Ontario Public Service Guidance Document for Quantifying Projected and Actual Greenhouse Gas Emission Reductions

Transcription

1 Ontario Public Service Guidance Document for Quantifying Projected and Actual Greenhouse Gas Emission Reductions Final Version 1 June 30, 2017 Prepared for: Ontario Ministry of the Environment and Climate Change Program Planning and Implementation Branch Prepared by: Cheminfo Services Inc. 30 Centurian Drive, Suite 205 Markham, Ontario L3R 8B8 Phone: (905) Fax: (905) info@cheminfoservices.com

2 Table of Contents 1. GUIDANCE SUMMARY BACKGROUND PURPOSE AND SCOPE BASIC CONCEPTS PROJECT DESIGN AND QUANTIFICATION PRINCIPLES MANAGEMENT PROCESS FOR QUANTIFYING GHG REDUCTIONS INITIATIVE PLANNING PROJECT PLANNING PROJECT IMPLEMENTATION INTRODUCTION BACKGROUND PURPOSE AND SCOPE KEY CONCEPTS AND PRINCIPLES INTRODUCTION KEY GHG PROJECT ACCOUNTING CONCEPTS OPS INITIATIVE DESIGN PRINCIPLES QUANTIFICATION PRINCIPLES MANAGEMENT PROCESS FOR QUANTIFYING GHG REDUCTIONS INITIATIVE PLANNING INTRODUCTION SITUATIONAL ANALYSIS: HISTORICAL GHG PERFORMANCE IDENTIFYING TARGETED GHG SOURCES DEFINING PROJECT TECHNOLOGIES AND PRACTICES ESTABLISHING REFERENCE YEAR AND BAU FORECAST EMISSIONS PREPARATION OF HISTORICAL AND REFERENCE YEAR ESTIMATES PREPARATION OF BUSINESS-AS-USUAL FORECAST PREPARATION OF ADOPTION RATE OBJECTIVE PROJECT PLANNING INTRODUCTION DEFINING THE PROJECT SCOPE AND OBJECTIVE SELECTION OF APPROPRIATE GHG REDUCTION METHODOLOGY RIGOROUS APPROACH OF EVALUATING ALL SOURCES/SINKS ADAPTATION OF EXISTING GHG OFFSET PROJECT PROTOCOLS SIMPLIFIED CALCULATION APPROACH ESTIMATE PROJECTED GHG REDUCTIONS DOCUMENT PROJECT PLANNING QUALITY ASSURANCE REVIEW 83 i

3 6. PROJECT IMPLEMENTATION INTRODUCTION BASELINE SCENARIO ADJUSTMENTS QUANTIFICATION OF PROJECT ACTIVITY LEVEL PERFORMANCE QUANTIFY PROJECT GHG REDUCTIONS DOCUMENT PROJECT REPORT QUALITY ASSURANCE REVIEW MANAGEMENT REVIEW APPENDIX A - FACTORS GREENHOUSE GAS GLOBAL WARMING POTENTIALS DEFAULT ENERGY EMISSION FACTORS APPENDIX B - GHG QUANTIFICATION REFERENCES APPENDIX C - SAMPLE PROJECT CALCULATIONS PROJECT DESCRIPTION PROJECT PLANNING PROJECT IMPLEMENTATION APPENDIX D - SURVEY SAMPLING AND STATISTICAL ANALYSIS POPULATION MEAN POPULATION TOTAL POPULATION PROPORTION STRATIFIED SAMPLING CLUSTER SAMPLING APPENDIX E REFERENCES AND BIBLIOGRAPHY APPENDIX F - DATABASES APPENDIX G - AVAILABLE OFFSET PROTOCOLS ALBERTA OFFSET PROTOCOLS CALIFORNIA OFFSET PROTOCOLS BRITISH COLUMBIA OFFSET PROTOCOLS ONTARIO/QUEBEC OFFSET PROTOCOLS (PLANNED) CLIMATE ACTION RESERVE OFFSET PROTOCOLS 119 ii

