PANEL II OF A HEARING OF THE SENATE FOREIGN RELATIONS COMMITTEE
SUBJECT: GLOBAL CLIMATE CHANGE: U.S. LEADERSHIP FOR A NEW GLOBAL AGREEMENT
CHAIRED BY: SENATOR JOHN KERRY (D-MA)
WITNESSES: NED HELME, PRESIDENT, CENTER FOR CLEAN AIR POLICY; PAUL CAMUTI, PRESIDENT AND CHIEF EXECUTIVE OFFICER, SIEMENS GLOBAL RESEARCH; HELENE GAYLE, PRESIDENT AND CHIEF EXECUTIVE OFFICER, CARE
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SEN. KERRY: I'm delighted again to welcome Ned Helme, the president of the Center for Clean Air Policy; Paul Camuti, president and chief executive officer of Siemens Global Research; and Helene Gayle.
And Helene -- Helene, do you want to lead off, Helene?
MS. GAYLE: (Off mike.) Yeah, thank you.
SEN. KERRY: And I'd ask that you each summarize, if you would, please. Your full testimony will be placed in the record, and we'd really enjoy the chance to explore questions with you.
MS. GAYLE: Great. And thank you very much to you, Chairman Kerry, to Senator Lugar, for this session and also for your long- standing commitment on this issue. We also would like to acknowledge the administration's pledge to prioritize climate change and to really reengage in the global negotiations, as was mentioned in the first panel.
My goal today is to provide input on this important discussion from the perspective of CARE, an international development and relief organization that's been working in partnership with the poorest communities around the world for 60 years, fighting poverty and trying to represent the interests of poor communities on two aspects of the Bali Action plan -- forestry, and the issue of deforestation that's already been raised; and adaptation.
And I'd just say that my overall message is that, beyond our part to preserve the planet, as has been talked about already (in our ?) U.S. climate policy and legislation, we must also respond to the impact that climate change will have on people in the world's poorest communities. And so, in that context, I will make remarks.
There's obviously a growing body of evidence that shows that the cost of doing business as usual with energy and the environment is going to pull the rug out from underneath the progress that the world is making with the Millennium Development Goals. As has already been mentioned, people in extreme poverty who are always living on the edge of crisis, are going to have climate change push them over that ledge whether it's from reducing agricultural productivity; increase in water stress; health risks; frequency, and severity and intensity of water-related hazards; and, as has already been mentioned, in addition, unmitigated climate changes is likely to have an impact on global security and global instability, whether contributing to mass migration, refugee crisis, increased scarcity of natural resources.
And I would just take a moment to thank the chair for the work on Sudan. And I think, as you mentioned, if you go to Darfur, if you go to Sudan, you see what that impact is already in some places. Ultimately, climate change is going to have its greatest impact on the poorest communities and most marginalized groups, including women and girls, which is a major focus of our organization.
Now, to avoid this scenario, I want to just touch briefly on three recommendations related to deforestation and adaptation that we believe can make an impact, understanding that the U.S. has to act aggressively to put in policy -- put in place policies to effect deep and immediate reductions in domestic greenhouse gas emissions that people have already touched on.
So, my three recommendations relate to: protecting the rights within the context of the reduction of emissions from deforestation and forest degradation in developing countries, or so-called RED; funding adaptations, making sure that there are set-asides of substantial revenues, new and additional to our official development assistance to support adaptation in developing countries that are vulnerable to climate change; and three, to reach the poorest and the most vulnerable with these funds to ensure that adaptation funding actually reaches and responds to the priority of the poorest populations who are most vulnerable.
Let me just give a bit of detail about each of those very quickly. First of all, the issue of protecting rights under RED. Clearly, to reach mitigation goals we need to make sure that we reduce emissions from deforestation and degradation in the U.S. climate change legislation because it does account for about 20 percent of human induced greenhouse gas emissions. But, RED activities must include pro-poor social standards and safeguards. We know from our experience that conservation efforts are going to be much more effective if they also recognize communities' central role in forest conservation, and protect their rights, and ensure that they have a livelihood in the context of reducing degradation and deforestation.
