microsoft power point - presentation 3 - the cdm project-cycle
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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
robert.kelly@undp.org
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
feasibilityassessment/ PIN
CDM projectdevelopment
/ PDD
CDM project
development/ PDD
Host countryapproval
Host countryapproval
ProjectvalidationProject
validation
Projectregistration
Projectregistration
CERissuance
CERissuance
Projectverification
Projectverification
The CDM project cycle
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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
feasibilityassessment/ PIN
CDM projectdevelopment
/ PDD
CDM project
development/ PDD
Host countryapproval
Host countryapproval
ProjectvalidationProject
validation
Projectregistration
Projectregistration
CERissuance
CERissuance
Projectverification
Projectverification
The CDM project cycle
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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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6 to 12 months 1.5 months Crediting period of the project
Project
Dev
eloper
DNA
DOE
CDM
Executive
Board
Project
feasibilityassessment/ PIN
Project
feasibilityassessment/ PIN
CDM project
development/ PDD
CDM project
development/ PDD
Host countryapproval
Host countryapproval
ProjectvalidationProject
validation
Projectregistration
Projectregistration
CERissuance
CERissuance
Projectverification
Projectverification
The CDM project cycle
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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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6 to 12 months 1.5 months Crediting period of the project
Pr
oject
Dev
eloper
DNA
DOE
CDM
Executive
Board
Project
feasibilityassessment/ PIN
Project
feasibilityassessment/ PIN
CDM project
development/ PDD
CDM project
development/ PDD
Host countryapproval
Host countryapproval
ProjectvalidationProject
validation
Projectregistration
Projectregistration
CERissuance
CERissuance
Projectverification
Projectverification
The CDM project cycle
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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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6 to 12 months 1.5 months Crediting period of the project
Pr
oject
Dev
eloper
DNA
DOE
CDM
Executive
Board
Project
feasibilityassessment/ PIN
Projectfeasibility
assessment/ PIN
CDM project
development/ PDD
CDM project
development/ PDD
Host countryapproval
Host countryapproval
ProjectvalidationProject
validation
Projectregistration
Projectregistration
CERissuance
CERissuance
Projectverification
Projectverification
The CDM project cycle
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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
6 to 12 months 1.5 months Crediting period of the project
Project
Dev
eloper
DNA
DOE
CDM
Executive
Board
Project
feasibilityassessment/ PIN
Projectfeasibility
assessment/ PIN
CDM project
development/ PDD
CDM project
development/ PDD
Host countryapproval
Host countryapproval
ProjectvalidationProject
validation
Projectregistration
Projectregistration
CERissuance
CERissuance
Projectverification
Projectverification
The CDM project cycle
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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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6 to 12 months 1.5 months Crediting period of the project
Project
Dev
eloper
DNA
DOE
CDM
Executive
Board
Projectfeasibility
assessment/ PIN
Projectfeasibility
assessment/ PIN
CDM project
development/ PDD
CDM project
development/ PDD
Host countryapproval
Host countryapproval
ProjectvalidationProject
validation
Projectregistration
Projectregistration
CERissuance
CERissuance
Projectverification
Projectverification
The CDM project cycle
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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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6 to 12 months 1.5 months Crediting period of the project
Project
Developer
DNA
DOE
CDM
Executive
Board
Projectfeasibility
assessment/ PIN
Projectfeasibility
assessment/ PIN
CDM project
development/ PDD
CDM project
development/ PDD
Host countryapproval
Host countryapproval
ProjectvalidationProject
validation
Projectregistration
Projectregistration
CERissuance
CERissuance
Projectverification
Projectverification
The CDM project cycle
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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
robert.kelly@undp.org
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