MONTREAL PROTOCOL ON SUBSTANCES THAT DEPLETE THE OZONE LAYER

1991 ASSESSMENT

Report of the

TECHNOLOGY AND ECONOMIC ASSESSMENT PANEL

DECEMBER 1991 FINAL

CHAPTER TWELVE: EXECUTIVE SUMMARY

ECONOMICS

I. OVERVIEW

S.01 Recent developments in the international effort to protect the stratospheric ozone layer reveal both opportunities and dangers. The transition out of ozone-depleting substances is proceeding more rapidly and at a lower economic cost than had been expected. However, recent evidence indicates that the global ozone depletion problem is worse than had been predicted at the times when the Montreal Protocol (1987) and the London Amendments (1990) to it were reached. Furthermore, successes to date should not obscure the difficulties that remain to be surmounted.

S.02 In the light of what has already been achieved, the most important remaining barriers to the successful transfer of ODS-replacing technologies are more likely to be informational, organisational and financial rather than political, technical or economic. Measures to deal with these barriers have been identified and implementation, though at an early state, is underway.

II. LESSONS FROM THE TRANSITION

S.03 Several valuable lessons can be drawn from the experience of implementing the process of ODS substitution. As in any complex social process, there is no guarantee that future events will unfold as they have in the past, but awareness of the main features of the dynamics of the transition as observed so far should guide the Parties as they negotiate the next revisions of the Protocol.

S.04 LESSON 1. Technological optimism is amply justified by the historical record. Innovation to replace CFCs has been rapid, effective, and economical. Fears that substantial cutbacks in the use of ozone-depleting substances (ODSs) would reduce the quality and/or increase the price of goods and services previously dependent on CFCs have largely been proven groundless. While the path of technological substitution has not always been smooth, and although it is probable that some setbacks and disappointments will occur between now and the final phase-out of ozone-depleting substances, it has nevertheless been generally true that scientific, engineering, and entrepreneurial innovations have been sufficient to overcome the losses of ODSs. Not only has it been technically possible to replace CFCs in a continuously expanding range of applications, but in many cases it also has been relatively inexpensive or even profitable to do so. And while it may be expensive to substitute for some high-value uses of ODSs as the phaseout deadline approaches, it is only in a few highly specific case that such replacements might prove to be infeasible.

S.05 LESSON 2. Private sector firms and governments in the developed countries have moved faster than they were required to by the formal regulatory structure of the Montreal Protocol. There are a variety of reasons for this unexpected development, including the presence of strong and broadly based public sentiment to protect the stratospheric ozone layer, competitive and wider regulatory pressures inducing firms to innovate, and a general sense of responsibility shared by corporate and government leaders. Environmental protection need not be a burden or an impediment to productivity. Protection of the ozone layer has provided an impetus to Scientific and industrial progress and the benefits of focused research and development appear to have exceeded the cost of those efforts.

S.06 LESSON 3. A spirit of partnership, cooperation, and devotion to widespread information exchange has greatly speeded the substitution process and lowered its economic cost. Joint efforts between firms, between private companies and governments, and between the governments themselves are all contributing to the success of the ODS replacement process. Engineering breakthroughs, transfers of technology, and manufacturing innovations are all information-centered processes. The greater the extent of information exchange, the more rapid and efficient is the pace of change. This is illustrated by the success of the electronics industry in moving away from CFC solvents; even though the technical demands for solvents in electronics manufacture are very high, the CFC phase-out will be accomplished in advance of the Protocol's schedule largely because of this industry's active approach to the diffusion and exchange of information. Corporate partnerships may also prove to be a more valuable source of technical assistance and transfer to the developing countries than formal intergovernmental funding mechanisms such as the Interim Multilateral Ozone Fund.

