President, Whitman Strategy Group; Member, Board of Directors, Council on Foreign Relations; Former Administrator, Environmental Protection Agency (2001-2003)
Managing Director, Rock Creek Global Advisors; Former Deputy National Security Advisor for International Economic Affairs, White House
Chief Executive Officer, Eni
David M. Rubenstein Senior Fellow for Energy and the Environment and Director of the Maurice R. Greenberg Center for Geoeconomic Studies, Council on Foreign Relations
Experts discuss global efforts to mitigate climate change.
This symposium is cosponsored by the Maurice R. Greenberg Center for Geoeconomic Studies and the International Institutions and Global Governance Program.
LEVI: Good morning. We are going to get started with the second session of this symposium on the Paris Climate Summit and beyond. The first session today was on the Paris Climate Summit, and this session is on beyond. We are going to be talking about the great diversity of international efforts, institutionalized and otherwise, to tackle the climate change problem, to govern efforts, to deal with climate change.
And it is a big, big space. I would say that if you looked at the climate change landscape six or seven years ago, the general assumption was that the U.N. talks sat at the center and there were all sorts of other things perhaps hanging on but they flowed from it. Today you have a much wider range of activities related to climate change, ranging from ones at the multilateral development banks to the World Trade Organization to the U.N. to private sector consortia, bilateral arrangements. And so we’re going to try and touch on a bunch of that.
We have three fantastic panelists to help guide us through this session. To my immediate left is Claudio Descalzi, CEO of Eni, one of the world’s largest oil and gas companies. He has been with Eni since, I believe, 1981—
DESCALZI: One, yes.
LEVI: —and became CEO at the auspicious time of May 2014. So he has had a boring time since then. (Laughter.)
To his immediate left, Christie Whitman, president of Whitman Strategy Group, former EPA administrator, former governor of New Jersey. And her most distinguished title: member of the Council on Foreign Relations Board of Directors, or at least the one that we derive enormous value from.
And on my far left is Dan Price. Dan is managing director of Rock Creek Global Advisors. He was deputy national security adviser for international economics in the George W. Bush White House and the leading figure in—at the National Security Council, National Economic Council, in crafting, really, the second-term strategy on climate change.
So we have three fantastic people to help us through this session. The session is on the record. That includes not only the conversation up here but, when we get to questions from members, your questions as well.
Before we dive into the different pieces of the broader climate change regime I want to bridge a bit the gap between the first session and this. So Paris is part—or the U.N. climate talks are part of a broader constellation of international efforts. On a scale of zero to 10, where zero is Paris doesn’t really matter, to 10, which is Paris is really most of what matters to dealing with climate change, where do you put reality? (Laughter.) Claudio, one-word answer.
DESCALZI: Yes, just one answer, that we have a lot of potential in Paris but I think that we are still far from a solution, so I put Paris at seven.
LEVI: Seven? OK.
DESCALZI: So, important.
WHITMAN: Slightly lower. I’d go for six with Paris.
LEVI: OK. And, Dan?
LEVI: OK, so —
DESCALZI: Thank you. (Laughter.)
LEVI: —we are going to have a lot of debate and conflict during this session with those sharp disagreements. (Laughter.)
Claudio, expand a bit on why Paris is so central, if I—seven is pretty close—it’s closer to 10 than to zero, if I follow David’s math instructions earlier. (Laughter.) Why—
DESCALZI: Why 7?
DESCALZI: Well, because these are COP 21, so we are already at 21 years that we talk about climate change, and for the first time I think that, globally, we felt that we have an issue. And we have a strong issue, and most of the players—most of the players accepted this issue at the level of government and companies. They thought and decide that in Paris we have to find a solution. So that is really a very important point. So the perception is strong on them before.
And now I think there is not enough to put targets. We have also to define policies and also how to get this to a degree limit. And I think that is the big issue because renewable, there is a—the future solution is not enough. It’s too expensive. In the last 10 years we spent—we invested $2 trillion and we increased the contribution of the renewable—I’m talking about—(inaudible)—and solar—of about 2 percent. So in the electricity, the main renewable, now they are account for 3.5 percent. We spent 2 trillion (dollars).
And we have in front of us a big economical—and we have to change model, the model that we built in the last 200 years that is based on fossil fuels. So I think the challenge is important. We have to try to be effective, understand how we can go fast to the solution. And that is the main reason why I said that it’s important, because a strong perception. I’m not sure that we find a global solution or a global agreement, and to share how to get it.
LEVI: Christie, why six? Why are you so much more pessimistic?
WHITMAN: I am not so much more pessimistic.
DESCALZI: So very far from seven.
WHITMAN: I think that—well, my feeling is that Paris is important because it has helped focus the debate. It’s brought more countries to the table with concrete proposals than we’ve had before, and that’s important. I mean, it’s been a long time since COP 21 and we haven’t seen the kind of progress that we would have liked to have seen.
