[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]
EXAMINING THE ADMINISTRATION'S
PROPOSAL TO ESTABLISH A
MULTILATERAL CLEAN TECHNOLOGY FUND
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
DOMESTIC AND INTERNATIONAL
MONETARY POLICY, TRADE, AND TECHNOLOGY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TENTH CONGRESS
SECOND SESSION
__________
JUNE 5, 2008
__________
Printed for the use of the Committee on Financial Services
Serial No. 110-117
----------
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HOUSE COMMITTEE ON FINANCIAL SERVICES
BARNEY FRANK, Massachusetts, Chairman
PAUL E. KANJORSKI, Pennsylvania SPENCER BACHUS, Alabama
MAXINE WATERS, California DEBORAH PRYCE, Ohio
CAROLYN B. MALONEY, New York MICHAEL N. CASTLE, Delaware
LUIS V. GUTIERREZ, Illinois PETER T. KING, New York
NYDIA M. VELAZQUEZ, New York EDWARD R. ROYCE, California
MELVIN L. WATT, North Carolina FRANK D. LUCAS, Oklahoma
GARY L. ACKERMAN, New York RON PAUL, Texas
BRAD SHERMAN, California STEVEN C. LaTOURETTE, Ohio
GREGORY W. MEEKS, New York DONALD A. MANZULLO, Illinois
DENNIS MOORE, Kansas WALTER B. JONES, Jr., North
MICHAEL E. CAPUANO, Massachusetts Carolina
RUBEN HINOJOSA, Texas JUDY BIGGERT, Illinois
WM. LACY CLAY, Missouri CHRISTOPHER SHAYS, Connecticut
CAROLYN McCARTHY, New York GARY G. MILLER, California
JOE BACA, California SHELLEY MOORE CAPITO, West
STEPHEN F. LYNCH, Massachusetts Virginia
BRAD MILLER, North Carolina TOM FEENEY, Florida
DAVID SCOTT, Georgia JEB HENSARLING, Texas
AL GREEN, Texas SCOTT GARRETT, New Jersey
EMANUEL CLEAVER, Missouri GINNY BROWN-WAITE, Florida
MELISSA L. BEAN, Illinois J. GRESHAM BARRETT, South Carolina
GWEN MOORE, Wisconsin, JIM GERLACH, Pennsylvania
LINCOLN DAVIS, Tennessee STEVAN PEARCE, New Mexico
PAUL W. HODES, New Hampshire RANDY NEUGEBAUER, Texas
KEITH ELLISON, Minnesota TOM PRICE, Georgia
RON KLEIN, Florida GEOFF DAVIS, Kentucky
TIM MAHONEY, Florida PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio JOHN CAMPBELL, California
ED PERLMUTTER, Colorado ADAM PUTNAM, Florida
CHRISTOPHER S. MURPHY, Connecticut MICHELE BACHMANN, Minnesota
JOE DONNELLY, Indiana PETER J. ROSKAM, Illinois
ROBERT WEXLER, Florida KENNY MARCHANT, Texas
JIM MARSHALL, Georgia THADDEUS G. McCOTTER, Michigan
DAN BOREN, Oklahoma KEVIN McCARTHY, California
BILL FOSTER, Illinois DEAN HELLER, Nevada
ANDRE CARSON, Indiana
Jeanne M. Roslanowick, Staff Director and Chief Counsel
Subcommittee on Domestic and International Monetary Policy, Trade, and
Technology
LUIS V. GUTIERREZ, Illinois, Chairman
CAROLYN B. MALONEY, New York RON PAUL, Texas
MAXINE WATERS, California MICHAEL N. CASTLE, Delaware
PAUL E. KANJORSKI, Pennsylvania FRANK D. LUCAS, Oklahoma
BRAD SHERMAN, California DONALD A. MANZULLO, Illinois
GWEN MOORE, Wisconsin WALTER B. JONES, Jr., North
GREGORY W. MEEKS, New York Carolina
DENNIS MOORE, Kansas JEB HENSARLING, Texas
WM. LACY CLAY, Missouri TOM PRICE, Georgia
KEITH ELLISON, Minnesota PATRICK T. McHENRY, North Carolina
CHARLES A. WILSON, Ohio MICHELE BACHMANN, Minnesota
ROBERT WEXLER, Florida PETER J. ROSKAM, Illinois
JIM MARSHALL, Georgia KENNY MARCHANT, Texas
DAN BOREN, Oklahoma DEAN HELLER, Nevada
C O N T E N T S
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Page
Hearing held on:
June 5, 2008................................................. 1
Appendix:
June 5, 2008................................................. 23
WITNESSES
Thursday, June 5, 2008
Blackwelder, Brent, President, Friends of the Earth US........... 12
Deutz, Dr. Andrew, Director of International Institutions, The
Nature Conservancy............................................. 18
McCormick, Hon. David H., Under Secretary for International
Affairs, U.S. Department of the Treasury....................... 3
Werksman, Jacob, Program Director, Institutions and Governance
Program, World Resources Institute............................. 16
Wheeler, David, Senior Fellow, Center for Global Development..... 14
APPENDIX
Prepared statements:
Gutierrez, Hon. Luis V....................................... 24
Carson, Hon. Andre........................................... 32
Blackwelder, Brent........................................... 33
Deutz, Dr. Andrew............................................ 40
McCormick, Hon. David H...................................... 47
Werksman, Jacob.............................................. 51
Wheeler, David............................................... 60
Additional Material Submitted for the Record
Blackwelder, Brent:
``Global Civil Society Statement on World Bank Climate
Investment Funds,'' signed by over 100 international
organizations.............................................. 75
EXAMINING THE ADMINISTRATION'S
PROPOSAL TO ESTABLISH A
MULTILATERAL CLEAN TECHNOLOGY FUND
----------
Thursday, June 5, 2008
U.S. House of Representatives,
Subcommittee on Domestic and
International Monetary Policy,
Trade, and Technology,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 1:40 p.m., in
room 2128, Rayburn House Office Building, Hon. Luis V.
Gutierrez [chairman of the subcommittee] presiding.
Members present: Representatives Gutierrez, Moore of
Wisconsin, Clay; and Paul.
Ex officio present: Representative Frank.
Chairman Gutierrez. This hearing of the Subcommittee on
Domestic and International Monetary Policy, Trade, and
Technology will come to order. Good afternoon and thank you to
all of the witnesses for agreeing to appear before the
subcommittee today.
Today's hearing will focus on the Bush Administration's
proposal to establish and provide funding for a multilateral
Clean Technology Fund. We will hear more detail from Mr.
McCormick today, but the Administration has indicated that the
purpose of the Clean Technology Fund will be to ``help fund
deployment of clean technology to reduce greenhouse gas
emissions in major developing economies.''
As envisioned by the Administration, the multilateral Fund
would exceed $10 billion in total funding and would be
administered by the World Bank. President Bush is seeking
authorization from Congress for a U.S. contribution of $2
billion over 3 years, starting with a $400 million
appropriation in Fiscal Year 2009.
With our jurisdiction over international financial
institutions, including the World Bank, the subcommittee and
the full Committee on Financial Services will be responsible
for any funding authorization.
Testifying on our first panel today, we have David
McCormick, Under Secretary for International Affairs at the
U.S. Department of the Treasury. Our second panel is made up of
representatives of several international environmental
organizations, whom I will introduce later in the proceedings.
