TL:The Joint Implementation Pilot Phase: A Critical Approach SO:Greenpeace International DT:22 August - 2 September 1994 Keywords:atmosphere climate change geneva conferences greenpeace reports / Prepared for the 10th Session of the Intergovernmental Negotiating Committee for a Framework Convention on Climate Change Summary Greenpeace has grave concerns that the use of joint implementation measures for emission credits prior to the development and implementation of real and effective national emission reduction commitments will seriously undermine the political and environmental effectiveness of the Climate Convention. In addition significant concerns remain unresolved as to the real and equitable economic effectiveness of joint implementation. Joint implementation for credit should only be considered: * when developed countries have further legally binding quantitative emission reduction targets, this is consistent with the obligation for developed countries to act first * when clear emissions baselines are established for all parties participating in joint implementation projects to enable verification that emissions are actually being reduced over what they would otherwise have been * on agreement that guiding principles of additionality, equity, transparency, local environmental effectiveness and comprehensiveness must underpin any joint implementation framework, all projects including any pilot phase should be reviewable by the Conference of Parties (COP). Greenpeace does not believe a pilot phase for JI should operate outside of an monitored international framework agreed by the COP. Any pilot phase should not be for emissions credit under existing Convention obligations. Introduction The Climate Convention envisages that Parties to the Convention may jointly implement measures to achieve their commitments, subject to the development and approval of criteria by the Parties. Joint implementation is perceived by some countries to offer a means of obtaining credits against emission reduction obligations within one's own borders, by undertaking emission reduction projects in other countries. One of the principal justifications cited for joint implementation is "cost-effectiveness". However, Greenpeace believes that cost-effectiveness should be only one consideration in reaching the ultimate environmental objective of the Convention, the stabilisation of greenhouse gas concentrations at a protective level. Within the terms of the United Nations Framework Convention on Climate Change (FCCC) "cost-effectiveness" is a concept to support the application of the precautionary principle. Environmental Effectiveness The 'ultimate objective' of the Convention is to achieve 'the stabilisation of greenhouse gas concentrations in the atmosphere' at a protective level (Article 2) 'that would prevent dangerous anthropogenic interference with the climate system' with this 'achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and to enable economic development to proceed in a sustainable manner'. The current emission stabilisation commitments for developed countries are not sufficient to achieve this objective of the Convention. The first priority for developed countries must thus be to implement the current emissions commitments and to negotiate further emission reduction obligations to be adopted at the First Conference of the Parties. The use of joint implementation to avoid even the current insufficient commitments undermines any possible realisation of the Convention's objective. Greenpeace believes that the overall intent of the Convention and of Article 4(2)(a) (the provision that relates to joint implementation) is that all Parties involved in joint implementation must have similar emission commitments and clear emission baselines. Joint Implementation conducted between Parties that have dissimilar quantitative obligations - that is, between developed nations which have quantitative emission commitments and developing countries who do not have any such emission commitments or economies in transition (EITs) with declining emissions -threatens the long term environmental effectiveness of the Convention. Under these circumstances there can be no guarantee that aggregate global emissions would be reduced, since there will be no way of verifying if the joint implementation actions have reduced emissions in these countries below what would otherwise have occurred. The process would be open to abuse, including double counting and the shifting of emissions to other countries. Emission limits obligations or binding baselines on all parties involved in joint implementation would prevent double counting, fake additionality, counter productive strategic behaviour ( for example waiting with measures because a worse situation could attract more projects, bad environmental policy could be rewarded this way) and the shifting of emissions to other locations. Joint implementation for credit between Annex II countries and other Annex I countries (ie Economies in Transition - the former USSR and eastern Europe) gives rise to a similar class of problems. The Convention defines developed countries to include those of eastern Europe and the former Soviet Union. The latter economies now often have declining emissions as a consequence of economic collapse as well as previously excessively inefficient energy use and production practices. This situation gives rise to the potential for joint implementation to be abused by countries. In this context Greenpeace believes that the intent of the Convention is to reduce emissions below the level that would otherwise have occurred. Where the "business-as-usual" emissions of one party to joint implementation are likely to be below the 1990 levels over the period to 2000 (and for some period thereafter) the potential exists for joint implementation to result in no real reduction