VER PROJECT DESIGN DOCUMENT FORM Version 03 of SSC-PDD Form - in effect as of: 22 December 2006 CONTENTS. Annexes

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1 VER PROJECT DESIGN DOCUMENT FORM Version 03 of SSC-PDD Form - in effect as of: 22 December 2006 CONTENTS A. General description of the small scale project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the proposed small scale project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring Information 1

2 SECTION A. General description of small-scale project activity A.1 Title of the small-scale project activity: Soil & More Reliance Cape Town Composting (Version 2, Final Version, 30 th March 2009) A.2. Description of the small-scale project activity: Soil & More International is a company, registered under laws of the Netherlands, which has developed standards and techniques to produce high quality compost suitable for organic and conventional farming. Soil & More International is a leading global authority for the development of sustainable methods to manage soils and food crops. Reliance Compost (Pty) Ltd is a South African company which has been operating a composting site for a number of years. However, due mainly to escalating fuel costs, the profitability of the operations was being eroded to such a point that the company had to consider closing down operations. In order to keep operations going and provide a much needed capital injection, Soil & More International and Reliance Compost established a joint venture called Altius Trading 271 (Pty) Ltd trading as Soil & More Reliance (Pty) Ltd. Without carbon credits, Soil & More International would not have made their investment in the joint venture, and hence the operations would have been closed down. Soil & More Reliance (Pty) Ltd will not keep up implementing the project activity if issuance of ERs from methane avoidance cannot be secured. The joint venture aims to produce and sell so called controlled microbial compost (CMC) from the existing composting site in South Africa, The joint venture also plans to expand operations in the future, and will move to a new, larger site as soon as the Environmental Impact Assessment has been approved (expected towards the beginning of 2010). This compost production replaces dumping of organic waste at municipal waste dumping facilities and other places where the waste would decompose anaerobically, leading to methane emissions into the atmosphere. The organic waste used consists of Garden and Park Waste. The waste is initially received at three Green Waste Transfer Stations (GWTS) in the City of Cape Town. Waste-Mart cc is contracted by the City of Cape Town to manage these GWTS s. Soil & More Reliance (Pty) Ltd is subcontracted to chip and remove the green waste. The quality of the waste is therefore controlled by Soil & More Reliance (Pty) Ltd. The composting process is aerobic due to mechanical aeration as well as strict control of key parameters carbon dioxide (and implied oxygen) levels of the compost mounds, temperature and humidity to ensure that the process proceeds optimally. Suppliers of input material into the GWTS s include garden service companies, private gardeners, municipal contractors, city parks departments, and various cleaning operations. Soil and More Reliance chips the input materials and then trucks the green waste to its composting facility. The compost is then produced aerobically and is ready in 6 to 8 weeks which is indicative of the normal processing time for compost Soil and More Reliance (Pty) Ltd conducts strict control of key parameters: there is daily monitoring of temperature CO 2 and O 2 levels in place. As soon as CO 2 levels reach more than 11%, the windrow will be turned to add oxygen. Oxygen levels are always above 10% which is the condition accepted as sufficient by UNFCCC in order to prove aerobic conditions. Workers are trained accordingly in order to ensure this control 2

3 is adhered to. The composting process is described in detail in the standard operating procedures and will be made available during validation. Social, environmental and economic aspects The composting project s impact will be: Improvement at an ecological level by sustainably building up soil fertility in the Western Cape region; Increasing the water holding capacity of the soils by up to 70%This is particularly important in a South African context as water availability and quality has been listed as one of the top three important environmental issues in South Africa by the United Nations Environment Programme ( Africa: Atlas of our Changing Environment, UNEP, 2008) Improving the disease suppressiveness of the crops leading to less requirements for chemical pesticides Improving the economic situation of the growers in the area, as compost applications will bring up yields, avoid high costs of chemical fertilizers and pesticides, extend the seasons Employing around 55 workers at the compost project within the next five years and having a considerable impact on employment in the agricultural sector up-and downstream due to above mentioned measures Improving the social circumstances in the area as more jobs are provided, leading to a secure and stable income for many people at far above average working conditions. Creating further employment during the construction of the site. The exact number of jobs created will be confirmed during the contracting process with the civils contractor Reliance Compost (Pty) Ltd has a long history of social upliftment in the community since being founded in For example, they have supplied compost for free or at a heavily reduced price over a number of years to Abalimi, an NGO working in the Phillipi area to uplift the community through a number of activities including a vegetable garden project. Similarly, they have also supplied compost at reduced prices to Soil for Life which runs a similar project. The company has also given compost for free to a mental health institution to improve landscaping facility. Reliance Compost (Pty) Ltd was the recipient of the Cleaner Cape Award 2002 for suggesting the removal of green waste from municipal waste stream. A.3. Project participants: Name of party involved (*) ((host) indicates a host party South Africa (host) Switzerland The Netherlands Private and/or public entity(ies) project participants (*) (as applicable) Altius Trading 271 (Pty) Ltd trading as Soil & More Reliance (Pty) Ltd South Pole Carbon Asset Management Ltd Soil & More International BV 3