So, an example -- and we cite several examples in our written testimony, CARE work in Nepal, with Weyerhaeuser Company, USAID and World Wildlife, to have a three-pronged approach that promoted conservation and biodiversity, strengthened economic development, but also worked on changing government policies -- forest policies in Nepal to make sure that they were responsive to the needs of the poor.
We're going to continue to do projects like this, working in partnership with environmental groups, to use these models to demonstrate the ability to conserve natural resources, but also to make sure that livelihoods are maintained and that policies are changed in the meantime that meet the needs of the poor.
The second recommendation: New funds for adaptation in developing countries. Some people have mentioned this and touched on this, but I think it's important to recognize that this is going to be key. (Past ?) emissions have already set in motion the changes that we've talked about, and it's important that we recognize the need for adaptation on the ground.
The estimates are large for this, so this is not something that can be done on the cheap. The estimates of international adaptation needs are as high as $86 billion a year by the year 2015. Now, there's a range of estimates here, but it's clear that we're talking about tens of billions of dollars if we want to meet the adaptation needs.
But, we also know that investing in adaptation today is going to save dollars tomorrow, perhaps in the range of one dollar of prevention for every seven dollars that it would cost us in the future. It's going to save lives, and it also is going to build resiliency in communities to be able to withstand the ongoing climate change that has already occurred.
Funding international adaptation is also the right thing to do. The world's poor are the least responsible for the climate change and are the most severely impacted.
So, understanding all the issues about out own domestic concerns, clearly, it's the right thing to do. We have been most responsible for the climate change that others are suffering for.
And, finally, number three point: Assuring that adaptation funds reach those at greatest need. And, as I mentioned before, the best way to do that is to make sure that local communities are empowered to facilitate ownership and adaptation of strategies -- and ownership of adaptation strategies.
And I would just, again, point out we've included several examples in our written testimony, but the good news is that we already know how to do that. In Tajikistan, for instance, we're working with women to develop greenhouses to be able to grow more food, because the winter season has already lengthened and decreased agricultural productivity.
In Kenya we're helping communities build "sand dams" in freshwater rivers to capture and store water for use during longer seasons. In Bangladesh women have identified duck rearing as an adaptation option -- as opposed to chickens, which is oftentimes a use of livelihood, because ducks float during these normal, frequently ocurring floods.
So there are simple ways in which communities have already found ways to adapt to climate change. And we want to be able to help support them and their ability to do some of the very simple things that can make a difference in saving lives and providing livelihoods.
Finally in conclusion, I'd just say, you know, I think, as everyone has said before, the opportunity to make a difference is extraordinary. And clearly, it is vital that the U.S. pass domestic legislation that does reduce U.S. greenhouse gas emissions but also that protects the rights and interests of forest-dependent communities around the world, funds international adaptation and guides those funds so that they reach the people in poor countries most vulnerable to climate change. This is the time to act. As everybody says, this is urgent, not only for us but for others around the world.
So again, I thank you. And we have full written testimony that's already been submitted.
SEN. KERRY: Thank you very much.
MR. CAMUTI: Mr. Chairman, Senator Lugar and members of the committee, thank you for the opportunity to share some perspective on technology development, transfer and deployment. We at Siemens believe this is kind of a critical part of the conversation with regard to climate change.
Again, I'm Paul Camuti. I'm the chief executive officer of Siemens Corporate Research. This is our central technology development organization based in Princeton, New Jersey. We have a team of over 350 scientists and engineers working on cutting-edge technologies for energy, health care and for industrial competitiveness.
One of the most valuable contributions that we're making in our business is what you'd already mentioned, which is in energy-saving technologies. Of particular interest is also the area of energy solutions. And Siemens and a number of our lines of businesses are involved every day in transferring and developing technology on a global basis.
