Clean Development Mechanism Project Identification

Transcription

1 Clean Development Mechanism Project Identification Shannon Flint Carbon and Energy Management Alberta Research Council Edmonton, Alberta, T6N 1E4, Canada Introduction In December1997, 160 countries adopted the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC). Under the Protocol, industrialized countries negotiated targets to reduce greenhouse gas emissions. Reductions can be achieved through both domestic and international actions. Within the Protocol several flexibility mechanisms were provided including the Clean Development Mechanism (CDM), Joint Implementation (JI) and International Emissions Trading (IET). Clean Development Mechanism The Clean Development Mechanism (CDM) allows for emission reduction projects between Annex 1 (industrialized countries with targets, including countries with economies-in-transition Table 1) and developing countries (see Table 2 for a list of developing countries in Latin America and the Caribbean). Table 1 List of Annex 1 Countries Australia Austria Belgium Bulgaria Canada Croatia Czech Republic Denmark Estonia European Finland France Community Germany Greece Hungary Iceland Ireland Italy Japan Latvia Liechtenstein Lithuania Luxembourg Monaco Netherlands Russian Federation Ukraine New Norway Poland Portugal Romania Zealand Slovakia Slovenia Spain Sweden Switzerland U.S.A. Table 2 List of Developing Countries in Latin America and the Caribbean Antigua and Argentina Bahamas Barbados Bolivia Brazil Barbuda Chile Colombia Costa Rica Cuba Dominican Ecuador Republic El Salvador Guatemala Guinea Honduras Jamaica Mexico Nicaragua Panama Paraguay Peru Saint Lucia Saint Vincent and the Grenadines Trinidad and Tobago Uruguay For a complete list of countries who have ratified the Kyoto Protocol go to The Clean Development Mechanism (CDM) contained in Article 12 (Appendix A) of the Kyoto Protocol is a mechanism whereby an entity or government of an industrialized country, country A invests in an emission reduction project in a developing country, country B. In return, country A receives certified emission reductions (CERs) based on the project s performance (see Figure 1). In order for countries to participate in CDM projects, the following three criteria must be met:

2 Voluntary participation by each country in CDM; Establishment of a national authority for CDM purposes; and Ratification of the Kyoto Protocol Figure 1 Transfer Certified Emission Reductions to Country A Country A Identification/ Formulation/ Investment in Clean Development Project in Country B Country B Project Approved/ Implemented/ Monitored Investment in project - $$ There are also three eligibility criteria that CDM projects must meet. Projects must: Assist non-annex 1 Parties in achieving sustainable development and in contributing to the ultimate objective of the Convention; Be real, measurable, and provide long-term benefits related to the mitigation of climate change; and Provide reductions in emissions that are additional to any that would occur in the absence of the certified project activity. Conference of the Parties/Members of the Parties Executive Board Two authorities administer all Clean Development Mechanism (CDM) projects: The Conference of the Parties, serving as the Meeting of the Parties (COP/MOP) and an Executive Board. COP/MOP membership includes those countries that have ratified the Protocol. The role of COP/MOP is: Provide guidance to the Executive Board on their rules and procedures; Review annual reports of the Executive Board; and Review regional and sub-regional distribution of designated operational entities to promote their equitable distribution (designated operational entities will be discussed later).

3 The Executive Board (EB) reports to the COP/MOP and is comprised of ten members of the Parties of the Protocol. The EB is responsible for: Accrediting operational entities; Define operating procedures for CDM projects; Approving methodologies and guidelines related to baselines; and Maintaining the CDM registry and database. Issues Certified Emission Reductions Designated Operational Entity In order for CDM projects to generate certified emission reductions, the project proponent must work with a Designated Operational Entity (DOE). The DOE is accountable to the Conference of the Parties/Members of the Parties through the Executive Board. The role of the DOE is to: Validate proposed CDM project activities; Verify and certify reductions in anthropogenic emissions by sources of greenhouse gases Validation or verification and certification Maintain a public list of all CDM project activities for which it has carried out validation, verification and certification Submit an annual activity report to the executive board The DOE provides this information to the Executive Board who approves all CDM projects. The Executive Board is responsible for maintaining a list of all accredited DOE s. National Authority for Clean Development Mechanism Countries participating in the Clean Development Mechanism (CDM) must designate a National Authority to evaluate and approve the projects. National Authorities (NA) in developing countries is responsible for evaluating and assessing projects to ensure they meet the sustainable development goals of that country. If the project is deemed to meet the sustainable development objectives outlined, the NA then issues a letter or certificate indicating that the project meets the sustainable development goals of that country. The NA is also responsible for reporting to the United National Framework Convention on Climate Change (on an annual basis) CDM activities within its country. Clean Development Mechanism Project Cycle The Marrakech Accords (Decisions coming out of the Seventh Conference of the Parties held the 29 th of October to November 10, 2001 in Marrakech, Morocco) have identified five fundamental stages of cycle of a Clean Development Mechanism (CDM) project (see Figure 2). These are: Design Validation and Registration Monitoring Verification and Certification Issue of Certified Emission Reductions

