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Climate Change: Reporting Guidelines under the MOU Daniel E. Klein Twenty-First Strategies, LLC McLean, VA 22101 [email protected] presented to American Public Power Association 2006 APPA National Conference Chicago, IL June 13, 2006 What we’ll cover today Background on U.S. GHG programs Climate Vision & Power PartnersSM Growing pressures for power companies to take action on GHGs Revised §1605(b) GHG Reporting Guidelines Page 2 21st Strategies Addressing Climate and Energy Security in the Global Climate Change Initiative On February 14, 2002, President Bush set a goal to reduce U.S. GHG emissions intensity by 2012 “My administration is committed to cutting our nation’s greenhouse gas intensity ... by 18 percent over the next 10 years.” GHG “intensity” will be measured in terms of GHG per unit of GDP This goal is equivalent to ~500 million metric tons of cumulative carbon equivalent reductions from 2002-2012 Page 3 21st Strategies Improving GHG intensity is a key component of the U.S. strategy Over time, improving GHG intensity could: emissions 1. Slow the rate of GHG growth 2. Stabilize GHG emissions 3. Reduce absolute emissions … depending on the rate of improvement Page 4 time 21st Strategies So … how is the U.S. doing so far? Goal: 18% reduction in GHG intensity, 2002-12 But BAU forecasts show ~14% improvement (~1.5%/yr) 18% implies average annual rate of ~2.0%/year From 1990-2003, GHG intensity fell ~1.9%/year GHGs $GDP GHG intensity / 2003 1.0% 2.7% -1.7% 2004 ~2.0% 4.2% -2.1% (prel.) 2005 (very prel.) Page 5 ~0% 3.5% ~-3.5% 21st Strategies Climate VISION Program Launch Climate VISION – Voluntary Innovative Sector Initiatives: Opportunities Now A part of the Global Climate Change Initiative (GCCI), launched February 12, 2003 Part of a continuum of shortmid-, and long-term approaches to address climate change Nature of problem requires development and use of transformational technologies Page 6 21st Strategies Climate VISION Private-Sector Partners Alliance of Automobile Mfgrs. Aluminum Association American Chemistry Council American Forest & Paper Association American Iron & Steel Institute American Petroleum Institute Industrial Minerals Assoc. – N. America International Magnesium Association National Lime Association National Mining Association Portland Cement Association Power Partners Assoc. of American Railroads The Business Roundtable Semiconductor Industry Association Each partner has committed to contribute to President’s GHG intensity goal. Page 7 21st Strategies Power PartnersSM: Historical Roots In 2002, electric power sector created Power PartnersSM Voluntary partnership with Federal government Designed to deliver results in short, medium & long term U.S. electric power sector recognized early on as a world leader in voluntary GHG programs Power industry came together in the 1990s Successfully undertook voluntary climate initiatives through the Climate Challenge program First major industry to do so 281 MMT CO2 of reported reductions in 2002. But does its reputation for “early action” still hold? Page 8 21st Strategies Electric Power Participants in Climate VISION & Climate Leaders Power PartnersSM Participants American Public Power Association (APPA) Edison Electric Institute (EEI) Electric Power Supply Association (EPSA) Large Public Power Council (LPPC) National Rural Electric Cooperative Association (NRECA) Nuclear Energy Institute (NEI) Tennessee Valley Authority (TVA) EPA’s Climate Leaders program 86 companies so far (all sectors) Power companies include AEP, Entergy, We Energies, FPL, PSEG, etc. Page 9 21st Strategies Power PartnersSM Goal Achieve equivalent of 3-5% reduction in GHG intensity by 2012 through credible, verifiable reductions in GHG emissions or offsets Intensity measured as CO2/MWh Collaborative, industry-wide initiatives Individual actions that best suit company capabilities, resources and business strategies Cross-sector programs and outreach Signed Umbrella MOU with DOE December 13, 2004 Highlights roles of partners in achieving voluntary reductions Page 10 21st Strategies So … how’s the Electric Power Sector doing so far? Goal: 3-5% reduction in GHG intensity, 2002-12 CO2 MWh CO2 intensity / 2003 1.25% 0.6% 0.6% 2004 0.89% 2.0% -1.0% ~2.7% 2.0% ~0.7% (prel.) 2005 (very prel.) So far, not so good …. Page 11 21st Strategies Business-as-Usual predicts some improvement, but EPICI target will need more Generation Intensity (mmtCO 2e/bkwh) Generation Intensity (MMTCO2e/bkWh) 0.6840 0.6720 0.6600 Actual mmtCO2e/bkwh 0.6480 Model 0.6360 0.6240 0.6120 AEO 2005 0.6000 0.5880 0.5760 0.5640 0.5520 Power PartnersSM target AEO 2006 19 80 19 82 19 84 19 86 19 88 19 90 19 92 19 94 19 96 19 98 20 00 20 02 20 04 20 06 20 08 20 10 20 12 20 14 20 16 20 18 20 20 20 22 20 24 20 26 20 28 20 30 0.5400 Updated Model Forecast Data from AEO 2006 Historical Data from AER 2004 Data compiled by EOP Group. Page 