Carbon Market Watch

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Simplifying Additionality through Standardisation (Newsletter #17)

04 Nov 2011

Standardisation of the additionality test has been suggested as a way to both ease requirements for project developers and to limit the number of non-additional credits. We summarise and comment on some of the upcoming plans to simplify parts of the CDM process.

At the most recent climate change conference in Cancun, the CDM Executive Board was tasked by the CMP to standardise and simplify procedures and methodologies. The following simplifications have been suggested for additionality testing:

  • Positive lists: lists of technologies that are automatically considered additional.
  • Performance benchmark: e.g. the most efficient 15% of a technology type is automatically considered additional
  • Penetration rates: e.g. technologies with very low penetration rates are automatically considered additional (this is often used to determine which technologies should be on a ‘positive list’.)

These approaches are now being implemented into CDM procedures and methodologies. We discuss a few that are on the agenda of the upcoming Board meeting:

Micro-scale projects

With the aim of simplifying additionality requirements for very small renewable energy projects (5 MW or less), the Board will discuss a Draft procedure for submission and consideration of microscale renewable energy technologies for automatic additionality. Designated National Authorities (DNAs) are invited to submit lists of renewable energy technologies that would automatically be considered additional in their own countries.

Transportation projects

The Board may approve two methodology revisions for large mass transportation projects[1]. In both proposed methodology revisions, additionality proof has been simplified. If adopted, such projects implemented in Least Developed Countries (LDC) would automatically be considered additional. If the project is implemented in a non-LDC (and less than 50% of the total capital investment is provided by commercial entities) CER revenuemust cover at least 10% of the total operating costs.

Draft work programme on standardised baselines

The board will consider a Draft work programme on standardised baselines. The draft of the work program includes several suggestions that are not conservative enough. For example, it sets the performance benchmark for additionality and baseline determination at 70%. This means any project that is more efficient than 70% of the existing facilities would automatically be deemed additional. Given the experience with coal methodology AM0013 which had a more conservative threshold for the baseline (15%) and nevertheless lead to significant over calculation of CERs, the proposed thresholds are clearly not conservative enough.

CDM recommends:

Standardisation of additionality can simplify project procedures but must not come at the cost of compromised environmental integrity. Therefore such approaches have to be used very carefully and only for project types that will not lead to large numbers of non-additional projects. We specifically suggest:

  • More thorough assessment of micro scale positive lists: The draft procedure for micro scale projects  does not allow enough time for a thorough analysis of the proposed positive lists and too few people are involved in the assessment. For example, only two members of the Small Scale Working Group (SSWG) evaluate proposed positive lists and they are given only seven days to do so. We recommend that the whole SSWG assess proposed positive lists and that the potential risk of non-additional projects is carefully assessed.
  • Higher proportion of CDM revenue for transportation projects: The two transportation methodologies deem projects additional if they are located in LDCs or if CER revenue can pay for at least 10% of the operating costs. However, 10% is too small a fraction to argue that the CDM has a considerable influence on the project. This fraction should be raised to 30%. Also, automatic additionality for all transportation projects in LDCs is not sufficiently conservative. This rule should only apply to the first project in each country and then be reevaluated.
  • More conservative thresholds for standardisation. Standardisation has not yet been road tested on a large scale. Therefore, it is especially important to use conservative rules. The performance benchmark for additionality and baseline determination should not be set below 85% and  in some cases should be more stringent.

[1] AM0031 Baseline Methodology for bus rapid transit projects. ACM0016 .Baseline Methodology for Mass Rapid Transit Projects.