In the absence of a global climate policy, what steps can the energy sector take to slow the pace of rising global temperatures? During today's E&ETV Event Coverage, the Carnegie Endowment for International Peace hosts a discussion about the International Energy Agency's (IEA) latest report focused on redrawing the energy-climate map. Panelists include Fatih Birol, chief economist of the IEA; Daniel Poneman, deputy secretary of energy at the Department of Energy; Andrew Steer, president of the World Resources Institute; and Polly Trottenberg, undersecretary for policy at the Department of Transportation. The discussion is moderated by David Burwell, director of the Energy and Climate Program at CEIP.
David Burwell: I'd like to make a special thank you to the International Energy Agency itself, and particularly its chief economist, Dr. Fatih Birol, who is going to make the presentation today. IEA was created in 1973 or 1974, right after the oil embargo, and its mission was to help mainly the energy consuming nations, oil consuming nations of the OECD, to collectively address oil supply issues, particularly with the creation of strategic petroleum reserves. It also had other missions, like identifying issues relating to energy security, energy supply, collection of information, energy information, and making energy more transparent.
Nothing in its initial mission statement mentioned the word climate. However, over the last two decades the IEA has become the world's leading authority on documenting and advertising with increasing urgency the changes required in global strategy to align energy policy with climate security, particularly the goal of holding planetary global warming within no more than two degrees Celsius. This report, its latest in this effort, is directly in pursuit of that mission.
And we don't need to go any more than the morning papers to see how important this issue is. This week, we, the newspapers, we read about temperatures in Alaska reaching in the upper nineties. It was flippantly reported in the newspapers as baked Alaska, to demonstrate the truth of this message. And then last week, it was about breaching the 400 parts per million atmospheric density of carbon dioxide for the first time. So the message is clear. There is no place to hide from climate change.
In the context of the news, the news that IEA brings today is a positive one. As the science of climate change becomes increasingly incontrovertible and alarming, the debate in Congress has actually shifted slightly from one of ideology to one of practicality. One side says that our climate is out of control and we can't afford to wait to do something about it. The other side says our budget is out of control and we can't afford to do anything about it.
So it's a question of actually what can we do. In this debate, IEA brings some positive news. There are four things that we can do to buy us time at no cost to our economy. It is a message worth listening to.
So we have a very distinguished panel today, and, to lead this discussion on this new report. However, our first speaker, Deputy Secretary Daniel Poneman from the Department of Energy, has to leave early, and so we will delay the introductions of the panel until Deputy Secretary Poneman has made his remarks.
I would, I am pleased to introduce Mr. Poneman. We have invited him to address this issue precisely today, how to align U.S. energy policy with the rapidly emerging imperative of climate security. Mr. Poneman is a lawyer by training, and he has dedicated his life to public service. He has had White House assignments at the National Security Council. He has also been a member of a commission charged with combatting the spread of weapons of mass destruction.
Since 2009, he has served as Deputy Secretary of the Department of Energy, and its chief operating officer. And actually, a short time was the acting secretary between Secretary Chu and Secretary Moniz. So welcome, Mr. Poneman.
Daniel Poneman: Thank you, David. It's always a pleasure to come here to Carnegie, and I think we've had a couple of good rollouts of the World Energy Outlook. It's always a pleasure to come and hear Fatih Birol's latest thinking and efforts. He is a, not only a deep and insightful analyst, but a prodigious author and workhorse. And as David was giving his opening remarks, it did remind, some of us, a few of us in the room, by judging the gray hairs around here, can remember those earliest days when we didn't have the mechanisms that the IEA provides us in terms of emergency response. And I don't think anybody could really have anticipated at that point that the IEA would in time become not just a mechanism for emergency response, but really a thought leader, really a place where people come together, where honest data is exchanged, and where that data gives rise to very deep and insightful analyses.
And I think each of us look forward each year to the reports that come out, not only the annual reports, but the special reports, which I think have also become a really important area of discussion. I know many of us had an opportunity to study the Iraq report that Fatih and his team did last year, so it's always a very important moment, and I'm very happy to join you here and talk about it, precisely because this is really the issue of our era. This is the issue of our generation.
The president has been very clear that tackling climate change and enhancing energy security will be among the very top priorities that he will be addressing in his second term, but already in the first term, the President and his administration have taken historic action to confront climate change, including proposing the first national standard for curbing carbon pollution from new power plants, as well as establishing unprecedented standards for cars and trucks that will slash emissions of carbon pollution while at the same time saving consumers billions of dollars at the pump.
As the report notes, U.S. emissions for 2012 are down to levels not seen since the 1990s. The United States has also more than doubled the power that we obtain from renewable sources in the last four years. The president has continually addressed this issue, and in his inaugural address, he noted that failure to continue to confront this would betray our children and future generations.
Just this week, during his trip to Berlin, the president reiterated his commitment to build on that progress, noting that we know that we have to do more, and we will do more.
Dr. Birol has been consistent in warning about the threat of climate change. We always wait for how many years we've got left to turn the corner in these reports that he publishes, and not surprisingly, the report that we're talking about here today addresses the critical, salient issues that need to be addressed, and it's very much in synch with many of our own efforts to get our arms around this problem.
It's an impressive report. I've not had a chance to read the whole report yet, but I've had a chance to review the highlights. And I think each of the areas of discussion in the report is worthy of our study and our reflection, and let me talk about a bit about each of them.
When it comes to energy efficiency, we heartily agree that energy efficiency measures are the most important and most achievable measures that we can undertake in the short term. Many of these are not just cost effective, but also provide net positive benefits for consumers and for business. We have a major focus on energy efficiency at the Department of Energy, as the report notes. The United States recently announced our goal to double energy productivity by 2030, and the Department of Energy will play a very important role in trying to make that happen. We've already set efficiency standards on a wide range of products, and we are working to expand that list.
On the international front, a key initiative in the Clean Energy Ministerial that we have been carrying out these last four years has been focused on the area of equipment efficiency. The initiative that we have there, the Super-Efficient Appliance Deployment Initiative, has just launched a competition to identify the world's most efficient motors. This will help spur the adoption of more efficient models around the world.
Another Clean Energy Ministerial initiative is focused on building industrial efficiency, and we have seen that energy management systems and cool roof technologies can pay for themselves in a reasonable timeframe.
Now when it comes to scaling back the emissions from coal fired plants, a second area that the report addresses, it's clear that we need breakthroughs so that coal fired plants can be a clean part of our energy mix. That's why the Department of Energy has invested on the order of $6 billion in clean coal technologies, particularly in carbon capture, utilization, and storage, helping to ensure that fossil energy is cleaner, safer, and more sustainable.
In the United States, carbon capture, utilization, and storage is now operational at industrial sites. These sites are demonstrating the potential and providing crucial experience for scaling up carbon capture and sequestration. Other power plant projects are underway. We need to build on the success and continue to accelerate this vital technology.
