Given the alarming trends in dangerous climate change, the overall limits on emissions, as required by science, must be structured so as to both protect the atmosphere and to allow sustainable and equitable development in all the nations. Despite the attention devoted to the challenge facing developed nat ions in reducing their greenhouse gas emissions, COP4 must accept the overar ching challenge of equitable development and burden sharing. Recognition of the inadequacy of the commitments accepted by the developed nations in the K yoto Protocol and their revision must be a priority.

With a fifth of the world's population, industrialised countries are respons ible for around 2/3rds of the worlds greenhouse gas emissions. They are also responsible for virtually all historic emissions. Despite this, they are inc reasingly demanding that developing countries meaningfully participate in em ission reduction even though the UNFCCC, and the Kyoto Protocol, requires in dustrialised countries to take action first. The US has made meaningful part icipation a precondition of its ratification of the Kyoto Protocol, a demand that has been supported by countries like Australia and Japan. These demands ignore the fact that there are many good practice examples of emission reduc tion in the developing world.

The current industrialised country targets specified by the Kyoto Protocol a re not sufficient to prevent dangerous climate change. Industrialised countr ies will clearly have to make much greater emission reduction if the ultimat e objective of the Convention is to be achieved. However, the use of the Kyo to Protocols flexibility mechanisms enables industrialised countries to avoi d taking domestic action to meet their current inadequate commitments and co ntinue on a path of dangerous emissions. This is not only iniquitous but it is also ecologically ineffective.

Lacking from this process is any definition of the ecological limits, i.e. t he global scale of emission reduction that would actually prevent dangerous climate change. The Review of Adequacy of Commitments provides an opportunit y to rebuild a scientific basis for the core tasks of the Convention and Pro tocol as well as review the adequacy of the Annex 1 commitments adopted in t he Kyoto Protocol.

If one takes the view that there is a global carbon budget, i.e. an amount o f carbon that can be emitted before dangerous climate change becomes an inev itability - the core task is to allocate the carbon budget equitably and fai rly among all the Parties.

In other words, even if the Kyoto Protocol is implemented and all the loopho les closed it will do little to stop climate change. It is clear, therefore, that much greater emission reduction will have to be made by industrialised countries, while non-Annex 1 countries develop along a low carbon path. Howe ver, the respective balance between subsequent emission reductions between c ountries - including developing countries when they get to the point of acce pting reduction targets - cannot be decided unless the parties have worked o ut a fair and equitable system for the allocation of the global emission bud get.

Moving forward to avert dangerous climate change requires two key elements - (i) a scientifically derived global carbon budget and (ii) an allocation sys tem which fairly and equitably divides this global budget among the countrie s of the world.

In reality, both these elements will require first scientific judgements and secondly, political consensus. It is therefore necessary that NGOs work towa rds promoting the science and building that political consensus.

A number of steps can be outlined, using the Adequacy of Commitment Review, to take this issue forward. COP IV:

・ Acknowledge that the emission reduction targets in the Kyoto Protocol are inadequate.

・ Establish a binding timetable to review (and consider the timetable for t he establishment of new targets?) in light of the IPCC Third Assessment Report.

・ Require SBSTA to identify the issues and factors relevant to a definition of dangerous climate change and report at COP VI. The COP should communicate this definition to the IPCC for the Third Assessment Report.

・ Mandate the Subsidiary Bodies to assess the different ideas and models fo r the fair and equitable allocation of global emissions e.g. the Brazilian p roposal, Contraction and Convergence, per-capita or other approaches and to submit a report to COP VI.

Some of these ideas pose a particular challenge for the flexibility mechanis ms contained within the Kyoto Protocol, particularly emission trading which confers the right for industrialised countries to trade among themselves - w ithout the assignment of comprehensive set of entitlements on the basis of e quity. The G77 and China, at the Ministerial Meeting of the Non Aligned Move ment in May 1998, argued that it is important to examine how the emission ri ghts and entitlements of developed countries will be determined and created for trading systems. Will this be consistent with the principle of equity ke eping in view the historical and current responsibility of developed countri es to climate change and the ultimate objective of the Convention? The NAM C ommunique adopted at the Summit Meeting in September also said that Emission trading can only commence after issues relating to the principles, modalitie s etc of such trading, including the initial allocation of emission entitlem ents on an equitable basis has been agreed upon by the Parties to the UNFCCC . This view has also been endorsed by the European Parliament. It is also st rongly supported by many of CANs members.

