Robert McMahon: Hello, everyone, and welcome to this Council on Foreign Relations media conference call. I am Robert McMahon, editor of CFR.org. And the subject today is global climate change negotiations and the deadlock world leaders are confronting as the U.N. gets set to convene a summit next Tuesday the 22nd.
The latest issue of Foreign Affairs magazine, conveniently, has a package of articles exploring climate change and possible ways of emerging through the negotiating thicket ahead of the year-end conference at Copenhagen, which is supposed to negotiate the global -- next global agreement on cutting greenhouse gas emissions.
We're fortunate to have as our guest the author of one of those Foreign Affairs pieces, Michael Levi, who's CFR's senior fellow for energy and the environment, and director of the Program on Energy Security and Climate Change. Michael, welcome.
Michael Levi: Good morning.
McMahon: In his article titled "Copenhagen's Inconvenient Truth," Michael Levi says the odds of signing a comprehensive agreement in December are vanishingly small, but he does lay out a number of practical alternative paths towards the same end of cutting emissions in a meaningful way.
I'm going to kick off this call with a question. Then I'm going to open right up to our callers. We have a long list.
So Michael, just looking ahead to next week, U.N. officials are seeing the meeting -- the summit as crucial for displaying at least political will of major emitters toward real changes in cutting emissions. Otherwise, some fear we're in for a train wreck towards Copenhagen.
What should we be looking for next week?
Levi: Well, the situation coming into the the U.N. summit next week is pretty grim. There's been a steady beat of articles, leaks, statements in the last week or two, I think recognizing the reality that we have big gaps between countries, not just between developed and developing countries, but amongst the rich countries themselves, coming into Copenhagen.
The goal next week of those convening the meeting is to go beyond the major emitters, to go to about a hundred different leaders and to try to get momentum going for a deal at Copenhagen.
We should watch for a few things. We're not going to see any kind of big resolution on the key issues at the meeting next week, but we can learn a lot from how the different leaders approach their public presentations and also how they approach their private discussions, because one of the key points of bringing together world leaders is to be able to have them try to resolve issues one on one.
The big thing we should be looking for is to see how much space leaders open up for interim measures at Copenhagen, for things that are less than a grand global deal that appears to solve everything once and for all, but that moves things along and maintains momentum. There is real tension out there amongst those who think that we should ratchet up expectations in the hope that we'll have a breakthrough, and those who are starting to say that we need interim steps at Copenhagen to keep the momentum going.
We should also look for some clarity from a few countries on their own national plans, because ultimately what matters for cutting emissions is what countries do themselves.
So the Chinese have come out and said that they are going to talk about their national policies, new national policies, at the meeting. That will be interesting to watch. The Japanese, with the change in government, have announced a superficially more ambitious plan, or at least target for emissions cuts, but haven't really laid out any details. It would be interesting to see if they come out with anything.
And the other piece to watch, again, will be behind the scenes; in particular, I think, what happens between the U.S. and the EU behind the scenes. There is real growing tension between the United States and Europe. You saw, for example, Todd Stern, the U.S. negotiator, come out today -- yesterday -- talking about the possibility that Congress might bring in tariffs if the right sort of agreement and the right sort of arrangement wasn't reached. You're seeing talk from several European negotiators -- again, on background to the press -- complaining that the United States is trying to change the rules of the game too much. And it will be interesting to see the balance between the focus on the U.S.-Europe confrontation and the focus on the divide between developed and developing countries which ultimately will need to be bridged if we're going to get anywhere.
McMahon: Do you think there's an expectation -- there might be unreal expectations facing the Obama administration? It's coming in, it's its first U.N. General Assembly summit, its first -- and its first big summit on the sidelines on climate change. That, you know, it's signaled that it wants to be serious about mandating emissions caps -- yesterday, for example, it introduced some new vehicle emission standards for
miles-per-gallon by 2016. But is it facing a set of expectations maybe that are unrealistic?
Levi: I think the expectations for the administration are starting to shift a bit. Whatever the other implications of the health-care debate over the past several months, one thing it has made clear to folks around the world is the difficulty in moving significant legislation in the U.S. Congress. It's made quite -- been made quite clear that this was not simply a U.S. bargaining position on climate change, to say that it's difficult to move major economic legislation in the United States; it's become very transparent through the health-care debate that it actually is very difficult.
The challenge, and I think where people don't quite accept what the administration says, is on the front of providing finance and other support to developing countries to help them cut their emissions.
Europe has come out last week with a proposal to put up on the order of 2 to 15 billion euros a year by 2020. And based on the formula, that would expect similar numbers and frankly numbers toward the high end of that from the United States.
The U.S. domestic political debate is nowhere close to being able to deliver anything like that. There's still haggling focused on domestic efforts. That international piece, the U.S. isn't yet there.
