Climate Change Science: High Quality Greenhouse Gas Emissions Data are a Cornerstone of Programs to Address Climate Change
Published: 2009-02-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Elevated levels of greenhouse gases in the atmosphere and the resulting effects on the earth's climate could have significant impacts in the United States and internationally. Potential impacts include a change in sea levels, ecosystems, and ice cover. The United States Congress is considering proposals to limit greenhouse gas emissions using market-based mechanisms that would place a price on emissions. Such programs would create an economic incentive for regulated entities to limit their emissions. Limiting greenhouse gas emissions requires an understanding of existing emissions as well as the development of a program to monitor, report, and verify emissions from entities that might be affected by a future regulatory program. A greenhouse gas mitigation program also requires an understanding of the numerous emissions sources and methods for calculating emissions of six major greenhouse gases--carbon dioxide, methane, nitrous oxide, and several synthetic gases. This testimony focuses on (1) the importance of quality data on emissions in the context of a program intended to limit greenhouse gas emissions, and (2) key considerations in developing reliable data on greenhouse gas emissions. This testimony is based on several prior GAO reports and a review of related literature.
section_title: What GAO Found
paragraphs: Quality data on emissions are essential to the development and implementation of a system intended to limit greenhouse gas emissions. Domestic and international experiences with cap-and-trade programs, which place a price on emissions, demonstrate the importance of data quality in establishing baselines, monitoring results, and maintaining the integrity of a program. Existing cap-and-trade programs establish an overall allowable level of emissions and distribute allowances to regulated entities, which in turn are able to buy or sell excess allowances. The United States has operated a cap-and-trade program to limit emissions of sulfur dioxide--a pollutant that contributes to acid rain-- from electric utilities since 1995. Based on prior GAO work and independent studies, the program has benefited from the development of an accurate emissions baseline for regulated entities as well as strong monitoring, verification, and reporting requirements. The European Union has also employed a cap-and-trade system to limit emissions of carbon dioxide--the most prevalent greenhouse gas--from electricity generators and certain industrial sectors since 2005. In November 2008, GAO reported that the program has faced challenges because of a lack of facility-specific data on baseline emissions. While the program has addressed many of these challenges, the European Union's experience demonstrates the importance of data quality in establishing a market-based program to limit greenhouse gas emissions. Key considerations in developing reliable data on greenhouse gas emissions revolve primarily around the purpose and intended use of the data. In cases where the data are used to develop or implement a program to limit emissions, key considerations include (1) the scope of the program across emissions sources, such as whether it affects all emission-producing activities or a specified subgroup, and (2) the program's coverage across the six primary greenhouse gases. These considerations depend on the point of regulation--namely, whether the program affects a small number of "upstream" emitters such as fossil fuel producers and importers or instead affects smaller "downstream" emitters such as individual industrial facilities. Overall, the challenges in establishing baseline emissions data, as well as in monitoring, reporting, and verifying ongoing emissions will increase as the number of regulated entities, activities, and greenhouse gases increase. In some cases, existing emissions inventories (typically at the national, state, or industrial sector level) and registries (typically at the facility or project level) provide a starting point for understanding the challenges in establishing baselines and tracking emissions over time. For example, the United States Environmental Protection Agency maintains an official U.S. emissions inventory that provides national-level emissions data and background on methods to calculate emissions. In addition, several inventories and registries maintained at the regional level or by private and nonprofit entities provide a useful starting point for understanding data needs and developing standards for monitoring, reporting, and verification.

section_title: Letter
paragraphs: I am pleased to be here today to discuss the importance of high quality  data on greenhouse gas emissions in the development and implementation  of programs intended to address climate change. In recent years, key  scientific assessments have underscored the importance of reducing or  stabilizing emissions of carbon dioxide and other greenhouse gases— including methane, nitrous oxide, and several synthetic gases—to mitigate  the adverse effects of climate change. According to the National Academy  of Sciences, global temperatures have already risen 1.4 degrees Fahrenheit  since the start of the 20th century—with much of this warming occurring  in the last 30 years—and temperatures will likely rise at least another 2  degrees Fahrenheit, and potentially more than 11 degrees, over the next  100 years. Most scientists agree that the warming in recent decades has  been caused primarily by human activities that have increased the amount  of greenhouse gases in the atmosphere. This warming will cause  significant changes in sea level, ecosystems, and ice cover, among other  impacts. In the Arctic region, temperatures have increased almost twice as  much as the global average, and the landscape is changing rapidly.  Figure  1 below identifies the contribution of carbon dioxide emissions, the most  prevalent greenhouse gas, from various sources in the United States.
