Designated Operational Entity

Designated operational entities (DOEs) are independent auditors that assess whether a potential project meets all the eligibility requirements of the CDM (validation) and whether the project has achieved greenhouse gas emission reductions (verification and certification). They are accredited by the CDM Executive Board and designated by the COP/MOP to perform these functions, according to their expertise.

Usually, a DOE performs either validation or verification and certification, but the CDM Executive Board can give permission for the same DOE to perform all three tasks for the same project:

A designated operational entity shall: (...)

  1. Perform one of the following functions relating to a given CDM project activity: validation or verification and certification. Upon request, the Executive Board may, however, allow a single designated operational entity to perform all these functions within a single CDM project activity (3/CMP.1, Annex, paragraph 27(e), previously 17/CP.7, Annex, paragraph 27(e)).

EB 77, Annex 12 clarifies that, for Paragraph 134 of the CDM project cycle procedure (Version 05.0), the same DOE may perform a validation of post-registration changes and a verification for the same project activity or PoA.

Role of the DOE

The functions of a DOE are set out in 3/CMP.1, Annex, paragraph 27:

A designated operational entity shall:

  1. Validate proposed CDM project activities;
  2. Verify and certify reductions in anthropogenic emissions by sources of greenhouse gases;
  3. Comply with applicable laws of the Parties hosting CDM project activities when carrying out its functions referred to in subparagraph (e) below;
  4. Demonstrate that it, and its subcontractors, have no real or potential conflict of interest with the participants in the CDM project activities for which it has been selected to carry out validation or verification and certification functions;
  5. Perform one of the following functions relating to a given CDM project activity: validation or verification and certification. Upon request, the Executive Board may, however, allow a single designated operational entity to perform all these functions within a single CDM project activity;
  6. Maintain a publicly available list of all CDM project activities for which it has carried out validation, verification and certification;
  7. Submit an annual activity report to the Executive Board;
  8. Make information obtained from CDM project participants publicly available, as required by the Executive Board. Information marked as proprietary or confidential shall not be disclosed without the written consent of the provider of the information, except as required by national law. Information used to determine additionality as defined in paragraph 43 below, to describe the baseline methodology and its application, and to support an environmental impact assessment referred to in paragraph 37 (c) below, shall not be considered as proprietary or confidential (3/CMP.1, Annex, paragraph 27).

Accreditation and designation

The process for the accreditation and designation of operational entities is set out in detail here. In summary, operational entities are accredited (or "provisionally designated") by the Executive Board upon a recommendation by the CDM Accreditation Panel, which is advised by a specially constituted CDM Accreditation Team, and then designated by the COP/MOP.

The process is illustrated in the diagram below:

Annual activity reports

As noted above, DOEs are required to submit annual activity reports to the CDM Executive Board (3/CMP.1, Annex, paragraph 27(g)). At EB 19, the Executive Board adopted guidance on the preparation of this report, based on a recommendation by the CDM Accreditation Panel, to ensure consistency and completeness of reporting with respect to the key CDM activities of a DOE.

The report must cover the period from 1 July of the preceding year to 30 June of the current year, and shall be submitted to the CDM Executive Board not later than 30 September. The report should not exceed five pages (although supplementary information may be provided in annexes), and must be signed off by the Chief Executive Officer of the DOE. All information in the report will be treated as confidential (EB 53, Annex 4).

The report must contain the following elements (EB 53, Annex 4):

  1. Introduction
    1. Period covered by report
    2. Purpose of report
  2. Accreditation status
    1. Scope{s} accredited for indicating date of accreditation
    2. Scope{s} applie d for and status of application
  3. Organization
    1. Major changes in organizational structure and personnel
    2. CDM-related training undertaken
    3. Use of subcontractors
    4. Management systems
      1. Internal audit(s) carried out
      2. Management review(s) carried out
      3. Complaints, disputes and appeals on CDM-related activities
  4. Activities relating to the consideration of project activities
    1. List of project activities
    2. Status of project activities
    3. Regional distribution of project activities
    4. Sectoral distribution of project activities
    5. List of project activities declined, if any, including the reasons for doing so
    6. List of the project activities undertaken in countries having less than 10 registered project activities
    7. Number of project activities under validation or verification per qualified auditor
    8. Average timeframes for the validation and verification of project activities (from the signing of contract to submission of the request to the CDM EB), divided by region
    9. Average fees for the validation and verification of CDM project activities, divided by region.
  5. Interactions with interested parties
    1. Interactions with Executive Board
    2. Interactions with other designated operational and/or applicant entities
    3. Interactions with other interested parties
  6. Financial statement
    • Annual income and expenditure relating to CDM related activities.
  7. Challenges and lessons learnt (EB 53, Annex 4)

Quality control

The Executive Board has expressed some concern about the quality of validation activities conducted by some DOEs, and have requested that DOEs ensure that they comply fully and transparently with the CDM rules in validation reports and that their work is consistently of high quality and complete (EB 26, paragraph 87).

