Course 5 CDM Baseline Methodologies

N Yuvaraj Dinesh Babu The Carbon Rating Agency IDEAcarbon, Singapore

The views expressed in this presentation are the views of the speaker and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Governors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequence of their use. Terminology used may not necessarily be consistent with ADB official terms.

Is CDM for you?

CDM Project Development

Stage 1: Project Screening will the project mitigate / sequester GHG emission? will the project result in real, measurable, additional emission reduction? Could the project have been undertaken as a result of normal business investment logic? Stage 2: Project Development Determine real emissions reductions: Choose project boundary Select project baseline Set crediting period Calculate emissions reductions Prepare Project Design Document Develop emissions monitoring and verification protocol Stage 3: National Approval Conduct stakeholders consultation Submit PDD & PCN to DNA and present the project to DNA (India) Obtain host country approval

CDM Project Development

Stage 4: Validation and Registration Designated Operational Entity (DoE) evaluates and validates project Designated Operational Entity (DoE) host the project in the website for Global StakeHolder Consultation for 30 days Registration of the project with CDM- Executive Board Stage 5: Implementation and Monitoring Implement project Monitor emissions and key parameters Stage 6: Verification and Certification DoE verifies emissions reduction Executive Board certifies project and issues CERs Stage 7: Trading & CERs Delivery Identification of a suitable buyer (during project cycle also) Delivery of CERs to Buyers

CDM Project Design Document Development

Section A Section B Title of the project Title Title of methodology Version Version Date Date Reference Project description Justification of choice Project Participants of methodology Project details Tabular format Emission reductions Baseline Sustainable development Additionality Data available at validation Location Monitoring plan Exact location Monitoring structure Maps Metering Technical Description Schedules Design specifications Calibration Monitoring parameters Emission reductions As per PDD guidelines Section C Project start date How to choose a start date Date format Project lifetime How to address Choice of crediting period Fixed / Dynamic Start date of crediting period

Section D Environmental Impact Assessment Refer EIA notification Analysis of positive and negative impacts

PDD Development

Ideal step by step approach for a PDD

Project Design Document

General write up of PDD

Additionality

Emission Reductions

Stakeholder consultation details

General Project description discussion / on identification Important dates of etc Barriers

Financial Data

Baseline Emission Project Emission Data Data

Leakage Data

Stakeholder meeting

Baseline Concept
The Marrakech Accord defines the baseline for a CDM project activity as the scenario that reasonably represents the anthropogenic emissions by sources of greenhouse gases that would occur in the absence of the proposed project activity. Baseline : refers to level or quantity of GHG emissions of an activity or source of emission in the baseline scenario. Baseline Scenario : defining likely activities / sources of GHG emissions in the absence of a CDM project activity
Support : UNEP RISOE

Baseline Scenario
Before calculating baseline emissions, it is necessary to identify baseline scenarios. A baseline (emissions) shall cover emissions from all gases, sectors and source categories within the project boundary. A baseline (scenario and emissions) shall be established: (a) based on approved and new methodologies; (b) transparent and conservative manner ( approaches, assumptions, methodologies, parameters, data sources, key factors and additionality, and taking into account uncertainty) (c) project-specific; (d) simplified procedures : small-scale CDM project activities (e) analyse relevant national and/or sectoral policies and circumstances - sectoral reform initiatives, fuel details, power plans and project economic situation
Source : IGES CDM in Charts

Baseline Scenario
Different scenarios may be elaborated as potential situation existing before the proposed CDM project activity : - continuation of a current activity - implementing the proposed project activity - others options Baseline methodologies needs narrative description of all reasonable baseline scenarios. For different scenarios, different elements to be taken into consideration - take into account national / sectoral policies and circumstances, ongoing technological improvements, investment barriers, etc. - a scenario where future GHG emissions are projected to rise above current levels, due to the specific circumstances of the host Party.

Source : IGES CDM in Charts

Baseline Approaches
Three approaches : Existing actual or historical emissions, as applicable; or Emissions from a technology that represents an economically attractive course of action, taking into account barriers to investment; or Average emission of similar projects activities undertaken in the previous 5 years, in similar circumstances, and whose performance is among the top 20% of their category.

The three global CDM criteria as outlined in Paragraph 5, Article 12 of the Kyoto Protocol are: Participation in the CDM is voluntary Real, measurable, and long term benefits in GHG reductions The reductions in GHG emissions from the CDM project should be additional to any that would occur in the absence of the CDM (additionality).

Baseline Methodology Process

Source : World Bank

Crediting Period

CERs issued only after the date of registration of a CDM project activity. Crediting period options : - A maximum of 7 years which may be renewed at most 2 times. (BL updated after 7 years) - A maximum of 10 years with no option of renewal.

Projects since 2000 eligible to claim CERs (subject to CDM rules)

Source : IGES CDM in Charts

Baseline Key Parameters

Technology / Measures project technology / measure to reduce GHG emissions Project Boundary - physical / geographical site (project site) Baseline emissions (current / business as usual fossil fuel emissions) BEy Project Emissions (emissions from use of fossil fuels) PEy Leakage LEy Emission Reductions ERy : BEy PEy - LEy All units in (t CO2e/y) Monitoring (Measure, Estimate, Calculated or Default)

Source : IGES CDM in Charts

Baseline Key Parameter

Boundary

GHG Impact Operations

CDM Input supplied by PP operations

Source : IGES CDM in Charts

Baseline Key Parameter

Boundary : Schematic of existing situation at steel plant.

Existing situation

CDM Activity

Baseline Key Parameters

GWP and Emission Factors emissions

Source : IGES CDM in Charts

Baseline Key Parameters

Leakage (increase in emissions outside of the project Boundary) Activity Shifting (physical displacement of current GHG source) Market Leakage (difficult to predict) Temporal Leakage (non-permanence / reversibility : forestry)

Leakage levels Negative and significant : to be accounted for No Leakage : justification to be provided Positive : cannot claim credits

Establishing a Baseline Methodology

Source : UNEP RISOE

Small Scale CDM Project : Definition

Preliminary Screening Category (Type I, II and III ) Type I : Renewable Energy ; Type II : Energy Efficiency ; Type III : Others Installed Capacity <=15MWe Thermal Capacity <= 45 MWth Emission Reductions <= 60k tCO2e annually De-bundling Application of consolidated methodology for grid connected projects (ACM0002)
Source : IGES Charts on CDM

Small Scale CDM Project

Baseline & Monitoring methodology selection
Check the sectoral scope Check the methodologies within the sectoral scope Correlate the project details with the applicability of the respective methodologies Check the data availability for calculating the baseline, project emissions and leakage Develop emission reduction calculation template Discuss for additionality Conduct stakeholder meeting Conclude PDD

Small Scale CDM Project

Additionality
Two options: - Option 1: - Tools for demonstration and assessment of additionality - Option 2: - Barrier analysis as per the Simplified - Modalities and Procedures for Small Scale - CDM Project activities

