Page 1 © Copyright 2004 IETA/PCF Validation and Verification Manual Version 3.3, March 2004 Previous Page Next Page

Page 1 © Copyright 2004 IETA/PCF

Validation and Verification Manual

Version 3.3, March 2004Previous

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Det Norske Veritas Certification (DNV) has lead the development of this Validation and Verification Manual (VVM), which replaces the World Bank’s Prototype Carbon Fund’s (PCF) earlier Preliminary Validation Manual, issued in November 2000. Input to this revision is also provided by TÜV Süddeutschland and KPMG, and comments are provided by other certification bodies applying for CDM accreditation.

Facilitated by PCF and the International Emissions Trading Association (IETA), the draft VVM was at several occasions presented to other prospective DOEs and published on the IETA website in May 2003 and subsequently made available for road testing the fall of 2003.

The purpose of the VVM is to be an independent state-of-the-art manual owned jointly by Designated Operational Entities (DOEs). The VVM will be a tool to support the DOEs’ important role as partners of the UNFCCC bodies in ensuring a credible market for emission credits. It represents an attempt to bridge the new ISO guidelines for validation and verification under development and the principles contained in the World Business Council for Sustainable Development’s GHG protocol in a process oriented manner. The VVM builds on existing UNFCCC requirements and is not meant to add any new requirements to the validation and verification process.

The VVM must not be used without due consideration of its limitations. In particular, it is the responsibility of the individual DOE to adapt the VVM guidelines, procedures and templates to ensure that they fit perfectly with: (a) the policies and procedures for validation and verification that the respective DOE is likely to have. (b) the specific circumstances of each project in relation to the relevant CDM or JI requirements as provided and interpreted by the competent Kyoto Protocol bodies. Such adaptation can include eliminating or adding items to the VVM validation protocols and verification checklists.

The Manual is expected to evolve and be updated over time in line with a growing body of project experience.November 2003

Validation and Verification Manual: Preface

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This Validation and Verification Manual has been developed for the use of validation and verification of greenhouse gas (GHG) projects according to Art. 6 and 12 of the Kyoto Protocol (JI and CDM). Its content is drawn on experiences gathered to date by the Prototype Carbon Fund (PCF) and third party validators/ verifiers. The purpose of the Validation and Verification Manual is to provide guidelines for the validation and verification process, serve as a tool for third party validators/ verifiers, and present templates for validation and verification reports. The Validation and Verification Manual shall:

• guarantee the quality and ensure transparency of the validation and verification process to enhance trust in the work of third party validators/ verifiers, and

• allow third party validators/ verifiers to work in a consistent manner, promoting fair and equal treatment of projects

The manual is based on the Kyoto Protocol, the Marrakech Accords and relevant CDM Executive Board decisions. The Validation and Verification Manual comprises:

• a guideline for validation and verification activities• generic protocols/ checklists for validation and verification of CDM/JI projects, • templates for validation and verification reports.

The VVM does not exempt third party validators / verifiers from followingthe developments regarding further guidance and standards for validationand verification.

The methodologies presented in this manual for validation and verification of GHG emission reduction projects are intentionally applicable for all types of projects, including sequestration projects. However, necessary adjustmentsand amendments, as applicable, should be made in order to allow for the particularities of individual projects.

Report Templates

Protocols/Checklists

(Requirements)

Guidelines

Validation and Verification Manual: Introduction

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Validation and Verification Guidelinesfor CDM and JI Projects

Part of the Validation and Verification Manual

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Validation and Verification GuidelinesFor CDM and JI Projects

Introduction

This Validation and Verification Guideline is a part of the Validation and Verification Manual. It intends to give guidelines to the validation and verification processes of CDM and JI projects.

The Validation and Verification Guidelines shall be seen in context with the other parts of the Validation and Verification Manual:

• generic protocols/ checklists for validation and verification of CDM/JI projects, • templates for validation and verification reports.

As for the rest of the Validation and Verification Manual, this guidelineis expected to evolve and be updated over time in line with a growingbody of project experience.

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Report Templates

Protocols/Checklists

(Requirements)

Guidelines


Structure of the Guidelines

Part Two:CDM

Validation

Part Two:CDM

Validation

Part Three:Small Scale CDM

Validation

Part Three:Small Scale CDM

Validation

Part Four:JI

Determination

Part Four:JI

Determination

Part Five:Initial Verification

Part Five:Initial Verification

Part Six:Periodic Verification

Part Six:Periodic Verification

Part One:Generic Guidelines

Part One:Generic Guidelines

CDM ValidationProtocol

CDM ValidationReport Template

Small Scale CDM Validation Protocol

JI DeterminationProtocol

VerificationReport Template

These Guidelines are divided into six parts, with related protocols and report templates as illustrated in the figure below:

Initial Verification Report Template

JI DeterminationReport Template

Initial Verification Checklist

VerificationChecklist

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Part One: Generic Guidelines

Designated Operational Entities / Independent Entities Guiding Principles Level of assurance Conflict of Interest Liability and Suspension Validator and Verifier Criteria and Selection Validation and Verification Contract Team Selection Communication Abbreviations

Content:

Part 6:Periodic

Verification

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Part 5:Initial

Verification

Part 4:JI Deter-mination

Part 3:SSC

Validation

Part 2:CDM

Validation

Part 1:Generic

Guidelines

Part 1:Generic

Guidelines


Designated Operational Entities / Independent Entities

A Designated Operational Entity / Independent Entity shall be accredited (or have applied for accreditation) by the CDM Executive Board (EB) / JI Supervisory Committee (SC) and comply with the Marrakech Accords and CDM EB/ JI-SC Decisions. In addition the Entity shall:

– Validate proposed CDM /JI project activities

– Verify and certify reductions in GHG emissions

– Comply with applicable laws and requirements of the Parties hosting CDM/JI project activities when carrying out its functions

– Demonstrate that it has no real or potential conflict of interest related to the project

– Perform only one of either validation or verification and certification related to the same CDM project (Upon request to the CDM Executive Board, exceptions to this may be allowed). For small-scale CDM project activities the same operational entity may undertake validation, and verification and certification.

– Maintain a publicly available list of all CDM project activities it has been involved in

– Submit annual activity reports on CDM project activities to the CDM Executive Board

– Make the Project Design Document (PDD) and the monitoring report obtained from the project as well as the validation report and verification report publicly available, as required.

Further requirements and information related to Designated Operational Entities: http://cdm.unfccc.int/DOE/.

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Verification

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Part 5:Initial

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Part 3:SSC

Validation

Part 2:CDM

Validation

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Guidelines


Guiding Principles

The following principles apply for both parties in a validation and verification process and shall be used as guidance when documents related to validation and verification are prepared:

Cost-effectivenessThe amount of costs and effort necessary to document, validate, monitor, report and verify a GHG project should be made dependent on the attained uncertainties and the amount of predicted emission reductions, i.e. by use of a risk-based assessment approach.

ReliabilityFor the estimation of emission reductions from the project the most realistic and likely operational characteristics and most likely development relevant to the project shall be chosen as reference for projected emissions and baseline.

ValidityFor the estimation of emission reductions from the project it is crucial that factors or indicators used for baseline determination and the use of operational characteristics give opportunity for real measurements of achieved emission reductions. The baseline and operational characteristics used in the project documentation shall therefore be based on factors or indicators that provide a plausible picture of what would otherwise occur.

AccuracyThe relative measure of the exactness of relevant performance indicators. This should enable performance indicators and emission reduction estimates to be calculated as accurately as possible, i.e. by use of statistical techniques in order to reduce uncertainties and arrive at confident numbers for emission reductions.

CompletenessThe project documentation and the scope of validation/ verification should cover all relevant greenhouse gases, sources and sinks, – if affected by the project activities. It should also include other indicators, e.g. leakage effects or project effects beyond the chosen project boundaries, as appropriate.

ComparabilityMethods for estimation of emissions [and removals] should be comparable between the project baseline(s) and the project. This should enable comparison of the project with the relevant baseline scenario(s) and subsequent determination of the selected baseline's applicability.

ConsistencyThe project documents should address comparable key indicators that enable consistent review of project performance over time. To the extent possible, the methodologies and measurements identified in the baseline methodology should also be addressed and made verifiable via the Monitoring Plan.

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Verification

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Part 5:Initial

Verification


Part 3:SSC

Validation

Part 2:CDM

Validation

Part 1:Generic

Guidelines

Part 1:Generic

Guidelines

TransparencyTransparency is an imperative for all involved parties inthe validation and verification process (see next page).


Transparency

Transparency will be a significant means to ensure credible emission reductions.

Client Transparency:Where the client is a project developer, they shall be transparent in their presentation of information, such as project design documents, baseline study, monitoring plans, calculation methods and assumptions and/or other relevant project documentation. Where the client is a project operator, they shall be transparent in their presentation of performance data that constitute the audit trail which sustain the determination of emission reductions.

The project validator/verifier shall be transparent in the reviews, discussions and decisions that give the rationale for the validation opinion / verification statement.

Transparency implies that:• All assumptions are clearly stated and

documented• All background material is clearly referenced• The rationale for selection and use of

methodologies, as well as the use of such are clearly explained

• There is a clear conclusion or decision from all presented discussions

• All formulas used for calculations are stated • All calculations are incorporated or referenced• Changes in documentation as a result of

validation/ verification are clearly identified in revised documents

• Confidential information is clearly identified.

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Verification

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Part 5:Initial

Verification


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Validation

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Validation

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Guidelines


Level of assurance (1)

Level of assurance: Degree to which the validator or verifier is confident that the validation or verification conclusions prove or disprove the fact that GHG assertions taken as a whole are free from material misstatement. (ISO 14064-3 (draft))

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Level of assurance - Validation:The CDM Executive Board has agreed that in issuing a validation opinion in the validation report, the DOE shall include a statement of the likelihood of the project activity to achieve the anticipated emission reductions stated in the CDM-PDD. A medium level of assurance is hence appropriate for emission reductions estimates However, it should be aimed for a reasonable level of assurance with regard to the project’s eligibility to be registered under the CDM. Level of assurance – Verification: As a verification opinion will result in certification of emission reductions and thereby generate the value of this asset, a verification opinion must have a reasonable level of assurance. This must be reached by rigorously testing the uncertainty related to quantification of emission reductions.

The verifier or validator shall establish a process for providing assurance to all stakeholders that the project’s GHG assertions are complete, accurate, consistent, transparent and free from any material misstatements. Neither a validation opinion nor a verification statement can give an absolute level of assurance. The level of assurance is dependent on several factors, qualitative and quantitative. For a validation, most of these factors are related to uncertainties of future events taking place. For a verification, the factors causing uncertainty is the inherent uncertainty of emission measurements, calculations or estimations. Each Operating Entity performing validation or verification should use its own procedures, necessary expertise and expert judgement as well as applicable international standards and UNFCCC methodologies to arrive at a desired level of assurance. The expertise should be maintained and updated as UNFCCC methodologies and other standards related to level of assurance for GHG emission estimation and project validation and verification emerge.


Level of assurance (2)

Part 6:Periodic

Verification

Part 5:Initial

Verification


Part 3:SSC

Validation

Part 2:CDM

Validation

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Guidelines

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Level of assurance – Validation/determination:The level of assurance for a validation is limited by the fact that no one is able to predict the future exactly. Hence, the validation opinion needs to include the disclaimer that only under the given circumstances, the estimated emission reductions will be likely to occur. However, these circumstances will have a varying degree of certainty themselves. The level of assurance for a baseline should for example be reached by rigorously testing critical assertions in the PDD that have impact on the baseline determination. The selection of the project baseline and the quantification and projection of emission reductions may nevertheless depend on factors that have high uncertainty or low predictability. Hence, only conservative assumptions should be accepted by the validator.

Level of assurance – Verification: In order to reach a reasonable level of assurance through the verification, it must be recognised that several facts and factors for the determination of emission reductions need be seen as fixed factors and not as variables. This comprises validated baseline methodology factors (e.g. baseline emission factors), validated publicly accessible and recognised factors such as national or IPCC emission factors and coefficients and other factors that are available in the public domain and are used for calculation input. These should be accepted despite their inherent uncertainties and not to be pursued for further verification. The level of assurance through verification should be reached by rigorously testing the uncertainties related to the remaining variable factors such as fuel consumption, activity levels etc. in the quantification of emission reductions. Emissions have a decreasing level of accuracy, dependent on whether these are monitored, calculated, estimated or projected. For emissions factors it is the same, the more specific an emissions factor is, the higher level of assurance it provides. It is expected that a verifier discounts verified emission reductions or requests a discount of these by using conservative assumptions for uncertainties in emission estimates that cannot be fully quantified or that cannot give a desired level of assurance.


Conflict of Interest

Cautious operations and conflict of interestStakeholders depend on 3rd Party assurance of GHG emission reductions through CDM and JI projects as a vehicle to ensure real and long-term environmental gains. As the CDM/JI are emerging mechanisms and their success rely on the credibility of CDM/JI projects, provisions for cautious operations must be made. For DOEs/Independent Entities, this relates to e.g.:

– Ensuring transparency of methodology, processes and results– Being conservative in estimates and conclusions– Ensuring verifiability of conclusions– Avoiding conflict of interest situations

Sources of potential and perceived conflict of interests should be identified and the necessary structure and provisions should be put in place to ensure and demonstrate that no conflict of interest exists. Conflict of interests could arise within the DOE/Independent Entity organisation or from the activities of related organisations, e.g. if parts of the organisation or its personnel are involved in consulting activities for CDM/JI projects.

