In the CDM context, emission reductions represent the difference between baseline emissions and actual emissions, once leakage has been accounted for:
Subsequent to the monitoring and reporting of reductions in anthropogenic emissions, CERs resulting from a CDM project activity during a specified time period shall be calculated, applying the registered methodology, by subtracting the actual anthropogenic emissions by sources from baseline emissions and adjusting for leakage (3/CMP.1, Annex, paragraph 59).
Reflecting this principle, the project design document must contain the following information relating to the calculation of emission reductions:
- Description of formulae used to calculate and estimate anthropogenic emissions by sources of greenhouse gases of the CDM project activity within the project boundary
- Description of formulae used to calculate and to project leakage, defined as: the net change of anthropogenic emissions by sources of greenhouse gases which occurs outside the CDM project activity boundary, and that is measurable and attributable to the CDM project activity
- The sum of (i) and (ii) above representing the CDM project activity emissions
- Description of formulae used to calculate and to project the anthropogenic emissions by sources of greenhouse gases of the baseline
- Description of formulae used to calculate and to project leakage [in the baseline scenario]
- The sum of (iv) and (v) above representing the baseline emissions
- Difference between (vi) and (iii) above representing the emission reductions of the CDM project activity (3/CMP.1, Annex, Appendix B, paragraph 2(i)).
Estimating emission reductions
Multiple regression analysis
Where multiple regression analysis is used to estimate baseline emissions or project emissions, the Executive Board has clarified that certain safeguards must be used in order to ensure the conservativeness and rigour of the fitted regression model:
- In the process of fitting the regression, assumptions and requirements for regression models should be considered e.g. testing for multicollinearity;
- Independent variables that are likely to influence the dependent variable in question should be accounted for. Technical background information that may support the selection of such variables should be provided with the methodology for the review of the panel;
- Testing for statistical significance for all independent variables should be done. Independent variables which are statistically significant at 95% confidence level should be selected in the regression model;
- If the time series data is used to fit the regression, autocorrelation should be tested. In case autocorrelation is found to be statistically significant, time series analysis should be used instead of regression (EB 21, Annex 7, paragraph 1).
Where lifecycle analysis (LCA) is used to estimate emission reductions, project participants must provide all equations, parameterisations and assumptions used to calculate baseline and monitoring methodologies. This can be accomplished, for example, by attaching a copy of the referenced LCA or LCA tool, with relevant sections highlighted (EB 22, Annex 2, paragraph 1).
Consideration of uncertainties
Methodologies employing sampling to derive parameters in estimating emissions reductions must quantify these parameter uncertainties at the 95% confidence level. In addition, the choice of the upper or lower bounds used in estimating emission reductions must be conducted in a manner that ensures conservativeness (EB 15, Annex 2, paragraph 10).
Inclusion/exclusion of emission sources in baseline and monitoring methodologies
When defining which emission sources should be considered in the project boundary, in the baseline scenario and in the calculation of leakage emissions, project participants should make conservative assumptions. For example, the magnitude of emission sources omitted in the calculation of project emissions and leakage effects (if positive) should be equal to or less than the magnitude of emission sources omitted in the calculation of baseline emissions (EB 15, Annex 2, paragraph 11).
Click here or more information on estimating baseline emissions and developing a baseline scenario.
Avoiding double-counting in biofuel projects
At EB 26, the Executive Board provided guidance on how to avoid the double-counting of emission reductions that could occur in project activities if both biofuel production and biofuel use are eligible to generate CERs. Eligible biofuels projects include:
- The consumption (end-use) of biofuels where this displaces fossil fuel consumption; and
- The production of biofuels, provided that:
- the consumers, to whom the biofuel is sold, are included in the project boundary; and
- the emissions reduction from use of biofuel are estimated based on monitored consumption by the consumers included within the project boundary.
EB 26, Annex 12 clarifies that:
- Biofuel production, where the biofuel is exported to Annex I countries, is not eligible to claim CERs under the CDM.
- Emissions associated with the production of the biomass used to produce the biofuel must be accounted for when calculating emissions achieved by the project activity, unless it is using biomass originating from a registered afforestation/reforestation project activity.
- For producers, the methodology must provide a monitoring framework (e.g. electronic logs) that can verify without doubt the actual amount of biofuel consumed by the end user for displacement of fossil fuels. The monitored consumption by the end-user is then the basis for calculating emission reductions.
- For consumers, the methodology must provide an estimate of leakage which is measurable and attributable to the project activity.
The Executive Board has requested the Meth Panel to provide further guidance on upstream emissions, and in particular:
- the definition of upstream emissions;
- the boundary for consideration of upstream impacts;
- definition of significance;
- the double accounting of emissions due to CDM project activities upstream of the project activity; and
- a clear definition of "causality" in identifying the relevant emission sources upstream of the project activity (EB 33, paragraph 28).
The Meth Panel is expected to report back on these issues in the near future.
Land use changes
Where activities that are carried out on a project site prior to the project being implemented are simply shifted to another site once the project is operational, this can result in considerable emissions as well as degradation of lands and deforestation of natural forests.
The Executive Board has clarified that in this circumstance, the resultant emissions must be taken into account in the development of baseline and monitoring methodologies. The Executive Board requested at EB 29 that the Meth Panel work with the Afforestation and Reforestation Working Group to address these issues (EB 29, paragraph 34).
At EB 33, the Executive Board revised the approved simplified baseline and monitoring methodology for small-scale A/R projects implemented on grasslands or croplands (AR-AMS0001) to take into account the leakage of emissions from the shift of pre-project activities to other land (EB 33, paragraph 42).