GOLD STANDARD VALIDATION REPORT GAUTENG, FREE STATE, MPUMALANGA, LIMPOPO & NORTHERN CAPE CFL REPLACEMENT PROJECT (1) IN SOUTH AFRICA

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1 GOLD STANDARD VALIDATION REPORT GAUTENG, FREE STATE, MPUMALANGA, LIMPOPO & NORTHERN CAPE CFL REPLACEMENT PROJECT (1) IN SOUTH AFRICA REPORT NO REVISION NO. 01 DET NORSKE VERITAS

2 Date of first issue: ConCert Project No.: PRJC CCS-ITA Approved by: Michael Lehmann Client: BNP Paribas Organisational unit: Accredited Climate Change Services Client ref.: Mr. Francois Carré DNV CLIMATE CHANGE SERVICES AS Veritasveien 1, 1322 HØVIK, Norway Tel: Fax: Org. No: NO MVA Summary: Project Name: Gauteng, Free State, Mpumalanga, Limpopo & Northern Cape CFL Replacement Project (1) in South Africa UNFCCC Reference Number: 7478 UNFCCC Project Registration Date: 10 October 2012 Gold Standard Reference Number: GS1139 Country: South Africa Methodology: AMS-II.J Version: 04 GHG reducing Measure/Technology: Demand side activity for efficient lighting technology ER estimate: tco 2 e per year (average) Size Large Scale Validation Phases: Desk Review Follow up interviews Resolution of outstanding issues Validation Status Corrective Actions Requested Small Scale Clarifications Requested Full Approval and submission for registration Rejected In summary, it is DNV s opinion that the project activity Gauteng, Free State, Mpumalanga, Limpopo & Northern Cape CFL Replacement Project (1) in South Africa, as described in the PDD, version 06 of 13 August 2012, and in the GS Passport version 02 dated 4 March 2013 meets all relevant Gold Standard requirements for CDM projects. DNV thus requests the registration of the project as a Gold Standard CDM project activity in the Gold Standard Registry. Report No.: Subject Group: Environment Indexing terms Report title: Gauteng, Free State, Mpumalanga, Limpopo & Northern Cape CFL Replacement Project (1) in South Africa Work carried out by: Francesca Feller, Grant Little, Giovanni Tenderini Work verified by: Andres Espejo, Chandrashekara Kumaraswamy, Kaliaperumal Thamizharasi Date of this revision: Rev. No.: Number of pages: Key words Gold Standard GS CER Additionality Sustainable Development No distribution without permission from the client or responsible organisational unit free distribution within DNV after 3 years Strictly confidential Unrestricted distribution 2009 Det Norske Veritas AS All rights reserved. This publication or parts thereof may not be reproduced or transmitted in any form or by any means, including photocopying or recording, without the prior written consent of Det Norske Veritas AS. Head Office: Veritasvn. 1, N-1322 HØVIK, Norway GS Validation Report Template, version 01,

3 Table of Content Page ABBREVIATIONS... III 1 INTRODUCTION Objective Scope GHG Project Description 1 2 METHODOLOGY Desk review of the project design documentation Follow-up interviews with project stakeholders Resolution of outstanding issues Internal quality control Validation team 9 3 GOLD STANDARD VALIDATION FINDINGS PROJECT ELIGIBILITY ACCORDING TO GS REQUIREMENTS Scale of the project activity Host country or state Type of project activity Greenhouse gases Official Development Assistance (ODA) Project timeframe Other certification schemes 12 5 ADDITIONALITY SCREEN ACCORDING TO GS CRITERIA Public announcement Conservative approach check of the baseline scenario Technology transfer and/or technology innovation 13 6 SUSTAINABILITY ASSESSMENT GOLD STANDARD CRITERIA FOR STAKEHOLDER CONSULTATION PRE-FEASIBILITY ASSESSMENT AND DISCUSSION OF GOLD STANDARD FEEDBACK SUSTAINABILITY MONITORING PLAN VALIDATION OPINION Page i

4 Appendix A Gold Standard Validation Protocol Appendix B Curricula Vitae of the Validation Team Members Page ii

5 Abbreviations CAR CDM CER CFL CL CO 2 e DMS DNA DNV DSM DOE DRC CDM-EB EIA EPB ER ESCOs FAR GHG GWP GS GS-TAC ICL LSC KP MP NGO PDD SV tco 2 e UNFCCC GS-VVM Corrective Action Request Clean Development Mechanism Certified Emission Reduction Compact Fluorescent Lamp Clarification Request Carbon dioxide equivalent Data Management System Designated National Authority Det Norske Veritas Demand Side Management Designated Operational Entity Development and Reform Committee CDM Executive Board Environmental Impact Assessment Environmental Protection Bureau Emission Reduction Energy Services Companies Forward Action Request Greenhouse gas(es) Global Warming Potential Gold Standard Gold Standard Technical Advisory Committee Incandescent Lamp Local Stakeholder Consultation Kyoto Protocol Monitoring Plan Non-governmental Organisation Project Design Document Site Visit Tonnes of CO 2 equivalents United Nations Framework Convention on Climate Change The Gold Standard Validation and Verification Manual for CDM Projects Page iii

