Experiences from Determination and Verification of JI projects in Russia

1. Experiences from Determination and Verification of JI projects in Russia Challenges, Pitfalls and Hints for Improvement Moscow, 26 and 27 April, 2007 International Conference „Kyoto Protocol: Opportunities of the Carbon Market for Russian Enterprises“ Thomas Kleiser TÜV SÜD Industrie Service GmbH

2. Agenda 1.Overview TÜV SÜD and Carbon Management Services • TÜV SÜD – Activities and Experiences as AIE 3. Determination and Verification of JI- projects: Challenges and Pitfalls / Hints for Improvement 4. Resumee and Expectations Abteilung:

3. 1. Overview: TÜV SÜD and Carbon Management Services Abteilung:

4. What TÜV SÜD Does Certification Testing Consulting Training on behalf of industry, trade and commerce, public institutions and private individuals - > 12.000 employees - founded more than 140 years ago - 130 offices in more than 60 countries worldwide - 1 bn. € in sales www.tuev-sued.com Abteilung:

5. TÜV SÜD Industrie Service and CMS TÜV SÜD Industrie Service • Currently around 2.500 employees • The experts of the TÜV SÜD Industrie Service branch have decades of experienceacross almost all fields of technologies. • TÜV Industrie Service provides support on issues ranging from industrial safety to cost and risk management, from occupational health and safety to environmental protection, from feasibility studies to technical solutions of monitoring. Department Carbon Management Service (CMS) – since 1999 • The team of the Department Carbon Management Service (CMS) maintains a team of around 16 professionals in its HQ in Munich. Globally about 55 auditors are active for CMS in the field of CDM and JI. A key asset of CMS is the high level of technical expertise present in-house. • Validation/Determination and verification of more than 400 CDM and JI projects • Certification of Renewable Energy (RECS) Abteilung:

6. Reference List (CDM / JI) • - Latvia • - Marocco- Mexico • Moldova • Madagascar • Nicaragua- Panama- Philippines • Peru- Poland • - Romania- Russia • - Slovakia • South Africa • Trinidad • Uganda • Ukraine • and many others…. Project types: - renewable energy - energy efficiency - all types of industrial projects - fuel switch- landfill gas - afforestation (AR) Abteilung:

7. Accreditation for CDM scopes Abteilung:

8. 2. TÜV SÜD Activities and Experiences as AIE Abteilung:

9. Reminder: JI Eligibility Requirements • Annex B Party to the Kyoto Protocol • Designated focal point • National guidelines and procedures • AAU calculated / Initial Report* • National registry in place for tracking assigned amount • National system in place for estimating emissions/removals • Submission of most recent required emissions inventory • Accurate accounting of assigned amount and submission of information Track 2 procedure Verification procedure under JISC Track 1 procedure Verification procedure according to host Party rules *Remark: Canada, Russia, Bulgaria and Romania have not submitted yet their Initial Reports; deadline was 1. January 2007 !! No eligibility needed to develop and run JI projects, eligibility only relates to ERU issuance, transfer and acquisition Abteilung:

10. Reminder: JI Process of Determination and Verification Project DesignPDD Proj.Part. ERUs DFP Host CountryLoE DeterminationDet.-Report AIE Acceptance of Verification DFPsLoAs Initial and Periodic Verification Verification Report AIE DFP Host Country Project-RegistrationJISC Implementationof Project and Monitoring System MonitoringMonitoring Report Abteilung:

11. Reminder: Role of AIEs • Determination and verification of JI track 2 projects • Carrying out GSP on JI-SC website • Assessment and approval of project specific baseline and monitoring methodologies • Assessment of compliance with national regulations and procedures • Initiating of registration of JI track 2 projects (on behalf of Annex I host country) by uploading final reports and LoA s (!) to JI-SC. Abteilung:

12. CMS - Activities and Experiences under JI • TÜV SÜD - Activities and Experiences under JI • (Pre-) Determination of more than 45 JI projects in almost all countries in Eastern Europe as well as projects in some old EU-15 countries • among these: 16 JI-projects in Ukraine and 16 JI-projects in Russia • verification started in around 12 JI projects • more than 15 projects published on JI-SC website for Global Stakeholder Consultation Process (GSP) currently • First project registered under track 2: „Podilsky Cement in Ukraine“ Abteilung:

13. Project Types Project Types determinded/verified by TÜV SÜD - Rehabilitation/Improvement of district heating networks and power plants - Coal mine methane utilization projects - cogeneration projects - Energy efficiency projects (for example in steel industry) - Fuel switch projects (coal to gas; coal to biomass) - Landfill projects - Renewable energy projects (wind and hydro power) - Cement projects Abteilung:

