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FAQ regarding Joint Crediting Mechanism (JCM)
- * This FAQ was created by the OECC based on the "Recent Development of The JCM" issued by the Government of Japan.
Regarding procedures of the JCM
- What are the procedures regarding registration of JCM projects and issuance of JCM credits?
- If an applicable JCM methodology doesn't exist, it is necessary to go through the JCM methodology development procedure. You can find the necessary documents in the JCM website.
I. JCM methodology development procedure
There are four steps: submission of proposed methodology, verification by the secretariat, public input and approval of the proposed methodology. Firstly, submission of proposed methodology is required.
- Proposed methodology form
- Proposed methodology spreadsheet
* The documents are uploaded on each countries’ page in the JCM website.
Methodology proponents need to prepare the above documents and submit them to the secretariat of the joint committee. Contact information of the secretariat of the joint committee is also available on each countries' page in the JCM website.
After the submission of the proposed methodology, the secretariat of the joint committee will go through a completeness check (within seven days) and the result will be notified to the project participant. After a public input of fifteen days and a consideration by the joint committee within normally up to 60 days (it may be extended up to 90 days as necessary), the conclusion will be notified to the methodology proponent.
II. Project registration and issuance of credits
After the approval of the JCM methodology, it is necessary to follow the following procedures: development of a PDD, validation, registration of project, monitoring, verification and issuance of credits.
Project participants need to submit documents regarding development of a PDD, registration of project, monitoring and verification, and issuance of credits in the procedures above.
* Validation and verification may be implemented simultaneously or separately. Also the same Third Party Entity (TPE) may implement both validation and verification.
1. Development of a PDD
- Project Design Document form
- Monitoring spreadsheet
- Modalities of Communication statement form
2. Registration of a project
- Project registration request form
3. Monitoring and verification
- Monitoring report sheet
4. Issuance of credits
- Credits issuance request form
*The documents are uploaded on each countries' page in the JCM website.
- What kind of fee will apply for JCM methodology development procedure, registration of JCM projects and issuance of JCM credits?
- No fee is required for JCM methodology development procedure. Fee to a TPE is necessary for conducting validation and verification which are necessary for JCM project registration and JCM credit issuance. The amount of fee usually differs according to type of project and scale. Please contact the TPEs for further information.
*Information of the TPEs that are designated by the joint committee is posted on the JCM website.
- How long will it take from an application of a JCM project registration to a registration as the JCM project?
- The length may differ from a project to another while JCM is aiming for a simple and practical mechanism. It takes 47 days in average from an application to its registration.
- Is a development of a methodology required at the beginning to implement an emission reduction project under the JCM?
- It is not necessary to develop a methodology at the beginning of the project implementation and is possible to develop it based on actual circumstances and register it as a JCM project later while both the proposed methodology and the project need to be approved by the joint committee.
Regarding eligibility criteria
- How can we confirm the eligibility criteria? Where is it indicated?
- Eligibility criteria are indicated in an approved methodology. These criteria show conditions for a proposed project to be eligible to be registered under the JCM and well as for the approved methodology to be applicable to the said project. A methodology approved by a joint committee is uploaded to the JCM Website.
- What is the difference between a positive list and a checklist of eligibility criteria?
- A positive list under the JCM may be understood as a list of approved JCM methodologies which are uploaded in the JCM website. Eligibility criteria, on the other hand, is a list of requirements in an approved methodology all of which are necessary to be fulfilled when applying the approved methodology to a project.
- What does JCM eligibility criteria mean? How does the JCM contribute to additional emission reductions?
- Project proponents can see if their proposed project is applicable under the JCM by fulfilling eligibility criteria which is like a checklist consisting of items (usually around 5 items) to decide whether the approved methodology can be applied to their proposed project. In order to realize additional emission reductions through the JCM, Ministry of the Environment (MOE) is facilitating implementation of new projects under its JCM Financing Programs.
Regarding MRV and Methodologies
- Is a CDM methodology applicable in the JCM?
- A CDM methodology may be a basis in considering development of a JCM methodology, however it is necessary to follow applicable steps under the JCM such as filling in the proposed methodology form and proposed methodology spreadsheet in line with "Guidelines for Developing Proposed Methodology".
- What kind of support can a project participant receive for developing a JCM methodology?
- They can apply a support for implementing a feasibility study which is funded by MOE, Ministry of Economy, Trade and Industry (METI) and New Energy and Industrial Technology Development Organization (NEDO).
Also, for the project participants who implement a project under MOE's JCM Financing Programs, it is possible to receive support from consultants for developing a JCM methodology as necessary. In that case, the project participants need to provide relevant information for developing a methodology and do not need to develop a methodology by themselves.
- How are the Measurement, Report and Verification (MRV) conducted?
- The project participants develop a monitoring plan based on the monitoring spreadsheet (monitoring plan sheet, monitoring structure sheet and monitoring report sheet) provided by each methodology. The project participants conduct monitoring based on the monitoring plan sheet and submit the monitoring report sheet to the TPE. The TPE verifies it based on "Guidelines for Validation and Verification" and sends a report to the project participants.
- Is a JCM methodology too complicated for project participant to develop?
- JCM methodologies are made to be simple. Use of default values reduces the burden of monitoring and use of spreadsheets reduces burden of developing formulas. JCM methodologies are only a few pages long while most of the CDM methodologies have dozens of pages. As a result, project participants' work load for PDD development and for validation and verification by a TPE is also reduced.
- Can a methodology approved in one country be used in another country?
- The JCM aims to develop a methodology reflecting each countries' circumstances considering user friendliness. This is because to develop a methodology which uniformly applies to any countries may lead to make the methodology too complicated and/or to end up with excessively conservative calculation of emission reductions by hiring too conservative default values.
