The Climate Convention requires carbon offsets based on certified emission reduc­tions (CERs) to be clearly additional. This criterion demands that selected projects
have a credible, quantifiable and verifiable baseline of emissions, from which reductions can be measured and verified. The baseline represents the emissions from electricity generation that would occur in the absence of the certified project activity. A clearly additional project is one that represents actions that would have little chance of being taken without the use of the CDM. The reason why an independent body is needed to certify emissions reductions is that an offset transaction is not totally straight forward. Both the buyer and the seller could benefit from exaggerating the emissions reductions. To ensure that total emissions indeed decrease, emissions reductions must be real and measurable in reference to a defined baseline.

The goal is to acquire carbon offsets (CERs) of high quality. The quality of CERs from an offset project depends on the credibility of the project’s additionality. Thus, “the baseline describes the greenhouse gas emissions associated with a counterfactual scenario that would prevail without the JI or CDM intervention and with which actual emissions can be compared” (World Bank, 1999a). The credibility of the baseline is crucial, as this is the key to the acceptance of the project’s CERs.

Reliable supply of electric power is a key input for the industrialization process of developing countries’ economies. In Brazil, the growth rate of this sector is higher than that of the overall economy, as electrification is often closely linked to development priorities. The growth rate of energy demand in Brazil drives the government to invest in ready-to-use technology instead of developing new alternatives even if they could result in less greenhouse gases per MWh generated. The government’s expansion plan for the energy sector pushes ahead the thermal energy generation from 9 to 17 per cent of the installed capacity from 2001 to 2004. In this context, the carbon intensity of the electrical system obviously increases.

A cogeneration project based on renewable resources such as Santa Elisa is environmentally additional as it contrasts with what is the business-as-usual and thus likely to happen in the absence of the project. Therefore, the project is eligible under the CDM and can generate CERs. The updating of the multi-project baseline at regular intervals will be important to ensure that developments in the electricity sector are captured in the assessments of the project.