Select Committee on Environmental Audit Minutes of Evidence

Memorandum from the Deputy Prime Minister and Secretary of State for the Environment, Transport and the Regions


  The Sixth Conference of the Parties (COP6) to the UN Framework Convention on Climate Change (UN FCCC), which took place in The Hague from 13 to 25 November 2000, aimed to resolve outstanding issues relating to the implementation of the Kyoto Protocol, so as to pave the way for its ratification and entry into force. This note sets out the background to COP6, considers the reasons for the breakdown of negotiations in The Hague, and describes next steps.


  The UN FCCC, which entered into force in 1994, represented the international community's initial response to the problem of climate change. The ultimate objective of the Convention is the stabilisation of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Its principal provisions are as follows:

    —  All Parties to publish national greenhouse gas emissions inventories and put in place national programmes containing measures to mitigate climate change by addressing man-made emissions and removal by sinks[1] of greenhouse gases.

    —  Parties should take action in accordance with their common but differentiated responsibilities and respective capabilities. Developed countries should take the lead given that they are responsible for the largest share of historical and current emissions.

    —  Developed countries committed themselves to aim to return their emissions to 1990 levels by the end of the last decade.

    —  Developed countries required to provide new and additional financial resources to help developing countries meet their Convention obligations. Developed countries required to help particularly vulnerable developing countries meet the costs of adaptation to the adverse effects of climate change, to promote and finance the transfer of environmentally sound technologies to developing countries and to support capacity building. The Convention also requires Parties to consider what actions are needed to address the impacts of response measures on developing countries, including countries whose economies are highly dependent on fossil fuels.

  In 1995 the first Conference of the Parties to the Convention decided that the existing commitments of developed countries were inadequate and a new round of talks was opened with the aim of strengthening them. This led to the adoption of the Kyoto Protocol to the Convention in December 1997. Key provisions of the Protocol are as follows:

    —  Developed countries to reduce their combined emissions of a basket of six greenhouse gases[2] by at least 5 per cent compared to 1990 levels by 2008-12 (the first commitment period). The EU agreed to reduce by 8 per cent, the United States by 7 per cent and Japan by 6 per cent. The Russian Federation agreed to stabilise its emissions at 1990 levels, while some countries agreed to limit the growth of their emissions (Iceland to 10 per cent, Australia to 8 per cent and Norway to 1 per cent).

    —  Three flexibility mechanisms (widely referred to as the "Kyoto mechanisms") established to allow developed countries to meet their commitments more cost-effectively by "buying" emission reductions in other countries:

      —  Emissions trading: developed countries can buy emission reduction credits from other developed countries

      —  Clean development mechanism (CDM): developed countries get credits for undertaking emission reduction projects in developing countries

      —  Joint Implementation (JI): developed countries get credits for undertaking emission reduction projects in other developed countries

    —  Use of the Kyoto mechanisms must be supplemental to domestic action to reduce emissions

    —  Developed countries allowed to count net removals by sinks—limited to afforestation, reforestation and deforestation—since 1990 towards their Kyoto targets. Article 3.4 provides for a further decision to be taken as to which additional human-induced activities in the agricultural soils, land-use change and forestry categories can be counted.

    —  A compliance procedure to be developed to address cases of non-compliance.

    —  Protocol to enter into force after it has been ratified by 55 Parties to the Convention, including developed countries accounting for at least 55 per cent of the total carbon dioxide emissions of this industrialised group in 1990.

  The EU subsequently agreed to redistribute its Kyoto target between the Member States under a burden sharing agreement (the "EU bubble"). The UK agreed to reduce its emissions by -12.5 per cent. Other targets include Germany -21 per cent, Netherlands -6 per cent, France 0 per cent, Spain +15 per cent, Portugal +27 per cent.


  Kyoto was a significant political achievement. It provided a global framework for action to reduce greenhouse gas emissions, and for the first time developed countries agreed to take on legally binding targets. But Kyoto also left many detailed questions about implementation unresolved, and since 1997 the negotiations have focussed on resolving these issues. COP4 in Buenos Aires in November 1998 agreed a two-year Plan of Action, with the aim of reaching an agreement at COP6. This included an enormous amount of technical work, particularly in relation to the detailed rules and procedures needed to operationalise the Kyoto mechanisms.

  Between 1998 and 2000 negotiations continued at official level, through meetings of the Subsidiary Bodies to the COP and a series of informal consultations and workshops. Ministers intervened at key points in the process to take stock and give a political steer to officials. In view of the considerable amount of work still to be completed, Parties agreed at COP5 in November 1999 to an intensification of the work programme, including an additional two-week meeting of the Subsidiary Bodies in September last year.

