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LEGAL ISSUES FOR JI COUNTRIES

LEGAL ISSUES FOR JI COUNTRIES. JI Workshop Budapest, July 11 to 13, 2001. Part I. Legal Framework for JI Projects under the KP/UNFCCC. Joint Implementation. Requirements for Participation: National inventories and registries Project baselines and inventories Additionally of the project

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LEGAL ISSUES FOR JI COUNTRIES

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  1. LEGAL ISSUES FOR • JI COUNTRIES JI Workshop Budapest, July 11 to 13, 2001

  2. Part I Legal Framework for JI Projects under the KP/UNFCCC

  3. Joint Implementation Requirements for Participation: • National inventories and registries • Project baselines and inventories • Additionally of the project • Credit sharing • Host country approval

  4. Art. 6 KP 6 (1) For the purpose of meeting its commitments under Article 3, any Party included on Annex I may transfer to, or acquire from, any other such Party emission reduction units resulting from projects aimed at reducing anthropogenic emissions by sources […] 6 (3) Any Party included in Annex I may authorize legal entities to participate, […], in actions leading to the generation, transfer or acquisition under this Article of emission reduction units.

  5. Problem: Forward Selling of Assigned Amount Units

  6. Emission Reductions Generated by JI projects before 2008 Forward selling of credits Advantage: e.g. market development, providing start-up capital for mitigation measures. Condition: Transparent registries for recording and tracking forward sales, as well as transparent emissions inventories Risk: Emission Reductions generated before 2008 not eligible under the KP

  7. The Multiple Lives of an Emission Reduction • Emission Reduction • Generated by a Project • Verified by an independent entity converted Assigned Amount Units National Registry converted transferred Emission Reduction Units Adding a Project Identifier Emission Reduction Units Account of Parties or Private Entities

  8. ERs-AAUs-ERUs • Selling Party issues ERUs by converting AAUs previously issued by that Party and held in its national registry • AAUs will be converted in an ERUs by adding project identifier to the serial number and changing the type indicator to indicate ERU • Upon such issuance the Party will transfer ERUs to account of project participants and Parties • It also will notify the Secretariat transaction log

  9. Pronk’s Proposal FCCC/CP/2001/2/Add.2 Guidelines for the implementation of Art. 6 KP The CoP “…decides that projects starting as of the year 2000 may be eligible as Article 6 projects and may generate emission reduction units as of the year 2008 if they meet the requirements of the guidelines for the implementation of Article 6…”

  10. Problem: Emission Reductions generated by JI projects before 2008 • Not eligible under the Article 6 • Written promise to transfer ERUs after 2008 • Tradable under the rule of Art. 17 KP

  11. Art. 17 KP …” The Parties included in Annex B may participate in emissions trading for the purposes of fulfilling their commitments under Art. 3….”

  12. Selling Forward AAUs I Emission Target Hot Air Art.17 ERUs Art. 6 2008 2012

  13. Selling Forward AAUs II Emission Target Hot Air Art.17 Selling forward ERs ERUs 2008 2012

  14. Part II PCF Legal Documents

  15. Basic Approach Emission Reductions (Host Country + Project Entity) Payments (PCF)

  16. PCF : Actors involved UNFCCC rules Annex 1 Government (acquiring country) – PCF Participants (Gov. + Priv.) Host government (transferring country) World Bank /PCF Project entity

  17. Legal Agreements for PCF Projects 3. Host Country Agreement Host Country National Legislative Framework / Agreement / Authorization 1. Letter of Project Endorsement 2. Letter of Intent PCF Trustee Project Entity 4. Emission Reductions Purchase Agreement

  18. PCF Key Legal Instruments • Letter of Project Endorsement • Letter of Intent • Host Country Agreement • Emission Reductions Purchase Agreement

  19. Legal Agreements for PCF Projects 3. Host Country Agreement Host Country National Legislative Framework / Agreement / Authorization 1. Letter of Project Endorsement 2. Letter of Intent PCF Trustee Project Entity 4. Emission Reductions Purchase Agreement

  20. Letter of Project Endorsement Host Country endorses further development of the project for the purposes of the UNFCCC/KP Host Country: • Signals Commitment to render aid and assistance (e.g. registration of the ERs in any international or national regulatory regime) • Approves projects for KP purposes • Allows access to information 16

  21. Legal Agreements for PCF Projects 3. Host Country Agreement Host Country National Legislative Framework / Agreement / Authorization 1. Letter of Project Endorsement 2. Letter of Intent Project Entity PCF Trustee 3. Emission Reductions Purchase Agreement

  22. Letter of Intent • Project Sponsor agrees • To reserve exclusive right to ERs generated by the project • To recover project preparation costs in case project sponsor decides not to negotiate an ERPA • PCF Trustee agrees • To purchase ERs under specific terms

  23. Legal Agreements for PCF Projects 3. Host Country Agreement Host Country National Legislative Framework / Agreement / Authorization 1. Letter of Project Endorsement 2. Letter of Intent PCF Trustee Project Entity 3. Emission Reductions Purchase Agreement

  24. Host Country Agreement Obligation to enter into an ERPA PCF Trustee Host Country Obligation to transfer ERs

  25. Main Elements of Host Country Agreement (HCA) PCF commits to • buy ERs Host Country commits to • authorize the transfer of ERs by the Project Entity to the PCF or • transfer ERs to the PCF

  26. Legal Agreements for PCF Projects 3. Host Country Agreement Host Country National Legislative Framework / Agreement / Authorization 1. Letter of Project Endorsement 2. Letter of Intent PCF Trustee Project Entity 3. Emission Reductions Purchase Agreement

  27. Emission Reductions Purchase Agreement Purchase Price (net of costs) PCF Trustee Project Entity Exclusive Right of Certification and Verification of purchased ERs (ERs) Transfer of ERs

  28. Main Elements of Emission Reductions Purchase Agreement (ERPA) • Purchase of ERs from the Project Entity / Payment for achieving ERs • PCF commits to arrange for initial and periodical verification, validation and certification. • Transfer of ERs

  29. Legal Agreements for PCF Projects 2. Host Country Agreement and ERPA 3. Subsidiary Agreement Host Country Project Entity 1. Letter of Project Endorsement PCF Trustee

  30. Legal Agreements for PCF Projects Model for Small Projects Project Entities Host Country 2. Letter(s) of Intent 1. Umbrella Agreement 3. Letters of Project Approval PCF Trustee 4. Standard Emission Reductions Purchase Agreements

  31. Legal Agreements for PCF Projects Model for working with Intermediaries Host Country Intermediary Project Entities 2. Host Country Agreement 1. Intermediary Agreement 3. Standard Letters of Project Approval PCF Trustee 4. Emission Reduction Purchase Agreements

  32. Questions ?

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