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    Sixth Conference of the Parties to the UN Framework Convention on Climate Change 
Resumed Session
Bonn, Germany; 16-27 July 2001

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Sunday, 22 July 2001

ENB BREAKING NEWS

PRONK’S “CORE ELEMENTS” TEXT – THE DETAILS

President Pronk’s new text contains core elements for the implementation of the Buenos Aires Plan of Action (BAPA). It includes an introduction, a short decision of the Conference of the Parties adopting the agreement contained in an Annex detailing the key political decisions, and the Annex itself, which is 12 pages long.


Introduction

In the introduction, Pronk notes that this text builds on the negotiations undertaken in the first days of the resumed COP-6, as well as in discussions in the high-level Group convened by Pronk himself, and in informal consultations. The text further notes that it aims at the adoption of a “balanced package of decisions” and takes the form of a draft decision that registers political agreements on core elements of the BAPA. These agreements are to be incorporated into complete decisions on the relevant subjects for adoption in the coming week’s negotiations. Some other issues have been left for negotiation in the coming week, including those related to Articles 5 (methodological issues), 7 (communication of information), and 8 (review of information) of the Protocol.


The Decision

The COP decides to adopt the agreements contained in the Annex to this decision as core elements for the implementation of the BAPA. It also decides to devote the coming week of negotiations to negotiating and adopting a balanced package of further decisions to give full effect to this agreement.


Annex

The Annex contains the core political elements of agreement for implementation of the BAPA, and is divided into eight sections covering the key areas.


1) Funding to the Convention

The first section of the Annex to the proposed decision addresses funding under the UNFCCC.  It proposes agreement by the COP that Parties included in Annex II and other Annex I Parties that are in a position to do so provide funding to meet the commitments under Article 4.1, 4.3, 4.4, 4.5, 4.8 and 4.9 through the GEF replenishment, the proposed Special Climate Change fund, and bilateral and multilateral channels. It further provides that appropriate modalities for burden sharing among the Parties included in Annex II need to be developed. It specifies that the Special Climate Change fund is to be established to finance activities related to climate change that are complementary to those funded by the resources allocated to the GEF and bilateral and multilateral funding. These activities include adaptation; technology transfer; energy, transport, industry, agriculture, forestry and waste management, as well as activities to assist developing countries diversify their economies. On LDCs, the text proposes that an LDC fund be established, including funding for the purpose of funding NAPAs.


2) Funding under the Kyoto Protocol

The second section of the Annex addresses funding under the Protocol. This section agrees that appropriate modalities for burden sharing need to be developed. It confirms the establishment of the Adaptation fund to finance concrete adaptation projects in Parties to the Protocol. The Adaptation fund is to be financed from the share of proceeds on the CDM project activities and other sources of funding. Annex I Parties are invited to provide this additional funding. The fund is to be operated by the entity that operates the financial mechanism of the UNFCCC.


3) Development and Transfer of Technologies

The third section provides for the establishment of an Expert Group on Technology Transfer comprised of 20 experts: three from each region of non-Annex I Parties; one from a small island developing State (SIDS); seven from Annex I Parties; and three from relevant international organizations.


4) Implementation of Convention Article 4.8 and 4.9 and Protocol Articles 2.3 and 3.14 (adverse effects)

This section proposes agreement that the implementation of identified activities in response to adverse effects of climate change be supported through the GEF, the proposed Special Climate Change fund, and other bilateral and multilateral sources. The COP also agrees to consider at its eighth session the implementation of insurance-related actions to meet the specific needs and concerns of developing country Parties arising from the adverse effects of climate change, based on the outcome of workshops on insurance. On the impact of response measures, it agrees to support the implementation of identified activities through the GEF, the Special Climate Change fund and other bilateral and multilateral sources.


