cdm project cycle training - s kolar

7/31/2019 CDM Project Cycle Training - S Kolar

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Session 1

CDM Project Cycle

PDD and Validation Reports ReviewIntroduction to PIN


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CDM Projects by Country


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CDM Projects by Type


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CDM Project Cycle

Design

Develop

idea

Prepare

PDD

Submit PDD to DOE

Validation/

Registration

Obtain DNA approval

Prepare

Validation

Report

Forward documents

to EB

Registration

Issuance ofCERs

Verification/

Certification

Prepare

Verification

and Certification

Reports and

submit to EB

Monitoring

Project Participant Designated Operational Entity CDM Executive Board

Submit monitoring

report to DOE

Implement

Project Reviews

Certification

Report and

Issues CERs

PDD using

approved

Methodology

PDD using

new

Methodology

Methodology to be

approved by EB

Complete PDD


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CDM Project Development

Requires significant personnel and

financial resources

The entire project cycle is long and has

uncertain outcome

Outside entities must be hired to perform

validation and verification

Transaction costs can be high


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Is CDM Too Complex and Risky?

Yes!

Source: Michaelowa 2001


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But

CDM still offers much to host countries

and investors

Potentially profitable partnerships to build

emission-reducing projects benefiting local

and global environment

at lower costs to all


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CDM Key Project Cycle Milestones

Project Design Document (PDD) Preparation - At this stage the project isdesigned as a CDM project. A PDD has the following componentsDevelopment of baseline and estimation of baseline emissions, estimationof project emissions, contribution to sustainable development (this is inaccordance with host country guidelines), Monitoring and VerificationProtocol (M&VP), Report on EIA, Report on Stakeholders participation andletter of endorsement from host country government

Validation- The methodologies, values and results mentioned in the PDDhave to be validated by an OE before the project can be registered with theCDM Executive Board.

Registration - A project validated by OE is registered as CDM project withthe CDM Executive Board

Implementation and Operation - Of the project

Verification and Certification - An OE based on the M&VP undertakesverification of the claimed emission reduction by owner of the CDM project.On verifing the claims, OE issues a note to CDM EB to issue certificate foremission reductions, which are termed as CERs. The project promoter cansell the CERs to the investor as per the agreement between the two entities.


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Content of the Project Design

Document (PDD)A. General description of project activity

B. Baseline methodology

C. Duration of the project activity

D. Monitoring methodology and plan

E. Calculation of GHG emission by sources

F. Environmental impacts

G. Stakeholder Comments

Annex 1. Contact information on project participants

Annex 2. Information regarding public funding

Annex 3. New baseline methodology

Annex 4. New monitoring methodology

Annex 5. Table of baseline data

Small-scale PDD contains the same sections (fewer annexes).

CER creditation can be 2*7 years or 1*10 years


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4 Examples of PDDs

Moldova biomass heating in rural area

Moldova energy efficiency in public

buildings

Honduras 4.7 MW La Gloria hydro power

plant

Armenia, Yerevan landfill gas capture andelectricity generation


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The Validation Process


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Validation Report Example

DET NORSKE VERITAS Validation Report for Moldova Biomass Heating

1 INTRODUCTION

1.1 Validation Objective

1.2 Scope

1.3 Description of Proposed CDM Project

2 METHODOLOGY

2.1 Review of Documents

2.2 Follow-up Interviews2.3 Resolution of Clarification and Corrective Action Requests

3 VALIDATION FINDINGS

3.1 Participation Requirements

3.2 Project Design

3.3 Baseline Determination

3.4 Additionality

3.5 Monitoring Plan

3.6 Calculation of GHG Emissions

3.7 Environmental Impacts

3.8 Comments by Local Stakeholders

4 COMMENTS BY PARTIES, STAKEHOLDERS AND NGOS

5 VALIDATION OPINION

REFERENCES

Appendix A Validation Protocol


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CDM Project Resources

All necessary documents, methodologies,

guidelines are on the CDM Executive

Board web site:

http://cdm.unfccc.int/EB

All basic rules for CDM are set in theMarrakesh Accords (Decision 15/CP7)
http://cdm.unfccc.int/EBhttp://cdm.unfccc.int/EB


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Idea Behind the PIN

PIN

Project Idea Note

Developing CDM project is labor and resource intensive

PIN serves as low-cost option to find out:

If home government will likely approve project as CDM

If project has a chance to get ultimate CDM status approval by EB

If there are investors who could finance project

development costs, including PDD.

Having your project assessed based on PIN may save investors money!


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Session 2

1. Baseline

2. Additionality

3. Approved Methodologies4. Own Baseline Development


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Contents

Baseline Definition and principles

Where in CDM process?

Baseline scenario

Baseline methodology Additionality

Definition

Demonstration of Additionality

Leakage Monitoring Methodology


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Definition

Marrakech accords, modalities and

procedures for CDM, article 44:

.the scenario that reasonably represents theanthropogenic emissions by sources of

greenhouse gases that would occur in the

absence of the proposed project activity.


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?

A baseline is a hypothetical scenario thatrepresents what would have happened inthe absence of the project (i.e. business

as usual).

