1. CDM Projects: Renewable Energy and Energy Efficiency Projects Project cycles and Technical Issues

2. Contents CDM as one incentive option –Additional revenue from CDM –How CDM increase the financial feasibility of the project Baseline –Definition and principles –Where in CDM process? –Baseline scenario –Baseline methodology Additionality –Definition –Demonstration of Additionality Leakage Monitoring Methodology

3. CDM as an incentive

4. CDM Scheme in a project Transaction cost in addition to the underlying project financing Additional stream of income during the operation stage

5. Traditional Project cycle Vs CDM Feasibility Study/Design/Environment al Impact Assesment Construction stage Financing CDM Documentation (Due dilligence, PDD) Operation stage Verification CER Payment Transaction, negotiation Registration Legend:: Expenses : Income

6. Carbon Funds for CDM Purchase of Emission Credits from Projects that generate GHG emission reductions Most of CER buyers conduct the forward purchase contract through an ERPA Few buyers are open for equity participation and/or provision of debt using ERPA as the collateral Buyers: –Multilateral funds –Bilateral Funds –Brokers –Private entity

7. 8

8. How much does it cost? For a project with 33,000 t CER/year Assumption: 8 US$/CER

9. Expense and Fees related to Post-Registration Activities Verification expense by DOE: 10,000 US$ Share of proceeds –CERs issuance charges NIL for all project generating CERs < 15,000 every year 0.1 US$/ CER (for the first 15,000 CERs) 0.2 US$/CER (for CERs>15,000/year) –Adaptation fee @ 2 % of CERs issued

10. Baseline

11. Baseline Definition Marrakech accords, modalities and procedures for CDM, article 44: “……. the scenario that reasonably represents the anthropogenic emissions by sources of greenhouse gases that would occur in the absence of the proposed project activity ….”

12. Concept GHG emissions (Ton of CO2 eq) Time (Years) In the absence of the project (baseline) Project Real, long term and measurable emission reductions

13. Baseline Scenario Marrakech accords, modalities and procedures for CDM, article 48: a)Existing actual or historical emissions, as applicable; or b)Emissions from a technology that represents an economically attractive course of action, taking into account barriers to investment; or 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 Baseline scenario should take into account national and/or policies and circumstances

14. Where in CDM Process? Submission of Project Design Document (PDD) including application of Baseline and Monitoring methodology

15. Project Design Document CONTENTS A. General description of project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders’ comments Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring plan

16. Baseline methodologies Approved and consolidated baseline methodologies (EB) Proposed new methodology

17. Baseline methodologies 31 Approved methodologies 9 Consolidated methodologies Small scale methodologies http://cdm.unfccc.int/methodologies/PAmethodologies

18. Baseline methodologies: Renewable energy

19. Baseline methodologies: Energy efficiency/fuel switching

20. Application of approved methodologies Small scale renewable energy connected to the Grid: Application of AMS I.D for installed capacity < 15 MW –Biomass: Rice husk, palm kernel shell, bagasse –Mini Hydro projects –Wind, Solar power generation connected to the grid

21. Application of approved methodologies Small scale renewable energy: Electrical energy generation by the user, mechanical energy for the user, and thermal energy for the user –Utilization of Combined Solar, Wind and Biomass for a Small Agro-Processing Unit Solar cooker

22. Application of Approved Methodology Renewable energy or natural gas power plant connected to the grid, Large scale –Geothermal projects –Hydropower projects –Natural gas combined cycle

23. 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 registered CDM project activity”

24. Additionality –The definition is not sufficient to guarantee the environmental integrity of a CDM project –Tools to demonstrate additionality (EB) –COP/MOP Decision: call for input to simplify/improve current additionality tool –Provide evidences!

25. Tool to demonstrate additionality Identification of alternatives to the project activity; Investment analysis to determine that the proposed project activity is not the most economically or financially attractive; and/or Barriers analysis; Common practice analysis; and Impact of registration of the proposed project activity as a CDM project activity

26. Leakage Marrakech accords, modalities and procedures for CDM, article 51: “Leakage is defined as the net change of anthropogenic emissions by sources of greenhouse gases which occurs outside the project boundary, and which is measurable and attributable to the CDM project activity”

27. Monitoring Methodology Monitoring plan: –Monitor baseline emissions –Monitor project emissions –Monitor leakages –Estimation and calculation of emission reductions –Address the uncertainty (data) –Quality assurance/Quality control –Monitoring management –Designated system/human resources Be consistent with the algorithm/methodology used to estimate the Baseline and Project emissions

28. Monitoring Plan

29. Challenges: Lessons learned It takes time! Developing baseline scenarios Argumentation and evidences to demonstrate additionality Spend time in developing the methodology for leakage Use approved methodologies!

30. More information on the Carbon Finance, World Bank Jakarta Contact: Josef Leitmann jleitmann@worldbank.org Farida Zaituni fzaituni@worldbank.org