Achieving a Deal on Climate Change: A European Union View on Copenhagen

LLOYD C. BLANKFEIN: Good morning, and welcome to today's Council on Foreign Relations meeting. I'm Lloyd Blankfein, Chairman and CEO of Goldman Sachs. Before we begin, I'd like to remind everyone to please completely turn off all wireless devices to avoid interference with the sound system.

I also want to remind members that this meeting is on the record.

I'm delighted to be the first to officially welcome European Commission President Jose Manuel Barroso to the Council on Foreign Relations for a timely discussion on the EU's approach to climate change.

In addition to our audience here in New York this morning, CFR members in Washington, D.C., are participating via videoconference and members around the world are taking part via teleconference.

When you consider President Barroso's responsibilities and achievements over his past five years as European Commission president, it's easy to appreciate his effective stewardship. And, as validation of that record, last week President Barroso was overwhelmingly confirmed to serve a second mandate as president of the European Commission.

As most of you are aware, President Barroso represents a remarkable economic and political union of 27 different countries and nearly 500 million citizens. In fact, the creation of the European Union and the EU's further integration, most especially the EU single market, is an incredible achievement. Not only has it created a barrier-free trade zone for goods, capital, services and people, but it has also harmonized standards across Europe, affording equal access and benefits to European citizens. Each member state in the EU still maintains its own cultural and social identity. Defining and maintaining this balance is quite a challenge, but it has been a success under the leadership of President Barroso.

The president has exhibited exceptional leadership in understanding the interrelated issues of climate, energy and economic growth. In 2005, he helped to establish the EU Emissions Trading System, the first of its kind in the world, which has inspired other countries, including the U.S., to consider and create related mechanisms. In 2008, President Barroso launched a "big bang" of climate and green legislation focusing on cutting greenhouse gas emissions, reducing energy consumption and increasing the use of renewable energy.

More recently, the president announced his plans to create a new European commissioner for climate change. This organizational change reflects the importance of climate change issues across the entirety of the EU's policy making.

President Barroso is also positioning Europe to be a leader in Copenhagen. The European Commission a few weeks ago issued their proposals on their contributions to financing climate change at the international level. This initiative is the first of its kind and demonstrates the president's commitment to achieving a robust global agreement on these issues.

We all have a role to play in mitigating climate change. At Goldman Sachs, we share the president's deep commitment to climate change issues. In 2005, we launched our environmental policy framework. This initiative reflects our philosophy that capital markets can and should play an important role in addressing today's environmental challenges. As part of this policy, we've integrated environmental initiatives into our core business functions, as an advisor to our clients as well as a financier and co-investor in scaling up clean energy solutions. From its inception, we have also been an active market maker in the cap-and-trade mechanism, the EUTS, which was established under your leadership.

And now just a few words on the format for today's meeting. President Barroso will provide a few introductory remarks. I will then pose a couple of questions to him and then I will turn to the audience for the remaining period to ask questions of President Barroso.

I would like to remind you again that when asking questions, please wait for the microphone and speak directly into it. Also, please stand, state your name and affiliation.

With that, please join me in welcoming the president of the European Commission, Jose Manuel Barroso. (Applause.)

PRESIDENT JOSE MANUEL BARROSO: I'd like to thank Lloyd Blankfein for this kind introduction. I'm delighted to be here at the Council of Foreign Relations to discuss with members the vital subject of climate change.

As you know, there will be a high-level climate change summit called by Ban Ki-moon these days here in New York. And I think it is a vital moment to prepare to Copenhagen and, in fact, in the way to Copenhagen we'll also see each other at Pittsburgh during this week.

I think this is the right subject also for the Council on Foreign Relations, because climate change is no longer the reserved province of the environmental community. It is an economic issue; it's a development issue, a health issue, migration issue, an agriculture, a fisheries, an energy, a transport issue, because climate change is going to affect all these areas of our lives, and we are going to have to adapt. Indeed, just recently I have announced that during the next five-year term of European Commission we'll assess how all our European Community policies must adapt to the realities of climate change. And I also intend to create a commissioner for climate action.

But climate is also, of course, a foreign policy and security issue. Climate change is likely to trigger and exacerbate conflict. It risks undermining our efforts to bring development to the poor parts of the world. And we will see potentially dangerous disputes about water, about maritime resources, about population migration. But most of all, given difficulties in negotiations in the run-up to Copenhagen, the whole foreign policy community needs to be involved in urging movement, in pushing for progress from everyone involved. So you are right to be concerned and I urge you to continue your focus on this.

I have made this short introduction to our discussions this morning, review where we are and spell out what European Union wants to see in Copenhagen. I will be brief on science, because audiences in general no longer have to be convinced about the need for climate action. We have moved past what I call the "polar bear-ization" of debate about how terrible climate change is going to be. People want to hear more about solutions. But it is important to restate what climate scientists are telling us, because the more we hear the more compelling is the case.

Indeed, climate change seems to be happening even faster than the International Panel on Climate Change predicted only two years ago. Continuing with business as usual almost certainly means dangerous, perhaps catastrophic, climate change during the course of this century. This is not just one of those intergenerational threats likely to hurt us at some point in the future. We need to find solutions now.

The (step ?) is international agreement based on science. So it was, I thought, important that the G-8 and the Major Economies Forum both recognized in July in L'Aquila, Italy, what science tells us -- namely, that we must keep average global warming to more than 2 degrees Celsius or 3-1/2 degrees Fahrenheit above pre-industrial levels. This, in turn, means that global emissions will need to peak before 2020 and then by 2050 be reduced to at least half their 1990 levels. Again, this in turn means that we both have to get on with emissions reduction now and we have to plan for tomorrow's low-carbon economy. This means taking steps now, for instance, towards de-carbonizing our electricity supply and transport sector by 2050.

In fact, the economic case is just as strong. Acting against climate change is, of course, a moral imperative to current and future generations, but it is also an immense economic opportunity. The cost argument is getting clearer. Tackling climate change will be expensive. However, climate change expert Nick Stern tells us that failing to act will cost much more, at least 5 percent of the world's GDP every year.

But it's about more than minimizing the pain; it's about serving the next wave of economic development. Take Europe's climate and energy package, for example, which we have agreed in 2008, cutting emissions by at least 20 percent below 1990 levels by 2020 and doubling the share of renewable energy to 20 percent within the same time frame. We think this will generate some 90 billion Euros -- around $130 billion -- of additional investment in renewables and some 700,000 new jobs in this sector, as well as reducing our oil and gas import bill by around 45 billion Euros -- or around $70 billion -- a year by 2020.

So the commission is determined to green Europe's economy via energy efficiency, for example, via clean car technology and carbon capture and storage. We want to position Europe as one of the first movers in developing these kind of technologies. There is going to be a lot of healthy low-carbon competition in the next couple of decades, and Europe must be ready.

So if science is clear, if there is a strong net economic upside, what's the problem? Copenhagen shall be an easy conference, right? No. In fact, at this point, I confess that I'm very, very worried by the prospects for Copenhagen. Negotiations are dangerously close to deadlock at the moment. And let me spell out what that means: This may not be a simple negotiating standoff that we can fix next year. It risks being an acrimonious collapse, delaying action against climate change perhaps for years. And the world right now cannot afford such a disastrous outcome. So I hope that as world leaders peer over the edge of -- (inaudible) -- in New York and Pittsburgh this year, we'll collectively conclude that we have to play an active part in driving negotiations forward.

Part of the answer lies in the process of the negotiations themselves. We fully back the U.N. process. No one is trying to undermine or short circuit that. But now is the time for putting offers on the table, offers at the outer limit of our political constraints. This is what Europe has done, to be frank, and we will be pushing others to do the same.

But part of the answer lies in identifying the heart of the potential bargain that might yet bring us to a successful result. And here, I think that world leaders gathering here in New York can make a real difference on this.

The first part of the bargain is that all developed countries -- and I have underline the word "all developed countries" need to clarify their plans on mid-term emissions reductions and show the necessary leadership, not least, in line with our responsibilities for past emissions. If we want to achieve at least an 80 percent reduction by 2050, as, in fact, we are committed to doing, developed countries must strive to achieve the necessary collective 25 to 40 percent reductions by 2020. European Union is ready to go from 20 percent to 30 percent if others make comparable efforts.

Second, we must now explicitly recognize that all developed countries have to play a significant part in helping to finance mitigation action by developing countries. Our estimate is that by 2020 developing countries will need roughly an additional 100 billion Euros -- around $150 billion -- a year to tackle climate change. Some of this will be financed by developing countries themselves, particularly the advanced emerging economies. And the biggest share shall come from the carbon market, if we have the courage to set up a robust global scheme in the coming decade. But some will need to come in flows off public finance from developed to developing countries, perhaps from 22 (billion) to 50 billion Euros -- 30 (billion dollars) to $70 billion -- a year by 2020. Depending on the outcome of international burden-sharing discussions, the European Union's share of that could be anything from 10 to 30 percent, up to 15 billion Euros, or $22 billion a year.