A baseline methodology is used to

estimate baseline GHG emissions that willbe compared to project emissions todetermine overall emission reductions


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ConceptGHG emissions(Ton of CO2 eq)

Time(Years)

In the absenceof the project(baseline)

Project

Real, long term andmeasurable emissionreductions


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Application of a Baseline

Methodology CDM project proponents have two options:

Use an existing approved methodology

Simpler approach

Only if a relevant methodology exists

Develop a new methodology

Additional effort required

A new monitoring methodology and plan (SectionD) will also be required


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Baseline Scenario

Marrakech accords, modalities and proceduresfor CDM, article 48:

a) Existing actual or historical emissions, as applicable; or

b) Emissions from a technology that represents an economicallyattractive course of action, taking into account barriers toinvestment; or

c) The average emissions of similar project activities undertaken in

the previous five years, in similar social, economic,environmental and technological circumstances, and whoseperformance is among the top 20 per cent of their category

Baseline scenario should take into account national and/or policies andcircumstances


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Baseline methodologies

Approved and consolidated baseline

methodologies (EB)

Proposed new methodology


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Baseline methodologies

28 Approved methodologies 8 Consolidated methodologies

Industrial processes

HFC incineration, decomposition of N2O from adipic acid production plants, use ofrenewable CO2 in the production of inorganic compounds, Increased share of additivematerials in cement production

Waste management

Landfill gas capture and recovery, biomethanisation, forced methane extraction,organic waste composting

Renewable energy

Electricity generation from renewable resources exported to the grid, biomasscogeneration, grid connected electricity generation from biomass residues

Agriculture

Manure management systems, improved animal waste management

Energy efficiency (including fuel switching)

Flared gas recovery, switching from coal and petroleum fuels to natural gas, naturalgas cogeneration, steam efficiency improvements, steam optimization system, waterpumping efficiency improvements, leak reduction from natural gas pipeline

E l 1


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Example 1

Nubareshen Lanfill CDM Project

Yerevan, Armenia Ladfill near Zerevan for 1.2 million people

Baseline

Keep landfill as is today.

No legislation in Armenia to require changes

(additionality!)

CDM Project

Collect landfill gas (LFG)

Combust LFG in power generator

E l 1


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Example 1

Nubareshen Lanfill CDM Project

Yerevan, Armenia Emission Savings

Baseline actual CDM project emissions

BaselineA) LFG * % CH4 * 21 = CO2 equivalent

B) Armenian kWh average * CO2 = CO2 equivalent

Emissions

Actual project emissions

CER

Baseline - Emissions


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Example 2

Moldova Energy in Public BuildingsSmall-scale CDM

Baseline

Keep buildings as they are

No fuel switch in heating plants

CDM Project

32 buildings (schools & hospitals) to be

insulatred, doors and windows replaced

Fuel will be switched in heating plants fromcoal and oil to natural gas


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Example 2

Moldova Energy in Public Buildings

Emission Savings (Baseline-Project)

Fuel consumption over project period less fuel

consumption under CDM project (in CO2

equivalent)

Additionality

Would project happened in absence of CDM?

NPV without CDM is negative, with it ispositiveadditionality is proven


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Example 3

La Gloria Hydro Power Plant, HondurasSmall-scale CDM

Baseline

No power generation on site

Emissions are assumed to come from other

power sources in Honduras

CDM Project

4.7 MW run-of-river hydro plant

E l 3


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Example 3

La Gloria Hydro Power Plant, HondurasSmall-scale CDM

Emission Savings kWh from project * average CO2 intensity of

Honduran kWh

Project baseline is fixed for at least 7 years, but actual

conditions can change over time

Additionality Would project happen in absence of CDM?

More difficult to prove, depends on local conditions. If

power prices from project high, it may be difficult toprove additionality. Accepted standard to measureadditionality in such projects is NPV calculations.


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Complexities of Baselines

Baselines are complex & difficult to

determine

Inherently speculative it attempts to predict

what will not happen

Forecasting uncertainty

Business-cycle forecasting is extremelydifficult

Baseline level of emissions tend to be

overstated


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Additionality

Marrakech accords, modalities and

procedures for CDM, article 43:

A CDM project activity is additional if

anthropogenic emissions of greenhouse gases

by sources are reduced below those that would

have occurred in the absence of the registeredCDM project activity


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Additionality

The definition is not sufficient to guarantee theenvironmental integrity of a CDM project

Tools to demonstrate additionality (EB)

COP/MOP Decision: call for input to simplify/improvecurrent additionality tool

Provide evidence!


