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any strategy that can shape these investments to meet the crucial objectives of global environmental protection.

The economic growth anticipated for so many parts of the developing world also demands new U.S. policies that can help our industries participate in that growth and stimulate U.S. companies' investment in innovation. Well-crafted joint implementation strategies can bolster U.S. firms' efforts in the global marketplace and introduce new incentives for innovation, casting the NAP itself as a renewal of President Clinton's "clarion call for creativity and ingenuity".

Finally, by enabling developing countries to participate directly in the achievement of our Climate Convention obligations, joint implementation would provide a practical model for global environmental and economic cooperation.

DESIGNING U.S. JOINT IMPLEMENTATION POLICIES

The promise of joint implementation could prove to be completely hollow unless the U.S. approach to joint implementation is scrupulously designed. Actions undertaken under the auspices of U.S. joint implementation policies must result in real emissions reductions and our joint implementation policies must create an authentic change in the status quo for both the parties making overseas investments and for the countries hosting those investments.

Accordingly, we suggest that U.S. joint implementation policies look to the following criteria:

1. To qualify, joint implementation investments would have to be for actions not required by law.

2. All projects must include activities and investments undertaken for the specific purpose of verifying, and if possible, continuously monitoring, their greenhouse gas emissions.

3. In evaluating an overseas project's contribution to greenhouse gas reductions, each project must have a specific baseline that captures or identifies the on-theground and emissions-based "status quo" that would prevail in the absence of the project. Again, joint implementation projects have value only if they produce a palpable, improving change relative to a clear baseline, accurately reflecting that status quo.

4. For assessing the emissions reduction or carbon-sequestration consequences of each project, the NAP must confine itself to annual, after-the-fact emissions monitoring and verification reports. Prospective inter-annual averaging or forward discounting schemes are irrelevant, since joint implementation projects must be scrutinized only for the actual emissions reduction or carbon-sequestration achieved in each year of their operation. Otherwise, these projects, like the NAP itself, would suffer a fatal lack of accountability.

5. Projects subject to identifiable failure risks such as fires or other natural disasters that can destroy carbon sinks-must include demonstrable "insurance" elements or strategies. For example, a forest management project may be required to include a certain number of acres whose carbon sequestration capacity is treated as set-aside from the evaluation of the carbon sequestration produced by project. The set-aside acreage, and the carbon uptake produced on that acreage, can function to offset a potential loss of carbon resulting from accidental destruction of the sink. Portfolios of geographically dispersed acreage or bundles of other greenhouse gas reductions could serve also.

6. A firm seeking to engage in qualifying joint implementation projects must be required to establish a firm-wide baseline and report regularly its firm-wide emissions. In many cases, this information may be essential to evaluating the overall emissions impact of any specific overseas project launched by the firm.

7. Before another country can qualify as a partner in a U.S. joint implementation project, that country must commit to establishing a greenhouse gas emissions accounting system similar to that of the U.S., which, as set forth above, we believe must be included in the NAP. Countries' efforts to fulfill this requirement should be supported by the U.S. government and U.S. firms seeking to create joint implementation projects. In addition, for the purpose of verification and precluding double-counting, joint implementation projects must be tracked through a doubleentry bookkeeping system so that both the investing firm and host country monitor and report the project's emissions in their respective accounts.

It goes without saying that U.S. joint implementation projects must not only achieve greenhouse gas reductions, but also must be consistent with, if not actively promote, the broadest range of environmental values and objectives. U.S. joint implementation projects must also be compatible with the interests of local cultures and populations in host areas.

While we believe that these criteria are critical to fashioning a successful joint implementation policy, we do not believe that joint implementation projects alone must be subject to these requirements. On the contrary, all measures included in the NAP must be subject to these requirements in order to ensure that they, too, will contribute to meeting the President's greenhouse gas commitments.

LEGAL ISSUES

Public debate in recent months has highlighted the many ambiguities in the language of the Climate Convention with respect to both joint implementation and carbon sinks. In fact, the upcoming meeting of the Intergovernmental Negotiating Committee in Geneva is likely to address these ambiguities extensively. In our view a resolution of these issues that unduly constrains the use of joint implementation and sinks in fulfilling countries' obligations could be counter-productive. Again, welldesigned joint implementation projects offer not only a strategy for dealing with potentially burgeoning greenhouse gas emissions in countries with rapidly growing economics, but they can also contribute to global sustainable development.

In addition, the carbon-sequestration capacity of forests is critical to comprehensive programs for reducing and offsetting greenhouse gas emissions. At the same time, the enhancement and preservation of forests and other terrestrial ecosystems is critical to achieving a host of environmental objectives. That is why it is essential for both the NAP and the Climate Convention to promote sink enhancement strategies.

CONCLUSION

In constructing the NAP, the Clinton administration has a superb opportunity to establish a comprehensive framework for fostering innovative actions to address the greenhouse challenge. Rather than simply relying on a fixed list of discrete measures and optimistic, prospective assumptions about their ultimate efficacy, the Plan must be founded on a reiteration of the President's commitment on emissions together with a commitment to establish a comprehensive emissions tracking system as described above. To achieve the emissions commitment, the NAP, in the spirit of "reinventing government” should create a dynamic, ongoing and competitive process to elicit both government agency and private sector initiatives-domestic and overseas that meet criteria for high-quality, cost-effective reductions and innovation.

By all accounts, however, the NAP is likely to rely on nothing more than a variety of voluntary and subsidized measures. To be successful these must be aimed both at reducing emissions and at shaping and reconfiguring domestic and overseas economic infrastructure so that economic activity can develop along environmentally sustainable, rather than globally destructive paths. For these reasons it is critical that the U.S. NAP include both strict emissions accounting and strategies that promote innovative environmental investment domestically and world-wide. Thank you for your consideration in this matter.

Sincerely,

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