Joint Implementation
http://ji.unfccc.int
Overview
Additionality and Quantification Procedures
Overview
Type of Standard and Context
Joint Implementation (JI), like the CDM, is a project-based mechanism under the Kyoto Protocol. It is limited to transactions between industrialized countries and countries with economies in transition (EIT) that have commitments to limit or reduce their GHG emissions under the Protocol. The goal of the program is to increase market efficiency by allowing industrialized countries to meet a part of their obligation by investing in GHG abatement projects in another industrialized or EIT country if the cost of abatement is lower in the other country.
Like the CDM, the JI mechanism was negotiated in 1997 as a part of the Kyoto Protocol. Its goal is to combat climate change using a flexible GHG trading mechanism. JI grew out of a pilot program which began in 1995. Most of the pilot projects cannot be converted into JI emission reduction credits because they started before January 1, 2000, which precludes them from being considered under the JI mechanism (UNFCCC, 2006b).
Although the program became officially operational after the entry into force of the Protocol in 2005, the final determination (similar to registration) of the first JI project was only completed in March 2007. This was because the JI Supervisory Committee (JISC), the governing authority for the JI program, was not established until December 2005, and the verification procedure under the committee was only finalized in October 2006. The program entered its first commitment period under the Kyoto Protocol in January 2008 and it is expected to show better growth in 2008–2009.
The administrative and regulatory functions of the JI will be funded by the fees charged to project participants, and by the core and supplementary budgets of the UNFCCC. However, the funds generated from fees are not expected to accumulate to adequate levels until 2010, so reliance on industrialized and EIT country funding contributions will continue at least until the end of 2009 (UNFCCC, 2007a).
Standard Authority and Administrative Bodies
The JI program is supervised by the JISC, a 10-member team with voting rights that represent the EIT countries, the industrialized countries, developing countries and the small island developing states. There are 10 additional members without voting rights who represent the same country groups as the voting members. They participate in all JISC meetings and share the work responsibilities of the JISC. The JISC is supported by an expert panel for the accreditation of independent auditors (JI Accreditation Panel) and is ultimately accountable to the governing body of the Kyoto Protocol, which includes representatives of all countries that have ratified the treaty.
Within each industrialized and EIT country, there is a Designated Focal Point (DFP) that serves as the nodal agency responsible for administering JI activities within its jurisdiction.
Regional Scope
The JI scheme is international in its scope, but only industrialized and EIT countries that have ratified the Kyoto Protocol can host JI projects and issue the emission reduction units generated from the projects.
Recognition of Other Standards/ Linkage with Other Trading Systems
As in the case of the CDM, although the emission reductions of other schemes cannot be used under the JI program, other compliance programs, including the EU ETS, RGGI, the VCS and the VOS, and voluntary standards either recognize and accept JI emission reductions under their schemes or plan to do so in the near future.
Market Size and Scope
Tradable Unit and Pricing Information
The tradable unit under the JI program is an Emissions Reduction Unit (ERU). Each ERU is equal to one metric ton of carbon dioxide equivalent (mtCO2e). According to the 2008 World Bank report on the carbon markets, ERUs were transacted at an average price of USD 12.20 (EUR 8.90) in 2007, a 38% increase over the 2007 price (Capoor and Ambrosi, 2008).
Participants/Buyers
JI project participants include public or private entities based in industrialized and EIT countries that have ratified the Kyoto Protocol, or other legal entities that are approved by the project’s host country DFP to participate in the project. Approved entities may develop JI projects, sell the emission reduction generated, or buy ERUs to comply with their domestic and international obligations. To avoid the double counting of units, if industrialized or EIT country participants sell the JI emission reduction generated, they cannot count these reductions towards meeting their own targets. Buyers from other voluntary programs may also purchase JI emission reduction units.
Current Project Portfolio
As of June 11 2008 there were a total of 141 JI projects in the pipeline (UNEP Risoe Centre, 2008). JI distinguishes between track 1 and track 2 projects. All the projects currently in the pipeline are following track 2 verification procedures. Track 2 projects must be approved by the JISC. Track 1 projects, on the other hand, are approved by their respective host countries. Track 2 projects are located in countries that either do not fully comply with the eligibility requirements for participating in the JI program, or meet the eligibility requirements, but have voluntarily chosen to use the Track 2 verification procedure under the JISC. Projects that follow the Track 1 verification procedure established by their respective host country governments are located in countries that meet all the eligibility requirements for participating in the JI program and are thus authorized to verify projects. ERUs are issued and transferred by the host country under both the Track 1 and Track 2 verification procedures.