  As a result significant progress was made in resolving technical issues and secondary political issues, though a large number of issues still needed to be resolved at COP6. The process also clarified the key outstanding political issues which needed to be resolved.


  The three principal negotiating groups are the EU, the Umbrella Group (including the USA, Japan, Canada, Australia, New Zealand, Russian Federation, Norway), and the developing countries (G77 and China). The UK negotiates as part of the EU. The Member State currently holding the Presidency usually speaks on behalf of the EU in the negotiations. France held the EU Presidency during COP6.

  The key political issues to be resolved at COP6 were as follows:

Article 3.4 sinks:

  The extent to which "additional" sinks activities under Article 3.4 could be counted towards the Kyoto targets. The EU argued that although sinks had a role to play, the emphasis should be on action to reduce man-made emissions. We were concerned that the potential scale of sinks activities could enable developed countries to meet their targets without taking significant domestic action to reduce their emissions. We estimated that Article 3.4 sinks could generate credits of up to 1000 MtC[3] a year—approximately equivalent to the total emission reductions which developed countries would need to make (based on business-as-usual projections). Our view was that the vast majority of this amount was not additional activity. Permanence was an issue, since forests could burn down or be destroyed by pests. There were also considerable scientific and other uncertainties and risks, including difficulties in monitoring and verifying sinks, which needed to be addressed. The EU's position was therefore that no Article 3.4 sinks should be counted in the first commitment period unless our concerns were met. The Umbrella Group—in particular the US, Canada and Japan—argued that full credit should be given for sinks activities in the first commitment period. The United States made proposals which would have given it 312 MtC a year from sinks.

Sinks in the CDM:

  A number of developing countries, particularly in Latin America, argued that sinks projects should be eligible for the Clean Development Mechanism. They were strongly supported by the US and other members of the Umbrella Group. The EU, along with many developing countries, including China, India and the small island states, pointed out that this was not foreseen in the Kyoto Protocol. The EU argued that its concerns about Article 3.4 sinks applied even more strongly to sinks in the CDM, and with the additional problems of "leakage" (ie a project could be undertaken in one area of a developing country while another area was deforested instead) and "additionality" (ie how to establish whether a project was genuinely additional or whether it would have taken place anyway).


  The extent to which the Kyoto mechanisms could be used to supplement domestic action. The EU insisted that it was necessary to define "supplementarity", and had proposed a quantitative cap (or "concrete ceiling") on the use of the Kyoto mechanisms which would effectively have meant that each developed country would have to meet about half its required emission reductions through domestic action. The Umbrella Group was strongly opposed to any constraints on the use of the Kyoto mechanisms, arguing that this would significantly increase the cost of meeting the Kyoto targets.


  Most countries accepted the need for a comprehensive compliance regime to facilitate compliance and deter non-compliance, but views differed as to what the consequences of non-compliance should be. The EU had proposed that Parties in non-compliance should face binding consequences, including a requirement to produce a compliance action plan setting out how they intended to make good their excess emissions through additional policies and measures. Some Umbrella Group countries (including Japan, Canada and Russia) were opposed to binding consequences.

  The EU was also concerned that emissions trading created a new source of possible non-compliance with the Kyoto targets—so-called "over-selling". Over-selling occurs when a country sells part of its permitted emissions ("assigned amount") that it needs to meet its target. The EU had signalled its willingness to work on the basis of a proposal originally put forward by the small island states—the commitment period reserve—as one way to try to reduce this risk. Under this proposal, countries could only trade a limited proportion of their assigned amount—the majority would be put aside in a reserve and could not be traded. The Umbrella Group was opposed to this, regarding it as a further unnecessary constraint on the use of the Kyoto mechanisms, though by COP6 they were beginning to recognise the dangers of "rogue" over-selling (ie wilful overselling by a Party with no intention to comply).

Funding for developing countries:

  The G77 and China had made clear that no deal would be possible unless developed countries agreed to make available significant new financial resources to address their Convention commitments to support technology transfer, capacity building, and adaptation to the adverse effects of climate change and of response measures. Saudi Arabia in particular was insistent that any deal must include actions to address the concerns of countries whose economies are dependent on fossil fuels. The EU and the Umbrella Group both indicated that they were ready to provide further assistance to developing countries, but that compensation for OPEC and others was out of the question.


  The Ministerial segment of COP6 did not begin until 20 November. COP6 was chaired by Jan Pronk of the Netherlands, who played a key role in the proceedings. On the evening of 23 November, ie on the Thursday of the second week, he presented a paper (attached at Annex A) setting out his proposals, the key elements of which were as follows:

Article 3.4 sinks:

  Forest management, cropland management, grazing land management and revegetation eligible for credits, with discounting to factor out non-direct human-induced effects and to address uncertainty, with total credits limited to 3 per cent of each developed country's base year emissions,.

