Standardised baselines could see the CDM expanded
Zurich (1 June 2010)
The wider use of standardised baselines may well provide an opportunity for the scaling up of Clean Development Mechanism (CDM) projects in countries whose participation to date has been limited, according to a recent report compiled by Perspectives GmbH for the UK’s Department for International Development (DFID). Perspectives is a world-leading carbon offset market specialist.
Performance standards, a form of standardised baselines, are a method for allocating emission reduction credits where allowances are distributed based on output (e.g. one allowance per MWh generated) or on intensity standards in the industry, based on best-performing companies. In the case of the CDM, a performance standard approach would not only mean the standardisation of the current complex and often subjective process of CDM baseline setting, it would also help clarify additionality demonstration, an area which has provoked controversy and criticism in the past. Using a performance standard approach to CDM projects would also take away some of the operational burden and transaction costs from CDM project developers making the CDM more attractive to developers in countries where few CDM projects exist, such as the least developed countries.
A performance standard approach is already widely used globally to compare the energy and/or emission performances of companies. Though this experience already gives important insights into how a performance standard approach could be widely applied, the further harmonisation of methodological approaches would be required for the wider application of performance standards to the CDM, according to the report which is called “Towards a more standardised approach to baselines and additionality in the CDM”.
“CDM performance standards are feasible, but require an improvement in data collection, the early set up of adequate institutions and the development of specific approaches for the choice of performance indicators as well as the choice of stringency levels for the selected indicators”, said Daisuke Hayashi, Head of Business Unit in the Methodology Development at Perspectives and author of the report. “For this to work, substantial international upfront financing would need to be found for the expansion of current data collection efforts and for new data collection to begin in additional key sectors which could be used by the CDM”. The report suggests that the necessary funding could initially be taken from the accumulated surplus of the CDM’s Executive Board (EB), which currently stands at around $40 million, or from multilateral or unilateral support programmes.
Hayashi continues “approaches for indicator choice and proposals regarding performance standard stringency could be developed by a Standardised Approach Co-ordinator (SAC), with the CDM’s EB taking the final decisions on the performance standards”.
The process of scaling up the use of performance standards within the CDM would take between one and four years to implement so agreement would be needed swiftly in order for it to be operational by 2013, the report argues. Perspectives estimates that the development of a performance standard covering 200 plants would be €1.2-4.5 million, assuming one-year monitoring for the data collection. This drops to €0.2-0.5 million where the data already exists.
Note to editors
- The Kyoto Protocol to the United Nations Framework Convention on Climate Change, which entered into force in February 2005, defined targets for developed-country emissions over the 2008-12 period. It also prompted the launch of the EU’s Emissions Trading Scheme (ETS). The EU ETS is the world’s first international greenhouse gas emissions trading scheme. It works on a cap-and-trade basis, where the total volume of permitted emissions (the “cap”) is set at the start of a trading period. EU Allowances (EUAs) are the tradable units under the EU ETS, each representing a permit to emit one metric tonne of carbon dioxide equivalent (CO2e). Up to a certain limit, companies regulated by the EU ETS are also allowed to use carbon credits from third countries (CERs and ERUs) instead of EUAs.
- The CDM allows private and public sectors to invest in emission-reduction projects in developing countries and receive related emission reduction credits that are tradable and can be bought by emitters to offset their own emissions. These are called Certified Emissions Reductions (CERs).
- The report will be presented at the UNFCCC’s SBSTA meeting from 31 May-9 June 2010, in Bonn, Germany, where Perspectives will be holding a side event on 2 June. A Subsidiary Body for Scientific and Technological Advice, SBSTA counsels the UN’s Conference of the Parties on matters of climate, the environment, technology and method. It meets twice a year.
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Daisuke Hayashi
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About Perspectives
Perspectives is an independent, highly qualified consulting firm providing advise to private sector, governmental and non-governmental clients in the international greenhouse gas market. Its core competences are the risk assessment and management of Clean Development Mechanism (CDM) and Joint Implementation (JI) projects, developing baseline and monitoring methodologies for CDM/JI projects, providing climate policy advice and conducting capacity building on CDM in developing countries. Its staff have top-level experience and understanding of the Kyoto Protocol, CDM, JI, the EU Emissions Trading Scheme (EU-ETS), as well as voluntary offsets markets.
Perspectives has successfully developed numerous Project Design Documents and is globally leading in developing new baseline and monitoring methodologies for CDM and JI projects.
With experience on climate policy issues going back to 1994, Perspective’s staff have established a comprehensive international contact network in industry, governments, research and NGOs.
Perspectives’ staff have a high-level, interdisciplinary education in the field of economics and environmental/industrial engineering, enabling them to put together the most qualified team for the projects in question. The focus of its staff is on energy and industrial projects, e.g. electricity and heat generation/distribution, renewable energies, waste water management as well as industrial gas abatement.
Perspectives has more than 60 clients with projects in over 40 countries. It has offices in Hamburg and Zürich.