June 13, 1993

Dear Group of Seven Leaders:

As you begin the Tokyo Economic Summit, just over a year will have passed since the Earth Summit was held in Rio de Janeiro. You will face the important task of demonstrating with concrete actions your continuing dedication to the commitments and objectives you endorsed in Rio. By asserting bold, creative leadership, the G-7 can ensure that the Earth Summit's agenda of promoting sustainable development in both industrialized and developing nations will continue to possess sufficient momentum to move forward throughout the world.

Last year at the Munich G-7 Summit you recognized the need for aggressive follow-up to UNCED to render the Conference truly successful. In your discussions at the Tokyo Economic Summit, we urge that you focus on specific, multilateral actions to which the G-7 is prepared to commit on sustainable development issues. Below are some of our main recommendations:

World Bank Reform

At present, the World Bank and the other public international financial institutions tend to act as impediments to, rather than catalysts for, sustainable development in developing countries. Outdated development strategies and poor project design and implementation quality are resulting in many environmentally and socially damaging projects, which exacerbates the developing world's already crippling debt crisis. In this context, we are disturbed that the Bank is weakening and reissuing its current operational "directives" in a general, less-rigorous form, as operational "policies."

The G-7 nations should put forward an agenda for environmental reform and accountability at the World Bank in which the Bank makes project quality and sustainable development its first, priorities. By October 1993, the Bank should establish a new information policy that dramatically increases its transparency. All information not specifically defined as confidential should be made available to the public in borrower and donor countries.

Another critical action that requires G7 leadership is the creation of a permanent Independent Appeals Commission that would oversee the World Bank. This Commission would hear appeals from citizens' groups, and investigate violations of Bank policies, procedures, and loan agreements, as well as specific complaints of environmental and human rights abuses associated with World Bank financed projects or programs. The Commission would have access to all relevant Bank files, and would be competent to recommend suspension or cancellation of specific projects or programs. Ideally this Commission should be established before the end of the year.

In addition, the G-7 should instruct Bank management to reorient its energy portfolio towards least-cost investments in energy conservation, end-use efficiency, and integrated least-cost planning. This would maximize the availability of energy services, minimize emissions of greenhouse gases and other pollutants, and free scarce capital resources in developing countries for alternative uses. In order to accomplish this, the Bank will have to stop using outmoded planning tools, such as the computer model WASP, which invariably favors the construction of large hydroelectric, nuclear, oil and coal plants. In its place, the Bank should use up-to-date computer models which give appropriate weight to cost-effective investments in demand-side efficiency measures, and in renewable energy supply.

Finally, the G-7 should instruct Bank management to review and reform its policies and priorities in the agricultural sector to incorporate environmentally sustainable practices. In particular, the Bank should promote land reform in order to enhance economic equity and to ensure a sustainable food base at the local level. The Bank should also discourage over-reliance on export-oriented cash crops, which require heavy use of chemical fertilizers and pesticides for profitability.

Global Environment Facility Reform

The G-7 should emphasize the importance of the Independent Evaluation as the basis for considering a post-pilot phase GEF that is not dominated by the World Bank, and which will be able to serve as a credible central financial mechanism for international environmental agreements. No final decisions should be made on the GEF as a financing mechanism until the Parties to the Climate and Biodiversity Conventions have had the full opportunity to set parameters and priorities, and to assess funding needs. In order to succeed, the Climate and Biodiversity Conventions will require financial mechanisms which are effective, transparent, and accountable. While the Global Environment Facility (GEF) may have the potential to acquire these traits, it presently falls far short.

The G-7 should aggressively promote increased transparency within the GEF, including full public access to information on all GEF projects and associated World Bank loans throughout the project cycle. The World Bank, trustee of the GEF, should not be blindly entrusted with managing GEF funds without public scrutiny, consultation and input. The GEF should be run by a true partnership of all three of its implementing agencies, while being served by an independent Secretariat. To help ensure high quality in all GEF projects, the G-7 should advocate project approval only if it is supported by a broad consensus within the Participants' Assembly.

Climate Change

Although every G-7 economic summit since 1989 has stressed the importance of addressing climate change in a cooperative manner among the Group of Seven nations, few concerted, substantive measures have been taken. At the 1993 Tokyo Economic Summit, the G-7 should convert the declarations of the past into action, leading to the prompt implementation of the Climate Convention.

First, the G-7 should call for the immediate commencement of negotiations to implement and strengthen the Climate Convention. These talks should have the goal of further reducing greenhouse gas emissions from industrialized countries, as numerous groups have recommended. As a first step, the G-7 leaders should announce that they will institute policies to cap their countries' emissions of carbon dioxide and other greenhouse gases at 1990 levels by the year 2000, and that they will also undertake measures to reduce emissions below these levels.

