Irrespective of whether CDM projects are initiated by the private sector, non-government organisations or government agencies, their development will involve a number of essential steps. This section outlines these requirements, from a project developer's perspective. They are illustrated in the diagram below. The shading in the diagram represents the group responsible for the activity: project developer, host government, operational entity (third party certifier), or CDM Executive Board.
Figure 3: A simplified CDM Project Flow - The Project Developer's Perspective
Identify project and develop project concept note
The first stage is the identification of the potential CDM project.
This will need to take into account any national or regional requirements
for project eligibility. Project developers should note that potential
investors and verification bodies will also operate their own screening
procedures. It is important that local stakeholders' needs and aspirations
are considered at this early stage.
Quantify greenhouse gas benefits
Each project plan should include details of how the greenhouse
gas benefits are calculated and how they will be monitored over time.
In most cases the quantification of benefits will begin prior to submission
to the National CDM Authority. Quantification involves the following steps:
- Definition of the boundaries of the project - this will result
in a list of all the processes that result in uptake or release of carbon
(and other greenhouse gases covered by the Kyoto Protocol) as a result
of the project activities.
- Description of the baseline and additionality - the effect
of the project is measured relative to a 'baseline scenario' that represents
what would happen in the absence of the project. Additionality is the
extent to which the activities promoted by the project (e.g. the planting
of trees) can only have happened with the project's specific intervention
. The precise interpretation of additionality and the methods used to
measure it are among the details still under discussion between the
parties to the Climate Change Convention.
- Quantification of baseline emissions and crediting period -
the emissions that would occur with the baseline scenario, and the number
of years over which the project may take credit, will be defined using
one of the procedures approved by the CDM Executive Board.
- The emissions and uptake of carbon by the project - in the
case of afforestation and reforestation projects, the uptake of carbon
will be calculated using forestry growth data. The net benefit of the
project is then calculated by subtracting the emissions that would have
occurred in the baseline scenario.
- Adjustment for leakage and risk - The amount of benefit for
which a project will be allowed to take credit may need to be adjusted
to take account of leakage and risks. The specific procedures to be
applied are still being decided by the CDM Executive Board, but creating
a reserve or buffer of carbon offsets is one method that has been proposed
for dealing with project risks. The best approach to managing leakage
is to avoid it in the first place. This is best done at the project
design stage, notably by:
- Consultation with local stakeholders;
- Integration of project design with local, regional and/or national priorities and legislation;
- Participation of landowners or managers in the project, avoiding their exclusion or displacement;
- Clear and fair benefit sharing through the project;
- Awareness building of carbon project needs;
- Effective monitoring of project activities and likely sources of leakage.
The results and methodologies used in the quantification of the greenhouse gas benefits will need to be presented in a Project Design Document. A report summarising comments by local stakeholders and how these are taken into account in the project design must also be included in this document.
Any project wishing to participate in the CDM must obtain approval from the host government. A pro-active government National Authority for CDM will facilitate this. In addition, the host government should determine whether or not the project will lead to sustainable development benefits.
Before projects can produce emission reductions that will be recognised by the CDM, they must be 'validated' by one of the independent companies approved by the CDM Executive Board. The project developer must submit the Project Design Document and any related documentation to the so-called 'operational entity'. The process will involve detailed scrutiny of the institutional capacity of the project stakeholders, the evidence underlying the calculations of carbon benefits, the systems to be used for monitoring, and of course the relevant government approvals. During this period, the Project Design Document will be made publicly available for comments.
The validation report and Project Design Document will be submitted to the CDM Executive Board by the operational entity. Registration will be finalised after a maximum of 8 weeks from receipt, unless a review is requested.
Registered projects, and those that have entered the implementation phase, will be required to maintain internal monitoring systems to demonstrate they are achieving the emission reductions specified in the Project Design Document.
Verification and certification
Once the project is being implemented, it will undergo additional
scrutiny by the operational entities in the form of verification and certification.
The verification report is then made available to the CDM Executive Board
and the general public, after which the Certified Emission Reductions
will be issued to the project developer within 15 days, unless the Executive
Board requests a review.
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What can we expect as the CDM evolves?