International Environment: Experts' Observations on Enhancing Compliance
With a Climate Change Agreement (Letter Report, 08/23/1999,
GAO/RCED-99-248).

Pursuant to a congressional request, GAO identified issues that could
enhance compliance with the Kyoto Protocol or any climate change
agreement, focusing on the: (1) clarity of the protocol's goals and
procedures; (2) use of incentives that encourage compliance to
supplement punitive measures to punish noncompliance; and (3) role of
environmental and industry groups.

GAO noted that: (1) three features could enhance compliance with the
provisions being negotiated for the Kyoto Protocol on reporting
greenhouse gas emissions, monitoring emissions and verifying compliance
with emissions limits, and enforcing the protocol's requirements; (2)
while the protocol specifies country-by-country emissions limits, it is
not clear how these limits fit into the long-term objective of
stabilizing the concentration of greenhouse gases in the atmosphere; (3)
clear reporting requirements will help ensure that the data collected on
emissions are accurate and comparable; (4) clearly defined processes for
monitoring nations' progress toward their goals and for taking action
against those that do not comply will help ensure that the monitoring
and enforcement processes are perceived as equitable and, ultimately,
make them more effective; (5) international environmental agreements
have tended to use enforcement provisions infrequently or ineffectively;
(6) recent experience with agreements such as the Montreal Protocol on
Substances That Deplete the Ozone Layer suggests that supplementing
enforcement penalties with incentives can help ensure that nations
comply with an agreement's requirements; (7) the panelists discussed
three types of incentives that could be incorporated into the Kyoto
Protocol's provisions: (a) the protocol's requirements must be binding,
but different reporting requirements may be appropriate for different
nations; (b) because the signatory nations vary widely in terms of the
resources they have available to implement the protocol's requirements,
some nations may need technical or financial help to design and
implement reporting systems; and (c) because the ability to buy and sell
emissions allowances is an incentive for nations to participate, the
protocol needs to specify how the risks involved with an international
emissions trading system will be allocated; (8) traditionally, official
recognition (standing) for the purpose of monitoring compliance with
international agreements has been provided only to the authorized
delegates of the nations that are parties to the agreement; (9)
environmental and industry groups traditionally lack standing under
these agreements; and (10) such entities may have data on certain
greenhouse gas emissions that could be used to help verify the data that
nations report, and they may have resources that could assist in the
monitoring of compliance.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED-99-248
     TITLE:  International Environment: Experts' Observations on
	     Enhancing Compliance With a Climate Change Agreement
      DATE:  08/23/1999
   SUBJECT:  Reporting requirements
	     Environmental monitoring
	     International cooperation
	     Hazardous substances
	     Air pollution control
	     Data integrity
	     Environmental policies
	     International agreements
	     Sanctions
IDENTIFIER:  United Nations Framework Convention on Climate Change
	     Kyoto Protocol
	     Montreal Protocol on Substances That Deplete the Ozone
	     Layer

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Cover
================================================================ COVER

Report to the Ranking Minority Member, Committee on Commerce, House
of Representatives

August 1999

INTERNATIONAL ENVIRONMENT -
EXPERTS' OBSERVATIONS ON ENHANCING
COMPLIANCE WITH A CLIMATE CHANGE
AGREEMENT

GAO/RCED-99-248

Climate Change Agreement

(160455)

Abbreviations
=============================================================== ABBREV

  CITES - Convention on International Trade in Endangered Species of
     Wild Fauna and Flora
  CRS - Congressional Research Service

Letter
=============================================================== LETTER

B-283174

August 23, 1999

The Honorable John D.  Dingell
Ranking Minority Member
Committee on Commerce
House of Representatives

Dear Mr.  Dingell: 

In December 1997, the parties to the 1992 United Nations Framework
Convention on Climate Change adopted the Kyoto Protocol.  The
protocol was developed to advance the convention's objective, which
is to stabilize concentrations of human-made greenhouse gases in the
atmosphere.  Under the protocol, developed nations (the United
States, France, Japan, and 35 others) pledged to limit their
emissions of carbon dioxide and other greenhouse gases for the period
2008 through 2012.  If the U.S.  Senate approves the protocol, the
United States would be required to significantly reduce its
greenhouse gas emissions. 

Ratification has been the subject of much debate.  Two main concerns
are the costs of complying with the protocol and the possibility that
U.S.  businesses that invest in reducing their emissions might have
to raise the prices of their goods, making them less competitive with
goods produced by nations that do not limit their emissions.  To
date, many of the protocol's key provisions have not been decided and
are to be worked out in upcoming meetings among the nations that are
parties to the Framework Convention on Climate Change and that
negotiated the protocol.  In that regard, during meetings in November
1998, these nations developed an action plan, with a deadline of
year-end 2000, for adopting the rules and procedures for compliance,
including the consequences of noncompliance. 

Concerned about the effectiveness of the rules and procedures now
being developed, you asked us to identify issues that could enhance
compliance with the protocol or any climate change agreement.  To do
this, we convened a panel of nine experts--representatives from the
federal government, industry, academia, and environmental
organizations.  (See app.  I.) This report reflects the results of
the panel's discussions, but the issues presented were not
necessarily endorsed by all panelists.  The report focuses on three
issues that could influence compliance with the protocol or other
future international environmental treaties on climate change:  (1)
the clarity of the goals and procedures, (2) the use of incentives
that encourage compliance to supplement punitive measures to punish
noncompliance, and (3) the role of environmental and industry groups. 

   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

According to the panelists, three features could enhance compliance
with the provisions being negotiated for the Kyoto Protocol on
reporting greenhouse gas emissions, monitoring emissions and
verifying compliance with emissions limits, and enforcing the
protocol's requirements. 

  -- Clear overall goals and procedures for reporting emissions and
     for monitoring, verifying, and enforcing emissions reductions. 
     While the protocol specifies country-by-country emissions
     limits, it is not clear how these limits fit into the long-term
     objective of stabilizing the concentration of greenhouse gases
     in the atmosphere.  Defining this long-term objective for the
     concentration levels would help build support for the specific
     actions needed to ensure that nations meet their limits. 
     Similarly, the procedures for implementing the protocol must be
     clear.  Clear reporting requirements, for instance, will help
     ensure that the data collected on emissions are accurate and
     comparable.  Clearly defined processes for monitoring nations'
     progress toward their goals and for taking action against those
     that do not comply will help ensure that the monitoring and
     enforcement processes are perceived as equitable and,
     ultimately, make them more effective. 

