Climate Change: Reporting Guidelines under the MOU

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Climate Change Reporting Guidelines under the MOU
Daniel E. Klein Twenty-First Strategies,
LLC McLean, VA 22101 dklein_at_21st-strategies.co
m
presented to American Public Power
Association 2006 APPA National Conference Chicago,
ILJune 13, 2006
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What well cover today

• Background on U.S. GHG programs
• Climate Vision Power PartnersSM
• Growing pressures for power companies to take
  action on GHGs
• Revised 1605(b) GHG Reporting Guidelines

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Addressing Climate and Energy Securityin the
Global Climate Change Initiative

• On February 14, 2002, President Bush set a goal
  to reduce U.S. GHG emissions intensity by 2012
• GHG intensity will be measured in terms of GHG
  per unit of GDP
• This goal is equivalent to 500 million metric
  tons of cumulative carbon equivalent reductions
  from 2002-2012

My administration is committed to cuttingour
nations greenhouse gas intensity... by 18
percent over the next 10 years.
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Improving GHG intensity is a key component of the
U.S. strategy

• Over time, improving GHG intensity could
• Slow the rate of GHG growth
• Stabilize GHG emissions
• Reduce absolute emissions
• depending on the rate of improvement

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So how is the U.S. doing so far?

• Goal 18 reduction in GHG intensity, 2002-12
• But BAU forecasts show 14 improvement
  (1.5/yr)
• 18 implies average annual rate of 2.0/year
• From 1990-2003, GHG intensity fell 1.9/year

GHGs GDP GHG intensity ?/?
2003 1.0 ? 2.7 ? -1.7 ? ?
2004(prel.) 2.0 ? 4.2 ? -2.1 ? ?
2005(very prel.) 0 ? 3.5 ? -3.5 ? ? ?
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Climate VISION Program Launch

• Climate VISION Voluntary Innovative Sector
  Initiatives Opportunities Now
• A part of the Global Climate Change Initiative
  (GCCI), launched February 12, 2003
• Part of a continuum of short- mid-, and long-term
  approaches to address climate change
• Nature of problem requires development and use of
  transformational technologies

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Climate VISION Private-Sector Partners

• Industrial Minerals Assoc. N. America
• International Magnesium Association
• National Lime Association
• National Mining
• Association
• Portland Cement
• Association
• Power Partners
• Semiconductor Industry Association

• Alliance of Automobile Mfgrs.
• Aluminum Association
• American Chemistry Council
• American Forest Paper Association
• American Iron Steel Institute
• American Petroleum Institute
• Assoc. of American Railroads
• The Business Roundtable

Each partner has committed to contribute to
Presidents GHG intensity goal.
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Power PartnersSM Historical Roots

• In 2002, electric power sector created Power
  PartnersSM
• Voluntary partnership with Federal government
• Designed to deliver results in short, medium
  long term
• U.S. electric power sector recognized early on as
  a world leader in voluntary GHG programs
• Power industry came together in the 1990s
• Successfully undertook voluntary climate
  initiatives through the Climate Challenge program
• First major industry to do so
• 281 MMT CO2 of reported reductions in 2002.
• But does its reputation for early action still
  hold?

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Electric Power Participants inClimate VISION
Climate Leaders

• Power PartnersSM Participants
• American Public Power Association (APPA)
• Edison Electric Institute (EEI)
• Electric Power Supply Association (EPSA)
• Large Public Power Council (LPPC)
• National Rural Electric Cooperative Association
  (NRECA)
• Nuclear Energy Institute (NEI)
• Tennessee Valley Authority (TVA)
• EPAs Climate Leaders program
• 86 companies so far (all sectors)
• Power companies include AEP, Entergy, We
  Energies, FPL, PSEG, etc.

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Power PartnersSM Goal

• Achieve equivalent of 3-5 reduction in GHG
  intensity by 2012 through credible, verifiable
  reductions in GHG emissions or offsets
• Intensity measured as CO2/MWh
• Collaborative, industry-wide initiatives
• Individual actions that best suit company
  capabilities, resources and business strategies
• Cross-sector programs and outreach
• Signed Umbrella MOU with DOE
• December 13, 2004
• Highlights roles of partners in achieving
  voluntary reductions

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So hows the Electric Power Sector doing so far?

