Land Use, Land-Use Change and Forestry

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5.3.2.1.3. Fixed or adjustable baselines?

Baselines could be fixed for the lifetime of the project or adjusted following periodic reviews or the occurrence of unexpected events. A preliminary report to the Secretariat to the Convention (UNCCCS, 1997) argued that baselines for AIJ projects should not be revised because such revisions would increase the uncertainty associated with any investment and entail significant additional costs. The central argument for revising the baseline over the length of the project is that such revisions may ensure more realistic offsets. A key counter-argument is that continuous revision of baselines could have a significant impact on the economic value of the project, introducing another source of risk. Moreover, disassociating changes observed after the implementation of the project from the impact of the project itself also is difficult. Detailed discussion of methods for adjusting baselines and their implications appears in Michaelowa (1998, 1999) and Ellis and Bosi (1999).

5.3.2.2. Additionality Tests

After a project baseline is determined, it may then be necessary to demonstrate that the purported GHG benefits of the project are truly additional (environmental additionality). Several additionality tests have been devised to assess the eligibility of projects to enter the AIJ program. Tests applied by the USIJI (USIJI, 1997a) included the following:

• Technological tests: Where activities have resulted from the introduction of new technologies or the removal of technological barriers. Evidence would include comparison of current practices and technologies with those to be adopted by the project (Carter, 1997b).
• Institutional or program tests: Where activities go beyond the scope of the programs of the institutions involved in the development of the project. Evidence would include removal of institutional constraints or implementation of measures in excess of current activities and regulatory requirements.
• Financial tests: Demonstration that the project incurred higher costs (or has higher risks) compared with those of comparable baseline activities. Evidence could include an assessment of the potential for commercial finance, as well as cost-benefit analyses.

Projects may demonstrate additionality with one or more (but not necessarily all) of the foregoing tests. According to the USIJI experience, additionality criteria are difficult to evaluate objectively on a project-by-project basis (Carter, 1997a). As with other screening programs, two types of errors exist: approval of non-additional projects and exclusion of valid projects (Chomitz, 1998). The concept itself is complicated because it requires assessment of hypothetical future scenarios in the absence of the project.

For projects implemented under the AIJ modality, additionality has not only been required in terms of expected GHG benefits but also with regard to funding. The first COP ruled that "the financing of AIJ shall be additional to the financial obligations of Parties included in Annex II to the Convention within the framework of the financial mechanism as well as to current international development assistance flows." This requirement applies to country-level Official Development Assistance (ODA) transfers, funding mechanisms under the UNFCCC, and various multilateral development bank and development agency activities.