Approved CDM Methodologies, CDM Project Design Document (PDD)

Lucas BelenkyACX Executive Climate Change and Carbon Trading Course

November 12th 2012

• Contribute to Sustainable Development

• Local Stakeholder Consultation and EIA

• Approval from the Host Country

• Result in emission reductions that are additional

• Prior Consideration of the CDM

Requirements for Projects under the CDM

1. Project Type

a) Type 1: Energy Generation

b) Type 2: Efficiency Measures

c) Type 3: All other types

2. Project Size

a) Large

b) Small

c) Micro

Categories of CDM Projects

Electrical Energy Other Energy Off-Grid Power Bio Fuels

• Grid-connected renewable energy

• Renewable energy for mini-grid or captive use

• Electricity from biomass combustion

• Mechanicalenergy for the user

• Thermal energy production

• Solar water heaters

• Electricitygeneration by the user

• Biogas/biomass for thermal applications

• Biodiesel production

• Plant oil production and use for energy generation

Type 1 CDM Projects – Energy Generation

Supply-Side Demand-Side Fuel-Switching

• Generation

• Transmission and distribution

• Installation of co-generation or tri-generation systems

• Efficiency activities for lighting technologies

• Efficiency activities in new buildings

• Efficiency activities in hot water devices

•Efficiency application in the use of non-renewable biomass

• Switches in buildings

• Switches in agricultural facilities

• Switches in industrial facilities

Type 2 CDM Projects – Energy Measures

Gas Avoidance & Destruction

TransportationSpecific

TechnologiesChange in Practice

• Methane avoidance

• HFC Destruction

• Sulfur Hexafluoride destruction

• Mass public transit systems

• Hybrid vehicles

• Fuel monitoring in commercial freight

• Water purificationsystems

• Solar LED lighting

• Renewable energy technologies in new residential buildings

• Shift from high-to low-carbon fuel/energy

• Recovery and recycling of materials

• Recovery of waste gas in industrial facilities

Type 3 CDM Projects – Gas Destruction and Other

Type Large Small Micro

Energy Generation > 15 MW 5 – 15 MW < 5 MW

Efficiency Measures> 60 MWh

Saved60 – 20 MWh

Saved< 20 MWh Saved

Other Projects > 60,000 Credits60,000 – 20,000

Credits< 20,000 Credits

CDM Projects by Size

• Methodologies cover different project types and size. The describe how to determine the Baseline.

• Baseline:

• Describes what is happening in absence of the project

• Sets level of carbon emissions occurring now

• Commonly called the “business-as-usual” scenario

Determining Project Baselines

• Baseline established through surveys, historical data, or government data and published reports

• Emissions during the project activity monitoring throughout the project

• Emission reductions are calculated as the difference between the baseline and the project activity

Calculating Emission Reductions

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Baseline Emissions Project activty Emission Reductions

Example Emission Reductions from a Project

Definition: An activity is deemed additional if it results in real and measurable emission reductions that would not have occurred without carbon finance.

Each activity under the CDM must prove it is additional:

Examples

1. Renewable Energy

2. Diesel Generator

3. Landfill Gas Flaring

Additionality is relative to the baseline

Additionality of CDM Activities

Prove the proposed project activity is not:

a) The most economically or financially attractive; or

b) Economically or financially feasible, without the revenue from the sale of Certified Emission Reductions (CERs).

Simple Cost Analysis

Investment Analysis

Benchmark Analysis

Proving Additionality – Investment Analysis

Prove the proposed project activity faces barriers that:

a) Prevent the implementation of this type of proposed activity; and

b) Do not prevent the implementation of at least one of the alternatives.

“The identified barriers are only sufficient grounds for demonstration of additionality if they would prevent potential project proponents from carrying out the proposed project activity undertaken without being registered as a CDM project activity.”

Barrier due to Prevailing Practice

Investment Barriers

Technological Barriers

Project is a “First-of-its-kind”

Proving Additionality – Barrier Analysis

Micro-scale projects are automatically additional if:

• The technology is approved by the Host Country

• The activity serves households or SMEs

• The activity is in a Least Developed Country

Prior Consideration: Each proposed activity, regardless of size or type, must show that the pursuit of CERs was intended since inception of the project concept.

1. Letter of Prior Consideration

2. Restricted Project Start Date

Proving Additionality – Microscale Projects and Prior Consideration

Step 1. Identify Alternatives

Step 2. Investment Analysis

and/or

Step 3. Barrier Analysis

Step 4. Common Practice Analysis

If all are steps are satisfied, activity is additional.

The Process of Demonstrating Additionality

Feasibility Documentation Validation Registration

DOEProject Proponent UNFCCC

2 Weeks 8 Weeks12 Weeks8 Weeks

Complete Project Development: 30 Weeks

CDM Project Cycle: Project Development

Operation

Monitoring

Verification

Issuance

Repeat for 10 Years. Repeat for 21 Years. Renew the Baseline

every 7 Years.

Fixed Renewable

Project Proponent

DOE

UNFCCC

Project Proponent

CDM Project Cycle: Project Life

• Data Collection on the project activity

• Select appropriate (or best) baseline and monitoring methodology

• Determine if the activity can be shown to be additional

• Estimate achievable emission reductions and future carbon credit revenue

1st Step: Project Feasibility Study

• Establish project baseline

• Write PoA-DD, CPA-DD, and CPA Template

• Prove Additionality

• Conduct LSC

• Perform EIA

2nd Step: Develop Project Documentation

• Appoint DOE to perform project validation

• Address and correct CLs and CARs from the DOE

• Apply for LoA from Host Country

3rd Step: Validation of Project Documentation

• Submit project for registration

• Address and correct remaining CLs and CARs from the DOE

• Register the activity under the CDM

• Begin Crediting Period

4th Step: Registration of the Activity

• Operate project for 1 (or 2) year(s)

• Collect monitoring data (continuous or sampling)

• Prepare monitoring report with achieved emission reductions

Monitoring Emission Reductions of the Project

Appoint DOE to verify Monitoring Report

DOE reviews report and recommends volume of CERs for issuance to the activity

Verification and Issuance

Requested CERs are issued to the project proponent

Project Proponent pays issuance fee

Process repeats every year throughout the crediting period of the activity