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FOIA Number: 2017-1095-F
FOIA
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This is not a textual record. This is used as an
administrative marker by the William J. Clinton
Presidential Library Staff.
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Withdrawal/Redaction Sheet
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. cable
Country Clearance for Climate Change Delegation [partial] (1 page)
05/17/2000
b(7)(C), b(7)(F), b(6)
COLLECTION:
Clinton Presidential Records
Council of Economic Advisers
(Subject Files)
OA/Box Number: 21608
FOLDER TITLE:
[Global Climate Change - Uzbekistan]
2017-1095-F
bg249
RESTRICTION CODES
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RR. Document will be reviewed upon request.
Josef E. Aldy
Council of Economic
Advicers
Executive Office of the President
Dear Josef E. Aldy,
We would like to inform You that we have officially informed all relevant
Ministries, Departments and Institutions about proposal on establishment of
the Initiative Group «Third Way». This idea has been discussed in detail and
the outcomes of our discussions are positive.
Now, as we arranged with You in Bonn, we kindly ask You to send to our
Government the official request concerning reaction on Initiative Group
«Third Way». This action would significantly speed up negotiation process.
We are looking forward for Your reply on this matter.
Thank You very much for cooperation,
Yours Sincerely,
to
Mirzakhan Mansimov
Vice-chairman
State Committee on Hydrometeorology
Baku, Azerbaijan Republic
Republic of Uzbekistan
Statement by Mr. V.E. Chub
Head of the Delegation of the Republic of Uzbekistan,
Minister, Chief of the Main Administration of Hydrometeorology,
at the Fifth Session of the Conference of the Parties
to the United Nations Framework Convention
Dear Mr. Chairman, dear delegates of COP 5, ladies and gentlemen,
It is a great honour for me, as the Head of the delegation of the Republic
of Uzbekistan to congratulate Mr. President of COP on his election and thank
him for the excellent organisation of COP 5 Work.
I am also pleased to thank the government of Germany, mayor and
citizens of Bonn for their constant concern about the global environmental
issues and their hospitality.
The period after our meeting in Buenos Aires was very important for
Uzbekistan from the point of view of measures taken at the national level for
the fulfilment of commitments under the UNFCCC. In this concern, we
emphasize the adherence of the Republic of Uzbekistan to the objectives and
principles of the UNFCCC. The issues of the global climate change are
included into the priorities of the international policy of the Republic of
Uzbekistan. In August 1999, the Parliament of the Republic of Uzbekistan
ratified the Kyoto Protocol on the UNFCCC. Within the framework of the
fulfilling the commitments under the UNFCCC, we have prepared and
presented the Initial National Communication to the 5th Session of the COP,
and we are interested in its in-depth review.
The evaluation of GHG-s emission trends up to 2010 has shown that in
the forthcoming year, the level of 1990 can be exceeded. In Uzbekistan, GHG
emissions reduced only by 5.5% during 1990-1990 in comparison with other
CIS countries (including Russia, Kazakhstan, Ukraine). In conformity with such
insignificant rates of emissions reduction in Uzbekistan, the further
development of Uzbekistan economy can be regarded as optimistic.
Nevertheless, it is necessary to apply additional measures to reduce GHG
emissions in our country.
Mark
UNCLASSIFIED
Joe
Printed By: Daniel K Balzer 10/13/99 09:25:12 PM
TASHKENT 3838
For our mtg. Sat. w/
Uzbeks
tom
at
From: AMEMBASSY TASHKENT
MRN: 3838
Date/Time: 231024Z SEP 99
8:45
Subject: CLIMATE CHANGE: UZBEKISTAN
ICNbr: TED4078
Precedence: ROUTINE
CONSIDERS COP-5 OPTIONS
Cable Text:
TED4078
ACTION OES-01
INFO
LOG-00
NP-01
AGRE-00
AID-00
AMAD-01
CIAE-00
CIP-00
COME-00
DINT-00
DODE-00
DOEE-00
ITCE-00
SRPP-00
EB-00
EUR-01
E-00
UTED-00
H-01
TEDE-00
INR-00
IO-00
ITC-01
LAB-01
L-01
ADS-00
NASA-01
AC-01
DCP-01
NSAE-00
NSCE-00
NSF-01
OIC-02
PM-00
PRS-00
ACE-00
SP-00
SSO-00
SS-00
STR-00
TRSE-00
T-00
USIE-00
EPAE-00
SNIS-00
NISC-00
PMB-00
DRL-02
G-00
SAS-00
/016W
FB4AB8
231027Z
/38
R 231024Z SEP 99
FM AMEMBASSY TASHKENT
TO SECSTATE WASHDC 2529
INFO AMEMBASSY ALMATY
AMEMBASSY ASHGABAT
AMEMBASSY BISHKEK
UNCLAS SECTION 01 OF 02 TASHKENT 003838
ALMATY PLEASE PASS DUSHANBE
STATE FOR OES/EGC
E.O. 12958: N/A
TAGS: SENV, AID, UZ
SUBJECT: CLIMATE CHANGE: UZBEKISTAN CONSIDERS COP-5 OPTIONS
TASHKENT 01 OF 02 3838
1. SUMMARY: REO ATTENDED A SEMINAR ON GLOBAL CLIMATE
CHANGE HELD IN TASHKENT ON SEPTEMBER 21 AT THE INSTITUTE
FOR STRATEGIC STUDIES (ISS). THE EVENT WAS SPONSORED BY
USAID CONTRACTOR ENVIRONMENTAL POLICIES AND INSTITUTIONS
FOR CENTRAL ASIA (EPIC). WITH EPIC SUPPORT, A TEAM OF
UZBEK SPECIALISTS HAS BEEN WORKING SINCE MAY TO CONSIDER
THE BEST OPTION (S) FOR UZBEKISTAN'S PARTICIPATION IN THE
KYOTO PROTOCOL. THIS IS THE SECOND STUDY SPONSORED BY
FOREIGN DONORS IN THE PAST YEAR. THE GOVERNMENT OF
UZBEKISTAN WILL NOW CONSIDER BOTH STUDIES AS IT PREPARES
FOR NEXT MONTH'S COP-5 MEETING IN BONN. END SUMMARY.
2. THE VENUE FOR THE SEMINAR WAS THE INSTITUTE OF
STRATEGIC STUDIES, A GOVERNMENT-SPONSORED THINK TANK WHICH
CLAIMS TO HAVE ACCESS TO THE HIGHEST LEVELS IN THE UZBEK
GOVERNMENT. ITS DIRECTOR, RAFIK SAIFULIN, HAS BECOME AN
IMPORTANT CONTACT FOR EPIC (AND USAID) HE ALSO HOLDS THE
RANK OF DEPUTY MINISTER FOR NATIONAL SECURITY.
UNCLASSIFIED
1
UNCLASSIFIED
3. ABOUT 30 UZBEK AND AMERICAN OFFICIALS ATTENDED THE
PROGRAM ON SEPTEMBER 21. KEY MINISTRIES ON GLOBAL CLIMATE
CHANGE WERE REPRESENTED, INCLUDING THE MINISTRY FOR
MACROECONOMICS AND STATISTIC, THE MINISTRY OF FOREIGN
AFFAIRS, THE STATE COMMITTEE FOR NATURE PROTECTION, AND THE
STATE COMMITTEE FOR HYDROMETEOROLOGY, REPRESENTED BY DR.
VICTOR CHUB, A CABINET MINISTER WHO WILL LIKELY BE HEAD OF
THE UZREK DELEGATION TO BONN. SEVERAL HIGH-RANKING
OFFICIALS DID MOT APPEAR, HOWEVER, INCLUDING
REPRESENTATIVES OF THE ALL-IMPORTANT PRESIDENTIAL APPARAT.
4. THE PRESENTATATIONS INCLUDED A SUMMARY OF THE CURRENT
LEVELS OF EMISSION OF GREENHOUSE GASES IN UZBEKISTAN.
UNLIKE MANY OTHER STATES WHO BROKE AWAY FROM THE SOVIET
UNION, UZBEKISTAN DID NOT SUFFER A DEEP ECONOMIC DEPRESSION
IN THE EARLY 1990S. ADD TO THAT A RAPIDLY GROWING
POPULATION, AND ONE CAN SEE WHY LEVELS OF GHG HAVE NOT
FALLEN AS FAR AS THEY HAVE IN RUSSIA, UKRAINE AND
KAZAKSTAN. THE PRESENTATION INCLUDED INFORMATION ON THE
RELATIVELY INEXPENSIVE COST OF REDUCING GHG IN UZBEKISTAN.
5. A LENGTHY PRESENTATION ON UZBEKISTAN'S TRANSPORTATION
SECTOR FOLLOWED. IT CONCLUDED THAT UZBEKISTAN SHOULD
ATTEMPT TO DECREASE ITS USE OF GASOLINE BY INCREASING USE
OF DIESEL FUEL IN THE TRUCKING SECTOR AND BY TURNING TO GAS
FUEL FOR PUBLIC TRANSPORT. UZBEKISTAN HAS SUBSTANTIAL
RESERVES OF NATURAL GAS (ENOUGH TO LAST 35 TO 50 YEARS) BUT
IS LESS RICH IN OIL RESOURCES. THERE ARE THREE LARGE
REFINERIES IN UZBEKISTAN AND THE PRESENTER TOUCHED ON THE
NEED TO MAKE THEM MORE EFFICIENT.
6. THE THIRD PRESENTATION (BY EPIC REPRESENTATIVE MEGAN
FALVEY) PROVIDED AN EXPLANATION OF THE KYOTO PROTOCOL AND
THE SO-CALLED FLEXIBLE MECHANISMS. THE DISCUSSION INCLUDED
CONJECTURE ABOUT ANNEX C, AND EPIC TEAM MEMBERS URGED THE
UZREKS TO PLAY AN ACTIVE ROLE IN THE FORMULATION OF ANNEX C
IF/WHEN IT IS INTRODUCED BY ARGEMTINA AT BONN.
7. AFTER THE PRESENTATION, EPIC'S ALEXANDER GOLUB LED A
DISCUSSION OF THE PRESENTATIONS AND SEVERAL UZBEKS ASKED
TECHNICAL QUESTIONS ABOUT THE KYOTO PROTOCOL. FROM OUR
POINT OF VIEW, ANNEX C GENERATED MORE COMMENT THAN ANNEX B
OR THE EXCLUSIVE USE OF CLEAN DEVELOPMENT MECHANISM
PROJECTS. DR. CHUB MADE NO COMMENT DURING THE DISCUSSIONS,
RUT AS ALWAYS, HE PAID CLOSE ATTENTION TO EVERYTHING.
8. THIS IS THE SECOND STUDY OF UZBEK OPTIONS FOR
PARTICIPATION IN THE KYOTO PROTOCOL IN THE PAST YEAR. THE
SWISS GOVERNMENT SPONSORED AN EARLIER STUDY THROUGH THE
WORLD BANK AND THE MINISTRY POR MACROECONOMICS AND
STATISTICS. IT ESSENTIALLY IDENTIFIED AND PRIORITIZED
POSSIBLE CLEAN DEVELOPMENT MECHANISM PROJECTS. IN
ADDITIOM, THE GLOBAL ENVIRONMENT FACILITY (GEF) SPONSORED
THE FIRST NATIONAL COMMUNICATION ON CLIMATE CHANGE, A DRAFT
OF WHICH WAS PRESENTED IN THE OFFICE OF THE UNITED NATIONS
DEVELOPMENT PROGRAMME. THE PRESENTATION OF THE DRAFT
NATIONAL COMMUNICATION WAS SIMILAR IN CONTENT TO EPIC'S
PROGRAM, BUT FOCUSED MORE ON THE CONSEQUENCES OF GLOBAL
WARMING AND LESS ON THE ECONOMIC ADVANTAGES OF EMISSIONS
TRADING.
UNCLASSIFIED
2
UNCLASSIFIED
9. COMMENTARY: IN OUR CONVERSATIONS WITH DR. CHUB, HE HAS
INDICATED EVERYTHING IS OPEN FOR NEGOTIATION. HE IS A
SERIOUS MAN WITH A STRONG GRASP OF THE ISSUES. HE TOLD US
HIS POSITION IS NOT THE SAME AS OURS, BUT NEITHER IS IT THE
POSITION OF THE G-77. WE THINK GOU SUPPORT OF ANNEX C IS
LIKELY, GIVEN UZBEKISTAN'S CURRENT LEVELS OF ECONOMIC
ACTIVITY AND ENVIRONMENTAL POLLUTION. WE WILL PURSUE THE
MATTER FURTHER WITH DR. CHUB.
10. WE ALSO NOTE THAT THE FUNDING OF TWO STUDIES AND A
NOTE: NOT PASSED TO ABOVE ADDRESSEE (S)
TASHKENT 02 OF 02 3838
NATIONAL COMMUNICATION ON CLIMATE CHANGE BY THREE FOREIGN
DONORS PERESENTED IN THREE DIFFERENT VENUES IS A FAMILIAR
PATTERN. THIS OFFICE IS ATTEMPTING TO ARRANGE A MEETING OF
EPIC, SWISS, UNDP, AND WORLD BANK OFFICIALS WHO TOOK PART
IN THESE ACTIVITIES. PERHAPS WE CAN COME TO SOME
UNDERSTANDING OF HOW AND WHY APPROACHES DIFFER AND WHAT
EACH RECOMMENDATION, IF IMPLEMENTED, WOULD MEAN FOR
UZBEKISTAN. END COMMENTARY.
11. FOR THE RECORD, THE REPUBLIC OF UZBEKISTAN SIGNED THE
UN FRAMEWORK CONVENTION ON CLIMATE CHANGE IN 1993 AND
SIGNED THE KYOTO PROTOCOL IN NOVEMBER 1998. IT RATIFIED
THE KYOTO PROTOCOL IN AUGUST 1999. IT IS NOT A MEMBER OF
ANNEX 1, NOR IS IT A MEMBER OF ANNEX B.
PRESEL
NOTE: NOT PASSED TO ABOVE ADDRESSEE (S)
NNNN
End Cable Text
Printed By: Daniel K Balzer 10/13/99 09:25:12 PM
UNCLASSIFIED
3
AN EXAMPLE OF CALCULATING THE GREENHOUSE GAS
EMISSIONS BUDGET FOR UZBEKISTAN
Alexander Golub, Harvard University
The objective of this document is to propose preliminary estimates of the
emissions budget for Uzbekistan as a country that has expressed its wish to
enhance the degree of its participation in the UN Framework Convention on
Climate Change in the form of choosing the so-called Third Way Concept.
No generally recognized and established procedures for determining such a
budget exist. We suppose that they will be elaborated in the course of
negotiations among the Parties to the Convention with active participation of
the countries that have expressed their desire to follow the Third Way.
In any event, the approaches for establishing the emissions budget should
comply with the fundamental principles have been previously discussed by
the Action Committee. These principles are as follows:
The emissions budget should be based on comprehensive studies to
substantiate the undertaking of voluntary commitments at a certain level;
Emissions reduction commitments should not put any obstacles in the
way of social and economic development;
When undertaking the commitments, the countries proceed from the
necessity of making their own contribution to ensure ecological benefits
for the planet as a whole;
The undertaking of the voluntary commitments of emissions limitations
should give to the country the opportunity to participate in all flexible
mechanisms under the Kyoto Protocol (KP) including emissions trading.
It is supposed that this example of determining the emissions budget may
serve as an illustration how to implement the indicated principles in concrete
figures as well as the basis for further activity of the Action Committee with
the aim of developing the formalized attitude of the Action Committee to the
problem concerning some approaches to determine the voluntary
commitments (emissions budgets).
In the conceptual plan, the estimates provided below are based on the Draft
Third Way Concept of 01.04.2000 prepared by Harvard University. As for
the data on GHG emissions in Uzbekistan and the emissions forecast and for
information concerning major indicators of social and economic
development, the principal sources are the First National Communication of
the Republic of Uzbekistan, WB NSS and operating materials prepared
within the framework of the EPIC Program. It is highly desirable to expand
this information base and, first of all, improve the general economic
information. The invoking of additional information sources will make it
possible to enhance the quality of forecasts and decrease the risks associated
with the specified voluntary commitments (emissions budget).
Concept of the Group Third Way and the Integrated Approach for
Establishing the Emissions Budget
In the above-mentioned Draft Concept of 01.04.2000, the fundamental issues
of the Third Way Concept were discussed in detail. The analysis we carried
out suggested that for today the integrated approach for determining the
emissions budget to a greater degree meets the specific character of the New
Independent States' (NIS) economies in transition.
The direct indexation of the emissions budget won't create adequate
conditions for more complete participation of the countries in the flexible
mechanisms under the KP. Thus it is proposed to consider a new, the so-
called integrated, approach that provides for establishing the constant and
variable components of the emissions budget.
With regard to the specific features of the economies in transition, some
aspects might be noted that should be taken into consideration when setting
the emissions budget for the "new countries".
Following are some features of the economy of transition period:
2
Uncertainty of forecasting GDP dynamics and its pattern.
Uncertainty of the pace and extent of technological renovation.
Underdevelopment of the capital market.
Poor development of market incentives.
High discount rate (and, as a consequence, predominance of short-term
motivation).
Low rate of the internalization of externalities.
From the standpoint of realizing the long-term program on GHG emissions
reduction, it is essential to establish the emissions budget as quickly as
possible and to commence implementing the investment projects on
emissions reduction as soon as possible. To do this requires sale on a
forward or option basis some part of the emissions quota and to create a
financial mechanism for reinvesting the funds gained.
It's our opinion that the Third Way Group could make the following
proposal: to divide the emissions budget into two parts. The first part of it
the country should receive immediately. Its determination should be based
on the "low" GDP forecast, and the country will receive the second part
within several years when the GDP real dynamics will be estimated.
The first part is constant and the second one is variable. To gain greater
insight into the idea of the integrated approach, one should refer to Figure 2.
Curve 1 corresponds to the GHG emissions forecast at the higher rate of the
GDP growth and when the country chooses the resource-intensive path of
development. Curve 2 fits the GHG emissions forecast at the high rate of
the GDP growth but when the country chooses the resources-saving path of
development. If it is known that the development will follow the "high"
scenario, the emissions budget could be set at Curve 2 level (Fig. 1). The
aggregate emissions budget would be equal to the total of the areas
S4 + S3 + S2.
3
Curve 3 corresponds to the GHG emissions forecast at the "low" scenario of
the GDP growth and at the resource-intensive way of development, and
Curve 4 - at the resources-saving path of development.
Provided it is known that the development will follow the "low" scenario,
the emissions budget should be set at the level of Curve 4 (it would be equal
to the area S4). Thus, the emissions budget is confined between Curves 2
and 4 (Fig. 1). The constant part S4 may be separated from the budget and
fixed at the very beginning without its revision thereafter. In addition, the
interval may be set where the variable part S3 + S2 will be confined, and the
rules should be specified whereby the emissions budget will be indexed
within the variable part. The country will receive it several years prior to the
commencement of the first budget period. Its value can't exceed S3 + S2.
The part S3 + S2 that the country will receive shall be related to the
economic index that in the lowest degree depends upon the country's efforts
in GHG emissions reduction prior to the beginning of the first budget period.
For example, there may be proposed average annual rates of the GDP
growth.
By way of illustration let us consider that the "low" scenario of the GDP
implies a GDP average annual growth of 3% and the "high" scenario - 6%.
In case the GDP growth rates are lower, for example, 4 % per year, the
additional emissions budget will represent (S3 + S2)/3.
Estimating the Value of the Integrated Emissions Budget for Uzbekistan
(Preliminary Estimates)
First we'll describe the formal algorithm on constructing the integrated
budget, and then we'll apply it for constructing the emissions budget of
Uzbekistan.
Algorithm for Constructing the Integrated Budget
Step 1
Determining the corridor that involves the emissions budget.
4
The maximum and minimum forecasts for GHG emissions should be taken
to determine this corridor. As we specified it earlier in the process of
analysis of GHG emissions dynamics in the countries with economies in
transition, there are several major factors that determine the emissions
dynamics. They are as follows:
GDP dynamics;
GDP pattern;
Rates of technical renewal;
Energy balance structure and its dynamics.
In case there is the top-down macroeconomic model adjusted to the
determining of the GHG emissions, the most precise estimates of the
corridor may be got on its basis. If such model is not available, a certain
simplified procedure may be proposed.
Step 1.1
Determining the interval that may involve the specified parameters.
The interval shall be determined for the GDP wherein the growth rates may
be, for example, from 2.5 to 5%. Specialists in the area of macroeconomics
may readily identify such interval.
It is important to know the share of the energy sector for the GDP structure.
The respective specialists may make the required estimates.
The rates of technical renovation may be given as the share of new
technologies or in the form of GHG specific emissions indicator per GDP
unit.
The shares of diverse types of fuel give the energy balance structure.
Step 1.2
Determining the best and worst combination of parameters.
To get the upper boundary of the corridor, it is required to consider the
highest rates of the GDP growth, to use the most energy-intensive structure,
low rates of technological advance and the least favorable energy balance
structure. To get the lower boundary of the corridor, everything should be
done vice versa.
5
In actual practice such combinations are almost impossible. One of the
reasons is the fact that at the higher rates of the GDP growth there are more
resources for developing new technologies, and positive changes in the GDP
structure are more likely. As a consequence, the upper boundary of the
corridor will be overestimated and the lower one - underestimated. It will be
required to narrow the corridor.
Step 2
The narrowing of the corridor.
To narrow the corridor, it is necessary to develop the likely scenarios for
combination of major economic parameters that influence on the GHG
emissions dynamics.
It is best to do this on the basis of the model. If such model is not available,
the scenarios may be chosen by Delphi method.
Step 3
A probability of the "outlet" of real emissions outside the limits of the
corridor should be determined at this stage.
Step 4
Determining the country's own contribution into the GHG emissions
reduction.
On the model basis there may be distinguished no-regret & low-costs
measures. The result of their applying may be considered as the country's
own contribution to the GHG emissions reduction. The countries with the
economy in transition should address this problem with a great caution and
take into account all existing barriers while implementing similar projects.
As a result, estimation of the country's contribution into GHG emissions
reduction may appear to be lower than the aggregate outcome of applying
the no-regret & low-costs actions.
In case the estimate of the emissions reduction potential is made on the basis
of the bottom-up approach, the potential turns out to be obviously
overestimated. Ultimately, the realistic value of the country's contribution
into the GHG emissions reduction should be determined, and the upper
boundary of the "narrow corridor" should be adjusted on this basis.
6
One more approach may be proposed for determining the value of the
country's own contribution into the GHG emissions reduction. For example,
if it is known that at the costs K the emissions reduction Q may be achieved,
and it is also known that the price of one GHG ton on the carbon market is
P, then the value of the country's own contribution in the GHG emissions
reduction q may be determined by the formula q = Q - K/P.
To put it differently, the sources attracted from the sale of the unused quota
(Q - q) should be sufficient for financing the actions on GHG emissions
reduction in the volume Q covering both of the country's own contribution q
and the reductions corresponding to the sold part of the quota Q - q.
Step 5
Determining the constant part of the emissions budget.
The lower boundary of the "narrow" corridor is taken as the constant part of
the emissions budget.
Step 6
Determining the boundaries of the variable (indexed) part of the emissions
budget.
The variable (indexed) part of the budget is within the limits from the zero to
the difference between the adjusted upper boundary of the corridor and the
constant part of the budget.
Step 7
Indexation of the variable part of the budget.
Indexation of the variable part of the budget may be carried out in 2005,
three years prior to the commitments on the emissions reduction coming into
force. The indexation should be made in conformity with the procedures
stipulated. The indexation procedure should be transparent. Once the
indexation has been done, the emissions budget should not be adjusted any
more.
It is feasible to choose the factor that influences the GHG emissions most of
all as the indicator on the basis of which the indexation is being carried out.
7
For the countries with economy in transition the GDP should be selected as
such indicator.
The Integrated Budget for Uzbekistan
The estimates presented below have only illustrative character.
Step 1
Determining the corridor that involves the emissions budget.
The wide corridor for the first budget period 2008-2012 may be determined
within the limits from 550 to 700 million tCO2. Therewith, the data available
will enable to take into account only the possible fluctuations of the GDP.
Step 2
The narrowing of the corridor.
Having regard to the most probable scattering in the GDP values, the
corridor may be narrowed up to 575-675 million t.
Step 3
There is lack of information required for the sensitivity analysis.
Step 4
Determining the country's own contribution into the GHG emissions
reduction.
According to the conservative estimates, the country's own contribution may
be determined as 5 million tCO₂ annually or 25 million t over the first
budget period. Thus, the adjusted upper boundary of the corridor may
amount to 650 million t.
Step 5
Determining the constant part of the emissions budget.
The volume of 575 million t is taken as the constant part of the emissions
budget.
8
Step 6
Determining the boundaries of the variable (indexed) part of the budget.
The variable part of the budget constitutes 75 million t.
Step 7
Indexation.
The GDP is chosen as the parameter by which the indexation is being carried
out since as to the NIS countries the GHG emissions are most sensitive to
this indicator.
Average rates of the GDP growth over the period 2000-2005 shall be
determined. Should they are less than 3%, the indexation coefficient is taken
to be equal to zero. If they are 5% and more - it is equal to 1. In case they
make up X% between 3 and 5%, the indexation coefficient shall be
determined by the formula K = (X - 3)/2.
The variable part of the budget of 75 million t shall be multiplied by the
indexation coefficient. The result gained should be added to the constant part
of the budget.
9
GHG emissions
1
$1
2
3
S2
S3
4
S4
2000
2008
2012 Years
Figure 1
10
1
S1
2
S2
4
S4
2000
2008
2012 Years
Figure 2
11
Synopsis
Tashkent Seminar: "A Third Way to Participation in the UN FCCC"
23-24 May, 2000
Hosted by the Institute for Strategic and Regional Studies under the President of the
Republic of Uzbekistan
Sponsored by USAID through the EPIC and Global Training Development Programs.
At the Fifth Conference of the Parties to the UN Framework Convention on Climate
Change (UN FCCC), Uzbekistan took a leadership role among transition economies
seeking to find a way to reduce greenhouse gas emissions without damaging their
prospects for continued growth. Under the leadership of the Uzbek delegation, a
group, which calls itself "The Third Way" formed and agreed to examine the best
ways for transition economies to participate in the Framework Convention more fully.
Seven countries signed the memorandum indicating their intent to join the Third Way
group - Armenia, Azerbaijan, Georgia, Moldova, Turkmenistan, Tajikistan and
Uzbekistan. Two countries - Kazakhstan and Kyrgyzstan - signed as observers,
indicating that they wanted to be informed of the "Third Way" as plans develop
The Third Way group is developing a proposal for how transition economies might
participate in the so-called flexible mechanisms of the UNFCCC. In exchange for
taking on these voluntary commitments, the Third Way states hope to obtain the right
to participate in these mechanisms (such as emissions trading, Joint Implementation
projects) which are expected to attract investment in the modernization of the energy
and other sectors.
The US government is supporting this meeting of the Third Way group, because the
US has expressed its desire to find ways to attract «meaningful involvement» on the
part of developing countries. This development is one of the most significant in
negotiations with developing and transition countries. The Third Way group has been
greeted with enthusiasm, and is proposing some strategies for transition economies
similar to those being proposed by Argentina for developing countries. An
Ambassadorial-level US delegation will be attending the meeting, and is hoping to
hear what the Third Way representatives plan to present at the Sixth Conference of the
Parties (COP-6) scheduled to take place in the Hague in November.
Draft Agenda
«A Third Way to Participation in the UN FCCC»
23-24 May 2000, Tashkent
8:30-9:00 Registration of participants
9:00 - 10:00 Opening Remarks
for Uzbekistan - Rafik Saifullin, Director of Institute for Strategic and
Regional Studies
for US - Ambassador Hambley
for USAID - Ken McNamara
Brief commentary on the first Third Way meeting at COP-5: Alexander Golub
10:00-10:30 Coffee Break
10:30 -11:30: Panel 1: Central Asian Perspective
moderator - T. Sabonis-Helf
Kazakhstan - Irina Yesserkepova, KazNIIMOSK
Turkmenistan - Yuri Fedorov, National Focal Point
Tajikistan - B. Makhmadaliev, GlavHydromet
Kyrgyzstan - TBD.
Uzbekistan - V. Chub/ T. Ossoskova, GlavHydromet
11:30 - 12:30: Questions and discussion
13:00 - 14:00: Lunch at «Bakht» restaurant
14:30-15:30: Panel 2: Caucasus and Moldovan Perspective
moderator: M. Boyd
Georgia - T. Gzirishvilli - National Focal Point
Azerbaijan - M. Mansimov, Project Manager of Initial National Comm.
Armenia - A. Gabrielian, National Focal Point
Moldova - L. Treshilo, GlavHydromet
15:30-16:30 Questions and discussion
16:30-17:00 Coffee Break
17:00-17:30 Commentary from the US - Joseph Aldy
17:30- 18:00 Independent expert commentary - Alexander Golub
Day 2
10:00-10:30: Experience from Argentina - Dan Balzer
10:30-12:00: Round table discussion on the theme of <<Prospects for Realizing a
Third Way for Participation in the UN FCCC»
12:00- 12:30: Coffee Break
12:30-13:30: Final Session and Summary of results of the Seminar, preparation of
recommendations for next steps - Moderator: A. Golub
MAY-12-2000 09:30
OES/EGC
202 647 0191
P.01/02
DEPANTMENT OF STATE
Facisimile
UNITED STATES OF AMERICA
To: Joe Aldy
Cc:
Fax #: 395-6870
Phone #:
From:
Dan Balzer
Subject:
Date:
Pages:
2, including cover sheet
Urgent
For Review
Please Comment
Please Reply
Invite letter for 3rd Way meeting -
May be useful for Vi3a application.
Office of Global Change
Bureau of Oceans and
International Environmental
and Scientific Affairs
2201 C Street, Room 4330
Washington, DC 20520
tel.: (202) 647-4069
fax: (202) 647-0191
MAY-12-2000 09:31
DES/EGC
202 647 0191 P.02/02
Institute for Strategic and Regional
O'zbekiston Respublikasi Prezidenti
Studies under the President of the
huzuridagi Strategik va
Republic of Uzbekistan
mintaqalararo tadqiqotlar instituti
Toshkent 700027, Xalqlar Do'stligi ko'chası,2. Telefon (998-712) 45-87-04, faks (998-71) 120-66-28
Tashkent 700027, Khalklar Dostligi str.,2, Phone (998-712) 45-87-04, fax (998-71) 120-66-28
Fax: (101-202) 6470191
Dear Mr. Joseph Aldy,
The Institute for Strategic and Regional Studies under the President nf the Republic of
Uzbekistan (ISMI) invites you to take part in a seminar titled «A Third Way for
Participation in the UNFCCC ».
The Seminar will be conducted by ISMI together with the GlavHydromet of the
Republic of Uzbekistan, with the support of USAID through the EPIC and Global
Training for Development Projects. The seminar will take place in our Institute, 23-
24 May 2000, in the city of Tashkent.
The purpose of the seminar is to continue the discussions which we began in side
meetings at COP-5. Participating in the seminar will be representatives from
organizations involved in the problem of climate change in the following countries:
Armenia, Azcrbaijan, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan,
administrative questions snoula De referred to the
EPIC program in their Tashkent or Almaty offices:
In Almaty:
Tel. (3272) 65-46-95, 64-44-05
Fax: (3272) 64-68-49
e-mail: [email protected]
In Tashkent:
Tel/Fax: (371) or (998 71) 133-89-57
e-mail: [email protected]
Respectfully,
Rafik Saifullin
Director ISMI
JUJ
TOTAL P.02
MAY-17-2000 18:43
OES/EGC
202 647 0191 P.01/03
UNCLASSIFIED
Printed By: Daniel K Balzer 05/17/2000 02:09:58 PM
TASHKENT 1878
From: AMEMBASSY TASHKENT
MRN: 1878
Date/Time: 171156Z MAY 00
Subject: COUNTRY CLEARANCE FOR CLIMATE ICNbr: TED1793
Precedence: IMMEDIATE
CHANGE DELEGATION, MAY 21-29
Cable Text:
TED1793
ACTION OES-01
INFO
LOG-00
NP-00
CEA-01
CIAE-00
DOEE-00
EB-00
EUR-01
UTED-00
VC-01
TEDE-00
INR-00
VCE-00
AC-01
DCP-01
NSAE-00
ACE-00
SS-00
IAP-00
EPAE-00
CCR-01
SAS-00
/007W
57E722
1711592 /38
o 1711562 MAY 00
FM AMEMBASSY TASHKENT
TO SECSTATE WASHDC IMMEDIATE 4125
OPTIONAL FORM B9 (7-90)
UNCLAS TASHKENT 001878
FAX TRANSMITTAL
H of pages
3
To
Joe Aldy
From Dan Balzer
Dept./Agency CEA
Phone # 736-7092
Fax
#
Fax # 395-6870
647-0191
NSN 7540-01-317-7368
5099-101
GENERAL SERVICES ADMINISTRATION
DEPT FOR OES/EGC: DANIEL BALZER
DEPT FOR EUR/CACEN: EDWARD BIRSNER
E.O. 12958: N/A
TAGS: OTRA, SENV, KSCA, UZ
SUBJECT: COUNTRY CLEARANCE FOR CLIMATE CHANGE DELEGATION,
MAY 21-29
REF: SECSTATE 92058
1. EMBASSY TASHKENT WELCOMES THE ARRIVAL OF OES SPECIAL
NEGOTIATOR FOR CLIMATE CHANGE AMBASSADOR MARK G. HAMBLEY,
OES/EGC OFFICER DANIEL BALZER, AND COUNCIL OF ECONOMIC
ADVISORS ECONOMIST JOSEPH ALDY, AND GRANTS COUNTRY CLEARANCE
FOR THE PROPOSED VISIT TO TASHKENT FROM MAY 21 THROUGH MAY
Wrong. Embassy advises
29, 2000. EMBASSY WILL MAKE RESERVATION AT THE SHERATON
HOTEL. EMBASSY EXPEDITER TO MEET AND ASSIST UPON ARRIVAL.
we will be at the Shodlik
COST OF AFTER-HOURS EXPEDITER IS 25 USD, WHICH COVERS
EXPEDITER AND DRIVER OVERTIME. THIS FEE IS REIMBURSABLE AS A
TRAVEL EXPENSE. ALL VISITORS TO UZBEKISTAN MUST HAVE A VALID
Palace Hotel as previously
UZBEK VISA. VISAS FROM OTHERS CI9 COUNTRIES ARE NOT/NOT
in formed.
