NGO "ANOTHER WAY" (STICHTING BAKENS VERZET), NETHERLANDS, SUSTAINABLE INTEGRATED SELF-FINANCING DEVELOPMENT PROJECTS AND ADVANCED DEVELOPMENT TECHNOLOGIES

The report reference FCCC/CP/2001/13/Add.2 of the seventh session of the Conference of the Parties (COP) held in Marrakesh from 29 October to 10 November 2001, was published on 21 January 2002. Part 2 (Action taken by the Conference of the Parties) of the addendum to the report includes decision 17/CP.7 “ Modalities and procedures for a clean development mechanism, as defined in Article 12 of the Kyoto Protocol”.

Paragraph 6 (c) of decision 17/CP.7 describes one of the tasks assigned for adoption in the eight meeting as follows :

“To develop and recommend to the Conference of the Parties, at its eighth session, simplified modalities and procedures for the following small-scale clean development mechanism project activities:

(i) Renewable energy project activities with a maximum output capacity equivalent of up to 15 megawatts (or an appropriate equivalent);

(ii) Energy efficiency improvement project activities which reduce energy consumption, on the supply and/or demand side, by up to the equivalent of 15 gigawatt/hours per year;

(iii) Other project activities that both reduce anthropogenic emissions by sources and directly emit less than 15 kilotonnes of carbon dioxide equivalent annually;”

By implication, small scale projects were therefore divided into three groups :

I. Projects for the generation of renewable energy.

II. Energy efficiency projects whereby energy consumption is reduced.

III. Other small projects reducing man-made emissions, up to maxmum CO2 savings of 15 kilotonnes.

The report on the meeting of the parties to the Kyoto Treaty held in Nairobi 6-17 November 2006 was published on 2^nd March, 2007. During that meeting, the definitions originally proposed in paragraph 6 (c) of decision 17/CP.7 were modified by paragraph 28 of 1/CMP.2,8 as follows :

[The Conference]

“28. Decides to revise the definitions for small-scale clean development mechanism project activities referred to in paragraph 6 (c) of decision 17/CP.7, as follows:

(a) Type I project activities shall remain the same, such that renewable energy project activities shall have a maximum output capacity of 15 MW (or an appropriate equivalent);

(b) Type II project activities or those relating to improvements in energy efficiency which reduce energy consumption, on the supply and/or demand side, shall be limited to those with a maximum output of 60 GWh per year (or an appropriate equivalent);

(c) Type III project activities, otherwise known as other project activities, shall be limited to those that result in emission reductions of less than or equal to 60 kt CO2 equivalent annually. Calculation procedures for group III projects have been simplified. ”

The three groups of small-scale projects then became :

I. Projects for the generation of renewable energy up to 15 MW (or equivalent). This definition was unchanged.

II. Energy efficiency projects whereby energy consumption is reduced. Maximum project size was increased to 60 GWh per year, and the group was extended to cover appropriate equivalents.

III. Other small projects reducing man-made emissions, up to maximum CO2 savings of 15 kilotonnes. Maximum project size was increased to 60 kt of CO2.

One reason for the increase in size is that the costs of compliance for approval and monitoring of small scale projects as originally defined were too high for the projects to be economically viable.

At first appearance, the three groups of projects may seem to be easily distinguishable from one another. In practice, this is not always so.

By definition, individual small-scale activities under integrated development projects may use methodologies under any of the three groups. Common sense would indicate that where possible they be included under group III for which procedures have been simplified. The fact that more small-scale activities have taken place so far under groups I and II than under group III may be linked to the history of the development of the CDM mechanism and the relatively recent introduction of simplified group III procedures. For instance, there is still no specific simplified group III methodology for bio-mass briquettes ( the methodology in 06. Selection of the CDM methodologies is methodology AMS 1.E) and the use of improved stoves see AMS-II-G (version 5).

Type III small-scale methodologies have been selected in 06. Selection of the CDM methodologies wherever practicable.

Advantages of registration of applications as small-scale projects.

The advantages of small-scale projects are that they :

- Can be bundled (several projects presented as one) using the form for submission of bundled small-scale project activities (CDM-SSC-Bundle).

- Use the “simplified” CDM-SSC-PDD (version 03 – 22 December 2006) project design document. A guideline for the drafting of this document is available.

- Use “simplified” baseline methodologies.

- New baseline methodologies can be also submitted following the “simplified” monitoring plans for afforestation and reforestation (AR) projects:

a) the collection and archiving of data needed to estimate or measure anthropogenic (man-made) emissions by sources of greenhouse gases occurring within the project boundary during the crediting period as specified in appendix B for the relevant project category (4/CMP.1, Appendix B, pp. 76-78);

b) the determination of the baseline of anthropogenic (man-made) emissions by sources of greenhouse gases occurring within the project boundary during the crediting period, as specified in appendix B for the relevant project category (4/CMP.1, Appendix B, pp. 76-78);

c) the calculation of the reductions of anthropogenic (man-made) emissions by sources by the proposed small-scale CDM project activity, and for leakage effects, in accordance with provisions of appendix B for the relevant project category (4/CMP.1, Appendix B, pp. 76-78).

- Use the same designated operational entity (DOE) for initial validation, and for subsequent verification and certification. For large-scale projects two different DOEs are needed.

Despite these advantages, the complexity of the preparation and management of small-scale CDM projects means they too are time-consuming and expensive and need well-qualified personnel. Initial investment costs and on-going compliance costs always need to be carefully weighed against the potential financial benefits. It may take two years, or even more, for project approval and several more years before CER certificates are actually made available for trading. This means that the high set-up costs have to be paid in advance without any guarantee the application will be accepted.

A possibility of interest-free finance through the CDM loan scheme (United Nations Environment Programme (UNEP) Risø Centre, Roskilde, May 2012) to meet the costs of setting CDM projects in least-developed countries up has recently been introduced. The funds are for the benefit of and are received by the consulting engineers involved, who must already be established in the CDM system. The efficacy of this new procedure has been questioned in The CDM loan scheme : Is it additional? by the Differ Group, Oslo, May 2012.