2.1 Developing Countries
2.2 Developed Countries
2.3 Private Sector Initiatives
The success of carbon offset projects will depend upon structuring the projects in a way that meets the objectives and expectations of all parties involved. In creating a framework for JI or AIJ projects, it is critical to think about the expectations of (1) the developing countries which will host such projects, (2) the developed countries from which the investors will come, and (3) the investors themselves, who will generally be private sector organizations responsible for substantial GHG emissions. Over the past decade, initiatives to address climate change have emerged from international forums, national governments, and the private-sector. These initiatives and responses to them are discussed in the following sections, presenting varying perspectives on JI/AIJ from developed and developing countries.
2.1.1 Asia/Pacific Region
2.1.2 Opportunities for Tangible Benefits
2.1.3 Costa Rica and Central America
Developing countries do not have any commitments under the FCCC to reduce their GHG emissions, nor are they likely to have any in the near term. However, by definition AIJ has a significant impact on developing countries and they have been active in defining the scope and structure of AIJ. Developed countries see AIJ as a way of meeting their emissions reduction commitments more cost effectively. Developing countries generally view AIJ as a cheap emissions reduction opportunity for developed countries.
The UN FCCC COP1 presents a framework for the pilot phase of AIJ that allows developed and developing countries to gain experience with the concept of JI and that addresses some developing country concerns about whether AIJ projects will contribute to their development priorities. To reiterate, the COP agreement clearly states that AIJ projects should: (1) be compatible with and supportive of national development priorities; (2) be approved by host and investor country governments; (3) bring about real, measurable, and long-term environmental benefits related to climate change that would not have occurred in absence of projects; (4) be funded by additional resources, beyond the Convention requirements and current official development assistance; and (5) not receive any carbon credit for emissions reductions during pilot phase.
For the developing countries, different regions of the world have responded differently to prospects for developing JI projects. Latin America has benefited the most from AIJ investment. Costa Rica has developed the most sophisticated approach to developing AIJ projects among developing countries. The success of Costa Rica's approach is spilling over into other countries in Central and South America, such as Mexico, Belize, and Bolivia. In other regions, the Russian Federation is reportedly developing an internal process for reviewing proposals in the forestry sector, and countries in Eastern Europe, such as Hungary and the Czech Republic are developing AIJ initiatives. Developing countries in the Asia/Pacific might see AIJ as a potential means of helping to meet national development priorities, but they have been more reluctant than developing countries in other regions to pursue AIJ opportunities. A number of countries have exhibited a wait-and-see attitude concerning AIJ, and have seemed sceptical about its prospects for success. Others, such as India, have strongly supported a pilot phase for AIJ, arguing that the time was needed to experiment with the JI concept and insure that it would work for the benefit of developing countries. But even countries like India, which support AIJ, have not stepped forward to accept the development of JI/AIJ projects. This lack of a proactive approach by developing country governments has also contributed to the dearth of AIJ projects in this region to date.
Developing country resistance is led by several countries of the Asia Pacific region. This has created difficulty for potential JI/AIJ project developers in the region, especially because there has been limited knowledge and enthusiasm for such projects within host country governments. The Asia/Pacific region has generally been less receptive to JI/AIJ, largely due to political tensions that have ensued through negotiations under the FCCC and COP framework between developed and developing countries. Several points of opposition have been raised by some developing countries from the Asia/Pacific region (and to a lesser extent other regions), such as:
a. Developing countries want to see progress by the developed countries in reducing their GHG emissions at home. This means that developed countries must face up to the policy and economic realities of reducing their energy consumption.b. Developing countries have a right to develop their natural resources and grow their national economies in a manner similar to what most developed countries used in the past to fuel their economic development. Why should developed countries bear the brunt of global responsibility to reduce GHG emissions now when it is their opportunity to utilize their natural resources in ways that meet the demands of their growing populations?
c. The JI framework will allow investors in the developed countries to purchase the lowest-cost GHG credits from the developing countries, leaving the developing countries to have to invest more of their own resources in future activities to reduce GHG emissions in order to meet their own future obligations.