We'll need to be ready, in other words, to make a significant contribution in the medium term, and also to look at the short term start-up funding for developing countries in the next year or so. We have discussed this last week in an informal European Council meeting -- in fact, it was on Thursday -- and I'm pleased that the commission's proposals on financing were well-received. But we'll need to discuss this again at European Union level in late October. So we need to signal our readiness to talk seriously about finance this week.

The counterpart of this grand bargain is that developing countries -- especially the economically advanced amongst them -- have to be much clearer on what actions they are ready to take to mitigate carbon emissions as part of an international agreement. They are already putting in place domestic measures to limit carbon emissions, but they clearly need to step up such efforts. They understandably stress that the availability of finance from the rich world is a prerequisite to mitigation action on their part, as, indeed, agreed in Bali, but the developed world will have nothing to finance if there is no commitment to such action. So, in short, no money, no deal, but no actions, no money.

Ladies and gentlemen, we have less than 80 calendar days to go till Copenhagen, 80 days -- less than 80 days. As of the Bonn meeting least month, the draft text contains some 200 pages, a feast of alternative options, a forest of square brackets. If we don't sort this out, it risks becoming the longest global suicide note in history.

Copenhagen is probably the best chance to shift collectively onto an emissions trajectory that keeps global warming below two degrees Celsius At the moment, as I've said this morning, rather bluntly, I don't believe we are on track for a successful meeting in Copenhagen. We need to get back on track as soon as possible. So the (fight back ?) has to begin this week in New York.

Thank you for your attention. (Applause.)

BLANKFEIN: Well, that's -- thank you very much for those remarks.

Mr. President, the first question -- or maybe I should just ask you to deal with an issue that everyone -- is on everybody's mind, I'm sure, which is how do you think about balancing the issue at this time with economic growth, which is generally the prevailing trade-off and a very important issue, but in this particular moment in time just seems to be overwhelming out of concern -- because of the economic situation facing the world at the moment. So how do you think about that now? And maybe how should that adjust your expectations for Copenhagen?

BARROSO: We are, of course, aware that it is more difficult to achieve an agreement during this economic situation. And precisely that's why we are underlining also the benefits of action on climate change now and the potential that it opens for new business and also for new jobs.

It is very important to do it now. According to all science that we have received, there is a strong case not to postpone. And according to independent advice -- I quoted Nick Stern -- the Nick Stern report was clear -- and other independent advice, we have to see that the costs of inaction or the costs of postponement, speaking also from an economic point of view, are higher than the costs of acting now. So it's a rational argument that we will try to push forward. Of course, I don't know if people are open to rational arguments in these specific circumstances, but I believe we have to make that point.

And we are, in Europe -- it was already in the end of 2008 that we achieved this agreement. It was not easy. And how was it possible to do it? In fact, we have linked the issue of climate change action with energy security, because, honestly, the (impetus ?) for climate change for this agenda is not the same in all European countries, as I believe in parts of the world.

So the -- what we have tried to achieve was to see that this is also a way of increasing our energy security. And we are combining this agenda with some important projects of public funding and public financing -- for example, for networks, for grids, new grids, for gas and electricity. So it is a trade-off, a very complicated trade-off, but -- that takes in consideration the different positions in which our 27 countries find themselves.

So I believe that, of course, at another level, but the same should apply globally, that we should see what also each one gets economically from this. That is why we have put this week -- or I mean two weeks before we have put on the table those ideas on finance, because for some countries that's also a way of getting additional public finance for their development.

BLANKFEIN: Do you think the consensus that you achieved a year ago would be much harder to achieve today, even within Europe?

BARROSO: No, that was already approved. This -- what I have mentioned here is --

BLANKFEIN: Right, but --

BARROSO: -- now binding legislation, so that we have already done. Whatever the result of Copenhagen, that 20 percent target is already in our legislation. Can we go further? That depends on others making comparable efforts. I believe it's difficult, but we can achieve it if others like the United States and -- that's why I insist on developed part of the world like United States, also Russia, also Canada and others also move significantly.

BLANKFEIN: I see. Perhaps just another -- just to move to another topic, can you comment a bit on your experiences, perhaps in Europe, with respect to public-private partnerships, the relationship between the private sector and the public sector? And maybe we can extrapolate to that some advice for us here in the United States.

BARROSO: Part of this -- the funding -- our estimates, when we have put forward this 100 billion Euros per year by 2020 -- our estimate is that 40 percent of this comes from the carbon market. So we really believe the way to do it is not with a global tax on carbon. I really believe it's impossible to have a global tax on carbon. (Laughs.)

Even in Europe, it would be very difficult, if not impossible. So the best way is to put a -- have a cap-and-trade system that, in fact, we have created. But it is still very reduced. So the way to engage with the private sector is basically through this carbon -- global carbon market. And so there will be plenty of opportunities also for the private sector to enter in this scheme.

Apart from this, yes, we have the system of public-private partnerships in Europe. In fact, one of the proposals I have made just now for the new term was to have a common system, because we don't have today in Europe a common, let's say, framework for that. So different countries have different ways. For instance, the big trains of high speeds, the TGV, as we say in Europe, some of them are now being built with schemes of public-private capital, as you know. But there is not an harmonized system. And I promise now to come up soon with a proposal for an harmonized system of public-private partnership. That could be also a way of funding some of those projects, namely in technology.

Part of this is coming from technology. Let me tell you, because being in touch -- these years I have been working on this, of course, with my colleagues from the commission -- and being in touch with many people that are operating this scheme, I believe there is a huge potential -- a huge potential, namely on energy efficiency. The gains -- also in the United States there are -- very important progress now is going on in terms of technology.

So the gains from new technologies -- just to give you an example, we have created recently a line of 5 billion Euros for the development of greener cars, cleaner cars in the European Investment Bank. Immediately now I read it spent 7.5 billion Euros in a very short period of time. And it's not only big German companies that are using it. Sometimes our very small businesses are trying to see how to introduce some innovations that are more -- that favor energy efficiency in the -- in all parts of the vehicle. So that's a huge -- I'm sure that is a huge domain for innovation, technology where the private sector also has a lot to gain.

BLANKFEIN: And I suppose the silver lining to the current economic situation is the consensus of the need for stimulus.

BARROSO: Yes.

BLANKFEIN: And these technologies provide good opportunity for governments to help the private sector spend money.

BARROSO: Yes. We are, in fact, saying that. Part of the economic stimulus program that was approved in Europe was -- the lines we have defined as priority lines for public investment, part of it from the European Community budget but also from the national budgets was invest on, let's say, low-carbon economy and development of low-carbon and -- technologies and cleaner technologies, from transport to energy.

BLANKFEIN: I see.

Let me see -- let's take some questions from some of the members here. Microphone?

QUESTIONER: Thank you. Bal Das from Kailix Investment Advisors. President Barroso, on Friday I was hosting India's minister for environment, Jairam Ramesh, who stated his view -- who was here stating his view on India's position. What stood out to me are two things: One, it seems to be somewhat of a very firm position that India is not going to subject itself to any form of hard emission limits. Second, actually what stood out more to me was the fact that a vast part of the country, from a political standpoint, is yet to buy into the fundamental harm that climate change may bring about, which therefore results in the political process not becoming very firmly committed to the kind of commitment that it needs.

I'd be interested in your thoughts of leaving India out, which is really between 4 and 5 percent of the global emitter, and focusing more trilaterally between the United States, Europe and China, which by and large account for a vast amount of the emission. And somehow that seems to me to be a better route to go in trying to come to a conclusion. I'd be interested in your thoughts. Thank you.

BARROSO: For some years I've been discussing this issue with Prime Minister Singh and also the commission has been discussing at all levels with the Indian government and also Indian scientists. In fact, we have been organizing fora -- scientific fora with distinguished scientists from India and Europe and other parts of the world.

And, in fact, without India we really cannot do it. India will become very soon the biggest country in the world in demographic terms. It makes no sense to have a global agreement without India or without China. That's quite obvious. That is why we have been accepting the principle of shared but differentiated responsibilities, where the developed countries all should accept targets, binding targets, and the developing -- even if they are big emerging economies like India -- should draw up low-carbon development strategies which will map out concrete actions to limit their emissions and indicate what is needed.

We understand the sensitivities of India and others about the need for -- to go for their own development and that we don't want to block their economic growth and their development. At the same time, being the biggest countries in the world, I will say that they are the ones who have the biggest interest in keeping this world a safe place to live for their -- for future generations. So it's a question of global responsibility. I mean, it's quite -- quite obvious, because some -- by the way, some of the leading scientists in this matter are Indian, like the president of the International Panel on Climate Change, and they have been the -- some of the strongest advocates of resolute action in this -- in this field, like Dr. Pachauri.

So we have to make a deal where, of course, the effort is not the same but that all give a contribution. And to some extent, once again, I would like to quote the European experience. In some of our countries in Europe, the less developed countries, we allowed them to go up with some emission for some years more. So internally also we made a deal where some have the possibility to, because of their relatively lower level of development, to see the growth -- growing their emissions, but others are making very severe cuts. I think this principle should be adopted internationally. So it's what in the United Nations jargon we call the "shared but differentiated" responsibilities.