6 1 INTRODUCTION BNP Paribas has commissioned DNV Climate Change Services AS (DNV) to perform a validation of the Gauteng, Free State, Mpumalanga, Limpopo & Northern Cape CFL Replacement Project (1) in South Africa (hereafter called the project ) in relation to the Gold Standard (GS). The project has been registered as a CDM project on 10 October 2012 (UNFCCC Reference No. 7478) /51/. Hence, all the UNFCCC requirements have been met as set by the Kyoto Protocol, the Marrakech Accords and relevant guidance by the CDM Executive Board. The project has been listed with the Gold Standard Registry (Project ID: GS1139) as a proposed Gold Standard project and DNV has performed the validation of the project on the basis of Gold Standard, version 2.1 /38//39/. 1.1 Objective The objective of the validation in accordance with the GS for CDM projects is to have an independent third party assess that the project design of a GS CDM project fulfils the requirements set out by the GS. The GS validation seeks premium quality carbon credits, by ensuring that the CDM project meets the additionality requirements posed by the GS and that the project results in real and measurable benefits to local stakeholders. Hence, the validator will confirm that the project design is sound and reasonable and meets the relevant criteria. This implies that the project, its baseline and the monitoring plan must be in compliance with relevant UNFCCC and host party criteria, as well as the GS specific criteria. 1.2 Scope The validation scope is defined as an independent and objective review of the project design document (PDD) and other relevant documents. The information in these documents is reviewed against the GS requirements based on the recommendations in the Gold Standard Requirements and Toolkit version 2.1 /38/. The validation is not meant to provide any consulting towards the project participants. However, stated requests for clarifications and/or corrective action requests may have provided input for improvement of the project design. 1.3 GHG Project Description The project s location is defined as the provinces of Gauteng, Free State, Limpopo, Mpumalanga and Northern Cape in the South Africa. Municipalities involved in the project are listed and defined by relevant coordinates. The objective of the project activity is to boost the energy efficiency of South Africa s residential lighting stock by replacing working Incandescent Compact Lamps (ICLs) with up to Compact Fluorescent Lamps (CFLs) free of charge to households in the municipalities of the following provinces: Gauteng Free State Page 1

7 Mpumalanga Limpopo Northern Cape The description of the project activity provided in the GS Passport was verified to be complete, accurate and clear by means of: A site visit, during which representatives of the DNA /65//66/, of the project participants /68//67//68//72//71/, of the project manager of the CFLs distribution /75//76/, of the monitoring team /74//73/ and of the carbon consultant /70/ have been interviewed. The review of the procedures used by the project manager (ESCO Requirements Document /18/), the monitoring guidelines provided by the monitoring team (Monitoring & Verification activities /17/) and Eskom Holdings SOC Limited Integrated Report 2011 /59/. The review of the summary of the database of all distribution/destruction data, prepared by Karebo System Ltd, the project implementation manager of the project activity /19/. The project activity involves the substitution of working ICLs with CFLs providing equal or better luminosity. The project participant demonstrated in the PDD that the incandescent lighting replacement would lead to an annual electricity saving of kwh for each CFL installed. The annual electricity saving of kwh is the maximum possible estimation, since it has been calculated with the highest possible ICL replacement in terms of wattage (100 W). DNV considers the project description of the project contained in the GS Passport to be complete and accurate. Page 2

8 2 METHODOLOGY The validation consisted of the following three phases: I a desk review of the project design documents II follow-up interviews with project stakeholders III the resolution of outstanding issues and the issuance of the final validation report and opinion. The following sections outline each step in more detail. 2.1 Desk review of the project design documentation The following tables list the documentation that was reviewed during the validation Documentation provided by the project participants /1/ RAMP Carbon, BNP Paribas, Eskom Holdings SOC Limited: CDM-PDD for project activity Gauteng, Free State, Mpumalanga, Limpopo & Northern Cape CFL Replacement Project (1) in South Africa, version 01 dated 12 July 2011 and version 06 dated 13 August 2012 /2/ RAMP Carbon, BNP Paribas, Eskom Holdings SOC Limited: Gold Standard Passport for project activity Gauteng, Free State, Mpumalanga, Limpopo & Northern Cape CFL Replacement Project (1) in South Africa, Version 02 dated 4 March 2013 and version 3 date 22 September 2014 /3/ RAMP Carbon: Gold Standard Local Stakeholder Consultation Report, 25 March 2013 /4/ South Africa, Department of Environmental Affairs and Tourism: Emissions of Mercury Associated with Coal-Fired Power Stations in South Africa, February 2010 /5/ Eskom Holdings SOC Limited: The safest way to handle your household s biggest energy saver, June 2010 /6/ Eskom Holdings SOC Limited: CFL Recovery, Recycling & Disposal Implementation Guidelines, 7 July 2011 /7/ Eskom Holdings SOC Limited: Management of fluorescent tubes, compact florescent lamps (CFLs) and mercury-containing devices, 3 November 2011 /8/ Institute of Waste Management of Southern Africa: Certificate of membership, 1 July 2010 /9/ The Skills Matrix: Certificate of Competence, 22 August 2010 /10/ Gauteng Provincial Government: Certificate of Registration, 30 September 2010 /11/ Gundo Engineering: Audited incandescent lamps count sheet, 22 February 2011 /12/ Gundo Engineering: Audited incandescent lamps count sheet, 10 May 2011 /13/ Enviroserv: Safe disposal certificate, 10 August 2011 /14/ Gundo Engineering: Waste manifest document & safe disposal certificate, 19 March 2011 /15/ Dantran: Dangerous goods training & assessment, 28 July 2011 /16/ Eskom Holdings SOC Limited: Stakeholder consultation session report /17/ Markus Storm: Eskom CDM CFL Project M&V Activities, 3 November 2011 /18/ Karebo Systems Ltd: ESCO requirements document, 27 November 2009 Page 3

