1. Japan Program for Activities Implemented Jointly Under the Pilot Phase ("AIJ Japan Programme")

(1) Establishment of the AIJ Japan Programme

At the first session of the Conference of the Parties (COP1) to the United Nations Framework Convention on Climate Change (UNFCCC) held in Berlin in March 1995, the establishment of Activities Implemented Jointly (AIJ) under the pilot phase, in which voluntary participation would be open to developing country parties, was decided.

Based on this decision, the Japanese Government established a consensus among relevant ministries and agencies in November 1995 on the fundamental framework of the "Japan Program for Activities Implemented Jointly Under the Pilot Phase ("AIJ Japan Programme")" in order to contribute positively to global efforts to limit greenhouse gas emissions by promoting AIJ activities.

The objectives of the AIJ Japan Programme are as follows:

(i) To accumulate experience in order to contribute to the deliberative work pertinent to the formation of an international framework of Joint Implementation (JI) based on Article 4.2 (a) & (b) under the UNFCCC;

(ii) To establish methodologies to conduct comprehensive analysis for the net volume of greenhouse gas reductions and removals resulting from JI; and

(iii) To study measures to encourage participation of the private sector for JI projects.


(2) Structure of the AIJ Japan Programme

Individual AIJ projects are approved by each ministry or agency on the basis of their specialized knowledge. At the same time, the Japanese Government has established the "Inter-Ministerial Agency Co-ordination Committee for AIJ" (IMACC) among relevant ministries and agencies to share information.

(3) Adoption of "Evaluation Guidelines for Approval of AIJ Projects"

In January 1996, IMACC adopted the "Evaluation Guidelines for Approval of AIJ Projects," which compiled the essential items to be considered when ministries and agencies responsible for projects conduct their evaluation and approval.

2. Projects Approved for AIJ Japan Programme

First of all, in order to make AIJ objectives universally known by potential project participants in Japan and to explore potential AIJ projects, "AIJ Seminars" were held in major cities in Japan. The first public invitation for application was conducted from April 1 to June 10, 1996. During that period, a total of 16 applications were made by industry, local governments and NGOs. From these applications, 11 projects were authorized and publicly announced on July 5, 1996.

Since then, applications have been approved on various occasions. As of February 1999, 18 projects have been approved under the AIJ Japan Programme.

(For a summary of the projects approved under the AIJ Japan Programme, refer to Attachment.)

Among these projects, nine have been approved by the governments of host countries. However, only one notification has been made to the Secretariat of the UNFCCC. This was for "The Model Project for Installation of Coke Dry Quenching (CDQ) Facility" (hereinafter the "CDQ project") in the People's Republic of China. Nevertheless, preparations for notification regarding the other projects are being made with the governments of host countries.

3. Experiences from AIJ Projects

(1) Experiences in Japan

(i) Communication with Host Country Parties

A number of projects have been implemented in various host countries such as China, Indonesia, Thailand and Vietnam involving a wide range of implementing organizations. Thanks to these experiences, we have been able to foster common understanding with host countries on how important and necessary it is to tackle climate change issues together.

Particularly in the CDQ project in China, an expert level working group (WG) was established to prepare for the notification of the project to the Secretariat of the UNFCCC. The WG intensively and sincerely discussed a number of issues, including those mentioned in (iii) below, and finalized their work to draw up a reporting format. Thus, meaningful experience was gained through the work carried out.

A notification WG with China was also formed in regards to "The Model Project for Utilization of Waste Heat from Incineration of Refuse" and "The Model Project for Energy Conservation in Electric Furnace Use for Ferro-Alloy Refining." Discussions on reporting are currently taking place.

(ii) Approval by the Governments of Host Countries

Many of the AIJ projects involved much cost and time until they were approved by the governments of the host countries. This was due to the fact that, at the stage when these projects were brought to the host countries, institutional arrangements had not yet been developed and the approval scheme and criteria of AIJ projects were still unclear and opaque.

Therefore, Japan's AIJ approval scheme and criteria as outlined above were introduced so as to take them into account as one of the references in establishing a system. On top of this, as result of sincere and positive efforts, there have been significant improvements. However, it is also true that there are still areas where further improvement might be needed. Hence, a transparent, simple and predictable approval scheme with clear criteria is highly expected so as to minimize costs and time in launching projects.


(iii) Establishment of the Baseline

AIJ is at the pilot phase, and one of its objectives is the accumulation of various kinds of experiences. From this point of view, methodological issues related to baseline setting have also been discussed with special attention. The following experiences which were obtained from experiences of AIJ baseline setting could also be applied to the discussion of JI and CDM rules based on the Kyoto Protocol.

In calculating emission reductions generated by a project, the baseline is an indispensable assumption. The methodologies used to establish baselines differed from country to country and from project to project. This is why a lot of time and long discussions were required to resolve various complicated issues.