BLANKFEIN: Now, is it possible that cap-and-trade also -- that framework also --

BARROSO: Yes.

BLANKFEIN: -- provides a -- you know, some subsidization, real money for -- from the developed world to the developing world, and that's also a useful prod.

BARROSO: Yes. That's what we -- our -- maybe I can explain because of the -- what I said very generally. Our -- the points we have put forward the last week -- and it was well-received by the European Council, so the commission put forward for finances -- but more or less this one -- we believe that developing countries need by 2020 roughly 100 billion Euros. We think 40 percent of this should come from the carbon market, 20 to 40 percent from developing country domestic sources -- when I say developing countries, meaning also big emerging economies like China or India -- and the potential there is immense -- in energy efficiency, it's immense potential. So it is not unrealistic, this figure. And therefore, we need 20 to 40 percent in public finance flows from developed to developing countries.

So the rest of -- those -- the LDCs, less-developed countries, according to our proposal, of course, will not -- should not contribute. But the other countries can contribute, also. And the global carbon market can also give the incentives for them to integrate in that.

BLANKFEIN: Thank you. Just wait for the microphone. Please.

QUESTIONER: Thank you

BLANKFEIN: Right. Thank you.

QUESTIONER: Thank you very much. Ruben Kraiem from Covington and Burling. Mr. President, borrowing also again from the presentation that Minister Ramesh made here in New York last Friday, I would appreciate your reaction to the following two proposals that are beginning to be floated, which is in light of the complexity of the negotiating text and the difficulty that lies ahead, might be there be some merit in focusing less on targets and more on specific actions that individual countries would undertake, so that rather than negotiating numbers relative to 1990 countries might negotiate specific commitments for action in their respective energy or other sectors? And combined with that, might there be any merit in agreeing in Copenhagen on other issues such as the international protection of forests, the sharing of technology and possibly the continuation of Clean Development Mechanism or similar arrangements and then leave for a later date agreements on targets?

BARROSO: What you are suggesting is already a plan B in case Copenhagen does not work. (Laughter.)

But I think now we shall work for Copenhagen to work. And I think everything we have said about deforestation, I agree, about technology, certainly about these kind of mechanisms, the CDM -- so-called CDM certainly as well. But honestly, we believe that without targets it will not work. That's -- we are really very convinced that cap-and-trade system is necessary.

Some time ago -- very -- being very blunt to you -- when discussing this issue with our American partners, the response here was technology would make it; it's not necessary to have targets. The new administration is already working also on targets. We believe we need both. We need targets and binding targets to create the right economic incentives also to develop technology. We need technology and we need targets.

Of course, as underlined by India and, indeed, by China and others, they are not ready to accept binding targets in a let's say kind of international treaty. But they are moving. The Chinese are making some clear progress. And this week, President Hu is coming here to New York.

And I expect some developments, some evolution in their position. Because if they -- and we have been discussing this issue with them for some years now. I myself have been discussing these issues, I know, with Premier Wen. If they accept to put their national plans in kind of a global framework as their contribution, I mean, that could be already helpful.

So this is the point: We have to find the right -- the right point of balance, of course, where everybody contributes, certainly at a different level, but everybody has to contribute. If not, I don't know in United States, but also, let me tell you very frankly, in Europe, I don't see our public in Europe accepting to make these efforts if other parts of the world don't do it. Our emissions, I think, are more or less 14 percent of global emissions in Europe -- 14 percent of -- so even if you put at zero the emissions, that will not solve the problem.

And so we have now in Europe -- and I am very happy and proud to say it -- we have a strong backing in public opinion to go forward with ambitious targets, but we need others also to move. If not, we don't have the conditions for this to keep this ambition.

So I think it is -- we need both. We need targets, binding targets coming from developed countries. We need some plans of low-carbon strategies from other, namely the developing countries. And we need some mechanisms of international agreement to monitor all these developments. That's what -- the position we are going to come to Copenhagen with.

BLANKFEIN: Another question.

QUESTIONER: John Watts, with global energy investing company called Sequel Energy. You said a couple of times that you feel that in Europe there's a wide acceptance of the severity of the problem and willingness if other countries go ahead to accept some new actions. But I'm concerned that you seem to think that is probably the case in this country, where it seems that -- to me that it quite clearly isn't. There's huge amounts of polling data that indicate our fellow citizens, as a group, will accept a very small amount -- or won't accept a very large amount -- a few postage stamps a day, someone calculated -- and that without that it's going to be hard to move the Congress or move any part of this government if it's considered death to a congressman to propose serious taxes or serious increases in expenses for electricity.

Do you have any advice for the United States, if that's a fair characterization of our public opinion?

BLANKFEIN: Don't breathe. (Laughter.)

BARROSO: Look, we have been discussing this issue already with President Obama, when he came to Europe, to Prague. And I personally had the opportunity to discuss this with him, and he met all the 27 heads of state and government, plus the commission at that meeting. He knows well what we think.

I think we should praise President Obama, because he's for less than nine months now in power and, in fact, there is a real change in terms of doing much more on that matter. But we understand that he's also fighting other battles, apparently, at this moment.

Now, I believe this country, the United States, listens to science. You are the number one power of the world in terms of science and technology. And science is clear: We have to move now. And there is also moral responsibility. I believe that it's a question of time to have a strong support in the public opinion to move faster in this matter, because science tells us that we really need to move in this matter. And there is also some kind of moral responsibility here. So I think the elected leaders will do everything they can to rise to the occasion.

Of course we all understand that there are constraints -- political constraints, economic constraints -- but I think there is a strong case to make here, and the evolution has been in the right direction.

Now, are Americans going to adopt -- for instance, will the Senate adopt legislation that was already approved by the House of Representatives? I don't know. You are the experts. I am not the expert on the United States. You probably can tell me better. But certainly, we encourage the United States to show leadership in this -- in this critical issue for the world. And that's why we are working, praising your efforts done so far. They are very, very important, because, in fact, the American administration has accepted the need to have some targets and limits.

Now, we can discuss, of course, the level of ambition, but, in fact, that step now is taken. And I'm sure that also with the enormous potential -- economic potential of this agenda also for the -- coming from the global carbon market for new technologies, United States will be, of course, interested in a successful outcome from Copenhagen.

QUESTIONER: And also some of the states, I think, have shown leadership here, because -- given our federalist -- like California have set emission standards that have shown some leadership --

BARROSO: Yes. Yes.

QUESTIONER: -- in this space.

BARROSO: Some states, yes, I have seen. Yes, you have been -- in fact, some years ago -- I think two years ago -- there was a kind of a global coalition for action on this matter and Europe was signing with states from the United States of America and other parts of the world, from Australia, New Zealand. By the way, Australia also made recently some announcements. Japan -- the new Japanese prime minister made some very interesting announcements.

So I want to be very honest with you. I mean, I'm not underestimating the difficulties of this -- (inaudible). It's extremely difficult, particularly because of the general economic situation. But there are also good news. There are also good news.

BLANKFEIN: Let me just see if there's a question in Washington.

MODERATOR: Good morning, Lloyd. Thank you. Good morning, President Barroso and council members in New York. Thank you very much for allowing us in Washington to participate in your meeting. We have one question down here from Mark Esper with the U.S. Chamber of Commerce.

QUESTIONER: Good. Thank you. Mark Esper, United States Chamber of Commerce.

Mr. President, technology will be critical to addressing climate change. And most would agree that strong intellectual property rights are critical to driving that innovation. The United States has made clear that as part of any treaty or agreement that intellectual property rights must be respected, particularly when it comes to technology transfer. Can you tell us what the commission's view is on this matter?

BARROSO: We agree. We have been fighting very hard to -- for to protect intellectual property rights, also with the other parts of the world. That's one of our top priorities. I want to discuss these issues namely with some emerging economies.

At the same time, we believe that it can be part of the agreement, the transfer of some of those technologies, but based on recognition of intellectual property rights.

QUESTIONER: Thank you.

PRESIDENT BARRASO: That can be part of our contribution, you see. So if there are some technologies, it can be part of our contribution. In fact, we have made some estimates in the program I have mentioned earlier.

QUESTIONER: Thank you. Elizabeth Bramwell, Bramwell Capital. I'm concerned about the impact on manufacturing. You know, we basically have been losing manufacturing here and in Western Europe to China and elsewhere, countries with fewer emissions standards than we have. And so, you know, I really would hate to see the steel industry kind of being forced offshore to China, from a national security point of view. And I worry about the impact on job creation in the blue-collar sector, both here and in Western Europe. I wonder if you could comment.

BARROSO: Yes. That's precisely why we need a global, comprehensive agreement. If not -- if we put out of Europe or out of United States the pollution but also the jobs, it's not a good deal. We want to keep the jobs also in our industries. That's certainly in the States, but also in Europe. That is why in the legislation that we have approved in Europe, we have Article 10B -- puts some of the measures to support energy intensive industries in the event of carbon leakage. There is a list of those measures.

