CLEANDEVELOPMENT MECHANISMS CDMfor multiple project categoriesUNITE - PDF document

CLEANDEVELOPMENT MECHANISMS (CDM)for multiple project categories:UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANIZATION of any opinion whatsoever on the part of UNIDO concerning the legal status of any country,territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or Special acknowledgement is due to Mr. Ingo Puhl, who served as Chief Technical Adviser forwho led the research effort and drafting of this report. We would also like to thank Mr.Michael Klein who provided technical support and assistance throughout the developmentof this document. Finally, we would like to thank colleagues at UNIDO, UNDP and UNCTADThe project was carried out in parallel with the work undertaken in the context of the GHGProtocol Initiative, which is a process jointly led by the World Business Council for SustainableDevelopment and the World Resources Institute. Efforts have been made to ensure consis-means of specific reduction projects. At the time of publishing this report, it is in its roadtestoperation with UNDP, UNCTAD, and WBCSD. The UNIDO component was managed byMs. M. Ploutakina, Industrial Development Officer, Energy Efficiency and Climate Change, Introduction1The accounting of emission changesDefining system boundaries3Explaining the occurrence of emission changes4Framework to account for project-based emission changes5Summary accounting framework72Primary emission impacts by project type3Selecting a baselineStep-wise approach for the selection of project-specific baselines13Application of the project-specific baseline selection procedure14I.Workbook25II.Sample case study33Glossary IntroductionIntroductionThese guidelines have been prepared for project devel-opers seeking to develop CDM or JI projects in the indus-try, energy, and possibly other sectors,

where projectsaiming at reducing GHG emissions can take place. Theguidelines are intended to be applied in the planningstages of an emission reduction project to support thework involved in preparation of the project design doc-umentation for registration.The guidelines assist project developers to:Determine proper system boundaries within whichIdentify and describe a baseline for the proposedproject;Document and justify the baseline selection process.The guidelines are intended to be used with an elec-tronic software tool that provides standard, ready-to-use formats for baseline documents that are sufficientlyprojects. These guidelines propose a systematic proce-dure for the development of baselines in compliancewith the requirements of the CDM and JI. In 2001, the World Business Council for SustainableDevelopment (WBCSD) and the World ResourcesInstitute (WRI) started a project on the accounting forproject-based emission reductions (GHG ProtocolProject Quantification Standard, roadtest draft).efforts were made to ensure consistency between theUNIDO and the WBCSD efforts and to avoid the emer-gence of different “dialects” for the accounting of emis-sion reductions, minor differences still exist as the GHGProtocol continues to evolve due to its underlying devel-opment process. It is being roadtested in late 2003 andfurther differences may emerge after the roadtestThis document seeks, where possible, to build on com-monalities and draw attention to the differencesbetween the two work efforts. The GHG ProtocolProject Quantification Standard (roadtest draft) will besupplemented with “GHG Protocol Project Typology:Defining Reduction Projects”. This contains a classifica-tion of project types and categories, and additional spe-cific issues and guidance on each project type.related to t

he monitoring of emissions or emissionreductions. However, they do address issues related toa different baseline. The objective of the GHG Protocol Initiative is to develop interna-tionally accepted standards and guidance on accounting andreporting of GHG emissions and reductions. Convened and led bythe World Business Council for Sustainable Development and theWorld Resources Institute, it is a process, involving NGOs, busi-ness, government, academia, and others. It comprises twomodules: (1) GHG Protocol: Corporate Accounting and ReportingStandard, and (2) GHG Protocol Project Quantification Standard.The latter is currently in its roadtest draft. Its development wasprimarily informed by small groups of experts or “taskforces” toaddress specific issues relating to project quantification. These guidelines propose a procedure for the account-Protocol Corporate Accounting and ReportingStandards which differentiates between the accountingdirect and indirect emissions in three scopes.Scope 1: direct emissionsScope 2: indirect emissions from import/export ofScope 3: other indirect emissionsCorrespondingly, the guidelines account for direct andindirect emission reductions. However, no differentia-tion is made between energy and non-energy relatedindirect emissions (scopes 2 and 3). Differentiating between direct and indirect emissionreductions is relevant due to potential ownership con-flicts surrounding indirect emission reductions.The guidelines differentiate boundaries for two systems: The sources and sinks of GHG emissions within thecontrol of the project operator that create a changeof direct emissions per unit of output as a result ofa project intervention (referred to as a “scope 1The sources and sinks of GHG emissions outside thecontrol of the project operator that experience aa

result of a project intervention in a scope 1 systemboundary (referred to as a “scope 2 system”). 1 system defines boundaries for direct project emissionsrect emissions.If a project creates more than one primary GHG emis-sion impact, the project developer will need to prepareresult in changes of direct emissions per unit of outputthat can be measured within the scope 1 system bound-energy flows between the relevant sources (or sinks).boundary is a waste heat utilization project in an indus-trial boiler thus reducing primary energy use for a givenlevel of heat production. The GHG Protocol Corporate Accounting and Reporting Standardis a tool for accounting of GHG emissions. For additional infor- .ghgpr otocol.or For more information on the concept of scopes please see GHGProtocol Corporate Standards, published in 2001. The concept ofdirect and indirect project GHG effects is also included in theroad-test draft of the project module. Here, “scope” identifies the location of occurrence of the directemission reduction caused by a project intervention. Within a scope 2 system boundary, emission changesare caused by changed activity levels resulting from aproject intervention in a scope 1 system that changesthe demand for the output produced by the scope 2CDM Projectsboundary is a waste heat utilization project within anindustrial facility that reduces the import of heat sup-plied by a heating plant located elsewhere. the scope 1 system boundary as well as all sources (orsinks) within the scope 2 system boundary.In addition to identifying the sources and sinks withinthe system boundaries, a project developer also needsboundary. A project developer should estimate the activ-projected activity level change within the scope 2 systemreplaced with actual activity level to determine theE

xplaining the occurrenceThe relationship between quantification of GHG emis- Figure I. Flow chart of a scope 1 system boundary WasteWaste gas heat pre-heater Fresh See Hesse-Tender emission reduction purchase tender documentation, 2002. generator Figure II. Flow chart of a scope 2 system boundary Wet See Hesse-Tender emission reduction purchase tender documentation, 2002. Improvedpress Scope 2 system Waste gas is comparable to standard financial accountingexplains the year-system boundary), which is comparable to a profit andloss statement that explains year-to-year changes of a(direct and indirect) within a given system boundary canalways be explained by one or more of the followingEvent 1: a change of a direct or indirect emission ratewithin a system boundary as a result of an interven-tion, e.g. improving fuel efficiency (direct emissionsrate) or improving the efficiency of importedheat/electricity use (indirect emissions rate).Event 2: a change of a direct fuel-specific emissionsfactor within a system boundary as a result of anboundary due to market forces, e.g. an economicdownturn.system boundary due to a project-based interven-tion within a (scope 1) system boundary, thus chang-ing the demand for the scope 2 system’s output. e.g.the increased power production from renewableenergy sources within an existing electricity grid,thus reducing activity levels within a fossil-fuelpowered facility.Thus, the accounting for emission reductions providesfor project-based emission changesThe guidelines provide formulas for the calculation ofof emission rate and/or activity level changes that aredifferent from those predicted in the baseline calcula-One formula accounts for output-based “emission rate”changes within a scope 1 project system boundary, i.e.it accounts for direct emission

rate changes, and defineschanges within a scope 2 system boundary, i.e toaccount for indirect emissions. Accounting for direct emission rate changesUsing the GHG Protocol Corporate AccountingStandard for GHG emissions, the quantification of directWhereby::emission rate (emissions per unit of output):average primary energy use (fuels) per unit ofoutput (in either a production or energy conver-area (for sinks) whereby :emission factor of primary energy use includingoxidation efficiencyFor example, the co-firing of biomass in a coal-firedpower generation boiler could create a from 900 kg CO/MWh after project implementation due tofrom 353 kg COAlternatively, the refurbishment of that boiler couldcreate a fromfrom 39.2 per cent to 41.5 per cent (with Accounting for indirect emission rate changes According to GHG Protocol standards, indirect emis-Whereby::emission rate (emissions per unit of output): average specific delivered secondary energy use area outside the project area induced by theproject:average primary energy use (fuels) per unit ofsecondary energy carrier production (cannot besequestration per impacted area whereby :emission factor of primary energy including oxi-dation efficiency (cannot be the target of anNote that ”Output” refers to the output of the facility,emissions source or sink within the scope 1 systemFor example, the production of electricity using biomasscould create a from 1.07 MWh delivered secondary energy (from theabove coal-fired power generator plus 7 per cent T&Dtricity from a new, zero net emissions generator.Consequently, a change in emissions can beexpressed as:whereby are the factordifferences before and after the project intervention.Factors subject to project interventionsIt is to be noted that a project developer can only causeA project developer

cannot change the order to calculate indirect emission changes.CDM ProjectsareChange of direct energy use per unit of output (i.e.fuel-efficiency improvement),Change of process emissions per unit of output (i.e.clinker substitution in cement production),capture and destruction (i.e. landfill-gas capturing,Changes of net sequestration per land area (withinthe scope 1 project boundary).are related to project interventions thatcreate activity-level changes in an upstream, same-stream or down-stream indirect boundary 2 system.within the scope 1 system boundary thus reducingdemand in an upstream scope 2 system (i.e. an elec-tricity-related energy efficiency project),boundary thus reducing demand in an upstreamwith ashes within the scope 1 system, thus reducingIncreased production within the scope 1 systemboundary, thus substituting production within asame-stream scope 2 system boundary (i.e. produc-ing electricity from renewable energy, substitutingthe production of electricity from other facilities orproducing bio-fuels that substitute the use of fuelsfrom other sources),Increased production of outputs in the scope 1system boundary thus reducing demand in a down-stream scope 2 system (i.e. producing energy effi- cient building materials, thus reducing demand foroutside the scope 1 project area (leakage).sources do not change as a result of alterations to theproject.Table 1 gives an overview of the relationship betweenemission reductions, emission types and systemproject developer to determine a baseline value for thefactor(s) that is/are changed as result ofthe project-based intervention using a project-basedapproach. Table 1. Scopes 1 and 2 in emission reduction accounting Scope 1Scope 2Emission typeDirect emissionsIndirect emissionsEmission change byEmission rate changeActivity le

vel changeSystem boundaries in which directThe proposed project and the baseline coverProposed project experiences a change of indirect emission change occursthe same sources and sinks within scope 1emissions within the scope 1 system that creates system boundaries.an activity level change on corresponding direct(average specific delivered secondary energy of output, or net sink capacity)use per unit of output, or land-use impact) Primary emission impacts by project type As indicated above, project-based interventions createemission changes related to one or more of the factorsdescribed above. Tables 2 to 7 classify project typesaccording to emission factors.. Future versions of these guidelines willalso provide emission factors for other GHG emissions.This classification provides guidance to project develop-ers with respect to the selection of baselines as well asthe calculation of emission changes as a result of projectProject developers may use the tables to identify thetype of project that they are proposing and to identifythe corresponding emissions from the project. [Futureversions of these guidelines might also recommendtypical baseline options for different project types, thusfurther simplifying the work of project developersrelated to the selection of baselines.]by project type The table uses a project type classification that was promoted inan early draft of the GHG Protocol Project Typology for illustrativeadded by the authors to make the point that all project types canbe expressed as one or more primary emission impact. Table 2. Classification of project types (energy and power) Energy and powerPrimary emissions impactEmission rateActivity level elsewhere Type of projecte = p A. Energy and powerExamplepA 1 Energy generation, supply, transmission and distributionA

1.1 Renewable energy Generation of electricitySubstitution of production offrom renewable sources forsecondary energy output at gridown use or salefeeding plant(s)Biomass co-firingSubstitution ofA 1.2 Generator efficiencyProcess controls to improveReduced primaryReduced production of secondarycombustion efficiencyenergy useenergy generation at grid feedingA 1.3 Grid managementImproved insulation of districtReduction of secondary energy heating conductsoutput at the grid feeding plantA 1.4 CHPReplacement of a heating plant[Changed primarySubstitution of production ofby a CHP plantenergy use]Heat supply network extensionSubstitution of secondary energy CDM Projects Table 2. Classification of project types (energy and power) Energy and powerPrimary emissions impactEmission rateActivity level elsewhere Type of projecte = p A. Energy and powerExamplepA 2 End use energy efficiencyA 2.1 Industrial andReduced heat losses from Reduced primarybuilding efficiencyenergy useSecondary energy use improvement,Reduction of secondary energy i.e. use of efficient motorsoutput at the grid feeding plantSubstitution of secondary energyIncreased primaryReduction of secondary energy use with primary energy useenergy useoutput at the grid feeding plantSubstitution of electricity withReduced electricity generation from imported steamgrid AND increased production of Emission rateActivity level elsewhere Type of interventione = pA 3.1 Boiler fuel switchFuel switch in the directionSubstitution of ���coal oil gas biofuelsfuel with higherA 3.2 Switch to other lessBiomass or waste co-firingSubstitution ofReduction of biodegradable carbon-intensive fuel technologiesfuel with highermaterial left to decompose and emissions factorrelease methane Table 3. Classification of project types (t

ransport) TransportPrimary emissions impactEmission rateActivity level elsewhere Type of interventione = p B TransportationExamplepB 1.1 Fuel switchSubstitution of diesel withSubstitution of fuel with LNG in municipal buseshigher emissions factorB 1.2 Energy efficiencyReplacement of old freightReduced primary vehicles by modern, low fuelenergy useB 1.3 Haulage efficiencyImprovement of transportationReduced primary logistics of a freight serviceenergy usecompany, cutting totalIf intervention causes an increase of output. Table 4. Classification of project types (industrial) Industrial projectsPrimary emission impactEmission rateActivity level elsewhere Type of interventione = p C. IndustryExamplepProductionC.1.1 CementImproving process energyReduced primaryReduced use of electricityefficiencyenergy useDecreasing the clinker factorReduced clinker use Primary emission impacts by project type Table 5. Classification of project types (fugitive emissions capture) Fugitive Emission CapturePrimary emission impactEmission rateActivity level elsewhere Type of interventione = p D Fugitive emission captureExamplepD 1.1 Coal industryCHemission capture andConversion of CHemission capture andCorresponds to energy and power typology: renewable energyD 1.2 Oil industryAssociated gas capture andConversion of CHemission capture,Corresponds to energy and power typology: renewable energyD 1.3 TransmissionSealing of gas leakagesReduced CHdistribution of methane and oilemissions per unitD 2 Waste managementD 2.1 Landfill/biomass captureCollection of landfill gas andReduction ofReduction of secondary energy combustion in a CHP-plantbiodegradableoutput at the grid feeding plantsrelease methanefrom methane Table 4. Classification of project types (industrial) Industrial projectsPrimary emission impa

ctEmission rateActivity level elsewhere Type of interventione = p C. IndustryExamplepProductionSubstituting waste for fossil fuelsSubstitution ofC 1.2 Iron and steelImproving process energy efficiencyCorresponds to energy and power project typologyreduction of ironSubstituting coke with biomassC 1.3 Aluminium and non ferrousImproving process energy efficiency Corresponds to energy and power project typologyC 1.6 Pulp and paperImproving process energy efficiencyCorresponds to energy and power project typologyWaste managementCorresponds to fugitive emissions capture and recyclingRecycling and reuseC 2.1 Recycling and reuseRecovery and reuse of materials,Substituting use of materials, half-products, heathalf-products, heat CDM Projects Table 5. Classification of project types (fugitive emissions capture) Fugitive Emission CapturePrimary emission impactEmission rateActivity level elsewhere Type of interventione = p D Fugitive emission captureExamplepD 2.2 Waste preventionCollection and incineration of straw,Reduction of Reduction of secondary energy and recoveryother agricultural residuals or foodbiodegradable output at the grid feeding plantindustry residuals for energymaterial left togeneration purposesdecompose andrelease methaneDirect COemissions fromburnt methaneD 2.3 Wastewater treatmentprojects Table 6. Classification of project types (agricultural) Agricultural projectsPrimary emission impactEmission rateActivity level elsewhere Type of interventione = p E Agricultural projectsExamplepE 1.1 Reduced methane fromProcess changesReduced CHrice cultivationemissions per unitE 1.2 Improved livestockCattle feed additives that reduceReduced CHproduction efficiencyCHproduction in digestionemissions per unitE 1.3 Animal waste managementCapture of biogas from sewageReduced CH Table 7.

Classification of project types (sequestration) Carbon sequestrationPrimary emission impactEmission rateActivity level elsewhere Type of interventione = p F Carbon sequestrationExamplepF 1.1 Afforestation andReplanting of native tree species,Increased carbon reforestationplanting of shade treessequestrationper areaF 1.2 Avoided deforestation/Declaration and protection of aIncreased carbon preservationnatural reserve, accompanied bysequestration awareness building and teachingper areaof local residentsF 1.3 Cropland managementSoil enrichmentIncreased carbonper areaF 1.4 Forest managementSwitch to sustainable forestIncreased carbon management with selectivesequestration loggingper areaF 2.1 Deep injectionCOcapture at exhaust stacks andIncreased carbon re-injection into oil fieldssequestrationper area most qualified baseline and a baseline crediting periodfor a project. These guidelines describe how to select abaseline using a project-specific approach, determine acrediting period for this baseline and how to identifythis crediting period.As outlined above, a project is categorized by the impactStep-wise approach for the selectionof project-specific baselinesA project developer seeking to claim credit for reducingemissions, needs to manage limited resources to selectthe most credible baseline from a potentially large poolThis guidance is aimed at providing a consistentapproach to facilitating a project developer's efforts inidentifying a credible baseline and reducing the cost ofon the basis of criteria that provide a reasonablebasis for elimination early in this process, and Conducting formal tests in a sequential order to rankremaining baseline options according to the likeli-hood of their occurrence under business-as-usualThe following guidance is written from the perspectiveof

a project developer in the early phases of the projectdevelopment process and is interested in determiningwhether the project under consideration is likely to earncredit for its GHG reductions. The guidance can also be used to prepare documenta-tion that may be required to obtain regulatory approvalfor the registration of such projects under voluntary ormandatory regulatory programmes at later stages in thedevelopment process.Figure 3 outlines the steps involved in selecting aproject-specific baseline. The steps are listed below andexplained in more detail in the following sections:1.Identify possible baseline options for every primary GHGimpact of the project;2.Eliminate non-plausible baseline options using the candi-date elimination screens;3.End the baseline selection procedure if the proposedproject is the only plausible baseline: the project is non- The original step-wise approach has been developed in an earlierdraft of this document and was refined by a GHG Protocol task-force working on Project Specific Baseline Selection. That workhas since been revised and modified in the process to reflect feed-back from the stakeholders.These guidelines focus exclusively on project-specific baselines. .ghgpr otocol.or .nor obase/. The definition of these steps is the result of an evolutionaryprocess involving a number of earlier efforts including an earlierdraft of this document, the guidelines for the Dutch ERUPT pro-gramme as well as an earlier draft on project-specific baselineswritten for the GHG Protocol Project Quantification Standard(roadtest draft). 4.Perform the Barrier Test if there is more than one plausi-tomized baseline selection procedure if the Barrier Testprovides one definitive baseline for all variations of test5.Use the Investment Ranking Test on all competing ba

se-lines if the Barrier Test does not provide one definitive6.End the customized baseline selection procedure ifthe Investment Ranking Test provides one definitive7.If the Investment Ranking Test does not provide a defini-tive baseline, the project developer has the followingTo quantify the emissions/removal rate for allor highest removals over the life-time of theproject), orTo specify the set of assumptions (e.g. price dif-ferentials between competing input factors,result in switching from one baseline to anotheritoring plan, establish the necessary protocolsCDM Projectsevery GHG primary impact that is created by a projectintervention. If a proposed project has two or moreprimary impacts, this process is to be repeated for everyprimary impact. For example, a landfill gas project maycapture the waste methane and needs to purchase grid electricity. In this case, a project“capture” impact as well as for the “offsetting of gridApplication of the project-specificbaseline selection procedureThe possible baseline options for the project's primarye.g. existing and new alternative delivery systems forproducing the project system's output. The purpose of this step is to create a list of possibleing the baseline (figure 4). The list should include:The proposed project;If appropriate, the status quo of the existing facility Figure III. Step-wise approach for the selection of project-specific baselines START: Project definition and identification of all possible baseline options In project screen? Is there Is there End procedure:project is not Select project Test Remove from Select project select mostconservative select mostconservative baselineshifting rankingtest YesYesYesYes A modified status quo, defined as the current statusquo plus future projects necessary to achieve com-pliance wit

h existing mandatory regulations andplanned regulations that will become mandatorywithin the crediting period;nology that would be used to produce the sameoutputs as the project elsewhere (e.g. purchase ofment of non-competitive production facilities (e.g. acement plant driven out of production due to highOther locally available and currently used alternativeproduction systems.candidates that represent possible courses of action thatThe purpose of screening possible baseline options is toreduce the number of baseline options that a projectdeveloper needs to assess in more detail using theBarrier and Investment Ranking Tests, thus reducingtime and cost of selecting a baseline without compro-mising the integrity of this process.met, eliminate a possible baseline option from furthercable national, state or local regulation or legalrequirement that is customarily enforced within theregion/area of the project's location, orrelated to the local availability or cost of a keyresource or technology at the scale it is to bedeployed that cannot be overcome by project designtrated for an industrial boiler project. For the proposedproject which upgrades the boiler to a more efficientcoal-fired boiler, there are two possible baseline options:maintaining the currentbe eliminated on the basis of a resource availability crite-tures). Similarly, the second possible baseline, the statusquo, could be eliminated using the regulatory criterion, ifthe current status quo of that facility did not comply withlocally enforced air pollution regulations. If in fact, bothcriteria were applicable, the proposed project would rep-resent the only permissible course of action, and couldnot generate any additional GHG reductions. Figure IV. Generating possible and plausible reference scenario candidates START: Def

ine output and output level Proposedproject status quo native fac. able tech. elimination baselineoption? remove from further screen criteria Determine and selectmostconservative plausible baselineoptions and remove from plausible baseline�options 1? CDM Projectscriteria that are well documented and have unquestion-able reasoning. The project developer must be able toThe applicability of regulations and other legalrequirements as well as their enforcement is notsubject to interpretation or argument;sible baseline option is reliable and verifiable.Project developers should use their best efforts to iden-tify all relevant criteria and related data that might leadto the elimination of a possible baseline option fromfurther consideration. This is to protect them from sub-sequent suggestions by a third party, such as a regula-tor, verifier or stakeholder, that a component baselineAvailability of data for the optionThe application of option elimination criteria requiresaccess to reliable and verifiable data that informs aproject developer whether a possible baseline optionsources for these criteria. The application of option elimination criteria is a three-step process.The project developer screens all possible baselineapplicable and customarily enforced regulations orother legal requirements;sible and cannot be overcome by project designadjustments. This could be related to the availabilityof key resources, such as fuels, materials, staff, tech-circumstances (list to be extended) that could not beovercome through project design or would make itsProject developers are required to provide supporting Box 1: Data sources and information for the application of candidate elimination screensList of applicable national/regional/local mandatory lawsList of applicable mandatory regulato

ry standards, permitting requirementsIf appropriate, information on levels of enforcement of law or regulation in questionOther evidence (e.g. policy positions) that project contributes to GHG legislation Locally available fuels, materials, know-how, technology and other resourcesData/information sources:Local regulators/enforcement agencyEnvironmental NGOsCase law, e.g. publicly available baseline studies from other verified projectsOfficial planning dataResource mapsTechnology inventory lists ProposedModifiedExistingOtherprojectstatus quoalternative fac.available tech.How projectDesc of barrierDesc of barrierDesc of barrierDesc of barrieraddresses itrelevance/relevance/relevance/relevance/scorescorescorescorescoreHow projectDesc of barrierDesc of barrierDesc of barrierDesc of barrieraddresses itrelevance/relevance/relevance/relevance/scorescorescorescorescoreTotal scoreSum scoreSum scoreSum scoreSum scoreSum scoreing a possible baseline option from further considera-Which mandatory requirements, i.e. related to localemissions, technology, performance standard,process, emissions, or land-use management thatare customary within the local sector are not met byWhich key resource is not locally available and can-not be made economically available through projectWhich climatic, geographical or other circumstancesexists that cannot be overcome through projectIf the candidate elimination screens eliminate all base-line options from further consideration, the proposedproject resembles the baseline and can therefore notgenerate emission reductions. This baseline selection process also ends if the applica-elimination of the proposed project, as this implies thatthe proposed project does not meet a mandated regu-latory requirement.After project developers have applied all elimination cri-T

he Barrier TestThe purpose of the Barrier Test is to identify barriersfacing a project (that may be overcome through projectproposed project in terms of their ability to overcomeis least affected by the barrier(s) (which may also be theproject case). An example for the application of theBarrier Test is included in box 3 below.Ideally, the Barrier Test delivers one definitive baselineirrespective of changing assumptions. However, ifchanging assumptions do create competing baselinesthen subsequent procedures need to be performed toApplicability of the Barrier TestThe Barrier Test is particularly relevant for projects thatare implemented in environments with imperfectother factors that require special project design specificinterventions to remove such barriers and ensure suc- Figure V. Barrier Test START: Description of proposed project relevant for proposedproject? Assess next barrier;if no barrier exist,perform financialranking test lowest score Proof of potentialYes CDM ProjectsSome possible project design elements that can be usedto overcome barriers include:Project partnership/network arrangements;Supporting capacity-building measures and informa-tion dissemination related to technology, operationaland maintenance know-how, product use, etc.;Availability of carbon revenue;If the project developer finds that the Barrier Test is notapplicable for his proposed project because no barriersthe Investment Ranking Test. Table 8 illustrates somebarriers that may affect projects.Some examples of how barriers may affect a projectEnergy-efficient technology that would create sub-stantial operational cost reductions: Investment inthis type of project may not occur because of con-cerns that operating experience is insufficient, orthere is a lack of local manufacturing capacity and/ora regu

latory bias against imported equipment. Theseand supply-chain related barriers.Energy efficiency project to improve building insula-tion in a hospital: The investment might have a pre-dictable cash-flow from energy cost savings (deter-hurdle rate, but financing could be contingent uponenergy efficiency investments. This investment deci-priorities that are facing the hospital. This reflects afinancial/budgetary barrier.A project that captures and combusts landfill gasfrom an existing municipal waste landfill. The under-lying technology is well tested; no relevant barriersexist in the country to the use of this technology. Inthis case the Barrier Test is not applicable. Availability of data for the Barrier TestBefore using this test, a project developer should assesswhether the data that is required to perform this test isbarrier is relevant for the proposed project and, confidentiality requirement or it lacks verifiability.If a project developer does not have sufficient data toperform the Barrier Test, he should proceed with theInvestment Ranking Test. Barrier categoryDescriptionFinancial/ budgetaryAccess to capital for project finance Hurdle rates of third-party investorsHigh initial capital costs and lacking access to creditLack of access to foreign capitalLegalRegulatory biases or absence of regulationTechnology, operation and maintenanceHigher perceived risks of new technology Need to make changes to existing infrastructure to integrate technologySupply-chainLack of adequate supply infrastructure for spare parts, fuels, etc. Lack of transport infrastructure (may overlap with above category — maintenance) Market structureBelow long-run marginal cost pricing and other price distortions InformationalLack of awareness about available technologies, products, financial support Table

8. Illustrative barrier categories Implementing the Barrier TestThe Barrier Test is implemented as a six-step process:1.Identify perceived barriers to the implementationof the proposed project and reference documentsreferred to as evidence of barriers2.Describe how project design overcomes the barri-3.Describe barrier relevance to all plausible baseline4.Rank plausible candidates and proposed project inorder of increasing barrier relevance and assignincreasing scores5.Aggregate scores over all barriers for each candi-date and the project (only applies if more than one6.Select baseline: candidate with the lowest aggre-gate scoreIdentify all perceived barriers that will impact projectthat the project developer isthe proposed project. See example in box 3.The project developer needs to describe how the barri-ers identified in step 1 are overcome by project design.By so doing, the project developer documents the rele-vance of the barrier for the proposed project. Forinstance, a project developer could describe how a spe-cific project arrangement, e.g. project partnerships, useof advanced financing instruments, know-how transfer,process/technology innovation as well as the additionalvalue generated by GHG reductions could be used toovercome a barrier. See example in box 3.The project developer needs to describe how these bar-tion is used to establish the relevance of a barrier to anyThe project developer needs to rank all plausible base-line options and the proposed project in order of increas-ing barrier relevance. The candidate which is leastaffected by the barrier is given the lowest score. Thisranking is used to identify the baseline from the set ofplausible candidates whereby candidates where thebarrier has the least relevance are the “more likely Box 2. Data sources and inform

ation required for the Barrier TestFinancial or budgetary information, e.g. availability of financing, credit, foreign capital, etc.Societal, skill and informational data, e.g. social traditions, training programmes, information dissemination mechanisms,Market information, e.g. product prices, tariffs, import rules, distribution systems, etc.Other themes that have a direct impact on the feasibility and/or design of the project.Sources of data/informationDocuments prepared by the project developer, contractors or project partners in the context of the proposed project orsimilar previous project implementationsExpertise from local advisors/experts that are familiar with the local conditions where the project will be implemented Public Reports or studies, i.e. baseline studies for other projectsGovernment sources (e.g. the climate change coordination office of the project host country)Sector-level reports of bi-/multilateral organizations (e.g. JI/CDM National Strategies Studies which now exist for a large We suggest including “expected” barriers, considering that thisanalysis is prepared at an early stage of project development andconclusive analysis, i.e. the relevance of individual factors might This step is only relevant where there was more than onebarrier identified for the proposed project. If this is thecase, the project developer needs to repeat step 4 for allbarriers identified. All scores are then added for eachCDM Projects Box 3. Applying the Barrier Test: Energy efficiency project to improve building insulation in a hospitalStep 1: Identify perceived barriers to the implementation of the proposed projectThe main barrier identified is the lack of owner/operator financing to fund up-front investment costs for the project. This isdespite the project meeting the investors (

ESCO) hurdle rate. The project developer in consultation with an internationalenergy efficiency expert (name and company should be included ) and the project operator identified the barrier. Step 2. Describe how the project design overcomes the barriersThe identified barrier could be removed by supporting the project operator's co-financing through a loan that is secured bythe additional cash-flow expected from the sale of emission reduction credits. Step 3. Describe barrier relevance to all plausible baseline optionsThe project developer identified two plausible baseline options:1) the proposed project, and 2) the current status quo.The barrier identified in step 1 (lack of co-financing) is highly relevant for the first (as described in step 1 of the Barrier Test)baseline option. However, the barrier is not relevant for the second option because this baseline does not require an invest-ment and therefore the lack of owner co-financing is irrelevant.Step 4. Rank plausible candidates and proposed project in order of increasing barrier relevance andassign increasing scores2. current status quo (score = 1, i.e. barrier is not relevant)1. proposed project (score = 2, i.e. barrier is more relevant)Step 5: Aggregate scores over the barriers for each candidate and the projectThe baseline would be the current status quo for this project. Table 9. Test result: generates one definitive baseline Cells show ranksBaseline 1as baselineBaseline 2Barrier 1231Barrier 2321Cumulative 552Total rank221The GHG Protocol Initiative Project Quantification Standard roadtest draft usesan adapted evaluation method on the basis of feedback received from stake-holders. It suggests a binary system for the evaluation of barriers and proposes Table 10. Test result: two competing baselines Cells show ranksBasel

ine 1as baselineBaseline 2Barrier 1321Barrier 2312Cumulative 633Total rank311 Table 11. Test result: three competing baselines Cells show ranksBaseline 1as baselineBaseline 2Barrier 1231Barrier 2213Cumulative 444Total rank111riers are deemed similarly relevant (they all requirespecial project design to overcome them), they areweighted equally. The plausible baseline option with the lowest scorebecomes the baseline. Should there be more than onecandidate with the lowest score, the project developerIf the Investment Ranking Test is not applicablequantify the GHG emissions or removals for all com-peting project baseline options and choose the can-didate with the lowest emissions (or greatestremovals).If only one baseline is identified the project developercan end the customized baseline selection process.Investment Ranking TestThe purpose of the Investment Ranking Test is to use anappropriate financial indicator to rank all plausible base-line options and the proposed project in terms of theirperformance vis-à-vis that indicator. The baseline optionusual conditions is selected as the project baseline.Ideally, the Investment Ranking Test delivers one defini-tive baseline irrespective of changing assumptions.However, if changing assumptions do create competingbaselines then subsequent procedures need to be per-TestThe Investment Ranking Test is used when: The Barrier Test was not applicable to or used for theproposed project, orThe Barrier Test generated one or more competingFor example, in the case of a landfill-gas capture project,there were no barriers to the project identified, so theBarrier Test was not applicable. An Investment RankingTest — using an economic rate of return indicator anda financial rate of return indicator — could then be usedto select a baseline from a set of

plausible baselineAvailability of Investment Ranking Test dataA project developer should check whether the necessarydata to conduct the Investment Ranking Test (includingplausible baseline options including the proposedproject (see box 4). Box 4. Data sources and informationfor Investment Ranking TestSources of data/informationProject developer experiencefor certain project typesstudies for other projectsIf there is insufficient data to implement the InvestmentRanking Test after all reasonable efforts to obtain suchdata have been taken, the project developer is asked toestimate the GHG emissions/removals of all competinglowest GHG emissions or highest removals.Implementing the Investment Ranking TestThe Investment Ranking Test has three steps (seefigure 6). A project developer can choose from a number of finan-the project type, and project developer (e.g. public vs. private).Internal return rate on equity (IRR), or alterna-indicator is appropriate to compare two invest-ment options with each other. Sequestrationprojects as well as direct energy impact projectscompare between baseline options.appropriate to use when plausible baselineoptions include more than one facility, because adirect comparison of investment options is notpossible. Most projects with indirect impacts(e.g. renewable energy) would most likely usethis financial indicator to compare betweenbaseline options. LRMC are further differentiatedin built LRMC and operating LRMC, wherebybuilt LRMC refers to costs including additionalcapital costs to construct new production facili-ties that are required to meet demand within aCDM Projectssystem and operating LRMC refers to costs that1.Project developers should use the when comparing a proposed project with newproduction capacities in a supply-constrainedences black-outs o

r brown-outs). The built LRMCis appropriate under these conditions, since theproposed project competes against other newprojects to reduce the supply constraint. 2.Project operators should use the when comparing the proposed project withexisting production capacities in a demand-con-excess reserve margins, over-capacity, or globalcompetition). The operating LRMC is appropriateunder these conditions, since the proposedproject is most likely replacing production froman existing facility.3.In some cases, a proposed project will competeproject developer needs to assess the relative rel-evance of these circumstances or use both indi-cators on a proportional basis. Figure VI. Investment Ranking Test Yes START: Description of proposed project Choose LRMC asfinancial indicator Yes financial indicator about direct emissions/ sensitivityanalysis financialanalysis shifting select mostconservative 1. Status quo1. Status quo2. Existing2. Existing alternative fac.alternative fac.3. Other3. Other available tech.available tech.4. Proposed4. Proposed projectproject5. Modified5. Modifiedstatus quostatus quoCreate ranking ranked optiondominant? The financial analysis for the proposed project and forUNIDO's COMFAR.assumptions that are used in the project's feasibilitystudy. Do not assign any value to the projected GHGreductions.indicator becomes the project baseline of choice.discount rates) the project developer needs to performa sensitivity analysis to verify the robustness of theselected project baseline. Usually, any financial analysisadditional effort for the project developer.The project developer is asked to define realistic devia-tions from the chosen assumptions and determine viadifferent baseline.Competing project baseline options will exist if the base-If this procedure delivers one base

line and no compet-ing project baselines, the project developer can end theselection procedure. If competing project baseline options still do exist, theproject developer has three options: Choose a long-term crediting period, document thetrigger a baseline change within the crediting periodand include provisions in the project's monitoringChoose a conservative crediting period that wouldprovide regulatory assurance of the baseline irre-spective of the occurrence of changing assumptionsand reassess the validity of the baseline for a secondcrediting period, orEstimate the GHG emissions or removals for all com-removals.For example, the baseline for a proposed project couldboiler would have been fired with coal.However, asprice of gas, the boiler would have been fired with gas.The project developer could:Make provisions in the monitoring plan that wouldtrack the price differential between coal and gas formatically if that price differential were observed forLimit the crediting time to a period that wouldprovide regulatory assurance and reassess the base-line at the end of that crediting period; orChoose a gas-fired baseline. A licence for this tool can be obtained directly from UNIDO.In comparison, the GHG Protocol Project Quantification Standard(roadtest draft) suggests focusing on indicators that are outsidethe project developer’s control, such as import tariffs or fuel matter, considering that adjusting the burner carries aonly occur if the switching costs can be recovered in the context key assumptions related to the performance withrespect to criteria that were relevant in the baselineoption ranking process are valid. At the end of thisperiod, these assumptions have to be reviewed toThis process may result in the renewal of the initialproject baseline, the establishment of a ne

w baseline, ora finding that the project is no longer additional (i.e. theproject activity itself is the baseline). Forthcoming regu-lations from the Kyoto Protocol process are to be fol-lowed in this procedure.period for which the project can generate ERUs/CERs buttions need to be reviewed and adjusted as necessary. Therules governing review and adjustment should be pre-determined to improve process transparency, so thatinvestors have confidence that they will be able to earnERU/CER generation to net present value when usinglonger-term time horizons. While the discussion of suchrules has not yet started in international negotiations, theCDM ProjectsThe review should be limited to the criteria thatwere relevant in the initial determination of theThe consequences of different criteria performanceThe re-validation should also occur in accordanceProtocol for monitoring key criteria thatWhen the baseline is re-assessed at the end of the initialemission reduction calculation factors the external factors because project interven-Because these factors will require constant updating,monitoring and verification protocols should be definedthat clearly specify the needed measurement of thesefactors, how measurement should be conducted andverified. These protocols will be specific to the kind ofenergy or material/product under observation. Box 5. Calculation of specific (output-based) emission reductionsAfter the baseline has been chosen, specific emission reductions (per unit of output) can be determined as described on pageBy specifying the projected activity level of the project, absolute emission reductions canis equal to the output of the project system. Annex I. WorkbookThe design of the workbook for these guidelines corresponds with the sections A to C of the UNFCCC CDM Project Desi

gnDocument (PDD) format that are supported by these guidelines. Future versions of these guidelines might address additionalsections in the future.Some generic inputs that are common due to the use of this methodology have already been made and are indicated in A. General description of project activityA.1.Title of the project activity:____________________________________________________________________________A.2.Description of the project activity: theA.3. Project participants:tion; indicate at least one of the above as the contact for the CDM project activity.A. 3.1.Participant 1Address: ___________________________________________________________________________________________________CDM project contact: Yes A. 3.2.Participant 2Address: ___________________________________________________________________________________________________CDM project contact: Yes A. 3.3.Participant 3Address: ___________________________________________________________________________________________________CDM project contact: Yes A.4. Technical description of the project activity:A.4.1.Location of the project activity:Region/State/Province etc.:____________________________________________________________________________________City/Town/Community etc:____________________________________________________________________________________A.4.2. Category(ies) of project activity Project categoryProject typeEnergy generation, supply, transmission and distributionGeneration of electricity from renewable sources for own use or saleGenerator efficiencyProcess controls to improve combustion efficiencyImproved insulation of district heating conduitsEnd use energy efficiencyIndustrial and building efficiencyReduced heat losses from exhaust gasSecondary energy use improvement, i.e. use of efficient motorsFuel

switch in the dir���ection coal oil gas biofuelsTransportationEnergy efficiencyReplacement of old freight vehicles by modern,Haulage efficiencyImprovement of transportation logistics of a freight service company,CDM Projects Project categoryProject typeProductionImproving process energy efficiencyDecreasing the clinker factorIron and steelImproving process energy efficiencySubstituting materials for reduction of ironAluminium and non ferrousImproving process energy efficiency Improving process energy efficiencyWaste managementRecycling and reuseRecycling and reuseRecovery and reuse of materials, half-products, heatFugitive emission captureemission capture and destruction in coal minesemission capture and combustion for electricity generationAssociated gas capture and combustion.emission capture, liquefaction and sale to generate electricity Transmission and distribution of methaneWaste managementLandfill/biomass captureWaste prevention and recoveryCollection and incineration of straw, other agricultural residuals or foodindustry residuals for energy generation purposesWastewater treatment projects Project categoryProject typeAgricultural projectsReduced methane from rice cultivationProcess changesImproved livestock production efficiencyCattle feed additives that reduce CHproduction in digestionCapture of biogas from sewageAfforestation and reforestationReplanting of native tree species, planting of shade treesAvoided deforestation/preservationDeclaration and protection of a natural reserve,accompanied by awareness building and teaching of local residentsCropland managementForest managementSwitch to sustainable forest management with selective loggingcapture at exhaust stacks and re-injection into oil fieldsA.4.3.Technology to be employed by the project act

ivity: if the technology is new to the project developer, whether know-how will be transferred by the sellers of the proposed tech-nology.A.4.4. Brief explanation of how the anthropogenic emissions of anthropogenic greenhouse gases (GHGs) are to be reduced bythe proposed CDM project activity, including why the emission reductions would not occur in the absence of the proposedproject activity, taking into account national and/or sectoral policies and circumstances: system boundaries) and the nature of the emission impact in terms of the emission relevant factor(s) that will change as a resuCDM Projects The proposed project will lead to a change of:†average primary energy use per unit of output, or net sink capacity of a land area unit, methane emissionactivity level at an upstream, same-stream or down-stream facility, or land-use outside the system bound-ary (area) of a sequestration project.In detail, the project will:The baseline for this proposed project has been determined on the basis of a new baseline methodology that takesinto account emission impacts that would not occur in the absence of the proposed project activity, that takes intoaccount national and/or sectoral policies and circumstances in the baseline selection process. According to thismethodology, the baseline has been identified as follows:A.4.5.Public funding of the project activity:of public funding for the project activity, including an affirmation that such funding does not result in a diversion of officiB.Baseline methodology B.1.Title and reference of the methodology applied to the project activity: ology for baseline and additionality analysis for multiple project categories”. Detailed documentation re the use .unido.or B.2.Justification of the choice of the methodology and why it is applicable to

the project activityAs documented in annex 3 for this new methodology, this methodology applies to the project categories listed inA.4.2. The project activity falls into one (or more) of these categories. CDM ProjectsB.3.Description of how the methodology is applied in the context of the project activity: The methodology is based on a systematic, step-wise approach that is applied as follows:1.Identification of possible baseline options for every primary GHG impact of the proposed project;2.Elimination of non-plausible baseline options using elimination screen criteria;3.Performance of a barrier test to rank remaining plausible baseline options;4.Performance of an investment ranking test on all competing likely baselines if the barrier test does notprovide one definitive baseline;5.Selection of one baseline if the investment ranking test provides one definitive most likely baseline;6.Otherwise, selection of the most conservative competing baseline (lowest emissions or highest removalsover the life-time of the project), or definition of a monitoring protocol that allows observing a set ofassumptions (e.g. price differentials between competing input factors, local availability of input factors)that would result in switching from one competing baseline to another competing baseline.B.4.Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurredin the absence of the registered CDM project activity (i.e. explanation of how and why this project is additional and thereforeInstruction: Please complete section B.4. for every primary emission impact of the proposed project.Step 1: The following possible baseline options were identified: Ref. #Name of possible baseline optionBrief description001Proposed project002Status quo etc….Step 2:

The following possible baseline options were eliminated on the basis of the following elimination screen criteria: Name of possible baseline option Ref. #to be eliminated from further analysisDocument applicability of a barrier screen Step 3: A barrier test was applied to all plausible baseline options and a ranking of barrier relevance was created as follows:Instruction: Use guidance from page 14, The Barrier Test, to complete this step: 0. check test applicability, 1. identify all r all Plausible baseline option # BarrierProposed projectRef. No.Ref No.Ref. No.Brief descriptionDescribe how project designDescribe relevance of barrier for this of barrier 1overcomes barrierbaseline option and assign comparative Instruction: Select baseline with lowest score. If the barrier test yields more than one baseline with lowest score, (a) perfor Step 4: An investment ranking test was applied to all remaining competing plausible baseline optionsInstruction: Use guidance from page 21, Investment Ranking Test, to complete this step: 0. check applicability of this test, 1.select financial indicator, 2. perform financial analysis and rank results in decreasing order of performance, 3. perform sensi Financial analysisSensitivity analysisRef. No. of competing Financial indicator Ref. No. of competingFinancial indicator baseline optionperformancebaseline optionperformance Step 5: Considering that after the financial ranking test no conclusive baseline could be identified, the projectsponsor chooses to proceed as follows:Instruction: Use guidance from page 23, Choose conservative baseline or define baseline shifting parameters, to complete this schoosing a long-term crediting period, documenting the deviation of the chosen assumption that wouldtrigger a shifting of baseline within the crediting pe

riod between the competing options and including pro-visions in the project’s monitoring plan that will observe any changes in assumptions triggering such shift-ing (details are provided in the monitoring plan);choosing a conservative crediting period that eliminates the incidence of changing assumptions triggeringbaseline shifting and commits to reassessing baseline validity at the end of the current crediting period;estimating the GHG emissions or removals for all competing baseline options and choosing the candidatewith the lowest GHG emissions or highest GHG removals.B.5.Description of how the definition of the project boundary related to the baseline methodology is applied to the projectThe baseline methodology differentiates two project boundary scopes and three kinds of GHG impacts that canoccur within these scopes. These definitions are applied consistently to all project activities that are qualified to usethis methodology. Relevant system boundaries and all cross-boundary material and energy flows are identified inthe flow chart below. CDM ProjectsB.6.Details of baseline developmentC. Duration of the project activity/Crediting period C.1Duration of the project activity:C.1.1.Starting date of the project activity: _____________________________________________________________________date” has been defined and applied in the context of this project activity.C.1.2.Expected operational lifetime of the project activity: _______________________________________________________C.2Choice of the crediting period and related information: Instruction: Please check the appropriate option and fill accordingly. Note that the crediting period may only start after the of registration of the proposed activity as a CDM project activity. In exceptional cases, the starting date of the credit

ing pecan be prior to the date of registration of the project activity.C.2.1Renewable crediting period (at most seven (7) years per period)Starting date of the first crediting period (DD/MM/YYYY): Length of the first crediting period: C.2.2Fixed crediting period (at most ten (10) years): The following case study is based on an existing project design document (PDD) that was submitted to the CDM Executive Boardfor approval. It has been adopted for illustrative purposes only. No statement made within the context of this case study shallbe construed as meaning to represent an actual description of the project submitted to the CDM Executive Board.A. General description of project activityA.1 Title of the project activity: A.T. Biopower Rice Husk Power Project, ThailandA.2.Description of the project activity: theThe project involves construction and operation of five new combined heat and power facilities that willsupply electricity to the grid and steam to industrial and agricultural users. It contributes to sustainable develop-ment by meeting Thailand's growing energy needs using renewable energy sources. A.3. Project participants:tion; indicate at least one of the above as the contact for the CDM project activity.A. 3.1.Participant 1AT BiopowerAddress: ___________________________________________________________________________________________________CDM project contact: Yes A. 3.2.Participant 2Address: ___________________________________________________________________________________________________CDM project contact: Yes A. 3.3.Participant 3Rolls Royce Power VenturesAddress: ___________________________________________________________________________________________________CDM project contact: Yes CDM ProjectsA.4. Technical description of the project activity:A.4.1.Location of

the project activity:Instruction: Please enter all information to allow unique identification of this project activity.Region/State/Province etc.: City/Town/Community etc:____________________________________________________________________________________A.4.2. Category(ies) of project activity Project categoryProject typeEnergy generation, supply, transmission and distributionGeneration of electricity from renewable sources for own use or saleGenerator efficiencyProcess controls to improve combustion efficiencyImproved insulation of district heating conductsEnd use energy efficiencyIndustrial and building efficiencyReduced heat losses from exhaust gasSecondary energy use improvement, i.e. use of efficient motorsFuel switch in the dir���ection coal oil gas biofuelsTransportationEnergy efficiencyReplacement of old freight vehicles by modern,Haulage efficiencyImprovement of transportation logistics of a freight service company, Project categoryProject typeProductionImproving process energy efficiencyDecreasing the clinker factorReducing cement use in concrete productionIron and steelImproving process energy efficiencySubstituting materials for reduction of ironAluminium and non ferrousImproving process energy efficiency Improving process energy efficiencyWaste managementRecycling and reuseRecycling and reuseRecovery and reuse of materials, half-products, heatFugitive emission captureemissions capture and destruction in coal minesemissions capture and combustion for electricity generationAssociated gas capture and combustionemissions capture, liquefaction and sale to generate electricity Transmission and distribution of methaneWaste managementLandfill/biomass captureWaste prevention and recoveryCollection and incineration of straw, other agricultural residual

s or foodindustry residuals for energy generation purposesWastewater treatment projects CDM ProjectsProject categoryProject typeAgricultural projectsReduced methane from rice cultivationProcess changesOther: reduce methane emissions from rice husk land-fillingImproved livestock production efficiencyCattle feed additives that reduce CHproduction in digestionCapture of biogas from sewageAfforestation and reforestationReplanting of native tree species, planting of shade treesAvoided deforestation/preservationDeclaration and protection of a natural reserve,accompanied by awareness building and teaching of local residentsCropland managementForest managementSwitch to sustainable forest management with selective loggingcapture at exhaust stacks and re-injection into oil fieldsA.4.3.Technology to be employed by the project activity: used is transferred to the host party, if any.The project will use suspension-fired boilers that produce high quality ash as a by-product. This project will bringthis technology to Thailand for the first time. The project operator will provide capacity building for O and M throughA.4.4. Brief explanation of how the anthropogenic emissions of anthropogenic greenhouse gases (GHGs) are to be reduced bythe proposed CDM project activity, including why the emission reductions would not occur in the absence of the proposedproject activity, taking into account national and/or sectoral policies and circumstances: system boundaries) and the nature of the emission impact in terms of the emission relevant factor(s) that will change as a resuThe proposed project will lead to a change of:⌧average primary energy use per unit of output, or net sink capacity of a land area unit, methane emissionactivity level at an upstream, same-stream or down-stream facility, or land-use

outside the system bound-ary (area) of a sequestration project. In detail, the project will replace the generation of electricity, heat and cement at other facilities (scope 2 effect) andwill lead to a reduction of methane emissions associated with land-filling rice husk.The baseline for this proposed project has been determined on the basis of a new baseline methodology that takesinto account why emission impacts would not occur in the absence of the proposed project activity, and taking intoaccount national and/or sectoral policies and circumstances in the baseline selection process. According to thismethodology, the baseline has been identified as follows:1.Electricity generation: Average CO2.Heat generation: currently used bunker oil combustion (90 per cent efficiency)3.Rise husk land-filling: uncontrolled combustion4.Rice husk ash utilization: Avoided calcination and avoided fossil-fuel emissions from kiln firing fromavoided clinker production Primary GHG impactpBeforeElectricity generation1 MWh delivered/504 kg COMWh producedHeat generation1 t steam delivered/t236 kg COsteam producedRice husk uncontrolled combustion0.052 tCOAsh utilization1 t ash/t clinker1000 kg/t clinkerElectricity generation0 MWh delivered/504 kg COMWh producedHeat generation0 t steam delivered/t236 kg COsteam producedRice husk uncontrolled combustion0 tCO Ash utilization0 t ash/t clinker1000 kg/t clinker CDM ProjectsThe table only displays those factors that experience a change due to project intervention. All other factors remainconstant. On the basis of this data, emission reductions can be calculated as follows: Primary GHG impacteOutputExpected emission reductionEmission reductionElectricity generation504 kg CO/MWh660 GWh/a332,640 tCOHeat generation236 kg CO/t steam @ 6 bar83 kt steam/a19,588 tCORic

e husk uncontrolled combustion52 kg COe/t rice husk715 kt rice husk/a37,180 tCO2Ash utilization1000 kg/t clinker30 kt rice husk ash/a30,000 tCO2 Total (p.a.)A.4.5.Public funding of the project activity:of public funding for the project activity, including an affirmation that such funding does not result in a diversion of officiB.Baseline methodology B.1.Title and reference of the methodology applied to the project activity: ology for baseline and additionality analysis for multiple project categories”. Detailed documentation re the use .unido.or B.2.Justification of the choice of the methodology and why it is applicable to the project activityAs documented in annex 3 for this new methodology, this methodology applies to the project categories listed inA.4.2. The project activity falls into one (or more) of these categories.B.3.Description of how the methodology is applied in the context of the project activity: The methodology is based on a systematic, step-wise approach that is applied as follows:1.Identification of possible baseline options for every primary GHG impact of the proposed project;2.Elimination of non-plausible baseline options using elimination screen criteria;3.Performance of a barrier test to rank remaining plausible baseline options;4.Performance of an investment ranking test on all competing likely baselines if the barrier test does notprovide one definitive baseline;5.Selection of one baseline if the investment ranking test provides one definitive most likely baseline;6.Otherwise, selection of the most conservative competing baseline (lowest emissions or highest removalsover the life-time of the project), or definition of a monitoring protocol that allows observing a set ofassumptions (e.g. price differentials between competing input factors, local availabili

ty of input factors)that would result in switching from one competing baseline to another competing baseline.B.4.Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurredin the absence of the registered CDM project activity (i.e. explanation of how and why this project is additional and thereforeInstruction: Please complete section B.4. for every primary emission impact of the proposed project.Step 1: The following possible baseline options were identified: Annex II Ref. #Name of possible baseline optionBrief description001Proposed projectClimate neutral supply of electricity002Power development plan and oil-fueled Grid average on the basis of national planning process NOT including the displacement caused by projectplanned phasing out of oil-fired generation003Power development plan and oil-fueledGrid average on the basis of national planning process including the displacement NOT caused by projectplanned phasing out of oil-fired generation Ref. #Name of possible baseline optionBrief description004Proposed projectClimate neutral supply of steam 005Status quoContinued use of bunker oil for steam production Ref. #Name of possible baseline optionBrief description006Proposed projectControlled combustion of rice husk007Status quoRice husk land-filling and decay to methane 008Modified status quoLand-filling and uncontrolled combustion Ref. #Name of possible baseline optionBrief description009Proposed projectRice husk ash use as cement replacing additive in concrete production 010Status quoContinued calcinations and fossil-fuel use for kiln firing for clinker productionStep 2: The following possible baseline options were eliminated on the basis of the following elimination screenNo options were eliminated. Additional analysis is

required to select a project baseline. Name of possible baseline option Ref. #to be eliminated from further analysisDocument applicability of a barrier screen Instruction: If all possible baseline options but the proposed project are eliminated, the procedure ends here and the proposedproject is not eligible for the CDM. CDM ProjectsStep 3: A barrier test was applied to all plausible baseline options and a ranking of barrier relevance was createdInstruction: Use guidance from page 17, The Barrier Test,to complete this step: 0. check test applicability, 1. identify all rebarriers to the proposed project, 2. describe how the design of the proposed project addresses these barriers, 3. describe all Plausible baseline option # BarrierProposed project (Ref. No. 001, 004, 006, 009)Ref. No. 002, 003, 005, 007, 008O and MThe technology provider will implement Barrier is not relevant as no relateda training package for operators.new technology is transferred.capacityRank: 2Rank (for all options): 1Access to An equity share of 25% of total investment costs was raised Barrier is not relevant as no capitalon the basis of the expected sale of emission reduction credits. investment is required.Financial closure could not have been achieved without this Rank (for all options): 1added incentive which increased return on equity by 5%. Instruction: Select baseline with lowest score. If the barrier test yields more than one baseline with lowest score, (a) perforAdditional analysis is required for primary effects 1 and 3 whereas a clear baseline was determined for primaryeffects 2 and 4.Step 4: An investment ranking test was applied to all remaining competing plausible baseline optionsInstruction: Use guidance from page 21, Investment Ranking Test, to complete this step: 0. check applicability of th

is test,1. select financial indicator, 2. perform financial analysis and rank results in decreasing order of performance, 3. perform seThe investment ranking is not likely to generate additional insight into the selection of a baseline for primary effects1 and 3. Instead, the project developer chooses to determine and select the more conservative options. Ranking of competing plausible baseline options in order of decreasing performance Financial analysisSensitivity analysisRef. No. of competing Financial indicator Ref. No. of competingFinancial indicator baseline optionperformancebaseline optionperformance [Step 5: Considering that after the financial ranking test no conclusive baseline could be identified, the projectsponsor chooses to proceed as follows:] not applicableInstruction: Use guidance from page 23, Choose conservative baseline or define baseline shifting parameters, to complete this schoosing a long-term crediting period, documenting the deviation of the chosen assumption thatwould trigger a shifting of baseline within the crediting period between the competing optionsand including provisions in the project’s monitoring plan that will observe any changes inassumptions triggering such shifting (details are provided in the monitoring plan);choosing a conservative crediting period that eliminates the incidence of changing assumptionstriggering baseline shifting and commits to reassessing baseline validity at the end of the currentcrediting period;estimating the GHG emissions or removals for all competing baseline options and choosing thecandidate with the lowest GHG emissions or highest GHG removals. B.5.Description of how the definition of the project boundary related to the baseline methodology is applied to the projectThe baseline methodology differentiates two proj

ect boundary scopes and three kinds of GHG impacts that canoccur within these scopes. These definitions are applied consistently to all project activities that are qualified to usethis methodology. Relevant system boundaries and all cross-boundary material and energy flows are identified inthe flow chart below. Current uses end users end-users agriculturalusers to grid burning transportation ATB power industrial users manufacturers (RHA) (1) The dotted lines indicate the Project’s boundaries.(2) For the reasons mentioned in section E.2, this item is viewed as outside the project boundaries.(3) For conservatism, these reduction possibilities are not included in the calculation of the project’s CERs. CDM ProjectsB.6.Details of baseline developmentMitsubishi Securities, not a project participantC. Duration of the project activity/Crediting period C.1Duration of the project activity:C.1.1.Starting date of the project activity: date” has been defined and applied in the context of this project activity.C.1.2.Expected operational lifetime of the project activity: C.2Choice of the crediting period and related information: Instruction: Please check the appropriate option and fill accordingly. Note that the crediting period may only start after the of registration of the proposed activity as a CDM project activity. In exceptional cases, the starting date of the crediting pecan be prior to the date of registration of the project activity.Renewable crediting period (at most seven (7) years per period)Starting date of the first crediting period Length of the first crediting period: C.2.2Fixed crediting period (at most ten (10) years): Barrier Test: Procedure to select a baseline from a set of plausible baseline options by taking intoAn additional project baseline that — under certain assu

mptions or criteria —may be the project baseline as well. A competing baseline could be the outcome of scenario and sen-sitivity analysis within the Barrier or Investment Ranking Tests.Investment Ranking Test: Procedure to select a baseline from a set of plausible baseline options (afteroperating LRMC are the mar-ginal unit supply costs, assuming that demand is met by operating production facilities; built LRMCare the marginal unit supply costs, assuming that demand is met by new production facilities that needbaseline option from further consideration.A quantity and quality of a product, service or secondary energy carrier that isprovided by either the scope 1 or scope 2 system. It is used to define the relevant system boundariesA baseline option that could be a viable project baseline on first impression.Primary GHG emission impact: The effect as a result of a project intervention that leads to a changeof either direct or indirect emissions. A primary GHG emission impact is created by one of the follow-ing three effects: a change of primary energy carrier with a different emission factor, processchanges leading to a different direct GHG emission rate per unit of output OR net carbon sequestra-process changes or substitution of secondary energy carriers or materials leadingto different activity levels and therefore direct GHG emissions elsewhere.Projects with more than one primary emissions impact need to define arenewable fuel source in the context of a land-fill management project). Scope 1 system boundary: The sources and sinks of GHG emissions within the control of the project oper-ator that create a change of direct emissions per unit of output as a result of a project intervention. Scope 2 system boundary: The sources and sinks of GHG emissions outside the control of the p

rojectenergy carriers and materials as a result of a project intervention in a scope 1 system boundary. A scope2 system boundary could include sources that are located down-stream (a steam generator experienc-ing reduced production due to a waste heat recovery project), same-stream (a power generating facil-ity experiencing reduced production due to a renewable energy project) or upstream (a land-fill expe-System boundary: The sources and sinks of GHG emissions as well as imports and exports of second-ary energy carriers and materials within the control of the project operator that create a GHG emis-sion-related impact due to the project intervention. The reduction in emissions by sources or enhancement of removals by sinks that is addi-tional to any that would occur in the absence of a JI or CDM project activity. The Marrakech Accordstates that a project activity is additional if anthropogenic emissions of greenhouse gases are reducedbelow those that would have occurred without the JI or CDM project activity and that a baseline canreasonably represent what existed without the project. Before Marrakech, there were several distinctinterpretations of additionality:Financial additionality: a JI or CDM project shall not use ODA (Official Development Assistance) orGEF funds. This interpretation reflected concerns that ODA might be diverted to support CDM orJI projects Economic/investment additionality: If the project had a high Internal Rate of Return, it was con-sidered likely to occur regardless of whether it was made a CDM or JI project since it presented agood investment opportunity. However, in some cases it was accepted that even with a high IRRa project might not go ahead as a result of risks and non-monetary barriers. Thus in some cases itwould be possible to justify that a pr

oject was additional despite attractive IRRs. There were dif-Environmental additionality: the project reduces emissions. List of annex I parties to the Kyoto Protocol that is setting out each party's emissionlimitation or reduction target for the first Commitment Period, relative to the base year.The industrialized countries listed in this annex to the UNFCCC trying to return theirgreenhouse gas emissions to 1990 levels by the year 2000 as per article 4.2Protocol. They include the 24 original OECD members, the European Union, and 14 countries witheconomies in transition (Croatia, Liechtenstein, Monaco and Slovenia joined at COP-3, and the CzechRepublic and Slovakia replaced Czechoslovakia).The Kyoto Protocol's term for the total tonnage of greenhouse gas, measured inmitment period. Assigned amounts are calculated on the basis of the Quantified Emission Limitationand Reduction Commitments laid down in annex B of the Protocol.Saving of emissions permits or CER for future use in anticipation that these will accrue valueFormal document included within the project design document that quantifiesprojects emission reductions and clearly outlines the method used to calculate the baseline.A projected level of future emissions against which to measure the success of emissions-reduction projects.A generic term for a verified, real 1 tonne GHG emission reduction.If the project is a CDM project a carbon credit is referred to as a Certified Emission Reduction (CER),if generated from a JI project it is referred to as an Emission Reduction Unit (ERU).2 per cent in-kind levy on the CERs created by CDM projects to finance adapta-tion measures in non-annex I countries.Carbon credits generated from CDM projects. One of the three Kyoto mechanisms, the CDM aims to promote sus-with their cap. It allows

annex I countries to invest in emission-saving projects in developing countriesand gain credit for the savings achieved through the generation of CERs that they can use to con-The period during which a project baseline is valid and carbon credits are generated.In the context of the CDM, this period is either 7 years, which can be renewed twice after review ofthe baseline or 10 years without renewal. For JI, the term, crediting period, has not been formerlyCDM Projects Carbon credits generated from JI projects. The annex I country pur-chasing the ERUs can add them to their assigned amounts whilst the seller must deduct the ERUs from(JI) One of three Kyoto mechanisms. JI allows annex I parties to invest in emis-sion-reducing/sequestering projects in other annex I countries and generate carbon credits, in the formof ERUs, for each tonne of GHG reduced. The host country must deduct the ERUs from its own assignedamount of emissions. Like Emissions Trading, JI must be supplemental to domestic actions. "Measurable and attributable" net change of emissions outside the project boundary of anemission-reduction/sequestration project.Monitoring and Verification Protocol: (MVP) Formal document that is part of a project design docu-ment establishing the procedures that are required to monitor the occurrence of emission reductionsand verify this occurrence by a third party (operational entity).Independent and accredited certification body that is authorized to perform vali-dations and verifications of emission-reduction projects.Validation: Assessment by a certifier of a project design document, containing its baseline and moni-toring plan before the project can be registered by the Executive Board.Verification: tion of an emission-reduction project to establish whether project operators have

followed the termsand conditions formulated in the project design document and to confirm an actual quantity ofreduced/sequestered emission reductions. It involves physical, on-site inspection, or where useful,deployment of techniques such as remote sensing, interviewing, sampling. .co2e.com/common/glossar Project design documentsPCF: PDD, MVP and Baseline study for the Plantar Project in Brazil.PCF: PDD, Baseline Study and Monitoring Plan for Thomayer Energy Efficiency in Public BuildingsProject in the Czech Republic.PCF: PAD, MVP and Baseline Study for the Liepaja Regional Solid Waste Management Project in Latvia.UNFCCC: Clean Development Mechanism Project Design Document, (CDM PDD), 2002.FCCC/CP/2001/13/Add.2: CDM Modalities and Procedures (Extract of Decision 17/CP.7), 2002.Studies, reportsBosi, M.; Ellis, J.: Implications of multi-project emission baselines for CDM projects - Examples fromEnergy and Environment Division, International Energy Agency, 9, rue de la Fédération, 75015 Paris,Deshun, L.; Jingfei, G.; Nielsen. P Chris; Rogers P. Peter: Baseline Determination for Greenhouse GasProtocol. In: Working paper, pp. 1-43 . Director of Global Climate Change Institute (GCCI), TsinghuaUniversity, Beijing, China.Ellis, J.; Bosi, M.: Options for project emission baselines, IEA and OECD. Jane Ellis, Pollution Preventionand Control Division, OECD, 2 rue André Pascal, 75775 Paris Cedex 16, France.Energetics Pty Ltd: Workbook for calculating greenhouse gas reductions from industrial energy effi-ciency projects, pp. 1-79, International Greenhouse Partnerships Office, C/- Department of Industry,Science and Resources, GPO Box 9839, Canberra City, Australia.Energetics Pty Ltd: Workbook for calculating greenhouse gas reductions from commercial energy effi-ciency projects, pp. 1-77, Inter

national Greenhouse Partnerships Office, C/- Department of Industry,Science and Resources, GPO Box 9839, Canberra City, Australia.Energy Strategies; George Wilkenfeld & Associates: Workbook for calculating greenhouse gas reduc-tions from projects using electricity and heat generation from fossil fuels, International GreenhousePartnerships Office, C/- Department of Industry, Science and Resources, GPO Box 9839, Canberra City,Hargrave, T.; Helme, N.: Options for simplifying baseline setting for Joint Implementation and CleanDevelopment Mechanism projects, pp. 89-99, New Energy and Industrial Technology Development Organization (NEDO) and Global Industrial and Social Progress Research Institute (GISPRI). Center forClean Air Policy.Harrison, D. Jr.; Schatzki, S. T.; Haites, E.; Wilson, T. F.: Setting baselines for greenhouse gas credittrading programs: Lessons from experience with environmental and non-environmental programs,pp. 1-113. Electric Power Research Institute. National Economic Research Associates, Inc. MagareeHeister, J.: Determining a reference project for a JI investment, Vol. 3. Dr. Johannes Heister, GlobalEnvironment Division, World Bank, 1818 H Street, N.W., Washington, D.C. 20433, USA.Lashof, D. A.: Additionality under the Clean Development Mechanism. Natural Resources DefenceMeyers, S.: Additionality of emission reductions from Clean Development Mechanism projects: Issuesand options for project-level assessment, Ernest Orlando Lawrence Berkeley National Laboratory.Energy Analysis Department, Environmental Energy Technologies Division, Ernest Orlando LawrenceBerkeley National Laboratory, Berkeley, CA, USA.Mullins, F.; Morlot, J. C.; Ellis, J.; Varangu, K.; Hou, J.: Status of research on project baselines underthe UNFCCC and the Kyoto Protocol, Vol. ENV/EPOC(99)19/FIN

AL OECD.Probase briefing note #3: Baselines in the Marrakech Text; Foundation Joint Implementation Network;Centre for Environmental Strategies, University of Surrey (Paterswolde, Guildford, March 2002).Probase briefing note #8: Additionality.Puhl, I.: Options for simplifying baseline setting for Clean Development Mechanism projects . Centerfor Clean Air Policy.Swisher, J. N.: Project baselines and additionality in the Clean Development Mechanism. EconenergyInternational Corp., Boulder CO, USA.Telnes, E.; Ybema, R.: Operational Guidelines for Baseline Studies, Validation, Monitoring andVerification of Joint Implementation projects; Vol. 3b: Procedural Guidelines for Validation andVerification, version 1.0. Telnes, E.; Ybema, R.: Operational Guidelines for Baseline Studies, Validation, Monitoring andVerification of Joint Implementation projects; Vol. 3a: Organisational Requirements for Validation andVerification, version 1.0. Telnes, E.; Ybema, R.: Operational Guidelines for Baseline Studies, Validation, Monitoring andVerification of Joint Implementation projects; Vol. 2a: Baseline Studies, Monitoring and reporting,Telnes, E.; Ybema, R.: Operational Guidelines for Baseline Studies, Validation, Monitoring andVerification of Joint Implementation projects; Vol 2b: Baseline studies for specific project categories;A guide for project developers, version 1.Telnes, E.; Ybema, R.: Operational Guidelines for Baseline Studies, Validation, Monitoring andVerification of Joint Implementation projects; Vol. 1: Introduction; A guide for project developers andvalidation/verification bodies. Version 1.0.UNIDO: COMFAR III English Manual, Vienna, Austria.World Business Council for Sustainable Development and the World Resources Institute (2001). TheGreenhouse Gas Protocol: A Corporate Accounting and