• Goal 3-5 reduction in GHG intensity, 2002-12

CO2 MWh CO2 intensity ?/?
2003 1.25 ? 0.6 ? 0.6 ? ?
2004(prel.) 0.89 ? 2.0 ? -1.0 ? ?
2005(very prel.) 2.7 ? 2.0 ? 0.7 ? ?

• So far, not so good .

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Business-as-Usual predicts some improvement,but
EPICI target will need more
Generation Intensity (MMTCO2e/bkWh)
Power PartnersSM target
Data compiled by EOP Group.
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States are getting more involved in Climate


GHG Reporting and Registries
Powerplant Carbon Caps of Offsets
Greenhouse Gas Inventories
Climate Action Plans Completed
Source Pew Center for Global Climate Change,
July 2005 update
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U.S. Mayors Climate Protection Agreement

• Initiated shortly after Kyoto Protocol took
  effect
• Actions urged
• Cities should meet or exceed Kyoto targets
• State federal governments should meet or beat
  Kyoto targets by 2012
• Congress should enact cap trade legislation
• Effort has growth rapidly
• 235 Mayors have signed (as of May 19, 2006)
• Representing over 45 million citizens
• Press attention worldwide

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Rapid Growth in U.S. Mayors C.P.A.

• 16-Feb-2005 Kyoto Protocol takes effect
• 30-Mar-2005 10 Mayors launch program
• 13-Jun-2005 U.S. Conf. of Mayors unanimously
  endorse
• 8-Dec-2005 Mayor Nickels (Seattle) highlighted
  at Montreal COP
• 19-May-2006 235 Mayors signed, representing over
  45 million citizens

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Its not too late to be proactive 1

• Every challenge containsopportunity as well as
  danger.

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Its not too late to be proactive 2
In a future filled with uncertainty,
business-as-usual wont cut it.

• Come gather round peopleWherever you roamAnd
  admit that the watersAround you have grownAnd
  accept it that soonYoull be drenched to the
  bone.If your time to youIs worth savinThen
  you better start swimminOr youll sink like a
  stoneFor the times they are a-changin.
• Bob Dylan, 1963

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Its not too late to be proactive 3

• If youre not at the table,youre on the menu.
• -- Washington D.C. proverb

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Power Companies should continue and expand their
GHG reduction efforts

• Understand your GHG footprint and risks
• Identify GHG activities already under way
• Assess options for further GHG reductions
• Costs
• Effectiveness
• Ancillary impacts
• Develop capabilities for GHG reporting
• Join climate programs?
• National?
• State local?
• Set a GHG target?
• Absolute level of emissions?
• GHG emissions intensity?

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GHG Management Options An all-in-1 Formula
GHG emissions GDP X GHG intensity Btu/GDP
X GHG/Btu sequestration
Sequester Carbon

• Capture Store
• Enhance Natural Sinks

• All options needed to
• Maintain economic growth
• Affordably meet energy demand
• Address environmental objectives

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Use the Power PartnersSM Resource Guide

• 1990s Climate Challenge program developed an
  Options Workbook of best practices
• MOU commits to developing and maintaining a
  Power PartnersSM Resource Guide
• At a minimum
• Meet Climate Vision commitment
• Information for utilities, esp. smaller ones
• Information for general public
• and maybe also
• Data collection for measuring intensity?
• Aid in annual Power PartnersSM reporting to DOE?
• Other purposes?

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http//uspowerpartners.org/
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DOEs Revised Guidelines for Voluntary Reporting
of Greenhouse Gases (1605(b)

• Background How we got here
• Overview of Guidelines
• Key steps in Reporting

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Background on Revising the 1605(b)GHG Reporting
Guidelines

• Voluntary Reporting of Greenhouse Gases Program
• Established by Section 1605(b) of the Energy
  Policy Act of 1992
• Oct. 1994 Final Guidelines issued
• First reporting year was 1994, reported by DOE in
  July 1996
• Reporting rules were quite flexible
• Scope of the reporting entity
• Emissions and/or reductions
• Entity-wide or project-specific
• Power sector initially dominated, still majority

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Background on Revising the 1605(b)GHG Reporting
Guidelines

• Concerns grew with the original program
• Flexibility reduced credibility
• Weak basis for future crediting
• Emergence of competing reporting standards
• Administration plan to substantially improve the
  emission reduction registry
• Part of Feb. 2002 GCCI
• create world-class standards for measuring and
  registering emission reductions
• transferable credits to companies that can show
  real emission reductions
• take into account emerging domestic and intl
  approaches

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Will new 1605(b) guidelines help or hinder its
purposes?