We also agree that there are real opportunities to reduce methane emissions. Natural gas producers are starting to employ what we call green completions, which capture the methane rather than releasing it into the atmosphere. This technology quickly pays for itself, and is expected to become standard practice over the next few years.
Through our Natural Gas Star Program, we're also working with the oil and gas industry, both in the United States and abroad, to reduce methane emissions. And individual states are setting their own standards for reducing methane emissions as they develop the gas reserves that are themselves contributing to reduced U.S. emissions.
And finally, we agree with the report's findings on the need for fossil fuel subsidy reform. We would argue that it's also important to address production as well as consumption subsidies. The President has continued to push for an end to production subsidies here in the United States, and for an end to subsidies through the G20 process.
We appreciate that the proposals presented in this report are holistic in nature and take into account economic impacts. Economic growth, I think it's very clear, and I think it's very important for all of us to remember, is now negatively affected in the long term by these kinds of investments. To the contrary, we believe that these investments are important, and in fact, a pivotal element of a long-term positive growth strategy.
As the report notes, government policy is critical to tackling climate change, but it's also critical to have the involvement and the participation and the thought leadership of the private sector. There are some exciting developments already taking place, of course, in the private sector, particularly in the area of renewables and natural gas, as well as in the area of energy efficiency. I've had an opportunity to visit a number of these facilities around the country in the last few years. I've been to a factory in Newton, Iowa, that was a Maytag factory that was shut down, and many people lost their jobs, and now if you go there, you will find them making 54 inch wind turbine blades, and people are very excited about the role that they've been able to play. And if I may say, the extension of the Production Tax Credit has been very, very important to keeping that momentum going forward.
I had the opportunity to go to Smyrna, Tennessee, and cut the ribbon on a battery factory that was supporting the manufacture of batteries for the Nissan Leaf, which was another one of the programs that we have supported. All around the country you see economic activity, you see jobs, you see growth. And this is something that we want to build on, and we need to incorporate the conversations that we have with the private sector.
And if I may say, the thought leadership from people like Andrew Steer and others in the NGO committee is absolutely pivotal as well. It's a national conversation. Indeed, it's a global conversation. And I think everybody has a very important perspective, a very important voice. All need to be heard. All need to be taken into account.
But it's also clear that we can do more, and that we must do more. The President has therefore called for a further doubling of power we will obtain from renewable resources by 2020, having already doubled it since 2008, and he's announced a new goal to double American efficiency by 2030. To help reach that goal, the administration is launching a new energy efficiency race to the top challenge under which the federal government will partner with states that want to cut energy waste to improve our economic competitiveness and to create new jobs, and here again, I think it's very important to recognize that the problems are global in nature, and that we have to address them at all levels. It is not just a federal question. We are going to be working ever more closely with states, with localities, with municipalities.
I was recently in Portland, Oregon, looking at what they are doing with energy service performance contracts, trying to perform an integrating function among those people who've got clean energy technologies but who need financial means to make it available, and consumers who may not have the knowledge necessarily in all cases on how to tap it. So the intermediation role that government can serve as a convener, that help bring the various assets together with the people who need them, I think is also going to continue to be terribly important.
We also have got to reduce the capital requirements for these investments. When it comes to something like renewable energy from wind or solar, you don't have the classic commodity price risk, and the burdens that people have dealt with for years in purchasing oil and gas, but you do have high capital costs. We've got to drive down those capital costs and get money available both in equity markets and in debt markets that can help underwrite these investments.
It's already happening. We've seen some of it happen through our own loan program guarantee program. Again, out in Oregon, Shepherds Flat, the largest wind farm I believe in the world. I've been out to Sempra Mesquite in Arizona, where you sit there and see 900 megawatts of panels literally soaking up the sun. No moving parts, and quietly pumping electricity to California, where it is needed by the consumers there.
These programs have demonstrated that you can get large-scale renewable-based energy programs, and you can have a business model that is supported by a power purchasing agreement for 20, 25 years. And when you've got that kind of predictable cash flow coming in, there's no reason why the creativity of our capital markets cannot be tapped to find ways to lower the cost of borrowing, lower the cost of equity to support those kinds of investments.
It's very important to recognize, as the report succinctly points out, that the energy sector is obviously deeply affected by the physical impacts of climate change. Even limiting warming to two degrees Centigrade will not eliminate the new to address this vulnerability, given the impacts that we are already experiencing from extreme weather events. And I think all of us really went to school on Superstorm Sandy, where that which was known by specialists became clear to everybody, which is that there is a deep intertwining of our fuels sector and our electric power sector. And I see some of the people who are participating in that effort, as we are working with government, with industry, with our colleagues in the administration. The President himself has been deeply involved in this.
And let me just make one final point here, because I think it's terribly important. Many of the kinds of investments, many of the kinds of efforts that we need to continue to make to modernize our grid, we have a grid that is still, if I may say, sclerotic. When you look back 50 years at automotive technology compared to what we've got today, it's a breathtaking improvement. If you look at what's happening in IT technology, it's a breathtaking improvement. If you look at almost every sector in technology, there is incredible progress, and yet in many aspects, the old model of the pole with a can transformer on top still characterizes America's grid, and you are still in a situation in my own neighborhood where I have to call up the power provider to tell him I don't have lights on in my house.
Now surely we can do better than that, and surely we must do better than that. But what I want to say here is the recognition is in doing so, in getting a grid that's got more long distance, high power transmission, that's got self-healing aspects, you are not only creating an opportunity for better and more efficient integration of renewable source of energy, which has a tremendous benefit in terms of advancing our climate agenda, not only are you giving consumers greater choice through smart metering, which also allows a more supple use of the grid, and the anticipation of the possibility of, for example, integrating electric vehicles into the grid, not only as sources of demand to draw down from the grid, but also as a large-scale storage capacity that can feed into the grid and help even out the load factors.
All of that makes all kinds of sense in energy efficiency and climate improvement terms, but also, it provides for resiliency against the effects of climate, because with that kind of a more supple and self-aware grid, with phasers, measurement units deployed much more widely, and other sensory enhancements, you are going to be much more able to avoid the kind of devastating effects that we've suffered from storms in years past.
If you look at the tick-tock of what happened in the big blackout of 2003, there's no reason why the technology that we have developed cannot be deployed in a way that makes Americans who find themselves in keen distress when these storms hit in a better situation.
And the final factor in terms of why it makes so much sense to do that grid modernization is as we go increasingly to an IT-dominated society, including in terms of the dispatch of power and the control of our grid, we have tremendous cyber vulnerabilities as well. The modernization of the grid therefore must be very tuned into the improvements that have to be made in cybersecurity so that we can be resilient not only against the natural disasters, but also resilient against the threat that is presented by cyber challenges.
