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June 5, 2002

Office of Policy and International Affairs

Office of Electricity and Natural Gas Analysis, PI-23

U.S. Department of Energy

Forrestal Building, Room 7H-034

1000 Independence Ave., SW

Washington, DC 20585

### [Voluntary Reporting Comments]{.underline}

The American Forest & Paper Association (AF&PA) appreciates the
opportunity to submit comments on the Department of Energy's (DOE) May
6, 2002 Notice of Inquiry regarding the voluntary reporting of
greenhouse gas emissions, reductions, and carbon sequestration.[^1] The
forest products industry plays an important and complex role in the
global carbon cycle. Forests supply the industry's primary raw material,
and the sustainable management of these forests sequesters massive
amounts of carbon while providing needed products. Forest products
continue to sequester carbon, and the recycling of these products
sustains the sequestration process. Additionally, the forests supply
renewable energy or biomass fuels -- which are carbon neutral.

AF&PA is the trade association and leading voice of the forest, pulp,
paper, paperboard, and wood products industry in the United States. We
represent approximately 130 member companies engaged in growing,
harvesting and processing wood and wood fiber, manufacturing pulp, paper
and paperboard products from both virgin and recycled fiber. AF&PA
members include manufacturers of over 80 percent of the paper, wood and
forest products produced in the United States and our members include
non-industrial private landowners, large multi-product producers, and
family-run mills.

Modifications that DOE may make to the guidelines governing the
voluntary reporting of greenhouse gases and carbon sequestration under
section 1605 (b) of the Energy Policy Act of 1992 are important to AF&PA
members. The forest products industry leads all other manufacturing
sectors in onsite electricity generation, meeting more than half of its
own energy needs through highly efficient co-generation processes using
biomass fuels derived from wood waste products. By recycling these wood
wastes into a renewable energy source, the forest products industry is
able to divert waste from landfills and, at the same time, reduce
reliance on fossil fuels and offset greenhouse gas emissions by
substituting renewable biomass-based carbon for carbon from fossil
fuels. Thus, DOE's treatment of biomass emissions is of primary concern
to AF&PA members.

### [Biomass Fuels and Emissions]{.underline}

DOE's guidelines for calculating greenhouse gas emissions must clearly
state that carbon dioxide emissions from the combustion of biofuels and
from the oxidation of biomass in general, do not contribute to global
warming and thus are not considered greenhouse gas emissions. The
President's climate initiative emphasizes incentives for the use of
renewable forms of energy -- such as biomass -- and proposes tax
incentives to increase their use. Yet, as currently written, DOE's
guidelines on estimating biomass emissions are complex and confusing.
They outline elaborate procedures for calculating biomass emissions and
only randomly acknowledge the neutrality of such emissions.

Most international protocols including that of the Intergovernmental
Panel on Climate Change (IPCC) consider biomass emissions to be neutral.
The IPCC views biomass emissions as part of the natural carbon balance
and states that such emissions do not add to atmospheric concentrations
of carbon dioxide. In fact, the Energy Information Administration (EIA)
1605(b) reporting instructions contain a footnote[^2] citing the IPCC
guidance and stating that "reporters may wish to use an emission factor
of zero for wood, wood waste, and other biomass fuels."[^3] The
information contained in this footnote needs to be brought into the body
of DOE's guidance and made the cornerstone of DOE's biomass policy.

Energy-rich biomass carbon -- derived from wood chips, bark, sawdust and
pulping liquors recovered from the harvesting and manufacturing
processes -- is atmospheric carbon dioxide that is transformed and
sequestered by trees during their growth. When these biomass fuels are
burned, the CO~2~ that is emitted is in fact the atmospheric carbon
dioxide that has been sequestered during growth, and it becomes part of
the natural carbon cycle that includes trees, air and other normal CO~2~
emissions. This cycle is a closed-loop: new tree growth keeps absorbing
atmospheric carbon dioxide; hence, there is no net contribution to the
atmospheric CO~2~ level.

