Clean Development Mechanism (CDM)
The Clean Development Mechanism provides an incentive for industrialized countries to invest in initiatives in developing countries that reduce net greenhouse gas emissions. Some of the eligible projects are renewable energy commercialisation, energy efficiency, and fuel switching, and methane recovery from landfills. Under the clean development mechanism, the savings in carbon dioxide emissions will be recorded as a credit, which will be shared among the parties to the transaction. Generally, investments in developing countries offer opportunities for greater reduction in greenhouse gas emissions per dollar than in developed countries. Industrial economies have already achieved higher levels of efficiency in their industrial facilities and infrastructure. Furthermore, the higher growth rates in many developing countries create more opportunities for deployment of energy efficient technologies at the inception stage.
Host Country Approval in the Kingdom of Saudi Arabia
Approval procedures
The National Committee for the Mechanism of Clean Development (the “National Committee”) is the Designated National Authority (DNA) for the Kingdom of Saudi Arabia.
The National Committee has established the following procedure for the approval or rejection of proposed CDM projects. It allows for a prompt and efficient evaluation and approval of CDM project opportunities.
Submission of CDM project application
The first step in the National Committee’s CDM project approval procedure is the submission of the CDM project application to the Secretariat.
Solicitation of Stakeholder Comments
The Secretariat will review the application and verify its completeness. Afterwards, the proposed CDM project’s Project Design Document – the “PDD” – will be posted on the website of the National Committee. This allows public and private stakeholders to comment on the sustainable development impacts of the proposed CDM project.
Preparation of Technical Project Evaluation Report
Meanwhile, the Technical Project Evaluation Unit of the DNA reviews the completed application and prepares a report that evaluates the proposed CDM project according to the following criteria:
• The CDM project’s contributions to further sustainable development of the Kingdom;
• The likelihood of the CDM project’s achieving CDM registration by the CDM Executive Board, including the likelihood of its satisfying the CDM’s additionality requirements; and
• The likelihood of the CDM project’s satisfying the applicable baseline and monitoring methodologies approved by the CDM Executive Board. The report also includes a summary of the comments on the PDD received from public and private stakeholders, as well as a recommendation from the Technical Project Evaluation Unit to either accept or reject the proposed CDM project.
Voting on the Proposed CDM Project
The National Committee votes on whether to approve or reject the proposed CDM project. Depending on the decision by the National Committee, the Chairman will either issue a Letter of Approval or a Letter of No Approval to the project proponent.
Requests for Review
In case of no approval, the project proponent may file a petition to the Minster of Energy MOE to review such decision.
Kingdom of Saudi Arabia National CDM Committee - Project Evaluation and Approval Cycle
How to apply for a Letter of Approval
Project proponents applying for a Letter of Approval from the Kingdom of Saudi Arabia need to submit the following:
- A completed application form, which can be obtained from DNA.
- The constitutional documents of the project proponent (such as the commercial registration and bylaws);
- The Project Design Document (PDD), as submitted for publication on the UNFCCC website;
- A completed questionnaire that identifies the anticipated contribution of the proposed CDM project to the sustainable development of the Kingdom.
- Additional information and/or supporting documentation enabling the DNA to evaluate the project’s likelihood for satisfying the CDM’s additionality requirements, and on its sustainable development impacts; and
- An undertaking that all documents submitted are accurate and all statements in the application are true and correct (part of the application form).
The CDM project cycle – international requirements
The Clean Development Mechanism (CDM) is a project-based mechanism, laid down in Article 12 of the Kyoto Protocol within the framework of the United Nations Framework Convention on Climate Change (UNFCCC) in 1997. The CDM has a two-fold objective: to support CDM host countries in their sustainable development and to minimize costs for reaching internationally agreed greenhouse gas reduction targets for so-called Annex B countries (“industrialized countries”). The CDM functions as follows: the realization of a climate protection project – e.g. an increase in the efficiency in power stations, the use of renewable energies, or the capture of landfill gas – leads to a reduction of greenhouse gases (GHGs) such as Carbon Dioxide (CO2) in the host country. These reductions are quantified via a baseline scenario (see figure 2) and credited in the form of certificates, so-called Certified Emission Reductions, each equivalent to one ton CO2-reduction. CERs can be sold, traded and used by industrialized countries to meet their emission targets. In some countries, e.g. in all EU member states, even private companies can use CERs to comply with domestic national policies such as national emission trading schemes on company level. This has created a significant demand for CERs from both governmental and private players.
UNFCCC Level Approval
The CDM approval procedure
Prior to the generation of CERs, any CDM project needs to be registered and approved by the UNFCCC, namely the CDM Executive Board. The public registration and issuance process is designed to ensure real, measurable and verifiable emission reductions that are additional to what would have occurred without the project.
The registration and issuance process consists of the following steps:
Elaboration of a Project Design Document (PDD): It is the template for project applications to the UNFCCC. Major components of a PDD are the establishment of a baseline, estimation of GHG-reductions, discussion of the additionality of the project, and establishment of an adequate monitoring plan.
- Approval by the host- and investor country DNA: To be considered for registration, a project must first be approved by the Designated National Authorities (DNAs) of host- and investor countries. In case of “unilateral” CDM projects, only the host country’s DNA approval is required.
- Validation of the PDD by an independent entity: The Designated Operational Entity (DOE)
- Request for registration at the UNFCCC by the DOE, and registration (or not)
- Implementation of the project’s monitoring plan; elaboration of monitoring reports.
- Verification of the monitoring report(s) by an independent entity, the Designated Operational Entity (DOE)
- Request for issuance of CERs by the DOE
- Issuance of CERs by the CDM Executive Board
More information on the CDM approval requirements on the international level can be found at www.unfccc.int/cdm.
