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CDM Life Cycle
S. Balasubramoniam & Vidyacharan Astakala
DNV-Climate Change Services,
9 May 2008
Version
Slide 2
13 May 2008
Det Norske Veritas
Det Norske Veritas --DNV
DNV
�Purpose
TO SAFEGUARD LIFE PROPERTY & ENVIRONMENT
�Vision
GLOBAL IMPACT FOR A SAFE AND SUSTAINABLE
FUTURE
Version
Slide 4
13 May 2008
DNV worldwide
Head Office
Main support and service centres
Local offices
Version
Slide 5
13 May 2008
Key Industry sectors Managing risk
Automotive
General
Maritime
Renewable energy
Food and beverage
Aviation
Oil and gas
Process
Rail
ICT
Version
Slide 6
13 May 2008
Accreditation scopes
�Sector 01 Energy industries (renewal -/ non-renewable resources)
�Sector 02 Energy distribution
�Sector 03 Energy demand
�Sector 04 Manufacturing industries
�Sector 05 Chemical industries
�Sector 06 Construction
�Sector 07 Transport
�Sector 08 Mining/mineral production
�Sector 09 Metal production
�Sector 10 Fugitive emissions from fuels (solid, oil and gas)
�Sector 11 Fugitive emissions from production and consumption of halocarbons
and sulphur hexafluoride
�Sector 12 Solvent use
�Sector 13 Waste handling and disposal
�Sector 14 Afforestation and Reforestation
�Sector 15 Agriculture
�DNV is accredited to all scopes for both validation and
verification except Sector 14, and handled more than 1300
Hundred projects in above areas world wide.
Version
Slide 7
13 May 2008
Introduction of Det Norske Veritas
�Global presence (>6000 employees, 300 offices)
��CLASSIFICATION, CERTIFICATION, CONSULTANCY
CLASSIFICATION, CERTIFICATION, CONSULTANCY
��Third Party Services for Greenhouse Gas Emission Reductions, for
Third Party Services for Greenhouse Gas Emission Reductions, formore than 8
more than 8
yrs.
yrs. -
Leadin
g A
ccre
dited D
OE
-Valid
ation o
f C
DM
/JI pro
jects
-C
ertific
ation o
f Em
issio
n R
eductions (C
ER
) genera
ted b
y
CD
M
pro
jects
-Verification o
f Em
issio
n R
eduction U
nits (ER
U) genera
ted b
y J
I pro
jects
Version
Slide 8
13 May 2008
DNV -Performance
100.0%
318
100.0%
3265
Total
0.0%
0.0%
n.a.
Name not avalibale
0.0%
0.0%
GFA
GFA Consulting Group
0.3%
10.0%
ICONTEC
Colombian Institute for Technical Standards and Certification
0.0%
0.0%
AZSA
AZSA & Co
0.0%
0.0%
1Deloitte-TECO
Deloitte Tohmatsu Evaluation and Certiification Organization
0.0%
0.1%
2BSI
British Standard Institution (BSI)
0.0%
0.1%
2Rina
RINA S.p.A
0.0%
0.1%
3PwC
PricewaterhouseCoopers (PwC)-South Africa
0.6%
20.2%
5JACO
Japan Audit and Certification Organisation for Env. And Quality
0.0%
0.2%
6KPMG
KPMG Certification B.V.
0.0%
0.3%
9KFQ
Korean Foundation for Quality
0.0%
0.6%
18
KEMCO
Korea Energy Management Corporation
0.0%
0.7%
23
LRQA
Lloyd's Register Quality Assurance Ltd.
