Development Alternatives CDM Criteria Roadmap for CDM Project

Development Alternatives CDM Criteria & Roadmap for CDM Project Development For Orientation Workshop on March 25 th – 26 th, 2004 1

MITIGATION OPTIONS IN THE ENERGY SECTOR IDENTIFIED ARE : Development Alternatives q Improvements in energy efficiency through upgrading currently employed technologies q Introduction of advanced technologies that are more efficient q Use of renewable energy sources wherever feasible to bring down the carbon content of the grid, to provide sustainable energy, and as a decentralised energy source at remote areas 2

MITIGATION POTENTIAL Development Alternatives Greenhouse Gas Carbon Methane Nitrous Oxide Mitigation Options Mitigation. Potential 2002 -2012 (million tons) Long-term Marginal Cost ($/ton of carbon equivalent) Demand-side energy efficiency 45 0 -15 Supply-side energy efficiency 32 0 -12 Electricity transmission and distribution 12 5 -30 Renewable electricity technologies 23 3 -15 Fuel switching (gas for coal) 8 5 -20 Forestry 18 5 -10 Enhanced cattle feed 0. 66 5 -30 Anaerobic manure digesters 0. 38 3 -10 Low methane rice varieties marginal 5 -20 Cultivation practices marginal 0 -20 Improved fertilizer application marginal 0 -20 Nitrification inhibitors marginal 20 -40 Source: Based on modeling exercises reported in Rana, A. and Shukla, P. R. (2001), Ghosh et al. (2001); Garg A. Shukla, P. R. (2002), and ALGAS (1998) 3

CDM PROJECT ELIGIBILITY Development Alternatives Such activities should be Ø Ø Ø Approved by the Govts. of the participating Parties be host country driven May involve private / or public entity Environmental integrity is a must Economic efficiency for cost effectiveness Equity Implementation of such projects should result in social, environmental, economic and technological well-being - the four pillars of sustainable development 4

PROJECT CONCEPTUALIZATION PROJECT CYCLE IDENTIFICATION AND ORGANIZATION TARGET BENEFICIARIES AND NETWORKING Development Alternatives PARTICIPATORY PROJECT DEVELOPMENT -identify stakeholder, position, interest expected argument -choose appropriate technologies PROJECT FUND SOURCING / FINANCING PROJECT PLANNING -integrating sustainable development goals of the region / site specific PROJECT IMPLEMENTATION -an agreed time frame -an agreed monitoring and verification arrangement; the organization to monitor -establish emission baseline PERIODIC MONITORING AND EVALUATION -emission reduction 5

Implementin g Agencies PD/CCC CDM PROJECT CYCLE Project Idea Note (PIN) / Project Concept Note (PCN) Baseline & Additionality M&V Plan EIA St. Consul Contracts DNA; Investor Host / Investor approval PD/CCC PDD OE Validation EB Registration PD Financing & Implementation PD Monitoring OE Verification Participation EIA Baseline & ER M&V Plan On-site Inspection Review Monitoring GHG Reductions Verification Report Certification EB 6

CDM PROJECTS Some Important Aspects Development Alternatives q Participation is voluntary, approved by each party involved q Additional to any that would occur in the absence of certified project activity q Project fulfills the criteria of financial additionality q Reduction of emissions should be real, measurable and should have long time benefits q Project should contribute to the sustainable development of the host country 7

CDM PROJECT CYCLE Development Alternatives Implementin g Agencies PD/CCC Project Idea Note (PIN) / Project Concept Note (PCN) DNA; Investor Host / Investor approval 8

PIN/PCN Development Alternatives q Name of the project q Ownership details of project sponsors q Project Description q Status of Project Clearances q Financing details of the projects q Total CDM contribution sought q IRR and DSCR with & without CDM revenue q Estimate of GHG abetment q Sustainable development criteria q Project Risks 9

CDM PROJECT CYCLE Development Alternatives Implementin g Agencies PD/CCC Project Idea Note (PIN) / Project Concept Note (PCN) DNA; Investor Host / Investor approval PD/CCC PDD Baseline & Additionality M&V Plan EIA St. Consul Contracts 10

PROJECT DESIGN DOCUMENT Development Alternatives q Project Description q Promoter Details q Baseline q Additionality q Sustainable Development Criteria q Monitoring Plan q Financial Status 11

