Speech at CICERO Conference

Let me begin by commending the organizers - MIT and CICERO for having gathered us all here today. You are a highly distinguished group of people. Your different backgrounds tell us that we are here to deal with a highly complex issue.

Treaty-making. The crafting of international agreements on environmental protection and resource management has become a science. Earlier generations of treaties and agreements typically regulated state behaviour and relations and exchanges between states. We have now reached a more mature stage when treaties affect the most complex aspects of economic policy within states.

The future protocols to the Climate Convention belong to this new generation of treaties. They strike at the core of the economic life of states. Climate change is indiscriminate. It will affect every state. We cannot tell today precisely how it will affect us. Only that it will and that the consequences may profoundly change the way we live and work, all over the world.

It becomes the more challenging to draw up solutions in a situation where everything is connected: Investment and employment, fiscal measures and wages. The globalized economy means that even measures applied to one sector in one country will affect the global competition and the global economy. This complexity is also a challenge to the way we cooperate internationally. International agreements used to take years to negotiate. Now, with the pace of global change, we can not allow ourselves to pursue endless negotiations. Time itself is a scarce resource.

The threat of climate change has been known to the world for ten years. And still we have not yet worked out legally binding commitments, procedures, timetables and targets that work. It was while we worked on the World Commission on Environment and Development that scientists from 29 countries gathered in Villach, Austria in October 1985 announced the conclusion that climate change was a "plausible and serious probability". The World Commission dealt seriously with this problem and in our report "Our Common Future" we called for internationally agreed policies and a global convention.

We knew already then that the effect of measures, even harsh measures taken in only some countries would be nullified if other countries pursued laissez-faire-policies. That is the intrinsic nature of the climate threat.

There followed a serious of international meetings and conferences. The establishment of the International Panel, the IPCC, and the Toronto Conference in June 1988 were among the most notable. The call at the Toronto Conference for a 20 per cent cut in emissions triggered processes in a number of countries which lead to a series of declarations of national emission target reductions. Here in Norway we dealt with this issue for the first time when the Government presented a White Paper to parliament on the follow-up of the World Commission.

Knowing that Norway depends on technology developed abroad, and that we live and work in an international economy, we added to our national target a statement that it would be reconsidered in the light of technology change and measures taken in other countries.

We were also the first to introduce CO2 taxes on the use of fossil fuel. Many other oil producing countries could not believe this. In their view, we were undermining our own income base as a nation. They thought we were out of our minds, and they said so, loudly.

We on our side found it necessary that we should be pioneering new ground, and that other countries would have to adopt similar measures. But alas, to this day, only a handful of smaller countries have introduced such taxes.

We recognized early on that all countries would have to contribute to the solution, but that the ability to do so, and the responsibility to do so, and for creating the problem was a differentiated one. This was recognized by 24 Heads of state and Government meeting in the Hague in March 1989.

We recognized there that we needed regulatory, supportive and adjustment measures that would reflect the fact that states have reached different stages of development. In essence we recognized that a fair burdensharing was necessary for creating a global consensus.

The Rio Conference gave impetus to the work on a global convention. It was written in 16 months, quite an achievement. But the Convention is only a framework. And I said already in Rio that it is imperative that we make it more effective.

The Conventions gave us important principles for future solutions.

• Solutions needed to be costeffective. Measures would affect all our economies. We cannot approve wasteful solutions, only those that give maximum return.
• Activities could be implemented jointly, a principle recognizing the true international character of the problem.
• And, we approved the comprehensive approach, recognizing that there are many gases that contribute to the problem and that we could achieve goals by a mix of measures.

Today, four years after Rio, our situation can be described as the well known "prisoners dilemma": All countries and people in fact have objective interests in finding a solution. But - if a country takes mesures alone, it may have no effect. Most countries seem to expect that other countries carry the burden. All countries are pursuing essential short-term goals that are difficult to reconcile with some of the possible measures.

In essence, climate change is a challenge to how our democracies work. We must take measures today to prevent damage far into the future. Those who will suffer, if we fail, cannot vote to defend their future, - they aren't even born.

