Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEXAdditionality in NovaGerar Gas to Energy Landfill Project Amr Abdel-Aziz, Ph.D. Consultant

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEXAdditionality Emission reductions that are additional to any that would occur in the absence of the project Most critical issue for project acceptance Project will be refused if additionality is not proven Definition Importance Year Emissions Baseline Project Project Additionality Environmental Additionality Year Baseline Project Emissions New Policies Attractive econ.

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEXAdditionality Flow chart of series of questions that lead to narrowing down of potential options Qualitative or quantitative assessment of different potential options and an indication of why the project is more likely Qualitative or quantitative assessment of one or more barriers facing proposed project An indication that the project type is not common practice in the proposed area of implementation How to Demonstrate

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEXAdditionality Economic Technology In Easier Terms Institutional Barriers

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX NovaGerar Landfill Project CH 4 Excess Flared Some Used to Generate Electricity

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX Project Design 4 MW 5 MW 7 MW 9 MW 11 MW 12 MW Difference Flared

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX Additionality in AM Continue BAU (no collection) 2. LFG collection and flaring 3. High efficiency flaring and power generation Baseline and project are the only plausible options Calculate a conservative IRR (excluding CERs) IRR < Conservative acceptable IRR Project IRR  4% Gov. Bond Rate = 22% Additional Not Additional Y N Not Required Additional

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX IRR Calculations -- Elements Capital Costs (-ve) –Electricity Generator (1 kW * 12 unit) –Flaring equipment –Gas plant –Assembling and testing –Connection to grid Operating Costs (-ve) –Gas plant and flaring equip. O&M –Maintenance and supervision –Administrative expenses (PCF and EB) –Land rent Others (-ve) –Income Tax Revenue (+ve) –Carbon credits –Electricity sales

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX IRR Calculations -- Elements

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX IRR Calculations – Cash Flow YearCapital CostsOperational CostsElec. SalesNet Cash Flow 0(799,811)(174,012)0(1,390,488) 10(174,012) (3,410,701)(524,556)670,568(3,322,880) 40(524,556)670,568146,012 5(794,093)(524,556)832,211(486,439) 60(524,556)832,211307,655 7(1,684,907)(524,556)1,155,495(1,053,968) 80(524,556)1,155,495630,939 9(1,787,518)(524,556)1,478,779(833,295) 100(524,556)1,478,779954,223 11(1,896,378)(524,556)1,802,063(618,870) 120(524,556)1,802,0631,277, (524,556)1,802,0631,277,507 14(1,036,112)(524,556)1,963,705403, (524,556)1,963,7051,439, (524,556)1,963,7051,439, (524,556)1,963,7051,439, (524,556)1,963,7051,439, (524,556)1,963,7051,439, (524,556)1,963,7051,439,149 IRR  4% < Benchmark IRR  Additional Flaring and collection Generators Incremental

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX Benchmark IRR Government bond rate plus suitable project risk premium Commercial lending rate Expert views on expected IRRs for this or comparable project types Other hurdle rates that can be applied for the country or sector

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX Application of Additionality Test Part 1: Has construction of the project already started Part 2: Is Execution of Project based on direct on indirect legal obligation? Project Economically less attractive N Y N Part 3a: Financial or Economic barrier (Benchmark Approach) Y Project is more attractive N Part 4: Are many projects, based on same type of technology recently implemented without CDM (50/20 test) Y Project Additional IRR  4% < acceptable IRR No landfill in Brazil employs this technology

Additionality and Project Cycle Tunis, August 27-29, 2004 TIMS/EEAA CD4CDM- Fourth Regional Workshop (Phase II) UNEP RISOE / APEX General Advice When Proving Additionality Transparent information should be provided Documented evidence has to be available Conservative interpretation of documented evidence as how it is used to demonstrate additionality Conservative assumptions to be used