**Comments by**

**The Pew Center on Global Climate Change**

**regarding**

**Voluntary Reporting of Greenhouse Gas Emissions, Reductions, and
Carbon Sequestration**

These comments by the Pew Center on Global Climate Change are written in
response to the notice of inquiry by the U.S. Department of Energy (DOE)
regarding "Voluntary Reporting of Greenhouse Gas Emissions, Reductions,
and Carbon Sequestration" (Federal Register: May 6, 2002, Volume 67,
Number 87, Pages 30370-30373). The Pew Center appreciates the
opportunity to comment on this important issue.

On February 14, 2002, President Bush directed the DOE to recommend
improvements to the Voluntary Reporting of Greenhouse Gases Program
established under section 1605(b) of the Energy Policy Act of 1992
("1605(b) program"). In particular, the President directed the Secretary
of Energy to recommend reforms to ensure that businesses and individuals
that register greenhouse gas (GHG) reductions are not penalized under a
future climate policy -- an assurance known as "baseline protection" --
and to provide transferable credits to companies that achieve real GHG
emissions reductions.\
\
The Pew Center applauds these efforts to improve the quality of
voluntary GHG reporting and to recognize the importance of baseline
protection and transferable GHG emissions reduction credits. The
comments below are offered in the spirit of advancing these objectives.

**Recommended: A Mandatory Program**

The Pew Center believes a mandatory GHG reporting and disclosure program
is an essential first step in any effort to reduce U.S. GHG emissions,
as discussed in an attached policy brief published by the Pew Center,
"Greenhouse Gas Reporting and Disclosure: Key Elements of a Prospective
U.S. Program."[^1] The program should be comprehensive, but should be
implemented in phases to allow for the development of widely accepted
and sound reporting protocols. Ultimately, the program should:

-   Cover at least 75 percent of the human-induced U.S. GHG emissions;

-   Accurately track at least six greenhouse gases: carbon dioxide
    (CO~2~), methane (CH~4~), nitrous oxide (N~2~O), hydrofluorocarbons
    (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF~6~), and
    others as appropriate;

-   Require reporting by the largest GHG emitters of emissions under
    their control, including direct emissions from their facilities and
    vehicle fleets, and indirect emissions generated elsewhere in
    association with their purchase of electricity, heat, and steam[^2];

-   Require reporting of emissions associated with use of certain
    GHG-intensive consumer products, i.e., vehicles and major
    appliances, by their manufacturers, and encourage reporting of other
    product use emissions as protocols are developed;

-   Allow and encourage voluntary reporting by smaller GHG emitters and
    of projects to curb or sequester emissions, both in the United
    States and abroad;

-   Ensure that voluntary GHG reductions that are tracked in accordance
    with the reporting program (including verifiable previous
    reductions) are recognized under any future U.S. domestic program to
    limit GHG emissions;

-   Disclose the collected information to the public via the Internet in
    a timely fashion; and

-   Minimize the cost and general burden associated with reporting and
    maximize transparency and accuracy through several measures,
    including the establishment of reporting protocols, emissions
    factors, and electronic reporting, and integration with other GHG
    and environmental reporting programs.

