CDM Terminologies and Acronyms

CDM Terminologies and Acronyms


Adaptation Fund

Two percent of the CERs from every CDM project are deposited in a special registry run by the Executive Board. Revenues from their sale will be used to fund climate change adaptation projects in developing countries. Projects in Least Developed Countries are exempt.

Additionality

Additionality asks whether the CDM project would have happened anyway or whether it needed the CDM to go ahead. “It is generally recognised that credits for GHG emissions reduction should only be granted for projects that are additional; that is, for projects which would not have taken place in the absence of the crediting procedure or trading scheme”.
Additionality is a critical issue. Registering a non-additional CDM project will result in no additional benefit to the climate and thus represents wasted investment. Furthermore, a non-additional project will generate fake carbon credits that an Annex I country can use to avoid making real emission reductions domestically, and ultimately leads to an increase in global emissions above what was expected due to the Kyoto Protocol.

Annex I countries

The industrialized countries who have specific commitments to reduce greenhouse gas emissions under the 1992 United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol. The only exceptions are Turkey and Belarus which are in Annex I but do not have reduction commitments under the Kyoto Protocol.
Baseline
The baseline describes what will happen, and how many greenhouse gas emissions will eventuate,in the absence of the CDM project, ie. the business as usual outcome. It is the alternative, or “counter-factual” scenario that is used as a comparison with the proposed CDM project to estimate the emissions reductions that will be achieved, and helps to determine additionality.


Certified Emission Reduction (CER)
The name given to a carbon credit from a CDM project. Credits from JI projects are called Emission Reduction Units (ERU). CERs are equal to one tonne of carbon dioxide equivalent (tCO2e).

Crediting period
The crediting period is the length of time during which the project will generate carbon credits. Under the Marrakech Accords projects can choose between a 7 year period which can be renewed twice to make a total of 21 years, or a one-off 10 year period. If they chose the former they must renew the baseline after every 7 year period. The crediting period is different from the project lifetime; a dam, for example, may have an estimated life of 50 years, but only be a CDM project and generate credits for 10 of those years.

Designated National Authority ( DNA) for the CDM
The DNA is the focal point for CDM matters in your country. It is frequently a unit in a government ministry that is responsible for administering CDM implementation and overseeing approval of projects. A list of some DNAs is on the official UNFCCC CDM webpage: http://cdm.unfccc.int/DNA.

Designated Operational Entity
DOEs are accredited by the Executive Board and perform two functions: validating CDM projects, and verifying and certifying emissions reductions from projects. The same DOE cannot perform both functions for one project unless it is a small-scale project. A list of accredited DOEs is available on the UNFCCC CDM webpage : http://cdm.unfccc.int/DOE.

Emissions Trading
The trading of emission allowances between Parties who have a reduction commitment under the Kyoto Protocol. It is expected that various national and regional trading schemes will be established.

Executive Board
The CDM Executive Board supervises the CDM and makes the final decision about project registration and the issuing of carbon credits. The Board also makes the final decision whether to approve new baseline and monitoring methodologies and must approve new DOEs. The Board was elected at the Marrakech Conference of Parties in 2001 and has 10 members from Parties to the Protocol. The Board must meet no less than three times a year. Members are elected for a term of two or three years.

Joint Implementation
Joint Implementation is one of the three so-called flexible mechanisms of the Kyoto Protocol, and like the CDM is project based – ie. Industrialized countries get reduction credits for investing in emission reducing projects in another country. In the case of JI projects, however, both countries have to have a reduction commitment under the Kyoto Protocol, unlike the CDM where the projects happen in countries without a reduction commitment.
Leakage
Leakage refers to emissions that take place outside of the project boundary but are attributable to the project. For example, a large energy efficiency project may result in reduced electricity prices leading to increased usage and greenhouse gas emissions1.

Marrakech Accords

The Marrakech Accords set out the rules for CDM projects, with the exception of those involving forestry projects, although they did determine that forestry projects are restricted to Afforestation and Reforestation projects and set a limit on their use The Accords are named after the meeting at which they were agreed – the 7th Conference of Parties to the Climate Convention in Marrakech, Morocco, in 2001.

Monitoring and Verification
The reduction in emissions achieved by a CDM project must be monitored by the project operator consistent with the monitoring plan outlined in the Project Design Document (PDD). This data is then verified by a designated operational entity, who then certifies that the reductions have taken place and recommends that the Executive Board issues carbon credits.

Project Boundary
Each CDM project has to identify a “project boundary”. The project boundary encompasses all of the increases and reductions of greenhouse gases that are reasonably attributable to the project so that total reductions can be calculated. For example, a biomass plant utilizing agricultural waste that displaces coal fired electricity can claim credit for the reduction in emissions that results from its operations. But it may also have to account for the greenhouse gas emissions that result from the transporting of biomass to the plant.

Project Design Document (PDD)
The document that describes the prospective CDM project and how it meets the validation requirements spelt out in the Marrakech Accords. The PDD is the main document assessed by the validator and is made available during the 30 day public comment period.

Registration
Registration is the final approval of a CDM project by the Executive Board, meaning the project can begin to generate carbon credits. Registration is expected to be a formality; the real decision about whether a project should be approved will be taken by the validator.

Stakeholders
Stakeholders are defined in the Marrakech Accords as “the public, including individuals, groups or communities affected or likely to be affected, by the proposed clean development mechanism project activity”.

Target
Under the Kyoto Protocol industrialized countries agreed to reduce their emissions. The amount they agreed to is their target. The targets are expressed as a percentage reduction of greenhouse gas emissions compared to 1990 emission levels, which has to be achieved in the period 2008-2012. So, for example, Japan has a target of 6%, which means that in the period 2008-2012 its emissions must be 6% below what they were in 1990.

Transaction costs
Transaction costs are the costs involved in developing a CDM project and then monitoring and verifying the emission reductions or sequestration that it achieves during the crediting period. It includes expenses such as preparing a PDD, which is usually done by a consultant, and baseline studies.

Validation
Before a CDM project can be presented to the CDM Executive Board for registration, an independent certifier – the validator - checks whether it meets the CDM’s validation requirements, which are in the 2001 Marrakech Accords. If the validator judges that it satisfies these requirements then it sends a recommendation to the CDM Executive Board, in the form of a validation report, that the project be registered. In reality, validation is the stage at which


Projects are approved, with registration being a formality. If a validator says that a project satisfies the CDM requirements, it is unlikely to be rejected by the Executive Board
.
UNFCCC – the United Nations Framework Convention on Climate Change
The UNFCCC is the Convention signed at the Earth Summit in Rio de Janeiro in 1992 which included a non-binding commitment by industrialized countries to stabilize their emissions at 1990 levels by 2000. When this proved inadequate, a supplementary protocol was agreed – the Kyoto Protocol – which committed industrialized countries to an average 5% reduction in greenhouse gas emissions by 2010 compared to 1990 levels.