Salvador Da Bahia Landfill Gas Project: Baseline Methodology 1 of the 1 st 2 methodologies recommended for approval by the Meth Panel, July 2003

A. General description of project activity A.1 Title of the project activity: Salvador da bahia Landfill Gas Project A.2 Description of the project activity: The project is located in the rural area, 20 km north- east of downtown Salvador. The total area reserved for waste disposal is 600,000m 2.

A.2 Description of the project activity : The landfill has a total capacity of 18,000,000 m 3 and receives approximately 850,000 tonnes/year of domestic waste. The Project involves installing equipment for methane destruction with capacity of 6,250 m 3 /hr in 2000 (expanding to 46,250 m 3 /hr in 2020). The equipment will consist of enclosed flaring with controlled burning condition.

A.3 Project Participants Project developers:VEGA Bahia Tratamento de Residuos S.A., (project sponsor) Project Participant: SUEZ Environment PDD Consultant: ICF Consulting

A.4 Technical description of the project activity: A.4.1. Location of the project activity: A Host Country Party: Brazil A Region/State/ect.: Estado da Bahia A City/town/etc.: Municipio de Salvador A.4.2 Category of project activity: Landfill gas emission reduction project

A.4.4. Brief explanation of how the anthropogenic emissions of anthropogenic GHGs by sources are to be reduced by the proposed CDM project activity... Anthropogenic emission of GHG at Salvador Landfill occurs when methane produced at the landfill is not destroyed; The proposed project activity pretends to better the landfill gas capture and destruction efficiency by increasing the total amount of gas to be destroyed over the amount determined by the landfill concession contract.

Why the emission reductions will not occur in the absence of the proposed activity? Landfill contract barriers to investment: The Salvador municipality established the maximum price to be paid for the landfill activity in 1999 at R$/ton (5.6 US$/ton). The winning price Vega has proposed was 15.86R$/ton (5.3 US$/ton). The price includes landfill design, licensing, construction, operation and aftercare for a period of 20 years.

Why the emission reductions will not occur in the absence of the proposed activity? (Cont.) There was no specific requirement on gas management. Any investment or operation to destroy more than the contractual amount is additional and will not have other form of remuneration other than the CERs. In baseline study the total cost was estimated to be 45 Millions of BRL for the period 2003 to 2019 shared between investment cost (flares and gas capture works) and operation cost (electricity for pumping gas, gas network maintenance, handiwork..).

Why the emission reductions will not occur in the absence of the proposed activity? (Cont.) National and sectoral policies Typical recovery of methane or biogas is minimal and there is no regulatory requirement governing its recovery. A conservative estimate of 20% recovery of methane gas for passive system has been considered as the best practice based on a waste management study.

Why the emission reductions will not occur in the absence of the proposed activity? (Cont.) National and sectoral policies There is no national framework governing landfill practice and only technical norms issued by the Brazilian Association of Technical Norms without any technical requirement on LFG management. A Study on basic sanitation for State of Bahia shows that in 2000, 60% of MSW was treated in inappropriate site or with simple control, and 39.4% in sanitary landfills.

Project Additionality Assessment Baseline: Concession agreement between VEGA and the Municipal Government of Salvador da Bahia –Capture and destruction rate of 19-24% of the methane that will be generated from the entire landfill CDM Project: Collection system and destruction capacity will be expanded and improved so that an estimated 75-80% of the methane will be destroyed

Project Additionality Assessment Procedure: Investment analysis –Baseline has a higher NPV Baseline has NPV > 0 –Concessionaire is paid fixed fee per ton of waste entering the landfill covering all construction and operating cost Without CERs, CDM Project has NPV < 0 –If there are no CER revenues, concessionaire will not receive additional revenue (from the present contract) to improve significantly landfill capture and destruction efficiency which will be costly

Project Additionality Assessment 0 NPV Present ContractCDM Project CERsCERsCERsCERs Baseline No CERs

B. Baseline methodology B.1 Title and reference of the methodology applied to the project activity: Contractual amount of landfill gas capture and flaring defined through public concession contract.

