Robert v.d. Luft
Chairman, Entergy Corporation

September 13, 1999

I am delighted to be here with so many people who are responding to the challenge of global climate change. I believe that the United States must unleash the power of our companies to meet that challenge. And the most important step we can take to unleash that power is to establish credit for early action.

Increasing concentrations of carbon dioxide and other greenhouse gases in the atmosphere pose a risk to the world's climate a risk we can't simply dismiss. We need to take action now to reduce greenhouse gases in the atmosphere. But U.S. companies cannot put forth their best efforts until our government gives clear direction. In the absence of action to regulate and limit greenhouse gas emissions, Congress can provide the necessary direction with a credit for early action.

Most of us here are familiar with the forecasts of global climate change. The forecast that best represents dominant scientific thinking is this: if emissions of greenhouse gases continue to increase as projected, and if this growth is somehow controlled to level off at a doubling of CO2 levels in the atmosphere, we will likely see a rise in global temperatures of between 1 degree and 3.5 degrees centigrade within the next century. Such an increase is expected to severely stress the planet and is likely to have substantial adverse effects on our environment and economies.

Global warming could have serious consequences for future generations. We should not leave a legacy of inaction and growing greenhouse gas emissions to our children and grandchildren. The Kyoto protocol is a starting point for reducing the risk of global climate change. But the United States is unlikely to enact national limits on greenhouse gas emissions to meet the Kyoto targets not anytime soon. So what can we do now? The most important step we can take as a nation is to establish credit for early action.

Credit for early action would recognize companies that take voluntary steps to control greenhouse gas emissions. The program would require Congressional authorization, and credit would be given only if and when the U.S. adopts binding climate change rules. Companies would receive credits for reducing emissions, for reducing the rate of emissions, and for offsetting emissions. Obviously, there are a number of issues to be worked out. This conference will address those issues. I think we will show that it's possible to create a simple, fair, effective system of early credits, and that this is something our nation can and should do now.

Let me suggest three reasons for enacting credit for early action: to encourage continued voluntary efforts on global climate change, to establish the principle and structure of emission credits for greenhouse gases, and to facilitate international cooperation. First, a credit for early action is essential to encourage continued voluntary efforts.

In 1992, President Bush signed the United Nations Framework Convention on Climate Change, and Congress ratified that treaty. To meet our obligations, the United States developed a national action plan, to reduce greenhouse gas emissions to 1990 levels by the year 2000. Of the fifty-plus programs included in the plan, the overwhelming majority was strictly voluntary. The White House called on the executives of major companies to take voluntary actions to reduce emissions, and many responded. These actions need to be recognized and rewarded, or future calls to action likely will be ignored.

I'll use my own company as an example of voluntary action. But many other companies -- including many represented here today -- have made great efforts to address global climate change.

Entergy operates power plants generating nearly 30,000 megawatts of electricity. We also deliver electricity to two and a half million customers. Entergy's fleet of generating plants already has one of the lowest CO2 emissions rates in the country. If the U.S. Electric generating industry achieved an emission rate as low as Entergy's, the utility sector would achieve the Kyoto reduction target.

Nevertheless, Entergy became active in the U.S. government's Climate Challenge program. In February 1995, we pledged to undertake more than three dozen voluntary projects during the 1990s. Since 1995, these efforts have eliminated nearly 20 million tons of greenhouse gas emissions. We're committed to achieving reductions of more than 27 million tons of CO2 through the year 2000. We're increasing the capacity and availability of our nuclear plants, which produce no greenhouse gas emissions. We're also improving the efficiency of our fossil plants and our transmission and distribution systems, to produce and deliver more electricity with fewer emissions. In the U.K., Entergy is developing a power plant with ultra-efficient combined cycle gas turbine technology. Its CO2 emissions will be 60 percent less than those of a conventional coal-burning plant.

We've also made a commitment to global carbon sequestration efforts. In the past five years, we've planted more than two and a half million trees on 20,000 acres of company land in the south. Entergy is one of 55 electric utilities participating in the utility forest carbon management program, which achieves carbon sequestration through a variety of forest enhancement projects.

We're willing to make investments and develop new technologies to reduce the impact of greenhouse gases. But companies like ours need assurance that we will not be penalized for reducing emissions before we're required to do so -- an issue I'll return to in a moment.

Let me turn now to the second point. Credit for early action can be a step toward developing a robust system of emission credits to reduce greenhouse gases in the atmosphere.

A program of allocating and trading emission credits can promote cost-effective reductions in greenhouse gas emissions. Such a program should be structured to encourage energy efficiency, reliance on clean energy sources, and continuous improvement in environmental performance.

An early reduction program would allow a market in greenhouse gas emission credits to develop. Currently, there is no reliable means for a company to estimate the long-term economic benefits of reducing greenhouse gas emissions. If companies are awarded credits for reducing emissions, and are allowed to sell the credits to other companies, the market will send these critical price signals.