The varying support for AIJ around the world can probably be attributed to a countries stage of economic development and concern over AIJ as a form of developed-country eco-imperialism, but also geography. Latin America is closest to the United States where the AIJ concept was first developed. In addition, U.S. based NGOs and companies that first advanced AIJ were most active in the Latin American region. Thus, since AIJ's inception, awareness of the concept has been greatest in Latin America. Countries with rapidly developing economies, mostly from Southeast Asia, but also some Latin American countries (Brazil, Venezuela), have expressed limited support. Lesser developed countries of the Asia Pacific region are more receptive although the position of regional leaders (e.g. Malaysia) tends to affect the positions of lesser developed countries. This difference between lesser and more developed countries is that in the short term the less developed countries are more dependent on international assistance, such as AIJ investment. Another reason is that more developed countries anticipate increasing emissions from their continued rapid economic development and are reluctant to engage in activities that might reduce their economic growth. Lastly, eco-imperialism has been a concern to developing country governments, industry and NGOs over the last decade. AIJ is viewed as another mechanism whereby developed country governments dictate or control forestry (and energy) resources in a developing country.
The response toward JI in the Asia/Pacific region - which in different situations might be interpreted as opposition, disinterest, or caution - has resulted in limited understanding, even confusion, among governmental officials and non-governmental representatives regarding JI/AIJ. It has translated into an environment that has not been receptive to AIJ proposals from project developers and an organizational context in most countries in which there is limited commitment and capacity to develop mechanisms or approaches to facilitate AIJ projects. In a number of countries, it has been difficult to determine the government's position regarding AIJ because officials in various ministries disagree or are uncertain about AIJ in general and what agency is the appropriate AIJ focal point.
However, as developing countries in the region begin to recognize potential benefits, resistance to the concept seems to be waning. In this regard, India and the Philippines recently released criteria for AIJ projects. Other countries are likely to follow. AIJ is increasingly being viewed as a means for developing countries to meet their national development and environment priorities. AIJ should contribute to their economic, social, and institutional development, while improving their local environment. These benefits, in turn, can provide the basis and the funding for broader objectives, such as better health care, education, and human development - but only if the AIJ system is structured to make these far-reaching potential benefits possible. The next section provides an overview of potential benefits of JI/AIJ projects for developing countries.
A major benefit that developing countries would obtain through a properly structured AIJ system -the potential benefit that is driving their expectations - is access to capital from foreign investment and new technologies. Many developing countries are seeking increased foreign investment to improve their infrastructure, and AIJ might provide a mechanism for directing such investment to areas where it is most needed. In addition, many countries are seeking ways to improve their obsolete or inefficient technologies and see AIJ as a mechanism for obtaining state of the art technologies. New technologies through AIJ projects in energy efficiency or alternative energy sources might allow countries to reduce the costs of energy (oil) imports, which would free up some foreign exchange and provide additional fund for development programmes. AIJ projects in the forestry sector might be developed to provide biomass as a local source of alternative fuels. In addition, forestry projects can provide environmental benefits such as reducing soil erosion, enhancing watersheds and water quality, and improving biodiversity, as well as creating or maintaining valuable carbon sinks. The following opportunities are adapted from a paper presented at a 1997 AIJ workshop in India.
Increased Investment in Priority Sectors
Because the COP1 criteria specifically require the approval of host country governments in AIJ projects, countries have the opportunity to direct new private capital flows into the priority sectors of their economies. Therefore, pilot projects could contribute to investment into forestry sector projects that host governments deemed most desirable. These investments through AIJ have certain advantages over joint ventures and foreign direct investment because the economic, social, and environmental benefits are an integral part of the project, not simply incidental effects. In contrast, the viability of joint ventures is based primarily on the financial returns of the project within the host country, while the global environmental benefits, if any, are purely by-products. For AIJ projects, the contribution to GHG abatement is explicit and closely monitored. The economic return will include various incentives provided by the host and investor country governments. If there is a trading system for carbon credits in the future, the value of these credits would also be included in the value of the project. In this way, projects that benefit the global environment can move forward even if they would not be economically viable outside the AIJ framework. On the other hand, although joint venture projects do not necessarily provide these other benefits and are probably difficult (or nearly impossible) to develop, they might provide a more direct, less politically charged approach to obtaining foreign investment.
