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CHAIR'S DRAFT REPORT OF THE AD HOC INTERSESSIONAL WORKING GROUP ON FINANCE AND CHANGING CONSUMPTION AND PRODUCTION PATTERNS

Delegates considered the section of the Chair's Draft Report on consumption and production patterns during three sessions, beginning Wednesday afternoon, 6 March. Although informal consultations took place on a number of paragraphs, resolution was not reached by the close of the meeting. The Secretariat was asked to consult interested parties about these paragraphs so that the Chair's Report will be completed in time for the CSD. The CHAIR stated that he would include a footnote to the text with definitions of difficult concepts, including "ecological footprint" and "extended and shared producer responsibility," in simple language.

The section of the Chair's Draft Report on finance was considered during an extended morning session on Friday, 8 March. Delegates received the draft on Thursday and submitted written amendments to the Chair that evening. In an effort to end the session by 3:00 pm, the Chair attempted to facilitate the discussion by combining amendments and distributing a new draft. Delegates considered the new draft in their regional groups, and reconvened from 12:00 to 1:50 pm Friday to offer major comments to the text. Delegates then adopted the report of the Working Group (E/CN.17/ISWG.II/1996/L.1), with the understanding that the Secretariat would finalize the report in cooperation with the Chair.

During the deliberations on the Draft Report, the Chair developed a number of metaphors for the delegates' work style, including the "dance" in which they were engaged. Those who read amendments too quickly were asked to slow down from "lambada" style to a "fox trot." Some of the negotiations on the consumption and production text were described as a "dance of compromise." During debate on parts of the finance text, the Chair noted that a new dance had begun, one that takes three steps forward and two back.

FRIENDS OF THE EARTH welcomed a reference to targets in a paragraph recognizing eco-efficiency and suggested that the Working Group invite the Secretariat to start a work programme on global targets. He proposed adding a paragraph noting that changing sustainable production and consumption patterns involves issues related not only to restrictions and reductions, but also to opportunities, the right to basic needs, social justice and equality between and within nations. The following is a brief summary of the text and the major issues that were debated.

INTRODUCTION

The introduction to the report of the Working Group notes that it is not a negotiated text, although its contents were discussed by the Group. The report focuses on key issues and conclusions, and suggests possible recommendations and policy options for CSD consideration at its fourth session.

I. INTERLINKAGES

This section highlights the following linkages between finance and changing consumption and production patterns: the role of savings as a function of income and consumption; possibilities for reduced input costs due to efficient consumption and production patterns; and the possibility for economic instruments to serve as part of an incentive/disincentive framework.

In the paragraph noting that savings are generated as a function of income and consumption, the G-77 and CHINA proposed deleting the sentence stating that savings may be allocated as resources to finance sustainable development, and added two sentences noting that: savings are among the international and national resources available for financing sustainable development and the margin available for such savings in developing countries is limited in view of their already low levels of consumption. JAPAN stated that the second sentence did not make economic sense, while the IMF noted that savings levels are high in some developing countries. The second paragraph was altered to note that savings in "many" developing countries are limited in view of their low levels of "income."

The paragraph calling for reduced input costs through efficient consumption and production patterns, and noting the need for "defensive" expenditures to mitigate pollution, was replaced. The G-77 and CHINA noted that changes in consumption and production, particularly in developed countries, could result in the optimal use of resources, transformation into products and services for equitable benefit, as well as mitigation of pollution costs. The US, CANADA, and the EU suggested deleting "particularly in developed countries" and "equitable," which were bracketed. AUSTRALIA changed "optimal" to "sustainable."

II. RECOMMENDATIONS RELATING TO CHAPTER 4 ON CHANGING CONSUMPTION AND PRODUCTION PATTERNS

General Considerations: This section states that the Working Group: generally supports implementation of the work programme of CSD-3; recognizes that industrialized countries are taking the lead in this area, highlighting the principle of common but differentiated responsibilities; acknowledges progress on a policy framework that includes demand-side measures and asks that developing countries be involved in policy analyses; notes that education is an important tool for changing consumption and production patterns; recognizes the importance of eco-efficiency, including such concepts as carrying capacity, eco-space and ecological footprints; notes that an incremental policy implemented over the long-term may be more effective in "deflecting" major trends driven by market forces; and reaffirms the importance of sound analysis and transparency.