One quick example is we've invested, you know, in a wind turbine business. We've built a wind turbine blade manufacturing factory in Iowa, a gearing factory in Illinois. We established the R&D center in Colorado. And we have a pretty large and growing services team for our wind business headquartered in Texas. Our business not only works through public-private partnerships but we enable technology transfer through trade and direct investment.
I wanted to just briefly hit on the technologies that we're talking about. I think when we're talking about technology transfer, it's somewhat important to get our arms around the scope of the technology because there's literally thousands and thousands of technologies that apply and can help to mitigate climate change.
We group these into four basic areas. One is in the area of power generation. This is the one that gets kind of the most focus. These are renewable sources like wind, solar, hydro, wave power. Importantly in the equation is high-efficiency gas and steam turbines and increasingly running on a diverse set of fuels like coal, oil, gas and nuclear. There's also a set of technologies in the power- generation area for carbon capture, both pre and post combustion. These are all areas that we're currently working on.
The second grouping of technologies that we looked into are the electrical transmission systems. This has been much talked about in the area of the smart grid. But also important for us is high-voltage DC transmission. This is a set of technology that flexibly it links power from distant areas where renewable energy is generated to the points of use in cities. And we have a really good example actually of linking large hydro sources in China to the main cities.
There's also an aspect of energy storage and a whole range of technologies around energy storage.
We're also involved pretty heavily in technologies for transportation. This is light rail vehicles, electrification, automation, hybrid-electric vehicles, all-electric vehicles and -- (inaudible) -- transportation systems. And also and very importantly because they're probably the set of technologies that are the most- readily deployed are a set of technologies around the demand side of the energy efficiency, and this is technologies like new lighting technologies or high-efficiency motors and drives for industrial processes, industrial automation, energy-efficient computing and another area that we're very focused on in advanced building controls.
I'd like to just make a couple of comments on the state of technology around the globe. From our opinion, you know, a lot of the industrialized countries like the U.S., Europe, Japan have traditionally led in the development of these technologies. Increasingly, China, India, Brazil and other emerging economies are also investing heavily in R&D as a source of their nation's competitiveness. And a lot of the investments are dedicated today to clean technology.
There are significant variances to the state of readiness and availability of the technology on a global basis. And critical to the conversation on climate change is how we move the technology around the globe. And so it's also, I think, just been pointed out that there's differences in how the technologies will be moved. So the commercially available, off-the-shelf technologies that we take for granted actually here in the United States might not be sufficient where basic infrastructure, skilled labor and on-the-ground operational know-how is lacking in the least-developed countries. So there is a need for adaptation of the technology.
And this becomes even more problematic the higher the level of technologies. So some of the most advanced technologies create some significant barriers to deployment in emerging countries.
We have some experience with the CDM mechanism. We've been working. Our lighting business has done a project in India that I'd like to just share a few of the details with you on. This was a project which we did in conjunction with the German utility RWE. And the idea here was that in rural parts of India, their access to compact fluorescent lighting, CFLs, which are about 80 percent more efficient way of lighting than a standard incandescent bulb is greatly restricted. There's unique requirements in terms of the technology and the robustness of the technology but also the affordability of the technology.
So we conceived this project to actually give a way or at very low cost, equivalent to an incandescent bulb, supply light bulbs in rural India with the corresponding carbon offsets being valued. And under an agreement with RWE, they would take over these offsets at a stipulated price. So not talking about the value of the mechanisms, they're focusing on the process. This process took us over five years to get through an approval process with the verification being kind of the critical thing. We went through two iterations of a methodology in order to get the project off the ground. Now that the methodology exists, it's reusable for other projects of this nature. And we believe that, you know, through the verification methodology that's in here that it's actually replicable and could be used as a model for how to set up processes like this for future agreements.
But the point would be that -- (inaudible) -- significant amount of administrative time and initial investment on our part in order to be able to pull this project together. And it would be helpful to take the learnings that have occurred around CDM projects to dramatically improve the way that we're doing those types of projects.
