July 25, 2000
The Honorable Frank E. Loy Dear Under Secretary Loy: The Conference of the Parties (COP) to the Framework Convention on Climate Change (FCCC) is scheduled to hold its annual session in The Hague, Netherlands next November, preceded by two one-week meetings of its subsidiary bodies in Lyon, France in September and in The Hague. This will be the sixth Convention session and the third since the Kyoto Protocol was negotiated and adopted in 1997. Expectations are high that the session will produce decisions that would enable many of the Convention Parties to ratify the Protocol. They apparently have been fueled by the Convention’s Executive Secretary, who last April released a "Background Note" saying that the sixth session will be judged successful if it triggers such ratification, particularly by Annex I Parties, "sufficient for its entry into force." Also, on June 22, the European Union concluded that a "successful outcome at COP-6" is one that creates "the conditions for the ratification and entry into force of the Kyoto Protocol by 2002 at the latest." Wisely, you did not commit the United States to such a timetable when you spoke on the question at the last COP session. The wisdom of that position is bolstered by the meager results of the most recent session of the Convention’s subsidiary bodies session in Bonn, Germany, in June. It shows that much work lies ahead to resolve many extremely difficult and complex issues from the standpoint of the interests of the United States in a manner fully consistent with the Administration’s July 1998 economic analysis of the Protocol and the principles of the Byrd-Hagel Resolution, S. Res. 98, passed by the Senate in 1997. We are writing to express our support for the view inherent in your resistance to such a ratification timetable: if and when the U.S. ratifies the Protocol and it enters into force, the implementing rules, guidelines and procedures should ensure that the costs to the United States of complying are completely in accord with that economic analysis and that the Protocol should be truly global. As matters stand in the wake of the June session, such assurances are not currently foreseeable insofar as COP-6 is concerned. As we understand the June results, the provisions of Article 3.3 and 3.4 of the Protocol regarding sinks have only just recently begun to receive serious attention by the FCCC Parties. Additionally, the latest negotiation text on the Kyoto mechanisms, particularly Article 17 on emission trading and Article 12 on shared credit for projects abroad, includes so many hurdles and requirements that the usefulness of these mechanisms in reducing mitigation costs of the Kyoto emissions target is in serious doubt. While some of these provisions may have been added for purposes of negotiation, we fear that given the short timeframe remaining for negotiation at Lyon and The Hague, the necessary compromises are likely to be unacceptable to the Administration and Congress. Insofar as sinks are concerned, no text exists to even commence negotiations. Yet, inclusion of sinks provisions pursuant to both Articles 3.3 and 3.4 in the first commitment period of 2008-12 is, like the Kyoto mechanisms, also essential to help offset the costs to our economy of mitigation. In our view, some of the objectionable proposals put forth in the negotiating text for mechanisms by your negotiating Convention partners include: buyer liability, or a hybrid of buyer and seller liability in emissions trading; the setting of quantitative or qualitative caps or limitations on trading emissions; setting forth lists of projects that would effectively exclude clean coal and other energy sources and sinks for the Clean Development Mechanism (CDM); expansion of the "share of proceeds" provisions of Article 12 of the Protocol to the other mechanisms contrary to the Protocol; expanding additionality consideration for CDM projects beyond environmental additionality so as to include, for example, financial additionality; and proposals to effectively rewrite the Protocol so as to make Article 12 requirements applicable to one or more of the other mechanisms. For the United States, the November session cannot succeed if decisions on all of the key issues regarding each of the mechanisms and Articles 3.3 and 3.4 are not fully resolved at COP-6 in a way that, when examined in the light of a needed updated economic analysis, will demonstrate that the costs are truly modest. In short, deferral of some issues, such as the methodologies for determining baselines, to another COP session, or delaying the resolution of Article 3.4 issues until some undefined future commitment period, is unacceptable. In addition to the many unresolved sinks and mechanisms matters, there are also important concerns about proposals for a compliance system with multiple layers of institutions that strongly suggests that the sovereign nations that may ratify the Protocol will not act in good faith and try to game the Protocol. These complex proposals include various concepts concerning financial penalties to be adopted not by amendment as called for in Article 18 of the Protocol, but by COP decision. While we think it important to ensure compliance with the Article 3 commitments by all Parties, when and if the Protocol enters into force (if ever), the establishment of such a complex international compliance system for that laudable objective seems unnecessary, inappropriate, and potentially overly intrusive of the sovereignty of a country by a U.N. body. Additionally, there are significant Convention implementation issues and related Protocol matters that the developing country Parties are apparently quite insistent about also deciding at COP-6. They all seem to entail financial commitments by the United States and other Annex I Parties that are not warranted, based on the present state of knowledge. Resolution of those issues, without discussion of the commitments of non-Annex I parties toward emissions reduction in the first commitment period, places ratification of any agreement at serious risk. These concerns and many others, together with the absence of any discussion of commitments by developing countries as required by S. Res. 98, lead us to question the wisdom of viewing COP-6 as anything approaching a final act leading to submission of the Protocol to the Senate for advice and consent to ratification and ultimately to entry into force. Too much needs to be done with care, not haste. Proposals to defer so-called technical and procedural details in order to claim success are, in our view, misleading. Such details are more important than broad agreements on targets, as they address issues of practicality, workability, and acceptability. We nevertheless would welcome your perspective prior to Lyon on these matters and on what you anticipate will be the likely results of COP-6. Your early reply is appreciated. Sincerely,
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