While GHG reporting could be either voluntary or mandatory, experience
suggests that mandatory reporting will stimulate voluntary reductions
across the economy --- not just among the small group of corporate
leaders who typically participate in voluntary programs. During 2000,
for example, 222 U.S. companies and other organizations reported to the
1605(b) program that they had undertaken 1,882 projects to reduce or
sequester GHGs. Of these, only 100 reported entity-wide emissions, as
opposed to projects.[^3] These companies are a small group compared to,
for example, the roughly 10,000 establishments nationwide that together
generate about 80 percent of the CO~2~ emissions from the manufacturing
sector.\
\
In addition to its low rate of participation, the 1605(b) program has
been criticized for lacking rigorous reporting standards and
verification requirements, allowing the double-counting of reductions,
and failing to account for overall GHG emissions increases by entities
registering reductions at the project level.[^4] The present effort to
improve the 1605(b) program is commendable and may remedy some of these
weaknesses. However, even were such flaws remedied and baseline
protection and other incentives provided, significant GHG reductions
would not be assured because most emitters would still not participate.
Experience suggests that only mandatory reporting can achieve the broad
participation needed to stimulate voluntary reductions across the
economy.\
\
A case in point is the Toxics Release Inventory (TRI) program, a
mandatory reporting and disclosure program long considered effective in
stimulating voluntary reductions of chemical releases across a large
segment of industry. Under the TRI, mandatory disclosure has prompted
voluntary action by firms not typically predisposed to voluntary action.
The top managers and non-environmental staff of large firms have often
first learned of their releases through TRI disclosure --- leading them
to reduce the economic waste represented by the chemical releases.
Vendors of pollution prevention technologies have used the TRI to find
customers. State and local agencies have used the TRI to identify firms
in need of technical assistance. And, finally, entities not otherwise
moved have been motivated to reduce emissions by the publicity
associated with disclosure. All these mechanisms would likely operate
under a mandatory GHG reporting program as well. In other words,
*mandatory* reporting and disclosure is key to stimulating *voluntary*
GHG emission reductions.\
\
In addition, the information yielded by a mandatory reporting program --
broader and more detailed than what is available now --- would provide
policy-makers a stronger foundation on which to develop a comprehensive
climate change strategy.

**Baseline Protection**

It is not known when a mandatory program to limit emissions of GHGs will
be established in the United States or what the design of such a program
will ultimately be. Despite these uncertainties, it is important to move
forward with GHG reductions, given the long atmospheric lifetimes of
greenhouse gases. To stimulate voluntary reductions of GHG emissions
today, a GHG reporting program should provide "baseline protection" for
companies that have already taken action or are planning to take action
to reduce their emissions. These entities should be assured that --- in
the event of future controls on GHG emissions --- they would receive
credit for reductions achieved voluntarily. The extent and form of such
credit would depend on the design of the ultimate GHG control program.
All this is implicit in the President's February 14, 2002 directive to
the Secretary of Energy.\
\
Baseline protection from the first year of reporting and onward should
apply to all participating entities that are in compliance with program
requirements, and that report emissions for the entire entity -- not
just for projects or individual facilities -- with adjustments made to
account for acquisitions, mergers, and other changes in the entity's
operation. An entity's "baseline" would be emissions reported during its
first year of reporting under this program, unless it chooses to select
an earlier base year for which there is credible and verifiable
information on GHG emissions. Those selecting an earlier base year and
attempting to qualify for baseline protection or crediting would follow
the procedures discussed below.

The Pew Center's review of existing statutory authorities indicates that
the Executive Branch currently lacks authority to assure that current
efforts to reduce GHG emissions will receive credit under a future law.
If a baseline protection program is to have binding effect, it must be
authorized by law to provide greater assurances to companies that the
baseline protection would extend beyond the current Administration.
Language in the version of the Energy Policy Act of 2002 (H.R. 4) passed
by the Senate attempts to provide this assurance.

**Information Required on Entity Emissions**\
\
Measurement and reporting of GHG emissions -- particularly that done by
entities seeking baseline protection and the right to trade GHG
emissions credits -- should be done according to generally accepted
reporting standards and established by rule. One existing tool that
could serve as the basis for reporting emissions from a particular
entity is the Greenhouse Gas Protocol Initiative Corporate Accounting
and Reporting Standard, which was developed through an international
multi-stakeholder process.[^5] Ultimately, a balance must be struck
between developing reasonably complete information and minimizing the
burden on the reporting entities. One way to strike this balance would
be to require entities seeking baseline protection to report the GHG
emissions released: (1) directly from all but their smallest U.S.
facilities, (2) from their vehicle fleets, and (3) as indirect
emissions[^6] estimated to be associated with imported electricity,
heat, or steam (e.g., by using standard factors under the reporting
protocol). Each of these three would be reported as a separate item of
information to prevent double counting when the data are aggregated ---
for example, of the indirect emissions from electricity use by a
manufacturer and the direct emissions of its power company. These
factors represent the main emissions sources under the control of most
reporting entities. This system could allow for --- but not require ---
separate reporting of individual projects within a facility.

