Remarks of J. Brian Atwood

This is an archived USAID document retained on this web site as a matter of public record.
Remarks of J. Brian Atwood
University of Massachusetts
"Global Climate Change: The Developing Country Challenge and U.S. Leadership"
Boston, Massachusetts
October 6,1998

Thank you for that kind introduction, it is a pleasure to be here. Today, I would like to discuss a specific issue: climate change. But I would also like to also put this particular issue in the larger context of the importance of U.S. leadership internationally.
Standing here at the edge of Boston Harbor I cannot help but be reminded of the debate surrounding the Harbor clean-up that took place about ten years ago. That debate, like the climate change negotiations today, focused in part on the issue of responsibility and leadership-- who was responsible for the problem, who needed to lead the clean-up and, once work had begun, who deserved the credit. In Boston ten years ago this debate sometimes overshadowed the fundamental environmental problem; the same is true today in the climate change negotiations.
Negotiation of the climate change treaty is one of the most complex international negotiations ever, involving critical decision-making worldwide that will affect global economic development and investment in all sectors. As we undertake this negotiation, however, we need to make sure not to lose sight of the challenge we are trying to overcome.
Global climate change is the most far-reaching threat to sustainable development in Asia, Africa and Latin America in the coming century. The nature and scale of the climate challenge is so vast that it threatens to alter all aspects of life on the planet.
I would like to discuss today the role that developing countries play in the climate equation. Before doing so, however, I would like to set the stage by touching briefly on what scientists are telling us about this problem.
The evidence that human activity is altering our climate is compelling. Globally, eight of the ten warmest years in recorded history have occurred in the last decade. July 1998 was the hottest month on record. Every month this year has set a new record for average global temperature.
A panel of over 2000 scientists has concluded that we can expect average global temperatures to increase by two to six degrees by 2100, with a sea level rise of as much as three feet.
With increased temperatures, we will face more severe weather and more droughts as a hotter planet experiences greater rates of evaporation. Vector-borne diseases, like malaria and dengue fever, will spread, and are already doing so.
And we will see more and more of the drought-induced fires like those in Florida, Indonesia, Brazil and Mexico this past year. In a vicious cycle, these fires will intensify global warming by releasing the carbon stored in forests. The Indonesian fires released more carbon into the atmosphere in three months than all of Europe’s industry does in one year.
I was in the Dominican Republic and Haiti last week to review U.S. humanitarian assistance to the victims of Hurricane Georges. And I saw there a taste of what is to come -- extremely poor communities in low-lying coastal areas exposed to the terrible force of more frequent -- and more severe -- storms.
The sad part of that story was underscored in a qoute from a Dominican government officila who noted, "Frankly, we don’t even know how many people died in this disaster."
Developing countries play a pivotal role in the complex climate equation in three ways: they are the most vulnerable, they are the fastest growing emitters, and they are essential to achieving ratification of the Kyoto Protocol.
First, the developing world is the most vulnerable to the impacts of climate change and they are the least prepared to cope.
Over 2 billion people in developing countries live within 50 miles of the coast, exposing them to the threat of storm damage as well as rising sea levels.
Loss of agriculture production, increase in vector-borne disease, coastal inundation, weather-related infrastructure loss -- all of these predicted impacts of climate change stand to undermine our very best efforts to build sustainable economic and social progress in poor countries. And we will feel the consequences of the resultant chaos here at home.
Second, developing countries are an increasingly large share of the global emissions problem. Their higher rates of economic growth mean that developing countries also have the highest growth rate in greenhouse gas emissions. Their emissions are expected to surpass those of industrialized nations in the next twenty five years. As countries like India and China bring dozens of new coal-fired power plants on line each year, emissions of carbon dioxide will skyrocket.
Thirdly, developing country participation is essential if we are to engender political consensus in the U.S. that we must tackle the climate challenge. As many of you know, the U.S. Senate passed a resolution last year sponsored by Senators Byrd and Hagel that effectively put the Administration on notice that the Kyoto Protocol would not be ratified without meaningful participation by developing countries. The Senators acknowledged the seriousness of the climate challenge, and asserted that there can be no effective response to this global phenomena without engagement by developing countries.
