(JI) mechanism

Transcription

(JI) mechanism

Climate change:
Guide to the Kyoto Protocol
project mechanisms
VOLUME
C
FIRST EDITION
The Joint
Implementation
(JI) mechanism
MINISTÈRE DE L’ÉCONOMIE,
DES FINANCES ET DE L’INDUSTRIE
MISSION INTERMINISTÉRIELLE
DE L’EFFET DE SERRE
FONDS FRANÇAIS POUR
L’ENVIRONNEMENT MONDIAL
To obtain the official documents of the United Nations Framework Convention on
Climate Change, the Kyoto Protocol and the Bonn and Marrakesh Agreements, please
contact the Climate Change Secretariat:
secretariat@unfccc.int
http://www.unfccc.int
t.B - D. Falconer / Photolink / Gettyimages - PhotoAlto / Frédéric Cirou et James Hardy
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The content of the documents do not necessarily reflect the views of each of the
contributing experts.
Climate change:
Guide to the Kyoto Protocol
project mechanisms
FIRST EDITION
VOLUME
C
The Joint
Implementation
(JI) mechanism
MINISTÈRE DE L’ÉCONOMIE,
DES FINANCES ET DE L’INDUSTRIE
MISSION INTERMINISTÉRIELLE
DE L’EFFET DE SERRE
FONDS FRANÇAIS POUR
L’ENVIRONNEMENT MONDIAL
2
Guide to the Kyoto Protocol project mechanisms
Introduction
o tackle the global phenomenon that is climate change, two major agreements have
been adopted by the international community: the United Nations Framework
Convention on Climate Change, adopted in 1992 in Rio and, more recently, the Kyoto
Protocol, adopted in 1997.These agreements set quantified and binding commitments
for limiting or reducing GHG emissions of anthropogenic origin for 39 countries that are
developed or in the transition process towards a market economy, for the 2008-2012 period.
T
In order for each country to respect its commitments, regional or national policies are
progressively implemented. Further to these efforts, three market mechanisms, known as
flexible mechanisms, were set up: firstly, international emissions trading, and secondly, two
project mechanisms: Joint Implementation (JI) and the Clean Development Mechanism
(CDM), which both enable an investor country to obtain emission credits by investing in
projects that reduce or avoid GHG emissions in a host country.
The purpose of Joint Implementation is to encourage efforts aimed at tackling climate
change in two ways: firstly, through the implementation of efficient activities, technologies
and techniques emitting less GHGs in northern countries and, secondly, through the possibility
for the entities subjected to GHG emission objectives to make additional emission reductions, at less economic cost. The advantages of Joint Implementation projects are threefold:
• An environmental advantage, on both a local and global level, from the reduction in
GHG emissions resulting from the project;
• A development advantage, both economic and social, for the host country, which benefits from the location of the project, the transfer of technology and related know-how, and the
introduction of a new source of financing;
• An economic advantage due to the improved financial viability of low GHG emission
technologies, which favors their application, and, for entities with GHG emission reduction
commitments, the possibility of satisfying these commitments at less cost.
The commitments made by developed countries and their operators as well as countries
in transition to a market economy have resulted in the progressive internalization of the
“carbon” component of their strategic production choices. This process, with respect to JI, is
therefore likely to have a significant impact on investment in the developing countries, in
such varied sectors as energy, industry, transport, construction, waste disposal, agriculture or
forestry. This will involve sites or sectors that are not already covered by other mechanisms
(in particular the trading scheme) or regulatory measures.
JI is an innovative tool which encourages the transfer of technologies. Its appeal should
increase upon consolidation of the international price of carbon. It offers a promising partnership framework, where together investors and host countries can define more sustainable
methods of investment.
Further to the first volume (“Guide to the Kyoto Protocol Project Mechanisms – Overview
of the project mechanisms”) that introduces the key issues associated with GHG emission
reductions, this guide provides a practical approach to the set-up of projects. It is mainly
aimed at operators, but may also be used by other players, from both the private and public
sector, seeking to improve their management of the operational components of JI.
3
Table of contents
First Part
Greenhouse gas emission reduction policies in Northern countries:
Joint Implementation and other options .................................................................................. 9
1. GHG emission reduction: an increasingly established
objective at the national and international levels in
the Annex B countries ............................................................................................................ 11
.............................................................................................................. 12
The flexible mechanisms of the Kyoto Protocol ................................................................................ 12
The European policies tackling climate change ................................................................................. 13
A variety of national initiatives and policies among the EU Member States ................................ 13
European Union accession countries: a unique situation with respect to GHG emissions .......... 15
The international agreements
2. A market-based mechanism: the European Union Emissions
Trading Scheme ........................................................................................................................... 16
Directive 2003/87/EC of the European Parliament and of the Council: an emission
allowance trading scheme between GHG emitting industrial sites ................................................. 16
.................................................................................................................... 17
A gradual implementation beginning January 1, 2005 ...................................................................... 18
Several activities involved
3. Joint Implementation: one of the two project mechanisms
defined by the Kyoto Protocol ........................................................................................ 19
............................................................................................................................ 20
Several activities are affected ............................................................................................................. 22
An implementation by 2008 ................................................................................................................ 23
The advantages of JI for the investor ................................................................................................ 23
A flexible mechanism
4. Various options for the host country, depending
on the local context ............................................................................................................... 25
........................................... 25
Arbitrations to be conducted .............................................................................................................. 26
A specific situation for EU accession countries ................................................................................ 29
JI: participation in the sustainable development of the host country
Second Part
Can my project be developed under JI? .................................................................................... 31
1. Is my project eligible for JI? .............................................................................................. 33
.......................................................................... 33
Mandatory approval by the host country .......................................................................................... 33
Other eligibility criteria ......................................................................................................................... 34
Eligibility test ......................................................................................................................................... 34
What are the environmental eligibility conditions?
4
2. Does the considered JI project deserve to be continued? ........................ 37
.......................................... 37
Specific restrictions, in terms of costs and deadlines, of a JI project ........................................... 38
Direct and indirect benefits a developer can expect from a JI project
How to quickly determine whether a project merits development as part of JI
via a preliminary screening? ................................................................................................................ 39
3. Who can help me with my approach? ....................................................................... 41
The contacts in the host country ......................................................................................................... 41
Partnership agreements
........................................................................................................................ 41
Third Part
JI project formalization .................................................................................................................... 43
1. What is involved in the preparation of a JI project? ..................................... 45
What is included in the preparation cycle of a JI project? .............................................................. 45
Who are the main participants in the JI projects?
............................................................................ 46
2. What is a PDD and how is it prepared?
................................................................. 49
General description of the project’s activity ...................................................................................... 49
Methodology used to evaluate a project’s additionality .................................................................. 49
Duration of the project’s activity, crediting period ............................................................................ 51
Methodology and monitoring plan ...................................................................................................... 51
Environmental impact ........................................................................................................................... 52
Comments of local stakeholders ......................................................................................................... 52
3. The key stages for JI project approval ..................................................................... 53
................................................................... 53
Track 2: Determination by the Independent Entity ........................................................................... 54
Track 2: review by the Supervisory Committee ................................................................................. 55
Approval by the Parties – host and investor countries
4. How are emission reduction units obtained? ...................................................... 55
................................................................................ 55
The transfer of emission reduction units by the host country ....................................................... 55
Track 2: verification by the Independent Entity
Fourth Part
The methodological phase of the JI project ............................................................................ 57
1. How is a baseline established? ...................................................................................... 59
................................................................................................................. 59
What are the rules to be applied in establishing the baseline? ..................................................... 60
What is the baseline’s use?
5
2. How to assess project additionality? ......................................................................... 64
3. How to assess emission reductions? ......................................................................... 65
.............................................................................................................................. 65
Project emission calculation ................................................................................................................ 65
Net emission reductions ....................................................................................................................... 65
Baseline calculation
4. How to set up a monitoring plan?
.............................................................................. 66
What are the monitoring plan criteria? .............................................................................................. 66
Monitoring plan content ....................................................................................................................... 66
Fifth Part
Taking into account “carbon credits” in the JI project financing plan ..................... 67
1. The negotiations relating to credit sharing .......................................................... 69
2. How to use “carbon credits”? .......................................................................................... 69
3. How to set up an emission reduction purchase agreement?
................. 70
4. Terms of payment: the various options .................................................................. 70
........................................................................................................................................ 70
Call option (payment on delivery) ....................................................................................................... 71
Recourse to the market ........................................................................................................................ 71
Firm purchase
5. Risks and uncertainties surrounding the volume
and price of credits ................................................................................................................. 71
To conclude .............................................................................................................................................. 73
Annexes
1. English-French Lexicon .................................................................................................................. 76
2. Reference texts ................................................................................................................................. 78
Article 6 of the Kyoto Protocol ........................................................................................................... 78
Decision 16/COP.7 - Guidelines for the implementation of Article 6 of the Kyoto Protocol ........ 78
Draft decision -/CMP.1 (Art. 6) Guidelines for the implementation of Article 6
of the Kyoto Protocol ........................................................................................................................... 78
3. List of Parties included in Annex I to the UNFCCC .......................................................... 79
4. Examples of projects submitted to ERUPT or to the PCF ............................................ 80
6
5. Transition periods for the implementation of the Community
legislation ........................................................................................................................................ 82
Bulgaria .................................................................................................................................................. 82
Cyprus ..................................................................................................................................................... 82
Czech Republic ...................................................................................................................................... 82
Estonia .................................................................................................................................................... 82
Hungary .................................................................................................................................................. 82
Latvia ...................................................................................................................................................... 82
Lithuania ................................................................................................................................................ 82
Malta ....................................................................................................................................................... 82
Poland .................................................................................................................................................... 82
Romania ................................................................................................................................................. 82
Slovakia .................................................................................................................................................. 83
Slovenia .................................................................................................................................................. 83
6. Conversion tables ........................................................................................................................... 84
7. Clean Development Mechanism Project Design Document .......................................... 85
Note ....................................................................................................................................................... 85
Clean Development Mechanism - Project Design Document (CDM-PDD)
Version 01 (in effect as of: 29 August 2002) .................................................................................... 85
7
Table of Figures
Figure 1
1990 CO2 emissions for sectors covered by the “Quota
Directive” (in Mt), in the 15-member European Union .......................... 18
Figure 2 Flexible mechanisms to tackle climate change
.................................... 19
Figure 3 Impact of a JI project on the registries and inventories
of partner countries ............................................................................ 20
............... 27
The two JI phases of an investment project ........................................ 37
JI project cycle (Track 1) ...................................................................... 47
JI project cycle (Track 2) ...................................................................... 47
Baseline and additionality ................................................................... 50
Breakdown of responsibilities (Track 2) .............................................. 56
Decision tree for the preparation of a project methodology ............... 59
Main elements of a project methodology ............................................ 59
Illustration of the three baseline approaches ...................................... 60
Figure 4 Decision tree: possible strategies for the project developer
Figure 5
Figure 6
Figure 7
Figure 8
Figure 9
Figure 10
Figure 11
Figure 12
Figure 13 Representation of emission sources within the Svilosa biomass
project boundaries .............................................................................. 63
Tables
8
Table 1
Projected emissions for European Union countries in 2010
(base index of 100 in 1990) ................................................................. 13
Table 2
CEEC greenhouse gas emission levels in million tCO2-eq (1998)
and margin in relation to the Kyoto Protocol ...................................... 15
Table 3
Activities covered by the European Union Emissions
Trading Scheme ................................................................................... 17
Table 4
Advantages and disadvantages of the various options
designed to equalize the CO2 balance ................................................ 28
Table 5
Estimation of additional costs for a JI project
Table 6
Simplified example of costs and revenues associated
with JI projects .................................................................................... 40
Table 7
Impact of the carbon component on the Return on Investment
Table 8
Example of an emission reduction calculation table –
Svilosa biomass project ...................................................................... 65
Table 9
Comparison of the various terms and conditions of payment
..................................... 38
.......... 40
............. 71
VOLUME
C
First Part
Greenhouse gas
emission reduction
policies in Northern
countries: Joint
Implementation
and other options
9
Greenhouse gas emission
reduction policies in
Northern countries:
Joint Implementation
and other options
I n
b r i e f
o meet the greenhouse gas emission reduction or control commitments they have set as part of the
Kyoto Protocol, northern countries
must give priority to the implementation of
regional or national policies and measures.
T
In particular, as of January 1, 2005, the
European Union is preparing the implementation of a Directive calling for the establishment of a GHG allowance trading scheme
between companies whose installations
emit high volumes of GHGs.
In addition, three market mechanisms,
known as flexible mechanisms, have been
designed.They are intended to limit the economic cost of the fight against climate
change and, for two of the mechanisms, to
facilitate the transition towards a global
economy generating lower GHG emissions.
Firstly, countries that have ratified the Kyoto
Protocol will be able to exchange GHG emission allowances.Secondly, two project mechanisms, Joint Implementation (JI) and the
Clean Development Mechanism (CDM) will
provide emission credits to a country that
invests in another country’s GHG emission
reduction or prevention projects.
10
Similarly to the CDM, JI projects provide
the host country with non-financial benefits,
which are the main point of interest (support for direct foreign investments, transfers
of clean technologies, etc.). However, the
Parties included in Annex I, subject to quantified commitments as part of the Kyoto Protocol, can choose among several competing
instruments (trading scheme, regulations, JI,
etc.) that apply to several sectors and/or
different time horizons. The status granted
to JI in each host country will thus largely
depend, moreover, on the policies conducted
to meet emission commitments. For certain
host countries, JI does not appear to be the
tool of choice, whereas for others this mechanism offers significant economic leverage for
the realization of projects meeting national
interests and falling within a mid- and longterm sustainable development rationale,
particularly in the industry and energy production and distribution sectors.
A sound knowledge of the local institutional environment is thus indispensable
in assessing to what extent and by which
channel a greenhouse gas emission reduction project can be developed.
VOLUME
n response to the global issue related to climate
change, two major agreements were adopted
by the international community: the United
Nations Framework Convention on Climate
Change and an application protocol: the Kyoto
Protocol.
I
In connection with the latter, a certain number of
countries (Annex I countries) have made emission control commitments. To meet these commitments, they can implement domestic measures (standards, taxes, incentives, permits
market, etc.) and, additionally, flexible mechanisms, namely international emissions trading,
and two project mechanisms – Joint Implementation (JI) and the Clean Development Mechanism (CDM).
●
These project mechanisms enable the promotion of greenhouse gas emission reduction projects or activities by making them profitable, in
part by the “carbon credits” they generate in
proportion to the effective reductions. These
“credits” therefore serve as an incentive to the
realization of these projects.
●
JI, the subject of this volume, covers projects
conducted in countries that have ratified the
Kyoto Protocol and made emission commitments, whereas the CDM involves projects conducted in countries that have ratified the Kyoto
Protocol but not made emission commitments
(countries “not included in Annex I” that are
essentially developing countries).
●
Before breaking down the JI procedures, two
specificities must be grasped when planning an
emission reduction project in an Annex I country:
●
These countries are subject to control or reduction commitments for their emissions as part of
the Kyoto Protocol, but the host country that will
approve the JI project concerned will at the
same time sell the “allowances” it will have
received to meet the commitments undertaken.
A special vigilance can thus be expected from
the host country as to the quality of the projects
conducted, the economic and financial terms
and conditions of their implementation, and
their contribution, in the short, medium or long
term, to the fight against climate change.
●
Joint Implementation is not of course the only
incentive instrument for the set-up of a greenhouse gas emission reduction project. Other
means may be preferred, including not only the
usual instruments (standards, taxes, etc.) but
also the set-up of emissions trading schemes (or
permits market as provided by the Kyoto Protocol). Consequently, the operator must ensure
that his project falls under JI and not some
other form of development for his emission
reduction efforts.
The first section of this part will be devoted to the
policy implemented by the host country since, overall, it
plays a key role. The second section will cover the European Union Emissions Trading Scheme. One of the objectives will be to assist the operator in identifying whether
his project falls under JI or the trading scheme. The third
section will outline the JI eligibility criteria. Finally, the
fourth section summarizes the options offered to potential host countries and reviews the advantages and
disadvantages of JI compared to other development
channels for emission reductions.
1. GHG emission reduction: an increasingly
established objective at the national and
international levels in the Annex B countries
The following section, placed in the introduction to underscore the importance of a sound
understanding of the policy conducted by the
States, is not intended to shed an exhaustive
light on the policies conducted by the various
countries, but rather to evoke the common factors (particularly the commitments contracted
under the Kyoto Protocol), and call attention to
the implementation differences.
Depending on whether their objectives are simple
or difficult to attain, the sectoral priorities and
the nature of the policies conducted, the host
countries can manifest widely contrasting expectations with regard to the investment projects.
11
C
The Joint
Implementation
(JI) mechanism
GHG emission reduction policies: JI and other options
> THE INTERNATIONAL AGREEMENTS
To tackle the global phenomenon of climate
change, two major agreements were recently
adopted by the international community:
●
●
The United Nations Framework Convention on
Climate Change (UNFCCC), signed in Rio de
Janeiro in 1992, acknowledged that climate
change is a major environmental issue and set an
ultimate objective of stabilizing “greenhouse gas
(GHG) concentrations in the atmosphere at a level
that would prevent dangerous anthropogenic
interference with the climate system.” In addition,
it stipulated that in 2000 thirty-nine countries that
were developed or undergoing the process of transition to a market economy, as well as the European Union as such, would reduce their GHG
emissions to 1990 levels. These countries, listed in
Annex I of the UNFCCC, are referred to as
“Annex I Parties.” The UNFCCC came into force
in early 1995, after ratification by 175 countries.
The UNFCCC implementation rules and criteria
were specified by the Kyoto Protocol (1997). This
implementation has been the subject of an annual
international meeting, known as a “Conference
of the Parties” (COP), since 1995. The most significant meeting was COP7, concerning the
implementation of project mechanisms, which
took place in Marrakesh in November 2001.
The Kyoto Protocol set quantified commitments to limit
or reduce GHG emissions for 39 developed countries
(including countries undergoing the process of transi-
> THE FLEXIBLE MECHANISMS
OF THE KYOTO PROTOCOL
To enable the Annex I Parties to meet their objectives cost
effectively, the Kyoto Protocol has defined, in addition to
national priority efforts (policies and measures), three
international mechanisms, known as flexible mechanisms.
The three flexible mechanisms are intended to
limit, on a global scale, the cost of measures that
tackle climate change:
●
As of 2008, the international trading of
Assigned Amount Units will allow Annex I
Parties that have difficulty complying with their
restriction or reduction commitments to
purchase Assigned Amount Units from other
Annex I Parties that have a surplus;
●
As of 2008, the Joint Implementation (JI) mechanism, subject of this Volume C, will grant emission credits to Annex I countries that invest in
emission reduction projects in another Annex I
country;
●
The Clean Development Mechanism (CDM)
already provides, under certain conditions,
emission credits to Annex I countries that invest
in emission limitation or reduction projects in
non-Annex I countries.1
JI and the CDM are called “project mechanisms.”
By extension, the investment projects carried out
under these “project mechanisms” are sometimes
called “Kyoto projects.”
tion to a market economy and the European Union),
known as “Annex B Parties,” and listed in Annex B of the
Each Annex I country will be attributed an “assigned
Kyoto Protocol. The European Union as such is also party
amount“ of emissions, expressed in metric tons of CO2
to the Kyoto Protocol.
The commitments target an overall emission
reduction of at least 5% for these countries, in relation to 1990 levels, during the first commitment
period from 2008 to 2112, for six GHGs of
anthropogenic origin: CO2, CH4, N2O, SF6, PFCs,
and HFCs.
The Kyoto Protocol will become effective upon ratification by 55 countries, including the Parties included in
equivalent.2 This quantity corresponds to their objectives in connection with the Protocol and their 1990
emission level.
To ensure the environmental effectiveness of the
Protocol, the Marrakesh Accords defined a compliance regime, which is to say a system for verifying commitment compliance by the Annex I
countries, in November 2001. The regime will be
set up upon the entry into force of the Protocol.
The compliance regime will enable verification as
Annex I representing at least 55% of the 1990 GHG emissions of this group. The European Union and its 15 Member States ratified the Kyoto Protocol on May 31, 2002. All
1
EU accession countries have also ratified the Protocol.
2
Since 2001, when the United States announced that it
would not ratify the Protocol, only the Russian Federation’s ratification is required, as of the date this guide
was drafted, for the Protocol to enter into force.
12
For more information, refer to Volume B.
The gases are each allocated a global warming potential
(GWP) coefficient, reflecting their respective warming
capacity. The coefficient is used to compare the various
GHG emissions based on a common measurement unit
which, by convention, is one metric ton of carbon dioxide
equivalent (tCO2-eq).
VOLUME
to whether the Annex I countries satisfy the terms
and conditions of their participation in the flexible mechanisms.3
> THE EUROPEAN POLICIES TACKLING
CLIMATE CHANGE
The European Climate Change Program was launched
in 2000. Its goal is to identify the policies and measures aimed at reducing GHG emissions, in consulta-
●
the energy performance of buildings;
●
landfilling;
●
the promotion of biofuels;
●
the promotion of cogeneration;
●
fluorinated gases.
The Joint
Implementation
(JI) mechanism
> A VARIETY OF NATIONAL INITIATIVES
AND POLICIES AMONG THE EU
MEMBER STATES
tion with all parties concerned, with a view to their
adoption at the European Community level.
Certain actions, such as the voluntary agreement
between the Commission and automobile manufacturers, were initiated prior to the European
program. As part of the European program’s
preparation, the Commission set up working
groups to examine the various options for initiating actions in the following areas: flexible
mechanisms, energy supply, energy demand,
transport, industry, including fluorinated gases,
research, agriculture, sinks in agricultural soils
and forest-related sinks. Based on the work
undertaken, the Commission presented a certain number of proposals to the Council of Ministers and the European Parliament, certain of
which have been adopted, in particular:
●
●
Directive 2003/87/EC of the European Parliament and of the Council of October 13, 2003
(the so-called “Quota Directive”), establishing a
scheme for GHG emission allowance trading, as
of 2005, involving the energy sector and industries that consume significant amounts of energy;
A proposed directive linking the emission
allowance trading scheme to the Kyoto projects. The proposal4 would enable participants
in the European Union Emissions Trading
Scheme to meet their obligations by using JI
or CDM credits, following their conversion
into allowances. The proposal is currently
being negotiated by the Member States and
the European Parliament.
The other proposals of the European Union
involve:
●
the promotion of electricity from renewable
energy sources;
>> Diverse national initiatives
Countries within the European Union are not all
in the same situation. If the trend for some countries is already favorable, suggesting that the
objectives they set under the Kyoto Protocol will
be reached thanks to policies and measures now
in place, other countries will have to implement
additional policies and measures to reach – or
approach – their objectives. Table 1 illustrates the
diversity of these situations.
Table 1 – Projected emissions for European
Union countries in 2010 (base index of 100 in
1990)5
Country
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Ireland
Italy
Luxembourg
Netherlands
Portugal
Spain
Sweden
United Kingdom
Total
Kyoto
target
Emissions in
2010 with
existing
policies and
measures
Emissions in
2010 with
additional
policies and
measures6
87
92.5
79
100
100
79
125
113
93.5
72
94
127
115
104
87.5
92
111.5
115.4
82.4
116.6
109.0
66.3
128.9
139.8
108.1
77.1
116.1
158.1
148.3
100.7
86.1
95.3
92.8
105.9
79.9
98.3
98.0
65.2
NA
112.6
93.2
NA
104.7
NA
128
NA
77.5
87.6
Overall, the European countries have implemented
diverse policies, based on actions conducted within a
national (“domestic”) or international framework, via
3
the purchase of “carbon credits” from JI or CDM projects.
4
5 Source: European Environment Agency, Greenhouse Gas
Emissions Trends and Projections in Europe, 2002.
For more information, refer to the section “A significant and
binding international commitment: the Kyoto Protocol” in Volume A.
The draft version of the proposal for the directive is available
at: http://europa.eu.int/eur-lex/en/com/pdf/2003/com2003_04
03en01.pdf
6
C
In addition to existing policies and measures.
13
The national policies and measures set up in the
various European countries cover a very wide
range of instruments and target numerous sectors:
●
Tax measures implemented in energy-intensive
sectors of the United Kingdom and Sweden;
in the latter country, the introduction of a carbon tax from 1991 has notably led to the significant development of biomass-based municipal heating systems and an upstream fuel
supply business;
●
Support initiatives for energy efficiency and
renewable energy projects have been implemented. By way of example, in Spain, an M€
180 line of credit has been earmarked for the
support of projects via grants or low-interest
loans;
●
Other sectoral measures have been developed.
In the waste sector, for example, German federal regulations have focused on the reduction
of methane emissions, by encouraging the
recovery and use of organic waste, while incorporating the terms and conditions of storage in
the new controlled landfills, and requiring the
collection of biogas and its recovery in controlled landfills that are already operational.
British “domestic” actions
In the United Kingdom, the program tackling climate
change comprises a series of tax measures covering
climate change, including ambitious recovery targets
for energy-intensive sectors. The revenue from the
tax measures will be allocated to the development of
energy efficiency in industry, and the circulation of
economical technologies with low-level GHG emissions among manufacturers subject to the levies.
Among the program’s other measures are:
●
An obligation for suppliers of electricity to use
renewable energy sources for 10% of the electricity
supplied in 2010, provided that the cost is acceptable to consumers. The renewable energy sources
will be exempted from the tax measures;
●
The set-up of a national allowance trading scheme
enabling energy-intensive sectors to attain set
objectives as part of voluntary commitments,
entered into in return for tax breaks. In addition,
enterprises not concerned by the energy tax measures have a financial incentive to make voluntary
emission reduction commitments, due to initial
government support amounting to £ 30 million for
2003-2004.
The status granted to project mechanisms in
national policies also varies a great deal
depending on the country. Few European
Union countries have instituted genuine policies for hosting JI-type “carbon” projects. Gen-
14
erally, their priority lies rather in obtaining
“carbon credits” generated by projects carried
out abroad (JI and CDM), either through the
use of public funds to purchase these units, as
is the case in the policies implemented by the
Netherlands, Denmark, Austria and Sweden
for example, or by simply facilitating the participation of national enterprises in these
mechanisms, which is the case for France and
Germany.
