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Indonesia hosting the next COP/MOP 13
Did you know that Indonesia offered to host the next COP/MOP 13 which will be held from 3 -14 December 2007 (the final decision will be taken February 15). And that Poland offered to host COP/MOP 14 and Denmark to host the 15th session. And that one of the reasons why negotiations about targets in the 2012-17 period are being dragged out until 2008 is that negotiators are quite aware that the position of the USA is likely to change after presidential elections in 2008?
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Restricting project participation to a certain time period
When dealing with a single transaction for issued CERs, some sellers are reluctant to admit new project participants to a CDM project for fear of having them around for the life time of the project. It is, however, legally possible to restrict project participation to a certain time period, after which project participation "expires". This should make sellers less reluctant to admit new project participants and hence facilitate the sale of issued CERs. (Just call us to find out how it's done)
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CDM project review
Once either three (out of ten) CDM Board members or one Party involved in a CDM project request a review, a project will have to undergo review at one of the upcoming EB meetings. These meetings are held every 1-2 months.
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Adding an additional project participant
If you want to add an additional project participant to a CDM project and the project is still in the "request for registration" stage, all communication with the secretariat must be channeled through the DOE for that project activity. If, however, the project has already been registered, the secretariat communicates with and receives documents directly from the focal point named in the modalities of communication.
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CDM EB rejecting issuance
Only twice out of over 70 issuance requests did the CDM EB reject issuance. Both times it was for the same reason: Faulty monitoring reports of a specific project developer in Mexico. (I don't know, though, if the DOE was actually liable for the loss of CERs). In any case the total amount of requested CERs was less than 6,000.
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Malta's Kyoto status
Though an EU member state, Malta is not an Annex I party to the UNFCCC and Kyoto Protocol has no emission limitation or reduction target under the Protocol. As such, they are potentially a CDM host country.
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Banking first phase CERs and ERUs
The Kyoto Protocol allows to bank CERs and ERUs from the first period (08-12) into the second period (13-17). The volumes, however, are constrained to 5% of a country's Assigned Amount (2.5% CERs and 2.5% ERUs). So far there is no guidance how this quota is distributed between the corporate sector and governments who wish to bank CERs and ERUs.
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Compliance with Article 17
Compliance with Article 17 of the Kyoto Protocol and functioning of the ITL are requirements that EU member states have to fulfil in the second EUETS period, from 2008 onwards, not only to transfer CERs, but also to transfer EUAs across countries. Forward trading can still happen (as it is right now), but the transfer needs the two conditions fulfilled. Without Article 17 and ITL EUAs can only be transferred within the same national registry at best.
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Total projects approved by UK DNA
The UK Designated National Authority (DNA) to date approved a total of 141 CDM projects. 62 of the projects (44%) go to the account of just two companies.
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Belarus Kyoto commitment
At the COP/MOP in NairobiBelarus proposed to take on an 8% below 1990 level Kyoto commitment, thus making it another country capable of hosting JI projects. Belarus accepted various safeguards to limit the potential for "hot air," including a requirement that it hold 7 percent of its allowances in reserve, unavailable for trading, and a commitment to use any proceeds from emissions trading for further emission abatement measures.
To this end there will be an amendment in the Annex B to the Kyoto Protocol and the following text will be inserted between the entries for Austria and Belgium: Belarus *
(The asterisk signifies that Belarus is one of the countries undergoing the process of transition to a market econom. http://unfccc.int/files/meetings/cop_12/application/pdf/cmp_9.pdf)
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Some of proposed methodologies
Some of the new proposed methodologies include fancy things like "SF6 Switch at Dead Sea Magnesium" (NM0193), "Green House Gas emission reduction by 'Manufacturing of natural surfactant Alpha Olefin Sulphonate (AOS)" (NM0194) and "Inoculant distribution in Brazil" (NM0198).
