The Marrakech Accords

Donald Goldberg
Katherine Silverthorne

After the collapse of climate change negotiations in The Hague, Netherlands, in November of 2000, many thought the Kyoto Protocol was doomed to fail. However, eight months later in Bonn, Germany, countries were able to pick up the pieces and resume negotiations with renewed momentum. The Bonn negotiations resulted in a political agreement that set forth broad-brush guidelines on key issues including the flexible mechanisms, "sinks," funding, and compliance. While this agreement insured continued momentum in the negotiations, it left many details to be finalized.

The Seventh Conference of the Parties (COP7) to the UN Framework Convention on Climate Change (UNFCCC), held in Marrakech, Morocco, in October of 2001 was tasked with finalizing the underlying legal texts for the Bonn Agreement and setting in place the accounting system for the Kyoto Protocol. This task was completed and the finalized texts are all contained in the 245-page Marrakech Accords. A draft of the Marrakech Accords can be found at http://www.unfccc.de/cop7/documents/accords_draft.pdf.

The following summarizes the final outcome on some of the key controversial issues.

Flexibility Mechanisms
The Kyoto Protocol sets out three market-based mechanisms that are intended to increase flexibility in meeting emissions targets. These are emissions trading, joint implementation (JI), and the clean development mechanism (CDM). The Bonn agreement set out some big picture guidelines on these mechanisms: for example, Annex I countries may make unlimited use of the mechanisms, but they may not use JI or CDM credits generated by nuclear power to meet their targets and, in the first commitment period of 2008-2012, they may only use CDM "sinks" credits up to 1 percent of their assigned amount. In Bonn, Parties also established a fast-track process for specific categories of small-scale projects. A number of additional key issues regarding the mechanisms were decided in Marrakech.

Parties made some important decisions regarding tradable emissions units. Annex I countries will be allowed to bank from one commitment period to the next any assigned amount units (AAUs) that they do not need to meet their target. Banking of emissions reduction units (ERUs) and certified emissions reductions (CERs) generated under JI and the CDM, respectively, is limited to 2.5 percent of a Party's initial assigned amount, a generous limit that few are likely to reach. Each Party will be required to retain emissions units in a commitment period reserve (CPR) of an amount equal to 90% of its allowable emissions or five times its most recently reviewed emissions inventory, whichever is lower. The CPR was designed to address the risk of overselling. A new unit was created for sinks credits generated in Annex I countries. These units, referred to as removal units or RMUs, must be used in the commitment period in which they are generated and cannot be banked for future commitment periods. However, this limitation is of little practical consequence because CERs, AAUs, ERUs, and RMUs are, with a few exceptions, interchangeable.

The eligibility requirements for participation in the mechanisms were among the most contentious issues in Marrakech. In order to participate, a country must: a) be a Party to the Protocol; b) have satisfactorily established its assigned amount; c) have in place its national system for estimating emissions and removals; d) have in place its national registry; e) have submitted its most recent required inventory (the inventory must also be assessed for quality); and f) submit the "supplementary information" required to show that it is in compliance with its emissions commitments. For Parties that have failed to meet the eligibility requirements, expedited procedures were adopted to reinstate their eligibility if they are able to demonstrate that problems have been resolved.

The draft legal texts forwarded from the Bonn negotiations included a requirement that a Party must have accepted the agreement on compliance to be eligible to use the mechanisms, but this requirement was removed in Marrakech. However, the enforcement branch of the compliance committee is specifically authorized to determine whether a party has met its eligibility requirements.

For purposes of JI, Annex I Parties that cannot meet the inventory eligibility requirement may utilize a second "track," which incorporates a project approval and verification process similar to the CDM. A JI supervisory committee, similar to the CDM Executive Board, was created to oversee this process. The Executive Board of the CDM was elected in Marrakech and held its first session on the Saturday (November 10, 2001) after the conference concluded.

Land Use, Land Use Change and Forestry
The Bonn Agreement allows countries to meet part of their targets through four types of land use, land use change and forestry (LULUCF) activities: forest management, cropland management, grazing land management, and re-vegetation. These activities, commonly referred to as "sinks" activities, absorb carbon from the atmosphere and fix it in plants, soil and other organic matter. Each Annex I country was allocated a number of tons of carbon uptake that it could count towards its emissions target from forest management activities. If cropland, rangeland or re-vegetation activities are selected, they must be accounted for on a "net-net" basis (rate of uptake during the commitment period minus rate of uptake in 1990). A decision on accounting for consumption and trade of wood products was deferred until SBSTA20, scheduled for 2004.