  -- Incentives that encourage nations to comply with the protocol's
     requirements.  International environmental agreements have
     tended to use enforcement provisions infrequently or
     ineffectively.  Recent experience with agreements such as the
     Montreal Protocol on Substances That Deplete the Ozone Layer
     suggests that supplementing enforcement penalties with
     incentives can help ensure that nations comply with an
     agreement's requirements.  The panelists discussed three types
     of incentives that could be incorporated into the Kyoto
     Protocol's provisions: 

(1) The protocol's requirements must be binding, but different
reporting requirements may be appropriate for different nations,
depending on, among other things, their levels of greenhouse gas
emissions.  For example, a nation that produces relatively low
emissions could be held to a less demanding standard of reporting
than a nation that produces relatively high emissions. 

(2) Because the signatory nations vary widely in terms of the
resources they have available to implement the protocol's
requirements, some nations may need technical or financial help to
design and implement reporting systems. 

(3) Because the ability to buy and sell emissions allowances is an
incentive for nations to participate, the protocol needs to specify
how the risks involved with an international emissions trading system
will be allocated (that is, assigning liabilitywhether to the seller
or the buyerif a nation sells allowances that it is not entitled to
sell). 

  -- A mechanism to recognize environmental organizations, industry
     groups, and others involved in making the protocol work. 
     Traditionally, official recognition (standing) for the purpose
     of monitoring compliance with international agreements has been
     provided only to the authorized delegates of the nations that
     are parties to the agreement.  Thus, environmental and industry
     groups traditionally lack standing under these agreements. 
     However, such entities may have data on certain greenhouse gas
     emissions that could be used to help verify the data that
     nations report, and they may have resources that could assist in
     the monitoring of compliance.  Recently, these entities have
     been given monitoring responsibilities under treaties such as
     the Convention on International Trade in Endangered Species of
     Wild Fauna and Floracommonly referred to as CITESwhich deals
     with protecting wildlife.  Establishing a means to allow such
     entities to present information under the protocol could help
     strengthen reporting and compliance. 

   BACKGROUND
------------------------------------------------------------ Letter :2

The increased understanding of our environment and the recognition
that environmental problems do not stop at national boundaries have
resulted in global concern about the future of our planet and an
increasing number of international agreements to address those
concerns.  There are currently more than 900 international
environmental agreements.\1

Human activities, primarily those involving emissions from the
production and use of energy, are increasing the concentrations of
carbon dioxide and other greenhouse gases in the atmosphere. 
Greenhouse gases include carbon dioxide (mainly from burning coal,
oil, and natural gas); methane and nitrous oxide (due to agriculture
and changes in land use); and hydrofluorocarbons, perfluorocarbons,
and sulfur hexafluoride (manufactured by industry).  These gases trap
heat in the atmosphere and are believed to contribute to global
warming, which could lead to future climatic changes. 

The United Nations Framework Convention on Climate Change (Framework
Convention) was signed by 155 nations, including the United States,
in 1992.  The Framework Convention's objective was to stabilize
concentrations of greenhouse gases in the atmosphere at a level that
would prevent dangerous anthropogenic (human-made) interference with
the climate system.  Under the Framework Convention, both developed
and developing nations agreed, for example, to report on their
greenhouse gas emissions.  In addition to the general provisions
agreed to by all nations, developed nations agreed to report on their
policies and measures with the aim of returning their greenhouse gas
emissions to 1990 levels by the year 2000.  However, this goal was
not binding on the developed nations. 

The Framework Convention entered into force in 1994.  However, by
1995, the parties to the convention, including the United States,
realized that insufficient progress was being made toward its goals
and thus decided to begin negotiations on a follow-up protocol for
the post-2000 era.  In December 1997, the parties reconvened in
Kyoto, Japan, to finalize binding measures to reduce greenhouse gas
emissions.  The resultant Kyoto Protocol to the Framework Convention
established binding emissions limitations or targets for the period
2008 through 2012 for the 38 developed nations referred to as Annex B
nations (because they are listed in that annex to the protocol, see
app.  II).\2 The protocol also laid the groundwork for additional
measures aimed at decreasing greenhouse gas emissions, including
participation in the protocol by developing nations that have no
emissions limits but that are expected to have increasing emissions
as their economies develop. 

The Framework Convention requires all parties to report periodically
to the secretariat of the convention on their greenhouse gas
emissions and on their plans for developing programs to mitigate
climate change and strategies for adapting to the impact of climate
change.  To date, most developed nations that are parties have
reported this information twice.  Developing nations have reported
less often, depending on their circumstances.  The protocol would add
the requirement for Annex B nations to establish national systems for
estimating greenhouse gas emissions using methodologies adopted by
the parties.  In addition, Annex B nations would have to report those
emissions estimates annually. 

One of the Kyoto Protocol's most significant features is the
incorporation of market-based mechanisms designed to make it less
expensive for Annex B nations to meet their required emissions
reductions.  Annex B nations would use the so-called flexibility
mechanisms when the cost of reducing emissions is higher in one
nation than in another, transferring, in effect, greenhouse gas
emissions between nations.  No other international agreement to date
has relied on flexible market mechanisms to the extent called for in
the protocol. 

Among the Kyoto Protocol's flexibility mechanisms are the following: 

  -- Joint implementation allows Annex B nations to transfer to or
     acquire from each other credits for emissions reductions
     associated with projects that reduce emissions.  Thus, one Annex
     B nation may sponsor an emissions reduction project in another
     Annex B nation; in exchange, the sponsoring nation may claim
     some part or all of the emissions reductions resulting from the
     project. 

  -- The Clean Development Mechanism allows Annex B nations to
     sponsor or finance emissions reduction projects in developing
     nations that are parties to the protocol and, in exchange, to
     claim the reduced emissions. 

  -- Under an international emissions trading system, Annex B nations
     would be able to buy and sell allowances to emit greenhouse
     gases.  For some Annex B nations, the cost of taking domestic
     actions to reduce emissions to the target levels will be more
     expensive than in other nations.  In those cases, one Annex B
     nation could increase its target by buying an allowance to emit
     more greenhouse gases from another Annex B nation, thereby
     reducing the first nation's costs of meeting the emissions
     reduction targets.  As a result of this transaction, both
     parties would adjust their net target levelsthat of the buyer
     would be increased, while that of the seller would be decreased. 
     Nations likely to have excess emissions allowances to sell are
     those with economies in transition to market economies, such as
     the nations of the former Soviet Union.  This is because their
     emissions are substantially lower than their targets. 