We are not underlining them at the moment, because our effort now is to have an agreement. And I think we should put our emphasis and our energy in trying to find an agreement in Copenhagen, a global agreement that is as comprehensive as possible. But of course, if there is no agreement, we in Europe, we will introduce some of those measures to protect our industries to avoid carbon leakage. And they are, for instance, free permits for -- free emissions permits for industries that are energy intensive. So there is a lot that you can find that -- of course, in legislation. I'm not going into detail now. But we have to have these kind of measures in case others do not accept a global commitment.

BLANKFEIN: But at the end of the day, an agreement would have to be more permissive in the developing world than in the developed world, and therefore you could get kind of a -- you know, a carbon arbitrage just by virtue of those industries finding a more favorable home --

BARROSO: Yes.

BLANKFEIN: -- in developing markets, and -- which is just baked in the cake.

BARROSO: Yes.

BLANKFEIN: Back -- just step back. Thank you.

QUESTIONER: Good morning. (Name and affiliation inaudible) -- European energy group. Mr. President, as you properly indicated, we Europeans are standing totally behind the program that you have initiated with the 2020-20, however technical questions comes from the current situation that we have in our industries back in Europe. With the recession biting on the manufacturing effort, following on the question that the lady just raised, isn't there a case for revising the allocation among the different segments of the pieces of free allocations? Isn't there a case for increasing the level of CDM and GI applications to favor the technological transfers you need to reduce the global emissions? And is any possibility that the French ideas of imposing carbon tax on imported goods is going to be one of the leading European themes for future? Thank you.

BARROSO: Look, I usually prefer not to deliberate on negative scenarios before trying to do everything to get a positive scenario. That is a question. Of course we are concerned with the points we have raised of carbon leakage.

Now, it's important to know -- namely to our American friends that are not so familiar with the legislation we have approved in Europe -- that part of it is already approved. So there is now going on in Europe, as I think in all parts of the world, some discussion about what we should do further, what can be the new commitments. But I was on Thursday in Brussels. We had a meeting with the 27 heads of state and government of Europe. And honestly, no one suggested, "Let's roll back our commitments." No one. The discussion was exactly what can we do more.

But, yes, some people say, if others don't do their part, then we have to protect their industries. That is why in legislation already approved, I refer again, Article 10B, for instance, we have put that reference, inclusion in the community scheme of importers of products which are produced by the sectors or sub-sectors mentioned before. So one -- it's not idea -- it's not exactly the idea of the carbon tax in the border, but it's the idea of putting the -- subject the importers in Europe to the same conditions of those who produce some products -- energy-intensive products inside. So there will be, of course, some mechanism to defend ourselves.

Now, the point is, I think it's not helpful to start discussing this before doing our best to agree on the most ambitious possible outcome in Copenhagen. What we want is not to close -- we don't want, as the commission -- let me be clear, we don't like green protectionism. We don't like protectionism, period. And we don't like green protectionism, also. So -- but of course, that raises a problem. If part of the world limits the greenhouse gas emissions clearly with binding legislation and the rest of the world does not do it -- we are not naive. We don't want our industries to go out.

So that is why it's so crucial to have some kind of agreement coming from the big emerging economies. That is why it's so vital, the position of China and position of India and others as well. And we hope that with this principle of differentiated responsibilities they come on board. I'm confident that we'll see progress on their positions, probably this week -- probably this week. This matter will be also in Pittsburgh. We're going to -- President Obama's going to meet President Hu, I think, from China. And we are also working with our Chinese partners and others.

So it is critically important, and this is exactly what we are telling them. I mean, now, everybody recognizes now that they have a very important word to say about the future of our global community. But that brings also responsibility. And this is what we have been negotiating.

But so I will not go now about the -- to deliberate about what safeguard measures we have before doing our best to achieve an agreement in Copenhagen.

QUESTIONER: Thank you.

BLANKFEIN: In the back. Thank you.

QUESTIONER: Hi. Sorry. President Barroso, I'm Walter Brandimarte with Reuters News. I'd like to ask you if -- is Europe working with the United States on a plan to rebalance the world economy? And what can we expect from that during the G-20 meeting? And can that eclipse the discussions about climate change?

BARROSO: Well, we are doing everything in parallel, in fact. The G-20 process, I think it was a very -- it's been -- has been a very successful process that was launched after the big financial crisis. In fact, I was, together with President Sarkozy -- then it was president of the council in Europe -- I was in Camp David suggesting this to President Bush. We had the first summit here in the United States, in Washington, the second in London under the very able leadership of Gordon Brown and now we have the third here in Pittsburgh with President Obama leading. And I really believe that he's changing the way we are looking at global governance.

And global governance is not just about, I mean, trying to fix the financial system. It's about macroeconomic dialogue. This is clear, nowadays; it's obvious that we have to try to coordinate the so-called "exit strategies." We have to look at global demand globally. What China is doing is, indeed, critical for the rest of the world. People now understand that we -- either we swim together or we sink together.

And climate change is also part of this, because that's the future of our planet, and there is also a very important finance dimension in it. That is why I certainly hope that at Pittsburgh there will be also some time to discuss climate finance. That was what we were suggesting to our partners in the G-20, the commission and the other European members of the -- of the G-20. And I think we should do that in parallel, that -- or in a convergent approach. It's about global governance.

And I think there is a good -- a good possibility to achieve some progress in Pittsburgh this week.

BLANKFEIN: Good. Kay (sp), is there another question in Washington?

MODERATOR: Lloyd, I don't think we have another question down here. Thank you.

BLANKFEIN: Okay. (Inaudible.)

QUESTIONER: My name is Hiroko Gonu (ph) with Yomiuri Shimbun, Japanese newspaper. Mr. President, you mentioned new Japanese prime minister's announcement. My question, how does it -- does it have any effect on international negotiations and how it will affect, do you think? Thank you.

BARROSO: I welcome that statement. It seems to be good news. And now we have to see how it exactly translates in concrete commitments. But, in fact, it shows more ambition from Japan. And Japan being, in national terms, the second economy in the world, it's so important that Japan really gives a contribution. And Japan being also the country of the Kyoto process -- so Japan has had in the past a leading position in these matters. And I know well the Japanese sensitivity to these issues of security, from food security to climate security.

And so I really expect Japan to take a leading role and very much looking forward to working with the new Japanese prime minister. We're going to meet him in Pittsburgh on these issues.

But now we have to see if we can translate those very positive announcements in some kind of concrete positions for negotiating at Copenhagen. As I said in my introductory remarks, now it's no longer to -- it's not the time to keep our cards close to the chest; it's to put the -- to ask all leaders, look, what is really the maximum you can do? We understand, I mean, Japan has constraints. We in Europe have constraints. Some of you also referred to some of the points that -- here in the United States also people are worried about what can happen to some energy. So let's see honestly what is the limit; what can we do each one of us and put that on the table and then try to find an appropriate compromise.

If we miss the Copenhagen deadline, I don't think things are going to get better in the future. That's why we need at least to find the basic principles of the compromise in Copenhagen. That's what we are starting to do this week in New York. Tonight there will be a working dinner with Secretary-General Ban Ki-moon. And tomorrow we have that high-level event. I hope for the progress in Pittsburgh so to build the momentum for Copenhagen.

BLANKFEIN: Okay. I think we have time for one more question.

QUESTIONER: Rush Baker with Deutsche Bank. I think you brought up a very good point about not keeping our cards close to our chest. Are there specific ways that the private sector and providers of capital can participate and weigh in at Copenhagen?

BARROSO: Yes. I believe that only with public authority we will not reach those targets, I've mentioned before. That's why we want a global carbon market and that's why in the technology development there will be user -- (inaudible). I've mentioned before that because I just received -- (inaudible) -- the interest there is now in some sectors of our market -- first in automobile industry, it's a typical case. There is a lot of interest of -- for more finance to develop low-carbon technology, cleaner cars, from electric cars to others. So I think the private sector and namely also the financial sector can give an important contribution to development of this agenda.

And one of the key -- now to give you a more political remark -- one of the keys to explain why in Europe we're able to make some progress that we are proud in this field was to link the different parts of this agenda. Traditionally, this issue was seen as a green issue, a(n) issue for the environmental constituency. That of course is very important in Europe, as in other parts of the world. But what we have done was to link this issue of environment, protecting of our, you know, planet, to the energy security issue that is so crucial, namely for some of our member states that are very much exposed to one supplier and they don't want to be so much dependent on fossil fuels or one supplier and to link it also to the internal market for energy and to the competitiveness of our economy.

So I think today, apart from the other geopolitical or geo implications, this issue of climate change is a green issue or an environmental issue, an energy security energy and a global competitiveness issue. And I'm sure there are very good opportunities also for the economic private sector and the financial sector specifically.

BLANKFEIN: Well, Mr. President, our time has come to an end. I'd like to thank you for your remarks. And most importantly, I'll observe Europe has been a great leader in this area, and you've been a great leader of Europe in this area. So we thank you very, very much.

BARROSO: Thank you. Thank you very much. (Applause.)

