Meeting eligibility requirements

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Session 4 Meeting eligibility requirements Fi
rst UNFCCC workshop on implementation of Article
6 projects under the Kyoto Protocol Moscow 26-27
May 2004
www.unfccc.int UNFCCC secretariat
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Overview of presentation

• Eligibility requirements safeguard the integrity
  of
• the Kyoto Protocol
• JI projects and their credits
• the underlying carbon market
• Three linked questions to be examined here
• What do Annex B Parties require for JI
  eligibility?
• - regarding emissions
• - regarding assigned amounts
• How do JI credits fit into the targets of the
  Kyoto Protocol?
• How is the compliance of Parties with targets
  verified?

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Crediting JI projects

• Conversion (issuance) of existing units of the
  host Partyto emission reduction units (ERUs)
  based on the project
• ERUs are transferred to investing Party/entity
• ERUs may be used by Annex B Parties for
  compliance
• ERUs differ from CDM credits, which are newly
  generated units

AAU
ERU
for emission reducing projects
RMU
ERU
for LULUCF projects
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Compliance with Annex B targets
Projected emissions
Annex B assigned amount
Emissions side
Assigned amount side
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Verifying compliance with the targets
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Eligibility requirements for JI
Track 1 (full eligibility)

• a. Party to the Kyoto Protocol
• b. Assigned amount calculated
• c. National system in place for estimating
  emissions/removals
• d. National registry in place for tracking
  assigned amount
• e. Submission of most recent required emissions
  inventory
• f. Accurate accounting of assigned amount and
  submission of information

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Issuance, transfer and acquisition
All Annex B Parties may develop and run JI
projects ? eligibility relates to ERU issuance,
transfer and acquisition
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• Reporting and review processes relating to
  eligibility

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Key points on reporting/review procedures

• Determination of eligibility requirements is
  normal outcome of reporting, review and
  compliance procedures
• All Annex I Parties report and are subject to
  review annually
• All review reports considered by the Compliance
  Committee
• 2 phases
• - Initial reporting and review calculates and
  records assigned amount under 3.7 and 3.8 and
  determines eligibility
• - Ongoing (annual) reporting and review
  maintains or suspends eligibility during
  commitment period
• Compliance Committee makes determination of
  eligibility

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Initial reporting and review

• Initial report and review is to facilitate
  calculation of assigned amount and demonstrate
  capacity to account for emissions and assigned
  amount
• GHG inventory ? focus on base year (1990
  or other)
• National system
• National registry
• Calculation of initial assigned amount under
  Articles 3.7/8
• Calculation of commitment period reserve
• Selection of sinks activities under Article
  3.3/4

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Annual reporting and review

• Annual greenhouse gas inventory
• Annual assigned amount information
• Changes in the national registry
• Changes in national system
• Calculation of commitment period reserve

Information recorded in the compilation and
accounting database of the secretariat after
review and consideration by Compliance Committee
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Compliance Committee

• Facilitative Branch
• Considers questions related to reporting and
  accounting prior to commitment period
• Can provide advice, and facilitate financial and
  technical assistance
• Enforcement Branch
• Can apply adjustments to inventories
• Make corrections to Partys accounting
• Suspend and reinstate eligibility to participate
  in mechanisms

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• Requirements relatingto the emissions side

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Key points on the emissions side

• Reliable inventories are fundamental for
  determining compliance of Parties with their
  Kyoto targets
• - calculation of assigned amount under Articles
  3.7/8
• - maintaining mechanisms eligibility
• - end of commitment period compliance test
• Difference between track 1 and 2 hinges on
  ongoing provision of annual inventory that meets
  requirements
• Initial inventory with full time-series is
  important for calculation of assigned amount
  under both track 1 and 2

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National systems for estimating emissions

• Institutional, legal and procedural arrangements
  necessary to prepare national greenhouse gas
  inventory in accordance with 7.1
• Single national entity
• Planning (define responsibilities, choice of
  methods and data)
• Preparation (Use of good practice, inventory
  estimation, documentation)
• Quality assurance and quality control
  procedures
• Archive inventory information
• Requirements are functional
• Flexibility for national circumstances
• Compliance depends on ability of system to
  produce reliable inventory

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National GHG inventory requirements

• All gases and sources? LULUCF removals not
  required for base year
• Full geographic coverage
• Complete time-series? All years from base year
  (1990 or other) up to most recent available
• Use of methods that are consistent with IPCC
  methodologies and Good Practice Guidance
• Common Reporting Format? Standardized electronic
  reporting tables
• National inventory report? Description of
  methods used, data sources, etc.

