Objective:

1. Screening Tool for Pilot MDG Carbon projects Objective: This screening tool is intended to be used to structure project concept assessment to quickly determine project eligibility for registration for the pilot phase of MDG Carbon, and to identify areas of concern. The screening tool only addresses aspects related to 'carbon', and does not address other important project issues such as project proponent solvency, project financing etc. These must be addressed separately.  • The tool is divided into 9 simplified assessment flowcharts. The assessment is not intended to be exact, but requires some interpretation: • All screens give ‘A’ = A – looks good. • 1 ‘B’ = B, 1 ‘C’ = C, but several ‘B’s will result in a ‘C’ • 1 ‘C’ = C, but several ‘C’s means the project is going to be difficult (ie- ‘D’) • Any ‘D’ = D – unlikely to be eligible. • Assessment for a project concept may result in ‘A – B’ for projects that receive mostly A ratings, but have 1 or 2 parts that could be rated B pending further information. • Some project concepts will have one aspect that is critical and rates a C or even D, though all other screens rate A. In such cases, the overall ranking would be ‘C’ or ‘C-D’, but the user may choose to follow up on the critical rating to see if this can easily be resolved to improve the overall rating to ‘A’. • Note that the tool is intended to structure thinking – it assists, but does NOT REPLACE GOOD JUDGEMENT.

2. Screening Tool for MDG Carbon projects How to use: If the flowchart leads to an 'A' result, proceed to the next chart. Projects that result in 'A' on all charts should be considered as having no impediments (from 'carbon' perspective) to registration with MDG Carbon. A If the flowchart leads to any 'B' rating, this issue is a significant (but not major) concern. Users of the tool should continue through the screens to determine whether there are other areas of concern (ie more than one 'B' result). B If the flowchart leads to any 'C' result, this issue is a major concern. Users should continue through the screens, however if the flowchart leads to two or more 'C' results it may be difficult to overcome all of these major concerns. C If the flowchart leads to a 'D' at any point the project is unlikely to be eligible and the project should probably not be pursued as a 'carbon' project. D Notes to assist users are provided at the end of the screens, however where sufficient information is not available to answer a question in the screens, users should follow both paths (ie take 'yes' and 'no' paths) to ascertain the potential impact of the uncertainty. If either path results in a 'C' or 'D' result, this information is critical and should be sought before investing any further resources in project development.

3. Screen 1: General eligibility for CDM START Does project reduce, prevent or mitigate the release of 1 or more of the Kyoto gases [See appendix 3]? Project not relevant Does the project remove CO2 or other GHGs from the atmosphere? NO NO D YES YES Are reductions based on avoided deforestation?  go to sequestration page YES X NO Project not eligible Are reductions based on nuclear power, decrease in production/ project activity level or force majeure [1]? YES D NO Does project contravene or work against other international, regional or national treaties [2]? YES Project unlikely to be approved D NO Project unlikely to be eligible – see note [4]. Have project activities already started [3]? YES D NO Project not eligible for some buyers & unattractive to MDG Carbon Does the donor provide clear documentation that they do not have, and will not make any claim to the emission reductions? Is Official Development Aid (ODA) used in implementation of the project [5]? YES D NO NO YES B Usage of this finance (& all project financing) will require very clear & careful analysis & tracking to ensure it is not used in contravention of the Kyoto Protocol or the donor’s documented intent. Continue screening Are loans concessional and/or underwritten by ODA? Is loan finance used in any of the parts listed in [5]? Are any loans provided by International Finance Institutions [6]? YES YES YES NO NO NO Are any grants included in the project financing for tasks other than those listed in [7] Does grant include ODA or IFI loan underpinned by ODA? YES YES NO NO A A

