1. 1 Basics of CDM Development Technical Workshop on CDM Paramaribo, 18 June 2008 Adriaan Korthuis

2. 2 Project development PROJECT IDEACONSTRUCTIONFINANCINGFEASIBILITY STUDY MAKE PDD OPERATION REGISTERVALIDATEISSUE CERsVERIFY STAKEHOLDER COMMENTS TEST ADDITIONALITY USE OR MAKE METHODOLOGY NEGOTIATE ERPASELECT BUYER PREPARE PIN and TERM SHEET DELIVER CERs CDM / JI DEVELOPMENT PHYSICAL PROJECT DEVELOPMENT COMMERCIAL DEVELOPMENT STAKEHOLDER COMMENTS MONITOR LETTER OF APPROVAL GENERATE CERs SELECT BUYERSELL AND DELIVER

3. 3 Project Design Document (PDD)  The basic document in the CDM process, that describes the assumptions underlying the future CERs  Based on an approved methodology  Major components: –Technical project description –Additionality –Project boundary –Baseline emissions –Estimated project emissions –Leakage –Monitoring procedure –Stakeholder comments –Effects on the environment

4. 4 General principles of the PDD PDD Accuracy Complete- ness Conservative- ness ConsistencyRelevanceTransparency

5. 5  No statement without proof!  Provide proof for all assumptions and statements  Use publicly accessable data sources  Don’t quote sources that are not verifiable or that you don’t want to disclose  State all calculations  Provide clear documentation in spreadsheets Transparency

6. 6  Reduce uncertainty as much as possible  Use accurate quantitative data  When using qualitative information, be clear and precise Accuracy

7. 7  Quote all relevant sources of greenhouse gasses;  When some sources are left out deliberately, clarify and justify Complete- ness

8. 8  In assumptions, estimations, values and procedures: prefer the more conservative values over the more attractive  Refrain from overestimating  Choose the lower value, even if the higher one is the more attractive Conservative- ness

9. 9  Use comparable key indicators in the same way  Use tests and assumptions equally across the potential baseline scenarios  Use the same methods over time and across technologies Consistency

10. 10  Only use information that is relevant for your project  Don’t blur the PDD with nonsense Relevance

11. 11 Project Idea Note (PIN)  A summary of project characteristics used to communicate with potential buyers of carbon credits; –Also used in approval procedures of some countries  Touches upon the basic issues of the project: –Project design, technology used –Project sponsors and developers –Finance –Timing and status –CDM basics: volume CERs, additionality, methodology used –Sustainable development benefits  Model of the World Bank is generally accepted: –www.carbonfinance.org -> Operations handbook -> Project document templateswww.carbonfinance.org

12. 12 Other relevant documents  Validation report: confirmation of a Designated Operational Entity (DOE) that the project design complies with CDM requirements;  Letter of Approval (LoA): confirmation of a Designated National Authority (DNA) that –The Party has ratified the Kyoto Protocol. –The approval of voluntary participation in the proposed CDM project activity –In the case of Host Party(ies): statement that the proposed CDM project activity contributes to sustainable development of the host Party(ies).

13. 13 Additionality  “A CDM project activity is additional if anthropogenic emissions of greenhouse gasses are reduced below those that would have occurred in the absence of the registered CDM project activity”  In practice: –Demonstrate that CDM helps to overcome financial barriers or –Demonstrate that CDM helps to overcome technical, practical, insititutional or other barriers.

14. 14 Methodologies  Methodologies are standardised procedures how to measure and calculate emission reductions in a CDM project  Extensive elaborations on –Formulas –Definition of project boundaries –Monitoring requirements –Leakage  Compulsory to use  Project type specific  Approval by the Executive Board needed  Different sets for large scale and small scale projects

15. 15 Baseline and project scenario

16. 16 Project boundaries  The project boundary contains all GHG emissions under the control of the project participants that are significant and reasonably attributable to the CDM project activity.  Emission reduction = Baseline emissions - Project emissions – Leakage Landfill CH 4 CO 2 Flare Power Project boundary CO 2 Baseline Project

17. 17 Leakage  Emission changes outside the project boundary, due to the project, not under control of the project participants  Examples: –Transport –Changed fuel use –Increased energy consumption  Leakage must be addressed in the PDD, and monitored

18. 18 Validation & registration  Validation: check of the PDD by a Designated Operational Entity (DOE), validator –Document review –Site inspection –International stakeholder comments on PDD –Check monitoring and QA/QC procedures  Registration: acceptance by the EB of the project as being a CDM Project Activity –Solliciting Letters of Approval with host and Annex 1 country –Submission of PDD and validation report –Stakeholder comments on validation report –Review possibility

19. 19 Monitoring Operating the project  Measuring project performance and emission reduction  Monitoring project assumptions (e.g. temperature)  Monitoring report

20. 20 Verification & issuance  Verification: check of the monitoring report by a Designated Operational Entity (DOE), verifier –Document review –Site inspection –QA/QC check –Establishment of volume of emission reductions  Issuance: the CDM Executive Board issues CERs to registry accounts of project participants –Submission of monitoring and verification report –Stakeholder comments –Review possibility

21. 21 Small scale  Use of dedicated, simpler methodologies  Simpler additionality testing: barrier analysis only  Definition: –Type I: Renewable energy project activities with a maximum output capacity equivalent to up to 15 MW (or an appropriate equivalent); –Type II: Energy efficiency improvement project activities which reduce energy consumption, on the supply and/or demand side, limited to those with a maximum output of 60 GWh per year (or an appropriate equivalent); –Type III: Other project activities limited to those that result in emission reductions of less than or equal to 60 kt CO2 equivalent annually;  Bundling – debundling. Debundling is not permitted. –By the same project participants; –In the same project category and technology/measure; and –Registered within the previous 2 years; and –Whose project boundary is within 1 km of the project boundary of the proposed small-scaleactivity at the closest point.

22. 22 CDM website of UNFCCC  http://cdm.unfccc.int  Project activities section: browse PDDs of registered and non- registered projects  Methodology section: select the methodology for your project  Reference / documentation: seek guidance in completing the procedure

23. 23 Contact details  Adriaan Korthuis  Phone +31 10 217 5993  E-mail a.korthuis @ climatefocus.com  www.climatefocus.com

24. 24 CDM jargon CDM wordRegular English CDM project activityProject DOEValidator or verifier PartyCountry DNACountry’s CDM office Project participantOrganisation (company, country) that can decide on the distribution of CERs from a project Further reading: http://cdm.unfccc.int www.carbonfinance.org www.cd4cdm.org