A paragraph that generally supported the Secretary-General's report was amended after extensive debate on specific references to Agenda 21, Chapter 4. The G-77 and CHINA proposed a new paragraph that quotes Agenda 21, paragraph 4.3 (emphasizing unsustainable patterns in industrialized countries). CANADA proposed a complementary reference to Agenda 21, paragraph 4.8, referring to the need for all countries to achieve sustainable patterns. The CHAIR suggested that the paragraph include the phrase "in particular paragraphs 4.3 and 4.8 of Agenda 21."

A sentence was added to the paragraph confirming the global consensus on the importance of sustainable patterns of consumption and production by GERMANY, as amended by IRAN, welcoming the use of "instruments proposed by the CSD" and recommending exchange of experience.

In the paragraph noting that industrialized countries are taking the lead and have the responsibility to demonstrate the feasibility of low pollution consumption and production patterns, the G-77 and CHINA proposed noting that industrialized countries "should take" the lead, and added a sentence stating that the Working Group acknowledged the need to view sustainable consumption against the background of poverty eradication and the provision of financial and technical assistance. The EU added a sentence noting that rapid change, especially economic, in a number of large developing economies is leading to a change in their relative impact on the global environment. NORWAY and the US supported "are taking" the lead, and the group agreed to "are taking and should take." GERMANY and the UK objected to the G-77 and CHINA linkage of changes in consumption and production patterns to poverty eradication and technology transfer. The G-77 and CHINA objected to the EU proposal.

The G-77 and CHINA proposed a new paragraph, noting that the Working Group urged developed countries to provide improved access to financial resources and ESTs, in accordance with the principle of "common but differentiated responsibilities." The US, supported by the EU, AUSTRALIA and JAPAN, replaced the reference to "developed countries" with "continued and intensified efforts" and deleted the reference to common but differentiated responsibilities, which they did not understand to refer to financial resources and ESTs. The G-77 and CHINA indicated they could delete the final phrase, but insisted on "developed countries."

The paragraph regarding developing policy frameworks for achieving more sustainable consumption and production patterns, which include demand-side measures, was amended to acknowledge the progress made by various countries in developing policy frameworks. An amendment by the EU encouraged countries to report to the CSD on national experiences. The EU added a paragraph noting that education is on the agenda of CSD-4, and underlining the importance of school curricula and public awareness.

The G-77 and CHINA amended the paragraph recognizing the importance of "eco-efficiency" in policy development to note that action should take into account national priorities and policies, and to note that eco-efficiency should not "substitute for fundamental changes in the unsustainable lifestyles of consumers in industrialized countries." The phrase "in industrialized countries" was bracketed. The US replaced the reference to the concepts of carrying capacity, eco-space and ecological footprints as "helpful tools" with "potentially helpful."

The G-77 and CHINA suggested deleting a paragraph that notes "that major trends driven by market forces can be deflected but rarely stopped." The US supported the paragraph. The EU stated that the paragraph was too pessimistic, and changed it to note that patterns of consumption and production can be part of major trends driven by market forces, and should be changed by step-by-step policy adjustments using market instruments. The G-77 and CHINA bracketed the paragraph.

Delegates agreed to the G-77 and CHINA-proposed reference to FDI in the paragraph noting the importance of sound analysis and transparent decision making.

The G-77 and CHINA proposed three additional paragraphs calling for: involvement of developing countries in studies on economic instruments; discussion to translate studies and discussions on changing consumption and production patterns into specific actions and commitments; and identification of constraints to the transfer of technology and entrepreneurial skills, and their removal by mutual consultation. The US suggested that the discussion to translate studies into actions be in conjunction with the existing CSD programme of work. The UK proposed that barriers to transfer be removed, "as appropriate."

A. Identifying the Policy Implications of Trends and Projections in Consumption and Production Patterns: This section notes that the Working Group: recognized the need for a better understanding, and adequate information, about the linkages between consumption patterns and socio-economic trends; welcomed the initiative to develop an integrated and well-balanced framework; and stressed that work on the policy implications for consumption and production patterns benefit from the ongoing work on indicators for sustainable development.

The US stressed that the CSD initiative to develop an integrated modeling framework should be closely related to work on indicators for sustainable development. The Secretariat noted that the work is coordinated.

