continue to divert from the tougher task of contributing to sustainable development by decarbonizing the energy sector and urban growth, a situation which is not recommendable in the long run. With the bulk of these gases now eliminated, most developing countries could be expected to require their continued elimination as a production standard. In addition the OECD could consider a grant program for the poorer countries that have such facilities to ensure that they have the incremental funds to install the required catalysts and incineration equipment and operate this as per the Multilateral Fund for phase out of Ozone Depleting Substances (Figueres and Newcombe 2007).

- **REDD.** Negotiations on a REDD crediting mechanism are more advanced than comparable negotiations in other sectors. This is the more surprising as REDD has been deliberately excluded from the CDM and the crediting of emission reductions and removals from forestry activities has been controversial throughout the history of climate negotiations (Streck and Scholz 2006). In 2005, Costa Rica and Papua New Guinea brought the topic back to the agenda when they signaled willingness to reduce emissions from deforestation provided an acceptable incentive mechanism would be put in place.<sup>57</sup> There is now an agreement to incorporate the sector in the next chapter of the international climate regime.<sup>58</sup> Disagreement continues however on the source for the funding, with some countries pushing for REDD to be included in the future market mechanism and other countries proposing the establishment of a specialized fund that would pay for the global environmental service of reducing deforestation emissions without creating international offsets. Given the fact that REDD is of such potentially high volumes, dependent on good policies and governance, Parties may consider an international funding mechanism that makes funds available in stead or in parallel to a market based approach (e.g. Norway has already pledged USD 1 billion to the Brazil Amazon Fund). Taking into account a history of government failures to reduce deforestation, it would however be desirable for an effective REDD mechanism to complement government funding with a private sector driven mechanism that channels funds into forest conservation.

- **Demand side energy efficiency.** While redirecting investments towards more efficient and low carbon technologies is crucially important, there is a very substantial amount of mitigation potential in energy efficiency in industries, buildings and transport systems. Indeed the findings of the IPCC Working Group 3 suggest that energy efficiency provides the greatest short-term mitigation potential and provides for one of the most cost efficient ways to reduce GHG emissions. A very substantial portion of the mitigation potential in energy efficiency measures is in buildings, industry and the transport sector. This is typically characterized by a very large number of small actions. While programmatic CDM will open the door for emission reductions from energy saving measures, recent studies (Hinostroza 2007, Figueres and Philips, 2007), point

> 57 FCCC/CP/2005/MISC.1

> 58 The UNFCC COP-13, held in Bali in December 2007, adopted a decision that officially confirms the intent of the Parties to address the issue of deforestation in a post-Kyoto framework and encourages the implementation of demonstration activities, FCCC/SBSTA/2007/L.23/Add.1/Rev.1. Decision 2/CP13.

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