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Inventory adjustment procedure

• Identification of problem during individual
  review
• - Opportunity for Party to correct problem
• - Review team calculates and recommends
  adjustment based on technical guidance
• - Party has opportunity to accept or reject
  adjustment
• If Party does not accept adjustment, Enforcement
  Branch of Compliance Committee determines whether
  to apply it
• Adjustments can be removed later during
  commitment period if inventory problem is
  corrected
• - Not for base year, since initial assigned
  amount fixed

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Inventory adjustments

• Intended to correct inventory problems for
  purpose of accounting for emissions and assigned
  amount
• Adjustments are conservative
• - Estimates adjusted downwards in base year
• - Upward for year of commitment period
• Applied only after Party has had opportunity to
  correct problems
• If adjustment applied, then adjusted estimate is
  recorded in compilation and accounting database

Adjustments allow Party to remain in
compliance with inventory and eligibility
requirements in event of minor inventory problems
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Recording assigned amount (Articles 3.7/8)

• Based on reviewed initial GHG inventory
• Assessment of consistency with the IPCC
  methodologies and Good Practice Guidance (GPG)
• Review of entire time-series
• Adjustments recommended to base year inventory if
  GPG not correctly applied
• Assigned amount recorded only after review and
  consideration
• by the Compliance Committee
• AA based on adjusted base year, if applied
• Once recorded, is fixed for entire commitment
  period

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Failure to meet annual inventory requirements

• Decision on Article 7.1 of the Kyoto Protocol
  defines
• Complete annual inventory (both Common Reporting
  Format and National Inventory Report) not
  submitted within 6 weeks of due date
• Omission of large key source that accounts for 7
  or more of annual emissions
• Total adjustments in any year greater than 7 of
  submitted inventory
• Sum of the total adjustments for any years of
  commitment period exceeds 20 of submitted
  emissions
• A key source that accounts for 2 or more of
  emissions is adjusted in three consecutive years

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• Requirements relatingto the assigned amount side

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Key points on the assigned amount side

• National registries to be established by all
  Annex B Parties
• Registries to interact with other registries and
  the transaction log
• Accurate accounting in accordance with Article
  7.4
• Reporting of additions and subtractions to
  assigned amount

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What national registries have to do

• National registries established by Annex B
  Parties
• Electronic databases for tracking the
• - issuance and holdings of units
• - transfers of units under the mechanisms
• - replacement and cancellation of units
• - retirement of units for compliance purposes
• - carry-over of units to the next commitment
  period
• Accounts for governments and entities
• Independent transaction log established by the
  secretariat
• Checks transactions when they are proposed
  against rules
• Ensures the integrity of transactions before
  completion

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National registry accounts
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Registries, the ITL and STLs
NR2
NR3
NR4
CDM-R
NR1
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Sufficient harmonization

• International rules define
• Basic registry requirements (decision 19/CP.7)
  ? Parties have significant scope to implement as
  they wish
• Basic data exchange standards (decision
  24/CP.8) ? Recognized that exact technical
  specifications are needed
• Detailed specifications of the data exchange
  standards
• Define how registries enact the mechanisms
• Being developed by the secretariat, with
  registry developers
• Version 1.0 to be completed by July 2004
• To be enhanced through registry administrator
  cooperation

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Data exchange standards

• Management of secure communications over the
  Internet
• Transaction and reconciliation sequences
• Serial numbers, account numbers and transaction
  numbers
• Transaction log response codes
• Message formats to ensure all communications can
  be read
• Processes for initializing registry activities
  with the ITL
• Change management procedures for the data
  exchange standards

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Assigned amount info in reporting
Accurate accounting of additions and
subtractions to assigned amount required for
continued eligibility

• Annual electronic reporting
• Aggregate registry information on holdings and
  transactions
• LULUCF accounting under Article 3.3 (mandatory)
• LULUCF accounting under Article 3.4 (optional)
• Reporting at end of the commitment period
• Additions and subtractions to assigned amount
• Total retirement for compliance purpose
• Units available for carry-over the next
  commitment period

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• In conclusion

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Timing when is it all to happen?

• Eligibility requirements for Annex B Parties are
  integral to the system to safeguard the integrity
  of the Kyoto Protocol
• Parties are to meet requirements for the
  following prior to 2007 (or one year after entry
  into force of the Protocol for the Party),
• National system
• GHG inventory
• Calculation of assigned amount under Articles
  3.7/8
• National registry
• Notification of Article 3.3/4 information
• Selection of Article 3.4 activities