The Executive Board has agreed to provide constructive feedback to DOEs, by considering the nature of errors at each meeting and communicating its observations to DOEs through the Secretary of the Board. If issues are frequent or recurrent in relation to particular DOEs, formal actions will follow (EB 26, paragraph 88).

At the 49th meeting of the Executive Board, a general Policy framework to address non-compliance by Designated Operational Entities was created, based on the following principles:

  1. Any non-compliance of a DOE shall be addressed;
  2. A non-compliance shall be addressed in line with the risks it posed to:
    • Credibility of the CDM process; and/or
    • Confidence level of the Board in the DOE performance;
  3. An individual non-compliance issue bears a combined risk and contributes towards overall non-compliance;
  4. The overall non-compliance is graded in accordance with the combined risk that the individual non-compliance issues are posing to the process and the ongoing confidence of the Board in a particular DOE;
  5. Consequences of non-compliance are determined according to the grade;
  6. DOE performance can be measured by the level of its overall non-compliance (EB 49, Annex 3, para 12).

EB 79, Annex 7 adopts the revised Guidelines for quality assurance and quality control of data used in the establishment of standardized baselines.

Accountability

3/CMP.1, Annex, paragraph 26 provides that DOEs are accountable to the COP/MOP through the Executive Board and must comply with the CDM rules:

Designated operational entities shall be accountable to the COP/MOP through the Executive Board and shall comply with the modalities and procedures in decision 17/CP.7, the present annex and relevant decisions of the COP/MOP and the Executive Board (3/CMP.1, Annex, paragraph 26, previously 17/CP.7, Annex, paragraph 26)

At EB 31, the Executive Board requested that the CDM Accreditation Panel consider appropriate actions for non-compliance with the CDM rules and Executive Board directions, noting again that:

DOEs are accountable to the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (COP/MOP) through the Executive Board and therefore shall comply with the decisions/ instructions of the Board (EB 31, paragraph 9).

As a consequence, the CDM Validation and Verification Manual (VVM) was adopted in late 1998 to be used as a basis for developing guidelines in order to promote quality and consistency in the validation and verification work of DOEs. The latest version of the VVM (1.2) can be accessed here (EB 55 Annex 1).

The Executive Board did note, however, the problems that may arise from the fact that the DOE is under a contractual arrangement with its client (the project proponent) and operates in a competitive market. The Executive Board has therefore established a practice of meeting with DOEs and applicant entities at regular intervals to exchange views and experiences (EB Report COP 10, paragraph 21). The Executive Board has also clarified that DOEs must:

...act in an independent manner and provide, in a transparent fashion, information on the content of their exchanges with project participants in the context of validation and verification (EB 22, paragraph 10(a)).

The Executive Board has also committed to taking measures to avoid the deliverables of DOEs being compromised by potential conflicts of interest, including the following:

...the establishment of the registration and issuance team, as well as through enhanced dialogue, the DOE forum and coordination workshops (EB Report COP/MOP 2 Addendum Pt 1, paragraph 9).

The Executive Board has confirmed that in carrying out their role, DOEs cannot include disclaimers in documentation submitted to the Board:

The Board reiterated that it agreed with the CDM-AP that AEs/DOEs shall take full responsibility for the quality of their work1 and shall therefore not include any disclaimers in documentation submitted to the Board (EB 17, paragraph 9).

Any mistakes made by validating or verifying DOEs in approved methodologies are to be addressed through requests for revisions or deviations (EB 28, paragraph 110).

Communication with the Executive Board

The Executive Board has established a forum (the AE/DOE Forum) as a means to enhance the channels of communication between the Board and DOEs and to provide guidance on decisions and clarifications on specific issues in a timely manner (EB 31, paragraph 12).

Requests for clarifications from DOEs on the CDM Accreditation Standard should be provided directly to the CDM-AP as part of the CDM-AP progress report to the Board.

Small-scale projects

For small-scale project activities or bundled small-scale project activities, a single designated operational entity may perform validation as well as verification and certification services:

A single designated operational entity may perform validation as well as verification and certification for a small-scale CDM project activity or bundled small-scale CDM project activities (4/CMP.1, Appendix II, paragraph 20).

The role of the DOE in relation to small-scale project activities is otherwise the same as for large-scale project activities.

Afforestation and reforestation projects

The role of the DOE in relation to A/R projects is the same as for ordinary project activities, except that the DOE is required to verify and certify net anthropogenic greenhouse gas removals by sinks (rather than verifying and certifying abatement from a project):

In the case of afforestation and reforestation project activities under the CDM, a designated operational entity shall verify and certify net anthropogenic greenhouse gas removals by sinks (5/CMP.1, Annex, paragraph 6).

Related Topics

Accreditation and designation of DOEs

CDM Accreditation Panel (CDM-AP)

CDM Assessment Team (CDM-AT)

Role of the DOE in validation (P)

Role of the DOE in verification (P)

Role of the DOE in certification (P)

Suspension of accreditation of DOEs