Joint Implementation (JI), defined in Article 6 of the Kyoto Protocol, allowed Annex B countries[1], with emission reduction commitments, to acquire emission reduction units (ERUs) from emissions mitigation projects in another Annex B party and use these ERUs towards their Kyoto target. For every tCO2e reduced and credited through JI projects, host countries would cancel one of their country-wide Kyoto allowances (AAUs), thus avoiding 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. There were two forms of JI: “track 1” with rules determined only by countries participating in the transaction, and “track 2” with international oversight by the JI Supervisory Committee (JISC).
More than 90% of the ERUs were issued by Russia and Ukraine, countries with allocations of Kyoto allowances that exceeded their business-as-usual (BAU) emissions (so called “hot air”).
This allowance surplus at the national level meant that additionality of JI units could be assessed only on a project level. Given the absence of international oversight under “track 1”, no credible additionality test was applied to “track 1” JI projects from Russia and Ukraine. Because of this, as well as the lack of credible and stringent baselines for ’track 1”projects, they 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.[2]
CAT and JI are similar in that they involve carbon credit exchanges between countries with national emissions reductions commitments, under the Kyoto Protocol for JI and under the Paris Agreement for CATs. 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 and an ambitious crediting baseline which is set well below a credible BAU scenario and the national (NDC) reference scenario. This ensures that high integrity units are achieved. As discussed above, ‘track 1” JI projects-lacked credible additionality and baseline determination, and were not subject to an ambitious national cap. Demonstration of additionality under a CAT agreement is relatively straightforward, as it involves emission reductions beyond an already ambitious NDC, which effectively sets a binding GHG emissions cap for the host country.
[1] In its Annex B, the Kyoto Protocol set binding emission reduction targets for 37 industrialized countries and economies in transition and the European Union.
[2] 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 Practice ‘ Climate Policy 11 Feb. pp. 1-12