Other fossil fuel power plants  (e.g., natural gas)
The Congress is currently considering various proposals to address or  mitigate the adverse effects of climate change, including actions to limit  greenhouse gas emissions. In the United States, most debate over  mitigation options generally focuses on market-based programs—such as  carbon tax or cap-and-trade system—that would create a price on  emissions of greenhouse gases. For either program, the point of regulation  may occur (1) “upstream” and cover sources of carbon dioxide when they  first enter the economy, such as fossil fuel producers; (2) “downstream”  and cover direct and indirect emitters, such as power plants; or (3) at a  combination of upstream and downstream sources.
In general, under a cap-and-trade program, the government would limit the  overall amount of greenhouse gas emissions from regulated entities. These  entities would need to hold allowances for their emissions, and each  allowance would entitle them to emit a specific amount of a greenhouse  gas. Under such a program, the government could sell the allowances, give  them away, or some combination of the two. Firms that find ways to  reduce their carbon dioxide emissions to below their allowed limit could  sell their excess allowances to firms that emit more than their limits,  effectively creating a market for allowance trading and establishing a price  for a ton of emissions based on supply and demand.
Another possible mitigation policy is a tax on greenhouse gas emissions. A  tax would establish a direct price on emissions by levying a charge on  every ton of carbon dioxide emitted, creating an economic incentive for  emitters of greenhouse gases to decrease their emissions by, for example,  using fossil fuels more efficiently. Unlike a cap-and-trade program, a tax  would provide more certainty as to the cost of emitting greenhouse gas  emissions, but the precise effect of the tax in reducing emissions would  depend on the extent to which producers and consumers respond to  higher prices.
In discussing the emissions data required for a climate change mitigation  program, it also is useful to distinguish between emissions inventories and  emissions registries. Emissions inventories aggregate emissions data on a  high level—for example, by state, industrial sector or country. Inventories  generally account for greenhouse gases emitted and removed from the  atmosphere over a specific timeframe. An emissions registry, on the other  hand, is a tool for collecting, verifying, and tracking emissions data from  individual facilities or projects. Because registries can serve a variety of  purposes, their structures may vary substantially. For example, registries  may vary in terms of the gases monitored, the timing of data collection,  and the method of data verification.
In this context, my testimony today discusses (1) the need for high quality  data on emissions in the context of a program intended to limit  greenhouse gas emissions, and (2) key considerations in developing  reliable data on greenhouse gas emissions. This testimony is based on our  previously issued work and a review of relevant literature.
subsections: section_title: High Quality Emissions Data are Critical to the Integrity of Programs Intended to Limit Greenhouse Gas Emissions
paragraphs: The domestic and international experiences with market-based air  pollution control and climate change programs demonstrate that  comprehensive and accurate information on emissions is critical to a  program’s success. Since 1995, the United States has operated a cap-and- trade program to limit sulfur dioxide emissions, an air pollutant that  contributes to acid rain, from electric utilities. Under Title IV of the Clean  Air Act Amendments of 1990, this program has reduced sulfur dioxide  emissions by capping total emissions, distributing allowances to emit  sulfur dioxide through a combination of free allocation and auctions, and  allowing electric utilities to buy and sell allowances as needed to cover  their emissions.
Prior GAO reports and independent studies have shown that strong data  collection, monitoring, reporting, and verification requirements have been  central to this program’s success. First, with respect to setting a baseline  level of emissions from regulated entities, the program relied on data  spanning several years rather than any one year in particular. Specifically,  it used historical average emissions from 1985 to 1987 as the baseline  against which to measure reductions required to begin in 1995 and 2000.  The use of historical data reduced the covered entities’ incentive to  increase emissions prior to the program’s establishment to obtain a greater  allowance allocation—the baseline years occurred too far before the  announcement of the program. Averaging these data across several years  also helped to ensure that the baseline reflected changes in emissions that  can result in a given year due to economic and other conditions. As a  result, the program achieved greater assurances that it reduced emissions  from historical levels. In addition, electricity generating units regulated  under Title IV of the Clean Air Act Amendments of 1990 are required to  monitor and report their sulfur dioxide, nitrogen oxide, and carbon  dioxide emissions, among other data. The monitoring and reporting  requirement has ensured a high degree of compliance and overall program  integrity. It is important to note that regulating a single pollutant, such as  sulfur dioxide, from a largely homogenous population of electric utilities is  less complicated than monitoring, reporting, and verifying emissions of up  to six different greenhouse gases from diverse types of facilities.
The European Union also has experience implementing a cap-and-trade  program that illustrates the importance of quality data in a market-based  system. As discussed in our November 2008 report, the European Union’s  Emissions Trading Scheme (ETS) relies on a cap-and-trade model similar  to that used in the U.S. acid rain program. The ETS began with a learning  period—phase I—to gain experience with emissions trading from 2005 to  2007. Phase I included approximately 11,000 electric power and industrial  installations in 25 member states, which accounted for about half of the  EU’s carbon dioxide emissions.