Annex B nations vary in the extent to which they expect to rely on
the flexibility mechanisms.  The European Union's position is to
limit the amount of emissions reductions to be achieved through joint
implementation, the Clean Development Mechanism, and international
emissions trading.  The United States, however, opposes quantitative
limits on use of the mechanisms. 

All of the flexibility mechanisms require some further clarification
by the nations that are parties to the agreement (party nations). 
How the mechanisms are clarified will influence the implementation
of, and compliance with, the obligations of the protocol. 
Clarification of the mechanisms will be particularly difficult since
the mechanisms have little, if any, precedent in international law. 

Other important issues that were not addressed at Kyoto include the
role of developing nations and the procedures for determining, and
the consequences for, noncompliance.  Negotiations are continuing on
these issues, and the parties have set a deadline for resolving them
by the sixth Conference of the Parties, currently scheduled for
year-end 2000.  The Kyoto Protocol, initially adopted by all of the
parties to the Framework Convention, was open for signature until
mid-March 1999.  As of that deadline, 84 nations, including the
United States, had signed, thereby affirming their commitment to work
toward the protocol's goals.  After signing such an agreement, the
nations must also ratify it for it to enter into force.  As of July
1, 1999, 12 nationsall developing nations that are not subject to
emissions limitations and many of which are small island nations that
might be threatened by climate changehave ratified the protocol. 
Appendix III lists the nations that have signed the protocol and
highlights those that have ratified it.  U.S.  ratification of the
Kyoto Protocol, which requires the advice and consent of the Senate,
is uncertain at this time. 

Estimates of the economic impact of achieving the emissions
reductions set for the United States vary greatly; however, all agree
that some increase in energy prices and some decrease in gross
domestic product will result.  U.S.  business interests are
particularly concerned because they expect higher energy prices to
increase their costs of production.  Because developing nations do
not face emissions limits and comparable energy price increases, U.S. 
businesses are concerned that their products will become relatively
more expensive thanand thereby less competitive withthose of
developing nations.  Examples of U.S.  businesses expected to be most
severely affected include chemical, paper, and electronics
manufacturers. 

--------------------
\1 Edith Brown Weiss, Daniel Barstow Magraw, and Paul C.  Szasz,
International Environmental Law:  Basic Instruments and References, 2
vols.  (Ardsley, N.Y.:  Transnational Publishers, Inc.; vol.  1,
1992; vol.  2, in press). 

\2 While the Kyoto Protocol specifies that the emissions reductions
are binding, the parties have yet to specify the consequences of not
reaching the reduction targets.  Those provisions are scheduled to be
complete by year-end 2000. 

   SPECIFICATION OF OVERALL GOALS
   AND PROCEDURES FOR REPORTING,
   MONITORING, AND ENFORCEMENT
   COULD ENHANCE COMPLIANCE
------------------------------------------------------------ Letter :3

Ambiguity of goals and procedures has been recognized as an obstacle
in the implementation of many international environmental agreements. 
Experience has shown that when goals and procedures are not clearly
stated in an agreement, implementation is often either delayed or
prevented until the parties resolve their differences in
interpretation.  According to some experts, this ambiguity occurs
because of the need to obtain consensus during the negotiating
process; the more specific the language, the more difficult it is for
all parties to agree.  Studies have also indicated, however, that as
the economic costs of implementing an agreement increase, the parties
generally insist that the agreement include specific mechanisms that
will ensure that all parties are implementing the terms of the
agreement.  These mechanisms can include requirements for the
periodic reporting of information on each party's implementation of
the agreement and monitoring or enforcement procedures. 

With respect to the Kyoto Protocol, some of the panelists indicated
that its long-term goals and the procedures for implementing its
provisions need to be specified.  This specificity is important so
that the parties to the agreement, who must decide whether to ratify
it, and the businesses and environmental organizations that will play
important roles in implementing it, can have confidence that the
agreement is equitable and that all parties will contribute to
attaining its goals.  The panelists generally agreed that
transparencythat is, reporting accurate information about each
nation's greenhouse gas emissions, making clear the methodologies
used to collect and report the information, and disseminating that
information to all parties who have an interestis one important
element needed to obtain the necessary level of confidence and
assurance. 

      THE LONG-TERM GOAL FOR
      GREENHOUSE GAS
      CONCENTRATIONS NEEDS TO BE
      ESTABLISHED
---------------------------------------------------------- Letter :3.1

Under the Kyoto Protocol, the 38 Annex B nations agreed to either
limit or reduce their greenhouse gas emissions during the period 2008
through 2012.  It is reasonably certain that the greenhouse gas
limitations accepted by these nations would result in lower emissions
and lower greenhouse gas concentrations than would have occurred
without the agreement.  However, the agreement will not necessarily
result in a net reduction in worldwide emissions of greenhouse gases
because emissions by non-Annex B nations are projected to continue to
increase, more than offsetting the reductions by Annex B nations. 
For this reason, atmospheric concentrations will continue to rise. 
Stabilization of atmospheric concentrations of greenhouse gases would
require additional reductions by either Annex B or non-Annex B
nations, or both. 

A concern expressed during the panel discussions was that without
establishment of a long-term goal, such as a specific target for the
concentration of carbon dioxide in the atmosphere, the extent of
future reductions that will be needed is unclear.  One panelist said,
for example, that businesses and developing nations are concerned
that the agreement does not specify explicit goals for the longer
term.  (The Kyoto Protocol only specifies emissions limits for the
period 2008 through 2012.) Without long-term goals, the emissions
reports required by the protocol could simply become the basis for
requiring further emissions reductions, he said.  The panelist also
stated that specific goals would allow not only the parties but also
businesses, which will largely be responsible for reducing emissions,
to better assess their role in the agreement. 

