Recommendations on the Advancement of the CDM ......mitigation activities under the CDM. Other...

Recommendations on the Advancement of the CDM Standardized Baselines Framework

(Project No (FKZ) 3712 41 502)

CDM

Environmental Research of the Federal Ministry for the Environment Nature Conservation and Nuclear Safety

On behalf of the Federal Environment Agency

IMPRINT

Publisher

German Emissions Trading Authority (DEHSt) at the Federal Environment AgencyBismarckplatz 114193 Berlin

Telefon (0 30) 89 03-50 50Telefax (0 30) 89 03-50 10

Internet wwwdehstdeE-mail emissionshandeldehstde

Authors

Lukas Hermwille Christof Arens

Wuppertal Institut fuumlr Klima Umwelt Energie GmbHDoumlppersberg 1942103 Wuppertal

Martin Burian

GFA Consulting Group GmbHEulenkrugstraszlige 8222359 Hamburg

Stand 102013

IProject No (FKZ) 3712 41 502

AUTHORSLukas Hermwille is Research Fellow at Wuppertal Institute for Climate Environment and Energy His research within the Research Group 2 Energy Transport and Climate Policy focuses on market-based climate policy instruments particularly flexible Kyoto mechanisms and EU emissions trading

Christof Arens is Project Coordinator at the Wuppertal Institute for Climate Environment and Energy His work concentrates on international climate policy with a special focus on market-based instruments especially the flexible mechanisms of the Kyoto Protocol

Martin Burian is Senior Consultant at the Competence Centre for Climate and Energy of GFA Consulting Group His work focuses on Joint Implementation amp Clean Development Mechanism projects especially on Energy Efficiency amp Energy Saving Forest-Climate and Bioenergy projects he has special regional expertise for Africa amp Latin America

1 Project No (FKZ) 3712 41 502

CONTENTAuthors I

Preface2

1 Introduction 3

2 The SB Guidelines 4

21 Introduction to the Performance Penetration Approach 5

22 Conservativeness vs Market Incentive 6

23 Unresolved Issues 8

231 A clear and concrete Definition of Technologies 8

232 An adequate Level of Aggregation 9

233 Data Requirements 9

24 Financial Evaluation andor Barrier Analysis 10

3 QAQC Guidelines 11

4 Suppressed Demand Guidelines 12

5 From Approved Standardized Baselines to CDM Projects 13

6 Coordination of Activities 14

7 Conclusions and Recommendations 14

Annex 1 Interview Guidelines 17

References 20

2Project No (FKZ) 3712 41 502

PREFACESetting baselines for calculation of greenhouse gas emissions reductions and defining additionality under the CDM have been a complex and time-consuming process At the same time the CDM has been criticized for its risk of weak environmental integrity burdensome procedures and unequal regional distribution of projects In order to address these shortcomings the CDM has gone through a reform process which has led to a long list of valuable innovations - ia the introduction of Programme of Activities (PoA) the tool for defining microscale - additionality the Guidelines on the Consideration of Suppressed Demand and the increased use of performance benchmarks and default values

In particular standardized baselines have been seen as an opportunity to reduce transaction costs enhance transparency and regional distribution as well as to facilitate objectivity and predictability Thus in Cancun 2010 Parties to the Kyoto Protocol decided to accelerate the standardized approach and called for the use of standardized baselines with which baseline and additionality is determined ex-ante Since Cancun the CDM Executive Board (EB) has approved a number of guidelines and procedures that together constitute the framework of Standardized Baseline (SB)

With the SB approach the CDM is moving away from a project-to-project approach and by using both SB and PoA structures for selected sectors developing countries may even expand their mitigation activities under the CDM Other design elements of the reformed CDM ndash like project eligibility criteria accounting tools for a sector or the project organization - may be used for a new scaled-up crediting or supporting mechanism Today it seems likely that a future mechanism will be built upon several elements of the reformed CDM and on the first experiences gained so far

In May 2013 the EB approved the first two SBs and four more have been proposed to the EB Due to the lack of demand for carbon credits the market may not bring forward many CDM projects in this area in the near future Nevertheless we think it is important to work towards the next climate regime and to be prepared for the implementation of a new scaled-up mechanism when the international agreement enters into force

We thank the team of Wuppertal Institute and GFA Envest who conducted a survey among stakeholders that have been involved in the development of SB Based on these first-hand experiences the research team derives recommendations on the advancement of the CDM SB framework

This discussion paper although not necessarily reflecting the view of the German Emissions Trading Authority gives valuable input to the discussion on the further development of the framework for Standardized Baselines

Berlin October 2013

Dr Hans-Juumlrgen Nantke

Head of the German Emissions Trading Authority at the Federal Environment Agency


1 INTRODUCTIONThe Conference and Meeting of the Parties to the Kyoto Protocol in Cancun 2010 (CMP6) de-cided to promote the standardization of baselines and monitoring methodologies under the CDM The decision was made bdquo[n]oting that the use of standardized baselines could reduce transaction costs enhance transparency objectivity and predictability facilitate access to the clean development mechanism particularly with regard to underrepresented project types and regions and scale up the abatement of greenhouse gas emissions while ensuring environmental integrityldquo1 Since then the CDM Executive Board (EB) has approved a number of guidelines and procedures that constitute the Standardized Baselines (SB) framework and govern the process of the development of SBs and their application in projects

The lsquoGuidelines for the Establishment of sector specific Standardized Baselinesrsquo (hereafter SB Guidelines) were first approved at EB62 and updated at EB65 The SB Guidelines describe a route to derive a standardized crediting baseline and a positive list of project types that are automatically additional Alternatively SBs can be developed on the basis of approved CDM methodologies Project developers are invited to submit alternative approaches to derive a standardized crediting baseline andor positive list

The lsquoProcedure for the Submission and Consideration of Standardized Baselinesrsquo (hereafter SB Procedure) was approved at EB68 and constitutes the administrative process to be followed to propose a SB

The lsquoGuideline for Quality Assurance and Quality Control of Data used in the Establishment of Standardized Baselinesrsquo (hereafter QAQC Guidelines) was approved at EB66 It constitutes the host DNAs responsibility with respect to the collection and management of data required to develop and update a SB

The lsquoGuideline for the Establishment of Standardized baselines for afforestation and reforestation project activities under the CDMrsquo was approved at EB70 and describes the requirements for the development of a SB in the forest sector

The lsquoGuidelines on the consideration of suppressed demand in CDM methodologiesrsquo (hereafter Suppressed Demand Guidelines) were first adopted at EB62 and then revised at EB68 The concept of suppressed demand is not exclusively related to the SB framework but could make an important contribution to the applicability of the SB framework in least developed countries (LDCs)

First experiences with SBs are currently being gained Six SBs have been proposed so far the first two of which were approved at EB73 Still no projects have been brought forward to date that make use of one of the approved SBs Although progress is being made it is slower than many had hoped The current crisis of international carbon markets is certainly adding to this problem Another reason is however that the current regulatory framework is perceived by many as far from perfect As one interviewee put it

ldquoIt is currently not looking good because the methodological requirements are pretty vague I think the concept did not yet show its full potential with those project types that have been brought forward to date It did not demonstrate what the added value with respect to conventional small-scale approaches is This however will be important in the next 1-2 years I think there is a real danger that the regulatory approach as it stands now fails and consequently standardized approaches in general will vanish for a while That would be badrdquo

However the SB framework is not set in stone To the contrary the development of the SB framework is work in progress and a number of complementary regulations are still in the making

To support this development the German Federal Environmental Agency commissioned the Wuppertal Institute and GFA Consulting to investigate implications of SBs on least developed countries (LDCs) and their utilization in national MRV systems

