Panel Discussion on Greenhouse Gas Accounting:
The Greenhouse Gas Protocol and ISO's Draft Standard for Greenhouse Gas Quantification, Reporting and Verification

A COP9 Side Event Hosted by ECOLOGIA and the Natural Resources Defense Council
10 December 2003, Milan, Italy


Summary by Heather McGray, ECOLOGIA

ABSTRACT

On December 10, 2003, ECOLOGIA and the Natural Resources Defense Council convened a panel discussion to compare two evolving standards for greenhouse gas accounting: the Greenhouse Gas Protocol, and the International Organization for Standardization's upcoming standard, ISO 14064. Representatives of the two standards, together with discussants from the World Bank Carbon Finance Business Unit, the California Climate Action Registry, and an audience of UNFCCC COP9 attendees, discussed issues related both to the two initiatives specifically and to greenhouse gas accounting in general. Discussion covered: the scope and verifiability of the two standards, the processes by which they are being developed, likely evolution of greenhouse gas accounting going forward, sources of politicization in standards-making, and the relationship between greenhouse gas accounting standards and various schemes for climate change mitigation. Key points raised include the need for credible accounting standards that are useful for a wide range of applications in various policy contexts, and the question of whether the greenhouse gas accounting field is yet mature enough for standardization. Click here for a full webcast of the event.
 

INTRODUCTION

Local, provincial, national and international bodies are initiating a host of activities designed to reduce greenhouse gas emissions and remove greenhouse gases from the atmosphere. To implement and evaluate these initiatives, corporations, governments, public interest groups, and others need sound methods for quantifying, reporting and verifying greenhouse gas emissions. Moreover, the effectiveness of many initiatives - especially trading schemes - may be enhanced by standardizing these methods, so that a tonne of greenhouse gases emitted in one place is sure to be equivalent to a tonne emitted elsewhere.

The Greenhouse Gas Protocol Initiative, a multi-stakeholder consortium convened by the World Resources Institute and the World Business Council on Sustainable Development, has developed what is perhaps the most widely used GHG accounting standard today. In June 2002, the International Organization for Standardization (ISO) initiated the development of a similar standard, which it expects to publish as the ISO 14064 standard in 2005. Because of ISO's global reach among governments, intergovernmental organizations and, especially, the business community, ISO 14064 could become widely used and very influential.

ISO has committed to making ISO 14064 compatible with the GHG Protocol, and has drawn much material from it. However, because ISO 14064 will have a verification component, because it will serve as part of the ISO 14000 family of environmental management standards, and because the process of its development differs from GHG Protocol's, the two accounting approaches may differ in aspects of their content and function.

Heather McGray of ECOLOGIA and Jeff Fiedler of the Natural Resources Defense Council, participants respectively in the ISO and GHG Protocol initiatives, convened a panel discussion to explore the relationship of these two important methods for GHG accounting. The panel was conducted as a side-event to the UN FCCC COP9 in Milan, Italy before an audience of approximately forty COP9 attendees.
 

PANEL PARTICIPANTS (in order of presentation)

Simon Schmitz, World Business Council for Sustainable Development. GHG Protocol Initiative team member for corporate accounting.

Mahua Acharya, World Business Council for Sustainable Development. . GHG Protocol Initiative team member for project accounting.

Janet Ranganathan, World Resources Institute. Co-Director of the GHG Protocol Initiative.

Chan Kook-weng, Malaysian Palm Oil Board. Convener of ISO Technical Committee 207 Working Group 5 on Climate Change.

Klaus Radunsky, Federal Environmental Protection Agency, Austria. Facilitator of the project accounting sub-group of ISO Technical Committee Working Group 5.

Johannes Heister, World Bank Carbon Finance Business Unit, Senior Economist.

Diane Wittenberg, California Climate Action Registry, President.

Heather McGray, ECOLOGIA Moderator)
 

ISO 14064 AND GHG PROTOCOL: THE BASICS

Simon Schmitz, Mahua Acharya, and Chan Kook-weng began the panel discussion by providing overviews of the ISO and GHG Protocol initiatives. Their presentation slides may be obtained from the ECOLOGIA website. Highlights are as follows:

GHG Protocol
Launched in 1997, the GHG Protocol is a multi-stakeholder group of GHG experts and practitioners convened by the World Resources Institute and the World Business Council on Sustainable Development. A corporate accounting and reporting standard was published in 2000 and has since been adopted by many companies and voluntary programs. In addition to accounting and reporting standards, the GHG Protocol corporate module provides guidance and electronic calculation tools for use in preparing corporate emissions inventories. A revised edition will be published in Jan. 2004, with additional guidance and enhanced specificity regarding emissions from purchased electricity and increased flexibility in organizational boundaries for reporting purposes. In addition, the GHG Protocol team has partnered with a number of industry associations (e.g., pulp and paper, cement, and aluminium) to create industry-specific protocols and calculation tools complementary to the GHG Protocol corporate standard.

In September 2003, GHG Protocol released a draft of its project quantification standard for "road testing" by project developers and review by stakeholders, who will submit feedback for incorporation into a final draft. Key elements of the draft project standard include a core set of accounting principles, three options for how to set baselines, a classification of project effects, and a screen for determining whether a project is additional to legal requirements. GHG Protocol is also working on developing guidance for project monitoring plans.

ISO 14064
ISO Technical Committee 207 (Environmental Management) established Working Group 5 in June 2002 to begin development of an international standard for quantifying, verifying and reporting organization- and project-level GHG emissions and removals. Led jointly by representatives of the Malaysian and Canadian national standards bodies, Working Group 5 (WG5) is comprised of experts nominated by national WG5 advisory committees, which organize stakeholders to formulate national positions on the standard. ISO requires its standards to be completed in three years. The first "committee draft" of ISO 14064 is currently being reviewed by national committees; final publication of the standard is expected in mid-2005.

ISO 14064 consists of three parts: 1. organizational (also called "corporate" or "entity") accounting 2. project accounting and 3. validation and verification protocols. In development of the standard, WG5 has established four principles: technical rigor, broad participation, neutrality with regard to GHG policies or other schemes, and speed to market.

Core Differences
In addition to the above overviews, the initial presentations highlighted the following two areas of difference between the two standards:

  • Scope: ISO 14064 and GHG Protocol overlap in scope in that both provide rules for organizational and project GHG accounting. However, ISO 14064 includes a verification protocol where GHG Protocol does not, and GHG Protocol provides detailed guidance and calculation tools not covered by ISO.
  • Verification: Verifiability is a requirement for all ISO standards, and WG5 has engaged verifiers in the development of ISO 14064 from the start. GHG Protocol did not originally prioritize verifiability, as it aims primarily to encapsulate best practice guidance. However, in its second edition, the GHG Protocol corporate module was revised to use "shall" language more conducive to verification and is currently being evaluated for verifiability before finalization.

 

DISCUSSION

Janet Ranganathan and Klaus Radunsky began the discussion component of the panel with presentations comparing the two standards. Johannes Heister and Diane Wittenberg followed with comments from their experience, and then the floor was opened for 40 minutes of questions from the audience. The summary below attempts to collect key points under five topics distilled from the wide-ranging discussion.

Process and Pace of Work
As a key element in developing its standard, GHG Protocol has used a formal "road testing" procedure, whereby companies and project developers are asked to implement the draft standard and provide feedback to be incorporated into subsequent drafts. In parallel to the road test, GHG Protocol conducts a "stakeholder review" of the draft standard before it is finalized. ISO does not conduct systematic road testing, relying instead upon review by hundreds of stakeholders in its advisory committees around the globe to bring 'real world' experience to bear on the development of its standards.

GHG Protocol has developed its draft project quantification standard more slowly than its corporate standard on account of the greater technical and political challenge involved in project accounting. The slower pace enables GHG Protocol to take into account UNFCCC decisions about the Clean Development Mechanism, and other evolving political constraints. WG5 was for a time also developing its project part more slowly than the other two parts, but decided recently to move all three forward at the same pace so that more rapid development of the organizational accounting part would not create an overall framework for the standard inappropriate for project accounting.

Both GHG Protocol and ISO rely upon consensus decision-making in their standards-making process. For GHG Protocol, difficulties in operationalizing additionality and addressing leakage in ways that are both practical and credible have posed challenges for consensus-building, and have contributed to the slower pace of development of its project module. Janet Ranganathan highlighted the importance of continuing discussion and delaying decisions when needed, rather than avoiding difficult topics or releasing a document that does not represent consensus. Klaus Radunsky raised the example of terminology as an area where reaching consensus can be challenging. In cases where two conflicting definitions for a term must be resolved, ISO frequently reaches consensus by choosing a third, more general definition that encompasses the others. For instance, this approach has been used in ISO's project accounting standard to try to reconcile differing approaches to leakage in GHG Protocol and the Marrakech Accords.

Evolution and Change in GHG Accounting
Project GHG accounting is an emerging discipline, and the trajectory of its evolution is difficult to predict, given the on-going emergence of diverse government policies and other climate schemes. Both participants and audience members raised the question of whether it is in fact too early for standardization in this field, especially with regard to project GHG accounting. Johannes Heister articulated the opinion that standards work best when a) you know what you're dealing with and b) you're dealing primarily with technicalities. Because of the political nature of many elements of project accounting, he said, and because requirements for Clean Development Mechanism (CDM) projects are still evolving, project GHG accounting standards are unlikely to be as universally applicable as their makers may claim.

Diane Wittenberg highlighted the evolution of accounting practices for organizational inventories by describing how the California Climate Action Network (CCAR) responds to calls on its "hotline" from member companies needing guidance on issues not covered in the CCAR accounting and reporting guidelines. Mobile emissions sources provide an example of an area that prompts many questions. Is a generator on a flatbed that never moves a mobile or stationary source? Do a ship's emissions count as California emissions only when in a California port, when a certain distance from the California shore, or do they count for the duration of a trip, until the ship is in a port elsewhere? Ms. Wittenberg contended that such questions will take time to settle down, and that standards should not pre-empt the organic decision-making process.

Discussion turned to mechanisms for reviewing and changing GHG accounting requirements as the field evolves. ISO requires all of its standards to undergo review and revision every five years, using the same process of national representation used in the making of its standards. Johannes Heister described the revision process for the World Bank's Best Practice Manual on Validation and Verification: the International Emissions Trading Association is compiling comments from verifiers into an annex to the manual, enabling the manual to be a living document. When the comments reach a critical mass, the annex will be used to re-write the manual. The GHG Protocol Initiative is less focused on the future evolution of its product. Its primary aim is to standardize GHG accounting and reporting practices by encapsulating current best practice, since many GHG programs are now emerging, and there is a need for consistent GHG accounting standards and guidance. The GHG Protocol recently undertook an 18-month structured feedback process of soliciting and reviewing feedback from users and other stakeholders in order to create a revised edition of the corporate standard. Janet Ranganathan said they would consider whether further revision is needed based on response to the revised edition as well as the first edition of the project standard once it is completed. She also noted a trend where international industry associations were using GHG Protocol in developing and maintaining industry-specific GHG standards and calculation tool. It is possible that these efforts will be the center of gravity for developing and promoting best practice accounting and reporting methods in the future.

Audience member Maurice Lefranc (US Environmental Protection Agency) raised the question of whether the difficulty of standardizing project GHG accounting implies that it is still too early to trust emissions reductions from offset projects for use in the CDM or other project-based schemes. While he did not receive a direct answer, there was general sentiment on the panel that the climate community should not allow the continuing need for evolution in accounting procedures to prevent action on mitigation. Chan Kook-weng reminded the audience that GHG accounting will always be changeable, at least to some extent, comparing it to scientific discovery, in which no scientist ever truly has the "last word". Janet Ranganathan asserted that, at some point, the climate community must stop debating and reinventing the "yardstick" of GHG accounting, and just use the existing best available yardstick to get down to the business of actually reducing emissions.

Politicization in Standards-making
A number of audience members asserted that there are political considerations embedded in the setting of GHG accounting procedures, and questioned whether it is possible for ISO 14064 and GHG Protocol to be scheme neutral as they assert. Taka Hiraishi (Institute for Global Environmental Strategies, Japan) raised in particular the political questions involved in defining system boundaries and additionality criteria. The goal, responded Diane Wittenberg, is to differentiate between accounting and policy such that accounting rules result in consistent, transparent data that can be used differently under different governmental or voluntary program policies.

The panelists acknowledged the challenge of avoiding political decisions, and articulated some of the approaches used in attempting to make GHG Protocol and ISO 14064 tools for use within a wide range of GHG schemes, without being biased toward one or another. Mahua Acharya asserted that additionality is not a scheme-specific criterion, and that it may be dealt with neutrally within a standard by looking at additionality needs specific to the various uses of the standard. Klaus Radunsky described ISO's decision to leave project certification out of the ISO 14064 project cycle, saying that decisions about certification must be left to GHG schemes.

Relationship Between Standards and GHG Schemes/Programs
Audience member Eric Holdsworth (Edison Electric Institute) asked whether ISO's decision to make its standard compatible with GHG Protocol violates its "scheme neutrality" principle, implying that GHG Protocol is itself a GHG scheme. The GHG Protocol representatives replied that GHG Protocol is not a scheme but a loose network of practitioners and experts, with no authority over whether or how their work is used in GHG schemes, though there are many examples of where GHG Protocol has been incorporated into schemes. For instance, Diane Wittenberg characterized the CCAR accounting and reporting rules as "operationalizing" the GHG Protocol by making some additions and changes to it. ISO 14064 may differ in that laws in some countries reference ISO standards explicitly, making it possible that ISO 14064 could become a formal adjunct to regulatory schemes without any scheme-specific adaptation. Under such a scenario, a project's emissions reductions accounting could be verified with reference to the ISO standard; that verification would then be taken to the scheme administrators for certification of the reductions, at which point criteria outside the scope of ISO 14064 might also come into play. Reference to international standards made in the EU Emissions Trading Scheme regulations may lead to ISO 14064 being employed in this way. The calculation tools in GHG Protocol are the most likely element of that standard to be relevant to the EU Emissions Trading Scheme.

Because GHG Protocol, ISO 14064 and many climate schemes are all still evolving, it remains difficult to clearly characterize how these standards will relate to important schemes, including the CDM. Despite efforts to be as broadly applicable as possible, full consistency with all relevant schemes is unlikely. ISO has addressed this challenge in part through a clause stipulating that regulatory requirements take precedence over ISO 14064 requirements. Thus, in cases where regulatory requirements conflict with aspects of ISO 14064, a project or inventory will still be considered to meet the standard if it meets the regulatory requirements. In addition, in order to be user-friendly for CDM project developers, Part 2 of ISO 14064 (project accounting) will include an annex linking Kyoto/Marrakech terms and requirements to the parallel elements of the ISO standard.

There remains significant uncertainty about how useful ISO 14064 will prove to be for CDM project quantification. Maurice Lefranc and Johannes Heister both observed that ISO provides very little concrete, proscriptive guidance for project development, which is what CDM project developers are looking for at this time. Klaus Radunsky acknowledged that the ISO standard may currently be less useful for CDM projects than for projects under other schemes, but speculated that this may change as the CDM executive board approves more project methodologies over time.

Panelists and audience members concurred that it also remains uncertain whether or how organizational and project accounting may prove useful in the calculation of national GHG inventories. There has been some movement toward using organization and project data for national inventories, but data availability remains too fragmentary to work well. Janet Ranganathan suggested that GHG Protocol's calculation tools may be its most useful element for national inventories. Klaus Radunsky cautioned that using organization or project data may require a great deal of additional effort in calculating national inventories, and that care will be needed to prevent double-counting. Bill Irving (US Environmental Protection Agency), who directs the US national inventory, called for greater exchange between people involved in organizational accounting and those responsible for national inventories.

Relationship Between GHG Protocol and ISO 14064
ISO has constructed its standard largely based on the work of GHG Protocol and has committed to making ISO 14064 compatible with it. Maintaining consistency is sometimes challenging, however, because of the parallel need to be compatible with other ISO environmental standards and because ISO standards must be translated into many languages. In general, said Klaus Radunsky, ISO 14064 will work best if used in conjunction with GHG Protocol, since ISO specifies clearly "what" to do and GHG Protocol gives specific guidance on "how" to do it. In cases where ISO 14064 terminology or concepts diverge from GHG Protocol, an annex will provide guidance on linking the two standards to one another.

In addition to this panel discussion, there are many opportunities for exchange between GHG Protocol and ISO 14064. In spring 2003, GHG Protocol invited WG5 participants to road test their draft project module. The leadership of WG5 have invited GHG Protocol representatives to attend their meetings, and Mahua Acharya attended a meeting of the ISO 14064 Part 2 sub-group in October, 2003. GHG Protocol has also submitted written comments on ISO 14064 draft documents. Both GHG Protocol and ISO representatives called for continuing communication between the two initiatives.

Last modified by: H. McGray on 26-Jan-04
 
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