Update - Nov. 2, 2001

As the first week of negotiations at COP 7 drew to a close, major fault lines emerged on several key issues. Umbrella Group countries frequently were at odds with the European Union and G-77/China, which appear to be coordinating their positions more closely than in past negotiations. Overall, progress has been slower than many delegates had hoped, and a number of issues already have been put aside for Ministers to consider when they arrive next week. Many view the goal of resolving the remaining "technical" issues by Sunday morning as a significant challenge.

Key areas of disagreement include: whether or not the Bonn agreement provides for binding consequences for failing to meet emissions targets; the rules determining whether Parties are eligible to participate in emissions trading and Kyoto's other flexibility mechanisms; and the composition of the bodies that will oversee Joint Implementation and the Clean Development Mechanism. There has been no progress on another key issue: Russia's request to for a higher ceiling for forest management activities under the country-by-country allowances adopted in Bonn.

Key Developments

Compliance - Major differences have emerged over interpretation of the compliance component of the Bonn agreement. Umbrella Group countries maintain that the agreement defers a decision on whether the compliance regime is binding until the first meeting of Parties after the Protocol's entry into force. The EU and the G-77 have consistently opposed that view here in Marrakech. The EU also has opposed motions by Umbrella Group Parties to delete text referring to noncompliance with requirements such as annual inventories, adjustments, and national systems. Australia and Russia also have proposed eliminating any opportunity for Parties to request a review of other Parties' implementation status.

The review of the adequacy of commitments, which must be undertaken by 2005, was discussed briefly. It quickly became apparent that the Umbrella Group Parties hope to use the review of the adequacy of commitments as an opportunity to take a forward look at commitments for developing countries. Developing countries responded that the intention of the review is to assess progress by developed countries. The Chair deferred further discussion of the adequacy of commitments until COP 8.

Mechanisms - Significant headway was reported on the Joint Implementation text. Work on the CDM text has been minimal thus far. The negotiations have bogged down on a portion of JI text that would require a Party to accept a binding compliance regime in order to be eligible to participate in the Mechanisms. Despite strong objections by the Umbrella Group, the EU and the G-77 have held a common line in favor of this provision.

Significant progress has been reported on standards and procedures for the accreditation of operational entities for the CDM. Less progress has been made on the more technical issues of baselines, monitoring, accreditation and verification procedures. Talks have been slowed by disagreements over the make up of the CDM Executive Board, the JI Supervisory Committee, and previously unidentified issues. For instance, the Umbrella Group representatives raised concerns that a portion of previously unbracketed JI text could be interpreted to preclude the sale of ERUs generated by private entities if their home country falls into non-compliance.

There reportedly have been far more applicants for the CDM Executive Board than the spaces allotted under the representation formula in the Bonn agreement. Several G-77 countries have been lobbying for an expansion of the Executive Board.

In debate over the make up of the JI Supervisory Committee, members of the Umbrella Group have maintained that the Committee should be comprised exclusively of representatives of Annex I Parties. The G-77 has called for representation according to the traditional UN formulation. The G-77 (Samoa and China in particular) have made repeated attempts to harmonize the JI text concerning the make up of the Committee with the text on the make up of the CDM Executive Board. These interventions have resulted in lengthy debates. To date, these Parties have successfully introduced text that would make JI Supervisory Committee meetings open to all accredited observers. The issue of representation of the Committee has been bumped to the Ministerial session.

Articles 5,7 and 8- Despite early optimism that issues surrounding articles 5, 7 and 8 (monitoring, reporting and review) progress has slowed in recent days. The most contentious issue has been Mechanism eligibility. The EU and G-77 are calling for mandatory reporting under article 3.14 (efforts to minimize adverse effects of climate change and climate mitigation on developing countries) as a condition of eligibility. Their position has been persistently opposed by the Umbrella Group. This impasse has slowed negotiations on other topics related to articles 5,7 and 8, and many issues have been referred to drafting groups.

LULUCF- Talks on LULUCF have been delayed pending the arrival of the Russian lead negotiator on the topic.

SBSTA- Several items on the SBSTA agenda have been covered in the past few days with varying results. On public education and outreach, the only consensus that could be achieved was that there should be an international Climate Change Day. Further consultations will be conducted and draft conclusions will be presented next week.

The scheduled review of the AIJ pilot phase was one of the few topics that has been dealt with quickly. The US delegate noted the extent to which the US has participated in the program and the G-77 noted the lack of investment in projects on the African continent. Conclusions on the session will be produced following informal consultations.

Canada's concerns over GHG emissions emerging from "clean energy" exports to the United States were raised under the miscellaneous portion of the agenda. Canada presented the results of a workshop held on the topic prior to the Conference and with support from other Parties agreed to hold a follow-up workshop. Nigeria is to coordinate informal consultations on the topic.