4 A.4. Technical description of the small-scale project activity: A.4.1. Location of the small-scale project activity: The project activity will take place on 2 sites: an existing site; and a new site. The new site will come into use once the EIA thereof has been approved. This is estimated to take 12 to 18 months. 4

5 The above pictures show the existing and new project sites (yellow pin and green pin respectively). Existing site: Co-ordinates: 33 40'19.72"S and 18 47'13.94"E. The existing site is situated approximately 17km North West of Paarl. The address of the existing project site is Klipheuwel, Farm 935, Durbanville. New site: Co-ordinates: S and E The new site is situated approximately 2km West of Klapmuts on the old Western Cape Road (R101). The site forms part of portion 1 of Farm No The site is bordered by both the R101 on the southern border and the N1 on its northern border. 5

6 A Host Party(ies): South Africa. A Region/State/Province etc.: Western Cape A City/Town/Community etc: City of Cape Town A Details of physical location, including information allowing the unique identification of this small-scale project activity : Existing site: The address of the existing project site is Klipheuwel, Farm 935, Durbanville. The coordinates are 33 40'19.72"S and 18 47'13.94"E. The current compost production site has an area of 6 ha, and its physical boundaries are marked and limited with fencing on the road side, and trees on the inner borders. New site: The address of the new project site is Part 1 of farm Weltervrenden, ERF 721, Klapmunts. The coordinates are S and E. The new site is situated approximately 2km west of Klapmuts on the old Western Cape Road (R101). The site is bordered by both the R101 on the southern border and the N1 on its northern border. This site has an area of 45 ha, and its physical boundaries are marked and limited with fencing all around, with the plan to plant trees on the side adjacent to the N1 highway. A.4.2. Type and category(ies) and technology/measure of the small-scale project activity: The project is a small scale project activity and would fall under the category III.E according to the Appendix B of the Simplified Modalities and Procedures for Small-Scale CDM project activities. Yet this project activity is a VER project, using the CDM methodology AMS III.E. version 7, Avoidance of methane production from biomass decay through controlled combustion, because this is the methodology most applicable to this project (baseline emissions are the same no matter if the waste is composted or burnt in the project). Project activity emissions have been calculated using AMS III.F, version 5, Avoidance of methane production from biomass decay through composting. The project uses unwanted waste materials of plant and animal origin and processes it in a controlled method including a thermophyllic and microbial composting system in order to produce clean compost that contributes directly to improved environmental responsibility and fruit and vegetable production of high quality. The compost windrows will be turned periodically with a mechanical turner to ensure good aeration and temperature control. This environmentally safe technology is used because it: 6

7 - is a solution against soil erosion - puts a halt to soil deterioration - recycles and uses waste products - contributes to water use efficiency - Contributes to the reduction of Greenhouse Gases. A.4.3 Estimated amount of emission reductions over the chosen crediting period: Please indicate the chosen crediting period and provide the estimation of total emission Reductions as well as annual estimates for the chosen crediting period. Information on the emission reductions shall be in indicated using the following tabular format. Years Estimation of annual emission reductions in tones of CO 2 e 1/5/ /12/ /1/ /4/ Total estimated reductions (tones of CO 2 e) Total number of crediting years Annual average of the estimated reductions over the crediting period (tco 2 e) Detailed data and calculations are given in Annex 3. A.4.4. Public funding of the small-scale project activity: No public funding is involved into the project activity. 10 years A.4.5. Confirmation that the small-scale project activity is not a debundled component of a large scale project activity: The project activity is not a debundled component of a larger project activity and there is no registered small-scale CDM project activity and will not be applied to register another small-scale CDM project activity: - With the same project participants, - In the same project category and technology/measure, - Registered within the previous 2 years, and - Whose project boundary is within 1 km of the project boundary of the proposed small scale activity at the closest point of a larger project activity. 7

