By Siân Green

The Kyoto Protocol looks likely to be ratified following the historic negotiations in Bonn last month. Can this multilateral deal proceed, and indeed, succeed, without the US?

The world’s industrialized nations finally reached consensus last month on the rules to implement the 1997 Kyoto Protocol. The historic agreement means that the Protocol can now be ratified, and its provisions become legally binding as early as 2002.

The talks – dubbed COP6-Part 2 – followed the failed climate negotiations held in The Hague in November 2000, where talks broke down over aspects of the deal such as compliance and flexibility mechanisms. Pivotal to this breakdown were the disagreements between the EU and the USA over these fundamental issues.

Last month’s talks in Bonn, Germany were designed to repair this damage and to try once again to bring over 170 industrialized nations to agreement on how the greenhouse gas emission reductions spelled out in 1997 will be attained. Success was reached on the morning of Monday July 23, when Japan finally gave its blessing to the deal following all-night negotiations over compliance issues.

Notably absent from the talks and the final agreement was, of course, the USA. And in spite of the reported euphoria among delegates to COP6-Part 2 over the agreement, US under-secretary of state for global affairs Paula Dobriansky maintained the USA’s stance that Kyoto was basically unsound and unworkable.

The decision by US president George W. Bush in March this year to pull out of Kyoto caused many to question the protocol’s future. And in this sense the Bonn agreement is a major coup: there is enough support for the deal for it to become legally binding without the USA.

In this sense, Japan’s approval of the deal was crucial. Japan is a member of the Umbrella Group, which in the November negotiations included the US and opposed Europe’s strict views on flexibility mechanisms. Without Japan, implementation of Kyoto would not be possible.

Along with Canada, Russia and Japan the USA formed the Umbrella Group to push for the inclusion of emissions trading and carbon sinks in the deal to help them meet their targets.

The EU opposed such mechanisms in November, saying that they would undermine the environmental integrity of Kyoto, but in Bonn made major concessions on these points to facilitate an agreement.

Under the new deal, countries will be allowed to account for ‘carbon sinks’ – the absorption of carbon dioxide by forests, croplands and grasslands – in their reduction targets. Although the amount accounted for by sinks is to be capped, their inclusion effectively reduces each nation’s reduction target. The WWF estimates that this means that the overall emission reduction target of 5.6 per cent of 1990 emissions has been reduced to just 1.8 per cent.

Crucially for Japan and its allies, parties to the agreement will be allowed to use flexibility mechanisms such as emissions trading. Countries will not be able to trade more than ten per cent of their reduction target, and in line with the wishes of the EU, will not be able to generate emission reduction credits by funding nuclear power projects in other countries.

In terms of compliance, a clause requiring payment for environmental damage caused by exceeding emission allowances was dropped. Instead, countries exceeding emission allowances will have their assigned allowances reduced and future allowances will include a penalty ‘interest rate’ of 30 per cent.

The new deal also includes a funding package to help developing countries adapt to climate change. Two new funds will be administered by the global environment facility to promote technology transfer in the energy, industry and transport sectors, while a third fund will finance specific projects in those developing countries which have ratified the Kyoto Protocol.

Many developing nations are undergoing rapid economic development and are also dependent on fossil fuels. Thus their inclusion is crucial to meeting the objectives of Kyoto, i.e. stabilizing greenhouse gas emissions and preventing global warming. And as the world’s largest single emitter of CO2, the eventual inclusion of the US in the deal is also probably needed.

But right now, the USA seems to have different ideas. It wants to present an alternative to Kyoto at the next Conference of the Parties – COP7 – in Morocco in October 2001. Meanwhile, the EU hopes that the Bonn agreement will persuade the US that it needs to be included in Kyoto.

The US fears that the cost of compliance with Kyoto will be too much and will affect the competitiveness of its industry. However studies by the European Commission suggest that compliance will cost Europe K3.7bn ($2.3bn) per year for the 2008-2012 period, equivalent to 0.06 of the EU’s projected GDP in 2010. The UN estimates that compliance will cost 0.1-2 per cent of a country’s GDP.

In addition, commentators have suggested that the exclusion of the US from Kyoto will leave it out in the cold in the long run. It will be unable to participate in the global emissions trading scheme and could even face some form of trade penalties.

Already in the US there is growing political support for Kyoto. Convergence of US policy with that of the agreement’s parties is therefore likely in the future but the next major step is ratification of the Protocol. A historic agreement has been made, but there are still many challenges ahead for Kyoto.