Baseline & Additionality

The development of any CDM project entails 3 steps:

• Determining the Baseline
• Proving Additionality
• Choosing a Methodology

Baseline

Baseline for a CDM Project activity is the volume of emissions that would occur in the absence of the proposed Project.

Project activities that result in GHGs emissions like Carbon Dioxide (CO₂), Methane (CH₄) and Nitrous Oxide (N₂O) are eligible for CDM. Examples of such Projects are domestic bio digesters, solar photovoltaic lamps in houses without electricity, planting trees that store carbon in biomass, etc. These Projects aim to replace activities which earlier emitted GHGs. Biogas digesters replace fuel wood and kerosene use, solar photovoltaic lamps replace kerosene use, etc. Scenarios of GHG emissions in the absence of a CDM Project activity are commonly referred to as the "Baseline scenario".

There is a second consideration. Even in the absence of CDM, an economy is likely to witness a move towards:

1. More Efficient Energy Usage, and
2. Increased Renewable Energy Usage

This is a natural progression of economies will also result in GHG emissions reductions, called Carbon Intensity Reduction. For a Project to be an eligible CDM Project, the GHG reductions should be greater than or Additional to the GHG reductions that are expected to occur in this manner.

Let us take the example of a Biogas CDM Project. In the absence of the Project, no action is expected to be taken to reduce the CO₂ emissions from burning fuel wood and kerosene. Therefore, the Baseline scenario represents the level of CO₂ that is emitted from fuel wood and kerosene use and the Baseline for the Project is the quantity of CO₂ emitted.

Consider a proposed solar power Project for individual users using LED lights in houses that are not connected to the electricity grid. The Baseline scenarios would be use of kerosene for domestic lighting which results in emission of Carbon Dioxide, a GHG. This is the only source for most rural households in India, heavily backed on the basis of government subsidies. Without a CDM Project, no action is likely to be taken for poor households to meet their domestic lighting needs. Therefore, the Baseline scenario would represent the quantity of carbon emissions from kerosene usage for the wick stoves and hurricane lanterns.

Therefore, the baseline scenario and the baseline are the bases for testing whether the CDM project activity meets the additionality criterion.

Additionality

To avoid giving credits for emission reductions that would have occurred even without the CDM Project, the CDM Executive Board has specified rules to ensure that the Project reduces emissions more than what would have occurred in the absence of the Project. If the emissions from the Project are lower than the Baseline, it looks at what would have happened without the Project, which is the 'Project Additionality'.

The UNFCCC has developed a Tool for the demonstration and assessment of Additionality. This document provides for a step-wise approach to demonstrate and assess Additionality. These steps include:

• Identification of Alternatives to the Project Activity
• Investment Analysis to determine that the proposed Project activity is not the most economic or financially attractive
• Barriers Analysis
• Common Practice Analysis

Identification of Alternatives

There are plenty of alternatives to Biogas Units, such as fuel wood, kerosene, LPG, etc. - not a single family would stop cooking if there were no Biogas Units installed. But these are regressive steps that will take the emission scenario from bad to worse.

If no credible alternatives to a Project exist, then it cannot be Additional.

Investment analysis

As a next step, we need to ask the question, "Are the alternatives financially more attractive than the proposed CDM Project activity?". If the answer is "Yes", then the Project is likely to be Additional. Because, in the absence of CDM Project, communities will choose the more financially attractive option.

Using fuel wood for cooking is financially more attractive since much of it is obtained free of cost, though there is a heavy price to paid in terms of time, inconvenience and insecurity. As against that, the construction of Biogas Units involves heavy financial investment.

Barrier Analysis (optional)

This step allows other criteria to be brought to bear on the question of Additionality.

For example, a developing country might lack access to the necessary technical expertise to implement a desired technology. This is a barrier that the CDM Project could help overcome.

Common Practice Analysis

A final common-sense Additionality check looks at what actions the community would have taken in the absence of the CDM Project. Regardless of whether cheaper alternatives exist, if everyone had chosen Biogas Units over fuel wood, even if there was no CDM Project, there is good reason to suspect that the CDM Project isn't needed to stimulate the construction of Biogas Units.

It is difficult especially for "Greenfield Projects" (new Projects) to establish with certainty what would have happened without the CDM Project. Nevertheless, official guidelines have been designated to facilitate uniform assessment.

Methodology

A proposed CDM Project has to use an approved Baseline and Monitoring Methodology to be validated, approved and registered.

In order to identify Baseline, CDM chose to propose "Methodology" which attempts to standardize the calculation by applying common Methodology to similar type of Projects. Therefore, Baseline Methodology describes the procedure/formulae to establish the Baseline and assess Additionality of the proposed CDM Project.

Application of a Methodology should result in a Baseline scenario that reasonably represents the anthropogenic emissions by sources of greenhouse gases. The Methodology has to be described in a transparent manner and should be conservative. Calculations and assumptions used have to be appropriate and adequate.

Each Methodology has two key factors:

• Baseline Methodology - The final purpose of Baseline Methodology is to provide a procedure on how to calculate emission reductions.
• Monitoring Methodology - It describes how to monitor the identified parameters in the emission reductions formulae given in the Baseline Methodology, upon implementation of Project, and is indivisible with Baseline emissions.

Project developers have two options regarding the use of Methodology for their Project:

• Use an approved Methodology: If a Methodology already exists and is approved by the CDM Executive Board, then that can be used, with a reasoned justification for applying it in the Project Design Document. All approved Methodology are listed in the UNFCCC home page.
• Propose a new Methodology: In case none of the approved Methodologies are applicable for the proposed Project activity, a new Methodology can be developed and proposed to the EB for its approval. Historically, developing a new Methodology takes about a year.
  But it must be borne in mind that, to date, over 250 Methodologies have been proposed and more than half have been rejected.