S.07 LESSON 4. Developing countries have played a major and positive role in the drive to preserve the ozone layer. Negotiation of the Montreal Protocol and its subsequent revision have brought forth a new spirit of international cooperation to protect the global environment. Individual nations have been able to arrive at a consensus based on scientific appraisal of the threat posed by ODS chemicals, and have been able to codify that consensus in a working international agreement. Recognition of the special circumstances of the developing countries (in the original Protocol) and the establishment of the Interim Multilateral Ozone Fund (in the London Amendment) demonstrate that the developed and developing countries are able to agree on an equitable burden-sharing arrangement. The commitment by the industrialised countries to meet developing countries' incremental costs of compliance with the Montreal Protocol embodies the vital principle that global environmental protection need not be purchased at a price of sacrificing the economic development of the lower income nations. Indeed, the contingent technology transfer process is very likely to prove growth enhancing. In response to this tangible evidence of economic cooperation, developing countries have taken the same type of steps necessary to protect the ozone layer as those taken by the industrialised nations. And even though differences of national interest, industrial structure, and internal policy remain, the ozone protection accord shows that the dual goals of universal economic growth and global environmental protection are not mutually inconsistent.

S.08 The nations that are participants in the effort to control ozone depletion have a unique chance to ride a wave of rapid technological progress at this moment in history. Determination by governments, business organisations, and citizens of the planet to avert catastrophic destruction of the stratospheric ozone shield has resulted in an explosion of scientific, technological, and diplomatic creativity. It is fortunate, in the light of recent scientific evidence on ozone losses already incurred, that the world community can draw on these reservoirs of technical and political success as negotiations proceed on preventing further damage to the ozone layer. However, meeting the challenge to accelerate the ODS phase-out will place heavy demands on these resources and require appropriate incentives to guide their efficient exploitation and replenishment.

III. THE WIDER POLICY CONTEXT

S.09 The forthcoming negotiations during the October 1992 Meeting of the Parties will be influenced by the wider context of current international debates regarding the economics of environmental policies. The key relevant issues are (1) economic efficiency, (2) equity and (3) the inter-play between the established institutions and policies relating to international trade and those newly emerging from negotiations over the ways and means of managing major risks to the global environment.

S.10 Economic Efficiency. The main focus of the economic efficiency debate is the real resource cost of realising the objectives of environmental policies. The resource costs of the relevant policy options vary, often by substantial magnitudes. The difficulty of their measurement can also vary by the nature of the implementing measure. For example, regulatory controls tend to provide a high level of certainty in environmental effect, assuming that compliance can be secured, but tend to obscure the resource costs incurred. In comparison, the resource costs of economic, or marketbased, instruments tend to be more transparent in that they are more readily reflected in market prices, whilst their accurate calibration, at least initially, can be difficult given the usual deficiencies of information on market dynamics. A practical way forward is to start by calibrating the economic instruments at relatively low values and to increase them gradually in the light of experience towards values that are consistent with the environmental policy objectives. If this can be done within a well-specified and well-publicised policy regime, economic theory and practice suggests that the environmental policy objectives are likely to be realised at minimum resource costs. Whilst this proposition is widely accepted, the process of policy appraisal often results in a policy choice that combines regulatory and economic instruments with a view to drawing on the greater certainty of the former and the greater economic efficiency of the latter.

S.11 In the current climate of environmental policy debate, the Montreal Protocol, as a regime of quantitative regulatory controls, could be subject to scrutiny on the resource costs of compliance. Prospective changes in that regime imply changes in the costs of compliance. However, in the current state of knowledge in the relevant areas of science, environmental effects and economies, it is not possible to closely measure the changes in compliance costs contingent on specific changes in the regime; the same applies to the contingent changes in benefits. This means that any assessments of net benefits can only be broad estimates subject to substantial uncertainty.

S.12 In these circumstances, it is unlikely that the Montreal Protocol's regulatory regime will come under effective pressure from this direction. It is more likely that the debate over the comparative advantages of regulatory and economic instruments will be pressed in the context of national implementation policies designed to achieve the regulatory targets. There could well be pressure on the design of national implementation policies with a view to improving their economic efficiency with clear carry-over implications for the identification and funding of 'incremental costs' under the Interim Multilateral Fund.

