CDM Project Developers Workshop

1. CDM Project Developers Workshop

2. Session II • Boundaries & Leakage • Calculating emissions reductions • Any other issues

3. What is a project boundary? Project Boundary: The project boundary shall encompass all anthropogenic emissions by sources of greenhouse gases (GHG) under the control of the project participants that are significant and reasonably attributable to the CDM project activity. (Guidelines for Completing CDM-PDD, CDM-NMB and CDM-NMM)

4. What is reasonable and significant? • To date, the CDM Executive Board had not made a uniform ruling on what constitutes “reasonable” and “significant” emissions. Therefore project developers are required to demonstrate their reasoning and justify the choice of project boundary adopted when submitting their PDD. Slide source: IETA

5. What is reasonable and significant? • The GHG Protocol (forthcoming) Project Quantification Standard classifies changes in GHGs as a result of the project activity into two categories: • Upstream and downstream effects: changes in GHGs that occur up- and downstream of the project activity; and • Market effects:changes in GHG emissions that result when a project activity alters the quantity of goods/services available to other users, causing them to substitute or replace these goods/services in their production processes or consumption. • Provides tools to assess and quantify these effects and draw GHG assessment boundary accordingly. Leaves choice of boundary to project developer.

6. Upstream effects Upstream effects Upstream effects Project Activity Operation Project activity End of Life Project activity Startup / Construction Space Downstream effects Downstream effects Downstream effects Time GHG Protocol: GHG assessment boundary Source: WBCSD/WRI GHG Protocol Project Quantification Standard (draft).

7. GHG Protocol: GHG assessment boundary Construction/preparation (i) Are there any on-site practices or processes that give rise to GHG emissions during the construction/preparatory phase? (ii) Are there any other off-site inputs or outputs during the construction/preparation phase that give rise to GHG emissions or removals, e.g., transportation of heavy equipment over long distances? Operation (iii) Are there any on-site practices or processes that give rise to GHG emissions or removals during the operating phase? (iv) Are there any off-site inputs to or outputs from the project activity that give rise to GHG emissions or removals during the operating phase? Source: WBCSD/WRI GHG Protocol Project Quantification Standard (draft).

8. GHG Protocol: GHG assessment boundary End of life (v) Are there any practices or processes that occur on-site during decommissioning or at the end of life that give rise to GHG emissions or removals? (vi) Are there any off-site inputs to or outputs from the project activity that give rise to GHG emissions or removals during the decommissioning phase, e.g., off-site waste disposal, decommissioned capital equipment? Source: WBCSD/WRI GHG Protocol Project Quantification Standard (draft).

9. GHG Protocol: GHG market effects • For each project activity, is there an increase in the supply of any • goods or services to others? If yes, is a change in GHG emissions • likely? If not, some explanation of why there is likely to be no change • should be provided. • ii. For each project activity, does the GHG project reduce the availability • of any goods or services to others outside the site or location of the • GHG project? If yes, is there likely to be a change in GHG emissions? • If not, some explanation of why there is likely to be no change should • be provided. • iii. What is the nature of any market effect identified in (i) or (ii) above? • Is it a result of displacing the activities of a discrete number of • identifiable entities? Or is it the result of changes in supply and • demand in broader secondary markets with a large number of • unidentifiable consumers? Source: WBCSD/WRI GHG Protocol Project Quantification Standard (draft).

10. What is a project boundary? Project Boundary: Which emissions (i.e. emissions at which sources & sinks) will change based on the actions by the project developer own actions. Operational Guidelines for Project Design Documents of Joint Implementation Projects. Volume 1: General guidelines Version 2.2., Ministry of Economic affairs of the Netherlands, June 2003

11. Examples of Project Boundary Fuel Switch project • Red dotted line represents the project boundary based on the fact that: • emissions related to the fuel supply and grid cannot be influenced by the project participant (excluded) • emission to the end use can not be influenced by the project participant (excluded) Slide source: IETA

12. Examples of Project Boundary LFG Recovery project Dashed line represents the project boundary based on the fact that: • Emission related to the waste collection and transport can not be influenced by the project participant (therefore excluded) Slide source: IETA

13. Reasonable and significant • Rule of thumb for “significant”: Any emission larger then 1% of the total baseline emission is to be considered significant. • Rule of thumb for “reasonable”: Draw up a flow diagram of the project activity and then go at least one step before and after the project activities. Then see if emission can be reasonably altered by the project developer. Slide source: IETA

14. What is leakage? Leakage: Is defined as the net change of anthropogenic emissions by sources of greenhouse gas (GHG) which occurs outside the project boundary, and which is measurable and attributed to the CDM project activity. (Guidelines for Completing CDM-PDD, CDM-NMB and CDM-NMM) Conceptually, seems to constitute both upstream/downstream and market effects. Approved methodologies normally indicate the type of leakage that should be considered and how it is to be calculated.

15. Example of possible leakage in biomass boiler project Leakage could occur if the project diverts biomass from other users and thereby increases fossil fuel use. As per AM004 proposed project activity must demonstrate that: • The project will not deplete the supply of the biomass in question to the extent that it will affect the construction of planned biomass power plants; • There is no competition for supply of the biomass that will result in a decrease in the load factor of other biomass-fuelled plants; • The project will not deplete the supply of biomass to current users. Slide source: IETA

16. Example of possible leakage in an industrial fuel switching project Leakage Fugitive CH4 emissions from fuel production and CO2 emissions from fuel transportation are categorized as leakage. Emissions from fuel production/transportation is counted only if the fuel is produced/transported in a non-Annex I country. Slide source: IETA

17. Calculating emissions reductions For emissions reductions projects GHG Reductioni (t CO2e) = Baseline Emissions i – Project Activity Emissionsi,adjusted for leakage. Project Activity Emissionsj = GHG emissions for the project activity j in year i (in t CO2e) Baseline Emissionsi, = GHG emissions for the baseline scenario in year i (in t CO2e) Leakage: GHG emissions from the relevant upstream, downstream and market effects associated with each project activity j and corresponding baseline scenario in year i (in t CO2e)

18. Calculating GHG removals For biological removals: GHG Reductioni (t CO2e) = Baseline Carbon Stocks i – Project Activity Carbon Stocks,adjusted for leakage. Project Activity Carbon Stocksj = Carbon stocks from each pool (related to the project activity) in year i (in t CO2e) Baseline Carbon Stocksi, = Carbon stocks from each pool for the baseline scenario in year i (in t CO2e) Leakage: GHG emissions from the relevant upstream, downstream and market effects associated with the project activity and corresponding baseline scenario in year i (in t CO2e)

19. For more information, contact Alenjandro Lorea alorea@cce.org.mx Or Mahua Acharya acharya@wbcsd.org Some of the slides used in this presentation were developed by IETA. For more information, contact info@ieta.org