Remarks by James L. Connaughton, Director, Council on Environmental Quality, The White House

Hosted by the German Friedrich Ebert Foundation
Berlin, Germany
Friday, October 27, 2006

Transatlantic Dialogue Series
"Current Environmental and Energy Policy Issues in the United States and Germany"

Thank you, Arnd, and good morning everybody. I want to extend my thank you to Pia Bungarten and to Michael Meyer of the Friedrich Ebert Foundation for pulling this program together on relatively short notice, and I want to thank all of you for coming to give me an opportunity to exchange views with you in this increasingly strong relationship between Germany and the United States as we confront the next generation of sustainable developments, of clean energy, and climate change challenges.

I'm very pleased to be joined by our Ambassador, William R. Timken, Jr. If you've not spent time getting to know him I would encourage you to do so. He's been a leading businessman in America, who knows how to make a lot of good products -- that's important to the foundation of our economies -- and to do so in a remarkably environmentally sustainable way. And in fact it is the technologies that our Ambassador is familiar with that are central, for example, to the future of clean and zero-emission coal, and so you have someone who is very experienced in how to take technological innovation and put it into environmental protection and efficiency.

I think the core theme of my discussion today -- I will express it in a variation of an American phrase – and it is, what part of "yes" don't you understand? When we think of Germany, and we think of the United States, we think of the kinds of controversies or conflicts in which we have differences of opinion that tend to capture the imagination, that tend to capture the politics. And of course the reality is far different from the perception. The remarkable energy of our societies, the innovation in our technologies, the spirit of our democracies and our vision for the future is actually far more in common than these differences that come up from time to time. And I hope in the next 15 minutes I will give you a picture of that reality that will be a foundation for our discussion.

I want to start first by giving you a sense of our overall philosophy when it comes to the economy, to energy and to the environment. I will then walk you through a set of examples of recent policies that we have enacted that should be unfamiliar to you because they were not controversial in the United States, they enjoyed broad bipartisan support, and therefore you did not hear about them because there was no conflict. I will then give a sense of how we are performing together, what are we actually doing, Europe and the United States, in making progress on climate change, and then give you a sense of the technology future and the kind of conversation we can have as we go forward.

At the starting point I would note my own personal situation though. I think Arnd had noted that my position in the White House has to be confirmed by our legislature, and I was confirmed right after our legislature flipped control, switched control. As it happens, though, I was confirmed unanimously; so even at this point of a dramatic shift in our Congress, the President's environmental advisor was confirmed unanimously by our Senate. This occurs again and again and again in our system. Again, you do not have a perception of that because there is no disagreement. It occurs flawlessly.

So let me start with our overall philosophy, and it's very, it's very simple. The next generation of environmental progress will occur in direct proportion to the advancement of economies and to our efforts to lift people out of poverty. It's very, very simple. Lifting people out of poverty and economic growth and opportunity are a necessary but not sufficient condition to achieving that goal. Why is it necessary? Well, I can stand in this building, this is a very expensive building to construct, and yet it is probably one of the most efficient buildings in Germany. Technology, environmental control, requires resources. If you are a person living in poverty and your immediate needs are access to water, access to affordable energy of any kind, your immediate need is to feed your children and provide just the rudiments of health care, if you can find it. You are not very interested in the broader dimensions of the environmental impact of your activities. However, as we bring people out of poverty, they have resources, they're able to achieve the greater values of natural resource conservation and environmental protection. So we must have these things go together.

Now, our philosophy is a step advanced from the 1990s. In the 1990s we used the expression, "the environment and the economy can go hand in hand." That suggests a zero-sum trade-off. The reality is we need economic growth and opportunity to achieve our environmental and our social aspirations. That's a very important shift in thinking, and it is one, by the way, in which there is broad agreement, even if it is not articulated in the manner that I just described.

So let me tell you about what we are doing in the United States and then use that as a setting for what we are accomplishing internationally.

