Update on Carbon Reporting project Presentation to LowCVP Fuels - - PDF document

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Update on Carbon Reporting project

Presentation to LowCVP Fuels Working Group

7th December 2006

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Contents

Introduction Project update Draft Methodology

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Contents

Introduction Project update Draft Methodology

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Project inception

Draft Technical Guidance development Piloting Methodology development Roll out of Technical Guidance Finalising Technical Guidance Formal consultation Structure

Technical Advisory Group will receive first draft of methodology on Monday for review

By mid Jan By mid Mar By mid Mar - Aug By end Sep By end Mar 08 Methodology Draft Technical Guidance Report on piloting and public consultation Final Technical Guidance Final project report Deliverables Second Advisory Group meeting mid Dec Focus groups in early Jan Focus groups in early Jan Third Advisory Group meeting late Feb Piloting Consultation Fourth Advisory Group meeting late Aug Industry input

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You have two opportunities to comment on the Methodology in the next two months

• Second Advisory Group meeting (18th Dec)
• Does methodology cover all potential sources of GHG emission?
• Are default values appropriate?
• Focus groups (Jan)
• Are default values appropriate?
• Where are the opportunities to streamline data collection / verification?
• Focus groups: UK/EU agriculture, palm agriculture, soy agriculture, sugar cane,

biodiesel conversion, ethanol conversion and other.

• Invitations issued by end of next week

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We are currently seeking expressions of interest for piloting the Technical Guidance

• Up to six chains
• Ethanol – UK produced (wheat or sugar); Brazilian; ETBE
• Biodiesel – UK (multi-feedstock plant); imported (fuel or feedstock)
• Biomethane
• Planning
• Deadline for expression of interest: end of December
• Confirmation of participants: Early 2007
• LowCVP (Jessica) are co-ordinating

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Contents

Introduction Project update Draft Methodology

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The default value system will be designed to minimise the costs of compliance

• Default values will exist for all data required to calculate the carbon intensity of a

fuel chain

• Carbon intensity can be reported without any knowledge of actual fuel chain data
• Qualitative information can be used to provide a more accurate representation of

the fuel chain

• Origin defaults: feedstock and/or country
• Selected defaults: energy configuration; mode of transport; cultivation practices
• Any quantitative data that is known can be used to more accurately reflect fuel

chain (e.g. biodiesel plant’s NG consumption is known)

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The magnitude of the default values will have important implications for the RTFO’s effectiveness and the cost of compliance

• If default values are set too low:
• Little incentive to report => no differentiation between chains
• Underestimate carbon intensity (risk to industry and Govt)
• Uncertain carbon savings from policy
• If default values are too high:
• Incentive to report, but potentially high compliance costs
• Overestimate carbon intensity => negative public perception
• From a policy perspective, default values should be set on the conservative side

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The magnitude of default values should depend on the ease of reporting and the contribution to overall carbon intensity

Easy How easy is data to report? Does input exceed compliance threshold? Typical Typical Conservative High Difficult No

• Ease of reporting
• Scientifically more difficult to

determine and collect

• E.g. N2O emissions from soils
• Compliance threshold
• Small contribution to fuel chain’s

carbon intensity

• Industry unlikely to report
• E.g. 3-5% of fuel chain?

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Should the default value system recognise that it will initially be “difficult” to collect actual data further upstream?

• Upstream data will be difficult to collect
• Large number of actors upstream
• Upstream actors may not have any interest

early on in Carbon Reporting

• Takes time to get information gathering

systems in place

• PROPOSAL:
• Create a subset of upstream default

values at “typical” for Phase 1

• Change to “conservative” for Phase 2
• Is this useful?
• Would it create too much uncertainty?

Easy How easy is data to report? Does input exceed compliance threshold? Typical Typical Conservative High Difficult No

RTFO Phase 2

Difficult (Phase 1)

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Questions and comments

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The Technical Guidance will cover in detail the main fuel chains likely to play a role in the first phase of the RTFO

• The following fuel chains have been included
• Ethanol from: sugar cane, sugar beet, wheat and corn
• Ethanol converted to ETBE
• FAME biodiesel from: tallow, used cooking oil, palm oil, soy and rapeseed
• Biomethane from anaerobic digestion of MSW
• Not included
• Biodiesel from jatropha
• Biobutanol
• BtL and other “second generation” processes
• These fuels could still be awarded RTF Certificate
• Methodology would work, but Technical Guidance would not include default values.
• Process by which Administrator will develop Technical Guidance for new fuel chains
• Use fuel defaults

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General principles will be used to establish which sources of GHG emissions are included in the carbon intensity calculation

• Complete consistency between chains
• If a source is included for one chain, it must be included for all other chains where it exists
• However, sources may be treated differently in setting default values depending on impact

and potential for improvement

• Costs of collecting data must not significantly outweigh the benefits
• Benefits = impact on the overall carbon intensity
• Sources of emissions that do make a significant contribution to emissions will be excluded
• Industry data collection efforts should be focused on sources that have a large impact and

that can be influenced by practice

• Hypothetical reference systems are undesirable
• E.g. what would have land been used for if a biofuel crop had not been grown?
• Include only where significant avoided emissions can be demonstrated e.g. waste?
• Exclusion from calculation of very large sources of emission that render carbon

intensity calculation unnecessary

• E.g. land use change, but ensure that considered in other ways
• Annual reporting to include land use change using sustainability reporting + IPCC values?

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Biofuels will receive a “credit” for the co-products produced, either by “substitution” or “allocation”

• Co-products must be considered within the scope of Carbon Reporting
• System for addressing this should be
• Accurate – reflect as closely as possible the net effect on GHG emissions
• Low cost – i.e. cost to industry and to regulator
• Flexible – i.e. able to address all different co-products and their uses
• “Substitution” will be preferred
• Biofuel receives a credit based on the GHG emissions avoided because the co-

product has displaced another product

• However, not always feasible / practical
• Various “allocation” methods are available - select most appropriate for each co-product

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Questions and comments