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CDM Criteria & Roadmap for CDM Project Development
For Orientation Workshop
on
March 25th – 26th, 2004
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MITIGATION OPTIONS IN THE ENERGY SECTOR IDENTIFIED ARE :
Improvements in energy efficiency through upgrading currently employed technologies
Introduction of advanced technologies that are more efficient
Use of renewable energy sources wherever feasible to bring down the carbon content of the grid, to provide sustainable energy, and as a decentralised energy source at remote areas
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MITIGATION POTENTIAL
Greenhouse Gas
Mitigation Options MitigationPotential 2002-2012 (million
tons)
Long-term Marginal Cost ($/ton of carbon
equivalent)
Carbon Demand-side energy efficiency 45 0-15
Supply-side energy efficiency 32 0-12
Electricity transmission and distribution
12 5-30
Renewable electricity technologies
23 3-15
Fuel switching (gas for coal) 8 5-20
Forestry 18 5-10
Methane Enhanced cattle feed 0.66 5-30
Anaerobic manure digesters 0.38 3-10
Low methane rice varieties marginal 5-20
Cultivation practices marginal 0-20
Nitrous Oxide Improved fertilizer application marginal 0-20
Nitrification inhibitors marginal 20-40
Source: Based on modeling exercises reported in Rana, A. and Shukla, P.R. (2001), Ghosh et al.
(2001); Garg A. Shukla, P.R. (2002), and ALGAS (1998)
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CDM PROJECT ELIGIBILITY
Such activities should be Approved by the Govts. of the participating Parties be host country driven May involve private / or public entity Environmental integrity is a must Economic efficiency for cost effectiveness Equity
Implementation of such projects should result in social, environmental, economic and technological well-being - the four pillars
of sustainable development
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PROJECT CONCEPTUALIZATION
IDENTIFICATION AND ORGANIZATIONTARGET BENEFICIARIES AND NETWORKING
PARTICIPATORY PROJECT DEVELOPMENT-identify stakeholder, position, interest
expected argument-choose appropriate technologies
PROJECT FUND SOURCING / FINANCING
PROJECT PLANNING-integrating sustainable development goals
of the region / site specific
PROJECT IMPLEMENTATION -an agreed time frame
-an agreed monitoring and verification arrangement;
the organization to monitor-establish emission baseline
PERIODIC MONITORING AND
EVALUATION-emission reduction
PR
OJE
CT
CY
CL
E
CDM PROJECT CYCLE
Project Idea Note (PIN) / Project Concept Note (PCN)
Host / Investor approval
PDD
Validation
Registration
Monitoring
Financing & Implementation
Verification Certification
DNA; Investor
PD/CCC
OE
EB
PD
PD
OE EB
Participation EIA
Baseline & ERM&V Plan
On-site Inspection Review MonitoringGHG Reductions Verification Report
PD/CCC
Implementing Agencies
Baseline & Additionality M&V Plan
EIA St. Consul Contracts
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CDM PROJECTSSome Important Aspects
Participation is voluntary, approved by each party involved
Additional to any that would occur in the absence of certified project activity
Project fulfills the criteria of financial additionality
Reduction of emissions should be real, measurable and should have long time benefits
Project should contribute to the sustainable development of the host country
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CDM PROJECT CYCLE
Project Idea Note (PIN) / Project Concept Note (PCN)
Host / Investor approvalDNA;
Investor
PD/CCC
Implementing Agencies
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PIN/PCN
Name of the project
Ownership details of project sponsors
Project Description
Status of Project Clearances
Financing details of the projects
Total CDM contribution sought
IRR and DSCR with & without CDM revenue
Estimate of GHG abetment
Sustainable development criteria
Project Risks
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CDM PROJECT CYCLE
Project Idea Note (PIN) / Project Concept Note (PCN)
Host / Investor approval
PDD
DNA; Investor
PD/CCC
PD/CCC
Implementing Agencies
Baseline & Additionality M&V Plan
EIA St. Consul Contracts
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PROJECT DESIGN DOCUMENT
Project Description
Promoter Details
Baseline
Additionality
Sustainable Development Criteria
Monitoring Plan
Financial Status
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CDM PROJECT CYCLE
Project Idea Note (PIN) / Project Concept Note (PCN)
Host / Investor approval
PDD
Validation
Registration
DNA; Investor
PD/CCC
OE
EB
Participation EIA
Baseline & ERM&V Plan
PD/CCC
Implementing Agencies
Baseline & Additionality M&V Plan
EIA St. Consul Contracts
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Validation of CDM Projects Validation is a process of independent evaluation
of a project activity by a designated Operational Entity (OE) against the requirements of the CDM on the basis of the PDD.
