FAQ regarding Joint Crediting Mechanism (JCM)

* This FAQ was created by the OECC based on the "Recent Development of The JCM" issued by the Government of Japan.

Regarding procedures of the JCM

What are the procedures regarding registration of JCM projects and issuance of JCM credits? NEW
If an applicable JCM methodology doesn't exist, it is necessary to go through the JCM methodology development procedure. You can find the necessary documents in the JCM website.

I. JCM methodology development procedure

There are four steps: 1) submission of proposed methodology, 2) verification by the secretariat, 3) public input, and 4) approval of the proposed methodology
Firstly, submission of proposed methodology is required.

[Necessary documents]
  • ・Proposed methodology form
  • ・Proposed methodology spreadsheet

* The documents can be obtained from each of the countries’ page at the JCM website.

Methodology proponents need to prepare the above indicated documents and submit them to the secretariat of the joint committee. Contact information of the secretariat of the joint committee is also available on each countries' page at the JCM website.

After submission of the proposed methodology, the secretariat of the joint committee will go through a completeness check (within seven days) and the result will be notified to the project participant. After a call for a public input of fifteen days and a consideration by the joint committee (for approximately 60 days, extendable to 90 days as necessary), the results will be notified to the methodology proponent.

II. Project registration and issuance of credits

After obtaining the approval of the JCM methodology, it is necessary to follow the following procedure: development of a PDD, validation, registration of project, monitoring, verification, and issuance of credits.

Project participants need to submit documents regarding development of a PDD, registration of project, monitoring and verification, and issuance of credits in the procedures above.

* Validation and verification may be implemented simultaneously or separately. Also the same Third Party Entity (TPE) may implement both, validation and verification.
* In order to acquire JCM credits, it is necessary to open an entity holding account at the country where and by the time the credits are issued.

[Necessary documents]
  • Development of a PDD
    • Project Design Document form
    • Monitoring spreadsheet
    • Modalities of Communication statement form
  • Registration of a project
    • Project registration request form
  • Monitoring and verification
    • Monitoring report sheet
  • Issuance of credits
    • Credits issuance request form

* The documents are uploaded on each countries’ page at the JCM website.

What kind of fee will apply for the JCM methodology development procedure, registration of JCM projects, and issuance of JCM credits? NEW

No fee is required for JCM methodology development procedure. However, if there is no methodology that can be applied to the new project, the cost to develop a new methodology will be charged. In addition, for JCM project registration and credit issuance, an additional cost is usually incurred depending on the type and scale of the project for validation and verification which will be conducted by a TPE (third party entity). It is important to note that JCM does not require a registration fee such as SOP (share of proceeds) as applied in CDM or other fees for registration. Furthermore, for government supported projects, financial support for methodology development costs, validation and verification might be provided.

  • *Information of the TPEs that are designated by the joint committee is posted on the JCM website.
How long will it take from an application of a JCM project registration to a registration as the JCM project?
The length may differ from a project to another while JCM is aiming for a simple and practical mechanism. It takes 70 days in average from an application to its registration as of October 1st, 2018.
Is a development of a methodology required at the beginning to implement an emission reduction project under the JCM?
It is not necessary to develop a methodology at the beginning of the project implementation and is possible to develop it based on actual circumstances and register it as a JCM project later while both the proposed methodology and the project need to be approved by the joint committee.

Regarding eligibility criteria

How can we confirm the eligibility criteria? Where is it indicated?
Eligibility criteria are indicated in an approved methodology. These criteria show conditions for a proposed project to be eligible to be registered under the JCM and well as for the approved methodology to be applicable to the said project. A methodology approved by a joint committee is uploaded to the JCM website.
What is the difference between a positive list and a checklist of eligibility criteria?
A positive list under the JCM may be understood as a list of approved JCM methodologies which are uploaded in the JCM website. Eligibility criteria, on the other hand, is a list of requirements in an approved methodology all of which are necessary to be fulfilled when applying the approved methodology to a project.
What does JCM eligibility criteria mean? How does the JCM contribute to additional emission reductions?
Project proponents can see if their proposed project is applicable under the JCM by fulfilling eligibility criteria which is like a checklist consisting of items (usually around 5 items) to decide whether the approved methodology can be applied to their proposed project. In order to realize additional emission reductions through the JCM, Ministry of the Environment (MOE) is facilitating implementation of new projects under its JCM Financing Programs.

