Carbon Accounting – Page 8

Climate Action Reserve Board Adopts Nitrous Oxide Reduction Methodology for Synthetic Nitrogen Fertilizer Management

The Climate Action Reserve (CAR) has developed a Nitrogen Management Project Protocol (NMPP) for the agricultural sector to provide guidance on how to quantify, monitor and verify greenhouse gas (GHG) emission reductions from improving nitrogen use efficiency in crop production. The protocol was adopted by CAR in June 2012. It is available online.
Within the same field, scientists at the National Science Foundation’s (NSF) Kellogg Biological Station (KBS) Long-Term Ecological Research (LTER) are putting the finishing touches on a program called the nitrous oxide greenhouse gas reduction methodology. This program, which is being conducted in partnership with the Electric Power Research Institute, would pay farmers to apply less nitrogen fertilizer in a way that doesn’t jeopardize yields. When farmers reduce their nitrogen fertilizer use, they can use the methodology as a means of generating carbon credits. These credits can then be traded in carbon markets for financial payments. The methodology was recently approved by the American Carbon Registry and is in its final stages of validation by the Verified Carbon Standard.

In the United States, agriculture accounts for almost 70 percent of all nitrous oxide emissions linked with human activity. Nitrous oxide is one of the major gases contributing to human-induced climate change and has a lifetime in the atmosphere of more than 100 years. In addition, a molecule of nitrous oxide has more than 300 times the heat-trapping effect in the atmosphere as a molecule of carbon dioxide.

To achieve desired production levels of crops such as corn, most farmers apply synthetic nitrogen fertilizer to their fields every year. While the production of nitrous oxide through microbial activity is a natural process in soils, the large-scale application of fertilizer has greatly increased the amount of nitrous oxide in soils. Once nitrogen fertilizer hits the ground, it is hard to contain and is easily lost to groundwater, rivers, oceans and the atmosphere. Nitrogen lost to the environment from agricultural fields is nitrogen not used by crops, which costs farmers money and degrades water and air quality. Farmers already manage fertilizer to avoid large losses, but to reduce losses further it currently costs more money than the fertilizer saves.

Carbon credits provide an incentive for farmers to apply fertilizer more precisely, rather than to reduce yields. In addition to providing an economic incentive, the methodology is a tool that farmers can apply to enhance their land stewardship.

Québec introduces amendments to draft GHG Regulations

To help Québec meet its emission reduction targets, the province introduced amendments to two draft GHG regulations in the June 8, 2012 edition of the Québec Official Gazette: (i) Regulation respecting mandatory reporting of certain emissions of contaminants into the atmosphere, and (ii) Regulation respecting a cap-and-trade system for greenhouse gas emission allowances.

Amendments to the Regulation respecting a cap-and-trade system for greenhouse gas emission allowances are intended to link the Quebec system with the California system as well as those of future partners such as Ontario and British Columbia. To this end, it specifies system registration admissibility conditions and necessary documents, as well as the procedure regulating emission rights trading and auctions, and provides the conditions for the delivery of offset credits, including protocols regarding certain admissible projects. Finally, amendments were made to adjust the regulation further to the adoption of Bill 89, An Act to amend the Environment Quality Act in order to reinforce compliance, by providing for administrative penalties and stronger sanctions.

The Regulation respecting mandatory reporting of certain emissions of contaminants into the atmosphere was also amended in order to complete the necessary harmonization with Western Climate Initiative (WCI) rules by adding declaration protocols. It provides, among other things, that the obligation to audit GHG emission declarations only applies to emitters subject to the GHG cap-and-trade system. In Québec, 2012 is a transition year during which regulated entities will have an opportunity to become familiar with the cap-and-trade system. The first carbon market compliance period will begin on January 1, 2013.

