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> February 17, 2004

# Electronic submission to <1605bgeneralguidelines.comments@hq.doe.gov>

Hard copy submission to:

Mr. Mark Friedrichs, PI-40

Office of Policy and International Affairs

U.S. Department of Energy

Room 1E190

1000 Independence Ave., S.W.

Washington, D.C. 20585

Re: **Comments of Waste Management, Inc., on the Department of Energy's
Proposed General Guidelines for Voluntary Greenhouse Gas Reporting, 68
Fed. Reg. 68204 (December 5, 2003)**

Dear Mr. Friedrichs:

Waste Management, Inc., ("Waste Management") appreciates this
opportunity to comment on the Department of Energy's ("DOE") proposed
general guidelines for the Voluntary Reporting of Greenhouse Gases
Program ("1605(b) Program" or "the Program"), published at 68 Fed. Reg.
68204 (December 5, 2003) (the "proposed guidelines").

Waste Management has been an active participant in the 1605(b) Program.
The company has submitted reports each year since the Program's
inception. In 2002, the most recent year for which results were
tabulated, Waste Management reported the largest total emission
reductions of any company participating in the Program: 26,495,867
metric tons of CO~2~-equivalent emission reductions. This represents a
13 percent increase in reported emission reductions over Waste
Management's total in 2001. Between 1995 and 2002, Waste Management has
reported over 138 million metric tons of CO~2~-equivalent reductions.

Participation in the 1605(b) Program is just one of the elements of
Waste Management's strong corporate commitment to addressing the risks
of climate change and the need to reduce emissions of greenhouse gases
("GHGs").

Waste Management also is one of the founding members of the Chicago
Climate Exchange ("CCX"). Under the CCX, Waste Management has committed
to reducing GHG emissions from its waste-to-energy facilities and its
vehicle fleet operations by one percent each year during the years
2003-2006 from a baseline corresponding to Waste Management's annual
average emissions in 1998-2001. In addition, Waste Management will
calculate and supply CCX offsets resulting from methane collection
projects at its landfills.

In addition to its commitments in the CCX, Waste Management has sold GHG
offsets to a company subject to the Massachusetts' carbon dioxide
regulations for power plants. Waste Management also has donated GHG
offsets to help make the 2004 Super Bowl and the 2002 Salt Lake City
Olympics "carbon-neutral."

Finally, Waste Management has developed a "Waste Route" initiative,
which is intended to achieve an average waste collection reduction of
10% for our more than 15,000 commercial and residential routes. This
will directly result in decreased diesel consumption and resulting
greenhouse gas emissions.

As it has implemented these various efforts, Waste Management has
developed substantial technical capacity and understanding of GHG
measurement and mitigation, particularly respecting methane collection
and carbon sequestration at landfills. Waste Management 's technical
staff has been working for some time with EPA technical staff to develop
and refine protocols for such mitigation.

The comments below reflect Waste Management's interest in and experience
with progressive GHG policies and practices.

I. Overview: The 1605(b) Program guidelines need to be workable not only
for utilities and large manufacturers but also for service sector
companies.

The proposed guidelines reflect a rigorous development process and
careful thought. However, they are marked by a fundamental flaw. As
proposed, the guidelines entail very substantial entity-wide emissions
inventorying requirements in return for the rather ill-defined benefit
of "registered reductions." The entity-wide inventorying requirements
oblige entity reporters to measure all of their direct emissions of all
six of the primary GHGs, all of their indirect emissions associated with
electricity purchases, and all of the carbon stock changes at their
sinks. [Id.]{.underline}, at §300.6. In addition, the proposed
guidelines strongly steer participating companies to report on an
"intensity" (emissions/unit-output) basis. [Id.]{.underline}, at §300.8.

The breadth of the emissions inventory requirements and emphasis on
intensity reporting suggest that the drafters were focused primarily, if
not exclusively, on two sectors of the U.S. economy: utilities and large
manufacturers. Utilities have large amounts of easily-measured direct
emissions in the form of carbon dioxide emissions from electricity
generation. In addition, it is rather straightforward for utilities to
report their emissions and reductions on an intensity basis --
emissions/kWh constitutes a convenient metric. Similarly, large
manufacturers typically have a few sizable factories that have
easily-measured direct emissions and indirect emissions in the form of
electricity use. They too can readily report in the form of
emissions/unit output.