9 /19/ Karebo Systems Ltd: Summary of CFL/ICL replacement database, dated 18 July 2012 /20/ Eskom Holdings SOC Limited: Minutes of the Eskom board of directors (board) meeting (B3/ ) held at megawatt park, in the huvo nkulu meeting toom, on Thursday, 27 September 2007 from 09H30 15H30, 27 September 2007 /21/ Eskom Holdings SOC Limited: Annex 2 Background Information Document, 31 January 2012 /22/ Rodrigo Castellanos: Eskom CDM Projects - GS Process Clarification, 9 February 2012 /23/ Eskom Holdings SOC Limited and The Gold Standard Foundation: Memorandum of Understanding (MoU), dated 12 February 2012 /24/ Eskom Holdings SOC Limited: Declaration of non-use of official development assistance by project owner, 3 February 2012 /25/ Eskom Holdings SOC Limited: Guidelines for Submissions to Exco Investment & Capital Assurance Subcommittee Meeting (ICAS)/Boards Investment & Financing Committee (IFC), May 2009 /26/ Eskom Holdings SOC Limited: History and Chronology of Eskom CFL CDM Project, April 2011 /27/ Eskom Holdings SOC Limited: Stakeholder/Participants list, 20 June 2011 /28/ Eskom Holdings SOC Limited: Original feedback forms, 20 June 2011 /29/ Eskom Holdings SOC Limited: CFL CDM stakeholder participative session Cape Town City, 20 June 2011 /30/ Eskom Holdings SOC Limited: Evaluation form: CFL CDM stakeholder participation workshop, Eastern region DBN, 22 June 2011 /31/ Eskom Holdings SOC Limited: CFL CDM stakeholder participative session JHB/PTA 24 June 2011 /32/ UN High Commission for Human Rights: Embedding Human Rights in Business Practice II, 27 March 2008 /33/ Karebo Systems Ltd: The Rollout of 1.5 Million CFL Lamps to Replace Incandescent Lamps in the Central, Northern and Eastern Regions of Eskom Report 3, 16 February 2011 /34/ Karebo Systems Ltd: Screenshot of the Data Management System, dated 23 February 2012 /35/ Karebo Systems Ltd: Job Statistics for Eskom CFL Greenfield Programme 2011, dated 23 February Letters of approval /36/ Department of Energy (DNA of South Africa): Letter of approval dated 26 March 2012 /37/ Ministry of Ecology, Sustainable Development, Transports and Housing (DNA of France): Letter of approval dated 16 May Methodologies, tools and other guidance by The Gold Standard /38/ The Gold Standard Requirements Version 2.1, 01 July 2009 /39/ The Gold Standard Toolkit (and annexes) Version 2.1, 01 June 2009 Page 4

10 2.1.4 Methodologies, tools and other guidance by the CDM Executive Board /40/ CDM Executive Board: Validation and Verification Manual, Version 1.2 /41/ CDM Executive Board: Baseline and monitoring methodology AMS-II.J, Version 04 /42/ CDM Executive Board: Guidelines on the demonstration of additionality of small-scale project activities, Version 09, 20 July 2012 /43/ CDM Executive Board: Tool to calculate the emission factor for an electricity system, Version 2.2.1, 29 September 2011 /44/ CDM Executive Board: Guidelines on assessment of debundling for SSC project activities, Version 03, 28 May 2010 /45/ CDM Executive Board: General guidelines for sampling and surveys for small-scale CDM project activities, Version 01, 16 October 2009 /46/ CDM Executive Board: General Guidelines to SSC CDM methodologies, Version 19, 13 September 2012 /47/ CDM Executive Board: Forty-first meeting report, 2 August 2008 /48/ CDM Executive Board: Glossary of CDM terms, Version 06, 2 March 2012 /49/ CDM Executive Board: Prior consideration of the CDM, available at: /50/ CDM Executive Board: List of Non-Annex I Parties to the Convention, available at: Other Documentation used by DNV to validate / cross-check the information provided by the project participants /51/ DNV: Validation report of Gauteng, Free State, Mpumalanga, Limpopo & Northern Cape CFL Replacement Project (1) in South Africa, Version 02, Report Number , Date 26 September 2012, and registered on 10 October 2012 as CDM project 7478 /52/ Heba Rabie: communication on additionality, 22 November 2011 /53/ Eskom: Integrated report 2011, 31 March 2011 /54/ Statistics South Africa: Quarterly Labour Force Survey Quarter , July 2011 /55/ 40M: Compact fluorescent lights, available at: /56/ South Africa.info: Unemployment rises to 25.7%, available at: /57/ Peet du Plooy (WWF): Time to Rethink Investment, 22 August 2007 /58/ Republic of South Africa, Department of science and technology: South Africa s climate change technology needs assessment, September 2007 /59/ Eskom: Integrated Report 2011, 21 June 2011 /60/ Eskom: Energy saving project, November 2009 /61/ OECD and the Energy and Development Research Centre of the University of Cape Town: Climate change, sustainable development and energy: Future perspectives for South Africa, 2002 /62/ Eskom: Stakeholder engagement, available at: /63/ ENERGY STAR: Light Bulbs for Consumers, available at: pgw_code=lb /64/ The Gold Standard Foundation: Gold Standard CDM/JI Projects, available at: Page 5