Global Protocol for Community-scale GHG Emissions released for Public Comment

On March 20, 2012, the ICLEI – Local Governments for Sustainability and C40 Cities Climate Leadership Group released a draft edition of the Global Protocol for Community-Scale Greenhouse Gas Emissions (GPC) to help cities around the world measure and report GHG emissions using a consistent protocol. Public comments on the draft GPC may be submitted until April 20, 2012 and a final version will be released on May 15 at the United Nations climate talks in Bonn. The design of the GPC is specified within the scope of the Memorandum of Understanding that was signed between ICLEI – Local Governments for Sustainability and C40 Cities Climate Leadership Group on 1 June 2011 in Sao Paulo.

The GPC is the result of a year-long collaboration between ICLEI – Local Governments for Sustainability and C40 Cities Climate Leadership Group; in June 2011, the two organizations forged an agreement to develop a standard approach for accounting and reporting GHG emissions that will boost the ability of cities to access funding and implement actions. Other organizations that participated in the development of GPC include the World Bank Group, United Nations-HABITAT, United Nations Environment Program, the Organization for Economic Cooperation and Development, and the World Resources Institute. This new collaboratively developed community protocol establishes a single minimum standard for accounting and reporting community scale greenhouse gas (GHG) emissions that can be used across multiple platforms. The GPC complements ICLEI’s programs and tools on local climate action that are being implemented globally, in particular the 2009 International Local Government GHG Emissions Analysis Protocol (IEAP) and its national supplements.

The GPC has three main components:

guiding principles and a policy framework to link the efforts across local and national governments and the private sector;
the 2012 Accounting and Reporting Standard with supplemental guidance on methodologies, and reporting templates; and
a roadmap for institutionalizing the process for updating the Standard on an ongoing basis.

Background

To manage emissions in an effective and transparent way, cities must measure and publicly report them. Planning for climate action at the city level starts with developing a GHG inventory, which allows local policy makers and residents to understand which sectors drive GHG emissions in their city or community, and respond by developing action plans that address those sectors. To date, a consistent accounting and reporting guidance for cities on how to conduct community scale inventories has been lacking. Rather, competing guidance has resulted in a proliferation of protocols and inventories that cannot be easily communicated between financing institutions, local and national governments, and the private sector. The absence of a common approach prevents comparison between cities and across time, and reduces the ability of cities to demonstrate the global impact of collective local actions.

Harmonization of GHG accounting methodologies presents local governments with opportunities for credible reporting of climate data in a transparent, verifiable, consistent, and locally relevant way. An internationally recognized GHG accounting standard which harmonizes prevailing methodologies can help local governments to set targets, measure progress, and leverage national and international financing. The community protocol integrates seamlessly with national and corporate GHG accounting methodologies, facilitating linkages between these entities for improved coordination to reduce GHG emissions. ICLEI is also working with its partners to reflect provisions of the GPC in the GHG performance section of the carbon Cities Climate Registry (cCCR). As of February 2012, the cCCR had compiled more than 1 GtCO2/yr of community GHG emissions reported by over 160 cities worldwide.

The GPC builds upon the principles, knowledge, experiences, and practices defined in previously published city-led inventories, institutional standards, and organizational protocols. These include the International Local Government GHG Emissions Analysis Protocol (ICLEI), Draft International Standard for Determining Greenhouse Gas Emissions for Cities (UNEP/UN-HABITAT/WB), GHG Protocol Standards (WRI/WBCSD), Baseline Emissions Inventory/Monitoring Emissions Inventory methodology (EC-CoM JRC), and Local Government Operations Protocol (ICLEI-USA).

Within the context of the GPC, several challenges have been identified in efforts to account for community-scale emissions:

Developing a community-scale GHG accounting and reporting standard that attributes emissions to the activities of the community.
Harmonizing existing community-based GHG accounting methodologies and standardizing accounting, reporting, and the relationships of community-scale inventories with national, organizational, and global climate efforts.
Advancements in GHG accounting methodologies at the community-scale are continuously evolving. An open, global protocol must therefore include a process for revising the standard to meet the inevitable improvements of tomorrow.