CDM PROJECT CYCLE Development Alternatives Implementin g Agencies PD/CCC Project Idea Note (PIN) / Project Concept Note (PCN) DNA; Investor Host / Investor approval PD/CCC PDD OE Validation EB Registration Baseline & Additionality M&V Plan EIA St. Consul Contracts Participation EIA Baseline & ER M&V Plan 12

Validation of CDM Projects q Development Alternatives Validation is a process of independent evaluation of a project activity by a designated Operational Entity (OE) against the requirements of the CDM on the basis of the PDD. Registration q Registration is the formal acceptance of a validated project as a CDM project by the Executive Board. Ø Registration is the prerequisite for certification and issuance of the CERs verification, 13

CDM PROJECT CYCLE Implementin g Agencies PD/CCC Development Alternatives Project Idea Note (PIN) / Project Concept Note (PCN) DNA; Investor Host / Investor approval PD/CCC PDD OE Validation EB Registration PD Financing & Implementation PD Monitoring Baseline & Additionality M&V Plan EIA St. Consul Contracts Participation EIA Baseline & ER M&V Plan 14

MONITORING q Development Alternatives Project Participants, as part of the PDD provide a monitoring plan: Ø Based on previously approved methodology/new methodology Ø Determined by Do. E as appropriate to circumstances of the project activity Ø Reflects good monitoring practice Ø A monitoring report in accordance with monitoring plan is to be submitted to the Do. E for verification 15

Implementin g Agencies PD/CCC CDM PROJECT CYCLE Project Idea Note (PIN) / Project Concept Note (PCN) Development Alternatives Baseline & Additionality M&V Plan EIA St. Consul Contracts DNA; Investor Host / Investor approval PD/CCC PDD OE Validation EB Registration PD Financing & Implementation PD Monitoring OE Verification Participation EIA Baseline & ER M&V Plan On-site Inspection Review Monitoring GHG Reductions Verification Report Certification EB 16

Verification q Development Alternatives Verification is the periodic independent review and determination by Do. E of the monitored reductions by sources of greenhouse gases that have occurred as a result of the CDM project activity Certification q Certification is the written assurance by the Do. E that the project activity achieved the reductions in anthropogenic emissions by sources of GHGs as verified 17

ISSUANCE OF CERTIFIED EMISSION REDUCTIONS q Development Alternatives Certification Report constitutes request to EB for issuance of CERs equal to verified amount of reductions of GHGs 18

MINIMUM TRANSACTION COST ASSOCIATED WITH CDM PROJECT CYCLE Development Alternatives (from literature survey) CDM project cycle stages where costs are incurred Pre-operational phase design Operational phase Cost Estimates (Pound sterling) Baseline study 12, 000 – 15, 000 Monitoring plan 5, 000 – 10, 000 Environmental assessment Time & uncertainty Stakeholder consultation Time & uncertainty Approval Time & uncertainty Validation 10, 000 – 20, 000 Legal and contractual arrangements 15, 000 – 25, 000 Sale of CERs 5% -15% of CER value. Adaptation levy 2% of the CER value Risk mitigation 1% - 3% of CER value Verification 5, 000 per audit 19

Bundling Development Alternatives q Effective way to reduce transaction costs q Several projects bundled together to share transaction costs and CER benefits q Projects should have: Ø Similar technology Ø Be in the same geographical area Ø Preferably have the same project owner, but not necessary 20

Development Alternatives 21

Development Alternatives 22

Validation, Verification and Certification of CDM Projects Development Alternatives l Validation is the process of independent evaluation of a project activity by a DOE against requirements of CDM in Article 12 of the Kyoto Protocol and on the basis of the project design document l Verification is the periodic review and ex-post determination by a DOE of the monitored reductions in anthropogenic emissions by sources of greenhouse gases that have occurred as a result of a registered CDM project during the verification period l Certification is the written assurance by the DOE that during a specified time period, a project activity achieved the reductions in anthropogenic emissions 23

Development Alternatives as a Designated Operational Entity Development Alternatives Participation Requirements Validation & Registration Analysis Environmental Impact Reduction in GHG emissions through a baseline as determined by project participants Validation of Monitoring Plan submitted by Project Participants Validate Verify, Certify SD Goal achievement DESIGNATED OPERATIONAL ENTITY Finally the validation of the Project activity by the OE and sends validation report to EB for registration Periodic review and expert determination of the monitored reductions in GHGs Conduct on-site inspection Verification & Certification Review monitoring results Determine the GHG reductions Provide verification results to project participants, the Parties involved and the EB, and make publicly available Based on its verification results, certify CERS 24

