Environmental Protection and Energy Sustainability

Clean Development Mechanism (Article 12, Kyoto Protocol)

Introduction:

The 1992 United Nations Framework Convention on Climate Change (UNFCCC) ("the convention") divided countries who are parties to the convention into three main categories:

Annex I countries include the industrialized countries and countries with Economies in Transition (EIT),
annex II countries are the industrialized countries only (i.e Annex I countries without the EITs);
Developing countries (countries in Asia, Africa, South America) are considered the non-annex I countries.

Clean Development Mechanism (CDM) is one of the flexible initiatives proposed to enable parties to the convention and those that have ratified the Kyoto Protocol meet their Kyoto commitments. CDM allows emission reduction projects that assist developing countries in achieving sustainable development and at the same time generate certified emission reductions (CERs) which the investing countries can use towards meeting their Kyoto targets of carbon emissions reduction.

Under CDM, Annex I countries fund clean (alternative energy) technologies, such as wind and solar power projects, in the developing nations (i.e. the non annex I countries). The developing countries acquire sustainable development (of low or no carbon emissions potential) while the investing (annex I) countries that undertake the projects earn Certified Emission Reductions (CERs) that counts as credits towards meeting their Kyoto targets.

Annex I countries can also claim CERs for planting trees - afforestation and/or reforestation (which serves as carbon sinks) in the developing world. Afforestation/reforestation projects are the only allowed carbon sink projects for the first commitment period of 2008 -2012. Also an annex I country can only use CERs genrated from sink projects for up to 1% of the country's emissions in its base year, for each of the five years of the commitment period.

The annex I countries are to refrain from using CERs generated through nuclear facilities to meet their emission targets.

The convention agreed that, since we have the same atmosphere worldwide, efforts towards carbon emissions reduction at a location result in the global reduction of 5.2% set by the Kyoto Protocol. As a result, annex I countries that are unable to reduce emissions at home can do so in other countries and will still be credited with emission reduction points that count towards their targets.

Typical CDM projects include:

Renewable energy projects such as Wind Power, Hydropower, Biomass;
End-use energy efficiency improvements;
supply-side energy efficiency improvements;
Fuel Switching projects;
Reduction of industrial emissions (CO2 from Cement, HFCs, PFCs, SF6)
Methane capture and re-use from coal mines, landfills and industrial wastewater;
Afforestation/reforestations

The other Kyoto mechanisms are: Joint Implementation and Emissions Trading

Implementation of CDM:

The Rules:

The Kyoto Protocol was adopted (signed) in 1997. Modalities and procedures for the implementation of CDM were developed over a period of time leading to the adoption of the "Marrakesh accords" during the meeting of the parties to the convention held in Marrakesh, Morocco in 2001. Marrakesh accords refer to a set of rules for implementing the CDM initiative. Follow the link "Marrakesh Accords" to obtain a copy of the CDM rules.

Some of the conditions CDM project implementation should meet are:

General:

Project must have approval by all parties involved;
Project must lead to sustainable development in the host (non-annex I) countries;
Project must result in real, measurable and long-term benefits in terms of climate change mitigation.
The reductions must also be additional to any that would have occurred without the project.

The parties involved:

Parties must participate voluntarily;
Each party must establish national CDM authority;
Each party must have ratified the Kyoto Protocol.

The annex I parties must, in addition to the above three conditions, have:

an assigned amount of emission reduction target;
a national system for the estimation of greenhouse gases;
a national registry, an annual inventory, and an accounting system for the sale and purchase of emission reductions.

Bodies/Parties involved in the Implementation of CDM:

COP/MOP: The Conference of the Parties to "the convention" serving as the meeting of the Parties to the Kyoto Protocol. This body has the overall control and makes rules for CDM
CDM Executive Board (EB): supervises the CDM, under the guidance of the COP/MOP.
Designated National Authority (DNA)- provides a Letter of Approval to project participants confirming that the project contributes to sustainable development in the host country.
Designated Operational Entity (DEO) - validates / verifies and certifies, project activities under the CDM.
Project Owners/Owner Representatives/Sellers - Sell CERs - usually the developing country or their representative
Project Sponsors/Sponsor Representatives or Brokers/Buyers - Sell CERs - usually the developed country or their representative/broker.

CDM Project Cycle (Chart to the right from UNFCCC):

Project Identification and Design - Development of Project documents - Project Idea Note (PIN), Project Concept Note (PCN) and Project Design Document (PDD).
Project Approval - Approval by country DNA's after been satisfied that project meet CDM conditions and has the potential to qualify for registration by EB
Project Validation - Done by a DOE. Involves the review all project documents particularly the PDD
Project Registration - Registration of project as CDM project by the EB
Project Implementation and Monitoring - Involves the implementation of CDM project and the monitoring of CER generation by the Project Owner or representative
Verification/Certification - Generated CERs verified by a DOE
Issuance of CERs - By the EB

Other Sources of Information:

CDM RuleBook - Clean Development Mechanism's Rules, Practices and Procedures
IISD Climate Change Meeting Coverages
CDM: CDM HOME - United Nations Framework Convention on Climate Change (UNFCCC) CDM website
Intergovernmental Panel on Climate Change
UNEP - Climate Change - Home
Capacity Development for the CDM (CD4CDM) - UNEP CDM project
Carbon Finance - World Bank Carbon Finance Unit (CFU)
UNEP Risoe CDM/JI Pipeline Analysis and Database - contains CDM/JI projects that have been sent for validation/determination. It also contains the baseline & monitoring methodologies, a list of DOEs and several analyses
CDM Bazaar - Contains list of CER Sellers, Buyers and service providers.