Joint Implementation

Abstract

In the context of international environmental agreements, Joint Implementation (JI) involves a bilateral deal, or even a multilateral one, in which countries with high costs of pollution abatement or environmental conservation invest in abatement or conservation in a country with lower costs, and receive credit for the resulting reduction in emissions or increase in conservation. While JI is potentially applicable to any environmental objective, it is generally applied in contexts where one of the partners in the deal has a commitment to reduce pollution emissions. A constraint on the trade is that emission reductions in the low cost country, the ‘host’ country, must at least offset the avoided reductions in the ‘donor’ country. The obvious potential attraction of JI is that it reduces the global costs of meeting internationally agreed emission targets. It therefore contributes to cost-minimization. This is fairly self evident: if the donor avoids cutting emissions of X tons at cost C, and invests in cutting emissions in the host nation by X tons at cost αC (α<1), then there are cost savings of (1-α)C and no worsening of global environmental quality. However, the latter result, that global quality does not decline, can be guaranteed only if the obligation being traded is ‘uniformly mixed’, i.e. the damage being done does not vary with the location of the bargaining parties. Greenhouse gases (GHG) are examples of such uniformly mixed pollutants: it does not matter where the reduction takes place since 1 ton of a GHG does the same amount of global damage wherever the reduction takes place.

David Pearce is director of the Centre for Social and Economic Research on the Global Environment (CSERGE) and professor at University College London and University of East Anglia.