Sinks in the CDM:

  Afforestation and reforestation projects to be eligible for the CDM, with a process to establish ways of addressing concerns about permanence, social and environmental effects, leakage, additionality and uncertainty. Other forms of sink activity, such as avoided deforestation, were not included.


  Developed countries to meet their commitments primarily through domestic action. Compliance to be assessed by the facilitative branch of the compliance committee (ie scope for naming and shaming but no sanctions for non-compliance).


  Excess emissions to be subtracted from a Party's assigned amount for the subsequent commitment period at an initial penalty rate of 1.5. Parties in non-compliance to submit a compliance action plan setting out how they intended to meet their commitments in the subsequent commitment period.

Funding for developing countries:

  Two new funds to be established under the Global Environment Facility (GEF):

    An Adaptation Fund to implement adaptation projects in developing countries. Funded from a 2 per cent levy on the proceeds of CDM projects.

    A Convention Fund to support activities including capacity building and technology transfer. Funding to come from the third GEF replenishment, voluntary contributions, ODA and a levy on developed countries' assigned amounts (ie part of their emission allowances, expressed in tonnes of carbon, which could be sold on the international emissions trading market).

  Annual climate change funding for developing countries to reach $1 billion by 2005, otherwise a levy to be applied to JI and/or emissions trading transactions.

  Mr Pronk invited Parties to submit written comments on and amendments to his paper. Having considered these submissions, late on 24 November (the final day of the conference) he convened a meeting of key Parties from each of the main negotiating blocs with a view to brokering a deal.


  By the early hours of the morning it was becoming clear that at the current rate of progress it would not be possible to reach an agreement. At this point I approached Dominique Voynet and suggested that we should make contact with the Umbrella Group to see whether we could break the deadlock. Mme Voynet agreed that I should seek discussions with Frank Loy, the chief US negotiator. It was also agreed that French officials would be fully involved throughout.

  When I met Frank Loy he shared my view that there was a very real danger that COP6 was not going to reach agreement. We therefore agreed to ask our officials to work up the broad outline of a deal on the key political issues dividing the EU and the Umbrella Group, which we could feed in to Jan Pronk in order to facilitate his work. Officials and Ministers from a number of EU and Umbrella Group countries were involved at various points in these discussions. We were of course fully aware that any deal would need to be agreed by all Parties, and that the views of G77 and China would need to be taken into account.

  Our understanding of the proposed package was that it contained the following elements:

Article 3.4 sinks:

  Eligible activities same as in the Pronk paper, with discounting to factor out indirect effects, BUT with US, Canada and Japan capped at 50, 15 and 15 MtC per year respectively for forest management, with the prospect of perhaps an additional 24MtC for soils. There would be no credits for other developed countries from 3.4 sinks activity.

Sinks in the CDM:

  No sinks in the CDM in the first commitment period. A process established to study issues of permanence, additionality and leakage.


  Agreement that domestic action should constitute a significant part of each developed country's required emission reductions. Each developed country to submit a detailed report on the effects of its domestic actions, with compliance with this reporting requirement to be assessed by the facilitative branch of the compliance committee.


  Parties in non-compliance to submit a compliance action plan, including as a priority measures to restore the excess emissions through domestic action, acquisition of emission credits from the preceding commitment period or mitigation projects.

  In my view this would have represented a good deal for the EU compared to the Pronk package, and according to our calculations would have resulted in a saving of between 160 and 430 MtC per year, depending on the assumptions used. More importantly, it would have resolved the outstanding difficulties and enabled governments and businesses to move forward to taking real action with greater certainty.

  This deal was initially agreed by Ministerial representatives of France, Sweden, Germany, Denmark, the UK and the Commission, together with representatives from the US, Canada, Japan, Australia and New Zealand. When the package was later put to all fifteen EU ministers, the majority view was that the deal should be rejected, since some Member States felt that on the basis of the available information they could not be sure that it would safeguard the environmental integrity of the Kyoto Protocol. This message was relayed by the French Presidency to Jan Pronk and Jan Pronk concluded that a deal would not be possible within the time available.

  Later that morning Mr Pronk convened a final plenary session and announced that regrettably it had not been possible for COP6 to reach agreement. There was nevertheless a strong feeling among Parties that although we had not been able to do a deal, we had come very close. We agreed that it was important to avoid a loss of momentum and that we should therefore aim to resume negotiations as soon as possible. It was agreed that COP6 should be suspended and that Jan Pronk would consult Parties with a view to its early resumption.