We must act today in the interest of our children and grandchildren. The costs of inaction, in terms of sea-level rise, soil erosion, desertification and reduced agricultural output would be formidable, even devastating in many areas.

China and Indonesia, the worlds largest and fourth largest countries, will develop into middle income countries in the course of a generation. If they do, and do so based on today's technology, our Western efforts, within a relatively stable population, will play a very modest role.

By far the largest pr. capita emission comes from the US. The average American emits today more that twice the CO2 of the average Norwegian. It is self evident that a stabilization at that level, which is the stated US goal, cannot be defended if we want serious change.

We Europeans have a hard time understanding how controversial the issue of taxing oil and gasoline is in the US. To us, very low gasoline prices are not only wasteful, but also seem such an obvious source of revenue which could provide at least a part of a solution to a deficit problem. The price of Gasoline in the US is only one-fourth of that in Norway or in Italy. American gasoline is in fact one of the "best buys" there is in any industrialized country, and such prices will of course offer little incentive for energy conservation.

Germany is a country that has seemingly done well in reducing its emissions. But statistics are deceiving. Mark Twain coined the triad of white lies, black lies and statistics. And even President Eisenhower seemed to be concerned when told that half of all Americans where less than averagely intelligent.

The Germans can present an impressive CO2-account since the closing down of pollutive, outdated industries in the former GDR leads to a sharp decline in total emissions. The situation in the West of Germany is, on the other hand, virtually unchanged.

There are other such examples. The Netherlands keep the emissions at Schiphol out of the national account, since air travel is "international".

A great majority of countries make very little efforts at all to curb their emissions. And with today's low world prices on fossil fuel, there is too little incentive to change the patterns of energy use.

Many countries, in particular the OECD-countries are willing to make stronger efforts. But we have experienced that all countries are unique and that measures which will work in one country run up against serious political problems if introduced in the next country. Goals that can be achieved easily in one country would entail excessive costs in the next country - depending on differences in structure, technology and tradition.

That is why an effective climate protocol requires a combined political and scientific craftsmanship which we have yet to see in this world. Unless a binding agreement is both cost-effective, equitable and verifiable, and unless it recognizes that also within the West, states have reached different levels of development, it will not work.

An ambitious short term emission reduction target without the introduction of long term practical policies does not necessarily imply a commitment to a long term global reduction strategy.

The discussion of national targets and percentage reductions take some of the pressure off those countries which can achieve their goals by means of no regret measures, such as closing down industries whose time has gone anyway. Countries that have already modernized their industries, have nothing easy to close.

Norway is in such a situation. We also live in a cold climate. In winter, many people have the opposite of midnight sun. We live scattered and far apart, and most of us live in one-family houses. On a surface the size of Germany, stretched almost like Chile, mountainous, indented by fjords and cut by valleys, we have a road and railway-system serving fewer people than surround the railway-station of Osaka, Japan. We depend on energy for light, heat and fuel.

And still, even when counting the emissions from our large off-shore industry, our emissions pr. capita is 8,2 tonns per year, which is lower than the EU average. Because we are endowed with hydropower. Thus we are at the same time in a fortunate and a difficult situation.

An agreement based on equal percentage reductions among developed countries would require us to take measures that other countries would not dream of, such as restricting the use of cars, or closing down competitive and comparably clean industries. What we ask is that an effective and binding agreement would allow us to make a serious contribution without doing severe damage to the welfare state.

It seems reasonably clear: Equal percentage reductions would make life easy on those developed countries who have done the least so far. Would that be a wise consequence? Policies should stimulate progress where progress is mostly needed. - and where new technology has not been taken into effective use.

It will be more than difficult to have countries join an international agreement that ensures one thing: A steady decline in economic performance and the financial base of the welfare state.

Countries that are already resonably advanced in cleaning up its industries may face such a situation, while latecomers may easily and cheaply comply, without feeling the external pressure to accelerate other policy changes.

That is why and equitable burdensharing is so essential for the success of our endeavours. A policy based on equitable burdensharing will enable us to achieve more and to realize more ambitious goals. We believe, and continue to believe that fiscal measures like CO2-taxes is one good option.