An early reduction credit program is also a key element of any such system. It's absolutely essential to give credit for voluntary, good faith actions taken in advance of mandates. Otherwise, companies that have already made the most cost- effective reductions would be at a competitive disadvantage to competitors who have done nothing, while waiting for the federal government to order further reductions.

That's what happened with sulfur dioxide allowances in the acid rain program of the 1990 Clean Air Act amendments. While that program demonstrated the value of a trading mechanism to reduce emissions, it was flawed. The higher a company's historic emissions, the greater the share of the limited allowances the company received. Although some accommodation was made for companies with lower emissions, the basic message was: no early good deed goes unpunished. Giving credit for reducing emissions now would eliminate the risk of being penalized for doing the right thing early.

A third advantage of credit for early action is that it can encourage U.S. companies to promote emission reductions in developing countries. Entergy supports the United States' efforts to improve the Kyoto Protocol by encouraging broader participation by key developing nations. As part of a system of emission credits, we support international trading of those credits. This will encourage going after the most cost-effective opportunities, no matter where in the world they are.

We should encourage technology transfers to developing countries by awarding emission credits. Entergy is currently involved in transferring environmental technology at a power plant in Bulgaria. This Russian-designed lignite coal power plant was commissioned 20 years ago without emissions control equipment. Entergy, in cooperation with the Bulgarian national electric company, NEK, is modernizing the plant and improving its efficiency, which will reduce CO2 emissions by 13 percent.

We should promote similar technology transfers to reduce greenhouse gas emissions. The best way to do that is to award tradable credits for such transfers.

So far, I've talked about the importance of credit for early action in our nation's near-term approach to global climate change. Let me briefly mention one other point that should be a key element of our national policy. And that is to maintain nuclear energy as a significant element in meeting our nation's energy needs.

Today, over 100 nuclear units provide approximately 20 percent of the nation's electricity with no emission of greenhouse gases or other air pollutants. If we replaced that nuclear capacity with fossil-fired generation, the increase in greenhouse gas emissions would exceed 150 million metric tons of carbon annually. Coincidentally, 150 million metric tons is about how much the U.S. needs to reduce emissions just to get back to 1990 levels. So eliminating nuclear power would essentially double our current obligations.

Today, a number of nuclear plants are nearing the end of their licensed operating lives. Some uneconomic or otherwise troubled plants have been shut down. But many others can continue to produce electricity safely, efficiently, and without greenhouse gas emissions. Some already have applied for license extensions. I believe that a streamlined and cost-effective licensing process will encourage companies to keep productive plants on-line. Preserving the nuclear option is a key to stabilizing growth in emissions without derailing our economy.

As our nation struggles with the challenge of global climate change, I believe we can learn from our experience with another environmental challenge, the ozone depletion issue. In 1974, scientists first hypothesized

• that chlorofluorocarbons, or CFCs, could release chlorine into the stratosphere,
• that this chlorine could reduce the concentration of ozone in the stratosphere,
• that this would allow more ultraviolet light to reach the earth, and
• that this could have adverse effect such as increases in skin cancer.

In the decade after that hypothesis was first advanced, we can see many parallels to the current debate on global climate change:

• we were presented with a scientific hypothesis about the impact of man-made emissions on our planet, a hypothesis that was difficult to prove with certainty.
• scientists around the world came to a reasonable level of agreement about the nature of the threat. But significant uncertainty remained as to the ultimate outcomes.
• new technologies were needed, but known alternatives were not yet economically available -- at least on a commercial scale.
• the developed world was responsible for the majority of historical emissions, but the developing world's emissions were growing rapidly, and global action was necessary.
• and finally, because the gases survive a long time in the atmosphere, any delay in the response made the problem worse and the challenge more difficult.

As a senior executive of a company that produced CFCs, I was directly involved in this issue. As you know, our nation and others around the world have taken effective action against ozone depletion. The U.S. Congress authorized a ban on the use of CFCs in aerosols in 1977. And the adoption of the Montreal Protocol has led to real progress in reducing CFC concentrations in the stratosphere.

I know that this climate change issue is far more complex than the CFC issue, because the world's economies are so dependent on burning fossil fuel. Still, I believe that scientific, economic, and political forces are moving clearly in the direction of global action.

The problem is this: as we move toward a solution, populations and economies continue to grow. And we must continue to make investments in power production, transportation, and manufacturing capacity to serve this growth. Unless we use new technologies in these investments, emissions of greenhouse gases will continue to grow as predicted. It will be far more costly to undo that investment than to develop new approaches today.

We all know that our nation is engaged in a sharp debate about climate change. There is a deep split between those for and against stringent reductions in greenhouse gas emissions. Some members of Congress oppose any action that could be seen as back-door implementation of the Kyoto Protocol. Their view is that such action would hurt the domestic economy and undercut our global competitiveness. Contrary to this view, I believe that Congressional passage of some form of credit for early action would simply remove existing barriers to innovation. Its success does not depend on implementing the Kyoto Protocol, but on encouraging economical approaches to greenhouse gas emissions. I expect that this conference will help us accomplish this goal.