CDM Project Developers Workshop

Baselines – what, types of baselines, baseline scenarios, baseline emissions. Additionality – what, why, how Establishing a baseline – baseline approaches in the Marrakech Accords. Demonstrating additionality. Using the CDM additionality tool.

Session I: Baselines and Additionality

A project activity is a measure, operation or an action that aims at

reducing greenhouse gases (GHG) emissions. [CDM PDD Glossary of terms]

Single “project” can comprise more than one project activity. E.g. landfill gas projects, involving (i) capture & storage, and (ii) re-use. To calculate the reductions that each project activity is creating, each needs to be assessed separately as each will have a different baseline to quantify against.

CDM Project activity

Basic premise: Project level reductions are based onreducing emissions below a projected reference caseor “baseline”.

What is a baseline?

Baseline scenario: A hypothetical representation of whatwould have happened in the absence of the project.

Is the “most likely” scenario for what would have happened had the project not been implemented. Is based on certain assumptions and parameters of local (past, present and future) circumstances.

Baseline scenario = qualitative representation for what would have happened in the absence of the project.

Baseline emissions: Emissions associated with the baseline scenario. Quantitative.

What is a baseline?

Accounting for project reductions/offsets/credit

s

Emissions

Real emissions

Credits/ avoided emissions

Baseline emissions (“what would otherwise have happened in the absence of the project“)

Start of project Year 1 Year 2

Reduction over time

Emissions

Real emissions

Corporate Inventory

Corporate emissions, project emissions, project reductions

Source: WBCSD/WRI GHG Protocol Project Quantification Standard (draft).

For a CDM project, emissions reductions must be beyond - or in addition to – what would have happened in the absence of the project. This criterion is called additionality.

Intrinsically (and by definition) linked to the baseline. Project emissions must be lower than baseline emissions. Used as a criterion to determine whether emissions reductions are real, measurable and in addition to what would have happened. Is a criterion to ensure that reductions are not counted more than once.

What is additionality?

Importance is basic to any cap-and-trade system that for the use of emissions reductions from outside the cap. If reductions from projects are used to offset emissions elsewhere (i.e. reductions from GHG sources & sinks not covered by a cap, and are used to offset emissions under a capped system), then those reductions should not have happened anyway, or else there will be a net increase in atmospheric emissions by that amount. Additionality is thus integral to ensuring the integrity of the cap against which emissions reductions are used.

Why is additionality important?

Baseline approaches, methodology, calculation etc

Baseline approach (defined by the COP in the Marrakech Accords)Can specify calculation method sometimes.

Baseline methodology(general method used arrive at/determine the baseline scenario)

Baseline scenario(Qualitative)

Baseline emissions(Quantitative)

One of the three approaches to be chosen to establish a baseline for the project activity.

48(a) of the Marrakech Accords“Existing, actual or historical emissions.”

48 (b)“Emissions from technology that represents an economically attractive course of action, taking into account barriers to investment.”

48 (c)“Average of similar plants, previous 5 years, in similar economic, environmental and technological circumstances and whose performance is among the top 20% of their category.”

How to establish a baseline: using a methodology

- Standard example: retrofit projects (replacing certain parts of equipment etc.)- Based on premise that retrofitting is taking place before the end of life of the equipment.- Calculation based on historic or current emissions.

Key challenges- What constitutes a “retrofit”? - What is “end of life”? (Is it economic end? Or the specified end date? etc.)- Is retrofitting commonplace? How is the intervention different from others in the sector/area?

48(a) of the Marrakech Accords

- Example: any new project. Use for projects where there are alternatives.- Based on premise that project would not have happened because of certain barriers (financial and non-financial) that would have inhibited implementation, but now project is able to overcome these barriers.- Calculation method not specified.

Key challenges- What would constitute barriers enough to inhibit implementation? Demonstrating the effect of barriers;- Financial and non-financial barriers; - Confidentiality concerns

48(b) of the Marrakech Accords

- Example: any project- Baseline developed by aggregating data from multiple projects of the same type, in the same sector, geographic area and under certain time scale. No investment data needed. - Consequently, baseline can be applied to multiple projects.- Calculation based on emissions of control group.

Key challenges:- Data availability and reliability (e.g. how many such projects, over what geographic area);- Confidentiality – using competitors’ data.

48(c) of the Marrakech Accords

By definition, additionality entails having to establish a credible baseline. Is thus, a concept embedded in the baseline methodology.

Demonstrating additionality includes a number of analyses, assumptions and premises, and is dependent/based on the project’s circumstances.

Basic question behind additionality demonstration: why and howis the CDM project different from what would have happenedanyway, or under “business as usual circumstances”?

Establishing a baseline scenario and demonstrating additionality

Is basically a part of determining the baseline. Analyzing scenarios – “with project” and “without project”

scenarios. What else c/would have happened had the project not been implemented? Need to make thorough analysis, so list the possible scenarios, including status quo.

Why is your project different? Why was it not implemented “anyway”? Effect of barriers that would have prevented implementation - Investment analysis and/or barriers analysis.

Is there sufficient data to support claims? (Is it available, reliable and credible? Confidentiality concerns).

Is the project activity/type of technology or practice commonplace, or part of customary practice?

Demonstrating additionality: key issues to think about

Need to identify the baseline; applying/using additionality tools on these scenarios to identify the baseline and ensure that project activity itself is not part of the baseline scenario.

Did the project face barriers to investment? (financial and non-financial). If so, how were the barriers overcome?

Is the project surplus to existing legislation? i.e. is this project being implemented simply to come into compliance with the law or is it beyond compliance? Are the alternatives legal practices?

Neither overestimate nor underestimate – err on the side ofconservativeness especially when dealing with uncertainty.

Demonstrating additionality: key issues to think about

CDM additionality tool

CDM EB has consolidated an additionality tool based on methodologies submitted to date. Due to the bottom-up system adopted by the CDM, this is based primarily 48 (b) of the Marrakech Accords. Is optional – project participants can submit other types of tools for the demonstration of additionality. Applicable to any type of projects; can be used for small-scale projects as well, though not required for small-scale.

Information used for demonstrating additionality must be made public.