While the first phase provided key lessons about emissions trading, its  cumulative effect on emissions is uncertain because of a lack of baseline  emissions data. In the first phase, each EU member state had to identify  which entities to regulate under the ETS (such as power plants, oil refineries,  and other manufacturing facilities), obtain baseline emissions data for the  covered entities, establish an emissions cap, and determine how many  allowances to distribute to each covered entity. At the time, most member  states had high-level, aggregated estimates on carbon dioxide emissions that  accounted for sources within and outside the scope of the ETS, but did not  have baseline data on a facility-specific basis. This facility-specific data was  necessary to determine both the total emissions released by all entities  covered under the ETS—a downstream program—as well as how many  allowances each particular entity would need to cover its annual emissions. In  addition, some member states had limited authority to collect data because  they did not yet have in place a national law or regulation mandating  submission of emissions data. Accordingly, member states based their  emissions caps and allocation decisions on business-as-usual emissions  projections and baseline data voluntarily submitted by covered entities.
The inherent uncertainty about business-as-usual projections—i.e., how  actual emissions compare to the emissions that would have occurred in  the absence of the ETS—was compounded by the assumptions underlying  the models used by member states to forecast emissions. The models  incorporated assumptions about factors that influence business-as-usual  emissions projections, such as economic growth and relative fuel prices.  Some member states made relatively optimistic assumptions about  economic growth, which resulted in higher projections of emissions. As  such, while the first phase provided key lessons about emissions trading,  the lack of facility-specific baseline data means its cumulative effect on  emissions is uncertain.
The lack of facility-specific baseline data also affected the price of ETS  allowances. Under the ETS, covered entities are required to report  emissions data that have been verified by third parties to their member  states. In 2006, the release of emissions data revealed that the supply of  allowances—the cap—exceeded the demand, and the allowance price  collapsed. This illustrated the problems that can arise when a program  relies on poor baseline emissions data and highlighted the need for  accurate baseline data in setting an effective emissions cap and achieving  the intended environmental objectives.  See figure 2 for a graph displaying  the allowance price trends in phase I.
As we reported in our prior work on lessons learned from the international  climate change programs, many experts participating on a panel we  assembled in cooperation with the National Academy of Sciences would  not expect the United States to encounter the data challenges experienced  in the EU’s first trading phase because some baseline emissions data are  already available. Several experts also stated that existing data on fossil  fuel consumption are sufficient to establish an emissions trading program.  These data can be used to estimate economy-wide carbon dioxide  emissions as well as facility-specific data on carbon dioxide emissions  from certain industrial sectors, such as power plants that have  participated in the US sulfur dioxide emissions trading program.
Collecting and reporting emissions data can also provide benefits beyond  ensuring the integrity and results achieved through a greenhouse gas  reduction program. Such data can be used by researchers to analyze  environmental conditions and trends, create atmospheric and economic  models, and provide early warning of potential environmental problems. It  can also help inform and direct environmental management efforts. The  availability of emissions data may aid strategic planning in the private sector,  enabling individual firms to make better-informed decisions pertaining to  capital investments and energy use. Because many states, municipalities, and  private firms have established voluntary climate goals, emissions data will  enable these organizations to assess progress and better account for  performance. Finally, the availability of emissions data can provide a  consistent and transparent basis for comparison between countries,  industries, and individual firms and enhance public understanding of  emissions sources.
section_title: Collecting Reliable Data on Greenhouse Gas Emissions Involves Key Considerations.
paragraphs: Monitoring, reporting, and verification needs for reliable data on  greenhouse gas emissions depend first on the purpose and intended use of  the data; for example, the data required for a mandatory program to limit  emissions may vary substantially from that required for a business or  governmental entity that voluntarily tracks its emissions for public  relations or other purposes.
First, as we have previously reported, the scope of a data collection  effort—i.e. monitoring, reporting, and verification activities—is  determined by the program’s point of regulation. An upstream mitigation  program would affect a relatively small population of regulated entities,  such as fuel importers and producers, whose products could be less  difficult to measure and report.  The quantity of emissions associated with  those products could be calculated using available emissions factors.  Under a cap-and-trade program, each importer or producer would have to  hold an allowance for each ton of carbon dioxide emissions associated  with its products. Alternatively, under an emissions tax, each regulated  entity would have to pay the government a pre-determined amount of  money for each ton of emissions associated with the combustion of its  products. Under either system, accurate reporting and verification of  emissions would help ensure the integrity of the program, and accurate  and reliable baseline data would be necessary to track progress.
