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February 20, 2007

Office of Policy and International Affairs

U.S. Department of Energy

To Whom It May Concern:

The World Resources Institute (WRI) acknowledges the recent corrections
made to the Technical Guidelines of the U.S. Department of Energy (DOE)
Voluntary Reporting of Greenhouse Gases \[1605(b)\] Program and the 20
day public comment period regarding these corrections. However, while we
appreciate the opportunity to comment on the corrected Technical
Guidelines, we would like to take this public comment period as an
opportunity to reiterate and expand on our significant and broad
concerns regarding the overall design and usefulness of the 1605(b)
program.

In June 2005, WRI, through the WRI/World Business Council for
Sustainable Development (WBCSD) Greenhouse Gas Protocol Initiative,
submitted formal comments to the DOE on the 1605(b) Revised Guidelines
for Voluntary Greenhouse Gas Reporting.

The GHG Protocol Initiative is a multi-stakeholder partnership of
businesses, NGOs, governments, and others led by the WRI and WBCSD. The
Initiative's mission is to develop internationally accepted accounting
and reporting standards for corporate greenhouse gas emissions (GHG)
inventories and GHG mitigation projects and to promote their use by
businesses, governments, and other organizations.

The GHG Protocol Corporate Accounting and Reporting Standard, revised
edition (GHG Protocol) is the pre-eminent international standard for
preparing a corporate-wide GHG emissions inventory. Hundreds of the
world's largest corporations now track and report their GHG emissions
based on the GHG Protocol, and many GHG initiatives are based on the GHG
Protocol including the U.S. EPA Climate Leaders Program, California
Climate Action Registry, Mexico GHG Program and World Economic Forum GHG
Register. In addition, the International Organization for
Standardization (ISO) 14064 Part 1 (organization level quantification)
is based on the GHG Protocol and refers its users to the GHG Protocol
for guidance in implementing ISO's requirements and standards.

In the June 2005 comments, the WRI/WBCSD team noted six areas where the
1605(b) program fell short of achieving its stated intentions and
purposes, including:

-   The guidance for defining the reporting entity is insufficient and
    too flexible;

-   The revised guidelines are not based on and do not incorporate GHG
    accounting principles;

-   The guidelines do not promote the consistent reporting of absolute
    emissions over time;

-   There is not a clear or adequate distinction between entity-level
    and project-level GHG accounting;

-   The guidelines use project-level accounting concepts, but do not
    feature a sufficient project-level accounting and reporting
    methodology;

-   The methodology proposed to convert intensity changes into absolute
    reductions in the technical guidelines yields an abstract type of
    reduction that does not fulfill the need for data consistency over
    time.

The WRI/WBCSD team went on to note that "the failure to make a
sufficient distinction between entity-level and project-level GHG
accounting threatens the legitimacy and credibility of the 1605(b)
guidelines. Also, the absence of strong guidance on reporting absolute
emissions consistently over time is not compatible with GHG Protocol
standards or internationally accepted entity-level and project-level
accounting and reporting standards. This incompatibility could harm the
credibility of the guidelines, and result in unnecessary duplication of
work and higher transaction costs for companies that wish to report
under other registries and programs as well as 1605(b)."

Following the June 2005 public comment period, the DOE in April 2006
published to the Federal Register final General Guidelines to the
1605(b) program and also released revised Technical Guidelines. An
assessment of the final General and Technical Guidelines shows that
while the technical quantification methodologies and rating system
followed by the 1605(b) program for entity-level accounting in general
look sound and are informed by other credible GHG accounting
programs[^1], the overall design and framework that underpins the
1605(b) program has not been significantly changed following the June
2005 public comment period.

For the reasons reiterated above and several additional points described
below, WRI believes that the 1605(b) registry does not provide a
sufficient GHG accounting and reporting framework to support effective
U.S. action to address climate change, including the consensus
recommendations from the U.S. Climate Action Partnership (USCAP).

Launched in January 2007, USCAP is a business and NGO partnership
calling for "prompt enactment of national legislation in the United
States to slow, stop and reverse the growth of greenhouse gas (GHG)
emissions over the shortest period of time reasonably achievable."
Founding USCAP members include Alcoa, BP America Inc., Caterpillar Inc.,
Duke Energy, DuPont, Environmental Defense, FPL Group, General Electric,
Natural Resources Defense Council, Pew Center on Global Climate Change,
PG&E Corporation, PNM Resources, and World Resources Institute.

[]{.mark}

A primary recommendation of USCAP is the establishment of an
"economy-wide, market-driven approach that includes a cap and trade
program that places specified limits on GHG emissions."

According to the recommendations, "cap and trade is essential" and
"complementary policies and measures will be necessary". USCAP also
calls for policymakers to "fast track" the establishment a national GHG
registry by no later than the end of 2008. This registry should "ensure
consistency in the definition, counting, and reporting of GHG emissions
from all regulated entities (i.e., those that are subjected to the cap)
and from all other emission sources on a voluntary basis."

Based on WRI's experience with GHG accounting and reporting and registry
design, we feel that the design features adopted by the 1605(b) registry
are in conflict with these recommendations. As stated in the General
Guidelines, a primary objective of the 1605(b) program is to provide a
platform for tracking the contribution of individual companies towards
the President's goal of reducing U.S. emissions intensity by 18 percent
between 2002 and 2012. This objective has strongly influenced several
aspects of the program, including:

-   The registry does not require the reporting of facility or unit
    level emissions data.

