GUIDE FOR DESIGNING MANDATORY GREENHOUSE GAS REPORTING PROGRAMS NEELAM SINGH AND KATHRYN BACHER CONTRIBUTING AUTHORS: RANPING SONG, MARY SOTOS, AND LEI YIN WRI.ORG | THEPMR.ORG Guide for Designing Mandatory Greenhouse Gas Reporting Programs i Design and layout by: Carni Klirs cklirs@wri.org Julie Moretti jmoretti@wri.org TABLE OF CONTENTS 1 Foreword 2 Acknowledgments 5 Executive Summary 11 CHAPTER I Introduction 15 CHAPTER II Determining Program Objectives 21 CHAPTER III Creating An Enabling Environment 39 CHAPTER IV Determining Program Structure and Requirements 75 CHAPTER V  Program Review 79 Appendices 79 Appendix A 82 Appendix B 86 Abbreviations 86 Glossary 89 Endnotes 90 References iv WRI.org | thePMR.org FOREWORD Measurement leads to understanding, which in turn The Guide for Designing Mandatory Greenhouse informs and spurs action. Gas Reporting Programs builds on both our organizations’ expertise in this field. WRI has years This is why a growing number of countries and sub- of experience in promoting standard methodolo- national regions have created programs that require gies for greenhouse gas accounting and measure- facilities and companies to measure and report ment at various national and sub-national levels their greenhouse gas (GHG) emissions. With these via the Greenhouse Gas Protocol. PMR supports insights in hand, policymakers are better equipped countries in the preparation and implementation to set strategies for scaled up greenhouse gas reduc- of climate change mitigation policies, including tions. Today, over 40 countries already mandate technical assistance on the monitoring, reporting, emitters to provide GHG emissions-related data. and verification systems that support those policies. This report, prepared jointly by the World Together, we have produced a resource that can Resources Institute and the World Bank’s Partner- support jurisdictions in designing a system that can ship for Market Readiness, provides comprehen- correspond with such a significant undertaking. sive, step-by-step guidance on designing mandatory Our hope is that an increasing number of govern- greenhouse gas reporting programs for policy- ments worldwide will develop strong and effective makers who wish to establish similar initiatives in greenhouse gas reporting programs for their juris- their jurisdictions. It is a useful reference for prac- dictions, creating a resource that facilitates titioners that draws on the lessons learned from decisionmaking and leads to meaningful and reporting programs around the world and enables nationally appropriate climate action. development of new programs to fulfill domestically relevant objectives. Andrew Steer Mr. Christian Grossmann President Director of Climate Change World Resources Institute World Bank Group Guide for Designing Mandatory Greenhouse Gas Reporting Programs 1 ACKNOWLEDGMENTS This report was prepared by Neelam Singh of the World Resources We thank our colleagues from the World Bank Group who reviewed Institute (WRI) and Kathryn Bacher, formerly an intern at WRI, in the report and provided helpful feedback including Xueman Wang, collaboration with the Partnership for Market Readiness (PMR). Pierre Guigon, Marcos Castro, Michael McCormick, and Harikumar The PMR financially supported the research and preparation of the Gadde. report. Pauline Kennedy of the PMR Secretariat provided substantive inputs and project oversight. We also thank WRI colleagues who reviewed this report and provided valuable feedback. These include Pankaj Bhatia, Cynthia We sincerely thank policymakers, representatives from reporting Cummis, Thomas Damassa, Wee Kean Fong, Taryn Fransen, Kelly programs, experts, and colleagues who shared their insights and Levin, David Rich, Ranping Song, Mary Sotos, Chris Weber, knowledge related to designing and implementing GHG reporting and Lei Yin. Special thanks go to WRI’s office of Science and programs through interviews, and those who reviewed the draft Research, particularly Laura Malaguzzi Valeri, who reviewed the document. These include colleagues from Australia, Chile, China, draft document, and Allison Meyer, who helped us through the the European Union, France, Germany, Mexico, New Zealand, publication process and coordinated the WRI review process. Norway, South Africa, Turkey, and the United States. Interviewees Further thanks go to Hyacinth Billings, Bill Dugan, Carni Klirs, Julie and reviewers are listed below. We would also like to acknowledge Moretti, and Mary Paden for their invaluable editorial, design and the input from the PMR Working Group for Measuring, Reporting publication support. We would also like to thank Gillian Duggin, and Verification (MRV Working Group). Reviewers from the MRV an independent consultant, for providing research in the early stage Working Group are also listed below. of the project. WRI would also like to thank the German Federal Ministry for the Environment, Nature Conservation, Building, and Nuclear Safety (BMUB) for supporting the publishing of this report. COUNTRY ORGANIZATION INTERVIEWEE AND/OR REVIEWERS Australia Clean Energy Regulator Lesley Dowling Australia Department of the Environment Zoe Lagarde Australia Department of the Environment Gareth Prosser (also a reviewer) Australia Department of Foreign Affairs and Trade Ken Xie (reviewer only) Chile Ministry of Energy Nicola Borregaard Chile Ministry of Energy Ignacio Fernandez Chile Ministry of Environment Juan Pedro Chile Ministry of Energy Marcos Serrano Ulloa China Sino Carbon Tang Jin (also a reviewer) China World Resources Institute Ranping Song (also a reviewer) European Union European Commission Marco Loprieno (also a reviewer) France French Agency for Environment and Thomas Gourdon (also a reviewer) Energy Management (ADEME) Germany German Emissions Trading Authority Doris Tharan (reviewer only) Mexico Secretariat of Environment and Natural Resources Luis Alfonso Munozcano Alvarez (SEMARNAT) Mexico SEMARNAT Soffia Alarcón Díaz (also a reviewer) Mexico EMBARQ Mexico Hilda Martínez Salgado 2 WRI.org | thePMR.org COUNTRY ORGANIZATION INTERVIEWEE AND/OR REVIEWERS New Zealand Ministry for the Environment Helen Plume (reviewer only) Norway Norwegian Environmental Agency Stian R. Andresen South Africa Department of Environmental Affairs Thapelo Lete South Africa Department of Environmental Affairs Brian Mantlana South Africa Department of Environmental Affairs Jongikhaya Witi (also a reviewer) Turkey Ministry of Environment and Urbanization Tugba Icmeli (also a reviewer) United States Environmental Protection Agency Kong Chiu (also a reviewer) United States ICF International (Consultant to the Deborah Harris Environmental Protection Agency) United States Environmental Protection Agency Sean Hogan United States Environmental Protection Agency Travis Johnson United States Environmental Protection Agency Katherine Sibold Guide for Designing Mandatory Greenhouse Gas Reporting Programs 3 4 WRI.org | thePMR.org EXECUTIVE SUMMARY Over the past decade, greenhouse gas (GHG) reporting programs have emerged at the regional, national, and subnational levels to provide information on emission sources and trends. As more jurisdictions plan to design and implement these programs, this report draws on the experience of 13 existing and proposed programs to guide policymakers and practitioners in developing GHG reporting programs. Businesses, industry associations, civil society, and funding agencies may also find this guide useful in facilitating their participation in the development of a reporting program. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 5 GHG reporting programs can be voluntary or Norway’s Emissions Trading System, South Africa’s mandatory. Unlike a voluntary program (in which proposed GHG reporting program, Turkey’s GHG participation is voluntary), a mandatory program Reporting Scheme, United Kingdom’s GHG Report- obligates entities (companies and facilities) to ing Program, and the United States’ GHG Reporting report their emissions at regular intervals. This Program. report focuses on mandatory reporting programs, but much of the information can be applied to the Establishing mandatory GHG reporting programs design of voluntary programs. is a resource- and time-intensive process that can be daunting for jurisdictions with limited capacity Mandatory reporting programs provide cred- and resources. It is, however, feasible to make a ible information about GHG emissions and meaningful beginning and obtain reliable informa- their sources, which can help establish a strong tion to serve local objectives. Jurisdictions can foundation to support mitigation policies. These implement GHG reporting programs in phases by programs also enable governments and industries starting with a few major sectors or large emission to understand their emissions-related risks and sources or with simpler methodologies. They can opportunities so they can efficiently focus on miti- incorporate additional components over time to gation activities that will produce the greatest GHG spread out the cost as they strengthen reporting reductions. Mandatory reporting programs bring capacity. For example, programs can start with a consistency and enhanced accuracy in reporting basic data management system and scale up or link entity-level emissions through rigorous calculation with other databases. An initial learning period and quality management methods. offers an opportunity to gradually enhance capacity within the program and among reporting entities, A reporting program encompasses several compo- raise awareness, build consensus around a set of nents, such as a secretariat or program administra- long-term objectives, and gain valuable experience tor, reporting entities, emissions accounting and to inform the next phase of the program. quantification methodologies, and a data manage- ment system. Four broad steps are necessary to establish a reporting program (Figure ES-1): ▪▪ Until now, little information has been available for policymakers on designing GHG reporting Determine program objectives. programs based on experiences and insights from existing programs. This report analyzes the objec- ▪▪ Create an enabling environment for program design and implementation. tives and design features across 13 programs and recommends options to consider in establishing a ▪▪ Determine program structure and requirements. ▪▪ new program. It is meant as a reference for policy- makers and practitioners developing economy-wide Conduct program review. or sector-specific reporting programs. Step 1: Determine Program Objectives The mandatory programs researched for this report Defining program objectives is the first step toward include: Australia’s National Greenhouse and developing a GHG reporting program because these Energy Reporting Scheme, California’s Mandatory objectives influence design decisions. Programs can GHG Reporting Program, Canada’s GHG Emissions modify their objectives over time as domestic policy Reporting Program, China’s proposed national evolves and the reporting entities’ capacity to report reporting program, European Union’s Emissions emissions improves. Reporting programs can serve Trading System, France’s Bilan d’Emission de GES, a wide range of objectives and individual programs Japan’s Mandatory GHG Accounting and Report- may pursue different objectives based on priorities ing System, Mexico’s National Emissions Registry, specific to their jurisdictions. 6 WRI.org | thePMR.org Figure ES-1 | Steps to Establish GHG Reporting Programs 1 2 3 4 Determine Program Create an Enabling Determine Program Conduct Program Objectives Environment Structure and Review Requirements ▪▪ Define objectives based ▪▪ Establish legal ▪▪ Define program coverage ▪▪ Focus on program’s on local context and architecture ▪▪ Provide emissions process, its substantive priorities ▪▪ Seek stakeholder quantification details and/or its impact engagement methodologies ▪▪ Determine details ▪▪ Build institutional, human resource, ▪▪ Lay out reporting requirements regarding who should conduct the review and ▪▪ Establish technical, and financial how the review is to be a reporting conducted capacity platform ▪▪ Define quality control and quality assurance procedures ▪▪ Create enforcement rules The following are common objectives of reporting Step 2: Create an Enabling Environment programs: Building a strong foundation for a reporting pro- ▪▪ Facilitate evaluation of national or subnational policies, identify new mitigation opportunities, gram requires ensuring a strong legal architecture; stakeholder support; and adequate institutional, and inform the development of new policies. human, technical, and financial resources. ▪▪ Support policies or regulations such as emis- sions trading schemes or carbon taxes that The legal architecture for a reporting program includes the law that mandates entities to report, require emissions data from individual entities and the accompanying rules and regulations specify- to operate in a transparent, credible manner. ing the implementation of the law. It is influenced by ▪▪ Enhance the overall quality of emissions data reported by entities. the jurisdiction’s legal system and method of estab- lishing rules and procedures. Mandatory reporting programs can be anchored in an existing law or in ▪▪ Promote transparency in GHG reporting and provide emissions-related information to stake- new legislation. Using an existing law may be quicker than developing new legislation. Existing laws, such holders. as those related to air quality, environmental protec- ▪▪ tion, and corporate sustainability, may be able to Improve and/or validate the national GHG support GHG reporting programs with little or no emissions inventory. amendment. A comprehensive legal review can help ▪▪ evaluate whether, and how, an existing law may Help reporting entities assess their climate be used. New legislation developed specifically to risks and opportunities. support the reporting program may be preferable in the absence of suitable existing legislation or if using existing laws would limit the effective design and operation of the reporting program. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 7 Adequate institutional, human, technical, and Figure ES-2 |  HG Reporting Program G financial capacity within the jurisdiction is neces- Design Elements sary to effectively design, implement, and sustain a reporting program. Programs can build on existing PROGRAM COVERAGE institutions or establish a new set of arrangements. Programs also require professionals with techni- Who reports what? cal knowledge to design and operate the program. Tasks that are human-resource intensive (e.g., data EMISSIONS QUANTIFICATION validation) or highly technical (e.g., data collection How to calculate and measure emissions? system development) can be outsourced. REPORTING PROCEDURES & SCHEDULES Financial capacity involves understanding the costs related to program design and implementation and What to report and how often? ensuring that a sufficient budget is available to start and sustain the program. Some major program REPORTING PLATFORMS & DATA DISCLOSURE costs are those related to staff, outreach, training, Where to report and who has access to reported developing and maintaining an emissions data information? management system, and facilitating compliance and enforcement. QUALITY CONTROL & ASSURANCE Stakeholder support and engagement during Who verifies what and how? program design, and development can secure buy-in, resolve conflicts, promote transparency, ENFORCEMENT and improve reporting entities’ preparedness and What measures to apply in case of noncompliance? compliance rates. Consultations can help establish a common understanding of program objectives and rationale, inform the technical details and rules of the program, and provide training so entities can Program coverage report accurately. Establishing a plan that explains why to engage, whom to engage with, when to GHG reporting programs can determine their scope engage, what issues to engage on, and how to by defining: engage can improve the effectiveness of stakeholder engagement throughout the design and implemen- ▪▪ Whether the program is applicable at the facility and/or company level ▪▪ tation of the program. Whether only emissions from sources con- Step 3: Determine Program Structure trolled by the reporting entity (direct emis- sions) must be reported, or if reporting entities and Requirements must also report emissions that are the conse- Designing a reporting program requires develop- quence of their activities (indirect emissions) ▪▪ ing rules and requirements for key design ele- ments to ensure reliability, consistency, accuracy, Applicability requirements (e.g., annual emis- transparency, and completeness of the data. These sions or energy consumption threshold) to de- design elements include program coverage, emis- termine which entities must report, and when sions quantification methodologies, reporting they can cease reporting procedures and schedules, reporting platforms and data disclosure, quality control and assurance, and enforcement (Figure Es-2). Various options ▪▪ Which GHGs reporting entities should report Factors such as program objectives, cost to report- under each program design element allow the ing entities, and administrative burden influence flexibility to address context-specific objectives and decisions related to program coverage. circumstances. 8 WRI.org | thePMR.org Emissions quantification Quality control and quality assurance Programs provide guidance on how reporting Programs can employ various measures to enhance entities should calculate their emissions from quality along the entire chain of data collection, various sources. Emissions can be quantified quantification, monitoring, reporting, and veri- using calculation-based or direct measurement fication. They can facilitate quality assurance by methods. Calculation-based methods are based on prescribing calculation and monitoring methodolo- measurements of activities that drive emissions gies, designing data management systems, and (such as the amount of fuel consumed) and emis- undertaking compliance assistance activities, such sion factors (such as the GHG content of fuels). as training. To ensure quality, programs can either Direct measurement involves directly measuring review and audit submissions themselves or require the emitted GHGs. Programs can provide report- third-party verification. Typically, programs require ing entities with a technical guide on quantification reporters to submit self-certified information and methodologies for different emission activities then conduct some level of review themselves even so they can calculate emissions from individual when the submissions are verified by a third-party. sources. The methodologies are often categorized in Factors influencing the choice of quality control tiers, or data quality levels, of generally increasing and assurance measures include program objec- accuracy. Higher tier methods are usually required tives, the cost for the program administrator and for major emission sources. Programs can decide reporters, and capacity within the program to take how prescriptive the methodologies should be given on a verification role. their objectives and the capacities of their reporting entities. Enforcement Enforcement measures are necessary to ensure that Reporting procedures and schedules all entities report their emissions accurately, submit Reporting programs define the type of information them on time, and perform revisions when needed. entities should submit, and specify related details Programs can apply increasingly strict options if such as frequency of reporting and records to be reporters fail to comply, for example, first, giving a retained. This helps ensure consistency across firm deadline; next, imposing monetary fines; and reporters, assess compliance, and obtain relevant finally, applying legal penalties. data to realize program objectives. Step 4: Conduct Program Review Reporting platforms and data disclosure Periodic review helps evaluate the program’s Program administrators also need to develop a effectiveness and make modifications if necessary. data management system to collect the reported A review process lends credibility to the program information. Data management systems can range by providing an opportunity to seek feedback from from simple spreadsheets to sophisticated web- stakeholders, identify good practices as well as based systems. The appropriate system can be inefficiencies, and assess the program’s impact. selected based on factors such as the number of Policymakers can determine who should conduct reporters; the time and resources needed to design the review and how often. Reviews can focus on the and develop the system; associated training needs; program’s process (e.g., administrative efficiency), security and data protection features; and potential its substantive details (e.g., whether the objectives to scale it up to include more reporters, GHGs, or need to be revised), and/or its impact (e.g., number emission sources. of reporters). Reporting programs should state what kind of infor- mation will be disclosed publicly. When making this decision, programs should seek a balance between promoting transparency and protecting confidential- ity within the bounds of local laws governing disclo- sure of commercially sensitive information. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 9 CHAPTER I INTRODUCTION Measuring greenhouse gas (GHG) emissions is crucial to understanding the emission trends of companies and facilities so that targeted and effective mitigation strategies can be developed. GHG reporting programs provide a platform to gather emissions data from these entities and help mainstream the measurement and reporting of GHG emissions. Emissions data are needed to understand how to influence the emissions trajectories of different sectors, support policies such as emissions trading schemes that require emissions information from facilities, set realistic policies and evaluate their effectiveness, help reporting entities assess their climate risks and opportunities, and provide information to stakeholders. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 11 A reporting program basically comprises a secre- broad climate and energy strategy can spread the tariat or program administrator, reporting entities, resources needed across multiple policies and agen- emissions accounting and quantification method- cies. A new program is more easily justified if it can ologies, data management systems, and review and serve multiple policies or agencies. verification methods. The Guide for Designing Mandatory Greenhouse Reporting programs can be voluntary or manda- Gas Reporting Programs, a collaboration between tory. Voluntary programs, in which participation by the Partnership for Market Readiness and the entities to report their GHG emissions is voluntary, World Resources Institute, offers guidance for may be developed by the government, nongovern- policymakers and practitioners in developing mental organizations, or business associations. Pro- mandatory GHG reporting programs. It also pro- grams with voluntary participation include the Bra- vides information to stakeholder groups that wish zil GHG Protocol program, The Climate Registry, to participate effectively in the development and and CDP, a global initiative to promote emissions design of these programs. Stakeholders may include disclosure by companies. Mandatory programs are the entities that expect to be regulated, industry developed by the government and require regulated associations, environmental and academic groups, entities to estimate and report their GHG emis- multilateral organizations, and funding agencies. sions at regular intervals. Examples of mandatory programs include Australia’s National Greenhouse The report is meant as a reference for policymak- and Energy Reporting Scheme, the European Union ers and practitioners developing economy-wide or Emissions Trading System, Turkey’s GHG Report- sector-specific programs that address national and ing Scheme and the GHG Reporting Program in the subnational priorities and objectives. It highlights United States. the major design elements of a reporting program and discusses various factors influencing decisions Voluntary programs help entities become familiar under each element. Where relevant, the report with calculation methodologies, emissions data highlights initial steps that jurisdictions with lim- management procedures, and reporting protocols. ited resources can take to make tangible progress Jurisdictions considering mandatory programs toward establishing reporting programs. Although often capitalize on the GHG quantification and the emphasis is on the design of a mandatory reporting knowledge of entities that participated reporting program, many aspects of the report are in voluntary initiatives. Mandatory programs are relevant for developing voluntary programs.1 likely to be more prescriptive in their requirements, which brings greater consistency and accuracy The mandatory programs researched for the report (Defra 2010; Gray and Shimshack 2011; U.S. EPA include (Figure 1): ▪▪ 2008). Australia (National Greenhouse and Energy GHG reporting programs establish a monitor- Reporting Scheme) ing, reporting, and verification (MRV) system for facilities or companies, which can inform national ▪▪ California (Mandatory GHG Reporting Program) or subnational mitigation policies and goals. GHG reporting programs should be well-aligned with ▪▪ Canada (GHG Emissions Reporting Program) ▪▪ national and subnational objectives and rooted in domestic priorities. China (proposed national reporting program) Developing countries with a lack of reliable emis- sions data can particularly benefit from reporting ▪▪ European Union (EU Emissions Trading System) programs, but they are often challenged in develop- ▪▪ France (Bilan d’Emission de GES) ▪▪ ing sustainable programs because of insufficient resources and inadequate capacity. Embedding an Japan (Mandatory GHG Accounting and emissions reporting program within a jurisdiction’s Reporting System) 12 WRI.org | thePMR.org ▪▪ Mexico (National Emissions Registry) these interviews, as well as from program websites, ▪▪ official documents, and a wider literature review. Norway (Emissions Trading System) An attempt has been made to identify design ▪▪ South Africa (proposed national GHG reporting program) options and provide practical recommendations while recognizing that reporting programs are context specific. ▪▪ Turkey (GHG Reporting Scheme) ▪▪ This report is organized into four chapters. Chapter United Kingdom (GHG Reporting Program) 2 describes the objectives that mandatory reporting ▪▪ United States (GHG Reporting Program)2 programs can fulfill. Chapter 3 discusses creating an enabling environment for program design and Hereafter, the existing and proposed programs are implementation. Chapter 4 focuses on program referred to by their respective jurisdictions irrespec- structure and design, including coverage, emissions tive of their formal name. quantification, reporting requirements, reporting platforms and data disclosure, quality control and These programs were chosen because they repre- assurance, and enforcement. Chapter 5 concludes sent a range of experiences and insights from older, with a discussion of how a program can adopt a newly established, and proposed programs, and regular review process to ensure that it remains from industrialized as well as developing countries. relevant and effective. In each chapter, key consid- We interviewed staff members from these programs erations or recommendations for policymakers are either specifically for this report or for a prelimi- identified. A checklist of questions for policymakers nary publication on this topic.3 The guidance given is also provided for each design element to guide here is based on information synthesized from the decisionmaking process. Figure 1 | M  andatory GHG Reporting Programs Researched for this Report CANADA EUROPEAN UNION UNITED STATES JAPAN CHINA MEXICO AUSTRALIA SOUTH AFRICA Active Reporting Program Proposed Reporting Program Guide for Designing Mandatory Greenhouse Gas Reporting Programs 13 14 WRI.org | thePMR.org CHAPTER II DETERMINING PROGRAM OBJECTIVES Defining program objectives is the first step toward developing a mandatory greenhouse gas reporting program because the objectives will determine many design decisions. Objectives can be short term or long term. They should be reviewed and modified over time as policy and business contexts evolve and as reporting entities’ capacity improves. Reporting programs can serve multiple objectives. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 15 Some of the major objectives of setting up a gation in a certain sector may use data from facili- reporting program are to: ties, along with other information, to gain a better ▪▪ understanding of the range of efficiencies across the Facilitate policymaking by analyzing emissions sector and establish a realistic emissions intensity data at different resolutions (entity, sector, or goal. Annual reporting over time can indicate the economy-wide). impact of the policy in each entity’s emissions ▪▪ Support policies and regulations, such as emis- sions trading schemes, which require detailed trajectory. This objective has major implications for the source-level data. program’s design including the types of emissions ▪▪ Improve GHG data quality to support policy objectives. to be reported, the emissions threshold (by sector or economy-wide), as well as the kind of data that ▪▪ must be collected to support meaningful policy Provide information to stakeholders to facilitate formulation (e.g., total emissions versus emissions their involvement. per unit of output) (see Chapter 4). ▪▪ Inform national GHG inventories under the United Nations Framework Convention on The Australian reporting program has identified informing policy formulation as one of its objectives Climate Change. (Australia, Department of the Environment 2014a). ▪▪ Help reporting entities assess their climate risks and opportunities. The GHG data collected through that reporting program is the basis of emissions projections to inform climate change policy. The program also col- Jurisdictions may pursue different objectives for a lects data on energy production and consumption, reporting program based on their priorities (Table 1). which informs energy efficiency policy development For instance, while one jurisdiction may want the (Prosser 2015a). The newly established Mexican reporting program to support an emissions trad- reporting program plans to use the information ing scheme, another may use the program mainly gathered to develop mitigation policies (Alvarez and to improve data quality and provide information Alarcon-Díaz 2014). to stakeholders. To promote sustainability, the long-term objectives of reporting programs should 2.2 Support Policies and be aligned with key strategic policies in the juris- Regulations That Require diction, such as national climate change policies, energy policies, low-carbon roadmaps for the Detailed Source-Level Data economy, and mitigation goals. Reporting programs are the foundation of certain policies, such as GHG emissions trading programs Some common examples of program objectives are and certain carbon taxes, which require source-level discussed in Chapter 2.1–2.6. data from individual entities to operate in a trans- parent and credible manner. The Californian and 2.1 Facilitate Policymaking Through EU reporting programs were both designed to sup- port emissions trading schemes (European Com- the Analysis of Emissions Data at mission 2014a; CARB 2013a). Mexico’s program is Different Resolutions meant to be the first step toward the development Reliable, detailed data from a mandatory program of a carbon market (Alarcon-Díaz 2015a). can help policymakers formulate comprehensive sector or economy-wide policies and actions to When planning and designing market-based reduce emissions. Emissions data analyzed over instruments, policymakers need GHG emissions time and at different resolutions—entity, sector, or data gathered by reporting programs to make economy-wide —can help evaluate existing policies informed decisions, such as which sectors of the and actions, identify new mitigation opportunities, economy should be covered and what emissions and inform the development of new policies and threshold to use to determine policy coverage. actions. For example, governments pursuing miti- Reporting programs are fundamental to determin- 16 WRI.org | thePMR.org ing an entity’s liability under emissions trading and design elements related to calculation and monitor- carbon tax schemes. For example, in an emissions ing, data quality, and verification (see Chapter 4). trading scheme, a liable entity is required to sur- render an emissions allowance for each metric ton New programs in jurisdictions with little experience of CO2 equivalent (tCO2e) emitted. The reporting in emissions reporting can take incremental steps system verifies each entity’s annual emissions and toward improving the quality of reported data, such determines the number of allowances that must be as training reporters, or beginning with simpler surrendered. calculation methods using easily available default emission factors then adopting more rigorous Implications for design elements include deci- methods over time. For example, one of the objec- sions regarding coverage, emissions calculation tives of both the Mexican and Turkish reporting and monitoring methodology, and verification (see programs is to improve the quality of their GHG Chapter 4). GHG reporting programs supporting emissions data (Alvarez and Alarcon-Díaz 2014). emissions trading and carbon tax schemes pro- Their emphasis in the initial period will be to build vide a uniform methodology to calculate, report, capacity among reporters, service providers, and the monitor, and verify emissions. This is essential to programs themselves. building trust in carbon markets, which themselves depend on publicly available, reliable data for their 2.4 Provide Information smooth and efficient functioning. Further, reporting to Stakeholders systems can provide reliable emissions data at the entity level to determine baseline emissions and, This objective promotes transparency in GHG where relevant, inform the allocation of allowances reporting and is commonly included in reporting or tax credits and exemptions. The lack of reliable programs. In addition to policymakers, other stake- emissions data can adversely affect trading and tax holders such as investors, environmental organiza- schemes. For example, in the European Union, after tions, companies, researchers, customers, and the verified emissions data were released at the end of general public, are interested in GHG emissions the EU Emission Trading Scheme’s first compliance information. These groups may seek emissions data cycle in 2006, carbon prices fell because it became at different resolutions for a range of purposes. clear that a lack of accurate data when the scheme For example, they may use these data to inform began had resulted in an initial overallocation of investment decisions, support policy analysis and emission allowances (European Commission 2014b). advocacy campaigns, or inform customer choices. Almost all reporting programs share and disclose reported data either at an entity level, and/or in an 2.3 Improve Data Quality aggregated form for use by stakeholders (also see and Consistency Reporting programs may also be designed to improve the overall quality of emissions data submit- ted by reporting entities. Even if entities in a region had been calculating and reporting their emissions under a voluntary program, a mandatory program with standardized calculation methodologies and verification systems can increase stakeholder confi- dence in the reported data. Improving data quality and consistency is a crucial first step toward achiev- ing other program objectives, such as supporting emissions trading schemes and informing national inventories. Reporting programs seek to enhance data quality through several ways, such as reviewing and improving quantification methodology, using updated emission factors, or requiring better moni- toring. This objective is likely to influence program Guide for Designing Mandatory Greenhouse Gas Reporting Programs 17 Chapter 4.4). For example, data from the Australian 2.6 Help Reporting Entities Assess program is used by the Australian Bureau of Statis- Their Climate Risks and Opportunities tics, to produce yearly energy statistics that monitor changes in the supply and use of energy over time Reporting entities themselves can derive signifi- (Prosser 2015a). cant benefits from the exercise of quantifying their emissions. Reporting programs can support enti- Programs need to find a balance between reporters’ ties in measuring their emissions, which is the first confidentiality concerns about disclosing emissions- step toward managing emissions over time. GHG related information and stakeholders demand for measurement and monitoring helps entities identify transparency. Stakeholders may seek access to data major sources of emissions and assess their climate with sufficient detail to conduct meaningful analysis risk. Risks may include impact on entities’ opera- and inform their decisions, whereas entities may tions from factors such as fluctuating energy prices want to publicly disclose only aggregate emissions. and shifting consumer demand and consumption This objective has implications for program design; patterns in response to growing awareness about for example, in terms of specifying the level of dis- climate change (Kauffmann, Less, and Teichmann aggregation for emissions data and seeking greater 2012). Measurement also enables entities to transparency in the use of calculation methodolo- develop mitigation strategies, prioritize abatement gies (see Chapter 4). opportunities, and remain competitive in a carbon- constrained world. Tracking and reporting GHG emissions can lead entities to a better understand- 2.5 Inform National Inventories ing of their emissions profile, which can drive them Under the UNFCCC to invest in more efficient technology, drive innova- Countries that are party to the United Nations tion, and identify new business opportunities that Framework Convention on Climate Change involve a lower carbon footprint. Reporters can also (UNFCCC) may set up mandatory reporting pro- benchmark themselves based on reported data from grams to improve their national inventory esti- other entities—either at an entity level or aggre- mates, as is done with the Australian, Canadian, gated at a sector level. Norwegian, and U.S. programs (Environment Canada 2011; CER 2012a; Anderson 2014). Source- This objective has design-related implications in level data from entities can be used to improve terms of including elements that would assist enti- accuracy and/or provide validation to national ties in accurately and consistently measuring and emissions estimates. This can enhance the qual- tracking their emissions and related performance ity of national inventories, thus strengthening indicators. For example, programs can provide the foundation for subsequent mitigation efforts detailed guidance on what to measure, how to mea- (Singh, et al. 2014). For example, the Australian sure it, and what to track and report (see Chapter 4). reporting program collects data in a form readily useful for the national inventory. Entities must The UK program recommends that reporters set a provide enough information to classify the data into base year and a target of their choice to track their categories, such as industrial process emissions emissions. The target can be an absolute reduction and fossil fuel combustion, that are relevant for the in emissions compared with the base year, or an national inventory (Singh, et al. 2014). intensity target based on an appropriate normal- izing factor (e.g., metric tons of manufacturing However, emissions data from reporting programs output). The program also recommends that can only be used in national inventories under reporters develop at least three key performance certain conditions, for example, when sources under indicators associated with their environmental both systems are defined in the same way (Singh, et impacts (Defra 2013). They should report their al. 2014). To support this objective, program design progress against targets annually and provide infor- needs to be consistent with the national inventory. mation on measures implemented to reduce their This influences decisions related to threshold defini- GHG emissions. The French program was also set tions, the sectors and emission sources to be covered, up to help reporters understand their climate risks calculation methods, and the level of disaggregation and opportunities. required in reported data (see Chapter 4). 18 WRI.org | thePMR.org Table 1 | Objectives of Various GHG Reporting Programs European United United Program Objectives Australiaa California Canada Mexico Turkey Union Kingdom States Facilitate policymaking through the analysis of emissions data Support policies requiring b detailed source-level data Improve data quality and consistency Provide information to stakeholders Inform national inventories Help reporting entities assess their climate risks c and opportunities Notes: a. The Australian program has another objective: to avoid duplication of similar reporting requirements in the states and territories (CER 2014a). b. This is no longer a stated objective given the repeal of the carbon tax in 2014 (Australia, Department of the Environment 2014b). c. This is not an explicit objective but it is expected that the program supports this objective. Source: Compiled from country program websites by interpreting and synthesizing stated program objectives and from information obtained through program staff interviews. Programs may also implicitly support other objectives. PROGRAM OBJ ECTIVES Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Identifying GHG reporting program ob- jectives is the first step because objectives ▪▪ Have domestic priorities been considered in determining the program objectives? ▪▪ influence subsequent design decisions. GHG reporting programs can serve a ▪▪ Have objectives been defined for short-term and long-term time frames? wide range of objectives. The choice of objectives will depend on national and subnational priorities and context. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 19 20 WRI.org | thePMR.org CHAPTER III CREATING AN ENABLING ENVIRONMENT Strong legal architecture, adequate institutional, human, technical, and financial capacity, and regular stakeholder engagement provide a robust foundation for designing and implementing reporting programs. An early focus on these enabling factors can help a program reach its full potential and achieve the stated objectives. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 21 3.1 Legal Architecture able option. For example, one of the reasons Aus- tralia opted for new legislation was that no existing The legal architecture includes the law that man- legislation supported the program’s objective of dates entities to report their emissions, and the streamlining reporting and overriding various state accompanying rules and regulations specifying the reporting laws with a national program. arrangements to implement the law (Figure 2). A well-defined legal architecture is central to a man- Using existing legislation may allow the reporting datory reporting program because it establishes program to take advantage of established systems, the obligation for entities to report, and provides procedures, compliance, and enforcement mea- a basis for the institutional, administrative, and sures. However, new legislation can also align with compliance and enforcement arrangements for the related laws and use existing systems and proce- program (also see Chapter 4). dures. The legal review can help identify legislation with reporting obligations that the GHG reporting 3.1.1 Existing versus new legislation program could adopt or build upon to minimize Policymakers can either anchor the program in additional burden on reporting entities. For an existing law, with an amendment if neces- example, Mexico allows entities from energy and sary, or develop new legislation. A comprehensive industry sectors reporting under the national pol- legal review may have to be undertaken to assess lutants database system (Registry of Emissions and whether, and how, existing legislation may be used Transfer of Pollutants) to continue to report at the to establish a mandatory GHG reporting program facility level, while outlining corporate-level obliga- (Witi 2015). Existing laws in environmental protec- tions for entities from other sectors (Alarcon-Díaz tion, air quality, pollution control, and corporate 2015b). Australia adopted the existing reporting sustainability can support GHG reporting pro- obligations for electricity generators (Prosser grams. Alternatively, program administrators can 2015a). It is also important to identify legisla- develop new legislation to support the reporting tion that could influence the requirements of the program. Table 2 lists the laws underpinning a few mandatory reporting program, such as legislation mandatory reporting programs. related to data confidentiality, access to informa- tion, or competitiveness (Witi 2015). Many factors, including the program’s objectives, buy-in from reporting entities, political context, 3.1.2 Laws and regulations available resources, and legal and institutional The legal system in individual jurisdictions will capacity, can help program designers decide which influence the specific legal arrangements supporting option to pursue. Implementing the program using GHG reporting programs. The legal architecture to an existing law even if it requires an amendment, is support the reporting program normally has several likely to be quicker and more cost-effective, com- layers, depending on the country, which include pared with developing new legislation. However, the primary legislation, secondary legislation or if this approach limits the scope of the program, regulations, and accompanying rules and guidelines establishing new legislation may be a more desir- established by the program administrator and Figure 2 | E nabling Factors Institutional, human resource, Legal architecture Stakeholder engagement technical, financial capacitiy 22 WRI.org | thePMR.org Table 2 | Laws Underpinning Mandatory Reporting Programs EXISTING/ NEW JURISDICTION LAW SOURCE LEGISLATION Australia National Greenhouse and Energy Reporting Act, http://www.comlaw.gov.au/Details/C2007A00175 New 2007 California California Global Warming Solutions Act http://www.leginfo.ca.gov/pub/05-06/bill/asm/ New (AB 32), 2006 ab_0001-0050/ab_32_bill_20060927_chap- tered.pdf Canada Canadian Environmental Protection Act, 1999 http://www.ec.gc.ca/lcpe-cepa/default. Existing asp?lang=En&n=CC0DE5E2-1&toc=hide European Directive No. 2003-87-EC establishing a scheme http://eur-lex.europa.eu/legal-content/EN/ New Union for greenhouse gas emission allowance trading TXT/?uri=CELEX:32003L0087 within the Community, 2003, and its revisions France Grenelle 2 Act, 2010 http://www.developpement-durable.gouv.fr/IMG/ New pdf/Grenelle_Loi-2_GB_.pdf Japana Act on Promotion of Global Warming Counter- http://www.cas.go.jp/jp/seisaku/hourei/data/ Existing measures, 1998 APGWC.pdf Mexico General Climate Change Law, 2012 http://www.inecc.gob.mx/descargas/2012_lgcc. New pdf South Africab National Environmental Management Act: Air http://www.saflii.org/za/legis/consol_act/ Existing Quality Act (Act 39 of 2004) nemaqa2004454.pdf Turkey Regulation on Monitoring, Reporting and Verifi- New cation of Greenhouse Gas Emissions, 2012 United Climate Change Act, 2008; Companies Act, 2006 http://www.legislation.gov.uk/ukpga/2008/27/ Existing Kingdom pdfs/ukpga_20080027_en.pdf United States Clean Air Act, 1970 http://www.epw.senate.gov/envlaws/cleanair.pdf Existing Notes: a. The original 1998 Act did not include provisions for the GHG mandatory reporting program, which were introduced in the revision of the Act in 2005 (enforced in April 2006). b. Proposed reporting program. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 23 other relevant authorities. The primary legislation agreements.” In Australia, the National Greenhouse establishes the obligation to report, the institutional and Energy Reporting Act 2007 (amended), along arrangements, the enforcement provisions, and sets with its regulations and the National Greenhouse limits beyond which the detailed regulations and and Energy Reporting (Measurement) Determina- rules cannot go. The secondary legislation is often tion, form the legislative framework of the country’s used to specify the details of the program. These reporting program (Australia, Department of the details may also be specified in rules and guide- Environment 2014c). The Measurement Deter- lines established by the administrator, which also mination provides methods for calculating GHG provide practical interpretation of the law. emissions. The Act identified the greenhouse and energy data officer as the program administrator, For instance, Mexico’s General Climate Change Law but in 2012 the function was transferred to a new requires that the environment ministry (SEMAR- agency, the Clean Energy Regulator, which is now NAT) develop regulations that define the reporting responsible for administering legislation to reduce threshold and specify other program design ele- emissions and increase the use of clean energy ments such as GHGs to be reported; calculation (CER 2014b). methodologies; a monitoring, reporting, and verifi- cation system; and links with other reporting pro- The time needed to pass a bill, develop regulations, grams. The law also legally obliges covered entities and institute the legal and regulatory framework to report emissions to the program administrator varies in different jurisdictions and needs to be fac- (Kadas 2014). SEMARNAT published the reporting tored into the timeline to establish a GHG report- regulations in October 2014. The technical require- ing program. For example, in some jurisdictions ments related to quantification methodologies (e.g., an impact assessment may need to be completed global warming potential values to be used, GHGs to demonstrate the net benefit of the proposed to be reported, emission factors to be used) will be requirements before the new law is passed. published in secondary laws, called the “secretarial LEGAL ARCHITECTURE Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ The jurisdiction’s legal system will influence the legal architecture governing the report- ▪▪ Has a comprehensive assessment been done to ascertain if an existing law can support ing program. the reporting program? ▪▪ Policymakers can either anchor the report- ing program in an existing law or develop ▪▪ Did the assessment consider how other leg- islation (e.g., related to competitiveness and new legislation based on factors such as confidential business information) might program objectives, available resources, and interact with the legislation supporting the legal and institutional capacity. reporting program? ▪▪ The legal architecture may include the primary legislation, mandating the relevant entities to report, and secondary legisla- tion, with rules and regulations specifying the arrangements to implement the law and establish the reporting program. ▪▪ Establishing key laws and regulations can be a lengthy process and policymakers should budget sufficient time to finalize the legal architecture. 24 WRI.org | thePMR.org 3.2 Capacity Building rules for reporting and verification. Program administrators collect, analyze, synthesize, and The presence of appropriate institutional, human present the reported data; provide monitoring resource, technical, and financial capacity among and reporting guidance; set verification and potential reporters and program administrators can accreditation guidelines to ensure the quality provide a strong foundation on which to establish a of data and may also verify the data; provide reporting program. An increased level of prepared- training to reporting entities; conduct outreach; ness among all key players is more likely to lead to and undertake compliance measures. ▪▪ a program that is well-designed and successfully implemented. Strengthening institutional, human, REPORTING ENTITIES: These entities are respon- technical, and financial capacities can be one of the sible for providing accurate, reliable data, and first areas of focus for jurisdictions with limited may employ inventory developers and verifiers resources. to facilitate this task. 3.2.1 Institutional capacity ▪▪ AUDITORS AND VERIFIERS: These professionals conduct audits in accordance with the verifica- Institutional capacity refers to the existence of tion and accreditation guidelines. Professionals effective institutions and agencies with a mandate doing energy audits or air quality regulatory to lead or support the design, implementation, and audits in a jurisdiction can acquire expertise administration of the reporting program. Transpar- related to GHG audits. Program administrators ent and effective institutional arrangements can may also perform the emissions auditing and verification function. ▪▪ help to streamline program administration, effi- ciently deploy resources to achieve program objec- ACCREDITATION AGENCIES: These agencies pro- tives, and result in long-term sustainability of the vide an independent assessment of verifiers’ program. This requires a clear understanding of the technical competence—in emissions accounting various functions needed to support the program, as well as in calculation and measurement of deciding whether existing institutions can under- GHGs from specific sources or sectors—and im- take these roles or if new institutions are needed, partiality to carry out verification in accordance and defining how they will interact with each other. with the program rules. The following entities can facilitate the develop- ▪▪ JUDICIAL COURTS AND AGENCIES: Their role is to resolve disputes and exercise legal penalties in ment and implementation of reporting programs by an impartial manner to enforce the law. Accred- undertaking the functions discussed below: ▪▪ itation agencies may also take the appropriate LEGISLATIVE OR LAWMAKING BODY: It develops action to respond to any complaints against the legislation or amends the existing law to verifiers. mandate reporting. Lawmakers may draft the detailed rules to govern the program, or may Jurisdictions may build on existing institutions or outline the broad principles and objectives of the establish a new set of arrangements to design and program and direct the program administrator administer the GHG reporting program (Table 3). to develop the detailed rules. An arrangement in This decision can be based on factors such as the which distinct entities carry out the functions of cost effectiveness of the selected option; required making and administering the rules can promote skills, systems, and resources; and the broader legal good governance and enhance credibility. system. Policymakers can start by mapping existing ▪▪ ADMINISTRATING BODY: This body is tasked with implementing the program as per the rules es- institutions in terms of their capacity and expertise to support or lead the program. They can identify tablished by the legislation and regulations. In gaps as program planning and design progresses. some programs, the administrating agency may also be responsible for developing the detailed Guide for Designing Mandatory Greenhouse Gas Reporting Programs 25 Desk research, stakeholder consultations, targeted reports to MOE and the Ministry of Economy, Trade, questionnaires, interviews, and workshops are and Industry (METI) (Sekiya 2007). some tools that can facilitate a comprehensive assessment of existing institutions relevant to GHG GHG reporting programs usually pertain to activi- reporting and their administrative and technical ties under several departments or ministries such capacities. as environment, climate, energy, industry, treasury, and commerce. Therefore, even when a single Multiple agencies can also share responsibility to agency designs and/or implements the program, administer the program. For example, in Japan, the it may be helpful for all related departments to Ministry of Environment (MOE) acts as the program be engaged from the outset. This may be done administrator, but different ministries manage through a working group with representation different industry sectors and reporters submit their from relevant departments and agencies, and/or GHG reports directly to the appropriate ministry other stakeholders. For example, in South Africa, for their sector (Singh and Mahapatra 2013) (Figure the Department of Environmental Affairs is 3). Individual ministries compile and submit GHG coordinating with other departments such as the Department of Energy and the Department Table 3 | Institutional Arrangement Options for Reporting Programs INSTITUTIONAL ADVANTAGES CHALLENGES EXAMPLES ARRANGEMENT Mandate an existing agency with data Existing technical expertise and administrative capacity to ▪▪ Incapacity some countries, existing may be quite Environment Canada, South Africa’s Department of collection and verification manage the reporting program limited Environmental Affairs (DEA), experience ▪▪ May need to adapt, expand, or work closely U.S. Environmental Protection Agency (EPA) are existing with other agencies to agencies implementing satisfactorily carry out new reporting programs responsibilities Establish a new agency Ability to establish institution Likely to involve higher Australia established a new or a new branch in an with most effective design upfront cost and capacity agency, the Clean Energy existing agency building Regulator, to administer its reporting programa Multiple existing agencies with data ▪▪ Accommodates existing institutional structures ▪▪ Requires clear division of roles, decisionmaking ▪▪ The Japanese and United Kingdom reporting programs collection and verification ▪▪ Spreads out upfront invest- and authority to minimize follow this model experience share ment potential conflicts ▪▪ The EU program requires EU responsibility ▪▪ Taps widespread expertise ▪▪ Needs a well-defined Member States to facilitate ▪▪ Anmoreefficient option where than one agency is process for coordination and information sharing coordination if multiple competent authorities are already involved in data col- involved in monitoring and lection and monitoring reporting of GHG emissions (European Commission 2012c) Note: a. An existing government department developed and administered the Australian reporting program for the first five years. 26 WRI.org | thePMR.org Figure 3 | Institutional Structure for GHG Reporting in Japan Reporters ▪▪ Submit GHG reports to respective ministries Responsible Ministries ▪▪ Collect and compile data from reporters ▪▪ Submit data to Ministry of Environment (MOE) and Ministry of Economy, Trade, and Industry (METI) MOE and METI ▪▪ Compile and publish GHG data received from different ministries Source: Singh and Mahapatra 2013. of Mineral Resources, which have the authority Allocating adequate budget and financial resources to collect energy and fuel data respectively from to the responsible agency(ies) is also critical to potential reporters. It is signing a memorandum of enable them to successfully carry out their functions understanding with each department to formalize (see Chapter 3.2.3). the coordination process (Witi 2014). INSTITUTIONAL CAPA C ITY Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ A clear understanding of various functions needed to design and support the program ▪▪ What roles and functions need to be under- taken to develop and implement the report- is an important first step toward building ing program? ▪▪ institutional capacity. Factors such as cost effectiveness, required ▪▪ Have existing agencies been mapped to assess how they can support the reporting skills, systems and resources, and the program? broader legal system, can help designers decide whether existing institutions can ▪▪ Have clear roles and responsibilities been articulated for agencies that may be involved perform the necessary functions, or new in- in program administration? stitutions are needed. Each approach has its associated benefits and challenges depend- ing on the local context. ▪▪ When multiple agencies are involved in de- signing and implementing the program, clear division of roles and decisionmaking author- ity, a transparent process for information sharing, and allocating adequate resources can minimize coordination challenges. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 27 3.2.2 Human resource and technical capacities covers about 750 facilities and has about 12 staff members—mostly with graduate degrees (Singh and A mandatory reporting program requires human Mahapatra 2013; CARB 2014a).Turkey’s program resources and technical capacity to design and oper- covered about 600 facilities in its first reporting ate the program. Human resource capacity refers to year and has five staff members–all with graduate the availability of skilled staff to support technical degrees in engineering. The Australian program and nontechnical functions needed to plan, design, covers roughly 1,000 reporting entities provid- establish, operate, and maintain a reporting pro- ing information for about 10,000 facilities and gram. Nontechnical functions may include those has a team of 50 spread across different divisions related to managerial, convening, and communi- engaged in a range of activities, such as data col- cation activities. Supporting technical functions lection, random audits, verification, outreach, and requires human resources with knowledge related education (Singh and Mahapatra 2013). Reporting to aspects such as emissions accounting standards; programs should also consider the time needed to sector-specific and cross-sector emission sources, seek necessary authorization in their jurisdictions emission factors, and calculation methodologies; for staffing these positions. data collection and management systems; and auditing and verification. Effective implementa- Reporting programs need industry experts, engi- tion of the reporting program also needs adequate neers, economists, data analysts, information technical capacity among the reporting entities and technology (IT) experts, lawyers, communications service providers. experts, compliance officers, and auditors, among others. However, these experts and profession- An important decision for administrators is how als may not be needed full-time. While the legal many employees to hire and what skills they should structure is being put in place and rules are being have. The number and skill level of staff may designed, there is a greater need for policy ana- depend on factors such as the scale of the program, lysts, legal specialists, regulators, industry experts, the number of reporting entities, compliance economists, lawyers, and communications experts. and enforcement requirements, and the program As the program moves into the implementation budget. For instance, California’s program with phase, the desired skill set is likely to include data its rigorous calculation, reporting, and verification analysts, industry experts, software developers, requirements underpinning a cap-and-trade policy 28 WRI.org | thePMR.org trainers with industry knowledge, and verifiers and reported data and facilitate compliance. This can be auditors with expertise in technical audits. done as part of the stakeholder engagement process through training workshops, regular exchanges In the absence of adequate skilled staff, some pro- of information between the program and report- grams have outsourced human resource-intensive ers, program websites, and so on. It can also start or technical tasks to qualified consultants. Out- while the program is being designed and developed sourcing may be a useful option while programs as part of building the foundation for a success- develop in-house expertise and capacity, which can ful program. For example, South African program take time and resources. However, outsourcing also administrators are already training potential requires program oversight and contractor manage- reporting entities to use more accurate quantifica- ment. Over time, programs may internalize these tion methods and build their capacity in advance jobs and build capacities among staff on opera- of the launch of the reporting program (Witi 2014). tional, methodological, and implementation issues Programs may also find it useful to start building a through a sustained training initiative. Examples pool of experts in emissions accounting and quality of reporting programs that outsource operations assurance, who can provide these services to report- include the Japanese reporting program, which ers when the program becomes operational. For has four regular staff members and outsources example, the newly established reporting programs operations such as a help desk service for technical in Mexico and Turkey involved consultants and questions and data validation to private consult- potential verifiers, along with reporting entities, in ing companies (Singh and Mahapatra 2013). The training workshops. U.S. program also seeks support from specialized contractors on several technical aspects, including Jurisdictions can also draw on knowledge from engineering, data systems, and IT support (Singh voluntary programs. For example, France had a vol- and Mahapatra 2013). The Californian and Turkish untary program for a decade before the mandatory programs rely on their own staff for most activities, reporting program was established. The voluntary but outsource the development of data systems program had created expertise and technical mate- (Singh and Mahapatra 2013). rials on which the mandatory program was able to build. In addition to building technical capacity, Programs also need to invest in building technical programs may also need to include sufficient time capacity among the reporting entities and ser- for entities to acquire, install, and operate proper vice providers, which may improve the quality of monitoring and measurement equipment. H UM AN RESOURCE AND TEC HNICAL C A PA C I T I E S Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ The number and skill level of staff depends on the scale and nature of the program, and ▪▪ Has the existing human resource and technical capacity in the jurisdiction been on financial resources. tapped to support the design and develop- ▪▪ Outsourcing is an option for programs that lack in-house expertise and capacity in cer- ▪▪ ment of the program? Has an assessment been done to ascertain tain areas. Programs can decide to internal- the number and skill level of staff persons ize these activities over time. needed? Did the assessment consider needs ▪▪ Investing in capacity building among the reporting entities can greatly improve data during the design as well as implementation phases? Has outsourcing of some functions quality and program acceptance. been considered? Guide for Designing Mandatory Greenhouse Gas Reporting Programs 29 3.2.3 Financial capacity taxes, international public finance (bilateral or mul- tilateral) and so on. For example, the World Bank’s Financial capacity refers to the availability of suf- Partnership for Market Readiness initiative helps ficient financial resources to design and implement build systems for GHG data monitoring, reporting, the reporting program. Some of the major ongoing and verification in developing countries, among costs associated with program management include other activities. The initiative has financially and staff time and costs associated with stakeholder technically supported countries, such as Turkey, engagement, including outreach and training; to design and implement GHG reporting systems developing and maintaining a data management (PMR 2013a). system; and monitoring, verification, compliance, and enforcement. These costs should be determined Programs should engage potential funders from the in the short-to-medium- as well as the long-term to beginning to secure early buy-in and avoid delays ensure program sustainability. The design phase of in arranging financial resources. For example, the program is likely to incur costs associated with SEMARNAT liaised with the Ministry of Finance as developing quantification methods or conducting it began planning the Mexican reporting program to analysis to determine program coverage, which lay the foundation for a subsequent budget request can be budgeted as a one-time expense. If mul- for 10 staff positions for the reporting program tiple agencies are involved, early coordination can (Alarcon-Díaz 2015a). ensure that budget allocations are in accordance with program responsibilities and that they are Table 4 presents a summary of the proportion of available in a timely manner. costs incurred toward staffing and performing vari- ous program functions (e.g., conducting outreach, Programs should identify potential source(s) of drafting regulation, establishing verification rules), funding to support the institution(s) charged with as reported by program administrators. The costs program implementation and administration. In involved in executing different functions depend jurisdictions with limited resources, identifying on a variety of factors, such as the existing capac- financial resources can provide impetus to the ity among reporters in the jurisdictions, program program. These sources may be domestic or inter- objectives, and the sophistication of the program. national, and include budget appropriations, fuel Programs should identify financial resources and engage potential funders from the beginning to secure early buy-in and avoid delays. 30 WRI.org | thePMR.org Table 4 | Program Administration Cost Levels for Staff and Various Functions PROGRAM COST FOR DIFFERENT PROGRAMS FUNCTIONS Australia Canada California France Turkey United States Not Not Not Staff High Moderate Moderate Applicablea Applicablea Applicablea Pre-regulation outreach and Low Moderate Low High Low Moderate discussions Drafting Moderate Moderate Moderate Moderate Moderate Moderate regulation Initial setting up of program High High Moderate Moderate Low Moderate infrastructure Initial introduction to Moderate Moderate Moderate Low Low Moderate reporting entities Data management Moderate High High Moderate Moderate Moderate system Not Not Not Not Support systemsb Low Moderate Applicablea Applicablea Applicablea Applicablea Verification Moderate Low Moderate Low Moderate Moderate system Analysis/ summarizing Low Moderate Low Moderate Low LowC reported data Notes: Programs provided a relative, qualitative estimate for each function. Costs were not compared across programs. Programs used the following guidance to provide cost estimate: Low–less than 25 percent of total program cost; Moderate–25–50 percent of the total program cost; High–more than 50 percent of the total program cost. a. Cost not separately identified by programs because it is incorporated in the cost of other functions. b. Any infrastructural, institutional, technical or other major recurring expenses (e.g., IT, telephones) that are essential to operate the program but are not covered in other categories. c. This cost is likely to increase as the U.S. Environmental Protection Agency collects multiple years of data and begins to analyze trends more thoroughly. Source: Singh and Mahapatra 2013; Icmeli 2015a. FINANCIAL C A PACITY Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Financial capacity involves identifying fund- ing sources, and budgeting and allocating ▪▪ Has a budget been prepared that outlines various program costs during the design and resources for activities related to design and implementation phases? Has an estimate implementation. been made for financial resources needed to ▪▪ Early coordination among multiple agencies involved in program implementation can ▪▪ sustain the program over the long term? Have domestic as well as international fund- avoid delays and potential conflicts over the ing sources been considered to support the availability of adequate resources. program? Guide for Designing Mandatory Greenhouse Gas Reporting Programs 31 3.3.1 Why to engage In many jurisdictions, policymakers seek stake- holder input to program design as a standard procedure or because of legal requirements. Stake- holder engagement can improve program design and yield multiple benefits, including (PMR 2013b; PMR 2013c; Matthes 2013): ▪▪ Greater transparency in rulemaking ▪▪ Enhancing trust between stakeholders and policymakers, which in turn promotes open communication ▪▪ Facilitating development of a program that reflects national priorities and circumstances ▪▪ Promoting higher compliance rates through im- proved preparedness among reporting entities 3.3 Stakeholder Engagement ▪▪ Identifying sectors and entities that may not be familiar with GHG reporting and may need ad- ditional support and training ▪▪ Early stakeholder involvement and a shared understanding of program objectives can result in Avoiding misinformation, resolving conflicts, a variety of benefits. Policymakers and program and securing consensus and buy-in administrators can lay out a plan that defines the process for stakeholder engagement and addresses ▪▪ Drawing on widespread expertise for complex issues and strengthening program design issues such as why to engage, whom to engage with, when to engage, what issues to engage on, and how ▪▪ Generating positive interest, alleviating general skepticism, and creating a sense of ownership ▪▪ to engage (Figure 4). The plan provides a structured approach to stakeholder engagement that can make Raising and maintaining public support the process more efficient and effective. The fol- lowing discussion describes each element of the engagement plan. Figure 4 | Components that a Stakeholder Engagement Plan Should Address Whom to What issues Why to engage? When to engage? How to engage? engage with? to engage on? ▪▪ Outline benefits of stakeholder ▪▪ Identify stakeholders ▪▪ Timing and frequency of ▪▪ Identifiy topics on which to engage ▪▪ Determine methods of engagement engagement stakeholders engagement 32 WRI.org | thePMR.org 3.3.2 Whom to engage with tion and monitoring methodologies are practi- cal to implement. ▪▪ The next step is to identify the stakeholders and map their interests and concerns related to the OTHER REPORTING PROGRAMS: Existing or past reporting program. Potential stakeholders include voluntary or mandatory reporting programs (Figure 5): in the jurisdiction can provide rich lessons for ▪▪ NATIONAL AND SUBNATIONAL GOVERNMENT AGEN- CIES AND DEPARTMENTS: Engagement with vari- program design and implementation. Engag- ing with existing programs is also important to avoid duplication and seek ways to harmonize ous agencies and departments is necessary to reporting requirements if needed. ▪▪ improve coordination, seek necessary approv- als, reach consensus within the government, SERVICE PROVIDERS AND CONSULTANTS: These and avoid misalignment with other policies and include professionals, such as inventory prac- measures (PMR 2013b). titioners and verifiers. Service providers need ▪▪ REPORTING ENTITIES: These may include, for example, high-level executives, facility manag- to understand the program rules and require- ments so that they can help reporters submit high-quality data and comply with the program. ers, staff from engineering, environment, health Their involvement can also enhance the pro- and safety, accounting, and legal divisions. En- gram design process because they may have tities from some sectors may need immediate had prior experience with GHG reporting. ▪▪ or greater attention depending on the program objectives (e.g., sectors with a large number of INTERNATIONAL ORGANIZATIONS AND FUNDING reporting entities with limited capacity, sectors AGENCIES: These can support the establishment with more heterogeneity among entities). of the program, help seek technical expertise, ▪▪ TRADE AND SECTOR ASSOCIATIONS: Trade and sector associations typically have relationships facilitate outreach activities, and disseminate information on proposed rules and require- ments. ▪▪ with potential reporting entities, and can play a crucial role in disseminating information, ENVIRONMENTAL ORGANIZATIONS, ACADEMIA, AND securing buy-in, and resolving conflicts. MEDIA: These stakeholders can help disseminate ▪▪ TECHNICAL EXPERTS FROM VARIOUS INDUSTRY SECTORS: Industry experts can provide valuable information and build support for the program. Academic researchers and technical experts from environmental organizations and other feedback related to sector-specific concerns, for civil society groups can also lend their expertise example, ensuring that the prescribed calcula- during the policy formulation and design phases. Figure 5 | Typical Stakeholder Groups Government Industry Others ▪▪ Relevant ministries ▪▪ Potential reporting entities ▪▪ Environmental groups ▪▪ Environmental agencies ▪▪ Industry or trade associations ▪▪ Civil society ▪▪ Energy agencies ▪▪ Service providers and consultants ▪▪ Other reporting programs ▪▪ Industry agencies ▪▪ Development and aid agencies ▪▪ Legal departments ▪▪ Researchers, ▪▪ Local governments scientists, and technical experts ▪▪ Media Guide for Designing Mandatory Greenhouse Gas Reporting Programs 33 3.3.3 When to engage well as consensus building across relevant govern- ment departments on issues, such as the institu- Consultations with stakeholders can begin as the tional, human, technical, and financial capacities policy and legislation are formed and continue needed, and potential program objectives. through the design and implementation phases of the reporting program. During the design phase, consultations with stake- holders can inform the technical details of the pro- In the initial phase, engagement is crucial to estab- gram and help refine the rules and requirements. As lish a common understanding of program objec- the program moves into implementation, its focus tives and rationale. For jurisdictions with limited changes to building reporting entities’ capacity and resources, engaging stakeholders to raise awareness providing training to improve compliance. During and build a constituency for the program can be a this phase, stakeholder engagement also provides good starting point. This may include outreach as crucial feedback to modify the program as necessary (Figure 6). Figure 6 | Focus of Stakeholder Engagement During Each Phase of the Program Policy/law formulation Program design Program implementation ▪▪ Seek feedback on objectives and rationale ▪▪ Seek inputs on draft rules and requirements ▪▪ Conduct training on rules and requirements ▪▪ Disseminate information to establish a common ▪▪ Disseminate information to raise awareness of the program ▪▪ Seek feedback following initial implementation understanding of the program 34 WRI.org | thePMR.org Stakeholder engagement holders from a variety of backgrounds. Program administrators may use the following methods to is an ongoing process convey information, address concerns, and gather feedback: using a range of forums ▪▪ Solicit written comments to draft laws, regula- to reach a diverse set tions, rules, and requirements. of groups. ▪▪ Provide explanatory documents (e.g., technical guidance, issue briefs), impact assessments, and cost-benefit analysis to facilitate discussions. ▪▪ Hold open meetings and presentations for diverse groups of stakeholders. 3.3.4 What issues to engage on ▪▪ Conduct smaller, more focused discussions with select groups of stakeholders (e.g., meet- A range of topics may be covered in consultations ings with reporting entity representatives to depending on participants’ level of knowledge obtain feedback on methodology and emissions and preparedness and their specific interest in the data to be collected). ▪▪ program. These include: ▪▪ Establish working groups or committees with Rationale for the program and its proposed a mandate to engage stakeholders on specific objectives issues. ▪▪ Institutional and administrative arrangements ▪▪ Conduct targeted one-on-one conversations, ▪▪ Design of the program, including technical issues in-person meetings, and emails. (e.g., coverage and applicability, quantification ▪▪ Hold public hearings and webinars. ▪▪ and monitoring methodologies, data manage- ment, quality control and quality assurance) Develop program websites, which can be an ▪▪ excellent way to provide a number of resources Sector-specific issues, compliance and (e.g., guidance documents, presentations, flow- enforcement charts, FAQs) and offer continued support and information to reporting entities. ▪▪ Policymakers can also use these discussions to alle- viate general skepticism about climate change and Use help desks, hotlines, and social media tools its impacts, and demonstrate the need for mitiga- to interact with stakeholders. tion strategies while explaining the significance of collecting source-specific GHG data. ▪▪ Formally seek stakeholder feedback on any revisions to the program design. 3.3.5 How to engage Stakeholder engagement is an ongoing process using a range of forums to reach a diverse set of groups. The choice of methods employed to seek stakeholder inputs depends on who is being engaged and at which program stage, available resources, and the nature of the topic discussed. For example, some topics may be more appropriate for technical discussions with facility engineers, while other topics may be more suitable for stake- Guide for Designing Mandatory Greenhouse Gas Reporting Programs 35 Box 1 illustrates how the U.S. program has engaged In addition, the following good practices can be stakeholders through different stages of the pro- adopted to ensure a smooth and productive engage- gram development. ment process: ▪▪ Engage stakeholders as early as possible and draw up an engagement plan to guide the process. BOX 1 | STAKEHOLDER ENGAGEMENT IN THE U.S. REPORTING PROGRAM The U.S. Environmental Protection associations and nongovernmental to assisting reporters that did not routinely Agency (U.S. EPA), which was tasked organizations to disseminate information deal with air pollution regulations. with developing the U.S. reporting and communicate with a wide range of program, has engaged closely with stakeholders. The U.S. EPA continues to organize stakeholders since it began drafting the targeted meetings and webinars during Greenhouse Gas Reporting Rule in 2008 Outreach efforts continued after the the reporting window each year and as (Table B1.1). The rule forms the basis of publication of the proposed rule, and new guidance is added or an amendment the reporting program. once the rule was finalized, to build is made to the rule. It uses the program capacity, facilitate compliance, and website to provide detailed sector- During the rule development process, ensure high-quality reports (Chiu, specific guidance for all emission U.S. EPA’s emphasis was on informing et al. 2014). The U.S. EPA organized sources covered under the rule along stakeholders, addressing their concerns, webinars and meetings to explain with factsheets, a comprehensive list of and seeking feedback to inform the program requirements, for example, FAQs, a monitoring checklist, slide decks, program design. It organized public what was included in the reporting rule, a sector-specific list of the kind of data hearings, meetings, and webinars, how to register as a reporter, and what that can be considered confidential, as and invited written comments monitoring and reporting emissions well as announcements and reminders from stakeholders to support rule entailed. As the implementation phase for important dates and events. development. It also tapped trade began, the agency gave special attention TABLE B1.1 | OUTREACH AND TRAINING ACTIVITIES CONDUCTED UNDER THE U.S. PROGRAM METHOD OF ENGAGEMENT NUMBER OF EVENTSa Meetings 200+ starting with rule development in February 2008 Webinars 130 since the rule was published in October 2009 Help desk questions 33,000+ since rule publication FAQs 1,200 hits per day during reporting window Note: a. As of September 2013. Source: Sibold 2013. 36 WRI.org | thePMR.org ▪▪ Plan for multiple opportunities to seek feed- back. for every situation. Identify champions who support the policy and can help engage and ▪▪ convince their fellow stakeholders. ▪▪ Use a variety of formats. ▪▪ Ensure transparency by making draft docu- Tailor information to different stakeholder ments, comments received, and responses to groups based on their specific concerns, and be comments publicly available. ▪▪ informed about stakeholder concerns prior to engaging. Communicate the outcomes of the stakeholder ▪▪ engagement process and clearly explain how it Manage stakeholder expectations because led to revisions in program design and policy. reaching a consensus may not be possible STAKEHOLDER ENGAGEMENT Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Programs should prepare an engagement plan identifying why to engage, whom to ▪▪ Has a stakeholder engagement plan been developed that identifies stakeholders and engage with, when to engage, what issues to issues to be discussed with each group of engage on, and how to engage. stakeholders? ▪▪ Stakeholder engagement can promote trans- parency, inform decisionmaking, improve ▪▪ How will different groups of stakeholders be consulted? reporting entities’ preparedness, resolve conflict, and avoid misinformation. ▪▪ A range of topics may be covered in stake- holder discussions using a variety of meth- ods. The choice of method should be tailored to the topic and consider the needs of the stakeholders. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 37 Photo FPO CHAPTER IV DETERMINING PROGRAM STRUCTURE AND REQUIREMENTS Six key program design elements define the structure of reporting programs and ensure reliability, accuracy, consistency, transparency, and completeness of the data. This chapter presents an overview of these elements and illustrates the main decision points. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 39 These elements and decision points include: Facility or Company 1. Defining coverage in terms of applicable enti- If programs decide that their requirements will ties and emissions sources and GHGs (who apply to facilities, they should define what con- reports which emissions) stitutes a facility for the purposes of the program. 2. Providing calculation methodologies for dif- Broadly speaking, a facility refers to an installation ferent emission sources and data monitoring (e.g., a power plant or a cement manufacturing requirements (how to calculate and measure plant) with potentially several emitting activities emissions) and sources located within a physical boundary. In some sectors, such as oil and natural gas and 3. Determining reporting requirements and electricity distribution, the notion of a physical schedules (what to report and how often) boundary may not be applicable and there may be 4. Developing reporting platforms and data multiple emission sources spread over a vast area. disclosure rules (where to report and who has A facility may need to be defined differently for access to reported information) these sectors. 