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www.unfccc.intUNFCCC secretariat
Session 4Meeting eligibility requirements
First UNFCCC workshop on implementationof Article 6 projects under the Kyoto Protocol
Moscow26-27 May 2004
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?
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
RMU
ERU
ERU
for emission reducing projects
for LULUCF projects
Compliance with Annex B targets
Emissions side Assigned amount side
Projectedemissions
Annex Bassignedamount
Finalemissions
LULUCF activities
Mechanismsacquisitions
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Verifying compliance with the targets
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Emissions 2008 - 2012
Secretariat compilation and
accountingdatabase
KyotoProtocol
ComplianceCommittee
Review, adjustment, compliance processes
National systems
Annex I Partysystems
Emissionsinventories
Reportingprocess
National registries
Assigned amount info
Assigned amount
2008 - 2012
Eligibility requirements for JI
a. Party to the Kyoto Protocolb. Assigned amount calculatedc. National system in place for
estimating emissions/removalsd. National registry in place for
tracking assigned amounte. Submission of most recent required
emissions inventoryf. Accurate accounting of assigned
amount and submission of information
Track 1 (full eligibility)
a. Party to the Kyoto Protocolb. Assigned amount calculatedd. National registry in place for
tracking assigned amount
Track 2
Issuance, transfer and acquisition
All Annex B Parties may develop and run JI projects eligibility relates to ERU issuance, transfer and
acquisition
Can issue, transfer and acquire ERUsMay verify the project and
reductions by its own procedures
Track 1 (full eligibility)
No eligibility Cannot issue or transfer ERUs
Track 2 Can issue and transfer ERUsonly after verification of the
project and reductions by the Article 6 Supervisory Committee
Reporting and review processes relating to eligibility
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
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
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
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 Party’s accounting• Suspend and reinstate eligibility to participate in mechanisms
Requirements relatingto the emissions side
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
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
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.
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
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
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 considerationby the Compliance Committee• AA based on adjusted base year, if applied• Once recorded, is fixed for entire commitment period
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
Requirements relatingto the assigned amount side
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
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
National registry accounts
Issuance of AAUs
and RMUs
Cancellation (not for compliance)
Retirement (for compliance)
Czech registry
Party account
Legal entity a/c
Legal entity a/c
Retirement a/c
Cancellation a/c
Replacement a/c
Canadian registry
Party account
Legal entity a/c
Legal entity a/c
Retirement a/c
Cancellation a/c
Replacement a/c
Transfers
tCER
ERU
lCER
CER
RMUAAU
Registries, the ITL and STLs
NR2 NR3 NR4 CDM-RNR1
Independent transaction logCommunications hub
Virtual private network
Basechecks
Supplementarytransaction log1
Supple-mentary
checks
Supplementarytransaction log2
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
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
Assigned amount info in reporting
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
Accurate accounting of additions and subtractions to assigned amount required for continued eligibility
In conclusion
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