Evaluation of CDM project proposals by CDM Executive Board

1. Evaluation of CDM project proposals by CDM Executive Board Main issues based on examples By Steve Thorne SouthSouthNorth Addis Ababa 20th October 2003

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

3. EB responsibilities (from Decision 17/CP.7Modalities 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; …

4. 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

5. 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).

6. Applicant Entities

7. Source of projects submitted

8. Project types

9. Who submitted projects

10. Status of projects

12. 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.

13. 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.”

14. 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.”

15. 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.

16. 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.

17. 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.”

18. 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.

19. 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 PP’s 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.

20. 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

21. Slide 7

23. 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.

24. 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.”

25. 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 M&P 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.