International Climate Change Partnership Maintaining the Flexibility of the Flexible Mechanisms Fred Sciance General Motors on behalf of The International Climate Change Partnership September 8, 2000

International Climate Change Partnership Fundamental Success of the Kyoto Protocol Agreement Employ market-based mechanisms as a primary means of achieving greenhouse gas emissions reductions.

International Climate Change Partnership Successful Fulfillment of Flexible Mechanisms Emissions trading Joint implementation Clean development mechanism These are the keys to engagement of the private sector that will result in the best hope for achieving environmental objectives while promoting worldwide economic growth.

International Climate Change Partnership COP 6 Goal Resolve flexible mechanisms issues, NOT reopen issues resolved in Kyoto increasecosts to all parties. The current negotiating text contains numerous proposals that would hamper operational utility of flexible market mechanisms. Could result in significant increase in costs to all parties.

International Climate Change Partnership ICCP View on Key Mechanism Issues Supplementarity decided in Kyoto; further attempts to elaborate hurt the credibility of governments with the private sector. Fungibility credits should be fully fungible and eligible for multiple transactions; original registry listings should be preserved. Additionality numerous additionality tests have been proposed--environmental, technical, financial. only environmental additionality should be considered, as specified by the Kyoto Protocol.

International Climate Change Partnership ICCP View on Key Mechanism Issues (cont.) Share of Proceeds limited only to CDM projects under Kyoto Protocol; should be limited so as not to deter industry participation. Public Involvement important for general policy decisions at COP/MOP and Executive Committee level; should not be required for specific project decisions; project level decision making should be subject to host-country review and disclosure to assure transparency. Equity not specified in Kyoto Protocol; equity is the overriding goal of process; attempts to impose equity tests will be self-defeating.

International Climate Change Partnership ICCP View on Key Mechanism Issues (cont.) Project Limitations arbitrary limitations on types of projects under CDM should be avoided; concept of positive or negative lists of technologies is unnecessary, interferes with national sovereignty; Carbon sequestration clearly provided for in CDM under Kyoto Protocol. Entity Participation Private legal entities must be assurred an opportunity to participate in the holding and transfer of ERUs, CERs and AAUs with the consent of the directly-involved parties.

International Climate Change Partnership Summary key success Flexible mechanisms are key to success centralcredibility and central to credibility of the agreement