5) Matters relating to Protocol Article 3.14

Section five of the Annex is on matters relating to Protocol Article 3.14. It recognizes that minimizing the impact of the implementation of Protocol Article 3.1 (assigned amounts) is a development concern affecting both developed and developing countries. It recommends the COP/MOP to request Annex I Parties to provide information, as part of the necessary supplementary information to their annual inventory report, on how they are striving to implement commitments under Article 3.1 in such a way as to minimize adverse social, environmental and economic impacts on developing country Parties. Priority should be given to the implementation of, inter alia: the progressive reduction or phasing out of market imperfections, fiscal incentives, tax and duty exemptions and subsidies in all greenhouse gas emitting sectors, taking into account the need for energy price reforms to reflect market prices and externalities; cooperating in the technological development of non-energy uses of fossil fuels, and supporting the developing country Parties to this end; and assisting developing country Parties highly dependent on the export and consumption of fossil fuels in diversifying their economies.


6) Mechanisms

The Annex relating to mechanisms addresses: principle, nature and scope; joint implementation (JI); CDM; and emissions trading.

On principles, nature and scope, the COP agrees that:

* Parties shall be guided by the objective and principles contained in Protocol Articles 2 and 3, and UNFCCC Article 4.7;

* Annex I Parties shall implement domestic action in accordance with national circumstances and with a view to reducing emissions in a manner conducive to narrowing per capita differences in emissions between developed and developing country Parties;

* the use of mechanisms shall be supplemental to domestic action and domestic action shall constitute a “significant element” of the effort made by each Annex I Party to meet Protocol Article 3.1 commitments;

* Annex I Parties shall be requested to provide relevant information in relation to their supplemental activities, in accordance with Protocol Article 7, for review under Protocol Article 8;

* the provision of such information shall take into account reporting on “demonstrable progress”;

* the Compliance Committee’s facilitative branch shall address questions of implementation;

* a recommendation be made to the COP/MOP that CERs, ERUs and AAUs may be used to meet Article 3.1 commitments and can be added as provided for in Article 3.10, 3.11, and 3.12, and ERUs and AAUs can be subtracted as provided for in Article 3.10 and 3.11 in conformity with provisions on registries, without altering Annex B commitments;

* the share of proceeds to assist particularly vulnerable developing countries to meet adaptation costs shall be two percent of the CERs for a CDM project activity; and,

* a recommendation be made to the COP/MOP that eligibility to participate in the mechanisms shall be dependent on compliance with methodological and reporting requirements with oversight being provided by the Compliance Committee’s enforcement branch, and on acceptance of the compliance agreement.

On JI and the CDM, the COP agrees that it is the host Party’s prerogative to confirm whether JI/CDM project activities assist in achieving sustainable development, and that Annex I Parties “refrain” from using ERUs/CERs generated from nuclear facilities to meet Article 3.1 commitments. On JI, the COP agrees to recommend to the COP/MOP to establish a supervisory committee to supervise, inter alia, the verification of ERUs.

On the CDM, the COP agrees:

* to emphasize that public funding for CDM projects from Annex I Parties is not to result in the diversion of ODA, and is to be separate from and not counted towards the financial obligations of Annex I Parties;

* to facilitate a prompt start for a CDM and to invite nominations for membership of the executive board prior to COP-7 with a view to electing members at that session;

* that the board shall comprise ten members with one from each UN regional group, two others from Annex I Parties, two others from non-Annex I Parties, and one representative of SIDS;

* that the board shall develop and recommend to COP-8 simplified modalities and procedures for small-scale CDM project activities on renewable energy project activities with a maximum output capacity equivalent of up to 15 megawatts, energy efficiency improvement project activities which reduce energy consumption on the supply and/or demand side by up to the equivalent of 18 gigawatthours per year, or other project activities that both reduce anthropogenic emissions by sources and directly emit less that 15 kilotonnes of CO2 equivalent;

* to invite the executive board to review these modalities and procedures and the definition of small-scale projects and if necessary to make recommendations to the COP/MOP;

* that afforestation and reforestation shall be the only eligible LULUCF projects under the CDM during the first commitment period, with implementation of these projects guided by the LULUCF principles defined elsewhere in the Annex and by definitions and modalities developed by SBSTA for decision at COP-8 including on non-permanence, additionality, leakage, scale uncertainties, and socio-economic and environmental impacts; and

* that LULUCF projects under the CDM in future commitment periods shall be decided in negotiations on the second commitment period.

