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As Prepared for Administrator Johnson, Tel Aviv University, Tel Aviv, Israel

Thank you for your gracious introduction and warm welcome.

It is a great pleasure to join you here today at Tel Aviv University.

I have always enjoyed my visits to schools and universities – both in the United States and around the world – because they provide me with opportunities to speak directly with the leaders of tomorrow.

As a 27-year employee of the U.S. Environmental Protection Agency, including the three years I’ve served as Administrator, I have come to understand that the continued improvement of the global environment depends on how well the next generation is prepared to meet those challenges. So I appreciate your interest in learning how our two nations can work together to hand down a cleaner, healthier, more productive future.

I also appreciate the fact that your faculty is making efforts to integrate other disciplines into the curriculum of the Porter School, including business studies. This is a growing trend in schools in the United States, and I believe it is long overdue. We are working hard at EPA to break down the barriers among various scientific disciplines and between scientists and economists. While we are making progress, progress will no doubt be faster when environmental scientists and regulatory managers coming out of graduate schools have a broader interdisciplinary perspective of their missions.

Let me also say how excited I was to learn about the Porter School’s plans for a new green building. As you well know, buildings have a significant impact on the natural environment. In the United States, buildings alone account for 39-percent of our country’s total energy use, and more than a third of total U.S. greenhouse gas emissions. The green buildings movement is serious and taking hold around the world. I have personally visited Leadership in Energy and Environmental Design, or LEED-certified buildings in Beijing, China, and in Hyderabad, India. And EPA has its own LEED gold-certified building in Denver, Colorado. The green building movement is developing worldwide because it is both environmentally smart and economically sound.

Which takes me to the subject of your conference, the role of business in environmental protection. From what I have seen this week – in Jordan, and now in Israel – it is clear that our countries share a number of similar environmental challenges, as well as a strong commitment to solving them.

When I think about our environmental challenges, I realize the goals of economic growth and environmental protection are strongly linked. Unfortunately, the two are often presented as mutually exclusive – we are told we must make a choice of one or the other. But I don’t see it that way. The economy and the environment are inextricably linked, and choosing one or the other is an unnecessary choice.

When President Bush asked me to serve as EPA Administrator, he gave me the following charge: He said “I want you to accelerate the pace of environmental protection while maintaining our nation’s economic competitiveness.”

Let me repeat that if I may – he said “I want you to accelerate the pace of environmental protection while maintaining our nation’s economic competitiveness.”

The President’s direction makes two important points. First, by talking about the “pace” of environmental protection, he recognizes that the job of environmental protection is similar to a race. But the President also recognizes that the work of environmental protection is never completely finished, and in that sense it’s like a generational relay race, where each generation runs its lap as quickly as possible, and then hands the baton to the next generation.

The second – and perhaps more important – point of the President’s charge to me is that it is unnecessary – and perhaps unwise – to choose between the goals of environmental protection and economic growth. His charge to me clearly reflects his view that we can accomplish simultaneously both environmental protection and economic growth.

And the record of environmental protection in the United States over the past 30 years bears out the President's view. It shows that it is clearly possible to achieve both significant economic growth and an improved environment. Since the early 1970s when EPA was established, the U.S. population has grown by nearly 40 percent, our energy use has increased by almost half, and our gross domestic product has nearly tripled. Yet even with these added demands on our natural resources, emissions of major pollutants in the U.S. have decreased more than 50 percent.

So how did this happen? How has the U.S. achieved a balance between environmental protection and economic growth? Our success in achieving this balance is based on a strong foundation of environmental laws and regulations, and a fair and firm enforcement. When companies know that the environmental laws have teeth, there’s a culture of compliance.

In addition, we have sought out opportunities to where we could be flexible and allow businesses to use market-based strategies to comply. This flexibility has lead to better compliance in the U.S. and has sparked companies to see business advantages to going beyond compliance.

Let me explain.

The U.S. Environmental Protection Agency was created in 1970, by President Nixon, in response to a strong public outcry over egregious environment conditions. Air pollution was so bad in some cities, that businessmen were forced to change their white shirts twice a day. And a river in our state of Ohio was so polluted with fuel oil and other chemicals that it actually caught fire and burned for days.

These and other environmental problems prompted the United States Congress to enact a number of landmark statutes in the 1970s, including the Clean Air Act, the Clean Water Act, and the Safe Drinking Water Act. Each of these statutes required EPA to establish rigorous Federal standards and gave states the authority to enforce those standards. But if a State didn’t take action against an alleged polluter, the Federal government was authorized to step in and enforce the law.

Under the authority of these statutes, EPA developed an effective enforcement division, with agents trained as law enforcement officers and authorized to bring both civil and criminal complaints that were designed to keep people from benefiting from non-compliance. As a result, manufacturers began to recognize that it was cheaper to comply with these new Federal standards than to risk an enforcement action, or worse, a criminal investigation.

The ground was laid for a strong culture of compliance.

Then in the late 1980s, it became clear that emissions of sulfur dioxide from electric generating plants in the Midwestern United States were causing serious acid rain damage in forests in the Northeastern United States and Canada. But state regulators were having trouble determining which Midwestern state was responsible for the damaging emissions. And even if they could determine the source of the emissions, one state was not authorized to enforce against another state.

To address this problem, Congress utilized a market-based approach and created a novel “cap-and-trade” program in the 1990 amendments to the Clean Air Act. This program created an overall limit – or cap – on SO2 emissions, and also created a market for tradable “allowances” – each allowance representing one ton of sulfur dioxide emissions. Under the program, a power plant could accelerate its reduction of SO2 and then sell its allowances to a power plant choosing to delay its reductions until the statutory deadline for the overall cap.

By all accounts, the acid rain “cap and trade” program has been immensely successful. Recent estimates show benefits of SO2 trading and direct NOX controls reaching upwards of $120 billion annually with annual costs of around $3 billion. That’s a benefit - cost ratio of about 40 to 1. We have attempted to adopt the concept of a market-based “cap and trade” approach for other multi-state air pollutants, such as mercury and oxides of nitrogen, or NOX.

With a strong foundation of compliance and laws encouraging the use of market-based strategies, companies began to see the benefits to going beyond compliance and actually look for ways to make good environmental practices that are also good for their businesses.

I believe at least four factors have contributed to this phenomenon. First, businesses recognize it's more cost effective to avoid pollution and minimize waste.

General Motors, for example, has set a goal of being landfill –free for half of their plants worldwide by 2010. Businesses are finding ways, such as “lean manufacturing” and supply chain management, to reduce waste and flow those savings through to the bottom line.

Second, businesses are paying even better attention to workplace safety. This is not just in response to their inherent concerns for workers’ safety and the government safety mandates. Businesses are also paying closer attention to avoid the high costs of litigation and the public disapproval of an apparently unsafe workplace. By replacing or reducing toxic chemicals and fundamentally rethinking how products are not just created, but used over their entire lifespan, companies can reduce liability risks and the potential public backlash that can come from poor environmental performance.

Third, consumers are demanding “greener” products, and businesses are responding. EPA’s ENERGY STAR program is a great example of a partnership that is helping businesses respond to this demand. Administered by EPA and the U.S. Department of Energy, ENERGY STAR provides information to consumers about products that are good for the environment and provide cost-effective savings. This approach helps consumers make decisions that positively impact their budgets and the environment. In 2006 alone, by purchasing ENERGY STAR products, Americans saved $14 billion on their utility bills. At the same time, those purchases prevented greenhouse gas emissions equivalent to those from 25 million cars.

Finally, companies are recognizing a “green” strategy can enhance corporate good will. For example, General Electric doesn’t sell its jet engines or industrial products directly to consumers, but it advertises its “eco-imagination” initiative widely in an effort, I presume, to establish its brand as “green.” To encourage this kind of thinking, EPA launched the National Environmental Performance Track program in 2000 to harness this energy and provide businesses with an opportunity to showcase their good "green" works to provide to the public.

With Performance Track, members must demonstrate sustained environmental compliance, implement an environmental management system and set goals for continuously improving environmental performance in several areas. In return, companies get benefits, such as public recognition, best practice networking with their peers and flexibility in meeting certain regulatory and administrative requirements.

These are the lessons from the past – how do they inform the future? As I said in the beginning, the job of environmental protection can be viewed as a relay race. And as we confront new environmental challenges, the proverbial "track" can become steeper with every lap. Let me give you an example.

As my presence here today might indicate, the world is becoming a smaller place, and we are becoming more aware of the implications of our business activities on other nations, and theirs on ours. Climate change is a good example of this type of challenge. But just as was the case with acid rain in the United States where one state did not have authority to regulate another state, we are facing international problems where our actions affect one another and remedial tools are not readily available.

If and when an international consensus on climate change is reached, I hope it will contain elements that will foster a culture of compliance in all nations. But until this occurs, each country must be responsible for its own emissions.

In the U.S. we are developing a variety of regulatory and market-based approaches to address climate. For example, I recently signed a draft regulation that would establish standards for sequestering carbon dioxide captured from coal fired power plants. And while we don’t yet have the technology to capture carbon dioxide from power plants, when we have that technology, we’ll be ready to ensure that when that carbon dioxide is injected into the ground, it isn’t endangering our drinking water supplies.

As for harnessing the market, we are investing in an array of industry partnerships, relying on voluntary measures to reduce greenhouse gas emissions in cost-effective ways. Over the past 6 years, these programs have prevented an estimated 500 million metric tons of greenhouse gas emissions. That is equivalent to taking 335 million cars off the road, more than all the vehicles in the United States.

We are also working with other countries to develop voluntary approaches to address carbon dioxide. The Methane to Markets program is a good example of these efforts.

In 2004, the U.S. and 13 other countries launched the Methane to Markets Partnership. This partnership targets four methane-producing sectors – Landfills, Coal Mines, Oil and Gas systems and Agricultural Manure Management. The partnership has been a big success and today, Methane to Markets includes 27 partner governments across the globe – from Argentina to Vietnam – and over 800 private sector partners and other non-governmental organizations. The Methane to Markets Partnership is a voluntary initiative and we invite Israel to join the partnership and explore opportunities for methane capture and use within your borders.

If we are to truly achieve a balance between environmental protection and economic growth, businesses must play a responsible role in the process. Governments will need to develop enforcement regimes that are fair and firm, creating a culture of compliance.

At the same time, governments must be willing to consider all approaches for controlling pollution, including approaches that adopt market principles and allow businesses to exercise business judgments in meeting environmental goals.

This flexibility will lead to better compliance and spark companies to see business advantages to going beyond compliance. When companies go beyond compliance, the environment, the economy, and the consumer benefit.

Utilizing the market as a partner in environmental protection, just makes sense.

And finally, both governments and businesses must be aware that the work of environmental protection is never really finished. As scientific understanding continues to expand – and it will – governments and businesses must be willing to adjust to continue pursing both increased environmental protection and enhanced economic growth.

Thank you again for having me. I hope that my remarks have been useful to you in your thinking about the role of business in environmental protection.

And I look forward to taking your questions.