Announcement of Groundrules for U.S. Initiative on Joint Implementation

DEPARTMENT OF STATE

Bureau of Oceans and International Environmental and Scientific Affairs

[Public Notice 2015]

Announcement of Groundrules for U.S. Initiative on Joint

Implementation

ACTION: Final groundrules.

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SUMMARY: The U.S. Climate Change Action Plan, announced by President

Clinton on October 19, 1993, set forth a series of measures designed to

return U.S. greenhouse gas emissions to 1990 levels by the year 2000

through domestic actions alone. Recognizing the enormous potential for

cost-effective greenhouse gas emission reductions in other countries,

the Administration also called for a pilot program--the U.S. Initiative

on Joint Implementation [USIJI]--to help establish an empirical basis

for considering approaches to joint implementation internationally and

thus help realize the potential of joint implementation both to combat

the threat of global warming and to promote sustainable development.

Department of State Public Notice 1918 (58 FR 66057-66059, December

17, 1993) set forth draft Groundrules for the U.S. Initiative on Joint

Implementation as directed by the President in the U.S. Climate Change

Action Plan, to provide criteria for the operation of a pilot program.

This notice provides the final Groundrules, together with a summary of

and response to comments on the draft Groundrules.

FOR FURTHER INFORMATION CONTACT:Daniel A. Reifsnyder, Director, Office

of Global Change, OES/EGC, room 4333, Department of State, 2201 C

Street, Washington, DC 20520-7818, telephone: (202) 647-4069,

facsimile: (202) 647-0191.

summary of and response to comments on the draft groundrules: The

Department of State received twelve sets of comments on the draft

Groundrules. The discussion below provides a review of the comments

received, as well as an explanation of the rationale for making

revisions to the Groundrules. Comments are organized according to the

outline of the Groundrules themselves: (I) Purpose, (II) evaluation and

assessment, (III) eligible participants, (IV) evaluation panel, and (V)

criteria for project eligibility.

Section I. Purpose

Only one comment was received on this section. It proposed revising

the language to reflect that used in the United Nations Framework

Convention on Climate Change. As the intent of the Groundrules is, in

part, to provide an empirical basis for use internationally, the

Groundrules were modified to maintain appropriate parallelism with the

Convention.

Section II. Evaluation and Reassessment

Comments on this section raised two issues: (1) Questions regarding

the timing of the evaluation of the pilot program, and (2)

recommendations that the evaluation process be open to the public.

Regarding the timing of the evaluation, one comment suggested that the

first evaluation should be within one year of the issuance of the

Groundrules. Section IV, paragraph C(8) of the draft Groundrules called

for the preparation of annual reports; this paragraph has been

maintained, and in the Department's view, fully covers the need for a

one-year interim assessment of the USIJI.

With regard to opening the evaluation to the public, it was decided

that the modalities for preparing the evaluation should be left to the

discretion of the Evaluation Panel. To this end, a specific

responsibility related to ``operational modalities'' has been added to

the Panel's tasks (IV.C.(7)); this new language appropriately covers

the specific circumstance referred to in the comment.

Section III. Eligible Participants

Two main issues emerged in comments on this section: (1)

Recommendations that ``groups'' of entities be entitled to submit

projects, and (2) recommendations regarding restrictions on foreign

participants in the program.

To address the former comment, the text has been revised to allow

for groups. This change takes account of the potential for a consortium

of companies to coordinate in the preparation and implementation of a

JI project.

Comments on the latter point included suggestions for restricting

eligibility of foreign participants to (i) countries that are parties

to the FCC, or (ii) Annex I Parties only. As the Groundrules are

designed to allow for the maximum number of acceptable projects to go

forward, additional restrictions such as limitations on project

participant eligibility were not incorporated.

Section IV. Evaluation Panel

Comments were received on the Evaluation Panel membership, as well

as on its responsibilities. On membership, commenters proposed that

non-governmental representatives from both industry and the

environmental community be added to the Evaluation Panel. In the

revised Groundrules, language has been added which requires the

Evaluation Panel to develop operational modalities for implementing the

program, providing the Panel with the opportunity to assure public

participation. Furthermore, while the Department recognizes the

importance of full public consultations, it supports the existing

language which establishes responsibility at the federal level to

accept or reject project proposals.