UNCLASSIFIED
1
Withdrawal/Redaction Marker
Clinton Library
DOCUMENT NO.
SUBJECT/TITLE
DATE
RESTRICTION
AND TYPE
001. cable
Country Clearance for Climate Change Delegation [partial] (1 page)
05/17/2000
b(7)(C), b(7)(F), b(6)
COLLECTION:
Clinton Presidential Records
Council of Economic Advisers
(Subject Files)
OA/Box Number: 21608
FOLDER TITLE:
[Global Climate Change - Uzbekistan]
2017-1095-F
bg249
RESTRICTION CODES
Presidential Records Act - 144 U.S.C. 2204(a)]
Freedom of Information Act - 15 U.S.C. 552(b)]
PI National Security Classified Information [(a)(1) of the PRA]
b(1) National security classified information [(b)(1) of the FOIA]
P2 Relating to the appointment to Federal office |(a)(2) of the PRA|
b(2) Release would disclose internal personnel rules and practices of
P3 Release would violate a Federal statute |(a)(3) of the PRA]
an agency [(b)(2) of the FOIA]
P4 Release would disclose trade secrets or confidential commercial or
b(3) Release would violate a Federal statute [(b)(3) of the FOIA]
financial information |(a)(4) of the PRA|
b(4) Release would disclose trade secrets or confidential or financial
P5 Release would disclose confidential advice between the President
information [(b)(4) of the FOIA]
and his advisors, or between such advisors [a)(5) of the PRA|
b(6) Release would constitute a clearly unwarranted invasion of
P6 Release would constitute a clearly unwarranted invasion of
personal privacy [(b)(6) of the FOIA]
personal privacy [(a)(6) of the PRAJ
b(7) Release would disclose information compiled for law enforcement
purposes |(b)(7) of the FOIA|
C. Closed in accordance with restrictions contained in donor's deed
b(8) Release would disclose information concerning the regulation of
of gift.
financial institutions |(b)(8) of the FOIA]
PRM. Personal record misfile defined in accordance with 44 U.S.C.
b(9) Release would disclose geological or geophysical information
2201(3).
concerning wells |(b)(9) of the FOIA]
RR. Document will be reviewed upon request.
MHY-17-2000 18:43
UES/EGO
202 647 0191 P.02/03
UNCLASSIFIED
RECOGNIZED, EVEN IN CASES OF TRANSIT. SEE PARA 5 FOR
DETAILS.
2. CONTROL OFFICER FOR VISIT WILL BE(b)(6), (b)(7)c, (b)(7)f
POLITICAL-ECONOMIC OFFICER. OFFICE TELEPHONE 998-71-120-54-
50, CELLULAR TELEPHONE 998-712-31-53-65. TIE LINE 793-2324.
3. SECURITY: DUE TO RECENT EVENTS, BOTH IN UZBEKISTAN AND
WORLDWIDE, VISITORS ARE REMINDED REMAIN VIGILANT WITH REGARD
TO THEIR PERSONAL SAFETY. IN PARTICULAR, STRIVE TO MAINTAIN
A LOW PROFILE; AVOID COMMERCIAL ESTABLISHMENTS THAT CATER
TO WESTERNERS WHICH MIGHT BE TARGETS OF TERRORIST ATTACKS;
AND MAINTAIN CLOSE CONTACT WITH THE REGIONAL SECURITY OFFICE
FOR UPDATES ON THE SECURITY SITUATION.
4. TRAVEL FUNDS: POST SUPPORTS DEPARTMENT POLICY
REQUIRING TRAVEL ADVANCES TO BE OBTAINED FROM THE TRAVELER'S
SPONSORING OFFICE/POST. TASHKENT IS A CASH ONLY POST FOR
TRAVEL PURPOSES EXCEPT FOR SOME HOTELS WHERE CREDIT CARDS
ARE ACCEPTED. POST CASH RESERVES ARE INADEQUATE TO MEET THE
TRAVEL ADVANCE NEEDS OF THE NUMEROUS VISITORS WE RECEIVE.
U.S. BILLS OLDER THAN 1991 ARE NOT ACCEPTED IN TASHKENT AND
SMALL BILLS ARE IN SHORT SUPPLY. VISA AND AMERICAN EXPRESS
1 have inquired
CARDS ARE ACCEPTED AT THE UZBEKISTAN, LE MERIDIEN, SHERATON
AND INTERCONTINENTAL HOTELS. THE INTERCONTINENTAL, SHERATON
whether or not the
AND LE MERIDIEN HOTELS WILL ACCEPT ONLY CREDIT CARDS FOR
ROOM ACCOMMODATIONS ALTHOUGH MEALS IN THEIR RESTAURANTS MAY
BE PAID EITHER BY CREDIT CARD OR IN SOUMS (LOCAL CURRENCY).
Shodlik accepts plastic.
THE UZBEKISTAN HOTEL WILL ACCEPT ONLY SOUMS IN ITS
RESTAURANT. TRAVELERS' CHECKS ARE RARELY ACCEPTED AND
DISCOURAGED IN TASHKENT. PLEASE BE INFORMED THAT AUTOMATIC
TELLER MACHINES DO NOT EXIST IN UZBEKISTAN.
5. VISA: ALL VISITORS TRAVELING TO UZBEKISTAN--REGARDLESS
OF THEIR LENGTH OF STAY AND DURPOSE OF VISIT--MUST OBTAIN AN
UZBEK VISA. TRAVELERS SHOULD APPLY FOR UZBEK VISAS TWO
WEEKS PRIOR TO THEIR EXPECTED TRAVEL IT IS ALSO ESSENTIAL
THAT TRAVELERS COMPLETE THE CURRENCY FORMS PRIOR TO LANDING
IN TASHKENT AND KEEP THEM IN THEIR POSSESSION UNTIL
DEPARTURE FROM UZBEKISTAN UNLESS THEY ARE TRAVELING ON A
DIPLOMATIC PASSPORT.
6. CLIMATE/DRESS: WEATHER CONDITIONS IN UZBEKISTAN CAN
CHANGE FREQUENTLY DURING THE SPRING SEASON FROM NEAR-
FREEZING TEMPERATURES AND SUDDEN RAIN TO PLEASANT, WARM AND
DRY PERIODS. TEMPERATURES RANGE FROM 45-95 FAHRENHEIT.
NORMAL DRESS IS STANDARD BUSINESS ATTIRE DURING WORKING
HOURS. TASHKENT IS A COSMOPOLITAN CITY WHERE MOST MODERN
DRESS IS ACCEPTED. HOWEVER, DRESS OUTSIDE OF TASHKENT IS
MORE CONSERVATIVE. IN CASE OF TRAVEL TO SUCH AREAS,
PROVOCATIVE DRESS SHOULD BE AVOIDED.
UNCLASSIFIED
2
MAY-17-2000 18:43
DES/EGC
202 647 0191
P.03/03
UNCLASSIFIED
7. HEALTH ISSUES: FOOD AND WATERBORNE DISEASES ARE COMMON
SUCH AS SALMONELLA, HEPATITIS A & B, TYPHOID AND MENINGITIS.
TRAVELERS ARE ADVISED TO DRINK ONLY BOTTLED/BOILED WATER AND
TO EAT ONLY FRUITS AND VEGETABLES THAT HAVE BEEN COOKED AND
PEELED. UNDER-COOKED MEAT SHOULD BE AVOIDED AS WELL. DUE
TO POOR SANITATION, TRAVELERS SHOULD AVOID EATING UNCOOKED
DAIRY PRODUCTS AND MOST FOOD SOLD ON THE STREET.
MO'NEAL
NNNN
End Cable Text
Printed By: Daniel K Balzer 05/17/2000 02:09:58 PM
UNCLASSIFIED
3
TOTAL P.03
2 inventing main
next -aralysis steps domesticlly
3 polizies,
Mtg m/ Chub
-policies
-prajects
will explain maino economic analysis
need to der clin ch center in Uzbeh
suffer shortage it experts; :: need assistance
succeeded in demonstrating the importance of this issue to
this gnt, want to help the cruties L region
do the same
extent of benefit for contries that take on commitments
-hey question for this contence
need addl research
a lot of uncertainties @ econ der
Netl Strategy Program for GHG,
- passed on to ministries for approval
-ID'ed following actions: specific projects
- need ministries support + investment
- hey is project finance
email of energy basies in munipal sector
- thedize feasibility study is several months
- Cooling for investor currently
CEA inpt earl der
lay to is attract foundation Mtg w/ Gatwor, 1st Dep Min, Ministry of Macrowins + Statistics
structuring
attents tgts
have projects - need investment
want to have right to participate is mechanisms
- -positively intluence investment
-expect substantal support if us
2 projects i. Uzkede
1) removing basiess is muni H2O, energy
GEF/WB funded project
2) CDM project (how to implemat)
Ready to learn Argentine experience
(
5/23 3' Way aroup Mtg, Tashbeat
Saifulin -intro
- hey component of sustainable development
-it is also a strategiz 3sue
Hambley - into
POTUS interest, concern, challenge of 21st C
common but differentiated responsibilities
McNama- intro
Golub - enissions in this region
impact of enu3 on climate
common but differentiated, but can't heap this separation
bt A1 + non A1 be all enis aftect climate
-all conties will have to take commitments at same pant
NIS contrices interest in 3d way e Bann
early tyt-tahers will get a premium
Find for Nature
Fundection 91. trand ection lation
opportunities for NIS given transition
\
for EDF
investment through K? flex mechs
-CDNL has limitations, more reductions, movimestment under tyt
opportunity to enis by switching from coal to 8as
commitments must be birdy, but also must be consistent w/susdev
1st Way- A1 - differention in fg.ts, base years
2d way - non-A1? or just Arx3
3d Way- - Argentive, NIS consultations a CoP-5
30 Way Group Principles
1) livis budget based on studies, must be validated by and $ 00
z) enis bedget can't constrain econ der, but delive enn bens
3) e-i3 bodget must be below BAU
4) limis budget must allow full participation in ther mechs
2
5/23 3d Way Group mtg, Tashhent
- -trading, JI, CDM
many technical issues involved we will discuss today
Yes suhepara (Kaz) - Supports efforts of all those have
4/99 Kaz ashed to join A1
obj- envl + econ beneficial
:-
citerest in qualtitative tgt
doing program of der- will allow them to forecast erris
Natt strategy to & GHGs inde development
dev institutions - end inventory
system of noth stds for GHG programs
-intedytal cate to undertable this work
welcome apportunity to share experience w/ those
gether here esp macro forecasts + emis
appreciate AID/EPIC assistance + technical support
Mansimor (Aze) - is your if is addition to your matt cam.
Yessehgrova - yes, 7 we've now used attrial mac topecest
Ossehna / U2b) - you almady have forecast,
Yessehepara- frucast the 2015 new approved, now need their
assistance to fish
we Lane 3 different forecasts, but nad to refine consistet
w/ concerns of Agency of Stategic Planning
Gabridya (Arm) - to take a a tgt, writgen have to and
K?, when do you think this happen what will be you
106 :- flex nech esp COM bye or seller
lessehapara- we are now ready to regotiate gratitative commitments
plan to present proposals of grant tzts e Cop-6
3
5/23
wat to take + use special conditions as EIT in taking am
tgt - eg, may use 1992 base year - data are more
transport
Fedora (Turhamstan)
- problems + challenges, esp in plan + inventry :- notl comm
-govt Dec commission corrdinates all clin change issues in Turk
in 98, Twh ratified KP in Dec 99 - concept of dov
- 2010 development plan, began to look to enis forecost
based on this plan
-in unique situation- 100% not ges pronsion in industry, hhalts.
:- no opportunities for trel suritahing
-clin change part at ratt plan of action on env.
-Pres proposed countain for enc actions, incl clin change
- just finalized nott communication
-neel experince w/ CPM + KP
ussehepora- what's potential for renewable projects
Fedora- no specific projects, distributed heat project the GEF
mole consideration - see how it could energy efficiency
sime potential for sala, wind- but rather expensive -ccrrent
policy ained R not gas
Yelhi- in nott comm- how do emis compare to 1990
Fedor curent enis will exceed 1990
Maximor don't undestad you view of 3d way
Fedoral 3d way sn't clear, we can So research before ID approaches
to implement K?, just itemested:- regativing freework now
Marina - LGHG, only there new tech now based a your pentation
4
Fedarar - GHG, shold be the 7 efficiency (endruce + greating
tech)
Gabrielyan - our GEF project, 1, like yours, but is not very succerful, yours?
what is your usion of future em3 ? I expect an increase
at least above 10% growth -coldyor get = tgt
Fedoral still working on forecast based on approved der strategy
Gab- how much emis will you have in first commitment
Fed- 60% T above 1990 in 2010
Golub- how do enis grow relative to GDP, 3-way coldallow sus der
Fed -
Makhmadalize ev (Tajih) -ratified FCCC in 98
nothing has been done is Taj, but govt programs an clin ch
NaHl e e cological education program have same work on clin change
1" not! carm Lasn't been developed yet, but home a dieft
will have devinor on clin change soon, to finalize notl -
stating in June
Annahlier Kyrgyzin)- recently signed FCCC + drigpretion work a
satitying KP
will need tech assistance
certal Asia is basically / economic regin - study an Kyrs
enis will need to Le in this context
only have data bach to 90s, need to improve 8 aloty
arez, -lg coul resure, bit pour guality soburn mretuae cod each yo
survey .t energy, + of for frelwood
a lot of hydro potatial
S
need tech + fu assistance from foreign contries for 44drs
projects to I GHG,
now only studying possibilities for Kyrg on 34 way
Gabr just thinking e 31 way, but will compule/callect all
GHG statistics - we can show an expecence
Annar- just propred to do so,
Yessehepan- hydro export share of total enesy exports
Annon - ~ 20-30'C, also export cral + gas to V2b.
70%of exports is hydro exports
Schanis - Helt have not received for FCCC e your ratification
Annan- - ratitied 1/14/00, then sent to goodal secy-
B.1.5
Ososhova (V2b) - vatified KP in 1999
1st notl cam e COP-5 end inventory, enis frecast, enegy-sing
program
84% of GHG and tran energy
have have some preling 98+99 enis, CH4 0.1'C, CO2 15mll,
but CH4 has grow the this decade (+15%: (990-1997)
66% of enis as CO₂, 28% of em3 are CH4
need to revise inentory, esp focus of CH4 leahages
-IPCC methodlogies may not be appropiate -may reed to focus an
local emil factors
em3/GPP 1990: 5.6 2000:- : 4.5 2010. 4.5
very ancetion GDP forecast, uncetinity e tech 0, structural refrrms
ID'ed possible can prints, but most butried pryjects coldit be pursued
the CDM low or mag invental costs, : low GIG pitese -not profitable fru Uzb
6
30 way to limit not reduce eris, should out constrain
earn der, allow participation isall Ki rechs
Reiterate 4 princyles
Workprogram needstoic in
-specification of inventory lesp (H4)
-inprome reliability of forecasts (errently have 3 scenaries)
-shold der way of indexation of emissions
-pe GDP, pe capita, some other way
-should ind public participation
w/o from analysis, writ be able to der eris budgets
A
Cabr- why is trading more beneficial then COM
Odos- everyoneshald focus on what's best for them
Gabr we are talling e 3d way of COM? would it not be is see
world there be cases where it world be useful
Shvangiradze (Georgia)
e Kyoto - Gerrgia indicated it world be willing to take on a volutory
commitment, but f ready to annance #
GA realy to take on a commitment
Primity for GA is econ der, clim change :3 addl to ecan der
Recognize that clin days can help attract new investment
+ new tech to catry
2 problems - dec 10, dec " e COP-5 capacity -bldg,
nmA1 EITs left at, also in can of expet review of notl communities
need a gray to represent + protect interests of non A1 EIG
then it should put 3d way approachar agenca
Concern e beigable to pay FCCC dues
7
pilot projects wold be useful to dirastrate implementation at KP
GA presented notl comm e COP-5
profond
GEF project -similar to Armenia's
revise
expert treview
- need cagacity-blog in idustry + energy sectors, esp is
is trandation
collecting intormation is
them will stat 2d commination
Mansimer (Arer)
Finalizing 1st notl Comm - will present e COP-6
Vice-PM heads GCC commission
1990: 8.5 tons pe capital (congarable w/ European arg)
1994:
gradaed improvement for elec since 1995 is economy
vie diesel fuel, but have now ford not gas + will substitute for
electricity; also some hydro potential
concern e GHGs i from al + gas + industry
huge potential to V GHGs of, need to do more 5 trdies
plan to to macro torecest - will be wrappedyp by end of y.
by 2025,- (990+10D% -by Minof Economy
Aze gat not against involvement is 30 way gray
Gabridger (Him)
Kyoto -offered to take an voluntary tgt
ready to vol. commitment
3 forecasts
8
Moldova
natl comm in final stages
1997 c.m.'s = 1/3 1990 eris
use marroement analysis mde Moldeve 21 program-
probable + optimatic scenaries, the latter are used
willot achieve 1990 en's bad Cy final yr of forecast (2010a~2020?)
lots of incertainty in scenaios
ready for GHG reducing comitment
lach of capital
a
May 24
Argentina discussion
8's e funding, process, how to index
Discussion
Aze
what are next steps this group can act as a coalition e COP
if we one to annance, we need to begin research complex effort,
need to do careful malio forecasts + and forecasts, then predict tgts
Need advize from experienced peoples in different contrices
should we work together or as regions ? Same research can be
generalized, same will be cantry-specitic
Challenges in collecting data, dealing w/ corruption, incetainties is data
Gray must be est by COP-6 -annoment
steps
Sasha
1
Political annamement e COP-6; note 4 principles
2
Research work that needs to be done, how to do it, when
3
Joint work or separate
4
what needs to be done by COP6
?