For all these reasons, we need to work closely with developing countries to meet the climate challenge. Unfortunately, several myths about the Kyoto Protocol have been propagated in the recent months. Perhaps you have seen some of the television ads that threaten everything from the doubling of gas prices to economic ruin if we deal with climate change. Now, I know that many of you will find this a little hard to believe, but these ads put together by oil companies and other members of the fossil fuel fraternitys, are not entirely truthful. That's why I would like to take some time this afternoon to address the myths that have been generated in the climate change debate in turn.
The first myth is that developing countries are doing nothing to address climate change.
The reality is that they have done a great deal in the 1990s -- and in some cases more than we in the U.S. have been prepared to do. One of the most significant efforts in the developing world to combat greenhouse emissions has come through efforts to reduce or eliminate energy subsidies.
Fossil fuel subsidies in developing countries declined 45 percent between 1990 and 1996, a remarkable step in rationalizing energy prices in a short period of time. In China, for example, total fossil fuel subsidies in 1996 were less than half of those in place in 1990.
We have also seen the developing world take important steps forward in promoting conservation and renewable energy. India's National Thermal Power Corporation -- with USAID assistance -- will reduce carbon emissions in its coal-fired plants by two million tons a year through improved efficiency and coal beneficiation. Energy efficiency programs in Mexico saved an estimated 2 percent of total energy consumption in 1997. By the end of 1995, the use of renewable energy in China approached 300 million tons of coal equivalent annually. In January of this year, the Energy Conservation Law was enacted which will promote energy savings throughout the Chinese economy.
These are but a few examples of the many and wide-ranging reforms developing countries have undertaken in this decade. While many of these actions -- from macroeconomic policy, to energy sector reform to national program initiatives -- were undertaken for reasons other than climate change, these efforts have contributed to slowing the rate of growth in emissions. The fact that all of these measures promote these nations' competitiveness shows that reducing greenhouse gases can be achieved through win-win strategies.
A second and related myth is that the Kyoto Protocol lets developing countries off the hook.
It is true that developing countries have not undertaken the same binding commitments as developed countries. But the U.N. Framework Convention on Climate Change, which was signed by President Bush in Rio de Janeiro in 1992 and ratified by the Senate, never intended a "one size fits all" approach. They acknowledged that all nations have a "common but differentiated" responsibility. Even among the industrialized country targets adopted at Kyoto there are wide variations, reflecting the different capacities of advanced industrial democracies to constrain the rate of emissions of greenhouse gasses. Iceland and Australia, for example, have growth targets, while most other developed countries have committed to reduce greenhouse gas emissions below 1990 levels by the period 2008-2012.
Under the Rio treaty, developing countries do have a responsibility to inventory their national emissions of greenhouse gasses and report that back to the Convention. They also have an obligation under the Convention to undertake policies and measures appropriate to their national circumstances to mitigate emissions. Many developing countries have -- with the help of the US Country Studies Program -- developed comprehensive National Action Plans.
For example, Mexico has completed its national inventory of greenhouse gas emissions and developed a mitigation strategy that includes a $10 billion program to replace oil with natural gas for power generation, lighting efficiency, improved efficiency of motors and boilers, and co-generation.
Finally, the Clean Development Mechanism under the Kyoto Protocol will reward investment in carbon-reducing projects in developing countries. I am certain that developing countries are keenly interested in taking advantage of this to attract investment in sustainable development projects with global benefits. So this is yet another means by which they will actively participate in the Kyoto Protocol.
A third myth is that US jobs would migrate to developing countries not bound by emissions limits.
The reality is that energy price differentials do not drive international investment flows. If it did, the US would not be making the lion's share of foreign direct investment in Japan, Canada and Europe where energy prices are higher than in the US. In 1994, a barrel of heavy fuel oil cost $13.65 in the U.S. and only $5.06 in Venezuela, but we did not see a rush to invest in Venezuela.
Energy costs are a small share of the value of tradeable goods and services. Over 90% of US employment is in industries in which energy costs represent no more than 3% of the value of sales. Given this small share of energy costs, differences in energy pricing are very unlikely to have a significant impact on investment location decisions or trade flows. And even if it were, two thirds of US emissions are from energy use in buildings and transport -- two sectors that cannot migrate.
