State Secretary, Mr. Leiv Lunde

Address at Conference on Implementing the Kyoto Protocol

London 14 June 1999

Ladies and gentlemen,

It is a great pleasure to address this Conference. This gathering provides a unique opportunity to exchange views on the results achieved and, in particular, on the way forward following the meetings of the subsidiary bodies in Bonn. It is not only the timing of this meeting that is unique, but the gathering of stakeholders from all over the world in a less formal setting than in the negotiations. For the process to move forward, it is crucial that we meet in fora where the purpose is not to defend our national positions but to develop solutions through the exchange of ideas, thoughts and experiences. I would like to thank the Royal Institute of International Affairs for inviting me to participate in this meeting and share my views on the CDM (the Clean Development Mechanism).

Norway regards the Kyoto Protocol as one of the most notable successes in international environmental co-operation. Climate change is the most complex and truly global environmental problem the world has ever attempted to address through an international treaty establishing quantified targets.

Considering the complexities involved, the results produced in Kyoto are remarkable. Not only is this due to our success in agreeing commitments, but perhaps even more so because of the innovative concepts and mechanisms in the Protocol. The concept of differentiated quantitative targets, comprehensive approach and flexibility in achieving these targets, were necessary conditions for reaching agreement. Having established these principles and mechanisms in the body of the Protocol promise well for the further development of the international climate regime. It is important not to forget that the Kyoto targets only represent the first steps in what should be subsequent, and more ambitious, targets in the future.

The two last weeks in Bonn have however shown that there are still many problems to be solved in order to implement the Kyoto Protocol. One of the encouraging outcomes of the Bonn meetings was the progress made on the mechanisms. With an initial reading of the chair’s synthesis document on the three mechanisms complete, parties can now begin to focus on texts that will make the mechanisms operational. Since decisions on the rules and modalities of the mechanisms are to be taken at COP 6, it is important that there now is agreement on the process.

While the Bonn meetings set the framework and schedule for further discussions on the mechanism, less progress was made on the content. There are still substantial differences between the Parties on how the mechanisms should work in practise, and there are a number questions still to be answered. This presentation will focus on the Clean Development Mechanism that was defined during the Kyoto negotiations, not least because of the diligent efforts of Dr. Meira Filho.

I find that the CDM is one of the most progressive and exiting concepts that has developed within the area of environmental policy. For years we have been talking about how important it is that developing countries should not repeat the mistakes of industrialised countries. The CDM provides an opportunity to achieve a different and more sustainable development path in developing countries.

Norway's experience from a number of AIJ-pilot projects clearly indicates the potential for combining global environmental concerns with local and national environmental and developmental objectives in host countries. Norway is involved in AIJ-projects at different levels of implementation in Mexico, Poland, Costa Rica, India, China, Burkina Faso, Romania and Slovakia, and welcomes the decision from the Bonn meetings to start a review of the pilot phase. We believe that there are many lessons to be learned from the various projects, and that these experiences constitute important background in the further work on the project based mechanisms. The review should focus on both positive and more problematic experiences and lessons learned from the AIJ pilot phase.

From our side, a significant experience from the AIJ pilot phase has been the difficulties in attaining private sector involvement. With the lack of crediting under the pilot phase, it has proven to be hard to get involvement from the private sector. Only one of our eight AIJ projects has private sector involvement, and other countries with AIJ projects report that it has been almost impossible to attract investments from the private sector. The most important lesson in this regard, is that we have to get the CDM started, including the opportunity to obtain Certified Emissions Reduction units.

A second important lesson learned is that developing countries can, and increasingly have, facilitated for project based activities by promoting an enabling environment that encourages the identification and development of projects within their borders. After five years of the AIJ pilot phase, there is still, however, a fundamental need for capacity building to, among other things, identify and implement projects.