We will be limiting opening statements to 10 minutes per
side, but without objection, the record will be held open for
all members' opening statements to be made a part of the
record.
I understand that Under Secretary McCormick is under some
time constraints, so in order to expedite this process, I will
submit my opening statement for the record and recognize Mr.
Frank, the chairman of the full Financial Services Committee.
The Chairman. Thank you, Mr. Chairman.
I appreciate this. I am not going to be able to stay for
the whole hearing, so I do want to make my statement now.
First, I think it is a sign of progress that everyone
should welcome that this proposal comes to the Administration.
We progress at different rates, but progress still should be
noted.
The fact that we have here a proposal from this
Administration to put funding behind clean technology is, of
course, based on the recognition that climate change is a
serious issue and that significant improvement in environmental
impacts are a very, very high priority.
There are some concerns that have been expressed that we
need to address. To begin with, we should be clear that part of
the problem here is that we don't come free of history.
Historically, the World Bank has not been seen as an
institution which is friendly to environmental concerns.
Now, I think progress has been made here as well, and there
have been substantial improvements. In some cases, this
committee has played a role in that, for example, in our
insistence on the establishment of inspection panels, which
have contributed.
But part of the problem that remains is the concern about
the World Bank being the most suitable entity to do this.
People want to see some movement forward here, but we can't
always get what we want. The choice may be, given the reality
between the World Bank and nothing, there may be some argument
for doing it elsewhere. But then there is a second set of
issues which is, if it is going to be the World Bank, under
what conditions, and subject to what rules?
I do think, if this is going to work, it is going to be
incumbent upon the Administration and the Bank to allay fears
that are well-grounded in history, that are not paranoia, and I
think there is the burden of proof to be shown that the Bank
will take this mandate and do it in a way that significantly
improves the situation.
Another concern is that we don't really do enough in this
world, and this country does not do nearly enough, to alleviate
poverty. There are far too many malnourished children in this
world, proportionately more in Africa than elsewhere, but an
awful lot, for any of us to feel good about it.
Any suggestion that these funds would be diverted from
public remediation and economic development in general will
also be a severe obstacle. So we are going to need some very
strong commitments that this will be wholly additive.
I say that because we are in a situation where, when we
draft our budget, we are sometimes told--I guess, by
``sometimes,'' I mean once every year--by the Administration
that here is an absolute dollar limit above which we cannot go.
We say, if these funds are going to come out of an already
too constrained budget for development purposes, then there is
an obstacle to that. Unless we can get an agreement that these
will be additive and will not come at the expense of other
issues, again, I think, this does not go forward.
There are some more fundamental issues about what types of
technology would be dealt with, but assuming it is going to go
to the World Bank--and that is obviously by no means
guaranteed--those two are absolutely minimum conditions.
Assurances that this will be done well and a guarantee that
there is no diversion, and I would say that finally, one way in
which you do that is to shorten the period in which it is
allowed to go forward.
So, at this point, I think the shorter the authorization
period, the more we may feel that we will be able to see
whether or not this works.
Obviously, you do have, at some point--you need a longer
term to get projects going. But that wouldn't be an argument in
the first year because you are not going to be making huge
commitments in the first year. So I think there is going to be
an argument strongly that many of us will feel that, given the
sort of experimental nature of this, we should not have a very,
very long time in which it is authorized, because whatever
assurances we get now on the two points I mentioned, they are
only assurances, and we can't take them literally to the Bank,
even if we get them from the Bank.
So, what I think people may look forward to is a testing
period of a year or so in which the two points that I mentioned
will have to be established if this is to go further.
I thank you, Mr. Chairman.
Chairman Gutierrez. Thank you, Mr. Chairman.
Our first panel consists of only one witness, Mr. David
McCormick. Mr. McCormick is the Under Secretary for
International Affairs for the U.S. Department of the Treasury.
We welcome him and ask him to please proceed.
STATEMENT OF THE HONORABLE DAVID H. McCORMICK, UNDER SECRETARY
FOR INTERNATIONAL AFFAIRS, U.S. DEPARTMENT OF THE TREASURY
Mr. McCormick. Thank you, Chairman Gutierrez, Congressman
Paul, and members of the committee. Thank you for the
opportunity to discuss an issue of global importance with you
today, and that is the Clean Technology Fund, also referred to
as the CTF.
The CTF is a new multilateral effort to reduce the growth
of greenhouse gas emissions in developing countries by
financing the additional cost of deploying clean technologies
over dirtier, usually cheaper, alternatives. The President's
Fiscal Year 2009 budget includes a $400 million appropriations
request for the initial U.S. contribution to the CTF, which
will be housed at the World Bank where it will leverage the
capital bases of multilateral development banks and the
donations of other contributing countries. The Administration
has requested authorization from Congress to commit $2 billion
to the Fund over the next 3 years.
We are aiming, along with our donor partners in the G8 and
beyond, at a global effort of up to $10 billion over the next 3
years, with the United States as the lead donor.
Now, what is the problem we are trying to solve here? Let
me outline for you the magnitude of the problem that this new
multilateral aims to address and why it is so critical that the
United States be a part of it.
Since 2002, emerging and developing economies have been
responsible for about two-thirds of global GDP growth. While
this unprecedented expansion has brought economic opportunities
and higher standards of living to desperately poor people from
around the globe, it has also led to a surging demand for
energy. That energy has come in the power industry in the
transport, building, and industrial sectors.
According to the International Energy Agency, by 2030,
global demand for energy will have increased by over 50
percent, with almost three-fourths of this increase coming from
a handful of developing countries. Now, currently, most
developing countries are focused on the most cost-effective way
to grow their economies, feed their people, and raise their
standard of living.
They tend to invest in the available energy technology that
can provide the most economic impact at the least cost. But
each time they invest in dirty technology, such as a
subcritical coal plant with a 30-year life span, the harder and
more expensive it will be to mitigate the resulting climatic
effects in the future.
If we take no action to provide developing countries with
the right incentives, their investments today could lock in the
legacy of high-polluting, less-efficient technologies for which
we would all eventually pay through the accelerated efforts of
climate change.
What is the response? Well, in response to this global
challenge, the United States, the United Kingdom and Japan have
been working multilaterally with the other G8 countries and
potential donors to create an international Clean Technology
Fund to help developing countries deploy these commercially
available technologies. These are technologies that we in the
United States and Japan and other developed countries are
already using.
Since September of 2007, Secretary Paulson, at the request
of the President, has led U.S. efforts to negotiate the
development of the Fund with our international partners.
The proposed Clean Technology Fund has three objectives:
first, to reduce emissions growth in developing countries
through the accelerated deployment of existing commercially
available clean technologies; second, to stimulate and leverage
private-sector investment in these existing technologies; and,
third, to promote international cooperation on climate change
in the broader context of pursuing a future climate change
agreement.
The Clean Technology Fund will help developing countries
finance the additional cost of deploying clean technologies
over dirtier ones. The Clean Technology Fund will not cover the
entire cost of any project. It will help cover the portion of
the cost needed to reach the point of economic viability.
National governments and private sponsors will be responsible
for the bulk of project financing.