The other place where expectations may not be quite in line with reality is when it comes to the form of legal commitments from the United States. When the United States makes a commitment on this sort of deal, it really binds itself in significant ways.
There are strong legal measures within the United States. Groups can sue the government to comply with these sorts of rules. The binding nature in Europe is quite different. And the binding nature frankly in some
other countries is quite different.
So there's going to be a lot of haggling about the form of commitment. And I think there is still a lot of misunderstanding about what the administration is trying to do on that front.
McMahon: Great. Well, thank you, Michael.
We're ready to open up, Operator, to questions from our callers.
Operator: Thank you.
At this time, we will open the floor for questions. If you would like to ask a question, please press the star key followed by the one key on your touchtone phone now.
Questions will be taken in the order in which they are received. If at any time you would like to remove yourself from the questioning queue, you may press star-two. Please limit your questions to one at a time. And again to ask a question, press the star key followed by the one key.
Our first question comes from Suzanne Goldenberg with The Guardian.
Hi. Thanks so much for taking this.
Just if you could, go back and sort of describe in a little bit more detail, you know, how -- you know, if we're headed towards a fiasco on Tuesday's summit. But also how big a setback are these statements from Harry Reid yesterday? What kind of signal is that sending?
Well, let me talk about the second point first. The statements you're referring to are ones that the U.S. may not or the Senate may not move climate legislation in 2009. Now, his spokesman has come out this morning and on some level clarified that but not much. I still think things are open.
Look, on the one hand, it's obviously a setback if the U.S. can't come with particularly concrete emissions targets to Copenhagen. It makes it very difficult in particular for the United States to come up with any kind of coherent, broad negotiating position.
At the same time, there has been a working assumption amongst a lot of folks that if the U.S. gets the target right, then the deal happens. And I don't think we're there. The -- to make a deal happen, we don't only need the right goals from developed countries, but we also need the right combination of commitment to action from developing countries, and support, financial and technological, from the developed world. Even if the United States nails down its targets, we're not there on that second cap. So this is -- the Senate action is not what makes or breaks the Copenhagen deal, but it does hurt the ability to have a decent outcome there.
Now, whether it will actually be this year or next year, I'd probably put my money on next year, though there are a lot of factors in play. Bottom line is, politically, it's going to be very difficult for a lot of senators to do cap-and-trade this year, particularly if they have their arms twisted on health care and find themselves in a political position where they are very wary of taking two very tough votes in an environment with very high unemployment still.
On the matter of what -- so what do we do if we're not going to get a grand breakthrough at Copenhagen, one of the first things to do is to recognize that. And that's really essential.
The image of a spectacular failure at Copenhagen, this from a very parochial American perspective, will look very bad on Capitol Hill. If we don't have legislation yet and senators look out and see, whether rightly or wrongly, a sign that the world can't make progress and that things are hopeless, they are going to be less likely to move legislation through early next year. So understanding and making sure that we don't have that very negative signal is very important.
The other piece is we have to remember that Kyoto -- we think of as a deal made in 1997 -- was really an -- something of an eight-year process starting in 1997, okay? We had a deal in Kyoto then.
The details were basically filled in in 2001. And then the political deals that were made to get people to actually ratify the agreement happened 2004 with ratification, and come into force in 2005.
I think we need to think about Copenhagen a bit that way, without quite so long a timeline. If Copenhagen can set some basic parameters for negotiations, a global goal in the long term, a sense of when global ambitions need to peak and a basic idea on the division of labor between developed and developing countries, then structure a set of negotiations going forward. Focus on filling in things in -- a decent bit of detail, then we can have success. I think of this sort of as a Copenhagen round. That's not necessarily promising if you look at what trade rounds are like, but I actually do think it has the greatest chances for eventual success.
Questioner: Okay. Thank you.
McMahon: Thanks for that question. Next caller, please.
Operator: Our next question comes from Lane Greene with The Economist magazine.
Questioner: Hi, Mike. How are you?
Questioner: I'm working on a story this week about unlocking private financing for cutting emissions in the developing world. There are a group of investors announcing today that they are going to -- they represent trillions under management in the rich world, and they're looking for global leaders to announce a cap on emissions and give some predictability to a future framework where this is going to be taken seriously so that they can start finding investments.
And the idea is that the relatively smallish amounts of rich money -- or public money available can be leveraged into greater numbers, more billions, by using them to insure, essentially, risks -- political risk, currency risk. So that a Dutch pension firm wants to invest in a Malian wind farm; the regional development banks, the World Bank might step in and unlock those trillions so that money can flow to where, you know, the carbon cuts are the cheapest.
I think this sounds quite promising, and so I'm wondering if there are reasons to be skeptical or if it's something that you would take seriously as well.