S.13 Equity. The implementation of environmental policies imposes costs and generates benefits. Those who enjoy the benefits are not necessarily those who carry the cost burden. Even though the environmental policies might increase overall social welfare in the sense that the benefits out-weigh the costs, the issue of equity remains. Therefore, gaining general participation in voluntary environmental agreements, or even effective compliance under statutory regimes, requires careful attention to be given to who gains and who loses and to the role of compensatory mechanisms in securing agreement and effective compliance. These considerations extend to global environmental policies.

S.14 Such policies tend to benefit all people but not necessarily to the same extent; and the distribution of cost burdens do not necessarily conform to the 'polluter pays principle', nor to the incidence of the benefits enjoyed, nor to the capacity to pay. Compensatory schemes cannot fully resolve these equity issues, but they can be essential to the securing of sufficient participation and compliance to ensure the effectiveness of global environmental policies.

S.15 The creation of the Interim Multilateral Fund under the Montreal Protocol is an example of such a scheme. It has the effect of reducing the costs to developing countries of accepting the commitments undertaken by becoming Parties to the Montreal Protocol. The main mechanism is to reduce the cost of securing the transfer to them of those technologies which make it possible for them to eliminate their use of ozone-depleting substances. Whilst recognition of this role of the Fund has been endorsed by its establishment, much remains to be done to ensure its operational effectiveness.

S.16 International Trade and Environmental Policies. The inter-relationships between trade and environmental policies have become an active area of debate in the OECD Trade and Environment Committees and within the institutions of the GATT. There is concern from the environmental side that international trade policies do not take the objectives of environmental policies sufficiently into account; and conversely, the trade side is concerned about the tendency for environmental policy regimes to include trade restrictions as a means of enforcing compliance without giving adequate attention to the implications for the objectives of international trade policies. The OECD and GATT discussions should help to clarify the main issues of concern and to signpost the way to greater complementary between international trade and environmental policies.

S.17 The provisions set out in the Montreal Protocol for the use of trade restrictions in pursuit of its environmental objectives provides a prime example of the concerns of the trade authorities. These trade restrictions were designed to give non-Parties commercial incentives to become Parties to the Montreal Protocol. Over time, it is likely that these measures will have their desired effect. The potential distortions to trade are unlikely to be substantial. But there is concern that the use of trade restrictions might be proposed for policy regimes designed to control other environmental problems, especially that of global warming. Given the magnitude of the global warming issue, the use of trade restrictions to enforce compliance with any abatement control regime for emissions of greenhouse gases could result in trade distortions and welfare costs of serious consequence.

S.18 Whilst attitudes towards the trade restrictions set out in the Montreal Protocol might well be influenced by the wider debate, there is no immediate focus on potentially effective pressure on these provisions. It remains to be seen whether challenges to these trade restrictions will be raised through the GATT complaints procedures in future as they begin to impact on the interests of Non-Parties. The rulings of GATT on such potential challenges cannot be foreseen as they are likely to depend on the highly specific circumstances of individual cases.

S.19 It will be necessary to monitor closely developments in these wider international policy debates for their potential implications for the implementation of the Montreal Protocol. In particular, there is a rapidly evolving need to clarify the implications of trade agreements for the legality of more stringent national and international measures to protect the ozone layer and other global commons.

IV. CONCLUSIONS

S.20 The 1991 Economic Options Committee has agreed the following statement of its conclusions which is based on the 1989 Economic Panel Report, other materials available to it and its own deliberations.

S.21 A SENSE 0F URGENCY. New scientific evidence continues to reveal more rapid depletion of the stratospheric ozone layer than indicated by scientific prediction. The implication is that the estimated economic benefits of damage cost avoidance associated with the current ODS phase-out schedules of the Montreal Protocol have increased from what they were prior to this new evidence on ozone depletion (ie the gross economic benefit curve has shifted upwards). However, the economic cost of eliminating the use of ODSs associated with the current phase-out regime have remained unchanged or have decreased (ie the cost curve has remained as it was or more probably has shifted downwards). Another way of putting this is that the benefits of ODS substitution appear to be very high compared with the costs; this implies that any loss of these benefits due to delays of implementation could be expected to greatly exceed the possible cost savings that might accrue from taking the time to fine-tune the response to make it more "cost-effective".