The Clean Technology Fund will be a multilateral fund
administered by the World Bank and implemented through all the
multilateral banks. It will be able to leverage the resources
of the MDBs, which collectively lent over $55 billion in 2007
for international development. The Fund will invite developing
countries with an emphasis on those with expected high
emissions growth, and they will be invited to submit requests
for CTF support to finance energy, transport, or other projects
with significant emissions reduction potential, including
large-scale energy efficiency projects.
To be eligible to receive such funds, developing countries
will be required to work with the World Bank to develop
investment strategies that are based on national plans for low
carbon growth. Projects would be evaluated based on their
consistency with these national plans, their expected reduction
of greenhouse gas emissions, and their capacity to transform
sectors onto cleaner energy pathways. The Fund will use a mix
of concessional loans, grants, equity investment, and credit
guarantees to finance any additional cost of deploying clean
technologies.
Mr. Chairman, the status of the Fund--we have talked to
many other countries. The United Kingdom and Japan already
expressed publicly their contribution or their willingness to
commit, and we recently had a CTF design conference in Germany
where potential donor and recipient countries came together and
reached general agreement on the parameters of the Fund. We
believe donor support will go well beyond the G8 to include a
number of countries in Europe and throughout the Middle East.
A final comment, Mr. Chairman, for U.S. leadership and
involvement, I believe the CTF will do more than make an
immediate impact on emissions growth in the developing world. I
believe it can contribute to building the kind of trust between
developed and developing countries, trust that I am sorry to
say has been lacking for some time, that will be necessary for
a new U.N. climate arrangement to be reached in the years
ahead. Thank you very much.
[The prepared statement of Under Secretary McCormick can be
found on page 47 of the appendix.]
Chairman Gutierrez. Thank you very much for your testimony.
Mr. McCormick, I only have one question. There is
significant concern in the environmental community regarding
the lack of a definition of ``clean technology'' in the
Administration's proposal. Has Treasury ruled out certain
technologies and projects that others might be pushing for
eligibility under the CTF?
In other words, are there technologies or projects that
some might promote as clean or transformational that would not,
in your view, be appropriately funded by the CTF? What about
the super-critical coal plants?
Mr. McCormick. Thank you, Mr. Chairman.
The projects that would be considered, first, would only be
those projects from countries that had already developed and
had the approval for national plans for reaching low-carbon
economic growth.
Within that continuum of projects, we would expect that
there would be a number of those projects that would be
retrofitting existing infrastructure, trying to make existing
infrastructure, whether it be buildings or transportation
networks, much cleaner.
We would also expect that there would be some of the
projects that we would consider which would be new energy
infrastructure. Within that new energy infrastructure there
may, in some instances, be proposals for coal-related
technologies.
In those instances, those projects would be considered. I
wouldn't expect that to be a significant portion of the
portfolio, but it might be part of the portfolio. This, I
think, does bring to the forefront a difference among many
here. From a very practical standpoint, in some of these
developing countries, they are moving forward with the
development of coal-fired plants.
The only question, really, is whether we may, in certain
circumstances, within the context the of a low-carbon plan that
they have agreed to, finance the deployment of the cleanest
available coal technology possible, but those economies are
going to develop, in some cases, coal infrastructure with or
without our support.
We think there may be cases that do, in fact, justify the
deployment of the cleanest available coal technology possible,
just as we would advocate that under certain circumstances in
our open country.
Chairman Gutierrez. Thank you, Mr. Under Secretary.
The ranking member, Dr. Paul, is recognized for 5 minutes.
Dr. Paul. Thank you, Mr. Chairman.
Programs like this are always based on the assumption that
without a program like this, no good can come of it; there is
no other alternative, that there is never a market force, there
is never a profit incentive to accomplish some of these goals.
There is also the fact that some of these programs, if not
most of them, programs of the multilateral development banks,
aren't always that successful. Sometimes there is a lot of
money wasted, and there are a lot of special interests who
benefit.
It is always designed to do good to help the poor and to
clean up the environment, but sometimes we know that it
feathers the pockets of some special interests. Of course, I
have always had concerns about that.
The other thing, of course, that we shouldn't ignore is the
cost of a program like this. We are talking about just a
piddling sum, you know, $2 billion, throw that out there. That
is not much in a big budget. But we never talk about where the
money is coming from, and I would like to find out what the
Administration is thinking. Is this going to be part of the
deficit? Is this going to be borrowed money, or is this going
to be paid for by taxes?
For a $2 billion program, the odds are, it will be a lot
more. So, could you tell me, has anybody considered how we are
going to pay for this, and what we should do? What are the
considerations on paying for this?
Mr. McCormick. Congressman Paul, thanks for that question.
We certainly, I think, have a common agreement on the
commitment to market forces, and in the area of the
environment, particularly in the area of greenhouse gas
emissions, that has typically been pointed to by many as a
public goods issue, where we don't have market forces that are
essentially operating at some of these developing countries
where there is enough of an incentive for the investment in the
cleanest available technologies possible.
The reason for that is these governments are making trade-
offs in some cases--not in all cases--between basic human needs
and incremental investment in clean technology, and they are
making a trade-off that ultimately means dirtier technologies,
which creates the public goods problem for us all. So that is
what the Fund is designed to highlight.
As Chairman Frank noted in his opening remarks, we are
committed to this not being a trade-off between ODA funding,
existing ODA funding for poverty reduction and environmental
funding, so it is, indeed, additive. And it would be part of
the overall President's budget. It is additive to our
development funding.
I recognize your concern, Mr. Paul, with overall deficit
concerns and deficit spending. I can't point to a specific
trade-off that is being made within the budget as a consequence
of this or a specific tax, but I certainly do note your concern
on that point.
Dr. Paul. Yes, and I think this is probably typical. You
know, the programs get started, and we don't pin it down, and
it does contribute. You have a program here and there, and soon
we have a national debt increase. This year, the national debt
increase could be three-quarters of a trillion dollars at the
rate we are going. It is close to 600 now.
So if the economy continues down, it could be a major
factor.
But back to this idea about the market, you argue that, you
know, in these circumstances, the market isn't available and
doesn't work. Well, that almost guarantees bad decision-making
because instead of picking and choosing, let's say, nuclear
over wind and all these difficult things, if you don't have a
market factor in there, somebody has to make the decision, and
it has to be a bureaucrat. It has to be a politician, and it is
going to be slower, and it is going to be more costly.
So I guess, from what I am saying, I lack enthusiasm and
belief that something like this can be successful, although,
politically, it has a lot of appeal. I understand this, but I
would caution everybody that someday we, as a country, will
have to wake up and be responsible for paying these bills.
Thank you.
Mr. McCormick. May I respond?
Chairman Gutierrez. Yes, if you would like to respond.
Mr. McCormick. Certainly I think part of the issue here--
and I recognize $2 billion is a great deal of money. However,
within the overall scheme of this gap, between existing
infrastructure that is being deployed today, just in the energy
sector alone, it is $30 billion. That is the differential in
cost between the technology that is being deployed and the
cleanest available technology.
So if you think about the global implications of that from
a carbon emissions standpoint, it is quite enormous. While $2
billion is a lot, it is, frankly, just a fraction of addressing
the overall problem.
Now, why we think this $2 billion is a worthy investment
for the taxpayers is because the $2 billion becomes $10
billion, hopefully, if we are able to get multilateral support
for it, and then is leveraged much more significantly than that
by the fact that private-sector investment comes into this
further, the countries' investment.
So I don't mean to suggest market forces won't be at work
here. They will be, because companies will compete for
projects. Projects will complete among themselves for funding
opportunities.
I am simply saying the market is not working today in terms
of helping countries make that trade-off because they are
opting to address near-term poverty needs as opposed to the
long-term implications of global warming. That is something we
have a common interest in addressing as Americans.
Thank you.
Chairman Gutierrez. Congressman Frank. Please, Mr.
Chairman.
The Chairman. Thank you, Mr. Chairman.
I won't intrude into a family dispute over the market
between the gentleman from Texas and the Department of the
Treasury, but I am interested in the budgetary implications.
You were asking for a $400 million appropriation.
Now, if I am correct, this is different than our usual
financing of World Bank activities with the lending and
leveraging, etc. There is leveraging in that we expect others
to contribute, but this is a dollar-for-dollar appropriation,
correct?
Mr. McCormick. Yes, Mr. Chairman.
The Chairman. This is money, unlike World Bank or other IFI
funds that we have the dollar-for-dollar out-of-pocket
spending, so you can assure me that the $400 million being
requested is purely additive to what was otherwise being
requested in the foreign aid budget?
Mr. McCormick. Yes, sir, Mr. Chairman.
The Chairman. Okay, the reason it is important for this to
work is that--and I know a couple of the witnesses mentioned
this as well--this is money that is going to be spent in
middle-income countries, because poor countries are too poor to
bother the environment very much, certainly not from their
emissions.
So we have the continuing scandal of starving children in
Africa. This is not money that is going to go to Africa. It is
not money that will go to the poorest countries, so that makes
it especially important that we be very clear about that, and I
will be talking to the budget and appropriation people.
And I will tell you, I am ready to support this if we work
this out--the way this would probably work is, if we do agree
with it, we will be recommending it, in effect, if we pass it
out of the Financial Services Committee, to the Foreign
Operations Subcommittee.
But I will be prepared to tell them that if they get into a
budget crunch with the Administration and we are told we are
spending too much, you go over this side first. I want to be
very clear about that. I am prepared to support this but not at
the expense of poverty alleviation. I don't like to have to
make that trade-off, and I hope I am not forced to. You know,
we do this, but my advice to the Foreign Operations people will
be, okay, if you can do it that way.
Then the other issue I would raise is--and I noticed this
in some of the testimony--one of the things that could make it
easier for us to get this done would be--you know, we talk
about trade-offs. The World Bank has not compiled a record that
most environmentalists approve of in its general operations,
and there is a danger that we would have an ongoing World Bank
operation that was not environmentally sensitive, and then
this, you know, it is like they do their environmental work 1
day a month, and then they undo it the other 29 days.
A commitment from the World Bank, or a commitment from us
to work to see that the World Bank does better on environmental
issues, in general, could be very helpful. That is, again, why,
I think we may be talking about a trial period here.
But that would be important, that the World Bank not be
funding projects, for example, that would go counter to a
concern for clean technology. I think that is another issue
that we would ask you to address and that we may address when
we legislate on this.
Now, let me ask you, one of the most controversial
questions, controversial within this body as well, and that is
clean coal. What is your sense about that, because that is
probably the issue that causes the most controversy, because it
causes it within this body as well?
I would say to my environmental friends, obviously, there
is not yet a consensus here on the issue the way they would
like, but what would your sense be, would a significant amount
of this go to clean coal, some part? What is your sense?
Mr. McCormick. Mr. Chairman, thank you.
First, just a word on the Bank. I think I would be the
first to admit that there is a real tension in the Bank's
poverty reduction mandate and also a growing prioritization
within the Bank on an environmentally friendly energy and, in
particular, climate change. I know President Zoellick has made
this one of his top six priorities.
And what you should take confidence in from the Fund is
that, unlike other funding mechanisms at the World Bank, we
would have, as the United States, as one of the members of the
Fund trust committee, an ability to veto any project that is
inconsistent with a mandate that we are discussing today.
The Chairman. Well, I appreciate that, Mr. McCormick.
And I mean no personal disrespect, but the fact that this
Administration has a veto does not always fill me with joy.
Mr. McCormick. Understood, Mr. Chairman.
The second point is that, I think within these projects
that would be funded, there is absolutely--and our friends from
the NGO community have reinforced the importance of this many
times--there needs to be a focus on retrofitting existing
infrastructure, on efficiency and those types of projects,
every bit as much as new infrastructure. Within the category of
new infrastructure--
The Chairman. You mean, the ongoing activity of the World
Bank and the other MDBs, that this would have to be accompanied
by some sensitivity there.
Mr. McCormick. Yes, sir, and also within the Fund.
The Chairman. I understand that, but if this is confined
only to the Fund, you will run into trouble. One of the ways
you can help is if a trade-off for the existence of the Fund is
some more sensitivity within the main operation as well.
Mr. McCormick. We think this is a critical way to help the
Bank become more green in its outlook and how it thinks about
projects, absolutely.
There will be new infrastructure projects that we would
expect this Fund to support. I wouldn't expect a
disproportionate amount of that to be coal, but I do think that
the Fund may, on occasion, consider projects that are clean
coal technology and may, in fact, in some cases, support those.
Again, Mr. Chairman, the argument that I would make to you
is that those coal-fired facilities are going to be built in
some countries anyway. We want to discourage that, but there
may be cases where, if that is going to happen, we want to help
finance a project.
The Chairman. Let me call for this then, and this isn't
going to satisfy everybody, but one potential trade-off that
could help you would be if the Bank would say, okay, we are
going to go ahead with this, but we would be much less likely
now to finance existing coal technology, absent some
improvement, so that, again, there is an interplay between what
is done in the Fund and what is done in the main activity of
the Bank.
Mr. McCormick. Mr. Chairman, I couldn't agree more. The
point I would make, just knowing this was an issue of concern,
just looking back over the last 10 years, in terms of the Bank
support for energy infrastructure, only about 10 percent of
that has been coal.
Of that 10 percent, roughly 75 percent has been
retrofitting versus 25 percent of new infrastructure. I know,
for many people, that 25 percent of the 10 percent is still
much too much, but I think it would be unfair to represent coal
as a major portion of the energy infrastructure today.
I think, in the future, it can become less or probably
should become less, and I think the Fund contributes to that.
The Chairman. Thank you, Mr. Chairman.
Chairman Gutierrez. I thank the gentleman.
I now recognize Congresswoman Moore for 5 minutes.
Ms. Moore of Wisconsin. Thank you, Mr. Chairman.
Thank you, sir, for appearing today.
I have questions that really relate to the questions that
have already been asked by the subcommittee Chair and our full
committee Chair, and perhaps you have answered them by saying
that clean coal technology would, in fact, be regarded as part
of this--eligible for the Fund.
I suspect that we are going to hear testimony later on
today which indicates that it is very inefficient, that there
won't be anything brought on board until 2030. Yet other
resources are going to be spent for technology that is really
not clean. What is the thinking in terms of including that in
this Fund?
Mr. McCormick. Congresswoman, there was a real focus on not
prejudging what technology would be most appropriate. So,
again, I think we agree with Congressman Paul in the sense that
we don't think the government should be in the process of
developing or advancing technology. It is only supportive--just
to be clear--of those technologies that are broadly available
and already commercially deployed.