Registration Registration is the formal acceptance of a
validated project as a CDM project by the Executive Board. Registration is the prerequisite for verification,
certification and issuance of the CERs
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CDM PROJECT CYCLE
Project Idea Note (PIN) / Project Concept Note (PCN)
Host / Investor approval
PDD
Validation
Registration
Monitoring
Financing & Implementation
DNA; Investor
PD/CCC
OE
EB
PD
PD
Participation EIA
Baseline & ERM&V Plan
PD/CCC
Implementing Agencies
Baseline & Additionality M&V Plan
EIA St. Consul Contracts
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MONITORING
Project Participants, as part of the PDD provide a monitoring plan:
Based on previously approved methodology/new methodology
Determined by DoE as appropriate to circumstances of the project activity
Reflects good monitoring practice
A monitoring report in accordance with monitoring plan is to be submitted to the DoE for verification
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CDM PROJECT CYCLE
Project Idea Note (PIN) / Project Concept Note (PCN)
Host / Investor approval
PDD
Validation
Registration
Monitoring
Financing & Implementation
Verification Certification
DNA; Investor
PD/CCC
OE
EB
PD
PD
OE EB
Participation EIA
Baseline & ERM&V Plan
On-site Inspection Review MonitoringGHG Reductions Verification Report
PD/CCC
Implementing Agencies
Baseline & Additionality M&V Plan
EIA St. Consul Contracts
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Verification Verification is the periodic independent review
and determination by DoE of the monitored reductions by sources of greenhouse gases that have occurred as a result of the CDM project activity
Certification Certification is the written assurance by the DoE
that the project activity achieved the reductions in anthropogenic emissions by sources of GHGs as verified
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ISSUANCE OF CERTIFIED EMISSION REDUCTIONS
Certification Report constitutes request to EB for issuance of CERs equal to verified amount of reductions of GHGs
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MINIMUM TRANSACTION COST ASSOCIATED WITH CDM PROJECT CYCLE(from literature survey)
CDM project cycle stages where costs are incurred
Cost Estimates (Pound sterling)
Pre-operational phase design
Baseline study 12,000 – 15,000
Monitoring plan 5,000 – 10,000
Environmental assessment Time & uncertainty
Stakeholder consultation Time & uncertainty
Approval Time & uncertainty
Validation 10,000 – 20,000
Legal and contractual arrangements 15,000 – 25,000
Operational phase
Sale of CERs 5% -15% of CER value.
Adaptation levy 2% of the CER value
Risk mitigation 1% - 3% of CER value
Verification 5,000 per audit
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Bundling
Effective way to reduce transaction costs
Several projects bundled together to share transaction costs and CER benefits
Projects should have:
Similar technology
Be in the same geographical area
Preferably have the same project owner, but not necessary
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Validation, Verification and Certification of CDM Projects
Validation is the process of independent evaluation of a project activity by a DOE against requirements of CDM in Article 12 of the Kyoto Protocol and on the basis of the project design document
Verification is the periodic review and ex-post determination by a DOE of the monitored reductions in anthropogenic emissions by sources of greenhouse gases that have occurred as a result of a registered CDM project during the verification period
Certification is the written assurance by the DOE that during a specified time period, a project activity achieved the reductions in anthropogenic emissions
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Development Alternatives as a Designated Operational Entity
DESIGNATED OPERATIONAL
ENTITY
Validation & Registration
Verification & Certification
Validate Verify, Certify
SD Goal achievement
Participation Requirements
Analysis Environmental Impact
Reduction in GHG emissions through a baseline as determined by project participants
Periodic review and expert determination of the monitored reductions in GHGs
Conduct on-site inspection
Review monitoring results
Based on its verification results, certify CERS
Determine the GHG reductions Provide verification results to project participants, the Parties involved and the EB, and make publicly available
Validation of Monitoring Plan submitted by Project Participants
Finally the validation of the Project activity by the OE and sends validation report to EB for registration
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MonitoringMonitoring
Project participants are required to include as part of the Project Design Document (PDD) a monitoring plan that provides for :
a. Collection and archiving of all relevant data necessary for estimating or measuring anthropogenic emissions by sources of GHGs occuring within the project boundary during the crediting period.
b. Collection and archiving of all relevant data necessary for determining the baseline of anthropogenic emissions by sources of GHGs within the project boundary during the crediting period.