11 (accessed: January 2013) 2.2 Follow-up interviews with project stakeholders On 19 October 2011 DNV visited the DNA of South Africa and from 2 to 3 November 2011 DNV visited the Gauteng Province (South Africa) and performed interviews with project stakeholders. The validation team members visited some households and checked a total of 25 CFLs installed. The sample size has been calculated taking into account that, for monitoring purposes, the applied methodology /41/ is requiring the project participants to adopt a sample size not smaller than 100. Considering a 90% confidence interval and a 10% maximum error margin on the minimum sample size indicated in the methodology, DNV adopted a sample size of 25 CFLs. The purpose of the sampling made during the site visit was to check the reliability of the data management system prepared by the project participant. The results are positive, since in all the sampled household were found installed CFLs distributed by the proposed project activity. The sample of 25 CFLs verified in the Gauteng Province is considered statistically robust and relevant since the population (i.e. the distribution of CFLs in the provinces of Gauteng, Free State, Limpopo, Mpumalanga, Northern Cape) is homogeneous. Indeed the distribution has been carried out following the same procedures and guidelines by the same entity regardless of the involved province. The below listed persons have been interviewed and/or provided additional information to the presented documentation. Date Name Organization Topic /65/ Mukwejho Lufumu DNA Project contribution to sustainable development, LoA issuance, applicable regulations, confirmation of baseline, confirmation of barriers, environmental licences. /66/ Patrick Tuwani DNA Project s contribution to sustainable development, LoA issuance, applicable regulations, confirmation of baseline, confirmation of barriers, environmental licences. /67/ Ivan Radebe Eskom Definition of relevant grid, grid emission factor, confirmation of baseline, confirmation of barriers. /68/ /3 Enoch Liphoto Eskom Definition of relevant grid, grid emission factor, Page 6

12 confirmation of baseline, confirmation of barriers, project description, baseline, additionality, implementation, operations, data management, emission reduction, environmental impacts, stakeholder consultation; /69/ /3 François Carré BNP Paribas Project description, validation; /70/ /3 Rodrigo Castellanos RAMP Carbon Project description, baseline, additionality, implementation, operations, data management, emission reduction, environmental impacts, stakeholder consultation; /71/ Iris Claete Eskom Waste handling, operations, environmental impacts; /72/ /3 Ingrid Nyathi Eskom Project implementation, waste handling; /73/ Daniel Barnard North West University /74/ Markus Storm North West University /75/ Devan Kistnasami Monitoring and surveys; Monitoring and surveys; Karebo Project implementation, CFL distribution, ICL collection, data recording and management; /76/ N. Nyumalo Karebo Project implementation, CFL distribution, ICL collection, data recording and management; /77/ F. Vein BNP Paribas Site visit findings, project validation. Page 7

13 2.3 Resolution of outstanding issues The objective of this phase of the GS validation was to resolve any outstanding issues which needed to be clarified prior to DNV s positive conclusion on the project design. The validation protocol consisted of two tables. The completed validation protocol for the Gauteng, Free State, Mpumalanga, Limpopo & Northern Cape CFL Replacement Project (1) in South Africa is enclosed in Appendix A of this report. Findings established during the validation can either be seen as a non-fulfilment of GS criteria or where a risk to the fulfilment of project objectives is identified. Corrective action requests (CAR) are issued, where: - Mistakes have been made with a direct influence on project results; - GS and/or methodology specific requirements have not been met; or - There is a risk that the project would not be accepted as a GS project or that emission reductions will not be certified. A request for clarification (CL) may be used where additional information is needed to fully clarify an issue. A forward action request (FAR) is raised during validation to highlight issues related to project implementation that require review during the first verification of the project activity. FARs shall not relate to the CDM requirements for registration. 2.4 Internal quality control The final GS validation report underwent the technical review by a technical reviewer qualified before requesting registration as a Gold Standard project activity. The technical team leader and technical review are in accordance with DNV s qualification scheme for CDM validation and verification. Page 8

14 Desk review Site visit / Interviews Reporting Supervision of work Technical review TA 3.2 competence DET NORSKE VERITAS 2.5 Validation team Type of involvement Role Last Name First Name Country Technical team leader Feller Francesca Italy (CDM validator) Assessor Under Little Grant Italy Training Assessor Under Tenderini Giovanni Italy Training Technical reviewer Espejo Andres Italy Person with sectoral Kaliaperumal Thamizharasi India competence assisting technical reviewer Page 9