So this is not meant to advance the development of the new
technology but rather the deployment of assistant technologies.
The trade-off, in terms of collecting, selecting, or willing to
consider new projects--again, Congresswoman, I consider this to
be a very small percentage of this--was based on the fact that
some countries that are so heavily dependent on coal, to
suggest that they wouldn't be deploying coal technology as part
of supporting their energy technology just wasn't practical,
just wasn't pragmatic.
Ms. Moore of Wisconsin. All right. Thank you.
The World Bank, as has been indicated before, is probably a
suspect source of funding this project. What would be wrong
with the United Nations framework? I realize that their limited
capacity, perhaps, will not start till 2012. But if we could
put this in place and perhaps turn the portfolio over to them,
there would be a more global systematic deployment of these
resources.
The World Bank, as recently as April, did a major fossil
fuel lending program, and there may be some conflicts of
interest, we think, the huge portfolio that they have with
fossil fuel projects and really using some due diligence in
administering this program.
So what was your thinking in terms of the World Bank, given
their record and their portfolio, doing this lending?
Mr. McCormick. Again, Congresswoman, I think this was just
very practical and pragmatic so the UNFCCC is essentially then
negotiating--or the Secretary oversees negotiation. It doesn't
have the practical organizational capabilities for oversight of
implementation, where that has traditionally been a role of the
MDB. So we thought the Bank would be in a position to do that.
We also thought sharing many of the things that have been
said today about the need for the Bank to become more green, we
thought the Clean Technology Fund housed within the Bank would
give us greater influence in moving in that direction.
Ms. Moore of Wisconsin. Let me just ask you this,
countries, like Sub-Saharan Africa, as our chairman has already
indicated, wouldn't initially be part of this concessional
funding. But as other countries become more clean, and the
World Bank has invested heavily in fossil fuel programs in Sub-
Saharan Africa, and we see climate change and floods and other
problems, what would happen with the debt that those Sub-
Saharan countries have pursuant to fossil fuel creation and
then, at some point, some imperative for them to come on board
with clean coal technology?
In other words, I am not clear as to how this two-track
lending is going to work in the real world.
Mr. McCormick. Congresswoman, we certainly haven't ruled
out any country being a participant, any developing country
being a participant. I simply said that we expect that the
initial focus would be on some of those major economies that
account for the most significant portion of greenhouse gas
emissions.
So it doesn't rule out the poor of the poorest countries,
and we also share your concern, as Chairman Frank has outlined,
and that was the reason for the President's increased request
on ODA of about 30 percent win this budget.
Ms. Moore of Wisconsin. I know, but they won't be able to
afford the exploratory kind of clean technology in Sub-Saharan
Africa, but they are going to have the debt on their books at
whatever point they join the program. I see my time has
expired.
Chairman Gutierrez. You can answer the question, if you
want.
Ms. Moore of Wisconsin. Yes, thank you.
Mr. McCormick. Congresswoman, they would be eligible. In
other words, if they are financing energy infrastructure today,
they would be potentially eligible for asking for support to
finance the incremental gap between the clean technology and
the dirty technology, so they would be eligible potentially for
that program.
Ms. Moore of Wisconsin. That is kind of an underwater loan.
They are borrowing today, knowing that it is going to be
inadequate. Thank you.
Chairman Gutierrez. First of all, let me thank you for
coming and testifying before the committee. We look forward to
having more conversations as we move forward and try to define
just what the moneys will be used for with a little more
specificity. Hopefully, you will get to testify before your
term has expired. I have a funny feeling this money might not
get spent while you are there.
I am not saying that in a negative way. It is just the
reality of time, and the Administration is closing--you know,
this is going to be 2009 by the time things go. I want to thank
you. You have always been so kind and generous with your
explanations before the committee and your answers. I want to
thank you for your testimony this afternoon.
Mr. McCormick. Thank you, Mr. Chairman.
Chairman Gutierrez. Thank you, Mr. Under Secretary.
We have a second panel, and we would like to welcome Mr.
Brent Blackwelder, a senior environmental lobbyist and
president of Friends of the Earth since 1994.
Mr. Blackwelder founded the Environmental Policy Institute,
which merged with Friends of the Earth in 1989, and the
American Rivers, the national leading river-saving
organization.
Next we have Dr. David Wheeler, senior fellow of the Center
for Global Development. As lead economist in the World Bank's
development research group from 1993 to 2006, Mr. Wheeler
directed environmental policy and research issues in
collaboration with policymakers and academics from South
America and Southeast Asia.
Third, we have Mr. Jake Werksman, program director of the
Institutions and Governance Program at the World Resources
Institute. Dr. Werksman served as a lawyer, program director,
and managing director at the Foundation for Environmental Law
and Development for 10 years.
Finally, we welcome Dr. Andrew Deutz, senior policy advisor
of the Nature Conservancy. He currently heads the International
Institutions and Agreements Team, which oversees relationships
with a variety of multilateral and bilateral agencies.
We welcome you all, and we ask Mr. Blackwelder to proceed.
STATEMENT OF BRENT BLACKWELDER, PRESIDENT, FRIENDS OF THE EARTH
US
Mr. Blackwelder. Good afternoon, Mr. Chairman.
I am Brent Blackwelder, president of Friends of the Earth,
United States. We are part of Friends of the Earth,
International, with member groups in 70 countries. We are the
world's largest global environmental advocacy network.
We certainly commend you for holding this hearing on the
Clean Technology Fund, and we also appreciate the role that
this committee has played over the last 25 years. Going back to
June of 1983, when we asked the committee to do the first
oversight hearing on the lending of the World Bank--and I
testified that June before this committee--and you proceeded to
take my testimony and that given by my colleagues to heart.
Many, many things were done to try to improve the lending of
the Bank so that it actually didn't create big winners and
losers; that it improved environmental quality; that it did not
fund projects that spread disease or extinguished the lives of
indigenous peoples, or displaced hundreds of thousands of
people. We raised all those issues. Some steps have been taken.
What I want to focus on in my testimony here are two
questions: One, what is the definition of clean technology; and
two, is the World Bank the right entity to be pursuing that?
We are very concerned, in the first, place that coal, even
when you try to use the most efficient plants, has a very dirty
cycle from start to finish, whether it is the mining process,
whether it is burned or the ash, when it is left, how it is
disposed of. It is not only in the United States where we are
blasting the mountain tops of West Virginia to smithereens and
leaving little for the future of the people who would hope to
reside there, or whether it is the power plants that we have
focused on and testified about that have been financed by the
Bank with our tax dollars--in India and China, most recently.
One was referred to in earlier testimony. We have brought all
those to your attention.
The world is now burgeoning with many, wonderful clean
technologies, whether it is getting rid of energy waste through
efficient appliances, motors, gears, lights and the like, or
whether it is going solar, wind technology and geothermal.
There is no shortage.
If the technologies of the past were not subsidized in one
way or another, through the Tax Code and through
appropriations, these things would be absolutely competitive.
The problem has been that there is not a level playing field,
and all the externalities of these dirty technologies are
shoved off on others.
So, in particular, if you allow a ``clean'' coal to come in
with money going to carbon sequestration, which is decades away
from commercial viability, it is another subsidy to coal. And
that is not acceptable if we want to go in a new direction that
does not have the adverse economic and social environmental
consequences of this fossil-fuel lending.
