Paragraph 1

For the purpose of meeting its commitments under Article 3, any Party included in Annex I may transfer to, or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources or enhancing anthropogenic removals by sinks of greenhouse gases in any sector of the economy, provided that:

(a) Any such project has the approval of the Parties involved

Parties involved in Joint Implementation (JI) project activities must give approval for:

  • a proposed project to take place; and
  • the participation of the project participants in the project.

Unlike the Clean Development Mechanism (CDM), letters of approval are not formally discussed in the JI rules.  However, the requirement for project-level approval by Parties is implied by Article 6, paragraph 1(a) of the Kyoto Protocol above.

Similarly, the need for participant-level approval is implied by 9/CMP.1, Annex, paragraph 29:

A Party that authorizes legal entities to participate in Article 6 projects shall remain responsible for the fulfilment of its obligations under the Kyoto Protocol and shall ensure that such participation is consistent with the present annex. Legal entities may only transfer or acquire ERUs if the authorizing Party is eligible to do so at that time (9/CMP.1, Annex, paragraph 29).

In practice, the project-level and participant-level approvals are collapsed into a single approval process.  For Track 1 projects, these approvals are obtained and confirmed internally, according to national regulations.

For Track 2 projects, approvals are confirmed by the accredited independent entity (AIE) as part of the project determination:

The accredited independent entity shall determine whether:

  1. The project has been approved by the Parties involved (9/CMP.1, Annex, paragraph 33(a)).

Although this appears to refer only to project-level approval, the JI rules do not provide for confirmation/determination of participant-level approval, so this paragraph should be read as requiring both approvals.

(b) Any such project provides a reduction in emissions by sources, or an enhancement of removals by sinks, that is additional to any that would otherwise occur

Emission reductions from JI projects are required to be 'additional' - that is, the greenhouse gas emissions after implementation of a JI project must be lower than those that would have occurred in the most plausible alternative scenario to the implementation of the JI project (that is, the baseline scenario).

If the same level of emission reductions would have occurred even without implementation of the project, then the project will not be considered additional, and therefore will not be eligible to receive emission reduction units (ERUs) as a JI project.

Project participants may demonstrate additionality in one of a number of ways, which are set out in Annex I to the Guidance on criteria for baseline setting and monitoring (JISC 4, Annex 6).  These are:

  • In accordance with the criteria for demonstration of additionality in an approved Clean Development Mechanism (CDM) methodology;
  • By applying the most recent Tool for the demonstration and assessment of additionality approved for use in the CDM;
  • By applying any other method approved by the CDM Executive Board for assessing additionality;
  • By providing transparent and traceable information to demonstrate additionality, having used conservative assumptions; or
  • By providing transparent and traceable information to demonstrate that an AIE has already determined that a comparable project is likely to result in emission reductions that are additional to the baseline scenario.

(c) It does not acquire any emission reduction units if it is not in compliance with its obligations under Articles 5 and 7

2/CMP.1 provides that Annex I Parties must also fulfil the methodological and reporting obligations under Article 5 and Article 7 in order to participate in any of the flexible mechanisms, including JI:

... the eligibility to participate in the mechanisms by a Party included in Annex I shall be dependent on its compliance with methodological and reporting requirements under Article 5, paragraphs 1 and 2, and Article 7, paragraphs 1 and 4, of the Kyoto Protocol (2/CMP.1).

These methodological and reporting requirements include:

  • Implementing a national system for estimating greenhouse gas emissions from sources and removals of emissions by sinks; and
  • Submitting an annual inventory covering all emissions and removals of greenhouse gases not covered by the Montreal Protocol; and
  • Providing all necessary supplementary information required to ensure that Parties do not exceed their assigned amounts calculated pursuant to their quantified emission limitation and reduction commitments.

The full text of those Articles is as follows:

Article 5
  1. Each Party included in Annex I shall have in place, no later than one year prior to the start of the first commitment period, a national system for the estimation of anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol. Guidelines for such national systems, which shall incorporate the methodologies specified in paragraph 2 below, shall be decided upon by the Conference of the Parties serving as the meeting of the Parties to this Protocol at its first session.
  2. Methodologies for estimating anthropogenic emissions by sources and removals by sinks of all greenhouse gases not controlled by the Montreal Protocol shall be those accepted by the Intergovernmental Panel on Climate Change and agreed upon by the Conference of the Parties at its third session. Where such methodologies are not used, appropriate adjustments shall be applied according to methodologies agreed upon by the Conference of the Parties serving as the meeting of the Parties to this Protocol at its first session. Based on the work of, inter alia, the Intergovernmental Panel on Climate Change and advice provided by the Subsidiary Body for Scientific and Technological Advice, the Conference of the Parties serving as the meeting of the Parties to this Protocol shall regularly review and, as appropriate, revise such methodologies and adjustments, taking fully into account any relevant decisions by the Conference of the Parties. Any revision to methodologies or adjustments shall be used only for the purposes of ascertaining compliance with commitments under Article 3 in respect of any commitment period adopted subsequent to that revision.
  3. The global warming potentials used to calculate the carbon dioxide equivalence of anthropogenic emissions by sources and removals by sinks of greenhouse gases listed in Annex A shall be those accepted by the Intergovernmental Panel on Climate Change and agreed upon by the Conference of the Parties at its third session. Based on the work of, inter alia, the Intergovernmental Panel on Climate Change and advice provided by the Subsidiary Body for Scientific and Technological Advice, the Conference of the Parties serving as the meeting of the Parties to this Protocol shall regularly review and, as appropriate, revise the global warming potential of each such greenhouse gas, taking fully into account any relevant decisions by the Conference of the Parties. Any revision to a global warming potential shall apply only to commitments under Article 3 in respect of any commitment period adopted subsequent to that revision.

