Additional Funds, Incremental Costs and the Global Environment

z zyx zyxwv Volume 3 Numbers 2/3 Financing Global Environmental Protection z Additional Funds, Incremental Costs and the Global Environment Andrew Jordan and Jacob Werksman II UNCED and the Debate on Finance One of the most contentious issues raised at the June 1992 United Nations Conference on Environment and Development (UNCED) was whether and to what extent the developed countries would meet the additional cost of measures undertaken by the developing countries to protect the global climate system and preserve biodiversity. It was generally recognized that sufficient financial incentives would need to be built into the agreements then under negotiation to encourage greater developing country s u p port, but little discussion took place as to how these incentives would function in practice. After protracted negotiations, a compromise of sorts was reached. Developing countries pledged to implement certain measures to address global environmental problems in return for new and additional finance provided by the industrialized states. The total amount of ‘additionality’ was not specified.’ However, the additional money was earmarked for the incremental costs incurred by developing countries in implementing the terms of any agreements they entered into. Over the last five years, the terms ‘additionality’ and ‘incrementality’ have appeared with increasing regularity in international negotiations and agreements. Broad conceptual agreement on additional financing contributed to the successful renegotiation of the Montreal Protocol in 1990’ and to the adoption of the Conventions on Climate Change and Biodiver~ity.~ The successful use of financial bargains between North and South in these areas appears to have set an important precedent. An expectation has developed that financial transfer packages or other ‘selective inducement^'^ will be needed to accelerate and strengthen the process of negotiating inter- national environmental regimes in other areas of g l e bal concern such as desertification and deforestation. In practice, however, the two concepts have proved elusive and little agreement exists over how much money should be transferred and how it should be used. This is partly because additionality and incrementality touch the heart of deeper political debates over which countries should shoulder the responsibility for human-induced global environmental change, and on how the costs of responding to such change should be apportioned between countries. Historical grievances and the temptation to link finance to other disputed issues in international politics, serve only to complicate the debate even further. Some measure of agreement must be sought or the implementation of agreements sighed at Rio may be jeopardized. This article reviews the emergence of the terms ‘new and additional’ and ‘incremental cost’ in international environmental politics. It focuses on the theoretical and practical difficulties that have arisen during initial stages of implementing the Climate Change Convention and in the operation of the Convention’s financing institution, the Global Environment Facility (GEF). Additionality and Incrementality Additionality describes the origins of the financial resources needed to solve global environmental problems, while incrementality determines the total size of those resources needed to address a particular area of concern (e.g. biodiversity, marine pollution). The concepts, thus, interlock: the greater the incremental costs, the more additional resources will be required; the more additionality that is provided, the greater the ‘total’ incremental cost that can be met. zyxwvu zyxw 0 Basil Blackwell Ltd. 1994. 108 Cowley Road, Oxford OX4 IJF. UK and 238 Maln Street, Cambridge, MA 02142. USA. 81 zy z zyxwvutsrqp Financing Global Environmental Protection zyxwv The concepts have tended to take on different meanings in different contexts. The first context is that of regime formation (i.e. international negotiations), where bargains are struck between countries to produce international law and policy. Finance can help to lubricate the process of international diplomacy. The second context is the more drawn-out process of operational decision-making (i.e. the implementation of international agreements), where implementation programmes are drawn up, individual projects are identified and ranked, and finance begins to flow. The rapid entry into force of both the Rio Conventions has forced differences of opinion, which were subsumed during the process of negotiation, to the surface. ‘New and Additional’ Financial Resources At the core of the concept of additionality is a general understandlng that resources should be provided by the industrialized world over and above existing flows of international finance for measures taken by developing countries to address global environmental challenges5 Additionality is either the price the South demands for its participation in international attempts to resolve global environmental problems or the debt the North owes towards the solution of problems primarily of its making. The word ‘new’ is generally understood to describe either the sources of funding or the financial mechanisms used to provide them.6 The term ‘additional’ suggests that the assistance supplements, rather than diminishes, existing flows of finance.’ The Additionality Debate The principle of additionality could now be said to form one of the central planks of the Group of 77 (G77) developing countries’ negotiating strategy in international discussions on environment and development.8 On a very general level, the industrialized states have been sympathetic to the South’s plea for extra financial assistance but they have carefully avoided making specific commitments. Some donor states have sought to put promises into action, and have pledged their support for the new and additional .funding mechanisms of the Montreal Protocol Multilateral Fund (MPMF) and the recently restructured Global Environment Facility (GEFJ9 Neither fund, however, has sought to clarify or define the additionality of its contributions. The Rationale for Additionality The concept of additionality has an intellectual coherence and is politically attractive to both North and South. The developing countries’ calls for additionality are symptomatic of a number of underlying concerns, some essentially practical, others with a moral and ethical dimension. First, developing countries claim that their attempts to industrialize should not be hindered by the costs of measures designed to ameliorate problems not of their making. 0 Basil Blackwell Ltd. 1994. 82 Volume 3 Numbers 2/3 Additionality would provide them with the inducement to leapfrog the polluting and wasteful stages of industrialization. Second, capital constraints and an overwhelming need to address domestic concerns such as poverty and food security do not allow them to tackle environmental problems with the same vigour as the industrialized world. During the 1980s, flows of finance from the North (aid, private flows and export credits) declined sharply (largely as a result of reductions in private flows) and even reversed as the debt problem reached its peak in the mid to late 1980s.lo Calls for additionality are thus one attempt to address much deeper inequalities and economic imbalances in the world economy. During international negotiations for the Conventions and the GEF, the developing countries insisted that contributions be additional and disbursements concessional (i.e. in the form of grants or very low interest loans). They were particularly concerned that contributions to the GEF would not diminish the funds available for development assistance.” The notion of providing an extra quantum of finance specifically for the global environment holds a certain appeal for the North as well. First, allocating a certain amount of money for sustainable development or the global environment makes for good and publicly visible ‘gesture politics’. Second, separating out a distinct portion of money for global warming or ozone depletion raises the hope that it will be used more ‘efficiently’(in the sense that it specifically funds global environmental projects rather than developmentrelated activities), while also helping to parry criticism that existing flows of aid fail to reflect global environmental concerns. Additionality Baselines Additionality is a relative term, which predicates the need for some form of bench mark or baseline, above which an ‘additional’increment can be measured. The most common interpretation of additionality sets this baseline empirically by measuring the existing level of development assistance. Total net resource flows to the South in 1991 amounted to $131bn (at 1990 prices) (World Resources Institute, 1994),12of which $3bn (56%) was in the form of Official Development Assistance (ODA).I3 Although global aid volume has grown markedly in gross terms in the last 20 years, as a percentage of OECD GNP it has hardly changed and remains lodged at around 0.33%.Additionality, so measured, would thus constitute any increase in ODA over and above 0.33%. zyxw zyxwvz Developing countries have pressed for a higher, aspirational baseline of 0.7% of GNP, which has been the UN’s official target for ODA since 1970.14At present only five developed countries could be said to be meeting or exceeding this target.15 Not surprisingly, individual OECD donors support definitions of zyxwvutsrqpo z Volume 3 Numbers 2/3 Financing Global Environmental Aptection additionality that place their practice in the best light. Sweden, a country which nets its contributions to the GEF and the Montreal Protocol Multilateral Fund (MPMF) from a general multilateral aid budget (thereby failing the aforementioned test for additionality)Ifi that is around 0.92% of its domestic GNP, would clearly have a strong incentive to push for the acceptance of a 0.7% baseline and indeed has made representations to that effect.17 flows of development assistance continues to increase and finance becomes more closely linked with the future prospects for global environmental governance, greater scrutiny may need to be applied to the measurement and enforcement of additionality. Arguably, this may help to engender trust between Parties and may improve the quality of the overall cooperative effort. zyxwvu The US government, in the context of ozone protection, describes additionality as ‘the allocation of more funds specifically to ozone protection, but not necessarily the allocation of funds in addition to overall resource flows’ (emphasis added).18 On this interpretation, any extra money which is diverted to environmental protection is judged to be additional regardless of its origins.’’ In the context of the GEF’s pilot phase the US announced that it was not prepared to contribute ‘additional’ funds to the GEF‘s core fund. Instead, the US negotiated a co-financing agreement with the GEF, contributions to which a r e redirected from the regular US Agency for International Development (USAID) budget. Finally, some countries have argued that additionality should be measured over and above the level of total net resource flows, including resources in the form of private flows of money.zo In this respect, the US government has argued that more should be done to exploit private sources of funding ‘in which case much additionality would ensue’.z1 If net financial transfers are taken as the unit of account (i.e. total flows minus interest and dividends on loans) the bench mark in 1990 would have been just $34bn. The concept of additionality could then be stretched to include such things a s debt forgiveness or ‘debt-fornature’ swaps. The adequacy of money allotted to the GEF and MPMF could be judged to be either very large or relatively small, depending on the baseline adopted. Incremental Cost Financing The term incremental cost is important because it quantifies the size of the payment that developing countries will receive from developed countries as compensationzz for acceding to, and implementing the terms of, international environmental agreements. Just as with the term ‘additionality’, recipient Parties clearly have an incentive to try and maximize the size and scope of the total side payment; providers, the converse. Incrementality can be traced to the text of the revised (1990) Montreal Protocol. During the negotiations, countries of the South expressed concern that measures to address ozone depletion, a problem they repeatedly stressed was not of their making, would ‘add new burdens to their economies and adversely affect their standard of living’.z3 What were termed ‘incremental burdens’ by negotiators were eventually incorporated into the text of the revised Protocol as ‘incremental costs’. zyxwvu Additionality Post-Rio The texts of the Climate Change and Biodiversity Conventions d o not clarify the meaning of additionality, and merely commit industrialized countries to provide ‘new and additional’ finance, If ‘existing flows’ are t o provide the baseline, then what is ‘additional’ can only be calculated on the counterfactual of what a donor would have done had they not entered into an international agreement or pledged to support an international fund. The absence of a definition opens up an enormous opportunity for conflicting interpretations and expectations. In the Montreal Protocol the sources and technical solutions for ozone depletion are relatively easy to identify. Defining and implementing the term ‘incremental cost’ has proved comparatively straightforward and Parties have agreed on a broad list (an ‘indicative list’) of costs judged to be eligible for ‘incremental’ cost financing.z4 In terms of climate change, a problem more complex and uncertain to predict and alleviate, the task will be far more challenging. Much of the controversy surrounding the concept of incrementality has arisen because of expectations attached t o the concept when it was expressed as a broad principle. Thus far, the work of developing a specific definition for incrementality in the Climate Change Convention has been carried forward by two separate but related institutions: the Intergovernmental Negotiating Committee (INC) for a Framework Convention on Climate Change, which is carrying out preparatory work for the first meeting of the Convention’s Conference of Parties (COP), and the GEF, which is to serve as t h e interimz5‘operating entity’ of the Convention’s financial mechanism. The INC has only considered the issue in the period since the signing of the Convention (June 1992), whereas the GEF has made much greater headway during its pilot zyxwv zyxwvutsrqponmlkji An accurate calculation o r indeed enforcement of additionality will be difficult to achieve not least because it would transform a general commitment to a specific obligation. But, as the demand for regular 0 Basil Blackwell Ltd 1994 83 zy z zyxwvutsr Financing Global Environmental Protection phase (1991-1994). The future of the incremental financing issue will probably be determined by the continuing interplay between these two institutions. zyxwvu Incremental Costs and the Climate Convention All Parties to the Convention, developed and