8 SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the smallscale project activity: Title of baseline methodology: Avoidance of methane production from biomass decay through controlled combustion, Type III.E, Version 07, in Appendix B of the Simplified Modalities and Procedures for Small- Scale CDM project activities. Title of the methodology used for calculating project emissions: AMS III.F, version 5. Furthermore, the Tool for the demonstration and assessment of additionality (Version 05.2) has been used. B.2 Justification of the choice of the project category: This project activity comprises measures to avoid the production of methane from biomass and other organic matter that would have otherwise been left to decay anaerobically in a solid waste disposal site without methane recovery. Due to the project activity, decay is prevented through aerobic treatment by composting and proper soil application of the compost. The project activity does not recover or combust methane. This methodology is used because it is a UNFCCC methodology quantifying the methane emissions that are avoided through avoided waste disposal activities at a municipal waste facility. The approach used corresponds to the methane generation capacity of each ton of organic waste deposited. This methodology correctly quantifies the methane emissions from the waste during the next decades given that the waste facility will not be removed or altered or equipped with methane capture equipment in the future, which is not foreseen according to the information available to the project participants. B.3. Description of the project boundary: The project boundary is the physical, geographical site consisting in the places: (a) where the solid waste would have been disposed of and the methane emission would have occurred in the absence of the proposed project activity. The disposal site would be either Coastal Park or Vissershok landfill sites in the City of Cape Town. (b) where the treatment of biomass through composting takes place. The treatment facility is an area of 6 Ha at the existing site and 45 Ha at the new site and its physical boundaries are marked with fences and trees. (c) where the soil application of the produced compost takes place. The soil application takes place in various agricultural production areas an average of 30 to 35km from the composting site, a minimum of 8km from the composting site and a maximum of 65km from the composting site. (d) where the transportation of waste and compost occurs. Waste is being transported from the GWTS s to the various landfills. Composting starters are sourced or produced on site. B.4. Description of baseline and its development: The City of Cape Town has a number of Green Waste Transfer Stations (GWTS s) throughout the city. Anyone is permitted to dump green waste at these sites, where it will be chipped or shredded. This waste is brought by garden service companies, private gardeners, municipal contractors, city parks departments and cleaning operations. From here the waste is ordinarily transported to one of a number of landfills throughout the City for disposal. Although only green waste is meant to be disposed of at these GWTS s, some other waste streams are also dumped here, including some construction and other waste. 8

9 Waste-Mart cc has been contracted by the City of Cape Town to some of these GWTS s. Reliance Compost (Pty) Ltd has in turn been subcontracted by Waste-Mart cc to shred the waste at three of the sites: Gordon s Bay, Morningstar and Ladies Mile. Reliance Compost used this opportunity to obtain a source of organic waste for its composting site: they sort the organic waste from the inorganic waste, shred the organic waste, transport inorganic waste and unsuitable organic waste to one of two landfills, and divert the suitable organic waste to their composting site. Due to rising costs and declining profitability, it recently became unfeasible for Reliance Compost (Pty) Ltd to continue the production of compost. In the absence of this composting operation, all of the waste would simply be transported to the same landfills, which the inorganic and unsuitable waste is currently being sent to. These landfills are anaerobic managed solid waste disposal sites according to the IPCC 2006 Guidelines for National Greenhouse Gas inventories, with n Methane Conversion Factor of 1.0. These landfills are as follows: Gordons Bay GWTS waste goes a distance of 44.6km to Coastal Park landfill Ladies Mile GWTS waste goes a distance of 13.3km to Coastal Park landfill Morningstar GWTS waste goes a distance of 17.3km to Vissershok landfill 17.3km 13.3km 44.6km The project activity causes the waste to be transported to the existing composting site over the following distances: Gordons Bay GWTS = 68.5km Ladies Mile GWTS = 65.6km Morningstar GWTS = 26.5km 9

10 26.5km 68.5km 65.6km When the new site comes online, the distances will be reduced as follows: Gordons Bay GWTS = 47.0km Ladies Mile GWTS = 55.1km Morningstar GWTS = 20.3km 20.3km 55.1km 47.0km 10

11 It is estimated that organic component of the waste at the GWTS, that is diverted from landfills to the composting site is composed as follows in terms of the UNFCCC Tool to determine methane emissions avoided from dumping waste at a solid waste disposal site (Version 03) comprises 100% other (non-food) organic putrescible garden and park waste. Because the waste is diverted from the GWTS s to the composting site instead of the landfills, the project boundary does not include the areas in which the waste is generated or how it is transported to the GWTS. In this boundary, illegal dumping and burning is not an issue with or without the project activity, as Reliance Compost (Pty) Ltd has direct control over where all waste from the GWTS is taken. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered small-scale CDM project activity: This section describes how the emissions are reduced below those that would have occurred in the absence of the project activity using the Tool for the demonstration and assessment of additionality (version 05.2) to define the baseline scenario and the project activity. Step 1. Identification of alternatives to the project activity consistent with mandatory laws and Regulations Sub-step 1a. Define alternatives to the project activity: Alternative 1: Continued operation of the project activity without ER The first baseline scenario is the continued operation of the existing composting facility without ER generation. This alternative does contribute to reducing methane emissions and provide for a better use for the abundantly available biomass residues than landfilling. However, due to escalating fuel costs which comprise 37% of operating costs, this alternative has recently become unprofitable, forcing Reliance Compost (Pty) Ltd to consider shutting down operations. Furthermore, the technology, equipment and process used in the original Reliance Compost operation did not yield a high quality product, posing a further risk to future operations. Alternative 2: Waste dumping at an official waste treatment facility The official disposal sites that would be used for the waste from this project are anaerobic managed solid waste disposal sites according to the IPCC 2006 Guidelines for National Greenhouse Gas inventories. They are Vissershok (receives tons per day) and Coastal Park (receives tons per day). The waste received is directed to specific deposition areas, where it is leveled and mechanical compacted and covered by 15cm of topsoil as soon the waste layer reaches a thickness of 5-10 meters. The waste mix dumped includes almost all kinds of waste, including branches, green material, manures and other organic and nonorganic materials. At Vissershok, co-disposal of animal waste (e.g. carcasses) and liquid waste (e.g. oils) also takes place. Sub-step 1b. Consistency with mandatory laws and regulations: Both of the above baseline alternatives involve either the disposal of waste at managed landfills, or the diversion of waste to the composting sites. Both of these alternatives are in full compliance with South African regulations, and hence neither is excluded by the enforcement of applicable laws and regulations. As per 11

