LULUCF CDM small-scale projects -Small-scale energy projects -Current draft text in SBSTA/2003/L.13 -Simplified procedures for energy projects -Potential savings from simplified procedures -How large is small-scale? UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003 Jens Mackensen

Energy projects that are eligible for simplified modalities and procedures include: (i) Renewable energy projects activities with a maximum output capacity equivalent of up to 15 megawatts (or an appropriate equivalent); (ii) Energy efficiency improvement project activities which reduce energy consumption, on the supply and/or demand side, by up to the equivalent of 15 gigawatt/hours per year; (iii) Other projects activities that both reduce anthropogenic emissions by sources and directly emit less than 15 kilotonnes of carbon dioxide equivalent annually. UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003

Baseline establishment (Paragraph 24d, FCCC/SBSTA/2003/L.13) “[In the case of afforestation and reforestation project activities under the CDM that [remove at most 15 kilotonnes of CO 2 equivalent per year] [or] [are implemented in an area of less than [XX] hectares,] in accordance with simplified procedures developed for such activities;]” UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003

Monitoring (Paragraph 31d, FCCC/SBSTA/2003/L.13) “[In the case of afforestation and reforestation project activities under the CDM that [remove at most 15 kilotonnes of CO 2 equivalent per year] [or] [are implemented in an area of less than [XX] hectares, follows simplified monitoring procedures developed for such activities;]]”. UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003

Simplified modalities and procedures for energy small-scale projects include the following: Project activities may be bundled, but total size of bundle should not exceed limits stipulated in paragraph 6 (c ) of decision 17/CP.7; Requirements for Project Design Document are reduced; Baselines methodologies are simplified; Monitoring plans are simplified; Same operational entity may undertake validation, verification and certification; CDM Executive Board may propose lower share of proceeds to cover administrative costs and registration fees. UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003

Search costs (fixed) Negotiation costs (degressive) Baseline determination costs (fixed) Approval costs (fixed) Validation costs (fixed) Review costs Registration costs (fixed) Monitoring costs (fixed) Verification costs (degressive) Review costs Certification costs (degressive) Enforcement costs (proportional) Transfer costs Registration costs Adopted from Michaelowa & Stronzik, 2002 UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003

For small-scale projects (2-20 Kilotonnes CO 2 equivalent per year) transactions costs are estimated to reach up to 10 Euro per t CO 2 ). Michaelowa & Stronzik (2002) estimate that the minimum fixed costs for any CDM project amounts to 150,000 Euro, of which costs for baseline determination and monitoring represent approximately 30%. UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003

Method Locatelli & Pedroni, 2003 Median value (ha) % of profitable projects <500 ha % of profitable projects <1000 ha Ton- year 11,0000%2.8% ACS3,0005.1%17.7% TCER12, %30.2% TCER23,2509.7%23.1% UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003

Extreme condition Ton-yearACSTCER1TCER2 Crediting period only 10 years 275,00014,2003,00050,000 CER price of only 3$/tCO 2 30,0006,7504,5006,550 Highest transaction costs 18,5505,6503,7005,000 2% risk discounting per year 11,0005,1502,4003,250 CER price to increase 3% per year 11,0003,00014,55030,000 Without any condition 11,0003,0002,3003,250 (Locatelli and Pedroni, 2003) UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003

Thank you Jens Mackensen, PhD UN Environment Programme /32 83 UNEP-IUCN-FAO „CDM and Forestry“ Addis Oct 2003