B. Assessing the Impact on Developing Countries, Especially the Least Developed Countries and Small Island Developing States, of Changes in Consumption and Production in Developed Countries: This section reaffirms the importance of assessing the impact of changes in consumption and production patterns, concentrating on two key elements: mitigating adverse economic, social and environmental impacts and identifying new trade opportunities. It highlights the use of new and innovative policy instruments, such as eco-labels, extended producer responsibility, enhanced recycling schemes and life-cycle management, to attain more sustainable consumption and production patterns, and cautions that adoption of eco-labels must be voluntary and transparent.

The paragraph reaffirming the importance of assessing the impact on developing countries and describing future work calls first for "understanding and defining the impacts," as amended by the US. It then focuses on two key areas, mitigation of adverse impacts and identification of new trade opportunities, including "investment opportunities," as suggested by the G-77 and CHINA, which the US amended to call for particular attention to "the transparency of decision making" for all interested parties.

The paragraph stating that innovative policy instruments, such as eco-labels, extended producer responsibility, enhanced recycling schemes and life-cycle management, while stimulating more sustainable patterns, should be implemented in a transparent manner, tailored to developing countries' needs, and be voluntary, was amended by the G-77 and CHINA to note that such innovative policy instruments "should not be used as new forms of trade barriers." The US replaced the last sentence referring to voluntary adoption tailored to developing countries' needs with: "In this context the group also noted that domestic eco-labelling, adopted at national discretion within developing countries, remains an important strategy to promote sustainable production and consumption patterns." INDONESIA changed this to note that adoption is "on a voluntary basis" and replaced "developing countries" with a reference to all countries. The US proposed removing "extended producer responsibility," but the Working Group adopted "extended and shared producer responsibility, for example consideration of life cycle impacts at the design stage of production," as proposed by the EU and taken from language agreed upon at a previous OECD meeting on trade and the environment.

The paragraph welcoming the work of the UN in this area, including development of internationally accepted guidelines for national eco-labelling schemes, taking into account the International Organization for Standardization (ISO), was amended by the G-77 and CHINA to include the "participation of developing countries" to, as proposed by the US, "further study" the "feasibility of" internationally accepted guidelines.

The reference to "national eco-labelling schemes" was amended to "eco-labelling schemes" by the G-77 and CHINA and the EU. AUSTRALIA and the EU added the "OECD and other relevant organizations" to the list of organizations that have done work in this area.

A final sentence, proposed by the G-77 and CHINA and amended by the EU, was added to state that "these guidelines should include transitional measures and the promotion of production on a sustainable basis of goods related to relevant and endangered eco-systems with a view to generating economic opportunities for the local population."

C. Evaluating the Effectiveness of Policy Measures Intended to Change Consumption and Production Patterns: This section notes that there is no uniform blueprint for the implementation of effective policies, which will vary according to environmental, economic and socio-cultural circumstances. It calls for a variety of institutions to contribute to an information clearing house on the topic, emphasizes the need for further analysis of the optimal mix of economic, regulatory and social instruments, and urges governments to reduce or remove environmentally damaging subsidies.

The G-77 and CHINA added references to contributions from "the Bretton Woods institutions" and "other relevant intergovernmental organizations" to the paragraph calling for an information clearinghouse on policy instruments. Delegates also accepted a reformulated G-77 and CHINA proposal calling for information on facilitating EST transfer.

The EU added text to the paragraph recognizing the need to analyze further the design of optimal mixes of economic, regulatory and social instruments, calling for focus on those instruments and policies that can generate both revenue and send signals to the market to help change consumption and production patterns. The EU also called for countries to report to the CSD their national experiences with these issues.

In the paragraph calling on governments to devote attention to the reduction and, where possible, the removal of environmentally damaging subsidies, the G-77 and CHINA proposed adding sentences noting that the elimination of subsidies in developing countries should not increase national and regional differences in patterns of per capita consumption and that in-depth studies should be undertaken. In place of the reference to national and regional differences, the UK proposed calling for subsidy reduction programmes to take account of the scope for minimizing associated adverse social consequences. INDIA added a sentence calling for attention to the economic and social impacts of subsidies, keeping in mind the special situation of developing countries. Delegates agreed to note that the design of subsidy reduction programmes, especially in developing countries, needs to take into account and address associated adverse social and economic impacts.