12 21st Strategies States are getting more involved in Climate GHG Reporting and Registries Powerplant Carbon Caps of Offsets Climate Action Plans Completed Greenhouse Gas Inventories Page 13 Source: Pew Center for Global Climate Change, July 2005 update 21st Strategies U.S. Mayors Climate Protection Agreement Initiated shortly after Kyoto Protocol took effect Actions urged: Cities should meet or exceed Kyoto targets State & federal governments should meet or beat Kyoto targets by 2012 Congress should enact cap & trade legislation Effort has growth rapidly 235 Mayors have signed (as of May 19, 2006) Representing over 45 million citizens Press attention worldwide Page 14 21st Strategies Rapid Growth in U.S. Mayors C.P.A. 16-Feb-2005: Kyoto Protocol takes effect 30-Mar-2005: 10 Mayors launch program 13-Jun-2005: U.S. Conf. of Mayors unanimously endorse 8-Dec-2005: Mayor Nickels (Seattle) highlighted at Montreal COP 19-May-2006: 235 Mayors signed, representing over 45 million citizens Page 15 21st Strategies It’s not too late to be proactive: #1 Every challenge contains opportunity as well as danger. = CRISIS Page 16 = + DANGER + OPPORTUNITY 21st Strategies It’s not too late to be proactive: #2 In a future filled with uncertainty, “business-as-usual” won’t cut it. Come gather ’round people Wherever you roam And admit that the waters Around you have grown And accept it that soon You’ll be drenched to the bone. If your time to you Is worth savin’ Then you better start swimmin’ Or you’ll sink like a stone For the times they are a-changin’. Bob Dylan, 1963 Page 17 21st Strategies It’s not too late to be proactive: #3 “If you’re not at the table, you’re on the menu.” -- Washington D.C. proverb Page 18 21st Strategies Power Companies should continue and expand their GHG reduction efforts Understand your GHG footprint and risks Identify GHG activities already under way Assess options for further GHG reductions Costs Effectiveness Ancillary impacts Develop capabilities for GHG reporting Join climate programs? National? State & local? Set a GHG target? Absolute level of emissions? GHG emissions intensity? Page 19 21st Strategies GHG Management Options: An all-in-1 Formula GHG emissions = $GDP X GHG intensity Btu/$GDP X GHG/Btu – sequestration Improve Energy Efficiency Reduce Fuel Carbon Intensity Demand Side Supply Side Renewables Nuclear Fuel Switching Sequester Carbon Capture & Store Enhance Natural Sinks All options needed to: Maintain economic growth Affordably meet energy demand Address environmental objectives Page 20 21st Strategies Use the Power PartnersSM Resource Guide 1990s Climate Challenge program developed an “Options Workbook” of “best practices” MOU commits to developing and maintaining a “Power PartnersSM Resource Guide” At a minimum … Meet Climate Vision commitment Information for utilities, esp. smaller ones Information for general public … and maybe also … Data collection for measuring intensity? SM Aid in annual Power Partners reporting to DOE? Other purposes? 21st Strategies Page 21 http://uspowerpartners.org/ Page 22 21st Strategies DOE’s Revised Guidelines for Voluntary Reporting of Greenhouse Gases (§1605(b) Background – How we got here Overview of Guidelines Key steps in Reporting Page 23 21st Strategies Background on Revising the §1605(b) GHG Reporting Guidelines Voluntary Reporting of Greenhouse Gases Program Established by Section 1605(b) of the Energy Policy Act of 1992 Oct. 1994: Final Guidelines issued First reporting year was 1994, reported by DOE in July 1996 Reporting rules were quite flexible Scope of the reporting entity Emissions and/or reductions Entity-wide or project-specific Power sector initially dominated, still majority Page 24 21st Strategies Background on Revising the §1605(b) GHG Reporting Guidelines Concerns grew with the original program “Flexibility” reduced credibility Weak basis for future crediting Emergence of competing reporting standards Administration plan to “substantially improve the emission reduction registry” Part of Feb. 2002 GCCI “create world-class standards for measuring and registering emission reductions” “transferable credits to companies that can show real emission reductions” take into account emerging domestic and int’l approaches 21st Strategies Page 25 Will new §1605(b) guidelines help or hinder its purposes? Feb. 2002: “These improvements will enhance measurement accuracy, reliability and verifiability, working with and taking into account emerging domestic and international approaches.” Announced at a time when fragmentation of registries seemed to threaten. But is the WRI/WBCSD GHG Protocol becoming the new standard? Will §1605(b) be a uniter or a divider? What is L/T fate of §1605(b)? st Page 26 21 Strategies Overview of new §1605(b) Guidelines All reporting entities must: Define themselves and their organizational boundaries Use the measurement and calculation methods contained in the guidelines Maintain