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federal agencies that support the Initiative. The Initiative's budget was $3.8 million in fiscal year 1996 and $2.6 million in fiscal year 1997.

Under the Kyoto Protocol, negotiated in December 1997, the United States
would be required to reduce its emissions of six greenhouse
gases namely, carbon dioxide, methane, nitrous oxide,
hydrofluorocarbons, perfluorocarbons, and sulphur

hexafluoride-7 percent below its 1990 emissions level by 2012. The Kyoto
Protocol also includes provisions for market-based approaches to reduce
emissions of greenhouse gases. Such approaches include emissions
trading, joint implementation, and the "clean development mechanism."
The philosophy behind these approaches is that the cost of reducing or
capturing emissions varies among countries and that it is more efficient to
seek the reductions where the cost is the least.

Nine Criteria Are
Used to Judge Project
Proposals

Through the first six rounds of submissions, Initiative officials have used nine criteria and considered four other factors to determine which proposals to accept. The criteria primarily involve ways of measuring the project's effect in reducing emissions and steps for verifying these reductions. One of the criteria also requires the project's participants to provide annual reports to the Evaluation Panel on the emissions reduced or captured (sequestered) by the project. The other four factors considered involve determining whether the actions of U.S. participants and the host country support the objectives of United Nations Framework Convention on Climate Change and the potential positive and negative effects of the project on greenhouse gas emissions outside the project's boundaries and apart from its effect on greenhouse gas emissions. The Initiative uses more criteria than do certain other countries with similar programs, and the U.S. criteria are more strict in some respects.

When the pilot program was being developed, an interagency task force led by the State Department established criteria for determining which proposed projects would be accepted into the program. The criteria were developed to help ensure that proposed projects meet the development goals of the host country, while providing greenhouse gas benefits beyond those that would have occurred in the absence of the project. Moreover,

Prior to the Kyoto Protocol, joint implementation was the terminology generally used for the concept that would allow a developed country to meet at least part of its obligation for reducing greenhouse gas emissions by receiving credit for investing in projects that reduce emissions in another country. The Kyoto Protocol, however, makes a distinction on the basis of whether the investment is in a developing or developed country. Investments in developing countries are included under the Protocol's clean development mechanism provisions and investments in other developed countries are inchaded under its joint implementation provisions.

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the criteria are intended to help ensure that the projects result in real, measurable net emissions reductions.

An initial set of nine criteria was proposed in a Federal Register notice on December 17, 1993. Twelve organizations and individuals submitted comments on the proposed criteria. On the basis of these comments, the criteria were revised, and the final criteria were published in the Federal Register on June 1, 1994. These criteria now have been used for evaluating the six rounds of proposals considered through March 1998.

Most of the nine criteria relate to identifying and measuring a project's benefits. For example, one criterion asks whether the proposal provides enough information to determine the level of current and future emissions both with and without the project. A second asks whether the proposal contains adequate provisions for tracking the emissions reduced or sequestered. A third asks whether the proposal provides adequate assurance that the benefits will not be lost or reversed over time. Other criteria relate to such matters as acceptance by the host country and annual reporting, including the greenhouse gas benefits as they are attained. Among the other four factors considered, one is whether the project has potential positive or negative effects on the host country's employment and public health. (All nine criteria and four other considerations used in the project evaluation process are paraphrased in app. I.)

The U.S. Initiative generally uses more criteria than did certain other countries with similar programs, and the criteria are stricter, in some respects, than the criteria used in other countries' programs, according to our analysis of a 1996 report prepared for the Agency for International Development. 10 This report described the criteria of the U.S. Initiative and similar programs in Australia, Canada, Germany, Japan, and the Netherlands. Our analysis of this information showed that the number of criteria used by the U.S. Initiative (nine) was equal to the number used by the Netherlands and larger than the number used by the other four countries (four to seven each). In addition, the U.S. criteria were stricter in some respects. For example, only the U.S. Initiative had requirements for maintaining benefits over time and for external verification of benefits. Conversely, two other countries Germany and the Netherlands--had a criterion related to stimulating the use of modern technology or renewable energy.

Implementing JVAL: A Guide for Establishing Joint Implementation Programs, Center for
Sustainable Development in the Americas (Nov. 1996).