15 3 GOLD STANDARD VALIDATION FINDINGS The Gold Standard validation of the project must be seen in conjunction with the CDM validation report and protocol of the project (DNV Report No: , version 02 of 26 September 2012) /51/. The Gold Standard validation consists of the screening of the project eligibility, additionality and contribution to sustainable development and the sustainability monitoring plan according to GS requirements: - Project eligibility according to GS requirements - Gold Standard criteria on additionality Public announcement Conservative approach check of the baseline scenario. Technology transfer and/or technology innovation - Sustainable development assessment - Gold Standard criteria for stakeholder consultation - Pre-feasibility assessment and discussion of Gold Standard feedback - Sustainability monitoring plan All of the requirements indicated above are elaborated in the following sections. 4 PROJECT ELIGIBILITY ACCORDING TO GS REQUIREMENTS 4.1 Scale of the project activity The project activity will reduce electricity consumption by an average of GWh/year, therefore the project qualifies as a small case CDM project: Type (ii): energy efficiency improvement project activities which reduce energy consumption, on the supply and/or demand side, by up to the equivalent of 60 gigawatt hours per year (according to the definition of paragraph 6(c) of decision 17/CP.7). According to the Guidelines on assessment of debundling for SSC project activities /44/, if each of the independent subsystems/measures (e.g., biogas digesters, residential solar energy systems, kerosene or incandescent lighting replacements) included in one or more CDM project activities is no greater than 1% of the small scale thresholds defined by the applied methodology and the subsystems/measures are indicated in the PDDs to be each implemented at or in multiple locations (e.g., installed at or in multiple homes) then these CDM project activities are exempted from performing a de-bundling check, i.e., considered as being not a de-bundled component of a large scale activity. Energy efficiency improvement project activities which reduce energy consumption, on the supply and/or demand side, by up to the equivalent of 60 GWh per year gigawatt hours per year are considered small scale projects (according to the definition of paragraph 6(c) of decision 17/CP.7). Therefore the 1% of the small scale thresholds is kwh. The project participant demonstrated in the PDD that the incandescent lighting replacement would lead to annual electricity savings of kwh for each CFL installed, which is far below the 1% of the small scale thresholds. DNV verified that the annual electricity saving of kwh is the maximum possible estimation, since it has been calculated with the highest Page 10

16 possible ICL replacement in terms of wattage (100 W). Therefore DNV considers the project activity as being not a de-bundled component of a large scale activity. 4.2 Host country or state The project participants are Eskom Holdings SOC Limited of South Africa and BNP Paribas of France /1/. The host Party (South Africa) and the Annex I Party (France) meet all relevant participation requirements to the Kyoto Protocol according to the UNFCCC. South Africa is therefore an eligible state for Gold Standard CDM projects. South Africa does not have a cap on GHG emissions /50/. 4.3 Type of project activity The project fits into the End-Use Energy Efficiency Improvement category, in that it results in a reduction in the amount of energy required for delivering or producing non-energy physical goods or services. The proposed project falls into the relighting type of activity listed in annex C of the Toolkit /39/. According to Annex C of the Toolkit, relighting project activities implying the substitution of incandescent light bulbs by CFLs shall provide a detailed description of the future collection and transport process and disposal or recycling plan of the CFLs, with a particular attention to mercury. The proposed project activity meets the project type eligibility criteria, as demonstrated by the CFL disposal Initiative led by Eskom /6//7/, and well as efforts for awareness raising on safe disposal /5//60/. 4.4 Greenhouse gases The proposed project activity only involves CO 2 emission reductions, and is therefore eligible under the GS according to the Toolkit paragraph /39/. 4.5 Official Development Assistance (ODA) The Project Participant has submitted a declaration of non-use of official development assistance for the proposed project activity /24/. 4.6 Project timeframe The project participant has declared in the GS Passport that no previous announcement was made. In fact, the project participant announced several times that carbon credits have been an important consideration in the economics of the CFL distribution, and in support to such claim, has submitted board meeting reports, media releases and internal procedures for the consideration of carbon revenues dating back to 2007 /20//25//26/. The evidences provided have been verified by DNV to be in accordance with the abovementioned claim, i.e. they are confirming that carbon credits have been considered as a key aspect for the implementation of the proposed project activity since Since the implementation of the project started on 13 January 2011 /33//34/, the proposed project applies a retroactive project cycle. As confirmed by the Memorandum of Understanding (MoU) between Eskom Holdings SOC Limited and The Gold Standard Foundation /23/, the proposed project activity has been chosen to undergo the GS Fast-track, described as a process that will allow the project proponent to by-pass the GSv2.1 retroactive registration pre-feasibility assessment. Page 11

17 4.7 Other certification schemes The project applied for GS CERs, and will therefore request registration both under the UNFCCC CDM registry and the GS registry. Furthermore, during the site visit DNV held an interview with the South African DNA /65//66/ and confirmed that no white certificate programme exists in South Africa. Recipients of the CFLs will have to sign a form accepting the transfer of all carbon credits to Eskom. Hence, the project is eligible under the Gold Standard. 5 ADDITIONALITY SCREEN ACCORDING TO GS CRITERIA The project participant provided copies of an communication with a representative of the Gold Standard /52/, stating that CDM GS projects can use the simplifications foreseen by the CDM for small scale projects. The project participant applies the Guidelines on the demonstration of additionality of smallscale project activities /42/, by demonstrating how the proposed project activity is to be considered as part of the positive list of technologies defined automatically additional. In fact, according to the guidelines, project activities solely composed of isolated units where the users of the technology/measure are households or communities or Small and Medium Enterprises (SMEs) and where the size of each unit is no larger than 5% of the small-scale CDM thresholds are exempted from demonstrating additionality through the documentation of barriers. The proposed project activity will distribute CFLs to households, communities or small and medium enterprises, as it is clearly indicated in the PDD and confirmed through interviews held on site /65//66//68//67//68//72//71//75//76/. Moreover, the size of individual units is below 5% of the SSC threshold: as part of the discussion on whether the project is a debundled component or a large-scale activity, the project participant demonstrated in the PDD that the incandescent lighting replacement would lead to an annual electricity saving of kwh for each CFL installed, which is far below the 5% of the small scale thresholds. The annual electricity saving of kwh is the maximum possible savings achieved by an individual CFL, since it has been calculated with the highest possible ICL replacement in terms of wattage (100 W). In conclusion DNV was able to confirm the relevance of the presented arguments and the project s additionality i.e. its ability to reduce anthropogenic emissions of greenhouse gases by sources below those that would have occurred in the absence of the registered CDM project activity. 5.1 Public announcement DNV was able to verify that there was no public announcement of the end-use energy efficiency improvement project activity going ahead without CDM benefits. This claim has been verified through supporting evidence submitted by the project participant that carbon revenues had been considered since 2007 /20//25//26/. The evidences provided have been verified by DNV to be in accordance with the abovementioned claim, i.e. they are confirming that carbon credits have been considered as a key aspect for the implementation of the proposed project activity since Page 12