developing countries alike, have committed themselves to undertake a wide range of measures to address the threat of climate change. These ‘general commitments’ are designed to develop, collect and disseminate information on climate change and possible responses, to implement programmes containing measures to reduce net emissions of greenhouse gases and to facilitate adequate adaptation to climate change. Developed country Parties further commit themselves to provide new and additional resources to meet the agreed full incremental costs of developing country Parties. The term ‘agreed full incremental cost’ was, in itself, a compromise. Throughout negotiations, developed countries had advocated the use of the single qualification ‘agreed’, whereas developing countries preferred the term ‘full’.z6 As a last minute compromise, the two qualifiers, ‘full’ and ‘agreed’, were combined to produce the seemingly contradictory term ‘agreed full incremental Volume 3 Numbers 2/3 GEF on parallel tracks. The INC, a large and looselystructured intergovernmental body with limited administrative and research capacity but a wide-ranging agenda, has thus far failed to resolve the issue beyond renewing its requests to its Secretariat for further clarification of the issues. As this vacuum developed, the GEF administration launched its own multi-million dollar research Programme for Measuring Incremental Costs for the Environment (PRINCEJZ8 Certain commentators expressed surprise over PRINCE’S approach to measuring incrementality because it appeared both to significantly erode the level of financial resources that would be available under the Convention and prejudge the outcome of discussions which are scheduled to begin at the first meeting of the Convention’s Conference of the Parties (COP) in 1995.29The Convention provides specifically that the COP (and not the GEF) will ‘decide on. . .policies, programme priorities and eligibility criteria’ for the financial mechanism. zy zyxwvutsr Incremental Costs and the GEF During the GEF‘s pilot phase (which began almost a year before the Convention was signed at Rio), donor country Participants defined incremental cost as that segment of an eligible project’s total cost which directly benefits the global environment, but which would not normally be in the interest of a host nation to finance itself. Only those projects which generated global benefits, but which required extra concessional financing to be viable to the host nation (i.e. where national costs exceeded national benefits), were judged to be eligible for GEF support in the pilot phase. ‘Domestically beneficial’ projects were to be excluded. In the context of the GEF, then, incremental cost is the difference between the national costs and national benefits of a project designed to generate global environmental benefits. So, for example, the GEF could meet the incremental cost of redesigning a proposed coal-fired power station project to utilize a local supply of natural gas, thereby realizing the global benefit of reduced CO, emissions. In this example, the GEF would pay for the incremental cost of the conversion; the ‘baseline’ cost of the coal-fired station would have been financed by the host nation (either from its own resources, or from international lending or the private sector). Since Rio, discussions on developing an operational definition for incremental costs in the climate change context has been proceeding within the INC and the 0 Basil Blackwell Ltd. 1994. 84 It is easy to imagine that the bulk of the measures to be undertaken by developing countries under the Convention will have national as well as global benefits. Because of this, CEF conceded early on that ‘only a limited number of projects are likely to be. . .eligible for full funding from GEF‘. The GEF suggests that the rest of the increment, to cover that portion of the costs seen to have ‘national’ benefits, should come from ‘other sources of domestic and foreign funding sources’.31In a later statement the GEF claimed that ‘in typical cases, the incremental cost will be a relatively small proportion of the total cost of the redesigned or alternate activity.. .’.31 ‘Cross’ and ‘Net’ Incremental Costs As policy makers begin to struggle with the impli- cations of these early attempts to apply incremental cost principles, two competing interpretations can be said to have emerged: gross and net incremental costs.32Gross incremental costs can be defined as the difference between the total costs of implementing a proposed project and that course of action which the developing country would have pursued had it not undertaken commitments under the Convention. S u p porters of this interpretation rely on a direct reading of the text of the Convention and tend to lay stress upon the word ‘full’ in ‘agreed full incremental Net incremental costs, on the other hand, can be viewed as the additional cost of complying with the Convention minus the value of any domestic benefits thereby generated. Generally, this has been the approach taken by the GEF, and justified on the grounds that