14. Timing of Determination/Verification Determination: 2 ½ - 6 month depending on project and PDD quality Additional issue: in case the validation period can be kept short the risk to adjust the PDD according to new rules/regulations can be minimized. Verification: No predefined period, but can be decided by the PP. Advisable: once per year as this complies with fiscal year and other reporting formats An Initial Verification after project implementation makes always sense at least in complex projects Abteilung:

15. Decisive parameters in determination/verification process • Decisive parameters for determination/verification • complexity of the project (small scale/large scale/bundle of sites and methodologies) • applied methodology (CDM or project-specific) • location of the project • availability of local auditors • country specific requirements – national guidelines and procedures • quality of submitted documents • Time for issuance of the LoAs Abteilung:

16. Assistance for project developers - VVM Guidelines Validation and Verification Guidelinesfor CDM and JI Projects See: http://www.vvmanual.info The VVM is an initiative of World Bank, IETA and all Applicant Entities, which aims to harmonize the process and quality of all GHG assessments. At the same time the VVM gives guidance for PDD developers regarding requirements in the validation and verification process. Abteilung:

17. Determination and Verification of JI Projects: Challenges and Pitfalls / Hints for Improvement Abteilung:

18. Determination Process – Different Steps • Different steps of Determination: • Pre-check of the project documentation • Desk review of PDD, baseline study, monitoring plan as well as further documents such as Business Plan, Technical Study etc. • On-site visit/audits: visit of the project location, audits/discussions with the project owner and investors, consultation of local and state authorities (as far as possible), contacts to local stakeholders, identification of national requirements (stakeholder process, EIA), assessment of approval process (licenses, permits, ownership etc.), additionality of the project • Starting of the global stakeholder process (parallel to 2-3) via JI-Sc website • Draft determination protocol (+ report) • Issuing of the final determination report with information reference list and determination protocol Abteilung:

19. Main Topics/Issues in the Determination Process • Main topics of the assessment: • Project documentation – project history – project motivation • Additionality - additionality tool for CDM projects - business plan, barriers, risks etc. • Crediting period/project lifetime • Applied technology and technological issues • Baseline study – correctness of scenario and assumptions (proof of given information in the PDD) • Monitoring Plan – concept, responsibilities, maintenance, calibration, emergency case, internal reviews, trainings etc. • Environmental Impact Assessment • Local Stakeholder Process • Results of the Global Stakeholder Process Abteilung:

20. Experiences from Determination of JI-Projects in Russia Abteilung:

21. Experiences from Determination In general: Our experiences are in most cases positive! • most PDDs are well-developed already in the initial phase of determination • in most cases good data basis • high standard in technical planning and technical solutions • well-developed monitoring concepts in most PDDs Difficulties: • in most cases development of a project-specific methodology and/or bundling of (CDM-) methodologies • very complex projects (bundle of a number of measures in on project) • missing understanding of requirements for JI-projects (“not business as usual” Abteilung:

22. Experiences from determination of JI projects Observed Problems (1): • Often limited understanding of “additionality” • Missing experiences with “additionality tool”/how to proof additionality • Mixture of business-as-usual measures and additional JI-measures • Project start without clear evidence for JI-consideration at the beginning • International accepted default values not always applied / proof for applied national values is sometimes not sufficient • Problems in defining project boundaries correctly/ not all sources and emissions included • LoA – missing national guidelines and procedures (DFP?) Abteilung:

23. Experiences from Determination of JI-Projects Observed Problems (2): • After Project-Implementation: Changes of project measures/technical solutions during project lifetime • Change in project boundaries during the lifetime of the project - Changes in the monitoring plan (missing sensibility what a JI project means) • Limited Environmental Impact Assessment • Limited local stakeholder process • Not all “JI-documents” in English available Abteilung:

24. Pitfalls: Project description The description of the project history and motivation is too limited. The description of the technical equipment to be applied in the project is not detailed enough or even missing. The management structure of the project and the corresponding responsibilities are not clearly described or missing. Risk management tools in case of unintended developments affecting the projects’ success but also the generation of carbon credits is not defined clearly enough. Abteilung:

