In October 2020, Japan’s Prime Minister Suga Yoshihide declared Japan is committed to achieve net zero emissions by 2050. UN Secretary-General António Guterres welcomed this announcement as “a very significant positive development.” The world’s third largest economy and fifth biggest emitter, Japan joined the growing number of major economies aiming to reach carbon neutrality by mid-century. China, the EU, the Republic of Korea, and the UK have expressed similar commitments.

The Secretary-General expressed confidence in Japan using “the necessary technological, financial and engineering tools to get to net zero emissions by 2050” and assist developing countries to achieve the same objective through, inter alia, technological assistance and public and private financing for renewable energy.

Since its inception in 2013, Japan’s Joint Crediting Mechanism (JCM) has been aiding partner countries in reducing their emissions through the diffusion of decarbonizing technologies, products, systems, services, and infrastructure that enable implementation of mitigation actions in partner countries, while promoting sustainable development. Japan’s 2020 nationally determined contribution (NDC), submitted to the UNFCCC Secretariat under the Paris Agreement on climate change, estimates cumulative emission reductions or removals achieved through the JCM by 2030 at 50 million to 100 million tCO2. The Mechanism’s role in promoting the SDGs is likewise significant as in addition to facilitating climate action, JCM projects generate a range of co-benefits across the SDG spectrum, and help realize a blueprint for a sustainable society.

How Does the JCM Work?

The Joint Crediting Mechanism is implemented through bilateral cooperation between Japan and 17 partner countries: Bangladesh, Cambodia, Chile, Costa Rica, Ethiopia, Indonesia, Kenya, the Lao People’s Democratic Republic (PDR), Maldives, Mexico, Mongolia, Myanmar, Palau, the Philippines, Saudi Arabia, Thailand, and Viet Nam. Its objective is to promote diffusion of advanced low-carbon and decarbonizing technologies, to implement the Paris Agreement by facilitating mitigation actions, and to contribute to achievement of NDCs and the SDGs. The Mechanism enables Japan to quantitatively evaluate its contribution to greenhouse gas (GHG) emission reductions or removals by generating credits that can be used towards NDCs in Japan and in the 17 partner countries.

The main JCM implementing entity is the private sector. By contributing to the SDGs, companies create new business opportunities and strengthen their businesses. In the JCM, a Japanese company collaborates with a local company to launch a project, such as on energy efficiency improvement or renewable energy. By following JCM rules for application, the project is registered as a JCM project. After registration, the GHG reduction from the project is issued as JCM credits through quantification by monitoring, reporting and verification (MRV). The credits are then shared among both governments and the participating entities.

As an illustration, credit allocation for a 2017 JCM project implemented by Japan and Mongolia to reduce GHG emissions by introducing solar power generation in Darkhan, Mongolia, and supplying power to the grid proceeded as follows: 7,158 tonnes (80%) to the Japanese side; and 1,789 tonnes (20%) to the Mongolian side. The project is estimated to result in a cumulative GHG emissions reduction of approximately 157,094 tCO2 by 2030, and contributes to SDG 13 (climate action) and SDG 7 (affordable and clean energy). It has also helped advance, among other Goals, SDG 8 (decent work and economic growth) by providing employment opportunities, SDG 9 (industry, innovation and infrastructure) by encouraging industry innovation, SDG 12 (responsible consumption and production) by promoting sustainable use of resources, and SDG 17 (partnerships for the Goals) by enabling technology diffusion and transfer to a developing country.

JCM Global Partnership

To facilitate multilateral partnerships among JCM partner countries and relevant stakeholders, including national and local governments, the private sector, financial institutions, and non-governmental and international organizations involved in JCM implementation or interested in market mechanisms under the Paris Agreement, the Ministry of the Environment, Japan (MOEJ) launched the JCM Global Partnership. The JCM Global Partnership supports the development and implementation of carbon-neutral projects, promotes the JCM as a pilot for Article 6 of the Paris Agreement, and facilitates JCM projects’ contribution to the SDGs.

JCM Carbon Neutral Projects

To facilitate the development and execution of projects promoting carbon neutrality, the Global Environment Centre Foundation (GEC) runs JCM Global Match – an online matchmaking platform, which promotes accelerated diffusion of advanced low-carbon and decarbonizing technologies in the 17 JCM partner countries. Since each JCM project is carried out through a partnership between a Japanese company providing decarbonizing technologies and a local company wishing to implement such technologies, the platform provides a valuable service by automatically matching all registered companies with each other according to their role, views, and interests in their future JCM projects.

