Practitioners Workshop on the "Standards for baseline scenario identification and baseline emission calculations" 4-5 March 2011 in Bonn, Germany March 2011 Gareth Phillips Chair, Project Developer Forum Chief Climate Change Officer, Sindicatum Carbon Capital

March 2011 | 2 Overview of presentation – General comments on Call for inputs – Scope of the tools – Specific comments on technical aspects of the draft tools – Overview of alternative / parallel proposal

March 2011 | 3 General comments on Call for Inputs – The Call for inputs was entitled Call for public inputs on the draft "Tool for baseline scenario identification and baseline emission calculations" but in fact it covers 3 draft tools Call for public inputs on the draft "Tool for baseline scenario identification and baseline emission calculations" – There is no indication as to the scope of application of these draft tools and therefore it is very difficult for PPs / stakeholders to comment upon the content or implications of the tools. If it is made clear how they are to be applied, a more productive consultation can be undertaken – The titles are not suitably descriptive, for example the Draft Tool for baseline emission calculation contains important proposals about benchmarks which stakeholders need to be consulted upon – The style of presentation and the inconsistencies in the text make the tools very difficult to comprehend

March 2011 | 4 Scope of the tools – The concept of having a single decision making framework to arrive at the baseline for a project activity is good in principle – However, few new meths are being submitted (on account of the low success rate, long and uncertain time frames, impending 2012 issues) – Proposing a radical shake up of the whole approach to baselines at this time seems inappropriate and out of touch with reality

March 2011 | 5 Specific comments on technical aspects – PDF has concerns about: The increase in the volume work required, by all parties, even in simple cases where baseline determination need not be so complicated Reduction in certainty of the outcome with considerable duplication of work in different PDDs Even with the complexity, frequent reference to the conservative options DOE verification requirements – what third parties would have done The arbitrary selection of a 20% threshold for benchmarks, with complete disregard to practical difficulties of establishing a benchmark and dealing with heterogeneous technologies – Assessing the implications of changing to this new approach is a very large task – We recommend that before any further work is done, the Secretariat prepare an impact assessment evaluating the costs and benefits of these proposals and present it for stakeholder consultation

March 2011 | 6 Overview of alternative proposals – PD Forum is very supportive of the concept of Standardized Baselines – We believe that new approaches to determining baselines, baseline emissions and additionality is exactly what the CDM requires – In our opinion, the proposed tools are simply addressing challenges with the existing approaches to baselines and additionality and not addressing the instructions from the CMP to explore new approaches – Therefore we disagree with any suggestion that these tools will be used as a basis to assess methodologies and standardized baselines

March 2011 | 7 Alternative / in parallel proposal – PDF would like to suggest that the Secretariat devote its resources towards the definition of standardized baselines incorporating the following proposals: – As well as recognizing three existing types of methodologies – AM/ACM; ASM and Micro-scale meths (each with their own approach to additionality) – We propose at least 4 more types of methodologies which have different approaches to the establishment of the baseline and proof of additionality and will help take the CDM into under represented countries and sectors:

March 2011 | 8 SCC Policy Team 8 Proposed New types of meths Super Tool AdditionalityBaselineBoundaryFeaturesPoAActivity areas Bench- marks (BM) There is no additionality test required for a benchmark because in beating the benchmark, the facility is acting beyond BAU Performance benchmark expressed in t CO2 per unit of activity / output. In order to motivate action it must be set below existing performance (i.e. act to improve performance) * Applies to a defined population which has been used to establish benchmark– similar scale, technology, environment A benchmark does not restrict activity to a single technology A benchmark requires data from peers – plants of similar scale / technology / social / environmental setting Suitable for PoA approach applied to other members of the benchmark population EE initiatives, multiple technological interventions Deemed savings (DS) Deemed Savings additionality tool** or conventional additionality tool Assumed rate of utilization of appliance based on survey data or expert opinion eg 3 hours per CFL Within the geographic scope of the DS meth (national or regional) Ex ante determination of emission reductions per unit installed with much simpler monitoring requirements*** The geographic scope of boundary suggests PoA not necessary CFLs, VFD, insulation, chillers, electric vehicles, cookstoves etc. *REDD falls under BM because national or nested afforestation or deforestation or REDD baselines can be expressed in terms of t CO2 per ha **Deemed Savings additionality tool (DSAT): to help with establishing additionality for deemed saving projects, it might be possible to define a DSAT based on a comparison of cost of the proposed technology compared to the discounted cost savings associated with its use ***Could combine multiple technologies with a matrix identifying technologies which interact & a percentage adjustment in DS where appropriate.

March 2011 | 9 SCC Policy Team 9 Proposed New types of meths Super ToolAdditionalityBaselineBoundaryFeaturesPoAActivity areas Additional Technologies (AT) Positive list of types of technologies / activities that are automatically additional – for example EE and RE at a household level Qualitatively defined in meth. Quantitatively defined based on literature or local research data As defined in the applicability criteria of the baseline and additionality decisions Automated additionality test and baseline determination greatly reduce transaction burden. Well suited to single technologies installed in high numbers Not required as the positive additionality status and quantified baseline removes barriers to scalability Household heating and cooking; biodiesel; off grid RE; transport in least developed countries and sectors Modeled baselines (MB) Benchmark or additionality tool? Modeled using approved model design combined with industry standards (e.g. building standards for HVAC) As defined in applicability criteria of model and standards (eg type / age / size of buildings and scope of building standard) A theoretical baseline constructed on the basis of a combination of historic data and statistically significant variables, achieving a desired level of statistical performance (ie a high r 2 ) Applicable, and well suited to building management companies Built environment e.g. building energy management, cities

March 2011 | 10 In conclusion.... – PDF considers that the proposed draft tools may not serve to enhance the CDM at this point in time – The overall goal of a unified approach to the establishment of the baseline has merit, but before any further steps are taken, an impact assessment should be performed – The proposed tools will create many challenges and inconsistencies with existing practice and are likely to substantially distract resources at a key stage in the CDMs development – We believe that the Secretariats scarce resources would be better applied to developing and promoting the concept of standardized baselines – We have made some suggestions as to how standardized baselines could be practically advanced