cdm project cycle training - s kolar
TRANSCRIPT
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Session 1
CDM Project Cycle
PDD and Validation Reports ReviewIntroduction to PIN
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CDM Projects by Country
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CDM Projects by Type
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CDM Project Cycle
Design
Develop
idea
Prepare
PDD
Submit PDD to DOE
Validation/
Registration
Obtain DNA approval
Prepare
Validation
Report
Forward documents
to EB
Registration
Issuance ofCERs
Verification/
Certification
Prepare
Verification
and Certification
Reports and
submit to EB
Monitoring
Project Participant Designated Operational Entity CDM Executive Board
Submit monitoring
report to DOE
Implement
Project Reviews
Certification
Report and
Issues CERs
PDD using
approved
Methodology
PDD using
new
Methodology
Methodology to be
approved by EB
Complete PDD
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CDM Project Development
Requires significant personnel and
financial resources
The entire project cycle is long and has
uncertain outcome
Outside entities must be hired to perform
validation and verification
Transaction costs can be high
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Is CDM Too Complex and Risky?
Yes!
Source: Michaelowa 2001
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But
CDM still offers much to host countries
and investors
Potentially profitable partnerships to build
emission-reducing projects benefiting local
and global environment
at lower costs to all
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CDM Key Project Cycle Milestones
Project Design Document (PDD) Preparation - At this stage the project isdesigned as a CDM project. A PDD has the following componentsDevelopment of baseline and estimation of baseline emissions, estimationof project emissions, contribution to sustainable development (this is inaccordance with host country guidelines), Monitoring and VerificationProtocol (M&VP), Report on EIA, Report on Stakeholders participation andletter of endorsement from host country government
Validation- The methodologies, values and results mentioned in the PDDhave to be validated by an OE before the project can be registered with theCDM Executive Board.
Registration - A project validated by OE is registered as CDM project withthe CDM Executive Board
Implementation and Operation - Of the project
Verification and Certification - An OE based on the M&VP undertakesverification of the claimed emission reduction by owner of the CDM project.On verifing the claims, OE issues a note to CDM EB to issue certificate foremission reductions, which are termed as CERs. The project promoter cansell the CERs to the investor as per the agreement between the two entities.
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Content of the Project Design
Document (PDD)A. General description of project activity
B. Baseline methodology
C. Duration of the project activity
D. Monitoring methodology and plan
E. Calculation of GHG emission by sources
F. Environmental impacts
G. Stakeholder Comments
Annex 1. Contact information on project participants
Annex 2. Information regarding public funding
Annex 3. New baseline methodology
Annex 4. New monitoring methodology
Annex 5. Table of baseline data
Small-scale PDD contains the same sections (fewer annexes).
CER creditation can be 2*7 years or 1*10 years
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4 Examples of PDDs
Moldova biomass heating in rural area
Moldova energy efficiency in public
buildings
Honduras 4.7 MW La Gloria hydro power
plant
Armenia, Yerevan landfill gas capture andelectricity generation
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The Validation Process
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Validation Report Example
DET NORSKE VERITAS Validation Report for Moldova Biomass Heating
1 INTRODUCTION
1.1 Validation Objective
1.2 Scope
1.3 Description of Proposed CDM Project
2 METHODOLOGY
2.1 Review of Documents
2.2 Follow-up Interviews2.3 Resolution of Clarification and Corrective Action Requests
3 VALIDATION FINDINGS
3.1 Participation Requirements
3.2 Project Design
3.3 Baseline Determination
3.4 Additionality
3.5 Monitoring Plan
3.6 Calculation of GHG Emissions
3.7 Environmental Impacts
3.8 Comments by Local Stakeholders
4 COMMENTS BY PARTIES, STAKEHOLDERS AND NGOS
5 VALIDATION OPINION
REFERENCES
Appendix A Validation Protocol
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CDM Project Resources
All necessary documents, methodologies,
guidelines are on the CDM Executive
Board web site:
http://cdm.unfccc.int/EB
All basic rules for CDM are set in theMarrakesh Accords (Decision 15/CP7)
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Idea Behind the PIN
PIN
Project Idea Note
Developing CDM project is labor and resource intensive
PIN serves as low-cost option to find out:
If home government will likely approve project as CDM
If project has a chance to get ultimate CDM status approval by EB
If there are investors who could finance project
development costs, including PDD.
Having your project assessed based on PIN may save investors money!
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Session 2
1. Baseline
2. Additionality
3. Approved Methodologies4. Own Baseline Development
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Contents
Baseline Definition and principles
Where in CDM process?
Baseline scenario
Baseline methodology Additionality
Definition
Demonstration of Additionality
Leakage Monitoring Methodology
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Definition
Marrakech accords, modalities and
procedures for CDM, article 44:
.the scenario that reasonably represents theanthropogenic emissions by sources of
greenhouse gases that would occur in the
absence of the proposed project activity.
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?
A baseline is a hypothetical scenario thatrepresents what would have happened inthe absence of the project (i.e. business
as usual).