4 List of Tables TABLE 1: GREENHOUSE GASES AND GLOBAL WARMING POTENTIALS... 3 TABLE 2: DEVELOP THE BUSINESS-AS-USUAL FORECAST FOR TARGET POPULATION TABLE 3: ESTABLISH TECHNOLOGY ADOPTION OBJECTIVE TABLE 4: ESTIMATING PROJECTED GHG REDUCTIONS TABLE 5: NORTH AMERICAN GHG OFFSET PROJECT PROTOCOLS TABLE 6: QUANTIFICATION OF ACTUAL PROJECT PERFORMANCE TABLE 7: QUANTIFICATION OF ACTUAL PROJECT GHG REDUCTIONS TABLE 8: TYPICAL SOURCES OF GHG EMISSIONS TABLE 9: ILLUSTRATIVE EXAMPLES OF BACKGROUND INFORMATION RELATED TO TARGET POPULATION OF EMISSION SOURCES FOR INITIATIVE TABLE 10: NORTH AMERICAN GHG OFFSET PROJECT PROTOCOLS TABLE 11: GHG GLOBAL WARMING POTENTIALS TABLE 12: DEFAULT ENERGY GHG EMISSION FACTORS TABLE 13: REFERENCE QUANTIFICATION METHODOLOGY RESOURCES TABLE 14: GHG EMISSION RATES FOR BASELINE & PROJECT SCENARIOS TABLE 15: BAU GHG FORECAST TABLE 16: GHG PROJECT SCOPE - ADOPTION RATE OBJECTIVE AND NUMBER OF TECHNOLOGY ADOPTERS TABLE 17: CALCULATION OF PROJECTED GHG REDUCTIONS AND PROJECTED GHG FORECAST TABLE 18: REVISED BAU GHG FORECAST TABLE 19: GHG PROJECT SCOPE - ACTUAL TECHNOLOGY ADOPTERS AND CALCULATED ADOPTION RATES TABLE 20: CALCULATION OF ACTUAL GHG REDUCTIONS AND ACTUAL GHG PERFORMANCE TABLE 21: USEFUL DATABASES TABLE 22: ALBERTA OFFSET PROTOCOLS TABLE 23: CALIFORNIA OFFSET PROTOCOLS TABLE 24: BRITISH COLUMBIA OFFSET PROTOCOLS TABLE 25: ONTARIO/QUEBEC OFFSET PROTOCOLS (PLANNED) TABLE 26: CLIMATE ACTION RESERVE OFFSET PROTOCOLS List of Figures FIGURE 1: SIMPLIFIED GHG REDUCTION QUANTIFICATION MANAGEMENT PROCESS... 8 FIGURE 2: PROJECT PLANNING - SAMPLE PROJECTED GHG REDUCTIONS FIGURE 3: PROJECT IMPLEMENTATION - SAMPLE ACTUAL GHG REDUCTIONS FIGURE 4: DETAILED GHG REDUCTION MANAGEMENT PROCESS FIGURE 5: IDENTIFYING AND SELECTING GHG SOURCES/SINKS FIGURE 6: PROJECT PLANNING - SAMPLE PROJECTED GHG REDUCTIONS FIGURE 7: PROJECT IMPLEMENTATION - SAMPLE ACTUAL GHG REDUCTIONS iii

5 Abbreviations and Acronyms BAU Business-as-usual CCAP Climate Change Action Plan CH 4 Methane CO 2 Carbon dioxide CO 2 e Carbon dioxide equivalent EF Emission Factor EPA U.S. Environmental Protection Agency GGRA Greenhouse Gas Reduction Account GHG Greenhouse gas(es) GJ Gigajoule GWP Global warming potential HFC Hydrofluorocarbon HHV Higher Heating Value HistY Historical year IESO Independent Electricity System Operator IPCC Intergovernmental Panel on Climate Change ISO International Organization for Standardization IT Information technology J Joule kg Kilogram LHV Lower heating value M 3 Cubic metre MBC Management Board Cabinet MJ Megajoules MW Megawatt MWh Megawatt-hour N 2 O Nitrous oxide NF 3 Nitrogen trifluoride ODS Ozone depleting substance OPS Ontario Public Service PFC Perfluorocarbon PY Project year RefY Reference year Q Quantity SF 6 Sulphur hexafluoride t Metric tonnes TB Treasury Board UNFCCC United Nations Framework Convention on Climate Change WBCSD World Business Council for Sustainable Development WCI Western Climate Initiative Inc. WRI World Resources Institute y, yr Year iv

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7 1. Guidance Summary 1.1 Background Ontario s Climate Change Strategy 1 outlines a path to a low-carbon, climate resilient society by setting out the transformative change required to reduce greenhouse gas (GHG) emissions to meet target levels. The strategy provides GHG reduction targets of 15% by 2020, 37% by 2030, and 80% below 1990 levels by Ontario s 2016 Climate Change Action Plan (CCAP) marks the first of a series of five-year plans focused on reducing GHG emissions to meet reduction targets, create a low-carbon economy, and support industry, businesses and households in making low-carbon choices. 2 In support of the CCAP, the province has implemented a cap and trade program for which compliance obligations for emitters began January 1, Government proceeds from the program will be invested into initiatives that are projected to reduce or support the reduction of GHGs, as outlined in the Climate Change Mitigation and Low-carbon Economy Act of All proceeds from the program will be tracked in a designated purpose account called the Greenhouse Gas Reduction Account (GGRA). Proceeds will be applied to implement CCAP initiatives. Ontario Public Service (OPS) ministries will be managing funds for CCAP initiatives that will achieve GHG emission reductions among emitters in communities under their jurisdictions. The Minister of the Environment and Climate Change will review and evaluate investments for initiatives and provide the evaluation to Treasury Board and Management Board Cabinet (TB/MBC) prior to the release of GGRA funds to ministries. Credible estimates of GHG emission reductions are key components of OPS ministry submissions for funding initiatives. Such estimates will also be important for the management process in tracking progress and making continuous improvements to the design, implementation and ongoing funding of initiatives. 1 Government of Ontario (2016) Ontario s Climate Change Strategy. 2 Government of Ontario (2016) Climate Change Action Plan. 3 Government of Ontario (2016) Ontario Climate Change Mitigation and Low-carbon Economy Act, 2016 and Schedule 1 of Ontario Regulation 143/

8 1.2 Purpose and Scope The purpose of this guidance document is to provide assistance to OPS ministries for their process of preparing and submitting estimates of projected and actual GHG emission reductions for CCAP projects. It may also be useful for GHG emitter community partners and stakeholders that are working with ministries to plan, implement and quantify achievements in reducing emissions. The guidance document describes principles and quantification methodologies, along with some of the supporting information and further resources that are likely to be needed. Applying the principles and methodologies outlined in this document should result in reduced effort and enhance the overall quality of submissions and reports on progress achieved by the initiatives. This Guidance Summary provides some basic concepts and then focuses on three phases involved in the process of estimating GHG emission reductions, namely: Initiative Planning; Project Planning; and Project Implementation. The principles, methodologies and other suggested guidance in this document are meant to be voluntary for consideration by OPS ministries. Their application should facilitate the continuous improvement process for managing CCAP initiatives and their specific GHG reduction projects. There are a number of concepts and elements involved in estimating GHG emission reductions associated with projects. One way to help understand some of these concepts is to work through an example. For this Guidance Summary, a simple generic illustrative example is used to help explain the estimation logic. More detailed information on the project example is provided in the rest of the document and Appendix C. However, further guidance and information than that which is contained in this document will likely be needed in calculating GHG emission reductions resulting from projects. Depending on the complexities involved in calculating GHG emission reductions and the internal capabilities of OPS ministry staff, subject matter experts might also need to be consulted. 2

9 1.3 Basic Concepts Greenhouse Gases and Their Global Warming Potentials There are five greenhouse gases (GHGs) and two additional groups of chemicals that contribute to warming of the atmosphere. These GHGs are not all equal with respect to their contribution to atmospheric warming. A metric ton (tonne) of methane, nitrous oxide or other GHG is more potent than one tonne of carbon dioxide (CO 2 ). The Intergovernmental Panel on Climate Change (IPCC) identifies the Global Warming Potential (GWP) factors for all GHGs in their Assessment Reports. GWPs are used to convert mass emissions of each GHG to carbon dioxide equivalent (CO 2 e) units. By converting to equivalent units, all GHG emissions can be summed on a consistent basis. Table 1: Greenhouse Gases and Global Warming Potentials Greenhouse Gases Formula GWP Carbon dioxide CO 2 1 Methane CH 4 25 Nitrous oxide N 2 O 298 Sulphur hexafluoride SF 6 22,800 Nitrogen trifluoride NF 3 17,200 Hydrofluorocarbons (HFCs) 19 GHG chemicals 53-14,800 See Appendix A Perfluorocarbons (PFCs) 7 GHG chemicals 7,390-12,200 See Appendix A Source: Environment and Climate Change Canada (2017) National Inventory Report : Greenhouse Gas Sources and Sinks in Canada, Table 1.1 (obtained from IPCC AR4 Report, 2007) Calculation Example: A vehicle consuming 10,000 litres of diesel fuel releases tonnes of carbon dioxide (CO 2 ), tonnes of methane (CH 4 ), and tonnes of nitrous oxide (N 2 O). Using the GWPs above, these quantities can be multiplied by their GWPs and summed to estimate the total GHG emissions. CO x 1 = tonnes-co 2 e CH x 25 = 0.03 tonnes-co 2 e N 2 O x 298 = 0.45 tonnes-co 2 e Total GHG = tonnes-co 2 e. 3

10 1.3.2 GHG Sources and Sinks A GHG emission source is a physical unit or a process that releases a GHG into the atmosphere. Fossil fuel combustion sources are typically classified as: stationary fuel combustion (e.g., furnaces, boilers) and mobile equipment combustion (e.g., vehicles, heavy equipment). Flaring is a specialized case of fuel combustion. GHG emissions can occur directly from contained or natural sources through venting or fugitive emissions. GHG emissions can also be generated from industrial processes (e.g., chemical reactions), fertilizer use in soils, livestock, and organic waste. Emissions of fluorinated GHGs (HFCs, PFCs, SF 6 ) usually come from generation or use of these gases. Biogenic CO 2 emissions, which originate from biological carbon sources (produced by life processes), are deemed to have a net-zero contribution to global warming because they are part of the natural carbon cycle. In other words, emissions of CO 2 generated from the combustion or decomposition of biomass or other biogenic sources are typically not considered to be anthropogenic (man-made) GHG emissions. However, it is still good practice to calculate biogenic CO 2 emissions and report them separately as information items. CH 4 and N 2 O emissions that may be generated from the combustion or decomposition of biomass and other biogenic sources are included as GHG emissions because they are created by man-made processes. There are no biogenic sources of SF 6, NF 3, HFCs, and PFCs. A GHG sink is a physical unit or process that removes a GHG from the atmosphere. These include biological sinks such as trees in forests, agricultural crops, and other vegetation. Manipulated biological systems, such as agricultural lands, forest tracts, and land converted to other uses, can be sinks as well as sources diffused over very large areas. 4 CO 2 that is removed from the atmosphere by man-made increases in biological sinks (e.g., afforestation, reforestation) are included as removals in GHG project accounting GHG Emission Reduction Projects In this guidance document, the term GHG reductions will be a general term that refers to both GHG emission reductions and GHG removal enhancements for simplicity. GHG emission reductions are achieved by emitters adopting technologies and making changes in behaviours and operating practices. GHG removal examples of technologies are: fuel switching to fuels that have lower carbon content per unit of energy released; higher efficiency furnaces; installation of insulation; and wind power. Examples of behaviours and operating practices are: reducing the temperature of the home thermostat; turning off lights when not needed; and, optimizing an industrial process to reduce energy use. 4 Environment and Climate Change Canada (2017) National Inventory Report : Greenhouse Gas Sources and Sinks in Canada, 4

11 GHG removal enhancements, which typically apply only to CO 2, are achieved by capturing and storing man-made CO 2 in a permanent reservoir, or increasing the amount of CO 2 removed from the atmosphere by man-made increases in biological sinks such as forests or other land use changes. In developing GHG reduction estimates, it is important to explicitly identify the specific technologies, systems, behaviours and/or operating practices that reduce GHG emissions or increase GHG removals. In this guidance document, the term technologies will be a general term that refers to any technologies, systems, behaviours and/or operating practices causing a GHG reduction for simplicity. Government regulations, actions, programs, and specific incentives can encourage the adoption of technologies by emitting entities. In this guidance document, the term initiatives will be a collective term that refers to any regulations, actions, programs and specific incentives that would be managed by Ontario Public Service (OPS) ministries. An initiative is designed to induce one or more GHG reduction projects. GHG-reducing technologies are adopted by one or more emitting entities that can belong to a target population. In this guidance document, the term project is used as the basis for estimating GHG emission reductions. This is consistent with the term GHG project used in ISO Part 2 standard 5 to denote the fundamental boundary for which a GHG reduction is estimated. A project consists of a set of GHG-emitting sources or GHG-removing sinks defined by the GHG reducing technologies that would not otherwise have been adopted in the absence of the influence of initiatives. GHG-emitting sources can be one piece of equipment (e.g., vehicle engine, home heating furnace) or complex systems (e.g., natural gas pipeline system). A GHG reduction project can consist of one or more technologies applied over one or more economic sectors (or segments) involving one or many emitting units, at one or more locations, over a period of time to achieve a projected GHG reduction objective. In developing estimates of GHG emission reductions it is important to clearly state the full scope or boundary of emitting units that are to adopt technologies encompassed by a project. A GHG emission reduction can only be calculated from a clearly-defined project and its unique baseline scenario. A baseline scenario is related directly to a defined project. A baseline scenario is a hypothetical reference case that is established in order to represent the conditions that would have occurred in the absence of the project. A project s baseline scenario provides an equivalent level of product or service as that provided by the project 5 ISO :2006. Greenhouse gases -- Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements. 5

12 and therefore has a common level of activity as that of the project. A GHG emission reduction is a calculated decrease of GHG emissions between a baseline scenario and a project scenario. A GHG removal from the atmosphere (i.e., an increase of a sink e.g., planting trees that sequester CO 2 with growth) is a calculated increase in GHG removals between a baseline scenario and a project. 1.4 Project Design and Quantification Principles The body of the guidance document discusses the importance of applying certain principles in designing projects, and when quantifying GHG reductions. Some of these are listed below. Initiative / Project Design Principles 6 The GHG emissions reductions need to occur in Ontario. GHG reductions should be demonstrated through quantification. GHG reducing technologies adopted by emitters under the project should not result in increases in GHG by emitters that were unaccounted for in the project scope or boundary. That is the project should account for all changes by emitters influenced by the initiative s project. A project should result in GHG reductions that would not otherwise have occurred had the project not been implemented. Project accounting literature calls this concept additionality. GHG quantification principles 7 Relevance. The target population or set of emitting units and their GHG sources that are the focus of the initiative and associated funding should be selected and well defined. Completeness. All the GHG emission changes that are influenced by the project should be taken into account and quantified. Very small changes in emissions should be at least considered and dismissed if deemed negligible. Consistency. GHG emission estimates need to be described and prepared to allow for meaningful comparisons between projected and actual project GHGs as well as comparisons of emission reduction performance over time. 6 Borrowed from: World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) (2003) The GHG Protocol for Project Accounting. Government of Alberta (2013) Technical Guidance for Offset Project Developers. 7 Borrowed from: International Standards Organization, ISO Part 2: Specification with Guidance at the Project Level for Quantification, Monitoring and Reporting of Greenhouse Gas Emission Reductions or Removal Enhancements, First Edition, Mar. 1, 2006; ISO :2006(E). 6

13 Transparency. In estimating GHG reductions for a project it is very important to ensure data sources, quantification methodologies, assumptions, unit conversions, calculation equations, results and references are clearly documented and transparent so that a reviewer can easily follow how the estimates were developed. Sufficient and appropriate information needs to be provided to allow intended users to make decisions with reasonable confidence. Accuracy. Diligence is required to ensure that GHG calculations have the precision needed for their intended use and provide reasonable assurance on the integrity of reported GHG information. Accuracy is usually satisfied by avoiding or eliminating bias from sources within estimations and reducing uncertainties as far as is practical. Conservativeness. It is best practice to apply conservative assumptions, and use values and procedures to ensure that GHG reductions resulting from initiatives are not over-estimated. The principle of conservativeness is particularly useful when data with high uncertainty and weak correlations may need to be employed. 1.5 Management Process for Quantifying GHG Reductions The proposed management process for the OPS initiative program has three phases: 1) Initiative planning, in which the initiative is developed into a tangible and specific policy or program measure that can create one or more projects; 2) Project planning phase, which occurs before the start of any projects under the initiative; and 3) Project implementation phase, which occurs in each reporting period after projects have started. A simplified flow diagram illustrating the management process is presented on the next page. 7

14 Figure 1: Simplified GHG Reduction Quantification Management Process 1. Initiative Planning 2. Project Planning (One-Time Before Project) 3. Project Implementation (Each Project Reporting Period) Define Target Population for the Initiative Define Project Scope and Objectives Review/Validate Baseline Scenario Assumptions Conduct Situational Analysis Determine Project's Baseline Scenario Quantify Project Activity Variables Develop Project Ideas Develop Quantification Methodology Quantify and Document Actual GHG Reductions Prepare Business-As-Usual GHG Forecast Estimate and Document Projected GHG Reductions Conduct Management Review 8

15 1.6 Initiative Planning Initiative planning involves several key steps that lead to the development of the businessas-usual (BAU) GHG forecast for the target population of GHG emitters that are to be influenced by the initiative. The key steps are as follows. Define and characterize the target population of GHG emitters. Develop historical GHG estimates for target population. Develop the business-as-usual GHG forecast for the target population. Quantifying historical emissions and developing a business-as-usual (BAU) forecast of GHG emissions for the target population and/or specific emitting sources provides information that is fundamental to the process for managing such emissions and associated application of resources. Historical GHG emission estimates often referred to as an emissions inventory provide an understanding of the magnitude of the GHGs involved. GHG forecasts form the basis for identifying emission reduction opportunities, setting future reduction objectives, and tracking performance Define and Characterize the Target Population of GHG Emitters Achieving GHG reductions starts with the identification of a target population of GHG emitters. It is useful to characterize the target population of emitters and their emission sources in such a way as to facilitate the identification, prioritizing and/or selection of sources that represent the best target(s) to achieve reductions for the initiative. For example, background research and analysis may show it is more effective to prioritize on higheremitting sources, such as homes that are over 35 years of age or have heating furnaces that are over 20 years of age Develop Historical GHG Estimates for Target Population Historical GHG emissions from the target population of Ontario emitters will very likely be encompassed by Canada s National Inventory Report (NIR) of GHG emissions, which is quite comprehensive. It is prepared annually by Environment and Climate Change Canada (ECCC) and available at the following website. United Nations Framework Convention on Climate Change, National Inventory Submissions ubmissions/items/10116.php The most recent NIR (which contains historical emissions from 1990 to 2015) should be reviewed to seek out Ontario-specific information for the target population of emitters and their emission sources. The NIR documents definitional boundaries for numerous GHG 9

16 emission source categories. For each category quantification methodologies are provided along with key assumptions, calculation equations, some activity data for emission sources, emission factors and emission rates applied, equations, conversion factors, GWP factors, references, and other useful information. While historical emissions from the target population of Ontario emitters may be encompassed by the NIR, the exact target population and their emission sources that are the focus of the initiative may or may not be explicitly available. If the target population and emission sources for the initiative s project is the same as the emission source category in the NIR, then the NIR emissions can be used to establish the historical level of emissions. However, the NIR will not have data available for the most current calendar year 8, which typically serves as the reference point for development of the BAU GHG forecast. While the NIR is comprehensive, the GHG emissions for the exact set of emission sources defined to be the target of the initiative, may not be available. In absence of useful NIR emissions data, research may need to be conducted to identify historical GHG emissions for the target emission sources and/or information to support development of estimates. GHG estimates may be available from focused studies and other emission inventories. For example, there are potential useful data available for a large number of Ontario s Broader Public Sector (BPS) facilities and industrial facilities from the following websites. Energy use and greenhouse gas emissions for the Broader Public Sector Environment and Climate Change Canada, National Pollutant Release Inventory (NPRI). Additional research should be conducted on the subject matter related to the target population. Even if emission estimates matching the target population of emissions sources are not found, the results of the research may be useful. There may be useful information from other Canadian and international jurisdictions, which might help in preparing historical and forecast emission estimates for the targeted population of Ontario emission sources Develop the Business-as-Usual GHG Forecast It is useful to develop a BAU GHG emissions forecast for the target population of emitters to be influenced by the initiative. The BAU GHG forecasted emissions are those that would occur in the absence of any influence of the initiative. The BAU would include a forecast 8 The NIR is finalized in April of each year, providing estimates for calendar year ending 16 months prior. That is, the NIR for the year 2015 was made available in April Year 2016 emissions should be available in April

17 of the number of emitting units in the target population, forecast of emission rates associated with their activities, and the resulting forecast of their GHG emissions. Since project GHG accounting typically includes the indirect GHG emission impacts of a project (such as from upstream energy, transportation and product supply lifecycle model 9 stages), it is good practice to prepare a BAU GHG forecast that accounts for both direct and indirect emissions. This ensures that calculated project GHG reductions can be compared to the population s BAU GHG forecast on the same basis. In the illustrative example, a population is observed to grow at 3% per year (e.g., from the historical year to the project reference year) and the simplifying assumption applied was that this growth rate would remain constant in the foreseeable future. The project reference year population is determined to be 20,000 emitters. In the example, the simplifying assumption is that the growth rate will remain constant. In reality, there may be a number of important economic, technical, regulatory and other drivers that should be taken into consideration in developing the BAU forecast for the targeted population. Table 2: Develop the Business-As-Usual Forecast for Target Population Unit of Measure Historical Year Reference Year Project Year 1 Project Year 3 Project Year 5 Project Year 7 Calculation Code BAU Forecast of Number of Targeted Population Emitting Units 19,417 20,000 20,600 21,855 23,185 24,597 A Average Direct GHG Emission Rate t CO2e/unit/year B Average Ontario Indirect GHG Emission Rate t CO2e/unit/year C Average Ontario Fuelcycle GHG Emission t CO2e/unit/year D = B+C Rate BAU GHG Forecast t CO2e 87,379 90,000 92,700 98, , ,689 E=A*D Average emission rates (emissions released to the atmosphere per unit per time period) may be available or will need to be developed, and multiplied by the number of emitting units to establish the BAU GHG forecast for the target population. There will be direct and possibly significant indirect emissions. Direct emissions are those emitted from the emission source (e.g., a vehicle using gasoline, a furnace burning natural gas, an air conditioner leaking an HFC refrigerant). Indirect emissions (also referred to as upstream emissions) are those mostly associated with energy supply 10 (e.g., fossil fuels, biofuels, electricity), refrigerants supply, and products supply. For the purposes of this document, the term fuelcycle GHG emission rates is applied to the sum of the direct plus indirect emission rates associated with fuels. As stated earlier, it is good practice to prepare a BAU 9 Fuelcycle stages are the portion of all lifecycle stages that are associated with fuels production and use. GHGenius 4.03 for Excel 2013 (2013), 10 Supply would include the various stages of production and transportation. 11

