Reductions/removals from the JCM projects are likely to be reported as national achievements to the international community. It is thus important to ensure that the JCM reports accountable emissions reductions from projects that contributes to sustainable development
in partner country. Four aspects need to be strengthened to deliver this goal: governance, MRV methodology development, project development and capacity building, and a framework to evaluate sustainable development contribution.
The JCM Joint Committee typically consists of six to seven Japanese officials (the Embassy of Japan
, Ministry of the Environment
, Ministry of Economy, Trade, and Industry, Ministry of Foreign Affairs, and sometimes Forestry Agency) and eight to ten partner country officials related to the environment, foreign affairs, industry, trade, energy, agriculture, and economy and finance. Considering the nature of JCM support scheme which favours energy-related projects, it is important to involve ministries and agencies with a mandate in energy, industry, and infrastructure. It is also recommended to engage organizations with an established, strong relations with private companies such as investment bureaus, trade councils, and business councils.
As the main supporting entity for the Joint Committee, capacity of the JCM secretariat of the partner countries is a key aspect in enhancing the implementation of the JCM. Not only to support general management, the secretariat could push forward projects that meet the need of country stakeholders by gathering project proposals, review projects contribution to sustainable development
, ensure additional features of projects, and enhance capacity building of local entities. Cooperation for capacity building between secretariats and other organizations including through international support not only from the Japanese government is very important. Despite its status as a bilateral partnership, acknowledgment of the JCM contribution in achieving the international goal is inevitable, not different with other regional or national market-based initiatives that are increasingly being developed. Furthermore, the sources or providers of advanced low-carbon technologies to be supported by the JCM are not limited. This opens the door for various countries, companies, and international organizations to be involved and cooperate. To encourage this, transparency and timely information should be enhanced especially on project approval process and financial aspects.
Another important aspect in governance is credit sharing. The existing rule that needs to be clarified is the general term of credits allocation between participants (or countries) to be based on consultations among participants ‘on a pro rata basis’.Footnote 10 At the same time, the JCM Model Project are requested to deliver at least half of issued credits to the Japanese government, regardless of the finance rate.Footnote 11
As the JCM clearly mentions, the credits need to be recorded in a registry system. An online JCM registry system (https://www.jcmregistry.go.jp/) is already operational, which also provides the space for partner countries to manage their registry. However, partner countries prefer to run its own registry system and thus the set of common specifications and rules of registry system were agreed beforehand. Both governments also agreed to request projects in Indonesia to allocate at least 10 % of issued credits to the Indonesian government. In May 2016, credits were issued from two projects in Indonesia to the registries of Japan and Indonesia. The information on issuance are available on JCM websites of Japan and Indonesia. From the first project, Japan side received 23 tCO credits (20 tCO allocated to the government and 3 tCO to the project participant) and Indonesia side received 6 tCO credits (3 tCO allocated to the government and the project participant each). From the second project, Japan side received 8 tCO credits (7 tCO allocated to the government and 1 tCO to the project participant) and Indonesia side received 3 tCO credits (2 tCO allocated to government and 1 tCO allocated to the project participant).
Towards and beyond 2020, it is crucial for the partner countries to consider how the JCM emissions reductions will be accounted in their national report to the UNFCCC. There are indications that partner countries plan to report their achievement through their Biennial Update Report (BUR) under nationally appropriate mitigation actions (NAMA) umbrella or national registry system. In this regard, the way of accounting the JCM credits in these reports without double counting, double issuance, and double claiming, need to be arranged at the domestic and international level. Countries without an established inventory system may consider reporting outside the inventory for pre-2020 achievements. For post-2020, an international accounting rules and infrastructure for Internationally Transferable Mitigation Outcomes (ITMO) shall be in place.