>> The French policy
At the French level, the first measures to reduce GHG
emissions were launched in the early 1990s.
An initial National Program for tackling Climate Change (Plan national de lutte contre le
changement climatique, PNLCC) was officially
adopted by the government in January 2000; it
will be reinforced by the 2003 Climate Action
Plan to enable France to meet its Kyoto Protocol
commitments. These programs include national
policies and measures that extend the measures
undertaken at the European level.
The PNLCC includes and mostly reinforces
measures that were decided prior to its preparation (urban transport plan, thermal control of
buildings, regulation of industrial boilers, etc.).
It also includes some one hundred new measures that are quite diverse, which would enable
France to comply with the Kyoto Protocol commitment, based on the projections at the time of
launching.
The implementation of the measures undertaken by the public authorities enabled France
to stabilize its total GHG emissions between
1990 and 2001. Nevertheless, if the emission
trend in the energy and industry sectors appears
to be under control with some leeway,7 that of
the transport and building sector is proving to
be particularly worrisome. Overcoming this
7
As demonstrated by the development, virtually throughout
the world (the United States, European Union, Japan), of
voluntary agreements between public authorities and professional organizations, or the adoption of voluntary commitments by those companies with the highest GHG emissions. Of
note in the latter category is the initiative recently adopted by
some thirty major companies and French professional federations, resulting in the creation of AERES.
AERES (Association of companies for the reduction of the
greenhouse effect) was created in 2002. According to its
bylaws, “the association is part of an experimental process
with a view to preparing the implementation of European
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challenge is a priority for the 2003 Climate
Action Plan, the preparation of which, under
the responsibility of the French Interministerial Task Force on Climate Change, takes a longterm approach, reflecting the phenomenon that
must be reversed.
The direction taken by France, which favors socalled “domestic” measures, in no way excludes
the use of economic tools to limit the cost of
change as we steer towards a society with
reduced GHG emissions. It is in the interest of
the entire country and its companies, which find
themselves in a win-win situation in terms of
competitiveness.
> EUROPEAN UNION ACCESSION
COUNTRIES: A UNIQUE SITUATION
WITH RESPECT TO GHG EMISSIONS
>> Assigned amounts and emissions:
striking a CO2 balance
The CEEC (Central and Eastern European
Countries that are EU candidates with the
exception of Turkey) have pledged to reduce
their emissions by 6 to 8% in relation to 1990
levels or an average emission volume over several years.
In relation to the base years, emissions from the
CEEC have dropped due to the economic recession and restructurings. Most of these countries
could thus have a positive CO2 balance, i.e. an
initial allowance that will exceed the actual
emissions between 2008 and 2012. This positive CO2 balance is sometimes called “hot air.”
Table 2 provides the GHG emission targets and
the 1998 actual emissions for the ten CEEC
countries that are European Union accession
candidates. Most of these countries experienced
significant economic growth over the 1998-2003
period, which could have altered the CO2 bal-
Community measures for the control of GHG emissions. More
generally, the association’s activity falls in line with the Kyoto
Protocol’s application and the reduction of the greenhouse
effect.”
Accordingly, “it is responsible for technical management relating to the use of:
– ‘domestic projects’ concerning transport and buildings (tertiary sector) for members able to initiate action;
– Clean Development Mechanisms and Joint Implementation upon their recognition at the international level.”
At the time of publication of this guide, the AERES members
were: Arc International, Arjo-Wiggins, Atofina, BP France,
BSN Glasspack, Ciments Calcia, Clariant, Confédération
ance and could, if not for the first commitment
period (2008-2012), at least over the longer
term, necessitate the rigorous management of
greenhouse gas emissions.
Table 2 – CEEC greenhouse gas emission levels
in million tCO2-eq (1998) and margin in relation
to the Kyoto Protocol 8
million
tCO2-eq
Bulgaria
Czech Republic
Estonia
Hungary
Latvia
Lithuania
Poland
Romania
Slovakia
Slovenia
Kyoto
target
1998 emissions
in relation
to Kyoto target
Surplus/
Deficit at
the end
of 1998
144.5
174.5
37.4
95.3
32.6
47.3
530.2
243.5
70.0
17.6
-42%
-15%
-42%
-13%
-65%
-50%
-24%
-33%
-25%
11%
60.9
26.8
15.8
12.8
21.3
23.5
128.0
79.6
17.2
-1.5
>> A GHG emission reduction potential
that remains significant
The GHG emission reduction potential remains
particularly significant for European Union
accession countries:
●
Energy intensity, within a historical context of
cheap energy and low productivity, is very
high;
●
Technical and environmental standards which
historically have been less stringent than in
Western Europe.
Incorporation of the Community acquis via the
implementation of more rigorous standards
and, ultimately, the European Union Emissions
Trading Scheme, will contribute to the reduction of GHG emissions in the CEEC.
française de l’industrie des papiers, cartons et celluloses,
Cristal Union, Electricité de France, Esso SAF, Fédération
deschambres syndicales de l’industrie du verre, Glaverbel
France, Holcim France, International Paper, Lafarge Aluminates, Lafarge Ciments, Owens Corning Fiberglass France,
Pechiney, Pilkington Glass France, Rhodia, Roquette Frères,
Saint Gobain, Saint-Louis Sucre, Saverglass, Shell (Société
des pétroles), Société nationale d’électricité et de thermique,
Société vermandoise-industries, Sucreries distilleries des
Hauts de France, Syndicat francais des industries cimentières,
Syndicat national des fabricants de sucre de France, Tembec
SA, Total France, Union SDA (sucreries et distilleries agricoles) – Béghin-Say, Usinor, Vicat, Gaz de France.
8
Source: UNFCCC.
15
C
The Joint
Implementation
(JI) mechanism
The reduction potential, according to the
United Nations Economic Commission for
Europea
“Industrial energy use during the 1990s fell in Central
and Eastern Europe and NISb and grew slowly in Western Europe. However, industrial value added in Western Europe grew more rapidly than industrial energy
use, so energy efficiency continued to improve. […] Nevertheless, industry in Central and Eastern Europe is still
three times more energy-intensive than that in Western Europe, and in NIS seven times more. This is
explained partly by the relatively low energy prices prevailing in the former Soviet republics. Especially alarming is the fact that energy efficiency did not improve
between 1997 and 1999; improvements in utilization
capacity may not yet have been succeeded by new
investments in more energy efficient technologies.”
a Source: United Nations Economic Commission for Europe, Ad
Hoc Working Group on Environmental Monitoring, November
2002.
b
The Community measures must not only be introduced in each country’s national legislation, but
also implemented as of the accession date (May 1,
2004 for ten of the countries). Transition periods
for the full implementation of certain Community measures have been negotiated on a case-bycase basis and set forth in the accession treaties of
each country (see Annex 5).
By becoming an EU member, candidate countries
accept the Community acquis, which is to say all
Community legislation irrespective of category
and the rules and principles contained in the
European Union treaties, mainly the Rome,
Maastricht, Amsterdam and Nice treaties. Incorporation of the Community acquis involves implementation of the following priority tasks for accession countries:
●
Integration of all Community framework law,
including environmental law, into their national
legislation. Of particular relevance to JI implementation are the directives relative to waste
management, access to environmental information, environmental impact assessments, and
the “Quota Directive”;
●
Application of the measures subsequent to
international agreements to which the European
Community is a contracting party, the United
Nations Framework Convention on Climate
Change for example.
New Independent States.
>> The Community acquis
European Union accession countries9 have pledged to
align their legislative, regulatory and administrative
measures to Community legislation as a whole by no
later than the accession date.
9
In the short term, the European Union accession countries
are: Cyprus, the Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Malta, Poland, Slovakia, and Slovenia. These
countries will be EU members as of May 1, 2004. Bulgaria,
Romania and Turkey are official candidates.
This incorporation of the Community acquis
should absorb a portion of the GHG emission
reduction potential with respect to historical emissions, while contributing to the reduction of
future emissions.
2. A market-based mechanism: the European
Union Emissions Trading Scheme
> DIRECTIVE 2003/87/EC OF THE
EUROPEAN PARLIAMENT AND OF THE
COUNCIL: AN EMISSION ALLOWANCE
TRADING SCHEME BETWEEN GHG
EMITTING INDUSTRIAL SITES
As of January 1, 2005, the European Union Emissions
Trading Scheme will be operational. It will initially cover
the energy sector and industries that consume significant amounts of energy.
16
This system differs from the emissions trading
covered by the Kyoto Protocol in that entities and
not governments are involved, by the fact that it
uses its own unit of account – allowances – and
not the Kyoto units, and that it will be implemented as of 2005 for an initial 3-year period,
contrary to the Protocol’s emissions trading,
which cannot be initiated before January 1, 2008.
As of 2008, the European system will function by
5-year period (2008-2012 being the first period),
in tandem with the 5-year commitment periods of
the Kyoto Protocol.
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Simply put, the Member State authorities will
allocate GHG emission allowances to cover the
emissions of the activities of the major GHG
emission groups or companies under their
responsibility. Each installation will be attributed an administrative authorization to emit
GHGs (a GHG emissions permit) and an initial
emission allowance for the corresponding commitment period. The main obligation of operators will be to restitute a quantity of allowances
covering the actual verified emissions of their
installations.
Based on the market allowance price, the marginal costs of emission reduction and the difficulty in meeting targets, each operator will
decide, as appropriate, to invest in technologies
or activities that emit less GHGs and/or sell or
purchase allowances.
Those companies whose installations exceed
their emission allowance may:
●
●
●
As the European Union Emissions Trading Scheme only
concerns CO2 for the 2005-2007 period, the activities covered by the Directive will initially be the most energy
intensive.
The sectors directly targeted are presented in
Table 3. The threshold values given below generally refer to production capacities or outputs.
Where one operator carries out several activities
falling under the same subheading in the same
installation or on the same site, the capacities of
such activities are added together.
Table 3 - Activities covered by the European
Union Emissions Trading Scheme10
Energy activities:
- Combustion installations with a rated thermal input
exceeding 20 MW (except hazardous or municipal waste
installations);
- Mineral oil refineries;
Purchase allowances from companies that emit
less GHGs and who thus have a surplus of
allowances;
Production and processing of ferrous metals:
Invest in JI or CDM projects with a view to
generating or acquiring emission credits, in
accordance with the European Commission’s
proposed directive enabling operators covered
by the allowance trading scheme to use JI and
CDM credits in order to meet their obligation
to restitute a quantity of allowances equal to
the actual verified emissions.
National governments will set objective criteria for allowance distribution according to the
various installations concerned, and will prepare a national allocation plan to be validated
by the European Commission departments.
National governments will also be responsible
for the application of sanctions for the failure
to comply with the allowance restitution obligation, particularly in terms of financial penalties applicable under the “Quota Directive.”
Initially, these penalties will amount to
€40/tCO 2-eq (between 2005 and 2007) and,
subsequently, €100/tCO 2-eq as of January 1,
2008. They will in no way discharge the company at fault from having to retrocede the
quantity of allowances that was not met over a
given period.
The Joint
Implementation
(JI) mechanism
> SEVERAL ACTIVITIES INVOLVED
Approve new investments in GHG emission
reduction projects on their sites;
C
- Coke ovens.
- Metal ore (including sulphide ore) roasting or sintering
installations;
- Installations for the production of pig iron or steel (primary
or secondary fusion) including continuous casting, with a
capacity exceeding 2.5 tonnes per hour.
Mineral industry:
- Installations for the production of cement clinker in rotary
kilns with a production capacity exceeding 500 tonnes per
day or lime in rotary kilns with a production capacity
exceeding 50 tonnes per day or in other furnaces with a
production capacity exceeding 50 tonnes per day;
- Installations for the manufacture of glass including glass
fibre with a melting capacity exceeding 20 tonnes per day;
- Installations for the manufacture of ceramic products by
firing, in particular roofing tiles, bricks, refractory bricks,
tiles, stoneware or porcelain, with a production capacity
exceeding 75 tonnes per day, and/or with a kiln capacity
exceeding 4 m3 and with a setting density per kiln exceeding 300 kg/m3.
Other activities:
- Industrial plants for the production of:
(a) pulp from timber or other fibrous materials;
(b) paper and board with a production capacity exceeding 20 tonnes per day.
10
Source: Directive 2003/87/EC of the European Parliament
and of the Council of October 13, 2003.
17
Other industries will be involved through their
energy production installations if the latter have
a capacity that exceeds 20 MW: chemical, aluminium, automobile industries, etc.
Upon the launch of the scheme in 2005, the Commission
By way of example, chemical industry installations will only be concerned via their on-site
combustion capacity and will not fall under the
directive’s scope of application, unless their
rated thermal input exceeds 20 MW. Greenhouse gas emissions generated by other activities on the same site (particularly emissions
related to the production of chemical products)
will not initially be covered by the allowance
trading scheme.
sions will be covered.
For oil refineries on the other hand, all CO 2
emissions will be covered by the allowance trading scheme, whether the emissions are generated by combustion installations (even if their
capacity does not exceed 20 MW), or a related
process.
Figure 1 provides an estimate11 of CO 2 emissions for sectors covered by the Directive.
Figure 1 – 1990 CO2 emissions12 for sectors
covered 13 by the “Quota Directive” (in Mt), in the
15-member European Union
estimates that at least 10,000 installations could be concerned by the Directive for the 15-member European
Union alone and that approximately 46% of CO2 emis-
> A GRADUAL IMPLEMENTATION
BEGINNING JANUARY 1, 2005
For the European Union Emissions Trading
Scheme’s first commitment period, from January 1, 2005 to December 31, 2007, only the CO2
emissions generated by the activities listed in
Table 3 will be concerned.
During the scheme’s implementation reviews, made
obligatory for 2004 and 2006 by the Directive, the
Commission could extend the Directive’s scope of application to other greenhouse gases and other activities.
Subject to certain conditions, Member States
may unilaterally include activities and GHGs
not explicitly covered by the trading scheme:
●
As of January 1, 2005, Member States may
lower the directive thresholds applicable to
installations;
●
As of January 1, 2008, Member States may apply
the Directive’s measures to activities, installations and GHGs that are not listed in Table 3.
Conversely, Member States and Candidate
States may benefit, for certain installations and
under certain conditions, from the trading
scheme’s temporary exclusion measures:
11 Source: European Environment Agency, Economic Evaluation of Sectoral Emission Reduction Objectives for Climate
Change.
12
The figures only include CO2 emissions and not other GHG
emissions.
13 However, the installations in these sectors will not necessarily be subject to the “Quota Directive’s” measures (for example, if they do not attain the production capacity or output
thresholds).
18
●
Member States may petition the Commission
for temporary exclusion regarding certain
installations and activities. This exclusion,
known as the “opt-out“ measure cannot
extend beyond December 31, 2007.14
●
Candidate States benefit from negotiated dispensations (transition periods with respect to
the Community acquis).
●
Finally, the “Quota Directive” provides for links
with other greenhouse gas allowance trading
14
The final decision rests with the Commission, which must in
particular ensure that the installation or the activity will (i)
limit emissions as much as would be the case if they were subject to the provisions of the directive; (ii) be subject to monitoring, declaration and verification requirements, and (iii) be
subject to penalties that are at least equivalent to those stipulated in the directive. The Commission must also ensure that
there is no distortion of the internal market.
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schemes, based on mutual recognition agreements to be negotiated by the European Community.15
Moreover, within a different framework, a proposed
directive currently under discussion would allow
15
In addition to accession countries, the European Union
Emissions Trading Scheme could be extended to all countries
of the European Economic Area (European Union, Norway,
Iceland and Liechtenstein).
trading scheme participants to convert the credits
generated by JI and CDM projects into useable
“quotas” with respect to the “Quota Directive.” This
link would benefit both the project mechanisms
stipulated by the Kyoto Protocol (greater demand
for JI and CDM credits, subsequent acceleration in
the transfer of technologies and know-how to the
host country) and the European political instrument represented by the European Union Emissions Trading Scheme (improved European market, liquidity lower market price for allowances).
Figure 2 – Flexible mechanisms to tackle climate change
»
For further information
On the “Quota Directive” (Directive 2003/87/EC of the European Parliament and of the Council of
October 13, 2003):
http://europa.eu.int/eur-lex/pri/en/oj/dat/2003/l_275/l_27520031025en00320046.pdf
Frequently asked questions:
http://europa.eu.int/comm/environment/climat/emissions_faq.pdf
3. Joint Implementation: one of the two project
mechanisms defined by the Kyoto Protocol
Joint Implementation (JI) is a mechanism instituted by
the Kyoto Protocol,16 based on GHG emission reduction or sequestration projects in Annex I countries.
16
The widely accepted term “Joint Implementation” does not
explicitly appear in the Kyoto Protocol. As article 6 of the Kyoto
Protocol introduced JI, the official texts refer to JI projects as
“projects from Article 6.”
19
C
The Joint
Implementation
(JI) mechanism
> A FLEXIBLE MECHANISM
JI was introduced in the Kyoto Protocol. Its rules
and conditions of implementation were set forth
in the Marrakesh Accords in November 2001.
However, in contrast to the CDM, JI is not yet
formally operational. This does not prevent
Annex I countries from hosting JI projects, even
though the ERUs can only be transferred as
from 2008.
The purpose of JI is to encourage efforts aimed
at fighting climate change in two ways:
●
Firstly, through the implementation of efficient activities, technologies and techniques
emitting less GHGs in the countries included
in Annex I hosting the projects, thereby contributing to respecting their commitments
under the Kyoto Protocol, as well as to their
sustainable development. The host country is
responsible for the definition of priority sustainable development issues and the way the JI
projects can contribute.
●
Secondly, through the possibility for the
Annex I countries to reduce GHG emissions
beyond their borders at less cost. The JI projects can, in accordance with the contractual
modalities retained by the participants to the
project, generate emission reduction credits,
allocated partially or in full to investors.
>> JI project implementation principles
JI projects must be performed in an Annex I
country, and constitute a formal agreement for
the transfer of “assigned amounts” with another
Annex I country. Both partner countries have
emission reduction obligations, which is an
essential point. As shown in Figure 3, the emission reductions taken into account in a JI project give rise to an assigned amount transfer
from the host country to the investor country.
There is therefore no creation ex nihilo of emission rights as with the CDM, and it is a zerosum game.17
17 In practice, the host country converts, in its national registry, a portion of the assigned amounts that it holds equivalent to the emission reductions generated by the project into
emission reduction units (ERU). These ERUs are transferred
from the host country’s registry to that of the investor country.
Although both public and private entities are
eligible to develop JI projects, JI is mainly
intended for the private sector. Participation in
JI is voluntary and JI investments shall comply
with market regulations, just like standard
investments.
A certain number of main criteria must be met
for a project to be approved as a JI project. One
of the most important criterion is undoubtedly
that of additionality: the project must result in
Figure 3 - Impact of a JI project on the registries and inventories of partner countries
20
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a reduction of emissions that would not have
occurred in the project’s absence, i.e. a comparison with a “Business as Usual” scenario.
The following is necessary to demonstrate additionality:
●
A mainly qualitative assessment of the political, regulatory, economic and financial aspects
of implementing the project. This implies
demonstrating that there are significant barriers to implementing the project that JI helps
to overcome.
●
A mainly quantitative analysis of the difference
between GHG emissions in a normal situation
with no GHG emission reduction efforts and
the project’s GHG emissions. A project is additional, in terms of emission reductions, if it
produces measurable and verifiable sustainable GHG emission reductions.
It should be noted that it will be impossible to
know whether an Annex I country satisfies all
the criteria prior to 2007. If the host country
does not satisfy all the criteria and is therefore
ineligible, the Marrakesh Accords have defined
a second separate procedure for the development of JI projects, known as “Track 2.” The
development of a project under Track 2 is
supervised by an international authority – the
Supervisory Committee of Article 6 of the Kyoto
Protocol – and based on the CDM project
implementation procedure.
If the host country satisfies all the eligibility criteria,
the JI project can be developed under Track 1. Since the
project, in this instance, can also be developed under
Track 2, the host country and project developer should
choose between the two tracks.
If the host country does not satisfy all the eligibility
It must be noted that demonstrating additionality,
criteria, the project can only developed under Track 2.
though not always easy, is a major step in the development of the JI project.
JI and CDM: what are the primary differences?
For more information on this subject, refer to
the chapter “The methodological phase of the
JI project.”
>> One mechanism, two tracks: JI Track 1
and JI Track 2
The procedure to develop JI projects was originally designed to be quick and simple, with the
decisive factor being the agreement between the
Parties involved. The host country is therefore
free to apply any measures it wishes to approve
the project and transfer the ERUs. However,
this procedure can only be applied if the host
country satisfies all the eligibility criteria and
if it has adopted the guidelines for project
approval.
Track 2 of Joint Implementation, with respect to the
procedure to follow, resembles the Clean Development Mechanism. The preparation of the practical
measures governing JI will, following the entry into
force of the Kyoto Protocol, continue under the
responsibility of the Supervisory Committee. For
Track 2, the Committee is asked to rely on the work
of the Executive Board of the Clean Development
Mechanism.a
However, JI differs fundamentally from the CDM in
several ways:
●
As JI projects are developed in partnerships
between Annex I countries, which have emission
reduction commitments, the integrity of the mechanism is ensured by construction, since it concerns
a zero-sum game (see Figure 3).
●
In contrast to the CDM, it is directly in the interest
of the host country to ensure that the JI project
generates effective, measurable and sustainable
reduction emissions. Otherwise, the host country
runs the risk of transferring more ERUs than the
volume of emission reductions actually generated,
thus reducing its ability to achieve the reduction
target.
●
JI is not yet formally operational, and will only
become so when the Kyoto Protocol enters into
force.
To be able to participate in JI, an Annex I country must have:
●
Ratified the Kyoto Protocol;
●
Calculated its assigned amount;
●
Set up a national system to estimate GHGs
and perform GHG emission counts;
●
Set up a national registry;
●
Submitted additional information on the
assigned amount.
a The Executive Board of the Clean Development Mechanism
has been operational since COP7 in November 2001.
21
C
The Joint
Implementation
(JI) mechanism
> SEVERAL ACTIVITIES
ARE AFFECTED
The Kyoto Protocol does not explicitly mention
the project categories eligible for JI. It only
mentions “projects aimed at reducing anthropogenic emissions by sources or enhancing
anthropogenic removals by sinks of greenhouse
gases in any sector of the economy,”18 provided
that the project has the approval of the Parties
involved and is additional.
Pursuant to the Marrakesh Accords, for the first
JI commitment period (2008-2012), project eligibility modalities have not been approved in
the following sectors:
●
Agriculture: in particular, agricultural management practices and livestock breeding;
●
Use of soils and changes in the use of soils,
other than for afforestation19 and reforestation,20 (due to the uncertainties surrounding
the procedures of crediting and monitoring
sequestration);
●
CO2 storage in underground reservoirs.
Furthermore, eligibility conditions for afforestation and reforestation projects as part of JI
should be specified during the 9th Conference
of the Parties in December 2003.
●
>> Waste management
●
Capture of biogases produced by municipal
waste stored in controlled landfill sites (capture and combustion with or without energy
recovery from the methane produced);
●
Use of waste energy.
>> Industry
●
Any changes in industrial processes resulting
in a reduction in GHG emissions, e.g. conversion in a cement works from a wet process kiln
to a dry process kiln; incorporation of ash and
blast furnace slag in the clinker; use of energyefficient ovens for glass production; capture
of nitrous oxide22 generated by the production of fertilizer;
●
Capture and use of methane produced by
industrial waste water treatment equipment;
●
Improved energy efficiency in industrial projects.
>> Housing and tertiary sectors
●
Some examples of project categories potentially
eligible for JI are given below:
>> Energy
●
●
18
Substitution of high carbon-content fuels
(such as coal and oil products) with lower carbon-content fuels (natural gas or renewable
energies), with restrictions regarding nuclear
energy. Fuel switching also includes the
replacement of energy equipment. Fuel
switching projects include the improvement of
existing technology, or the set-up of new facilities;
Cogeneration: joint generation of electricity
and heat, enabling a very high energy yield;
Source: Kyoto Protocol, Article 6.
19
Afforestation consists in planting trees in sectors that have
not had forests in the last 50 years.
20 Reforestation consists in planting trees in sectors that have
not had forests since 12/31/1989.
22
Capture and recovery of methane leakage21
from transport or flaring in the oil or gas
industry.
Improved energy efficiency in residential or
tertiary buildings (offices, shopping malls,
etc.).
>> Transport
●
Improved energy efficiency of vehicles;
●
Vehicle fuel substitution, e.g. substitution of
gasoline or diesel for liquefied petroleum gas
(LPG) or natural gas for vehicles (NGV);
●
Substitution of high energy consumption
means of transport with low GHG emission
means of transport, e.g. replacement of individual means of transport (car) by buses or
trains.
21 The Global Warming Potential (GWP) of methane is 21,
meaning that the emission of one ton of methane is equivalent
to twenty-one tons of CO2. Methane capture and combustion
projects are therefore highly interesting in terms of the combat
against climate change.
22 Certain GHGs such as N O, SF and halocarbons have a
2
6
high Global Warming Potential, meaning that the capture of
these GHGs, even at low tonnage volumes, may generate
significant reduction emissions.
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>> Agriculture
●
Improved energy efficiency or use of low GHG
emission energy sources to drive irrigation
pumps;
●
Reduced methane emissions produced by rice
crops;
●
Reduced animal waste or capture and use of
methane generated by animal waste.
●
Afforestation;
●
Reforestation;
●
Increased use of timber in construction, to
replace other materials that produce GHGs
upon manufacture;
●
Use of energy wood (woodchip, carpenters’ or
felling waste, etc.), to replace fossil fuels.
This list is not complete and any project satisfying the eligibility conditions may be developed
as a JI project.
Even though JI is not yet formally operational, there
are at present several possibilities for project developers within a context similar to JI.
For example, “carbon credit” purchase funds already
acquire, in the form of call options, the ERUs which
would have been generated by projects likely to be
eligible for JI. At present, the main buyersa of “carbon
credits” are public bodies such as:
●
The “Prototype Carbon Fund,” a “state/private” fund
set up by the World Bank, involving around thirty
companies and governments;
●
Annex I country governments, such as the Dutch,
Austrian, Swedish and Danish governments.