To address these challenges, the GPC provides a template to analyze the relationship with national and organizational GHG accounting methodologies, allocating all community activities and services that may result in GHG emissions, including inter-city emissions, to categories defined by the 2006 IPCC Guidelines and by Scope definition, to reflect varying levels of control by the community over these emissions. In addition, the GPC introduces a community-scale GHG accounting standard – referred to as the 2012 Accounting and Reporting Standard – which harmonizes GHG accounting methodologies and provides step-by-step guidance for cities on how to collect relevant data, quantify emissions, and report results using a series of summary reporting templates. Data collection for reporting is guided through use of data collection tables, providing transparency in activity data, emissions factors, and data sources. The 2012 Accounting and Reporting Standard enhances local policy development by: (i) benchmarking emissions between cities to facilitate peer-to-peer networking and sharing of best practices; (ii) allowing for consistent measurement of a community’s GHG emissions over time to evaluate various GHG abatement efforts; and (iii) facilitating climate-linked finance.

The GPC and associated processes are guided by six principles:

Measurability. Data required to perform complete emissions inventories should be available; where necessary partners will work with communities to develop local capacity communities to enable for data development and collection for compliance with the 2012 Accounting Standard.
Accuracy. The calculation of GHG emissions should not systematically overstate or understate actual GHG emissions.
Relevance. The reported GHG emissions should reflect emissions occurring as a result of activities and consumption from within the community’s geopolitical boundaries.
Completeness. All significant emissions sources included should be accounted for.
Consistency. Emissions calculations should be consistent in approach.
Transparency. Activity data, sources, emissions factors and accounting methodologies should be documented and disclosed/

Comments on the full document should be submitted through the feedback form template. The deadline for feedback is April 20, 2012. Feedback should be sent directly to GPC@iclei.org.

World’s Leading Investors Issue Guidelines for Company Action on Climate Change

At the Investor Summit on Climate Risk & Energy Solutions held at the United Nations in New York in January 2012, the world’s largest investors issued guidelines detailing their expectations of how companies should approach responding to climate change. The guidelines, entitled “Institutional Investors’ Expectations of Corporate Climate Risk Management”, provide a unified global investor voice on the issue for the first time in response to concerns about the impact of climate change on their investments.

Co-ordinated by three leading investor groups on climate change, the US-based Investor Network on Climate Risk (INCR), the European Institutional Investors Group on Climate Change (IIGCC) and the Investors Group on Climate Change (IGCC) in Australia and New Zealand, the document outlines seven steps investors expect companies to take to minimize the risks and maximize the opportunities presented by climate change and climate policy:

Governance. Clearly define board and senior management responsibilities and accountability processes for managing climate change risks and opportunities.
Strategy. Integrate the management of climate change risks and opportunities into the company’s business strategy.
Goals. Make commitments to mitigate climate change risks: define key performance metrics and set quantified and time-bound goals to improve energy efficiency and reduce greenhouse gas emissions in a cost-effective manner; and set goals to address vulnerabilities to climate change.
Implementation. Make a systematic review of cost-effective opportunities to improve energy efficiency, reduce emissions, utilize renewable energy and adapt to climate change impacts. Where relevant, integrate climate change considerations into research and development, product design, procurement and supply chains.
Emissions inventories. Prepare and report comprehensive inventories of greenhouse gas emissions; data should be presented to allow trends in performance to be assessed and it should include projections of likely changes in future emissions.
Disclosure. Disclose and integrate into annual reports and financial filings, the company’s view of and response to its material climate change risks and opportunities, including those arising from carbon regulations and physical climate change risks.
Public policy. Engage with public policy makers and other stakeholders in support of effective policy measures to mitigate climate change risks. Ensure there is board oversight and transparency about the company’s lobbying activity and political expenditures on this topic.

In addition, the guidelines set out steps that investors will take in the following areas: analysis, inquiry, monitoring, engagement, collaboration and public policy. By moving beyond disclosure and clearly outlining the areas in which investors expect to see companies take action, the guidelines provide a platform from which investors can monitor the performance of companies and engage with them to encourage positive steps on climate change. Investors are already taking action by monitoring alignment with their expectations through initiatives such as the Carbon Disclosure Project, and collaborating with companies through investor networks and the UN Principles for Responsible Investment. This group of investors considers the guidelines to be of particular importance to companies in carbon-intensive sectors, and those who have not have adopted carbon reduction targets or a systematic approach to managing climate change risks.

