CDM Basics Marcos Castro, World Bank Institute CFCB Sao Paulo Workshop São Paulo City Hall, 4 May 2010

Sao Paulo Carbon Finance Workshop, April Financing Low Carbon Development in Cities The CDM Option

Sao Paulo Carbon Finance Workshop, April 26 3 CDM survival kit for city officiers: 1. Baseline The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox  Reveals how much GHG can be saved and therefore demonstrates Carbon Financing potential (ex-post and market-dependent!) Carbon credits = emissions Carbon credits = emissions Greenhouse gas emissions Historical Trend Project start Time Baselin e Actual emissions

Sao Paulo Carbon Finance Workshop, April 26 4 CDM survival kit for city officiers: 2. Additionality The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox  Proves that the targeted emmissions wouldn‘t be saved without CDM (precondition for every CDM project) Project without carbon revenue is profitable – but not sufficiently profitable compared with alternatives Project without carbon element Project with carbon element Carbon revenue makes the project attractive relative to investment alternatives Investment threshold Revenue / NPV / IRR

Sao Paulo Carbon Finance Workshop, April Some examples of additionality Capturing methane from an urban landfill and flaring it  Carbon credits represent the only source of income for undertaking this activity ? Capturing methane from an urban landfill and utilising it to generate electricity  Project developer would have to demonstrate that the electricity revenue alone would not make this project attractive  Building a large hydro project for the grid in Ethiopia  Questionable additionality: there is already plenty of hydro activity in Ethiopia

Sao Paulo Carbon Finance Workshop, April 26 6 The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox  The Carbon Finance add-on challenge! CDM survival kit for city officiers: 3. CDM Toolbox Project Recall: CDM Project Cycle Depicts the step-by-step approach to CDM as well as the key institutions 6 to 12 months1.5 months Crediting period of the project Project Developer DNA DOE CDM EB PIN PDD Host country approval Project validation Project registrati on CER issuance Project verificati on Recall: CDM Methodologies Depict the approach for different project types CDM Cycle

Sao Paulo Carbon Finance Workshop, April to 12 months1.5 monthsCrediting period of the project Project Developer DNA DOE CDM Executive Board Project feasibility assessment / PIN CDM project development / PDD Host country approval Project validation Project registration CER issuance Project verification The CDM project cycle

Sao Paulo Carbon Finance Workshop, April to 12 months1.5 monthsCrediting period of the project Project Developer DNA DOE CDM Executive Board Project feasibility assessment / PIN CDM project development / PDD Host country approval Project validation Project registration CER issuance Project verification The CDM project cycle

Sao Paulo Carbon Finance Workshop, April to 12 months1.5 monthsCrediting period of the project Project Developer DNA DOE CDM Executive Board Project feasibility assessment / PIN CDM project development / PDD Host country approval Project validation Project registration CER issuance Project verification The CDM project cycle

Sao Paulo Carbon Finance Workshop, April to 12 months1.5 monthsCrediting period of the project Project Developer DNA DOE CDM Executive Board Project feasibility assessment / PIN CDM project development / PDD Host country approval Project validation Project registration CER issuance Project verification The CDM project cycle

Sao Paulo Carbon Finance Workshop, April to 12 months1.5 monthsCrediting period of the project Project Developer DNA DOE CDM Executive Board Project feasibility assessment / PIN CDM project development / PDD Host country approval Project validation Project registration CER issuance Project verification The CDM project cycle

Sao Paulo Carbon Finance Workshop, April to 12 months1.5 monthsCrediting period of the project Project Developer DNA DOE CDM Executive Board Project feasibility assessment / PIN CDM project development / PDD Host country approval Project validation Project registration CER issuance Project verification The CDM project cycle

Sao Paulo Carbon Finance Workshop, April to 12 months1.5 monthsCrediting period of the project Project Developer DNA DOE CDM Executive Board Project feasibility assessment / PIN CDM project development / PDD Host country approval Project validation Project registration CER issuance Project verification The CDM project cycle

Sao Paulo Carbon Finance Workshop, April to 12 months1.5 monthsCrediting period of the project Project Developer DNA DOE CDM Executive Board Project feasibility assessment / PIN CDM project development / PDD Host country approval Project validation Project registration CER issuance Project verification The CDM project cycle

Sao Paulo Carbon Finance Workshop, April Roles and timing for starting a CDM project in Cities Who Key points City officers/ Project teams Technical experts Timing 1. Baseline Collect basic dataFirst estimateBefore PIN 2. Additionality Announce project as under CDM Initial adoptionBefore official announcement/ project tender 3. Toolbox Refer to expert for choosing methodology Become project participant and work on a contract Plan project according to CDM project cycle Technical expertise, guiding through project cycle According to steps in CDM project cycle

Sao Paulo Carbon Finance Workshop, April Thank you very much for your attention! t. +44.(0)

Sao Paulo Carbon Finance Workshop, April References (amongst others)  CFCB:  Carbon Finance Assist/Carbon Finance Unit, World Bank  (WB/ UNDP) t. +44.(0)