Categories: Climate Article 3

Introduction

The Eleventh Meeting of the Parties to the Montreal Protocol on Substances that Deplete the Ozone Layer was held between 29 November and 3 December 1999 in Beijing. It took place in combination with the Fifth Meeting of the Conference of the Parties to the Vienna Convention for the Protection of the Ozone Layer. Representatives of 130 parties to the Protocol, several United Nations bodies and specialized agencies as well as a number of intergovernmental bodies and non-governmental organizations attended the sessions. The Meeting not only had before it a full agenda, but also constituted the biggest international environmental conference ever held in China. It was subdivided into a technical session that started on 29 November and a high-level session held on 2–3 December. Negotiating groups continued to meet during the high-level session to try to arrive at a compromise package. The Meeting of the Parties was preceded by the 23rd Meeting of the Implementation Committee under the NonCompliance Procedure of the Montreal Protocol, held on 27 November 1999 and by the 29th Meeting of the Executive Committee of the Multilateral Fund for the Implementation of the Montreal Protocol, and meetings of its sub-committees, from 22–26 November 1999. 

The Meeting of the Parties had to deal with a number of important issues, including the level of replenishment of the Multilateral Fund and several proposals for further Adjustments and Amendments to the Protocol put forward by the European Union (EU). These concerned in particular the introduction and strengthening of controls on hydrochlorofluorocarbons (HCFCs), methyl bromide and bromochloromethane and the continued production of chlorofluorocarbons (CFCs) in industrialized countries to meet the “basic domestic needs” of developing countries operating under Article 5 of the Montreal Protocol (socalled Article 5 countries). The meeting also addressed the continued non-compliance of several “countries with economies in transition” (CEITs), dealt with the potential for conflict with the Kyoto Protocol to the UN Framework Convention on Climate Change by accepting the greenhouse gases hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs) as CFC replacements and passed a Beijing Declaration, a draft of which had been submitted by the Chinese host government.

The replenishment of the Multilateral Fund with US$ 440 million was eventually agreed for the period 2000– 2002. This will be employed to keep developing countries on track with their phase-out schedule. The Beijing Amendment, containing a package of measures relating to HCFCs, methyl bromide and bromochloromethane, will start to be enforced on 1 January 2001. If fewer than 20 Parties have ratified the Amendment by that date, it will enter into force 90 days after the 20th instrument of ratification has been submitted. The Adjustments will, in accordance with Article 2.9 of the Protocol, become binding after six months without any ratification.

Replenishment of the Multilateral Fund for 2000–2002

The Multilateral Fund for the Implementation of the Montreal Protocol was founded in 1991 in order to assist Article 5 countries in complying with the applicable phaseout schedules and eventually achieve a complete phaseout of ozone-depleting substances (ODS) (see Table 1). Since then, it has operated on the basis of three-year budget periods. The Beijing Meeting thus faced the challenge of agreeing on the replenishment of the Multilateral Fund for its fourth triennium, 2000–2002. Negotiations took place at a critical juncture in international policy for the protection of the ozone layer: the “grace period” applying to developing countries with low per capita consumption of ODS under Article 5 of the Montreal Protocol ended. The freeze on the production and consumption of CFCs took effect in mid-1999 and further control measures will become applicable during the next decade until the phase-out of the major ODS in 2010–2015 (see Table 1).

The replenishment negotiations were informed by analyses of a special task force of the Technology and Economic Assessment Panel (TEAP) of the Montreal Protocol. The task force presented its assessment of the funding requirements for the period 2000–2002 in April 1999.2 Although it came to the conclusion that only about US$ 300 million would be needed to enable compliance with the phase-out schedule between 2000–2002, it recommended a replenishment in the range of US$ 500 million. This “advanced funding” was meant to provide for smooth progress towards meeting the next steps in the phase-out process, most importantly the 50 per cent cut in CFC production and consumption by 2005, and also allow for continuous project development in the mid-term to maintain momentum. The TEAP report was first discussed at the meeting of the Open-Ended Working Group of the Parties that was held in Geneva from 15–18 June 1999. Discussions were conducted mainly within an ad hoc group on replenishment that consisted of 14 Parties, seven Article 5 countries and seven Non-Article 5 countries. Deliberations concerned the accuracy of assumptions made in the TEAP analysis, and resulted in a list of 10 questions being presented to the TEAP task force for its further consideration. 

