Greenhouse Gas (GHG) Monitoring, Reporting and Registries

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

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

3. Background and Context

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

5. Who Can Trade Parties • To be eligible to trade (transfer or acquire), an Annex 1 Party must first: • 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 • To continue to be eligible to trade, An an Annex 1 Party must • 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 • Must be authorized to trade by an eligible Party

6. 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 • Following review of pre commitment period report (submitted no later than 1 January, 2007) To: 24 July, 2015 • 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)

7. How Much Can be Traded Quantity restrictions imposed by Marrakech Accords limited to: Throughout trading period i) Maintenance of the Commitment Period Reserve • Lower of 90% of initial allocation or 100% of 5 times latest inventory • Transfers and cancelled units affect compliance with reserve level End of trading period ii) Cap on net acquisitions of sinks CERs • 1% of 1990 emissions times 5 iii) Caps on Carry Over • AAUs (no cap); ERUs and CERs (2.5% of initial allocation); RMUs (0%)

8. 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

9. 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?

10. What Does this Mean Domestically?

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

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

13. Reporting Implications of the Kyoto Protocol

14. 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 mandatoryto: • establish an emissions allowance (initial assigned amount) • participate in the Kyoto Mechanisms • Avoid a third-party “adjustment” to our emissions estimate

15. 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

16. Domestic Reporting Commitments • 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, • 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.

17. Large Emitters System Reporting Implications • Climate Change Plan envisages a large industrial emitters system with Covenants/DET • Mandatory Reporting will be required under the system. Reporting Objectives • 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

18. UNFCCC & KYOTO REPORTING UNFCCC & KYOTO REPORTING Kyoto Implications Current Inventory System Information Gathering NATIONAL (Including GHG INVENTORY NPRI/CIPEC/SC) Verification National Centre SYSTEM Inventory Registry (EC - Review Single Entity with Overall Responsibility) Trends Analysis Linkages with DTR IET/CDM/JI Good Practice National Guidance Inventory DC Impacts Large QA/QC • Report Industrial Methodologies • Trends Analysis Emitters Reporting on Research • ( +GPG) Articles 3.3 & 3.4 Verification • CERs RMUs , , / Uncertainty Analysis • (Sinks) AAUs ERUs Domestic Central Archive • Initiatives & ISO Standards

19. The GHG Verification Centre • Established to assist domestic initiatives with GHG calculation methodologies and verification • Activities over the last 1½ years: • Developed calculation protocols for • stationary fuel combustion (entity GHG inventory) • landfill gas (GHG emission reduction project) • capture and geologic storage of CO2 (project) • Begun development of GHG verifier training course • in consultation with SCC, CICA, CEAs • Providing technical assistance via email and phone

20. In Summary • 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.