Technological innovation, sustainable development, and post-Paris voluntary cooperation — a closer look at Japan’s joint crediting mechanism

The following article appeared in the July 2016 issue of the American Bar Association International Environmental and Resources Law Committee Newsletter.

By Fatima Maria Ahmad, Solutions Fellow, Center for Climate and Energy Solutions (C2ES)

After the Paris Agreement, a major challenge will be achieving emissions reductions while promoting sustainable development and allowing nations flexibility to meet targets. As Japanese Prime Minister Shinzo Abe stated at COP21, “The key to acting against climate change without sacrificing economic growth is the development of innovative technologies.” GOVERNMENT OF JAPAN, RECENT DEVELOPMENT OF THE JOINT CREDITING MECHANISM 8 (Feb. 2016), available at http://www.mmechanisms.org/ document/20160203_JCM_goj_e_rev.pdf (last visited May 15, 2016). Furthermore, two new provisions in Article 6 of the Paris Agreement highlight that international voluntary cooperation will be a core part of the solution to meet these challenges. In particular, bilateral voluntary cooperation that leverages a nation’s technological expertise and financial resources may be uniquely advantageous because such approaches may also provide strategic geopolitical benefits. An early look at the Japanese experience with the Joint Crediting Mechanism (JCM) demonstrates how these considerations may play out in the years ahead.

The Impact of Fukushima

Five years ago, nuclear reactors provided 30 percent of Japan’s energy and Japan’s nuclear capacity was the third highest in the world. Mark Hay, Five Years After Fukushima, Japan’s Nuclear Power Debate Is Heating Up, GOOD, Mar. 16, 2016, available at https://www.good.is/articles/ japan-nuclear-power-debate-heats-up (last visited May 15, 2016) (Japan was the third highest after France and the United States). After the March 2011 earthquake and tsunami led to nuclear meltdowns at the Fukushima Daiichi power plant and a release of radioactive material, all Japanese nuclear plants were closed out of safety concerns. Eliza Strickland, Explainer: What Went Wrong in Japan’s Nuclear Reactors, IEEE SPECTRUM, Mar. 16, 2011, available at http://spectrum.ieee.org/techtalk/energy/nuclear/explainer-what-went-wro... (last visited May 15, 2016).

This disaster underscored the importance of flexibility for Annex B parties under the Kyoto Protocol, i.e., those parties that agreed to quantified emission limitation or reduction commitments. After the accident, Japan became the largest importer of natural gas, the second-largest importer of coal, and the third-largest importer of crude oil. Hay, supra. This sudden change caused electricity prices to rise and raised concerns about Japan’s ability to meet its emissions reduction target under the Kyoto Protocol first commitment period (Jan. 1, 2008–Dec. 31, 2012). Within months of Fukushima, and citing concerns about the lack of binding commitments for the United States, China, and India, Japan pulled out of the Kyoto Protocol and therefore did not take on a binding target for the Kyoto Protocol second commitment period (Jan. 1, 2013–Dec. 31, 2020). Andre Le Roux, Japan on Kyoto Protocol, NEWS 24, Dec. 5, 2011, available at http://www.news24.com/Opinions/ QAndA/Japan-on-Kyoto-Protocol-20111205 (last visited May 15, 2016).

Ultimately, Japan did meet its target for the first commitment period of the Kyoto Protocol. See Japan Meets Kyoto Goal via Credit Buys, JAPAN TIMES, Nov. 17, 2013, available at http://www. japantimes.co.jp/news/2013/11/17/national/ japan-meets-kyoto-goal-via-credit-buys/#. Vziusce7GA8 (last visited May 15, 2016). For the post-2012 period, however, Japan reduced its Copenhagen 2020 emissions reduction pledge from 25 percent to 3.8 percent below 2005 levels. Stian Reklev, Japan Releases Draft Climate Action Plan, Commits to 80 Percent GHG Cut by 2050, CARBON PULSE, Mar. 15, 2016, available at http://carbon-pulse.com/17029/ (last visited May 15, 2016). Japan expressed that it remained committed to the overall goals of climate change mitigation. Le Roux, supra.

