Implications of early action for JI baselines

Abstract

This article discusses possible implications of early Joint Implementation (JI) action. Some projects which would otherwise be non-additional during the first commitment period, can become additional by implementing them before 2008 through early JI. For example, several environmental investments that will be mandatory under the European Union (EU) Acquis Communautaire as of, e.g. 2008 or 2010 could be carried out earlier than that with early JI action. As such, candidate countries could partly finance the accession process through JI credits and their environmental standards would earlier be in line with the Acquis. The theoretical risk that projects would have to follow a slow track if JI parties are not eligible for the fast track is not large for JI hosts that are candidate for EU membership.     

Convergence or divergence?: Status and prospects for US climate strategy

The objective of this paper is to assess recent developments and prospects for future changes in United States (US) climate strategy. In doing so, the paper explores some of the key factors that have shaped strategies and policies to date, distinguishing between factors related to institutional and governance structures, linkages between science and policy, energy technology and the role of interest groups. Against this background, the paper attempts to explore future development paths for US climate policy. More specifically, the paper assesses opportunities for policy changes compared to the preferences of the current administration, and the prospects for future linkages between US and international climate change strategies. In brief, the paper argues that substantial changes are unlikely to take place in the near to medium term, leaving open, however, the possibility of wide-ranging changes in domestic politics or major incidents that could facilitate a shift in the perceived need for near-term action.     

The impact of private investor’s transaction costs on the cost effectiveness of project-based Kyoto mechanisms

From a private investor’s point of view transaction costs of project-based Kyoto mechanisms relate mainly to project management and interaction with government representatives. However, when analysing the cost effectiveness of project-based Kyoto mechanisms these transaction costs are often underestimated or completely ignored¹ due to limited data availability. This paper presents an analysis of transaction costs of project-based Kyoto mechanisms by applying cost estimates from comparable activities, for example, activities implemented jointly (AIJ). The findings show that transaction costs of AIJ projects range between 7% and more than 100% of production costs with 80% of projects lying between 14 and 89%. Furthermore the data clearly illustrate that “bigger” projects have lower specific project costs indicating the existence of economies of scale. Due to the fact that high transaction costs will push many promising projects out of the market, efforts should be undertaken to reduce transaction costs by improving procedures and business environments, for example, by standardisation.     

Transaction costs of the Kyoto Mechanisms

Transaction costs will reduce the attractiveness of the Kyoto Mechanisms compared to domestic abatement options. Especially the project-based mechanisms Clean Development Mechanism (CDM) and Joint Implementation (JI) are likely to entail considerable costs of baseline development, verification and certification. The Activities Implemented Jointly (AIJ) pilot phase and the Prototype Carbon Fund (PCF) programme give indications about the level of these costs. Under current estimates of world market prices for greenhouse gas emission permits, projects with annual emission reductions of less than 50,000 t CO₂ equivalent are unlikely to be viable; for micro projects transaction costs can reach several hundred € per t CO₂ equivalent. Thus, the Marrakech Accord rule to have special rules for small scale CDM projects makes sense, even if the thresholds chosen advantage certain project types; projects below 1000 t CO₂ equivalent per year should get further exemptions. An alternative solution with no risk for the environmental credibility of the projects would be to subsidise baseline setting and charge lower, subsidised fees for small projects for the different steps of the CDM/second track JI project cycle.     

The EU as a frontrunner on greenhouse gas emissions trading: how did it happen and will the EU succeed?

The objective of this paper is first to provide empirical evidence of what can be seen as a rather remarkable change in EU’s position on the use of greenhouse gas (GHG) emissions trading (ET) in climate policy, from the role of a sceptic in the run-up to Kyoto towards more of a frontrunner. The paper argues that there is a synergistic and multilevel mix of explanatory factors for this “U-turn”, including developments at the international, EU, Member State, sub-national, and even down to the personal level. Second, the paper explores and discusses the philosophy behind the Commission’s proposal for a directive on GHG ET. Third, the paper examines the prospects for ‘success’ of a scheme for EU-wide ET using a multifaceted set of metrics. In brief, we argue that output success—the chances for having a directive adopted—hinges on the resolution of two key issues. First, whether the preliminary phase is to be mandatory or voluntary, and second, incompatibilities with domestic ET schemes. Outcome success—steering and cost-effectiveness—will in turn depend on factors like the coverage of the scheme and inclusion of project-based credits, while more long-term political implications hinges on the successful adoption and operation of the scheme.

“The Proposal on emissions trading represents a major innovation for environmental policy in Europe. We are de facto creating a big new market, and we are determined to use market forces to achieve our climate objectives in the most cost-conscious way […]. The emissions trading system will be an important cornerstone in our strategy to reduce emissions in the most cost-effective way”.

Environment Commissioner Margot Wallström.     

Implications of early action for JI baselines

This article discusses possible implications of early Joint Implementation (JI) action. Some projects which would otherwise be non-additional during the first commitment period, can become additional by implementing them before 2008 through early JI. For example, several environmental investments that will be mandatory under the European Union (EU) Acquis Communautaire as of, e.g. 2008 or 2010 could be carried out earlier than that with early JI action. As such, candidate countries could partly finance the accession process through JI credits and their environmental standards would earlier be in line with the Acquis. The theoretical risk that projects would have to follow a slow track if JI parties are not eligible for the fast track is not large for JI hosts that are candidate for EU membership.