[Federal Register Volume 59, Number 104 (Wednesday, June 1, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-13262]


[[Page Unknown]]

[Federal Register: June 1, 1994]


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DEPARTMENT OF STATE

Bureau of Oceans and International Environmental and Scientific Affairs
[Public Notice 2015]

 

Announcement of Groundrules for U.S. Initiative on Joint 
Implementation

ACTION: Final groundrules.

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SUMMARY: The U.S. Climate Change Action Plan, announced by President 
Clinton on October 19, 1993, set forth a series of measures designed to 
return U.S. greenhouse gas emissions to 1990 levels by the year 2000 
through domestic actions alone. Recognizing the enormous potential for 
cost-effective greenhouse gas emission reductions in other countries, 
the Administration also called for a pilot program--the U.S. Initiative 
on Joint Implementation [USIJI]--to help establish an empirical basis 
for considering approaches to joint implementation internationally and 
thus help realize the potential of joint implementation both to combat 
the threat of global warming and to promote sustainable development.
    Department of State Public Notice 1918 (58 FR 66057-66059, December 
17, 1993) set forth draft Groundrules for the U.S. Initiative on Joint 
Implementation as directed by the President in the U.S. Climate Change 
Action Plan, to provide criteria for the operation of a pilot program. 
This notice provides the final Groundrules, together with a summary of 
and response to comments on the draft Groundrules.

FOR FURTHER INFORMATION CONTACT:Daniel A. Reifsnyder, Director, Office 
of Global Change, OES/EGC, room 4333, Department of State, 2201 C 
Street, Washington, DC 20520-7818, telephone: (202) 647-4069, 
facsimile: (202) 647-0191.

summary of and response to comments on the draft groundrules: The 
Department of State received twelve sets of comments on the draft 
Groundrules. The discussion below provides a review of the comments 
received, as well as an explanation of the rationale for making 
revisions to the Groundrules. Comments are organized according to the 
outline of the Groundrules themselves: (I) Purpose, (II) evaluation and 
assessment, (III) eligible participants, (IV) evaluation panel, and (V) 
criteria for project eligibility.

Section I. Purpose

    Only one comment was received on this section. It proposed revising 
the language to reflect that used in the United Nations Framework 
Convention on Climate Change. As the intent of the Groundrules is, in 
part, to provide an empirical basis for use internationally, the 
Groundrules were modified to maintain appropriate parallelism with the 
Convention.

Section II. Evaluation and Reassessment

    Comments on this section raised two issues: (1) Questions regarding 
the timing of the evaluation of the pilot program, and (2) 
recommendations that the evaluation process be open to the public. 
Regarding the timing of the evaluation, one comment suggested that the 
first evaluation should be within one year of the issuance of the 
Groundrules. Section IV, paragraph C(8) of the draft Groundrules called 
for the preparation of annual reports; this paragraph has been 
maintained, and in the Department's view, fully covers the need for a 
one-year interim assessment of the USIJI.
    With regard to opening the evaluation to the public, it was decided 
that the modalities for preparing the evaluation should be left to the 
discretion of the Evaluation Panel. To this end, a specific 
responsibility related to ``operational modalities'' has been added to 
the Panel's tasks (IV.C.(7)); this new language appropriately covers 
the specific circumstance referred to in the comment.

Section III. Eligible Participants

    Two main issues emerged in comments on this section: (1) 
Recommendations that ``groups'' of entities be entitled to submit 
projects, and (2) recommendations regarding restrictions on foreign 
participants in the program.
    To address the former comment, the text has been revised to allow 
for groups. This change takes account of the potential for a consortium 
of companies to coordinate in the preparation and implementation of a 
JI project.
    Comments on the latter point included suggestions for restricting 
eligibility of foreign participants to (i) countries that are parties 
to the FCC, or (ii) Annex I Parties only. As the Groundrules are 
designed to allow for the maximum number of acceptable projects to go 
forward, additional restrictions such as limitations on project 
participant eligibility were not incorporated.

