1. Introduction of information note Compilation and analysis of available information on the scope, effectiveness and functioning of the flexibility mechanisms under the Kyoto Protocol UNFCCC http//:unfccc.int http//:cdm.unfccc.int http//:ji.unfccc.int Pres-sessional workshop on the second review of the Kyoto Protocol pursuant to its Article 9 22 – 23 October 2008 Athens, Greece

2. Outline | Background & Scope of note Possible improvements to - Institutional arrangements and governance in relation to the Executive Board in relation to designated operational entities - Rules and procedures of the CDM - Joint Implementation

3. Background & Scope of note | Mandate At its 28th session SBI requested secretariat to prepare an information note to compile and analyse available information on the scope, effectiveness and functioning of the flexibility mechanisms under the Kyoto Protocol SBI further requested secretariat to make the note available to Parties prior to this pre-sessional workshop Parties were invited to submit their views on the issue, which the secretariat has compiled in document FCCC/KP/CMP/2008/MISC.2

4. Background & Scope of note | Scope Compiles & analyses information on the scope, effectiveness and functioning of mechanisms, focusing on CDM and JI Sections II and III consider possible improvements to institutional arrangements and governance in relation to the CDM Executive Board and designated operational entities Section IV considers possible improvements to the rules and procedures of the Executive Board Section V discusses the potential to apply these possible improvements to JI Sources: Submissions by Parties Work undertaken by Executive Board & JISC Issues identified by Parties at 5 th session of AWG-KP

5. Possible improvements | Institutional arrangements and governance In relation to the Executive Board: Delegation of technical decision-making Delegation to the secretariat and/or committees and panels established under the Board (support structure) Rationale: to allow Board to focus on strategic and policy issues and improvements to system Could enhance overall efficiency Board would maintain full accountability Support structure would be accountable to Board and provide regular, comprehensive reporting Board has taken a number of steps to move in this direction already, with secretariat performing many support duties and several panels already having been established

6. Possible improvements | Institutional arrangements and governance In relation to the Executive Board: Delegation of technical decision-making Specific areas where delegation could happen: Approval of baseline and monitoring methodologies, development of methodologies using benchmarks and, assistance in developing methodologies where none are being proposed; Accreditation of designated operational entities; Registration of projects and issuance of certified emission reductions (CERs), including reviews of registration and issuances cases.

7. In relation to the Executive Board: Consistency and transparency of decision-making Proposal for enhancement of the consistency and transparency of decision-making by the Board have been made Would reduce likelihood of value judgments and improve understanding of decisions by stakeholders Following measures considered: All decisions taken classified, published and indexed; Introduction of classification system for decisions; Establish a formal hierarchy of decisions; Decisions reference to previous decision; Process for amending/replacing previous decisions; All decisions and rationale to be published. Board has already acted or is in the process of concluding on some of these issues Possible improvements | Institutional arrangements and governance

8. In relation to the Executive Board: Process for reviews and issuance Proposal for streamlining the review process so as to reduce or avoid delays in project registration Reconsideration of the ways in which reviews are made, including possible change to timelines and establishment of criteria for triggering reviews and deciding what to include in a review Board presently takes all decisions within the prescribed timelines Some delays are occurring due to resource constraints in the support structure and DOEs – the Board is in the process of addressing these Possible improvements | Institutional arrangements and governance

9. In relation to the Executive Board: Process for appeals Proposal for introduction of an appeals process for the CDM Appropriate body for appeals: the Board or third body? If new body need to consider: composition, competencies of members and required support structure Appeals on what: due process or question technical issues? Will need criteria for what appeals may be brought forth and what actions can be taken by appeals body Steps will need to be taken to ensure appeals system not misused Possible improvements | Institutional arrangements and governance

10. In relation to the Executive Board: Selection and role of members Proposal that members be selected to ensure Board possess appropriate expertise and that members’ activities need be declared Specific measures suggested: Terms of reference for members to clarify their roles and identify restrictions Publication of nominations period prior to selection Separate selection process from election process to other constituted bodies Direct election of Chair and Vice-Chair by CMP to full-time posts Establishment of code of conduct to ensure quality of work and assure impartiality Possible improvements | Institutional arrangements and governance

11. In relation to the Executive Board: Management of support to bodies Proposal that secretariat enhance the management and transparency of its resources use Need for more closely monitoring allocation of resources to activities in the support of the Board to ensure they are effectively focused to facilitate CDM projects Take advantage of similarities and synergies between the support structures of the Board and JISC Possible improvements | Institutional arrangements and governance

12. In relation to the designated operational entities: Accreditation process Proposal to adopt a single standard for accreditation of entities Specific areas to consider: Clarify roles of each stage – desk review, onsite assessment, witnessing Elaborate purpose of spot checks and surveillance of DOEs Establish indicative timelines for each stage Address the issue of availability of projects for witnessing Establish mandatory formal training for experts working for DOEs Possible improvements | Institutional arrangements and governance

13. In relation to the designated operational entities: Guidance provided by bodies Suggestion for more guidance from Board to DOEs Regular communication to keep DOEs informed of latest decisions and ensure appropriate understanding and interpretation of decisions Actions the Board presently undertaking: Meets with representative of DOEs at each meeting Sends email alerts after each meeting Involves DOEs in development of procedures and guidance Provides substantive support to regional calibration meetings Possible improvements | Institutional arrangements and governance

14. In relation to the designated operational entities: Quality and consistency of assessments Propose the Board enforce higher standards in results of DOEs Establish a system of non-compliance, leading to suspension or withdrawal of accreditation Publish statistics of DOE performance; apply sanctions (financial or restricting right to further work) Reporting of outcomes of DOEs assessment, whether positive or negative Suggestion for publishing of all outcomes of validation process Board has initiated work on a policy framework to address non- compliance Possible improvements | Institutional arrangements and governance

15. In relation to the designated operational entities: Selection and payment Propose the Board or secretariat select and pay for the services of DOEs Enhance the impartiality of DOEs and independence from the project participants Project participants would still bear the direct costs for each project though Possible improvements | Institutional arrangements and governance

16. Additionality and methodologies More objective and standardized assessment of additionality of projects Specific options: Greater standardization in the use of financial benchmarks; More objective and quantitative criteria in project barrier analysis; Greater use of emission benchmarks for demonstrating additionality Further enhance the objectivity and environmental integrity by further using sector- and subsector-specific benchmarks at a national level The Board is already exploring the subject of benchmark and refernce values Possible improvements | Rules and procedures of the CDM

17. Programmes of activities Suggestion to further enhance the approach to programmes of activities under the CDM Process is still in its infancy (DOEs currently validating five PoAs) Likely to be further scope for enhancing current rules for PoAs – the Board has made a call for public inputs to collect information on experiences and challenges Possible improvements | Rules and procedures of the CDM

18. Potential to apply improvements to JI In principle many of the suggested improvements could be implemented for JI as well However, JI has less experience than CDM and not clear if changes would be warranted in the context of JI – if were to be applied, the characteristics and circumstances of JI would need to be taken into account The example of delegation of technical decisions to support structure for example would imply a different scope for JI (and Track 2 only) As well, as there have been fewer projects that have received a final determination, issues of consistency of decision-making has not arisen in the process Overall, the specific characteristics of JI Track 2 would need to be considered, but it would be possible to apply some of the proposed measures discussed for the CDM to JI Track 2 Possible improvements | Joint Implementation

19. Thank you