It’s also raised it in the public’s mind. You start to see more of the validation of the science and you see more real numbers. I mean, for instance, when you say that if we continue on the current course, by 2030 there will be 100 million more people—excuse me, 100,000 (sic) more people driven into poverty. And that has all sorts of implications not just for the displacement of the people and the humanitarian side of it but also because of what it implies for where they’re going to concentrate, what’s going to be the unemployment numbers there, and where do people like ISIS go to find their recruits?
WHITMAN: So it’s starting to move across from just this sort of amorphous idea of the climate is changing and, oh, by the way, I, as an individual, can’t do anything about it, to something that’s more, gee, the science—first of all, we see it because we see what’s happening in the climate around us and it does have some real implications for us, especially after what went on last week in Beirut, in Paris, and the plane—the Russian plane.
So I think this is—it’s important. I would tend to agree that we’re not going to see a legally binding international agreement. We may see agreements on broad goals but the United States has never been one that’s been great at stepping up and saying, yes, we’ll take another—an international body to hold us legally responsible. So that’s why I gave it a little harsher in my rating.
LEVI: And, Dan, you also said seven, so pretty central.
PRICE: Yes. I’m answering the question how important is reaching an agreement in Paris on a scale of zero to 10, and I would say seven. And I’ll explain why in a moment, but in terms of the role of the Paris outcome in fundamentally addressing climate change, I would rate that below five.
So why seven in terms of importance? Two things are happening. One, Paris is testing a new model. We have abandoned the doctrinal faith of a globally agreed single emission reduction target that will be allocated top-down. And we’ve evolved to, I would call it, pledge and review, although the review piece is not yet worked out and that’s a critical piece. So that’s one new feature. The second new feature is the outcome will reflect a degree of cooperation among at least some of the key major players that we have not seen before. So a success in Paris will validate, or could validate, those two developments.
In terms of why I put it no higher than five, trade policy, investment policy, mobilization of capital, structural reform in a number of countries, right? We talk about insurance. You know, there’s an underinsured population in India. The insurance market is closed to outside investors, largely. So, I mean, there’s a lot that’s going on, on the trade and investment front, on the diffusion of technology front—again, also related to robust intellectual property protections, in my view. So there’s a lot that needs to happen beyond agreement in Paris if we’re to address this problem.
LEVI: So let’s dive into what happens beyond Paris.
And, Dan, I want to pick up on something you said at the end there: trade policy. What can we expect from trade policy in either helping or hurting our ability to deal with climate change? What should we be aspiring to? Do the trade agreements we’re seeing on the table right now, like TPP, have a role to play? Does the potential forthcoming agreement that we might have between the United States and Europe have some role to play?
PRICE: I think they do. A couple of aspects—and don’t forget the Environmental Goods Agreement at the WTO, right? At its most primitive level, lowering tariffs on environmentally friendly products helps the diffusion of them. Our problem multilaterally has been what do you put in that basket? What is right? Do you put automobile batteries or does Detroit say no to that? Anyway, so there’s been a lot of debate about that basket, but certainly that’s one element.
If you look at the Trans-Pacific Partnership, there is a couple of features there which are quite novel. One is the degree of disciplines on state-owned enterprises. So if you want to get at some of the key actors in countries in the energy space, you’ve got to look at state-owned enterprises.
There’s another piece in there, and I’ll come back to this later, hopefully: new rules on the digital economy, rules prohibiting data localization or data storage in particular jurisdictions. And as the data richness of our energy-efficient technologies—which are going to be a combination of sensors and data analytics—expand, insuring cross-border data flows is going to be key.
Last comment, let me say a word about the Transatlantic Trade and Investment Partnership that is the potential FTA between the United States and the 28 states of the European Union. The centerpiece of this is not so much traditional trade and investment roles as it is the possibility of regulatory cooperation, harmonization, and mutual recognition. A key element to solving energy efficiency, greenhouse gas emission is going to be standardization and cooperation among regulators. I query here the impact of the VW scandal on the appetite at least of the United States for mutual recognition.
LEVI: Claudio, Dan talked about diffusion of technologies, which is ultimately at the core of a lot of this. And one of the technologies that people are talking about in the broadest sense is that—the suite of technologies around natural gas. A piece of the oil and gas industry has really come around this and a broader set of climate issues through a recent announcement on the Oil and Gas Climate Initiative. Can you tell us a bit about—and you’re a leading player in that. Tell us a bit about the Oil and Gas Climate Initiative, how it came about, what it is, where you want to see it going.
DESCALZI: So, as I said before that we have—there is a new perception about the climate issue and, for the first time, oil and gas companies that create CO2 emissions. So they have to be proactive and do something, or at least showing what they are doing. So for the first time, one-half year ago, we started discussing, among the first six most important European companies, to try to be a part of the solution. And we put it together. And then also Saudi Aramco and Pemex, so other two companies from Saudi Arabia and from Mexico, join us.
And what we—I think that the most important step was to recognize the degree, so the need to reduce the CO2 emissions that, if you are following this trend, also with the engagement already proposed by all the different countries, 147 countries, we are not able to reach the target because in 2030 we are going to produce 57 gigaton of CO2. That is 35 percent more than what we expected to reach, the 2 degrees in terms of temperature limit.
