Common, but Differentiated Responsibiliy in the Future Climate Change Regime : The Proposed Annex C and Annex C on Mitigation Fund as the Safeguard to

CHAPTER I
INTRODUCTION

A. Background Of The Paper
The world has witnessed those of the worst natural disasters in recent decade: Tsunami (Aceh), Earthquake (Kobe) and Hurricane Katrina (New Orleans). Scientists have linked the increasing number of these disasters, such as hurricane, to global warming. During the observation, it was concluded in figure 1 and 2 the close link between the increase of ocean temperature with hurricane intensity and scale of destruction. In addition, number of heat-waves is projected to increase. The incidence of floods is expected to increase due an increase in the frequency of heavy precipitation events and changes in such major meteorological phenomena as El Nino are likely to increase the frequency and severity of droughts and floods. The most feared fact is that global warming can reach one point of irreversible impact.
This urges international community to take immediate actions to reduce the already severe impact of global warming or at the very least halt its destruction. The milestone of international commitment in reducing carbon emission was created at Rio de Janeiro, Brazil, also commonly known as Earth Summit. The Summit was the initial point of the creation of United Nations Framework Convention on Climate Change (UNFCCC). The Conference of the Parties subsequently gave birth to Kyoto Protocol, which was agreed on 11 December 1997 at the third Conference of the Parties. However, this protocol is toothless in its implementation. While it imposes the utopian idea of reducing carbon emission, it was also driven by political motives and tension. This is particularly true for United States’ failure to ratify the Kyoto protocol and China’s and India’s rejection to be included into Annex B of the Protocol as States committing to reduce its carbon emission. United States argued that it is unfair to expect it to reduce its carbon emission and jeopardize its economic growth while the rapid-developing States like China and India, which emit significant amount of carbon emission, do not have obligation to participate in the carbon emission reduction. China and India argued that United States has emitted carbon emission for several hundred years since industrial revolution while China and India have just started to excel in their economic growth for few years consequently emitting more carbon emission, yet they have to take equal responsibility to United States to reduce carbon emission
One of the novel idea proposed is the inclusion of the Annex C and annex C on mitigation fund, which will create a new list of States committing to reduce carbon emission with different level of commitment. The reasons why the inclusion of this list will bring it huge benefit for climate change: (1). China and India will be encouraged to commit themselves in reducing the carbon emission since the proposed annex C and annex C on mitigation fund provides different level of commitment, transfer of technology and mitigation fund; (2). United States’ main concern not ratifying Kyoto Protocol will be accomodated by emission reduction commitment taken by China and India. Furthermore, United States will be able to utilize Clean Development Mechanism (CDM) to comply with its commitment under the Kyoto Protocol consequently pay far less than it should if it reduces carbon emission in its own territory
Moreover, the proposed inclusion of Annex C and Annex C on mitigation fund will then create a legal platform for States not listed in Annex B to participate in reducing carbon emission. United States as the 25% carbon emitter, as well as China and India will be encouraged to take part in carbon emission reduction. Under this scenario, the sustainable development will be safeguarded, principle of equity will be upheld. Conference of Parties in UNFCCC can focus more on the transfer of technology and mitigation fund, than to worry about the Kyoto Protocol failure to reduce carbon emission.
This paper will analyze Annex C and the Annex C Mitigation Fund, examines possible amendments to Kyoto Protocol from academic perspective and how it will encourage major carbon emitter States to take commitment in reducing emission. Furthermore, it will discuss how Indonesia can benefit from the inclusion of Annex C and Annex C on mitigation fund. In philosophical level, this paper will explain the integration of economy and ecology as the foundation stone of sustainable development concept and how economy and ecology can work as harmonious law.

B. Problems To Be Discussed
1. What are the underlying reasons of Kyoto Protocol’s failure to reduce carbon emission?
2. How can the proposed Annex C and Annex C on mitigation fund on Kyoto protocol cope with this failure?
3. How can Indonesia benefit from the inclusion of Annex C and annex C on mitigation fund?
C. Purposes and Benefits of the Research
1. General Purpose
The research is conducted to study the mechanism of carbon emission reduction under Kyoto Protocol, specifically regarding the failure on the current system to motivate political willingness in the global effort to reduce emission. The more specific focus is to introduce and analyze the proposed inclusion of annex C and annex C on mitigation fund in Kyoto Protocol and how it will effectively encourage major carbon emitter States to take commitment in reducing emission.
2. Specific purposes
There are three purposes extracted from the abovementioned general purpose, namely:
a. To elaborate the principle of common, but differentiated responsibility (CDBR) in the framework of sustainable development and its philosophical approach to reducing carbon emission;
b. To determine the obstacles of global effort to reduce carbon emission;
c. To introduce and analyze the proposed inclusion of annex C and annex C on mitigation fund as the most feasible solution to cope with such obstacles.
3. Benefits of the Research
The benefits of the research are:
a. To inform the public, generally, and academician, specifically, as to the imminent threat of global warming and urgent actions States in the world need to take to deal with it
b. To provide insight for Indonesia government with regards to the benefits it seeks to acquire from reducing carbon emission if annex C and annex C on mitigation fund proposal is realized.


