GHG PROTOCOL INITIATIVE Standards Guidance November 1 2002

GHG PROTOCOL INITIATIVE Standards & Guidance November 1 2002 COP 8, New Delhi, India World Resources Institute

Some background…. Ø Convened in 1998 by WBCSD and WRI Ø Mission: To develop international GHG accounting and reporting standards for business through an inclusive and transparent multi-stakeholder process Ø The GHG Protocol Initiative has 2 modules: Corporate inventory module GHG mitigation projects module

Some background: Corporate Inventory Ø 350+ stakeholders contributed and reviewed corporate standard • Businesses • NGOs (WWF, Climate Neutral Network, TERI…) • Governments (US EPA, Canada, UK, Australia, …) • Inter-government organizations (UNFCCC, IPCC, IEA, EU, …) Ø Corporate standard tested by 30+ companies in 9 countries Ø Peer reviewed for verifiability and consistency Ø Corporate inventory standard published in 2001 Ø Second edition scheduled for release in mid-2003 Setting the scene

Need for an international standard on corporate GHG accounting & reporting • Accepted by business, NGOs, and Governments • Improve consistency, comparability, and credibility • Simplify measurement & reporting • Minimize cost of developing an inventory • Harmonization across borders and initiatives • Common building blocks for GHG markets

Process of Development ØInclusive and transparent multi-stakeholder process ØBuild on existing approaches GHG Protocol Initiative ØAdoption and continuous improvement Setting the scene

Climate Initiatives (based on or informed by GHG Protocol Corporate Standards) v U. S. Environmental Protection Agency Climate Leaders v World Wildlife Fund Climate Savers v California Climate Action Registry v Respect. Europe Business Leaders Initiative for Climate Change (BLICC) v French REGES Protocol v Chicago Climate Exchange v Global Reporting Initiative v CERES Sustainable Governance Initiative v WBCSD Cement Protocol v USAID Greenhouse Gas Pollution Prevention Program v International Forum of Forest and Paper Associations Calculation Tools for Estimating GHG Emissions from Pulp & Paper Mills v 35 of the worlds largest investors with assets of more than $4. 5 trillion have asked the world’s Top 500 companies to quantify their GHG emissions by adopting the GHG Protocol

Business using GHG Protocol: Corporate Standards (as participants of schemes/initiatives or for own purposes) v. Alcan Aluminum, USA v. Holcim, USA v. N. V. Nuon Energy, Netherlands v. Alcoa, USAAstra. Zeneca, UK v. IBM, USA v. Philips & Yaming, China v. Astra. Zeneca, UK v. IKEA International, Sweden v. PWC, New Zealand v. BP, USA v. International Paper, USA v. PSEG, USA v. Bethlehem Steel, USA v. Interface, USA v. SC Johnson, USA v. Birka Energi, Sweden v. Johnson & Johnson, USA v. Seattle City Light, USA v. The Body Shop, UK v. Kansai Electric Power, Japan v. Simplex Paper & Pulp, India v. Cinergy, USA v. Lockheed Martin, USA v. Sony Electronics, Japan v. Eastman Kodak, USA v. Miller Brewing Co. , USA v. STMicroelectronics, Switzerland v. CODELCO, Chile v. Mirant, USA v. Suncor, USA v. Edison Mission Energy, USA v. National Renewable Energy v. Tata Steel, India v. Ford, USA Laboratory, USA v. Tokyo Gas, Japan v. ENDESA, Spain v. Nike, USA v. Volkswagen, Germany v. Green Mountain Energy, USA v. Norm Thompson Outfitters, USA v. We Energies, USA v. Norsk Hydro, Norway v 500 PPM Gmb. H, Germany

Protocol Structure Calculation tools Web-based, user-friendly, step Standards -by-step guidance. Accounting Principles. Organizational Boundaries. Operational boundaries. Historic Datum. Public reporting. Guidance Business goals and inventory design. Accounting for GHG reductions. Identifying GHG sources. Managing inventory quality. Verification of GHG emissions. Build on IPCC methodologies & industry best practice. Cross sector. Sector specific.

Standards 5 Principles Ø Relevance Organizational Boundaries Ø Completeness Operational boundaries Ø Consistency Historic Datum Reporting GHG emissions Ø Transparency Ø Accuracy ØEnsure information represents a true and fair account of GHG emissions ØEnsure information is credible and unbiased in its treatment and presentation of issues

Standards Principles Organizational Boundaries Ø Accounting emissions from subsidiaries, JVs, etc. Operational boundaries Ø Based on financial accounting practices Historic Datum Reporting GHG emissions

Standards Principles Organisational Boundaries 3 scopes guarantee transparency: Ø scope 1: Direct emissions (must report) Operational boundaries Ø scope 2: Indirect Emissions - imported electricity, heat, or steam (must report) Historic Datum Ø scope 3: Other relevant indirect emissions (voluntary) Reporting GHG emissions Selection of scope/s depends on objectives of inventory (e. g. internal risk management vs. trading markets).

Standards Principles Operational Boundaries Organizational boundaries Historic Datum Reporting GHG emissions Ø Set base year to compare emissions over time. ØAdjust base year emissions for significant structural changes of the business (investment/ divestment) or in calculation methodologies. Ø No adjustment for organic growth or decline. (e. g. changes in productivity)

Sector-specific tools Aluminum CO 2 & PFC Iron and steel CO 2 Nitric acid N 20 Ammonia CO 2 Adipic acid N 20 Cement CO 2 Lime CO 2 HCFC-22 HFC-23 Semi-conductor PFC Cross sector tools Stationary combustion CO 2 Mobile combustion CO 2 Air conditioning/refrigeration HFC Calculation tools Web-based, user-friendly, step -by-step guidance Build on IPCC methodologies & industry best practice Cross sector Sector specific

Next Steps… Structured feedback process for corporate standard (Feb 2002) • Revise and Improve the 1 st Edition • Update Existing GHG Calculation Tools • Develop New GHG Calculation Tools Publication of 2 nd edition by June 2003 Outreach & adoption

Project Accounting Standard - Motivation The absence of clear international accounting rules for GHG mitigation projects under different trading schemes and initiatives Setting the scene

Purposes of the Project Accounting Standard ØIdentify and compare GHG reduction and storage opportunities ØSelect a credible and robust baseline underpinned by GHG accounting and reporting principles ØFacilitate and accelerate required government acceptance and approval procedures in host countries ØLower project transaction costs, while improving the quality and credibility of quantification procedures ØIncrease accounting consistency between trading schemes Setting the scene

Key Steps in GHG Project Accounting ØGHG Project Objectives ØProject Accounting Principles ØIdentification • Types of projects • Project boundary and ownership • Project eligibility (e. g. sustainable development criteria, scheme-specific rules) ØQuantification • Selection of baseline scenarios, calculation of baseline and project emissions • Project and crediting lifetime, baseline adjustment ØMonitoring and Verification • Presentation and disclosure of information • Calculation tools Setting the scene

Key Accounting Issues ØEligibility e. g. regulatory, sustainable development, scheme specific ØSetting project boundaries and assessment of leakage: using causation and significance tests ØCalculating baseline emissions: identification and selection of most likely baseline scenarios using benchmark and project specific baselines ØProject typology: addressing boundary and baselines attributes of specific projects/technologies Setting the scene

Project Module Timeline Oct, 02 Task Force work continues Jan Feb May July WRI/ Revisions WBCSD collates External doc Review and Road Testing Sept, 03 COP 9? WRI/ WBCSD external review Release Printing