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Session 1

CDM Project Cycle PDD and Validation Reports Review Introduction to PIN

CDM Projects by Country

CDM Projects by Type

CDM Project Cycle


Design Validation/ Registration
Registration

Monitoring

Verification/ Certification

Issuance of CERs

Develop idea
PDD using approved Methodology PDD using new Methodology

Forward documents to EB

Implement Project

Prepare Verification and Certification Reports and submit to EB

Methodology to be approved by EB Complete PDD

Prepare PDD

Reviews
Certification Report and Issues CERs

Obtain DNA approval

Submit PDD to DOE Prepare Validation Report Submit monitoring report to DOE

Project Participant

Designated Operational Entity

CDM Executive Board

CDM Project Development


Requires significant personnel and financial resources
The entire project cycle is long and has uncertain outcome Outside entities must be hired to perform validation and verification Transaction costs can be high

Is CDM Too Complex and Risky?


Yes!

Source: Michaelowa 2001

But
CDM still offers much to host countries and investors
Potentially profitable partnerships to build emission-reducing projects benefiting local and global environment
at lower costs to all

CDM Key Project Cycle Milestones


Project Design Document (PDD) Preparation - At this stage the project is designed as a CDM project. A PDD has the following components Development of baseline and estimation of baseline emissions, estimation of project emissions, contribution to sustainable development (this is in accordance with host country guidelines), Monitoring and Verification Protocol (M&VP), Report on EIA, Report on Stakeholders participation and letter of endorsement from host country government Validation - The methodologies, values and results mentioned in the PDD have to be validated by an OE before the project can be registered with the CDM Executive Board. Registration - A project validated by OE is registered as CDM project with the CDM Executive Board Implementation and Operation - Of the project Verification and Certification - An OE based on the M&VP undertakes verification of the claimed emission reduction by owner of the CDM project. On verifing the claims, OE issues a note to CDM EB to issue certificate for emission reductions, which are termed as CERs. The project promoter can sell the CERs to the investor as per the agreement between the two entities.

Content of the Project Design Document (PDD)


A. B. C. D. E. F. G. Annex 1. Annex 2. Annex 3. Annex 4. Annex 5. General description of project activity Baseline methodology Duration of the project activity Monitoring methodology and plan Calculation of GHG emission by sources Environmental impacts Stakeholder Comments Contact information on project participants Information regarding public funding New baseline methodology New monitoring methodology Table of baseline data

Small-scale PDD contains the same sections (fewer annexes). CER creditation can be 2*7 years or 1*10 years

4 Examples of PDDs
Moldova biomass heating in rural area Moldova energy efficiency in public buildings Honduras 4.7 MW La Gloria hydro power plant Armenia, Yerevan landfill gas capture and electricity generation

The Validation Process

Validation Report Example


DET NORSKE VERITAS Validation Report for Moldova Biomass Heating
1 INTRODUCTION 1.1 Validation Objective 1.2 Scope 1.3 Description of Proposed CDM Project 2 METHODOLOGY 2.1 Review of Documents 2.2 Follow-up Interviews 2.3 Resolution of Clarification and Corrective Action Requests

3 VALIDATION FINDINGS 3.1 Participation Requirements 3.2 Project Design 3.3 Baseline Determination 3.4 Additionality 3.5 Monitoring Plan 3.6 Calculation of GHG Emissions 3.7 Environmental Impacts 3.8 Comments by Local Stakeholders
4 COMMENTS BY PARTIES, STAKEHOLDERS AND NGOS 5 VALIDATION OPINION REFERENCES Appendix A Validation Protocol

CDM Project Resources


All necessary documents, methodologies, guidelines are on the CDM Executive Board web site:

http://cdm.unfccc.int/EB
All basic rules for CDM are set in the Marrakesh Accords (Decision 15/CP7)

Idea Behind the PIN


PIN Project Idea Note

Developing CDM project is labor and resource intensive


PIN serves as low-cost option to find out: If home government will likely approve project as CDM If project has a chance to get ultimate CDM status approval by EB If there are investors who could finance project development costs, including PDD.

Having your project assessed based on PIN may save investors money!

Session 2
1. 2. 3. 4. Baseline Additionality Approved Methodologies Own Baseline Development

Contents
Baseline
Definition and principles Where in CDM process? Baseline scenario Baseline methodology

Additionality
Definition Demonstration of Additionality

Leakage Monitoring Methodology

Definition
Marrakech accords, modalities and procedures for CDM, article 44: .the scenario that reasonably represents the
anthropogenic emissions by sources of greenhouse gases that would occur in the absence of the proposed project activity.