Since 1970, since the dawn of the modern environmental movement, the United States of America has managed to cut its harmful air pollution in half. During a period in which our economy nearly tripled, our vehicle miles nearly tripled, our energy use went up 50% and our population increased by almost 50%. That is a remarkable achievement, but as remarkable is that 12% of that 50% reduction occurred just in the last four years. So our rate of improvement of reducing air pollution is accelerating. And why is that? Because of the advances of technology, the advances of capital investment structures and then the resources that we’re able to have as a result of these growing expectations from environmental control and the availability of the technologies to address it. Now we have started together, we have all started looking at green house gases effectively in the last, over the last ten years. So you should imagine a similar pathway. On air pollution in the 70s it was still rising, here in Germany and in America. And by the early 80s it began to slow down and by the mid-80s we stopped the rise of air pollution and since then in our countries it’s been coming down; but took a period of slowing down first before we stopped and before we reversed. And you can imagine the exact same curve when it comes to green house gases. There is evidence of this. Since 2000 the green house gases in America only went up 1.3% during a period in which our economy grew by nearly 10% and during a period in which we added the entire population of Greece and Iceland to America. The rate of economic growth is the equivalent of adding the entire GDP of Brazil and India to the United States economy. And we accomplished this with very incremental growth in our green house gases. That is a major achievement.

So what are we doing going forward in America? Let me start first again with air pollution because that is an immediate human health need. As I stand here today, I am proud to say, with strong bipartisan support, and strong support from industrialists to our harshest critics among the activists, we are poised to cut the power plant pollution from coal fire power plants in America by nearly 70%. It’s a mandatory program that uses a trading system. We do support trading systems when they make sense. That will require a 50 billion dollar investment by our power companies in pollution controls, efficiency upgrades and associated services. By the way a significant portion of that 50 billion dollars will come from German service providers and German technology providers. This is a consequential program because it will produce quantifiable health benefits that are in the hundreds of billions of dollars, which is why we have achieved national consensus on this strategy. We do not have any law suits challenging the central part of this program. It will be implemented on time. It also a program that is high compliance, we will be assured of 100% compliance, and requires a few dozen government officials to run it. At the same time we are looking at pollution in the transportation sector, and I’m pleased to say as of last week we have removed the sulfur dioxide from our diesel fuel nationwide. So we have ultra low sulfur diesel fuel coming out of all our refineries. That is going to enable a new generation of diesel engines that will be 90% free of nitrogen oxide emissions. So that black puff of smoke associated with diesel vehicles will be a thing of the past. This is a rule making that in America we also negotiated. We put the environmental groups in the same room as the fuel providers and the engine makers and told them that we will regulate as quickly as they can come to agreement on a rational schedule for achieving this outcome. It took them 18 months. The program is going into place on time and we are delivering health benefits as we speak all across our nation.

Why is this important? In addition to the fact that it’s going to make all of our trucks clean, including our locomotives, our diesel marine vessels, our farm equipment, our mining equipment, it also creates a new opportunity for America to reintroduce clean diesels in our passenger fleets and in our light duty fleets, which currently are all gasoline. Germany knows better than any other nation the fuel economy advantages of diesel for consumer use and for light commercial use. We would like to see that happen in America, too.

Now in addition to these regulatory strategies, we have dramatic new programs as a result of legislation last year in the energy sphere. The most important though is tax law changes. It was not an environmental initiative, it was economic initiative. We have dramatically cut the taxation on the purchase of new equipment by consumers and by businesses. This is unleashing hundreds of billions of dollars of investment in new equipment to replace older, inefficient and higher polluting equipment. You’ll never read about the environmental benefits of this strategy and yet it is true. The incredible turnover of capital stock and equipment in America is causing one of our greatest advances in efficiency and productivity in our history, and that was because of good economic policy, having no explicit reference to environmental policy. I was part of the team that pulled that package together and I was insistent on this program because of these benefits. We also then have direct tax policies that go specifically to clean energy.

It is popular mythology that our energy bill last year was giveaways to oil and gas businesses. The reality is the President opposed subsidies for oil and gas, was successful in eliminating almost all of them, and instead replacing those subsidies with 11.5 billion dollars that went to clean technologies, solar, wind, geothermal as well as hybrid vehicles and clean diesel vehicles. In addition we have two new mandatory programs on renewable fuels. It is not well known but last year America produced more renewable fuel than other nation. Last year America installed more renewable power than any other nation including Germany, by the way. Friendly competition between America and Germany over renewables is a very good thing. But we also initiated new fuel economy standards. In Europe you have a voluntary program for improving fuel economy of your vehicles. In America we have a mandatory one, again same goals, different approaches. We have accomplished new fuel economy standards for our light trucks, including those big SUV’s, for the first time and we are looking forward to doing the same in our passenger fleets. I will also note we have partnerships; my favorite one is the partnership where we are working on a nationwide network that will allow all of our truck drivers to plug their trucks in at night instead of running their diesel engines all night long as they sleep during the night. The fuel savings are enormous but it requires a concerted national effort and really a market-based effort to create the equipment kits and the capacity at all of our trucks stops so their truckers can plug in at night.