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c. Identification of all potential sources of, and the collection and archiving of data on, increased anthropogenic emissions by sources of GHGs outside the project boundary that are significant and reasonably attributable to the project activity during the crediting period.
d. Collection and archiving of information on the analysis of the environmental impact. If there impacts are considered significant by the project participants or the host Party environment impact assessment is to be undertaken in accordance with procedures by the host Party.
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MonitoringMonitoring
e. Quality assurance and control procedures for the monitoring process.
f. Procedures for the periodic calculation of the reductions of anthropogenic emissions by sources by the proposed CDM project activity and for leakage effects.
g. A paper documentation
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MonitoringMonitoring
A monitoring plan shall be based on a previously approved monitoring methodology
Determined by DOE as appropriate to the circumstances of the proposed activity and has been successfully applied elsewhere
Reflects good monitoring practice appropriate to the type of project activity
For small scale CDM project activities, simplified modalites may be followed.
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MonitoringMonitoring
Based on the monitoring and reporting of reductrions in anthropogenic
emissions, CERs resulting from a CDM project activity will be
calculated applying registered methodology by sustainable the actual
anthropogenic emissions
by sources from baseline emissions and
adjusting for leakage.
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Criteria that must be met by a CDM project for CERs
• Participation should be voluntary and approved by each Party involved
• Project should be certified by competent authority
• Emission reductions :
- real
- measurable
- provide long term benefits to the mitigation of Climate Change
• Emission reduction should be additional to any that would occur in the absence of the certified project activity
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Elements of a CDM Project proposal
1. Briefly describe proposed project
• objective of the project • technologies involved
- current status in India- current status in the world
• approach to be pursued (i.e, emission avoidance, reduction or sequestration
• target group
- existing industrial uses
• potential partners (including third party validators and verifiers if possible)
• project feasibility, technology transfer, specific performance or design standards for
transferred technologies
• typical application of the project in the country
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Elements (Contd..)
2. Discuss barriers to the project (i.e. why has the project not been undertaken previously),and how the project proposes to surmount these barriers (e.g., the CDM will provide additional financing not previously available)
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Elements (contd..)
3. Project implementation plans in phases
- work plan
- monitoring and evaluation plan- certification of ERs
4. Quantify the ghgs reduction to be achieved through the project
- develop a project reference case or baseline that accounts for what would have happened at the project site without the proposed project activities
- identify ghg sources and sinks at the site included in the emission baseline / reference and
- describe all measures to be` taken as part of the project to avoid, reduce or sequester ghg emissions
- quantify the emission reductions to be achieved through each such measure and for the project as a whole
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Elements (Contd..)
5. Workout project economic costs and benefits
- economic cost of the project
- economic benefit of the project
- cost benefit ratio
- customer benefits
- host partner benefits
- investing partner benefits
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Elements (Contd..)
6. Workout other benefits of the project :
- sustainable developments and other benefits to the host country
- social benefits
- economic benefits
- environmental benefits
- global
- local
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Elements (Contd..)
7. Estimate the cost per metric tonne of ghg avoided, reduced or sequestered
- provide other informations relevant to cost such as anticipated pay-back period on investment
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Elements (Contd..)
8. Identify any potential sources of leakage (i.e. activities not directly related to the project that could result in loss or reversal of accrued ghg benefits) and describe steps to be taken to reduce the risk of such potential leakage
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Elements (Contd..)
9. Provide a description of how the project could contribute to the advancement of scientific knowledge especially regarding options to mitigate climate change
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Elements (Contd..)
10. Highlight innovations / unique approaches incorporated in the proposal
11. Discuss the replicability and transferability potential of the project
12. Discuss other benefits
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