Ven early to decide now e polit annomecrant, better to focus an other
issues- can't decide for on govts here @ taking tgts
Should dBwss amending KP
Aze
Each cantry will decade tgt independently
Announcement has to be prepared officially by govt
Arm
These countries should express willingness
We shold make recommedation as a group of arpects
Uzbeh Foreign Ministry ?
10
May 24
Yelhin Have to inform gats e results of this contrance + then gants decide
Ososhora Polit annount does need to be decided by each centr, govt first
Uzbeh girt will decide soon
Fedar
Went bach to govt after COP-5 it -pdate
Believe that Turkman will support this graps work
Geargia Ready + interested to take an countrients
Need to submit a document to each govt for them to emsider
what we have - hand is a start
Gat needs to him principles as well as her it cald be ing Centerted
Need to printly present an position
Need to do a document from this group to on youts, so they can decide
wi.t
Uzbeh
We should help each other, and take comparable positions
Support of us will play essential 'ole
Need credible statistics
shold support 3d Wong as 1 team
Sarha contries in LAM + the regions will likely support this 3-way
Moldown We support principles
Necessary to mahe polit statement e Cop 6 + declare principles
Litrah recommends that a small group compile a document that all
would take bach to govts
1.
May 24
Tajih We never signed a memorandum
We support plan for 3- Way, but I must confe w/ gat first
This will be discussed e June Tajin wshgo
I will in form govt the need + imptance of 30 Way group, but
govt will need to decide
Tajch not e Cip-4 or Cop-5
Sasha
Proyose an editorial cante to write a document to deaft reflect
this discussion, w/ recommentions
Rec 1-wnh together, + meet once more before COP-6
need an analytic working pape to be should of garts
AN EXAMPLE OF CALCULATING THE GREENHOUSE GAS
EMISSIONS BUDGET FOR UZBEKISTAN
Alexander Golub, Harvard University
The objective of this document is to propose preliminary estimates of the
emissions budget for Uzbekistan as a country that has expressed its wish to
enhance the degree of its participation in the UN Framework Convention on
Climate Change in the form of choosing the so-called Third Way Concept.
No generally recognized and established procedures for determining such a
budget exist. We suppose that they will be elaborated in the course of
negotiations among the Parties to the Convention with active participation of
the countries that have expressed their desire to follow the Third Way.
In any event, the approaches for establishing the emissions budget should
comply with the fundamental principles have been previously discussed by
the Action Committee. These principles are as follows:
The emissions budget should be based on comprehensive studies to
substantiate the undertaking of voluntary commitments at a certain level;
Emissions reduction commitments should not put any obstacles in the
way of social and economic development;
When undertaking the commitments, the countries proceed from the
necessity of making their own contribution to ensure ecological benefits
for the planet as a whole;
The undertaking of the voluntary commitments of emissions limitations
should give to the country the opportunity to participate in all flexible
mechanisms under the Kyoto Protocol (KP) including emissions trading.
1
It is supposed that this example of determining the emissions budget may
serve as an illustration how to implement the indicated principles in concrete
figures as well as the basis for further activity of the Action Committee with
the aim of developing the formalized attitude of the Action Committee to the
problem concerning some approaches to determine the voluntary
commitments (emissions budgets).
In the conceptual plan, the estimates provided below are based on the Draft
Third Way Concept of 01.04.2000 prepared by Harvard University. As for
the data on GHG emissions in Uzbekistan and the emissions forecast and for
information concerning major indicators of social and economic
development, the principal sources are the First National Communication of
the Republic of Uzbekistan, WB NSS and operating materials prepared
within the framework of the EPIC Program. It is highly desirable to expand
this information base and, first of all, improve the general economic
information. The invoking of additional information sources will make it
possible to enhance the quality of forecasts and decrease the risks associated
with the specified voluntary commitments (emissions budget).
Concept of the Group Third Way and the Integrated Approach for
Establishing the Emissions Budget
In the above-mentioned Draft Concept of 01.04.2000, the fundamental issues
of the Third Way Concept were discussed in detail. The analysis we carried
out suggested that for today the integrated approach for determining the
emissions budget to a greater degree meets the specific character of the New
Independent States' (NIS) economies in transition.
The direct indexation of the emissions budget won't create adequate
conditions for more complete participation of the countries in the flexible
mechanisms under the KP. Thus it is proposed to consider a new, the so-
called integrated, approach that provides for establishing the constant and
variable components of the emissions budget.
With regard to the specific features of the economies in transition, some
aspects might be noted that should be taken into consideration when setting
the emissions budget for the "new countries".
Following are some features of the economy of transition period:
2
Uncertainty of forecasting GDP dynamics and its pattern.
Uncertainty of the pace and extent of technological renovation.
Underdevelopment of the capital market.
Poor development of market incentives.
High discount rate (and, as a consequence, predominance of short-term
motivation).
Low rate of the internalization of externalities.
From the standpoint of realizing the long-term program on GHG emissions
reduction, it is essential to establish the emissions budget as quickly as
possible and to commence implementing the investment projects on
emissions reduction as soon as possible. To do this requires sale on a
forward or option basis some part of the emissions quota and to create a
financial mechanism for reinvesting the funds gained.
It's our opinion that the Third Way Group could make the following
proposal: to divide the emissions budget into two parts. The first part of it
the country should receive immediately. Its determination should be based
on the "low" GDP forecast, and the country will receive the second part
within several years when the GDP real dynamics will be estimated.
The first part is constant and the second one is variable. To gain greater
insight into the idea of the integrated approach, one should refer to Figure 2.
Curve 1 corresponds to the GHG emissions forecast at the higher rate of the
GDP growth and when the country chooses the resource-intensive path of
development. Curve 2 fits the GHG emissions forecast at the high rate of
the GDP growth but when the country chooses the resources-saving path of
development. If it is known that the development will follow the "high"
scenario, the emissions budget could be set at Curve 2 level (Fig. 1). The
aggregate emissions budget would be equal to the total of the areas
S4 + S3 + S2.
3
Curve 3 corresponds to the GHG emissions forecast at the "low" scenario of
the GDP growth and at the resource-intensive way of development, and
Curve 4 - at the resources-saving path of development.
Provided it is known that the development will follow the "low" scenario,
the emissions budget should be set at the level of Curve 4 (it would be equal
to the area S4). Thus, the emissions budget is confined between Curves 2
and 4 (Fig. 1). The constant part S4 may be separated from the budget and
fixed at the very beginning without its revision thereafter. In addition, the
interval may be set where the variable part S3 + S2 will be confined, and the
rules should be specified whereby the emissions budget will be indexed
within the variable part. The country will receive it several years prior to the
commencement of the first budget period. Its value can't exceed S3 + S2.
The part S3 + S2 that the country will receive shall be related to the
economic index that in the lowest degree depends upon the country's efforts
in GHG emissions reduction prior to the beginning of the first budget period.
For example, there may be proposed average annual rates of the GDP
growth.
By way of illustration let us consider that the "low" scenario of the GDP
implies a GDP average annual growth of 3% and the "high" scenario - 6%.
In case the GDP growth rates are lower, for example, 4 % per year, the
additional emissions budget will represent (S3 + S2)/3.
Estimating the Value of the Integrated Emissions Budget for Uzbekistan
(Preliminary Estimates)
First we'll describe the formal algorithm on constructing the integrated
budget, and then we'll apply it for constructing the emissions budget of
Uzbekistan.
Algorithm for Constructing the Integrated Budget
Step 1
Determining the corridor that involves the emissions budget.
4
The maximum and minimum forecasts for GHG emissions should be taken
to determine this corridor. As we specified it earlier in the process of
analysis of GHG emissions dynamics in the countries with economies in
transition, there are several major factors that determine the emissions
dynamics. They are as follows:
GDP dynamics;
GDP pattern;
Rates of technical renewal;
Energy balance structure and its dynamics.
In case there is the top-down macroeconomic model adjusted to the
determining of the GHG emissions, the most precise estimates of the
corridor may be got on its basis. If such model is not available, a certain
simplified procedure may be proposed.
Step 1.1
Determining the interval that may involve the specified parameters.
The interval shall be determined for the GDP wherein the growth rates may
be, for example, from 2.5 to 5%. Specialists in the area of macroeconomics
may readily identify such interval.
It is important to know the share of the energy sector for the GDP structure.
The respective specialists may make the required estimates.
The rates of technical renovation may be given as the share of new
technologies or in the form of GHG specific emissions indicator per GDP
unit.
The shares of diverse types of fuel give the energy balance structure.
Step 1.2
Determining the best and worst combination of parameters.
To get the upper boundary of the corridor, it is required to consider the
highest rates of the GDP growth, to use the most energy-intensive structure,
low rates of technological advance and the least favorable energy balance
structure. To get the lower boundary of the corridor, everything should be
done vice versa.
5
In actual practice such combinations are almost impossible. One of the
reasons is the fact that at the higher rates of the GDP growth there are more
resources for developing new technologies, and positive changes in the GDP
structure are more likely. As a consequence, the upper boundary of the
corridor will be overestimated and the lower one - underestimated. It will be
required to narrow the corridor.
Step 2
The narrowing of the corridor.
To narrow the corridor, it is necessary to develop the likely scenarios for
combination of major economic parameters that influence on the GHG
emissions dynamics.
It is best to do this on the basis of the model. If such model is not available,
the scenarios may be chosen by Delphi method.
Step 3
A probability of the "outlet" of real emissions outside the limits of the
corridor should be determined at this stage.
Step 4
Determining the country's own contribution into the GHG emissions
reduction.
On the model basis there may be distinguished no-regret & low-costs
measures. The result of their applying may be considered as the country's
own contribution to the GHG emissions reduction. The countries with the
economy in transition should address this problem with a great caution and
take into account all existing barriers while implementing similar projects.
As a result, estimation of the country's contribution into GHG emissions
reduction may appear to be lower than the aggregate outcome of applying
the no-regret & low-costs actions.
In case the estimate of the emissions reduction potential is made on the basis
of the bottom-up approach, the potential turns out to be obviously
overestimated. Ultimately, the realistic value of the country's contribution
into the GHG emissions reduction should be determined, and the upper
boundary of the "narrow corridor" should be adjusted on this basis.
6
One more approach may be proposed for determining the value of the
country's own contribution into the GHG emissions reduction. For example,
if it is known that at the costs K the emissions reduction Q may be achieved,
and it is also known that the price of one GHG ton on the carbon market is
P, then the value of the country's own contribution in the GHG emissions
reduction q may be determined by the formula q = Q - K/P.
To put it differently, the sources attracted from the sale of the unused quota
(Q - q) should be sufficient for financing the actions on GHG emissions
reduction in the volume Q covering both of the country's own contribution q
and the reductions corresponding to the sold part of the quota Q - q.
Step 5
Determining the constant part of the emissions budget.
The lower boundary of the "narrow" corridor is taken as the constant part of
the emissions budget.
Step 6
Determining the boundaries of the variable (indexed) part of the emissions
budget.
The variable (indexed) part of the budget is within the limits from the zero to
the difference between the adjusted upper boundary of the corridor and the
constant part of the budget.
Step 7
Indexation of the variable part of the budget.
Indexation of the variable part of the budget may be carried out in 2005,
three years prior to the commitments on the emissions reduction coming into
force. The indexation should be made in conformity with the procedures
stipulated. The indexation procedure should be transparent. Once the
indexation has been done, the emissions budget should not be adjusted any
more.
It is feasible to choose the factor that influences the GHG emissions most of
all as the indicator on the basis of which the indexation is being carried out.
7
For the countries with economy in transition the GDP should be selected as
such indicator.
The Integrated Budget for Uzbekistan
The estimates presented below have only illustrative character.
Step 1
Determining the corridor that involves the emissions budget.
The wide corridor for the first budget period 2008-2012 may be determined
within the limits from 550 to 700 million tCO2. Therewith, the data available
will enable to take into account only the possible fluctuations of the GDP.
Step 2
The narrowing of the corridor.
Having regard to the most probable scattering in the GDP values, the
corridor may be narrowed up to 575-675 million t.
Step 3
There is lack of information required for the sensitivity analysis.
Step 4
Determining the country's own contribution into the GHG emissions
reduction.
According to the conservative estimates, the country's own contribution may
be determined as 5 million tCO₂ annually or 25 million t over the first
budget period. Thus, the adjusted upper boundary of the corridor may
amount to 650 million t.
Step 5
Determining the constant part of the emissions budget.
The volume of 575 million t is taken as the constant part of the emissions
budget.
8
Step 6
Determining the boundaries of the variable (indexed) part of the budget.
The variable part of the budget constitutes 75 million t.
Step 7
Indexation.
The GDP is chosen as the parameter by which the indexation is being carried
out since as to the NIS countries the GHG emissions are most sensitive to
this indicator.
Average rates of the GDP growth over the period 2000-2005 shall be
determined. Should they are less than 3%, the indexation coefficient is taken
to be equal to zero. If they are 5% and more - it is equal to 1. In case they
make up X% between 3 and 5%, the indexation coefficient shall be
determined by the formula K = (X - 3)/2.
The variable part of the budget of 75 million t shall be multiplied by the
indexation coefficient. The result gained should be added to the constant part
of the budget.
9
GHG emissions
1
$1
2
3
S2
S3
4
S4
2000
2008
2012 Years
Figure 1
10
1
S1
2
S2
4
S4
2000
2008
2012 Years
Figure 2
11
Synopsis
Tashkent Seminar: "A Third Way to Participation in the UN FCCC"
23-24 May, 2000
Hosted by the Institute for Strategic and Regional Studies under the President of the
Republic of Uzbekistan
Sponsored by USAID through the EPIC and Global Training Development Programs.
At the Fifth Conference of the Parties to the UN Framework Convention on Climate
Change (UN FCCC), Uzbekistan took a leadership role among transition economies
seeking to find a way to reduce greenhouse gas emissions without damaging their
prospects for continued growth. Under the leadership of the Uzbek delegation, a
group, which calls itself "The Third Way" formed and agreed to examine the best
ways for transition economies to participate in the Framework Convention more fully.
Seven countries signed the memorandum indicating their intent to join the Third Way
group - Armenia, Azerbaijan, Georgia, Moldova, Turkmenistan, Tajikistan and
Uzbekistan. Two countries - Kazakhstan and Kyrgyzstan - signed as observers,
indicating that they wanted to be informed of the "Third Way" as plans develop
The Third Way group is developing a proposal for how transition economies might
participate in the so-called flexible mechanisms of the UNFCCC. In exchange for
taking on these voluntary commitments, the Third Way states hope to obtain the right
to participate in these mechanisms (such as emissions trading, Joint Implementation
projects) which are expected to attract investment in the modernization of the energy
and other sectors.
The US government is supporting this meeting of the Third Way group, because the
US has expressed its desire to find ways to attract «meaningful involvement» on the
part of developing countries. This development is one of the most significant in
negotiations with developing and transition countries. The Third Way group has been
greeted with enthusiasm, and is proposing some strategies for transition economies
similar to those being proposed by Argentina for developing countries. An
Ambassadorial-level US delegation will be attending the meeting, and is hoping to
hear what the Third Way representatives plan to present at the Sixth Conference of the
Parties (COP-6) scheduled to take place in the Hague in November.
Draft Agenda
«A Third Way to Participation in the UN FCCC»
23-24 May 2000, Tashkent
8:30-9:00 Registration of participants
9:00 - 10:00 Opening Remarks
for Uzbekistan - Rafik Saifullin, Director of Institute for Strategic and
Regional Studies
for US - Ambassador Hambley
for USAID - Ken McNamara
Brief commentary on the first Third Way meeting at COP-5: Alexander Golub
10:00-10:30 Coffee Break
10:30 -11:30: Panel 1: Central Asian Perspective
moderator - T. Sabonis-Helf
Kazakhstan - Irina Yesserkepova, KazNIIMOSK
Turkmenistan - Yuri Fedorov, National Focal Point
Tajikistan - B. Makhmadaliev, GlavHydromet
Kyrgyzstan - TBD.
Uzbekistan - V. Chub/ T. Ossoskova, GlavHydromet
11:30 - 12:30: Questions and discussion
13:00 - 14:00: Lunch at «Bakht» restaurant
14:30-15:30: Panel 2: Caucasus and Moldovan Perspective
moderator: M. Boyd
Georgia - T. Gzirishvilli - National Focal Point
Azerbaijan - M. Mansimov, Project Manager of Initial National Comm.