A fourth myth is that the US cannot afford to implement the Kyoto commitments.
Opponents of the Kyoto process suggest that gas prices will double and that electricity prices will skyrocket if we ratify the Protocol. These estimates are based on very skewed analysis of the terms under which the US would participate in the Kyoto Protocol. These estimates also come from the same people who claimed that the Clean Air Act would send the U.S. economy into a 20-year recession, that oddly enough, never seemed to materialize. The Administration is adamant in its pursuit of flexible market-based emissions trading mechanisms to lower the cost of compliance, while investing in new technologies and practices which will help reduce the carbon-intensity of our economy.
The conclusion of the Council of Economic Advisers is that U.S. compliance with the terms of the Kyoto Protocol -- assuming emissions trading -- will cost about $7-12 billion dollars, or about 0.1% of GDP. By 2010, this would increase gas prices by 4-6 cents per gallon and raise the average household energy bill by $70 - $110 per year. Hardly an unbearable cost to insure against the risks of climate change -- and a cost far less expensive than dealing with the harmful impact of climate change.
The noted economist William Cline estimates that a doubling of carbon dioxide levels in the atmosphere would impose severe costs on the U.S. economy in lost infrastructure, agriculture productivity and other economic losses totalling 1.1% of GDP annually, or about $90 billion in today's dollars. And this analysis assumes we stabilize atmospheric concentrations of carbon dioxide at twice pre-industrial levels -- a target we are not likely to be able to achieve even with full compliance with the Kyoto targets.
The overwhelming evidence is that we can become more energy efficient and economically competitive and reduce emissions at the same time. That is why it is so important to implement the President's $6.3 billion budget proposal to promote energy efficiency and renewable energy in the U.S.
So where do we go from here? Unfortunately, we are faced with a potential stalemate. On one hand, developing nations are not yet prepared to assume binding legal commitments, and want to see the developed world take action first. On the other hand, the US Senate tells us that we need to have developing countries on board before ratification can occur. And make no mistake, the stakes, are high.
Without Senate ratification, the entire international effort to meet this global challenge will likely unravel. Again, American leadership is indispensable.
Let me be clear. I believe that we need even more aggressive engagement by developing countries to meet this global test. But I also know that countries still struggling to meet basic human needs must reconcile economic and social development goals with environmental stewardship. We cannot expect them to lead the world in staving off the threat of climate change.
We in the U.S. have contributed significantly to this problem. We remain the world's number one emitter of greenhouse gasses by far. We have an obligation to lead and to work with developing countries to avert a catastrophic and irreversible change in the atmosphere which nurtures all life on the planet.
Recognizing this challenge, President Clinton announced at the United Nations in 1997 a plan to invest $1 billion over the next five years in programs and activities to help developing countries and countries in transition to reduce greenhouse gas emissions that contribute to global warming.
USAID is implementing this commitment. We will continue to help countries undertake the complex restructuring and privatization of inefficient state-run or monopoly utilities. We will offer technical assistance work with key policy makers to ensure that energy efficiency and renewable energy are built into the new systems in developing and transition countries from the start.
Global warming is getting people's attention. The reinsurance industry -- not a group particularly known to be populated with wild-eyed environmentalists -- is certainly paying attention to the risks created by climate change.
Insurance payouts for weather-related damage worldwide was $14 billion in the 1980s, and rose to over $35 billion in the first half of the 1990s. Professional risk managers are taking this issue seriously -- and so should we.
If we hope to begin to reverse this alarming trend, we are going to have to make some changes in the way we manage natural resources and use energy. And we are going to do so in ways that continue to allow economies to prosper.
Dealing with climate change is an imperative; denial is not an option. This is a situation where modest investments now will save us a great deal over the long run. Dealing with international environmental issues like climate change is no different than helping slow the spread of new infectious diseases, supporting economic reform in developing countries or working to prevent renewed conflict in places like Bosnia -- we do so because it is in our best interests to do so. This country must maintain and expand our international leadership if we hope to continue to thrive domestically. Thank you.
This is an archived USAID document retained on this web site as a matter of public record.

Last Updated on: July 18, 2001