It's a rich and important agenda. It's a moment in history in which the clock is ticking, and a few minutes ago I made reference to the fact that Fatih Birol has been I think very eloquent, and if I may say, insistent on bringing this to the attention of not only this community of experts, but really to the wider world. It's a debate that we must encourage. It's a discussion that we must embrace, because the stakes could not be higher. Our children are depending on us. Their children yet unborn will be profoundly affected by decisions that are being made now.
And because of the intrinsic nature of the problem, where carbon emissions that are occurring today are effectively baked into the calculation, we have to really I think take full moral account of the responsibility that we hold to all succeeding generations. That's why important events such as the publication of this study are moments for us to come together and gather. That's why so many of you came out this morning, and I want to acknowledge the thought leadership that many people out here in the audience who I recognize have contributed as well.
I wish I could stay for the whole debate, but I cannot, but I do want to both thank Fatih Birol, and through him, the whole IEA network, and Maria van der Hoeven for the tremendous leadership they've brought to the energy sector, and to these discussions for many years. And I want to thank also Carnegie Endowment for International Peace, which locally here, but also with a global footprint, with now offices everywhere from Moscow to China, at least the ones that I've laid eyes on, and probably more besides, has also been a tremendous contributor. And of course, our interagency colleagues and Mr. Steer as well.
I wish you call great success in studying the report, and let's come back next year and see how well we've done.
David Burwell: Also, I want to thank Deputy Secretary Poneman for raising the moral element of this challenge. I don't want to give too much exposure to our friendly competition on the other side of this wall at Brookings, but I've been impressed with the comment made by president, their president Strobe Talbot in a book called Fast Forward that I recommend to everybody. He made the observation that we are the first generation that fully understands the impact of climate change, and we're probably the last generation that has any chance of doing anything about it. So that kind of raises the stakes for us to get it right.
So I'll go directly to our panel now, and I will start by introducing all three of them. And we will hold questions until after their presentations, but we do want this to be very participatory.
First up is Dr. Fatih Birol. We know that Dr. Birol is the chief economist of the International Energy Agency. He also chairs the World Economic Forum's Energy Advisory Board, and has served as a member of the U.N. Secretary General's High Level Group for Sustainable Energy for All, which just came out with a report. He has received high level awards for his energy work from the governments of Iraq, Germany, Italy, Austria, the Netherlands, Poland, and France, among others. So I guess he qualifies to be Secretary General of the U.N. as well.
He's a native of Turkey, and he has also worked for the Organization for Petroleum Exporting Countries, otherwise known as OPEC, before he joined the IEA. And that kind of is like, you know, going from the New York Yankees to the Boston Red Sox, if you understand our baseball in the United States. But anyway, we're glad he's on our team.
After Dr. Birol's presentation, we will hold questions, so, I've already said that, right? After Dr. Birol, we're going to Dr. Andrew Steer, who will make some observations on the global challenges, as well as the domestic imperatives, of implementing the IEA agenda. Dr. Steer is president of the World Resources Institute, a position he assumed last year after a career at the World Bank, serving most recently as the special envoy for climate change. In this role, he directed World Bank climate efforts in more than 130 countries, and he oversaw a $7 billion climate investment fund.
He has also served with the director of the bank's environmental department and in other roles. Between 2007 and 2010, he took a break from the bank and served as the managing director of the UK Department of International Aid, also known as DFID, which is the equivalent agency of USAID at the UK. He has a PhD in economics, and has written widely on sustainable development issues.
The discussion will wrap up with Polly Trottenberg, the Undersecretary for Policy at the U.S. Department of Transportation, which is the third highest position after the secretary and deputy secretary. Polly is a true transportation maven and good friend, and I use that word advisedly, maven. She was one of the most creative minds in developing new ways to bend transportation policy to serve the needs and goals of the customers of the system, freight users, the general public, and communities.
She worked on the Hill for many years as the legislative director for New York Senators Charles Schumer and Daniel Patrick Moynihan, and most recently was legislative director for California Senator Barbara Boxer, chair of the Senate Environment and Public Works Committee.
She has championed the mainstreaming of transit, rail, street cars, and other non-highway modes in transportation policy and practice, especially bicycling and walking, with a particular goal of making the system more carbon-efficient. She has a master's degree of public policy from the Kennedy School of Government. And with that, I'll turn it directly to Dr. Birol for his presentation.
Fatih Birol: So good morning, ladies and gentlemen. Thank you very much to Carnegie for organizing this event, once again. It's very much appreciated. And thank you very much for the kind words, for introducing our work, David.
So there are many distinguished colleagues among the audience, and since Mr. Poneman made a very nice introduction of our work, and mentioned the special report we did on Iraq last year. I would like to recognize the Iraqi ambassador to the United States. He's actually, Mr. Lukman is with us today, among other distinguished guests.
Both Mr. Poneman and David mentioned that the foundation reason of the IEA, the motivation of us, looking after the oil security, and look at, looking at the climate is definitely a bonus. And making a special report on climate change is definitely something not very usual for us as well. And we published this report last week in London to the international press, and since then, my colleagues and myself make a few presentations throughout the different capitals, with press, with industry, with governments, more simple, and we got this question: why does the IEA, it is good that you do it, but why do you do it?
So I wanted to a bit explain why we do it. So first of all, there are two reasons, if I may just summarize. First of all, the climate change is sliding down in the international policy agenda, especially the last three years, driven by many reasons, but at the end of the day, when you look at the, before Copenhagen, where the climate change was in the international policy agenda, where it is now, it is sliding down. And when you look at it today, the scientific evidence, the growing increase in scientific evidence, and the decreasing interest in climate change, you see a rather tragic paradox. Normally, if there is more evidence of something going wrong, then there should be more interest to fix it, but in this case, it is going the other way around. Even though the scientific evidence is increasing, the interest in climate policy making is decreasing.
So the first reason why we did this report is using the World Energy Outlook's modest but strong muscles to push the climate change up in the policy agenda. So this is the first reason why did this report.
The second is also very obvious, why we do this report, because about two-thirds of the greenhouse gas emissions come from the energy sector. If we cannot find a solution within the energy sector to address the climate change, we lose the battle. So therefore, energy sector is at the heart of the climate change debate, and it is the very reason we look at it in this special report.
And when we look at the energy trends recently, we observe some mixed trends. In terms of gas and coal competition, especially in the United States, and its impact on the emissions, as Mr. Poneman mentioned, is, to be honest with you, an exception, when you look at the rest of the world. Gas, coal-gas competition sometimes end up with increase in the CO2 emission, as it is the case in some countries in Europe, as I will mention in a minute.
In terms of renewables, they are on the rise, very strong increase in the last seven, eight years. The only concern is 2012 was the first year where we observed a slowdown in the renewable energy investments globally.