The JI projects in the pipeline have been dominated by renewable energy, methane reduction, cement and coal bed methane project types. However, the majority of ERUs generated have come from methane reduction, cement and coal bed methane projects (see Figure 4 3).
Of the 141 track 2 projects: one has been rejected by the JISC; one project’s determination report, which is similar to a validation report under the CDM, has been assessed by the JISC and secured a ‘final determination’, which is similar to registration under the CDM; one is under review by the JISC; and the rest are at the determination stage. Together, all these projects are expected to reduce emissions by 265MmtCO2e by 2012. The number of projects in the program’s initial phase was lower than expected, partly due to the delay by some parties in the finalization of national guidelines and procedures for JI. However, it is estimated that the number of projects that will come to the JISC after final determination by accredited auditors will increase to 50–75 projects per year in 2008–2009 (UNFCCC, 2007b).
Although projects may be developed in any industrialized or EIT country, in practice most of the projects are currently located in Eastern European countries and in the countries of the former Soviet Union. The portfolio illustrates this trend: the majority of the JI projects are being developed in Russia and Ukraine, which had proposed 79 and 23 projects, respectively, as of June 11 2008 (UNEP Risoe Centre, 2008). Bulgaria, Russia and Ukraine accounted for 20% each of the 44MmtCO2e in ERUs supplied between 2003 and 2006 (Capoor and Ambrosi, 2007).
The buyers, on the other hand, tend to be from Western Europe. Public sector buyers, mainly in the Netherlands, Denmark and Austria, have dominated the JI market in the early years, accounting for 92% of the ERUs transacted in 2006, and 80% in 2004 and 2005 (Capoor and Ambrosi, 2007). However, in 2007 private sector buyers, notably from Japan, made purchases in Eastern Europe. In 2007, 41MmtCO2e in ERUs, worth USD 499 million, was transacted (Capoor and Ambrosi, 2008).
Figure 4-3. Distribution of JI projects and ERUs by project type
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Source: UNEP Risoe Centre 2008
Offset Project Eligibility
Project Types
The project types eligible or ineligible under JI are the same as those under the CDM. The only difference is that while only afforestation and reforestation LULUCF projects are eligible under the CDM, other LULUCF project types, including forest management, cropland management and grazing management, are eligible under JI (UNFCCC, n.d.e).
Project Locations
A JI project can be located in any industrialized or EIT country that has ratified the Kyoto Protocol and has GHG emission limitations under the treaty.
Project Size
There are only specific project size limitations for small-scale renewable energy projects with a maximum output capacity of 15 MW (UNFCCC, 2007c).
Start Date
The project start date for eligibility is January 1, 2000.
Crediting Period
The crediting period for a JI project must begin after January 1 2008 and end in 2012. However, the length of the crediting period can be extended beyond 2012 up to the operational life of the project if it is approved by the JI DFP in the country hosting the project (UNFCCC, n.d.f).
Co-benefit Objectives and Requirements
Like the CDM, there are no explicit guidelines on the environmental or social co-benefits of JI projects. Unlike the CDM, JI projects are not required to assist countries with achieving their sustainable development goals, and projects do not have to be assessed based on any sustainable development criteria (UNFCCC, 1997).
Additionality and Quantification Procedures
Additionality Requirements
Like the CDM, every JI project must demonstrate that without JI, either the project would not have gone ahead, or it would have used an inferior technology resulting in higher GHG emissions. A JI project can demonstrate additionality in one of the following ways:
• Using an approved CDM baseline and monitoring methodology;
• Applying the most recent version of the ‘Tool for the demonstration and assessment of additionality’ or any other method approved by the CDM EB;
• Providing traceable and transparent information showing that the project’s baseline was identified on the basis of conservative assumptions, that the project scenario is not part of the identified baseline scenario and that the project will lead to reductions in anthropogenic emissions or enhancements of net removals; or by
• Providing traceable and transparent information on a previously ‘successfully determined’ comparable project implemented under comparable circumstances, and justifying why it is relevant to the proposed project under consideration.
Quantification Protocols
The basic principles and the processes that apply in the quantification of emission reductions in CDM projects are the same for JI projects.
