Danger to set precedent when deciding about first-of-its kind threshold (Newsletter #4)

A project activity is assumed to be additional if no similar project has been implemented previously in a certain geographical area. If a project activity is “first-of-its- kind”, no additional assessment steps are undertaken to confirm additionality. As stated in the last CDM Watch newsletter, the application of this barrier is highly problematic as project activities that deem to be “first-of-its-kind” pass the additionality test by default.

When discussing the revision to methodology ACM0005 concerning the increasing of blend in cement production at its next meeting, the Board will decide upon the threshold for when this barrier is deemed first-of-its-kind.

The meth panel recommends that if the market share for blended cement in the host country is below 5%, the project activity should be deemed additional without further consideration. If the market share for blended cement in the host country is above 5% on the other hand, the project activity cannot use this barrier to demonstrate additionality. However, investment analysis, investment barrier or market acceptability barriers may be used.

In the case of increasing the blend in cement, CDM Watch does not have objections for the threshold of 5% for the first-of-its kind barrier test. However, the Board must be cautious that in the future, this threshold will not set a generalizing precedent for first-of-its kind thresholds. The Board has to keep in mind that the threshold for first-of-its-kind is highly subjective and critically depends on the sector as well as the technology used and could lead to free riding of certain technologies.

Action to be taken by the Board:  CDM Watch calls on the Board not to set a precedent of 5% for first-of-its-kind thresholds. Any limit must be based on a thorough analysis of the sector as well as the technology used and should be determined separately for each methodology.