  Further contacts between the EU and the Umbrella Group took place immediately after COP6 to see whether it might be possible to reach a political understanding on the key issues that divided us. Canada hosted a meeting involving officials from a number of EU Member States and Umbrella Group countries, in Ottawa on 6 and 7 December, to explore whether there was sufficient common ground to proceed with a Ministerial meeting before Christmas in Oslo.

  In Ottawa it emerged that the two sides now had different understandings of the political package which had been discussed in the early hours of 25 November in The Hague. In particular:

    —  the Umbrella Group insisted that it could not agree to no sinks in the CDM in the first commitment period. In Ottawa they claimed that a decision would simply have been deferred, pending the results of technical work to address the EU's concerns.

    —  The Umbrella Group was not prepared to argue that only the US, Canada and Japan should get credits for Article 3.4 sinks.

  Nevertheless technical discussions continued and compromise options were prepared with a view to a possible Ministerial meeting in Oslo. EU Ministers then met at the Environment Council in Brussels on 18 December and considered their position. They agreed that while the Ottawa meeting had revealed further differences of opinion, they were willing to proceed with the Oslo meeting. They also agreed that the EU should make clear its negotiating position, signalling that we could accept a limited opening of Article 3.4 sinks in the first commitment period as part of a political deal, but that we saw major difficulties in allowing sinks in the CDM, and that we continued to believe that domestic action should constitute the primary part of each developed country's emission reductions. The troika was mandated to relay the EU's position to Umbrella Group representatives in a conference call. The Umbrella Group took note of the EU's position as presented by the troika and decided that they did not wish to proceed with the Oslo meeting, on the grounds that there was insufficient reason to believe that it would be a success.


  A number of factors contributed to the unsuccessful outcome at COP6:

    —  These were highly complex negotiations. The sheer volume of technical detail and the many linkages between the issues made agreement very difficult to achieve.

    —  Parties failed to get down to real negotiation early enough. Ultimately negotiators simply ran out of time in The Hague.

    —  The need to agree everything by consensus—and the complex web of often conflicting geo-political interests—meant that progress in the two years leading up to COP6 was much slower than we would have liked.


  It was widely assumed that "COP6 bis" would be held in the slot already reserved for a meeting of the Subsidiary Bodies, from 21 May to 1 June 2001. However, the United States contacted Mr Pronk in January with a request that the meeting be held in July, in order to give the new Administration more time to prepare its position. The COP Bureau met on 12 February and agreed that COP6 bis should be held between the middle of June and the end of July. Having reviewed various possible dates and venues, Mr Pronk has now announced that the only cost-effective option is to hold COP6 bis in Bonn from 16 to 27 July.

  After COP6 Mr Pronk invited Parties to submit further written comments and amendments to his paper, and a large number were submitted, mainly by developing countries. He has been considering the views expressed by Parties, and is conducting further informal consultations, with the aim of tabling new proposals in early April. He then intends to hold informal high-level consultations involving ministers from key Parties in New York on 21 April. He has also encouraged bilateral discussions between Parties and regional groups.

  The position adopted by the new US Administration will clearly be important. The Department of State leads for the US in the negotiations, but at the time of writing their lead negotiator has not yet been appointed. However, Christine Todd Whitman, the new Administrator of the US Environmental Protection Agency, outlined the Administration's initial position at a meeting of G8 Environment Ministers in Trieste from 2 to 4 March. She said that the Bush Administration accepted that climate change was one of the greatest environmental challenges facing the world, and that there was increasingly little room for doubt that it was caused by man-made emissions. She said that the Administration was committed to the UN FCCC and to international action to reduce emissions in line with the aims of the Kyoto Protocol. However, the Administration was conducting a fundamental review of the US position on climate change, and she did not wish to prejudge the outcome, though she emphasised that the US would not necessarily wish to pick up negotiations from the point they reached in The Hague. We will be strongly encouraging the new Administration to engage constructively in the negotiations on the basis of the Kyoto Protocol.

  In the meantime the EU is continuing to reflect on its position, though clearly it is difficult for us to move forward until we know the outcome of the US review. The Government remains committed to securing an effective international agreement to reduce greenhouse gas emissions, and we will be doing everything we can to promote an agreement at the resumed COP6 which will pave the way for ratification and entry into force of the Kyoto Protocol by 2002.

March 2001

1   A "sink" means any process, activity or mechanism which removes greenhouse gases from the atmosphere. Back

2   Carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons and sulphur hexafluoride. Back

3   Millions of tonnes of carbon. Back

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