Establishing a baseline

Baselines for JI projects must be established in accordance with the rules set out in 9/CMP.1, Annex, Appendix B, paragraph 2 (and reiterated by the Joint Implementation Supervisory Committee (JISC) in the Guidance on criteria for baseline setting and monitoring, adopted at its fourth meeting (JISC 4, Annex 6) and revised at its eighteenth meeting (JISC 18, Annex 2).

A baseline shall be established:

1. On a project-specific basis and/or using a multi-project emission factor;
2. In a transparent manner with regard to the choice of approaches, assumptions, methodologies, parameters, data sources and key factors;
3. Taking into account relevant national and/or sectoral policies and circumstances, such as sectoral reform initiatives, local fuel availability, power sector expansion plans, and the economic situation in the project sector;
4. In such a way that emission reduction units (ERUs) cannot be earned for decreases in activity levels outside the project activity or due to force majeure;
5. Taking account of uncertainties and using conservative assumptions (9/CMP.1, Annex, Appendix B, paragraph 2; Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 13(b)).

Project participants must justify the chosen baseline:

Project participants shall justify their choice of baseline (9/CMP.1, Annex, Appendix B, paragraph 3; Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 13(c)).

Baseline and monitoring methodologies established for use in the Clean Development Mechanism (CDM) may be applied to JI projects, where appropriate:

The Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol: ...

4. Also decides that:
   1. Methodologies for baselines and monitoring, including methodologies for small-scale project activities, approved by the Executive Board of the clean development mechanism, may be applied by project participants under joint implementation, as appropriate (10/CMP.1, paragraph 4(a)).

Basic features of a baseline

The Guidance on criteria for baseline setting and monitoring restates the basic features of a baseline identified by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (COP/MOP) as follows:

The baseline for a JI project:

1. Is the scenario that reasonably represents the anthropogenic emissions by sources or net anthropogenic removals by sinks of GHGs that would occur in the absence of the project;
2. Shall cover emissions from all gases, sectors and source categories listed in Annex A of the Kyoto Protocol, and/or anthropogenic removals by sinks, within the project boundary (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 20).

The JISC also notes that in any case, baselines must be established in accordance with 9/CMP.1, Annex, Appendix B, projects must be approved by the Parties involved, and the accredited independent entity (AIE) engaged to determine the project must confirm whether the baseline is appropriate:

In any case:

1. The project participants shall set a baseline in accordance with appendix B of the JI guidelines;
2. The host Party/Parties (as well as the other Parties involved) has/have to approve the project; and
3. The AIE has to determine whether the project has an appropriate baseline in accordance with the criteria set out in appendix B of the JI guidelines (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 29).

Options for establishing a baseline

As noted in paragraph 13(b) of the Guidance on criteria for baseline setting and monitoring, a baseline may be established on a project-specific basis and/or using a multi-project emission factor:

A baseline shall be established on a project-specific basis and/or using a multi-project emission factor, taking into account the project boundary and in particular paragraph 29 below (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 21).

Sector-wide baselines may be used if the following criteria are satisfied:

A multi-project emission factor may be used and its application shall be justified. Sector-wide baselines may e.g. be used if:

1. The physical characteristics of the sector justify the application of a standard emission factor across the sector (e.g. in the case of an integrated electricity network with no major transmission constraints, the physical characteristics of the system may imply that the impact of a project on emissions can be assessed irrespective of its location); and/or
2. The emissions intensity does not vary significantly across the sector (e.g. in the case of diesel power generation in off-grid electricity systems, the emission factor for electricity generation may be based on standard factors with a reasonable degree of accuracy) (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 22).

If a project-specific baseline is used, project participants may either:

• Use a methodology approved for the CDM; or
• Establish a baseline in accordance with the Criteria for baseline setting and monitoring in 9/CMP.1, Annex, Appendix B.

A baseline shall be established in accordance with appendix B of the JI guidelines. (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 23).

Project boundaries and leakage

In order to establish the baseline, participants must first set the project boundary, because the baseline for a project is the most likely scenario for emissions within the project boundary.

The project boundary for a non-LULUCF project sets the limits of the project, from the perspective of calculating the emission reductions attributable to the project.  The JISC has clarified the requirements for the project boundary as follows:

In the case of a JI project aimed at reducing emissions, the project boundary shall:

1. Encompass all anthropogenic emissions by sources of GHGs which are:
   1. Under the control of the project participants;
   2. Reasonably attributable to the project; and
   3. Significant, i.e., as a rule of thumb, would by each source account on average per year over the crediting period for more than 1 per cent of the annual average anthropogenic emissions by sources of GHGs, or exceed an amount of 2,000 tonnes of CO2 equivalent, whichever is lower; and
2. Be defined on the basis of a case-by-case assessment with regard to the criteria referred to in subparagraph (a) above. (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 14).

