Development Alternatives CDM Criteria Roadmap for CDM Project

Development Alternatives CDM Criteria & Roadmap for CDM Project Development For Workshop on January 28 th – 29 th, 2005 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

What is CDM Development Alternatives } Emissions to be reduced Developing Country Inves tment s Carbo n Cred its Total GHG Emissions Developed Country No emission reduction commitments 4

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 5

Types of CDM Projects Development Alternatives Energy Ø Renewables: Wind, solar, hydro, biomass, geothermal Ø Power Generation: Combined Cycle turbines, clean coal technology Ø Fuel Switching: Natural Gas, methane, biomass & biogas Ø Co-generation: Sugarcane, chemical processes 6

Types of CDM Projects Development Alternatives Industry Ø Efficiency: Boilers. Motors, lighting Ø Cogeneration-chemical, metellurgy, paper Ø Retrofits Ø Production Process Ø Waste Fuel Recovery – including landfills 7

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 8

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 9

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 10

CDM PROJECT CYCLE Development Alternatives Implementin g Agencies PD/CCC Project Idea Note (PIN) / Project Concept Note (PCN) DNA; Investor Host / Investor approval 11

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 12

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 13

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 14

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 15

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, 16

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 17

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 18

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 19

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 20

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 21

MINIMUM TRANSACTION COST ASSOCIATED WITH CDM PROJECT CYCLE Development Alternatives CDM project cycle stages where costs are incurred Pre-operational phase design Operational phase Cost Estimates (Rupees) PIN/PDD Preparation 6 lakhs Validation (to be paid to DOE) 4 -10 lakhs* Registration (to be paid to CDM EB) 2. 25 – 7. 5 lakhs* Monitoring & Verification (to be paid to DOE) 10 lakhs * Certification (to be paid to CDM EB) 2% of the CER value Risk mitigation 1% - 3% of CER value 22

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 23

Development Alternatives 24