B.2 Justification of the choice of the methodology and why it is applicable to the project activity The selection of baseline is straightforward because of the existing contractual document between VEGA and the municipality governing the volume of methane gas to be captured; The legal document covers the contractual lifetime and therefore represents an actual crediting period; There is no regulatory requirement governing the recovery of methane or biogas in Brazil;

B.3 Description of how the methodology is applied in the context of the project activity: The calculation of baseline and project emissions is estimated from the volume of landfill methane destroyed as measured in the project minus the volume indicated in the original technical proposal submitted to the Municipal Government of Salvador; The emissions from existing electricity generation and the avoided emissions from displaced electricity generation have not been used to calculate CERs to ensure a straightforward and conservative baseline;

B.3 Description of how the methodology is applied in the context of the project activity (cont) : The emissions reductions from proposed landfill gas management project are calculated by: Project Life-time Emissions Reductions =  yr (Annual Emissions Reductions) =  yr [(EmLandfill baseline - EmLandfill Proj.) Where: EmLandfill baseline = baseline emissions from landfilled waste EmLandfill proj. = project emissions from landfilled waste Yr = project years

B.3 Description of how the methodology is applied in the context of the project activity (cont): Methane Emission Reduction (ER CH4 ) from project activity will be calculated as the difference between real capture and destruction of methane in project scenario and contractual amount. ER CH4 = CH 4 captured in project scenario - CH 4 captured in baseline scenario Contractual Amount was established based on call for tender technical requirement and economic consideration, i.e. maximum bearable cost that gas capture and destruction can represent within the total cost for Landfill.

B.3 Description of how the methodology is applied in the context of the project activity (cont.): The amount of gas in baseline will be calculated on an annual basis, proportionally to the real waste entrance, through the following equation: LFG captured in baseline scenario = LFG captured in concession contract x (WASTE really disposed /WASTE disposed in contract scenario ) Real amount of methane captured and flared will be directly and continuously monitored as indicated in monitoring methodology.

Discussion on the conservatism of the baseline methodology when applied to Salvador project. Previous studies including World Bank studies, and a recent Brazilian Environment Ministry study show that gas capture and flaring is not conducted in more than 90% of Brazilian landfills. The Salvador de Bahia Landfill as designed by VEGA in its technical proposal is probably the only municipal landfill in Brazil that respect European technical standard in relation to bottom lining system, complete drainage layer and water management. The project is The Best Practice on the matter.

B.5 Description of how the definition of the project boundary related to the baseline methodology is applied to the project activity: All of the generation of waste occurs locally, within the confines of the country. The Baseline Study has not found leakage since the project is a closed system. Two potential sources of emissions were identified and were assessed immaterial: - CO 2 emissions generated from CH 4 produced by plastic decomposition; - emissions resulting from electricity used to pump methane gas.

Recommendations of the Meth Panel on the baseline methodology: The methodology is applicable to landfill gas capture and flaring project activities where there exists a contractual agreement to capture a certain volume of methane from a landfill; Some of the required changes are: 1. The presentation of the methodology lacks clarity and conciseness. Consolidate Annex 3 and The contractual volume may vary with the quantity of waste disposal. Explicitly state the relationship.

Recommendations of Meth Panel on the baseline methodology cont…: 3. It is not clear if electricity generated is part of the baseline. In case methane used to generate electricity in the baseline is greater than the contracted amount, it is necessary to include this methane burnt as part of the baseline. The schematic equation should be : ER calculation = CH 4 captured less (CH 4 contracted amount or CH 4 baseline power generation which ever is greater) Compared to proposed: ER CH4 = CH 4 captured in project scenario - CH 4 captured in baseline scenario

Recommendations of Meth Panel on baseline methodology cont…: 4. The financial analysis referred to in the “Baseline Study” needs to be detailed and included in Annex 3 to strengthen the additionality statement. 5. Specify the COP-accepted value for the GWP of methane (21, IPCC 1995 Guidelines) and, where necessary, perform all calculations accordingly using the correct (21 instead of 23) GWP.

Evaluation of Meth Panel on the proposed new methodology 1. General approach: The project participant choose a mix of approaches of paragraphs 48 (b) and 48 (c) of the CDM M & P although the focus is on approach 48 (c) : “The average emissions of similar project activities undertaken in the previous five years, in similar social, economic, environmental and technological circumstances, and whose performance is among the top 20 per cent of their category”. The methodology is based on the level of emissions that this top 20% would create, which was very conservatively determined.

Evaluation of Meth Panel on the proposed new methodology Applicability of methodology across project types and regions. This methodology is applicable to landfill gas capture and flaring project activities where: There exists a contractual agreement to capture a certainvolume of biogas from a landfill; The concession obligation stipulate the amounts of landfill gas to be collected by the concessionaire; Given the possibility of generating electricity from captured landfill gas, there should be no electricity generation planned.