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Small Scale Projects – Learning from the CDM Paul Soffe

Explore the concept and advantages of small-scale projects in the carbon market. Learn about a dedicated facility providing CERs from small-scale projects and the key factors for their success. Case studies highlight lessons learned and innovative approaches in Honduras and the Philippines.

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Small Scale Projects – Learning from the CDM Paul Soffe

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  1. Small Scale Projects – Learning from the CDMPaul Soffe

  2. Small-scale Facility Concept • A dedicated facility providing buyers with CERs from small-scale projects • Facility participants structure their requirements, specifying: • Project type / Countries / Fixed price • Current buy orders from Government of Austria and Japan Carbon Finance • EcoSecurities sources all projects • Direct sourcing + global network • eg. E+Co joint venture (2E Carbon Access) • EcoSecurities prepares all project documentation • PDD, M&V plan etc. • Arranges validation with a DOE • Coordinates and oversees monitoring, verification and issuance • All project developer costs are covered by the facility • PDD, Validation, Registration • Only cost to developer is verification and annual Share of Proceeds after CERs are produced • Track-record – Small-scale Facility has registered 5 projects under CDM. One has issued CERs.

  3. Facility Structure Project #1 Master ERPA Buyer – Govt of Austria and JCF EcoSecurities Project #2 Project #3 Project #4 Individual ERPAs Project #5

  4. Key issues for SSc Project Success under carbon mechanisms • Minimise costs– all costs related with CDM project development, including third party costs for validation and registration have to be minimised • Simplicity - all documentation standardized • Speed – entire process process cannot be too long, SSc developers have limited budgets (time and cost) • Expertise – SSc need access to assistance with process • Financial value-added – prices for ERUs (CERs) for smallest project may need to be higher • Track-record – Demonstrating that JI SSc can work with the rapid approval and development of the first projects is very important

  5. Advantages for Buyers • Small-scale projects with high sustainable development benefits; • High-quality projects that have received business development services, thorough due diligence and assistance reaching financial closure – more likely to reach CER delivery targets; • Projects that have advanced through the CDM Development Process – PDD completed, validated, or registered; • Low transaction costs and high efficiency; and • Optimum equilibrium between high quality project assessment and low transaction costs. • Track-record: Small-scale Facility has registered 5 projects and 2 pending. One has received CERs.

  6. Case Study: La Esperanza Hydroelectric Project • Location: Western Honduras • Project type: Hydroelectric • Installed Capacity:12.73 MW • CO2e per year: 37,031 tons • CER buyer: World Bank • Current Status: Issued CERs • Lessons learned: • Partnerships • Engage with DNA early in the process • Additionality: include early • Start Early

  7. Case Study: Pig projects in the Philippines • Case Study: Small-scale pig projects • Location: Philippines • Project type: Anaerobic Digestion • Installed Capacity: 150 kW each • CO2e per year: 1,500 to 10,000 tons • CER buyer: Austria, JCF, and EcoSecurities • Current Status: Final validation • Lessons learned: • Difficult to keep transaction costs low • Economies of scale possible over time • Methodologies + data availability • Validation costs high

  8. Case Study: Hydro in Honduras • Case Study: Cuyamapa Hydroelectric Project • Location: Western Honduras • Project type: Hydroelectric • Installed Capacity:12.20 MW • CO2e per year: 38,552 tons • CER buyer: EcoSecurities through Austrian Facility • Current Status: 1st Registered Unilateral Project • Lessons learned: • Engage with DNA early in the process • Unilateral Project

  9. Lessons Learned • Bundles of SSc projects an attractive option for buyers to secure a number of projects • Under CDM rules it was possible to develop a large pipeline of projects for the Facilities • Uncertain what problems may be encountered during moniotirng, certification, and issuance stages • Other problems unrelated to CDM Executive Board • price expectations and forecast for CERs • host country approval can take a long time

  10. Conclusions • Make system for SSc projects as simple as possible to reduce transaction costs associated with carbon related aspects of project development • Any charges for by JISC must be kept low • Specify as much of JI cycle in detail ASAP. Clarity is important in building confidence that JI is workable • Do not re-invent the wheel • Utilise CDM baseline meths & additionality tools of SSc • Are any specific meths needed for JI SSc in addition to CDM meths (I do not know). If so develop them – SSc developers will not and cannot (they are by default relatively poor)

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