Eligibility issues and joint implementation UNFCCC technical workshop on joint implementation Bonn 9-10 March 2006 Andrew Howard UNFCCC secretariat www.unfccc.int ahoward@unfccc.int

Overview Eligibility requirements safeguard the integrity of Kyoto’s compliance accounting Crediting for JI projects The underlying carbon market Four linked questions to be examined here How is crediting under JI implemented? How does JI eligibility impact on JI crediting? What do Annex B Parties require for JI eligibility? What is the process and timing for determining eligibility?

Crediting JI projects Registries convert (“issue”) host Annex B Party’s existing units into emission reduction units (ERUs) based on a JI project Registries transfer ERUs to investing Party/entity ERUs may be used by Annex B Parties for compliance ERUs differ from CDM credits, which are newly created units AAU RMU ERU for emission reducing projects for LULUCF projects

Kyoto institutions and eligibility National systems Annex I Party systems Emissions inventories Reporting process National registries Kyoto Protocol units Assigned amount 2008 - 2012 Eligibility requirements Review and compliance processes Emissions 2008 - 2012 Secretariat compilation and accounting systems Article 3.1 compliance assessment > = <

JI eligibility requirements Track 1 (full 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 Track 2 eligibility National systems and reliable inventories are fundamental for determining compliance of Parties with their Kyoto targets calculation of assigned amount under Articles 3.7/8 maintaining mechanisms eligibility end of commitment period compliance test Initial inventory with full time-series is important for calculation of assigned amount under both track 1 and 2 Difference between track 1 and 2 hinges on ongoing provision of annual inventory that meets requirements

Issuance, transfer and acquisition No eligibility Cannot issue or transfer ERUs Track 2 Can issue and transfer ERUs  only after JISC verification of the project and reductions Can issue, transfer and acquire ERUs  Party may verify projects and reductions by its own procedures Track 1 (full eligibility) No eligibility needed to develop and run JI projects  eligibility only relates to ERU issuance, transfer and acquisition

Implementing eligibility checks CDM registry International transaction log Base checks European Union transaction log Supple- mentary checks National registry Other supplementary transaction logs International transaction log connects all national registries 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 ITL allows transfer of track 2 ERUs without considering commitment period reserve

Eligibility process Initial review process Compliance Committee Annex B Party Initial Report Review report (may include questions of implementation) Compliance Committee (Enforcement Branch) Decides that requirements are not met Decides that it is not proceeding with any questions of implementation Compliance Committee determination is decisive Initial report and review is “to facilitate calculation of assigned amount and demonstrate capacity to account for emissions and assigned amount” GHG inventory (focus on base year) National system National registry Calculation of initial assigned amount under Articles 3.7/8 Calculation of commitment period reserve Selection of sinks activities under Article 3.3/4 Facilitative Branch Considers questions on reporting and accounting prior to CP Provides advice, and facilitate financial and technical assistance Enforcement Branch Can apply adjustments to inventories Make corrections to Party’s accounting Suspend and reinstate eligibility to participate in mechanisms

Eligibility timing Automatic eligibility after 16 months of initial report (unless Compliance Committee determines a requirement is not met) Compliance Committee may decide earlier that it is not proceeding with any questions of implementation relating to eligibility Initial reports expected in the 2nd half of 2006 Party must continue to meet requirements to maintain eligibility - Annual inventory and assigned amount reporting - Inventories pass the quality test in the annual review Compliance Committee can subsequently suspend eligibility Any eligibility reinstatement considered under expedited procedures Annual reporting and review Annual greenhouse gas inventory Annual assigned amount information Changes in the national registry Changes in national system Calculation of commitment period reserve

Closing thoughts Minimum eligibility needs assigned amount calculation (needs national system and base year emission inventory) and a national registry JISC verification offers JI projects international credibility - For Annex B Parties meeting only track 2 requirements - But also for Annex B Parties meeting full track 1 requirements Eligibility requirements expected to be met in late 2007 or early 2008 Annual reporting and review Annual greenhouse gas inventory Annual assigned amount information Changes in the national registry Changes in national system Calculation of commitment period reserve