These purchases are made within a very precise context, since both PCF and ERUPT have drafted guidelines for the formalization of projects. PCF and ERUPT
projects are mainly developed in the following sectors:b
●
Energy efficiency, renewable energy, and fuel substitutes;
●
Waste treatment;
●
Afforestation and reafforestation.
The main objectives of current carbon market players
are:
●
To anticipate the risk of not respecting commitments: the risk of entities involved in the European
Union Emissions Trading Scheme not respecting
commitments could result, as mentioned previously, in severe penalties;c
●
To anticipate the market price: current ERU market
prices, which remain call option prices as long as JI
is not formally operational, are very low in comparison to the prices resulting from several simulations.
> AN IMPLEMENTATION BY 2008
For JI projects, emission reduction crediting is
only forecast for the Kyoto Protocol commitment
periods, due to the relationship between emission
reduction units (ERU) and assigned amount units
(AAU). Initial ERU crediting will only be generated as from 2008.
> THE ADVANTAGES OF JI FOR
THE INVESTOR
>> Economic benefits for the project
developer
For companies, the JI projects offer two options as
to the use of the credits they generate:
The Joint
Implementation
(JI) mechanism
The possibilities of developing in the shortterm JI projects
>> Forestry
In addition, certain Annex I countries have already
set up, as part of bilateral agreements, projects destined to become JI projects once JI is operational. For
instance, the Romanian and Danish governments are
jointly developing a project to substitute fossil fuels
with wood waste for municipal heating systems in
Romania. The project anticipates an emission reduction of 720,000 metric tons of CO2 equivalent, corresponding to the transfer of almost 720,000 ERUs.
In the medium term, it can be expected that the entities involved in the European Union Emissions Trading Scheme will account for a significant percentage
of the market demand for ERUs.
1. An additional source of income for the project from
the generation and sale of Emission Reduction Units
(ERUs), more generally referred to as “carbon credits.”
For example, an electricity production project
may generate income from the sale of electricity
as well from the sale of “carbon credits.” These
“carbon credit” sales particularly interest companies with no objectives to meet under the European Union Emissions Trading Scheme, or which
are net sellers. They can propose these ERUs to
entities or countries subject to emission reduction
commitments, and which, as a result, shall
become net buyers.
C
a
See Volume A, p. 20.
b
A list of the PCF and ERUPT projects is enclosed in Annex 4.
c Furthermore, these penalties shall not relieve the noncompliant entity of its obligations to cover its remaining emissions with allowances.
Another advantage is the positive impact of an
Emission Reduction Purchase Agreement on the
completion of a project’s financing plan, due to
the resulting additional revenues.
23
increase substantially, not incorporating this
revenue could gradually become a factor for
disqualification in certain sectors; e.g., in the
waste treatment sector, the valuation of emission reductions may generate a significant difference in the rate of return on the project
investment. Accordingly, the current familiarization and training phase would appear
essential. Indeed, committing to the development of Kyoto projects today, at a relatively
early stage of their operational implementation, will provide a competitive edge tomorrow;
Often significant advantages
For certain renewable energy projects, and even with
a highly conservative CO2 price (€3/metric ton of CO2
equivalent), income from the sale of CERs can represent 5 to 15% of the project investment costs. For
methane emission reduction projects, the income
from the sale of “carbon credits” to a third party may
represent up to 70% of the additional investment
costs to recover the methane.
2. An option to reduce and diversify risks is likely to
interest companies or groups with domestic GHG
emission reduction objectives as part of the European
●
Facilitated penetration of new GHG emission
reducing technologies: JI may facilitate the
expansion and development of markets for
these new technologies. The accelerated
amortization of the development programs for
these resulting new technologies shall enhance
their international competitiveness;
●
Image enhancement, at the local level, of the
company developing the project, whether
with respect to the host country, its clients or,
more largely, the populations the project
might affect. This aspect may strengthen and
facilitate the communication process and
therefore the acceptability of certain complex
projects such as mass urban transport projects
(tramway, subway) or urban heating projects
(installation of individual meters, etc.);
●
Materialization of the company’s environmental and social responsibility policies,
using JI projects that contribute to both the
sustainable development of the host country
and the protection of the global environment.
Union Emissions Trading Scheme.
For a company with emission volume restrictions, one of the options available to facilitate
commitment compliance is the acquisition of
additional “carbon credits,” either by buying
them from a third party, or by generating them
directly via a JI project. French companies or
groups with activities or subsidiaries in countries included in Annex I are therefore well
positioned to assess the emission reduction
opportunities.
>> Advantages of a longer-term strategy
JI is also likely to provide further benefits to project
developers, particularly in terms of competitiveness
and image.
In certain cases, these commercial benefits shall
be the main motivation for project developers.
Using JI may, for example, enable:
●
●
Projects of better quality to be proposed,
involving more advanced environmentally
friendly technologies, and/or less costly technologies if emission reductions can be recovered on the market, thereby generating a
reduction in the price of goods and services;23
and enhancing the competitive positioning of
the operator;
Conversely, to avoid a marginalization of the
offer proposed. If the price of carbon was to
JI may therefore be used as an additional instrument
to enhance the competitiveness of the company. It is
precisely the instrument’s incentive nature that is of
interest to a number of companies with respect to
both innovation and the transfer of technology to
other Annex I countries, and above all countries undergoing the process of transition to a market economy24
which, ultimately, are the main beneficiaries of these
mechanisms.
24
23
Particularly when bidding for tenders.
24
Central and Eastern European States (CEEC) and New
Independent States (NIS).
VOLUME
The Joint
Implementation
(JI) mechanism
4. Various options for the host country,
depending on the local context
For certain countries likely to host JI projects, the
advantage of participating in Joint Implementation is not always obvious. The implementation
of JI projects certainly creates, in a similar way to
the CDM, non-financial advantages for the host
country, which constitute the main interest. However, to reduce their emissions, Annex I countries
can choose between several rival instruments
applicable to different sectors and/or time horizons:
●
Two of the Kyoto Protocol flexible mechanisms:
Joint Implementation and international emissions trading;
●
Regional or national tools for effective emission
reductions within a country or a group of countries. For example, for EU member or accession
countries, this will involve the emissions trading scheme, excluding of course the Russian
Federation, the Ukraine and Belarus.
Each country faced with this choice should therefore prepare its own “carbon strategy,” in order to
optimize the “carbon constraint” and meet the
Kyoto Protocol commitments, at lesser or even at
negative cost, by making a wise choice between
all these instruments. The following paragraphs
describe the options which may be taken into
account by the Annex I countries in preparing
their strategy.
> JI: PARTICIPATION IN THE
SUSTAINABLE DEVELOPMENT
OF THE HOST COUNTRY
●
While positively contributing to the economy (increased energy efficiency), and generating positive social impacts (improved environment, reduction in maintenance charges,
etc.);
●
Favor Foreign Direct Investment (FDI) in new
low emission technologies and technology
transfers: energy efficiency, industrial processes, etc.;
●
Provide an additional financial contribution to
render a project financially viable by lowering
the cost of its implementation and operation.
Different national situations for Annex I
countries regarding JI project hosting
There are three situation types for the countries committed to the international combat against climate
change:
●
Within the European Economic Area (15 EU Member States, Norway, Iceland and Liechtenstein),
Japan, Canada, Switzerland and New Zealand, the
national GHG emission trends generally result in
reduced flexibility in relation to the Kyoto Protocol
emission objectives for 2008-2012. Current regulatory standards and the existing technological level
of eco-efficiency relating to GHG emissions offer
few opportunities for low-cost reduction. On the
face of it, there is little scope for hosting JI projects,
such as they are contemplated at the present time,
within these countries.
●
As described above, there is, however, a significant
emission reduction potential in most EU accession
countries. A certain number of these countries, fully
committed to the process initiated at Kyoto, are setting up authorities and drafting procedures, mainly
to host JI projects. The incorporation of the Community acquis by the implementation of stricter
standards and the implementation of the “Quota
Directive,” especially for countries entering the EU
as from 2004 will, however, absorb a significant
portion of the emission reduction potential that
can be developed in JI projects. Romania and Bulgaria, which do not feature in the first EU accession
group, maintain a particular status, with JI remaining a preferred instrument for a financial return on
emission reductions.
●
The Russian Federation, the Ukraine and Belarus
also present significant emission reduction scope.
The position of these countries in relation to the
Kyoto process has not been approved, and an active
debate is still ongoing at the national level as to
the possibility of ratifying the protocol and therefore taking part in its project mechanisms. Should
this approval be granted and considering the
significant potential of JI projects, there would be
numerous financial (“carbon credit” purchase
funds, multilateral institutions) and private players
likely to participate.
One of the prime objectives of JI is to contribute to the
sustainable development objectives of the countries
included in Annex I.
Taking into account the fact that the investments
provided for as part of JI shall be made in countries with economies in transition and that they
will generally be financed by countries (“Parties”
within the meaning of the protocol) subject to the
Kyoto Protocol, or by companies located in these
countries, this innovative mechanism can be considered as a new source of financing for the transition to a market economy.
The role of JI is to favor projects that can:
●
Positively contribute to the local environment
(waste, urban pollution, etc.);
C
25
Finally, investment enables governments to meet
their GHG emission reduction commitments, and
enables host countries that wish to maintain a
portion of their “carbon credits” generated by the
project to improve their position in relation to the
Kyoto Protocol objectives.
Accordingly, the appeal of this new mechanism
for the host countries is the set-up of structures, in
a certain number of countries with economies in
transition, for the promotion, accompaniment
and approval of these projects. This new dynamic
shall largely depend on increases in the price of
carbon, and the alternative policies set up by host
countries to meet their emission commitments.
> ARBITRATIONS TO BE CONDUCTED
The main parameters that can influence the
strategic choices of Annex I countries for the first
commitment period (2008-2012) are as follows:
●
The profile of the emission reduction unit costs
in the country;
●
The country’s expected position in relation to
its Kyoto objectives, at the end of the first commitment period;
●
●
The date for the operational implementation of
the mechanism or tool for the emission reduction development projects (including JI);
The host country’s institutional capacity (legislative framework, administrative and operational procedures for monitoring and verifying
project GHG emissions).
These parameters will also have to be taken into
account when arbitrating between the Kyoto Protocol’s initial commitment period and subsequent
commitment periods.
>> Profile of the emission reduction
unit costs
The costs of the “most recent” metric ton of CO2
equivalent in emission reductions, or GHG emission reduction marginal costs will increase. This
standard assumption reflects the fact that economic players first carry out the least expensive
emission reductions, i.e. they benefit from lowcost opportunities.
A country’s emission reduction unit costs depend
on sectoral features, the production techniques
used in the country and the price of fuels, especially fossil fuels. In particular, a country in a specific sector with a low technology level will very
likely present very low emission reduction marginal costs in this sector.
26
The difference in the marginal costs of emission
reductions between the various Annex I parties
will be the main driving force behind Joint Implementation, if transaction costs, especially in the
second track, are not too high.
>> Assigned amounts and emissions:
the CO2 balance
The relationship between the initial allowance
(“assigned amount”) of a country and its actual
emissions between 2008 and 2012 can be illustrated by considering it as a balance, called the
“CO2 balance.”
In the next section of this guide, we will cover the
following:
●
Equal balance, when the emissions offset the
assigned amounts;
●
Deficit balance, when the emissions outweigh
the assigned amounts;
●
Surplus balance, when the assigned amounts
outweigh the emissions.
Likewise, in the event of an operation involving
the assigned amounts and/or emissions, the following terms can be used:
●
Improvement in the balance, when the operation reduces the deficit (or increases the surplus);
●
Deterioration of the balance, when the operation increases the deficit (or reduces the surplus).
The emissions forecast by each country for the
first commitment period are fundamental, since
the country can adopt a different strategy,
depending on whether it has a surplus or deficit
balance.
The objective for each party to the Kyoto Protocol is not
to have a deficit CO2 balance at the end of the initial
commitment period.
>> Arbitrations at different time horizons
The Kyoto Protocol’s initial commitment period,
on which the Joint Implementation mechanism
is based, covers the period 2008-2012. As from
2013, the commitment periods will be successive
5-year periods. The international rules that will
then govern the implementation of the Kyoto
Protocol and its flexible mechanisms are still to
be determined.
VOLUME
The choices made for one commitment period will affect
subsequent commitment periods.
The Parties to the Kyoto Protocol have the possibility of maintaining a portion of their
assigned amounts for later use, either selling
them or using them to meet a commitment in a
future period.
The low-cost reduction opportunities, which are
granted to foreign investors as part of JI, will
no longer be possible in subsequent domestic
measures or projects, thereby reducing the host
country’s future scope of action. However, it
should also be noted that the emission reductions generated by a JI project normally have
an impact beyond the short term (especially the
JI crediting period). These projects, generally
resulting in structural changes (fuel substitution, improved insulation for buildings with life
cycles of several decades, etc.), permanently
modify the site’s or sector’s emission trajectory.
By selling the credits related to short-term
reductions, the host country, on the contrary,
benefits from the emission reductions that the
long-term project will continue to generate.
Over and above the project itself, the host country can count on a transfer of technology or practice. Using pilot projects (approved as JI projects), the host country can hope that this practice
is communicated within the country, with the
related medium and long-term benefits.
>> Summary tables
The advantages and disadvantages of the various options made available to Annex I countries
are summarized in Table 4. The strategy that the
project developer can adopt depending on the
attitude of the host country is summarized in
Figure 4.
Figure 4 - Decision tree: possible strategies for the project developer
27
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The Joint
Implementation
(JI) mechanism
Table 4 – Advantages and disadvantages of the various options designed to equalize the CO2 balance
Joint
Implementation
(from the host
country’s point
of view)
Advantages for the host country
Disadvantages for the host country
The “multiplier” effect of JI contributes to increasing the foreign direct investment (FDI) in the host
country, which generates more projects, thus creating jobs and new sources of foreign currency.
Credits will only be generated through JI in 2008.
Compared to other types of investment, the multiplier effect of a JI project creates numerous side
benefits (improved local environment and social
conditions, transfer of state-of-the-art technology
and know-how).
According to the provisions negotiated between
the host country and the project developer, JI can
improve the CO2 balance of the host country in the
short (e.g. if there is credit sharing), medium or
long term (if the project life is longer that the JI
crediting period).
International
emissions trading
(from the seller’s
point of view)
European Union
Emissions Trading
Scheme
(reserved for EU
Member States
and accession
countries)
JI offers its foreign players the most interesting
low-cost opportunities, but these are not available
in the later stages.
According to the “Projects Directive,” under negotiation, the JI should not be authorized for activities already covered by the emissions trading
scheme in Member States, but shall remain compatible with activities covereda by the European
Union Emissions Trading Scheme for non EU projects (Russian Federation, Ukraine, Belarus, other
countries like Canada, etc.) or, with the expected
dispensation periods, for accession countries. It is
uncertain whether projects indirectly involving
covered sectors, such as renewable energies and
energy efficiency, are eligible for JI due to the risk
of double accounting by the European Union
scheme and JI. Finally, the European Union Emissions Trading Scheme enables each Member State
to extend its scope of coverage, thus restricting the
scope that remains accessible to JI. This opt-in system is supervised by the regulatory committee,
which assists the Commission in implementing the
“Quota Directive.”
Emissions trading ensures an immediate financial
return on a host country’s surplus CO2 balance.
Emissions trading will only be operational in 2008,
if the Kyoto Protocol enters into force.
Under certain conditions, emissions trading furthers the developments already achieved since the
base year.
It is the governments who participate in trading,
even though they can authorize legal entities to
trade on their behalf.
Emissions trading enables national players to
profit from its low-cost opportunities, by combining it with local tools designed for emission reductions, such as the European Union Emissions Trading Scheme or other mechanisms.
Emissions trading is initially reserved for countries
with a surplus CO2 balance.
The European scheme will be operational as from
2005.
The initial implementation of an emissions trading
scheme is difficult.
Emissions trading affects the CO2 balance.
The European scheme furthers the developments
already achieved since the base year.
The European scheme allows the Member States to
extend the scope of coverage, which constitutes a
tool to improve the CO2 balance.
The European scheme enables national players to
profit from its low-cost opportunities.
Other tools
(taxation,
legislation,
aids, voluntary
agreements, etc.)
Other tools can be set up to suit each country.
Other tools further the developments already
achieved since the base year .
Other tools enable national players to profit from
their low-cost opportunities.
Other tools are partly incompatible with the sectors
covered by the emissions trading scheme.
Under certain conditions, other tools restrict the
scope remaining accessible to JI.
a Activities covered by the European Union Emissions Trading Scheme are not eligible for JI. It should though be possible to develop JI projects in
sectors covered by the “Quota Directive,” for activities whose envisaged capacities are below the thresholds.
28
VOLUME
ric ton of CO2 equivalent prices, which could
reduce any short-term financial return.
> A SPECIFIC SITUATION FOR EU
ACCESSION COUNTRIES
>> Profile of emission reduction unit costs
affected by the incorporation of
Community acquis
As mentioned previously, the GHG emission
reduction potential is particularly significant in
EU accession countries, due to a very high
energy intensity, and environmental and technical standards that historically are not as
restrictive as those in Western Europe. Therefore, marginal emission reduction costs are initially low.
However, it should be noted that the incorporation of the Community acquis, obligatory for
the accession countries, through the implementation of more stringent standards should
absorb a portion of the medium or long-term
GHG emission reduction potential. The incorporation of the Community acquis at the same
time significantly reduces the JI potential, insofar as a number of investments corresponding
to the application of this acquis can no longer
be considered as additional within the meaning
of the Kyoto Protocol (the baseline being the
Community regulations, if there is no dispensation period).
●
CEECs remain, due to their low-margin emission reduction costs, appealing countries for JI
projects, in sectors not covered by the European Union Emissions Trading Scheme and
for projects not involving the simple incorporation of the Community acquis.
JI in candidate countries: additionality and the
European Community acquis
For ten of the countries seeking accession to the
European Community, transposition to the Community acquis shall be concluded at the latest by the
accession date, that is, by May 1, 2004a The Community legislation requirements must be considered as
part of the baseline for JI projects undertaken in
these countries. The IPPC Directive and the best available techniques shall necessarily be taken into
account.
In particular, it is clear that facilities ultimately falling
under the European Union Emissions Trading
Scheme may not simultaneously, and outside of the
transitional period,b be part of a JI project, in order to
avoid the double accounting of emission reductions.
a Except for certain transition measures agreed during accession negotiations.
b The European Directive on project mechanisms, currently
under negotiation, should provide further information on this
point.
>> A wide range of instruments
for the “carbon” strategy
EU candidates should, like any Annex I Party,
assess each strategy’s opportunity, taking
account of the various time horizons. However,
CEEC candidates to the European Union are
potentially affected by all the previously mentioned tools:
●
●
European Union accession countries will integrate, in respect of the Community acquis, the
European Union Emissions Trading Scheme.
CEECs have strong chances of benefiting from
a surplus CO 2 balance following the initial
commitment period, which is an important
factor in the decision to use international
emissions trading. However, the withdrawal of
the US from the Kyoto Protocol, even though
this party was expected to be the main “carbon
credit” buyer, may result in a decrease in met-
»
The challenge for EU accession CEECs will therefore be to
manage their surplus CO2 balance like an asset base, by
creating in their strategy a balance between:
• The tools enabling them to benefit from short-term
financial interest, but automatically deteriorating their
CO2 balance: international emissions trading;
• The tools enabling them to profit, at the national level,
from their low-cost emission reduction opportunities:
European Union emissions trading scheme or other
national or regional tools (taxation, legislation, aids,
voluntary agreements, etc.);
• The tools enabling them, in return for low-cost emission reduction opportunities, to attract foreign direct
investment and non-financial profits (sustainable development, job creation, transfer of technology, improvement in the local environment): Joint Implementation.
On the Community acquis and the negotiations relating to the environment (in English):
http://www.europa.eu.int/comm/enlargement/negotiations/chapters/chap22/index.htm
29
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The Joint
Implementation
(JI) mechanism
30
VOLUME
C
Second Part
Can my project be
developed under JI?
31
Can my project be
developed under JI?
I n
b r i e f
oint Implementation (JI) is a mechanism defined by the Kyoto Protocol,
whereby projects with a component
that induces the reduction or sequestration of greenhouse gas (GHG) emissions
are implemented. JI enables industrialized
countries to invest in emission reduction
projects on the territory of other industrialized countries or countries in transition to
a market economy. One of the objectives of
JI is to further sustainable development in
these countries, as part of a partnership
between the host country and the project
developer.
J
In order to be eligible for JI, a project
must, in particular, be:
• in a host country that has signed the
Kyoto Protocol and satisfied the minimum
eligibility conditions;
• developed in compliance with the
domestic policies and strategies of the host
country, and in a wider context, its sustainable development policies;
• additional, i.e. the emission reductions
of the project must be in addition to those
that would have occurred had the project
not been implemented.
This means that JI projects must first
and foremost be part of a global approach
to climate change issues, while respecting
the development strategies adopted by the
host countries.
Conversely, for the project developer, the
benefits of a JI project are essentially economic. Firstly, the sale of Emission Reductions Units (ERUs), also known as “carbon
credits,” represents an additional source of
project income. Secondly, JI may be a solu-
32
tion for the reduction and diversification of
risks, which is likely to interest companies
or groups with domestic GHG emission
reduction objectives, particularly in the
immediate term, as part of the European
Union Emissions Trading Scheme (EU ETS).
The implementation of JI projects may
also be part of the company’s wider-reaching strategy in the host country and abroad,
by enhancing both its price competitiveness and image. The potential advantages
for companies, although more difficult to
quantify, could be significant.
On the downside, the development of a
JI project generates additional costs for the
project developer, also known as “transaction costs.” These costs are related to the
formalization and validation of the JI project, as well as the monitoring and verification of the emission reductions. They can
vary significantly from one sector or country to another, but are generally not
dependent on the size of the project in
terms of emission reduction volumes.
Therefore, projects with significant emission reductions are generally favored. However, the transaction costs, often significant
for the first JI project due to the training
necessary, are generally reduced considerably for the development of subsequent
projects. Furthermore, this necessary training is part of the company’s effort to progressively master the “carbon constraint,”
at its own scale.
Accordingly, a quick preliminary screening of the eligibility and profitability of the
JI component of the investment project is a
crucial step before adopting a more indepth approach.
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The Joint
Implementation
(JI) mechanism
1. Is my project eligible for JI?
This section provides a guide to help project
developers assess the acceptability of projects
proposed as part of JI, by performing a preliminary screening of their project, in order to
determine whether the project is likely to be
approved as a JI project under Track 1 by the
host country,25 or “determined” as a JI project
under Track 2 by an Independent Entity accredited by the JI Supervisory Committee.
The “baseline” concept
An example of a project which may be additional is a
project for the recovery/conversion of waste biogas into
energy. Let us suppose that the situation in the host
country satisfies the following criteria:
fied the Track 1 eligibility criteria. As project developdevelopers should for the moment formalize their
projects under JI Track 2. The rigor associated with JI
Track 2 enables the preparation of files that could be
eligible for purchase funds, should JI be delayed.
The Marrakesh criteria are broken down
between the environmental aspects of the project, host country approval and other criteria.
> WHAT ARE THE ENVIRONMENTAL
ELIGIBILITY CONDITIONS?
Firstly, the project emission reductions must be additional to those produced in the absence of the
project.
JI was not designed to accompany projects
which would have been implemented in any
case. The basic concept is therefore “additionality,” which is analyzed in greater detail in the
section “The methodological phase of the JI
project.”
26
The Project Design Document is given in Annex 7.
●
No standard or national legislation imposing the capture and burning of biogas.
Let us now suppose that the recovery of biogas for
energy purposes is mandatory under the regulations.
The baseline would then be the use of the methane to
produce energy, and the emission reductions would no
longer be additional.
There are six eligible GHGs: carbon dioxide
(CO 2), methane (CH 4), nitrous oxide (N 2O),
hydrofluorocarbon (HFC), perfluorocarbon
(PFC) and sulphur hexafluoride (SF6). A project
can only be eligible if the emissions of one or
more of these GHGs are reduced.
The project should not have any significant harmful
impacts on the environment.
If significant impacts are expected, an Environmental Impact Study (EIS) shall normally be
required. The project developer should study
host country regulations to determine whether
an EIS is necessary.
> MANDATORY APPROVAL BY
THE HOST COUNTRY
It is the responsibility of the host country government to accept or refuse the project proposed as part of JI. The host country shall in
particular:
●
Provide an opinion on the contribution of the
project to the sustainable development of the
country;
●
Determine whether the project can be
accepted as a JI project in the host country.
25
The Track 1 eligibility criteria for the host country are listed
in the section “JI project formalization.”
Marginal nature of this type of project in the host
country;
The emissions associated with the project are those
arising from the conversion of methane into CO2 by
combustion in an engine producing electricity. The difference between the methane emissions (measured in
metric tons of CO2 equivalent) without the project and
the CO2 emissions with the JI project constitutes the
emission reduction in the atmosphere considered as
additional.
ment within this framework is extremely risky, project
The Marrakesh Accords define a certain number of eligibility criteria for the project. Compliance with these criteria, set forth below and
developed in more detail throughout the document, shall be established by the project developer prior to the completion of the Project
Design Document 26 (PDD), which is the key
document of the approval process of the project
under Track 2.
●
In the absence of JI, the most likely scenario would have
been the continued release of biogas into the atmosphere. This scenario is known as the “baseline.”
As of the date this guide was drafted, no Party satis-
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33
Can my project be developed under JI?
To qualify as a JI project, the project must be devel-
The role of the Designated Focal Point (DFP)
oped in compliance with the domestic policies and
This body is responsible for controlling the approval
process in the host country and shall approve or
refuse the JI projects. It is the responsibility of the
DFP to ensure that the different projects meet the
country’s sustainable development objectives. It is
also responsible for rendering public the project categories that shall be refused, in order for project
developers to focus on sectors open to investment
with respect to JI.
strategies of the host country.
The project must be acceptable for the host
country, and meet its own JI requirements.
Accordingly, certain host country governments
have drawn up “positive” project lists, i.e. lists of
projects that they wish to encourage. Conversely, certain projects may not be acceptable
for certain host countries.
As far as possible, the project must generate the
transfer of technology and know-how.