Efficiency. Now there are many colleagues here who went to many, who went to many international energy meetings. Efficiency was talked a lot, and the general cliché, the general understanding, efficiency is talked a lot, but nothing happens. This was the general thing. And I can tell you, this is wrong. Especially in the last one and a half, two years, we are seeing that A, there are some new efficiency policies in a legally binding manner put in place, and B, more importantly, we are seeing the impact of those efficiency policies on the consumption trends in the hard data.
I know that there are many efficiency skeptics throughout the world, and I can tell you that they will be proven wrong very soon if they do not see the impact of energy efficiency on the demand, on the consumption side, and also on the CO2 emissions. And I will give you two examples, one in United States now, and the second one is on the, on China in a moment.
For the United States, when, last November, I think, when I came here, invited by Carnegie to release our World Energy Outlook report, one main message which was all in the newspaper at that time, U.S. is making giant steps for being self-sufficient in terms of oil. Even some big papers called Saudi America, and all of these things.
Now many people who didn't read the report carefully thought that this is happening only because of the increase in the U.S. shale oil production. This is definitely a key part of it, but as we have highlighted in our work, the other part, other leg of this success story, is that the U.S. needs less oil to import because of the recently set efficiency standard for cars and trucks and others.
So on one hand, the production of oil is set to increase in the United States, mainly the shale oil, as highlighted in our work. And second, the domestic consumption of oil is set to decline, mainly driven by the efficiency standards. So efficiency does matter. Efficiency gives a shape to the demand sector, and the analysts, the decision makers who are not looking at the efficiency trends in a careful way, will be making perhaps not the right decisions in the next years to come, and the U.S. is a very good example here, and many other countries in the world.
And I can tell you that in Europe, in Asia, many countries are now pushing the efficiency button, not necessarily driven by the climate change concerns. They are mainly driven by the cost competitiveness concerns, to be honest with you. But it is going on in many countries.
And nuclear power is facing significant challenges throughout the world, after Fukushima, and this is, in Europe, many countries changed their policies, Japan is still discussing the future of nuclear power, whereas carbon capture and storage, which is a crucial technology, is, as it stands now, I should say, unfortunately, still remains a distant technology.
Now I wanted to first give you a bit of a flavor of what happened last year in CO2 emissions. The news is, the global CO2 emissions increased 1.4 percent, which puts the global CO2 emissions at a historical high. So this is definitely not good news. And when you look at the countries, there are different countries with different outcomes.
Japan is a very interesting example. Japanese emissions last year increased about six percent, which is the highest in the last two decades in Japan, mainly as a result of nuclear power being replaced by coal and LNG, a historical high in Japan. In India, a bit lower than historical trends growth, mainly driven by a slowdown of the economy, and in Europe, we have about, a small decline, and this is mainly driven by, again, economic downturn.
But within Europe, we have different trends. For example, while the general European emissions declined, in U.K., we have seen one of the highest growth of CO2 emissions in the past few years. In U.K., the CO2 emissions increased about five percent higher than China, mainly driven by the coal replacing gas. A lot of coal has been used in the U.K., mainly as a result of, not only in U.K., many European countries, the coal process as a result of, among other reasons, U.S. coal exported to Europe. Coal prices were very low in Europe. Carbon prices are also very low. As a result of that, we have seen a lot of coal used, and gave a boost to the CO2 emissions in Europe.
But there are two countries where we see encouraging, if I may so, trends, in relative terms. One of them is China. China emissions increased 3.8 percent, still an increase, but it is one of the lowest in the last decade, and I will come to that, why it has happened. And in United States, as Mr. Poneman also underlined, we have seen a significant decline in the CO2 emissions, mainly driven by gas replacing coal, and also as a result of energy efficiency improvements.
I want to give a quick look at U.S. and China, and put some, a bit of a heads up on certain things. For the United States, yes, the emissions declined, but this is, as I said, mainly driven by gas replacing coal. Only five years ago, the share of coal in the U.S. electricity generation was about 50 percent, and at the end of last year, it went down to about 35 percent. In an economy such as the United States, in such a short period of time, 15 percentage point of decline of coal is a revolutionary change, and this is mainly shale gas coming in the picture.
But I know I am speaking in the United States now, but I have to tell you that Americans, I believe, didn't start to use so much shale gas or gas in general, suddenly so much, because, not because gas is clean, not because shale gas is a new innovation, not because gas is a domestic product. I think Americans started to use so much gas because gas is cheaper. So this is the main reason why we have seen a major penetration of gas, and at the cost of coal, and this was definitely the main reason.
And yet last year the gas prices averaged about $2.80, the natural gas prices, and we see that this year, they are increasing. Currently, they are about $4, and our analysis show that if the gas prices, natural gas prices, come closer to around $5, we may well see a strong comeback of coal if there are no regulatory measures put in place. And this very impressive trend of CO2 emissions decline may well be not continuing, and we may well be reverse, if this trend is going in that direction.
China. China's slowdown of the emissions are due to two reasons. The first one is the Chinese government in the country's five-year plan set a very strong target in terms of energy efficiency improvements. And last year, China energy improved 3.8 percent, a very strong improvement. And also, we have seen a lot of hydropower and renewables coming in the network. So as a result of that, it is definitely, with the government push, mainly, energy efficiency policies, the renewables push, and we have seen this positive development in China.
Of course, it remains to be seen if this efficiency improvements in China will continue. And as I mentioned, in China, especially countries like China, the efficiency push is mainly driven by cost and local pollution concerns rather than climate change, but it does have climate change as well.
Now why I mentioned these two countries for two reasons. One, they make together about 45 percent of the emissions. This is one. And second, these two countries are giving some encouraging signals, both in terms of the data, I just show it to you, and second, in terms of giving signals to put some policies in place to address climate change. And the recent agreement between China and United States to address the HFCs is definitely a very important step, not only about the size of the emissions, but also in terms of giving a political signal to the rest of the world, and I hope that it goes beyond HFCs, and it goes beyond China and the United States.
Now looking at the global picture, again, we see that the CO2 emissions are increasing, and worldwide, we are perfectly in line of a temperature increase trajectory up to 5.3 degrees Celsius. I think it is, in terms of Fahrenheit, it must be about 9.6 and so on. If it is wrong, please let me know. And this is definitely something, many of you know better than me, this is definitely something which is devastating for all of us, U.S., China, Europe, rich, poor, business, academia, wherever. It would have devastating consequences.
And therefore, we thought, what can we do in this context, as energy is responsible for these emissions? And what we have, what we came up is the following. We as the IEA, we know the energy sector. At least, we think we know the energy sector. And we thought, there is economic crisis. Many countries are struggling to go through the economic crisis. And globally, the chances of seeing international legal binding agreement is currently rather low. So two major problems.