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Tool to demonstrate

additionality

Identification of alternatives to the project activity;

Investment analysis to determine that the

proposed project activity is not the mosteconomically or financially attractive;

and/or

Barriers analysis;

Common practice analysis; and

Impact of registration of the proposed project

activity as a CDM project activity


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Leakage

Marrakech accords, modalities and procedures

for CDM, article 51:

Leakage is defined as the net change ofanthropogenic emissions by sources of

greenhouse gases which occurs outside the

project boundary, and which is measurable and

attributable to the CDM project activity

L k l t t


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Leakage: example, cement sector

Raw MaterialPreparation

Pre-drying, RawGrinding, Mixing

Shipping

Bagging, Storage,Transportation

Pyro-Processing

Pre-heating,CalcinationClinkering

, Cooling

Add

itiveMaterial

P

reparation

Cru

shing,Drying

RAW MIX CLINKER CEMENT DISTRIBUTION

Fine Grinding

Finish Grinding,Blending

FuelPreparation

Crushing,

Grinding,Drying

RawMaterial

Supply

Qua

rrying,Mining,

Crushing

On-site electricity Purchasedelectricity

National grid

Electricity

consumption

for other

purposes

Processes or activities

affected by the project

Processes or activities

unaffected by the project

Cirebon electricity line

Tarjun electricity line

Project Boundary

CirebonTarjun

Citeureup

Citeureup

Main electricity line forcement manufacturing Source: Indocement PDD,

NM 0047-0048

-Increased GHG

emissions

associated with the

transportation of

renewable fuels

-Reduced

transportation GHG

emissions from

reduced coal use

-Reduction in GHG

emissions due to

the lower quantity

of renewable fuels

being dumped and

generating methane


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Leakage

In estimating leakage:

Clearly define the project boundary

In proposing new methodology: Requirement

to elaborate leakage in a detailed manner

Pay attention to indirect leakage

Increased fossil fuel consumption at x due to

utilisation of renewable energy at y


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Session3

Small-Scale CDM Projects


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Advantages of Small-Scale CDM

A simplified project design document

Simplified methodologies for baseline determination and monitoringplans

Bundling of project activities at various stages in the project activity

Simplified provisions for environmental impact analysis

Lower project registration fee

Shorter review period for the registration of SSC CDM projectactivities

The same DOE can validate as well as verify and certify emissionsreductions for a specific SSC CDM project activity


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Eligible small-scale CDM

project categories

The project participants can themselves propose new categories

incl. methodologies to the EB.

Project types Small-scale CDM project activity categories

TypeI I: A. Electricity generation by the user

Renewable B. Mechanical energy for the user

energy projects C. Thermal energy for the user


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Bundling Small-Scale

Projects Small-Scale CDM Projects can be "bundled" to encourage

companies to pursue these types of activities;

Bundled projects form a single CDM activity or portfolio without

the loss of distinctive characteristics of each individual project, allmust have same crediting period;

Characteristics include technology/measure, location, application

of simplified baseline methodology.

The sum of the output capacity of project activities within a bundle

shall not exceed the maximum output capacity limit for its type: up to 15 MW max. output for RE projects

up to 15 Gwh/yr for EE projects

reduction by source emitting less than 15 kt/yr of CO2 equivalent


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Debundling is not allowed

A small-scale project activity that is part of a larger project

activity is not eligible.

A small-scale project activity is debundled if there is aregistered small-scale CDM project activity:

With the same project participants

In the same project category and technology/measure

Registered within the previous 2 years; and\Whose project boundary is within 1 km of the project boundary of the

proposed small-scale activity at the closest point.


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Modalities and Procedures (M&P) for

the Small-Scale CDMA special M&P for Small-Scale CDM was adopted at COP8, and can be

found on the UNFCCC-CDM home page.

The M&P describe the general rules for the CDM project cycle, and the

Executive Board have developed more detailed rules in their first 12 meetings.

At their seventh meeting (EB7) the detailed rules for Small-Scale CDM were

finalised.

At COP9 the annex to the CDM M&P was finalised: Small scale LULUCF

project must be


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Additionality in the SSc M&P

Show that the project would not have occured

without CDM due to:

Investment barrier

Technological barriers Barrier due to prevailing practice

Other barriers: Institutional, information, managerial,

organizational capacity, financial, or capacity to

absorb new technologies


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Other Small-Scale CDM Issues

The crediting period can be 3*7 years or 1*10 years. For

afforestation and reforestation projects it is 3*20 years or 30 years,

with a mandatory verification and certification every 5 years.

Only if the technology is transferred from another activity is

leakage calculation required.


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Session 4

Developing the PIN form


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Role of the PIN

First general information about the project

The submission of PIN is voluntary

PIN aims to improve the quality of the official PDD and improvechances of project success

PIN contains information on

Project participants

Type and size of project

Financial details

Additionality

Emission baseline

Emission reduction calculations Crediting period

Sustainability impact of the project

Other information requested by the PIN


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Ideal Evaluation & Approval of CDM Projects

DNA receives PIN

Initial evaluation: PIN

(Reply : max 2 weeks)

Second evaluation : PDD

(Reply : max 4 weeks)

Project not accepted

Approval letter delivered by the

CDM DNA to the Project developer

Projectto

berevised

Pr

ojectto

berevised


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What does PIN look like?

There are dozens PIN forms today

Every CDM investor wants to first see initial

information about a project in the form of a

PIN form Host countries want to provide initial

assessment based on PIN forms

It saves time and money to investors and hostcountry governments


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Practice makes perfect!

PIN form development exercise