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1
Carbon Financing
Project Cycle
Sundar Bajgain
Senior Biogas Advisor, SNV
Background
United Nations Framework Convention
on Climate Change
June 1992- Opened for signatures at Rio
Earth Summit
Came into force on 21 March 1994
Kyoto protocol - 1997
Ratified by 194 countries as of February
2008
Kyoto Protocol
Covers 6 Green House Gases (GHGs)
CO2- Carbon Dioxide
CH4 - Methane
N2O - Nitrous Oxide
HFC - Hydro fluorocarbons
PFC - Per fluorocarbons
SF6 - Sulphur Hexafluoride
Overall emission reduction of 5.2% of 1990 levels by
Annex 1 parties
Differentiated targets among Annex-1 countries
( Japan- 6%, US-7% reduction)
First commitment period 2008- 2012
Kyoto Mechanism
3 market based/ cooperative/ flexibility
mechanism:
Emissions trading
Trade of carbon credits among Annex 1
countries
Joint implementation
Carbon credits generation through projects that
absorbs or reduces GHGs, developed in Annex 1
countries
Clean Development Mechanism
Carbon credits generation through projects that
absorbs or reduces GHGs, developed in Annex 2
countries
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2
Clean Development Mechanism
(CDM)
Projects in developing countries which
reduce GHG emission reductions
relative to the baseline
1 tone CO2 = 1Certified Emission
Reduction (CER)
Used by developed countries to meet
their Kyoto commitments
Contribute to sustainable
development in developing countries
6
CDM Project Cycle
Operational
Entity* A
Public
Executive
Board
Project Design
Document
Project design
& formulation
Registration
National
Approval
Validation
Public
Review
Registered
Project
Registration Process
* An Operational Entity is an independent Classification Society such as DNV, TV, SGSetc.
Operational
Entity* B
Executive
Board
Verification/
Certification
report
Monitoring
report
Verification/
Certification
Monitoring Issuance of CERs
Issuing Process for Registered Project (periodic)
Contact
Person
CER
Request for Issuance
Step 1 Project Formulation
Additionality
A CDM project is additional if emission of GHG by
sources are reduced below those that would have
occurred in the absence of registered CDM project
activity
Small scale project categories
RE projects up to 15 MW projects reduces less than
15 ktCO2/eq
Energy efficiency projects up to 15GWh/year
Others
Project Design Document (PDD)
Step 2 National Approval
CDM Project approval by Designated
National Authority (DNA)
Project developers participate
voluntarily
Project assists host countries for
sustainable development
DNA needs to be appointed by host
country government- generally
Ministry of Environment.
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3
Step-3 Project Validation
Validation by Designated Operational
Entity (DOE)
Parties have ratified Kyoto Protocol
Stakeholders comments are accounted for
Environment impact analysis/assessment
has been done
GHG emission reduction is additional
Approved baseline and monitoring
methodologies are used
Step- 4 Registration
Project registration in EB based on
positive validation report
Within 8 weeks for small scale projects
Registration fees:
Up to 15,000 tCO2 annually= 5000 US $
15,000 to 50,000 = 10,000
50,000 to 100,000 = 15,000
100,000 to 2000,000 = 20,000
200,000 and above = 30,000
Step- 5 Monitoring
Systemic surveillance of project
performance by project participants
Transparent and reliable monitoring
plan to collect and archive all data
needed to:
Estimate GHG emissions occurring within
project boundary,
Determine baseline GHG emissions,
Determine leakages
Step-6 Verification by DOE
Step-7 Certification by DOE
Verification is the periodic independent
review and ex post determination by
the DOE of the monitored emission
reductions resulting from the project
OE which has done validation can not
do verification except for small scale
projects
Certification is written assurance by
the OE that project has achieved
emissions as verified
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4
Step- 8 Issuance of CERs
CERs is issued within 15 days of
making certification report public
(unless objections by a project
participant or 3 EB members)
CDM registry
Upstream: Project Design & Planning
Host Country
Approval
Downstream: Project Operation (CER Generation)
Validation
Registration
Project Operation
& Maintenance
Monitoring
Verification/
Certification
CERIssuance Crediting Renewal
Project Construction
& Start
Project Design
Document
Project Entity
Designated
National Authority
(DoA)1
Designated
Operation Entity
CDMExecutive
Board
0- 0.5 years 0.5- 1.5 years
Project Crediting Period U
Project Idea Note
Project Feasibility
& Design
Project
Business Plan
Permits
Financing
Third-Party
Contract
Baseline
Monitoring Plan
Addionality
N
o
r
m
a
l P
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c
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Notes:
1: Same DoE for validation and verification if the project is categorized as a small scale CDMproject CDMproject
Different if the project is categorized as a regular scale CDMproject activity
Design
1.5- 2.5 years 7 year period 7 year period
Stage
Time
C
D
M
P
r
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t C
y
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Methodology
Development
Initial Verification
Volunteer Market
Verified Emission Reduction (VER)
VER is not registered in CDM Exe Board
It is voluntarily purchased by private
sector
Process is simpler and relatively faster,
however, Gold Standard asks the same
process as CDM
Price is lowered than CER
Main market is Europe but USA is
emerging
Key Elements for Success
Accurate baseline
High functional rates of biogas
Leakage control
Slurry management (Methane capturing)
Strong quality control and management
Continued repair and maintenance service
Highly efficient stoves
High number of biogas plant construction
Environment mitigation plan and
implementation
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5
Annex-1 Parties
(42 parties)
Australia, Austria, Belarus, ** Belgium, Bulgaria,
Canada, Croatia, ** Czech Republic, ** Denmark,
Estonia, European Community, Finland, France,
Germany, Greece, Hungary, Iceland, Ireland,
Italy, Japan, Latvia, Liechtenstein, ** Lithuania,
Luxembourg, Monaco, ** Netherlands, New
Zealand, Norway, Poland, Portugal, Romania,
Russian, Federation, ** Slovakia, ** Slovenia, **
Spain, Sweden, Switzerland, Turkey, **
Ukraine, ** United Kingdom of Great Britain and
Northern Ireland, United States of America.
** Party for which there is a specific COP and/or
CMP decision