Sustainable CDM Projects A MultiCriteria Tool for CDM

Sustainable CDM Projects: A Multi-Criteria Tool for CDM Project Assessment Renat Heuberger Swiss Federal Institute of Technology, Zurich Official Side-Event “Sustainability Assessment of CDM Projects” Co. P 9, Milan, December 5 th, 2003 Environmental Physics – Energy & Climate

The Multi-Criteria CDM Assessment Tool Multi-Attributive Assessment of CDM Projects Transparent Sustainability assessment of CDM projects Clearly defined scales for all criteria Stakeholders participate by defining and weighting the sustainability criteria ETH Zurich Environmental Physics Energy and Climate 2

Why a Multi-Criteria CDM Assessment Tool? Sustainable development (SD) is explicit goal of CDM SD approval is the prerogative of Host Countries Sound assessment methodologies are often lacking ETH Zurich Environmental Physics Energy and Climate 3

Applications of the CDM Assessment Tool 2002: South Africa and India Test-Application, collaboration with the South African DNA, Pricewaterhouse. Coopers, and University of Pretoria Criteria weighting with 89 (SA) , 31 (I) participants Application of the criteria on 6 potential CDM projects. ETH Zurich Environmental Physics Energy and Climate 4

Applications of the CDM Assessment Tool 2003: Uruguay Application with Uruguayan DNA, Ministry of Environment Stakeholder Process to identify criteria and indicators Criteria weighting workshop with 36 participants ETH Zurich Environmental Physics Energy and Climate 5

Utility U (P) Overview on the CDM Assessment Tool 1 0 Goal Criterion c (P) Criterion 1 Criterion 2 Criterion 3 -1 m U (P) = å w juj (c j ( P)) j =1 1. Identification of sustainability criteria c 2. Defining Indicators, utility function u 3. Weighting the criteria w 4. Assessment of the CDM project P 5. Aggregation and interpretation of results 6

1. Identification of Sustainability Criteria Sustainable Development Social Environmental Minerals / Energy Resources Stakeholder Participation Water Quality Air Quality Employment Generation Land Resources Improved Service Availability Capacity Development ETH Zurich Economic Sustainable Technology Transfer Equal Distribution Environmental Physics Energy and Climate Microeconomic Efficiency Regional Economy 7

Each criterion must be linked to an indicator Utility U (P) 2. Defining Indicators – Measuring the Criteria 1 0 Criterion c (P) -1 Indicators are either quantitative (measurable) or qualitative with a transparent scale Most indicators are measured “compared to the baseline” ETH Zurich Environmental Physics Energy and Climate 8

Criterion 11: Employment Generation Description of Criterion “the project creates jobs” Utility U (P) 2. Defining Indicators – Example 1 0 Criterion c (P) -1 Indicator: Additional jobs (in man-month) per 1000 CER generated Measurement of Indicator: The number of man-months of labour is counted and compared to the baseline project. The 10 years after project implementation are therefore considered. The absolute change in man-months created is normalized with the amount of CER generated. ETH Zurich Environmental Physics Energy and Climate 9

2. Indicators – Example Criterion 11: Employment Generation Unit Employment Generation (EG): where: JP= the total amount of man-months created by the project, including the construction and operation phases JB = the total amount of man-months created in the baseline case CERp = Emission Reductions ETH Zurich Environmental Physics Energy and Climate 10

3. Weighting the Criteria Weights to express relative importance of the criteria Weights should correspond to the participants’ individual values Several weighting procedures Analytical hierarchy process (AHP) Direct weighting ETH Zurich Environmental Physics Energy and Climate 11

3. Weighting the Criteria Weighting Institution: - Stakeholder Workshop - Expert Panel - Politically legitimated body (parliament) - Community Panel (randomly selected) South Africa: Direct interviews and mailed questionnaires to group of experts ETH Zurich Environmental Physics Energy and Climate 12

4. Assessment of the CDM project All criteria (their indicators) are applied on the CDM project Work mainly done by project developer – possibly support by DNA Test assessment of projects: 3 South African, 3 Indian, 1 Uruguayan ETH Zurich Environmental Physics Energy and Climate 13

5. Aggregation and Interpretation of Results å ETH Zurich Environmental Physics Energy and Climate 14

5. Aggregation and Interpretation of Results å ETH Zurich Environmental Physics Energy and Climate 15

5. Aggregation and Interpretation of Results To what extend shall trade-offs be allowed? å Are certain criteria “restrictive”? (e. g. no negative values) Tool not only to accept or reject a project – but also to prioritise? ETH Zurich Environmental Physics Energy and Climate 16

Application of the CDM Assessment Tool in Uruguay 17