?
A baseline is a hypothetical scenario that represents what would have happened in the absence of the project (i.e. business as usual). A baseline methodology is used to estimate baseline GHG emissions that will be compared to project emissions to determine overall emission reductions

Concept
GHG emissions (Ton of CO2 eq)
In the absence of the project (baseline)

Real, long term and measurable emission reductions

Project

Time (Years)

Application of a Baseline Methodology


CDM project proponents have two options:
Use an existing approved methodology
Simpler approach Only if a relevant methodology exists

Develop a new methodology


Additional effort required A new monitoring methodology and plan (Section D) will also be required

Baseline Scenario
Marrakech accords, modalities and procedures for CDM, article 48:
a) Existing actual or historical emissions, as applicable; or b) Emissions from a technology that represents an economically attractive course of action, taking into account barriers to investment; or c) The average emissions of similar project activities undertaken in the previous five years, in similar social, economic, environmental and technological circumstances, and whose performance is among the top 20 per cent of their category
Baseline scenario should take into account national and/or policies and circumstances

Baseline methodologies
Approved and consolidated baseline methodologies (EB) Proposed new methodology

Baseline methodologies
28 Approved methodologies 8 Consolidated methodologies
Industrial processes HFC incineration, decomposition of N2O from adipic acid production plants, use of renewable CO2 in the production of inorganic compounds, Increased share of additive materials in cement production Waste management Landfill gas capture and recovery, biomethanisation, forced methane extraction, organic waste composting Renewable energy Electricity generation from renewable resources exported to the grid, biomass cogeneration, grid connected electricity generation from biomass residues Agriculture Manure management systems, improved animal waste management Energy efficiency (including fuel switching) Flared gas recovery, switching from coal and petroleum fuels to natural gas, natural gas cogeneration, steam efficiency improvements, steam optimization system, water pumping efficiency improvements, leak reduction from natural gas pipeline

Example 1 Nubareshen Lanfill CDM Project Yerevan, Armenia


Ladfill near Zerevan for 1.2 million people Baseline
Keep landfill as is today. No legislation in Armenia to require changes (additionality!)

CDM Project
Collect landfill gas (LFG) Combust LFG in power generator

Example 1 Nubareshen Lanfill CDM Project Yerevan, Armenia


Emission Savings
Baseline actual CDM project emissions

Baseline
A) LFG * % CH4 * 21 = CO2 equivalent B) Armenian kWh average * CO2 = CO2 equivalent

Emissions
Actual project emissions Baseline - Emissions

CER

Example 2 Moldova Energy in Public Buildings


Small-scale CDM

Baseline
Keep buildings as they are No fuel switch in heating plants

CDM Project
32 buildings (schools & hospitals) to be insulatred, doors and windows replaced Fuel will be switched in heating plants from coal and oil to natural gas

Example 2 Moldova Energy in Public Buildings


Emission Savings (Baseline-Project)
Fuel consumption over project period less fuel consumption under CDM project (in CO2 equivalent)

Additionality
Would project happened in absence of CDM? NPV without CDM is negative, with it is positiveadditionality is proven

Example 3 La Gloria Hydro Power Plant, Honduras


Small-scale CDM

Baseline
No power generation on site Emissions are assumed to come from other power sources in Honduras

CDM Project
4.7 MW run-of-river hydro plant

Example 3 La Gloria Hydro Power Plant, Honduras


Small-scale CDM

Emission Savings
kWh from project * average CO2 intensity of Honduran kWh Project baseline is fixed for at least 7 years, but actual conditions can change over time

Additionality
Would project happen in absence of CDM? More difficult to prove, depends on local conditions. If power prices from project high, it may be difficult to prove additionality. Accepted standard to measure additionality in such projects is NPV calculations.

Complexities of Baselines
Baselines are complex & difficult to determine
Inherently speculative it attempts to predict what will not happen Forecasting uncertainty Business-cycle forecasting is extremely difficult Baseline level of emissions tend to be overstated

Additionality
Marrakech accords, modalities and procedures for CDM, article 43:
A CDM project activity is additional if anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the registered CDM project activity

Additionality
The definition is not sufficient to guarantee the environmental integrity of a CDM project
Tools to demonstrate additionality (EB) COP/MOP Decision: call for input to simplify/improve current additionality tool Provide evidence!

Tool to demonstrate additionality


Identification of alternatives to the project activity; Investment analysis to determine that the proposed project activity is not the most economically or financially attractive; and/or Barriers analysis;

Common practice analysis; and


Impact of registration of the proposed project activity as a CDM project activity

Leakage
Marrakech accords, modalities and procedures for CDM, article 51: Leakage is defined as the net change of anthropogenic emissions by sources of greenhouse gases which occurs outside the project boundary, and which is measurable and attributable to the CDM project activity

Leakage: example, cement sector


Project Boundary
RAW MIX Raw Material Supply Quarrying, Mining, Crushing CLINKER Fuel Preparation Crushing, Grinding, Drying CEMENT Additive Material Preparation Crushing, Drying DISTRIBUTION

-Increased GHG emissions associated with the transportation of renewable fuels -Reduced transportation GHG emissions from reduced coal use -Reduction in GHG emissions due to the lower quantity of renewable fuels being dumped and generating methane

Raw Material Preparation Pre-drying, Raw Grinding, Mixing

Pyro-Processing Pre-heating, CalcinationClinkering , Cooling

Fine Grinding Finish Grinding, Blending

Shipping Bagging, Storage, Transportation

Citeureup On-site electricity Purchased electricity

National grid

Tarjun

Electricity consumption for other purposes

Cirebon

Processes or activities affected by the project


Processes or activities unaffected by the project

Cirebon electricity line Tarjun electricity line Citeureup

Main electricity line for cement manufacturing

Source: Indocement PDD, NM 0047-0048

Leakage
In estimating leakage:
Clearly define the project boundary In proposing new methodology: Requirement to elaborate leakage in a detailed manner Pay attention to indirect leakage
Increased fossil fuel consumption at x due to utilisation of renewable energy at y

Session3
Small-Scale CDM Projects

Advantages of Small-Scale CDM


A simplified project design document

Simplified methodologies for baseline determination and monitoring plans


Bundling of project activities at various stages in the project activity

Simplified provisions for environmental impact analysis


Lower project registration fee Shorter review period for the registration of SSC CDM project activities The same DOE can validate as well as verify and certify emissions reductions for a specific SSC CDM project activity

Eligible small-scale CDM project categories


Project types TypeI I: Renewable energy projects <15 MW Type II: Energy efficiency improvement projects <15 GWh savings Type III: Other project activities always <15 ktCO2 Types I - III: Small-scale CDM project activity categories A. Electricity generation by the user B. Mechanical energy for the user C. Thermal energy for the user D. Renewable electricity generation for a grid A. Supply side energy efficiency improvements - transmission and distribution B. Supply side energy efficiency improvements - generation C. Demand-side energy efficiency programmes for specific technologies D. Energy efficiency and fuel switching measures for industrial facilities E. Energy efficiency and fuel switching measures for buildings A. Agriculture B. Switching fossil fuels C. Emission reductions by low-greenhouse emission vehicles D. Methane recovery and avoidance Other small-scale project

The project participants can themselves propose new categories incl. methodologies to the EB.

Bundling Small-Scale Projects


Small-Scale CDM Projects can be "bundled" to encourage companies to pursue these types of activities; Bundled projects form a single CDM activity or portfolio without the loss of distinctive characteristics of each individual project, all must have same crediting period; Characteristics include technology/measure, location, application of simplified baseline methodology. The sum of the output capacity of project activities within a bundle shall not exceed the maximum output capacity limit for its type:
up to 15 MW max. output for RE projects up to 15 Gwh/yr for EE projects reduction by source emitting less than 15 kt/yr of CO2 equivalent

Debundling is not allowed


A small-scale project activity that is part of a larger project activity is not eligible. A small-scale project activity is debundled if there is a registered small-scale CDM project activity:
With the same project participants In the same project category and technology/measure Registered within the previous 2 years; and\ Whose project boundary is within 1 km of the project boundary of the proposed small-scale activity at the closest point.

Modalities and Procedures (M&P) for the Small-Scale CDM


A special M&P for Small-Scale CDM was adopted at COP8, and can be found on the UNFCCC-CDM home page.
The M&P describe the general rules for the CDM project cycle, and the Executive Board have developed more detailed rules in their first 12 meetings. At their seventh meeting (EB7) the detailed rules for Small-Scale CDM were finalised. At COP9 the annex to the CDM M&P was finalised: Small scale LULUCF project must be <8 kt CO2 and implemented by low-income communities or individuals.

Additionality in the SSc M&P


Show that the project would not have occured without CDM due to:
Investment barrier Technological barriers Barrier due to prevailing practice Other barriers: Institutional, information, managerial, organizational capacity, financial, or capacity to absorb new technologies

Other Small-Scale CDM Issues


The crediting period can be 3*7 years or 1*10 years. For afforestation and reforestation projects it is 3*20 years or 30 years, with a mandatory verification and certification every 5 years. Only if the technology is transferred from another activity is leakage calculation required.

Session 4
Developing the PIN form

Role of the PIN


First general information about the project The submission of PIN is voluntary PIN aims to improve the quality of the official PDD and improve chances of project success PIN contains information on
Project participants Type and size of project Financial details Additionality Emission baseline Emission reduction calculations Crediting period Sustainability impact of the project Other information requested by the PIN

Ideal Evaluation & Approval of CDM Projects


DNA receives PIN
Project to be revised

Initial evaluation: PIN (Reply : max 2 weeks) Project not accepted

Project to be revised

Second evaluation : PDD (Reply : max 4 weeks)

Approval letter delivered by the CDM DNA to the Project developer

What does PIN look like?


There are dozens PIN forms today
Every CDM investor wants to first see initial information about a project in the form of a PIN form Host countries want to provide initial assessment based on PIN forms It saves time and money to investors and host country governments

Practice makes perfect!


PIN form development exercise