Joint Implementation (JI) and the Clean Development Mechanism (CDM), the first internationally recognised crediting mechanisms, were introduced under the Kyoto Protocol. It was especially with the CDM that valuable initial experience was gained – more than 8,000 emission reduction projects have been registered under the CDM so far. For an assessment of the first 10 years of the CDM, see The Clean Development Mechanism - The World‘s First Carbon Crediting Mechanism.
The CDM and JI are firmly embedded in the structure created under the Kyoto Protocol. Industrialised nations can use emission reduction certificates generated under both the CDM (Certified Emission Reductions, or CERs) and JI (Emission Reduction Units, or ERUs) to meet their Kyoto commitments. This also applies for the current, second commitment period, which runs until 2020. Sweden and Norway are two of the countries that have made use of this option.
The certificates may also be used in emissions trading schemes. For example, companies participating in the EU ETS can use CERs to comply with their climate change mitigation commitments. In addition, private individuals and businesses may use their Kyoto certificates to reduce their carbon footprint voluntarily (known as the voluntary market). Demand for Kyoto certificates has dropped significantly in recent times and the associated drop in prices for CERs and ERUs has led to a strong decline in registration of new CDM and JI projects.
JI enables projects to be conducted in industrialised countries that have committed to emission reductions under the Kyoto Protocol. The CDM is used for climate change activities in developing countries that are not bound by Kyoto commitments. In contrast to JI, the CDM was established not only to promote climate change effort, but also to support developing countries in achieving more sustainable forms of development.
Both mechanisms were designed to promote bilateral cooperation in climate change mitigation. The cooperation activities are conducted not at national level, but at project level with the involvement of private entities, and of companies in particular. This has enabled valuable experience to be gained in integrating the private sector into climate change effort. Through international cooperation, capacities have been established – especially in developing countries – to assist the development, implementation and validation of emission reduction activities. In this way, governments and administrations have gained experience in managing and monitoring greenhouse gas emissions, acquiring the necessary skills and expertise, and creating the associated institutions.
With the CDM and JI, a detailed set of rules and numerous methodologies have been created to assist implementation of climate change mitigation measures. Both mechanisms are structured so that project developers register their emission reduction activities with the respective authorities. Once the project or the programme has completed a pre-determined cycle, the project developer receives emission certificates in the amount of the emission reductions achieved or the amount of carbon sequestered. The requirements and methodologies for implementing emission reduction projects have been adapted and enhanced over time. This has given rise to a very flexible and adaptive instrument, particularly as regards the CDM.
The gradual enhancement was also a response to the weaknesses that had been identified in the two mechanisms over the years, one being the unbalanced geographic distribution of CDM projects. Concentration of CDM activities in emerging economies, especially in Asia, meant that less-developed regions, and especially Africa, were excluded from the benefits to be had from using the CDM. This is all the more problematical in that promoting sustainable development, which is the second aim of the CDM, is of particular importance in less-developed countries.
Another major point of criticism involves doubt regarding the additionality of CDM and JI projects in that climate change activities which would have been conducted without the CDM or JI are not additional and could undermine the integrity of the Kyoto Protocol. Because the certificates generated by such activities can be used by industrialised countries to meet their Kyoto commitments, each certificate must be equal to a defined amount of emission reductions that would not have been achieved without the CDM and JI. If this cannot be verified, and if industrialised countries use certificates from activities that would have been conducted anyway, they emit greater quantities of greenhouse gases without achieving the corresponding reductions elsewhere. Critics point out that some climate change activities, especially large-scale projects such as wind farms and dam projects, would also have been conducted without the additional incentive provided by the CDM and JI.
These weaknesses have been remedied with far-reaching reforms and the introduction of new concepts such as the programmatic approach and standardised methodologies. Given their central role in the development of future market-based mechanisms under the Paris Agreement, both approaches are addressed in detail in the following.