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Sustainable Development: Nowhere
to Hide - Latest Legal Developments
Dr. Anita M. Halvorssen
Global Legal Solutions, LLC
March 1, 2005
Copyright © 2004 by Anita M. Halvorssen
I. Main Focus
• 1. What is sustainable development?
• 2. Corporate Social Responsibility
• 3. UN Framework Convention on Climate Change
(UNFCCC) and Kyoto Protocol (KP)
• 4. Emissions trading
• 5. How will the Clean Development Mechanism
(CDM) work?
I. What is sustainable development?
• Brundtland definition - WCED
• Economic growth is the means to meeting the needs, but not with
“business as usual” in other words, sustainable development is the
integration of economic, environmental and social elements.
Sustainable development – principle of reconciliation (Case Concerning
Gabcicovo-Nagymaros Project – 1997 – ICJ decision)
Rio Conference - Rio Declaration Principles and how these are reflected
in newer legal instruments
New Delhi Declaration - Declarations of Principles of International
Law relating to Sustainable Development
World Summit on Sustainable Development (WSSD) – 2002 Johannesburg Plan of Implementation
Sustainable development-1
• Sustainability of ecosystems on which the global economy depends must be guaranteed,
sustainable development necessitates respect for the environmental life-support system
of the planet and its renewable capabilities, living off of nature’s “income” rather than
dissipating its capital.
• Conserving the capacity to produce economic well-being for the very long term.
• Economic growth is based on energy. A safe and sustainable energy pathway is
crucial to sustainable development.
• - We need to produce more energy without destroying the environment. To prevent
dangerous climate change we need to move toward a society with significantly reduced
emissions of greenhouse gases
- WSSD Johannesburg Plan of Implementation – “substantially increase the global
share of renewable energy sources with the objective of increasing its contribution to
total energy supply…”
Rio Declaration
• Principle 4 – environmental protection shall constitute an integral part
of the development process and cannot be considered in isolation from it.
Principle 3 – The right to development must be fulfilled so as to
equitably meet developmental and environmental needs of present and
future generations
Principle 5 – eradication of poverty – an indispensable requirement for
sust. dev.
Principle 15 – precautionary approach – “threats of serious or
irreversible damage, lack of full scientific uncertainty shall not be used
as a reason to postpone cost-effective measures to prevent
environmental degradation”
Principle 16 – polluter-pays principle “ internalisation of environmental
costs… polluter should in principle bear the cost of pollution”
Principle 17 – environmental impact assessment
New Delhi Declaration
Declarations of Principles of International Law relating to
Sustainable Development
1. The duty of States to ensure sustainable use of natural resources
2. The principle of equity and the eradication of poverty
3. The principle of common but differential responsibilities
4. The principle of the precautionary approach to human health, natural resources, and
• 5. The principle of public participation and access to information and justice
• 6. The principle of good governance
• 7. The principle of integration and interrelationship, in particular in relation to human
rights and social, economic, and environmental objectives
Sustainable development-2
• Four ways to look at it :
• - 1. Non-renewable. No more fossil fuels for future generations? Takes millions of years to replace, hence
• - 2. Fossil fuel extraction represents a natural asset that is converted to financial wealth for future
generations (social and economic capital)
• - 3. Impacts on environment and society are so great as to be non-sustainable
• - 4. The problem being not that the fossil fuels will run out, but that the demand for the resource may
disappear – consequences for the fossil fuel producer in developing countries; their dependence on oil & gas
export combined with weak government, implies that the economy, the state, the social and economic system
is dependent on the volatile commodity prices. There is a close correlation between the countries rich in
natural resources and the countries with high levels of poverty.
Sustainable development-3
• Best case scenario: governments establish a petroleum
fund investing some of the surplus from the more
profitable years and saving it for the less profitable
• Converting the extracted resource from the
underground account of the nation into an equivalent
or higher unit of social and economic capital, enabling
the state to promote sustainable development.
Sustainable development-4
• Implementing sustainable development:
– Treaties and other instruments that use sustainable development:
- WTO, EU Treaty, NAFTA, etc.
- Mulitilateral environmental agreements (MEAs)
- Kyoto Protocol, Biodiversity Convention, etc.
– Practice of international financial institutions (e.g.World Bank)
– Corporate social responsibility (CSR)
– Extractive Industries Transparency Initiative (EITI)
Good Governance
The developing countries must use modern forms of natural resource agreements
(concessions, licenses), regulations, taxation systems, and have institutional
structures in place in order to transform the revenues from natural resource
exploitation into economic and social capital with a long-term societal rate of
Extractive Industries Transparency Initiative (EITI)
Goal: increase transparency in transactions between governments and companies
within extractive industries. Initiative announced at World Summit on
Sustainable Development (WSSD) 2002 by Tony Blair, Uk Prime Minister.
There is a close correlation between the countries rich in natural resources and the
countries with high levels of poverty.
