GHG Monitoring in the UK Emissions Trading Scheme

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GHG Monitoring in the UK Emissions Trading Scheme

• Tatiana Bosteels
• COP8
• New Delhi
• October 2002

2
Agenda

• The UK ETS
• Aim of the GHG monitoring system
• Key Principles
• Issues behind the requirements
• Monitoring requirements

3
UK Emission Trading Scheme

• Economy wide voluntary scheme with a variety of
  entry routes and types of participants
• Climate Change Agreement
• Direct Participants through government incentives
• Future potential participants
• Projects
• Links with other national and regional schemes

4
Aim of the Monitoring system

• Ensure accurate and transparent
  calculation/estimation and reporting of emissions
  
• By provision of the detailed steps for
  measuring and reporting emissions
• Final Objective
• Facilitate third party verification of baseline
  and yearly performance

5
Monitoring procedures

• Procedures Intended to be consistent with
• Good practices issued by the Intergovernmental
  Panel on Climate Change (the IPCC)
• UK Environmental Reporting guidelines
• Climate Change Agreements

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Monitoring System Key Principles

• Faithful representation
• Of transactions and event, quantify uncertainties
• Completeness
• Data within bounds of materiality and rules of
  scheme
• Consistency
• Over time between baseline and subsequent years
• Reliability
• Data free from material misstatement and bias
• Transparency
• Data shall be replicable by a third party through
  provision of sufficient information and a clear
  audit trail

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Issues Behind Monitoring Requirements

• Double Counting.
• Only one participant to claim responsibility for
  a single emissions source.
• Verifiability.
• The Baseline and claimed emission reductions
  shall be supported by data of sufficient
  quality.
• Cherry Picking.
• Must present the complete picture of emissions,
  no picking of preferred sources only
• National boundary.
• Emissions of UK- based operations only
• Leakage.
• Ensure that Participants cannot claim emissions
  reductions by shifting the responsibility outside
  their Source List.

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General Rules of Monitoring System

• Management Control
• Dominant influence over the emission from a
  source
• Ability to direct the financial and operating
  policies governing the emissions from the source
• Materiality threshold in annual reporting figures
  and baseline
• Relative significance or importance of
  misstatement in the total emissions figure
• Material if
• Broad guideline aggregate uncertainty in the
  total emissions figure gt 5 of total emissions
• Accepted Reasons for Exclusions of sources
• Lack of management control
• Based on size threshold (individually lt1 total
  baseline)
• No protocol for the source and not willing to
  develop one
• Lack of verifiable data during baseline period

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Direct Participants

• Participants shall be monitoring and reporting
  emission reductions at the source level
• Sources can be aggregated to a level which makes
  sense in the context of the business activities
• The collection of one or more point
  sources of the same type within a site
• point source is any separately
  identifiable point from which greenhouse
  gases are emitted

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Direct Participant Emission Sources

• Energy related emissions sources include
• On-site combustion of fossil fuels for on-site
  use
• On-site consumption of electricity that is
  generated off-site
• On-site consumption of electricity generated
  on-site
• On-site consumption of heat or steam generated
  off-site
• On-site consumption of heat or steam generated
  on-site.
• Exclusions
• Heat or electricity exported from a site will not
  be counted
• Process emissions
• CO2 process emissions protocols provided for
  main activities
• non-CO2 process emissions participants to
  propose protocol to the Government

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Direct Participant Monitoring requirements

• Identifying source list and calculating baseline
• Identify the sources it is bringing into the
  Scheme
• Management control
• Source within a sector
• verifiable emission data
• eligibility for entry
• coverage of GHG
• Coverage within reporting guidelines
• Calculate Baseline emissions
• Estimate annual emission over period 98-99-00
• Identify sources below the size threshold (1)
• Keep a written record of the decisions taken at
  each step

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Direct Participant Monitoring requirements

• Data to be monitored and reported on annual basis
• Series of protocols that specify in detail the
  methodology to be used to measure and report
  emissions from sources.
• Effective data management system must be in place
• Processes for internal audit, data checking, and
  quality assurance
• Clear definition of responsibilities for data
  management
• Risk management procedure in place
• Track adjustments to Baselines, Source Lists and
  targets

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Direct Participant Monitoring requirements

• Series of protocols that specify in detail the
  methodology to be used to measure and report
  emissions from sources.
• Protocol for energy related emission
• Fuel consumption related CO2 emissions
• Import of export of heat and power
• Renewable
• Protocol for process related emissions
• Cement manufacture
• Lime production
• Limestone and dolomite use
• Soda Ash
• Ammonia use of fuels as feedstock
• Metal production
• Waste incineration, Municipal Solid Waste and
  Sewage
• Non CO2 process related emissions developed by
  participants
• CH4 from Flaring
• HFCs

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Example of required data - Baseline
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Example of required data Annual Emissions
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CCA Participants

• Minimum Monitoring requirements
• To demonstrate compliance with target
• Get 80 reduction of Climate Change levy
• Requirements for trading into the ETS
• More stringent requirement
• Independent third party verification

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CCA Participants Minimum Requirements

• Energy use by fuel
• Including fuel ascribed to bought-in heat or
  electricity from CHP or other dedicated plant and
  excluding fuel ascribed to heat or electricity
  exports
• Measure of output
• For sectors with efficiency targets
• Qualitative performance measures
• Where these form part of the agreed target
• Volume of allowances bought or sold in the Scheme

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CCA Participants Minimum Requirements

• Energy figures to be reported in terms of primary
  energy units
• A standard set of conversion factors is to be
  used to convert to delivered energy
• Same factors as Direct participants but for two
  exception LPG and Coke
• Conversion factors for energy efficiency targets
• Common unit tonnes of CO2 equivalent
• Must take account of both the average emission
  factor, and the annual production level
• Guidelines provided

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CCA Participants trading in the UK ETS

• However, to sell emission reduction in the market
• Must have third party verification
• energy use
• emissions data
• output and product mix data where relevant
• evidence of a systematic approach to data
  management
• Must follow monitoring requirement of Direct
  Participants

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Thank You

• Tatiana Bosteels
• ERM Climate Change Team
• Tel [phone]
• email tatiana.bosteels_at_erm.com

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Monitoring procedures

• Procedures Intended to be consistent with
• Good practices issued by the Intergovernmental
  Panel on Climate Change (the IPCC)
• IPCC guidelines are designed for use at the
  national level, but the recommended methodologies
  for data collection, calculation of greenhouse
  gas emissions,reporting conventions, plus both
  data quality control/assurance and treatment of
  uncertainties in the data are also relevant for
  emissions trading. Need to adapt to site level
• UK Environmental Reporting guidelines
• Same methodology, but different approach as ETS
  must be more prescriptive on issues such as
  eligibility, scope, inclusion of sources,
  boundaries, and double counting
• Climate Change Agreements

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Aim of the Monitoring Guidelines

• Specify the key principles which Direct
  Participants must follow when
  calculating/estimating and reporting emissions.
  These principles shall be taken into account in
  the development of new protocols submitted by
  Direct Participants to DEFRA. These principles
  are given in section 2.
• Give practical guidance to Direct Participants
  on a number of the requirements of the
  Scheme outlined in the framework document. These
  are provided in sections 2-5.
• Provide the detailed steps for measuring
  and reporting emissions. These are set
  out in the annexes

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Monitoring System Key Principles

• Faithful representation
• Information shall represent faithfully the
  transactions and other events it either purports
  to represent or could reasonably be expected to
  represent.
• Uncertainties shall be quantified and data shall
  neither be systematically overestimated nor
  underestimated so far as can be judged.
• Uncertainties shall be reduced so as to be
  immaterial.
• Completeness
• Complete within the bounds of materiality and the
  rules of the Scheme, such that information shall
  not be misleading or unreliable in terms of its
  relevance.
• All sources above the Size Threshold within the
  defined and chosen Source List shall be included
  in the Baseline and annual emissions.
• Leakage effects shall be accounted for

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Key Principles

• Consistency
• Consistent methodologies and measurements shall
  be used between the Baseline and subsequent
  years.
• Data shall be comparable over time.
• Estimates shall be comparable with the UK
  inventory estimates and with international
  guidelines including IPCC guidance.
• Reliability
• Baseline and annual emissions and related
  disclosures shall be free from material
  misstatement and bias and capable of being
  depended upon by users to represent faithfully
  that which it either purports to represent or
  could reasonably be expected to represent.
• Changes in methodologies shall derive from
  continuous improvement of data quality and shall
  be clearly stated and documented to allow for
  year-to-year comparisons.

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Key Principles

• Transparency
• Reported data shall be replicable by a third
  party through provision of sufficient information
  and a clear audit trail.
• References and methodologies shall be clearly
  documented.
• Changes over time shall be clearly documented to
  allow clear understanding.
• Third party verification by an accredited
  verifier shall be undertaken

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Issues Behind Monitoring Requirements

• Double Counting.
• It is not acceptable for more than one
  Direct Participant to claim responsibility for
  a single emissions source. This is of primary
  importance for Direct Participants when
  determining the sources over which they have
  management control.
• Verifiability.
• The Baseline and any claimed emission
  reduction from a source shall be supported
  by data of sufficient quality.
  Consideration of the key principles
  underpinning the Reporting Guidelines should
  help guide Participants towards obtaining data of
  sufficient quality to satisfy an independent
  accredited verifier.

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Issues Behind Monitoring Requirement

• Cherry Picking.
• Participants shall not be allowed to
  include only those elements of their
  operations which they consider would provide the
  easiest scope for emissions reductions. There is
  an obligation to present the complete picture
  of emissions in order to prevent
  organisations from claiming emissions
  reductions in one area of their operations
  while simultaneously increasing emissions from
  other areas.
• National boundary.
• Since the Scheme is to contribute to UK emissions
  reduction (and hence to the UKs target under the
  Kyoto Protocol), the scope for reporting
  emissions under the Scheme will not extend beyond
  the scope of the UK inventory. Thus for the
  purposes of the UK Scheme, the emissions
  associated with UK- based operations must be
  separately identifiable.

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Issues Behind Monitoring Requirements

• Leakage.
• Having defined the Source List for reporting
  emissions, it is important to ensure that
  Participants cannot simply claim emissions
  reductions by shifting the responsibility outside
  their Source List. One example of this would be
  to outsource a product or service which
  transfers accountability of the associated GHG
  emissions to another organisation. Such changes
  need to be accounted for.

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Direct Participant Monitoring requirements

• Effective data management system must be in place
• Clearly defined responsibilities for issues such
  as data collection, collation, aggregation, and
  quality control
• The existence of appropriate tools or procedures
  to support consistency in data estimation and
  collation within an organisation
• Methods for systematic data archiving and process
  documentation
• Processes for internal audit, data checking, and
  quality assurance.
• Processes for taking corrective and preventative
  actions.
• Clearly articulated methods of data
  interpretation.
• Processes for periodic review of the data
  management system itself.

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Direct Participant Monitoring requirements

• In order to track adjustments to Baselines,
  Source Lists and targets following data must be
  recorded
• Identify any changes in management control to
  individual sources within the Source List that
  are above the Change Threshold as defined in the
  framework document
• Identify whether the cumulative effect of
  changing management control of sources within the
  Source List meets or exceeds the Change Threshold
  as defined in the framework document
• Provide evidence showing whether sources within
  the Source List have been divested to another
  Direct Participant or divested in any other way
  (including closure)
• Provide evidence of any contractual arrangements
  for maintaining a source in the Baseline in the
  case of divestment or acquisition from another
  Direct Participant
• If substitute sources are added to the Source
  List, evidence shall be provided showing details
  of this substitution.

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Climate Change Agreement Participants

• Energy figures to be reported in terms of primary
  energy units
• where an agreement is set in terms of an energy
  or energy efficiency target, the reported
  quantity is primary energy (i.e. losses
  associated with delivery of the energy are
  associated with the end-user).
• Conversion factors for energy efficiency targets
• Converted to a common unit, i.e. tonnes of CO2
  equivalent
• Must take account of both the average emission
  factor, and the annual production level.
• Guidelines provided
• (Guidelines for carrying out this conversion are
  given in Climate Change Levy technical guidance
  notes NA(99)30 and NA(00)07. )
• A standard set of conversion factors is to be
  used to convert to delivered energy
• Same factors as Direct participants but for two
  exception LPG and Coke

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• Methodologies for calculating/estimating CO2
• Protocols
• emissions from fuel-related sources
• Emissions from industrial processes (termed
  .process emissions.).

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BAU Emissions
98-00 average 2002 baseline
Govt payment /tonne
2003 baseline
2002 target
Successful bid quantity
Emissions tCO2eq
Govt payment
2003 target
2004 baseline
Govt payment
2005 baseline
2004 target
Govt payment
2005 target
2006 baseline
Govt payment
2006 target
2002
2003
2004
2005
2006
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Outline of proposed UK ETS
adapted from ETG slide
UK Renewable Obligations ROCs, Energy efficiency
Commitments
ETS, JI, CDM AAUs, ERUs, CERs
Emission Saving Projects 0.3mtC pa?
Unit Participants
Absolute participants
Gateway
CCA cos with output related target
Incentives bidding cos 2 mtC pa?
CCA cos with absolute targets 2.5mtC pa?
Reconciliation retire permits
Reconciliation retire permits
Approval and Certified credits
Emissions Trading Authority
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