U.S.-China Strategic & Economic Dialogue / Act on Climate: Celebration of Energy and Environment Cooperation Panel

John Kerry
Secretary of State
Environmental Protection Agency Administrator Gina McCarthy, and Former Secretary of Treasury Hank Paulson
Dean Acheson Auditorium
Washington, DC
June 23, 2015

(Video is played.)

MODERATOR: Ladies and gentlemen, please welcome the Honorable Gina McCarthy, Administrator of the U.S. Environmental Protection Agency. (Applause.)

ADMINISTRATOR MCCARTHY: Good morning. As we all know and just saw in the video that played, the last year has been a big year for U.S.-China climate change cooperation. Since the S&ED last year, our presidents made a historic announcement of our respective climate change targets. We are already working to fulfill our commitments through both domestic actions like EPA’s carbon pollution standards for power plants. We are further complementing our governmental leadership and action by engaging civil society, academics, the private sector and many actors who are important to achieving these goals. As such we are excited to have with us today Secretary Hank Paulson, who will moderate a panel on climate change with our four S&ED co-chairs.

Secretary Paulson is chairman of the Paulson Institute, and he is no stranger to the Strategic and Economic Dialogue. As Treasury Secretary from 2006 to 2009 he chaired the first Strategic and Economic Dialogue and helped to create many of the interagency ministerial platforms we still are utilizing today. Today the Strategic and Economic Dialogue is the premier platform to discuss global issues of importance to both countries such as the global environment. Please join me in welcoming Secretary Paulson to moderate our panel, Act on Climate. (Applause.)

SECRETARY PAULSON: Thank you very much, Administrator McCarthy, and good morning. Sitting here with the four distinguished leaders of the Strategic and Economic Dialogue and looking at so many familiar Chinese and American faces in the audience, my memory does go back to 2006 in the beginning when this was the Strategic Economic Dialogue and to 2008 when we put in place the 10-year framework for cooperation on energy and the environment. And as many of you know, I’m still spending a lot of time in China, and I’m still very much engaged in working on climate change in the U.S. and China because I see this as one of the major risks that the world faces in that it threatens the quality of life on this planet as we know it for future generations.

And because the U.S. and China are the two biggest economies and the biggest emitters of carbon, as Secretary Kerry said, the only way we can mitigate and curb carbon emissions is if the U.S. and China lead the way. So I, like so many citizens in the U.S. and China and throughout the world, applauded the historic announcement made by President Obama and President Xi Jinping on climate change in November. I see it also as a prime example, a clear example of the huge potential of U.S.-China bilateral relationship because when our two countries work together, we can make real progress in solving some of the big problems that are confronting the world and in doing so benefit the people of the world, throughout the world and of our two countries.

Now, I know that there’s been a lot of work done since the November announcement on climate change, and my first question for the panel today is going to go to Secretary Kerry. But before doing so, I just want to, again, congratulate him on coming back so quickly from his accident and looking so fit, and he’s a real competitor and it’s just great to see him back and going at 100 percent.

So Secretary Kerry, how are the U.S. and China working together to implement this climate change initiative and make it a reality in both of our countries?

SECRETARY KERRY: Well, we’re working – first of all, Hank, thank you very much for being willing to do this, and thank you for your own leadership and engagement on this topic. We really appreciate it, and it’s very important. It makes a difference.

We are working, frankly, extremely effectively together beyond, I think, either side’s initial expectations. Let me just say why this is so important and what it signifies. In 1992, I had the privilege of being one of the members of the Senate who went in a delegation to Rio for the original Earth Summit at which we had a voluntary agreement that people entered into regarding lowering greenhouse gas emissions. And between 1992 and today, there have been many, many conferences of the parties all over the world – Buenos Aires, in Copenhagen and so forth. I’ve been to many of them. At most of them, I have to say, China and the United States were just on the opposite side of the ledger. We were knocking heads together rather than cooperating. And in fact, there was sort of a stalemate in terms of trying to really move forward in dealing with this issue of climate change on a global basis.

