All Clean Development Mechanism (CDM) projects must go through a "project cycle". Some steps in this cycle are the same as for any other investment project - such as raising finance and implementing the project. What is different for CDM are the special requirements of qualifying and overseeing the project as a bona fide CDM project. Each of the steps in the project cycle is explained in detail - particularly the various approval processes through which a project must pass before it can become an official CDM project.

CDM projects must also involve specific elements of public consultation. Information on this is provided towards the end of this page.

Steps in the project cycle

For a diagram of the key steps in a typical CDM project, click here.

Step 1: Project Identification and Design
The project owner identifies an opportunity for a CDM project and develops a Project Design Document (PDD) that includes a baseline estimate and an analysis of the net carbon emissions reductions.

Step 2: Host country approval
This is carried out by the Designated National Authority. Note: The process for host country approval can happen "in parallel" with the validation process but it is required before a project can be submitted for registration to the Executive Board.

Step 3: Third-party validation of the Project Design Document
This step is carried out by a Designated Operational Entity.

Step 4: Registration
Once a project is validated and approved by the host country, it is registered by the CDM Executive Board.

Step 5: Financial structuring
Finances are then secured. The investors provide capital investment in the form of debt or equity. These investors may or may not be the carbon buyers who will pay for certified credits on delivery.

Step 6: Implementation and operation
The project is built, commissioned and begins operation.

Step 7: Monitoring
Project performance, including baseline conditions, is measured by the project developer in the commissioning process and during on-going project operation.

Step 8: Third-party verification of project performance
An independent third party (a Designated Operational Entity or DOE) verifies project performance against the validated design and baseline in order to approve certification.

Step 9: Certification and issuance
Based on the host-country approval, the validated project design and baseline, and the verified project performance, CERs are certified by a DOE and issued by the CDM Executive Board.

Approval stages for a CDM project

It is up to the project developer to initiate the above process and to follow this cycle. However, within the cycle, there are four key points at which official consideration of the project is carried out and various types of approval given.

It is important to note that the South African DNA has a role in only one of these (host country approval) - and plays no part in any of the other approval stages of a CDM project.

Other bodies are also involved and the following table provides a brief introduction to the roles and responsibilities of each.

Host country approval
Who is responsible? Designated National Authority (DNA) of South Africa

What is examined and approved? Fulfilment of South Africa's sustainable development criteria. For more information on this step and details of the sustainability criteria for South Africa, see the page on the DNA Approval Process.

Validation
Who is responsible? A Designated Operational Entity (DOE). This is a third party (ie not the project developer or the DNA) accredited by the Executive Board of the CDM on the basis of its technical expertise and experience with carbon mitigation and relevant technologies. For more information on DOEs as well as a list of accredited DOEs, visit the UNFCCC website

What is examined and approved? Validation that the project meets international rules of the CDM. Important components of this are validating the baseline of the project and checking that the project fulfils additionality criteria. The formal document validated by the DOE is termed a Project Design Document.

Registration as an official CDM project
Who is responsible? The CDM Executive Board

What is examined and approved? Registration as a CDM project takes place following successful approval by the host country and validation by an operational entity.

Verification and certification of project performance
Who is responsible? Independent third party - typically not the same operational entity as validated the project

What is examined and approved? Each project requires a monitoring and verification protocol (contained within the PDD). The performance of the project is checked against this protocol. Carbon reductions generated are verified and certified. Once this step has been carried out CERs can be issued by the Executive Board.

For more information on project approval processes in South Africa, see the DNA Project Approval Process on this site.

Public consultation

CDM projects require specific and extensive consultation with stakeholders - most of what is required is laid down within the rules of the CDM. Stakeholders in this sense are defined as: the public, including individuals, groups or communities affected, or likely to be affected, by the proposed clean development mechanism project activity.

The various stages of consultation required for CDM projects are:

Project Design and Preparation of PDD
Who is responsible? Project developer or owner

The project developer or owner must:

• Follow a statutory EIA process where required - including the consultation elements of this process;
• Invite comments and inputs from communities and other stakeholders;
• Document all comments received; and
• Report (within the PDD) on how comments received were addressed within project design. This report is submitted to the DOE as part of the validation process.

Host country approval
Who is responsible? Designated National Authority

There is no requirement in terms of the CDM rules for public consultation by the DNA in relation to the host country approval process. However, the DNA in South Africa has decided to make all PDDs publicly available for comment by posting them on this website under Documents for Public Comment. These are posted for 30 days. PDD documents will also be made available to any interested parties on request. All comments received during this time will be considered by the DNA when making a decision as to whether host country approval should be granted.

Validation
Who is responsible? Designated Operational Entity

The DOE must:

• Make the PDD publicly available for comment. The method used must ensure that international parties and stakeholders have access to the document;
• Receive comments from parties, stakeholders and accredited NGOs over a 30 day period. If a new methodology is received as part of a PDD - the DOE must submit this to the Executive Board for review (and the board will carry out its own consultation on this).

Once the DOE has carried out the above, the DOE makes a validation decision on the basis of the information provided and taking comments received from consultation into account. The DOE then informs the developer of its decision and submits the result in the form of a validation report to the Executive Board. The validation report must contain a note of actions taken to address comments received.

Registration
Who is responsible? Executive Board

The Executive Board must:

• Make the application available for review to parties involved and members of the Executive Board. Note: Registration by the board is deemed final eight weeks after the date of receipt of the request for registration, unless a party involved in project activity or at least three members of the board request a review of the proposed project activity