Establishing additionality

Small-scale projects must demonstrate that they would not be implemented in the absence of CDM registration because of one or more barriers:

A simplified baseline and monitoring methodology listed in appendix B may be used for a small-scale CDM project activity if the project participants are able to demonstrate to a designated operational entity that the project activity would otherwise not be implemented due to the existence of one or more of the barriers listed in attachment A to appendix B.  Where specified in appendix B for a project category, quantitative evidence that the project activity would otherwise not be implemented may be provided instead of a demonstration based on the barriers listed in attachment A to appendix B (4/CMP.1, Annex II, paragraph 28).

Attachment A to Appendix B to Annex II of 4/CMP.1 sets out the following barriers:

• Investment barrier
• Access-to-finance barrier
• Technological barrier
• Barrier due to prevailing practice
• Other barriers

At the 2nd meeting of the Conference of the Parties serving as the meeting of the Parties (COP/MOP), the COP/MOP requested that the Executive Board develop non-binding best practice examples for demonstrating the additionality of small-scale projects in each of these four categories:

The Conference of the Parties serving as the meeting of the Parties ...

Encourages the Executive Board:

1. To provide non-binding best practice examples on the demonstration of additionality to assist the development of project design documents, in particular for small-scale project activities... (2/CMP.1, paragraph 15(a)).

In response to this decision, the Executive Board developed the Non-binding best practice examples to demonstrate additionality for small-scale projects (EB 35, Annex 34) and provided the following examples:

Project participants shall provide an explanation to show that the project activity would not have occurred anyway due to at least one of the following barriers:

1. Investment barrier: a financially more viable alternative to the project activity would have led to higher emissions;

Best practice examples include but are not limited to, the application of investment comparison analysis using a relevant financial indicator, application of a benchmark analysis or a simple cost analysis (where CDM is the only revenue stream such as end-use energy efficiency). It is recommended to use national or global accounting practices and standards for such an analysis.

2. Access-to-finance barrier: the project activity could not access appropriate capital without consideration of the CDM revenues;

Best practice examples include but are not limited to, the demonstration of limited access to capital in the absence of the CDM, such as a statement from the financing bank that the revenues from the CDM are critical in the approval of the loan.

3. Technological barrier: a less technologically advanced alternative to the project activity involves lower risks due to the performance uncertainty or low market share of the new technology adopted for the project activity and so would have led to higher emissions;

Best practice examples include but are not limited to, the demonstration of nonavailability of human capacity to operate and maintain the technology, lack of infrastructure to utilize the technology, unavailability of the technology and high level of technology risk.

4. Barrier due to prevailing practice: prevailing practice or existing regulatory or policy requirements would have led to implementation of a technology with higher emissions;

Best practice examples include but are not limited to, the demonstration that project is among the first of its kind in terms of technology, geography, sector, type of investment and investor, market etc.

5. Other barriers such as institutional barriers or limited information, managerial resources, organizational capacity, or capacity to absorb new technologies (EB 35, Annex 34, paragraph 1).

Project participants are required to select one of the barriers above and provide evidence of its applicability (using the best practice examples of evidence or other examples):

Project participants shall:

1. Identify the most relevant barrier;
2. Provide transparent and documented third party evidence such as national/international statistics, national/provincial policy and legislation, studies/surveys by independent agencies etc.

A project activity that is indentified as a first-of-its-kind project activity is additional, however its crediting period can only be for a maximum of 10 years with no option of renewal.

A proposed project activity is the first-of-its-kind in the applicable geographical area if:

The project is the first in the applicable geographical area that applies a technology that is different from any other technologies able to deliver the same output and that have started commercial operation in the applicable geographical area before the state of the project.

The default "applicable geographical area" covers the entire host country. If the technology applied is not country specific, then the applicable geographical area should be extended to include other countries. Project participants are able to justify an applicable geographical area smaller than the host country for technologies that vary considerably across locations depending on local conditions.

Guidelines for Demonstrating Additionality for Certain Projects

Certain grid-connected renewable electricity generation technologies are automatically considered as additional. These including the following grid-connected renewable electricity generation technologies of installed capacity up to 15MW:

1. Solar technologies (photovoltaic and solar thermal electricity generation);
2. Off-shore wind technologies;
3. Marine technologies (wave, tidal) (EB 63, Annex 24, para 2).

A Designated National Authority (DNA) may propose specific micro-scale renewable energy technologies/measures to the Executive Board to qualify them for automatic additionality status. The process which the DNA must undertake is set out in the Procedure for Submissions and Consideration of Microscale Renewable Energy Technologies for Automatic Additionality (EB 65, Annex 33).

The Procedure applies to grid-connected renewable energy technologies of installed capacity equal to or smaller than five MW. However, it does not apply to technologies that don't produce electricity such as solar hot water systems. The approved specific renewable technologies are applicable as conferring automatic additionality only in the country for which the DNA submitted the proposal, and are valid for three years (EB 65, Annex 33).

