Introduction to registry systems under Article 7.4 of the Kyoto Protocol Pre-sessional consultations on registries Bonn, 2-3 June 2002 Andrew Howard UNFCCC secretariat ahoward@unfccc.int Technical presentation of text Relatively new text in its current form Elements brought together from other texts in the CNT

Scope of presentation Kyoto Protocol compliance Registry system requirements - registry structures - transactions - features for integrity and transparency Based on document FCCC/CP/2001/13/Add.2: Decision 19/CP.7 on Article 7.4 (pages 55-72) Para numbers in this presentation refer to this decision Decision 17/CP.7 on the CDM (see pages 41-43 on the CDM registry) Scope is the parts of the Article 7.4 text conceptual elaboration of AA modalities – from Art7 registries are their operationalisation – from mechs C&A is database and reports for summarising emission and AA data – for the compliance assessment – from Art8 Doc references Presentation represents current texts (no dec 5/CP.6) These could change in future, but this is current stance

Compliance with Kyoto Protocol targets Emissions Target Annex B target Party B is a net seller … Party A is a net buyer … Sink additions Mechanisms subtractions Mechanisms additions Sink additions Annex B target Target Emissions

Accounting units (paras 1-4) All units denominated as 1 tonne of CO2 equivalent: Assigned amount unit (AAU) Based on the Annex B target (Articles 3.7/8) AAU Removal unit (RMU) Based on carbon sequestration in sinks (Articles 3.3/4) RMU ERU Emission reduction unit (ERU) converted from AAUs or RMUs as a result of JI projects Part II of the Art 7.4 text Registries section is the operationalisation of concepts First the units …. AAUs are the first units issued into a registry by the Party ERUs arise from emission reductions through JI projects CERs arise from emission reductions through CDM projects All units = 1 tonne CO2 equivalent Units can move between Parties / legal entities Concerned about integrity of system. Why? (someone transfers unit twice, units transferred that don’t exist) Discrepancies could arise – similar problems faced by other systems of exchange – eg banks, stockmarkets Solution: accounting system similar to banking system CER Certified emission reduction (CER) issued into the CDM registry as a result of CDM projects

Tracking the units through the registry system Transaction log (operated by the secretariat) Transactions ERU AAU CER National registries (operated by Annex I Parties) Annex I Bulgaria Russia Annex I Canada Germany CDM registry (operated by the executive board) Similar system to that used by banks AIPs have national registries – duplicated/compatible Have different kinds of account – held by Party and LEs Can do transactions between a/cs – in or between registries Also a CDM registry on behalf of NAIPs for CDM needs, operated by the executive board EB issues CERs transfers of CERs to AIP registries Transaction log another computer which monitors transactions as they are proposed and implemented Unit held in only one account at a time 3 components of registry system need to be (a) electronic and (b) standardized sufficiently to be compatible A registry is a standardized electronic database for recording and tracking of units (ERUs, CERs, AAUs and RMUs) (para 19)

National registry account types (para 21) Canada Held by the government Party account Held by companies, organizations or individuals (if authorized by the Party) Legal entity a/c Units transferred here to count towards compliance Retirement a/c Units transferred here to compensate for net emissions from sinks or to strengthen targets Cancellation a/c

AAU and RMU issuance (paras 23 and 25) Calculation of assigned amount (Articles 3.7/8) AAU Bulgaria Party account Legal entity A Legal entity B Retirement a/c Cancellation a/c Calculation of net sequestration (subject to limits!) (Articles 3.7/8) RMU Consider several basic functions of registries Initial filling of national registry on the basis of AA-3.7/8 Party A issues AAUs into accounts in its registry each registry has many accounts (for Party or legal entities) and issuance can occur into any of them

Transfers and acquisitions under emissions trading (para 30) Canada Party account Legal entity A Legal entity B Germany CER RMU ERU AAU Once units are in a registry … can be transferred from account to account domestically internationally Current text says that AAUs, ERUs and CERs may be transferred or acquired in this manner

Retirement and carry-overs (paras 34 and 36) Unused units carried-over in holding accounts to the next commitment period (paras 36) Russia Party account Legal entity A Legal entity B Retirement a/c Retirement (para 34) RMU CER ERU AAU Compliance assessment Units in retirement account > = < Retirement: AA set aside for compliance purposes transferred into a retirement account by Party or legal entity At end CP, units in retirement account used for Party’s compliance assessment comparison against emissions during CP Retired units can’t be transferred back out of the retirement account (may need provision for if not needed for compliance) After compliance assessment, units that weren’t required can be carried over into the next CP Emissions 2008 to 2012 Units in retirement accounts not transferable

