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Summary of the Seventh Conference of the Parties to the UN Framework Convention on Climate Change 29 October - 10 November 2001

The Seventh Conference of the Parties (COP-7) to the United Nations Framework Convention on Climate Change (UNFCCC) was held in Marrakesh, Morocco, from 29 October - 10 November 2001. Over 4400 participants from 172 governments, 234 intergovernmental, non-governmental and other observer organizations, and 166 media outlets were in attendance. The meeting sought to finalize agreement on the operational details for commitments on reducing emissions of greenhouse gases under the 1997 Kyoto Protocol. It also sought agreement on actions to strengthen implementation of the UNFCCC. In attempting to achieve these goals, which were set out in the 1998 Buenos Aires Plan of Action (BAPA), COP-7 intended to bring to a close three years of negotiations, and complete tasks left unfinished at COP-6 Parts I and II held in The Hague and Bonn, respectively. The Bonn Agreements -- a political declaration on outstanding issues that was adopted at COP-6 Part II in July 2001 -- served as the basis for delegates striving to finish their work.

From 30 October to 6 November delegates met in negotiating groups, closed drafting groups and informal consultations in their attempt to resolve outstanding issues. These included the mechanisms under the Protocol, a compliance system, accounting, reporting and review under Protocol Articles 5 (methodological issues), 7 (communication of information) and 8 (review of information), and land use, land-use change and forestry (LULUCF). Ongoing negotiations were also held on draft COP decisions relating to the least developed countries (LDCs), the Consultative Group of Experts (CGE), and input to the 2002 World Summit on Sustainable Development (WSSD).

The fifteenth sessions of the COP’s subsidiary bodies met during COP-7 from 29 October to 8 November. The subsidiary bodies adopted draft conclusions on a number of issues, including national communications, administrative and financial matters, and methodological issues.

On Wednesday, 7 November, COP-7’s High-Level Segment began, with ministers and senior officials seeking to bring negotiations to a successful conclusion. Informal consultations were facilitated by Minister Valli Moosa (South Africa) and Secretary of State Philippe Roch (Switzerland). After protracted bilateral and multilateral talks, a package deal on LULUCF, mechanisms, Protocol Articles 5, 7 and 8, and the input to the WSSD was proposed on Thursday evening, 8 November. Although the deal was accepted by most regional groups, including the G-77/China and the EU, the Umbrella Group (a loose alliance of Annex I Parties that includes Canada, Australia, Japan, the Russian Federation, and New Zealand) did not join the consensus, with key issues of dispute including eligibility requirements and bankability under the mechanisms. However, after further extensive negotiations throughout Friday and into Saturday morning, a package deal was agreed, with key features including a compliance eligibility requirement, consideration of LULUCF Principles in reporting of such data and limited banking of units generated by sinks under the Clean Development Mechanism (CDM).

A BRIEF HISTORY OF THE UNFCCC AND THE KYOTO PROTOCOL

Climate change is considered one of the most serious threats to the sustainability of the world's environment, human health and well-being, and the global economy. Mainstream scientists agree that the Earth's climate is being affected by the build-up of greenhouse gases, such as carbon dioxide, caused by human activities. A majority of scientists believe that precautionary and prompt action is necessary.

The international political response to climate change took shape with the development of the UNFCCC. Adopted in 1992, the UNFCCC sets out a framework for action aimed at stabilizing atmospheric concentrations of greenhouse gases at a level that would prevent human-induced actions from leading to "dangerous interference" with the climate system. The UNFCCC entered into force on 21 March 1994. It now has 186 Parties.

THE KYOTO PROTOCOL: In 1995, the Ad Hoc Group on the Berlin Mandate was established by COP-1 to reach agreement on a further step in efforts to combat climate change. Following intense negotiations culminating at COP-3, in Kyoto, Japan, in December 1997, delegates agreed to a Protocol to the UNFCCC that commits developed countries and countries making the transition to a market economy to achieve quantified targets for decreasing their emissions of greenhouse gases. These countries, known under the UNFCCC as Annex I Parties, committed themselves to reducing their overall emissions of six greenhouse gases by at least 5% below 1990 levels over the period between 2008 and 2012, with specific targets varying from country to country. The Protocol also provided the basis for three mechanisms to assist Annex I Parties in meeting their national targets cost-effectively -- an emissions trading system, joint implementation (JI) of emissions-reduction projects between Annex I Parties, and a Clean Development Mechanism (CDM) to encourage joint projects between Annex I and non-Annex I (developing country) Parties.

It was left for subsequent meetings to decide on most of the rules and operational details that will determine how these cuts in emissions are achieved and how countries’ efforts are measured and assessed. Although 84 countries have signed the Protocol, most have been waiting for the negotiation of these operational details before deciding whether to ratify. To enter into force, the Protocol must be ratified by 55 Parties to the UNFCCC, including Annex I Parties representing at least 55% of the total carbon dioxide emissions for 1990. To date, 40 Parties have ratified the Protocol, including one Annex I Party, Romania.