Section IV. Evaluation Panel

    Comments were received on the Evaluation Panel membership, as well 
as on its responsibilities. On membership, commenters proposed that 
non-governmental representatives from both industry and the 
environmental community be added to the Evaluation Panel. In the 
revised Groundrules, language has been added which requires the 
Evaluation Panel to develop operational modalities for implementing the 
program, providing the Panel with the opportunity to assure public 
participation. Furthermore, while the Department recognizes the 
importance of full public consultations, it supports the existing 
language which establishes responsibility at the federal level to 
accept or reject project proposals.
    One commenter proposed deleting Evaluation Panel authority to 
approve or reject a project. The commenter argued that the Evaluation 
Panel should accept all projects unless they were deficient, putting 
the onus on the Evaluation Panel to discover deficiencies rather than 
on the project to demonstrate adequacy. The Department's view is that 
such a procedure would be inappropriate; project proposers have the 
information at hand, and the responsibility for compiling information 
needed is appropriately theirs. The Panel will not have adequate 
resources to perform such a review.
    Original item IV.C(3) has been amended to specify that the 
Evaluation Panel will be responsible for reviewing and evaluating 
project submissions, including baseline projections (further discussed 
under Section V. amendments).
    Many of the comments received stressed the importance of the 
operational aspects of joint implementation. The Department fully 
agrees that these issues are critical, although the stipulation of such 
detailed operational guidance is beyond the purview of these 
Groundrules. For this reason, and to indicate explicitly the important 
attached to the development of operational criteria, a new section 
(Section IV.C(7)) has been added to the text to allow the Evaluation 
Panel to oversee the development of the day-to-day operations of the 
USIJI, including such tasks as preparing the forms for project 
submissions, setting internal rules to determine what constitutes a 
``complete'' submission, and the degree of assistance which may be 
provided by the Evaluation Panel to project applicants.
    One commenter suggested requiring the return of project evaluations 
within 30 days of receipt of a completed application. In the 
Department's view, a 30-day turnaround would be impossible to meet, and 
would provide too little time for adequate review of project 
submissions.
    It was recommended that the Panel coordinate with other 
organizations such as the Export-Import Bank, the Overseas Private 
Investment Corporation, the Commodity Credit Corporation, and the 
Enterprise for the Americas Program. The Department fully agrees with 
the thrust of this recommendation; however, representation by each of 
these organizations on the Evaluation Panel is not necessary to assure 
this coordination, modalities for which can be left to the Evaluation 
Panel to develop.
    It was recommended that the Evaluation Panel be specifically 
authorized to establish either ad hoc or standing sub-committees with 
technical expertise in areas related to evaluating eligibility 
requirements to assist the Evaluation Panel in executing its duties. 
The Department agrees with this recommendation, and believes that such 
specific operational modalities are covered by the additional language 
in this section.

Section V. Criteria

    Nearly every set of comments referred both generally to this 
section, and more specifically to the language of individual criteria; 
to simplify the discussion, each criterion is discussed separately 
below. In this discussion, criterion numbers refer to those of this 
new, revised text except where otherwise stated.

Chapeau for Subsection A.

    One commenter recommended that the language in the chapeau 
paragraph be changed from ``must find'' to ``shall consider''. The 
commenter argued that in a pilot phase, the more stringent ``must 
fine'' requirement would rule out all projects. However, the Department 
strongly believes that a credible minimum standard must be set for 
projects to be included as part of this initiative. Further, in the 
Department's view, each of the criteria contained in this section is 
critical to the acceptability of a project submission. The language of 
this chapeau was therefore left unchanged.

Criterion A.1

    Several commenters noted potential difficulties with this 
criterion, questioning both the uncertain nature of documentation 
required to assure host government ``acceptance'', and the value of 
having such a criterion at all. while the Department agrees that the 
nature of the documentation that must be provided to determine 
``acceptability'' has not been defined, the Department also believes 
the criterion--for the host government to find the project acceptable--
is essential. Unless the United States, through the USIJI, can begin to 
examine how other countries' governments treat JI projects during the 
pilot phase, it will be impossible to develop an empirical database for 
developing appropriate criteria in the operational phase.

Criteria A.2, A.3 and A.4

    Numerous comments were received on these criteria. Issues were 
raised regarding, for example: How to interpret the requirement; the 
difference between ``actual'' and ``projected'' reductions; the level 
of certainty required regarding the likelihood of the projected 
reductions; whether a grandfathering of projects should be allowed; 
requirements to reject projects that may be mandated but not 
implemented under host country law; and the need to include the 
information regarding fiscal year 1993. The Department agrees that the 
operational modalities for these are complex matters; however, as noted 
above, language has been added to provide the Evaluation Panel with the 
authority to develop the appropriate forms and specifications required 
for projects. However, in addition to this language, the text of these 
criteria has been amended in several ways from that originally 
published for public review and comment.
    First, a new criterion has been added (Section V.A. (2)):

    To be included in the USIJI, the Evaluation Panel must find that 
a project submission involves specific measures to reduce or 
sequester greenhouse gas emissions initiated as the result of the 
U.S. Initiative on Joint Implementation, or in reasonable 
anticipation thereof.