The majority of countries included in Annex I
have ratified the Kyoto Protocol. However, this
does not imply that all of these countries have
set up the institutions (notably the DFP), guidelines and procedures to approve a JI project. A
number of countries still do not have the personnel and expertise available to evaluate the
projects or set up a DFP.
For more information on these criteria, refer to
“JI project formalization.”
> OTHER ELIGIBILITY CRITERIA
The project must contribute to the sustainable
development objectives of the host country, and
the JI project must obtain the formal approval
of the host country. Several governments have
drawn up sustainable development criteria lists.
●
The project must provide for consultation with
stakeholders and ensure the transparency of
the information used to prepare the project;
●
It must be noted that although JI is still not
formally operational, JI projects can be developed at the present time.
In order for a project to be approved and determined,
i.e. validated as a JI project, the host country must set
up a specific institutional framework.
The following requirements must have been satisfied by the host country:
●
Ratification of the UNFCCC;27
●
Ratification of the Kyoto Protocol; however, a
project developer can still decide to develop a
JI project, having not already done so, if the
host country indicates that it is set to ratify the
Kyoto Protocol in the short term;
●
Calculation of its Assigned Amount;
●
Set-up of a national registry;
●
Set-up of a national system for the estimation
of GHG emissions (only for Track 1);
●
Submission of an annual national inventory of
its GHG emissions (only for Track 1).
Other JI requirements concern project levels:
●
Adoption, by the government of the host
country, of guidelines for JI project approval;
●
Set-up of a Designated Focal Point (DFP) for
JI.
27
Most countries have ratified the UNFCCC.
34
> ELIGIBILITY TEST
In order to quickly evaluate the eligibility of a JI project, the project developer may use the eligibility test
detailed below. Given that the JI rules are still being
clarified, a conservative and prudent approach will
have to be adopted.
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The Joint
Implementation
(JI) mechanism
Eligibility test – Is my project likely to be eligible for JI?
1. Does the host country meet the following conditions?
● It has ratified the Kyoto Protocol;a
● It has designated a National Authority (focal point) for the
UNFCCC;
● It has calculated its Assigned Amounts;
● It has set up a national registry;
● It has set up a national system for the estimation of GHG
emissions and submits an annual national inventory of its
GHG emissions to the UNFCCC;
● It has expressed its desire to support JI projects (for example, signature of a heads of agreement with other Annex I
countries regarding the terms and conditions for hosting
JI projects, formalization of a sustainable development
strategy explicitly covering JI projects, etc.);
● It has set up or is currently setting up a JI bureau (Designated Focal Point).b
2. Is the project a GHG emission reduction or sequestration
project? By way of example, typical JI projects could be
developed in the following sectors:
● Energy;
● Waste;
a If the host country has not ratified the Kyoto Protocol, the project may still be developed in anticipation of future ratification.
See section “Approval by the host country” for further information.
b
As the focal point involved in the UNFCCC negotiations, the DFP
has a very specific role in the monitoring and approval of JI projects.
Changes in industrial processes;
Transport;
● Agriculture;
● Forestry, afforestation or reforestation (current stage of
international negotiations).
●
●
3. Does the project comply with the sustainable development policy of the host country?
To verify this, one can refer to the national sustainable development strategy of the host country and examine the
national and local Agenda 21 implementation, or the
UNFCC’s third national communication which should provide the priorities by sector.
4. Is the project “additional”? Does it generate additional
GHG emission reductions which are verifiable and certifiable with respect to the normal situation without the project (“Business as Usual”)?
For example, a renewable energy source (with zero or very
low GHG emissions) which would replace fossil energy and
generate additional emission reductions, that would have
not occurred without the project.
It is advised that a preliminary and purely technical estimate be made of the emission reductions that may arise
from the project. For a preliminary estimate, the GHG emission factors presented in Annex 6 may be used.
5. Does the project have significant negative impacts on the
environment? For significant impacts on the environment,
a specific impact study must be performed in accordance
with the legislation and procedures of the host country.
By way of example, here are two potential projects subject to eligibility tests.
Is my project likely to be eligible for JI? Example 1: a small hydroelectricity project in Eastern Europe
A company seeks to invest in micro hydroelectric power
stations in an Eastern European country; accordingly, it
wishes to build and commission a 4 MW hydroelectric
power station to be connected to the host country’s
national power grid.
The baseline adopted corresponds to the lower cost
national electricity expansion program for the power utility. In the local context, this hydroelectricity project,
despite its innovative nature, would not have been
approved because of its relatively high cost per KW.
1. What is the position of the host country with regard to JI?
The project developer can consult the webpage
http://unfccc.int/resource/kpstats.pdf to see if the host
country signed the Kyoto Protocol and ratified it in 2002.
The National Commission on Climate Change, within the
Ministry of the Environment, is responsible for the implementation of the UNFCCC and the Kyoto Protocol. The
Ministry of the Environment is the focal point for the
UNFCCC, and houses a Designated Focal Point.
At present, one JI project has already been approved by
the host country. The government has signed a letter of
approval for this project, thereby demonstrating its willingness to support JI projects.
2. Can the project be included in the category of projects to be
typically developed as part of JI?
Yes, the project is a renewable energy source (hydroelectricity).
3. Does the project comply with the host country sustainable
development policy?
C
The scheduled JI project does comply with the domestic
policies implemented with respect to the environmental policies of the host country. This point shall be
subject to written confirmation by the host country
authorities.
4. Is the project “additional”? Does it generate additional and
verifiable GHG emission reductions, in comparison to the situation had the project not been implemented?
The hydroelectric project shall be connected to the network, and shall therefore enable the electricity with the
higher carbon content to be “replaced.” According to
the GHG Protocol energy statistics (http://www.ghgprotocol.org), the average emission factor per electrical
unit for the host country was approximately 0.8 metric
ton CO 2 equivalent/MWh in 2000. The project developer estimates that the project will generate approximately 25,000 MWh per year, and that the GHG emissions attributable to the project are negligible. A
preliminary estimate would therefore value the effective GHG emission reduction at 20,000 metric tons of
CO 2 equivalent per year, an additional reduction in the
sense that it would not have occurred in the project’s
absence.
5. Does the project generate significant negative impacts on
the environment?
The project developer does not expect any significant
impact on the environment. However, an Environmental
Impact Study is obligatory in accordance with local legislation, given the projected activity.
35
In the rest of this guide, we shall use a recurrent example based on a real project: the use of wood wastes to
replace coal currently used in a plant in Bulgaria that we
shall refer to as the “Svilosa project.”
We shall also use other examples from time to time.
If the answers to the questions above are positive,
the project is likely to be eligible, and the project
developer can assess the opportunity of developing the project as part of JI.
The project developer should then consider
whether the potential emission reduction volumes
of the project justify the transaction costs,28 before
developing the full documentation. These elements could feature in a “cost-benefit” assessment
of the project.
28
The additional costs of developing the project as part of JI
or the CDM are known as “transaction costs.” These costs are
related to the documentation and validation of the JI project,
and the monitoring and verification of emission reductions.
Is my project likely to be eligible for JI? Example 2: a biomass project in a pulp
and cellulose plant
An industrial group that owns a pulp and cellulose planta
in Bulgaria wishes to reduce its energy costs to improve
its competitiveness. The group has three options: upgrade
its coal-fired boilers to increase their energy efficiency,
convert its boilers to natural gas or invest in a new biomass boiler that could generate electricity using wood
waste (bark and edgings). In connection with the third
option, which would have a significant environmental
impact in that it would substitute coal for biomass and
eliminate unwieldy stockpiles of unused wood waste that
are a pollution source, the industrial group plans to sell its
GHG emission reductions to a foreign purchase fund,
namely the Prototype Carbon Fund.
The baseline used corresponds to the lower cost expansion plan adopted by the company owning the plant.
Locally, this means that despite its innovative nature, the
biomass project would not be retained because of a significantly higher cost compared to an upgrade of the current coal-fired boilers. Natural gas conversion would also
be too costly.
1. What is the position of the country with regard to JI?
The project developer can consult the webpage
http://unfccc.int/resource/kpstats.pdf to verify that Bulgaria signed the Kyoto Protocol and ratified it in 2002.
The government has expressed its desire to support JI
projects. The Bulgarian Ministry of the Environment and
Water is the focal point for the UNFCCC, and houses a
Designated Focal Point.
2. Can the project be included in the category of projects to
be typically developed as part of JI?
Yes, the project is a renewable energy source (biomass).
36
3. Does the project comply with the host country sustainable development policy?
The contemplated JI project complies with the national
energy and environmental policies implemented in Bulgaria. The project would use a local energy source, eliminate a local environmental nuisance, and reduce local pollution. It would also create 15 on-site jobs.
4. Is the project “additional”? Does it generate additional
and verifiable GHG emission reductions, in comparison to
the situation had the project not been implemented?
The biomass project could partially “replace” the coalfired boilers. Emissions from two measurable GHG
sources would thus be reduced: the CO2 generated by coal
combustion, because of the change in fuel, and the
methane emissions from the fermentation of moist wood
waste previously stored outside. The developer estimates
that the project would generate approximately
117,000 MWh annually, and initially assesses the effective
GHG emission reduction at 900,000 tCO 2 -eq over
9 years. This is an additional reduction in the sense that
it would not have taken place in the absence of the proposed JI project.
5. Does the project generate significant negative impacts
on the environment?
The project developer does not expect any significant
impact on the environment. However, an Environmental
Impact Study is obligatory in accordance with the Bulgarian legislation, given the projected activity.
a Source: This simplified project profile is directly inspired by the
Prototype Carbon Fund, Svilosa Biomass Project file in Bulgaria.
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2. Does the considered JI project deserve
to be continued?
> DIRECT AND INDIRECT BENEFITS A
DEVELOPER CAN EXPECT FROM A JI
PROJECT
>> The generation of “carbon credits”
The prices29 set by the existing ERU purchase
programs currently range between € 2.75 and
€ 9 per metric ton of CO2 equivalent. For comparison purposes, it must be remembered that the
penalties set forth in the European Union Emissions Trading Scheme Directive are € 40 per metric ton of CO2 equivalent prior to 2008 and
€ 100 in subsequent years. It must also be reiterated that the carbon market is an emerging market, and the prices per metric ton of CO2 equivalent are likely to vary significantly in the future.
According to the experts who manage the various
“carbon” funds of the World Bank, the implementation of the European Union Emissions
Trading Scheme should lead to a significant
increase in the price per tCO2-eq, in relation to
present levels. Figures exceeding € 10/tCO2-eq
are frequently cited.
A project developer can secure “carbon income”
through an Emission Reduction Purchase Agreement with the investor country. The purchase
agreement must, in particular, specify the quantity of ERUs produced per year, the price per
29
These are purchase prices practiced at the end of 2003 by
the Dutch program ERUPT and the Prototype Carbon Fund
of the World Bank. It should be noted that the prices reflect an
“early action” approach.
C
ERU, and the term or crediting period over which
the ERUs will be generated.
In all cases, (whether there is a credit purchase
agreement or own use of the credits generated),
the project developer shall define the period over
which the JI credits will be generated (which is
different from the project lifetime) in the PDD.
This choice is described in more detail in chapter
“JI project formalization.”
In any case, it is in the interest of all Parties, primarily project developers, that the price of “carbon credits” remain above a certain level so as not
to jeopardize the financial viability of projects that
are marginal to the main investment cash flows.
> Additional benefits
The potential gains in terms of image for the company,
although more difficult to quantify, are significant.
A company may use its JI projects for different
reasons:
●
Reduction of its GHG emissions and protection
of the global environment;
●
Transfer of GHG emission reducing technology to
the Annex I countries hosting these projects, and
contribution to their sustainable development.
The framework of the JI project may also support
local communication in the host country with
respect to the authorities, local communities and
public opinion for certain more complex projects
(collective transport, sanitation, energy efficiency in
the home, etc.).
Figure 5 – The two JI phases of an investment project
37
Table 5 – Estimation of additional costs for a JI project
Standard project steps
Additional steps for a JI project
Additional costs
JI feasibility study
Project documentation : baseline,
monitoring plan, information research
to draft the PDD
From € 5,000 to € 40,000
Project preparation
Completion of the PDD; application
for host country approval
From € 20,000 to € 60,000
Project approval*
Determination by the Independent Entity
From € 15,000 to € 40,000
Negotiation of a purchase agreement
or equivalent (optional)
Development of an ERU sales agreement
The budget may range from € 10,000
to € 40,000
Registration*
Running costs of the JI Supervisory
Committee
No decision has been taken yet.**
Project preparation phase
From € 40,000 to € 140,000 (excluding
purchase agreement negotiation costs)
Total
Project operational phase
Production / operations, maintenance,
management
Monitoring and verification by the Independent Entity
From € 3,000 to € 15,000 per year or every
two years
Sale of ERUs (optional)
If brokers are used, success fee between 3
and 15% of the value of the ERUs
Total
Shall depend on the frequency of verification
* These steps are required only for JI Track 2.
** With respect to the CDM, costs should be between € 5,000 and € 30,000.
As these projects attract more media coverage,
they shall of course also be more closely scrutinized by the public. Certain types of project are
also the subject of active NGO debates on these
topics. The NGOs should be identified and contacted to demonstrate the project’s benefits with
respect to GHG emission reduction, contribution
to the host country’s sustainable development and
the benefits resulting from the transfer of technologies and know-how.
> SPECIFIC RESTRICTIONS, IN TERMS
OF COSTS AND DEADLINES, OF A JI
PROJECT
>> Transaction costs
For a project developer, it is important to have an
idea of the additional costs associated with the
project’s development under JI, known as “transaction costs.” These costs are related to the documentation and validation of the JI project, and
the monitoring and verification of emission
reductions. Certain transaction costs, such as project documentation costs, are entry costs. Other
costs such as verification costs are deferred until
the project is operational and has begun to generate income.
Table 5 presents indicative transaction costs for
JI, according to the experience of the Prototype
Carbon Fund of the World Bank, the Dutch
38
ERUPT program and one document on transaction costs for JI projects.30
The transaction costs generally do not depend on the
size of the project in terms of emission reduction volumes, but may vary significantly according to the sector. Major projects in terms of emission reduction volumes are therefore favored. The JI Track 1 simplified
procedure should benefit from lower transaction costs.
Furthermore, costs are particularly high for the
first JI project because of the training required.
Subsequent costs directly linked to the development of a JI project shall be significantly reduced
for similar projects, particularly if the first project
was developed internally. Finally, it must be noted
that the know-how developed for a JI project facilitates the training necessary for the management
of the “carbon constraint” to which the company
is progressively confronted, particular with
respect to the European Union Emissions Trading Scheme.
The Marrakesh Accords do not provide for the
payment of carrying charges for the operating
expenses of the JI Supervisory Board in connection with the project determination procedure
30
EcoSecurities, 2000, Financing and financing mechanisms
for Joint Implementation (JI) projects in the electricity sector.
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performed by the Accredited Independent Entity.
By way of comparison, in the case of the Clean
Development Mechanism, the fees for registering
with the Executive Board, although still subject
to the approval of the Parties, should be based on
the size of the project.
Based on the current transaction price,of approximately € 3
per metric ton of CO2 equivalent, it can be estimated that:
• A project is “interesting” if it produces emission reductions of more than 50,000 metric tons of CO2 equivalent
per year;
• For projects generating between 30,000 and 50,000 met-
>> Delays that can be slightly longer
ric tons of CO2 equivalent per year in emission reductions,
the project may be considered interesting but a more in-
Compared to the development of a classical
investment, the development of a project under JI
also implies additional delays which are either
regulatory or induced by the time spent on developing the new carbon component.
depth study may often be necessary before proceeding
further;
• For projects generating less than 30,000 metric tons of
CO2 equivalent in emission reductions per year, there is a
strong probability that the preparation costs of the JI project shall be too high with respect to the expected “carbon
It is important to note that most of these delay inducing
steps occur prior to the project’s implementation. Consequently, effective management ensures the simultaneous
development of the project and its “carbon” component.
The regulatory deadlines prior to implementation of the project are:
●
A 30-day period during which time the PDD is
made available for public comment by the Independent Entity; then
●
A 45-day period at the end of which, if the Supervisory Committee has no reservations, the project
will automatically be approved as a JI project.
Furthermore, the conclusion regarding the emission reductions determined by the Independent
Entity shall be deemed final 15 days after the date
on which it is made public.
These additional regulatory deadlines are largely
considered reasonable with respect to the usual
project development period. In particular, the
project developer must also schedule additional
time and budget resources to develop the project’s carbon component, especially if the development of JI projects under the Kyoto Protocol is
a new experience.
> HOW TO QUICKLY DETERMINE
WHETHER A PROJECT MERITS
DEVELOPMENT AS PART OF JI
VIA A PRELIMINARY SCREENING?
A project developer shall have to calculate the
development costs of a JI project and the potential income (“carbon income” and additional benefits) of the project to determine whether it merits development as part of JI.
income.”
It must be noted that this clearly simplistic classification is merely indicative. Of course, the projects
must be valued on a per-case basis. Furthermore, if
the prices of the ERUs were to increase, as suggested
by several studies, the viability threshold would
decrease.
Table 6 demonstrates the importance of the preliminary screening in the decision-making process for
the launch of a project’s JI component by comparing
the investments, costs and revenues associated with
three relatively different JI projects.
The data is only given for instructive purposes. In
practice, this data may vary significantly according to
the market value of the ERUs generated, the nature
of the project, the host country, and the developer’s
internal resources.
The table has three limits: (i) for simplification purposes, the costs and revenues have not been updated
over the lifetime of the project; (ii) furthermore, the
table assumes that the investor benefits fully from all
ERUs generated. In reality, the host country may
wish to retain part of the ERUs generated, especially
if it itself incurs significant expenses to prepare these
JI files; (iii) finally, in addition to their economic benefits, these JI projects generate significant environmental benefits, although difficult to quantify, which
are not taken into account in the calculation.
Despite these limits, the table highlights the importance of a preliminary examination in the decisionmaking process of the JI project’s development.
Based on the assumptions adopted, it is clear that JI
projects 2 and 3 generate significant surpluses,
whereas project 1 generates a smaller positive margin. The Track 1 simplified procedure, potentially
combined with relatively standardized methodologies, should maximize the reduction of transaction
costs associated with the projects, and in particular
facilitate the formulation of small JI projects.
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Table 6 – Simplified example of costs and revenues associated with JI projects
Standard project steps
Additional steps for a JI
project
Project 1
Development of
a 20-MW wind farm
Project 2
Biogas use/recovery
for 4 municipal
landfills
Project 3
25-MW biomass
power station
Investment costs (excluding JI-related costs)
€ 20,000,000
€ 28,000,000
€ 35,000,000
Emission reductions generated by the project (ERUs)
40,000 metric tons of
CO2 equivalent/year
CO2 equivalent/year
CO2 equivalent/year
Gross income generated by the sale of ERUs over
5 years (assumption: 1 metric ton of CO2 equivalent= € 5)
€ 1,000,000
€ 2,250,000
€ 3,250,000
Costs - Project preparation phase
JI feasibility study
Project documentation :
baseline, monitoring plan,
information research to
draft the PDD
€ 5,000
€ 15,000
€ 15,000
Project preparation
Completion of the PDD;
application for host
country approval
€ 30,000
€ 30,000
€ 60,000
Project approval
Determination by the
Independent Entity
€ 15,000
€ 30,000
€ 30,000
Negotiation of a purchase agreement or
equivalent (optional)
Development of an ERU
sales agreement
The cost is borne by
the buyer of the ERUs
Registration
Running costs of the
JI Supervisory Committee
€ 50,000
€ 75,000
€ 105,000
Internal cost of
monitoring;
€ 3,000 per year
for verification, over
5 years, i.e. € 15,000
Internal cost of
monitoring;
€ 6,000 per year
5 years, i.e. € 30,000
Internal cost of
monitoring;
€ 6,000 per year
5 years, i.e. € 30,000
Total
Costs - Project operational phase
Production/operations,
maintenance,
management
Monitoring and
verification by the
Independent Entity
€ 15,000 over 5 years
€ 30,000
€ 60,000
€ 65,000
Net income from the sale of ERUs/Total project
investment in % (not updated)
4.6%
7.6%
8.8%
Interest of the JI component
Strong
Strong, improved
situation thanks
to the grouping of
4 neighboring sites
managed by the same
operator
Very strong
Sale of ERUs (optional)
Total
Impact of JI on the “viability” of the project
Table 7, taken from a World Bank PCF memorandum, illustrates the impact of a project’s “car-
bon income” on the Return On Investment, for
PCF projects.
Table 7 - Impact of the carbon component on the Return on Investment
Country
Technology
Poland
Romania
Wind
District heating
Energy efficiency
District heating
Geothermy
District heating
Methane
Romania
Poland
Latvia
Source: World Bank, July 2001, April 2002.
40
% IRR
without carbon
10.9
10.5
% IRR
with carbon
11.9
11.4
% Increase
in IRR [% points]
1.0
0.9
% Increase
in IRR
9
9
16.9
18.9
2.0
12
11.5
11.4
12.6
18.8
1.1
7.4
10
65
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At this stage, the project developer may also wish
to anticipate and take into account the wishes of
the potential ERU buyers. The project developers
can present information on their project to one or
more potential ERU buyers to assess their level
of interest for the project. The potential buyers
shall examine the information generally provided
in Project Idea Note (PIN) format, with respect
to the prevailing JI rules and their own investment criteria.
»
PIN template format defined by the PCF:
http://prototypecarbonfund.org/router.cfm?Page=Index
3. Who can help me with my approach?
> THE CONTACTS IN THE HOST
COUNTRY
Various ministries may be involved in the development of a JI project:
●
Environment;
●
Energy and Industry;
●
Agriculture;
●
Finance;
●
Transport and Equipment;
●
Foreign Affairs.
In this context, with many players involved at different levels, the Marrakesh Accords oblige the
host countries to appoint a Designated Focal Point
(DFP), to take charge of the approval of JI projects.
This DFP may be governed by a particular ministry, but can also be an interdepartmental body.
Once the DFP is designated, the host country
must inform the Secretariat of the UNFCCC,
which shall publish the information on its Internet site.
Ultimately, all countries shall have set up a Designated Focal Point and internal procedures to
approve the projects. If a host country has not set
up a DFP, this does not mean that it cannot host
JI projects, insofar as the JI Supervisory Committee can initially accept a “provisional DFP,”
appointed by the national authorities.
> PARTNERSHIP AGREEMENTS
The signature of a Memorandum of Understanding (MoU) between an investor country and
a host country may reduce the perception of
country risk for potential investors. Its main aim
is to state the general cooperation objectives of
the two countries concerned, and reassure potential investors of the host country’s willingness to
validate the projects and resolve the problem of
ERU sharing.
These agreements are not a prerequisite for the
implementation of projects by Annex I entities;
they merely facilitate project implementation.
The agreements may be relatively general or, conversely, more detailed by specifying, for example,
the following points:
●
The parties concerned by the agreement;
●
The voluntary nature of the process;
●
A host country’s commitment to facilitate the
project approval process, ERU transfer, etc.
At this stage, two agreements with Columbia and
subsequently Morocco have already been signed
by France since the start of 2003, and other agreements are envisaged with certain Eastern Europe
countries. The purpose of these agreements is not
to purchase the credits using French state funds
but to promote the involvement of French operators in the development of JI projects in the host
countries.
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Third Part
JI project
formalization
43
JI project formalization
I n
b r i e f
he Marrakesh Accords provide two
procedures for the formalization of
JI projects: a procedure solely based
on the host country’s approval and
verification (Track 1)a and a procedure based
on the host country’s approval supervised
by international authorities, following a procedure similar to that of the Clean Development Mechanism (Track 2). This chapter will
cover the Track 2 procedure.
T
In order for a project to be validated by
an Independent Entity accredited by the
Supervisory Committee as a JI Track 2 project
and generate emission reduction units, it
must follow a specific preparation procedure or cycle. All potential JI projects must
meet the same criteria and follow the same
process, regardless of their size.
The difference in the set-up of a project
with a JI component is essentially due to the
fact that the local authorities of the host
country, and an independent third party, the
Independent Entity, designated by the
United Nations Framework Convention on
Climate Change after being accredited by
the Article 6 Supervisory Committee, shall
guarantee that the project satisfies the
eligibility conditions.
44
The document used as the framework
for project development under Joint Implementation should be, as for the Clean Development Mechanism, the Project Design
Document (PDD); it requires the documentation of the project context and objectives,
as well as the argumentation of the principles underlying the demonstration of project additionality and the assessment and
monitoring of the associated emission
reductions. Once the PDD has been completed, the project shall, after being made
available for public comment (in the broad
sense), be approved by the host country,
then determined by the Independent Entity.
The emission reductions generated by
the project shall then be verified by another
Independent Entity, and the emission reduction units shall be transferred by the host
country throughout the implementation of
the project.b
a
Under the Track 1 procedure, the host country must have fully
satisfied the obligations stipulated in the Marrakesh Accords.
b Formalization of a PDD is not essential under the Track 1 procedure, and the host country conducts the verification.
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his chapter presents the different steps that
a project developer must follow for the project to be validated, or “determined” by an Independent Entity accredited by the Supervisory
Committee as a JI project and to generate
ERUs. All potential JI projects must meet the
T
same criteria and follow the same process,
regardless of their size.
The process to be followed to develop a project as
part of JI, otherwise known as the “preparation
cycle of a JI project,” is described in detail below.
1. What is involved in the preparation
of a JI project?
Firstly, a project developer assesses the eligibility
of a project for JI. If this assessment is positive,
the project developer shall begin to prepare the
documentation required.
> WHAT IS INCLUDED IN THE
PREPARATION CYCLE OF A JI PROJECT?
>> Track 1: The initial procedure designed
prior to the Marrakesh Accords
As a reminder, countries wishing to host JI projects must have:
●
Ratified the UNFCCC;31
●
●
Calculated its Assigned Amounts;
●
●
Designated a JI Focal Point.
To transfer ERUs in connection with Track 1, host
countries must have also:
project. To do so, it must establish project approval
guidelines that indicate the procedures and the
persons responsible for verification.
For a JI project developed under Track 1, the ERU quantities to be transferred and the transfer modalities will be
negotiated by mutual agreement with the host country
according to the baseline. They may vary depending on
the project’s interest for the host country, particularly in
terms of sustainable development: job creation,
improvement of the local environment, transfer of technology, etc.
