In a Joint Implementation transaction, a seller agrees to deliver a certain number of ERUs to a buyer during the first Kyoto commitment period (2008-2012). The number of ERUs is determined by comparing the projects baseline (or business as usual) carbon emissions to emissions after the project has been implemented. This calculation is based on a detailed analysis of technical and financial considerations. The methodology and numbers must be approved by a third-party validator.
The sale of ERUs requires the approval of the host government, which must agree to adjust its Kyoto accounts to reflect the fact that another country acquired the rights to its emission reductions. After the project has taken place, actual emissions are monitored each year according to methods agreed in advance, and ERUs are delivered to the buyer during the 2008-2012 period. | The JI process includes the following main steps 1. Evaluating whether the project qualifies for JI. Having concluded successful JI deals and evaluated dozens of potential projects, Vertis staff can accurately identify the strong and weak points of a potential JI deal in advance.
2. Preparing a Project Idea Note (PIN) which summarizes the projects technical and financial characteristics and includes a preliminary calculation of the projects emissions reductions. Vertis staff prepares the PIN in close consultation with the clients technical and financial management.
3. Securing a Letter of Endorsement from the host government indicating support for the project and a willingness to consider formal approval of a JI deal. Vertis has close relationships with government officials responsible for evaluating JI projects throughout CEE and is familiar with the process and argumentation necessary to get a Letter of Endorsement.
4. Preliminary marketing of the project to buyers of carbon credits to governments, funds, and private corporations. As one of Europes leading JI project brokers, Vertis has close relationships with a wide variety of ERU buyers in Europe, North America, and Japan. Projects endorsed by Vertis have substantial credibility in the market.
5. If buyers express interest based on the steps above, work can begin on the Project Design Document (PDD) that forms the basis for the deal. This includes the baseline study, a comprehensive analysis of the proposed project and a detailed calculation of ERUs. This study must be validated by an independent auditor and submitted to the buyer with other documentation. Vertis prepared the first successfully validated baseline study in Hungary and is recognized for the quality of PDD documentation we produce.
6. Securing a formal Letter of Approval from the host government is a necessary step to signing a contract. This often requires lobbying and coordination with a number of government ministries and offices, and bullet proof argumentation for the projects environmental, economic, and social merits. Vertis arranged the first JI approval ever granted by the Hungarian government and has an excellent track record of obtaining approval for other transactions.
7. Negotiation of contractual terms with a buyer, including price and quantity of ERUs, timing of payment (advance versus on delivery), and liabilities of the seller in case of non-delivery. The exact terms of the JI agreement are extremely important for both parties. Vertis has negotiated a number of difficult issues in conjunction on behalf of its clients and is familiar with contractual risks that must be addressed. In price negotiations, our clients also benefit from our extensive knowledge of ERU pricing trends and terms.
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