So in summary, we have to exclude coal and be very clear on
what constitutes an acceptable recipient here. And furthermore,
there are abundant possibilities.
Let me next turn to the World Bank itself as an entity.
Having looked at and tried to convince the World Bank, with the
bipartisan support of Congress, to shift the energy lending
over 25 years into newer technologies that were appropriate and
that countries actually wanted, they have actually refused and
continue to this day to fund very damaging projects.
And over the years--I will just relate one incident. One of
the Bank staffers said, ``We have some wonderful energy
conservation loans that Tunisia wants, but we can't fund them;
it is too small. The Bank doesn't want to do this.'' And it
says, ``We can't manage a series of smaller projects.'' Well,
McDonalds manages 28,000 small franchises; they found a
managerial model that works.
So I am trying to lay the grounds by saying, what has the
World Bank done that would justify any confidence whatsoever
that now it has changed its ways? The lending for fossil fuels
hopped big time from Fiscal Year 2005 to Fiscal Year 2006. They
are going in the wrong direction. Rather than coming to you and
saying, ``Oh, we have changed our ways and look at what we are
doing, look at the results we are getting, put more into
us,''--no, they can't make this claim.
We have no confidence at Friends of the Earth that this
money would be spent wisely at the World Bank. There are other
mechanisms which we lay out in our testimony that would be
suitable.
In summary, we would urge you not to proceed to give the
World Bank the authority to do this, but to look at other ways
to quickly accelerate the technologies that are available.
[The prepared statement of Mr. Blackwelder can be found on
page 33 of the appendix.]
Chairman Gutierrez. Thank you.
Dr. Wheeler, please.
STATEMENT OF DAVID WHEELER, SENIOR FELLOW, CENTER FOR GLOBAL
DEVELOPMENT
Mr. Wheeler. Thank you, Mr. Chairman.
I am here today for the Center for Global Development,
which really works on issues that have to do with poverty in
the developing world. And so we have an environment component,
but it is not our main line as an organization. It is my main
line.
I worked in the World Bank for 17 years before coming to
the center a year-and-a-half ago. So I thought I would offer
you some remarks today to provide you a perspective, at least
my perspective, on the World Bank and its candidacy for this
Fund and also some conditions that might be useful in trying to
steer the World Bank towards responsible governance in this
context.
I think I could frame this by trying a couple of
retrospective stories on you. Suppose it is 2015. The money has
been appropriated for the Clean Technology Fund. The World Bank
has been designated as a steward for that Fund. We ask
ourselves, what happened with that money?
I think there are two stories we can tell here. At this
point, they are equally credible stories, and the outcome will
depend largely on the decisions you make.
The first story we might call, ``Business As Usual.'' In
that story, the World Bank, guided by the current draft for the
Clean Technology Fund, pursues its normal course, which is to
try to please everybody and all of its member countries and
pass out the money on a number of demonstration projects which
make people feel good, pass some of the money out to countries
that want to clean up their coal technology a little bit.
People feel pretty good about that.
But at the end of 7 or 8 years, having spent billions of
dollars, we ask ourselves where did we get for the money? The
answer is, not far, because during that entire period, in all
of these countries, dirty technology remained cheaper than
clean technology.
Without any regulation, the private sector, which is going
to propel most of the investment of the power sector, continued
right along investing in coal-fired power and fossil-fired
power. So this was a feel-good project, but in the final
analysis, I don't think the taxpayers' money was well spent.
Now there is an alternative, and that will really depend on
this committee, and that is to insist that this money will be
focused where it can do the most good. The only credible
argument here for a Clean Technology Fund is to find renewable
sources of power whose costs you can drive down to
competitiveness with fossil-fired power in fairly short periods
of time.
There are technologies out there, as we know. Solar thermal
technology is one; wind is another. We are at the cusp here,
and we can do this. Now if the money had been spent, as we look
back in 2015, on that course, then what we would expect to have
seen is the private sector with some subsidies coming into
these sectors, coming in to these clean power sources. We would
expect them to come down the learning curve, and we could fully
expect that some of them would have met cost parity with dirty
power by 2015. Then the private sector would take over, and we
would have a very hopeful story.
Now those are two equally plausible outcomes. I think the
conditions that you put on this arrangement will determine
which way we go.
Perhaps I can offer you a few quick thoughts about the
Bank, which I think I know pretty well. I have tremendous
respect for the Bank. I have many good friends there. And the
Bank has done some good work on the environment, and I can
provide some details if you are interested.
Fundamentally, it is a powerful organization with a global
reach and a lot of experience in big projects. Those are the
pros.
What are the cons? Well, as some colleagues have said here,
the Bank has a problem with focus. What we need for this Clean
Technology Fund is focus, but the Bank has many constituencies.
It has many agendas. It has a very hard time focusing and
disciplining itself to do one thing well.
Secondly, it is a bureaucracy. It is very natural for
people in a bureaucracy to want to perpetuate business as
usual. If you read the drafts of the proposals for the Clean
Technology Fund, you will see all the voices in that
bureaucracy weighing in, in various ways. And the drafts tend
to wander around as different constituencies weigh in. It is a
very natural thing. It has to be fought.
Now, as my colleagues here have said, the Bank right now
doesn't seem well-positioned as a steward for this Fund for two
reasons. The first is--as has been said by several--it is still
funding big coal-fired power projects. Now there is a rationale
for that, but, honestly, it doesn't withstand much scrutiny. It
is just business as usual. It has been doing it for a long
time.
The second thing is that the Bank is not into carbon
accounting. It can't account for the carbon consequences of its
own actions. Even though we have U.S. investment banks now
doing the carbon accounting, thinking about the projects and
valuing the carbon output to those projects, the Bank is not
doing it.
So, my conclusion, if you let this thing move forward as an
authorization and appropriation without any conditions, what
you are going to get is a bunch of feel-good projects that
won't amount to anything in the final analysis that will solve
the desperate problem that we face.
But there are three conditions you can impose that will
help a lot. The first is a mission focus; the purpose of this
Fund should be to make clean power as cheap as dirty power,
full stop. If we can't do that, we lose. That means you have to
find sources of clean power that are near cost parity now and
push those down the learning curve.
And, finally, the World Bank cannot position itself to play
well in this sphere if it is not doing carbon accounting. So
the third condition I would propose would be, put carbon
accounting in place. That is a prerequisite for doing this
work. If you can't do it, you don't qualify.
Thank you very much.
[The prepared statement of Mr. Wheeler can be found on page
60 of the appendix.]
Chairman Gutierrez. Thank you very much.
Mr. Werksman, please.
STATEMENT OF JACOB WERKSMAN, PROGRAM DIRECTOR, INSTITUTIONS AND
GOVERNANCE PROGRAM, WORLD RESOURCES INSTITUTE
Mr. Werksman. Thank you, Mr. Chairman, it is an honor to
present these observations on the proposal before you.
I am speaking on behalf of the World Resources Institute,
an environmental think tank based in Washington but with a
network of hundreds of partners throughout the world dedicated
to developing practical solutions to the world's most pressing
environmental problems.
We make our observations from a point of view of principle
rather than prescription, because we understand that this
decision is being weighed in the context of several layers of
very complex multilateral negotiations, and even a body as
powerful as the U.S. Congress can't prescribe outcomes.