So we decided that we have to play a role. So, first of all, we have to recognize the climate change issue, and we recognize it. Second, we put in place a list of points like energy efficiency or gas, so switch from coal to gas, and the gas flaring, and renewables and energy mix issue. And we are proposing solutions and we work together. We work together also in terms of technology that is quite important for the future like carbon capture and sequestration. That is a way to reduce the impact of CO2 emissions. So that was a reason. I think that is historical—is a historical decision that the European companies took.
And we talk also about another point that is a crucial one, because we said we have to change our economical and energy mix more, but at the same time we have to care about the growing need, though, the growing population. We have at least 1.2 billion people without access to energy, so access to energy became another important issue in our agenda.
LEVI: Let me ask you, you have this group of very influential, very powerful companies together. How much can you do through industry cooperation by itself and how much needs to happen through effecting government policies and changing government policies?
DESCALZI: Thank you for the question. There is a very, very crucial question in Europe. I think that to invest in new technology you must have policies. So you must know of stability in terms of fiscal and subsidies and in the long run. So if you know that, you can invest in new—if you are in the market freely, like happened in Europe, Europe is investing about 73 billion euro per year to promote renewable, and we increased the renewable of about 2 (percent), 3 percent in the energy sector up to 23 percent. So it’s a huge number. But from the other side, we open our door to coal coming from the U.S. and we increase the coal disposal utilization with 10 percent in four years. And 1 percent of coal is deleting the positive impact of 10 percent of renewable.
So what we are—it was a subsidy on the renewable are promoting on give room to the coal. So in Europe we got, without a policy, a crazy energy mix, renewable and coal, and we didn’t change at all our emission policy and perspective. For that reason, policy is absolutely crucial.
LEVI: Christie, one of the things that’s being squeezed there is nuclear. And you’ve spent a lot of time thinking about nuclear and thinking about the conditions that would allow nuclear to become a larger part of the climate solution. What needs to be done internationally on that front, because nuclear entails not only the climate regime but regimes focused on safety, on security. What are the pieces of governance that need to be put in place to make nuclear work?
WHITMAN: Well, there’s some 140 nuclear reactors currently under construction or in the licensing stages around the world. And I think the most important thing is we need to be players in it, because our regulatory structure is perhaps—it is the gold standard. It is the most—we have the most regulated nuclear industry with the highest set of standards of any country in the world and we want to make sure that we are a player to be able to help influence some of these other countries as they move forward.
It’s something that is a very good economic tool for us. Right now in China, four of their reactors that are being built are being built using the Westinghouse Advanced Processing 1000, and that’s already accounted for 15,000 jobs in this country. So it’s a win-win—it’s not a bad thing—which gets us to trade, and it gets us to the Ex-Im Bank and the need for a more coherent and cohesive, I believe, plan from our Congress about how we engage with the rest of the world.
But particularly, if you look at—nuclear is the one form of base power that releases no regulated pollutants while it’s producing power. And while oil and gas are far better than coal, nuclear still—they still release the carbon and they release the other criteria pollutants into the atmosphere. So it needs to be an all-of-the-above strategy.
When you look at, particularly in the developing world, in many parts of it, this move now to small modular reactors, or SMRs, it really holds out a lot of hope. Those can be built faster. They’re must less expensive. They have fewer component parts. They’re easier to manage. And they can—they’ll range anywhere from probably about 30 megawatts to 500 megawatts. And they can be put down in place. They’ll be built inside, transported to where they’re going to produce the power.
So you can reach places that are off the grid. And in many of the developing countries, because of the use of biomass as a regular form of power and of cooking, and all the ramifications of that, particularly on women, and women being major drivers of the development—economic development in countries, when their lifespan is shortened, when they have to spend a lot of time not working for the community, not doing business, going to collect wood or dung in order to be able to produce and—meals and feed their families, you’re losing their economic value to the country as a whole.
So to me, nuclear is often overlooked because of fears around nuclear. But if you look at the history, the actual history in this country, and our regulatory regime, it’s been a very safe form of power. And it’s been something that’s shown to be 90 percent efficient, runs 90 percent of the time. It isn’t affected by weather extremes in the way some of the other power producers are. So it’s something that I believe needs to be part of this discussion if we’re really going to try to slow down this path that we’re on, on climate change, which isn’t enormously serious.
LEVI: So one of the things that you emphasized here was this potential role of small modular reactors, so next-generation technology. And you talked about U.S. investment there. Does there need to be more international collaboration on investment there, on diffusing that technology? Are we sort of OK with the U.S. taking the lead there and hoping we’ll sort it out ourselves?
WHITMAN: Well, we always do better when we bring everyone else into the process. I mean, clearly there is going to be an advantage when you have a—you have enough numbers, enough money being put in, enough brains being put to it. There’s no one country that has all the answers, but much of the base technology that’s been developed even further in France—particularly in France and Japan—came from this country before we got out of the nuclear business in the ’70s.