4. Screen 2: Host country eligibility and approval of projects for CDM START Project not eligible for CDM in this country Is project in an Annex I country (see Appendix 2 for list of countries)? Is the project in an Annex II country (see Appendix 2 for list of country)? YES YES D NO NO Project is not eligible for CDM but may be eligible for JI JI Unlikely CDM project will be successful in this country Has the host country ratified the Kyoto Protocol [See Appendix 2 for list of countries]? NO Is ratification planned to be completed by 1/1/2008? NO D YES YES NO Does host country have an operating DNA [1]; [See Appendix 2]? Is a DNA in the process of being established now? NO C Unlikely project will be approved soon enough to be viable YES YES Will DNA be functional for approval before 1/1/2008? C NO YES DNA high risk of being impediment to project development Is the DNA likely to be able to operate effectively & efficiently by 1/1/2008 [2]? Does the DNA currently operate effectively [2]? NO NO C YES YES Need to work with host government to build DNA capacity B Project will not achieve DNA approval NO D Is project type likely to be accepted/incorporated into host governments sustainable development policies? Will the project likely satisfy the stated host country sustainable development policies and/or is host government actively supportive of project type? NO Need to work to make project attractive to host government’s SD policies C YES YES UNKNOWN A B Consult with host government on sustainable development policies

5. Screen 3: Additionality START Can it be clearly demonstrated that non-compliance with these laws is widespread? Is the project required by federal, state or municipal legislation or regulation? YES NO D Not eligible NO YES Were these policies implemented after 11 December 1997? Is overcoming this policy an important part of showing additionality? Are there relevant national or regional sectoral policies that give comparative advantage to higher emitting technologies (E+) [1]? Unlikely to be additional YES YES YES C Baseline establishment and additionality cannot include these policies NO NO NO B Were these policies implemented after 11 November 2001? Is excluding this policy an important part of showing additionality? Are there relevant national or regional sectoral policies that give comparative advantage to lower emitting technologies (E-) [2]? Unlikely to be additional YES NO YES C Baseline establishment and additionality cannot exclude these policies NO NO B YES Are there other barriers to project implementation [4]? Is the project the least cost option [3]? Unlikely to be eligible YES NO D NO YES Can project conservatively and transparently demonstrate barriers? Unlikely to be eligible YES NO OR UNKNOWN D Are there particular circumstances for this project that can clearly show why this project is different to local conditions? Is project common practice in the region? Is the project common practice in the country? YES Not eligible YES NO D NO NO YES Can project clearly demonstrate differences between national and local conditions, and that the project is not common practice locally? Significant risk this project will be rejected unless particulars of the project are clearly unique - B C YES Can project clearly show this? YES NO NO A B A Need to demonstrate that the project is not common practice

6. Screen 4: Baselines START Identification of sources is required before assessment of project viability can be made Has the project identified relevant sources of emissions in the project [1]? NO B YES Identification of a baseline scenario is required before assessment of project viability can be made Has the project determined a credible baseline scenario (ie an objectively reasonable description of what would happen in the absence of the project)? NO B YES Identification of baseline sources is required before assessment of project viability can be made Has the project identified relevant sources of emissions in the baseline [1]? NO B YES Any further delay in methodology approval will seriously threaten project viability Has the project identified an Approved Methodology that is applicable? (see Appendix 4) Is an applicable methodology confidently expected to be approved before 1 June 2007? NO NO C YES YES Reliable data can be difficult to attain, and this may prove a significant obstacle to baseline approval Does the project have relevant historical, market &/or sectoral data required for the baseline? Is the required baseline data easily and cheaply attainable [2] ? NO NO C YES YES Project should attain this data before committing extensive resources B Can emissions be monitored and verified using data generated from measurements of project fundamentals [3]? Are monitoring devices specifically for emissions available cheaply “off-the-shelf” in the host country [3]? Can project &/or location specific monitoring devices be developed and implemented at reasonable cost and time [4]? Costs of monitoring may be higher than income created. NO NO NO C YES YES YES B A Costs of monitoring will need to be carefully examined & strictly controlled