The Kyoto Protocol must ensure that the atmosphere is made "whole" in the ev ent that any Party fails to comply with its commitments. This will depend on the ability of the Parties to institute a compliance system that would help them implement their commitments and impose penalties on those that fail to do so.

The effectiveness of the measures agreed to in Kyoto to reduce emissions of GHGs will depend on the ability of the Parties to institute a compliance sys tem. A well designed compliance system can simultaneously help Parties imple ment their commitments, impose penalties on those that fail to do so, and ac complish the overarching goal of ensuring that the climate benefits of those commitments are achieved, including by ensuring that the environment is made "whole" in the event that a party fails to comply. While the Convention and Protocol both contain skeletal elements of a compliance system, the Parties must resolve many difficult methodological and political issues before they can in implement such a system.

CAN believes that the Parties must take an holistic approach that integrates all the elements necessary to ensure compliance, and must include considerat ion of issues derived under many of the Protocol Articles: including Art., 3 , 4, 5, 6, 7, 8, 9, 12, 16, 17, 19. To this end the Parties must begin a pro cess at this COP for dealing with the breadth of the issues that must be add ressed and conclude on the same time-scale as the flexible mechanisms work p lan. CAN thus calls for the creation of an Ad-hoc Experts Group on Complianc e. The Ad-hoc group should be comprised of international legal and technical experts familiar with the operation of effective compliance mechanisms in other international and domestic regimes.

The group should be authorized to meet inter-sessionally as needed to develo p clear proposals for the Parties to adopt at COP. In order to focus and gui de (without predetermining) the work of the group, the COP should direct the Ad-hoc Experts Group on Compliance to address an explicit list of questions or issues.

An effective compliance regime must include at a minimum the following eleme nts for an over-arching compliance regime:

・ Design a compliance regime that addresses all aspects of compliance under the Protocol, including: implementation of obligations; clear and automatic accountability rules under the cooperative mechanisms; a formal non-complian ce regime under Article 18; mechanisms that automatically ensures that emiss ions in excess of any party are remedied directly .
・ Achieve the overarching goal of making the climate whole (i.e., achieving the full measure of emissions reductions under the Protocol) by incorporatin g mechanisms to cure any overage.
・ Require Parties to prepare individual i mplementation plans that provide specific details on how it will monitor and report and on the actions to be taken to meet their emissions targets.
・ Ensure that monitoring, reporting, and review mechanisms developed under the P rotocol provide sufficient information to fully evaluate compliance and allo w for interim assessments based on the implementation plans.
・ Coordinate with ongoing work on national inventories and reporting being undertaken by the IPCC and OECD National Inventories and Reporting to ensure flow of information, in light of decisions on Articles 5 and 7.
・ Formulation of an Article 7 FCCC decision by the COP that would go into effect when t he Kyoto Protocol went into effect specifying procedures and mechanisms of a formal non - compliance regime under Article 18, including a list of consequ ences for cases of non - compliance.
・ Integration with the Article 8 review process into compliance system.
・Elaboration of clear and automatic accountability rules under Articles 4 (no n - REIOs), 6, 12, 7.
・ Provide opportunities for NGO participation in compliance responses, incl uding the right to raise potential non-compliance issues and the right to pr ovide and evaluate information.
・ Include buyer or hybrid seller/buyer responsibility for the cooperative mechanisms.
・ Provide for automatic responses to non-compliance.
・ Offer guidelines to assist interested Parties in the creation of domestic compliance regimes, co nsistent with the Kyoto Protocol.
・ Draft language in the form of an amendm ent to Article 18 that would ensure the availability of the full range of no n-compliance responses following a formal determination of non-compliance.
・ Establish clear institutional responsibility and interrelationships for t racking compliance and responding to cases of actual or impending non-compli ance.
・ Encourage early domestic action to reduce the chance that Parties may fin d it difficult to fully comply at a later date.

Flexibility mechanisms are only a valid option if they benefit the environme nt, economic efficiency, if they are institutionally independent, transparen t and verifiable. They must not represent a loophole that allows high per ca pita emitters to evade aggressive domestic action. The three flexibility mec hanisms should be constructed concurrently and in accordance with common pri nciples. The flexibility mechanisms must conform to the foregoing principles of science and equity. It is inadvisable for the World Bank or other Interna tional Financial Institutions (IFI) to have any direct role in managing or i mplementing the flexibility mechanisms.