Another investment benefit of AIJ projects is that they would involve more grants than a normal joint venture, or even a multilateral concessionary loan. Although carbon credits are not available during the pilot phase, AIJ investors would provide much of their investment as grants. In an operational phase, these grants would be in exchange for a portion of the credit for emissions reductions. The Global Commons Institute analysis of historical carbon emissions shows that developing countries whose per capita emissions are less than the threshold required to stabilize the climate system are providing a subsidy to over-consuming countries of a half a billion tons of carbon per year - with no compensation. Converted into national income using average output per unit of carbon emissions, this amounts to a $4 trillion annual subsidy. Capital grants for AIJ projects, even though they may be tiny compared to the size of this environmental subsidy, are at least a first step in reversing this flow of resources.
Technology Transfer
AIJ guidelines require parties to report the transfer of environmentally sound technologies and know-how to developing countries. This framework, along with government approval of projects, can insure that state-of-the-art technologies are brought to countries in the region. In the forestry sector reduced impact logging, intensive plantation management, conservation through social forestry and biomass energy systems are only a few technologies that might be transferred through an AIJ project.
Reduced Petroleum Imports
AIJ projects that promote renewable energy sources, industrial and power generation efficiency, and fuel efficiency in the transportation sector can ease the burden of petroleum imports and free up funds for critical development needs. Even though the capital costs of some alternative energy sources are higher than coal thermal plants or diesel generators, most renewable and decentralized technologies, like biomass energy, are competitive in the long run.
Job Creation
AIJ can assist countries in meeting the challenge of creating new jobs for the currently under-employed and the growing workforce. In the power sector, new jobs can be created by promoting renewable and decentralized power generation technologies which are more labour intensive and less capital intensive. In the forestry and agricultural sectors, new jobs can be created through the development of sustainable management practices. Examples of more labour intensive technologies include wind power and biomass energy production. New power generation plants can support small scale rural industries in agroforestry, food and wood processing, and traditional crafts, just to name a few. Access to power also increases the potential for irrigation, which can raise farm yields, agricultural employment, and demand for services.
Social and Infrastructural Benefits
AIJ projects in the energy sector, especially those using decentralize technologies, which would in turn increase local food supplies and employment. Projects promoting sustainable management of forests and more efficient use of fuelwood (e.g., efficient cookstoves) would effectively increase local access to fuel and encourage enterprises based on non-timber forest products while protecting valuable GHG sinks.
Institutional Capacity
A major barrier to moving forward with AIJ projects in most developing countries is the lack of institutional capacity to design, execute, and monitor projects. The fact that only a few pilot phase AIJ projects have emerged in the region attests to the need for capacity building. Foreign investment, while it may provide capital, does not necessarily contribute to local skills. On the contrary, many projects have relied heavily on foreign equipment, consultants, technical expertise, and monitoring. In the long run, this only perpetuates dependence on outside experts, which is clearly inconsistent with the notion of sustainable development. AIJ reporting guidelines during the pilot phase require projects to address the degree to which they strengthen host country capacity as they are being formulated and implemented. These projects, therefore, should provide opportunity for training and assistance in such areas as project planning and development, technology assessments, marketing, project evaluation, communication and outreach, and policy analysis. Capacity building strategies should be directed to organizations functioning at the local, state and national levels.
