La mise en œuvre conjointe : un outil méconnu mais prometteur Université de Montréal, 28 avril 2006 Colloque organisé par le CEDRIE Helena Olivas – Directrice, changements climatiques Philip Raphals –Directeur général

www. centrehelios.org Outline Joint Implementation what it is how it works JI and “hot air” Canada’s position on JI Should Canada participate in JI?

www. centrehelios.org n One of the three flexibility mechanisms under art. 6 of Kyoto Protocol >CDM >Emission Trading (ET) >JI n Like CDM, based on projects that reduce GHG n Unlike CDM >occurs between two Annex I countries, both of which have reduction obligations >credits are transferred but not created hence more like ET Joint Implementation

www. centrehelios.org How does it work? n JI results in conversion of Assigned Amount Units (AAUs) to Emission Reduction Units (ERUs) >ERUs are transferred to foreign and local project partners >partners can sell them to any company or government AAU RMU ERU for emission reducing projects for LULUCF projects

www. centrehelios.org What is an AAU? n An AAU is a Party’s entitlement to emit a tonne of CO 2 e n Each year, each Party is issued AAUs equal to its 1990 emissions multiplied by the percentage agreed to (Canada = 94%) n By the end of the compliance period, each Party must have retired AAUs (or equivalent) equal to its actual emissions >CERs (CDM), ERUs (JI) and RRUs (sinks) are equivalent to AAUs

www. centrehelios.org Retirement >=<>=< Emissions 2008 to 2012 Compliance assessment Units in retirement account Units in retirement accounts not transferable Canada Party account Legal entity A Legal entity B Retirement a/c RMU CER ERU AAU

www. centrehelios.org Converting AAUs to ERUs n In a JI project: >host country AAUs are converted to ERUs, 1 AAU for each tonne of reduction >ERUs are transferred to local and foreign (Annex I) partner n Since host country has lost an AAU, it must >reduce its emissions by one more tonne (or acquire equivalent credit) n Reduction from JI project integrated into national inventory >no harm to host country n Hence, JI is a zero-sum game >credits are transferred >not created

www. centrehelios.org ERU issuance ERU Germany Party account Legal entity A Legal entity B Retirement a/c Cancellation a/c Russia 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

www. centrehelios.org Additionality and JI n Since no credits are created, failure to achieve additionality >does not harm the environment global emissions the same with or without additionality >but it does harm the host country (financially) the host country must still make additional reductions (or purchase additional credits) to replace the AAUs converted to ERUs n fundamental difference from CDM >CERs are new credits >if project is not additional, global emissions will increase

www. centrehelios.org Once an ERU is created … n ERUs divided per agreement between project partners >can sell them to host country, foreign partner’s country, or any other entity with an account companies and other subnational entities have their own accounts within national account >Ultimately, they are purchased by a Party and counted towards its reduction obligation (or voluntarily retired)

www. centrehelios.org Two tracks n JI has two tracks >if host country meets Kyoto reporting and reviewing requirements  Track 1 >if not  Track 2 third party verification approval from Joint Implementation Supervisory Committee ( JISC)

www. centrehelios.org n Host country bears responsibility >Designated focal point approves projects >National guidelines for: Approving projects Monitoring Verification >make information on projects publicly available n International guidelines regarding information to be made public >to be reviewed by JISC and recommended to COP/MOP JI Track 1

www. centrehelios.org n More rigorous than track 1 >Project requirements established by JISC >needs third-party verification through an Accredited Independent Entity (AIE) >more transaction costs >greater confidence JI Track 2 – International oversight

www. centrehelios.org Demystifying “hot air” n “Hot air”: excess AAUs resulting from economic collapse of Countries with Economies in Transition (ex-USSR) >Current emissions far below 1990 levels (without reduction effort)  excess AAUs >Excess AAUs officially recognized otherwise, Russia would not have ratified >But many countries unwilling to buy these AAUs Hot air AAUs worthless if no one will buy them

www. centrehelios.org JI and “hot air” n JI projects in Economies in Transition >if projects not additional, no harm to host country, since it has excess AAUs buying non-additional JI from EIT = buying hot air >if projects are additional, ERUs perfectly valid n In EIT countries, JI is more like CDM not zero-sum additionality essential

www. centrehelios.org JI and “hot air” n JI unfairly tainted by “hot air” issue >Parties can decline to purchase “hot air” >It is possible to participate in JI without buying “hot air” either refuse to buy ERUs from EIT projects, or (better) insist on demonstrated additionality –Track 2 (3 rd party verification) for EIT projects –Green investment schemes (GIS): JI revenues invested in environmental protection

www. centrehelios.org Canada’s position on JI n Chrétien/Martin administrations initially interested in JI >opposed to purchasing “hot air” >supported GIS n When Offset System proposed, Canada announced it would not participate in JI >Canada as host country under JI, credits from Canadian reduction projects could be sold in other Annex I countries with $15 price cap, better prices abroad staying out of JI  no competitors for domestic credits n Harper administration: no interest in any flexibility mechanisms

www. centrehelios.org Should Canada buy credits? n Even if it can’t fully meet Kyoto commitments … >Maximize domestic reductions >If insufficient, either purchase art. 6 credits, or be in non-compliance n Buying credits has same effect on global climate as domestic reductions >CDM: because of additionality >ET and JI: because zero-sum contribute to economic efficiency n Refusing to purchase credits while failing to make significant domestic reductions  >disrespect to international community >failure to meet legal commitments >unfair to Parties that do comply >consequences?

www. centrehelios.org n Participation in JI would create opportunities for Canadian companies >access to European (and other) carbon markets >invite foreign investment in emissions reduction technologies (Canada as host country) n If Canada does not participate in JI, Canada « owns » all domestic reductions >without offset system or JI, no incentive for companies to voluntarily reduce emissions >domestic reductions in partnership with foreign partners  good for Canadian economy  good for global climate Should Canada participate in JI?

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