The composition of the Enforcement Branch An example

Whether or not the factors elaborated above will influence the decision making of the Enforcement Branch as a whole depends largely on the composition of the Enforce ment Branch. This section presents examples of different compositions of the Enforcement Branch that may occur under the specific rules for the regional distributions of the members. We show that under the voting regulations for the Enforcement Branch, one specific composition of the Enforcement Branch may lead to a decision to impose sanctions for non-compliance, while another composition of the branch may not.

According to the Marrakesh Accords, the Enforcement Branch consists of ten members. as follows:17

1 one member from each of the five regional groups of the United Nations,18 and one member from the small island developing states (SIDS), taking into account the interest groups as reflected by the current practice in the Bureau of the Conference of the Parties;

2 two members from parties included in Annex I; and

3 two members from parties not included in Annex I.

Voting rules for the Enforcement Branch and the Compliance Committee are also stipulated.19 The decisions of the Compliance Committee may be made by a majority of at least three-quarters of the members present and voting. In addition, the adoption of decisions by the Enforcement Branch requires a majority of members from parties included in Annex I present and voting, as well as a majority of members from parties not included in Annex I present and voting.

Lets us consider two different compositions of the Enforcement Branch, both satisfying the rules referred to above.

Table 5.1 Alternative compositions of the Enforcement Branch

A 1) Tanzania, China, Poland, Bolivia, Australia and the Maldives

2) Japan and Italy

3) India and Egypt

B 1) Tanzania, China, Poland, Bolivia, Australia and the Maldives

2) Japan and Spain

3) India and Egypt

In both compositions there are four members from parties included in Annex I and six members from parties not included in Annex I. The only difference between the two compositions is that a member from Spain replaces a member from Italy.

As discussed in the previous section, whether a complying country will gain or lose when a non-complying country faces sanctions depends on a number of complex world market effects that pull in different directions. Hence, it is not possible for any enforcing country to have complete knowledge about the economic impact of voting in favour of an implementation of the sanctions. However, the extensive literature on emission trading (see this chapter's third section) suggests that it is likely that an enforcing country will have a general idea about how sanctions may affect quota prices and whether a low or a high quota price is beneficial for its economy.

We assume in this section that members of the Enforcement Branch act in the interest of their country of nationality. Since the purpose of our example is to show that the composition of the Enforcement Branch may influence the decisions, we simplify the analysis by making certain assumptions regarding the enforcing countries' interests. First, we assume that the enforcing countries are concerned about the economic impacts of changes in the quota price resulting from imposing sanctions.20 Second, we assume that enforcing countries prefer to impose sanctions if they do not have a negative economic impact. If the sanctions are likely to result in negative economic impacts for the enforcing country, we assume that they would prefer not to impose sanctions.

We consider a hypothetical situation where considerable evidence suggests that Russia is in non-compliance. As discussed above, several empirical models show that Russia, like other East European countries, is likely to be a large seller of quotas. If Russia loses its eligibility to sell quotas, the international quota price will rise significantly. The rise in permit prices will occur whether Russia responds to the sanctions by withdrawing from the agreement or not. An increase in the permit price will surely hurt buyers of quotas, and be beneficial for other sellers of quotas and nonAnnex I countries with a large potential for hosting CDM projects.

In our example, at least two of the non-Annex I countries have a potential for hosting inexpensive CDM projects (China and India), while the other non-Annex I countries may be indifferent to changes in the international quota prices. Hence, all the non-Annex I countries in our example would prefer that sanctions were imposed.

According to a numerical model study by Holtsmark and Msstad (2002), Italy and especially Japan will be large buyers of quotas under the Kyoto agreement (with US participation).21 Australia, Spain and especially Poland will be sellers of quotas. A higher quota price will be beneficial for Australia, Spain and Poland, and costly for Japan and Italy. On the assumptions above, Enforcement Branch members from the non-Annex I countries and Australia, Spain and Poland will vote in favour of sanctioning Russia, while the members from Japan and Italy will vote against. We see from our example that composition A of the Enforcement Branch will not reach a decision to declare Russia in non-compliance and implement the sanctions, while a replacement of the representative from Italy with a representative from Spain (composition B) would lead to an implementation of the sanctions.

Under composition A, the requirement of a majority among the Annex I countries blocks the decision of non-compliance, although more than three-quarters of the members favour implementing the sanctions.

In our example, we assumed that enforcing countries are only concerned about the economic impact following from a possible implementation of the sanctions. Obviously, there are concerns other than the pure economic effects on the national economy that may also be taken into account when enforcing countries evaluate whether they prefer the sanctions to be implemented. Enforcing countries may have strong preferences for preventing a weakening of the agreement. To carry out the sanctions when non-compliance is observed will surely strengthen the deterrence effect. On the other hand, sanctions may lead to withdrawal from the agreement and thus weaken the environmental effect of the agreement. Enforcing countries' perceptions of the non-compliant countries' responses to sanctions are therefore relevant to their decisions of whether or not to impose sanctions.

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