One commenter proposed deleting Evaluation Panel authority to

approve or reject a project. The commenter argued that the Evaluation

Panel should accept all projects unless they were deficient, putting

the onus on the Evaluation Panel to discover deficiencies rather than

on the project to demonstrate adequacy. The Department's view is that

such a procedure would be inappropriate; project proposers have the

information at hand, and the responsibility for compiling information

needed is appropriately theirs. The Panel will not have adequate

resources to perform such a review.

Original item IV.C(3) has been amended to specify that the

Evaluation Panel will be responsible for reviewing and evaluating

project submissions, including baseline projections (further discussed

under Section V. amendments).

Many of the comments received stressed the importance of the

operational aspects of joint implementation. The Department fully

agrees that these issues are critical, although the stipulation of such

detailed operational guidance is beyond the purview of these

Groundrules. For this reason, and to indicate explicitly the important

attached to the development of operational criteria, a new section

(Section IV.C(7)) has been added to the text to allow the Evaluation

Panel to oversee the development of the day-to-day operations of the

USIJI, including such tasks as preparing the forms for project

submissions, setting internal rules to determine what constitutes a

``complete'' submission, and the degree of assistance which may be

provided by the Evaluation Panel to project applicants.

One commenter suggested requiring the return of project evaluations

within 30 days of receipt of a completed application. In the

Department's view, a 30-day turnaround would be impossible to meet, and

would provide too little time for adequate review of project

submissions.

It was recommended that the Panel coordinate with other

organizations such as the Export-Import Bank, the Overseas Private

Investment Corporation, the Commodity Credit Corporation, and the

Enterprise for the Americas Program. The Department fully agrees with

the thrust of this recommendation; however, representation by each of

these organizations on the Evaluation Panel is not necessary to assure

this coordination, modalities for which can be left to the Evaluation

Panel to develop.

It was recommended that the Evaluation Panel be specifically

authorized to establish either ad hoc or standing sub-committees with

technical expertise in areas related to evaluating eligibility

requirements to assist the Evaluation Panel in executing its duties.

The Department agrees with this recommendation, and believes that such

specific operational modalities are covered by the additional language

in this section.

Section V. Criteria

Nearly every set of comments referred both generally to this

section, and more specifically to the language of individual criteria;

to simplify the discussion, each criterion is discussed separately

below. In this discussion, criterion numbers refer to those of this

new, revised text except where otherwise stated.

Chapeau for Subsection A.

One commenter recommended that the language in the chapeau

paragraph be changed from ``must find'' to ``shall consider''. The

commenter argued that in a pilot phase, the more stringent ``must

fine'' requirement would rule out all projects. However, the Department

strongly believes that a credible minimum standard must be set for

projects to be included as part of this initiative. Further, in the

Department's view, each of the criteria contained in this section is

critical to the acceptability of a project submission. The language of

this chapeau was therefore left unchanged.

Criterion A.1

Several commenters noted potential difficulties with this

criterion, questioning both the uncertain nature of documentation

required to assure host government ``acceptance'', and the value of

having such a criterion at all. while the Department agrees that the

nature of the documentation that must be provided to determine

``acceptability'' has not been defined, the Department also believes

the criterion--for the host government to find the project acceptable--

is essential. Unless the United States, through the USIJI, can begin to

examine how other countries' governments treat JI projects during the

pilot phase, it will be impossible to develop an empirical database for

developing appropriate criteria in the operational phase.

Criteria A.2, A.3 and A.4

Numerous comments were received on these criteria. Issues were

raised regarding, for example: How to interpret the requirement; the

difference between ``actual'' and ``projected'' reductions; the level

of certainty required regarding the likelihood of the projected

reductions; whether a grandfathering of projects should be allowed;

requirements to reject projects that may be mandated but not

implemented under host country law; and the need to include the

information regarding fiscal year 1993. The Department agrees that the

operational modalities for these are complex matters; however, as noted

above, language has been added to provide the Evaluation Panel with the

authority to develop the appropriate forms and specifications required

for projects. However, in addition to this language, the text of these

criteria has been amended in several ways from that originally

published for public review and comment.

First, a new criterion has been added (Section V.A. (2)):

To be included in the USIJI, the Evaluation Panel must find that

a project submission involves specific measures to reduce or

sequester greenhouse gas emissions initiated as the result of the

U.S. Initiative on Joint Implementation, or in reasonable

anticipation thereof.