The TEAP task force then presented a supplementary report addressing these questions at the end of August 1999. The questions concerned issues that were contentious in intergovernmental talks, such as the rationale for the advanced funding, the justification of funding noninvestment activities (e.g. institutional strengthening for policy development), the cost-effectiveness levels of methyl bromide projects and of projects involving small and medium-sized enterprises and low-volume consuming countries as well as the cost implications of disfavouring HCFCs and favouring hydrocarbons in Fund projects. In addition, the TEAP task force introduced a few modifications to the calculations put forward in April. However, these did not have major implications for the funding requirements. The ad hoc group on replenishment subsequently met again in Washington, D.C., on 30 September and 1 October 1999 to discuss the supplementary report. Hard bargaining on the figures involved only started at the Beijing meeting, when the ad hoc group was slightly extended to allow for the wider participation of countries in preparing the final decision.

In the discussions, developing countries argued that the financial requirements for 2000–2002 may exceed the US$ 500 million proposed by the TEAP task force, because the “low-hanging fruits” (i.e. the cheap reductions) had already been reaped. Future reductions would have to be achieved by addressing small and medium-sized enterprises and the informal sector which were characterized by far less favourable cost-effectiveness levels. A high level of uncertainty was inherent in other factors influencing the costs to be incurred by the Multilateral Fund in the next triennium, including the specific costs of phasing out methyl bromide.

Industrialized countries, on the other hand, emphasized that only around US$ 300 million would be required if strict criteria were applied, believing that some assumptions made by the TEAP are too pessimistic, thus reducing the likely financial demand. Nevertheless, the willingness of industrialized countries to settle at an amount well above US$ 300 million grew during 1999 in order to maintain momentum and provide for constant progress towards ODS phase-out. However, the willingness of industrialized countries to pay varied quite substantially, for two main reasons. First, several European countries faced severe budgetary constraints resulting from general financial policies aimed at reducing budget deficits under the European stability pact for a common currency, the euro. Second, and more importantly, contributions to the Multilateral Fund are assessed on the basis of the UN scale of assessments. The latter had been revised in recent years leading to a substantial increase in the share of several EU member states and Japan. These countries would thus be faced with an increase to their contributions even if the overall size of the Multilateral Fund remained unchanged. For the triennium 1997–1999, the Multilateral Fund replenishment had been US$ 466 million. Therefore, these countries (which included France, Italy, Japan and Germany) wanted the upcoming replenishment to stay below the level of US$ 466 million. Others, including the US and a number of smaller industrialized countries, were more flexible. The big contributors were, however, united in requesting the introduction of the possibility of realizing projects under the Multilateral Fund by way of “innovative financing”, especially concessional loans. This possibility had been envisaged in Article 10.3 of the Montreal Protocol. Nevertheless, the Fund operated solely on the basis of grants throughout the 1990s. Earlier attempts to introduce concessional lending had met with strong opposition by developing countries.

Major industrialized countries tried to overcome this stalemate by offering a trade-off: concessional lending for more money in the replenishment round. In protracted negotiations, the issue of concessional lending remained the only unresolved matter. A replenishment level of at least US$ 440 million was agreed on, and industrialized countries offered to contribute another US$ 20 million on the condition that concessional lending was accepted. After an unsuccessful search for a compromise, developing countries opted for less money without concessional lending. Thus, Decision XI/7 adopted by the Meeting determines a replenishment level of US$ 440 million for the triennium 2000–2002. The total budget for the triennium will, however, amount to US$ 475.7 million, since US$ 35.7 million of the previous budget period had not been spent and will be carried over to the next triennium.5 Such a carry-over does not necessarily result from a lack in demand for the resources. Rather, a number of countries paid their contributions late so that these could not be allocated.