More recently, in 2015, Japan pledged to reduce emissions by 26 percent from 2013 levels by 2030. This is approximately 1.042 billion tons of CO2 and is a 25.4 percent reduction from 2005 levels. See GOVERNMENT OF JAPAN, SUBMISSION OF JAPAN’S INTENDED NATIONALLY DETERMINED CONTRIBUTION (INDC) (July 17, 2015), available at http://www4.unfccc.int/ submissions/INDC/Published%20Documents/ Japan/1/20150717_Japan%27s%20INDC.pdf (last visited May 15, 2016). Groups within Japan have criticized the INDC as being too weak. See Stian Reklev, Japan Pledges 26 Percent GHG Reduction by 2030, CARBON PULSE, July 17, 2015, available at http://carbon-pulse.com/6575/ (last visited May 15, 2016). The apparent lack of an interim 2025 target may also contribute to the weakness of the 2030 target by locking in lower levels of ambition. Climate Action Tracker Partners, Japan, July 22, 2015, available at http:// climateactiontracker.org/countries/japan (last visited May 15, 2016).

The 2030 target is well supported by Japan’s new 15-year energy plan issued in 2015, which anticipates increasing its supply of renewable energy to between 22 and 24 percent of its total electricity supply, with 9.2 percent from hydropower, 7 percent from solar energy, 4.6 percent from biomass, 1.7 percent from wind energy, and 1.1 percent from geothermal energy. Chisaki Watanabe et al., Japan Sees Clean Energy Edging Out Nuclear Power in 2030, BLOOMBERG, Apr. 28, 2015, available at http:// www.bloomberg.com/news/articles/2015-04-28/ japan-expects-renewable-energy-to-edge-outnuclear-power-by-2030 (last visited May 15, 2016). Notably, Prime Minister Abe supports redevelopment of nuclear power plants due to climate change concerns as well as economic concerns. See Hay, supra. Under the 15-year energy plan, nuclear will provide 20–22 percent of electricity. Watanabe et al., supra. Currently, only the Kyushu Electric Power Company Sendai nuclear power plant is online. NRA Sees “No Safety Problem” with Nuclear Plants, YOMIURI SHIMBUN, Apr. 18, 2016, available at http://thejapan-news.com/news/article/0002885516 (last visited May 15, 2016). The 15-year energy plan anticipates that 56 percent of Japan’s electricity supply will come from fossil fuels, with 27 percent from gas, 26 percent from coal, and 3 percent from oil. Watanabe et al., supra.

The Fukushima disaster made clear that it is reasonable to anticipate that nations will experience unforeseen energy policy changes with attendant consequences for the development of international environmental law. Measures that allow for flexibility will ease the adjustment period after unexpected triggers for policy changes.

Kyoto Protocol Clean Development Mechanism

The Kyoto Protocol allows Annex B parties to achieve emission reduction targets through investments in developing nations through the Clean Development Mechanism (CDM), the first international investment and credit transfer mechanism for carbon. Kyoto Protocol to the United Nations Framework Convention on Climate Change, Dec. 10, 1997, U.N. Doc FCCC/ CP/1997/7/Add.1, 37 I.L.M. 22 (1998). Under Article 12, Annex B nations may implement emission reduction projects in developing nations to generate certified emission reduction (CER) credits for each ton of carbon reduced or avoided. Examples of CDM projects include rural electrification projects using renewable energy and the installation of energy-efficient boilers. The CDM Executive Board developed a registration and credit issuance process. These saleable CERs may be applied toward an Annex B nation’s emission reduction targets.

For CDM to achieve its promise, emissions reductions need to be real, measurable, and verifiable, as well as additional, i.e., above and beyond what would have been achieved otherwise. Credits may be awarded for projects that cause a net emissions increase in the host country as long as the emissions are at a lower level than would have otherwise occurred. See Stian Reklev, Baby Steps for Japan’s JCM as It Seeks to Break New Ground, CARBON PULSE, Mar. 28, 2016, available at http://carbon-pulse.com/17597/ (last visited May 15, 2016).

