General Conditions
(A) By this approval, China agrees that in exchange for the funding level agreed in paragraph (B), it will be bound to reduce its production and consumption of halons to the following levels in accordance with the following schedule:
(i) China will reduce its halon 1211 production (as defined in the Montreal Protocol) to the following levels in the following years: 7960 tonnes in 1998; 5970 tonnes in 1999; 3980 tonnes in 2000; 3317 tonnes in 2001; 2654 tonnes in 2002; 1990 tonnes in each of the years 2003 through 2005; and, to 0 tonnes in 2006.
(ii) China will reduce its halon 1211 consumption (as defined in the Montreal Protocol) to the following levels in the following years: 7160 tonnes in 1998; 5370 tonnes in 1999; 3580 tonnes in 2000; 3117 tonnes in 2001; 2654 tonnes in 2002; 1890 tonnes in each of the years 2003 through 2005; and, to 0 tonnes in 2006.
(iii) China will reduce its halon 1301 production (as defined in the Montreal Protocol) to: 618 tonnes in each of the years 1998 through 2001; 600 tonnes in each of the years 2002 through 2005, 150 tonnes in each of the years 2006 through 2009, and 0 tonnes in 2010.
(iv) China will limit its halon 1301 consumption (as defined in the Montreal Protocol) to the following levels in the following years: 300 tonnes in each of the years 1998 through 2001; 150 tonnes in each of the years 2002 through 2005; 100 tonnes in each of the years 2006 through 2009; and 0 tonnes in 2010.
The above agreement assumes that 1211 and 1301 are the only halons produced in China, and that total halon production and consumption in China (including halon 2402, or any other halons that may be produced in the country) would be limited to the aggregate 1211/1301 levels listed above for the years given. Halon 1202, a by-product of halon production, will also be phased out.
(B) In order to facilitate China in meeting their first reduction targets in accordance with the above noted schedules, the Executive Committee decides at its Twenty-third Meeting to approve US $12.4 million in funding for 1998. The Executive Committee has also agreed in principle that it will continue to provide funds on the basis of annual programmes submitted in accordance with the following schedule, subject to the conditions set out in paragraph (C).
Annual Programme Actual amounts (US$ millions) to be paid
In the year prior to the annual programme
1998 12.4
1999 9.7
2000 10.6
2001 4.5
2002 3.7
2003 5.9
2004 1.2
2005 1.8
2006 11.4
2007 0.4
2008 0.3
2009 0.1
Total 62.0
(C) The payments in respect of each annual programme (other than the initial tranche for 1998) are conditional on:
(i) adequate progress being maintained in phasing out halon in accordance with the schedule in paragraph (A) and the other requirements of the agreement;
and in addition, from 2000 onwards,
(ii) the Executive Committee receiving satisfactory confirmation that reductions have been made in accordance with the schedule in paragraph (A) and the requirements of paragraph (F) for the year two years prior to the year to which the annual programme relates (e.g. confirmation of the 1998 level to determine funding for the year 2000).
(D) China agrees to establish a system to ensure accurate monitoring of the import, export and production (including in free trade zones), and to report regularly, consistent with the reporting and monitoring regime outlined in Part I, Chapter V of the proposal contained in UNEP/OzL.Pro/ExCom/23/11. China also agrees to allow for annual independent technical audits administered as directed by the Executive Committee to verify that annual halon production and consumption levels agreed in paragraphs (A), (E) and (F) are actually being met.
(E) China agrees that it will use all funds provided to it by the Executive Committee through this decision to implement its halon sector strategy. In using the funds provided in this initial US $12.4 million tranche being approved at the Twenty-third Meeting of the Executive Committee, and subsequent tranches China understands, consistent with Executive Committee rules, that it has a responsibility to ensure that it will not use Fund resources to build aggregate capacity for the production of substitute chemicals or substitute extinguishers that exceeds that capacity (for halon 1211, 17,800 tonnes; for halon 1301, 1000 tonnes; and for halon fire extinguisher production capacity of 7.71 million units). China also agrees that, after full conversion, that at least 3.59 million extinguishers[8] produced in China will, in 2005, be either CO2 extinguishers or extinguishers using a technology that is at least as expensive. If that is not the case, funding will be requested to be refunded based on a rate of US $3.08 per unit shortfall of CO2 or equivalent fire extinguishers.