Historically, the forest products industry has recovered energy from the
industry's waste stream by utilizing biomass as a primary energy source
in its manufacturing processes. The amount of carbon dioxide emissions
offset through the use of carbon-neutral biomass fuels by the forest
products industry is the equivalent of taking nearly 16 million cars off
the road every year.

The President's initiative specifically expands tax credits for
electricity produced from biomass and seeks to expand eligible biomass
sources. Currently, the forest products industry derives 63 percent of
its energy requirements from biomass wastes. At many mills,
self-generated electricity goes beyond serving onsite production needs
by providing supplemental electricity to the surrounding electric power
grid.

To fully accommodate the President's climate policy and to be consistent
with existing domestic and international protocols on accounting for
greenhouse gases, DOE must modify its guidelines and clearly state the
neutrality of emissions from biomass fuels. As currently written, DOE's
guidance for the industry and forestry sectors is so complicated and
difficult that it presents a substantial obstacle to the
administration's goal of increasing the use of renewable biomass fuels.

**[Accounting Procedures for Greenhouse Gases:]{.underline}**

AF&PA members think that sector variations and the global nature of
today's industries must be recognized by any greenhouse gas accounting
system. In early 2001, the pulp and paper industry working through the
International Forum of Forest and Paper Associations began a project to
develop international guidance for estimating greenhouse gas emissions
from pulp and paper mills. The resulting industry-specific method is
intended for use with an accepted protocol such as those issued by the
World Resources Institute/World Business Council for Sustainable
Development and the Intergovernmental Panel on Climate Change. A current
draft of the methodology is attached to these comments.[^4]

The project was undertaken to create a unified process for collecting
credible data that is comparable worldwide and to establish a method
that addresses the industry\'s unique attributes. This process assures
that the assumptions and calculations used to estimate the industry's
emissions are transparent -- or that they are consistent, accurate, and
easily understood.

The forest products industry elected to use an inventory method to
account for emissions on a facility or company-level basis. The
inventory addresses:

-   Core pulp and paper making operations (direct emissions as well as
    indirect emissions from transfers of power, heat, and steam) and

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-   Other company owned sources (such as a company-owned truck fleet).

The guidance also includes discussion on establishing inventory
boundaries and, to aid in interpreting the results, the guidance
recommends the inventory results include a list of the operations
contained within the boundaries and a list of emission factors used to
estimate emissions. The document also contains an extensive
documentation of emission factors generated by international research.

The methodology accounts for:

-   Carbon dioxide emissions from fossil fuel combustion based on the
    carbon content of the fuel and the amounts burned. This includes
    emissions from production processes as well as the use of vehicles
    and other equipment.

-   Methane and nitrous oxide emissions from combustion processes (both
    fossil fuel and biomass).

-   Greenhouse gas emissions from mill landfills and wastewater
    treatment plants

-   Indirect emissions -- such as those related to the import/export of
    electricity or steam. Mills sometimes produce excess electricity for
    export; thus, the method provides guidance for estimating the
    indirect emissions or indirect emission offsets associated with
    imported and exported electricity and steam.

Consistent with the protocols evaluated in preparing the methodology,
carbon dioxide emissions from biomass combustion are not counted as a
source of greenhouse gas emissions. The neutrality of these emissions
must be recognized if the industry and the nation are going to increase
their reliance on renewable energy.

**[General Comments:]{.underline}**

AF&PA members commend the Administration for addressing the reduction of
greenhouse gas emissions through voluntary approaches. We applaud the
Administration's commitment to research on energy technologies. These
efforts will allow the United States to avoid the overly stringent
timeframes and complex -- and often incomprehensible -- processes and
terminology embodied in the Kyoto Protocol.

This said, AF&PA members are also supportive of efforts to make any U.S.
system of accounting for emissions reductions compatible with
international efforts. Many of our members operate in multinational
markets. The ability to establish and transfer credits globally -- for
projects voluntarily undertaken to reduce greenhouse gas emissions -- is
vital.