CHAPTER II
RELATED LITERATURE
The purpose of Chapter II is to introduce the general theory on sustainable development, and irreversible impact on global warming. The introduction of the theory is to explain why sustainable development must be maintained and how this principle is the philosophy underlying States’ effort to reduce carbon emission. It will also elaborate on the related principles, which are intergenerational equity and intragenerational equity.
A. Why Sustainable Development?
Sustainable development is an expression of the dual recognition that development is essential and that from all possible forms that development could only take sustainable variety is desireable. Development may be unsustainable for many reasons, such as political, social and financial; but it is the interaction between economy and ecology that defines sustainable development. That implication is that an economy which disregards and undermines the ecology on which it is ultimately based is, in fact, undermining itself, no matter how robust it appears to be at the present. The relationship between economy and ecology is at the heart of sustainable development. The present part of the paper is aimed to explain why sustainable development is the underlying concept of States’ effort to reduce carbon emission.
1. Sustainable development promotes the Integration of Ecology and Economy
The staunchest opponent and constraint of ecology preservation is economy concern. Many developed States, including United States and Australia (Australia’s policy before Kevin Rudd was elected as the new prime minister), argued that signing Kyoto Protocol and taking commitment to reduce carbon emission will restrict its economy development. Former President Clinton (United States of America) particulary said that “Signing of the Kyoto Protocol is a threat to the property rights of all Americans, especially small business owners. Many small businesses will be forced to close their doors because of higher food and fuel prices”. If developed States would argue so, let alone developing States. Developing States that are struggling to escape poverty meet the growing aspirations to their still expanding populations find the concern for ecological soundness an added constraint to what is already a Herculian task. Apparently, the solution to this complicated situation is the concept of sustainable development.
There are two basic questions to the examine the validity of sustainable development concept. First, can the market be made to value, use efficiently and conserve ecological funtions and environmental services and their interactions? The answer is yes, provided that ecology can be brought into the domain of markets and translated into physical scarcity into economic scarcity and their physical interactions into market interactions through prices.
Second, how? A fundamental condition for the efficient functioning of markets is the existence of secure, exclusive, and enforceable property rights over all resources and the goods and services they produce. What is unowned is unmarketed, what is unmarketed is unpriced, what is unpriced is mismanaged, overused, and wasted. Thus, it all boils down to the fact that many natural resources, their ecological functions and amenity services are unowned and as a consequence free rather that economic goods. To bring them into the domain of markets, it is required to establish some form of secure, exclusive and enforceable property rights over them. Once all resources are securely owned, the economy is no longer the vicious enemy of ecology but its staunch protector, who makes everyone that protects and enhances it is duly rewarded. In return, ecology performs the vital functions of ecological balances, resilience, productivity for the economy as well as generates a steady stream of amenity values that enhance the quality of life and social welfare. The parsiminonious laws of nature become part of the laws of scarcity of the economy, the economy of nature becomes the nature of economy.
The concept of sustainable development is the foundation stone of UNFCCC and subsequently Kyoto Protocol. States are increasingly aware that the harmonious development of economy and ecology is the key to motivate them to reduce carbon emission. Once development of ecology means development of economy, States will no longer hesitate to reduce their carbon emission.
2. Sustainable development promotes Intergenerational equity and Intragenerational equity
The other constraint to ecology preservation is the inequality between what the present generation has to sacrifice for next generation and what one State has to sacrifice for another State emission of carbon emission. Sustainable development also serves as the answer to this concern of equity. This part of paper will elaborate on international community’s behaviour towards the principle of intergenerational equity and intragenerational equity and how sustainable development can promote this principle.
a. Intergenerational equity