Local environmental benefits
Population growth, rapid urbanization, the development of heavy industry, and unsustainable agriculture and forestry practices have had significant adverse environmental impacts on many countries in the region. These impacts Throughout the developing world, it is the poor who suffer the most from air and water pollution, erosion, and other environmental problems - the poor who have no option but to rely on their immediate environment for survival. In many cases, government policy may exacerbate problems rather than fix them. International regimes such as AIJ, therefore, should focus on providing local environmental benefits and promoting the development of sustainable livelihoods which do not degrade the environment. The AIJ pilot phase criteria require projects to report on the local social and environmental benefits provided to host countries, beyond the benefits of GHG mitigation.
Early experiences from another region of the world are worth noting. As mentioned earlier Latin America has been a leader in developing JI/AIJ programmes. Costa Rica is widely perceived as the innovation leader in developing mechanisms for promoting JI projects. As a result, it has had the greatest success of all developing countries in getting projects approved through international programmes like USIJI, and in obtaining funding for such projects. Costa Rica's success is generally attributed to the early recognition by the nation's political leadership that JI held tremendous potential for attracting foreign capital to support development activities, consistent with Costa Rica's own development and environment priorities. The country therefore created internal research, development, and financial institutional mechanisms to promote JI. Its leadership and success have spilled over to other countries in Central and South America, such as Mexico, Belize, and Bolivia, which have developed JI initiatives of their own and begun developing frameworks to encourage and assist project developers, and to attract investment.
In July, 1994, the Ministry of Natural Resources, Energy and Mines established the Costa Rica Office for Joint Implementation to facilitate and promote the participation of Costa Rican private individuals and companies in GHG mitigation activities (Van der Gaast, 1996). In October 1994, the Costa Rican government signed the first bilateral JI agreement with the United States.
Due to this early and effective adoption of JI, Costa Rica already has eight USIJI approved projects, four of which are in the forestry sector. These projects include and integrate several forestry activities, including preservation, sustainable forest management, reforestation, and agroforestry. A new forestry law signed in March, 1996, creates a specific framework for attracting JI investments to forestry sector projects. It also provides for a Costa Rican National Forestry Financing Fund (FONAFIFO) to assist with project development and administer funds for small-scale reforestation and forest management projects (Tattenbach, 1996).
The Costa Rican Office for Joint Implementation (CROJI) is developing a Carbon Fund through which it will oversee a portfolio of carbon offset projects. Similar to a mutual fund approach, the Carbon Fund will protect investors against the level of risk associated with individual projects by allowing them to purchase portions of the Fund's overall GHG reductions. The Fund is also expected to help investors reduce the transaction costs associated with the development of individual projects and ensure the credibility of GHG reductions through rigorous third party verification. The Carbon Fund will serve as an intermediary between project developers and JI investors, creating a system of Certifiable, Tradable Offsets (CTOs)2 for purchase by investors.
2 CROJI (1996) describes a CTO as "... a specific number of units of GHG emissions reduced or sequestered in which all phases of the JI project in the host country have already been completed and in which the without project baseline has been certified by both the home and host countries. The home country verification would certify that the offsets are of high enough quality to allow them to count against national and firm level GHG reduction commitments, if such crediting is permitted under the FCCC."
CROJI is pursuing the first issue of CTOs through two separate JI initiative: A Protected Areas Project (PAP) focused on preserving biological resources through land purchases and related activities aimed at consolidating Costa Rica's system of National Parks and Biological Reserves; and a Private Forestry Project (PFP) focused on compensating landowners for conservation, reforestation, and sustainable management efforts (Tattenbach, 1996). FONAFIFO is currently developing the framework for a revolving fund, starting with a small carbon tax that is providing funds to initiate several PFP projects. As the projects are implemented, project developers will assign the GHG reductions to the Carbon Fund, which will then sell them as CTOs to JI investors. Revenues from the sale of CTOs will be recycled into additional PFP projects, thus creating more CTOs.
Costa Rica's innovative leadership and success in promoting JI projects as a means of attracting foreign investment into the country appears to have had a significant impact in Latin America. A number of other countries have developed JI proposals and are seeking to develop domestic JI frameworks that will enable them to better compete in efforts to attract foreign capital. The Mexican government, for example, recently convened a workshop to bring JI project developers together to share information and lessons about how to develop JI projects, and to explore ways to build internal mechanisms to support the development and marketing of JI projects.
The Mexican government has demonstrated its interest in JI through the establishment of a focal point for JI/AIJ within INE-SEMARNAP and the formation of three committees to review potential projects and address methodological issues related to both forestry and energy sector projects. The priority ascribed to the forestry sector is signified by the fact that the first two AIJ projects approved by Mexico are in the this sector. At an April 1997 workshop in Chiapas, a government official noted that forestry sector opportunities provide an important short-term "window" for JI initiatives that could help the Mexican government meet sustainable development and environmental priorities while providing substantial GHG reduction benefits. In the longer term, however, he stated that opportunities related to investments in energy efficiency and alternative energy sources will be necessary.
The Chiapas workshop explored some of the innovative mechanisms used in the Scolel Te project (see Section 4.3.2), such as using a credit union to serve as an intermediary between investors seeking GHG reductions and farmers implementing forestry and agroforestry practices to develop such GHG reductions. Participants in the workshop also discussed national level mechanism to assist with the development of widely acceptable methodologies for quantifying forestry sector GHG reductions and for creating a portfolio of JI projects, such as Costa Rica's Carbon Fund, to make investments in Mexico less risky and cost-effective for investors.
2.2.1 United States
2.2.2 The Netherlands
2.2.3 Australia
2.2.4 Canada
2.2.5 Japan
Developed countries are urged by the FCCC to take the lead in developing and applying strategies for reducing global GHG emissions. They are also motivated by their voluntary commitments under the FCCC to reduce national emissions - commitments that generally are not being met and might be strengthened. Their expectations of AIJ projects focus on:
a. Developing cooperative and mutually beneficial approaches for reducing GHG emissions on a global scale that take advantage of the cost-effective opportunities in developing countries.b. Promoting sustainable development in developing countries through technology transfer and increased foreign investment.
c. Encouraging increased private-sector investment and technology transfer in developing countries.
d. Developing innovative pilot projects and evaluation methods through which the international community can learn and develop broadly accepted criteria for joint implementation.
AIJ has been of interest to developed countries because any carbon dioxide offset in developing countries ought to be cheaper. They also represent another an additional form of overseas development assistance (ODA). Concerns of developed countries centre around reliability or credibility of project implemented in developing countries where it is often difficult to implement and monitor projects. This is especially true in the case of land use projects where technical, financial, institutional and policy barriers are common. Therefore, forestry AIJ projects are viewed as risky ventures needing adequate contractual safeguards, such monitoring plans.
Responses from Developed Countries
As noted above, one positive aspect of the current failure of developed countries to mitigate their GHG emissions through voluntary initiatives is that there is a significant opportunity for AIJ projects - assuming these countries are indeed serious about their commitments under the FCCC. In response to this perceived opportunity, a number of domestic AIJ programmes have emerged. These programmes are driven by factors in both the governmental and private sectors, such as:
a. Development advocates who recognize the potential for JI investment to promote the goals of sustainability and technology transfer (Owang and Karani, 1994; Rose and Tietenberg, 1994).b. Economists and diplomats who recognize the efficiency potential of JI (Jones, 1994).
c. Host countries who wish to source the foreign investment and technology for sustainable development priorities (Sughandy, 1996; Stowall, 1996).
d. Private companies who see JI as a means to protect shareholder value against policy uncertainty, as well as low-cost opportunity for highly visible entry in emerging markets under the banner of environmental sensitivity (Malin, 1996; Lafstedt, et. al., 1996).
Developed Country Programmes
Currently, at least ten developed countries, including the United States, Netherlands, Canada, Germany, Australia and Japan have developed, or announced intentions to develop, mechanisms to review and approve international investment proposals which reduce GHG emissions (Stuart and Sekhran, 1996). To date these national programmes have lead to implementation of several projects and an estimated capitalization of US$40 million. Much of the investment has funded projects in Latin America. The number of such programmes is expected to grow as more countries become interested in developing JI programmes. The Netherlands, one of the most experienced countries in carbon offsetting, has opted for a different track and developed a "JI Simulation" programme to review selected sustainable development initiatives supported by Netherlands Development Assistance programmes and model their JI potential. A recent event that could spur interest in JI was the statement by the U.S. government officials, at the July 1996 UN FCCC Second Conference if the parties meeting in Geneva, calling for the establishment of binding and verifiable commitments by nations to reduce GHG emissions (Stuart et. al., 1996) A few of the more prominent programmes adopted by above listed countries are briefly discussed here.
The United States Initiative on Joint Implementation (USIJI) is an US inter-agency panel chaired by the Environmental Protection Agency and the Department of Energy, with membership drawn from the Departments of State, Treasury, Agriculture, Interior, and Commerce, as well as USAID. The USIJI was developed under the 1993 US Climate Change Action Plan and is the first US attempt to develop a programme encouraging voluntary private sector JI initiatives. The USIJI acts both as a auditor of ongoing projects and as an evaluator of proposed project concepts which are yet to be implemented.
The USIJI has had three submission reviews (November 1994, July 1995, and October 1996) through which 25 projects have been approved as "credible" projects. About half the projects are in the forestry sector. Most projects are in Latin America and Eastern Europe with only one project currently in Asia/Pacific (Indonesia). Of the six forestry interventions, preservation, reforestation, reduced impact logging and biomass energy are all represented. Many of the projects are still unfunded.
The Dutch Electricity Board, S.E.P, instigated one of the earliest forestry offset programmes, the Forests Absorbing CO2 Emissions (FACE) initiative, with the express goal of financing 150,000 hectares of varied reforestation activities over the coming 20 years. FACE presently has planting programmes ongoing in Malaysia, the Czech Republic, Uganda and Ecuador, as well as in the Netherlands itself.
The Dutch government has developed a JI modelling initiative; the Pilot Project Programme (PPP). The PPP is a testing regime for developing organizational models, GHG reduction calculation methodologies and criteria for identifying suitable projects. PPP participants are selected from ongoing Dutch bilateral aid projects with characteristics which, if replicable, could be suitable candidates for JI investment in the future. To participate in the PPP modelling process, host governments must agree to the status of "early experience," but do not need to formally endorse JI principles at this time.
Presently, the PPP initiative is modelling eight projects. They include three FACE Foundation forestry projects (in Ecuador, Uganda and the Czech Republic), a landfill methane extraction project in Moscow, a horticultural efficiency project in Western Siberia, a municipal energy efficiency project in Hungary and compressed natural gas retrofitting for buses, also in Hungary and, lastly, a micro-hydro project in Bhutan.
In late 1994, Australia initiated a Pilot JI Programme for the South Pacific. This pilot programme is oriented toward energy proposals and is being undertaken in cooperation with the South Pacific Forum Secretariat Energy Division. Two projects are presently in the final stages of contractual negotiations; a photovoltaic installation in Fiji and a demand-side management programme in the Solomon Islands. Both of these projects are funded by the Australian Department of Environment and are designed as models to explore the various issues of JI, including baselines, intergovernmental affairs and crediting. It appears that this pilot programme will not be expanded, due to its total reliance on internal departmental funding.
Australia is also developing a larger AIJ programme, along the lines of the USIJI. Unlike the South Pacific initiative, these projects will not be directly government funded. The initiative is designed to encourage Australian companies to redirect capital towards projects which are profitable as well as GHG beneficial. The plan will include an effort to develop bilateral agreements with APEC and South Pacific countries. The plan will include the development and implementation of cooperative projects with other countries, initiatives to enhance the export of Australian technologies and services with greenhouse benefits, and greenhouse specific development assistance to countries in the Asia/Pacific.
