GHG Reduction Project / CDM

FAQs

Q: What are the benefits in participating in the Clean Development Mechanism?
A: The Clean Development Mechanism provides an incentive for developing countries to use more advanced technology for cleaner production, which results in lower greenhouse gas emissions into the atmosphere. CDM also attracts foreign investment through the creation of carbon credits or Certified Emission Reductions (CERs) which can be counted against the national emission reduction targets for industrialized countries. The CDM intends in assisting developing countries as the host countries in reaching some of their economic, social, environmental, and sustainable development objectives at both local and national levels. While there are certain environmental benefits from CDM like improvement in local environmental quality, reduction of waste and waste disposal, and a decline in non-renewable fuel depletion, economically, the development of a CDM project will increase local economic activities and generate employment. Local communities can receive a higher income by selling their agricultural wastes or residues for energy production, as a result of which the amount of energy imports can also be reduced. Additionally, CDM projects can lead to several social benefits such as improving public health and local quality of life. Meanwhile, Thailand’s participation in CDM can help contribute to solving international issues.

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Q: What are the transaction costs related to the development of CDM projects?
A: The development and registration of a CDM project incur several costs, which typically include the following:
1. Preparation of the Project Design Document (PDD): 1.5–2 million THB.
2. Validation by Designated Operational Entities (DOE): approximately no more than 1 million THB (for first revision).
3. Administrative fees by TGO for analyzing and screening the CDM projects for issuance of the Letter of Approval (LoA) and monitoring the projects. Fees are applied according to the amount of greenhouse gas emission reductions the project can achieve over the crediting period.

  • ≤ 15,000 tonnes of CO2-e per year at the cost of 75,000 THB per project.
  • > 15,000 tonnes of CO2-e per year at the cost of 10 THB per tonne of CO2-e but not more than 900,000 THB per project.

4. Registration fees by the EB. Fees are applied according to the amount of greenhouse gas emission reductions the project can achieve over the crediting period.

  • ≤ 15,000 tonnes of CO2-e per year at the rate of 10 cents per tonne of CO2-e
  • > 15,000 tonnes of CO2-e per year 20 cents per tonne of CO2-e, but not more than 350,000 USD per project.

5. Monitoring costs at the range of 150,000 – 300,000 THB.
6. Verification and Certification by DOE costs at the range of approximately 1–2 million THB.
7. CER Issuance fees by the EB: these fees are the same as the rates of the registration fees above.
8. The share of proceeds at 2 per cent of CERs that are issued to the Adaptation Fund, that costs approximately 4–8 million THB. The share of proceeds from certified project activities is used to cover the administrative expenses, as well as to assist developing country parties that are particularly vulnerable to the adverse effects of climate change to meet the costs of adaptation.

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Q: Are forest plantation projects eligible as CDM project activities? Could oil palms and fast-growing crop plantations be registered as CDM projects and generate carbon credits for sale?
A: In general, projects that involve crop plantation can be CDM projects; afforestation or deforestation projects specifically. However, a project must first meet the definition of “forest land”. Forest land is defined as an area of land not less than 0.05–1 hectare (500–10,000 sq.m.) with the stand density or “crown cover” greater than 10–30 per cent of the area, wherethe trees must have a growing potential to reach at least 2–5* meters at maturity.’ The plantation area can be classified as a forest land once it meets the above criteria. Thailand follows a slightly different definition. The country has defined a forest land as an area with a size of at least 1 rai (0.16 hectares), with tree crown cover greater than 30 percent of the total area and trees with more than 3 meters height. In Thailand, only afforestation or reforestation that complies with the following definitions can be declared as CDM project activities:

  • Afforestation is the direct human-induced conversion of land that has not been forested for a period of at least 50 years to forested land through planting, seeding and/or the human-induced promotion of natural seed sources.
  • Reforestation is the direct human-induced conversion of non-forested land to forested land through planting, seeding and/or the human-induced promotion of natural seed sources, on land that was forested but that has been converted to non-forested land. For the first commitment period, reforestation can occur on lands that did not contain forest on 31 December 1989.

* The minimum height of trees that is used in defining criteria of “forest area” varies from one country to another. Host countries that agree to enlist afforestation and reforestation activities for CDM are required to form and submit their local criteria to the EB.

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Q: When is it most suitable to sell carbon credits?
A: Price of carbon credits depends on the project’s stage with regards to the CDM project cycle. Their prices imply the uncertainty of the project to achieve the claimed emission reductions. While the sale price can be low if the project is at the stage of PDD preparation, a reasonable price is generally preferable for a successfully registered project. Hence, prices can be higher for successfully verified projects.