THE BUENOS AIRES PLAN OF ACTION: COP-4 met in Buenos Aires, Argentina, in November 1998, to set out a schedule for reaching agreement on the operational details of the Protocol and for strengthening implementation of the UNFCCC itself. This work schedule was outlined in a decision known as the Buenos Aires Plan of Action (BAPA). The critical deadline under the BAPA was COP-6, where Parties were to reach agreement on a package of issues. Pressing Protocol-related issues needing resolution included rules relating to the mechanisms, a regime for assessing Parties’ compliance, and accounting methods for national emissions and emissions reductions. Rules on crediting countries for carbon sinks were also to be addressed. Issues under the UNFCCC requiring resolution included questions of capacity building, the development and transfer of technology, and assistance to those developing countries that are especially vulnerable to the adverse effects of climate change, or to actions taken by industrialized countries to combat climate change.

Numerous formal and informal meetings and consultations were held during 1999 and 2000 to help lay the foundations for an agreement at COP-6. However, as COP-6 drew near, political positions on the key issues remained entrenched, with little indication of willingness to compromise or move forward.

COP-6 PART I: COP-6 and the resumed thirteenth sessions of the UNFCCC’s subsidiary bodies were held in The Hague, the Netherlands, from 13-25 November 2000. During the second week of negotiations, COP-6 President Jan Pronk, Minister of Housing, Spatial Planning and Environment of the Netherlands, attempted to facilitate progress on the many disputed political and technical issues by convening high-level informal Plenary sessions to address the key political issues, which he grouped into four "clusters" or "boxes," as follows: (a) capacity building, technology transfer, adverse effects and guidance to the financial mechanism; (b) mechanisms; (c) land use, land-use change and forestry (LULUCF); and, (d) compliance, policies and measures (P&Ms), and accounting, reporting and review under Protocol Articles 5 (methodological issues), 7 (communication of information) and 8 (review of information).

By Thursday, 23 November, negotiations appeared stalled, and President Pronk distributed a Note containing his proposals on key issues in an attempt to encourage a breakthrough. After almost 36 hours of intense talks on the President’s proposals, negotiators could not achieve an agreement, with financial issues, supplementarity in the use of the mechanisms, compliance and LULUCF proving to be particular sticking points. On Saturday afternoon, 25 November, President Pronk announced that delegates had failed to reach agreement. Delegates agreed to suspend COP-6, and resume their work in 2001.

A number of meetings and consultations were convened after COP-6 Part I in an effort to get negotiations back on track. In addition in March 2001, the US declared its opposition to the Protocol, stating that it believed it to be "fatally flawed," as it would damage its economy and exempted developing countries from fully participating.

COP-6 PART II: COP-6 Part II and the fourteenth sessions of the UNFCCC’s subsidiary bodies met in Bonn, Germany, from 16-27 July 2001. On Thursday, 19 July, the High-Level Segment of the resumed COP-6 began, with participants striving to make a breakthrough by achieving agreement on a "political" decision on key outstanding issues. On Saturday night, after protracted consultations, President Pronk presented his proposal for a draft political decision outlining agreements on core elements of the BAPA. However, in spite of several Parties announcing that they could support the political decision, disagreements surfaced over the section on compliance.

President Pronk held ongoing consultations on this section until Monday morning, when the ministers finally agreed to adopt the original political decision from Saturday, with a revised section on compliance. The political decision -- or "Bonn Agreements" -- was approved by the ministers in Plenary late Monday morning, and formally adopted by the COP on Wednesday evening, 25 July. High-level discussions over the weekend also resulted in a Political Declaration by a number of developed countries, in which they pledged additional funding for climate change activities for developing countries.

Although draft decisions were approved on several key issues, delegates were unable to complete all their work on the mechanisms, compliance and LULUCF. Since not all texts in the entire "package" of decisions were completed, all draft decisions were forwarded to COP-7, where delegates were to attempt to conclude their negotiations. The outstanding texts related to LULUCF, the mechanisms, compliance, P&Ms, and Protocol Articles 5, 7 and 8.

COP-7 REPORT

The Seventh Conference of the Parties (COP-7) to the UNFCCC opened on Monday, 29 October 2001. COP-6 President Jan Pronk opened COP-7, suggesting that the events of 11 September had cast international agreements in a new light, and noting that the Bonn Agreements demonstrated the effectiveness of multilateralism and international cooperation in solving global problems within the framework of the UN. He expressed confidence that COP-7 would complete the process of translating the Bonn Agreements into legal language, and would bring work on the Buenos Aires Plan of Action (BAPA) to a successful conclusion.

The COP elected Mohamed Elyazghi, Morocco’s Minister of Territory Planning, Urban Management, Housing and Environment, as COP-7 President. President Elyazghi welcomed delegates to Morocco, adding that this was the first UNFCCC COP to be held in Africa. He thanked COP-6 President Pronk for his perseverance and for leaving an "indelible mark" on the process.

Welcoming remarks were also made by Abdelaziz Saâdi, President of the Regional Council of Marrakesh, Omar Jazouli, President of the Urban Community of Marrakesh, and Michael Zammit Cutajar, Executive Secretary of the UNFCCC.

