Microsoft Power Point - Presentation 3 - The CDM Project-cycle

8/9/2019 Microsoft Power Point - Presentation 3 - The CDM Project-cycle

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The CDM:Project-Cycle & Institutions

Robert Kelly

Regional Coordinator, CDM Capacity Development,Southern & Eastern Africa

[email protected]

Presentation 3, Addis Ababa, May 8th, 2008


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Agenda

Governance structure of the CDMGovernance structure of the CDM

CDM project cycle & institutions


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International CDM bodiesConference of Parties to the UNFCCC,

Meeting of the Parties to the Kyoto Protocol (COP/MOP)

Conference of Parties to the UNFCCC,Meeting of the Parties to the Kyoto Protocol (COP/MOP)

CDM Executive Board (CDM-EB)

CDM Executive Board (CDM-EB) CDM EB operates under the authority of the COM/MOP

Methodology Panel

Methodology Panel Recommend to the EB on baseline and monitoringmethodologies, revisions to the PDD, etc.

Recommend to the EB on baseline and monitoringmethodologies, revisions to the PDD, etc.

Accreditation Panel

Accreditation Panel

Afforestation and ReforestationWorking Group

Afforestation and ReforestationWorking Group

Small Scale CDM Panel

Small Scale CDM Panel

CDM Registration and IssuanceTeam

CDM Registration and IssuanceTeam

Recommend to the EB on baseline and monitoringmethodologies for small-scale project activity

Recommend to the EB on baseline and monitoringmethodologies for small-scale project activity

Recommends to the EB on baseline andmonitoring methodologies for A/R CDM

Recommends to the EB on baseline andmonitoring methodologies for A/R CDM

Recommends to the EB on the accreditation of anApplicant Entity (AE), suspension, withdrawaland/or re-accreditation of a DOE

Recommends to the EB on the accreditation of anApplicant Entity (AE), suspension, withdrawaland/or re-accreditation of a DOE

Assists the CDM EB by appraising requests forproject registration and requests for CER issuance

Assists the CDM EB by appraising requests forproject registration and requests for CER issuance


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6 to 12 months 1.5 months Crediting period of the project

Project

Developer

DNA

DOE

CDM

Executive

Board

Project

feasibilityassessment/ PIN

Project


CDM projectdevelopment

/ PDD

CDM project

development/ PDD

Host countryapproval


ProjectvalidationProject

validation

Projectregistration

Projectregistration

CERissuance

CERissuance

Projectverification

Projectverification

The CDM project cycle


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Project

Developer

DNA

DOE

CDM

Executive

Board

Project


Project


CDM projectdevelopment

/ PDD

CDM project

development/ PDD




validation

Projectregistration

Projectregistration

CERissuance

CERissuance

Projectverification

Projectverification



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The Project Idea Note (PIN)

The PIN is typically a five-page document providing information on aCDM project

Some countries require a PIN in order to be able to obtain a letter ofendorsement from the DNA of the host country

The PIN is typically used as a marketing tool to distribute topotential CDM investors to begin negotiations on partnership orpurchase of CERs

The PIN has three main components:

Project description type of project, location, schedule, etc.

Finance expected costs and expected revenues

Expected environmental and social benefits


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Project

Dev

eloper

DNA

DOE

CDM

Executive

Board

Project


Project


CDM project

development/ PDD

CDM project

development/ PDD




validation

Projectregistration

Projectregistration

CERissuance

CERissuance

Projectverification

Projectverification



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The Project Design Document (PDD)

An official component of the CDM project cycle

Official standardised template is available from the UNFCCC website

Covers all the information essential for carbon layer assessment

Incorporates significant project thinking project design, partnerships,funding, revenue and cost forecasts, due diligence, sensitivity analysis,etc.

The PDD is validated by a Designated Operational Entity and describesthe baseline and monitoring methodology that must be carried out

PDDs are public documents


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Pr

oject

Dev

eloper

DNA

DOE

CDM

Executive

Board

Project


Project


CDM project

development/ PDD

CDM project

development/ PDD




validation

Projectregistration

Projectregistration

CERissuance

CERissuance

Projectverification

Projectverification



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The Designated National Authority (DNA) is the legal entity authorised tosign a Letter of Approval (LoA) for a CDM project

Typically an inter-ministry agency (Environment, Economy, Energy,Meteorology, etc.) with a small secretariat

The DNA provides written approval that the CDM project assists inachieving the countrys sustainable development

The details of the approval procedure are up to each country

Typically, 3 broad development criteria are employed:

Economic: the project has a positive effect on economic

development

Environmental: the project leads to reduced pressure on theenvironment

Social: the project has positive effects on social development

The DNA and host country approval


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[State Forest Agency MOLDSILVA]

No.018 03/9.04 from 2nd of September, 2004ref No. 01-07/401 from 20th of July 2004

On examination of the project proposals

Soil conservation in the Republic of Moldova

Through the present, we acknowledge that the the Supreme Designated National Authority, responsible for the implementation ofthe Clean Development Mechanism of the Kyoto Protocol, has examined on its meeting from 9th of August 2004 the project Soil

Conservation in the Republic of Moldova, elaborated and presented by the State Forest Agency MOLDSILVA. As result ofexamination, the National Commission concluded the following:

The State Forest Agency MOLDSILVA is the only responsible for elaboration and implementation of the CDM Project SoilConservation in the Republic of Moldova. In the name of the Government of the Republic of Moldova, the Agency has negotiatedand contracted with the World Bank Prototype Fund all the conditions of the CDM Project (Government Resolution No. 1155 from26th of September 2003).