The concept of inter-generational equity has been advanced to explain the optimum basis for the relationship between one generation and the next. The theory requires each generation to use and develop its natural and cultural resources in such a manner that it can be passed on to future generations in no worse condition that it was received. Central to this idea is the need to conserve options for the future use of resources, including their quality, and that of the natural environment. This concept is endorsed by international community evidenced of the inclusion of this principle in many declarations. The generational perspective underlies references in the 1972 Stockholm Declaration to human’s responsibility to protect the environment and the earth’s natural resources. Inter-generational equity is explicitly referred to in Principle 3 of the 1992 Rio Declaration, which provides for the right to development to be fulfilled “so as to equitably meet developmental and environmental needs of present and future generations.” It is reiterated in the same terms in the 1993 Vienna Declaration on Human Rights, while Article 3(1) of the 1992 Convention on Climate Change calls for inter-generational equity to be taken into account in decisions of the parties to that convention. These international declarations indicate the importance now attached in international policy to the protection of the environment for the benefit of future generations.
Brown-Weiss argues that inter-generational equity is already part of the fabric of international law. The policy which underlies a number of global environmental treaties is the avoidance of irreversible harm, as in the Ozone Convention, THe Convention on Biological Diversity, and the Convention on Climate Change. The phasing out of dumping at sea, particularly of radioactive waste, the elaboration of a comprehensive regime of ecosystem protection for Antartica including the prohibition on mineral-related activities and the designation of the continent as a world park, and the adoption of further controls on whaling through the International Whaling Commission and regional conventions do point to a real concern for the interests of future generations. This reflects international community behaviour to favour intergenerational equity principle.
Next, although States’ behaviour favours intergenerational equity, but question seems to arise as to why the current generation has to sacrifice its economy advancement and usage of natural resources for the next generation. This problem is avoidable by the fusion of the sustainable development principle. Sustainable development, as explained above, is capable of bringing ecology into the regime of economy. Many mechanisms are developed under Kyoto Protocol, being: Joint implementation, Clean Development Mechanism and Carbon Trading, which provides great financial reward for environmental preservation. The essential point of the theory, that human has a responsibility for the future, and that this is an inherent component of sustainable development, is incontrovertible, however it is expressed. This point is best expressed in the following question. If sustainability means a sacrifice by the current generation of poor so that the next generation of poor would have a better standard of living, where is the intergenerational equity? If on the other hand, sustainability means that future generations should be able to enjoy the same poverty as the current generation, why sustain poverty? Clearly, sustainable development is meant to benefit both the current and future generations
b. Intragenerational Equity.
Intragenerational equity means that it is important for current generations to ensure that our finite resources are spent sensibly on solving environmental problems, taking into account the relative scale of the potential impacts and the distribution of risks and benefits. In both Brundtland Report and Agenda 21 adopted by the United Nations Conference on Environment and Development in June 1992, there is no doubt that redressing the imbalance wealth between the developed and developing worlds and giving priority to the needs of the poor are important policy components of sustainability. Unlike intergenerational equity, intragenerational equity addresses inequity within the existing economic system. Several substantive provisions, and the Climate Change and Biological Diversity Conventions imply that intragenerational concerns are now an element of international environmental law.
Intragenerational equity particularly is the most controversial issue hitherto and is the core obstacle in global effort of reducing carbon emission. More specifically, the problem lies in the question of how to determine the extent of burden each State has to share. The general principle of common, but differentiated responsibilty is designed to address this issue. However, it lacks specific procedure on determining the extent of responsibility. Chapter four of this paper will address this issue by the proposed Annex C and Annex C on mitigation fund to draw a clearer line on the extent of each State burden to reduce carbon emission.
B. Global Warming With The Irreversible Environmental Impact
It is almost undisputed that the damage caused by global warming carries the risk of irreversible impact. United Nations’ report, World Wildlife Funds’s report, many columnists and scientists have confirmed the validity of this claim. According to Steve Connor of The Independent, rapid warming of Earth is irreversible and "past the point of no return." United Nations’ report titled 'Climate Change 2001’ predicts the new century will bring, 'large-scale and possibly irreversible changes affecting every last person on earth. WWF reported that ice levels in the Arctic polar region have idled at their lowest recorded levels for the past four years. Normally sea ice will recede in the summer and re-form in the winter. The ice has recently been receding but not returning. Reporters like Connor cite current simulated models that conservatively estimate the northern ice cap to completely melt by 2070.