Principles, rules and guidelines for flexibility mechanisms:

・ A set of prerequisites must be in place in each country before it is perm itted to transfer or acquire parts of assigned amounts. These include: compl iance with Articles 5 and 7 of the Protocol, national monitoring and verific ation systems, national registries and reporting systems, national enforceme nt systems and ratification of the Kyoto Protocol and the compliance system.

・ Rules defining the "supplemental" role of emissions trading and joint imp lementation must be quantified and verifiable. The vast majority of Climatection Network members believe this is best achieved by placing a quantitati ve cap on the use of the flexibility mechanisms.

・ To negotiate second budget period targets and the review of adequacy, Par ties must be certain that domestic action will be the main means of achievin g targets. This needs a quantitative and verifiable measure against which th is commitment can be measured.

・ Rules governing trading and joint implementation among current and future Annex B parties must ensure that global emissions are no higher than in the absence of trading and JI, by taking into account the stringency of Parties emission reduction commitments.

・ Any Party joining Annex B must undergo scrutiny of its target to ensure i t requires real emission reductions.

・ To ensure fairness of treatment, the adequacy of commitments discussion m ust invoke this principle when considering amendments to existing Annex 1 co mmitments.

・ Tradable permits, Emission Reduction Units (ERUs) and Certified Emissions Reductions (CERs) are not property rights.

・ Assigned amounts and derived permits are by definition not permanent righ ts even when banked. The MOP/COP may alter their value or allocation at any time.

・ Legal entities cannot claim compensation for any such decisions by COP/MOP.

・ Any private entity trading must be guided by agreed international rules a nd standards.

・ To ensure compatibility of national systems with Convention objectives, c ompliance penalties, reporting requirements, public transparency, and other regulations governing market institutions must comply with the international level.

・ COP/MOP should have final authority.

・ Rules shall ensure that liability for non-compliance falls on both buyers and sellers of emissions permits.

・ Sellers must not be able to borrow from future periods through non-compli ance. Therefore, future assigned amounts should be discounted to achieve bot h environmental integrity and provide a significant penalty.

・ Buyers must not benefit from others non-compliance. The value of any perm its they purchase must be revised downwards to reflect actual emissions redu ctions.

・ National reporting requirements must provide adequate and timely informat ion to support buyer, as well as seller liability.

・ Annual information on emissions projections, details of domestic action o n both sources and sinks, and planned use of flexible mechanisms will be nee ded if buyers are to accurately and cheaply assess the quality of permits.

・ Distinct serial numbers must identify all permits passing through the tra ding system, including those generated through the Clean Development Mechani sm and Joint Implementation.

・ Rules on tracking and transferring ERUs, CERs and partial assigned amount s produced under Article 6 and 12 must provide for real-time public access t o information and allow the application of buyer, or joint buyer-seller liab ility.

・ This will require project identification on the permit, and reporting of significant domestic events which could affect the assessment of the project baselines and credibility of additionality.

・ JI projects must be subject to the same criteria for certification, addit ionality and verification as CDM projects, including investor liability and sustainable development. Only projects based on environmentally sound techno logy should be eligible, in accordance with Article 4.5 of the Convention. F or example, large hydro, coal or nuclear projects should be excluded.

・ There must be a fair and competitive playing field for all flexibility me chanisms, including allocation of a proportion of proceeds for adaptation an d mitigation.

・ Levying a fee on all transactions when registered within the Protocol ins titutions would help correct the current competitive disadvantage of the CDM , as well as the failure of markets to generate projects in the least develo ped countries.

・ Rules should maximize the potential of the trading system to provide both incentives for compliance and consequences for non-compliance.

・ While not replacing the need for strong consequences under Article 18, th e flexible mechanisms provide an opportunity to introduce more automatic con sequences for non-compliance.

・ These rules, principles and guidelines should be taken into account in th e development of a comprehensive regime.

One of the key objectives of the CDM is contributing to sustainable developm ent priorities in the South while helping reduce the threat of global climat e change. The CDM clearly is not going to achieve this by itself. Therefore, objectives and priorities for the CDM have to be related to the context in w hich it is being used. In 1996 private sector capital flows alone added up t o some US$244 billion and the CDM will never account for more than a small f raction of this. It is important that the those currently competing for infl uence over the way the CDM is set up also address these other areas Without a clear idea of how the CDM fits into the overall process of achieving susta inable development in the South, it will not achieve its goals.