5. Deciding on verification procedures for quality assurance and control (who verifies what and In the EU and U.S. programs, the reporting entity how) is an individual facility. The U.S. program defines a facility as “any physical property, plant, building, 6. Establishing enforcement rules (what mea- structure, source, or stationary equipment, located sures to apply in case of noncompliance) on one or more contiguous or adjacent properties, in actual physical contact or separated solely by a 4.1 Program Coverage public roadway or other public right-of-way, and The first design element determines the scope of under common ownership or common control, that the program by defining the reporting entities, emits or may emit any GHG” (U.S. EPA 2009a). In determining which entities need to report, and the oil and natural gas (onshore) sector, the U.S. which GHG emissions will be reported. Mandatory program defines a facility to include all emissions reporting programs can be sectoral (e.g., electricity associated with wells owned or operated by a single generation, cement manufacturing), subnational company in a specific hydrocarbon producing basin (e.g., Alberta in Canada; California in the United (Bradbury, et al. 2013). In electricity distribution, States), national (e.g., Canada, France, Japan, a facility refers to the electric power system, which United States) or multinational (e.g., the European comprises all electric transmission and distribution Union). When designing a mandatory GHG report- equipment, linked through electric power transmis- ing program, two fundamental questions regarding sion or distribution lines, and functioning as an program coverage are: integrated unit (U.S. EPA 2009b). 1. Which entities will be subject to the program If a program requires reporting at the company requirements? (Who) level, that is, companies are responsible for report- 2. Which emissions will be reported by those enti- ing emissions, it must define what constitutes a ties? (What) company. Programs in Australia and the United Kingdom cover companies, which may comprise 4.1.1 Defining the reporting entity one or more facilities. For emissions reporting at Programs must determine whether the require- the corporate level, the program needs to define ments will be applicable at the level of a facility (e.g. how to consolidate emissions from different facili- a plant or installation) or a company. They must ties and operations within the company. The GHG also determine whether to require entities to report Protocol Corporate Reporting Standard outlines their direct emissions only or also their indirect three methods to consolidate emissions: equity emissions (as defined below under “direct and share, operational control, and financial control. indirect emissions”). The operational and financial control methods are known as control-based approaches (Box 2) (WRI and WBCSD 2004). Programs can specify the consolidation approach to be used to bring consis- 40 WRI.org | thePMR.org tency in emissions reporting across entities. Some programs, such as the Australian program, require BOX 2 | CONSOLIDATION APPROACHES that emissions data be reported at both facility and corporate levels. Three methods can be used to consolidate emissions from facilities to obtain total emissions at a corporate level. Program objectives play a significant role in deter- EQUITY SHARE APPROACH: Under this approach, a mining how to define the reporting entities. For company accounts for GHG emissions from each facility example, if the program’s primary objective is to according to its share of equity in respective facilities. support an emissions trading system, reporting obligations should be aligned with who has the CONTROL-BASED APPROACHES: There are two control- based approaches–financial and operational. A company has liability to comply under the trading system. This financial control over a facility if it has the ability to direct the liability could be at the facility level (e.g., as in the facility’s financial and operating policies to gain economic EU program), or at the corporate level (e.g., as in benefits from its activities. The company has operational the proposed national reporting program in China). control if it has full authority to introduce and implement The UK and French mandatory reporting programs the operating policies in the facility. Generally, a company aim to promote disclosure of GHG emissions and accounts for 100 percent of GHG emissions from facilities over which it has financial or operational control. It does not related risks and opportunities at the corporate account for GHG emissions from facilities over which it has level, hence companies have been identified as no control. reporting entities. Programs interested in meeting multiple objectives, such as the Australian program, The Australian program uses the operational control approach include both facility and corporate reporting. to consolidate GHG emissions at the corporate level whereas the French program allows a choice between operational and Direct and Indirect Emissions financial control approaches (CER 2012b, MEDDE 2011). The GHG Protocol Corporate Reporting Standard For more information, refer to WRI and WBCSD 2004. classifies an entity’s GHG emissions into three “scopes.” Scope 1 emissions are direct emissions from owned or controlled sources. Scope 2 emis- sions are indirect emissions from the generation of energy purchased by the reporting entity for its own consumption. Scope 3 emissions are all indirect emissions (not included in scope 2) that occur in the value chain of the reporting entity (Figure 7). Pro- grams must determine whether to require entities to report only their direct emissions (Scope 1) or also indirect emissions (Scope 2 and 3 emissions). Table 5 shows the coverage of emissions across dif- how much of their emissions are from electricity ferent reporting programs. use. This information enables them to undertake energy efficiency and demand-side measures to What indirect emissions, if any, should be reported, reduce their emissions. depends on factors such as program objectives, administrative burden and the entity’s reporting Some programs encourage Scope 3 reporting to burden. For example, a reporting program set up help entities manage their emissions as well as to to inform energy efficiency policies can gain valu- collect policy-relevant information. The Californian able insights into electricity consumption patterns and U.S. programs require some entities to report and trends from Scope 2 emissions reporting (Rich on direct and indirect emissions to yield data rel- 2008). The Australian program requires entities to evant for policy formulation for both upstream and report Scope 2 emissions and electricity consump- downstream sources, without significantly increas- tion data. This data is useful to inform policy affect- ing their reporting burden. Data from upstream ing electricity end use across different economic sources (e.g., natural gas and petroleum producers sectors (Prosser 2015a). Scope 2 reporting also and importers) inform policies such as low carbon allows the entities themselves to better understand fuel standards and carbon taxes (U.S. EPA n.d.a); Guide for Designing Mandatory Greenhouse Gas Reporting Programs 41 When both direct and indirect The Californian and U.S. programs, in particular, require entities that supply fuels and GHGs to the emissions are reported, economy to report on the GHG emissions that would result if the supplied fossil fuels or GHGs they should be clearly were completely combusted, released, or oxidized (U.S. EPA n.d.a.). These indirect emissions are distinguished from each released outside the entities’ facility, for example, gasoline produced by a refinery may be used by other and not be aggregated millions of individual cars (use of sold products).4 But capturing them as direct emissions from small at the program level to avoid sources through reporting by individual entities is not practical, and would involve a significant double counting. administrative burden. These emissions can instead be reported as indirect emissions by a fewer num- ber of regulated entities. When both direct and indirect emissions are data from downstream sources (e.g., from facilities reported, they should be clearly distinguished from in electricity generation and industrial sectors) are each other and not be aggregated at the program necessary to formulate and assess the impact of level to avoid double counting. end-use emission standards. Figure 7 | Scopes 1, 2, and 3 as defined in the GHG Protocol Corporate Reporting Standard ▪▪ Emissions from sources owned/controlled by the entity. ▪▪ For SCOPE 1 (DIRECT EMISSIONS) example, emissions from fuel combustion in a power plant, limestone processing in a cement manufacturing plant. SCOPE 2 ▪▪ Indirect emissions that result from the reporting entity’s activities but occur in sources not owned or controlled by the entity. (INDIRECT EMISSIONS) ▪▪ Specifically, emissions from the generation of electricity, heat, or steam purchased by the entity for its own consumption. ▪▪ Allincluding indirect emissions (besides Scope 2) that occur in the value chain of the reporting company, both upstream and downstream emissions. ▪▪ For SCOPE 3 (INDIRECT EMISSIONS) example, emissions from disposal of the entity’s waste, extraction of fuels used at the entity, production of materials purchased by the entity, transportation of materials purchased or sold by the entity, or use of products by consumers. Sources: WRI and WBCSD 2004; WRI and WBCSD 2011. 42 WRI.org | thePMR.org Table 5 | Emissions Coverage in Reporting Programs INDIRECT EMISSIONS DIRECT FROM PURCHASE OF OTHER INDIRECT JURISDICTION LEVEL OF REPORTING EMISSIONS ELECTRICITY, HEAT, OR EMISSIONS (SCOPE 3) (SCOPE 1) STEAM (SCOPE 2) Australia Corporate and facility Encouraged California Facility (and corporate)a b a Canada Facility European Union Facility France Corporate Encouraged Japan Corporate and facility Encouraged Mexico Corporate and facility Turkey Facility United Kingdom Corporate Encouraged United States Facility (and corporate)a a Notes: a. Entities supplying fuel and other GHGs into the economy report at corporate level. b. California requires reporting of purchased electricity, heat, or steam, but does not require the industrial user of purchased energy to calculate the emissions associated with the indirect energy because the suppliers of electricity and steam report them under the program. Sources: Singh and Mahapatra 2013; Alarcon-Díaz 2015b; Icmeli 2015b. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 43 4.1.2 Defining program applicability (also see Table A1 in Appendix A for applicability requirements for individual reporting programs). Program designers must decide which facilities and/or companies are subject to reporting. Often The decision involves determining both the type of reporting programs do not require every facility or applicability requirement and its level. Consider- company within their jurisdiction to report, given ations influencing a program’s applicability require- cost- and capacity-related constraints. They may ments include: define a threshold, above which facilities or com- panies must report, or identify other applicability requirements. Table 6 lists applicability require- ▪▪ The objectives of the program–Applicability requirements determine the program cover- ments commonly seen in reporting programs age, which should be defined in a way that Table 6 | Applicability Requirements for Entities in Reporting Programs APPLICABILITY DESCRIPTION REQUIREMENT Emissions threshold Threshold defined in terms of annual emissions of carbon dioxide equivalent (CO2e) (e.g., 25,000 metric tons CO2e [tCO2e]), so that all entities emitting equal to or more than the defined quantity are required to report their emissions. For example, the Canadian program applies to all facilities in the country emitting 50,000 tCO2e or more annually; the U.S. program employs a 25,000 tCO2e threshold (Environment Canada 2010; U.S. EPA 2009a). This kind of threshold could be applied economy-wide to all sectors or defined for individual sectors. Energy threshold Threshold defined in terms of annual energy consumption. For example, in Japan, companies with annual energy consumption of 1,500 kiloliters of oil equivalent or more must report (MoE and METI 2010). Source categories All entities within a certain source category (sector/subsector) are required to report their emissions. For example, the U.S. program requires all facilities producing adipic acid, aluminum, ammonia, cement, lime, nitric acid, petrochemicals, silicon carbide, soda ash, or titanium dioxide to report (U.S. EPA 2009a). Production tonnage Threshold defined for entities in a sector in terms of production. For example, paper manufacturing facilities threshold (sector- producing more than 20 metric tons per day are required to report in the EU program (European Parliament specific threshold) 2009a). Number of Threshold is based on the number of employees. For example, in France, companies with more than 500 employees employees are required to report their emissions (Kauffmann, Less, and Teichmann 2012). Publicly traded Applicability is defined by whether a company is publicly trading on a stock exchange. For example, all UK companies companies listed on the London stock exchange are required to report under the UK program (Defra 2012). Transport capacity Threshold defined specifically for freight and passenger transport in terms of transport capacity, such as number of railroad cars, number of vehicles, aggregate tonnage of ships, and maximum takeoff weight of airplanes. For example, in Japan, companies with at least 300 railroad cars or at least 200 vehicles are required to report (MoE and METI 2010). 44 WRI.org | thePMR.org helps achieve the program objectives. Whereas Mexico, and Turkey conducted similar analyses an emissions threshold is appropriate for a when deciding their reporting thresholds. ▪▪ program underpinning an emissions trading scheme, a program seeking to improve data Cost to the program administrator–To man- quality may want to define its applicability age their costs, programs may want to seek a requirement to capture large emitters across balance between the emissions covered and the the economy or focus on a few sectors with number of reporting entities. Generally, small little existing data. To support the objective of reporters entail higher administrative costs improving the quality of the national inventory, per unit of emissions relative to big emitters. the program may define applicability to include But, programs can include simplified report- all sources within sectors where better source- ing and compliance requirements for smaller level data can be used to cross check with emitters to reduce their administrative costs. national inventory estimates. Programs with For example, the Californian reporting program the objective of influencing policy formulation allows simplified reporting for entities that may establish applicability requirements that emit between 10,000 tCO2e and 25,000 tCO2e allow for the collection of a wide range of data to help reduce the program’s administrative to inform both demand and supply-side energy burden (CARB 2014b).5 policies. For example, they may establish an energy threshold defined in terms of energy ▪▪ The existence of other reporting programs (vol- untary or mandatory, GHG or non-GHG)–If generation (for supply-side policies) or electric- similar programs exist, program administrators ity consumption (for demand-side policies). could adopt similar rules and requirements ▪▪ Cost to the reporters–The U.S. program ana- lyzed the average reporting cost per metric to foster consistency and ease the reporting burden for facilities that may have to report to ton of emissions (Figure 8). By lowering the more than one program. For example, to select threshold beyond a certain point (from 25,000 its economy-wide emissions threshold, the tCO2e to 10,000 tCO2e) the cost to the reporter United States adopted 25,000 tCO2e threshold increased, without a correspondingly large for reporting used by the existing Californian increase in additional emissions captured. This reporting program (CARB 2013b). In Turkey, analysis helped the program select 25,000 the reporting program adopted the same appli- tCO2e as the most practical threshold (U.S. cability requirement as the EU reporting pro- EPA 2009c). Reporting programs in Australia, gram to achieve harmonization in requirements. Figure 8 | The Average Reporting Cost per Metric Ton of Emissions Increased as the Threshold Level Decreased, U.S. Program First year Subsequent years average 0.1 US$ per metric ton of CO2e 1K Threshold 0.08 0.06 25K Threshold 10K Threshold 0.04 100K Threshold 0.02 0 52 53 54 55 56 Percent of total emissions reported Source: U.S. EPA 2009c. Program administrators may modify the longer subject to reporting, and explain the reasons requirement(s) over time to include new reporting for the change in their applicability status. entities and sectors. For example, the U.S. program increased the covered industry sectors from 29 in For example, in the U.S. program, if an entity’s 2010 to 41 in 2011 (U.S. EPA 2010). The French reported emissions are less than 25,000 tCO2e per program started with the largest companies and year for five consecutive years, or less than 15,000 subsequently added others. The Canadian program tCO2e per year for three consecutive years, or if lowered its reporting threshold from 100 metric the entity ceases to operate all applicable GHG kilotons CO2e (ktCO2e) to 50 ktCO2e in 2009 lead- emitting processes and operations, it can notify ing to an almost 50 percent jump in the number the U.S. EPA and stop reporting. Reporting must of reporters (Environment Canada 2010). Starting resume if annual emissions in any future calendar small can allow program staff to gain experience year increase to 25,000 tCO2e or more (U.S. EPA and build capacity before implementing the pro- 2009a). The Canadian program requires report- gram at a large scale. Programs should be clear ers to notify the program administrator if they no from the beginning about their plans to scale up to longer meet the reporting threshold in a particular provide entities with regulatory certainty. year because of changes in production levels, tech- nologies, and so on (Environment Canada 2015). Programs can also provide guidance as to what In China’s proposed national reporting program, happens when the reporting entity ceases to meet an entity once found applicable should continue to the applicability requirements. Typically, programs report for five years before evaluating its applicabil- allow entities to stop reporting if they no longer ity again (Song 2014). meet the applicability requirements for a specified number of consecutive years. This helps maintain Programs can use simple, user-friendly online tools continuity of data by preventing a situation in that let reporters check their applicability. These which entities stop reporting for a year because can be particularly helpful for small emitters. they no longer meet the applicability criteria due to short-term or temporary changes, but begin Programs may also allow facilities not meeting the reporting again in the following year if they fulfill applicability requirements to report voluntarily as the criteria. Programs may require entities to notify is done by the Canadian program. the program by the reporting deadline if they are no 46 WRI.org | thePMR.org 4.1.3 Identifying which GHGs to report as PFCs, SF6 and NF3, are specific to certain sectors. For example, tetrafluoromethane (CF4) and hexa- Program designers need to determine exactly which fluoroethane (C2F6) are emitted from aluminum GHGs reporting entities should report. As with production, SF6 from magnesium production, and other program coverage aspects, factors such as NF3 from electronics manufacturing (U.S. EPA program objectives, administrative burden, cost 2014a). of reporting, and capacity levels can influence the number and type of GHGs covered in the program. Jurisdictions may also require reporting of other pollutants; for example, entities under the Mexican Programs in Australia, California, and the United program report black carbon emissions (Alarcon- Kingdom require reporting for the six original Díaz 2015b) because the information is required GHGs under the Kyoto Protocol. These are carbon to support the national climate change policy to dioxide (CO2), methane (CH4), nitrous oxide (N2O), reduce black carbon emissions (Alarcon-Díaz hydrofluorocarbons (HFCs), perfluorocarbons 2015b; SEMARNAT 2014). (PFCs), and sulfur hexafluoride (SF6). The Califor- nian and U.S. programs also require reporting of Programs can start with requiring reporting of CO2 nitrogen trifluoride (NF3). Programs may specify emissions only and allow the entities to build capac- GHGs to report for each sector covered under the ity before requiring other GHGs to be reported. This program because not all GHGs are relevant to all approach also allows time to develop the program sectors. Whereas CO2, CH4 and N2O are released architecture (Ellerman and Joskow 2008). from fossil fuel combustion, an emissions source generally present across sectors, other GHGs, such PROGRAM COVERAGE Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Policymakers must make the following deci- sions to define reporting program coverage: ▪▪ Have program objectives been considered in determining which entities will be required □□ to report? ▪▪ Who will be covered – facilities and/or companies (reporting entity)? Has the program decided whether, and □□ What will be reported – only direct which type of, indirect emissions should be emissions, or direct and indirect emis- reported considering the associated report- sions; what type of indirect emissions ing burden and relevance of the reported data in supporting program objectives? ▪▪ (e.g., emissions from the generation of electricity purchased for own consump- Have applicability requirements been set to tion, emissions from the use of fuels define program coverage after considering produced by the covered entity)? factors such as cost to the reporter, cost to □□ the administrator, and program objectives? ▪▪ How to assess which entities are sub- ject to reporting (applicability require- Have factors, such as cost of reporting and ments)? capacity levels, been considered when deter- □□ Which GHGs to report? mining which GHGs to report? ▪▪ Factors that inform decisions related to program coverage include program objec- tives, cost to reporters, and administrative burden. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 47 4.2 Emissions Quantification 2. Repeat step 1 using an emission factor for each GHG being reported to obtain corresponding Once program administrators determine coverage, GHG emissions. the next step is to identify how reporting entities will determine their emissions. There are two broad 3. Multiply emissions for each GHG by its global ways to determine GHG emissions: warming potential (GWP) value to obtain emis- ▪▪ Calculation-based approaches sions in CO2 equivalent (CO2e). CO2e represents a consistent, comparable metric of total atmo- ▪▪ Direct measurement approach spheric impact of GHGs. □□ Emissions (in CO2e) = CH4 emissions x These approaches are not mutually exclusive and GWP of CH4 can be used in combination to determine emissions from different sources in a reporting entity. This approach can use a range of simple to sophisti- cated methods to obtain activity data and emission Further, programs can provide guidance outlining factors (discussed below). calculation and monitoring methods that should be used for specific sources to improve consistency and ACTIVITY DATA accuracy of emission estimates. Activity data refers to the measure of activity result- ing in emissions. It varies depending on the emis- 4.2.1 Calculation-based approaches sion sources, which include stationary combustion Calculation-based approaches include the emissions of fossil fuels, fugitive emissions, process emissions, factor approach and the mass balance method. These and waste management (Table 7). approaches do not directly measure GHG emis- sions, but, instead, measure the activity, such as fuel EMISSION FACTORS consumption, leading to emissions, and provide an An emissions factor is a value that relates a given estimate of emissions from that activity. The decision quantity of activity to the GHGs emitted (e.g., tons regarding which approach to use typically depends of carbon dioxide emitted per ton of fossil fuel on the emissions source. For example, the emissions consumed). Reporting entities may use published factor approach is appropriate for sources such as country-specific emission factors (e.g., a repre- fuel combustion and calcination. The mass balance sentative average based on many samples taken approach is more suitable for calculating process across the country), or international defaults (e.g., emissions in industries such as petrochemicals pro- published by Intergovernmental Panel on Climate duction and integrated iron and steel manufacturing. Change [IPCC]),6 or use facility-specific emissions The Emissions Factor Approach factors (e.g., derived from analysis of samples of fuel being combusted at the facility). The emissions factor approach is a common multistep process used when a fuel or material is directly related The choice of emission factors used is typically to emissions. The calculation steps are as follows: based on their availability and the emission source. 1. Multiply activity data (such as quantity of fuel For example, emissions from waste depend on its combusted or raw material consumed) by an composition and treatment; therefore, detailed emission factor, and other factors as needed information on the composition and treatment to correct for nonemitted carbon because of methods is generally needed to determine the incomplete chemical reactions. quantity of CO2 and CH4 emissions released from For example, methane emissions from munici- municipal solid waste landfills. pal solid waste landfills may be calculated as: Programs can also influence the choice of emission □□ CH4 emissions = Activity data (tons of waste factors (also see Chapter 4.2.4). They can provide a disposed in the landfill annually) x Emis- list of default emission factor values to be used, as sion factor for CH4 (based on site-specific well as lay out the requirements to be followed to waste composition and amount of methane derive site-specific emission factors. Requirements collected and destroyed at a particular site) can include details such as how often fuel samples 48 WRI.org | thePMR.org Table 7 | Examples of Activity Data for Various Emission Sources TYPE OF EMISSION SOURCE EXAMPLE OF ACTIVITY DATA Stationary combustion of fossil fuels Fuel-flow meter data, facility fuel consumption records (monthly bills) Process emissions (e.g., cement manufacturing, pulp and paper manufacturing, adipic acid production) ▪▪ Quantity of limestone used, quantity of clinker ▪▪ Quantity of fossil fuels used in chemical recovery furnaces, quantity of makeup chemicals added, quantity of adipic acid produced Fugitive emissions (e.g., underground coal mines) Quarterly or more frequent sampling of liberated CH4 from ventilation shafts Waste management (e.g., municipal solid waste Measured or estimated values of annual waste disposal quantities landfill) Mobile combustion Distance travelled, fuel consumed should be taken for a comprehensive analysis, what The Mass Balance Method can be considered a representative sample, and The other calculation-based approach, the mass equations to use to calculate emission factors. They balance method, is based on determining the may allow the use of international default values balance of GHGs entering and leaving the entire from the IPCC for minor sources of emissions entity or a specific unit or process within the entity. in a reporting entity. Programs requiring Scope It calculates the difference between the amount of 2 emissions reporting may also want to provide GHGs entering the process through feedstocks and electricity-generation-related emission factors for the amount exiting the process through products their jurisdiction. (U.S. EPA 2014b). This difference represents the GHGs released into the atmosphere. In addition, program administrators may lay down a process for entities to provide rationale and The mass balance approach is used in situations supporting evidence if they significantly improve where it is possible to directly monitor the changes the emission factors used. For example, the EU in GHG quantity (e.g., changes in HFC or PFC program requires that reporters revise their annual inventory) or where it is difficult to relate emissions monitoring plan to reflect changes in calculation to individual input materials through an emission methodology, which can include changes in the factor (e.g., in chemical processes) or when the quality of emission factors. If an entity applies a final product contains embedded carbon that is not higher tier (quality level) factor, such as site-specific released as CO2 emissions (European Commission emission factors, instead of the lower tier factor 2012a). For example, the Australian, EU, Mexican based on the national inventory values, it should and U.S. programs require use of the mass balance update the monitoring plan indicating the revised approach to estimate emissions from integrated emission factor (Tharan 2015). iron and steel facilities. In these integrated facili- ties, it is difficult to identify emissions attributable Guide for Designing Mandatory Greenhouse Gas Reporting Programs 49 to each part of the production process. Carbon also frequent measurements are taken, entities calculate leaves the system embedded in steel, the product an hourly average (U.S. EPA 2009d; European (Tharan 2015). Therefore, emissions are estimated Commission 2013). from the activity as a whole by estimating the car- bon content of input and output (Australia, Depart- This approach is useful when a number of different ment of the Environment 2014c). Examples of other fuels and input materials are used. For example, sectors where the mass balance approach is used direct measurement can be used when combust- include hydrogen production, ferroalloy produc- ing various waste types in cement kilns, because it tion, fluorinated gas production, and petrochemical does not depend on knowing the carbon content production (U.S. EPA 2009a). or quantities for individual fuels. However, direct measurement is generally not suitable for measur- 4.2.2 Direct measurement approach ing fugitive emissions that are not emitted through a defined point source, for example, emission leak- The direct measurement approach involves measur- ages from equipment, storage tanks, and pipeline ing the emitted GHGs using measurement equip- systems. It is also not practical for facilities with ment. GHGs can be measured directly where they multiple exhaust stacks or for small emitters given are vented from the entity (usually out of a stack) the large cost involved in installing direct measure- into the open air, using a continuous or periodic ment equipment (Table 8). emissions monitoring system. The monitoring system continuously or periodically measures the Accuracy of the emissions value obtained from concentration of GHGs in the flue gas and the flue direct measurement depends on proper installation gas flow volume. For each emission point or stack, of the measurement system, performance tests, and average concentration and average flow rates taken calibration and monitoring. Programs may also at periodic intervals are used to determine emis- require that emissions measured directly are cor- sions for that period. These are then aggregated roborated by calculations, as does the EU program over the year for total emissions. Programs can (European Commission 2013). specify the frequency of measurement for emis- sions sources. For example, both the EU and U.S. When using the direct measurement approach, programs require hourly measurements; if more programs can provide guidance regarding: 50 WRI.org | thePMR.org ▪▪ Measurement equipment: This includes provid- ing guidance related to the type of measure- ▪▪ Frequency of measurements, sampling, and data aggregation: For example, in the case of ment equipment installed, including all the measurements from two (or more) stacks, the instrumentation and software required to mea- EU program requires that the data from hourly sure emissions on a practically continuous basis measurements is first aggregated for the year and transferring meter readings to the entities’ for each individual source and then summed up data management systems. for the two stacks to get total emissions (Euro- ▪▪ pean Commission 2013). ▪▪ Certifying the measurement equipment: Pro- grams can prescribe that the equipment used Substituting missing data: Missing data may be certified. For example, the U.S. program be due to reasons such as equipment failure. requires that the installed continuous emissions The EU program, for instance, lays out detailed monitoring system (CEMS) for stationary fuel requirements for calculating substitution values combustion sources that includes a gas moni- when data is missing and requires entities to tor or a stack gas volumetric flow rate moni- describe the process followed to fill data gaps in tor, must be certified in accordance with the their monitoring plans (European Commission program regulations (U.S. EPA 2009d.). 