      THE PROCEDURES FOR
      IMPLEMENTING THE PROTOCOL
      NEED TO BE ESTABLISHED
---------------------------------------------------------- Letter :3.2

The collection, analysis, and dissemination of accurate information
on greenhouse gas emissions are crucial to determining compliance
with the protocol's requirements.  In this respect, the panelists
discussed the quantity and quality of data being reported under
existing international environmental agreements.  One panelist who
has studied this issue indicated that, in general, the problem of
party nations either submitting incomplete reports or not reporting
at all appears to be diminishing.  This panelist referred to the
apparent success of the Montreal Protocol on Substances That Deplete
the Ozone Layer (Montreal Protocol) in improving reporting rates by
making funds available contingent on a party's compliance with the
agreement's reporting requirements.  Several panelists endorsed the
concept of allowing parties to participate in the Kyoto Protocol's
proposed flexibility mechanisms only if they meet the reporting
requirements.  According to one of the panelists familiar with the
negotiations, this is one of the issues being considered by the party
nations, but specific criteria for a nation's eligibility to
participate in the proposed flexibility mechanisms have not yet been
determined. 

According to a panelist who has studied reporting under international
agreements, although the quantity of information being reported under
other international environmental agreements is improving, little is
known about the quality of the underlying data because independent
checks on data sources and the information contained in the reports
that the nations submit are rare.  The issue of state
sovereigntynations' resisting oversight of their activities within
their own borders by outside organizations or by other nationshas
precluded extensive reviews of the quality of reported data and has
resulted, for the most part, in acceptance of the information that
nations report.  The Kyoto Protocol does provide for the outside
review of annual inventories of emissions submitted by the Annex B
nations.  These reviews would be done by teams selected from experts
nominated by the party nations and intergovernmental organizations
such as the Organization for Economic Cooperation and Development and
the International Energy Agency. 

However, under the protocol, the review teams would examine only
Annex B nations' information; the protocol does not provide for these
teams to review information on compliance submitted by parties other
than the Annex B nations.  In addition, guidelines or procedures that
clarify the review teams' authority and responsibility have not been
developed.  For example, whether the teams will have the authority to
conduct on-site inspections and whether they can consider information
provided by third parties such as environmental organizations has not
been specified. 

The signatories also have not decided which, if any, aspects of
compliance the review teams will be allowed to determine or the
criteria they may use.  As one panelist explained, determining a
nation's actual emissions is a factual issue, but interpreting the
agreement's obligations is a legal issue.  For example, determining
the number of trees a nation planted or the methodologies used in
estimating emissions removed by those trees is a factual issue, but
determining whether the trees qualify as afforestation or
reforestation (essentially planting trees on open land or new trees
on previously forested land) under the agreement is a legal issue.\3

Providing the review teams with the authority to conduct on-site
monitoring or to make legal interpretations would require the party
nations to relinquish some of their sovereign authority, and
obtaining agreement on such provisions could be difficult.  Some
panelists questioned, for example, whether the United States would
accept on-site monitoring of emissions by an international body.  One
panelist pointed out that the protocol refers specifically to a
nation's emissions estimates rather than to actual emissions and
therefore does not imply the need for the monitoring of actual
emissions.  Instead, the parties would establish guidelines for
estimating emissions, and the review teams would examine the
procedures that a nation followed in developing its estimates. 

In addition to these specific procedures related to reporting and
monitoring, specific enforcement procedures also need to be
established, according to the panelists.  Although the Kyoto Protocol
established a framework and some requirements for monitoring and
reporting, the agreement contains at this time only a general
statement that the protocol would include procedures for determining
and addressing noncompliance.  According to a panelist familiar with
the protocol negotiations, the lack of enforcement procedures was due
more to the time constraints of the negotiations than to substantive
disagreements over the issues.  One issue that is being negotiated is
whether the consequences for noncompliance will be specifically
stated in the protocol or whether a process or group will be
established for determining the consequences of noncompliance on a
case-by-case basis.  Another issue is whether the consequences of
noncompliance will be discretionary or automatic.  For example, one
panelist asked whether, if a party does not comply with the reporting
requirements, should it be automatically penalizedfor example,
prevented from participating in emissions tradingor should some body
be granted discretion to decide what the consequences should be.  If
the consequences are automatic, then there is a risk that a nation
could be severely penalized for a relatively minor infraction, such
as submitting a report 2 days late.  However, business interests are
concerned that a discretionary body may not act consistently or
equitably on noncompliance. 

In addition to the establishment of procedures for enforcement,
substantive procedures and rules are also needed for the flexibility
mechanisms, which the signatory nations are developing.  Panelists
mentioned other areas for which additional procedures or guidance
could be beneficial.  For example, one panelist suggested the
development of a quality assurance system that would require parties
to verify and cross-check the data in their own inventories.  To
support the flexibility mechanisms, another panelist suggested an
expedited monitoring procedure that would allow the private sector to
make more focused and quick evaluations than the review teams'
comprehensive efforts could produce. 

--------------------
\3 The levels of greenhouse gases in the atmosphere are determined by
the difference between the processes that generate the gases and the
processes that destroy or remove them.  Forests are an agent for
removing (sequestering) greenhouse gases.  The Kyoto Protocol allows
nations to use afforestation and reforestation to offset their
emissions. 

   FEATURES OTHER THAN PENALTIES
   MAY RESULT IN BETTER COMPLIANCE
------------------------------------------------------------ Letter :4

Historically, few international environmental treaties have used
enforcement provisions effectively.  Recent experience, such as with
the Montreal Protocol, suggests that using economic or other
incentives to supplement enforcement penalties can help ensure that
nations comply with an agreement's requirements.  The panelists
discussed various examples of features for encouraging compliance
that could be incorporated into an environmental agreement on climate
change such as the Kyoto Protocol. 

      ENFORCEMENT PROVISIONS HAVE
      NOT BEEN EFFECTIVE AT
      ENSURING COMPLIANCE
---------------------------------------------------------- Letter :4.1

In the past, the effectiveness of international environmental
agreements' enforcement provisions has been limited for a number of
reasons.  An agreement may not specify enforcement procedures, may
allow party nations to exempt themselves from enforcement, or may be
so limited in scope that the environmental problem is not effectively
addressed. 

For example, the Northwest Atlantic Fisheries Convention, which
applies to all waters of the northwest Atlantic Ocean, has the
authority to establish and allocate fishing quotas for all convention
members.  The convention's Fisheries Commission, which is the body
responsible for managing the convention's resources, can adopt
proposals for the enforcement of the convention's rules.  However,
the commission has jurisdiction only in the area that is beyond the
200-mile off-shore economic zone each coastal nation controls; thus,
the commission has no jurisdiction over some of the most productive
fishing areas.  In addition, the convention allows any member of the
agreement to exempt itself from any enforcement proposal from the
commission by lodging an objection. 