The DOE shall work in a credible, independent, non-discriminatory and transparent manner. The structure of the DOE shall safeguard impartiality of its operations. If the DOE is part of a larger operation, the DOE shall clearly define the links with other parts to demonstrate that no conflicts of interest exists. The DOE shall demonstrate that it is not involved in any commercial, financial or other processes which might influence its judgement or endanger trust in its independence and integrity.

CDM modalities & procedures, Appendix A, paragraph 2

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Liability and Suspension

The verifier is liable for the emission reductions verified and certified. If a review by the CDM Executive Board/ JI Supervisory Committee reveals that excess CERs/ ERUs were issued, the verifier, who has falsely verified and certified excess CERs/ ERUs, must acquire an amount of CERs/ ERUs equal to the excess CERs/ ERUs and transfer this amount to a cancellation account.

JI modalities & procedures, paragraph 43

CDM modalities & procedures, paragraph 22

Cautious operations, including transparent processes and conservative conclusions, will reduce the risk of liability for the DOE. The risk of liability exists if a DOE has falsely verified and certified excess CERs/ ERUs.

Based on CDM Executive Board/ JI Supervisory Committee recommendations, the COP/MOP may decide to suspend or withdraw the designation of a DOE/Independent Entity if they no longer meet the accreditation requirements. This is applicable if significant deficiencies are identified, such as fraud, malfeasance or serious incompetence of the DOE.

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Validator and Verifier Criteria and Selection

The nature of the project is an obvious parameter when selecting the right validator/verifier for a GHG project. While other parameters may be of varying importance due to the circumstances, the validator’/ verifier’s capacities and capabilities in assessing the technical nature of the project will always be of critical importance.

The general rule is that the validator shall be different from the verifier and certifier for the same CDM project (Upon request to the CDM Executive Board, exceptions to this may be allowed). For small-scale CDM project activities the same operational entity may undertake validation, and verification and certification.

The skills required to undertake a validation project are different from those required to undertake a verification project. The latter typically requires more expertise in assessing the adequacy of monitoring and metering equipment, assessing information systems, calibration records, laboratory procedures etc., while validation will require a thorough analysis of e.g. baseline, monitoring aspects, additionality and host country circumstances.

Criteria for validator/verifier selection will be based on the following:• Accredited or applying for accreditation for validation/verification by the UNFCCC for the technical scopes

relevant for the project • Have the necessary expertise and understanding related to:

• the UNFCCC requirements and processes• relevant environmental issues and environmental auditing methodologies• the technical aspects of setting baselines, monitoring of emissions and other environmental impacts• Methodologies for accounting of GHG emissions

• Have management structure with clear responsibilities and quality assurance procedures in place• Work in a credible, independent, non-discriminatory and transparent manner• References from similar projects• Experience from operations in the host country• Availability of a project team covering all required skills

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Validation and Verification Contract

Validation/ Verification scope

The scope of the engagement shall define project boundaries, and the nature of the data necessary to validate/ verify the project. When defining the scope in discussion with the validator/ verifier, it shall be ensured that the project can be validated/ verified against UNFCCC requirements using objective criteria and a risk-based assessment approach. A validator/ verifier shall not accept a scope that is not sufficient to form and issue a validation opinion/ verification statement. Scope determination has to include:

– Parts of project included in assessment– Methodology review/submission to the CDM-

Executive Board (as applicable)– Sites included in assessment– Content, but not conclusions for the

Validation Opinion/ Verification Statement– Timeframe of engagement– Limitations in the scope– Confidentiality clause regarding non-

disclosure of confidential information

The contract between the project proponent and the validator/ verifier shall include and determine the following aspects:

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Documentation

The contract shall identify project documents, including but not limited to the Project design document (ref. UNFCCC CDM-PDD)

Other information– Name, address and contact person(s) of the project

operating organisation and Host County authorities – The validator's/ verifier’s liability

The validator/ verifier shall review the contract and any presented documentation to ensure that the requirements for validation/ verification are understood, that the documentation is complete, accurate and verifiable. Any difference in understanding between the validator/ verifier and the project proponent shall be resolved before the contract is signed.

Contract caveat:The validation is based on the information made available to the validator/verifier and the engagement conditions detailed in this contract. The validator/verifier can not guarantee the accuracy or correctness of this information. Hence, the validator/verifier can not be held liable by any party for decisions made or not made based on the verification opinion.


Team Selection

Roles and ResponsibilitiesTeam LeaderThe tasks of the team leader typically include:

• Plan the validation/ verification processes (time, place, criteria for the assessment, etc.).

• Select other team members. • Run meetings. • Be the single point of contact • Manage the validation/ verification and conclude on decisions affecting

the validation/ verification process. • Be responsible for the validation/ verification report and the follow-up of

possible corrective action/ clarification or forward action requests.

Team Members Team members shall assist the team leader, and are responsible for performing the parts of the validation/ verification assigned to them by the team leader. These actions may be taken in conjunction with the team leader or separately. Team members shall be responsible for acquainting themselves with the project documentation and the project context as a part of the validation/ verification preparations.

Inform the project proponentThe project proponent shall be provided the names of the validation/ verification team members, with sufficient notice to appeal against the appointment of any particular member(s).

Appointment of teamThe validation/ verification team shall be formally appointed and provided with the appropriate working documents.

Team composition

The validator/verifier shall appoint a validation/verification team leader to be in charge of the engagement. As most engagements will require multiple skills to be employed, the team shall contain necessary competence for all relevant aspects of the validation/verification. These skills may include, but not limited to:

– Technical– Environmental– Legal– Host Country– Financial

Members of the validation/verification team shall be independent of the activities they audit. The team member(s) shall be objective, and free from bias and conflict of interest throughout the validation/verification process.

Time and resources needed for the validation/verification project will depend on the specific risks and complexity of the project.

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Communication

To achieve a cost-effective and efficient validation/ verification, the validator/ verifier and project proponent are required to communicate effectively. This implies that the project proponent as well as the validator/ verifier shall appoint personnel (single point of contact) with the authority and responsibility to facilitate effective communication when establishing the validation/ verification contract, identify and make contact with host country personnel or other persons as relevant, resolve unclear issues, or any identified corrective action or clarification requests.

As the project proponent is likely to engage consultants for parts of the project design, the effectiveness of communication also calls for direct liaison between the validator/ verifier and the consultants. This will be particularly important for issues of technical character. Such communication is encouraged, and should be copied to the project proponent. Any preliminary conclusions made by other parties on behalf of project proponent shall be confirmed by the project proponent before they are used by the validator/ verifier.

For effective communication, it is crucial that the involved parties comply with agreed deadlines and keep up to date on the validation progress.

This includes early notification of possible delays or missing information.

It is also imperative that the nature of all changes resulting from the first phases of the validation are clearly identified.

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Abbreviations

Glossary for CDM projects:

http://cdm.unfccc.int/Reference/Documents

LoI Letter of Intent

MoU Memorandum of Understanding

MP Monitoring Plan

ODA Official Development Assistance

PDD Project Design Document

UNFCCC United Nations Framework Convention for Climate Change

CDM Clean Development Mechanism

CAR Corrective Action Request

CEF Carbon Emission Factor

CER Certified Emission Reduction

CL Clarification Request

CO2 Carbon dioxide

CoP Conference of the Parties to the UNFCCC

DNA Designated National Authority

EB CDM Executive Board

EIA Environmental Impact Assessment

ERU

FAR

Emission Reduction Unit

Forward Action Request

GHG Greenhouse gas(es)

GWP Global Warming Potential

JI Joint Implementation

KP Kyoto Protocol

LoA Letter of Approval

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Part Two: CDM Validation Guidelines

Content: CDM Validation Objective

Validation Actors

Risk-Based Validation Approach

Risk Examples

CDM Validation Criteria

Host Party criteria

UNFCCC criteria

Participation Requirements

Project Design Document

Baseline Methodology and Baseline

Additionality of project activity

Sustainable Development

Assessment of Environmental Impact

Monitoring Methodology and Plan – Coverage of Emission Source

Monitoring Methodology and Plan – Monitoring Practise and GHG Data Management

Means of Verification

The Validation Process

Baseline and Monitoring Methodology Check

EB Approval of Methodologies

Document Review

Background Investigation

Follow-up Interviews

Draft Validation Report

• Clarifications and Corrective Action Requests

• Validation Protocol

• Validation Protocol Legend

Resolution of Corrective Action Requests

Final Validation Report

• Validation Opinion

• Examples of Validation Opinions

• Unresolved IssuesPart 6:

Periodic Verification

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CDM Validation Objective

The purpose of a validation is to have an independent third party assess the project design. In particular, the project's baseline, the Monitoring Plan (MP), and the project’s compliance with relevant UNFCCC and host Party criteria shall be validated in order to confirm that the project design as documented is sound and reasonable and meets the identified criteria. Validation is a requirement for all CDM projects and is seen as necessary to provide assurance to stakeholders of the quality of the project and its intended generation of certified emission reductions (CERs).

UNFCCC criteria refer to the Kyoto Protocol criteria for the CDM, the CDM rules and modalities as agreed in the Marrakech Accords and relevant decisions by the CDM Executive Board.

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CDM Validation Actors

Consultants

Host PartyDesignated

NationalAuthority

DesignatedOperational

Entity

ProjectProponent

Validation Contract Parties

Involved actors

Project Entity

Note: The above diagram reflects a contractual model where the project proponent is independent from the project entity. The frame for “project participants” only shows an example. Other relationships are possible, such as a direct contractual relationship between project entity and the DOE.

CDM ExecutiveBoard

PartiesStakeholders,

Accredited NGOs

LocalStakeholders

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Project participants

Contractual relationshipsCommunication channels during validation


Risk-Based Validation Approach

The validator shall use a risk-based validation approach to focus and to determine the detailed scope of the validation. The key risks associated with the project design, baseline, monitoring plan, emission reduction estimates, environmental impacts and comments by local stakeholders are elements that are critical for meeting UNFCCC criteria for achieving real, measurable, long-term as well as additional GHG reductions.

– Based on the information on the project provided in the project design document and based on the comments received by Parties, stakeholders and NGOs, the validator shall identify the key risks associated with assumptions/claims made and data sources used.

– The completeness, conservativeness and accuracy of the underlying evidence for the assumptions/claims made and data sources used are reviewed. Assumptions/claims and data sources that are well identified and discussed in the PDD, that are substantiated with information from reliable references and that are sufficiently controlled through the monitoring plan are of less risk and should thus be given less emphasis.

– Remaining areas of material uncertainty associated with assumptions made and/or data sources used, which could not be fully recognised and approved by the validator during the above review, shall be investigated and further tested by the validator.

– The results of this investigation shall then - together with the results of the review of other areas - give the necessary input for the validation opinion.

Identify risks (H, M, L) associated with assumptions made and data sources used

Review risk areas for completeness, conservativeness and accuracy

Detailed investigation of remaining areas of material uncertainty

Validation scope

Validation Report & Opinion

Project Design Document (PDD):Project designBaselineMonitoring PlanEmission reduction estimates Environmental impactsComments by local stakeholders

Comments by Parties, stakeholders and NGOs

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Risk-Based Validation Approach – Examples

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Risks can be classified in risk categories (e.g. High, Moderate and Low). A risk may be high, moderate or low depending on the issue’s potential to cause misstatement of the baseline emissions. In addition, a non compliance with the CDM modalities and requirements can form a major risk situation. The risk of understating baseline emissions is higher than the risk of overstating these. Understating baseline emissions could lead to a situation where emissions reductions that are not real are transferred.

Whether a risk is classified as high, moderate or low is to a large extent subjective and requires the validator’s expert judgement. In order to be able to make decisions on an issue the validation team leader should have sufficient validation and verification experience.

Once an issue has been classified as high risk, more information shall be provided by the project proponent to clarify the situation and explain how the risk can be reduced. Measures can be taken to limit the risk e.g. in the form of additional emission monitoring. Risks can also be reduced by choosing a more conservative option in the event of encountered uncertainties, e.g. by selecting the lowest emission value from an uncertainty range of emission values for a baseline scenario.

In the following pages, examples are given of risks encountered during the validation of baseline studies and monitoring plans of CDM projects related to the following:

1. Accuracy of baseline emissions

2. Uncertainty of external data sources used

3. Coverage of leakage in the baseline scenario

4. Baseline emission assumptions

5. Accuracy of emission calculations in the monitoring plan


Risk Example (1): Accuracy of emissions in the baseline

High Moderate Low

The accuracy of the emissions in the selected baseline is low. Emissions are estimated or calculated.Example: A baseline scenario was based on emissions determined from a registration system of a production unit. The systems of registration was weak and/or the documented systems were lacking.

To reduce the risks substantive data testing was required in order to verify the emission level per tonne of product produced.