Levi: I think there are two important points, Lane, in what you brought up. The first: As you say, they're looking for a cap so that they know what to do. I think it's important to remember that a global cap doesn't actually tell you what the policies will be that are in place to allow these people to make investments in areas that are profitable for them. What matters are the national policies that are put in place -- in some cases, maybe cap-and-trade systems; in some cases, maybe other policies -- that incentivize private investment. Because certainly public investment will be grossly insufficient to deal with the problems that we're looking at.
So I think their basic point that we need a broad political signal is important.
I don't know that that needs -- signal needs to be sent through some sort of global cap. It's not, you know, sufficient by itself, and it's not necessarily what needs to happen.
The other point you bring up I think is a very important one, that policymakers miss a lot, and that's the one about risk. Investors don't only look for the highest expected return on their investments. For a lot of them, what matters is ensuring that there isn't enormous risk; and particularly, as you say, for pension funds, who are interested in a fairly reliable return for their -- the sorts of people that they're managing money for.
But again, that points to thinking beyond simply a price mechanism for carbon. I mean, a cap -- a cap-and-trade system or a carbon tax -- which again can be very useful, depending on where it's implemented -- that just uses the overall return. It doesn't -- it is not necessarily the most direct way of getting at this issue of risk. So other government measures that provide certainty for investment, whether it's feed-in tariffs for renewable energy, loan guarantees for investments in low-carbon technologies, or a variety of things along those lines -- some of which could be national, some of which could be coordinated at a multilateral level -- might incentivize investment better.
And I think that an effective global agreement will be one that actually looks at some of this in a decent amount of detail and that sorts out cooperation -- again, not just on overall caps, but on some of these other mechanisms that make investment in low-carbon alternatives as attractive as possible. That's the kind of detail we haven't really gotten into in a significant way, particularly on the U.N. track. But -- and that will take time to work through, but that could be really invaluable.
McMahon: Lane, thanks for that question.
Next question, please.
Operator: Our next question comes from Daniel Anyz with The Financial News.
Questioner: Hello. Thank you for taking my question, which is a kind of typical Czech one. But one of the leaders at United Nations conference will be Czech President Vaclav Klaus, who is a famous global -- skeptic concerning the global warming. And I wonder how his voice is important. Is it something which is out of serious discussion, or is there any kind of movement seeded by this -- by his opinions? Because two years ago, he came out of the United Nations conference and he said to Czech media, "You would be surprised how many leaders in private conversation told me that I was right."
So I wonder whether his voice is really important or it's not.
Levi: I think almost all global leaders are focused on sorting out an arrangement that helps us move toward a low-carbon economy and reduces the risks of catastrophic climate change. His voice will certainly be heard in the discussion, but I don't think that it is part of the mainstream discussion that is going to be happening. And I don't think, frankly, that it is going to have significant influence on what happens at the U.N.
McMahon: Thanks for the question. Our next question, please.
Operator: Our next question comes from William(sp) Murray with Energy Intelligence Group.
Questioner: Yes, thank you. I was interested in your comment about how serious the U.S. may be about changing the structure of the negotiations. I know that the story that came out yesterday in The Guardian talked about this increased tension. And does this really have the potential to bung up the works between negotiations with the EU and the U.S.?
Levi: I think it really does. The United States, as I understand it, wants to make sure that all of its actions are credited to it as part of its effort under a global agreement.
Right now, if you look at the legislation that passed the House, you have several important components. You have a cap-and-trade system, including carbon offsets internationally. But you have a variety of other measures aimed at promoting cuts internationally in emissions. The most prominent of those is a substantial multi- billion-dollar-a-year fund to promote avoided deforestation internationally. The goal is to incentivize cuts in global deforestation equivalent to about 10 percent of current U.S. emissions. And U.S. negotiators would like for things like that to be accounted for.
They'd like to be credited for those efforts.
The Kyoto model essentially only allows you to be credited for efforts abroad if they are financed through carbon offsets: currently through the clean development mechanism; in the future, potentially through a sectoral crediting mechanism.
So that's the crux of that particular debate. I think what the U.S. negotiators are saying is, the point is to drive finance to critical areas in the developing world and in the most effective way possible.
If that is through carbon trading, then that's great. If it's through a fund like this forest fund, then we should be doing it that way instead. And the structure of the agreement shouldn't bias things in favor of using carbon trading to drive action in the developing world.
So I think that is the key. That is a key piece of that tension. I think it's important. The other part is the nature of the commitments from developing countries. There are a lot of folks on Capitol Hill who frankly care more about the nature, the legal nature of the commitments -- from countries like China, India -- than about the actual content of them.