Enforcement provisions have also tended to be ineffective because
there often is no meaningful or practical enforcement mechanism.  The
secretariats established by the agreements may not have enforcement
authority, or if they have the authority, they do not have the
resources or the international jurisdiction that would be needed to
carry out enforcement activities.  Furthermore, no centralized
regulatory body has jurisdiction or enforcement authority for
international environmental agreements.  As a result, the
effectiveness of international environmental agreements has depended
almost entirely on voluntary compliance. 

      SUPPLEMENTING ENFORCEMENT
      WITH INCENTIVE FEATURES MAY
      IMPROVE COMPLIANCE
---------------------------------------------------------- Letter :4.2

Rather than relying exclusively on penalties to discourage
noncompliance, the protocol might be more effective if it included
incentives to encourage compliance, some of the panelists suggested. 
Three of the incentives that the panelists discussed include

  -- tailoring the protocol's requirements for reporting emissions so
     that they are appropriate for different nations, depending on
     their level of greenhouse gas emissions, among other things;

  -- providing technical or financial help for nations with
     insufficient resources; and

  -- specifying how the liabilities for noncompliance involved in an
     international emissions trading system should be assigned. 

         NATIONS WITH HIGHER
         EMISSIONS SHOULD MEET
         MORE RIGOROUS
         REQUIREMENTS
-------------------------------------------------------- Letter :4.2.1

Although all parties are required to report periodically on their
greenhouse gas emissions, under the Kyoto Protocol, only Annex B
nations are required to report annually on their emissions.  That
could change, however.  According to some of the panelists, the
implementation of the flexibility mechanisms could require more
frequent or more specific reporting (for example, project-based
reporting) on emissions by the non-Annex B parties that participate
in the mechanisms.  The panelists discussed the need for standardized
reporting by all nations, the difficulty that some nations will have
in meeting standardized requirements, and a two-tier reporting system
as a means of encouraging all nations to report the necessary data. 

The panelists generally agreed that it is important that all parties
report on their emissions in a standardized format so that it can be
readily determined whether the Annex B nations are in compliance with
the protocol's requirements.  Standardization is important for other
reasons as well.  For example, one panelist noted that standardized
requirements that do not change frequently would help to ensure a
higher quality of reported data.  As nations gain experience with the
methodologies for collecting and reporting data and build the
infrastructure they need to collect and report data, the quality of
their data tends to improve and they can become better at targeting
their efforts to reduce emissions.  Another panelist noted that
consistent, standardized data are needed to assure businesses that
they will be given credit for the activities that they undertake to
reduce emissions. 

The panelists acknowledged that standardized reporting could be
difficult because of the widely varying resources, experience, and
technical capabilities of the nations.  Under the Kyoto Protocol,
both developed and developing nationswhich have the least resources,
experience, and technical capabilitieswill be required to report on
emissions.  Experience with the Framework Convention has shown that
Annex B nations, which are mostly industrialized and developed
nations and theoretically are in the best position to comply, have
varied in their ability to meet that agreement's basic reporting
requirements and have often fallen short of complying. 

Because a relatively few nations account for a large proportion of
the world's greenhouse gas emissions, according to some of the
panelists, it is more important to know whether the nations that emit
the most greenhouse gases are reporting accurately rather than
whether all party nations are doing so.  For example, 20 nations
accounted for about 80 percent of worldwide carbon dioxide emissions
in 1997.  The top 20 include Annex B nationssuch as the United
States, the Russian Federation, and Japanand developing nationssuch
as China, India, and South Korea.  (See app.  IV for the complete top
20 list.)

Bearing in mind the differences both in nations' greenhouse gas
emissions and in their ability to report on their activities to limit
emissions, several of the panelists suggested establishing two levels
of requirements.  According to one panelist, the World Trade
Organization's Trade Policy Review Mechanism is an example of an
international agreement that does thisthe mechanism requires large
trading nations to undergo more frequent reviews than small ones. 
Under the protocol, the first level of requirements would call for
detailed, standardized information on emissions and activities to
reduce emissions.  The nations that emit the most greenhouse gases
would be required to comply with these requirements, thereby
furnishing extensive information for analyzing most of the world's
emissions. 

The second level of requirements would call for data containing
common elements needed for good quality reports, but the requirements
would be less extensive.  The panelists implied that this would be
the minimum needed to assure businesses that investments they make to
reduce emissions would be acknowledged and to assure signatory
nations that other signatory nations are meeting their obligations
under the agreement.  The second level might also require less
frequent reporting.  Because of the second level of requirements'
limited nature, meeting them would be less costly and less difficult. 
This is particularly important to nations with small or resource-poor
environmental ministries, according to one panelist.  Nations that
emit relatively small amounts of greenhouse gases would be required
to comply with the less extensive requirements and therefore would
have an incentive to comply with them.  The panelists did not further
specify the requirements that should be included in each level. 

         TECHNICAL OR FINANCIAL
         HELP FOR NATIONS WITH
         INSUFFICIENT RESOURCES
-------------------------------------------------------- Letter :4.2.2

As of July 1999, 84 nations had signed the protocol.  The signatories
include nations of many sizes and stages of economic development and
with different levels of experience in reporting on emissions. 
Several panelists expressed concern about the ability of some
developing nations and nations in transition to market economies to
meet their reporting obligations.  They suggested that technical or
financial assistance could provide an incentive for those nations to
comply. 

One panelist noted that it is important for businesses that have
emission reduction activities in developing nations to play a role in
facilitating data reporting by those nations.  However, according to
the panelist, businesses are concerned about being overburdened with
costly reporting requirements in nations that may not have adequate
capacity for that function and believe that it is important that the
responsibilityand costsfor establishing reporting systems not be
shifted from the governments onto the businesses that invest in those
nations. 

Other international environmental agreements have successfully
provided financial assistance for developing nations that lacked the
resources or administrative capacity for fulfilling their
obligations.  For example, as mentioned earlier, the Montreal
Protocol provides funds to boost developing nations' activities to
comply with that protocol's provisions.  The fund pays for projects
in developing nations to gather baseline data and build the
administrative capacity to report the data.  According to experts,
this financial assistance has resulted in better self-reporting of
certain data by developing nations. 

