The President's Plan on Reducing Gasoline Usage and Strengthening America's Energy Security

MODERATOR: Good afternoon and welcome to the Foreign Press Center. This afternoon, the President's Chairman of the Council on Environmental Quality, James Connaughton and Assistant Secretary in the Department of Energy, Alexander Karsner, will be briefing on the President's plan to reduce gasoline usage and strengthening America's energy security under the initiatives he brought out in Tuesday night's State of the Union.

We'll start with two opening statements and then be happy to take your questions. Thank you.

MR. CONNAUGHTON: Good afternoon, everybody. I'm pleased to be here following the President's historic State of the Union address in which he laid out a bold plan to help improve our nation's energy security while at the same time being good stewards of the environment through very significant reductions of air pollution and, very importantly, dramatic new reductions in CO₂ emissions related to global climate change.

What I wanted to do is just run you through some of the essential elements of the plan and put it in perspective in terms of performance, what do we get in terms of the result of the plan, in terms of energy security performance and environmental performance. And then I'll turn it over to my colleague, Assistant Secretary Karsner, who will give you a sense of the technology and the technology pathway to achieving the President's objective.

First -- we're calling this the Twenty In Ten Goal. We're seeking to reduce U.S. gasoline usage by 20 percent in the next 10 years. This is the most ambitious program of displacing gasoline in history. It is the largest requirement for gasoline displacement any place in the world. We have divided the Twenty In Ten goal into two essential policy components. One is we're going to increase the supply of renewable and alternative fuels by setting a mandatory fuel standard that will require 35 billion gallons of renewable and alternative fuels in 2017.

This figure represents a five time increase over the standard that is currently in law, that was enacted just two years ago in 2005. This we expect will displace about 15 percent of the projected annual gasoline use 10 years from now in 2017.

The other part of the plan is to reform and modernize our mandatory corporate average fuel economy standards for cars and then extend the existent regulations that we've put in place for light trucks to produce 8.5 billion gallons of fuel savings. And to put that in perspective, that represents up to four percent improvement in automobile efficiency each year. And this covers passenger cars, minivans, pick-up trucks, as well as the very large SUVs for the first time, the very large sport utility vehicles.

Now to accompany these regulatory programs, we have some very strong budget commitments. The President's fiscal year 2008 budget is going to request $2.7 billion for the advanced energy initiative. Now that request is 26 percent above the President's request last year, and it will be 53 percent above the request for 2006. And that's the budget we're currently operating under right now. And that will focus on items that Assistant Secretary Karsner will tell you about.

In addition, we have new farm bill legislation coming up this spring. Agricultural Secretary Mike Johanns is going to announce some significant new efforts to advance the technologies on alternative and renewable fuels. This farm bill is going to propose $1.6 billion in new funding over 10 years for energy innovation, including bio-energy research, energy efficiency grants, and $2 billion in loans for cellulosic ethanol plants.

Now the other components of the plan will include doubling the current capacity of the strategic petroleum reserve to 1.5 billion barrels by 2027. The President believes that it's very important to us to have a much longer and more secure supply of the reserve to prevent disruptions in the future.

In addition, we'll have a $175 million Highway Congestion Initiative that will help consumers save fuel and commute time. Americans waste about 2.3 billion gallons of fuel each year, at a cost of $63 billion, sitting in traffic. So we are hoping, through this initiative, to come up with more innovative schemes, such as market-based pricing schemes and the use of modern technologies to reduce those congestion times.

And then the third component of the Energy Security Initiative is, in addition to the ones I mentioned, stepping our domestic oil and gas production in environmentally sensitive ways. Now when you take the fuel economy piece and the renewable fuel piece and you put that together in a very conservative scenario -- so this is a scenario that is largely based on corn ethanol, which has a slight advantage in terms of CO₂ over gasoline. In a very conservative scenario, this policy will stop the growth of CO₂ emissions from our automobile sector.

If you anticipate, as we do, some of the breakthroughs in commercialization of technologies such as cellulosic ethanol, which has a nearly zero carbon dioxide footprint, this curve begins to drop down significantly toward the back end of the 10 year cycle, and then those reductions would carry forward into the future.

In your materials -- I won't spend a lot of time on this other than to note, since 2001 we have a lot of policies that are going to be backstopping this new initiative, but it's important because there's much question about the extent to which the President's programs are mandatory, are incentive based or are partnership based. The fact of the matter is they're all three, but today, in 2007, we have mandates in every major emitting sector of our economy. So we have mandatory fuel economy standards. We have mandatory fuel standards. We have mandatory appliance standards at the federal level, and our states now have mandatory renewable power requirements covering 80 percent of our electricity generation. And then the Department of Energy has a model building efficiency code that they are working with our states to help them adopt it. And that is a 30 percent improvement in the efficiency of buildings. And we are looking forward to our states taking a good look at that proposal.