it is more ‘cost effective’ than funding the full cost of projects (i.e. by funding only those aspects of a project that specifically yield global environmental benefits, more funds will be available zyxwv zyxwvutsrqpo z Volume 3 Numbers 2/3 Financing Global Environmental Protection zyxwvuts zyxwvu to fund the globally beneficial aspects of further projects). The significant difference between the two approaches is that on the gross cost interpretation, developing countries are left better off than they would have been without Convention funding, whereas on the net cost interpretation developing countries are left no better off (except for their share of the global environmental benefit) than had the Convention not been adopted.34 The G77 coalition and China have signalled that they expect the costs of all the commitments mentioned in the Climate Convention to be met including those measures with primarily domestic benefits such as adaptation, research, training.35They have expressed concern that some developed countries are attempting to reduce the scale of transfers by disallowing projects which are domestically beneficial from being eligible for funding (i.e. the net cost appr~ach).~~ If the net approach is followed, developing countries may be asked to look outside the GEF for funding. To implement the Convention, developing countries may be forced to fend for themselves in financial channels ungoverned by the principles of the Convention. This may, in turn, lead to an unsystematic and uneven distribution of resources. No system would be in place to ensure funding from other sources is new and additional, and at the same on the concessional terms agreed to under the Convention. Ironically, the net approach, if adopted, would render those countries least capable of fulfilling their obligations (and thus most likely to benefit nationally from enhanced capacity) least’ eligible for extra funding. Least developed countries would be saddled with an inequitable share of the global burden of climate change (for which they have relatively less responsibility) under a Convention in which developed country Parties have committed themselves to ‘take full account of the specific needs and special situations of the least developed countries in their actions with regard to funding and transfer of technology’. Negotiated Incremental Costs On closer analysis, the line dividing the two interpretations is more blurred than the simple ‘net’ and ‘gross’ typology suggests. There are, for example, measures which could be taken to reduce global warming at a negligible incremental cost (correcting subsidies for example) or even a negative incremental cost (e.g. energy efficiency measures). Meanwhile, it is likely that for certain types of projects (e.g. game parks to protect biodiversity and institutional strengthening) the incremental cost might approach 100% (i.e. because nothing would have been done in the absence of the respective Convention). Indeed, the GEF suggests that ‘there are cases when the incremental cost will be equal to the full cost of the a~tivity’.~~ In practice, a balance between the gross and net interpretations will probably emerge out of a process of n e g ~ t i a t i o na, ~view ~ now reflected in statements from the GEF.39 Negotiations could proceed on two levels: at a sectoral level to determine the eligibility of certain classes of activity, through the preparation of indicative lists; and at the project level to determine the scale of assistance to individual interventions. What remains to be agreed on are a set of guidelines to structure and inform these negotiations. These should be agreed by the COPS and may draw upon the research emerging from the PRINCE programme. Incrementality Baselines As with additionality, incremental costs can only be defined against some kind of hypothetical baseline which measures what a host nation would have done in the absence of an international agreement. Incremental cost baselines are as difficult to establish as additionality baselines, not least because if a proposed project is financed then the baseline situation will never occur. The baseline is intrinsically hypothetical, since it can be premised upon a number of very different scenarios and may adopt many different forms, and hence is open to manipulation. King (1993)40 suggests that the baseline could be based on a number of factors, including economic efficiency, equity, and existing trends. In the case of the power station example (above), the costs and benefits of a hypothetical coal-fired power station project over the next 10 to 20 years would need to be calculated. This would not be easy. The interim Secretariat to the Climate Convention notes that rules of ‘economic, environmental, technical, and financial reasonableness’ may need to be applied, but.these have yet to be formulated and agreed upon.41 W Conclusions As implementation of the Rio Convention proceeds, the importance of measuring, verifying and perhaps enforcing additionality and incrementality will increase. Yet, both are relatively elastic terms and the