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THIS IS A RUSH TRANSCRIPT.

LLOYD C. BLANKFEIN: Good morning, and welcome to today's Council on Foreign Relations meeting. I'm Lloyd Blankfein, Chairman and CEO of Goldman Sachs. Before we begin, I'd like to remind everyone to please completely turn off all wireless devices to avoid interference with the sound system.

I also want to remind members that this meeting is on the record.

I'm delighted to be the first to officially welcome European Commission President Jose Manuel Barroso to the Council on Foreign Relations for a timely discussion on the EU's approach to climate change.

In addition to our audience here in New York this morning, CFR members in Washington, D.C., are participating via videoconference and members around the world are taking part via teleconference.

When you consider President Barroso's responsibilities and achievements over his past five years as European Commission president, it's easy to appreciate his effective stewardship. And, as validation of that record, last week President Barroso was overwhelmingly confirmed to serve a second mandate as president of the European Commission.

As most of you are aware, President Barroso represents a remarkable economic and political union of 27 different countries and nearly 500 million citizens. In fact, the creation of the European Union and the EU's further integration, most especially the EU single market, is an incredible achievement. Not only has it created a barrier-free trade zone for goods, capital, services and people, but it has also harmonized standards across Europe, affording equal access and benefits to European citizens. Each member state in the EU still maintains its own cultural and social identity. Defining and maintaining this balance is quite a challenge, but it has been a success under the leadership of President Barroso.

The president has exhibited exceptional leadership in understanding the interrelated issues of climate, energy and economic growth. In 2005, he helped to establish the EU Emissions Trading System, the first of its kind in the world, which has inspired other countries, including the U.S., to consider and create related mechanisms. In 2008, President Barroso launched a "big bang" of climate and green legislation focusing on cutting greenhouse gas emissions, reducing energy consumption and increasing the use of renewable energy.

More recently, the president announced his plans to create a new European commissioner for climate change. This organizational change reflects the importance of climate change issues across the entirety of the EU's policy making.

President Barroso is also positioning Europe to be a leader in Copenhagen. The European Commission a few weeks ago issued their proposals on their contributions to financing climate change at the international level. This initiative is the first of its kind and demonstrates the president's commitment to achieving a robust global agreement on these issues.

We all have a role to play in mitigating climate change. At Goldman Sachs, we share the president's deep commitment to climate change issues. In 2005, we launched our environmental policy framework. This initiative reflects our philosophy that capital markets can and should play an important role in addressing today's environmental challenges. As part of this policy, we've integrated environmental initiatives into our core business functions, as an advisor to our clients as well as a financier and co-investor in scaling up clean energy solutions. From its inception, we have also been an active market maker in the cap-and-trade mechanism, the EUTS, which was established under your leadership.

And now just a few words on the format for today's meeting. President Barroso will provide a few introductory remarks. I will then pose a couple of questions to him and then I will turn to the audience for the remaining period to ask questions of President Barroso.

I would like to remind you again that when asking questions, please wait for the microphone and speak directly into it. Also, please stand, state your name and affiliation.

With that, please join me in welcoming the president of the European Commission, Jose Manuel Barroso. (Applause.)

PRESIDENT JOSE MANUEL BARROSO: I'd like to thank Lloyd Blankfein for this kind introduction. I'm delighted to be here at the Council of Foreign Relations to discuss with members the vital subject of climate change.

As you know, there will be a high-level climate change summit called by Ban Ki-moon these days here in New York. And I think it is a vital moment to prepare to Copenhagen and, in fact, in the way to Copenhagen we'll also see each other at Pittsburgh during this week.

I think this is the right subject also for the Council on Foreign Relations, because climate change is no longer the reserved province of the environmental community. It is an economic issue; it's a development issue, a health issue, migration issue, an agriculture, a fisheries, an energy, a transport issue, because climate change is going to affect all these areas of our lives, and we are going to have to adapt. Indeed, just recently I have announced that during the next five-year term of European Commission we'll assess how all our European Community policies must adapt to the realities of climate change. And I also intend to create a commissioner for climate action.

But climate is also, of course, a foreign policy and security issue. Climate change is likely to trigger and exacerbate conflict. It risks undermining our efforts to bring development to the poor parts of the world. And we will see potentially dangerous disputes about water, about maritime resources, about population migration. But most of all, given difficulties in negotiations in the run-up to Copenhagen, the whole foreign policy community needs to be involved in urging movement, in pushing for progress from everyone involved. So you are right to be concerned and I urge you to continue your focus on this.

I have made this short introduction to our discussions this morning, review where we are and spell out what European Union wants to see in Copenhagen. I will be brief on science, because audiences in general no longer have to be convinced about the need for climate action. We have moved past what I call the "polar bear-ization" of debate about how terrible climate change is going to be. People want to hear more about solutions. But it is important to restate what climate scientists are telling us, because the more we hear the more compelling is the case.

Indeed, climate change seems to be happening even faster than the International Panel on Climate Change predicted only two years ago. Continuing with business as usual almost certainly means dangerous, perhaps catastrophic, climate change during the course of this century. This is not just one of those intergenerational threats likely to hurt us at some point in the future. We need to find solutions now.

The (step ?) is international agreement based on science. So it was, I thought, important that the G-8 and the Major Economies Forum both recognized in July in L'Aquila, Italy, what science tells us -- namely, that we must keep average global warming to more than 2 degrees Celsius or 3-1/2 degrees Fahrenheit above pre-industrial levels. This, in turn, means that global emissions will need to peak before 2020 and then by 2050 be reduced to at least half their 1990 levels. Again, this in turn means that we both have to get on with emissions reduction now and we have to plan for tomorrow's low-carbon economy. This means taking steps now, for instance, towards de-carbonizing our electricity supply and transport sector by 2050.

In fact, the economic case is just as strong. Acting against climate change is, of course, a moral imperative to current and future generations, but it is also an immense economic opportunity. The cost argument is getting clearer. Tackling climate change will be expensive. However, climate change expert Nick Stern tells us that failing to act will cost much more, at least 5 percent of the world's GDP every year.

But it's about more than minimizing the pain; it's about serving the next wave of economic development. Take Europe's climate and energy package, for example, which we have agreed in 2008, cutting emissions by at least 20 percent below 1990 levels by 2020 and doubling the share of renewable energy to 20 percent within the same time frame. We think this will generate some 90 billion Euros -- around $130 billion -- of additional investment in renewables and some 700,000 new jobs in this sector, as well as reducing our oil and gas import bill by around 45 billion Euros -- or around $70 billion -- a year by 2020.

So the commission is determined to green Europe's economy via energy efficiency, for example, via clean car technology and carbon capture and storage. We want to position Europe as one of the first movers in developing these kind of technologies. There is going to be a lot of healthy low-carbon competition in the next couple of decades, and Europe must be ready.

So if science is clear, if there is a strong net economic upside, what's the problem? Copenhagen shall be an easy conference, right? No. In fact, at this point, I confess that I'm very, very worried by the prospects for Copenhagen. Negotiations are dangerously close to deadlock at the moment. And let me spell out what that means: This may not be a simple negotiating standoff that we can fix next year. It risks being an acrimonious collapse, delaying action against climate change perhaps for years. And the world right now cannot afford such a disastrous outcome. So I hope that as world leaders peer over the edge of -- (inaudible) -- in New York and Pittsburgh this year, we'll collectively conclude that we have to play an active part in driving negotiations forward.

Part of the answer lies in the process of the negotiations themselves. We fully back the U.N. process. No one is trying to undermine or short circuit that. But now is the time for putting offers on the table, offers at the outer limit of our political constraints. This is what Europe has done, to be frank, and we will be pushing others to do the same.

But part of the answer lies in identifying the heart of the potential bargain that might yet bring us to a successful result. And here, I think that world leaders gathering here in New York can make a real difference on this.

The first part of the bargain is that all developed countries -- and I have underline the word "all developed countries" need to clarify their plans on mid-term emissions reductions and show the necessary leadership, not least, in line with our responsibilities for past emissions. If we want to achieve at least an 80 percent reduction by 2050, as, in fact, we are committed to doing, developed countries must strive to achieve the necessary collective 25 to 40 percent reductions by 2020. European Union is ready to go from 20 percent to 30 percent if others make comparable efforts.

Second, we must now explicitly recognize that all developed countries have to play a significant part in helping to finance mitigation action by developing countries. Our estimate is that by 2020 developing countries will need roughly an additional 100 billion Euros -- around $150 billion -- a year to tackle climate change. Some of this will be financed by developing countries themselves, particularly the advanced emerging economies. And the biggest share shall come from the carbon market, if we have the courage to set up a robust global scheme in the coming decade. But some will need to come in flows off public finance from developed to developing countries, perhaps from 22 (billion) to 50 billion Euros -- 30 (billion dollars) to $70 billion -- a year by 2020. Depending on the outcome of international burden-sharing discussions, the European Union's share of that could be anything from 10 to 30 percent, up to 15 billion Euros, or $22 billion a year.