As used here, the term ``specific measures'' is meant to refer to 
actions to reduce or sequester greenhouse gas emissions that may form a 
part of a broader project. In some cases, the specific measures may 
constitute the entire project; in other cases, the specific measures 
may be a lesser subset of the project.
    This criterion is designed to promote ``additionality''--that is, 
actions above and beyond those that would have been taken otherwise. It 
seeks to do so in two ways:
    (1) By establishing a reference date before which it would be 
difficult to conclude that activities were undertaken as the result of 
the USIJI; and
    (2) By requiring that project participants demonstrate what 
measures were or will be implemented in response to the USIJI.
    With respect to the reference date, the phrase ``or in reasonable 
anticipation thereof'' is designed to provide a reasonable ``grace 
period'' for participants and to establish some certainty. The United 
Nations Framework Convention on Climate Change involved negotiations on 
joint implementation and provides for joint implementation in Article 
4.2. It would thus be reasonable to consider project submissions 
involving measures initiated after the date of the Convention's 
adoption--May 9, 1992; although it would be more difficult to reach 
such a conclusion with respect to measures initiated prior to that 
date, the Evaluation Panel may do so on a reasonable showing that the 
measures were undertaken in anticipation of joint implementation.
    With respect to the need to demonstrate what measures were or will 
be implemented in response to the USIJI, the Department acknowledges 
the difficulty in seeking to gauge why participants undertook or plan 
to under-take specific measures, since most projects will be 
implemented for multiple reasons. At the same time, the integrity of 
the pilot program would be undermined if participants were able simply 
to repackage activities that would otherwise have been undertaken and 
submit them for inclusion under the USIJI. In this regard, the 
Department notes that an issue closely debated at the 9th Session of 
the Intergovernmental Negotiating Committee for the Framework 
Convention on Climate Change (February 1994) was the need to assure 
``additionality'' with respect to joint implementation projects. To 
promote such ``additionality'', it will be important for project 
participants to demonstrate to the satisfaction of the Evaluation Panel 
that the measures undertaken or to be undertaken were implemented in 
response to the USIJI or in reasonable anticipation thereof. In 
particular, they will need to demonstrate how these measures are above 
and beyond what would reasonably have been or be likely to occur 
otherwise.
    The original criteria under Section V. have also been amended to 
eliminate the tautology that would have been established by original 
Section V.A.(3). Original Section V.A.(2) has also been amended in this 
process.
    These two amended criteria (new Section V.A.(3) and (4)) are also 
intended to promote ``additionality.'' In this sense they are similar 
to the requirement with respect to federally funded activities, i.e., 
that they be undertaken with funds in excess of those available for 
such activities in fiscal year 1993.
    Under new Section V.A.(3), project submissions will need to include 
data and methodological information sufficient to establish a baseline 
of current and future emissions--both in the absence of, and as the 
result of, the specific measures taken or to be taken to reduce or 
sequester greenhouse gas emissions. Under new Section V.A.(4), the 
Evaluation Panel will need to find that the specific measures have 
reduced or sequestered, or will reduce or sequester, greenhouse gas 
emissions beyond the baseline of current and future emissions in the 
absence of the specific measures taken or to be taken. In reaching such 
a conclusion, the Evaluation Panel will need to pay particular 
attention to baseline projections in the absence of the project's 
specific measures. The Evaluation Panel will need to find that such 
baseline projections are reasonable. Relevant factors the Evaluation 
Panel may consider include, among others:

--Whether the baseline projections are consistent with the prevailing 
standard of environmental protection in the country involved
--Whether the baseline projections are consistent with existing 
business practices within the particular sector or industry
--Whether the baseline projections are consistent with trends and 
changes in those practices
--Whether a project was altered before or after being implemented to 
take into account considerations related to joint implementation

As noted, the Evaluation Panel will be able also to consider any other 
evidence it deems relevant to its assessment of the reasonableness of 
the baseline projections. The Evaluation Panel will be able to reject 
project submissions which, in its judgment, do not establish reasonable 
baseline projections.
    With respect to measures already undertaken, participants may be 
able to demonstrate ``additionality'' and ``reasonable anticipation'' 
in a number of ways. Relevant factors the Evaluation Panel may consider 
include, among others:

--Evidence that a project was altered before or after implementation to 
take into account considerations related to joint implementation
--Evidence that a project was specifically undertaken to promote joint 
implementation
--Contract provisions that specifically allocate among project 
participants the greenhouse gas emissions reduced or sequestered

Criterion A.5

    One commenter suggested requiring the project proposers to include 
in their submissions a monitoring schedule. While such recommendations 
may be appropriate to the operational activity, in the Department's 
view the specific criteria for monitoring cannot be resolved at this 
time, and should be thoroughly discussed and established by the 
Evaluation Panel. The addition of language providing the Evaluation 
Panel with authority to develop operational modalities will assure that 
this issue can properly be addressed.

