Policy Relevance

The concept of JI has become increasingly important in the international policy arena in the time since this project began. It will continue to be important in the approach to (and in the wake of) the 6^th Conference of the Parties to the FCCC in the year 2000. This Conference must define the modalities for operationalising JI, and bears the burden of ensuring that the institutional procedures which are set in place do not compromise the environmental objectives of the Convention. The lessons learned from this study are central to that task.

The language associated with the use of "flexibility mechanisms" has changed several times during the course of this study. Early terminology referring to JI and AIJ has given way to the terminology of emissions trading, transfer of emission reduction credits, and the Clean Development Mechanism. These kinds of linguistic shifts are confusing in policy terms. This study has shown that the new terminology in fact refers to mechanisms which bear many of the same characteristics referred to by earlier terminology. It has argued that the linguistic shifts are themselves evidence of the existence of contentious and still unresolved features of the underlying mechanisms. The names may have changed but the problems remain.

This study has argued that JI-type mechanisms are all haunted by the existence of an irreducible epistemological uncertainty. Evaluating how well abatement investments perform in environmental and economic terms requires an evaluation of what would have happened in the absence of the investment – ie it requires a counterfactual baseline. It may be possible to establish more or less credible or defensible hypotheses about this counterfactual context; but it is epistemologically impossible to verify these hypotheses, even in retrospect; nor is the situation necessarily improved by employing complex models or increasingly data intensive assessment procedures.

This situation requires careful policy management. The approach advocated in this study is three-fold. Firstly, there is a need to identify those situations in which the counterfactual nature of the evaluation process offers opportunities for gaming or cheating by participants in the process. These opportunities will vary according to the operational context. Next, the evaluation process can in certain circumstances be aided by the adoption of streamlined or standardised assessment procedures. Finally, an appropriate balance between underlying objectives can be achieved by combining these standardised procedures with certain institutional safeguards. These institutional safeguards must be established through policy intervention in the "market" for JI, and include:

• the establishment of appropriate approval criteria for JI investments;
• the use of common accounting and assessment methodologies;
• the requirement for broader environmental and social assessment of JI projects;
• limitations on the crediting life;
• the use of partial or discounted credits; and
• appropriate verification and audit procedures.

This study has carried out a thorough examination of the crediting regimes implied by the Kyoto Protocol has highlighted the dangers of allowing early crediting under the Clean Development Mechanism, and suggests that an extension of interim period banking to Article 6 JI should not be countenanced.

Finally, this study presents a clear warning to policy-makers against hard and fast generalisations about the efficiency of flexibility mechanisms. The seductive premise that JI represents an economically-efficient means of achieving an environmental goal is not sustained by a closer examination of the philosophical, technical, social, economic and institutional complexity involved. Although this study set out to evaluate JI as a fair and efficient instrument for abating greenhouse gas emissions, it has become clear that no such overarching evaluation is possible: each combination of institutional procedures in each situation must be assessed on its own individual merits against the range of underlying objectives.

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