At EB 54, the CDM EB approved the guidelines for Demonstrating Additionality of Renewable Projects ≤ 5 MW per year and Energy Efficiency Projects with Energy Savings ≤ 20 GWH per year (Version 01) (EB 54, Annex 15).

At EB 60, the CDM EB revised the above guidelines, renaming them the "Guidelines for Demonstrating Additionality of Microscale Project Activities" (EB 60, Annex 25).

Renewable Energy Projects

Project activities up to 5MW that employ renewable energy as their primary technology are additional if any one of the conditions below is satisfied:

a. the geographic location of the project activity is in one of the Least Developed Countries or the Small Island Countries (LDCs/SIDs) or in a special underdeveloped zone of the host country identified by the Government before 28 May 2010;

b. the project activity is an off grid activity supplying energy to households/communities (less than 12 hours grid availability per 24 hours is also considered as 'off grid' for this assessment);

c. the project activity is designed for distributed energy generation, not connected to a national grid, with both of the below conditions satisfied:

i. each of the independent subsystems/measures in the project activity is smaller than or equal to 1500 kW electrical installed capacity; and

ii. end users of the subsystems or measures are households/communities/small and medium enterprises (SMEs);

d. the project activity employs specific renewable energy technologies/measures recommended by the host country DNA and approved by the Board to be additional in the host country. The following conditions shall apply for DNA recommendation:

1. "Specific renewable energy technologies/measures" refers to grid connected renewable energy technologies of installed capacity equal to or smaller than 5 MW;
2. The ratio of installed capacity of the specific grid connected renewable energy technology in the total installed grid connected power generation capacity in the host country shall be equal to or less than 3%;
3. Information, no older than three years, outlining the percentage of contributions of specific renewable energy technologies to the national grid must be provided;
4. Technologies/measures recommended by DNAs and approved by the Board to be additional in the host country remain valid for three years from the date of approval. However, additionality of eligible project activities applying the guidelines remains valid for the entire crediting period.

(EB 63, Annex 23, paragraph 2).

Energy Efficiency Projects

Energy efficiency project activities that aim to achieve energy savings at a scale of no more than 20 gWh per year are additional if any one of the conditions below is:

a. the geographic location of the project activity is in LDC/SID or special underdeveloped zones of the host country identified by the Government before 28 May 2010; and

b. the project activity an energy efficiency activity with both of the below conditions satisfied:

i. each of the independent subsystems/measures in the project activity achieves an estimated annual energy savings of equal to or smaller than 600 MW; and

ii. end users of the subsystems or measures are households/communities/SMEs (EB 63, Annex 23, paragraph 3).

Other project activities not included in Annex 25, paragraphs 2 or 3 that aim to achieve emissions reductions at a scale of no more than 20 ktCO2e per year, are additional if any one of the following conditions is satisfied:

The geographic location of the project activity is a LDC/SID or special underdeveloped zone of the host country as indentified by the government before 28 May 2010;

The project activity is an emission reduction activity with both conditions below satisfied;

Each of the independent subsystems/measures in the project activity achieves an estimated an annual emission reduction equal to or less that 600tCO2e per year; and

End users of the subsystems or measures are households/communities/SMEs (EB 60, Annex 25, paragraph 4).

Project activities that meet the requirement specified in Annex 23, paragraphs 2, 3 or 4, are termed 'Microscale CDM project activities'.

Eligibility of project activities as microscale CDM project activities will be determined in accordance with the principles laid out in paragraph 3 and paragraph 4 of the most recent "General Guidelines to SSC CDM methodologies":

1. Project activities remain under the thresholds defined above during each year of the crediting period and in cases where ex ante projected emissions reductions show an increase during the crediting period, project activities that go beyond the microscale limits in any year of the crediting period are no eligible.
2. Renewable energy projects that produce electrical, thermal and mechanical energy, and cogeneration projects are covered. Definitions provided for output capacity and guidelines provided for conversion from electrical to thermal units in the most recent version of the "General Guidelines to SSC CDM methodologies" shall be used. Where applicable, additional guidelines provided in relevant methodologies shall be followed.
3. A project activity with more than one component, where each component meets the microscale threshold, is eligible. The sum of the size components of a project activity belonging to the same type (capacity for Type I, energy savings for Type II and emissions reductions for Type III) shall not exceed the limits for microscale project activities (e.g. the limit for the ethane recovery component is 20 ktCO2e/yr and the limit for the electricity production component is 5MW output capacity) (EB 63, Annex 23, paragraph 8).

Microscale CDM project activities shall demonstrate that they are not a debundled component of a small-scale CDM project activity by applying the criteria in the "Guidelines on assessment of debundling for SSC project activities" (EB 63, Annex 23, paragraph 10).