Regarding MRV and Methodologies

Is a CDM methodology applicable in the JCM?
A CDM methodology may be a basis in considering development of a JCM methodology, however it is necessary to follow applicable steps under the JCM such as filling in the proposed methodology form and proposed methodology spreadsheet in line with "Guidelines for Developing Proposed Methodology".
What kind of support can a project participant receive for developing a JCM methodology?

They can apply a support for implementing a feasibility study which is funded by MOE, Ministry of Economy, Trade and Industry (METI) and New Energy and Industrial Technology Development Organization (NEDO).

Also, for the project participants who implement a project under MOE's JCM Financing Programs, it is possible to receive support from consultants for developing a JCM methodology as necessary. In that case, the project participants need to provide relevant information for developing a methodology and do not need to develop a methodology by themselves.

How are the Measurement, Report and Verification (MRV) conducted?
The project participants develop a monitoring plan based on the monitoring spreadsheet (monitoring plan sheet, monitoring structure sheet and monitoring report sheet) provided by each methodology. The project participants conduct monitoring based on the monitoring plan sheet and submit the monitoring report sheet to the TPE. The TPE verifies it based on "Guidelines for Validation and Verification" and sends a report to the project participants.
Is a JCM methodology too complicated for project participant to develop?
JCM methodologies are made to be simple. Use of default values reduces the burden of monitoring and use of spreadsheets reduces burden of developing formulas. JCM methodologies are only a few pages long while most of the CDM methodologies have dozens of pages. As a result, project participants' work load for PDD development and for validation and verification by a TPE is also reduced.
Can a methodology approved in one country be used in another country?

The JCM aims to develop a methodology reflecting each countries' circumstances considering user friendliness. This is because to develop a methodology which uniformly applies to any countries may lead to make the methodology too complicated and/or to end up with excessively conservative calculation of emission reductions by hiring too conservative default values.

From the above reasons, a methodology approved by a joint committee in one country will not automatically be applicable to another county. However, it is possible to develop a methodology building upon an already approved methodology in other countries. This will help to lower the burden of methodology development such as researches to establish uniformly applicable default values.

Can an approved methodology which is developed by a project participant be used by another project participant?
It is possible if the proposed project fulfills the eligibility criteria on application of a JCM methodology.
How is the amount of emission reduction of the JCM project calculated? NEW

The amount of emission reduction is calculated as the difference between project CO2 emissions and reference CO2 emissions. Project CO2 emissions means emissions after the introduction of an equipment/device financed by the JCM project. Reference CO2 emission is the value representing the amount of emission that is set in a conservative manner when emission reduction measures are not implemented.

The JCM realizes net decrease in emissions by calculating emission reductions as the difference between "reference emissions" which are conservatively calculated below BAU emissions and project emissions. This approach is realized by using conservative default values set in the methodologies, which will be more efficient since will reduce the task necessary for monitoring, establishment of reference emissions, and verification by TPEs.

The concept of “net emission reduction” can be understood as crediting lower amount than substantive emission reduction, which differs from crediting reduction from BaU (business as usual) emissions following the calculation method of CDM. This is a concept based on the use of the credits equivalent to actual amount of GHG emission results in that the emission reduction is not achieved eventually for the entire world when the emission reduction from BaU emissions is issued as credits (this is merely called offset).



Regarding Credits

How will the JCM credits be allocated?
The JCM is to appropriately evaluate contributions to greenhouse gases emission reductions or removals from Japan in a quantitative manner, through mitigation actions implemented in developing countries and use those emission reductions or removals to achieve emission reduction targets. The actual amount of allocation of JCM credits will be decided between project participants taking into consideration their contributions, and specified in the credit issuance application form, and submitted to the Joint Committee. For example, the project participants shall deliver at least fifty percent of the issued JCM credits to the account of Japanese government under the JCM Model Project. Allocation of the rest of the credits will be decided among both governments and project participants, taking into consideration their contributions to the project implementation. Certain countries adopt policies on the rule of credit allocation. Information on JCM Partner Countries can be found on the following page: Information on JCM Partner Countries
When and how will the JCM credits be traded?
The JCM credit transactions are conducted through the JCM registry. However, the JCM credits cannot be transferred internationally. In order for companies based overseas to trade credits, it is necessary to open an account in the JCM registry in Japan. Please refer to the JCM registry system for details. The JCM credits will be used to meet the Japanese government's greenhouse gas (GHG) reduction target, and will also allow businesses to adjust their emissions under the GHG calculation, reporting and announcement system or to offset their own emissions as carbon offset.
The Japanese government does not purchase the JCM credits that have been issued to project participants.
How can I acquire JCM credits in Japan?