But important countries have rejected such means, and continue to do the exact opposite, to subsidize the use of coal. If, in this situation, we should increase our high CO2-taxes even further, it would amount to imposing a unilateral export-tax on our industries to the benefit of its competitors abroad, which operate under more lenient environmental rules. The situation for the atmosphere would worsen - or remain unchanged.

The European Union has proposed to establish three categories of measures: Those which must be introduced by all. Those who ought to be introduced by all, and those which could be introduced by all. But the large EU countries still seems to work along the lines of favour equal cuts, while others are opening up for the differentiated approach.

We believe that by diverting attention away from quantity and percentages, and focus on types and costs of measures, we would get a much clearer picture. Who are the free riders and who are doing their fair share?

In addition: It would be plainly irresponsible to dump the concept of joint implementation. And moreover, we have consistently argued we need a system whereby groups of countries take on a common commitment, - the OECD-countries, or the Annex 1 countries.

When we extract natural gas, the production and transport produces emissions. But the gas moves in pipes to Europe where it reduces the need for oil and coal that pollutes much more. Today, we in fact import electricity produced from coal, in Denmark. That increases the Danish emissions, while benefiting Norway. This is a clear illustration of how approaching a global problem with the prime ambition of reaching a national target will lead to irrational results.

The problem is that we are all watching each other. Norway has played an active role in the climate negotiations and will continue to do so. We have taken on a significant national burden. Industry has protested severely when measures where imposed, not least when we decided to tax emissions from off-shore petroleum production. But it produced results - remarkable results. Our off-shore production is the cleanest in the world. Industry found new solutions. Emissions where cut deeply.

All in all, our emissions of all greenhouse gases where reduced from 1989 to 1994. That total figure comes from deep cuts in emissions of other greenhouse gases than CO2 - in fact by 16 prosent.

Those of you who are guests in our country will undoubtedly notice that some Norwegians believe that Norway is the Big Bad Wolf. That is sometimes the role of domestic pressure groups. It also illustrates that climate policies are indeed complex.

The IPCC has stated that CO2-emissions must be cut by 60 percent in order for us to stabilize the CO2-content in the atmosphere at today's level. It is clear that such cuts are not possible given the state of technology of today.

Equity requires that we in the developed world take the lions share of new commitments while the developing countries are allowed to increase their emissions in their struggle to break out of poverty. We are also best suited to develop new solutions, to give people the same services with less emissions. We still posses the technology edge.

Market forces influence research and development efforts. The ten largest companies in the US spend more on research and development than the entire Third World, including China. In the case of environmental technology, the demand that influences supply is not a private demand, but a public demand. This is a serious problem as our economic systems do not sufficiently take into account harm done to people's welfare or the environment. A part of the solution must therefore be to make market forces act in harmony with the need of society today and in the future.

Only international research efforts of the scale of the Manhattan project can open possibilities for such changes in energy use. It is estimated that China will quadruple its energy use by the year 2030. The energy-use of Indonesia, Thailand and Malaysia will double eight-fold. How that energy is produced will have a severe impact on the composition of the atmosphere a generation from now.

These large developing countries will depend on technology developed in the west. We depend on the same technology. Our technology-level today can be nothing more than a transition to a future that depends less on fossil fuel. We do not know today what the energy mix of the future will be, but we do know that the present is not sustainable.

In this transitional period, significant no-regret measures are available in most countries. Reductions are possible and economically feasible by utilizing an array of technology and policy measures that accelerate technology development, diffusion and transfer.

At Rio, we had to adopted a watered down climate convention. We had no other option. The world was simply not ripe at Rio. We knew the basic principles on which we needed to build, cost-effectiveness, equity, joint implementation and comprehensiveness. But not how to make them operational. Meanwhile the problem is growing more and more serious. Many are impatient. We are impatient.

All governments must heed the clear message of the Second Assesment Report of the IPCC, and move to totally levels of commitment.

Never have we faced a task so essential to how we live, work and hope. That is why we must make progress now, and why this conference is so important.

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