We'll need to be ready, in other words, to make a significant contribution in the medium term, and also to look at the short term start-up funding for developing countries in the next year or so. We have discussed this last week in an informal European Council meeting -- in fact, it was on Thursday -- and I'm pleased that the commission's proposals on financing were well-received. But we'll need to discuss this again at European Union level in late October. So we need to signal our readiness to talk seriously about finance this week.

The counterpart of this grand bargain is that developing countries -- especially the economically advanced amongst them -- have to be much clearer on what actions they are ready to take to mitigate carbon emissions as part of an international agreement. They are already putting in place domestic measures to limit carbon emissions, but they clearly need to step up such efforts. They understandably stress that the availability of finance from the rich world is a prerequisite to mitigation action on their part, as, indeed, agreed in Bali, but the developed world will have nothing to finance if there is no commitment to such action. So, in short, no money, no deal, but no actions, no money.

Ladies and gentlemen, we have less than 80 calendar days to go till Copenhagen, 80 days -- less than 80 days. As of the Bonn meeting least month, the draft text contains some 200 pages, a feast of alternative options, a forest of square brackets. If we don't sort this out, it risks becoming the longest global suicide note in history.

Copenhagen is probably the best chance to shift collectively onto an emissions trajectory that keeps global warming below two degrees Celsius At the moment, as I've said this morning, rather bluntly, I don't believe we are on track for a successful meeting in Copenhagen. We need to get back on track as soon as possible. So the (fight back ?) has to begin this week in New York.

Thank you for your attention. (Applause.)

BLANKFEIN: Well, that's -- thank you very much for those remarks.

Mr. President, the first question -- or maybe I should just ask you to deal with an issue that everyone -- is on everybody's mind, I'm sure, which is how do you think about balancing the issue at this time with economic growth, which is generally the prevailing trade-off and a very important issue, but in this particular moment in time just seems to be overwhelming out of concern -- because of the economic situation facing the world at the moment. So how do you think about that now? And maybe how should that adjust your expectations for Copenhagen?

BARROSO: We are, of course, aware that it is more difficult to achieve an agreement during this economic situation. And precisely that's why we are underlining also the benefits of action on climate change now and the potential that it opens for new business and also for new jobs.

It is very important to do it now. According to all science that we have received, there is a strong case not to postpone. And according to independent advice -- I quoted Nick Stern -- the Nick Stern report was clear -- and other independent advice, we have to see that the costs of inaction or the costs of postponement, speaking also from an economic point of view, are higher than the costs of acting now. So it's a rational argument that we will try to push forward. Of course, I don't know if people are open to rational arguments in these specific circumstances, but I believe we have to make that point.

And we are, in Europe -- it was already in the end of 2008 that we achieved this agreement. It was not easy. And how was it possible to do it? In fact, we have linked the issue of climate change action with energy security, because, honestly, the (impetus ?) for climate change for this agenda is not the same in all European countries, as I believe in parts of the world.

So the -- what we have tried to achieve was to see that this is also a way of increasing our energy security. And we are combining this agenda with some important projects of public funding and public financing -- for example, for networks, for grids, new grids, for gas and electricity. So it is a trade-off, a very complicated trade-off, but -- that takes in consideration the different positions in which our 27 countries find themselves.

So I believe that, of course, at another level, but the same should apply globally, that we should see what also each one gets economically from this. That is why we have put this week -- or I mean two weeks before we have put on the table those ideas on finance, because for some countries that's also a way of getting additional public finance for their development.

BLANKFEIN: Do you think the consensus that you achieved a year ago would be much harder to achieve today, even within Europe?

BARROSO: No, that was already approved. This -- what I have mentioned here is --

BLANKFEIN: Right, but --

BARROSO: -- now binding legislation, so that we have already done. Whatever the result of Copenhagen, that 20 percent target is already in our legislation. Can we go further? That depends on others making comparable efforts. I believe it's difficult, but we can achieve it if others like the United States and -- that's why I insist on developed part of the world like United States, also Russia, also Canada and others also move significantly.

BLANKFEIN: I see. Perhaps just another -- just to move to another topic, can you comment a bit on your experiences, perhaps in Europe, with respect to public-private partnerships, the relationship between the private sector and the public sector? And maybe we can extrapolate to that some advice for us here in the United States.

BARROSO: Part of this -- the funding -- our estimates, when we have put forward this 100 billion Euros per year by 2020 -- our estimate is that 40 percent of this comes from the carbon market. So we really believe the way to do it is not with a global tax on carbon. I really believe it's impossible to have a global tax on carbon. (Laughs.)

Even in Europe, it would be very difficult, if not impossible. So the best way is to put a -- have a cap-and-trade system that, in fact, we have created. But it is still very reduced. So the way to engage with the private sector is basically through this carbon -- global carbon market. And so there will be plenty of opportunities also for the private sector to enter in this scheme.

Apart from this, yes, we have the system of public-private partnerships in Europe. In fact, one of the proposals I have made just now for the new term was to have a common system, because we don't have today in Europe a common, let's say, framework for that. So different countries have different ways. For instance, the big trains of high speeds, the TGV, as we say in Europe, some of them are now being built with schemes of public-private capital, as you know. But there is not an harmonized system. And I promise now to come up soon with a proposal for an harmonized system of public-private partnership. That could be also a way of funding some of those projects, namely in technology.

Part of this is coming from technology. Let me tell you, because being in touch -- these years I have been working on this, of course, with my colleagues from the commission -- and being in touch with many people that are operating this scheme, I believe there is a huge potential -- a huge potential, namely on energy efficiency. The gains -- also in the United States there are -- very important progress now is going on in terms of technology.

So the gains from new technologies -- just to give you an example, we have created recently a line of 5 billion Euros for the development of greener cars, cleaner cars in the European Investment Bank. Immediately now I read it spent 7.5 billion Euros in a very short period of time. And it's not only big German companies that are using it. Sometimes our very small businesses are trying to see how to introduce some innovations that are more -- that favor energy efficiency in the -- in all parts of the vehicle. So that's a huge -- I'm sure that is a huge domain for innovation, technology where the private sector also has a lot to gain.

BLANKFEIN: And I suppose the silver lining to the current economic situation is the consensus of the need for stimulus.

BARROSO: Yes.

BLANKFEIN: And these technologies provide good opportunity for governments to help the private sector spend money.

BARROSO: Yes. We are, in fact, saying that. Part of the economic stimulus program that was approved in Europe was -- the lines we have defined as priority lines for public investment, part of it from the European Community budget but also from the national budgets was invest on, let's say, low-carbon economy and development of low-carbon and -- technologies and cleaner technologies, from transport to energy.

BLANKFEIN: I see.

Let me see -- let's take some questions from some of the members here. Microphone?

QUESTIONER: Thank you. Bal Das from Kailix Investment Advisors. President Barroso, on Friday I was hosting India's minister for environment, Jairam Ramesh, who stated his view -- who was here stating his view on India's position. What stood out to me are two things: One, it seems to be somewhat of a very firm position that India is not going to subject itself to any form of hard emission limits. Second, actually what stood out more to me was the fact that a vast part of the country, from a political standpoint, is yet to buy into the fundamental harm that climate change may bring about, which therefore results in the political process not becoming very firmly committed to the kind of commitment that it needs.

I'd be interested in your thoughts of leaving India out, which is really between 4 and 5 percent of the global emitter, and focusing more trilaterally between the United States, Europe and China, which by and large account for a vast amount of the emission. And somehow that seems to me to be a better route to go in trying to come to a conclusion. I'd be interested in your thoughts. Thank you.

BARROSO: For some years I've been discussing this issue with Prime Minister Singh and also the commission has been discussing at all levels with the Indian government and also Indian scientists. In fact, we have been organizing fora -- scientific fora with distinguished scientists from India and Europe and other parts of the world.

And, in fact, without India we really cannot do it. India will become very soon the biggest country in the world in demographic terms. It makes no sense to have a global agreement without India or without China. That's quite obvious. That is why we have been accepting the principle of shared but differentiated responsibilities, where the developed countries all should accept targets, binding targets, and the developing -- even if they are big emerging economies like India -- should draw up low-carbon development strategies which will map out concrete actions to limit their emissions and indicate what is needed.

We understand the sensitivities of India and others about the need for -- to go for their own development and that we don't want to block their economic growth and their development. At the same time, being the biggest countries in the world, I will say that they are the ones who have the biggest interest in keeping this world a safe place to live for their -- for future generations. So it's a question of global responsibility. I mean, it's quite -- quite obvious, because some -- by the way, some of the leading scientists in this matter are Indian, like the president of the International Panel on Climate Change, and they have been the -- some of the strongest advocates of resolute action in this -- in this field, like Dr. Pachauri.

So we have to make a deal where, of course, the effort is not the same but that all give a contribution. And to some extent, once again, I would like to quote the European experience. In some of our countries in Europe, the less developed countries, we allowed them to go up with some emission for some years more. So internally also we made a deal where some have the possibility to, because of their relatively lower level of development, to see the growth -- growing their emissions, but others are making very severe cuts. I think this principle should be adopted internationally. So it's what in the United Nations jargon we call the "shared but differentiated" responsibilities.

BLANKFEIN: Now, is it possible that cap-and-trade also -- that framework also --

BARROSO: Yes.

BLANKFEIN: -- provides a -- you know, some subsidization, real money for -- from the developed world to the developing world, and that's also a useful prod.

BARROSO: Yes. That's what we -- our -- maybe I can explain because of the -- what I said very generally. Our -- the points we have put forward the last week -- and it was well-received by the European Council, so the commission put forward for finances -- but more or less this one -- we believe that developing countries need by 2020 roughly 100 billion Euros. We think 40 percent of this should come from the carbon market, 20 to 40 percent from developing country domestic sources -- when I say developing countries, meaning also big emerging economies like China or India -- and the potential there is immense -- in energy efficiency, it's immense potential. So it is not unrealistic, this figure. And therefore, we need 20 to 40 percent in public finance flows from developed to developing countries.

So the rest of -- those -- the LDCs, less-developed countries, according to our proposal, of course, will not -- should not contribute. But the other countries can contribute, also. And the global carbon market can also give the incentives for them to integrate in that.

BLANKFEIN: Thank you. Just wait for the microphone. Please.

QUESTIONER: Thank you

BLANKFEIN: Right. Thank you.

QUESTIONER: Thank you very much. Ruben Kraiem from Covington and Burling. Mr. President, borrowing also again from the presentation that Minister Ramesh made here in New York last Friday, I would appreciate your reaction to the following two proposals that are beginning to be floated, which is in light of the complexity of the negotiating text and the difficulty that lies ahead, might be there be some merit in focusing less on targets and more on specific actions that individual countries would undertake, so that rather than negotiating numbers relative to 1990 countries might negotiate specific commitments for action in their respective energy or other sectors? And combined with that, might there be any merit in agreeing in Copenhagen on other issues such as the international protection of forests, the sharing of technology and possibly the continuation of Clean Development Mechanism or similar arrangements and then leave for a later date agreements on targets?

BARROSO: What you are suggesting is already a plan B in case Copenhagen does not work. (Laughter.)

But I think now we shall work for Copenhagen to work. And I think everything we have said about deforestation, I agree, about technology, certainly about these kind of mechanisms, the CDM -- so-called CDM certainly as well. But honestly, we believe that without targets it will not work. That's -- we are really very convinced that cap-and-trade system is necessary.

Some time ago -- very -- being very blunt to you -- when discussing this issue with our American partners, the response here was technology would make it; it's not necessary to have targets. The new administration is already working also on targets. We believe we need both. We need targets and binding targets to create the right economic incentives also to develop technology. We need technology and we need targets.

Of course, as underlined by India and, indeed, by China and others, they are not ready to accept binding targets in a let's say kind of international treaty. But they are moving. The Chinese are making some clear progress. And this week, President Hu is coming here to New York.

And I expect some developments, some evolution in their position. Because if they -- and we have been discussing this issue with them for some years now. I myself have been discussing these issues, I know, with Premier Wen. If they accept to put their national plans in kind of a global framework as their contribution, I mean, that could be already helpful.

So this is the point: We have to find the right -- the right point of balance, of course, where everybody contributes, certainly at a different level, but everybody has to contribute. If not, I don't know in United States, but also, let me tell you very frankly, in Europe, I don't see our public in Europe accepting to make these efforts if other parts of the world don't do it. Our emissions, I think, are more or less 14 percent of global emissions in Europe -- 14 percent of -- so even if you put at zero the emissions, that will not solve the problem.

And so we have now in Europe -- and I am very happy and proud to say it -- we have a strong backing in public opinion to go forward with ambitious targets, but we need others also to move. If not, we don't have the conditions for this to keep this ambition.

So I think it is -- we need both. We need targets, binding targets coming from developed countries. We need some plans of low-carbon strategies from other, namely the developing countries. And we need some mechanisms of international agreement to monitor all these developments. That's what -- the position we are going to come to Copenhagen with.

BLANKFEIN: Another question.

QUESTIONER: John Watts, with global energy investing company called Sequel Energy. You said a couple of times that you feel that in Europe there's a wide acceptance of the severity of the problem and willingness if other countries go ahead to accept some new actions. But I'm concerned that you seem to think that is probably the case in this country, where it seems that -- to me that it quite clearly isn't. There's huge amounts of polling data that indicate our fellow citizens, as a group, will accept a very small amount -- or won't accept a very large amount -- a few postage stamps a day, someone calculated -- and that without that it's going to be hard to move the Congress or move any part of this government if it's considered death to a congressman to propose serious taxes or serious increases in expenses for electricity.

Do you have any advice for the United States, if that's a fair characterization of our public opinion?

BLANKFEIN: Don't breathe. (Laughter.)

BARROSO: Look, we have been discussing this issue already with President Obama, when he came to Europe, to Prague. And I personally had the opportunity to discuss this with him, and he met all the 27 heads of state and government, plus the commission at that meeting. He knows well what we think.

I think we should praise President Obama, because he's for less than nine months now in power and, in fact, there is a real change in terms of doing much more on that matter. But we understand that he's also fighting other battles, apparently, at this moment.

Now, I believe this country, the United States, listens to science. You are the number one power of the world in terms of science and technology. And science is clear: We have to move now. And there is also moral responsibility. I believe that it's a question of time to have a strong support in the public opinion to move faster in this matter, because science tells us that we really need to move in this matter. And there is also some kind of moral responsibility here. So I think the elected leaders will do everything they can to rise to the occasion.

Of course we all understand that there are constraints -- political constraints, economic constraints -- but I think there is a strong case to make here, and the evolution has been in the right direction.

Now, are Americans going to adopt -- for instance, will the Senate adopt legislation that was already approved by the House of Representatives? I don't know. You are the experts. I am not the expert on the United States. You probably can tell me better. But certainly, we encourage the United States to show leadership in this -- in this critical issue for the world. And that's why we are working, praising your efforts done so far. They are very, very important, because, in fact, the American administration has accepted the need to have some targets and limits.

Now, we can discuss, of course, the level of ambition, but, in fact, that step now is taken. And I'm sure that also with the enormous potential -- economic potential of this agenda also for the -- coming from the global carbon market for new technologies, United States will be, of course, interested in a successful outcome from Copenhagen.

QUESTIONER: And also some of the states, I think, have shown leadership here, because -- given our federalist -- like California have set emission standards that have shown some leadership --

BARROSO: Yes. Yes.

QUESTIONER: -- in this space.

BARROSO: Some states, yes, I have seen. Yes, you have been -- in fact, some years ago -- I think two years ago -- there was a kind of a global coalition for action on this matter and Europe was signing with states from the United States of America and other parts of the world, from Australia, New Zealand. By the way, Australia also made recently some announcements. Japan -- the new Japanese prime minister made some very interesting announcements.

So I want to be very honest with you. I mean, I'm not underestimating the difficulties of this -- (inaudible). It's extremely difficult, particularly because of the general economic situation. But there are also good news. There are also good news.

BLANKFEIN: Let me just see if there's a question in Washington.

MODERATOR: Good morning, Lloyd. Thank you. Good morning, President Barroso and council members in New York. Thank you very much for allowing us in Washington to participate in your meeting. We have one question down here from Mark Esper with the U.S. Chamber of Commerce.

QUESTIONER: Good. Thank you. Mark Esper, United States Chamber of Commerce.

Mr. President, technology will be critical to addressing climate change. And most would agree that strong intellectual property rights are critical to driving that innovation. The United States has made clear that as part of any treaty or agreement that intellectual property rights must be respected, particularly when it comes to technology transfer. Can you tell us what the commission's view is on this matter?

BARROSO: We agree. We have been fighting very hard to -- for to protect intellectual property rights, also with the other parts of the world. That's one of our top priorities. I want to discuss these issues namely with some emerging economies.

At the same time, we believe that it can be part of the agreement, the transfer of some of those technologies, but based on recognition of intellectual property rights.

QUESTIONER: Thank you.

PRESIDENT BARRASO: That can be part of our contribution, you see. So if there are some technologies, it can be part of our contribution. In fact, we have made some estimates in the program I have mentioned earlier.

QUESTIONER: Thank you. Elizabeth Bramwell, Bramwell Capital. I'm concerned about the impact on manufacturing. You know, we basically have been losing manufacturing here and in Western Europe to China and elsewhere, countries with fewer emissions standards than we have. And so, you know, I really would hate to see the steel industry kind of being forced offshore to China, from a national security point of view. And I worry about the impact on job creation in the blue-collar sector, both here and in Western Europe. I wonder if you could comment.

BARROSO: Yes. That's precisely why we need a global, comprehensive agreement. If not -- if we put out of Europe or out of United States the pollution but also the jobs, it's not a good deal. We want to keep the jobs also in our industries. That's certainly in the States, but also in Europe. That is why in the legislation that we have approved in Europe, we have Article 10B -- puts some of the measures to support energy intensive industries in the event of carbon leakage. There is a list of those measures.