0.0%
0.9%
30
JQA
Japan Quality Assurance
1.9%
60.9%
30
AENOR
Spanish Association for Standardisation and Certification
0.0%
1.0%
32
JCI
Japan Consulting Institute
0.3%
14.6%
151
TÜV-Rhein
TÜV Industrie Service GmbH -TÜV Rheinland
4.1%
13
5.6%
182
TÜV-Nord
TÜV-Nord Cert GmbH (RWTÜV)
10.1%
32
5.8%
191
BV Cert
Bureau Veritas Certification
32.1%
102
12.7%
414
SGS
SociétéGénérale de Surveillance
14.8%
47
24.7%
808
TÜV-SÜD
TÜV Industrie Service GmbH -TÜV Süd Gruppe
35.8%
114
41.6%
1358
DNV
Det Norske Veritas Certification
%Number
%Number
CDM
CDM
name
Verified projects
Validated projects
Short
Designated Operational Entity (DOE) used
Version
Slide 9
13 May 2008
CDM ELIGIBILITY
For a project to be considered for CDM, should fulfill following
eligibility criteria:
─The project contributes to the Sustainable Developmentof the
host country
─The project results in real, measurable and long term benefitsin
terms of climate change mitigation,and
─The reductions must be a
dditio
nalto any that would have
occurred without the project
Version
Slide 10
13 May 2008
Introduction
�Aim: to reduce unexpected delays and costs from the validation of Project
Design Documents (PDDs) for CDM projects.
�Objectives:
-Introduce the CDM PDD Guidebook
-Enable to people to better interact with the Designated Operating Entity
(DOE) through a better understanding of the validation process
-Help to get PDD submissions right first time, through raising awareness of the
major 20 pitfalls in completing PDDs, particularly those pitfalls that cause the
longest delays.
Version
Slide 11
13 May 2008
CDM PPD Guidebook
�The Guidebook was supported by
the CD4CDM (Capacity
Development for CDM) project),
implemented by the UNEP
RISOE Centre
�Information gathered from DNV
practical experience and research
-DNV has validated over half of all
CDM projects coming through to
the validation stage.
-DNV is the one of the leading
Designated Operational Entity
accredited for allmajor energy,
industry and waste sectors under
the CDM
Version
Slide 13
13 May 2008
CDM Project Stages and Parties Involved
Des
ign
Reg
istr
ati
on
Imp
lem
enta
tion
Mon
itori
ng &
Rep
ort
ing
Vali
dati
on
Ver
ific
ati
on C
erti
fica
tion
Pro
ject
Part
icip
an
ts
Des
ign
ate
d O
per
ati
on
al
En
tity
(D
OE
)
CD
M E
xec
uti
ve
Board
Sta
keh
old
er
con
sult
ati
on
s
Des
ign
ate
d N
ati
on
al
Au
thori
ty (
DN
A)
of
host
an
d A
nn
ex I
cou
ntr
y
Part
ies,
Sta
keh
old
ers,
Acc
red
ited
NG
OsAp
pro
val
Version
Slide 14
13 May 2008
Key pitfalls –Frequency more than 20%
•Evidence of EIA and/or
required
construction/operating
permits/approvals not
provided
•Letter of Approval
insufficient or delayed
•Lack of logic and consistency in
PDD
•Deviations from selected
calculation methodology not
justified sufficiently or incorrect
formulas applied
•Compliance with local legal
requirements not covered
sufficiently
•Insufficient information on the
stakeholder consultation process
Delay more than 1 month
Delay more than 1 week
Version
Slide 15
13 May 2008
Key Pitfalls –Frequency less than 20%
•Small-scale selected for a
large-scale project
•No written confirmation
that funding will not result
in a diversion of official
development assistance
•Non-compliance with the
applicability conditions of
the applied baseline
methodology or
methodology compliance
not explained sufficiently
•Project participants not identified clearly
•Insufficient description of the technology
•Insufficient explanation of baseline scenarios
•Insufficient explanation of project additionality
•Baselineinformation not sufficiently supported by
evidence and/or not referenced sufficiently
•Major risks to the baseline not identified/described
•The project boundaries not defined clearly
•Project and/or crediting start date unclear
•Deviations from monitoring methodology not justified
sufficiently
•Monitoring and project management procedures not
defined
•The modalities of communication with the Executive
Board in terms of CERsissuance and allocation
instructions not stated clearly, or not signed by all project
participants.