D. Progress Made in Implementing Voluntary Commitments to Achieving Sustainable Development Goals that have an Especially High Priority at the National Level: This section states that the Working Group noted that a comprehensive systematic overview of progress achieved by countries is valuable for fostering policy development globally. The Group welcomes efforts by UN bodies and other international organizations to develop a data base to report to the CSD on new developments with respect to broad strategies being implemented, and recommends that governments report on progress made in cooperation between developed and developing countries to increase eco-efficient management practices and technology transfer.

In the paragraph calling for attention to measures that are designed and implemented to improve the environmental performance of governments, the G-77 and CHINA added a call for attention to measures to improve indicators for sustainable development. The EU added a reference to UNEP decision 18/10 on good environmental housekeeping within the UN system. Delegates accepted both proposals.

Delegates added references to UNCTAD (G-77 and CHINA) and UNEP (EU) in the paragraph welcoming efforts underway to develop a data base on strategies being implemented to achieve key measurable objectives of sustainable consumption and production.

E. Revision of the UN Guidelines for Consumer Protection: The sole paragraph in this section recognizes the role that the UN Guidelines for Consumer Protection have played in influencing the development of national consumer legislation and encouraged the Secretariat to promote a transparent process in the revision of the Guidelines. The G-77 and CHINA called for the involvement of NGOs in the revision process. The US suggested that information on the revision be provided as it becomes available.

III. RECOMMENDATIONS RELATING TO CHAPTER 33 OF AGENDA 21 ON FINANCIAL RESOURCES AND MECHANISMS

General Considerations: The Chair's Draft Report notes that the Working Group benefitted from the report of the Third Expert Group Meeting on Financial Issues of Agenda 21 held in Manila, 6-8 February 1996. The group reviewed financing of sustainable development, emphasizing external and national financial resources, innovative financial mechanisms, transfer of ESTs and the UNEP matrix on policy and finance, and stressed Chapter 33 of Agenda 21 as a clear framework for discussion, including the decrease in ODA and the increase of private flows to some developing countries.

A. Mobilizing External Financial Resources for Sustainable Development: This section of the report underlines the need to fulfil the financial commitments of Agenda 21, and discusses the role and effectiveness of ODA vis-�-vis the role of foreign private capital flows, including the role of development assistance agencies, political, economic and social factors affecting foreign private investment, multilateral debt and debt swaps.

The US objected to the paragraph underlining the need to provide substantial and predictable, new and additional financial resources, and suggested replacing a reference to the obligation of donor countries to meet the "accepted UN target of 0.7% of GNP" with the call for "those countries which have accepted the UN target" to meet this obligation. The G-77 and CHINA objected. The EU objected to language referring to the need to fulfil all financial "recommendations and commitments" of Agenda 21, preferring "commitments." JAPAN proposed language underlining the "need to promote new approaches to enhancing the effectiveness of ODA and increasing it within relevant bilateral and multilateral mechanisms," but the EU objected. The CHAIR took all of these recommendations into account, saying that his text generally would reflect what was adopted by CSD-3, in particular paragraph 7, underlining the "need to fulfil all financial commitments under Agenda 21, especially Chapter 33, new and predictable financial resources, and the need to reach the accepted UN target of 0.7%."

JAPAN commented on the paragraph advocating greater public awareness of the need to meet ODA targets in donor countries, stating that there is a reciprocal responsibility on the part of recipient countries to use ODA "effectively and efficiently" in order to ensure an increase in ODA.

The US commented on the paragraph calling for examination of the allocation of ODA flows to the components of sustainable development, questioning who would be examining the flows "on a continuous basis," as mentioned in the text.

The G-77 and CHINA inserted a reference to commitments made for development aid at the Social Summit into the paragraph emphasizing a pro-active approach for all funding agencies in meeting Agenda 21 objectives, including through coordination with national sustainable development strategies.

The paragraph recognizing that a variety of political, economic and social factors impact foreign private capital flows was amended by: AUSTRALIA, who added language addressing sustainable development; the US, who added language referring to the need for a stable environment for investment; and CANADA, who added "environmental factors" to the list of factors.

The paragraph emphasizing that the ability of developing countries to attract private flows also depends "on enhancing international cooperation towards a durable solution to the external debt problem" was amended by the EU to state that the ability depends "on a durable solution to the external debt problem, including international cooperation."

B. Mobilizing National Financial Resources for Sustainable Development: This section notes that some countries have shown progress in mobilizing domestic financial resources, although external resources, including ODA, remain essential. The importance of private sector participation, and efforts to facilitate such participation, are also noted. Studies on the application of economic instruments, the potential global competitive impact of ecological tax reform, and a cross-country performance review of conservation trust funds are proposed.