But at the same time, as Mr. Poneman said, the time is ticking, and we do not have much time, because the longer we wait for international agreement, the more investment will be done in the wrong way, and a lot of infrastructure will be locked in, and a lot of carbon will go to atmosphere. And finding a solution will be much more difficult because it will be much of a burden in the future, and burden sharing will be much of a problem. So we have to do something in this, under these circumstances.
And what we have done is that we said, what can the countries do on a national basis to buy time? It is to buy time, then we hope to see a international agreement to come into force. What can we do?
And we said, we have to choose some policies which are pragmatic and should meet some criteria, so that they can be taken by the governments. The first one is, we said, those policies we are going to suggest should have no negative impact on the economy of a given country. There may be some losers and winners within a given country, but as a whole, GDP, it should be GDP neutral, if I may say so, no impact on the economy of a given country.
Second, they should be able to reduce emissions significantly in the near term. So we have not much time, so 10 years to 2020, this should be in the very short period of time, significant emission reduction should come.
Third, and perhaps very importantly, they should be able to proceed, these policies, without expecting new technologies to come in the picture, with the existing technologies only. So you don't need to discover new technologies, just relying on the existing technologies. There are many technologies which are coming in the picture, such as on the transportation side, on the electricity generation side, but leave them aside for a moment. Just with the existing technology is what we can do.
And fourth, very important for the developing countries, I believe, these measures should bring additional benefits, additional CO2 emission reduction, to some countries, such as reduction of local pollution, a major preoccupation for many developing countries, or reduction of the energy import bills, improving the trade balance of the countries.
So these are the criteria that we have chosen to identify our four measures, and with the four measures, we built a vision, which, a scenario which we call Four-for-Two: four policies for two degrees target, remain alive. So our objective is the door to two degrees is not closed, 2 degrees Celsius, I should mention, and this is 3.6 degrees Fahrenheit.
So what can we do to keep our chances for a two degrees future? What does it mean? Translated into layman's language, which is more or less the language I understand? It is mainly, it means we should still keep the chances to have a planet more or less similar like we have now. So two degrees is more or less similar to what we have now, and what we can do.
So what are those policies, four policies, to keep the 2 degrees target alive, to keep the our expectation to have a planet as of today alive for the future? About half of the emission reductions come from one single bundle of policies, and this is mainly energy efficiency. And within the energy efficiency, there are thousands of energy efficiency policies. As you will see in a moment, we have focused on a few of them.
The second one comes from the limitations on the use of inefficient coal fired power plants. The third one is the reduction of methane emissions from oil and gas, upstream sector. The final one is the acceleration of the removal of fossil fuel subsidies.
And they, the four policies we suggest, if they were to put in place together, they are going to bring us to a line which means in 2020, we can stop the growth of global CO2 emissions, and we will still have chances to keep the two degrees target alive, if we want to do it, of course, and we assume we want to do it.
So let me take you through these four measures very quickly. First of all, improving energy efficiency. As I said, there are many energy efficiency policies, but we focus on base of this criteria on a few things which can be easily implementable, no economic, negative economic costs to the country's economy, and also, no need for the new technologies.
So first of all, on the building side, appliances, putting the minimum energy performance standards for electrical appliance such as lighting, cooking, dishwashers, refrigerators, and others, and many countries are doing this, but not enough. In the, in China, there is, as I said, there is a very strong target on it for the new five-year plan. In the United States, we hope to see more efforts on the building codes and the other efficiency measures. In Japan, after Fukushima, stronger efficiency on the appliances side is coming in the picture. So this is the first area.
The second is industrial motors. When we talk about CO2 emissions in China, the first thing comes to our mind is the power plants, but believe me, the industrial emissions, especially coming from the inefficient electric motors, is a huge problem, and Chinese government is now setting a new target, improve the electric motors in the industry, which will in turn improve the competitiveness of the Chinese manufacturing industry.
And transportation, both in terms of the cars, but also trucks. When we talk about the, worldwide, about the transportation efficiency improvement, the first thing that comes to our mind is the passenger vehicles, but trucks are very, very important. Let me give you one number from the World Energy Outlook. About one-third of the growth in global oil demand will come from the trucks in Asia alone. So one-third of the growth in the global oil demand will come from the Asian trucks. So think about the improving of those efficiencies of those trucks, will have significant implications.
And as it is the, in the case of United States, in Europe, in Asia, many countries are trying to put standards, improve the standards, fuel efficiency standards here, which is very important subject that my colleague, worked many, many years.
Second, limitations on the inefficient coal power plants, so-called subcritical coal-fired power plants. We see that first of all the demand, the electricity demand, will be much less as a result of the appliances' improvement of electricity, and the second, we suggest that the construction of new sub-critical coal fired power plants should be banned. And the definition of sub-critical is different for different countries, and a bit of course higher in the developed countries, and a bit lower in the developing countries. But this is something is, must, we think, we still need coal, but we need coal with higher efficiency grades.
And also, there may be a need to look at the existing sub-critical coal fired power plants, use limitation with that, jeopardizing the stability of the network of a given country. So this is another one. And some countries are doing significant work here. The country that we all think it is a major coal country, China, China in the last three and a half years shut down more than 70 gigawatts of sub-critical coal fired power plants, before their economic lifetime was over. So just underlined. And Chinese economy is still growing. And this is mainly done in China as a result of the local pollution concerns, but as I said, does at the end have the decrease of CO2 emissions.
In Europe, there is very strong quality standards to hamper that, and I hope that the other countries also look at this issue carefully.
Now another measure we have is on the methane. Some colleagues who do not work on the oil and gas issues very closely, just to bring to their attention that during the production of oil and gas, significant proportion of methane in some cases escapes to the atmosphere, and methane is a very powerful greenhouse gas, very powerful greenhouse gas. And we have heard several times in several meetings, I personally heard, there is a lot of methane escaping, and this is bad for the climate change.
But a lot means almost nothing, so we said, let's look what, how much this a lot is, and we made a survey, to my knowledge the first detailed survey made worldwide for this study. And we have found out that the global methane released to atmosphere is about 1.1 gigaton CO2 equivalent, which is substantial amount of emissions.
And the good news is these methane emissions can be relatively easily tackled through existing technologies by replacing in many cases the old technology, old infrastructure, and this can definitely be very helpful. And these emissions, by the way, are only upstream methane emissions. We didn't look at the transmission and distribution leakage coming from the methane, because they are much more difficult to fix. If you remember, our criteria, in a short period of time, and do it immediately. But if it is, if you look at the transportation and distribution of methane from the pipelines, there's a lot of leakage there. This was not a point that we look at in this report.
So if this can be done, this can be done, as I said, through very simple, in many cases, measures taken by the oil and gas companies, we could easily half the methane emissions, with an additional investment of 0.5 percent of the investment that the companies are doing for oil and gas upstream sector. So for example, last year, the companies, oil and gas upstream sector, invested about $600 billion U.S. dollars for oil and gas upstream operations. And they would only need to make a 0.5 percentage point additional investment in order to fix this problem.