From the above reasons, a methodology approved by a joint committee in one country will not automatically be applicable to another county. However, it is possible to develop a methodology building upon an already approved methodology in other countries. This will help to lower the burden of methodology development such as researches to establish uniformly applicable default values.
- Can an approved methodology which is developed by a project participant be used by another project participant?
- It is possible if the proposed project fulfills the eligibility criteria on application of a JCM methodology.
- What does "net decrease and/or avoidance" mean? How are they applied to the JCM methodologies? How will the JCM ensure environmental integrity?
- The JCM is implemented in accordance with the decision 1/CP.18 under which a mechanism must achieve a net decrease and/or avoidance of greenhouse gas emissions.
The concept of the net decrease is achieved by calculating the amounts of emission reductions to be credited lower than that is calculated from the Business-as-usual (BAU) emissions.
Issuing credits by calculating emission reductions from the BAU emissions means that, once they are used, it will lead to pure offsetting of the emissions and not to the global emission reductions.
The JCM realizes net decrease by crediting emission reductions as the deference between the "reference emissions" which are conservatively calculated below BAU emissions and the project emissions. This approach is realized by hiring conservative default values set in the methodologies, which will also enable to reduce the task related to monitoring and/or establishing reference emissions as per the project, as well as verification by TPEs.
- When and how will the JCM credits be traded?
- JCM started its operation as a non-tradable credit type mechanism under which JCM credits are not international transferred. Japan and the partner countries continue consultation for the transition to the tradable credit type mechanism and reach a conclusion of such consultation at the earliest possible timing, taking account of implementation of the JCM.
- How will the JCM Credits be allocated?
- The JCM is to appropriately evaluate contributions to greenhouse gases emission reductions or removals from Japan in a quantitative manner, through mitigation actions implemented in developing countries and use those emission reductions or removals to achieve emission reduction targets. The actual amount of allocation of JCM credits will be decided between project participants taking into consideration their contributions, and specified in the credit issuance application form, and submitted to the Joint Committee.
- Will the JCM continue after 2020?
- In COP21, the Paris Agreement was adopted as a new international framework under the UNFCCC after 2020. Use of market mechanisms, including the JCM, is articulated under Article 6 paragraph 2-3 which prescribes for the use of emission reductions realized oversees towards national emission reduction targets, authorized by participating Parties.
In addition, the followings are mentioned in Japan's INDC.
- Japan establishes and implements the JCM in order both to appropriately evaluate contributions from Japan to GHG emission reductions or removals in a quantitative manner achieved through the diffusion of low carbon technologies, products, systems, services, and infrastructure as well as implementation of mitigation actions in developing countries, and to use them to achieve Japan’s emission reduction target.
- The JCM is not included as a basis of the bottom-up calculation of Japan's emission reduction target, but the amount of emission reductions and removals acquired by Japan under the JCM will be appropriately counted as Japan's reduction.
- Apart from contributions achieved through private-sector based projects, accumulated emission reductions or removals by FY 2030 through governmental JCM programs to be undertaken within the government's annual budget are estimated to be ranging from 50 to 100 million t-CO2.
- Is a prevention of double accounting necessary for the JCM?
- Yes. Japan has been constructively engaging in the UNFCCC negotiations on market mechanisms over several years, aiming at developing robust accounting rules including how to avoid double counting. The issue of double counting may occur in all market mechanisms including the CDM in which mitigation outcomes are transferred internationally and, therefore, it should be dealt with internationally.
Also, as stated in "Submission by Japan on the Framework for Various Approaches" submitted in October 2014 (page 5), in order to avoid “double registration” of projects and “double issuance” of credits, the information regarding the proposed project e.g. project location including coordinates, scope, scale, etc. are provided to the JC. Project participants are also required to submit a written oath in the modalities of communication statement (MoC) form indicating that a proposed JCM project is not registered under any international climate mitigation mechanisms other than the JCM.
If a proposed JCM project is registered under the JCM, the same project will not be registered under any other international climate mitigation mechanisms, and vice versa.
The matter of double registration and double issuance is checked by a TPE at the time of both validation and verification. A TPE conducts, at the minimum, a search on the website of the CDM and JI to check whether projects with similar technology and location in the partner country have been registered.
In addition to that, all the project information is shared to the public through the JCM Website to secure transparency.
- How is the JCM's compliance with the WTO rules?
- The rules on subsidies are described in Article 3.1 (a), 3.1 (b) and 2 of the Agreement on Subsidies and Countervailing Measures of the WTO. There are several Financing Programs conducted by MOE in relation to the JCM and they do not violate these articles for the following reasons.
- Article 3.1 (a) prohibits subsidies contingent upon export. The purpose of the JCM Financing Programs is to financially support the implementation of projects which reduce CO2 emissions by saving energy and/or introducing renewable energy in developing countries with leading low carbon technologies, and in return, these programs seek to acquire JCM credits for achievement of Japan's GHG emission reduction target. These Financing Programs don't require, or are not limited to, exportation.
- Article 3.1 (b) prohibits subsidies contingent upon the use of domestic over imported goods. The JCM Financing Programs don't prioritize the leading low carbon technologies from certain country including Japan.
- Article 2 prohibits subsidies specific to an enterprise or industry or group of enterprises or industries. The JCM Financing Programs don't deliver subsidies to specific enterprise, industry, or group of enterprises or industries.
- Also, gaining profit is one of the definitions of subsidy provisioned in the Agreement on Subsidies and Countervailing Measures of the WTO. For the JCM Financing Programs, the subsidy recipient receives financial support to cover part of their initial investment cost. Although, in return, the subsidy recipient delivers, to the government, part of the JCM credit generated from the recipient's CO2 emission reduction activity. From this, we can't simply say that the recipient is gaining profits.