I'm not sure that that's the right focus. But that is the reality on Capitol Hill. So they want the legal
nature of their commitments to be similar to the legal nature of the U.S. commitments.
The Kyoto structure creates two very different types of commitments: one for developed countries, where these are legally binding, and one for developing countries, where they are entirely voluntary.
That is the other significant division between the United States and Europe. That's sort of encoded in this whole, do we do Kyoto II or something else, going on.
McMahon: Thanks for that question, William.
Next caller, please.
Operator: Our next question comes from Jim Angle with Fox News.
Thanks for doing this. My question is twofold.
One, what can the administration really do if it doesn't have some kind of guidance from Congress beforehand, including a bill passed by the House and the Senate? How can the administration know exactly what it can promise?
And secondly how complicating is the talk of the tariff issue?
Levi: Those are both great questions.
Look, I think, the administration understands that it can't do a final deal by any stretch, at Copenhagen, in part because of the lack of clarity from Congress, which means that it will probably focus on broad goals, like the sorts of things that were the focus of the G-8 meeting this summer and the major economies meeting this summer, and on hammering out the answer to the last question which was, what is the legal form of an agreement, and then structuring a negotiation going forward so that the House and Senate can feed in.
I think one step that would be extraordinarily useful would be to form a very much official Senate observer group that would really participate in the negotiations. Historically that was very effective in helping with arms control and nonproliferation negotiations. There was a standing Senate observer group that joined in with the negotiations, and that really created a sense of joint ownership between the executive and legislative branches. That could be a positive step. And it will be interesting to see if perhaps something like that is
brought into place before Copenhagen.
But the administration is very aware that it shouldn't get out ahead of Congress, sometimes perhaps a little bit too cautious, but I think that it will be -- it will be careful because of -- because of this.
On the trade measures issue, I think, look right now at -- as long as we don't have any climate legislation, we're not going to have trade measures that might go along with it. The danger is that if -- so I don't think that complicates the actual discussions in Copenhagen enormously. The danger is, if Copenhagen blows up and Congress still goes ahead with cap and trade, there's a very high likelihood of trade measures coming into place sooner rather than later if Congress is seeing a signal that the world is not going to move forward.
And that, of course, becomes a self-fulfilling thing at some level. I think the trade measures don't actually accomplish that much of substance, because they only apply to a small chunk of global emissions, but at the same time, they could be a major political irritant.
We have all sorts of other approaches to helping the vulnerable industries during a transition to a carbon-constrained economy. In particular, there are provisions in the House bill for providing free emissions allowances, essentially something to soften the cost of compliance with the regime while maintaining the incentives to cut emissions. That would apply to U.S. firms rather than having the U.S. government slap tariffs on foreign firms.
It is not something that we can do for several decades, but it's something we can do in the near term that helps with the transition without causing the international friction that trade measures would bring about.
Questioner: Thank you.
McMahon: Thanks for those questions.
Operator, next caller, please.
Operator: Our next question comes from Kim Landers with Australian Broadcasting.
Questioner: Hello. I wanted to ask that if the United States is unlikely to pass legislation before the Copenhagen meeting, should a country like Australia, for example, wait to pass our own legislation to set up an emissions trading scheme until after Copenhagen II?
Levi: I don't think we should be starting a race to the bottom here. It's not advisable for the United States to wait until after Copenhagen to pass its cap-and-trade legislation. It may be the reality.
But I -- it strikes me that individual countries should be moving forward as much as they can regardless of what's happening at Copenhagen. As I've said a few times, what matters most is what individual countries do. The point of an international deal and international negotiating process is to help build confidence and allow countries to do more. It would be a shame if the international negotiating process actually encouraged countries to do less.
So I don't think that the peculiarities of the U.S. process should mean that a country like Australia holds back on its own domestic efforts.
McMahon: Thanks for the question.
Next question, please.
Operator: Our next question comes from Cheryl Hogue with Chemical Engineering News.
Questioner: Hi, Michael. My question goes back to a couple of things you said early on, which is about -- you said the political debate is nowhere near the point of coming up with some numbers for financing at Copenhagen.
And also, this idea of if we're not going to have a specific cap- and-trade deal done at Copenhagen, would this pave the way for a Copenhagen round of future negotiations -- do you think that the U.S. is willing to put any kind of figures out or ranges? And how about other developing -- developed countries on this issue, other than the EU?
Levi: Well, the EU are the only ones with significant numbers out there on finance, and even those vague in certain ways. They're very wide ranges.
The -- you know, the previous Japanese position was that it was going to have a certain domestic cut and that it was going to announced its international commitments -- financing commitments later. The new Japanese government has now said that it will do a much more ambitious cut. But implicit in that is that part of that will probably be met through carbon offsets, and that means international financing.