The accuracy of the emissions in the selected baseline is limited, but the impact of this issue on the overall emission level was equally limited (<5%).Example: The measuring devices for the coal consumption in the baseline of a fuel switch project were old and not very accurate. As a result of this the estimated error in the baseline emission data was ±5%.

The reported emission data for the baseline was reduced by 5% to compensate this inaccuracy.

The accuracy of the emissions in the selected baseline is limited but the impact of this issue on the overall emission levels is negligible (<1%).

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Guidelines

Example of risks classified in High, Moderate and Low risk categories.

High Moderate Low

External unverified data sources are used. An error in these data would have a material impact (>5%) on the baseline emissions.

Example: In a wind farm project the produced electricity will replace a similar amount of fossil fuel based electricity. The national emission data that were used for calculating the baseline emissions have never been verified. This could have a material impact on the calculated baseline emissions .

.

External unverified data sources are used . An error in these data would have a limited impact (<5%) on the emissions on the baseline emissions.Example: IPCC default values for the carbon content and the net calorific value of coal were used for the calculation of baseline emissions of a fuel switch combustion project. No check was made whether these values were applicable for the type of coal used in this specific case.

To reduce this risk, the project proponent was requested to provide analyses from the coal used by the project.

External unverified data sources are used. An error in these data would have a negligible impact (< 1%) on the baseline emissions.

Example: Default values from the “Cement industry GHG protocol” were used for the determination of the CO2 emissions of the decarbonisation of limestone in a cement plant. Checking the analyses of the raw materials used in the project showed that the real data gave comparable results with the default values.

Risk Example (2): Uncertainty of external data sources


High Moderate Low

Leakage has not been included in the baseline study and material leakage can be expected in the project. (>5% of project emissions).

Example: As the result of a fuel switch project (from coal to gas) a waste stream that used to be blended with coal before combustion is now land-filled. This leads to additional landfill emissions.

Leakage has not been included and limited (<5%) leakage is expected.

Example: In a fuel switch project, coal is replaced by natural gas. However the natural gas pipeline system is not well maintained and substantial leakage of gas occurs from this system. The supply chain of both 1) coal for the baseline scenario and 2) gas for the project scenario have been excluded from the scope of the project.

Leakage has not been included, but the effects of leakage are negligible (<1%).

Example: The use of biomass as fuel in a project leads to additional transport. If this transport is material the additional transport emissions should be included in the project scenario. The project developers made an estimation of the impact of this issue on the overall emissions, showing that the impact on the presented emission reductions will be less than 1%.

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Risk Example (3): Coverage of leakage

Risk Example (4): Baseline emissions assumptionsHigh Moderate Low

There is insufficient evidence for parts of the baseline emissions existence.

Example: The baseline scenario of a bio-fuel project has been based on the assumption that the wood cuttings are landfilled, and thus leading to methane emissions. During the validation site-visit it appeared that the bio-fuel material was not land filled but used for the production of chipboard. As a result of this, no evidence was found for more than 40% of the assumed baseline emissions.

There is insufficient evidence for parts of the baseline emissions existence, which have a limited impact on the baseline emissions (<5%).

Example: In a landfill gas recovery project one assumed that landfill gas was emitted to the atmosphere in the baseline. During the validation site-visit it appeared that during the warm season some of the gas was flared to reduce odour . Therefore in the most likely baseline, flaring had to be taken into account. Since only a part of the gas was expected to be flared, the impact of this issue on the baseline emissions was limited.

The amount of emission reductions is uncertain due to an uncertain baseline situation. This has no impact on the accuracy of emission reductions, as the emission variations will be covered through the monitoring plan.

Example: A cement plant might produce at lower production levels or even be shut down for economical reasons. Consequently, the projected emission reductions will not occur. However, this does not affect the risk of misstating the emission reductions because the production level is one of the monitoring parameters of the monitoring plan.

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Risk Example (5): Accuracy of emissions in monitoring plan

High Moderate Low

The monitoring plan is designed in a way that it is expected to generate material inaccurate emission data for the project emissions during the crediting period, due to lack of emission parameters.Examples:

1) Critical parameters are estimated or calculated instead of measured

2) the measuring frequency is low.

3) The landfill gas production of a landfill gas recovery system will be continuously measured but analysing the methane concentration of the landfill gas is not included in the monitoring plan.

The monitoring plan has been developed in such a way that it is expected to generate material inaccurate emission data for the project emissions during the crediting period, having a limited impact on the project emissions

Example: According to the monitoring plan the fuel consumption and heat production of a biomass boiler will be registered by the process computer of the installation. Nothing was said about back-up procedures of these data or about making monthly printouts of the registered data.

Responsibilities for the monitoring tasks have not yet been defined in the monitoring plan, because the project organisation still has to be formed.


CDM Validation Criteria

The validator shall test and when possible confirm that the project design meets the following criteria:

UNFCCC criteria: The Kyoto Protocol Article 12 criteria, the modalities and procedures for the CDM (Marrakech Accords) and the relevant decisions by the CDM Executive Board. UNFCCC criteria include, but are not limited to:

• Participation Requirements• Project Design Document• Project Additionality• Sustainable Development and Approval by Parties Invo

lved• Baseline Methodology and Project Baseline• Monitoring Methodology and Plan – Coverage of Emiss

ion Sources• Monitoring Practise and GHG Data Management

Host Party criteria: National CDM requirements, including sustainable development priorities, and potential specific requirements contained in, for example, the preliminary approval by Designated National Authority or project agreements between involved parties.

The validator is expected to identify and determine the appropriate criteria for project validation based on the technical nature of the project, the presented project design documentation as well as any background study performed in advance of the validation. The project design is assessed against these criteria and the result of this should be recorded in the validation protocol.

Host Party criteria shall be identified on a project and country specific basis.

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The CDM is still evolving and clarifications on the CDM requirements are provided by the CDM Executive Board at its meetings. Hence, the validator shall keep up to date with the latest CDM Executive Board decisions.



The validator shall determine whether the host Party is eligible to host a CDM project activity and verify that:

The host Party has ratified the Kyoto Protocol The host Party has designated a national authority

for the CDM The sponsor Party has been identified.

The validator shall also determine whether the host Party voluntarily participates in the project. This is verified by checking that the project has been approved by the host Party’s Designated National Authority.

The sponsor country shall be identified, and the written approval of the project by the host Party (in the form of at LoA, MoU or LoI) will be necessary for project registration.

The validator shall also determine whether the sponsor party is in compliance with Kyoto Protocol Article 5 and 7 (The requirements for national communication and keeping national GHG inventories).

Participation in a CDM project activity shall be voluntary.

Parties participating in the CDM shall designate a national authority for the CDM.

A Party not included in Annex I may participate in a CDM project activity if it is a Party to the Kyoto Protocol.

CDM modalities & procedures, paragraph 28 - 30

The project has the written approval of the designated national authorities of each party involved.

CDM modalities & procedures, paragraph 40 (a)

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The project design documentation used as a basis for validation shall be complete and comprehensive enough to give an accurate picture of the project and its baseline. The documentation shall follow the structure and criteria given in the UNFCCC CDM-PDD template and be approved by the project proponent for its completeness before it is presented to the validator.

The Project Design Document (PDD) may be supported by additional documentation, such as:– Baseline study– Monitoring plan


This document shall include, but not be limited to: Project Summary Baseline Methodology Duration of the Project Activity/ Crediting Period Monitoring Methodology and Plan Calculation of GHG emission reductions, using conservative assumptions for estimating emission reductions Environmental Impacts Stakeholder Comments

This document shall also provide the validator with sufficient information of the technical features of the project, and other relevant information about the project.

For more details of the content, please refer to the UNFCCC CDM-PDD template.

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Baseline Methodology and Project Baseline

The validator shall determine whether the baseline methodology employed by the project to determine the project’s baseline is previously approved by the CDM Executive Board. If the validator determines that the project intends to use a new baseline methodology, the new methodology must be submitted for approval by the CDM Executive Board.


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In choosing a baseline methodology for a project activity, project participants shall select from among the following approaches:

Existing actual or historical emissions, as applicable; or

Emissions from a technology that represents an economically attractive course of action, taking into account barriers to investment; or

The average emissions of similar project activities undertaken in the previous five years, in similar social, economic, environmental and technological circumstances, and whose performance is among the top 20 per cent of their category.


A baseline shall be established: in a transparent and conservative manner

regarding the choice of approaches, assumptions, methodologies, parameters, data sources, key factors and additionality, and taking into account uncertainties;

on a project specific basis; taking into account relevant national and/or

sectoral policies and circumstances, such as sectoral reform initiatives, local fuel availability, power sector expansion plans, and the economic situation in the project sector.


The baseline of a CDM project activity is the scenario that reasonably represents the anthropogenic emissions in the absence of the proposed project activity. [..]



Additionality of a Project Activity

Emission reduction shall be additional to any that would occur in the absence of the certified project activity.

Kyoto Protocol, Article 12

A CDM project activity is additional if anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the registered CDM project activity.


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The assessment of the additionality of a project activity shall determine whether there is sufficient evidence that demonstrates that the CDM project activity itself is not a likely baseline scenario. Additionality may be demonstrated by:

(a) a flow-chart or series of questions that lead to a narrowing of potential baseline options;

(b) a qualitative or quantitative assessment of different potential options and an indication of why the non-project option is more likely;

(c) a qualitative or quantitative assessment of one or more barriers facing the proposed project activity: Investment barrier: a financially more viable alternative to the project activity would have led to higher emissions; 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;

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

Other barriers: without the project activity, for another specific reason identified by the project participant, such as institutional barriers or limited information, managerial resources, organizational capacity, financial resources, or capacity to absorb new technologies, emissions would have been higher;

(d) an indication that the project type is not common practice in the proposed area of implementation, and not required by a Party’s legislation/regulations.


Sustainable Development and Approval of Parties Involved

The validator shall assess the appropriateness of the local stakeholder consultation process performed by the project proponent. In particular, the validator shall determine whether:

relevant local stakeholders have been consulted, a summary of the comments received provided, due account has been taken of any comments received.

CDM shall assist Parties not included in Annex I in achieving sustainable development.


The DOE shall receive written approval of voluntary participation from the designated national authority of each Party involved, including confirmation by the host Party that the project activity assists it in achieving sustainable development.

CDM modalities & procedures, paragraph 40 (a)

The DOE shall confirm that comments by local stakeholders have been invited, a summary of the comments received has been provided, and a report to the DOE on how due account was taken of any comments has been received.

CDM modalities & procedures, paragraph 37 (b)

The validator shall assess whether the social and environmental impacts of a project are sufficiently addressed and whether the project is in line with sustainable development criteria defined by the host Party. Moreover, the validator shall verify that the host Party has confirmed that the project assists in achieving sustainable development.

If sustainable development criteria are elaborated and accepted by the host Party, a discussion on how the project complies with the sustainable development criteria shall be included in the project’s PDD. If no sustainable development criteria are defined, the validator shall assess the project’s compliance with the host Party’s current sustainable development priorities if these are defined.

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Assessment of Environmental Impacts

Project participants shall submit to the DOE documentation on the analysis of the environmental impacts of the project activity. If those impacts are considered significant by the project participants or the host Party, project participants shall have undertaken an environmental impact assessment in accordance with procedures as required by the host Party.

CDM modalities & procedures, paragraph 37 (c)

The validator shall determine whether an assessment of the environmental impacts of the project is required by national legislation. If so, the validator shall verify that the assessment of the environmental impacts has been carried out in accordance with national requirements and that the assessment of the environmental impacts has been approved by the relevant national authority.

Where no legal requirements exist, the analysis of the environmental impacts of the project activity should be reviewed by the validator to ensure this is in line with the CDM-PDD. The coverage of such a review has not been formally decided yet, but the validator should review that all relevant impacts have been identified and are properly taken into account in the project.

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Monitoring Methodology and PlanCoverage of Emission Sources

A monitoring plan shall provide for the collection and archiving of all relevant data necessary for determining:

anthropogenic emissions by sources of greenhouse gases occurring within the project boundary during the crediting period;

the baseline of anthropogenic emissions by sources of greenhouse gases within the project boundary during the crediting period;

increased anthropogenic emissions by sources of greenhouse gases outside the project boundary that are significant and reasonably attributable to the project activity during the crediting period.

A monitoring plan shall provide for the collection and archiving of information related to the environmental impacts of the project, if those impacts are considered significant by the project parties or the host Party.


The validator shall assess whether the monitoring plan provides for the monitoring of the relevant project and baseline GHG emission indicators and whether it addresses all other factors that should be monitored over the project lifetime, including social and environmental sustainability indicators.

This includes an assessment of the proposed system boundary with regard to whether the proposed boundaries for accounting project and baseline GHG emissions, respectively, include all significant sources of GHG emissions and all relevant GHG gases. A test of materiality may be used to assess to which extent important GHG emissions may be omitted.

The validator shall determine whether the monitoring methodology employed by the project is previously approved by the CDM Executive Board. If the validator determines that the project intends to use a new monitoring methodology, the new methodology shall be submitted for approval by the CDM Executive Board.


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Monitoring Methodology and Plan Monitoring Practise and GHG Data Management

A monitoring plan shall provide for: quality assurance and control procedures for the

monitoring process; procedures for the periodic calculation of the

reductions of anthropogenic emissions by sources by the proposed CDM project activity, and for leakage effects;

documentation of all steps involved in the calculations of emission reductions.


The validator shall assess the proposed GHG data management, control and reporting systems, e.g. instructions, procedures, record keeping systems, assumptions, technical equations, models and other means that support complete, accurate and conservative CER estimates. This shall confirm that project quality control procedures and operations reflect best practices and enable verification of GHG emission reductions that are sound, credible and provide an adequate basis for a successful completion of periodic verifications.

A monitoring plan shall reflect good practise.

CDM modalities & procedures, paragraph 54 (b)

The validator shall determine whether: the proposed system for monitoring reflects good monitoring

practise the monitoring plan provides for complete, accurate and real

measurements of achieved emission reductions the monitoring plan provides for conservative monitoring of

baseline, when applicable, taking into account data uncertainty.

Validation of the monitoring plan requires a thorough and comprehensive assessment of known risks and uncertainties related to emission reductions. The validation shall ensure that identified risks and uncertainties related to emission reductions are sufficiently addressed by the monitoring plan.

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Means of Verification

• Document Review – Review of data and information to confirm the

correctness of presented information – Cross-checks between information provided in the

project design documentation and information from independent background investigations

• Follow-up Interviews– On site– Via telephone– Via email

Interviews shall include relevant stakeholders in the host country, personnel responsible for project design and implementation, and other stakeholders as applicable.

• Cross-check of information provided by interviewed personnel, i.e. by source check or other interviews

• Comparison with projects or technology that have similar or comparable characteristics

• Test of the correctness of critical formulas and calculations• Witness and comparisons of similar projects in the host

country• Comparison between baseline factors and project

performance factors to confirm comparability and consistency in the use of the MP

The validation requires the use of a set of means that shall be used to identify and determine risks related to project implementation and GHG reductions. To sustain a risk-based assessment, these means shall be used both during the desk reviews and the follow-up interviews. The methods employed shall particularly focus on the accuracy of provided information and the credibility of the selected project baseline. The validation protocol shall provide guidance as well as document the results of the validation activities.

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The Validation Process


Validation Team Selection

ValidatorSelection

Validation Contract Establishment

Develop ProjectDocumentation


Final Validation Report and Opinion

Background Investigations

Document Review


The main steps in a successful CDM project validation are shown in this flow diagram. The different layers may be seen as representing the validation preparations, the validation itself and at last the results of the validation process. The box colour represents the party responsible for the activity.(Green for project proponent, orange for the validator, blue for the CDM EB). For most of the activities the guidelines provide links to issues that give further and detailed explanation and guidance on the validation process. Project proponents may select a two-step validation approach as described on the next page.

EB Approval ofMethodologies

Public Stakeholder Comment Process (30 days)

EB Registrationof project

Baseline & Monitoring Methodology Check

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Baseline and Monitoring Methodology Check

The validator shall check whether the baseline and monitoring methodologies employed by the project is previously approved by the CDM Executive Board (EB).

If the validator determines that the project intends to use new baseline and monitoring methodologies, the new methodologies shall be submitted for review and approval by the CDM EB. The validator shall check whether documents are complete, i.e. the draft CDM-PDD shall as a minimum include complete sections A to E as well as annexes 3 and 4 describing the new baseline and monitoring methodology, respectively. Then the validator shall forward, without further analysis, the proposed new methodology to the UNFCCC secretariat using the propose new methodology form (F-CDM-PNM).

The secretariat forwards the documentation to the EB and the Methodology Panel and makes the proposed new methodology publicly available on the UNFCCC CDM web site and invites public inputs for a period of 15 working days. The Methodology Panel, taking into consideration public comments and the recommendations by the desk reviewers, prepares its recommendation regarding the approval of the proposed new methodology to the EB. The EB considers and eventually approves a proposed new methodology at the next meeting following the receipt of the recommendation regarding the approval of the proposed new methodology by the Methodology Panel.

Two-steps validation approach :

1. An initial validation of the CDM project, including a complete assessment of the proposed baseline and monitoring methodologies, prior to the submission of new methodologies to the EB for review and approval.

2. A final validation of the project baselines and monitoring plans, taking into account the CDM Executive Board’s comments on the proposed baseline and monitoring methodologies, after EB approval of the new methodologies.

The advantage of the two-steps approach is that new methodologies are thoroughly reviewed by the validator prior to the submission to the EB. However, the two-steps approach requires two stakeholder consultation processes, one during phase 1 and one during phase 2, as comments by Parties, stakeholders and NGOs shall be invited after the baseline and monitoring methodologies applied by a project are approved.

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EB Approval of Methodologies

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Pro

ject

Pa

rtic

ipa

nts

(PP

)

DO

E(o

r A

E)

UN

FC

CC

Se

cre

tari

at

Me

th P

an

el

Exe

cutiv

eB

oa

rd (

EB

)P

ub

licSubmit PDD with

proposed new baselineand monitoring

methodology to DOE

Check PDD forcompleteness and

submit PDD toSecretariat using

F-CDM-NM

Forward PDD toEB and Meth

Panel and makePDD publicly

available

Select twoExperts

Expert 1 submitsrecommendation(F-CDM-Nmex)

Expert 2 submitsrecommendation(F-CDM-Nmex)

Upon request,provide

additionaltechnical

information

Meet and make apreliminary

recommendation andsubmit, through the

Secretariat and DOE,preliminary

recommendation toPP

Submit, through DOEand Secretariat,clarifications to the MethPanel (clarificationsshall include revisions inannexes 3 and 4 of thePDD in highlighted form)

Comment(F-CDM-Nmpu)

5 working days

15 days

5 weeks

Prior to making arecommendation, the

Meth Panel mayrequest, through the

Secretariat and DOE,additional technicalinformation from PP

10 working days

If recommendation isin favour of approval

or if PP do notprovide clarifications,the recommendationshall be considered

as a finalrecommendation

Considerclarifications at

its next meetingand prepare its

finalrecommedation

Approveor not approvemethodology at

its nextmeeting

max 4 months

If methodology isapproved, perform

valdiation

If methodology is notapproved, may

resubmit revisedmethodology in next

round

10 working days

Approveor not approvemethodology at

its nextmeeting


Document Review

The document review shall comprise, but not be limited to, an evaluation of the following:• the documentation is complete and comprehensive and follows the structure and criteria given in the

UNFCCC CDM-PDD template • the baseline and monitoring methodologies are justified and appropriate for the specific project• the assumptions for the baseline are conservative and appropriate• the description of the baseline development has considered technological, political, socio-demographic,

environmental and legal trends of relevance to the project• additionality of the project is sufficiently demonstrated in the PDD• all aspects related to direct and indirect emissions, including leakage, are captured in the project design

documentation and potentially claimed emission reductions• the calculation of GHG emission reductions is appropriate and uses conservative assumptions for estimating

emission reductions• local stakeholder consultation has been carried out and comments are taken into account in the project design• the technical features of the project, as well as other information about the project has been sufficiently addressed.• the monitoring plan clearly identifies the frequency of, responsibility and authority for monitoring, measurement and

data recording activities and sufficiently describes quality control/ quality assurance/ management control procedures

The document review shall establish to what degree the presented project design documentation (PDD), including the baseline study and the monitoring plan, meet the established validation criteria.

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Background Investigation

To supplement documentation provided from the project proponent, the validator will normally have to identify other sources that can provide background information for the validation. Focus for this should be to identify issues that are potentially of relevance to the project. Such background studies are particularly important if the project is in an industrial or public sector that has not hosted a project of this character before, or if the validator has limited experience with particular host country circumstances. The background study should evaluate the political and legal, environmental, socio-demographic and technological policies, circumstances and trends applicable to the specific project. A background investigation through a host country visit is encouraged for projects where host country or sector-specific information is not obtained through prior validation of projects.

The background study shall enable a risk-based validation, thus the validator should emphasise on issues that might incur risks related to successful project implementation or accomplishment.

Examples of issues that might prove useful as background information for project validation:

– Project technology– Environmental legislation in the host country– UNFCCC acceptance and registration of similar

projects– Previous established agreements, Memorandums

of Understanding or Letters of Intent between the project proponent and the host Party

– Sustainable development priorities in the host country

– Macro-economic trends in the host country – Political aspirations in the host country, such as

energy policies and waste management policies.– Identification of data sources and data availability– Issues related to project implementation impacts,

such as despatch patterns, marginal power plants, grid factors etc. and gas distribution network coverage for energy projects

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Follow-up interviews with host country project stakeholders may prove useful or even necessary in order to discuss and validate issues related to project baseline and additionality. For discussions related to the technical implementation or financing of the project, follow-up interviews with the project developer may also be beneficial.

Discussions with the host Party’s designated national authority in order to understand and validate issues related to sustainable development is important for CDM projects. Unless local validators are used for project validation, a thorough understanding of such complex issues may be difficult to achieve through other means.

Follow-up interviews are a prerequisite if the validator does not find sufficient or complete information or evidence via other means of verification. Interviews may be performed face-to-face or via telephone.

Desk review vs. visit to host country

A validation based on a desk review only, including telephone interviews with host country project stakeholders, may be used as a cost-effective way for validation of a project when the project context is well known and the project’s additionality is proven by similar projects in the same environment.

A validation based on a desk review only will usually require that similar projects have been validated and previously achieved registration with the UNFCCC, and that the implementation of these projects have not changed the additionality of the proposed project. Hence, a well-documented project proposal with reference to prior projects of the same character might cause the validator to choose not to incur the extra costs related to a host country visit.

The assessment performed during a GHG project validation shall enable the validator to arrive at a conclusion regarding the reasonableness of project presumptions. This assessment shall include theoretical as well as practicable considerations, and also give an opinion on critical factors related to the project baseline.

A site visit may prove useful for some projects, such as refurbishment of existing installations and energy efficiency projects. A site visit may not be required for green-field projects, but will need be considered.

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Stakeholder Consultation Process

The validator shall make the project design document of the project under consideration publicly available and invite Parties, stakeholders and UNFCCC accredited NGOs to comment on the validation requirements within 30 days. Comments received during the 30 day stakeholder consultation process shall be made publicly available.

The invitation for comments shall be open and transparent in a way that allows to receive comments from regional stakeholders. The CDM-EB decided that the PDD and comments from Parties, stakeholder and NGOs shall be made available through the validator’s website, with a link to this site from the UNFCCC website. Only if a validator has no website or no possibility to link the documents to another site, they will be made public using the UNFCCC website and server.

The validator shall take into account the comments received and shall demonstrate how due account was taken in the validation process of the comments received. The validator is not required to enter into a dialog with Parties, stakeholders or NGOs commenting on the validation requirements. However, if comments are not sufficiently substantiated, the validator may request further clarifications on the comments received.

To ensure a transparent validation process, the validator may include the comments received and how the validation has taken due account of the comments received in a separate appendix to the validation report. Issues brought up by stakeholders may be further discussed and elaborated in the project’s validation protocol

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The DOE shall:a) establish a web site where PDDs shall be made

publicly available in PDF format through a link to the UNFCCC CDM web site; or

b) Make PDDs directly publicly available in PDF format on the UNFCCC CDM web site.

CDM-EB-09 Annex 7



The draft validation report should facilitate the joint effort between the project proponent and the validator to develop and document answer(s) and conclusions to requirements which are considered applicable for CDM projects. The independent validation exercise and subsequent discussions given in the report shall enable the project proponent to address any concerns the validator may have raised related to the project, and how these may be clarified. The report should also give an overview of the scope of the validation and the conclusions for individual requirements.

The draft validation report should give an overview of the efforts deployed by the validator in order to arrive at the draft validation findings. It should build on the transparency principles, and particularly indicate the implications of corrective action requests identified during the validation.

The draft validation report shall include a general discussion of details captured by the validation protocol, and clearly state the conclusions relate to each of the general issues required for successful validation.

The content of a draft validation report may look like this:

1 Introduction1.1 Objective1.2 Scope1.3 GHG Project Description

2 Methodology2.1 Review of Documents2.2 Follow-up Interviews2.3 Resolution of Outstanding Issues

3 Preliminary Validation Findings3.1 Project Design3.2 Baseline3.3 Monitoring Plan3.4 Calculation of GHG Emissions3.5 Environmental Impacts3.6 Comments by Local Stakeholders

4 Comments by Parties, Stakeholders and NGOs

5 References

Appendix 1: Validation Protocol

There is a CDM validation report template available for outline and further explanation of the validation report content.

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Clarifications and Corrective Action Requests

A validation may identify issues related to the project’s baseline, implementation or operations that need to be further elaborated, researched or added to meet UNFCCC or host Party requirements and achieve credible emission reductions. There will be different ways of reporting such results. However, it is imperative that these issues are transparently identified, discussed and concluded in the validation report and opinion. Non-compliance with project requirements, or the identification of a risk to successful fulfilment of the particular project’s objectives have been termed ”Corrective Action Request" .

The validator shall make sure that all Clarification Requests and Corrective Action Requests are reported and elaborated in the conclusion of the draft validation report.