We believe that developed countries should assist developing countries in order to better position themselves to attract investments in CDM projects, and to ensure that those projects are in line with their national strategies for sustainable development. Norway is now supporting numerous activities in order to build capacity and strengthen networking between developing countries. Capacity building will be crucial in order to ensure broad participation in the CDM.

In order to meet the objectives in article 12.2 of the Protocol, the CDM will need to be environmentally sound and economically efficient. The latter will be crucial in order to attract investors. The CDM is a market-based concept that will rely heavily on private sector participation. It is also important that the institutional arrangements related to the operation of the CDM is efficient and minimises costs, while ensuring transparency and accountability.

We believe that it is important to have a comprehensive approach to CDM activities, including reductions as well as removals, and covering all six gases. Emission reductions or removals from project activities, including AIJ-projects, begun before the CDM is operational, should be retroactively certified from the year 2000 onward. A necessary provision for this is that the project meets the applicable CDM criteria, and was approved by the participating Parties.

Further participation in CDM project activities should be open to any private and public sector entity in a country wishing to participate. The Party in which the entity resides should provide guidance for participation.

The best way to approach the development of the framework for the CDM is through learning by doing. It is therefore important to have an open mind and allow a variety of different solutions at this beginning stage.

An area where further work is needed is the institutional aspect related to certification, verification and approval of certified emission reductions. To contribute to the development of a viable, and potentially global, certification and verification process for green house gas emissions reductions, the Ilumex AIJ project in Mexico, an energy-efficiency project has been used as a test case for certification and verification. An independent third-party auditing firm, DNV, was, together with their partner ICF Kayser, engaged to verify the emission reduction at the Ilumex project.

As a basis for the audit, they applied internationally established and recognised ISO environmental audit procedures. These traditional tools were adjusted to audit the project in a manner that could be compatible with the procedures to be established under the CDM. The results of this exercise have been promising, showing that it is possible to successfully apply a certification process to CDM type activities.

Another important aspect of the CDM is the development and transfer of technology. A consultative process has begun to look at ways and means to exchange information and to facilitate technology transfer. This process will be important for two reasons: it could help developing countries identify their specific technology needs, and introduce models for facilitating technology transfer. Technology is largely owned by the private sector in OECD countries. Governments do support and sometimes undertake research and development, but it is the private sector that will make this technology available to the public at large.

After almost 50 years of discussions on technology transfer within various UN frameworks, we have achieved very little. CDM provides a window of opportunity to move beyond this sad record. The CDM gives new incentive structures and has contributed to a more benign political climate for discussions on technology transfer, involving a more active participation from the private sector. The CDM has the potential to encourage the transfer of technologies that are appropriate for the country hosting the project.

After Kyoto we have moved beyond the discussion of whether or not to make use of the mechanisms, to a stage were the task is to define in detail how to make them work as effectively as possible. Norway fully acknowledges and supports the language as agreed to in the Kyoto Protocol, that the mechanisms should be supplemental to domestic actions. However, there is no basis in the Protocol for defining supplemental in quantitative terms, as some parties have proposed.

In our view, such a restrictive definition has serious political implications for Parties abilities to meet their Kyoto commitments. A quantified cap will further alter the cost-effectiveness and environmental effectiveness of the mechanisms and would necessitate the establishment of additional bureaucracy.

To conclude, when discussing the details in the development of the mechanism, we must not loose sight of the new opportunities that the innovative mechanisms provide us with. We are establishing new vehicles for international co-operation, which, if we do it right, may provide strong, effective mechanisms to meet several objectives. First of all, we can become more effective in combating global climate change. Secondly, we can greatly advance the development, transfer and dissemination of environmentally friendly technologies by expanding the market for such technologies and facilitating technological leap-frogging, which promote developmental objectives.

When elaborating the mechanisms, it is important to keep clear in our minds why the mechanisms were included in the Protocol: They will be effective, and indeed invaluable ways for us to meet the objectives of the Convention.

Thank you.