According to several panelists, getting developing nations to
participate in international environmental agreements has, to some
degree, required that developed nations pay the additional cost of
data reporting by developing nations.  The Framework Convention
requires developed nations to pay for reporting by developing
nations.  One panelist noted that the data reporting requirements
under a climate change agreement such as the Kyoto Protocol are
likely to be more extensive and difficult, and therefore more
expensive, than for other international environmental agreements. 
They anticipated that the developing nations would need assistance if
they are to participate.  However, according to one panelist, the
developed nations may not be willing to absorb all of the additional
costs for the developing nations. 

One solution is to target financial or technical resources to the
specific needs of each developing nation.  For example, a nation may
give low priority to devoting resources to reporting on emissions
because it faces more urgent problems, such as providing safe
drinking water to its population.  Or a nation may recognize the
importance of compliance but be inexperienced in getting government
ministries to work together administratively.  Both nations lack the
capacity to comply with reporting requirements, but addressing those
capacity issues effectively will require different types of
assistance. 

Another approach would be to encourage nations with similar
conditions and problems to work together when their individual
resources are insufficient.  According to the panelists, some nations
have used this technique effectively for other international
agreements.  For example, officials from Latin American and Asian
nations meet periodically to learn from each others' experiences with
the Montreal Protocol's multilateral fund, focusing on problems they
have encountered and solutions that have been effective. 

         ASSIGNMENT OF RISKS
         WITHIN AN INTERNATIONAL
         EMISSIONS TRADING SYSTEM
-------------------------------------------------------- Letter :4.2.3

The ability to buy and sell emissions allowances provides an
incentive for nations to participate in the protocol.  A nation whose
emissions are less than its limit under the protocol or that can
reduce its emissions at low cost stands to gain financially by
selling part of its emissions allowance.  A nation that finds it
expensive to reduce its emissions to meet its limit under the
protocol may prefer to buy those allowances rather than make the
investments needed to bring down its emissions.  However, if a nation
that sells allowances fails to meet its emissions target level, then
the allowances are not backed by real reductions in emissions. 

According to most of the panelists, for this incentive to be
effective and for an Annex B nation to be willing to participate in
international emissions trading, a nation must have assurance that
the allowances it is buying are valid (that is, that the seller has
not actually exceeded its assigned emissions limit).  Thus, the
allowances can be used to increase the buyer nation's emissions
target.  Which nationthe seller or the buyerwill assume the risk of
ensuring that allowances are valid needs to be specified.  The Kyoto
Protocol does not currently address this issue; however, some
analysts believe that seller liability is implied by the agreement. 

A system of seller liability makes sellers responsible for ensuring
that the allowances they sell are valid.  The seller liability system
relies on effective penalties for noncompliancepenalties that are
large enough to discourage the seller from selling invalid credits. 
Seller liability may not be effective in an international emissions
trading system, however, for two reasons.  First, although the Kyoto
Protocol's penalties for noncompliance remain to be negotiated, as
already discussed, penalties for noncompliance with international
agreements in general are typically weak and difficult to enforce. 
Second, no international regulatory body currently has authority to
carry out enforcement provisions, although the enforcement regime for
the Kyoto Protocol currently being negotiated by the parties may
specify that authority. 

As a result, some panelists have suggested that buyer liability might
be appropriate for this agreement because it relies on price
incentives rather than penalties and enforcement.  If the buyer is
liable for ensuring the validity of the allowances being purchased,
the buyer will weigh the likelihood that the seller will exceed its
emissions limit.  Hence, a buyer will offer a lower price for
allowances whenever the buyer believes that the risk is higher that
the allowances may prove to be invalid.  Sellers will therefore have
an incentive to comply with their emissions limits because their
allowances will then be worth more to buyers. 

However, according to some of the panelists, a system of buyer
liability could be costly and difficult for buyers.  Without a
mechanism to provide basic information on the reliability of sellers,
buyers may have to carry out separate investigations of each seller. 
Such a process could be costly, especially during the early phases of
the agreement's implementation when there is little experience with
evaluating sellers' performance.  In some cases, buyers may not have
the capability to perform these investigations.  One panelist
suggested that some form of insurance might be created to cover some
of the costs and difficulty for buyers.  It was also suggested that
the trading system could include a process for verifying that
allowances are valid before they can be traded. 

   INCREASED INVOLVEMENT IN THE
   PROCESS BY OTHER GROUPS COULD
   IMPROVE COMPLIANCE
------------------------------------------------------------ Letter :5

The Framework Convention has formal mechanisms for groups other than
the parties to the convention to provide input into negotiations. 
Groups that have participated in negotiations for the Kyoto Protocol
include intergovernmental organizationsfor example, the
International Energy Agencyand nongovernmental organizations,
including business representativesfor example, The Nature
Conservancy and the Edison Electric Institute.  Both of these groups
have the knowledge and experience to provide information on possible
policy options, technical feasibility, and the costs and benefits of
implementing agreements. 

Some businesses and environmental organizations carry out emissions
monitoring programs, and some experts believe that the data that they
compile are more reliable than that reported by the signatory
nations.  Procedures for determining how information provided by
groups other than the signatory nations could be included in
determining compliance are being considered by the signatory nations. 
Some of the panelists supported including provisions in the protocol
that would allow these groups to provide input into the protocol's
procedures for determining compliance. 

Data collected by such groups have sometimes been used in
international environmental agreements.  For example, a panelist
noted that under the Convention on International Trade in Endangered
Species of Wild Fauna and Flora (commonly referred to as CITES),
almost all of the major instances of noncompliance have been
identified by environmental organizations working inside the nations
that signed the convention.  Conversely, another panelist cited an
example of businesses obtaining information that showed a country was
not complying with the provisions of the Montreal Protocol; however,
in that case, no action was taken despite attempts by businesses to
provide the information to responsible authorities. 

One panelist pointed out that because most fossil fuels, which are
the primary source of carbon dioxide (the main source of global
warming), are traded in commercial markets, there are many sources of
independent data that could be used under the Kyoto Protocol to
compute estimated emissions.  However, panelists noted that under the
protocol as it now exists, there is no mechanism for gathering or
considering information from groups other than the signatory nations. 
Another panelist suggested the possibility that the review teams
established to review the inventories submitted by the parties could
be given the authority to accept and consider information provided by
other groups such as the environmental organizations. 