Delegates then heard general statements from a number of Parties. Many speakers thanked UNFCCC Executive Secretary Cutajar, COP-6 President Pronk, and the Secretariat for their invaluable contributions to the progress made in the negotiations. Several speakers, including the G-77/China, EU and the Central Group 11 (CG-11, a group of 11 central and eastern European countries), supported entry into force of the Protocol in time for the WSSD.

Iran, on behalf of the G-77/China, supported completion of work forwarded from COP-6 Part II, adding that this is not the right forum to raise the question of new or additional commitments by developing countries. Burkina Faso, on behalf of the Africa Group, underscored the high expectations of the international community that COP-7 would be a success. Switzerland, on behalf of the Environmental Integrity Group, stressed the need for entry into force of the Protocol. Mali, speaking for the LDCs, hoped that developing countries, and especially LDCs, would benefit from meaningful assistance. Australia and Japan welcomed President Elyazghi’s intention to consult and report back to the COP before the High-Level Segment on the agenda item "second review of the adequacy of Article 4.2 (a) and (b)," and said they looked forward to a full discussion of this issue at COP-8. Belgium, on behalf of the European Union, said the review of commitments should not be debated at COP-7 or the WSSD, but only after the Protocol has entered into force, possibly at COP-8.

ORGANIZATIONAL MATTERS: On 29 October, President Elyazghi reported that 42 Parties had so far ratified the Kyoto Protocol and called on the remaining Parties to do so in time for the WSSD. On the rules of procedure, the COP decided to continue applying the draft rules (FCCC/CP/2001/6 and Add.1), with the exception of rule 42 (voting). Participants then adopted the agenda, with the exception of the item "second review of the adequacy of UNFCCC Article 4.2(a) and (b)" (review of commitments), which was held in abeyance. The matter was subsequently taken up in informal consultations. However, no agreement was reached, and on Saturday, 10 November, President Elyazghi informed the COP that intersessional consultations would be held, and the item placed on the provisional agenda for the sixteenth sessions of the subsidiary bodies (SB-16).

Following consultations, members of the COP-7 Bureau other than the President were elected in Plenary on 9 November. The Vice Presidents elected were: Mohammed Barkindo (Nigeria), A. Gopinathan (India), Mohamed Al-Maslamani (Qatar), Andrej Kranjc (Slovenia), Alexandre Bedritsky (Russian Federation), Max Rai (Papua New Guinea), and Karsten Sach (Germany). Gonzalo Menendez (Panama) was appointed Rapporteur. Raúl Estrada-Oyuela (Argentina) and Halldor Thoreirsson (Iceland) were named Chairs of SBI and SBSTA, respectively. The COP also decided to admit as observers those organizations listed in document FCCC/CP/2001/7.

The COP considered and adopted a draft decision (FCCC/CP/ 2001/L.23) forwarded by the SBI to the COP on 8 November on the date and venue of COP-8. The decision states that COP-8 will be held from 23 October to 1 November 2002, and notes the expression of interest by India in hosting the conference. It requests consultations to be continued between the Executive Secretary and India, and notification of the outcome to be reported not later than 24 November 2001. It requests the Bureau to decide on the venue of COP-8 at its next meeting in December 2001.

Draft conclusions on the calendar of meetings of Convention bodies 2005-2007 (FCCC/CP/2001/CRP.15) were adopted by the SBI on 8 November and by the COP on 9 November 2001. The COP adopted the report on credentials (FCCC/CP/2001/9) on Friday, 9 November.

Implementation of the Buenos Aires Plan of Action: adoption of decisions giving effect to the Bonn agreements

The critical issues addressed during COP-7 related to the implementation of the BAPA. The following section of this report starts with a synopsis of the financial and funding decisions completed at COP-6 Part II and adopted at COP-7 (Editor’s note: Details of the negotiations at COP-6 Part II that led to these decisions are available in Earth Negotiations Bulletin Vol.12, No. 176.) The section then outlines the substantive discussions and decisions on issues that needed further negotiation and completion at COP-7. These issues included the Protocol mechanisms, compliance, and national systems, adjustments and guidelines under Protocol Articles 5, 7 and 8.

COMPLETED DECISIONS FORWARDED FOR ADOPTION: Eight draft decisions on financial issues were agreed at COP-6 Part II, and forwarded for adoption during the closing COP-7 Plenary. Previously agreed decisions were also forwarded on activities implemented jointly (AIJ) and on the impact of single emissions in the commitment period.

Capacity Building: The draft decision on capacity building in developing countries (FCCC/CP/2001/L.2) requests the Global Environment Facility (GEF) to report on its progress in support of the implementation of the capacity-building framework, and urges an operating entity of the financial mechanism to adopt a streamlined and expedited approach in financing activities of the framework. It requests the COP to draw on information from national communications and reports from the GEF and other agencies for the review of progress in the implementation of the framework.

The draft decision on capacity building in countries with economies in transition (EITs) (FCCC/CP/2001/L.3) sets out in an annex a capacity-building framework. It recommends that COP/MOP-1 adopt a decision endorsing a framework for capacity building under the UNFCCC that parallels the framework contained in the annex. Both draft decisions give immediate effect to the frameworks.

