Kyoto e WTO

TRADE LURKS IN BACKGROUND AT UNFCCC MEETINGS

The intergovernmental meetings of the twelfth session of the Subsidiary Body for Scientific and Technological Advice and the Subsidiary Body for Implementation [SBSTA and SBI, respectively] of the UN Framework Convention on Climate Change (FCCC) met in Bonn from 12 to 16 June. The meetings drew some 1,700 delegates and representatives of non-governmental organisations (NGOs) and intergovernmental organisations (IGOs). The sessions were a first round to discuss the principles, modalities, rules and guidelines for the three 'Kyoto mechanisms' (Joint Implementation, emissions trading, and Clean Development Mechanism (CDM)) pursuant to Articles 6, 12 and 17 of the Kyoto Protocol expected to be adopted by the sixth Conference of the Parties (COP-6) in The Hague, Netherlands from 13 to 24 November 2000. (The COP-6 meeting is likely to attract up to 10,000 participants and will represent a first milestone towards the implementation of the Protocol opened for signature in December 1997.)

The underlined goal of the Bonn meetings was to move towards a final text for the Kyoto mechanisms in order to render credible emissions reduction targets outlined in the Protocol. The 'rulebook' text for operating these mechanisms was discussed exhaustively but much still remains to be agreed upon before the end of COP-6. As such the real discussion of potential trade implications of the Protocol has still to take place. One key issue that remains to be resolved is the "capping" in the use of the Kyoto mechanisms vis-à-vis the introduction of domestic policies and measures (PAMs).

Although many believe that they are inevitable, trade implications of the Kyoto mechanisms and the implementation of domestic mitigation PAMs were not discussed openly at the Bonn meetings. One the one hand, there seemed to be a consensus that the UNFCCC is a unique regime that seeks its own compliance system provided in the Convention Articles 14 and 19 of the Protocol. In that sense, some believe that if a trade-related dispute was ever to arise, the FCCC regime should be able to solve it within its own jurisdiction by applying Article 3 par. 5. On the other hand, there exists an underlying concern for potential conflict with WTO rules if and when the Protocol enters into force. Such concern seems to be behind the establishment of a contact group on "best practice" PAMs. Among other issues, this group would discuss the formulation of a framework for PAMs that would prevent unnecessary conflict with trade rules.

While some leading EU countries consider that Certified Emissions Reductions (CERs) are neither a commodity nor a service -- hence deemed irrelevant as far as WTO rules are concerned -- others consider that it is still too early to discuss trade implications of the Protocol. Most parties seem to converge around the need to have a Protocol that goes beyond sheer rhetoric, which means that at the moment Parties should concentrate on the search for efficient greenhouse gas emissions mitigation strategies.

While Non-Annex 1 (developing country) Parties do not have specific emission reduction targets under the Protocol, some seem to be aware of potential discrimination against their exports if one considers, for example, the use by Annex 1 (developed country) Parties of subsidies and countervailing measures, which could be WTO-inconsistent. Non-Annex 1 Parties' products could also be discriminated against in a number of indirect ways depending on the layout of the Kyoto mechanisms. For instance, if the CDM -- which, inter alia, enables transfer of financial resources and technology from Annex 1 to non-Annex 1 Parties -- leads to unrestricted foreign direct investment, it could result in a direct impact on competition policies.

With respect to emissions trading, efforts are underway to ensure that an emissions trading system is set up in a way that guarantees the environmental integrity of the Protocol. The EU seems to favour a limitation of transfers in CERs. "Overselling" is also an EU concern that could be addressed through some form of buyer liability scheme proposed by Switzerland. The mechanisms text is therefore still open, requiring from delegates a narrowing of differences at the next meeting of the SBI and SBSTA in Lyon from 11-15 September. For many, the US' intention to meet up to 90 percent of its greenhouse gas emission reduction targets through the purchase of CERs is seen as dangerously compromising the environmental goals of the climate regime.

Some delegates were of the opinion that trade-related issues will not likely to be raised after COP-6, though some suspect that the Lyon sessions might be the first meetings in which "trade echoes" clearly
arise.

Information on the daily evolution of the UNFCCC negotiations can be obtained on-line from the IISD Earth Negotiation Bulletin at: http://www.iisd.ca/climate. Also see http://www.unfccc.de for further
information.
ICTSD Internal Files.