For the CDM, the Methodologies Panel (Meth Panel) is currently working on specific proposals for consideration by the Executive Board on how to operationalise the terms "under the control of" and "reasonably attributable".  Pending decisions on these terms by the Executive Board, project participants are invited to explain their interpretation of the terms when submitting a new methodology (CDM Glossary of Terms, Version 03).  Once these clarifications have been provided, it is likely that participants in Joint Implementation (JI) mechanism projects will be eligible to use this guidance in setting project boundaries.

The delineation of the project boundary must be described in the project design document (PDD):

The delineation of the project boundary and the gases and sources/sinks included shall be described and justified in the relevant JI PDD. It is encouraged to use a figure or flow chart. All gases and sources/sinks included should be explicitly stated. Exclusions of any sources/sinks related to the baseline or the project shall be justified (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 16).

Leakage is defined in the Guidance on criteria for baseline setting and monitoring as follows:

Leakage is the net change of anthropogenic emissions by sources and/or removals by sinks of GHGs which occurs outside the project boundary, and that can be measured and is directly attributable to the JI project (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 17).

Therefore, leakage refers to the increase in emissions outside the project boundary that occurs as a consequence of the project activity's implementation.

Project participants are required to estimate leakage in establishing a baseline:

Project participants must undertake an assessment of the potential leakage of the proposed JI project and explain which sources of leakage are to be calculated, and which can be neglected.  All sources of leakage that are included shall be quantified and a procedure provided for an ex ante estimate shall be provided. (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 18).

Crediting period

Project participants must also establish a crediting period, since the baseline reflects the likely emissions from sources during the crediting period in the absence of the project.

'Crediting period' has not been expressly defined for Joint Implementation (JI) projects.  However, the definition provided for projects under the CDM is as follows:

The crediting period for a CDM project activity is the period for which reductions from the baseline are verified and certified by a designated operational entity for the purpose of issuance of CERs (CDM Glossary of Terms Version 03).

Applying this definition to JI projects, the crediting period is the period during which emission reductions from the baseline are verified, either according to national guidelines (Track 1) or by an accredited independent entity (AIE) (Track 2), for the purpose of issuance of emission reduction units (ERUs) to project participants.

Crediting periods may only commence after 2008, even if the starting date of the project is earlier:

ERUs shall only be issued for a crediting period starting after the beginning of 2008 (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 19).

The crediting period can only commence once the first emission reductions have been generated by the project:

The project participants shall choose the starting date of the crediting period to be on or after the date the first emission reductions or enhancements of net removals are generated by the JI project (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 19).

The crediting period cannot extend beyond the project's operational lifetime:

The crediting period shall not extend beyond the operational lifetime of the project (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 19).

The crediting period can continue past 2012, subject to the approval of the host Party, and the status of any ERUs generated after this time is subject to an agreement by the UNFCCC relating to the post-2012 period:

The crediting period can extend beyond 2012 subject to the approval by the host Party. The status of emission reductions or enhancements of net removals generated by JI projects after the end of the first commitment period may be determined by any relevant agreement under the UNFCCC (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 19).

Identification of a baseline

Taking into account paragraph 23 of the Guidance on criteria for baseline setting and monitoring, baselines shall be established in accordance with appendix B of the JI Guidelines (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 19).

This is set out in paragraphs 24 and 25 of the Guidance on criteria for baseline setting and monitoring:

• A baseline shall be identified by listing and describing plausible future scenarios on the basis of conservative assumptions and selecting the most plausible one. (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 24); and
• A baseline shall be established taking into account relevant national and/or sectoral policies and circumstances, such as sectoral reform initiatives, local fuel availability, power sector expansion plans, and the economic situation in the project sector. Key factors that affect a baseline shall be taken into account, e.g.:

1. Sectoral reform policies and legislation;
2. Economic situation/growth and socio-demographic factors in the relevant sector as well as resulting predicted demand. Suppressed and/or increasing demand that will be met by the project can be considered in the baseline as appropriate (e.g. by assuming that the same level of service as in the project scenario would be offered in the baseline scenario);
3. Availability of capital (including investment barriers);
4. Local availability of technologies, skills and know-how and availability of best available technologies in the future;
5. Fuel prices and availability;
6. National and/or subnational expansion plans for the energy sector, as appropriate;
7. National and/or subnational forestry or agricultural policies, as appropriate (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 25).

Furthermore, each baseline shall be established:

1. In a transparent manner with regard to the choice of approaches, assumptions, methodologies, parameters, data sources and key factors;
2. Taking account of uncertainties and using conservative assumptions; and
3. In such a way that ERUs cannot be earned for decreases in activity levels outside the project activity or due to force majeure (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 26).

In establishing a baseline the project participants shall draw on the list of standard variables contained in Appendix B to this document, as appropriate (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 62 paragraph 27).

Project participants must also justify their choice of baseline, and must explain any differences from approaches taken in comparable projects:

The project participants shall justify their choice of baseline taking into account annex 1 to this document. If the baseline approach chosen differs from approaches already taken in comparable cases (same GHG mitigation measure, same country, similar technology, similar scale) that an AIE has positively determined, the differences shall be explained and justified (Guidance on criteria for baseline setting and monitoring, JISC 18, Annex 2, paragraph 28).