FACT SHEET: THE KYOTO PROTOCOL ON CLIMATE CHANGE

[USIA]

USIS Washington File

23 January 1998

FACT SHEET: THE KYOTO PROTOCOL ON CLIMATE CHANGE

(Features free market approach pioneered by U.S.) (1850)

(The following fact sheet was released by the Department of State's
Bureau of Oceans and International Environmental and Scientific
Affairs.)

BACKGROUND

At a conference held December 1-11 1997 in Kyoto, Japan, the Parties
to the U.N. Framework Convention on Climate Change agreed to an
historic protocol to reduce greenhouse gas emissions by harnessing the
forces of the global marketplace to protect the environment.

The Kyoto Protocol in key respects -- including emissions target and
timetables for industrialized nations and market-based measures for
meeting those targets -- reflects proposals advanced by the United
States. The protocol makes a down payment on the meaningful
participation of developing countries, but more needs to be done in
this area. Securing meaningful developing country participation
remains a core U.S. goal.

EMISSIONS TARGETS

A central feature of the Kyoto Protocol is a set of binding emissions
targets for developed nations. The specific limits vary from country
to country, though those for the key industrial powers of the European
Union, Japan, and the United States are similar -- 8 percent below
1990 emissions levels for the EU, 7 percent for the U.S., 6 percent
for Japan.

The framework for these emissions targets is based largely on U.S.
proposals:

-- Emissions targets are to be reached over a five-year budget period
as proposed by the U.S., rather than by a single year. Allowing
emissions to be averaged across a budget period increases flexibility
by helping to smooth out short-term fluctuations in economic
performance or weather, either of which could spike emissions in a
particular year.

-- The first budget period will be the U.S. proposal of 2008-2012. The
parties rejected proposals favored by others, including budget periods
beginning as early as 2003, that were neither realistic nor
achievable. Having a full decade before the start of the binding
period will allow more time for U.S. companies to make the transition
to greater energy efficiency and/or lower carbon technologies.

-- The emissions targets include all six major greenhouse gases. The
EU and Japan initially favored counting only three gases -- carbon
dioxide, methane, and nitrous oxide. Ensuring the inclusion of the
additional gases (synthetic substitutes for ozone-depleting
chlorofluorocarbons) that are highly potent and long-lasting in the
atmosphere provides more comprehensive environmental protection and
lends more certainty concerning the treatment of the additional gases.

-- Activities that absorb carbon, such as planting trees, will be
offset against emissions targets. The treatment of these so-called
"sinks" was another controversial issue at Kyoto. Many countries
wanted sinks to be excluded. The United States insisted that they be
included in the interest of encouraging activities like aforestation
and reforestation. Accounting for the role of forests is critical to a
comprehensive and environmentally responsible approach to climate
change. It also provides the private sector with low-cost
opportunities to reduce emissions.

Is the target the United States agreed to actually 7 percent lower
than what the President proposed in October?

No. The 7 percent target represents at most a 3 percent real reduction
below the president's initial proposal of reducing greenhouse gases to
1990 levels by 2008-2012. The remaining 4 percentage points result
from certain changes in the way gases and sinks are calculated and do
not reflect any increase in effort as compared to the president's
original proposal.

-- Changing the baseline for the three synthetic greenhouse gases from
1990 to 1995 accounts for about 1 percent of the 7 percent reduction.
Use of these three gases has grown since 1990, so that permitting a
1995 baseline allows for a higher overall baseline than the
administration assumed last October when the president announced his
goal of reaching 1990 levels by 2008-2012. Making reductions to meet a
higher baseline is of course easier than making reductions to meet a
lower baseline. Had the United States maintained the same level of
effort assumed by the president in October, and no other factors had
changed, the shift to a 1995 baseline for the three synthetic gases
would, alone, have transformed the President's goal of 1990 levels
into a goal equivalent to 1 percent below 1990 levels.

-- Altering the accounting method for carbon-absorbing activities,
such as planting trees, accounts for about 3 percent of the 7 percent
reduction. The president's original goal assumed that the 1990
baseline would be lowered by carbon-absorbing activities, but under
the method agreed in Kyoto, such activities do not lower the 1990
baseline. Because the 1990 level baseline is thus higher under the
Kyoto agreement, the U.S. target becomes somewhat less stringent.
Specifically, had the U.S. maintained the same level of effort assumed
by the president in October, and no other factors had changed, the
shift in the accounting method for carbon-absorbing activities would,
alone, have transformed the President's goal of 1990 levels into a
goal equivalent to at least 3 percent below 1990 levels. (As noted
above, certain carbon-absorbing activities will count against emission
reduction commitments in the budget period.)

INTERNATIONAL EMISSIONS TRADING

The United States prevailed in securing acceptance of emissions
trading among nations with emissions targets. This free market
approach, pioneered in the U.S., will allow countries to seek out the
cheapest emissions reductions, substantially lowering costs for the
U.S. and others.