So it might be -- we may find some clarity next week on the Japanese position. I'm not sure. It's not clear that they've worked through it -- (audio break).
Levi: (In progress after audio break) -- find the significant financing to be palatable to the U.S. Congress -- in fact, with the U.S. government -- there's going to have to be a lot of clarity on how that money will be deployed, how it will be spent.
I don't see funds of many billions of dollars a year being pledged generically to assist with transition to a low-carbon economy globally. Much more likely to have arrangements where there are specific commitments from major developing countries, with very well- defined contributions from those countries themselves, and then requests for additional support targeted at particular measures. That's the only way to sell things in the United States, is to make it very clear that there are specific outcomes coming with the money and that the effort is shared between the developed and developing countries.
Questioner: Thank you.
McMahon: Thank you. Mike, I just want to note, next week's U.N. summit, I don't believe there's an outcome document, per se, emerging from the climate summit. But the follow-on meeting, the G-20 meeting in Pittsburgh, might have something more concrete. Is there -- can you talk a little bit about what we might see emerging out of the Pittsburgh meeting?
Levi: Well, the G-20 summit will have finance -- you know, will be focused on finance in particular. The general sense is that there won't be an enormous amount on climate change. The background documents for the meeting were fairly generic.
What we might see is something on -- something on governance for climate finance. There's a lot of interest and debate over who should be running the money. Is the World Bank the right forum? Is the OECD the right forum for monitoring the flows of carbon -- of climate finance, because they monitor other flows of development assistance? So we might see some movement on there, but I don't think on actual numbers.
The other interesting piece that's being discussed for the G-20 that the U.S. has put out there is agreement to phase out energy -- fossil-fuel subsidies globally. And there are huge fossil-fuel subsidies, primarily in the developing world, in Asia and in the Middle East, particularly in oil-producing countries, that encourage over-consumption of fossil fuels. Now, some of these have legitimate social goals of expanding access to energy that need to be managed. But I think there will be a decent push from the United States there.
I don't expect resolution on it, because it's a tough thing for some of the developing countries to agree to. But I think it will be useful and important to have that put on the agenda in a serious way -- I think for the first time at such a high level.
Okay, operator, our next caller, please?
Operator: Our next question comes from Lisa Friedman, with The ClimateWire.
Questioner: Hi, Michael. Thanks for doing this. My question was on border adjustment tax, and you pretty well answered that.
But maybe you could talk a little bit more, logistically -- I mean, what a -- what a plan B, what a Copenhagen bis would look like over the
course of 2010. I mean, so they come up with a framework, let's say, in Copenhagen in December, and what plays out internationally over 2010? How do you see that working?
Levi: Right. Well, so first let's be clear for the broader group here, who -- not everyone is as deeply, I think, immersed in the negotiations as you are.
Questioner: Right. I'm in the lead. (Chuckles.)
Levi: So Copenhagen bis is essentially a follow-on to the Copenhagen conference. It's not the next annual conference, but would be sort of an extension of the Copenhagen conference in December. I expect there to -- there may be such a thing, but frankly, that would be still about sorting out the basic political parameters and the structure of a negotiation, the legal form of an agreement. Even -- it's -- and that's something that you would expect to have sort of mid-year in 2010.
I don't think that the details can all be filled in, frankly, by mid-year in 2010, unless the agreement is much looser and less formal than past -- than past agreements. I think what you essentially have is, again, the same kind of regular negotiations like we've been having, but with a clear sense where countries come to the table with specific proposals of what they're going to do, with requests for what assistance they need, and where we then negotiate over those details. We don't have those things put on the table.
Different countries have talked about having sort of space in a final agreement for schedules and national actions, whether -- you know, different variations on the theme, whether it's the U.S. proposal, the European proposal or the Australian proposal. But a lot of that has been described as something that would sort of be done after an agreement. I actually think that, to make it work, that has to be done -- a lot of the negotiation over those schedules has to be done as part of bringing an agreement into force -- frankly, just like it's done in a lot of trade negotiations.
McMahon: Thanks for the question. Next question, please.
Operator: Our next question comes from Neil MacFarquhar with The New York Times.
Questioner: Hi. I'm sorry, I joined a little bit late, so you might have addressed this. But you talked about how, you know, in the midst of economic -- and worries about jobs, it's kind of hard for the Congress to pass this kind of legislation.
And I'm just wondering, just looking at -- U.N. officials are a little bit gloomy about prospects for getting Copenhagen finished by December, and they're hoping momentum comes out of this meeting on Tuesday. But given the fact that the domestic worries seem to take precedence, is there any real hope for momentum, especially since the U.S. seems to think that bilateral negotiations are more important?