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Approved Designated Operational Entities (DOEs)
There are 16 approved Designated Operational Entities (DOEs). Only six of them are approved to do certification and verification of CDM projects worldwide
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JI Supervisory Committee (JISC)
As of 26th Oct 2006 the JI Supervisory Committee (JISC) will take up its work. The JISC is the equivalent of the CDM EB whe nit comes to Joint Implementation projects. Here is a web snippet from the UNFCCC website:
---snip---
Whilst the JI's Track 1 process may only be applied if the host Party fully meets all eligibility requirements, the Track 2 provision allows Parties to issue and transfer ERUs if only the basic eligibility requirements are met, provided the projects go through the verification procedures under the JISC (Track 2). The official launch of the JI Track 2 process is scheduled for October 26. As of that date, independent entities will be able to submit project design documents to the UNFCCC secretariat via a dedicated interface on its JI website.
---snap---
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Constitution of enforcement branch
"The enforcement branch is responsible for determining whether a Party included in Annex I (Annex I Party) is not in compliance with its emissions targets, the methodological and reporting requirements for greenhouse gas inventories, and the eligibility requirements under the mechanisms." It is therefore interesting to note the majority of its 10 members are from non-Annex I countries:
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Western Europe and Others
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Africa
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Asia
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small island developing States
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Latin America and the Caribbean
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Eastern Europe
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Annex I Parties
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Non-Annex I Parties
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Delivering CERs into national registries
The most common registries to trade secondary CERs are UK and Netherlands. It is much more difficult to find sellers to deliver into Germany, Spain or Italy for instance.
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Steps used assess additionality of a CDM project
The following steps are used to demonstrate and assess additionality of a CDM project:
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Identification of alternatives to the project activity;
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Investment analysis to determine that the proposed project activity is not the most economically or financially attractive;
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Barriers analysis;
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Common practice analysis; and
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Impact of registration of the proposed project activity as a CDM project activity.
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Approved methodologies for Small Scale Projects
By now there are 20 approved methodologies for Small Scale Projects covering 9 "Sectoral Scopes".
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Designated National Authority confirming project participation status
Depending on the country the respective Designated National Authority (DNA) could take up to three months to confirm project participation in a CDM project. The slower the DNA the less competitive comanies are when it comes to bidding for CERs where they need to become project participants. For example: The UK and Netherlands take usually 3-4 weeks while DNA approval in Germany, Spain and other seems to take twice as long.
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PFCs global warming potential
PFCs have a Global Warming Potential (GWP) in the range of 7,000 to 9,000. HFC-23 is the most potent of the HFCs, with a GWP of 12,000. SF6 is the most potent of all the greenhouse gases, with a GWP of 23,900, i.e. each ton of SF6 that has been reduced will generate 23,900 CERs. The methodology for SF6 has first been implemented in Nigeria: "Reducing SF6 Emissions in High-Voltage Transmission/Distribution Systems in Nigeria".
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New deadline for CDM projects claiming retroactive credits
The CDM Executive Board in its last meeting agreed to a new deadline for CDM projects that want to claim retroactive credits by allowing projects to request registration before the 31st of December 2006 and reception of the registration fee are to be confirmed by the UNFCCC Secretariat by the 15th of January 2007. This decision is subject to approval by the COP/MOP.
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Chinese registered projects
China is host of 42.2% of the currently registered CERs which amounts to appr. 36.77m CERs annually. This is more than registered CERs from India, Chile and Brazil together.
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Submitting a certification report of a CDM project
The certification report of a CDM project that is submitted to the CDM EB constitutes a request for issuance of the respective CERs, which will be granted after 15 days unless a request for review arises. Such a review has to be completed within 30 days.
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Timescale for registering a project
Unless they object, the EB must register a project within 8 weeks (4 weeks for a small scale project) of the date of receipt of the request.
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CERs issued into a pending account
CERs issued into a Pending Account may only be forwarded to the Temporary/Permanent Holding Accounts of registered project participants. Temporary Holding Accounts are associated with the registry of the country in which authorization for their participation (DNA approval) has been granted, i.e. CERs can not be transferred from the Temporary Holding Account into the registry of a different country.
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Falsely verified or certified CERs
If a review by the CDM Executive Board reveals that a Designated Operational Entity (DOE) falsely verified or certified CERs that were issued, the responsible DOE must acquire an amount of CERs equal to the excess CERs and transfer this amount to a cancellation account. The COP/MOP may eventually decide to suspend or withdraw the designation of a DOE.
