Role of host countries and investor countries
In principle, CDM activities require the approval of the host country. The "Designated National Authority" (DNA) will give its consent in a "Letter of Approval" (LoA), if the CDM activity meets the national legislation and demonstrably contributes to sustainable development. Each host country can also enact specific rules for CDM activities in the national context, e.g. sustainability criteria or a tax on the proceeds from certificate sales.
In addition to the approval by the host country, CDM activities also require approval from an investor country. In Germany, such approvals are granted by the German Environment Agency (see also Application). The Federal Republic of Germany has bilateral agreements with several host countries (Memorandum of Understanding) about cooperation in project activities under CDM.
Bilateral Agreements (Memoranda of Understanding)
Eligibility for the implementation of CDM projects
The following criteria must be met by the investor country and its duly authorised company to use the carbon credits (CERs) acquired from a CDM activity (cf. Decision 3/CMP.1 Number 31):
- Ratification of the Kyoto Protocol
- Calculation of the number of allocated allowances (Assigned Amount Units, AAUs, ac-cording to Annex B of the Kyoto Protocol)
- Setting up a national system for estimating greenhouse gas emissions and carbon stored in geological sinks
- Setting up a computerised national registry
- Timely submission of annual emission inventories
- Submission of additional information on the Assigned Amount.
The only participation criterion for the host developing country is to ratify the Kyoto Protocol.
For implementation of CDM projects, an approval by the host country is necessary which also in-cludes the confirmation that the project promotes sustainable development. The approval – if available – must be submitted to DEHSt at given times.
To register the project, the project documentation, the validation report and approval by the host country must be submitted to the Executive Board. The approval of an investor country is required later when an Annex B country requests their CERs in the Emissions Trading Registry.
Least developed countries (LDCs)
Source: Perspectives GmbH
The EU restricts the origin of new credits from registered CDM activities beginning with the third trading period of the EU emissions trading scheme (from 2013) and will only permit credits from the "Least Developed Countries" (LDCs).
The background is the current concentration of the CDM on a few emerging economies – particularly China, India and Brazil. The EU does not consider the need for external promotion of environmentally friendly development in these countries via CDM to be urgent and therefore plans to focus on needier areas. In particular, CDM activities in LDCs are so far maintained to a very limited extent.
The status "LDC" is assigned to a country from the United Nations because of economic (per capita income and characteristics of the economy) and social (education and health) criteria. Currently 49 countries belong to the group of LDCs, of which the largest part is on the African continent.
Special rules apply for CDM activities in LDCs in determining the additionality and in terms of collection of registration fees.