In a related matter, it was decided that a fixed exchange 3 rate mechanism may be used by Parties in contributing to the Fund during the triennium 2000–2002. Accordingly, industrialized countries may pay their contributions in their national currency (as opposed to US dollars) if their inflation rate fluctuation was below 10 per cent between 1997 and 1999. The operation of the mechanism and its implications on the operation of the Fund will be reviewed at the end of 2001. 

Adjustments and Amendments

The EU also put forward in 1999 a number of proposals for adjusting and amending the Protocol. These were related to strengthening control measures on the production and consumption of HCFCs and introducing HCFC trade controls, restricting the production of controlled substances for the basic domestic needs of developing countries, strengthening controls on methyl bromide and prohibiting the production and consumption of bromochloromethane, an ozone-depleting substance that had recently appeared in the marketplace. As such “new” ozone-depleting substances appear to be developed from time to time, the European Union also suggested that an “expedited procedure” for bringing such substances under the control of the Montreal Protocol should be considered.

These proposals met with little enthusiasm and even outright objection by other Parties during the preparation of the Beijing meeting and at the Meeting of the Parties. There can be little doubt that without the EU pushing forcefully for its proposals there would have been no Adjustment or Amendment to the Protocol adopted in Beijing. The EU did not only work towards the acceptance of each of the specific proposals, but it also strove to achieve a viable “package”. This was essential in particular for those parts of the proposals that needed to be agreed by adopting an Amendment to the Protocol. Such Amendments introducing new measures need to be ratified by Parties before taking effect.7 In contrast, Adjustments to existing measures adopted under Article 2.9 of the Protocol become binding on all Parties without national ratification.

HCFCs

In its proposals related to HCFCs, the EU followed up on a declaration supported by 34 Parties to the Protocol at the Ninth Meeting of the Parties in 1997 in Montreal that called for a decision on consumption and production controls of HCFCs at the Eleventh Meeting. The EU specifically proposed that the baseline for HCFC consumption controls in industrialized countries be reduced to take into account only 2.0 instead of 2.8 per cent of 1989 CFC production and that the intermediate reduction steps in 2004 and 2010 be strengthened (see Table 1 for applicable phaseout schedules). In addition, the EU called for controls to be introduced on the production of HCFCs for both industrialized and developing countries (including a full phase-out of production in the timeframe of the consumption controls) as well as HCFC trade controls (i.e. a ban on trade in HCFCs with Non-Parties).9 Both these measures were new under the Montreal Protocol and thus needed to be adopted by means of an Amendment. However, the trade controls were thought to be essential for the overall Amendment package, as they would provide a strong incentive for countries to actually ratify the Amendment. Only if a country was considered a Party with respect to the Amendment, would they be able to participate in international HCFC trade without restrictions.

Other major players lent little support to the EU proposals. Neither the US, Japan, China, India or other developing countries were prepared to accept a phase-out of HCFC production. As in previous negotiating rounds, the proposed strengthening of the HCFC consumption phaseout schedule for industrialized countries met with fundamental opposition by the US. One of the reasons for this opposition apparently was an understanding reached between the US government and US industry during the first half of the 1990s that no further controls restricting the use of HCFCs would be introduced. This was meant to provide a stable basis for taking investment decisions regarding HCFCs that are used to substitute CFCs. HCFC trade controls met with little support since this would increase pressure on developing countries who have not yet ratified all the Amendments to do so, and might restrict export markets for some of the major producers, including the US. On top of this, the Scientific Assessment Panel and the TEAP provided little support for the EU’s case in their reports.