Probably capital also is very critical. I think, Senator Kerry, you had said earlier, how do we find the next Google? The level of investment that happens in clean-tech technologies is far and away dominated by the private players. And so we believe pretty strongly that we need to facilitate the market in a way that actually attracts an increasing amount of private investment. Much of this private investment actually is done on a global basis in conjunction with local partners. So when we work in a local market, it usually is in an ecosystem of other stakeholders and local workers. And so this private investment actually results in quite a bit larger investment.
By way of example, we're spending about $6 billion annually just on R&D. We're teaming with universities, with government labs, with suppliers. And the projects that we're implementing are actually quite a bit larger than our own investment.
I'd like to point out just one project in this area, again to hit the high-performance building topic. It's already been stated, I think you're all aware, that the building infrastructure in the world generates or is responsible for about 38 percent of the greenhouse gas emissions. There's a significant and the Intergovernmental Panel on Climate Change estimated that 30 percent of that baseline carbon dioxide (from ?) buildings can be mitigated with today's technology. And my team has had an ongoing project, partnered with partners in Switzerland, the University of California at Berkeley, Tsinghua University and several labs in order to be able to develop a concept to dramatically increase the energy efficiency of buildings. The stages that we go through have this right now at a point of commercial proof of principal. And here, multinational public funding for demonstration projects in different parts of the world would really help to move this ball along.
And so part of the technology transfer and the work that we're doing in climate change will require substantial government and multilateral funding in order to be able to have an impact.
Lastly, I wanted to just mention kind of the processes by which this technology transfer happens. So we work at the earliest stages with research institutions like universities. We build those into pilots. It's deployed and transferred. (Inaudible) -- usually pilot and then large-scale deployments. The idea of having a price signal for carbon in the market is actually important for us in order to be able to justify the deployment parts of these projects. That happens through IP protection and the investments that we make. We would like to have a robust environment of IP law on a global basis in order to protect and expand on this investment.
So I guess the conclusion that I'd like to make is that technology transfer related to climate change is kind of a critical aspect. There's a lot of technologies involved. The environmental focus on products, services and technology and our experience in the United States and with the academic community here, we fully believe that America can and does have a technology leadership position. But we're in global competition. There's emerging high-growth economies; they're also focused on the same technology. And spurring on this investment in technology deployment and development is what's going to help to grow new businesses here in the United States.
So again, thank you for the opportunity to share my views. I'd be interested in addressing any of the questions.
SEN. KERRY: Thank you, Mr. Camuti.
MR. HELME: Thank you, Mr. Chairman. It's a pleasure to have a chance to testify before you this morning. I'm Ned Helme. I'm the president of the Center for Clean Air Policy. We're an environmental think tank based here in Washington and in Brussels, and we work extensively in China, Brazil, Mexico, India and California, working with governments to design climate programs. In addition, we bring together several times a year 30 heads of delegation to the UNFCC negotiations for off-the-record discussions about the key issues that are pending in the negotiations, so a good sense of the pulse of where things are.
I want to make four points today. First, I want to talk about the Bali action plan and distinguish that from Kyoto, to make clear to you all that this is a major departure. We're talking about an opportunity now where developing countries are going to take significant action which, of course, wasn't part of Kyoto.
Secondly, I want to build on your point earlier, Mr. Chairman, that developing countries are indeed taking a lot of action already, and it's not just action that is being generated in credits to sell in the CDM market. It's basically action that is done for its own sake on their own as a contribution to the protection of the atmosphere, a very important point.
Thirdly, I want to talk a little bit about the Copenhagen agreement. I think it will have two key parts, one will be targets for the (unexploring ?) countries, a next set of goals, and the other will be an architecture for these developing countries to deal with the common but differentiated language we talked about earlier in this first panel to be sure that there is a process for them to set these mitigation actions and to receive the financing to make that go.
Finally, I want to talk about the role for the U.S. and (explain developed ?) countries. Two key questions: What target do we take? How do we handle the finance that Senator Lugar was talking about earlier?