Taking an example of the CDQ project in China, the following issues have become subjects of discussion:

(1) The scope of emission reductions which could be regarded as a result of installing CDQ facilities. By installing CDQ facilities, the following two effects could be predicted:

a. Steam generation using recovered coke heat at the CDQ facilities (direct effect); and

b. A decline in coke usage ratio in blast furnace operations due to coke quality improvement (indirect effect).

In setting the baseline, should both a. and b. above be taken into consideration, or should b., which is an indirect effect, be excluded?

(2) The issue of whether the baseline should change according to future technological advances

Should such factors as improvements in technological level and higher fuel costs in the future be taken into account when setting the baseline, and should the baseline scenario be changed accordingly?

Discussions by the CDQ notification WG were concluded as follows:

With regard to (1), it was decided that only a. (direct effect) would be included in the reduction effect of the projects. With regard to (2), no concrete calculation method for setting a changing baseline was available. Therefore, it was decided to keep it static.

A different issue is under discussion by the WG for "The Model Project for Utilization of Waste Heat from Incineration of Refuse." The question is whether to use the default figures in the IPCC Guideline or to use figures from other sources in calculating methane generation from open dumping.

Further discussion is required concerning the issue of baseline setting in the future. In doing so, the following points should be given due consideration.

(1) In order to promote projects through minimizing transaction costs as well as to ensure a verifiable environmental benefit by avoiding an arbitrary setting of baselines, a standardized baseline would be preferable.

(2) In cases where standardization is difficult, case-by-case baseline setting would be applied. In this case, it is important to make baseline setting transparent and accountable by providing precise grounds.

(3) Would a general method regarding other aspects, such as how to take into account technological progress, be necessary in setting baselines?

(iv) Project Financing

When private enterprises implement AIJ projects, the method to procure the project financing has become an important issue. To increase the number of projects, and to promote global warming countermeasures, technology transfer and capacity building at the private sector level, it has become clear that the AIJ scheme should be more attractive than it is. Furthermore, under the present situation, the implementation of projects may lose geographical balance. In order to solve these issues and raise the benefits of host countries, a study on a scheme which promotes global warming countermeasures and maximizes available funds, including increased public funds mainly through ODA, will be required.

(v) Raising Benefits of the Project

In "The Model Project for Energy Conservation in Electric Furnace Used for Ferro-Alloy Refining," low-cost raw material with lower quality than conventional material became usable through the introduction of a pelletizer. Due to benfits from energy conservation as well as from a lower cost of raw material, this project has become more profitable and more attractive for enterprises in the host country. When trying to expand business in an environment where energy prices are low, exploring such attractive business opportunities is considered important. Identifying projects most profitable to enterprises in the host countries is the key to promote projects and firmly establish technologies over a wide range.


(2) Benefits for Developing Countries

(i) Contributing to Sustainable Development in Developing Countries

Through the implementation of AIJ projects, such as in the CDQ installation project for example, not only will carbon dioxide be reduced. Economic effects such as saving fuel costs due to reduced energy consumption and social effects such as reduction of air pollution can also be expected. In this manner, AIJ projects are considered to make great contributions to sustainable development in host countries.


(ii) Transfer of New Technologies

Through implementation of AIJ projects by Japan, the latest environmental and energy conservation technologies have been introduced to developing countries. Hence, greenhouse gas emissions could be reduced in a more efficient manner by jointly implementing AIJ projects.

(iii) Capacity Building

At first, concerns over climate change issues seemed to have less significance in developing countries. Because of that, the importance of AIJ and climate change issues were stressed repeatedly on various occasions such as seminars and workshops. For example, the "Workshop on Transfer of Environmentally Sound Technologies and Activities Implemented Jointly" held in Osaka, Japan in June 1996 by the Environmental Agency of Japan, the "Japan-U.S.-China AIJ Seminar" held in China jointly with the United States in July 1996, and the "AIJ Seminar" in Indonesia in February 1997 by Japan's New Energy and Industrial Technology and Development Organization (NEDO) were held consecutively. Furthermore, AIJ approval of projects was requested to the governments and a scheme for approval was established as explained above. In this manner, AIJ contributed not only to project implementation directly, but also to the formation of capacity building in developing countries.

(iv) Other Environmental Benefits (Multi-Benefits)

The CDQ project implemented in China has been useful in other environmental aspects, in particular, as measures to deal with SOx, NOx, soot and smoke. Since the amount of coal consumption decreased due to installation of CDQ facilities, scattering of soot in the atmosphere as well as SOx emissions were reduced. Projects related to coal do not only contribute to countermeasures against greenhouse gas emissions, but also to local environment measures. Through the implementation of AIJ projects, the contribution to other environmental aspects as well as reduction of greenhouse gas emissions cannot be ignored.