Volume 24 Number 24
Wednesday, November 21, 2001 Page 1059  
ISSN 1522-4090
Special Report

Climate Change

Emphasis Likely to Shift to Rules
For Nations Not Part of Kyoto Accord

MARRAKECH, Morocco--
Most industrialized countries left the climate change talks here ready to start the process of ratifying the
four-year-old Kyoto Protocol.

But the United States and its two main allies have said they will not approve the agreement in the near term--setting up what many experts point to
as the next major battle on the climate control front.

Kyoto advocates say that with the increasing likelihood that the treaty will go into force by the end of 2003, attention will now shift to developing
rules under which companies in participating countries will be able to do business with companies in nonparticipating nations.

Without such a framework, they say, countries that are not bound by Kyoto-mandated limits will have an unfair advantage over companies that work
within them.

"This is the next big issue," Annie Petsonk, a climate change analyst at the U.S. environmental group Environmental Defense, told BNA Nov. 12.
"The task will be developing a framework that gives proper incentives for countries to comply [with Kyoto targets] without creating a system that
would simply make it more cost-effective for a country to simply move its operations or establish shell companies."

Main Topic of Conversation

The issue is likely to be the main topic of conversation at special meetings on the subject tentatively scheduled to be held in Russia in 2003, when
supporters of the treaty say the Kyoto agreement will already be in force.

In the Marrakech talks, known officially as the Seventh Conference of the Parties to the U.N. Convention on Climate Change (COP-7), delegates
only discussed the issue in broad strokes.

When implemented, the Kyoto Protocol will amend the 1992 framework convention by setting specific targets for reducing carbon dioxide and other
greenhouse-effect gases worldwide.

Two European delegates told BNA there had been informal discussions involving trade measures against countries that stay outside the system for a
long period of time. And market mechanisms would certainly pass on costs involved in meeting Kyoto goals to buyers of products whether they are
in a participating country or not.

Three members of the so-called Umbrella Group that have not yet committed to ratifying the Kyoto pact--the United States, Australia, and
Canada--account for 41.5 percent of the industrial world's 1990 greenhouse gas emissions.

That total was nearly enough to prevent the treaty from being ratified, and environmental advocates point out that if the trio continues to operate
outside the system that their emissions will certainly be enough to severely limit the effectiveness of the countries acting to limit emissions.

The three other Umbrella Group members--Japan, Russia, and New Zealand--have already said they will start the process of ratifying the agreement.

Canada Most Likely to Commit

Of the three abstainers, Canada is the most likely to eventually commit to the pact.

Canadian Environment Minister David Anderson told reporters Nov. 10 that he was "cautiously optimistic" about the treaty's chances for
ratification in Canada, though he stopped short of saying the government was prepared to start pushing for parliamentary approval of the document.

"In Canada's case, our prime minister said that [the previous round of talks in] Bonn 'opened the door' to the possibility of Canadian ratification,"
Anderson said. "I would have to say that as a result of the progress here in Marrakech the door has opened a little wider."

Canada's main problem stems from its geographic proximity and strong economic ties to the United States, the Kyoto Protocol's most visible

About 87 percent of Canada's exports are to the United States, and Canadian officials told BNA that there are distinct fears in Canada that by
approving the agreement, Canadian products could become too costly for the U.S. market.

Furthermore, officials said, the country could lose jobs to the United States and Mexico, its partners in the North America Free Trade Agreement,
and to countries that are nonparticipants in Kyoto.

As a developing country, Mexico is not required to participate at this point in reaching mandated quantifiable targets under the Kyoto accord.

"Trading blocks work much better when they move in step on issues like these," one Canadian delegate told BNA on Nov. 9. "This is why the
European Union agreed as a whole. Otherwise, you could have a situation where one country produces, say, electricity under Kyoto rules and sells it
in a country that can use the power any way it pleases."

U.S. Stance Clear

The stance in the United States and Australia is clearer.

In March, U.S. President George Bush said his administration would not move to ratify it--a stance echoed in Marrakech by U.S. delegation head
Paula Dobriansky.

Similarly, the recent reelection of the political coalition led by Australia's John Howard virtually assures that that country will maintain its previous
anti-Kyoto stance.

In a White Paper distributed in Marrakech by the International Chamber of Commerce, analysts discussed ways in which the competitive advantages
that will be enjoyed by noncomplying nations like the United States, Australia and Canada will be accounted for.

"Will a nation be allowed to impose trade barriers in the form of border taxes or other adjustments?" the paper asked. Will countries move "to limit
some types of international tariffs under Kyoto mechanisms depending" on whether or not countries ratified the treaty?

Legal experts said purely trade-related initiatives against companies in noncomplying countries could be sidestepped if countries simply move assets
to subsidiaries in countries that are parties to the protocol or to developing countries that are not yet included in the process.


Though those acts can be controlled somewhat by rules requiring a country to be counted depending on where its main office is or where the majority
of its employees work, the main barrier at first will likely be the cost involved in such maneuvers.

As a nonparticipant to most of what took place in Marrakech, the U.S. role was limited, and U.S. officials said they were hesitant to speculate about
issues beyond those under discussion at the COP-7 summit.

But Dobriansky, the U.S. delegation head, told reporters after the close of the meetings that she would favor a new kind of negotiating in future
meetings--including those scheduled to take place in Russia in two years.

"I'm not sure how constructive this kind of take-it-or-leave-it negotiating is," she said, though she did not say how she would change the negotiating

By Eric J. Lyman

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ISSN 1522-4090
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