But our Department of Energy now has put money aside, a significant amount, for the development of small modular reactors. Under the Clean Power Plan they have opened up the ability to take some money for R&D and for actual construction, particularly for SMRs. But we would all be better off if we were working with the rest of the world, but that gets back to international: How willing are we to trade things? And some of these are—it’s going to involve intellectual property.
LEVI: And I suspect also it’s not just a matter of cooperating to make the innovations but also getting at least enough regulatory coherence so that a plant that is allowed to operate in one place can actually be deployed somewhere else.
WHITMAN: Well, that’s one of the advantages certainly in this country and around the world under the old regimes that we had. In this country, of 104 reactors we’ve had operating over the more-than-50-year history of nuclear in the United States, 95 of them use different technologies. So even within one utility company you couldn’t train somebody at one reactor and send them to the next one because it would be a different technology.
Now there are maybe going to be, worldwide, four. And so that is going to make it much easier to harmonize and to move people around and be able to have it. But that’s, again, why we, the United States, want to be involved. We want to be working with these countries as they set up their regulatory structures to make sure that they are adopting some of the most advanced forms of oversight.
I mean, just a quick example. After Fukushima Daiichi, what happened was not the earthquake, and I think most people know that. It was the tsunami. And the reason was that they had co-located their backup generators actually in the building with the reactor. After 9/11, our Nuclear Regulatory Commission had identified this as a potential problem and told all of the utilities that had nuclear reactors that they had to move their backup generators to separate buildings. So we really are ahead of the curve in much of this and we should want to be part of what’s going on in the rest of the world.
LEVI: Dan, I want to shift gears a bit. One of the big criticisms of the U.N. process has been that—I’ve lost count, but 190-and-some-odd countries get together, and who can negotiate anything with 190-plus countries? So I know when you worked in government this was a big focus and you created the Major Economies Meetings to try and deal with that, which was reincarnated as the Major Economies Forum in this administration.
Can you talk to us first, briefly, what that is? But second, now looking back on roughly 10 years of trying to do something in a smaller group, does it offer significant advantages? If it does, what are they? Or has it not lived up to its potential?
PRICE: Wow. OK. (Laughter.)
The idea behind the Major—we called it the MEM. It was rechristened the MEF. I like the MEF better, the Major Economies Forum. We called it the Major Economies Meeting. But essentially it was the 17 countries that together constituted 85 percent of greenhouse gas emissions. And the idea was that if one could reach agreement in principle or agreement on a number of items in that forum—not that you would be prejudging the outcome of the UNFCCC, but that if you could reach agreement on certain items that could then be socialized within the broader group.
I would say, over its life it’s had mixed results. Certainly it served to elevate—I think one of our previous speakers, I think it was David, emphasized the importance of heads of state coming. Well, the meeting of the major economies would coincide, in my day, with the G-8 or the G-20. And to have the leaders—so there was an awful lot of overlap between the major economies countries and the G-20. To have those leaders together for half a day or a day focusing exclusively on issues of climate and energy was quite helpful.
I think, in the broader context—I mean, you’ve seen a proliferation of large regional trade agreements, right? TPP is in part a response to the failure of the multilateral system to make progress, principally because of the veto of a number of large emerging markets and the recalcitrance of a number of large developed countries to reach agreement on certain things.
So I think both processes are important. Eventually one needs to get a broad-based consensus, particularly since what we’re talking about is fundamentally changing the organization of our economies and human behavior. That can’t be done as a group of 17.
LEVI: You describe this in a way that makes the challenge just seem very, very small.
Claudio, when we talk about these major economies, we typically think about the United States and we think about European countries. We think about China, India. But one of the largest ones that’s consistently part of the discussion is Saudi Arabia. And there are other major oil-exporting countries that matter in these discussions. And I’m struck when I look at the list of companies involved in the new initiative that you’ve recently released, that Saudi Aramco is part of that.
LEVI: How did that work, and what insight do you get into how they think about this set of challenges?
DESCALZI: I think, first of all, that is a big result, this success, Saudi Aramco with us. Saudi Aramco is very interested too in technological collaboration and cooperation with all the major companies. So they are working on energy efficiency, flaring down, and in the meantime on emissions. And so they are working on some of the items that we are working on.
It’s clear that as Europeans we are advocating for gas. We are advocating also for carbon pricing, ETS or EPS, and that maybe we are not sharing exactly the same kind of solution in this case but it’s part of the dialogue. So I think that then every country—talking about the consensus, a large consensus, a lot of countries together, I think that every country can—has a different solution for the climate change. It’s clear that there are some points, from our point of view, that—for example is carbon pricing or EPS—that is, emission performance standard—that we are to apply. Otherwise we cannot cope with the reduction of CO2 emissions.
