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Preliminary Validation Manual

Version 1.0, November 2000

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Introduction

This Validation Manual has been developed for use on an interim basis for the validation of greenhouse gas (GHG) projects under Art. 6 and 12 of the Kyoto Protocol (JI and CDM). Its content is drawn on experiences gathered to date by the Prototype Carbon Fund (PCF) as in validation of other GHG projects. The Manual may be used by the PCF for its portfolio of JI and CDM projects and is available for use by other project developers at their discretion on an interim basis and without prejudice to decisions the UNFCCC Parties may take on modalities for Art. 6 and 12 Kyoto Protocol.

Validation is a process of assessing whether a project, as elaborated in project design documents, meets specified criteria. The validation process described in this manual is expected to give necessary documentation and assurance for the UNFCCC to register eligible GHG projects. It is also supposed to provide confidence for investors in a validated GHG project that it meets necessary criteria and will achieve the estimated emission reductions. Initial verification should then be performed at the time of project commissioning to ensure that the project has been constructed according to design, the monitoring system is in place as required by the MVP and the case for environmental additionality presented in the baseline study reflects the reality. After commissioning, periodic verification of emissions reductions is needed. These verification activities are outside the scope of this Preliminary Validation Manual.

The purpose of the Preliminary Validation Manual is to provide instructions regarding the validation process, serve as a tool for third party validators, and present a template for validation reports and opinion. The Preliminary Validation Manual comprises:

• proposed guidelines for validation activities• a generic table of requirements for validation of JI and CDM projects (Validation protocol)• a proposed template for validation reports and opinion.

When this Manual presents methodologies for validation of GHG emission reduction projects, the methodologies are also intended for sequestration projects as applicable. The use of the above mentioned documents should ensure that necessary adjustments and amendments are made to match project characteristics for all relevant project categories. The Manual is preliminary as it is expected to evolve and be updated over time in linewith pending UNFCCC decisions and a growing body of project experience.

Report Template

Protocol(Requirements)

Guideline

Preliminary Validation Manual

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PreliminaryValidation Guidelines

for CDM and JI Projects

Part of the Preliminary PCF Validation Manual

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PreliminaryValidation Guidelines

For CDM and JI Projects

Introduction

This Preliminary Validation Guideline is a part of PCF’s Validation Manual. It intends to give guidelines to the necessary activities captured in the validation process of PCF GHG projects. As such it has been specifically tailored towards PCF needs. Other investors or Parties may have additional requirements or activities that need to supplement the activities presented here.

The Preliminary Validation Guideline must be seen in context with the the two other parts of the PCF Validation Manual:• The Validation Protocol• The template for validation reports and opinion.

While these documents present methodologies for validation of GHG emission reduction projects, the methodologies are also intended for sequestration projects as applicable. Hence, the use of the documents should ensure that necessary adjustments and amendments are made to match project characteristics for any relevant project category.

As for the rest of the Preliminary Validation Manual, this guideline is expected to evolve and be updated over time in line with pending UNFCCC decisions and a growing body of project experience.

Report Template

Protocol(Requirements)

Guideline

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Content

Validation Actors The Validation ProcessProject CriteriaGuiding PrinciplesTransparency Project DocumentationValidator Criteria and SelectionValidation ContractValidation Team SelectionBackground InvestigationDocument ReviewRisk-Based Assessment Means of Verification

The preliminary guidelines cover the following themes:

On-Site Assessment and Desk ReviewValidation ProtocolValidation Protocol LegendClarifications and Corrective Action RequestsPreliminary Validation ReportCorrective Actions ResponseCommunicationFinal Validation ReportValidation OpinionExamples of Validation OpinionsUnresolved IssuesFurther Activities and ResultsAbbreviations

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Validation Actors

Consultants

Host Country

ValidatorPrototype

Carbon Fund

Validation Contract Parties

Involved actors

Project Entity

Solid lines indicate contractual relationships. Dashed lines indicate communication channels during validation.Note: Other relationships are possible.

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The Validation Process

Preliminary Validation Report

Validation Team Selection

Validator

Selection

Validation Contract

Establishment

Project

Documentation

Corrective Action Response

Final Validation Report and Opinion

Document Review

Background Investigations

Desk Review and On-Site Assessment

Clarifications and Corrective

Action Requests

The main steps in a successful PCF project validation is shown in this flow diagram. The different layers may be seen as representing the validation preparations, the validation itself and at last the results of the validation process. The box colour represents the party responsible for the activity.(Green for PCF, orange for the validator). For most of the activities the guidelines provide links to issues that give further and detailed explanation and guidance on the validation process.