in their aggregate emissions. Parties could claim emission credits from actions in EITs, whilst they, or other Parties may be undertaking actions, not reviewable by the Convention, that have the effect of lifting emissions from their declining level towards the 1990 level. In other words, returning jointly to 1990 emission levels by an Annex II (OECD) country with increasing emissions and an Economy In Transition country with otherwise decreasing emissions does not guarantee real emission reductions and is not consistent with the intention of the Treaty. Furthermore, Greenpeace does not believe that the creation of carbon sinks or stores via for example tree planting is an acceptable substitute for cutting emissions at source. We believe that emissions reductions regimes, including any Joint Implementation projects must deal directly with gross emissions. This of course does not prevent countries assisting with afforestation. Political Effectiveness Greenpeace believes that attempts by developed countries to use joint implementation measures to obtain emission credits could be seen as an attempt to evade the obligations on developed countries to act first. Such attempts could seriously undermine the confidence of developing countries in the Convention and ultimately reduce the prospects of their agreeing binding emission limitations. Achievement of the Convention's overall objective of stabilising greenhouse gas concentrations would thus ultimately be threatened. The Convention requires developed countries to take the lead in addressing the problem and to do this by the adoption of national measures to limit their own emissions. The Convention also obliges them to assist developing countries by paying the full incremental costs of mitigating measures and by the transfer of technology and information. It is not consistent with the intent of the Convention that developed countries should receive credit for what they are already obligated to do. Furthermore, with developing countries likely to have to adopt quantifiable emission obligations in the future, global equity may not be served if developed countries have already used up cheap emission reduction opportunities in developing countries. In view of these considerations, Greenpeace believes that industrialised nations should focus on assisting developing countries by stimulating projects that reduce emissions. They should not receive credit for these projects because they are already a part of their obligations under the Convention. Greenpeace believes that a new international institution is needed to support the transfer of know how and technology to developing countries, and others, in order that they may limit the growth in their emissions. Economic Effectiveness To a significant extent the overall economic effectiveness of global moves to reduce greenhouse gas emissions will depend on the rapid development and deployment of energy efficient and renewable energy technologies in the world's largest economies. Advocates of joint implementation as a "cost- effective" device for developed countries overlook the potential for this approach to undermine the rate of technological innovation and market penetration in developed economies. By diverting effort from national emission reduction programmes and the policies designed to achieve these joint implementation could slow down or stop the adoption of much needed improvements in the energy efficiency of many industrialised countries. In particular it could delay the adoption of measures desperately needed in the transport sector to protect human health and the natural environment in addition to the climatic implications of this sector. Often joint implementation is advocated from the point of view of a particular economic sector heavily dependent on the production of energy from fossil fuels. Ignored often is the perspective of those sectors that would benefit economically from more rapid global adoption of energy efficient and renewable energy technologies. Joint implementation could thus increase the costs of achieving deeper emission reductions in the future through the inhibition of technological innovation and commercialisation in developed countries. Guiding Principles In order to enhance the environmental effectiveness of the Convention and demonstrate the commitment of developed countries to a fair and equitable regime for limiting and reducing carbon dioxide and other greenhouse gas emissions joint implementation projects should be conducted that are additional to existing obligations. Moreover, joint implementation actions should only involve Annex I parties having quantitative emission reduction commitments and agreed, reliable baselines and joint implementation should not be used for emission credit at this stage until real, legally binding emission reduction commitments have been achieved by developed countries. A secure multilateral monitoring and verification system must be put in place before joint implementation actions can begin to ensure that the overall effectiveness of the climate convention is not threatened. A bilateral system without independent verification and extensive reporting requirements is open to abuse. Joint implementation projects should be reviewable by the COP and its designated subsidiary body to ensure that operational criteria are being met. Registering and verifying greenhouse gas (GHG) inventories, emission baselines, cost-effectiveness of the project compared to national options in the donor country and other information on projects is vital for the ongoing development of the global response to climate change. In addition the World Bank dominated Global Environmental Facility (GEF) has a conflict in relation to the question of project quality and control and is therefore not suited as controlling institution. The Conference of Parties should