4.2 MRV Methodology and System
As of January 2016, 19 MRV methodologies have been approved under the JCM, all for countries in Asia and Pacific region. More than 50 % (11 methodologies) are in the energy efficiency sector, more than 20 % (4 methodologies) in the energy industry (power generation by waste heat recovery, solar power), energy efficiency (energy-efficient chillers, refrigerators, LED) and the rest in energy distribution (improvement of electricity transmission and distribution grid), waste handling and disposal (anaerobic digestion of market waste for biogas), and transport (digital tachograph in vehicles). These methodologies are technology-based and applicable only in the country where they are approved, as shown in methodology ID number (VN_AM001 means the first approved methodology to be used in Vietnam). There are three key aspects of a JCM methodology: ensuring net emissions reductions by conservative determination of reference emissions, eligibility criteria, and simple
Net emissions reductions are ensured by conservative measurements of reductions, by assuming the highest amount of emissions possible in the baseline scenario, to ensure the emissions reductions achieved by the projects are not overestimated. Baseline, or called “reference emissions” in the JCM, does not necessarily mean result of ‘before project’ emissions calculation. Instead, the calculation can be done in two ways.
The first way is to adjust “reference emissions” conservatively. They are set as high as possible while staying below business-as-usual emission, which represent plausible emissions in providing the same outputs or service level of the project. Emission reductions to be credited are defined as the difference between “reference emissions” and “project emissions”. In this case, the reference emissions are assumed to be the highest plausible emissions. Most of the approved methodologies applied this approach.Footnote 12 Second way is to adjust “project emissions” conservatively. The methodology uses predefined default values instead of the actual values measured and monitored from the project. This will result in “calculated project emissions” that are larger than “actual project emissions”. In this case, emission reductions to be credited are defined as the difference between BaU emissions and “calculated project emissions” (Fig. 7.3).
Reference emissions can be determined by conducting a survey on the best available or most widely used technology in the partner country, from legal requirements, the current situation and performance or average historical performance at a relevant project site, and voluntary standards and/or targets, national or international. The use of national standards and regulations as methodology reference need to be supportedFootnote 13 and The use of internationally-recognized default values and rules for equipment calibration need to be strengthened continuously
Procedures for market surveys during methodology development also need to be strengthened as they are heavily used in determining reference emissions. The Joint Committees could consider setting a general standard for survey, data collection and renewal of reference. As reference condition are very likely to improve over time, reference emissions need to be adjusted periodically. A number of methodologies in Indonesia and Mongolia have set the requirement for the default values to be updated every 3 years. However, the responsible party for updating these methodologies needs to be clarified.
Eligibility criteria are developed in a concise manner to reduce the risk of project rejection. They provide specific requirements for each project and technology type, touching upon the concepts of ‘additionality’ and ‘applicability’ of projects under the CDM to a certain extent, through an easy-to-apply simple ‘checklist’ in each methodology. The number of project eligibility criteria defined by the 19 approved methodologies ranges from two to seven, with an average of four criteria in one methodology.Footnote 14 Highly used criteria are the specification and components of technology, capacity of service, and the types of eligible activity (for example, new installation or replacement of technologies). These criteria should be specific but also general enough to enable them for use by multiple projects, not only for the projects the methodologies are developed for. Ensuring this among countries will reduce the time and costs of project development.
parameters is the shortlist of data for monitoring emissions to be collected by project participants, the approved sources, and default values from IPCC or other approved standards that are ready to use. These default values can be applied in the standardized Microsoft Excel-based monitoring and calculation spreadsheets in each methodology. The set of spreadsheets is arguably the most valuable aspect of the JCM MRV for the project participants, as they clearly indicate the options of data collection method, default values, and formulas to calculate reference emission, project emission, and emission reduction. In addition to that, project monitoring
team is also described in the same spreadsheet. The basic requirements such as continuity of operation, production year, and availability of data are assumed as given, resulting in brief and easy-to-read documents. By using these sheets, project participants do not need to spend much time to justify the calculation formula and ways to acquire required data
In the long run, quality of methodology and its development process need to be consistent between countries and improve inclusion of local programs or standards. It is also important to design more general methodologies to increase their applicability to similar projects. For example, as opposed to developing methodology for a specific ‘air conditioners with inverters to public sector building’ (VN_AM002), the methodology could be developed for air conditioners with inverters to any kind of building.
