Status of Joint
Implementation
Jari Vayrynen
World Bank Carbon Finance Business
Host Country Committee
Washington 15 February, 2005
Content of presentation
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Overview of current status
Interaction between JI and EU ETS
Track One JI: how could it be done?
World Bank’s role in Greening of
AAUs
Role of Joint Implementation
less than expected?
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Has received muss less international
attention than CDM
International Emission Trading could
be more attractive
• All countries expected to meet eligibility
requirements for trading by 2008
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In EU countries ETS often easier
route
Interference with the EU ETS
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Uncertainties around the NAPs has delayed
decisions on projects
Limits the JI opportunity:
• For many covered installations EU ETS simple and more
attractive
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Treatment of indirect emission reductions/double
counting still unclear:
• EU Commission Guidance by end of 2005?
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The increased risk for JI buyers could be
mitigated through LoAs that cover cancellation of
EUAs by:
• The operator (for directly covered installations) from its
EUA account
• The Government (for indirect ERs) from the national
registry
Why would anyone do JI in EU
countries (current or accession)?
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Gases not covered in ETS
Uncertainty on 2005-2007 EUA prices and
2008-2012 allocation of EUAs
JI baselines may give more ERs to sell
than EU ETS:
• “Fix” a baseline to which project emission
compared through 2012
• This baseline likely higher than the EU
Allowances would get for the 2008-2012 period
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JI contracts longer term and larger
volumes (but so far lower prices)
Bigger market with Japan and Canada
Emissions
“STAY IN ETS”
JI Baseline
Grandfathered
2005
Project
??
2008
Role of Article 6 Supervisory
Committee Unknown
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Members, exact mandate, meetings?
Will it adopt most of CDM guidance or
something simpler?
Could much more standardized baselines
be used?
Is the CDM additionality tool appropriate
for JI, e.g.:
• evidence on consideration of JI before start of
project (Step 0)
• impact of JI revenue (Step 5)?

Need to move to first track as soon as
possible!
How could Track
One JI be done?
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ERUs only in 2008-2012, but project
generate ERs even before 2008
• Some flexibility exists for Pre-2008 ERs!
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Verification of pre-2008 ERs (for AAUs)
therefore an agreement between host
and buyer:
• Makes sense to apply a procedure similar to
Track One JI
• Same procedure can be extended to the true
Track One JI period of 2008-2012
Track One JI:
Where to start?
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Use Validated Methods and Projects as
Starting Point:
• Host Country can simply adopt and stardardize
existing methods and use them to verify ERs
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Projects prepared using Track Two JI
procedure provide a credible basis
• Validation (and in some cases Verification) have
confirmed eligibility and ERs
• Monitoring Reports can be used for host country
verification
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Host country Verification can be done
administratively or using a domestic auditor
(e.g. some ETS verifiers?)
Track One: Where to Start?
(cont.)
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Same Baseline and monitoring methods
can be applied to new projects “validated”
and verified by host country or in
Greening of AAUs
Buyer could retain right to revert back to
Track Two JI verification
DNA to coordinate
• Project Entity sends Monitoring Report to both
buyer and DNA
• verification administratively or using an
auditing company
‘Excess AAUs’ and Greening
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At least 1.5 billion tons of AAUs required to meet
targets of OECD countries:
• The direct value of the AAU sales could be $10-15
billion.
• Overall investment leveraged by these sales can be $5075 billion over the next 7 years.
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“Non-greened” AAUs might not be acceptable to
taxpayers in buying countries
Some governments have already announced that
they would not purchase unless “greened”
By devoting the proceeds of the sales to ‘green’
investments EITs could make investment in key
sectors (e.g. energy, forestry) more attractive
AAU Headroom Estimates
Country
Russian Federation
Ukraine
Poland
Romania
Bulgaria
Lithuania
Hungary
Latvia
Estonia
Slovakia
Czech Republic
Croatia
Slovenia
Total
Annual Headroom
(MtCO2e)
Total Headroom
(MtCO2e)
580-876
351-365
81-125
81-97
57-64
26-28
14-23
14-15
17-20
5-12
9-25
0-3
(-5)-(-2)
2,900-4,380
1,757-1,825
405-627
407-486
286-322
130-142
73-118
70-78
86-100
29-59
44-127
(-2)-14
(-25)-(-13)
1,230 – 1,651
6,160 – 8,265
Source: Emissions data for 2002 (all gases) compiled based on UNFCCC website (ghg.unfccc.int); projections for 2010
based on U.S. DoE (2004) International Energy Outlook 2004 Mid- and Hi- scenarios, and from International Energy Agency
(2004) World Energy Outlook 2004; Projections for Russia also based on Lecocq and Shalizi (2004)
Potential Value of the
Headroom
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Japan, Canada, and Western Europe need hot
air to comply with the Kyoto Protocol
• Potential demand for outside credits: 2.5 - 3.5 btCO2e
• Potential supply of CDM/JI:
0.3 - 1.0 btCO2e
 Required amount of AAUs:
1.5 - 3.2 btCO2e
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Supply (6.2 - 8.2 btCO2e) larger than demand
• but there is value in holding AAUs
(risk-hedging, banking, monopolistic behavior).
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The price thus uncertain: $ 7-$10 range?
• Sale of 2.5 btCO2e could bring 15 – 25 b$ + 3-5 times as
much in leveraged investment to ECA
Bank Activities in Greening of AAUs
World Bank regional staff and carbon finance team
have:
 apprised countries of opportunity of Green
Investment Schemes
• received request for technical assistance from Bulgarian,
Czech, Polish, Romanian and Slovak Governments.
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Completed Green Investment Scheme initial
design for Bulgaria;
Discussed purchase of credits on an informal
basis with potential buying countries;
Mobilized some of the funding necessary to carry
out additional design work in other countries.
Proposed Activities
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Jointly marketing the Green Investment Scheme
in the OECD with the Government or
Government selected commercial bank
• Commercial bank to to lend against the face value of
the OECD sovereign purchase commitment
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Assist the Government mobilize the financing
for the underlying projects.
Examine the use of Bank’s lending and partial
risk guarantee instruments to facilitate the
financing of the Green Investment Scheme.
Build the capacity of the seller governments to
validate, certify and report emissions reductions
from the green investments.
Proposal for GIS
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Green Investment Scheme (GIS) business
development proposal submitted to WB region
management in December 2004
• Proposes the launch of GIS in Bulgaria in FY 05
• Initiate a special effort in Russia and Ukraine to
study the feasibility of a GIS
• Initiate design of GIS in interested countries
(Romania, Poland, Czech and Slovak Republic) in
FY05
• Allocates $850K from the Carbon Finance Business
for these activities