So there’s a huge effort under way right now and has nothing to do with regulation, it was nothing to do with these incentives, it’s getting the sectors together to accomplish this great outcome. Now let me give you a picture of trends in greenhouse gas emissions; and it’s important not to reference the Kyoto protocol because the Kyoto protocol had a 1990 base line that was essentially artificial. What I will talk to you about is actual performance, what are we actually achieving together. Well, as it happens between 2000 and 2004 the United States, as I indicated, saw a rise in greenhouse gases of 1.3%. Germany and the UK were able to achieve about a 0.6, 0.7% reduction in actual greenhouse gases. So Germany and the UK are leading the way in this effort; but you know it is about half a percent, a little more than half a percent. The EU fifteen as a whole had an increase of greenhouse gases of about 2.4% during the same period, and then you can look at countries like Italy and Spain you know who saw -- Spain had greater than 11% increase in greenhouse gases. The next chart will show you though what I think is the more important figure. This is how we are doing in our greenhouse gas intensity. And what that means is what are your greenhouse gases in relation to your economic activity, because that’s a better indicator of true performance; are you re-investing in the technologies and efficiencies that produce sustainable reductions in greenhouse gases.

And here the picture’s also very complimentary. Germany improved by about 3.4% and that was in relation to your rate of economic growth. The EU fifteen improved intensity by about 3.9%, and then as I indicated because of these policies have enabled a massive reinvestment in efficiency and productivity in America, we achieved an efficiency improvement of 7.5% during this period. Now we had more room, Germany is more efficient to begin with and so you should expect America to be moving, getting more of a gain because we were less efficient than Germany was, quite frankly. But the importance of this chart is to show that we are all making progress and we are all making about the same rate of progress in real terms.

Now why is that important? When I took my job in 2001 I was told by the experts that in 2030 the major emerging economies of the world would have greenhouse gases that would exceed those of the United States, Germany and the other developed countries. As I stand here today that projection has now been pulled forward in time to 2010, so in just 5 years the rapid rate of fossil-based growth of the economies if India, China, South Africa, Mexico are going to exceed ours. I think it is likely when get the new statistics next year that that number will be reduced to 2009. This poses the picture in a very important way. Our efforts together in a developed world will only be meaningful if we will find a way forward in a constructive conversation with the emerging economies to approach this issue together. And how do that? Well, it’s all about technology, technologies and practices; we’re very good at that in America and in Germany. How do we rapidly and more dramatically make available to the world the technologies and practices that will reduce our air pollution footprint and our greenhouse gas footprint. And so they range from the very practical near term opportunities -- the United States just joined in a partnership with India, China, South Korea, Japan and Australia. These are countries who represent 50% of the world’s economy, of the world’s population and of the world’s fossil fuel energy use now and into the future.

We have designed a series of programs that are dedicated in high energy using sectors to cut in the air pollution from those sectors and cut in the greenhouse gases from those sectors. But we are also working on broad multilateral partnerships, such as the methane-to-markets partnership, in which Germany is a founding member, that seeks to find profitable ways to cut air pollution and greenhouse gases, and one of those is to go to mines, coal mines and capture the methane and turn it into energy rather than release it to the environment. The same is true from landfills, which is common practice in Germany and America, as well as large agricultural operations, also common practice in Germany and America. How do we create that kind of a practice every place it occurs in the world? The opportunity for reducing greenhouse gases is huge. We have a very limited, immodest goal of reducing greenhouse gases by 50 million metric tons by 2015 at a profit. That represents one tenth of the Kyoto commitment with just this one international effort focused on a small group of sectors. This gives you a sense of what can be achieved if we define goals that are sector-relevant and define goals by the way they produce very substantial economic opportunity.