A baseline methodology is used to
estimate baseline GHG emissions that willbe compared to project emissions todetermine overall emission reductions
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ConceptGHG emissions(Ton of CO2 eq)
Time(Years)
In the absenceof the project(baseline)
Project
Real, long term andmeasurable emissionreductions
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Application of a Baseline
Methodology CDM project proponents have two options:
Use an existing approved methodology
Simpler approach
Only if a relevant methodology exists
Develop a new methodology
Additional effort required
A new monitoring methodology and plan (SectionD) will also be required
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Baseline Scenario
Marrakech accords, modalities and proceduresfor CDM, article 48:
a) Existing actual or historical emissions, as applicable; or
b) Emissions from a technology that represents an economicallyattractive course of action, taking into account barriers toinvestment; or
c) The average emissions of similar project activities undertaken in
the previous five years, in similar social, economic,environmental and technological circumstances, and whoseperformance is among the top 20 per cent of their category
Baseline scenario should take into account national and/or policies andcircumstances
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Baseline methodologies
Approved and consolidated baseline
methodologies (EB)
Proposed new methodology
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Baseline methodologies
28 Approved methodologies 8 Consolidated methodologies
Industrial processes
HFC incineration, decomposition of N2O from adipic acid production plants, use ofrenewable CO2 in the production of inorganic compounds, Increased share of additivematerials in cement production
Waste management
Landfill gas capture and recovery, biomethanisation, forced methane extraction,organic waste composting
Renewable energy
Electricity generation from renewable resources exported to the grid, biomasscogeneration, grid connected electricity generation from biomass residues
Agriculture
Manure management systems, improved animal waste management
Energy efficiency (including fuel switching)
Flared gas recovery, switching from coal and petroleum fuels to natural gas, naturalgas cogeneration, steam efficiency improvements, steam optimization system, waterpumping efficiency improvements, leak reduction from natural gas pipeline
E l 1
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Example 1
Nubareshen Lanfill CDM Project
Yerevan, Armenia Ladfill near Zerevan for 1.2 million people
Baseline
Keep landfill as is today.
No legislation in Armenia to require changes
(additionality!)
CDM Project
Collect landfill gas (LFG)
Combust LFG in power generator
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Example 1
Nubareshen Lanfill CDM Project
Yerevan, Armenia Emission Savings
Baseline actual CDM project emissions
BaselineA) LFG * % CH4 * 21 = CO2 equivalent
B) Armenian kWh average * CO2 = CO2 equivalent
Emissions
Actual project emissions
CER
Baseline - Emissions
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Example 2
Moldova Energy in Public BuildingsSmall-scale CDM
Baseline
Keep buildings as they are
No fuel switch in heating plants
CDM Project
32 buildings (schools & hospitals) to be
insulatred, doors and windows replaced
Fuel will be switched in heating plants fromcoal and oil to natural gas
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Example 2
Moldova Energy in Public Buildings
Emission Savings (Baseline-Project)
Fuel consumption over project period less fuel
consumption under CDM project (in CO2
equivalent)
Additionality
Would project happened in absence of CDM?
NPV without CDM is negative, with it ispositiveadditionality is proven
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Example 3
La Gloria Hydro Power Plant, HondurasSmall-scale CDM
Baseline
No power generation on site
Emissions are assumed to come from other
power sources in Honduras
CDM Project
4.7 MW run-of-river hydro plant
E l 3
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Example 3
La Gloria Hydro Power Plant, HondurasSmall-scale CDM
Emission Savings kWh from project * average CO2 intensity of
Honduran kWh
Project baseline is fixed for at least 7 years, but actual
conditions can change over time
Additionality Would project happen in absence of CDM?
More difficult to prove, depends on local conditions. If
power prices from project high, it may be difficult toprove additionality. Accepted standard to measureadditionality in such projects is NPV calculations.
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Complexities of Baselines
Baselines are complex & difficult to
determine
Inherently speculative it attempts to predict
what will not happen
Forecasting uncertainty
Business-cycle forecasting is extremelydifficult
Baseline level of emissions tend to be
overstated
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Additionality
Marrakech accords, modalities and
procedures for CDM, article 43:
A CDM project activity is additional if
anthropogenic emissions of greenhouse gases
by sources are reduced below those that would
have occurred in the absence of the registeredCDM project activity
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Additionality
The definition is not sufficient to guarantee theenvironmental integrity of a CDM project
Tools to demonstrate additionality (EB)
COP/MOP Decision: call for input to simplify/improvecurrent additionality tool
Provide evidence!