4 Figure 2 Overview of the CDM Project Cycle Stage 1 Design of Project/Project Design D ocument/project Proponent Stakeholder C omments/designated Operational Entity (30 days) Stage 2 Validation/D esignated O perational Entity (Eight W eeks) Registration/ Executive B oard Stage 3 Monitoring/Project Proponent Stage 4 Verification/Designated Operational Entity Certification/D esignated Operational Entity (Fifteen D ays) Stage 5 Issu e C ertified E missio n Re duc tion s/ Executive Board Each of these stages is outlined below. Design Each CDM project is required to complete the Project Design Document (PDD) as outlined by the Conference of the Parties/Members of the Parties (COP/MOP). The COP/MOP is currently reviewing a first draft of what elements will need to be included in the PDD (Appendix B) and are considering the following: General description of project activity that includes: o Title of the project activity o Participants in the project activity o Purpose of the project activity o Technical description of the project activity Baseline methodology that includes: o Title and reference of the methodology applied to the project activity o Justification of the choice of the methodology and why it is applicable to the project activity o Description of how the methodology is applied in the context of the project activity o Description of how the anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the registered CDM project activity o Description and justification of the project boundary o Details of baseline development Duration of the project activity/crediting period must include information on: o Duration of the project activity o Choice of the crediting period and related information Monitoring methodology and plan that includes: o Name and reference of approved methodology applied to the project activity o Justification of the choice of the methodology and why it is applicable to the project activity o Data to be collected in order to monitor emissions from the project activity, and how this data will be archived o Potential sources of emissions which are significant and reasonably attributable to the project

5 activity, but which are not included in the project boundary, and identification if and how data will be collected and archived on these emissions sources o Relevant data necessary for determining the baseline of anthropogenic emissions by sources of GHG within the project boundary and identification if and how such data will be collected and archived. o Quality control and quality assurance procedures are being undertaken for data monitored. o Name of person/entity determining the monitoring methodology. Calculation of GHG Emissions by sources: o Description of formulae used to calculate and estimate anthropogenic emissions by sources of greenhouse gases of the project activity within the project boundary. o Description of formulae used to calculate and to project leakage, defined as the net change of anthropogenic emissions by sources of greenhouse gas emissions which occurs outside the project boundary, and that is measurable and attributable to the project activity. o Description of formulae used to calculate and to project the anthropogenic emissions by sources of greenhouse gases of the baseline. o Description of formulae used to calculate and project leakage. o Calculation of differences between the project activity emissions and the baseline emissions that represent the emission reductions of the project activity. Environmental Impacts: o Documentation must be provided on the analysis of the environmental impacts, including transboundary impacts. o If impacts are considered significant by either the project proponent or the host Party, documentation and all references of an any environmental impact assessments that have been undertaken should be included. Account of stakeholder comments and environmental impacts: o Brief description of the process on how comments by local stakeholders have been invited and complied. o Summary of the comments received. o Report on how due account was taken of any comments received. Validation and Registration Validation is the process of independent evaluation of a project that is carried out by a designated operational entity (DOE). Under the validation process, the DOE reviews the project design document and any supporting documentation to confirm that the project meets the following requirements outlined by the COP/MOP: Baseline and monitoring methodologies comply with requirements approved by the Executive Board. Conformation that the project meets the sustainable development objectives of the host country. Ensures that concerns/comments raised are addressed. The designated national authority has approved the project. Emission reductions are real. On the DOE has assured itself that the above conditions have been met, it releases the Project Design Document for additional stakeholder input. Stakeholders have thirty days within which to respond. At this point, the DOE either validates or rejects the project. If the project is validated, it is sent to the Executive Board for approval. Once the Executive Board approves the CDM project, it is formally registered and the project can begin.