To date, no Annex I Party has communicated its
guidelines or procedures for project approval in
connection with Track 1. The participants concerned should therefore get in touch with the contact point designated by the host country to
obtain information on the procedure to follow.
>> The preparation cycle
●
Set up a national system for the estimation of
GHG emissions and absorptions;
The preparation cycle of a JI project is comprised
of the following steps:
●
Submitted an annual national inventory of its
●
Project identification;
●
Preliminary assessment of the project’s eligibility and its capacity for self-financing;
●
Where necessary, negotiations for the sharing of
credits between the different partners involved
in the project;
●
Where necessary, contact with potential buyers
to measure the interest raised by the future
ERUs generated by the project;
●
Preparation of the Project Design Document
(PDD) including, in particular, the study of the
baseline and requirements of the monitoring
plan;
●
Request for the host country’s formal approval;
●
Presentation of the project for determination
with an Independent Entity accredited by the
Supervisory Committee;
●
Submitted additional information for the
Assigned Amounts, as stipulated in the Marrakech Accords.
A host country’s eligibility for the Track 1 procedure is
not permanent and can be challenged.
A project developed under Track 1 is not subject
to the JI Supervisory Committee procedure, and
therefore does not have to be determined by an
Accredited Independent Entity. A country eligible
for Track 1 can itself decide as to the procedure for
verifying the emission reductions generated by the
31
Most countries have ratified the UNFCCC.
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●
Possible drafting of the Emission Reduction Purchase Agreements.
It must be noted that certain steps of the preparation cycle, such as the formulation of the business plan and the search for financing, may be
implemented during standard project development phases.
> WHO ARE THE MAIN PARTICIPANTS
IN THE JI PROJECTS?
The following sections present the various participants in the development of a JI project, irrespective of the track used.
What can legally be expected from the host
country?
The host countries can actively support the development of JI projects. However, a distinction must be
made between the tasks that are legally considered
as incumbent to the host country, arising mainly
from the Marrakesh Accords, and the non-mandatory
tasks intended to favor the implementation of JI projects. The tasks that must legally be performed by the
host countries are as follows:
●
Ratify the Kyoto Protocol;
●
Appoint a Designated Focal Point;
●
Draw up guidelines for project approval;
●
Establish the criteria for compatibility with their
sustainable development strategies;
●
Ensure, where required by local legislation, that the
impact studies were performed in full;
●
Give its formal approval for the presentation of
projects to an Independent Entity accredited by the
JI Supervisory Committee;
●
Convert Assigned Amount Units and authorize the
transfer of ERUs.
>> The host country
The host country has a key role on several levels: it must
be eligible and capable of performing the approbation
process. Furthermore, it must provide the project developer with a letter of approval indicating that it approves
the project and that it meets its sustainable development objectives.
The Marrakesh Accords render essential the signature and ratification of the Kyoto Protocol by
the country, which thereby becomes Party to the
Protocol, in order to be able to host a JI project.
Although these conditions do not directly concern the project developers, the status of a host
country must be studied in full during the assessment of the project’s eligibility; the projects
hosted by a country that has not ratified the Protocol shall not be eligible under JI.
»
The up-to-date list of the countries that have
ratified the Kyoto Protocol is available at:
http://unfccc.int/resource/kpstats.pdf
It is strongly urged that assurance be obtained from
the host country that it intends, if it has not already
done so, to ratify the Kyoto Protocol in the very near
future before continuing project development as
part of JI.
What else can be expected from the host
country?
The countries that are already involved in the implementation of the Kyoto Protocol can speed up the
development of JI projects in their own countries by:
●
Drafting and communicating recommendations or
guides to develop and submit the JI projects for DFP
approval;
●
Informing potential project developers of any
opportunities;
●
Providing support to the project developers during
the preparation of the project (baseline development, validation);
●
Receiving and processing project applications as
quickly as possible.
It must be noted that the ratification of the Kyoto
Protocol is not the only requirement to be met by
a country for it to be authorized to host JI projects. In addition to ratification, the host countries
must calculate their Assigned Amounts, set up a
national registry, and appoint a Designated Focal
Point (DFP) responsible for expressing the country’s interest in participating in JI and approving
the JI projects.
The support offered to the project developers shall
depend on the context. However, it is in the interest
of the host country to reduce the risk for project
developers by drawing up a clear project approval
process, and supporting the project during the key
steps. The risk of project failure at the national level,
after more or less significant investments in terms
of time and money, is reduced by close dialogue
between the project developers and the DFP
throughout the entire development process. The
potential obstacles to obtaining approval by the DFP
may be identified and resolved well in advance.
The host country must individually approve each
JI project and ensure that it meets the national
sustainable development objectives. It is the
responsibility of the project developer to obtain
host country approval.
In all cases, the host country authorities cannot be
expected to complete the PDD, monitor the emissions of the project, or pay for the determination or
verification. This is the responsibility of the project
developer.
46
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Figure 6 - JI project cycle (Track 1)
Figure 7 - JI project cycle (Track 2)
>> The project developer
The project developer is the entity which is responsible
for operations.32
32
Often significantly involved in the financing of the project
activities, the project developer is also known as the “investor,”
in contrast to the “carbon investor” who exclusively finances
the carbon component of the project.
C
The JI guidelines suggest that many entities could
potentially develop JI projects and acquire ERUs.
For example, among the project developers, the
following entities could, in theory, be included: private or state companies, financial institutions, local
communities, ministries, foundations and NGOs.
The bodies acting as intermediaries for any of the
above entities can, on behalf of the project developer, also submit projects to Independent Entities
accredited by the Supervisory Committee. In practice, most project developers are companies.
47
>> The investor country
According to the Marrakesh Accords, the investor
country, i.e. the country where the project developer’s head office is located, must approve each
project individually, in the same way as the host
country. The national authority responsible for
this approval is the designated contact point.
>> Track 2: the Independent Entity
Independent Entities (IEs) are national or international
bodies which will be accredited by the Supervisory Com-
though its prerogatives are less extensive, the
characteristics and operating method of the JI
Supervisory Committee will largely be based on
the experience of the Clean Development Mechanism Executive Board.
The Board is composed of ten members and ten
alternate members, reflecting a concern for balance between the different UNFCCC Parties.33
According to the Marrakesh Accords, the Executive Board is specifically responsible for the following activities:
●
Elaboration of the Project Design Document
specific to JI, while giving consideration to the
work conducted by the CDM Executive Board;
●
Examination, review and monitoring of the criteria for determining baselines, while giving
consideration to the work conducted by the
CDM Executive Board;
●
Accreditation and suspension of Independent
Entities;
●
Making available to the public data on the proposed JI activities and all the procedures relative
to the development of a JI project;
●
Review of project determination and verification reports.
mittee after it is set up. The IEs are responsible for the
essential steps of the JI project preparation cycle.
Their responsibilities include:
●
The determination, i.e. the validation under
Track 2, of project activities with respect to JI;
●
Ensuring public access to the project design and
development documents;
●
●
Gathering public comments on the project documents and taking these comments into
account;
The verification of emission reductions.
Approximately fifteen verification companies are
currently undergoing accreditation by the Clean
Development Mechanism Executive Board to validate and verify projects for the CDM. Once the
JI Supervisory Committee is set up, these same
companies will likely request accreditation to
determine and verify JI projects.
»
>> The “carbon credits” investor
With respect to a JI project, a “carbon credits” investor is
an entity that purchases all or a portion of ERUs generated by the project.
On Designated Operational Entities as part of
the Clean Development Mechanism:
http://cdm.unfccc.int/DOE
>> Track 2: the JI Supervisory Committee
The JI Supervisory Committee organizes and monitors
the set-up of Joint Implementation. Its role will be to
accredit the Independent Entities responsible for JI project determination. It will also carry out several transversal assignments.
The JI Supervisory Committee will be set up by
the Conference of the Parties serving as the meeting of the Parties, i.e. the first Conference of the
Parties after the Protocol comes into force. Even
48
The carbon credits investor is mandated by, or
falls under the responsibility of, one or more
Annex I countries. The investor can be a private
or public organization, a private company or an
NGO. There can be several “carbon credits”
investors involved in the same project, as well as
several types of “carbon credits” investors.34
33
To illustrate, the JI Supervisory Committee will comprise ten
members from the UNFCCC Parties: three members from
Annex I Parties undergoing the process of transition to a market economy; three members from Annex I Parties not undergoing the process of transition to a market economy; three other
members from Parties not included in Annex I, and one representative of the Small Insular Developing States. The ten
alternate members follow the same pattern. Overall, the Supervisory Committee membership will represent an extensive geographical diversity.
34 The “carbon investor” can commit funds to the project upstream (source of financing), or downstream (source of revenue).
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2. What is a PDD and how is it prepared?
After a project’s eligibility is confirmed by a
preliminary assessment, a more detailed analysis must be performed. This section will outline, with respect to JI projects, the information to be provided by the project developer
and formalized in the project design document
(PDD). As illustrated in Figure 7, the PDD is
submitted to an Independent Entity for determination. All countries hosting projects under
Track 1 of JI or “carbon credit” purchase funds
are likely to demand a similar document,
before deciding on the project. The PDD – or
similar – is therefore a key document in all
cases.
It should be noted that the PDD relating to JI
projects will be prepared by the Supervisory
Committee. The Marrakesh Accords stipulate
that the PDD relating to JI projects should contain the following information:
●
Approval by the Parties involved;
●
A demonstration of the project’s additionality;
●
Proof that the project has an appropriate baseline and monitoring plan;
●
An environmental impact assessment.
According to the Marrakesh Accords, the
Supervisory Committee shall draw on the
experience of the CDM Executive Board,
which implies that the PDD for JI projects will
be very similar to the PDD for CDM projects.
A model of the most recent PDD approved by
the Clean Development Mechanism Executive
Board and effective as of the publication date
of this guide is provided in the annexes.
Updated versions can be found on the
UNFCCC Website dedicated to CDMs:
http://unfccc.int/cdm.
The PDD is the main technical document to be
submitted to Independent Entities for a project’s assessment. The PDD must include the
following sections:
●
Project description;
●
A methodology with respect to the baseline
and the additionality assessment;
●
Monitoring plan;
●
Environmental and social impacts;
●
Consultation of stakeholders.
The following sections provide further detail.
C
> GENERAL DESCRIPTION
OF THE PROJECT’S ACTIVITY
This section provides recommendations on the
information the project developer should
include in the PDD.
The information should at minimum include
the following elements:
●
Definition of the proposed activity;
●
Project purpose;
●
List of project participants;
●
Technical description, including the project’s
location and classification, technical performances, how the applied technology will be
transferred to the host country and how GHG
emissions will be reduced;
In addition to the above information, the following issues should be covered for a better
understanding of the project:
●
Project context;
●
Problems and difficulties tackled in connection with the project;
●
Project planning and schedule;
●
Description of the project’s key points and
major development stages;
●
Any other pertinent information, knowing
that more extensive documents are not
processed with greater care.
Generally, a large portion of the information to
be included in this section can be drawn directly
from the project’s business plan.
> METHODOLOGY USED TO EVALUATE
A PROJECT’S ADDITIONALITY
>> Additionality, baseline, and reduction
calculation: the key to and closely linked
elements of the methodology
To ensure that the project is acceptable for JI, a
developer must be able to demonstrate that the
choices made in connection with the project are
additional in relation to the baseline.
He must thus propose a methodology:
●
Indicating the baseline used with justification;
●
Demonstrating that the project does not correspond to the baseline;
49
●
Estimating the anticipated emission reduction
by evaluating the baseline emissions and the
emission level “with the project.” The difference
between these two amounts must be positive, if
the project is additional;
●
Elaborating a methodology for monitoring
emission reductions (next section).
The Marrakesh Accords define the baseline of a JI project
activity as the “scenario that reasonably represents the
anthropogenic emissions by sources […] of greenhouse
gases that would occur in the absence of the proposed project activity” [Decision 16/COP.7, Appendix B, Paragraph 1].
As mentioned previously, a project is additional if
it “would result in a reduction of anthropogenic
emissions […] that is additional to any that would
otherwise occur” [Decision 16/COP.7, Section E,
Paragraph 33].
Additionality is assessed by measuring the difference
between the estimated emission levels associated with
the baseline (“Business as Usual”) and the emissions
expected from the project. Demonstrating a project’s
additionality is equivalent to proving that its activities
are not equivalent in the baseline.
Sections B and E of the current Clean Development Mechanism PDD cover the analysis of baselines, calculations by sources of GHG emissions,
and additionality.
Figure 8 - Baseline and additionality
would have occurred in the project’s absence
cannot of course be directly observed. This
means that the emission differential remains a
theoretical calculation, based on assumptions
open to debate and challenge. Certain projects
that would appear to have positive effects in
terms of GHG emissions are not additional, particularly those consisting in the simple application of existing regulatory requirements.
We therefore recommend great prudence in the
formulation, inasmuch as the developer’s
demonstration of his project’s additionality will
be verified by a third party. The baseline issue is
covered in greater detail in the chapter entitled
“The methodological phase of the JI project.”
In this context, the Executive Board of the
Clean Development Mechanism has created an
approval process for methodologies, so that the
methods developed can be reproduced. Before
pursuing a methodological strategy, it is
strongly recommended that the Executive
Board of the Clean Development Mechanism be
consulted to verify the methodologies that have
already been accepted for different types of
projects under the CDM. The first methodologies are now being validated by the Methodology Panel, and information, still limited as
of this guide’s publication date, can already
be obtained on the UNFCCC Website,
http://unfccc.int/cdm.
If none of the site’s methodologies are pertinent
to the new project, or if the developer wishes to
propose an alternative, he will have to prepare
a new methodology and submit it to the host
country for approval and to the Independent
Entity for determination.
For a given project activity, it should also be
determined whether the host country wishes to
apply a specific methodology or whether a predefined baseline exists. If an emission baseline
is available, its applicability to the proposed
project’s activity should be verified with the
competent authorities, such as the host country
stakeholders, an Independent Entity, or the
Supervisory Committee.
> DURATION OF THE PROJECT’S
ACTIVITY, CREDITING PERIOD
>> A decisive and delicate phase
of the JI project
The crediting period is the period during which emis-
This phase is among the most delicate in the
structuring of a JI project. The emissions that
ited to create ERUs. The crediting period can differ
50
sion reductions generated by the project can be credfrom the lifetime of a project.
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With respect to Joint Implementation, emission
reductions can only be credited during the initial
commitment period (2008-2012).35 However, the
crediting period can, in certain cases, exceed the
2008-2012 period:
●
●
The emission reductions generated prior to
2008 can for example give rise to an exchange
of emission rights in the form of assigned
amounts once these exist (as from 2008). The
modalities of such a transaction must therefore
be negotiated, on a case-by-case basis, with the
host country.
The emission reductions generated after 2012
could also be credited. This depends on the
crediting period adopted and approved by the
host country (period in which the project can
generate ERUs, which does not necessarily coincide with the commitment periods). This point
is also to be negotiated with the host country.
> METHODOLOGY AND MONITORING
PLAN
The following list provides recommendations on
the type of information required in the monitoring plan:
●
How were the project boundaries defined (include a
justification for the boundaries selected)? The project
boundaries must be defined so as to include all
significant emission sources that are reasonably
attributable to the proposed activities under the
control of the project developer;
●
How was the data used to develop the baseline collected (modalities, frequency, etc.) and how is it
archived?
●
How will all the data be assembled and archived for
estimating GHG emissions resulting from implementation of the proposed activities? The frequency of
data collection should also be described. The
monitoring data should be conserved for two
years following the most recent creation of
ERUs;
●
How is leakage accounted for? The measurement
of possible leakage requires the identification
and characterization of potentially significant
GHG emission sources that occur outside of the
project’s defined boundaries. Those which are
deemed significant can vary considerably
depending on the type of project and over its
lifetime. It is up to the project developer to
define which emissions are significant. For any
leakage considered significant, the monitoring
plan should indicate how the emission data
stemming from these activities will be collected,
at what frequency, and how it will be archived;
●
What are the procedures for calculating emission
reductions resulting from the proposed project activity?
The monitoring plan should include all formulae and/or algorithms used to calculate emission
reductions;
●
What are the quality assurance/quality control procedures?
●
How is environmental impact data collected and
archived?
●
How was the choice of monitoring methodology justified?
The project developer must set up and formulate an
emission reductions monitoring plan, the mechanisms
of which are to be described in a dedicated section of
the PDD. The data generated by the monitoring plan will
ultimately be sent to a third party, the Independent
Entity, which will be responsible for verification throughout the crediting period.
The monitoring plan must detail the modalities
for collecting data generated by the project once
it is operational, and must cover and track all
aspects of the expected GHG emission reductions. This necessitates the continuous supervision of activities to verify that the project’s operational performances are in line with the
estimates, and that the expected emission reductions have in fact been attained. Consequently,
the monitoring plan must provide for the collection and archiving of all data necessary to estimating and measuring the activity emissions
within the project boundaries and throughout the
defined crediting period.
In order to limit expenses in the project’s operational phase, it is important that the monitoring
plan be developed accurately so that future verification is as simple – and thus cost-effective – as
possible.
Other information relative to the monitoring plan
can be useful:
●
Characteristics of the planned verification work;
●
Measurement and gauging methods;
●
Management method for missing data, if relevant;
●
Length of time for the measurements;
●
Person(s) responsible for the collection of monitoring data;
35
The crediting of emission reductions after 2012 depends
on the follow-up to the Kyoto Protocol during subsequent
commitment periods.
51
C
The Joint
Implementation
(JI) mechanism
●
Person(s) responsible for the archiving of monitoring data;
●
Back-up process for data collection;
●
Who has ultimate responsibility for the monitoring process?
The data generated by the implementation of the
monitoring plan will serve as the basis for verification of emission reductions generated by the JI
project’s activities.
If the project’s environmental impacts are considered significant, or if the host country’s legislation requires an environmental assessment, an
Environmental Impact Analysis must be performed. The project developer must defend his
choice, which will be reviewed at the time of the
IE validation.
> ENVIRONMENTAL IMPACT
Should an environmental impact analysis be
required, the project developer must indicate the
date it was or will be carried out. He must also
indicate where a copy of the report can be
obtained. Following completion of the analysis
and if the competent host country authority has
approved the report, the approval can be used to
attest that the project’s environmental impacts
have been assessed and explained.
The PDD must include a project environmental impact
> COMMENTS OF LOCAL
STAKEHOLDERS
These aspects will be covered in greater detail in
the chapter “The methodological phase of the JI
project.”
analysis.
The mandatory environmental impact analysis
includes, for example:
●
Biodiversity: e.g. ecosystems or species preserved or endangered by the project;
●
Air quality: e.g. project impact on air pollutant
emissions other than GHGs (SOx, NOx, CO,
hydrocarbons, dust, etc.);
●
Availability of water resources: e.g. impact on
the relative water shortage, when the resource is
limited;
●
Project impact on water pollution;
●
Soil: e.g. project impact on soil erosion and
pollution;
●
Noise level;
●
Use of natural resources;
●
Use and management of chemical products;
●
Impact on the landscape: e.g. in the case of wind
farms;
●
Efficiency of waste procedures and management.
52
One of the stages of the Clean Development
Mechanism PDD’s preparation consists in inviting the local stakeholders to comment on the proposed project. Stakeholders are defined as
upstream or downstream public sectors, local
authorities, individuals, groups or communities
affected, or likely to be affected, by the proposed
project activity.
Consultation with local stakeholders does not
appear obligatory, the JI principle being somewhat ambiguous on the issue. Consultation with
stakeholders, already ensured by the publication
of the PDD by the Secretariat, is not required at
the local level. However, it is possible to consider
that, given the national laws adopted in the countries that will host this type of project and the preliminary public surveys, this consultation will
occur de facto.
The participation of stakeholders is an effective and
essential means of increasing the transparency of the JI
process. It also guarantees that the project is part of the
host country’s sustainable development. Although not
an official requirement, the PDD may include a description of the process followed in order to receive public
comments.
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3. The key stages for JI project approval
This section presents the stages to be followed
for a project’s JI validation. The first part covers
the recognition of Track 1 projects, which
essentially falls upon the host country. However, to be successfully validated by an Independent Entity accredited by the Supervisory
Committee, a stage essential to Track 2, the
project must follow all three stages described
in the chapter.
> APPROVAL BY THE PARTIES – HOST
AND INVESTOR COUNTRIES
Practical recommendations concerning the host
country’s approval
What if the host country has not ratified the Protocol?
To approve a JI project, the host country must have ratified the Kyoto Protocol. This condition must be strictly
observed, and an approval letter issued by a country
that has not ratified will not be considered by the Independent Entity accredited by the Supervisory Committee. However, in certain cases, the project developer
may wish to pursue the JI process. To assess the risk
exposure, the country’s position towards JI should be
verified. For example, the project developer could verify:
●
The host country’s participation in the Activities
Implemented Jointly pilot phase;
●
The national communication provided by the host
country to the UNFCCC;
The project is implemented in the host country and must therefore comply with the laws
and regulations in force nationally and locally;
●
The existence of guidelines or procedures for JI project approval;
●
The host country’s climate change policy;
●
The project must meet the sustainable development objectives of the host country;
●
The registration terms and conditions in the host
country.
●
For JI, the project must be officially approved
by both the host and investor countries. The
host country must have ratified the Kyoto Protocol.
When a JI project is developed, the host and
investor countries are essential for at least three
reasons:
●
The organization responsible for approving the
project on behalf of the host country is the Designated Focal Point (DFP). The project developer must contact this organization as soon as
possible.
Contacting the host country as soon as possible
enables it to be fully associated with the project’s
development, thus facilitating official approval.
The information needed for the project’s submission changes from country to country. However, generally, the DFP will require:
If it is clear that the host country is seriously planning
to ratify the Kyoto Protocol in the very near future, it is
possible to proceed with the project’s preparation
within the JI framework, while accepting a certain risk.
But if the host country has not yet begun the ratification process or is not involved in any of the above
actions, the project’s development process within the JI
framework should be postponed or cancelled.
Where can information on the host country and contacts be found?
It is recommended that the host country be contacted
as soon as possible and the idea of developing the project within the JI framework shared. The project developer will thus be able to determine whether there are
specific conditions for JI projects in the host country,
as certain host countries could add criteria to the minimum eligibility requirements.
●
A correctly completed PDD;
The DFP should be contacted at once if the host country has instituted such proceedings; in the event that
no Focal Point has been designated, the operator
should contact the National Climate Change Focal
Point: http://unfccc.int/resource/nfp.html.
●
An assessment of the project’s environmental
impacts;
The Economic Department of the French Embassy can
also be reached by French operators for any information on contact points or the host country’s JI policy.
●
A demonstration of the contribution to the
host country’s sustainable development.
Once the host country has endorsed the project,
it will issue a letter of approval stipulating that
it:
●
Accepts the project as a JI project;
●
Recognizes the project’s contribution to the
country’s sustainable development.
C
The host country is at liberty to request a portion of the credits that will be generated by the
project. As credits are distributed on a contractual basis, this issue should be discussed with
the host country’s competent authorities as soon
as possible, as there will be repercussions for the
project’s financing.
53
> TRACK 2: DETERMINATION BY THE
INDEPENDENT ENTITY
>> What is determination?
Validation is the process of assessment, by an
independent third party and based on the PDD,
of the appropriateness of the proposed JI project’s activity with regard to JI conditions. The
project developer is responsible for initiating the
validation; he must contact an organization
authorized to validate JI projects, known as an
Accredited Independent Entity (AIE).
>> The Independent Entity, responsible for
determination
Only an AIE can validate a JI project. These
organizations are independent of the project
developer and of the host country and have been
accredited by the Supervisory Committee to perform the determination.36
The Marrakesh Accords specifically require international
>> What are the required documents?
The project developer must submit the following
documents to the DOE for validation:
●
The PDD;
●
The host country government’s confirmation
that the project responds to its requirements, in
line with its sustainable development strategy;
●
Approval of the project by both the host and
investor countries.
In most cases, the Independent Entity in charge
of the determination will then make an on-site
visit to meet the project participants and stakeholders, and verify the data contained in the
PDD. In certain cases, based on the project type
and location, a validation based solely on the documents may suffice, particularly for small-scale
projects that use the standard UNFCCC methodologies.
Proprietary or confidential information obtained
by the Independent Entity is not to be revealed,
unless required under national law of the host
consultation for the determination of JI projects. The
Accredited Independent Entity and the project developer
will in this case share responsibilities.
>> The tasks of the Accredited
Independent Entity
The AIE is responsible for the following tasks:
●
●
●
The AIE must make the PDD public, which
means it must be made available to the stakeholders and the NGOs accredited by the
UNFCCC and published on the UNFCCC Website. An international consultation is specifically
required for JI project activities;
The AIE must grant stakeholders 30 days, from
the PDD’s publication date, to make comments.
The AIE must register the comments after they
are received;
When contacting an AIE, the following elements should
be considered:
●
Select the AIE with care. Certain Independent Entities may have more experience in specific project
categories. By way of example, an Entity may specialize in renewable energy or a specific host country. The Supervisory Committee does not recommend any particular AIE. The project developer is
thus free to choose;
●
When and how to contact the AIE? The AIE should
be contacted as early as possible in the project
development process, but not before the preliminary project examination is completed. The AIE will
then draw up a schedule for the work;
●
To facilitate the determination process, it is best to
interact with the AIE throughout the process. For
example, it might be useful to provide the AIE with
outline versions of the PDD or its components, as
they are drafted. In addition, sensitive issues and
their handling should be discussed in advance with
the AIE;
●
It is preferable that the AIE carry out the determination process during the 30 days the PDD is published on the Website, so as to receive the stakeholders’ comments. This will avoid waiting out the
30 days until all the comments have been received;
●
The contractual arrangement with the AIE should
specifically indicate which activities will be determined. The various problems that might occur
should be contractually agreed upon in advance: a
determination report of poor quality, a validation
report refused by the host country, etc.
The AIE must then report as to how the comments received were taken into account.
No decision has yet been made as to how to invite
the stakeholders. The invitation will certainly
involve the UNFCCC Website.
Lastly, the consultation procedure conducted by
the AIE is not to be confused with that possibly
led by the project developer with local stakeholders prior to determination.
