The UNFCCC states that Annex II Parties (basically Annex I Parties except for the Parties in Central and Eastern Europe) shall provide new and additional financial resources, including the transfer of technology, needed by the developing country Parties to meet the agreed full incremental costs of implementing measures taken under the Convention and that are agreed between a developing country Party and the international entity or entities referred to in Article 11 of the Kyoto Protocol (UNFCCC, 1997, Article 11). So, the extent to which developing country Parties effectively implement their commitments under the Convention will depend on the effective implementation by developed country Parties of their commitments under the Convention related to financial resources and transfer of technology.
Sustainable development requires increased investment, for which domestic and external financial resources are needed, particularly for developing countries (UN, 1992, Agenda 21, Chapter 34). In its Resolution 44/228 of 1989 giving a mandate to the convening of the UN Conference on Environment and Development (UNCED) in Rio de Janeiro, the UN General Assembly notes, inter alia: that the largest part of current emission of pollutants into the environment originates in developed countries, and therefore recognizes that those countries have the main responsibility for combating such pollution, and that new and additional financial resources will have to be channelled to developing countries in order to ensure their full participation in global efforts for environmental protection. Developed country Parties reaffirmed their commitments in the related provisions of the Kyoto Protocol. The implementation of these existing commitments shall take into account the need for adequacy and predictability in the flow of funds and the importance of appropriate burden sharing among developed country Parties (UNFCCC, 1997, Article 11).
Accordingly, Agenda 21 (UN, 1992, Chapter 33, especially its 15th Section) carries the consensus formulation that for developing countries: ODA is a main source of external funding, and substantial new and additional funding for sustainable development and implementation of Agenda 21 will be required. In practice, however, there has been a clear trend of a continuing decline in ODA levels since UNCED. Total ODA dropped from 0.35% of total gross national product of the developed countries in 1991 to 0.29% in 1995, with further declines in 1996 and 1997 (OECD, 1998c). Some developed countries are contributing to solving the environmental problems that developing countries face with financial resources other than ODA. For instance, the Japanese government is implementing the Green Aid Plan that aims to achieve both economic development and environmental protection in developing countries in Asia. Most developing countries maintain that a sufficient level of financial resources is key to effective implementation of Agenda 21 and is a priority issue to be resolved to enable the implementation of the global consensus reached at the UNCED.
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