That changed in 2013 with China’s willingness to open up and listen and engage, and my counterpart, State Councilor Yang Jiechi, received us on my first trip to China and we created a working group. And the working group then went to work over the next year trying to pull together, working with our friend Mr. Xie Zhenhua, who is – and Todd Stern and our team, to narrow differences and see where we could cooperate.

So today it is significant that we have a list of initiatives on which we are cooperating as a result of the announcement made by President Xi and President Obama. We have a major initiative we’re going to engage in here, which is a zero bus emissions effort, to reduce the static emissions that are constantly coming out of our ports and harbors and ships that are sitting there. There are many ways to reduce emissions. We’re looking at heavy duty and other vehicles as part of the working group. We’re looking at smart grids. We’re working on carbon capture utilization and storage. We’re looking at energy efficiency in buildings and industry. We are collecting and managing greenhouse gas emissions data so that we’re all operating off of good input. We are looking at climate change and forests and that interrelationship and steps we can take together. We’re looking at low-carbon cities, boiler efficiency, fuel switching, and we’re also working on the issue of HFCs, hydrofluorocarbons, and an enhanced policy dialogue.

All of that has come out of this one announcement and the working group efforts. And we believe there are enormous opportunities for us to share in business possibilities, in joint ventures, in joint research, in groundbreaking efforts with respect to the leadership that we can offer to other countries, particularly poorer nations that are energy poor as well as poor in other ways, that face a major challenge as a result of the major emissions of the world. But because China and the United States are the world’s two largest emitters today, when we make a decision to move on this, it has a profound impact.

And I’d just close by saying, Hank, in the Lima, Peru conference, things we’re kind of stuck. And it was because of the China agreement and the language that we specifically used in that agreement, that was able to be transferred into the Lima discussion and, in fact, utilized as a way of breaking a deadlock at Lima. So an example of the outcome is not only do we have all of this working group progress, but we’ve been able to have an impact on other global meetings and efforts to try to deal with climate change. And it’s an example of the profound impact of the current level of cooperation and leadership that’s being offered by our two countries.

SECRETARY PAULSON: Very impressive. State Councilor Yang Jiechi, so now over to you. What do you see as the impact of this joint announcement? And how do you see our two countries working together to operationalize it?

STATE COUNCILOR YANG: (Via interpreter) Thank you, Mr. Paulson. First I want to sincerely thank you. You have followed with great interest the response to climate change. You are also a renowned conservationist for wildlife. So I know that you have a high attainment in this regard and you have great enthusiasm for this.

Secretary Kerry just now talked about his attendance at the UNFCCC conference in Brazil, and over the years he has been committed to tackling climate change and protecting the environment. As I first started consultation with Secretary Kerry, I had the feeling that he has a strong sense of history and he has a wealth of knowledge. And in this regard, both the Chinese and American team have very good people, knowledgeable people, like Vice Premier Wang and Mr. Xie. And today, I’m very glad to see Dr. Stern here.

Our cooperation in tackling climate change has also impressed many people. I believe that when President Obama visited China at the invitation of President Xi Jinping, an important outcome is the joint announcement on climate change. This joint announcement not only promoted our cooperation in tackling climate change but also promoted our cooperation in a green and a low-carbon economic growth. And at the same time, this joint announcement has brought a great deal of inspiration to the world. This joint announcement will contribute to the success of the Lima conference, has a played an important role in contributing to the Lima conference. And under no circumstances shall we stop our progress in this regard.

From this joint announcement, we can sum up some best experience. We need to work together to proceed further. On our part, China will continue to – continue our efforts to save energy and raise efficiency. We need to increase forest carbon stock. We need to cut carbon intensity, and we should also promote green economy. I also believe that China and the U.S. should work more closely in shale gas, nuclear power, clean energy, carbon capture and sequestration, green trade, and some other areas. We should continue our practical cooperation in these areas. I also agree with Secretary Kerry’s words; that is, the China-U.S. Climate Change Working Group has to play a bigger role and to tap its potential. Third, we should work together to contribute to the global response to climate change. We need to work with the international community to ensure the success of the Paris conference at the end of this year so that it can achieve a big result. Thank you. (Applause.)