Yet, the majority of U.S. companies are not in the utility or large
manufacturing sectors, but rather in the service sector. For such
companies -- of which Waste Management is one -- the inventorying
requirements are particularly onerous and will discourage participation.
In service-sector companies such as Waste Management, operations tend to
be widely dispersed, management is decentralized, and each individual
operation is relatively small in scale. Waste Management operates 243
municipal solid waste landfills, over 30,000 collection vehicles,
hundreds of fleet terminals, over 100 recycling facilities, and many
additional administrative support offices. For these reasons,
inventorying total direct and indirect emissions is exceedingly
cumbersome and costly for companies such as Waste Management. In
addition, unlike manufacturers, service sector companies such as Waste
Management typically do not collect information on electricity use from
their far-flung offices and operations. Therefore calculating indirect
emissions is a far more significant burden. Moreover, where the "output"
of a company is not a product but a service that is highly tailored to
local circumstances (*e.g.*, delivery and storage of waste), reporting
on an intensity basis is nearly impossible and, in any event, does not
provide particularly meaningful information. This is the situation of
Waste Management, as well as many other service- sector companies that
otherwise might be eager to participate in this Program but could find
it prohibitively expensive under the guidelines as proposed.

Within the comments below are a number of suggestions for modifications
to the proposed guidelines that would make the enhanced 1605(b) Program
more accommodating to service-sector companies such as Waste Management.

## II. Definition of Entity

Waste Management supports DOE's proposed approach to defining the
reporting entity. [Id.]{.underline}, at p. 68208, c.1. Requiring simply
that the reporting entity be a "legally-distinct" entity is sufficient
to encourage reporting at the "highest meaningful level of aggregation."
At the same time, it accommodates those companies that have complex
corporate structures, consisting of diverse business units -- some of
which might be prepared to participate in reporting and some of which
might not be prepared.

## III. Emissions Sources and Sinks Covered

**A. Introduction**

As discussed above, the proposed entity-wide emission inventory
requirements are very onerous, particularly for service sector companies
such as Waste Management. It is difficult to imagine that many service
sector companies will incur the kinds of costs involved in meeting these
requirements for a benefit as uncertain and ill-defined as "registered
reductions."

**B. Impracticability**

At a minimum, the proposed guidelines should allow entity-wide reporters
to exclude from their baseline and their annual inventories those
emissions for which measurement is impracticable. In this regard,
landfill operators such as Waste Management should not be required to
inventory annual fugitive methane emissions from their landfills. Waste
Management has determined that it is infeasible to make reliable
measurements of methane emissions at the 243 landfills it operates,
unless and until such emissions are actually collected. Emission
monitors or meters are infeasible to operate at individual landfills and
the extraordinary diversity among landfills has made it impossible to
develop a useful, broadly-applicable model of fugitive emissions.

In addition, in Waste Management's view, leakage of methane from
landfills does not constitute "emissions" as defined in §300.2 of the
proposed guidelines, because the leakage does not result from an
*anthropogenic* sources, but rather results from *natural* degradation
of organic matter found in municipal solid waste.

In any event, it is inconceivable that Waste Management could develop,
for any reasonable cost, a sufficiently precise inventory of its
fugitive landfill methane emissions that its CEO or a senior responsible
official could provide the kind of certification required under §300.10.

**C. Indirect Emissions From Electricity Purchases**

It is Waste Management's view that registration of reductions should not
be conditioned on reporting of indirect emissions and reductions
associated with electricity purchases. [Id.]{.underline}, at §300.6(c).
Such reporting might make sense for large manufacturers, which own
factories that are sizable and highly-centralized consumers of
electricity. For service-sector companies like Waste Management,
however, calculating indirect emissions from electricity purchases would
be a highly resource-intensive task. In addition to its landfills, Waste
Management operates nearly 1500 other small facilities. Calculating
electricity use and associated emissions for these disparate facilities
would be cost-prohibitive.

**D. Sequestration**

Waste Management supports the option of reporting sequestration, which
the proposed guidelines define as "the removal of atmospheric carbon
dioxide, either through biologic processes or physical processes,
including capture, long-term separation, isolation, or removal of
greenhouse gases from the atmosphere." [Id.]{.underline}, §300.2
(defining "sequestration"). Carbon sequestration in landfills falls
squarely within this definition. Landfills are, literally, double-lined
sinks. EPA GHG Reports and studies already recognize the sequestration
phenomenon for carbon in landfills. See, for example, Environmental
Protection Agency, [Solid Waste Management and Greenhouse Gases: A
Life-Cycle Assessment of Emissions and Sinks]{.underline},
EPA530-R-02-006 (2^nd^ ed. May 2002). The company is pleased to work
with DOE and EPA to ensure that a landfill carbon sequestration protocol
is reflected in the 1605(b) Program Technical Guidelines.

