Project procurement process

Project selection

The project cycles of the CDM and JI programmes begin with the evaluation and selection of a project proposal based on short project descriptions (Project Idea Notes - PINs) or alternatively on more a detailed project description (Project Design Document – PDD) if there is one prepared. At the same time there is a discussion with the Project Developer and the Project Owner, the gathering and analysis of further information about the project, plus a site visit.

Further project controls

By means of Due Diligence the project’s finances and the host company’s/project owner’s financial status are examined.

Agreement 1 – Options Agreement:

If the Swedish Energy Agency chooses to proceed with the project an agreement is drawn up, the Options Agreement. This is in order to ensure that the parties keep to the trading process.

Project Development

The Project Design Document – PDD, is developed or completed by the Project Developer in consultation with the Project Owner. It should be clear from this document that the project has made use of a methodology, approved in advance, which describes how the baselines for the project were formulated and how additionality was ascertained. It shall also make clear what other environmental impact the project will have (Environmental Impact Assessment). Moreover the document shall include a monitoring plan stating what data is necessary for the measurement of emissions reductions and how said data will be registered and archived.

Additionality

The Kyoto Protocol requires that the project shall be additional. This means that each project must result in reductions in greenhouse gas emissions that exceed that which they would have been without the project. Additionality is evaluated from “baselines”  which describe the amount of greenhouse gases a facility or operation would emit if there were no CDM or JI project.

Agreement 2  – Purchase Agreement (ERPA):

The ”Emission Reduction Purchase Agreement” – ERPA, is negotiated between the Parties to decide (i) the number of emission reductions units (CERs or ERUs respectively) which are to be bought, (ii) the price of emission units, (iii) how the costs of the various stages of the project process are to be divided by the Parties and (iv) clarification of roles and fields of responsibility during the implementation of the project. This is also intended to motivate the Parties to see the project through to completion.

Approval

In order that the purchaser of CERs or ERUs may transfer CERs and ERUs to their account the purchaser must have been registered as a project participant. In order to be a project participant it is necessary to be approved by the project authority (Designated National Authority, DNA or Joint Implementation Focal Point, JIFP) in the home country of the purchaser. Approval is issued by means of signing a Letter of Approval. See further under ”Project Authority for CDM and JI projects”.

Implementation

In order for CERs and ERUs to be issued the project must also be validated, registered and verified. The CDM Executive Board or the JI Supervisory Committee respectively monitors this process.