**[Specific Comments:]{.underline}**

The following represent AF&PA's responses to the specific areas where
DOE is seeking comments:

1.  **[Time frame of data reported]{.underline}. The current DOE
    registry accepts information on emissions and reductions back to
    1991 and on emissions back to 1987. Submitted reports may be revised
    and supplemented. DOE is seeking suggested improvements to this time
    frame.**

Under a voluntary program, maximum flexibility should be provided to
encourage reporting of greenhouse gas emissions. This includes selection
of a base year. AF&PA members also think it is important that past
actions be recognized. If past action is not taken into account,
important information that could be used to explain sector or company
performance would be lost.

2.  **[Reporting entity definition]{.underline}. The current guidelines
    define a reporting entity as a "legal U.S. entity," meaning "any
    U.S. citizen or resident alien; any company, organization, or group
    incorporated under or recognized by U.S. law; or any U.S. Federal,
    state, or local government entity."**

> The term "entity" should also include trade associations. Some
> industries may wish to file collective emissions reports, which would
> give an overall perspective of that particular industry or sector.
> Such an approach was used to report energy information to DOE in the
> past, and it addresses concerns about the release of confidential
> business information.

3.  **[Level of reporting]{.underline}. DOE asks whether it is
    appropriate for reports to cover (1) all emitting activities of the
    entire reporting entity, (2) emissions by facility/site, affiliate,
    or subsidiary; or (3) an emissions reduction, emissions avoidance or
    carbon sequestration project. Also, DOE is seeking comments on how
    different levels of reporting may be appropriate for various
    reporting purposes, including transferable credits and protection
    against penalty under future climate policy.**

AF&PA members think that all levels of reporting are appropriate and
informative. The registry should be designed to accommodate reports of
emissions and emissions reductions for an entire entity (which may
include a trade association) or a single facility. The registry should
also collect data on direct and indirect emissions, emissions avoidance,
and emissions reduction.

The registry also should document emission reductions, avoidance and
carbon sequestration that are reported as projects.

Appropriately documented reports to the registry of emissions reduction,
emissions avoidance and carbon sequestration projects should be eligible
for transferable credits and protection against penalty under future
climate policy.

4.  **[Reportable GHGs]{.underline}. DOE asks whether and how it may be
    appropriate to modify the current GHG approach, which allows reports
    on various greenhouse gases and other pollutants, and their
    reduction.**

Reporting should be limited to the primary greenhouse gases (CO2, CH4,
N2O, HFCs, PFCs and SF6), as the most accurate data is available on
these gases and methods are available for determining their global
warming potential. However, DOE also should recognize that some
industries do not emit all of these gases in quantitative amounts. For
example emissions of HFCs, PFCs and SF6 from pulp and paper mills are
too small to quantify.

Furthermore, there is still uncertainty about the relative effects of
the primary gases on climate change, and far greater uncertainty remains
about the effects of other gases currently reported to DOE's registry
(such as NOX, NMVOCs, and CO). Until a quantitative method is available
for characterizing the relative importance of these other gases, they
should not be targeted by the Administration's program.

A quantitative approach is particularly important if a trading system
with "credits" is to be established. Credits must be based on
quantitative methodologies that can be agreed upon by the scientific
community and accepted by the financial community.

5.  **[Indirect emissions]{.underline}. DOE asks commenters to identify
    and discuss how a reporter could treat indirect emissions, such as
    those resulting from electricity use, and indirect emissions
    reductions, such as those from decreased electricity use. How should
    life cycle and fuel cycle emissions and wholesale electric or
    natural gas transactions be treated?**

As suppliers of electricity generated from renewable sources, AF&PA
members have a great interest in the issue of indirect emissions
reductions and think that appropriate credit must be given for exports
of renewably based energy. Also, emissions reductions from reduced use
of purchased electricity should be recognized.

The greenhouse gas inventory methodology developed by AF&PA members
includes indirect emissions such as those related to the import/export
of electricity or steam. At many mills, self-generated electricity goes
beyond serving onsite production needs by providing supplemental
electricity to the surrounding electric power grid. Thus, the method
provides tools for estimating the reduction in indirect emissions
associated with exported electricity and steam.