Here's a list of other initiatives. I won't go into that in detail, but it's in your materials for any questions.

And then just yesterday the President announced a new executive order whereby the federal government is going to lead the way in meeting his new objective on energy security and reducing greenhouse gases. And he's directing the federal government to purchase more renewable fuel and hybrid vehicles. He's directing the federal government, when the vehicles become commercially available, to purchase plug-in hybrids. And he's directed the federal government to reduce the percentage of petroleum use by 20 percent by 2015. So our goal is to reduce the federal petroleum use two years faster than the goal the President has set out for the nation.

There's some additional components related to energy efficiency of federal operations. We can dramatically cut our greenhouse gases by improving our efficiency by 30 percent between now and 2015, and then there's some additional components on procurement.

The piece I will conclude with is to give you a sense of U.S. performance since 2000. This combination of policies, many of which are just coming into implementation in the last two years or so, has enabled the U.S. to see an increase of CO₂ of just 1.7 percent during a period in which our economy grew by nearly 10 percent.

Now that in contrast, for example, Japan had economic growth of about four percent and they saw a rise of their CO₂ by about 2.5 percent, and the EU-27, so if you take all the EU member states at this point, their collective economy grew by about seven percent, while their CO₂ has increased by five percent.

I put these up to make the essential point that all the nations of the world are making progress, and we're all making about the same rate of progress. As it happens, we've been able in the U.S. to enjoy particularly good progress as we all work our way toward reducing the growth of greenhouse gases and then ultimately stopping it and then reversing them.

So I will end there and turn it over to my colleague.

MR. KARSNER: Thanks, Jim. Thanks, everyone.

The Department of Energy has as its top-line mission energy security, and energy security has very specific dividends to it that we concentrate on with regularity, including our economic competitiveness and our environmental well being.

The other night the President, in the second successive State of the Union speech but actually for the seventh time that he's used that podium to speak to the world, elevated the bar for us once again. What makes this last elevation of the bar so ambitious and distinct is that it comes with a policy that we intend to mandate in law.

There are only two ways to make great gains in our energy security and reducing our greenhouse gas emissions, and that is increasing efficiency and displacing those sources that contribute to those greenhouse gases. The President has laid out the most ambitious agenda ever in terms of what a nation could do by quantity, and he expects us to continue to make available the technology and to have that technology enter the market in a specific time frame, also the most ambitious time frame laid out by any leader in the world -- a 10-year period with measurable results.

So we have a top-line performance metric that our markets need to respond to, that we are already seeing broad bipartisan response to, we are seeing the industry respond to with a claim to this goal, and so we intend to support that. It will take the research, and the development and the deployment that we do at the Department of Energy and across science institutions that we collaborate with worldwide and it will take effective policy, the type that the President has showed leadership and asked people to cross the aisle to engage the Administration to develop in the coming weeks. And it will take the capital markets responding.

There is occasion where people confuse the amount of investment that a government and the tax coffers can make to R&D. And of course, as Jim pointed out, we are elevating that again for the second year in a row. This year we're up 26 percent. Last year we were up 22 percent.

But the government cannot out invest the private sector to solve this problem. It will take the transactions growth that we are seeing. The transactions in clean energy are up more than 400 percent since the beginning of this Administration. So we are in a record growth rate. We're in a record clip. We surpassed Brazil this year as the largest alternative bio-refining capacity on earth with the largest amount of capital formation.

The good news as well is that we collaborate very proactively around the world. Many of you are aware of the Asian Pacific Partnership for Clean Development and Climate that I co-chair along with Jim and Under Secretary Dobriansky at the Department of State. We have a healthy U.S.-EU renewables transatlantic dialogue on bio-fuels, and we have a growing hemispheric cooperation. And so even though the United States has proven to be a treasure trove of these new technologies, reducing vehicular emissions, increasing our efficiency in a way that we can meet the President's new objectives over this time frame, adding to the market new domestic alternative bio-refining capacity with increased efficiency in the conservative case, like Jim had pointed out, for conventional corn, but also increasingly with cellulosic ethanol.

The Energy Policy Act has funded us specifically for pilot plants that we expect to see announced this year using different feed stocks that the President has talked about before, corn stover, switch grass, wood waste, in different regions of the country on a distributed basis. And we expect these to continuously enter the market at a growing rate owing to these new policies.

So I'm happy to answer any questions you all have about the directions that we're taking and about the partnerships that are evolving worldwide to address these important issues.

