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

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URL: https://www.frixlaw.com/law-library/documents/fr%3A94-13262

## Record

- **Collection:** Federal Register
- **Document type:** Uncategorized Document
- **Published:** June 1, 1994

## Text

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]
BILLING CODE 4710-09-M

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