This is an archived USAID document retained on this web site as a matter of public record.

Testimony of David Hales, Deputy Assistant Administrator, Center for Environment
Before the House International Relations Committee
Washington, D.C., July 24, 1997
U.S. Agency for International Development

Chairman Gilman and Members of the Committee, it is a pleasure to be with you today to discuss the U.S. Agency for International Development's (USAID's) role in U.S. Government climate change strategy.

President Clinton's recent announcement before the United Nations General Assembly of a sustained U.S. effort to help developing countries achieve greenhouse gas emission reductions is a major component of our engagement with developing nations at the climate negotiations in Kyoto and beyond. As Undersecretary Wirth indicated in his remarks, what happens in Kyoto only sets the stage for the actions that will need to be taken by all countries. The leadership role of the United States in enabling, encouraging and promoting those actions will be a critical determinant of the success of efforts to stem global climate change.

As President Clinton and Vice President Gore noted at the United Nations, the cost of ignoring climate change will be high indeed. The science is clear and compelling: humans are changing the global climate. Concentrations of greenhouse gases in the atmosphere are the highest in 200,000 years, and climbing sharply. If this trend continues, scientists expect the seas to rise two feet or more over the next century. In the United States, 9,000 square miles of coastal areas would be flooded. Island chains such as the Maldives and coastal nations such as Bangladesh would be devastated. Climate change disrupts agriculture, causes severe droughts and floods and helps speed the spread of infectious diseases. The President's initiative addresses the impact of climate change through effective long-term partnership with developing countries that engages market forces and will produce mutual economic and environmental benefits for all involved.

Meeting the challenges of climate change and encouraging energy sector policy reform will create significant opportunities for U.S. business and vast new markets for U.S. technology and know-how worldwide. The technology, capital and innovation of the private sector are the driving forces which will make a lasting difference in the carbon intensity of development in the next century. USAID's role is to help enable the private flows of capital and technology by supporting appropriate polices, privatization, capacity building measures and overcoming market barriers in the developing world.

As numerous studies have shown, the potential market for "climate friendly" technologies is enormous. The world market for energy efficiency technologies has been calculated at almost $1.8 trillion over the next 40 years; and that is without the added incentive of a global greenhouse gas emissions cap. Likewise, the potential market for renewable energy is also vast -- incentives for cleaner production will only help to increase the promise of new markets overseas in an area where the U.S. is highly competitive.

USAID has substantial experience in helping create large markets for U.S. technologies and services. Among those industries benefiting from a global focus on reducing greenhouse gas emissions are the renewable energy, natural gas, energy efficiency, fuel cell, electric vehicle, and clean coal industries. Currently, USAID has greenhouse gas mitigation programs that are creating significant opportunities for U.S. industry in many of the key climate change countries. Consider:

*    In Indonesia and the Philippines, USAID has supported feasibility studies and trade missions for the U.S. renewable energy industry that have successfully leveraged tens of millions of dollars in trade and investment opportunities;

*    In Mexico, USAID has helped develop state-of-the art power plant retro-fits and energy efficiency audits using U.S. technologies that are reducing emissions of harmful pollutants and greenhouse gases;

*    In India, USAID is supporting Utility Partnerships whereby U.S. utilities are "twinned" with utility counterparts to provide an exchange of technical and institutional expertise and promote overseas business opportunities for these U.S. companies; and,
    
*    In the Newly Independent States and Eastern Europe, privatization and market-reform initiatives are helping to reduce emissions and increase economic stability by providing assistance for efficiency improvements in energy production and consumption.

The Role of Developing Countries

It is abundantly clear that stabilizing global greenhouse gas emissions will require concerted action by both developed and developing countries. Action by both is essential; action by either group alone will be insufficient. While developed nations are responsible for approximately four-fifths of current humanly produced greenhouse gas emissions, developing countries are expected to account for at least half of all annual emissions by as early as 2020.

