Glossary

Recognizing the serious threat that climate change poses to mankind, the United Nations Framework Convention on Climate Change (UNFCCC) was adopted in 1992 by 186 nations. Belize signed the UNFCCC in 1992 and ratified the Convention in 1994. In 2003, Belize ratified the Kyoto Protocol.

The United Nation Framework Convention on Climate Change (UNFCCC) sets non-binding commitments whereby Annex I (industrialized countries) should reduce their GHG emissions to 1990 levels by 2000. This target has been reached only by a few countries. The Kyoto Protocol to the Convention, however, sets legally binding emission targets for industrialized countries. These amount to a total cut among all Annex I countries of 5% from 1990 levels by 2008-2012 which is the first commitment period. Each Annex I country was allotted its own emission reduction target.

The Kyoto Protocol allows for three flexible mechanisms to assist Annex I Parties in meeting their emission reduction targets. These are: Joint Implementation (JI), Clean Development Mechanism (CDM) and Emissions Trading (ET). These mechanisms aim at curbing emissions in a cost-effective manner.

Of the three mechanisms, the Clean Development Mechanism (CDM) is the only mechanism that non-Annex I Parties (developing country) can participate in. The CDM is a market-based mechanism which encourages participation from private and public parties. It allows emission-reduction projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to 1 tonne of carbon dioxide. CERs can be traded and sold, and used by industrialized countries to meet a part of their targets under the Protocol.

A primary objective of the CDM is to allow developed countries to cost-effectively achieve compliance with their quantified emission limitations by investing in a range of GHG mitigation projects in developing countries, in a number of different sectors, including:

• Energy industries (renewable/non-renewable sources)
• Energy distribution
• Manufacturing
• Chemical industries
• Construction
• Transport
• Mining/mineral production
• Metal production
• Fugitive emissions from fuels (solids, oil, gas)
• Fugitive emissions from production and consumption of halocarbons and sulphur hexafluoride
• Solvent use
• Waste handling and disposal
• Afforestation and reforestation
• Agriculture

The CDM allows industrialized countries some flexibility in how they meet their emission targets. Another key objective is to promote the sustainable development objectives of the Host Country. In other words CDM allows Annex I Parties to meet part of the emission reduction targets by carrying out or financing sustainable development project activities in non-Annex I countries to reduce their greenhouse gas emissions.

The CDM is supervised by the CDM Executive Board (CDM EB), which is an international authority acting under the supervision of the conference of parties (COP/MOP) to the UNFCCC. The CDM EB is responsible for issuing emission reductions units (CERs) for approved CDM project activities.

Besides assisting the Host Country to achieve its sustainable development, for projects to be eligible under the CDM, projects must:

• be carried out voluntarily with the approval by both Parties involved,
• result in real, measurable and long-term benefits related to mitigation of climate change,
• result in reductions that are additional to those that would have occurred in the absence of project activity.

The purpose of this manual is to illustrate the processes involved in the evaluation and approval of CDM projects. The methodology employed is based on the UNEP "CDM Information and Guidebook" and UNDP "The Clean Development Mechanism User’s Guide." The goal of the approval process is to ensure transparency, consistency and fairness in dealing with projects, as well as to ensure that the sustainable development objectives of the Host country are being met.

The Kyoto Protocol came into force on the 16^th February 2005. Belize is therefore qualified to participate in the CDM once the Designated National Authority (DNA) is established. This was achieved with the National Meteorological and Hydrological Service being given that responsibility by the Ministry of Natural Resource and Environment. The National Meteorological and Hydrological Service then is the official body representing the Belize government in the approval of CDM projects. Elements of the DNA will comprise of a committee aimed at policy issues.

The CDM Designated National Authority of Belize role includes:

• The assessment and approval of projects based on their consistency with the national sustainable development goal of the country.
• Granting written approval indicating voluntary participation, including confirmation that project activities assist with the national sustainable development of the country.

Type of Function:

• Regulatory function which centers on evaluation approval process and annual reporting

Functions of the DNA:

• Ensure that international criteria are adhered to
• Design and implement a transparent process for screening projects
• Channel and promote broad participation of private and public entities
• Maintain database for all projects, contacts, CERs for Belize
• Be the focal point for Designated Operational Entity and Executive Board

Apart from the establishment of the DNA, the government has established national procedures for evaluation and approval of CDM projects. Additionally sustainable development criteria were developed for the evaluation of CDM projects.

One of the most important criteria that attracts investment in CDM projects is the credibility, consistency, transparency, fair and equal treatment of the entire process. In response to this concern, the Government of Belize has implemented a standard procedure for CDM DNA. This will guarantee the quality and ensure the transparency of the evaluation and approval process.

The procedure will be conducted in two phases: a preliminary project evaluation or primary screening that embodies the submission (completion) of a Project Idea Note (PIN) by the project

developer. The second phase is the issuance of letter of approval with acceptance of the project design document (PDD).

The goal of the primary screening is to determine if the data and information in the CDM Project Idea Note submitted by the project proponents provide indicative information on the type and size of project, parties involved, its location, the anticipated total amount of GHG reductions, project costs, and sources of finance, suggested carbon price and the project’s conformity to the national sustainable development criteria. The CDM DNA recognized that at this stage of the project the project proponent may not have a complete finance plan and the PIN will be useful to search for finance. The CDM DNA response to the primary screening will be revealed to the project developer within 2 weeks with either a decision or a request for clarification.

The second phase includes a secondary or in-depth screening of the project design document (PDD) by experts in the relevant department concerning the project. This screening is to determine if project conforms to international criteria (see Box I) and national sustainable development criteria of the country. With acceptance of the PDD, the CDM DNA will deliver a letter of approval to the project developer within four weeks after the submission of the PDD. See Annex 1 (figure 2) for the evaluation and approval process of the CDM Designated National Authority.

Table 1 describes Belize’s Greenhouse Gas Emissions by sectors and gases as reported in the National Greenhouse Gas Inventory conducted in 2007, for 2000 base year. These therefore indicate the development sectors within which mitigation projects would be of benefit to Belize. CDM projects can include projects in the sectors mentioned in Table 1. These examples are not exhaustive.

　Source: National Greenhouse Gas Inventory, 2007

Project opportunities in the various sectors include:

　　　　 Energy Sector

• Hydro

　　　　 Agriculture Sector

• Agro-forestry
• Improved Soil Treatment Practices
• Methane capture from agricultural operations

　　　　 Waste Management Sector:

• Methane gas capture from Landfills
• Land-use, land-use change and forestry (LULUCF): Projects limited to afforestation and reforestation projects
  • Forest management
  • Cropland management
  • Grazing land management
  • Re-vegetation

　　　　 Transport: Transportation Improvement projects

• National Bus System
• Traffic Management- reduce frequency of transport activity
• Energy efficient vehicles

The national sustainable development criteria defined for CDM projects should be linked with National Development goals. These goals are defined as follows:

• Environmental

Projects should be compatible with and supportive of national environment and development priorities, they must abide by existing legal requirements (laws, regulations, permits).

Promote Sustainable use of Natural Resource such as:

• Biodiversity conservation
• Reforestation and forest conservation- maintenance or increase of population of local plant species
• Sustainable Land Use
• Watershed Protection
• Renewable energy systems
• Achieve Energy Efficiency: reduced energy consumed by equipment (appliances, heating, air conditioning, lighting etc.)

• Social
• Community participation should be encouraged.
• Projects must improve quality of life of local community with regards to social variables such as: health, education, housing, employment.
• All efforts should be made to sustain local cultures.

• Economic
• Overall positive impact on the national economy, that is, it must contribute to the economic growth of the country
• Generation of new investments
• Effective transfer of technology/best practices; (indicators include efficient technology in the use of natural resources, technology with minimum negative impact on the environment than the ones used traditionally).