This line of reasoning suggests that the phase-out schedules could be accelerated without diminishing net benefits below that pertaining when the current phase-out regime was agreed by the Parties. However, the extent of any acceleration is also important as the economic cost could be expected to rise if the phase-out period does not allow sufficient time for substitutes and new technologies to become readily available. The available scientific and economic information is insufficient to permit meaningful quantitative estimation of the implied changes in net benefits associated with changes in phaseout schedules. Therefore, the choice of the economically optimal degree of acceleration in the phase-out schedules cannot be determined analytically.

The sense of urgency in curtailing the emissions of ODS chemicals also extends to recycling. It is a weakness of the Protocol that it does not include emissions from existing sources of equipment that leak ODSs into the atmosphere. The only incentives for recycling under the Protocol arise because recycling makes it possible to continue using existing equipment for longer thereby slowing the pace of the switch-over to ODS substitutes. The strongest incentives for recycling operate through the market. If producers increase their demand for recycled materials in response to rising prices for newly produced ODS materials or their substitutes as the restrictions on controlled substances become effective, then markets for recycled materials will be stimulated. Whether the markets will flourish depends on the availability and cost-effectiveness of the requisite recycling technology. However, the recycling market can be weakened by uncertainty about future costs and availability of substitutes and by inadequate policy pressure on the prices of ODS chemicals. In these circumstances, special fiscal incentives for recycling could help to achieve a faster rate of reduction in the emissions of ODS chemicals.

Furthermore, in responding to this sense of urgency, we should be aware that an inadequate or delayed response to worsening stratospheric ozone depletion may make it increasingly necessary to take measures to contain the adverse impacts of ozone depletion on human health and to deal with rising agricultural and ecological risks.

S.22 TECHNOLOGICAL OPTIMISM. The case for accelerating the phase-out schedules is supported by the evidence for technological optimism in the development of substitutes for ODS chemicals. Certainly, the progress of the substitution process has been more rapid than expected. There is specific evidence that what were seen, not so long ago, as big and difficult problems have been successfully dealt with much more quickly and at lower cost than expected. That is not to say that the process of ODS substitution has been or will be easy or simple to realise. It is vitally important that appropriate incentives are in place to motivate and guide the actions of the key player. Market forces have played a major role in this process as industry has had to respond to the commercial implications of the regulatory regime set out in the Montreal Protocol and to the changes in the behavior of consumers associated with their growing awareness of the ozone depletion problem. These forces have driven the changes in commercial reality that have led industry to accelerate its research and development, investment and marketing efforts in pursuit of competitive advantage in a changing marketplace. However, it is recognised that sustaining the pace of achievement may become more challenging as the substitution process proceeds. For example, representations have been made to the Committee to the effect that difficulties are expected in substituting for methyl chloroform (1,1,1-trichloroethane) in metal cleaning applications, especially in view of its diversified uses by large numbers of small enterprises which do not necessarily have the incentives or the capacity to respond actively to the regulatory regime. Other challenges for the phase-out of ODS chemicals include (a) the costs of capital equipment re-tooling, redesigning, retro-fitting and some early scrapping of air conditioning equipment; and (b) rigid foams for which non-toxic substitutes may not be readily available.

S.23 EVIDENCE OF DYNAMISM. The dynamism which has characterised the responses of the key actors provides convincing evidence of their commitment to accelerating the ODS substitution process. The Second Meeting of the Parties (London, June 1990) agreed (1) to accelerate the then existing phase-out schedules (2) to extend the scope of the Protocol to additional ODS chemicals and (3) to establish new incentives for non-Party countries to accede to the Protocol. Individual governments continue to press for more rapid phase-out schedules. The Parties established The Interim Multilateral Ozone Fund to facilitate the technology transfer to eligible developing countries through the provision of finance, technical assistance and information services. Several of these developing countries have made impressive progress with the implementation of the ODS substitution process. Industry continues to respond dynamically to the challenge of developing and marketing ODS substitutes, in reducing their own use of ODS chemicals, and in making technology transfer a reality.