SECRETARY PAULSON: Thank you very much, State Councilor Yang. Now I have a question for Secretary Lew and for Vice Premier Wang Yang. So Jack, let me start with you on this. Why is action on climate change imperative from an economic perspective, both in terms of minimizing or limiting the risks and from the perspective of creating new opportunities?

SECRETARY LEW: Well, thank you. First, Hank, let me thank you personally for changing your schedule to be with us here today. We very much appreciate it. It adds a lot to this program.

I think the reality on climate change is we’re either going to deal with it now or later. And the cost of delay is very substantial. We have seen increasingly extreme weather; that has costs. We also have seen through studies that for every decade we delay, we increase the cost of dealing with climate change by 40 percent. So the reality is the economic pressure is real and it’s going to get more real as time goes on. We each have to take the measures we can take in our systems. Obviously, if there were market forces that pitted the tradeoffs between the cost of climate change and the cost of remediation more directly, that would be most efficient. But what we’ve seen is we have a variety of mechanisms that we can take in our respective systems to deal with the challenge.

The problems of climate change are not limited to any one sector of the economy. It spreads from the agriculture sector to the health sector, and to each of us in our own lives, in our personal health. It has to do with the stability of our transportation and infrastructure grids. And these are the kinds of challenges that we’re seeing more and more as the consequences of climate issues manifest themselves through extreme weather, through storms that cause great damage.

One of the things that happens when we see those storms – we saw it in New York and New Jersey with Superstorm Sandy, we’ve seen it around the world – is that it imposes extreme costs either on the community and the businesses in that community or on a government that steps in to help as all governments are feeling that they need to when there’s such terrible devastation in the area. This means that the long-term fiscal challenges are very real. If we don’t deal with climate change by controlling it, we’re going to be dealing with the consequences by cleaning up after it, and that imposes a burden on our fiscal system and it puts, ultimately, a tax burden on people.

So I’ll kind of end where I began. You either deal with it now at the best, lowest cost, or you wait and deal with it at a higher cost, and that will be felt throughout our economy.

SECRETARY PAULSON: No doubt, no action is really radical risk-taking, really radical risk-taking. Vice Premier Wang Yang, what’s your take on this question, the economic implications in terms of limiting risk and the opportunities we have here?

VICE PREMIER WANG: (Via interpreter) First of all, I want to thank you, Mr. Paulson. Microphone, please. Microphone, please. So I want to repeat myself. I want to join my colleagues in thanking you, Mr. Paulson. After retiring as the secretary of treasury, you’ve been committed to environmental efforts between our two countries.

To tackle climate change is a shared mission of mankind, and I agree with Mr. Lew that the early and faster we act, the cost will be lower. And from the economic perspective, I believe the core of our action to tackle climate change is to shift the growth model. Now nature has shown human beings a red light, telling us that the traditional growth model is coming to its limit, and human beings must change the old way of production that relies too much on consumption of resources and the environment, and change our way of life that is too extravagant. And we must change the philosophy of pollution first and treatment later.

To tackle climate change is both a challenge and an opportunity. In industrial emission reduction, energy efficiency in buildings, and the development of clean energy and also the restoration and protection of the ecological environment, there are so many business opportunities. In the past four years, the environmental industry in China, the output of the industry grew by 15 percent year-on-year average. And last year, the industrial output reached 700 billion U.S. dollars. And in 2014, China sold 750,000 new energy vehicles – three times as large as 2013 – giving great opportunities and profit to companies like Tesla and BYD.

So in a word, I believe to tackle climate change is a must for efforts to promote global economic recovery and promote the sustainability of development. (Applause.)

SECRETARY PAULSON: Thank you very much, and I really believe that’s something we need to really pay more attention to is the opportunity. We talk so much about the costs, but the real opportunity in terms of an economic growth if we get it right.

Now I’m – John Kerry, I’m going to go back to you. And you touched on this a little bit in your first answer, but how are you looking to leverage this announcement in terms of – your leadership opportunity in terms of galvanizing the rest of the world on climate change? This is – as I’ve traveled around, it’s just changed the whole tenor of the way people are looking at this. And there’s much more optimism, but you’re leading the effort. So how are you looking at this?

