Greenhouse Gas Reporting – GHG Accounting

BC Restructures GHG Emissions Regulatory Framework in Light of LNG Projects

On October 20, 2014, Environment Minister Mary Polak announced the first part of a restructuring of BC’s GHG emissions regulatory framework with the release of Bill 2, also known as the Greenhouse Gas Industrial Reporting and Control Act. This piece of legislation will replace the Greenhouse Gas Reduction (Cap and Trade) Act that came into force on May 29, 2008. The restructuring will continue with the release of the relevant Regulations under the new Act once it is given Royal Assent and comes into force. These regulations will include a new GHG Reporting Regulation and a new Emission Offset Regulation. It is expected that the reporting thresholds in the new GHG Reporting Regulation and the resulting obligations thereunder will remain the same. Tim Lesiuk, Executive Director and Chief Negotiator at Climate Action Secretariat, emphasized in a technical briefing the importance and responsibility of companies assuming to be below the lowest reporting threshold of 10,000 t CO2e annually (called non-reporting entities), to also monitor and document their GHG emissions in order to mitigate the risk of regulatory non-compliance and provide proof of their status as a non-reporting entity in case of an inspection.
A new Emission Offset Regulation is expected to offer an independent offset certification process from the BC Government’s Carbon Neutral purchase program. This will be achieved through a new certification and registry system. The BC Government’s existing Carbon Neutral purchase program conducted by the Climate Investment Branch will continue, but they will source their offsets from the new certification and registry system. Existing offset purchase contracts are expected to be grandfathered into the new system.
The functional new aspect in Bill 2 is the introduction of a new carbon intensity performance requirement. This carbon intensity performance target, called Regulated Operations’ Emission Limits in the Act is an additional requirement beyond the reporting obligation that only applies to industries that are listed in the Schedule of Regulated Operations and Emission Limits in the Act.
The only two listed industries so far are coal-based electricity generation operation with a limit of 0 tonnes carbon dioxide equivalent emissions and liquefied natural gas operations with a limit of 0.16 carbon dioxide equivalent tonnes for each tonne of liquefied natural gas produced. However, additional industries may be added and the BC Government has indicated that it will be announcing climate change measures in other sectors going forward.
The emission target carbon intensity performance quantification is limited to the facility level and therefore does not include any upstream or downstream emissions outside of the facility boundary. In order to meet their obligations, regulated entities with prescribed emission limits will have several compliance mechanisms available to them. In particular, they can:
• improve energy efficiency or increase the use of clean electricity through facility design;
• acquire emissions offsets by investing in BC-based emission reduction projects at market prices; or
• contribute to a technology fund at a rate of $25 per tonne of CO2e.

Besides setting up a new technology fund, Bill 2 also requires the establishment of a registry for the purposes of the Act. This registry will be the only place where offset units and earned credits, resulting from performance below the emissions limit, are tracked. This is also the only place where transactions under the Act can be executed for compliance purposes.
If you have any questions about Bill 2 and the proposed changes to the BC emission offset regime or their potential impacts on your operations or offset project, please contact GHG Accounting Services.

BC signs Climate Action Plan with California, Oregon and Washington

On October 28, 2013 the leaders of British Columbia, California, Oregon and Washington signed the Pacific Coast Action Plan on Climate and Energy committing their governments to a comprehensive and strategic alignment to combat climate change and promote clean energy. The region covered by the Action Plan has a combined population of 53 million people and a GDP of $2.8 trillion, which represents the world’s fifth largest economy.

Through the Action Plan, all four jurisdictions will account for the costs of carbon pollution and where feasible, link programs to create consistency and predictability across the region. In addition, the Action Plan provides for the following actions:

harmonizing 2050 targets for greenhouse gas (GHG) reductions and developing mid-term targets needed to support long-term reduction goals;
cooperating with national and sub-national governments around the work to press for an international climate change agreement in 2015;
enlisting support for research on ocean acidification and taking action to combat it;
adopting and maintaining low carbon fuel standards in each jurisdiction;
taking action to expand the use of zero-emission vehicles, aiming for 10% of new vehicle purchases by 2016;
continue deployment of high-speed rail across the region;
supporting emerging markets and innovation for alternative fuels in commercial trucks, buses, rail, ports and marine transportation;
harmonizing standards to support energy efficiency on the way to “net zero” buildings;
supporting federal policy on regulating GHG emissions from power plants;
sponsoring pilot projects with local governments, state agencies and the West Coast Infrastructure Exchange to make infrastructure climate smart;
streamlining approval of renewable energy projects; and
supporting integration of the region’s electricity grids.

