JISC work regarding criteria for baseline setting and monitoring UNFCCC Technical Workshop on Joint Implementation 9 March 2006, Bonn Olle Björk, Ministry of Sustainable Development

Introduction The decision on implementation of Article 6 of the Kyoto Protocol adopted by COP/MOP 1 requests JISC to: “..develop, as soon as possible, guidance with regard to the guidelines for the implementation of Article 6 of the Kyoto Protocol Appendix B on “Criteria for baseline setting and monitoring”, including provisions for small-scale projects as defined in paragraph 6 (c) of decision 17/CP.7…”

Time frame Public input before JISC 02 Presentations at JI technical workshop Discussion (incl. early mover projects) at JISC 02 Adoption of guidance at JISC 04 (Draft work programme of the JI Supervisory Committee)

Public input ECON Norway Carboncredits.nl - SenterNovem The World Bank IETA Danish Environmental Protection Agency TÜV Rheinland Group CARBON GmbH, Austria Reforest The Tropics, Inc Public input has been received from a number of organisations and individials ECON/BASREC has submitted the Basrec JI handbook– DEBBIE ANGER INTE ATT SUBMISSION KOMMER FRÅN ECON. DET ENDA SOM FINNS ÄR HENNES EGET NAMN Carboncredits.nl/SenterNovem of NL have submitted material related to the ERUPT guidelines for JI baseline and monitoring plans World Bank’s Carbon Finance Unit IETA Danish Environmental Protection Agency TÜV Rheinland Group, Germany CARBON GmbH, Austria Reforest The Tropics, Inc. This input relates to small-scale reforestation projects but may be of limited applicability since it deals specifically with projects in Tropical countries

Relevant requirements for the determination of JI projects The reduction in anthropogenic greenhouse gases (GHG), or enhancement of removals by sinks, provided by JI projects should be additional to any that would otherwise occur (Article 6.1(a) of Kyoto Protocol) For track one projects, the host country must assess whether a project meets the relevant criteria For track two projects Independent Entities will determine if a project meets the relevant criteria The determination of baseline scenarios for Joint Implementation (JI) projects must take place in accordance with the relevant legal texts in the Kyoto Protocol, the Marrakech Accords, and the decisions of COP/MOP-1. Important implication of these texts: According to Article 6.1(a) of the Kyoto Protocol, the reduction in anthropogenic greenhouse gases (GHG), or enhancement of removals by sinks, provided by JI projects should be additional to any that would otherwise occur For track one projects, the host country must assess whether a project meets the relevant criteria. For track two projects Independent Entities will determine if a project meets the relevant criteria. The verification of reductions from a JI project by an Independent Entity shall occur under the verification procedure under JI Supervisory Committee which is specified in Appendix B of the “Guidelines for the implementation of Article 6 of the Kyoto Protocol”

The JI baseline “..the scenario that reasonably represents the anthropogenic emissions by sources or anthropogenic removals by sinks of greenhouse gases that would occur in the absence of the proposed project” (Decision 16/CP.7, Appendix B, paragraph 1) - Appendix B of the “Guidelines for the implementation of Article 6 of the Kyoto Protocol” defines the baseline for JI projects as ‘the scenario that reasonably represents the anthropogenic emissions by sources or anthropogenic removals by sinks of greenhouse gases that would occur in the absence of the proposed project’ Appendix B of the JI Guidelines specifies further criteria for baselines, these are shown on the next slide

Further detailed baseline criteria in the JI guidelines A baseline shall be established: On a project-specific basis and/or using a multi-project emission factor; In a transparent manner with regard to the choice of approaches, assumptions, methodologies, parameters, data sources and key factors; Taking into account relevant national and/or sectoral policies and circumstances; In such a way that ERUs cannot be earned for decreases in activity levels outside the project or due to force majeure; Taking account of uncertainties and using conservative assumptions (Decision 16/CP.7, Appendix B, paragraph 1) Appendix B of the JI Guidelines states that a baseline for a JI project shall be established: On a project-specific basis and/or using a multi-project emission factor; In a transparent manner with regard to the choice of approaches, assumptions, methodologies, 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 or due to force majeure; Taking account of uncertainties and using conservative assumptions The SenterNovem submission includes the ERUPT guidelines for project design documents of JI projects. In an accompanying memo the applicability of those guidelines are tested against these detailed criteria. It is shown that the guidelines meet the criteria.

Applying CDM rules to JI Methodologies for baselines and monitoring approved by the CDM EB may be applied under JI (Decision on implementation of Article 6 of the Kyoto Protocol, para 4(a)) Many project participants are currently applying existing CDM rules for JI projects BUT, as public submissions point out: Unlike a CER, an ERU is part of a country’s assigned amount and will not increase the overall cap on emissions COP/MOP 1 decided that methodologies for baselines and monitoring approved by the CDM EB may be applied under JI. Many project participants are currently applying existing CDM rules for JI projects. Currently, many project participants are applying existing CDM rules for JI projects In submissions, one important difference between JI and CDM is pointed out (World Bank, ECON/BASREC): - Unlike a CER, an ERU is part of a country’s assigned amount and will not increase the overall cap on emissions. Annex 1 countries hosting JI project activities have an interest in ensuring that the emission baselines are not inflated, as this would lead to an over-reduction of the host country’s assigned amount units. The JI Supervisory Committee is encouraged to take this important aspect into account when developing guidance criteria for baseline setting and monitoring.

