New members will have to do their part for the Kyoto Protocol.Compliance won't be easy but may have surprising benefits. By Maria Khovanskaia BIG LEAP: The accession states will have to do better curbing emissions of greenhouse gases, believed responsible for everything from flooding in CEE to thinning polar ice caps. EU applicant states have done a lot of work on the environment in preparation for union membership, but little of that has focused on climate change mitigation. Now that the EU has decided to accept 10 new members in 2004, these countries will have to play catch-up, meaning climate change will be among the political and economic processes most affected by EU expansion. EU membership will influence the international elements of the Kyoto Protocol to the Convention on Climate Change, namely the flexible mechanisms through which signatory countries can stay within their limits for greenhouse gas emissions. In Central and Eastern Europe, that means joint implementation mechanisms, which allow major polluters to mitigate for excess emissions by investing in environmental projects in other parts of the world. EU membership will also spur on the practice of "emissions trading," a system that allows polluters who meet their Kyoto obligations to sell surplus allowances on the open market. Three things shaped the background of the expected changes. First of all, membership for some of the applicant states was offered much earlier than expected. Until very recently, the first group of new members was expected to include only the Czech Republic, Estonia, Hungary, Poland and Slovenia, while Latvia, Lithuania and Slovakia were to join later in a "second wave." Surplus of greenhouse credits Secondly, in the initial time period for compliance with the Kyoto Protocol, it is expected that all the CEE countries except Slovenia will meet their commitments on the curbing of greenhouse emissions. This means that, as a group, the new members will have a net surplus of greenhouse credits, which they may be able to sell. The third factor was the adoption of the Directive on the EU Emission Trade System by the European Parliament in December. Undoubtedly, the field of joint implementation (JI) will be affected. In order for a project to be eligible for JI, it must be determined that it wouldn't have been implemented otherwise. It must fulfil the "additionality principle," which means that it must represent an added benefit to the environment on top of those projects that would have gone forward in any case, with or without JI. Despite the jubilation surrounding early acceptance of the second-wave countries, the accelerated schedule will have the drawback of disqualifying many emission-abatement projects for JI. The new EU members are supposed to join the European Climate Change Programme and adopt more extensive environmental regulations to comply with the Integrated Prevention and Pollution Control Directive and the directives on landfill, energy efficiency, afforestation, and renewables. As a result, many projects concerning technological changes won �ft meet the additionality criteria; instead they will just be meeting basic EU requirements. Such projects include ones concerned with landfill gas capture, demand-side management in energy efficiency, and many other concerns. In their report "Joint Implementation in the Context of European Union Accession (The case of the Czech Republic)" the authors revealed that for the Czech Republic the accession process led to a 29% reduction in the national supply of the JI opportunities. Similar developments, in turn, have deprived major polluters of inexpensive ways to pay down their "greenhouse debt" and may well rob the new member states of some expected foreign investment. However, the fact that some new member states are less prepared for accession than others for legal harmonisation may result in grace periods, possibly ones that overlap with Kyoto's first commitment period. Joint implementation will not suffer as much if the former second-wave countries are granted a temporary exemption from the aforementioned regulations. A decision on the matter will likely be in the offing by fall. There may be a countervailing factor with an impact that is hard to quantify. EU requires liberalisation of electricity and gas markets, which may lead to a drop in prices. In turn, this will make small co-generation plants and the use of renewables less attractive commercially, and thus more likely to qualify for Joint Implementation. Stepping up the work The current development of the EU emission trading system (ETS) will affect new member states in a number of ways. In order to join the ETS, the accession countries will have to step up work on the necessary institutional framework, including governmental or privately operated offices that keep greenhouse gas inventories, registries and national communications centres. The cost of this infrastructure will burden economies, especially given the proximity to accession. The formerly second wave countries have lost the possibility to spread out these expenditures out over a longer period. The second problem (and it is a problem, not a challenge) with entering the EU's emission trading scheme is that the new members may have to share their net surplus of greenhouse credits with the existing states, who, as a group, are expected to have a net deficit. The current EU states, who are separate signatories to the Kyoto Protocol, have a burden-sharing agreement according to which they redistribute their obligations to reduce GHG emissions among the members. To transform the surplus into emission allowances the procedure needs to be defined first. Then a decision needs to be made on the distribution among the stakeholders:governmental agencies and the industries in the private sector. Since the interests of both national and international stakeholders differ dramatically, distribution of CEE countries' quota surpluses will lead to heated debates. Another challenge for new member states within the emission trading scheme will be the management of their tradable surplus. Strategies must be found to maximise revenues from credit trading, possibly through cooperation with other surplus holders, such as Russia and Ukraine. Rather than flood the market with emissions credits, the new EU States will have to settle on a common strategy to maintain a desired market price.   - Maria Khovanskaia, Project Officer, Climate Change Programme of the Regional Environmental Center for Central and Eastern Europe

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