Levi: Well, I wouldn't say that the U.S. thinks that -- I'll come back to your broader question in a moment. I wouldn't say that the U.S. thinks that bilateral negotiations are more important. I think they think that they're essential and that they're a key part of the overall approach, but that each of the different forms has an important part to contribute.
Now, there's a range of sort of gloominess and positiveness amongst U.N. officials. I don't think momentum is frankly what we need, because we don't know what to do with that momentum. Too much momentum without a good idea of where you're going leads you to a very big and messy accident, and we need to be careful about focusing on momentum without a sense of direction.
I said earlier on as well that it's not just a matter of getting the U.S. legislation in place. It's also that we haven't really started to bridge the gap on financing and technology support for developing countries and on the legal nature of the commitments from developing countries to emissions cutting -- to emissions-cutting actions.
So I am not optimistic that next week's meeting fundamentally changes the negotiations and leads us to a grand deal with the Is dotted and Ts crossed in Copenhagen this year.
I think the meeting next week could be constructive if it helps redefine expectations and reorient the discussions, toward something that is constructive, that helps the process along, that may not finish everything off this year but that continues momentum and a sense of positive direction, well into next year, when it will be needed to help U.S. domestic legislation and domestic efforts in other countries move forward.
McMahon: Thanks very much.
Next caller, please.
Operator: Our next question comes from Kristen Saloomey with Al Jazeera English.
Questioner: Hi, yes.
I'm wondering if you could talk about -- you know, at the same time this conference is happening, behind the scenes at the U.N., there's a lot of negotiating on the continental shelf, Law of the Sea issues,
development in the Arctic.
Do you see any conflicts, how the conflicts are playing out, as countries try to develop new sources of oil, how that is conflicting with their efforts to deal with climate change? I'm just wondering if you could comment on that.
Levi: You've just basically described the expertise of a fine colleague of mine. So I'd encourage you to look at Scott Borgerson's writings, both a recent study on the Law of the Sea and a Foreign Affairs article on the Arctic.
Look, I -- you know, it's a mixed bag. So the Arctic is obviously opening up
as a new region for competition, as ice recedes, and as shipping routes open up and new resources become more economic and more reliable to extract. And having a stable legal framework for dealing with that is very important.
I don't think that this gets in the way of action on climate change in any way. I think frankly it's one of the pieces that is waking global leaders up to the need to, you know, get a handle on what's going on with climate change.
But it also -- it also reminds us frankly, and I'll take your point much more broadly, we've had this entire conversation so for this morning, about mitigation, about cutting greenhouse gas emissions. But there's a big part of both the negotiations and simply policy -- national policy, international cooperation -- which is adaptation.
There are unavoidable effects of climate change that we're going to need to deal with. And for a lot of the countries involved in the U.N. negotiations, that's actually the most important, immediate part of the discussion.
And frankly, it's one of the places where we might be able to get some real progress at Copenhagen. At some level, agreement on providing support for the poorest countries in the world in dealing with the effects of climate change can be separated from the broader negotiations over cutting emissions. And if we can make progress on some of those fronts, I think it's important both in demonstrating good faith in making sure that a lot of countries get what they want out of the negotiation, and also in dealing with genuine problems that the world needs to confront.
McMahon: Thank you, Kristen. Next question, please.
Operator: A quick reminder to everyone. If you would like to ask a question, hit the star key followed by the "1" key to enter the questioning queue.
Our next question comes from Cameron Joseph with the National Journal.
Questioner: Hi. Thanks for doing this again. But looking at -- all right, so assuming if climate -- cap and trade gets pushed back after the new year, what's the best-case scenario for Copenhagen? What's the best thing that could be accomplished during the conference to lead into the Senate possibly passing a bill after the new year?
Levi: I think the key is for there to be a sense that there is momentum going forward, that this is -- that the international process is not being entirely derailed, because if there is that sense on Capitol Hill, there will be enormous reluctance to move anywhere on cap-and-trade legislation.
I think it's also going to be important for the administration not to box the Senate in. The Senate clearly appreciates its own prerogatives and wants to make sure that it is doing things because it wants to rather than because something has been imposed on it. So, frankly, those are the two most important pieces at Copenhagen.
The worst outcome would be some sort of arrangement where the Europeans and Japanese decide that the United States is hopeless and that they are going to go ahead with something that looks very much like Kyoto and possibly drag the U.S. along later or possibly not have the U.S. be part of it. I think that would have negative ramifications on the Hill to an extent much greater than a lot of negotiators from other countries appreciate.
McMahon: Great. Thank you.
Next question, please.
Operator: Our next questions comes from Christina Bergmann with the German International Radio.
Questioner: Yes. Hello, and thanks for doing this. Could you please talk a little bit more about the tension between the United States and the EU, the European Union? The expectations throughout the Obama administration definitely are very high to do something constructive. So what are the key points of disagreements? And do you see any agreements?