On the other hand, data collection, monitoring, and verification  requirements become more substantial under a downstream program  because it could affect a larger population of regulated entities, potentially  including industrial facilities, agricultural operations, mobile and other  fuel combustion sources, and users of refrigerants. Again, each regulated  entity would need to have accurate and reliable data on historical and  current emissions, and in some cases, gathering such information would  be relatively straightforward. For example, electricity generating units  regulated under Title IV of the Clean Air Act Amendments of 1990 are  required to monitor and report their carbon dioxide emissions. However,  other regulated entities may face greater challenges in determining their  emissions due to limited monitoring data or a lack of reliable emissions  factors.
Furthermore, the data requirements for a mitigation program become more  complex and challenging as the number and types of covered activities  increases. This challenge may be of particular concern in a downstream  program that covers emissions from diffuse sources. Of the six primary  greenhouse gases, emissions of some are better characterized than others.  For example, carbon dioxide emissions from energy-related activities and  cement processing are relatively easy to estimate with a high degree of  accuracy, whereas measuring the emissions of other greenhouse gases  stemming from other types of activities is more challenging. Specifically,  there may be insufficient scientific understanding to develop a data collection  methodology, data may be incomplete or missing, or emissions factors may  not be sufficiently developed. For instance, nitrous oxide emissions occur  from the production of caprolactam—a chemical used to produce a  polymer—but there are currently not enough data on the production of  caprolactam to estimate these emissions in the United States.
In some cases, existing emissions inventories and registries that have been  developed for a variety of purposes could help regulated entities in  meeting potential requirements to establish baseline emissions levels and  monitor, verify, and report their ongoing emissions. For example, the  United States Environmental Protection Agency prepares an official U.S.  greenhouse gas inventory each year to comply with its commitments  under the United Nations Framework Convention on Climate Change  (UNFCCC). This inventory provides national information on the activities  that cause emissions and removals, as well as background on the methods  used to make the calculations. In addition to the U.S. inventory, multi-state  emissions reduction programs, such as the Regional Greenhouse Gas  Initiative, a regulatory program targeting reductions in carbon dioxide  from electricity generators, have developed emissions inventories to guide  their programs. Many individual states also prepare greenhouse gas  inventories using guidance provided by EPA. These existing inventories  and registries could assist in the development of a mandatory emissions  reduction program.
Other emissions inventories and registries developed by government and  private entities also provide a useful starting point for understanding data  requirements for establishing emissions baselines and monitoring,  verifying, and reporting greenhouse gas emissions. For example, the  Department of Energy’s Voluntary Reporting of Greenhouse Gases  Program encourages corporations, government agencies, non-profit  organizations, households, and other private and public entities to  annually report their greenhouse gas emissions, emission reductions, and  sequestration activities to a registry using consistent standards. In  addition, EPA’s Climate Leaders Program, an EPA industry-government  partnership that works with companies to develop comprehensive climate  change strategies, has developed standards to measure and monitor  emissions reductions from certain types of projects.
Several private and nonprofit efforts also provide data collection services.  For example, the Greenhouse Gas Protocol, a widely-used international  accounting system for quantifying and managing greenhouse gas  emissions, has developed accounting and reporting standards that are  compatible with most greenhouse gas inventory programs. Another  effort, the Climate Registry, is a nonprofit collaboration involving U.S.  states and Canadian provinces that has developed standards to calculate,  verify, and report greenhouse gas emissions.  Both voluntary and  mandatory programs can use the Climate Registry’s standards and publicly  report their emissions through its website. Other private initiatives, such  as the Chicago Climate Exchange (CCX), a voluntary emission reduction  and trading system, requires participants to establish emissions baselines  and track their progress towards emissions reduction goals. Emissions  reductions through CCX must be confirmed by an independent, third party  verifier. Finally, an entire industry of companies exists to help companies  track and monitor their greenhouse gas emissions and many have  developed protocols and best practices for measuring baseline emissions  levels and tracking reductions. Many of these companies also provide  external third-party verification services to help industrial and other  facilities ensure the accuracy of their emissions accounting practices.
Mr. Chairman, this concludes my prepared statement. I would be happy to  respond to any questions that you or other Members of the Subcommittee  may have at this time.
section_title: Contact and Staff Acknowledgments
paragraphs: Contact points for our Offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. For further  information about this testimony, please contact John Stephenson,  Director, Natural Resources and Environment at (202) 512-3941 or  stephensonj@gao.gov. Key contributors to this statement were Michael  Hix (Assistant Director), Kate Cardamone, Jessica Lemke, Alison O’Neill,  and Joseph Thompson. Chuck Bausell, Cindy Gilbert, Richard P. Johnson,  Carol Kolarik, Micah McMillan, and Jeanette Soares also made important  contributions.
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