Evaluation of CDM project proposals by CDM Executive Board

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Evaluation of CDM project proposals by CDM
Executive Board

• Main issues based on examples
• By Steve Thorne
• SouthSouthNorth
• Addis Ababa 20th October 2003

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Contents of presentation

• Some EB responsibilities
• Status of EB DNAs, DOEs
• Project activity reviews from where, what type,
  status of methodologies baseline and MV plans
• Rejected and approved projects with examples
• Communication with PPs
• Evaluation of PDD
• Conclusions and recommendations (specific to
  Africa).

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EB responsibilities (from Decision 17/CP.7
Modalities and procedures for a clean development
mechanism)

• (d) Approve new methodologies related to, inter
  alia, baselines, monitoring plans and project
  boundaries
• (h) Report to the COP/MOP on the regional and
  subregional distribution of CDM project
  activities with a view to identifying systematic
  or systemic barriers to their equitable
  distribution
• (i) Make publicly available relevant information,
  submitted to it for this purpose, on proposed CDM
  project activities in need of funding and on
  investors seeking opportunities, in order to
  assist in arranging funding of CDM project
  activities, as necessary

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Status of EB

• No Kyoto no COP/MOP mandated by the COP
  currently
• Limited functions
• No DOEs - only Applicant Entities
• No projects under review only methodologies
• Has established panels accreditation of
  operational entities, small-scale, methodology

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DNAs contact details sent to Secretariat

• Antigua and Babados, Argentina, Bhutan, Bolivia,
  Brazil, Columbia, Costa Rica, Cuba, El Salvador,
  Germany, Georgia, Malaysia, Morocco, The
  Netherlands, Nicaragua, Panama, Peru, Trinidad
  and Tobago, and Uruguay (19).

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Applicant Entities
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Source of projects submitted
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Project types
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Who submitted projects
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Status of projects
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Detailed description of a rejected project
methodology

• Methodologies that have been rejected are those
  where the methodology is not transparent and
  conservative
• Projects have been referred to PPs for
  modification and/or later resubmission
• Describe project 3 rice husk power gen, bagasse
  biomass cogen, 2 hydro, 1 methanol, 1 fuelswitch
  rejected so far.

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Example of NM0011 Bagasse/biomass based
cogeneration power project

• 1. No methodology regarding whether the project
  activity is not the baseline scenario
• The simple statement that the technology is less
  carbon intensive and more costly does not
  demonstrate additionality, since it is also
  stated that the technology is more efficient and
  will generate additional revenues when compared
  to the baseline, and no methodology is proposed
  to demonstrate that these additional revenues are
  not sufficient to ensure the attractiveness of
  the investment.

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Rejected example of NM0011 Bagasse/biomass based
cogeneration power project (cont.)

• 2. Ex-post calculation
• In the context of supply constrained systems and
  technological change trend on the supply side,
  the methodology should provide additional
  elements to explain why ex-post average emissions
  generated by all other power plants operating at
  the same time than (as) the project activity can
  be considered as a possible estimate of what
  would have occurred in the absence of the project
  activity (baseline emissions)1.
• 1. For instance the project activity (for e.g.
  industrial cogeneration may delay the
  construction of a zero emission hydro plant
  (which would be the baseline) and get CERs on the
  basis of the on (of) the proposed methodology if
  the rest of the system is partially fossil
  based.

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Approved project NM0004 rev. Salvador da Bahia
landfill gas project

• Project to capture and flare landfill gas.
• Methodology Contractual amount of landfill gas
  capture and flaring defined through public
  concession.
• Applicable conditions
• Contract to capture certain volume of LFG
• Concession stipulates amount of LFG to be
  captured
• No electricity should be generated.

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Approved project NM0004 rev. Salvador da Bahia
landfill gas project (cont.)

• Minor changes
• Removal of repetition
• Estimation/measured of contracted amount of
  methane (not theoretical amount). Assumed methane
  50 measured amount 57 i.e. incorrect
  calculations in PDD.

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Approved project NM0004 rev. Salvador da Bahia
landfill gas project (cont.)

• Monitoring Methodology applicable to baseline
  methodology conditions, and
• Gas flow and analysis equipment appropriate to
  climate and contaminants
• Periodic equipment calibration.
• Minor changes
• The baseline of the contractual amount should
  assume the percentage of methane in the LFG to be
  equal to the estimated/measured amount, in the
  interest of conservative estimates for the
  baseline.

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Discuss factors contributing to approval

• Clear description of how an existing methodology
  is applied/new method can be generically applied
• Conservatism in baseline definition
• Stringency in application of the methodology
  inclusion of leakage
• Transparency in application of methodology
• Incorporation of national regulations/ targets
• Clear links between baseline, activity emissions
  and monitoring plans
• Conservative definition of additionality.

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Process of notifying the project participants and
participants response

• The EB notifies project participants of decisions
  via the website http//cdm.unfccc.int/EB/Meetings
  /
• The EB achieves dialogue with PPs via the
  methodology panel and the secretariat
• The Meth Panel may propose revisions to approved
  methodologies in order to consolidate them in a
  more general methodology - NM0005 and NM0021 may
  already require consolidation once approved
• Project participants if asked to modify PPs
  methodologies can do so and resubmit them via the
  secretariat
• Much of the communication will be via the DOEs
  who communicate between the secretariat, the Host
  Party DNA, and the PP.

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Clearly discuss evaluation process of PDD

• PDD can be pre-validated
• Validation process initiated by DOE
• Approval by DNA
• New methodology assessed by EB
• Validation report for public scrutiny
• Validation by OE
• Registration by EB

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Lessons and recommendations

• Without a full mandate for the EB it is difficult
  to know how to extend the lessons to a future
  fully mandated institutions
• New projects should attempt to be stringent in
  their design
• Methodologies should strive for simplicity as far
  as possible
• Baselines methodologies should be calculated on
  ex-ante as opposed to ex-post bases (unless
  properly justified) as far as possible.

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What lessons taking into account the African
context can be learned?

• As expected the minority of CDM project
  activities (and no AEs) are from Africa the EB
  needs to report on barriers to regional and
  sub-regional distribution of projects African
  negotiators could make a call to this effect
  based on the Marrakech accord
• The COP/MOP shall further
• (b) Review the regional and subregional
  distribution of designated operational entities
  and take appropriate decisions to promote
  accreditation of such entities from developing
  country Parties.
• (c) Review the regional and subregional
  distribution of CDM project activities with a
  view to identifying systematic or systemic
  barriers to their equitable distribution and take
  appropriate decisions, based, inter alia, on a
  report by the executive board
• (d) Assist in arranging funding of CDM project
  activities, as necessary.

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What lessons taking into account the African
context can be learned?

• Africa needs to move on DNA establishment
• Africa needs to consider DOE establishment
• Africa could consider the possibility of
  cross-border bundling
• In Africa the number of projects will not be many
  and hence parties need to consider a piggy-back
  model
• The para. 46 of MP that deals with baseline
  scenarios where the emissions are projected to
  rise, need to be shaped to include projects where
  poverty/lack of infrastructure exists
• Congratulations of EB, methodology and
  accreditation panels on high degree of
  stringency, and Secretariat on implementing
  appropriate systems.