Project Approval Process
Validation and Registration
Under JI, the validation stage is referred to as the determination. The determination of a JI project is carried out by an independent auditor (an Accredited Independent Entity, AIE) accredited by the JISC. There are no accredited auditors under the JI program as yet, so the CDM auditors (DOEs) are serving as provisional auditors for determining JI projects. The acceptance of the auditor’s determination report by the JISC, referred to as final determination, is similar to the registration of the project under the CDM. This is only required for Track 2 projects as Track 1 projects are not assessed by the JISC.
Like the CDM, the project developers have to develop a project design document, which the AIE reviews to confirm that the project is eligible, additional and compliant with national laws and environmental requirements. The AIE also solicits public comments through the UNFCCC and then prepares a Final Determination Report, which is made public through the JISC. Like the CDM registration process, unless a party involved in the project or three members of the JISC request a review of the project, the AIE’s determination report is accepted and the project secures a final determination from the JISC. If a review is requested, the JISC must make a final decision no later than six months or at its second meeting after the review was requested.
Monitoring, Verification and Certification
The monitoring and verification processes for JI projects under its Track 2 procedure are similar to that of the CDM projects. It requires the preparation of a Monitoring Report by the project developer, verification with possible site visits and the preparation of a Verification Report by the accredited auditor. Both the documents are made public through the UNFCCC secretariat. If the JISC is not asked to review the auditor’s verification, then the assessment is made final and the project host country can issue ERUs equivalent to the amount of emission reductions approved by the JISC. The ERUs are converted from Assigned Amount Units (AAUs) or from Removal Units (RMUs, from LULUCF activities). There is no certification procedure for JI projects.
Registries and Fees
There is no JI registry. ERUs are issued to the national registries of the industrialized and EIT countries hosting the projects. ERUs may be transferred from one national registry to another if the ERUs are purchased by an entity authorized by an industrialized or EIT country DFP. The JI fee structure is as follows:
• Independent auditors applying for JI accreditation are required to pay a one-time non-reimbursable fee of USD 15,000 in addition to any direct costs incurred by the team assessing its application.
• A progressive fee based on the volume of emission reduction or removal is charged for processing verification reports. The fee is USD 0.10 per metric ton of CO2e for the first 15,000 units generated in a year, and USD 0.20 for each additional unit.
• The fee is charged as an advance at the time of applying for final determination by the JISC. The advance is adjusted against actual payments due at the time of verification. Small-scale projects with emission reductions of less than 15,000 tCO2e are exempted from paying in advance but are required to pay the fee at the time of verification.
• Up to USD 30,000 of the amount paid in advance is non-reimbursable if the project does not secure a final determination by the JISC.
Selected Issues
JI projects face risks similar to those faced by CDM projects. These relate to the uncertainties surrounding: the national approval, validation and registration processes; technical failure; and the demand for JI credits post-2012 (Carnes et al, 2007). The JI status of some countries is still unclear, and in these countries the implementation rules either have not been fully agreed, or have been agreed but not yet implemented or communicated sufficiently (Van de Ven, 2007).
Another issue with JI is double counting. For example, if the JI reduction happens in an installation under the EU ETS and no account is given for these reductions, the operator can sell the EU ETS allowances (EUAs) that were avoided through the JI project as well. As a result, the government could potentially hand out two credits (1 ERU and 1 EUA) for a reduction of just one ton of CO2. This issue is addressed in the double counting guidelines of the linking directive , which states that projects at installations covered by the EU ETS cannot be put forward as JI projects because the allocation of EUAs and the generation ERUs in the same installation would lead to double counting. Some, however, argue that the restrictions on the eligibility of JI projects imposed by the double counting guidelines and the need to comply with other EU laws in setting the baselines restrict wind and hydropower projects, and that the double counting guidelines should be relaxed for renewable energy projects (Van de Ven, 2007).
Other issues highlighted include: the lack of reliable data to establish baselines; concern on the part of project developers that what they realize or sell now will be cut later when cap-and-trade programs are established/expanded; and unclear rules and processes for host nation approval, which makes getting project approval more uncertain. Proposed solutions to these problems include the creation of an ex ante ‘white list’ of project types for host nation approval, making decision-making processes more transparent with the right to appeal decisions and taking steps to limit the sovereign risk associated with the issuance and transfer of ERUs (Van de Ven, 2007).
References
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