S.24 REDUCING UNCERTAINTY. At present, there are major uncertainties with respect to the ODS substitution process that are being faced by the developing countries. These include the costs of compliance and the extent to which their incremental costs will be covered by the Interim Multilateral Ozone Fund. Uncertainty cannot be eliminated. However, there can be substantial benefits from reducing uncertainty where it is possible to do so at acceptable cost. These uncertainties could be reduced by pushing forward the programme of country studies and resolving the outstanding issues regarding the modus operandi of the funding mechanism. The operating procedures of the Interim Multilateral Ozone Fund need to be well-defined, widely known and widely accepted. Delays in realising an adequately staffed and funded Secretariat are reflected in the small number investment projects currently under consideration and the lack of any disbursement of funds as of October 1991. Their effects also extend to delays in the delivery of the mandated technical assistance and information services. Progress in expediting these matters was made during the Third Meeting of the Parties (Nairobi; June 1991) but much remains to be done. As this process evolves, it is fundamental to its success that the Parties sustain confidence in the efficacy and equity of the operating procedures of the Interim Multilateral Ozone Fund.

S.25 SUBSTITUTION COST PROFILES. The incremental cost to individual countries of the substitution process for controlled substances varies with respect to (1) their end-uses of ODSs; (2) the extent to which ODSs are imported or produced domestically; (3) the extent to which a country exports these chemicals, or products containing or requiring them in their production processes; and (4) the size of their ODS-related markets relative to the size of their respective domestic economies. As the cost of substitution varies by end-use (eg foams; refrigeration; aerosols; fire suppression), differing structures of end-uses and sources of supply can significantly affect the incremental cost of ODS substitution. Countries which produce ODSs tend to have higher substitution costs than those which rely on imports. Export-oriented countries tend to address the substitution process more aggressively than those which focus on their domestic markets; the need for export-oriented countries to foster their competitiveness in world markets drives forward the substitution process with the costs usually being subsumed in market prices.

S.26 THE ROLE OF INFORMATION. The work of the Committee has made it clear that information is a key resource in the ODS substitution process, not least through reducing uncertainty. It is information on the extent of ozone-depletion and the contingent damage costs that motivates the ODS substitution process, and it is information on alternative technologies and processes that makes substitution possible. Furthermore, the effectiveness of the Interim Multilateral Ozone Fund will be built on efficient information flows; it requires a flow of information to the developing countries on what is available and a return flow on the incremental costs of the substitution process as essential inputs into decisions on the financing of technology transfer. Information, in the form of data reporting is essential to ensure compliance with the Protocol. It is critical to the success of the Protocol that the resources necessary are available to ensure that these information flows are generated, managed and disseminated efficiently.

S.27 TRANSITIONAL CHEMICALS. Accelerating the phase-out of the controlled substances would raise the demand for transitional chemicals. Consortia of international chemical companies are conducting unified risk assessments of the myriad of chemicals presently being considered as potential substitutes for CFCs. It is essential that the search for zero ozone depleting replacements for CFCs should not foreclose intermediate steps that would help to alleviate the problem. Uncertainty surrounding the regulatory fate of the so-called "transitional chemicals" (ie the HCFCs) could delay or prelude their production and adoption, with the perverse consequence that CFCs with much greater ozone-depleting and global warming potentials would continue to be used. One of the major challenges for the negotiators in revising the Protocol will be to allow a sufficient window for transitional chemicals to supplant CFCs in the near term, which would allow investments in their supply to be recovered, without opening the door for unacceptable environmental damage caused by indefinite or excessive reliance on such chemicals. Whilst it is technically feasible to meet these conditions, it is not clear how to translate them into a workable regulatory framework. One of the chief difficulties is that percentage cut-backs in their use, applied to each individual country, would not constitute a reasonable control scheme because the market for these chemicals is only in an early stage of development.

S.28 UNIFIED RISK ASSESSMENT. It has become clear that the evaluation of substitute chemicals and technologies must have regard to technical criteria other than their respective ozone-depleting potentials (ODP). The major examples of other relevant criteria are their respective implications for climate change, molecular stability, toxicity and flammability. The use of multiple criteria complicates the evaluation process in that it makes additional testing necessary and tends to produce mixed results in performance testing. The ranking of the possible ODS substitutes are likely to differ across the criteria. Hence, uniquely dominant substitute are likely to be exceptions. Thus the choice of substitutes for specific ODS uses is likely to depend on specific factors rather than to be generic solutions.

