The CDM Project Cycle
The first step -- submit a PIN
(template on www.carbonfinance.org)
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Description of Project Proponent
Type of Project
Location of Project
Expected Schedule
Financing Sought
Technical Summary of Project
Expected Environmental Benefits
Project Proposal Review and
Upstream Due Diligence
Proposal Review and Upstream Due Diligence
Project completion
1.
2.
3.
4.
5.
Periodic verification
& certification
Construction and start up
6.
PIN reviewed by CFB
Upstream Due Diligence
If PIN is acceptable, sponsor notified with request to
prepare CFD; Regional/ Sectoral approval sought
Host Country Endorsement/No Objection sought in
some cases where country CDM approval process is
not clear
If CFD approved (approval process varies from fund to
fund), further work is authorized
Letter of Intent issued after PIN or CFD approval
Negotiation of Project Agreements
Carbon Asset Due Diligence
Project completion
Preparation and review of the Project
Carbon Asset Due Diligence
1.
Periodic verification
& certification
2
3.
4.
5.
Construction and start up
Project Design Document prepared
(a. Determine whether existing
methodology is applicable
b. may require baseline study)
Monitoring Plan prepared
CFB quality control of results
Documents for Validation prepared
by CFB and sponsor
Bank region begins technical,
financial, environmental and social
due diligence
Validation Process
Project completion
Preparation and review of the Project
Carbon Asset Due Diligence
Periodic verification
& certification
Validation process
Construction and start up
Negotiation of Project Agreements
1. CFB contracts the Independent
Validator and submits documents
2. Validator studies project design
document, including baseline study
and monitoring plan where
applicable
3. Documents are posted for 30-day
comment period
4. Validator issues a report and opinion
5. Registration request is submitted (can
be after the ERPA signature)
Negotiation of Project Agreements
Project completion
Preparation and review of the Project
Carbon Asset Due Diligence
Periodic verification
& certification
Validation process
Construction and start up
Negotiation of Project Agreements
1. CFB prepares term sheets and draft ERPA and negotiations
initiated.
2. 3. Project Due Diligence is completed and World Bank internal
approvals are secured.
4. Letter of Approval obtained from Host Country
5. ERPA is signed
Start of Generation of ERs & Monitoring
Project completion
Preparation and review of the Project
Carbon Asset Due Diligence
Periodic verification
& certification
Validation process
Construction and start up
Negotiation of Project Agreements
1. At construction completion, CFB contracts Independent Verifier
2. Verifier checks that specifications of the monitoring plan are met (“Initial
Verification”)
3. Project implementation starts
4. Project entity monitors in accordance to the monitoring plan
Verification and Certification
Project completion
Preparation and review of the Project
Baseline Study and Monitoring
Plan (MP)
Periodic verification & certification
1. Verifier issues periodic verification report
2. CFB pays project sponsor for ERs
3. Certified ERs are issued by the CDM Exec. Board
4. Verification undertaken annually or as deemed
appropriate
Construction and start up
Validation process
Negotiation of Project Agreements
Project Completion
Project completion
Preparation and review of the Project
Crediting period either
• 10 years fixed or
• 7 year renewable (maximum 21 years)
Carbon Asset Due Diligence
Periodic verification
& certification
Validation process
Construction and start up
Negotiation of Project Agreements
Carbon Asset Creation and Maintenance
Manufacturing Process and Costs based on Bank experience
Preparation and review of the Project
Project completion
• Upstream Due Diligence, carbon risk
assessment and documentation: $ 25K
Carbon Asset Due Diligence
For new methodologies
•Baseline : $30 K
• Monitoring Plan: $25K
Periodic verification &
certification
• Verification: $10-25 K
• Supervision: $10-20K
Validation process
• Contract, Processing
•and documentation: 25k
Project Appraisal and Negotiation
Construction and start up
• Initial verification at start-up: $25K
• Consultation and Project Appraisal: $60K
• Negotiations and Legal documentation: $100K
Total through Negotiations
All expenses:
$265 K for regular size projects
$150 K for small scale projects
What is involved in CFD/ PCN
preparation?
• Field visits for identification and preparation
• Due diligence on:
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environmental and social issues,
carbon asset,
status of project financing,
quality and experience of project sponsors and any financial
intermediaries
• Consultations with Government on the proposed carbon
financed project (including relevant discussions needed
to obtain a letter of approval), and related legal services
review and support