Now we have the G-8 action plan which has 200 tasks related to the advancement of technology. We have the global bio-energy partnership, a nuclear energy partnership; we are working on hydrogen, we are working on fusion, we are working on the next generation of nuclear, and we are working on renewable energy and energy efficiency. This mythology that there is a lack of international action is broken by this very clear outcome of the last five years of the construction of a huge amount of multilateral effort dedicated to the advancement of current and future technologies; and this comes together into a new philosophy that was articulated by the G-8 in Gleneagles in 2005. This agreement unfortunately was overshadowed by the tragic London subway bombings. So the same day that terrorists were bombing London the G-8 leaders were in Gleneagles envisioning a cleaner energy future for the world. And that vision was captured with a very important recognition that we cannot consider climate change alone any longer. We cannot consider energy security alone any longer. We cannot consider the important human benefits of attacking air pollution alone. We must pull these programs of political work, of technology work, together and deal with them in an integrated manner because that is the way our societies have to confront them. That was a very, very important shift, advancement of thinking on how to approach these issues, because it also then brings onboard a number of actors who were dealing with these issues in individual ways and who sometimes conflicted with each other.

In America we have some in our political world who are extreme skeptics about climate change and we have others who are ardent supporters of aggressive action on climate change. As it happens the skeptics care a lot about energy security. You do not need to convince the skeptics about climate change in order to get them on an agenda that is dedicated to energy security. We have others in our public health community in America who are really focused on air pollution and had been frustrated about the conversations on climate and energy security. Well, we can help them address their needs, their immediate priority needs, in a manner that also helps advance energy security and climate objectives; so by advancing this philosophy our leaders are creating a platform for a broader, more constructive and more active dialogue, and that’s a good thing. At the same time we just met two days ago in the U.S. – EU High Level Dialogue. We agreed on a few things before we started the conversation. First of all we agreed we were not there to negotiate diplomatic texts. That saved us about 5 weeks of discussions. Secondly we agreed that we weren’t going to discuss the future of diplomatic texts. That saved us a lot of prepared statements where we had to do our set pieces to be sure that our political constituencies back home felt satisfied. By reaching those two fundamental agreements, we spent 24 hours, working through lunch and dinner and breakfast, dealing with very specific tasks that governments have to achieve if we want to see a cleaner energy future, and it was the most frank and practical set of discussions I have been involved with in five years. And what did we come with? Well, it’s going to be grossly obvious to you all.

One, we will accomplish nothing in the area of sustainable development unless we address the challenge of clean coal and of finding our pathway to a zero carbon coal future, because it is a given that our economies will continue to have coal as a substantial portion of our energy mix. Not the only portion, that would be bad, but it will be a substantial portion, and we together have to confront and accelerate the period in which this becomes a technically feasible and commercially viable option. As it happens, I feel pleased to be standing in Germany, Germany and the United States are the two countries that are leading the way down this path toward this zero carbon coal future. You have Siemens, you have GE, who are putting massive amounts of private capital into, it but your German scientific institutions are working hand in hand with American scientific institutions on the technology breakthroughs that will make this possible and make this affordable. But we also in the near term have huge opportunities on energy efficiency, and the time for energy efficiency is now, in particular in the transportation sector and building and appliances sectors. We need to enhance methane recovery, we need to research, develop and deploy second generation bio-fuels, and then we need to overcome some of the barriers to the use of these sources. A few of my favorite barriers are things like international standards. Germany is working on a standard for bio-diesel that is different than the standard we are working on in America. Well that is ridiculous. We need to come to an agreement on a common standard so that our engine manufacturers can produce engines for a global economy to use bio-diesel, and we can accomplish that.

So let me conclude with just a quick picture of the effort we’re doing in Asia, to give you a sense of the consequence of it. We have work in clean our fossil energy, we have work in renewable energy, we are challenging the steel sector, the aluminum sector and the cement sectors to take on meaningful, sector-wide commitments to improving their efficiency and reducing their air pollution. And then we have a group specifically focused on buildings and appliances which, again, I’m standing in a building that again I can fully appreciate in terms of its ecological benefits; every new building in the future needs to be a green building. We should no longer in fact have a classification of green buildings because that would suggest that we allow un-green buildings, non-green buildings, so the future is every building should be a highly eco-efficient building and that is the future to which we are trying to exhilarate progress.

So thank you all for indulging me, and I look forward to a good exchange over the next hour.