Tips for Greenhouse Gas Project Developers, Part 2: Creating an Effective Project Design Document

In “Tips for Greenhouse Gas Project Developers, Part 1” (2010-01-17), we discussed the important project attributes of emission baselines and additionality, and described how a “performance-based” project protocol differs from the model employed in the Kyoto Protocol’s Clean Development Mechanism (CDM).

This blog addresses another important greenhouse gas (GHG) project element, the “Project Design Document” (PDD). The PDD name comes from CDM but has its equivalent in voluntary GHG programs as well, even if called by a slightly different name. The International Standard ISO 14064:2006 Part 2 refers to it simply as project “documentation.”

There are multiple audiences for a PDD. The first audience is internal. A PDD describes the project in detail, including relevant GHG sources, sinks and reservoirs; emission reduction or removal enhancement quantification methodologies, and the number of tons of CO2-e that the project is expected to create. The PDD also defines requirements for quality control/quality assurance and for monitoring and measurement. It may discuss applicable crediting periods, plans for validation and/or verification, and plans for registering project offset credits.

A second audience for the PDD is an organization that may provide project financing prior to the creation of the offset reductions, or a prospective purchaser of offset credits. Both a carbon financing source and a buyer use PDDs as initial screens for identifying potentially attractive projects and making preliminary assessments of risk.

The third audience for a PDD is the project’s validation or verification body (VVB). VVBs use PDDs to assess audit risk and to develop verification plans and data sampling plans.

Because the PDD is often the means by which outside parties are first introduced to a project, the document should be carefully prepared. It should make a convincing case that the project is eligible, additional, and monitored, and that emission reductions or removal enhancements are (or will be) properly quantified and reported.

A central element of the PDD is the monitoring plan. This section of the PDD describes the need for and purpose of monitoring, and the types of information to be tracked. It discusses where monitored information comes from, and what monitoring methodologies are employed. The latter can include estimation, modeling, measurement or calculation. The monitoring plan defines intervals for monitoring, and discusses roles and responsibilities. It describes any GHG information management systems to be employed, such as automated equipment and data loggers, and specifies the location and retention time for stored data. The monitoring plan also describes plans for calibration and maintenance of monitoring equipment, and includes or refers to procedures needed to carry out the monitoring function.

Monitoring plans should provide for tracking regulatory compliance and other eligibility criteria as well as applicable flows of gases, fluxes in carbon stocks, project emissions, project leakage and changes to the baseline scenario.

A well designed PDD is essential for proper project implementation. It can open the door to project financing and sale of credits, and ease validation and verification. Project developers can undertake this important task on their own or engage the help of qualified consultants, such as Futurepast.

Tips for Greenhouse Gas Project Developers, Part 1: Baselines, Additionality and Performance-Based GHG Protocols

Recent publicity surrounding the climate change negotiations in Copenhagen raised public awareness about the need to transition to a low carbon economy. As a result, inventive people are thinking about new ways to avoid, reduce, or sequester carbon dioxide. But where to start?

Greenhouse gas (GHG) projects are defined as “[an] activity or activities that alter the conditions in the baseline scenario which cause greenhouse gas emission reductions or greenhouse gas removal enhancements” (ISO 14064:2006, Part 2, 2.12). This means the activities of a project need either to reduce GHG emission or increase carbon removals compared to what would have otherwise occurred had the project activities not been implemented. The project emissions then, are always compared against a baseline, which represents “business as usual.”

The following diagram illustrates the basic concepts of a baseline scenario, the calculation of emission reduction credits, and a time-limited project. The diagram shows a flat baseline—that level of GHG emissions that would be expected to exist in the absence of the GHG project. The curved line on the graph illustrates how a project might reduce GHG emissions compared to the baseline scenario. In the example, GHG emissions decline relative to the baseline as a result of project activity, and then level out. Emission reductions, then, are represented by the quantity, measured in metric tons of CO2-equivalent, of emission reductions achieved by the project compared to the baseline. The solid line shows a finite crediting period, which for many projects is 10 years. After that time period, the project may still generate emission reductions, but no longer earn offset credits.

Projects are implemented for many reasons. It is important to keep in mind that the project developer has to demonstrate that the project activity is “additional to” what would have occurred in the baseline scenario. Some projects do not qualify for the issuance of carbon offset credits because they fail this test of “additionality.” For example, the US EPA regulates large municipal solid waste landfills. Once a landfill’s design capacity exceeds 2.5 million metric tons or 2.5 million cubic feet, the landfill is required to install a landfill gas collection and combustion system to control nonmethane organic compound (NMOC) emissions. The same requirement is triggered if the landfill emits more than 50 metric tons per year of NMOCs. Consequently, such a landfill could not claim greenhouse gas emission reduction credits if it installed a landfill gas capture and combustion system after crossing the regulatory threshold.

Another test of additionality is “common practice.” In other words, if everyone else is doing it, because it makes good business sense, the emission reduction activities may not qualify as “additional.” How common practice is defined is subject to interpretation, so people who pass judgment on these things apply other tests as well. We’ve discussed the “regulatory additionality” test already.

Other tests are technology and financial. The technology test is met when the project uses a technology that has been approved for GHG crediting by a GHG Program. Prominent GHG programs include the Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC), the Climate Action Reserve, and the Chicago Climate Exchange.

The financial test asks whether the project would be implemented anyway regardless of the money that would be raised from the sale of carbon offset credits. The project is only additional from a financial perspective if the answer is “no.”

It should be apparent that judgments about “additionality” can be tricky to make. Fortunately, there are many cases where a case-by-case determination does not have to be made. This occurs when a project is developed that meets a specific “performance standard” established by a GHG program. The term “performance standard” means that if a project fulfills all the criteria set out in a project methodology or protocol, then it is deemed by the GHG program that issued or recognized that methodology/protocol to be additional.

Project protocols developed by the Climate Action Reserve in the United States are of the “performance standard” type. A project developer need only find a suitable CAR protocol, fulfill all its requirements, have the project verified, and credits will be issued.

In the CDM, by contrast, a project developer follows an approved methodology, or proposes a new one. Next, the project developer hires a GHG validation body to “validate” the project. Validation means that an auditor examines the project design, scrutinizes the monitoring plan and other project controls, and renders a decision about whether the project, if properly implemented, will generate GHG offset credits that are real, additional and permanent. Validation of the project takes place prior to implementation. Once the project has been validated and implemented, verification that the planned emission reductions have been achieved is also required.

In North America, the project protocols of most GHG programs are of the performance-standard type. However, the Voluntary Carbon Standard (VCS) is one notable exception. It issues offset reduction credits for projects that, in most cases, have followed a CDM methodology and have been validated and verified. I say “in most cases” because VCS also has a mechanism whereby a project developer can propose a new methodology and have it accepted if it passes muster by two independent validation bodies.

Would-be project developers face a steep learning curve when implementing projects for the first time. The field is highly technical, requires a thorough understanding of complex sets of rules, and demands attention to detail during implementation. For this reason, the use of project consultants from firms such as Futurepast can be highly cost-effective.

Reducing Emissions Below A Project Baseline
Reducing Emissions Below A Project Baseline