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Clean Development Mechanism

Note: As from September 2010, the Malta Resources Authority assumed the function of the Designated National Authority for Clean Development Mechanism in Malta. The procedure described below may no longer be applicable. Users are advised to seek up-to-date guidance from the Malta Resources Authority. The new contact details can be found below.

Designated National Authority

Name
Malta Resources Authority

Address
Malta Resources Authority
Triq Aldo Moro
Marsa
Malta

Telephone   356 2295 5120
Fax             356 2295 5200
Email          
ceo@mra.org.mt 

Designated Contact Person

Name
Ing Anthony Rizzo
Chief Executive Officer

Address
Malta Resources Authority
Triq Aldo Moro
Marsa
Malta

Telephone   356 2295 5120
Fax             356 2295 5200
Email          
ceo@mra.org.mt 

National Focal Point for UNFCCC
and Kyoto Protocol


Name
Dr. Ing Christopher Ciantar
Permanent Secretary

Address
Ministry for Resources and Rural Affairs
Triq Francesco Buonamici
Floriana  FRN 1700
Malta

Telephone   356 2295 2227
Fax             356 2295 2225
Email    
euaffairs.mrra@gov.mt

 

Clean Development Mechanism - Introduction

This page is dedicated to the Clean Development Mechanism (CDM), one of the tools available to Malta to help reduce
greenhouse gas emissions. Here you will find information on how the mechanism operates, what sort of projects are potentially eligible and the role of various institutions in the CDM process. The information provided in this website is not intended to substitute official guidance on CDM process. The aim is to provide a brief overview of the CDM, and to direct the interested parties to seek further information from official sources which should be consulted prior to considering initiating a CDM activity.


What is Clean Development Mechanism?

Clean Development Mechanism (CDM), is an instrument under the United Nations Framework Convention on Climate Change and its Kyoto Protocol that facilitates the achievement of objectives set out under these international agreements.

Parties to the Convention, which Malta has also ratified, have agreed to take action to achieve:

“stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system”

Signatories to the Convention fall into three categories:

  • Annex I parties are members of the OECD (Organisation for Economic Co-operation and Development) and countries with Economies In Transition (the EIT Parties), including several Central and Eastern European States;
  • Annex II parties - consist of the OECD members of Annex I, but which are not EIT Parties. They are required to provide financial resources to enable developing countries to undertake emissions reduction activities and help them adapt to the effects of climate change;
  • Non-Annex I parties - consist mostly of developing countries. CDM emphasizes that help should aim to cater more for their needs with regards to climate change.

To achieve the objectives of the Convention, the Kyoto Protocol sets out quantified targets for Annex I parties to the Convention, together with a number of so-called flexible mechanisms, which help these parties achieve their respective emission limitation or reduction targets. One of these mechanisms is CDM.

Malta currently has the status of a Non-Annex I country, which allows it to host emission reduction projects under the CDM. If Malta’s status changes, the country would no longer be eligible to host CDM projects, but will still be able to participate in CDM as an Annex I party.

Under the CDM, Annex I countries (or enterprises in such countries) with a greenhouse gas reduction commitment may undertake projects in Non-Annex 1 countries (including Malta) to reduce the latter’s emissions, help foster sustainable development and promote technology transfer.  In return for their investments, Annex I countries may obtain the so-called “Certified Emission Reduction” units (CERs), which can subsequently be traded on international carbon markets or used as a contribution to compliance with emission reduction commitments at the national or enterprise level. The CDM allows net global greenhouse gas emissions to be reduced at a lower cost by financing emissions reduction projects in developing countries where costs are lower than in industrialised countries.

However, investment supported by an Annex 1 country is not a necessary prerequisite for a CDM project to take place in a Non-Annex 1 country. A Non-Annex 1 country may instead opt for financing a project out of its own resources, or team up with another Non-Annex 1 country.


Which projects are eligible for CDM?

To be eligible for CDM, projects must meet certain criteria, which could be summarised as: 

  • Projects must promote sustainable development in the countries where they are located;
  • Projects must lead to emission reductions, which must be real, measurable, long term and additional to reductions that would have occurred without the project;
  • Projects must not divert funding from existing official development assistance.

Projects that broadly satisfy the above criteria, may be considered as potentially eligible for CDM, provided they comply with the requirements of the CDM process, which is described below.


How does it work?

To ensure that CDM project activities lead to real, measurable and long-term emission reductions, the CDM process is governed by a set of rules supervised by specially designated institutions.

Emission credits generated by CDM projects, as already outlined above, are called certified emission reduction (CERs) units. One ton of CO2 equivalent reduction equals one certified emission reduction unit. The registration process under the CDM may be time consuming and could be costly, and in the case of some projects, one needs to assess the feasibility of using CDM as the value of CERs arising from the CDM project activity may not even cover the costs of registration. On the other hand, some projects may generate substantial amount of CERs and provide considerable additional financial incentive to justify investment in the project especially where it is difficult to access alternative additional funding sources.

The CERs can only be allocated to a project after independent verification through so-called Designated Operational Entities (DOEs), which are mostly commercial certification companies. The DOEs have two functions:

  1. Validation and subsequently requesting registration of a proposed CDM project activity which will be considered valid after 8 weeks if no request for review was made; and
  2. Verification of emission reduction of a registered CDM project activity and requesting the CDM Executive Board (CDM EB) to issue CERs accordingly.

A project cycle is overseen by the CDM EB, whose 10 members and 10 alternates are elected by the UNFCCC Conference of the Parties (COP). The CDM Executive Board undertakes a variety of tasks relating to the day-to-day operation of the CDM. The EB has to ensure that projects conform to the rules and formally registers them; it sets the definitions of CDM rules, such as baseline methodologies, definition of terminology, fees of registration and supervises the issuance of CERs.

Countries wishing to undertake CDM activities are required to appoint a Designated National Authority (DNA). One of the key tasks of the DNA is to establish an efficient and transparent national CDM project approval procedure for the evaluation of project ideas submitted to the authority and in particular to verify whether the project contributes to the host country’s sustainable development goals. The Malta Environment & Planning Authority (MEPA) has been nominated by the Maltese Government to perform the functions of the Designated National Authority for Malta.

The process of project registration as a CDM activity can be summarised as follows:


A.   Plan and design your proposal
 

Any legally established entity in a Non-Annex 1 country is eligible to propose projects for CDM.  Project planners should consider the conditions which need to be adhered to prior to registration into the CDM mechanism.
 
At the initial stages, a
Project Idea Note (PIN), or a short project description is prepared including the basic details of the project to be undertaken, such as type and size of project, location, anticipated total GHG reduction compared to the business-as-usual scenario (baseline) and suggested crediting lifetime. Projects can have a lifetime or “crediting period” of ten or three times seven years. Project participants have to choose the starting date of a crediting period to be after the date the first emission reductions are generated by the CDM project activity. A crediting period cannot extend beyond the operational lifetime of the project activity. See CDM in Charts for guidance.

In designing the CDM project proposal, project developers should consider a range of issues, such as whether the project would fit within the overall framework of national policies, and whether it would be compatible with the existing environmental, planning and other regulations. Thus consultation with the relevant authorities, including with the DNA, is highly encouraged at this stage. The webpage of the
Carbon Finance Unit of the World Bank contains useful guidance on developing project ideas.


B.   Obtain the Letter of Prima Facie Acceptability

The PIN is subsequently submitted to the Designated National Authority (MEPA) for a preliminary review. Submissions can be sent by email to
cdm@mepa.org.mt or in hard copy addressed to:

Director of Environment
CDM Designated National Authority Focal Point
Malta Environment & Planning Authority
St. Francis Ravelin, Floriana
Malta

If there are no major issues concerning the project, a Letter of Prima Facie Acceptability
is issued within 4 weeks from the submission of the PIN. The letter would state that based on the information provided in the PIN, the DNA has no objections to further development of the project proposal, provided it satisfies all applicable national regulatory requirements and international criteria for CDM. Alternatively, the DNA may send the PIN back to the proposer with comments on issues that need improvement or further consideration.

The PIN template may be downloaded from
here 


C.   Submit the Project Design Document (PDD)

Once the PIN has been accepted in principle, the project proposer must then prepare a Project Design Document (PDD).  The PDD is the document required for validation, registration and verification of the project and provides a detailed description and specification of the proposed CDM activity. It includes in-depth information on the baseline methodology, justification of additionality, duration of the project, the monitoring methodology and plan, calculation of GHG by sources, environmental impacts and the comments provided by stakeholders.

There are several different PDD formats available for download from the UNFCCC website according to the category of the project. The templates and guidelines for their completion can be downloaded from here. In parallel with the development of the PDD, project proposers are advised to consult the relevant authorities and initiate any applications that may be required by applicable national regulations.


D.   Obtain consent from responsible authorities

All CDM projects that are proposed for implementation in Malta must obtain written approval from MEPA, which acts as the local Designated National Authority (DNA) for CDM.

Submission of PDD should follow the same procedure as for the submission of PIN. If the DNA is satisfied with the contents of the PDD, a Letter of Approval (LoA) is issued within 1 month from the receipt of the PDD. Alternatively, the DNA may send the PDD back to the proposer with comments on issues that need improvement or further consideration.