A legal entity needs to open an entity holding account in the JCM registry to acquire JCM credits. Not only can JCM project participants open an account but Japanese entities and foreign entities may also opt to do so. JCM credits can be transferred among the entity holding accounts in the registry. There is no fee to open the account and it takes about two weeks to be available for use. Regarding the procedure for opening the account and information on account holding entities and JCM credits held in accounts, please look at the JCM registry system (JCM registry system website).

Are there any documents that show the price level of JCM credits? NEW

Currently, JCM credits are mainly acquired through projects supported by governmental financing programmes, and there are no statistics available to show the price level of JCM credits. Trading of JCM credits can be conducted by Over-The-Counter (OTC) trading between a credit holder (as a seller) and a buyer.


Is a prevention of double accounting necessary for the JCM?

Yes. Japan has been constructively engaging in the UNFCCC negotiations on market mechanisms over several years, aiming at developing robust accounting rules including how to avoid double counting. The issue of double counting may occur in all market mechanisms including the CDM in which mitigation outcomes are transferred internationally and, therefore, it should be dealt with internationally.

Also, as stated in "Submission by Japan on the Framework for Various Approaches" submitted in October 2014 (page 5), in order to avoid “double registration” of projects and “double issuance” of credits, the information regarding the proposed project e.g. project location including coordinates, scope, scale, etc. are provided to the JC. Project participants are also required to submit a written oath in the modalities of communication statement (MoC) form indicating that a proposed JCM project is not registered under any international climate mitigation mechanisms other than the JCM.

If a proposed JCM project is registered under the JCM, the same project will not be registered under any other international climate mitigation mechanisms, and vice versa.

The matter of double registration and double issuance is checked by a TPE at the time of both validation and verification. A TPE conducts, at the minimum, a search on the website of the CDM and JI to check whether projects with similar technology and location in the partner country have been registered.

In addition to that, all the project information is shared to the public through the JCM Website to secure transparency.

How is the JCM's compliance with the WTO rules?

The rules on subsidies are described in Article 3.1 (a), 3.1 (b) and 2 of the Agreement on Subsidies and Countervailing Measures of the WTO. There are several Financing Programs conducted by MOE in relation to the JCM and they do not violate these articles for the following reasons.

  • Article 3.1 (a) prohibits subsidies contingent upon export. The purpose of the JCM Financing Programs is to financially support the implementation of projects which reduce CO2 emissions by saving energy and/or introducing renewable energy in developing countries with leading low carbon technologies, and in return, these programs seek to acquire JCM credits for achievement of Japan's GHG emission reduction target. These Financing Programs don't require, or are not limited to, exportation.
  • Article 3.1 (b) prohibits subsidies contingent upon the use of domestic over imported goods. The JCM Financing Programs don't prioritize the leading low carbon technologies from certain country including Japan.
  • Article 2 prohibits subsidies specific to an enterprise or industry or group of enterprises or industries. The JCM Financing Programs don't deliver subsidies to specific enterprise, industry, or group of enterprises or industries.
  • Also, gaining profit is one of the definitions of subsidy provisioned in the Agreement on Subsidies and Countervailing Measures of the WTO. For the JCM Financing Programs, the subsidy recipient receives financial support to cover part of their initial investment cost. Although, in return, the subsidy recipient delivers, to the government, part of the JCM credit generated from the recipient's CO2 emission reduction activity. From this, we can't simply say that the recipient is gaining profits.
Is it possible to register a project as a JCM project without financial support from the Japanese government (e.g. JCM financing programme)?

In principle, it is possible. However, Japan’s contribution to the JCM partner countries must be demonstrated at the time of registration as a JCM project, and approval from the government of the partner country must be obtained.