When notifying the Secretariat regarding "The Model Project for Installation of Coke Dry Quenching (CDQ) Facility" (hereinafter the "CDQ project"), which is an AIJ project between Japan and China, an expert level working group was established. Discussions were held regarding the contents to be included in the reporting format (Uniform Reporting Format, URF), ways to report, etc., with the aim of reaching an agreement. The usage of URF are presented below based on these discussions.

1. Description of A. 4) Costs

In the URF, the costs of the project and the costs of AIJ components are to be accounted for. A great deal of time was spent by the Japan-China Notification WG to complete the fields. The important points and questions raised in these discussions were:

(1) Should the operating cost (such as expenses for water, utility, electricity and personnel matters required in the operation of the CDQ facilities) be added to the initial investment (i.e., facility expense, construction expense) when calculating the cost per CO2?

(2) The Japanese Government contributes the funds. In a situation where Japanese budgets are decided each year, the contribution amount for subsequent years is not necessarily definite. How should they be described?

(3) In a situation where the concept of AIJ components is unclear, what range of expenses should be covered under the AIJ component? Should all of the costs involved in the CDQ facilities (CDQ facilities expenses, construction expenses, etc.) be applicable? Should costs related to equipment that is necessary for the operation of the CDQ facility but does not directly contribute to CO2 reduction (dust elimination systems, etc.) be excluded?

With regard to these points, there were differences in the views of both sides. However, as a result of discussion, the following was decided:

(1) For the cost per avoided ton of CO2 equivalent, the amount of the initial investment (AIJ component) deducted by total emissions amount ($19.60/ton) was described, and $30.00/ton, figure including the operating cost was entered in parentheses.

(2) The contribution amount needed for subsequent fiscal years was uncertain. However, it was entered to the extent that it could be estimated.

(3) All of the costs related to equipment and construction necessary for the operation of the CDQ facilities including in costs for dust elimination systems, etc. were considered as an AIJ component.

The description of the costs, as above, needs further discussion. In that case, the following points would become important.

(1) What are the reasons and the purpose for describing the costs?

(2) What is the appropriate definition of a cost when a description of the cost is required? Will the concerned definition be technologically possible? (Specifically, there would be cases where AIJ components are difficult to separate from the cost of overall investment. In such cases, how should it be treated?) Furthermore, will the necessity of maintaining confidentiality of the project participants, particularly the private sector, for operational reasons and the uncertainty of future governmental budgets be considered in this definition?

2. Description of E) Calculating the Amount of GHG Reduction

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 project. 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?