THE COMPLIANCE FUND

The document argues that the Kyoto Protocol lacks a clear system for managing Annex I Parties that exceed their assigned emission amounts at the end of a commitment period. It proposes a Compliance Fund where Parties can pay a fee—based on mitigation costs plus a multiplier—to receive emissions credits that 'make the climate whole' by funding reliable GHG mitigation projects. This is presented as a superior alternative to 'borrowing' from future periods, which the authors claim merely shifts the burden to future generations. For willful non-compliance, the report suggests 'Compliance Assessments' (monetary penalties) that could be enforced through a 'Compliance Assessment Recognition Agreement,' allowing these assessments to be treated as arbitral awards enforceable in domestic courts.

• Annex I Parties may face a shortage of available credits from cooperative mechanisms (joint implementation, emissions trading, and the Clean Development Mechanism) during the 'true-up' period, potentially leading to non-compliance even if they have the will to comply.
• The proposed Compliance Fund allows Parties with an emissions overage to pay a fee to receive equivalent emissions credits, with the funds used to underwrite highly reliable GHG mitigation projects globally.
• The Compliance Fund is designed to neutralize the economic advantage of non-compliance by requiring up-front payment and using a 'multiplier' (surcharge) to discourage Parties from using the Fund as a primary implementation strategy.
• The authors argue that 'borrowing' (reducing future assigned amounts) is an inadequate compliance tool because it fails to remove the economic advantage of non-compliance and risks the GHG debt never being repaid.
• The Clean Development Mechanism (CDM) is identified as a plausible administrator for the Fund, as it aligns with the CDM's mission to help Annex I Parties achieve compliance and support sustainable development in non-Annex I countries.
• The Global Environment Facility (GEF) is another potential administrator, offering the advantage of existing resources to finance projects before the first commitment period ends, though its mandate for 'grant and concessional funding' may conflict with issuing credits in exchange for payment.
• For Parties that willfully fail to correct overages after the true-up, the report proposes 'Compliance Assessments'—automatically determined monetary penalties based on the size of the overage.
• To ensure the collection of Compliance Assessments, the report proposes a 'Compliance Assessment Recognition Agreement' where Parties treat these assessments as arbitral awards enforceable in domestic courts, similar to the NAFTA Environmental Side Agreement.
• The report suggests a 'traffic light' system for emissions trading to prevent non-complying Parties from selling assigned amount units (PAAs) from subsequent periods until their assessments are paid.

APA

Goldberg, D., & Wiser, G. (1999). THE COMPLIANCE FUND. Center for International Environmental Law. https://www.ciel.org/wp-content/uploads/2015/03/ComplianceFund.pdf

Chicago

Goldberg, Donald, and Glenn Wiser. THE COMPLIANCE FUND. Center for International Environmental Law, 1999. https://www.ciel.org/wp-content/uploads/2015/03/ComplianceFund.pdf.

Wikipedia

{{cite report |last1=Goldberg |first1=Donald |last2=Wiser |first2=Glenn |title=THE COMPLIANCE FUND |publisher=Center for International Environmental Law |date=June 1999 |url=https://www.ciel.org/wp-content/uploads/2015/03/ComplianceFund.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{goldberg1999compliance, author = {Goldberg, Donald and Wiser, Glenn}, title = {{THE COMPLIANCE FUND}}, institution = {Center for International Environmental Law}, year = {1999}, month = jun, url = {https://www.ciel.org/wp-content/uploads/2015/03/ComplianceFund.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }