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UBC greenhouse gas trading protocol Kadijevic, Alexandre Jun 30, 2003

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UBC Social, Ecological Economic Development Studies (SEEDS) Student Report  UBC Greenhouse Gas Trading Protocol Alexandre Kadijevic University of British Columbia CHBE June 2003  Disclaimer: “UBC SEEDS provides students with the opportunity to share the findings of their studies, as well as their opinions, conclusions and recommendations with the UBC community. The reader should bear in mind that this is a student project/report and is not an official document of UBC. Furthermore readers should bear in mind that these reports may not reflect the current status of activities at UBC. We urge you to contact the research persons mentioned in a report or the SEEDS Coordinator about the current status of the subject matter of a project/report.”  EXECUTIVE SUMMARY Companies have already approached UBC to buy potential greenhouse gas (GHG) emissions reductions from projects currently under way even though there is currently no GHG Trading Mechanism in place in Canada. This consists of an opportunity that UBC could possibly benefit from.  By using standardized and internationally recognized  protocols to report GHG emissions, UBC would increase the reliability of its GHG emission figures and sell GHG emissions at a reasonable price. Furthermore, by complying with a recognized protocol, UBC would be only one step from certifying its emissions ahead of the Canadian GHG Trading Scheme.  Our search for recognized protocols began in Canada but with no success. Canada’s institutions, such as the Voluntary Challenge Registry and the GHG Verification Center, are still developing protocols and can only offer guidelines to report emissions. Looking abroad, the UK GHG Emissions Scheme is the only source that offers viable protocols. The UK Scheme is the first and currently the only GHG trading scheme in the world. With the assumption that Canada would replicate the UK Scheme, the scheme protocols were applied in the context of UBC.  For reasons discussed in the text, the Direct Participant option was chosen as the mechanism of entry into the scheme. It requires an entity-based approach of reporting GHG emissions as opposed to project-based reporting. Technical recommendations are provided on what UBC should do in order to fully comply with UK GHG Trading  Scheme Standards. This is followed by a brief introduction to the World Resource Institute, a good source of guidelines for emissions not covered by the UK Scheme.  Within a few weeks of completing this project, the Canadian Government published a discussion paper outlining how the Canadian Trading Scheme would operate. As a result of what is proposed, UBC would not be able to participate using UK’s Direct Participant entity-based reporting approach. It will only be able to obtain credits from project-based emission reductions.  UBC is currently undergoing energy retrofit projects in collaboration with MCW. The International Performance Measurement and Verification Protocol (IPMVP) will be used to measure energy efficiency performance for each project and insure compliance with targets. MCW is in fact offering performance guarantees. Further investigation of the 2001 protocol document indicates that its standards are likely to become the international greenhouse gas trading standard for monitoring and verification of greenhouse gas emissions. Consequently, the IPMVP is the appropriate protocol for UBC to use for eventual certification of GHG emissions.  Once UBC produces verifiable emission  reductions, it will be able to register them at the Registered Emissions Reduction program offered by the VCR and wait until the Canadian GHG Offset System is in place. Alternatively, it could also trade these emissions immediately at a favorable price due to the increasing reliability of the underlying data. Another possibility if for UBC to keep its records of projects that reduced emissions and wait until the Canadian GHG trading system is in place.  TABLE OF CONTENTS Introduction 3 Section 1 - Trading Mechanisms of the Kyoto Protocol 8 Section 2- Emission Trading Schemes 10 Section 3 - Joint Implementation & Clean Development Mechanisms 13 Conclusion to Sections 2 and 3 14 Section 4 - UK GHG Trading Scheme 15 Introduction 15 Entry into the UK GHG Emissions Scheme 15 Direct Participant Option 17 Principles of reporting 18 Regulation guidelines for the establishment of the baseline, boundary and defining 20 eligible emissions Six-step approach to define the baseline, boundary and eligible emissions 21 1 - Management control 21 Organizational boundary 22 Operational boundary 23 Operational boundary for UBC Point Grey campus 23 Methodology applied when compiling UBC’s Point Grey Campus facilities 26 boundaries and ownership lists 2 - Sources within a sector 28 3- Emissions data 29 Power and Heating Sector 30 Initial Invoice 30 Electricity and Gas 30 Steam 30 Tenants and Ancillaries Meter Reading 31 Electricity, Gas and Steam 31 Controls 32 Invoices 32 Conclusion 33 Transportation 33 4 - Eligibility for entry 34 5 - Coverage of GHG 35 6 - Coverage within the reporting guidelines 36 Conclusion of the 6 Steps 36 Adjustment of the Baseline year policy 37 Summary of UBC’s Baseline and Annual Emissions Calculation 40 Documents that must be reported to the scheme annually 42 Implications of reporting using this methodology considered in the context of UBC’s 43 ability to trade GHG emissions in Canada. Section 5 – World Resource Institute 45 Section 6 – Current discussions of the Canadian Offset System 49 Implications for UBC emissions reporting 51 Conclusion 52 Bibliography 54  APPENDICES LIST APPENDIX 1 – BC Hydro offer to purchase GHG emissions reduction projects. (Refer to accompanying CD) APPENDIX 2 – Joint Implementation Protocols (Refer to accompanying CD) APPENDIX 3 – Off UBC Point Grey campus properties owned by UBC APPENDIX 4 – Organizational chart demonstrating managerial control of ancillary services APPENDIX 5 – Core and Ancillary buildings built prior to April 1999. (Refer to accompanying CD) APPENDIX 6 – List of tenant owned facilities APPENDIX 7 - Tenants leasing space in facilities owned by UBC built before 1999 APPENDIX 8 – Core and Ancillary facilities built after the baseline year April 1999 APPENDIX 9 – List of UBC’s Vehicles Fleet. (Refer to accompanying CD) APPENDIX 10 – UBC Properties Trust List of Properties under Development APPENDIX 11 –Billable (Tenant & Ancillary) metering list provided by Gavin Yap, Meter Reader at UBC Utilities. (Refer to accompanying CD) APPENDIX 12 – Non-Billable (Core) metering list provided by Gavin Yap, Meter Reader at UBC Utilities. (Refer to accompanying CD) APPENDIX 13 – List of Accredited Verifiers by the UK Scheme  2  Introduction The industrial revolution accelerated the process of migration to urban centers and the reliance on machines rather than man and animal power. In essence, western societies moved from a predominantly rural to urban economies. Specifically, Canada’s urban population shifted from approximately twenty (20) percent in 1871 to currently eighty (80) percent.1 Needless to say, over the century, our societies became dependent on fuel forms of energy, especially on petroleum. Indeed, in 1998, petroleum represented thirtysix (36) per cent of the world’s source of energy followed by coal at twenty-three (23) per cent and gas at twenty (20) per cent. Overall, approximately eighty (80) per cent of the world’s energy demand is met by fossil fuels.2  Fossil fuel combustion is the leading contributor of greenhouse gases. Indeed, emissions from fossil fuel combustion consist predominantly of carbon dioxide. Over the past half century, the concentration of CO2 in the atmosphere increased from a mean concentration of approximately 316 parts per million by volume (ppmv) in 1958 to approximately 369 ppmv in 1998 for a total increase of approximately seventeen (17) per cent3 leading to an average increase of the earth’s temperature of 0.6°C.4 This will seriously impact many ecosystems. In particular, scientists from the International Panel on Climate Change predict a reduction in crop yields in warm countries, decreased water  1  Helsley, R. Urban Real Estate Economics, UBC Commerce, 2000 Gregory A. Keoleian, Environmental Sustainability Educational Resources, School of Natural Resources and Environment, Center for Sustainable Systems University of Michigan. Power point presentation on the internet, http://css.snre.umich.edu/css_doc/Energy.ppt, May 4th 2003. 3 UNEP, http://www.grida.no/climate/vital/06.htm, May 4th 2003. 4 UNFCCC, http://www.unfccc.int, April 15th 2003 2  3  availability in regions where water is already scarce, an increase in flooding risks, and the spread of diseases such as malaria and cholera.5  Unfortunately, fossil fuel consumption forecasts only seem to be on the rise according to a report published by the US Department of Energy. The Financial Times (Friday May 2, 2003) reported that demand for oil is forecast to climb fifty (50) per cent by 2025. Most of the demand will come from emerging countries, especially China, India and South Korea. They are forecast to need eighty-six (86) per cent as much oil as the developing world. The current level of urbanization in China is an indicator of the future demand of petroleum. It currently only has thirty per cent of its population living in cities(Helsley, 2000). In order to achieve the average level of urbanization of western countries i.e. eighty (80) per cent, China will need large amounts of energy to sustain very large urban populations, a very bleak outlook for climate change. In 1992, leaders around the world signed the Kyoto Protocol, recognizing the threat of global warming and the urgency to mitigate sources of greenhouse gas emissions. One of the proposed methods to mitigate emissions is the introduction of an international greenhouse gas emissions trading system. In essence, the trading system is a marketbased system of trading either pollution allowances or credits from projects that have produced a certified amount of reduction in greenhouse gas emissions. Many countries have ratified the protocol including Canada in December 2002. There is currently only one ratification is required before the protocol become legally binding.  5  Quirin, Scheirmeier, Climate change offers bleak future, Nature 409, 971 (2001).  4  In October of 2003, soon after the appearance of this report, the Russian electorate will decide whether or not to ratify the Kyoto Protocol. In the event of ratification, the commitments made by countries that have already ratified the Protocol will become legally binding. Canada will therefore be legally obligated to reduce its greenhouse gas emissions by 6% below its 1990 levels in time for the first commitment period of 2008 to 2012.  The international community is currently at a key turning point in history.  Greenhouse gas trading is close to becoming a widespread reality.  Even though the current legal framework for the Canadian National Greenhouse Gas Trading Scheme is still under development, companies have already approached UBC to buy potential greenhouse gas emissions reductions from projects currently under way. Specifically, Mr. Jonathan Frantz indicated that GEMco was interested in purchasing UBC’s GHG emissions at three to eleven dollars per ton of CO2e. He indicated that BC Hydro also approached UBC6 (see Appendix 1). A brief research on GHG emissions trades that occurred recently in the international community seems to suggest that the price of one ton of CO2e ranges between ten and twenty-five Canadian dollars7. It is therefore assumed that potential buyers are offering a discounted price, due possibly to the uncertain accuracy of UBC’s GHG emission figures. By mitigating this risk, it is reasonable to assume that buyers could be persuaded to raise their offer.  6  Request for Greenhouse Gas Offset Proposals, June 2002, BC Hydro, www.bchydro.com, September 6, 2003. 7 An Overview of Carbon Transactions, General Characteristics and Specific Peculiarities, H.C. de Coninck, N.H. van der Linden, March 2003, International Emissions Trading Association, www.ieta.org, July 2003.  5  The primary objective of this research is to find and apply, in the context of UBC, a GHG emissions reporting protocol that could offer the possibility to certify greenhouse gas emissions. In essence, by applying an already recognized protocol, UBC will be able to assess where contentious issues will arise when reporting GHG emissions under our future National Greenhouse Gas Emissions Trading Scheme.  Furthermore, if UBC wants to sell its emissions reductions immediately, applying a recognized protocol would place UBC in a stronger negotiating position with potential buyers. A rough calculation indicates that if UBC meets its goal of reducing emissions by 10%, as indicated in UBC’s Energy Management Action Plan, at an average market price of $10, UBC could earn approximately $60,000. The approximation is based on values published in UBC’s Energy Management Action Plan.  The investigation will be performed in the following order. Section 1 offers a brief introduction on the trading mechanisms available under the Kyoto protocol. Section 2 covers Emissions Trading Schemes, one of three trading mechanisms offered by the Kyoto Protocol. These will be investigated from a Canadian, and then from an international perspective to assess what GHG emissions reporting protocols are currently available. Section 3 assesses whether UBC could profit and therefore use the protocols from the remaining two trading mechanisms: Joint Implementation and Clean Development Mechanism. Sections 2 and 3 conclude that the best emissions reporting protocols currently available are from the UK Emissions Trading Scheme and the World Resource Institute (WRI). Section 4 therefore applies the UK protocols in the context of UBC. Section 5 covers the remaining emissions sources not covered by the UK protocols  6  and offers reporting insights on the WRI protocols. Section 6 summarizes recent events in the development of the Canadian Emissions Trading Scheme and its potential implications for UBC.  7  Section 1 - Trading Mechanisms of the Kyoto Protocol A detailed account of the Kyoto Protocol is beyond the scope of this research. If the reader is interested to learn more about the Protocol, a recommended reading is: “A Guide To the Climate Change Convention and its Kyoto Protocol, Bonn, 2002” which can be found in the accompanying CD.  The Kyoto Protocol offers three mechanisms to trade greenhouse gas emissions between Annex B countries8. These are: Joint Implementation, Clean Development Mechanism and Emissions Trading.  The first two mechanisms allow the purchase of emission reduction credits on a projectbased approach. Units, in tons of CO2e, associated with these two mechanisms are called Emission Reduction Units (ERUs) and Certified Emissions Reductions (CERs) respectively.  The third option, Emission Trading Schemes, is a medium to trade GHG emission units between scheme participants, nationally and internationally.  ERUs and CERs are  tradable on these Schemes as well as Assigned Amount Units (AAUs). AAUs are emission allowances distributed by the governments to selected participants.  The  government gradually retires them to force compliance with the national emission target. Participants trading allowances use an entity-based approach to reporting as compared to  8  The 39 emissions-capped industrialized countries and economies in transition listed in Annex B of the Kyoto Protocol. Canada is an Annex B Country and has committed to reduce its greenhouse gas emissions by 6% of 1990 levels. Refer to document: A guide to the climate change convention and its Kyoto protocol, Bonn 2002. www.unfccc.int, August 2003. Found in the accompanying CD: UNFCC-guideconvkp-p.pdf  8  a project-based approach. A thorough comparison is made later in the text. The Trading Schemes objectives are to facilitate the achievement of GHG emission reductions at the lowest possible cost. All trades and ownership of units is recorded and monitored by national Registries.  For clarification, a project-based method of reporting requires participants to implement a project that reduces emissions above and beyond what would normally occur or is legislated by the government. The project has a defined boundary regardless of the entity’s organizational structure. Audited emission reduction projects receive credits that are then tradable on Emission Trading Schemes. On the other hand, an entity-based method of reporting requires corporations, entities or persons to define their realm of influence, establish their organizational boundary and then calculate their total emissions. They receive an equivalent number of emission allowances and the government gradually retires them. This approach forces participating entities to either undertake projects to reduce their emissions or purchase allowances or credits to meet declared emissions reduction targets.  The next two sections investigate the three trading mechanisms in further detail to find a recognized protocol that UBC could use to report its GHG emissions.  9  Section 2- Emission Trading Schemes Canada is currently in the process of developing an Emissions Trading Scheme. While this is under development, a Voluntary Challenge Registry (VCR) was initiated to encourage early GHG reduction actions. The VCR is the precursor National Registry that will be part of a national compilation and accounting database. The national database will serve as a monitoring tool to determine Canada’s emission target compliance.  Although there are currently no official trading mechanisms in Canada, the VCR offers participants the opportunity to either report their emissions using an entity-based approach or a project-based approach. The VCR also offers other services, but these are beyond the scope of this project.  The first approach is related to the program: ‘Energy Management Action Plan Guidelines9’.  The project is voluntary and offers a GHG emission calculation  methodology for energy related GHG emissions. Unfortunately, the document guidelines do not offer a methodology on how to establish a boundary. Furthermore, they do not specify what type of source of emissions will be eligible to trade, nor how to solve issues with respect to double counting. In addition, it is still unknown if participants should use an absolute or rate-based approach to set targets and report their emissions. Although this program is a positive step for participants to learn about their sources of emissions and take action to mitigate them, the proposal falls short of offering the future means to trade GHG emissions. UBC currently report its emissions using this protocol.  9  Energy Management Action Plan Guidelines, August 1999, Voluntary Challenge Registry, www.vcrmvr.ca, August 30th 2003.  10  The second program is called the Registered Reduction Registry. It offers a brief twopage guideline on how to calculate project-based emissions10. The VCR can review the projects using principles developed by the World Resource Institute. If approved, these are registered and will be considered favorably by the Government when the Trading Scheme is in place. Again, no detailed protocols are available to certify emissions. The VCR only offers guidelines.  Other organizations such as the Canadian Greenhouse Gas Verification Centre11 or consultation papers such as the GERT12 report do not offer further insights. In fact, a recent report indicates that Canada is currently in the process of developing protocols. This will further be discussed in Section 6.  Currently there is only one economy-wide Greenhouse Gas Emissions Trading Scheme in the world. The UK Emissions Trading Scheme, a precursor to the European Emissions Scheme, started trading in April 2002. This scheme offers detailed protocols and methodologies to report and certify emissions. It also offers strict rules to establish a boundary, defining which emissions are eligible and what documents are necessary to submit in order to certify emissions. The UK Scheme offers protocols which UBC could use to learn and possibly apply as part of the future Canadian Emissions Trading Scheme, depending on whether Canada decides to replicate the UK system. Prior to jumping to  10  Validation Protocol for Registered Emission Reductions, Voluntary Challenge Registry, www.vcrmvr.ca, August 30th 2003. 11 Greenhouse Gas Verification Centre, http://www.ec.gc.ca/pdb/ghg/verification_procedures_e.cfm, September 3rd 2003. 12 Greenhouse Gas Emission Reduction Trading Pilot, GERT Technical Committee, August 2002.  11  conclusions, the other two mechanisms offered by the Kyoto protocol are investigated to assess if other options exist.  12  Section 3 - Joint Implementation & Clean Development Mechanisms The Joint Implementation system allows Annex B signatories to implement greenhouse gas reduction projects in other Annex B countries. Emission reduction units (ERUs) generated by these projects can serve to meet the investor’s emission targets. It is theoretically possible for a project to take place in an industrialized economy, but most projects take place in economies in transition (EITs). Central and Eastern Europe play host to most of these projects due to their greater scope for emission reduction projects at lower cost. UBC would therefore be an unlikely benefactor of this mechanism. In fact, an electronic communication with the Prototype Carbon Fund, a World Bank Initiative, which has set aside US$75 million for Joint Implementation projects indicated that they purchase emission reductions only from projects in EITs. Although this could eventually change, UBC is unlikely to benefit from this mechanism in the near future. Nevertheless, Appendix 2 includes standardized protocols that will be used to monitor these projects. They might eventually become useful.  The Clean Development Mechanism allows Annex B parties to implement projects that reduce emissions in the territories of non-Annex B parties, usually developing countries. These projects generate certified emission reductions (CERs), which can be used by the investor to meet his/her emission target. UBC is not eligible to sell emission credits using this mechanism and therefore will not be investigated further.  13  Conclusion to Sections 2 and 3 UBC is unlikely to be able to trade under a Joint Implementation project and unable under the Clean Development Mechanism. Moreover Canada currently does not have a National Greenhouse Gas Exchange with associated rules and protocols. Hence the UK Greenhouse Gas Emissions Trading Scheme’s rules and protocols are used in this report as UBC’s emissions reporting standard. The UK trading scheme is in fact the only reliable source of rules and protocols for trading greenhouse gas emissions. It is assumed that the Canadian Trading Scheme will replicate the UK Trading Scheme. By using the UK protocols, UBC could be at the forefront of emissions trading.  14  Section 4 - UK GHG Trading Scheme Introduction The UK Emissions Trading Scheme was successfully launched in April 2002 creating the world’s first economy-wide greenhouse gas trading scheme. The primary objective of the scheme is to achieve a significant amount of absolute emission reductions at a reasonable cost.  The UK Trading Scheme operates both a ‘cap and trade’ and a ‘rate-based’ program to regulate and trade emissions. In the first instance, regulated sources are required to limit their emissions to a fixed quantity of emissions per unit of time. Alternatively, emissions limitations with a ‘rate-based’ program are linked to levels of economic activity. Several measures of economic activity level can be used as the metric to define the emissions limitation in rate-based programs. These include physical output, energy input and monetary measures such as revenue.  The entry route chosen by a participant determines which trading program it will adhere to. This also affects the type of protocols a participant will use to report its emissions, as well as the type of trading restrictions that will apply. The next section explains the options available and associated restrictions.  Entry into the UK GHG Emissions Scheme There are four options of entry into the scheme: Direct Participant, Climate Change Agreement, Project-Based and Trader. The following describes each entry option.  15  The Direct Participant option allows an organization to set a voluntary absolute emissions target with the benefit of a financial incentive from the government. Participation is on a voluntary basis with no restrictions to entry other than both direct and indirect emissions must be emitted in the UK. At the beginning of the year, participants receive emission allowances equal to their emissions less their year-end target.  In case of over-  achievement, they can sell their allowances, while in the case of non-compliance; they must purchase either allowances or emission credits. The UK scheme provides protocols Direct Participants must use to report their emissions. Note that Direct Participants are required to report using an entity-based approach.  A second option is through the Climate Change Agreement (CCA). This is a separate agreement between the government and organizations to reduce their emissions. Unlike Direct Participants, CCAs can have relative emissions targets.  Furthermore, the  participant’s targets are set prior to entry into the scheme. The objective is to offer a more flexible option to meet targets. In the case of over-achievement, participants can audit their emissions and receive allowances at the end of the year to trade in the open market. As with Direct Participants, they can also buy allowances or credits in case of under-achievement. Restrictions apply to relative target holders who trade allowances so as not to compromise the overall absolute emissions reduction objective. Specifically, restrictions are imposed on transfers of allowances from the relative sector to the absolute sector. Transfers are regulated by a “gateway” mechanism that prohibits a net inflow of allowances from the relative to the absolute sector. Unfortunately, no protocols for CCA participants are offered in the documentation regarding this scheme.  16  The third option is the Project-Based approach. Projects will be allowed in any sector but cannot be from sources of emissions already covered by the Scheme. This is to prevent double counting. Once a person or organization certifies its emission reductions, it is entitled to receive emission credits and to trade them in this scheme. Indeed, participants can also use credits generated from projects to help them meet their targets. Joint Implementation and the Clean Development Mechanism credits will also be valid to trade with some restrictions. Unfortunately, the final rules and protocols for project-based emission reductions are still under discussion.  Finally, it is also possible to open a trading account. Traders can speculate and hedge investments in GHG emissions allowances or credits.  UBC is eligible to enter the trading Scheme using any of these four options. Based on UBCs current reporting methodology and the protocols available with the UK Emissions Scheme, the Direct Participant approach to trade emissions is the preferred option. Specifically, the UBC’s Energy Management Plan and the Direct Participant option both report emissions using an entity-based approach. The next section of this report applies in the context of UBC the regulations and protocols developed by the UK Emissions Trading Scheme for Direct Participants.  Direct Participant Option The emission reporting rules for Direct Participants will be applied to UBC according to the following methodology. The principles of reporting will first be defined. Regulation guidelines are then highlighted for the establishment of the baseline year, the boundary  17  and defining eligible emissions. This is followed by a six-step approach developed by the scheme to define the baseline, boundary and eligible emissions. Issues affecting the adjustment of the baseline year are then considered. The calculation methodology of GHG emissions is subsequently summarized with its current pitfalls. Finally, the implications of reporting emissions using this methodology are considered in the context of UBC’s ability to trade GHG emissions in Canada.  Principles of reporting Direct Participants shall follow these principles when measuring and reporting baseline and annual emissions. Verifiers will ensure that Direct Participants have measured and reported emissions against these principles when carrying out verification.  18  Table 1. Greenhouse Gas Reporting Principles • Information shall represent faithfully the transactions and other events it either purports to represent or could reasonably be expected to represent. Faithful Representation  • Uncertainties shall be quantified and data shall neither be systematically overestimated nor underestimated so far as can be judged. • Uncertainties shall be reduced so as to be immaterial. • Complete within the bounds of materiality and the rules of the Scheme, such that information shall not be misleading or unreliable in terms of its relevance.  Completeness  • All sources above the Size Threshold within the defined and chosen Source List shall be included in the Baseline and annual emissions. • Leakage effects shall be accounted for. • Consistent methodologies and measurements shall be used between the Baseline and subsequent years.  Consistency  • Data shall be comparable over time. • Estimates shall be comparable with the UK inventory estimates and with international guidelines including IPCC guidance.  Reliability  • Baseline and annual emissions and related disclosures shall be free from material misstatement and bias and capable of being depended upon by users to represent faithfully that which it either purports to represent or could reasonably be expected to represent. • Changes in methodologies shall derive from continuous improvement of data quality and shall be clearly stated and documented to allow for year-to-year comparisons. • Reported data shall be replicable by a third party through provision of sufficient information and a clear audit trail. • References and methodologies shall be clearly documented.  Transparency • Changes over time shall be clearly documented to allow clear understanding. • Third party verification by an accredited verifier shall be undertaken.  19  These principles draw on existing statements of key principles in other GHG reporting guidelines and the qualitative characteristics or financial statements within international accounting standards. These existing principles and characteristics are applied within the context of the UK Scheme.  Regulation guidelines for the establishment of the baseline, boundary and defining eligible emissions Direct Participants are to report emissions in absolute terms. Real absolute reductions are difficult to assess since factors of production, which vary from year to year, directly impact greenhouse gas emissions. There are therefore many steps to help ensure that the figures are real and accurate, truly reflecting a reduction in emissions. These include the establishment of the baseline, the boundary and the sources of eligible GHG emissions.  Establishing the baseline is a first important factor to evaluate performance. Under an absolute emissions trading system, the choice of a baseline must take into account factors of production as levels vary from year to year. The scheme therefore requires the baseline to be the average emissions between 1998 and 2000. In the case of UBC, fiscal year 1998-1999 (April to May) was chosen as the baseline year. This year was chosen because it was the end of a period of growth at the University. Energy and water use stabilized after a period of growth and the Campus Sustainability Office had just been formed and was to start initiatives to reduce energy and water use.13 This baseline will be used for the purpose of this report.  13  UBC Energy Management Action Plan, December 2002.  20  In addition, the boundary must encompass all sources of emissions in order to prevent ‘cherry picking’. It prevents participants from only including the easiest sources of emissions to mitigate. In fact, there is an obligation to present the complete picture of emissions in order to prevent organizations from claiming reductions in one area of their operations while simultaneously increasing emissions from other areas. There are exceptions to this rule under some unusual circumstances.  Finally, the UK GHG Trading Scheme follows 6 steps outlined below to establish both the baseline and boundary, and eligible emissions. Decisions taken at each step must be fully documented when presenting the documents to the authorities. These steps are applied here in the context of UBC. The 6 steps are 1) Management Control, 2) Sources within a sector, 3) Emissions data, 4) Eligibility for entry, 5) Coverage of greenhouse gases, and 6) Coverage within the reporting guidelines.  Six-step approach to define the baseline, boundary and eligible emissions 1 - Management control A Direct Participant has management control over a source of emissions when it exercises dominant influence over the emissions from a source, through having the ability to direct the financial and operating policies governing the emissions from that source. A source of emission must be either energy based or process-based.  21  Limits of management control will be defined in two categories: organizational and operational boundaries. Further description of these categories is found in the next two sections.  Organizational boundary An organizational boundary is often defined as the limit of dominant influence of an organization. This principle is often clear to participants because it is the same principle used when submitting information to auditors as part of the preparation of consolidated financial statements. Examples of dominant influence include: a) by virtue or the provisions contained in its memorandum or articles b) through holding a majority of the voting rights in that company c) through having a right to appoint or remove the directors holding a majority of voting rights in the company. A brief electronic communication with Freda Pagani, Director of the Campus Sustainability Office, indicated that at this point in time it would be too difficult to assess all of UBC’s investments and joint ventures. No further investigation was initiated. Therefore, for the purpose of this research, only UBC’s facilities will be considered under managerial control.  Recommendation - Further evaluation of UBC GHG emissions will require that all facilities and organizations under UBC’s managerial control be included.  22  Operational boundary UBC owns facilities both on and off the Point Grey campus. Due to a lack of data, facilities located off the Point Grey campus are excluded from UBC’s managerial control for the time being. The facilities are listed in Appendix 3.  Recommendation – Off-campus facilities should eventually be part of UBC’s emissions report.  Operational boundary for UBC Point Grey campus As described in UBC’s Energy Management Plan document submitted to the Voluntary Challenge Registry, UBC Point Grey campus hosts three main types of facilities: core academic and administrative facilities funded and operated by the University (Core Buildings), facilities operated by University ancillary departments, such as Housing, Food Services, Parking & Security, and Athletics & Recreation (Ancillaries), and facilities owned and operated by land-lease tenants on the University Point Grey campus, such as UBC Hospital, Forintek, BC Research, NRC and TRIUMF (Tenants).  UBC purchases bulk electricity and natural gas from BC Hydro, Terasen and resells part of it to Tenants at the prevailing market price. UBC also produces steam on campus for its own use as well as for sale to Tenants. It therefore becomes important to clearly define managerial control of installations and therefore energy consumption, the source of greenhouse gas emissions.  23  Core facilities are directly under managerial control. Ancillary services and facilities also fall under managerial control following the organizational chart found in Appendix 4. Tenants who own facilities on land-lease terms are outside UBC’s managerial control. This is true at least for energy-based sources of GHG emissions.  Not all Tenants own their facilities. Some lease space in facilities owned by UBC. These include companies leasing space in the Student Union Building (SUB) such as the Deli and Subway. In addition, the Bread Garden leases space in the Forestry building. Furthermore, Detwiler and Purdy pavilions are jointly owned by UBC and part of the facility is leased to tenants. It is currently unclear if tenants lease the portion of the facility owned by UBC. In addition, the Pulp and Paper Building and Koerner pavilions are 100% owned by UBC and are leased, at least partly, to tenants14.  The issue of ownership becomes important when establishing the boundary of sources of emissions. UBC possesses the managerial control to reduce emissions from facilities it owns by implementing energy retrofit programs even though it is not the ultimate consumer of energy. Critical is the risk of double counting. UBC could therefore insert a clause in their leases that any greenhouse gas emissions associated with the leasers’ energy consumption falls under UBC’s jurisdiction. This way, UBC could retain the benefit from emissions mitigation projects and avoid any conflicts of ownership over these emissions.  There is room for debate and any assumptions made should be  documented in the final report submitted to the authorities. Currently, UBC’s Energy  14  The information was provided by Mr. Peter Jia,UBC Senior Analyst, Space Analyst, and Ms. Mercedes Sumang, UBC Space Analyst.  24  Management Action Plan reports these sources as outside its managerial control but does not fully document its assumptions. For the purpose of this research due to currently unavailable data, it will be assumed that UBC Tenants, regardless of building ownership, fall outside UBC’s managerial control.  UBC also possesses managerial control on mobile sources of emissions. UBC operates a large fleet of vehicles from many different departments. Even though many vehicles are leased, UBC is responsible for the emissions from the combustion of fossil fuels15.  A list of Core and Ancillary facilities for fiscal year ending April 1999 is found in Appendix 5 found in the accompanying CD. The list covers over 400 facilities. Tenant owned facilities along with their respective energy meters identification numbers are found in Appendix 6. Finally, a complete list of facilities owned by UBC and leased to tenants is found in Appendix 7. For completeness, Core and Ancillary buildings completed after the establishment of the baseline year are listed in Appendix 8. These facilities will be referred to later in the Adjustment of the Baseline Year Policy section. Unfortunately, assumptions had to be made when compiling these lists. The following section summarizes the methodology used to assemble these documents. Finally, a complete list of UBC’s fleet is found in Appendix 9.  15  The Greenhouse Gas Protocol, a corporate accounting and reporting standard, World Resource Institute, www.ghgprotocol.org, July 15th 2003.  25  Recommendation – Assumptions should be documented to define whether the facilities that UBC leases are within or outside its managerial control or, in other words, within or outside its operational boundary.  Methodology applied when compiling UBC’s Point Grey Campus facilities boundaries and ownership lists The property database list maintained by Mercedes Sumang, Space Analysts at Campus and Community Planning was used as the starting point. Ms. Sumang provided a list that includes all properties located on the Point Grey campus as well as a separate list of UBC properties located off-campus (see Appendix 3).  From the On-Point-Grey-Campus list, a list or properties that are leased were extrapolated from a list of facilities that UBC Utilities bills every month as tenants provided by Gavin Yap, Meter Reader at UBC Utilities. The tenant’s list was sent to Ms. Sumang to verify ownership. Buildings built prior to April 1999, owned by UBC and leased to tenants are listed in Appendix 7. Buildings owned by its third party occupants remain outside of the operational boundary of UBC and are included in Appendix 6.  Fortunately, the database provided by Ms. Sumang also indicated the year of construction for most facilities though some completion dates are unavailable, and it is unclear how construction dates were derived. In other words, it is unclear if these dates are start or completion dates. Because key personnel were on vacation, it was not possible to obtain an answer. Completion date is an important factor discussed below in the section dealing with Adjustment of the Baseline Year Policy. This section will explain why Appendix 7 only lists buildings built prior to April 1999. 26  In order to resolve this issue, Jim Carruthers, Manager of Development Services Planning Department at Campus and Community Planning suggested that building permits be used as the official completion date. Unfortunately, Eddie Ho, Chief Building Official Permits and Inspections at Campus and Community Planning, did not believe it was feasible to search manually all the building permit files, as there is currently no computer database.  Fortunately, the author was able to obtain an unofficial list of buildings completed after 1999 from Bob Makela, Building Inspector at Campus and Community Planning. Mr. Makela compiled the list by looking quickly at their records and from memory. Although it might not be 100 per cent accurate, it provides the best information currently available. From this information, it was possible to derive a list of Core and Ancillary buildings completed after April 1999 found in Appendix 8.  Mr. Makela also highlighted the importance of a proper definition of a ‘new building’. To complicate matters, there are sometimes large additions to buildings or complete refurbishing of structures. A tentative definition of ‘new building’ is as follows: ‘A new construction that breaks new grounds, has a separate legal address and is not connected significantly to another facility’. A more precise definition should be devised. In any event, this definition was used to define the buildings listed by Mr. Makela. This definition will also become important in the section on Adjustment of the Baseline Year Policy.  27  Buildings or facilities listed in the database provided by Ms. Sumang with no completion date that were not part of Mr. Makela’s list or UBC’s Properties Trust project list provided by Mr.Graeme (see Appendix 10) are assumed to have been completed prior to April 1999.  Furthermore, facilities that were not part of the Meter Reader’s tenant list are assumed to be either Core or Ancillary facilities. Hampton Place, which also figured on the property database, was removed from the list as units are owned by a third party and are not part of UBC’s energy grid. They are independently powered and heated.  Recommendations –A better methodology of establishing completion dates must be found and further research is needed to certify these lists. In addition, a better definition of ‘new building’ is required.  2 - Sources within a sector Once the source list is complete, the sources in step one must be separated into different industrial sectors. UBC’s process-based or energy-based sources of emissions under managerial control can be split in two sectors: Power and Heating, and Transportation.  Direct participants are able to choose which sectors will be brought into the scheme, and which will remain outside. They are not permitted to ‘cherry pick’ their sources within a sector.  They must include every source within a sector over which they have  management control. In fact, as previously mentioned, there is an obligation to present a complete picture of emissions in order to prevent organizations from claiming reductions  28  in one area of their operations while simultaneously increasing emissions from other areas.  UBC is therefore obligated to include all facilities completed prior to April 1999 and under managerial control. The Power and Heating sector includes direct emissions from natural gas and light oil and indirect emissions from imported electricity.  UBC’s complete vehicle fleet also falls under UBC’s managerial control. All Universityowned and leased vehicles should therefore be included in the Scheme. UBC’s fleet consumes marked and unleaded fuel in addition to marked and regular diesel.16  3- Emissions data This section requires identifying the subset of sources in step 2 with verifiable emissions data for the baseline period. If a Direct Participant cannot fulfill this criterion for certain sources, at the consent of a verifier, these sources can remain outside the Scheme.  The author was unable to collect all required data from sources included in the Scheme. This is not because of a lack of existence, but because of unavailability of staff or lack of staff time and resources. This research will therefore concentrate on highlighting the qualitative aspects of the data and provide recommendations where sources of information could be improved. Sources of data will be defined for Power & Heating and Transportation sectors in the chronological order used to calculate UBC’s GHG emissions.  16  UBC Energy Management Action Plan, December 2002.  29  Power and Heating Sector UBC purchases its bulk electricity and natural gas from BC Hydro and Terasen. Part of it is resold to Tenants at the prevailing market price. UBC also produces steam on campus by burning either natural gas or light oil, and distributes it to Core, Ancillaries and Tenants.  UBC’s core facilities are not in most case metered individually. UBC therefore accounts for its total energy consumption by subtracting from its bulk utility purchase the utilities billed to tenants and ancillaries. Ancillaries’ energy consumption is then added back to obtain the total energy consumption under managerial control.  The next section  describes how each step is performed to calculate UBC’s total energy consumption. This is followed by an audit trail summary.  Initial Invoice Electricity and Gas UBC receives bills from BC Hydro and Terasen Gas that encompass energy consumption from Core, Ancillaries and Tenants. The Invoice is received at UBC Utilities and sent to Accounts Payable. The invoices are filed at Accounts Payable and records are kept for seven years. Steam UBC possesses a steam plant at 2040 West Mall. It burns natural gas and light oil to produce steam. Natural Gas consumption at the steam plant is metered separately from  30  the rest of the campus17. The invoice is received by UBC Utilities and sent to Accounts Payable. Invoices are again filed and kept for seven years.  Light oil is burned on occasion. The consumption of oil is calculated with a “dip stick” and records are kept with the Shift Engineer17. IT is assumed UBC Utilities accountants enter the figures in a database. Records of oil delivery are received by UBC Utilities and sent to Accounts Payable where the records are kept for seven years.  Tenants and Ancillaries Meter Reading Gordon Apperley, Director of UBC Utilities, indicated that the University of British Columbia meters and meter reading procedures are certified by Measurement Canada. UBC follows rigorous standards established by the Canadian Government. Electricity, Gas and Steam Every month, Ancillary and Tenant meters are read using the spreadsheet included in Appendix 11. The list includes the serial number of meters where available. The meter reader records the total consumption and, where available, the month’s consumption and then resets the instrument. These two records double-check each other. The meter reader then enters these figures in a database with limited password access.  17  Reference: UBC Utilities Chief Engineer, David Babich  31  Controls There are two controls to verify that Tenant and Ancillary monthly energy consumption figures are accurate. First, the software performs an automatic verification every time data is entered. It performs a variance check in relation to the last twelve meter readings. If the figure surpasses 2 variances, a screen prompts the user to confirm the value.  A second verification involves the Meter Reader and a UBC Utilities accountant. Together, they compare the figure to previous figures for the same period. If there is a large discrepancy, the meter reader verifies his data, tries to find an explanation from the users and might also return to the site to reconfirm his reading. No records are currently kept to describe the discrepancy where abnormal figures are found to be accurate.  Recommendation - Under the UK trading mechanism, all abnormal events must be recorded to explain to a verifier the reasons for large discrepancies from previous records18.  Invoices Once all the figures are verified, invoices are printed and sent out by the Meter Reader. All original files and data are kept with the Meter Reader at UBC Utilities. Original records are available from the baseline year to present.  18  Guidelines for the Measurement and Reporting of Emissions by Direct Participants in the UK Emissions Trading Scheme, DEFRA, October 2002, www.defra.org.uk, July 16th 2003.  32  Conclusion The above sources of data are both reliable and accurate. Original invoices are undisputable and UBC maintains seven years of records. Furthermore, the meters and the metering methodology follow rigorous principles regulated by Measurement Canada. Invoices and original records are also kept for seven years. With these sources of data, it is possible to calculate the baseline year energy consumption.  Calculation of annual emissions requires additional information and will be covered in the section on Adjustment of the Baseline Year Policy.  The actual calculation methodology is summarized in the section on Summary of UBC’s Baseline and Annual Emissions Calculation.  Transportation Fuel consumption is also available for UBC’s fleet. Plant Operations operates a fueling station and invoices every department using its facilities monthly.  Records are  maintained by Plant Operations and originals are kept for seven years. The contact person for this information is Jorge Marques, Energy Manager Sustainability. Furthermore, purchases off-site are recorded with credit card invoices.  Supply  Management manages the credit card accounts and maintains the records. Transportation emissions are not analyzed further because they do not constitute an eligible source of emission under the UK Emissions Scheme as described in the next section.  33  4 - Eligibility for entry Sources that cannot be entered into the Scheme include the following: •  direct emissions from electricity or heat generations except where the electricity and heat are both generated and used on site.  •  emissions from facilities within a target unit covered by an agreement  •  emissions from land and water transport  •  methane emissions from landfill sides covered by the landfill directive  •  emissions from households (Section 8.4 of the framework document)  A note on the last point; emissions from households are already regulated in the UK under a different umbrella which explains why they are excluded from the scheme. It is assumed that Canada does not have such a program in place and therefore, we will disregard this limitation and included dwellings from UBC Housing into the scheme.  Since Transportation cannot be part of the trading scheme, only emissions from the Power and Heating sector are included in this section of the report. Furthermore, energy sold to the grid or other institutions over which UBC does not have managerial control (eg. Tenants in the case of UBC) is excluded from the scheme. Emission calculations in previous sections respect this regulation.  The scheme Guidelines19 document also offers further descriptions of what is most likely part of the Direct Participant sources of emission. These include:  19  Guidelines for the Measurement and Reporting of Emissions by Direct Participants in the UK Emissions Trading Scheme, DEFRA, October 2002, www.defra.org.uk, July 16th 2003.  34  •  On-site combustion of fossil fuels for on-site use  •  On-site consumption of electricity generated off-site  •  On-site consumption of electricity generated on-site  •  On-site consumption of heat or steam generated off-site  •  On-site consumption of heat or steam generated on-site  In summary, all direct emissions from the steam plant consumed by UBC, direct emissions from natural gas for on-site use and indirect emissions from electrical consumption all fall under UBC’s jurisdiction. UBC has managerial control over all of these sources of emissions. Transportation emissions are excluded from the Scheme for unspecified reasons.  5 - Coverage of GHG A direct participant can either enter only its carbon dioxide sources, or sources of all greenhouse gases.  In the Energy Management Action Plan, UBC has chosen to report all types of greenhouse gas emissions. It used protocols established by the VCR to calculate them. The calculation methodology should continue to follow Canada’s standards, which is in agreement with the UK Emission Scheme’s Protocol. In fact, both are in accordance with the Intergovernmental Panel on Climate Change (IPCC) guidelines. For further details, refer to the ‘Energy Management Plan Guidelines’ document.  35  6 - Coverage within the reporting guidelines If the Guidelines document does not offer protocols to calculate corresponding GHG emissions, the Direct Participant can either submit a protocol for approval or withdraw this source from the scheme.  UBC currently applies the VCR’s calculation methodology offered in the ‘Energy Management Action Plan Guidelines’ document found in the accompanying CD. Protocols are available from the UK Scheme but they apply the same calculation methodology as the VCR’s.  A summary of the calculation methodology consists of the following: once the total energy consumption figures are calculated, these are multiplied by conversion factors which convert energy figures into greenhouse gas emissions. These conversion factors vary somewhat between the VCR and the UK Scheme. However, since the future Canadian Trading Scheme will most likely use factors already established by the VCR, UBC should continue using calculation methodologies already established by the VCR.  Conclusion of the 6 Steps Both the UK Scheme and the VCR offer the same calculation methodologies to derive greenhouse gas emissions from energy consumption, but only the UK Scheme offers a methodology to calculate the total energy consumption. Specifically, with the previous 6 steps methodology, the UK Scheme offers a proper method of defining the boundary and baseline with which to calculate the total energy consumption. Neither the VCR nor other guidelines to our knowledge offer a rigorous method of accurately defining the overall  36  energy consumption. The next section defines how the baseline is adjusted and how to maintain the established boundary and report annual energy consumption accurately.  Adjustment of the Baseline year policy Since companies are not static entities, the UK Emissions Scheme devised ways the baseline can be adjusted to reflect changes in the organizational, as well as operational, structure. This may arise from acquisition or divestment of subsidiaries or other assets.  Each time a Direct Participant changes its structure, it must assess whether the baseline emissions from the sources involved in the change are equal to or greater than the Change Threshold: 25,000 tCO2e or 2.5 per cent of total verified baseline emissions at the time of the auction (whichever is less). This threshold is cumulative over the five compliance periods from 2002 to 2006.  This rule affects the maintenance of UBC’s baseline over the years. UBC is indeed a growing institution. As was previously highlighted, many various infrastructures have been constructed since the baseline year 1998-1999. In fact, based on the definition of ‘new building’, five new buildings were completed since the baseline year (see Appendix 8).  Under the UK Trading Scheme, opening a new source of emissions such as a new construction is considered as an acquisition of a new source. Furthermore, new developments are considered as acquisitions from an entity other than another Direct Participant. In this case, paragraph B.16 of the framework document indicates that:  37  “Participant A is a Direct Participant in the Scheme and acquires sources that are not from another Direct Participant. (…) Participant A’s acquired sources remain outside the Scheme, until such a time as Participant A elects to enter them into the Scheme as new or late entrants, as appropriate.”20  On the other hand, if a Direct Participant acquires a source of emissions from another Direct Participant, and it surpasses the Change Threshold, it must then adjust its baseline emissions and targets.  In the case of divestiture outsourcing, if a change in emissions is greater than the Change Threshold, adjustments are also required. Otherwise, the Baseline remains unchanged. The nature of the changes is described in Appendix B of the UK scheme framework document found in the accompanying CD.  Any other construction that does not meet the definition of ‘new building’ must not be excluded from the scheme. The rationale for keeping additions within the scheme is because these could be considered as an expansion of the services offered of an existing department. It does not constitute a completely new department being created. In this case, even though this new construction increases the level of emissions, UBC must find other ways to reduce its emissions to compensate these additional emissions. As a Direct Participant, UBC could also purchase additional allowances or credits from other participants. There is currently no firm regulation on this specific issue on a definition for new buildings. Therefore a professional auditing organization should be consulted for clarification.  20  Guidelines for the Measurement and Reporting of Emissions by Direct Participants in the UK Emissions Trading Scheme, DEFRA, October 2002, www.defra.org.uk, July 16th 2003.  38  A methodology is therefore required to remove the energy consumption of Core and Ancillary buildings built after the baseline year. Tenant buildings on the other hand always remain outside of the Scheme so there is no need for additional calculation procedures in this case.  Removal of energy consumption from Ancillary buildings built after the baseline year is straightforward since metering is performed monthly using the rigorous protocol described earlier.  New Core buildings are, on the other hand, not as rigorously monitored. Although new Core buildings are individually metered, meter reading is not performed as consistently nor as rigorously as for Tenant and Ancillary facilities.  When the Tenant and Ancillary meter readings are recorded, the meter reader reads the meters from the Core buildings. The monthly reading is sometimes omitted for lack of time to perform the duty.  When the meter reader performs a survey, he gives a  photocopy of the completed document found in Appendix 12 to Jorge Marques, Energy Manager, who then enters the data values into a separate database. For these readings, there are no sets of controls to ensure accuracy.  Recommendations – Meters for new Core buildings should be read every month to ensure data quality. If a meter breaks, it can be detected rapidly. Furthermore, proper sets of controls for Core buildings built after April 1999 should be implemented such as the ones used for Ancillary and Tenant meter readings.  39  Summary of UBC’s Baseline and Annual Emissions Calculation A summary of the calculation methodology for reporting UBC’s absolute emissions from the baseline year onwards, in addition to the sources of data and contact person, is summarized in the following table. Even though it was assumed that buildings owned by UBC but leased to third parties remain out of the scheme, for demonstration purposes, the following summary table assumes that tenants who lease facilities owned by UBC are under UBC’s managerial control and therefore included in UBC’s energy usage.  