We have to discuss between us, but we have also to create the changing. I’m talking about the case of the U.K. and the U.S., for example. U.K., in Europe, they’ve been the most successful in reducing emissions. What they applied, they applied the EPS, so the Emission Performance Standard that is practically an indirect carbon pricing that touches the most polluted plants like the coal plant. And in a few years they created a different kind of energy mix based on gas and renewable and they’ve been able to reduce 25 percent the emissions in the U.K. And that is an example. In the U.S. you reduced about 10 percent, but you have changed the energy mix, renewable. You have still coal but you create a new renewable, and gas, less coal.
So I think that we have to find a consensus. We have to discuss about the solution. I don’t think that we have to—we don’t have time to discuss too much—that is the issue—because in 2030 we are to cut about 35 percent of our emissions. And we have to follow also some changes. And that is the case, U.K., the U.S.; Europe is the worst case because we put together—so I think that we need the rules and policy. And we share this point. Saudi Aramco and Pemex has other kind of objectives. They don’t have big emissions so they have a different kind of objective. That is energy efficiency and the energy mix, for example.
LEVI: I’m struck that in each of your comments you talk about standards as being—as being important, not typically the stuff of high politics and summitry. You don’t come out and say, we have a new set of technical standards. But it’s hard to come away from this discussion without concluding that, actually, standards are critical for advancing technology and for helping it spread more rapidly. We might do well to find ways of accelerating change on that front.
Claudio, I have one last question for you and then I want to open things up to members for questions. So we’re talking a lot about governance, about policies, about initiatives, but this all happens overlaid on huge market-driven changes. And your industry has seen enormous market-driven changes in the last year. Weigh the relative importance of these two pieces to us. If you think, for example, about the collapse in oil prices versus the progress on policy, which one is going to influence our ability and willingness to decarbonize more?
DESCALZI: I think we need both. I think that we need both in the sense that we need standard policy and going to the low price, oil price. I think that that is open to create more efficiency. We are cutting costs. We are more energy efficient. And that is a—is a result, and that is impacting CO2 emission and climate change. And we are working more on gas, because gas is decoupling so gas is no more linked to oil.
DESCALZI: So oil dropped down but gas less down. So I think that this situation creates anomalies that I’m not about—I’m not happy about the low price but I think that is a—in a sense creates—is pushing us toward a different energy mix.
LEVI: Well, we’re clear—for any shareholders, you are not happy about the low oil price.
DESCALZI: No, I’m not happy. I can—
LEVI: Just to be clear.
DESCALZI: Yes, a lot.
We are going to turn now to questions from members. A reminder that this conversation is on the record. Put up your hand. I’ll point to someone. You’ll be brought a microphone. Please speak directly into it. Stand, state your name and affiliation, and have a quick, sharp question so we can bring as many in as possible.
Ruben, the gentleman on the right side of the aisle here.
Q: Thank you. Ruben Kraiem, Covington & Burling.
For Mr. Descalzi: In comparing the carbon budget, so to speak, the amount of carbon that could be put into the atmosphere within the expectations of temperature increase that we can live with, and comparing the resources—the fossil fuel resources that we have on hand or in reserves, people have come up with this notion of stranded assets—
Q: —I take your point with respect to the replacement of coal, and that of course makes a big difference for the oil and gas companies, but even assuming that natural gas replaced coal to a substantial degree, how do you think of the stranded assets issue? And what can the industry be doing to address that prospectively? Thank you.
DESCALZI: Well, thank you. The stranded assets—when we talk about fossil fuel and we talk about stranded assets, I think that we have three different models. So the first real stranded asset is coal, clearly, for the long run. And when you go to the oil and gas companies—and we work on a—in terms of research, on the two tiers here that is a subset of the—of the full resources. And the lifetime is less than 18 years, 15 years. So our two-tier research, for that reason we make inspirational every day, because our lifetime is very short and it’s clearly inside the 30, 40, 50, 60 years where we have to change our energy mix.
So I don’t think at all that we have a problem of stranded assets. We have some problem of stranded assets for marginal price because—but they’re already stranded now because they are too expensive, and not for climate reasons. So I think that is a—is an issue that is not well-positioned when you talk about stranded—it’s clear that you look at a hundred, 200 years, we have coal, we have oil, and then we have gas.
We need gas because we have to replace all the different kind of resources and it’s faster and cheaper. And especially when you look at Africa, for example, where we have 1.2 billion—no, sorry, 600 million people without energy but they have gas, so they have to use this gas. We have to have them use this gas to create development and access to energy.
So when you talk about this kind of stuff, we have to look at the different geography at people that they don’t have energy at all. They are using biomass, as we said before, that’s causing 4.5 million dead people every year. And so I think that we have to look at it without an ideology. We must be very pragmatic.
LEVI: The gentleman here on the left.
Q: Carter Page, Global Energy Capital.