Levi: Sure. I think there are three key points of disagreement between the U.S. and Europe. And there's, of course, variation within Europe, as well.
The first point is on the near-term emissions targets for the United States. The U.S. and Europe are on essentially the same page as far as where they want their emissions to be in 2050. They're actually on roughly the same page in terms of where they want their emissions to be in 2030. But Europe doesn't like the numbers that the United States is putting out for 2020 for where its emissions will be then.
So that comes -- that is potentially resolved in part through different accounting rules that we talked about earlier, and that's part of the tension over the Kyoto -- the Kyoto format. The U.S. might be able to give a token, small amount, but frankly, if you look at the science of it, small tweaks in the 2020 target don't actually make a huge difference for the atmosphere so long as the 2030 targets and 2050 targets are correct and so long as the investments in innovation and deployment are happening now that need to that would take the United States on the right path.
The second area of disagreement is on financing for developing countries. Europeans have put out significant numbers. They have caused real heartburn in the Obama administration and amongst friends of the Obama administration, because I think the Europeans know that the U.S. can't come with similar numbers to Copenhagen. So that is a problem that is going to need to somehow be resolved, presumably through private conversations in the next few months.
And the third disagreement is, again, on the (legal form ?) for developing country commitments. The way the Europeans have laid out their proposals on finance, it essentially says if you don't want to do much, we won't give you much money; if you want to do more, we'll give you more money. That's fine, but the missing -- the implicit part in there is that there's a willingness to accept an agreement where they don't actually do all that much.
If we want to get anywhere close to this 2-degree Centigrade goal that people talk about, you're going to need to have ambitious actions; not emissions caps, but ambitious actions from the big developing country emitters, like China, India, Brazil, Indonesia, Russia, depending on how you categorize it. We're going to need to have those. And I think there still is tension between the U.S. and Europe about how much -- how central that is to getting an agreement.
Where there is broad agreement, I think, is in the sense that we need to be cutting global emissions in half by mid-century; that the energy sectors in the developed world should be essentially decarbonized by mid-century, and that we need near-term investments to get us -- to get us on that path.
I think ultimately European negotiators will probably be willing to accept slightly less ambitious near-term -- slightly less ambitious-looking near-term targets from the U.S., so long as the medium-term targets are acceptable. The other pieces; it's hard to see exactly how they will be resolved. That will be a matter for bargaining.
McMahon: Michael, one of the mantras that came out of the armistice control negotiations in the Cold War was, trust but verify. You get into verification a bit in your Foreign Affairs piece.
Is one of the byproducts of these meetings perhaps an agreement on verification that will really have some teeth?
Levi: I think that could be very important. We have a confidence problem on a variety of fronts. Various countries are not confident that other countries will cut their emissions.
But also if we're going to have a scheme where some countries provide support, to others, the countries providing the support will need to have confidence that it is producing action. And the countries that need to go ahead and take action need to be confident that they're getting the support.
All of that depends on a robust scheme for what's called, in the jargon, measurement, reporting and verification or MRV. I think that's actually a really critical part of an agreement.
It provides transparency. It helps build confidence. And it's again something that at some level can be separated off from the nature and ambition of particular commitments under a deal. So that is one piece that could probably move somewhere at Copenhagen. I talk about it a bit in my Foreign Affairs article.
If there's some basic agreement, on the parameters of an MRV scheme -- for example, agreement that all countries would be subject to it, not just developing countries; that it would monitor actions that aren't just emissions caps and emissions trading but other national policies and other provision of finance and technology support -- that can also really help shape international efforts in a productive way.
We tend to focus on whatever it is we can measure, which under the Kyoto Protocol means caps and carbon trading. If we expand the set of things -- that's being measured, reported and verified -- we really expand our sense of the tools that countries can bring to bear, in dealing with the problem.
Operator, next question, please.
Operator: Once again quickly to ask a question, please press the star key, followed by the one key. Again that's star-one. Our next question comes from William Murray with the Energy Intelligence Group.
Questioner: Yeah, thanks again.
I'm interested -- you know, we talk about Plan Bs in terms of Copenhagen. But there's also a weaker version of a Plan B in the Congress, which could happen next year, in which we don't really have a carbon market passed through the Senate but instead have renewable fuel standards, which could be strict and have some effect.
How negative is that for the long-term negotiations at the EU -- excuse me -- at the U.N.?
Levi: Well, firstly I'd say that if it were -- if legislation that is not cap-and-trade is going to happen, there's a very good chance it would happen this year rather than next year and wouldn't only be a renewable standard -- a renewable electricity or clean electricity standard but also energy efficiency measures. Energy efficiency is the cheapest, sometimes better than cheap, option of cutting emissions in the near term, and you could see a significant effort on that in Congress.