18 DNV is able to confirm that the requirement of serious consideration of CDM prior to the implementation has been demonstrated and justified. 5.2 Conservative approach check of the baseline scenario The project participant has identified and discussed in the PDD three alternative baseline scenarios: Mandatory replacement: laws stipulating the replacement of inefficient lamps with more efficient technologies such as CFLs; Autonomous replacement: this scenario consists of the proposed activity undertaken without being registered as a CDM project activity. Under this scenario householders chose to replace their existing lighting systems with new CFLs (or purchase CFLs to replace failed Eskom CFLs from previous projects) on a scale comparable to that envisaged by the proposed project activity; Business as usual: continued use of existing lighting technologies by residential households; Alternative incentives: The introduction of alternative energy saving regulations or policies, such as a demand side management scheme, that create an incentive in the absence of the CDM to improve the energy efficiency of residential lighting systems. Such incentives would need to cause the uptake of energy efficient lighting technologies on a scale comparable to that envisaged by the proposed Project Activity The first two alternatives were excluded since no regulatory requirements or alternative incentives are currently in place in the host country /1/. This was confirmed by representatives of the local DNA /65//66/. As a result, only the business as usual scenario is identified as the most likely scenario in the absence of the project activity. This coincides with the scenario indicated by the applicable methodology, AMS-II.J. This is a simplified baseline and monitoring methodology /41/. DNV confirms that the baseline has been constructed in a conservative manner in order to reduce the risk of artificially inflating the number of Gold Standard CERs received by the project activity, and the establishment of the baseline has been done in a transparent and conservative manner. As discussed in the CDM PDD, the identified baseline scenario most reasonably represents what would occur in the absence of the proposed CDM project activity. 5.3 Technology transfer and/or technology innovation In the case of the proposed project activity, the technology used comes from another non- Annex-1 country, China. 6 SUSTAINABILITY ASSESSMENT For what concerns environmental benefits, the introduction of energy efficient lighting in households will reduce the consumption, and hence generation of electricity. In addition to reducing GHGs, the proposed project activity will therefore reduce the emission of harmful gases and particulate matter produced during the burning of fossil fuels to produce electricity /1/. Page 13

19 In terms of social benefits, it is expected that the proposed project activity will create jobs within the South African economy /1/. As well as the direct financial benefit to households in terms of savings on their electricity bills each year, the project will also generate a range of less tangible social outcomes in education and awareness /1/. Such additional benefits were discussed with and confirmed by representatives of the South African DNA /65//66/ Do no harm assessment The project participant has performed a Do no harm assessment, which is included in the Passport, against the principles of the Millennium Development Goals. Each point of the assessment was cross-checked against publicly available information, as follows: 1. Human rights: the risk of breaching human rights has been assessed to be low. The implementation of this principle in all its business practices is discussed on Eskom s website, in the section relative to how Eskom s main activities in support of the UN Global Compact s principles /62/, as well as in several pages of its official website, which it is stated that all Eskom s operations are in accordance with national regulation (which includes provisions against the breach of human rights). Since Eskom is the most prominent energy company in South Africa, it is DNV s opinion that there is a strong level of assurance that any breech in human rights caused by Eskom would be readily reporter and addressed by the company; 2. Involuntary resettlement: no resettlement of people is caused by the project s implementation. This is confirmed by DNV based on the project s design /1/; 3. Cultural heritage: The project does not involve and is not complicit in the alteration, damage or removal of any critical cultural heritage, DNV agrees with the assessment of the PP regarding this principle based on the project s design /1/; 4. Employee s freedom of association: the project respects the employees freedom of association and their right to collective bargaining and is not complicit in restrictions of these freedoms and rights. This indicator was scored as low in terms of risk because Eskom employs Energy Service Companies and project managers in South Africa through contracts that comply with the employment conditions required by South African laws and regulations /64/. DNV conducted interviews with project managers involved in recruiting and training distribution staff /75//76/, and was provided with copies of the list of requirements applicable to Energy Services Companies (ESCOs), which state that employment contracts need to be in place /18/. Based on this evidence, DNV can conclude that employees involved in the programme are granted freedom of association and the effective recognition of the right to collective bargaining; 5. Compulsory labour: the project does not involve and is not complicit in any form of forced or compulsory labour. This indicator was also scored low in terms of risk because Eskom employs Energy Service Companies and project managers in South Africa through contracts that comply with the employment conditions required by South African laws and regulations /64/. DNV conducted interviews with project managers involved in recruiting and training distribution staff /75//76/, and was provided with copies of the list of requirements applicable to ESCOs, which include employment contracts to be in place /18/. /18/. Based on this evidence, DNV can conclude that employees involved in the programme are not forced to any form of forced or compulsory labour; Page 14