(conversion of AAUs to ERUs) ERU issuance (para 29) Russia Party account Legal entity A Legal entity B Retirement a/c Cancellation a/c Germany Party account Legal entity A Legal entity B Retirement a/c Cancellation a/c JI project (conversion of AAUs to ERUs) Verification by host Party (track 1) or independent procedure (track 2) AAU ERU ERU Look at a JI project Party C implements a project in Party A Leads to emission reductions verified under Art 6 rules Party A takes AAUs equal to the emission reduction converts them into ERUs transfers them to an account in Party C No new unit created Only conversion of an old AAU into a new ERU (later: serial number links new ERU to old AAU)

CER issuance (into the CDM registry) Participants’ request CER CDM registry Pending account Share of proceeds (for adaptation and admin costs) Bolivia account India account Canada Party account Legal entity A Legal entity B Retirement a/c Cancellation a/c CER CDM project Certification of emission reductions by an operational entity For CDM projects Party D implements a CDM project in an NAIP emission reductions certified under Art 12 rules CERs issued by EB into pending account of CDM registry share of proceeds moved to another account (to help NAIPs with adaptation and cover admin costs of CDM) remainder of CERs distributed to accounts of project participants in accordance with distribution agreement

Cancellation of units to strengthen targets (para 33) Party account Legal entity A Legal entity B Retirement a/c Cancellation a/c Germany What: Cancelled units are removed from the system and cannot be used for compliance Who: schools, NGOs, individuals, etc RMU CER ERU AAU Units in cancellation accounts may not be transferred or retired Final function … Another cancellation specific removal of units from system so that they cannot be used for compliance purposes by the Party strengthens Art 3.1 target for that Party eg. school, NGO As before for cancellation due to Art 3.3/4 activities … Cancelled units can’t be transferred or retired

Features for integrity and transparency --------------------------> to keep track of the units -------------------------> to identify the accounts -----> to ensure the integrity of transactions -----------------> to maintain transparency serial numbers account numbers the transaction log accessible information Returning to need for integrity in the system … Design features in registry …

Unique serial numbers for units (para 24, 27 and 29) AAU 01 CH 1 0 314782 000 RMU 01 CA 2 3 003752 000 ERU 01 PL 3 0 078625 033 CER 01 BO 4 0 047691 046 Commitment period Party of origin Unit type LULUCF activity Unique number Project number Serial numbers … each unit has a unique one can follow a unit as it moves between accounts/registries AAU example consecutive number makes this AAU unique for this Party ERU example project identifier this links ERU to a specific project project info on registry of Party hosting the project CER example Art 7.4 text gives elements, not order or formats Number formats are not yet specified - these are examples only

Account numbers (para 22) Party account Legal entity A Legal entity B Retirement a/c Cancellation a/c Canada Unique number Party CA 001 CA 002 CA 003 CA 485 CA 486 Similarly, each account has a number But simpler Party whose registry it is unique number

Message exchange: International transfer (para 38-43) Proposal 1 Transaction record containing: - trans. number - trans. type - serial numbers - account numbers Instruction / transfer 3 Account in national registry of Party A Account in national registry of Party B Proposal response 2 Confirmation 4 Transaction log (automated checks)

Message exchange: Domestic issuance (para 38-43) Account in national registry of Party A Proposal 1 Transaction record containing: - trans. number - trans. type - serial numbers - account numbers Proposal response 2 Confirmation 4 Transaction log (automated checks)

Potential discrepancies (para 42) The transaction log conducts automated checks for: units improperly issued or duplicated units units previously retired/cancelled units not carried over from the previous commitment period eligibility of Parties / legal entities infringements on the commitment period reserve infringements on the limits for carbon sequestration The transaction log ensures the integrity of all transactions Each unit is held in one account at a time What possible discrepancies is the TL checking for?

Publicly accessible information (paras 44-48) Account information (account type, holder, representative, etc) JI and CDM project information (on national registries and the CDM registry respectively) - name - location - reports / documentation Information on holdings and transactions, including on cancellations and retirements List of legal entities authorized by the Party (national registries) Each national registry and the CDM registry to have: interface to allow public access to info a searchable website?

Registries development beyond COP7 Technical standards on the exchange of data between national registries, the CDM registry and the transaction log … a decision at COP 8 (Nov 2002) … before 1 Jan 2007 Establishment of national registries by Annex I Parties … interim registry by COP 8? Establishment of the CDM registry by the CDM executive board Technical standards to enable data exchange needed for development of nat. regs, CDM reg. and TL (the standardized elements) need COP adoption? then adopt at COP8? National registries AIP to develop some AIPs already advanced for domestic trading (these should be compatible with international system) CDM registry and TL secretariat to develop? issuances under CDM prompt start as early as 2003 3 components need parallel development (compatible) Process for cooperation and exchange (AIP, sec, NAIPs) … completed by COP 10 (Nov 2004) Establishment of the transaction log by the secretariat

Introduction to registry systems under Article 7.4 of the Kyoto Protocol www.unfccc.int Andrew Howard UNFCCC secretariat ahoward@unfccc.int