V. RECOMMENDATIONS INCLUDING RESPONSES TO DECISION III/12 OF THE PARTIES

S.29 The Economic Options Committee makes the following recommendations and responses to the issues set out in Decision III/12 of the Parties to the Montreal Protocol based on the 1992 Economic Panel Report, other materials available to it, and its own deliberations.

S.30 With regard to whether the phase-out schedules of the ozone-depleting substances subject to the Montreal Protocol should be accelerated, our response is as follows.

As set out in paragraph S.20 above, there is an economic case for accelerating the ODS phase-out schedules. We cannot determine the optimal reductions in these schedules analytically given the uncertainties attached to the available scientific and economic information. However, it is our judgment, based on our reading of the available evidence, that the phase-out schedules could be accelerated by three years without incurring a diminishing level of net economic benefits; more rapid accelerations would be expected to encounter steeper rises in substitution costs with the implication that net benefit levels, though still large, might be diminished. Although, the information available to us will not support the estimation of meaningful quantitative changes in the level of net benefits associated with changes in the regulatory regime, it is our judgment that a three year acceleration is close to the margin of acceptability. Whilst recognising that methyl chloroform (1,1,1-trichloroethane) is a more recently controlled chemical under the Protocol, and currently has a lengthier phase-out schedule, there is evidence from the 1992 Report of the Solvents Technical Options Committee that its phase-out could be accelerated to conform with those of the other controlled chemicals.

S.31 With regard to whether the 10 year grace period for the phase-out schedules of the developing countries should be reduced, our response is as follows.

A shorter grace period would reduce the incentives to build-up stocks, production capacity and/or use of ODS chemicals in the interim before the phase-out schedules become effective for the developing countries which might raise the economic cost of the eventual phase-out.

The Government of Mexico has announced the goal of phasing out the controlled substances on the same schedule as the developed countries. The other developing countries are also invited to consider this strategy and to make further study about the possible benefits and whether they really need the grace period.

There is evidence from the country studies that the total costs of compliance, subject to market structure and trade policy, could be lower than under the existing phase-out schedules. Furthermore, the incremental costs associated with the ODS substitution process would remain eligible for funding through the Interim Multilateral Ozone Fund. Therefore, even if these costs were to be somewhat higher, which is not expected, the cost would be paid by the Fund.

Whilst the available information is insufficient to determine analytically by how much developing countries could reduce the phase-out schedule, it is our judgment that it would be economically worthwhile to reduce it by 2 to 5 years.

S.32 We recommend that the Parties should make all practicable effort to sustain mutual confidence in the efficacy and equity of the Interim Multilateral Ozone Fund in meeting the incremental costs to the developing countries.

The establishment of the Fund is indicative of the spirit of global partnership that is necessary to underpin initiatives to manage global environmental risks. The uncertainties faced by the developing countries in the ODS substitution process can be best contained if confidence in the capacity of the Fund to prevent the cost from becoming excessive relative to national resources. Mutual confidence depends on good faith negotiating, the acceptability of the modus operandi of the Fund, and the adequacy of the Fund's resources to meet the legitimate demands placed upon it.

S.33 We recommend that the Parties should set interim targets for ODS substitution in their national ozone strategies that are consistent with the phase-out schedules of the Montreal Protocol.

The setting of interim targets in national ozone strategies would create a framework for policy action and establish pressures for early and sustained action on ODS substitution. In their absence, there is the risk that some national implementation programmes could be adversely affected by a lack of motivation and direction, especially during the grace period allowed for developing countries.

S.34 We recommend that the resources of the Interim Multilateral Ozone Fund, and that of its successors, should be determined on a "rolling plan" basis that is consistent with the interim targets established in the national implementation programmes of the Parties.