   AGENCY COMMENTS
------------------------------------------------------------ Letter :6

We provided a draft of this report to the Secretary of State and the
Administrator of the Environmental Protection Agency for review and
comment.  Neither agency commented on the report.  The panelists from
both agencies reviewed the report and suggested technical
corrections, which we incorporated as appropriate. 

   SCOPE AND METHODOLOGY
------------------------------------------------------------ Letter :7

This report summarizes the discussions of the panel of nine experts
that we convened for one day in Washington, D.C., in December 1998. 
We selected the panelists because of their prominence in the areas of
international environmental agreements and the Kyoto Protocol,
choosing a cross section from the federal government, business,
academia, and environmental organizations.  A knowledgeable senior
analyst from the Congressional Research Service moderated the
panelists' discussions.  The panelists discussed reporting,
monitoring and verification, and enforcement of international
environmental agreements and the historical lessons that could be
applied to an agreement on climate change such as the Kyoto Protocol. 
As a starting point for the discussions, we prepared a summary of
recent literature on those issues.\4 The panelists made many
insightful comments throughout the day; we have included in this
report those that were most prominent during the discussion. 
Profiles of the panelists and moderator are contained in appendix I. 
We performed our work from July 1998 through August 1999. 

--------------------
\4 International Environment:  Literature on the Effectiveness of
International Environmental Agreements (GAO/RCED-99-148, May 1999). 

---------------------------------------------------------- Letter :7.1

As arranged with your office, unless you announce its contents
earlier, we plan no further distribution of this report until 30 days
after the date of this letter.  At that time, we will send copies to
congressional committees with jurisdiction over international
environmental affairs; interested Members of Congress; the Honorable
Madeleine K.  Albright, Secretary of State; the Honorable Carol M. 
Browner, Administrator, Environmental Protection Agency; and other
interested parties.  We will also make copies available to others on
request. 

Should you or your staff need further information, please contact me
or David Marwick at (202) 512-6111.  Key contributors to this
assignment were Karla Springer; William H.  Roach, Jr.; and John A. 
Crossen. 

Sincerely yours,

David G.  Wood
Associate Director, Environmental
 Protection Issues

PROFILES OF THE PARTICIPANTS ON
THE EXPERT PANEL
=========================================================== Appendix I

Ruth Greenspan Bell is the director of the International
Institutional Development and Environmental Assistance Program at
Resources for the Future.  This program is designed to help
governments, nongovernmental organizations, development banks, and
other institutions become more effective in implementing natural
resource management and environmental protection laws and related
international environmental obligations.  Prior to this position, she
was an attorney in the Office of General Counsel at the Environmental
Protection Agency.  She has also designed and coordinated
environmental assistance programs, principally in Central and Eastern
Europe and the countries of the former Soviet Union.  She chairs the
board of the Women's Foreign Policy Group and is a member of the
Council on Foreign Relations. 

Susan Biniaz is an assistant legal adviser in the Bureau of Oceans,
International Environmental and Scientific Affairs, at the Department
of State.  In this capacity, she has been the legal adviser for many
treaty negotiations, including the International Space Station
agreement, the United States-Russian maritime boundary treaty, the
1992 Framework Convention on Climate Change, the Kyoto Protocol on
Climate Change, the United States-Canadian Air Quality Agreement, and
various amendments to the Montreal Ozone Protocol and Basel
Convention on Transboundary Movement of Hazardous Waste.  Prior to
accepting her present position, she was the assistant legal adviser
for European and Canadian Affairs at the State Department. 

Clare Breidenich is a policy analyst at the Environmental Protection
Agency.  In this capacity, she works on the development of
international policy to address climate change and has been a member
of the U.S.  delegation to the climate change negotiations for the
past 5 years.  Her particular expertise is in matters relating to
reporting, verification, and review of greenhouse gas emissions.  Ms. 
Breidenich holds masters' degrees in environmental science and in
public affairs from Indiana University, School of Public and
Environmental Affairs. 

Edith Brown Weiss is the Francis Cabell Brown Professor of
International Law at the Georgetown University Law Center and is
active in the areas of public international, environmental, and water
resources law.  Her professional experience includes positions as
associate general counsel for international activities at the
Environmental Protection Agency, assistant professor of civil
engineering and politics at Princeton University, and a research
associate at Columbia University and the Brookings Institution.  She
served as an attorney-adviser to the U.S.  Arms Control and
Disarmament Agency.  She has been a member of numerous scientific and
legal advisory committees on international environmental law.  She
served as president of the American Society of International Law and
chair of the Committee for Research in Global Environmental Change of
the Social Science Research Council.  She serves on the Board of
Directors of the Japanese Institute for Global Environmental
Strategies and on the Council of Advisers to the Cousteau Society. 
In 1988, Professor Brown Weiss became a member of the board of
editors of the American Journal of International Law and a member of
the editorial advisory boards for Global Governance, the Berkeley
Journal of International Law, and Environment Magazine.  She has
published numerous articles on international and environmental law
and is the author of many books. 

Kevin Fay is the executive director for the Alliance for Responsible
Atmospheric Policy, a coalition of several hundred companies and
trade associations working to develop international policies to
address ozone depletion issues.  He is also the executive director of
the International Climate Change Partnership, which he helped to
organize.  The partnership is an industry organization dedicated to
facilitating responsible industry participation in the climate change
policy process at the international and national levels.  He has been
an industry representative on the U.S.  delegation at the
international climate change negotiations and has been involved in
all the negotiating sessions pertaining to the Montreal Protocol on
Substances That Deplete the Ozone Layer.  He also has participated
with U.S.  officials in a roundtable dialogue with the European Union
on the subject of trade and the environment; in legislative
activities dealing with energy and environment issues, particularly
the Clean Air Act Amendments of 1990; and numerous other legislative
issues at the state and local level. 

Susan Fletcher (moderator of the panel) is a senior analyst in
international environmental policy at the Congressional Research
Service (CRS), Library of Congressthe research arm of the Congress. 
She advises the Congress, writing reports and organizing research
efforts and assisting with hearings and legislation on a wide variety
of issues pertaining to the international environment.  Currently the
division coordinator for climate change issues, she has written CRS
materials on the Kyoto Protocol and other treaty issues concerning
climate change and oversaw the preparation of an electronic briefing
book on these issues.  She also has done research and written on such
issues as sustainable development, trade and the environment,
biological diversity, global forests, and foreign assistance related
to the environment.  As a congressional observer, she was a member of
the U.S.  delegation to the 1992 Earth Summit in Rio de Janeiro and
to the preparatory negotiating meetings for the Rio conference, as
well as to three annual follow-up meetings of the United Nations
Commission on Sustainable Development, which is charged with
overseeing the implementation of Earth Summit decisions. 