The G-7 should discuss and adopt multilateral efforts to reduce greenhouse gas emissions among G-7 countries, including strengthened energy efficiency standards and cooperative efforts to ensure that the price of energy more accurately reflects its environmental and social costs. The reduction of emissions should be paired with increased utilization of renewable energy resources. Further, the G-7 should also work to ensure that GATT does not become an obstacle to the implementation of these types of measures at the national level.

It is also important that the G-7 governments agree to realign their bilateral development assistance with the goal of enhancing the implementation of the Rio accords. For example, improving access to energy and transportation services in an environmentally sound and equitable manner would require replacing the current emphasis on large-scale construction of road projects and coal, hydroelectric, and nuclear power plants with a new emphasis on energy efficiency, renewable energy supply, non-motorized transport, and public transit systems.

Population

UNCED's failure to address effectively the critical issues of uncontrolled growth in population and consumption can be remedied at the upcoming U.N. Conference on Population and Development in Cairo. World population, now at 5.5 billion, will double to over 10 billion within the next century, with most of this growth occurring in developing nations. The populations of the G-7 countries, despite their slower growth, have disproportionately high impacts on resources and the global environment because of their high levels of per capita consumption and pollution. The combination of rapid population growth, poverty, and wasteful consumption results in deforestation, migration pressures, and resource depletion.

To address the environmental aspects of human population growth, the G-7 should support strong action recommendations at the Cairo conference. They should ensure that population and consumption implications are considered in economic deliberations, with the goal of attaining long-term sustainable development. Towards this end, the G-7 should increase aid to levels sufficient to meet the goals of the U.N. Amsterdam Declaration by the year 2000, of providing full access to family planning for all people, and addressing related issues of women's status, education, health care, and economic opportunities.

Russia and Eastern Europe

There exists a particularly urgent need for G-7 countries to provide economic assistance to Russia and other young democracies in Eastern Europe as they struggle with the difficult objective of market-oriented reform. At the same time, international leadership is crucial in the effort to eliminate the hazards of unsafe nuclear reactors within these countries, and to improve their energy efficiency, reducing emissions of CO2 and other pollutants. Such efforts would also assist in addressing Arctic contamination, which in large part comes from Russia and other Eastern European countries.

At the Tokyo Economic Summit, G-7 leaders should agree to provide adequate funding to help close and decommission the most dangerous nuclear power plants in Russia and other Eastern European countries. This effort should also specifically provide technical and financial assistance to the Ukraine to close down and decommission the Chernobyl station, including the construction of a new sarcophagus around the failed reactor. The G-7 should agree not to fund the construction of any new unclear reactors in this region.

In addition, the G-7 should create a $10 billion fund to help replace these nuclear plants and convert the largest coal-fired power plants in the region, using high-efficiency gas turbines. This fund should also support a loan guarantee program, which would finance modernization of key industries in order to greatly increase energy efficiency, thereby sharply reducing emissions of CO2 and transboundary air pollutants. The program should promote Russian/G-7 private sector partnerships as a means of achieving these objectives, which could seek to recoup their costs through the sale and/or export of the energy saved.

The G7 should also expand official environmental assistance programs to Russia and Eastern Europe using experts from national and local governments, as well as businesses and NGOs, to address urgent problems of water and air pollution and hazardous wastes. The G-7 should promote a wide variety of non-governmental people- to-people initiatives that operate at the grassroots and small business levels, to provide advice and training in addressing these problems.

Debt Reduction and IMF Reform

The external debt burden faced by many of the poorest countries presents a major obstacle to sustainable development. For example, debt service payments consume scarce foreign exchange that could otherwise be spent on schools, health clinics, and environmental protection. Largely as a result of the misguided conditionalities imposed by the World Bank and the International Monetary Fund (IMF), many countries have adjusted to the pressures of debt repayment and falling commodity prices by implementing policies that exacerbate conditions for the poor. Relying on massive exports of natural resources such as timber and minerals and converting agricultural land from subsistence to export crops creates food insecurity and damages the environment. Sharply reducing the debt burdens of these countries is an absolute condition for achieving both economic viability and environmental sustainability.

The need for a comprehensive international policy to address developing country debt is particularly strong in sub-Saharan Africa. To reduce a major portion of these debts, the G-7 should substantially increase debt relief granted under the auspices of the Paris Club of official creditors. Specifically, they should call for the immediate adoption of the "Trinidad Terms" proposed by Prime Minister Major in 1990 (while serving as U.K. Chancellor of the Exchequer). These terms would forgive two-thirds of non- concessional bilateral debts of low-income countries, and reschedule payments for the remainder. The G-7 leaders should also call for the immediate cancellation of concessional (ODA) debts of low-income countries, and should develop a strategy to help reduce obligations of heavily-indebted middle-income countries. It is also important that the G-7 initiate discussions within the Paris Club regarding revision of cut-off dates for loan forgiveness and debt reduction.

