1. Introduction *

2. The Main Issues *

3. Entry into force of the Kyoto Protocol at Rio+10 *

4. Environmentally and Economically Sound Clean Development Mechanism (CDM) *

5. Procedures and mechanisms relating to compliance under the Kyoto Protocol *

6. International aviation and marine fuels: Why is this not on the agenda? *

7. HFCs, PFCs and SF6 *

8. "Best practices" in policies and measures among Parties included in Annex I to the Convention. *

The 13^th Session of the Subsidiary Bodies has a heavy burden: preparing critical and complex decisions to be taken at COP6 in Den Haag, Netherlands, 13-24 November 2000 on a wide range of issues.

At stake is the environmental integrity of the Kyoto Protocol:

A separate analysis by Greenpeace of the potential loopholes - or options for cheating - proposed by Parties shows that if these are adopted then very little, or no action, would be required from industrialized countries to "meet" their emission commitments of the Kyoto Protocol (Cheating the Kyoto Protocol: Loopholes and environmental effectiveness, August 2000).

In the negotiations ahead Parties should clearly prioritize those decisions necessary for the orderly operation of the Kyoto Protocol that will reinforce rather than undermine the environmental integrity of the Protocol. Simple co-option of the language of environmental integrity is no substitute for the right decisions and implementation.

COP6 will have to take decisions on issues such as land-use change and forestry, the mechanisms, the compliance system and other issues that will fundamentally affect the environmental integrity of the Kyoto Protocol. Under the Kyoto Protocol the OECD Annex B countries would have to reduce emissions from business as usual by around 770 MtC/yr (Millions of tonnes of carbon per year) in 2010 to meet their targets.

The loopholes (or "climate-cheating" options) under negotiation include:

• Unlimited "Hot Air": Unlimited "Hot Air" emission trading would permit all of the approximately 150 MtC/yr to be bought by OECD countries thereby permitting emissions to increase by this amount.

• Climate Perverse Definitions: Implementation of Article 3.3 requires the definitions of forests, deforestation, afforestation and reforestation activities. Manipulation of these definitions can lead to quite large amounts of sequestered carbon being arbitrarily counted for credit and thereby allow increases in countries emissions. This could either be quite small (of the order of 30 MtC/yr) or quite large (200MtC/yr) depending on the definitions adopted at COP6.

• The Clean Development Mechanism: The Clean Development Mechanism (CDM) allows industrial countries to claim credit for activities conducted in developing countries. Each CDM credit claimed permits an increase by the corresponding amount in the fossil fuel and other industrial emissions of the industrial country. The CDM market size is potentially very large, to the order of some hundred of millions tonnes of carbon/year, not taking into account the use of land use change and forestry projects. A minimum size would be of the order of 100 MtC/yr with a likely size more in the range of 300 MtC/yr.

• LULUCF in the CDM: If land use change and forestry activities are permitted in the CDM then available supply of CDM credits would be much larger; of the order of 700 MtC/yr by 2010.

• Bunker Fuels: The continued exemption of international aviation and shipping fuels from the Kyoto Protocol and with no firm agreement to consider on when, and how, to include them in controls, adds a further 90MtC/yr to the emissions to the atmosphere (above 1990 levels) by 2010.

Together, these loopholes are of the order of at least 1500 MtC/yr. Allowing all these under Kyoto Protocol accounting would remove any need for domestic action on fossil fuel and other industrial gas emissions. In other words rather than reduce OECD emissions by nearly 7% the end result of implementing the Kyoto Protocol without environmental integrity could be an increase in OECD emissions of the order of 15% (business as usual emissions).

• Decisions on Article 3.3 should follow the IPCC land-use change definitional scenarios for afforestation, reforestation and deforestation and exclude forest management. These decisions should incorporate rules that would stop Parties from benefiting from deforestation between 1990 and the first commitment period. All greenhouse gases should be accounted for. Implementation of Article 3.3 should promote the long-term restoration of natural forests, not monoculture plantations of exotic species. Use of genetically engineered trees should be prohibited.

• Exclude Article 3.4 additional activities in the first commitment period as this would significantly weaken the Kyoto target.

An overall quantitative cap for the flexible mechanisms should be set up in order to ensure Annex I countries will achieve most of their emission commitment by domestic action.

The CDM should be set up so that is:

• Environmentally effective and socially equitable, with appropriate opportunities for public participation (there is a separate CAN briefing paper available).

• Establish a prompt start interim positive list for renewable energy and demand side energy efficiency technologies that would apply exclusively until the first Conference of the Parties serving as the Meeting of the Parties (COP/MOP).

• Exclude sinks, nuclear power, coal and large hydro.

• Ensure active involvement of local communities in CDM projects.

• Operate all aspects of the CDM upholding strong a principle of transparency.

• Establish rules to ensure that JI projects are environmentally effective and based on those agreed for the CDM.

• Prioritize renewable energy and demand side energy efficiency projects.

• Exclude nuclear power, coal, and large hydro.

• A hybrid-buyer/seller liability system should be put in place to minimize the risks of over selling of assigned amount units.

• Strong pre-requisites for participation in emissions trading regime.

• Selling limit to reduce amount of "hot air" on the market.

• Share of proceeds of trading and JI to go to an Adaptation fund.

• Binding consequences for non-compliance including financial penalties.

• There should be no "borrowing" of assigned amounts from any future commitment periods in the compliance regime.

• Establish at least a Compliance Fund and a Compliance Reserve.

• SB13 needs to prepare for a decision at COP6 acknowledging that the emission reduction targets in the Kyoto Protocol are inadequate to establish a process after COP6 to review methodologies for establishing and sharing global limits on emissions that can avoid dangerous climate change.

• New and additional funds should be forthcoming to finance adaptation measures for particularly identified vulnerable developing countries.

Significant political momentum has been built since COP5 towards the entry into force of the Kyoto Protocol at Rio+10 in 2002. Of the Annex I Parties, the European Union and New Zealand have all made public commitments to ratify the Kyoto Protocol in this time frame. The USA, Japan, Canada, Norway and Australia have however resigned from supporting such an aim.

Rio+10 is set to occur in the tenth year after the adoption of the Climate Convention at the Earth Summit at Rio in 1992. Any later than this and the implementation of the protocol would be called into question.

Movement towards ratification by Parties now requires efforts to put in place domestic policies. A public commitment to ratify by 2002 at the latest so that the Kyoto Protocol can enter into force at Rio+10 is one of the basic tests a Parties willingness to implement the Protocol.

The Kyoto Protocol’s Clean Development Mechanism holds the potential for assisting the start of a transition towards truly environmentally, economically and socially sustainable energy systems in developing countries. Such a transition would bring large benefits in the short and mid term such as reduced air pollution, water demands and land-use conflicts. In the longer term it would bring very strong climate protection benefits. However, some of the proposals on the table for the negotiation for the Clean Development Mechanism could threaten the fundamental ability of the Kyoto Protocol to tackle climate change by facilitating investment in carbon intensive energy infrastructure. Many of the proposals on the table seem aimed to minimise the economic return to developing countries. Others, such as nuclear power, are a threat to sustainability.

Separate Greenpeace papers review some of the threats Greenpeace sees to a clean and green CDM and outline a model for ensuring that the CDM delivers all of the benefits – climate and sustainable development – for which it was adopted at Kyoto. The main conclusions are summarised below.

The key threats that Greenpeace has identified are:

1. CDM funds will be used to promote and create dependence on unsustainable fuel sources - such as coal.
2. The CDM will be used to dump obsolete technology on the developing countries- such as nuclear power plants.
3. The inclusion of forest projects (sinks) in the CDM will allow developed countries to pay very little for achieving their Kyoto emission commitments and thus halt promotion and transfer of more expensive renewable energy and efficiency technology. The inclusion of forest projects could make developing countries liable (and therefore subject to international monitoring and surveillance) for generations to come.
4. That only a few developing countries will get to access to the CDM funds if coal, nuclear or sinks projects are allowed into the CDM. The majority of developing countries may end up excluded.

There is a serious risk that the inclusion of sinks, clean coal and other cheap and dirty technologies will create a race-to-the bottom between developing countries as they compete for the supply of CDM credits to the industrialized countries at the lowest possible price. Keeping the CDM focused on state-of-the-art renewable energy and demand side efficiency technology would have the economic benefit of leveling the playing field between developing countries. All developing countries can benefit from these options and all have potential projects, whether they are emissions reduction or emissions avoidance.

Greenpeace believes that the way around these manifold problems is to establish an exclusive list of renewable and demand side energy efficiency projects for the CDM that would be used until the first COP/MOP. This list would be used on an interim base as the set of authorised technological categories under the CDM, which would then be filtered with all the relevant rules, baseline tests and other criteria. The First COP/MOP could then review the operation of the exclusive positive list and make appropriate changes.

