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.