This paper provides recommendations for many aspects of how the CDM could be developed, governed and operated, and how it might evolve. These recommendations are grounded in the reality that the CDM opens up a serious "loophole" in meeting the objective of the Convention. This is a matter of substantial concern to all NGOs, and we hope of concern to all governments. Starting as early as 2000, Article 12 allows developed countries to take credit for proj ects in developing countries that have no emissions caps, to be used in meet ing their first commitments. CDM credits add to the emissions budget of Anne x B parties. Unless CDM projects are fully additional, this increase will no t be compensated with corresponding reductions in non-Annex B Parties and th e overall reduction target of the Protocol will not be achieved. The CDM is the only flexible mechanism that opens up this possibility.

The CDM should not be used as a substitute for domestic actions by Annex 1 c ountries to make the necessary deep reductions in their emissions. The vast majority of CAN members believe this is best achieved by placing a separate quantitative cap on the use of the CDM. Ratification of the Protocol and acc ordance with its compliance regime must be a prerequisite for Parties partic ipating in the CDM and generating CERs.

If the CDM has a sound system of governance, is guided by criteria oriented toward fulfilling the conditions expressly articulated in Article 12, and ut ilizes appropriate accreditation and certification procedures, there is a po sitive potential. Provided those requirements are met, there is merit in get ting an early start in utilizing the CDM. But the CDM should start slowly, a nd be modified as we learn how to make it work properly.

Before the CDM can start, the Parties need to agree on criteria, principles, rules, methodologies and institutional arrangements that will allow it to he lp developing countries in appropriate ways, while preventing the CDM from b eing used to undermine the Convention and Protocol.

・ CDM projects and activities generate demonstrable net benefits to the glo bal climate, thereby helping to meet the fundamental objective of the Conven tion and Protocol.

・ CDM projects are compatible with sustainable development strategies of th e host country and local communities that are affected.

・ CDM projects avoid significant adverse environmental, social and cultural impacts.

・ CDM activities promote development of domestic institutional capacities. Institutional capacity is rapidly and systematically built up in developing countries to allow them to participate effectively in the CDM.

・ CDM activities promote transfer of the best technology, use of appropriat e local technologies in host countries, and introduction of demonstrated cut ting-edge technologies.

・ As a result of the CDM, sustainable energy services are made available to a substantial percentage of the rural poor who presently lack them, estimate d to be about 20% of the world's population.

・ CDM projects are fully consistent with the Biodiversity and Desertificati on Conventions as well as other relevant UN Conventions covering the environ ment, development, human rights and International Labour Organisation agreements

・ There is an equitable sharing of benefits from CDM projects between spons ors and host countries for example from sharing CERs.

・ There are substanti al proceeds available for adaptation, human and institutional capacity build ing in developing countries.

・ There is equity among countries in the flow of CDM projects, with a wide range of developing countries having the chance to benefit.

・ CDM financial flows significantly increase the total resources available to developing countries beyond existing financial obligations of Annex I Par ties as well as existing ODA flows.

・ The governance structure and mechanisms for certification, verification a nd review are transparent to civil society.

Annex I Parties are responsible for the vast majority of excess GHG emission s in the atmosphere, and therefore have a responsibility to demonstrate lead ership by reducing their own emissions at home. The CDM should not be allowe d to be used by developed countries as a substitute for aggressive action to reduce domestic emissions. In order to ensure that the necessary domestic ac tions are taken in Annex I countries and that the CDM is not undercutting th e objective of the Convention and Protocol, there are several options that c an be considered in concert with a quantitative cap. A trigger for review of the CDM rules, if CDM projects reach a total of, say, 1% of total Annex I bu dgets (projected over their lifetimes).

・ CDM credits could be discounted.

・ A trigger to review the existing cap if Annex I countries are not taking effective steps to reduce their emissions by 2005.

・ Very strong requirements for additionality, monitoring and verification, with appropriate precautions taken to account for uncertainty. Benchmarks or baselines should be chosen to represent the high performance end of current practice.