**Reporting of Product Use Emissions**\
\
The use of certain GHG-intensive consumer products, such as vehicles and
major appliances, generates a large portion of U.S. GHG emissions.
Furthermore, many companies are developing technologies or products ---
including cars, appliances, and computers --- that through increased
energy efficiency or other means could substantially reduce GHG
emissions. Their success in doing so is vital for any domestic or global
effort to reduce GHG emissions.

In addition, manufacturers of these or other GHG-intensive products
should be allowed to report voluntarily on product emissions and
emissions reductions achieved through changes in product design. Further
development of calculation tools for these and other "life-cycle"
emissions could provide a basis in the future for more widespread
reporting of these emissions.

**Verification and Enforcement**\
\
A GHG reporting program -- particularly one intended to provide baseline
protection and foster trading of GHG emissions credits -- can only be as
effective as the verification of the reported information. Toward this
end, GHG emissions reports should be submitted annually on
DOE-designated reporting forms by the reporting entities. The forms
should be self-reported and signed by an authorized officer of the
reporting entity to certify that emissions reported are accurate and
complete. Entities should face civil penalties if they intentionally
misrepresent their emissions.\
\
The DOE could develop additional verification requirements --- including
requiring other data to supplement or corroborate the initial filing,
and allowing for site inspections. Companies could choose to engage
third-party verifiers to review their data, but verification by such
entities should not be required for reporting their direct and indirect
emissions. Third-party verifiers should receive government certification
to ensure the integrity of their results. The DOE should establish
minimum criteria to ensure that the certifications are of the highest
possible quality and the methodologies are consistent.

**Public Disclosure**\
\
A key objective of a GHG reporting program would be to give the public
direct access to information on GHG releases in a timely fashion. To
meet this objective, data on individual facilities and companies should
be made available to the public over the Internet --- except for
information determined to be a trade secret[^7] or information vital to
national security. Companies should also be allowed to provide
production-based[^8] emissions information on a voluntary basis, for
example, to show relative emissions reductions even as production
increases.

**Off-site Projects and Offsets**\
\
Because GHG emissions have the same warming effect regardless of where
on the globe they are emitted, it is useful to encourage the most
cost-effective GHG mitigation opportunities even if they are not in the
United States or at a facility owned by a reporting entity. Many
companies have already invested in off-site projects to reduce GHG
emissions, for example, by investing in renewable energy projects.
Others are investing in projects to remove and store, or "sequester,"
carbon through, for example, reforestation and conservation. This work
has been done by U.S. firms both domestically and abroad and provides an
important means of keeping GHGs out of the atmosphere.\
\
Allowing companies to register the progress of these programs would
likely stimulate investments in more such projects. To this end,
entities participating in a GHG reporting program should have the option
of reporting reductions and offsets achieved through projects both
inside and outside the United States, for example, through carbon
sequestration and increased energy efficiency. Such offsets should: (1)
be certified as real, quantifiable, and not resulting in increased
emissions elsewhere; (2) be verified by a third party qualified to
provide such certification; and (3) pertain only to projects not
reported elsewhere in the register.\
\
Entities should also be able to report voluntarily transfers of
ownership of a given GHG reduction or offset.

**Reporting of Activity Prior to Enactment of this Reporting Program**\
\
Many companies have taken responsible actions to curb their GHG
emissions and undertake GHG reduction projects over the last decade, due
to concern about climate change impacts and in response to the United
Nations Framework Convention on Climate Change and various U.S.
voluntary programs. These companies should receive credit for their
early action -- even when their actions were not previously reported to
the 1605(b) program or any other federal or state program. A GHG
reporting program should make it possible for such entities to report
(and receive baseline protection for) emission reductions and offsets
implemented after 1990 and before enactment of the program, so long as
the information is certified by the reporting entity and is reported
under the established reporting standards as explained above, or the
entity can provide substantially the same information. Companies should
select a base year for which their emissions are well documented and
verifiable.\
\
Procedures should also be developed by the DOE for considering petitions
from companies that can show that, even though they cannot meet the
exact requirements of the newly developed protocol, they can provide
substantially the same information in order to support use of an earlier
base year for entity-wide reporting. In addition, entities that have
reduced emissions through either on or off-site projects that can
rigorously document and certify reductions are real, quantifiable and
verifiable and that such reductions have not resulted in increased
emissions elsewhere should be able to receive baseline protection/credit
for these measures.