records and certify accuracy of reports All reporters are encouraged to: Report at the highest level Meet the requirements for registering reductions Have reports independently verified Page 27 21st Strategies Framework of Revised §1605(b) Program “Reporting Only” Entities Small Emitters Large Emitters Inventory of Emissions for Selected Activities Entity-wide Emissions Inventory Measure emissions at any level/year Calculate Net Reductions Across U.S. Entity: Changes in Emissions; Changes in Carbon Stocks; Avoided emissions Calculate Reductions at any level: project; facility; pre-2002, etc. Calculate Net Reductions for Reported Activities, e.g., DSM Same for non-U.S. operations (optional) Potential Offsets Reported Reductions Offset Reductions (if any) Registered Emission Reductions All Reporters: Require Legal Basis for Entity; ‘Encourage’ Highest Level Page 28 21st Strategies Overview of §1605(b) Guidelines: Registered Reductions Qualifying reporters will be credited with registered reductions U.S., non-U.S. and offset reductions to be calculated separately Registered reductions gauge entity’s contribution to Presidential goal of reducing U.S. emissions intensity 18% by 2012 Registered reductions may be transferred to other entities using private agreements [but no changes to DOE records] To retain reductions from sequestration, entities must continue to report Page 29 21st Strategies Overview of Guidelines: Small Emitters (<10,000 metric tons CO2e per year) Small emitters that intend to register must: Emit less than 10,000 metric tons of CO2 equivalent per year Report all emissions and reductions for at least one activity, e.g. livestock operations or forested land Report annually Certify that activities being reported do not cause an increase in emissions elsewhere under the entities’ control Page 30 21st Strategies Overview of Guidelines: Large Emitters (>10,000 metric tons CO2e per year) Large emitters that intend to register must: Submit comprehensive, high-quality emissions inventories Determine reductions based on entity-wide assessments of changes relative to base period Ensure offset reductions are calculated according to entity rules and are subject of agreement with other entities Report annually Page 31 21st Strategies Basic Elements of the Revised §1605(b) Guidelines 1) Defining and naming the entity, and setting 2) 3) 4) 5) 6) 7) Page 32 organizational boundaries Determining Start Year, Base Period and First Reduction Year Entity Statements Emissions Inventories Emission Reductions Other reporting requirements, including record keeping, certification, and verification Offsets, non-U.S. emissions, aggregators, other gases and sources 21st Strategies Key Addresses for Revised §1605(b) All documents and guideline development background can be found at: http://www.pi.energy.gov/enhancingGHGregistry/ Information on EIA implementation of program and revised guidelines can be found at: http://www.eia.doe.gov/oiaf/1605/aboutcurrent.html/ Page 33 21st Strategies Questions? Dan Klein Twenty-First Strategies, LLC 6595 Terri Knoll Ct. McLean, VA 22101 703-893-8333 [email protected] Page 34 21st Strategies Appendix Basic Elements of the Revised §1605(b) Guidelines Page 35 21st Strategies Basic Elements of the Revised §1605(b) Guidelines 1) Defining and naming the entity, and setting 2) 3) 4) 5) 6) 7) Page 36 organizational boundaries Determining Start Year, Base Period and First Reduction Year Entity Statements Emissions Inventories Emission Reductions Other reporting requirements, including record keeping, certification, and verification Offsets, non-U.S. emissions, aggregators, other gases and sources 21st Strategies Emissions Inventory - The Emissions Rating System Reporters must “rate” their emissions measurement and estimation methods The ratings are ordinal, with four levels, A, B, C & D (valued 4, 3, 2, 1) An “A” rated method = best method available (e.g. direct measurement) A “D” rated method = least rigorous method (e.g. estimated activity data) The weighted average rating must be at least 3.0 to register reductions (i.e., a “B” average”) Reporters must calculate an inventory weighted average rating for each year Page 42 21st Strategies Emissions Inventory - Measuring Emissions When choosing measurement or estimation methods, entities should consider: Rating Cost and feasibility of available methods Accuracy Size of the source Variability and performance over time, and Ancillary Benefits Page 43 21st Strategies Emissions Inventory – Potential Sources of Emissions and Sequestration Stationary source combustion Indirect emissions from purchased electricity, steam, hot and chilled water Mobile source combustion Industrial process emissions Mining, oil, and gas production emissions Waste treatment and handling Non-fuel use of fossil fuels Other indirect emissions Forestry sources and sinks Agricultural sources and sinks Engineered sequestration Page 44 21st Strategies