Court gives California Green Light to Proceed with Cap-and-Trade

On September 28, 2011, a California Supreme Court judge ruled that the state’s Air Resources Board (ARB) can proceed with implementation of the California’s cap-and-trade program. The ruling was issued in the case of California Air Resources Board vs. Association of Irritated Residents, in which anti-poverty environmental justice organizations have argued a market-based approach exposes poor and minority communities to higher levels of pollution.
The implementation of the cap-and-trade program, which is scheduled to begin in California in 2012, has been held up because of a March 2011 court ruling that required the ARB to further consider alternatives to cap-and-trade that might provide more effective ways of reducing greenhouse gas (GHG) emissions. ARB says that it has adequately considered alternatives such as a carbon tax, and is appealing the March 2011 decision in Superior Court. The September 28th ruling allows the ARB to move forward on cap-and-trade before the Superior Court rules.
California’s proposed cap-and-trade program is a major component of AB32, the state’s 2006 landmark climate change legislation. Under the law, California must reduce its GHG emissions to 1990 levels by 2020. In addition, the legislation sets an overall limit on emissions from sources responsible for 85% of California’s GHG emissions. The cap-and-trade program is designed to work in collaboration with other complementary policies that expand energy efficiency programs, reduce vehicle emissions, and encourage innovation.
More information on the status of California’s cap-and-trade program is available on the ARB web site.

Australia Passes Legislation for Offsets from Farming and Forestry

On August 22, 2011, Australia’s parliament endorsed the world’s first national scheme to regulate the creation and trading of carbon credits from farming and forestry, which will complement government’s plans to put a price on carbon emissions from mid-2012.
The new law is a precursor to carbon price legislation that will be put before parliament in late 2011. Known as the Carbon Farming Initiative (CFI), the new law allows farmers and investors to generate tradeable carbon offsets from farmland and forestry projects. Land use, including agriculture, accounts for 23% of Australia’s emissions. Projects backed by the CFI include reforestation, protection of native forests, curbing methane emissions from livestock, better fire management of savannah grasslands as well as capturing methane emissions from some landfills. Excluded projects include those deemed to affect the availability of water, threaten the richness of plant and animal species in an area or might threaten jobs. Managed investment schemes for forestry are also excluded. Under the rules, a project can only earn carbon credits if the investment is additional to those that would occur normally, with the lure of revenue from credit sales making the project financially viable.
Modeling by the Australian Treasury estimates the CFI will generate credits totalling 7 million tonnes of GHG reductions by 2020. ClimateWorks, a non-profit organization focusing on low-carbon growth, has calculated the CFI could reduce emissions by up to 41.5 million tonnes by 2020, mainly through greater investment in carbon tree plantations.

The CFI scheme is expected to start off slowly until the approval of laws parliament passes laws to put a price on carbon emissions from July 2012. Under the scheme, a government panel will vet and approve the rules for each project activity and an agency will administer the scheme’s offset registry. A number of project types have already been approved, see www.climatechange.gov.au/cfi. Successful projects will earn Australian carbon credit units, or ACCUs, that can either be traded domestically or overseas. ACCUs can be compliant under the U.N.’s Kyoto Protocol, depending on the project type. Or projects can sell non-Kyoto Australian units that can be used in the domestic voluntary carbon market to help firms meet carbon neutral goals. Kyoto-compliant units can be converted into credits that can be traded internationally and sold to companies or governments with Kyoto emissions targets. To provide investor certainty, the initial crediting period for native forest protection is 20 years, 15 years for reforestation projects and 7 years for all other eligible offset projects.

