Climate, business and society: elements for success at the 6th Conference of the parties (COP6)
Introduction: Business expectations for a successful outcome at COP6 envision decisions that will advance the ability of business and industry to contribute to sustainable development through economic growth coupled with new technologies and effective environmental initiatives.
COP6 aims to fill in essential details of the Kyoto Protocol concerning compliance and consequences for non-compliance, and establish rules and procedures for project activities and international emissions trading, and for next steps that may affect decisions on future commitment periods.
Its results will affect the ability of the Kyoto Mechanisms to contribute to the goals of the Protocol and could stimulate the development and transfer of cost efficient technology.
Business and industry have taken major steps to address climate issues through research, investment and voluntary initiatives to improve efficiency, and have deployed new processes and products with lower emissions, in both developed and developing countries.
Innovation leading to the development of climate friendly technologies will continue independently of the U.N.
Framework Convention for Climate Change (UNFCCC) as part of ongoing business research and development processes.
Meeting the Protocol's targets will require action by all elements of society, actions that will affect individuals, as well as governments and businesses.
Greenhouse gas emissions arise from essential everyday activities through energy use, agriculture, land use, and others.
Consequently, efforts to curtail the considerable projected growth in future emissions under the Kyoto Protocol timetable will have impacts, not just on industry, but on individuals in their everyday activities at home, at work and in the use of services such as transport.
Because climate change is a long-term global issue, effective responses must involve innovative global cooperation.
COP6 should set into motion a process to define participation by all countries in future commitment periods.
On-going international cooperation between developed and developing countries is essential to minimize negative impacts and societal burdens of the measures promoted by the Kyoto Protocol while allowing individual countries to pursue economic growth and effective environmental policy.
Participation by companies under the Protocol will depend on both the international framework and policies for domestic implementation in all of the countries where they operate.
Climate change response policies need to engage market and business innovation over the long-term for development and deployment of technical and management solutions, with a view to capacity building and sharing of good and best practices.
Below we discuss four priority areas on which industry believes governments must concentrate in the remaining weeks before COP6:
The Kyoto Mechanisms
Technology Transfer, Capacity Building, Trade and Investment.
II. The Kyoto Mechanisms (KMs):
Thousands of KM-related projects and transactions that will necessarily involve business will be required in the coming years to ensure that the mechanisms meet their intended purpose.
To facilitate this potential, the mechanisms should be designed so that they are attractive to business.
Rapid and predictable project approval should be assured under JI and CDM with project approval procedures that are effective, non-discriminatory, and consistent across sectors, between domestic and foreign companies, and between small and medium businesses and larger companies.
Potential host countries around the world will need to develop adequate institutional capacity to process the project applications without excessive delay.
The KMs need to be designed and implemented so as to retain their focus as efficient, market-based instruments to minimize costs and render environmental benefits.
For some business sectors, the KMs will result in increased costs with direct implications for their growth and international competitiveness.
Consequently, great care should be taken to ensure that implementation of the Kyoto Protocol does not distort the market and threaten competitiveness, growth and jobs in those sectors.
The use of KMs should be permitted in governmental implementation of the Kyoto Protocol, without limits or ceilings.
Fungibility and transferability of emissions credits should be possible across all the mechanisms.
In practice, this means that businesses can acquire, freely exchange and use credits from project activities wherever they operate and from allocations of assigned amounts from governments, if any, to satisfy domestic obligations or targets in any country where they may be needed.
Absolute emissions caps should not be imposed upon business sectors or companies.
The definition of sinks is one of the issues critical to the operation of the Kyoto Protocol.
Sinks should be accepted starting fully in the first commitment period as means to meet emissions obligations, and should be eligible for credits as projects under CDM and JI.
To reduce investment risk and to propose projects, firms need clear and timely guidance on the procedures required to develop baselines, additionality, and the calculation of anticipated emissions reductions.
Every effort should be made to minimize all mechanism-related transaction costs to avoid the risk of discouraging a source of foreign direct investment.
In particular, the concept of "a share of the proceeds" represents an incremental transaction cost that will affect the overall economic attractiveness of projects under the CDM.
Environmental additionality should be based solely on atmospheric greenhouse gas emissions avoided.
Other environmental challenges, although important, are more appropriately and effectively addressed through other environmental treaties and programmes.
No other forms of additionality, such as technological, financial or investment additionality, should be considered in determining a project's approval.
Constraints on the geographical distribution of investment and projects would restrict access to emissions reduction opportunities and penalize particular regions. Instead, the proper positive enabling conditions are the likeliest to attract projects.
Proposals for public comment in the project approval and credit allocation process should protect confidential business information, adequately limit scope and timing for input and specify how comments might be used.
Efforts to limit access to KMs based on ensuring presumptions of future compliance may threaten the value of flexible long-term commitment periods established in the Protocol.
Compliance regimes should be clear, effective, predictable, fair and transparent to ensure the integrity of national commitments and should complement the market-based KMs.
The extent to which the Protocol develops truly "flexible" frameworks and institutions will be critical to ensuring cost-effective responses, and improving the prospects of compliance.
If appropriate contractual and legal frameworks are in place and are enforced, markets and contractual arrangements will be able to incorporate risks associated with liability in exchanges between private buyers and sellers.
However, resolution of the debate concerning liability between the original government issuer and final government user of credits and allowances will affect market transaction costs and effectiveness.
Business needs to be confident that mechanism-based transactions it has undertaken in good faith will not be unraveled or disqualified because of non-compliance by a transacting country after the transaction is undertaken.
The most economically feasible way to address the long-term challenge of climate change is through the development, commercialization and wide spread dissemination of both efficient existing technologies and new, currently non-commercial technologies that can help reduce greenhouse gas emissions into the atmosphere.
All technology options may be required to enable Parties to meet their Kyoto Protocol commitments and should be kept open. Innovation can substantially improve the future performance of current and proposed technologies.
We do not support the establishment of positive or negative technology lists. These would only serve to hinder effective long-term utilization of the most appropriate technology for the countries where they are to be used.
Decisions about appropriate technology should be part of the host-country approval process.
V. Technology Transfer, Capacity Building, Trade and Foreign Direct Investment:Business believes that working within liberalizing trade, commerce and investment frameworks will facilitate compliance and lessen transaction costs for the implementation and enforcement of KMs.
Trade and investment are important means for business to promote capacity building and technology transfer, especially through foreign direct investment.
In that regard, businesses will site investments according to acceptable requirements for investment security and with the potential for a competitive return.
Proper enabling frameworks are required, which include: stable economic systems, transparent and equitable legal and financial structures, sound environmental laws, uniform non-discriminatory enforcement procedures, respect for local cultures, a safe and secure environment for workers and contractors, and no unnecessary barriers to the movement of personnel and materials.
The Kyoto Protocol and its domestic implementation should not provide cover for countries that might misuse the Protocol to justify trade or market access discrimination.
Investment decisions for long-lived facilities typically involve considerations extending well beyond the first commitment period.
Consequently, these decisions may be affected by changes in the second commitment period, including emissions obligations, participating Parties, covered gases, global warming potentials, and procedures for compliance. Processes that affect later periods should be defined transparently, so that investment risk can be assessed.
Commission on Energy jointly with Commission on Environment, 4-15 September 2000
Source: icc-wbo. org
© 2000 Mena Report (www.menareport.com)