18 GHG forecast that accounts for both direct and indirect emissions occurring in Ontario for the target population of emitters. General guidance and helpful information are provided in the body of this document regarding how to estimate direct, Ontario fuelcycle emissions and other indirect fuelcycle emissions. Specific data and calculation methodologies, which will likely be unique for each combination of target population of emitters, emission sources, and technologies to be adopted, cannot be contained in the guidance document. These will need to be developed for each project by OPS ministries. While the simplifying assumption for the illustration example has been to keep the average emission rates constant between the historical year and the last project year, there may be BAU factors that drive changes over time. For example: vehicles may become more fuel efficient (reducing fuel consumption rates per kilometer travelled); biofuels may increase their market penetration (changing GHG emission factors); and air conditioner leakage rates might improve. These types of factors should be considered in establishing BAU emission rates over time. Emission rates can be developed from observed historical inventories (a top-down approach) or calculated using emitting activity levels and standard emission factors (a bottom-up approach). Examples of activity levels include: fuel consumption rates (e.g., standard cubic metres of natural gas consumed by a furnace per year, litres of diesel consumed per vehicle-kilometer-travelled); production rates (e.g., tonnes of cement produced per year); fertilizer application rates (kilograms of fertilizer applied per hectare); landfill loading (tonnes of waste sent to landfills each year); and electricity consumption. Emission factors are used to convert activity levels (fuel use, production, etc.) to GHG emissions. Standard emission factors are available to carry out these conversions. A set of emission factors for common fuels is provided in Appendix A. Direct GHG emission factors are provided for fuel combustion along with estimates of indirect GHG emission factors for fuel supply applicable to Ontario. Additional emission factors may need to be gathered from references or energy suppliers. Appendix A also documents the annual average electricity grid displacement factors associated with the mix of energy sources (i.e., nuclear, hydro, natural gas, diesel, wind, etc.) for generation and transmission/distribution 11 for all regions of Ontario for These default electricity grid displacement factors are borrowed from Environment and Climate Change Canada, National Inventory Report. 12 However, the emission factors for fuels and electricity to be applied in estimating GHG reductions should reflect project conditions. For example, where known or reasonable estimates can be developed, electricity grid displacement factors should take into account annual, seasonal, time-of-day, and/or significant regional 11 Accounts for transmission/distribution line losses and sulphur hexafluoride (SF 6 ) dielectric fluid emissions. 12 Environment and Climate Change Canada (2017) National Inventory Report, , Table A

19 use and generation factors. These factors may change over the time horizon of the project. OPS ministries should consult with Ontario Ministry of Environment and Climate Change (MOECC), which will be working with stakeholders to develop appropriate GHG emission factors aligned with the Province s long term energy plan. 1.7 Project Planning Project planning ultimately results in the development of projected GHG reductions expected for the project. Project planning encompasses the following steps. Clearly define the GHG project scope and activity level objectives. Select the most appropriate GHG reduction calculation methodology. Estimate the projected GHG reductions attributable to the GHG project. Document a Project Plan Defining the Project Scope and Objective A GHG project can consist of one or more technologies and practices to be adopted by a target population in one or more sectors (or segments), at one or more locations, over a specified period of time to achieve one projected GHG reduction objective. The definition of a project s scope and GHG reduction objective is a key starting point in the project planning process and are typically found in the front sections of a Project Plan. The scope of a GHG project should be defined with the following elements. Title. Ownership, stewardship, or management responsibility. Description. Technologies or practices to be adopted to achieve a GHG reduction. Specific greenhouse gases covered by technologies or practices. Target population, sectors (or segments) in which the technologies or practices are to be applied. Location geographical boundary of potential technologies or practices. Timing project start date, project duration, project reporting periods. 13

20 GHG Technologies, Behaviours, Operating Practices GHG emission reductions are achieved by emitters adopting technologies and/or making changes in behaviours and operating practices. Examples of technologies would include, but not be limited to the following. Fuel switching to lower or zero fossil carbon fuels. Installation of electricity generated from renewable sources (e.g., wind, solar). Installation of new, more fuel-efficient equipment. Adoption of electric vehicles. Smaller, more efficient vehicle engines or other fuel combustion requirement. Installing additional insulation to reduce heat loss with associated lower fuel use. Planting trees to sequester carbon from the atmosphere. Use of biogenic fuels made from renewable sources (e.g., biofuels from plants, renewable natural gas). Examples of changes in behaviours and/or practices that can reduce GHG emissions are as follows. Aligning climate control to occupancy (reducing space heating and electricity use). Reduce vehicle engine idling times. Drive vehicles at slower speeds. Shifting transport modes (e.g., use public transit). Improved industrial process control to reduce heat, material and product losses. In developing GHG emission reduction estimates, it is important to explicitly identify the specific technologies, behaviours and/or operating practices that are to be adopted by the target population of emitters to be influenced by the initiative and encompassed by the project. Each technology, behaviour and operating practice will have a GHG reduction potential relative to existing (in place) or alternative technologies. For example, natural gas may be able to reduce direct GHG emissions by 30-40% when replacing heating oil in furnaces. A new natural gas furnace may be 10-20% more efficient and therefore reduce GHG emission by the same percentage versus a less efficient natural gas furnace. GHG emission reduction potentials needs to be established and documented for the project Establish the Technology Adoption Rate Objective It is important to establish the number of GHG emitting units in the population that are expected to adopt the GHG reduction technologies. One way to do this is to develop an estimate of the technology adoption rate objective for the project. This can also be 14