The Canadian government has initiated a Canadian Joint Implementation Initiative (CJII). Emission reductions are registered within an internal Canadian system, the Voluntary Challenge and Registry (VCR) run by Canada's Ministry of Natural Resources. After its initiation in February 1995, VCR has registered over 475 participants by November 1995. Now, 50 % the forestry, pulp and paper industries, 100% of all refiners, 95% of electric utility and chemical industries, 88% of natural gas distribution companies and 60% of the mining industries are participating in the VCR (Stuart and Sekhran, 1996).
The CJII is a sub-programme within the VCR. The stated objectives of CJII are to: contribute to global efforts to reduce net emissions of green house gases through voluntary partnerships between Canadian and foreign entities; encourage private sector initiatives to develop and disseminate technologies and build capacities in other countries; test and evaluate methodologies for initiating JI; and gain early, practical experience that can be used to develop a longer-term JI programme both domestically and internationally. Initiated pilot projects are supposes to: achieve GHG emission reductions cost effectively; be sustainable over the long term; have social, environmental and economic benefits; and improve energy efficiency in other countries as well.
The Japanese AIJ initiative began in late 1995. The lead agencies for the Japan AIJ initiatives are the Environmental Agency (EA) and the Ministry of International Trade and Industry (MITI). The initiative has similar elements to the Dutch PPP in that it emphasizes monitoring and evaluating a number of exiting development assistance projects, mostly aimed at improving energy efficiency. There is a defined emphasis in the Asian region. Project proposals are eventually expected to broaden in range and include forestry and renewable energy proposals with members of Alliance of Small Island States (AOSIS) (Matsuo, 1995a). It is apparently one of the aims of the Japanese AIJ programme to create a wide portfolio of projects upon which to develop monitoring and certification protocols. In the Japanese AIJ Programme, each ministry or agency is only responsible for assessing the specific individual projects submitted to it.
The guidelines include stipulations that to qualify for such recognition as a Japanese AIJ project, the following conditions must be met: the project's effectiveness in reducing carbon dioxide emissions must be assessable; the recipient country must agree to the project; project must be subject to environmental impact assessment and no increase in CO2 after the implementation of project.
The Ministry of Agriculture, Forestry and Fisheries also approved six forestry projects, utilizing community reforestation efforts. Four of the projects are in Southeast Asia, one in central Asia and the other one in East Africa. These are all sponsored by the NGOs except one by commercial group called the Sumitomo Forestry Group and this project involves the development of a project in conjunction with large forestry plantation.
2.3.1 Edison Electric Institute
2.3.2 The World Business Council for Sustainable Development (WBCSD)
2.3.3 E-7 Network For Expertise
2.3.4 Forest Absorbing CO2 Emissions (FACE) Foundation
Private sector investors in AIJ projects are responding to both international market-based opportunities and the possibility of regulatory approaches to reducing GHG emissions. For companies with significant GHG emissions, it is logical to seek low-cost investment opportunities in developing countries through which they can meet their obligations (at this point on a voluntary basis) to offset their emissions. One investment approach for companies is to "bundle" projected GHG emissions with investments in projects that will offset those emissions. Such a proactive, voluntary approach by companies provides opportunity for recognition, creates a record of emission reductions, and helps demonstrate the credibility of a voluntary, market-based approach. Investments by companies in AIJ projects can also provide market access in rapidly growing economies of developing countries, providing companies with opportunities strengthen business opportunities in host countries.
Private sector investors are also responding to expectations, or fears, of a regulatory framework which could be imposed. Their response, therefore, is based on a strategy that, on the one hand, might prevent such a framework from being imposed, and, on the other hand, might take advantage of investment opportunities that are below anticipated regulatory costs.
In addition to the government programmes, the private sector has also developed a number of initiatives to promote and learn from the concepts of JI/AIJ. Beyond individual corporate investments in carbon offset projects, there are four major private sector initiatives which promise to play a part in identifying investment opportunities for industrial concerns and, hopefully, lower the transaction costs involved in participation.
