Ajay Mathur
Energy-Environment Technology Division
Tata Energy Research Institute
New Delhi - 110 003, India
Keywords: AIJ, USA, GHG reduction, N
S, N E, Joint ImplementationSummary
The US IJI was launched in 1993 to facilitate private sector AIJ projects between the United States (US) and foreign partners in developing countries and economies in transition. Of the 110 proposals that were submitted to the Initiative until July 1998, only 30 met the additionality and sustainability criteria for IJI approval. Finally, only 13 were fully financed. The experience underscores the need for clear and widely understood goals and procedures; as well as for increased project financing. Transaction costs in the process were often substantial.
Background
The first Conference of the Parties (CoP) to the Climate Change Convention authorised a five year pilot phase of activities implemented jointly (AIJ) to learn more about the operation of inter-country climate mitigation projects in which the carbon emissions reductions were transferred from the host country to the investor country. The AIJ phase sought to build confidence in the approach and to develop a framework for the international implementation of such projects. The US government established the US Initiative on Joint Implementation (USIJI) in 1993 to facilitate US based private investors to finance climate mitigation projects in developing countries and CEITs.
Objective
The USIJI encourages private investment in climate change mitigation projects in developing and transitional economies, and enables the development and promotion of a broad range of projects to test and evaluate methodologies for measuring, tracking and verifying costs and benefits. The USIJI experience will contribute towards the formulation of international criteria for joint implementation projects.
Approach
The USIJI developed a set of criteria for accepting projects. These criteria include the requirements set out in the decision of the CoP (which include additionality in financing and in emissions reductions), as well as other criteria that help document the emissions reductions and other non-GHG benefits. By July 1998, 110 proposals had been submitted. Of these, 30 were approved as having met the established criteria after seven rounds of proposal reviews. Finally, 13 of the accepted proposals were fully financed. These projects are currently at various stages of implementation. The results of project evaluations will be released soon.
Impacts
The coal bed methane recovery project in Poland launched in October 1994 with an investment of US$ 7.5 million for a commercial scale plant is estimated to reduce net GHG emissions by the equivalent of more than 450 kilotons of CO2. Similarly the fuel switching/cogeneration in the Czech Republic was commissioned in September 1996. USIJI estimates that over the 25 year lifespan of the project, GHG emissions will be reduced by the equivalent of more than 600 kilotons of CO2. While it is still too early to assess the level of carbon emission reduction and their cost effectiveness, the process has had a major impact on the design of processes to promote inter-country carbon emission reduction projects. Provisions establishing the CDM in the Kyoto Protocol reflect some of the experiences of the Initiative.
Lessons Learned
In the early cases, transaction costs in establishing the projects were substantial. While the nature of transaction costs changed over time, they still remain somewhat considerable. Project proponents regard USIJI acceptance as a major hurdle that illustrates the need for clear and widely understood goals and procedures for investor country approval. Some USIJI projects also became entangled in the kinds of problems that bedevil other transactions in developing and transitional economies, reflecting the importance of the economic and legal context of the host country in project finalisation. The lack of adequate project financing remains the ultimate challenge even after projects meet the approval criteria. This lack of demand for GHG reduction projects needs to be urgently addressed.
Bibliography
Lile R., M. Powell, and M. Toman, 1998: Implementing the Clean Development Mechanism: lessons from US private sector participation in activities implemented jointly. Discussion Paper 99-08.
US Initiative on Joint Implementaion (USIJI), 1996: The USIJI International Partnerships Report, vol.2, no.3 (June).
US Initiative on Joint Implementation (USIJI), 1998: Activities Implemented Jointly. Second report to the Secretariat of the United Nations Framework Convention on Climate Change: accomplishments and descriptions of projects accepted under the US Initiative on Joint Implementation, vol.1 (January).
Contact
Dr Robert K. Dixon, Acting Director, USIJI Secretariat, 1000 Independence Avenue SW, PO-63, Washington DC 20585Tel: 202 426 0011; Fax: 202 426 1540/1551; E-mail: rdixon@igc.apc.orgOffice Location: 600 Maryland Avenue SW, Suite 200, Washington DC