Also minor issues, i.e. those which do not represent a risk of changing the validation conclusions, shall be brought to the attention of the project proponent for consideration. However, minor issues may not necessarily be presented as a part of the validation opinion.

After the presentation of Clarifications or Corrective Action Requests in the draft validation report the project proponent will have to respond to the corrective action and clarification requests and barring exceptions resolve the issue before a final validation opinion is formulated by the validator. Every exception shall be justified.

A Corrective Action Request is issued where:a) mistakes have been made in assumptions or the

project documentation which directly will influence on project results;

b) the requirements deemed relevant for validation of a project with certain characteristics have not been met; or

c) there is a risk that the project would not be registered by the UNFCCC or that emission reductions cannot be verified and certified.

A Clarification Request is issued where information is insufficient, unclear or not transparent enough to establish whether a requirement is met.

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Validation Protocol

A generic protocol for the validation of CDM projects has been developed to facilitate cost-effective and comprehensive validation of CDM projects. These protocols may prove useful as a starting point in identifying generic as well as specific criteria for individual projects. For cost-effective and systematic validations of CDM projects, the protocol may be used as the documented backbone of a transparent validation process.

The protocol may also be used during the validation process to assist the validator to keep track of:

- issues to be further verified/ checked,

- issues to be clarified by the project parties,

- issues to be corrected by the project parties

In order to fulfil the requirement for transparency, both the original comments in the draft validation protocol (which shall be submitted together with the draft validation report) as well as the final comments made after subsequent discussions with the project proponent and other project participants and updating of project documentation shall be included in the validation protocol.

An example of how a validation protocol may be structured is explained on the next page.

The generic CDM, JI and Small-Scale validation protocols (with requirements and checklist questions) can be found in separate files.

NB!

Dependent on individual project circumstances and the detail of the project documentation, the relevant protocol has to be amended to ensure its applicability for individual projects.

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Validation Protocol Legend

Table 1 Mandatory Requirements for Clean Development Mechanism (CDM) ActivitiesREQUIREMENT Ref CONCLUSION Cross Reference to Checklist (Table 2)

The requirements the project must meet.

Reference to the legislation or agreement where the requirement is found.

This is either acceptable based on evidence provided (OK), or a Corrective Action Request (CAR) of risk or non-compliance with stated requirements.

To ensure a transparent process, this refers to the relevant checklist questions in Table 2 to show how the specific requirement is validated.

CHECKLIST QUESTION Ref. MoV COMMENTS Draft Conclusions Final Conclusions

The various requirements in Table 1 are linked to specific checklist questions the project shall meet. The checklist is organised in different sections, following the CDM-PDD structure. Each section is then further sub-divided. The lowest level constitutes a checklist question

Reference to documents where the source to the checklist question or item is found.

The means of verification explains how conformance with the checklist question is investigated, i.e. through document review (DR) or interview (I).

The section is used to elaborate and discuss the checklist question and/or the conformance to the question. and to explain the conclusions reached.

This is either acceptable based on evidence provided (OK), or a Corrective Action Request (CAR) or a Clarification Request (CL) Whenever a CAR or CL is issued, table 3 shall be used to describe how the findings have been resolved and concluded.

The final conclusion of the validation shall be documented as either OK , CAR or CL. This is based on the resolution of outstanding issues as elaborated in Table 3.

Table 2 Requirements Checklist

Table 3 Resolution of Corrective Action and Clarification RequestsDraft report clarifications and corrective action requests by

validation team

Ref. to checklist question in table 2

Summary of project owner response Validation team conclusion

If the conclusions from the draft validation are either a Corrective Action Request or a Clarification Request, these shall be listed in this section.

Reference to the checklist question number in Table 2 where the CAR or CL is explained.

The responses given from the project proponent or other project participants during the communications with the validation team shall be summarised in this section.

This section shall summarise the Validation Team responses and final conclusions. The conclusions shall also be included in Table 2, in the section called “Conclusions Final”.

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After the corrective action requests stated in the draft validation report are acknowledged by the project proponent, these will have to to be resolved.

The requests can be resolved or "closed out" by the project proponent by modifying the project design and by rectifying and updating the project design documentation. If this is not done in the final stages of the validation, it may cause the project not be recommended for UNFCCC registration, or cause the expected emission reductions not to be subsequently verified and certified. However, such a choice shall be reflected as a qualification in the final validation opinion.

Conversely, a validation with no (remaining) corrective action requests could still end up not producing the expected emission reductions. Some issues will only be possible to clarify fully during detailed design, e.g. after an investment decision has been made. Other issues may even be unclear until an ex post (i.e. for the time emission reductions have been achieved) verification and certification has established if and how many CERs the project actually has generated.

Corrective action requests may lead to amendments to the projects monitoring plan, or adjustments of the selected project baseline. Corrective action requests may also require further investigation of issues that are not considered or appropriately addressed in the project documents.

It is the responsibility of the project proponent to respond to the corrective action requests identified by the validator in a timely manner. However, as some issues may only be verified during or after project implementation, it shall be clearly documented in the project design documentation how these requests will be addressed. For this as well as for all other changes as a result of the validation, the nature and location of changes shall be clearly identified in the revised project design documentation.

All changes shall be approved by the project proponent before submitted to the validator for final review.

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Final Validation Report

The final validation report should reflect the results from the dialogue and any adjustments made to the project after the draft validation report was submitted. It will in its appearance look much like the draft validation report, but will now reflect the responses to corrective action and clarification requests, discussions and revisions of project documents. Thus, the final validation report should give the final conclusions regarding the projects conformance with relevant UNFCCC requirements (especially each requirement of the CDM modalities & procedures, paragraph 37). The validation report may raise issues that need to be subsequently addressed during project implementation.

The final validation report shall include a validation opinion which either forms the basis for UNFCCC registration of the project or which explains the reason for non-acceptance if the project is judged not to fulfil validation requirements.

The validation report shall give an overview of the approach employed by the validator in order to arrive at the final validation conclusions and opinion. It shall particularly indicate the implications of any remaining corrective action requests not resolved during the validation. Apart from this, the general discussion of details captured by the validation protocol and conclusions related to project requirements shall be included in the final report. The DOE shall employ necessary quality assurance procedures to ensure the correctness of the report and opinion.

The final validation report shall be made publicly available upon transmission to the EB.

CDM modalities & procedures, paragraph 40 (g)

The content of a validation report may look like this:


2 Methodology2.1 Review of Documents2.2 Follow-up Interviews2.3 Resolution of Outstanding Issues

3 Validation Findings3.1 Project Design3.2 Baseline3.3 Monitoring Plan3.4 Calculation of GHG Emissions3.5 Environmental Impacts3.6 Comments by Local Stakeholders

4 Comments by Parties, Stakeholders and NGOs

5 Validation Opinion

6 References

Appendix 1: Validation Protocol

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Validation Opinion

After completed validation, a validation opinion shall be provided by the validator. The validation opinion shall either form the basis for UNFCCC registration of the project or shall explain the reason for non-acceptance if the project is judged not to fulfil the requirements for validation. In addition, the opinion will be an important decision factor for project proponents whether to proceed or not with the project.

This opinion shall include: Summary of the validation methodology and

process and the applied validation criteria Statement on project components/issues not

covered in the validation engagement Summary of the validation conclusions Statement on the likelihood of emission

projections Liability statement with regards to the validity

of the validation opinion

The validation opinion shall confirm that the project meets stated criteria and that the methods presented in the project design documentation are acceptable and have been correctly applied.

Possible validation outcomes:

A. Unqualified validation opinion

An unqualified validation opinion is issued if the review and further assessment of the project design, the baseline and monitoring plan concluded that the project complies with all UNFCCC and host Party requirements. This means that all corrective action requests presented in the draft validation report were satisfactorily resolved.

B. Qualified validation opinion

A qualified validation opinion will be issued when the project meets all UNFCCC and host Party requirements, but does not meet criteria given to provide for consistent project operations, monitoring and reporting. The project developer shall rectify such issues prior to project commencement, and the initial verification or first periodic verification shall determine whether qualifications stated in the validation opinion have been sufficiently addressed.

C. Denial of validation

A denial of validation shall be clearly expressed when the validator is unable to obtain sufficient and appropriate evidence which could confirm that UNFCCC or host Party requirement are met, or where evidence show that such requirement are not met. Hence, the validator will conclude that the project cannot be validated.

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Examples of Validation Opinions

Unqualified validation opinion

“XYZ Verification Ltd. has performed a validation of the ABC project in Country X. The validation was performed on the basis of UNFCCC criteria and host Party criteria, as well as criteria given to provide for consistent project operations, monitoring and reporting.

The review of the project design documentation and the subsequent follow-up interviews have provided the validation team with sufficient evidence to determine the fulfilment of stated criteria. In our opinion, the project meets all relevant UNFCCC requirements for the CDM and all relevant host Party criteria.

XYZ Verification Ltd. has received a confirmation by the host Party that the project activity assists it in achieving sustainable development.

By displacing fossil fuel-based electricity with electricity generated from a renewable source, the project results in reductions of CO2 emissions that are real, measurable and give long-term benefits to the mitigation of climate change. An analysis of the investment and technological barriers demonstrates that the proposed project activity is not a likely baseline scenario. Emission reductions attributable to the project are hence additional to any that would occur in the absence of the project activity. Given that the project is implemented as designed, the project is likely to achieve the estimated amount of emission reductions.

Following the endorsement of the project by the Country X Designated National Authority, the project will hence be recommended by XYZ Verification Ltd. for registration with the UNFCCC.

Qualified validation opinion

“…The validation has revealed that the procedures for monitoring and reporting are not yet sufficiently developed. The lack of such procedures may represent a risk for emission reductions not being verified and certified. Satisfactory procedures should hence be developed prior to project implementation. …”

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Individual DOEs may apply their own “language” and own terms to express their validation opinions.


Unresolved Issues

Although the majority of the modalities and procedures for the CDM are in place, the CDM is still not fully operational. As a consequence, a project may not yet fulfil all relevant validation criteria at the time the validation is concluded and a qualified validation opinion is issued.This may be due to one or more of the reasons below:

The host Party has not yet defined sustainable development requirements or other requirements applicable for CDM projects;

The host Party has not yet established or designated a national authority to approve (or reject) CDM project activities;

The modalities for including afforestation and reforestation activities under the CDM are not yet in place.

It must be kept in mind that a validation only can tell something about the project’s likelihood to comply with requirements and to succeed at a certain point in time and under given circumstances.

For the verifier, the validation report will hence be one of the inputs used for verification of emission reductions, and any changes that have occurred since validation and that have impact on the claimed emission reductions shall therefore be considered.

If factors that impact project performance change after validation, such changes shall be brought to the attention of the verifier.

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Part Three:Small Scale CDM Validation Guidelines

Content:

Small Scale Project Activity Categories

Differences between Small-scale and other CDM projects

The Validation Process for Small-Scale Projects

For the validation of small scale CDM projects the same criteria and process apply as for CDM validations with the exception of some key differences.

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Small-Scale Project Categories

Type I: Renewable energy projects (Capacity < 15 MW):

I.A Electricity generation by the user

I.B Mechanical energy for the user

I.C Thermal energy for the user

I.D Renewable electricity generation for a grid

Type II: Energy efficiency improvement projects (Energy Efficiency Improvement <15 GWh per year)

II.A Supply side energy efficiency improvements - transmission and distribution

II.B Supply side energy efficiency improvements - or generation

II.C Demand-side energy efficiency programmes for specific technologies

II.D Energy efficiency and fuel switching measures for industrial facilities

II.E Energy efficiency and fuel switching measures for buildings

Type III: Other project activities (Direct Project Emissions < 15 kilotonnes of CO2equivalents)

III.A Agriculture

III.B Switching fossil fuels

III.C Emission reductions by low-greenhouse gas emitting vehicles

III.D Methane recovery and avoidance.

For the above small-scale project categories simplified baselines and monitoring methodologies shall be employed.

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Differences between Small-Scale and other CDM Projects

Different requirements related to the project design:• Shall use the simplified baseline and monitoring methodologies specified for the project category or

propose changes to simplified baselines and monitoring methodologies, or propose additional project categories for consideration by the EB.

• Shall provide an explanation to show that the project activity would otherwise not be implemented due to the existence of one or more barriers:

– Investment barriers– Technological barriers– Barriers due to prevailing practice– Other barriers

• Project boundary is limited to the physical project activity.• Leakage shall be considered for biomass projects and as required for individual project categories• Use the Simplified PDD for Small-Scale CDM Project Activities• Documentation on the analysis of environmental impacts is only necessary if required by the host Party• The project participants may propose changes to the simplified baseline and monitoring methodologies or

propose additional project categories for consideration in writing directly to the CDM Executive Board.