CHAPTER III
RESEARCH METHODOLOGY
The methodology of this research is a literature methodology. This type of research is descriptive and analytical. The purpose is problem solution through a feasible proposal and in its discipline is a multi-disciplinary research.
The type of data used is secondary consisting of reports from relevant international organization and bureaus and international instruments relevant to facilitate the analysis, understanding and elaboration of the general theory asserted. It also relies on books, internet materials, scientific articles and journals



CHAPTER IV
ANALYSIS
The critical issue now is which countries should take the main responsibility for reducing greenhouse gas emissions in the next phase after 2012 when the first commitment period of the Kyoto Protocol comes to an end. Is it sufficient to carry on with the existing Kyoto Protocol arrangement that the current Annex I Parties are to have more stringent commitments under Article 3 to be spelled out in Annex B of the Kyoto Protocol? Or should the fast-growing, developing countries - which emit more Green House Gases (GHG) than several developed countries, such as India and China - also take on binding commitments for the second commitment period or soon thereafter?
Unfortunately, there seems to be a complete lack of leadership regarding this issue each time the Parties resume discussions. This occurred in Nairobi, Kenya, in November 2006, at the annual Conference of the Parties to the Climate Convention (COP) and the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (COP/MOP). Instead of resolving the problem, there is a constant effort to justify the lack of action by blaming others. Since the United States, which produces a quarter of the world's , is not a Party to the Kyoto Protocol, India and China argue that they should not have to agree to binding reduction commitments. The United States argues that because the fast-growing developing countries, emitting large amount of GHGs, have no binding commitments, the United States should not have any either. Even the United Nations Climate Change Conference in Bali 2007 from 3-15 December 2007 and the on-going Bangkok Climate Change Talks 2008 from 31 March-4 April 2008 did not seem to result in a clear framework to address the issue of inequity.
The goal of the international community is to move much more quickly to act on climate change, especially now that it does not have decades to determine what to do. Just as with the Montreal Protocol on Substances that Deplete the Ozone Layer, the solution must be found by crafting equitable bargains, tailored to the issue of climate change, regarding economic and environmental issues between developed and developing countries. This paper proposes amending the Kyoto Protocol to incorporate "Annex C" which would include the fast-growing developing countries that emit large amounts of GHGs. Furthermore, a separate provision, Article 11-Bis, would be added to the Kyoto Protocol, entitled the "Annex C Mitigation Fund." This fund would specifically assist the fast-growing developing countries in achieving compliance with their new Kyoto Protocol commitments to be specified in AnnexC.

Amending the Kyoto Protocol by adding Annex C and the Annex C Mitigation Fund would create the needed equitable bargain between developed and developing countries. This bargain would balance the primary interests of developing countries, such as economic development to eradicate poverty and address debt issues, with the primary interest of the developed countries to protect the climate system. Furthermore, this bargain would operationalize the concept of sustainable development, which the international community agreed to implement through the Rio Declaration and Agenda 21 adopted at the Rio Conference in 1992. Amending the Kyoto Protocol by adding Annex C and the Annex C Mitigation Fund would reflect the principle of common, but differentiated responsibilities enunciated in the Rio Declaration. Ultimately, this proposal would promote sustainable development while upholding the stated objective of the UN Framework Convention on Climate Change: "stabilizing GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system."
This Chapter will explain the underlying constraint to the successful reduction of carbon emission in the context of international law, the principle of common, but differentiated responsibility and its operation under Kyoto Protocol and finally elaborate the proposed amendment of the Kyoto Protocol to include Annex C and the Annex C mitigation fund
A. Sovereign Equality And Equity - Asymmetrical Rights And Obligations
Under international law, countries have accepted the principle of sovereignty to include sovereign equality as reflected in the UN Charter, thereby giving all countries equal rights and obligations on the international plane. Addressing global environmental problems using treaties that require universal participation requires developed and developing countries to take on obligations. Yet, to encourage universal participation and reflect the principle of equity in international law, these environmental treaties must provide differentiated responsibilities for developing countries. This is because developing countries historically have not had the same economic growth and social benefits as developed countries, and they have contributed to a lesser degree to the environmental problems. This historical context, along with the developing countries' lack of capacity to address the environmental problems, have led to the idea of asymmetrical or differential rights and obligations for developing countries in international environmental law.
The depletion of the stratospheric ozone layer was the first environmental problem regarding the atmosphere that was tackled on a global scale using differential treatment for developing countries. In many ways, it was an easier problem to solve than climate change, since there were just a few manufacturers of ozone depleting substances, as opposed to all car drivers, for instance, being emitters of CO<2>, a GHG. Once they came up with a substitute for chlorofluorocarbons (CFCs), the manufacturers were willing to produce it. Most of the countries that were big producers and consumers of CFCs ratified the Vienna Convention for the Protection of the Ozone Layer, followed by the Montreal Protocol on Substances that Deplete the Ozone Layer. In the Montreal Protocol, the negotiating countries adopted an approach whereby all countries were to take action, but developing countries were to have a delayed compliance schedule. Shortly thereafter, the Montreal Protocol was amended to include a multilateral fund to facilitate the replacement of technology using CFCs in developing countries, thereby persuading India and China to become Parties to the Protocol
B. General Principle of Common, but Differentiated Responsibility
Historically, developing countries have had different developmental, social, and environmental needs and priorities and have not had the same economic benefits as the developed countries that degraded the global environment in their process of industrialization. However, the picture in China and India is rapidly changing as those countries are growing exponentially and experiencing immense environmental problems that need to be dealt with. Yet, they are much more aware of environmental degradation than were the developed countries when they began industrializing and, to a certain extent, they are addressing their environmental problems using a new, “cleaner” technology.
Even in this context, it is not equitable for developing countries to equally share the burden of controlling GHG emissions when, until recently, developed countries have done most of the polluting. This is because economic growth is still the primary strategy for eradicating poverty and should not be prohibitively restricted through the use of environmental controls. Due to this principle of equity, asymmetrical or differentiated obligations for developed and developing countries have become the norm in international environmental treaties. This equity principle is now often called "common, but differentiated responsibility" and is expressed in Rio Declaration Principle 7 as:
States shall cooperate in a spirit of global partnership to conserve, protect and restore the health and integrity of the Earth's ecosystem. In view of the different contributions to global environmental degradation, States have common but differentiated responsibilities. The developed countries acknowledge the responsibility that they bear in the international pursuit to sustainable development in view of the pressures their societies place on the global environment and of the technologies and financial resources they command.
Despite the fact that the CBDR principle is not considered binding international law, it has become a cornerstone of burden-sharing structures adopted in international environmental treaties. In the context of climate change, developed countries have historically contributed the most to the climate change problem and have the greater technological and economic capacity to address the problem, whereas developing countries have not significantly contributed to climate change and are more vulnerable to its impacts because they lack the resources to address the problem. As a result, developed countries should take primary responsibility for controlling Green House Gas emisions
The CBDR principle can also be seen as requiring obligations of solidarity assistance in the form of technology transfer and financial assistance. To do this, developing countries would make the implementation of their commitments in environmental treaties conditional on the receipt of assistance from developed countries. The Climate Convention reflects this theory: "the extent to which developing country Parties will effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology."

The CBDR principle does have its limits. First, it is only meant to last for a limited time period to allow the developing countries to achieve the same level of economic growth as industrialized countries, while simultaneously addressing environmental issues. It is not supposed to institute a permanent arrangement. Once the differences between the countries cease to exist, differential treatment should no longer be used. Second, the CBDR principle should not be incompatible with the object and purpose of the treaty in question. If implementation of the CBDR principle defeats the object and purpose of the treaty, it has gone beyond the limits of the treaty. For example, the object and purpose of the Climate Convention is "stabilizing GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." This objective would be defeated if the developing countries' emissions of GHGs continue to grow to meet their development needs, leading to dangerous anthropogenic interference with the climate system. Thus, sustainable development requires that economic growth in all countries is balanced with the climate change objectives.
C. How to Operate Common, but Differentiated Responsibility in the Climate Convention and the Kyoto Protocol
Article 3 of the Climate Convention dictates that the CBDR principle is to be used as a guiding principle. By applying the CBDR principle, the Climate Convention specifically stipulates in Article 4 that the developed countries are to "take the lead." However, it does not give Annex I Parties (developed countries) any binding commitments; it only "urges" them to reduce their GHGs. Non-Annex I Parties (developing countries), however, were not given such an "aim" to reduce GHGs, but the Convention does specify that non-Annex I Parties can take on voluntary commitments to do so. However, all Parties were required to fulfill binding commitments to report on their national inventory of anthropogenic emissions and measures taken to implement the Climate Convention. The timetables for the reporting requirements were differentiated among the Parties: developed countries were given a six-month deadline, developing countries were given three years, and the least developed countries could report at their discretion.

At the first Conference of the Parties to the Climate Convention, COP-1, the Parties agreed in the Berlin Mandate that the commitments to reduce GHGs under the Climate Convention needed to be strengthened, but stipulated again that the Annex I Parties were to "take the lead." As a result, the developing countries were not given any binding commitments to reduce GHG emissions in what became the Kyoto Protocol
The core commitment of the Kyoto Protocol, stated in Article 3, also clearly captures the CBDR principle. That commitment requires Annex I Parties to reduce their overall emissions of GHGs by at least 5% below the 1990 levels in the commitment period 2008 to 2012, in accordance with the reduction commitments specified in Annex B of the Kyoto Protocol. Only Annex I Parties were given binding reduction commitments while non-Annex I Parties were not given any targets.

The Kyoto Protocol also introduces three market-based mechanisms, Kyoto Mechanisms, to assist Annex I Parties in fulfilling their emission reduction commitments. These are important because Parties to the proposed Annex C of the Kyoto Protocol would be able to use all three mechanisms. The first mechanism, joint implementation, allows an Annex I Party to finance a project in the territory of another Annex I Party and get credits toward its own emissions reduction commitment. The second mechanism, emissions trading, allows an Annex I Party to buy credits or allowances from other Annex I countries to fulfill its emissions reduction commitments. The third mechanism, the Clean Development Mechanism (CDM), is currently the only market mechanism where the developing countries can participate in climate change mitigation efforts. With CDM, an Annex I Party finances a project in the territory of a non-Annex I Party and receives credit toward its emissions reduction commitment. The CDM provision specifies that the purpose of the CDM is to assist non-Annex I Parties in achieving sustainable development and contributing to the Climate Convention's objective, while at the same time assisting Annex I Parties to fulfill their emission reduction commitments under the Kyoto Protocol.
Looking at the planet as a whole, it makes no difference where the GHGs are reduced, because the atmosphere is one global system with no borders. However, reducing emissions in less developed countries is more cost effective due to the high marginal cost of GHG abatement in developed countries as compared to that of economies in transition (EIT) and developing countries. Nevertheless, there are limits to the use of the Kyoto Mechanisms as they are meant to be supplemental to domestic action and not the primary source of action.

D. Amendment of the Kyoto Protocol to Include Annex C and the Annex C Mitigation Fund as the Solution to Inequity
The Berlin Mandate and the Climate Convention both state that Annex I Parties should "take the lead." This can be interpreted as implying that developed countries are to take a leadership role based on the CBDR principle. However, the ordinary meaning of "to take the lead" also implies that once the Annex I Parties (developed countries) have taken the first step, namely to fulfill their commitments in the first commitment period, then non-Annex I Parties (developing countries), are to "follow" with their own binding reduction commitments. This interpretation is drawn from the context of the Climate Convention's object and purpose of "stabilizing GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system." Not taking drastic action now to stabilize the GHGs will lead to dangerous interference with the climate system.

Assuming Annex B Parties actually take the lead by fulfilling their obligations during the first commitment period of the Kyoto Protocol, developing countries (at least those emitting large amounts of GHGs) then need to follow with commitments of their own during either the second or third commitment period. It is becoming quite clear that, in terms of development, some developing countries, such as China and India, are growing much more rapidly than they were at the time the Kyoto Protocol was adopted in 1997. Consequently, they are emitting much greater amounts of GHGs than many developed countries. This new situation must be reflected in the Kyoto Protocol's commitments. Given the scientific indications that climate change needs to be addressed urgently, all Parties that are major emitters of GHGs (both Annex B Parties and countries like China and India) must have binding commitments. Otherwise the object and purpose of the Climate Convention would be defeated: the international community would not be able to stabilize GHGs at a level that would prevent dangerous anthropogenic interference with the climate system
If the major GHG-emitting developing countries are not given binding reduction commitments, the CBDR principle will have been taken beyond the limits of the object and purpose of the Climate Convention. However, it is important to stress that the assumption of binding commitments by major GHG-emitting developing countries is still contingent upon the actions of the developed countries. The developed countries still need to "take the lead" by reducing their emissions during the first commitment period as dictated in Annex B and by committing to new strengthened reduction targets for the second commitment period.

Using the Montreal Protocol as a model, the Parties to the Kyoto Protocol should amend the Kyoto Protocol to create Annex C, a new category of Parties with binding commitments. Annex C would include non-Annex I Parties with high levels of GHG emissions, such as China, India, and Brazil. Annex C Parties would have binding limitation or reduction commitments starting in the second (2013-2017) or third commitment period (2018-2022) with a five-year delayed compliance schedule.
The definitions in Article 1, Paragraph 7 of the Kyoto Protocol would also be amended to reflect the new Annex C. The definition of a "Party included in Annex I" (Annex I Parties) would now read "a Party included in Annex I to the [Climate] Convention ... or a Party listed under Annex C of this Protocol." Technically, Annex C Parties would be considered Annex I Parties in the context of the Kyoto Protocol, but not in the context of the Climate Convention, where they would remain non-Annex 1 Parties.
Furthermore, Article 3 of the Kyoto Protocol, containing the core commitment, would be amended to include Annex C as follows: "The Parties included in Annex I shall ... ensure that their ... emissions ... do not exceed their assigned amounts, calculated pursuant to their quantified emission limitation and reduction commitments inscribed in Annex B or Annex C." As they grow and emit greater amounts of GHGs, developing countries would graduate into the Annex C category. China and India would qualify right away to be included in Annex C. For some developing countries included in Annex C, there would only be a limitation on emission of GHGs and not a reduction requirement. Within Annex C, the amount of reductions or limitations would be differentiated, just as they are in Annex B among the developed countries.