As Undersecretary Wirth has explained, the U.S. has taken the lead in pushing for developing country commitments under the current negotiations for a Protocol. Yet, the U.S. effort has met with opposition from developing nations for several reasons. Developing country governments believe that, in principle, they should not be forced by developed economies to apply different decision criteria then the Annex I countries used when they industrialized. Developing countries argue that their emissions growth is associated with meeting basic human needs while increased emissions in developed countries contribute to a standard of living far exceeding that to which most developing country citizens could realistically aspire.

To support this argument, they point to the vast differences in per capita income and per capita emissions between developing and more developed nations. Developing countries also argue that those nations who have contributed the most to the human-induced build up of atmospheric concentrations, and benefitted from those actions, should take the lead in addressing their reductions. However, many developing countries recognize that successful development requires an environmentally sustainable approach, but fear that binding emissions reduction obligations will adversely affect their potential for economic growth and development by tying-up scarce resources.

Despite opposition to new binding commitments at Kyoto, developing nations are making some progress toward reducing their emissions of greenhouse gases. A recent report by the World Resources Institute notes that developing countries are taking measures to reduce their emissions of greenhouse gases, measures that have positive impact on their economies and their environments. In summarizing the findings of the report, WRI indicates that it "appears that developing countries may be achieving equivalent or greater carbon dioxide emissions savings than OECD countries in absolute terms and, since they are starting from a lower baseline, significantly greater savings as a percentage of their emissions."

The report also states that "...policy changes and conservation and renewable energy programs in developing countries are leading to significant carbon emissions savings." It is important to note, that the report argues that some of the most dramatic emissions reductions have been achieved through efforts to reduce fossil fuel subsidies, develop national energy efficiency programs and privatize inefficient national utilities resulting in more realistic fuel prices and lower carbon emissions. Fostering these kinds of policy reforms has long been an integral part of USAID's approach to development.

In addition, developing countries are undertaking both restructuring and reform in the energy sector to attract more private investment. Progress in policy reform, institutional change, capacity building and market development are contributing to important "upstream" investments for a less carbon-intensive path to development. These structural reforms are a prerequisite to any enduring shift in policy regarding the costs and benefits of undertaking emission reductions. Getting prices right, for example, by removing the $230 billion in annual fossil fuel subsidies in developing countries is a critical element in any strategy for a cleaner energy future and a more productive economy.


USAID'S Global Climate Change Program

I am pleased to bring to your attention the critical role USAID has played in helping to develop the policies that have resulted in emission reductions in the developing world. USAID has been engaged in climate change activities since 1990 when the agency submitted its first report to Congress on Global Climate Change and Developing Countries. Our approach has consistently focussed on "win-win" opportunities to advance economic development goals while curbing greenhouse gas emissions. More efficient use of energy, renewable energy applications and sustainable forestry practices are good examples of this "no regrets" approach to climate change and development.

This strategy was summarized in the Agency's 1994 "Report to Congress on Global Climate Change: "Energy efficiency, sustainable land-use management and a less carbon-intensive path to modernization can accelerate economic growth while reducing local, regional and global environmental risks." The report outlined the agency's global climate change strategy which remains in effect today. The strategy focusses on mitigation of emissions by targeting clean energy applications, forest conservation and support for policy reform and privatization. USAID's strategy identifies key target countries including India, Indonesia, Philippines, Mexico, Brazil, Russia, Ukraine, Kazakstan and Poland, as well as central Africa as a region for purposes of forest conservation.

Today, the agency is funding approximately $150 million in climate-related activities in energy and forestry in 44 countries. In addition, we actively participate with both the interagency Country Studies Program, and with the U.S. Initiative on Joint Implementation as well as several over interagency working groups. In the energy sector, USAID efforts to promote energy efficiency focus on the promoting integrated resource planning and demand side management, creating financing mechanisms for energy efficiency, developing standards and codes for efficient buildings and appliances, and implementing pilot and demonstration projects for steam, lighting and motor efficiency. By encouraging privatization and working to reform inefficient state-controlled energy systems, we are helping to encourage much greater energy efficiency in the developing world.