・ All CDM projects should be certified to be free from significant adverse social and environmental impacts as well as significant adverse consequences for indigenous peoples. Clearly nuclear technologies and large hydro project s cannot satisfy this test.

・ CDM projects should not result in giving host countries "perverse incenti ves" to maintain high emission levels in non-CDM activities in order to gain CDM credits. This problem applies to all sectors and should be addressed in rules on baselines and additionality.

・ There is a major decision to be taken on whether sinks can qualify under the CDM framework. There are difficult issues to be resolved in how to deal with sinks of various types. Any decision to include sinks should be deferre d until the IPCC Special Report expected in 2000, and that report is fully c onsidered by relevant subsidiary bodies and the COP.

・ As CDM activities will constitute only a small portion of total investmen ts in the energy sector, the CDM should be reserved for clean, cutting-edge technology options.

・ In its early years, the CDM should support a robust variety of renewable energy (including small-scale hydro), demand-side efficiency, energy conserv ation and advanced co-generation projects.

・ One key focus should be on bringing sustainable energy services to the es timated 20% of the world's population that presently lacks them.

・ Rules and guidelines for creating baselines that are equitable and serve to support the objective of the Convention and Protocol should be agreed. Ba selines should be created for each category of energy project, which should be objective and performance based.

・ Performance benchmarks for new projects should be chosen to represent the high-performance end of the spectrum of current commercial practice (not ave rage performance).

・ So-called "clean coal" projects do not have the reduced greenhouse gas em issions performance necessary to achieve the objective of the convention, an d should not receive credit under the CDM.

・ Parties should be able to participate in the CDM only if they have ratifi ed the Kyoto Protocol, submitted inventories and national communications pur suant to Article 12 of the Climate Convention and Articles 7 and 10 of the P rotocol, and ratified the compliance regime that will be developed pursuant to Article 18 of the Protocol.

・ Potential host countries need to put into place CDM management entities, policies, programs and strategies, with clear project selection criteria, pr ior to any consideration of a project being approved for credit.

・ Project credits should be given only when results are realized, and not w hen the feasibility study is done or the project is approved.

・ No accumulation of credits should be permitted until a Party has ratified the Protocol.

・ CERs associated with the CDM should be separately accounted for, and trac ked as to year, origin and specific project.

・ A certifiable CDM project must include demonstrable local benefits as wel l as environmental benefits. These benefits should contribute to the ultimat e objective of the Convention - prevention of dangerous anthropogenic interf erence with the climate system. Projects should be integrated with and suppo rt the host country's national plan to reduce or limit greenhouse gas emissions.

・ All CDM projects should include a life-cycle assessment and strict invest or liability, taking into account social and ecological impacts, and country -wide GHG leakage.

・ Setting up viable verification, monitoring, auditing and reporting proces ses is a key part of the overall governance system, which will be crucial to the success of the CDM, as well as of the Convention and Protocol.

・ The Executive Board will need to establish a process for "certifying the certifiers", which ensures their competence, which should be transparent to civil society.

・ There should be a conflict of interest test, to ensure that certifiers ha ve no financial interests in any CDM project or activity.

・ Verification methodologies need to account for additionality, baselines a nd GHG leakage, taking into account both direct and indirect country-wide le akage through social and/or ecological change.

・ Verification procedures should incorporate the full range of stakeholders , including local NGOs, affected communities and indigenous peoples, and sho uld build on experiences with the AIJ programme.

・ Independent monitoring teams should be created and funded to spot-check p roject activities. They should have the capacity to verify quickly such fact s as (1) whether the reported CERs are being achieved and actualized, (2) wh ether the project is actually promoting sustainable development, and (3) whe ther local communities are receiving the promised benefits.

・ A uniform reporting framework should be established, and there should be an International Registry of CER transactions that is maintained in an up-to -date way and is fully accessible to the public.

・ Standards for evaluating CER transactions should be transparent and compa rable. A review of current AIJ experiences show that these methodologies are inconsistent in practice, are too often non-transparent, and thus are subjec t to variable reporting. Variations in project methodologies, such as what d iscount rate to use for the cost-benefit analysis of the technology) have la rge effects on calculations of $/tonne CO2.

・ Parties should report annually on individual CDM projects, and should inc lude a description of CDM projects in national communications.

・ The Executive Board, operating directly under the authority of the COP/MOP, should have a clear mandate and appropriate powers to govern development of the CDM.