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About One-Third of the Proposed Projects Have Been Accepted

In a July 1996 report to the Secretariat of the United Nations Framework
Convention on Climate Change, the Initiative said that its Evaluation
Panel, which is responsible for accepting or rejecting project proposals for
inclusion in its program, considers not only how a project measures
against all criteria, but also how the project contributes to the pilot
program. The report stated that while failure on any single criterion could
keep a project from being approved, the panel may find relatively poor
performance on one criterion to be outweighed by excellent performance
on another. The report further stated that because the criteria were also
being tested for their appropriateness, the Evaluation Panel did not use a
single rigid approach to applying the criteria but remained flexible in their
interpretation and application to each project.

In our review of Initiative files, we found that 18 of the 32 projects accepted during the first six rounds had been accepted even though internal documentation indicated that the proposals were judged as not clearly meeting one or more of the nine criteria. For example, reviewers raised questions about a project involving the development and operation of a wind electricity-generating plant. The project review documentation noted that because the project had been under discussion since 1992, a year before the U.S. pilot program was announced, it was not clear that the project was initiated either in response to or in reasonable anticipation of the pilot program-one of the nine criteria for a project's acceptance. The documentation also indicated that the project's developers believed that acceptance of the project into the Initiative would better enable them to obtain the necessary funding for the project. The Evaluation Panel accepted this project. An Initiative official said that individual technical reviewers sometimes interpreted the criteria differently and came to different conclusions. In such cases, the Initiative's Secretariat labels these findings as "less than clear compliance" and requests that the Evaluation Panel make this judgment on a case-by-case basis. According to the Secretariat, when the Evaluation Panel accepts such projects, it believes that the criteria were adequately met."

Of the 97 proposed projects submitted during six evaluation rounds, 32 projects have been accepted into the program. Of the accepted projects, 17 are designed to reduce emissions, and 15 are designed to sequester emissions. All but one of the projects are aimed at reducing or

"According to an Initiative official, the criteria that have been the most difficult to interpret
consistently are those related to "additionality," which is discussed later in this report.

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sequestering carbon dioxide emissions, while the other project is aimed at reducing methane emissions.

Through the six rounds, a total of 119 proposals have been submitted, 22 of which have been submitted twice. Thus, 97 separate proposals have been submitted. Thirty applications were submitted in the first round. Thereafter, the number of applications declined steadily to five applications in the fourth round. Although the number of applications rebounded to 30 in round five, it declined again to 18 in the most recent round. Secretariat staff suggested some possible explanations for the variations in the number of project proposals submitted in the various rounds. The staff suggested that the two largest rounds (rounds one and five), which occurred immediately prior to the First and Third Conferences of the Parties to the United Nations Framework Convention on Climate Change, were the result of project developers' expectations that international crediting of joint implementation projects might be negotiated at those sessions. The staff also suggested that the smallest number of proposals came in round four because it was the first round occurring after the Initiative increased the number of rounds conducted a year from one to three and the resulting short period of time between rounds three and four (about 4 months). According to the Secretariat's Director, in response to project developers' expressed desires for a quicker turnaround process, the Initiative increased the frequency of its evaluation rounds by streamlining its application procedures.

A total of 32 proposals have been accepted into the Initiative, including at least one proposal in each round. The proportion of proposals accepted increased from 23 percent in round one to 67 percent in round three. However, this proportion declined to 20 percent in round four and 7 percent in round five. Secretariat officials said that they had not attempted to determine a reason for this decline, but they pointed out that many of the proposals submitted for round five were found not to be complete. Our analysis showed that the project reviewers found 19 of the 30 round-five proposals, or more than 60 percent, did not contain sufficient information to permit a complete evaluation. The proportion accepted in round six was about 22 percent. (See fig. 1.)

Of the 32 approved projects, 31 focus on carbon dioxide, while the other project focuses on methane. Seventeen of the approved projects are designed to reduce emissions. For example, a project in Costa Rica involves the construction and operation of a privately owned and operated hydroelectric plant. The electricity generated by this plant will displace electricity that would have otherwise been generated by burning fossil fuels, thus reducing carbon dioxide emissions. The project that focuses on reducing methane emissions is located in the Russian Federation and will capture natural gas that is now escaping from a transmission and distribution system by sealing valves at two compressor stations.