Jennifer Morgan is a senior program associate in the Climate Campaign
Program at the World Wildlife Fund.  In this position, she is
responsible for representing World Wildlife Fund-U.S.  in the
international climate negotiations and formulating and advocating
climate change policies on the international and national levels. 
Prior to joining the World Wildlife Fund, she worked at the U.S. 
Climate Action Network, which is a network of over 200 environmental
groups worldwide working on global climate change.  In 1996, she
received a fellowship with the Robert Bosch Foundation in Germany,
where she worked for the European Business Council for a Sustainable
Energy Future and for the Federal Ministry of Environment.  She also
has worked on international trade issues at the Natural Resources
Defense Council and on World Bank policy at the National Audubon
Society. 

Stephen Porter is a staff attorney at the Center for International
Environmental Law and an adjunct professor of law at The American
University's Washington College of Law, where he has taught courses
on trade and the environment and an international environmental law
research seminar.  At the Center for International Environmental Law,
he focuses primarily on climate-related work, including most recently
a study of compliance mechanisms in the global climate regime. 
Previously, he was an environmental associate in a private law firm,
did forestry and erosion control work in Mali as a Peace Corps
volunteer, and was a budget analyst at the Congressional Budget
Office. 

David Victor is a Robert W.  Johnson, Jr., fellow in science and
technology at the Council on Foreign Relations.  In this position, he
is writing a book on A Technology Strategy to Combat Global Warming
and is leading a project on protection of the world's forests. 
Previously, he directed a project on implementation of international
environmental treaties at the International Institute for Applied
Systems Analysis in Laxenburg, Austria.  He recently published a book
on treaty implementation and coauthored an article in Scientific
American that projects worldwide passenger mobility to the year 2050. 

Richard C.  Visek is an adjunct professor at the Georgetown
University Law Center, where he teaches Comparative Law:  Legal
Systems in Transition. He recently joined the Department of State's
Office of the Legal Adviser and, previously, worked on overseas Rule
of Law assistance programs and environmental enforcement litigation
for the Department of Justice.  He also has taught courses in
international law and European Community law and has worked on
environmental litigation in private practice. 

NATIONS LISTED IN ANNEX B TO THE
KYOTO PROTOCOL
========================================================== Appendix II

Thirty-eight nations, including 13 nations in transition to market
economies (indicated by an asterisk), agreed to emissions limitations
or reductions in the Kyoto Protocol and are listed in Annex B to the
protocol.  They are Australia, Austria, Belgium, Bulgaria,* Canada,
Croatia,* Czech Republic,* Denmark, Estonia,* Finland, France,
Germany, Greece, Hungary,* Iceland, Ireland, Italy, Japan, Latvia,*
Liechtenstein, Lithuania,* Luxembourg, Monaco, Netherlands, New
Zealand, Norway, Poland,* Portugal, Romania,* Russian Federation,*
Slovakia,* Slovenia,* Spain, Sweden, Switzerland, Ukraine,* United
Kingdom of Great Britain and Northern Ireland, and the United States. 

NATIONS THAT HAVE SIGNED OR
RATIFIED THE KYOTO PROTOCOL
========================================================= Appendix III

Annex B nations
------------------------------  ------------------  ------------------
Australia                       Germany             Poland

Austria                         Greece              Portugal

Belgium                         Ireland             Romania

Bulgaria                        Italy               Russian Federation

Canada                          Japan               Slovakia

Croatia                         Latvia              Slovenia

Czech Republic                  Liechtenstein       Spain

Denmark                         Lithuania           Sweden

Estonia                         Luxembourg          Switzerland

European Union                  Monaco              Ukraine

Finland                         Netherlands         United Kingdom

France                          New Zealand         United States

Georgia\a                       Norway

Non-Annex B nations

Antigua and Barbuda             Israel              Paraguay

Argentina                       Jamaica\a           Peru

Bahamas\a                       Kazakhstan          Philippines

Bolivia                         Korea, Republic of  Saint Lucia

Brazil                          Malaysia            Saint Vincent and
                                                    the Grenadines

Chile                           Maldives            Samoa

China                           Mali                Seychelles

Cook Islands                    Malta               Solomon Islands

Costa Rica                      Marshall Islands    Thailand

Cuba                            Mexico              Trinidad and
                                                    Tobago

Ecuador                         Micronesia,         Turkmenistan
                                Federal States of

Egypt                           Nicaragua           Tuvalu

El Salvador                     Niger               Uruguay

Figi                            Niue                Vietnam

Guatemala                       Panama              Uzbekistan

Honduras                        Papua New Guinea    Zambia

Indonesia
----------------------------------------------------------------------
Notes:  Bold type indicates the nation has ratified the Kyoto
Protocol. 

\a This nation ratified the protocol but has not signed it. 

Source:  Web site of the U.N.  Framework Convention on Climate Change
(July 1, 1999). 

TOP 20 CARBON DIOXIDE-PRODUCING
NATIONS
========================================================== Appendix IV

                       (Metric tons in millions)

                                                        1997 emissions
----------------------------------------  ----------------------------
Annex B nations
United States                                                    1,488
Russia\a                                                           422
Japan                                                              297
Germany                                                            234
United Kingdom                                                     157
Canada                                                             143
Italy                                                              116
Ukraine\a                                                          106
France                                                             102
Poland\a                                                            95
Australia                                                           89
Spain                                                               68
Non-Annex B nations
China                                                              822
India                                                              237
South Korea                                                        116
South Africa                                                        99
Mexico                                                              94
Brazil                                                              77
Saudi Arabia                                                        74
Iran                                                                73
Total  20 largest CO2 emitters                                  4,909
======================================================================
Total  worldwide CO2 emissions                                  6,232
======================================================================
Percentage of worldwide CO2 emitted by                             79%
 top 20 nations
----------------------------------------------------------------------
\a Nation in transition to a market economy. 

Source:  World Carbon Dioxide Emissions From the Consumption and
Flaring of Fossil Fuels, 1988-1997; International Energy Annual 1997,
Energy Information Administration, Department of Energy.  These are
the latest data available on carbon dioxide emissions. 

*** End of document. ***