・ As a matter of equity, Southern countries should have a majority of seats on the Board, in order that their sustainable development considerations are properly emphasized by the Board's decisions.

・ There should be at least three seats on the Board for environmental NGOs and indigenous peoples, one from the north and two from the south.

・ Baselines are a first order issue. The integrity of the process depends o n the integrity of the baselines. We note that the AIJ phase didn't produce a common understanding of baselines. However they are defined, there will be serious incentives for either side - or both - to cheat. The CDM must not al low this to occur, as it would fatally undermine the Climate Convention. Thi s issue should be a high priority in the workplan emerging from this COP.

・ How questions are answered about administrative fees - who bears them, ho w are they to be raised or charged, which entity holds them, and how they ar e used - will have an important impact on how the CDM works in practice.

・ In order to fund the CDM's administrative expenses, an initial percentage of the project's total financing cost should be levied as an up-front charge paid by the project sponsor._

・ An "adaptation" charge should be introduced, perhaps based on a share of the CERs from the project, which should be paid out in freely convertible cu rrency.

・ Consideration should be given to a charge on projects under the CDM and o ther flexibility mechanisms to provide funds for developing human and instit utional capacity to assess, develop, certify and monitor CDM activities.

・ The World Bank Group should not be allowed to house or operate any part o f the CDM's financial mechanism, given the large conflicts of interest inher ent in its own portfolio, which makes it impossible for the World Bank to pl ay an "honest broker" role.

・ Brokers should be accredited through internationally agreed procedures in order to ensure consistency among all the "actors" involved, and there shoul d consequences for fraudulent activities.

Nuclear power inflicts serious damage to human health and ecosystems because it produces permanent environmental problems, including dangerous waste that lasts thousands of years and the impacts of major accidents.

Nuclear energy is an inflexible and expensive option that precludes the more sustainable, clean, flexible and inexpensive energy efficiency and renewable energy solutions available today. The Protocol should not lead to the life e xtension of operating reactors or to the construction of new ones. Nuclear p rojects under the CDM and/or JI must be prohibited by a Decision of COP4.

COP4 is witnessing a dramatic increase in the level of nuclear industry lobb ying wrongly claiming that nuclear power is an answer to climate change beca use it is a "zero emission source of boundless energy". One third of the ind ustry people present in Buenos Aires are connected to the nuclear industry. This is because they see the Kyoto Protocol, CDM and JI as the "saviours" of their industry.

Nuclear is no solution to climate change and is incompatible with achieving sustainable development for the following reasons:

・ safety issues are not solved and nuclear power is an unforgiving technolo gy which inherently carries the risk of catastrophic accidents;

・ the radioactive half-lives of some radioactive wastes reach millions of y ears. Safe waste disposal technologies have not been proven anywhere in the world;

・ nuclear power always carries the risk of proliferation of nuclear weapons;

・ nuclear power is not a cost-effective means of generating energy. This is especially the case for developing countries, where the World Bank has state d that "Nuclear plants in the power sector would not be economic; they are l arge white elephants"_;

・ the fundamental problems of radioactive waste and nuclear safety must not be traded off against the problem of climate change.

The huge amount of capital required for nuclear power projects would take aw ay from the resources needed for clean and efficient sources of energy and s ignificantly hinder the emergence of a sustainable energy future.

At the time when many reactors are reaching the end of their planned operati ng lives, and aging makes their continued operation more dangerous and costl y, it is essential to take the opportunity to reorient energy policies towar ds clean and sustainable energy sources.

The majority of the world's countries have never sought to use nuclear power . Others have already decided to phase out nuclear power in their countries. At CoP-4, these countries' Ministers should clearly articulate that energy e fficiency and renewable energy projects are the only reliable and sustainabl e solutions to address climate change and achieve sustainable development an d that nuclear power has no role to play in combating climate change.

At present, emissions from international aviation bunker fuels are not requi red to be included in national inventories. The aviation sector represents o ne of the fastest growing emissions sources. These emissions are likely to t riple in the next couple of decades, and occur at altitudes where their glob al warming potential is multiplied. Consequently, they would represent more than the total Annex B reduction commitment.

Aviation is one of the fastest growing sources of greenhouse gas emissions: for the coming decades the annual demand and emissions from this sector are expected to increase by 6% and 4% respectively. If this rate of increase is maintained, aviation emissions alone could be greater than the 5.2% reductio n target for Annex I countries by around 2015.