Article 7

  1. Each Party included in Annex I shall incorporate in its annual inventory of anthropogenic emissions by sources and removals by sinks of greenhouse gases not controlled by the Montreal Protocol, submitted in accordance with the relevant decisions of the Conference of the Parties, the necessary supplementary information for the purposes of ensuring compliance with Article 3, to be determined in accordance with paragraph 4 below.
  2. Each Party included in Annex I shall incorporate in its national communication, submitted under Article 12 of the Convention, the supplementary information necessary to demonstrate compliance with its commitments under this Protocol, to be determined in accordance with paragraph 4 below.
  3. Each Party included in Annex I shall submit the information required under paragraph 1 above annually, beginning with the first inventory due under the Convention for the first year of the commitment period after this Protocol has entered into force for that Party. Each such Party shall submit the information required under paragraph 2 above as part of the first national communication due under the Convention after this Protocol has entered into force for it and after the adoption of guidelines as provided for in paragraph 4 below. The frequency of subsequent submission of information required under this Article shall be determined by the Conference of the Parties serving as the meeting of the Parties to this Protocol, taking into account any timetable for the submission of national communications decided upon by the Conference of the Parties.
  4. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall adopt at its first session, and review periodically thereafter, guidelines for the preparation of the information required under this Article, taking into account guidelines for the preparation of national communications by Parties included in Annex I adopted by the Conference of the Parties. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall also, prior to the first commitment period, decide upon modalities for the accounting of assigned amounts.

Satisfaction of these requirements, and consequently, eligibility, will be determined by the enforcement branch of the Compliance Committee:

Oversight of this provision will be provided by the enforcement branch of the Compliance Committee, in accordance with the procedures and mechanisms relating to compliance as contained in decision 24/CP.7, assuming approval of such procedures and mechanisms by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol in decision form in addition to any amendment entailing legally binding consequences, noting that it is the prerogative of the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol to decide on the legal form of the procedures and mechanisms relating to compliance (2/CMP.1, paragraph 5).

The reporting obligations set out above are in addition to the requirement in Article 12 of the UNFCCC, which requires Parties to submit national inventory reports (National Communications) to the COP/MOP.

In addition, the eligibility requirements for Parties involved contained in paragraph 21 of the JI guidelines state that Parties must have fulfilled, among other things, its obligations under Articles 5 and 7 in order to engage in the transfer and/or acquisition of emission reduction units (ERUs):

Subject to the provisions of paragraph 22 below, a Party included in Annex I with a commitment inscribed in Annex B is eligible to transfer and/or acquire ERUs issued in accordance with the relevant provisions, if it is in compliance with the following eligibility requirements:

  1. It is a Party to the Kyoto Protocol
  2. Its assigned amount pursuant to Article 3, paragraphs 7 and 8, has been calculated and recorded in accordance with decision 13/CMP.1
  3. It has in place a national system for the estimation of anthropogenic emissions by  sources and anthropogenic removals by sinks of all greenhouse gases not controlled by the Montreal Protocol, in accordance with Article 5, paragraph 1, and the requirements in the guidelines decided thereunder
  4. It has in place a national registry in accordance with Article 7, paragraph 4, and the requirements in the guidelines decided thereunder
  5. It has submitted annually the most recent required inventory, in accordance with Article 5, paragraph 2, and Article 7, paragraph 1, and the requirements in the guidelines decided thereunder, including the national inventory report and the common reporting format.  For the first commitment period, the quality assessment needed for the purpose of determining eligibility to use the mechanisms shall be limited to the parts of the inventory pertaining to emissions of greenhouse gases from sources/sector categories from Annex A to the Kyoto Protocol and the submission of the annual inventory on sinks
  6. It submits the supplementary information on assigned amount in accordance with Article 7, paragraph 1, and the requirements in the guidelines decided thereunder and makes any additions to, and subtractions from, assigned amount pursuant to Article 3, paragraphs 7 and 8, including for the activities under Article 3, paragraphs 3 and 4, in accordance with Article 7, paragraph 4, and the requirements in the guidelines decided thereunder (9/CMP.1, Annex, paragraph 21).

(d) The acquisition of emission reduction units shall be supplemental to domestic actions for the purposes of meeting commitments under Article 3.

Annex I Parties may use ERUs generated by registered JI projects to meet part of their Kyoto targets.

However, the Conference of the Parties decided that use of the Kyoto Protocol's flexibility mechanisms (that is, the CDM, JI and emissions trading) must be "supplemental" to domestic action to reduce emissions, and that domestic action by Parties must therefore constitute a "significant element" of actions by Annex I Parties to reduce emissions.

Articles 5, 7 and 8 of the Kyoto Protocol require Parties to include information in their national communications on how use of the flexible mechanisms has been "supplemental" to domestic action.

The limitations that apply to transfers of other credits under the international emissions trading rules under Article 17 do not apply to ERUs issued in respect of emission reductions that were verified under the Track 2 verification procedure:

Any provisions relating to the commitment period reserve or other limitations to transfers under Article 17 shall not apply to transfers by a Party of ERUs issued into its national registry that were verified in accordance with the verification procedure under the Article 6 Supervisory Committee (9/CMP.1, Annex, paragraph 41).

This means that Parties are eligible to transfer Track 2 ERUs from their national registry without breaching their commitment period reserve and to use as many Track 2 ERUs as they wish for compliance with their Kyoto targets.

Last updated on 24 November 2008

Related topics

Letter of approval

Project participant

Determination (Track 2)

What is additionality?

ERUs