-   Companies are only eligible to *register* emissions if they have
    reduced emissions since 2002; the 1605(b) registry is designed not
    to track emissions *per se*, but to track company-wide reductions.

-   The default method for calculating emission reductions is based on
    emission intensity, although there are extensive rules on
    calculating reductions using other metrics (see below).

While these design features may enable the DOE registry to track
contributions towards the President's national GHG emission intensity
goal, they are not suited to the potentially broader objectives and
requirements of a future GHG regulatory program, such as the cap and
trade program called for by USCAP, and may also limit the registry's
usefulness to companies who wish to voluntarily report to a national
registry to facilitate corporate its GHG management goals. In contrast
to the 1605(b) program, a national GHG registry system should:

[Require Reporting of Unit or Facility-Level Data]{.underline}

To design a registry that can support the requirements of a future GHG
regulatory scheme and possibly other GHG initiatives, it will be
necessary for entities to report entity-wide emissions data at the
greatest level of granularity -- at the unit-level or at least the
facility-level. Most if not all existing cap and trade programs,
including the U.S. Acid Rain Program, U.S. NOx Budget Trading Program,
the E.U. Emissions Trading System, regulate at the unit or
facility-level. The reporting of unit or facility-level emissions data
would then enable a registry system to "roll-up" emissions to the
company-level, which is important for corporate GHG management efforts
-- another potential use for a national GHG registry. Emissions reported
at the unit or facility-level can also be rolled-up to the state,
regional, or sectoral-level, so a registry that requires unit or
facility-level emissions reporting can serve as a foundation for
multiple types of GHG policies and programs, multi-sectoral or
sector-specific; mandatory or voluntary; national-level or
state/regional-level.

[Track Emissions, Not Just Reductions]{.underline}

As noted above, entities reporting to the 1605(b) program are only
eligible to register emissions if they have reduced emissions since
2002. While this is in-line with the 1605(b) goal of tracking a
company's contribution towards a GHG intensity target, this is
inconsistent with GHG registry requirements of a cap and trade system.
Such a system, as well as best practice corporate GHG management
efforts, requires a registry whose primary function is to register
*emissions* data, not just *emission reductions* data. In any given
year, a facility or entity covered under a regulatory scheme may
experience growth, decline, or no change in its emissions levels. In any
of these situations, year to year emissions need to be accounted for and
tracked in a registry system.

[Based on Absolute, Not Intensity Metrics]{.underline}

Under the revised 1605(b) program, the primary method for calculating
emission reductions is based on emission intensity calculations and
measurements. Intensity measurements can be valuable as performance
indicators that are independent of company growth, and can provide
helpful benchmarks for achieving emission reductions. However, in order
to have a mechanism that monitors overall environmental effectiveness,
they need to be couched in the context of transparent and consistent
reporting of absolute emissions over time. This will allow the clear and
transparent monitoring of overall progress in achieving real reductions.

In addition to the default intensity method, the 1605(b) program
provides extensive rules on calculating reductions using other metrics,
which are allowed under special circumstances. These other metrics
include:

-   absolute reductions, where a company's economic output has not
    decreased;

-   reductions due to carbon sequestration;

-   reductions from displacing high-emitting energy production
    ("avoided" emissions); and

-   reductions associated with specific actions or projects.

This multiplicity of methods for measuring emission reductions are
unnecessarily complicated and inconsistent with best practice GHG
accounting, under which entity-level reductions are quantified simply
and transparently by tracking changes in absolute emissions over time.

These five reduction methods presented in the 1605(b) guidelines also
confuse and conflate entity-level and project-level (often referred to
as emissions "offsets") accounting methodologies. It is important that
any project-level or offset methodologies incorporated into a national
U.S. registry ensure that reductions are environmentally additional,
verifiable, permanent, and enforceable.

In conclusion, there is a clear need for a credible national GHG
registry system capable of supporting effective U.S. action on climate
change. However, while certain aspects of the 1605(b) program are based
on credible methodologies, it is equally clear that the program as a
whole does not meet this criteria. There is therefore a strong case to
be made for U.S. policymakers to establish a new, credible, national GHG
registry, based on standardized best practice GHG accounting and
reporting procedures, such as those featured in the WRI/WBCSD GHG
Protocol and currently being implemented by the Multi-State Registry,
which a national registry system could adopt or be based upon.

Thank you again for the opportunity to comment on the DOE 1605(b)
program. We hope that the DOE and other policymakers will consider our
concerns and suggestions on this important issue.

Best Regards,

WRI GHG Protocol Team

[^1]: GHG accounting sources that have informed the 1605(b) Technical
    Guidelines include:

    -Intergovernmental Panel on Climate Change *Good Practice Guidance
    and Uncertainty Management in National Greenhouse Gas Inventories*
    (2000) and *Revised 1996 IPCC Guidelines for National Greenhouse Gas
    Inventories* (1997);

    -U.S. Environmental Protection Agency Climate Leaders Program *GHG
    Inventory Protocols* and *Inventory of U.S. Greenhouse Gas Emissions
    and Sinks: 1990 -- 2004*;

    -U.S. Energy Information Administration;

    -World Resources Institute/World Business Council for Sustainable
    Development *Corporate Accounting and Reporting Standards, Revised
    Edition (March 2004)* and Calculation Tools*;*

    -California Climate Action Registry *General Reporting Protocol* and
    Industry-Specific Protocols; and

    -American Petroleum Institute (API) *Compendium of Greenhouse Gas
    Emissions Estimation Methodologies for the Oil and Gas Industry*
    (February, 2004).