potential for conflict and confusion remains high. For example, the foregoing underscores the importance of having proper baselines, calculated according to what a donor or recipient would have done had they not entered into the respective global environmental agreement. Clearly, there are enormous difficulties in estimating. and, more importantly, verifying this ‘counterfactual’. Further, both donors and recipient parties have an incentive, and the latitude allowed them by the vagueness of international agreements, to push the rules of assessment in their favour, leaving plenty of room for discord and conflict in the future. zyxwvutsr zyxwvutsrqponm D Basil Blackwell Ltd. 1994. z zyxwvutsrqpon ~ ~~ ~~ Financing Global Environmental Protection zyxwvutsrqponmlkjihgfedcbaZYXWVUTSRQPONM Volume 3 Numbers 2/3 A vital need has arisen for some form of mutually 4. P. Sand, Lessons Learned in Global Environmental acceptable calculus or set of criteria for measuring both terms. As the process of implementation begins to roll forward, the policy debate may now turn to fundamental questions about the types of institutions and decision-making structures appropriate to developing and applying these criteria. Issues such as additionality and incrementality involve sophisticated social, economic, moral, scientific and political judgments. Policy makers must decide if such complex issues can be handled by open-ended debates in large intergovernmental bodies such as the Conventions’ COPs or the UN’s Commission on Sustainable Development, or be delegated to more efficient but less democratic processes such as the CEF‘s PRINCE. Governance (Washington, World Resources Institute, The foregoing discussion challenges the simple idea that the Rio Summit resolved the issue of how to finance the transition to sustainable development. One suspects that there are very profound discrepancies in the manner that North and South perceive the need for, probable role and scope of additional financial transfers. The developed states tend towards a minimal interpretation; transfers being a price (to be minimized wherever possible) to be paid for enlisting the support of the South in tackling common problems. Meanwhile the developing states seek perpetually to advance a maximal interpretation of additionality and incrementality, arguing that ‘new’ environmentally related transfers are a rightful and legitimate means to address the inequities inherent in the operation of the world economy. These very different standpoints are not easily reconcilable. In the short term, the task of balancing will be worked out between the COPs and the CEF and the coming years will provide a fascinating test case of how well North and South can adapt to the challenge of sustainable development. 1990). 5. UNEP, ‘Interpretations of Phrases “Adequate, New and 6. 7. 8. 9. zyxwv 10. 11. 12. 13. 14. 15. Notes Basil Blackwell Ltd 1994 86 16. zyxwvut zyxwvu The UNCED Secretariat calculated that the North would need to provide the South with $125bn of additionality each year between 1992 and 2000 t o implement Agenda 21, World Resources Institute, World Resources 1994-5: A Guide to the Global Environment (Oxford, Oxford University Press, 1994), p. 226. A.J. Jordan discusses other estimates made of the total amount of additionality needed to implement sustainable development in A.J. Jordan, ‘Financing the UNCED Agenda: The Controversy Over Additionality’, Environment, vol. 36 no. 3 (1994), pp. 16-20 and 26-34. J.M. Patlis, ‘The Multilateral Fund of the Montreal Protocol’, Cornell International Law Report, vol. 25 no. 1 (1992), pp. 181-230. D. Bodansky, ‘The United Nations Framework Convention on Climate Change’, Yale Journal Of International Law, vol. 18 no. 2 (Summer) (1993), p. 492. (i’ Additional, New and Additional, and Adequate and Additional”’, Intergovernmental Negotiating Committee For A Convention On Biological Diversity, Fourth Session, 23 September-2 October, (UNEP/BIO.DIV/INC. 4/4, 16 August), (Nairobi, UNEP, 1991). UNEP, ‘Interpretations of Phrases’, n. 5 above. P. Kohona, ‘UNCED: The Transfer Of Financial Resources T o Developing Countries’, RECIEL, vol. 1 no. 3 (1992), pp. 307-313. A.J. Jordan, ‘Financing the UNCED Agenda: The Controversy Over Additionality’, Environment, vol. 36 no. 3 (1994), pp. 16-20 and 26-34. A.J. Jordan and J. Werksman, ‘Power, Money and the Global Environment: Restructuring and Replenishing the Global Environment Facility’, EcoDecision (1994) (forthcoming). Developed country Parties t o the Montreal Protocol recently agreed to provide between $300500m t o the Multilateral Ozone Fund in the period 19946, 1. Rowlands, The Fourth Meeting o f the Parties to the Montreal Protocol, CSERGE Working Paper vol. GEC 9318 (London and Norwich, CSERCE, 1993). OECD, Development Cooperation: I992 Report (Paris, OECD, 1992), p. 79. Net North-South Financial Transfers (US$) amounted t o 54bn in 1980 and 34bn in 1991; in 1985 and 1986 they were minus 13bn and minus 3bn respectively (id., p. A-25). UNEP, UNDP, World Bank, Report of the Independent Evaluation of the Global Environment Facility (Washington, GEF, 1993), p. viii. World Resources Institute, World Resources 1994-5: A Guide to the Global Environment (Oxford, Oxford University Press, 1994), p. 227. OECD, Development Cooperation: I992 Report, p. 25, see n. 10 above. J. MacNeill et al., Beyond Interdependence (Oxford, Oxford University Press, 1991), p. 104. Note also that Switzerland and the US d o not accept this target. Norway, Denmark, Sweden, Netherlands, Finland (OECD, Development Cooporation: I992 Report, see n. 10 above). 