MODERATOR: If you would, raise your hand and state your name and organization, and we'll pass the microphone.

QUESTION: Thank you. My name is Kaori Iida with NHK, Japanese Public Television. On global warming, can you share with us what the Administration's current position is on global warming? And also, what is your reaction to the companies coming out this week, requesting a mandatory cap on greenhouse gas emissions?

And separately, on CAFE, can you help us understand how big a challenge the change will be to the auto industry and if you see any difference between the burden on the domestic automakers and the Japanese and European automakers because there's a difference in how many SUVs they have?

MR. CONNAUGHTON: Well, first, the President set a national goal to improve the greenhouse gas intensity of our economy by 18 percent by 2012. Based on the most recent calculations by the Energy Information Administration, we are on track to meeting that goal. We'll be having a study coming out shortly that will have some updated information in that regard, and again it will be quite positive.

The goal is to slow the growth of greenhouse gases. We have an increasing population. With that increasing population comes increasing demand for vehicles, and homes and energy use, and the goal is to try to separate the economic growth from the growth of greenhouse gases.

And then as we continue to evolve our policies, as our knowledge of technology grows stronger, and as the science justifies, the President has made clear, we can look forward in the future to stopping the growth of greenhouse gases and ultimately reversing it. This is the same pathway that's being followed in Japan, the same pathway that's being followed in Europe.

And it's being accomplished, then, to go to your second question, it's actually being accomplished through a combination of mandates, of partnerships with industry, as well as a large amount of incentives and technology development programs that Assistant Secretary Karsner described.

And so on CAFE, we have not set -- until President Bush came into office, a new CAFE standard for vehicles had not been set since, I believe, 1987. We came into office and removed -- the President asked Congress to remove a barrier to the ability of us to be able to do that for light trucks, and we initiated two mandatory regulations for light trucks -- these are the large SUVs -- for the first time. And we set a 15 percent improvement in the fuel economy of those light trucks over seven years.

To give you a sense of scale, in this instance, we're talking about up to four percent per year for ten years. So to give you a sense of the ambition of this -- the President's proposal that he outlined in the State of the Union, what will that take? One, it will take the application of a lot of new technology. And by reforming the way we do our system, we're going to address the issue you raised: What's the difference between large trucks and SUVs and small passenger cars?

The reform that we are seeking will allow us to set a fuel economy standard for every class of vehicle. The old approach, you could build a big, gas-guzzling vehicle and off-set its inefficiency by building a lot of smaller, more fuel efficient vehicles; but they might have created more of a safety risk because they're lighter and smaller.

Under the new system, we are going to require improvements in fuel efficiency in every class of vehicle. So if you're driving a large Hummer, you're going to be subject to a new fuel efficiency standard for how that Hummer performs. And then if you have a pickup truck -- pickup trucks will have to become more efficient as a class all the way down to the various categories of vehicles.

This will allow us actually to achieve more fuel economy reduction in a way that also reduces the risk in terms of fatalities on the highways and risk of injury. And then for manufacturers -- it gives them more freedom to design. So if you want to be a manufacturer that only sells pickup trucks, you will have a CAFE standard that applies to your category, but it won't force you to make passenger cars. If you are an automaker who really has a heavy concentration in luxury sedans, you'll be looking at a fuel economy standard that applies to that market category. So this is actually going to give more consumer choice by drive technology into all the classes of the vehicles.

Finally, the proposal by the group on Monday is one of dozens of proposals that are out there. Some of them are focused exclusively on CO₂. Others, like what the President has announced, are looking through the energy security perspective and going after a different metric, which is in one case fuel efficiency, in another case is the renewable and alternative content of the fuel.

And so we will see many proposals as the time goes forward. We've been talking about them for a decade in America. And so that is one addition. We are dedicated to meeting the President's goal, to 2012. We have supported that already with some ambitious mandatory programs. In the State of the Union, the President put two more on the table that are quite consequential, and we will continue to do our own policy development consistent with our objective of increasing economic growth.

We will continue to oppose policies that significantly harm our economy, that put Americans out of work, and, as importantly, simply shift those jobs and emissions to other countries. We do not want to back policies that make greenhouse gases go up someplace else. Then we would not want to claim credit for reducing them here if it results in that kind of an outcome. We have not solved the global warming issue if we're merely moving our emissions from the United States to another country.

QUESTION: Takashi Sadahiro with Yomiuri Shimbun, Japanese newspaper.
Mr. Connaughton, I would like to know why you limit this initiative to gasoline and not extend it to other sectors like electric power, especially -- if I'm not mistaken, the so-called cap-on-trade scheme was already introduced to tax and does your Administration regard it as a success.