(F) China agrees that if it does not meet an annual production reduction requirement it has agreed to meet in paragraph (A) above, it will decrease its following year’s production allocation by an equivalent amount. If this should happen for a second year, in addition to reducing the subsequent year’s production allocation by an equivalent amount, China understands that the Multilateral Fund will withhold the subsequent tranche of funding outlined in paragraph (B) until such time as the required reduction has been met. In addition, China understands that the Multilateral Fund will reduce the subsequent tranche and, therefore, total funding for the Halon Sector Strategy, on the basis of US $5510/tonne for halon 1301 and US $486/tonne for halon 1211 of reductions not achieved per year.
(G) In light of the fact that this project is expected to fund an extensive recycling capability, and that related funds for such capability are being provided solely to allow China to meet its reduction obligations, China will endeavor to prevent export to developed countries of recovered/reclaimed halon.
(H) In accordance with the strategy, China will propose technical assistance in its annual programme and agrees to carry out any technical assistance performed with Fund money in accordance with terms of reference as agreed with the Implementing Agency.
Special Conditions
(I) The Executive Committee wishes to provide China with maximum flexibility in using the agreed funds to meet China’s reduction requirements and alternative fire safety needs. Accordingly, while the strategy included estimates of specific funds that may be needed for specific items, the Executive Committee is of the understanding that during implementation, as long as expenditures are consistent with this agreement, the funds provided to China may be used in the way China believes will achieve the smoothest possible phase-out.
(J) To carry out its responsibilities as outlined in Part I, Chapter V of UNEP/OzL.Pro/ExCom/23/11, the World Bank has agreed to be the Implementing Agency for this project at a fee of 10 per cent of project costs for 1998. The fee for future years will be agreed between the Executive Committee and the Implementing Agency. Funds for the independent technical audit will be approved separately from the agency fee.
(K) China agrees that the funds being agreed in principle in paragraph (B) by the Executive Committee at its Twenty-third Meeting for implementation of the China Halon Sector Strategy is the total funding that will be available to China to enable its full compliance with the halon reduction requirements of the Montreal Protocol (as at the time of this agreement) and the undertakings as promised under the halon sector strategy. It is also understood that, aside from the agency fee referred to in paragraph (J) above, China and the Multilateral Fund and its Implementing Agencies and bilateral donors will neither provide nor request further Multilateral Fund-related funding for the accomplishment of the total phase-out of halons in accordance with the schedule noted above and the terms of the strategy being approved. This includes but is not limited to funding for actions that China will take regarding conversions of fixed systems, any retrofits of any equipment using halons, and all technical assistance including training. As halon destruction is not part of the Protocol, it is not part of the programme.
Other Conditions
(L) If the Executive Committee determines that China has demonstrated a persistent delay in implementation of the agreed phase-out targets included in paragraph (A), China, at the call of the Executive Committee, agrees to repay any funds advanced to it in excess of US $0.40/kg ODP production and consumption that has been verified as being eliminated. A call for repayment on the part of the Executive Committee would signal the end of obligations under this agreement.
(M) The funding components of this decision shall not be modified on the basis of future Executive Committee decisions that may affect the funding of the halon sector.
(N) The Executive Committee recalls its decision 22/75 and understands that this decision and the China Halon Sector Strategy embody a specific agreement with the Government of China. In the context of that agreement, several factors that are specific to China have been taken into account. In that regard, and while the Executive Committee welcomes this innovation for phasing out production and consumption of halons in China, the Executive Committee agrees that this agreement establishes no specific precedents (including audits and eligibility or ineligibility of funding for specific levels or specific items).
(UNEP/OzL.Pro/ExCom/23/68, Decision 23/11, para. 27).
(Supporting document: UNEP/OzL.Pro/ExCom/23/11).