The Marrakech Accords specified seven fundamental stages of the CDM project cycle. The stages are illustrated in figure 1, page 17. These are: description and formulation, national approval, validation and registration, project financing and implementation, monitoring, verification/certification and issuance of CERs.

The first step includes a project design document (PDD). The PDD comprises of:

• General description of the project
• Presentation of the baseline methodology
• Starting date and duration of project activity/crediting period
• Plans for monitoring reductions

• Rationale of how projects will meet additionality requirements (Calculations of GHG emissions)

• Environmental Impact Assessment
• Evidence of Public participation and stakeholder comments

Annex 1. Contact information on project participants

Annex 2. Information regarding public funding

Annex 3. New baseline methodology

Annex 4. New monitoring methodology

Annex 5. Table of baseline data

The Project Design Document (PDD) must follow the format established by the Conference of Parties (COP), and the elements of the PDD are listed above.

Note: standard PDD formats vary for large scale and small-scale CDM projects.

See http://cdm.unfccc.int/Reference/PDDs_Forms/PDDs/index.html to access the most current PDD templates.

2. National Approval

The Designated National CDM Authority (DNA) approves projects. The DNA decides whether the projects contribute to the country’s sustainable development objective as well as whether the country agrees to participate in the project. It also serves as a point of contact.

Once the PDD is completed, a Designated Operational Entity (DOE) has to approve it. A DOE is a CDM project validator accredited by the CDM Executive Board and designated by the COP/MOP. The role of DOE is as follows:

• Ensure the project conforms with all CDM requirements.
• Submit, if necessary, the new baseline or monitoring methodology proposals to the CDM Executive Board for approval.
• Check that an appropriate approved baseline and monitoring methodology has been applied properly.
• Ensure that potential environmental and social impacts have been sufficiently assessed.
• Check that adequate monitoring, verification and reporting plans have been included.
• Validate the project activity.

Part of the validation process is to ensure that project developers have consulted with (and adequately addressed the concerns of) potentially affected local populations. Based on the input, the DOE may request the project developer to take measures and adjust the PDD.

Operational Entities are typically private companies such as auditing, consulting, accounting or law firms with the capacity to conduct credible independent evaluations and assessments of emission reductions. It is important to note that for large scale projects DOEs can only perform either validation or verification/certification but not both to avoid conflict of interest. The DOEs accredited by the EB are listed on the UNFCCC CDM website.

The registration request is submitted to the CDM Executive Board by the DOE on behalf of the project developer. A request for the registration includes:

• PDD
• DOE’s Validation Report.
• Evidence for authorization of the private and/or public entity involved as a project participant (if necessary).
• Letter of Approval (LoA) issued by the host DNA.
• Letter of Approval (LoA) from Annex 1 country (not necessary prior to registration in all cases) . This is only necessary if an Annex 1 country is directly involved in the project.
• Declaration of Non-Diversity of ODA by Annex 1 country (not necessary prior to registration in all cases).
• Instructions for the allocation of Certified Emission Reductions (CERs).

It was initially previewed that Registration with the CDM EB would occur in eight weeks, from receipt of validation report, unless a review is requested. Nevertheless, with the current backlogs, the CDM EB was not able to respect this timeframe and it could take several months before the Registration of a project.

Only projects registered by the CDM Executive Board may produce CERs. In order to register, the project developer will have to pay a fee and provide evidence of Host Country approval as stated above.

5. Monitoring

Monitoring of the project is performed according to the monitoring plan. The Monitoring plan is part of the Project Design Document (PDD). Once the CDM project is implemented the Project Proponent will publish a monitoring report which is submitted to a DOE for verification. If the project is of large scale, the DOE contracted for the verification of the monitoring report, should differ from the one contracted for the validation of the PDD. The monitoring is designed to show that projects are achieving their emission reductions specified in the PDD. It shall be based on a previously approved monitoring methodology which has to be submitted with a draft version of the Project Design Document and approved by the EB.