So prior to State of the Union address have you studied possibility or feasibility to introduce some kind of new medical target or cap-on-trade scheme?

MR. CONNAUGHTON: Well, first of all, as I think I showed you, we have a number of policy measures that are oriented toward meeting the President's goal of improving greenhouse gas intensity by 18 percent.

The -- we have chosen this sector because the forefront of the American public's concern is this issue of energy security. So for this State of the Union address, we put a real focus on energy security which is primarily the issue of our massive imports of foreign oil. And so we wanted to construct a coherent strategy that involved efficiency, that involved substitution of fuel, that evolved more domestic supply, and that evolved this security of our reserves.

So it's a very -- the President likes to pursue focused strategies. That is not the exclusion of other policies. Last year, you may recall, the President announced the Advanced Energy Initiative, which had a strong emphasis on the electrical power sector, most importantly on lower carbon coal, advanced coal technologies, and it was a new research agenda there, as well as the new emphasis on nuclear power, not just in the U.S. but creating a global partnership among responsible states that use civilian nuclear energy.

In addition, in electrical power, just two months ago the Secretary of Treasury and the Secretary of Energy announced a new $1.6 billion tax credit initiative. We announced the first nine projects to build state of the art, highly efficient coal plants that will have a high efficiency rating and therefore reduce the CO₂ associated with the coal fire production. And we'll be doing a few more of those grants this year.

In addition, as I noted briefly, strongly supported by the President and by the Department of Energy, 22 of our states have now issued mandatory renewable power standards. Now we prefer the states to do that because we have a very large country and each region has a very different capacity to do renewable power. And so what we did is we provided the technical support from the Department of Energy to help each of the states design their strategy. And as it happens, we then have a wide variety of approaches that are relevant to each state's market.
So you asked about power. In America we have 80 percent of our power under a regulatory program that's going to cut the air pollution as well as the greenhouse gases from those power sources. It's an issue of a portfolio, a diversified portfolio versus a one-size-fits-all. We think it's much stronger to design specific strategies in specific sectors.

Let me make one more note for our European friends, just to give you a shared example. In Europe, the emission trading system applies to industrial users and to power generators. It exempts transportation. So in Europe they have a voluntary program for transportation and for fuel. In America, what the President has announced are two mandatory programs on vehicle efficiency and on fuels. So we have many pathways to a shared objective, and the European experience is an example. They also are pursuing multiple, different policies not one single policy.

QUESTION: Brian Beary from Europolitics. You mentioned corn ethanol and the fact that you don't actually save much in terms of emissions. Have you got the exact percentage in terms of how much compared to fossil fuels? And if it's the case that you don't really save much with corn ethanol, why is the U.S. still promoting further production of corn ethanol given that there's environmental concerns about it and also it's pushing up corn prices around the world?

MR. KARSNER: Let me take that in a few parts, first with the last part, the environmental concerns. We work very actively with many of the environmental groups out there that look at land use issues. And as the portion of bio-fuels grows, we feel like most of the environmental groups come along with that. I think there are some frivolous concerns out there. There are some dubious studies that have been planted around.

I don't know where they're funded and what legitimacy of base that they have, but we have multiple studies, responsible, peer-reviewed studies, the National Academy of Sciences, many global institutions that will tell you that corn-based ethanol and conventional ethanol sources are carbon neutral at worst and carbon reducing at best. And we estimate that carbon reduction to be generally in the range of 25 percent conservatively and improving on a wells-to-wheels basis. And so when we say "and improving," the plant efficiencies at the corn-based ethanol plants -- it's a very big growing market, as I said.

So 50 new facilities last year -- are increasingly more efficient, are increasingly less dependent on fossil sources -- and then the engine efficiency, you know, the more bio-fuels enter into the market, we work on vehicular technologies like direct injection and improved compression ratios. You have Saab BioPower in Sweden claiming to be at a one-to-one ratio with gasoline. We're testing that in our national laboratories now. So you have an evolving market for utilization that should push that savings even higher.

But of course we don't think corn and conventional ethanol gets us all the way. It may not even get us most of the way. And that is why we have the intensive research and development method on cellulosic ethanol. And there, the carbon savings are upwards of 85 percent.

I think it's commendable Jim that you use a very, very conservative estimate of the savings based on the minimal savings technology. I actually think that that goes up a great deal when you run your own scenarios based on more realistic projections of what we believe the cellulosic ethanol rate of penetration and date of market entry will be. But I appreciate that you're using just existing technology for your estimate.