The uncertainties associated with the ODS substitution process are too great to make possible realistic estimates of the total incremental costs to be financed by the Fund over the phase-out periods for the developing countries. Substitution requirements and costs are both changing significantly over time. The way to deal with this problem is to reassess funding requirements at appropriate intervals based on information available at the time. The timing of these reassessments should correspond to the phasing of the recommended interim targets for national implementation programmes so that decisions on the overall resource requirements of the Fund might relate to the latest estimates of the cost of the next tranche of the substitution process.

S.35 We recommend that the funding of incremental costs should be used only to subsidise economically efficient ODS substitution.

Funding should be granted only to the extent that would be warranted by an economic cost efficient substitution strategy. In particular, project funding should be based on resource, not financial, costs estimates. This implies that a country that insisted on pursuing an industrial strategy which was not consistent with cost efficient substitution would be granted financial aid only to the extent that would be sanctioned by a cost efficient strategy. Furthermore, in the light of the points made about recycling in paragraph S.21 above, The IMOF could legitimately finance a range of market based recycling activities as part of a cost efficient strategy. Apart from technical assistance in setting up the recovery facilities and in instituting the appropriate fiscal incentives, funding for the transfer of recovery technology could be a substantial part of such financing.

S.36 We recommend that any outstanding issues regarding the modus operandi of the Interim Multilateral Ozone Fund should be resolved with a sense of urgency consistent with the case for accelerating the ODS phase-out schedules.

The information, technical assistance and financial services of the Fund to the developing countries are essential to the ODS substitution process. The delays in settling operational procedures and in delivering these services is a source of uncertainty which can only hinder the implementation of the Protocol. We recommend, in particular, that the funding of ODS substitution initiatives in developing countries should not be impeded solely on the grounds that a national implementation strategy is not yet in place. Allowance must be made for projects that would be robust under any feasible strategy. An extension of this exception, would be to specify the basic components of "generic" strategies (eg projects with recognised low ODS abatement costs and perhaps a simple, supportive policy such as a tax on CFCs) that might be funded in the absence of a specially designed national implementation strategies.

S.37 We recommend that high priority be given to the full implementation of the information clearing-house role of the UNEP Industry and Environment Office.

We regard information as a key resource in the ODS substitution process. The Committee encountered evidence of a high level of unmet demand for the information that is expected to be delivered by the UNEP Industry and Environment Office (IEO) under its June 1991 mandate from the Executive Committee of the Interim Multilateral Ozone Fund. There are opportunities for collaborative efforts in generating information exchange through the IEO clearing-house, and demand for an authoritative on-line computer information service. Face-to-face meetings of people actively, or prospectively, involved in the ODS substitution process are particularly important to catalyse technology transfer in local areas and to generate information flows back to the clearing-house for wider dissemination. We welcome the impetus given to these important activities by the UNEP Industry and Environment Office and recommend that high priority is given to adequately resource and progress its information services.

S.38 We recommend the early resolution of the regulatory uncertainty that exists with respect to transitional chemicals.

Regulatory uncertainty can impede the commercialisation of ODS substitutes. Economic analysis cannot prescribe a "best" outcome; equity concerns, political acceptability and administrative efficiency must all bear upon the shaping of a workable agreement.

S.39 We recommend that the Parties should seek the commitment of those carrying out unified risk assessments of potential ODS substitutes, involving multiple criteria, to ensure direct comparability between the reported results.

Decisions by end-users on the most appropriate ODS substitutes will need to take into account the full range of the performance testing results for each substance. It is important that the reported test data are based on a common set of criteria and measurements so as to facilitate the decision process. Such decisions may depend on highly specific factors which makes it necessary to have close regard to the respective performance mixes of each potential substitute with respect to the multiple criteria used in the evaluation process.

S.40 We recommend that a standing technical and economic advisory panel should be kept on call to review projects submitted for funding to the Interim Multilateral Ozone Fund and the Global Environmental Facility.

The continuous involvement of a small number of technical and economic experts would facilitate the accumulation of expertise of direct relevance to the work of the Parties. The proposed panel would have the contacts in academia, government and with consultants to influence research work on the most appropriate issues. The chairs and vice-chairs of the Technical and Economic Assessment could form the first committee.