The work consists of two components A case study was conducted to make the case for the utilization of SB CDM to promote rural electrification in LDCs This study investigated opportunities arising from SB development putting strong emphasis on the consideration of Suppressed Demand

1 UNFCCC (2010) Decision 3CMP6


It sketched a possible standardized emission factors for a rural electrification program in Ethiopia In a stepwise approach national default emission data were derived for rural household lighting other household electrical appliances and for electricity consumption by other (ie non-household) consumers The study thereby investigated the application of the CDM EBrsquos Guidelines for Suppressed Demand by defining a Minimum Service Level for household lighting based on extensive data on available household lighting technologies and consumption patterns

As a second component we conducted and evaluated 10 expert interviews Interview partners included DNA officials and consultants that have been involved in the development of SBs and hence gathered first-hand experiences with the SB framework Furthermore we interviewed project developers DOE experts and (policy) researches that have been actively involved in the debate around the CDM in general and SBs in particular The interviews covered five topics the development of a positive list and its application in CDM projects the QAQC requirements the coordination of activities and interests with respect to the development of SBs the concept of Suppressed Demand in the SB framework and the use of SBs and or key components beyond the CDM eg in NAMAs under a New Market Mechanism or as part of the operationalization of the Green Climate Fund The interviews were held in the form of qualitative personal telephone or Skype interviews This allowed for a more flexible and more open approach as compared to standardized internet-based questionnaires and enabled us to make full use of the respondentsrsquo expertise The guidelines that were used to structure the interviews are attached to this report in Annex 1

Both components interviews and case study fed into the analysis presented in this paper It is structured in line with the regulatory documents of the SB framework to facilitate the discussion with policy makers Chapter 2 focuses on the SB Guidelines To start off we give a short introduction to the performance-penetration approach that is the conceptual foundation of the SB Guidelines Most of our interview partners argued that this approach is not universally applicable We recapitulate their arguments and refine them where necessary Some of the arguments are of a very general nature In Chapter 22 we discuss these broader issues and provide a non-exclusive list of alternative approaches that could be worthwhile investigating In Chapter 23 more specific issues are discussed the difficulty of defining technologies finding the right level of aggregation and data requirements Last but not least we discuss the second step that is required to determine a positive list using the SB Guidelines demonstrating additionality through financial evaluation andor barrier analysis

Chapter 3 concentrates on data management and data quality requirements stipulated in the QAQC Guidelines We discuss whether the requirements are feasible for LDC DNAs whether there is room for simplifications and if and how DNAs can be supported to comply with the QAQC Guidelines

The Suppressed Demand Guidelines are at the core of chapter 4 of this paper We discuss the inevitably political nature of the suppressed demand concept and the problems this entails

In chapters 5 and 6 no direct reference to official documentation is possible Chapter 5 discusses how CDM projects can make use of an SB once it has been approved The World Bankrsquos proposal to introduce streamlined registration templates for projects applying an SB is at the core of the discussion Chapter 6 discusses if and how private sector engagement in the development of SBs can be promoted through coordinating measures

In the final chapter we conclude by summarizing the main results and deriving recommendations These recommendations are addressed to various stakeholders Some are specifically aimed at the CDM Executive Board and the UNFCCC Secretariat others are directed to DNAs Last but not least some of the questions will have to be discussed at a higher political level at the CMP


2 THE SB GUIDELINESThe concept of SB has been developed to some extent with a view to facilitate the participation of least developed countries (LDCs) and other underrepresented countries in the CDM We asked our interviewees what sectors could benefit most from standardization of additionality demonstration and crediting baseline

The respondents presented diverse views in this regard Some saw the development of standardized grid emission factors (GEFs) for the power sector as particularly promising as these facilitate the development of all sorts of renewable energy projects However GEFs provide standardization only for the crediting baseline not necessarily for additionality demonstration2 Others saw particularly large potential for SBs in small and traditional often underdeveloped industrial sectors Two of the first proposed SBs are examples for this the SB for the rice mill sector in Cambodia and the Ugandan SB for charcoal production However not only such small-scale industries could be targeted by SBs but also cement iron amp steel and the waste sector Last but not least our respondents mentioned sectors that have a large number of small-sized projects such as energy efficiency measures in households and small and medium enterprises as particularly promising The diffusion of efficient cook stoves efficient lighting and efficient electric appliances could be facilitated through the application of SBs in these sectors

However respondents agreed that the SB framework as it currently stands does not necessarily correspond to the structure and the circumstances of the sectors that have been identified as potential beneficiaries of standardization in the CDM While for some sectors the performance-penetration (PP) approach that has been elaborated by the UNFCCC Secretariat and adopted by the CDM EB might be suitable and can capture the structure and particularities of the sector and hence can effectively separate additional from non-additional projects for many other sectors this might not the case

In the following we will first give a short introduction to the PP approach and then summarize the main concerns of our respondents analyse and refine their arguments and derive recommendations to enhance the SB framework whenever possible

21 INTRODUCTION TO THE PERFORMANCE PENETRATION APPROACHThe lsquoProcedure for submission and consideration of standardised baselinesrsquo (SB Procedure) allows for two different approaches to derive an SB A proposed SB can be developed either on the basis of an approved methodology or by using the lsquoGuidelines for the establishment of sector specific standardized baselinesrsquo (SB Guidelines) These guidelines form an integral part of the SB framework In the following we will focus exclusively on the second route ie the application of the SB Guidelines

The PP approach is defined in the SB Guidelines It stipulates a way to derive a positive list of technologies fuels or feedstock in a sector In this approach technologiesfuelsfeedstock are ranked in descending order of their emissions intensity The least emission intensive technologyfuelfeedstock needed to produce a certain percentage of the sectorrsquos output is selected as baseline technologyfuelfeedstock All technologiesfuelsfeedstock that feature lower emission intensities than the baseline technology are candidates for the inclusion in a positive list of technologiesfuelsfeedstock that are automatically deemed additional Moreover the baseline technology is not only used to condition the additionality of projects it is also used to determine the crediting baseline against which emission reductions are calculated

Figure 1 depicts an example All technologies that contribute to the sectorrsquos output are ranked as described above The result is the step function illustrated in the figure Each step of the function represents one technology In this example we chose 80 as the value that determines the baseline technology The last ie most efficient technology that is needed to generate 80 of the sectors output is the baseline technology (blue step of the function) All technologies that are more efficient than the baseline technology (green steps of the function) are candidates for a positive list of the SB

2 see the GEF of the Southern African Power Pool which has been one of the first approved SBs


0

20

40

60

80

100

0 20 40 60 80 100

o

f max

imum

EF

of cumulative output

Figure 1 Illustration of the Performance Penetration Approach

The CDM EB has defined a preliminary additionality and crediting threshold ie the percentage value that determines the baseline technology The EB chose a value of 80 for priority sectors3 and 90 in other sectors Currently the EB is discussing lsquoDraft guidelines for determination of baseline and additionality thresholds for standardized baselines using the performance penetration approachlsquo to develop objective ways to identify the common practice segment of a sector and based on this to derive alternative threshold values However this approach is controversial among the EB and various members of the EB have repeatedly expressed concerns with it Among other things the proposal was criticised for being to complex arbitrary in some ways and technical issues including with respect to the applied normalization methods4 Consequently the draft guidelines were refused5 and the EB has requested the Secretariat to continue to further work on the approach

22 CONSERVATIVENESS VS MARKET INCENTIVETo make use of the full potential of SBs any approach must ensure a level of conservativeness that guarantees environmental integrity while at the same time it preserves a sufficient incentive to invest in mitigation projects that make use of an approved SB We asked our respondents to comment on the level of stringency of the approach chosen by the EB Most respondents see the default values on the conservative side maybe even too conservative However most importantly the respondents agreed that the conservativeness can hardly be judged considering only the theoretical framework They all concurred that the conservativeness of the approach will be fundamentally dependent on the sector that it is applied to Again while for some sectors the approach might be suitable and can effectively separate additional from non-additional projects for many other sectors this might not be the case