Okay, let me to right to the point about Bali. This package in Bali has two tracks. It basically says developing countries will take nationally appropriate mitigation actions that will be verifiable, contingent on receiving financial support for technology and for capacity building. That's the quid pro quo. And that financial support is also verifiable. That's the heart of the deal.
In terms of the story on emissions, as you pointed out, Mr. Chairman, China is already very active. The program that you talked about, the 20 percent energy-intensity program that they have under way that they'll reach in 2010, would produce 1.5 billion tons of reductions. To give you a context, that's 20 percent of our national emissions, so a very significant reduction. Couple that with what Mexico and what Brazil are doing, if you look on page six of my testimony, and you can see that those three developing countries are doing as much in reductions by 2010 as the EU would do with its new target for 2020 and as we would under the Lieberman-Warner bill and probably under Waxman-Markey. We haven't seen the final numbers on Waxman-Markey.
But the bottom line is these are unilateral reductions by these countries, not reductions that are being paid for by the CDM. And they're also already of a size comparable to what we're talking about from Europe and from the United States. So it's a very significant program.
And to build on what you all were saying earlier, in China, we're seeing they are the number one investor in renewable last year. They will displace Germany as the highest spender in terms of percentage of GDP on renewables of any country in the world next year, so very significant. On cars, they are 10 years ahead of us. Our new CAF standards are 35 miles to the gallon. They're doing that now. And they last year put in an $8,000-a-vehicle tax on SUVs. Obviously, some advantage to the command and control system. You can move taxes a lot faster than we can. But it certainly tells you how significant this effort is.
Brazil similarly will reduce several hundred million tons of emissions and they reduced deforestation in the last two years. They have the best program in the world today with the satellite monitoring with the entire (forest service ?) of Brazil in a national number which we don't have in the United States for how much is happening in terms of net flows from the carbon and the other agricultural activities in Brazil. And they follow it up. Every two weeks they get a satellite survey. The police are out there arresting people when there's big deforestation. Very effective program.
So there's some real stuff on the ground that often goes missed here in this country when you talk about these issues.
So building on that, this Bali plan is basically saying, we're going to create nationally appropriate mitigation actions, NAMAs, that's the new rhetoric. When you hear people say NAMAs, that's the new acronym, the new lingo of the international negotiations. NAMAs probably take three forms. One is unilateral actions that I was just talking about. The second is conditional actions where I'm the developing country, I'll go further if I see the financing. That's the heart of this Bali negotiation, this Copenhagen negotiation. And then the third piece is this question of, can I set a target, a baseline that if I exceed I (do a program ?) that's strong enough, I exceed that target, I then can generate carbon credits? So no more CDM in the future for a lot of these big countries, more about let's get the whole sector in.
So today, you know, if you have a group plan, if you do good deeds, you get some credits. You get three plants over here polluting out the wazoo, don't even notice that. In this new world of sector agreements Mr. Casey was talking about, you'll be required to look at what happens in the entire sector, all the plants, just like we do in the United States. So very promising in terms of the potential direction.
I'll give you one more example. Mexico -- (inaudible) -- in December announced what this means in real terms. We need some, you know -- delegates talk about these concepts, NAMAs and so on. What does it mean on the ground? Mexico said, all right, we'll make it clear. Four sectors -- cement, steel, oil refining, electricity. We will set intensity targets in every one of those sectors. We will make them more stringent if you send us some money in the form of loans to help us. And if we exceed that, we'll generate credits, and we'll do it through cap and trade. So a very strong program in Mexico. And it gives you a concrete example of what's possible in this negotiation.
Let me hit at the second half of this issue, which is, what about the (nonaffluent ?) countries, what about the developed nations and the targets? I was encouraged by Todd Stern's comments about the U.S. target because, frankly, the U.S. target at 1990 levels is not going to cut it. If we look at the numbers we need in terms of reductions to get to stay on track for 2 degrees Centigrade by 2050 we've got to do better than that because everybody else is watching. As you said, Mr. Chairman, all eyes are on the United States. We had a great -- (inaudible). Everybody was really happy. The president was making speeches in a number of countries, great stuff. I mean, everybody was very excited about it. Now we get to the real game. What is our target, Mr. Corker's questions?