MR. CONNAUGHTON: And let me just add one more point to this. At least in the near term, what we look for in climate change policy is as many one percent, five percent, and ten percent reductions as we can find, and then you add them all together. So if you're starting with corn-based ethanol, which is up to 20 percent reduced CO₂ today -- that's before you get to efficiencies -- that is a huge CO₂ reduction within our near term.
In the midterm we're looking forward plug-in hybrids. We're looking forward to hydrogen cells. And then of course in the longer term, we're looking advanced nuclear when you look at the power side and even -- you know, we're looking at fusion technology.

But this interim step, these next 10, 15, 20 years is all about finding those five percent, those ten percent, those 20 percent reductions in every sector. So this is big by any standard conservatively. And then of course cellulosic and bio-butanol and some of these other new renewable technologies, you're talking 85 or even net zero greenhouse gases.

That's exactly what we want to see ultimately. We want zero emission sources by the time we are done with this exercise. It's a marathon. It's not a sprint. But with this effort, we're stepping up the pace.

QUESTION: Tony Walker from the Financial Review of Australia. Can I ask a simple question? Instead of all these complex and incremental measures that you're adopting, why don't you simply increase the tax on fuel and thereby have a more dramatic earlier effect on fuel usage and energy consumption?

MR. CONNAUGHTON: I'll take first, and then I'll let Andy dive in. We actually believe the answer is not to raise the price to consumers dramatically, drive energy-intensive businesses to places where energy is cheaper who aren't taking these strategies -- and I won't name countries.

We believe it's more important to put money in consumers' pockets and be sure that industry is actually thriving and earning revenues so they can pay for these new technologies that we want them to implement. Most of the climate change strategies that are going to be successful require large expenditures of capital investment up front, and then you get the climate change benefits as you use the new technology.

Every dollar that's spent paying more for the same amount of energy is a dollar that's not going to innovation and purchases of these new technologies. So our firm belief is we want strong economic growth to pay for these new investments rather than using coercive pricing mechanisms for which -- you know, if somebody owns a car and you drive their gasoline prices up two, three, four, five times, you have to have to get it pretty high for pretty long before they decide to buy a new car.

Now that may make a difference for the person who's getting rid of their car today, but the person who just bought a car is going to be stuck with that high gasoline price for the lifetime of their car. So I think it's actually a little bit easy to suggest that raising prices is going to produce these dramatic gains. That is not true. Getting the technologies forward at affordable prices, that will produce those gains more sustainably and faster.

QUESTION: Just in response to that, didn't the recent spike in prices push people away from purchasing larger SUVs and towards hybrid vehicles? So doesn't that prove my point?

MR. CONNAUGHTON: Well, actually there's a lot of analysis going on right now, and that was the result of many causes. First of all, the large SUV and Hummer market was saturated, and the same is true of minivans.

In America, the minivan market is saturated and now it's just competition among the manufacturers for who will buy which minivan. The other thing is you're talking about automobile fleet turnover. So I don't think there's any question that the recent spike in prices caused some customers to make a decision about their vehicle choice, but that's a small portion of the overall vehicle market.

It's also the case if you are -- if you have enough money to buy a $65,000 sport utility vehicle, a large increase in gasoline prices is not going to motivate that decision very much. You've got a lot of extra -- you know, you've got good means. So again, that's why I'm suggesting we have decided these policies will be much more effective because it will drive directly through technology application the changes in the vehicle structure that will make all classes of vehicles more efficient.

These are choices we always make. Sometimes you tax. Sometimes you regulate. Sometimes you incentivize. Sometimes you do all of the above. And that's what the role of policymakers is, to try to find the right mix.

MR. KARSNER: I think you raised a very good question, and it's been very central to the debate on these things because fundamentally it goes to the question of how do the price signals affect all of these things in the end, and what role does extra government taxation play atop the price signal.

I think it's important to dig down one layer on that in two subject areas. The office I run used to be called the Office of Conservation and Renewable Energy, and it was changed some time ago to the Office of Energy Efficiency and Renewable Energy. And not many people grabbed the distinction between conservation, suppressing demand, having people turn the lights off or wear a sweater if it's too cool outside instead of raise the temperature, as opposed to efficiency, where we actually change the lightbulb and the lighting technology rather than rely exclusively on the human behavior relative to the price signal or change the meter in the house so it responds more intelligently to the grid.

And that difference is subtle but it's very important because the conservation or the taxation in this case, the idea of suppressing demand to get the end result, also affects the economic growth. And what we're looking for is not to get less out of less; we're looking to get less out of more. And so what Jim is talking about is trying to decouple economic growth and activity with better and smarter displacement technologies and efficiency technologies to get to the end result, decouple that from the growth in greenhouse gas emissions.

As I said, there are only two ways to do it, displace those sources that contribute and do it in a reasonable time frame that makes a difference to the problem -- that's the President's prescription -- and/or not use it altogether with efficiency, far greater efficiency. And that too is part of the 20 percent package.