Armenia - A. Gabrielian, National Focal Point
Moldova - L. Treshilo, GlavHydromet
15:30-16:30 Questions and discussion
16:30-17:00 Coffee Break
17:00-17:30 Commentary from the US - Joseph Aldy
17:30- 18:00 Independent expert commentary - Alexander Golub
Day 2
10:00-10:30: Experience from Argentina - Dan Balzer
10:30-12:00: Round table discussion on the theme of «Prospects for Realizing a
Third Way for Participation in the UN FCCC»
12:00- 12:30: Coffee Break
12:30-13:30: Final Session and Summary of results of the Seminar, preparation of
recommendations for next steps - Moderator: A. Golub
Clinton Presidential Records
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USAID/Environmental Policies and Institutions
for Central Asia (EPIC) Program
USAID
USAID/Global Training for Development (GTD) Project
In ollaboration with
Institute for Strategic and Regional Studies
under the President of the Republic of Uzbekistan
present
"A Third Way to Participation in the
United Nations' Framework
Convention on Climate Change"
Training Seminar
23-24 May, 2000
Tashkent, Uzbekistan
ЮСАИД/Проект Природоохранной Политики и Усиления
Организационной Структуры Управления Ресурсами
Центральной Азии
Международный Проект Обучения для
Развития ГЛОБАЛ
B сотрудничестве C
Институтом Стратегических и Региональных Исследований
при Президенте Республики Узбекистан
Представляют семинар
"Третий путь подхода K
Рамочной Конвенции OOH
по изменению климата"
23-24 Мая, 2000 Γ.
Ташкент, Узбекистан
"A Third Way to Participation in the UN FCCC"
23-24 May 2000
Tashkent, Uzbekistan
Agenda
Tuesday, May 23
8:30
Registration
9:00
Opening Remarks
for Uzbekistan - Rafik Saifulin, Institute for Strategic and Regional Studies
for US - Ambassador Hambley
for USAID - Ken McNamara
Brief commentary on the First Third Way meeting at COP-5: Alexander
Golub
10:00
Coffee Break
10:30
Panel 1: Central Asia Perspective
moderator - T. Sabonis-Helf
Kazakhstan - I. Yesserkepova, KazNIIMOSK
Turkmenistan - Yu. Fedorov, National Focal Point
Tajikistan - B. Makhmadaliyev, GlavHydromet
Kyrgyzstan - M Amanaliyev, Ministry of Nature Protection
Uzbekistan - V. Chub/T. Ososkova, GlavHydromet
11:30
Questions and discussion
13:00
Lunch at "Bakht" restaurant
14:30
Panel 2: Caucasus and Moldova Perspective
moderator: M. Boyd
Georgia - M. Shvangiradze, National Focal Point
Azerbaijan - M. Mansimov, Project Manager of Initial National Comm.
Armenia - A. Gabrielyan, National Focal Point
Moldova - L. Treschilo, GlavHydromet
15:30
Questions and discussion
16:30
Coffee Break
17:00
Commentary from the US - Joseph Aldy
17:30
Independent expert commentary - Alexander Golub
Wednesday, May 24
10:00
Experience from Argentina - Daniel Balzer
10:30
Round table discussion on the theme of "Prospects for Realizing a Third Way
for Participation in the UN FCCC"
12:00
Coffee Break
12:30
Final Session and Summary of results of the Seminar, preparation of
recommendations for next steps - Moderator: A. Golub
14:00
Reception
Семинар «Третий путь подхода K Рамочной Ковенции OOH по изменению
климата»
23-24 мая, 2000
Γ. Ташкент, Узбекистан
"A Third Way to Participation in the UN FCCC"
23-24 May 2000
Tashkent, Uzbekistan
Список приглашенных
List of Invitees
UZBEKISTAN
УЗБЕКИСТАН
Borii Alikhanov
Борий Алиханов
Senior Consultant
Старший консультант
President's Administration
Аппарат Президента
Rafik Saifulin
Рафик Сайфулин
Tel. (998712) 45-87-04
Director
Директор Института стратегических
Fax (99871) 120-66-28
Institute for Srtategic and Regional
и региональных исследований при
Studies under the President
Президенте
Sergey Russ
Сергей Pycc
Tel. (998712) 45-14-69
Head of Department
Начальник отдела
Fax (99871) 120-66-68
Institute for Srtategic and Regional
Институт стратегических и
Studies under the President
региональных исследований при
Президенте
Isom Mustafaev
Исом Мустафаев
Tel. (99871) 133-33-43
Deputy Minister
Заместитель министра
Fax (99871) 133-68-12
Ministry of Foreign Affairs
Министерство иностранных дел
Khalilulla Sherimbetov
Халилулла Шеримбетов
Tel. (998712) 41-49-23,
First Deputy Chairman
Первый заместитель председателя
41-30-80
State Committee for Nature
Государственного комитета по
Fax (99871) 41-39-90,
Protection
oxpaHe природы
41-56-33
Asatulla Salimov
Асатулла Салимов
Tel. (99871) 139-80-70
Deputy Minister
Заместитель министра
Fax (99871) 132-63-10
Ministry of Macroeconomy and
Министерство макроэкономики и
Statistic
статистики
Victor Chub
Виктор Чуб
Tel. (99871) 133-61-13,
Head
Начальник Главгидромета
133-61-80
Glavgidromet
Fax (99871) 133-20-25
Shukhrat Abdullaev
Шухрат Абдуллаев
Tel. (99871) 133-60-96
Deputy Minister
Заместитель министра
Fax (99871) 136-27-00
Ministry of Energy and
Министерство энергетики и
Electrification
электрификации
Tatiana Ososkova
Татьяна OcocKoBa
Tel. (99871) 133-61-17
National GEF Focal Point
Национальный координатор по
Fax (99871) 133-20-25
Glavgidromet
проблемам изменения климата
Главгидромет
Fakhritdin Shamsiev
Фахритдин Шамсиев
Tel. (99871) 133-65-90
Secretary
Секретарь
Fax (99871) 132-65-62
National Commission on Climate
Национальная комиссия по
Change
проблемам изменения климата
Alexander Mironenkov
Александр Мироненков
Tel. (99871) 132-65-27
Secretary
Секретарь
Fax (99871) 132-63-19
National Commission on
Национальная комиссия по
Sustainable Development
устойчивому развитию
Ikram Nazarov
Икрам Ha3apoB
Tel. (99871) 133-73-41
Head
Начальник управления
Fax (99871) 139-15-17
International and Environmental
международно-экономических
и
Organizations Division
экологических организаций
Minisrty of Foreign Affairs
Министерство иностранных дел
Burkhan Mamatkulov
Бурхан Маматкулов
Tel. (99871) 133-73-41
Third Secretary
Третий секретарь управления
Fax (99871) 139-15-17
International and Environmental
международно-экономических
И
Organizations Division
экологических организаций
Minisrty of Foreign Affairs
Министерство иностранных дел
TURKMENISTAN
ТУРКМЕНИСТАН
Yury Fedorov
Юрий Федоров
Tel. (99312) 35-73-42
National GEF Focal Point
Национальный координатор по
Fax (99312) 39-20-39
Ministry of Nature Protection
проблемам изменения климата
Министерство охраны окружающей
среды
KYRGYZSTAN
КЫРГЫЗСТАН
Mars Amanaliev
Mapc Аманалиев
Tel. (996312) 21-36-05
Head of Ecological Control and
Начальник Главного экологического
Fax (996312)
Inspective Department
контрольно-инспекционного
управления Министерства охраны
окружающей среды
Anarbek Matisakov
Анарбек Матисаков
Tel. (996312) 27-72-35
Environmental Policy Consultant
Консультанат по природоохранной
Fax (996312)
Zhgorku Kenesh
политике
Жогорку Кенеш
Zhyldyz Sydygalieva
Жылдыз Сыдыгалиева
Tel. (996312) 22-67-61,
UNDP Division
Атташе управления Управления
22-76-68
Ministry of Foreing Affairs
OOH МИД
Fax (996312) 66-05-01
KAZAKHSTAN
KA3AXCTAH
Irina Yeserkepova
Ирина Есеркепова
Tel. (3272) 54-25-27
Head Researcher
Ведущий научный сотрудник
Fax (3272)
КазНИИМОСК
E-mail:
KazNIIMOSK
[email protected]
Kanat Baigarin
KaHaT Байгарин
Tel. (3172) 11-71-70
National Focal Point
Национальный координатор по
Fax (3172) 11-71-69
GGERI Program
проблемам изменения климата
Программа GGERI
TAJIKISTAN
ТАДЖИКИСТАН
Bekmurad Makhmadaliev
Бекмурад Махмадалиев
Tel. (992372) 21-41-24
Chief
Начальник Главгидромета
Fax (992372) 21-55-22
Glavgidromet
GEORGIA
ГРУЗИЯ
Marina Shvangiradze
Марина Швангирадзе
Tel. (99532) 92-21-40
National Focal Point
Национальный координатор по
Fax (99532) 94-15-36
проблемам изменения климата
MOLDOVA
МОЛДОВА
Lidia Treschilo
Лидия Трещило
Tel. (0422) 77-36-44
Chief
Начальник Главгидромета
Fax (0422) 77-36-36
Glavgidromet
AZERBAIJAN
АЗЕРБАЙДЖАН
Mirzakhan Mansimov
Мирзахан Мансимов
Tel. (99412) 93-15-26
Project Manager
Менеджер проекта
Fax (99412) 93-69-37
Initial National Communication to
по подготовке национального
the UNFCCC
сообщения
ARMENIA
АРМЕНИЯ
Aram Gabrielyan
ApaM Габриэлян
Tel. (8852) 53-49-82
National Focal Point
Национальный координатор по
Fax (8852) 15-19-59
Ministry of Nature Protection
проблемам изменения климата
US DELEGATION
ДЕЛЕГАЦИЯ США
Ambassador Mark Hambley
Посол MapK Хэмбли
Chief Negotiator for the US
Уполномоченный представитель
Government on Climate Change
Правительства США Ha переговорах
Issues
по проблемам изменения климата
Joseph Aldy
Джозеф Алди
Advisor
Советник
White House Council of Economic
CoBeT экономистов при Белом Доме
Advisors
Daniel Balzer
Даниэль Балзер
Climate Change Specialist
Специалист по проблемам
Office of Global Change
изменения климата
US Department of State
Государственный департамент США
USAID
ЮСАИД
Alexander Kalashnikov
Александр Калашников
Tel. (99871) 133-18-52
USAID/CAR/Tashkent
ЮСАИД/Ташкент
Fax (99871) 133-76-56
Ken McNamara
KeH MaKHaMapa
Tel. (3272) 50-76-12/15
USAID/CAR/Almaty
ЮСАИД/Алматы
Fax (3272) 50-76-36
Sergey Yelkin
Сергей Елькин
Tel. (3272) 50-76-12/15
USAID/CAR/Almaty
ЮСАИД/Алматы
Fax (3272) 50-76-36
Angela Crooks
Анжела KpyKc
USAID, Washington
ЮСАИД/Вашингтон
Michael Boyd
Майкл Бойд
USAID, Yerevan
ЮСАИД/Ереван
US EMBASSY/TASHKENT
ПОСОЛЬСТВО США/ТАШКЕНТ
Barbara Cates
Барбара Кейтс
Tel. (99871) 120-54-50
Fax (99871) 120-63-35
Molly O'Neal
Молли О'Нил
Tel. (99871) 120-54-50
Fax (99871) 120-63-35
EPIC PROGRAM
ПРОГРАММА ЭПИК
Daene McKinney
Дейн МакКинни
Tel. (3272) 65-46-95, 54-
Chief of Party
Руководитель Программы
44-05
Fax (3272) 64-68-49
Theresa Sabonis-Helf
Tepe3a Сабонис-Хелф
Tel. (3272) 65-46-95, 54-
Energy and Environmental Policy
Советник по природоохранной и
44-05
Advisor
энергетической политике
Fax (3272) 64-68-49
Farkhad Sabirov
Фархад Сабиров
Tel. (99871) 133-67-46
Environmental and Energy Policy
Специалист по природоохранной И
Fax (99871) 133-89-57
Specialist
энергетической политике
Raisa Toryanikova
Раиса Торяникова
Tel. (99871) 133-89-57
Nature Resources Specialist
Специалист по природным pecypcaM
Fax (99871) 133-89-57
Vladimir Litvak
Владимир Литвак
Tel. (3172) 11-71-70
Team Leader
Руководитель Программы GGERI
Fax (3172) 11-71-69
GGERI Program
INDEPENDENT EXPERTS
НЕЗАВИСИМЫЕ ЭКСПЕРТЫ
Alexander Golub
Александр Голуб
Advisor
Советник Гарвардского института по
Harvard Institute for International
международному развитию
Development
Nino Khiroshi
Нино Хироши
Advisor
Советник
JICA
JICA
Hideki Tanabe
Хидеки Танабе
Advisor
Советник
JICA
JICA
INTERNATIONAL GLOBAL CLIMATE CONFERENCE IN
TASHKENT
During May 23-24. the U.S. Agency for International Development (USAID) in Tashkent
will sponsor an international climate change conference entitled. "A Third Way to
Participation in the United Nations Framework Convention on Climate Change". The
conference will be hosted by the Institute for Strategic and Regional Studies in
collaboration with the Main Committee for Hydrology and Meteorology under the
Cabinet of Ministers of the Republic of Uzbekistan.
At the Fifth Conference of the Parties to the UN Framework Convention on Climate
Change (UN FCCC). Uzbekistan took a leadership role among transition economies in
seeking to find a way to reduce greenhouse gas emissions without damaging their
prospects for continued growth. Under the leadership of the Uzbek delegation. a group,
which calls itself "The Third Way" was formed and agreed to examine the best ways for
transition economies to participate in the Framework Convention more fully.
The following seven countries signed the memorandum indicating their intent to join the
Third way group: Armenia, Azerbaijan, Georgia, Moldova, Turkmenistan, Tajikistan and
Uzbekistan. Kazakhstan and Kyrgyzstan signed as observers. and indicated that they
wanted to be informed of the "Third Way" as plans develop.
The Third Way group is developing a proposal for how transition economies might
participate in the so-called flexible mechanisms of the UNFCCC. In exchange for taking
on these voluntary commitments, the Third Way countries hope to obtain the right to
participate in these mechanisms (such as emissions trading, Joint Implementation
projects) which are expected to attract investment in the modernization of the energy and
other sectors.
The US government is supporting this meeting of the Third Way group. because the
United States wishes to find ways to attract meaningful involvement on the part of
developing countries on this important issue.
The Third Way group is proposing some strategies for transition economies similar to
those being proposed by Argentina for developing countries. An Ambassadorial-level US
delegation will be attending the meeting. and is hoping to hear what the Third Way
representatives plan to present at the Sixth Conference of the Parties (COP-6) scheduled
to take place in the Hague in November.
USAID
Development of the Third Way Concept
Prepared by:
Alexander Golub
January 2000
Prepared for:
Central Asia Mission
U.S. Agency for International Development
Environmental Policy and Institutional Strengthening Indefinite Quantity Contract (EPIQ)
Partners: International Resources Group, Winrock International, and Harvard Institute for International
Development
Subcontractors: PADCO; Management Systems International; and Development Alternatives, Inc.
Collaborating Institutions: Center for Naval Analysis Corporation: Conservation International;
KBN Engineering and Applied Sciences, Inc.; Keller-Bliesner Engineering; Resource Management
International, Inc.; Tellus Institute: Urban Institute: and World Resources Institute.
Task Order No. 813
Contract No. PCE-I-00-96-00002-00
Development of the Third Way Concept
Prepared by:
Alexander Golub
January 2000
Prepared for:
Central Asia Mission
U.S. Agency for International Development
Environmental Policy and Institutional Strengthening Indefinite Quantity Contract (EPIQ)
Partners: International Resources Group, Winrock International, and Harvard Institute for International
Development
Subcontractors: PADCO; Management Systems International: and Development Alternatives, Inc.
Collaborating Institutions: Center for Naval Analysis Corporation; Conservation International;
KBN Engineering and Applied Sciences, Inc.; Keller-Bliesner Engineering: Resource Management
International, Inc.; Tellus Institute; Urban Institute: and World Resources Institute.
2
CONTENT
1. FUNDAMENTAL PRINCIPLES OF THE THIRD WAY CONCEPT
6
1.1. Commitments on the emissions limitation should put no obstacles in the way
of social and economic development
6
1.2. Undertaking commitments, every country should make its contribution to
ensuring ecological benefits for the Planet as a whole
6
1.3. It is necessary to perform comprehensive studies for substantiating voluntary
commitments
7
1.3.1. Construction of the base (likely) scenario for the emissions
dynamics
8
1.3.2. Analysis of a potential for additional emissions reduction at
different versions of implementing the domestic policy in the GHG
emissions management and different versions of participating in
the international GHG emissions trading
9
1.3.3. Analysis of additional economic, social and political benefits
associated with the GHG emissions reduction
10
1.3.4. Analysis of institutional aspects of the GHG emissions
management and construction of the project line (the projects
assigned to the GHG emissions reduction)
10
1.4.
