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In opening this discussion, the Chair noted that in the Secretary-General's report there is a wide range of innovative international mechanisms referred to but two were flagged for discussion: the feasibility of an international user charge on air transportation and a pilot scheme to trade CO2 permits on a regional or global basis.

The REPUBLIC OF KOREA said that while these mechanisms deserve special attention, many of the suggestions in the report need to be further elaborated with a focus on feasibility. Three principles should be adhered to: (1) the mechanisms should be based on the polluter-pays principle; (2) they should address global environmental concerns; and (3) they should be implemented gradually after experimentation in developed countries. The air travel tax is an interesting idea and could raise funds, but needs further study on how it could be implemented. The Republic of Korea is willing to discuss joint implementation on the condition that this debate does not prejudice the discussion at the COP of the Climate Change Convention.

GERMANY pointed out that perhaps it is not difficult for people to be taxed only a dollar on an air ticket, but to realize and organize this is difficult and we must be realistic. The chances of actually realizing these ideas politically are not as good as they are imagined scientifically. A realistic assessment of the scale of the operation should be determined. The number of consumers ready to engage in a voluntary scheme is limited and the revenues are meager. People's willingness to donate money and pay higher prices for a good cause is limited and the value to the environment may be lost as other social problems develop. The CSD should encourage other relevant institutions to discuss these issues.

The NETHERLANDS supported the call for a charge on international air transportation. Debt-for-nature swaps require further investigation. He elaborated on the advantages of joint implementation and said that although it is being addressed in other fora, the CSD could undertake further studies on this.

The UK was disappointed that the Secretary-General's report referred to a tax on international air transport instead of a user or pollution charge, based on the "polluter-pays" principle, as recommended at the Glen Cove meeting.

MALAYSIA stated that in the face of shortage of traditional resources, efforts should be made to find innovative means of mobilizing resources, although these should not replace traditional financing. These could include user charges, tradeable permits and joint implementation. He supported the idea of a user charge on international air transport. The CSD could undertake a study of its feasibility that takes into account the environmental, economic, legal, administrative and political aspects. The CSD can also initiate a study on tradeable permits using a pilot scheme. Malaysia also supports joint implementation.

While the US is sympathetic to innovative ideas for financing sustainable development, it does not want to pursue discussions on an air transport tax since airplanes are not major sources of pollution The airline industry is already in economic straits and is faced with many environmental regulations. An additional tax will have a negative impact on the consumer, especially in developing countries. The US has been experimenting with tradeable permit programmes, however, in general, it has not endorsed this idea in the global context, because there must be overall limits and the current Climate Change Convention does not have such a cap system on which permits can be based. Joint implementation offers many of the same advantages in cost savings and efficiency and is more feasible in the short term.

The IMF said that extreme care is needed when thinking about the air transport tax. It is not clear to the IMF why only air transport should be taxed and not other sources of pollution and what would be the basis of such a tax — size of air traffic, freight traffic, use of fuel, etc. The IMF has two basic problems. (1) Many countries, especially developing countries, already have a tax on air travel. If you take away their right to levy a tax, you will affect the fiscal situation of these States.( 2) There is no international tax at this moment and there is no international taxing authority. To monitor and administer an international tax requires skills that existing organizations lack. The possibilities of avoidance and evasion will be massive. Furthermore, if there is any revenue, who will have the authority to disburse it?

The WORLD BANK representative said his institution had participated in both the Czech and Glen Cove meetings. The Bank has increased the number of sustainable development projects, related to the credit and lending facilities that it has funded, by 10%. Small scale projects have also increased, some of which are related to defining the implementation and management in sustainable development projects. The Bank is fully accountable to its policy guidelines and is now fully transparent and open to the public. The Bank has 300 environmental experts.

POLAND described its experience with debt-for-nature swaps. For donor countries there are two types of benefits: environmental benefits can be used for projects of international significance and debt swaps are also a possibility for transferring environmentally sound technology. The bulk of money comes back in an indirect manner to the donor country by promoting its industry in the recipient country. Debt-for-nature swaps are more effective than foreign assistance because they are focused on investment projects with international significance, each decision is a result of close cooperation between recipient and donor countries, and they secure the optimum technologies.

The EC made two points about the air transport charge. First, the charge would only be acceptable if it was used on all airlines in all countries, otherwise there would be trade distorting flags of convenience. Second, the tax would bear most heavily on airlines with older, less efficient aircraft, most of which are in developing countries and countries with economies in transition.

The PHILIPPINES welcomed the cautionary statements on international air transport tax, and pointed out that a tax is already imposed on air travel in most developing countries. This proposal may contravene the right to family re-unification, an issue that was addressed at the Cairo Conference, and have repercussions in countries with many islands, such as the Philippines. He noted that tradeable permits would compromise the needs of the developing countries. He stated that conversion of bilateral and commercial debt is very important.

CHINA said that more study is needed on these innovative mechanisms. The CSD, at this stage, is not the forum to deal with joint implementation, because these discussions are ongoing within the context of the Climate Change Convention. According to the Convention, joint implementation should only be for developed countries, but China could have joint projects with developed countries to address climate change, but not for purposes of crediting or offsetting.

The International Civil Aviation Organization (ICAO) mentioned that his agency has been examining a variety of issues dealing with taxation and the environment.

UNCTAD reported that its extensive studies on tradeable permits indicate that they are feasible and can be useful in increasing the resource base of developing countries. He stated that the UNCTAD Secretariat will be looking into the preconditions to moving into the tradeable permit scheme.

The NATIONAL WILDLIFE FEDERATION, in collaboration with several NGOs, said they favored debt-for-nature-swaps, private funds, including those on joint implementation, and the removal of subsidies. The CSD should also look into two other mechanisms — national funds and the transaction fee proposed in 1978 by Professor Tobin.

CANADA noted that a user charge and a tax differ, and each will determine the nature of objectives, and analysis and studies to be undertaken. It is important to also bear in mind the agreements with ICAO and other bilateral agreements on air transport.

FINLAND sought clarification from the World Bank. Based on the output of the experts meetings, what is envisaged as the future role of the Bank and other international financial institutions in bringing forward the work on innovative instruments and nationalizing it, taking into account the comparative advantages and strengths of various institutions, in order to arrive at a strategic approach?

The WORLD BANK said they would prefer to deal with comparative instruments, instead of comparative institutions. The Bank is able to prepare a comparative study of the instruments, as proposed by the CSD, for consideration at a future session.

COLOMBIA said that with regard to the tax on air transport, it is important to determine the economic effect of this type of mechanism on developing countries or on the international aeronautical industry. What could be the benefits for developing countries? What would be the volume of resources? How would these resources be earmarked? What volume of resources could be transferred to developing countries to deal with the needs of sustainable development? With regard to tradeable CO2 permits, the main concern is equity and how the mechanism would benefit developing countries. More information is also needed on joint implementation. The subject of debt swaps for sustainable development has to be targeted in a flexible way.

ALGERIA said that with regard to the question of an air transport tax, it would be very difficult, if not impossible, to establish such a tax unless there was an international authority responsible for that tax. It would be difficult to have such a tax in developing countries and he disagreed with the EC about putting all countries on an equal footing. He supported China's statement on joint implementation and said it is premature to discuss this. As for tradeable permits, Algeria thinks that it is premature to discuss it, since it has to be examined in depth in appropriate fora.

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