The situation thus very much resembled that at the Ninth Meeting of the Parties in 1997, when a similar attempt by the EU failed: prospects for new and strengthened controls on HCFCs were slim. As in 1997, the EU nevertheless pressed for progress in this area. In some respects, the situation was more favourable towards the EU. First, the EU and its member states were united in their request to include controls on HCFC production in the Protocol. This was also a result of internal agreement on phasing out HCFC production within the EU by 2026. Such a phase-out will be part of a new EU Regulation that is expected to enter into force in 2000. Second, and as a result of the forthcoming EU rules, the chemical industry became more supportive of production controls in order to provide an industrial standard at the global level. Third, China was instrumental in the end in tipping the balance. The host government was eager to bring about some outcome of the conference that would demonstrate its success. To this end, China proposed a “Beijing Declaration” (see below on other matters). This gave the EU the opportunity to put pressure on the Chinese host by refusing to sign such a declaration unless a substantial outcome (i.e. a “Beijing Amendment”) was agreed.

The EU was eventually able to achieve partial success. It was unable to obtain agreement on strengthening controls on HCFC consumption in industrialized countries and on a phase-out of HCFC production. It achieved, however, two of its major goals, the inclusion of trade controls on HCFCs and a freeze of HCFC production. Thus, each Party to the Beijing Amendment will have to ban the import and export of HCFCs to and from NonParties from 2004. As of the same date, industrialized countries will have to freeze HCFC production. The level of the freeze will be the average HCFC production and consumption in 1989 plus the average of 2.8 per cent of production and consumption of CFCs in the same year. Developing countries will have to freeze their HCFC production in 2016 at the level of the average of their production and consumption of HCFCs in 2015. The formula for the level of the freeze for HCFC production was the result of protracted negotiations in which Canada in particular took an active stance. It feared that it may not be able to produce a particular HCFC for export, which it had produced in the 1990s, if production in 1989 was taken as a baseline. Having included controls on HCFC production in the Protocol, Parties will be able to use the speedier and less demanding Adjustment procedure for any future strengthening of controls on HCFC production.

New Ozone-depleting Substances

The proposal to prohibit the production and consumption of bromochloromethane met with little opposition, as this chemical has not yet been widely introduced into the marketplace. If not regulated, however, it was expected to have a significant market potential, especially as a solvent. It was thus agreed that, as part of the Beijing Amendment, the production and consumption of bromochloromethane (listed in Group III of Annex C of the Protocol) would be banned by 1 January 2002. The prohibition only enters into force, however, upon ratification of the Beijing Amendment by at least 20 Parties and takes effect only for those Parties which have ratified the Beijing Amendment. Parties are faced with this situation with respect to any new ozone-depleting substance, i.e. in order to regulate its production and consumption, an Amendment is required that needs to be ratified. In cases where such a prohibition is not part of a viable package which provides enough incentives for Parties to ratify (as does the ban on the trade of HCFCs with Non-Parties that is part of the Beijing Amendment), this might considerably delay the effectiveness of any such prohibition.

The EU therefore suggested that Parties consider an expedited procedure for adding new substances to the control regime without the need for ratification. On that basis, the legal drafting group had developed the option of changing the existing Amendment procedure. The revised procedure would have required consensus for the adoption of Amendments (in contrast to the current twothirds majority). In addition, each Party would have had the opportunity to opt out of the new procedure and request that its ratification remain to be required for any new agreement reached on the basis of the expedited procedure. However, several Parties considered the new expedited procedure to be legally problematic. Even some EU representatives were not sure whether the form the expedited procedure had taken in the elaboration of the legal drafting group met with their original intentions, in particular since consensus would now be required, which might make decision-making on Amendments more burdensome. At Beijing, the expedited procedure was thus not at the centre of political negotiations. Although attempts were made to accommodate differing views on the matter, an acceptable solution could not be found. As a result, the meeting decided “to continue to give full consideration to ways to expedite the procedure for adding new substances and their associated control measures to the Protocol and for removing them therefrom”.

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