UNFCCC Technical Workshop on Joint Implementation Session 9 Role and Future of JI Track 2 in the Carbon Market

Jakob Forman Chief Programme Coordinator Danish Environmental Protection Agency Climate Change Division

Danish Strategy on JI

• Government will help get the carbon market up and running through early investments • Use of flexible mechanisms is primarily a task for the private sector under the EU ETS • The purchase programme DanishCarbon.dk has activities in both potential Track 1 and 2 countries in Central and Eastern Europe • Funds for capacity building in host countries • Facilitating information and experiences on the carbon market to the private sector

Danish Purchasing Programme for JI DanishCarbon.dk:

• 57 mill. € from 2003-06 and 27 mill. € from 2007-09 • 18 contracts with approx. 9.4 mill. tonnes of CO 2 .

• 5 projects are implemented and generating emission reductions.

• So far contracts in Estonia, Lithuania, Poland, Czech Republic, Romania, Bulgaria and Russia

Handling Track 2

• No countries are so far eligible for Track 1 • Will do running evaluation of projects and countries during this spring • Close dialogue with host countries • As Denmark has been an early mover some early projects need to be converted to Track 2 • Track 2 has been used in some of the latest projects • Risks related to Track 1 or 2 have been assessed as any private buyer would do • Being a governmental buyer we have also had the objective to start activities and thereby build capacity in many countries to enlarge the market

Handling Track 2

• The price of ERUs is negotiated taking all risks into consideration • The question on Track 1 or 2 is naturally part of the contract negotiation • Costs of potential Track 2 registration will most often be reflected in the price • Track 2 is more costly in the short run, but more intensive follow up on project performance (monitoring/reporting/host country procedures etc.) might be necessary and a potential risk for Track 1 projects

Capacity Building and Technical Assistance

Denmark supports a number of JI-countries in their effort to get eligible (risk mitigation): • Russia: Regional pilot inventories, criteria for approval of JI projects, legal advice • Romania: National climate strategy and action plan, national climate change registry • Bulgaria: Implementation of EU ETS, national climate change registry, draft legislation for Track 1 compliance • Ukraine: Support for Track 1 compliance

Role and Future of JI Track 2

The development of Track 2 – has taken a successful start with interesting perspectives – has been transparent and logic in its set up – offers a relevant framework for countries only lately entering the JI market – offers UN legitimacy and we experience confidence in the system Thanks to the JISC and Secretariat - but the good work needs to be continued to get it fully operational

CDM and GIS

CDM • Denmark has a similar purchase programme for CDM • Spreading risk on the purchase (countries, technologies, mechanisms) • Advantage of being fully operational • No country risk on eligibility Green Investment Scheme • Denmark has at this moment no intention to purchase from GIS • The Danish Climate Strategy has been to get the market up and running for the private sector

Concluding remarks

• The establishment of the JI Track 2 has helped build trust in the market for JI projects • Each project in DanishCarbon.dk will be assessed to finally chose Track 1 or Track 2 status • Risk mitigation e.g. by helping build capacity in host countries • Denmark focus on the project mechanisms to make the market attractive to the private sector • Track 2 framework can potentially be an incentive for advanced non-Annex I Parties

Thank you for your attention!

For further information

Please contact:

Jakob Forman [email protected]

www.DanishCarbon.dk