And I think I was also encouraged by Todd Stern's comments that he sees the Waxman target is in the same ballpark as what the administration has been talking about. I see it as very significantly stronger and a much better card to play in the international negotiations because they're talking about a deeper target for the U.S. and, in addition, a significant supplemental reduction by investing in deforestation programs in places like Brazil and Bolivia and Indonesia. And this is new ground. This is an innovative idea that I think really is deserving of a lot of attention.
What they're basically saying is, we'll do our target in the United States, we'll get our reduction and we'll have some offsets, but we'll also take a chunk of allowances, 5 percent of allowances, we'll turn that into cash, and we'll invest that in Brazil and these countries in programs to reduce deforestation. And that will produce additional reductions that are not offsets. This is not about what Mr. Menendez was talking about, I need more offsets. This is about net reduction to protect the atmosphere in addition to the U.S. target. And I think that's the right way to go with forestry. I mean, I heard Mr. Menendez and Mr. Corker saying they felt offsets were a better way to go. Our personal view is this program is not the same thing as putting scrubbers on power plants. This is a social program. This is about convincing (little ?) landowners in the Amazon to not chop down the trees to raise three or four cows.
Basically, we're talking about a social program where we're investing in paying them for environmental services so they stop cutting down the forest. And that's not the same thing as putting ridges on smoke stacks. So that's not something I want in the carbon market to start. I want to be sure that this thing works, that the numbers add up and so on before I put this in the carbon market. And the Waxman-Markey piece puts that out there. It says, we're going to have a separate goal, we're going to put some investment directly in deforestation that's not about offsets that gets us more toward the environmental goal we need.
And it helps us. In the other sense, it helps us in terms of costs. Because you say, well, take Mr. (Menendez's ?) point. Let's make this a tougher U.S. target. Take the U.S. target down another 10 percent and say that much more of this forestry can be scored in the U.S. game. Sounds good if there's grants. But remember, if that program doesn't materialize in Brazil, I've got a 10 percent tougher target on all those U.S. companies, and they've got no place to go to get those reductions. So I don't want to bet the store on setting that tougher target and coming up with those reductions. I'd much rather put the money in Brazil and the countries that know what they're doing, develop the program, prove it works, then we can come back and look at the carbon market in 2020 and say, all right, at this point we'll bring it in.
But I think there's a really important piece here of taking some allowances, putting that revenue on the table, spending it on deforestation programs in these countries and making something happen.
That takes me to the last point which is the finance question. And Mr. Lugar said, you know, the key is, how do we incentivize low- carbon strategies? He's right on the money. That's our number one issue here. And I think, again, there's a real opportunity here to deal with technology. We can again take a chunk of allowances, use that revenue to invest in advanced technologies. And Mr. Shi'a (ph) was here. I think he met with you, Chairman, a few weeks ago from China. He was courteous. He said, look, we're ready to go further. We've done a billion and a half tons -- (inaudible). We'll do more in the next round. We'll do more on renewables. We're committed to renewables, and we don't need your money for that. What we want your money for is we want money for those very expensive technologies we can't do today, those advanced wind technologies, carbon capture and storage. That's what we want the money for. We want help to write down the carbon. We don't want free technology. We want affordable technology, and we want to see it develop.
In the past, we would have said, we'll build that in the United States, 25 years later we'll build it in China and India. We can't afford that. We're building a coal plant a week in China. If we're going to turn this around, we've got to build that technology, that CCS here in Ohio and Indiana and also in China at the same time. We can't afford to wait 25 years to have this work. And I think that's the place to go.
And you know, I think when we talk about financing, I think Todd said it well. He said, you know, these calls for huge amounts of -- (inaudible) -- GDP. I think that's ridiculous. When you get down to the bottom line, Mr. Shi'a (ph) puts it on the table. He's saying, I don't need buckets of money. I need some help with really expensive technology that's very promising that I can't build commercially today in China. That's not big handouts. Mexico's program, they're asking for loans, they're not asking for any grants.