20 6. Child Labour: the project does not employ and is not complicit in any form of child labour. The implementation of this principle in all its business practices is discussed on Eskom s website, in the section relative to how Eskom s main activities in support of the UN Global Compact s principles /62/, as well as in several pages of its official website, which it is stated that all Eskom s operations are in accordance with national regulation (which includes provisions against the breach of human rights). Since Eskom is the most prominent energy company in South Africa, it is DNV s opinion that there is a strong level of assurance that any breech in human rights caused by Eskom would be readily reporter and addressed by the company; 7. Discrimination: the project does not involve and is not complicit in any form of discrimination based on gender, race, religion, sexual orientation or any other basis. The implementation of this principle is discussed on Eskom s website, in the section relative to how Eskom s main activities in support of the UN Global Compact s principles /62/. Evidence for Eskom following Global Compact principles in practice in its business operations is substantiated by an article published by the UN HCHR /32/, which analyses the way in which Eskom has integrated principles of human rights into its core business strategy. In particular, the article highlights how Eskom s procurement policy demonstrates the company s endeavour to equality by expanding its reliance on BEE (Black Economic Empowerment) suppliers to eliminate discrimination in employment and occupation. The analysis covers Eskom s operation as a whole, and it is therefore also relevant for the proposed project activity; 8. Work environment: the project provides workers with a safe and healthy work environment and is not complicit in exposing workers to unsafe or unhealthy work environments. Application of this principle is clearly considered in the ESCOs requirements list, which confirms under the safety section that ESCO s must acknowledge their understanding Eskom s 5 Cardinal Rules and are expected to comply accordingly as well as compliance with Occupational Health & Safety Act /18/; 9. Precautionary principle: the project takes a precautionary approach in regard to environmental challenges and is not complicit in practices contrary to the precautionary principle. This principle can be defined as: When an activity raises threats of harm to human health or the environment, precautionary measures should be taken even if some cause and effect relationships are not fully established scientifically. At an individual level, CFLs present a very low risk environmental and health hazard. However, there is potential for a concentration of mercury in landfill sites across South Africa as bulbs are disposed. Eskom has already designed a CFL disposal program in collaboration with leading retail shops /2/. DNV verified the disposal programme, and checked the PP s policy document on regarding the Management of Fluorescent Tubes, Compact Fluorescent Lamps (CFLs) and Mercury-Containing Devices /6/, as well as the guidance for the safe disposal of CFL, which has been made publicly available on their website /7/. This information is made available to recipients through brochures providing safe disposal tips and advice on how to handle broken CFLs /5/. With regard to the destruction of ICLS, DNV visited one of the disposal centres that will be involved in the destruction of ICLs as part of the programme, and which currently handles the destruction of ICLs from other Eskom distribution projects. The quality management system of the destruction centre is ensured by a number of standards: DNV was provided copies of a valid certificate of membership to the Institute of Waste Management of Southern Africa /8/,a certificate of registration as hazardous waste transporter /10/ and a certificate of competence for the Page 15

21 operation of skip trucks /9/, certification of training in safety standards /13/, safe disposal certificates /14/, and copies of audited incandescent lamps count sheets for two selected dates 22 February and 10 may 2011 /11//12/. Based on this evidence, DNV can conclude that measures are in place for the safe collection and destruction of ICLs, and of CFLs once they reach the end of their lifetime; 10. Natural habitat: The project does not involve and is not complicit in significant conversion or degradation of critical natural habitats. At an individual level, CFLs present a very low risk environmental and health hazard. However, there is potential for a concentration of mercury in landfill sites across South Africa as bulbs are disposed. An assessment of how the threat posed by the mercury contained in CFL is handled by Eskom is discussed as part of the assessment of the application of the precautionary principle; 11. Anti-corruption: the perceived low risk of corruption is supported by information published on Eskom s website, in particular its Code of Ethics /62/. Eskom, the Project Participant, is a signatory of the UN Global Compact, on which the Do no harm assessment is based, as stated in their official website /62/ Sustainable Development Matrix The scoring of all twelve indicators has been completed and documented in the programme s Passport. They have been validated against publicly available information as follows: 1. Air quality: + This indicator received a positive score both in the project participant s own Sustainable Development Matrix, and in the stakeholder s blind one /3/. The project participant s scoring is based on the environmental savings in terms of reduced exploitation of natural resources and the emission of pollutants that result from a reduction in energy generation from fossil fuel /4/. The claimed environmental benefits from reduced energy production are supported by Eskom Annual Report 2011 /53/. From this evidence, it is possible to conclude that the proposed programme will have a positive effect on air quality; 2. Water quality and quantity: 0 This indicator received a neutral score both in the project participant s own Sustainable Development Matrix, and in the stakeholders blind one. The project participant s scoring is based on the environmental savings in terms of reduced exploitation of natural resources and the emission of pollutants that result from a reduction in energy generation from fossil fuel /4/. The claimed environmental benefits from reduced energy production are supported by Eskom Annual Report 2011 /53/. From this evidence, it is possible to conclude that the proposed programme will have no significant impact on water quality and quantity; 3. Soil conditions: 0 This indicator received a neutral score both in the PP own Sustainable Development Matrix, and in the stakeholders blind one. The PP scoring is based on the environmental savings in terms of reduced exploitation of natural resources and the emission of pollutants that result from a reduction in energy generation from fossil fuel /4/. The claimed environmental benefits from reduced energy production are supported by Eskom Page 16