The Action Plan provides a much needed boost to regional and national efforts climate change policy efforts.

The Pacific Coast Collaborative was established in 2008 to address the unique and shared circumstances of the Pacific coastal areas and jurisdictions in North America by providing a formal framework for co-operative action, a forum for leadership and the sharing of information on best practices, and a common voice on issues facing coastal and Pacific jurisdictions.

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.

Another Study links High GHG Emissions with Negative Impact on Company’s Value

A study by researchers at the University of Wisconsin-Madison, Georgetown University and the University of Notre Dame has found that high levels of greenhouse gas (GHG) emissions can have a negative impact on a company’s value. According to the study – Voluntary Disclosures and the Firm-Value Effects of Carbon Emissions (April 2011) – a company’s value decreases on average by $202,000 for every additional thousand metric tons of emissions it produces.

Researchers used hand-collected carbon emissions data for 2006-2008 that Standard and Poor’s (S&P) 500 companies disclosed voluntarily to the Carbon Disclosure Project to examine two issues: (1) firm-level characteristics associated with the choice to disclose carbon emissions, and (2) relationship between carbon emission levels and firm value. With respect to the first issue, researchers found a higher likelihood of carbon emission disclosures by firms with superior environmental performance, conditional on firms taking environmentally proactive actions. However, researchers found no association between inferior environmental performance and the likelihood of disclosing carbon emissions, conditional on firms taking environmentally damaging actions. Furthermore, researchers found that companies are more likely to voluntarily disclose their carbon emissions as the proportion of industry peer firm disclosers increases. In connection with the second issue, the researchers found a negative association between carbon emission levels and firm value. From its sample of S&P 500 companies, the study found that a company’s value decreases on average by $202,000 for every additional thousand metric tons of GHG emissions it produces.

In the study, researchers also pointed out that according to the 2009 Goldman Sachs’ GS Sustain Report it is expected that the relationship between carbon emissions and global climate change will drive a redistribution of value from firms that do not control their carbon emissions successfully to firms that do.
The study may be accessed online

Study Finds that Lowering Levels of GHG Emissions can Increase a Company’s Stock Value

A recent study by researchers at the University of California (Davis and Berkeley) and the University of Otago in New Zealand entitled “The Relevance to Investors of Greenhouse Gas Emission Disclosure” has found that the amount of greenhouse gas (GHG) emissions a company produces and whether a company discloses their emission levels or not has a significant effect on the value of the company’s stock. In particular, the researchers found that the greater the GHG emissions, the lower the value of a company’s stock. Likewise, lower emission levels lead to higher stock values, all other factors being equal. Even if companies do not disclose this information, GHG emission levels are estimated by investors themselves, resulting in an even stronger risk discount to the stock value for high level emitters. This trend is particularly strong in energy intensive industry sectors. The study was led by Paul Griffin, a professor in the University of California, Davis Graduate School of Management.

Professor Griffin and his colleagues also discovered that markets respond almost immediately when a company releases information on their GHG emissions, with stock values responding the same day as the disclosure. “It really does appear to be a valuation factor,” Professor Griffin says. “Greenhouse gas emissions are important to investors in assessing companies.”

The findings bolster the arguments of investor groups, environmental advocates and watchdog organizations that have been seeking greater disclosure of company actions that affect climate change. The U.S. Securities and Exchange Commission (SEC) does not require all companies to report GHG emissions, but companies are required to disclose any information that is considered material to stock values. The findings of this study strongly suggest that GHG emissions data is relevant information to investors, therefore it could be argued that all public companies should disclose their GHG emissions to comply with SEC requirements. Approximately 50% of large U.S. firms report GHG emissions through the Carbon Disclosure Project.