The current DOE guidance allows a variety of approaches for estimating
the indirect emission reductions associated with exports of power from
industrial facilities. This flexibility is important, as there is
considerable site-to-site variability in facility operations and
arrangements.

There is a specific change that AF&PA suggests to the guidance
terminology. DOE appears to use the terms direct and indirect as
synonymous with "on-site" and "off-site." The greenhouse gas protocol
developed by the World Resource Institute (WRI) and the World Business
Council on Sustainable Development (WBCSD) uses the terms direct and
indirect to describe the organizational boundaries -- or the ownership
and control of the sources emitting the greenhouse gases. For domestic
and international consistency, DOE should adopt the terminology and
associated meanings used in the WRI/WBCSD protocol.

6.  **[Avoided emissions]{.underline}. The GHG Registry currently
    includes avoided emissions such as those from electricity generation
    from renewable energy sources or nuclear power, the use of natural
    gas-fueled motor vehicles, and energy efficiency improvements in
    industrial or other applications. DOE asks commenters to discuss how
    a reporter could treat actions that avoid, at least in part, the
    production of GHG emissions.**

DOE's registry should recognize "avoided emissions." In the forest
products industry, avoided emissions are generally the result of three
major industry practices: use of biomass materials and fuels,
co-generation, and recycling.

Generators of renewable electricity that is produced for on-site
consumption should receive special recognition in DOE's policy
formulation. The forest products industry leads all other manufacturing
sectors in onsite electricity generation, meeting more than half of its
own energy needs through highly efficient co-generation processes using
biomass fuels derived from wood waste products. The Gas Research
Institute estimates that this important energy resource will continue to
grow, and by 2015, pulp and paper mills will generate 1.7 quads of
electricity.

Where this electricity is not used on site, it is exported, and the
export of excess power or steam should be recognized as avoiding
emissions in other locations. This is especially important when the
power is produced from biomass -- or emissions neutral fuels. Such
recognition and credit creates added incentives for generating power for
export. Additionally, increased co-generation of power from fossil fuels
should be recognized.

Another important method of avoiding or reducing emissions is through
the recycling of paper. Almost 50 percent of all paper is recovered for
recycling at the current time. Besides reducing landfill emissions of
methane, the recovery process plays an important role in extending the
amount of time that carbon is sequestered in paper products. These
actions need to be recognized.

7.  **[Baselines (or reference case) definition]{.underline}. DOE asks
    for discussion of appropriate changes to the GHG Registry's
    approaches to determining an emissions baseline(s) or reference
    case. The current guidelines permit several options for identifying
    the baseline (referred to as the reference case) for emissions
    reductions or carbon sequestration. The options include use of
    historical emissions or sequestration (historical reference case),
    or an estimate of what emissions or sequestration would have been in
    the absence of a project or a group of projects (modified reference
    case). Specifically, DOE asks:**

-   **How different baseline determinations may be appropriate for
    reporting purposes, transferable credits, or protection against
    penalty under future climate policy.**

-   **How the reporting program could be used by reporters who may wish
    to report their GHG emissions measured as emissions per unit of
    output or emissions intensity**

-   **How "units of output" or emissions intensity could be calculated
    for varying industries.**

Flexibility needs to be maintained in determining a baseline. Both the
use of historical emissions or an estimate of what emissions or
sequestration would have been in the absence of a project should be
allowed. Flexibility will encourage reporting, as many facilities may
not have access to historical data.

From a manufacturing perspective, reporting emissions per unit of output
or as emissions intensity is more reflective of true emissions levels,
and reporting in this manner compensates for expansion or shrinkage of
operations. If a company expands (through a merger or direct operational
expansion), its emissions may increase, but emissions per unit of output
may actually decrease due to operational efficiencies.