Approved Small Scale Baseline Methodologies

Project type s Type I: Re ne w able e ne rgy projects <15 MW Type II: Ene rgy e fficiency improvement proje cts <60 GWh sa vings Sma ll-sca le CDM project activity cate gorie s A. Electricity generation by the user B. Mechanical energy for the user C. Thermal energy production with or without electricity D. Renewable electricity generation for a grid E. Switch from Non-Renewable Biomass for Thermal Applications by the User A. Supply side energy efficiency improv ements - transmission and distribution B. Supply side energy efficiency improv ements - generation C. Demand-side energy efficiency programmes for specific technologies D. Energy efficiency and fuel switching measures for industrial facilities E. Energy efficiency and fuel switching measures for buildings F. Energy efficiency and fuel switching measures for agricultural facilities and activ ities G. Energy Efficiency Measures in Thermal Applications of Non-Renewable Biomass H. Energy efficiency measures through centralization of utility prov isions of an industrial facility Technology I. Efficient utilization of waste energy in industrial facilities J. Demand-side activ ities for efficient lighting technologies (deemed savings) A. Urea offset by inoculant application in soybean-corn rotations on acidic soils on existing cropland B. Switching fossil fuels C. Emission reductions by low-greenhouse emission v ehicles D. Methane recov ery in animal manure managements systems E. Av oidance of methane production from biomass decay through controlled combustion F. Avoidance of methane production from biomass decay through composting G. Landfill methane recovery H. Methane recov ery in wastewater treatment I. Av oidance of methane production in wastewater treatment through replacement of anaerobic lagoons by aerobic systems J. Av oidance of fossil fuel combustion for carbon dioxide production to be used as raw material for industrial processes K. Av oidance of methane release from charcoal production by shifting from pit method to mechanized charcoaling process L. Avoidance of methane production from biomass decay through controlled pyrolysis M. Reduction in consumption of electricity by recov ering soda from paper manufacturing process N. Av oidance of HFC emissions in rigid Poly Urethane Foam (PUF) manufacturing O. Hydrogen production using methane extracted from biogas P. Recov ery and utilization of waste gas in refinery facilities Q. Waste gas based energy systems (gas/heat/pressure) R. Methane recov ery in agricultural activ ities at household/small farm lev el S. Introduction of low-emission v ehicles to commercial v ehicle fleets T. Plant oil production and use for transport applications U. Cable Cars for Mass Rapid Transit System (MRTS) V. Decrease of coke consumption in blast furnace by installing dust/sludge recycling system in steel works W. Methane capture and destruction in non-hydrocarbon mining activities X Energy efficiency and HFC-134a recovery in residential refrigerators . Y. Methane avoidance through separation of solids from wastewater or manure treatment systems Z. Fuel switch, process improv ement and energy efficiency in brick manufacture AA. Transportation Energy Efficiency Activities using Retrofit Technologies AB. Avoidance of HFC emissions in Standalone Commercial Refrigeration Cabinets AC. Electricity and/or heat generation using fuel cell AD. Emission reductions in hydraulic lime production AE. Energy efficiency and renewable energy measures in new residential buildings AF. Avoidance of methane emissions through excav ating and composting of partially decayed MSW AG. Switching from high carbon intensiv grid electricity to low carbon intensiv fossil fuel e e AH.Shift from high carbon intensive fuel mix ratio to low carbon intensiv fuel mix ratio e
Note: The number includes rejected projects

Number 31 4 326 1504 5 2 23 24 150 25 3 1 7 0 12 0 66 9 248 63 69 26 189 10 1 2 0 3 3 1 5 82 3 0 1 1 1 0 1 0 1 0 0 0 0 0 0 0 0 2902

PoAs 1 1 3 1

2 1

Type III: EB27: <60 ktCO2 reduction

1 1

11

Approved Baseline Methodologies

Sectors Afforestation and Reforestation Biofuels Biomass Cement CO2 Capture Energy Distribution Energy Efficiency, Households Energy Efficiency, Industry Energy efficiency, own generation (of electricity) Energy efficiency, Supply Side Energy efficiency, Service Fossil Fuel Switch Fugitive Emissions From Fuels HFC Landfill N2O PFC & SF6 Transport Zero Emission Renewables Approved Methodologies AR-ACM1, AR-ACM2, AR-AM1,AR-AM2, AR-AM3, AR-AM4, ARA-M5, AR-AM6, AR-AM7, AR-AM8, ARAM9, AR-AM10 AM47 AM7, ACM3, ACM6, AM36, AM42,AM82 ACM15 AM27, AM63 AM45, AM58, AM67 AM46, AM70, AM71 AM17,AM18,AM38,AM44,AM54,AM60,AM68 ACM12,AM24,AM49,AM55 ACM7,ACM13,AM14,AM48,AM52,AM61,AM62,AM76 AM20 ACM9, ACM11,AM29, AM50 AM9,AM23,AM37,AM43,AM77,AM81 AM1 ACM1, AM83 AM21,AM28,AM34,AM51 AM30,AM35,AM59,AM65,AM78,AM79 AM31 ACM2, AM26,AM19,AM72

Baseline Key Parameters

Typical baseline emission factors for grid power - India

Emission Reductions ERy : BEy PEy - LEy (t CO2e/y) BEy = Wind power generated (MWh)* GEF (tCO2/MWh) ERy = BEy 0 0 (t CO2e/y)
Source : IGES CDM in Charts