In case of implementation of the CDM Project in its actual version, the planned activities would essentially contribute to thesustainable development of the Republic of Moldova and would positive influence the quality of the environment.

Through this CDM Project, the Republic of Moldova is participating on voluntary basis on realization of the Clean DevelopmentMechanism of the Kyoto Protocol.

Constantin MIHAILESCU

Minister, Ministry of Ecology and Natural Resources,Chair of the National Commission

Letter of approval - example


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Compliance with national policies:

Environmental Impact Assessment

Sectoral regulations (construction permits, licences, etc)

Compatibility with local/sectoral strategies and priorities

Public participation:

Comments by local stakeholders directly and indirectlyinvolved with the project

Infrastructure and technical capacity:

Local availability of qualified human resources

Local availability of adequate institutional resources

Other host country requirements


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Pr

oject

Dev

eloper

DNA

DOE

CDM

Executive

Board

Project


Projectfeasibility

assessment/ PIN

CDM project

development/ PDD

CDM project

development/ PDD




validation

Projectregistration

Projectregistration

CERissuance

CERissuance

Projectverification

Projectverification



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Validation a process of systematic assessment leading to astatement on the reasonableness of the assertion of future

greenhouse gas performance

Basically is the plan reasonable?

Project validation


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A required pre-approval step for CDM project registration

Undertaken before the project crediting period, and (typically) beforeimplementation / construction of the project

Requires assessment of the assumptions, calculations, methodologiesand justifications relating to the baseline scenario

Is the project truly additional?

Will the greenhouse gas emission reductions be monitoredand calculated appropriately?

Provides no assurance of the projects future performance!

Project validation


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Undertaken by Designated Operational Entities (DOEs):

Essentially audit companies:

Confirm that the PDD conforms to CDM requirements andcorrectly applies the baseline methodology andgreenhouse gas quantification procedures

Check calculations are accurate and assumptions are

reasonable in the PDD Confirm that the project satisfies the additionality

requirement

Make the PDD available for public review

Submit the PDD to the CDM Executive Board for registration(together with Letter of Approval from the DNA)

Project validation


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The independence of DOEs

Validator/Verifier(DOE)

(3rd party)

Validator/Verifier(DOE)

(3rd party)

assurance

independence

CDMExecutive

Board(2nd party)

CDMExecutive

Board(2nd party)

GHGAssertion

ProjectProponent

(1st party)

ProjectProponent

(1st party)

accountability

sta

tem

ent

Independenceshown by nofinancialinterest


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DOEs are accredited for specific sectoral scopes

Agriculture15

Afforestation & reforestation14

Waste handling & disposal13

Solvent use12

Fugitive emissions from HFCs & SF611

Fugitive emissions from fuels (solid, oil and gas)10

Metal production9

Mining / mineral production8

Transport7

Manufacturing industries4

Chemical industries5

Construction6

Energy demand3

Energy distribution2

Energy industries (renewable / non-renewable sources)1

Sectoral ScopeScope Number


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DOEs market shares

DNV, 42%

TV-SD, 25%

SGS, 13%

BV Cert, 6%

TV-Nord, 6%TV-Rhein, 5%

Other, 5%

Share of CDM Validations, March 2008


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2020


Project

Dev

eloper

DNA

DOE

CDM

Executive

Board

Project


Projectfeasibility

assessment/ PIN

CDM project

development/ PDD

CDM project

development/ PDD




validation

Projectregistration

Projectregistration

CERissuance

CERissuance

Projectverification

Projectverification



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The CDM Executive Board checks that the submitted PDD and

accompanying documents are complete

The CDM Registration Fee is paid

The PDD is then placed on the UNFCCC website for a period of 8

weeks for public comment known as a request for registration

The CDM Executive Board can request changes to the project designor can reject the project outright

Otherwise, the project is formally registered as a CDM project

Project registration


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Project registration fee The registration fee covers the Executive Boards administrative expenses

The registration fee is:

10 US cents per CER issued for the first 15,000 CERs

20 US cents per CER issued for any amount in excess of 15,000 CERs for agiven year

The maximum registration fee is $350,000

No registration fee has to be paid for CDM project activities with expected

average annual emission reductions below 15,000 CERs

$ 18,500100,000 tCO2e

$ 350,0001,757,500 tCO2e

$ 350,0003,000,000 tCO2e

$ 4,50030,000 tCO2e

$ 1,50015,000 tCO2e

-10,000 tCO2e

US$Average Annual Emission Reduction


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Project registration fee

No registration fee has to be paid for CDM project activities hosted in

least developed countries:

E.g. Ethiopia, Mozambique, Tanzania, Zambia

But not (for example)Botswana, Kenya, Mauritius

The PDD constitutes the basis for the calculation of the registration fee

If an activity is not registered, any registration fee above $30,000 is

reimbursed


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Project

Dev

eloper

DNA

DOE

CDM

Executive

Board

Projectfeasibility

assessment/ PIN

Projectfeasibility

assessment/ PIN

CDM project

development/ PDD

CDM project

development/ PDD




validation

Projectregistration

Projectregistration

CERissuance

CERissuance

Projectverification

Projectverification



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Verification a process of systematic assessment leading to astatement confirming the assertion that past greenhouse gasperformance has been appropriately calculated and reported

Basically provides confirmation of the greenhouse gas

assertion

Project verification


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Undertaken after the CDM project has been implemented and hasstarted to generate greenhouse gas reductions. Typically requiresrigorous data collection, testing and evaluation of evidence to present

a complete audit trail

Essentially, seeks to confirm two things:

that past greenhouse gas performance has been appropriatelycalculated and reported

that the project has been executed in accordance with thevalidated PDD

Verification is undertaken by a DOE but not the one that performedthe validation

Verification can take place as often as the project developerwishes represents a balance between cost and revenue

Project verification


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Before the project

Validation gives assurance that if the project is implemented according tothe Project Design Document (PDD) then it will meet CDM eligibility criteriaand that, once verified, CERs will be issued.

- Once validation is achieved, the bargaining power of the project

developer increases considerably as does the price of the CERs

During the project

Verification provides assurance that the project developer has adhered to

the validated PDD and that emission reductions have, in fact, taken place.

- Once results are verified, CERs can be issued. These are a uniform(hard) currency, and have a higher value than any projected CERs

The link between validation and verification


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The cost of validation of a project depends on:

The complexity of the project

Quality of the PDD

Quality of underlying control and information systems

If the PDD fails validation you do not have a project!

What you need to know about validation


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The best project in the world is worthless if not monitored properly:

- If the project developer does not collect (with calibratedinstruments), process and record relevant data during theoperation of the project, it is usually not possible to reconstruct(back-cast) this data

If data is not transparently available to the DOE, certification will not bepossible

- If the Monitoring Report fails verification, the project cannot beissued with CERs

What you need to know about verification


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Project

Developer

DNA

DOE

CDM

Executive

Board

Projectfeasibility

assessment/ PIN

Projectfeasibility

assessment/ PIN

CDM project

development/ PDD

CDM project

development/ PDD




validation

Projectregistration

Projectregistration

CERissuance

CERissuance

Projectverification

Projectverification



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Certification and CER issuance The DOE provides a verification report to the project participants and

the executive board. The report is made publicly available.

The verification report constitutes a request for issuance to theExecutive Board of CERs equal to the verified amount of reductionsof anthropogenic emissions by sources of greenhouse gases.

The issuance of CERs is considered final 15 days after the date of

receipt of the request for issuance.

The Executive Board then instructs the CDM registry to issue thespecified quantity of CERs in the CDM registry:

A Share of Proceeds (SOP-Admin) fee is deducted

2% of the total CERs are deducted as a SOP-Adaptation fee

The remaining CERs are forwarded to the registry accounts ofthe project participants involved


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Share of Proceeds Administration (SOP-Admin) payment

The SOP-Admin fee is levied at the time of issuance of CERs

The SOP-Admin fee covers the Executive Boards administrativeexpenses

The SOP-Admin fee is:

10 US cents per CER issued for the first 15,000 CERs

20 US cents per CER issued for any amount in excess of 15,000CERs for a given year

The registration fee is deducted from the SOP-Admin fee

No SOP-Admin fee has to be paid for CDM project activities hosted inleast developed countries


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Share of Proceeds Adaptation (SOP-Adaptation) payment

2% of issued CERs are diverted to an Adaptation Fund to enabledeveloping countries meet the costs of adapting to climate change

CDM projects in least developed countries are exempt from the SOP-Adaptation payment

Administered by the Adaptation Fund Board, with the GlobalEnvironment Facility (GEF) acting as interim Secretariat and the WorldBank acting as interim Trustee

Controversies over management as the Adaptation Fund is not fundedby donors

The Fund currently contains 2.7 million CERs and may contain 36million CERs by the end of 2012

At a price of EURO 15/CER: EURO 540 million ($810 million)


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End

Robert KellyRegional Coordinator, CDM Capacity Development,

Southern & Eastern Africa

[email protected]

Documents

Microsoft Power Point - Presentation 3 - The CDM Project-cycle