Undertaking voluntary commitments on the emissions limitation should
provide for a country a potentiality to participate in all flexibility
mechanisms under the Kyoto Protocol including the emissions
trading
11
2.
WHY CAN'T THE COUNTRIES WITH THE ECONOMY IN
TRANSITION BE CONTENT WITH PARTICIPATION IN THE
CLEAN DEVELOPMENT MECHANISM?
13
2.1. Flexibility mechanisms under the Kyoto Protocol
13
2.2. Why doesn't the CDM meet with the interests of many countries?
16
3.
WHAT ARE THE WAYS FOR ESTABLISHING THE EMISSIONS
BUDGET FOR THE "NEW" COUNTRIES: THE THIRD WAY
18
3.1. Why is there the need in the third way?
18
3.2. How will the commitments of the "new" countries be established?
19
3.3. The integrated approach for establishing the emissions budget
21
4. CONCLUSIONS
23
ANNEXES
25
IMPLEMENTING THE PRINCIPLES OF THE THIRD WAY CONCEPT
FOR UZBEKISTAN
25
A.1. Why doesn't the CDM meet the interests of Uzbekistan?
25
A.2. The integrated budget for Uzbekistan
26
A.3. The studies that should be done for Uzbekistan
26
A.4. Potential risks and their minimizing
29
3
In the past few years a number of the CIS countries not listed in Annex I to the UN
Framework Convention on Climate Change (FCCC) and Annex B to the Kyoto
Protocol (KP) have begun considering the possibility of more active participation in
activities implementing the Convention and the Protocol. The basic reasons for this
are the concern for the climate change problem and the understanding of the fact that
the specific character of the economy of each of these countries creates some
opportunities for mutually beneficial participation in international cooperation aimed
at greenhouse gases (GHG) emissions reduction or their removal by sinks.
The status that has been de facto assigned to these countries by the aforementioned
documents cannot comply with these countries' interests either by political or
economic considerations.
From the political point of view, the CIS countries cannot be ranked with the
developing countries. Each of them, though they are going through economic crisis,
possesses considerable potential. Politically it would be more correct to characterize
them as the countries with economies in transition.
From an economic point of view, the aforementioned CIS countries cannot be content
with prospects for participation only in the Clean Development Mechanism (CDM)
according to Article 12 of the KP. The specific character of the economies in
transition lies in the fact that these countries may expect considerably better results if
they have access to some other flexible mechanisms under the Kyoto Protocol.
Therewith, they may achieve greater GHG emissions reductions and furnish
opportunities to their partners for realizing the flexibility mechanisms and also gain
economic benefits exceeding those that could be obtained by limiting their
cooperation to CDM projects.
To ensure application of the indicated above potential, the counties should undertake
voluntary commitments on greenhouse gas emissions limitation.
The sole mechanism provided by the KP (the undertaking of such commitments in the
form of fixed budget of emissions in the context of Annex B under the KP) does not
conform well to the specific character of the economic development processes in
4
these countries. Therefore, the Action Committee organized at the Fifth Conference
of the Parties (COP-5) which involves representatives from Azerbaijan, Armenia,
Georgia, Moldova, Turkmenistan and Uzbekistan posed the question as to the search
for the so called third way for undertaking commitments on limiting emissions.
In consequence of the Action Committee activities, the joint document was developed
in which the common principles of the Third Way Concept were elaborated. These
principles include:
The countries intend to perform comprehensive studies for substantiating
voluntary commitments;
Commitments on the emissions limitation should not put obstacles on the social
and economic development
Undertaking the commitments, the countries proceed from the necessity to make
their own contribution for ensuring the ecological benefits for the Planet as a
whole;
The undertaking of the voluntary commitments on the emissions limitation should
give to the country a possibility to participate in all flexible mechanisms under the
Kyoto Protocol including emissions trading.
It is supposed that this document will form the basis of further activities of the Action
Committee with the purpose of subsequently organizing the officially formalized
group to participate in negotiations at the Conferences of the Parties under the FCCC
and uphold their common interests.
The goal of this Concept is a more detailed discussion of the fundamental principles
of the Third Way Group and consideration of additional benefits that could be
achieved by the countries having undertaken voluntary commitments on limitation of
GHG emissions. In addition, diverse schemes are being discussed for undertaking
commitments on limitation of greenhouse gas emissions.
5
1. FUNDAMENTAL PRINCIPLES OF THE THIRD WAY CONCEPT
1.1. Commitments on emissions limitations should put no obstacles in the way of
social and economic development
Commitments on emissions limitations should be realistic ones, and they shouldn't
present any artificial obstacles to social and economic development of the countries
undertaking these commitments. The commitments in themselves may become the
factor that will initiate transition to sustainable development and may facilitate the
choice of resource-saving technologies. The experience of developed countries
demonstrates that it is possible to combine sustainable GDP growth with relative and
even absolute reduction of emissions of both GHG and local pollutants.
At present the countries with economies in transition have a great degree of discretion
in choosing the technological structure of their economies that will define the type of
social and economic development as well as the character and scopes of adverse
effects on the environment in the nearest 20-30 years. The fact of undertaking
voluntary commitments on GHG emissions limitations should become a barrier in the
way of realizing the nature-intensive path of development but not limiting sustainable
development.
Such emissions limitations will be both in the interests of the world community and in
the interests of the country undertaking these commitments. Every country of the CIS
is trying to get rid of the resources-intensive and nature-destroying path of
development inherited from the Soviet Union.
1.2. Undertaking commitments, every country should make its contribution to
ensuring ecological benefits for the Planet as a whole
Operational experience in the long-term forecasting of GHG emissions in the
countries with economies in transition indicates that there is a reasonable degree of
freedom available in choosing a GHG emissions management strategy. We have
already noted above that by selecting the path of sustainable development each county
may ensure the limitation of GHG emissions growth. This fact in itself makes a
6
considerable contribution to providing ecological benefits for a country as a whole.
Such emissions limitation doesn't require any other additional costs. and it is only an
additional effect associated with improving the GDP pattern and enhancing the
efficiency of the economy. Some part of such emissions reductions may be
considered as the country's contribution to resolving the common problem -
preventing global climate change. And another part may be regarded as a certain
"bonus" that the country obtains due to the fact that it undertakes commitments
voluntarily on GHG emissions limitations.
Curve 1 in Figure 1 signifies the GHG emissions forecast from choosing the resource-
intensive path of development, and curve 2 - the emissions dynamics from the
transition to sustainable development and implementing the actions on GHG
emissions reductions that require no additional costs. Traditional economic benefits
(earnings due to fuel saving, etc.) provide for the economic self-repayment of these
measures. Curve 3 depicts the level of voluntary commitments of the country. The
emissions reduction in the volume corresponding to the area between Curves 1 and 3
is the country's own contribution to ensuring the ecological benefit for the planet as a
whole, while the area between Curves 3 and 2 is the country's bonus for undertaking
voluntary commitments.
The budget of emissions that the country will receive eventually (it corresponds to the
disposition of Curve 3) is the product of the negotiations process. Some profound
studies are required in order to define the boundaries of Curve (disposition of Curves
1 and 2). These studies should forestall the negotiations concerning the concrete way
to establish the emissions budget and definite the level of commitments. This
circumstance suggested the following principle of forming the third way group.
1.3. It is necessary to perform comprehensive studies for substantiating
voluntary commitments
After the example of Russia and Kazakhstan, it can be understood what type of work
should be executed in the area of forecasting GHG emissions and analyzing the
influence of diverse factors on the emissions dynamics. In terms of Figure 1, the task
of such study is not only to define the likely disposition of Curves 1 and 2 but to try
7
to plot Curve 3 which defines additional potential for GHG emissions reduction. This
potential may be achieved on the basis of implementing investment projects that
become feasible due to linking the country to the mechanisms of emissions
allowances trading and realizing joint implementation projects.
Such study should include the following elements:
Construction of the base (likely) scenarios for emissions dynamics;
Analysis of the potential for additional emissions reduction in different versions of
implementing the national policy on GHG emissions management and different
versions of participating in international GHG emissions trading;
Analysis of additional economic, social and political benefits associated with
GHG emissions reduction;
Analysis of institutional aspects of GHG emissions management and construction
of a project line (projects aimed at GHG emissions reduction).
All these actions together will create favorable conditions for adopting the national
strategy for GHG emissions management and participating in international
collaboration on the problem of surmounting global climate changes.
1.3.1. Construction of the base (likely) scenario for emissions dynamics
To construct the base scenarios for emissions, it is essential to have a long-term
forecast of GDP dynamics and its pattern. Then the intersectoral balance model,
which is well known in the CIS may be applied. To plot Curve 1, the "old" input-
output matrix that reflects the up-to-date technological level may be taken, and one
can follow the conservative approach to the problem of changing the GDP pattern.
To construct Curve 2, it is necessary to design a new input-output matrix (the
resource-saving path of development) and to adopt more progressive assumptions as
to the structural changes in the economy.
8
The specific challenge for all CIS countries is the lack of reliable forecasts for GDP.
In this case several GDP scenarios are considered. For fairness sake, it should be
noted that the similar situation might be seen in some other countries too. For
example, Argentina also considered several diverse GDP scenarios.
The economies of the CIS countries, though being similar, have some distinctions.
Thus, despite common principles, it is necessary to have individual approaches to
each separate country.
1.3.2 Analysis of the potential for additional emissions reduction from different
versions of implementing domestic policy in GHG emissions management and
different versions of participating in international GHG emissions trading
The performance of such analysis requires application of more complicated
instruments. For example, in Russia a model was applied that was specially
developed for such studies in countries with economies in transition. Conceptually,
this is a modified intersectoral balance model with two input-output matrices. The
velocity of transition from one matrix to the other (the velocity of replacement of the
old technologies by the new ones) depends upon various managing parameters (upon
prices for energy resources, prices for GHG emissions quotas, etc. included). In
Kazakhstan the ENPEP model was used with the assistance of which various
scenarios for development of the power sector were simulated. This model was a part
of a model complex involving the standard model of intersectoral balance on the
upper level and the ENPEP model on the lower level. In Uzbekistan the analyses by
sectors of economy (power sector, transport sector, etc.) was carried out during the
process of preparing the First National Communication. For each sector either a
separate model or expert judgements were applied. In all countries listed above, work
was also executed on identifying separate projects assigned to GHG emissions
reductions.
9
1.3.3. Analysis of additional economic, social and political benefits associated
with GHG emissions reduction
The essence of this analysis is to show what additional benefits for the country may
be gained through implementing a policy of GHG emissions reduction. Such benefits
are as follows:
Additional capital inflow (by estimates of the World Bank, on average for one
dollar of investments put into GHG emissions reductions there are four dollars of
investments put into traditional business);
Reductions of the local pollutant emissions like SO₂, NOx, PM₁₀ and some others.
It is evident that CO₂ emissions reduction at the same time leads to reduction of
the emissions of listed substances. In its turn, this prevents damage of the
ecosystem, and the risks for the people's health are lessened;
Social benefits. Development of new business facilitates the creation of new jobs.
And transition to new technologies promotes the total enhancement of the
educational level;
Fiscal benefits for the budget. Development of new business encourages tax
revenue increase. The sickness rate decrease allows cutting health expenditures,
etc.
Some other attendant benefits can be assessed for their feasibility at the level of
specific projects. Thus, the analysis of additional benefits should be carried out both
at the macroeconomic level (estimation of additional benefits from realizing policy on
GHG emissions reduction as a whole) and at the microeconomic level (estimation of
additional benefits from every individual project).
10
1.3.4. Analysis of institutional aspects of GHG emissions management and
construction of a project line (the projects assigned to GHG emissions
reduction)
A necessary element of the country's strategy on greenhouse gases emissions
management is creation of a mechanism for strategy implementation. Such a
mechanism will be different for various CIS countries although it will have some
common features. As of now, the Environmental Defense Fund (EDF) is completing
work on a Report devoted to the analysis of the minimum system of elements required
for a country's participation in GHG emissions trading (and in implementing some
other flexible mechanisms as well). This document may be considered a starting
point for studying the institutional aspects.
The work that has already been done in Russia and Kazakhstan depicts that along with
the institutions, the creation of which has been inspired by the objectives of
implementing the FCCC and the KP, it is feasible to establish an investment center.
The objectives of this Center involve data collection, and assessment and tracking of
projects assigned to GHG emissions reduction.
1.4. Undertaking voluntary commitments on emissions limitations should
provide a country the possibility of participating in all flexibility mechanisms
under the Kyoto Protocol including emissions trading
As a matter of fact, the access to all mechanisms under the Kyoto Protocol is just one
of the reasons the countries working on establishing the "Third Way" Group would
like to undertake voluntary commitments. The detailed interpretation of this principle
has not been elaborated yet but even now several key moments should be noted:
The commitments should be undertaken in terms of absolute value of the
emissions budget and shouldn't be adjusted after their final approval in the course
of the first budget period 2008-2012. For example, once the indexed budget
concept is adopted, the last indexation should be made prior to 2008. This will
enable the potential buyers to have a distinct idea of what commodity the seller
possesses;
11
The world community should recognize the commitments. Otherwise, the self-
declared quota wouldn't be a commodity on the market of GHG emissions
allowances. When a country or a group of countries advances an initiative for
undertaking voluntary commitments, their concrete value will be the result of the
negotiation process. Only after successful completion of this process and its
official fixing (for example, in the form of Annex C to the Kyoto Protocol) will
the emissions budget be legal. Then the country will be able to participate in the
flexible mechanisms under the KP on equal terms with the Annex B countries
under the KP.
The commitments should be realistic. The emissions limitation shouldn't be too
strict. Otherwise, the potential buyers will fear that the country won't fulfill its
own commitments on GHG emissions limitations, and they won't trade with such
a country. That is, substantiating its own contribution to the climate problem
solution, a country shouldn't overestimate its potential and it should assess
realistically what scale of GHG reduction it can realize on its own, and what part
can be implemented on the basis of participating in emissions trading;
The approach of setting the emissions budget should allow the country to enter
quickly into the system of emissions trading on the basis of forward and option
transactions. The specific character of the economies in transition is such that at
the current moment decisions are being taken which will define the technology of
the countries for a long period of time. Thus, it is important to ensure, as soon as
possible, additional incentives for making nature-saving choices. The forward
trade is an incentive. It is necessary to assign the quantified emissions limitation
in the form of a definite number as soon as possible so the country can participate
in trading. Recognizing the necessity of indexing the emissions budget, an
integrated approach may be proposed for approving the budget comprised of the
constant part and the indexed part (more detailed information is given below).
In the strict sense, only the accession to Annex 1 under the FCCC and Annex B under
the KP makes it possible to participate in all flexible mechanisms including the CDM
12
but now not as the investments recipient but as the investor. Some CIS countries may
become interested in implementing similar projects with neighboring countries. In
case a new Annex C of the KP is formed, it is not quite clear whether the regulations
specified by the Protocol and Convention for Annex 1- countries will be extended to
this new Annex. This issue should be regulated in the course of negotiations when
defining the status of Annex C.
2. WHY CAN'T THE COUNTRIES WITH ECONOMIES IN TRANSITION BE
CONTENT WITH PARTICIPATION IN THE CLEAN DEVELOPMENT
MECHANISM?
The political aspects of this issue have already been discussed above. Now let's
consider some economic aspects. From the economic point of view the answer to this
question is very simple: participation in emissions trading and in joint implementation
projects is much more beneficial than participation in CDM projects. Kazakhstan,
Argentina, Uzbekistan and a number of Latin American countries have already
perceived this straightforward economic fact and are seeking ways of joining all
flexibility mechanisms specified by the Kyoto Protocol. It was correctly reasoned
that therewith they will get overwhelmingly greater access to the capital market. In
addition, they will ensure a greater reduction of GHG emissions.
Below are given the main arguments in favor of orientation to the higher-order forms
of economic cooperation in the area of GHG emissions reduction.
2.1. Flexible mechanisms under the Kyoto Protocol
When developing the strategy for participating in the implementation of the FCCC
and Kyoto Protocol, each country analyzes potential economic and political effects of
choosing one or another strategy. The basic reason that states desire to undertake
quantified commitments is the quest for facilitating the process of cooperation in the
area of surmounting the danger of global climate change and thereby increasing the
capital inflow from abroad.
13
The Kyoto Protocol provided for four flexibility mechanisms. Their descriptions are
given below.
As of now, for the non-Annex B countries the sole accessible way for participating in
international cooperation is by implementing projects on GHG emissions reduction
within the framework of the Clean Development Mechanism. The quest of a number
of countries to undertake the budget emissions limitation commitments testifies that
the countries are not content with this capability and would like to enhance the extent
of their participation in international cooperation on this problem. In 1992 the United
Nations Framework Convention on Climate Change was adopted at the Conference in
Rio de Janeiro. Under this Convention all countries involved should develop and
adopt National Action Plans on preventing climate change. The countries should
make common efforts to reduce GHG emissions and to enhance carbon removal by
sinks (sequestration). From this point onwards some specific flexibility mechanisms
for the Parties' cooperation under the KP have been in development. There are four
principal mechanisms:
Emissions quota trading
Joint Implementation projects
Transfer of emission quotas within the "bubble" under Article 4 of the Kyoto
Protocol
Clean Development Mechanism.