Would they do it by themselves? I don't know. I think there may well need to be a mandatory regulatory framework here, and a reporting system put in place. But perhaps some companies would do it themselves. And I cannot imagine a better image of a company who says, I made this additional investment even though it's not mandatory, and saved so much emissions, which is equal to something. And one page of advertisement, it is very good for the companies, I believe, which is important, even there was no regulatory, mandatory measure. But the best thing would be to have a mandatory measure here, that they should be reported, and they should be limited.
Finally, our final measure is under fossil fuel subsidies. In many countries today, there are substantial amount of fossil fuel subsidies, and they are, ladies and gentlemen, are of those countries' governments to be phased out. Once again, it is not driven directly by the climate change concerns. They are driven by economic efficiency concerns in most cases.
In many developing and oil exporting countries, the export of oil is under risk because of the very high domestic oil consumption growth patterns, mainly driven by artificially very low oil product prices as a result of subsidy policies. So some countries are making very good efforts. Russia earns a praise here in terms of the natural gas prices, what they have done. China made major efforts, trying to bring to the, their prices with the international price levels, and improve therefore the energy efficiency of those countries. Indonesia, Nigeria made two steps forward, one step back, but still made some improvements there. And countries are doing that. And this is definitely something very important for climate change.
Let me give you one example why it is important. Currently, fossil fuel subsidies are about half a trillion U.S. dollars, half a trillion U.S. dollars. In Europe, we have in Europe, or Europeans have, I should say, a carbon price about today $10.00 per ton of CO2. And the main reason for, of that carbon price is to provide a disincentive to use fossil fuels or any carbon, so $10.
And this half a trillion fossil fuel subsidies translates into $110 per ton of CO2 to provide the incentive to emit carbon dioxide. So a $10 disincentive in Europe, $110 in many countries to provide incentive by implication to provide CO2 emissions. So therefore, G20 hate this agenda, and still continue to push this issue. And I think this will be more and more important in the next G20, and I think it is one of the major topics to be discussed in the next G20 in Russia.
Now these, our four policies, as I said, they are rather modest, I will say pragmatic, but at the same time, can still keep our two degrees target alive. What happens if the two degrees target cannot be kept, which is very, very, of course, a big probability, still, looking at where we are today. Does the energy sector, can the energy sector get away with this?
Our answer is absolutely not, and I want to give you some examples. If temperature increases, and as a result of global warming, we will see that we will have implications of climate change on the energy sector, on the infrastructure. And there are two types of impacts, gradual impacts and sudden impacts on the infrastructure of energy.
The gradual impacts are mainly as a result of the heat waves, droughts, and mainly on the electricity generation. Many colleagues know better than me for the power plants, you need water to cool down the power plant. So Mr. Ambassador of Italy, who is working for now, knows better than me, the old power plants, power plants, needs water to cool down. But if the water is warmer, it is much more difficult. And if water is not available, there's a water stress, as we have seen very recently in China, which led to power cuts, water stress, then you are in trouble. And we think this is especially so an issue in Asia, in United States, in Africa, and in Europe, which we have also seen the examples of.
So therefore, power sector will be affected with the increase in the temperature. There is no way out for the energy sector in this respect.
Second, a bit more of a more sudden and disruptive implications. The change in the climate means more cyclones and more storms, tropical storms, and this will have implications for the energy infrastructure, as you have recently seen, as Mr. Poneman mentioned. And this is especially important for the oil and gas infrastructure, especially for the offshore. Many basins are going to face that challenge, but especially Western Australia, North Sea, Gulf of Mexico will be exposed to the impact of the tropical storms on the oil and gas platform, oil and gas rigs.
Even if there was no such storm taking place, the fact that it may take place is pushing and will push even more many oil and gas companies to improve their oil and gas platforms, to increase the height of the platforms, which in turn means additional investments. So adaptation of energy sector to climate change is now an imperative. Therefore, this is definitely, energy sector will be affected from the climate change.
Now I would like to finish by highlighting one other issue for the energy sector. This is the very fact that the governments may well change their policies in terms of climate change, and those policies will have effect on the available oil and gas and coal reserves worldwide. We have today substantial amount of coal, oil, and gas reserves, and if we burn all of them, I mentioned to you that current trends are going through a 5.3 degree Celsius, which has devastating effects. If we burn all these reserves, then even 5.3 will be on the optimistic side.
Even in our current policy trends, in our new policy, forget the 2 degrees, but 50 percent of the existing fossil fuel reserves until 2050 will remain undeveloped, unless you have carbon capture and storage. And when I say fossil fuel reserves, 50 percent, this is mainly of course for the coal industry. And if you go for a two degrees or a 450 PPM, as we call it, context, if the government change their policies and agree the trajectory, to keep the temperature increase two degrees Celsius maximum, then about two-thirds of the existing fossil fuel reserves may well remain undeveloped until 2050, unless we have carbon capture and storage. Once again, here, the main fossil fuel which will be affected will be coal, and the least affected will be natural gas.
So, ladies and gentlemen, let me finish my remarks by putting my thoughts together. Emissions are increasing every year while we see scientific evidence about the climate change increases as well, but we see despite general losing interest on climate change, we see some encouraging steps, such as the one coming from U.S., China, Europe, and other countries, and this makes us hopeful. But the general trend is unfortunately not in the right direction.
And there will be an important meeting, 2015, in Paris, like the Copenhagen meeting, where all the countries will come together, hopefully, and agree on a international legally binding agreement which will come into force by 2020. However, A, it is not sure that they will agree on something. We hope they do. But at the same time, even if they do something, agree on something, at that time, if the burden is too heavy, if there are too much CO2 in the atmosphere, and if the infrastructure is already locked in, the cost will be so high, then the chances of agreement will be less. Therefore, early national action is extremely important, especially in the countries where the emissions make a major contribution to the global CO2 emissions.
And the four specific measures we suggest, namely efficiency in certain areas with very short payback periods, the shutting down of the inefficient coal fired power plants, reducing the methane emissions, and acceleration of the fossil fuel subsidies, can keep the two degrees target alive without harming the economic growth in any given country. But this is not enough, unfortunately. These four measures have to be supported with other, much more radical innovation and much more radical technology push.
And here, I was very encouraged to hear from Mr. Poneman the U.S. efforts on carbon capture and storage. It is a critical technology, especially for the fossil fuel industry, and especially, especially for the coal industry. I think carbon capture and storage is a very wise asset protection strategy for the coal industry.
And finally, coming, or finishing with the energy sector, energy sector cannot ignore climate change. Energy sector and some of the players in the sector may want to address climate change, can be part of the solution. They may not want to be part of the solution. But at the end of the day, they will be affected by climate change, either with the effects of climate change or the policies which are going to put in place to address the climate change. Therefore, it is very important, we believe, that the energy sector takes climate change as a factor in their long-term business plans, in their long-term investment decisions. Otherwise, they may well be caught unprepared.
