Applying the GHG Protocol The revised edition of

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“Applying the GHG Protocol” • The revised edition of the GHG Protocol Corporate Accounting

“Applying the GHG Protocol” • The revised edition of the GHG Protocol Corporate Accounting and Reporting Standard • Update on the emerging Project Quantification Standard • Applications in capacity-building, registry schemes and voluntary efforts: Russia, Mexico, Japan Speakers Simon Schmitz WBCSD Mahua Acharya WBCSD Marina Dragan Agency for Direct Investments, Russia Michael Yulkin Archangelsk Pulp and Paper, Russia Hirofumi Kazuno KEPCO, Japan Manuel Estrada SEMARNAT, Mexico www. ghgprotocol. org

The GHG Protocol Corporate Accounting and Reporting Standard Revised Edition Simon Schmitz Project Officer,

The GHG Protocol Corporate Accounting and Reporting Standard Revised Edition Simon Schmitz Project Officer, Energy & Climate WBCSD www. ghgprotocol. org

The revised edition WRI Stakeholders WBCSD Ø Result of a two-year intensive multistakeholder revision

The revised edition WRI Stakeholders WBCSD Ø Result of a two-year intensive multistakeholder revision process Ø Confirms main thrust of the first edition but provides more clarity and guidance www. ghgprotocol. org

The road to the revised edition (2002 -2004) Revision Working Group Structured Feedback WBCSD/

The road to the revised edition (2002 -2004) Revision Working Group Structured Feedback WBCSD/ WRI internal review Process Sub-groups & meetings § 2 developing country roundtables § Washington DC meeting § Brussels meeting Participants § 25 + businesses, 11+ countries § 30 + other stakeholders (industry associations, government agencies, NGOs, climate initiatives etc. ), 8 countries § § § § Australian GHG § Office BP p. l. c. Environment Canada § Ford Motor Company § Holcim Ltd. § International Aluminium Institute Kansai Electric § Power Co. § KPMG, Sustainability Advisory Services § National Council for Air and Stream Improvement (NCASI) Price. Waterhouse. Coo pers Royal Dutch/Shell The Energy Research Institute (TERI), India UNFCCC Secretariat US Environmental Protection Agency, Climate Leaders WWF USA Revised Edition www. ghgprotocol. org

An accounting and reporting standard… Ø …makes GHG information more credible and comparable Ø

An accounting and reporting standard… Ø …makes GHG information more credible and comparable Ø …simplifies GHG measurement and reporting Ø …minimizes costs of developing inventories Ø …enhances compatibility between schemes -> foundation for policy schemes Ø …serves as a platform for dialogue and capacitybuilding www. ghgprotocol. org

Towards global compatibility • • • • California Climate Action Registry Chicago Climate Exchange

Towards global compatibility • • • • California Climate Action Registry Chicago Climate Exchange Dow Jones Sustainability Index EU Emissions Trading Scheme French REGES Protocol Global Reporting Initiative (GRI) METI, Japan Respect Europe Business Leaders Initiative for Climate Change (BLICC) Trade Associations (Aluminum, IPIECA, ICFPA, Cement, Iron and Steel) UK Emissions Trading System U. S. Northeast Registry (NESCAUM) U. S. EPA Climate Leaders Initiative World Wildlife Fund Climate Savers World Economic Forum Global GHG Registry ISO 14064 (under development) U. S. Department of Energy (under development) Compatibility with GHG Protocol www. ghgprotocol. org

Business users Automobile Manufacturers Ford Motor Company, USA Volkswagen, Germany (those that we know