Criterion A.6

    No comments received.

Criterion A.7

    Several commenters proposed that the criterion be deleted as 
placing too onerous a burden--i.e., for a full environmental impact 
assessment--on each project. In the Department's view, it is imperative 
not to move forward with projects which, while leading to greenhouse 
gas reductions, also lead to potentially significant but unidentified 
negative non-GHG environmental impacts. Again, however, the details of 
what will be required to meet this criterion are appropriately left to 
the Evaluation Panel.
    Another commenter proposed that the criterion be strengthened so 
that project submission would be automatically rejected if any negative 
impact were found. In the Department's view, the Evaluation Panel 
itself must be given discretion to evaluate the results--and this is 
done through Section V.B, which allows other environmental 
considerations to be used in determining the acceptability of the 
project.

Criterion A.8

    One commenter suggested limiting the time over which the reduction 
credit could be claimed as part of the assurance that emissions reduced 
or sequestered were real. The Department believes that this is a matter 
for individual project participants to determine, and that individual 
circumstances warrant individual attention from the Evaluation Panel.

Original Criterion A.8 (now deleted)

    In the December 17 Federal Register notice draft Groundrules, this 
criterion provided for registration of the project in the national 
inventory established under section 1605 of the Energy Policy Act of 
1992. While the Administration is rapidly moving to develop this 
registry, guidelines for the program have not yet been completed. Thus, 
this criterion has been deleted. However, it is the Department's firm 
expectation that the 1605 registry will be developed in a manner 
consistent with these USIJI Groundrules, and that in the future, 
project participants may be expected to register their projects through 
the 1605 program.

Criterion A.9

    Commenters suggested amending the criterion to limit how the 
``credit'' for the project could be apportioned--with a minimum amount 
allocated to the host country, and an automatic discounting of total 
allowable emissions reduced or sequestered based on the uncertainty of 
the project. In the Department's view, it is most appropriate that the 
allocation of emissions reduced or sequestered be decided by the 
participants. Thus this suggestion was not included.

Section V.B

    The second category of criteria in the Groundrules contains items 
that the ``Panel shall also consider''--a less stringent formulation 
than that required for the criteria in Section V.A. The principal 
comment on this section proposed to delete it as being redundant with 
Section V.A. As discussed above, in the Department's view, it is 
essential to establish two categories--one for minimum requirements 
that must be met to include a project submission; the other with 
additional items that the Evaluation Panel shall also consider in 
deciding whether to include a project submission.

General Comments on Language

    A number of the comments received addressed the usage of the word 
``net'' throughout the text. The comments expressed concern that the 
word could be read to require project submitters to total their 
domestic emissions with their international emissions (and for that 
total to be reduced through the JI project) to allow the project 
submission to be included. This reading was not intended. As a 
consequence, the language has been changed throughout the text, and the 
words ``reduced or sequestered'' are now used vice ``net.'' The 
Department interprets ``reduced'' also to include ``avoided.''

Groundrules

    The following describes the U.S. Initiative on Joint Implementation 
(USIJI), which shall be established as a pilot program.

Section I--Purpose

    The purpose of the pilot program shall be to:
    (1) Encourage the rapid development and implementation of 
cooperative, multually voluntary, cost-effective projects between U.S. 
and foreign partners aimed at reducing or sequestering emissions of 
greenhouse gases, particularly projects promoting technology 
cooperation with and sustainable development in developing countries 
and countries with economies in transition to market economies;
    (2) Promote a broad range of cooperative, mutually voluntary 
projects to test and evaluate methodologies for measuring, tracking and 
verifying costs and benefits;
    (3) Establish an empirical basis to contribute to the formulation 
of international criteria for joint implementation;
    (4) Encourage private sector investment and innovation in the 
development and dissemination of technologies for reducing or 
sequestering emissions of greenhouse gases; and
    (5) Encourage participating countries to adopt more complete 
climate action programs, including national inventories, baselines, 
policies and measures, and appropriate specific commitments.

Section II. Evaluation and Reassessment of Pilot Program

    The pilot program shall be evaluated and reassessed within two 
years of its inception or within six months of adoption of 
international criteria for joint implementation by the Conference of 
the Parties to the United Nations Framework Convention on Climate 
Change, whichever is earlier.

