As we have said repeatedly, MRV will be at the heart of the political deal to be sealed in Copenhagen.

The M – that stands for Measurement – and the R – that stands for Reporting – should not be two difficult to agree on. It is pretty easy to find what could be the common and the differentiated elements.

For the M, both developed and developing countries would have to measure what their policies and measures are delivering in terms of emission reductions. But developed countries would have an additional commitment: they should report on progress made, through these policies and measures, to reach their economy wide binding target.

For the R, both developed and developing countries would report through the existing instrument under the UNFCCC – the national communications – although they would have to be strengthened. But developed countries would report more frequently – annually – than developing countries – every two years. Etc…

But the real difficulties lie with the V – that stands for Verification. The two extreme options are: self-reporting only and international review by independent expert review teams.

When looked at it from a climate-negotiations-only perspective, the story is about symmetry and asymmetry. This story looks like the impossible trinity between the KP Parties, the USA, and emerging countries – especially China. KP Parties want to ensure the commonality in between their own rules and these of the USA. The USA wants to ensure the commonalities their own rules and these of China. And China wants to ensure the differentiation in between their rules and these of all developed countries.

When looked at it from a broader perspective, especially if we include trade, it also becomes a story bout the WTO and Border tax Adjustment (BTA). There are still very divergent views among lawyers regarding whether or not a BTA could be made compatible with WTO rules, under the general chapters on non discrimination or, if discriminatory, under the exception regime (article XX GATT). But what is necessary though not sufficient for it to be made compatible, the USA – or the EU, which is also envisaging the possibility of putting in place a BTA – would have to prove that China has breached WTO rules on the ground that it has violated a legal obligation and can be regarded as a non climate friendly country, notably on the basis of findings from a verification system established under a multilateral process, such as an international review by independent expert teams. The – not so hidden – issue behind verification is then one of trade sanctions and dispute settlements.

One can always devise a clever compromise. For example, the review might not be automatic for developing countries whereas it would be for developed countries. Developed countries would only ask for a review if they suspect that self-reporting is not trustworthy. In order to prevent frivolous or harassing disputes from being raised, if the expert review teams find that the dispute was raised with no legitimate basis, it must report that to the COP. But at the end of the day we face a simple binary choice. Either there will be such an international review, and the US might be able to put in place a BTA; or there will be none, and they will then have more difficulties to demonstrate on other grounds the extent to which China’s measures result in discriminatory practices. It then becomes an issue of risk management: the risk of being imposed a BTA for China, and the risk of not being able to put in place a BTA for the USA. In case China takes such risk, it should then be given compensation by the US for that, and vice and versa. And in each case, the compensation should be something big: a deal a technology or on trade for example, because the stakes are very high. That decision can only be made at the highest level. This will probably be on of the most important issues at the end of Copenhagen, when Barack Obama and Hu Jintao, together will other leaders will meet, and will need not only to make grandiose statements but to negotiate hard.