Pricing of the ACCUs will depend on the demand for offsets from certain types of projects, and particularly on the price for carbon in Australia. Some analysts expect ACCUs to closely track the national price on carbon emissions from power generators, smelters, refiners and others.
Prime Minister Julia Gillard plans a carbon tax starting at A$23 a tonne on about 500 of Australia’s biggest polluters from July 2012, ahead of emissions trading from mid-2015. Agriculture is not included in the carbon price scheme, but the government wants farmers to be able to benefit from the market for carbon credits. Under the carbon price plan, Australian industries which buy carbon offsets will need to ensure at least 50% of the offsets are domestic credits.

The government estimates that the CFI will help Australia reduce its carbon emissions by 460 million tonnes by 2050. The government has committed to cut total emissions by five percent of year 2000 levels by 2020. While Australia accounts for only about 1.5% of global emissions, it is the highest per capita polluter in the developed world because coal is used to generate most of the country’s electricity.

U.S. EPA Defers Deadline to Report Factors Used to Calculate GHG Emissions

The U.S. Environmental Protection Agency (EPA) is deferring the deadline for several industries to disclose factors they used to calculate their 2010 greenhouse gas (GHG) emissions. The agency has established two deadlines for industries to report the inputs for calculations they performed to comply with the EPA’s mandatory reporting rule (40 C.F.R. Part 98), while the EPA continues to evaluate industry concerns about revealing potentially confidential business information. For factors the EPA said can be quickly evaluated, industries will be required to report their calculation inputs by March 31, 2013. For factors that will take longer to evaluate, the deadline is March 31, 2015, the agency said in a final rule to be published in the Federal Register on August 25, 2011. The EPA had proposed deferring the input reporting requirements until March 31, 2014 (75 Fed. Reg. 81,350), but now says the additional year is necessary for many of the calculation inputs because “the number of data elements that would require a more in-depth evaluation is much larger than EPA had anticipated at the time of the deferral proposal.” The final rule will require electric transmission systems, stationary sources that burn fuels, underground coal mines, municipal solid waste landfills, industrial wastewater treatment, electric equipment manufacturers, and industrial waste landfills to begin reporting several emissions inputs by March 31, 2013. The various inputs include the total heat input of fuels combusted, methane emissions, the decay rate of materials stored in landfills and the type of coverings used, and volumes of wastewater treated using anaerobic processes.

The second deadline of March 31, 2015 applies to several data elements that must be reported by stationary sources that burn fuels, adipic acid production, aluminum production, ammonia manufacturing, cement production, electronics manufacturers, ferroalloy production, fluorinated gas production, glass production, HCFC-22 production and HFC-23 destruction, hydrogen production, iron and steel production, lead production, lime manufacturing, carbonate uses, nitric acid production, petroleum and natural gas systems, petrochemical production, petroleum refineries, phosphoric acid production, pulp and paper production, silicon carbide production, soda ash manufacturing, titanium dioxide production, zinc production, industrial wastewater treatment, and industrial waste landfills.
Other industries must report inputs by September 30, 2011, which is also the deadline for all industries subject to the mandatory reporting rule to reveal their 2010 emissions.
Industries originally had until March 31 to report their 2010 emissions and calculation factors. But in March, the EPA extended that deadline until September 30th to allow the agency time to review industry concerns that some of the inputs used to calculate their emissions would be considered confidential business information (76 Fed. Reg. 14,812; 53 DEN A-4, 3/18/11). The agency has since determined that GHG emissions and the calculations and test methods used to measure emissions are public information and will not be treated as confidential. They are continuing to examine the factors used in calculations to determine if confidentiality is warranted (102 DEN A-2, 5/26/11). EPA sent another proposed rule to the White House Office of Management and Budget for review on July 13th that would define confidential business information that cannot be disclosed for eight emissions sources, including electronics manufacturing, petroleum and natural gas systems, and carbon sequestration (136 DEN A-9, 7/15/11). (Source: EPA, August, 25, 2011). For more information, see www.epa.gov.