Section III--Eligible Participants

A. Domestic
    (1) Any U.S. citizen or resident alien;
    (2) any company, organization or entity incorporated under or 
recognized by the laws of the United States, or group thereof; or
    (3) any U.S. federal, state or local government entity.
B. Foreign
    (1) Any country that has signed, ratified or acceded to the United 
Nations Framework Convention on Climate Change;
    (2) any citizen or resident alien of a country identified in B(1) 
of this section;
    (3) any company, organization or entity incorporated under or 
recognized by the laws of a country identified in B(1) of this section, 
or group thereof; or
    (4) any national, provincial, state, or local government entity of 
a country identified in B(1) of this section.

Section IV--Evaluation Panel

    A. An Evaluation Panel is hereby established.
    B. The Evaluation Panel shall consist of eight members, of whom:
    (1) One shall be an employee of the Department of Energy, who shall 
serve as Co-Chair;
    (2) One shall be an employee of the Environmental Protection 
Agency, who shall serve as Co-Chair;
    (3) One shall be an employee of the Agency for International 
Development;
    (4) One shall be an employee of the Department of Agriculture;
    (5) One shall be an employee of the Department of Commerce;
    (6) One shall be an employee of the Department of the Interior;
    (7) One shall be an employee of the Department of State; and
    (8) One shall be an employee of the Department of the Treasury.
    C. The Panel shall be responsible for:
    (1) Advising and assisting prospective U.S. and foreign 
participants on the technical parameters (including with respect to 
baselines, measuring and tracking) of projects submitted for inclusion 
in the USIJI;
    (2) Accepting project submissions from eligible U.S. participants 
and their foreign partners;
    (3) Reviewing and evaluating project submissions, including 
baseline projections;
    (4) Approving or rejecting project submissions for inclusion in the 
USIJI, based on criteria contained in section V;
    (5) Providing written reasons for its decisions, which shall be 
made publicly available, within 90 days of receipt of a complete 
submission or resubmission;
    (6) Certifying emissions reduced or sequestered estimated to result 
from projects;
    (7) Developing operational modalities for the implementation of the 
Program; and
    (8) Preparing an annual report of its activities, including a 
summary of approved projects.

Section V--Criteria

    A. To be included in the USIJI, the Evaluation Panel must find that 
a project submission:
    (1) Is acceptable to the government of the host country;
    (2) Involves specific measures to reduce or sequester greenhouse 
gas emissions initiated as the result of the U.S. Initiative on Joint 
Implementation, or in reasonable anticipation thereof;
    (3) Provides data and methodological information sufficient to 
establish a baseline of current and future greenhouse gas emissions:
    (a) In the absence of the specific measures referred to in A.(2)-- 
of this section; and
    (b) As the result of the specific measures referred to in A.(2) of 
this section;
    (4) Will reduce or sequester greenhouse gas emissions beyond those 
referred to in A.(3)(a) of this section, and if federally funded, is or 
will be undertaken with funds in excess of those available for such 
activities in fiscal year 1993;
    (5) Contains adequate provisions for tracking the greenhouse gas 
emissions reduced or sequestered resulting from the project, and on a 
periodic basis, for modifying such estimates and for comparing actual 
results with those originally projected;
    (6) Contains adequate provisions for external verification of the 
greenhouse gas emissions reduced or sequestered by the project;
    (7) Identifies any associated non-greenhouse gas environmental 
impacts/benefits;
    (8) Provides adequate assurance that greenhouse gas emissions 
reduced or sequestered over time will not be lost or reversed; and
    (9) Provides for annual reports to the Evaluation Panel on the 
emissions reduced or sequestered, and on the share of such emissions 
attributed to each of the participants, domestic and foreign, pursuant 
to the terms of voluntary agreements among project participants.
    B. In determining whether to include projects under the USIJI, the 
Evaluation Panel shall also consider:
    (1) The potential for the project to lead to changes in greenhouse 
gas emissions elsewhere;
    (2) The potential positive and negative effects of the project 
apart from its effect on greenhouse gas emissions reduced or 
sequestered;
    (3) Whether the U.S. participants are emitters of greenhouse gases 
within the United States and, if so, whether they are taking measures 
to reduce or sequester such emissions; and
    (4) Whether efforts are underway within the host country to ratify 
or accede to the United Nations Framework Convention on Climate Change, 
to develop a national inventory and/or baseline of greenhouse gas 
emissions by sources and removals by sinks, and whether the host 
country is taking measures to reduce its emissions and enhance its 
sinks and reservoirs of greenhouse gases.

    Dated: May 24, 1994.
David Colson,
Acting Assistant Secretary, Bureau of Oceans and International 
Environmental and Scientific Affairs.
[FR Doc. 94-13262 Filed 5-31-94; 8:45 am]
BILLING CODE 4710-09-M