7. Screen 5: Ownership & Stakeholder engagement START Not possible to assess project viability without further site specific information Is project a generic, national approach/strategy that does not apply to a particular site [1]? Has the project selected a particular site/region for implementation? NO NO B YES YES Ownership can be an intractable issue & should be addressed before any significant project investment Has the project identified & documented ownership of emission reductions? Are there comparable projects that set a precedent of ownership for the project? C NO NO YES YES Project should confirm ownership using precedent as soon as possible. B Competing ownership claims can quickly ruin a project. This should be addressed before any significant investment. Are there comparable projects that set a precedent for resolving competing ownership claims for the project? Have potential claimants (including governments) waived ownership claims? Are there, or could there be, competing ownership claims? YES NO C NO YES NO Ensure the precedent is applicable & confirm undisputed ownership of ERs YES B Does project have reliable up to date information from recent feasibility studies? This will be necessary to determine implementation times and stakeholder engagements NO B YES Does project have reliable information from local sources to indicate stakeholders views on the project [2]? Stakeholder support is essential for registration Has initial stakeholder consultation been undertaken? NO NO - B C YES YES Can stakeholder concerns be reasonably addressed with changes to project and/or other measures? Project will not be eligible without stakeholder support Are stakeholders supportive of the project? - NO NO C D YES YES Adjust or redesign project to address concerns B A

8. Screen 6: Implementation time and emission reductions START Project only likely to be viable with functional voluntary market and/or post-2012 policy certainty Can project be implemented by 1/1/2008 [1]? Can project be implemented by 1/1/2009? Can project be implemented by 1/1/2010? NO NO NO - C D YES YES YES Are average project emission reductions > 25 ktCO2e/year? Project only likely to be viable with functional voluntary market and/or post-2012 policy certainty NO D YES Any time delay or delivery failure likely to result in project failure unless post 2012 or voluntary market established C Are average project emission reductions > 25 ktCO2e/year? Are average project emission reductions 5 -25 tCO2e/year? Project only likely to be viable with functional voluntary market and/or post-2012 policy certainty NO NO D YES YES Any time delay or delivery failure likely to result in project failure unless post 2012 or voluntary market established C Any time delay may imperil project viability B Are average project emission reductions > 25 ktCO2e/year? Are average project emission reductions 5-25 ktCO2e/year? Are average project emission reductions 1 – 5 ktCO2e/year? NO NO NO D Not viable YES YES YES A B C Delivery failure may imperil project viability Any time delay or delivery failure likely to result in project failure unless post 2012 or voluntary market established

9. Screen 7: Sequestration Important – see note [Z] before screening sequestration projects. START Methodologies have not been approved and considerable administrative and political hurdles remain Does project remove CO2 from the atmosphere (sequestration?) Is project based on avoided deforestation? Is project based on capture and storage technologies [1]? NO NO YES C NO YES YES Project not easily defined as a sequestration project D Is project based on avoided deforestation that is currently occurring to supply thermal energy for users? This is not an eligible CDM project. However project may be an eligible JI project if undertaken in Annex 1 country NO D YES Are average project emissions < 15ktCO2/year and <15MW capacity (where electricity is part of project? NO D Project not eligible YES Project not eligible Can the project clearly demonstrate that deforestation will be avoided? NO D YES These project types are difficult to demonstrate clear baselines and extensive monitoring will be required. No projects of this type have been validated as of 1/6/2006 - B C Is project based on revegetation or forest/ cropland/ grazing land management? These are not eligible projects for CDM but may be an eligible JI project if undertaken in and Annex 1 country Is project based on afforestation or reforestation [2]? YES NO D YES NO Other project types are not eligible for CDM or JI D Was land unforested on 31/12/1989? Project is not eligible NO D YES Even where projects are clearly eligible, substantial difficulties remain, in particular: complexities in quantification and monitoring, permanence of removals, time lag between project commencement and significant removals occurring – significant removals unlikely to occur before 2012 and hence financial and political risks. See also [Z] - B C