In this context it is crucial to differentiate between the two components of the PP approach and their role in determining additionality and defining a baseline technologyfuelfeed-stock

The role of performance is relatively straightforward Only such technologiesfuelsfeedstock can reduce emissions that are at the efficient end of the spectrum Furthermore performance is the essential dimension to determine the crediting baseline

Penetration is less obvious as an indicator for the determination of additionality and a crediting threshold To identify common practice in a sector the measure of market penetration is indispensable The common practice segment can in turn be used to argue for a baseline technologyfuelfeedstock However not every technologyfuelfeedstock which performs better than the baseline is automatically additional

3 Currently priority sectors are energy in households electricity generation in isolated systems and agriculture

4 A detailed discussion of the proposal is beyond the scope of this paper especially as the proposal is still work in progress and has substantially altered with different versions

5 Most recently at EB73


If penetration is used to draw conclusions on additionality this is based on an inherent assumption The penetration of a technologyfuelfeedstock is negatively correlated with its cost and or with barriers that impede their deployment The lower the penetration of a technology the more expensive is it or the more barriers hamper its deployment If there is such a correlation then it is reasonable to assume additionality and include a technologyfuelfeedstock in a positive list If the correlation is strong one could even consider skipping the second step of financial evaluation that is foreseen in the SB Guidelines If there is no such correlation the performance penetration approach does not deliver reliable results

For sectors that feature a strong correlation of a technologyrsquosfuelrsquosfeedstockrsquos cost and its efficiencyemission intensity relative to competing technologiesfuelsfeedstock the PP approach can likely produce reasonable positive lists Such sectors are for example energy efficient lighting cooking and efficient electric appliances However for other sectors there may be no such correlation To give a practical example a large hydro dam with 100 MW installed capacity may be economically very attractive and may not qualify as additional Nonetheless an SSC hydro dam with 10 MW and a strong environmental profile may not be economically attractive and thus be additional Even if two hydro power projects are similarly sized they might feature vastly differing costs eg due to different topography accessibility of the site or soil conditions Hence the PP approach being constrained to comparison of technologiesfuelsfeedstock may not allow for discriminating between the additional and the non-additional project Similarly fuel prices are typically volatile and not correlated to the emission intensity Furthermore the choice of fuels in a country or region is typically subject to availability constraints and infrastructural conditions These conditions and constraints can vary widely even within a given country

The performance penetration approach therefore is not suitable for all sectors It should be considered to develop alternative approaches for the elaboration of a positive list In principle the road is open to third parties to develop alternative approaches and submit them to the EB However under the current market conditions there is hardly any incentive for the private sector to do so

Alternative Approaches

Our interview partners mentioned a number of alternative standardization approaches that could complement the PP approach Two of these are presented below Neither of the two options can or should substitute the PP approach but both approaches deserve to be further investigated with a view to complement the PP approach with a view to expand the applicability of the SB concept to sectors whose structure cannot be adequately captured by the PP approach

a) The lsquoVCS Guidance for Standardized Methodsrsquo stipulates a more process-oriented approach It specifies a detailed and transparent process of expert consultations that is to be followed to determine performance benchmarks for a sector or technology Similarly the development of ldquoperformance standardsrdquo under the Californian offset protocol follows an approach where every individual project type is being evaluated through broad-based and in-depth expert and stakeholder consultations6 One could argue that such a dialogue or policy based approach is less objective than the data driven approach taken by the SB Guidelines On the other hand such an approach could prove more feasible and less demanding especially for LDCs Given the often poor quality of data and the subjectivity involved in the determination of threshold values the perceived objectivity of data driven approaches such as the PP approach might be illusionary and thus likewise subjective but less transparent A process oriented approach based on expert consultations could therefore be worth exploring To match the high standards of the CDM such a consultation process would require thorough quality control and quality assessment measures based on principles such as conservativeness full transparency and consensus of the participating stakeholders How such guidance could look in detail is however beyond the scope of this paper and should be subject to further research

b) Focussing on market penetration alone could also be worthwhile investigating Suppose there is a relatively new technology a technology that can substitute an existing alternative and that is much more energy efficient andor that features a significantly lower emission factor This technology might even be financially attractive readily available and not subject to any constraining barriers It is then safe to assume that over time this technology will increase

6 California Air Resources Board (2013)


its penetration rate in the market significantly if not fully substitute older and less efficient technologies However this process will need some time Unless the use of a technology is mandatory according to national law only a few early adopters introduce it at first It takes some time until the development of market penetration picks up speed until the market is saturated (red line in Figure 2) Even if on a project level the change of technology would not be additional there might be room for additional emission reductions on an aggregate sectoral level If a project or programme can significantly accelerate the development of the penetration rate (ie change the shape of the red line to the blue) then the difference between the business-as-usual penetration pathway and the accelerated penetration pathway (shaded area) can be considered additional emission reductions

Pene

trat

ion

Time Time

Pene

trat

ion

Time

Pene

trat

ion

Figure 2 Illustration of an approach exclusively based on market penetration

The current SB framework does not allow for such an approach A market penetration approach certainly does not fit all sectors and technologies but especially for sectors that have seen highly dynamic development andor disruptive technology advancements it could be an avenue worth exploring

In the context of SBs this approach could be worthwhile investigating As opposed to a project by project approach the more aggregated approach could help to balance false positive and false negative projects Furthermore the regular updating of the SB could filter out extremely profitable and hence non-additional new technologies The benchmark set by an approved SB could thereby provide an additional means to safeguard environmental integrity as compared to a methodology for the use in a project-by-project approach

23 UNRESOLVED ISSUESApart from the more general critique of the PP approach as laid out above our interview partners highlighted some more specific problems that could limit the success of the SB concept if they are not addressed

231 A clear and concrete Definition of TechnologiesThe definition of technology as required in the PP approach is not necessarily straightforward Technologies can be defined reliably in relatively simple sectors and for cross-sectional technologies For complex sectors and integrated processes this might not be the case The cement industry for example might feature relatively homogenous output but this output is produced by a process that comprises a multitude of technologies using various fuels and feedstock

More precisely there are three different categories of mitigation measures that can be applied to drive down emissions in the cement sector

One can target process emission of the clinker production Clinker is produced from limestone through a process in which CO2 is released The emission intensity of the final product can be cut by reducing the clinker content and blending cement with other hydraulic substances such as fly ash or slag


The process of clinker production requires extremely high temperatures Coal is typically used to produce the necessary heat Emissions can be reduced by substituting coal andor by preheating the feedstock with less emission intensive or renewable fuels

A cement factory comprises of a multitude of electric motors eg in conveyors rotary kilns and mills To reduce electricity consumption these motors could be replaced by more energy efficient ones

While the PP approach might be suitable to develop a crediting baseline and particularly a positive list of additional technologiesfuelsfeedstock for each of these categories separately it is not straightforward how this can be done for more integrated mitigation measures If a project can beat the baseline in two of the three baselines but not in the last one is it then approved as additional or not How can one define ldquotechnologiesrdquo when more than one polluting dimension exists How can double counting be avoided in such an approach If separate baselines are to be developed to cover the three categories in our example would they be compatible with each other or do they interact in a way that effectively rules out that more than one of the baselines is applied in one project

The example shows that in some cases it might prove difficult to define a reliable positive list for complex and integrated processes Sometimes this problem can be used by disaggregating a sector but at a cost The more a sector is disaggregated the smaller the application potential of an SB Furthermore it is possible that SBs interact with each other in a worst case making the simultaneous application of multiple SBs in one project impossible and thus effectively ruling out integrated mitigation approaches which would in many cases provide the highest benefit both for the climate as well as for investors