4.3 Processing Time
Strengthened method and time-efficient approval process will improve the efficacy of JCM MRV. So far approval process are being implemented in an efficient manner. Approving proposed methodologies take from 18 to 384 days with an average of only 107 days from the time of methodology proposed. Similar trend is observed in project registration process, which generally takes less than a month with an average of 10 days.Footnote 15 These effective processes benefit from close cooperation between Japanese and partner countries government, supporting agencies, project participants, and the JCM budget allocated for implementation support. This could be expected to continue in the long run, as long as institutional support and commitment from the involved countries at least remain.
As the number of JCM projects continue to increase, however, it may become more challenging to maintain such speed. Thus methodology reviewers such as JCM secretariat and the general public need to ensure time efficiency does not overrule quality. Capacity building, technical assistance, and resources are important factors in this aspect.
TPE auditors that perform the future verification should be fully accountable for all their activities.Footnote 16 Since the JCM TPEs must be certified under CDM Designated National Authority or ISO 14064, their accountability should be high enough. Moreover, the Joint Committee and accreditation organizations have the authority to suspend or withdraw them in case of non-performance.
However, as next verification process is not financially supported, there is a need for a clear incentive for projects to verify emissions reductions and issue credits in the future, especially in 2021 and 2030, since the JCM credits are so far non-tradable and there has not been any indication of making it otherwise. Currently, the Japanese government supports the cost of first verification achieved at the end of first year of project. After the first request, participants may request issuance of the JCM credits for emission reductions achieved during several years in one time, but they shall request issuance of the JCM credits for emission reductions achieved by 2020 by the end of 2021.Footnote 17 The projects participants (especially from partner countries without any agreement with their government) who may not have enough budget for verification may be reluctant to continuously monitor and verify their achievements by the end of the project period, which is 13 years in average among registered projects.Footnote 18
The pathway to transform the JCM into tradable scheme, if there is any plan, is important not only for the participants but also for partner countries. While Japan
requires verification at the end of 2020 in the project financing rules, it is important for partner countries to take measures for the future use of credits owned by partner country participants.
4.4 Project Development and Capacity Building
Since the first batch of selected projects for funding in 2013, the JCM have registered eight projects, all in the Asia and Pacific region (Indonesia, Mongolia, Vietnam, and Palau). In total, 89 projects have been selected for funding and currently in the implementation pipeline as of January 2016.Footnote 19 They are concentrated in Indonesia and Vietnam and to a lesser extent in Bangladesh and Mongolia.
The “standard” project proposal procedure starts from submission by a project consortium to the Japanese government during call for request period, usually two to three times a year for 1 month. A consortium includes Japanese company and local company in partner countries. The application is to be made by Japanese institution as the main representative the consortium and showing an evidence
of agreement. This procedure inadvertently leaves out local companies without a Japanese partner to submit on their own at times.
Due to this constraint, Indonesia created “Project Idea Note” procedure, learning from the CDM. Indonesian parties without Japanese partners can propose their technology needs to the Indonesian secretariat who will communicate it to the Japanese government. According to the Indonesian government, proposals from Japanese side are typically “normal” projects under previously established cooperation with Indonesian side, while proposals from Indonesian companies are usually more crucial for their own development and come with a guarantee that the project will face less non-technical burdens, but the Japanese technology may not always available.Footnote 20 This may be one of the reasons why only one out of six PINs were able to be followed up (“Power Generation by Waste Heat Recovery in Cement Industry”).
This situation shows the need of strengthening project identification and development through close collaboration with partner countries. Some options for matchmaking could be innovated, for example (1) improving the use of available websites, also publishing a list of technology ideas and companies,Footnote 21 (2) promoting the involvement of state-owned companies, municipal governments and local companies, for example those experienced in the CDM, (3) working with the mass media and local company network.
Ideally, network of local companies and business-research institutions have the capacity to investigate the needs and potentials to support ‘matching’ between local and Japanese companies, as this needs to be done in business approaches. Effectiveness of processes and capacity building events must be enhanced through a long-term engagement with these organizations.
