The concept of Joint Implementation (JI) was introduced by Norway into pre-UNCED negotiations in 1991. This was reflected in Article 4.2(a) of the UNFCCC which gives Annex I countries (see below) the option of contributing to the Convention's objectives by implementing policies and measures jointly with other countries. The investing participants in these projects expected to claim emission reduction 'credits' for the activities financed, which would lower their greenhouse gas (GHG) liabilities (e.g., carbon taxes, emission caps) in their home countries. This expectation has not been realised.
In the first Conference of the Parties (CoP 1) to the UNFCCC held in 1995 in Berlin, developing country dissatisfaction with the JI model was voiced as a formal refusal of JI with crediting against objectives set by the Convention (see text for full discussion). Instead, a compromise was found in the form of a pilot phase, during which projects were called Activities Implemented Jointly (AIJ). During the AIJ Pilot Phase, projects were conducted with the objective of establishing protocols and experiences, but without allowing carbon credits to be transferred between developed and developing countries. It was decided at CoP6 Part II in Bonn to continue the AIJ Pilot Phase.
Set out in Article 6 of the Protocol, JI refers to climate change mitigation projects implemented between two Annex 1 countries (see below). JI allows for the creation, acquisition and transfer of "emission reduction units" or ERUs.
The CDM was established by Article 12 of the Protocol and refers to climate change mitigation projects undertaken between Annex 1 countries and non-Annex 1 countries (see below). This new mechanism, whilst resembling JI, has important points of difference. In particular, project investments must contribute to the sustainable development of the non-Annex 1 host country, and must also be independently certified. This latter requirement gives rise to the term "certified emissions reductions" or CERs, which describe the output of CDM projects, and which under the terms of Article 12 can be banked from the year 2000, eight years before the first commitment period (2008-2012).
Article 17 of the Protocol allows for emissions-capped Annex B countries (see below) to transfer among themselves portions of their assigned amounts (AAs) of GHG emissions. Under this mechanism, countries that emit less than they are allowed under the Protocol (their AAs) can sell surplus allowances to those countries that have surpassed their AAs. Such transfers do not necessarily have to be directly linked to emission reductions from specific projects.
These are the 36 industrialised countries and economies in transition listed in Annex 1 of the UNFCCC. Their responsibilities under the Convention are various, and include a non-binding commitment to reducing their GHG emissions to 1990 levels by the year 2000.
These are the 39 emissions-capped industrialised countries and economies in transition listed in Annex B of the Kyoto Protocol. Legally-binding emission reduction obligations for Annex B countries range from an 8% decrease (e.g., EC) to a 10% increase (Iceland) on 1990 levels by the first commitment period of the Protocol, 2008 - 2012.
In practice, Annex 1 of the Convention and Annex B of the Protocol are used almost interchangeably. However, strictly speaking, it is the Annex 1 countries that can invest in JI/CDM projects as well as host JI projects, and non-Annex 1 countries that can host CDM projects, even though it is the Annex B countries that have the emission reduction obligations under the Protocol. Note that Belorus and Turkey are listed in Annex 1 but not Annex B; and that Croatia, Liechtenstein, Monaco and Slovenia are listed in Annex B but not Annex 1.
RMUs (removal units) - the new technical term representing sink credits generated in Annex I countries, which can be traded through the emissions trading and JI mechanisms