www centrehelios org La mise en œuvre conjointe

www. centrehelios. org 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

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

Joint Implementation n www. centrehelios. org 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

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

What is an AAU? n n n www. centrehelios. org An AAU is a Party’s entitlement to emit a tonne of CO 2 e Each year, each Party is issued AAUs equal to its 1990 emissions multiplied by the percentage agreed to (Canada = 94%) 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

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

Converting AAUs to ERUs n www. centrehelios. org 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

ERU issuance JI project (conversion of AAUs to ERUs) www. centrehelios. org Russia Germany Party account Legal entity A ERU Legal entity A Legal entity B ERU Verification by host Party (track 1) or independent procedure (track 2) Legal entity B Retirement a/c Cancellation a/c AAU Cancellation a/c

Additionality and JI n www. centrehelios. org 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

Once an ERU is created … www. centrehelios. org 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)

Two tracks n www. centrehelios. org 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)

JI Track 1 n www. centrehelios. org 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 2 – International oversight 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

Demystifying “hot air” n www. centrehelios. org “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

JI and “hot air” n www. centrehelios. org 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

JI and “hot air” n www. centrehelios. org 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

Canada’s position on JI n www. centrehelios. org 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

Should Canada buy credits? www. centrehelios. org 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?

Should Canada participate in JI? 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

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