12 Notice 1832 Of 2007 for the Waste Management Bill 1 a municipality must establish service standards and levels of service for the collection of waste and requirements in respect of the directing of waste to specific treatment and disposal facilities. There is no law restricting the transfer of Green Waste to Landfills and the Municipality of Cape Town has not implemented any measures against green waste going to the landfills. Step 2. Investment analysis Sub-step 2a. Determine appropriate analysis method The proposed Project generates financial and economic benefits through the sales of compost and ER related income therefore the simple cost analysis (Option I) cannot be taken. The investment comparison analysis (Option II) is only applicable to projects where alternatives should be similar investment projects. The alternative baseline scenario of the proposed project is waste disposal at landfills rather than a new investment project. Out of the investment comparison analysis (Option II) and the benchmark analysis (Option III), the benchmark analysis (Option III) is chosen. Sub-step 2b. Option III. Apply benchmark analysis The adequate period to determine investment comparison analysis is 20 years, as comparable projects in South Africa that do not require major investments use the same timeframe. Because of the relatively unstable socioeconomic situation and the high country risk it is very hard to plan beyond 20 years. This period also corresponds to the expected operational lifetime of the project activity. As the relevant financial indicator the IRR was chosen. The benchmark will be derived from government bond rates. The 12 month NCD rate is chosen as the relevant benchmark, for which the interest rate as of 1 May 2008is 13.18% 2. For the purpose of deriving the benchmark, the above value of 13.18% shall be used as a yardstick. However, there are various major risks that can be identified as relevant to composting projects in countries such as South Africa. One of the more important ones is the risk reflecting the project type, an agricultural project. The second is the market risk. For these reasons, the applicable IRR should be above the return on the Treasury bills quoted above. Additionally, in discussions with finance experts, the required return on companies, and particularly start-up projects would be significantly above the return given by NCD rate. Yet for conservativeness, we will adopt the return of the NCDs as the benchmark, but expect a viable project to produce a return that is higher. Sub-step 2c. Calculation and comparison of financial indicators The project IRR of the current project activity being carried out by Reliance was calculated using the variables and data submitted to the DOE. Based on the calculations, the project IRR for the current Reliance Compost (Pty) Ltd Cape Town Composting Project was calculated to be 8.71% very much below the required rate of return. This already shows that without additional income, the project would never be implemented. The returns for Reliance Compost (Pty) Ltd have not always been this poor. Transport is a major cost component of the composting operation, accounting for about 37% of operating costs which includes intake and delivery transportation, and operation of diesel-powered machinery on site. The composting operation of (Accessed 1 May 2008). 12

13 Reliance Compost was operating marginally a few years ago, but as oil prices have increased, this has put pressure on the profitability. In fact the increase in oil prices and the expected future increases, means that the company no longer makes its required returns. At the same time, the price of compost has remained the same. Reliance Compost would have closed down or scaled down its operations at the end of However, at this point they began negotiations with Soil & More International who would provide them with the ability to obtain carbon credits from the expansion of their operations, which would sufficiently subsidise the operations. Since they were locked into a long-term contract to receive green waste from the municipality, and they realised that within a few months they could once again become profitable because of the carbon credits, they decided not to scale down operations and lose the contract. Soil & More s expertise and technology helped in making this decision. This process was kicked off with an LOI in December 2007, at which point Soil & More International gave their commitment to invest in Reliance Compost, and to obtain carbon credits. Banking on this commitment, and its related prospects for future growth, Reliance Compost purchased a transport company at the beginning of the year in order to avoid the margins in transport and increase the overall profitability of the operation. However, even with this intervention, carbon credits were still necessary to cross hurdle rates. The JV was finalised in May 2008, which was when all the new monitoring started. Whereas before Reliance Compost was focusing on producing moderate volumes of lower quality compost, the involvement of Soil & More has shifted their focus to the development of niche market high quality products and adherence to international standards, which can be used to access new clients. This quality improvement does not increase the profitability of operations as the selling price of the compost remains the same. Instead it provides certainty that the composting operation will have a sustainable client base going forward. With a VER price of 5 EUR, a realistic assumption for the VERs generated from this type of projects, the IRR increases to 46.83%. If the project continues without VER s generated the IRR of the project is 8.71% which is below the long-term NCD rate of 13.18%. Sub-step 2d. Sensitivity analysis A sensitivity analysis has been conducted and it shows that the financial attractiveness is robust to reasonable variations in the critical assumptions (sales price; energy costs; input material costs and repairs and maintenance costs). An increase in the price of compost of 10% (10% higher price than assumed in the normal scenario in all years) does push the project above the threshold of 13.18% without the income from carbon credits. This though is not seen as sufficient to cover the risks associated with the project activity in the long term. All other variables (costs) do not cross the benchmark IRR rate if they were to decrease by 10%. Scenario Variable Base Case 10% increase 10% decrease Compost sales price 8.7% 13.6% 2.6% Energy costs 8.7% 8.2% 8.8% Input material costs 8.7% 8.8% 9.9% Repairs and maintenance costs 8.7% 8.8% 7.9% The benchmark analysis provides a valid argument in favor of additionality because it consistently supports (for a realistic range of assumptions) the conclusion that the project activity is unlikely to be financially attractive in the long run. Step 3. Barrier analysis 13