In spite of these predictions, emissions from international aviation are cur rently excluded from the national inventories of the Parties. The allocation of emissions from international bunker fuels is still unresolved. SBSTA has been wrestling with the questions of allocation ever since the Convention en tered into force, and has suggested a number of solutions including: no allo cation to national inventories, allocation according to the country where th e fuel is sold, allocation according to the nationality of the airline or of the aircraft registration and allocation according to the country of departu re or destination of the aircraft. In theory, the methodological question re lated to allocation should be easy to solve. It is therefore clear that the issue is rather a political one.

Article 2.2 of the Kyoto Protocol, which is a binding article, calls upon th e Parties to "pursue limitation or reduction of emissions of greenhouse gase s from international aviation, working through the International Civil Aviat ion Organisation (ICAO)".

Subsequently to the Kyoto Protocol, ICAO held its general assembly (that onl y meets every three years) in September/October 1998. The assembly endorsed only the formation of Working Groups on Emissions and on Market Based Mechan isms under the Committee on Aviation Environmental Protection, but did not d ecide on any measures to comply with the requirements of the Kyoto Protocol. Thus, there will be no further decision taken by ICAO before its next genera l assembly in 2001.

The environmental NGOs hope that all the Parties share our demands about the necessity to take quick action. We are demanding that:

・ SBSTA 10 should develop proposals for the allocation of aviation emission s and prepare recommendations for COP5;

・ COP5 should decide on the allocation of aviation emissions to the Parties;

・ COP5 should consider modalities for including international aviation emis sions attributed to the Parties in the first budget period.

At present, International Financial Insitutions (IFIs) are investing signifi cant quantities of public moneys in fossil fuels in developing countries and economies in transition (EITs), thereby laying the foundation for continue d reliance on fossil fuels by these countries in the future. To begin the pr ocess of building transparency and accountability around these investments, COP-4 must instruct the IPCC to provide by COP-5 a transparent methodology f or IFIs to calculate the full climate change impacts triggered by all IFI de velopment lending and guarantees.

In response to growing criticism regarding the disproportionate amount of pu blic moneys being invested in fossil fuels, at the May 1998 G-8 Summit, the following statement was issued by the G-8 Environment Ministers and endorsed in their final communique: "We must ensure that the policies and operations of the World Bank and other IFIs take full account of climate change."

Meeting the terms of this communique is a vital exercise, for two reasons: 1 ) IFIs have begun the process of calculating GHGs in their portfolios, but i n an ad hoc, uncoordinated manner; and 2) it is essential that there be publ ic accountability and transparency around IFI investments to ensure that the se public moneys are being invested in a manner that does not undermine the goals of the Kyoto Protocol.

In the absence of any guidance, some IFIs are currently using IPCC methodolo gies to determine the climate change impact of their investments and, as a r esult, excluding from their calculations latent emissions from oil, gas and coal fields for which they provide funds. Others are calculating "net climat e benefits" when a small amount of carbon is captured from projects which ac tually will result in billions of tons of carbon being released.

To provide guidance to these IFIs, and get an accurate accounting of IFI inv estments' impact on the global climate, it is essential to calculate carbon emissions that WILL be released from projects IFIs help finance.

This calculation of the future impact of IFI lending is necessary, both to m eet the terms of the G-8 communique and other calls for transparency and acc ountability on behalf of IFIs, and to begin the process of correcting the fi nancial incentives that IFIs provide developing countries and EITs to develo p their economies using fossil fuels, rather than low or no-carbon energy al ternatives.

Thus, by COP5, the IPCC must provide IFIs with a methodology for IFIs to cal culate the full climate change impacts triggered by all IFI development lend ing and guarantees. And by COP-6, all IFIs must make available to the public , 120 days in advance of project approval by their board of directors, a ful l assessment of the climate change impact of their lending and guarantees.

The work-plan decided at COP4 should elaborate mechanisms to promote, facili tate and finance the transfer of, or access to, environmentally sound techno logies to developing countries; as early as possible, with a view of adoptin g a decision at COP6. The decision should be informed by the IPCC Special Re port on Technology Transfer and remain independent of the CDM.

These points do represent a broad consensus of CAN, but do not necessarily r eflect in full detail all groups' views. A short version of this document is available from the CAN web site