The MOEJ is also implementing a financing and support programme to promote JCM project development and implementation through the:

  • Financing Programme for JCM Model Projects;
  • City-to-City Collaboration Programme for Low-Carbon Society;
  • Japan Fund for the Joint Crediting Mechanism (JFJCM), managed by the Asian Development Bank (ADB); and
  • JCM F-gas Recovery and Destruction Model Project.

The Financing Programme for JCM Model Projects supports the introduction of decarbonizing technologies in partner countries by addressing the high initial cost barrier of introducing advanced technologies. As part of the Financing Programme, in 2020, the MOEJ introduced JCM Eco Lease Scheme with the aim of reducing the model projects participants’ reporting burden through a shorter monitoring period and simplified proposal document requirements. In October 2020, the MOEJ selected the first project under JCM Eco Lease Scheme to introduce a solar power system to a shopping mall in the Philippines. The JCM also promotes collaboration with projects supported by Japan Bank for International Cooperation (JBIC) and Japan International Cooperation Agency (JICA), as well as other government-affiliated financial institutions.

The City-to-City Collaboration Programme for Low-Carbon Society provides a collaboration framework for cities in Japan and cities in developing countries to create sustainable, zero-carbon urban societies in line with SDG 11 (sustainable cities and communities). The initiative supports the development of human resources and institutions in cities through implementation of low-carbon projects in collaboration with private companies and by sharing knowledge and know-how on urban management. These efforts also help promote the Goals on climate action as well as on strong institutions and partnerships. In addition to supporting low-carbon development in cities, projects carried out under the programme generate important co-benefits such as improving the environment and energy supply in cities, contributing to SDGs 7 and 15 (life on land). As of February 2020, 32 cities and areas in ten countries in Asia and 14 municipalities in Japan have taken advantage of the intercity collaboration programme since it launched in 2013. 

The JFJCM – a single-donor trust fund established in 2014 – aims to provide financial incentives for the adoption of advanced low-carbon technologies in ADB-financed and administered projects through grants and technical assistance. Six projects have benefited from JFJCM support, most recently a 2020 waste-to -energy project in Maldives, which, in addition to SDGs 13 and 7, will support sustainable consumption and production (SCP) and circularity to advance SDG 12. Other JFJCM projects have contributed to, among other Goals, SDGs 3 (good health and well-being) and 10 (reduced inequalities) by improving access to health services for disadvantaged groups in Mongolia and SDG 6 (clean water and sanitation) by replacing an outdated lagoon system with an energy-efficient wastewater treatment plant in Cambodia.

Mitigation activities under the JCM F-gas Recovery and Destruction Model Project focus on the recovery and destruction of fluorocarbons used in air conditioning, refrigeration, and cars, prior to their release in the atmosphere. Examples include a 2018 project in Thailand and a 2018 project in Viet Nam, which focused on developing a collection scheme and introducing a dedicated system for the destruction of used fluorocarbons. In Viet Nam, annual average emissions reductions of 6,500 tCO2eq are expected in 2020-2023, advancing SDGs 13 and 7, among others.

Piloting Article 6 of the Paris Agreement

The Government of Japan has been implementing the JCM in accordance with Article 6.2 of the Paris Agreement (cooperative approaches). As such, JCM projects:

  • Promote sustainable development;
  • Ensure environmental integrity by promoting additional GHG emission reductions, applying a “conservative calculation method,” and setting eligibility criteria in addressing the environmental impact;
  • Ensure transparency through the application of relevant rules, guidelines, and methodologies throughout the project cycle; and
  • Ensure robust accounting by avoiding double counting.

The MOEJ signed a Memorandum of Cooperation (MoC) with the World Bank to scale up JCM projects under Article 6 by utilizing the World Bank’s initiatives and programmes, including the Partnership for Market Readiness (PMR), Innovate 4 Climate (I4C), and Carbon Pricing Leadership Coalition (CPLC). The MoC also aims to promote the application of the JCM’s MRV methodologies to the World Bank’s programmes and initiatives.

The JCM’s Contribution to SDG Implementation

According to JCM rules of implementation and bilateral agreements concluded between Japan and the 17 partner countries, the JCM should contribute to sustainable development. To this end, the MOEJ has issued the JCM and SDGs Linkage Guidance, which can be used to identify and analyze JCM projects’ contribution to achieving the SDGs.

Japan and partner countries are also working to introduce sustainable development contribution guidelines for JCM projects, analyze the JCM’s impact on the SDGs, and incorporate the SDGs in the process of adoption and implementation of JCM Model Projects. Indonesia and Mongolia have already introduced such guidelines, along with a reporting mechanism to evaluate the JCM’s contribution to the SDGs.