Comparing baseline criteria for JI and CDM (I) Similarities: Must meet criteria for baseline setting, monitoring and additionality Must do so in a transparent and conservative manner

Comparing baseline criteria for JI and CDM (II) Distinctive differences: Under JI there is no requirement for development of methodologies Under the JI there is more flexibility in developing standardised baselines Methodological considerations received through public input Sectoral baseline studies regarding on- and off-grid electricity, district heating in Eastern Europe and Russia received Countries play a greater role in JI baseline work Participating countries required to establish national guidelines for project approval Particularly with respect to standardised baselines There are also several distinct differences - There is only one reference to the word ”methodology” in the JI guidelines (paragraph 40 which states that “….the baseline methodology and it application cannot be considered as proprietary or confidential”) - Under the JI there is more flexibility in developing standardised baselines. Recall from a previous slide that multi-project emissions factors are allowed. This should allow projects to be established using standardised methods such as sectoral baselines. If sector-wide baselines were used in JI, the baseline would represent a quantification of emissions that can represent the baseline emissions for any project in that sector. This can be applied where the physical characteristics of the sector lead to a standard emissions factor applicable across the sector. Eg in the case of an integrated electricity network with no major transmission constraints where the physical characteristics of the system imply that the impact on emissions is the same (per unit of electricity) wherever electricity is generated. Submissions elaborate on the possibilities of multi-project baselines in JI. E.g. ECON has submitted a “BASREC JI handbook” discussing methodological considerations related to baseline development under JI. Several examples of sectoral baselines are discussed in the context of on-grid and off-grid electricity production and and district heating production in NW Russia. The ERUPT Guidelines submitted by SenterNovem also contain multi-project baseline values for grid-connected projects in the electricity sectors in several Central and Eastern European countries. - A further difference is that countries participating in JI are required to establish national guidelines for project approval. Countries will thus play a greater role in developing what under the CDM would be termed methodologies, particularly in cases where standardised baseline approaches are developed.

Further points from public input Strong support for the development of multi-project or sectoral baselines and simplified procedures Utilise the CDM EB work to broaden the applicability of approved baseline and monitoring methodologies Early movers should not have to go through a lenghty process a second time - Several submissions support the development of multi-project or sectoral baselines and simplified procedures and criteria for JI projects (Danish Environmental Protection Agency, SenterNovem, ECON) - It is also pointed out in submissions that the work of the the CDM EB to broaden the applicability of approved baseline and monitoring methodologies could serve as a building blocks for the JI supervisory committee work on development of criteria. - Submissions (World Bank) also emphasise that it is important to recognize early start JI projects – that is, projects that have been pre-validated, and approved by the relevant Parties in anticipation of the operationalisation of JI Track 2. For these early start projects, it would be desirable that: There would be no need to re-format JI documents such as project design documents and baseline studies, as long as: The PDD has been made publicly available for stakeholder comments for a period of 30 days The independent entity would re-issue its Determination Report, reconfirming determination findings and make it public through the UNFCCC Secretariat.

Assessment of additionality under JI Ensure that emission reductions are not counted under other mechanisms Approaches for additionality assessment of track two projects: JISC may approve a CDM-style additionality tool approved JISC may opt to favour the use of any additionality tests supplied by host countries Technology-specific additionality Type of baseline: Project-specific baseline – case by case assessment Sector-wide baseline – criteria in the baseline could determine additionality As alreadey stated, according to the Kyoto Protocol and the JI guidelines, JI projects must generate emissions reductions that are additional to any that would otherwise occur. Beyond that, there is very little guidance related to additionality testing and JI projects. An important difference compared with CDM is, as I already mentioned, that unlike a CER, an ERU is part of a country’s assigned amount and will not increase the overall cap on emissions - but measures will need to be taken to ensure that JI project emissions reductions are not counted under other mechanisms for example, included in any emissions trading scheme. - For track two projects, an Independent Entity assesses the additionality. The assessment of additionality in track two projects would be dependent on the approach taken by the Supervisory Committee. Two approaches are possible: An additionality tool similar to that of the CDM Executive board could be adopted. A simplified version based on the CDM additionality tool could be developed The use of any additionality tests supplied by host countries in their national guidelines and procedures for the approval of JI projects. A project could be determined additional if it builds upon one of several declared technologies - Assessment of additionality will also be affected by the type of baseline used. If a project-specific baseline approach is used by a project then that project will have to determine whether the emissions reduced or sequestered are additional on a case-by-case basis. If a top-down approach such as sector-wide baselines is used, then additionality could be automatically determined through meeting requirements specified within the baseline limiting the need for any further assessment

Monitoring Public input: Calls for clear guidance on the minimum level of monitoringf Encourages simplified monitoring plans Requests guidance on the issue of re-determination of monitoring plan upon improvement of the plan - The JI Supervisor Committee is encouraged to provide clear guidance on the minimum level of monitoring required. Experiences from ongoing JI procurement projects should be taken into account. - Guidance is requested on the issue of monitoring plans having to be re-determinated upon improvement of the plan. How extensive must changes be in order to require re-determination?

Thank you for your attention!