Delay more than 1 month
Delay more than 1 week
Version
Slide 16
13 May 2008
Evidence of EIA and/or required construction/operating
permits/approvals not provided
�Projects are sometimes submitted for validation without evidencethat
they have all the required operating permits/approvals to proceed.
�Approvals, such as Environment Licences, need to be presented if
required by legislation.
�If required, the DOE will ask to see a copy (a scanned, signed document
is sufficient) of a valid construction permit, an operational licence and
sometimes an Environmental Impact Assessment (EIA).
�These documents should not be included in the PDD, as they are often in
local language and can be too comprehensive. Attachments in a
language other than English shall not be included, as the CDM-EB has
defined that the working language for the CDM is English only.
Version
Slide 17
13 May 2008
Letter of approval insufficient or delayed
�Over 80% of all PDDs submitted for validation are not accompanied by a
Letter of Approval (LoA) from all relevant DNAs. The reasons for this are
that:
-the process of receiving a Letter of Approval started too late and/or the DNAs
have not yet established procedures for the approval of CDM projects
-some DNAs want the validation report before they submit the LoA (e.g. Brazil,
Korea, Germany) and/or
-Parties and/or project participants change during the validationprocess
because of changing private investor or operator relations.
�G
ood p
ractice:The process of receiving an LoA should be initiated at an
early stage as this often takes time. Good examples of LoAs canbe
found on the UNFCCC website
(http://cdm.unfccc.int/Projects/registered.html).
Version
Slide 18
13 May 2008
Small-scale selected for a large-scale project
�Information from reliable and
conservative data sources must
be supplied to justify the
submission of a project as small-
scale.
�A full description is required to
show that the project is eligible as
a small-scale project and is below
the relevant small-scale project
threshold.
�For projects that are not yet
implemented, the correct cannot
be completely certain until the
technology is operational.
Operator A
Hydro 2.5 MW
Project starting
date: February
2006
Operator B
Wind22.5 MW
Project starting
date: January
2006
Operator C
Geothermal42 MW
Project starting
date: March2006
To bundle or not to bundle…
that is the question
Version
Slide 19
13 May 2008
Bundling
�In practice, it is not often that full-scale projects try to debundleinto
several small-scale projects, but sometimes project developers have
expressed a wish to bundle several projects into one full scale PDD. The
EB has requested the Small-scale Working Group to come up with more
detailed guidelines for these projects. Four categories of bundling have
been defined and each must be handled differently:
�• Bundling of project activities of the same type, same categoryand
technology/measure
�• Bundling of project activities of the same type, same categoryand
different technologies/measures
�• Bundling of project activities of the same type, different categories and
technologies/measures
�• Bundling of project activities of different types.
Version
Slide 20
13 May 2008
Bundling
�It is also possible to bundle full-scale projects together. For
example, a project to capture and combust methane from
swine manure treatment was registered for two projects in
Pocillasand La Estrellain Chile.
�For all of the above categories the crediting period should be
the same and the composition of bundles must not change
over time. Practically, the bundling of several projects into
one can be a problem if a delay in one project causes a
delay to the rest of the bundle. For example, any requests for
review that relate to only one part of a bundled project, lack
of operating license in one project part, or the definition of
how credits are distributed within the bundle, may also affect
the other parts of a bundled project.
Version
Slide 21
13 May 2008
Good practice
�Information from reliable and conservative data sources must be supplied
to justify the submission of a project as small-scale.
�A full description is required to show that the project is eligible as a small-
scale project and is below the relevant small-scale project threshold
although, for projects that are not yet implemented, this cannotbe
completely certain until the technology is operational. However,there
should be a reasonable correlation between the stated project capacity
(e.g. below 15 MW) and data on, for example, forecasted generation
levels, turbine capacity etc.