Now, how that contributes to -- to an international agreement is up in the air. Other countries do have sort of set a cap-and-trade system as a benchmark of whether the United States is serious. And the U.S. will have a more difficult time politically if it doesn't -- if it seems to have abandoned a cap-and-trade system, at least for the indefinite future.
The other challenge is that there is a basic understanding that developed countries in any kind of international deal will come with a total number of where their emissions are going to be. And the U.S. government can have its analysts put together various pieces of legislation and do projections on where that will bring U.S. emissions and then take that number to Copenhagen. The question is, though, how confident can they be in those predictions, how willing will they be to put them into an international deal if they might be held to them later, not necessarily through international law but through, again, domestic lawsuits and this sort of thing. So there will be much more nervousness about taking hard numbers to an international negotiation if there is not some sort of economy-wide cap system in place in the United States.
I'd also, by the way, throw in one more possibility that's in between the two. Right now we're talking about an economy-wide system versus something that's based strictly on bottom-up policies, like renewable standard and efficiency standards. There's also a possibility that you might see something like a power-sector-only cap-
and-trade system or a -- like there is in the Northeast now, or a stationary-source-only system that -- which would be power in industry, like the European emissions-trading scheme.
That's not sustainable on a long-term basis, especially if you see cars getting plugged into the electricity system. But in the near term, that may be an option. There's a lot of hostility toward it in some quarters, but I wouldn't write that off as a
McMahon: Thank you for the question.
Next question, please.
Operator: Our next question comes from Daniel Annies (ph) with The Financial News.
Questioner: Yeah, hello. Thank you again. Yeah, there was a -- recently a story in Washington Post basically comparing Senator Joe Lieberman, Kerry and John McCain, saying that John McCain somehow withdrew from the public discussion on climate bill. And I wonder, is it because of political reasons that this is some kind of reaction to the public opinion in USA, which is not really, like, set on the issue of climate change?
Levi: I'm not going to try to read John McCain's mind. But I expect that -- he has been a long-term supporter of action on climate change and of mandatory emissions cuts in the United States. I expect him to be a key player in Senate negotiations and Senate discussions on a cap-and-trade bill. I think he has very well formed views on what he thinks should and should not be in a bill. He was not delighted, you know, as -- by the House bill, at least if one judges by his comments to the press. But I would expect him to be engaged in the process going forward.
I think Joe Lieberman is probably a very reliable supporter of a cap-and-trade scheme that would come out of the Senate.
Questioner: Thank you.
McMahon: Thank you. Operator, next question, please.
Operator: Currently at this time there are no more questions.
McMahon: Okay. I would just wrap up. There's a couple more minutes on the call. Just a final question, which is, again, something that Michael refers to in his Foreign Affairs piece, which is the -- you know, there's -- 2050 is a deadline; seems way down the road, but, in fact, there are changes that need to be enacted now to help realize some of the goals for 2050, including infrastructure.
And Michael, maybe just as a sum-up, maybe you can include some things that you see that need to be done now that don't necessarily have to be part of even the Copenhagen process, but in terms of infrastructure changes, starting with the U.S., the emissions leader.
Levi: Right. Well, now, China is, of course, the emissions leader by a hair.
McMahon: By a hair, sorry.
Levi: But look, most of the infrastructure that we put in place in the next decade is still going to be around in 2050. So our decisions now determine what the energy world will look like in 2050.
It is a huge -- the global-energy system is enormous. It's slow- moving. It takes a long time to change. That's why we need to get moving now and why, when we talk about these 2050 goals, they actually do matter.
I mean, in the United States, there's a lot going on through various investments, particularly through the stimulus package, through regulatory moves that are going to prompt shifts in new directions; for example, toward lower-emissions vehicles and electric vehicles; different changes to the grid that encourage greater use of renewables; investment not just in R&D but in demonstration projects.
Most of the innovation in energy is not going to come in some guy's garage. It's going to come through expensive large-scale public demonstration projects, through basically economies of scale learning curve driving down costs simply by doing things many, many times and learning as we go along. So it's not something where we can sort of wait and wait and wait for the breakthrough and then move ahead.
And that's what we need to see from a wide range of countries in Copenhagen, whether it's the United States mandating expanded use of renewable power and of carbon capture and storage; whether it's China requiring a range of things -- and they are moving forward on a lot of fronts -- it's these steps in each individual country that will make the emissions cuts that we need through mid century affordable and feasible.
McMahon: Well, thanks very much. And thanks, everyone, for taking part in this CFR media conference call ahead of next week's U.N. Summit on Climate Change. And special thanks to Michael Levi, CFR senior fellow for energy and the environment. Thanks, everyone, and have a good day.
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