(GS-VER-PDD) WWF Nepal Gold Standard Biogas Voluntary Emission Reduction (VER) Project

Transcription

1 (GS-VER-PDD) WWF Nepal Gold Standard Biogas Voluntary Emission Reduction (VER) Project September 2008

2 VOLUNTARY OFFSET PROJECTS PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) Version 01 - in effect as of: January 2006) CONTENTS A. General description of project activity B. Application of a baseline methodology C. Duration of the project activity / Crediting period D. Application of a monitoring methodology and plan E. Estimation of GHG emissions by sources F. Environmental impacts G. Stakeholders comments Annexure Annex 1: Participant contact information Annex 2: Baseline information Annex 3: Monitoring plan Appendices Appendix 1: No Objection Letter Appendix 2: Contract Document Appendix 3: Legal Right Approval Appendix 4: An Affirmation Letter from WWF Acronyms References SECTION A. General description of project activity

3 A.1 Title of the project activity Title: WWF Nepal Gold Standard Biogas Voluntary Emission Reduction (VER) Project Version: 03 Date: September, 2008 A.2. Description of the project activity The purpose of the WWF Nepal Gold Standard Biogas VER Project: Under the proposed project activity, the World Wildlife Fund Nepal (WWF) aims to sell carbon credits generated from 7,500 biogas digesters plants in Nepal s Terai Arc Landscape (TAL) project area, and use renewable biogas energy to replace the heavy consumption of fuel wood in this area for cooking. Another objective of this project is to enable Verified Emission Reductions (VERs) from the project to reduce Greenhouse Gas (GHG) emissions by displacing conventionally used fuel sources, such as fuel wood and kerosene, for cooking. Credits from generated emission reductions will be owned by WWF Nepal Program. WWF Nepal Program, the project proponent, will be involved in providing a partial grant to households adopting biogas plants within the Terai Arc Landscape (TAL) project area, and credit to purchase systems through microfinance institutions (MFIs). WWF Nepal Program will also engage in awareness raising and capacity building of nongovernmental organizations (NGOs) promoting household biogas technology. Biogas Sector Partnership Nepal (BSP-Nepal) will, under its national biogas promotion activities, manage the database, check the quality of the installed plants, ensure after sales services through pre-qualified companies and manage the guarantee fund. Contribution to Sustainable Development At the local level, the proposed project has multiple social benefits. A major household benefit is the reduction in the time and energy spent by women and children in collecting firewood for cooking. The project will attach latrines to biogas plants, promoting better sanitation in rural households. Potential employment will add more than 255 persons for skilled people in the construction, maintenance, marketing, and financing of biogas plants. The use of biogas means negligible smoke, hence better family health. Moreover, the residual biological slurry from the biogas plants can be used as superior organic fertilizers to enhance agricultural yields. At the national level, the project supports the Nepali Government s sustainable energy goals as laid out in 10 th Five Year Plan to improve energy access for rural poor, and to reduce rural poverty by providing high quality biogas plants to poor households at an affordable price. Additionally, the project will support forest conservation goals by substituting traditional cooking the fuel, firewood, with biogas. Such use of renewable biogas energy will simultaneously improve the local and global environment by reducing GHG emissions. Results from the Sustainable Development Matrix Two stakeholder consultations 1 were held under this project. Overall there was a positive perception of local stakeholders towards the project, with a high level of interest to see the project go ahead successfully. No major environmental, physical or socially negative impacts were identified; neither were sensitive or protected areas. Table 1 presents the results of the stakeholder consultation meeting specifically conducted for this project. Table A.2.1: Sustainable Development Assessment Matrix Component Score (-2 to 2)/(-,0,+) 2 Justification/Reference 1 See the WWF Nepal Gold Standard Biogas VER Project: Consolidated Report on Stakeholders Consultations

4 Indicator Local/regional/global environment Water quality and quantity 0 The expected environmental impacts on water resources and water quality and quantity are negligible as the dung is fed into the digester mixed with water and the slurry is later used as a composed fertilizer in the agricultural land. Air quality (emission other than GHS) +2 The use of biogas plants will minimize air pollution and have health and sanitation benefits. In the absence of the use of biogas plants, and with poor ventilation systems in the rural context the use of fuel wood remarkably contributes to building up high concentration of TSP (Total Suspended Particles) of PM10 (Particles up to 10 microns in diameter) and PM 2.5 (Particles up to 2.5 microns in diameter) and carbon monoxide to cause indoor air pollution. Source: WHO: Indoor Air Pollution, Health and the Burden of Diseases ITDG: Smoke health and household energy AEPC, Biogas Users Survey 2006/07; page 9-1 Other pollutants (including where relevant, toxicity, radioactivity, POPs. stratospheric ozone layer depleting gases) 0 Not Applicable The proposed biogas plants are of small domestic scale Soil Conditions +2 The expected environmental impacts are negligible as only a small pit is dug open during construction phase. However there is positive impact of the use of slurry on agriculture production; which also decreases the use of chemical fertilizers reduced by 9%. Source: 1. Biogas Support Programme. An Integrated Environment Impact Assessment. June p. (unpublished) BSP Lib Temp No. 1; page 2; 2. AEPC, Biogas Users Survey 2006/07; page 9-1 Biodiversity +0 The proposed project activity will help to avoid deforestation, which in turn will also play a vital role to increase habitats of various species found in the area. With population increasing and people also migrating to the Terai for better 2 Scoring System: -2: major negative impacts; -1: minor negative impacts; 0: no, or negligible impacts:; +1: minor positive impacts; +2: major positive impacts

5 settlement opportunities, the deforestation rate in the Terai is quite high (1.3% annually) resulting in reduced regeneration of forests as compared to that a decade ago. The Nepal Millennium Development Goals Progress Report 2005 has also indicated the decrease in forest coverage (Pg 71) (37% in 1999 and 29% in 2000), which is an indicator for increased deforestation rates. Moreover the trend for demand for fuel wood has also increased from 2004 onwards. Source: ~Nepal Millennium Development Goals Progress Report 2005 ~Nepal Forest Inventory 1999 ~Forest Resources of Nepal FRA 2000 Sub Total +4 Social Sustainability and Development Employment* (including job quality, fulfilment of labor standards) +1 With the project activity new jobs will be created e.g. in the construction areas and financing sector. For most of them training are required. The types of training are: i) Masonry Training ii) Supervision Training iii) Gender Training iv) Business Management Training v) Promotional Training to Users Livelihoods of the poor* (including poverty alleviation, distributional equity and access to essential services) +2 Saved Time for income generation; Source: AEPC, Biogas Users Survey 2006/07; page 4-1;4-2 Toilets are constructed (motivated for construction) and connected with 65% of biogas plants. 74% of bio-slurry is utilized as an organic compost fertilizer Access to energy services* +2 The energy service provided by the use of biogas is durable. Source: AEPC, Biogas Users Survey 2006/07; page 4-1;4-2 Human and institutional capacity (including empowerment, education. Involvement, gender) +1 Reducing work burden of women, time saved*; more time for social involvement and income generation. Source: 1. Biogas Support Programme. An Integrated Environment Impact Assessment. June p. (unpublished) BSP Lib Temp No. 1; page 2;

6 Sub Total AEPC, Biogas Users Survey 2006/07; page 9-1 Economic and Technical Development Employment (numbers)* +1 Potential for employment; 255 persons Types of jobs created: Biogas Installation companies recruit unskilled labors (temporary), masons, QC control supervisors (skilled labors). Micro finance institutions recruit human resources. Source: Narayan Kafle, A Study on Employment Opportunities Created by Biogas Financed Through MFIs, 2006 Balance of Payments (sustainability) 0 The economic impact or the impact on the balance of payments is negligible as the funds obtained are to minimize the funding gaps to construct biogas plants through sale of verified quality carbon credits. Technological self reliance* (including project replicability, hard currency liability, skills development, institutional capacity, technological transfer) Sub total +2 TOTAL +12 Note: The indicators marked as * are included in the monitoring plan +1 The project will involve the institutional and capacity building in the region. At local level, the Community Forest Coordination Committees (CFCCs) have been formed. The Community Forest Coordination Committees have been capacitated to manage funds as loans through Micro Finance Institutions to construct the biogas plants. Biogas construction companies have an association - Nepal Biogas Promotion Association (NBPA) both regionally and in the centre which actively participates in the biogas promotion works. The biogas construction companies are periodically checked and trained on the quality of work and also evaluated annually by BSP Nepal. In the annual evaluation of listed companies, the best biogas construction companies are financially rewarded and the poor performing companies are punished by BSP Nepal (The company is de-listed as a verified company). A.3. Project participants: Name of Party involved (*) ((host) indicates a host Private and/or public entity(ies) project participants (*) (as applicable) Kindly indicate if the Party involved

7 Party) Government of Nepal 3 (host) Ministry of Environment, Science and Technology (MoEST)- public entity/alternative Energy Promotion Centre (AEPC) Government Agency Biogas Sector Partnership (BSP) - Nepal, Non Government Organization WWF Nepal Program, Non Government Organization Project Developer wishes to be considered as project participant (Yes/No) No No Yes BSP-Nepal will not have any financial obligation from the proposed project. In the proposed project, BSP- Nepal will take the following responsibilities: - Database management and reporting - Monitoring activities - Subsidy administration - Quality control of the plant - After sales Service through pre qualified company - Release guarantee fund - Capacity building activities AEPC will not have any financial obligation from the proposed project. It will work as the government counterpart to enable the project, and will have a monitoring role to channel the biogas subsidy amount and overall project implementation. Winrock International Nepal will act as the technical backstopping organization for preparation of the Project Design Document (PDD) documentation, and capacity building in the micro finance related activities. All biogas households agree by contract to transfer CO 2 credit 4 and all other rights 5 associated with the transaction and administration of this VERs to the WWF. The contact information of the above institutions is provided in Annex 1 of this report. A.4. Technical description of the project activity: A.4.1. Location of the project activity: Government of Nepal A Host Party(ies): A Region/State/Province etc.: The biogas plants under the proposed program will be installed in several locations in 9 out of the 75 districts in Nepal. A City/Town/Community etc: 3 The no objection letter from Nepal s DNA is presented in the Appendix 1 4 The copies of the contract agreements are presented in Appendix 2 5 The copy of the legal approval of the WWF Nepal Program to dispose the benefits that comes from the GHG reduction by this project is presented in Appendix 3

8 The 7,500 biogas plants under the proposed project will be installed in 38 Village Development Committees 6 (VDCs) of 9 districts including two villages and one municipality. A Detail of physical location, including information allowing the unique identification of this project activity (maximum one page): The biogas plants under the proposed project will be built across various locations in 9 districts of Nepal. Details of the geographic location are presented in the map below: Figure 1: Location of the biogas digesters under this project activity. The technology is best suited to the warmer districts below 2,000 m in altitude; hence the 9 selected districts are located mostly in the Terai 7. The following table depicts the districts and VDCs, and the estimated number of plants to be installed. SN District Table A4.1: Number of Biogas Plants and their location. Location 8 VDC/Municipality/Villag e Longitude Latitude Estimate no. of plants 1. Kailali '96'' 28 52'40'' Ratanpur '58'' 28 54'59'' Pawera '35'' 28 57'87'' Hasulia '83'' 28 62'38'' Basauti '97'' 28 67'18'' Udasipur '65'' 28 74'90'' Masuriya '20'' 28 66'37'' Pahalmanpur Nepal is divided administratively into 5 development regions, 14 zones, 75 districts and 3,995 Village Development Committees. There are 53 municipalities in the country. 7 The regions located at the elevation from 100 to 500 above sea level are the Terai, the regions located at the elevation ranging from 500 to 3,000 m above sea level are the Hills; and the regions located at eleveation ranging from 3,000 m up are the Mountains. 8 The district of Palpa lies in the 'Middle Hills' region of Nepal, between the Hills and the Terai.

9 '57'' 28 74'17'' Ramshikhar Jhala '73'' 28 49'33'' Bhajani '24'' 28 54'53'' Khailad '85'' 28 46'57'' Lalbojhi '64'' 28 69'52'' Dhangadhi '49'' 28 77'37'' Geta '91'' 28 40'09'' Suryapatuwa '25'' 28 35'44'' Dhodhari '07'' 28 46'57'' Thakurdwara Bardiya '79'' 28 47'69'' Neulapur '73'' 28 49'18'' Shivapur '06'' 28 40'23'' Baganaha '72'' 28 35'44'' Motipur Banke 81 80'82'' 28 17'61'' Mahadevpuri '60'' 27 85'90'' Lalmatiya Dang 82 64'75'' 27 86'79'' Sisahaniya '98'' 27 88'02'' Sonpur '30'' 27 87'42'' Chaulahi '86'' 28 91'63'' Krishnapur '15'' 28 69'75'' Baisibichawa '86'' 28 76'61'' Raikawarbichawa Kanchanpur 80 40'04'' 28 75'31'' Shankarpur '67'' 28 95'84'' Jhalari '85'' 28 87'60'' Pipaladi '30'' 28 98'57'' Daijee '20'' 28 66'37'' Suda '29'' 27 66'37'' Padampokhari Makwanpur 84 88'46'' 27 42'72'' Handikhola '81'' 27 51'37'' Ramouli '28'' 27 51'78'' Pratappur Parsa 84 66'07'' 27 28'01'' Nirmalbasti Palpa '90'' 27 75'83'' Dovan '08'' 27 69'77'' Jutpani Chitwan '64'' 27 57'58'' Bachhyauli 150 Grand Total 7500 A.4.2. Size of the project: The proposed project falls under small scale type as per the new 11 threshold (up to 60, 000 VERs per annum) for SSC projects under the Gold Standard. A.4.3. Category(ies) of project activity: Category of the project Activity: Renewable Energy: Biogas 12 Technology of the project activity: 9 Municipality 10 Village 11 Gold Standard Rules and Procedures Updates and Clarifications, September 6 th 2007, available at 12 According to the Appendix A of The Gold Standard VERs Manual for Project Developers

10 The biogas plants to be sold under this project activity will provide biogas for the thermal energy needs of households which have at least 2 heads of cattle (cow or buffalo). The use of biogas digester plants will displace fossil fuel and/or non-renewable biomass (firewood). In Nepal, the fixed dome design, called GGC 2047 model, which was designed and developed in Nepal, is the most popular. This model is considered to be reliable, well functioning, simple, durable and with low maintenance cost. This project would utilize the GGC 2047 model biogas digester. The biogas plants are based on a uniform technical design and are manufactured and installed following established technical standards in Nepal. The households feed cattle dung mixed with water into the biogas plant, which through anaerobic digestion produces biogas. The retention time of the slurry inside the tank is around 3 months. Biogas technology was first introduced in Nepal in 1955; household biogas digester plants have been developed and produced in Nepal since Currently 60 private companies are involved in producing and installing biogas plants. BSP-Nepal provides research and development support and technical assistance to the individual companies. Figure 2 below illustrates the technical design of the GGC 2047 Model Biogas Plant The biogas digester is made up of several interconnected parts. The specific role of each component is summarized below: Inlet The main purpose of the inlet is to mix organic material and water into a semi solid state. This mixture is fed into the digester via an inlet pipe. A hand operated mixer in the inlet helps mix the organic material and water thoroughly. Digester The digester holds the mixture of manure and water while microorganism activity produces biogas. It is cylindrical in shape and is made of brick masonry with a concave concrete cover, or the dome. Dome - The purpose of the dome is to collect the gas produced in the digester. This is plastered in several layers and painted with a special paint in order to minimize gas leakage. Gas accumulates under the dome creating pressure

11 and pushing down the level of the slurry and increasing the slurry level in the connected slurry tank. It is the difference in slurry levels between the slurry tank and the inside of the dome that maintains the pressure to push the gas into the outlet pipe and into the kitchen. Outlet - The outlet valve releases the collected gas under the dome to burners for cooking and gas lamps for lighting purposes. Gas is conveyed to the kitchen in galvanized iron (GI) pipes. Water Drain The water drain is put in at the lowest point of the GI pipe conveying gas to the kitchen. Its purpose is to release any condensed water from the pipeline. It needs to be opened and cleaned out periodically to make sure all the water in it is released. Slurry Tank: The slurry tank holds the slurry that the gas pressure from under the dome displaces. This slurry overflows into a composting tank as more manure is fed into the digester. The slurry can either be used directly as a fertilizer in its liquid form or can be turned into a more solid fertilizer after it has been composted with other organic material. A.4.4. Brief explanation of how the anthropogenic emissions of anthropogenic greenhouse gas (GHGs) by sources are to be reduced by the proposed project activity, including why the emission reductions would not occur in the absence of the proposed project activity, taking into account national and/or sectoral policies and circumstances: The project activity will reduce greenhouse gas emissions since biogas from bio digesters replaces the consumption of fuel wood and kerosene. Reduction in the use of both the kerosene, which is a fossil fuel and the largely unsustainable biomass by the proposed project activity, will reduce anthropogenic emissions. Currently, the biogas promotion activity under BSP-Nepal covers 65 of 75 districts in the country under a commercialization approach. Under this national program, biogas plants are purchased by those who can afford them and sales of plants are not focused on any particular areas. The proposed project activity seeks to reduce the dependency on forests for fuel/firewood by the local habitants in specific areas under the TAL program. At the program level, without the proposed Project Activity, penetration of biogas program would be very low in the TAL area. The national program under BSP-Nepal does not strongly focus on TAL area and so through this project in the TAL area targets to reduce fuel wood consumption by other alternatives like biogas plant. Furthermore the majority population in the TAL area is poor and unable to purchase biogas plants directly through a market mechanism. Without the project activity, it is most likely that residents of the TAL area would continue to use unsustainable biomass and kerosene for cooking. A Estimated amount of emission reductions over the crediting period: It is estimated that the proposed project activity will result in approximately net emission reductions of 147,613 tons CO2 e over a crediting life of 7 years. This figure includes only Emission Reductions (ERs) generated during the operational life of the biogas plants, and will be further verified during the project operation. More detailed information on how anthropogenic GHG emission reduction will be achieved and the calculation of emission reductions are provided in Section B and Section E, respectively. Table A Annual estimation of emission reductions in tonnes of CO 2 e Years Annual estimation of emission reductions in tonnes of CO2 e , , , , , ,216

12 , ,608 Total emission reductions (tonnes of CO2 e) 147,613 Total number of crediting years 7 Annual average over the crediting period of estimated 21,088 reductions (tonnes of CO2e)

13 SECTION B. Application of a baseline methodology PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) page 13 B.1. Title and reference of the approved baseline methodology applied to the project activity: Gold Standard (GS) Small Scale Biodigesters Methodology 13 (Indicative program, baseline and monitoring methodology for Small Scale Bio digester.) B.1.1. Justification of the choice of the methodology and why it is applicable to the project activity: This methodology is applicable to programmes of activities involving the implementation of biodigesters in households within the project s boundaries. The project activity is implemented by a project coordinator who acts as the project participant. The individual households will not act as project participants. The consumption of biogas from the biodigesters replaces the consumption of fossil fuel and/or biomass. According to the methodology, the following conditions apply to the methodology: - The biodigester programme promotes the wide-scale use of biogas as substitute for wood, agricultural residues, animal dung and fossil fuels that are presently used for the cooking, space heating and lighting needs of most rural households. - The methodology applies to project with biodigesters with a maximum total biodigester volume of 20 m3. - The biodigesters in the programme are not included in another CDM or voluntary market project, (i.e. no double counting takes place). - If more than one climate zone is included in the project, the project should make a distinction per climate zone. In line with this the project complies with this methodology as it involves installation of bio digesters, and meets all the applicability conditions stated in the application conditions as follows: The biodigester program promotes the wide-scale use of biogas as substitute for wood, agricultural residue, animal dung and fossil fuels presently used for cooking, space heating, and lighting needs of most rural households. The project aims to sell 7,500 biodigesters to the same number of households who are presently mostly using fuel wood for cooking activities. The methodology applies to project with biodigesters with a maximum total biodigester volume of 20 m 3. The maximum size of the biodigester under this project is 10 m 3. The following table B.2.1 gives details on biodijecters size and numbers. Table: B1.1: Number of Plants to be installed Biodigester Size (m3) Numbers , Total 7, Available at 14 Number of plants per size will vary depending on demand and subsidy available

14 page 14 The biodigesters in the program are not included in another CDM or voluntary market project, (i.e. no double counting takes place). The proposed 7,500 biodigesters are not the part of another CDM or voluntary market project If more than one climate zone is included in the project, the project should make a distinction per climate zone. The proposed 7,500 biodigesters are located in one zone: Terai 8 region of Nepal. B.2. Description of how the methodology is applied in the context of the project activity: In many developing countries the level of energy service is not sufficient to meet human development needs due to lack of financial means and/or access to modern energy infrastructure. The methodology proposes different options for the baseline calculation depending on whether the project activity is implemented under a situation where energy services provided are sufficient or insufficient to meet the needs of stakeholders. According to the methodology, the baseline emissions caused by the consumption of fuel for thermal energy demand can be determined in three separate ways: 1. Pre-project situation 2. Project level energy service demand using a fossil fuel and appliance as in situation with satisfied demand 3. Satisfied demand with fossil fuel mix and technology different from pre-project The below table summarises the approach considered for each of the baseline options. Table B.2.1: Overview of baseline options Baseline option Level of consumption Fuel technology 1: Pre-project situation Pre-project Pre-project situation 2: Project level energy Project level Technologies service demand with fossil using fossil fuel/s fuel (and/or charcoal) and/or charcoal technology (one or more of charcoal, LPG, electricity, coal, 3: Satisfied demand with different fuel mix and/or technology as pre-project Satisfied demand kerosene, etc.) Satisfied demand (from one or more fossil fuels such as LPG, diesel, electricity, coal, kerosene, etc.) Approach for data gathering Questionnaire among households Questionnaire among households with a higher standard of living outside the project boundary, to assess type of fuel and technology. Questionnaire among households using biogas to estimate level of fuel consumption. Questionnaire among households with a higher standard of living outside the project boundary to assess type and level of demand for cooking and space heating services. Apply model to assess satisfied demand for heating. In case of this project, the baseline scenario 1: pre-project situation has been selected. Households in the project area use biomass for their cooking need. The biomass used is in unsustainable manner. In comparison with other two baseline options this option is most appropriate for this project.

15 page 15 The other two options have been omitted because of the following reasons. Baseline option 2: project level energy service demand using a fossil fuel and appliance as in situation with satisfied demand "Satisfied demand is the situation where suppressed demand is satisfied through an increase in energy use (i.e. from an accessible and/or more affordable energy source). Since in Nepal, the level of energy service is not sufficient to meet human development needs due to lack of financial means and/or access to modern energy infrastructure, this baseline option is not appropriate for this project. All proposed biodigesters will be installed with subsidy, since the income of the households is low. Baseline Option 3: baseline emission from a situation with satisfied demand for type of fuel and technology and level of energy service demand. Due to the low economic status of the targeted households in the project are all the biogas plants to be installed will be subsidised. In the absesse of the proposed project the households will continue to use biomass for their cooking need. Hence the hypothetical use of fossil fuel as base line is not appropriate for this project. Procedure for selection of the most plausible baseline scenario The baseline scenario is one of the following options: a. The situation before implementation of the biodigesters (i.e. pre-project situation). b. The situation where fossil fuels are used to meet energy service needs (even if they are not currently being used). The situation before the implementation of the biogas plant is considered as most plausible baseline scenario. The use of fossil fuel seems to be neligible which has been supported by the baseline study as well. Hence the situation of use of fossil fuel is rulled out. B.3. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered VER project activity: A Gold Standard voluntary offset project must be additional, that is the emission reductions from the project are additional to what would have happened in the absence of the project. The additionality of the project should be demonstrated using the latest version of the Tool for the demonstration and assessment of additionality that is available on the UNFCCC website 15. According to the Methodological Tool for the demonstration and assessment of additionality (Version 04) to demonstrate and assess additionality the following step-wise approach should be followed: Step 1: Identification of alternatives to the project activity; Step 2: Investment analysis to determine that the proposed project activity is not the most economically or financially attractive; Step 3: Barriers analysis Step 4: Common practice analysis. In line with this, the additionality of the project is demonstrated as follows: Step 1: Identification of alternatives to the project activity 15

16 Sub-step 1a: Definitions of alternative scenarios to the proposed project activity. In the absence of the proposed activity the following alternative scenarios are identified: page 16 Alternative 1: Alternative 2: Alternative 3: Continuation of the current practices use of the unsustainable fuel food for cooking purposes- Business as usual Biogas installations undertaken without being registered as a VER project activity Use of the other Renewable Energy Technologies Outcome of step 1a: The most realistic and credible alternative scenario to the project activity is Alternative 1: Continuation of the current situation Sub-step 1b: Consistency with mandatory laws and regulations Alternative 1: Continuation of the current practices - Business as usual This alternative is in full compliance with current applicable laws and regulations. There are no local regulations or programs restricting the use of kerosene, natural gas or firewood as a household thermal fuel use in Nepal. Alternative 2: Biogas installations undertaken without being registered as a VER project activity Currently, the biogas promotion activity under BSP-Nepal covers 65 of 75 districts in the country under a commercialization approach. Under this national program, biogas plants are purchased by those who can afford them and sales of plants are not focused on any particular areas. The proposed project activity seeks to reduce the dependency on forests for fuel/firewood by the local habitants in specific areas under the TAL program. At the program level, without the proposed Project Activity, penetration of biogas program would be very low in the TAL area. The national program under BSP-Nepal does not strongly focus on TAL area and so through this project in TAL area it targets to reduce fuel wood consumption by other alternatives like biogas plant. Furthermore the majority population in the TAL area is poor and unable to purchase biogas plants directly through a market mechanism. Without the project activity, it is most likely that residents of the TAL area would continue to use unsustainable biomass and kerosene for cooking. Alternative 3: Use of the other Renewable Energy Technologies This proposed alternative is not mandated by the law either from the government or at the district level. Although the government through Alternative Energy Promotion Center (AEPC) is promoting such renewable energy endeavours, presently there is no other suitable technology (beside biogas) which will substitute the equal amount of the unsustainable fuel wood needed in rural households for cooking. Therefore most likely the project participants will continue use the unsustainable fuel wood. Outcome of step 1b: Thus Alternative 1: continuation of current dependence on unsustainable fuel wood for cooking purposes is the chosen baseline as being most realistic. Step 2: Investment analysis to determine that the proposed project activity is not the most economically or financially attractive The purpose of this analysis is to determine whether the proposed project activity is not:

17 (a) The most economically or financially attractive; or (b) Economically or financially feasible, without the revenue from the sale of Verified emission Reductions (VERs). Sub-step 2a: Determine appropriate analysis method page 17 Due to the low income of the target households, all the bigas plants will be installed with subsidy. The project can not be realized without subsidy. There is a significant funding gap of US$1,920,877 at program level. Sub-step 2b: Option I. Apply simple cost analysis Not applicable Sub-step 2b: Option II. Apply investment comparison analysis Not applicable Sub-step 2b: Option III. Apply benchmark analysis Not applicable Sub-step 2c: Calculation and comparison of financial indicators (only applicable to Options II and III): Not applicable Sub-step 2d: Sensitivity analysis (only applicable to Options II and III): Not applicable Step 3: Barriers analysis Investment Barriers: Investment barrier at the individual household level Depending on size and location, a biogas plant costs varies between US $350 and US $634, whereas the average cost of the plant has been considered as US $369. The average per capita income in districts under project activity is around US$ The high up-front investment cost of a biogas plant is a barrier for households in the project area to willingly switch to the more environmentally friendly technologies. So far the conventional and least cost cooking technology in the project area is the traditional or improved stove burning a combination of firewood, agricultural residue, and animal manure. Both the traditional stove and the improved cooking stove are low-cost devices constructed from local materials 17. Therefore, the subsidy 18 provided under the proposed project will be an essential financial incentive for farmers deciding to install a biogas plant. At the household level, the financial model is represented a follows: Average cost of Plant including subsidy - $ Nepal Human Development Report, The total cost of an improved stove can range from US$3-6 and the cost of a kerosene stove ranges from US$ WWF Nepal Program will release subsidy to plant owners as per the standard government subsidy rates through the biogas companies who will be responsible for biogas installation

18 WWF Subsidy 19 per plant US$ 20 CFCC (MFIs) US$ (interest rate to be fixed by community) Equity - 84 US$ WWF Subsidy for toilet - 31 US$ The implementation of this project requires total finance of US$ 3,226, It includes the the following costs. Table B.3.1: Summary of the Budget requirement and source of financing Amount Budget Item (US$) Source Development cost (US$) Program Operational Cost 449,336 WWF/Donor Program Costs (Subsidy for toilet, data management, monitoring etc) 581,573 WWF/Donor Installed costs (US$) Subsidy 569,477 WWF/Donor Laon fund for Biogas Installation 597,453 WWF/Donor Farmers' contribution as equity 632,885 Farmers MFIs' loan 302,870 Short term loans Other cost (US$) CDM project development and annual verification cost 92,595 WWF/Donor Total Project cost (US$) 3,226,190 Summary Equity Farmer 632,885 Donor 430,397 Short Term Loans MFIs 302,870 Total 1,366,152 Funding Gap 1,860,038 page 18 As there is a funding gap of US$ 1,860, the project could not be financially feasible with out VER revenue. At prices of approximately US$ per tco 2e this project aims to bring total carbon revenue of approximately US$ 1,010, Thus, the carbon finance is expected to fill a majority of the financing gap, and will contribute to the program aim to ensure equitable contribution of the intended subsidies among vulnerable community households. The Terai Arc Landscape (TAL) project, being implemented by WWF, aims to restore forests, and link 11 existing protected areas distributed over 49,500 km 2 in the outer foothills of the Himalayas. The area stretches from Nepal's 19 The funding of the project activities for the biogas program has not resulted in the diversion of ODA and this funding is not counted towards the financial obligation of the concerned Parties. Letter of affirmation on this from WWF Nepal Program presented in Appendix Conversion Rate : 1 US $ = 65 NRs

19 page 19 Parsa Wildlife Reserve in the east, to India's Corbett National Park in the west. Root causes analysis reveals that poverty, lack of alternative livelihood opportunity, and inadequate conservation awareness are underlying and cross cutting issues contributing to the loss of biodiversity in the TAL area. Sample surveys among 397 beneficiary households indicate that the majority of farmers acquire firewood at no monetary expense. According to this survey, only 2.50% of sampled households purchase firewood. The majority collect fuel from nearby forests. Firewood can be costly if purchased at the official government price of about US$0.02/kg of wood, and a liter of kerosene costs US$1. Restoration of the biological corridor can be achieved through support to communities for plantation, natural regeneration of degraded forests, promotion of community management of forests, institutionalization of Community Forest User Groups (CFUGs), support to communities to manage grazing, and promotion of alternative energy technologies. The program has already supported 550 targeted households to install toilet-attached biogas plants, as well as 2,000 households install Improved Cooking Stoves (ICS). The primary objective in promoting these alternative cooking technologies is to reduce the pressure on nearby forests. The above activity has helped to save more than 4,000 MT of fuel wood annually. Depending on size and location, a biogas plant costs varies between US $350 and US $634, whereas the average cost of the plant has been considered as US $369. The average per capita income in districts under project activity is around US$ The high up-front investment cost of a biogas plant is a barrier for farmers in the project area to willingly switch to the more environmentally friendly technologies. So far the conventional and least cost cooking technology in the project area is the traditional or improved stove burning a combination of firewood, agricultural residue, and animal manure. Both the traditional stove and the improved cooking stove are low-cost devices constructed from local materials 22. Therefore, the subsidy 23 provided under the proposed project will be an essential economic incentive for farmers deciding to install a biogas plant. The subsidies are greater for 4m 3 and 6m 3 plants than for 8m 3 plants. This is to encourage poorer farmers who have fewer cattle, and are less likely to pay for firewood to purchase plants. Table B.3.3: Cost of biogas plants in Nepal (US$). Location Size(m 3 ) Average Subsidy Net Cost Cost Terrai Hills Source: NBPA Quotation, 2007/08 Biogas construction without subsidy is therefore not a financially attractive initiative for the rural farmers in the TAL area, and they will opt to use the conventional fuels to meet their cooking energy needs. 21 Nepal Human Development Report, The total cost of an improved stove can range from US$3-6 and the cost of a kerosene stove ranges from US$ WWF Nepal Program will release subsidy to plant owners as per the standard government subsidy rates through the biogas companies who will be responsible for biogas installation

20 page 20 The Table B.3.2 below shows the financial analysis for this project. Financial analysis of 7,500 biogas plants Assumptions Performance rate of Biogas Plants 97% Nepal Biogas PDD Activity 1 Crediting period per system 7 years CO2 reduction 4.02 tco2/obp/yr ER Price $ per tco2 Discount rate 10% Grant support for toilet construction (per Plant0 $ 30.8 Biogas Subsidy per plant $ Equity of Household $ 84.4 Loan per plant $ Exchange Rate $1 65 Source: p Date 5/1/ NPV Year Total Biogas Plants New installations 1,178 1,180 2,000 3, ,500 Cumulative installations 1,178 2,358 4,358 7,500 7,500 7,500 7,500 7,500 Operational Cumulative 1,143 2,287 4,227 7,275 7,275 7,275 7,275 7,275 - CO2 reduction (tco2) 2,294 6,887 13,081 23,096 29,216 29,216 29,216 14, ,613 Expenditures Program Operational Cost for WWF 65,499 58, , ,397 56,286 62,447 68,678 74, , ,336 Program Cost Cost of BSP for quality control, company mobilization and data 36,482 39,285 71, , ,182

21 page 21 management Cost of AEPC for monitoring and subsidy management 4,712 4,720 8,000 12,568 30,000 Grant Support for toilet construction 36,246 36,308 61,538 96, ,769 Loan fund required for financing biogas plants 217, , , , , ,453 Subsidy 117, , , , , ,477 Additional Subsidy for the poor 9,231 18,127 27,358 Additional Subsidy for LPD (Least Penetrating District) 3,077 4,834 7,911 Insurance of Biogas Plants 7,255 13,409 23,077 23,077 23,077 23, ,972 Biogas Promotion Cost 15,000 15,000 30,000 Monitoring cost for the biogas plants- Independent users survey 7,500 7,500 7,500 7,500 7,500 7,500 45,000 Quality Control of Biogas Plants 3,021 6,046 11,174 19,231 19,231 58,703 Gold Standard Levy on Carbon Credit 7,226 2,310 2,922 2,922 2,922 1,461 19,761 Total Cost Required for Program 478, , ,389 1,061,411 95, , , ,692 3,014,183 2,197,840 CDM Cost CDM Project Preparation Cost 29,835 20, Annual CDM Verification Cost 15,000 10,000 10,000 10,000 10,000 10,000 10,000 75,000 Total CDM Cost 29,835 35,669 10,000 10,000 10,000 10,000 10,000 10, ,504 92,595 Incomes Grant Funding 355, , , ,397

22 page 22 From ER 25,812 77, , , , , , ,338 1,660,641 1,010,464 Cash flow without ER Annual (122,961) (236,118) (658,389) (1,061,411) (95,830) (107,120) (121,407) (125,692) Cumulative (122,961) (359,079) (1,017,468) (2,078,878) (2,174,709) (2,281,829) (1,767,443 NPV without ER ) Cash flow with ER and grant funding (2,403,236 ) (2,528,928 ) Annual (126,984) (194,307) (521,230) (811,582) 222, , ,268 28,646 Cumulative (126,984) (321,291) (842,521) (1,654,104) (1,431,259) (1,219,704) NPV with ER and with grant funding (849,574) (1,022,436 ) (993,790) Cash flow with ER and w/o grant funding Annual (482,239) (324,307) (521,230) (811,582) 222, , ,268 28,646 Cumulative (482,239) (806,546) (1,327,776) (2,139,359) (1,916,514) (1,704,959) (1,507,691 ) (1,479,045 ) NPV with ER and w/o grant funding (1,279,972 ) Total expenditures and ER income (482,239) (324,307) (521,230) (811,582) 222, , ,268 28,646 Total expenditures and ER income and grant (126,984) (194,307) (521,230) (811,582) 222, , ,268 28,646 Total expenditures and ER (1,507,691 (1,479,045 income/cumulative (482,239) (806,546) (1,327,776) (2,139,359) (1,916,514) (1,704,959) ) ) Total expenditures and ER income (126,984) (321,291) (842,521) (1,654,104) (1,431,259) (1,219,704) (1,022,436 (993,790)

23 and grant/cumulative ) PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) page 23

24 page 24 Technological Barriers: An essential part of the marketing strategy for biodigesters in Nepal is the quality of the product and the services. As the investment for a biodigester is high, low quality plants with a short lifespan cannot be accepted. Furthermore a well functioning plant is the best possible promotion, and the satisfied user is the best possible promoter for biodigester technology in rural settings. Therefore, control of quality regarding plant sizing, construction, user training on operation and maintenance and after-sales services are of utmost importance. In the absence of a proper quality control mechanism, suppliers of biogas plants would compete solely on price. Users cannot determine the quality of biogas plants. Thus, without the proposed VER project activity, biogas companies would have an incentive to save on costs and provide poor quality systems. Currently, in addition to the subsidy that it administers, BSP-Nepal provides quality control on all plants constructed by participating companies. A lot of effort has been put in plant model selection and modifications, proper quality standards for plant construction, appliances and after-sales service and technical training for masons and supervisors. VER revenues can support quality control and assurance function necessary to maintain standards in construction and, subsequently, the performance of the technology. As a part of the project, an average of US$ 36 per plant has been allocated to BSP-Nepal for annual quality control, database management and biogas company mobilization. Refer Table B.3.1. Step 4: Common practice analysis The Biogas Support Program (SNV/BSP), the umbrella biogas program in Nepal started in July By June 2006, 150, bio plants have been installed all over the country. With % 25 of households (3,509,687 hhs) residing in rural areas and having access to unsustainable source of energy, the penetration of this renewable technology under this program within the country is very low i.e. 4% only. Moreover, the 71,432 plants installed in Terai during that period reflect only 6.56% of the total potential of 1,089,445 biogas plants in that region. Therefore this proposed project will encourage replication of this technology among other stakeholders as WWF Nepal Program addresses nature conservation issues in Nepal. This will also speed up the penetration of this technology in eco-sensitive areas of Nepal. B.4. Description of how the definition of the project boundary related to the baseline methodology selected is applied to the project activity: Under this project, the physical, geographical site of the renewable energy generation delineates the project boundary. Table B.4.1 shows the emission sources and gases included or excluded in the project boundary District Demographic Profile of Nepal, Informal Sector Research and Study\y Center; 2002, page 26

25 Table B.4.1: Overview of emission sources Source Gas Included? Justification / Explanation CO2 Yes Major source of emissions Baseline Project Activity Thermal energy need Animal waste handling and storage Direct emissions from the biodigester PROJECT DESIGN DOCUMENT FORM (GS-VER-PDD) CH4 No Excluded for simplification, this is conservative N2O No Excluded for simplification, this is conservative CO2 No Excluded as CO2 emissions from animal waste are CO2 neutral. CH4 Yes Major source of emissions N2O No Excluded for simplification. CO2 No Excluded as CO2 emissions from biogas incineration are CO2 neutral. CH4 Yes Emissions from physical leakage and incomplete combustion of biogas N2O No Excluded for simplification page 25 Notes: 1. Insignificant emission sources (emissions < 1% of total baseline emissions) at the baseline situation are not included in calculations. These emissions are: - CO 2 emissions from burning kerosene; - CO 2 emissions from burning LPG - CO 2 emissions from burning agriculture and fodder residues; B.5. Details of baseline information, including the date of completion of the baseline study and the name of person (s)/entity (ies) determining the baseline: Details of Baseline: The baseline for this project is determined in accordance with the following paragraph from the applied methodology: The baseline emissions involve emission from use of fossil fuel and non-renewable biomass for cooking and heating, and emissions from the handling of animal waste in the baseline situation. Baseline emissions from fuel consumption for thermal energy needs are determined through Baseline Option 1: Baseline Emission from thermal energy demand in the pre-project situation, the overview of which is presented in Table B.5.1 below. The following is the overview of the selected Baseline Option 1: Table B.5.1: Overview of Baseline Option 1 Baseline option Level of Fuel technology Approach for data gathering consumption 1: Pre-project situation Pre-project Pre-project situation Questionnaire among households The following steps are to be followed to determine baseline emissions from thermal energy demand: 1. Determine baseline emissions from fuel consumption 2. Adjust baseline emissions for the share of non-renewable biomass