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Tool to demonstrate
additionality
Identification of alternatives to the project activity;
Investment analysis to determine that the
proposed project activity is not the mosteconomically or financially attractive;
and/or
Barriers analysis;
Common practice analysis; and
Impact of registration of the proposed project
activity as a CDM project activity
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Leakage
Marrakech accords, modalities and procedures
for CDM, article 51:
Leakage is defined as the net change ofanthropogenic emissions by sources of
greenhouse gases which occurs outside the
project boundary, and which is measurable and
attributable to the CDM project activity
L k l t t
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Leakage: example, cement sector
Raw MaterialPreparation
Pre-drying, RawGrinding, Mixing
Shipping
Bagging, Storage,Transportation
Pyro-Processing
Pre-heating,CalcinationClinkering
, Cooling
Add
itiveMaterial
P
reparation
Cru
shing,Drying
RAW MIX CLINKER CEMENT DISTRIBUTION
Fine Grinding
Finish Grinding,Blending
FuelPreparation
Crushing,
Grinding,Drying
RawMaterial
Supply
Qua
rrying,Mining,
Crushing
On-site electricity Purchasedelectricity
National grid
Electricity
consumption
for other
purposes
Processes or activities
affected by the project
Processes or activities
unaffected by the project
Cirebon electricity line
Tarjun electricity line
Project Boundary
CirebonTarjun
Citeureup
Citeureup
Main electricity line forcement manufacturing Source: Indocement PDD,
NM 0047-0048
-Increased GHG
emissions
associated with the
transportation of
renewable fuels
-Reduced
transportation GHG
emissions from
reduced coal use
-Reduction in GHG
emissions due to
the lower quantity
of renewable fuels
being dumped and
generating methane
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Leakage
In estimating leakage:
Clearly define the project boundary
In proposing new methodology: Requirement
to elaborate leakage in a detailed manner
Pay attention to indirect leakage
Increased fossil fuel consumption at x due to
utilisation of renewable energy at y
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Session3
Small-Scale CDM Projects
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Advantages of Small-Scale CDM
A simplified project design document
Simplified methodologies for baseline determination and monitoringplans
Bundling of project activities at various stages in the project activity
Simplified provisions for environmental impact analysis
Lower project registration fee
Shorter review period for the registration of SSC CDM projectactivities
The same DOE can validate as well as verify and certify emissionsreductions for a specific SSC CDM project activity
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Eligible small-scale CDM
project categories
The project participants can themselves propose new categories
incl. methodologies to the EB.
Project types Small-scale CDM project activity categories
TypeI I: A. Electricity generation by the user
Renewable B. Mechanical energy for the user
energy projects C. Thermal energy for the user
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Bundling Small-Scale
Projects Small-Scale CDM Projects can be "bundled" to encourage
companies to pursue these types of activities;
Bundled projects form a single CDM activity or portfolio without
the loss of distinctive characteristics of each individual project, allmust have same crediting period;
Characteristics include technology/measure, location, application
of simplified baseline methodology.
The sum of the output capacity of project activities within a bundle
shall not exceed the maximum output capacity limit for its type: up to 15 MW max. output for RE projects
up to 15 Gwh/yr for EE projects
reduction by source emitting less than 15 kt/yr of CO2 equivalent
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Debundling is not allowed
A small-scale project activity that is part of a larger project
activity is not eligible.
A small-scale project activity is debundled if there is aregistered small-scale CDM project activity:
With the same project participants
In the same project category and technology/measure
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.
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Modalities and Procedures (M&P) for
the Small-Scale CDMA special M&P for Small-Scale CDM was adopted at COP8, and can be
found on the UNFCCC-CDM home page.
The M&P describe the general rules for the CDM project cycle, and the
Executive Board have developed more detailed rules in their first 12 meetings.
At their seventh meeting (EB7) the detailed rules for Small-Scale CDM were
finalised.
At COP9 the annex to the CDM M&P was finalised: Small scale LULUCF
project must be
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Additionality in the SSc M&P
Show that the project would not have occured
without CDM due to:
Investment barrier
Technological barriers Barrier due to prevailing practice
Other barriers: Institutional, information, managerial,
organizational capacity, financial, or capacity to
absorb new technologies
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Other Small-Scale CDM Issues
The crediting period can be 3*7 years or 1*10 years. For
afforestation and reforestation projects it is 3*20 years or 30 years,
with a mandatory verification and certification every 5 years.
Only if the technology is transferred from another activity is
leakage calculation required.
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Session 4
Developing the PIN form
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Role of the PIN
First general information about the project
The submission of PIN is voluntary
PIN aims to improve the quality of the official PDD and improvechances of project success
PIN contains information on
Project participants
Type and size of project
Financial details
Additionality
Emission baseline
Emission reduction calculations Crediting period
Sustainability impact of the project
Other information requested by the PIN
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Ideal Evaluation & Approval of CDM Projects
DNA receives PIN
Initial evaluation: PIN
(Reply : max 2 weeks)
Second evaluation : PDD
(Reply : max 4 weeks)
Project not accepted
Approval letter delivered by the
CDM DNA to the Project developer
Projectto
berevised
Pr
ojectto
berevised
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What does PIN look like?
There are dozens PIN forms today
Every CDM investor wants to first see initial
information about a project in the form of a
PIN form Host countries want to provide initial
assessment based on PIN forms
It saves time and money to investors and hostcountry governments
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Practice makes perfect!
PIN form development exercise