The Edison Electric Institute (EEI) is the US utility trade association for investor-owned (private) utilities, with a combined annual revenue of US$170 billion (Stuart and Sekhran, 1996). In voluntary cooperation with the US Department of Energy, EEI is coordinating the US electricity industry's GHG emissions reduction initiatives as part of climate challenge programme. Individual utilities sign commitments of intent with the Department of Energy to reduce emissions by either a given percentage or a gross amount. Until the end of 1995, 113 commitments had been signed representing annual reductions of 47 million metric tones of carbon equivalent by the year 2000 (Stuart and Sekhran, 1996).
While aiming at the goals of climate challenge, the EEI has separately developed five individual initiatives in different sectors. One of them is the Utility Forest Carbon Management Programme (UFCMP). The UFCMP developed criteria and a process to review proposed carbon offset projects in the forestry sector, and a year later, issued a request for proposals to hundreds of individuals and organizations. Thirty-two proposals, from the US, Central America, South America and Asia were reviewed by the UFMCP committees (Kinsman, et. al, 1996).
A non profit corporation, the UtiliTree Carbon Company, has been established by 40 of the UFMCP's 55 utilities to sponsor the selected projects. UtiliTree was initially capitalized at US $2.4 million, with a range of contributions from US $10,000 to $25,000 (Energy Information Agency, 1996).
The WBCSD supports proactive business involvement in improving environmental efficiency. The WBCSD comprises several of the largest multi-nationals in the world and through WBCSD's working group on climate and energy, it has launched a project to promote GHG mitigation projects. A project entitled "International Business Action on Climate Change," intends to: secure and facilitate the design of credible, effective international business actions; implement relative GHG mitigation initiatives; achieve a portfolio of projects that is diverse in terms of location, technology employed and types of action, such as reduction, avoidance, or sequestration of GHGs. Also intended are advance development of GHG mitigation projects based on negotiation between businesses; and "catalyze" a market for international mitigation projects.
The E-7 is a non-profit international group of eight of the largest electric utilities in the world, including EDF of France, RWE of Germany, ENRI of Italy, Tokyo Electric and Kansai Electric of Japan, Ontario Hydro and Hydro Quebec of Canada and Southern California Edison of the United States. E-7 is providing assistance for GHG mitigation efforts under its, "E-7 Network of Expertise for Global Environment" and the E-7 working group on Greenhouse Gases and Joint Implementation.
The E-7 is focusing its AIJ programme on providing in-kind services to the energy sector in developing countries. However, E-7 is not committed to directly investing in formal mitigation projects. It is currently participating in three JI/AIJ type projects in Indonesia, Jordan and Zimbabwe. In Indonesia, the E-7 has contributed in-kind services, and plans to participate in local infrastructure development for a renewable energy system. In Jordan, it is assisting the Jordan Electricity Authority to increase efficiency of older thermal stations. E-7 is helping in micro hydro projects in Zimbabwe.
Set up in 1991 by the Dutch Electric Generation Board (S.E.P.), the FACE foundation helps offset GHG emissions from power plants. PACE helps finance reforestation in the developing world (85%), Eastern Europe (10%) and in the Netherlands itself (5%). FACE's goal is to restore 150,000 hectares of forest land throughout the world within 25 years. Funding is provided by channelling one Dutch Guilder per year from each household's electricity bill into the foundation.
The initial impetus behind FACE's creation was the desire of S.E.P. to demonstrate that the proposed EU carbon tax would not be the most effective or reliable way to lower overall carbon emissions. The tightening of emissions standards for sulphur and nitrogen oxide emissions, to reduce acid rain precursors in the Netherlands, had already forced coal-reliant Dutch utilities to make very significant investment in cutting edge scrubber technologies. Currently, 90% of the Dutch electricity is generated by burning fossil fuel, and S.E.P. admits that it will be decades before the industry can convert to a system which produces less CO2 emissions (Stuart and Sekhran, 1996).
The FACE foundation has already launched afforestation initiatives in the Netherlands, Central Europe, South East Asia, and Central America.