6 Monitoring A monitoring plan must be provided as part of the project design document. The plan must contain the following elements: Collection and archiving of all relevant data necessary for estimating or measuring anthropogenic emissions by sources of greenhouse gases occurring within the project boundary during the crediting period. Collection and archiving of all relevant data necessary for determining the baseline of anthropogenic emissions by sources of greenhouse gases within the project boundary during the crediting period. Identification of all potential sources of, and the collection and archiving of data on, increased anthropogenic emissions by sources of greenhouse gases outside the project boundary that are significant and reasonably attributable to the project activity during the crediting period. Documentation on the analysis of the environmental impacts of the project activity, including transboundary impacts and if impacts are considered to be significant by the project participants or the host Party, an environmental impact assessment must be undertaken in accordance with procedures as required by the host Party. Quality assurance and control procedures for the monitoring process. Procedures for the periodic calculation of the reductions of anthropogenic emissions by sources by the proposed CDM project activity, and for leakage effects. Documentation of all steps involved in the calculations. The monitoring report must be submitted to the Designated Operational Entity (DOE) who is responsible for verification and certification of the report. The DOE will review the report to ensure the report has been completed in accordance with the methodology outlined in the Project Design Document. If the DOE requires additional information or clarification on any elements contained in the monitoring report, it can either request the project proponent to provide clarification or undertake to obtain the information. Verification and Certification Once the Designed Operational Entity (DOE) has completed its review of the monitoring report and verifies that emission reductions have occurred, it provides to the Executive Board a certification report that verifies the emission reductions have occurred. The DOE also places a formal request with the EB to issue the Certified Emission Reductions. Issuance of Certified Emission Reductions The certification report constitutes a request for issuance to the Executive Board (EB) of certified emission reductions (CERs) equal to the verified amount of reductions. The issuance is considered final fifteen days after the date of receipt of the request for issuance unless a review is required (a review may be required if the designated operational entity is deemed to be incompetent or fraudulent in its practices). Once the EB approves the issuance of CERs (based on the certification report), the CDM registry administrator then forwards the appropriate quantity of CERs to the registry accounts of Parties and project proponents involved in the CDM project. A portion of the CERs is held back to cover administrative expenses and to assist in meeting costs of adaptation (see section on Costs of CDM Projects). Costs for Clean Development Mechanism Projects The Kyoto Protocol mandates that 2% of Certified Emission Reductions from CDM Projects will be deposited into a CDM account/registry that will be administered by the Executive Board. The revenues generated from the sale of the CERs will be sent to countries with CDM projects. This charge is to assist countries in adapting to climate change. In addition to funding adaptation, proceeds from CDM projects

7 will also be recovered to cover administrative costs. The amount of funding required for administration is yet to be determined but a resolution is expected at the Conference of the Parties 8. Ineligible Projects for Clean Development Mechanism The Kyoto Protocol limits the amount and types of credits for land-use, land-use change and forestry (LULUCF) projects. Credits arising from LULUCF activities are termed Removal Units (RMUS) and these RMUs cannot exceed 1% of the base year emissions of an Annex 1 country for the years 2008 to For instance, if a countries emissions in 1990 totaled 1,000 Mt, only 50 Mt in RMUs would be allowable for CDM projects (10 X 5 = 50 Mt). As well, nuclear power projects are disallowed to receive credit under CDM. Simplified Procedures for Small-Scale Clean Development Mechanism Projects The Marrakech Accords have recognized that the transaction costs involved in approving and implementing CDM projects may significantly impact the feasibility of smaller CDM projects. To resolve this problem, the Executive Board is developing simplified procedures for small-scale clean development mechanism projects. Specifically, the following types of projects will be eligible for the simplified procedures: Renewable energy project activities with a maximum output capacity equivalent of up to 15 megawatts (MW). Energy efficiency improvement project activities, which reduce energy consumption, on the supply and/or demand side, by up to the equivalent of 15 gigawatthours per year. Other project activities that both reduce anthropogenic emissions by sources and that directly emit less than 15 kilotonnes of carbon dioxide annually. The simplified procedures are expected to be finalized by November Summary The Clean Development Mechanism (CDM) can be used as an effective mechanism by both developing and developed countries. For companies in Annex 1 countries, CDM projects can assist them in to reaching their greenhouse gas emission reduction targets. As well, it provides companies with an opportunity to expand into new markets. For developing countries, CDM projects can contribute to the sustainable development objectives of the country as well as provide economic investment. References Pembina Institute for Appropriate Development, A User s Guide to the Clean Development Mechanism, June Center for Sustainable Development in the Americas, International Institute for Sustainable Development, Establishing National Authorities for the CDM, Clean Development Mechanism, Project Design Document, July Kyoto Protocol to the United Nations Framework Convention on Climate Change. Modalieites and procedures for a clean development mechanism as defined in Article 12 of the Kyoto Protocol, Marrakech Accords. Canadian Energy Research Institute, Greenhouse Gas Offset Project Proposal Guidelines for Colombian