**Minimized Reporting Burden**\
\
A GHG reporting program should be designed to minimize the cost,
inconvenience, and general burden associated with reporting. The DOE
should work with stakeholders to establish protocols and emission
factors, and the program should be integrated with GHG reporting
requirements at other levels of government (both domestic and
international), as well as with other existing environmental reporting
requirements. Electronic reporting should be allowed and encouraged, in
a format that allows entities to report directly from their internal
electronic databases to the reporting system. The DOE should specify
emissions factors for utilities and manufacturers and common
unit-process technologies that could be used by reporting entities.
Technical assistance in reporting should be available to any reporting
entity.

**Conclusion**\
\
While a mandatory greenhouse gas reporting and disclosure program is an
important step in any effort to address climate change, an improved
1605(b) program -- particularly if coupled with real baseline protection
-- would be beneficial.

[^1]: **Endnotes**

    ^?^ "Greenhouse Gas Reporting and Disclosure: Key Elements of a
    Prospective U.S. Program," *In Brief, Number 3.* March 2002. Pew
    Center on Global Climate Change. Arlington, VA. Available on the Pew
    Center website: <http://www.pewclimate.org/policy/index_ghg.cfm>.

[^2]: These indirect emissions can be estimated by using emission
    factors and protocols developed by the implementing agency.

[^3]: ^?^ U.S. Department of Energy, Energy Information Administration,
    Voluntary Reporting of Greenhouse Gases 2000, February 2000.

[^4]: D. Lashof and D. Hawkins, Less than Meets the Eye: An Analysis of
    Greenhouse Gas Emission "Reductions" Reported by Electric Utilities,
    Natural Resources Defense Council, March 2000.

[^5]: WBCSD/WRI, The Greenhouse Gas Protocol Initiative. The first
    "module" under this protocol consists of standards, guidelines, and
    calculation tools for companies and other organizations wanting to
    account and report their direct and indirect emissions of the six
    GHGs covered by the Kyoto Protocol. A future module under
    development will provide accounting and reporting standards for
    project-based GHG reduction activities.

[^6]: Direct emissions are emissions from sources that are owned or
    controlled by the reporting entity, e.g., emissions from factory
    stacks, manufacturing processes and vents, and from
    company-owned/controlled vehicles. Indirect emissions are emissions
    that are a consequence of the reporting entity's activities, but
    occur from sources owned or controlled by another entity, e.g.,
    emissions from the production of purchased electricity, contract
    manufacturing, employee travel on scheduled flights, and emissions
    occurring during the product use phase. World Business Council for
    Sustainable Development --- World Resources Institute (WBCSD/WRI),
    The Greenhouse Gas Protocol Initiative: Corporate Accounting and
    Reporting Standard, October 2001.

[^7]: Trade secrets are treated differently by different federal
    statutes. Under the Clean Air Act, for example, emissions
    information cannot be withheld on the basis of trade secrecy. Under
    the Superfund Amendments and Reauthorization Act of 1986 (SARA),
    which created the Toxics Release Inventory (TRI), however, a
    reporting entity may seek trade secret protection of information
    which: (1) has not been disclosed by the entity to any other person,
    unless under a confidentiality arrangement; (2) has not been
    disclosed under another law; (3) if disclosed, would cause
    substantial harm to the competitive position of the reporting
    entity; and (4) is not readily discoverable through reverse
    engineering. Upon showing that all four of these tests can be met,
    the specific chemical identity can be withheld from disclosure, and
    replaced by the generic class or category of the reported chemical.
    The rest of the reported information must be disclosed. (See SARA
    Section 322.) A similar approach under a GHG reporting program (once
    the trade secret determination had been made) would provide for
    disclosure of all the information except the identity of the
    specific greenhouse gas, which could be represented instead by its
    carbon dioxide equivalence.

[^8]: A production-based emissions report, for example, could state the
    amount of GHGs emitted per unit of product manufactured (for
    reporting entities that are manufacturers) or per unit of
    electricity generated (for reporting entities that sell
    electricity). Such a rate-based approach could provide important
    information on efficiency improvements that are not transparent from
    reporting absolute measures (e.g., metric tons).