• Transparency over payments and revenues increases accountability and
therefore the likelihood that the revenues generated by the development
of natural resources are used in an efficient and equitable manner
leading to sustainable development. It can also reduce the risk of
diversion or misappropriation of resources.
EITI Implementation
• Azerbaijan, Ghana, the Kyrgyz Republic, and Nigeria are the first countries working
to implement EITI. Discussions on possible implementation are ongoing in several
countries including: Angola, Chad, the Republic of Congo, Gabon, Sao Tome and
Principe, and Timor Leste.
II. Corporate Social Responsibility (CSR)
(also called coporate citizenship, ethics, etc.)
• Sustainable development at the corporate level – voluntary codes or standards
• Starting point: Profit – if the company spends money that ultimately decreasing its
profits – shareholders should sue the company
However, need to take the long-term view in weighing the costs and benefits of the
various activities - Making good economic sense for the company
- Holistic view - business as a stakeholder in society
- Annual sustainability reports - measurement tools - determine whether it is making
progress toward its sustainability goal
- multinational corporations are increasingly focusing on the needs of all of their
stakeholders, especially in the communities where they are located.
- environmental and social impact management
- sustainability is a business philosophy
- see also Equator Principles – affecting the banks lending for the projects
CSR - UN Global Compact
- includes 2,000 corporations
–seeks to make globalization more equitable, thus more sustainable
Human Rights
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
Principle 2: make sure that they are not complicit in human rights abuses.
Labour Standards
Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective
Principle 4: the elimination of all forms of forced and compulsory labour;
Principle 5: the effective abolition of child labour; and
Principle 6: the elimination of discrimination in respect of employment and occupation.
Principle 7: Businesses should support a precautionary approach to environmental challenges;
Principle 8: undertake initiatives to promote greater environmental responsibility; and
Principle 9: encourage the development and diffusion of environmentally friendly technologies
Anti-Corruption (new in 2004)
Principle 10: Businesses should work against all forms of corruption, including extortion and bribery.
CSR – success story - 1
• - Chevron – Kutubu oil field, Papua New Guinea
• - importance of avoiding very expensive
environmental disasters – save money in the long run
• - public expectations - Papua New Guinea – weak
centralized government - central government lacked
the ability to prevent disruptions – (see Bougainville
copper mine – shut down by landowners angry at
environmental damage in 1989)
CSR -2
• shows the value of anticipating global trend of increasing
government environmental standards
• cheaper to build a clean facility than retrofitting later to
comply with tighter government standards
• competitive advantage – good envtl reputation – can be part
of the reason for Chevron’s success in winning a bid for a
contract for development of oil/gas field in the North Sea.
• long range outlook of oil companies – predict likely
alternative scenarios for the state of the world 30 yrs. from
- the Science
1. The Science
• Latest:
• Two weeks ago leading US climate researchers at the Scripps Intstitute
presented the “most compelling evidence” that human activities are
responsible for global warming, not natural climatic fluctuations, using
the oceans rather than the atmosphere.
The likely impacts of climate change include more frequent severe storms
and droughts, sea level rise, ice cap and glacier melt, large-scale species
extinctions, spread of disease carriers (of malaria, etc.) to more
northernly latitudes, and millions of refugees - environmental refugees
by 2050
2. UNFCCC – adopted 1992
189 State Parties
• A. Objective - Article 2 – achieve stabilization of atmospheric
concentrations of GHG…
B. Principles – Sustainable development Art.3(4)
Precautionary principle Art.3(3)
Common, but differentiated responsibilities Art.3(1)
C. Commitments - Article 4(1) all Parties develop national inventories
of anthropogenic emissions and measures to mitigate climate
D. Industrialized states to take the lead in reducing GHG emissions
Art. 4(2) just aim – Annex I (industrialized) Parties - return GHG
emissions to 1990 levels by 2000 (non-binding commitments)
2. UNFCCC (continued)
• E. Reporting requirement Art.12 –
(binding commitments) - Annex I Parties
and non-Annex I Parties (developing countries)
• F. Financial mechanism Art.11 for technology transfer
Art. 21 – Global Environment Facility (GEF)
• G. Conference of the Parties - COP-1 Berlin Mandate (1995)
more action needed to be taken – binding reduction
commitments resulted in :
3. The Kyoto Protocol
- Only just getting started
• 141 Parties
• A. Adopted in 1997 at COP-3
• B. Art.2, Art.3 – Core commitment – reduce overall emission
by 5% below the 1990 level in the first commitment
period 2008-2012
• C. Art.9 – review of Protocol,
• D. Art. 10 – reaffirms commitments in UNFCCC, Art.4(1)(c)
transfer of, or access to environmentally sound
technology to developing countries
• E. Art.11 – financing by Annex II countries (OECD),
3. The Kyoto Protocol (continued)
• F. Institutions: Art.13 - COPs , Art.14 - Secretariat,
Art.15 - Subsidiary bodies
• G. The Kyoto Mechanisms – flexible mechanisms
Art. 6 joint implementation
Art.12 clean development mechanism,
Art. 17 – emissions trading
• H. Article 18 – Non-compliance mechanism
• I. Article 25 - Entry into Force – February 16, 2005
• J. Marrakesh Accords at COP-7 operationalized Kyoto
IV. Emissions trading – Kyoto Art.17
• Cap and trade –
• Kyoto Protocol, Annex B commitments
• Emissions trading - Annex I Parties (industrialized
countries) acquire units from other Annex I Parties
and use them towards meeting their emissions
targets under the Kyoto Protocol.
