The federal and local authorities are currently preparing the ratification of the Kyoto international protocol on limiting the emission of greenhouse gases. Within the framework of that protocol, Belgium must reduce its greenhouse gas emissions by 7.5 percent, compared to 1990, in the 2008-2012 period. Following the formal ratification of the Kyoto protocol by all the parliaments of the concerned countries, that protocol will become equivalent to a Belgian law. This implies -- whether or not one agrees with it -- that the Kyoto protocol will become binding for all of this country's inhabitants and institutions. 
	
	
 We readily accept that there are good intentions on the part of both the government and this country's various sectors to comply with the Kyoto standards. However, no broad social debate has yet been conducted on the crucial question: How much should each sector or target group contribute to achieving the Belgian Kyoto standard? Because this debate has failed to take place, it is understandable that all sectors (ranging from processing and manufacturing industrial sector, the electricity sector, the tertiary sector, and the transport sector to the residential sector) are currently doing their utmost to make their own future efforts as small (yet acceptable) as possible. 
	
	
 That is strikingly illustrated by Belgian large-scale industry, which has made great efforts over the past 10 years, over which energy intensity (energy use per unit of final product) has improved considerably. But a very considerable increase in production is expected in Belgium over the next 10 years, so that (even with very efficient processes) overall carbon dioxide emissions will certainly rise. Large-scale industry wishes to counter the expected rise with so-called benchmark covenants. 
	
	
 In a nutshell, benchmarking means that companies compare their energy efficiency with that of similar plants abroad. In these covenants, the companies pledge to rank among the world leaders in energy efficiency by 2012. In return for their commitment, they are exempted from additional (Flemish) emission restrictions, taxes on emissions, or negotiable emission rights. 
	
	
 Belgian industry is advocating benchmark covenants because it is afraid that an absolute limit would weaken considerably its competitive position with respect to similar companies in regions where the Kyoto protocol is not ratified. According to industry, relocation, with the resulting job losses, would be the only solution. However, this disregards the fact that arguments other than purely financial ones also play a part in the location decisions of companies in our region (favorable location near seaports, availability of know-how, well-educated personnel, stable political climate...). 
	
	
 Those covenants contain insufficient guarantees in themselves to achieve the Belgian/Flemish reduction targets in an economically efficient manner. 
	
	
 To begin with, the principle of benchmarking itself raises questions. If it were to emerge from the comparison with domestic and foreign companies that certain companies do not rank among the world leaders in energy efficiency, they would have to present a plan to achieve the highest energy efficiency on time (by 2012). But benchmarking is not sufficient from the viewpoint of economic efficiency (realizing the Kyoto restrictions on emissions at the lowest possible costs for the whole of society). 
	
	
 A cost-efficient division of efforts implies that each sector must limit its emissions to the point at which the additional costs for one extra ton of reduction are the same in all sectors. As a result, the costs of additional restrictions on emissions in industry must be compared with those of other sectors, such as the transport sector, households, the service sector, and so forth. Benchmarking guarantees only that companies belong to the top of their class, but says nothing about that class's performance as compared with the whole universe. 
	
	
 Second, benchmark covenants do not guarantee that the external climate costs of energy use (the increased greenhouse effect caused by the burning of fossil fuels) are correctly taken into account in the final products of the sectors concerned. However, taking into account these external climate costs is essential, because the users of energy-intensive goods are confronted in that way with the consequences of their choice of product. In that way, less energy-intensive products enjoy a relative advantage. 
	
	
 Third, questions can be asked about the emission restrictions that would be achieved by the covenants. Companies are urged in the proposed covenants to adopt measures which have an economic cost recovery period of less than five years or have an internal rate of return greater than that of a straight-lined obligation. But it is highly unclear whether these measures will lead to many extra reductions of emissions in comparison with the business as usual scenario without additional policy efforts. 
	
	
 Fourth is the contrast between the benchmark covenants' relative emissions standards and the Belgian Government's absolute restrictions on emissions within the framework of the Kyoto protocol. Since industry does not wish to let itself be pinned down on an absolute emissions ceiling, while the government feels itself committed to an absolute ceiling, industry is foisting the necessary efforts onto other sectors in society through the benchmark covenants. If industrial greenhouse gas emissions increase considerably over the next 10 years, that will have to be offset by a commensurate reduction of emissions in the transport sector, services, households, and so forth. 
	
	
 Thus the benchmark covenants could have very significant consequences for other sectors and target groups in our society, whereas the latter are not involved in the deliberations on those covenants. Hence a broad social debate on who should contribute how much to realizing the Kyoto standards is urgently necessary. 
	
	
 Despite these shortcomings, we believe that a role is reserved for the instrument of benchmark covenants. Thus the benchmark covenants could be reconciled with the European Commission's recent proposals for launching a unified market for European carbon dioxide emissions by 2005. This European proposal assumes absolute restrictions on emissions (companies obtain rights to emit a certain number of tons of carbon dioxide) and is hence irreconcilable at first sight with the Flemish benchmark covenants. However, the benchmark covenants could be opportune here for settling the initial allocation of emission rights. Companies could be allocated rights on the basis of an energy efficiency standard, on the condition that they are prepared to accept an absolute emissions ceiling. However, if they wish to emit more (because, for instance, their output is increasing considerably), they can do so provided that they purchase the necessary emission rights from companies which have a surplus of rights. 
	
	
 The great advantage of negotiable emission rights in that the system can lead to a cost-efficient division of effort among all sectors and target groups. By using the benchmark covenants to allocate emission rights initially, the good points of covenants are retained and their drawbacks are eliminated. 
	
	
 In any case, it is high time that a social debate be organized on the division of effort to achieve the Kyoto aims. Only a division that takes account of every sector's possibilities and is borne by the various target groups guarantees that Belgium will achieve its Kyoto aims without draconian measures having to be adopted at the eleventh hour.