According to a report, issued by the Institute for Global Environmental Strategies (IGES) in February 2021, JCM activities have resulted in a number of best practices of the Mechanism’s contributions to SDG achievement. The report showcases the contributions that JCM projects focusing on renewable energy, energy efficiency and energy transmission, agriculture, waste recycling, transport, and water have made to implementation of the SDGs and related targets. For example, it demonstrates how, in addition to contributing to SDG 7 (affordable and clean energy), projects introducing energy efficiency technologies in different industries and sectors also promote, inter alia: SDG 4 (quality education) by providing technical capacity training to local employees; SDG 13 (climate action) by contributing to climate change mitigation; SDG 8 (decent work and economic growth) by providing employment opportunities; SDG 9 (industry, innovation and infrastructure) by encouraging industry innovation; SDG 12 (responsible consumption and production) by promoting sustainable use of resources; and SDG 17 (partnerships for the Goals) by ensuring technology diffusion and transfer to developing countries.

For example, a project on the introduction of high-efficiency water pumps in Da Nang, Viet Nam, carried out under the City-to-City Collaboration Programme with Yokohama, Japan, replaced conventional water pumps with high-efficiency ones in two water pump stations of a water treatment plant owned by Da Nang Water Supply One-member Limited Company (DAWACO). The new pumps reduced CO2 emissions by reducing power consumption (SDGs 7, 13), and contributed to the achievement of Da Nang’s ‘Environmental City by 2020’ goal by ensuring a stable water supply (SDG 6), improving energy efficiency (SDG 7), and promoting responsible consumption (SDG 12). By improving employees’ working conditions and building local capacity, the project contributed to SDGs 8 and 4, and helped advance SDG 9 through infrastructure development. Intercity cooperation under the project, along with technology diffusion and transfer, promoted sustainable cities (SDG 11) and partnerships for the Goals (SDG 17).

Other examples of JCM activities with multiple SDG co-benefits include: a palm waste biomass power generation project in Indonesia; a low-carbon economic development project in the Philippines; and a solar power generation project in Mongolia to empower female farm workers, which is notable for, inter alia, its contribution to gender equality (SDG 5).

Another significant development in increasing women’s participation in JCM projects is the issuance of the MOEJ’s ‘Guideline on Gender Equality for the Joint Crediting Mechanism (JCM),’ which JCM Model Projects applicants should follow as of 2020.

Also of note is the private sector’s growing awareness of climate change risks as well as business opportunities presented by the SDGs. To help companies utilize the JCM to achieve their SDGs, in January 2021, the Overseas Environmental Cooperation Center, Japan (OECC), under the guidance of the MOEJ, convened a symposium to raise companies’ awareness of and discuss opportunities presented by the JCM for SDG achievement. The ‘JCM × SDGs Symposium’ addressed, among other issues: the significance of working on climate change and the SDGs as a business; diffusion of environmental, social, and governance (ESG) approaches in finance; ways to promote SDG efforts within companies; and the benefits, methods, and examples of using the JCM to reach the SDGs.

Using the JCM during the COVID-19 Pandemic

While the COVID-19 pandemic continues to present challenges for sustainable development and climate action, UN Secretary-General António Guterres has suggested countries use global recovery as an opportunity to solve the climate crisis and “build forward and build better.”

In that spirit, the MOEJ and the Global Environment Centre Foundation, in collaboration with local partners, organized a series of webinars on the theme, ‘Utilizing the JCM during the COVID-19 Period,’ to enable JCM partner countries to continue to take advantage of low-carbon and decarbonizing technologies to advance climate action and support sustainable development – notwithstanding COVID-19. Government officials and business leaders from Japan and Chile, Indonesia, Mexico, and Thailand explored ways to utilize JCM Model Projects effectively in the COVID-19 period, including through JCM Global Match, and shared good practices. After the webinar, online meetings convened between local companies that are considering implementing low-carbon or zero-carbon technologies and Japanese companies that can provide such technologies.

* * *

Over more than seven years, JCM projects have been helping countries tackle the climate crisis through the use of cutting-edge technologies – while promoting sustainable development at the same time. Better understanding of the interlinkages between the JCM and the SDGs can accelerate the Mechanism’s further contribution towards the Goals and the Paris Agreement through JCM project implementation.

Funding for this policy brief was provided by the Overseas Environmental Cooperation Center (OECC), Japan. Under the guidance of the Ministry of the Environment of Japan, OECC implements an information collection and dissemination programme regarding carbon market mechanisms, including the Joint Crediting Mechanism (JCM).

This policy brief was authored by Elena Kosolapova, SDG Knowledge Hub Content Editor for Climate Change Policy and Adaptation. A policy brief on delivering climate ambition through market mechanisms, which focuses on Article 6 piloting activities is available here.