25. Pitfalls: Application of Methodologies Expectations are sometimes too high regarding the contribution of the AIE to the application of already available methodologies (CDM) and the acceptance of project-specific methodologies differ from actual frame conditions. Not all solutions are acceptable under JI! And the project developer not the AIE has to develop the project-specific methodology! Applied methodologies are sometimes only rarely described. Conditions and consequences of the application of the methodologies are sometimes unknown! A lot of projects use a mix of different methodologies – sometimes a confusion in the description of the methodologies appears. Old CDM-methodology versions are applied. Abteilung:

26. Pitfalls: Monitoring Monitoring plans are sometimes not detailed (in technical issues) and comprehensive enough in the stage of PDD presentation for determination. Quality assurance due to national standards, but differences in standards Missing Calibration of non-commercial meters Routines and procedures are well performed by the motivated project team, but mostly not documented in a management system – risk for the future No project specific manual (work instructions, organization) available. Abteilung:

27. Pitfalls: Environmental Impact Assessment • EIA: Often only limited elaborated • National and international requirements unknown • only some partial aspects of the environmental impacts are • considered • often only comment: project is per se environmental additional • Consequence: problems with the “Letter of Approval” Abteilung:

28. Pitfalls: Local Stakeholder Process The project should be presented not only to local authorities but the actual local stakeholders (neighbours). Appropriate media to do so should be used. Otherwise the local stakeholder process is not very elaborated and limited to support from local and regional authorities. In order to take potential comments into account the stakeholder process should take place early in advance. Abteilung:

29. Experiences: Global Stakeholder Process Stakeholders and Parties contribute rarely to the global stakeholder process but the number of comments is increasing since JI Guidelines are available and publishing via JI-SC website is possible. The chance to comment on projects is mainly only taken by accredited observer organisations as environmental NGOs. Some comments come from competitors. Most comments given are negative. The number of comments for JI projects is lower than for CDM projects. TÜV SÜD welcomes all comments and takes them in its conclusion into account. Abteilung:

30. Experiences from Verification Abteilung:

31. Experiences from Verification Observed Problems (1): Project Implementation • unexpected problems with applicability of methodolgy • interpretable descriptions of monitoring method • missing approvals or licenses • inconsistencies of external data sources • use of accuracy indication given by equipment manufacturers • no availability of local support (e.g. accredited laboratories) Abteilung:

32. Experiences from Verification Observed Problems (2): Data Management • consistency in time over reporting period • data transfer between multiple computerized systems • time demand for consolidating data • verifiability of data processing (software codes, excel spreadsheets) • missing documentations • „private Know-How“ of single employees Abteilung:

33. Experiences from Verification Observed Problems (3): Quality Management • missing description of procedures and processes • availability of proofs (e.g. calibration documents) • missing investigation on representativity of samples (problems with confidence intervals) • missing calibration • access to plausibility parameter, which can deliver required level of assurance Abteilung:

34. Solutions • use of “best practice” in monitoring and quality assurance • reference to accepted standards- norms, - metering equipment,- Third Parties for external services • maintenance of a project-specific QM System • inclusion of the determination of data uncertainty into MP • consideration of conservativeness • development of prepared (e.g.) spreadsheets for later use Abteilung:

35. Advantage: Initial Verification • necessity depends on the size of the project (transaction costs) and the requirements of the involved parties • latest a first verification at the end of the first year always makes sense • an independent assessment of the monitoring plan before starting the project is helpful • delivers initial input for interim reports and internal reviews

36. 4. Resumee and Expectations Abteilung:

37. Resumee Resumee: - Nearly all JI projects determined by us can or could run under Track 2 and are able to fulfil the requirements set up by the JI-SC - Knowledge of additionality needs to be improved • In some cases major adjustments of the projects will be necessary; also experiences from CDM should be considered in the baseline concept and monitoring plan. • deficits in monitoring plans cause problems in verification in some cases • National guidelines and procedures need to be installed soon • Guidance for EIA/Stakeholder Consultation is needed! Abteilung:

38. Expectations Expectations: • Use the experiences from CDM for your projects! • Contact the AIEs in an early stage of the project in case you are not sure about your project! • Start documentation of your JI-project from the very beginning • Cooperate with experienced project developers (knowing national and international regulations) • Spend more time at the beginning – this will ease the future implementation of the project • Use the chances of an Initial Verification! Abteilung:

39. Thank you for your attention! Thomas Kleiser Tel. ++49 89 57 91 – 11 86 Thomas.Kleiser@tuev-sued.de www.netinform.net Abteilung:

40. TÜV Süd Industrie Service GmbH Carbon Management Service Thomas Kleiser Tel. ++49 89 57 91 – 11 86 Thomas.Kleiser@tuev-sued.de www.netinform.net Abteilung: