Note on CDM and CER

Clean Development Mechanism (CDM) allows emission-reduction projects in

developing countries to earn certified emission reduction (CER) credits, each
equivalent to one tonne of CO2. These CERs can be traded and sold, and used by
industrialized countries to a meet a part of their emission reduction targets under the
Kyoto Protocol, 1997.

The mechanism stimulates sustainable development and emission reductions, while

giving industrialized countries some flexibility in how they meet their emission
reduction limitation targets. The CDM allows carbon emission-reduction to earn
certified emission reduction (CER) credits, where each CER is equivalent to one tonne
of CO2. Thus a CER, commonly called carbon Credit, is reduction of 1 tonne of CO2
emission from the baseline of the project activity.

The CDM is the main source of income for the UNFCCC Adaptation Fund, which was
established to finance adaptation projects and programmes in developing country
Parties to the Kyoto Protocol that are particularly vulnerable to the adverse effects of
climate change. The Adaptation Fund is financed by a 2% levy on CERs issued by the
CDM.

In exercise of the powers conferred by sub-sections, (1) and (3) of section 3 of the
Environment (Protection) Act, 1986 (29 of 1986), the Central constituted the
"National Clean Development Mechanism (CDM) Authority" for the purpose of
protecting and improving the quality of environment in terms of the Kyoto Protocol
in the year 2004 and with the following composition:
1. Secretary (Environment and Forests) Chairperson
2. Foreign Secretary or his nominee Member
3. Finance Secretary or his nominee Member
4. Secretary, Industrial Policy and Promotion
or Member his nominee Member
5. Secretary, Ministry of Non Conventional Energy
sources or his nominee Member
6. Secretary, Ministry of Power or his nominee Member
7. Secretary, Planning Commission or his nominee Member
8. Joint Secretary (Climate Change),
Ministry of Environment and Forests Member
9. Director (Climate Change),

1 | Page
Ministry of Environment and Forests Member-Secretary

II. The National Clean Development Mechanism (CDM) Authority shall exercise
and perform the following powers and functions:
i. to take measures with respect to matters referred to in the clauses (viii),
(ix), (x), (xii) of sub-section (2) of section 3 of the said Act and may issue
directions under section 5 thereof,
ii. (a) To receive projects for evaluation and approval as per the guidelines
and general criteria laid down in the relevant rules and modalities
pertaining to CDM in addition to the guidelines issued by the Clean
Development Mechanism Executive Board and Conference of Parties
serving as Meeting of Parties to the United Nations Framework Convention
on Climate Change.
a. (b) The evaluation process of CDM projects would include: • an assessment
of the probability of eventual successful implementation of CDM projects
and evaluation of extent to which projects meet the sustainable
development objectives, as it would seek to prioritize projects in accordance
with national priorities.
iii. (a) To recommend certain additional requirements to ensure that the
project proposals meet the national sustainable development priorities and
comply with the legal framework to ensure that the projects are compatible
with the local priorities and stakeholders have been duly consulted.
a. (b) To ensure that in the event of project proposals competing for same
source of investment, projects with higher sustainable development
benefits and which are likely to succeed are accorded higher priority.
iv. Financial review of project proposals to ensure that the project proposals
do not involve diversion of official development assistance in accordance
with modalities and procedures for Clean Development Mechanism and also
ensure that the market environment of the CDM project is not conducive to
under-valuation of Certified Emission Reduction (CERs) particularly for
externally aided projects.
v. (a) To maintain a registry of CDM projects approved, and their Certified
Emission Reduction potential and confirm that these have been realized.
a. (b) To carry out activities to ensure that the project developers have
reliable information relating to all aspects of Clean Development Mechanism
which include creating databases on organizations designated for carrying
out activities like validation of CDM project proposals and monitoring and
verification of project activities

2 | Page
 (c) To collect, compile and publish technical and statistical data relating
to CDM initiatives in India.
III. The Member-Secretary of the National Clean Development Mechanism (CDM)
Authority shall be responsible for day-to-day activities of the Authority
including constituting committees or sub-groups to coordinate and examine
the proposals or to get detailed examination of the project proposals
conducted through experts or by consulting organizations for consideration by
the Authority or to engage or hire any consultant or specialist on contract basis
on such remuneration as may be approved by the Central Government and
submission of report to UNFCCC and other authorities.
IV. The National Clean Development Mechanism (CDM) Authority shall have power
a) to invite officials and experts from Government, financial institutions,
consultancy organizations, non-governmental organizations, civil
society, legal profession, industry and commerce, as it may deem
necessary for technical and professional inputs and may co-opt other
members depending upon need.
b) to interact with concerned authorities, institutions, individual
stakeholders for matters relating to CDM.
c) to take up any environmental issues pertaining to CDM or Sustainable
Development projects as may be referred to it by the Central
Government, and
d) to recommend guidelines to the Central Government for consideration
of projects and principles to be followed for according to host country
approval.
V. The National Clean Development Mechanism (CDM) Authority shall furnish
report about its activity at least once in three months to the Central
Government.

3 | Page
 An illustration of the CDM project

The steps involved in by any proponent for a project seeking CDM

A. Finalization of a carbon offset standard for registration of the project

B. Preparation of Project Assessment Report
i. Project Implantation Plan
ii. Project Design document
iii. Collect required technical studies and impact assessment
documents.
iv. Preparation of presentations/documents and organize
stakeholder consultation for the identified Carbon Offset Standard
Project
v. Prepare Carbon Offset Standard Project Description (PD)
template as per the applicable formats.
C. Validation of the project under the selected Carbon offset standard by a third-
party Validation / Verification Bodies (VVBs) and registration of the project
i. For understanding Validation/Verification Bodies (VVBs) – an agency to
assess projects against the carbon offset standard rules and the
requirements of the applied methodology. VVSs are qualified,
independent third parties which are approved by the Carbon Offset
Standard Board to perform validation and verification. This independent
assessment process is critical to ensuring the integrity of the projects
registered with the Carbon Offset Standard.
D. Monitoring of the project and verification by a third party VVBs
i. The site visit by Validator

4 | Page
 ii. Verification of VVBs
E. Submission of the verified project documents with the carbon offset standard
board.
i. Submit application and meet/present to host country designated
national authority or any other Government Authority for the letter of
approval.
ii.
iii. Resolve corrective action requests and clarification requests identified
by the auditor in the draft validation report.
iv. Submit documents to the Carbon Offset Standard Board for registration
of the project.
v. Provide any clarification/responses requested by the Carbon Offset
Standard Board before registration.
F. Issuance of carbon credits into the project’s account after review by the
registry officer check the completeness of the project documents.
G. Selling of carbon credits in open market and realization of its value
i. The sale of the carbon credits in market place to obtain the best market
prices through a robust contract
ii. Coordinate with other parties/buyers and execution of Emission
Reduction Purchase Agreements (ERPAs)
iii. Successful transaction of carbon credits

Example for Validators and Verifiers in India:

i. Carbon Check (India) Private Ltd.

Unit No.1791, Logix City Centre Office Tower,
Plot No. BW-58, Sector 32, Noida, UP
ii. Earthood Services Private Limited,
409-410, Tower B4, Spaze I – Tech Park, Sector 4, Noida, UP
iii. KBS Certification Services Pvt. Ltd
414-424, Om Shubham Tower, Neelam-Bata Road, N.I.T
Faridabad, Haryana
iv. Bureau Veritas India Pvt. Ltd
72 Business Park, Marol Industrial Area,
MIDC Cross Road 'C',
Andheri (East), Mumbai

5 | Page
Adaptation Fund

The Adaptation Fund (AF) was set up under the Kyoto Protocol of the United
Nations Framework Convention on Climate Change (UNFCCC). It was
established in 2001 and officially launched in 2007 at CoP 7 in Marrakech, Morocco.
It aims to finance concrete projects and programmes that help vulnerable
communities in developing countries that are Parties to the Kyoto Protocol to adapt
to climate change. The Fund is financed in part by government and private donors,
and also from a two percent share of proceeds of Certified Emission Reductions
(CERs) issued under the Protocol’s Clean Development Mechanism (CDM) projects.

Ministry of Environment, Forest & Climate Change, Govt. of India is the National
Designated Authority (NDA) for Adaptation Fund and proposals are submitted with
endorsement of NDA.

NABARD has been accredited as National Implementing Entity (NIE) for Adaptation
Fund in July 2012 and is the only NIE for India. The NIEs are those national legal
entities nominated by Parties (to the Kyoto Protocol) that are recognized by the Board
as meeting the fiduciary standards established by the Board. The NIEs bear full
responsibility for the overall management of the projects and programmes financed
by the Adaptation Fund and have all financial, monitoring, and reporting
responsibilities.

NABARD in the capacity of NIE can access Adaptation Fund from Adaptation Fund
Board (AFB) for implementation of feasible climate adaptation projects posed by
eligible Executive Entities such as Central/State Government Departments, NGOs,
Research Institutions and Technical Institutions etc.

The project concepts / proposals are scrutinized by NABARD RO and HO and finalized
proposals are submitted to MoEF&CC for endorsement of the same to Adaptation
Fund. The proposals/ concepts submitted by NABARD are subjected to initial technical
review by AF secretariat. Based on the comments from AF, the proposals/ concepts
are revised for consideration by AF Board. AF Board meetings are held once in six
months (i.e. April and October).

6 | Page
Projects sanctioned in Andhra Pradesh under Adaptation Fund Board

Project
Sr. Executing
Name of project State Outlay (Rs.
No Entity/ies
in Crores)

Conservation and Management

of Coastal Resources as a Andhra MS Swaminathan
1 0.69
Potential Adaptation Strategy for Pradesh Research
Foundation
Sea Level Rise

7 | Page