Business users Automobile Manufacturers Ford Motor Company, USA Volkswagen, Germany (those that we know of…) IBM, USA IKEA International, Sweden Johnson & Johnson, USA Miller Brewing Company, USA Nike, USA Cement Norm Thompson Outfitters, USA Cemex, Mexico Pfizer Inc. , USA Cimpor, Brazil Raytheon, USA Heidelberg Cement, Germany SC Johnson, USA Holcim, USA (and worldwide Sony Electronics, Japan Holcim facilities) Starbucks Coffee, USA Italcementi, Italy Staples Inc. , USA Lafarge, France and North Sun Microsystems America Target Corporation, USA RMC, UK Unilever HPC, USA St. Lawrence Cement Inc. , Canada United Technologies Corporation, Siam Cement, Thailand USA Taiheiyo, Japan Votorantim, Brazil Energy Services Birka Energi, Sweden Consumer Goods Cinergy, USA Manufacturers Edison Mission Energy, USA Bank of America ENDESA, Spain Body Shop, UK Exelon Corporation, USA Cargill, USA FPL Group, Inc. , USA Eastman Kodak, USA General Electric, USA Fetzer Vineyards, USA Green Mountain Energy, USA Kansai Electric Power, Japan Mirant, USA N. V. Nuon Renewable Energy, Netherlands PSEG, USA Seattle City Light, USA Tokyo Gas, Japan Wisconsin Electric, USA We Energies, USA Lockheed Martin Corporation, USA Philips & Yaming, China Simplex Paper & Pulp, India STMicroelectronics, Switzerland Stora. Enso, Finland Tata Steel, India United States Steel Corporation Services to manage Oil and Gas “Many firms have established multi-disciplinary teams 500 PPM Gmb. H, Germany BP UK Norsk Hydro, Norway the climate risk file. The. Shell use of standardized. Astra. Zeneca, measurement Casella Waste Systems, Inc. , USA International DHL, USA is up. ” Suncor, USA systems, such as the WRI/WBCSD GHG Protocol, European Bank for Reconstruction & Chevron. Texaco Industrial Manufacturers/ Mining Air Products and Chemicals, Inc. Archangelsk Pulp and Paper, Russia Alcan Aluminum Corporation, USA Alcoa, USA Ball Corporation, USA Baltimore Aircoil, USA Baxter International, USA Bethlehem Steel Corporation, USA CODELCO, Chile Du. Pont, Inc. Interface, Inc. , USA International Paper, USA ITC Inc. , India Development PE Europe, Germany Power. Comm, Canada Price Waterhouse Coopers, New Zealand Verizon Communications, USA Carbon Disclosure Project – Report 2, Executive Summary www. ghgprotocol. org

Revised edition: overview www. ghgprotocol. org Standards • Accounting Principles • Organizational Boundaries •

Revised edition: overview www. ghgprotocol. org Standards • Accounting Principles • Organizational Boundaries • Operational Boundaries • Tracking emissions over time • Reporting GHG emissions Guidance • Business goals • Accounting for GHG reductions • Identifying GHG sources • Managing inventory quality Calculation tools • Web-based, userfriendly, step-by-step guidance • Build on IPCC • Verification of GHG emissions methodologies & • Setting GHG targets (NEW) industry best practice www. ghgprotocol. org

Setting organizational boundaries (standard) Ø Companies can now choose between “equity share” (ownership) or

Setting organizational boundaries (standard) Ø Companies can now choose between “equity share” (ownership) or “control” for reporting purposes Ø Two criteria for defining ‘control’ o Financial control (based on Int. Fin. Acc. Standards): Ability to direct the financial and operating policies; usually = rights to majority of benefits/retains majority of risk o Operational control: The operator (who implements operating policies, or holds the operating license) Ø Quantitative threshold removed for equity ownership Ø Added guidance on accounting of GHGs from contracts www. ghgprotocol. org

Setting operational boundaries (standard) Scope 2: Import of electricity Scope 3: Other indirect emissions

Setting operational boundaries (standard) Scope 2: Import of electricity Scope 3: Other indirect emissions Leased assets: Ø Indirect emissions from the generation of electricity purchased and “consumed” by the reporting company (no more double counting within scope 2) Ø Emissions associated with T&D losses: expanded guidance v. Entity that owns/controls the T&D equipment reports in Scope 2, reflecting where energy is actually consumed v. End user reports in Scope 3 ØAdditional guidance and examples and categories expanded ØCleared up grey area: direct/indirect depends on chosen approach for organizational boundaries www. ghgprotocol. org