Guidance to the GEF: This draft decision (FCCC/CP/2001/L.4/ Rev.1) states that the GEF should provide financial resources to developing country Parties, in particular to the LDCs and Small Island Developing States (SIDS), including for implementing Stage II adaptation activities and establishing pilot or demonstration projects to show how adaptation planning and assessment can be translated into projects. The draft decision further urges the GEF to adopt a streamlined approach in financing activities within the framework for capacity building in developing countries.

Development and Transfer of Technologies: The draft decision (FCCC/CP/2001/L.10) establishes an expert group on technology transfer, and requests the GEF to provide financial support through the special climate change fund for the implementation of the framework annexed to the draft decision. The framework sets out the institutional arrangements for technology transfer and the role and composition of the expert group.

Adverse Effects: Parties agreed to separate decisions on UNFCCC Article 4.8 (adverse effects) and 4.9 (LDCs), and Protocol Article 3.14 (adverse effects). The draft decision on implementation of UNFCCC Articles 4.8 and 4.9 (FCCC/CP/2001/L.12) states that the GEF should support activities on information and methodologies, and on vulnerability and adaptation. It also decides that the special climate change fund, and/or the adaptation fund and other bilateral and multilateral sources should fund activities on adaptation, improving and monitoring of diseases and vectors, and capacity building. It further decides to establish a work programme on LDCs to: strengthen existing and establish national climate change secretariats; provide training in negotiating skills and language; and support the preparation of National Adaptation Programmes of Action (NAPAs). In addition, the decision provides for the establishment of an LDC fund. It also decides that the GEF, the special climate change fund and other bilateral and multilateral sources, should fund activities to assist LDCs.

The draft decision on Protocol Article 3.14 (FCCC/CP/2001/L.13) decides to develop guidelines to help determine if Annex I Parties are striving to minimize adverse effects, and agrees that Annex II Parties should give priority to assisting developing countries highly dependent on the export and consumption of fossil fuels in diversifying their economies.

Funding: The draft decision on funding under the UNFCCC (FCCC/CP/2001/L.14) states that: there is a need for funding that is new and additional to GEF and multilateral and bilateral funding; predictable funding should be available to non-Annex I Parties; and a special climate change fund should be established. The draft decision on funding under the Protocol (FCCC/CP/2001/L.15) establishes an adaptation fund.

Delegates also adopted SBSTA conclusions on AIJ (FCCC/ SBSTA/2001/L.15), according to which the SBSTA takes note of the fifth annual synthesis report on AIJ, invites Parties to submit their views on their experiences with the pilot phase and decides that the deadline for submissions for the sixth annual synthesis report is 17 June 2002.

DRAFT DECISIONS FORWARDED FOR ELABORATION, COMPLETION AND ADOPTION: Draft decisions under the BAPA were forwarded from COP-6 Part II to COP-7 for further negotiation and completion on a number of key issues, including Protocol Articles 5, 7 and 8, LULUCF, the mechanisms, compliance, and policies and measures.

Protocol Articles 5, 7 and 8: A negotiating group dealing with Articles 5, 7 and 8, which set out guidelines for reporting and review of information on Protocol implementation, met throughout both weeks of COP-7. The group considered a number of issues in the draft guidelines for preparation of information under Article 7 and in the draft guidelines for review under Article 8, as well as related draft COP-7 and COP/MOP-1 decisions. The group also briefly revisited and agreed on draft COP-7 and COP/MOP-1 decisions on Article 5.1 (national systems) and on further developing Article 5.2 (adjustments) technical guidance.

The group was chaired by Harald Dovland (Norway). Two small drafting groups were formed, regularly reporting back to the negotiating group. Helen Plume (New Zealand) chaired the drafting group on LULUCF-related issues, and the second group, dealing with all other issues, was co-chaired by Festus Luboyera (South Africa) and Newton Paciornik (Brazil). During the High-Level Segment, ministers resolved several outstanding issues, and on 10 November, the COP adopted four decisions. The following summary synthesizes discussions on the most contentious issues and outlines the decisions.

Land Use, Land-Use Change and Forestry: Regarding Protocol Article 3.3 (afforestation, deforestation, reforestation) and 3.4 (additional activities), the G-77/China introduced draft paragraphs in the Article 7 guidelines requiring Parties to submit information on how reporting on these activities takes into account the LULUCF Principles contained in the Bonn Agreements. Australia cautioned that the draft guideline text had become more detailed than the Agreements and stressed that details should be left to be defined in the IPCC good practice guidance.