10. Screen 8: Safeguard Principles START Does the project adhere to the following 13 safeguard principles? Principle 1: The project respects internationally proclaimed human rights NO D Not eligible YES NO D Principle 2: The project is not complicit in human rights abuses Not eligible YES NO D Principle 3: The project respects dignity, human rights, cultural property and uniqueness of indigenous peoples Not eligible YES NO D Principle 4: The project does not involve involuntary resettlement Not eligible YES Principle 5: The project respects employees´ freedom of association and their right to collective bargaining NO D Not eligible YES Principle 6: The project does not involve any form of forced or compulsory labor NO D Not eligible YES Principle 7: The project does not employ any form of child labor NO D Not eligible YES Principle 8: The project does not involve any discrimination based on gender, race, religion or sexual orientation NO D Not eligible YES Principle 9: The project provides workers with a safe and healthy work environment NO D Not eligible YES Principle 10: The project takes a precautionary approach in regard to environmental challenges NO D Not eligible YES Principle 11: The project does not involve significant conversion or degradation of critical natural habitats NO D Not eligible YES Principle 12: The project does not involve corruption at any level NO D Not eligible YES Principle 13: The project does not involve the alteration, damage or removal of any critical cultural heritage NO D Not eligible YES A

11. Screen 9: MDG screen - Precluding significant negative impacts START How does the project impact MDG 1 (“Eradicate extreme poverty and hunger” [1])? Can this impact be mitigated or compensated? NO NEGATIVE D Not eligible - Eligible if impact sufficiently mitigated YES B C POSITIVE OR NEUTRAL How does the project impact MDG 2 (“Achieve universal primary education” [2])? Can this impact be mitigated or compensated? NO NEGATIVE D Not eligible - Eligible if impact sufficiently mitigated YES B C POSITIVE OR NEUTRAL How does the project impact MDG 3 (“Promote gender equality and empower women” [3])? Can this impact be mitigated or compensated? NO NEGATIVE D Not eligible - YES B C Eligible if impact sufficiently mitigated POSITIVE OR NEUTRAL Not eligible How does the project impact MDG 4 (“Reduce child mortality” [4])? Can this impact be mitigated or compensated? NO NEGATIVE D - Eligible if impact sufficiently mitigated YES B C POSITIVE OR NEUTRAL How does the project impact MDG 5 (“Improve maternal health” [5])? Can this impact be mitigated or compensated? NO NEGATIVE D Not eligible - Eligible if impact sufficiently mitigated YES B C POSITIVE OR NEUTRAL How does the project impact MDG 6 (“Combat HIV/AIDS, malaria and other diseases” [6])? Can this impact be mitigated or compensated? NO NEGATIVE D Not eligible - Eligible if impact sufficiently mitigated B C YES POSITIVE OR NEUTRAL How does the project impact MDG 7 (“Ensure environmental sustainability” [7])? Can this impact be mitigated or compensated? NO NEGATIVE D Not eligible Eligible if impact sufficiently mitigated - YES B C POSITIVE OR NEUTRAL How does the project impact MDG 8 (“Develop a global partnership for development” [8])? Can this impact be mitigated or compensated? NO Not eligible NEGATIVE D - YES B C Eligible if impact sufficiently mitigated POSITIVE OR NEUTRAL A

12. Appendix 1: References

13. Appendix 1: References (Cont.)

14. Appendix 1: References (Cont.)

15. Appendix 1: References (Cont.)

16. Appendix 2: Country status (as of 1 June 2006)

17. Appendix 2: Country status (Cont.) (as of 1 June 2006)

18. Appendix 2: Country status (Cont.) (as of 1 June 2006)

19. Appendix 2: Country status (Cont.) (as of 1 June 2006)

20. Appendix 2: Country status (Cont.) (as of 1 June 2006)

21. Appendix 2: Country status (Cont.) (as of 1 June 2006)

22. Appendix 3: Kyoto Gases and Global Warming Potentials The six greenhouse gases addressed by the Kyoto Protocol are: Carbon dioxide (CO2), Methane (CH4), Nitrous oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs) and Sulphur hexafluoride (SF6). The table below provides Kyoto gases and their GWPs for a 100-year time horizon published by the Intergovernmental Panel on Climate Change (IPCC) in their 1996 reporting guidelines for national GHG gas inventories (www.ipcc.ch).

23. Appendix 4: Approved methodologies (as of 1 June 2006)

24. Appendix 4: Approved methodologies (Cont.) (as of 1 June 2006)