An important question for further analysis is when the CBDR principle ceases to apply because the former developing country has reached a certain level of economic growth, no longer being different from developed countries. In regards to emissions, would the state then graduate from Annex C into the Annex B category, joining the other developed Parties? One would have to take into account the capacity of fast-growing countries to take on the same binding commitments as long-time developed countries. Furthermore, one would need to determine at what level of development China and India should leave the developing country classification and enter the ranks of developed countries
To complement Annex C, a new Annex C Mitigation Fund needs to be incorporated into the Kyoto Protocol as "Article 11Bis," placed right after Article 11, the financial provision. This amendment would be adopted simultaneously with Annex C in order to promote the early participation of Annex C Parties. This new arrangement would depend on the political will of the developed countries, since to a large extent they would be funding the Annex C Mitigation Fund. This fund would have to be substantial to help the Annex C Parties receive technology transfers and other assistance much faster than provided by the current financial mechanism under the Climate Convention and the Kyoto Protocol that is operated by the Global Environment Facility. The financing for the Annex C Mitigation Fund would come from a specific small fee charged in emission trading transactions. As a result, the funding would come from developed countries because Annex B Parties are currently the only Parties using the emissions trading mechanism. As Annex C Parties start to use the emissions trading mechanism, they would also participate in funding the Annex C Mitigation Fund.

Following the trend in the UN to partner with the private sector, the Annex C Mitigation Fund would not necessarily be run by the Global Environment Facility, but could be managed by an international private bank accountable to and guided by the COP/MOP of the Kyoto Protocol. The goal would be to use the more efficient private banking system to track, manage, and disperse the funds earmarked for the financing of the incremental costs of "clean" technology transfer and other assistance to Annex C countries. The chosen bank would already have adopted the Equator Principles.
One could argue that developing countries emitting large amounts of GHGs would be more likely to take on voluntary commitments than agree to Annex C. However, setting up a system in which developing countries are in a separate category seems more advantageous than subjecting them to the binding commitments under Annex B. Furthermore, the Annex C system includes the five-year delayed compliance schedule and the Annex C Mitigation Fund set up specifically for developing countries. The purpose of an Annex C Mitigation Fund is to facilitate the assumption of binding commitments by developing countries emitting large amount of GHGs without having to slow down their economic growth in any drastic way, thereby promoting sustainable development
Regarding the Kyoto Mechanisms, Annex C Parties would be able to take advantage of all the flexible mechanisms. Currently, developing countries can only participate in the clean development mechanism. Participating in all three mechanisms is important because being eligible to participate in emissions trading can help Annex C Parties economically while at the same time fulfilling their reduction commitments. For instance, when they use energy efficiency to cut back on GHG emissions, they can sell the surplus credits and then use the revenue to fund new cleaner energy technology. However, Article 17 of the Kyoto Protocol would have to be amended to read as follows: "The Parties included in Annex B and Annex C may participate in emissions trading for the purposes of fulfilling their commitments under Article 3". In the same manner, joint implementation would give large GHG emitting developing countries the possibility of funding projects in the territory of other Annex I Parties and receiving credits toward their own commitment
In terms of the CDM, Annex C Parties, such as India with 33.02% of the program's projects, would likely want to carry on as host countries to projects carried out under the CDM. Yet, Article 12 of the Kyoto Protocol specifically states that the mechanism shall assist Parties not included in Annex I. This provision would have to be amended because it is very important that Annex C Parties receive assistance in "achieving sustainable development and in contributing to the ultimate objective of the Convention," as specified in Article 12. To achieve this, the text of Article 12 should be amended to read: "The purpose of the clean development mechanism shall be to assist Parties in Annex C and Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission reduction limitation and reduction commitments under Article 3." In other words, Annex C Parties could continue to host CDM projects, helping them achieve sustainable development. At the same time, these Annex C Parties could also carry out CDM projects in other developing countries and use the credits they receive to comply with their Annex C reduction commitments. For CDM projects carried out by Annex B Parties in the territory of Annex C Parties, the credits would go to the Annex B parties
In order to incorporate Annex C and the Annex C Mitigation Fund into the Kyoto Protocol, the Protocol would have to be amended by the Parties. Amending the Kyoto Protocol in order to incorporate the Annex C Mitigation Fund as Article 11Bis requires that a proposed amendment be sent to the Parties at least six months before the COP/MOP where it would be proposed for adoption. If the Parties to the Kyoto Protocol could not reach agreement by consensus, the amendment would be adopted by a three-fourths majority vote of the Parties. The amendment would enter into force for the Parties that accepted it ninety days after at least three-fourths of the Parties deposited their instrument of ratification. Adopting a new Annex C to the Kyoto Protocol would follow the same procedure as for an amendment to the Protocol.