As used here, the term ``specific measures'' is meant to refer to

actions to reduce or sequester greenhouse gas emissions that may form a

part of a broader project. In some cases, the specific measures may

constitute the entire project; in other cases, the specific measures

may be a lesser subset of the project.

This criterion is designed to promote ``additionality''--that is,

actions above and beyond those that would have been taken otherwise. It

seeks to do so in two ways:

(1) By establishing a reference date before which it would be

difficult to conclude that activities were undertaken as the result of

the USIJI; and

(2) By requiring that project participants demonstrate what

measures were or will be implemented in response to the USIJI.

With respect to the reference date, the phrase ``or in reasonable

anticipation thereof'' is designed to provide a reasonable ``grace

period'' for participants and to establish some certainty. The United

Nations Framework Convention on Climate Change involved negotiations on

joint implementation and provides for joint implementation in Article

4.2. It would thus be reasonable to consider project submissions

involving measures initiated after the date of the Convention's

adoption--May 9, 1992; although it would be more difficult to reach

such a conclusion with respect to measures initiated prior to that

date, the Evaluation Panel may do so on a reasonable showing that the

measures were undertaken in anticipation of joint implementation.

With respect to the need to demonstrate what measures were or will

be implemented in response to the USIJI, the Department acknowledges

the difficulty in seeking to gauge why participants undertook or plan

to under-take specific measures, since most projects will be

implemented for multiple reasons. At the same time, the integrity of

the pilot program would be undermined if participants were able simply

to repackage activities that would otherwise have been undertaken and

submit them for inclusion under the USIJI. In this regard, the

Department notes that an issue closely debated at the 9th Session of

the Intergovernmental Negotiating Committee for the Framework

Convention on Climate Change (February 1994) was the need to assure

``additionality'' with respect to joint implementation projects. To

promote such ``additionality'', it will be important for project

participants to demonstrate to the satisfaction of the Evaluation Panel

that the measures undertaken or to be undertaken were implemented in

response to the USIJI or in reasonable anticipation thereof. In

particular, they will need to demonstrate how these measures are above

and beyond what would reasonably have been or be likely to occur

otherwise.

The original criteria under Section V. have also been amended to

eliminate the tautology that would have been established by original

Section V.A.(3). Original Section V.A.(2) has also been amended in this

process.

These two amended criteria (new Section V.A.(3) and (4)) are also

intended to promote ``additionality.'' In this sense they are similar

to the requirement with respect to federally funded activities, i.e.,

that they be undertaken with funds in excess of those available for

such activities in fiscal year 1993.

Under new Section V.A.(3), project submissions will need to include

data and methodological information sufficient to establish a baseline

of current and future emissions--both in the absence of, and as the

result of, the specific measures taken or to be taken to reduce or

sequester greenhouse gas emissions. Under new Section V.A.(4), the

Evaluation Panel will need to find that the specific measures have

reduced or sequestered, or will reduce or sequester, greenhouse gas

emissions beyond the baseline of current and future emissions in the

absence of the specific measures taken or to be taken. In reaching such

a conclusion, the Evaluation Panel will need to pay particular

attention to baseline projections in the absence of the project's

specific measures. The Evaluation Panel will need to find that such

baseline projections are reasonable. Relevant factors the Evaluation

Panel may consider include, among others:

--Whether the baseline projections are consistent with the prevailing

standard of environmental protection in the country involved

--Whether the baseline projections are consistent with existing

business practices within the particular sector or industry

--Whether the baseline projections are consistent with trends and

changes in those practices

--Whether a project was altered before or after being implemented to

take into account considerations related to joint implementation

As noted, the Evaluation Panel will be able also to consider any other

evidence it deems relevant to its assessment of the reasonableness of

the baseline projections. The Evaluation Panel will be able to reject

project submissions which, in its judgment, do not establish reasonable

baseline projections.

With respect to measures already undertaken, participants may be

able to demonstrate ``additionality'' and ``reasonable anticipation''

in a number of ways. Relevant factors the Evaluation Panel may consider

include, among others:

--Evidence that a project was altered before or after implementation to

take into account considerations related to joint implementation

--Evidence that a project was specifically undertaken to promote joint

implementation

--Contract provisions that specifically allocate among project

participants the greenhouse gas emissions reduced or sequestered

Criterion A.5

One commenter suggested requiring the project proposers to include

in their submissions a monitoring schedule. While such recommendations

may be appropriate to the operational activity, in the Department's

view the specific criteria for monitoring cannot be resolved at this

time, and should be thoroughly discussed and established by the

Evaluation Panel. The addition of language providing the Evaluation

Panel with authority to develop operational modalities will assure that

this issue can properly be addressed.

