Introduction to Climate Change

8. Current Status And Cross-Cutting Themes

Assuming that all countries meet the Protocol's broad reductions in ODSs, scientists predict the ozone layer will stabilize by around 2050. In the meantime, however, because of ODSs still working their way up in the stratosphere, the situation continues to worsen with record low ozone layer concentrations reported annually over both the Arctic and Antarctic regions.
With nearly universal ratification and coverage of over 90 ozone depleting compounds, the Protocol must be regarded as a triumph of international diplomacy. Based on data submitted by parties, UNEP claims that production and consumption of CFCs has decreased by over 86% since 1986, with one third of developing countries stopping their consumption of halons and over half ending their consumption of carbon tetrachloride and methyl chloroform.

In an effort both to improve enforcement and improve reporting, the 1997 Montreal Amendments created a licensing system for trade in ODSs. Each party must license ODS imports and exports. It is hoped that the ability to cross check records between importing and exporting countries will better enable police and customs officials to track and identify illegal trading in new, used, recycled, and reclaimed controlled substances. Developing countries can request assistance from the Multilateral Fund to establish their licensing systems.

In addition to reduction schedules and enforcement initiatives, the United States has relied on economic instruments to speed up the phase out of controlled substances. In 1988, the EPA created a marketable permit program. Using 1986 as a baseline, EPA issued allowances to five CFC producers, three halon producers, fourteen CFC importers and six halon importers. This small number of companies dominated the CFC and halon markets. Beside keeping down administrative costs, the program allowed companies to trade permits amongst themselves as they responded to market demands. Over time, allowances are "retired" in line with the overall reductions called for in the Protocol.

In addition to implementing the reductions called for in London, Subtitle VI of the 1990 Clean Air Act Amendments codified the marketable permit program for all controlled substances, banned the use of CFCs for "nonessential products," established a national program for the recapture and recycling of ODSs during the repair of appliances and vehicle air conditioners, and prohibited the knowing release of ODSs used as refrigerants.

A. International Finance: The Montreal Protocol Fund

The parties established the Montreal Protocol Multilateral Fund ("Multilateral Fund") to provide financial and technical assistance, including the transfer of technologies, to developing countries.

To obtain assistance from the Fund, countries must prepare a Country Program study detailing their production and consumption of ODSs and a work program that details the planned steps for reducing ODSs (including technical assistance and pre investment activities). These studies and program are typically conducted in cooperation with the implementing agencies.

B. Developing Country Participation

Under the Montreal Protocol regime, by 2000 developing countries were required to freeze CFC emissions at their 1995-97 average levels and, by 2005, reduce emissions by 50% and, by 2010, completely phase out CFCs. In reviewing progress by 1998, many developing countries were on target to meet these targets. Eight of the nine developing countries still producing CFCs, for example, had reduced production below baseline levels. China was the only country that had increased production levels but it, too, was in compliance with the Protocol.

C. The Montreal Protocol And International Trade

The Montreal Protocol was one of the first multilateral environmental agreements to use trade measures to further its objectives. At the center of the trade controversy is the question whether the Protocol's trade provisions are consistent with the WTO agreements. Given the number of parties to the Protocol, a GATT dispute over implementation of the Protocol is unlikely. Nonetheless, the trade issues that faced the Protocol's negotiators, and the approaches they took to resolve those issues, provide useful lessons for future agreements and for understanding the complexities of the relationship between international trade and environmental protection.

The primary objective of the Protocol's measures restricting trade with non parties is to encourage broad participation in the Protocol by preventing nonparticipating countries from enjoying a competitive advantage during the phase out of ODSs and by discouraging the construction of ODSs production facilities in non party countries. The ban on importing controlled substances from non parties that do not comply with the Protocol's control provisions discourages expansion of production facilities in those countries. The ban on importing products containing or produced with controlled substances provides an incentive to countries that export such products to make their production methods and products ozone safe, lest they lose their markets. The ban on exporting controlled substances gives non parties an incentive to comply with the Protocol in order to maintain their supply of ODSs. The ban on exporting technologies or providing subsidies, aid, credits, etc. for the production of controlled substances by non parties is intended to prevent them from building or expanding production facilities to meet new demand for controlled substances in emerging markets, particularly in developing countries.

In the end, controls were placed on both production and consumption. A party is allowed to increase its production by obtaining some or all of another party's allowed production. Why were parties permitted to transfer their allowances for production but not for consumption? In part production was made transferable to accommodate countries with small producers that might find, at some point, that their total production had become too small to be profitable. Such transfers, known as "industrial rationalization," permits parties with small producers to maintain economies of scale by combining their production with the production of other parties. Consumption transfers are not permitted because negotiators wanted to "lock in" any reductions that go beyond those required by the Protocol, and to make sure that every party, at a minimum, meets its required phase out schedule.