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Replenishment of the Montreal Protocol Multilateral Fund for the 2009-2011 Triennium

Daniel A. Reifsnyder, Deputy Assistant Secretary for Environment and Sustainable Development
Remarks to the 28th Meeting of the Open Ended Working Group of the Montreal Protocol on Substances that Deplete the Ozone Layer
Bankok, Thailand
July 8, 2008

The United States would like to thank the Technical and Economic Assessment Panel (TEAP) for its efforts in developing this report on the 2009-2011 replenishment of the Montreal Protocol’s Multilateral Fund. This report highlights many of the accomplishments by Parties -- such as the nearly complete elimination of the vast majority of ozone depleting substances.

Compared with the U.S. $470 million replenishment level for the last triennium, this report indicates that only U.S. $175 million is estimated to be needed to finish our important work toward the 2010 and 2015 complete phaseout of controlled production and consumption of chemicals such as CFCs, halons and methyl bromide.

This is a significant accomplishment and one that is extraordinarily cost effective -- an estimated 420,000 ODP tons of production and consumption of ozone depleting substances (ODS) will be phased out from the investments made to date at an average cost effectiveness of approximately U.S. $5.40 per kilogram.

We understand that, in the next triennium, the Multilateral Fund primarily must seek to accomplish two things simultaneously: (1) it must complete the phaseout of CFCs, the original purpose and goal of the Montreal Protocol; and (2) it must begin to fund the accelerated phase out of HCFCs, in implementation of the historic agreement we reached in Montreal last September. We understand as well that the Multilateral Fund may consider funding some demonstration work on the destruction of ODS now contained in banks.

Of these three potential tasks for the next triennium, the most critical would seem to be completing the phaseout of CFCs because this is work that must be accomplished in the next triennium and because only we in the Montreal Protocol can do it.

Beginning to fund the accelerated phaseout of HCFCs will also be critical, but phasing out HCFCs will not be accomplished in the next triennium or the next or the next. It is an effort that will extend over multiple years, and implementing those aspects of our decisions from last year that have to do with substitutes and alternatives that minimize other impacts on the environment may ultimately involve others outside the Montreal Protocol as well.

Funding initial work on destruction of ODS now contained in banks has a temporal component, as I noted yesterday in my remarks, but this is also work that may ultimately involve those outside the Montreal Protocol.

I make these observations because funding issues ultimately involve decisions about priorities and what can realistically be accomplished in a finite period of time with finite resources.

At the moment, the key aspect of replenishment that is highly uncertain is that aspect related to the accelerated phaseout of HCFCs. We congratulate the Task Force for producing its assessment in the absence of key decisions by the Executive Committee and by the Parties, and in the total absence of HCFC Phaseout Management Plans (HPMPs) that will be developed by the Parties. If the HCFC phaseout costs projected for the next triennium vary widely, those for subsequent triennia likely bear little resemblance to the situation that we will ultimately and actually face because, fortunately, for the replenishments in those subsequent triennia, we will have HPMPs in place that will constitute a much more realist barometer of actual costs.

Returning, however, to the next triennium from 2009 to 2011, we think the past cost effective operation of the Fund provides an excellent guide as we move forward, as does the agreement last year to “stable funding” in replenishment. And we believe that the TEAP report effectively demonstrates that the HCFC phaseout can easily be accommodated in this important context of stable funding.

In this connection, I would note that the Montreal Protocol has been funded at various levels from its initial capitalization through its five subsequent replenishments, none of which even approach the upper end of the range identified by the TEAP, as may be seen on page 29 of the TEAP Task Force Report.

The report describes the use of pragmatic tools such as HPMPs that are presently under consideration presently within the Fund’s Executive Committee. We have a long tradition of pragmatism in the Montreal Protocol and HPMPs are a practical, structured, commitment-based planning device. These HPMPs will be a useful tool to help developing countries put in place policies that begin to tackle the growth of HCFCs now and help countries identify sources of HCFCs, both those eligible for assistance and those sources that must be tackled on their own.

This commitment to early action will not only provide an environmental benefit to the ozone layer by cost effectively reducing growth in HCFCs but will provide a pragmatic management tool to Article 5 Parties.
We are pleased by the progress in bringing forward these plans because in analyzing the TEAP’s report, we were gravely concerned about underlying premise that growth in HCFCs is projected to continue unabated and unrestrained despite the agreement last year to control measures. Analytically, it simply does not make sense to us that countries would agree to near term action yet not begin to develop reduction measures to take effect immediately after the base year of 2009 and 2010.
In addition, we do not think the unabated growth of HCFCs is a good precedent in terms of approaches to global management of environmental issues.

If the Fund were simply to pay for an unlimited amount of future consumption of HCFCs, we fear this would send a distorted signal to the market and would encourage growth of HCFCs when clearly, we can all agree that we Parties are attempting to reduce such consumption. Further, it would call into question whether monies invested by the global community are being used to address an environmental problem, or to exacerbate it.

A more appropriate basis for discussion may start with consumption at 2006, the most recent year of reported data prior to the HCFC acceleration agreement, to address this significant and fundamental issue of the perverse incentive for growth that may otherwise be institutionalized by this body.

Lastly, we think that the report clearly highlighted that the circumstances in different groups of countries are vastly different. A differentiated approach to “servicing only” countries and to countries with significant manufacturing may be warranted.

We look forward to initial exchange of views on these and other issues at this Open Ended Working Group and to agreement on a stable replenishment at this year’s Meeting of the Parties.

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