After extensive discussion, including compromise proposals from several Parties and Chair Dovland, the LULUCF package relating to the Articles 5, 7 and 8 guidelines was forwarded to ministers for resolution. During their negotiations, it was agreed as part of the overall package, that for the purposes of reporting greenhouse gas inventory information, each Party shall include information on anthropogenic greenhouse gas emissions by sources and removals by sinks from LULUCF under Article 3.3 and, if elected, under Article 3.4, as elaborated by any good practice guidance in accordance with relevant COP/ MOP decisions on LULUCF. Estimates for sinks shall include, inter alia, information on how inventory methodologies have been applied, taking into account any IPCC good practice guidance on LULUCF agreed by the COP and the Principles on LULUCF, as well as information to ensure that units of land and areas of land are identifiable. Information should also be provided to indicate whether indirect human-induced effects are factored out, and, for Article 3.3 and 3.4 activities, respectively, how their determining features from the Protocol, including the "since 1990" clause, are demonstrated.

Mechanisms’ Eligibility: On the issue of mechanisms’ eligibility, Japan proposed text for an expedited procedure to review the reinstatement of eligibility to use mechanisms, stressing this as an issue of key importance to the country. Several Parties expressed concern at the lack of time to consider the issue. Decision text was agreed following minor amendments.

On loss of mechanisms’ eligibility due to reporting failures, Parties agreed on an EU package proposal including loss of eligibility triggered by: failure to submit an inventory; and exceeding specific Annex A source category thresholds. Regarding reporting on LULUCF, ministers agreed on a compromise by requesting SBSTA to develop criteria for failure to submit information on activities under Article 3.3 and 3.4, similar to the criteria related to Annex A source categories, following work on good practice for LULUCF with a view to recommending a COP/MOP-1 decision.

Supplementarity: Regarding supplementarity in the use of mechanisms, delegates disagreed over whether providing such information should be mandatory. China introduced a proposal specifying the aim of reducing per capita emissions differences between developed and developing countries. The US, supported by Canada, opposed translating preambular text from the Bonn Agreements into an operational paragraph. The EU noted problems with such reporting, including lack of relevant developing country data. Ministers decided to drop this paragraph and agreed that Parties "shall" report on supplementarity. However they agreed that reporting failures would not trigger loss of mechanisms’ eligibility.

Adverse Effects: Regarding Protocol Article 3.14 (adverse effects), Chair Dovland noted that the options involve whether or not reporting problems should lead to non-compliance and loss of mechanisms’ eligibility. Japan, with a number of other Annex I Parties and opposed by the G-77/China, indicated that he did not consider reporting under Article 3.14 to be mandatory, and could not accept a link to mechanisms’ eligibility. Following completion of negotiations on compliance, and the decision that Article 3.14 questions of implementation are to be addressed by the facilitative branch, Chair Dovland made a proposal regarding all issues related to Article 3.14 whereby reporting problems would not trigger loss of mechanisms’ eligibility. Japan, Australia and Canada expressed concern with suggested mandatory language on reporting of Article 3.14 implementation. Participants were unable to agree on the proposal and the issue was deferred to ministers, who agreed on mandatory reporting requirements not triggering loss of mechanisms’ eligibility.

COP Decisions: The COP adopted four decisions related to guidelines for national systems under Article 5.1, good practice guidance and adjustments under Article 5.2, guidelines for Article 7 and guidelines for Article 8. The decisions include draft COP/MOP-1 decisions and, with the exception of Article 5.2, annexed draft guidelines.

The decision on Article 5.1 (FCCC/CP/2001/L.18) recommends that COP/MOP-1 adopt the annexed guidelines, and encourages Parties to implement them as soon as possible to gain experience and to assist Parties with economies in transition in their guidelines implementation.

The decision on Article 5.2 (FCCC/CP/2001/L.19) requests the Secretariat to organize a workshop prior to SBSTA-16 to elaborate draft technical guidance on methodologies for adjustments. It also requests SBSTA to complete the technical guidance for consideration at COP-9, and decides to develop such guidance for the LULUCF sector, following relevant IPCC work, for consideration at COP-10.

The decision on Article 7 (FCCC/CP/2001/L.28):

• requests SBSTA to develop criteria for failure to submit information on activities under Article 3.3 and 3.4, similar to the criteria related to Annex A source categories, following work on good practice for LULUCF;
• requests SBSTA-16 to further elaborate the sections on information on assigned amounts and information on national registries (contained in an appendix to the decision), taking into account the COP decision on Article 7.4 (assigned amounts); and
• urges Parties to report by 1 January 2006, for the purpose of review of demonstrable progress by 2005, and requests SBSTA-16 to consider the issue further with a view to recommending a COP-8 decision.

The decision on Article 8 (FCCC/CP/2001/L.29):

• requests SBSTA-17 to elaborate on ways to ensure the competence of expert review teams (ERTs) and invites Parties to submit views on this matter;
• requests SBSTA-17 to elaborate terms of service for ERT lead reviewers, and invites Parties to submit views and the Secretariat to prepare a document on terms of service options;
• requests SBSTA-17 to consider options for the treatment of confidential data and the Secretariat to prepare an analysis of such practices of other international treaty bodies, and invites Parties to submit their views;
• decides that there shall be an expedited procedure for the review for reinstatement of mechanisms’ eligibility and invites Parties to submit views in this regard, considering elements contained in an appendix to the decision;
• requests SBSTA-16 to further elaborate Parts III and V of the guidelines on review of information on assigned amounts and on national registries (as contained in an appendix to the decision) as well as any additional issues decided by SBSTA; and
• requests SBSTA-16 to elaborate the procedures, timing and reporting for the reinstatement of mechanisms’ eligibility, considering the decision on Article 7.4.

