Greenhouse Gas GHG Monitoring Reporting and Registries Pierre

Greenhouse Gas (GHG) Monitoring, Reporting and Registries Pierre Boileau Greenhouse Gas Division Presentation for the Kyoto Mechanisms Seminar for the Manitoba Business Sector

Outline of Presentation l Background and Context ú What are the Kyoto Rules for Trading and how do Entities participate? l Current GHG Reporting àNational Inventory àVoluntary Challenge and Registry l Reporting Implications of the Kyoto Protocol ú National System / National Registry ú Domestic Reporting Commitments ú Large Emitters System under Covenants/DET 2

Background and Context 3

Background l The Kyoto Protocol and Marrakech Accords established a framework for the international emissions trading market ú Created 4 types of units (AAUs, ERUs, CERs, & RMUs) ú Set rules for the treatment of these units in 6 types of Registry transactions (issuance, transfer, acquisition, cancellation, retirement and carryover) l This framework determines three key characteristics of the international emissions trading market (transfer and acquisition between Registries) ú Who can trade ú When trading for each unit starts and ends ú How much of each unit can be traded l And has secondary implications for transactions outside that market (eg. Forward transactions) 4

Who Can Trade Parties To be eligible to trade (transfer or acquire), an Annex 1 Party must first: 1. ú ú ú Ratify the Protocol Establish its initial assigned amount Establish a national system to estimate emissions by sources and removals by sinks Establish a national registry to track and account for units ú To continue to be eligible to trade, An an Annex 1 Party must l ú ú ú l Submit annual emissions inventory of acceptable quality (NIR) Submit annual sinks inventory (NIR) Submit annual assigned amount report (NIR) Expedited procedure to reinstate eligibility if lost Entities l Must be authorized to trade by an eligible Party 5

When Trading Can Occur Two issues determine when trading occurs : I) When the (authorizing) Party is eligible to trade first commitment period units From: 1 January, 2008 at the latest ú Following review of pre commitment period report (submitted no later than 1 January, 2007) To: 24 July, 2015 ú Final day of the true-up period II) When the unit being traded is issued CERs: 2003? onwards AAUs: January 1, 2008 at the latest ERUs: January 1, 2008 onwards RMUs: April, 2011 (Annual Accounting); April, 2015 (Commitment Period Accounting) 6

How Much Can be Traded Quantity restrictions imposed by Marrakech Accords limited to: Throughout trading period i) Maintenance of the Commitment Period Reserve ú Lower of 90% of initial allocation or 100% of 5 times latest inventory ú Transfers and cancelled units affect compliance with reserve level End of trading period ii) Cap on net acquisitions of sinks CERs ú 1% of 1990 emissions times 5 iii) Caps on Carry Over ú AAUs (no cap); ERUs and CERs (2. 5% of initial allocation); RMUs (0%) 7

Implications for Market Participants • Spot transactions (involving transfers between Registry accounts) should be undertaken in a manner consistent with the Marrakech framework: – To avoid risk of transaction termination or invalidation of units involved – Parties responsible for accounting quality and legal entity participation • Forward transactions should be mindful of the Marrakech framework – Minimize cases of delivery default 8

Looking Ahead This is just a starting point. Some issues for further consideration include: • What tools are available to maximize the consistency of forward transactions with the Marrakech framework? • How will transaction structure be affected by the elaboration of detailed technical and function specifications for registries and the transaction log? • How will transaction structure be affected by Parties’ implementation of the provisions of Marrakech Accords, particularly within the context of domestic emissions trading? 9

What Does this Mean Domestically? 10

Current GHG Reporting l Canada’s National GHG Inventory ú Developed by Environment Canada ú Adheres to International Methodologies (IPCC) & International Reporting Guidelines (UNFCCC). ú Generally top down inventory, with limited point source information. l Voluntary Challenge & Registry ú Industry/Government Partnership ú Designed to promote voluntary GHG reductions ú Acting as registry for BPI (6 projects) & GERT (4 projects) 11

The National Greenhouse Gas Inventory How it is prepared - Responsibilities and Procedural Arrangements Natural Resources Canada Energy Forecasting Division Emissions Data & Energy Analysis Energy & Greenhouse Gas Forecast Statistics Canada Energy & Other Activity Data Natural Resources Canada Activity Data Industry Industries & Association’s Activity Data, Research & Information Mandatory Facility Reporting GHG Verification Centre • Develops emission estimation methods & emission and removal estimates. • Prepares, publishes & reports National Inventory, Fact Sheets, and GHG Indicators Develops standards & protocols for estimating and verifying domestic greenhouse gas emission reductions and provides outreach services for the GHG Division. PRODUCTS Specialty Emissions Expertise (Other Groups) Specialty Surveys & Research Specific Emissions Data Inventory Agency INPUTS Consulting Groups Exchange Greenhouse Gas Division Agriculture Canada Agriculture Research Data Some Emissions & Removals Environment Canada National Greenhouse Gas Inventory • National Inventory Report (NIR) • Trends Fact Sheets & GHG Indicators • UNFCCC & IPCC Monitoring & Reporting Guidelines Review (NPRI) (MOE) Additional Peer Review VCR Facilitate Participant Reporting • Environmental and Industry Stakeholders • Federal/Provincial Colleagues (NAICC-cc and NAICC-A) • Federal Departments (NRCan; Ag. Can, Industry Canada) 12

Reporting Implications of the Kyoto Protocol 13

Monitoring, & Reporting under the Kyoto Protocol (Articles 5 & 7) Kyoto requires that by January 1, 2007 Parties meet international guidelines related to : • The National Inventory System (Article 5. 1) - the institutional arrangements necessary to estimate, verify and report emissions and removals of greenhouse gases • The National Registry (Article 7. 4) – the electronic database to account for transaction of Kyoto credits • The Annual Inventory Report – (Article 7. 1) the reporting of all information required to assess compliance with the target Compliance with these guidelines is mandatory to: • establish an emissions allowance (initial assigned amount) • participate in the Kyoto Mechanisms • Avoid a third-party “adjustment” to our emissions estimate 14

Monitoring & Reporting under the Kyoto Protocol (Articles 5, & 7) International Requirements Each Party must establish a National System and National Registry • Single entity must be designated Inventory Agency with overall responsibility for the National Inventory • Annual National Inventory Report – Must include: • • Description of National System/Institutional Structure Detailed sectoral trends analysis QA/QC activities – Key Sources Quantified Uncertainties, National Registry information (AAUs, CERs, ERUs, RMUs), Details on forest and agriculture carbon stocks, and Information on activities undertaken to minimize adverse impacts on developing countries. Domestic Requirements • Reporting requirements related to Large Emitters System • Linkages of Large Emitters System to National Inventory 15

Domestic Reporting Commitments l l Canada Gazette (January 4, 2003) provided an explanatory note related to reporting on GHGs. It stated that: The Government of Canada is committed to requiring reporting of GHGs, beginning with reporting on 2004 emissions, à à à Reporting will be mandatory, Suitable provisions for facility level reporting will be included and The Government would consult with stakeholders on detailed reporting requirements arising from the Climate Change Implementation Plan. 16

Large Emitters System Reporting Implications l l Climate Change Plan envisages a large industrial emitters system with Covenants/DET Mandatory Reporting will be required under the system. Reporting Objectives l l l Reporting should link with the National GHG Inventory to ensure reductions are included Reporting requirements related to emissions, covenants, trades and the national GHG inventory should be consistent with international methodologies, protocols and standards. Where possible, facility/company level information should be publicly available 17

UNFCCC & KYOTO REPORTING Kyoto Implications Current Inventory System Information Gathering NATIONAL (Including GHG INVENTORY NPRI/CIPEC/SC) SYSTEM Inventory (EC - Review Verification National Centre Registry Single Entity with Overall Responsibility) Trends Analysis Linkages with IET/CDM/JI Good Practice Guidance • QA/QC • Methodologies • Research • Verification • • Uncertainty Analysis Central Archive National Inventory Report Trends Analysis ( +GPG) CERs , AAUs , RMUs DC Impacts DTR Large Industrial Reporting on Emitters Articles 3. 3 & 3. 4 / ERUs (Sinks) Domestic Initiatives & ISO Standards 18

The GHG Verification Centre l l Established to assist domestic initiatives with GHG calculation methodologies and verification Activities over the last 1½ years: ú Developed calculation protocols for àstationary fuel combustion (entity GHG inventory) àlandfill gas (GHG emission reduction project) àcapture and geologic storage of CO 2 (project) ú Begun development of GHG verifier training course àin consultation with SCC, CICA, CEAs ú Providing technical assistance via email and phone 19

In Summary l l Canada negotiated flexible allowance and credit trading rules that allow entities to participate; International framework requires rigour in GHG calculations at the National and Entity level for participating in trading; National GHG Inventory moving towards expanded reporting and verification that will include reporting of information on National Registry; GHG Verification Centre developing products to assist entities and projects with GHG calculations that are consistent with international requirements. 20