The Joint Implementation projects as well as the Clean Development Mechanism
(CDM) allow countries to fulfill jointly the commitments on GHG emissions
limitation and reduction on the basis of realizing concrete projects for GHG reduction.
This enables an increase in the emissions quota of the donor country at the expense of
investments in the projects providing for emissions reduction in the host country. The
donor invests the funds into the project ensuring the additional reduction in emissions
or the increase in carbon sequestration. The gained additional emissions reduction
will increase the emission quota of the donor country. Participation in Joint
Implementation projects will make it possible for the countries with high costs for
GHG emissions reductions to meet their commitments in the cheapest way.
14
A special phase of Joint Implementation projects and CDM are the "actions
implemented jointly" projects (AIJ). Their realization may be considered a pilot stage
during which no actual credits are permitted. The aim of this first phase was to gain
experience in baseline construction (reference GHG emissions level that occurs in the
absence of specific mitigation measures) and estimation of additional emissions
reduction as compared with the baseline. When carbon crediting is permitted, AJI
will provide incentives for foreign donors to invest funds into projects in the recipient
countries in return for submitting the carbon credits.
Emissions trading is a more general mechanism of international cooperation. It
means selling and buying of emissions quota from the emissions budget of the
country-seller specified by Annex B under the Kyoto Protocol. The emissions trading
may be performed directly between Participating Countries or indirectly through
intermediaries. At the initial stage, two or more countries may sign a special
agreement on redistribution of emissions quota between them and to fulfill jointly the
assigned commitments. The agreements between countries will promote developing
emissions trading in various forms. Eventually, the countries may simply reach an
agreement on joint fulfillment of obligations and to redistribute quotas by forming the
"bubble". Article 4 under the Kyoto Protocol provides for this. The European Union
was the first group to form such a "bubble". The EU Countries - Participants of the
"bubble" have already agreed upon redistribution of the quotas. Thus, we can state
just now that the first large-scale transaction associated with considerable volumes of
the quotas redistribution has been implemented. As a prototype of another "bubble",
the so-called "umbrella" group is under consideration involving the USA, Canada,
Japan, Australia, New Zealand, Iceland, Russia and the Ukraine, and Kazakhstan as
an observer.
The economic reason is the deciding factor for counties participating in emissions
trading or in realizing Joint Implementation projects or in CDM. The country-seller
has considerably fewer costs for GHG emissions reduction than the country-buyer
has.
15
The resources gained from the emissions trading should be allocated for the projects
on GHG emissions reduction or carbon sequestration.
The principal prerequisite of the Joint Implementation projects and GHG emissions
trading shall be the difference in the marginal costs for the emissions reduction
between the countries, sectors of economy and individual enterprises.
2.2. Why can't many countries be content with the CDM?
There are several reasons why the CDM doesn't meet the requirements of the
developing countries. Below we cite some of them.
Complicated bureaucratic process of approving CDM projects may take from
several months to several years;
High transaction costs. The costs may reach 20% of the project value. This
money will turn out to be lost for the country where the CDM project is being
implemented;
It is complicated to construct the baseline. Because of this many projects are
excluded from consideration particularly when it comes to diverse ways of
developing the economy of the country, region or enterprise. Selection of the
least carbon-intensive way of development doesn't mean that these actions would
qualify as CDM projects. When the country has an emissions budget, it possesses
more chances to gain benefits from such projects.
Principle of additionality and principle of additional costs. Realization of these
principles further implies that the carbon credit formed as a consequence of
project implementation will be sold at a price corresponding to the additional costs
but not at the market price of the GHG emissions quota.
For the CIS countries this issue is the most basic one since a great number of projects
on GHG emissions reduction have low or even negative additional costs. When, for
16
example, additional costs account to $2 per Carbon ton and the market price for the
emissions is $10 per Carbon ton, then by participating in a CDM project rather than
budget trading the buyer losses $8 per each ton sold. This is illustrated in more detail
by the example below.
Example:
Let's consider the project of enhancing the operation capacity of a local thermal
power station. The non-recurrent capital costs amount to $1,000,000 and the
discounted value of the current costs saving, on account of reducing the fuel
consumption achieved by the project implementation, amounts to $900,000. In this
case the additional costs of the project are $600,000. Just this part of expenditures by
the project may be financed under the CDM.
The project could be realized only when the unit costs per ton of carbon are less than
or equal to the price for the GHG emissions quota. It may be assumed that in the
given case the aggregate emissions reduction makes up 150,000 tons of CO₂
equivalent. Thus, the unit costs are equal to $4.5 per CO₂ ton. The price forecasting
for the GHG emissions quota is $10. The project will beneficial for the investor. But
will it be beneficial for the host country?
The investments will be equal to $600,000. This accounts only for 60% of the funds
required to make non-recurrent capital costs. If the resources for co-financing are
found, the project will be implemented (the funds invested into the co-financing will
be recouped at the expense of saving the current costs).
When the country where the hypothetical project is being implemented could have an
emissions budget (for example, if it were an Annex B-country), it could receive
$1,500,000 instead of $600,000 since the emissions trading allowances could be sold
at the price of $10 per one ton.
The analysis carried out by us in various countries with economies in transition
including Russia, Kazakhstan and Uzbekistan as well as the studies of other experts
who investigated the potential for implementing GHG emissions reductions projects
17
in the Czech Republic, Slovakia, Romania, Columbia and some other countries make
a compelling case that the most advanced and attractive projects are characterized by
negative additional costs, and for this reason they can't qualify as CDM projects.
This evident contradiction is one more significant reason why the countries concerned
have already started work to seek a new way to participate in the flexibility
mechanisms under the Kyoto Protocol on the grounds of undertaking voluntary GHG
emissions limitations commitments and establishing a common budget of emissions.
3. WHAT ARE THE WAYS FOR ESTABLISHING AN EMISSIONS
BUDGET FOR THE "NEW" COUNTRIES? : THE THIRD WAY
CONCEPT
3.1. Why is there a need for the Third Way ?
The desire of Kazakhstan and Argentina to undertake voluntary commitments on
GHG emissions limitation was declared at COP-4 and this promoted discussion
concerning ways of establishing such obligations. In the context of the KP there are
two approaches:
Joining Annex 1 under the FCCC and then Annex B under the KP (inclusion into
Annex B through joining Annex 1 - that is the way chosen by Kazakhstan);
Joining Annex B under the KP without inclusion into Annex 1 under the FCCC.
The first path seems to be faster. This perfectly complies with the interests of the
countries with economies in transition: the sooner they get access to investments the
greater is the potential for GHG emissions reduction. The FCCC has already entered
into force, and this means it is possible to amend the treaty. The country concerned
may hope for a quick solution of the issue on its status as an Annex 1-country. This
status provides the possibility of negotiating at the level of commitments in
18
compliance with Annex B and to coordinate the assigned amounts as to the emissions
reduction before the KP becomes valid.
For the second path it is required that the KP is already in effect. The country
concerned may also begin negotiating at the level of commitments but its position will
be weaker since the partners to negotiations will not be completely sure of the
intentions of this country.
Despite the indicated differences, both paths have similar features, namely: the budget
of emissions is rigorously related to a certain previously achieved level of GHG
emissions (for the most of the countries this is the level of 1990). The scatter of
commitments ranges from -8 to +10% of the base year (more often it is the year of
1990).
These principles for setting commitments are not convenient for all countries since
such obligations are primarily oriented towards states that have already reached a
definite level of development. These countries tend to possess more considerable
reserves for GHG emissions reduction per unit of GDP as compared with other
countries where the economic growth is associated with the growth of population,
essential structural shifts in economics are anticipated, and social and economic
processes are characterized by high dynamics.
Therefore, the Concept of the Third Way or "Annex C" to the Kyoto Protocol has
appeared. In any event this signifies either insertion of fundamental addenda to the
Kyoto Protocol or adoption of a new Protocol to the FCCC specifying the
commitments and status of the Parties previously not listed in Annex B under the KP.
3.2. How will the commitments of the "new" countries be established?
Inasmuch as the countries desiring to assume voluntary commitments on GHG
emissions limitations may contribute significantly to establishing the principles of a
new Annex to the KP or new Protocol to the FCCC, it would be worthwhile to
consider more thoroughly various approaches for setting the budget of emissions.
The material proposed below should assist the Participants of the Third Way Group to
19
elaborate their own position as to the mechanism on establishing the budgets of
emissions. It is worth noting that this mechanism doesn't have to be a unified one for
all countries that undertake commitments. There may be a suite of mechanisms used.
What really matters is that each such mechanism should comply with the four
fundamental principles formulated in the first Section of this Concept.
The challenge lies with the problem of finding certain fair grounds and a formalized
procedure for setting the growing emissions budget. Three technical approaches for
setting the growing emissions budget are discussed below:
Direct forecasting of GHG emissions dynamics considering the mitigation actions
that a country would take in any case starting from economic incentives;
Setting of the GHG emissions budget on the basis of the emissions factor per unit
of GDP;
Setting of the GHG emissions budget on the basis of the emissions factor per
capita.
Each of these approaches has favorable and unfavorable aspects. In any event, the
values obtained on the basis of these approaches will be only the starting point for
further negotiations.
To gain greater insight into what approach of setting the voluntary budget limitations
would be better for each of the countries involved in the Third Way Group, it is
necessary to make respective estimates and to assess what emissions budget the
country may get and what reserve for emissions trading it will then have.
The direct forecast approach is the best one from a theoretical point of view. It makes
it possible to define immediately the concrete value of the emissions budget and
thereby equalizes potential of "new countries" to attract investment resources with the
potential of Annex B-countries. However its implementing may involve some
difficulties and it may be even unfeasible because of some technical troubles. That is
20
why the idea of an indexed budget of emissions came into being. Indexation of the
emissions budget will solve the problem of forecasting (the precise long-term forecast
is no longer significant) but it poses new-challenges. The main problem lies in the
fact that both the incentives (so necessary for countries with developing economies or
with economies in transition) to GHG emissions reduction and the incentives (which
are of particular importance for the countries with economies in transition) to
effecting early actions prior to the beginning of the first budget period (2008-2010)
are not implemented in full measure. Quite the reverse, the incentives are provided
for faster growth of GHG emissions to have a better base (the less intensive emissions
budget) up to the moment of the final indexation. For this and some other reasons, an
indexed approach is being criticized by a number of NGOs, and it finds no wide
support among the countries participating in the Convention.
3.3. An integrated approach for establishing an emissions budget
Thus, the direct indexation of the emissions budget won't create sufficient provisions
for the most complete participation of the countries in the flexible mechanisms under
the KP. So let us consider a new so-called integrated approach making provision for
setting the constant and variable parts of the emissions budget.
With regard to the specific character of the economies in transition, some aspects
might be noted that should be taken into account when determining the emissions
budget for the "new countries".
To cite one example of some features of economies in transition:
Uncertainty of forecasting GDP dynamics and its pattern;
Uncertainty of the pace and rates of technological renovation;
Underdevelopment of the capital market;
Poor development of the market incentives;
High discount rate (and, as a consequence, predominance of short-term
motivation);
Low rate of internalization of externalities.
21
From the viewpoint of realizing a long-run program on GHG emissions reduction, it is
necessary to fix as soon as possible an emissions budget and to commence as quickly
as possible implementing the investment projects on emissions reduction. To do this
requires sale on a forward or option base of some part of the emissions quota and to
create a financial mechanism for reinvestment of the funds received.
It is our opinion that the Third Way Group could put forward a suggestion: to divide
the emissions budget into two parts. The first part of it the country shall receive at
once. Its definition is based on the "low" GDP forecast, and the second part the
country will receive within several years when the actual GDP dynamics can be
estimated.
The first part is constant but the second one is variable. Let's refer to Figure 2 in
order to explain the idea of the integrated approach. Curve 1. corresponds to GHG
emissions forecast at the higher rate of the GDP growth and when the country chooses
the resource-intensive path of development. Curve 2 conforms to the GHG emissions
forecast at the high rate of the GDP growth but in case of choosing the resources-
saving way of development. If it is known that the development will go by the "high"
scenario, the emissions budget could be fixed at the Curve 2 level (Fig. 2) that in the
given case is the analog of Curve 3 in Figure 1. The aggregate emissions budget
would be equal to the total of the areas S4 + S3 + S2.
Curve 3 correlates with a GHG emissions forecast at the "low" scenario for GDP
growth and at the resource-intensive way of development, while Curve 4 - at the
resource-saving path of development.
Provided it is known that the development will go by the "low" scenario, the
emissions budget should be set at the level of Curve 4 (it would be equal to the area
S4). Thus, the emissions budget is confined between Curves 2 and 4 (Fig. 2). The
constant part S4 may be separated from the budget and fixed at the very beginning,
not revising it thereafter. In addition, the interval may be assigned where the variable
part S3 + S2 will be confined, and the rules should be specified whereby the budget
will be indexed within the variable part. The country will receive it several years
22
prior to the beginning of the first budget period. Its value shouldn't exceed S3 + S2.
The share S3 - S2 that the country will get shall be related to the economic index at
least depending upon the country's efforts in GHG emissions reduction prior to the
beginning of the first budget period. For example, there may be proposed the average
annual rates of the GDP growth. Let us explain it by the following example.
Suppose that the "low" GDP scenario implied GDP average annual growth 3% and
the "high" scenario - 6%. Should the rates of the GDP growth are lower, for example
4% per year, the additional emissions budget will represent (S3 + S2)/3.
4. CONCLUSIONS
Application of the Clean Development Mechanism in the countries with economies in
transition not included into Annex B under the FCCC is not sufficient for complete
realization of their potential in implementing economically beneficial projects on
GHG emissions reduction. So their striving to find a means of participating in more
efficient flexible mechanisms under the Kyoto Protocol (such as the emission trading
and Joint Implementation Projects) has been based on profound economic foundations
and has been inspired by the quest for more active participation in mutually beneficial
international cooperation in the area of preventing global climate change.
The desire for more active participation in implementing the requirements of the
FCCC and KP expressed in undertaking voluntary commitments on GHG emissions
reduction will lend a greater political significance to these countries ranking them on
one level with the developed countries. At the same time, the selection of the Third
Way implies that their commitments will differ from the obligations of the developed
Annex 1 - countries under the FCCC. They may provide for some growth of GHG
emissions required for ensuring the social and economic development of the countries
undertaking these emissions limitation commitments.
The undertaking of the commitments on GHG emissions limitation will facilitate
transition of the countries for sustainable development since the full-scale
23
participation in the flexible mechanisms under the KP will create conditions for
capital inflow to these countries. And this will initiate their transition to the nature-
saving technologies and the required structural changes in the economies. The
profound economic analysis should proceed the formulating of commitments in
quantitative terms. In this situation the commitments not only create no obstacles on
the way of economic development but they will be able to attract the funds required
for this development.
Realization of the Third Way Concept will require considerable efforts at the
international negotiations. Therewith, the joining of the countries that share the
fundamental principles of the Third Way Concept will strengthen their position. The
Group should be open for adopting other countries sharing these principles who are
ready to choose the Third Way or to support the countries choosing this path.
24
ANNEX
IMPLEMENTATION OF THE PRINCIPLES
OF THE THIRD WAY CONCEPT
FOR UZBEKISTAN
A.1. Why isn't Uzbekistan content with the CDM?
The situation with low additional costs is typical for Uzbekistan. In the study on the
national strategy the data are cited as to additional costs by the Uzbekistan's projects.
Table. The proposed actions on the energy saving and incremental costs for CO₂
emissions reduction in 2010.
Action
CO₂ emissions reduction
USD/CO₂t
Million tons/year
Minimum
Maximum
Use of up-to-date gas turbines
3.6
4.8
2.7
Use of units with recurrent
1.9
3.1
2.7
cycle
Modernization of small boiler
2.4
3.9
7.6 - 21.6
houses with replacement of
equipment
Small hydropower plants
0.9
3.0
1.3 - 4.3
Use of closed cycle system for
0.9
2.1
heat supply
Better insulation of the
0.9
3.0
existing heat supply pipelines
Introducing the measurement
1.8
4.5
0.6
of gases
Energy-efficient lighting
1.0
1.7
(-0.8)
Energy-efficient air-
1.5
conditioning
Equipping operating machines
3.0
5.9
1.3
with gas engines
Use of natural gas
1.0
Total
16.4
34.5
.
(Marginal costs were calculated at the pre-qualification stage of preparing the
individual project).
25
On the basis of this table it is possible to estimate the losses from realization of the
given projects within the CDM. By assuming that the price of forward transactions in
2002-2003 is about S7 per Carbon ton and GHG emissions reduction corresponds to
the average level by the projects, the losses will amount to about $100M. This
estimation is of an illustrative character only. For precise assessment of the pluses and
minuses in choosing one or other strategy a more detailed analysis is required.
A.2. Integrated budget for Uzbekistan
The results of the GHG emissions forecast for Uzbekistan has been presented in the
First National Communication. Based on these data, the analogs of Curves 1. - 4
presented in Figure 2 may be constructed.
Relying on the calculations available, the corridor involving the emissions budget for
Uzbekistan may be estimated from 110 to 140% of the GHG emissions level in 1990.