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Q: How to choose crediting period: 7 years with renewals or 10 years with no renewal option?
A: The lifetime of a project typically varies from one activity to another. For example, a power generation facility usually has a longer operating lifetime than a biogas plant. Project developers are urged to select a crediting period that agrees with the project life. To carefully choose the right option, they should also be aware of any possible changes in the project baseline and should bear any additional transaction costs that will arise during the next renewals in mind.

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Q: What are the differences between CER and VER?
A: CER or Certified Emission Reduction is the amount of greenhouse gas emission reductions achieved from a CDM project's implementation. The CER is subject to certification, monitoring and verification according to the procedures established by the EB.
A VER or Voluntary/Verified Emission Reduction is achieved from a greenhouse gas emission reduction project that is implemented voluntarily. VERs are not subject to the specific CDM requirements but are simplified or adapted to the requirements of the voluntary market. Standards in developing VER projects vary depending on agreements between the sellers and buyers. Therefore, VER prices are generally lower compared to CERs.

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Q: What are the key elements of an Emission Reduction Purchase Agreement?
A: The CER purchasing contract will set out the terms and conditions of payment between the seller and buyer. It is imperative that the project proponent covers the main issues in a legal contract that will affect payment delivery and risk management; for example, the sale and purchase conditions for CERs, delivery and non-delivery of CERs, price and terms of payment, financial penalties, or payment of any transaction costs such as the EB registration fee and the adaptation fee, etc.

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Q: Is it necessary to submit the Project Idea Note (PIN) for CDM project approval?
A: The PIN is a document providing preliminary information about the project activity, such as project descriptions, estimation of greenhouse gas emission reductions, contribution to sustainable development and other financial information about the project. Although the project developer is not required to submit the PIN to TGO, it can be useful as a communication tool for project developers to seek for additional financial support from potential investors.

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Q: What should be included in Initial Environmental Evaluation (IEE) report? Is it necessary that the evaluation be conducted by consultants registered with the Office of Natural Resources and Environmental Policy and Planning (ONEP)?
A: The IEE report should include the following information (also see 'Guidelines for Preparing an Initial Environmental Evaluation (IEE) Report of CDM Project in Thailand'):
1. Introduction: outline of project purposes, rationale of project development, objective of the report, scope of the study and methodology of the study)
2. Project location
3. Alternative project location and project development process
4. Project description
5. Existing environment
6. Environmental impact evaluation of the project
7. Preventive, mitigation and compensation measures
8. Environmental quality monitoring measures
9. Summary table of signification of environmental impacts and preventive and mitigation measures

In addition, the IEE report should include results of evaluation on the project activity's contribution to sustainable development. Sustainable Development Criteria includes 4 groups of indicators: Natural Resources and Environment indicators, Social indicators, Development and/or technology transfer indicators, and Economic indicators, totaling 24 indexes.
Moreover, projects that are now in commission must also perform measurement and assessment of emission levels, noise level, wastewater quality and contaminations, and other important environmental qualities. It is not required that the environmental evaluator be the consultant registered with ONEP.

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Q: How do you speed up the CDM project approval process?
A: According to statistics, the following factors cause delay in approval process:
1. Missing and Incomplete documents like

  • Project Status Questionnaire (Form 1-2550) (30 copies).
  • Sustainable Development Criteria Evaluation Form (Form 2-2550) (30 copies).
  • Project Summary Report (Form 3-2550) (30 copies).
  • Project Design Document (PDD) (30 copies).
  • Approved Environmental Impact Assessment (EIA) or Initial Environmental Evaluation (IEE) report (as set by the legal requirement under the National Environmental Act) (30 copies).
  • Public Consultation Report (30 copies).
  • Electronic copy of the above documents in CD (5 copies).

2. Inconsistent information in submitted documents- For instance, system capacity stated in PDD, IEE report and the Project Summary Report must all be consistent unless different figures are reported in these documents. For example, wastewater effluent from a production process at 1,200 cu.m. per day is quoted in IEE report, while influent to an anaerobic digester is shown at 249,460 cu.m. per year in PDD and 529 cu.m. per day in the Project Summary Report.
3. Lack of information on environmental performance of a project, especially for projects that are now in operation- It is required that projects that have been in operation perform measurement and assessment of emission levels, noise level, wastewater quality and contaminations, and other important environmental qualities.
4. Insufficient information provided about technical specifications of major equipment, such as gas engine, boiler, blower, etc.
5. Inadequate supporting arguments provided in correspondence to the evaluation marks given in the Sustainable Development Criteria Evaluation Form (Form 2-2550).
6. Methodology used for estimating greenhouse gas emission reduction for the project (or its version) has been changed without informing TGO. To avoid delaying the approval process, project developers are encouraged to carefully check that the submitted documents are accurate, complete and consistent.

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