SECRETARY KERRY: Well, we do view it, Hank. We think that the next months are absolutely critical in order to build on this particular relationship with the visit of President Xi to the United States; with the UN, where we will have a meeting, a further sort of forum that will highlight this leading into Paris in December.

And all of our diplomacy right now is focused not just on the immediate issues with whatever country we’re dealing with, but in every case, we are engaging countries on the subject of their independent, direct contributions to the reduction of greenhouse gases. Countries are required to be setting targets right now over the course of these next days. And the idea is that you create a critical mass of countries which are setting these targets, and then everybody feels compelled, obviously, to join – not to be left out, not to be the skunk at the party. We have met individually now with Canada, with Mexico, with Indonesia, with Japan, with Korea, and other countries – India. Todd Stern was just over there. We’re leveraging as much as we can the joint U.S.-China cooperative effort to encourage other countries to be as bold and ambitious as possible in embracing their targets. And so far, it’s having an impact.

Now one of the things that we are trying to point out to people, Hank, is this – the economic opportunity is not to be trifled with. The marketplace that the United States experienced in the 1990s which saw us increase wealth in America as significantly as any time since the 1920s, the early boom when there was no income tax – that was the greatest period of growth in the American economy and more wealth was created in that period than in any other time. That was a $1 trillion market based on 1 billion users, and it was the technology market, principally communications and computer – home computer, so forth. The energy market that we are looking at today is a $6 trillion market with 4 to 5 billion users currently, growing, as I said earlier, to some 9 billion users over the course of the next 40, 50 years. If we can excite the marketplace to look to low-carbon solutions – which is why many people believe pricing carbon is so critical – the market will move immediately towards this opportunity. And literally there are millions of jobs to be created, unbelievable opportunities in solar, solar thermal, wind, hydro alternatives – in all the alternative and renewable fuels.

And I would just close by saying to people if you accept the science – and most people do today – if you accept the science that says that humans are contributing to global climate change, you do not have the luxury of being half-pregnant with respect to that judgment. If the scientists are telling you this is what we’re doing and then in the next breath they’re also telling us this is what will happen if we don’t respond, we have the same moral obligation to respond by taking the steps necessary to avoid the dire consequences of what happens if we don’t. Scientists tell us there’s a two-degree centigrade tipping point. We are nearing that. And so as Secretary Lew just said, it’s far more expensive to try to mitigate, to try to undo the consequences, than it is to avoid them altogether.

So if we could bring ourselves together as nations – and this is where China-U.S. cooperation is so critical – to begin to price carbon and begin to move in the opposite direction, the rest of the marketplace will follow, and there’ll be an exponential – as there is in every exciting technology market – movement of lower prices, lower cost, greater efficiency, and greater productivity which can solve the problem. So that’s really what we’re looking at, Hank. That’s the equation that we’re trying to bring to Paris, and that’s why we think the U.S.-China engagement on this is so critical, frankly, to dealing with climate change.

SECRETARY PAULSON: Thank you. State Councilor Yang Jiechi, what does long-term success look like for U.S.-China cooperation on climate change?

STATE COUNCILOR YANG: (Via interpreter) Microphone, please.

Yeah, our long-term cooperation on climate change will bring long-term benefits. First, we – both of us have vast territory. If our two countries can pursue green economy together, then it means that we can set a good example for the world. We should build a green China and you should build a green U.S. Washington D.C. is a beautiful city, but one point in history, pollution used to hit some parts of the United States. Vice Premier Liu visited Pittsburgh not long ago. It is a traditional industrial city, but after radical reform, it completes an economic transformation. So Pittsburgh today becomes a beautiful and habitable city. And the U.S. built the Hoover Dam. It changed the environment in states like Tennessee and also Los Angeles. And here in China, we are also working very hard. We believe that our two sides can further tap cooperation potential and showcase nuclear power, clean energy, carbon capture and sequestration, green trade, and so on, so that our two economies can become green and low-carbon.