232 An adequate Level of AggregationThe example of the Cambodian SB demonstrates another potential caveat with respect to disaggregation in the PP approach The Cambodian rice mill sector is dominated by a small number of large-scale rice mills that collectively contribute roughly 60 per cent of the total output The remaining output is produced in thousands of small-scale rice mills Within the sector the existing technologies differ vastly with regard to their emission intensity the least efficient plant featuring an emission factor more than 1000 times the factor of the most efficient plant To capture these circumstances it was inevitable to disaggregate the sector by the size of the installation If resources are limited DNAs will have to prioritize the development of an SB for one part of the sector over the other In such a setup DNAs could find themselves in a situation where they have to decide whether to promote the development of an SB for a limited large scale project potential ndash possibly projects of national interest ndash or a large potential for small-scale projects that would benefit most from standardization

Another example for the (undesired) side effects of disaggregation can be found in the power sector Consider a country that features a diverse power sector with all sorts of technologies and fuels being in use If this country proposes an SB based on the entire power sector of this country ie including hydropower and other renewable energy sources the PP approach would likely lead to a positive list that comprises renewables and potentially the most efficient fossil fuel technologies typically combined cycle gas turbines If the same country would disaggregate and only consider fossil fuel electricity generation in its SB the positive list would look very different Using this level of aggregation would probably lead to a positive list that would incentivise fuel switch instead The same country could even produce a positive list that allows for supply side efficiency measures if the level of aggregation is chosen to consider only technologies that use the same fuel Obviously the three different SBs cannot be considered complementary as the respective positive lists would contradict each other

DNAs should therefore be aware of the consequences of disaggregation The decision should be made in accordance with the host countryrsquos long-term low-carbon strategies It should also be considered whether the current EB guidance could be enhanced in this regard


233 Data RequirementsThe SB Guidelines require data on the current structure of the sector and the technologies used which may have been installed some year ago This data is sometimes difficult to obtain7 but even if it is available this data does not necessarily reflect recent trends eg technological leaps or price dropsrallies Furthermore the high-level CDM Policy Dialogue has recommended that in order to drive technological change the SB framework must ldquothat the focus of incentives constantly shifts to the next generation of technologiesldquo8

The current SB framework tries to account for this by specifying interim data vintages and update frequencies of 3 years respectively A more elaborate determination of data vintages and update frequencies is currently being prepared by the UNFCCC Secretariat under the lsquoGuidelines on vintage of data and frequency of updates of standardized baselinesrsquo9 Under these a more differentiated approach is pursued that takes into account the different development dynamics the various sectors might have For sectors which have featured a very dynamic development in the past a more frequent updating of the underlying data and the SB might be necessary while for sectors that have shown slow development update frequencies might be relaxed without compromising the integrity of the SB

Another approach may be to establish dynamic baselines which are based on national or international benchmarks established on an annual basis These benchmarks (eg electricity consumption in the cement sector per ton cement produced collected by the lsquoCement Sustainability Initativersquo) could then feed on an annual basis in the SB The crediting baseline could be chosen such that it is not constant over the validity period of the SB but increases or decreases over time either at a predetermined rate or indexed in some way to other relevant variables10

In our view such an approach could adequately address gradual developments in a sector It is however hardly possible to capture more radical developments or technology leaps While the respondents of our interviews acknowledged the fact that there is a danger of missing such developments they did not show much concern in this regard Any sbquomistakesrsquo in positive list and crediting baseline would be corrected after the next revision of an SB

24 FINANCIAL EVALUATION ANDOR BARRIER ANALYSISAccording to the SB Guidelines candidates for a positive list identified through the PP approach need to go through a second step of additionality demonstration and demonstrate that they are (a) financially not viable or less attractive than the baseline technology andor (b) that there are barriers that impede the deployment of the respective technologyfuelfeedstock Both (a) and (b) are to be carried out on a sectoral level for each of the technologiesfuelsfeedstock

The respondents of our interviews concurred that a financial evaluation of technologiesfuelsfeedstock is hardly possible at least in a majority of sectors It is very difficult to obtain the necessary data especially for sectors where operating costs which are typically considered confidential make up a substantive share of the levelized cost of the respective technology What is more companies might be reluctant to provide sensitive data without the prospect of participating in a concrete CDM project

Even if the required data is available a financial analysis might prove difficult Especially in LDCs small-scale industries often rely on second-hand or recycled andor repurposed technologies In the case of the Cambodian rice mill sector most rice mills use repurposed diesel engines from scrapped cars or trucks The remaining lifetime of these engines is extremely uncertain It is therefore nearly impossible to calculate levelized investment cost even on a project level let alone on a sectoral level

7 Hayashi and Michaelowa (2013)8 CDM Policy Dialogue (2012) p 69 See Concept Note ndash Further revision of the standardized baseline regulatory framework CDM Executive Board

Meeting 73 Available at httpcdmunfcccintfilestoragegr9OC3UYJWPMH4QD26N5SXLK71RATVG8pdfeb73_propan05pdft=dkJ8bXN1bTIyfDBdntw5MgtJL-gW4iUYgZLA

10 See Schneider et al (2012)

11 Project No (FKZ) 3712 41 502

Furthermore the SB Guidelines do not require disaggregating a sector by the size of the installation An SB once approved could thus be applicable for all sorts of projects irrespective of their size Due to economies of scale project sizes have a significant impact on the financial attractiveness of a project For sectors that feature both small and large-scale projects a financial evaluation at the sectoral level might thus not lead to a reliable separation of additional and non-additional projects One respondent suggested that the second step of additionality demonstration could be skipped for projects in the field of energy efficiency that feature a very strong correlation of cost and efficiency

With respect to barrier analysis most respondents were more optimistic Even though barrier analysis is generally a thorny route to take they expressed that barrier analysis on a sectoral level might prove more feasible as compared to financial evaluation On a project level it is almost always possible to demonstrate that barriers exist The question is often more whether the identified barriers would be high enough to effectively impede the project in the absence of the CDM The EB has provided guidance on the demonstration of barriers through its lsquoGuidelines for objective demonstration and assessment of barriersrsquo Still only a fraction of the CDM projects have made use of that route to demonstrate additionality11

To facilitate the development of SBs the CDM EB could thus strive to operationalize barrier analysis on a sectoraltechnology level and draft guidelines for objective demonstration and assessment of barriers on the sectoral level

3 QAQC GUIDELINESThe CDM-EB has provided sbquoGuidelines for quality assurance and quality control of data used in the establishment of standardized baselinesrsquo These formulate extensive and detailed requirements that DNAs have to fulfil DNAs are in charge of developing a data management system and implement a thorough quality control mechanisms Our interview partners concurred that these requirements are very demanding even for more developed countries so that they could potentially prohibit the development of SBs in LDCs To date all proposed SBs have been developed with support and on the initiative of donor organizations However donor support typically does not include the maintenance of an approved SB the regular revisions and data updates that are necessary to prolong the validity of the SB If there is no continuous support available for DNAs particularly in LDCs there is a serious risk that even approved SBs cannot be used to facilitate CDM projects

At the same time respondents agreed that the QAQC Guidelines are an essential element of the SB framework to ensure environmental integrity and hence the credibility of the approach Furthermore data management is seen as a key component that can add to the development of other mitigation instruments such as New Market Mechanisms (NMM) instruments under the NAMA framework or within the operations of the Green Climate Fund (GCF) Basically any mitigation activity that entails a form of measurement reporting and verification (MRV) could benefit from a robust data management system An investment in capacity building for adequate data management therefore pays out a multiple dividend

