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Climate and Energy: JI approval process gets off ground (11.08.2006)

Ukraine’s ministry of environment has issued two orders to adopt its internal procedures for considering and issuing letters of endorsement (LoEs) and letters of approval (LoAs) for JI projects

The orders will enter into force on 13 August.

The two orders now agreed with other ministries will provide the last piece of regulatory framework to lay the foundation of a speedier project approval process. Ukrainian project developers will now hope that the country, with an estimated annual 130 million tonnes of CO2e reduction potential, can make its presence felt in the market.

The order on JI project approval process stipulates project requirements, and says the application has to include a determination report from an accredited independent entity (IE) and an extended project design document (PDD). The latter must contain, apart from the usual components such as baseline assessment and a monitoring plan, a business plan and a plan for financing, incorporating ERU revenues. Revenues have to contribute at least 10 per cent of the project cost (with some exceptions). Projects also have to meet one of the three additionality criteria, which are mainly linked to project financing and include elements from the CDM additionality tool. An environmental impact assessment has to be prepared according to Ukrainian requirements, with the exception of forestry projects.

Applications for LoEs must comprise JI project justification - basically a detailed project idea note (PIN) - as well as the applicant’s financial documents. The justification must include a preliminary description of the baseline scenario, estimated annual emission reductions (which have to be above 20,000 tonnes CO2e per year) and a provisional financing plan that includes income from ERU sales. Importantly, a standard LoE contains a section on ‘early credits’ stating that the ministry will consider the transfer of assigned amount units (AAUs) to the buyer according to the emission reductions generated by the project prior to 2008.

Earlier this year Ukraine established its JI framework procedures that empowered the ministry of environmental protection to issue LoEs and LoAs as well as decide on JI project requirements and criteria for approval. The absence of the latter has kept JI project approval constrained since then, and only two JI projects with a total emissions reduction potential of 12.4 mtCO2e have received LoAs. The ministry has previously issued 19 LoEs. Only three Ukrainian project developers have so far signed emissions reduction purchase agreements (ERPAs) with foreign buyers, although that number is now set to grow.

Difficulties might still be looming, however, as the recent appointment of the new minister of environmental protection may result in restructuring within the ministry, which combined with the holiday season could potentially delay the start of LoE and LoA issuance until early autumn. Also, some projects that have previously submitted applications to the ministry now may need to change them and re-apply in order to meet the adopted requirements and format.

Source: PointCarbon