Criterion A.6

No comments received.

Criterion A.7

Several commenters proposed that the criterion be deleted as

placing too onerous a burden--i.e., for a full environmental impact

assessment--on each project. In the Department's view, it is imperative

not to move forward with projects which, while leading to greenhouse

gas reductions, also lead to potentially significant but unidentified

negative non-GHG environmental impacts. Again, however, the details of

what will be required to meet this criterion are appropriately left to

the Evaluation Panel.

Another commenter proposed that the criterion be strengthened so

that project submission would be automatically rejected if any negative

impact were found. In the Department's view, the Evaluation Panel

itself must be given discretion to evaluate the results--and this is

done through Section V.B, which allows other environmental

considerations to be used in determining the acceptability of the

project.

Criterion A.8

One commenter suggested limiting the time over which the reduction

credit could be claimed as part of the assurance that emissions reduced

or sequestered were real. The Department believes that this is a matter

for individual project participants to determine, and that individual

circumstances warrant individual attention from the Evaluation Panel.

Original Criterion A.8 (now deleted)

In the December 17 Federal Register notice draft Groundrules, this

criterion provided for registration of the project in the national

inventory established under section 1605 of the Energy Policy Act of

1992. While the Administration is rapidly moving to develop this

registry, guidelines for the program have not yet been completed. Thus,

this criterion has been deleted. However, it is the Department's firm

expectation that the 1605 registry will be developed in a manner

consistent with these USIJI Groundrules, and that in the future,

project participants may be expected to register their projects through

the 1605 program.

Criterion A.9

Commenters suggested amending the criterion to limit how the

``credit'' for the project could be apportioned--with a minimum amount

allocated to the host country, and an automatic discounting of total

allowable emissions reduced or sequestered based on the uncertainty of

the project. In the Department's view, it is most appropriate that the

allocation of emissions reduced or sequestered be decided by the

participants. Thus this suggestion was not included.

Section V.B

The second category of criteria in the Groundrules contains items

that the ``Panel shall also consider''--a less stringent formulation

than that required for the criteria in Section V.A. The principal

comment on this section proposed to delete it as being redundant with

Section V.A. As discussed above, in the Department's view, it is

essential to establish two categories--one for minimum requirements

that must be met to include a project submission; the other with

additional items that the Evaluation Panel shall also consider in

deciding whether to include a project submission.

General Comments on Language

A number of the comments received addressed the usage of the word

``net'' throughout the text. The comments expressed concern that the

word could be read to require project submitters to total their

domestic emissions with their international emissions (and for that

total to be reduced through the JI project) to allow the project

submission to be included. This reading was not intended. As a

consequence, the language has been changed throughout the text, and the

words ``reduced or sequestered'' are now used vice ``net.'' The

Department interprets ``reduced'' also to include ``avoided.''

Groundrules

The following describes the U.S. Initiative on Joint Implementation

(USIJI), which shall be established as a pilot program.

Section I--Purpose

The purpose of the pilot program shall be to:

(1) Encourage the rapid development and implementation of

cooperative, multually voluntary, cost-effective projects between U.S.

and foreign partners aimed at reducing or sequestering emissions of

greenhouse gases, particularly projects promoting technology

cooperation with and sustainable development in developing countries

and countries with economies in transition to market economies;

(2) Promote a broad range of cooperative, mutually voluntary

projects to test and evaluate methodologies for measuring, tracking and

verifying costs and benefits;

(3) Establish an empirical basis to contribute to the formulation

of international criteria for joint implementation;

(4) Encourage private sector investment and innovation in the

development and dissemination of technologies for reducing or

sequestering emissions of greenhouse gases; and

(5) Encourage participating countries to adopt more complete

climate action programs, including national inventories, baselines,

policies and measures, and appropriate specific commitments.

Section II. Evaluation and Reassessment of Pilot Program

The pilot program shall be evaluated and reassessed within two

years of its inception or within six months of adoption of

international criteria for joint implementation by the Conference of

the Parties to the United Nations Framework Convention on Climate

Change, whichever is earlier.

Section III--Eligible Participants

A. Domestic

(1) Any U.S. citizen or resident alien;

(2) any company, organization or entity incorporated under or

recognized by the laws of the United States, or group thereof; or

(3) any U.S. federal, state or local government entity.

