The EU and projectbased mechanisms

In November 2002, a working group of the ECCP presented a report on how to link Joint Implementation and Clean Development Mechanism measures to the emissions trading system, and on how to promote the private sector to start JI/CDM projects. The report saw project-related mechanisms as a complement to emissions trading, with the potential to cover the whole European Economic Area. The European Council decided in October 2004 on a directive linking the JI and CDM project-based mechanisms to the EU emission trading scheme (Directive 2004/101/EC amending Directive 2003/87/EC). The use of project-based mechanisms aims at cost-effective measures to decrease emissions, particularly for CDM projects generating positive side effects for economic development. However, it is also arguable that by way of CDM projects, developed states get credit for relatively cheap emission reductions, thus leaving the developing countries with no other option but to use more expensive measures to reach their commitments for future decreases in GHG emissions.

Several European countries have introduced programmes to develop these mechanisms. Together with Canada and Norway and companies from some other countries, including Japan, Finland and Sweden, The Netherlands participated in the World Bank Prototype Carbon Fund (PCF). The Dutch government plans to achieve half of The Netherlands' reduction burden through projects abroad. To that effect, it has an extensive programme to help Dutch companies invest in renewable energy and energy efficiency in Central and Eastern Europe, and buy carbon credits generated from these projects (Dutch Ministry of Housing, Spatial Planning and Environment, 2002). Committed to reducing its GHGs by 21 per cent, Denmark has a programme for Joint Implementation in the Eastern European countries. Since 1993, Sweden has been involved in a series of joint projects with actors in the Baltic States and Russia to develop systems for sustainable energy supply and more efficient energy use. Conducted under the Climate Convention pilot programme for Activities Implemented Jointly (AIJ), the projects include loans, credits and competence transfer (SOU, 2002). A national commission concludes, however, that the Swedish National Energy Administration will be the main actor and that there are, so far, no incentives for private companies to get involved in JI projects (Swedish Governmental Bills 2001/2002:55 and 2001/02:143).

Many member states (EU 15) have already planned for or begun projects in the ten new EU member states. Candidate countries were required to adopt EU environmental legislation when becoming members. This generally raised their levels of environmental protection and the baseline for counting credits for joint projects, thereby reducing the additionality. The outcome in credits for the investing country may therefore not be as high as initially expected (Engelbrektson, 2002).

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