The Practical Operation of Japan’s Joint Crediting Mechanism

Abstract

The Paris Agreement proposed a new measure to replace the Kyoto Protocol’s Clean Development Mechanism (CDM) (and Joint Implementation) at the end of the Protocol’s second compliance period in 2020. The Japanese government has developed the Joint Crediting Mechanism (JCM) with the inadequacies of the CDM in mind. The JCM, therefore, deserves close study. In a previous paper the author outlined the features of the JCM. This paper draws on interviews with government officials, consultants and corporate participants to assess the practical application of the JCM. It concludes that for the program to better achieve its full potential from an environmental perspective it would be preferable for JCM credits to be of value. Furthermore, although the JCM also has diplomatic and commercial mandates these ends are substantially achieved by the complementary funding program for JCM projects. Moves to better interline the two programs, with an emphasis on funding criteria that makes reference to a project’s cost of emissions abatement, should enhance the environmental effectiveness (of the two programs) provided priority is given to this criterion over other (diplomatic/commercial) criteria. The introduction of an emissions trading scheme in Australia in the future (or extension of the current safeguard mechanism) would be expected to provide a market for carbon credits generated from offset schemes. Given that the current Australian offset scheme is solely domestic focused a case could be made to also introduce at that time a JCM type scheme that awarded credits to Australian entities engaged in foreign joint ventures achieving low cost emissions reductions.