Other key changes and new appendices Ø Tracking Emissions Over Time: v Mid-year structural

Other key changes and new appendices Ø Tracking Emissions Over Time: v Mid-year structural change: Recalculations should include entire year’s emissions to avoid later recalculation Ø Managing Inventory Quality: v More focus on practical measures for implementation v How to think about inventory uncertainty: applications and limitations of quantitative uncertainty assessment (more detailed guidance in the new uncertainty tool on the website) Ø Verification of GHG Emissions: v Reporting “in accordance”: The use of “shall” aids verification Ø New Appendices: v Appendix 1: Accounting for emissions from purchased electricity v Appendix 2: Accounting for carbon stocks and removals v Base year recalculation methodologies (on the website) www. ghgprotocol. org

Why set a voluntary GHG target? Ø Logical follow-up to doing an inventory o

Why set a voluntary GHG target? Ø Logical follow-up to doing an inventory o What gets measured gets managed o Target-setting is routine business practice for anything that needs to be managed Ø Ø Not only identify, but minimize risks Reduce resource costs and stimulate innovation Prepare for and influence future regulation Demonstrate leadership and corporate responsibility www. ghgprotocol. org

Setting GHG targets (guidance) Ø WHY SET A TARGET? Ø STEPS IN SETTING A

Setting GHG targets (guidance) Ø WHY SET A TARGET? Ø STEPS IN SETTING A TARGET 1. Obtain senior management commitment 2. Choose the target type (absolute vs. intensity) 3. Decide on the target boundaries 4. Choose the target base year 5. Define the target completion date 6. Define the length of the commitment period 7. Decide on the use of external offsets 8. Establish a target double counting policy 9. Decide on the level of reduction 10. Track and report progress towards the target *** New chapter in revised edition *** www. ghgprotocol. org

Online guidance: calculating emissions Sector-specific tools • • • Aluminum CO 2 & PFC

Online guidance: calculating emissions Sector-specific tools • • • Aluminum CO 2 & PFC Iron and steel CO 2 Nitric acid N 20 Ammonia CO 2 Adipic acid N 20 Cement & lime CO 2 HCFC-22 HFC-23 Semi-conductor PFC Pulp & Paper CO 2 Office-based organizations Cross sector tools • • Stationary combustion CO 2 Mobile combustion CO 2 Air conditioning/refrigeration HFC Measurement and estimation uncertainty www. ghgprotocol. org

Update on the emerging GHG Protocol Project Quantification Standard Mahua Acharya Project Officer, Energy

Update on the emerging GHG Protocol Project Quantification Standard Mahua Acharya Project Officer, Energy & Climate WBCSD www. ghgprotocol. org

Corporate & Project (Offset/Credit) Accounting for project reductions/offsets/credits Corporate Inventory Real emissions Emissions Real

Corporate & Project (Offset/Credit) Accounting for project reductions/offsets/credits Corporate Inventory Real emissions Emissions Real emissions Reduction over time Year 1 Year 2 Baseline emissions (“what would otherwise have happened“) Credits/ avoided emissions Start of project www. ghgprotocol. org

GHG Protocol Project Quantification Standard Ø Tool for companies to quantify project-level reductions Ø

GHG Protocol Project Quantification Standard Ø Tool for companies to quantify project-level reductions Ø Currently under development with WRI in multistakeholder process (post road-test work) Ø Consistent with CDM procedures Ø Can be used under any scheme – CDM, JI, EUETS, US EPA, US DOE etc www. ghgprotocol. org

Project Quantification Standard road-testing Ø Road-tested by over 40 participants (companies and governments) Ø

Project Quantification Standard road-testing Ø Road-tested by over 40 participants (companies and governments) Ø Formed small group of experts to advise on integrating feedback Ø GHGP team currently working on integrating feedback, building document further www. ghgprotocol. org