And so that was hotly debated, and there may end up being costs by decoupling the costs of bio-fuels from petroleum. But it's not just the end price that we're looking for because you can't permanently fix a price signal that ourselves, western countries, don't actually control those price signals. So it's also trying to iron out price volatility, the characteristic of rapid price movement and how that affects our security, how that affects stimulus and response in the marketplace.

And by building in more bio-fuels and more clean energy technologies, we're building that hedge against price volatility itself instead of just against the high prices.

MR. CONNAUGHTON: And just one other reflection. You can tax and drive up price. You can also incentivize. And the President, over the course of the last six years -- we have provided -- I guess as we go forward on the new energy bill, we'll be providing more than $10 billion in direct incentives. For example $1 billion of those is going to consumers to purchase these highly fuel efficient vehicles. So you could tax them into purchasing the vehicles or you could incentivize them by relieving the tax burden on purchase of vehicles.

In America, you know, you get a lot more with sugar than you do with a stick. And so that's another tool that we've included as part of our policy portfolio.

QUESTION: Eric Weiner with TBS. Does the President think that human activity contributes to global warming? And secondly, what about the timing of this State of the Union address? Was there any motivation for that, any pressure perhaps from a new Congress?

MR. CONNAUGHTON: First of all, the President has made clear since 2001, and I'll refer you to a speech in June of 2001, "the earth is warming and humans are part of the problem," I think is the President's simplest way of saying it most recently.

He actually has been quite consistent in his views and his remarks on that. In recent times we've been pleased that more people have been paying attention, but the suggestion that somehow his views have changed dramatically is incorrect because his views were clear to begin with: There's global warming and humans are part of the problem.

In terms of the State of the Union, the timing of it is that the State of the Union is given at this time every year, and the President's job every year is to capture the items of greatest consequence to the American people. The energy security issue is becoming more intense not less intense every year.

Certainly the recent experience in Europe with some of the manipulation of markets related to its own access to oil and gas resources has had a dramatic impact this year in Europe. It's been an issue for us in America now for about three years with increasing gasoline prices, increasing natural gas prices, and, as Assistant Secretary Karsner mentioned, a lot of volatility, which makes it very hard to plan.

And so when the President seizes the moment, he likes to cease the moment in a bold way. And also this year, if you ask about timing -- last year he set the research agenda on ending our addiction to oil. This year he's setting the policy agenda on getting the technologies into the marketplace that will help us achieve that goal. And so if you want to see the linkage, that's where the linkage is.

QUESTION: Back on CAFE, I understand the current standard is 27.5 miles per gallon for passenger cars. What would be the new number for that and at what time do you have to have that number actually achieved? And also, does the authority belong to the Congress or does it belong to the executive side?

MR. CONNAUGHTON: The CAFE statute is 35 years old and has never been changed. We need to start with that. We've learned a lot in 35 years of how to do the regulatory side of the program better, so we have a statute initially set a number and then directed the executive branch to design a regulation to update that number from time to time. So it's a shared responsibility between the Congress and the executive branch, the President and his Administration.

The last time that number was set, the one you refer to, 27, was set back in 1987. And then, for a variety of reasons, Congress, in a bipartisan way, blocked the executive branch from setting new standards. When President Bush came to office, he asked Congress to lift that barrier and let us set new fuel economy standards.

But at the same time he also asked if we could reform the regulatory process because our National Academy of Sciences did a study that showed that the 35-year-old process that was given to us by law was causing increased highway fatalities and even a greater number of increases of highway injuries.

And so we had under the law -- it's a very curious law -- for light trucks, the law gave us more flexibility to reform the process ourselves, and so we did. President Bush did two regulations on light trucks and nobody complained very loudly, so we were actually successful. People were very afraid of it, but we actually got a lot of support in the end for that.

We want to do the same thing for passenger cars, but the way the statute is written, it won't let us. The only way we could do passenger car standards without the Congress would be under the old way that creates these safety risks. We've been asking Congress for five years to give us the authority to fix the program and then get more fuel economy. So that's what's going on now.
So when people say we have authority, the answer is yes. But we can't get as much fuel economy if we use our current authority because we'll create safety risks.

Now all of this however -- you ask about the amount. The President has set a goal of 8.5 billion gallons from fuel economy. So that means up to four percent per year. We want to use an administrative process to figure out in each year what that number should be. And the reason why that's important is because technology changes.

We may, and I hope, we see a huge increase in the use of clean diesel and bio-diesel vehicles in America, for example. And so if we set all the numbers for ten years in legislation today, there's a high likelihood we'll be wrong about what the numbers could have been if we just did the process on a year-by-year basis.

