Evaluation of CDM project proposals by CDM Executive Board

Evaluation of CDM project proposals Evaluation of CDM project proposals by CDM Executive Boardby CDM Executive Board

Main issues based on examplesMain issues based on examplesBy Steve Thorne By Steve Thorne SouthSouthSouthSouthNorthNorth

Addis Ababa 20Addis Ababa 20thth October 2003 October 2003

Contents of presentationContents of presentation Some EB responsibilities;Some EB responsibilities; Status of EB: DNAs, DOEs; Status of EB: DNAs, DOEs; Project activity reviews: from where, what type, Project activity reviews: from where, what type,

status of methodologies: baseline and M&V status of methodologies: baseline and M&V plans;plans;

Rejected and approved projects with examples;Rejected and approved projects with examples; Communication with PPs;Communication with PPs; Evaluation of PDD;Evaluation of PDD; Conclusions and recommendations (specific to Conclusions and recommendations (specific to

Africa).Africa).

EB responsibilities EB responsibilities (from (from Decision 17/CP.7Decision 17/CP.7 Modalities and procedures for a clean development mechanism)Modalities and procedures for a clean development mechanism) (d) Approve new methodologies related to, inter alia, (d) Approve new methodologies related to, inter alia,

baselines, monitoring plans and project boundaries …baselines, monitoring plans and project boundaries …(h) Report to the COP/MOP on the regional and (h) Report to the COP/MOP on the regional and

subregional distribution of CDM project activities with a subregional distribution of CDM project activities with a view to identifying systematic or systemic barriers to their view to identifying systematic or systemic barriers to their equitable distribution;…equitable distribution;…

(i) Make publicly available relevant information, submitted (i) Make publicly available relevant information, submitted to it for this purpose, on proposed CDM project activities to it for this purpose, on proposed CDM project activities in need of funding and on investors seeking in need of funding and on investors seeking opportunities, in order to assist in arranging funding of opportunities, in order to assist in arranging funding of CDM project activities, as necessary; …CDM project activities, as necessary; …

Status of EBStatus of EB

No Kyoto – no COP/MOP mandated by the No Kyoto – no COP/MOP mandated by the COP currentlyCOP currently

Limited functionsLimited functionsNo DOEs - only Applicant EntitiesNo DOEs - only Applicant EntitiesNo projects under review only methodologiesNo projects under review only methodologiesHas established panels: accreditation of Has established panels: accreditation of

operational entities, small-scale, operational entities, small-scale, methodologymethodology

DNAs – contact details sent to DNAs – contact details sent to Secretariat Secretariat

Antigua and Babados, Argentina, Bhutan, Antigua and Babados, Argentina, Bhutan, Bolivia, Brazil, Columbia, Costa Rica, Bolivia, Brazil, Columbia, Costa Rica, Cuba, El Salvador, Germany, Georgia, Cuba, El Salvador, Germany, Georgia, Malaysia, Morocco, The Netherlands, Malaysia, Morocco, The Netherlands, Nicaragua, Panama, Peru, Trinidad and Nicaragua, Panama, Peru, Trinidad and Tobago, and Uruguay (19). Tobago, and Uruguay (19).

Applicant EntitiesApplicant Entities1. Asahi and Co.

2. BVQI Holdings Ltd.

3. Det Norske Veritas Certification Ltd. (DNV Certification Ltd)

4. ChuoAoyama PwC Research Institute Corporation (Formally, Chuo Sustainability Research Institute Co. Ltd. (CSRI))

5. Japan Audit and Certification Organisation for Environment and Quality

6. Japan Consulting Institute (JCI)

7. Japan Quality Assurance Organisation (JQA)

8. KPMG Certification B.V.

9. PricewaterhouseCoopers Certification B.V.

10. SGS UK Ltd. (SGS = Société Générale de Surveillance)

11. The Korea Energy Management Corporation (Kemco)

12. Tohmatsu Evaluation and Certification Organization (TECO)

13. TÜV Anlagentechnik GmbH

14. TÜV Süddeutschland Bau und Betrieb GmbH (TÜV Süddeutschland)

15. URS Corporation Limited

Source of projects submitted Source of projects submitted

India , 6

Brazil, 8

Columbia, 1

Costa Rica, 2Mexico, 1

Chile, 2

South Africa, 1

Korea, 1

Thailand, 4

Guatamala, 1

Jamaica, 1

Trinidad and Tobago, 1

Argentina, 2

Vietnam, 1

China, 1

Project typesProject types

Biomass to energy, 6

Biogas , 1

Bagasse cogen , 1

Gogen, 2

Dung management, 1

Fuel switch, 3

HFC, 1Hydro , 4

Landfill, 4

Methanol, 1

Oil field gas recovery, 1

Refinery efficiency, 1

Solid waste treatment, 1

Sugar, 3

Waste heat recovery, 1

Wind, 2

Who submitted projectsWho submitted projects

Agcert CanadaAgrosuperBalrampul Chini Mills Limited

Cerupt

EcoEnergy

Ecosecurities

Ferrostaal(AG) and Methanol Holdings

HOLCM,Costa Rica

INEOS Flour Japan,Foosung Tech

INSTITUTO COSTARRICENSE

MGM InternatrionalMitsubishi Securities

OSIL

PCF

Quality Tonnes

Raghu Rama Renewable Energy LTD

Residuos S.A., Municipio de Salvador, Estado da Bahia, Brazil

SCM Sugars Limited

VEGA Bahia Tratamento de

Vietnam Oils and Gas Company

Status of projectsStatus of projects

A, 2

B, 5

C, 8

Under review, 19

Detailed description of a rejected Detailed description of a rejected project methodologyproject methodology

