Share of Proceeds

Article 12(8) of the Kyoto Protocol provides that:

The Conference of the Parties serving as the meeting of the Parties to this Protocol shall ensure that a share of the proceeds from certified project activities is used to cover administrative expenses as well as to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation (Kyoto Protocol, Article 12(8)).

Therefore, the Protocol requires that a proportion of the proceeds from CDM project activities be retained by the Executive Board for two purposes:

  1. To assist with the administrative expenses of the Executive Board and other bodies involved in the Protocol framework (the Administration Share of Proceeds); and
  2. To fund measures in developing country Parties to the Protocol that will assist them in adapting to the adverse effects of climate change (the Adaptation Share of Proceeds).

The CDM registry contains an account established for the purpose of receiving, holding and transferring CERs corresponding to the Share of Proceeds (Administration and Adaptation):

The CDM registry shall have the following accounts: ...

  1. At least one account for the purpose of holding and transferring CERs corresponding to
    • the share of proceeds to cover administrative expenses and to assist in meeting costs of
    • adaptation in accordance with Article 12, paragraph 8. Such an account may not
    • otherwise acquire CERs (3/CMP.1, Annex, Appendix D, paragraph 3(d)).

Administration Share of Proceeds

The Administration Share of Proceeds is a charge of:

  1. USD 0.10 per CER issued for the first 15,000 tonnes of CO2 equivalent for which issuance is requested in a given calendar year; and
  2. USD 0.20 per CER issued for any amount in excess of 15,000 tonnes of CO2 equivalent for which issuance is requested in a given calendar year (7/CMP.1, paragraph 37).

It is used to assist with the administrative expenses of the Executive Board and other bodies involved in the Protocol framework.

This replaces an earlier decision of the Executive Board which recommended that the Administration Share of Proceeds be set at USD 0.20 per CER issued (EB 21, Annex 26, paragraph 2).

Issuance of CERs

The Executive Board has confirmed that issuance of CERs shall only occur once the Administration Share of Proceeds has been received in each year:

The Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol: ...

Decides ... that the issuance of certified emissions reductions ... shall be effected only when the share of proceeds to cover administrative expenses has been received (7/CMP.1, paragraph 37).

Registration fee

A registration fee is payable by project proponents in order to have a project considered for registration (EB 5, paragraph 23).

The registration fee is an upfront payment of the estimated amount due for the Administration Share of Proceeds for the first year of the project. The amount paid as a registration fee is deducted from the Administration Share of Proceeds that is due at the time of the issuance of the first year's certified emission reductions (CERs). This was decided at EB 6:

The registration fee paid will be deducted from the share of proceeds for administration due at issuance of CERs (EB 6, Annex 5)

and clarified further in the Guidelines on the Registration Fee Schedule for Proposed Project Activities under the Clean Development Mechanism:

The registration fee shall be deducted from the share of proceeds due for issuance of the certified emission reductions. In effect, the registration fee is an advance payment of the share of proceeds due for the issuance of certified emission reductions likely to be achieved during the first year (EB 54, Annex 29, paragraph 14).

The Guidelines on the Registration Fee Schedule for Proposed Project Activities under the Clean Development Mechanism were adopted at EB 54, Annex 29 and revise EB 52, Annex 53.

Reimbursement of the registration fee

The Executive Board had initially stated that that the registration fee would be non-reimbursable (EB 5, paragraph 23). However, it has since clarified that:

The registration fee shall be reimbursed in full if the DOE withdraws the request for registration of the proposed project activity prior to date that the secretariat publishes the request for registration on the UNFCCC website (EB 54, Annex 29, paragraph 12).

The amount of the paid registration fee greater than USD 30,000 shall be reimbursed if the DOE withdraws the request for registration of the proposed project activity subsequent to the date that the secretariat publishes the request for registration on the UNFCCC website, or if the Executive Board declines to register the proposed project activity (EB 54, Annex 29, paragraph 13).

The Executive Board had also initially stated that, in the case of voluntarily withdrawal, the registration fee is entirely non-refundable:

The Board further clarified that in cases where project activities have been withdrawn voluntarily by the project participants prior to registration the registration fee is non-refundable and that in the case of resubmission a new registration fee will have to be paid (EB 31, paragraph 81).

However, it has since specified that the full registration fee will be reimbursed if a DOE (or a project participant via a DOE) asks that a request for registration be withdrawn prior to its publication:

In cases where a DOE, or a project participant via a DOE, requests that a request for registration be withdrawn prior to the publication of this request the full amount of the registration fee will be reimbursed (EB 41, paragraph 67).

Small-scale projects

The COP/MOP decided at its first meeting that the Executive Board could propose lower fees for small-scale CDM project activities:

The Executive Board, in proposing the share of proceeds to cover administrative expenses and registration fees to recover any project related expenses, may consider proposing lower fees for small-scale CDM project activities (4/CMP.1, Annex II, paragraph 21).