Baseline Key Parameters

Monitoring (Measure, Estimate, Calculated or Default) Monitoring methodology : used for collection and archiving all relevant data required for measuring and monitoring of emission reductions from the project activity. Use approved methodology or propose a new monitoring methodology. Application of monitoring methodology - List of data items to be monitored : Baseline emissions, Project emissions, Leakage, Emission reductions, - Monitoring plan and organization / Quality assurance and quality control measures

Additionality and CDM Project

Additionality tool developed by CDM EB Use of AT is not mandatory Largely used by project developers Underwent several versions CDM EB invites submission of new additionality arguments Investment Analysis most argued and controversial Objective is to deny Business As Usual projects, CDM benefits Rejection rates higher due to AT Scope sill exists to simplify and streamline

Source : CDM EB and IGES, Japan

Baseline Methodologies
Summary

A CDM project must use an approved CDM methodology. - New methodology can be submitted if approved not applicable A CDM methodology contains 2 major components : - baseline methodology (application of a baseline approach to an individual project activity) - monitoring methodology refers to the method for collection and archiving of all relevant project performance data as per monitoring plan

The baseline methodology and monitoring methodology must be used in combination All information related to CDM methodologies (approved and under approval by the CDM Executive Board are available on UNFCCC CDM website)

PDD Development : Resource documents

CDM-PDD Guidelines (http://cdm.unfccc.int/Reference/Guidclarif/) / http://cdm.unfccc.int/Reference/PDDs_Forms/PDDs/ CDM-Small Scale Methodologies (Simplified Modalities & Procedures) http://cdm.unfccc.int/methodologies/SSCmethodologies/approved.html and http://cdm.unfccc.int/Projects/pac/ssclistmeth.pdf Tools for assessment and demonstration of additionality (http://cdm.unfccc.int/methodologies/PAmethodologies/tools/am-tool-01-v5.2.pdf) and http://cdm.unfccc.int/methodologies/PAmethodologies/tools/am-tool-02v2.2.pdf Approved Methodologies and Consolidated Methodologies with Deviations and Revisions (http://cdm.unfccc.int/methodologies/PAmethodologies/approved.html) New methodologies under consideration by METH Panel and CDM EB (http://cdm.unfccc.int/methodologies/PAmethodologies/publicview.html) Main reference website : http://cdm.unfccc.int

CDM Useful Websites

http://www.cd4cdm.org http://www.iges.or.jp/en/index.html http://www.cdmrulebook.org

Thank you !

Small Scale CDM Project

Option 1 Vs Option 2
Additionality Tool Investment Barrier Similar activities have only been implemented with grants or other noncommercial financial terms Simplified M&P Investment Barrier A financially more viable alternative to the project activity would have led to higher emissions No private capital is available from domestic or international capital markets due to real or perceived risks associated with investment in the country where the proposed CDM project activity is to be implemented. -

Small Scale CDM Project

Option 1 Vs Option 2
Additionality Tool Technological Barrier Skilled and/or properly trained labour to operate and maintain the technology is not available, which leads to an unacceptably high risk of equipment disrepair and malfunctioning or other Underperformance Simplified M&P Technological Barrier A less technologically advanced alternative to the project activity involves lower risks due to the performance uncertainty or low market share of the new technology adopted for the project activity and so would have led to higher Emissions Lack of infrastructure for implementation and logistics for maintenance of the technology Risk of technological failure Technology is not available in the relevant region -

Small Scale CDM Project

Option 1 Vs Option 2

Additionality Tool Barrier due to prevailing practice The project activity is the first of its kind

Simplified M&P Barrier due to prevailing practice Prevailing practice or existing regulatory or policy requirements would have led to implementation of a technology with higher emissions

Small Scale CDM Project

Option 1 Vs Option 2

Additionality Tool Other barriers Methodology specific

Simplified M&P Other barriers Without the project activity, for another specific reason identified by the project participant, such as institutional barriers or limited information, managerial resources, organizational capacity, financial resources, or capacity to absorb new technologies, emissions would have been higher