CDM Overview
Agrinergy offers end-to end CDM solutions from identifying and registering climate change projects through to marketing the resulting carbon credits and obtaining related project finance.
We work with companies in industrialising countries seeking to develop, implement and finance CDM projects (and thus lower their carbon intensity).
Agrinergy manages the entire CDM project cycle for its clients:
Agrinergy’s capability to deliver end-to-end solutions from the identification of projects to the delivery of carbon credits adds value to both project sellers and buyers: It maximises the qualification potential of projects and ensures the delivery process is managed seamlessly. Agrinergy’s presence in both sellers’ and buyers’ markets guarantees an efficient transaction.
Project Portfolio
Agrinergy was an early mover in the CDM market and one of the first companies to develop an in-depth understanding of the key CDM concepts and how to apply them successfully. Agrinergy has developed and implemented a large number of CDM registered projects and is now managing and developing a diversified portfolio of over 90 CDM projects – and this portfolio is growing. The projects developed utilise a broad range of baseline and monitoring methodologies approved by the CDM Executive Board. In cases where approved methodologies did not exist, Agrinergy developed and submitted methodologies for approval.
Agrinergy’s founders have a solid experience in emerging and commodity markets. The initial projects developed by Agrinergy focused on the agro-processing sector, and this sector remains an important part of the portfolio. The CDM experience and knowledge gained in this sector was soon leveraged into other sectors and project types and today Agrinergy is managing a wide range of projects using many different technologies – from waste management, waste heat recovery, blended cement, iron and steel to renewable energy. For examples of Agrinergy’s sectoral experience go to Sector Experience
CDM Background
The Kyoto Protocol and its flexibility mechanisms Clean Development Mechanism (CDM), Joint Implementation (JI) and Emissions Trading – created a market for carbon. This market is based on the trading of emissions reductions and/or emission allowances to assist countries in meeting their emission reduction commitments. Some countries have passed on part of this commitment to industry. As this market is defined by legally binding obligations it is referred to as the Compliance Carbon Market or Regulatory Carbon Market.
Parallel to the compliance market, a Voluntary Carbon Market has emerged which, unlike the compliance market, does not rely on legally binding reductions to generate demand for carbon credits. Companies and individuals purchase carbon credit for philanthropic reasons to offset their carbon emissions.
The Clean Development Mechanism (CDM) is one of the three flexibility mechanisms outlined in the Kyoto Protocol.
A CDM project is an investment or activity in a developing country that reduces emissions of the six Greenhouse gases – CO2, CH4, N2O, HFCs, PFCs and SF6 – through energy efficiency, the generation of renewable energy or other measures. The emission reductions (carbon credits) resulting from CDM projects are called CERs (Certified Emission Reductions) and may be sold to a government or company in the industrialised world to help meet their Kyoto compliance targets. A key condition for the issuance of CERs is “additionality”, meaning that the emissions reductions generated by a project would not have occurred in absence of the project and are therefore not “business as usual”. The project must also enhance sustainable development. The development of a CDM project is strictly regulated and monitored by the CDM Executive Board of the UN to ensure that the emissions reductions are of a high standard.
Key milestones of the CDM process
Methodology
All CDM projects must follow a methodology that has been approved by the CDM Executive Board (EB) of the UN. Methodologies have already been approved for a number of project types and can be applied to all projects that fall under the applicability criteria outlined in the methodology. If a suitable methodology has not been approved, a new methodology must be developed and submitted to the EB.
Project Design Document (PDD)
The PDD forms the basis for approval of a CDM project. This document outlines the application of the methodology to the project, illustrating why and how the project reduces emissions and presenting a plan for annual monitoring of emissions reductions.
Host Country Approval
A precondition for registration of a CDM project is approval from the host country. This is provided by a Designated National Authority (DNA) and ensures that a project contributes to sustainable development in that country.
Validation and Verification
The completed PDD must be validated by an UN appointed auditor called a Designated Operational Entity (DOE). Validation ensures the methodology has been applied correctly and that the project results in a real reduction in emissions. Verification is the annual audit of a project by a DOE, and determines the quantity of carbon credits allocated to the project.
Registration and Issuance
Once a project has received a successful validation report and host country approval, it can be submitted to the CDM EB for registration. A registered CDM project is able to generate emissions reductions. Each year, the verification report from a DOE is submitted and subsequently the relevant quantity of CERs or carbon credits are issued by the EB.
The CDM offers exciting opportunities for both companies in the industrialising world who can use this mechanism to finance clean projects as well as corporate or governmental buyers of carbon credits in the industrialised world.