retain complete authority over the process. Greenpeace believes that before any detailed criteria for the pilot phase are to be discussed, the International Negotiating Committee (INC) should agree on the following guiding principles: Additionality: Joint implementation should be additional to the obligations of the Annex II countries to transfer capital and technology to developing countries and to pay the full agreed incremental costs of measures taken in developing countries to mitigate climate change and additional to projects that would have been carried out anyway. Equity: Joint implementation projects should be socially acceptable in the receiving country, with a social impact procedure, should be part of the initial phase of the project. Such projects should stimulate the development of the local technological structure and ensure positive local social- economic (capacity-building) effects or compensation for negative effects to ensure the support of the recipient country/community. Participation and Transparency: The whole process of the development of a joint implementation project (definition, implementation and verification) should be open to consultation (and approval) of the local community, NGOs and other interested parties to ensure that all local social, economical and environmental costs and benefits are included. Where necessary resource should be provided for local NGOs to participate meaningfully in the consultation phase. Local Environmental Effectiveness: Local environmental effects must be positive, with projects subject to environmental impact assessment procedures (to help prevent other environmental disasters resulting from hydropower and nuclear power). Comprehensiveness: A full accounting for the activities in the host country by the sponsoring party should be included to ensure that the intent of the Convention is being met. The Pilot Phase: Key Issues Joint implementation of emission reductions is likely to play a future role as one mechanism for meeting the objective of the convention, but it should only cover a small part of the further reduction commitments of Annex I countries. Reaching a common understanding and agreement between all parties on the nature of joint implementation, and generating confidence in the integrity of joint implementation is crucial if any future role is to be successful. Any pilot or experimental phase will play a critical role in whether such confidence is built and must be developed with great care. If the pilot phase is to inform effectively the future shape and role of joint implementation in meeting the objectives of the convention, it must reflect as closely as possible the most likely criteria and operating arrangements of joint implementation itself. The conditions and guiding principles such as those mentioned above must apply for the pilot phase as well. Pilot phase projects should be conducted within a multilateral institutional framework and within a common analytical framework to allow coherent conclusions to be drawn from the pilot phase. A badly designed or laissez faire pilot phase would probably lead to great difficulty in drawing generalizations and overall conclusions. COP1 and its subsidiary bodies should move quickly to develop and recommend such a framework for adoption by COP2 if this is not possible by the INC in the limited remaining time before COP1. As long as no multilateral institutional framework is developed and agreed by the INC no country or private sector project should be defined as Joint Implementation under the Convention. Recommendations * Clear criteria for any pilot phase must be agreed before that phase begins. The pilot phase could not begin before the Conference of the Parties reach agreement on this phase. * Multilateral structures for a formal ex ante project assessments process by or on behalf of the COP must be established before the pilot phase begins along with an agreed multilateral process of project review once the projects are complete. * Experimental projects should only involve parties with clear emission baselines and greenhouse gas projections using IPCC methodologies. * No emission credit sharing arrangements should occur during the pilot period or be considered until CO2 emission reductions goals have been agreed by Annex I countries. * Pilot phase projects should be designed to fully reveal transaction costs in order to test cost-effectiveness and to cover a sufficiently long period of time to enable an evaluation of longer term cost-effectiveness. * Secure operational and review structures, including extensive reporting requirements, must be agreed and established before that phase begins. The joint implementation operation should be managed by a subsidiary body under the convention. * Projects must be assessed on a transparent basis via lifecycle analysis of the environmental, social, developmental and economic impacts according to agreed criteria and methodologies. These must be agreed upon before the pilot phase begins and reviewed on a project by project basis. * The period of any pilot phase must be agreed and must allow sufficient time to review the success and difficulties with projects and institutional arrangements. A minimum period of ten years is appropriate for this phase. * Projects should be confined to those which result in clear CO2 reductions. * Forestry plantations for sequestering carbon should not be allowable under joint implementation criteria on the grounds of methodological uncertainty, risk associated with these projects and the unacceptability of permitting gross/fossil fuel related greenhouse gas emissions to increase. For further information: Mr. W. L. Hare,Climate Policy Adviser Ms. A. Stevens,Associate Adviser Greenpeace International Keizersgracht 176 1016 DW Amsterdam The Netherlands Phone:31 - 20 - 523 6 222 Fax: 31 - 20 - 523 6 200