The INDCs from partner countries should also be promoted as key reference document for project development. Combining partner country emissions reductions potential and priority sectors under its INDCs shows a way to promote nationally-appropriate projects. In the future, the JCM also needs projects with bigger emissions reduction potential to increase cost-effectiveness. Some potential options are increasing partner country and local participants involvement, promote a ‘program JCM’ or group of projects, similar to CDM’s Programme of Activities (PoA).Footnote 22 The Joint Committee can also consider identifying projects that were planned for the CDM but never could start. In any case, project approval must always uphold additional aspects of projects support, promote new activity, and more advanced technology than the prevailing technology in the country, and start after the earliest date decided by each partner country (most countries decided 1 January, 2013).
The functions of the JCM websites (so far, Indonesia, Vietnam, and Mongolia have established their own JCM websites in addition to the Japanese websites) should also be optimized to facilitate project developers showcasing their needs and availability, which can be followed up by the JCM secretariats and intermediary organizations. Transparency of information must always be ensured in communicating the JCM opportunities and approval process to eligible entities.
These information are crucial for private companies, whom are naturally attracted to the offered JCM subsidy of ‘up to the half of investment cost’, grant, and full ownership of the technologies. Although the price of advanced low-carbon technologies are generally higher than those available in the market, they are willing to invest because the subsidy helps pushing down payback period to a reasonable period of time. The emphasis on use of advanced technology should also be promoted. Current experience shows that the approved technologies have better efficiency and/or performance than those commonly used in partner countries. As a more specific criteria, MOEJ specifies cost effectiveness level and payback period as eligibility criteria for JCM Model Project support.
The role of state actors such as local government and their contribution to national emissions reductions efforts should also be encouraged. As the JCM has the additional value of realizing cost-intensive projects that may support local development plans, the global movement towards realizing sustainable cities and city-to-city cooperation programs can further encourage JCM projects. Schemes such as “sister city” and municipality international cooperation offices have been the playmakers for these cooperation. The City of Yokohama, for example, established a “Y-PORT” program in 2014, which aims to enhance collaboration between the government and private companies in the city to promote sustainable cities in other countries, utilizing, among others, the JCM. High social awareness and leadership on the environmental issues are helping to push these initiatives
Case Study: PT Semen Indonesia Tuban
PT Semen Indonesia (Persero), Tbk. is the largest cement producing company group in the country. The company has experience in developing a CDM project in power generation by waste heat recovery in its Semen Padang factory. In 2013, PT Semen Indonesia proposed another “Power Generation by Waste Heat Recovery in Cement Industry” project, developed with their Japanese partner JFE Engineering.
The project introduces a waste heat recovery at a Semen Indonesia cement production plant in Tuban, East Java, Indonesia. The waste recovery system is designed to utilize waste heat emitted from the cement factory to generate electricity for own consumption, therefore reducing electricity import from the national electricity grid of approximately 165,000 MWh/year, which will lead to the reduction of fossil fuel combustion at grid-connected power plants. A power generation facility with 30.6 MW capacity was proposed.
After feasibility in fiscal year 2013, official Project Idea Note proposal was submitted in May 2014 and the project was selected for funding as JCM Model Project (expected to be registered in 2017). Benefiting from project participants’ preparation, technical expertise, understanding and experience, as well as effective governmental consultation process, the approval of its MRV methodology (ID_AM001) took only 1 month.
PT Semen Indonesia sees three benefits from engaging in the JCM: environment, economic, and company image. Environmental benefits include CO2 emission reduction (approximately 122,000 tCO2/year, the largest selected project in Indonesia so far) and low stack gas temperature. Energy and water consumption reduction resulting from WHR process lead to both environmental and economic benefit. By utilizing about 30 MW electricity generated by the installed facility, more than 150 million kWH electricity per year can be saved, leading to more than 85 % cost saving. The company is also able to enhance company image, create jobs, and contribute to the community. The project investment costs around 50 million USD, and the JCM subsidy from the Ministry of Environment Japan, which accounts to around 18 % of this cost, decreases the project investment index (IDR/kW).
