Climate change mitigation projects that reduce greenhouse gas (GHG) emissions are in the early stages of implementation in the energy use and supply, landfill gas, and land-use sectors. In order to estimate GHG reductions, a project's emissions are compared to the performance of similar activities or services that represent the emissions that would be expected in the absence of the project.
Such mitigation projects are being advanced and considered under various state, national and international schemes. For example, the U.S. Department of Energy (U.S. DOE) is in the process of revisiting its reporting guidelines for the Voluntary Greenhouse Gas Reporting Program in an effort to improve its capacity to estimate reduced or avoided GHG emissions (U.S. DOE 2003). The U.S. Environmental Protection Agency (U.S. EPA) is looking at adopting guidelines for its Climate Leaders program for organizations that agree to meet GHG reduction targets. The World Resources Institute and the World Business Council for Sustainable Development have been working together to develop methods for estimating project-level GHG savings that could serve as an internationally accepted protocol. In addition, bilateral and international programs such as the Clean Development Mechanism, the Dutch government's Certified Emission Reduction Unit Procurement Tender, the Prototype Carbon Fund, and other preliminary carbon trading programs have provided guidelines for calculating avoided greenhouse gas emissions from mitigation projects. Several states in the U.S. are also developing climate change mitigation programs that include project opportunities.
Although administrative bodies responsible for these programs are exploring ways to bring greater rigor and uniformity in approach, to date there has been little consistency to the methodologies used for estimating baseline emissions. Regardless of the exact method used, the process of setting GHG baselines involves an examination of similar recent activities in the particular sector and within the relevant spatial boundary. The process of setting baselines for retrofit or replacement projects is different from that for new or “greenfield” projects. In the former case, the technology2 being replaced or retrofitted is already in place, and its GHG performance can be measured and monitored. For a “greenfield” project, however, a counterfactual baseline needs to be established, and its GHG performance needs to be estimated.
The approach described here estimates emissions reductions by comparing the emissions rate of projects to the expected average emissions rate of similar relevant activities that provide the same output or services (such as power stations, industrial plants, or commercial buildings).5 These activities are referred as “reference activities” and are used to help establish project baselines. One approach to estimating the expected average emissions rate is to examine activities that have recently come into operation and use the emissions from those activities to set a performance standard (defined as GHG emissions per unit of project output or service) to which the project will be compared.
Four steps are used in the performance standard-setting process for GHG mitigation projects. First, the project must be clearly defined so that relevant reference activities delivering the same service or output may be identified. The more clearly a project is defined the more narrowly appropriate reference activities may be selected. Second, the universe of reference activities may need to be restricted to those that lie within a certain spatial boundary. The spatial limitation becomes necessary where fuels and technologies that are available to accomplish a given reference activity are specific to a given political, socioeconomic, or physical boundary, or to an agro-ecological zone for land use projects.
Third, the set of reference activities may need to be restricted to those recent enough to be reasonably representative of the activities that a mitigation project is most likely to offset. Because energy conversion technologies, processes, and fuel sources are continually changing, a manufacturing facility constructed decades ago may not provide a reasonable estimate of the emissions that a current project will offset. Thus, it will frequently be necessary to restrict the temporal period of reference activities so that they clearly represent a plausible set of relevant reference alternatives.
Finally, when the set of relevant reference activities is selected, an average (or better than average) GHG emissions rate must be calculated to define the baseline GHG performance standard. This consists simply of the total emissions from the reference activities in a given year divided by their total output. The performance standard could then be set to reflect an emissions rate that is significantly better than average (e.g., top 25th percentile).
What criteria should be used to select the appropriate reference technologies, spatial boundary, and temporal periods of the reference activities? We address the issue of setting appropriate spatial boundaries and temporal periods for reference activities, but we do not address the issue of defining appropriate reference activities in this paper. We use examples from the electric power and land use change and forestry (LUCF) sectors in order to illustrate the setting of spatial boundaries and temporal periods in Sections 2 and 3 respectively, however, the concepts would also apply to other sectors and project types.