Under an emissions trading regime, countries or companies can purchase
less expensive emissions permits from countries that have more permits
than they need (because they have met their targets with room to
spare). Structured effectively, emissions trading can provide a
powerful economic incentive to cut emissions while also allowing
important flexibility for taking cost-effective actions.

The Kyoto Protocol enshrines emissions trading. Rules and guidelines
-- in particular for verification, reporting and accountability -- are
to be worked out at the next meeting of the parties at Buenos Aires in
November 1998.

The inclusion of emissions trading in the Kyoto Protocol reflects an
important decision to address climate change through the flexibility
of market mechanisms. Led by the United States, the conference
rejected proposals to require all parties with targets to impose
specific mandatory measures, such as energy taxes.

The United States also reached a conceptual agreement with a number of
countries, including Australia, Canada, Japan, Now Zealand, Russia and
Ukraine, to pursue an umbrella group to trade emissions permits. Such
a trading group could further contribute to cost-effective solutions
to this problem.

JOINT IMPLEMENTATION AMONG DEVELOPED COUNTRIES

Countries with emissions targets may get credit towards their targets
through project-based emission reductions in other such countries. The
private sector may participate.

Additional details may be agreed upon by the parties at future
meetings.

CLEAN DEVELOPMENT MECHANISM

Another important free market component of the Kyoto Protocol is the
so-called "Clean Development Mechanism" (CDM). The CDM embraces the
U.S. proposal for "joint implementation for credit" in developing
counties.

With the Clean Development Mechanism, developed countries will be able
to use certified emissions reductions from project activities in
developing countries to contribute to their compliance with greenhouse
gas reduction targets.

This Clean Development Mechanism will allow companies in the developed
world to enter into cooperative projects to reduce emissions in the
developing world -- such as the construction of high-tech,
environmentally sound power plants -- for the benefit of both parties.
The companies will be able to reduce emissions at lower costs than
they could at home, while developing countries will be able to receive
the kind of technology that can allow them to grow more sustainably.
The CDM will certify and score projects. The CDM can also allow
developing countries to bring projects forward in circumstances where
there is no immediate developed country partner.

Under the Clean Development Mechanism, companies can choose to make
investments in projects or to buy emissions reductions. In addition,
parties will ensure that a small portion of proceeds be used to help
particularly vulnerable developing countries, such as island states,
adapt to the environmental consequences of climate change.

Importantly, certified emissions reductions achieved starting in the
year 2000 can count toward compliance with the first budget period.
This means that private companies in the developed world will be able
to benefit from taking early action.

DEVELOPING COUNTRIES

Various protocol provisions, taken together, represent a down payment
on developing country participation in efforts to reduce greenhouse
gas emissions:

-- Developing countries will be engaged through the Clean Development
Mechanism, noted above.

-- The protocol advances the implementation by all parties of Article
4.1 commitments under the 1992 Framework Convention on Climate Change.
For example, the protocol identifies various sectors (including the
energy, transport and industry sectors as well as agriculture,
forestry and waste management) in which actions should be considered
in developing national programs to combat climate change and provides
for more specific reporting on actions taken.

-- While the conference rejected a proposal to create a new category
of nations that would voluntarily assume binding emissions targets,
developing countries may as a prerequisite for engaging in emission
trading still do so through amendment to the annex of the protocol
that lists countries with targets.

Securing meaningful participation from key developing countries
remains a priority for the United States. The administration has
stated that without such participation, it will not submit the Kyoto
Protocol to the Senate for advice and consent to ratification.

MILITARY EMISSIONS

The Kyoto Protocol achieves the objectives identified by the
Department of Defense where international agreement was necessary to
protect U.S. military operations.

-- Emissions from "bunker" fuels (for international maritime or
aviation use) are exempted from emissions limits.

-- Emissions from multilateral operations pursuant to the United
Nations Charter are exempted from emissions limits. This includes not
only multilateral operations expressly authorized by the U.N. Security
Council (such as Desert Storm, Bosnia, Somalia) but also multilateral
operations not expressly authorized that are nonetheless pursuant to
the U.N. Charter, such as Grenada.

-- Countries may decide, among themselves, how to account for
emissions relating to multilateral operations (for example, U.S.
training in another NATO country). This provision avoids the need to
use emissions trading to allocate such emissions.

COMPLIANCE AND ENFORCEMENT

The protocol contains several provisions intended to promote
compliance. These include requirements related to measurement of
greenhouse gases, reporting and review of implementation.

The protocol also contains certain consequences for failure to meet
obligations. For example, as a result of a U.S.-proposed provision, a
party not in compliance with its measurement and reporting
requirements cannot receive credit for joint implementation projects.

Effective procedures and a mechanism to determine and address
non-compliance are to be decided at a later meeting. For both
environmental and competitiveness reasons, the United States will be
working on proposals to strengthen the compliance and enforcement
regime under the protocol.

ENTRY INTO FORCE

The Kyoto Protocol will be open for signature in March 1998. To enter
into force, it must be ratified by at least 55 countries, accounting
for at least 55 percent of the total 1990 carbon dioxide emissions of
developed countries. U.S. ratification will require the advice and
consent of the Senate.