THEMATIC DEBATE

OF THE GENERAL ASSEMBLY
UNITED NATIONS HEADQUARTERS, NEW YORK
31 JULY / 1 AUGUST, 2007
"CLIMATE CHANGE AS A GLOBAL CHALLENGE"

(SECOND PART)

V. THE NEXT STEPS IN THE GLOBAL RESPONSE TO CLIMATE
CHANGE.

38. Around the world, discussions on climate change are moving with a
new sense of urgency and openness. Climate change has been included
in the agenda of several important international and regional meetings this
year, many of which have called for successful outcomes at the United
Nations Climate Change Conference to be held in Bali in December 2007.
The Bali Conference will provide the world with an opportunity to further
engage in the multilateral climate change process under the auspices of
the UN and to collectively craft the next steps in the global response to
climate change.

39. To facilitate an exchange of views and to galvanize political will for
the Bali Conference, on 24 September 2007 the Secretary-General will
convene an informal high-level event in New York on the margins of the
General Assembly. The event will provide an opportunity to involve all
countries and other stakeholders in the multilateral process.

Annex A

THE INSTITUTIONAL FRAMEWORK: THE UNITED NATIONS
FRAMEWORK CONVENTION ON CLIMATE CHANGE AND THE KYOTO
PROTOCOL

40. General Assembly resolution 45/212 launched negotiations that
resulted in the United Nations Framework Convention on Climate Change
(UNFCCC). The convention was opened for signature on 4 June 1992 at
the Rio de Janeiro ‘Earth Summit’ the United Nations Conference on
Environment and Development. Fifteen years later, the UNFCCC is at the
centre of the global response to climate change. The Convention
recognizes that man-made emissions of carbon dioxide and other
greenhouse gases are altering the world’s climate. Its have established a
long-term objective to stabilize greenhouse gas concentrations in the
atmosphere to prevent dangerous human interference with the climate
system while allowing development to take place.

41. The provisions of the Convention were not sufficient so a substantial
extension to the Convention – the Kyoto Protocol – was adopted at the
third Conference of the Parties in December 1997. The Kyoto Protocol,
which entered into force on 16 February 2005, established legally binding
emission targets for industrialized countries. Since adoption, both
instruments have been further elaborated by decisions of Parties at their
annual meetings. These collective decisions now make up a detailed set
of rules for implementation of both the Convention and its Kyoto Protocol.

A. Commitments under the UNFCCC

42. The UNFCCC sets an overall framework for international efforts to
tackle the challenge of climate change. All Parties must develop and
periodically submit special reports called national communications, which
must contain information on the greenhouse gas emissions of that Party
and describe the steps it has taken and plans to take to implement the
Convention. Each national communication is subject to an "in-depth"
review to provide a comprehensive, technical assessment of a Party's
implementation of its commitments.

43. The Convention also requires all Parties to put in place national
programmes and measures to control emissions and to adapt to the
impacts of climate change. Parties also agree to promote the development
and use of climate-friendly technologies; education and public awareness
of climate change and its impacts; sustainable management of forests and
other ecosystems that can remove greenhouse gases from the
atmosphere, and to cooperate with other Parties in these matters.

44. Industrialized countries, which are called Annex I Parties under the
Convention, have additional commitments. These Parties agreed to
undertake policies and measures with the specific aim of returning their
greenhouse gas emissions to 1990 levels by 2000. Annex I Parties must
also provide more frequent national communications and must separately
provide yearly inventories of their national greenhouse gas emissions,
which are subject to an annual technical review process.

45. They must also promote and facilitate the transfer of climate
friendly technologies to developing countries and to countries with
economies in transition, as well as provide new and additional financial
resources to help developing countries implement their commitments.
Such financial resources are to be provided through the Global
Environment Facility, which serves as the Convention’s financial
mechanism, and may also be provided through bilateral or other
multilateral channels.

B. Commitments under the Kyoto Protocol

46. The Kyoto Protocol shares the Convention’s ultimate objective to
stabilize atmospheric concentrations of greenhouse gases at a level that
will prevent dangerous interference with the climate system. The Kyoto
Protocol builds upon and enhances many of the commitments already in
place under the Convention. Only Parties to the Convention can become
Parties to the Protocol. Although all Parties have agreed to further
advance the implementation of their existing commitments under the
Convention, only Annex I Parties took on new commitments under the
Protocol. Specifically, these Parties have agreed to binding emission
targets over the 2008 – 2012 timeframe.