21 considered the potential market penetration of the GHG reduction technology among the target population. In the illustrative example, the technology adoption rate objective is to have 10% of the target population adopt the GHG reduction technology in project year 1, 50% by project year 3, and 95% by project year 7. Multiplying the technology adoption rate objective by the target population establishes the absolute number of expected adopters, which sets the boundary of the project. By difference, there will be the expected remaining population of emitters that do not adopt the technology. Table 3: Establish Technology Adoption Objective Reference Year Project Year 1 Project Year 3 Project Year 5 Project Year 7 Calculation Code BAU Target Population emitting units 20,000 20,600 21,855 23,185 24,597 A Adoption Rate Objective % of units 0% 10% 50% 80% 95% F Expected Technology Adopters emitting units 0 2,060 10,927 18,548 23,368 G=A*F Expected Remaining Population (non-adopters) emitting units 20,000 18,540 10,927 4,637 1,230 There are likely to be a number of factors that need to be studied and analyzed to establish the technology adoption rate objective. For example, the technology adoption rates can be influenced by the cost of the technology, turnover of existing technologies, technical performance, life of the GHG technology, and the magnitude of incentives to encourage technology adoption. Market survey work may be needed to identify the various factors and develop a credible basis on which to establish an estimate of the adoption rate. There may be uncertainties in developing the adoption rate objective, which should be taken into consideration and described. It is good practice to develop a conservative estimate (i.e., at the lower end of the range ) for the technology adoption rate objective. This will reduce the risks associated with application of initiative resources for projects that may ultimately not meet high expectations Selection of GHG Reduction Methodology There are many methodologies available to calculate GHG reductions from GHG projects. This guidance document cannot outline or summarize all the possible methodologies. Since they can be project and technology specific. General guidance on the concepts and elements for estimating GHG reductions are provided. Three general approaches for estimating project GHG reductions are as follows. 1. Follow ISO Part 2 standard (rigorous approach). 2. Adapt existing GHG protocols for use in Ontario. 3. Apply a simplified calculation approach. 15

22 This is typically a trade-off between accuracy and simplicity in calculating GHG reductions. Increased accuracy (lower uncertainty), completeness and transparency typically involves increased time and costs. Regardless of the approach applied, the aim is to develop the projected GHG reductions expected 13 from the project. The projected GHG reductions are estimated as the difference between: 1) expected baseline scenario GHGs; and 2) expected project GHGs, both of which are estimated from the expected number of technology adopters defined in the project objective. The expected baseline scenario GHGs for the project are estimated from the number of project adopters and the expected baseline scenario direct and indirect Ontario GHG emission rates. The expected project GHGs are estimated from the number of project adopters and the expected project direct and indirect Ontario GHG emission rates. The project s GHG reductions are calculated as the difference between the baseline scenario and project GHGs. Once projected GHG reductions are estimated, a projected GHG forecast for the population can be prepared. The projected GHG forecast for the population is the difference between the BAU GHG forecast for the population and the projected GHG reductions expected from the project. If more than one project is applied to a target population, the projected GHG forecast for the population would be the difference between the BAU GHG forecast for the population and the sum of the projected GHG reductions expected from the projects. In the illustrative example, the calculation of the projected GHG reductions expected from the project and the resulting projected GHG forecast for the population are shown in the table on the next page. The primary focus of OPS initiatives is for GHG reductions occurring in Ontario. Therefore, project GHG reductions should account for direct GHG emissions and those indirect GHG emissions estimated to occur in Ontario. Out-of-province indirect GHG emissions can be estimated but should only be reported separately as co- or dis-benefit information items. 13 The term expected is used in project planning before the project so that these estimates can be later compared with actual emissions after project implementation. 16

23 Table 4: Estimating Projected GHG Reductions Historical Reference Project Project Project Project Calculatio Year Year Year 1 Year 3 Year 5 Year 7 n Code BAU GHG Forecast tonnes-co 2 e 87,379 90,000 92,700 98, , ,689 E Expected Technology Adopters emitting units 0 0 2,060 10,927 18,548 23,368 G Expected Baseline Direct GHG Rate Expected Baseline Ontario Indirect GHG Rate Expected Baseline Ontario Fuelcycle GHG Rate Expected Baseline Scenario GHGs Expected Project Direct GHG Rate Expected Project Ontario Indirect GHG Rate Expected Project Ontario Fuelcycle GHG Rate Expected Project Scenario GHGs Projected GHG Reductions (from Project) Projected GHG Forecast (for Population) t CO2e /unit H t CO2e /unit I t CO2e /unit J=H+I tonnes-co 2 e 0 0 9,270 49,173 83, ,154 K=G*J t CO2e /unit L t CO2e /unit M t CO2e /unit N=L+M tonnes-co 2 e ,334 7,357 9,268 O=G*N tonnes-co 2 e 0 0 8,453 44,839 76,111 95,886 P=K-O tonnes-co 2 e 87,379 90,000 84,247 53,507 28,224 14,802 Q=E-P 17