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Project criteria

For validation of all PCF projects the validator is required to test and when possible confirm that the project design meets the following criteria:

• UNFCCC criteria, particularly criteria related to article 6 (Joint Implementation) or 12 (The Clean Development Mechanism) in the Kyoto Protocol

• Host country requirements for JI or CDM projects

• PCF project criteria, as stated in http://www.prototypecarbonfund.org/Projects and other operational criteria deemed necessary for successful project implementation and control, such as necessary management system support and control.

The host party’s adherence to Article 5 and 7 (The requirements for national communication and keeping national GHG inventories) in the Kyoto Protocol will not be object for validation. When applicable, the PCF will provide a statement that confirms that these articles are adhered to, or submit a copy of the relevant MoUs or LoIs applicable to the project to the validator. The MVP should ensure that such issues are addressed when necessary in order to cater for subsequent verification and certification of emission reductions.

The validator is expected to identify and determine the appropriate criteria for project validation based on the technical nature of the project, which flexible mechanism it is supposed to be operated under, the presented project design documentation as well as any background study performed in advance of the validation. These criteria should be tested out and recorded via the validation protocol.

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Guiding Principles

The following principles apply for both parties in a validation process and should be used asguidance when documents related to validation are prepared:

AccuracyThe relative measure of the exactness of relevant performance indicators. This should enable performanceindicators and emission reduction estimates to be calculated asaccurately as possible, i.e. by use of statistical techniques inorder to reduce uncertainties and arrive at confident numbers foremission reductions.

CompletenessThe project documentation and the scope of validationshould cover all relevant greenhouse gases, sources and sinks,– if affected by the project activities. It should also include otherindicators of project compliance, e.g. leakage effects or project

effects beyond the chosen project boundaries, as appropriate.

ComparabilityMethods for estimation of emissions [and removals] shouldbe comparable between the project baseline(s) and the project. This should enable comparison of the PCF project with the relevant baseline scenario(s) and subsequentdetermination of the selected baseline's applicability.

ConsistencyThe project documents should address comparable keyindicators which enable consistent review of project performanceover time.To the extent possible, the methodologies andmeasurements identified in the baseline study should also beaddressed and made verifiable via the Monitoring andVerification Protocol.

Cost-effectivenessThe amount of costs and effort necessary to document, validate,monitor, report and verify a GHG project should be madedependent on the attained uncertainties and the amount of predicted emission reductions, i.e. by use of a risk-basedassessment approach.

ReliabilityFor the estimation of emission reductions from the project themost realistic and likely operational characteristics and mostlikely development relevant to the project shall be chosen asreference for projected emissions and baseline. This also impliesthat the project’s crediting time must be conservative.

ValidityFor the estimation of emission reductions from the project it is crucial that factors or indicators used for baselinedetermination and the use of operational characteristics giveopportunity for real measurements of achieved emissionreductions.The baseline and operational characteristics used in the projectdocumentation must therefore be based on factors or indicators that provide a plausible picture of the business a usual scenario,and being reflected in subsequent monitoring and reporting of the project operations.

Transparency

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Transparency

Transparency is an imperative for all involved parties in a PCF validation process, and will be a significant means to create credible emission reductions.

Project designers shall be transparent in their presentation of project design documents, baseline study, monitoring and verification protocol and/or other relevant project documentation.

The project validator shall be transparent in the reviews, discussions and decisions that give the rationale for the validation opinion.

Transparency implies that:

• All assumptions are clearly stated• All presumptions are clearly documented• All background material is clearly referenced• The rationale for selection and use of

methodologies, as well as the use of such are clearly explained

• There is a clear conclusion or decision from all presented discussions

• All formulas used for calculations are stated • All calculations are incorporated or referenced• Changes in documentation as a result of

validation are clearly identified in revised documents

• Confidential information is clearly identified.

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Project Documentation

PCF requires that the documentation used as input to project validation is complete and comprehensive enough to give an accurate picture of the project and its baseline. The project documentation should use an conservative approach when estimating the project emission reductions. The documentation should be approved by PCF for its completeness before it is presented to the validator, and may be comprised in one or several separate volumes:

– Project document– Baseline study– Monitoring and verification protocol

Baseline studyThis document should include, but not be limited to: Description of the current energy delivery system(s) Description and determination of key factors influencing baseline

emissions Identification of baselines and selection of most likely baseline Projection of the baseline’s and project’s emissions (and thereby

project emission reductions) Discussion of project additionality Identification of necessary data that will provide for compliance

with UNFCCC requirements

Monitoring and verification protocol The project’s monitoring and verification protocol should describe the

relevant factors and the key characteristics related to greenhouse gases that will be measured or otherwise monitored and recorded by the project organisation on a regular basis.

The monitoring and verification protocol must incorporate all project factors that are of importance for controlling and reporting project performance. It should clearly identify frequency of, responsibility and authority for monitoring, measurement and data recording activities. The monitoring and verification protocol should also determine the verification schedule for claimed emission reductions and other relevant details necessary for the verification process.

Project documentThis document should include, but not be limited to: Description of project characteristics related to

greenhouse gases Description and determination of greenhouse gas

sources and sinks and system boundaries Description and determination of key factors influencing

project emissions Estimation of the project emissions Determination of crediting time Estimation of the emission reduction Description of the project’s impact on sustainable

development, as applicable

This document should also provide the validator with sufficient information of the technical features of the project, as well as give temporal, spatial, and financial information about the project. Under normal World Bank terms this information is likely to be included in a project appraisal document (PAD).

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Validator Criteria and Selection

The nature of the project is an obvious parameter when selecting the right validator for a GHG project design. While other may parameters may be of varying importance due to the circumstances, the validator’s capacities and capabilities in assessing the nature of the project will always be of critical importance.

The expectations in a validator lie in:• An credible and independent assessment of whether the

project meets/is likely to meet all the relevant requirements for a JI or CDM project.

• A comprehensive review of all aspects that may impact predicted greenhouse gas emission reductions related to the project.

• A thorough assessment of the risks related to the technical as well as environmental implementation of the project

• An independent opinion on the anticipated impact on sustainable development as a result of the project

• Ability to combine and manage multiple-skilled teams

Criteria for validator selection will be based on the validator’s

•Ability to meet stated requirements and expectations•Relevant environmental experience and expertise•Knowledge of the UNFCCC processes•GHG experience and expertise•Relevant technical experience and expertise•International recognition and credibility•Accredited for ISO 14001 certification or have similar organisational capacities•References from similar projects•Experience from operations in the host country•Accredited for validation from the UNFCCC

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Validation Contract

Validation scopeThe scope of the validation engagement should define project boundaries, and the nature of the data necessary to validate the project. When defining the scope in discussion with the validator, it should be ensured that project can be validated against Kyoto Protocol requirements using objective criteria and using a risk-based assessment approach. A validator should not accept a scope that is not sufficient to form and issue a validation opinion. Scope determination has to include:•Parts of project included in assessment•Sites included in assessment•Content, but not conclusions for the Validation Opinion•Timeframe of engagement•Limitations in the validation scope•Confidentiality clause regarding non-disclosure of confidential information

DocumentationThe contract must identify project documents, including but not limited to:•Project document, e.g. Project Appraisal Document(PAD)•Baseline study •Monitoring and verification protocol

Other information•Name, address and contact person(s) of the project operating organisation and Host County authorities •The validator's liability

The validator should review the contract and any presented documentation to ensure that the requirements for validation are

understood, that the documentation is complete, accurate and verifiable. and that any difference in understanding between the validator

and PCF are resolved before the contract is signed.

The contract between PCF and the validator should include and determine the following aspects:

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Validation Team Selection

Roles and ResponsibilitiesTeam LeaderThe tasks of the team leader include:•Plan the validation logistics (time, place, criteria for the assessment, etc.). •Select other validation team members. •Run meetings. •Take charge of the validation and conclude on decisions affecting the validation process. •Be responsible for the validation statement, validation report and the follow-up of possible corrective action requests.

Validation Team Members Validation team members shall assist the team leader, and are responsible for performing the parts of the validation assigned to them by the team leader. These actions may be taken in conjunction with the team leader or separately. Team members should be responsible for acquainting themselves with the project documentation and the project context as a part of the validation preparations.

Inform the customerPCF shall be provided the names of the validation team members, with sufficient notice to appeal against the appointment of any particular member(s).

Appointment of validation teamThe validation team shall be formally appointed and provided with the appropriate working documents.

Team composition

The validator should appoint a validation team leader to be in charge of the validation engagement. As most engagements will require multiple skills to be employed, the validation team should contain necessary competence for all relevant aspects of the validation. These skills may include, but not be limited to:

Technical

Environmental

Legal

Host Country

Financial

Members of the validation team should be independent of the activities they audit. The team member(s) should be objective, and free from bias and conflict of interest throughout the validation process.

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Background Investigation

To supplement documentation provided from the project proponent, the validator will normally have to identify other sources that can provide background information for the validation. Focus for this should be to identify issues that are potentially of relevance to the project, before the detailed validation commences. Such background studies are particularly important if the project is in an industrial or public sector that has not hosted a project of this character before, or if the validator has limited experience with particular host country circumstances. The background study will also be valuable as input to a PEST-review (evaluation of Political and Legal, Environmental, Socio-demographic and Technological trends). This test is one methodology that can be used during validation.

The background study should enable a risk-based validation, thus the validator can emphasise on issues that might incur risks related to successful project implementation or accomplishment.

Examples of issues that might prove usefulas background information for projectvalidation:• Project technology• Environmental legislation in the host country• UNFCCC acceptance and registration of similar

projects• Previous established agreements,

Memorandums of Understanding or Letters of Intent between the PCF and the host country

• Sustainable development priorities in the host country

• Identification of specific stakeholder needs• Macro-economic trends in the host country • Political aspirations in the host country• Issues related to project implementation

impacts, such as despatch patterns, marginal power plants, grid factors etc. and gas distribution network coverage for energy projects

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Document Review

The technical documentation must be reviewed to ensure that all aspects related to direct and indirect emissions are captured in the project design and potentially claimed emission reductions. Monitoring aspects and the possibilities for reliable data monitoring and data collection must be given attention. The review must also determine whether there is need for monitoring outside the project boundaries, i.e. to identify market transformation rates in demand side management projects.

A review of the baseline study must establish whether the selected baseline is relevant, and whether this represents a likely scenario among all other relevant and discussed baselines. Special attention must be paid to project boundaries and carbon leakage effects when comparing the baseline with the project. The baseline assessment must ensure that technological, political, socio-demographic, environmental and legal trends of relevance to the project are considered and estimated,e.g. by using a PEST-review.

The monitoring and verification protocol must address all relevant project aspects deemed necessary to monitor, report and verify reliable emission reductions. The document review must establish whether the MVP is appropriate for this type of project and in compliance with relevant standards or best practice. Formulas and/or algorithms for calculating baseline and project emissions should be reviewed. Such may include use of data from the project operation as well as outside of the project boundaries.

Indicators that show how the project contributes to achieving sustainable development in the Host Country must also be reviewed and checked for appropriateness.

The validator must ensure that the MVP lists indicators to be measured (e.g. fuel consumption), describes how to take measurements, identifies what records to keep, how to process performance documentation, and who will be responsible for these activities. If data sensitivities exist the MVP should describe how this is dealt with in the project performance reporting. This review must also include an assessment of factors included in the MVP used for determination of baseline validity.

The MVP review must also ensure that necessary instructions for management system and training requirements to support the monitoring activities are in place.

The document review shall establish to what degree the presented project design documentation, includingthe baseline study and the MVP, meet the established validation criteria.

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Risk-Based Assessment

After the initial document review, the validator should use a Risk-Based assessment approach to focus on the critical parts of the project design. This should determine the detailed scope of the validation. This idea is captured by looking at the risks in a project design and identifying which parts are critical in order to meet UNFCCC/KP and other project requirements, in particular regarding achieving real, measurable, long-term as well as additional GHG reductions. Issues that are well identified and discussed in project design documentation and sufficiently controlled by the monitoring and verification protocol, are of less risk and therefore given less emphasis. This will be particularly relevant for design issues that are well known from other project designs or with few or no options for variability. On the other side, issues in the design that cannot be sustained by sufficient monitoring, or assumptions that cannot fully be recognised and approved by the validator in the initial phase, should be investigated and tested further by the validator. The results of this testing of the residual risks in the project design parts should then- together with the results of the initial review of the other risks captured in the total project documentation- give the necessary input for the validation opinion. The validation report may indicate areas where project design improvements could be considered by the project proponent. PROJECT

IMPROVEMENT OPPORTUNITIES

VALIDATION REPORT &OPINION

Baseline and MVP

All risks associated with baseline validity, monitoring or reporting of project GHGs

(Gross risks)

Validation Scope

Technical ProjectDesign

The level of monitoring, control and reporting of project GHGs

GHG emissionsreductions

Remaining areas of uncertainty

Management systems in place to monitor baseline factors and control GHG data

generation and reporting

Detailed audit testing

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Means of Verification

• Document Review – Review of data and information provided on site, such as laboratory test results to confirm the correctness of presented

information – Cross-checks between information provided in the project documentation and information from independent background

investigations

• Interviews– On site– Via telephone

Interview must include relevant stakeholders in the host country, personnel responsible for project design and implementation, and other stakeholders as applicable.

• Cross-check of information provided by interviewed personnel, i.e. by source check or other interviews• Comparison with projects or technology that have similar or comparable characteristics• Test of the correctness of critical formulas and calculations• Witness and comparisons of similar projects in the host country• Comparison between baseline factors and project performance factors to confirm comparability and consistency in the use

of the MVP.

The validation requires the use of a set of means which must be used to identify and determine risks related to project implementation and GHG reductions. To sustain a risk-based assessment, these means must be used both during on-site assessments as well as in desk reviews as applicable. The methods employed should particularly focus on the accuracy of provided information and the credibility of the selected project baseline. The validation protocol should provide guidance as well as document the results of the validation activities.

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On-Site Assessment and Desk Review

• On-site assessment may prove useful or even necessary in order to discuss and validate issues related to project baseline and additionality with host country stakeholders. For discussions related to the technical implementation or financing of the project, on-site assessment may also be beneficial.

• Discussions with local stakeholders in order to understand and validate issues related to sustainable development is particularly important for CDM projects. The validator is likely to get a full appreciation of such issues by direct contact with authorities in the host country. Unless local validators are used for project validation, a thorough understanding of such complex issues may be difficult to achieve through other means.

• On-site assessment may not be required for green-field projects in a host country, unless the uncertainty related to additionality cannot be fully determined via other validation means.

• On-site assessment is a prerequisite if the validator does not find sufficient or complete information or evidence via other means of verification.

• Desk review may be used as a cost-effective way for validation of a project when the project context is well known and the project’s additionality is proven by similar projects in the same environment.

• Desk review will usually require that similar projects have been validated and previously achieved registration with the UNFCCC, and that the implementation of these projects have not changed the additionality of the proposed project. Hence, a well-documented project proposal with reference to prior projects of the same character might cause the validator to choose not to incur the extra costs related to a project site visit.

The assessment performed during a GHG project validation should enable the validator to arrive at a conclusion regarding the reasonableness of project presumptions. This assessment must include theoretical as well as practicable considerations, and also give an opinion on critical factors related to the project baseline.

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Validation Protocol

A generic protocol with requirements (validation protocol) has been developed to facilitate cost-effective and comprehensive validation of PCF projects. This protocol may prove useful as a starting point in identifying generic as well as specific criteria for individual projects. However, for cost-effective and systematic validations of PCF projects, the non-technical parts of the protocol may be used as the documented backbone of a transparent validation process. Dependent on individual project circumstances and the detail of the project documentation, this protocol has to be amended to ensure its applicability for an individual project.

In order to fulfil PCF’s requirement for transparency, both the original comments in the preliminary validation protocol (which shall be submitted together with the preliminary validation report) as well as the final comments made after subsequent discussions with PCF and updating of project documentation should be included in the validation protocol. The latter may appear in a different style (i.e.italic) as amendments in the Comment section of the protocol.

An example of how a validation protocol may be structured is explained on the next page.

The generic validation protocol (with requirements and checklist questions) can be found in the file accompanying this presentation.

PEST-review:

A PEST review may be performed when necessary to identify and determine questions for a more specific validation protocol that investigates how political, legal, environmental, socio-demographic, economical and technological trends might impact the project baseline. By systematically assessing such trends, the reasonableness of the selected project baseline can be determined. When assessing statistics in order to determine trends, the following questions can be asked:

- Are any trends present?

- What is the underlying cyclical pattern or anticipated systematic changes in the trend?

- What random influences are likely to be disturbing the trend?

The PEST-questions can be identified as part of the background study and could then be included in the validation protocol. Answers to the relevant PEST-questions should then be assessed through document checks, interviews and other means of verification. A PEST-review is only one of the means that can be used to form the base for a risk-based assessment approach.

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Validation Protocol Legend

This legend must be seen in context with the Validation Protocol and its content.

Validation Protocol Table 1: Mandatory Requirements and Annex I Table 1: PCF Requirements

Requirement Reference Conclusion Cross reference

The requirements the projectshould meet are divided intomandatory requirements (Table1) and recommended/ optionalrequirements (Annex I Table 1).

Gives reference tothe legislation oragreement wherethe requirement isfound.

This is either acceptable based onevidence provided (OK), or aCorrective Action Request of riskor non-compliance will be issued.The corrective action requests arenumbered and presented to PCFin the validation report.

Used to refer to the relevantchecklist questions in Table 2to show how the specificrequirement is validated. Thisis to ensure a transparentvalidation process.

Validation Protocol Table 2: Requirements Checklist

Checklist Question Reference Means ofverification(MoV)

Comment Conclusion Crossreference

The various requirements inTable 1are linked tochecklist questions theproject should meet. Thechecklist is organised inthree different sections.Each section is then furthersub-divided. The lowestlevel constitutes a checklistquestion.

Givesreference todocumentswhere theanswer to thechecklistquestion oritem is found.

Explains howconformancewith thechecklistquestion isinvestigated.Examples ofmeans ofverification aredocumentreview orinterview. N/Ameans notapplicable.

The section isused to elaborateand discuss thechecklist questionand/or theconformance tothe question. It isfurther used tosustain andexplain thereachedconclusions.

This is eitheracceptable based onevidence provided(OK), or aCorrective ActionRequest of risk ornon-compliance willbe issued. Theconclusions arecross-referencedback to the specificrequirements inTable 1.

Used to referto the relevantrequirementsin Table 1 inthe validationprotocol.

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Clarifications and Corrective Action Requests

A validation may identify issues related to project baseline, implementation or operations that need to be further elaborated, researched or added to achieve credible emission reductions. There will be different ways of reporting such results. However, it is imperative that this is transparently identified, discussed and concluded in the validation report and opinion. Non-compliance with project requirements, or the identification of a risk to successful fulfilment of the particular project’s objectives have been termed ”Corrective Action Request" .

The validator should make sure that all Clarifications and Corrective Action Requests are reported and elaborated in the conclusion of the preliminary validation report. Also minor issues, i.e. those which do not represent a risk of changing the validation conclusions, should be brought to the attention of the PCF for consideration. However, minor issues may not necessarily be presented as a part of the validation opinion.

After the presentation of Clarifications or Corrective Action Requests in the preliminary validation report the PCF will have to Respond to the Corrective Action and if possible resolve the issue before a final validation opinion is formulated by the validator.

A ”Clarification " during a JI or CDM project validation would be where information is insufficient, unclear or not transparent enough to establish if a requirement is met;

A ”Corrective Action Request " during a JI or CDM project validation would be where:

a) mistakes have been made in assumptions or the project documentation which directly will influence on project results; b) the requirements deemed relevant for validation of a project with certain characteristics have not been met; orc) there is a risk that the project would not be accepted as a JI or CDM project or that emission reductions cannot be verified and certified.

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Preliminary Validation Report

The preliminary validation report should facilitate the joint effort between the project proponent and the validator to develop and document answer(s) and conclusions to requirements which are considered applicable for PCF JI or CDM projects. The independent validation exercise and subsequent discussions given in the report should enable PCF to address any concerns the validator may have raised related to the project, and how these may be clarified. It should also give an overview of the scope of the validation and the conclusions for individual requirements.

The preliminary validation report should give an overview of the efforts deployed by the validator in order to arrive at the preliminary validation conclusions. It should build on the transparency principles, and particularly indicate the implications of corrective action requests identified during the validation.

The preliminary validation report should include a general discussion of details captured by the validation protocol, and clearly state the conclusions related to each of the general issues required for successful validation.

The content of a preliminary validation report may look like this:

Conclusive Summary

Introduction

Objective

Scope

GHG Project Description

Methodology

Review of documents

Assessment

Corrective Action Requests

Conclusions

Compliance with Political and Legal Obligations

Project Description

Project Baseline

Monitoring and Verification Protocol

Validation opinion

References

Annex 1: Validation Protocol

There is a file available for outline and furtherexplanation of validation report content

The preliminary validation report shall be reviewed and approved by a non-project team member at the validator as a part of the validator’s quality assurance.

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Corrective Actions

After corrective action requests stated in the preliminary validation report are acknowledged by the PCF, these have to to be resolved.

The actions can be resolved or "closed out" by the PCF by modifying the project design and by rectifying and updating the project documentation. If this is not done in the final stages of the validation, it may cause that the project is not recommended for UNFCCC registration, or that expected ERUs or CERs cannot be subsequently verified and certified. However, such a choice shall be reflected as a qualification in the final validation opinion.

Conversely, a validation with no (remaining) corrective action requests could still end up not producing the expected emission reductions. Some issues will only be possible to fully clarify during detailed design, i.e. after an investment decision has been made. Other issues may even be unclear until an ex post (i.e. for the time emisison reductions have been achieved) verification and certification has established if, and how many ERUs or CERs are actually generated.

Corrective action requests may lead to amendments to the projects monitoring and verification protocol, or adjustments of the selected project baseline. Corrective action requests may also require further investigation of issues that are not considered or appropriately addressed in the project documents.

It is the responsibility of the PCF to respond to the corrective action requests identified by the validator in a timely manner. However, as some issues may only be verified during or after project implementation, it should be clearly documented in the project documents how these requests will be addressed. For this as well as for all other changes as a result of the validation, the nature and location of changes should be clearly identified in the project documentation.

All changes should be approved by the PCF before submitted to the validator for final review.

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Communication

To achieve a cost-effective and efficient validation, the validator and project proponent are required to communicate effectively. This implies that the PCF as well as the validator should appoint personnel (single point of contact) with the authority and responsibility to facilitate effective communication when establishing the validation contract, identify and make contact with host country personnel or other persons necessary, resolve unclear issues or any identified corrective action requests.

As the PCF is likely to engage consultants for parts of the project design, the effectiveness of communication also calls for direct liaison between the validator and the consultants. This will be particularly important for issues of technical character. Such communication is encouraged, and should be copied to the PCF. Any preliminary conclusions made by other parties on behalf of PCF should be confirmed by the PCF before they are used by the validator.

For effective communication, it is crucial that the involved parties comply with agreed deadlines and keep up to date on the validation progress.

This includes early notification of possible delays or missing information.

As previously stated, it is also imperative that the nature of all changes resulting from the first phases of the validation are clearly identified.

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Final Validation Report

The final validation report should reflect the results from the dialogue and any adjustments made to the project after the preliminary validation report was submitted. It will in its appearance look much like the preliminary validation report, but will now reflect the response to corrective action requests, discussions and revisions to project documents. Hence, the final validation report should give the final conclusions regarding the projects conformance with relevant requirements and recommendation for UNFCCC registration.

The validation opinion can now be issued, and will determine how the project proponent will proceed with the project. This implies that the opinion still can raise issues that need to be subsequently addressed during project implementation.

The validation report should give an overview of the approach employed by the validator in order to arrive at the final validation conclusions and opinion. It should particularly indicate the implications of any remaining corrective action requests not resolved during the validation. Apart from that, the general discussion of details captured by the validation protocol, and conclusions related to project requirements be included in the final report.

Besides what is stated as content in the preliminary validation report, the final validation report shall include the following information:

Title: Identifying the nature of the validation engagementAddressee: Identifying the party/ies to whom the report is directedStatement of responsibility: A statement to identify the responsible parties and describe the validator responsibilities. Report date Final validation opinion.The final conclusion from the validation, as a result of all present documentation and related communication Final Validation Protocol: Complete protocol containing comments and conclusions, means of verification and references.

For further details, the Validation Report Template can be found in a separate file.

The final validation report shall be reviewed and approved by a non-project team member at the validator as a part of the validator’s quality assurance.

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Validation Opinion

After completed validation, a validation opinion should be provided by the validator to PCF. The validation opinion forms the basis for UNFCCC registration of the project. In addition the opinion will be an important decision factor for PCF whether to proceed or not with the project.

This statement must include:

validation methodology and process validation criteria timeframe of the validation agreement liability statement with regards to the accuracy of the

validation engagement statement on sites/issues not covered in the

validation engagement and conclusion

The validation opinion should confirm that the project is likely to meet stated criteria,and that the methods presented in the project design documentation are acceptable and have been correctly applied, and that the project will contribute to sustainable development.

The validation opinion may have the following outcome:

A. Granting of unqualified validation opinion Granting of an unqualified validation opinion can be done after the review of the project documentation and further assessment has proved that the project has met and is likely to meet all stated requirements.

B. Qualified validation opinionA qualified validation opinion will be the result of any lack of completeness of project design documentation, criteria not fully met during validation, or any omissions in the documentation that make the validator unable to determine whether the project meets the stated criteria or not. A rectification of such issues may subsequently lead to an unqualified validation opinion.

C. Denial of validation A denial of validation should be clearly expressed when the validator is unable to obtain sufficient and appropriate evidence which could confirm that criteria as stated in the validation protocol are met, or where evidence show that such criteria is not met. Hence, the validator will conclude that the project cannot be validated.

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Examples of Validation Opinions

Unqualified validation opinion“XYZ Verification Ltd. has performed a validation of the ABC project in x-land based on PCF and UNFCCC criteria, as well as criteria given to sustain sufficient project operations, monitoring and reporting. In our opinion, the presented project documentation, our research related to the project, site visit and interviews have provided the validation team with information sufficient to determine the fulfilment of stated criteria. In our opinion, the planned project is likely to achieve the estimated emission reductions as given in the project feasibility study. The project baseline is well elaborated and conservative in its nature. The planned project is also likely to create and enhance sustainable development in the FX region in x-land.

Given the above stated outcome of the validation process, XYZ Verification Ltd is convinced that the project meets the requirements for registration.

The validation is based on the information made available to us and the engagement conditions detailed in this report. XYZ Verification Ltd.can not guarantee the accuracy or correctness of this information. Hence, XYZ Verification Ltd. can not be held liable by any party for decisions made or not made based on the validation.”

Qualified validation opinion“XYZ Verification Ltd. has performed a validation of the ABC project in x-land based on PCF and UNFCCC criteria, as well as criteria given to sustain sufficient project operations, monitoring and reporting. In our opinion, the validated project documentation, site visit and performed interviews have provided the validation team with insight sufficient to determine the fulfilment of stated criteria. We are of the opinion that the following issues related to the project need further elaboration to completely sustain verification of the criteria. This refers to ……….

The validation has also shown that certain baseline issues have associated risks, without this being sufficiently addressed in the project’s MVP. This refers to …….

If these conditions are sufficiently rectified, and subsequently monitored and reported during project operations, it is expected that the project can earn ERUs in accordance with article 6 in the KP.

Given that the above qualifications are sufficiently addressed in the project’s monitoring plan and during project implementation, the project is recommended for registration.

The validation is based on the information made available to us and the engagement conditions detailed in this report. XYZ Verification Ltd.can not guarantee the accuracy or correctness of this information. Hence, XYZ Verification Ltd. can not be held liable by any party for decisions made or not made based on the validation.”

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Unresolved Issues

The nature of a validation process as well as of the project may prevent that all qualifications given a validation opinion are resolved before project implementation. Even though it is not possible to validate the effectiveness of any planned implementation measures, thorough and well documented plans that describe how relevant and suitable measures will be implemented during project implementation and operations can form the base for an unqualified opinion.

These issues may be followed if the project design documentation is submitted for validation again or at the time and as a part of the first verification undertaken for the project.Project circumstances will determine whether a limited validation can be the immediate continuation of the original validation if the outcome of this was unsuccessful, or whether it has to be performed at a later stage.

Verifiers that are contracted for verification of achieved GHG emission reductions should as a part of the scope of their first verification audit also review the validation report and opinion. In the case where the validation report and opinion contains qualifications, the reasons as well as any measures implemented to resolve the qualifications should be investigated as a part of the verification assignment. The result of this validation qualification investigation should be documented as a separate part of the verification report.

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Further activities and results

It must be kept in mind that a validation only can tell something about the project’s likelihood to comply with requirements and to succeed at a certain point in time and under given circumstances. If factors that impact project performance change during the time period from validation to the verification(s) of achieved emission reductions, such changes must be brought to the attention of the validator as well as the verifier. For the verifier, the validation report will be one of the inputs used for verification of emission reductions, and any changes that have occurred since validation and have impact on the claimed emission reductions must therefore be considered. For the validator, it will be of importance to know about such changes so these can be considered in subsequent validations of similar projects, and thereby provide for continual improvement of its services.

Successful validation requires a thorough and comprehensive third party assessment of how known risks and uncertainties related to emission reductions are addressed in a project. The validation can only be said to give a reliable assessment and prediction of project performance when these are taken into account in the project’s Monitoring and Verification Protocol. The verification scope for subsequent verification by another third party must therefore also include a review of this.

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Abbreviations

• CoP Conference of the Parties to the UNFCCC.• ERU Emission Reduction Unit• GHG Greenhouse gas(es) • GDP Gross Domestic Product• IPCC Intergovernmental Panel on Climate Change• JI Joint Implementation • KP Kyoto Protocol • LoA Letter of Approval• LoI Letter of Intent• MoU Memorandum of Understanding• PCF The World Bank's Prototype Carbon Fund• UNFCCC United Nations Framework Convention on Climate Change