GUIDELINES ON: (A) COMMON PRACTICE (B) ADDITIONALITY OF FIRST-OF-ITS KIND SDM JOINT COORDINATION WORKSHOP Bonn, Germany, March 2012

2 Background The CMP requested the Board to develop guidance on First of its kind and Common practice Draft guidelines were developed and, following a call for public inputs, adopted by EB63 in September 2011 EB65 revised the Additionality tool and the Combined tool to incorporate the provisions contained in the guidelines CMP7 requested the Board further improve the guidelines on the use of first-of-its-kind and the assessment of common practice, on the basis of the application of those guidelines to project activities

3 Guidelines on common practice (EB 63, Annex 12) Define the terms Applicable geographical area, Measure, Output, and Different technologies. Identify all plants in the applicable geographical area which have a capacity in the range defined by the project plant capacity 50% (N ALL ) Out of these plants, identify the plants that apply different technologies from the project technology (N DIFF ) Calculate the share of similar technologies: F = 1 – N DIFF /N ALL The project activity is common practice if (i) F > 0.2, and (ii) N ALL – N DIFF > 3

4 Guidelines First-of-its-kind project activities (EB 63, Annex 11) Define the terms Applicable geographical area, Measure, Output, and Different technologies. A project activity is First-of-its-kind if: (i) it is the first in the applicable geographical area; (ii) applies a different technologies from other activities that deliver the same output and that had started commercial operation before the start date of the project; and (iii) opts for a crediting period of a maximum of 10 years with no option of renewal A proposed project activity that is First-of-its-kind is additional (i.e. it does not require barrier analysis, financial analysis or common practice analysis).

5 Concerns raised by stakeholders (1) The new guidelines on common practice, instead of clarifying the steps of existing common practice analysis, introduce a completely new approach The data to apply the concept is not always publicly available Registered CDM projects may in the future be included for the purpose of defining the common practice threshold The strict criterion of first does not recognise barriers faced by the early adopters of new technologies; if there is more than one plant using a technology, it does not mean that the barriers are not there. The concept of first of its kind should not be linked to a 10 year crediting period

6 Concerns raised by stakeholders (2) The term measures is used in two different ways in the revised combined tool and additionality tool which allows for two interpretations The definition of different technologies fails to encourage development of new technologies. For example, a switch from biomass combustion to biomass gasification would require the adoption of a new technology but according to the definition it would not be different since the fuel remains the same. The definition of applicable geographical area is less clear than before

7 Next steps The Board and the UNFCCC secretariat will evaluate the comments from stakeholders and the practical application of the concept in project activities An information is planned to be prepared for EB69 Revised tools, improving the concept, are planned to be adopted at EB70