Mr. Dan Bodansky
Climate Change Coordinator
Bureau of Oceans and International Environmental
        and Scientific Affairs
U.S. Department of State
Washington, D.C. 20520

Dear Mr. Bodansky:

        Thank you for meeting with ICCP to discuss key issues for the upcoming UNFCCC meetings in Bonn. As a follow-up to our discussion, we wanted to reiterate and expand upon some of the points that were made during the meeting.

        In general, ICCP believes that the U.S. has outlined reasonable positions on the mechanisms, compliance, and reporting. We are concerned, however, that there has not been enough focus on how the structures and rules being developed will affect entity participation. We urge the U.S. negotiating team to consider the potential impact on business participation as they negotiate the details of the mechanism, compliance, and reporting systems.

        It appears that one of the main areas of focus in recent weeks has been the issue of seller versus buyer liability for emissions trading. ICCP believes that, from an entity perspective, liability should be negotiated as part of the transaction. At the national level, we believe that the most important aspect of the liability system is not necessarily the type of liability as long as it is transparent. While ICCP believes that buyer/seller liability is an important component in ofthe operation of the trading mechanism, we do not believe it rises to the level of other critical issues such as supplementarity and fungibility.

        ICCP believes that the Clean Development Mechanism (CDM) presents an opportunity to make real greenhouse gas emission reductions and at the same time provides a mechanism for technology transfer to promote sustainable development in developing countries. In order for business to make CDM investments, the rules and institutions associated with the CDM must be credible, simple, flexible, and cost-effective. ICCP supports the development of methodologies for determining project baselines that would allow industry to present technical information to the appropriate certifying organizations demonstrating the emission reductions produced by the project. Changes made to existing operations as well as new facilities or infrastructure improvements that emit less greenhouse gases when compared to an appropriate, rational baseline should be eligible. Baselines should consider availability of fuels, infrastructure and services to support advanced technologies, regional economic and environmental requirements, and other appropriate factors.

        ICCP supports the U.S. position that CERs should be "good as gold" and that CERs, ERUs, and AAUs should be fully fungible. We urge you to continue to work to ensure that these principles are adopted as part of the COP 6 decision-making process.

        With COP 6 less than 6 months away, it is becoming increasingly clear that decisions on all elements of the Buenos Aires Action Plan may not be possible by this arbitrary deadline. While delegates should continue to make every effort to complete as much work as possible at COP 6, some priorities may have to be established. ICCP believes it is of utmost importance to focus on completion of the rules for the flexibility mechanisms, including emissions trading, joint implementation, and the Clean Development Mechanism. This would include progress on the issue of determination of baselines.

        We look forward to working with you over the next several months on these important issues.