1 Basics of CDM Development Technical Workshop on CDM Paramaribo, 18 June 2008 Adriaan Korthuis

2 Project development PROJECT IDEACONSTRUCTIONFINANCINGFEASIBILITY STUDY MAKE PDD OPERATION REGISTERVALIDATEISSUE CERsVERIFY STAKEHOLDER COMMENTS TEST ADDITIONALITY USE OR MAKE METHODOLOGY NEGOTIATE ERPASELECT BUYER PREPARE PIN and TERM SHEET DELIVER CERs CDM / JI DEVELOPMENT PHYSICAL PROJECT DEVELOPMENT COMMERCIAL DEVELOPMENT STAKEHOLDER COMMENTS MONITOR LETTER OF APPROVAL GENERATE CERs SELECT BUYERSELL AND DELIVER

3 Project Design Document (PDD)  The basic document in the CDM process, that describes the assumptions underlying the future CERs  Based on an approved methodology  Major components: –Technical project description –Additionality –Project boundary –Baseline emissions –Estimated project emissions –Leakage –Monitoring procedure –Stakeholder comments –Effects on the environment

4 General principles of the PDD PDD Accuracy Complete- ness Conservative- ness ConsistencyRelevanceTransparency

5  No statement without proof!  Provide proof for all assumptions and statements  Use publicly accessable data sources  Don’t quote sources that are not verifiable or that you don’t want to disclose  State all calculations  Provide clear documentation in spreadsheets Transparency

6  Reduce uncertainty as much as possible  Use accurate quantitative data  When using qualitative information, be clear and precise Accuracy

7  Quote all relevant sources of greenhouse gasses;  When some sources are left out deliberately, clarify and justify Complete- ness

8  In assumptions, estimations, values and procedures: prefer the more conservative values over the more attractive  Refrain from overestimating  Choose the lower value, even if the higher one is the more attractive Conservative- ness

9  Use comparable key indicators in the same way  Use tests and assumptions equally across the potential baseline scenarios  Use the same methods over time and across technologies Consistency

10  Only use information that is relevant for your project  Don’t blur the PDD with nonsense Relevance

11 Project Idea Note (PIN)  A summary of project characteristics used to communicate with potential buyers of carbon credits; –Also used in approval procedures of some countries  Touches upon the basic issues of the project: –Project design, technology used –Project sponsors and developers –Finance –Timing and status –CDM basics: volume CERs, additionality, methodology used –Sustainable development benefits  Model of the World Bank is generally accepted: – -> Operations handbook -> Project document templateswww.carbonfinance.org

12 Other relevant documents  Validation report: confirmation of a Designated Operational Entity (DOE) that the project design complies with CDM requirements;  Letter of Approval (LoA): confirmation of a Designated National Authority (DNA) that –The Party has ratified the Kyoto Protocol. –The approval of voluntary participation in the proposed CDM project activity –In the case of Host Party(ies): statement that the proposed CDM project activity contributes to sustainable development of the host Party(ies).

13 Additionality  “A CDM project activity is additional if anthropogenic emissions of greenhouse gasses are reduced below those that would have occurred in the absence of the registered CDM project activity”  In practice: –Demonstrate that CDM helps to overcome financial barriers or –Demonstrate that CDM helps to overcome technical, practical, insititutional or other barriers.

14 Methodologies  Methodologies are standardised procedures how to measure and calculate emission reductions in a CDM project  Extensive elaborations on –Formulas –Definition of project boundaries –Monitoring requirements –Leakage  Compulsory to use  Project type specific  Approval by the Executive Board needed  Different sets for large scale and small scale projects

15 Baseline and project scenario

16 Project boundaries  The project boundary contains all GHG emissions under the control of the project participants that are significant and reasonably attributable to the CDM project activity.  Emission reduction = Baseline emissions - Project emissions – Leakage Landfill CH 4 CO 2 Flare Power Project boundary CO 2 Baseline Project

17 Leakage  Emission changes outside the project boundary, due to the project, not under control of the project participants  Examples: –Transport –Changed fuel use –Increased energy consumption  Leakage must be addressed in the PDD, and monitored

18 Validation & registration  Validation: check of the PDD by a Designated Operational Entity (DOE), validator –Document review –Site inspection –International stakeholder comments on PDD –Check monitoring and QA/QC procedures  Registration: acceptance by the EB of the project as being a CDM Project Activity –Solliciting Letters of Approval with host and Annex 1 country –Submission of PDD and validation report –Stakeholder comments on validation report –Review possibility

19 Monitoring Operating the project  Measuring project performance and emission reduction  Monitoring project assumptions (e.g. temperature)  Monitoring report

20 Verification & issuance  Verification: check of the monitoring report by a Designated Operational Entity (DOE), verifier –Document review –Site inspection –QA/QC check –Establishment of volume of emission reductions  Issuance: the CDM Executive Board issues CERs to registry accounts of project participants –Submission of monitoring and verification report –Stakeholder comments –Review possibility

21 Small scale  Use of dedicated, simpler methodologies  Simpler additionality testing: barrier analysis only  Definition: –Type I: Renewable energy project activities with a maximum output capacity equivalent to up to 15 MW (or an appropriate equivalent); –Type II: Energy efficiency improvement project activities which reduce energy consumption, on the supply and/or demand side, limited to those with a maximum output of 60 GWh per year (or an appropriate equivalent); –Type III: Other project activities limited to those that result in emission reductions of less than or equal to 60 kt CO2 equivalent annually;  Bundling – debundling. Debundling is not permitted. –By the same project participants; –In the same project category and technology/measure; and –Registered within the previous 2 years; and –Whose project boundary is within 1 km of the project boundary of the proposed small-scaleactivity at the closest point.

22 CDM website of UNFCCC   Project activities section: browse PDDs of registered and non- registered projects  Methodology section: select the methodology for your project  Reference / documentation: seek guidance in completing the procedure

23 Contact details  Adriaan Korthuis  Phone  climatefocus.com 

24 CDM jargon CDM wordRegular English CDM project activityProject DOEValidator or verifier PartyCountry DNACountry’s CDM office Project participantOrganisation (company, country) that can decide on the distribution of CERs from a project Further reading: