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Energy and Innovation

Ambassador William R. Timken, Jr.
Leipzig, February 5, 2007


As prepared for delivery.

Thank you very much for the invitation to join you this evening.

I would like to take this opportunity to talk to you about a subject that is front and center in the public mind. Recent concerns about the security and cost of energy supplies have converged with the ongoing discussions over the environmental impact of climate change. There is increased awareness about the linkages between energy consumption, the environment and the economy. As a result, debates about the long-term direction of energy policy have changed in both tone and content. The debate is serious and informed, but despite renewed interest and awareness, but the discussion that occurs is still often politically charged.

Too often, people in Germany and the rest of Europe focus on what they perceive the United States is doing wrong on energy and environmental protection. Well, tonight I would like to talk about what we are doing right.

First, I would like to emphasize that the United States takes seriously the challenges posed by climate change. The report of the Intergovernmental Panel on Climate Change has reminded us of the need for concerted action. While we may differ in our assessments as to the best ways to meet these challenges, we are committed -- as are you -- to addressing the issues posed by climate change. Indeed, the United States has a comprehensive set of policies and programs in place to accomplish this. And these policies and programs are not entirely new. As early as 2002, President Bush set an ambitious goal of reducing the greenhouse gas intensity of the U.S. economy by 18 percent by the year 2012. Our legislative and regulatory measures include new requirements for vehicle fuel economy standards, development of alternative and renewable fuel sources and environmentally-friendly building codes. Our aim is to slow the growth of emissions significantly, then to stop it, and finally to reverse it.

And there are clear indications that our policies are having a positive effect. According to the latest U.N. data, between 2000-04, America's rate of growth in CO2 emissions was eight percentage points lower than for the period of 1995-2000. By comparison, the EU-15 saw an increase of 2.3 points. What's more, the U.S. economy expanded 38% faster than the EU-15 in 2000-04, and our population has grown twice as fast.

A few more statistics: Since 1970, the United States of America cut air pollution levels in half. During the same period, overall energy use rose 31 percent -- but U.S. GDP also rose – and by a whopping 140 percent. At the same time our population increased by almost 50%. It’s clear that our rate of improvement of reducing air pollution and greenhouse gas emissions is accelerating. Why? Because of advances in technology and capital investment structures. We have learned that every one percentage point gain in improved energy efficiency – whether as a result of new technology or updated plants – means two to three percent less CO2 per kilowatt hour. These improvements can play an important part in reducing greenhouse gas emissions.

So, the trend lines are reversing. These facts unfortunately often get lost in the debate over climate change.

The key to success in the United States in reducing carbon emissions has been in unleashing the private sector, not capping it. Government cannot replicate the wisdom of markets. The U.S. strategy has been to keep economic growth strong and provide incentives for private industry to develop cleaner technologies. This approach combines a variety of mandatory, voluntary and incentive-based efforts to stimulate specific areas of the energy sector. In the U.S. we’ve always opposed a one-size fits all approach to energy and environmental policy. By using a variety of targets and incentives we have been able to encourage key technological developments while protecting economic growth.

For example, the U.S. government has committed to over $29 billion in climate-related activities since 2001. Some of this amount has gone to tax incentives; some to seed money for private sector investment; and some to support important scientific research. We have developed specific incentives for the development of new technologies such as biofuels, fuel cells, and clean coal while also imposing standards that encourage energy efficiency in construction and transportation. Clean, safe nuclear energy – which is CO2 free, is also another essential element of a realistic global greenhouse gas reduction strategy. Research is being done on this as well.

There are technologies on the verge of major breakthroughs that will provide cleaner, more efficient energy, but will also require significant and sustained investments. There are new sources of energy and production methods on the horizon.. All of these advances will be revealed through the scientific research that is taking place in government laboratories, at universities, and in corporate labs around the world.

There’s more good news. There is international agreement on this strategy. We have come a long way from the days of seeing environmental protection and economic growth as being mutually exclusive.

Both President Bush and Chancellor Merkel agree that the bottom line in any energy debate is the need to diversify our energy supplies in a cost-effective, environmentally responsible manner. Energy is an ingredient for growth and job creation. It is a global problem that demands a global solution. The demand for energy is only going to grow. That’s a good thing because demand fuels economic growth. We must grow the pie of what’s available. We must expand the availability of and access to clean, affordable, diverse sources of energy around the world. The market demands alternatives to oil. We must actively move toward developing and deploying alternatives to diversify our global energy supply. The private sector has a major role to play here. Companies are realizing that they can make money in the alternative energy business. But governments can play an important role in facilitating a quick and aggressive transition to alternatives.

There is a strong link between robust economic growth and a secure, reliable, diverse, and affordable energy supply to support myriad high-tech industries and the needs of citizens. We’re on the same page here. It’s time, as the President said, to put the “old, stale debates of the past” on energy and climate change behind us. We share the same goals of working together to solve both issues.

This was one of the issues that President Bush and Chancellor Merkel discussed at their meeting in Washington at the beginning of January, the Chancellor’s first international meeting as incoming president of the EU and G-8. I have attended all the meetings to date between the President and the Chancellor. This one was the best one yet. The discussion was open and free-wheeling. I am very optimistic about the potential of the dual German presidencies to foster serious discussion about strategies to advance new technologies to promote energy efficiency and environmental protection.