So I think we need to be careful of the rhetoric of the UNFCC and the reality of what we really need here. And I think it's very promising. So I'm very encouraged. I think the administration is off to a great start, and I certainly commend the committee for your leadership in the past on this issue of finance. I mean, you guys are the ones who understand this international game the best. And you can really help, as you know, sell this idea. We're not talking about paying for technologies that improve our competitor's ability to beat us. We're not talking about that. We're talking about carbon capture and storage which makes the plants less efficient but helps us from a carbon perspective.
So we're not talking about putting money in the hands of the steel industry to beat Mr. Casey's companies in Pennsylvania. We're talking about the advanced stuff. So let me stop there. Thank you.
And I'd like to include for the record, I have a paper on financing, which I couldn't cover in my testimony, but I'd like to include that for the record.
SEN. KERRY: It will be included in the record, and we appreciate it very much.
MR. HELME: Thank you.
SEN. KERRY: Let me just say that Senator Lugar had to go to a meeting with some of our friends from South Korea.
And I have a 12 noon meeting I've got to leave for momentarily. So I'm going to leave the gavel in the able hands of Senator Shaheen. But I do want to ask just a few things before I go. And then we'll submit some questions for the record if we can to answer a few more things.
But let me just go back quickly to what you just said, Mr. Helme. Senator Webb's concern, you know, China is sitting on $2 trillion surplus, blah, blah, blah, we're borrowing, they're our banker. Why are we talking about any kind of money with respect to even the high- end technology? I mean, a lot of people are going to have trouble understanding that.
MR. HELME: Well, I think you're talking about technology that's 30 percent more expensive. And it's for that --
SEN. KERRY: (Inaudible) -- no matter how much more expensive it is. I mean, there's a sense -- I mean, I can understand joint venturing.
MR. HELME: That's where I was going.
SEN. KERRY: Okay. Because in my conversations with Shi'a (ph), I think he's more sensitive to this notion, you know, this is not going to work in terms of the balance of payments and other kinds of things.
MR. HELME: Absolutely. I agree with you. I agree with you.
And that's what he's saying. He's saying, I'll pay my share. I'm not saying I won't pay. But this is a tricky, uncertain technology from his perspective. I don't tend to share that view, but I think it's doable.
SEN. KERRY: So they're really looking at where we are more advanced we need to be able to be helpful in order to help them do some of these things.
Mr. Camuti, you talked about the reductions, about the incentives, and I just wanted to follow up with you on that. What, in your judgment, what is the best incentive here for the private investment that you're talking about? I mean, you're doing 6 billion (dollars) in R&D you mentioned. And obviously, a lot of companies are already engaged in that, but you say there's not a sufficient incentive at this point?
MR. CAMUTI: I think with regard to the technologies that we're discussing is there's two aspects. One is predictability of the return, right? So the investments that we make in energy technologies are large investments. And we have to have certainty of a market that extends beyond a year or two. And so from the level of investment that we make and how we need to predict that goes over a 20 or 30-year life cycle of the plant. And you obviously have to build more than one or two of these types of plants in order to be recouping the R&D investment.
So you know, one of the main issues that we have to deal with is predicting which technologies to work on with which intensity, which is driven by our assessment of where the market is. And so, you know, something as simple as that. And we design and develop at the highest level to what the requirements of the market are. And if there's not a price on carbon, that's not put into the calculation. And if there is going to be a price signal on carbon, that needs to be predictable, stable and available over a longer period of time in order for us to recoup the investment that we're making in technology.
SEN. KERRY: That certainly happens under a cap and trade regime.
MR. CAMUTI: That's right.
SEN. KERRY: I know your chairman and chief executive officer have been very involved and engaged, and we're appreciative for his support and help in that endeavor. But do you believe there are sufficient levels of private capital now moving into this sector?