I have a follow-up question to some of the things that Mike was discussing with Claudio. Can you say a little bit more in terms of your strategy in the Middle East, just in dealing with many of the state-owned enterprises and governments there? They obviously have a great respect for you, and you’ve built great partnerships. You know, can you say a little bit in terms of finding the balance between the various tracks that you’re talking about, particularly with respect to oil versus some of the more carbon-neutral strategies you’ve been talking—
DESCALZI: Yeah. So Middle East, I think that’s a—our strategy was really more African and North African and some Middle East countries, but with a gas discovery we made—because now we are changing our energy mix, oil and gas, and with the Middle East we are working a lot, and especially in the Eastern Mediterranean hub, to create a strong gas alternative for Europe. And we are working together.
And that is quite interesting because it’s in line with the climate change target, because we are promoting gas. We are promoting gas in Egypt, in Cyprus, and recently we are discussing with Israel a lot because they find a lot of gas and the existing Egyptian infrastructure will be perfect to build on an extra strategy.
This region is growing. It is an old one, region, for Egypt but it’s growing because we already found 3,000 billion of cubic meters with a target 6,000 billion cubic meters. So it can create a strong change, state of change for climate change, for gas utilization in Europe. We have a—we have this potential to increase about 200 billion of cubic meters per year, so to reach 680 billion cubic meters, and we are now at 40 (billion cubic meters) or something. So there is a big, big gap to fill, and this region is working together.
So it’s not just an economic and industrial alliance but became a physical link between countries that before didn’t talk too much together, like Egypt, Cyprus, Israel, in the future Libya because it’s part of this hub. So how economy and industry can change also the geopolitical connection, and that is a—I think that is very positive for development, for climate change, and for energy mix.
LEVI: Christie, I want to—this discussion of countries with sort of less capacity reminds me of something that Leena said earlier.
You know, India has a lot of goals that it’s excited about but can’t necessarily meet them. And one of the things that is less prominent that the EPA does is it works with partners around the world to make them more effective regulators, make them more capable of actually achieving the things that they want to achieve. Are we doing enough to help others be able to achieve the goals that they’re already interested in? We typically think of climate talks as trying to harangue other folks into wanting to do more. How about helping them do more of what they already want to?
WHITMAN: Unfortunately, right now we’re not because the agency is being totally hamstrung by the Congress. Their budget has been cut dramatically. The number of people are retiring and leaving. And so there is not a lot left to do that kind of work, and we have a Congress that is constantly calling members of the agency up on the Hill to testify on a whole host of different subjects, and that takes away a lot of time and a lot of focus on the issues that need to be addressed. We were more proactive in the past, I believe, than we have been.
There is an office within EPA that just deals with those international involvements, and their budget’s tight. They can’t do the same kind of travel. It’s fine with modern technology. You can do a lot with Facetime and Skype and things like that, but that’s not the same. You’ve got to be there, particularly when you’re developing these very sophisticated standards, because you have got to—we’ve got to understand the cultural differences.
WHITMAN: It’s fine to say, this is how we do it, and it protects everything and it’s great, but that’s not how it’s always going to be able to be implemented in other countries. And you don’t get that over the phone or over the Internet. You have to be on the ground, and we just don’t—right now we’re not participating, I do not believe, in the way that we should or could.
LEVI: Teresa, on the right.
Q: Thank you. My question is on trade, on standards, so for Daniel Price.
I hear an increasing concern coming from the civil society in Europe on the negotiations on the TTIP. In a very simplified manner, their concern is this is a treaty that could freeze current standards, being combined with any company in a position to claim for protection for the previous investments in a context where what we need to promote is a progressive trajectory on newer standards in order to change the current solutions, so very particular on the energy and sustainability chapters.
So my question is, how we can promote or how we can use these instrumental fields—finance, regulation, trade instruments—in order to promote the action going beyond the existing standards and being a positive force into the new type of investments we need?
PRICE: Thank you for that question. Let me comment on two aspects of it.
You’re absolutely right; certain civil society groups in Europe have been protesting. I think there were 150,000 in the streets of Germany against TTIP. This was Angela Merkel’s brainchild initially.
LEVI: The agreement, not the 150,000—(laughter).
PRICE: Right, right, right, the agreement, the agreement. Thank you.
LEVI: Just to be clear.
PRICE: And I think—I think the anxiety is more broadly based than just about TTIP or just about investor stake. There is an element of global insecurity because of the slowness of the economic recovery from the financial crisis. There is a loss of confidence in institutions and elites. So I think there’s a lot that underlies this anxiety.
I think the particular concerns you identified—that is, that regulatory cooperation will be a race to the bottom, not a race to the top—and the concern about the ability of an investor to bring a claim against the host government for damages, I think those two particular concerns are totally unfounded and the issue has been largely demagogued.
Taking the second one first, there is not a single case under the more than 3,000 treaties that presently exist—not a single case in which a nondiscriminatory, generally applicable health, welfare, or environment measure has been found to violate a treaty, not one case. We see lots of demonstrations and protests when a Canadian country called Methanex brings a claim against the United States because California bans an additive, and lots of protests and demonstration, but they lost. People don’t take to the streets and say, hooray, the system worked as planned. So I think there is a burden of proof on the other side that is yet to be discharged.
In terms of regulatory cooperation, I would say the same thing. You know, you talked to regulators in Europe pre-VW and they were very concerned about, you know, are U.S. regulators rigorous enough? Do they have too cozy a relationship with the private sector? (Laughter.) You talk to regulators in the United States and they say, well, look, there’s 28 states in the European Union; we could see doing something with the big countries like, oh, say, the U.K. or France or Germany. And now they pause. They had thought the concerns were at the periphery—Bulgaria, Romania, Serbia, et cetera. Now it turns out there are other concerns.
But I would say the negotiators on both sides are committed to mutual recognition where it makes sense, right? If it’s fish safety, and you test the water and I test the fish but our outcomes in terms of safety are comparable, our datasets are comparable, should we not explore that? Does that necessarily lead to a lessening of consumer protection or does it lead to a promotion of engagement on products, services, and standards?
So yes, there have been lots of protests, in my view unfounded on any factual basis and largely accounted for, I think, for reasons other than the pendency of these negotiations.
Q: So do you think that it could promote better standards?
LEVI: The follow up is, could it produce better standards?
PRICE: And the answer is absolutely. You know, there’s a lot of problems in Europe—migration, eurozone—but there’s also some bright spots—energy market union, capital markets union, digital single market. And core to all of these is greater integration among the 28 and a kind of standardization across the 28 which will make it easier to promote global standards.
LEVI: The gentlemen in the second-to-last row there.
Q: Charles Frank, Brookings.
I’d like the panel to say what they think about global—about carbon pricing, either in the form or tax on carbon or a cap-and-trade system. How important is carbon pricing to reaching the goals of, say, two degrees Celsius, and will there be any discussion of that issue in Paris? I know we’re talking about beyond Paris, but if you can also indicate, beyond Paris, where do we go with carbon pricing?
LEVI: And since we’re focusing on governance in particular, let me put a spin on that.
To the extent that different states pursue different tools—carbon pricing through taxes, cap and trade, other measures—how important is it that they actually harmonize what they’re—what they’re doing? And maybe a quick answer so we can get a few more in, but, Christie, why don’t you start on that?
WHITMAN: Well, I mean, I happen to think it’s very important. And we did see back in 2007, when you had the leaders of major industrial companies standing up with the leaders from the major environmental groups saying, regulate us on carbon because we need to have harmonization, trying to meet standards in 50 different standards in 50 different states is just a nightmare, not to mention the international companies and looking at what they have to meet around the world.
So I believe it is very important. It is something that can be done, but we put a lot of objects in our own way. I think what you’ll see going forward is you’re going to see more of the RGGI-type approach where you have regional agreements and the Western states also have a trading thing. We are an enormously price-sensitive country, and unfortunately—well, fortunately for you, when prices went up people went to smaller cars. The minute gas prices went down, everybody is back in their SUVs again. And you wanted to raise your hand and say, hey, not only could you still save money by being in a Prius but you could also be helping the world and the earth, because cars, as we know, are huge emitters.
So price sensitivity is very great, and for my mind, having seen the stutters and starts we’ve had with cap and trade, and the CPP that the—the new regulation, the Clean Power Plant regulation allows for states to either determine they’re going to achieve their goals through regulating the—regulation specific to the utilities or a broader carbon reduction. And that gives them the flexibility which states need because they’re all very different, but on the other hand I think if you’re going to see real change it will be a tax on carbon rather than a cap and trade, because that’s had such a sporadic history and it’s very hard to—really to implement in a successful way. But I don’t see any appetite for it, by the way, in Congress.
LEVI: Claudio, is that what you and your peers are looking for? Does harmonization matter?
DESCALZI: Yeah. First of all, I think that we need to have a carbon pricing, or EPS, or a sort of cost for the CO2 that you are—your CO2 emissions. But we don’t need distortions.
What happened in the last 10 years that—the only continent that accepted to apply a carbon pricing was Europe. Then we failed because the ETS is so cheap that it doesn’t count. But what happened, that we apply carbon price; we set the 2020 target, so reduction of emission 20 (percent) more efficient; and then we create an energy system, very expensive. We pay energy three times—more than three times than you pay in the U.S.
So when we talk about carbon pricing or carbon tax, it’s something that has to consider competitiveness for each country, because if you apply in your country and you are not applying worldwide, you don’t solve the problem because Europe accounts for 8.6 percent of the total emissions. If you look at India, China, and U.S., they account for 52 percent, and there is no carbon pricing. There is no carbon pricing. There is no carbon tax. We have in Europe, we have in Norway, now we have very strong and very efficient EPS in U.K., but we create a monster where we have carbon pricing, we spend a lot on renewables, we—so we create an energy price that is not sustainable.
So we want to have a carbon pricing, an efficient and effective one, but we have to find an agreement with other countries where the emissions are more important, because we have to avoid distortion in the competitiveness for our industry. Otherwise we kill ourselves.
LEVI: Dan, you talk to a lot of different companies. Is consistency across jurisdictions important? Where does it rank in this space compared to, let’s say, not wanting to be overly burdened?