**E. *De Minimis* Threshold**

The proposed *de minimis* threshold for emissions inventories is
unreasonably low. [Id.]{.underline}, §300.6(e). Waste Management
supports the recommendation made by many who attended DOE's January 12
Public Workshop that the threshold be set at 5 percent of annual
CO~2~-eq. emissions.

DOE also should consider an alternative to a quantitative *de minimis*
threshold approach. Under this alternative, the proposed guidelines
would allow entities a *qualitiative* exclusion of emissions categories
or amounts based on a showing by the entity that it: (1) has reported
its primary business-related emissions and (2) has accounted for any
shifting of emissions between included and excluded categories of
sources (*i.e.*, "leakage").

**F. Independent Verification**

Waste Management supports the approach proposed by DOE regarding
independent verification -- namely, that independent verification is
strongly encouraged but not required. [Id.]{.underline}, §300.11. If
companies follow the methodologies set forth in the General and
Technical Guidelines, there should be adequate assurances that their
reports are credible. In any event, the reports will be sufficiently
transparent that interested members of the public will be able to
conduct their own evaluations.

To be sure, some companies, anticipating private emissions trading
opportunities, might elect to obtain independent verification. DOE's
approach promotes private markets by providing clear signals as to the
kinds of credentials a credible independent verifier should have.

## III. Registering Reductions

**A. Project-Based Reductions**

Waste Management supports the way that the proposed guidelines provide
reporters a number of methods to determine their reductions. However,
the proposed guidelines place unreasonable limits on the ability of
reporters to report and register project-based emission changes. For
some reporters, determining emission changes on an entity-wide basis
will not be practicable, but determining emission changes on a project
basis will be. Such reporters should have the ability to report on a
project basis if they can meet rigorous standards, i.e., if they can
demonstrate that the reductions are real and do not result from
emissions shifting or other types of leakage.

For example, when Waste Management implements methane collection
operations at its landfills, the resulting reductions are real.
Moreover, emissions-shifting is not a realistic possibility under such
circumstances. Waste Management has no incentive -- nor is it even
feasible -- to shift its waste between landfills for the purpose of
'inflating' its mitigation results.

**B. Avoided Emissions**

Waste Management supports the approach in the proposed guidelines to
determining what entity has the right to register avoided emissions. DOE
proposes to allow the owner of the non-emitting or low-emitting source
to register the avoided emissions, rather than the purchaser of
electricity from that source. [Id.]{.underline}, at 68212, c 2.

This approach appropriately rewards and encourages those companies that
incur the cost and bear the risk of investing in renewable energy.
Providing the right to register avoided emissions to the energy
generator rather than the purchaser is consistent with the preamble's
stated goal of "ensur\[ing\] . . . that recognition for reductions is
given to those entities *primarily responsible* for those reductions."
[Id.]{.underline} (emphasis added). Moreover, this approach harmonizes
the 1605(b) Program with existing State renewable energy credit trading
programs, which recognize the generator as the presumptive "owner" of
credits.

A critical issue with respect to avoided emissions is the emissions
factor used to determine the level of mitigation. The preamble suggests
that, in the Technical Guidelines, DOE might provide that avoided
emissions should be calculated by assuming the emissions associated with
regional electricity supplies at the margin. The preamble further states
that such a calculation would "largely exclud\[e\] electricity generated
by hydro, nuclear power plants and some coal, which tend to be fully
utilized, regardless of changes in regional demand for power."
[Id.]{.underline} In Waste Management's view, DOE should use an
emissions factor based on average regional emissions, taking into
account coal-fired generation. Utilities are most likely to substitute
renewable energy for coal-fired generation.

**C. Reductions Associated With Government Requirements**

Section 300.8(d)(2) of the proposed guidelines requires entity reports
to indicate whether reported reductions were the "the results, in whole
or in part, of plant closing, voluntary actions, or *government
requirements*." (Emphasis added). This provision needs to be clarified.
Waste Management interprets the provision to mean that an entity should
identify circumstances in which government requirements *directly*
required reductions. Otherwise, this provision would force entities to
undertake an impossible analysis. Numerous laws and regulations have at
least an indirect effect on an entity's emissions. For example,
recycling laws, packaging laws, and a host of other local, state, and
federal laws indirectly affect the quantity of waste and methane
emissions at landfills operated by Waste Management. A requirement to
calculate all such indirect effects would lead to endless debate between
DOE and reporting entities over what should be considered a government
requirement that affects emissions and what may be excluded. Resolving
ambiguities about this issue likely would necessitate a numerous
regulations and technical guidance documents assessing all conceivable
indirect effects on all emitting operations in the various sectors.

