Clean Development Mechanism

Primer on Carbon Credit Assessment

 United Nation Framework Convention on Climate Change (UNFCCC)

UNFCCC manages sustainable development through Clean Development

Mechanism framework. Established under the Kyoto Protocol, the CDM scheme
is an incentive for companies in industrialised countries to invest in eligible
emissions reduction projects in developing countries. The Kyoto Protocol
requires that all CDM-projects are subjected to validation and
verification/certification by an operating entity, i.e. a third party verifier.

The Clean Development Mechanism intends to assist developing countries

achieve sustainable development. The scheme provides incentive for
industrialised countries to invest in cost-efficient greenhouse gas reduction
projects in these countries.

While helping a developing country find ways to reduce their greenhouse gas
(GHG) emissions, you are honouring your own reduction commitments as well.
The CDM project in which you invest has to be eligible under the Kyoto Protocol,
which means it reduces GHG emissions beyond levels achieved in a business-
as-usual scenario.

Credit-earning opportunities

The CDM project must reduce GHG emissions consistently over a period of time.
Investing companies earn a determined amount of credits for achieved emissions
reductions. Credits awarded in the form of certified emission reductions (CER)
can be used to fulfil own reduction commitments or be traded on the CDM
market.

When properly organised and fulfilling the external validation and

verification/certification requirements, CDM projects can earn credits for either a
10-year period or for a 7-year period with the option of two renewals of 7 years
each. Participation in the scheme is voluntary.

Putting the climate first

The CDM scheme provides for a cost-effective implementation of the Kyoto
Protocol, since emissions can be reached at the lowest possible cost.
Investments in CDM projects benefit both developing and industrialised
countries, as well as the environment:

• Host countries receive assistance in reaching sustainable development.

• Investor parties receive help to achieve compliance with their emissions

reduction commitments.

• Real, measurable, long-term, and cost-effective benefits that can help

reduce the climate change are achieved.
 • Reductions in emissions that are additional to business as usual
operations are achieved.

Road to Certification

To obtain certified emission reduction credits from your CDM project, you have to
follow certain steps required by the Kyoto Protocol.

CDM Project Stages

The process is divided into two phases:

• The project design phase leading up to the registration and

implementation of the project.

• The operational phase where emissions reductions are verified.

What steps should I follow?

1. Document the project design

You must develop a CDM Project Design Documentation (PDD). As an
operating entity, we will validate the PDD. The PDD should describe:

- The project activity in general

- Baseline methodology
- Duration of the project activity/crediting period
- Monitoring methodology and plan
- Calculations of GHG emissions by sources
- Environmental impacts
- Stakeholders' comments
 Information on formats and content requirements of a Project Design
Document (PDD) can be found on the UNFCCC website.

2. Validate the documentation

Your PDD should be submitted for validation by an operating entity.
During the validation, we will assess whether the project satisfies all CDM
requirements, and consequently can earn emission credits.

Validation

This is an assessment of the design of a greenhouse gas emissions reduction

project. Validation is a requirement for all CDM projects. It validates whether the
project — if implemented as planned — will fulfil the CDM requirements and
generate tradable credits.

The validation is carried out by an operating entity, i.e. an accredited third party
verifier.

During the validation, we will analyse the project design document (PDD). This
includes:

• Project design. General project information, technical features of the

project, project implementation plan, sustainable development indicators,
and timeframes.

• Baseline study. A study of factors used for estimating expected

emissions without the project (the baseline emissions).

• Monitoring and verification plans. Description of frequency,

responsibilities and methods you have for monitoring, measurements and
calculations of your GHG emissions, including a verification schedule.
 Public hearing

As part of the assessment, the project design document is subject to public

hearing for 30 days. Stakeholders can provide comments to the PDD on our
online Climate Change project portfolio.

Following a successful validation, the operating entity will recommend that the
project is accepted and registered as a CDM project. Registration is a
prerequisite for later verification/certification of emissions reduction of the
projects activities. The validation report is sent to the CDM Executive Board, and
posted on our online Climate Change project portfolio.

3. Apply for registration

Following a successful validation, an application is made to the UNFCCC
Executive Board (United Nations Framework Convention for Climate Change) for
registration of the project as a CDM project.

4. Implement project
After your CDM project is registered, you can proceed with the implementation of
the project and start operations.

5. Implement a monitoring scheme

Implement the registered monitoring plan and calculate the emission reductions
as the difference between actual monitored emissions and the baseline
emissions. The results should be summarised in a monitoring report.

6. Verification of monitoring report

A monitoring report shall be provided to the designated operating entity for
verification. The report should include all necessary information on the relevant
factors and key characteristics that are necessary to claim emissions reductions
from the project in the applicable period. The project participants request
verification at the intervals of their choice.

Verification/Certification

Verification is a periodic review to determine actual emission reductions of your

CDM project activities. Following this process, you are issued the certified
emission reduction credits you have earned.

The verification/certification has to be performed by an independent operating

entity different from the one that performed the validation. Only for so-called
small scale projects can the CDM Executive Board accept that the same
operating entity carries out both the validation and verification/certification.
Verification
The verification is a result-oriented process to determine the emissions
reductions achieved by your project. It verifies continued compliance with the
criteria defined under the Kyoto Protocol.

The verification includes:

• Review of monitoring results and data collection systems linked to

emissions reductions.

• Review of established practices and the accuracy of data collected, and

monitoring equipment.

• Review of the management system supporting the reported emissions

reductions.

• Interviews with project participants and stakeholders.

Certification

Based on a successful verification, the operating entity will determine and

certify the amount of emission reduction (CER) that will be forwarded to the
CDM Executive Board for issuance of the credit documentation.

Submit for certification

Based on successful verification, the operating entity will determine the amount
of emission reduction (CER) that will be forwarded to the Executive Board for
issuance of the certified credit documentation.

Link to UNFCCC CDM site

http://cdm.unfccc.int/index.html
Our Services

We offer the following CDM services

• Conducting the Initial Feasibility study

• Establishing Additionality
• Performing the Carbon Credit Assessment
• Producing CDM-PDD (Project Design Document)
• Establishing the Monitoring Plan
• Performing the Baseline study
• Submission to DOE and DOE Issue Resolution and Approval (DNV)
• Submission to DNA (Malaysia Ministry of Natural Resources and Environment)
• Submission to UNFCCC for Carbon Credit Allocation
• Designation of Buyer
• Price negotiations for Carbon Credits
• Identification of Financial Institution to Hold Credits in Trust