In order to implement this Article, all nations must take into account Article 4, paragraphs 4, 5, 7, 8 & 9 of the FCCC. Article 4.4 says that all developed countries should assist developing countries that are particularly vulnerable to the adverse effects of climate change in meeting costs of adaptation to those adverse effects.
Article 4.5 says that developed countries shall take "all practicable steps" to promote, facilitate and finance technology transfer, particularly to developing countries. They will also support the development and enhancement of endogenous capacities and technologies.
Article 4.7 says that in the case of developing countries, the extent to which they will effectively implement their commitments under the FCCC, will depend on the effective implementation of developed country commitments to provide financial resources and technology transfer and will take into account the fact that economic and social development and poverty eradication are their first and overriding priorities.
Article 4.8 says that all countries will give full consideration to financial, insurance and technology transfer needs of developing countries arising from both the adverse effects of climate change and/or the adverse impacts of the response measures, especially in developing countries that belong to nine identified categories (these categories are listed in the analysis of Article 2.3 of the KP given above).
Article 4.9 says that all countries will pay attention to the financial and technology transfer needs of least developed countries.
Article 11 of the KP says that in order to implement Article 4.1 of the FCCC developed countries will provide "new and additional financial resources to meet the agreed full costs" incurred by developing countries to advance the implementation of existing commitments under Article 4.1 of the FCCC. They will also provide "such financial resources, including for the transfer of technology" which are needed by developing countries "to meet the agreed full incremental costs of advancing the implementation of existing commitments" under Article 4.1 of the FCCC which are covered under Article 10 of the KP and those that are agreed between a developing country and the international entity or entities entrusted with the operation of the financial mechanism referred to in Article 11 of the FCCC.
Implementation of these existing commitments will depend on the adequacy and predictability in the flow of funds and appropriate burden sharing among developed countries. Developed countries can also provide financial resources through bilateral, regional and other multilateral channels. International entity or entities entrusted with the operation of the financial mechanism set up by the FCCC will be guided by the decisions of the COPs.
Article 12: Clean Development Mechanism
This article defines the Clean Development Mechanism (CDM). Unlike Article 6, this article essentially talks about a form of Joint Implementation between industrialised countries and developing countries.
12.2 Purpose of CDM: To assist developing countries in "achieving sustainable development and in contributing to the ultimate objective of the Convention (FCCC), and to assist parties in Annex 1 in achieving compliance with their quantified emission limitation and reduction commitments..."
12.3 Benefits: While developing countries will benefit from project activities resulting in certified emission reductions, Annex I countries will use these reductions to meet their emissions reduction targets.
12.4 Supervision: The CDM will be overseen by the MOP and supervised by an executive board.
12.5 Certification: Emission reductions which result from project activities will be certified by operational entities designated by the MOP on the basis of real, measurable, long term benefits to the mitigation of climate change; reduction in emissions which are additional to any that would occur in the absence of the certified project activity; and voluntary participation approved by each nation involved.
12.6 Funding: CDM shall assist in providing funding of certified project activities.
12.7 Auditing and Verification: MOP-I will provide modalities and procedures for independent auditing and verification of CDM project activities.
12.8 Share of proceeds: The MOP will ensure that a share of proceeds from certified project activities will be used to cover the administrative expenses of the CDM as well as to assist developing country parties that are particularly vulnerable to climate change to meet the costs of adaptation.
Several arguments can be made against this provision.
One, it amounts to taxing activities that promote sustainable development.
Two, this means that proceeds from projects in developing countries are being used to support developing countries. Does this mean that the Northern project partners will pay extra for CDM projects or Northern countries will impose a tax on each project which is then returned to developing countries but then that would make CDM projects expensive and uncompetitive. The World Bank Carbon Initiative, for instance, emphasises a portfolio approach and emphasizes the need to keep climate change mitigation costs down, which is what makes CDM attractive.
Three, it is not clear what is meant by proceeds. The investment is received by the South and credit is taking by the North. So what are the proceeds?
Four, there is the issue of fairness. This provision says that South should be paying developing countries for adaptation costs rather than the North. It is a case of collecting from the poor and giving back to the poor. Incidentally, the Global Environment Facility (GEF), an entity designated under Article 11 of the FCCC does not fund adaptation measures/ policies. This measure takes away the responsibility of meeting adaptation costs from the North and turns it into a cooperative measure undertaken by both the North and the South.
12.9 Participation: Private and/or public entities can participate in CDM sponsored activities provided they follow the guidance provided by the executive board of CDM.