0. Kjorven and A. Sydnes, Funding for the Global Environment: The Issue of Additionality, Working Paper 199214, (Lysaker, Norway Fridjtof Nansen Institute, 1992), p. 12. Government of Sweden, Proposition 1999/1: IOO, bilga 5, Submission to the Swedish Parliament of Budget Proposals for 1991-2 (Stockholm, Ministry for Foreign Affairs, 17. 1991). 18. R. Benedick, Ozone Diplomacy (Cambridge, Mass., Harvard University Press, 1991). 19. This was the interpretation of additionality pushed by the US in negotiations t o revise the Montreal Protocol, but pressure from the other states subsequently forced it t o back down. (R. Benedick, Ozone Diplomacy, see n. 17 above.) 20. In 1991 private flows of money made up 42% of total resource flows from North to South. (OECD, Develop ment Cooperation: 1992 Report, 1992, see n. 10 above.) 21. Quoted in J. Holmberg, ‘Financing Sustainable Develop ment’, in J. Holmberg (Ed.), Policies for a Small Planet (London, Earthscan, 1992). Volume 3 Numbers 2/3 22. The term 'compensation' is used here to describe a payment in return for a service (i.e. the provision of global environmental 'services'), and not a payment by way of acknowledgement of liability for damage (i.e. a s demanded by a strict legal interpretation of the term). 23. R. Benedick, Ozone Diplomacy, see n. 17 above. 24. A. Wood, Study Three: 'The Interim Multilateral Fund for the Implementation of the Montreal Protocol', in D. Reed, (Ed.), The GEF Volume 11 (Washington, WWF International, 1993). 25. More definite arrangements will be discussed at the first meeting of the COP in 1995. 26. D. Bodansky, The United Nations Framework Convention on Climate Change, at p. 524, see n. 3 above. 27. In the last draft (March, 1992) of the Convention prior to it being signed, references t o the scope of funding still appeared thus: '[full]/[ agreed] incremental costs' (see A/AC/237/18 (Part I), 10 March 1992). A compromise (i.e. to include agreed and full) was only reached at INC 5 (8 May 1992) when the final text was adopted. This was only a month before the UNCED (see A/AC.237/L. 14). 28. A.J. Jordan and J. Werksman, Power, Money and the Global Environment, see n. 9 above. 29. R. Sharma, 'Debate on PRINCE likely t o Delay Progress on GEF', Climate Action Network - South Asia (CANSA) Newsletter, vol. 2 no. 3, p. 8; and J. Werksman, Incremental Costs under the Climate Change Convention: The International Legal Context, FIELD Working Paper (London, FIELD, 1993). 30. 1. Johnson, 'Incremental Costs and the GEF', Letter t o workshop invited participants (GEF Letter); 'Attachment 1: PRINCE', 10 November 1992 (Washington, GEF, 1992), p. 2. 3 1. GEF, GEF Replenishment Paper (Washington, GEF, 1993), p. 18. 32. 'Approaches 'To The Determination Of Agreed Full Incremental Costs', Note by the Interim Secretariat t o the Convention on Climate Change (A/AC.237/50/Add.l, 21 December 1993). Financing Global Environmental Protection z 33. J. Werksman, Incremental Costs under the Climate Change convention: The International Legal Context, FIELD Working Paper, (London, FIELD, 1993). 34. D. Pearce and S. Barrett, Incremental Costs and Biodiversity Conservation, Paper prepared for a GEF seminar on incremental costs and the global environment, Washington, September 21, 1993 (CSERGE, London and Norwich, 1993). 35. Group of 77 and China (draft decision), Matters Relating t o Arrangements for the Financial Mechanism, INC 7, 15-20 March 1993 (A/AC.237/L.18). 36. S. Oberthur, 'Discussions on Joint Implementation and the Financial Mechanism', Environmental Policy and Law, vol. 23 no. 6 (1993), p. 248. 37. GEF, GEF Replenishment Paper, see n. 30 above. 38. D. Pearce and S. Barrett, Incremental Costs and Biodiversity Conservation, see n. 33 above. 39. GEF, The GEF and the Evaluation: Learning h-om Experience and Looking Forward (Washington, GEF, 1993), p.18. '[Tlhe.. . incremental cost concept [provides] an analytical framework for a structured dialogue between a potential recipient country, o r institution, and an Implementing Agency', GEF, id., p. 5). 40. K. King, Issues to be Addressed by the Program Measuring Incremental Costs, Working Paper 8 (GEF, Washington, 1993). 41. A/AC.237/50/Add.l, p. 2. zyx zyx zyxwvutsr zyxwvutsrqp 0 Hasil Blackwell I.td 1991. I Andrew Jordan is a Research Associate at the School of Environmental Sciences, University of East Anglia. Jacob Werksman is a staff lawyer and a Co-Director of the Climate Change and Energy Programme at the Foundation for International Environmental Law and Development (FIELD). zyxwv zyxwvutsrqponml 87