2013). ▪▪ Calibration and monitoring requirements for measuring equipment: For example, the EU Though programs often provide direct measure- ment as an option available to entities to quantify program requires that all relevant measuring their emissions from many sources, such as power equipment be calibrated, adjusted, and checked generation, cement, aluminum production, and at regular intervals in accordance with the qual- iron and steel, it is not widely used because of its ity assurance requirements. The U.S. program high cost compared with other calculation method- requires that all measurement devices be cali- ologies (U.S. EPA 2013). brated according to the manufacturer’s recom- mended procedures, an appropriate industry standard, or another method specified in the regulations (U.S. EPA 2009d). Table 8 | Estimated Costs to Upgrade to Continuous Emissions Monitoring Systems for CO2 CURRENT SCENARIO ANNUAL COST TO UPGRADE TO CEMS (USD) Emission source has no continuous emissions monitoring system (CEMS) - Add 70,265 CO2 analyzer, flow meter, and infrastructure Emission source has CEMS for other pollutants—Add CO2 analyzer and flow meter 56,040 Emission source has CEMS for other pollutants—Add CO2 analyzer only 20,593 Emission source has CEMS for other pollutants—Add flow monitor only 24,511 Note: CO2 analyzer is used to detect and measure the gas concentration in a CEMS. Flow meter is used to measure gas flow rate. Source: U.S. EPA 2013. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 51 The three ways to estimate the GHG emissions changes. Programs could adopt GWP values from discussed above are briefly compared in Table 9. the latest IPCC assessment report or could use the GWP values in the national inventory. For instance, 4.2.3 Global warming potential values the U.S. program now requires that entities use GWP values mostly from the Fourth Assessment Global warming potential (GWP) is a measure of Report rather than those from the Second Assess- how much heat a greenhouse gas traps in the atmo- ment Report. The U.S. EPA amended the rule to sphere relative to the amount trapped by carbon reflect GWP changes and published a factsheet on dioxide over a specified time period, say 100 years. the program website to disseminate the information GWP values allow comparison of different types to the reporters. The amendment also ensured that of greenhouse gases by converting metric tons of the mandatory reporting requirements were consis- emissions of different GHGs into a single unit called tent with the U.S. national inventory practices. The carbon dioxide equivalent (CO2e). This is done by newly established Mexican program is using GWP multiplying GHG emissions with the corresponding values from the Fifth Assessment Report. GWP value, published by the IPCC. Programs typically require entities to report their emissions When the GWP value is changed, programs can in CO2e. also clarify whether entities should recalculate emissions for previous years. This may be par- GWP values are published in IPCC assessment ticularly relevant for programs, such as the UK reports and can change based on improvements program, that encourage reporters to track their in methods as well as changing interactions and progress over time by setting a base year and impacts of gases in the atmosphere. For example, reduction target. the GWP value for methane was changed from 25 to 28 (for a 100 year time horizon) from the IPCC Fourth Assessment Report to the Fifth Assessment 4.2.4 Providing technical guidance Report. Similarly the GWP for nitrous oxide was on emissions quantification changed from 298 to 265 (IPCC 2007; IPCC 2013). Programs can provide detailed technical require- ments and guidance to reporters to quantify their To ensure consistency in reporting, program admin- emissions. They can develop a range of methods istrators should decide which GWP values to use for to quantify emissions that rely on either the direct emission calculations and notify reporters of any measurement or calculation-based approaches. Table 9 | Comparing Direct Measurement and Calculation-Based Approaches to Estimating GHG Emissions DIRECT MEASUREMENT APPROACH CALCULATION-BASED APPROACHES ▪▪ Measure emissions directly at the point where air flows from the facility into the open air using continuous or periodic ▪▪ Two approaches: □□ Emission factor approach: Based on the amount of fuel emissions monitoring systems consumed and its carbon content (Emissions = activity ▪▪ Useful when a number of different fuels and materials are used data x emission factor) □□ Mass balance method: Based on the balance of GHGs ▪▪ Specific monitoring and maintenance requirements for entering and leaving a defined process in the facility measurement equipment ▪▪ Uncertainties in the input values of activity data and ▪▪ Not practical for small emitters and facilities with multiple exhaust stacks emission factors are reflected in the calculated emissions 52 WRI.org | thePMR.org The requirements may include aspects such as the quantification approach to be used, GWP values to be used, monitoring methods to be followed, how to obtain activity data, and how to calculate emissions factors. Many programs, such as those in Australia, California, the European Union, and the United States, provide detailed source-specific calculation requirements.7 These requirements specify calcula- tion methods for each emissions source, for exam- ple, providing methods that can be used to quantify emissions from solid fuel combustion. These can be supplemented with explanatory material on pro- gram websites and by providing a help desk or hot- line to support entities not familiar with calculating emissions. Programs should ensure that individual guidance provided through the help desk or hotline is consistent with the technical requirements. In deciding just how prescriptive the methods should be, programs typically rely on factors such as their objectives, reporters’ capacity and level of preparedness, and the calculation approach being used. For example, if a program’s objective is to support an emissions trading scheme, which puts a price on each ton of emissions, prescribing exact methods can bring greater consistency in emissions guidance on how to consolidate emissions from calculations because it ensures that all reporting facilities to obtain total emissions for the company. entities follow standardized methods. If a pro- gram’s objective is to support and contribute to the Categorizing Methods in Tiers national inventory, it can align source and sector The range of methods provided by programs to definitions with those used in the national inven- quantify source-specific emissions are often cat- tory.8 It may also require entities to use published egorized in tiers. Tiers represent differences in data national emission factors instead of global defaults quality, accuracy, and uncertainty; the higher the where appropriate (Singh and Mahapatra 2013). tier, the greater the data quality and the method- For example, in the Australian program entities ological complexity. must provide enough information to classify facil- ity-level data into categories used in the national The concept of tiers is borrowed from the IPCC, inventory, that is, by industrial process and by fossil which introduced tiers to prepare national inven- fuel combustion. tories of GHG emissions. Tier 1 is the simplest method to quantify emissions. It uses default emis- When the program revises or updates the calcula- sion factors and requires the least disaggregated tion methods, it can do so either by proposing an activity data (e.g., quantity of fuel consumed). amendment to the reporting rule or by updating Tier 2 and 3 methods are based on source-, technol- the appropriate guidance document and notifying ogy-, region-, or country-specific emission factors, the reporters. Programs may also allow entities and require highly disaggregated activity data (e.g., to submit an improved calculation methodology actual fuel consumption statistics by fuel type, or calculation factor at any time for the program economic sector, and combustion technology) administrators’ consideration. Reporting programs (UNFCCC 2009). applicable at the corporate level can also provide Guide for Designing Mandatory Greenhouse Gas Reporting Programs 53 Programs can uncertainty can start a process of investigating data quality and identifying opportunities to improve categorize emissions it (GHGP 2003). Programs can require entities to assess and report uncertainty to highlight the quantification methods value of higher-tier methods in improving accuracy (Prosser 2015b). Australia requires companies to in tiers representing assess uncertainty for each emission source in their facilities (CER 2013). The EU program also requires differences in data reporting of the uncertainty in estimates and defines tiers based on permissible uncertainty levels. quality and accuracy. Programs can develop a set of criteria to help The higher the tier, the entities select the appropriate tier for quantify- ing emissions. For instance, they can require that greater is the level of reporting entities apply higher-tier methods for their major emission sources, because the increased data quality. cost and effort to improve data quality and accu- racy may be easier to justify for a large quantity of emissions. Appendix B describes how the Austra- lian, EU, and U.S. programs use tiers to categorize calculation methods. Jurisdictions implementing new reporting pro- In general, higher tiers are more difficult and costly grams can start with a pilot learning phase with to apply than lower ones (European Commission simple emissions calculation requirements. Report- 2012a). For example, a lower-tier method will ers can initially use a simple methodology (lower allow the use of a calculation approach with easily tier in terms of data quality) and eventually adopt available global default values for emission factors. a more rigorous (higher tier) quantification meth- A higher tier method will require a site-specific odology. The use of a pilot phase can avoid placing emission factor, which may need sampling and undue burden on reporters and allow them to gain analysis of a fuel to assess its carbon content and expertise, build capacity, and put the necessary other qualities that could affect actual combustion systems in place. For example, the U.S. program emissions (Australia, Department of the Environ- allowed reporters to use best available monitoring ment 2014c). Higher-tier methods consider the methods in the beginning of the program, under- characteristics of fuels consumed at a particular standing that it may not always be feasible for a facility and, thus, obtain more accurate emissions new reporter to immediately install and operate all estimates for that facility, but at a higher cost. of the required monitoring equipment necessary to apply a higher-tier method (U.S. EPA n.d.b.). South Higher tiers are generally accompanied with lower Africa is considering a grace period of four years uncertainty values reflecting improved accuracy for entities to graduate from Tier 1 to Tier 2 or 3 of measurement. In a calculation-based approach, methodologies (Witi 2015). uncertainty in reported emissions is a combi- nation of the uncertainties in the data used to quantify emissions: emission factors and activity data (Ritter, Lev-On, and Shires 2006). In direct measurement, uncertainty arises from equipment measurement error (GHGP 2003). Assessing 54 WRI.org | thePMR.org EM ISSIONS QUA NTIFICATION Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Emissions quantification approaches in- clude direct measurement and calculation- ▪▪ Have quantification methodologies been provided based on the need for consistency based approaches. The direct measurement and accuracy? Have country-specific emis- approach measures the emitted GHGs and sion factors and global warming potential the calculation method determines emis- (GWP) values been specified to further sions based on the amount of fuel consumed promote consistency in calculations? ▪▪ and its carbon content. Programs can establish source-specific ▪▪ Are methodologies categorized in tiers? If so, have clear criteria based on factors, calculation methods and provide accompa- such as the quantum of emissions, permis- nying guidance to improve consistency and sible uncertainty, the type of activity data accuracy of emission estimates. and emission factors used, been laid out to ▪▪ These methods can be categorized in tiers, which represent differences in terms of data ▪▪ define the tiers? Have factors such as program objectives quality and accuracy. The higher the tier, and reporters’ capacity been considered in the greater is the level of data quality. In deciding how prescriptive the methodolo- general, higher tiers are more difficult and gies should be? Has a pilot learning phase costly to apply than lower ones. for reporting entities been considered? ▪▪ Have solutions, such as additional guid- ance and a help desk, been considered to help entities correctly apply the calculation methods? 4.3 Reporting Procedures or they may find that some types of data are not particularly useful to collect. and Schedules Program designers must also determine report- Contents of a GHG emissions report may include: ▪▪ ing procedures during the design phase. This includes specifying the type of information that Name, location and contact information of should be reported, the frequency of reporting, the reporting entity. If the reporting entity is a deadlines for report submission, and recordkeeping facility, give the name and identifying informa- requirements. tion for the parent company. 4.3.1 What is to be reported? ▪▪ Name and contact information of the report- ing entity’s designated representative (e.g., Programs should lay out the information that owner or operator of the entity) responsible for entities must provide to ensure consistent report- submitting, signing, and certifying the reports. ing over time and across reporters. The reporting If a reporting entity has multiple owners or process allows programs to assess compliance with operators, the program will need to establish a their requirements (e.g., calculation methods to process to identify which one has the legal obli- be used for specific emission sources) and obtain gation to report. For example, the U.S. program meaningful data to inform their objectives. Pro- asks the designated representative to certify grams may need to modify the requirements over that if there are multiple owners and opera- the first few years as experience builds, and stake- tors, he/she has provided a written notice to holders identify new information to be captured Guide for Designing Mandatory Greenhouse Gas Reporting Programs 55 the owners and operators regarding his or her selection as a designated representative (U.S. ▪▪ Information related to entities’ emission re- duction goals and measures implemented to EPA 2009a). achieve the goals, may also be collected. ▪▪ Reporting period and date of submittal. Some of the above information, such as input data ▪▪ □□Emissions information such as: Total emissions in metric tons of CO2e with for emissions calculations and tiers used, can also be included in a monitoring plan (see Chapter 4.5.1). additional information including emissions 4.3.2 Other reporting details disaggregated by GHG, by source or activity type, and by site or facility (in a corporate- Programs also need to decide on reporting periods level program), range of uncertainty in the and timelines for report submission, and what kind emissions value, and CO2 emissions from of records they need to retain and for how long. biomass combustion Reporting Periods □□ If Scope 2 emissions are covered, informa- tion on energy consumption and emissions Most programs opt for an annual reporting period in metric tons of CO2e from purchased following either the calendar or fiscal year (Table 10). energy [electricity, heat or steam] The choice may depend on the financial reporting period prevalent in the jurisdiction. Program objec- □□ If Scope 3 emissions are covered or encour- tives may influence the decision. For example, if the aged, information on these emissions in objective is to use the data to inform the national metric tons of CO2e and related activity inventory, it may be helpful to align the reporting data (for example, emissions from the sale period with the period in the inventory. If the pro- of fossil fuels and quantity of fuels sold, gram is supporting an emissions trading scheme, by type). the reporting period should be consistent with the ▪▪ Input data for emissions calculations and related information for individual operations compliance period of the trading scheme. The Aus- tralian program uses the fiscal year in keeping with and processes (e.g. energy content or carbon the financial reporting period of the country. The content values for fuels used in calculating CO2 Canadian program uses the calendar year to align emissions for each type of fuel burned, fre- with the national inventory (CER 2014c; Environ- quency at which these values were determined ment Canada 2015). (e.g., once a month, once per fuel lot), quantity of waste in landfills at the start of the reporting The French program is an exception with reporting year). required every three years, and the reporter allowed ▪▪ to choose the most appropriate 12-month period Emissions quantification methodologies and (Kauffmann, Less, and Teichmann 2012, Singh and tiers of activity data for emission sources. Mahapatra 2013). The French program’s objective ▪▪ of helping entities assess their climate risks and Third-party verification or self-certification opportunities influenced the decision to opt for statement, as applicable. reporting every few years. The program decided ▪▪ Additional data needed to inform policies depending on specific objectives may also be that entities needed a reasonable length of time to identify reduction opportunities and implement collected. For example, programs could obtain mitigation measures, and that reporting over three output data (e.g. tons of product manufactured) years better reflected the impact of mitigation from reporting entities that are used to validate measures adopted. Beginning December 2015, the baselines if allocations under a trading scheme program will require entities to report every four are to be based on an intensity baseline. Output years to align the GHG reporting requirements with data can also support policies related to GHG new mandatory energy audit requirements (Euro- performance standards or energy efficiency pean Parliament 2006; Bellasio 2014). standards. 56 WRI.org | thePMR.org Programs also need to specify the reporting other laws pertaining to industry in the jurisdiction. timelines. It is practical to have a 2–4 month gap For example, the Mexican program requires docu- between the end of the reporting period and the last ment retention for five years following the practice date for data submission to allow sufficient time for of taxation records being retained for five years in entities to prepare and verify their reports. Report- the country (Alarcon-Díaz 2015b). Programs may ing timelines should be aligned with schedules for also want to align their document retention period emission trading systems or national inventories, with that of emissions trading schemes. depending on the program objectives. Another factor to take into account is the cost of Recordkeeping retaining records either physically or virtually. Programs may ask entities to maintain records The Mexican reporting program calculated that it and retain them for a definite period of time after would cost roughly US$10,000 for entities to retain submitting the emissions report. The records are records for five years (Alarcon-Díaz 2015b). needed to provide the program administrator with sufficient evidence of the reporting entity’s compli- Program administrators can specify where facilities ance with the regulation and for verifiers to verify must store the records, but in general, the records GHG emissions data. Often programs choose the are only required to be made available to the pro- same duration to retain records as specified under gram administrator or the verifier when needed. Table 10 | Reporting and Record Retention Periods Across GHG Reporting Programs REPORTING PERIOD RECORD RETENTION PERIOD JURISDICTION (CALENDAR/FISCAL/OTHER) (YEARS) Australia Fiscal year (July 1—June 30) 5 California Calendar year 3 Canada Calendar year 3 European Union Calendar year 10 France 12 month period every 3 years Not specified Mexico Calendar year 5 Turkey Calendar year 10 United Kingdom 12 month period, recommended to be aligned with Not specified entities’ financial reporting period United States Calendar year 3 Sources: Respective reporting program websites. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 57 R EPORTING REQUIREMENTS A ND SCH E D U L E S Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Programs should specify what should be reported to ensure consistency across ▪▪ Have the reporting requirements been iden- tified based on factors such as what kind of reporters, help assess compliance, and information is needed to assess compliance obtain data to fulfill their objectives. and what kind of data can provide adequate ▪▪ Other requirements that should be laid out include period of reporting (calendar vs fis- ▪▪ information to serve program objectives? Does the decision about record retention cal year) and period of record retention. consider factors such as consistency with recordkeeping requirements under similar laws in the jurisdiction, associated costs, and the time period considered sufficient to verify compliance? ▪▪ What is the rationale behind the chosen reporting period? 4.4 Reporting Platforms and management of data management systems. For web-based systems, programs will need to budget Data Disclosure staff time to work closely with software developers Programs need to decide how to collect and report who are likely not familiar with GHG quantification GHG emissions and what kind of information to and reporting. disclose publicly. One of the first steps in developing data manage- 4.4.1 Reporting platforms ment systems is to decide what kind of features A reporting platform is a data management system and attributes the system should have. These may that facilitates the reporting, organization, and include details such as the type/quantum of data to analysis of GHG data. A data management sys- be collected, data analysis to be performed, quality tem, in its most basic form, collects and stores the control and assurance features, linkages with exist- reported information. It can also support quality ing data management systems, and data security assurance and quality control activities, track emis- and confidentiality. Programs can select the attri- sions over time, and facilitate analysis and sharing butes of their data management system based on of data with stakeholders (PMR 2013d). factors such as: Data management systems can range from simple ▪▪ The number of entities expected to report un- der the program spreadsheets with data submitted by entities and compiled by program administrators to a more ▪▪ Reporting entities’ level of comfort using web- based systems ▪▪ sophisticated online system used by reporters, verifiers, and administrators.9 Web-based systems Training needs for both reporting entities and require more resources but can perform more program administrators functions compared with a spreadsheet-based system (Box 3). Programs can also begin with ▪▪ Time needed to design and develop the data management system simpler systems and incorporate additional features or adopt a more sophisticated system over time. Programs often outsource the development and ▪▪ Flexibility and potential to scale up—in terms of serving more entities as the program extends its coverage, and/or meeting the requirements of multiple policies 58 WRI.org | thePMR.org BOX 3 | WEB-BASED REPORTING PLATFORMS A web-based system can: ▪▪ Allow data access to multiple users ▪▪ Ensure an enhanced degree of se- ▪▪ Facilitate program management and implementation (e.g., standardize (e.g., reporters, verifiers, admin- istrators) with different levels of curity (e.g., user log-in credentials, two user authentication) and track data submissions, email access ▪▪ Support data needs associated with participants about deadlines and updates) ▪▪ Support efficient data processing leading to reduced administrative multiple policies through a single point of data entry ▪▪ Handle large volumes of data and large numbers of entities burden (e.g., automated data entry, review, validation and submission; built-in checks for data entry errors and outliers; extracting customized reports) ▪▪ Integration with other data systems defined period of time or for a subset of reporters ▪▪ Data security requirements from each sector before scaling it up. This provides ▪▪ another opportunity to make revisions, rectify any Expertise of available IT providers technical problems as entities submit their infor- ▪▪ Development and ongoing maintenance costs mation, and develop a user-friendly and practical reporting platform. Programs can prepare a template that lists the information to be reported by entities and, where Finally, these are some considerations to keep applicable, by third-party verifiers, as well as the in mind while designing database management desirable features in the system, such as data range systems (PMR 2013e): ▪▪ checks (discussed in Chapter 4.5.1). The template can map out details including information and data Structure standardized data forms–Forms to be entered by the reporters, underlying calcula- standardized for the program reporting require- tions to be performed, default values for calculation ments can improve consistency in responses factors that can be included, and how to assess and ensure the submissions contain the infor- compliance (Jacquier 2014). This gives developers mation needed to comply with the reporting the components to start building the data manage- rules. ment system. For example, Turkey’s reporting program first developed a reporting template, ▪▪ Incorporate features to minimize errors– For example, minimization of errors can be which served as the starting point for IT experts achieved by narrowly defining data entry fields to develop the online database. The program also and automatic checking of input data for web- tested the template on-site with a representative based systems, providing emission factors to group of entities to assess whether the terms were avoid calculation errors, and requiring submis- understandable and the required information was sions to be reviewed by more than one person. being captured (Icmeli 2015b). The template was modified and finalized after incorporating the feedback from testing. ▪▪ Facilitate verification–This involves incorporat- ing features to support verification by program administrators as well as third-party verifiers, Programs may also find it helpful to launch the data such as providing access to verifiers to review management system in a pilot mode either for a the emissions report before it is submitted. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 59 ▪▪ Ensure security and data confidentiality–There needs to be a high degree of confidence that reporting, and verification provisions underly- ing the data management system should be the data cannot be tampered with, particularly robust, credible, and transparent. There should if emissions data from the reporting program be enough confidence in the reporting system are used to determine an entity’s liability under that a ton of emissions reported is indeed a ton a trading system or carbon tax. Further, it is emitted. Verified, high quality emissions data important to build trust among the reporters from the reporting data management system that the data management system has security can be used to determine allowance allocations. provisions to ensure the confidentiality of any Programs may need to decide whether to build commercially sensitive data they submit. Some a system that is well-integrated with other data measures to enhance security and minimize the systems, or whether a stand-alone, independent risk of cyber hacking in web-based systems in- system would suffice. Table 11 lists some advan- clude requiring log-in credentials, resetting IDs tages and challenges associated with indepen- and passwords at regular intervals, mandatory dent and integrated systems. ▪▪ two-user authentication to make submissions or changes, setting time windows for data entry, Treat electronically submitted data at par with using virtually and physically secure servers to paper submissions–When programs allow on- host data, and introducing differentiated levels line submission, it is important to ensure that of access for various users. the electronically submitted data carries the ▪▪ same legal weight and status as paper submis- Ensure compatibility with other data sys- sions (Chiu 2012). This can be accomplished tems–Other data systems can include national by including a provision in the regulation that inventories and emissions trading registry, as accords electronically submitted information, relevant. For example, aligning with national electronic signatures and a certification state- inventories requires that source and sector ment the same legal weight as signed paper definitions are consistent in the two systems submissions. For example, the U.S. EPA’s and entities report source-level data that can Cross-Media Electronic Reporting Regulation be aggregated for use in the inventories (Singh, (CROMERR) has set standards for electronic Damassa, et al. 2014). To ensure compatibil- submittals so that they can be treated at ity with trading registries, the measurement, par with corresponding paper submittals (U.S. EPA 2012). 60 WRI.org | thePMR.org Table 11 | Comparing Independent and Integrated Data Management Systems INDEPENDENT DATA MANAGEMENT SYSTEMS INTEGRATED DATA MANAGEMENT SYSTEMS ADVANTAGES ▪▪ May be developed more quickly ▪▪ Lower reporting burden because data needed under mul- ▪▪ Likely to be simpler, less costly tiple policies is reported only once ▪▪ Allows for greater coordination and comparison across different policies ▪▪ Easier to aggregate and analyze data CHALLENGES ▪▪ Difficult and more time consuming to aggregate and com- ▪▪ Likely to have higher setup costs pare data across different systems ▪▪ More time is needed up-front to identify and align data ▪▪ Operating multiple independent systems may impose higher costs in the long run requirements of separate policies ▪▪ Separate training likely required for each system Source: PMR 2013e. 4.4.2 Data disclosure and confidentiality that emissions and activity data can reveal valuable information to competitors. Data on production, Promoting emissions disclosure and transparency raw material consumption, facility operation, and in emissions reporting may be an objective for some future operations can be used to glean sensitive reporting programs. Thus, the way in which the information on capacity, market position, and costs. data are shared publicly is another key program Disclosure of such information may harm competi- design element. The reported data may be disclosed tors and/or consumers (U.S. Federal Trade Com- in a summary form or may be disaggregated and mission 2010). It is important to treat confidential searchable through an online database. information in a way that builds trust among reporters without sacrificing the transparency and In addition, programs may present annual data usability of reported data. Program administrators analysis identifying trends and statistics such as can evaluate the sensitivity around these issues distribution of emissions by geographic location among the reporters during the stakeholder consul- and economic sector, total number of entities tation phase. Programs should also check for any reporting by location and sector, total direct and existing laws governing confidentiality of reported indirect emissions reported, and trends in total data in their jurisdictions. emissions over time. The way in which reporting entities’ confidential- Table 12 summarizes the ways in which the data ity concerns are resolved plays a crucial role in submitted under different programs are publicly determining what information is publicly disclosed. disclosed in terms of access to information, data For example, the U.S. EPA requires emissions data presentation, and the level at which they are shared. of all covered facilities to be reported and avail- Confidentiality issues related to commercially sensi- able to the public. However, certain activity data tive data can be a major concern for reporters given that are inputs to emissions calculations, which Guide for Designing Mandatory Greenhouse Gas Reporting Programs 61 Table 12 | Public Access to Data in Different Programs Data Element/ European United United Australia California Canada Francea Japan Turkey Information Union Kingdom States I. ACCESS TO DATA Public access to information Information available on a centralized online platform II. DATA PRESENTATION Downloadable format (pdf or Excel files) Information online (web pages) Searchable/ interactive database III. LEVEL OF DETAIL By individual GHGs Facility level b Corporate level e Sector level Geography- d basedc Notes: a. France launched an online database in March 2015. Data submission is voluntary but it will become mandatory after a new law (the Energy Transition for Green Growth Act) comes into force. b. Facility data is publicly available for electricity generators only. c. Some programs allow viewers to access emissions data for their choice of geographic units such as a state or province. d. The Clean Energy Regulator plans to publish summaries of emissions in different states. e. Some corporate entities required to report indirect emissions. Sources: Singh and Mahapatra 2013; Icmeli 2015b; Prosser 2015b. 62 WRI.org | thePMR.org are considered sensitive business information, are petitiveness. However, if someone files a request declared confidential and not disclosed (U.S. EPA for public information, the reporter, rather than the 2011). Further, the disclosed data is aggregated in a program administrator, must defend data confiden- manner that it cannot be used to back-calculate the tiality (Singh and Mahapatra 2013). confidential information. In Canada, facilities can request confidentiality Similarly, the Californian program recognizes GHG by submitting a written request with appropriate emissions as publicly available information. Other justification and supporting documentation to the information, such as activity and process-related program administrator. They can also appeal within data reported to the program administrator, can 30 days if the confidentiality request is denied be designated as confidential business informa- (Environment Canada 2015). The Japanese report- tion. This designation allows the reporter to protect ing program also allows requests to treat certain information that could potentially threaten its com- data as confidential (Singh and Mahapatra 2013). REPORTING P LATFORMS A ND DATA D I S C LO S U R E Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Data management systems range from sim- ple spreadsheets to sophisticated web-based ▪▪ Is development of the data management system based on factors such as the number systems, which can serve many functions. of reporters, ease of reporting, availability ▪▪ Important considerations in designing reporting systems include incorporating of features to facilitate compliance, need for security, potential for scale up, and align- ment with other systems? ▪▪ features to promote consistency, minimize errors, enable verification, ensure security Is the decision regarding what level of data and data confidentiality, and ensure com- is publicly disclosed based on program ob- patibility with other data systems. jectives as well as confidentiality concerns? ▪▪ Programs need to find a balance between disclosure and protecting confidential Are data disclosure and confidentiality rules consistent with domestic laws governing business information. commercially sensitive information? Guide for Designing Mandatory Greenhouse Gas Reporting Programs 63 4.5 Quality Control and ▪▪ Calculation and monitoring methods Quality Assurance ▪▪ Data validation ▪▪ This design element focuses on ensuring that high quality, accurate data are reported to the program. Compliance assistance Quality control (QC) and quality assurance (QA) measures enhance quality along the entire chain of Calculation and Monitoring Methods data collection, quantification, monitoring, report- Programs can prescribe calculation and monitoring ing, and verification. Programs can develop quality methodologies for reporting entities to facilitate control and assurance requirements to improve submission of high quality data. Chapter 4.2.4 transparency, consistency, comparability, com- discusses programs’ role in prescribing calculation pleteness, and confidence in emissions estimates methodologies. In addition, programs can require (IPCC 2000). a complete documentation of the methodologies employed by reporters in the form of a monitoring Both QC and QA improve data quality, but each plan, as in the EU program. The monitoring plan, refers to a distinct set of activities and the terms which serves as a manual for the facility operator are not interchangeable. While QC is conducted by to monitor and report emissions, is considered the responsible staff of the reporting entity during the most important management instrument for the data collection and reporting process, QA is under- reporting entity in the EU program. A monitoring taken by an independent party after emissions have plan can include information, such as: ▪▪ been calculated and an initial emissions report has been prepared (Figure 9). Basic information to identify the installation including the contact person’s information. 4.5.1 Quality control Quality control refers to routine and consistent ▪▪ A list of GHG emission sources, and fossil fuels, raw materials or intermediate products that checks applied during all stages of preparing an need to be monitored to calculate emissions. emissions report, from data collection to final For example, for a district heating facility that reporting. Programs can focus their quality control burns natural gas and light fuel oil to produce measures in the following areas: heat, emission sources include a natural gas fired boiler and a light fuel oil fired boiler. Figure 9 | Q  uality Control and Quality Assurance Activities in a GHG Reporting Program QUALITY QUALITY CONTROL ASSURANCE ACTIVITIES ACTIVITIES Emissions Reporting Emissions Collecting Emissions Emissions Report to Emissions Activity Activity Data Calculation Report Verification Registry Source: Adapted from (PMR 2013e) 64 WRI.org | thePMR.org ▪▪ Activity data (e.g., estimated quantity of fuel consumed) and calculation factors (e.g., emis- responsibility, cross checking fuel volume on supplier invoices with the reading on the gas sion factor values, their sources and tiers, and meter, ensuring that at least two people review rationale for the choice of emission factor used). the final emissions report, data archiving) ▪▪ (Box 4). Description and rationale for the emissions quantification approaches used (discussed in Programs can provide a template on their websites Chapter 4.2). to develop the monitoring plan.10 Reporting entities ▪▪ Description of “who takes what data, when, from where and how, and does what with it” to ensure can submit the completed template at the beginning of the reporting period for administrator’s approval. For instance, the EU program requires installations that data are produced, collected, processed to submit a monitoring plan to the relevant com- and stored in a controlled way. This identifies: petent authority at the national level for approval. □□ Who is responsible for data collection The U.S. EPA asks entities to prepare a plan though (positions of responsibilities, job titles) it does not require them to submit it to the agency □□ What is to be measured or tracked and how (U.S. EPA 2009a). Programs can also advise report- frequently (e.g., fuel volume every month, ing entities to regularly collect this information amount of raw material consumed in a kiln even if there is no requirement to put it together as on a daily basis, net calorific value to be a plan. determined every time a new batch of fuel is consumed) □□ How is it measured or where is it found (e.g., sales invoices from the fuel supplier, reading from a gas flow meter or a weighing scale, a publicly available data source) □□ Where is it recorded (e.g., in a physical file, in entity’s IT-based data management system). ▪▪ Assessment of risks of errors, misrepresenta- tions and omissions in data collection and monitoring. Risk may arise from: □□ Human-induced factors; for example, the operator fails to read digital display on gas flow meter, misreads it, or records it incor- rectly (e.g., transposes numbers or copies data incorrectly) □□ Equipment related factors; for example, flow meter display disappears, weighing scale malfunctions □□ Data transmission and archive factors; for example, electronic data transmission fails to work, data collection software becomes corrupted. ▪▪ Description of quality control measures to miti- gate the identified risk of misstatements. These will be a combination of source- or process-spe- cific measures as well as generic measures (e.g., periodic staff training, assigning clear lines of Guide for Designing Mandatory Greenhouse Gas Reporting Programs 65 Depending on their capacity, programs may also are submitted. Data management systems can conduct site inspections to ensure that the report- incorporate various types of checks, range checks, ing entity’s monitoring plan reflects actual practice. year-to-year checks, statistical checks, and algo- For example, the program administrator may verify rithm checks—to alert the reporter to potential that the installed meters are of the type discussed errors during data entry. For example, the U.S. in the plan, that necessary records are retained and EPA’s electronic reporting system provides real- archived as stated in the plan, and that all GHG time validation of data with the help of over 4,000 sources have been identified (European Commis- built-in checks, which detect common mistakes sion 2012a). Information in the monitoring plan such as missing data or cases in which the entered can be revised as frequently as needed to reflect value is outside the expected range (Chiu 2014). changes in production processes, monitoring The Australian program also has built-in valida- instrumentation, addition of new emitting activi- tions and cross checks in the data management ties, and other relevant changes. system to detect data entry or calculation errors. Data Validation Compliance Assistance Programs can improve quality control by estab- Programs can ensure quality control by building lishing a number of controls in data management capacity around the reporting program’s require- systems to validate data before emissions reports ments—a “compliance assistance activity.” Through training and information dissemination, factsheets, interactive technical manuals, minicourses on the reporting system, online resources such as FAQs, and help desks, programs can support entities in their reporting and facilitate compliance with reporting requirements. Programs in Australia, California, Canada, the European Union, Turkey, and the United States provide many examples of compliance assistance measures. For example, the BOX 4 | QUALITY CONTROL MEASURES European Commission maintains an up-to-date APPLIED IN A COAL-FIRED POWER website with guidance material such as a sample PLANT monitoring plan and templates for emissions report. The U.S. reporting program conducts A coal-fired power generation plant uses the quantity of coal targeted meetings and webinars during the report- combusted in the power generation process as key input data ing window each year; and provides a help desk, to quantify its GHG emissions. The primary source of this input detailed sector-specific guidance, and factsheets for data is a device that weighs coal right before its combustion. all emission sources; a comprehensive list of FAQs; The power plant can adopt the following quality control a monitoring checklist; and slide decks to facilitate measures: ▪▪ Cross reporting. The Canadian program provides techni- check – metered quantity of fuel consumption can cal information through seminars, conferences, and be cross checked with annual energy balance, which is based on purchased fuel quantities and changes in stock. training materials. ▪▪ Accuracy of monitoring device – weighing device can be calibrated in accordance with the local or national stan- 4.5.2 Quality assurance dards, or as per manufacturer’s specifications. Quality assurance or verification refers to periodic ▪▪ Staff training– periodic training can be arranged for data collectors. reviews of the emissions report performed by inde- pendent experts11 after quality control procedures ▪▪ Data archiving– original monitoring records can be archived in the internal database. have been implemented. These assessments verify that the reported information represents the best possible emissions estimates given available data (IPCC 2000). They provide additional confidence that the reported results are complete, consistent, accurate, transparent, and relevant. 66 WRI.org | thePMR.org It is not practical for assurance providers to Assurance Methods assess the accuracy of every piece of data used in A reporting program can employ one or more of the emissions calculations; therefore, the risk-based following methods for quality assurance (Table 13): approach is often used. This approach begins with a comprehensive risk evaluation of misstatements, ▪▪ Self-certification by the reporting entity ▪▪ which involves reviewing the emissions sources, calculations, data flow, and quality control mea- Review by program administrators sures to identify areas with the greatest potential for error. ▪▪ Third-party verification Based on the risk assessment results, the assurance In practice, self-certification is commonly seen provider will typically select samples representing across programs and is applied in combination with the entity’s data collection and management the other two approaches. Further, it is possible for systems, input data, methodologies, and monitoring programs to apply all three approaches together as systems and review these closely for misstatements program administrators may perform some form of or misrepresentation of the entity’s emissions. audit (e.g., random desk reviews) even for third- Programs can define when a misstatement is party verified reports. considered significant or “material” in terms of the percentage of total emissions. For example, Programs may select an assurance method based a material misstatement may be defined as on factors such as the program objectives, the cost the aggregate of errors, omissions, and/or for the program administrator and reporters, and misrepresentations that lead to a discrepancy of 5 existing capacity and resources within the pro- percent or more between reported emissions and gram to take on the verification role. For example, the assurance provider’s estimate. programs whose objective is to underpin trading schemes tend to favor third-party verification given their need for confidence in the robustness and completeness of data from each reporter. Table 13 | Quality Assurance Methods QUALITY ASSURANCE APPROACH DEFINITION Self-certification Formal assertion by the reporting entity of the accuracy of its emissions report Review by program administrators External review undertaken by the program administrator Third-party verification Review by a qualified third party Guide for Designing Mandatory Greenhouse Gas Reporting Programs 67 SELF-CERTIFICATION The presence of adequate internal assurance and Self-certification is a quality assurance statement quality control processes can increase an entity’s issued by the reporting entity to confirm that it management’s confidence in reported data and help complies with program requirements and to declare it self-certify its emissions without hesitation. Inter- that the GHG emissions are correctly estimated nal assurance is performed by staff members from (Table 14). Programs may require reporting entities within the reporting entity who were not involved to self-certify their emissions report irrespective in the GHG emissions reporting process. It can help of whether another quality assurance approach is reporting entities identify and correct errors and mandated (Box 5). However, self-certification alone further strengthen quality control measures before is typically not considered sufficient assurance of the emissions report is submitted to the program or the reliability and accuracy of reported information, before third-party verification is sought. especially when the reporting program is support- ing emissions trading. Given the high degree of REVIEW BY PROGRAM ADMINISTRATORS confidence required in emissions data in such cases, Under this approach, the program administrator assurance from an independent, external agency verifies the reported data and conducts audits to carries more weight. Most programs review the assess compliance with the program requirements reported data themselves or require third-party veri- (see Table 14). Thus, the program design needs to fication in addition to self-certification (Table 15). include detailed reporting requirements for the administrators to have sufficient information to verify emissions estimates. For instance, entities may be required to provide detailed information on activity data, calculation methodologies, and monitoring procedures, and maintain records to be made available during audits and site visits. This approach is similar in process to third-party verification (discussed in next Chapter). It includes BOX 5 | SELF-CERTIFICATION UNDER THE activities such as reviewing the monitoring plan, U.S. REPORTING PROGRAM evaluating submissions for errors and inaccuracies, conducting site visits to check the implementation The U.S. reporting program requires reporting entities to of quality control measures, interviewing personnel, appoint a “designated representative,” who certifies and reviewing records, and performing independent signs GHG emissions reports submitted to the program. The tests of monitoring systems. designated representative electronically signs the following certification statement with the entity’s submission: Most reporting programs include some form of review by the program administrator, even if they “I am authorized to make this submission on behalf of the owners and operators of the facility or supplier, as applicable, require third-party verification. For example, the for which the submission is made. I certify under penalty of Australian, Canadian and U.S. reporting pro- law that I have personally examined, and am familiar with, the grams perform this kind of review. The Australian statements and information submitted in this document and all program administrator validates data before it is its attachments. Based on my inquiry of those individuals with published to identify order of magnitude errors, primary responsibility for obtaining the information, I certify that the statements and information are to the best of my knowledge query major shifts in emissions from a particular and belief true, accurate, and complete. I am aware that there facility or source, and so on (Prosser 2015b). Envi- are significant penalties for submitting false statements and ronment Canada conducts compliance and data information or omitting required statements and information, quality checks of the submitted data and follows including the possibility of fine or imprisonment.” up with facilities if there are questions (Environ- ment Canada 2015). Similarly, the U.S. EPA uses Source: U.S. EPA 2009a. electronic data checks and staff performs manual reviews of the data and emission reports. It also has the authority to conduct audits and site visits of the reporting entities. 68 WRI.org | thePMR.org This approach is less costly to the reporter com- pared with the costs of third-party verification Most reporting because it does not involve a verification fee. But it requires more time and resources on the part of the programs include program administrator. However, administrators can choose whether to build their own technical some form of review capacity, or potentially outsource some quality assurance tasks. Outsourcing this activity to con- by the program tractors is different from third-party verification because programs typically maintain oversight of administrator, even the contractors and reporters do not pay for the review, as is often the case for third-party verifica- if they require third- tion. The first few years of the program may require more quality assurance activities including audits party verification. and site visits, as reporting entities become familiar with reporting requirements and calculation and monitoring methodologies. Programs may manage their own costs related to emissions verification by adopting rigorous quality control measures to improve the quality of submissions (ERG 2009). Third-party verification typically includes the following steps: ▪▪ THIRD-PARTY VERIFICATION Obtaining an understanding of the entity’s Under third-party verification, independent veri- activities, including monitoring methodology fiers assess the accuracy of the emissions report and equipment, data flow, and quality control and its conformity with program requirements system (see Table 14) (The Climate Registry 2014). Many mandatory reporting programs, especially those directly supporting emissions trading schemes, ▪▪ Conducting a risk analysis of methodologies and control system to identify potential areas require third-party verification to ensure that the with significant risk of misstatements ▪▪ reported data are in compliance with regulations. For example, the Californian, EU, Mexican, and Verifying emission estimates by undertaking a Turkish programs require reporters to seek inde- detailed review (e.g., re-computing, reviewing pendent, third-party verification for their emission evidence, cross checking) of GHG data (e.g., reports. In Australia, the Clean Energy Regulator original data sources, spreadsheet calculations) conducts random audits and can require third-party and identifying material discrepancies verification if it has grounds to doubt the accuracy of reported data. Programs may also allow entities to voluntarily opt for third-party verification for a ▪▪ Preparing a verification report to record find- ings, which entities usually need to retain for a specified period of time (e.g., the California high degree of confidence in their emission reports, program requires facility operators to retain the given that verification findings can help improve the report for five years) entity’s internal emissions monitoring and report- ing process. ▪▪ Providing an assurance statement and discuss- ing areas for improvement. Verifiers must maintain their independence and are not al- lowed to offer their services to implement the findings. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 69 A well-laid out verification process combined with Programs may consider developing the verification a rigorous system to accredit verifiers and ongoing standard in advance of the first reporting period to regulatory oversight can enhance the overall quality allow time for verifiers to seek accreditation and of third-party verification and promote account- evaluate the first set of emission reports. Program ability. Programs can require that only accredited administrators can also ease reporters into the verifiers perform third-party verification, and process by implementing a transition period, which develop verification and accreditation standards to can be used to build verification experience and ensure high quality emission reports and qualified capacity among reporters as well as verifiers. For service providers. Under the Mexican program, for example, the Californian program made third-party example, verification bodies should be accredited by verification optional during the first year of the the Mexican Accreditation Entity (EMA) and should program (CARB 2008). If there are few qualified also be approved by SEMARNAT, the program verifiers, programs can begin with a pilot verifica- administrator. tion phase. Turkey’s program has adopted this approach to give potential verifiers an opportunity Program administrators can produce a verification to gain experience and eventually seek accredita- standard that explains the process verification bod- tion (Icmeli 2015b). Another approach is to require ies need to implement to verify reporters’ emis- reporters to verify their reports every few years sions. The standard can also include requirements instead of annually. For example, with only three for verifiers to seek accreditation and establish third-party verifiers in 2014, the Mexican program competency, impartiality, and independence. decided to require reporters to seek third-party Programs can also use the standard to provide verification once every three years. The program guidance on issues such as what constitutes a mate- will also phase in verification over time by requir- rial misstatement, level of assurance, a simplified ing only top emitters (more than 1 million tCO2e verification process where applicable, and how to [MtCO2e]) to verify their emissions in the first resolve disputes related to verification findings. reporting year (Alarcon-Díaz 2015a). They will need to decide, for example, the frequency of site visits during the verification process, how The cost of third-party verification varies depending often verification bodies will be changed to reduce on the size and complexity of the reporting entity, potential conflict of interest, and when to allow a scope of verification, existing quality control mea- simplified verification process. Program admin- sures, and available documentation of monitoring istrators may also retain general oversight of the and quantification methods. It can cost anywhere process and selectively participate in audits and site from US$5,000 to US$500,000 (Loreti 2001). In visits, as is done in California’s reporting program most GHG reporting programs, such as the EU (CARB 2008). program, reporting entities select the verifier and pay for verification. However, in China’s emissions As programs develop their verification standards, trading scheme pilot programs, the regulatory they can draw from internationally recognized authority assigns verifiers to reporting entities and standards, such as those from the International covers the cost of verification for the first one or two Organization for Standardization (ISO): years (Song 2014). ▪▪ ISO 14064-3 specifies the process that veri- fiers should undertake to establish the level of Programs that require third-party verification can also outline the process to accredit verifiers in an assurance, determine the verification approach, accreditation standard. Accreditation involves an assess GHG data and information systems, independent assessment of the verifier’s techni- evaluate GHG assertions, and prepare verifica- cal competence—in emissions accounting as well tion statements. as in calculation and measurement of GHGs from ▪▪ ISO 14065 provides requirements for verifica- tion bodies. specific sources and/or sectors—and impartiality to carry out verification in accordance with the program rules (European Commission 2012). It ▪▪ ISO 14066 provides competence requirements for verification teams. is granted by an accreditation body for a definite 70 WRI.org | thePMR.org period of time to perform verification activities Program administrators can work with an existing and assess reporting entities’ conformance with accreditation agency, as Turkey did, or set up a compliance requirements. The accreditation body new accreditation body. Or they may perform the may review the verifiers’ documents, visit their accreditation role themselves; for example, the Cali- premises to assess their management systems and fornia Air Resources Board also accredits verifiers. competence arrangements, and observe the verifier carrying out verification activities, for example, on It is common to accredit verifiers for a limited a site visit to a reporting entity. Once accreditation period of time, after which they are expected to has been granted, the accreditation body regularly seek accreditation again. For example, the national monitors verifiers’ performance to ensure consis- accreditation bodies in the EU program accredit tency and quality of the verification process. It also verifiers for up to five years at a time (European resolves disputes between reporting entities and Commission 2012d). Programs can publish a list of verifiers. Programs can draw from ISO 17011, which accredited verification bodies from which reporting provides general requirements for accreditation entities can choose. These lists can also indicate bodies assessing and accrediting verifiers. sector-specific expertise, as is done by the Califor- nian program (CARB 2008). Table 14 | Comparison of Quality Assurance Methods ADVANTAGES CHALLENGES QUALITY ASSURANCE (PROGRAM ADMINISTRATOR’S (PROGRAM ADMINISTRATOR’S APPROACH PERSPECTIVE) PERSPECTIVE) ▪▪ Puts the legal obligation to ensure accuracy on the entity May not instill sufficient confidence in the ▪▪ Relatively Self-certification reported data if it is the only quality assurance low-cost option (for both entity mechanism in place and the administrator) Review by program Carries a high level of confidence when ▪▪ Labor trator and cost intensive for the adminis- conducted in a rigorous and transparent manner ▪▪ Demands high level of technical capacity administrators per guidelines. ▪▪ Higher cost to the reporter that may affect program uptake Carries a high level of confidence when done by ▪▪ Relatively Third-party verification accredited third-party verifiers per guidelines costly option for the administra- tor if the cost is borne by the program Guide for Designing Mandatory Greenhouse Gas Reporting Programs 71 Table 15 | Assurance Methods in GHG Reporting Programs REVIEW BY PROGRAM INDEPENDENT THIRD-PARTY JURISDICTION SELF-CERTIFICATION ADMINISTRATORSa VERIFICATION Australia California b Canada European Union Japan Mexico Turkey United Kingdom United States Notes: a. Depending on the program, this could include random checks or systematic/periodic verification. b. California audits a random sample of GHG reports in addition to a full review by the third-party verifiers. Sources: Singh and Mahapatra 2013; Alarcon-Díaz 2015b; Icmeli 2015b. QUALITY CO NTROL A ND QUA LITY A S S U R A N C E Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Quality control and quality assurance mea- sures enhance quality along the entire chain ▪▪ Have measures been defined to enhance en- tities’ knowledge of rules and requirements of data collection, quantification, monitor- to ensure quality control? ▪▪ ing, reporting, and verification. Programs can prescribe calculation and ▪▪ What features does the data management system include that can help ensure quality monitoring methodologies, design data control? management systems, and undertake com- pliance assistance activities to ensure quality ▪▪ Have clear monitoring and calculation methodologies been provided to ensure control. ▪▪ quality control? For quality assurance, programs can require self-certification in combination with regu- ▪▪ Have quality assurance rules been estab- lished that take into account factors such as latory authority review, and/or third-party program objectives and costs to the reporter verification. ▪▪ and the administrator? Programs can develop verification and accreditation standards to streamline the ▪▪ Have clear guidance and standards for verifiers and accreditation agencies been third-party verification process. Further, developed to govern the third-party verifica- they can identify accreditation agencies to tion process? provide oversight for verifiers. 72 WRI.org | thePMR.org Strong enforcement measures can lead to improved participation and compliance rates. The nature of enforcement measures may be influenced by pro- gram objectives; for example, in programs support- ing emissions trading schemes, a strong enforce- ment mechanism is needed so that the scheme’s integrity is maintained and noncompliance does not diminish the value of emission allowances. Programs may want to ensure that reporters are familiar with the repercussions of noncompliance before the reporting period begins. Programs can establish a set of instruments to be used in case of noncompliance. These may range from soft options such as notifications asking entities to comply within a defined time period, to hard options such as imposing monetary fines and criminal penalties. Depending on the gravity of offense, programs may choose to apply the enforce- ment instruments in sequence starting with the softer options. For example, while the Australian 4.6 Enforcement program administrator provides help and education Programs can establish enforcement measures for minor violations, it has the mandate to initi- to ensure that all entities report their emissions ate investigations and pursue civil action for more accurately, submit them on time, and perform serious violations. For cases that involve consistent revisions as needed. Even though reporting pro- violations or dishonest behavior, the program grams’ emphasis is often on facilitating voluntary administrator may issue infringement notices or compliance, enforcement measures may be needed, pursue court action, and both actions are made for example, when an entity fails to comply with public. Additionally, the program issues fines of up program requirements despite the program admin- to US$285,000 (AUD 340,000) for failure to apply istrator’s repeated efforts. If third-party verification for registration and applies daily fines of up to is required, programs need to specify measures that US$14,000 (AUD 17,000) for each day of noncom- can be taken against a verifier who does not comply pliance (CER 2014c). The EU program publishes with the verification requirements. the names of the noncomplying reporters in addi- tion to imposing penalties. ENFORCEM ENT Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Enforcement measures ensure that report- ers provide the required information in a ▪▪ Have enforcement measures been developed to improve compliance rates and realize the timely manner and perform revisions if program objectives? needed. ▪▪ Programs can apply various options, ranging from soft (e.g., notifying reporters to comply by a deadline) to hard (e.g., fines and crimi- nal penalties) measures to enforce the rules and requirements. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 73 74 WRI.org | thePMR.org CHAPTER V PROGRAM REVIEW Review refers to comprehensively examining the design and implementation of the greenhouse gas reporting program to assess its effectiveness and undertake modifications as needed. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 75 Periodic program reviews help in (Sachweh 2014): ties’ quality assurance process, and the overall level ▪▪ of compliance. Process-focused reviews may be Lending credibility to the programs in the same carried out frequently to provide timely feedback way that the quality assurance process brings to the program administrator on how efficiently the credibility to the reporting entities’ emissions program is being implemented. reports ▪▪ Receiving constructive feedback from stake- holders through a systematic process and Assessment of the program’s substantive details may include reviewing each design element to ensure that it continues to be relevant. Questions identifying areas of improvement to be asked include, for example, whether the ▪▪ Giving policymakers evidence to demonstrate the program’s utility and its impact, and justify program should consider new objectives, whether the applicability threshold needs to be revised, allocating resources for the program whether the calculation and monitoring methodolo- ▪▪ gies have been updated as needed, and what kinds Examining whether the program is fulfilling its of outreach and information dissemination efforts defined objectives are being implemented to facilitate compliance. ▪▪ Assessing capacities and resources The review could also assess which data have been particularly useful (or not useful) to data users, ▪▪ Identifying good practices, inefficiencies, and any requirements that are not being met such as government agencies, as well as which data have been particularly problematic for entities to ▪▪ report and why. Providing oversight and avoiding complacency Finally, the review can assess a program’s impact, Reviews may be focused on the program’s process, which may be measured in terms of indicators such its substantive details, and/or its impact. as the number of entities reporting to the program, emissions coverage, or progress made toward Review of a program’s process may include assess- program objectives. For example, has the program ing aspects such as administrative efficiency (for improved data quality or informed national inven- example, how quickly does the program answer tories? This kind of review can also be performed reporters’ queries? Are tools made available to every few years to ensure that the program contin- reporting entities to facilitate compliance?), data ues to generate meaningful impact. security, the degree of oversight on reporting enti- 76 WRI.org | thePMR.org Program administrators may want to determine details regarding who should conduct the review Reviews lend and how the review is to be conducted. These details can be integrated into the rulemaking credibility, facilitate process itself to formalize the review process. Reviews may be conducted at a predefined inter- stakeholder val by an independent body, which ensures an impartial, objective assessment. The independent feedback, identify assessment can also seek systematic feedback from stakeholders. For example, the Australian govern- good practices and ment established the Climate Change Authority, an independent agency that conducts reviews of many inefficiencies, of Australia’s climate change policies including the GHG emissions reporting program. The review and demonstrate requirement is part of the National Greenhouse and Energy Reporting Act, which states that the program impact. Authority should conduct periodic and special reviews of the legislation. Whereas periodic reviews are undertaken every five years, special reviews can Other programs undertake regular revisions based be conducted at the environment minister’s request on ongoing stakeholder feedback and their imple- (Australian Government 2014a). Each review mentation experience rather than conducting a includes public consultation and must be submit- formal, periodic review process. For example, Cana- ted to the environment minister and published dian program administrators reduced the economy- on its website (Climate Change Authority n.d.). wide emissions threshold from 100,000 tCO2e to The Australian Department of the Environment 50,000 tCO2e in 2009—five years after the program also conducts an annual review of the National had been introduced (Environment Canada 2010). Greenhouse and Energy Reporting (Measurement) The U.S. EPA issues amendments for technical Determination, the technical guidelines for calcu- corrections and general revisions as needed. It lating emissions. seeks feedback from stakeholders through a public comment period before amendments are finalized (U.S. EPA 2014c). PROGRAM REV IEW Key Considerations Checklist of Questions to Guide Decisionmaking ▪▪ Reviews lend credibility to the program, facilitate feedback from stakeholders, help ▪▪ Does the review process specify who will conduct the review and how often? identify good practices as well as inefficien- cies, and provide an opportunity to demon- ▪▪ Does the scope of the review process con- sider potential benefits such as assessing strate the program’s impact. ▪▪ progress made against objectives, lending Programs can formalize a review process credibility to the program, and identifying in the authorizing legislation by designating good practices and inefficiencies? who should conduct the review and how often. ▪▪ Reviews can focus on the program’s process, its substantive details, and/or its impact. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 77 78 WRI.org | thePMR.org APPENDIX A EXAMPLES OF APPLICABILITY REQUIREMENTS IN GHG REPORTING PROGRAMS This appendix shows the requirements used by 11 of the 13 GHG gases must be reported. The two programs not included here are reporting programs reviewed in this report to determine which proposed programs that have not yet set official requirements. entities are required to report their greenhouse gases and which Table A1 | Type of Applicability Requirements in GHG Reporting Programs, Description, and GHGs Reported GREENHOUSE TYPE OF GAS (GHG) APPLICABILITY DESCRIPTION GHGS TO BE REPORTED REPORTING REQUIREMENT PROGRAM Australia National Emissions and energy threshold ▪▪ Allmetric facilities must report if annual emissions ≥ 25,000 tons of CO e (tCO e) or if the total amount of Facilities must report CO2, CH4, N2O, SF6, specified 2 2 Greenhouse and energy produced or consumed ≥ 100 terajoules HFC and PFC emissions Energy Reporting Scheme ▪▪ All50,000 corporate groups must report if annual emissions ≥ tCO e or if the total amount of energy produced or 2 consumed ≥ 200 terajoules California Mandatory Emissions threshold and ▪▪ AlltCOfacilities e must report if annual emissions ≥ 25,000 Facilities must report CO2, CH4, N2O, SF6, HFCs, PFCs, ▪▪ Some 2 GHG Reporting source categories source categories are required to report irrespective NF3, and other fluorinated Program of emission levels (e.g., cement production, lime GHG emissions manufacturing, petroleum refineries) ▪▪ Facilities can opt for abbreviated reporting if combustion and process emissions are ≥ 10,000 tCO e and < 25,000 2 tCO2e ▪▪ Suppliers of petroleum products, natural gas and natural gas liquids, and carbon dioxide must report if annual emissions that would result from consumption of products produced and sold are ≥ 10,000 tCO2e Canada GHG Emissions Emissions threshold All facilities must report if total annual direct emissions ≥ 50,000 tCO2e ▪▪ Facilities must report CO , CH , and N O 2 4 2 Reporting emissions Program ▪▪ Facilities must also report SF , PFC, and HFC 6 emissions originating from industrial processes or industrial product use Guide for Designing Mandatory Greenhouse Gas Reporting Programs 79 GREENHOUSE TYPE OF GAS (GHG) APPLICABILITY DESCRIPTION GHGS TO BE REPORTED REPORTING REQUIREMENT PROGRAM European Union Emissions Emissions Trading threshold, ▪▪ Allmegawatts facilities with a total rated thermal input exceeding 20 ▪▪ Facilities must report CO (MW) (except in facilities for incineration of emissions 2 System production hazardous or municipal waste) must report ▪▪ Facilities that produce tonnage, and source categories ▪▪ Specific source categories are required to report irrespective of emissions level (e.g., production of primary aluminum must also report PFC aluminum, ammonia, and coke, refining of mineral oil) emissions ▪▪ Specific production tonnage requirements by industry (e.g., manufacture of glass: melting capacity that ▪▪ Facilities that produce nitric, adipic, glyoxal, exceeds 20 metric tons/day, production of steel: capacity and/or glyoxylic acid exceeding 2.5 metric tons/hour) must also report N2O emissions France Number of Companies with 500 employees or more, public bodies with Entities must report CO2, Bilan d’Emission employees 250 employees or more, and local authorities with more than CH4, N2O, HFC, PFC, and SF6 de GES 50,000 inhabitants must report emissions emissions Japan Mandatory GHG Emissions threshold, energy ▪▪ consumption For energy origin CO , all entities with annual energy 2 ≥ 1,500 kiloliters crude oil equivalent All facilities must report CO2, CH4, N2O, HFC, PFC, and SF6 Accounting and Reporting System threshold, number of employees, and ▪▪ must For nonenergy CO as well as for other GHGs, all entities 2 report if annual emissions ≥ 3,000 tCO e and the emissions transport capacity company has at least 21 employees 2 ▪▪ Entities with specified transport capacities must report (e.g., those that have passenger transport with at least 300 railroad cars or 200 buses) Mexico Emissions Facilities and companies must report if annual emissions ≥ All facilities must report CO2, National threshold 25,000 tCO2e (covers specific activities within the energy, CH4, N2O, HFC, PFC, HCFC, Emissions transport, industry, agriculture, waste, and business/service CFC, SF6, NF3, halogenated Registry sectors) ether, halocarbon, and black carbon emissions from sources including mobile sources Norway Emissions Emissions Trading threshold, ▪▪ Allmegawatts facilities with a total rated thermal input exceeding 20 ▪▪ Facilities must report CO (MW) (except in facilities for incineration of emissions 2 System production hazardous or municipal waste) must report ▪▪ Facilities that produce tonnage, and source categories ▪▪ Specific source categories are required to report irrespective of emissions level (e.g., production of primary aluminum must also report PFC aluminum, ammonia, and coke, refining of mineral oil) emissions ▪▪ Specific production tonnage requirements by industry (e.g., manufacture of glass: melting capacity that ▪▪ Facilities that produce nitric, adipic, glyoxal, exceeds 20 metric tons/day, production of steel: capacity and/or glyoxylic acid exceeding 2.5 metric tons/hour) must also report N2O emissions 80 WRI.org | thePMR.org GREENHOUSE TYPE OF GAS (GHG) APPLICABILITY DESCRIPTION GHGS TO BE REPORTED REPORTING REQUIREMENT PROGRAM Turkey GHG Reporting Emissions threshold, ▪▪ Allexceeds facilities must report if aggregated rated thermal input ▪▪ Facilities must report CO 20 MW emissions 2 Scheme production tonnage, and ▪▪ Specific source categories are required to report irrespective of emissions level (e.g., production of ▪▪ Facilities that produce primary aluminum source categories aluminum and ammonia, refining of mineral oil) must also report PFC ▪▪ Specific production tonnage requirements by industry emissions (e.g., manufacture of glass: melting capacity that exceeds 20 metric tons/day, production of steel: capacity ▪▪ Facilities that produce nitric, adipic, glyoxal, exceeding 2.5 metric tons/hour) and/or glyoxylic acid must also report N2O emissions United Kingdom Publicly traded All UK incorporated companies whose equity share capital All entities must report CO2, GHG Reporting companies is listed officially on the main market of the London Stock CH4, N2O, HFC, PFC, and SF6 Program Exchange, a European Economic Area, or has dealt on the New emissions York Stock Exchange/NASDAQ must report annual emissions United States GHG Reporting Emissions threshold, energy ▪▪ Some source categories must report irrespective of emission levels (e.g., production of cement, aluminum, ▪▪ AllCOfacilities must report , CH , and N O2 4 2 Program threshold, and lime manufacturing, and industrial waste landfill) emissions source categories ▪▪ Some source categories must report if annual emissions ≥ ▪▪ Some sectors require 25,000 tCO e (e.g., production of lead, iron and steel, and reporting of additional 2 pulp and paper manufacturing) GHGs (e.g., aluminum ▪▪ Facilities not covered by the source category requirements above must report if annual emissions ≥ 25,000 tCO e production: CF4 and C2F6; magnesium and the aggregate maximum rated heat input capacity of 2 production: SF6) the stationary fuel combustion units at the facility is 30 million metric British thermal units per hour (mmBtu/hr) or greater ▪▪ Some suppliers must report GHG quantities that would result from consumption of produced and sold products irrespective of emission or energy levels (e.g., petroleum refineries that distill crude oil, all producers of coal-to- liquid products, industrial GHGs, CO2 suppliers) ▪▪ Some suppliers must report if they meet emissions or energy threshold requirements (e.g., importers/exporters of an annual quantity of coal-to-liquid products and petroleum products where emissions that would result from consumption of imports and exports would be equivalent to ≥ 25,000 tCO2e, local natural gas distribution companies that deliver ≥ 460,000 thousand standard cubic feet of natural gas per year) Note: See Abbreviations for names of greenhouse gases. Sources: (U.S. EPA 2009a; CARB 2013b; CARB 2014b; CER 2014d; Defra 2013; Diario Oficial de la Federación 2014; Environment Canada 2015; The European Parliament 2009b; Citepa 2014; Ministry of the Environment (Japan) 2014; Ministry of Environment and Urbanization (Turkey) 2014. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 81 APPENDIX B: CATEGORIZING EMISSIONS factors are to be used in the absence of better information about the qualities of fuels or raw materials used at a particular facility. CALCULATION METHODS IN TIERS Qualities refer to carbon, ash, and moisture content of a fuel and may vary significantly from source to source. Programs often provide emissions quantification methodology for individual emission sources and categorize them in data-quality This method is useful for fuel sources that are relatively tiers. This appendix describes how the Australian, EU, and U.S. homogenous (e.g., standard liquid fossil fuels that are expected programs define tiers to classify quantification methods. to be similar across most facilities). If better information on fuel qualities is available, the reporter may use methods 2 or 3. Australia’s reporting program METHOD 2: This method depends on sampling and analysis In Australia, the National Greenhouse and Energy Reporting of fuels or raw materials actually used in the facility. It requires (Measurement) Determination 2008 (Australian Government the use of more accurate, facility-specific calculation factors 2014b), provides methods to calculate GHG emissions under based on the qualities of fuels or raw materials (e.g., for solid the National Greenhouse and Energy Reporting Act of 2007 fuels, these qualities refer to carbon, ash, and moisture content (Australian Government 2014a). It is revised annually to reflect of the fuel). Therefore, this method is appropriate for fuels whose updates to emission factors and improvements in estimation qualities vary depending on the source, such as coal. methods, and in response to stakeholder feedback. The method requires that representative and unbiased samples of Emission sources covered in the Measurement Determination fuels consumed in the facility be obtained for analysis. Fuel and include fuel combustion for energy; fugitive emissions from the raw material analysis must be done in accordance with Australian extraction of coal, crude oil, and natural gas; industrial processes; or equivalent international standards. and waste management. The Measurement Determination provides detailed requirements and descriptions of information METHOD 3: This method is very similar to method 2, needed to calculate emissions, including methods, equations, except that it requires both sampling and analysis of fuels or raw how to estimate the quantity of fuel used, and procedures for materials in accordance with Australian or equivalent international sampling and analyzing fuels and raw materials. standards. (Method 2 requires Australian or equivalent international standards to be followed for analysis only, not for The Measurement Determination is accompanied by technical sampling.) guidelines that provide additional guidance and industry examples to help reporters understand and apply the calculation METHOD 4: This method involves direct measurement of methods. GHG emissions by either continuous or periodic monitoring. The Measurement Determination provides requirements for design, The Measurement Determination lays out four methods of installation, and maintenance of direct emissions measurement quantifying emissions, three of which depend on calculations, systems, including requirements for location of sampling while the fourth involves direct measurement (Figure B1) positions, measurement of flow rates and gas concentrations, (Australian Government Department of the Environment 2014c). and the frequency of measurements based on internationally recognized standards and practices. Reporters using this method METHOD 1: Method 1 specifies the use of national average are also required to reconcile the emissions value against an factors as emission factors. The Measurement Determination estimate obtained using method 1 if it is available. provides a list of average factors for different sources. These Figure B1 | Methods to Estimate CO2 Emissions Under the Australian Reporting Program METHOD 1 METHOD 2 METHOD 3 METHOD 4 ▪▪ Calculation based ▪▪ Calculation based ▪▪ Same as method 2, ▪▪ Based on direct ▪▪ Uses national default ▪▪ Uses facility-specific BUT: measurement of emission factors emission factor: ▪▪ Uses Australian or emissions which are provided in the quantification sampling and analysis of fuel or raw materials equivalent international standards for both ▪▪ Must be reconciled with emissions estimate requirements actually used in the fuel or raw material using method 1 facility sampling and their ▪▪ Analysis as per Australian or equivalent analysis international standards 82 WRI.org | thePMR.org The Measurement Determination allows reporters to select one of The next step is to determine whether the emission sources these methods to calculate emissions for each source. Reporting are major, minor, or de-minimis. The program defines these entities have the flexibility to select a method according to their categories as: capacity level and data availability with some exceptions. For ▪▪ Major sources—All sources not defined as minor or de-minimis. ▪▪ Minor example, for CH4 and N2O emissions from solid fuel combustion, only method 1 is prescribed because solid fuels are a minor sources—Sources that add up to less than 5000 tCO e/ 2 source of emissions for these two GHGs (Table B1). Similarly, year or to less than 10 percent of the total of all monitored emis- direct measurement is the only method prescribed to estimate sions, up to a total of 100,000 tCO2e/year, whichever is higher in fugitive emissions of CH4 and CO2 from coal extraction in terms of absolute value. underground mines. Method 1 cannot be used to calculate emissions from solid fuel combustion by electricity generation ▪▪ De-minimis sources—Sources that add up to less than 1,000 metric tons of CO e per year (tCO e/year) or, less than 2 percent 2 2 facilities with a capacity of 30MW or more and generating more of the total of all monitored emissions, up to a total of 20,000 than 50,000MWh of electricity in the reporting year. tCO2e/year, whichever is higher in terms of absolute value. These sources should no longer be included in minor sources. The European Union’s reporting program The EU program defines tiers for each of the two emissions The European Commission regulation on monitoring and quantification approaches: calculation-based and direct reporting of GHG emissions includes rules governing the measurement. In general, the program requires higher-tier quantification of emissions (European Commission 2012b). In methods for major sources, while lower-tier methods may be used addition, the program has developed detailed guidance to support for minor sources. reporters in implementing the program rules. The program requires reporters to follow a three-step process Calculation-based approaches (Figure B2) to determine which calculation method to apply. For calculation-based approaches, tiers are defined for activity Reporters begin by categorizing themselves into category A, data as well as for emission factors. B, or C according to their average annual emissions (Table B2) (European Commission 2012a). For the activity data (e.g., amount of fuel), the tier is defined in terms of maximum permissible uncertainty (Table B3). Table B1 | Methods Provided in the Measurement Determination to Calculate Emissions from Combustion of Solid Fuels METHOD CO2 CH4 N2O 1 Provided Provided Provided 2 Provided Not provided Not provided 3 Provided Not provided Not provided 4 Provided Not provided Not provided Figure B2 | Determining the Appropriate Calculation Method to Apply under the EU Program Categorize reporting entity Classify emission sources Identify appropriate tier ▪▪ Based on annual emissions ▪▪ Classify into major, minor, and de-minimis sources ▪▪ Tiers defined for each input data Guide for Designing Mandatory Greenhouse Gas Reporting Programs 83 Table B2 | Categorizing Reporters Based on Direct measurement approach Annual Emissions For the direct measurement approach, tiers are defined in terms of permissible uncertainties in the measurement of each GHG. The program provides guidance to determine uncertainty associated AVERAGE ANNUAL EMISSIONS with the values of GHG concentration and flue gas flow. Table B4 CATEGORY gives an example of tiers for measuring CO2 emissions using (METRIC TONS OF CO2e) continuous emissions monitoring systems (CEMS). A < 50,000 Table B4 | Tiers Defined in Terms of Permissible B 50,000 – 500,000 Uncertainty in Direct Measurement Approach: Example of CO2 Emissions C >500,000 Measured Using CEMS in the EU Program Table B3 | Tiers Defined in Terms of Permissible MAXIMUM PERMISSIBLE UNCERTAINTY IN Uncertainty in Calculation-Based TIER CO2 EMISSIONS MEASURED USING CEMS Approaches: Example of Activity (IN PERCENT OF TOTAL EMISSIONS) Data Related to Solid Fuel Combustion in the EU Program 1 ±10 2 ±7.5 MAXIMUM PERMISSIBLE UNCERTAINTY TIER IN AMOUNT OF FUEL 3 ±5 (IN PERCENT OF FUEL AMOUNT) 4 ±2.5 1 ±7.5 Note: CEMS = continuous emissions monitoring systems. 2 ±5 3 ±2.5 Reporters are then required to apply tiers based on their category (A, B, or C), emission source (major, minor, or de minimis) and the quantification approach (calculation-based or direct 4 ±1.5 measurement). Table B5 summarizes tier requirements for calculation-based approaches. For example, if the maximum permissible uncertainty in the amount of fuel is 5% (Tier 2), and the estimated amount of fuel is The U.S. reporting program 100 metric tons, the actual amount of fuel can be between 95 and The U.S. program has established requirements for calculating 105 metric tons. GHG emissions for each source category, such as stationary fuel combustion sources, electricity generation, and aluminum For emission factors, tiers are defined as: production. ▪▪ Tier 1—use standard factors based on IPCC 2006 Guidelines for National Greenhouse Gas Inventories (list is included Calculation methods are classified as Tier 1, Tier 2, Tier 3, and Tier 4. These differ in terms of rigor and effort involved in in the regulation), or other constant values based on fuel obtaining activity data and estimating calculation factors. As supplier data or historical data agreed with the competent with other programs, the lower tiers require fewer measurements authority. than the higher tiers, but the latter generally yield more accurate ▪▪ Tier 2a—use country-specific emission factor for the fuel. emission estimates. For example, in case of stationary fuel ▪▪ Tier 2b—derive emission factors using values established as per national or international standard (e.g., net calorific value combustion, applying respective tiers entails the following (U.S. EPA 2009d): provided by the fuel supplier). ▪▪ Tier 1—this is the simplest calculation and requires measur- ▪▪ Tier 3—derive emission factors based on sampling and analyses done in accordance with the rules given in the ing fuel use. The program provides default emission factor values to be used when applying this method. regulation. 84 WRI.org | thePMR.org ▪▪ Tier 2—this method requires entities to measure both fuel use and high heat value (HHV). It uses the same emissions under what circumstances. For example, the Tier 1 method may be used by entities with maximum rated heat input capacity of 250 factor as Tier 1. million metric British thermal units per hour (mmBtu/hr) or less. ▪▪ Tier 3—using this tier requires entities to measure fuel use and carbon content for solid and liquid fuels, as well as However, if entities routinely perform fuel sampling and analysis, then they cannot apply the Tier 1 method and must use a higher molecular weight for gaseous fuels. tier method. Tier 1 may also be used in municipal solid waste ▪▪ Tier 4—this tier requires the use of a CEMS. entities of any size that do not produce steam, if they are not required to use Tier 4. Municipal solid waste units that generate steam must use Tier 2. Figure B3 illustrates the tier approach for The program further lays out conditions to determine which calculating CO2 emissions from fuel combustion. calculation method (corresponding to each tier) must be applied Table B5 | Tier Requirements for Calculation-Based Approaches in the EU Program SOURCE CATEGORY A CATEGORY B CATEGORY C Major Tier requirements for each source Highest tier defined for Highest tier defined for (e.g., solid fuels, liquid fuels, coke activity data and calculation activity data and calculation production) factors factors Major, but technically Up to 2 tiers lower,a with Tier 1 Up to 2 tiers lower,b with 1 tier lower,c with Tier 1 not feasible or being the lowest possible tier Tier 1 being the lowest being the lowest possible unreasonable costs possible tier tier Minor Highest tier technically feasible and without unreasonable costs (Tier 1 is the lowest possible tier) De minimis Conservative estimation, unless a defined tier is achievable without additional effort Notes: a. Up to 2 tiers lower than the tier required for the combination of Major source-Category A. b. Up to 2 tiers lower than the tier required for the combination of Major source-Category B. c. 1 tier lower than the tier required for the combination of Major source-Category C. Figure B3 | Simplified Representation of the U.S. EPA’s Tier-Based System for Calculating CO2 Emissions from Stationary Combustion Sources TIER 4 TIER 3 TIER 1 TIER 2 ▪▪ Applies to large units ▪▪ Applies only under ▪▪ Applies certain conditions (such to units with with > 250 mmBtu/hr ▪▪ Applies as when solid fossil fuel to units with > 250 mmBtu/hr ▪▪ Periodic measurement is combusted, or when ≤ 250 million metric British thermal units per ▪▪ Same as Tier 1, except HHVs need to be of fuel carbon content and molecular weight a continuous emissions monitoring system hour (mmBtu/hr) measured or use of calibrated flow [CEMS] exists) ▪▪ Fuel usage as per records. Default high meters or fuel billing meters ▪▪ Use of CEMS required for measuring CO 2 heat values (HHVs) and emissions emission factors used Source: U.S. EPA 2010b Guide for Designing Mandatory Greenhouse Gas Reporting Programs 85 ABBREVIATIONS kWh kilowatt hour METI Ministry of Economy, Trade, and Industry, Japan C2F6 hexafluoroethane mmBtu million metric British thermal units CEMS continuous emissions monitoring systems MOE Ministry of Environment, Japan CF4 tetrafluoromethane MRV monitoring, reporting, and verification CH4 methane Mt million metric tons CO2 carbon dioxide Mtce million metric tons of coal equivalent CO2e carbon dioxide equivalent MtCO2e million metric tons of carbon dioxide equivalent CROMERR cross-media electronic reporting regulation MWh megawatt hour DEA Department of Environmental Affairs, South N2O nitrous oxide Africa NF3 nitrogen trifluoride EMA Mexican Accreditation Entity PFCs perfluorocarbons EU ETS European Union Emissions Trading System PMR Partnership for Market Readiness GHG greenhouse gas SEMARNAT Secretariat of Environment and Natural GWP global warming potential Resources, Mexico HFCs hydrofluorocarbons SF6 sulphur hexafluoride HHV high heat value t metric tons IPCC Intergovernmental Panel on Climate Change tCO2e metric tons of carbon dioxide equivalent ISO International Organization for Standardization tCO2e/year metric tons of carbon dioxide equivalent per year IT information technology UNFCCC United Nations Framework Convention on kg kilogram Climate Change Kl kilo liter U.S. EPA United States Environmental Protection Agency ktCO2e metric kilotons of carbon dioxide equivalent WRI World Resources Institute GLOSSARY Activity data A quantitative measure of activity that results in greenhouse gas (GHG) emissions. Activity data is multiplied by an emissions factor to derive the GHG emissions associated with a process or an operation. Examples of activity data include kilowatt hours of electricity used, quantity of fuel used, output of a process, number of hours equipment is operated, distance traveled, and floor area of a building. Allowance A commodity issued by an emissions trading program that gives its holder the right to emit a certain quantity of GHG emissions. Base year A historic datum (a specific year or an average over multiple years) against which an entity’s emissions are tracked over time. Black carbon A climate forcing agent formed through the incomplete combustion of fossil fuels, biofuel, and biomass. Carbon dioxide A naturally occurring gas, also a by-product of burning fossil fuels from fossil carbon deposits, such as oil, gas, and coal; of burning biomass; of land use changes; and of other industrial processes. It is the principal anthropogenic greenhouse gas that affects the Earth’s radiative balance. It is the reference gas against which other greenhouse gases are measured and therefore has a global warming potential of 1. 86 WRI.org | thePMR.org Carbon tax A levy on the carbon content of fossil fuels. Because virtually all of the carbon in fossil fuels is ultimately emitted as carbon dioxide, a carbon tax is equivalent to an emission tax on each unit of CO2 equivalent emissions. CO2 equivalent The universal unit of measurement to indicate the global warming potential (GWP) of each of the seven GHGs covered by the United Nations Framework Convention on Climate Change, expressed in terms of the GWP of one unit of carbon dioxide. Consolidation Combination of GHG emission data from separate operations that form part of one company or group of companies. Data management system A system for collecting and storing GHG emissions information from reporting entities. The system facilitates the reporting, organization, and analysis of GHG data. It can also support quality assurance, quality control and verification activities, track emissions over time, and facilitate analysis and sharing of data with stakeholders. Direct GHG emissions Emissions from sources that are owned or controlled by the reporting entity. Direct measurement Directly measuring GHG emissions in the exhaust stream using continuous or periodic emission monitoring systems (CEMS or PEMS). Double counting Occurs when two or more reporting entities take ownership of the same emissions or reductions. Emission factor A factor that converts activity data into GHG emissions data (e.g., kg CO2e emitted per liter of fuel consumed, kg CO2e emitted per kilometer traveled). Emission source Any physical unit or process that releases GHGs into the atmosphere. Emissions The release of GHGs into the atmosphere. Emissions trading system A system that sets an overall emission limit, allocates emission allowances to participants, and allows them to trade allowances and emission credits with each other. Fugitive emissions Emissions that are not physically controlled but result from intentional or unintentional releases of GHGs. They commonly arise from the production, processing transmission, storage, and use of fuels and other chemicals, often through joints, seals, packing, or gaskets. GHG Protocol A multistakeholder collaboration convened by the World Resources Institute and World Business Council for Sustainable Development to design, develop, and promote the use of accounting and reporting standards for businesses and governments. Global warming potential A factor describing the radiative forcing impact (degree of harm to the atmosphere) of one unit of a given GHG relative to one unit of CO2. Greenhouse gas reporting Any voluntary or mandatory international, national, subnational, government, or nongovernmental initiative programs that collects information on, or regulates GHG emissions or removals from reporting entities. Greenhouse gases (GHGs) For the purposes of this report, GHGs are the seven gases covered by the United Nations Framework Convention on Climate Change: carbon dioxide (CO2); methane (CH4); nitrous oxide (N2O); hydrofluorocarbons (HFCs); perfluorocarbons (PFCs); sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3). Indirect GHG emissions Emissions that are a consequence of the operations of the reporting entity, but occur at sources owned or controlled by another entity. They are categorized as Scope 2 and Scope 3 emissions. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 87 Intergovernmental Panel on International body of climate change scientists. The role of the IPCC is to assess the scientific, technical, Climate Change (IPCC) and socioeconomic information relevant to understanding the risk of human-induced climate change. Jurisdiction The geographic area within which the GHG reporting program is administered. Jurisdictions can be subnational, national, or multicountry regions. Mass balance method A method to calculate GHG emission based on determining the balance of GHGs entering and leaving the entire entity or a specific unit or process within the entity. Materiality threshold A concept employed in the process of verification. It is used to determine whether an error or omission is a material discrepancy or not. Mobile combustion Burning of fuels by transportation devices such as cars, trucks, trains, airplanes, or ships. Process emissions Emissions generated from manufacturing processes, such as CO2 that is emitted from the breakdown of calcium carbonate (CaCO3) during cement manufacturing. Program objective Refers to an objective, goal, or aim of a GHG reporting program, such as improving data quality and informing mitigation policies. Scope 1 Direct GHG emissions from sources owned or controlled by the reporting entity. Scope 2 Emissions associated with the generation of electricity, heating/cooling, or steam purchased for the reporting entity’s own consumption. Scope 3 Indirect emissions other than those covered in Scope 2. Source Any process, activity, or mechanism that releases a greenhouse gas into the atmosphere. Stakeholder engagement A plan that defines the process for stakeholder engagement and addresses issues such as why to engage, plan whom to engage with, when to engage, what issues to engage on, and how to engage. Stationary combustion Burning of fuels to generate electricity, steam, heat, or power in stationary equipment such as boilers and furnaces. Third-party verification An independent assessment of the reliability, completeness, and accuracy of emissions-related information submitted by reporting entities. Uncertainty 1. Quantitative definition: Measurement that characterizes the dispersion of values that could reasonably be attributed to a parameter. 2. Qualitative definition: A general term that refers to the lack of certainty in data and methodology choices, such as the application of nonrepresentative factors or methods, incomplete data on sources and sinks, or lack of transparency. 88 WRI.org | thePMR.org ENDNOTES 1. Also see WRI and WBCSD 2007. 7. For further information on source-specific calculation methodologies, policy makers may refer to the following 2. Respective program websites for the existing programs resources: discussed here: Australian National Greenhouse and Energy Reporting Australia: http://www.cleanenergyregulator.gov.au/National- Scheme, https://www.cleanenergyregulator.gov.au/National- Greenhouse-and-Energy-Reporting/Pages/default.aspx Greenhouse-and-Energy-Reporting/Legislation-and- California: http://www.arb.ca.gov/cc/reporting/ghg-rep/ghg- regulations/Development-and-Review/Pages/default.aspx; rep.htm U.S. GHG Reporting Program, http://www.epa.gov/ Canada: http://www.ec.gc.ca/ges-ghg/default. ghgreporting/reporters/subpart/index.htm; asp?lang=En&n=040E378D-1 EU Emission Trading System, http://ec.europa.eu/ European Union: http://ec.europa.eu/clima/policies/ets/ clima/policies/ets/monitoring/documentation_en.htm; monitoring/documentation_en.htm Intergovernmental Panel on Climate Change, http://www.ipcc- France: http://www.bilans-ges.ademe.fr/ nggip.iges.or.jp/public/2006gl/ Mexico: http://dof.gob.mx/nota_detalle.php?codigo=5365828 &fecha=28/10/2014 8. The IPCC has developed extensive methodological guidance Turkey: http://www.csb.gov.tr/projeler/iklim/ to support countries in reporting national GHG inventories: United Kingdom: https://www.gov.uk/government/publications/ Revised 1996 IPCC Guidelines for National Greenhouse environmental-reporting-guidelines-including-mandatory- Gas Inventories, Good Practice Guidance and Uncertainty greenhouse-gas-emissions-reporting-guidance Management in National Greenhouse Gas Inventories (2000), United States: http://www.epa.gov/ghgreporting/ 2003 Good Practice Guidance for Land Use, Land-Use Change and Forestry, and 2006 IPCC Guidelines for National 3. Interviews with GHG reporting program staff and experts from Greenhouse Gas Inventories. Australia, China, the European Union, France, Mexico, Norway, South Africa, Turkey and United States were held during 9. For examples of data management systems, see PMR 2013e. 2014–15. We had interviewed program staff from Australia, California, Canada, the European Union, France, Japan, Turkey, 10. For an example of a monitoring plan template, see “Monitoring the United Kingdom and United States for the 2013 WRI Plan for the Emissions of Stationary Installations” at http:// publication (Singh and Mahapatra 2013). Interviews are cited ec.europa.eu/clima/policies/ets/monitoring/docs/t1_mp_ in references. installations_en.xls. For an illustrative monitoring plan and a plan update, see 4. See WRI and WBCSD 2011 for more information on this “Exemplar Monitoring Plan” at http://ec.europa.eu/clima/ category (Category 11, Chapter 5 of the Standard). policies/ets/monitoring/docs/t1_mp_installations_example_ en.xls and “‘Exemplar Monitoring Plan Update” at http:// 5. The Californian program also allows these reporters to use ec.europa.eu/clima/policies/ets/monitoring/docs/t1_mp_ simpler emissions quantification methods, and does not installations_update_example_en.xls. require third-party verification, which helps lower the reporting entity’s cost of compliance. 11. In this report, these experts are interchangeably referred to as GHG assurance providers, verifiers, or auditors. 6. IPCC has a global emission factor database which provides current default emission factors, categorized as per IPCC 2006 Guidelines for National Greenhouse Gas Inventories at http:// www.ipcc-nggip.iges.or.jp/EFDB/main.php. Guide for Designing Mandatory Greenhouse Gas Reporting Programs 89 REFERENCES Alarcon-Díaz, S. 2015a. Director of Climate Change Mitigation ———. 2014a. “2013 GHG Facility and Entity Emissions.” http:// Policy, SEMARNAT, Mexico. Email communication to N. 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Supplement to ———. 2014b. “Emission Calculation Methodologies.” Factsheet. the GHG Protocol Corporate Accounting and Reporting Standard.” http://www.epa.gov/ghgreporting/documents/pdf/2014/documents/ WRI and WBCSD, Washington DC. GHGRP_Methodology_Factsheet.pdf ———. 2014c. “Greenhouse Gas Reporting Program. Technical Corrections.” http://www.epa.gov/ghgreporting/reporters/notices/ corrections.html#aug2012 Guide for Designing Mandatory Greenhouse Gas Reporting Programs 93 ABOUT THE AUTHORS ABOUT WRI Neelam Singh is a Senior Associate with World Resources World Resources Institute is a global research organization that Institute’s Climate Program, focusing on GHG accounting and turns big ideas into action at the nexus of environment, economic reporting issues in industry. opportunity and human well-being. Contact: nsingh@wri.org Our Challenge Kathryn Bacher was an intern with the World Resources Institute. Natural resources are at the foundation of economic opportunity and She is now working as a Public Engagement Intern at the White human well-being. But today, we are depleting Earth’s resources at House Council on Environmental Quality. rates that are not sustainable, endangering economies and people’s lives. People depend on clean water, fertile land, healthy forests, and a stable climate. Livable cities and clean energy are essential for a ABOUT PMR sustainable planet. We must address these urgent, global challenges this decade. The Partnership for Market Readiness (PMR) is a global partnership that supports countries to assess, prepare, and implement carbon Our Vision pricing instruments in order to scale up GHG mitigation. It also We envision an equitable and prosperous planet driven by the wise serves as a platform for international cooperation where countries management of natural resources. We aspire to create a world where share lessons learned and work together to shape the future of cost- the actions of government, business, and communities combine to effective climate change mitigation. eliminate poverty and sustain the natural environment for all people. The PMR brings together more than 30 countries, various international organizations, and technical experts to facilitate Our Approach country-to-country exchange and knowledge sharing and, as such, COUNT IT enables enhanced cooperation and innovation. We start with data. We conduct independent research and draw on the latest technology to develop new insights and recommendations. Our The PMR includes 13 Contributing Participants, which provide rigorous analysis identifies risks, unveils opportunities, and informs financial support to the PMR trust fund, and 17 Implementing smart strategies. We focus our efforts on influential and emerging Country Participants, which receive funding to finance the economies where the future of sustainability will be determined. assessment, technical ground work, design, and piloting of market- based approaches to GHG mitigation. CHANGE IT We use our research to influence government policies, business In addition, the PMR created a new category of participant— strategies, and civil society action. We test projects with communities, the Technical Partner—to include countries and subnational companies, and government agencies to build a strong evidence jurisdictions that have made significant progress with the base. Then, we work with partners to deliver change on the ground implementation of a carbon pricing instrument, and that can either that alleviates poverty and strengthens society. We hold ourselves benefit from specific technical support in the form of funding, and/or accountable to ensure our outcomes will be bold and enduring. provide expert advice and share relevant experience with other PMR participants. SCALE IT We don’t think small. Once tested, we work with partners to adopt The PMR also supports countries’ efforts to determine post- and expand our efforts regionally and globally. We engage with 2020 mitigation scenarios and identify packages of effective and decision-makers to carry out our ideas and elevate our impact. We cost-efficient policies—including carbon pricing instruments—to measure success through government and business actions that achieve climate change mitigation. Much of this support will improve people’s lives and sustain a healthy environment. contribute to the Implementing Countries’ work to prepare the mitigation component for their “intended nationally determined contributions” (INDCs) under the United Nations Framework Convention on Climate Change process. PHOTO CREDITS Through its Technical Work Program, the PMR promotes best Cover photo, pg. 37, 38, 43, 45 (right) Asian Development Bank; pg. practices and facilitates efforts to establish common standards ii-iii, 50 Daniel Foster; pg. iv Bilfinger; pg. 3, 17, 20, 28, 32, 34, 45 and approaches for GHG mitigation. Drawing upon country (left), 65, 74 World Bank Photo Collection; pg. 4 Vattenfall; pg. 10 experience, global industry experts, and in-house resources, the Patrick Emerson; pg. 14 Thomas Anderson; pg. 53, 73 Shutterstock; PMR Secretariat generates a host of knowledge products on various pg. 60 EMBARQ Sustainable Urban Mobility by WRI; pg. 63 The economic policy instruments and technical elements related to Danish Wind Industry Association / Vindmølleindustrien (left), carbon pricing. joiseyshowaa (right); pg. 76 James Marvin Phelps (left), America’s Finally, the World Bank serves as the PMR Secretariat, trust fund Power (right); pg. 78 eutrophication&hypoxia. manager, and principal delivery partner to the Implementing Country Participants. For more information on the Partnership for Market Readiness, please visit the website: www.thepmr.org. 94 WRI.org | thePMR.org © 2015 International Bank for Reconstruction and Development / The World Bank The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. Rights and Permissions The material in this work is subject to copyright. Because The World Bank encourages dissemination of its knowledge, this work may be reproduced, in whole or in part, for noncommercial purposes as long as full attribution to this work is given. 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