WRI/WBCSD GHG Protocol: Project Module Jeff Fiedler (jfiedler@nrdc.org) Natural Resources Defense Council Ag Modeling Forum, October 13, 2004

GHG Protocol: Project Module Multi-stakeholder, int’l, 2-year process Road-tested; final revisions before public comment Purpose: Simple & credible project quantification Reduce uncertainty and transaction costs Increase consistency across projects, programs Program- and policy-neutral for broad applicability Protocol is not a verifiable standard: Flexibility means that inconsistency is likely Interpretation required by projects and programs Value: Discussion, guidance on trade-offs

Baselines & Additionality Additionality is a critical concept for credibility, integrity of reported reductions Baselines: Key to additionality Project Specific: Identify possible baseline candidates, and use barriers tests to select most likely baseline Performance Standard: Key steps are baseline sample (geographical, temporal, technology) and setting the stringency (10th percentile?) Flexibility: Approach, stringency, sample…

Application to Forests & Ag Project Specific is relatively straightforward Performance Standard can be used to: Determine rate of change of land use practices Use appropriate sample to estimate baseline rate Sector guidance will discuss geographic area, temporal range, method of projecting rate of change (trend, model), stringency Carbon stocks still measured/estimated Considerable judgment is needed; uncertainty Estimate C stock change for a land use change For heterogeneous areas, use sample to estimate stock change per unit area, for a given activity or land use change

Leakage and Secondary Effects Protocol differs from other programs, which… Define project boundary (but how? ownership?) Leakage is an effect outside project boundary Leakage is integrated into project assessment: Define project’s primary activity and effect Identify secondary effects using guidance: Upstream/downstream Leakage (activity shifting, market effects) Quantify all elements, including leakage (within reasonable limits recognizing evolving tools) Provides greater clarity on assessment boundary

Permanence/Reversal Carbon Reversibility Management Plan Identify, assess reversible elements of project Describe actions to reduce reversibility Easements, prevention, contracts Describe mechanisms to compensate for loss Insurance, portfolio, buffer/reserve Reversibility monitoring plan Crediting programs and private contracts will determine liabilities and project requirements

1605(b) Federal Registry Baselines: Inconsistency is guaranteed Multiple definitions (Section 300.8) No definitions on stringency, criteria “Reductions” for C storage above base year Leakage: Attempted entity-wide reporting Loose definition of “distinct entity” Only addresses issue if reporting is mandatory Indirect Emissions Good to separate direct, energy indirect, other indirect Permanence: ???

1605(b) – Other Issues Transparency: What level of documentation? Emissions reporting, baseline selection, leakage…? De minimis exemptions? Minimal review of reports by EIA Registering vs. Reporting? Big Picture: Flaws of existing 1605(b) will continue Doesn’t provide certainty for business Doesn’t provide useful information for policy makers Sets terrible precedent for future crediting programs

CA Registry – Forest Protocol Baselines: Not generally applicable Assumes legal standard defines current land use Baseline not updated as law evolves Leakage: Limited treatment creates bad precedent Permanence: Requires annual monitoring; tracks losses

My Ideal Ag Sector Analysis What is the effect of mandatory policies? Mirror structure of McCain-Lieberman Use relevant targets and timetables Use range of carbon and energy prices Costs and benefits (e.g., new markets) Outputs: Net farm income Overall “market” size: how many gallons of ethanol? Regional distribution Soil, water, wildlife, other benefits

Ag Sector Analysis (2) Elements of analysis: Carbon cap on electricity, transport fuels, large sources: Renewables (on-farm wind; biomass energy) Methane to Energy Offsets: Include transaction costs of monitoring, rules Sequestration Nutrient management Methane capture/reductions Incentives Payments Energy Price: Fertilizer & Pesticide (natural gas) On-farm fuel & energy use

Ag Sector Analysis (3) Analytical Difficulties? How to interact with economic studies? Do you use all outputs in an ag analysis? Studies can project levels of offsets, renewables use Regional distribution? One analysis, or multiple coordinated elements? If separate, how to capture the effect of revenue from new markets?