Joint Implementation (JI) under the Kyoto Protocol allows project-level emissions trading between Annex B countries; trade is in Emission Reduction Units (ERUs), each equivalent to an AAU, which in turn is one tonne of CO2e. Under JI, annex B countries facing high abatement costs can pursue cheaper CO2e emission reduction projects in other Annex B countries. Most JI funding will probably flow from Japan and Western Europe, as such a pattern was observed during Activities Implemented Jointly, a precursor of JI.
Private sector companies in Annex B countries may initiate JI transactions which are recorded against a country's Assigned Amount of emissions. For example, if a country is 100 million tonnes above its emission target in 2010 it could initiate projects to generate a total of 100 million ERUs. Alternatively it could purchase a parcel of AAUs amounting to 100 million tonnes in the market. The choice will depend upon relative prices.
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