T HE W ORLD B ANK C ARBON F INANCE U NIT Standardised Baselines Framework March 24-25, Bonn

T HE W ORLD B ANK C ARBON F INANCE U NIT Purpose: –Up-scaling CDM –Better access to countries, regions and project types –Broadening the scope of CDM to new sectors, incentive schemes –Improve efficiency of the CDM Core idea: –Move away from project-by-project paradigm –Country owned (submitted by DNA) –Defines Emission factor : sector or technology specific –Not financially attractive technologies with EF less than BAT technology in baselines (i.e. positive list) –Baseline Technology is that with lowest EF contributing X% to output. –Partial crediting (due to conservative threshold) General –Many features of new market mechanisms Summary of the Standardised Baseline (SB) Framework

T HE W ORLD B ANK C ARBON F INANCE U NIT Demand Side Consideration: – Concerns expressed about the voluntary use of standardized baselines within a sector (i.e. concerns about cherry picking). Different buyers may have different demands. – Flexibility to correct mistake should be considered. – Environmental integrity (EI) must be ensured: Supply Side Consideration – Costs for establishing standardized baselines are unclear but public funding is in place to support early movers (e.g UNFCCC, International Development Banks). – If supplier chooses voluntary implementation of SB instead of mandatory, the impact on the value of credits is unclear. – In setting thresholds values, the average rate of return (IRR) for a sector could be used as a proxy. (where level of performance correlates with costs of technologies). Perceived Risks & Market Perspectives for credits developed under SB framework

T HE W ORLD B ANK C ARBON F INANCE U NIT 4 Recommendation 1a: Development of standardized registration process for activities applying standardized baselines (SBs). CDM project (currently) PDD by PE Validation of PDD by DOE Registration EB Monitoring Verification by DOE Issuance CERs Fast track registration for SB projects Check list filled PE Registration EB Monitoring Verification by DOE (check list/monitoring) Issuance of CERs The issue: How to register projects/activities that are using the SB?. Need simple and cost effective approach. Fast track CDM projects 1.Only check list for specific technologies 2.Automatic registration if project complies with criteria in check list. 3.Verification by DOE of 1) key criteria and 2) monitored parameters. Proposal, to be developed along with the principles: -Environmental integrity/ Conservativeness -Safeguards for implementation defined in eligibility criteria (e.g. high efficiency LED)

T HE W ORLD B ANK C ARBON F INANCE U NIT 5 Recommendation 1b: Development of standardized registration process for micro scale PoAs applying standardized baselines (SBs). The issue: transaction costs still too high for many activities. Solution for micro scale PoA: 1.Only PoA PDD (i.e. not CPA-DD) to be prepared for registration. CPAs do not need to be validated at inclusion. 2.PoA PDD validated by DOE. Should contain check list of eligibility requirements and must comply with additionality requirements for micro scale CDM projects 3.Monitoring periodically undertaken for representative sample of stock of all included units. 4.Verification - DOE ensure units comply with eligibility criteria i.e. verification = quasi validation. Risk of liability much less than at point of registration. 5.Issuance of CERs with verification report once approved by EB.

T HE W ORLD B ANK C ARBON F INANCE U NIT – Currently monitoring is not addressed under the standardized baseline framework. Need to refer to monitoring rules under existing CDM methodologies. – CMP decision required to standardize monitoring. – Issues to be explored as move towards standardisation of monitoring: How far can monitoring be standardized across technologies/countries without jeopardizing environmental integrity? It is expected that it will be different for different types of technologies and even different in different country circumstances. How far can standardization of monitoring and verification requirements reduce costs? How conservative will standardization have to be? If it is overly conservative it could result in less projects being viable. Recommendation 2: Extension of standardization to monitoring & verification

T HE W ORLD B ANK C ARBON F INANCE U NIT – How to support policy driven mitigation activities? How can policy driven CDM projects be monitored? – 1) to determine how to translate policy measures into mitigation impact (in CO2eq) ; – 2) to ensure there is no cherry picking through opt outs of compliance with policies could apply ambitious crediting level (Under crediting ) – 3) How to incentivize private sector participation? – New business models will require the blending of different sources of financing How to facilitate blending? Need clarity on regulations to provide clarity on how to use different sources of finance e.g. public procurement, assisted borrowing or a grant subsidies. What options are there for blending given legal requirements of different countries? Recommendation 3. Expand baseline standardization framework to non-energy sectors

T HE W ORLD B ANK C ARBON F INANCE U NIT 3 Areas to improve standardised baselines framework 1 Fast-track registration for projects using SB framework including PoAs. Validation converges with verification based on the use of checklist. Checklist will operationalize the SB framework Secretariat could take the lead in preparing generic checklists. 2 Extension of standardization to monitoring & verification. Participants consider it important that the CMP makes a decision to initiate this extension. 3 Standardization could be used to test new sectors/types of activities (e.g., LULUCF, transport), joint usage of funding sources, and policy crediting under the CDM framework.

T HE W ORLD B ANK C ARBON F INANCE U NIT Felicity Spors: Thank you for your attention