If the SB and the related QAQC system are solely developed with the objective to establish a national GHG benchmark then the requirements set out in the QAQC Guidelines may be demanding The SB may have a validity of eg three years a CDM PoA applying the SB may have a crediting period of 7 years Consequently if no new CDM project or PoA is developed thereafter the need for SB updating may occur only in a mid-term horizon ie in 7-10 years Moreover if the SB also considers Suppressed Demand potential cross-benefits eg to national GHG accounting National Communications and Biennial Update Reports may be limited Against this background it seems advisable that the Secretariat continues to develop flexible guidelines which may be tailored to the actual needs benefits and cross-benefits of SBs

11 According to the IGES CDM Project Database only 188 per cent of all registered projects rely exclusively on barrier analysis to demonstrate additionality


The Regional Collaboration Centres (RCCs) that have been established in Africa Latin America and the Caribbean12 could play a coordinating and supporting role in establishing data management and quality control systems eg by developing and maintaining regional data sets that can be used for the development of SBs Furthermore targeted capacity building for DNAs would be invaluable Our respondents commented that assistance to LDCs should not only target methodological and technical issues but also institutional and administrative ones

LDC-specific Simplifications

In our interviews we asked if there is room for LDC specific simplifications in the QAQC Guidelines Some respondents acknowledged that there principally is room for simplifications ndash various methodologies and regulations exist that feature differentiated requirements for a set of host countries However such simplifications could be difficult to agree upon unless the distinction is based on some sort of objective criteria Even if it was possible to create LDC specific simplifications these might not be a wise step to take As one respondent put it bdquoThe QAQC Guidelines are very stringent but also very necessary to ensure environmental integrityrdquo Furthermore as they are a key component for other MRV related mitigation activities they are also an element of which LDCs can take benefit for other activities Reducing the requirements for the QAQC system would also reduce these benefits

LDC specific simplifications could lower the barriers for the development of SBs However they would also lower the benefits that an effective and robust data management system yields for other MRV-related activities Instead targeted capacity building should be made available for LDCs to empower them to fulfil the QAQC requirements The CDM EB should request the Secretariat to coordinate with UN and other intergovernmental organisations as well as other donors active in the relevant countries to set up and coordinate capacity building programmes to enable LDC DNAs to fulfil the QAQC requirements as stipulated

The QAQC Guidelines already allow for flexible approaches to some extent when data is missing or data quality is low Conservative default values can be applied or secondary data can be utilized if primary data does not meet the required standards However the current QAQC Guidelines provide little guidance on how and when it is appropriate to revert to such measures Nor do the Guidelines specify what requirements ldquoreliable secondary datardquo have to fulfil As one respondent put it ldquoThe QAQC are a little bit missing the point They should define the standards but not for an ideal world They should specify what to do if data is missing or data is not available They do not deliver thatrdquo The guidelines describe a somewhat perfect world but the world is not perfect It should be elaborated in more detail how to deal with missing data when proxy data may be used and so forth

Therefore it should be explored whether the QAQC Guidelines could provide more guidance on how to deal with imperfect data Especially the role and quality of secondary data should be looked at In certain circumstances it might be adequate to revert to proxy data eg from neighbouring countries At the same time these efforts must ensure conservativeness

4 SUPPRESSED DEMAND GUIDELINESThe concept of suppressed demand is not exclusively linked to the SB framework However it can be an important element of an SB Particularly in LDCs SBs that incorporate suppressed demand in the crediting baseline could tap significant mitigation potential that has been neglected so far

The Marrakech Accords stipulate that ldquo[t]he Baseline may include a scenario where future anthropogenic emissions by sources are projected to rise above current levels due to the specific circumstances of the hostldquo The idea that the CDM baseline scenario covers demand that is currently non-existent due to a lack of economic development is commonly phrased as the concept of suppressed demand This concept is of particular interest in the development of SBs According to the Suppressed Demand Guidelines a minimum service level (MSL) is defined that serves basic human needs eg for lighting and electricity This minimum service level is then considered as the baseline consumption level even in cases where it is not yet being met due to insufficient economic resources

12 Another RCC is currently being set up for South-East Asia

13 Project No (FKZ) 3712 41 502

Currently this approach is being applied exclusively in projects in the household or small service sectors in low-income countries However in theory the concept of suppressed demand and minimum service levels is not limited to householdsmall services sectors

Suppressed demand allows crediting the abatement of emissions that would occur if a certain development took place It trades off to some extent environmental integrity for sustainable development benefits While some of our respondents reject this idea others have no direct objection to this principle There remains however one fundamentally political question What is a basic human need and who defines it Hence MSLs cannot be objectively defined Projects which have made use of the Suppressed Demand Guidelines have mostly reverted to surveys that have been prepared by United Nationrsquos organisations such as FAO WHO or UNDP or other intergovernmental organisations with irreproachable reputation Such organisations can provide data with a level of neutrality which can strongly support the acceptability of MSL internationally and thus circumvent a politicization of the concept

A further problem of rather political nature albeit on a different level is mirrored by the following example The guidelines for suppressed demand require not necessarily using the baseline technology which features the largest market penetration but they require the use of the technology which allows achieving the MSL most efficiently In the case of currently ongoing SB development for rural electrification in Ethiopia for example a baseline technology survey was used This survey shows that the dominant technology (7041 penetration) is a simple kerosene lamp without glass cover followed by a kerosene lamp with cover (1429) The most efficient technology is considered to be pressure lamps which have a penetration factor of 000

Following the guidelines the most efficient technology was determined as baseline technology In the course of the Public Consultation Workshop local experts and stakeholders questioned this procedure arguing that people in rural areas neither have access to nor funding for gas pressure lamps Considering the meaning of Suppressed Demand stakeholders raised the question why the guidelines constrain Suppressed Demand to the definition of the MSL while they do not include the choice of the baseline technology feeling that this negates the underlying concept of Suppressed Demand

5 FROM APPROVED STANDARDIZED BASELINES TO CDM PROJECTSCurrently there are no regulations available with regards to how a project proponent can apply for a project that is automatically additional and with predefined baseline The Secretariat is currently developing a lsquoStandard for CDM project activities using standardized baselinesrsquo The World Bank has proposed a streamlined process based on PDD-like generic registration templates which allow undertaking validation at the time of the first verification

Most of our respondents acknowledge that having standardized approaches for additionality determination and crediting baselines makes room for a more streamlined approach Generic registration templates seem to be a promising way to go In the Japanese Joint Crediting Mechanism (JCM) such an approach is currently being pursued The feasibility of the approach however has yet to be proven in practice13

The respondentsrsquo views on the question whether validation could be postponed to the time of the first verification were more divers For project developers a positive validation is considered an essential signal Without this signal it would be difficult to invest in projects according to one respondent

ldquo[A]s an investor the registration of the project is a key point for any further investment and certainly [] we would not make an investment we would not sign a contract to start constructions until the project was registered because the whole idea is that the CDM removes certain risks or provides additional revenues and until you know that that is in place the project is not bankableldquo

While this statement might not be valid for all types of projects it holds true for projects where the carbon revenues constitute a significant share of the cash flow

13 Kachi Taumlnzler and Sterk (2013)


If indeed a positive validation is paramount for the investment decision postponing the validation could lead to a situation where only projects go forward that are financially viable even without the additional revenues from the carbon market such projects are non-additional projects a serious threat for the environmental integrity of the regime A similar discussion is taken up by Schneider et al (2013) Currently CDM projects must document lsquoprior considerationrsquo ie they must prove that they considered the CDM before engaging with the project Schneider et al recommend that this regulation remains binding also for projects that utilize an approved SB

