International Environment

Operations of the Montreal Protocol Multilateral Fund Gao ID: T-RCED-97-218 July 30, 1997

The Montreal Protocol is an international agreement concluded nearly a decade ago that seeks to eliminate the use of substances, such as chloroflurocarbons, that deplete the ozone layer. In the first few years after the Protocol was signed in 1987, most developed nations agreed to reduce and eventually eliminate their use of ozone-depleting substances, but few third world countries made a similar commitment. A 1990 amendment to the Protocol established a multilateral fund to which developed countries could contribute. The purpose of the fund is to help developing countries reduce and ultimately cease their use of ozone-depleting substances. This testimony (1) identifies the principal contributors to the fund, (2) identifies the principal recipients of disbursements from the fund, (3) discusses the purposes for which disbursements were made, (4) discusses what has been accomplished with these expenditures, and (5) assesses the controls and accountability mechanisms in place to ensure proper use of money disbursed from the fund. GAO also provides information on administrative costs associated with project implementation.

GAO noted that: (1) the United States is the largest contributor to the Multilateral Fund, accounting for about 25 percent of the contributions; (2) for 1997 through 1999, the United States is expected to contribute about $39 million per year; (3) GAO estimates that the United States could avoid interest expenses of between $2 million and $3 million associated with its annual contributions by using an alternative payment method; (4) from its establishment in 1991 through May 1997, the Multilateral Fund has allocated about $570 million for projects in more than 100 Article 5 countries; (5) China has been the largest recipient, accounting for almost $150 million or 26 percent of the total; (6) there are seven broad purposes for which projects have been funded, but over 80 percent of the funds have been for investment projects, which help businesses to convert their operations from the use of ozone-depleting substances and to cease the production of goods containing them; (7) projects approved to date are projected to phase out the annual use of about 84,000 ozone-depleting potential-weighted metric tons of ozone-depleting substances, or about 40 percent of the estimated consumption of ozone-depleting substances, in Article 5 countries; (8) the Multilateral Fund has a number of mechanisms in place that are designed to ensure that funds are properly accounted for and that the amounts of funds allocated to specific projects are reviewed and verified; (9) the Multilateral Fund currently pays a 13-percent administrative fee to the implementing agencies for their costs associated with project implementation; and (10) however, efforts are under way to evaluate the appropriateness of the fees, with the goal of reducing the support costs to about 10 percent over the next 3 years.


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