• A prompt start positive list for renewable energy systems and high demand side energy efficiency projects that would apply until the First COP/MOP.

• Exclusion of dirty technologies such as the so-called "clean" coal technologies.

• Exclusion of unsustainable technologies such as nuclear power and large dam projects.

• Exclusion of sink activities.

• Financing for CDM projects be additional to Official Development Assistance programmes and to GEF contributions.

Articles 5 and 7 of the Kyoto Protocol require parties to have in place national systems for annually estimating and reporting emissions of greenhouse gases. Article 7.4 also requires the COP/MOP to decide on means of accounting for assigned amounts (including calculating baseline year emissions) prior to the first commitment period.

The effective operation of these systems is critical for the integrity of the first commitment period. The baseline year estimates are needed to establish clearly what parties’ targets are and the annual reports are needed to measure progress towards achieving the targets. Without them it will be impossible to assess parties progress towards emission reduction targets, or to know the real value of transfers and acquisitions under the Kyoto Mechanisms. A pre-commitment period review of compliance with articles 5 and 7 is therefore essential for all parties. At a minimum, the review should cover the following:

i) the national system for the estimation of anthropogenic emissions according to article 5.1 and

ii) the base year inventory and calculation of assigned amounts.

Parties must not be allowed to participate in the Kyoto mechanisms unless the above reviews demonstrate that their estimates are sufficiently good to do so. As such parties should demonstrate their eligibility in advance for transferring parts of their assigned amounts, certified emission reductions or emission reduction units.

Parties that wish to participate in the mechanisms should fulfil two additional, obligatory, reviews:

i) of their national registry for emissions transfers and

ii) of their national compliance system associated with emission transfers, especially emissions trading.

In practice, control over emissions transfers may well be slight. Eligibility criteria are thus absolutely vital before parties can participate in the mechanisms.

These systems should be in place by 2005, in order for the review of compliance to be completed prior to the start of the commitment period.

At the end of the commitment period parties that find themselves in non-compliance should have a limited time period to bring themselves into compliance. A ‘compliance fund’ could be established to allow parties to buy themselves into compliance by purchasing legitimate assigned amount units or their equivalent. At the end of this grace period any party found to be in non-compliance should be presumed to have acted in bad faith and must face consequences.

Consequences of non-compliance should be designed with the following objectives in mind:

i) to remedy the damage done to the atmosphere by non-compliance

ii) to be clearly less attractive than timely compliance

iii) to bring swift resolution to the case.

The exemption of international aviation and marine fuels from the Kyoto Protocol is one of the "built-in" cheating mechanisms in the protocol that already weakens the effectiveness of its target by a few percentage points. With the continued rapid growth of international travel, not just caused by the proliferation of meetings on climate change, it is becoming scandalous that Parties have failed to address this. SB13 should urgently re-start efforts to address this issue.

There is a need for efforts to address the expansion of the use of HFCs, PFCs and SF6 (the man made industrial gases that are covered by the Kyoto Protocol). Some of these gases are extremely long lived and others have substantial sustainability concerns in relation to their breakdown in the atmosphere. Emissions of these gases are growing rapidly in both developed and developing countries. Environmentally sound and climate friendly alternatives are available for most applications.

The UNFCCC should take the lead in ensuring that developing countries avoid starting to use these chemicals and that information and know-how is provided to assist this.

A process at UNFCCC level should immediately be initiated in order to establish a worldwide rapid phase out plan of these gases.

COP6 should give a real political impetus to addressing the urgent need to begin the implementation of domestic policies and measures. Until now little has been done and, as a result, emissions are continuing to grow from nearly all industrialised countries.

COP 6 should therefore call for urgent implementation of domestic policies and measures since Annex B Parties have to demonstrate progress by 2005.

Parties should recommend that an evaluation of existing policies and measures has to be carried out by the UNFCCC Secretariat by June 2001, aimed at assessing their environmental effectiveness, their transferability and their potential for co-ordination.

This is also necessary in order to facilitate the demonstration of real progress by 2005.

Finally, Parties should also convene sectoral workshops in 2001 with a view to identifying specific measures and instruments which should enhance the transparency, highlight the actual savings achievable and elaborate on how co-ordination of policies and measures could be carried out in practice in these specific areas.

FOR MORE INFORMATION

Bill Hare

Climate Policy Director, Greenpeace International

Keizersgracht 176,

1016 DW Amsterdam,

The Netherlands

Phone: +31-20-523-6222

Fax: +31-20-523-6200

Email: bhare@ams.greenpeace.org