China Announces Carbon Trading Pilot Scheme

On July 17, 2011, China’s official state news agency, Xinhua, reported that the Chinese government is planning to introduce a carbon trading pilot scheme as part of the country’s measures aimed at reducing emissions from energy-intensive industries. The pilot scheme would be introduced with a view to eventually establishing a national carbon market. While no specifics were given on how and when the schemes would be implemented, Chinese officials have indicated previously that a pilot scheme would be introduced in a handful of major cities (including Guangdong, Hubei, Beijing, Shanghai, Tianjin and Chongqing) by 2013 and then expanded nationally in 2015.

Xinhua quoted Xie Zhenhua, vice-minister of China’s National Development and Reform Commission, as saying the scheme would result in more punitive electricity tariffs being imposed on energy-intensive industries in an attempt to encourage them to enhance their efficiency. The China Daily newspaper also reported comments from Xie suggesting that a new wave of carbon regulations would be introduced with the carbon trading pilot scheme. These regulations would be geared towards accelerating the development of a more standardized approach to energy efficiency and introducing tighter regulations on labeling low-carbon products. Furthermore, Xie said that the Chinese government would introduce further incentives for companies producing energy-efficient products and business models.

This move will not only provide an extra tool for China to achieve its Copenhagen commitment to reduce carbon emissions relative to economic growth by 40-45% below 2005 levels by 2020, but a Chinese carbon market could represent a major boost to the global carbon market.

Study finds that cap-and-trade more likely to trigger clean tech adoption than carbon tax

A study by Professor Yihsu Chen at the University of California Merced has found that a cap-and-trade system is more likely than a carbon tax system to trigger the adoption of clean energy technologies. The study, which was coauthored by Chung-Li Tseng of the University of New South Wales in Australia and that is published in the Energy Journal Volume 32, Number 3, 2011 (a quarterly journal of the International Association for Energy Economics) also found that the volatile pricing of a cap-and-trade system could lead to earlier adoption of clean technology by firms looking to hedge against carbon cost risks.

The study used economic models based on a framework of real options to determine the optimal timing for a coal-burning firm to introduce clean technologies using the two most commonly considered policies: (1) cap-and-trade, in which carbon emissions are capped and low-emission firms can sell excess permits to high-emission firms; and (2) carbon taxes, which employ a fixed monetary penalty for per-unit carbon emissions.

According to Professor Chen, “…cap-and-trade offers ‘carrots’ while taxes offer ‘sticks’. Cap-and-trade induces firms to explore profit opportunities, while taxes simply impose penalties to turn clean technology into a less costly option.”

For the study, researchers considered the scenario of a small firm that owns a coal-fired power plant and is obliged to supply power to its customers. They compared cap-and-trade and carbon tax models in determining when the firm would choose to add a natural gas power plant – a relatively clean energy resource – in order to meet its energy demands while maximizing its long-term profits. The study found that the cap-and-trade model triggered the adoption of clean energy technology at a lower overall carbon price than a tax policy did. Further, the study found that the volatility of non-fixed permit prices was the key difference that led the firm to add a natural gas plant earlier than it would have under a more predictable tax system. Professor Chen said that: “Based on our study, mechanisms designed to reduce cap-and-trade permit prices or suppress price volatility — which have been implemented in existing cap-and-trade programs like the Regional Greenhouse Gas Initiative — are likely to delay clean technology investments.”

Québec releases draft cap-and-trade regulation

On July 6, 2011, Québec’s Ministry of Sustainable Development, Environment and Parks announced the publication of a draft regulation to facilitate the implementation of its cap-and-trade system based on the Western Climate Initiative (WCI) guidelines. The regulation is now undergoing public consultation for a period of 60 days.

The regulation to be adopted following consultation will enable Québec to implement its carbon market as early as January 1, 2012. The first year will be transitional in nature, allowing emitters and market participants to familiarize themselves with how the system will work. They will be able to register as system users, take part in pilot project auctions and buy/sell greenhouse gas emission allowances through the market. This phase will also enable partners to make any required fine-tuning in order to make a smooth transition to their obligations under the cap-and-trade system that will come into force on January 1, 2013.

Industrial facilities that emit 25,000 or more tons of carbon dioxide equivalent annually will be subject to the system for capping and reducing their emissions.

The draft regulation is available here.