German Emissions Trading Authority

Project development

Emission reductions can be certified under the CDM. The sources of these so-called Certified Emission Reductions (CERs) are individual projects, bundled projects or programmatic projects. For this purpose, the greenhouse gas (GHG) emissions of a hypothetical reference scenario ('baseline') are compared with the GHG emissions of the CDM scenario.

CDM-Projects and Programmes of Activities (PoAs)

For example, if the CDM project comprises the installation of a wind farm, the emissions factor per unit of energy generated in the current electricity mix in the national grid is used as the baseline. In the project scenario, energy is generated from renewable energy – the GHG reductions per unit of energy produced therefore comprise the difference between the emissions of the reference and project scenarios.

CDM projects can be implemented for different activities, using various techniques. Specific regulations for individual types of projects are specified in so-called "methodologies", including the determination of the reference scenario and project scenario emissions and measurement procedures (see below). Distinctions are made between large, small and micro projects. For small and micro projects, simplified rules apply, for example regarding the additionality assessment. In this area there are also separate and less complex methodologies.

Under the CDM, certification periods of varying length can be selected. The term is either fixed for a single 10 year period, or is set at seven years with the option for two extensions to up to 21 years. Programmatic projects may have a term of up to 28 years.

Programmatic CDM

Source: myclimate - The Climate Protection Partnership

In addition to conventional projects, programmes, the so-called "Programmes of Activities (PoA)" can also be implemented under the CDM from 2007. This describes the creation of a framework program for greenhouse gas reductions in which any number of individual projects can be implemented.

For many small and micro projects, the transaction costs associated with implementing them as separate projects are prohibitively high, or the expected GHG reductions are too small, so that development as a separate project is not viable. With the ability to add many smaller CDM activities (CDM Program Activities, CPA) to a programme, the specific reductions costs per activity are reduced. In sum, the GHG reductions of separate micro-projects aggregated in the PoA, can reach a significant level

PoAs can be multinational and thus cover whole regions. The same rules as for credits from single CDM projects apply to the use of credits from PoAs in EU emissions trading. Separate rules exist for PoAs in terms of proving additionality or the role of experts (DOEs).

Standardised Baselines

For project developers, the individual creation of reference scenarios sometimes involves consid-erable effort in terms of data research and emission calculations. In order to make the CDM more attractive in this regard, the CDM Executive Board authorised the use of standardised reference scenarios, so-called "standardised baselines" (SBL).

These standardised baselines relate both to the determination of the reference case and the definition of additionality. If the emissions reductions of a CDM project are calculated using a stan-dardised baseline, less project-specific data are required. This reduces the transaction costs and the methodological uncertainties of a CDM project. The goal is to make CDM projects in previously under-represented regions and project types, which up to now have been difficult to implement, more attractive. However, a prerequisite for the use of standardised baselines is that environmental integrity is maintained, despite the simplification.

In practice there are various possibilities for standardised baselines, such as the introduction of standard factors for input parameters, benchmarks for certain technologies, or calculating emission reductions based on emission intensity of output (e.g. t CO2/unit of production). Positive lists of projects that fulfil certain criteria (region/project type) allow for faster determination of additionality.

Standardised baselines can be developed "top-down" by the CDM Executive Board, but also "bot-tom-up" by governments, international organisations and project promoters. For the use of a stan-dardised baseline in a country, formal approval from that country is required, and quality assurance and quality control (QA/QC) of the data in accordance with UNFCCC guidelines must be performed. After approval by the DNA, the standardised baseline has to be submitted for approval by the CDM Executive Board. This requires an entry form, a QA/QC report and relevant supporting documents (data, statistics, studies, etc.) to be uploaded on the UNFCCC website. More information about submission and approval of standardised baselines at the CDM Executive Board can be found in Annex 28 to the 63rd Meeting of the CDM Executive Board.

CDM methodologies

For preparation and monitoring of CDM activity, project participants must proceed according to an internationally established procedure and use approved methodologies. Based on practical experience with CDM projects and programmes, a growing catalogue of such methodologies exists for different project categories and types, each of which is subject to eligibility criteria. Therefore, exist-ing, previously recognised or new methodologies based on the project or program can be used.

If, during the course of its assessment, the recognised expert agency (DOE) responsible for the validation concludes that the methodology used for a CDM activity has not yet been approved by the CDM Executive Board, it will forward the methodology along with project documentation to the Executive Board for assessment and approval. Methodologies once submitted to and approved by the CDM Executive Board are freely accessible and available for use by anyone.

Previously recognised methodologies are subject to ongoing review and may be amended or dis-carded. However, such changes and rejections do not mean that previously registered projects or programmes have to change the methodologies on which their registration is based. Instead the registration implies the use of the underlying method for the duration of the requested crediting period.

In addition to methodologies the CDM Executive Board provides additional tools, e.g. for emission factor calculation or for the determination of additionality..

UNFCCC CDM methods & tools

CDM project cycle

From project concept to the distribution of credits, there are several steps of the project cycle.

The figure below illustrates the project cycle and makes it clear which player is responsible and at what time. The steps include project development, validation, registration, implementation and meas-urement of emission reductions as well as verification and certification. Depending on project type, going through the project cycle takes several months, but can last over a year, e.g. if the quality of documentation makes corrections necessary or if a new methodology needs to be developed. The following players are usually involved in a CDM activity: project developers, consultants, experts (Designated Operational Entity, DOE, also "validator" or "verifier"), authorities of the host and in-vestor countries and bodies of the CDM Executive Board.

Schematic view of a CDM-project

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