Framework Convention on Climate Change n Basis for all negotiations since 1992 n Ratified by 186 Countries n Ratified by United States n Commits all Parties (developed and developing) to reduce emissions n Recognizes notion of common but differentiated responsibilities n Stabilization of atmospheric GHG concentrations at a level that would prevent dangerous anthropogenic interference with the climate system n No binding commitments for specific reductions ICCP 2001

Views on Scientific Status n IPCC Assessment Reports - meet minimum credibility to drive policy process n Recognize general consensus on potential temperature increase and sea level rise n Other Effects - Speculative, likely to be unresolved before policy implementation n Current concern more properly focused on rate of change –Returning atmosphere in 200 year period to CO 2 concentrations not seen in 50 million years ICCP 2001

U.S. Policy Framework Pre - Kyoto n Binding targets and timetables n Single basket of gases n Flexible market mechanisms n No international harmonized policies and measures n Developing country role n Long term objective ICCP 2001

Kyoto Protocol n Binding targets and timetables n Single basket of gases n Flexible market mechanisms (placeholder) n No common policies and measures n Developing country rule - unresolved n Long-term objective - unidentified ICCP 2001

Industry Views On Kyoto n No organized opposition outside U.S. n Wait and see attitude on completion of market mechanisms n Little strong support for protocol n Primary U.S. opposition focused in energy industry ICCP 2001

Basis For Opposition To Kyoto n Purely political n Emissions Cap n Stringency of target and timetable n Lack of developing country role n All of above ICCP 2001

Basis for International Views of U.S. Position - Perception n U.S. highest per capita emissions n Appearance of lack of domestic policy n Fear of market mechanisms as U.S. advantage n Dominance over developing countries ICCP 2001

Basis for International Views of U.S. Position - Reality n Emissions declined vs. economic growth n Domestic expenditures on climate change greater than any other country n Domestic U.S. action likely with market mechanisms n Developing country opportunities very great ICCP 2001

Current Industry Concerns n Agnostic on carbon cap in KP; but supportive of effective market mechanisms n Skeptical that policy process will proceed without some carbon constraint n U.S. credibility key to effective completion of market mechanisms n U.S. posturing threatens private sector opportunities overseas ICCP 2001

Path To Completion n Modification of first budget period n Definition of developing country role n Identification of long-term objective n Satisfactory completion of flexible mechanisms, including sinks ICCP 2001

Possible Path Forward n Focus discussion on long-term objective n Initiate technology project challenge –power production, transportation n Provide domestic stimulus to industry –Action:Tax policy Credit for early action Credit for early actionOther ICCP 2001

Possible Path Forward n Change metric for success –Penalty system / Incentive system n Eliminate regulatory barriers n Champion American ingenuity n Address concern for Japanese honor ICCP 2001

Target and Timetable n First budget period too tight, too slow n Few Parties can comply n Propose averaging with future periods n Relax compliance issues in near-term ICCP 2001

Developing Countries n No International treaties impose identical conditions on developing countries as developed n Establish process for negotiation n Identify metrics for participation n Consider financial assistance ICCP 2001

Market Mechanisms n Rational discussion on sinks n Identify support among EU and Umbrella Group countries n Avoid technology listing n Ensure full fungibility ICCP 2001

Summary n U.S. and world industry willing to manage balanced global effort n Process must be credible and have understandable long- term objective n If policy makers are to address greenhouse gas emissions, it should be done on a global basis, not on a domestic unilateral front n To succeed must include developing countries, but not under same conditions as developed n Market mechanisms approach may be the best of a bad choice of alternatives ICCP 2001