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Joint Implementation and the Clean Development Mechanism under the Kyoto Protocol

Introduction

Investing in a Joint Implementation Project

Investing in a Clean Development Mechanism Project

Further Information

Appendix 1: Letter of Approval Application

Appendix 2: Joint Implementation Approval Application Form

Appendix 3: Joint Implementation Form of Declaration

Appendix 4: Joint Implementation Letter of Approval Example

Appendix 5: Clean Development Mechanism Approval Application Form

Appendix 6: Clean Development Mechanism Form of Declaration

Appendix 7: Clean Development Mechanism Letter of Approval Example

Investing in a clean development mechanism project

New Zealand’s designated national authority

All countries wishing to participate in the Clean Development Mechanism must appoint a designated national authority (DNA). The DNA serves as a point of contact for CDM in a country and evaluates and approves investor involvement in CDM projects.

New Zealand’s DNA is the Carbon Markets Team at the Ministry for the Environment. The contact details for the NZ DNA are:

A detailed institutional process exists to ensure that projects meet all the rules of the CDM as set out in the Marrakech Accords.² This process is governed by the CDM Executive Board. The NZ DNA considers it unnecessary to duplicate evaluations within this process that are the responsibility of the host party, designated operational entity (DOE) involved, or the CDM Executive Board. As an Annex I Party, the New Zealand DNA’s main focus is in authorising voluntary participation of an entity in a CDM project.

Letter of approval

Article 12 of the Kyoto Protocol allows for the approval and authorisation of CDM projects. Paragraph 5(a) of Article 12 states that:

“Emission reductions resulting from each project activity shall be certified ... on the basis of: voluntary participation approved by each Party involved ...”

In addition, in the 16th meeting of the CDM Executive Board, Annex 6, it was decided that:

“A written approval constitutes the authorization by a designated national authority (DNA) of specific entity(ies)’ participation as project proponents in the specific CDM project activity.

The DNA shall issue a statement including the following:

• The Party has ratified the Kyoto Protocol

• The approval of voluntary participation in the proposed CDM project activity.”

Before an entity can receive certified emission reductions in the initial distribution, the CDM Executive Board will check that written approval has been given by the DNA in the Annex I country into whose registry the entity wishes to have their allocation of certified emission reductions deposited. If no approval has been given, CERs will not be issued into the project participant’s account.

The registration of a CDM project activity can take place without an Annex I Party being involved at the registration stage. Before an Annex I Party acquires CERs from the CDM Registry, it shall submit a letter of approval to the Executive Board. The CDM Registry administrator will then forward CERs from the CDM Registry to the national registry of the Annex I Party. This is outlined in 18th meeting of the CDM Executive Board, paragraph 57.

A new letter of approval is required from the NZ DNA when a new project participant is added to a CDM project (whether this takes place before or after registration). This includes both the replacement of a project participant with another entity, or the addition of a new entity as a project participant (in addition to the existing project participants).

Criteria for eligible entities

Applications for letters of approval should only be made by:

1. Persons (individual and entities) qualified to open a holding account in the NZEUR as defined under regulation 3 of the Climate Change (Unit Register) Regulations 2008. Information on how to open an account in the NZEUR is available at https://www.eur.govt.nz/eats/nz/

2. Entities that will be receiving the CERs in the initial distribution from the CDM registry.

Types of Clean Development Mechanism projects not eligible

The DNA will not approve projects from the following sectors:

• nuclear power plants/energy projects

• afforestation / reforestation projects where the entity has chosen to receive long-term certified emission reductions (lCERs).

  This is because emission units from nuclear power plants/energy projects and lCERs are prohibited to be held in the NZEUR by the Climate Change (Unit Register) Regulations 2008.

  Afforestation/reforestation projects where the entity has chosen to receive temporary certified emission reductions (tCERs) are eligible for DNA approval. However, it should be noted that under regulation 8 of the Climate Change (Unit Register) Regulations 2008, entities may not transfer tCERs from a holding account to a surrender account of the NZEUR.

Before applying for a letter of approval

The following steps must be undertaken before you can apply for a letter of approval:

1. Check the type of CDM project is eligible.

2. Check you fit the criteria for eligible entities.

3. Have a project design document using the UNFCCC forms.

Note: The NZ DNA does not want to be listed as an ‘other party’ in the project design document.

4. Obtain a letter of approval from the host party.

5. Make your project design document available for public comment, as required in the project validation process (outlined in the 13th meeting of the CDM Executive Board, paragraph 39).

6. Open a holding account with the NZEUR.

Applying for a letter of approval

To apply for a letter of approval for a CDM project, the following documents in electronic and hard copy should be sent to the NZ DNA:

1. Letter of Approval Application (Appendix 1).

2. CDM Approval Application Form (Appendix 5).

3. Project design document.

4. Host party letter of approval.

5. A declaration of compliance with the host party and UNFCCC guidelines (Appendix 6).

Note that it is not necessary to include the project design document or host party letter of approval in the application if the project is already registered or requesting registration.

Timeframes

The application for a letter of approval must be made after the project has host party approval and the project design document for the project has been made available for public comment. The timing of public comment on a project design document is outlined in the Annex of Decision3/CMP.1 Modalities and Procedures for a CDM, paragraph 40.

The NZ DNA will consider your application for a letter of approval within 10 working days of receiving the application. If the NZ DNA assesses the application to be incomplete, this timeframe will be extended.

Process for applying for a Clean Development Mechanism letter of approval

Note: Boxes shaded in grey indicate the stages in the CDM project cycle when you can apply for a letter of approval from the NZ DNA.

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