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Frank E. Loy, Under Secretary of State for Global Affairs and Head of the U.S. Delegation and Mr. Roger Ballentine, Deputy Assistant to the President for Environmental Initiatives Press Briefing by the U.S. Delegation to the Fifth Session of the Conference of the Parties to the U.N. Framework Convention on Climate Change (COP-5) Bonn, Germany, November 3, 1999

Under Secretary Loy: Thank you, my statement will be quite brief. I have been reading a little bit of some of the press reports and it strikes me that there are a couple of misconceptions -- at least as we see it -- which I would like to correct.

First, a number of stories talk about a trading proposal. Everybody in this room knows that we consider it important that there be maximum room for emissions trading in order that the United States, and a number of other countries, can meet the targets they took on at Kyoto... I want to make clear that we are not talking about a proposal of trading -- trading is in the agreement. Trading was very much a negotiated part of the agreement and it was agreed to by every signatory. It is increasingly understood by many, including a recent OECD report that I commend to you...that in fact if one has substantial trading, the costs of reducing carbon emissions, reducing carbon from the atmosphere, go down and go down dramatically.

The second misconception I would address is that we are so fixed on trading and that trading is the only way we propose to achieve our results. That is not at all the case. It is almost theoretically impossible that we would do that; it is certainly not our intention in any way. We will have a mix that comes from the kind of domestic actions we talked about yesterday a little bit and from trading. That has been our intention from the beginning. What we do oppose are any artificial limits, but that certainly doesn't mean that we would rely entirely on trading.

The third myth that I would point out, is that somehow or other trading is a U.S. issue, period. It is not. I think that not everybody may have realized that the European Union proposes to engage in its own trading -- with no limits, I might say. The EU bubble is a trade among nations of allocations and allowances. It is essentially a political form of emissions trading and we think it is a good idea. It's been in the agreement. It is permitted in the agreement and we raise no objection to it. But trading is not simply a U.S. issue.

Another misconception I would like to address briefly is that the talks here are at a stalemate. I read in one piece in the press that no progress is being made. I think we have made a good deal of progress in each and every one of the areas which is included in the Buenos Aires plan of action, and which is being worked on, sometimes more, sometimes less. In each and every case we have made progress. There is no big breakthrough. I am afraid for you that is a problem, you are supposed write the news and to write news about incremental progress is tough. So I understand the problem from the journalists' point of view, but the nature of this conference is to make significant progress in compliance, in the rules on the mechanisms, in the discussion of capacity building and the like -- and that all has been done. The result of that -- assuming that it continues in the path that it is going and is not in any way held back -- the result of that will be that we will be in much, much better shape to come to a successful COP-6. I would say that when you write your last story on this, I would hope that you will be able to say that the big news of this conference is they did what they were supposed to do when they came here, and that is to get this massive, complex negotiation in shape so that with the year of intersessional activity and one more COP, we can have a real agreement.

Question: Adam Tanner, Reuters: Some officials have described progress today and yesterday against Saudi obstructionism in some of the procedural issues. Can you talk a little about this? What are some of these core issues and what are the problems and what has been overcome?

Under Secretary Loy: The Saudis have, of course, a great interest in preserving the market, the long-term market, for petroleum. I think it is not an accident that the minister in charge of this negotiation is the Minister of Petroleum. They are right to be concerned about their future since such an overwhelming part of their national income comes from this one product: oil. There are sections of the Protocol which say that countries have to consider in some fashion...the actions by other countries to reduce carbon emissions [and the potential negative effect of these efforts]. So, it is understandable that the Saudis are so concerned. We have a great deal of interest in talking to them about whether there is anything that can be done to address that concern without, however, bringing this negotiation to a halt or slowing it down to a lame walk. I must say that in the process of this negotiation, there are times when it does appear that the interests of the Saudis are very, very different from the interests of almost all the other countries - and that all the other countries are very interested in coming to a very early agreement, and that the Saudi commitment to that is somewhat less urgent.

In the end, it is not right for the world to be held hostage to that, so we must find a way to work our way through [this], hopefully with the Saudis, so that the world can have a climate agreement despite the concerns of the Saudis. I have said this to the Minister and to others. The world is going to need petroleum for a long, long time, with or without Kyoto. Our aim is not [nor are] we in a position to bring the market for petroleum to a screeching halt or even to a very, very rapid decline. If we can slow the growth of the use of all carbon-intensive fuels and if we can, over time, find substitutes for them, that is what we are after. In the meantime, there is time for Saudi Arabia and other countries to find adaptations and necessary steps to take account of that.

Question: Adam Tanner (Reuters): A quick follow-up. Has there been a problem in overcoming the Saudi intransigence?

Under Secretary Loy: ...This is not the final day of the conference so I am perhaps speaking prematurely, I think we are going to come out with a series of resolutions and some of them I think would have been achieved more quickly and some of them might have taken a slightly different tone, in the absence of the objections of some countries. At the moment, it would appear that the views of the vast majority of countries, developing and developed, are that we must get on with this and that we have been able to overcome some objections that we've had, and some problems that we've had, with a number of countries who have had somewhat different views.

