What are the differences and similarities between Climate Action Teams Agreements (CATs) under Article 6 of the Paris Agreement, and Joint Implementation under the Kyoto Protocol?

The mechanism known as Joint Implementation (JI), defined in Article 6 of the Kyoto Protocol, allowed Annex B countries[2], with emission reduction commitments, to earn emission reduction units (ERUs) from emissions reduction or storage projects in another Annex B party, which could be counted towards meeting their Kyoto target. For every tCO2 reduced and credited through JI projects, host countries would cancel one of their country-wide Kyoto allowances (AAUs), which would avoid double counting. Also, JI projects needed to prove that their emissions reductions would be additional to what would have otherwise happened without the incentive of the ERUs. More than 90% of the ERUs were issued by Russia and Ukraine, countries with allocations of Kyoto allowances that exceeded their business as usual emissions (so called “hot air”) and where their incentives to bank allowances for future Kyoto periods where they would have binding commitments was weak (these binding Kyoto targets never did eventuate).

This lack of a binding target at the national level meant that additionality of JI units could be assessed only on a project level.  However the institutions to ensure additionality were not strong – and project additionality is inherently very difficult to establish in most cases.   The lack of credible and stringent baselines for Joint Implementation projects inundated the international carbon market with very cheap credits, bringing down global carbon prices and national carbon prices in those countries that allowed them for compliance with their ETS.[3]

CAT and JI are similar in that they involve carbon credit exchanges between countries with national emissions reductions commitments, under the Kyoto Protocol for Joint Implementation and under the Paris Agreement for Climate Action Teams. However, they propose two very different approaches to do so. CAT agreements are underpinned by a meaningful mitigation baseline for the whole host country economy, as set by an ambitious NDC. This ensures that high integrity units are achieved. JI instead relies on project-based baselines to demonstrate additionality. These project-based baselines are not constrained within an ambitious national cap. They were often not credible, leading to non-additional projects and credits. Demonstration of additionality under a CAT agreement is relatively straightforward, as it involves emission reductions beyond an already ambitious NDC, which effectively sets a GHG emissions cap for the host country.

[2] In its Annex B, the Kyoto Protocol set binding emission reduction targets for 37 industrialized countries and economies in transition and the European Union.

[3] For the NZ experience see Ormsby, Judd, Dominic White and Suzi Kerr. 2021 ‘Delinking the New Zealand Emissions Trading Scheme from the Kyoto Protocol: Comparing Theory with PracticeClimate Policy 11 Feb.  pp. 1-12