47. To assist Annex I Parties in meeting these targets, and to promote
sustainable development in non-Annex I Parties, the Kyoto Protocol
adopted three innovative mechanisms, by which Annex I Parties may avail
themselves of low-cost emission reductions achieved elsewhere. To
support the implementation of these mechanisms, the Kyoto Protocol
strengthened the Convention’s reporting and review procedures and
created a system of electronic databases, called national registries, to
monitor transactions under the Kyoto mechanisms, and an international
transaction log to verify transactions of emissions credits, including their
issuance, transfer and acquisition between registries. It also established a
compliance system designed to strengthen the Protocol’s environmental
integrity, support the carbon market’s credibility and ensure transparency
of accounting by Parties. It is overseen by a committee, which has the
authority to determine and apply consequences for non-compliance.

C. Market Mechanisms and the Carbon Market

48. The Kyoto Protocol’s market mechanisms seek to lower the costs of
achieving emissions targets: the clean development mechanism, joint
implementation and emissions trading. The clean development
mechanism, or CDM, allows Annex I Parties to invest in projects in non-
Annex I Parties that reduce emissions, or that enhance sinks through
afforestation or reforestation. The Annex I Party can then use credits
generated by these projects toward meeting its emission target. Similarly,
through joint implementation (JI) Annex I Parties can receive credit for
investing in projects in other Annex I Parties. Finally, emission trading
allows Annex I Parties to trade credits or emission allowances among
themselves.

49. Among these mechanisms, the CDM stands out, as it provides a
vehicle to finance sustainable development projects that reduce
greenhouse gas emissions in developing countries. It is overseen by an
Executive Board, operating under the authority of the CMP, that approves
methodologies for baselines and monitoring, registers projects and issues
credits. With over 1200 projects in the pipeline, the CDM has an overall
emission reduction potential of about 1.4 billion tonnes by 2012 (of which
590 million are already in the form of registered projects). The CDM is
gaining speed very rapidly, but the market needs long-term policy certainty
in demand beyond 2012 to continue to deliver.

50. Currently, CDM projects are not evenly distributed across geographic
regions. As a result, the Nairobi Framework was initiated by the United
Nations Development Programme (UNDP), the United Nations
Environment Programme (UNEP), the World Bank Group, the African
Development Bank, and the Secretariat of the United Nations Framework
Convention on Climate Change (UNFCCC) at the Nairobi Climate Change
Conference in 2006. It aims to help developing countries, especially those
in sub-Sahara Africa, to improve their level of participation in the CDM.

D. Financial architecture to address climate change

51. The contribution of countries to climate change and their capacity to
prevent and cope with its consequences vary significantly. The Convention
and the Protocol therefore call for financial assistance from countries with
more resources to those less endowed and more vulnerable. The Parties
to the Convention assigned operation of the financial mechanism to the
Global Environment Facility on an on-going basis, subject to review every
four years. The financial mechanism is accountable to the COP, which
decides on its climate change policies, programme priorities, and eligibility
criteria for funding. In addition, three special funds have been established:

(a) Special Climate Change Fund to finance projects relating to
capacity-building, adaptation, technology transfer, climate change
mitigation and economic diversification for countries highly
dependent on income from fossil fuels.

(b) Least Developed Countries Fund intended to support a special
work programme to assist the LDCs.

(c) Adaptation Fund, will finance practical adaptation projects and
programmes in developing countries and support capacity-building
activities. It will be funded from the adaptation levy on CDM projects.
Parties may contribute as well. It will become operational with the
entry into force of the Kyoto Protocol.

52. Different financing efforts need to be reconciled in a long-term legal
framework in order to provide security for carbon markets, investments and
long-term policy results. Existing financial structures and project-based
mechanisms need to complement each other so that available finances can
best be directed at both adaptation and mitigation. Governments will
consider existing and planned investment flows and finance schemes
relevant to the development of an effective international response to climate
change at Bali Conference in December 2007, with a particular focus on the
needs of developing countries.

