8 th May 2011 Gareth Phillips Chairman, Project Developer Forum

1. UNFCCCComplexities in demonstration of additionality of a POA: Perspective of a Project Developer  8th May 2011 Gareth Phillips Chairman, Project Developer Forum Chief Climate Change Officer, Sindicatum Carbon Capital Ltd

2. Overview • The headline benefit of PoA is reduced transaction costs due to the presumed application of previously approved baseline and additionality tests • In practice, this is not materializing • Why not and how can we enable it? Project Developer Forum | UNFCCC PoA Workshop, Bonn

3. Background • At EB 60 (15th April): “The Board clarified that a full additionality assessment is not required in the context of component project activities (CPA), rather the confirmation of additionality for CPAs should be conducted by means of the eligibility criteria.” • Thus, the emphasis is on compliance with the eligibility criteria which are defined in the PoA DD The POA DD shall include the following information…. • Definition of eligibility criteria for inclusion of a project activity as a CPA under the PoA, which shall include, as appropriate, criteria for demonstration of additionality of the CPA, and the type and/or extent of information (e.g. criteria, indicators, variables, parameters or measurements) that shall be provided by each CPA in order to ensure its eligibility; (EB55) Project Developer Forum | UNFCCC Technical Workshop, Kiev

4. In practice… • In practice, this requirement seems to have resulted in the repetition of the baseline selection and additionality test from the PoA DD in the CPA DD • Where the technology enables the same data and arguments to be used, the DOEs can sample • Where the technology does not permit this, the CPA DD becomes very long and the DOE cannot sample Project Developer Forum | UNFCCC Technical Workshop, Kiev

5. Two reasons why additionality is being complicated. (1) • The template for the CPA DD contains the following sub-headings: • B.2. Justification of the why the CPA is eligible to be included in the Registered PoA : • >>  • B.3. Assessment and demonstration of additionality of the CPA, as per eligibility criteria listed in the Registered PoA: • >> • Thus DOEs expect to see details of additionality at the CPA level. Project Developer Forum | UNFCCC Technical Workshop, Kiev

6. Two reasons why additionality is being complicated. (2) • Some technologies are not suited to one single proof of baseline and additionality whilst others are. • For example, CFLs are well suited and it is possible to provide one baseline and additionality assessment for a country or region • The eligibility criteria are then based on technology and geographic location. • Heat generation from biomass is not well suited, since the baseline may be different in different locations and the costs of plant may be different. Hence this kind of PoA requires re-demonstration of baseline and additionality in each CPA. • In the latter case the DOE will wish to assess each CPA DD as if it were a normal CDM project Project Developer Forum | UNFCCC Technical Workshop, Kiev

7. Proposed solutions • Implement the guidance from EB 60 to confirm that the emphasis is on demonstrating compliance with the eligibility criteria • Replace sub-headings B2 and B3 in the CPA DD with one sub-heading as follows: • B2: Demonstration of compliance with eligibility criteria • >> • Thus the PPs are able to address the eligibility criteria, with or without the re-setting of baseline and proof of additionality as appropriate Project Developer Forum | UNFCCC Technical Workshop, Kiev

8. Proposed solutions • This means that there is flexibility for PPs to establish the baseline and prove additionality once and for all in the PoA DD or do so on a CPA DD level • In the latter case, the principle advantages of PoA may be lost, but at least PPs have the choice. • Part of the solution may also be to reduce the emphasis on PoA as the only way to scale up the CDM and focus efforts on designing other types of methodologies which can work better than existing AM and AMS, with or without PoA. Project Developer Forum | UNFCCC Technical Workshop, Kiev

9. Proposed solutions • With regard to changes in project activity, there is a real risk that a change in a CPA DD relative to the PoA DD could render it ineligible • There is an urgent need for (sensible) guidance on this matter before the situation arises • In the meantime, to avoid this risk, PPs must be careful not to be explicit about technical details which are not required in the PoA DD Project Developer Forum | UNFCCC Technical Workshop, Kiev

10. Conclusions • Baselines and additionality are complicated anywhere in the CDM • PoA was designed to remove this barrier by validating the baseline and additionality in the PoA DD and then ensuring each CPA was eligible to use the same arguments • This approach has been lost somewhere along the way • If PoA is to fulfill even a fraction of its desired potential, we need to redesign the guidance and CPA DD template accordingly Project Developer Forum | UNFCCC Technical Workshop, Kiev