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Internation Transaction Log availability
The ITL provides 99.9% availability with only 9 hours downtime per year. The ITL will be publicly available via a dedicated website.
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Temporary holding accounts on the CDM registry
It is not possible to open a temporary holding account on the CDM registry without becoming a Project Participant.
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Carbon sink projects
Carbon Credits from "carbon sink" projects such as reforestation and afforestation are called lCERs or tCERs when generated in CDM countries. "RMUs" when generated in Annex-I countries. None of these can be used for compliance in the EU ETS, at least not in the first phase (2005-2007). Their use in the second phase (2008-12) is still being discussed.
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Unilateral CDM projects
The UNFCCC allows for "unilateral CDM" projects, i.e. projects that do not have an Annex-I country project participant. In order to forward or transfer CERs from such a project to an Annex-I party, the CDM Executive Board still requires a letter of authorization from that Annex-I country.
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Small scale CDM projects
Small Scale CDM projects are renewable energy activities that generate less than 15MW output; energy efficiency improvements that save up to 15 GWh per year; or other projects that reduce up to 15,000 tCO2 per year. Small scale CDM projects benefit from simplified PDDs and methodologies, can be bundled, enjoy faster registration process and can use the same Designated Operational Entity (DOE) for validation, verification and certfication.
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Which Annex I countries have approved the most projects?
The Netherlands is leading the pack of Annex I countries in terms of number of approved registered projects. It has 50 registered projects, followed by UK with 39 and Japan with 23 registered projects. Germany can only count 3 projects while Italy has 6 and Spain 10. India and Brazil are the most active host countries with 80 and 58 registered projects respectively. Fiji, Bhutan, Papua New Guinea and Jamaica (among others) are also proud hosts of one project each. China, the rising star of the carbon world, hosts 17 registered projects so far.
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IETA master agreements
The IETA Master Agreement does not only refer to EU emission allowances. It also covers other allowances such as CERs, unless these are specifically excluded in Schedule 2. This means that counterparties that are already trading EUAs based on an IETA master agreement can easily trade secondary CERs, only the confirmation will have to be amended accordingly.
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The enforcement branch of the compliance committee
The "Enforcement Branch" of the "Compliance Committee" will be responsible to check compliance of Annex I parties with requirements of Art. 17 of the Kyoto Protocol. Annex I Parties are granted 100 days after the expert review of their final annual emissions inventory has finished to make up any shortfall in compliance (e.g. by acquiring AAUs, CERs, ERUs or RMUs through emissions trading). In case of non-compliance the party will be suspended from selling and 130% of the shortfall will be deducted from the assigned amount in the next compliance period.
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CDM share of proceeds
2% of the total quantity of CERs issued for a CDM project will be deducted on a pro-rata basis upon issuance of CERs. This "Share of Proceeds" will be held as part of an "Adaptation Fund" under the UNFCCC. Interestingly, no decision has been made about how and when the growing number of CERs will be monetized. In November 2006 further guidance on the management of the fund, as well as policies, programme priorities and eligibility criteria for the operation of the Adaptation Fund will be discussed (at the second session of the COP/MOP).
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Companies in Cyprus and Malta
Cyprus and Malta form part of the European Trading Scheme and are connected to the Community Independent Transaction Log (CITL). They are not, however, Annex I countries and will not be able to comply with Article 17 of the Kyoto Protocol. Companies in Cyprus and Malta will therefore not be able to use CERs or ERUs for compliance.
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Upshot of Article 17
Both the transferring and acquiring Annex B Parties (i.e. countries where Seller and Buyer hold their accounts) must meet eligibility requirements set out in Article 17 of the Kyoto Protocol. Otherwise CERs can not be transferred between countries. In addition, these conditions must be met to be able to use CERs for compliance in this country from 2008 onwards.
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Expected tonnes of CERs from registered projects to date
As of today (3rd Aug 2006) 10,775,083 CERs from 43 projects have been issued. Based on the number of registered projects so far, another 450m+ CERs are expected to be issued until the end of 2012.
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Terminology for movements of CERs
The correct way of describing the movements of CERs is the following:
CERs are issued into Pending Account; forwarded into the (Temporary) Holding Account; and transferred into National Registries.
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