Methodologies that have been rejected are Methodologies that have been rejected are those where the methodology is not those where the methodology is not transparent and conservative;transparent and conservative;

Projects have been referred to PPs for Projects have been referred to PPs for modification and/or later resubmission;modification and/or later resubmission;

Describe project: 3 rice husk power gen, Describe project: 3 rice husk power gen, bagasse biomass cogen, 2 hydro, 1 bagasse biomass cogen, 2 hydro, 1 methanol, 1 fuelswitch rejected so far. methanol, 1 fuelswitch rejected so far.

Example of NM0011 Bagasse/biomass Example of NM0011 Bagasse/biomass

based cogeneration power projectbased cogeneration power project 1. “No methodology regarding whether the 1. “No methodology regarding whether the

project activity is not the baseline scenarioproject activity is not the baseline scenarioThe simple statement that the technology is less The simple statement that the technology is less

carbon intensive and more costly does not carbon intensive and more costly does not demonstrate additionality, since it is also stated demonstrate additionality, since it is also stated that the technology is more efficient and will that the technology is more efficient and will generate additional revenues when compared to generate additional revenues when compared to the baseline, and no methodology is proposed to the baseline, and no methodology is proposed to demonstrate that these additional revenues are demonstrate that these additional revenues are not sufficient to ensure the attractiveness of the not sufficient to ensure the attractiveness of the investment.” investment.”

Rejected example of NM0011 Bagasse/biomass Rejected example of NM0011 Bagasse/biomass based cogeneration power project (cont.)based cogeneration power project (cont.)

2. “Ex-post calculation: 2. “Ex-post calculation: In the context of supply constrained systems and In the context of supply constrained systems and

technological change trend on the supply side, technological change trend on the supply side, the methodology should provide additional the methodology should provide additional elements to explain why ex-post average elements to explain why ex-post average emissions generated by all emissions generated by all other other power plants power plants operating operating at the same timeat the same time than (as) the project than (as) the project activity can be considered as a possible estimate activity can be considered as a possible estimate of what would have occurred in the absence of of what would have occurred in the absence of the project activity (baseline emissions)the project activity (baseline emissions)11.”.”

““1. For instance the project activity (for e.g. industrial cogeneration may delay the construction of a 1. For instance the project activity (for e.g. industrial cogeneration may delay the construction of a zero emission hydro plant (which would be the baseline) and get CERs on the basis of the on (of) zero emission hydro plant (which would be the baseline) and get CERs on the basis of the on (of)

the proposed methodology if the rest of the system is partially fossil based.”the proposed methodology if the rest of the system is partially fossil based.”

Approved project NM0004 rev. Salvador da Approved project NM0004 rev. Salvador da Bahia landfill gas projectBahia landfill gas project

Project to capture and flare landfill gas.Project to capture and flare landfill gas.Methodology: “Contractual amount of Methodology: “Contractual amount of

landfill gas capture and flaring defined landfill gas capture and flaring defined through public concession.”through public concession.”

Applicable conditions:Applicable conditions:Contract to capture certain volume of LFGContract to capture certain volume of LFGConcession stipulates amount of LFG to be Concession stipulates amount of LFG to be

capturedcapturedNo electricity should be generated. No electricity should be generated.

Approved project NM0004 rev. Salvador da Approved project NM0004 rev. Salvador da Bahia landfill gas project (cont.)Bahia landfill gas project (cont.)

Minor changesMinor changesRemoval of repetitionRemoval of repetitionEstimation/measured of contracted amount of Estimation/measured of contracted amount of

methane (not theoretical amount). Assumed methane (not theoretical amount). Assumed methane 50% measured amount 57% i.e. methane 50% measured amount 57% i.e. incorrect calculations in PDD. incorrect calculations in PDD.

Approved project NM0004 rev. Salvador da Approved project NM0004 rev. Salvador da Bahia landfill gas project (cont.)Bahia landfill gas project (cont.)

Monitoring Methodology applicable to baseline Monitoring Methodology applicable to baseline methodology conditions, and:methodology conditions, and:Gas flow and analysis equipment appropriate to Gas flow and analysis equipment appropriate to

climate and contaminants;climate and contaminants;Periodic equipment calibration.Periodic equipment calibration.

Minor changes: Minor changes: ““The baseline of the contractual amount should The baseline of the contractual amount should

assume the percentage of methane in the LFG to assume the percentage of methane in the LFG to be equal to the estimated/measured amount, in be equal to the estimated/measured amount, in the interest of conservative estimates for the the interest of conservative estimates for the baseline.”baseline.”