22 Annual Report 2011 /53/. From this evidence, it is possible to conclude that the proposed programme will have no significant impact on soil conditions; 4. Other pollutants: 0 This indicator received a neutral score both in the PP own Sustainable Development Matrix, and in the stakeholders blind one. The PP scoring is based on the emission of pollutants that result from a reduction in energy generation from fossil fuel, as well as on savings in the mercury contents resulting from the replacement of ICLs with CFLs /4/. The claimed environmental benefits from reduced energy production are supported by Eskom Annual Report 2011 /53/. However, there is potential for a concentration of mercury in landfill sites across South Africa as bulbs are disposed. Eskom has already designed a CFL disposal program in collaboration with leading retail shops /2/. DNV verified the disposal programme, and checked the PP s policy document on regarding the Management of Fluorescent Tubes, Compact Fluorescent Lamps (CFLs) and Mercury- Containing Devices /6/, as well as the guidance for the safe disposal of CFL, which has been made publicly available on their website /7/. This information is made available to recipients through brochures providing safe disposal tips and advice on how to handle broken CFLs /5/. With regard to the destruction of ICLS, DNV visited one of the disposal centres that will be involved in the destruction of ICLs as part of the programme, and which currently handles the destruction of ICLs from other Eskom distribution projects. The quality management system of the destruction centre is ensured by a number of standards: DNV was provided copies of a valid certificate of membership to the Institute of Waste Management of Southern Africa /8/,a certificate of registration as hazardous waste transporter /10/ and a certificate of competence for the operation of skip trucks /9/, certification of training in safety standards /13/, safe disposal certificates /14/, and copies of audited incandescent lamps count sheets for two selected dates 22 February and 10 may 2011 /11//12/. Based on this evidence, DNV can conclude that measures are in place for the safe collection and destruction of ICLs, and of CFLs once they reach the end of their lifetime. From this evidence, it is possible to conclude that the proposed programme will have no significant impacts on the release of other pollutants; 5. Biodiversity: 0 This indicator received a neutral score both in the PP own Sustainable Development Matrix, and in the stakeholders blind one. The PP scoring is based on the environmental savings in terms of reduced exploitation of natural resources and the emission of pollutants that result from a reduction in energy generation from fossil fuel /4/. The claimed environmental benefits from reduced energy production are supported by Eskom Annual Report 2011 /53/. From this evidence, it is possible to conclude that the proposed programme will have no significant impacts on biodiversity; 6. Quality of employment: 0 This indicator received a neutral score by the PP, and a neutral one in the blind SDM. The PP initially scored this indicator positively based on the number of skilled jobs in ESCOs and local universities that will be created thanks to the proposed programme, particularly lamp installation, logistics, transport and data collection. The neutral score received by the local stakeholders is due to the jobs created not being permanent, a comment that was raised during the LSC. The project participant motivated this with the fact that distributions themselves will have limited duration, which is reasonable considering that the CFLs will not be replaced after the end of the lifetime. From the evidence submitted it Page 17

23 is possible to conclude that the proposed programme will have a neutral impact on the quality of employment; 7. Livelihood of the poor : + This indicator received a positive score both in the PP own Sustainable Development Matrix, and in the stakeholders blind one. Such scoring was motivated by the economic savings achieved by households through the use of the more efficient CFLs, as also confirmed by online information published as part of a public energy saving campaign /55/. From the evidence submitted it is possible to conclude that the proposed programme will have a positive impact on the livelihood of the poor; 8. Access to affordable and clean energy services: + This indicator received a positive score both in the PP own Sustainable Development Matrix, and in the stakeholders blind one. The scoring was based on the number of free CFLs distributed. Based on the fact that the programme aims to distribute a large number of CFLs for free, it is possible to conclude that the proposed programme will have a positive impact on the access to affordable and clean energy services; 9. Human and institutional capacity: + This indicator received a positive score both in the PP own Sustainable Development Matrix, and in the stakeholders blind one. This score is based on the generation of less tangible social outcomes in education, awareness and collateral energy saving measures. The current lack of institutional and human capabilities in relation to climate change, including lack of awareness, is confirmed by a study published by the OECD and the Energy and Development Research Centre of the University of Cape Town /61/. The proposed programme will contribute to their alleviation by the large scale transfer of knowledge from the CME to end users. From the evidence submitted it is possible to conclude that the proposed programme will have a positive impact on human and institutional capacity; 10. Quantitative employment and income generation: + This indicator received a positive score both in the PP own Sustainable Development Matrix, and in the stakeholders blind one. The positive score by the project participant was due to the number of jobs the programme will create, at a time of increasing unemployment in the South African Labour market /2//3/. This information was crosschecked with Quarterly Labour Statistics from 2011 /54/. From the evidence submitted it is possible to conclude that the proposed programme will have a positive impact on quantitative employment and income generation; 11. Balance of payments and investment: 0 This indicator received a neutral score by the PP, while was scored positively during the blind sustainability assessment. This is because the stakeholders considered positively the fact that the programme generates carbon credits, while the project participant did not take this into account in its own scoring, since these will be used to cover the costs of the programme /57/. From the evidence submitted it is possible to conclude that the proposed programme will have no significant impact on the balance of payments and investment; 12. Technological transfer and technological self-reliance: 0 This indicator received a neutral score by the PP, while was scored positively during the blind sustainability assessment. This is because the stakeholders considered positively the adoption of a more energy efficient technology into the country /58/, while the PP did not Page 18