Nevertheless, a sizeable appropriation for clean energy
could demonstrate that the United States is finally taking the
leadership on climate change that the world has been waiting
for. If these resources are invested wisely, the benefits will
reach underserved communities in developing countries in
desperate need of clean sources of energy.
Successful investments could also demonstrate to audiences
here in this country that these kinds of investments could, in
fact, reshape our own energy sector. If combined with U.S. caps
and domestic reductions obligations that support a global deal
on climate change, that could help us build the resilience of
communities vulnerable to climate change, and this
appropriation could, in fact, lead to genuine U.S. leadership
on combatting global warming.
But $2 billion, as others has have said, is a small part of
the trillions of dollars that are necessary to meet global
energy demand. Congress must therefore engage in a process that
ensures that these resources are committed to leveraging the
greatest possible impact.
Money for new technologies is not enough. In most
countries, energy policies focus on short-term costs and
supply, and overlook the longer-term benefits through cost
savings, energy security and better environmental performance
that can be offered by clean technologies. Only policy
innovations can really lead to this long-term change.
These could include things like demand-side management
systems, incentives to encourage energy efficiency, feed-in
tariffs for renewable energy, and renewable energy portfolio
standards. And these policies can really open the door to long-
term introduction of renewable energy sources.
Policymaking in the energy sector tends to be closed, and
tends to be dominated by interests that have a stake in
business-as-usual practices. So if policy reforms are able to
take hold in these countries that we care about, they must be
developed and implemented through transparent, open, and
credible processes. But support for new technologies or policy
reforms in developing countries should not be tied to narrow
prescriptions or strategies designed to force unregulated
reforms.
Approaches based on conditionalities or on coercion could
backfire and could undermine U.S. efforts to broker a global
deal on climate change.
This is, in other words, Mr. Chairman, a very complex
challenge.
We, therefore, believe that any U.S. investment in a CTF
administrated by the World Bank needs to leverage
transformation in the Bank itself as well as in the developing
countries that are the target of these resources.
We have basically three principles that we think should
guide these investments:
First, the Clean Technology Fund should leverage
investments in transformational technologies of the kinds that
David Wheeler just described, policies that fundamentally shift
away from carbon-intensive fuels to renewable resources.
Second, we think that this transformation needs to begin
with the World Bank's core energy portfolio if the World Bank
is, in fact, going to be administering these funds.
Any congressional appropriation for a CTF should promote
this transformation and should be seen as an opportunity to
actually monitor and verify that the Bank is, in fact,
following through on its commitments to be a significant
steward of the planet's future with regard to climate change.
Therefore, all of the multilateral development banks that
have access to the Clean Technology Fund should rigorously
measure and manage their greenhouse gas emissions along the
lines that Mr. Wheeler suggested.
Third, we think that the CTF itself, wherever it is housed,
needs to operate in accordance with widely accepted principles
that are reflected in the U.N. Framework convention and
elsewhere.
Donor governments should be prepared to demonstrate, as the
co-chairman suggested, that CTF funds are indeed new and
additional to development assistance that would otherwise be
targeted at poverty alleviation; that the source of the
technology used in these investments should not be tied to the
nationality of any particular donor; and that the governance of
the Fund itself needs to be guided by the principles of
transparency, inclusiveness, and accountability by disclosing
the information upon which the decisions are based by including
a balanced representation of both donors and recipients and to
provide opportunities for a meaningful, civil society
participation in its decisions.
We think that the governance, in order to succeed, must be
selected on the basis of independence and expertise of the
people involved in those decisions, as well as their ability to
represent a diversity of interest.
Overall, the United States and other donors involved in the
design and implementation of the CTF need to take an approach
that is based on genuine partnership that leads to the reform
of the banks involved; that creates credible and legitimate
governance structures; and that incentivizes the developing
countries to take meaningful actions to reduce their emissions
while allowing them to promote their sustainable development
plans.
And we stand by ready to help the committee with those
issues.
[The prepared statement of Mr. Werksman can be found on
page 51 of the appendix.]
Chairman Gutierrez. Thank you.
STATEMENT OF DR. ANDREW DEUTZ, DIRECTOR OF INTERNATIONAL
INSTITUTIONS, THE NATURE CONSERVANCY
Mr. Deutz. Good afternoon, Mr. Chairman, and members of the
subcommittee. I am Dr. Andrew Deutz, Director of International
Institutions and Agreements at The Nature Conservancy, a
national nonprofit conservation organization representing about
a million members in the United States with conservation
activities in all 50 States and in 34 countries around the
world. I would like to start by thanking you for the
opportunity to testify today on the Administration's proposal
to establish a multilateral Clean Technology Fund for climate
change to be administered by the World Bank. The Clean
Technology Fund is part of an emerging package to provide
short-term incentives and assistance to developing countries to
meet the challenge of climate change mitigation and adaptation
and to help them take on new commitments in a future
international climate change agreement.
The United States has an opportunity to show strong
leadership by contributing to the Clean Technology Fund, as
well as provide additional funding for adaptation and reducing
emissions from deforestation in developing countries. The World
Bank has a comparative advantage to administer these funds in
order to disperse large amounts of money to create the right
incentives quickly. But the World Bank needs to ensure that it
effectively leverages the Clean Technology Fund to both green
its own lending portfolio and to green the development
trajectory of its client countries. I would like to frame the
discussion in terms of how the Clean Technology Fund can help
catalyze global action of climate change. The Bali climate
convention last December agreed to initiate a new round of
global climate change negotiations to develop a new
international agreement to reduce emissions by the end of 2009.
One of the significant outcomes of that conference was that
developing countries agreed to take on new commitments, but it
is contingent on industrialized countries like the United
States taking on further emissions reduction commitments and
providing the technology and financial incentives to make that
happen. In order to get a global deal by the end of 2009, we
will need to construct a suite of incentives to bring
developing countries on board. Some of the developing
countries, the poorest of the poor, and sub-Saharan Africa and
South Asia, will require new and additional resources to help
them adapt to climate change. The forest-rich countries in the
south, countries like Brazil, Malaysia, and Indonesia can be
incentivized through a funding mechanism to reward their
efforts to reduce emissions from deforestation. The rapidly
industrializing countries, countries like China, India, and
South Africa can be incentivized by providing funding to spur
uptake of low carbon technologies across a wide range of
sectors.
And hopefully, that is what the Clean Technology Fund is
there to do. The Nature Conservancy endorses the
Administration's request for funds to contribute to the
establishment of the Clean Technology Fund administered by the
World Bank. We do, however, have a few qualifications: First,
the funding must be new and additional to existing U.S.
contributions for international climate change and biodiversity
aid; second, we would like to see the United States contribute
to and be an investor in the World Bank's forest carbon
partnership facility to help reduce emissions from
deforestation; third, we would also like to see the United
States show real international leadership, and also provide
similar funding for other critical incentive packages to enable
a global deal, namely, funding for adaptation to help the
poorest of the poor and for forests.