Different requirements related to the validation:• Ensure that the project complies with one of the small-scale project categories and qualifies to employ the

baseline and monitoring methodology of this project category• Make use of the small-scale validation protocol that takes into account the specific requirements for small

scale projects

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The Validation Process for Small-Scale Projects

The main steps in a successful validation of small-scale projects are shown in this flow diagram. The different tiers may be seen as representing the validation preparations, the validation itself and at last the results of the validation process. The box colour represents the party responsible for the activity (Green for the project proponent, orange for the validator, blue for the CDM EB). The guidelines provide in the CDM Validation Guidelines will be valid also for the validation of small-scale projects. The difference between validation of small-scale projects and other projects is described on the previous page. Links to the generic validation guidelines that give further and detailed explanation and guidance on the validation process are provided for the relevant activity boxes below.


Validation Team Selection

ValidatorSelection

Validation Contract Establishment



Final Validation Report and Opinion


Document Review



EB Registrationof project

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JI Determination Actors

Differences between JI Determination and CDM Validation

JI Determination Criteria• Participation Requirements• Baseline Setting• Additionality of project activity• Environmental Impacts• Monitoring

JI Determination Process

If the host Party meets all eligibility criteria related to the transfer and acquisition of ERUs as stated in the Marrakech Accords (Guidelines for the implementation of Article 6), the host Party is allowed to apply their own procedures for approving JI projects and for verifying emission reductions from an JI project (First track JI). Nonetheless, a host Party that meets all criteria may elect to use the verification procedure under the Article 6 Supervisory Committee, or an acquiring Party may request use of this procedure.

If the host Party does not meet these criteria, the verification procedure under the Article 6 Supervisory Committee apply (Second track JI). These verification procedures provide for the determination of a JI project activity and the verification of ERUs by an independent entity accredited by the Article 6 Supervisory Committee.

These guidelines apply to projects that use the verification procedure under the Article 6 Supervisory Committee apply (Second track).

Part Four: JI Determination Guidelines

Content:

For the determination of JI the same means of verification and process apply as for CDM validations with the exception of some key differences.

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Consultants

Host PartyDesignatedFocal Point

IndependentEntity

ProjectProponent

Validation Contract Parties

Involved actors

Project Entity

Note: The above diagram reflects a contractual model where the project proponent is independent from the project entity. The frame for “project participants” only shows an example. Other relationships are possible, such as a direct contractual relationship between project entity and the independent entity.

JI SupervisoryCommittee

PartiesStakeholders,

Accredited Observers

Project participants

Contractual relationshipsCommunication channels during validation


Difference between JI Determinationand CDM Validation

Different requirements related to the project design:

• Determination (for CDM projects this is named Validation) is not required if the host Party complies with the eligibility requirements according to Decision 16/CP.7, paragraph 21

• No requirement for contribution to sustainable development in the host Party

• No requirements for local stakeholder consultations. However a Party involved must have national guidelines in place including the consideration of stakeholders' comments, paragraph 20 (b).

Different requirements related to the determination:• Make use of the JI Determination Protocol that takes into account the requirements as stated above

• No approval of baseline and monitoring methodologies is required• Note that guidance for JI baseline methodologies, comparable to para. 48 of the CDM M&P, has yet

to be defined.

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JI Determination Criteria

The independent entity shall test and when possible confirm that the project design meets the following criteria:

UNFCCC criteria: The Kyoto Protocol Article 6 criteria, the guidelines for the implementation of Article 6 (Marrakech Accords) and the relevant decisions by the JI Supervisory Committee;

Host Party criteria: National requirements and potential specific requirements contained in, for example, the preliminary approval by the host Party or project agreements between involved parties.

The independent entity is expected to identify and determine the appropriate criteria for project determination based on the technical nature of the project, the presented project design documentation as well as any background study performed in advance of the validation. The project design is assessed against these criteria and the result of this is recorded in the determination protocol.

UNFCCC criteria include• Participation Requirements• Project Additionality• Environmental Impacts• Baseline Setting• Monitoring

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NB. The official starting year for JI projects is in 2008. The regulatory process for JI has not yet commenced and methodologies for JI and the "determination" process are subject to future guidance by the appropriate Convention bodies.



A host or acquiring Party may only issue, transfer or receive ERUs upon meeting the following requirements:

- The Party is a party to the Kyoto Protocol- Its assigned amount has been calculated and

recorded in accordance with the modalities for the accounting of assigned amounts

- The Party has in place a national registry in accordance with Article 7, paragraph 4

Guidelines for the implementation of Article 6, paragraph 21

Parties participating in JI shall designate a focal point for approving JI projects and have in place national guidelines and procedures for approving JI projects.

JI determination is mandatory if the host Party does not meet the eligibility requirements as described (paragraph 21). The secretariat maintains a publicly accessible list of Parties that meet these requirements. JI determination is optional for those host Parties that meet the requirements.

Legal entities participating in JI may only transfer or acquire ERUs if the authorizing party is eligible to do so at that time.

Guidelines for the implementation of Article 6, paragraph 20 - 29

The independent entity shall determine whether the host Party voluntarily participates in the project. This is verified by checking that the project has been approved by the Parties involved. The sponsor country shall be identified and the approval of the project by the host Party (in the form of at LoA, MoU or LoI) will be necessary for project registration.

The validator shall also determine whether the sponsor/acquiring parties are in compliance with Kyoto Protocol Article 5 and 7 (The requirements for national communication and keeping national GHG inventories).

The project shall have the written approval of the designated national authorities of each party involved.

Guidelines for the implementation of Article 6, paragraph 33 (a)

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Baseline Setting

The baseline for a JI project is the scenario that reasonably represents the GHG emissions that would occur in the absence of the proposed project.

A baseline shall cover emissions from all the six gases, the applicable sectors and source categories, and removals by sinks as listed in Annex A of the Kyoto Protocol, within the project boundaries.

Project participants shall justify their choice of baseline.

Guidelines for the implementation of Article 6, Appendix B

A baseline shall be established: in a transparent manner regarding the choice of

approaches, assumptions, methodologies, parameters, data sources, and key factors;

taking account of uncertainties and using conservative assumptions

on a project specific basis and/or using a multi-project emission factor

taking into account relevant national and/or sectoral policies and circumstances, such as sectoral reform initiatives, local fuel availability, power sector expansion plans, and the economic situation in the project sector.


The validator shall determine whether the baseline is appropriate and in accordance with the criteria above.

Guidelines for the implementation of Article 6, paragraph 33c and Appendix B

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Additionality of Project Activity

Any such project provides a reduction in emissions by sources, or an enhancement of removals by sinks, that is additional to any that would otherwise occur.


A JI project activity shall result in a reduction of anthropogenic emissions by sources or an enhancement of anthropogenic removals by sinks that is additional to any that would otherwise occur.


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The assessment of the additionality of a project activity shall determine whether there is sufficient evidence that demonstrates that the JI project activity itself is not a likely baseline scenario. Additionality may be demonstrated by

(a) a flow-chart or series of questions that lead to a narrowing of potential baseline options;

(b) a qualitative or quantitative assessment of different potential options and an indication of why the non-project option is more likely;

(c) a qualitative or quantitative assessment of one or more barriers facing the proposed project activity: Investment barrier: a financially more viable alternative to the project activity would have led to higher

emissions; 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;

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

Other barriers: without the project activity, for another specific reason identified by the project participant, such as institutional barriers or limited information, managerial resources, organizational capacity, financial resources, or capacity to absorb new technologies, emissions would have been higher;

(d) an indication that the project type is not common practice in the proposed area of implementation, and not required by a Party’s legislation/regulations.


Environmental Impacts

The project participants shall submit to the accredited independent entity documentation on the analysis of the environmental impacts of the project activity in accordance with procedures as determined by the host Party.

If those impacts are considered significant by the project participants of the host Party, the project participants shall have undertaken an environmental impact assessment as required by the host Party.


The independent entity shall assess whether the environmental impacts of a project are sufficiently addressed, whether the project is in line with environmental legislation, procedures and requirements defined by the host Party, and whether an environmental impact assessment is required and sufficiently carried out.

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Monitoring

As part of the project design document, a monitoring plan shall provide for the collection and archiving of all relevant data necessary for determining:

anthropogenic emissions by sources of greenhouse gases occurring within the project boundary during the crediting period;

the baseline of anthropogenic emissions by sources of greenhouse gases within the project boundary during the crediting period;

increased anthropogenic emissions by sources of greenhouse gases outside the project boundary that are significant and reasonably attributable to the project activity during the crediting period.

A monitoring plan shall also provide for the collection and archiving of information related to the environmental impacts of the project, in accordance with procedures required by the host Party, where applicable.

The monitoring plan shall provide for: Quality assurance and control procedures Procedures for periodic calculation of the above anthropogenic emissions Documentation of all steps involved in the calculations above


The independent entity shall assess whether the monitoring plan provides for the monitoring of the relevant project and baseline GHG emission indicators and whether it addresses all other factors that shall be monitored over the project lifetime, including environmental indicators as applicable.

This includes an assessment of the proposed system boundary with regard to whether the proposed boundaries for accounting project and baseline GHG emissions, respectively, include all significant sources of GHG emissions and all relevant GHG gases. A materiality test may be used to assess to which extent important GHG emissions may be omitted.

The independent entity shall also assess the proposed GHG data management, control and reporting systems, e.g. instructions, procedures, record keeping systems, assumptions, technical equations, models and other means that support accurate and conservative ER estimates.

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The JI Determination Process

The main steps in a successful determination are shown in this flow diagram. The different layers may be seen as representing the determination preparations, the determination itself and at last the results of the process. The box colour represents the party responsible for the activity (Green for the project proponent, orange for the independent entity, blue for the JI Supervisory Committee). Most of the guidelines provided in the CDM Validation Guidelines will be valid also for the JI determination process, including the Means of Verification to be used during determination. The difference between validation of CDM projects and JI determination and the specific JI determination criteria are described in the pages above. Links to the CDM validation guidelines that give further and detailed explanation and guidance are provided for each relevant activity in the flow diagram.

Draft Determination Report

Determination Team Selection

Selection of Independent Entity

Determination Contract

Establishment



Final Determination Report and Opinion


Document Review



Supervisory Committee Registration of project

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During the Initial Verification, the verifier will review that all operations are implemented and installed as planned and that all physical features of the project are in place. One important purpose of the initial verification is to confirm that the monitoring system is in place and fully functional.

The project parties can, based on a cost-benefit analysis, choose whether an initial verification is carried out

a) as a separate activity prior to the project commencing its regular operations, or

b) as an integrated part of the first periodic verification.

A separate initial verification prior to the project entering into regular operations is not a mandatory requirement. Performing an initial verification as part of the first periodic verification may result in reduced verification costs, but bears the risk that emission reductions generated in the period from project start to the first periodic verification may not be verified.

Part Five: Initial Verification Guidelines

Content:

Initial Verification Actors

Initial Verification Objective

Initial Verification Scope

Initial Verification Process

Desk Review

On-site Assessment

Draft Initial Verification Report

• Initial Verification Checklist

Final Initial Verification Report

• Initial Verification Statement

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Initial Verification Actors

VerifierProject

Proponent

Initial Verification Contract Parties

Involved actors

Project Entity

Solid lines indicate contractual relationships. Dashed lines indicate communication channels during verification.Note: The above diagram reflects a contractual model where the project proponent is independent from the project entity. Other relationships are possible, such as a direct contractual relationship between project entity and the verifier.

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Initial Verification Objectives

The are several purposes of the initial verification process: to ensure that the project has been implemented as planned, that the monitoring system is

in place and that the project is ready to generate and record GHG emission reductions; to assess adjustments and amendments to the monitoring plan that may have become

necessary during the detailed design and construction of the project (Please note that the CDM and JI modalities do not give guidance on handling changes to previous validated monitoring plans);

to provide assurance of generation of high quality emission reductions and clear the way for project commissioning.

The objective of an initial verification is to verify that the project is implemented as planned, to confirm that the monitoring system is in place and fully functional, and to assure that the project will generate verifiable emission reductions.

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Initial Verification Scope

The initial verification should typically address the following aspects:

• Remaining issues and qualifications from validation/ determination: Especially for projects which are not yet registered at CDM-EB or JI-SB, there might be some outstanding issues which have been identified in the validation report

• Project implementation: To assess the appropriate implementation is the core of the initial verification.

• External data sources: Especially for data of baseline emissions there might be the necessity to include external data sources.

• Environmental and social indicators: A Monitoring Plan may comprise the determination of environmental and/or social indicators which could be necessary to evaluate the success of the project activity.

• Management and operational system: In order to ensure a successful operation of a project and the credibility and verifiability of the emission reductions achieved, the project should have a well defined management and operational system.

If the initial verification is carried out as a separate activity prior to the project commencing its regular operations, the initial verification:

• will not verify emission reductions generated,• is not required to publish the monitoring

records or the verification report,• does not require a certification report,• is a dry-run in the context of monitoring and

reporting routines,• ensures the generation of verifiable data of

consecutive verifications,• antedates all extra steps of the first periodic

verification related to project implementation and management system.

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The Initial Verification Process

Verification Team Selection

VerifierSelection

Verifier ContractEstablishment

Desk Review

On-Site Assessment

Draft Initial Verification Report

The main steps in a successful initial verification is shown in this flow diagram. The different layers may be seen as representing the initial verification preparations, the initial verification itself and at last the results of the initial verification process. The box colour represents the party responsible for the activity (Green for the project proponent, orange for the verifier, yellow for project operator).