E. Technology

53. Clean technologies are central to combating climate change and
many are already available. Cleaner technologies and energy efficiency
can provide win-win solutions, allowing economic growth and the fight
against climate change to proceed hand in hand. Given the continued
dominant role of fossil fuels in the global energy mix, energy efficiency,
cleaner fossil fuel and carbon capture and storage technologies are needed
to allow their continued use without jeopardising climate change objectives.

54. Encouragingly, according to UNEP and New Energy Finance (NEF),
sustainable energy investment has increased markedly over the past couple
of years, with wind, solar and biofuels attracting the highest levels of
investment. This reflects technology maturity, policy incentives and investor
appetite. Investor appetite suggests that existing technology is ready for
scale-up and that renewable energy can become a larger part of the energy
mix without waiting for further technology development yet investments in
climate-friendly technologies are still in their infancy.

55. To fully meet the mitigation challenge across the globe, the scale-up
needed requires greater cooperation between industrialised and developing
countries. Clear and predictable policy frameworks for private investors to
operate within and, innovative financing approaches that allow public funds
to attract private investment will also help.

56. The UNFCCC has facilitated a number of investment instruments and
opportunities targeted at technology transfer. The current technology
transfer framework provides opportunities to attract financing for climate
change technology transfer by identifying priority technology needs of
developing countries and working to create enabling environments for
technology transfer. It is also important to build capacity at the national
level to improve legal and regulatory framework, and to help project
developers at the sectoral level to demonstrate to private financiers that
proposed projects are financially attractive.

57. In addition, the Global Environment Facility (GEF) aims to play a
catalytic role in the development of markets related to climate change. It
allocates and disburses about USD 250 million per year in grants for climate
change projects. GEF funds have been used to stimulate innovative
financing mechanisms, such as risk mitigation schemes, loan guarantee
programs and micro-finance.

58. The CDM also provides a number of opportunities for attracting
finance for climate change projects by offering a legal framework and a
marketplace for Parties that are required to reduce greenhouse gas
emissions. The CDM makes it easier to attract financing for climate change
projects, through sales of carbon emissions reductions. As such, the carbon
market has an important role to play in bridging the technology and
investment challenge, while addressing climate change concerns.

59. The interest of development finance institutions also indicates that
there is an opportunity for climate change technology transfer in emerging
markets. An important aspect of their activities is that they attract private
financiers to climate change projects.

F. Deforestation

60. Reducing deforestation plays an increasing role in carbon mitigation,
as well as in other sectors such as stemming biodiversity loss.

61. The UNFCCC acknowledges the need to protect forests as part of
efforts to combat climate change. Under the Kyoto Protocol, emissions from
deforestation in developed countries are taken into account as part of
national commitments to reduce greenhouse gases. Tropical deforestation,
however, was excluded from the Kyoto Protocol due to controversies
surrounding sovereignty, uncertainty and implications for efforts to reduce
fossil fuel emissions. Discussions on reducing emissions from deforestation
in developing countries are underway within the UNFCCC process, at the
initiative of developing countries.

H. Calendar of meetings

• Fourth workshop under the Dialogue on long-term cooperative action to
address climate change by enhancing implementation of the Convention and
the resumed fourth session of the Ad Hoc Working Group on Further
Commitments for Annex I Parties under the Kyoto Protocol (AWG)
Vienna, Austria
27 - 31 August 2007

• Thirteenth session of the Conference of the Parties (COP 13) and the third
session of the Conference of the Parties serving as the meeting of the Parties
to the Kyoto Protocol (CMP 3)
Bali, Indonesia
3 - 14 December 2007

• Sessions of the UNFCCC subsidiary bodies
Bonn, Germany
2–13 June 2008

• Fourteenth session of the Conference of the Parties (COP 14) and the fourth
session of the Conference of the Parties serving as the meeting of the Parties
to the Kyoto Protocol (CMP 4)
Poznan, Poland
1–12 December 2008

• Sessions of the UNFCCC subsidiary bodies
Bonn, Germany
1–12 June 2009

• Fifteenth session of the Conference of the Parties (COP 15) and the fifth
session of the Conference of the Parties serving as the meeting of the Parties
to the Kyoto Protocol (CMP 5)
Copenhagen, Denmark
30 November to 11 December 2009