ACME Applying CLEANER PRODUCTION to MULTILATERAL ENVIRONMENTAL AGREEMENTS

ACME Applying CLEANER PRODUCTION to MULTILATERAL ENVIRONMENTAL AGREEMENTS JI Joint Implementation SESSION 6 United Nations Environment Program Division of Technology Industry and Economy Swedish International Development Agency

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 2005. 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 2008 -2012; > Individual, quantified emission targets for each industrialized country; > 6 greenhouse gas covered: CO 2, CH 4, N 2 O, HFC, PFC, SF 6. 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) Developing Countries CDM Annex 1 countries EU – 25 Canada Japan Other OECD Certified Emission Reduction (CERs) ACME – Session 6 - Joint Implementation - 4 / 25 JI Emission Reduction Units (ERUs) Central and Eastern Europe

OVERVIEW Joint Implementation (JI) 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 2008. > 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. ACME – Session 6 - Joint Implementation - 5 / 25

TWO TRACKS Eligibility requirements 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. ACME – Session 6 - Joint Implementation - 6 / 25 d. National registry in place for tracking assigned amount.

TWO TRACKS Track 1 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… ACME – Session 6 - Joint Implementation - 7 / 25

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

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

TRACK 2 Project Design Document (PDD) Standardized format for PDD 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 ACME – Session 6 - Joint Implementation - 10 / 25

TRANSFER OF ERU Transfer ITL (International transaction log) connects all national registries. It allows transfer of track 2 ERUs without considering commitment period reserve. Supplementary checks European Union transaction log Other supplementary transaction logs International transaction log Base checks CDM registry National registry 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. ACME – Session 6 - Joint Implementation - 11 / 25

ORGANISATION Eligible projects and developers for JI Eligible projects Eligible developers > 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 ACME – Session 6 - Joint Implementation – 12 / 25

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. ” GHG emissions (t. CO 2 eq) 1. Validation of project design, baseline and monitoring plan 2. Verification / Certification of emission reductions Emissions baseline EMISSION REDUCTIONS Emissions after the project Years Project implementation 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): Type I Renewable Type II Energy efficiency Type III Others SSC threshold Max output up to 15 MW Reduction of energy Direct emission less consumption up than 15, 000 t-CO 2/yr to 15 GWh/yr Max Emission Reduction 18 -13. 5 kt-CO 2/yr 12 -9 kt-CO 2/yr 109 kt-CO 2/yr 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. ACME – Session 6 - Joint Implementation - 14 / 25

STATISTICS Overview of JI activities Statistics on Mars 2006 from Carbon Point 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 Mt. CO 2 e emission reduction until 2012. # Projects/ transactions Total volume until 2012 (Mt. CO 2 e) Projects (total) 515 268 Projects (PDD) 189 140 Transactions 82 63, 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 CDM projects ACME – Session 6 – Joint Implementation - 20 / 25 Source: Carbon Point. JI projects

STATISTICS Investor countries Major ERU-buyers > Netherlands ERUPT-program / www. senter. nl > NEFCO (The Nordic Environment Finance Corporation) / www. nefco. org > Worldbank’s Prototype Carbon Fund / www. prototypecarbonfund. org > EBRD (The European Bank for Reconstruction and Development) / www. ebrd. com 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 2012 - 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

CONCLUSION CP and JI: the link Cleaner Production methodologies are applicable to all eligible projects mentioned for JI. Cleaner Production Activities 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). ACME – Session 6 – Joint Implementation - 24 / 25 Joint Implementation

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