From a forestry perspective, the establishment of a baseline is a
particularly difficult calculation. Well managed forests sequester
carbon dioxide and store it in the form of carbon. When harvested,
forest products yield beneficial biomass energy -- that displaces
non-renewable fossil fuels -- and energy-efficient products that store
carbon for significant periods of time.

The carbon sequestration baseline or reference case will be the ultimate
factor in determining what role forests and agriculture can contribute
in offsetting or avoiding greenhouse gas emissions. Serious
consideration needs to be given to the question of what constitutes a
forest carbon sequestration baseline.

The U.S. Forest Service FORCARB model (and its ongoing improvements)
along with appropriate regional models should form the basis for
estimating carbon sequestration in the United States. The U.S. Forest
Service is the leading expert and authority on the role of forests in
removing carbon dioxide from the atmosphere and storing it in various
carbon pools including forest products. AF&PA strongly supports the
efforts of the U.S. Forest Service to improve carbon sequestration and
storage measurement techniques through research programs and projects at
the Forest Products Laboratory.

8.  **[Thresholds for reporting emissions and for reporting emissions
    reductions]{.underline}. DOE asks if minimum thresholds for
    reporting of emissions should be set.**

> Some minimum threshold should be set to eliminate collection of data
> that is within the margin of error of current measurement and
> estimation techniques. However, to create a meaningful program, all
> entities should be encouraged to voluntarily report greenhouse gas
> emissions. With CO~2~ emissions resulting from wide ranging
> industrial, commercial and transportation activities, a database
> containing information on each major sector would be a useful public
> policy tool. Unless all entities are encouraged to report, there will
> be significant gaps in information.

9.  **[Reduction activity reports on domestic and international
    projects]{.underline}. The current GHG Registry accepts reports of
    project-level emissions data for both domestic and international
    projects, without regard to entity-level emissions data. DOE asks if
    entity-level emissions data should accompany information on projects
    either within or outside the U.S.**

## Today, many U.S. companies operate in multinational markets; thus, the registry should allow for reporting of both domestic and international projects for purposes of future trading and transfer of credits. Also, allowing the registration of all projects is necessary if the emerging domestic and international trading systems are to be linked. AF&PA supports efforts that will lead to compatible trading systems.

10. **[Transferable credits and transferring ownership of
    reductions]{.underline}. DOE asks for a discussion of**

-   ***Attributes* of GHG emissions reductions or carbon sequestration
    that may be appropriate or necessary for transferable emissions
    reduction or carbon sequestration credits.**

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-   ***Information* on reporting parameters that are necessary to
    establish and transfer ownership of real emissions reductions or
    carbon sequestration credits.**

Under a voluntary system, trading between companies likely will focus on
acquiring credits from emission reduction or sequestration projects that
can be "banked" for future use in a trading system. To encourage
participation in a voluntary system, it is important to establish a
system that allows maximum flexibility and minimizes restraints.

The current program does not require a demonstration that the emissions
reduction project "goes beyond business as usual" or require a certain
level of financial commitment. This is an important feature to maintain.
For the forest products industry, certain projects, such as the use of
renewable energy, have been under way for many years. Increases in use
may be possible without making significant additional changes to a
facility. Such emissions reductions should be encouraged and the past
actions taken by the industry recognized.

The current guidelines ask that unintended greenhouse gas effects be
identified and quantified to the extent possible. For those areas where
effects are identified but cannot be quantified, the guidance allows a
qualitative assessment. A requirement for a detailed assessment of all
possible sources of unintended leakage is unrealistic and
counterproductive. An approach that allows a qualitative assessment is
more practical and encourages participation in the system.

11. **[Reporting joint activities, addressing duplication of reported
    emissions and reductions, and ownership]{.underline}. DOE asks
    whether changes are appropriate or necessary to minimize duplicative
    reporting and assure correct identification of the owner of
    emissions, emission reductions or avoidance, and carbon
    sequestration. The current guidelines permit reporters to report
    individual and joint activities and to modify reporter
    identification as needed.**

In reporting on joint projects, the contractual arrangements between
parties should take precedence. For example, if a facility has
established an agreement with a power company to modify its processes to
reduce its electricity consumption, the facility likely is entitled to
the credits for the emissions reductions under a contractual agreement.
The terms of such a contract should dictate which party takes credit for
and reports the reduction.

