Governments hosting mitigation activities need to undertake a set of assessments to identify which activities could be eligible for Internationally transferred mitigation outcomes (ITMOs) in the context of Article 6 of the Paris Agreement (PA). One of these assessments is additionality testing.

This report first introduces how financial additionality testing was applied to CDM projects in Peru.  The report then develops the theoretical concepts for undertaking financial additionality tests at higher levels of aggregation (e.g., technology, subsector, and sector) in the context of Article 6 of the PA, using examples from the Peruvian energy sector. Two scenarios are presented. In the first one, activities are deemed automatically additional when it is possible to demonstrate that they do not generate revenues and are regulatory and policy additional. The second scenario focuses on activities that generate revenues or savings. For industrial sectors with homogeneous technologies and activities that involve small-scale appliances, the suggested additionality test is performance benchmarks. For commercial activities that require investments, payback period thresholds testing is recommended.