On emissions trading, the COP agrees to recommend to the COP/MOP that each Annex I Party shall maintain in its national registry a commitment period reserve that should not drop below 90 % of the Party’s assigned amount, calculated in terms of Protocol Article 3.7 and 3.8 or 100 % of five times its most recently reviewed inventory, whichever is lowest.

7) Land use, land-use change and forestry (LULUCF)

In introducing the decision text on LULUCF, President Pronk noted significant progress on LULUCF. He said guiding principles as well as a pragmatic solution had been agreed for the first commitment period, without setting the precedent for the second and later commitment periods. He stressed that the total amount of credit for forest management, allocated between Annex I countries, amounts to less than the total under the proposed formula in the Pronk text, and said the decision meets the criteria of environmental credibility, provides predictability and takes into account national circumstances.

The section on LULUCF includes a paragraph affirming eight governing principles for the treatment of LULUCF activities: treatment on the basis of sound science; use of consistent methodologies over time for estimation and reporting of activities; consistency with the aim of Protocol Article 3.1; non-inclusion in accounting of “mere presence” of carbon stocks; contribution to biodiversity conservation and sustainable use of natural resources; accounting that does not imply transfer of commitments to a future commitment period; accounting at the appropriate time for the reversal of a removal of carbon from the atmosphere; and exclusion of windfall effects from accounting.

The decision on LULUCF proposes that the Protocol Article 3.3 definitions of “forest,” “afforestation,” “reforestation” and “deforestation” are based on changes in land use. Debits during the first commitment period from harvesting following afforestation and reforestation since 1990 are not to be greater than credits on the same land. Each Party may choose to apply all or a selection of additional activities – forest management, cropland management, grazing land management and revegetation – under Protocol Article 3.4 during the first commitment period. These activities must be proven to be human-induced and to have occurred since 1990. The decision lays out the following accounting rules for the first commitment period: net-net accounting for agricultural activities; accounting for forest management up to the level of a possible debit under Article 3.3; and a negotiated cap included in an Annex for Article 3.4 activities and LULUCF resulting from joint implementation. The decision further allows LULUCF under the CDM in the form of afforestation and reforestation only, limits such credits during the first commitment period and requests the SBSTA to develop definitions and modalities in this respect.

8) Compliance
The final section of the text addresses the issue of the procedures and mechanisms relating to compliance under the Protocol. The proposal covers eight aspects of the compliance system. On the mandate of the facilitative branch, the COP agrees that advice and facilitation shall be provided for compliance with: quantitative emission commitments prior to, and during, the commitment period; and with methodological and reporting requirements prior to the first commitment period. On the consequences of non-compliance to be applied by the enforcement branch, the COP agrees that these aim at restoring non-compliance and repairing the damage to the environment. Accordingly, enforcement consequences include: deduction at a rate of 1.3 for the first commitment period; development of a compliance action plan, to be assessed by the enforcement branch, that provides for action to comply with the emission commitment of the subsequent period and that gives priority to domestic policies and measures; suspension of eligibility to make transfers under Article 17 (emissions trading); and payments to repair the damage to the environment.

On the mandate of the enforcement branch, the COP agrees that this branch shall assess Annex I Parties� compliance with the quantitative emission commitments, the methodological and reporting requirements, and the eligibility requirements under Articles 6 (JI), 12 (CDM) and 17 (emissions trading). On appeal, the COP agrees that there will be a possibility of appeal to the COP/MOP in case of denial of due process. In such cases, the decision of the enforcement branch will only be overridden by a COP/MOP three-fourth majority decision. On Principles, the COP agrees that the principle of common but differentiated responsibilities and respective capabilities shall be reflected in the design of the compliance system as well as in the mandate of the facilitative branch. On the composition of the facilitative and enforcement branches, the COP agrees that both bodies shall be composed of: one member from each of the five UN regional groups and one member of the SIDS, taking into account the practice of the Bureau of the UNFCCC; two members from Annex I Parties; and two members from non-Annex I Parties.

On decision-making the COP agrees that, failing consensus, decisions shall be taken by a three-fourth majority, except in the case of the enforcement branch where a double majority of Annex I and non-Annex I Parties will also be required. Finally, on the adoption of the compliance system, the COP agrees to adopt at its sixth session a legal instrument on procedures and mechanisms relating to compliance as an integral part of the Protocol.

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