The Executive Board confirmed that projects that are expected to generate less than 15,000 CERs per year are not required to pay a registration fee:

No registration fee has to be paid for CDM project activities with expected average annual emission reduction over the crediting period below 15,000 t CO2-equivalent (EB 52, Annex 52, paragraph 7).

Afforestation and reforestation projects

The Administration Share of Proceeds for afforestation and reforestation (A/R) projects is based on the following:

  1. If the selected approach for addressing non-permanence is tCERs, the SOP-Admin is based on on the difference between the tCERs for which issuance is requested for a given verification period and the highest tCERs previously issued; and
  2. If the selected approach for addressing non-permanence is lCERs, the SOP-Admin is based on difference between the lCERs for which issuance is requested for a given verification period added to the sum of all previous issuances and reversals, and the highest among the sums of the issuances and reversals since start of the project calculated for each previous verification period. All reversals mentioned above are negative numbers (EB 36, Annex 21, paragraph 2).

 If the outcome of the calculations above is a positive number, then the registration fee is calculated using the following scale:

a. USD 0.10 per expected average annual net GHG removals by sinks for the first 15,000 t CO2 e; and
b. USD 0.20 per expected average annual net GHG removals by sinks for any amount in excess of 15,000 t CO2 e (EB 36, Annex 21, paragraph 3).

Small-scale afforestation and reforestation projects

Small-scale afforestation/reforestation projects are entitled to a reduced registration fee and a reduced rate of the Administration Share of Proceeds:

... small-scale afforestation and reforestation project activities under the clean development mechanism shall be entitled to a reduced level of the non-reimbursable fee for requesting registration and a reduced rate of the share of proceeds to cover administrative expenses of the clean development mechanism (14/CP.10, paragraph 1(e)).

This decision was confirmed by the COP/MOP in 6/CMP.1:

The Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol: ...

Decides to confirm and give full effect to any actions, including measures to facilitate the implementation of afforestation and reforestation project activities under the clean development mechanism, taken pursuant to decision 14/CP.10 (6/CMP.1, paragraph 1).

The COP/MOP has requested that the Executive Board set the fee that is to be payable for small-scale afforestation/reforestation:

The Executive Board shall stipulate a reduced level of the non-reimbursable fee for requesting registration and... a reduced rate of the share of proceeds to cover administrative expenses for small-scale afforestation and reforestation project activities under the CDM (6/CMP.1, paragraph 13).

The Executive Board has now determined that:

No registration fee has to be paid for CDM A/R project activities with expected average annual net GHG removals by sinks over the crediting period below 15,000 t CO2-equivalent (EB 23, Annex 35, paragraph 5).

Exemption for least-developed countries

At its 3rd meeting, the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (COP/MOP) decided to exempt least developed countries from paying the registration fee and share of proceeds at issuance:

The Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol ...

Decides to abolish the payment of the registration fee and share of proceeds at issuance for clean development mechanism project activities hosted in least developed countries (2/CMP.3, paragraph 31).

In response to this decision, the Executive Board has clarified that:

No registration fee must be paid for proposed project activities hosted in least developed countries. The application of this exemption shall be based on the status of the country on the date of the publication of the request for issuance (EB 52, Annex 53, paragraph 8).

Adaptation Share of Proceeds

The Adaptation Share of Proceeds is a deduction of 2% of the certified emission reductions (CERs) generated by the project each year used to fund measures in developing country Parties to the Protocol that will assist them in adapting to the adverse effects of climate change. This amount was set by the COP in 17/CP.7:

The Conference of the Parties: ... Decides :

That the share of proceeds to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation, as referred to in Article 12, paragraph 8, of the Kyoto Protocol, shall be two per cent of the certified emission reductions issued for a clean development mechanism project activity (17/CP.7, paragraph 15(a)).

This decision was subsequently confirmed by the COP/MOP in 3/CMP.1:

The Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol: ...

Decides to confirm, and give full effect to any actions taken pursuant to, decision 17/CP.7 and to any other relevant decisions by the Conference of the Parties, as appropriate (3/CMP.1, paragraph 1).

The CERs are deducted by the Executive Board prior to issuance, such that only 98% of generated CERs are delivered to project participants.

Exemption for projects in least developed countries

CDM project activities taking place in least developed country Parties are exempt from paying the Adaptation Share of Proceeds :

... clean development mechanism project activities in least developed country Parties shall be exempt from the share of proceeds to assist with the costs of adaptation (17/CP.7, paragraph 15(b), confirmed at 3/CMP.1, paragraph 1).

Exemption for small-scale A/R projects

Small-scale afforestation/reforestation projects are exempt from paying the Adaptation Share of Proceeds:

... small-scale afforestation and reforestation project activities under the clean development mechanism shall be exempt from the share of proceeds to be used to assist developing country Parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation; (14/CP.10, paragraph 1 (d), confirmed in 6/CMP.1, paragraph 1)

Related Topics

Adaptation Share of Proceeds

Administration Share of Proceeds

What is registration? (P)

Registration fee (P)

What is issuance? (P)

Executive Board

Certified emissions reductions (CERs)