Under the CDM, regional imbalance and project approval delays continue to present challenges. Most CDM projects to date have been located in China, India, Brazil, and Mexico. For small and poor countries, single projects may be too small to be viable. A programmatic approach was developed to address these problems; a group of similar projects may be approved and administered jointly, reducing transaction costs and potentially benefiting under-represented nations in Africa. Despite implementation challenges, however, the CDM is generally viewed as a success. Since the CDM became operational in 2006, over 1650 projects were registered. UN Framework Convention on Climate Change (UNFCCC), Clean Development Mechanism, available at http:// unfccc.int/kyoto_protocol/mechanisms/clean_ development_mechanism/items/2718.php (last visited May 15, 2016). During the Kyoto Protocol first commitment period, CDM projects generated credits for over 2.9 billion tons of CO2. Id.

Japanese Joint Crediting Mechanism

Japan demonstrated its support of CDM through the purchase of several hundred million CERs by Japanese firms during the Kyoto Protocol first commitment period. See Reklev, supra. At the same time, aspects of CDM bureaucracy frustrated Japan. Id. After Japan pulled out of the Kyoto Protocol, Japan created a new mechanism based on its interpretation of UNFCCC authority. Specifically, at the 18th Conference of the Parties, the UNFCCC adopted Decision 1, which “[a] cknowledges that Parties, individually or jointly, may develop and implement various approaches, including opportunities for using markets and non-markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries; . . .” UNFCCC 18th Conference of the Parties, Nov. 26–Dec. 8, 2012, Report of the Conference of the Parties Addendum 1, Decision 1, ¶ 41. U.N. FCCC/CP/2012/8/ Add.1 (Feb. 28, 2013) (emphasis added), available at http://unfccc.int/resource/docs/2012/cop18/ eng/08a01.pdf (last visited May 15, 2016). Such approaches must “deliver real, permanent, additional and verified mitigation outcomes, avoid double counting of effort and achieve a net decrease and/or avoidance of GHG emissions; . . .” Id. ¶ 42. See also UNFCCC 17th Conference of the Parties, Nov. 28–Dec. 11, 2011, Report of the Conference of the Parties Addendum 1, Decision 2, ¶ 79. U.N. FCCC/CP/2011/9/Add.1 (Mar. 12, 2012), available at http://unfccc.int/resource/ docs/2011/cop17/eng/09a01.pdf (last visited May 15, 2016).

Under its interpretation of this language, Japan launched the JCM in 2013 to achieve a number of purposes. First, the JCM leverages Japan’s technological expertise to facilitate diffusion of low carbon technologies and contributes to the sustainable development of developing countries. Second, it quantifies Japan’s contribution of GHG emission reductions to achieve Japan’s target. Third, the JCM supports greater participation and increased ambition among developing nations. GOVERNMENT OF JAPAN, supra, at 7.

On the first point, Japan is well known for its energy innovation expertise, particularly in high-efficiency coal technologies. After the 1970s-era oil crises, Japan established the New Energy and Industrial Technology Development Organization (NEDO) as a semi-governmental organization to research new energy technologies. NEDO researches photovoltaic solar, wind, and geothermal power, biomass and waste energy, thermal utilization, fuel cells, and energy conservation technologies. NEDO verifies technical results and conducts international demonstration projects to disseminate the research. Government of Japan, New Energy and Industrial Technology Development Organization, available at http://www.nedo.go.jp/english/introducing_ index.html (last visited May 15, 2016).