36
A few recommendations to facilitate
the determination stage
Currently, no Independant Entity has been accredited.
54
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country. The following information is not considered as proprietary or confidential:
●
The determination of emission reduction additionality;
The Joint
Implementation
(JI) mechanism
> TRACK 2: REVIEW BY THE
SUPERVISORY COMMITTEE
The JI project is deemed to be determined 45 days after
submission, unless a review is requested by one of the
●
●
The description of the baseline methodology
and its application;
The information used to prepare an Environmental Impact Analysis.
Based on a review of the documents and comments provided, the Accredited Independent Entity will decide
whether to determine the project. In the case of JI, the
AIE must make the determination report public after
submitting it to the Supervisory Committee.
Parties or at least three members of the Supervisory
Committee.
The Supervisory Committee completes the review
as soon as possible, but no later than six months
following the date on which the review request is
submitted or the second meeting following this
date. The Supervisory Committee communicates
its decision to the project participants and renders it public. It should be noted that the Supervisory Committee’s decision is final.
4. How are emission reduction units obtained?
> TRACK 2: VERIFICATION BY THE
INDEPENDENT ENTITY
>> What is verification?
The verification’s main objective is to have an independent third party verify that the anticipated emission
reductions were in fact achieved under the project. The
verification is in fact the periodic and a posteriori review
of emission reductions effectively measured, resulting
>> When should the project be verified?
The project should be verified periodically. The
frequency of verification audits can be influenced
by the emission reduction units purchase agreement. Many purchase agreements are based on
payment on delivery, which means that credits are
not paid until they have been verified. The purchase agreement will usually indicate the credit
delivery periods, which will influence the frequency of verifications.
in possible ERUs, and the comparison with the baseline.
As with the validation process, the project developer must again contact an AIE, which will be
responsible for the verification.
>> The Independent Entity, responsible for
verification
The verification is conducted by the AIE, which
verifies the data collected by the developer,
according to the monitoring plan specifications.
>> What are the required documents?
The verification is based on the data collected in
accordance with the monitoring plan. Consequently, project developers must collect all the
data indicated in the monitoring plan as soon as
a project is operational.
C
The conclusion concerning the emission reductions determined by the Independent Entity is
considered final 15 days after it is made public.
> THE TRANSFER OF EMISSION
REDUCTION UNITS BY THE HOST
COUNTRY
The host country converts in its national register
a portion of its assigned amount equivalent to the
emission reductions generated by the project into
Emission Reduction Units (ERUs). A portion of
these ERU, to be defined contractually by the host
country, will be transferred from the host country’s register to the project developer’s account.
The project developer will distribute them, taking
into account the contractual obligations linking
the different project participants.
55
Figure 9 - Breakdown of responsibilities (Track 2)
56
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Fourth Part
The methodological
phase of the
JI project
57
The methodological phase
of the JI project
I n
b r i e f
JI project methodology mainly
comprises two phases: “Baseline
and Additionality,” and the “Monitoring Plan.” The choice and
application of a methodology and its consistency in the demonstration proposed by
the operator constitute one of the keys to
the project’s successful determination, i.e.
validation by an Independent Entity accredited by the JI Supervisory Committee. The
project developer can either formulate his
own methodology, or use a methodology
that has already been approved and is applicable to his project.
A
58
The baseline for a JI project activity is the
scenario that reasonably represents the
anthropogenic GHG emissions that would
occur in the absence of the project. Demonstrating the additionality of the JI project is
thus demonstrating that the project is not
included in the baseline prevailing at the
time of presenting the project.
The monitoring plan defines a certain
number of monitoring tasks to ensure that
all of the GHGs emitted by the project are
controlled and quantified. The project must
be continuously monitored to assess its
effective emission reductions and provide
the elements necessary for their verification
by the Accredited Independent Entity (AIE).
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his chapter covers project methodologies. A
methodology mainly comprises two phases:
baseline and additionality, and the monitoring
plan.
T
As seen in the subsection “What is a PDD and
how is it prepared?,” these subjects are at the
core of the project design document. The
Figure 10 - Decision tree for the preparation of a
project methodology
methodology choice and application are one of
the keys to successful project determination as a
JI project.
Before drafting a methodology, it is worthwhile
referring to the existing methodologies of the
Clean Development Mechanism Executive
Board, particularly for a JI Track 2 project, since
the Supervisory Committee is likely to give consideration to the Executive Board’s expertise on
this issue. Reference should also be made to the
questions asked in Figure 10.
In comparison to the application of an existing
methodology, the preparation and approval of
a project methodology requires time (particularly in terms of the regulatory approval deadlines) and additional expertise.
The following paragraphs cover the main elements of a project methodology’s preparation
and application, the sequence of which is shown
in Figure 11. A consistency in the overall reasoning must be maintained when substantiating
the various elements of the methodology.
Figure 11 - Main elements of a project
methodology
1. How is a baseline established?
The baseline is established by taking into
account a national or sectoral context including, for example, sectoral reform initiatives,
local fuel availability, national power sector
expansion plans, the economic situation in the
project sector and prior realizations.
> WHAT IS THE BASELINE’S USE?
The baseline for a JI project activity is the scenario
that reasonably represents the anthropogenic GHG
emissions that would occur in the absence of the
project.
There must be an assessment of the baseline
emissions in the PDD. This chapter covers the
baseline analysis and its purpose and how to
complete the corresponding PDD sections.
This procedure is essential and must be
adhered to in a transparent manner in order to
ensure the success of the project’s JI phase.
The difference between baseline emissions and
project emissions can be demonstrated by a
simplified graph, as illustrated in Figure 8
(cf. page 50). If the project generates net emission reductions, the project is considered as
additional in terms of GHG emissions.
59
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The Joint
Implementation
(JI) mechanism
The methodological phase of the JI project
The development of a baseline is a relatively complex and evolutionary process that has its uncertainties. The baseline being a theoretical construction, the project developer must rely on
realistic assumptions to establish the most probable baseline without a project, using a variety of
sources: statistics, reports, expert information, etc.
In accordance with the Marrakesh Accords, the
baseline should be presented in a manner that is
both:
●
●
Transparent: The project developer must assess
the various possible baselines in the “without
project“ situation. Based on all these hypothetical baselines, a specific baseline is chosen, and
the choice is justified. The breakdown of formulae and calculations must also be explained;
Conservative: In the event of uncertainty concerning the values of the various parameters
and variables, the values resulting in the least
favorable baseline must be used.
The identified baselines should be illustrated in a
graph representing each baseline emission level
over time.
> WHAT ARE THE RULES
TO BE APPLIED IN ESTABLISHING
THE BASELINE?
>> Approach for developing a baseline
methodology
The most important step in establishing a baseline is the choice of approach. The Marrakesh
Figure 12 - Illustration of the three baseline approaches
60
Accords do not define any approach for Joint
Implementation, and only mention that baseline emissions, or the baseline, must be established:
●
On a project-specific basis and/or using a
multi-project emission factor;
●
In a transparent manner regarding the choice
of approaches, assumptions, calculations,
parameters, data sources and key factors;
●
Taking into account relevant national and/or
sectoral policies and circumstances, such as
sectoral reform initiatives, local fuel availability, power sector expansion plans, and the
economic situation in the project sector;
●
In such a way that ERUs cannot be earned for
decreases in activity levels outside the project
activity or due to force majeure;
●
Taking into account uncertainties and using
conservative assumptions.
The project developer may elect one of the following three approaches:
A. Take into account the effective level of emissions at the time of consideration or the level
of prior emissions, whatever the case;
B. Take into account the emissions obtained by
using a technology representing an attractive
course of action from an economic point of
view, given the investment barriers;
C. Take into account average emission levels
from project activities undertaken over the
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last five years that are comparable from a
social, economic, environmental and technological perspective, and which are rated
among the top 20% in their category.
A baseline methodology may be based on one
of the three approaches. The methodology
must then describe, step by step, how the
existing data was used to establish the baseline. For example, should a project developer
decide to develop his baseline using the first
approach, he can use the historical emission
level and extrapolate it over the lifetime of the
project.
The choice of approach should be justified in
the PDD. In particular, the reasons why the
other two approaches were not selected should
be presented.
Here are some practical suggestions for developing a baseline methodology:
●
All information on the methodology used for
the baseline must be entered in Section B of the
PDD;
●
A baseline methodology can be developed on
a case-by-case basis. Before preparing a project baseline, the Executive Board of the Clean
Development Mechanism should be consulted
to determine whether approved baseline
methodologies can be used directly for
greater efficiency. This will avoid the preparation of a new methodology. Additional
information and, specifically, a reference list
of approved methodologies, can be found on
the http://unfccc.int/cdm Website.
●
It bears mentioning that the project developer is
not obliged to use an approved methodology
and is free to develop a new methodology. If
such is the case, he must have it approved by
the host country, and determined by the Accredited Independent Entity.37
Baselines assumptions – The Svilosa biomass
project
The main factors considered to establish the baseline for the biogas recovery project are:
●
●
Financial analysis: an analysis focusing on three
different scenarios (maintenance of the coal-fired
boiler; replacement of the existing boiler by a natural gas boiler; and scenario of the project considered) has been performed. Conversion to natural
gas, by far the most expensive solution, has been
dismissed. In addition, the difference in financial
terms between the other two options (maintenance of the existing situation and the proposed
project) is estimated to be significant. For the two
options to have the same net discounted value,
either the investment cost for the biomass boiler
must drop by 60%, or the price of coal must
increase by 54%, which are both considered very
unlikely.
Environmental legislation:a for the moment, Bulgarian law does not require wood industry operators to treat their ligneous waste. Presently, this
waste is stored at Svilosa, and releases methane.
However, after the incorporation of the Community acquis in national Bulgarian law, storage of
this waste on site will be prohibited. Community
law also prohibits the burial of such waste in a controlled landfill. However, concerning Bulgaria, several studies have shown that the Community directives are unlikely to be applied to the industry as of
2007, but will be gradually applied over the next 5
to 10 years. The baseline shall therefore be
adjusted each year, based on the practices
observed within a test group comprising industries
with the same characteristics (plant in Bulgaria,
dumping of non-hazardous organic waste on private land).
a This interpretation should only apply to the methane component of the project. It is based on the July 2003 issue of the
“Joint Implementation Quarterly.” Other interpretations may
be envisaged.
It is essential to determine whether the host country has a predefined baseline or a preference in
terms of applying a specific methodology.
>> Project boundary
To determine which GHG emissions should be
calculated and estimated to establish the project baseline and emissions, the project boundaries must be defined. The activities and GHG
emissions included in the project boundary
are:
●
The activities to be included in the baseline
and the emission calculations;
●
The activities and GHG emissions to be monitored once the project is operational.
The project boundary must reflect both the physical
and geographical limits of the project and, specifically, the emission sources taken into account for the
project’s emission calculations.
All GHG emission sources of the proposed JI
activity that are “under the control” of the project developer, and which are “significant” and
“reasonably attributable” to the project must be
37 In the Clean Development Mechanism PDD’s current version, the project developer must complete Annex 3 in order to
submit a new methodology to the CDM Executive Board.
61
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The Joint
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(JI) mechanism
included in the project boundary. 38 These
terms shall be interpreted as follows:39
●
What is considered ‘significant’ can be based
on an absolute emissions level, relative to
emission levels of other projects or total emission levels, or relative to the largest GHG
impact of a project in that sector. For example, the guidelines for the Dutch ERUPT program suggest (as a rule of thumb) that emissions are significant if they are larger than 1%
of the total emissions/emission reductions of
the project.
●
The principle of ‘under control’ implies that
the project boundaries should be set in a way
that they contain all relevant emission effects
that can either be controlled or influenced by
the project participants, and that are reasonably attributable to the project. Emissions
from production, transport and distribution of
primary fuels (oil, coal, natural gas) will not
usually be included in the project boundary.
●
Which emissions are ‘reasonably attributable’
to the project can be determined from a geographic point of view as well as from an activity point of view. Until further guidance is provided, the principle of control as described
above should be used as a reference to define
what can be considered reasonable.
The project boundaries and the emission
sources included and excluded therein should
be represented in a flowchart. There are four
categories:
●
Direct on-site emissions. These are emissions
at the project site itself, including emissions
from on-site fossil fuel or biomass combustion.
●
Direct off-site emissions. This involves emissions that are directly related to the project
activity but do not occur at the physical project site. “Directly related” is defined here as
emissions one step upstream or downstream
that are under the operator’s control. For
example, this would include the sequestration
of CO2 in forests from which wood is extracted
for the production of electricity using biomass
or the prevention of fossil fuel combustion
emissions in the case of improved energy efficiency.
●
Indirect on-site emissions are emissions from
activities taking place at the physical project
site but which are only indirectly related to
project activity, such as the transport of materials on site. If significant, these emissions
should also be accounted for in the emission
calculations. Specific attention must be paid
to what is known as the “rebound effect.” This
would involve, for example, an increase in
production due to lower marginal production
costs. The emissions due to the increased production should be included in the calculation,
to take into account all project emissions.
●
Indirect off-site emissions. These are emissions that do not occur at the physical project
site and are not directly related to the project
activity. If they are significant, they must be
taken into account in emission calculations. By
way of example, the production of electricity
avoiding fossil fuel for a renewable energy
project is substantial. Examples are the emissions related to the transport of fuels to the
project site, the construction of project equipment, and the extraction and production of
fossil fuels used.
“Project boundary” or “System boundary”?
A frequent bone of contention is the use of the terms
“project boundary” and “system boundary” in the
English version of the negotiations. For an improved
understanding of the Marrakesh Accords, and the
various methodologies used to determine the baseline, it is important to make the distinction between
these boundaries:
●
The project boundary is its area of effect, where the
emissions could be “reasonably attributable to the
project.” For example, a project which uses biomass
for electricity production would be responsible for
the emissions released in the plant in addition to
those relating to the recovery, transformation and
transport of the biomass to the plant;
●
The system boundaries for baseline analysis can in
this case be much more extensive, since they must
include all the potential emission sources that the
project can replace or eliminate, or with which the
project may compete. For the aforementioned Biomass Project, the system boundary could be the
national electricity grid, insofar as this new source
of electricity will “displace” other more intensive
sources of carbon.
>> Leakage
38
COP.7 Draft decision, Article 12, Section G, Paragraph
52.
Leakage is defined as the net change of anthropogenic
39
occurs outside the project boundary, and which is meas-
Source: OECD, 2002, Developing Monitoring Guidance
for GHG Mitigation Projects.
62
emissions by sources of greenhouse gases (GHGs) which
urable and attributable to the JI project activity.
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The Joint
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(JI) mechanism
Figure 13 - Representation of emission sources within the Svilosa biomass project boundaries
It can be difficult to identify or control leakage
since, by definition, leakage is excluded from the
project boundary and is not necessarily under the
control of the project developer. Nevertheless, the
project developer will have to identify and assess
any possible leakage, while taking into account
the monitoring plan. Leakage is generally
assessed in the monitoring phase and not in the
project design phase, but should be identified in
the design phase to be incorporated into the
monitoring plan.
to outsourced activities should be accounted for.
For example, a foundry in China uses a fuelheated kiln and transforms it for conversion to
electricity. On-site, the new process will be clearly
more efficient in terms of the thermal units per
ton of cast iron; conversely, the project will require
vast quantities of electricity produced by coal
power stations, which emit high levels of CO2;
●
“Market effects” or “Outlet effects.” Emission
reductions are offset by higher emissions elsewhere due to project induced shifts in supply
and demand. These effects should be taken into
account only when non-marginal.
●
Changes in life cycle emission profiles:
changes in upstream or downstream processing
as a result of the project’s implementation.
The possible causes of leakage break down into
four main categories:
●
●
Activity shifting. The activities that caused
GHG emissions are not permanently avoided,
but simply displaced to another area. For example, a project developer sets up a power station
that runs on biomass, thus replacing the diesel
generators. The diesel generators are sold to
another entity, which uses them to produce electricity, thus emitting GHGs;
Outsourcing, or the purchase or contracting of
services or commodities that were previously produced or provided on-site: the emissions related
»
C
Leakage does not disqualify a project’s validity,
unless projected GHG losses are potentially so
substantial so as to negate a very large percentage
of the projected GHG emission reductions from
the core of the project case. In this case, all
attempts should be made to formally incorporate
the source of the leakage into the project boundaries and baseline.
For more information on the creation of baselines:
According to the International Energy Agency: http://www.iea.org/envissu/cdm.htm
According to the ERUPT program: http://www.senter.nl/asp/page.asp?alias=erupt&id=i000008
According to the Gold Standard methodology:
http://www.panda.org/downloads/climate_change/gspddfinal120703.doc
63
2. How to assess project additionality?
By definition, JI projects have to “result in a
reduction in anthropogenic emissions by
sources of greenhouse gases that are additional
to any that would occur in the absence of the
proposed project activity.” There is still much
discussion about the concept of additionality;
however, it is obvious that the project developer
must be able to reasonably demonstrate that the
project does not constitute a likely baseline.
Qualitative analysis of a JI project
For the qualitative analysis, the project developer
can, in particular, verify if the project meets one of
the following criteria:
Clarifications over the difference between project and
●
JI helps to remove barriers for implementing the
project. These can include investment, technological, institutional or competitive disadvantage barriers. For example, convincing the client to install
individual meters to reduce consumption or obtaining approval from local authorities to set up a wind
farm;
●
The project activity is beyond regulatory and policy
requirements. For example, if the country has regulatory requirements with regard to minimum insulation standards for buildings, additional emission
reductions could be realized by a project which
forecasts a higher level of insulation; in the case of
a project hosted by a European Union candidate
country, attention should be focused on the incorporation of the Community acquis;
●
The project has been developed with the intent to
reduce GHG emissions. This can be demonstrated
by initial discussions with the relevant international and national authorities. In particular,
obtaining determination for an already operational
project will no doubt be difficult, unless specific
strategies focusing on climate change were implemented in the project design phase. Comparing the
current technological practices in the sector as a
whole with those proposed by the project might
reveal evidence of whether the project is additional.
For example, if the project involves a technology or
practice that is equivalent or better, in terms of its
greenhouse gas emissions, than the best technology prevalent in the corresponding industry or sector, it is highly probable that it is additional.
baseline were requested in a number of the initial
methodologies for the Clean Development Mechanism
reviewed by the Methodology Panel in mid 2003.
In practice, the project developer must ensure that the
PDD clearly demonstrates a significant difference
between the project and the chosen baseline.
The proof of additionality consists of two components:
●
A quantitative analysis, to assess the project’s
emission reduction assumptions. All activities
that result in emissions should be identified
and quantified, for both the baseline and the
project implementation scenario. The quantitative analysis is positive if the project emissions are below those of the baseline;
●
A qualitative analysis, to determine whether
the emission reductions would have had
occurred in the absence of the JI project or, in
other words, whether the project leads to net
emission reductions compared to the chosen
baseline. All projects resulting in GHG emission reductions are not necessarily additional.
For example, a project is not additional if it
involves the simple application of new standards.
Financial considerations can sometimes also be an
important element in assessing additionality. If the
project developer can demonstrate that the project is
subject to a higher level of risk, and that the carbon
revenues will assist in achieving financial viability,
this could be supporting evidence of a project being
additional. However, it should be noted that just
because a project has high rates of return does not
mean that it cannot be additional. New technologies
or the application of technologies in new contexts
are generally viewed by the financial investment
community as being high-risk and they will expect a
high return for investing in such projects.
The current version of the Clean Development
Mechanism PDD requires information on additionality in Sections A and B.
●
Section A requires a brief summary of the
results of the additionality assessment, the
manner in which the proposed activity will
lead to GHG emission reductions (explanation
of why these emission reductions would not
have occurred in the absence of the project
64
activity), and the result of net emission reduction calculations;
●
In Section B, the project developer must provide a detailed analysis of additionality and
the emission reduction calculations.
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3. How to assess emission reductions?
> BASELINE CALCULATION
●
The baseline emissions correspond to the quantitative
assessment of baseline scenario emissions.
Il is important to present clearly and in a transparent manner all the assumptions adopted to
determine the baseline (emission factors, emission
projection models, etc.) and their specific origin.
The following parameters should be specified:
●
The baseline calculation parameters, which will
remain fixed over the entire duration of the
chosen crediting period (e.g. the emission factor
for baseline activities replaced by project activities);
●
The variable parameters taken into account in
the monitoring plan (e.g. the volume of project
activity). However, the baseline must initially be
calculated ex ante before being adjusted with
these variable ex post parameters.
For end-use energy efficiency projects, project
emissions can be calculated by multiplying an
activity parameter (i.e. reduction in energy used,
reduction in transmission and distribution losses,
etc.) with the appropriate emission factors.
> NET EMISSION REDUCTIONS
The net emission reductions generated by a
project are calculated by subtracting the total
project emissions from the baseline emissions
and adjusting for leakage. Calculations should
be made for each year in the crediting period
and expressed in tons of CO2 equivalent. As for
the other calculations, all numbers and assumptions must be transparent.
Net emission reductions =
Baseline emissions
– Project emissions
– Leakage
> PROJECT EMISSION CALCULATION
Net emission reductions – The Svilosa project
To determine the financial viability of the proposed project, the future emissions related to the
project activity must be estimated at the outset.
The emission reductions are effective as they are
taken into account – in addition to the theoretical
calculation from the production model – based on
the regular readings performed on the site.
As for the baseline, project emissions must be estimated
and calculated in a transparent manner for the entire
duration of the chosen crediting period.
By way of example, emissions can be estimated as
follows:
●
For energy projects, direct on-site emissions are
calculated by multiplying the project output by
the project emission factor. Direct off-site emissions are calculated similarly;
Each year, the baseline depends on the project’s
annual production, and the annual consumption of
the wood waste directly issued from the industrial
process and from the existing stock. The emissions
generated by biomass combustion are considered as
nil, the CO2 emitted during combustion being previously absorbed by the biomass.
The project developer has estimates for the five-year
period from 2008 to 2012, i.e. the initial crediting
period. In addition, he has estimated the annual
reductions prior to 2008, in order to contractually
negotiate with the host country a return on his
efforts prior to the initial crediting period.
Table 8 - Example of an emission reduction calculation table – Svilosa biomass project
Annual project output
Comsumption
Process wood
Stockpile wood
Saved coal
Emissions reductions
CO2 due to coal replacement
CH4 form process wood
CH4 form process wood
Total
Units
MWh
2004
117,114
2008
117,791
C
2005
117,791
2006
117,791
2007
117,791
2009
117,791
2010
117,791
2011
117,791
2012
117,791
metric tons
metric tons
metric tons
25,760 46,836
33,600 17,989
22,648 22,598
46,836
17,989
22,598
46,836 46,836 46,836
17,989 17,989 17,989
22,598 22,598 22,598
46,836
17,989
22,598
46,836 46,836
17,989 17,989
22,598 22,598
tCO2-eq
tCO2-eq
tCO2-eq
tCO2-eq
46,846
4,422
4,292
55,560
47,116
47,116
47,116
47,116 47,116
47,116
12,286 19,793 26,949 33,783 40,332 46,587
6,405
8,419 10,334 12,197 13,939 15,629
121,367 196,605 281,005 374,102 475,490 584,823
47,116 47,116
52,557 58,269
17,245 18,786
701,741 825,913
65
4. How to set up a monitoring plan?
Project developers need to develop a monitoring
plan as part of their PDD. The monitoring plan
outlines how data will be collected from the project once it is operational. The project developer
is responsible for the design and implementation
of the monitoring plan. Once the project is operational, the monitoring results collected will be
sent for verification to the AIE.
> MONITORING PLAN CONTENT
The monitoring plan should provide for the collection and archiving over the entire duration of
the crediting period of all relevant data necessary
for:
The main points for consideration are as follows:
●
●
Estimating and measuring project-specific GHG
emissions within the defined project boundary,
as presented and determined by the Supervisory
Committee of JI;
Identifying increased emissions outside the project boundary.
Project developers are responsible for the monitoring methodology that they intend to use, but
the following suggestions will help them to ensure
that their monitoring plans are based on wellfounded techniques, and a solid data collection
strategy.
●
Description of the monitoring process: this
description must provide an overview so as to
ensure that the collected data is exhaustive, consistent and reliable;
●
Identification of GHG sources: the identified
sources must be mentioned, particularly which
ones will be monitored and the reasons for this
choice;
●
Proposed measurement methodologies: measurement methodologies, based on well-founded
techniques for each GHG source and type, must
be defined. These methodologies must be
approved by the host country under Track 1,
and by the Accredited Independent Entity
under Track 2. If a different measurement protocol is used, the project developer must provide a description of the methodology, an assessment of its advantages and disadvantages, and
specify whether or not it has been successfully
applied to other scenarios;
●
Collection strategy: suitable collection methods
must be formulated to provide data with the
desired accuracy;
●
Data archiving and recovery: the data must be
securely stored and easily accessible to facilitate
its verification. Procedures should be defined,
stating the duration over which the data must be
preserved;
●
Quality assurance/quality control: the stages to
guarantee quality control must be defined, and
written reports on the results of the internal
account verifications must be prepared;
●
Procedures for the calculation of emissions and
total emission reductions: the aim of the monitoring plan is to assess the emission reductions
generated by the project. The process explaining how the data required for the calculation of
the prevented emissions is gathered and
processed must be covered.
It should be noted that the baseline methodologies and the monitoring plan are related, since
they must be proposed and approved together.
Should the project developer wish to use a different baseline methodology and monitoring plan
combination, he must submit a proposal to the
Methodology Panel.
Furthermore, the monitoring plan design should
be as basic as possible in order to reduce the
future costs of verification to a minimum.
> WHAT ARE THE MONITORING PLAN
CRITERIA?
The monitoring plan defines a certain number of monitoring activities which ensure that all project GHG emissions are controlled and quantified.The project must be
continuously monitored to quantify its effective emission reductions.
The monitoring plan is a guide which lists the
procedures involved in project monitoring: main
project indicators and monitoring of environmental impacts.
The monitoring plan is designed to meet the
terms and conditions laid down by the Kyoto protocol, which stipulates that JI projects must generate real measurable long-term emission reductions.