• Feb. 2002
• Announced at a time when fragmentation of
  registries seemed to threaten.
• But is the WRI/WBCSD GHG Protocol becoming the
  new standard?
• Will 1605(b) be a uniter or a divider?
• What is L/T fate of 1605(b)?

These improvements will enhance measurement
accuracy, reliability and verifiability, working
with and taking into account emerging domestic
and international approaches.
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Overview of new 1605(b) Guidelines

• All reporting entities must
• Define themselves and their organizational
  boundaries
• Use the measurement and calculation methods
  contained in the guidelines
• Maintain records and certify accuracy of reports
• All reporters are encouraged to
• Report at the highest level
• Meet the requirements for registering reductions
• Have reports independently verified

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Framework of Revised 1605(b) Program
Large Emitters
Reporting Only Entities
Small Emitters
Measure emissions at any level/year
Entity-wide Emissions Inventory
Inventory of Emissions for Selected Activities
Calculate Net Reductions Across U.S.
Entity Changes in Emissions Changes in Carbon
Stocks Avoided emissions
Calculate Reductions at any level project
facility pre-2002, etc.
Calculate Net Reductions for Reported Activities,
e.g., DSM
Same for non-U.S. operations (optional)
Reported Reductions
Potential Offsets
Offset Reductions (if any)
Registered Emission Reductions
All Reporters Require Legal Basis for Entity
Encourage Highest Level
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Overview of 1605(b) Guidelines Registered
Reductions

• Qualifying reporters will be credited with
  registered reductions
• U.S., non-U.S. and offset reductions to be
  calculated separately
• Registered reductions gauge entitys contribution
  to Presidential goal of reducing U.S. emissions
  intensity 18 by 2012
• Registered reductions may be transferred to other
  entities using private agreements but no changes
  to DOE records
• To retain reductions from sequestration, entities
  must continue to report

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Overview of Guidelines Small Emitters (lt10,000
metric tons CO2e per year)

• Small emitters that intend to register must
• Emit less than 10,000 metric tons of CO2
  equivalent per year
• Report all emissions and reductions for at least
  one activity, e.g. livestock operations or
  forested land
• Report annually
• Certify that activities being reported do not
  cause an increase in emissions elsewhere under
  the entities control

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Overview of Guidelines Large Emitters (gt10,000
metric tons CO2e per year)

• Large emitters that intend to register must
• Submit comprehensive, high-quality emissions
  inventories
• Determine reductions based on entity-wide
  assessments of changes relative to base period
• Ensure offset reductions are calculated according
  to entity rules and are subject of agreement
  with other entities
• Report annually

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Basic Elements of the Revised 1605(b) Guidelines

1. Defining and naming the entity, and setting
   organizational boundaries
2. Determining Start Year, Base Period and First
   Reduction Year
3. Entity Statements
4. Emissions Inventories
5. Emission Reductions
6. Other reporting requirements, including record
   keeping, certification, and verification
7. Offsets, non-U.S. emissions, aggregators, other
   gases and sources

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Key Addresses for Revised 1605(b)

• All documents and guideline development
  background can be found at
• http//www.pi.energy.gov/enhancingGHGregistry/
• Information on EIA implementation of program and
  revised guidelines can be found at
• http//www.eia.doe.gov/oiaf/1605/aboutcurrent.html
  /

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Questions?

• Dan Klein
• Twenty-First Strategies, LLC
• 6595 Terri Knoll Ct.
• McLean, VA 22101
• 703-893-8333
• dklein_at_21st-strategies.com

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Appendix

• Basic Elements of the
• Revised 1605(b) Guidelines

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Basic Elements of the Revised 1605(b) Guidelines

1. Defining and naming the entity, and setting
   organizational boundaries
2. Determining Start Year, Base Period and First
   Reduction Year
3. Entity Statements
4. Emissions Inventories
5. Emission Reductions
6. Other reporting requirements, including record
   keeping, certification, and verification
7. Offsets, non-U.S. emissions, aggregators, other
   gases and sources

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Defining and Naming the Entity, and Setting
Organizational Boundaries