So for example, if clean diesels become quite popular and begin to get introduced, that would allow us to actually make the standard go tighter even faster. If that technology doesn't work and we have to use some of the technologies we only know of right now, we might have to move a little bit slower in the first few years and then more aggressively in the later years. So we just want the flexibility to use a technical process to get the number right.

But this is why the President set a goal. He wanted to be clear. We have an outcome we want to achieve, and that's this 8.5 billion gallon displacement through efficiency in order to get the 20 percent goal overall. And by the way, we'll use other policies as well. We use incentives, we use a number of other policies to complement CAFE.

MR. KARSNER: A word on that. Jim is absolutely right. In a nutshell, we have never had an administration call for a greater quantity of efficiency gain over this period of time than the President did so the other night. And so even in the government we have separate agencies that work with this.

The Department of Transportation, EPA and our office attest to the availability of efficiency technology. When you think of those two decades that have passed and the many administrations that have come and gone with no change to a central number across a whole fleet, and think of the fact that none of us even used hard drives in 1987 and the rate and the evolution and the availability of technology that is dynamic against a policy that is that static at the centerpiece of the most available tools we have to address this problem, the President has laid the ball out there very aggressively in a way.

But he has said more than the change in a number, we want to change and a policy that lends itself to static behavior that is road-blocked. And so where the administration had the power to act, it has acted, and it has asked the Congress for comparable power on the passenger fleet where the great gains can be made so that we don't have a policy that says "every time you buy one Prius, you justify one Hummer."

And that's what the policy says today. It's an equilibrium midpoint that measures across the fleet, okay. And what we actually want is that to be more dynamic in recognition of what's going on in the buying.

All through the ‘90s we went way up with soccer moms in minivans. We went way up with SUVs. And we held tight to that number despite the carbon composites, despite the light-weighting materials, despite the greater engine efficiencies and despite the continuing evolution in the rate of technology.

So we want reform to CAFE that itself is dynamic and addresses the dynamic flow rate in the evolution of technology and recognizes those gains that have already taken place. And included in that might be, working with Congress -- a tradeable mechanism for CAFE credits nobody even thought of 20 years ago.

Twenty years ago, nobody even thought of hybrids getting into the market, but now we're talking about plug-in hybrids, plug-in flexible fuel hybrids, vehicles with maximum flexibility to give consumers choice about how they fuel their car. Whether they plug it in at home and don't drive the first 10 or 15 miles a day and don't use any petroleum wasn't thought of 20 years ago. So we want to account for that. We want to encourage that rate of marketplace penetration. So it's going to require a very mature, new dialogue with Congress and the Administration going forward to meet the President's challenge to get to this very aggressive goal.

QUESTION: My name is Higuchi with JiJi Press, a Japanese news wire. So as for the new CAFE, so there was a time line to set new rule-making, so that when the Administration finds the right rule-making and implement it?

MR. CONNAUGHTON: Thank you. The sooner Congress acts to give us the authority, the sooner we can get started with the rule-making. We did a lot of technical work in designing the policy that the President announced for the State of the Union, so we have a lot of the work underway that we can use in that rule-making. So we can move very quickly once we get the authority to move -- completed the rule-makings in less than a year. So we want to move very aggressively on this because the sooner we start, the sooner we start earning the benefits in terms of energy security and in terms of reducing CO₂.

QUESTION: My name is Hanne Skartveit. I'm from VG, a Norwegian newspaper. Is there any chance the Administration will change its mind about Kyoto and sign it?

MR. CONNAUGHTON: I think all the countries have moved beyond the debate over Kyoto. In fact, we've moved into a very constructive period of how we implement our shared obligations.

So I'll give you an example. The Asian Pacific Partnership has Japan, which is in Kyoto and has an obligation. It has South Korea, China and India in it. They are Kyoto parties, but they don't have any obligation to reduce emissions. And then it has Australia and the United States who are not part of Kyoto. And yet we have come together on a shared strategy for making significant gains in reducing CO₂ from the major energy intensive sectors like power production, aluminum, steel, coal mining and building and appliances, for example. So regardless of what each country's position is on Kyoto, we have found very practical ground to work on the specific components of what we need to achieve our shared objective of stabilizing greenhouse gases in the atmosphere.

The same is true with Europe. I just came back from the US-EU high level dialogue from a few months ago. It was probably the most constructive conversation that we've had because now we're all focused not on the politics and the rhetoric of treaty negotiation but on the very practical things we need to do to achieve our goals.

