In more detail

About the mechanism: JCM

Initiated by Japan, the JCM is one of the core cooperative approaches under Article 6.2 of the Paris Agreement, which aims to promote advanced decarbonization technologies for greenhouse gas (GHG) mitigation and removal projects. JCM is a bilateral carbon crediting mechanism between the government of Japan and partner countries. The basic concepts of JCM are the diffusion of advanced decarbonization technologies and implementation of measures to partner participants, evaluation of contributions from Japan to GHG emission reduction and removal projects, and the sharing of JCM credits for achieving Japan's Nationally Determined Contribution (NDC) under the Paris Agreement. As of December 2024, a total of 255 JCM projects have been implemented in 29 partner countries¹. More than half of these are related to the application of leading technologies in the areas of renewable energy (RE), followed by the energy efficiency (EE) category, which contributes to around one-third of the total project numbers.

Under the JCM, allocation of credits between the Japanese government and project participants depends on the ratio of financial support for investment in the decarbonization technology in each project, which the Japanese government will offer up to 50% financial support. The parties involved in the JCM include a Japanese entity, which is a representative of Japan, and a JCM partner country entity, who will implement the GHG mitigations or removals project. The Japanese entity and the JCM partner country entity will need to form an international consortium to participate in each JCM project. JCM procedures, including the approval of project plans, will be operated and managed by the joint committee (JC), which consists of representatives from both countries.

Participation in JCM projects by Japanese subsidiaries in the partner countries is another advantage of this program: the subsidiary's parent company in Japan can act as the Japanese partner entity and contribute to Japan's NDC target under the Paris Agreement.

To incentivize the Japanese private sector to take part in the JCM, the Japanese government also provides financial support for feasibility studies, the initial installation costs of the main construction, facilities and equipment of the project. Financial support for the implementation of JCM projects is given to the Japanese entities and then transferred to the project.

In addition, the private sector that obtains JCM credits without any financial support may consider another option under JCM, namely, "Private-Sector JCM," which allows more flexibility in the project timeline and JCM credits allocation percentage.

JCM Implementation in Thailand

There are currently 48 model projects (approved for financial support by the Japan government and preparing for project registration), 11 registered projects, and five projects with the issued carbon credits of 4,032 tCO2eq.

On 8 July 2024, Thailand and Japan signed the Memorandum of Cooperation on the Joint Crediting Mechanism between the Government of Japan and the Government of the Kingdom of Thailand (MoC). This MoC replaces the Bilateral Cooperation on the Joint Crediting Mechanism for the Low Carbon Growth Partnership between Japan and the Kingdom of Thailand, signed on 19 November 2015, and is the present Thailand-Japan bilateral agreement which sets out the JCM procedures for projects going forward.

Thailand JCM is distinct from JCM implementation in other partner countries and is subject to the Rules of Implementation for the Joint Crediting Mechanism Track under Premium T-VER ("JCM Premium T-VER Rules"), which requires that projects in Thailand must be registered as Premium T-VER projects. Premium T-VER is a part of Thailand's domestic carbon credits scheme, namely Thailand Voluntary Emission Reduction (T-VER), which is a voluntary crediting mechanism for projects located in Thailand. The Thailand Greenhouse Gas Management Organization (Public Organization), or TGO, acts as a scheme owner of T-VER for project registration and carbon credits issuance. Presently, there are two levels of project development for T-VER, namely, Standard T-VER and Premium T-VER. Premium T-VER was developed and launched by TGO in early 2023 as a scheme that is more aligned with international qualifications and standards.

JCM project development process under Premium T-VER

The four main phases for developing JCM projects in Thailand are as follows:

1. JCM Project Planning: In this phase, the eligibility of the planned projects, including activities or technologies, will be considered by the JC on whether they are in line with national policies on GHG mitigation and credits transfer, and against the criteria of both JCM and Premium T-VER, in the form of project idea note (PIN). Further consultation with the responsible ministries according to type of project may also be required.
2. JCM Project Registration: In this phase, the project participants will be required to (i) prepare document package for project registration approval by the Government of Japan; (ii) request for authorization from the Department of Climate Change and Environment (DCCE); (iii) request for Premium T-VER registration; and (iv) open a JCM-specific Premium T-VER account with TGO.
3. JCM Credits Issuance: This phase involves monitoring, reporting and verification of GHG reduction activity during the project implementation, submission of sustainability disclosure and safeguard assessment, request for fulfillment of authorization from the DCCE, and request for carbon credits issuance with TGO.
4. International Credits Transfer: The final phase of JCM procedure involves the transfer JCM credits from TGO to the Government of Japan.

Companies wishing to benefit from the funding support through the JCM program should seek advice as developing projects under the JCM Premium T-VER Rules requires a comprehensive set of skills and practical knowledge across various fields. This includes technical expertise in low-carbon technologies and new methodologies for carbon credit calculation. In addition, legal expertise for forming an international consortium, preparing relevant agreements between project parties and for ensuring compliance on rules and regulations related to the carbon projects as well as local and international laws is needed. Analysis on investment formation, eligibility of activities and financial analysis for evaluating cost-effectiveness, including any tax related aspects will also be necessary. Furthermore, the project must demonstrate additionality and contribution to Thailand's NDC which may further require close collaboration with governmental agencies in both Japan and Thailand. Note that, project participants from both sides must prepare and operate the project in accordance with the criteria and requirements of the two partner countries.

1 Seminar on the JCM Implementation in Thailand, 19 December 2024, Bangkok, the Ministry of the Environment, Japan

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The following have contributed to this legal update:

• Dhiranantha Rithmanee, Sustainability Specialist
• Muanjit Chamsilpa, Sustainability Specialist
• Chanata Kengradomying Chaivaivid, Sustainability Knowledge Management Lead