During the first Kyoto Protocol commitment period, NEDO assisted with Japan’s effort to achieve its emission reduction target using the CDM. For the post-2012 period, NEDO assists with JCM feasibility and measurement, reporting, and verification studies. As discussed below, Japan’s 16 partner countries are primarily located in Southeast Asia and many of them are Association of Southeast Asian Nations (ASEAN) partners. The 16 partner countries are Mongolia (agreement entered into on Jan. 8, 2013); Bangladesh (Mar. 19, 2013); Ethiopia (May 27, 2013); Kenya (June 12, 2013); the Maldives (June 29, 2013); Vietnam (July 2, 2013); Lao PDR (Aug. 7, 2013); Indonesia (Aug. 26, 2013); Costa Rica (Dec. 9, 2013); Palau (Jan. 13, 2014); Cambodia (Apr. 11, 2014); Mexico (July 25, 2014); Saudi Arabia (May 13, 2015); Chile (May 26, 2015); Myanmar (Sept. 16, 2015); and Thailand (Nov. 19, 2015). Recently, Japan and the Philippines drafted a memorandum reflecting their intent to enter into the 17th JCM. See GOVERNMENT OF JAPAN, supra, at 2. These partner nations in many cases lack institutional capacity so Japan’s ability to provide sophisticated technical assistance provides real value.

JCM projects use Japanese technological expertise to deploy various approaches to reducing greenhouse gas emissions, such as the installation of energy-efficient transmission lines in Mongolia; the installation of energy-efficient systems in the national hospitals of Vietnam; the installation of energy-efficient refrigeration at commercial food processing centers in Indonesia; the installation of solar photovoltaic systems in the Maldives and Palau; and power generation by waste heat recovery in the cement industry in Indonesia. Government of Japan, Joint Crediting Mechanism, available at http://gec.jp/jcm/about/index.html (last visited May 15, 2016).

For each JCM, a joint committee is set up consisting of representatives from Japan and the

partner nation to develop guidelines and administer project registration and credit issuance. While there is one CDM Executive Board, there are 16 JCM joint committees, allowing for a tailored approach for each partner nation. An example of the tailored approach is that the JCM with Indonesia includes a sustainable development-monitoring scheme. See Reklev, supra. In May 2016, credits were issued for the first projects under the JCM with Indonesia. Stian Reklev, Japan, Indonesia Issue First Carbon Offset Credits Under JCM, CARBON PULSE, May 13, 2016, available at http://carbon-pulse. com/19918/ (last visited May 15, 2016).

Each joint committee ensures against double counting of emission reductions. For example, a project should not be registered under both the CDM and the JCM. Additionally, third-party review of project proposals and emission reduction verification ensures accuracy. Notably, JCM requires that projects lead to a net reduction in global emissions in order to receive credits. Id. Credits from JCM projects are shared between Japan and the partner nation. Japanese credits may only be transferred domestically among Japanese businesses, unlike CDM CERs, which are more broadly saleable.

Looking forward, Japan publicly committed to use the JCM to cause a reduction of 50–100 million tons of carbon by 2030. GOVERNMENT OF JAPAN, supra. To date, 10 JCM projects have been approved. The emission reductions anticipated from these projects are 2000 tons of CO2. See Reklev, supra. Approximately 60 additional projects are in the JCM pipeline. Id. The emission reductions anticipated from these projects may be 1 million tons of CO2, which is a small proportion of Japan’s total emissions, which exceed 1.2 billion tons of CO2 per year.

There are two reasons for this. First, there is a lack of demand in Japan for the credits from JCM projects. Id. This may be because Japan’s INDC is too weak. Regarding Japanese domestic policies, in March 2016, Japan released a draft plan to meet its INDC and reduce emissions by 80 percent by 2050; the plan relies heavily on technological development and voluntary measures by Japanese businesses. Historically, voluntary measures in Japan have been useful. For example, “[d]uring the first commitment period of the UN Kyoto Protocol, Japanese firms bought several hundred million CERs and ERUs despite only having voluntary targets.” Reklev, supra. A promising development is that last year the Federation of Electric Power Companies, the industry association representing the 10 largest electricity generators in Japan and 19 suppliers, agreed to limit their emissions by 35 percent by 2030, which is a voluntary but significant reduction and may increase demand for JCM project credits. Id. Japan’s draft plan does refer to the possible use of an emissions trading system in the future. See Reklev, supra. In Japan, “[t]here is splintered sentiment toward capand-trade,” with some subnational governments such as the Tokyo government implementing capand-trade while national momentum has stalled. Environmental Defense Fund (EDF) et al., JAPAN: EMISSIONS TRADING CASE STUDY, May 2015, available at http://www.ieta.org/resources/Resources/ Case_Studies_Worlds_Carbon_Markets/japan_case_ study_may2015.pdf (last visited May 15, 2016). Since 2012, Japan has had a carbon tax; the revenues are directed toward energy-efficiency, renewable energy production, and financial assistance to local governments, among other purposes. See GOVERNMENT OF JAPAN, DETAILS ON THE CARBON TAX, available at https://www.env.go.jp/ en/policy/tax/env-tax/20121001a_dct.pdf (last visited May 15, 2016). See also Reklev, supra. Japan has also had energy efficiency standards in place for decades. EDF, supra. With a stronger target and stronger policy drivers, such as a higher carbon tax or cap-and-trade, the demand for credits from JCM projects may be able to assist with fulfillment of Japan’s INDC.

