Dear friends,

The CDM Executive Board will meet from 8 – 11 September 2009 in Bonn for their 5^th meeting this year to discuss a number of important issues. CDM Watch takes again the opportunity to read between the lines of the annotated draft agenda in order to bring some transparency to the decisions of the Executive Board (the Board), the market regulator of the clean development mechanism (CDM). The annotations to the draft agenda are published ahead of every Board meeting and are supposed to give a clearer overview about the Board’s agenda. However, due to the complexity of the issues, they are kept in a highly technical language and don’t seem to aim at revealing what’s really at stake. As a response, CDM Watch adds some meaning to the language by exposing the critical items and providing recommendations.

But before focusing at the upcoming meeting, CDM Watch takes a look back at a decision of the 48^th meeting of the Board concerning CDM Watch’s recommendation to avoid carbon leakage: In a bold move, the CDM Executive Board overruled the recommendation by the Meth Panel on how „existing capacity“ should be interpreted for projects that reduce N₂O emissions from adipic acid production. This decision will result in continued issuance of CERs that do not present real emission reductions, given the significant carbon leakage that is ongoing in this sector. The Board also ignored the continuous reminder to address a request for revision of the methodology AM0001 for HFC-23 destruction which was already submitted to the Board in December 2007.

On the positive side, CDM Watch welcomes that the Board rejected the proposed new methodology NM0297. This methodology would apply to project activities that reduce emissions in degraded tropical peat whose combustibility has been enhanced by artificial drainage and which is exposed to ongoing fire risk. However, CDM Watch understands that the National Council on Climate Change, Indonesia and JP Morgan Climate Care have now requested to re-examine NM0297 and urgently calls on the Board not to give in to any pressure.

High on the agenda of the upcoming meeting will be the performance of Designated Operational Entities (DOEs) which have so far failed in their responsibility to ensure the integrity of the CDM. CDM Watch welcomes that the Board will agree on the draft policy framework to monitor performance and address non-compliance by DOEs but strongly suggests that a wider set of sanctions should be developed. This would provide incentives for DOEs to implement internal procedures that ensure that validations and verifications are undertaken as required by the Board. Amongst others, DOEs have shown particular weak performance in the assessment of the common practice analysis, an approach to assess additionality of a project. A study shows that more than half of the projects applying this analysis were registered even though independent information to support the analysis had not been presented or it was not clear if the information presented had been checked by the DOE.

With the aim to improve additionality testing with more stringent guidelines, the Board will consider new guidances to the barrier test “first-of-its-kind” and the “common practice analysis”. After a lengthy struggle between the European and Chinese/Indian members of the Executive Board who did not agree on the stringency of the criteria, this important item will finally be discussed. Until more fundamental changes are made to the structure of the CDM, it will be important to make additionality testing procedures both more conservative, and more objective and predictable.

Table of contents

1. Board fails to address carbon leakage from adipic acid projects
2. Revision of HFC-23 methodology still ignored by the Board
3. The Board must resist pressure to re-examine NM0297
4. Non-compliance by DOEs should be sanctioned
5. Strong guidance to improve additionality testing is needed
6. Harmful and non-additional projects under consideration at this meeting
7. Implications of the possible inclusion of CCS as CDM project activities