PRICE: I would say, all of the above. But, you know, one of the questions that is not yet addressed, whether it’s an energy market union in Europe or in this broader discussion, is how much latitude should countries have for choosing energy source? I mean, is it OK for the major economy of Europe to say no nuclear? What if the top 50 economies of the world make that same choice?
So I realize this is largely, you know, a matter of domestic—
WHITMAN: We’d be in trouble.
PRICE: —politics, but if we’re going to be prescriptive on goal and agree on what that goal is, isn’t it the case that one state’s energy choice will then affect all of the other countries? And so as we think about this going forward, a question is, how much latitude ought there to be?
Q: Lukas Haynes—is it on? Lukas Haynes, David Rockefeller Fund.
So to build on that question, Daniel, can you imagine the major-emitting economy forum as a place where those countries go sector by sector, major emissions sources by sources, and agree on a set of policies, regulations to be harmonized for driving deeper cuts?
PRICE: Well, that’s a very interesting question. During the time that I was involved with the major economies process we were looking at that: aluminum, ocean vessels, aviation, iron, and steel. So the answer is yes, and the sectoral approach is one that a number of countries favor, and indeed a number of industries favor as well.
LEVI: Claudio, there have been some discussions within the oil and gas industry toward doing this on methane emissions from natural gas. Is that right?
DESCALZI: Yes, there is a big—but just because a forum—I think that before talking about—I think that we have too many forums. (Laughter.) We have too many meetings. You have 21 COPs, so 21 without solving anything.
I think that we are—we have to simplify. We have to find different solutions because gathering together and talking and talking and talking without solution is useless. So I think that we have to fight and kill all the forums. That is the first thing. (Laughter.) No, I petition I want to kill all the forums. (Laughter.) I’m joking. No, because I have to express—
LEVI: How will we host meetings here if we get rid of all the forums? (Laughter.)
DESCALZI: No, but that is not a forum. That is not a forum. I’m talking about a different forum.
So, no, I think that we—talking about methane emissions and all, that is an issue, big issue, in the U.S. We have some issues also in Europe. And that is still more important than CO2 emission because methane, a fugitive emission—
DESCALZI: —is at least 86 times stronger and more polluted than CO2 emissions, and causes nowadays three gigatons per year. So it’s very—is very harmful. We are working on that and we are investing. And we use common technology. That is the case where we put together our technology and we work together and we share technology.
LEVI: A final—
WHITMAN: And by the way, EPA is in the process now of finalizing their regulations on methane—
WHITMAN: —because it is much more polluting in a smaller area. It tends to fall closer to home, as it were. It doesn’t transport quite the way carbon does but it’s major.
LEVI: A final, very short question before we go to lunch break. Microphone, please.
Q: My name is Sally Kader, and I represent the U.S. Federation for Middle East Peace at the United Nations office.
This is for Claudio. Given the situation in Libya and the division in the two governments, and so are you handling the situation there vis-à-vis structure in oil and gas and all of that and the safety of it? Thank you.
LEVI: Let me put a tiny footnote and we’ll—you have all these day-to-day pressures like what’s just been described in Libya. How do you make climate change something you focus on regularly as opposed to the distant piece that you can put off to the next day?
DESCALZI: The first answer about Libya, no, we are not handling the situation; the situation has handled us. (Laughter.) So just a quick answer.
Why we are in a good—in a good—in a good situation, the situation is handled as positively because we made a strategic choice in the past not to sell out—export all the gas we produce. Now, 60 percent of the gas we are producing we are delivering to access to energy. So Libya, they grow very quickly in energy sector from in four or five years during the war, during the civil war. They pass 400 million cubic meters gas disposal for energy to 4.5 billion cubic meters per year.
So now we are supplying all the power sector in Libya, and that is one of the reasons why our installation is not shut down. But we created a positive situation from an energy point of view, and that is access to energy. So we transfer—they transfer—it’s very smart to do that—to all the oil or coal plant into gas plant. And then it’s a positive situation for us because we produce gas.
So you said—so out in the—I think the two can work together because we are—you know, when you—the energy mix and the climate change, when you make choice in the territory, especially Africa where we work, to change the energy mix and to promote gas. In Libya is the case you can do both. So you can create a good environment, a good step toward environment, and give energy—and sometimes revive and sometimes leave energy situation in a good way.
LEVI: So it’s very much about bringing it from the 40,000-foot level and integrating it into what you do. And I think that’s been a theme throughout all of the different elements of the global regime complex, as academics say, for climate change. If you didn’t think before this session that there was a lot more to climate governance than the Paris talks, I trust you’ll have changed your mind by now.
First, please join me in thanking our three panelists. (Applause.)
WHITMAN: I’ll be on a panel with you anytime. You get all the questions. I love it.
DESCALZI: (Laughs.) Thank you.
LEVI: There will now be a lunch reception on the first floor of the Pratt House until 12:30. We will begin our keynote session at 12:30 sharp here in the Peterson Room.
This is an uncorrected transcript.