8 CDM Projects, December Appendix A Article 12/Kyoto Protocol 1. A clean development mechanism is hereby defined. 2. The purpose of the clean development mechanism shall be to assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments under Article Under the clean development mechanism: a. Parties not included in Annex I will benefit from project activities resulting in certified emission reductions; and b. Parties included in Annex I may use the certified emission reductions accruing from such project activities to contribute to compliance with part of their quantified emission limitation and reduction commitments under Article 3, as determined by the Conference of the Parties serving as the meeting of the Parties to this Protocol. 4. The clean development mechanism shall be subject to the authority and guidance of the Conference of the Parties serving as the meeting of the Parties to the Protocol and be supervised by an executive board of the clean development mechanism. 5. Emissions reductions resulting from each project activity shall be certified by operational entities to be designated by the Conference of the Parties serving as the meeting of the Parties to this Protocol, on the basis of: a. Voluntary participation approved by each Party involved; b. Real, measurable, and long-term benefits related to the mitigation of climate change; and c. Reductions in emissions that are additional to any that would occur in the absence of the certified project activity. 6. The clean development mechanism shall assist in arranging funding of certified project activities as necessary. 7. The Conference of the Parties serving as the meeting of the Parties to this Protocol shall, at its first session, elaborate modalities and procedures with the objective of ensuring transparency, efficiency and accountability through independent auditing and verification of project activities. 8. The Conference of the Parties serving is the meeting of the Parties to this Protocol shall ensure that a share of the proceeds from certified project activities is used to cover administrative expenses as well as to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation. 9. Participation under the clean development mechanism, including in activities mentioned in paragraph 3(a) above and in the acquisition of certified emission reductions, may involve private and/or public entities, and is to be subject to whatever guidance may be provided by the executive board of the clean development mechanism. 10. Certified emission reductions obtained during the period from the year 2000 up to the beginning of the first commitment period can be sued to assist in achieving compliance in the first commitment period.

9 Copyright 2002 The copyright of this document or product, whether in print or electronically stored on a CD or diskette or otherwise (the "Protected Work") is held by the Alberta Research Council Inc. (ARC). The Inter-American Association of Sanitary and Environmental Engineering (AIDIS) and its Chapters have been granted a license to copy, distribute and reproduce this Protected Work on a non-commercial and cost-recovery basis in Latin America and the Caribbean. This Protected Work shall not, in whole or in part, be copied, photocopied, reproduced, translated or reproduced to any electronic means or machinereadable form without prior consent in writing from ARC. Any copy of this Protected Work made under such consent must include this copyright notice. Funding This document has been exclusively prepared for the AIDIS-CANADA Environmental Project. The Project was funded by the Canadian International Development Agency (CIDA), managed by the Alberta Research Council Inc. (ARC) and AIDIS as the Latin American partner. Alberta Research Council Inc. (ARC) 250 Karl Clark Road Edmonton, Alberta T6N 1E4 Tel: (780) Fax: (780) Website: Inter-American Association of Sanitary and Environmental Engineering Permanent Headquarters Abel Wolman Rua Nicolau Galiardi, Sao Paulo, SP, Brazil Tel: (55-11) Fax: (55-11) Website: aidis@unisys.com.br