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Corrective Action(if applicable)


Desk Review

A special focus shall be given to the monitoring plan and the monitoring methodology (both part of the PDD) which e.g. will comprise information concerning requirements on the quality of metering equipment, and quality assurance procedures and links to national or international standardization systems. The verifier shall make himself familiar with the applied monitoring technologies and the applied standards. Measurement equipment might be used for project performance parameters as well as for baseline emission indicators or environmental and social performance indicators.

The management system should be evaluated in the context of generation and reporting of emission reductions.

During the initial desk review the verification team should become familiar with the project in order to get the possibility to compare the situation on-site with the situation described by underlying documentation. At least the following documents shall be reviewed: the last revision of the PDD and attached documents, the last revision of the validation report, the written management manual (if applicable), operation licenses of local authorities (if applicable).

Other documents, such as process flow diagrams, technical drawings and manuals of equipment suppliers, may be reviewed as well.

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On-Site Assessment (1)

• The on-site assessment shall include an investigation of whether all relevant equipment is installed and works as anticipated.

• Discussions with local stakeholders might be necessary to check the achievement of environmental and social impacts which should already be reached during construction phase.

• The operating staff shall be interviewed and observed in order to check the risks for inappropriate operation and data collection procedures of the project.

• Information flows for generating, aggregating/collating and reporting the selected monitored parameters shall be reviewed.

• Metering equipment shall be checked and positions of counters have to be recorded in order to prepare for the next periodic verification.

• The project owners have to provide evidence that demonstrates that all metering equipment is calibrated.• The required processes, routines and documentations shall be audited to check their proper application.

The assessment performed during an initial verification shall enable the verifier to arrive at a conclusion regarding the readiness of a project to start with the generation of high quality emission reductions. As such, it is indispensably to have an inspection on site in order to verify that the project is implemented in accordance with the PDD.

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On-Site Assessment (2)

• Open issues indicated in Validation Report, especially in projects which are not yet registered at CDM-EB or JI-SB, there might be some outstanding issues which should have been indicated by the validation report.

• Status of the implementation of the project• Reliability of internal data, sources and ways in which the data have been collected, calculated, processed,

aggregated and stored should be part of initial verification• Reliability of the external data, also access to such data and a proof of data quality should be part of initial

verification. Moreover, the entity delivering such data should be audited (if required needed) • Environmental and Social Indicators• The completeness of the monitoring plan• The correct implementation of GHG Management and operational system• The relevant aspects related to the development of the Initial verification as well as the verification

conclusions must be clearly explained to the client during opening and closing sessions.

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During the Initial Verification the auditor shall pay particular attention to:


Draft Initial Verification ReportThe draft initial verification report shall give an overview of the approach employed by the verifier in order to arrive at the initial verification conclusion. Apart from that, the general discussion of details captured by the initial verification checklist and the conclusions related to project requirements shall be included in the report.

The draft initial verification report shall particularly indicate the implications of any remaining issues related to the implementation or operation that need to be further elaborated, researched or added to meet the requirements and ensure the delivery of credible emission reductions. There will be different ways of reporting such results. However, it is imperative that these issues are transparently identified, discussed and concluded in the initial verification report. The findings of the initial verification are either Corrective Action Requests or Forward Action Requests.

The verifier shall make sure that all Corrective Action and Forward Action Requests, including an indication of the party responsible for requested actions, are reported and elaborated in the conclusion of the draft initial verification report. Also minor issues, i.e. those which do not represent a risk of changing the initial verification conclusions, shall be brought to the attention of the project proponent for consideration. However, minor issues may not necessarily be presented as a part of the initial verification statement.

After the presentation of the draft initial verification report, the project proponent will have to respond to the Corrective Action and Forward Action Requests and if possible resolve these issues before a final verification statement is formulated by the verifier. It is the responsibility of the project proponent to respond to the CARs and FARs identified by the verifier in a timely manner. All changes shall be approved by the project proponent before submitted to the verifier for final review.

A Corrective Action Request (CAR) is issued, where: there is a risk that emission reductions cannot be

verified at a later periodic verification, and where immediate actions by the project parties are

necessary to ensure a later verification of generated emission reduction.

A Forward Action Request (FAR) is issued, where: the actual status requires a special focus on this

item for the first periodic verification, or an adjustment of the MP is recommended.

In the context of FARs, risks have been identified, which may endanger the delivery of high quality CERs in the future, i.e. by deviations from standard procedures as defined by the monitoring plan. As a consequence such aspects shall receive a special focus during the next consecutive verification.

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Initial Verification Checklist

OBJECTIVE Ref. COMMENTS Concl.

C Implementation of the projectThis part is covering the essential checks during the on-site inspection at the project’s site, which is indispensably for an initial verification

C.1 physical componentsCheck the installation of all required facilities and equipment as described by the PDD.

C.2 Project boundariesCheck whether the project boundaries are still in compliance with the ones indicated by the PDD.

C.3 Metering systemsCheck whether the required metering systems have been installed. The meters have to comply with appropriate quality standards applicable for the used technology.

C.4 Data uncertaintyHow will data uncertainty be determined for later calculations of emission reductions? Is this in compliance with metering equipment?

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The results of the initial verification may be documented using the initial verification checklist. Dependent on individual project circumstances and the detail of the project documentation, the relevant checklist has to be amended to ensure its applicability for individual projects. The checklist is available as a separate file.

Checklist Example



The final initial verification report shall reflect the results from the dialogue and any adjustments made to the project after the draft initial verification report was submitted. It will in its appearance look much like the draft initial verification report, but will now reflect the response to corrective action requests, discussions and revisions to project documents e.g the management system documentation. Hence, the final initial verification report shall give the final conclusions regarding the projects readiness to start operation and generation of emission reductions.

The initial verification statement can be issued, and will determine how the project proponent will proceed with the project. Before awarding a positive (unqualified) initial verification statement all findings indicated with a CAR should be resolved. FARs will need to be addressed during the first periodic verification.

The initial verification report will typically include the following information:


2 Methodology

3 Initial Verification Findings3.1 Remaining issues, CARs, FARs from

previous validation3.2 Project Implementation3.3 External data3.4 Environmental and Social Indicators3.5 Management and Operational System

4 Initial Verification Statement

5 References

Appendix 1: Initial Verification Checklist

For further details, the Initial Verification Report Templates can be found in a separate file.

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Initial Verification Statement

After completed initial verification, an initial verification statement shall be provided by the verifier to the project proponent. A positive initial verification statement forms the basis to start the monitoring of emission reductions. In addition the statement will be an important factor for the project proponent in the contractual relationship with the project entity.

The initial verification statement shall include an explanation of:

• initial verification scope, methodology and process• remaining issues from validation• initial verification engagement conclusion• liability statement on the initial verification

engagement

The initial verification statement shall give the final verdict of the project in terms of the compliance of its implementation vs. the approved PDD, the readiness to start operation and likeliness to deliver high quality emission reduction.

Initial Verification Outcomes

A. Unqualified initial verification statementAn unqualified initial verification statement will be issued when the review of the project documentation and the on-site assessment have proven that the project is ready for starting operation and no further adjustments have to be made. There might be aspects, which are not in compliance with the expected progress of the project implementation, but which can be rectified until the first periodic verification. Such aspects will not directly impact the quality of emission reductions.

B. Qualified initial verification statementA qualified initial verification statement will be issued when there is a risk that emission reductions cannot be verified at a later periodic verification, and where actions by the project parties are necessary to ensure a later verification of generated emission reduction. Hence, the verifier will conclude that the project is not ready to generate verifiable emission reductions.

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Part Six: Periodic Verification Guidelines

Content:

Periodic Verification Objective Periodic Verification Actors Risk-based Verification Approach Verification Principles

Compliance with Monitoring Plan

Materiality Quality of Evidence

Periodic Verification Process

Desk Review

On-Site Assessment

Verification Report

• Verification Findings

• Verification Statement

• Certification

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Periodic Verification Objective

The objective of the periodic verification is:

– to verify that actual monitoring systems and procedures are in compliance with the monitoring systems and procedures described in the monitoring plan,

– to evaluate the GHG emission reduction data and express a conclusion with a high, but not absolute, level of assurance about whether the reported GHG emission reduction data is “free” of material misstatements,

– the reported GHG emission data is sufficiently supported by evidence, i.e. monitoring records.

If no prior initial verification has been carried out, the objective of the first periodic verification also includes the objectives of the initial verification.

Verification is the periodic independent review and ex post determination by the Designated Operational Entity / Independent Entity of the monitored reductions in GHG emissions during the defined verification period.

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Periodic Verification Actors

VerifierProject

Proponent

Verification Contract Parties

Involved actors

Project Entity

Solid lines indicate contractual relationships. Dashed lines indicate formal communication channels necessary to complete the verification. Note: The above diagram reflects a contractual model where the project proponent is independent from the project entity. Other relationships are possible, such as a direct contractual relationship between project entity and the verifier.

CDM Executive Board/

JI Supervisory Committee

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Risk-based Verification Approach

The verifier shall familiarise himself/herself with the project by– reviewing the PDD, including the monitoring plan and the validation report,– reviewing the monitoring records that sustain claimed emission reductions,– reviewing any other information on the project and project operator.

The key reporting risks related to claimed emission reductions are identified and it is assessed to which extend the project operator’s control systems are adequate for mitigating these key reporting risks.Key reporting risks that are not sufficiently addressed by the project operator’s control system represent residual risks areas where detailed audit testing is necessary. Key issues in verification is verification of correct use of emission factors, accurate fuel consumption estimates, correct use of conversion factors and consistency in aggregation of emissions dataIn addition, other areas that have material impact on the amount of emission reductions may be selected for detailed audit testing. Material impact is defined as issues that will have an impact of more than 5% of the claimed emission reductions. .

Monitoring PlanMonitoring

records

GHG emissionreduction data

Understand control systems in place to manage risks

Identify areas of residual risk

Detailed audit testing of residualrisk areas and random testing of

other areas

Verification Statement

Forward Action Requests

Understanding the Project

Identify key reporting risks

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Issues that may cause risk for material misstatement of emission reductions should be identified through the use of a project-specific checklist. The verifier should ensure that the checklist cover all necessary specific project requirements that have impact on project performance. A score-card has been developed to assist the verifier in identifying reporting risks and to assess the control systems in place to mitigate these risks. Score is assigned as follows:• Full - all best-practice expectations are implemented.• Partial - a proportion of the best practice expectations are implemented• Limited - little or none of the expected system component are in place. For more information, refer to table 1 of the Periodic Verification Checklist.


Verification Principles

The verification shall consider both quantitative and qualitative information on emission reductions.

Quantitative data comprises the monitoring reports submitted to the verifier by the project entity.

Qualitative data comprises information on internal management controls, calculation procedures, procedures for transfer, frequency of emissions reports, review and internal audit of calculations/data transfers

The audit conclusion is based on the interaction of four key verification principles:

1. Compliance with monitoring plan

2. Materiality / Accuracy

3. Coverage

4. Quality of evidence

Coverage is identified in the project design and is validated during project validation. Hence, coverage is generally not revisited during verification.

Quantitativedata

Qualitativedata

Information onemission reduction

Site / Project Audit team

Compliance withmonitoring plan

Materiality /Accuracy

CoverageQuality ofevidence

VerificationStatement

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Compliance with Monitoring Plan

The verifier shall determine whether

the monitoring plan is properly implemented and followed by relevant personnel;

all indicators stated in the monitoring plan are sufficiently monitored and updated as applicable, i.e.:

• project emission indicators,• baseline emission indicators,• leakage indicators,• sustainable development indicators fro

CDM projects;

the responsibilities and authorities for monitoring and reporting are in accordance with the responsibilities and authorities stated in the monitoring plan.

In addition, the verifier shall also assess whether the proposed monitoring frequency is sufficient

to show the full range of variations, the accuracy of equipment used for monitoring is

sufficient and regularly controlled and calibrated,

monitoring results are consistently recorded, reviewed and approved.

The verifier shall also determine whether the monitoring plan is still applicable or whether the monitoring plan shall be revised to allow for any changes that may have occurred since validation and that have impact on the project.

Revision to the monitoring plan may be necessary if:

external sources of data is no longer available or is published in a different format,

project operations have changed.

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Materiality

Materiality is a test used to assess to which extent emission reduction data may be misstated. Data can be checked for errors by checking:

spreadsheet formulas and connections, that factors are used consistently with

recommended methods or guidelines, for manual transposition errors between data sets uncertainty of technology (e.g. metering), appropriateness of default data where specific

source data is lacking.

Emission reductions with material misstatements shall be discounted based on the verifier’s ex-post determination of the achieved emission reductions.

The verifier is liable for the emission reductions verified and certified. If a review by the CDM Executive Board/ JI Supervisory Committee reveals that excess CERs/ ERUs were issued, the verifier, who has falsely verified and certified excess CERs/ ERUs, shall acquire an amount of CERs/ ERUs equal to the excess CERs/ ERUs and transfer this amount to a cancellation account.

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Example: Material (or significant) uncertainty can be defined as, e.g., 1% of total CO2e for regular projects and 5% for small scale project.

