Swedish International Development Agency S ESSION 6 United Nations Environment Program Division of Technology Industry and Economy JI Joint Implementation ACME A pplying C LEANER PRODUCTION to M ULTILATERAL E NVIRONMENTAL AGREEMENTS

OUTLINE Objectives of this session 1/ Overview of the Joint Implementation (JI) > What are the objectives and purpose of JI ? 2/ Two tracks for JI projects > What are the two separate approaches for JI projects ? 3/ Organisation of JI projects and eligibility requirements > What are the different steps of a JI project ? 4/ Statistics > Where are we now with the JI ? 5/ Conclusion > What is the potential of JI projects ? ACME – Session 6 - Joint Implementation - 2 / 25

OVERVIEW About the Kyoto Protocol Signed in 1997; in force since 16 February Ratified by more than 130 countries > Major non participants: USA and Australia. Commits Annex 1 countries to reducing greenhouse gas emissions. > GHG emissions may be reduced by ~ 5% below 1990 levels in ; > Individual, quantified emission targets for each industrialized country; > 6 greenhouse gas covered: CO2, CH4, N2O, HFC, PFC, SF6. 3 flexibility mechanisms for financing emission reduction abroad. > Clean Development Mechanism (CDM) > Joint Implementation (JI) > International Emissions Trading (ET) ACME – Session 6 - Joint Implementation - 3 / 25

OVERVIEW Introduction to the carbon market 2 main commodities traded in the carbon market > Emission allowance > Project-based emissions reductions 4 different markets > Kyoto Protocol > EU Emissions Trading Scheme > Canada Greenhouse Gas Offset System > Japan (voluntary trading system) JICDM Annex 1 countries EU – 25 Canada Japan Other OECD Emission Reduction Units (ERUs) Certified Emission Reduction (CERs) Central and Eastern Europe Developing Countries ACME – Session 6 - Joint Implementation - 4 / 25

Key concepts of Joint Implementation: > Climate change mitigation projects implemented between two Annex B countries. > Creation, acquisition and transfer of Emission Reduction Units (ERU). > JI projects eligible from year 2000, but ERU can only be issued for a crediting period starting after > ERU bankable to a max of 2.5% of Assigned Amount (AAU). > JI projects can be carried out according to either of two methodologies: Track 1 and Track 2. OVERVIEW Joint Implementation (JI) ACME – Session 6 - Joint Implementation - 5 / 25

Track 1 (full eligibility)Track 2 (partial eligibility) a.Party to the Kyoto Protocol. b.Assigned amount calculated. c.National system in place for estimating emissions/removals. d.National registry in place for tracking assigned amount. e.Submission of most recent required emissions inventory. f.Accurate accounting of assigned amount and submission of information. a. Party to the Kyoto Protocol. b. Assigned amount calculated. d. National registry in place for tracking assigned amount. TWO TRACKS Eligibility requirements ACME – Session 6 - Joint Implementation - 6 / 25

TWO TRACKS Track 1 ACME – Session 6 - Joint Implementation - 7 / 25 Key role for host Party > Have designated focal point for approving projects; > Have determined national guidelines for: - Approving projects - Monitoring - Verification > Shall make directly or through secretariat information on projects publicly available; > Meet participation requirements. No international guidelines regarding approving projects, baseline definition, monitoring, verification…

PROJECT DEVELOPER HOST COUNTRY NATIONAL or INTERNATIONAL ADMINISTRATION INDEPENDENT ENTITY (IE) JI SUPERVISORY COMMITTEE (SC) Project Design Phase Step 1: JI project idea, definition Step 2: Preparation of Project Idea Note (PIN) Pre-screening of eligibility Pre-screening of eligibility of the proposed project Step 3: Opinion on the PIN Possible review PDD by admin Step 6-7: Determination of the PDD and other docs by an IE Submission of IE report to SC Step 8: Possible review by SC Step 4-5: Preparation of PDD Undertake EIA Positive Negative Step 9: Project confirmation by SC Registration of the project by admin Registration of the project with host country TWO TRACKS Track 2 step-by-step (1)

PROJECT DEVELOPER HOST COUNTRY NATIONAL or INTERNATIONAL ADMINISTRATION INDEPENDENT ENTITY (IE) JI SUPERVISORY COMMITTEE (SC) Project Operation Phase TWO TRACKS Track 2 step-by-step (2) Step 1-2: Monitoring of pro- ject performance and submission of monitoring results/report to IE Step 3: Verification by IE IE submits verification report to SC Step 4: Possible review by SC ERU transfer recorded in the national registry Verified ERUs recorded in host government’s national registry Step 5: SC confirms emission reduction verification by IE Issu e ERU s ACME – Session 6 - Joint Implementation - 9 / 25

TRACK 2 Project Design Document (PDD) ACME – Session 6 - Joint Implementation - 10 / 25 A. General description of the project > who, what, where and effects B. Setting of the baseline > How to describe what will happen without the project activity > As approved baseline methodology OR as new baseline methodology C. Duration of the project / Crediting period > Crediting period D. Setting of the monitoring plan > How to measure actual emission reductions (approved OR new) > Data type, source, completeness, quality, verification E. Estimation of GHG emission reductions F. Environmental impacts G. Stakeholders’ comments - Annex 1: Contact information on participants in the project Annex 2: Information regarding Public Funding Annex 2: Baseline information Annex 3: Monitoring plan Standardized format for PDD