Amending the Kyoto Protocol to incorporate the new Annex C and Annex C Mitigation Fund would only depend on the votes of the Parties to the Kyoto Protocol. The Parties to the Climate Convention that are not Parties to the Kyoto Protocol do not have a right to vote at the COP/MOP meetings. Thus, incorporating Annex C rather than expanding the list in Annex B avoids the need to amend the Climate Convention in order to add the developing countries to the Annex I list of the Convention. In this way, the only Parties that are necessary to vote on and accept the amendment would be Parties to the Kyoto Protocol.
E. Forest First in the Fight Against Climate Change – How Can Indonesia Benefit from Annex C and Annex C on Mitigation Fund?
Global warming can not be avoided without action on deforestation, which causes 18-25% of global carbon emissions, second only to energy. Forests offer the single largest opportunity for cost-effective and immediate reductions of carbon emissions. This is confirmed by the Stern Report of 2006, and the Mc Kinsey and IPCC reports of 2007. The world’s forest trees and soils contain twice as much carbon as is in the Earth’s atmosphere. Tropical forests store 120-400 tonnes of carbon/hectare. Burning them contributes huge quantities of CO2 emissions (approximately 400 million tonnes/year from Brazil and 350 million tonnes/year from Indonesia). In short, this would mean that saving forest would probably save the world from the threat of global warming.
Despite this fact, Kyoto Protocol lacks support in forests fight. Article 12 Kyoto Protocol does not explicitly refer to “removal” or “sinks” as the primary activity. Historically, forestry CDM suffered from a numerous States’ rejection. European Union States, G77 States, including China, rejected forestry CDM. Even the world largest forestry States Brazil and Congo, rejected forestry CDM. In the 6th COP, forestry was incorporated in CDM, however it is only limited to reforestation and aforestation, while avoided deforestation was completely rejected.
Currently, Indonesia is the third largest forestry State and the third largest carbon emitter on the back of deforestation which contributes 85% of its emission. The forest burn in Indonesia in 1997/1998 was condemned to be the worst environmental damage ever caused in this century. With the on-going damage to Indonesia’s forestry, Indonesia is currently struggling to avoid deforestation. Unfortunately, this effort is not covered by CDM since avoided deforestation is not one of the programs. The only access to fresh fund developing States have is CDM and Indonesia is even denied the access to such fresh fund under current Kyoto Protocol system.
However, scintilla of hope was observed in recent years. In the recent COP in Bali 2007 from 3-15 December 2007 and the on-going Bangkok Climate Change Talks 2008 from 31 March-4 April 2008, forest fight was heavily discussed. It is not clear as to what extent, but it is certainly a good sign for Indonesia.
One of the core problems in environmental fight in Indonesia, aside from law enforcement, is lack of financial capability and technology. Inclusion of Annex C and Annex C on mitigation fund means that: 1. Avoided deforestation can be included in mitigation fund project. 2. Indonesia will receive substantial amount of fresh fund and technology transfer. Indonesia will also improve its participation in the global fight against global warming by taking a commitment under the new Kyoto Protocol system.

CHAPTER V
CLOSING
The deductive conclusions from this paper are:
1. The integration of economy and ecology is the heart of sustainable development. The harmonious advancement between these two variants will create intergenerational and intragenerational equity. International community has upheld this principle as a common value, in fact, Convention on Climate Change and Kyoto Protocol adopted this philosophy.
2. Climate change needs to be addressed much more aggressively than it has been, and solutions ought to include the participation of the whole international community The Stern Report also reinforced this claim stating that is would cost 1% of gross domestic product (GDP) each year to take action now on climate change, versus 20% of GDP each year to take action later. Kyoto Protocol’s failure in the past was due to its inability to persuade States to agree that intragenerational equity should apply in the way of common, but differentiated responsibility. Developed States are reluctant “to take the lead” as the Climate Convention art 4(2)(a) imposes by arguing that rapid-developing States also contributed carbon emission significantly.
3. The critical issue is determining which countries should take action after the first commitment period of the Kyoto Protocol runs out in 2012. Under the principle of common, but differentiated responsibilities, it is imperative that the Parties to the Kyoto Protocol amend the Protocol to incorporate Annex C and the Annex C Mitigation Fund. Annex C would include the fast-growing developing countries emitting large amounts of GHGs. It would give them binding reduction commitments. The Annex C Mitigation Fund would enable developing countries emitting large amounts of GHGs to take on binding commitments without having to slow down their economic growth in any drastic way. At the same time, the Fund would reaffirm the developing countries' obligation to promote sustainable development.
4. The inclusion of annex C and annex C on mitigation fund will also accommodate Indonesia’s effort in reducing its carbon emission. This framework can include avoidance of deforestation as part of the mitigation fund allocation. Furthermore, it will also provide a legal platform on technological transfer and financial assistance from developed States. This is important since the current CDM mechanism, notably the only mechanism enabling Indonesia to participate in carbon reduction, does not favour avoidance on deforestation.