3.3.3 The Montreal Protocol
The Montreal Protocol (MP) on Substances that Deplete the Ozone Layer is one
of the more successful amongst international treaties related to global environmental
problems (see also Section 5.5.7 in Chapter
5). It provides a good example of an international agreement that has been
continuously amended in response to new scientific and technical assessments.
Signed by only 24 (mostly developed) countries in 1987, it has grown to almost
global participation, thanks to a judicious combination of trade measures, with
positive measures of financial and technology transfer provisions (Vossenaar
and Jha, 1998). The overall commitments acquired by the international community
to phase out ozone depleting substances (ODS) sent a "strong signal"
to governments and enterprises to take actions to lower production and consumption
of these chemicals and to search for adequate substitutes.
Furthermore, the initial reduction schedules were agreed to before adequate
substitutes were in the marketplace. Therefore, the MP could be seen as speeding
up the technological innovation and as a competitive process among leading enterprises.
In this regard, the MP has created a broad range of business opportunities all
around the world, and helped many developing countries create political and
economic conditions that are more favourable to technology transfer.
However, the large scale of illegal trade in controlled chemicals to the US
and the EU is an issue that threatens the Montreal Protocol achievements to
protect the ozone layer (Environmental Investigation Agency, 1998). A number
of authors have called for stronger intelligence and enforcement measures to
prevent and eliminate smuggling of these substances.
The Multilateral Fund
The treaty established a Multilateral Fund (1998) to assist developing countries
to comply with its commitments. Notwithstanding the fact that there are few
formal technology transfer agreements under MP operations (as outlined in Chapter
2, the Fund has been a key factor that has facilitated technology transfer
to developing countries.
The Fund operates under the authority of the Parties that appointed an Executive
Committee (ExCom) that has to "develop and monitor the implementation of
specific operational policies, guidelines and administrative arrangements, including
the disbursement of resources, for the purpose of achieving the objectives of
the Multilateral Fund (1998)". ExCom has 14 members divided equally between
developed and developing countries, with annual renewal. The way that the ExCom
works has allowed a wide participation of developing countries on an equitable
basis, encouraging adoption of balanced decisions on many controversial and
difficult issues. The practical operation and disbursement of the Fund to date
has been summarised in Chapter 2 (Box
The activities approved by the ExCom have helped developing countries in areas
which can be called "hard technology transfer", carried out mainly
by the World Bank, UNDP and UNIDO, and "soft technology transfer",
directed mainly by UNEP. UNEP's activities provide various types of support
including information exchange, networking, institutional strengthening, capacity-building
and training (Shende & Gorman, 1997). The World Bank, UNDP and UNIDO have
focussed mainly on investment projects and country programme assistance. The
implementing agencies have assisted developing countries in identifying projects,
assessing national plans and policies, providing adequate technical support,
and assistance for project development and implementation. At the same time
the implementing agencies played a crucial role in assisting the members of
the ExCom of the Multilateral Fund (1998) in solving difficult issues, through
policy and technical papers.
In addition, the Multilateral Fund (1998) has funded and mandated UNEP to facilitate
networks of National Ozone Units (NOUs), which enhance governments' abilities
to manage ODS issues, and facilitate cooperative work among the implementing
agencies, countries, technology suppliers and potential project proponents.
Currently, there are eight regional networks consisting of 90 NOUs which meet
regularly in their own region. Regional networking provides government ODS officers
with a means of sharing their knowledge with their peers in developing and developed
countries. Such networking has helped the countries to set up enabling environment
and policy settings for favourable technology transfer. Furthermore, the establishment
of NOUs responsible for implementing the Montreal Protocol activities at country
level have proved to be of critical importance to develop and promote the necessary
changes to phase out ODS in developing countries.
A study requested by the Parties to evaluate the effectiveness of the Multilateral
Fund (1998) indicates that the use of workshops as a primary mechanism to identify
projects, even before a national plan is set-up and the decision to give priority
to projects with high cost effectiveness, has favoured larger enterprises in
developing countries (COWI, 1995). The facts that large conversion projects
are becoming scarce and small, and medium size enterprises (SMEs) absorb most
of the labour force in developing countries have made SMEs one of the main issues
of the MP discussion, due to the fear that SMEs could become primary consumers
of ODS in the medium term.
The problem of cost effectiveness
The main objective of the MP was to phase out as much ODS as possible in a minimum
time frame. The cost effectiveness index reveals both the incremental costs
(operating and capital costs) covered by the Fund versus equivalent tons of
ODS phased out, and does not constitute a measurement of the full costs to developing
country societies of avoiding the use of ODS. Therefore, the costs of eliminating
ODS are borne jointly by the Fund, the enterprises and consumers (COWI, 1995).
It should be recognised that developing countries are not merely receiving the
funds to eliminate ODS. They are active partners by contributing their own financial
and technical resources to meet the overall responsibilities.
Meanwhile, the role and application of cost-effectiveness thresholds continue
to evolve as the Executive Committee takes decisions on new concepts of investment
projects to better assist SMEs.