Monitoring Development Alternatives Project participants are required to include as part of the Project Design Document (PDD) a monitoring plan that provides for : a. Collection and archiving of all relevant data necessary for estimating or measuring anthropogenic emissions by sources of GHGs occuring within the project boundary during the crediting period. b. Collection and archiving of all relevant data necessary for determining the baseline of anthropogenic emissions by sources of GHGs within the project boundary during the crediting period. 25

Development Alternatives c. Identification of all potential sources of, and the collection and archiving of data on, increased anthropogenic emissions by sources of GHGs outside the project boundary that are significant and reasonably attributable to the project activity during the crediting period. Collection and archiving of information on the analysis of the environmental impact. If there impacts are considered significant by the project participants or the host Party environment impact assessment is to be undertaken in accordance with procedures by the host Party. 26

Monitoring Development Alternatives e. Quality assurance and control procedures for the monitoring process. f. Procedures for the periodic calculation of the reductions of anthropogenic emissions by sources by the proposed CDM project activity and for leakage effects. g. A paper documentation 27

Monitoring Development Alternatives q A monitoring plan shall be based on a previously approved monitoring methodology F Determined by DOE as appropriate to the circumstances of the proposed activity and has been successfully applied elsewhere F Reflects good monitoring practice appropriate to the type of project activity q For small scale CDM project activities, simplified modalites may be followed. 28

Monitoring Development Alternatives Based on the monitoring and reporting of reductrions in anthropogenic emissions, CERs resulting from a CDM project activity will be calculated applying registered methodology by sustainable the actual anthropogenic emissions by sources from baseline emissions and adjusting for leakage. 29

Criteria that must be met by a CDM project for CERs • Development Alternatives Participation should be voluntary and approved by each Party involved • Project should be certified by competent authority • Emission reductions : - real - measurable provide long term benefits to the mitigation of Climate Change • Emission reduction should be additional to any that would occur in the absence of the certified project activity 2 30

Elements of a CDM Project proposal 1. Briefly describe proposed project • • Development Alternatives objective of the project technologies involved current status in India current status in the world approach to be pursued (i. e, emission avoidance, reduction or sequestration target group - existing industrial uses • potential partners (including third party validators and verifiers if possible) • project feasibility, technology transfer, specific performance or design standards for transferred technologies • typical application of the project in the country 3 31

Elements (Contd. . ) Development Alternatives 2. Discuss barriers to the project (i. e. why has the project not been undertaken previously), and how the project proposes to surmount these barriers (e. g. , the CDM will provide additional financing not previously available) 4 32

Elements (contd. . ) Development Alternatives 3. Project implementation plans in phases work plan monitoring and evaluation plan certification of ERs 4. Quantify the ghgs reduction to be achieved through the project develop a project reference case or baseline that accounts for what would have happened at the project site without the proposed project activities identify ghg sources and sinks at the site included in the emission baseline / reference and describe all measures to be` taken as part of the project to avoid, reduce or sequester ghg emissions quantify the emission reductions to be achieved through each such measure and for the project as a whole 5 33

Elements (Contd. . ) Development Alternatives 5. Workout project economic costs and benefits - economic cost of the project - economic benefit of the project - cost benefit ratio - customer benefits - host partner benefits - investing partner benefits 6 34

Elements (Contd. . ) Development Alternatives 6. Workout other benefits of the project : sustainable developments and other benefits to the host country - social benefits - economic benefits - environmental benefits - global - local 7 35

Elements (Contd. . ) Development Alternatives 7. Estimate the cost per metric tonne of ghg avoided, reduced or sequestered - provide other informations relevant to cost such as anticipated pay-back period on investment 8 36

Elements (Contd. . ) Development Alternatives 8. Identify any potential sources of leakage (i. e. activities not directly related to the project that could result in loss or reversal of accrued ghg benefits) and describe steps to be taken to reduce the risk of such potential leakage 9 37

Elements (Contd. . ) 9. Development Alternatives Provide a description of how the project could contribute to the advancement of scientific knowledge especially regarding options to mitigate climate change 10 38

Elements (Contd. . ) Development Alternatives 10. Highlight innovations / unique approaches incorporated in the proposal 11. Discuss the replicability and transferability potential of the project 12. Discuss other benefits 11 39