40  TABLE 2. Summary of baseline and annual emissions calculation Step Bulk energy consumption  Removal of all Tenants’ and Ancillaries’ energy consumption Add back all Ancillary buildings energy consumption Add back Tenants who lease space in UBC owned buildings  Remove energy consumption by Core and Ancillary buildings built after April 1999  Emission Data Terasen Invoice for UBC campus consumption BC Hydro Invoice for UBC campus consumption Terasen Invoice for the Steam Plant Light Oil Invoice in addition to the Shift Engineer consumption data List of original Meter Reading found in Appendix 11 Invoices also kept by the Meter Reader  Location Accounts Payable  Contact person Frances Volard, A/P Manager  Accounts Payable  Frances Volard, A/P Manager  Accounts Payable  Frances Volard, A/P Manager Frances Volard, A/P Manager Anne-Marie Novak Accountant Gavin Yap, Meter Reader Anne-Marie Novak, Accountant  Property database list found in Appendix 7  Campus and Community Planning for facility identification  Peter Jia, Senior Analyst, Space Analyst Unit  UBC Utilities for energy consumption Campus and Community Planning for facility identification  Gavin Yap, Meter Reader Peter Jia, Senior Analyst, Space Analyst Unit  Campus and Community Planning for energy figures  Jorge Marques, Energy Manager  Refer to Appendix 8  Accounts Payable UBC Utilities UBC Utilities  Baseline emissions, annual emissions and targets must be expressed in units of tCO2e using the methodology referred to in steps 5 and 6 of the previous section.  The Direct Participant must maintain an effective data management system and demonstrate adherence to the reporting principles listed above. Verifiers assess the accuracy and transparency of the system during the verification process based on these  41  principles. Part of this process will require that UBC prepare the following documents annually.  Documents that must be reported to the scheme annually Each accounting period, UBC will report the following information to verifiers as well as to those responsible for the UK Scheme to demonstrate compliance to annual emissions targets.  For the initial period, •  Source List (all facilities included in the Scheme found in Appendix 5) and Baseline Emissions  •  A self-declaration, signed by management or a ‘designated representative’ that the data reported provide a faithful representation of the Direct Participant’s emissions.  Where there have been no changes to the Source List, Baseline or targets during the compliance period, the following minimum information must be reported to the verifier, in order to be verified at the end of each reconciliation period: •  Source List and Baseline emissions  •  Annual emissions  •  Computation methods including evidence of the sources of emission, factors used, and any changes in the methodology that may influence the comparability of the reported data with previously reported data  42  •  A self-declaration, signed by management or a ‘designated representative’ that the data reported is a faithful representation of the Direct Participant’s emissions.  Implications of reporting using this methodology considered in the context of UBC’s ability to trade GHG emissions in Canada. By following the entity-base approach of reporting GHG emissions under UK’s Trading Scheme, UBC could potentially have its emissions certified by an international firm such as Price Waterhouse Coopers, which is already certifying emissions in the UK. A complete list of accredited verification companies in the UK is found in Appendix 13.  Using this methodology, UBC will not be able to receive credits because it is using an entity-based approach of reporting emissions. Therefore, only if the Canadian GHG Trading Scheme replicates the UK Scheme will UBC be able to trade. In this case, the Scheme would oblige participating entities to set their baseline at a certain period, possibly prior to UBC’s planned energy retrofit programs. Participants would then be allocated emission allowances equivalent to the baseline period less the first year emission reduction target. UBC would over-comply in the first year without taking any measures due to current actions current energy retrofit programs and be able to sell its additional allowances on the market and earn immediate reward for its early actions.  Under the assumption that Canada will replicate the UK Scheme, the advantage of taking early measures to build a robust reporting methodology consists of being able to deal immediately with the issues and recommendations highlighted in the text and then fast-  43  track an application to the future Canadian Scheme. Unfortunately, this method of reporting does not allow early trading to occur between entities since no credits can be issued.  The next section offers guidelines to report emissions not covered by the UK Emissions Trading Scheme.  44  Section 5 – World Resource Institute The World Resource Institute (WRI) is an environmental research and policy organization that creates solutions to protect the planet and improve people’s lives. They are an independent non-partisan organization that is funded through donations.  VCR’s principles are based on documents from the WRI. In fact, VCR’s principles of internal verification for Registered Emission Reduction replicate the principles found in the document: ‘The Greenhouse Gas Protocol, a corporate accounting and reporting standard’ also provided in the accompanying CD. This document is very thorough and covers how to report emissions in greater details than the VCR.  To go through each step is beyond the scope of this project. It is recommended that UBC review its GHG reporting system based on principles and methodologies offered by the WRI for emissions not covered by the UK Scheme.  Specifically, the WRI offers  guidelines for emissions classified in the following three categories. Each category is followed by a brief description of how it relates to UBC’s emissions. Scope 1 : Direct emissions These include: •  Production of electricity, heat or steam  •  Physical or chemical processing  •  Transportation of materials, products, waste and employees: use of mobile combustion sources, such as trucks, trains, ships, airplanes, buses and cars.  •  Fugitive emissions 45  Emissions at UBC, qualifying as Scope 1 emissions include combustion of natural gas, natural gas and light oil for the steam plant and UBCs Fleet fuel consumption. The stationary sources, natural gas and light oil, are already covered by the UK emissions Scheme.  The Energy Management Plan currently reports transportation emissions using a calculation methodology and conversion factors supplied by the VCR. The calculation methodology consists of multiplying total fuel liters consumed by emission conversion factors to obtain total GHG emissions. Although the calculation methodology is identical between the VCR and WRI, UBC might consider reviewing their reporting principles using ‘The Greenhouse Gas Protocol’ document.  Recommendation - UBC might consider adding off-campus fuel consumption. The data can be found at Supply Management by contacting Christine Dedrick. Furthermore, transportation emissions are considered by the WRI as a direct source of emissions contrary to the Energy Management Plan, which classifies it as an indirect source of emissions. UBC might consider revising their assumption.  46  Scope 2 : Indirect emissions from imports of electricity, heat or steam. Scope 2 accounts for indirect emissions associated with the generation of imported, purchased electricity, heat, or steam.  UBC imports electricity from BC Hydro. Only this source of emission falls in this category. The UK Trading Scheme also covers this section. Scope 3: Other indirect GHG emissions Scope 3 emissions account for other indirect emissions resulting from the activities of the reporting company, but arising from sources owned or controlled by another company, e.g. due to: •  Employee business travel  •  Transportation of products, materials and waste  •  Outsourced activities, contract manufacturing and franchises  •  Emissions from waste generated by the reporting company when the GHG emissions occurs as sources or sites owned or controlled by another company, e.g. methane emissions from land filled waste sites.  •  Emissions from the use and end-of-life phases of products and services produced by the reporting company  •  Employees commuting to and from work  •  Production of imported materials  This list is extensive. Many of these categories are currently not feasibly accountable. There is also room for conflict over double counting. Until policymakers clearly define  47  emission boundaries, it does appear to be worthwhile to commit resources to calculate these emissions. There is too much risk of not being able to claim ownership.  There is one exception; UBC has already made progress in accounting for GHG emissions from student and staff commuting. Jonathan Frantz, of the Campus Sustainability Office is responsible for this project.  In summary, with the UK Scheme protocols and guidelines offered by the WRI, UBC is able to solidify its emission reporting system. However, from recently published documents released only weeks before the completion of this project, it appears that Canada will not be following the same path as the UK. Section 6 summarizes recent developments in the proposed structure of the Canadian Emissions Trading Scheme and offers insights how the Canadian Scheme will impact UBC’s GHG reporting methodology and trading opportunities.  48  Section 6 – Current discussions of the Canadian Offset System When this research was initiated, Canada had not released any clear plan or given any sense of direction of how a trading system would be developed in Canada. Only recently, in June 2003, has the Government of Canada published a discussion paper on the type of Offset system (trading system) that is likely to be implemented in Canada21.  The  following is a description of the proposition and its implications for UBC.  The Government proposes to reduce GHG emissions by 55 Mega tons of CO2e from Large Industrial Emitters (LIE) sources. The Government defines a LIE as average annual greenhouse gas emissions per facility of 8 CO2e kilotonnes or more and average annual emissions per $1,000 output of 20 CO2e kilogrammes (kg) or more.  The  Government plans on achieving its target with LIEs through covenants with a regulatory or financial backstop. A backstop is legislation that allows the government to establish regulations setting out the emissions that will be allowed unless the company opts to negotiate and comply with a covenant.  Unlike the UK Scheme, the Government plans on adopting a rate-based approach for regulating emissions.  Therefore, LIES will set relative emission targets instead of  absolute ones. Furthermore, LIEs will receive allowances free of charge based on their relative emission targets in the case of over- or under- achievement they will then be able to trade the units.  There is currently no sign that the government will offer any  21  Offset System Discussion Paper, Government of Canada, June 2003, www.climatechange.bc.ca, August 27th 2003.  49  incentives. The actual description of the scheme’s operation is beyond the scope of this project.  In order to assist LIEs in achieving their target, the Canadian Government proposes to create an Offset system. This would provide a market incentive for identifying and developing projects to reduce GHG emissions not covered under the covenant system. Emission sources included under the covenant system are: • thermal electricity generation (coal, oil and gas) • oil and gas (upstream extraction, oil and gas pipelines, gas utilities, petroleum refining) • mining (both metal and non-metal) • pulp and paper production • chemical production (industrial inorganic chemicals, industrial organic chemicals and chemical fertilizers and fertilizer materials • iron and steel production • smelting and refining • cement and lime production  Only projects that meet certain requirements listed in the discussion document would be eligible for certification and issuance of credits. For further information, refer to the Discussion Paper in the accompanying CD.  50  Implications for UBC emissions reporting LIEs, like Direct Participants, trade allowances and report using an entity-based approach. Both are also able to purchase credits to help meet targets. But, whereas the UK Scheme did not restrict access to voluntary Direct Participants, the Canadian system offers a strict definition of LIEs. It is clear from the definition given above that UBC does not meet the requirement. Therefore UBC will not be able to participate in the scheme using this option. The Direct Participant approach of reporting defined in section 4 of this report is therefore not applicable. The only other option for UBC is to certify projectbased emission reductions and sell them to the scheme to help LIEs meet their annual target.  Emission reduction projects not already covered by covenants are admissible. It appears that imports of natural gas and combustion of light oil and fuel to operate UBC’s Fleet vehicles are eligible. It is still unclear whether import of electricity will be admissible.  It is important to exercise caution. Although the discussion paper indicates that energy retrofits could in principle be included in an offset system, other approaches to encourage or require these reductions/removals will also be considered by the Government according to the document.  51  Conclusion The coming into force of the Kyoto protocol seems imminent with Russia set to vote on the ratification of the protocol in fall of 2003. The likelihood of ratification is accelerating the field of Greenhouse Gas Trading, as National Emission targets set by Annex B countries might soon become legally binding.  Although the direction Canada was going to take was unclear at the beginning of this project, the Government recently released a Discussion paper indicating the probable mechanism of the National GHG Offset system. It appears that UBC will only be able to report on a project-based approach.  UBC will therefore only be eligible to certify  emission reductions from verified projects and obtain tradable credits. The assumption that UBC would be able to trade using an entity-based approach using allowances such as in the UK emissions scheme no longer appears to be valid. A protocol to report using a project-based approach is therefore required.  Caution remains, Discussion papers are not final and there are still chances that Canada decides to adopt a trading system similar to the UK’s.  Therefore the entity-based  approach to reporting emissions could remain pertinent for UBC. Until Canadian politicians finalize the project, it is uncertain which option will be best for UBC.  Nevertheless, a few weeks before the completion of this research project, it was brought to the author’s attention that UBC would be monitoring its energy retrofit projects using the International Performance Measurement & Verification Protocol (IPMVP). Further investigation of the protocol revealed that the IPMVP is the preferred international 52  approach for monitoring and evaluating energy efficiency projects because of its international acceptance. It covers many key issues in monitoring and evaluation and it allows for flexibility. It is expected that the IPMVP will contribute significantly to the international framework that will be developed for international greenhouse gas trading22.  By applying this internationally recognized protocol, UBC is heading in the right direction to trade GHG emission credits. In fact, once UBC has verifiable emission reductions, it could either trade these emission reductions immediately or wait until an Offset system is in place. By deciding to trade immediately, the GHG emission units would be priced more favorably than was initially possible without a recognized protocol. On the other hand, UBC could register its emissions reduction projects with the VCR’s program entitled ‘Registered Emission Reductions’. It is likely that projects registered with this program will receive credits when the Offset system is in place. UBC will then be able to trade these credits using the Offset system. The optimal trading strategy remains to be investigated.  22  International Performance Measurement and Verification Protocol, United States Department of Energy, 2001, revised March 2002, www.ipmvp.org, September 8, 2003.  53  Bibliography A guide to the climate change convention and its Kyoto protocol, Bonn 2002. www.unfccc.int, August 2003. CD REF: UNFCC-guideconvkp-p.pdf CD REF: UNFCC-infokit_02_en.pdf A summary guide to the UK Emissions Trading Scheme, 2001, www.defra.org.uk, July 2003. CD REF: UK trading-summary.pdf Climate Change Plan for Canada, Government of Canada, 2002, www.climatechange.gc.ca, May 2003. CD REF: Canadian Climate Change for Canada.pdf CO2e, www.CO2e.com, April 15th 2003. Ecosecurities, (http://www.ecosecurities.com/200about_us/223press_releases/223press_03_Feb_2003.h tml), May 4th 2003. Environment Canada Greenhouse Gas Division, http://www.ec.gc.ca/pdb/ghg/ghg_home_e.cfm, May 4th 2003. Gowlings and CO2e .com, Your Climate Change Advisors, March 2003, www.co2e.com, August 2003. CD REF: GHG Verifiers CO2e-Gowlings.pdf Greenhouse Gas Emission Reduction Trading Pilot Project, Final Report, GERT Technical Committee, www.climatechange.gc.ca, August 2002. CD REF: Canadian GERT.pdf Greenhouse Gas Verification & Monitoring Services, Profile. URS, www.co2e.com, August 2003. CD REF: GHG Verifiers URSver.pdf Gregory A. Keoleian, Environmental Sustainability Educational Resources, School of Natural Resources and Environment, Center for Sustainable Systems University of Michigan. Power point presentation on the internet, http://css.snre.umich.edu/css_doc/Energy.ppt, May 4th 2003. 54  Guidance on Source List Errors, UK Greenhouse Gas Emissions Trading Scheme, 2002, www.defra.org.uk, July 2003. CD REF: UK trading-stats_uncertainties.pdf Guidelines for the Measurement and Reporting of Emissions by Direct Participants in the UK Emissions Trading Scheme, Department for Environment, Food and Rural Affairs, June 2003. www.defra.org.uk, July 2003. CD REF: UK trading-reporting.pdf Helsley, R. Urban Real Estate Economics, UBC Commerce, 2000. International Performance Measurement & Verification Protocol, Concepts and Options for Determining Energy and Water Savings, Volume I, Volume II and Volume III, revised March 2002. www.ipmvp.org, August 2003. CD REF: ipmvp01.pdf CD REF: ipmvp01V2.pdf CD REF: ipmvp01V3.pdf Key Issues To Be Considered in the Development of Rate-Based Emissions Trading Programs: Lessons Learned From Past Programs. Final Draft for Discussion Prepared for EPRI Workshop. Richard Rosenzweig and Matthew Varilek, Natsource LLC, Vancouver, British Columbia April 29, 2003. www.ieta.org, August 2003. CD REF: Canadian rate based trading system.pdf Offset System Discussion Paper, Government of Canada, June 2003, www.climatechange.gc.ca, August 2003. CD REF: Canadian Discussion Paper GHG Trade.pdf Quirin, Scheirmeier, Climate change offers bleak future, Nature 409, 971 (2001). The Greenhouse Gas Protocol, a corporate accounting and reporting standard, World Resource Institute, World Business Council for Sustainable Development, September 2001. CD REF: WRI ghg.pdf (Wri folder, includes excel worksheets) The UK Greenhouse Gas Emissions Trading Scheme, Rules, 2002. www.defra.org.uk, July 2003. CD REF: UK trading-rules_rev2.pdf  55  The UK Emissions Trading Scheme, Auction Analysis and Progress Report, October 2002. www.defra.org.uk, August 2003. CD REF: UK trading-progress.pdf UBC Energy Management Action Plan, December 2002. CD REF: UBCenergymgmtplan.pdf UKAS Accredited Verifiers for Verification of GHG Emissions Data, UK Emissions Trading Scheme, www.defra.org.uk, July 2003. CD REF: UK trading-verifierlist.pdf United Nations Environment Program, http://www.grida.no/climate/vital/06.htm, May 4th 2003. United Nations Framework Convention Climate Change, http://www.unfccc.int, April 15th 2003. Verification and Monitoring Services, Price Waterhouse Coopers, www.co2e.com, August 2003. CD REF: GHG Verifiers PWC.pdf Voluntary Challenge Registry, www.vcr-mvr.ca, August 25th 2003 CD REF: VCR Challenge_Registry_Guide_E.pdf CD REF: VCR Section9_Emission_Factors_E.pdf Working 9 to 5 on Climate Change, An Office Guide CD REF: WRI_CO2Guide.pdf  56  APPENDIX 1 – BC Hydro offer to purchase GHG emissions reduction projects.  APPENDIX 2 – Joint Implementation Protocols  

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