MR. CAMUTI: As we look at it, there's a lot of early-stage capital. And there's been a boom prior to kind of the current economic circumstances in early-stage technology under the hope actually that the market is going to develop for those. The big challenge that we have with energy-related technology, and I think it gets lost in some of the conversation, is the scale with which you have to do pilot plants. It's not like the Internet where a couple of people and a computer can do the first proof of concept. To capture the amount of carbon that would come out of an average size coal-fired power plant is a very large investment to start.
And so the order of magnitudes that you have to have, a market of that --
SEN. KERRY: Well, I agree with that.
MR. CAMUTI: -- is totally different. And so there is private investment at the early stages of technology, but we still have a gap in how you're going to field the technologies and then improve the technologies over their lifetime.
SEN. KERRY: Former Senator Stevens and I actually through the Commerce Committee introduced legislation to create some immediate demonstration projects at commercial scale in sequestration and (10 ?) in capture so that we could allow the marketplace to go out and rapidly decide what's the best technology, what works and what doesn't work. And we should be doing it. I'm not sure. I think under the stimulus package we actually have some money, if I recall correctly.
MR. : Only $3 billion, I think.
SEN. KERRY: Right, that's directed towards that. So the key is to get it out there as fast as we can, needless to say.
Dr. Gayle, thank you for the extraordinary work that CARE does and for caring about these issues from the perspective that you do. A lot of countries are supporting a centralized fund under the -- (inaudible) -- convention. Do you think that's the best, most effective mechanism for channeling these funds? Or is there some other existing entity? Or should it be divided up? What's your approach to it?
MS. GAYLE: (Off mike.) Thank you. And this is obviously a complicated and somewhat contentious issue -- (inaudible) -- to make sure that there are funds available for adaption. Yet we think that some sort of adaptation fund could be incredibly useful. But I think there are also other mechanisms, other innovations, taxes that people have proposed, kind of similar to the kind of airplane tax that is now raising resources for AIDS and other diseases. And so I think there is a lot of taxes on use of maritime space, et cetera. So I think there are a variety of different ways, and it really is going to most likely be some combination of that.
But it is going to take the kinds of resources that, you know, are in the billions of dollars, probably tens of billions of dollars, if we want to make sure that we prevent as opposed to having to clean up even more later on. But I think the adaptation fund is a good central idea along with some of the other innovations.
Just one other comment I want to make to make sure that this committee is not left with what could be interpreted from Mr. Helme's comments. I'm sure it wasn't meant intentionally. But it isn't because of poor people intentionally cutting down forests that a lot of the deforestation is occurring. In fact, it's often large logging companies that come in, that use poor communities who have no other livelihood. So it's not the people in the communities themselves. I just want to make that point that oftentimes it's large companies that come in that lead to that kind of impact. I'm sure that you weren't putting it on the back of poor people, but I just wanted to make that --
MR. HELME: No, but I would say that in terms of deforestation in Brazil, the vast majority is for small-scale ranching and agriculture rather than big lumber companies. And in Indonesia, you're absolutely right.
SEN. KERRY: Well, thank you very much. I appreciate it. I regret that I'm not able to go into a little greater depth with you, but we're going to submit some questions.
Senator Shaheen, if you could conclude this, I'd appreciate it very much. Thank you very much for being with us.
SEN. SHAHEEN: Well, thank you, Mr. Chairman. I would now like to ask Ms. Gayle if she would be willing to go ahead and give her testimony.
MS. GAYLE: Actually, in the brief moment that you were --
SEN. SHAHEEN: I see.
MS. GAYLE: I'm not going to do it again but -- (laughs) --
SEN. SHAHEEN: No, no, thank you.
MS. GAYLE: -- but we have submitted a full written statement. And I just did a brief summary of that and stated our three primary recommendations. So thank you.
SEN. SHAHEEN: Good. Well, I actually don't have any questions because I have another commitment as well. But would just like to thank all of you for taking the time to be here and appreciate that as this debate continues toward legislation that we will continue to call on you for your expertise.
Thank you, all, very much. And thank you for being here, everyone.