Options for a Financial Mechanism Under the Kyoto Protocol
The issue of financial transfers to developing countries is an integral part of the negotiations on completing the "unfinished business" of the Kyoto Protocol (KP) of 1997 to the UN Framework Convention on Climate Change (FCCC). Ecologic examines how such a Special Climate Change Fund could be developed and implemented.
In the proposals by the President of COP 6 of April 2001 (the so-called Pronk-2 paper), Dutch Environment Minister Pronk also put forward a proposed design for the issue of finance. Accordingly, industrialised countries are to make available US$ 1 billion per year no later than 2005 for mitigating and adapting to climate change in developing countries. As financial flows entering into the calculation, the Pronk-2 paper mentions inter alia contributions to a Special Climate Change Fund. Ecologic will examine how such a Special Climate Change Fund could be developed under the proposition that the payment by Assigned Amount is granted and how such a fund could be implemented. In particular, Ecologic works on following issues related to such a financial mechanism as the Special Climate Change Fund could be:
- the approximate resource requirements and potential revenues (depending on the level of contribution),
- the distribution of contributions and the implications of an incomplete ratification of the Kyoto Protocol,
- institutional arrangements for performing the different functions of the financial mechanism,
- options for ensuring against price fluctations and for generating revenues starting in 2005,
- options for adressing the issue of uncertainty of revenue levels (shortage or excess),
- options for adressing the concerns of Parties that wish to prevent a strengthening of their target,
- potential implications for negotiations on the second commitment period, and
- potential implications for the domestic implementations by Parties.