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

1 7 th December 2006 Update on Carbon Reporting project Presentation to LowCVP Fuels Working Group

2 Draft Methodology Project update Introduction Contents

3 Draft Methodology Project update Introduction Contents

Technical Advisory Group will receive first draft of methodology on Monday for review Methodology Draft Technical Report on Final Technical Final project Deliverables Guidance piloting and Guidance report public consultation Piloting Structure Project Draft Finalising Roll out of inception Methodology Technical Technical Technical Guidance development Guidance Guidance Formal development consultation By mid Mar By mid Mar - By end Sep By end Mar 08 By mid Jan Aug Second Focus groups Piloting Industry input Advisory Group in early Jan Consultation meeting mid Third Advisory Dec Fourth Group meeting Advisory Group Focus groups late Feb meeting late in early Jan Aug 4

You have two opportunities to comment on the Methodology in the next two months Second Advisory Group meeting (18 th 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 5

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 6

7 Draft Methodology Project update Introduction Contents

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) 8

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 9

The magnitude of default values should depend on the ease of reporting and the contribution to overall carbon intensity • Ease of reporting • Scientifically more difficult to determine and collect Difficult How easy is data to • E.g. N 2 O emissions from soils Typical report? • Compliance threshold Easy • Small contribution to fuel chain’s carbon intensity • Industry unlikely to report No Does input exceed Typical • E.g. 3-5% of fuel chain? compliance threshold? High Conservative 10

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 Difficult How easy is data to Upstream actors may not have any interest • Typical report? Difficult early on in Carbon Reporting (Phase 1) • Takes time to get information gathering Easy RTFO systems in place Phase 2 • PROPOSAL: No Does input exceed Typical compliance threshold? • Create a subset of upstream default values at “typical” for Phase 1 High • Change to “conservative” for Phase 2 • Is this useful? Conservative • Would it create too much uncertainty? 11

12 Questions and comments

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 13

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? 14

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 15

16 Questions and comments