Testimony of Karen Harbert to Senate Energy Committee on International Climate

Testimony of Karen Harbert, President and CEO
Institute for 21st Century Energy, U.S. Chamber of Commerce
U.S. Senate Committee on Energy and Natural Resources
November 17, 2009

Thank you, Chairman Bingaman, Ranking Member Murkowski, and members of the Committee for holding today’s hearing on the international climate negotiations.  I am Karen Harbert, President and CEO of the Institute for 21st Century Energy, an affiliate of the U.S. Chamber of Commerce.

My testimony today will focus on what I believe are some of the major challenges to a new international agreement and where I believe the business community can play a constructive role.

That is really the theme of the paper the Energy Institute released last week, “The Prospects for Copenhagen: More Realism Can Smooth the Way,” and which I would ask to be entered into the record.

Trying to get over 190 countries to agree on a new treaty would be tough even in the best of economic circumstances, and these are not the best of economic circumstances. It is also important to keep in mind the global context in which these negotiations are occurring. The world has changed considerably since the UNFCCC was launched in 1992 with the vast majority of future energy demand and greenhouse gas emissions coming now from the developing world.

The Energy Institute has cautioned for some time about unrealistic expectations  surrounding technology readiness and commercial adoption, short-term commitments by developed countries, burden sharing by developing countries, finance, wealth transfers, technology transfer, and intellectual property.  The complexity of these issues has yielded confrontation and finger-pointing, not progress.

I think it would be a mistake to draw from recent developments the conclusion that all would be well if only the U.S. had domestic legislation in hand. These issues go well beyond what we can expect to see addressed in domestic legislation, and they will be no less contentious if we have it. We need to put to rest the idea that if the U.S. goes first, China, India, and other large emerging economies will fall into line with binding commitments of their own, something they remain adamant in opposing. This remains an unjustified article of faith that carries with it considerable risk.

We have seen with the Kyoto Protocol that top-down approaches do not work. A new agreement needs to be a bottom up approach that accommodates a wide range of national circumstances and should be as simple as possible to implement.

Climate change risks need to be addressed as part of an integrated agenda that proceeds from a clear understanding that, for many countries, energy security is still a greater concern than climate change. In reality, affordable energy provides a solution to climate change because it underpins the economic growth necessary to drive technology change and environmental protection.

At its most fundamental level, reducing carbon dioxide emissions from energy is a technology challenge that, as an article in Science once famously noted, “can not be simply regulated away”. It cannot be negotiated away, either.

An agreement that focuses on technology offers a path forward that developed and developing countries can embrace. How rapidly advanced energy technologies develop and are adopted commercially will be the most important factor in determining how quickly and at what cost greenhouse gas emissions can be reduced. Existing technologies can make an important contribution, but they alone are not capable of significantly reducing greenhouse gas emissions on a global scale at an acceptable cost. New and in some cases revolutionary energy technologies, many still years if not decades over the horizon, will have to be developed and adopted commercially along with the infrastructure to support them. 

That is why it is so critical that there not be weakening of intellectual property rights in any agreement which would only serve to stymie the development of the very technologies we need to make progress.  With a clear stake in the process, developing country governments can be convinced that intellectual property protections are in their interests as well as ours. Their businesses already know this—from less than 5% of patents in 1998, emerging economies now account for roughly 20% of patents worldwide.

Improving the performance and lowering the costs of advanced alternate energy technologies can, if successful, broaden the range of economically and politically viable policy options available to decision makers.  However, in order to have these technologies more quickly penetrate both developed and developing nations’ markets, we should seriously undertake efforts to reduce global tariff and non-tariff barriers on clean energy goods and services.

In addition, to be credible and effective in reducing greenhouse gas emissions, a new arrangement should include realistically ambitious commitments by all countries in keeping with the principle of “common but differentiated responsibilities and respective capabilities.” Large developing economies, like China, India, and Brazil, must be a part of any new international accord for it to achieve meaningful reductions in greenhouse gas emissions.

Finally, we believe there needs to be a greater role for the international business community in these negotiations.  When all is said and done, it is largely going to fall on the business community to implement whatever is in the treaty. Given the right environment, business is prepared to do what it does best—innovate to find solutions. But we need a seat at the table.

In September, the U.S. Chamber hosted the first meeting of the Major Economies Business Forum on Energy Security and Climate Change. Over two days, high-level representatives from 13 business organizations spanning six continents and representing more than 25 million businesses exchanged views, identifying some common ground on many of the issues being considered in the international negotiations.  Maybe surprising to policymakers but not to businesses, there was a significant amount of agreement on the importance of practically addressing energy security, finance, technology, and

economic competitiveness issues.   I would ask that the formal declaration endorsed by all the business organizations be entered into the record.

Our organizations plan to continue the Major Economies Business Forum and will meet regularly to provide valuable and practical input to the international negotiations.  Bottom line - the international business community would welcome more formal roles in both the UN Framework Convention and the Major Economies Forum.

In closing, let me say that business needs a predictable environment in which to operate and plan, and it would welcome an ambitious international climate change agreement. But that ambition needs to be tempered with a healthy dose of pragmatism. A realistic vision focused on technology that encourages cooperation, not confrontation, would be a good place to start.

Thank you. I would be happy to answer any questions you may have.