12. **[Verification and third-party audit standards]{.underline}. The
    current guidelines and EIA forms require that the reporter
    self-certify the accuracy of reported information. No independent
    certification or verification is required.**

## The current guidelines require certification of the accuracy of the information but do not require third-party verification. Independent verification of reported information is not necessary in all cases. Companies reporting the information maintain in-house professional engineers and certified public accountants to verify the data. These are professionals who adhere to the same standards as their third-party peers. Situations requiring independent verification can be specifically identified as they occur.

13. **[Confidentiality of reported data and public availability of
    information]{.underline}. Current guidelines provide that
    information determined to be confidential -- such as trade secret
    and commercial or financial information -- does not appear in EIA's
    public database and is not made available to the public. Should the
    revised guidelines include a provision requiring reporters to waive
    this protection if they wish to obtain a certificate of emission
    reductions for potential use in connection with transferable credits
    or for protection against penalty under future climate policy?**

## The statute that sets out the voluntary reporting program requires that "trade secret and commercial or financial information that is privileged or confidential shall be protected..." \[42USC3385(b)(3)\]. But DOE requests comments on whether or not they should require reporters to waive this statutory protection in order to obtain transferable credits or protection against penalty under future climate policy. Credits and policy-change-protection were proposed by President Bush in his February Climate Initiative, and the President did not condition his proposal on waiving the underlying statutory protections.

Information involving trade secrets and commercial and financial data
should be maintained as confidential. Such information is vital to a
company's competitive advantage in the market place. Any requirements
that reporters waive confidentiality protections will hardly improve
participation. To require that confidential, business data be made
public would dissuade many companies from reporting.

Additionally, a fact sheet accompanying the President's announcements
stated that improvements in the greenhouse gas registry will give
businesses incentives to invest in new, cleaner technology and
voluntarily reduce emissions. Businesses likely will not invest in new
technology if they must disclose the proprietary aspects of it.

14. **[Measurement and estimation techniques]{.underline}. Current
    guidelines and reporting forms provide a number of default and
    estimation techniques, but they do not prescribe measurement and
    estimation techniques. Identify and discuss the need for prescribed
    techniques for measurement and estimation under an improved GHG
    Registry that could provide the basis for transferable credits or
    protection against penalty under future climate policy.**

AF&PA supports the use of appropriate general protocols or models to
guide estimation techniques. For sequestration estimation, the U.S.
Forest Service FORCARB national model -- or other appropriate regional
models -- should form the basis for reporting and estimation of carbon
sequestration in the United States.

For determining emissions, the World Resources Institute and the World
Business Council on Sustainable Development (WRI/WBCSD) have developed a
general protocol that provides useful guidance on estimation of
greenhouse gas emissions. Estimations range from use of fuel data and
electricity invoices to calculate greenhouse gas emissions to
information on making minimum measurements.

When accounting for emissions, however, AF&PA members think that
development of an appropriate calculation tool that recognizes each
industry's unique attributes is important. These tools should be
flexible rather than prescriptive in nature, as within any industry,
operations vary from facility to facility.

> A draft of the methodology that AF&PA along with forest product
> companies from around the world developed for calculating greenhouse
> gas emissions from pulp and paper mills is attached.
>
> If you have questions concerning these comments, please call me at
> 202-463-2709.
>
> Sincerely,
>
> Dee Gavora
>
> Director, Environmental Policy

[^1]: 67 Fed. Reg. 30,370

[^2]: EIA 1605(b) long form reporting instructions, Appendix B, footnote
    "d."

[^3]: See also "Emissions of Greenhouse Gases in the United States
    2000," EIA, November 2001, document number DOE/EIA-0573 (2000)

[^4]: With minor modification, the methodology also is applicable to the
    wood products sector of the forest products industry.