Some more detailed studies will enable to narrow this corridor. When assuming that
the adoption of the integrated budget is based on the values cited above, the constant
part of the budget will make up 110% of the emissions level of 1990. As to the
variable part, it will be included in the interval between 0% and (α*30)% of the level
of 1990 (0<α<1).
A.3. Studies that should be carried out in Uzbekistan
Some general recommendations are given in Section 1.3. concerning the researches
that should be carried out for substantiating voluntary commitments of each country
joining the Third Way Group. These recommendations should be adapted to the other
countries based on the specific character of the country's economy and the outcomes
of the studies have already been performed in this area.
A great deal of work was executed in Uzbekistan in the process of preparing the First
National Communication and WB-NSS. The outcome of these studies may be used
26
for substantiating the voluntary commitments of Uzbekistan. On their basis the
preliminary conclusion has been made that Uzbekistan cannot be content with
participating in the CDM only. It should strive for getting access to some other more
effective flexible mechanisms under the Kyoto Protocol (this conclusion was
supported by the participants of the Seminar being hold in September 1999 in
Tashkent). At the same time the studies conducted are not quite sufficient to make
recommendations as to the concrete level of commitments.
As it was cited above, the more detailed study should involve the following elements:
Construction of the base (likely) scenario for emissions dynamics;
Analysis of the potential for additional emissions reduction from diverse versions
of implementing the domestic policy in GHG emissions management and from
different variants of participating in international GHG emissions trading;
Analysis of additional economic, social and political benefits associated with
GHG emissions reduction;
Analysis of the institutional aspects in GHG emissions management and
construction of a project line (projects assigned to GHG emissions reduction).
Construction of the base (likely) scenario for emissions dynamics
Up until now, all forecasts were based on a combination of the sectoral forecasts or
upon applying a model of the bottom - up type. This is inadequate for discussing the
level of Uzbekistan's quantitative commitments. The more plausible way for refining
the analysis shall be applying the intersectoral balance model with two input - output
matrices.
27
Analysis of the potential for additional emissions reduction from diverse versions of
implementing the domestic policy in GHG emissions management and from
different variants of participating in international GHG emissions trading
It is recommended at this point to apply the outcomes of the analysis made for various
sectors of economy. In addition, the use of the intersectoral balance model offers
possibilities for estimating the influence of structural changes on the value of the
potential for GHG emissions reductions.
Analysis of additional economic, social and political benefits associated with the
GHG emissions reduction
It is proposed to make these estimates at three levels:
Macroeconomic level;
Sectoral level;
The project level
At the macroeconomic level it is suggested to make an expert assessment as to the
additional capital inflow, tax revenues and creation of new jobs. It is necessary to
consider various scenarios of Uzbekistan's participation in GHG emissions trading
and in reinvesting the revenues gained. In addition, it is necessary to estimate the
potential for reducing emissions of such local pollutants as SO₂, NOx, PM₁₀ and
others, as well as to assess the damage prevented.
Some similar studies should be also performed at the level of the sectors of the
economy. As to the analysis of separate projects, their estimates should be more
precise. And in the future these estimates may assist in arranging the selection
between projects for financing one of them at the expense of funds gained from the
forward sale of the GHG emissions quotas.
28
Analysis of the institutional aspects in GHG emissions management and
construction of the project line (projects assigned to GHG emissions reduction)
Considering Uzbekistan's developed procedures of interaction between the
governmental authorities, it is necessary to elaborate an Action Plan on strengthening
the governmental management of GHG emissions. Creation of a minimum set of
elements required for successful participation of the country in the flexible
mechanisms under the KP should be the result of implementing this Action Plan.
To construct the project line, it is necessary to consider the financial institutions and,
first of all, the Republican Ecological Fund.
A.4. Potential risks and their minimization
There are available two principal approaches of the risk minimization:
The undertaking of only realistic commitments based upon the outcomes of
reliable analysis;
Creation of an effective mechanism for GHG emissions management including
the mechanism of reinvesting the funds, attracted in consequence of Uzbekistan's
participation in the flexible mechanisms under the KP, into the projects assigned
to GHG emissions reduction.
To ensure this, it is appropriate to develop the National Strategy for GHG emissions
management and participation in the flexible mechanisms under the KP, and to submit
it for approval to the President of the Republic.
C:\gal\463 Golub Development of the Third Way Concept.doc
29
USAID
AN EXAMPLE OF CALCULATING THE GREENHOUSE
GAS EMISSIONS BUDGET FOR UZBEKISTAN
Prepared by:
Alexander Golub
May 2000
Prepared for:
Central Asia Mission
U.S. Agency for International Development
Environmental Policy and Institutional Strengthening Indefinite Quantity Contract (EPIQ)
Partners: International Resources Group, Winrock International, and Harvard Institute for International
Development
Subcontractors: PADCO; Management Systems International; and Development Alternatives, Inc.
Collaborating Institutions: Center for Naval Analysis Corporation; Conservation International;
KBN Engineering and Applied Sciences, Inc.; Keller-Bliesner Engineering; Resource Management International,
Inc.; Tellus Institute; Urban Institute; and World Resources Institute.
Task Order No. 813
Contract No. PCE-I-00-96-00002-00
AN EXAMPLE OF CALCULATING THE GREENHOUSE
GAS EMISSIONS BUDGET FOR UZBEKISTAN
Prepared by:
Alexander Golub
May 2000
Prepared for:
Central Asia Mission
U.S. Agency for International Development
Environmental Policy and Institutional Strengthening Indefinite Quantity Contract (EPIQ)
Partners: International Resources Group, Winrock International, and Harvard Institute for International Development
Subcontractors: PADCO; Management Systems International; and Development Alternatives, Inc.
Collaborating Institutions: Center for Naval Analysis Corporation; Conservation International;
KBN Engineering and Applied Sciences, Inc.; Keller-Bliesner Engineering; Resource Management International, Inc.;
Tellus Institute; Urban Institute: and World Resources Institute.
2
The objective of this document is to propose preliminary estimates of the
emissions budget for Uzbekistan as a country that has expressed its wish to enhance the
degree of its participation in the UN Framework Convention on Climate Change in the
form of choosing the so-called Third Way Concept.
No generally recognized and established procedures for determining such a
budget exist. We suppose that they will be elaborated in the course of negotiations
among the Parties to the Convention with active participation of the countries that have
expressed their desire to follow the Third Way.
In any event, the approaches for establishing the emissions budget should comply
with the fundamental principles that have been previously discussed by the Action
Committee. These principles are as follows:
The emissions budget should be based on comprehensive studies to
substantiate the undertaking of voluntary commitments at a certain level;
Emissions reduction commitments should not put any obstacles in the way
of social and economic development;
When undertaking the commitments, the countries proceed from the
necessity of making their own contribution to ensure ecological benefits for the planet
as a whole;
The undertaking of voluntary commitments of emissions limitations
should give to the country the opportunity to participate in all flexible mechanisms
under the Kyoto Protocol (KP) including emissions trading.
It is supposed that this example of determining the emissions budget may serve as
an illustration of how to implement the indicated principles in concrete figures as well as
the basis for further activity of the Action Committee, with the aim of developing a
formalized attitude of the Action Committee to the problem concerning some approaches
to determine voluntary commitments (emissions budgets).
In the conceptual plan, the estimates provided below are based on the Draft Third
Way Concept of 01.04.2000 prepared by members of Harvard University. As for the data
on GHG emissions in Uzbekistan and the emissions forecast and for information
concerning major indicators of social and economic development, the principal sources
are the First National Communication of the Republic of Uzbekistan, World Bank NSS
and operating materials prepared within the framework of the EPIC Program. It is highly
desirable to expand this information base and, first of all, improve the general economic
information. The invoking of additional information sources will make it possible to
enhance the quality of forecasts and decrease the risks associated with the specified
voluntary commitments (emissions budget).
3
Concept of the Group Third Way and the Integrated Approach for
Establishing the Emissions Budget
In the above-mentioned Draft Concept of 01.04.2000, the fundamental issues of
the Third Way Concept were discussed in detail. The analysis we carried out suggested
that for today the integrated approach for determining the emissions budget to a greater
degree meets the specific character of the New Independent States' (NIS) economies in
transition.
Direct indexation of the emissions budget won't create adequate conditions for
more complete participation of the countries in the flexible mechanisms under the KP.
Thus it is proposed to consider a new, so-called integrated, approach that provides for
establishing the constant and variable components of the emissions budget.
With regard to the specific features of economies in transition, some aspects
might be noted that should be taken into consideration when setting the emissions budget
for the "new countries".
Following are some features of the period characterizing an economy in
transition:
Uncertainty of forecasting GDP dynamics and its pattern.
Uncertainty of the pace and extent of technological renovation.
Underdevelopment of the capital market.
Poor development of market incentives.
High discount rate (and, as a consequence, predominance of short-term
motivation).
Low rate of the internalization of externalities.
From the standpoint of realizing a long-term program on GHG emissions
reduction, it is essential to establish the emissions budget as quickly as possible and to
commence implementing the investment projects on emissions reduction as soon as
possible. To do this requires sale on a forward or option basis some part of the emissions
quota and to create a financial mechanism for reinvesting the funds gained.
It is our opinion that the Third Way Group could make the following proposal: to
divide the emissions budget into two parts. The first part of it the country should receive
immediately. Its determination should be based on the "low" GDP forecast, and the
country will receive the second part within several years when the GDP real dynamics
will be estimated.
4
The first part is constant and the second is variable. To gain greater insight into
the idea of the integrated approach, one should refer to Figure 2. Curve 1 corresponds to
the GHG emissions forecast at the higher rate of the GDP growth and when the country
chooses the resource-intensive path of development. Curve 2 fits the GHG emissions
forecast at the high rate of the GDP growth but when the country chooses the resources-
saving path of development. If it is known that the development will follow the "high"
scenario, the emissions budget could be set at Curve 2 level (Fig. 1). The aggregate
emissions budget would be equal to the total of the areas
S4 + S3 + S2.
Curve 3 corresponds to the GHG emissions forecast at the "low" scenario of GDP
growth and at the resource-intensive way of development, and Curve 4 - at the resources-
saving path of development.
Provided it is known that the development will follow the "low" scenario, the
emissions budget should be set at the level of Curve 4 (it would be equal to the area S4).
Thus, the emissions budget is confined between Curves 2 and 4 (Fig. 1). The constant
part S4 may be separated from the budget and fixed at the very beginning without its
revision thereafter. In addition, the interval may be set where the variable part S3 + S2
will be confined, and the rules should be specified whereby the emissions budget will be
indexed within the variable part. The country will receive it several years prior to the
commencement of the first budget period. Its value can't exceed S3 + S2. The part S3 +
S2 that the country will receive shall be related to the economic index that in the lowest
degree depends upon the country's efforts in GHG emissions reduction prior to the
beginning of the first budget period. For example, there may be proposed average annual
rates of the GDP growth.
By way of illustration let us consider that the "low" scenario of GDP implies a
GDP average annual growth of 3% and the "high" scenario - 6%. In case the GDP
growth rates are lower, for example, 4 % per year, the additional emissions budget will
represent (S3 + S2)/3.
Estimating the Value of the Integrated Emissions Budget for Uzbekistan
(Preliminary Estimates)
First we will describe the formal algorithm on constructing the integrated budget,
and then we will apply it for constructing the emissions budget of Uzbekistan.
Algorithm for Constructing the Integrated Budget
Step 1
Determining the corridor that involves the emissions budget.
5
The maximum and minimum forecasts for GHG emissions should be taken to
determine this corridor. As we specified it earlier in the process of analysis of GHG
emissions dynamics in the countries with economies in transition, there are several major
factors that determine the emissions dynamics. They are as follows:
GDP dynamics;
GDP pattern;
Rates of technical renewal;
Energy balance structure and its dynamics.
In case there is a top-down macroeconomic model adjusted to the determining of
the GHG emissions, the most precise estimates of the corridor may be obtained on its
basis. If such model is not available, a certain simplified procedure may be proposed.
Step 1.1
Determining the interval that may involve the specified parameters.
The interval shall be determined for the GDP wherein the growth rates may be,
for example, from 2.5 to 5%. Specialists in the area of macroeconomics may readily
identify such an interval.
It is important to know the share of the energy sector for the GDP structure. The
respective specialists may make the required estimates.
The rates of technical renovation may be given as the share of new technologies
or in the form of GHG specific emissions indicator per GDP unit.
The shares of diverse types of fuel give the energy balance structure.
Step 1.2
Determining the best and worst combination of parameters.
To get the upper boundary of the corridor, it is essential to consider the highest
rates of the GDP growth, to use the most energy-intensive structure, low rates of
technological advance and the least favorable energy balance structure. To get the lower
boundary of the corridor, everything should be done vice versa.
In actual practice such combinations are almost impossible. One of the reasons is
the fact that at the higher rates of GDP growth there are more resources for developing
new technologies, and positive changes in the GDP structure are more likely. As a
consequence, the upper boundary of the corridor will be overestimated and the lower one
- underestimated. It will be necessary to narrow the corridor.
Step 2
Narrowing the corridor.
6
To narrow the corridor, it is necessary to develop the likely scenarios for
combination of major economic parameters that influence on the GHG emissions
dynamics.
It is best to do this on the basis of the model. If such model is not available, the
scenarios may be chosen by the Delphi method.
Step 3
A probability of the "outlet" of real emissions outside the limits of the corridor
should be determined at this stage.
Step 4
Determining the country's own contribution to GHG emissions reduction.
On the basis of the model it is possible to distinguish no-regret & low-cost
measures. The result of their use may be considered the country's own contribution to
GHG emissions reduction. The countries with economies in transition should address
this problem with great caution and take into account all existing barriers while
implementing similar projects. As a result, estimation of the country's contribution to
GHG emissions reduction may appear to be lower than the aggregate outcome of
applying the no-regret & low-costs actions.
In case the estimate of the emissions reduction potential is made on the basis of a
bottom-up approach, the potential turns out to be obviously overestimated. Ultimately,
the realistic value of the country's contribution to GHG emissions reduction should be
determined, and the upper boundary of the "narrow corridor" should be adjusted on this
basis.
One more approach may be proposed for determining the value of the country's
own contribution to GHG emissions reduction. For example, if it is known that at the
costs K the emissions reduction Q may be achieved, and it is also known that the price of
one GHG ton on the carbon market is P, then the value of the country's own contribution
in the GHG emissions reduction q may be determined by the formula q = Q - K/P.
To put it differently, the sources attracted from the sale of the unused quota (Q -
q) should be sufficient for financing the actions on GHG emissions reduction in the
volume Q covering both of the country's own contribution q and the reductions
corresponding to the sold part of the quota Q - q.
Step 5
Determining the constant part of the emissions budget.
The lower boundary of the "narrow" corridor is taken as the constant part of the
emissions budget.
7
Step 6
Determining the boundaries of the variable (indexed) part of the emissions
budget.
The variable (indexed) part of the budget is within the limits from the zero to the
difference between the adjusted upper boundary of the corridor and the constant part of
the budget.
Step 7
Indexation of the variable part of the budget.
Indexation of the variable part of the budget may be carried out in 2005, three
years prior to the commitments on the emissions reduction coming into force. The
indexation should be made in conformity with the procedures stipulated. The indexation
procedure should be transparent. Once the indexation has been done, the emissions
budget should not be adjusted any more.
It is feasible to choose the factor that influences the GHG emissions most of all as
the indicator on the basis of which the indexation is being carried out. For the countries
with economies in transition the GDP should be selected as such an indicator.
The Integrated Budget for Uzbekistan
The estimates presented below have only an illustrative character.
Step 1
Determining the corridor that involves the emissions budget.
The wide corridor for the first budget period 2008-2012 may be determined
within the limits from 550 to 700 million tCO2. Therewith, the data available will enable
to take into account only the possible fluctuations of the GDP.
Step 2
Narrowing the corridor.
Considering the most probable scattering in the GDP values, the corridor may be
narrowed up to 575-675 million t.
Step 3
There is insufficient information available for the sensitivity analysis.
Step 4
Determining the country's own contribution to GHG emissions reduction.
8
According to the conservative estimates, the country's own contribution may be
determined as 5 million tCO₂ annually or 25 million t over the first budget period. Thus,
the adjusted upper boundary of the corridor may amount to 650 million t.
Step 5
Determining the constant part of the emissions budget.
The volume of 575 million t is taken as the constant part of the emissions budget.
Step 6
Determining the boundaries of the variable (indexed) part of the budget.
The variable part of the budget constitutes 75 million t.
Step 7
Indexation.
The GDP is chosen as the parameter by which the indexation is being carried out
since (as in all the NIS countries) GHG emissions are most sensitive to this indicator.
Average rates of GDP growth over the period 2000-2005 shall be determined.
Should they be less than 3%, the indexation coefficient is taken to be equal to zero. If
they are 5% and more, the coefficient is equal to 1. If they make up X% between 3 and
5%, the indexation coefficient shall be determined by the formula K = (X - 3)/2.
The variable part of the budget of 75 million t shall be multiplied by the
indexation coefficient. The result gained should be added to the constant part of the
budget.
9
GHG emissions
1
$1
2
3
S2
S3
4
S4
2000
2008
2012 Years
Figure 1
10
1
S1
2
S2
&
4
S4
2000
2008
2012 Years
Figure 2
11