• Companies are encouraged to report at highest
  level of aggregation
• Reporting entities must have a legal basis and be
  named appropriately
• Entities that register reductions must define an
  organizational boundary
• Entities should use financial control to
  determine boundary
• The same approach should be used to determine
  non-U.S. boundaries (if any)

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Determining Start Year, Base Period First
Reduction Year
The Start Year is the first Reporting Year. For
registering reductions, the Start Year must be
2002 or later (except certain CL/CV partners may
use 2000).
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Entity Statements Basic Requirements for All
Reporters

• Name, legal basis, and start year
• Summary description of sources (including de
  minimis sources) and basis for organizational
  boundary
• Names of any parent or holding companies NOT
  covered in inventory
• Names of any large subsidiaries or organizational
  units covered in inventory
• Description of the entity and its primary U.S.
  economic activities
• Description of non-U.S. operations (if included)
• Significant changes from previous report need to
  be documented

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Entity Statements - Additional Requirements for
Large and Small Emitters

• Large Emitters
• The Start Year is the first year for which a
  complete inventory is submitted
• Must continue to report as Large Emitter in all
  future years
• Small Emitters
• Must demonstrate annual emissions 10,000 MT
  CO2e using Technical Guidelines methods or
  Simplified Emission Inventory Tool (SEIT)

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Emissions Inventories

• Large emitters that register reductions must
  submit entity-wide inventories annually,
  including
• Direct emissions of all six GHG categories
• Certain indirect emissions, such as purchased
  electricity
• All sequestration or other changes in carbon
  stocks.
• Quantity-weighted quality rating of inventory
  must be 3.0 or higher
• May exclude de minimis sources if 3 of annual
  emissions
• Domestic and international emissions must be
  reported separately
• All reporters must quantify emissions associated
  with reported reductions

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Emissions Inventory - The Emissions Rating
System

• Reporters must rate their emissions measurement
  and estimation methods
• The ratings are ordinal, with four levels, A, B,
  C D (valued 4, 3, 2, 1)
• An A rated method best method available (e.g.
  direct measurement)
• A D rated method least rigorous method (e.g.
  estimated activity data)
• The weighted average rating must be at least 3.0
  to register reductions (i.e., a B average)
• Reporters must calculate an inventory weighted
  average rating for each year

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Emissions Inventory - Measuring Emissions

• When choosing measurement or estimation methods,
  entities should consider
• Rating
• Cost and feasibility of available methods
• Accuracy
• Size of the source
• Variability and performance over time, and
• Ancillary Benefits

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Emissions Inventory Potential Sources of
Emissions and Sequestration

• Stationary source combustion
• Indirect emissions from purchased electricity,
  steam, hot and chilled water
• Mobile source combustion
• Industrial process emissions
• Mining, oil, and gas production emissions
• Waste treatment and handling
• Non-fuel use of fossil fuels
• Other indirect emissions
• Forestry sources and sinks
• Agricultural sources and sinks
• Engineered sequestration

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Emissions Reductions

• Registered reductions based on assessment of all
  changes in emissions relative to Base Period(s)
• The Technical Guidelines permit five calculation
  methods
• Emissions intensity
• Absolute emissions
• Changes in carbon stocks
• Changes in avoided emissions
• Action-specific (project-based)
• Plus integrated method for energy generators
• Annual increases must be subtracted from future
  year reductions

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Record Keeping, Certification Other Requirements

• Records must be maintained for at least 3 years.
• Trade secret and confidential business
  information may be protected (5 U.S.C.
  552(b)(4)).
• All reports submitted to EIA must be certified
  as
• Accurate and complete
• Compiled in accordance with the Guidelines
• Consistent with prior years information
• Independent verification is encouraged, but not
  required but with independent verification,
  reports may be simplified

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Independent Verification

• Entities encouraged to have reports independently
  verified
• Independent verifiers should have following
  qualifications
• Not be owned by the reporter, nor provide
  additional services
• Accredited by independent, nationally-recognized
  accreditation program(s)
• Possess education, training and/or experience
  matching tasks performed
• Have a professional degree or accreditation in
  relevant fields, supplemented by training and/or
  experience in emissions reporting and accounting
• A few nationally recognized organizations that
  accredit individual verifiers
• American Institute of Certified Public
  Accountants
• ANSIs Registrar Accreditation Board for
  Environmental System Auditors
• Board of Environmental, Health Safety Auditor
  Certifications
• California Climate Action Registry
• Comparable international bodies