The CDM is the largest (but not the only) offsetting mechanism. Under the UNFCCC, there is the CDM’s little brother, Joint Implementation (JI), which works in a very similar way to the CDM but is for offset projects in developed (Annex 1) countries. There are two types of JI projects:
- Track 1 projects are approved and the credits are issued by host countries themselves
- Track 2 projects are approved by the Joint Implementation Supervisory Committee (JISC), an international body, much like the CDM Executive Board.
JI has much fewer projects but has nevertheless been marred by a lack of transparency and a glut of credits with very questionable environmental integrity. About one third of Kyoto offsets come from JI projects. 95% of those are from track 1 projects. For projects that are implemented under JI Track 1 there is little international oversight and countries can approve projects and issue as many credits as they want. There has been an exponential growth in issuance of JI Track 1 credits from Russia and Ukraine. This is troubling because ERUs are shadowed by AAUs. In other words, countries with large AAU surplus (such as Russia and Ukraine) can use the JI for “hot-air laundering.” This not only undermines environmental integrity but also threatens the viability of carbon markets.
Download the CAN submission on Joint Implementation from April 2012