24 1.7.3 Follow ISO Part 2 Standard (Rigorous Approach) The ISO Part 2 standard 14 the rigorous approach - is the ideal approach to GHG reduction quantification for projects. This approach requires a thorough and complete analysis of a project situation, which may require significant resources to perform. However, the benefit of this approach is a higher level of accuracy and reduced uncertainty, which can be important factors for users of the project results. The key steps, which are identified below, correspond to Sections 5.3 through 5.8 in the ISO Part 2 standard, namely: Section Identifying GHG sources/sinks relevant to the project; Section Determining the baseline scenario; Section Identifying GHG sources/sinks for the baseline scenario; Section Selecting relevant GHG sources/sinks for monitoring or estimating; Section Quantifying GHG emissions or removals; and Section Quantifying GHG reductions. Annex A of ISO Part 2 presents a logic flow diagram illustrating this approach, which is shown in Chapter 4 of this guidance document. Each of these steps are described briefly in Chapter 4. Full details, which are contained in the ISO standard, should be reviewed Adaption of Existing GHG Offset Project Protocols Rules or protocols have been established by various jurisdictions to outline the acceptable methodologies for estimating emission reductions for offset projects. 15 These typically follow ISO Part 2. These protocols could be adapted for use by Ontario OPS ministry project proponents. For relevant types of projects, these protocols offer important potential advantages, since they have already: identified the sources/sinks in the projects; identified the sources/sinks in baseline scenarios; selected the relevant sources/sinks for which GHG emissions need to be quantified (not all sources/sinks need will need to be quantified); and established the logic and detailed quantification methodologies, including emission factors, equations, models, etc. 14 ISO :2006. Greenhouse gases -- Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements A GHG offset project is one implemented by an emitter that does not have a regulatory (e.g., cap and trade) obligation to reduce emissions. These emitters may incur costs to implement the project but can sell offset credits to enable other emitters to meet their regulatory compliance obligations. 18

25 The table provides a summary of the number of offset protocols available in North America. These protocols are available from the jurisdictional websites. A list of protocols is included in Appendix G. Table 5: North American GHG Offset Project Protocols Project Type Category Alberta BC California Ontario, Quebec A Climate Action Reserve Agriculture Energy Efficiency 6 2 Forestry/Land Use Fuel Switching 1 1 Geological Sequestration 1 Industrial Ozone Depleting Substances Renewable Energy 6 Transportation 1 Waste Management Total Notes: A - under development Available protocols may be applicable to CCAP projects so that project GHG emission quantification methodologies contained could be adapted for Ontario-specific project conditions. The process of adapting an existing GHG offset project protocol would require the following steps. Identify potential GHG offset project protocols that would apply to the GHG project situation. Select the most relevant existing GHG offset project protocol and justify the selection. Extract the calculation methodology from selected protocol. If more than one methodology is provided, select the most relevant and justify the selection. Apply Ontario-specific criteria on eligible scope of sources/sinks for quantification to adjust any calculation formulas. Apply Ontario-specific factors to variables in calculation methodology. 19

26 Some Ontario-specific and/or project-specific factors that would need to be used in place of default factors in an offset project protocol might include the following. Direct combustion GHG emission factors for common fuels. Indirect Ontario GHG emission factors for the Ontario sources in the fuel supply chain. Electricity Grid Displacement Factors for Electricity Generation and Use - The Ontario Electricity Grid Displacement Factor for Electricity End Use accounts for GHG emissions from the average mix of electric power generation in Ontario, line losses, and the average GHG emissions from the Ontario electricity transmission network. Project-specific grid displacement factors may be needed if significantly different that the average Ontario estimate. Any project-specific factors that might be used to estimate activity levels specific to Ontario. A reference table of Ontario-specific default direct and indirect GHG emission factors appears in Appendix A. The Ontario-specific upstream fuelcycle default GHG emission factors were estimated based on the publicly-available GHGenius 16 model available from Natural Resources Canada. Where known or where they can be reasonably estimated, project-specific direct and indirect emission factors, including electricity grid displacement factors should be applied Simplified Calculation Approach Applying all the steps in ISO Part 2 or in Ontario-adapted GHG offset protocols may present some challenges. There may be a lack of data, and too much time, work effort and associated costs involved in implementing all of the steps. In some cases, application of limited time and resources for applying all of the steps may not significantly improve the accuracy of the estimates generated. There may be uncertainties that cannot be significantly overcome by conducting a reasonable level of background analysis, data collection and applying all of the steps outlined in ISO Part 2 or in Ontario-adapted GHG offset protocols. For some such projects, it may be reasonable and acceptable to simplify the calculation methodology for estimating project GHG reductions by considering the following. Developing a BAU GHG forecast that is constant with historical GHG emissions. Reducing background analysis that is used to justify technology adoption objective. Excluding detailed analysis of all sources (and sinks) associated with project. Dismissing indirect emissions, if they are roughly calculated or deemed to be small or negligible. Making simplifying assumptions. 16 GHGenius: A Model for Lifecycle Assessment of Transportation Fuels. 20