How to Determine if Your Project is Likely to Qualify for the CDM Adrian Stott Clean Energy Finance Committee Three Main Criteria in Determining Project Qualification 1. Contributes to the sustainable development of the host country 2. Additionality- a) registration vs. starting date - b) proof that CDM assistance is required for successful project implementation 3. Emission reduction - the project results in net GHG emission reductions 1) Contributes to the Sustainable Development of the Host Country •Foreign capital, technology transfer, etc. •Approval from host country DNA based on certain sustainable development criteria •Many DNAs will not accept projects without foreign capital investment and technology transfer •Some DNAs have yet to establish clear criteria and cannot as yet approve projects 2a) Additionality Registration vs. Starting Date •Ideally, construction has not started before the project is registered. •This may be impractical and a more realistic starting date could be after the PDD has finished public consultation on the UNFCCC website (with no prohibitive public comments) •If construction has started earlier, need proof that CDM was considered essential when deciding to implement the project Examples of Documentation to Demonstrate Premeditation for CDM Assistance •In order of preference: - PDD submitted to DOE - Signed contract with consultant for PDD - PIN or PCN •Examples - A.T. Biopower started construction after the methodology (AM0004) was approved - Confidential customer submitted a draft of the PDD to the DOE before starting construction 2b) Additionality – Proof that CDM Assistance is Required for Successful Project Implementation Four important points to consider: 1. The project is not the only scenario possible after considering applicable laws and regulations 2. Project’s IRR is lower than the bench mark/other scenario and/or faces insurmountable barriers 3. The project is not common practice 4. Demonstrate that CDM registration will allow project implementation Investment Analysis •Equity IRR (includes financing) is usually preferable to project IRR •A low IRR is usually the clearest indication of additionality •IRR lower than one of the alternatives (scenarios) or than a financial benchmark e.g. Government bonds, investors’ required return on comparable projects, etc. Barrier Analysis •Other investment barriers e.g. risk is too high to attract equity investors or to achieve financial closure -Ideally, financial closure should not be reached before registration z Technological barriers z Barriers due to prevailing practice z Other barriers e.g. force majeure, etc. 3) Emission Reduction • Baseline selection and applicability - Baseline is not always the current situation, must also consider likely future trends - Methodology used must be approved by the EB - If an approved methodology cannot be used, need to produce a new methodology - Data availability is a key factor i.e. host country power authorities are sometimes reluctant to release necessary data e.g. generation (MWh) data for individual plants • Baseline emissions are greater than project emissions and leakage Example of a Fictitious Project that is Likely to Qualify for the CDM A 40 MW grid connected wind farm in country X is planned by a specialist wind power company. Construction is due to start at the end of next year and financial closure has yet to be reached. Example of a Fictitious Project that is unlikely to Qualify for the CDM A landfill gas project is planned for country X. All the captured LFG will be flared. Construction will be finished next month since a new regulation was passed where LFG gas must be captured and destroyed. Financial closure was reach 4 months ago under favorable terms. Areas of Continuing Discussion • No “diversion” of ODA -How to define the term “diversion” •New decisions by the EB such as Type Epolicies / regulations, etc. -If approved by the EB, this could potentially have a positive influence in regards to both baseline determination and additionality Clean Energy Finance Committee’s CDM Services •Initial project assessment •Assistance in managing of the CDM process for the project •Development of the Project Design Document (PDD) •Assistance in gaining necessary approvals e.g. host country, validation and registration •Assistance in the sale of CERs from the project Examples of CDM/JI Projects that CEFC is Currently Consulting on •A.T. Biopower (Pichit) Rice Husk Power Project (Thailand) • PNOC EC Landfill Gas (LFG) Collection and Utilization Project (Phillipines) •Bumibiopower Methane Extraction and Power Generation Project (Malaysia) •Zafarana Wind Power Plant Project (Egypt) •Several CDM/JI projects for the World Bank (PCF) •Large hydropower project THANK YOU