**D. Pre-2003 Reductions**

Under the proposed guidelines, entities would be allowed to report
reductions achieved prior to 2003 if they are calculated in accordance
with the revised guidelines. However, the guidelines prohibit
*registration* of such reductions. [Id.]{.underline}, at p. 68206, c. 2.

Waste Management sees no rationale for denying reporters the ability of
setting a pre-2003 baseline and registering reductions achieved prior to
2003. DOE provides no reason for the 2003 cut-off. In the preamble, DOE
asserts that the 1605(b) Program should "focus on current and future
actions." Yet, it is unclear to Waste Management why focusing on current
and future actions requires DOE to penalize companies that achieved
real, measurable pre-2003 reductions by prohibiting those companies from
even registering them in the revised database.

As a company that has invested considerable time and resources in the
1605(b) Program since its inception, DOE's proposed prohibition is
highly discouraging. What assurances would Waste Management and other
companies have that DOE will not again use its administrative authority
to eliminate reductions already achieved and reported?

In any event, if DOE determines it is necessary to distinguish between
pre-2003 reductions and more current reductions, it can do so without
punishing companies that have been long-time participants in the 1605(b)
Program. Instead, DOE simply could develop the database in such a way as
to individually identify registered reductions by their vintage.

## IV. Emissions Trading and Other Uses of Registered Reductions

At the January public workshop, DOE announced that it has determined
that it lacks the legal authority to issue "credits" or provide
"baseline protection" to participants in the 1605(b) Program. However
one comes out on these legal questions, it is clear to Waste Management
that any "enhanced" 1605(b) Program needs to provide participating
companies some benefits for incurring the cost of meeting the reporting
requirements.

In particular, the enhanced database should provide a clear framework
under which participating companies can keep track of their holdings of
registered reductions. Registered reductions should be identified
individually -- preferably, by their vintage. This will enhance the
ability of participating companies to use the 1605(b) Program for
multiple purposes, including: meeting voluntary corporate goals,
participating in state or private registry programs, and participating
in private emissions trading markets.

With respect to private trading markets, the enhanced 1605(b) Program
will be helpful first by identifying what is a real and credible
reduction. However, the Program also can help by serving as mechanism
through which 'ownership' of reductions will be clear. The database
should provide a means by which to track transfers. It is Waste
Management's understanding that such tracking can be implemented
entirely electronically. Accordingly, there would be no need for DOE to
"manage" a trading program. In any event, the proposed guidelines
provide precious little detail as to how the database will achieve the
ends of promoting private trading markets.

**V. Offsets**

Waste Management believes that the proposed guidelines should encourage
the development and marketing of high quality offset projects. Waste
Management has been active in creating such projects, including through
the Chicago Climate Exchange. By encouraging offset projects, the
guidelines can encourage innovation and progress toward the President's
intensity goal.

Waste Management notes that DOE is soliciting comment on a number of
issues respecting offset transactions. [Id.]{.underline}, at p. 68213,
c. 1. For example, DOE is asking whether a participating company even
should be allowed to transfer different portions of its registered
reductions to different buyers. Waste Management cannot see any reason
why this should not be possible. Indeed, this ability is fundamental to
a liquid emissions trading market.

The preamble also solicits comment as to whether the guidelines should
require an offset buyer to demonstrate that it financed or managed the
activities that achieved the emission reductions. [Id.]{.underline}
Waste Management sees no basis for such a rule. If the reductions have
been calculated in accordance with the guidelines, what is to be gained
by further requiring proof that the offset buyer has paid for or managed
the reductions? Such a rule is unnecessary and, moreover, would chill
trading markets. In many cases, a company invests in mitigation
activities in anticipation of a future buyer. Such arrangements would be
prohibited by the rule suggested in the preamble.

**VI. Conclusion**

Waste Management welcomes DOE's efforts to enhance the 1605(b) Program.
As a long-time and active participant in the Program, Waste Management
looks forward to working with DOE to make modifications to the
guidelines so that the enhanced 1605(b) Program encourages broad
participation by other companies in the U.S. service sector.

Waste Management urges DOE to provide interested members of the public
an opportunity to review and comment on the proposed General Guidelines
*and* the proposed Technical Guidelines together as a single package. In
addition, Waste Management seeks opportunities to work with DOE and its
partner agencies on development of Technical Guidelines that pertain to
the service sector, and to solid waste management companies in
particular. Officials from Waste Management will be contacting DOE and
EPA to determine how to pursue such collaboration.

> Sincerely,

*Original signed*

> Edmund J. Skernolis
>
> Director of Government Affairs