Discuss factors contributing to Discuss factors contributing to approvalapproval

Clear description of how an existing Clear description of how an existing methodology is applied/new method can be methodology is applied/new method can be generically applied;generically applied;

Conservatism in baseline definition;Conservatism in baseline definition; Stringency in application of the methodology Stringency in application of the methodology

inclusion of leakage;inclusion of leakage; Transparency in application of methodology;Transparency in application of methodology; Incorporation of national regulations/ targets;Incorporation of national regulations/ targets; Clear links between baseline, activity emissions Clear links between baseline, activity emissions

and monitoring plans;and monitoring plans; Conservative definition of additionality.Conservative definition of additionality.

Process of notifying the project participants Process of notifying the project participants and participants responseand participants response

The EB notifies project participants of decisions via the The EB notifies project participants of decisions via the website; http://cdm.unfccc.int/EB/Meetings/# website; http://cdm.unfccc.int/EB/Meetings/#

The EB achieves dialogue with PPs via the methodology The EB achieves dialogue with PPs via the methodology panel and the secretariat;panel and the secretariat;

The Meth Panel may propose revisions to approved The Meth Panel may propose revisions to approved methodologies in order to consolidate them in a more methodologies in order to consolidate them in a more general methodology - NM0005 and NM0021 may already general methodology - NM0005 and NM0021 may already require consolidation once approved;require consolidation once approved;

Project participants if asked to modify PP’s methodologies Project participants if asked to modify PP’s methodologies can do so and resubmit them via the secretariat;can do so and resubmit them via the secretariat;

Much of the communication will be via the DOEs who Much of the communication will be via the DOEs who communicate between the secretariat, the Host Party DNA, communicate between the secretariat, the Host Party DNA, and the PP.and the PP.

Clearly discuss evaluation process Clearly discuss evaluation process of PDDof PDD

PDD can be pre-validatedPDD can be pre-validatedValidation process initiated by DOEValidation process initiated by DOEApproval by DNAApproval by DNANew methodology assessed by EBNew methodology assessed by EBValidation report for public scrutinyValidation report for public scrutinyValidation by OEValidation by OERegistration by EBRegistration by EB

Slide 7Slide 7

Lessons and recommendations Lessons and recommendations Without a full mandate for the EB it is difficult to Without a full mandate for the EB it is difficult to

know how to extend the lessons to a future fully know how to extend the lessons to a future fully mandated institutions; mandated institutions;

New projects should attempt to be stringent in their New projects should attempt to be stringent in their design;design;

Methodologies should strive for simplicity as far as Methodologies should strive for simplicity as far as possible;possible;

Baselines methodologies should be calculated on Baselines methodologies should be calculated on ex-ante as opposed to ex-post bases (unless ex-ante as opposed to ex-post bases (unless properly justified) as far as possible. properly justified) as far as possible.

What lessons taking into account What lessons taking into account the African context can be learned?the African context can be learned?

As expected the minority of CDM project activities (and no As expected the minority of CDM project activities (and no AEs) are from Africa – the EB needs to report on barriers to AEs) are from Africa – the EB needs to report on barriers to regional and sub-regional distribution of projects – African regional and sub-regional distribution of projects – African negotiators could make a call to this effect based on the negotiators could make a call to this effect based on the Marrakech accord: Marrakech accord: ““The COP/MOP shall further:The COP/MOP shall further:

((b) Review the regional and subregional distribution of designated b) Review the regional and subregional distribution of designated operational entities and take appropriate decisions to promote operational entities and take appropriate decisions to promote accreditation of such entities from developing country Parties.accreditation of such entities from developing country Parties.(c) Review the regional and subregional distribution of CDM project (c) Review the regional and subregional distribution of CDM project activities with a view to identifying systematic or systemic barriers to their activities with a view to identifying systematic or systemic barriers to their equitable distribution and take appropriate decisions, based, inter alia, on a equitable distribution and take appropriate decisions, based, inter alia, on a report by the executive board;report by the executive board;

(d) Assist in arranging funding of CDM project activities, as necessary(d) Assist in arranging funding of CDM project activities, as necessary.”.”

What lessons taking into account What lessons taking into account the African context can be learned?the African context can be learned?

Africa needs to move on DNA establishment;Africa needs to move on DNA establishment; Africa needs to consider DOE establishment;Africa needs to consider DOE establishment; Africa could consider the possibility of cross-border bundling;Africa could consider the possibility of cross-border bundling; In Africa the number of projects will not be many and hence In Africa the number of projects will not be many and hence

parties need to consider a “piggy-back” model; parties need to consider a “piggy-back” model; The para. 46 of M&P that deals with baseline scenarios where The para. 46 of M&P that deals with baseline scenarios where

the emissions are projected to rise, need to be shaped to the emissions are projected to rise, need to be shaped to include projects where poverty/lack of infrastructure exists;include projects where poverty/lack of infrastructure exists;

Congratulations of EB, methodology and accreditation panels Congratulations of EB, methodology and accreditation panels on high degree of stringency, and Secretariat on on high degree of stringency, and Secretariat on implementing appropriate systems.implementing appropriate systems.