The researchers analyzed four years of data (from 2006-2009) on firms listed in the Standard & Poor’s 500, and five years of data (2005-2009) for the top 200 publicly traded firms in Canada. While the researchers found the link between stock values and GHG emissions to hold true in most industries, the correlation was strongest for energy companies and utilities. According to Griffin, “after controlling for normal valuation factors like assets and earnings, we found the value of stocks to be a function of greenhouse gas emissions”.

Investors care about GHG emissions because markets are forward looking. Professor Griffin has indicated that in this case, investors are anticipating a time when companies will face increased costs for climate change mitigation, regulation and taxes.
The full study can be downloaded at Link.

UK Study finds that Measuring and Reporting GHG Emissions Delivers Cost Savings and Business Benefits

A research study released by PwC and the Carbon Disclosure Project (CDP) found that voluntary reporting of greenhouse gas (GHG) emissions is helping to cut costs and improve relationships for businesses.

On November 30, 2010, a research study released by PwC and the Carbon Disclosure Project (CDP) found that voluntary reporting of greenhouse gas (GHG) emissions is helping to cut costs and improve relationships for businesses. The research, commissioned by the UK Department for Environment, Food and Rural Affairs (Defra), surveyed more than 150 large companies and found that over 50% said the benefits of GHG reporting outweigh the costs involved. Participating businesses said the emission reports initiated board level interest in environmental issues and drove environmental change company-wide. Furthermore, 72% said they now have a corporate climate change strategy designed to reduce GHG emissions.

Measuring emissions cost less than £50,000 (approximately CAD $80,000) for 65% of the companies surveyed and approximately 14% of companies calculated energy cost savings of more than £200,000 a year (approximately CAD $320,000) as a result of GHG accounting initiatives. Against quantifiable business costs and benefits, 60% of companies found there to be a net cost of reporting, but when considering wider benefits such as reputation and consumer awareness, 53% of companies said there was a net benefit. Companies also said the distinction between voluntary and mandatory reporting is already blurred, with schemes such as CDP becoming semi-mandatory.

Joanna Lee, Chief Partnerships Officer at CDP commented that: “Reporting drives the action of measuring, helping companies to identify opportunities for emission reductions. It also helps companies set meaningful and achievable reduction targets, as well as advancing better risk management and increased awareness of new market opportunities.”

The study has been submitted to the UK Parliament as part of a wider analysis commissioned to inform the government’s decision on mandatory reporting. A decision is expected in early 2011.

WCI issues Second Harmonization Package for GHG Reporting Requirements for Canadian Jurisdictions for Consultation

The Western Climate Initiative (WCI) issued for stakeholder review a second harmonization package for reporting requirements for Canadian jurisdictions.

On October 29, 2010, the Western Climate Initiative (WCI) issued for stakeholder review a second harmonization package for reporting requirements for Canadian jurisdictions that builds upon the previously released Harmonization of Essential Requirements for Mandatory Reporting in Canadian Jurisdictions with the WCI Essential Requirements for Mandatory Reporting and the EPA Greenhouse Gas Reporting Program (which contains the WCI’s proposal for harmonizing the existing WCI Essential Requirements for Mandatory Reporting for use in Canadian jurisdictions). Comments on the second harmonization package are due by November 24, 2010.

The second harmonization package contains the WCI’s proposal for new quantification methods for five remaining sources: magnesium production, electronics manufacturing, underground coal mining, petroleum and natural gas systems, and natural gas transmission and distribution. The proposed WCI essential requirements are consistent with those of the U.S. Environmental Protection Agency, but are appropriate for use in the Canadian jurisdictions. It is expected that WCI jurisdictions in Canada will implement the harmonized essential requirements through their reporting regulations.

The second harmonization package is available online link.