Question: Claire Nullis (AP): I also have a question relating to Saudi Arabia. This afternoon in his speech, the Saudi delegate was saying that they wanted some sort of financial aid to help them diversify their economy away from oil. They were also saying that industrialized countries should stop subsidizing their own production of, be it fuel, coal or natural gas. How would you respond to a) the request basically for money and b) the demand that industrialized countries should stop their own subsidies?

Under Secretary Loy: I think that actual payment to Saudi Arabia for trying to curb climate change in our own countries strikes me as a kind of a difficult political package to sell to our own people.

On the other hand, when Saudi Arabia says, let us examine policies that nations have that unfairly and in a biased way -- as I think that is the term he used -- single out a particular product, their product, maybe that is something that one must look at because trade-distorting subsidies, for example, are things that we frequently look at and we frequently consider to be not desirable. I do not have a particular view because I don't know the facts of that. I make the distinction between the willingness to look at policies that nations have that might be biased and in some fashion trade-distortive and a payment to Saudi Arabia. The latter it seems to me -- I don't think that that is in the cards.

Question: Albert Pilgram, Dutch Radio & Television: Sir, you reported progress on several issues, for instance, on the issue of compliance. Would you please be more specific about the type of compliance we are heading on, and what the United States is willing to accept?

Under Secretary Loy: I am going to be a little bit in over my head here if I should try to tell you exactly where that stands today, to tell you the truth. We have said that we think that we need a strong enough compliance regime so that there is validity and integrity to the system, and that one good way to achieve that would be -- in the case of a failure to comply with the target that you took -- would be to take the overage out of the subsequent period. There are other ways to achieve that result and some of them are better and some of them we would oppose; but that is one way that has actually received quite a bit of support. Where the thing stands this evening, I am not in a position to tell you.

Question: Chris Holly, Energy Daily (Washington): You have spent most of your statement today addressing questions that had been raised regarding the U.S. domestic action plan. The U.S. environmental community, however, continues to criticize the U.S. plan pointing, for example, to the fact that U.S. emissions in 2000 will be 11% above what they should be, were the country to comply with the Rio aim. In what way are the actions that you describe significant, given the fact that the U.S. has not come close to meeting, first, the 1992 aims, and certainly is not in a position to reach the Kyoto Protocol goals?

Mr. Ballentine: As I am sure you know, we have had extensive briefings this week, and as we do when we are back home, with the NGO community. There is certainly some validity to their criticism although I have had some trouble with some of the ways in which our domestic program has been attacked. We spoke recently with a number of the members of the community. One of their criticisms was that we were not taking a long-term view of how we transition from a carbon-intensive to a less carbon-intensive economy. It was at that point that I held up a publication which they put out which criticized us for not doing enough in the short term and for fussing around with only long-term solutions. I think a little bit of the criticism has been a little unbalanced, shall we say.

Let me more specifically address your question with another example. The target of the Kyoto Protocol which the United States took on in 1997 -- which I think was pretty much universally acknowledged to be a very tough target, a very strong and bold target -- it was never contemplated that that target would be achieved 100% through domestic action. We have never said it would. It was never understood to be that way. As Under Secretary Loy pointed out earlier today, the Kyoto Protocol itself was designed such that any country's target is not necessarily to be accomplished 100% though domestic action. We were no exception to that. It is very difficult to project a trend based on where we stand today on how we might get to the 2008-2012 target... you must look at longer term solutions over that time period. Just to give one example, our bioenergy initiative which we unveiled this year calls for a tripling of U.S. reliance on bio-based energy by the year 2010, smack dab in the middle of the Kyoto period. It is estimated that that initiative alone, by 2010, will get us more than 20%, all by itself more than 20% toward the Kyoto target. I am certain that the estimates that are being used to predict that we will not meet our target do not incorporate a long-term development such as that. I think the criticism that our emissions are too high today is perfectly fair. We know that, which is why the President and the Vice President are working so hard, rolling out these new initiatives and you will see more before we leave office. The real question is, do we have a plan to get to our Kyoto target by the first budget period, and the answer is that we absolutely do.

Under Secretary Loy: Just to underline that, part of that is the Kyoto [process].

Question: (Verena Schmidt, AP German Service): There has been some talk that the Kyoto Protocol might actually come into force without the United States. Do you have a view on that? Is that possible? Do you have any fears connected with that -- that the rest of the world might act without you?

Mr. Ballentine: Let me say first what we started out saying in our first press briefing. The United States is absolutely committed to the Kyoto process. It is because we are committed to finalizing and achieving a treaty that can be ratified and entered into force in the United States -- that is precisely why we are pushing so hard on the issues that we feel are necessary to get the most effective treaty possible. So, first, if there is a premise in that suggestion which you report that we are not committed, we wholly reject that. Second, let me say, that whatever countries might consider about that prospect, the United States will be a major player in the battle against climate change -- regardless. We are going to take action to reduce our emissions and move toward cleaner energy in the 21st century. We are going to do that - regardless -- but we expect to do it in the context of the Kyoto Protocol.

Thank you.

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