The use of standardized elements would not only facilitate the development of a PDD but it would also dramatically facilitate its validation It is not obvious how shifting the validation can decrease the necessary effort much further Some respondents therefore did not see an added value in postponing validation Moreover under the current CDM regulations projects must not by validated and verified by the same DOE The idea is not to create an incentive for DOEs to wrongfully validate projects in order to be rewarded with follow-up contracts to verify the same projects Combining validation and first verification could therefore not only eliminate one layer of scrutiny but also create an undesired incentive for fraudulent validation

In the context of the World Bank proposal we also asked how stakeholder consultations and environmental impact assessment could be ensured in a meaningful way when validation is postponed to the first verification The respondents did not show much concern in this regard Stakeholder consultations and environmental impact assessment could be carried out under the host countriesrsquo project evaluation to obtain a Letter of Approval Alternatively one respondent suggested to conduct stakeholder consultations and impact assessment on a sectoraltechnology level as well

6 COORDINATION OF ACTIVITIESAll of our respondents agreed that under the current market conditions there is not much chance for private sector engagement in the development of SBs There is simply no incentive to invest On the other hand respondents agreed that with a higher price level on international carbon markets there could well be scope for private sector cooperation on the development of SBs In the early days of the CDM similar investments in common methodologies was made and the private sector did engage and coordinate itself The Project Developer Forum is one institution that has played an important part in coordinating private sector activities in the past

The Regional Collaboration Centres (RCCs) established by UNFCCC could play an important role in coordinating public and eventually private activities especially in a time where the infrastructure that has been set up to develop the CDM is difficult to maintain due to the collapse of the international carbon markets On the other hand one respondent criticised that the RCCs would compete with private consultants and investors over the remaining CDM niche Furthermore a potential conflict of interest was highlighted by one respondent If UNFCCC staff at the RCCs develops an SB and the same SB is than evaluated and recommended for approval by the same body

Under the current market conditions there is not much hope for private sector engagement in the development of SBs and the SB framework14 The field will remain dependent on public activity unless the general market conditions improve If the development of the SB framework is to be continued continued donor support and strong engagement of the UNFCCC Secretariat is indispensible

14 Mersmann and Arens (2012)

15 Project No (FKZ) 3712 41 502

7 CONCLUSIONS AND RECOMMENDATIONSThe expert interviews conducted have made clear that the current SB framework does not meet its claim for (near) universal applicability The performance-penetration approach for example does not fit the needs of many of the sectors that could benefit most from standardization of determination of additionality and crediting baseline In addition the QAQC Guidelines are very demanding even for more developed countries At the same time they function as the crucial safeguard for environmental integrity As a consequence striking the right balance between tight requirements and the situation on the ground is essential

Moreover assumptions have to be made to allow for standardization in general To improve the acceptability of the SB concept inherent assumptions should be made explicit whenever possible The SB framework can only be successful if and when it is practical in its applicability and concerns over the environmental integrity of the concept are adequately addressed Transparency is paramount in this regard

Likewise the concept of suppressed demand features an inherently political component We recommend being as transparent as possible with these components to make them explicit whenever possible This will help to address integrity concerns

In essence we recommend the following

SB Guidelines

The performance-penetration approach is no silver bullet for all sectors Alternative approaches for the elaboration of a positive list should be explored including approaches based on market penetration and guided stakeholder dialogue processes While the EB can explore options in this regard the underlying deviation might require a CMP decision

The SB Guidelines should be as clear and transparent as possible The performance-penetration approach for example is based on inherent assumptions if penetration is used to draw conclusions on additionality this is based on the assumption that the penetration of a technologyfuelfeedstock is negatively correlated with its cost and or with barriers that impede their deployment The CDM EB should make the assumptions of the approach explicit The PP approach should be constrained to those sectors for which the assumptions hold true

Financial evaluation on the sectoraltechnology level is very difficult Barrier analysis on a sectoral level might prove more feasible To facilitate the development of SBs the CDM EB should make efforts to operationalize barrier analysis on a sectoraltechnology level and develop guidelines for objective demonstration and assessment of barriers on the sectoral level

QAQC Guidelines

The requirements of the QAQC Guidelines are very demanding even for more developed countries DNAs in LDCs will likely have to bridge information gaps to develop an SB The CDM EB should further elaborate the QAQC Guidelines with a view to provide more guidance on how to deal with imperfect data Some of the related questions are the following When and what type of secondary data can be used What standards do ldquoreliable secondary datardquo have to fulfil How to ensure conservativeness When can it be considered adequate to revert to proxy data eg from neighbouring countries

Strategic decisions at host country level

Disaggregation is crucial for the development of SBs As resources are limited DNAs have to prioritize the development of an SB for one part of a certain sector over the other Furthermore the level of aggregation can be chosen to effectively cancel out certain types of mitigation measures while incentivising others DNAs should therefore be aware of the consequences of disaggregation This decision should be made in accordance with their respective long-term low-carbon strategies Choosing the right level of aggregation is key in developing an SB

In this context the EB should provide guidance on how to choose and what to consider when determining the level of aggregation to aid DNAs developing SBs


Furthermore the Regional Collaboration Centres should develop expertise in this regard with a view to enabling them to advise DNAs and national governments accordingly This work should be carried out in collaboration with initiatives targeting climate policy on a broader level such as NAMAs New Market Mechanisms

Stakeholder Consultations

Some observers recommend postponing the validation of projects using an SB to the first verification While this approach has positive and negative aspects it is unclear how stakeholder consultations (and environmental impact assessments) could be carried out in this scenario in a meaningful way One way to solve this problem could be conducting stakeholder consultations on a sectoral or technology level The EB should therefore task the secretariat with an assessment looking into cases and scenarios in which a stakeholder consultation process at sector or technology level would make sense and how this could be undertaken

Suppressed Demand Guidelines

Basic issues related to Suppressed Demand can be resolved at the political level only This includes questions such as ldquowhat is a basic human need and who defines itrdquo The suppressed demand guidelines should therefore explicitly state that such subjective components are inevitable and that this is accepted by the regulator (CMP) This would increase transparency and could thus help to improve the acceptability of the concept and lead to a more widespread deployment

The UNFCCC Secretariat should liaise with other UN organisations such as FAO WHO and UNDP and with other intergovernmental organisations to develop an index of research and data that can be used to define a minimum service level in order to identify sectors or services that have not yet been targeted and to (jointly) commission further research for these sectors and services respectively

A further remaining problem not covered explicitly by the interviews is the question of incentives for developing a SB The current system combined with extremely low CER prices makes it commercially unattractive for private sector entities to develop SBs This is mirrored by the fact that the SB proposed so far have mainly been financed by international donor organisations

As pointed out above the CDM EB in connection with the Regional Collaboration Centres has a decisive role in this situation Yet it is doubtful that the Boardrsquos resources will suffice to fulfil this task

In this context Mersmann and Arens (2012) suggest the creation of a revolving fund which could provide seed funding for SB development Parties other donors and project developers would provide a certain amount of finance to fill the fund SB developers could use these resources to co-finance baseline development for a certain project activity Projects using this SB would then reinvest a share of their revenues into the fund thus replenishing the fund for the next developer With the help of this model the financial risk of SB development could be spaced out over a wider number of actors This would make the development of SBs not only more attractive it would also make it easier to reap their benefits

We encourage the CDM EB the UNFCCC Secretariat DNAs that are engaging in the development of SBs and other political stakeholders to consider the highlighted recommendations Some of the issues raised in this paper are subject to the currently ongoing reform of the SB rules others are not The SB framework as it stands now does in our view not exploit the full potential of the concept of standardization If it is not improved to accommodate a wider range of sectors especially sectors in LDCs there is the danger that the concept will remain marginal and fail to prove its effectiveness