WRI Releases Greenhouse Gas Protocol for U.S. Public Sector

The World Resources Institute (WRI) and LMI have released a protocol entitled the “GHG Protocol for the U.S. Public Sector: Interpreting the Corporate Standard for U.S. Public Sector Organizations”. This protocol outlines how federal, state and local governments can account for their greenhouse gas (GHG) emissions and serves as a resource for U.S. public sector organizations implementing Executive Order 13514, which requires federal agencies to report and reduce their GHG emissions.

The protocol interprets and applies the GHG accounting principles established by WRI’s “Corporate Standard” to the unique structures of the public sector. The term “public sector” is a broad one that includes any organization owned, controlled or operated by the government and includes government agencies, school systems, quasi-governmental organizations and utilities, as well as public-private partnerships. The protocol aims to help managers of organizations at all government levels design and develop a GHG inventory. For organizations that have already created GHG inventories through voluntary or mandatory programs that are based on the Corporate Standard, the protocol provides useful information on key accounting issues.

The protocol was developed in response to the need of public organizations for tailored guidance on interpreting the Corporate Standard for the public sector. Public sector activities often involve shared resources between multiple organizations and leasing arrangements for buildings, vehicles, and land that can pose challenges attributing ownership or control of GHG emissions. For organizations that already monitor and report energy use and other environmental metrics, GHG emissions reporting represents a new and integrative performance indicator.

As stated by the WRI, the objectives of the protocol are as follows:

• To help public organizations prepare a GHG inventory that represents a true and fair account of their emissions, through the use of standardized approaches.

• To simplify the process and reduce the costs of compiling a GHG inventory.

• To provide public sector organizations with information for use in building an effective strategy to manage and reduce GHG emissions.

• To support voluntary and mandatory GHG reporting.

• To increase consistency and transparency in GHG accounting and reporting among public sector organizations and GHG programs.

While the protocol was developed primarily for U.S. government organizations, the principles contained in the protocol can be applied to governments worldwide since it is based on the internationally accepted Corporate Standard.

LINK

Background on the GHG Protocol Initiative

The Greenhouse Gas Protocol Initiative was launched in 1998 with the objective of developing internationally accepted GHG accounting and reporting standards. Designed as a multi-stakeholder partnership of businesses, non-governmental organizations (NGOs), and governments, it was convened by the WRI and the World Business Council for Sustainable Development (WBCSD).

The cornerstone document of the GHG Protocol Initiative is the GHG Protocol Corporate Accounting and Reporting Standard (Corporate Standard, 2004), which provides a step-by-step guide for quantifying and reporting GHG emissions. The Corporate Standard was designed to be program and policy neutral, allowing users the flexibility to adapt the core methodology and concepts to specific accounting and reporting needs. To provide guidance on how to build GHG policies, reporting programs, and tools based on the concepts of the Corporate Standard, two accompanying documents were developed:

• Measuring to Manage: A Guide to Designing GHG Accounting and Reporting Programs (2007); and

• Designing a Customized Greenhouse Gas Calculation Tool (2007).

U.S. EPA Issues Greenhouse Gas Reporting Requirements for Four Additional Emissions Sources

The U.S. EPA has added underground coal mines and industrial wastewater plants to the list of facilities that must track their greenhouse gas emissions and report them. In addition, magnesium production plants and industrial waste landfills will be required to submit annual reports on emissions, although no regulations to control emissions have been implemented yet.

The final rule for Mandatory Reporting of Greenhouse Gases from Magnesium Production, Underground Coal Mines, Industrial Wastewater Treatment, and Industrial Waste Landfills (40 CFR Part 98) was issued on June 28, 2010. This action amends the Greenhouse Gas Reporting Program (GHG Reporting Program) requirements. In addition, this action states the EPA’s final decision not to include ethanol production and food processing as distinct subparts in the GHG Reporting Program, as well as the final decision not to include suppliers of coal at this time. With this final rule, the EPA has taken action on all outstanding source categories and subparts from the April 2009 proposal for the GHG Reporting Program.

These new source categories will begin collecting emissions data on January 1, 2011, with the first annual reports to be submitted to the EPA by March 31, 2012.