• Enables Parties to make use of lower cost
opportunities to reduce emissions, irrespective of the
Party in which those opportunities exist.
Emissions trading -2
• Annex I Parties may therefore prepare to sell units
when they do not require them for compliance with
their own emissions targets
• Annex I Parties required to hold a minimum level of
units in its national registry to avoid “overselling”
units and subsequently being unable to meet their
own emissions targets
• Emission trading “shall be supplemental to domestic
Emissions trading -3
• Emission credits –
- need a strictly enforced cap – make CO2 credits
scarcer, hence more valuable, increasing incentive for
business to control emissions
• European Union Emission Trading Scheme (ETS)
launched January 1, 2005 - $9 pr. ton carbon
• The carbon price is the price of an allowance to emit
one metric ton of carbon dioxide
V. Clean Development Mechanism (CDM)
Kyoto Protocol Art. 12
• A. Projects carried out by Annex I Parties in non-
Annex I countries
• B. Cost-effective way for Annex I Parties to meet
their binding emission reduction commitments
- issued Certified Emission Reductions (CERs)
- use against their emission limitation
• C. Promote sustainable development for developing
- transition to more sustainable energy use
- capacity-building
• D. Involvement by private entities
• E. Market mechanism - attract foreign investment
• F. Additionality and supplementarity
• G. CDM CERs generated from the year 2000
• H. 2% from proceeds from CDM projects (CERs)
- to assist developing countries most vulnerable
to climate change to meet adaptation costs
Implementation of the
prompt start of the CDM
• A. Establishment of CDM institutions and procedures.
• B. Simplified modalities and procedures for small scale
project activities (renewable energy projects < 15MW capacity)
• C. Procedures for accrediting operational entities (OE) and
establishment of accreditation panel
• D. Procedures for approving new methodologies (baselines
and monitoring) – of the 56 received, 11 were approved
• E. First version of Project Design Document (PDD)
– 17 PDDs out for public comment
(Georg Børsting, CDM, EB)
• A. COP/MOP (COP until Kyoto Protocol enters into force)
• B. CDM Executive Board (EB) – supervise the CDM, incl. registration of
project activities and issuance of CERs
C. Panels established by the EB:
– Accreditation panel (w/ assessment teams)
– Methodology panel
– (Working group on Afforestation and Reforestation project activities)
D. Operational Entities (OE) – validation and certification
-------------------------------------------E. Parties
F. Hosts (Non-Annex I Parties or private entities in developing countries)
F. Investors (Parties or private entities)
F. Designated National Authorities (DNA)
G. Stakeholders
(from Georg Børsting, CDM, EB)
Project Cycle
• Project design document (PDD) – document with information on a proposed CDM
project submitted for validation
Validation -Independent evaluation of a CDM project by an operational entity
(accredited by the Executive Board)
Registration –Formal acceptance by the Executive Board of a validated project.
Monitoring -Collect and archive all relevant data for determining GHG emissions
during the crediting period
Verification - Determination of GHG emissions reductions as a result of the project by
an operational entity
Certification - Written assurance by an operational entity on achieved GHG emission
reductions stated during specified time period
Issuance of certified emission reductions (CERs) –On the basis of the certification
report, the Executive Board issues CERs
(Some Examples)
1. Energy industries (renewable-/non-renewable sources)
2. Manufacturing industries
3. Chemical industry
4. Construction
5. Transport
6. Mining/mineral production
7. Fugitive emissions from fuels (solid, oil and gas)
8. Solvents use
9. Waste handling and disposal
10. Afforestation and reforestation
11. Agriculture
Approved methodologies
(some examples)
• Grid connected biomass power generation that avoids uncontrolled burning
of biomass
GHG emission reduction through landfill gas capture and flaring - baseline established by a
public concession contract
Methane recovery from landfill gas used for electricity generation
• Industrial fuel switching from coal and petroleum fuels to natural gas
for landfill gas recovery
• Small scale (less then 60 MW) hydro replacing power from grid
• Oil field associated gas utilization (flaring conditions displacing energy in
Biomethanation of municipal solid waste (less than 50% compliance with
MSW rules)
- International Institute for Sustainable development
- Extractive Industries Transparency Initiative
-A Guide to the Climate Change Convention and its Kyoto Protocol - Clean Development Mechanism - World Resource Institute
- Scripps Institute of Oceanography
- European Union Emission Trading Scheme
- International Emissions Trading Association
- Global Legal Solutions, LLC.