And we set a very constructive agenda to focus on renewable fuels, and not just on the technologies but on the market issues, how you get them into market, on low carbon coal on the way to zero emission coal as an agenda item. And then we're talking about things of common standards, for example for bio-diesel, which does not have an international standard right now. We have different fuels in different countries, and we want to get an international standard to open up the market for bio-diesel, because not only is it bio but it's also -- as a diesel product it's more fuel efficient, and so you can use more of it in more vehicles to get the same amount of mileage delivery.

And then all the nations of the world are now looking forward because the Kyoto protocol time line ends in 2012. And I think there's a very constructive and interesting dialogue going on right now that is expanding beyond the climate specialists and the environment ministries to include, really, for the first time, the transport ministries, the energy ministries, the finance ministries and the trade ministries. And that's a very encouraging sign.

I think that's what was missing in Kyoto before. We didn't have the government officials who were actually responsible for the sectors and the technologies that are part of the solution. And so by expanding the dialogue, I think you'll begin to see more of a breakout of these kinds of approaches where we address this issue sector by sector and get a clearer sense of what we might achieve near term and what we might achieve over longer periods.

So it's a very constructive and active time, and we've put a lot of those old debates behind us. And that's really a statement from the President. If you saw his remarks with Chancellor Merkel from a few weeks ago and with President Barroso of the EU, I'd just point you to those remarks. We can get them for you. He was very clear, look, let's put those debates behind us. Let's stop debating the science. Let's get on with the practical actions. And let's link this. Let's link our energy security needs with our climate needs, and then we can make even broader progress because we have a broader base of support for these objectives.

QUESTION: Philippe Gelie, Le Figaro of France. I was a bit surprised by the chart you showed us that Russia arrives first in terms of efficiency compared to economic growth. I don't know how you guys calculate that, but are you optimistic on the fact that the big report that is expected on global warming next early February, do you think that will recognize the excellency and the efficiency of the United States in these matters?

MR. CONNAUGHTON: Well, first, on the chart of Russia, I wouldn't read too much into Russia. Russia is a unique case given the economic situation back in the early ‘90s and their turnover, and then also the nature of Russia in reporting of what it's doing. So I would just leave Russia as Russia. But I could give you reasons quite sound for why that is but also reasons that even Russians wouldn't be happy about for that number. It has to do with some areas of economic growth that aren't happening.

I also want to underline, in any chart like this you could pick different periods, right, and you could get different configurations depending on whether it's 1997 to 2004 or 1990 to 2000. The point I want to underline with that chart is the essential one that actually in this growing world economy, greenhouse gases are still increasing, but they're increasing at a much slower rate. And that's the central point I want you to take away from this chart.

It is not the case that any country is achieving dramatic reductions in greenhouse gases related to their climate strategy. The big reductions in Europe that they largely take account for was the U.K. switching from coal to natural gas way before Kyoto for reasons unrelated to climate change and then of course the integration of East Germany -- the unification of Germany and then all the reductions that were associated with stopping those very inefficient industrial enterprises in East Germany.

Now that created a huge job issue, you know, so you don't want to take credit for reducing greenhouse gases by putting people out of work. And so if you back those emission reductions out, we are all -- you know, Japan, the United States, Europe, Canada, Australia, we're all at about the same place making a good rate of progress. And that's the important takeaway on that point.

And your second question was the report. The report next week will have three components, two of them largely science components. And actually it won't be next week. They're discussing the report. It's the high level meeting next week. The report is still off in the future a little bit. I think the report is going to enforce a lot of the science that most of you have been reporting for some time now.

These panel reports, they collect all the science that's out there, and then they analyze it and summarize it. It doesn't create new science. And it's very clear that it will further reinforce that the earth is warming, that that temperature trend is occurring, and it will reinforce, I expect, that human activity is a very substantial factor in that equation. So I don't know what exact words they'll use, but it will be a further reinforcement of the advancing science.

There will be a section on economics, which I think will get into some of these strategies and what's happening and what they're doing. And that will be worth watching because that's really where the weight of the conversation is now. It's not among governments. It's not so much in the science anymore. It's really focused on finding the most economically rational approaches to addressing these greenhouse gases.

So we're looking forward to it. Just to underline for you, the United States is responsible for probably half the science that will be contained in that report. The President's budget on science -- he spent 12 billion U.S.-taxpayer dollars on underlying climate research. That's more than any other nation in the world contributes to the climate science enterprise.

And as President Bush's Administration, again contrary to some public perception, we have been publishing all of this science and producing all kinds -- you know, the research priorities and actually working very closely with nations around the world on Earth observations. We have a very aggressive, forward-looking agenda on the science related to climate change that is part of, again, this continuing commitment to forward progress.

MODERATOR: Thank you all very much.