If an Annex I Party is involved in the CDM activity, the respective DNA of that country must also issue a LoA. A list of DNAs, their focal points and, when available, the DNA websites can be found
here.


E.   Validate the proposal

After getting the necessary approvals, the project needs to be validated.  The validation is carried out by a Designated Operational Entity (DOE), which could be any entity certified by the CDM Executive Board to perform validation activities. 

It is the responsibility of the project participants to initiate contacts with a DOE to follow their guidance on validation. The DOE will be using the “Validation and Verification Manual” to evaluate the PDD. Particularly, the DOE will assess whether:

  • The PDD follows the CDM requirements;
  • The methodology used is suitable and applied correctly;
  • The GHG emission reduction proofs to be additional;
  • The calculations are accurate and assumptions correct and conservative;
  • Where applicable, EIA has been implemented in accordance to the requirements of the host country;
  • The LoA(s) and relevant documentation have been issued.

During the validation process, DOEs may request further documentation concerning the project, visit the project site and meet with any parties concerned. During the validation, the DOE posts the PDD on the UNFCCC webpage for a 30 day public consultation period.

If comments arise, the DOE has to describe in detail how the comments were taken into account in the validation process. As a next step the DOE issues either a pre-validation report through which the project developer is requested to look into outstanding issues needed to be accomplished before the final validation report is prepared for submission to the EB or the validation report.


F.   Register validated proposal with the CDM Executive Board

Registration is the formal acceptance of a validated project as a CDM project activity.  At this stage, the project participants (PPs) will be expected to pay the registration fee which ranges from $1,000 to $350,000, according to the annual emission reduction potential of the project. Projects with the annual reduction potential of below 15,000 tons of CO2e are exempted from paying the registration fee. The application process is initiated by the Designated Operational Entity (DOE) on behalf of the project proponent. It takes between 4 and 8 weeks for the registration of the project to be completed.


G.   Commence implementation and monitoring

Once the proposal has been successfully registered as a CDM project activity, project participants are required to collect and archive the relevant data for calculating GHG emission reductions, in accordance with the validated monitoring plan in the PDD.



H.   Verification and certification

The verification of the project is carried out by the DOE and consists of an independent periodic review and ex-post monitoring of GHG reductions, followed by the certification of the project. This is the written assurance by a DOE that a project activity achieved the reductions in GHG emissions as verified.


I.   Issuance of CERs

The Executive Board (EB) will issue certified emission reductions (CERs) equal to the verified amount of GHG emission reductions.  The issuance of CERs, in accordance with the distribution agreement, will be affected only when the share of proceeds to cover administrative expenses of the CDM is received.

The share of proceeds for administrative expenses is calculated as follows: US$ 0.10 per CER for the first 15.000 CERs per year and US$ 0.20 for additional CERs issued for that period. In addition a mandatory contribution to the adaptation fund amounting to 2% of the issued CERs is also deducted. Usually, the CERs are issued within 15 days, unless a review is required. The CERs will be transferred into the accounts of the projects participants as outlined in the PDD.

After the CERs have been issued, they can be distributed amongst project participants in accordance with any agreement in place. Earned CERs can be traded with other corporations or governmental authorities. Some companies may choose to bank their CERs to be traded later.


Summary of the CDM registration process

The diagram below outlines key stages in the registration process.

 

 

Issues to consider

Baseline & Additionality

In order to calculate the amount of CERs that a project may generate, a baseline for a CDM project activity has to be defined. The establishment of the baseline of a project is a central component when designing a CDM project. The baseline sets the level that reasonably represents the anthropogenic emissions by source of GHG that would occur in the absence of the proposed project activity. It should cover emissions from all gases, sectors and source categories listed in Annex A of the Kyoto Protocol within the project boundary.

GHG eligible for CDM:

CO2 - Carbon dioxide
CH4 - Methane
N2O - Nitrous oxide
PFCs - Perfluorocarbons
HFCs - Hydrofluorocarbons
SF6 - Sulphur hexafluoride  

 

 

 




The project developer also needs to assess whether there is a “leakage” in the proposed CDM activity. Leakage is defined as the net change of anthropogenic emissions by sources of greenhouse gases which occurs outside the project boundary, and which is measurable and attributable to the CDM project activity.

For a CDM project to take place, emissions reductions must be beyond, or in addition to what would have happened in the absence of the project. This criterion is called additionality and is intrinsically (and by definition) linked to the baseline. The criterion is used to determine whether emissions reductions are real, measurable and in addition to what would have happened and to ensure that reductions are not counted more than once. Project emissions must be lower than baseline emissions. The CDM Executive Board developed a combined reference tool to help project proposers assess the baseline and additionality of their projects. The tool may be downloaded from here.


Contribution to sustainable development

One objective of CDM is to assist non-Annex I countries to meet sustainable development objectives. It is the responsibility of the country hosting the project (via the DNA) to ensure that the project contributes to sustainable development in the country.

In Malta, the
National Strategy for Sustainable Development forms the basis for the assessment of sustainability of CDM project proposals. The Strategy is founded on the three pillars of economic, social and environmental sustainability and therefore all CDM projects hosted in Malta must positively contribute to these dimensions.

The DNA is mandated to review a potential CDM project to determine whether and to what extent it fulfills the relevant national sustainable development criteria, including criteria for public participation and any other national legal requirements such as environmental impact assessments.

Below guidance is intended to help project proposers to consider sustainable development issues in the design of CDM projects.  Not all criteria may be applicable to a project; however consideration of criteria should be as exhaustive as possible.
   

Sustainability Impact Assessment Criteria

The Environment 

Explanation

1.   Climate Change

Reducing greenhouse gas emissions and contributing towards the development of renewable energy actions. Measures to adapt to changes in climate should also be promoted.

2.   Air Quality

Promote remedial actions to control emissions of air pollutants and achieve compliance with International and European air quality standards. 

3.   Nature and Biodiversity

Enhance protection of biodiversity and promote actions to achieve effective management of protected areas.

4.   Freshwater

Ensuring that the utilisation of water resources is environmentally and economically sustainable, whilst safeguarding the water needs of the population and of the agricultural, commercial and industrial sectors

5.   Seawater

Sustain compliance with the Bathing Water Directive and achieve compliance with Barcelona Convention standards.

6.   Wastes

Prevent and minimise waste production, also by a reducing, reusing and recycling policy.

7.   Land use

Protect, maintain and improve the urban and rural environment and protect and manage the open countryside.

8.   Transport

Promote and enhance public transport and support the reduction in private car usage.

The Economy

9.   Economic Growth.

Sustain and enhance the economic growth and the GDP per capita in real terms.

10.  Employment.

Support employment opportunities in order to promote additional income and improve the quality of life of the population.

11.  Labour productivity.

Adopt policy measures to increase the average labour productivity and sustain balanced wages, taxation and productivity, in collaboration with the social partners.

Society

12.  Poverty reduction.

Support poverty reduction strategies.

13.  Labour force participation of women.

Sustain the adoption of policy measures in order to increase the labour force participation rate of women

14.  Health.

Reduce the need for curative care by enhancing the prevention factor focusing on healthy living.

15.  Education.

Support the adoption of measures to decrease the early school leavers rate.

Cross Cutting Issues

16.  Spatial development plan.

Consider integrated spatial development plans in all actions and the active involvement of major stakeholders in decision making mechanisms.

17.  Economic Instruments.

Enhance the use of economic instruments, and support actions to promote the polluter pays principle

18.  Enforcement.

Support the existing enforcement measures and promote an integrated enforcement mechanisms taking into account all interested sectors.

In addition to the fulfilling of the broad criteria exposed in the table ‘Sustainable Impact Assessment Criteria’, the proposers are responsible to ensure that their projects comply with all applicable national, European Union and international policies and regulations.


CDM projects in Malta

Ta’ Zwejra Landfill Gas Recovery, Flaring and Energy Producing Project

This project is the first CDM project activity in Malta.  The project`s aim is to capture gas produced by the Ta’ Zwejra landfill and either flare it or use it to generate electricity (including for internal use by the plant itself).  WasteServ Malta Ltd., which is the owner of the project, is responsible for the management and operation of a number of waste disposal facilities including that of Ta’ Zwejra which is located in Ta’ Hammud Maghtab Enviromental Complex. As a result of the combustion of methane contained in the gas extracted from the landfill, the project will result in a net reduction in greenhouse gas emissions from the site.    

The project should result in a number of benefits:

  • The avoidance of methane emissions from the landfill to the atmosphere;
  • The area surrounding the landfill currently experiences odour nuisance from certain pollutant emissions from the landfill.  As a result of this project, this area is expected to improve in this regard once the project is implemented; 
  • The substantial reduction/elimination of the gases, will also help address  health issues which may arise in the surrounding areas Through the emissions of such gases and will therefore have a positive impact on potential development of the area surrounding the landfill;
  • Safe and effective extraction of landfill-gas produced at the site will significantly reduce the risk of fire at the landfill;
  • The project’s implementation will assist Malta in demonstrating best practices on correct post-closure landfill site management landfill.

The project activity will install a landfill gas collection system, effectively covering the landfill.  Several wells and a complex piping system will be installed to ensure a safe and complete capture of the methane produced.