Development Alternatives 1 CDM Criteria & Roadmap for CDM Project Development For Orientation Workshop on March 25 th – 26 th, 2004

Development Alternatives 2 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

Development Alternatives 3 MITIGATION POTENTIAL Greenhouse Gas Mitigation OptionsMitigationPotential (million tons) Long-term Marginal Cost ($/ton of carbon equivalent) Carbon Demand-side energy efficiency Supply-side energy efficiency Electricity transmission and distribution Renewable electricity technologies Fuel switching (gas for coal)85-20 Forestry Methane Enhanced cattle feed Anaerobic manure digesters Low methane rice varietiesmarginal5-20 Cultivation practicesmarginal0-20 Nitrous Oxide Improved fertilizer applicationmarginal0-20 Nitrification inhibitorsmarginal20-40 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)

Development Alternatives 4 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

Development Alternatives 5 PROJECT CONCEPTUALIZATION IDENTIFICATION AND ORGANIZATION TARGET 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 PROJECT CYCLE

CDM PROJECT CYCLE Project Idea Note (PIN) / Project Concept Note (PCN) Host / Investor approval PDD Validation Registration Monitoring Financing & Implementation VerificationCertification DNA; Investor PD/CCC OE EB PD OE EB Participation EIA Baseline & ER M&V Plan On-site Inspection Review Monitoring GHG Reductions Verification Report PD/CCC Implementin g Agencies Baseline & Additionality M&V Plan EIA St. Consul Contracts 6

Development Alternatives 7 CDM PROJECTS Some 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

Development Alternatives 8 CDM PROJECT CYCLE Project Idea Note (PIN) / Project Concept Note (PCN) Host / Investor approval DNA; Investor PD/CCC Implementin g Agencies

Development Alternatives 9 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

Development Alternatives 10 CDM PROJECT CYCLE Project Idea Note (PIN) / Project Concept Note (PCN) Host / Investor approval PDD DNA; Investor PD/CCC Implementin g Agencies Baseline & Additionality M&V Plan EIA St. Consul Contracts

Development Alternatives 11 PROJECT DESIGN DOCUMENT  Project Description  Promoter Details  Baseline  Additionality  Sustainable Development Criteria  Monitoring Plan  Financial Status

Development Alternatives 12 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 & ER M&V Plan PD/CCC Implementin g Agencies Baseline & Additionality M&V Plan EIA St. Consul Contracts

Development Alternatives 13 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

Development Alternatives 14 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 Participation EIA Baseline & ER M&V Plan PD/CCC Implementin g Agencies Baseline & Additionality M&V Plan EIA St. Consul Contracts

Development Alternatives 15 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

Development Alternatives 16 CDM PROJECT CYCLE Project Idea Note (PIN) / Project Concept Note (PCN) Host / Investor approval PDD Validation Registration Monitoring Financing & Implementation VerificationCertification DNA; Investor PD/CCC OE EB PD OE EB Participation EIA Baseline & ER M&V Plan On-site Inspection Review Monitoring GHG Reductions Verification Report PD/CCC Implementin g Agencies Baseline & Additionality M&V Plan EIA St. Consul Contracts

Development Alternatives 17 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

Development Alternatives 18 ISSUANCE OF CERTIFIED EMISSION REDUCTIONS  Certification Report constitutes request to EB for issuance of CERs equal to verified amount of reductions of GHGs

Development Alternatives 19 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 study12,000 – 15,000 Monitoring plan5,000 – 10,000 Environmental assessmentTime & uncertainty Stakeholder consultationTime & uncertainty ApprovalTime & uncertainty Validation10,000 – 20,000 Legal and contractual arrangements15,000 – 25,000 Operational phase Sale of CERs5% -15% of CER value. Adaptation levy2% of the CER value Risk mitigation1% - 3% of CER value Verification5,000 per audit

Development Alternatives 20 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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Development Alternatives 23 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

Development Alternatives 24 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

Development Alternatives 25 Monitoring 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.

Development Alternatives 26 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.

Development Alternatives 27 Monitoring 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

Development Alternatives 28 Monitoring  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.

Development Alternatives 29 Monitoring 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.

Development Alternatives 30 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 2

Development Alternatives 31 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 3

Development Alternatives 32 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) 4

Development Alternatives 33 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 5

Development Alternatives 34 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 6

Development Alternatives 35 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 7

Development Alternatives 36 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 8

Development Alternatives 37 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 9

Development Alternatives 38 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 10

Development Alternatives 39 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 11