Chancellor Merkel has repeatedly drawn strong links between the need for environmental protection and economic growth. She sees innovation in clean energy technologies as a vehicle for job creation in Germany.

It’s paying off. You can see it here in the eastern part of Germany. In Saxony more than 4,700 people work in the sector of renewable energy. Overall the renewable energy sector in the state is growing by 10 percent every year. The state of Thuringia gets 11.5 percent of its energy from regenerative sources, way above the German average of 4.6 percent. Of the regenerative energy in Thuringia, 85 percent is produced from biomass. Seventy percent of biodiesel in Germany is produced in Saxony-Anhalt. The Total refinery in Leuna plans to invest 50 million Euro in the next two next years. With 700,000 tons, the Leuna facility is already the biggest methanol producer in Germany.

There are also some good examples of transatlantic private sector partnership and investment in the energy field. In Saxony–Anhalt, EverQ, a joint venture including the German Q-Cells company and U.S. Evergreen Solar, employs 360 employees at two factories. In Brandenburg, FirstSolar plans to invest 115 million euros in 2007, creating 400 jobs in the process.

Germany and the U.S. have a lot in common in what we’ve already done to advance solar, wind and biomass energy and promote the development of clean energy technologies. It’s an area where the both our governments uses subsidies and tax incentives to promote investment. But we need to use a broad combination of new technologies and efficiency measures to maximize our energy security and greenhouse gas reductions.

An integrated approach to increasing energy independence, combating climate change, cutting pollution, promoting sustainable economic growth and alleviating poverty has been the focus of President Bush’s energy agenda from the beginning of his first term. That commitment has only increased. In the United States, we're going full-steam ahead with new technologies that will change the way we drive our cars and power our homes and light our streets.

In the State of the Union Address a few weeks ago, the President outlined a road map for increasing American energy independence and decreasing CO2 emissions. The idea is that by solving the problem of energy security we also target environmental challenges. Technologies that increase energy security, such as carbon capture and storage, fuel cells and biofuels also cut down on CO2 emissions and reduce the threat of global warming.

The President’s strategy calls for decreasing American’s gasoline use by 20% over the next ten years. This will be done by increasing the amount of biofuels mix in gasoline throughout the U.S. while also increasing fuel efficiency standards for automobiles.

Today, the major use of petroleum products is for transportation. In the United States, 68.4 percent of oil consumed is consumed by the transportation sector, mainly cars and trucks. Globally, demand for transportation services is the key driver for oil demand. Four million new cars being sold in China will generate a lot more demand for petroleum products. By promoting the use of cleaner biofuels, we have an opportunity to shape the future of transportation fleets in growing economies such as China and India.

It is very clear that in the 21st century, energy is essential to people in both developed and developing countries. It is necessary for economic progress and vital to maintaining and raising living standards. The global demand for energy is rising rapidly -- and will continue to do so.

One of the best opportunities for the U.S., Germany, and the rest of Europe to lead in this area is through investment in clean energy. Investment is key to developing new technologies. The private sector in both the U.S. and Europe has long been the most dynamic sector for investment and innovation. By mobilizing venture capital on both sides of the Atlantic to work together to develop the best new technologies to promote energy security and protect the environment, we can lead the way to a brighter future for the entire world. That is why the U.S. is working with the European Union to increase this type of cooperation between our businesses so that we can combine the best traditions of American and European research and investment to develop the next generation of clean energy technologies. Promoting new energy technologies provides potential for economic growth and international cooperation and market leadership.

The strongest growth is expected in Asia’s booming economies – in China and India – with growth projected to triple in that region over the next 25 years. This reality makes it more important than ever that the developed countries of the world, such as the U.S. and Germany, work together on new environmental technologies to ensure that developing economies have access to cleanest, most efficient technologies possible.

China is going to exceed U.S. greenhouse gas emissions is 2009. In China, they are building new coal plants at a rate of one per week. And these are not the state of the art, highly efficient plants you see in more developed economies. Instead, due to lack of specific government targets and focus on short-term costs, they often utilize out-dated, dirty technology. This is going to be a serious problem for global greenhouse gas emissions levels in a couple of years that industrialized countries won’t be able to negate – Kyoto commitments or no Kyoto commitments. We need to work together to take on the challenge of engaging new industrial powerhouses like China and India in the global debate on climate change and we need to do it together.

There is good news here as well. The Bush Administration has initiated $1 billion in tax credits for nine new coal-fired power plants that will double efficiency and reduce pollution compared with older generations. China is picking up on these tactics. This year it bought $58 million in machines from Caterpillar Inc. that trap methane in coal mines and use it to power electric generators. I would like to see German and American companies, engineers, and scientists working together as partners in meeting our common energy and environmental challenges.

Let me conclude here. There are numerous programs and initiatives I could describe at this point but I think we all know the answers to the energy challenges of the 21st century are complex. The bottom line, however, is this: If we work together, if we promote the very type of understanding and collaboration that the transatlantic partnership excels at, we can expand our world’s energy supply in a way that is cleaner, more diverse, more secure, and more affordable to all people of all nations.


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Updated: June 2007