Before COP7, Russia contested the amount it was allocated in Bonn for forest management and asked that the amount be nearly doubled from 17.6 million tons of carbon (MtC) to 33MtC. Russia held up the conclusion of the Marrakech meeting until it received its full demand of 33MtC. Having received its full demand, the Russian delegate stated that the Marrakech Accord "opens the path for ratification by Russia."

Consistent with the Bonn Agreement, the Marrakech Accords limit sinks projects in the CDM to afforestation and reforestation. Conservation projects are explicitly excluded. In the first commitment period, Annex I Parties' use of CERs from such projects is limited to an amount equal to 1 percent of their assigned amount. The specific rules for sinks projects in the CDM are to be adopted at COP9, based on a recommendation from the SBSTA. These rules will address methodological questions, such as baselines, leakage, additionality and permanence, and definitions, including "reforestation" and "afforestation." They will also take into account socio-economic and environmental impacts. An important question is whether natural regeneration will be included in the definition of reforestation. The rules will also determine whether and how sinks activities will contribute to the conservation of biodiversity and sustainable use of natural resources. The terms of reference for developing these rules are to be decided by the SBSTA at its next meeting in June 2002.

Eligibility to participate in emissions trading will depend on the annual submission of a sinks inventory and a report on activities under Articles 3.3 and 3.4. The sinks inventory will be reviewed by international teams, and if found not to be of sufficient "quality," as defined by IPCC guidance on best practice, the country will not be eligible to use the mechanisms. There will also be a quality assessment of the report on Article 3.3 and 3.4 activities. Unlike the inventory assessment, this quality assessment will not affect eligibility (a limitation insisted upon by Russia and Japan).

Each Annex I country must also provide information on its sinks activities in a separate report that establishes its assigned amount, including such issues as how it will define "forest," which activities it will select under Article 3.4, the geographical location of these activities, and how and when it intends to account for them (either annually or at the end of the commitment period). Annex I countries must also report on their national "legislative arrangements and administrative procedures" for ensuring that Article 3.3 and 3.4 activities contribute to the conservation of biodiversity and sustainable use of natural resources.

Monitoring, Reporting and Review
The Marrakech Accords outline how a country must calculate and record its annual emissions. Utilizing best practice standards from the Intergovernmental Panel on Climate Change (IPCC), each country's national system should ensure that the quality of "carbon credits" entering the market will be sound. Adjustments will be made in cases where countries have underestimated their emissions. As mentioned above, in cases where the inventories are poor, the country will not be allowed to enter the carbon market.

The Marrakech Accords include an international accounting system to keep track of all the carbon credits bought and sold and calculate whether a country has met its target at the end of the commitment period. The accounting system will include a transaction log administered by the Kyoto Protocol secretariat that will record all issuances, transfers, acquisitions, cancellations and retirements of AAUs, ERUs, CERs and RMUs. The system will be very transparent and includes: serial numbers for each carbon unit; the country where the credit was initiated; the type of unit; and, if it is derived from a project, the type of project. This is an essential step that allows governments and civil society to track how countries and companies meet their obligations. The log will also automatically check to ensure that: each party is eligible to use the mechanisms, there are no infringements of the CPR, there are no infringements of the sinks caps and there are no unresolved discrepancies. If a discrepancy is flagged, Parties have 30 days to take corrective action.

The Accords also create a system of review by expert review teams (ERTs). ERT members will be selected by the secretariat based on their expertise, but also giving consideration to geographical balance. The ERTs will review annual inventories (including information on sinks activities), information on assigned amounts, national systems for monitoring emissions and removals, national registries, and at the insistence of OPEC countries, information on minimization of adverse impacts of response measures on developing countries. ERTs will determine whether any adjustments to Parties' inventories are required, but they must refrain from making any "political judgements," (e.g., whether a Party is out of compliance). Inventory reviews are to be conducted as "desk reviews" (i.e., without requiring an in-country visit), but once before the commitment period and at least once during the commitment period each Annex I Party will be subject to an in-country review.