According to the Marrakech Accords, the monitoring plan should provide the following information:

• Clearly identify responsibility and authority for registration, frequency of monitoring and measurement of GHG emissions;
• Determine the verification schedule for claimed reductions;
• Give enough information to satisfy the needs of the verification body (in the next step.)
• Collection and archiving of all relevant data necessary for estimating the baseline as well as the emissions within the project boundary during the crediting period;
• Identify all potential sources of, and the collection and archiving of data on, increased GHG emissions outside the project boundary that are significant and reasonably attributable to the project activity during the crediting period;
• Establish quality assurance and control procedures for monitoring process;
• Procedures for the periodic calculation of the reductions of GHG emissions by the proposed CDM project activity, and for leakage effects;
• Documentation of all steps involved in the calculations of leakage and the procedures for the periodic calculation of the emission reductions during the lifetime of the project.

Verification is carried out by a Designated Operational Entity and ensures that the CERs have resulted according to specific guidelines and conditions. According to paragraph 27(c) of the Modalities and Procedures, an Operational Entity that has validated a project cannot conduct the verification/certification process. However, for small-scale CDM projects, there is a fast track mechanism whereby the same operational entity can validate and verify projects.

Certification is the written assurance by the operational entity that the project has achieved the reductions in emissions by GHG sources as verified during a specified time period. Once certified, the DOE shall notify the project participants, Parties involved and the EB of its certification decision in writing. The certification report shall include a request to EB for issuance of CERs equal to the verified amount of reductions of GHG emissions.

The EB must issue the CERs equivalent to the emission reductions achieved within 15 days after the date of receipt of the request for issuance unless one party to the project or three board members need to revise the proposed issuance. The project developer bears the cost of the independent project validation and monitoring, and verification of emission reductions.

The EB will then instruct the CDM registry to issue the specified quantity of CERs in the CDM registry and deduct 2% of all CERs "Levy". The Levy is to assist non-Annex I Parties in meeting the costs of adaptation and will be deposited into the Adaptation fund. The World Bank is the entity responsible for selling the 2% of CERs obtained to raise finance for adaptation.

A portion of the share of proceeds from CDM project activities will also be retained by the CDM EB to assist with the administrative expenses of the CDM EB and other bodies involved in the Protocol framework. The charges increase from USD 0.10 per CER issued from 15,000 tonnes of CO₂ equivalent for which issuance is requested to USD 0.20 per CER issued for any amount in excess of 15,000 tonnes.

The least developed country Parties are exempted from this fee. CERs will only be issued for a crediting period starting after the date of registration of a CDM project activity.

The transaction costs of developing a CDM Project can be very costly. In order to reduce the transaction costs the CDM EB has approved streamline procedures and standardized baselines for small scale projects. Small-scale projects are defined as:

• Renewable energy projects with a maximum output capacity equivalent to up to 15 megawatts (Type I)
• Energy efficiency projects that reduce energy consumption by up to the equivalent of 60 gigawatts hour per year, (Type II) and
• Other project activities that result in emission reductions of less than 60 kilotonnes of carbon dioxide equivalent annually (Type III).

The simplified procedures include a simplified PDD (containing simplified modalities and procedures), a lower registration fee, a shorter timeframe for approval of project and the capacity to use the same DOE to validate and verify/certify emission reductions.

Programmatic CDM project activity is a CDM project activity where the emission reductions are attained by multiple actions carried out over time as a result of a government measure or a private sector initiative, which is not related to any mandatory and enforced local/national/regional policy (e.g. a nationwide programme to replace standard light bulbs with energy efficient light bulbs). The programme of activities is the single project activity: the mitigation actions that are implemented does not constitute individual projects in and of themselves, but must be measured and monitored according to approved methodologies to ascertain their contributions to emission reductions achieved by the programme.