14 As per Tool for the demonstration and assessment of additionality (version 05.2), as a financial analysis has been conducted, no barrier analysis is necessary. Step 4. Common practice analysis Sub-step 4a. Analyze other activities similar to the proposed project activity: Prevailing practice or existing regulatory or policy requirements would have led to implementation of an activity with higher emissions. The common practice in the industry is to leave agricultural waste to decay in piles, burn it, or dump it at municipal landfill sites. Sub-step 4b. Discuss any similar options that are occurring: As discussed, no similar project activities exist in the region that use the CDM and would lead to the same kind and quality of compost. As per the South African DNA, no other composting projects have been submitted 3. As per the Cape Town Municipality there are currently 20 GWTS in the area. 12 of which are run by government and on these sites No re-use, chipping or composting currently takes place. Of the 8 GWTS s which are privately run, 3 are in the management of Soil and More Reliance. The remaining 5 sites are run by Enviroserv who do not have any composting facilities 4. Based on the step-by-step additionality analysis above the project is proven to be additional. B.6. Emission reductions: B.6.1. Explanation of methodological choices: The formulas applied to estimate the emission reduction are obtained from methodology AMS III.E, version 7 for the baseline emissions and AMS III F, version 5, for the project emissions. The baseline emissions are the amount of methane from the decay of the biomass or organic waste treated in the project activity. IPCC default emissions factors are used. CH4_IPCC decay = (MCF * DOC * DOCF * F * 16/12) where, CH4_IPCC decay IPCC CH4 emission factor for decaying biomass in the region of the project activity (tones of CH 4 /tonne of biomass or organic waste) MCF methane correction factor (fraction) (default values are 0, 0.4 or 1 according to the way the material is disposed of [aerobically, illegal anaerobic dumping or Municipal Solid Waste Disposal (MSWD)]) DOC degradable organic carbon (default is 0.3) DOCF fraction DOC dissimilated to landfill gas (default is 0.77) 3 % pdf

15 F fraction of CH 4 in landfill gas (default is 0.5). BE y = Q biomass * CH 4 _IPCC decay * GWP_CH 4 where, BE y Baseline methane emissions from biomass decay (tones of CO2 equivalent) Q biomass Quantity of biomass treated under the project activity (tones) CH 4 _GWP GWP for CH 4 (tones of CO 2 equivalent/tone of CH 4 ). Project Activity Emissions Project activity emissions have been calculated using AMS III.F, version 5, Avoidance of methane production from biomass decay through composting. CO 2 emissions on account of fossil fuel based energy used by the project activity facilities includes energy used for turning of compost piles and internal movement of input materials or loading of final compost product. PE y = PE y,transp + PE y,power Where: PE y project activity emissions in the year y (tones of CO 2 equivalent) PE y,transp emissions from incremental transportation in the year y PE y,power emissions from electricity or diesel consumption in the year y (this calculation is derived from AMS-1.D.) PE y,power is calculated according to AMS-1.D. Electricity emissions are derived by taking electricity consumption and multiplying the South African Grid Emissions Factor. Diesel emissions are calculated by tones of diesel used in the project activity and multiplying by the emissions factor for diesel. PE y,transp = (Q y /CT y ) * DAF w * EF CO2 + (Q y,comp /CT y,comp ) * DAF comp * EF CO2 Where: Q y quantity of waste composted in the year y (tones) CT y average truck capacity for waste transportation (tones/truck) CT y, i average truck capacity for waste transportation (tones/truck) for input i DAF w average incremental distance for solid waste transportation (km/truck) DAF w, i average incremental distance for solid waste transportation (km/truck) for input i EF CO2 CO2 emission factor from fuel use due to transportation (kgco2/km, IPCC default values or local values may be used). Q y,comp quantity of final compost product produced in the year y (tones) CT y,comp average truck capacity for final compost product transportation (tones/truck) DAF comp average distance for final compost product transportation (km/truck) DAF comp was calculated from the project boundary. The median value of a trip within the project boundary was calculated and then multiplied by two so as to account for the trip there and back. Baseline The baseline scenario is the situation where, in the absence of the project activity, organic waste is left to decay within the project boundary and methane is emitted to the atmosphere. The baseline emissions consist of the 15