Compliance Regime
Parties to the Kyoto Protocol will look to the compliance regime to provide assurance that their trading partners will meet their commitments under the Protocol or be subject to specific agreed upon consequences. The regime will help instill confidence in the markets set up under the Protocol's "flexibility mechanisms."

In Marrakech, the Conference of the Parties adopted text on procedures and mechanisms relating to compliance, which it also recommended that the COP/MOP adopt at its first meeting. The Parties left open the issue of whether the regime will be adopted by amendment. Text in Article 18 of the Kyoto Protocol states that procedures and mechanisms entailing binding consequences shall be adopted by amendment. The Parties created a 20-member Compliance Committee consisting of two branches: a 10-member facilitative branch to assist all Parties in their implementation of the Protocol; and a 10-member enforcement branch to serve as a judicial-like forum for determining whether Annex I Parties have met their targets, complied with monitoring and reporting requirements, and met the eligibility tests for participating in the mechanisms. Members of each branch will be drawn from each of the five UN regional groups plus the small island states, with two additional members from Annex I and two from non-Annex I countries. Voting is by consensus, or three-fourths majority if consensus cannot be reached. Decisions by the enforcement branch also require a "double majority," meaning a majority of Annex I Parties and a majority of Non-Annex I Parties.

Questions of implementation can be raised by a Party with respect to itself, or by any Party with respect to another, provided the question is supported by corroborating information. The relevant branch will conduct a preliminary investigation within three weeks of the submission to determine whether the question is supported by sufficient information, is not de minimus or ill-founded, and is based on the requirements of the Protocol. If it decides to proceed, the branch may consider information from ERTs, the Party that submitted the question, reports from UNFCCC bodies, and the other branch, as well as from the Party concerned. "Competent" NGOs and IGOs may also submit information. Subject to confidentiality rules, the information considered will be made public, although in some cases, information submitted by the Party may not be released until after a final decision is made. For questions addressed to the enforcement branch, the concerned Party may make a written submission including a rebuttal, and request a public hearing. The branch has four weeks from the date of the submission or hearing, or 14 weeks from the initial notification (whichever is later), to make a preliminary finding or decide not to proceed further. The concerned Party then has ten weeks to make a further submission, after which the branch will issue its final decision.

The procedures and mechanisms on compliance set out specific consequences if a country fails to meet its emissions reduction targets. If the enforcement branch finds that a Party has not met its target, the following consequences apply: (1) For every ton of emissions by which a Party exceeds its target, 1.3 tons will be deducted from its assigned amount for the subsequent commitment period; (2) the Party will prepare a detailed plan explaining how it will meet its reduced target for the subsequent commitment period; and (3) the Party will not be able to use Article 17 emissions trading to sell parts of its emissions allocation.

Parties who feel they have been denied due process will have the right to appeal a non-compliance determination to the COP/MOP. The enforcement branch's decision will stand pending an appeal, and it may be overturned only by a three-fourths majority vote of the COP/MOP. If a Party's eligibility to participate in the Protocol's three flexibility mechanisms has been suspended, there are expedited procedures for reinstatement. These procedures ensure that the enforcement branch applies specific criteria when deciding whether or not to reinstate the Party's eligibility.

Next Steps
In order for the Kyoto Protocol to enter into force, it must be ratified by 55 countries, including enough Annex I countries to account for 55 percent of Annex I emissions in 1990. This can happen without US ratification if, for instance, the EU, Central and Eastern European countries, Japan and Russia ratify. The EU, Japan, Canada and New Zealand have all stated their intention to ratify the Protocol in 2002. This is consistent with a commitment made by many Parties at COP4 to see the Protocol enter into force by 2002. This goal is attainable if countries can maintain the momentum and political will exhibited in Bonn and Marrakech.

Don Goldberg is a senior attorney and director of the Climate Change Program at the Center for International Environmental Law, and a vice chair of the Section's Committee on Climate and Sustainable Development. Katherine Silverthorne is senior policy officer of the Climate Change Campaign, World Wildlife Fund-US, and a co-chair of the Section's Committee on Climate Change and Sustainable Development.