ITL checks that: > JI host Party originally issued the units being converted; > JI host Party meets either track 1 or track 2 eligibility requirements; > Acquiring Party meets full eligibility requirements for trading / track 1 JI. CDM registry International transaction log Base checks European Union transaction log Supple- mentary checks National registry Other supplementary transaction logs ITL (International transaction log) connects all national registries. It allows transfer of track 2 ERUs without considering commitment period reserve. TRANSFER OF ERU ERU Transfer ACME – Session 6 - Joint Implementation - 11 / 25

> Installations based on renewable energy source > Fuel switch to lower carbon intensive fuels > Energy efficiency at supply side > Energy efficiency at demand side > Combined heat and power (CHP) projects > Agricultural sector projects (excl. land-use change) > Transport sector > Reduction in methane emissions > Reforestation/afforestation projects > Government bodies/agencies > Municipalities > Foundations > Financial institutions > Private sector companies > NGOs > Organisations acting as intermediary for any of the above ORGANISATION Eligible projects and developers for JI ACME – Session 6 - Joint Implementation – 12 / 25 Eligible developers Eligible projects

ORGANISATION Baselines “A project is eligible for CDM if greenhouse gas emissions are reduced below those that would have occurred in the absence of the JI project.” Years GHG emissions (tCO 2 eq) Project implementation Emissions baseline Emissions after the project 1. Validation of project design, baseline and monitoring plan 2. Verification / Certification of emission reductions EMISSION REDUCTIONS ACME – Session 6 – Joint Implementation - 13 / 25

ORGANISATION Small-scale projects in JI Simplified methodologies for small-scale CDM projects are also valid for JI. Definition of small-scale projects (SSP): Why do we need SSP with simplified modalities and procedures? > Greatest barriers for low income communities are the high transaction costs; > Investment and technological barriers; > Not enough institutional & managerial capacity and/or financial resources; > Fight against smaller countries exclusion. Type I Renewable Type II Energy efficiency Type III Others SSC thresholdMax output up to 15 MW Reduction of energy consumption up to15 GWh/yr Direct emission less than 15,000 t-CO2/yr Max Emission Reduction kt-CO2/yr12-9 kt-CO2/yr109 kt-CO2/yr ACME – Session 6 - Joint Implementation - 14 / 25

STATISTICS Overview of JI activities Carbon market in 2005: > In 2005, global carbon market transactions worth €9,4 billion. > In 2005, JI projects transactions are estimated of €95 million (1%). Statistics of JI (as per June 2006): > 515 projects registered, for 268 MtCO2e emission reduction until Statistics on Mars 2006 from Carbon Point # Projects/ transactions Total volume until 2012 (MtCO2e) Projects (total) Projects (PDD) Transactions8263,7 ACME – Session 6 – Joint Implementation - 15 / 25

STATISTICS JI pipeline ACME – Session 6 – Joint Implementation - 16 / 25

STATISTICS JI host countries (1) ACME – Session 6 – Joint Implementation - 17 / 25

STATISTICS JI host countries (2) ACME – Session 6 – Joint Implementation - 18 / 25

STATISTICS JI projects by type ACME – Session 6 – Joint Implementation - 19 / 25

STATISTICS JI vs CDM project types PDD JI projects CDM projects Source: Carbon Point. ACME – Session 6 – Joint Implementation - 20 / 25

STATISTICS Investor countries Major ERU-buyers > Netherlands ERUPT-program / > NEFCO (The Nordic Environment Finance Corporation) / > Worldbank’s Prototype Carbon Fund / > EBRD (The European Bank for Reconstruction and Development) / ACME – Session 6 – Joint Implementation - 21 / 25

CONCLUSION Importance of Joint Implementation Many Annex I countries have established or are planning to establish acquisition programmes for ERUs and CERs; EU Emission Trading Scheme and the EU linking directive gave a new impulses to the market, demand has increased from private sector; Estimates exist for overall demand for project based credits, but difficult to split into JI and CDM demand; Estimated supply 2.1 billion tonnes CER and ERU (88% CDM, 12% JI) until Source: Point Carbon; European companies and carbon funds most active buyers of CERs. Governments most active buyers of ERUs. ACME – Session 6 – Joint Implementation - 22 / 25

CONCLUSION Potential of JI projects Early mover projects in Central and Eastern Europe. > Considerable amount of projects (more than 100 according to UNEP-Risø) > Majority of projects is in EU countries or countries that will be member states at the time of delivery of the emission reductions (Bulgaria and Romania are dominant); > Buyers are exclusively governments and multilateral; > Investor countries: Dutch domination; > Type of projects: renewable energy, energy efficiency, landfill gas, CMM. New projects are emerging in Russia, Ukraine, and Poland. > Only a few new projects in Central Europe due to EU emissions trading and double counting; > Russia/Ukraine: Energy efficiency, landfill, CMM, renewables > Central Europe: landfill, small energy efficiency, renewable energy under JI reserve in national allocation plans. ACME – Session 6 – Joint Implementation - 23 / 25

Cleaner Production methodologies are applicable to all eligible projects mentioned for JI. Stronger link with renewable energy, fuel switch, CHP and supply-side energy efficiency projects. CP financing through JI process (e.g. co-operation between Bulgarian and Dutch Governments). Cleaner Production Activities Joint Implementation CONCLUSION CP and JI: the link ACME – Session 6 – Joint Implementation - 24 / 25

CONCLUSION End of session 6 Thank you for your attention… Any questions? ACME – Session 6 – Joint Implementation - 25 / 25