From their experience in the CDM, PT Semen Indonesia sees that the JCM offers a simpler, more reliable, and faster mechanism for the private sector and its MRV system preferable for its simplicity. The JCM encouragement for private sector active engagement is appreciated. PT Semen Indonesia suggests to address the following to further enhance the JCM implementation:
Improve appropriateness of MRV system by increasing the number of Indonesia TPE, ensure affordability of their services, and including MRV cost in the project budget
Optimize capacity building for project host. For example, improve the role of project host to in equipment design and selection as well as supplier selection
Improve leadership of project host in the consortium, as the Japanese government requires Japanese entities to apply as head of consortium to apply for subsidy.
PT Semen Indonesia also addresses a concern on how to share the JCM credits among participants. To them, sharing the credits “on a pro rata basis” may relate to ‘the benefit earned by each party along the MRV period’. On the other hand, under the JCM Model Project subsidy scheme, the Japanese government requires at least half of the credits to be delivered to its government. This concern needs to be clarified by the Joint Committee.
assessment, local stakeholder consultations, and capacity building as part of the JCM MRV are important aspects in ensuring contribution to sustainable development. Requirement of an environmental impact assessment for each project refers to the partner country regulation. To date, only two registered projects were required to conduct environmental impact
assessment, both for installation of highly efficient heat-only boilers in Mongolia.Footnote 23
The efforts by partner countries to enhance local stakeholders’ engagement could be replicated. For example, Mongolia has been promoting local perspective in developing JCM projects by requiring project documents into Mongolian language in addition to Japanese. In Vietnam, a circular on the JCM implementation guidelines was distributed to governmental agencies.Footnote 24 To promote common standard and enhance the results of the JCM as a market mechanism
,Footnote 25 these efforts and a guideline from the Joint Committee in conducting local stakeholders’ consultation are useful. In the future, grievance mechanism could be established.
Public involvement in the public comment process also needs be further promoted, as the level of response for methodologies and projects are still low, receiving only up to three comments, with an average of two comments.Footnote 26
Capacity building under the JCM is a must to ensure appropriate management and MRV implementation on the ground. Although capacity building is not regulated under the JCM, and surprisingly does not seem to be the main interest of project participants, it should be required from feasibility study phase to project implementation including on equipment use and maintenance training for end-users. The partner countries may also provide recommendations on project-level capacity building strategies. Attractive information media are always beneficial.
Ultimately, there is a need for an overarching framework for ensuring sustainable development contribution. At present, a guideline of Sustainable Development Criteria has been released by the Joint Committee between Japan
and Indonesia for ex-ante and ex-post evaluation on the JCM projects contribution to sustainable development. The guideline assesses the benefits of each JCM project to the environment
, economy, social conditions, and technological improvement. It consists of a Sustainable Development Implementation Plan (SDIP) and Sustainable Development Implementation Report (SDIR). Project participants are required to evaluate their own project using SDIP, which identifies potential impact of the project through a negative/exclusion checklist. After a chosen period, the project participant develop a SDIR to report the impact
of their project, or outcomes of their SDIP, and review the contribution of their project to sustainable development, especially at the project area and its surrounding. The SDIP and SDIR are essential to integrate the JCM projects into the broader environmental, economic, and social impact management of the hosting entity, as well as to assess the co-benefits of projects.
The SDIP and SDIR are reviewed by the Joint Committee. The three registered projects were approved before adoption of these guidelines, but they may still be required to submit their plans. This procedure is applicable for all selected projects before they are registered by the Joint Committee. Availability of this procedure should be seen as an opportunity for the JCM to improve the sustainability
assurance of projects in market-based mechanisms. There are benefits for the project participants, too, in preventing the project risks. These guidelines could be made as a mandatory part of submission. The application of similar guideline in the other partner countries and a procedure for grievance/complaints from stakeholders during project should also be considered as a follow up of SDIP and SDIR.
The collective evaluation on these project-based SDIPs and SDIRs by the Joint Committee or the Japanese government may be used to evaluate contribution to sustainable development at mechanisms-level for the JCM.Footnote 27 Negotiations under the Article 6 of the Paris Agreement could consider the development of mechanisms such as the JCM. Once the negotiations start discussing sustainable development the JCM approach to sustainable development evaluation can be an example.