Bundling small scale projects Principles of bundling Bundling Documentation Examples and their applications in Carbon Finance projects Bundling (& “de-bundling”) Questions/discussion

What is a bundle? “A group of things fastened together for convenient handling.”

What is a CDM bundle? Bringing together of several small-scale CDM projects, Without the loss of distinctive characteristics of each activity. Can be arranged as one or more “sub-bundles” with each activity retaining its distinctive characteristics, technology/measure, location, application of simplified baseline methodology. Project activities within a sub-bundle are of the same type. Sum of output capacity of activities in a sub-bundle must not exceed the maximum output capacity of its type i: renewable energy ii: energy efficiency iii: other

General bundling principles Should be indicated when requesting registration. Once project activity is part of a bundle for a particular project cycle stage, it cannot be “de-bundled” for that stage. Bundle composition cannot change over time. Activities bundle cannot be taken out or added after registration.

General bundling principles Same crediting period for all activities. Should be demonstrated that bundle will remain under the limit for that type, every year during the crediting period. If bundle goes beyond its limits, maximum claimable ERs is capped at level for that type That is, excess ERs generated will not be eligible.

Principles - homogenous bundles Same baseline may be used under some conditions One DOE can validate. Common monitoring plan for the bundle, one monitoring report Conditions for sampling Same length and starting date of crediting period One verification report. One issuance – same time, for same period, 1 serial number for all projects (the bundle). Sum of all activities should be as per SSC limits. Must use SSC methodologies. Same type, same category, same technology/measure

Principles - heterogeneous bundles Same baseline may be used under some conditions One DOE can validate. Different monitoring plans, separate monitoring reports. Same crediting period for all activities. One verification report, one issuance, one serial number. Sum of all activities??? Must use SSC methodologies. (a) Same type, same category but different technology (b) Same type, different category, different technology (c) Different types

SSC bundles, SSC limits Type I: Maximum output capacity of 15 MW (or an appropriate equivalent); Type II: Maximum output of 60 GWh per year (or an appropriate equivalent); Type III: emission reductions of less than or equal to 60 kt CO2 equivalent annually.

Bundling Documentation Small-scale PDD CDM-SSC-PDD Version 03, in effect as of 22 December Form for submission of bundles At registration stage (sometimes DOEs request at validation) F-CDM-SSC-BUNDLE For additional reference, see CDM Glossary of Terms

Advantages and Limitations in Practice

Advantages Can save costs, depending on case. 1 DOE for validation and verification Sampling allowed in monitoring plan. 1 PDD collects all small project activities. Single entity can act on everyone’s behalf. Good way for small, rural, scattered projects to access carbon finance. Example: Nepal Micro Hydro Program: Installation of MH stations range 3 – 100kW Up to 15MW ~ 750 plants covered in 1 PDD Govt. of Nepal on behalf of all MH operators

Limitations Can also raise costs. What if # of project activities amount to greater than SSC limits? 1. Make large-scale bundle, with regular methodologies, if available 2. Parse into different PDDs - how many PDDs will this produce? Ex-ante identification of project activities Sites? Villages? Municipalities? Districts? Example: Nepal Biogas Program: Installation of 162,000 – 200,000 biogas plants. 1 PDD covers ~9000 average sized plants PDD writing + validation + verification yr1= $30K Plus $10K per year verification x # of years Not withstanding modality repetition per PDD!

Improve thermal performance of brick manufacturing through VSBK implementation Intention is to set up 127 VSBK plants, in 2-3 years; SSC threshold is 60 GWh per year; Bundles 14, 28, 21 VSBK plants which is GWh th per year (contracted for equivalent of 6 bundles, based on 45 GWh th ) Methodology “Energy efficiency and fuel switching measures for industrial facilities” AMS II.d Example: Vertical Shaft Brick Kiln India

PDD ready when enough VSBKs implemented Crediting period limitations, since all must have same length & start date Critical mass/ # of kilns needed to justify CDM costs. OK if: Kilns are identified. Reasonably short time span between first and last. Otherwise, first kiln loses the most ERs. VSBK India (contd.)

Each project activity = different company Focal point (bundling agency) with CFU? Legal agreements needed Between each VSBK and bundling agency (ER sharing, admin costs, technology fees etc). Sometimes between each entrepreneur and technical service agency (monitoring, community benefits plan implementation etc). (Bangladesh HHK in preparation) Capacity issues of bundling agency? Are they legally entitled to the ERs? (LoI, ERPA evidence) Do they have capacity to act “on behalf of”? VSBK India (contd.)

Bundling together regular CDM projects, Uses same bundling principles, No size limitations. Large Scale Bundles Example: Tunisia bundle of nice landfills 317,909 metric tones CO2 equivalent per annum Different landfill owners Validated and Registered

Company A Implementing agency World Bank Reporting/ community benefits etc 1 bundle Sub-project (legal) agreements ERPA Example – implementation arrangement with bundling agency + bundled project

No particular link to the concept of bundling Instead, checks the use of SSC methodologies. Fragmentation of large project into smaller bits Each CANNOT use SSC methodologies De-bundled occurs when: With 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-scale activity at the closest point. “De-bundling”

Questions to keep in mind Who is the bundling agency? Financier/technology provider/private company/1 of the companies/entrepreneurs/NGO/other? Are risks and benefits understood? Title and authorization to ERs, LoI signing? Are legal arrangements secure, adequate? Capacity as counterpart? Appraisal issues? …

Thank you!