17 Project No (FKZ) 3712 41 502

ANNEX 1 INTERVIEW GUIDELINES

How to obtain a positive list Additionality Threshold and the Performance-Penetration Approach

Probably the most important question in the process of developing a framework for the development of standardized baselines (SBLs) is to find the right balance between ensuring environmental integrity through choosing conservative additionality thresholds and at the same time provide sufficient incentives for investment The CDM-EB has in its guideline defined a preliminary additionalitycrediting threshold of 80 in priority sectors and 90 in other sectors That means that technologiesfuelsfeedstock be ranked in descending order of their emissions intensity The most emission intensive technologyfuelfeedstock that is needed to produce 80 or 90 respectively of the sectorrsquos output is selected as baseline technologyfuelfeedstock A technologyfuelfeedstock is additional (ie not very likely to be implemented in the absence of support from CDM) (1) if it is less emission intensive that the baseline and (2) if it faces barrier or is less commercially attractive than the baseline

At the same time the EB is discussing lsquoDraft Guidelines for determination of baseline and additionality thresholds for standardized baselinesrsquo Under this the Secretariat has developed the lsquopenetration-performance approachrsquo to identify the common practice segment of a sector The proposal was however heavily criticised by many stakeholders and although changes have been proposed the adoption of the guideline has been postponed

Questions (for yesno questions please provide your rationalejustification if possible)

1 Considering that the conservativeness of the additionality threshold will depend on a narrow or wide definition of sector scopes technologies andor fuels and feedstocks chosen by SBL proponents do you believe that it allows to identify non-additional projects with sufficient accuracy Is the 80-90 default value set right to allow for projects in LDCs How would you generally assess the current balance of conservativeness vs market incentive Are the proposed guidelines and procedures too stringent too lenient or just right

2 The SBL Guidelines require data on the current structure of the sector and the technologies used which may be installed some year ago This data does not necessarily reflect recent trends eg technological leaps or price dropsrallies How can on-going trends be reflected in the baselines Are the interim update frequencies and data vintages (3 years) proposed by the EB adequate Alternatively specify for which sectors 3 years may be appropriate)

Although CDM procedures and guidelines have global validity and must not be specific for selected countries the development of SBLs was driven to a good extent to consider country-specific situations and improve the participation of underrepresented countries inter alia LDCs in the CDM

Questions

3 What are LDC-specific needs that have to be addressed by such guideline and is the proposed Performance-Penetration approach suitable for sectors in LDCs Which SBL elements could be shortenedsimplified for LDCs

4 What are sectors that could benefit most from an SBL and does the Performance-Penetration-approach fit the needs of these sectors

The guidelines require that any technologyfuelfeedstock that is an element of the positive list must demonstrate that it is commercially less attractive than the baseline technology andor that it faces barriers

Questions

5 How can different project sizes (economies of scale) which can obviously have significant impact on efficiency and commercial viability be adequately addressed

6 Is it feasible and justifiable to conduct barrier analysis and financial evaluation (investment benchmark andor comparison analysis according to step 2 of the additionality tool) for the sector as a whole respectively independent of any specific project developer Would consideration of barriers related to technologyfuelfeedstock and not to a specific project developer make the development of the positive list more objective


From SBL to projects

Currently there are no regulations available with regards to how a project proponent can apply for a project which is automatically additional and with predefined baseline The World Bank has proposed a streamlined process based on PDD-like generic registration templates that allow to undertake validation at the time of the first verification

Questions

7 Can generic registration templates substitute a full-fledged PDD for a project which is automatically additional and with a predefined baseline How can countrysector specific circumstances be adequately addressed in such an approach

8 How can stakeholder consultations and environmental impact assessments be ensured under a streamlined registration process that allows to undertake validation at the time of the first verification

QAQC Procedures

The CDM-EB has provided sbquoGuidelines for quality assurance and quality control of data used in the establishment of standardized baselinesrsquo These formulate extensive and detailed requirements that DNAs have to fulfil

Questions

9 Is the QAQC approach chosen by the CDM EB feasible for LDCs Do LDC DNAs have the capacity to regularly update the SBL autonomously (currently with a three yearsrsquo frequency) If No What external assistance (technical andor financial one or more interventions) would be needed How could such assistance be institutionally structured (eg UNFCCC establishes a fund and a roster of experts)

10 How could this support be reflected in the QAQC Guidelines11 Should the EB provide further guidance on how to deal with missingconfidential data12 Is there a need for LDC-specific simplifications in the QAQC Guidelines

Coordination of Activities

The development of SBLs and the respective procedures to register projects under them is a challenging task especially for LDC DNAs facing constrained capacities However once an SBL has been developed the design is a common good and can help others to develop their own SBLs This calls for coordination of the different initiatives

Questions

13 Project developers have little incentives to develop an SBL themselves as their individual effort would likely not be recovered However many could benefit from an SBL once its been developed How can the interest of stakeholders benefiting from the application of a SBL be appropriately usedchannelled for SBL development

14 Are the current coordination measures sufficient Is there need for additional top-down development of SBLs and SBL-related issues

Suppressed demand

The Marrakech Accords allow that ldquo[t]he Baseline may include a scenario where future anthropogenic emissions by sources are projected to rise above current levels due to the specific circumstances of the hostldquo The idea that the CDM baseline scenario covers demand that is currently non-existent due to a lack of economic development is commonly phrased as the concept of suppressed demand

This concept is of particular interest in the development of SBLs A minimum service level is defined that serves basic human needs eg for lighting and electricity This minimum service level is then considered as the baseline consumption level even in cases where it is not yet being met due to insufficient economic resources Currently this approach is being applied exclusively in projects in the household or small service sectors in low-income countries However in theory the concept of suppressed demand and minimum service levels is not limited to householdsmall services sectors

19 Project No (FKZ) 3712 41 502

Questions

15 How can minimum service levels be defined reliably Would additional research be of help In which sectors

16 Is the concept of minimum service levels applicable also for emerging industrial sectors in Least Developed Countries or is it restricted to household consumption

General Assessment of the Development of SBLs

Global carbon markets are currently in a grave situation with extremely low CER prices and little hope for future demand for CERs Despite this many see the development of the SBL approach as such and specific SBLs as a worthwhile task as they hope to learn lessons and develop a concept that is also valuable for applications beyond the current CDM in the future

Questions

17 What are your expectations for the use of SBLs beyond the CDM eg for New Market Mechanisms Nationally Appropriate Mitigation Actions or the operations of the Green Climate Fund Which elements can easily be transferred to other uses and which are CDM specific

Room for further comments18 Do you have specific comments regarding the development of SBLs in the waste sector as

measures 3 and 4 (methane avoidance and destruction) of the SBL Guidelines19 How do you see the potential for such SBLs and are you aware of any barriers with respect to

their developmentimplementation


REFERENCES

California Air Resources Board (2013) California Air Resources Boardrsquos Process for the Review and Approval of Compliance Offset Protocols in Support of the Cap-and-Trade Regulation May 2013 Sacramento Available at httpwwwarbcagovcccapandtradecompliance-offset-protocol-processpdf

CDM Policy Dialogue (2012) Climate Change Carbon Markets and the CDM A Call to Action Recommendations of the High Level Panel on the CDM Policy Dialogue

Hayashi Daisuke and Axel Michaelowa (2012) Standardization of baseline and additionality determination under the CDM Climate Policy London

IGES (2013) IGES CDM Project Database Version 09-2013 Available at httppubigesorjpmodulesenvirolibviewphpdocid=968

Kachi Aki Dennis Taumlnzler and Wolfgang Sterk (2013) The Clean Development Mechanism and Emerging Offset Schemes Options for Reconciliation Draft Final Version Berlin

