Myth #7: Developing countries stand little to gain from the Kyoto mechanisms.

Economic development, not climate change, remains the primary concern of many developing countries. On one hand, this is understandable. Of what concern is climate change tomorrow to those who struggle for food, medicine and shelter today? (The distinguished Minister from India, Sir Suresh Prabhu, has helped us understand this point today.) On the other hand, those most vulnerable to the consequences of climate change, have a strong interest in assuring, through their direct participation, the existence, viability and success of an international climate control regime.

Developing countries are finding in the Kyoto Protocol avenues to pursue their development and environmental goals simultaneously. In the last year alone, business and government leaders have met in Africa, Latin America, Asia and North America to discuss the potential of the Clean Development Mechanism to channel advanced technology and major capital flows to the developing world. Those of you present in Bonn or Buenos Aires witnessed the enthusiasm of developing countries for the CDM. I met recently with a dozen CEOs from major Indian power and industrial companies who had traveled to Washington to discuss how the CDM could benefit their companies and India. In the months ahead, I expect developing country interest in all the Kyoto mechanisms to grow significantly.

Though CDM projects will stimulate investment in certain sectors, the potential of the CDM to produce economic benefit would be dwarfed by a well functioning trading market in certified emission reductions. Many developing countries will conclude that emission trading is in their interest. These countries will wish to preserve their option to use all the Kyoto mechanisms, including emissions trading, without artificial restrictions. Doing so will support their development and environmental goals.

Myth #8: The Kyoto Protocol is on its deathbed.

Some in the U.S. Congress and elsewhere have already heralded the death of the Kyoto Protocol. Though rumors of its demise are greatly exaggerated, to paraphrase Mark Twain, we are nearing a critical period. The absence of significant momentum over the next few years could preclude completion of the Protocol's rules in time for nations to meet their emissions reduction commitments.

Despite the persistence and pervasiveness of the myths I have sought to debunk today, I remain optimistic about the Kyoto process. Negotiating major international treaties requires time. The International Covenant on Civil and Political Rights required almost twenty years to complete and another ten to enter into force. As Michael Zammit Cutajar has already said, we are making good progress on many important operational elements of the Buenos Aires plan of action, including rules for the mechanisms, monitoring and compliance.

With regard to resolution of the more political issues I have raised, the Kyoto Protocol points the way. It can serve as a blueprint for sustained, serious and self-interested action by all countries, if we value its innovative architecture and allow its mechanisms to function effectively.

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