All of our efforts are targeted at demonstrating that economic growth and global climate change objectives are mutually reinforcing. To meet this challenge, USAID is working to establish market-based incentives for the application of clean technologies and practices (natural gas, energy efficiency, renewable energy, low impact logging) to meet the growing demands of industrializing economies. We are addressing several constraints to cleaner energy production and use, and improved natural resource management -- and not just on a "project" basis. USAID's climate change-related programs have already paid significant dividends:

*    The USAID forest management program in Mexico has reduced the deforestation rate on 3.1 million hectares of protected land by more than 30 percent.

*    The agency's Sustainable Forestry Practices Initiative has reduced the damage caused by poor land management on over 3.4 million hectares of forests by 70 percent.

*    A rural electrification program in the Philippines has reduced power line losses by three percent and reduced carbon dioxide emissions by 250,000 metric tons.

*    In India, USAID's support for the Center for Power Efficiency and Environmental Protection of the National Thermal Power Corporation has helped identify cost-effective supply side efficiencies which will reduce coal consumption by up to ten million tons per year.

*    USAID's program to promote bagasse co-generation has increased the commercial production of renewable energy and cut carbon dioxide emissions by two million metric tons.

The Developing Country Climate Change Initiative

To strengthen partnerships with developing countries and to advance the U.S. government's negotiating position at Kyoto, the underlying concerns that have fueled developing country opposition must be addressed. A successful developing country strategy must not only provide the tools and support necessary for meeting the requirements of the FCCC -- National Action Plans and National Communications -- but also help address the source of opposition to any additional commitments under the Convention through support for projects and activities that minimize growth in net greenhouse gas emissions while fostering sustainable development. No amount of assistance, by itself, however will solve the more profound disagreements between developing and more developed nations on how best to address climate change.

The President's recent announcement at the United Nations of a five year $1 billion commitment to work with developing countries includes a minimum of $750 million in grant assistance over five years for the promotion of "climate-friendly" energy and natural resource management policies and practices in developing countries. In addition, the Initiative proposes that USAID leverage up to $250 million in funding for climate change mitigation activities through application of the development credit authority proposed in the President's Fiscal Year 1998 budget submission to Congress. We believe that the credit mechanism, which this Committee included in its authorization bill, will be an invaluable tool in spurring greater market development for climate friendly investments in developing countries.

The well-managed and conservative use of credit, subject to the conditions agreed on with this Committee, will give USAID the ability to appropriately complement its ongoing grant assistance programs with real project support, while promoting U.S. and developing country economic progress.

USAID, in cooperation with other U.S. Government agencies, is now in the process of preparing a comprehensive agency-wide five year climate action plan to implement the President's commitment. We intend to have the first draft of this strategy available in September and will share our recommendations with the Committee at that time. Several precepts are guiding USAID in this effort:

*    We will build upon the large array of past and ongoing activities in technology cooperation, capacity building, and lessons learned regarding program effectiveness;

*    We will actively engage the U.S. private sector in partnerships to open commercial markets for "climate friendly" technology;

*    Where appropriate, we will strengthen efforts to identify and implement innovative approaches for attracting and channeling private financing into clean technology markets;

*    We will collaborate more closely with international financial institutions to assure that multilateral resources for climate projects are targeted to best utilize the strengths of USAID and U.S. private sector partners; and,

*    We will engage other organizations and institutions that are effectively promoting greenhouse gas emissions reductions.

In closing, let me reiterate my conviction that the positive engagement of developing countries is necessary to make meaningful progress in reducing greenhouse gas emissions. The President's new mandate to marshall USAID resources for a comprehensive Developing Country Climate Change Initiative will go a long way toward promoting that positive engagement.

Thank you.

This is an archived USAID document retained on this web site as a matter of public record.

:  :  :  :  :  :  :  :  :  :  What's New : FOIA Requests : Privacy Policy : Email This Page : Plug-ins : FAQs : Help Desk : Contact Us : Site Map Last Updated on: July 18, 2001