A second challenge for JCM is that some observers have found the JCM Joint Committees to be too conservative when registering projects for credit. This may have been to preempt criticism that an independent bilateral approach would not be sufficiently strict. See Reklev, supra. It is likely that as more projects are developed under JCM, the establishment of precedent will facilitate improved registration. Id. It is also possible that mitigation techniques deployed under JCM will expand to include critical technologies such as innovations in carbon, capture, and storage. See IETA, infra.

Current Geopolitical Considerations Regarding JCM

While JCM remains a small proportion of Japan’s total emission reduction efforts, JCM does help Japan achieve other objectives. As mentioned above, JCM supports the export of Japanese technologies like high-efficiency coal by creating markets for these technologies in developing countries. In fact, some critics have viewed the JCM as an export subsidy mechanism that may be in conflict with World Trade Organization rules.

Taking a different perspective, a review of recent Japanese official development assistance (ODA) policy highlights important geopolitical considerations for the continued use of JCM. ODA policy is separate from JCM but an awareness of Japan’s strategic interests underlies both programs. Recently, Japan revised its ODA policy to allow aid to be used to protect Japan’s national interests. Japan’s ODA Paper Stresses ASEAN Support for Safety of Vital Sea Lane, NIKKEI ASIAN REV. (Tokyo), Mar. 11, 2016, available at http://asia.nikkei.com/Politics-Economy/ International-Relations/Japan-s-ODA-paperstresses-ASEAN-support-for-safety-of-vitalsea-lane?page=1 (last visited May 15, 2016). Furthermore, in March 2016, Prime Minister Abe reiterated that “[s]upporting the development of developing countries helps enhance Japan's influence and voice internationally, thereby helping to secure the country’s national interests.” Editorial, Shinzo Abe, All-inclusive Endeavors Crucial in Carrying Out ODA Strategically, YOMIURI SHIMBUN (Tokyo), Mar. 22, 2016, available at http://www.asianews.network/content/ editorial-all-inclusive-endeavours-crucial-carryingout-oda-strategically-12331 (last visited May 15, 2016). In March 2016, Japan also announced a 30 percent increase in ODA, the first increase in 17 years. The commitment is for $110 billion through 2020 targeted toward infrastructure investments such as roads, bridges, and port facilities. This increased level of ODA still constitutes roughly half of the amount of assistance provided in 1997, which was a peak year for ODA. Id. It is clear that Prime Minister Abe is taking a careful look at ODA as a tool to enhance Japan’s strategic interests. Support for expanded use of JCM can be seen as part of this new perspective, especially when the JCM partners are viewed on a map.

For example, two-thirds of fossil fuel imports to Japan transit through the South China Sea underscoring the strategic importance of security in this area. China has moved forward with land reclamation work in the South China Sea to support its territorial claims and maritime interests. Michael Forsythe & Jane Perlez, South China Sea Buildup Brings China Closer to Realizing Control, N.Y. TIMES, Mar. 8, 2016, available at http://nyti. ms/1X9QPZt (last visited May 15, 2016). Aware of this threat, Japan emphasized the strategic importance of its ASEAN partners in its recent ODA policy, stating “ASEAN countries are an extremely important region from both political and economic perspectives as they lie along Japan’s sea lane and have strong economic ties.” See Pollmann, supra. Japan specifically emphasized the importance of maintaining security in the South China Sea lanes. NIKKEI ASIAN REV., supra. See also Ayako Mie & Jesse Johnson, Amid South China Sea Spat, Japan Foreign Aid White Paper Stresses Importance of Sea Lanes, JAPAN TIMES (Tokyo), Mar. 11, 2016 (“experts say Japan’s pledge to help secure sea lanes—especially those in the South China Sea—reflects its intention to shore up regional alliances as a bulwark against an increasingly bellicose China.”), available at http:// www.japantimes.co.jp/news/2016/03/11/national/ politics-diplomacy/amid-south-china-sea-spatjapan-foreign-aid-white-paper-stresses-importancesea-lanes/#.VwBfKVJGN0l (last visited May 15, 2016). Consistent with this partnership priority, Japan has entered into JCMs with six of the ten ASEAN members. Specifically, Japan has a JCM with Cambodia, Indonesia, Laos, Myanmar, Thailand, and Vietnam. Japan has entered into a memorandum of understanding to enter into a JCM with a seventh ASEAN member, the Philippines. GOVERNMENT OF JAPAN, supra, at 7. These strategic political considerations concerning the South China Sea likely facilitate continued Japanese support for the JCM.

Similarly, scholars have noted that Japan is prioritizing foreign aid through loans, grants, and technical assistance to the Middle East out of concern for the region’s stability given that Japan remains dependent on oil imports. Mina Pollmann, Japan: How Energy Security Shapes Foreign Policy, THE DIPLOMAT (Tokyo), Mar. 16, 2016, available at http://thediplomat.com/2016/03/ japan-how-energy-security-shapes-foreignpolicy/ (last visited May 15, 2016). Appropriately, Japan has entered into a JCM with Saudi Arabia. GOVERNMENT OF JAPAN, supra, at 7.

In parallel to its approach with ODA, Japan is able to use JCM to successfully leverage its technological expertise to strengthen alliances with strategic partners while also working toward its emission reduction target in a post-Fukushima era.

Voluntary Cooperation Under the Paris Agreement

More broadly, post-Paris partnering efforts will receive significant attention. Article 6 establishes two new provisions for voluntary cooperation and carbon trading, recognizing that such approaches “allow for higher ambition in their mitigation and adaptation actions” and “promote sustainable development and environmental integrity.” UNFCCC 21st Conference of the Parties, Nov. 30– Dec. 11, 2015, Adoption of the Paris Agreement, Annex, art. 6, U.N. FCCC/CP/2015/L.9/Rev.1 (Dec. 12, 2015), available at https://unfccc.int/ resource/docs/2015/cop21/eng/l09r01.pdf (last visited May 15, 2016).

First, Paragraph 2 of Article 6 provides that the Parties may engage “on a voluntary basis in cooperative approaches that involve the use of internationally transferred mitigation outcomes [ITMOs] towards nationally determined contributions, promote sustainable development and ensure environmental integrity and transparency, including in governance. . . .” Id. This provision will be critical as at least 65 nations indicated that they will use carbon trading to achieve their emission reduction pledges and an additional 24 will consider the use of carbon trading for this purpose in the future. Anthony Mansell, What’s Ahead for Carbon Markets After COP21, BIORES, v.10, no.1, Feb. 19, 2016, available at http://www.ictsd.org/bridges-news/ biores/news/what’s-ahead-for-carbon-marketsafter-cop21 (last visited May 15, 2016).

Second, Paragraph 4 of Article 6 establishes a successor to the Kyoto Protocol CDM with the following goals:

(a) To promote the mitigation of greenhouse gas emissions while fostering sustainable development;

(b) To incentivize and facilitate participation in the mitigation of greenhouse gas emissions by public and private entities authorized by a Party;

(c) To contribute to the reduction of emission levels in the host Party, which will benefit from mitigation activities resulting in emission reductions that can also be used by another Party to fulfill its nationally determined contribution; and

(d) To deliver an overall mitigation in global emissions.

UNFCCC, supra. The new mechanism must avoid double counting and will direct a share of its proceeds toward adaptation efforts for vulnerable Parties. Id.

The UNFCCC Subsidiary Body for Scientific and Technical Advice (SBSTA) held a meeting May 16–26, 2016, to commence discussion toward developing the parameters of these two new market mechanisms. See UNFCCC, SBSTA 44, available at http://unfccc.int/meetings/ bonn_may_2016/session/session/9393.php (last visited May 15, 2016). Japan stated that it will assist in the development of guidelines to avoid double counting. GOVERNMENT OF JAPAN, supra, at 10. Japan also helped organize a side event highlighting recent progress regarding JCM implementation. Institute for Global Environmental Strategies et al., The Joint Crediting Mechanism: Achievements and Current Progress of Projects Implementation, available at http://www.iges. or.jp/files/climate/pdf/sb44/20160518_sb.pdf (last visited May 17, 2016). It is not clear how JCM will be treated under the new guidelines that will be developed. Certainly, the new guidelines should ensure that bilateral approaches like JCM adhere to the same environmental, accounting, and transparency standards as other approaches.

There appears to be a growing interest in bilateral approaches. Leading up to the Bonn meeting, stakeholders met to discuss opportunities to link the JCM with other approaches, including other nations’ INDCs, bilateral agreements between Japan and capped jurisdictions that use emissions trading systems, the International Civil Aviation Organization’s Market Based Measures, and/ or in a carbon market “club” with other Asian nations. Jeff Swartz, International Emissions Trading Association (IETA), Challenges/ Opportunities to Link the JCM, POST-PARIS CARBON MARKETS: FROM LONDON TO TOKYO, Feb. 12, 2016, available at http:// www.ieta.org/resources/UNFCCC/JCM%20 Workshop%20Report_IETA_March%202016. pdf (last visited May 15, 2016). Additionally, immediately preceding the Bonn meeting, the environment ministers from the G-7 nations issued a joint statement supporting the sharing of best practices and lessons learned from the Joint Crediting Mechanism. G7 Toyama Environment Ministers’ Meeting, Communique, para. 43, May 15–16, 2016, available at http://www.env.go.jp/ press/files/jp/102871.pdf (last visited May 17, 2016); Environment Ministers to Urge Trading of Greenhouse Gas Cuts, YOMIURI SHIMBUN, May 15, 2016, available at http://the-japan-news.com/news/article/0002947125 (last visited May 15, 2016) (G-7 members are Canada, France, Germany, Great Britain, Italy, Japan, and the United States; Japan is currently the chair). In late May, a strategic dialogue of the G7 is scheduled to discuss carbon markets and a report will be presented at COP22. IETA, supra.

Regarding CDM, its future is also unclear. At the March 2016 CDM Executive Board meeting, the board agreed to monitor the ongoing development of the Article 6 provisions and requested that the Secretariat prepare an analysis on the use of the CDM beyond the second commitment period of the Kyoto Protocol, including as a tool for other uses. UNFCCC Clean Development Mechanism Executive Board 88th Meeting, Mar. 7–11, 2016, Meeting Report, ¶¶ 9–11, available at http://cdm.unfccc.int/ EB/index.html (last visited May 15, 2016).

Conclusion

While the Japanese experience with JCM is still in very early stages, it clearly demonstrates how climate change mitigation, energy policy, and security concerns converge. As the SBSTA develops the parameters of the new Article 6 market mechanisms, it is likely that bilateral voluntary cooperation on emissions reduction will continue to be important because in addition to promoting the dissemination of new technologies and sustainable development, bilateral approaches also allow for flexibility and enable nations to meet current geopolitical and strategic objectives. A key consideration will be ensuring that bilateral approaches adhere to the same environmental, accounting, and transparency standards as other approaches. Addressing that concern will go a long way toward validating bilateral approaches developed after the Paris Agreement.