66
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Fifth Part
Taking into account
“carbon credits”
in the JI project
financing plan
67
Taking into account
“carbon credits” in the
JI project financing plan
I n
b r i e f
ith respect to the project mechanisms, the Kyoto Protocol,
under Articles 6 and 12 that
provide for Joint Implementation (JI) and the Clean Development Mechanism (CDM) respectively, only refers to the
“Parties,” i.e. the States that will have ratified
it.It does not specify any predetermined scope
and legal rights with regard to implementation for the “legal entities” (companies,NGOs,
local authorities,etc.) likely to initiate actual JI
projects. On the face of it and by extension, it
does not refer to any direct relationship
between the “legal entity” that initially generated the GHG emission reductions (ERU
credits in the case of JI) by implementing a
project,and the “recovery”of these same credits under purchase conditions (as in the case of
the ERUPT program implemented by the
Netherlands, conditions in accordance with
the public procurement regulations within the
European Union) by the State- “Party”according to the Protocol under whose jurisdiction
they fall. This depends on the national decisions made by the various States having
undertaken commitments in respect of the
Protocol (c.f. Volume A of this guide).
W
68
Having said this, it nevertheless remains
incumbent upon each JI project developer
to negotiate the sharing between himself
and his partners of the “ERUs” to be generated, once the project has been determined
by the Independent Entity accredited by the
JI Supervisory Committee, and in the course
of verifications stipulated in the PDD.
The ERU holder, whether the government of the project’s host country (which
is also entirely free to negotiate the ownership of a portion of the ERUs), a “legal
entity” under the jurisdiction of the latter
or a different “legal entity” (under the jurisdiction of the country where it has registered a corporate name, i.e. in most cases
the investor), can choose between various
options regarding the use of these credits.
For a “legal entity” subject to quantified
GHG emission control objectives in its own
country, particularly under the European
Union Emissions Trading Scheme (c.f. Volume A), the choice of the most efficient
means of using credits, from an economic
and financial perspective, will be arbitrated.
VOLUME
The Joint
Implementation
(JI) mechanism
1. The negotiations relating to credit sharing
In many projects (concession agreements, joint
ventures, biomass projects assuming the development of the wood industry and investment in
wood boilers, etc.), several operators will be
involved in the project as a whole. Who can
therefore claim ownership of the ERUs generated by the project?
The Kyoto Protocol provides only two indirect
responses to these general questions: a response
for the moment when the Assigned Amount
Units, converted into ERUs by the host country, can be transferred from the host country’s
registry to a third party, whether it be a governmental or private entity, and a response on the
eligibility conditions for the transfer of ERUs to
an Annex I registry. The Kyoto Protocol states
that an Annex I country can only acquire ERUs
if it has:
Few countries should meet these conditions
before 2007;40 ERUs are unlikely to be obtained
before this date. The private or public operators that wish to obtain ERUs must therefore
wait until the countries where they wish to
recover ERUs have completed all these procedures.
However, as the Kyoto Protocol does not define any
standard rules on ownership and credit sharing, it is
essential that the problem be solved contractually.
●
●
Calculated its Assigned Amounts;
●
Although ERUs cannot yet be officially transferred by the host countries before 2008, the
problem of credit ownership should be resolved
as soon as possible with all project participants
by means of a contractual arrangement stating
the future distribution of ERUs among the various project partners. It should therefore be
noted that determining the project boundaries
is a key phase for calculating emission reductions and identifying the operators who may be
involved in credit sharing.
●
Set up a national system for the estimation of
GHG emissions;
In particular, the policy applied by the host
country regarding this issue should be verified.
●
Submitted an annual national inventory of its
●
Submitted additional information for the
Assigned Amounts.
40
For France, these obligations could be met as from 2005
and this will have to be confirmed in time with the authorities
concerned.
2. How to use “carbon credits”?
The project developer is faced with two main
scenarios:
●
The developer may decide to retain the credits and register them in a registry account of
his choice. He can then use them at his convenience, in particular, to demonstrate his
compliance with his emission obligations (e.g.
a developer subject to the European Directive
on emission allowances);
●
The developer may decide to sell the credits
on the market when he no longer needs
them.
C
The various conditions of sale are described in the
following paragraphs. However, it should be noted
that the developer can decide, based on his initial
search for financing, to include in the project’s
cash flow statement the expected credit amounts
and the estimated income from their sale, which in
fact corresponds to additional financing flows. In
this instance, he may even find, prior to project
implementation, a buyer with whom he can set up
a purchase agreement and who will ultimately
receive the credits issued by the JI Supervisory
Committee. The credits are then accounted for in
the project’s financial arrangement.
69
Ta k i n g i n t o a c c o u n t “c a r b o n c r e d i t s ” i n t h e J I p r o j e c t f i n a n c i n g p l a n
3. How to set up an emission reduction
purchase agreement?
The emission reduction purchase agreement
must set forth the terms and conditions of credit
delivery and payment between the seller (the
project developer) and the buyer.
This is a standard contractual relationship,
designed to cover the legal aspects of credit
ownership, the terms of payment and delivery
and the management of risks inherent to the
transaction, i.e.:
Supervisory Committee (for JI Track 2). The
coming into force of the Protocol shall strongly
reduce the risks associated to JI projects.
The contract, to which the PDD must be
appended, must also include the following
information:
●
Compliance with national and international
requirements (these are conditions precedent to
the completion of the transaction);
●
Risks inherent to all projects: “country” risk,
foreign exchange and inflation risk, etc.;
●
Description of the purchase agreement’s purpose
(type of allowances, quantity, year, etc.);
●
Risks specific to the JI phase of the project:
the risk of default (the project is not implemented or does not generate the expected
ERUs); deadline risk; counterparty risk (the
ERU buyer withdraws or is in default);
and above all, institutional risks, in particular
the risk of the Kyoto Protocol not coming into
force, which could call in question the existence
of JI and the generation of ERUs by the project,
particularly for JI Track 2; the risk of no validation, ex post, of the methodology by the JI
●
Initial ownership of the credits generated by the
project: this results from negotiations between
the project stakeholders, as from the preparation of the PDD if possible;
●
Allocation of risks and guarantees;
●
Purchase conditions (price, terms of delivery,
etc.), generally listed in an annex;
●
Standard clauses: commitments of the parties,
indemnity clauses, default, termination clause,
confidentiality, dispute resolution, taxes.
4. Terms of payment: the various options
There are different types of credit purchase agreements depending, in particular, on:
●
The type of project;
●
The state of progress;
●
The general organization;
●
The risks;
●
The rating of the stakeholders in the transaction.
In the following paragraphs, the project developer is
assumed to be the owner and therefore the seller. This
may not necessarily be the case, which is the reason why
the agreement must contain an ownership clause.
> FIRM PURCHASE
>> With advance payment
This type of purchase is the most highly sought by
developers, insofar as they provide the best guarantee for emission allowance/credit income.
70
From the buyer’s perspective, these terms of payment correspond to a loan (payment for goods
received at a later date) and therefore a high-risk
situation (risk that the project will not be implemented, deadline risks, risks on the amount and
quality of credits, etc.).
Thus, this type of agreement will contain strong
guarantees for the buyer, which will be reflected in
a lower purchase price, the standard consideration
for high risk. In the event of market pressure, and
therefore a higher price for emission allowances or
credits, the project developer will lose out.
>> Payment on delivery
In the case of payment on delivery, the buyer contractually undertakes to purchase the credits once
they have been transferred by the host country.
These terms combine security for the seller and
reduced risk for the buyer.
The credit purchase price is defined in the
agreement: it can be fixed or variable, which generates different levels of risk for both parties.
VOLUME
>> Fixed price
> CALL OPTION (PAYMENT ON DELIVERY)
The number of credits delivered is stated in
the agreement, as is the frequency of delivery
(most often annually), date of delivery to the
buyer’s account, and the price, expressed in
the chosen currency, which can be indexed to
inflation.
In this type of contract, the seller pays the project
developer a call option premium upon signing
the agreement, which contains a clause stating the
date from which the option may be exercised, e.g.
the first delivery date. Once the option is exercised, the price is set forth in the agreement: it
may be fixed or variable.
Pursuant to international laws, a clause must
be drafted to manage the baseline review
and its consequences for the delivery clauses.
>> Variable price (market indexed)
In this type of contract, the price is expressed
as a formula which correlates the purchase
price with the market price of the credits.
For example, this may refer to the average
recorded during the year, the median,
the highest price, or any other type of correlation.
The indexed price can nevertheless be
contained by stipulating a ceiling and a threshold in the agreement, or by limiting the annual
growth rate.
If the option is not exercised for whatever reason,
the buyer loses the premium to the seller. However, in the event of default by the seller (project
failure or number of allowances lower than the
amount stipulated in the agreement), he must pay
the premium and any damages to the buyer. The
agreement must account for all possible scenarios.
> RECOURSE TO THE MARKET
The owner of the credits may not wish to enter
into an agreement with a buyer and may prefer to
turn towards the market once in possession of
allowances or credits. According to the level of
market organization and liquidity, he can employ
a broker or find a buyer directly.
5. Risks and uncertainties surrounding the
volume and price of credits
Table 9 shows the advantages and disadvantages
for the seller of each of the terms described
above.
This review is not exhaustive:
There may be as many types of contract as there are
transactions!
Table 9 - Comparison of the various terms and conditions of payment
FIXED PURCHASE
Terms and conditions
Advantages
Disadvantages
Advance payment
Guaranteed amount of income
Risk of reimbursement of the entire amount,
discounted, in the event of default
Lower price in theory
Payment
upon delivery
(fixed price)
Higher price than in the advance
payment scenario
Guaranteed price
No market risk
No possibility for sale at the best price in the event
of market pressure
Payment
upon delivery
(variable price)
Possibility for sale at the best price
in the event of market pressure
Risk of fall in price
No guarantee of income
Obligation to sell at an agreed price
No guarantee as to the sequence of events
in the transaction
Risk of reimbursement of the option premium
in the event of default
CALL
OPTION
RECOURSE
TO THE MARKET
Best price sale
Need to know the market and contacts
Market risk in the event of a price collapse
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The Joint
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(JI) mechanism
72
VOLUME
The Joint
Implementation
(JI) mechanism
To conclude
J
ust like CDM projects, JI projects are
rigorous undertakings.
Despite the uncertainties as to the coming into force of the Kyoto Protocol, many
host countries, as well as businesses and
institutions in Annex I countries, have manifested their trust in this new tool by developing their JI project portfolio, and many
initiatives have been taken to boost development. A process has been created,a enabling
the various partners involved to gradually
internalize the “carbon constraint” in their
choice of investment, thus providing a
response to the global warming challenge.
At the present stage of international
negotiations, and based on the experience
gained from the Clean Development Mechanism, there are three particularly important
points:
• Close cooperation with the host country from the initial stages of the JI project. As
a JI project results in the creation by the host
country of emission reduction units by converting a portion of its assigned amount, this
association seems decisive.The host country,
seeking to maximize its profit under the “carbon constraint,” will be especially vigilant as
to the quality of projects conducted, the economic and financial conditions of their
implementation, and their short, medium
and long-term contribution to its policy for
combating climate change.
• A solid JI project, be it developed under
Track 1 or Track 2, is above all a traditional but
well-defined project. Its “JI” phase is princi-
C
pally an economic advantage to promote
more efficient and environmentally friendly
technologies, while overcoming the existing
obstacles.
• The quality of definition of the “baselines,” and ultimately, and in a more general
sense, the appropriateness of the methodology used, are among the essential prerequisites for the validation and approval of any
JI project. It is primordial that the project
developer base the JI documentation on a
flawless line of argument using the “caselaw” progressively enacted by the Clean
Development Mechanism Executive Board to
which the Supervisory Committee shall give
consideration.
In organizing a JI project, a French developer unfamiliar with this new mechanism
would benefit from contacting the Economic
Department of the French Embassy in the
country concerned, in order to request information on the JI context specific to the country (institutional organization, contact information for the JI Designated Focal Point,
policies, JI criteria and priorities of the country, possibilities of local specialized exper
tise, etc.).Where necessary, selective government financial backing may be considered
to facilitate the initial preparation of JI projects. This limited backing will focus on particularly innovative projects.
a This process will be reinforced as from 2005 by the entry into
force of the emission allowances European Directive.
73
74
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Annexes
English-French Lexicon
Reference texts
List of Parties included
in Annex I to the UNFCCC
Examples of projects
submitted to ERUPT
or to the PCF
Transition periods
for the implementation
of the Community legislation
Conversion tables
Clean Development Mechanism
Project Design Document
75
Annexes
1. English-French Lexicon
English
Abbreviation French
Abbreviation
Activities implemented jointly
AIJ
AEC
Additionality
Activités exécutées conjointement
Additionnalité
Assigned Amount
AA
Quantité attribuée (aux Parties)
QA
Assigned Amount Unit
AAU
Unité de quantité attribuée
UQA
Baseline
Scénario de référence
Boundaries
Périmètre
Burden sharing
Bulle de répartition
Business as Usual
BAU
Scénario sans effort de réduction
des émissions
Central and Eastern European Countries
CEEC
Pays d’Europe centrale et orientale
PECO
Clean Development Mechanism
CDM
Mécanisme pour un développement
propre
MDP
Commitment period
Période d'engagement
Conference of the Parties
COP
Conférence des Parties
Countries with Economies in Transition
CET
Pays en transition vers une économie
de marché
Crediting period
Designated Focal Point
CP
Période de comptabilisation
DFP
Determination
Point de contact désigné
PCD
Détermination
Emission Reduction Purchase Agreement
ERPA
Contrat d’achat de réduction
d’émissions
Emission Reduction Unit
ERU
Unité de réduction des émissions
Emission Reduction Unit Procurement
Tender
ERUPT
European Union Emissions Trading Scheme
EU ETS
Système européen d'échange de quotas
Executive Board of the Clean Development
Mechanism
EB
Conseil exécutif du mécanisme
pour un développement propre
Focal point
URE
Point focal
French Global Environment Facility
FGEF
Fonds français pour l’environnement
mondial
FFEM
Global Environment Facility
GEF
Fonds pour l’environnement mondial
FEM
Global Warming Potential
GWP
Pouvoir de réchauffement de la planète
PRP
Greenfield
Création d’activité ex nihilo
Greenhouse gas(es)
GHG
Gaz à effet de serre
GES
Independant Entity
IE
Entité indépendante
EI
Intergovernmental Panel on Climate
Change
IPCC
Groupe intergouvernemental
sur l'évolution du climat
GIEC
Interministerial Task-force for Climate
Change
ITCC
Mission interministérielle de l’effet
de serre
MIES
Joint Implementation
JI
Mise en œuvre conjointe
MOC
Land Use, Land Use Change and Forestry
LULUCF
Utilisation des terres, changement
d'affectation des terres et foresterie
UTCF
Leakage
Fuites
Memorandum of Understanding
MoU
Protocole d’accord
Metric ton of CO2 equivalent
tCO2-eq
Tonne d'équivalent CO2
76
teqCO2
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The Joint
Implementation
(JI) mechanism
English
Abbreviation French
Abbreviation
Monitoring
Suivi
National communication
Communication nationale
National Program for tackling Climate
Change
Programme national de lutte contre
le changement climatique
PNLCC
ONG
Non Governmental Organization
NGO
Organisation non gouvernementale
Project Design Document
PDD
Descriptif de projet
Project Identification Note
PIN
Note d’identification du projet
Prototype Carbon Fund
PCF
Fonds prototype carbone
Removal Unit
RMU
Unité d'absorption
Sink
UA
Puits
Supervisory Committee
SC
Comité de supervision de la mise
en œuvre conjointe
United Nations Framework Convention
on Climate Change
UNFCCC
Convention cadre des Nations unies
sur les changements climatiques
Verification
NIP
CCNUCC
Vérification
77
Annexes
2. Reference texts
> ARTICLE 6 OF THE KYOTO PROTOCOL
1. For the purpose of meeting its commitments
under Article 3, any Party included in Annex I
may transfer to, or acquire from, any other such
Party emission reduction units resulting from
projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic
removals by sinks of greenhouse gases in any sector of the economy, provided that:
a) Any such project has the approval of the Parties
involved;
b) Any such project provides a reduction in emissions by sources, or an enhancement of removals
by sinks, that is additional to any that would otherwise occur;
c) It does not acquire any emission reduction units
if it is not in compliance with its obligations under
Articles 5 and 7; and
d) The acquisition of emission reduction units shall
be supplemental to domestic actions for the purposes of meeting commitments under Article 3.
2. The Conference of the Parties serving as the
meeting of the Parties to this Protocol may, at its
first session or as soon as practicable thereafter,
further elaborate guidelines for the implementation of this Article, including for verification and
reporting.
3. A Party included in Annex I may authorize legal
entities to participate, under its responsibility, in
actions leading to the generation, transfer or
acquisition under this Article of emission reduction units.
4. If a question of implementation by a Party
included in Annex I of the requirements referred
to in this Article is identified in accordance with
the relevant provisions of Article 8, transfers and
acquisitions of emission reduction units may continue to be made after the question has been
identified, provided that any such units may not
be used by a Party to meet its commitments under
Article 3 until any issue of compliance is resolved.
> DECISION 16/CP.7 - GUIDELINES FOR
THE IMPLEMENTATION OF ARTICLE 6
OF THE KYOTO PROTOCOL
Aware of its decisions 3/CP.7, 11/CP.7, 15/CP.7,
17/CP.7, 18/CP.7, 19/CP.7, 20/CP.7, 21/CP.7,
22/CP.7, 23/CP.7 and 24/CP.7,
Affirming that it is the host Party’s prerogative to
confirm whether an Article 6 project activity
assists it in achieving sustainable development,
Recognizing that Parties included in Annex I to
the Convention are to refrain from using emission reduction units generated from nuclear facilities to meet their commitments under Article 3,
paragraph 1,
1. Urges the Parties included in Annex II to the
Convention to facilitate the participation in projects under Article 6 of Parties included in Annex
I with commitments inscribed in Annex B that are
undergoing the process of transition to a market
economy;
2. Invites Parties included in Annex I to finance
the administrative expenses for operating Joint
Implementation under Article 6 by making contributions to the UNFCCC Trust Fund for Supplementary Activities in order to facilitate
preparatory work by the secretariat, if necessary;
3. Recommends that the Conference of the Parties
serving as the meeting of the Parties to the Kyoto
Protocol, at its first session, adopt the draft decision below.
> DRAFT DECISION -/CMP.1 (ART. 6)
GUIDELINES FOR THE
IMPLEMENTATION OF ARTICLE 6
OF THE KYOTO PROTOCOL41
The Conference of the Parties serving as the
meeting of the Parties to the Kyoto Protocol,
Aware of its decisions -/CMP.1 (Mechanisms), /CMP.1 (Article 12), -/CMP.1 (Article 17), -/CMP.1
(Land use, land-use change and forestry), -/CMP.1
(Modalities for the accounting of assigned
amounts), -/CMP.1 (Article 5.1), -/CMP.1 (Article
5.2), -/CMP.1 (Article 7) and -/CMP.1 (Article 8),
and decisions 3/CP.7 and 24/CP.7,
1. Decides to confirm and give full effect to any
actions taken pursuant to decision 16/CP.7 and to
any other relevant decisions by the Conference of
the Parties, as appropriate;
The Conference of the Parties,
Recalling its decision 5/CP.6 containing the Bonn
Agreements on the implementation of the
Buenos Aires Plan of Action,
78
41 This project shall be submitted to the first “Conference of the
Parties serving as the meeting of the Parties” (CMP.1)
following entry into force of the Kyoto Protocol.
VOLUME
2. Decides to adopt the guidelines for the implementation of Article 6 of the Kyoto Protocol contained in the annex below;
3. Decides to establish the Article 6 supervisory
committee, at its first session, to supervise, inter
alia, the verification of ERUs generated by Article
6 projects;
4. Decides that projects under Article 6 aimed at
enhancing anthropogenic removals by sinks shall
conform to definitions, accounting rules, modalities and guidelines under Article 3, paragraphs 3
and 4, of the Kyoto Protocol;
5. Decides that projects starting as of the year
2000 may be eligible as Article 6 projects if they
meet the requirements of the guidelines for the
implementation of Article 6 of the Kyoto Protocol
as set out in the annex below and that ERUs shall
only be issued for a crediting period starting after
the beginning of the year 2008;
6. Urges the Parties included in Annex II to facilitate the participation in Article 6 projects of Parties included in Annex I with commitments
inscribed in Annex B that are undergoing the
process of transition to a market economy;
7. Decides that any administrative costs arising
from procedures contained in the annex below
relating to the functions of the Article 6 supervisory committee shall be borne by both the Parties
included in Annex I and the project participants
according to specifications set out in a decision
by the Conference of the Parties serving as the
meeting of the Parties to the Kyoto Protocol at its
first session;
8. Decides further that any future revision of the
guidelines for the implementation of Article 6
shall be decided in accordance with the rules of
procedure of the Conference of the Parties serving as the meeting of the Parties to the Kyoto
Protocol, as applied. The first review shall be
carried out no later than one year after the end
of the first commitment period, based on recommendations by the Article 6 supervisory
committee and by the Subsidiary Body for
Implementation drawing on technical advice of
the Subsidiary Body for Scientific and Technological Advice, as needed. Further reviews shall
be carried out periodically thereafter. Any revision of the decision shall not affect ongoing
Article 6 projects.
3. List of Parties included in Annex I
to the UNFCCC
Australia
Austria
Belarus a d
Belgium
Bulgaria a
Canada
Croatia a b
Czech Republic a b
Denmark
Estonia a
European Economic
Community c
Finland
France
Germany
Greece
Hungary a
Iceland
Ireland
Italy
Japan
Latvia a
Liechtenstein b
Lithuania a
Luxembourg
Monaco b
Netherlands
New Zealand
Norway
Poland a
Portugal
Romania a
Russian Federation a
Slovakia a b
Slovenia a b
Sweden
Switzerland
Turkey e
Ukraine a
United Kingdom of Great
Britain and Northern Ireland
United States of America
a
Countries with economies in transition.
b
Countries added to Annex I by an amendment effective as of August 13, 1998.
c
The Protocol adopted in 1997, after the entry in force of the Treaty of Maastricht, employs the term European Community.
d
Belarus had not ratified the Convention in 1997 when the Protocol was adopted and does not therefore feature in Annex B of the
Protocol. Belarus ratified the Convention in 2000, but has not yet ratified the Protocol. Belarus recently requested an amendment to
Annex B of the Protocol to set a quantified commitment.
e
Turkey has not yet ratified the Convention and does not feature in Annex B of the Protocol. The 26/COP7 decision adopted in October 2001 by the Conference of the Parties acknowledges the specific case of Turkey which, after becoming a Party, would hold a position different from that of the other Parties included in Annex I to the Convention.
Note: In addition to the Parties included in Annex I to the Convention, Kazakhstan notified its intention to comply with the provisions of
the Convention concerning the Annex I Parties. In accordance with the provisions of the Protocol, Kazakhstan will therefore be included
in the list of Annex I Parties. However, the country has no quantified commitment and does not feature in Annex B of the Protocol.
79
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The Joint
Implementation
(JI) mechanism
Annexes
4. Examples of projects submitted to ERUPT
or to the PCF
The following JI projects were submitted to
ERUPT or to the PCF. Some data (roles and
names of various players, annual GHG emission
reduction quantities, etc.) may have resulted in
transcription errors. Therefore, reference should
be made to the original files.
ERU
Buyer
Host
country
Sector
Title and nature
of the JI project
Partners
Period
(years)
tCO2-eq/
year
Observations
Total
emission
reduction
(tCO2-eq)
over period
PCF
Bulgaria
Industry
Biomass
Slivosa biomass
project - replacement
of a coal-fired boiler
with a 14-MW boiler
using wood waste
Slivosa AD - PCF
9
100,000
900,000
The GHG reductions stem
from the substitution
of bark and edgings
for coal in a new boiler
(CO2 emission reductions)
and the reduction of
emissions from
fermentation of the
existing wood waste
stock (methane emission
reductions)
PCF
Czech
Republic
Industry and
residential
Portfolio of small
projects, grouped in
"clusters," aimed at
the rational use of
energy and development
of renewable energies including a municipal
heating project in
Rozmital and an energy
efficiency project in a
hospital in Thomayer
9
A few
thousand
tons per
project
ND
Being finalized – cluster
approach (“umbrella
project”) should reduce
costs
PCF
Poland
Geothermal
power for
municipal
heating
Stargard project 14-MW geothermal
power installation
for municipal heating
to partially replace
coal-fired boilers
9
37,800
340,000
A similar geothermal
power project in Kolo
being considered
(around 20,000t/year)
PCF
Moldavia
Land restoration Land
conservation - reforestation of
reforestation 14,500 hectares
7
236,000
1,650,000
Minimal and prudent
estimate of CO2
absorptions
PCF
Latvia
Controlled
landfill biogas
11
62,000
682,000
The project includes
the production
of electricity using
biogas
PCF
Romania
Land restoration Land
conservation - reforestation of
reforestation 6,700 hectares in
the south-east and
south-west of Romania
15
68,000
1,020,000
80
Controlled municipal
landfills management
project in Liepaja
VOLUME
ERU
Buyer
Host
country
Sector
Title and nature
of the JI project
Partners
Period
(years)
tCO2-eq/
year
ERUPT
Bulgaria
Industry and
residential
Substitution of coal
with natural gas in
Veliko Tarnovo, Gorna
Oryahovitsa and
Lyaskovets and
introduction of
cogeneration
8
6,500 t
in 2004
81,000 t
in 2007
106,000 t
in 2012
ERUPT
Bulgaria
Controlled
landfill biogas
Modern management
of municipal landfills
with biogas recovery for
Sofia-Sudohol, Plovdiv,
Pleven and Stambolyiski
5
90,000
450,000
ERUPT
Bulgaria
Controlled
landfill biogas
Modern management
of municipal landfills
with biogas recovery
for Aksakovo, Bourgass
and Rousse
5
65,000
325,000
ERUPT
Hungary
Transformation of a
Biomass
power station section of the coal-fired
power station in Ajka
(30,000 inhabitants) in
order to use wood and
wood waste
5
98,000
490,000
ERUPT
Russian
Federation
Gas
conversion
of a power
station
Transformation of a
6
section of the existing
coal fired power station
(electricity and heat mix
for municipal heating)
in Amursk in Siberia for
conversion to natural gas
507,000 t
in 2006
600,000 t
in 2012
ERUPT
Estonia
Wind farm
Farm of twenty-two
7
50.6-MW wind generators
on the south of the gulf
of Finland replacing coalfired power stations
160,000
1,130,000
ERUPT
Romania
Hydro power
station
Restoration/modernization 5
of 4 turbines of the
Portile de Fier power
station on the Danube 22-MW total capacity
increase
127,000
636,000
ERUPT
Russian
Federation
Industry
Pulp and paper
5
manufacturing Kotlas-Koryazhama plant
- reduction of energy
losses by changing the
industrial process
90,000
450,000
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The Joint
Implementation
(JI) mechanism
Total
Observations
emission
reduction
(tCO2-eq)
over period
An exchange is expected
prior to 2008 using
Assigned Amount units
81
Annexes
5. Transition periods for the implementation
of the Community legislation
The information provided below can be found
on the Web site of the European Commission:
http://europa.eu.int/comm/enlargement/negotiations/chapters/chap22/index.htm. It briefly presents the transitional arrangements with respect
to the Community acquis the candidate States
negotiated for Chapter 22 (Environment).