So once again, thank you very much to Carnegie inviting me, and thank you very much for your kind attention. Thank you very much.
David Burwell: OK. We'll go right to Andrew. Andrew?
David Burwell: What do we about ...? How do we implement?
Andrew Steer: That was brilliant, Fatih. I can just simply say, I agree, and maybe sit down. Time is rushing on, so let me be very brief.
David, thank you for organizing this. We love what you do up here at Carnegie. The World Resource Institute is 17 blocks down Massachusetts Avenue at Union Station, and we often sort of look enviously up to the sort of policy wonk, midtown, up here, and we hope one day we'll be able to afford the rent up here, too. But it really, this is a very important event. Thanks very much.
Look, the report is dead right. Number one, we're losing the battle against climate change. Number two, it can be solved, and Fatih did a brilliant job showing how at least we can buy some time. And number three, every year we wait, it becomes a lot more expensive.
It is an astonishing thing, you think about it, that we are not grappling with this issue more urgently, isn't it? It's not that nothing is being done. More than 100 countries in the world have ambitious or not so ambitious goals for renewable energy. Go to the U.N. website, you'll see 90 countries have plans for mitigation for the year 2020. Go to China this year, you'll see a cap and trade system being introduced and implemented. Look at the investment rate in terms of renewable energy. Last year, almost $300 billion, up fivefold in the previous 8 years. Isn't this wonderful?
Well, yes, it is, actually. But add it all together, and it absolutely isn't adding up to what needs to be done. So let's not congratulate ourselves on how well we're doing. Let's ask the question why we are failing.
If you get scientists in a room together and they say, well, actually, at least 97 percent of scientists, who seem broadly to agree, they say, look, we're on track at the moment, even if you take all of the plans that are currently in the pipeline, we're on track for a 3 degree Celsius to a 5.5 degree Celsius world. The last time we had that, sea level was 22 meters higher than it is today. The evidence is overwhelming that the economic costs will be extremely high, and so on, and we won't, don't need to talk about that.
And you'd say, well, should we act? They'd say, yeah, of course we should act. But for some reason, we're not acting. And there are really two reasons. One, internationally, countries feel that they should only act if others act. So the house is burning, but, and we're all sort of arguing about who should, you know, pour water on it. And the other reason is that there is a belief out there that it's expensive to act, that we really can't afford the cost. It will kill jobs.
Well, Fatih's report helps a lot in dispelling that, but out there in the academic community, in the research community, and in the real world, there are some really important breakthroughs that are hopefully going to really kill this notion that it's too expensive.
Three things in particular I'd like to bring your attention to. First, the opportunities for efficiency are much greater than we thought. So if you think about a marginal abatement cost curve, the area under the curve, under the X axis, is much bigger than we thought. I think you helped to demonstrate that. Look at the McKinsey Resource Revolution report last year. Astonishing what you can get that's win/win. In other words, save electricity and save the planet and create jobs. So that's point number one.
Point number two, there's some very important research out there now that shows that the smart application of policies can, even if there is a real cost to investment, can actually bring in new technological change. And there's some academic literature. Go up to Harvard, see some of the work that people like Philippe Aghion are doing, and Asa Moglu, and people like that, what's called directed technological change. A modest carbon tax coupled with the public sector investment in research can be demonstrated, and is being demonstrated, that actually can raise investment, raise technology, create jobs, without any cost. The US, by the way, is in a very good position, because of the energy labs and so on, to actually demonstrate that this really works. So that's point number two.
Point number three, new understandings of how major investments are made by the private sector. The two words stranded assets were hardly on anyone's radar screen ten years ago, but now, you go and you talk to major corporations who have to decide what source of energy they want, they'll say, well, wait a minute. If we go this route, renewables, then, you know, at the moment, the incentive structure is, you know, this is very, this may be expensive for us. But if we go the route of fossil fuels, five years down the road, there'll probably be a carbon tax, so suddenly we'll find ourselves with a stranded asset that anywhere near as valuable as we thought.
So what's going to happen in the next two years, I would predict, is major investments are going to be delayed as the desire for more information comes along, and the overall level of investment in the economy will be lower than it would otherwise be.
So you add these three points together, and you have a very compelling case for green, low carbon growth. Now this needs to be demonstrated because at the moment we have a serious problem of lack of understanding in the policy realm, and even in the private sector realm, to some extent, for that.
Let me just turn just and say a word about the United States, because the United States has been doing some great things, and look forward to hearing Polly's statement, because transportation actually has been a real sort of breakthrough area for the United States. Of course, in the United States, there is no Congressional sort of majority for any legislation, so the real question is, under existing authority, does the administration have the capacity to get to its commitment of 17 percent?
We just brought out a major report on that. We conclude that yes, if there are four things done, very similar to the four things you say, which is, you know, new controls on power plant, addressing HFCs, which is a wonderful thing with the Chinese a couple of weeks ago, new measures on energy efficiency, and serious addressing of gas leakage. Add those all up, and under existing authority, you can get to your 17 percent, which is very good, which the world is looking for. It will have big ripple effects on attitudes elsewhere in the world, so it's very important.
At the same time, it's also very important to remember that whilst U.S. emissions at the moment, as Fatih showed, are roughly the same as they were in the mid-1990s, and whilst a 17 percent reduction is really great, remember, we have to go down by 80 to 90 percent by 2050. So the goal is not 2020. We need to be accelerating our progress as we go through the 2020 mark, and that requires a much more radical transformation.
And what we've been advocating, and many of you have, too, is that actually, what the United States needs is a climate change strategy. Why? Because it would change the investment climate. Once private investors know that there is a strategy, and here's what it looks like, and here are the goals, they'll start saying, right now I don't have to worry about stranded assets, because I can start, I can start investing.
So we were terribly encouraged, and there's been reports that maybe President Obama will be giving a major speech sometime in the near future on climate change, and we all look forward, hopefully, to a really great set of announcements.
Just finally, on the international side, as Fatih said, 2015 is a watershed year. There is a commitment to have a global deal. Unfortunately, at the moment we live in a world where government to government negotiations simply aren't able to make the kind of breakthroughs that are required. All the more reason that we need to win the intellectual battle to show that actually, you don't need to wait till your neighbor does something to put the fire out before you're willing to get the hose. It's actually in your interest, country X, Y, and Z, it's in your interest to start acting.
So look, Fatih, thanks very much. A great report, and look forward to the discussion.
David Burwell: Thank you, Andrew.
Polly Trottenberg: I think I'm going to just stay seated and try and keep my remarks very quick, because I know we're running a little late, and I'm sure folks have a lot of questions after these fantastic presentations. And I, too, am glad to be here on behalf of the Obama administration. I want to thank Carnegie and David Burwell for having me.
