Incentive Based Mechanisms for Reducing Greenhouse Gas Emissions
Project-Based Flexibility Mechanisms
Beyond emissions trading, two other flexibility mechanisms directly sanctioned by the Kyoto protocol both allow Annex 1 countries to take credit for GHG emission reductions produced by projects that they finance in other countries. These two programs are: joint implementation (JI) and the clean development mechanism (CDM). These two programs are similar with the major difference being where they are implemented — JI projects are in other Annex 1 countries and CDM in developing countries (non Annex 1 countries).
Both programs install new renewable energy systems (biomass, wind, solar, hydro), improve efficiency of fossil fuel use, eliminate GHG emissions from industrial facilitities, trap the release of methane from landfills or reforest deforested areas funded by private industry or governments in the Developed World (Annex 1) who claim carbon credits for resulting net reductions in greenhouse gas emissions. The initial financing for projects can come from different sources with these sources owning the produced (offset) credits to be kept or sold.
Where are these projects located? Most joint implementation projects are found in eastern Europe and the former Soviet Union — so-called “economies in transition” in Kyoto Protocol documents. The number of credits produced in JI projects have been very small compared to CDM projects but have grown dramatically since 2011 with total number of JI credits now about half of CDM credits. Here is map of the location of CDM projects:
A certificate of either: a reduction in greenhouse gas emissions; or an increase in carbon storage (e.g. net forestation). Typically, 1 credit = 1 ton of CO2 equivalent. Credits derived from joint implementation, CDM, and REDD+ projects can be purchased and used by private firms (and their governments) to address their GHG emission reduction obligations.