16 amount of methane emitted from the decay of the degradable organic carbon in the biomass waste that would not have been composted without the project activity. In the baseline scenario, there is no landfill where methane emissions are captured, fuelled or flared in order to comply with national or local safety requirements or legal regulations. BE y = Q biomass * CH4_IPCC decayy *GWP_CH 4 where: BE,y = baseline methane emissions from biomass decay (t CO 2 e) Q biomass = quantity of biomass treated under the project activity (tones) CH4_IPCC decay = IPCC emission factor for decaying biomass in the region of the project CH4_IPCC decay is calculated with the formula: CH4_IPCC decay = MCF * DOC * DOCF * F * 16/12 where: MCF = methane correction factor (value of 1 used) DOC = degradable organic carbon (value to be used is the more conservative of the default value of 0.3 and the calculated value of 0.21) Leakage The composting technology to be installed for the project activity is partially new, partially used. There will be no closing down or downsizing in scale of compost production activities from another activity. There will be no anaerobic decomposition of input materials on-site, as maximum storage duration and storage conditions for different kinds of waste are clearly defined by Soil & More operational guidelines. B.6.2. Data and parameters that are available at validation: Data / Parameter: Data unit: Description: Source of data used: Value applied: 0.5 Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: F Fraction Fraction of methane in landfill gas UNFCCC Methodology default values This factor reflects the fact that some degradable organic carbon does not degrade, or degrades very slowly, under anaerobic conditions in the SWDS. A default value of 0.5 is recommended by IPCC. Data / Parameter: DOC F 16

17 Data unit: Fraction Description: Fraction DOC dissimilated to landfill gas Source of data used: UNFCCC Methodology default values Value applied: 0.77 Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Data / Parameter: Emission factor electricity Data unit: tco 2 /MWh Description: Combined margin emission factor for electricity production in South Africa, 2007 Source of data used: PDD Transalloys Manganese Alloy Smelter Energy Efficiency Project, validated and registered CDM project in South Africa Value applied: Justification of the The combined margin was calculated from the operating margin and the build choice of data or margin. description of For the operating margin, the chosen method was simple OM, due to the measurement methods unavailability of dispatch data. The Simple OM method is applicable as the and procedures actually South African grid meets the condition that low-cost/must-run resources have applied: always constituted less than 50% of the total grid generation. The Simple OM emission factor is calculated as the generation-weighted average emissions per electricity unit (tco2/mwh) of all generating sources serving the system, not including low-operating cost and must-run power plants. Any comment: Data / Parameter: Default emission factor for diesel Data unit: Kg CO 2 /kg Diesel Description: CO 2 emission factor from fuel use due to burning diesel Source of data used: IPCC Guidelines Value applied: Justification of the Based on the IPCC values: choice of data or Emissions factor 74.1 tco2/tj description of NCV 43 TJ/Gg measurement methods and procedures actually applied : 17

18 B.6.3 Ex-ante calculation of emission reductions: The methodology for emission reductions is described in this paragraph together with actual project data from the year The remaining data can be found in tables in Annex 3. Project Activity Emissions - Data Used Emissions trough incremental distance of waste transp. Q y CT y DAFw EF CO2 PEy, waste transport Emissions through compost transportation Qy compost CTy compost DAF compost PEy, compost transport PE y, transport Emission through electricity or diesel consumption tonnes / year tonnes / truck km t CO2/km t CO2e tonnes / year tonnes / truck km tco2/km t CO2e t CO2e tonnes Diesel / year tco2/t Diesel 41, , PE y, power PE y, Total Project emissions tco2e through Diesel Electricity Cons./yr tco2/kwh Electricity tco2e through Electricity tco2e t CO2e ,

19 Baseline Emissions - Data Used % of total waste on MSW Brown: wood 0.00% Brown: Straw 0.00% Brown: Coffee 0.00% Green: Green, fresh % Total Manure 0.00% Total annual incoming waste DOCf F Conversion factor Total amount of waste with MCF 1 41, , DOC default value as per AMS-III.E v DOC calcluation for waste fraction with MCF 1 (applied) 0.17 CH4_IPCC for MCF 1 Waste 0.09 B.6.4 Summary of the ex-ante estimation of emission reductions: Year Estimation of project activity emissions (tco 2e) Estimation of baseline emissions (tco 2e) Estimation of leakage (tco 2e) Estimation of overall emission reductions limited to 60,000 p.a. (tco 2e) ,116-40, ,674-60, ,674-60, ,674-60, ,674-60, ,674-60, ,674-60, ,674-60, ,674-60, ,674-60, ,558-20,000 Total 3, , ,000 19

20 B.7 Application of a monitoring methodology and description of the monitoring plan: B.7.1 Data and parameters monitored: Data / Parameter: Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculated emission reductions in Section B.5 Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: Q biomass Tonnes Quantity of organic waste composted in the year y for each of the following waste types: B: Garden, yard and park waste (includes manure) Soil & More Reliance operations records Time series, see Annex 4. It is recorded daily, and yearly sums are used in the PDD. See B.7.2: Description of the monitoring plan, also with regards to the monitoring of storage See B.7.2: Description of the monitoring plan All waste input and transportation movements carried out are recorded in a monitoring system as well as on batch record sheets using standardized Soil& More International procedures. Data / Parameter: Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculated emission reductions in Section B.5 Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: Data / Parameter: Q y,comp Tonnes Quantity of final compost product produced in the year y Soil & More Reliance operations records Time series, see Annex 4 See B.7.2: Description of the monitoring plan See B.7.2: Description of the monitoring plan DAF comp 20