Second, I believe that we need to engage in long-term cooperation, and to do that we need to have a long-term perspective. Just now Secretary Kerry talked about 1990s. It saw rapid advancement in industrialization and economic development in the U.S. That was attributed to the advancement of new technologies, including the internet technology. The U.S. is a country with an enterprising spirit. In tackling climate change, the U.S. is expected to produce many scientific and technological products that will help build a green U.S., and such technologies can also help countries – other countries to build a green economy. This will produce win-win outcomes for all. So I believe that advanced technology in clean energy, if such technologies can be transferred to other countries, can lower the excess. It will be beneficial to all, because in the final analysis when it comes to tackling climate change, to undo damage will not be as cost-effective as forestalling any potential damage. So we can work together to benefit the people of our two countries and the people of the world with our respective technological products.

Third, our cooperation can set a good example for the world to show to the people around the world that efforts out of home front to grow economy and improve people’s lives can follow a shortcut. Although this is also a demanding challenge, we need to follow this challenging path – but this is a shortcut. Thank you.

SECRETARY PAULSON: Thank you very much. Now someone had handed me a note that said we’re running over time and could I please wrap it up at 11:00, but I’m going to use the chairman’s prerogative here, because there’s one more question that I just think is very important and that I have for Jack Lew and Vice Premier Wang Yang. And I’m going to ask you the question and maybe ask you each to be pretty brief in answering it.

But climate change – addressing this is a big job and it requires both the government and private sector actions and funding. And so how can China and the United States cooperate – and this is – I’m including mobilizing financial resources and technologies in order to get low carbon growth.

So again, we’re running over time, but I’d like to hear from both of you. And Jack, why don’t we start with you and then we’ll go to Vice Premier Wang Yang and that’ll be the – this will be the last question.

SECRETARY LEW: Well, Hank, I think that there’s no question but that public finance is a critical part of this. Financing will be needed for the work to be done to pursue low-carbon technologies and more resilient development.

I think that we’ve seen through multilateral institutions, bilateral programs, special purpose funds a number of ways that we can cooperate together. I think if you’ve watched the video this morning, listened to the panel, and looked back at the agreement that our leaders reached just last year, it shows that the largest developed and the largest developing economy in the world are seeing this problem as a clear and present danger. Now we see the Green Climate Fund as playing a special role; we both sit on the board. It’s something that we think could really make a big difference.

And I want to make just two other brief points. One of the things we need to do is to finance clean energy. One of the things we need to stop doing is financing the most dirty kinds of energy, and working together to come up with an approach where we limit the funding internationally of high-emissions plants is very important. I think this dialogue that we have in the context of the S&ED is indicative of the ability we have for the United States and China to work together and we need to do that because the world is going to look to the two of us for leadership.


VICE PREMIER WANG: (Via interpreter) I want to use Mr. Paulson’s words to answer Mr. Paulson’s question. Not long ago I came across an article written by Mr. Paulson and Mr. Rubin entitled, “Why the U.S. needs to listen to China.” You said that the best hope for effective transnational action on many of the world’s thorniest of problems lies on the cooperation of those two countries. For that to happen, perhaps the most crucial challenge will be to first look within.

Both our countries are large emitters of carbon. Through dialogue and cooperation, if we can solve our own problems, this will be a great contribution to the rest of the world. And we have our responsibilities as large carbon emitters, but we have differentiated responsibilities. And we should have Green Climate Fund and also South-South Cooperation Fund, and we should also have actions not just by Bill Gates, but also actions by Jack Ma. So we should not be focused on just one model or one way of funding, and we should make use of the imagination of enterprises and NGOs.

I believe that a more open system will mobilize more financial and technological resources. Actually, I have much more to say, but in the interest of time, I will just conclude my remarks. Thank you. (Applause.)

SECRETARY PAULSON: Again to thank you all. I want to thank the four gentlemen here for the outstanding leadership they are providing to the Strategic & Economic Dialogue, and the U.S. – working on the U.S.-China relations, and all of your colleagues sitting in the audience. And just want to say, in climate change – in my judgment – there is no better way to maximize a chance of avoiding the worst climate change outcomes than to have the U.S. and China working together to address this problem. So again, thank you for all you work, and panel adjourned. Thank you. (Applause.)