Land Use, Land-Use Change and Forestry: During the High-Level Segment, ministers considered and the COP adopted a proposal by the Russian Federation. According to the decision (FCCC/CP/ 2001/L.30), the COP agrees that the assigned amount for the Russian Federation from forest management activities under Protocol Article 3.4 shall not exceed 33 megatons of carbon per year, times five. On a related matter, the COP took note of a letter from Croatia on a unit for forest management under Article 3.4 and requested that this be considered at SB-16.

Mechanisms: Delegates met from 30 October - 6 November in a negotiating group co-chaired by Raúl Estrada-Oyuela (Argentina) and Kok Kee Chow (Malaysia). The group met to consider key political and technical issues outstanding from the Bonn Agreements relating to Article 6 (joint implementation), Article 12 (CDM), Article 17 (emissions trading), and Article 7.4 (assigned amounts). The crunch issues that cut across modalities and rules for the mechanisms and Article 7.4 included: the linkages between compliance and mechanisms’ eligibility; inventory reporting and mechanisms’ eligibility; fungibility and banking of units; and Principles on sinks and the CDM. The negotiating group relied on a Co-Chairs’ non-paper on issues relating to the procedures of the mechanisms, followed by a new draft text integrating mechanisms with regional groups’ positions on Article 7.4. From 7-10 November, extensive high-level bilateral and multilateral negotiations were held to broker a deal on these outstanding issues, which remained unresolved until early Saturday morning, 10 November, when a final "package deal" on mechanisms was agreed

Joint Implementation: During Article 6 negotiations, the EU, Umbrella Group and G-77/China put forward divergent positions on issues relating to:

• the criteria for baselines and monitoring;
• accreditation and verification procedures;
• Supervisory Committee responsibilities, composition, election of Chair and Vice-Chair, decision-making, and the coverage of costs of participation of members from developing country Parties;
• eligibility requirements relating to the procedures and mechanisms on compliance;
• the early start of projects, and their eligibility for emission reduction units (ERUs) as of 2008; and
• administrative costs.

All these issues were forwarded to ministers for consideration, and resolved during negotiations held from 7-10 November.

Clean Development Mechanism: Before the High-Level Segment, Parties reached agreement on standards for the accreditation of CDM operational entities and an EU proposal on developing, prior to SBSTA-16, definitions and modalities for including afforestation and reforestation under the CDM. However, many unresolved issues remained with divergence emerging on the eligibility requirements for the CDM. The Umbrella Group expressed concern with the suggested linkage between compliance and eligibility to participate in the mechanisms, and requested that the text remain bracketed as in the COP-6 Part II report. Co-Chair Estrada said the text used by the Co-Chairs was taken directly from the Bonn Agreements and that the ministers’ decision should be maintained. Canada highlighted inconsistencies in the Bonn Agreements described by COP-6 President Pronk as a "clash" between the purpose of text on the mechanisms and the text on compliance. On issues relating to the Annex on modalities and procedures for the CDM, Parties considered registry requirements for the issuance of certified emission reduction units (CERs) into the pending accounts. Parties adopted draft text under the provision that they could revisit the matter after consideration of Article 7.4

On the draft COP decision on principles, nature and scope of the mechanisms, Canada and Japan, opposed by the EU, G-77/China and the Alliance of Small Island States (AOSIS), proposed deleting text emphasizing that environmental integrity is to be achieved through sound modalities, rules and guidelines for the mechanisms, strict principles and rules governing LULUCF, and a strong compliance regime. After some discussion, the original text was retained, with reference to "strict" being replaced with "sound and strong." On consideration of the related draft COP/MOP decision, Co-Chair Chow suggested deleting a paragraph specifying that the provisions on the use of mechanisms shall apply individually for Parties acting under Article 4 (joint fulfillment), on the understanding that in Bonn the flexibility on supplementarity was given to some countries in exchange for the deletion of text on Article 4. Australia, Canada and Japan opposed the deletion, arguing, inter alia, that broader issues of transparency and good governance were involved. These matters were negotiated and resolved by ministers in talks held from 7-10 November.

Emissions Trading: During Article 17 negotiations, Parties failed to reach agreement on several elements relating to the commitment period reserve, including whether to consider ERUs and CERs for the first commitment period. The Umbrella Group said that Parties, upon establishment of their assigned amount and until expiration of the additional period for fulfilling commitments, "should" not make a transfer resulting in these holdings falling below the required commitment period reserve level. The EU, G-77/China, AOSIS and Switzerland supported the use of "shall." Switzerland noted the need for mandatory requirements to maintain the integrity of the Bonn Agreements. The issue was forwarded to ministers, and resolved during negotiations held from 7-10 November.