21 Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculated emission reductions in Section B.5 Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: km/truck Average distance for final compost product transportation multiplied by two to take into account the return trip of the truck. Soil and More Reliance records 65 km Records of destination of the compost transportation will be kept. Each delivery report is updated to a delivery distances per client worksheet Data / Parameter: C CO2 Data unit: Percentage fraction Description: CO 2 level in compost (% of total air) Source of data used: Daily measurements according to monitoring plan in 7.2 Value of data applied It will be kept at or below 11% for the purpose of calculated emission reductions in Section B.5 Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: C O2 Percentage fraction O 2 level in compost Daily measurements of CO 2 according to monitoring plan in 7.2 allow for calculation of the O 2 level. C O2 calculated as 21 less C CO2. Time series, daily records 21

22 Data / Parameter: Data unit: Description: Source of data used: Value applied: Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Data / Parameter: Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculated emission reductions in Section B.5 Description of measurement methods and procedures to be applied: T compost C Temperature of compost Daily measurements, together with the CO 2 measurement campaign Time series Ct y and CT y,comp Tonnes/truck Average truck capacity for waste transportation and average truck capacity for final compost product transportation Operation Manuals of trucks, Soil & More Reliance records based on direct measurements Ct y = 8 CT y,comp = 16 Average truck capacity for every truck is recorded according to the operations manual, or measured, if this is not available. CT y,comp : As Soil & More Reliance sells its compost product to its clients in m 3 - monthly density tests will be carried out on the final compost product. This will lead to a reference value as to the weight of product sold (in tones) per m 3 of product sold. Total amounts of compost sold each month will be calculated in m 3 and then multiplied by the reference value of tone/m 3. In order to ensure that the monthly quantities calculated can be easily verified Soil and More Reliance will be issuing a commercial invoice for every delivery made to a client recording the m 3 to be delivered. This will exclude summarization of invoices based on total volume ordered. Ct y : Soil and More keep records of monthly amounts of waste received from each GWTS in tones Each delivery of chipped waste from the GWTS s is weighed on the weighbridge and measured in kg QA/QC procedures to be applied: Any comment: Data / Parameter: Data unit: DAF w km/truck 22

23 Description: Source of data to be used: Value of data applied for the purpose of calculated emission reductions in Section B.5 Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: Data / Parameter: Data unit: Description: Source of data to be used: Value of data applied for the purpose of calculated emission reductions in Section B.5 Description of measurement methods and procedures to be applied: QA/QC procedures to be applied: Any comment: Average incremental distance for solid waste transportation Soil & More Reliance records, survey conducted by Soil & More Reliance DAF w =20 In the absence of the project waste is transported to a known set of landfills. The incremental distance for solid waste disposal is therefore the difference between the distance from each of the GWTS s to the relevant landfill, and the distance to the composting site. Monitoring of opening or close-down of MSW sites commonly used. EF CO2 kgco 2 /km CO 2 emission factor from diesel fuel use due to transportation Calculation derived from transportation fuel use of truck per km times CO 2 emission factor of fuel used This was calculated assuming 30 L / 100 km Diesel consumption and kg CO 2 /l Diesel (IPCC default). A conservative kg/litre of diesel figure of 0.9 has been used This diesel consumption / 100 km shall be monitored for the different truck capacities due to the fact that these vehicles might operate with a different CO 2 - efficiency or with another fuel. Data / Parameter: Baseline waste transportation distance for each scenario and each waste type Data unit: Km Description: Baseline waste transportation distance for each scenario and each waste type Source of data used: Value applied: See Annex 3 Justification of the Values obtained in yearly independent third-party survey choice of data or description of measurement methods and procedures actually applied : 23

24 Any comment: Data / Parameter: Diesel consumption Data unit: Tones/year Description: Diesel used per year for operation of machinery Source of data used: Monthly or annual diesel bills Value applied: 45 Justification of the Obtained from monthly fuel consumption report supplied by Soil & More choice of data or Reliance. description of measurement methods and procedures actually applied : Any comment: Data / Parameter: MCF Data unit: Fraction Description: Methane correction factor Source of data used: UNFCCC Methodology default values Value applied: 1 Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: Anaerobic managed solid waste disposal sites: These must have controlled placement of waste (i.e., waste directed to specific deposition areas, a degree of control of scavenging and a degree of control of fires) and will include at least one of the following: (i) cover material; (ii) mechanical compacting; or (iii) leveling of the waste. Coastal Park and Visserhoek Landfill sites are anaerobic managed solid waste disposal sites according to the IPCC 2006 Guidelines for National Greenhouse Gas inventories stated above For the organic waste dumped at the municipal solid waste disposal site, the value 1.0 is used. MCF must be monitored annually by determining the size of the landfills the waste would have been deposited at. Any closing of landfills should also be monitored and the baseline changed accordingly. Data / Parameter: Data unit: Description: Source of data used: DOC Fraction Degradable organic carbon Default value is provided by Methodology or calculation for project-specific case whichever is more conservative Equation provided by methodology DOC = 0.4*(A) *(B) *(C) *(D) where A percent waste that is paper and textiles (0%) B percent waste that is garden waste, park waste or other non food organic putrescibles (100%) C percent waste that is food waste (0%) D percent waste that is wood or straw (0%) Default Value:

25 Value of data applied for the purpose of calculated emission reductions in Section B.5 Justification of the choice of data or description of measurement methods and procedures actually applied : Any comment: 0.17 The composition of the chipped material arriving on site from the GWTS s must be monitored annually. A selection of chipped material should be obtained. The wood should be separated from the greens in order to accurately determine the percentage weight of wood and greens constituting the chipped waste B.7.2 Description of the monitoring plan: Continuous monitoring is maintained for all tasks applied to materials as well as all analyses carried out of materials. Parameters are monitored according to Soil & More International Standard Operational Procedures. Waste composition A waste composition analysis will be done once a year to determine the types of composition of waste types received as defined by the UNFCCC (A. Paper & textiles, B. Garden & park waste, C. Food waste, D. Wood & straw waste, E. Inert materials) as well as the average water content of the composted organic material. Carbon credits will be discounted in case excessively high water content (ie. above 90%) is established. The waste intake, stock and the amount processed will be separately recorded and summed up yearly, as there might be smaller amounts of waste received from the facility at an earlier point in time than its processing for compost production, and the emission reductions can only be claimed once the waste is processed to compost. Amount of compost produced The amount of compost produced will be obtained from delivery records of Soil & More Reliance. The amount will be summed yearly. Oxygen and CO 2 levels Every day the oxygen levels in the compost (pre-composting and maturing) are deduced and recorded. In each windrow with a maximum length of 100 meters, 3 daily measurements have to be taken at 3 equally distributed locations in the windrow. From the CO 2 concentration, and assuming constant N 2 and other gases concentration in the air, O 2 level scan be derived. Details of the monitoring plan will be available at validation. After all spots are measured, the field-form data will be transferred into spreadsheets, which then will be archived and kept in storage for at least 5 years. As soon the CO 2 exceeds 11% respectively the O 2 falls below 10%, the windrow must be turned within 24 hours. If for any reason the average CO 2 / O 2 levels of a specific windrow are above or below the maximum or minimum values for more than 24 hours after the detection for the specific windrow (annual waste processed on this batch divided by 365), no ERs will be claimed. Temperature levels The windrow core temperature is measured daily and recorded in the monitoring sheets. In each windrow with a maximum length of 100 meters, 3 daily measurements have to be taken at 3 equally distributed locations in the windrow. After all spots are measured, the field-form data will be transferred into spreadsheets, which then will be archived and kept in storage for at least 5 years. Temperature is a critical indicator for the stage of the 25

26 composting process and the conditions inside the windrow. As soon the core temperature of the windrow exceeds 60C on three-consecutive days, the windrow must be turned for aeration. Transporting distance and truck capacities Soil & More Reliance made conservative estimations for the trucks used for waste and compost transport, which include the kind of fuel used, the fuel use per 100 km and the truck capacity is recorded. Soil & More Reliance will update this record on a yearly basis. MCF MCF must be monitored annually by determining the size of the landfills the waste would have been deposited at. Any closing of landfills or changes to landfills should also be monitored and the baseline changed accordingly. Monitoring records Daily readings of all field meters will be registered in either electronic form or on paper worksheets on the premises of Soil & More Reliance. Data collected will be entered in electronic worksheets and stored. Periodic controls of the field monitoring records will be carried out to check any deviation from the estimated ERs. Recommendations on system and procedures improvements will be presented. Periodic reports to evaluate performance and to assist with performance management will be elaborated. Equipment calibration and maintenance All meters and temperature sensors will be subject to regular maintenance and testing regime according to the technical specifications from the manufacturers to ensure accuracy and good performance. Calibration of equipment will be performed periodically, but at least yearly or additionally when any deviation is suspected, according to technical specifications and in agreement with recommendations given by suppliers or responsible institutes. Corrective actions Actions to handle and correct deviations from the Monitoring Plan and Soil & More guidelines will be implemented as soon as these deviations are observed either by the operator or during internal audits. If necessary, technical meetings between the operator, Soil & More and other relevant groups will be held in order to define the corrective actions to be undertaken. Site audits: The verifying DOE will make regular site audits to ensure that monitoring and operational procedures are being observed in accordance with the Monitoring Plan. Training: The operator personnel will be trained in equipment operation, data recording, reports writing, and operation, maintenance and emergency procedures in compliance with the Monitoring plan and Soil & More guidelines. Currently junior managers are trained according to training schedules. The training process is less formal for general workers where important weekly aspects are highlighted on the job. B.8 Date of completion of the application of the baseline and monitoring methodology and the name of the responsible person(s)/entity(ies) 19 September 2008 Bruce Wylie South Pole Carbon Asset Management 26