Baseline procedures Three Procedures Project Specific Baseline Performance Standard Consistent with Marrakech Accords, Retrofit

Baseline procedures Three Procedures Project Specific Baseline Performance Standard Consistent with Marrakech Accords, Retrofit Arts. 48 (a), (b), (c) www. ghgprotocol. org

Addressing additionality Selection of “baseline candidates” Project specific Barriers Performance Standard Retrofits Further baseline

Addressing additionality Selection of “baseline candidates” Project specific Barriers Performance Standard Retrofits Further baseline evaluation Stringency Screen for Program level administrators Additional before end-of-life Project emissions < baseline emissions www. ghgprotocol. org

Addressing leakage ØLeakage is classified as a “secondary effect”, tied to project’s primary effect

Addressing leakage ØLeakage is classified as a “secondary effect”, tied to project’s primary effect (or CDM project activity) ØInside project’s assessment boundary ØSecondary effects that change between the project and baseline integrated into project’s reduction calculation in step 7 www. ghgprotocol. org

GHGP family of documents Generic 1. 2. 3. 4. Introduction to project accounting Project

GHGP family of documents Generic 1. 2. 3. 4. Introduction to project accounting Project accounting principles 7 quantification steps Monitoring procedure Sector-specific guidance under development: • Forestry and land-use change • Grid-connected electricity Project Typology: project-specific quantification issues Setting the scene www. ghgprotocol. org

Next steps ØIntegrate and address all feedback ØForm sector-specific sub-groups ØFinalize generic GHGP Project

Next steps ØIntegrate and address all feedback ØForm sector-specific sub-groups ØFinalize generic GHGP Project Quantification Std ØInternal WBCSD & WRI review, and publish More info: www. ghgprotocol. org, or email acharya@wbcsd. org www. ghgprotocol. org

Discussion Lessons learnt and challenges ahead in… Ø Setting up respective programs in different

Discussion Lessons learnt and challenges ahead in… Ø Setting up respective programs in different countries? Ø Capacity-building for corporate inventories? Ø How can offset programs be integrated into corporate inventory schemes? www. ghgprotocol. org

ØAdditional slides for more detail… www. ghgprotocol. org

ØAdditional slides for more detail… www. ghgprotocol. org

Why use the GHG Protocol as a business? Prepare for emissions trading Credit for

Why use the GHG Protocol as a business? Prepare for emissions trading Credit for early action Internationally recognised and credible reporting Business Goals Enhancing investor and shareholder confidence Minimize cost: guidance and calculation tools Risk management + opportunities for efficiency gains www. ghgprotocol. org

Operational boundaries – scope 2 (standard) Purchased Electricity Own use Scope 2 Indirect emissions

Operational boundaries – scope 2 (standard) Purchased Electricity Own use Scope 2 Indirect emissions from Own Use of Purchased Electricity Resold to end-user Scope 3 Indirect emissions from Purchased Electricity resold to end user Resold to intermediary Optional Information Emissions from Purchased Electricity resold to non end user www. ghgprotocol. org

Operational boundaries – leases etc. (standard) ØLeased assets, outsourcing and franchises: Apply chosen equity

Operational boundaries – leases etc. (standard) ØLeased assets, outsourcing and franchises: Apply chosen equity share or control approach Chosen approach (by lessee): Emissions from leased asset are included… Equity Share If the asset is wholly owned and is recorded as such on the balance sheet Financial Control If the asset is wholly owned and is recorded as such on the balance sheet If the asset is operated in accordance with Operational Control the lessee’s operational policies www. ghgprotocol. org

Thanks! Comments & Questions Simon Schmitz Project Officer, Energy & Climate, WBCSD Schmitz@wbcsd. org

Thanks! Comments & Questions Simon Schmitz Project Officer, Energy & Climate, WBCSD Schmitz@wbcsd. org +41 22 8393 -121 www. ghgprotocol. org

Project’s GHG effects www. ghgprotocol. org

Project’s GHG effects www. ghgprotocol. org