Absolute or relative baselines for JI/CDM projects in the energy sector?

The two project-based Kyoto mechanisms, joint implementation (JI) and the clean development mechanism (CDM), require a determination of the "baseline", the development of greenhouse gas (GHG) emissions in the absence of the project. This paper examines, whether absolute (given in tCO(2) equivalent) or relative baselines ("benchmarks", given, e.g. in tCO(2) equivalent/MWh) should be applied for JI/CDM projects in the energy sector. Accuracy of the GHG emission reduction and manageability of GHG emission balances are used as evaluation criteria. The results show that relative baselines are a more accurate instrument for the estimation of emission reductions in JI/CDM projects in the energy sector without posing significant additional risks to the management of GHG emission balances for large entities. In comparison to absolute baselines, relative baselines indicate in a more realistic and conservative manner the amount of emission reductions obtained in the energy system and give more appropriate incentives to project sponsors. The additional risks of relative baselines are likely to be small compared to the normal deviation of the domestic/internal GHG emissions. The findings are in line with the Marrakesh Accords, which set restrictions to application of absolute baselines. (C) 2002 Elsevier Science Ltd. All rights reserved.