Assigned Amounts: On assigned amounts, a Co-Chairs’ non-paper on modalities and guidelines on the Article 7.4 prepared following the submission of Parties’ proposals was considered by Parties in a drafting group chaired by Murray Ward (New Zealand). Co-Chair Estrada emphasized that the non-paper sought to achieve acceptable compromises on areas of divergence, including removal units (RMUs), fungibility, bankability, carry-over and eligibility requirements. The G-77/China expressed a willingness to work on the basis of the non-paper, while noting insufficient time to consider it in detail.

Starting on Tuesday, 6 November, the Co-Chairs held bilateral informal consultations in order to produce a new text on mechanisms that would be acceptable to all Parties. During these consultations, progress was reported on issues relating to the commitment period reserve, the transaction log, and definition of units, including RMUs. The significant areas of divergence were still unresolved, including bankability, carry-over and eligibility requirements. Parties agreed to forward the new Co-Chairs’ text on mechanisms to higher-level consultations, on the understanding that several countries had not agreed to the draft text.

Secretary of State Philippe Roch (Switzerland) and Minister Valli Moosa (South Africa) facilitated consultations with regional groups on the mechanisms group Co-Chairs’ cross cutting non-paper on 8 and 9 November. By 9 November, Parties had narrowed down key issues on eligibility in relation to the compliance regime and the mechanisms, the reporting of LULUCF data or inventories and the mechanisms, requirement for the commitment period reserve, and carry over, bankability and fungibility of credits with the Umbrella Group rejecting a potential package deal prepared by the co-facilitators. A compromise solution accommodating some of the Umbrella Group’s positions was finally agreed on 10 November.

COP Decisions and Conclusions: A final package deal on mechanisms and Article 7.4 was brokered on 10 November with Parties adopting decisions on the work programme on the mechanisms, principles, nature and scope of the mechanisms (FCCC/CP/2001/L.24) deciding, inter alia, that: the eligibility of Annex I Parties to participate in the mechanisms shall be dependent on its compliance with methodological and reporting requirements under Protocol Articles 5.1, 5.2, 7.1 (inventories) and 7.4, in accordance with the relevant provisions; and its being subject to the procedures and mechanisms on compliance under the Protocol. The COP also adopted the guidelines for the implementation of Article 6 (FCCC/CP/2001/L.24/Add.1), the modalities and procedures for a clean development mechanism (FCCC/CP/2001/ L.24/Add.2), and modalities and guidelines for emissions trading (FCCC/CP/2001/L.24/Add.3).

The COP also adopted the decision on the modalities for accounting of assigned amounts under Article 7.4. (FCCC/CP/2001/ L.25): requesting that SBSTA develop technical standards for the purpose of ensuring the accurate and efficient exchange of data between national registries, the CDM registry, and the transaction log with a view to establishing the transaction log no later than the second session of the COP/MOP; and deciding that each Annex I Party shall submit to the Secretariat reports on the calculations of assigned amounts pursuant to Article 3.7 (assigned amount) and 3.8 (base year for other greenhouse gases), on the ERUs, CERs, assigned amount units (AAUs) and removal units (RMUs) that are valid for an additional commitment period, and for the publication of annual and final compilation and accounting of emissions for Annex I Parties.

On a related mechanisms matter, COP-7 also elected the CDM Executive Board.

Compliance: Outstanding issues on compliance were discussed in a negotiating group as well as a closed drafting group under the Co-Chairship of Tuiloma Neroni Slade (Samoa) and Harald Dovland (Norway), on the basis of a Co-Chairs’ non-paper on the status of negotiation on procedures and mechanisms relating to compliance under the Protocol. The negotiating group met on 30 and 31 October and 6 November, while the drafting group met from 1 to 6 November. In addition, delegates convened in a series of bilateral informal consultations between regional groups in order to address a number of these issues, as well as on consultations on the draft COP-7 decision facilitated by Everton Vargas (Brazil). On 6 November, a package deal between the EU and the Umbrella Group formed the basis for general agreement to be reached among all Parties. Later that day, the success achieved was reported by the Co-Chairs to Plenary. The decision, including the annex containing the procedures and mechanisms relating to compliance under the Protocol, was adopted by the COP on 9 November.

The following summary provides a synthesis of compliance negotiations, focusing on the most controversial issues delegates had to face: the COP decision and the elements of the package deal struck between the EU and the Umbrella Group.

Discussions on the COP decision reflected the disagreement among Parties over the legal nature of consequences applied by the enforcement branch. For the G-77/China, ministers in Bonn had agreed on binding consequences, with the only issue deferred to COP/ MOP-1 being the mode of adoption. The EU said consensus at the ministerial level had been on a need for a binding compliance system applicable to all Parties, and with binding consequences. What was left open, and deferred to COP/MOP-1, was whether the consequences would be legally binding on Parties as a matter of international law, and this would depend on the mode of adoption chosen by the Parties to the Protocol. Canada, with Australia and the Russian Federation, said the issue of legally binding consequences had been deferred to COP/MOP-1. Several alternative texts to the Co-Chairs’ proposal were put forward by the EU and Umbrella Group, and discussed in the drafting group as well as in informal consultations. The compromise text proposed by Vargas, and agreed on 6 November, includes a preambular paragraph "noting that it is the prerogative of the COP/MOP to decide on the legal form of the procedures and mechanisms relating to compliance."