For more detailed information, please refer to
the French version of Volume C, pages 82-86.
For further information on other chapters, you
may also refer to:
http://europa.eu.int/comm/enlargement/negotiations/chapters/index.htm.
> LATVIA
●
Emissions of volatile organic compounds from
storage of petrol until 2008;
●
Recovery and recycling of packaging waste
until 2007;
●
Landfill of waste until 2004;
●
Treatment of urban waste water until 2015;
●
Quality of drinking water until 2015;
●
Integrated pollution and prevention control
until 2010 (instead of 2007 for Member States);
●
Storage of asbestos waste until 2004;
●
Health protection of individuals against ionising radiation in relation to medical exposure
until 2005.
> CYPRUS
●
Recovery targets of packaging waste until 2005;
●
Air pollution from large combustion plants,
special provisions;
●
●
A one-year derogation on sulphur content of
certain liquid fuels, provided by the directive.
> CZECH REPUBLIC
●
until 2005;
●
●
Air pollution from large combustion plants
until 2007.
> ESTONIA
> LITHUANIA
●
●
until 2006;
●
●
until 2015.
> MALTA
●
●
until 2009, beverage packaging until 2007;
●
●
Treatment of urban waste water until March
2007;
●
Landfill of oil shale until 2009;
●
●
●
●
Discharges of dangerous substances into surface water until March 2007;
●
until 2015;
●
●
Strict protection of lynx, special provision.
Protection of wild birds, use of clap-nets for
capture of seven finch species in order to establish a captive breeding system until 2008;
●
until 2005.
> HUNGARY
> POLAND
●
until 2005;
●
Sulphur content of liquid fuels until 2006;
●
●
●
until 2004;
●
●
Incineration of hazardous waste until 2005.
until 2007;
82
VOLUME
●
Waste landfills until 2012 (instead of 2009 for
Member States);
●
until 2007;
●
Shipment of waste until 2007;
●
●
●
●
Discharges of dangerous substances into surface water until 2007;
Discharges of dangerous substances into surface water until 2006;
●
Integrated pollution prevention control until
2011;
●
until 2007;
●
Incineration of hazardous waste until 2006.
●
●
●
Integrated pollution prevention and control
until 2010 (instead of 2007 for Member States);
until 2017;
Health protection of individuals against ionising radiation in relation to medical exposure
until 2006.
> SLOVAKIA
●
> SLOVENIA
●
until 2007;
●
●
Integrated pollution prevention and control
until 2011 (instead of 2007 for Member States).
83
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Annexes
6. Conversion tables
calculation tools. The project developer might in
particular find useful information in the calculation tool “Calculating CO2 emissions from stationary
combustion”;
The following tables are intended to enable project
developers to quickly assess, as a first screening, the
potential of emission reductions of a project. The
figures provided are only indicative.
http://www.iea.org/statist/calcul.htm: a unit converter;
To carry out a more extensive evaluation, the
project developer will find further information
on the following Websites:
●
http://www.bp.com/files/16/statistical_review_
1612.pdf: conversion factors are provided in the
Statistical Review of World Energy 2003.
●
http://www.ghgprotocol.org/standard/tools.htm:
to download sector-specific GHG emissions
●
Multiples
GHG
GWP
CO2
CH4
N2O
SF6
PFCs
HFCs
1
21
310
23,900
6,500 to 9,200
140 to 11 700
Volume
1 cubic meter (m3)
k
1,000
M
1,000,000
Giga
G
1, 000,000 ,000
Tera
T
1,000,000,000,000
L
Mass
kg
1,000
1 metric ton (t)
1,000
(ft3)
28.32
1 pound (lb)
0.454
1 US gallon (gal)
3.79
1 US barrel (bl)
159
1 cubic foot
Energy
kWh
J
cal
1 watthour(Wh)
0.001
3,600
860
1 megawatthour (MWh)
1 000
3,600,000,000
860,000,000
1 gigajoule (GJ)
278
1,000,000,000
329,000,000
1 000 000 BTU
293
1,055,000,000
252,000,000
1 ton oil equivalent (toe)
11 630
41,868,000,000
10,000,000,000
LHV
(GJ / m3)
kg CO2/GJ (LHV)
Natural gas
0.04
55
LPG
24
65
34
69
Fuel
Gasoline
84
Kilo
Mega
LHV
(GJ / ton)
45
kg CO2/ton
kg CO2/m3
2
3,150
1,550
2,350
Diesel oil
42
36
74
3,100
Fuel oil
41
37
75
3,100
2,700
2,600
Coal
23
95
2,200
Lignite
14
100
1,400
Wood and wood waste
19
100
1,900
VOLUME
The Joint
Implementation
(JI) mechanism
7. Clean Development Mechanism Project
Design Document
> NOTE
The virgin Clean Development Mechanism
Project Design Document (PDD), as elaborated
by the United Nations Framework Convention
on Climate Change, is presented below in digest
form. The Joint Implementation Project Design
Document will be drafted by the Supervisory
Committee, based on the work and experience of
the CDM Executive Board.
The document, once adapted to JI, will have to be
filled in and transmitted to the project stakeholders (Independent Entity, Designated Focal Point,
Supervisory Committee…). It is available at:
http://cdm.unfccc.int/Reference/Documents
Clean Development Mechanism - Project Design Document (CDM-PDD)
Version 01 (in effect as of: 29 August 2002)
Introductory Note
1. This document contains the clean development mechanism project design document (CDM-PDD). It
elaborates on the outline of information in Appendix B “Project Design Document” to the Modalities and Procedures (decision 17/CP.7 contained in document FCCC/CP/2001/13/Add.2).
2. The CDM-PDD can be obtained electronically through the UNFCCC CDM web site (http://unfccc.int/cdm),
by e-mail (cdm-info@unfccc.int) or in printed from the UNFCCC secretariat (Fax: +49-228-8151999).
3. Explanations for project participants are in italicized font.
4. The Executive Board may revise the project design document (CDM-PDD), if necessary. Revisions shall not
affect CDM project activities validated at and prior to the date at which a revised version of the CDM-PDD
enters into effect. Versions of the CDM-PDD shall be consecutively numbered and dated.
5. In accordance with the CDM M&P, the working language of the Board is English. The CDM-PDD shall
therefore be submitted to the Executive Board filled in English. The CDM-PDD format will be available on the
UNFCCC CDM web site in all six official languages of the United Nations.
6. The Executive Board recommends to the COP (COP/MOP) to determine, in the context of its decision on
modalities and procedures for the inclusion of afforestation and reforestation activities in the CDM (see
also paragraph 8-11 of decision 17/CP.7), whether the CDM-PDD shall be applicable to this type of activities
or whether modifications are required.
7. A glossary of terms may be found on the UNFCCC CDM web site or from the UNFCCC secretariat by e-mail
(cdm-info@unfccc.int) or in print (Fax: +49-228-815 1999).
Contents
A.
General description of project activity
B.
Baseline methodology
C.
Duration of the project activity / Crediting period
D.
Monitoring methodology and plan
E.
Calculations of GHG emissions by sources
F.
Environmental impacts
G.
Stakeholders comments
C
Annexes
Annex 1: Information on participants in the project activity
Annex 2: Information regarding public funding
Annex 3: New baseline methodology
Annex 4: New monitoring methodology
Annex 5: Table: Baseline data
85
Annexes
A. General description of project activity
A.1
Title of the project activity
A.2.
Description of the project activity
(Please include in the description
- the purpose of the project activity
- the view of the project participants of the contribution of the project activity to sustainable development
(max. one page).)
A.3.
Project participants
(Please list Party(ies) and private and/or public entities involved in the project activity and provide contact
information in Annex 1.)
(Please indicate at least one of the above as the contact for the CDM project activity.)
A.4.
Technical description of the project activity
A.4.1. Location of the project activity
A.4.1.1
Host country Party(ies)
A.4.1.2 Region/State/Province etc.
A.4.1.3 City/Town/Community etc.
A.4.1.4 Detail on physical location, including information allowing the unique identification of this project activity (max one page)
A.4.2. Category(ies) of project activity
(Using the list of categories of project activities and of registered CDM project activities by category available
on the UNFCCC CDM web site, please specify the category(ies) of project activities into which this project activity falls. If no suitable category(ies) of project activities can be identified, please suggest a new category(ies)
descriptor and its definition, being guided by relevant information on the UNFCCC CDM web site.)
A.4.3. Technology to be employed by the project activity
(This section should include a description on how environmentally safe and sound technology and know-how
to be used is transferred to the host Party, if any.)
A.4.4. Brief explanation of how the anthropogenic emissions of anthropogenic greenhouse gas
(GHGs) by sources are to be reduced by the proposed CDM project activity, including why the
emission reductions would not occur in the absence of the proposed project activity, taking
into account national and/or sectoral policies and circumstances
(Please explain briefly how anthropogenic greenhouse gas (GHG) emission reductions are to be achieved (detail
to be provided in section B.) and provide the total estimate of anticipated reductions in tonnes of CO2 equivalent as determined in section E. below.)
A.4.5. Public funding of the project activity
(In case public funding from Parties included in Annex I is involved, please provide in Annex 2 information on
sources of public funding for the project activity, including an affirmation that such funding does not result in
a diversion of official development assistance and is separate from and is not counted towards the financial
obligations of those Parties.)
B. Baseline methodology
B.1
Title and reference of the methodology applied to the project activity
(Please refer to the UNFCCC CDM web site for the title and reference list as well as the details of approved
methodologies. If a new baseline methodology is proposed, please fill out Annex 3. Please note that the table
“Baseline data” contained in Annex 5 is to be prepared parallel to completing the remainder of this section.)
B.2.
Justification of the choice of the methodology and why it is applicable to the project activity
B.3.
Description of how the methodology is applied in the context of the project activity
B.4.
Description of how the anthropogenic emissions of GHG by sources are reduced below those that
would have occurred in the absence of the registered CDM project activity
(i.e. explanation of how and why this project is additional and therefore not the baseline scenario)
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B.5.
B.6.
Description of how the definition of the project boundary related to the baseline methodology is
applied to the project activity
Details of baseline development
B.6.1 Date of completing the final draft of this baseline section (DD/MM/YYYY)
B.6.2 Name of person/entity determining the baseline:
(Please provide contact information and indicate if the person/entity is also a project participant listed in
Annex 1.)
C. Duration of the project activity/Crediting period
C.1
Duration of the project activity
C.1.1. Starting date of the project activity
(For a definition by the Executive Board of the term “starting date,” please refer to UNFCCC CDM web site. Any
such guidance shall be incorporated in subsequent versions of the CDM-PDD. Pending guidance, please indicate
how the” starting date” has been defined and applied in the context of this project activity.)
C.1.2. Expected operational lifetime of the project activity: (in years and months, e.g. two years and
four months would be shown as: 2y-4m)
C.2
Choice of the crediting period and related information
(Please underline the appropriate option (C.2.1 or C.2.2.) and fill accordingly.)
(Note that the crediting period may only start after the date of registration of the proposed activity as a CDM
project activity. In exceptional cases, the starting date of the crediting period can be prior to the date of registration of the project activity as provided for in paras. 12 and 13 of decision 17/CP.7 and through any guidance
by the Executive Board, available on the UNFCCC CDM web site.)
C.2.1. Renewable crediting period (at most seven (7) years per period)
C.2.1.1.
Starting date of the first crediting period (DD/MM/YYYY)
C.2.1.2. Length of the first crediting period (in years and months, e.g. two years and four
months would be shown as: 2y-4m)
C.2.2. Fixed crediting period (at most ten (10) years)
C.2.2.1.
Starting date (DD/MM/YYYY)
C.2.2.2. Length (max 10 years): (in years and months, e.g. two years and four months would
be shown as: 2y-4m)
D. Monitoring methodology and plan
(The monitoring plan needs to provide detailed information related to the collection and archiving of all relevant data needed to:
- estimate or measure emissions occurring within the project boundary;
- determine the baseline; and;
- identify increased emissions outside the project boundary.
The monitoring plan should reflect good monitoring practice appropriate to the type of project activity. Project participants shall implement the registered monitoring plan and provide data, in accordance with the
plan, through their monitoring report.
Operational entities will verify that the monitoring methodology and plan have been implemented correctly
and check the information in accordance with the provisions on verification.This section shall provide a detailed
description of the monitoring plan, including an identification of the data and its quality with regard to accuracy, comparability, completeness and validity, taking into consideration any guidance contained in the methodology.
Please note that data monitored and required for verification and issuance are to be kept for two years after
the end of the crediting period or the last issuance of CERs for this project activity, whatever occurs later.)
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Annexes
D.1.
Name and reference of approved methodology applied to the project activity
(Please refer to the UNFCCC CDM web site for the name and reference as well as details of approved methodologies. If a new methodology is proposed, please fill out Annex 4.)
(If a national or international monitoring standard has to be applied to monitor certain aspects of the project
activity, please identify this standard and provide a reference to the source where a detailed description of the
standard can be found.)
D.2.
Justification of the choice of the methodology and why it is applicable to the project activity
D.3.
Data to be collected in order to monitor emissions from the project activity, and how this data will
be archived:
(Please add rows to the table below, as needed.)
ID number
Data
Data
(Please use
type
variable unit
Data
Measured
Recording
Proportion
How will
For how long
(m),
frequency
of data
the data
is archived
numbers to
calculated
to be
be archived?
data to be
ease cross-
(c) or
monitored
(electronic/
kept?
referencing
estimated
to table D.6)
(e)
D.4.
Comment
paper)
Potential sources of emissions which are significant and reasonably attributable to the project
activity, but which are not included in the project boundary, and identification if and how data
will be collected and archived on these emission sources.
ID number
Data
Data
(Please use
type
variable unit
Data
Measured
Recording
Proportion
How will
For how long
(m),
frequency
of data
the data
is archived
numbers to
calculated
to be
be archived?
data to be
ease cross-
(c) or
monitored
(electronic/
kept?
referencing
estimated
to table D.6)
(e)
D.5.
Comment
paper)
Relevant data necessary for determining the baseline of anthropogenic emissions by sources of GHG
within the project boundary and identification if and how such data will be collected and archived.
(Depending on the methodology used to determine the baseline this table may need to be filled. Please add rows
to the table below, as needed.)
ID number
Data
Data
(Please use
type
variable unit
Data
Measured
Recording
Proportion
How will
For how long
(m),
frequency
of data
the data
is archived
numbers to
calculated
to be
be archived?
data to be
ease cross-
(c) or
monitored
(electronic/
kept?
referencing
estimated
to table D.6)
(e)
D.6.
Comment
paper)
Quality control (QC) and quality assurance (QA) procedures are being undertaken for data monitored. (Data items in tables contained in section D.3., D.4. and D.5 above, as applicable.)
Data
Uncertainty level of data
Are QA/QC procedures
Outline explanation why
(Indicate table and
(High/Medium/Low)
planned for these data?
QA/QC procedures are or are
ID number e.g. 3.-1; 3.-2.)
88
not being planned.
VOLUME
D.7
Name of person/entity determining the monitoring methodology
(Please provide contact information and indicate if the person/entity is also a project participant listed in
Annex 1 of this document.)
E. Calculation of GHG emissions by sources
E.1
Description of formulae used to estimate anthropogenic emissions by sources of greenhouse gases
of the project activity within the project boundary
(for each gas, source, formulae/algorithm, emissions in units of CO2 equivalent)
E.2
Description of formulae used to estimate leakage, defined as: the net change of anthropogenic
emissions by sources of greenhouse gases which occurs outside the project boundary, and that is
measurable and attributable to the project activity
E.3
The sum of E.1 and E.2 representing the project activity emissions
E.4
Description of formulae used to estimate the anthropogenic emissions by sources of greenhouse
gases of the baseline
E.5
Difference between E.4 and E.3 representing the emission reductions of the project activity
E.6
Table providing values obtained when applying formulae above
F. Environmental impacts
F.1.
Documentation on the analysis of the environmental impacts, including transboundary impacts
(Please attach the documentation to the CDM-PDD.)
F.2.
If impacts are considered significant by the project participants or the host Party
(Please provide conclusions and all references to support documentation of an environmental impact assessment that has been undertaken in accordance with the procedures as required by the host Party.)
G. Stakeholders comments
G.1.
Brief description of the process on how comments by local stakeholders have been invited and
compiled
G.2.
Summary of the comments received
G.3.
Report on how due account was taken of any comments received
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Annexes
Annex 1 - Contact Information On Participants In The Project Activity
(Please copy and paste table as needed)
Organization:
Street/P.O.Box:
Building:
City:
State/Region:
Postfix/ZIP:
Country:
Telephone:
FAX:
E-Mail:
URL:
Represented by:
Title:
Salutation:
Last Name:
Middle Name:
First Name:
Department:
Mobile:
Direct FAX:
Direct tel:
Personal E-Mail:
Annex 2 - Information Regarding Public Funding
Annex 3 - New Baseline Methodology
The baseline for a CDM project activity is the scenario that reasonably represents the anthropogenic emissions by sources of greenhouse gases that would occur in the absence of the proposed project activity. A
baseline shall cover emissions from all gases, sectors and source categories listed in Annex A of the Kyoto
Protocol within the project boundary. The general characteristics of a baseline are contained in para. 45 of
the CDM M&P.
(For guidance on aspects to be covered in the description of a new methodology, please refer to the UNFCCC
CDM web site.
Please note that the table “Baseline data” contained in Annex 5 is to be prepared parallel to completing the
remainder of this section.)
1.
Title of the proposed methodology
2.
Description of the methodology
2.1. General approach (Please check the appropriate option(s))
Existing actual or historical emissions, as applicable;
Emissions from a technology that represents an economically attractive course of action,
taking into account barriers to investment;
90
VOLUME
The average emissions of similar project activities undertaken in the previous five years,
in similar social, economic, environmental and technological circumstances, and whose
performance is among the top 20 per cent of their category.
2.2. Overall description (other characteristics of the approach)
3.
Key parameters/assumptions (including emission factors and activity levels), and data sources considered and used
4.
Definition of the project boundary related to the baseline methodology
(Please describe and justify the project boundary bearing in mind that it shall encompass all anthropogenic
emissions by sources of greenhouse gases under the control of the project participants that are significant and
reasonably attributable to the project activity. Please describe and justify which gases and sources included in
Annex A of the Kyoto Protocol are included in the boundary and outside the boundary.)
5.
Assessment of uncertainties
(Please indicate uncertainty factors and how those uncertainties are to be addressed.)
6.
Description of how the baseline methodology addresses the calculation of baseline emissions and
the determination of project additionality
(Formulae and algorithms used in section E)
7.
Description of how the baseline methodology addresses any potential leakage of the project
activity
(Please note: Leakage is defined as the net change of anthropogenic emissions by sources of greenhouse gases
which occurs outside the project boundary and which is measurable and attributable to the CDM project
activity.)
(Formulae and algorithms used in section E.5)
8.
Criteria used in developing the proposed baseline methodology, including an explanation of how
the baseline methodology was developed in a transparent and conservative manner
9.
Assessment of strengths and weaknesses of the baseline methodology
10.
Other considerations, such as a description of how national and/or sectoral policies and circumstances have been taken into account
Annex 4 - New Monitoring Methodology
Proposed new monitoring methodology
(Please provide a detailed description of the monitoring plan, including the identification of data and its quality with regard to accuracy, comparability, completeness and validity.)
1. Brief description of new methodology
(Please outline the main points and give a reference to a detailed description of the monitoring methodology.)
2. Data to be collected or used in order to monitor emissions from the project activity, and how this data will
be archived
ID number
Data
Data
Data
(Please use
type
variable unit
Measured
Recording
Proportion
How will
For how long
(m),
frequency
of data
the data
is archived
numbers to
calculated
to be
be archived?
data to be
ease cross-
(c) or
monitored
(electronic/
kept?
referencing
estimated
to table D.6)
(e)
Comment
paper)
3. Potential sources of emissions which are significant and reasonably attributable to the project activity,
but which are not included in the project boundary, and identification if and how data will be collected
and archived on these emission sources
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Annexes
ID number
Data
Data
(Please use
type
variable unit
Data
Measured
Recording
Proportion
How will
For how long
(m),
frequency
of data
the data
is archived
numbers to
calculated
to be
be archived?
data to be
ease cross-
(c) or
monitored
(electronic/
kept?
referencing
estimated
to table D.6)
(e)
Comment
paper)
4. Assumptions used in elaborating the new methodology
(Please list information used in the calculation of emissions which is not measured or calculated, e.g. use of any
default emission factors.)
5. Please indicate whether quality control (QC) and quality assurance (QA) procedures are being undertaken
for the items monitored.
(See tables in sections 2 and 3 above.)
Data
Uncertainty level of data
Are QA/QC procedures
Outline explanation why
(Indicate table and
(High/Medium/Low)
planned for these data?
QA/QC procedures are or are
ID number e.g. 3.-1; 3.-2.)
not being planned.
6. What are the potential strengths and weaknesses of this methodology?
(Please outline how the accuracy and completeness of the new methodology compares to that of approved
methodologies.)
7. Has the methodology been applied successfully elsewhere and, if so, in which circumstances?
(After completing above, please continue filling sub-sections D.2. and following.)
Annex 5 - Table: Baseline Data
(Please provide a table containing the key elements used to determine the baseline (variables, parameters,
data sources etc.). For approved methodologies you may find a draft table on the UNFCCC CDM web site. For
new methodologies, no predefined table structure is provided.)
92
Document produced with the assistance of
and
Copyright© 2003 by Agence française de développement
5, rue Roland-Barthes – 75598 Paris cedex 12 – France
All rights reserved. No part of this publication may be reproduced by any means, either electronic or
mechanical, without permission in writing from Agence française de développement.
The design of the three volumes of the Guide, dedicated to the Kyoto Protocol
project mechanisms, was carried out under the aegis of the Interministerial Taskforce for Climate Change (Mission interministérielle de l’effet de serre, MIES)
(Philippe Meunier, Secretary-General) and the Economic and Trade Department
(Direction des relations économiques extérieures, DREE) of the Ministry of Economy,
Finance and Industry (Véronique Massenet, Environment Adviser to the Director),
with the support of the French Global Environment Facility (Fonds français pour
l’environnement mondial, FFEM) (Philippe Bosse, climate change expert).
The orientation and editorial content of the guide was supervised by a Steering
Committee composed of about twenty representatives from the French
administration:
– Ministry of Ecology and Sustainable Development: Ghislain Rieb, Marie-Claire
Lhenry, Emmanuel Martinez
– Ministry of Economy, Finance and Industry: Philippe Grisoni (DGEMP)
– Ministry of Foreign Affairs: Olivier Nicolas, Jean-Philippe Dufour (DGCID)
– Ministry of Agriculture, Food, Fishing and Rural Affairs: Alain Chaudron
– Agency for Environment and Energy Management: Aurélie Bernard,
Mathieu Wellhoff
and from the private sector :
– Entreprises pour l’Environnement: Patrick Nollet
– Club Ademe International: Jean-Claude Andreini
– CDC-Ixis: Céline Lauverjat
– Dalkia: Sophie Ducoloner
– EDF: Jean-Yves Caneill
– Gaz de France: Christine Faure-Fedigan
– Lafarge: Gaëlle Monteiller, Michel Picard
– Onyx: Cyril Coillot
– Total: Michel Fontaine
The guide was produced by a team of consultants, coordinated by Bernard
Meunier (Seed): Alexandre Marty and Benoît Leguet (Deloitte), Paul Soffe and
Véronique Bovée (EcoSecurities).
Furthermore, the guide benefited from the advice of experts, among others:
Jean-Jacques Becker (Ministry of Economy, Finance and Industry, and member of
the CDM Executive Board), Frederick Jeske (Treasury Department of the Ministry
of Economy, Finance and Industry), Cyril Loisel (ONF), Matthieu Wemaere
(Huglo-Lepage, formerly French national expert on secondment to the
Environment Directorate-General of the European Commission),
as well as observations and suggestions from representatives from international and/or non governmental organizations: Sibi Bonfils (Institut de l’énergie et
de l’environnement de la francophonie), Christophe Rynikiewicz and Raphaëlle
Gauthier (Réseau action climat, French affiliate of the Climate Action Network),
Hélène Connor (Hélio International), Mark Kenber and Liam Salter (WWF).
The preparation, publishing and distribution of this guide were financed
through the French Global Environment Facility (FFEM).
de l’Effet de Serre
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Mission Interministérielle
et du Développement Durable
20 avenue de Ségur
75302 Paris 07 SP
Tel. +33 1 42 19 20 21
Fax +33 1 42 19 10 43
http://www.effet-de-serre.gouv.fr
Ministère de l’Économie,
des Finances et de l’Industrie
Direction des Relations
Économiques Extérieures
139, rue de Bercy
75572 Paris cedex 12
Tel. +33 1 53 18 82 93
Fax +33 1 53 18 96 09
http://www.missioneco.org/dree/
Fonds Français
pour l’Environnement Mondial
5, rue Roland-Barthes
75598 Paris cedex 12
Tel. +33 1 53 44 42 42
Fax +33 1 53 44 32 48
http://www.ffem.net
Création et réalisation
Ministère de l'Ecologie

(JI) mechanism

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