(UNEP/OECD/IEA 2001)

Materiality is the professional judgement of the validator or verifier whether an individual or aggregation of omissions, misrepresentations or errors that effects management’s GHG assertion will reasonably influence the intended users decisions.

(ISO/WD 14064)

“Materiality” is an expression of the relative significance or importance of any individual matter in the context of the project or baseline emissions.

(modified from UKETS)


Accuracy

Misstatements can be the result of errors: Calculation errors (e.g. inappropriate

factors, assumptions) Lack of clarity within the

methods/guidelines for determining GHG emissions or baselines

Data management weaknesses e.g. manual transposition errors

Reported emission reductions may be uncertain due to: technological limitations, i.e. inherent uncertainties

associated with the methods used to measure emission indicators;

lack of source data, i.e. use of default data which has been derived based on certain assumptions/conditions and which will therefore have varying applicability in different situations.

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The CDM and JI modalities do not include any guidance on treatment of uncertainties. However, verifiers may base their conclusion on other relevant guidance such as the guidelines for the monitoring and reporting of GHG emissions in the EU emission trading scheme, which addresses uncertainty matters, i.e.:- General treatment of uncertainty - Uncertainty and calculation - Uncertainty and measurement

The verifier may choose to discount emission reductions for technical uncertainties, if appropriate, in her/his ex-post determination of the achieved emission reductions. Uncertainty should be explored with the site personnel, based on their knowledge and experience. High risk parameters or source data (i.e. those with a significant influence on the reported data, such as monitoring equipment) should be reviewed for uncertainties.


Quality of Evidence

When verifying GHG information the auditor shall verify that there is a clear audit trail for the reported emission reductions.

The auditor shall also obtain sufficient and appropriate audit evidence. Evidence includes a complete audit trail including source documents the basis for assumptions, and other information underlying the GHG data.

Operational records to sustain claimed emission may include, but are not limited to:

• Fuel purchase records,• Fuel consumption records,• Invoices for sold heat,• Invoices for sold electricity,• Laboratory analysis.

Issues to address when assessing audit evidence include:• whether the evidence is of sufficient quantity and

appropriate quality;• professional judgement on the reliability of the evidence;• the source and nature of the evidence (external/internal,

oral, documented).

Audit evidence is the information obtained by the auditor in arriving at the conclusions on which the verification statement is based. This involves reviewing the adequacy of the data collection systems/management controls. Evidence includes source documents and records underlying the GHG information as well as corroborating information from other sources.

If the verification can not obtain sufficient evidence for the reported emission reductions or part of the reported emission reductions, these emission reductions shall not be verified and certified.

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The Periodic Verification Process

Verification Team Selection

VerifierSelection

Verifier ContractEstablishment

VerificationReport

The main steps in a successful project verification is shown in this flow diagram. The different layers may be seen as representing the verification preparations, the verification itself and at last the results of the verification process. The box colour represents the party responsible for the activity (Green for the project proponent, yellow for the validator, red for other parties).

Desk Review, including publicising the monitoring report

Certification and publicising of

Certification Report

Issuance of CERs by Executive Board

On-Site Assessment

Host Party toissue ERUs

CDM

JI

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Desk Review

The verifiers knowledge of the industry and the business issues faced by the project are of outmost importance in determining the areas and focus for the verification. This should help the verifier to focus on key risks relevant to the potential emission reductions of the specific project.

During the desk review, the verification team should become familiar with the project in order to be able to compare the situation and status on-site with the situation as described in underlying documentation. At least the following documents shall be reviewed in this step:

the last revision of the PDD and attached documents, including the most recent monitoring plan, the last revision of the monitoring report, including the claimed emission reductions for the project, the last revision of the validation/ determination report and/or the last revision initial verification report, the last revision of the previous periodic verification report (as applicable), the written management manual (as applicable), operation licenses of local authorities (as applicable).

Other documents, such as process flow diagrams, technical drawings, manuals of equipment suppliers, performance records, may be reviewed as well.

Publicise the Monitoring Report

As part of the verification, the designated operational entity shall make the monitoring report, received from the project participants, publicly available.

CDM modalities & procedures, paragraph 62 Guidelines for the implementation of Article 6,

paragraph 36

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On-site Assessment

During the verification, the verifier investigates on-site, using a risk-based approach. The verifier will typically follow the audit trails and data sets on site for the specific indicators, and cross check with the existing monitoring plan and records.

Key Focus Areas for On-Site Assessments:An on-site assessment shall focus on the following key areas:

• Information flows for generating, aggregating/collating and reporting the selected monitoring parameters

• Calculations and assumptions made in determining the GHG data

• Controls in place to prevent, or detect and correct any significant errors or omissions in the selected monitoring parameters reported

Planning the site visit:The verifier shall prepare the site visit by:

• assessing all relevant information and make a draft determination of the on-site audit activities,

• organise the logistical aspects of the visit, including the agenda and whom to interview.

On-site activities:Keeping in mind the principles of materiality and quality of evidence, typical activities on-site include:

• Introduction meeting, explain objectives of the verification,

• Interviews with data co-ordinators, process engineers and other key personnel at site,

• Review of performance records and collection of measurements,

• Check of monitoring equipment and observations of monitoring practices,

• Interviews with local project stakeholders, as applicable,

• Specific testing and calculation checks to be done on high risk, material data sources and data management issues,

• Close-out meeting presenting the results and findings.

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Verification Report

A draft verification report shall provide the project proponent with any concerns and conclusions related to the claimed emission reductions. The project proponent will have the possibility to address the concerns and supply relevant additional information before a final verification report is provided.

Building on the transparency principle, the verification report shall give an overview of the verification process deployed by the verifier in order to arrive at the verification conclusions. All verification findings shall be clearly identified and justified.

The final verification report shall:

• give an overview of the scope of the verification,

• include a general discussion of details captured by the verification protocol, and

• clearly state the conclusions related to the verification and the verified amount of emission reductions in a verification statement.

The content of the verification report may look like this:


2 Methodology

3 Verification Findings3.1 Remaining Issues, CARs, FARs from

Previous Validation or Verification3.2 Project Implementation3.3 Completeness of Monitoring3.4 Accuracy of Emission Reductions

Calculations3.5 Quality of Evidence to Determine Emission

Reductions3.6 Management System and Quality

Assurance

4 Project Scorecard

5 Verification Statement

6 References

Annex 1: Periodic Verification ChecklistThe final verification report shall be provided to the Project Participants, the Parties involved and the CDM Executive Board. In addition the report shall be made publicly available. CDM modalities & procedures, paragraph 62h

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Verification Findings

The term “Forward Action Request” shall be used in the verification report, when:– the actual project monitoring and reporting requires attention for the next consecutive verification period,

or – an adjustment of the MP is recommended.

In the context of FARs, risks have been identified, which may endanger the delivery of high quality CERs in the future, e.g.. by deviations from standard procedures as defined by the MP.

As a consequence such aspects shall receive a special focus during the next consecutive verification.

A FAR may originate from lack of data sustaining claimed emission reductions.

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Findings established during the verification may be that:

i) The verification is not able to obtain sufficient evidence for the reported emission reductions or part of the reported emission reductions. In this case these emission reductions shall not be verified and certified;

ii) The verification has identified material misstatements in the reported emission reductions. In this case emission reductions with material misstatements shall be discounted based on the verifiers ex-post determination of the achieved emission reductions.


Verification Statement

Example of Verification Statement

“XYZ Verification Ltd. has been engaged by Project Proponent XYZ to verify the emission reductions achieved by ABC-project in x-land.

This verification engagement was carried out during the period of dd-mm-yyyy to dd-mm-yyyy.

Based on the information we have seen and evaluated, it is our opinion that XX tonnes of CO2 have been abated by the project during the period dd-mm-yyyy to dd-mm-yyyy”.

After completed verification, a verification statement shall be provided by the verifier to the project proponent. The verification statement will be part of the final verification report and shall be made publicly available.

This verification statement shall include:• the scope of the verification• the period of the verification• conclusions of the verification, including the verified amount of emission reductions for the given period• liability statement with regards to the accuracy of the verification statement• statement of confidentiality

The verification statement shall give the final verdict of the project in terms of the completeness, comparability, accuracy and correctness of the reported GHG emission reductions. The verification statement should therefore include a high level of assurance. For CDM projects, the verification statement will be the basis for the certified emission reductions as described in the next page.

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Example, Verification Statement

IntroductionXYZ Verification Ltd has been engaged by ABC Project Developer to examine the greenhouse gas (GHG) emission and the calculations of GHG emission reductions reported from the ABC Project for the period, equating to xx.xxxx tonnes of CO2 equivalents.Our opinion relates to the project’s GHG emissions and resulting GHG emissions reductions reported for the year ended dd-mm-yyyy and related to the validated and registered project baseline, and its associated documents. We express no opinion on baseline methodology of the project nor on the Project Design Document nor on any projections regarding GHG emission performance. We express no opinion on applied emission factors published by the official and recognised sources in COUNTRY.Responsibilities of the ABC Project management of ABC Project Developer and XYZ Verification Ltd.The management of the ABC Project is responsible for the preparation of the GHG emissions data and the reported GHG emissions reductions on the basis set out within the project Monitoring and Verification Plan dd-mm-yyyy. The development and maintenance of records and reporting procedures in accordance with that plan, is the responsibility of the management of the ABC Project.It is our responsibility to express an independent GHG verification opinion on the GHG emissions from the project for the year ended dd-mm-yyyy and on the calculation of GHG emission reductions from the project for the year ended dd-mm-yyyy based on the verified emissions for the yyyy compared with the valid dd-mm-yyyy and approved baseline for the same period.Basis of GHG verification opinionOur verification approach was based on the requirements as defined under the Kyoto Protocol, Marrakech accord, as well as those defined by the CDM Executive board.Our approach is risk-based, drawing on an understanding of the risks associated with reporting GHG emissions data and the controls in place to mitigate these. Our examination includes assessment, on a test basis, of evidence relevant to the amounts and disclosures in relation to the project’s GHG emission and the calculations of GHG emission reductions for the year ended yyyy. We planned and performed our work to obtain the information and explanations that we considered necessary to provide sufficient evidence for us to give reasonable assurance that the amount of GHG emission and the calculation of the GHG emission reductions for the year ended yyyy, prepared on the basis of the Monitoring and Verification Plan dd-mm-yyyy, are fairly stated.We conducted our verification having regard to the Project Design Document including the ABC Project’s Monitoring and Verification Plan dd-mm-yyyy and the applied baseline as registered for the project. This assessment included: •• collection of evidence supporting the reported data •• checking whether the provisions of the Monitoring and Verification Plan dd-mm-yyyy, were consistently and appropriately applied •We have verified whether the information included in the attached appendix representing the project baseline is current and has been correctly extracted from the Project Design Document, that the emissions reduction achieved has been determined by correctly subtracting emissions for yyyy ended dd-mm-yyyy from the baseline figure for the comparable period.OpinionIn our opinion, ABC Project Developer’s GHG emissions for the ABC Project in yyyy as reported in DEF Reference Report, prepared on the basis of ABC Projects Monitoring and Verification Plan dd-mm-yyyy, are fairly stated.The GHG emission reductions were calculated correctly on the basis of the Project Design Document and the ABC Projects Monitoring and Verification Plan and the applied emission factors for the production of electricity in COUNTRY published by the UVW Research Centre. We have not audited the Project Design Document and the emissions factors for the production of electricity in COUNTRY published by the UVW Research Centre.

[Locaton], dd-mm-yyyy XYZ Verification Ltd Name Partner/Director]

Below is presented an example of a verification statement. As this is meant to be an example, it must be expected that individual verifiers word a verification statement to suit their own procedures as well as the project itself.

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Certification

Certification of CDM projects and CERs

For CDM projects, the designated operational entity shall certify in writing that the project activity has achieved the verified amount of emission reductions that would not have occurred in the absence of the CDM project activity in the specified time period.

The designated operational entity shall inform the project participants, the Parties involved and the Executive Board of its certification decision in writing. This shall be done immediately upon completion of the certification process. The certification report shall be made publicly available.

The certification report shall constitute a request for issuance to the Executive Board of CERs equal to the verified amount of emission reductions.

CDM modalities & procedures, paragraph 63 & 64

JI projects and ERUs

For JI determination projects, the emission reductions are not certified. When the independent entity has made a determination of the emission reductions, this determination shall be made publicly available through the secretariat, together with an explanation of its reasons. The determinations is deemed final 15 days after the date it is publicised, unless either a Party involved or three of the members of the Supervisory Committee request a review of the determination.

Guidelines for the implementation of Article 6, paragraph 38 & 39

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Updates of the VVM

The VVM will need further development as rules in the CDM and JI develop.

CDM EB and JI supervisory committee decisions and guidance will likely have a future impact on the content of the VVM. Hence, any OE seeing a need for update/adjustment/addition of a VVM relevant issue should take the lead in developing guidance on the issue with the support of other DOEs/AEs. Revisions to the VVM will thereafter be gathered and issued at regular intervals.

Aiming to have as many DOE’s utilise the VVM toolbox as possible, IETA will take a leading role in future coordination, further development and dissemination of the VVM.

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Verification

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