Mersmann Florian and Christof Arens (2012) Standardised Baselines and LDCs ndash Concept Issues and Opportunities Wuppertal Institute amp GFA Envest WuppertalHamburg Available at httpwwwjiko-bmude1209

Muumlller Nicolas Randall Spalding-Fecher Samuel Bryan William Battye Anja Kollmuss Christoph Sutter Sophie Tison Francis Yamba Anna Strom Daisuke Hayashi Axel Michaelowa Marc Marr (2011) Piloting greater use of standardised approaches in the Clean Development Mechanism Zuumlrich

Schneider Lambert Derik Broekhoff Juumlrg Fuumlssler Michael Lazarus Axel Michaelowa and Randall Spalding-Fecher (2012) Standardized Baselines for the CDM ndash Are We on the Right Track Available at httpwwwperspectivescc2Ftypo3home2Fgroups2F152FPublications2F20122F2012_Standardized-Baselines-for-the-CDM-Are-we-on-The-Right-Trackpdfampei=Qws8Uqn8AonMtAadqYEIampusg=AFQjCNEKOgELNN8Fw5qzsBnYqubEE3uXvQampbvm=bv52434380dYmsampcad=rja

Spalding-Fecher Randall and Axel Michaelowa (2013) Should the use of standardized baselines in the CDM be mandatory Climate Policy 131 p 80-88

Platonova-Oquab Alexandrina Felicity Spors Harikumar Gadde Julie Godin Klaus Oppermann and Martina Bosi (2012) CDM Reform Improving the efficiency and outreach of the Clean Development Mechanism through standardization Washington The World Bank

UNFCCC (2010a) Standardized baselines under the Clean Development Mechanism ndash Technical Paper FCCCTP20104 Bonn

UNFCCC (2010b) Decision 3CMP6 ndash Further Guidance relating to the clean development mechanism FCCCKPCMP201012Add2 Available at httpunfcccintresourcedocs2010cmp6eng12a02pdfpage=2

UNFCCC (2011) Guidelines for the establishment of sector specific standardized baselines ndash Version 200 EB65 Report ndash Annex 23 Available at httpcdmunfcccintReferenceGuidclarifmethmeth_guid42pdf

UNFCCC (2012a) Procedure for the submission and consideration of standardized baselines ndash Version 200 EB68 Report ndash Annex 32 Available at httpcdmunfcccintReferenceProceduresmeth_proc07pdf

UNFCCC (2012b) Guideline for Quality Assurance and Quality Control of Data used in the Establishment of Standardized Baselines EB66 Report ndash Annex 49 Available at httpcdmunfcccintReferenceGuidclarifmethmeth_guid46pdf

21 Project No (FKZ) 3712 41 502

UNFCCC (2012c) Guidelines on the consideration of suppressed demand in CDM methodolo-gies EB68 Report ndash Annex 2 Available at httpcdmunfcccintReferenceGuidclarifmethmeth_guid41pdf

UNFCCC (2012d) Guideline for the Establishment of Standardized baselines for afforestation and reforestation project activities under the CDM EB70 Report ndash Annex 10 Available at httpcdmunfcccintReferenceGuidclarifarmethAR_guid34pdf

VCS (2012) Guidance for Standardized Methods Version 32 Available at httpwwwv-c-sorgsitesv-c-sorgfilesVCS20Guidance2C20Standardized20Methods2C20v32_0pdf

German Emissions Trading Authority (DEHSt)at the Federal Environment AgencyBismarckplatz 114193 Berlin

Internet wwwdehstdeENE-Mail emissionstradingdehstde

Authors

Preface

1Introduction

2The SB Guidelines

21Introduction to the Performance Penetration Approach

22Conservativeness vs Market Incentive

23Unresolved Issues

231A clear and concrete Definition of Technologies

232An adequate Level of Aggregation

233Data Requirements

24Financial Evaluation andor Barrier Analysis

3QAQC Guidelines

4Suppressed Demand Guidelines

5From Approved Standardized Baselines to CDM Projects

6Coordination of Activities

7Conclusions and Recommendations

Annex 1 Interview Guidelines

References

Environmental Research of the Federal Ministry for the Environment Nature Conservation and Nuclear Safety

On behalf of the Federal Environment Agency

IMPRINT

Publisher

German Emissions Trading Authority (DEHSt) at the Federal Environment AgencyBismarckplatz 114193 Berlin

Telefon (0 30) 89 03-50 50Telefax (0 30) 89 03-50 10

Internet wwwdehstdeE-mail emissionshandeldehstde

Authors

Lukas Hermwille Christof Arens

Wuppertal Institut fuumlr Klima Umwelt Energie GmbHDoumlppersberg 1942103 Wuppertal

Martin Burian

GFA Consulting Group GmbHEulenkrugstraszlige 8222359 Hamburg

Stand 102013






CONTENTAuthors I

Preface2

1 Introduction 3















References 20








Berlin October 2013


































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11 Project No (FKZ) 3712 41 502


















13 Project No (FKZ) 3712 41 502



















15 Project No (FKZ) 3712 41 502





SB Guidelines




QAQC Guidelines
















17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References






CONTENTAuthors I

Preface2

1 Introduction 3















References 20








Berlin October 2013


































0

20

40

60

80

100

0 20 40 60 80 100

o

f max

imum

EF






















Pene

trat

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Time Time

Pene

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Time

Pene

trat

ion



























11 Project No (FKZ) 3712 41 502


















13 Project No (FKZ) 3712 41 502



















15 Project No (FKZ) 3712 41 502





SB Guidelines




QAQC Guidelines
















17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References








Berlin October 2013


































0

20

40

60

80

100

0 20 40 60 80 100

o

f max

imum

EF






















Pene

trat

ion

Time Time

Pene

trat

ion

Time

Pene

trat

ion



























11 Project No (FKZ) 3712 41 502


















13 Project No (FKZ) 3712 41 502



















15 Project No (FKZ) 3712 41 502





SB Guidelines




QAQC Guidelines
















17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References
































0

20

40

60

80

100

0 20 40 60 80 100

o

f max

imum

EF






















Pene

trat

ion

Time Time

Pene

trat

ion

Time

Pene

trat

ion



























11 Project No (FKZ) 3712 41 502


















13 Project No (FKZ) 3712 41 502



















15 Project No (FKZ) 3712 41 502





SB Guidelines




QAQC Guidelines
















17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References












Pene

trat

ion

Time Time

Pene

trat

ion

Time

Pene

trat

ion



























11 Project No (FKZ) 3712 41 502


















13 Project No (FKZ) 3712 41 502



















15 Project No (FKZ) 3712 41 502





SB Guidelines




QAQC Guidelines
















17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References




















11 Project No (FKZ) 3712 41 502


















13 Project No (FKZ) 3712 41 502



















15 Project No (FKZ) 3712 41 502





SB Guidelines




QAQC Guidelines
















17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References











13 Project No (FKZ) 3712 41 502



















15 Project No (FKZ) 3712 41 502





SB Guidelines




QAQC Guidelines
















17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References









15 Project No (FKZ) 3712 41 502





SB Guidelines




QAQC Guidelines
















17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References












17 Project No (FKZ) 3712 41 502









Questions




Questions






Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References




Questions



QAQC Procedures


Questions





Questions



Suppressed demand



19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References

19 Project No (FKZ) 3712 41 502

Questions





Questions






REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References


REFERENCES
















21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References

21 Project No (FKZ) 3712 41 502






Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References



Authors

Preface

1Introduction

2The SB Guidelines



23Unresolved Issues





3QAQC Guidelines






References

Recommendations on the Advancement of the CDM ......mitigation activities under the CDM. Other...

Documents

Transcript of Recommendations on the Advancement of the CDM ......mitigation activities under the CDM. Other...