B. Foreign

(1) Any country that has signed, ratified or acceded to the United

Nations Framework Convention on Climate Change;

(2) any citizen or resident alien of a country identified in B(1)

of this section;

(3) any company, organization or entity incorporated under or

recognized by the laws of a country identified in B(1) of this section,

or group thereof; or

(4) any national, provincial, state, or local government entity of

a country identified in B(1) of this section.

Section IV--Evaluation Panel

A. An Evaluation Panel is hereby established.

B. The Evaluation Panel shall consist of eight members, of whom:

(1) One shall be an employee of the Department of Energy, who shall

serve as Co-Chair;

(2) One shall be an employee of the Environmental Protection

Agency, who shall serve as Co-Chair;

(3) One shall be an employee of the Agency for International

Development;

(4) One shall be an employee of the Department of Agriculture;

(5) One shall be an employee of the Department of Commerce;

(6) One shall be an employee of the Department of the Interior;

(7) One shall be an employee of the Department of State; and

(8) One shall be an employee of the Department of the Treasury.

C. The Panel shall be responsible for:

(1) Advising and assisting prospective U.S. and foreign

participants on the technical parameters (including with respect to

baselines, measuring and tracking) of projects submitted for inclusion

in the USIJI;

(2) Accepting project submissions from eligible U.S. participants

and their foreign partners;

(3) Reviewing and evaluating project submissions, including

baseline projections;

(4) Approving or rejecting project submissions for inclusion in the

USIJI, based on criteria contained in section V;

(5) Providing written reasons for its decisions, which shall be

made publicly available, within 90 days of receipt of a complete

submission or resubmission;

(6) Certifying emissions reduced or sequestered estimated to result

from projects;

(7) Developing operational modalities for the implementation of the

Program; and

(8) Preparing an annual report of its activities, including a

summary of approved projects.

Section V--Criteria

A. To be included in the USIJI, the Evaluation Panel must find that

a project submission:

(1) Is acceptable to the government of the host country;

(2) Involves specific measures to reduce or sequester greenhouse

gas emissions initiated as the result of the U.S. Initiative on Joint

Implementation, or in reasonable anticipation thereof;

(3) Provides data and methodological information sufficient to

establish a baseline of current and future greenhouse gas emissions:

(a) In the absence of the specific measures referred to in A.(2)--

of this section; and

(b) As the result of the specific measures referred to in A.(2) of

this section;

(4) Will reduce or sequester greenhouse gas emissions beyond those

referred to in A.(3)(a) of this section, and if federally funded, is or

will be undertaken with funds in excess of those available for such

activities in fiscal year 1993;

(5) Contains adequate provisions for tracking the greenhouse gas

emissions reduced or sequestered resulting from the project, and on a

periodic basis, for modifying such estimates and for comparing actual

results with those originally projected;

(6) Contains adequate provisions for external verification of the

greenhouse gas emissions reduced or sequestered by the project;

(7) Identifies any associated non-greenhouse gas environmental

impacts/benefits;

(8) Provides adequate assurance that greenhouse gas emissions

reduced or sequestered over time will not be lost or reversed; and

(9) Provides for annual reports to the Evaluation Panel on the

emissions reduced or sequestered, and on the share of such emissions

attributed to each of the participants, domestic and foreign, pursuant

to the terms of voluntary agreements among project participants.

B. In determining whether to include projects under the USIJI, the

Evaluation Panel shall also consider:

(1) The potential for the project to lead to changes in greenhouse

gas emissions elsewhere;

(2) The potential positive and negative effects of the project

apart from its effect on greenhouse gas emissions reduced or

sequestered;

(3) Whether the U.S. participants are emitters of greenhouse gases

within the United States and, if so, whether they are taking measures

to reduce or sequester such emissions; and

(4) Whether efforts are underway within the host country to ratify

or accede to the United Nations Framework Convention on Climate Change,

to develop a national inventory and/or baseline of greenhouse gas

emissions by sources and removals by sinks, and whether the host

country is taking measures to reduce its emissions and enhance its

sinks and reservoirs of greenhouse gases.

Dated: May 24, 1994.

David Colson,

Acting Assistant Secretary, Bureau of Oceans and International

Environmental and Scientific Affairs.

[FR Doc. 94-13262 Filed 5-31-94; 8:45 am]

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