Finally, although linking debt reduction to policy reform is necessary, it must be based upon principles of sustainable growth. The IMF continues to focus upon short-term balance-of- payments problems. In attempting to stabilize a country's liabilities, the IMF ignores the longer term destabilizing impacts on the country's productive assets, which include its human and natural resources. This disregard for the productive assets of borrowing countries has led in most cases to aggravated poverty and environmental destruction, thus undermining the very foundations of sustainable development.

We urge the G-7 leaders to call for an enhancement of the IMF's present mandate. Human resource development and environmental sustainability must become an integral part of balance-of-payment stabilization and adjustment programs in all IMF programs. The IMF needs to ensure that, at a minimum, its programs have a neutral effect on environmental and human resources, if not a positive effect. Therefore, the IMF must analyze the impact of its programs on social and environmental sectors, incorporate degradation of environmental resources into national income accounting, and make its programs more transparent to give affected communities and local experts a voice in the design of adjustment programs.

International Trade and the Environment

Environmentally responsible international trade is one of the most important ingredients of sustainable development. However, international trade and environmental protection continue to be seen as being in conflict. The Tokyo summit is an opportunity for the G-7 countries to highlight the need for environmental reform of international trade, first as part of the Uruguay Round, which will then lay the groundwork for future reform of the General Agreement on Tariffs and Trade (GATT) as a whole.

As a first step in this direction, the G-7 countries should not consider negotiations leading to the creation of the Multilateral Trade Organization (MTO) complete until a clear, comprehensive environmental mandate has been established for the body.

The G-7 should make the necessary changes to the Uruguay Round text to ensure that it does not jeopardize a country's right to enact justifiable measures to protect the environment, public health and worker safety, provided the measures are implemented in a non-discriminatory manner. Similarly, the G7 should include in the negotiating text provisions to ensure that there is public participation and representation from all interested parties in the settlement of trade and environment disputes. In addition, the G-7 countries should take steps to ensure that the GATT dispute resolution process will include environmental and other appropriate expertise on any panels convened to rule on trade and environment disputes.

Some international conventions dealing with environmental protection include trade sanctions as an important remedy mechanism. A good example is the Montreal Protocol of 1987, amended as the London Protocol of 1990. Other international conventions, such as protocols to the Global Climate Convention may include trade sanctions as mechanisms to bring economic pressure to bear to force countries to comply with minimum international product and process standards. The G-7 countries should make sure that the Uruguay Round text explicitly provides that implementation of trade sanction provisions of international environmental conventions, treaties and protocols are authorized and justified under GATT.

Furthermore, G-7 governments should agree to an agenda and timetable for environmental reform of the GATT, which would be contained in a Ministerial Declaration accompanying the closure of the Uruguay Round negotiations. The Ministerial Declaration should call for negotiations, beginning immediately, to provide for environmental reform of GATT articles and operations, and guidelines for the justifiable use of process standards and other national measures aimed at protecting the environment. Until these environmental negotiations are complete, the G-7 countries should seek agreement from GATT Contracting Parties to a moratorium on trade and environment disputes before the GATT, as has been called for in the European Parliament.

The G-7 countries should also announce their support for the current GATT text on Domestically Prohibited Goods (DPG). This text will commit Contracting Parties to the GATT to provide notice when they are domestically producing and trading goods that are not permitted for consumption in the country of origin.

Finally, the G-7 should call for discussions within the relevant commodity agreements of methodology and mechanisms for incorporating "full cost pricing", such as the costs of sustainable natural resources management and environmental protection, into the international trade of those commodities.

Commission on Sustainable Development

The new U.N. Commission on Sustainable Development (CSD) has the potential to develop into a powerful new tool to promote greater transparency and access to information in international institutions such as the World Bank, and to address pressing environmental and development problems, such as water quality, climate, and debt. The G-7 should give the CSD the necessary resources, political support, and priorities it needs to play the critical role assigned it was at the Earth Summit.

Protection of Tropical Forests

The G-7 nations took an important step for the global environment in proposing the Pilot Program for the Conservation of Brazilian Tropical Forest in 1990, and have confirmed their commitment to the Program in 1991 and 1992. They should reiterate their interest in and commitment to the Pilot Program, and express willingness to increase their financial and other commitments as soon as the Brazilian Government creates a functioning mechanism for the transfer of funds. The G-7 should express the hope that the relevant Brazilian government agencies will implement the Program in spite of the surrounding political and economic crisis.

With regard to the U.N. Year of Indigenous Peoples, G-7 leaders should recognize (as they did in 1989 in Paris) the role of indigenous peoples in the conservation of natural forests, and stress the need to translate such recognition into specifically focused aid programs.

Finally, the G-7 should call for the acceleration of efforts to revamp the International Tropical Timber Organization and the Tropical Forestry Action Plan.

In conclusion, we urge that the G-7 nations work together to achieve substantive progress in the areas detailed above. In this regard, we believe it is vital for the G-7 governments individually and collectively to establish a process for implementing the commitments made in each Summit declaration.

Thank you for your interest and leadership on these issues.

Sincerely,

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