We are not underlining them at the moment, because our effort now is to have an agreement. And I think we should put our emphasis and our energy in trying to find an agreement in Copenhagen, a global agreement that is as comprehensive as possible. But of course, if there is no agreement, we in Europe, we will introduce some of those measures to protect our industries to avoid carbon leakage. And they are, for instance, free permits for -- free emissions permits for industries that are energy intensive. So there is a lot that you can find that -- of course, in legislation. I'm not going into detail now. But we have to have these kind of measures in case others do not accept a global commitment.

BLANKFEIN: But at the end of the day, an agreement would have to be more permissive in the developing world than in the developed world, and therefore you could get kind of a -- you know, a carbon arbitrage just by virtue of those industries finding a more favorable home --

BARROSO: Yes.

BLANKFEIN: -- in developing markets, and -- which is just baked in the cake.

BARROSO: Yes.

BLANKFEIN: Back -- just step back. Thank you.

QUESTIONER: Good morning. (Name and affiliation inaudible) -- European energy group. Mr. President, as you properly indicated, we Europeans are standing totally behind the program that you have initiated with the 2020-20, however technical questions comes from the current situation that we have in our industries back in Europe. With the recession biting on the manufacturing effort, following on the question that the lady just raised, isn't there a case for revising the allocation among the different segments of the pieces of free allocations? Isn't there a case for increasing the level of CDM and GI applications to favor the technological transfers you need to reduce the global emissions? And is any possibility that the French ideas of imposing carbon tax on imported goods is going to be one of the leading European themes for future? Thank you.

BARROSO: Look, I usually prefer not to deliberate on negative scenarios before trying to do everything to get a positive scenario. That is a question. Of course we are concerned with the points we have raised of carbon leakage.

Now, it's important to know -- namely to our American friends that are not so familiar with the legislation we have approved in Europe -- that part of it is already approved. So there is now going on in Europe, as I think in all parts of the world, some discussion about what we should do further, what can be the new commitments. But I was on Thursday in Brussels. We had a meeting with the 27 heads of state and government of Europe. And honestly, no one suggested, "Let's roll back our commitments." No one. The discussion was exactly what can we do more.

But, yes, some people say, if others don't do their part, then we have to protect their industries. That is why in legislation already approved, I refer again, Article 10B, for instance, we have put that reference, inclusion in the community scheme of importers of products which are produced by the sectors or sub-sectors mentioned before. So one -- it's not idea -- it's not exactly the idea of the carbon tax in the border, but it's the idea of putting the -- subject the importers in Europe to the same conditions of those who produce some products -- energy-intensive products inside. So there will be, of course, some mechanism to defend ourselves.

Now, the point is, I think it's not helpful to start discussing this before doing our best to agree on the most ambitious possible outcome in Copenhagen. What we want is not to close -- we don't want, as the commission -- let me be clear, we don't like green protectionism. We don't like protectionism, period. And we don't like green protectionism, also. So -- but of course, that raises a problem. If part of the world limits the greenhouse gas emissions clearly with binding legislation and the rest of the world does not do it -- we are not naive. We don't want our industries to go out.

So that is why it's so crucial to have some kind of agreement coming from the big emerging economies. That is why it's so vital, the position of China and position of India and others as well. And we hope that with this principle of differentiated responsibilities they come on board. I'm confident that we'll see progress on their positions, probably this week -- probably this week. This matter will be also in Pittsburgh. We're going to -- President Obama's going to meet President Hu, I think, from China. And we are also working with our Chinese partners and others.

So it is critically important, and this is exactly what we are telling them. I mean, now, everybody recognizes now that they have a very important word to say about the future of our global community. But that brings also responsibility. And this is what we have been negotiating.

But so I will not go now about the -- to deliberate about what safeguard measures we have before doing our best to achieve an agreement in Copenhagen.

QUESTIONER: Thank you.

BLANKFEIN: In the back. Thank you.

QUESTIONER: Hi. Sorry. President Barroso, I'm Walter Brandimarte with Reuters News. I'd like to ask you if -- is Europe working with the United States on a plan to rebalance the world economy? And what can we expect from that during the G-20 meeting? And can that eclipse the discussions about climate change?

BARROSO: Well, we are doing everything in parallel, in fact. The G-20 process, I think it was a very -- it's been -- has been a very successful process that was launched after the big financial crisis. In fact, I was, together with President Sarkozy -- then it was president of the council in Europe -- I was in Camp David suggesting this to President Bush. We had the first summit here in the United States, in Washington, the second in London under the very able leadership of Gordon Brown and now we have the third here in Pittsburgh with President Obama leading. And I really believe that he's changing the way we are looking at global governance.

And global governance is not just about, I mean, trying to fix the financial system. It's about macroeconomic dialogue. This is clear, nowadays; it's obvious that we have to try to coordinate the so-called "exit strategies." We have to look at global demand globally. What China is doing is, indeed, critical for the rest of the world. People now understand that we -- either we swim together or we sink together.

And climate change is also part of this, because that's the future of our planet, and there is also a very important finance dimension in it. That is why I certainly hope that at Pittsburgh there will be also some time to discuss climate finance. That was what we were suggesting to our partners in the G-20, the commission and the other European members of the -- of the G-20. And I think we should do that in parallel, that -- or in a convergent approach. It's about global governance.

And I think there is a good -- a good possibility to achieve some progress in Pittsburgh this week.

BLANKFEIN: Good. Kay (sp), is there another question in Washington?

MODERATOR: Lloyd, I don't think we have another question down here. Thank you.

BLANKFEIN: Okay. (Inaudible.)

QUESTIONER: My name is Hiroko Gonu (ph) with Yomiuri Shimbun, Japanese newspaper. Mr. President, you mentioned new Japanese prime minister's announcement. My question, how does it -- does it have any effect on international negotiations and how it will affect, do you think? Thank you.

BARROSO: I welcome that statement. It seems to be good news. And now we have to see how it exactly translates in concrete commitments. But, in fact, it shows more ambition from Japan. And Japan being, in national terms, the second economy in the world, it's so important that Japan really gives a contribution. And Japan being also the country of the Kyoto process -- so Japan has had in the past a leading position in these matters. And I know well the Japanese sensitivity to these issues of security, from food security to climate security.

And so I really expect Japan to take a leading role and very much looking forward to working with the new Japanese prime minister. We're going to meet him in Pittsburgh on these issues.

But now we have to see if we can translate those very positive announcements in some kind of concrete positions for negotiating at Copenhagen. As I said in my introductory remarks, now it's no longer to -- it's not the time to keep our cards close to the chest; it's to put the -- to ask all leaders, look, what is really the maximum you can do? We understand, I mean, Japan has constraints. We in Europe have constraints. Some of you also referred to some of the points that -- here in the United States also people are worried about what can happen to some energy. So let's see honestly what is the limit; what can we do each one of us and put that on the table and then try to find an appropriate compromise.

If we miss the Copenhagen deadline, I don't think things are going to get better in the future. That's why we need at least to find the basic principles of the compromise in Copenhagen. That's what we are starting to do this week in New York. Tonight there will be a working dinner with Secretary-General Ban Ki-moon. And tomorrow we have that high-level event. I hope for the progress in Pittsburgh so to build the momentum for Copenhagen.

BLANKFEIN: Okay. I think we have time for one more question.

QUESTIONER: Rush Baker with Deutsche Bank. I think you brought up a very good point about not keeping our cards close to our chest. Are there specific ways that the private sector and providers of capital can participate and weigh in at Copenhagen?

BARROSO: Yes. I believe that only with public authority we will not reach those targets, I've mentioned before. That's why we want a global carbon market and that's why in the technology development there will be user -- (inaudible). I've mentioned before that because I just received -- (inaudible) -- the interest there is now in some sectors of our market -- first in automobile industry, it's a typical case. There is a lot of interest of -- for more finance to develop low-carbon technology, cleaner cars, from electric cars to others. So I think the private sector and namely also the financial sector can give an important contribution to development of this agenda.

And one of the key -- now to give you a more political remark -- one of the keys to explain why in Europe we're able to make some progress that we are proud in this field was to link the different parts of this agenda. Traditionally, this issue was seen as a green issue, a(n) issue for the environmental constituency. That of course is very important in Europe, as in other parts of the world. But what we have done was to link this issue of environment, protecting of our, you know, planet, to the energy security issue that is so crucial, namely for some of our member states that are very much exposed to one supplier and they don't want to be so much dependent on fossil fuels or one supplier and to link it also to the internal market for energy and to the competitiveness of our economy.

So I think today, apart from the other geopolitical or geo implications, this issue of climate change is a green issue or an environmental issue, an energy security energy and a global competitiveness issue. And I'm sure there are very good opportunities also for the economic private sector and the financial sector specifically.

BLANKFEIN: Well, Mr. President, our time has come to an end. I'd like to thank you for your remarks. And most importantly, I'll observe Europe has been a great leader in this area, and you've been a great leader of Europe in this area. So we thank you very, very much.

BARROSO: Thank you. Thank you very much. (Applause.)

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