I too am a big fan, as someone said, we love what you do. We at DOT also love what you do. You have done some really smart work on transportation. David helped put together one of my favorite reports. It's called "Road to Recovery." I recommend it to those that are interested in the transportation sector. I think it does ...
David Burwell: It's outside in the hall.
Polly Trottenberg: Yeah, it does a very brilliant job of looking at some of these sort of political, programmatic, and economic challenges we faced as we have tried to reform the U.S. transportation sector, and ongoing challenges we face.
I too want to congratulate Dr. Birol for this wonderful study, and I'm so glad that transportation is a part of it. Sometimes we turn out to be a little bit of an afterthought in the climate discussion, and, you know, as my colleague from the Department of Energy said, I can promise you that at DOT, we think a lot about energy efficiency and climate, and it definitely informs a lot of our work.
And I will just quickly touch on a couple of the things that we're working on, and then I think we certainly want to get to questions. You know, I was a little encouraged here today to hear some of the trends that we've been talking about, how actually carbon emissions are down in the U.S., and fuel consumption is actually down, although the U.S. transportation sector still remains extraordinary energy intensive, and, you know, we're a country with a long history of land use decisions and transportation investment decisions that are decades in the making, and to some degree take a little bit of decades to, you know, potentially to ameliorate.
At DOT, I will sort of describe our work as falling into three main buckets when it comes to energy efficiency, and the first it something I think you're all very familiar with, the work we've done on things like more energy efficient vehicles. That has been something this administration has been a champion of, and it's had a huge effect, and I think you've seen it in some of the charts there. You know, last year, DOT, working with the environmental protection agency, you know, announced new national standards for cars and light trucks. We're also working on heavy duty truck standards. And those will have a tremendous effect on oil usage and carbon emissions in the transportation sector.
We've also just at DOT, it gets less attention, but we work on a lot of other fuel efficiency areas, aviation, biofuels, fuel cell technology, and hybrid technology for buses and transit. So we're also now looking at how we can help convert some of our maritime fleet to using LNG. So there is, and again I think sort of in the points you're making, Dr. Steer, a lot of that work also saves dollars. It saves dollars for transit operators. It saves dollars for consumers. So the good news is, if we can do it right, there are real economies to be made, and we can reduce carbon emissions and save people money.
So we're very interested in those types of technologies, and I think as my colleague from Department of Energy mentioned, our calculations on what we're doing for our latest round of CAFE standards is in the long run it will save consumers, I think the figure is $1.7 trillion at the pump. So it's an extraordinary amount of money. So if we can get over the political hurdles, these are win/wins, as you mentioned.
The other area, and David highlighted it a little bit, which is a little tougher, I think, in some ways, than the technological changes, is, again, changing how we use and deliver transportation on the ground in the United States. And the way we look at it is really giving, you know, our citizens and our freight users more choices. You know, we've had in the U.S. a pretty auto-centric transportation system, but, you know, gradually, over time, through the work of some real I think champions all over this country, because it doesn't just happen at the federal level in the United States, a lot of transportation work happens at the state and local level.
But the Obama administration has also really been putting all the muscle it can behind trying to encourage a transportation system that is more multi-modal, that gives people more choices, that is less energy intensive. We've had a few tools at our disposal. One that we've been very proud of is a partnership DOT has had with Environmental Protection Agency and the Housing and Urban Development Agency called our Partnership for Sustainable Communities, where we've really started to work closely with communities that are interested in how they can better plan land use, economic development, and transportation decisions so that when they do plan densities, when they plan development, when they plan transportation facilities, decisions that will stay with us for decades, I mean, if we're tackling a problem that's going to take decades to tackle, we need to make some really good decisions right at the start, and I think we've seen a lot of communities really rethink the way they do development and transportation.
We've also been fortunate to have some discretionary funding through Congress. We've had a program called TIGER, where we have been able, as David mentioned, to fund all kinds of terrific projects all over the country, focusing on transit and street cars, biking and walking, sort of alternative, less energy intensive forms of transportation.
We have, although the program has had sort of, some on people Capitol Hill love it and some do not. We are lucky. We're now on our fifth round of funding, and we are getting in a lot of terrific applications right now from all over the country. We will be hopefully announcing those sometime in the late summer, early fall.
We've also, as some of you know, been investing in high speed rail. We are really behind Europe and Asia in terms of, you know, U.S. passenger rail, but we are starting to catch up. And, you know, this is obviously for us another, I think I would describe it as a long-term journey, and one where we also face political and budgetary challenges, but we'll be really, for some parts of the U.S., although we're a big country and there's a great debate, because parts of the U.S. are obviously very low density, but if you look at our northeast corridor, it's as dense and populated and has as much economic activity as the, you know, the parts of Europe where you have very successful high speed rail. So we think we will get there, but it is another long-term project for us.
I would just mention finally, we are also looking increasingly for ways to make our system more efficient overall. Probably the biggest one that a lot of you had heard of is what we're trying to do in aviation through next gen. The U.S., we will have a navigation system in the aviation sector which is based on essentially World War II ground radar technology, and we are trying to evolve into a satellite-based system. When we are done, and we are sort of doing it incrementally, so we're already doing some experiments all over the country, the amount of aviation fuel we will save is remarkable. Carbon emissions reduction is remarkable. It will have a very big environmental impact.
We are also looking at sort of other operational ways that we can improve the efficiency of our existing systems through technology, really through smart technology and better operations. So, you know, overall, I think we have within our existing authorities a great opportunity to make huge energy efficiency improvements, but I will just sort of close on, because you sort of raised the question, you know, why are these things that are so self-evidently easy, why can't we just get together and make them happen on the climate front? And just some of the challenges we continue to face.
And, you know, you all know this if you're in Washington or reading the papers, you know, there is, particularly in transportation, still a great tension between what is done at the federal level and what is done at the state and local level. And we really work in partnership with states and localities, but it's not a top down system.
And so, you know, we, when it comes to sort of changing some of our transportation patterns, it's very much a question of the coalition of the willing. And, you know, we provide all the support that we can. But in the end, a lot of the work that happens at the U.S., you know, is at the state and local level.
And look, obviously, in the bigger picture here, we are facing still, you know, a lot of political and budgetary challenges. You know, to make big changes in infrastructure, sometimes that takes big investments. And right now in the U.S., as in Europe, you know, we're in a great debate about what should be the size of our transportation program, how much should we invest in that versus all the other needs the country's facing.
But, you know, I think at the Department of Transportation, we've, I think between the technological and the efficiency parts of what we've been doing, and working with states and localities to basically help create a system, as American consumers are asking for, that is less energy intensive, we've made some real progress. And we too look forward to hearing what our President is going to say next on this topic.
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