In a paragraph on private sector participation in sustainable development, JAPAN, supported by CANADA, deleted the reference noting that an appropriate framework that protects private property rights and liberalizes trade, "particularly in developed countries' markets," is required. The G-77 and CHINA supported the reference and INDIA noted that similar text has appeared in General Assembly resolutions. The G-77 and CHINA proposed a paragraph noting the importance of stable private capital flows.

In the paragraph regarding the application of economic instruments, the G-77 and CHINA deleted the sentence suggesting that countries should be invited to report to the CSD on their experiences with the economic and environmental effects of carbon taxes. The US suggested changing the reference to economic and other effects of environmental taxes.

The G-77 and CHINA proposed deleting a sentence noting that pollution abatement funds (PAFs) should make greater use of project evaluation techniques in a paragraph regarding PAFs, cost-sharing by recipients of funds and conservation trust funds. The IMF thought that the reference to project appraisals was useful.

C. Feasibility of Innovative Mechanisms for Financing Sustainable Development: This section notes that the Working Group considered an internationally agreed tax on air transport, international carbon taxes, Activities Implemented Jointly, Tradeable CO2 Permit schemes and the Tobin tax, and emphasized examination of the feasibility of these mechanisms, as well as pursuit of increased ODA, a replenished GEF and private sector investment. Continued studies by a number of international organizations on the prospects and requirements for practical implementation of these mechanisms were encouraged. The Group also welcomed the ECOSOC decision to put "new and innovative ways of generating funds" on its agenda at its 1996 substantive session.

In the paragraph identifying the innovative mechanisms that were discussed, the G-77 and CHINA added text stating that the Working Group noted the need for studies of measures that take into account historical levels of emissions and excessive use of environmental space. The US stated that the issue of historical emission levels had not been discussed by the Group and AUSTRALIA indicated difficulty with this issue. NORWAY noted that the paragraph's reference to further study of measures related to international transportation of oil was not discussed by the Group either. INDIA stated that there should not be a selectivity of the areas for studies and that the issues had been raised. BRAZIL suggested that delegates keep an open mind about innovative mechanisms.

D. Financing the Transfer of Environmentally Sound Technology: This one paragraph section of the Chair's draft notes that financing for ESTs should come from national public and private resources, external resources and innovative mechanisms. Governments should endeavor, in cooperation with relevant organizations, to implement an appropriate legal framework to protect intellectual property rights. To further facilitate technology transfer, technical assistance programmes are proposed, as are further studies on the feasibility of establishing EST rights banks.

The EU added text from the Chair's original draft, noting the necessity "for national governments to implement national policies that create a more predictable and ‘investor friendly' environment to facilitate technology transfer." The G-77 and CHINA proposed that implementation of an appropriate legal framework to protect intellectual property rights "take into account the special needs of developing countries." They also called for studies on other publicly funded intermediaries for technology transfer, in addition to the studies on EST rights banks.

The G-77 and CHINA proposed a new paragraph, noting that without the provision of substantial new and additional resources to developing countries, as agreed to in Agenda 21, and without the transfer of ESTs on favorable terms, sustainable development may appear as no more than an effective marketing strategy for the owners of ESTs, and this could undermine the basis for the global partnership on sustainable development. The US and the EU requested that the Chair adjust the language to reflect the sense of the entire Working Group. GERMANY stated that the proposal did not recognize the efforts of some countries in this field. The IMF reminded delegates that, during the debate earlier in the week, some countries noted that eco-efficient technologies exist in developing, as well as developed, countries. BENIN and INDIA objected to the IMF's participation in the negotiations, but JAPAN supported the IMF's comments. INDONESIA stated that he sympathized with JAPAN and the IMF.

E. Matrix of Policy Options and Financial Instruments: This section contains a single paragraph that notes that the Working Group recognized the usefulness of the matrix approach and encouraged further work to incorporate quantitative assessments.

The G-77 and CHINA proposed noting that the matrix approach could provide a format for the voluntary exchange of national experiences and information on the costs and benefits of experiences in applying different instruments, and could be broadened to include experiences related to the rights and benefits of indigenous and traditional holders of technology. The US and EU noted that the latter issue had not been discussed by the Working Group.

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