The elements of the package deal struck between the EU and the Umbrella Group focused on four issues: Party-to-Party trigger, appeal, reinstatement of eligibility and compliance action plan. The need for a process leading to the reinstatement of eligibility to use the mechanisms was advocated by Japan, both within the context of the mandate of the enforcement branch and the provisions on its expedited procedure. The agreed text on procedures and mechanisms relating to compliance provides for two processes leading to the possible reinstatement of eligibility. The first pertains to circumstances where eligibility is suspended due to the lack of meeting eligibility requirements. The second concerns cases where the suspension of eligibility to make transfers under Article 17 results from a Party exceeding its assigned amount. In the final deal, it was agreed that both processes could be triggered through ERT reports, as well as directly by the Party concerned.

The possibility for the Compliance Committee to receive questions of implementation submitted by a Party with respect to another Party was supported by the G-77/China and EU, and opposed by Australia and the Russian Federation. Arguments put forward by these countries were that a Party-to-Party trigger had the potential of creating rifts among Parties or could eventually be used by a Party for other purposes, and that the ERT reports provided a thorough triggering process. In the package deal, Parties agreed to maintain the Party-to-Party trigger.

One element of the proposed text on appeal was opposed by Australia, who suggested that the decision of the enforcement branch become effective if an appeal is not made. The EU, on the other hand, proposed that decisions stand pending the outcome of an appeal. Parties reached agreement on text providing that both the decision of the enforcement branch shall stand pending the decision on appeal, and that it shall become effective if, after 45 days, no appeal has been made against it.

The section on consequences applied by the enforcement branch, in particular that related to the development of a compliance action plan in cases of non-compliance with Articles 5.1, 5.2, 7.1, and 7.4, also constituted one element of the EU-Umbrella Group package deal. Japan expressed difficulties with the concept of a compliance action plan, while Canada said it had concerns with text providing that "further consequences" may be decided by the enforcement branch. The package deal gives Parties more flexibility with regard to the deadline for the submission of a compliance action plan and the timing for the submission of progress reports, and no longer provides for the possibility for further consequences to be decided by the enforcement branch.

Concerning other controversial issues discussed at COP-7, Parties decided that:

• questions of implementation relating to Article 3.14 (adverse effects) as well as with respect to supplementarity in the use of mechanisms fall within the scope of the mandate of the facilitative branch;
• the Compliance Committee is to take into account any "degree of flexibility" for EITs, and these countries may, like any other Party, benefit from the facilitation of financial and technical assistance;
• in exercising its responsibilities, the facilitative branch shall take into account the principle of common but differentiated responsibilities and respective capabilities, and also the circumstances of the case before it;
• hearings by the enforcement branch shall be public and information considered by either the enforcement or the facilitative branch shall be made public, unless decided otherwise by that branch; and
• the length of the additional period for fulfilling commitments is 100 days.

The COP decision, including the annex on procedures and mechanisms relating to compliance under the Protocol was adopted in Plenary on 9 November.

COP Decision: The decision (FCCC/CP/2001/L.21):

• notes that it is the prerogative of the COP/MOP to decide on the legal form of the procedures and mechanisms relating to compliance;
• adopts the procedures and mechanisms relating to compliance annexed thereto; and
• recommends that the COP/MOP-1 adopts these in terms of Article 18.

The annex provides that:

• a Compliance Committee is established and functions through a facilitative and an enforcement branch;
• the facilitative branch is responsible for providing advice and facilitation to any Party, through the facilitation of financial and technical assistance, or the formulation of recommendations;
• the enforcement branch is responsible for determining whether an Annex I Party is in compliance with Article 3.1 (assigned amount), methodological and reporting requirements under Articles 5.1, 5.2, 7.1 and 7.2, and the mechanisms eligibility requirements; and
• consequences applicable by the enforcement branch include: declaration of non-compliance; submission of a compliance action plan; deduction from the Party’s assigned amount of the second commitment period of a number of tonnes equal to 1.3 times the amount, in tonnes, of excess emissions; and suspension of eligibility to use the mechanisms.

Policies and Measures: In the SBSTA meeting on 30 October, Chair Dovland noted the recent workshop on P&Ms, suggested that in-depth discussions on this issue be deferred to SBSTA-16, and said he would produce draft conclusions.

The conclusions were presented to SBSTA on 6 November. Saudi Arabia, opposed by Poland, Switzerland, Central African Republic and Canada, advocated deleting the paragraph inviting Parties to consider and submit their views on the workshop, and on further action to advance work on P&Ms. Following discussion, Dovland's proposed conclusions were approved and forwarded to the COP, which adopted them during its final Plenary on 10 November.

Conclusions: In the conclusions (FCCC/CP/2001/5/Add.2), the SBSTA takes note of a recent workshop on P&Ms, decides to further consider the issue at SBSTA-16 and invites Parties to submit their views in this regard, and requests the Secretariat to compile information on P&Ms from Parties national communications for consideration at SBSTA-17.

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