Validation of Scenario Analysis and Control Group Baselines World Bank/PCF Workshop Delhi, Oct. 22, 2002 Trygve Roed-Larsen Det Norske Veritas (DNV)

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Introduction Key issues for scenario analysis Key issues for control group projects DNV experiences

Project design Validation Registration Project implementation/ monitoring/reporting The CDM project stages Verification Certification Project owners Independent party Registration Body Involved parties: Stakeholders Report made public, hearing Stakeholder

CDM project validation Validation Project DesignBaseline Study Monitoring Plan Stakeholder Views

CDM validation - work flow Tasks considered by the audit team for a validation exercise

Validation task set-up Phase 1: Risk-based approach to reviewing received material Verification of the assumptions and methodology Technical review of the documentation Assessment of how sensitivities and data uncertainties are addressed Assessment of the monitoring/verification protocol Review of GHG data management, control & reporting Review of the concept sustaining projects “additionality” Review of local stakeholders’ comments

Validation task set-up Phase 2: Tasks during site visit Confirm local & national monitoring capability Verify sustainable development indicators conform to local and national priorities Confirm project scenarios Assessment of the monitoring/verification protocol (to a more detailed level) Assessment of comments from public review process Preliminary conclusions of validation audit/ draft report and validation protocol for review

Validation task set-up Phase 3: Disclosure of any outstanding issues Finalisation of validation report in publishable format and issuance of final validation opinion. Forward request for registration.

Baseline validity - crediting period Two possibilities for crediting period. Project participants shall select one of the following: (49a): 7 years + max two renewals of 7 years each, using original or updated baseline (Operational entity determines and informs CDM Exec. Board) (49b): Maximum 10 years with no option of renewal

The “with project” and “without project” scenarios are useful for illustration of baselines Key issues: –Equality of services –Ascertain the same project boundaries –Supply and demand changes Scenario analysis

Key areas to assess: –Existing policies e.g. on renewable energy –Energy supply infrastructure development, e.g gas pipeline extensions –Technology present and not present in Host Country –Consequences of political aspirations, e.g. EU accession –The balance between supply and demand If supply < demand, the baseline may change! Scenario analysis

Chacabuquito Hydropower Project –Supply > demand: Marginal plant baseline approach selected and monitored (Coal-fired plants) –Demand > supply: Least cost option (gas-fired CHP) of capacity expansion falls in as default baseline. Scenario analysis example

Barrier analysis Barrier analysis are useful for validators in order to understand present and future scenarios –“Tangible” barriers, can be quantified: Financial/investment Technology Market penetration Legislation –“Intangible” barriers, only qualitative: Competitive disadvantage Capacity/management resources Institutional

Control group baselines Requires significant work from the Project Proponent’s side! Validator must ensure that: –Monitoring capacity in place, inclusive of data processing capacity –Control group data addresses the key issues (“must have!”, not “can have” data) –The data to be collected reflects the complete picture of necessary information –Action points are clearly described when thresholds are exceeded

Control group baselines & verification Control group baselines are likely to create more work during project verification. Not only emission records and project performance data, but also control group data need to be verified Likely to require specialized skills to a greater extent than a “normal” GHG verification, as control groups lie outside project boundaries

Baseline and Credit Year GHG emissions [t CO 2-eq ] BAU baseline emissions Emission baseline allowing for existing measures for abatement With project emissions Additional emission reductions Abatement project

Experiences Standardization may help on the way, but no project is identical to another! Need for specialized skills among validators despite standardization Projects using control groups are usually more labor demanding than others

GHG emission reduction projects DNV experiences With GHG emissions reduction projects Principles of ISO series for management systems Additional principles of: allocation, materiality and completeness Industry standards, including risk-based approach DNV’s basis for GHG auditing: Robust system ensuring transparency, efficiency and accountability and maintaining public trust