Lastly, I would like to address the proposal for the World
Bank to administer the funding. TNC believes that the World
Bank, together with the other regional development banks, are
capable of managing the clean development technology, but with
caveats. The World Bank does have several comparative
advantages, but the ability of the World Bank to manage these
should be--the World Bank should be accountable against these
comparative advantages. The success of the Clean Technology
Fund and the future role of the World Bank in any evolving
international climate change financing regime should be
contingent on the ability of the World Bank to do two things:
First, green its own lending portfolio; and second, help to
green the pathway of the developing country clients that the
World Bank serves. The World Bank has the ability to influence
national development frameworks in developing countries. The
World Bank is in dialogue continually with ministries of
finance and planning, as well as line ministries, and thus in a
position to ensure that clean energy pathways, as well as
climate change resiliency and forest conservation are
mainstreamed into the core development planning framework of
the countries where it works.
Unfortunately the World Bank's track record to date has
been fairly poor in mainstreaming environmental concerns into
poverty reduction strategies to developing countries. This will
be a critical test of the World Bank's credibility going
forward if it is to be a good environmental steward.
Finally, the World Bank has the ability to use the Clean
Technology Fund as a way to leverage its own much larger
transportation and infrastructure lending portfolios. To be a
credible part of any future international financial
architecture for climate change, the World Bank will need to
clean its own portfolio and demonstrate that it facilitates
policy change in its client countries. The Clean Technology
Fund should enable it to do this. The key point for the World
Bank is that the percentage of low carbon technology in its
portfolio has grown from 28 percent to 40 percent over the last
few years at a time when the World Bank lending for energy
sector has increased from roughly $4 billion to $8 billion.
The good news is that the percentage of lending for clean
technology is increasing, but the total amount of money for
dirty technology is also increasing. And the World Bank will
need to correct that if it is going to be a credible partner in
a future international climate change financial architecture in
2012 and beyond. Thank you, Mr. Chairman.
[The prepared statement of Dr. Deutz can be found on page
40 of the appendix.]
Chairman Gutierrez. This is the first panel I have had
where the minority witnesses and the majority witnesses don't
have a great degree--I mean, there are differences, but I can
see you are all headed in the same direction. That is unusual
in my 16 years here in Congress. We have about 9 minutes, and
then we are going to be voting for nearly an hour. So taking
that into consideration, I would ask the members to take into
consideration that the witnesses would have to wait for us for
an hour. I will be back here in an hour, but I am going to try
to see if we can't wrap this up. I am just going make two
quick--Mr. Blackwelder, we hope to take your testimony and the
testimony of your panelists as seriously as it was taken 25
years ago, and hopefully be as good today as you suggest we
were 25 years ago.
We understand our responsibility, so I thank you for that
comment. And secondly, to Mr. Wheeler, we are going to work on
the second outcome that you suggested for this money. We are
going to take into consideration all of the witnesses, because
I think everybody, as I listened to all four of you, it is the
second outcome that you all agree we should work on, and
obviously, there is going to be some differences. With that, I
would like to hand it over to my ranking member, Dr. Paul.
Dr. Paul. Thank you Mr. Chairman. I only have a brief
comment, and maybe one question. I was pleased to hear Mr.
Blackwelder mention his reservations about the World Bank being
the best vehicle for doing this, and I certainly agree with
that. I also want to raise the question about the potential use
of these funds for development of better technologies. Once
again, I am always concerned about economic decisions being
made and directed. It is sort of like politicians deciding,
well, the very best way to have ethanol is to subsidize farmers
and prohibit people from raising hemp, and hemp is so much
better. We make these foolish things and we get off track. And
in another area, I think we have done the same thing, and that
has to do with nuclear power.
We put up big road blocks to nuclear power. Everything I
read, the evidence is pretty clear; it is clean, it is safe, it
is efficient, but we don't even talk about it. It seems to me
even in this country, which would apply to every country, if we
had nuclear power and cheap electricity, maybe we would have a
lot of electric cars running around the country today. Why is
it that we hear no mention of nuclear power when the evidence
is so overwhelmingly in favor of this being a very efficient
and clean and cheap fuel? Does anybody care to make a comment?
Mr. Blackwelder. I would be glad to speak to that because
Friends of the Earth has been working on that issue now for
almost 40 years. The problem is even if you had no radioactive
waste disposal issues, even if there was no proliferation of
bomb making material, even if terrorists weren't targeting
nuclear power plants, which they have on their menu, and you
said with none of those problems, nuclear power plants can't be
built fast enough to do the job. If you had $20 billion to
spend, you could go 4 to 10 times further in terms of
greenhouse reductions by putting it into cost-effective on-the-
shelf technology available today. So why financially,
economically would you want to go the nuclear route?
Dr. Paul. Well, because after so much time, you can look
back and say, why didn't we open up the door to allow it to
develop? But we haven't done anything in 20 years. So if we do
nothing but encourage the world and ourselves to stay away from
it, 20 or 30 or 40 years, you will just say, well, it takes too
long, we have to keep doing these things, then you get the
pressure from the coal people. And they will say, we will clean
up the technology, we will clean up the coal, we can be totally
energy independent.
Their arguments are powerful, and you have to come back and
say, well, it really isn't all that clean. I am just saying
that overall when we talk about energy, I think we are just
harming ourselves. Even though these potential dangers exist,
they all exist for mining coal. And oil and everything else has
potential danger. But just think of the record. Think, we have
had 50 years of nuclear submarines, men sleeping beside a
nuclear reactor, and still no cancer in the people who have
been on nuclear submarines. To me, it is rather miraculous, and
all we seem to do is get in the way of it. So I am just
throwing that out as a suggestion. I understand the time
involved, it is true. But some day we have to plan for the
future rather than planning for the next year or two. And I
have no further follow-up.
Chairman Gutierrez. Thank you, Dr. Paul. We have about 4
minutes before the vote is over.
The Chairman. I just want to say to the panel that I
appreciate it. As you may have gotten from my questions, I read
some of your testimony. My sense is that the Administration
cares strongly about--something that is likely to happen. I
think we will be glad to work with you on the conditions,
including maybe a 1-year timetable. Beyond that, I don't want
to get into the substance on the question of men's sleeping
habits; that is one that I have tried to stay away from in
public, so I won't comment further.
Chairman Gutierrez. Thank you Mr. Chairman. Congresswoman
Moore, do you want to make a comment before we close off?
Ms. Moore of Wisconsin. Thank you. I appreciate all of your
testimony. I was particularly taken by how thoughtful you all
were. I think it was Dr. Deutz who talked about this being a
three-part kind of process considering all the different
economic statuses of all the countries, and saying that we
would have to give a lot more foreign aid to more developing
countries in order to keep pace with this technology. Thank
you. And I will be thoroughly reviewing your testimony.
Chairman Gutierrez. Let me thank the witnesses and the
members for their participation in this hearing. The Chair
notes that some members may have additional questions for the
witnesses which they may wish to submit in writing. Therefore,
without objection, the hearing record will remain open for 30
days for members to submit written questions to the witnesses
and to place their responses in the record. The subcommittee is
now adjourned.
Mr. Blackwelder. Mr. Chairman, may I submit a 2-page
statement signed by over 100 international organizations, a
global civil society statement for the record?
Chairman Gutierrez. Without objection, it is so ordered.
Mr. Blackwelder. I would also like to furnish the committee
with two copies of ``Carbon-Free Nuclear-Free by 2050'' to show
that it can be done.
Chairman Gutierrez. Thank you so much, gentlemen, for your
testimony.
[Whereupon, at 2:45 p.m., the hearing was adjourned.]
A P P E N D I X
June 5, 2008
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