�Where the justification of the small-scale eligibility is based on
calculations, the input data and the calculations should be transparently
and conservatively described.
Version
Slide 22
13 May 2008
Good practice
�A related example is the submission of small-scale PDDsfrom an
unbundled full-scale project. If separate projects are presented with the
same project participants, in the same project category and
technology/measure, registered within a two year period, and with a
project boundary within 1 km of the project boundary of the proposed
small-scale activity at the closest point, these will be defined as part of a
debundledfull-scale project. This practice is not allowed under the CDM.
Decis
ion 2
1/
Version
Slide 23
13 May 2008
Examples of scale mistakes
�The eligibility of a project as a small-scale CDM project may be
questioned
-For example, if the project emits more than 60 ktCO2 in a specific year,
although on average it emits less than 60 ktCO2 per year the eligibility as a
small-scale project will be questioned. If at the renewal of the crediting period,
the project emissions are higher than 60 ktCO2e/ year, the project ceases to
be a small-scale CDM project and must apply a large-scale approved
methodology.
�For several biomass co-generation systems and/or co-fires systems such
as boilers, if the energy output exceeds 180 MWth in total, the project is
not eligible as small-scale project
�Energy efficiency projects that exceed the limit of, for instance, 60 GWh
of energy savings during a year within the crediting period, will only
receive CERs up to the maximum value of 60 GWh.
�Bundle of several small scale projects that in total exceed the eligibility
limits.
Version
Slide 24
13 May 2008
No written confirmation that funding will not result
in a diversion of official development assistance
�Written confirmation that funding will not result in a diversionof official
development assistance must ideally be obtained from the relevant
Annex I country DNA.
-What this means is that Annex I countries shall not divert official development
assistance funds that previously have been directed to other purposes (e.g.
for school buildings) in the respective host country to the purchase of CERs
from a CDM project. Such evidence should be given by the Annex I country.
-A key word in this context is “diversion”.
�Such a statement is only needed when public funding from an Annex 1
Party is used by the project.
Version
Slide 25
13 May 2008
Non-compliance with the applicability conditions of the applied
baseline methodology or compliance not explained sufficiently
�Applicability criteria from the methodologies are sometimes not
specifically addressed in the PDD.
�In other cases, the project may be in non-compliance with one or more of
the applicability criteria. Hence, it is important that sufficient information
is provided through descriptions in the PDD in order to enable the
conformity of the project with the applicability criteria to be evaluated.
�Follow the structure and the wording of the methodology and, when
justifying the applicability of the methodology to the specific project,
substantiate this with as much evidence as possible.
�If in doubt on the appropriateness of an existing baseline methodology, it
may be wise to contact the DOE for a discussion
Version
Slide 26
13 May 2008
Stakeholder Comments -Process
Objective of stakeholder consultations:
�To secure that the view of all parties are considered in the assessment of
a CDM project.
Two tiers of stakeholder consultations are required:
�Local stakeholder comments (MA 37(b))
-Project proponent must invite and summarise local stakeholder comments
and report these to the validator
�Comments from Parties, stakeholders and UNFCCC-accredited NGOs
on the PDD (MA 40 (b)& (c))
-Validator must take into account comments provided and the project
developers response to local stakeholder comments
Also requirements for public disclosure of monitoring and verification
reports, but no option here for comments
Version
Slide 27
13 May 2008
Verification
�In most instances what is indicated in the registered PDD is ideal and hence not
reflected in practice:
-Adherence to the monitoring plan
-Parameters
-Frequency of measurement
-Value –measured vscalculated/estimated
�Systems not in place
-Calibration
�Vast difference in the estimates of the PDD and actual monitoring plan
�Ex-p
ostmonitoring not evident
�Detailed excel sheet calculations not available
�Current environmental permits and obligations not fulfilled.
Verification is rigorous and all that is stipulated in the methodology and the
registered PDD must be demonstrated –through records, data and evidences
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