Mandatory GHG Reporting: What gets Measured gets Managed
As a precursor to establishing market-based mechanisms to regulate greenhouse gas (GHG) emissions it is important to know the origin of these GHGs, which industries and companies are producing them, and how much is contributed by the various market sectors. Following the maxim “what gets measured gets managed,” the Ontario government has established a new regulation that will provide the much-needed baseline information on GHG emissions.
In December 2009, the Ministry of the Environment (MOE) filed O. Reg. 452/09 - the Greenhouse Gas Emissions Reporting Regulation, under the Environmental Protection Act (EPA). The regulation was accompanied by a technical guideline regarding mandatory GHG reporting requirements and was posted as a proposal on the Environmental Registry for comment in October 2009. The regulation took effect on January 1, 2010.
Ontario Regulation 452/09 requires companies in the petroleum, electricity production, and selected manufacturing sectors that emit over 25,000 tonnes of GHG emissions per year to begin reporting these emissions starting with 2010 emissions. Six types of greenhouse gases are covered: carbon dioxide, methane, nitrous oxide, sulphur hexafluoride, hydrofluorocarbons (HFCs) and perfluorocarbons (PFCs).
The regulation contains the following provisions and features:
- All companies exceeding the 25,000 tonne minimum threshold must report specific GHG data.
- For the first reporting year, companies have the option of using the best alternative quantification method for their 2010 GHG emissions.
- Starting with the 2011 reporting year, companies must use the identified standard quantification methods to quantify their GHG emissions.
- The annual reporting of GHG emissions is due by June 1 of each year covering the previous calendar year (i.e., the 2010 GHG Report is due by June 1, 2011).
- The third-party Verification Report of emissions is due by September 1 of each year covering the previous calendar year, starting with a 2011 GHG Verification Report (which will be due by September 1, 2012).
While the regulation only covers companies with GHG emissions in excess of 25,000 tonnes per year, companies with GHG emissions between 10,000 and 25,000 tonnes per year are encouraged to voluntarily report. This is in anticipation of emerging continental reporting requirements that may eventually cover these other emitters. MOE noted that linkage and harmonization with broader continental developments in emissions reporting and emissions trading requirements is important in order to avoid a patchwork of reporting, verification and trading regimes.
To ensure the province is on the same page with developments elsewhere in North America, Ontario joined the Western Climate Initiative (WCI) in July 2008. The WCI is a collaboration of certain U.S. states and Canadian provinces working towards a common framework for the reporting of GHGs and the design and implementation of a cap-and-trade system.
In addition to reporting on the quantities of GHGs released each year, companies will be required to retain third parties to verify the accuracy of their GHG Reports in accordance with International Standards Organization (ISO) 14064 and 14065 requirements. ISO 14064 provides general guidance to those validating and/or verifying GHG claims made by emitting facilities and specifies the requirements emitting facilities must follow for selecting GHG validators/verifiers. ISO 14065 specifies the qualification and accreditation principles and requirements for those bodies that validate or verify GHG assertions.
While the first verification report, covering 2011 emissions, is not due until September 1, 2012, MOE is encouraging all regulated sources to voluntarily undertake third-party verification in the first year (covering 2010 emissions) by September 1, 2011. As noted by MOE, the intent is to allow time to build capacity for third-party verification – capacity that is only in the early stages of development in Ontario.
Implications of the Decision
Mandatory reporting of GHGs by large emitters is a necessary first step in the development of a cap-and-trade (or tradable permit) system and will facilitate the buying and selling of emission rights under a future tradable permit system. The reporting of GHG emissions, however, is not new to most large industrial companies in Ontario. Since 2004, companies with annual GHG emissions of 100,000 tonnes carbon dioxide equivalent (CO2e) or more have been required to report these emissions to Environment Canada’s (EC’s) GHG Reporting Program. For the 2009 reporting year, the threshold for reporting GHG emissions to EC was reduced to 50,000 tonnes.
MOE expects that O. Reg. 452/09 will enable Ontario companies to link with other GHG trading systems under development elsewhere in North America, thus creating a single, integrated North American carbon market. (See Part 2.5 of this Annual Report for a discussion of amendments to the EPA that enable GHG emissions trading.)
It is expected that the requirements for both an annual GHG Report and a GHG Verification Report will result in additional costs to industry. However, MOE’s position is that the verification requirements will ensure the submission of credible emissions data and this data will provide the solid foundation for any future emission trading system. A considerable number of regulatory provisions are devoted to ensuring that impartiality is not compromised. This should maintain a reasonable level of assurance that there has been no material misstatement or discrepancy in a GHG Report. This appears to be in recognition that the skill sets required to audit and prepare a GHG Report on a facility’s emissions are in essence the same skill sets that a qualified third-party verifier would use to prepare a GHG Verification Report.
ECO Comment
The ECO supports mandatory and public reporting of GHGs by industrial emitters. The ECO commends MOE for a detailed and well-executed consultation process targeting industry and related stakeholders. MOE’s commitment to continued industry training and education on O. Reg. 452/09 is also welcomed.
However, the ECO does have concerns, echoed by industry stakeholders, regarding the ability of the fledgling monitoring, reporting and verification (MRV) industry to develop the capacity to meet the anticipated rapid growth in demand for MRV services. MOE indicates it will be monitoring developments around third-party verification in the emerging U.S. cap-and-trade system “to ensure Ontario requirements are comparable to those in the U.S. where feasible.” While this is welcomed, MOE has yet to adequately address the capacity issue raised by industry or the potential for conflicts of interest between service providers as both validators and verifiers of the same company’s emissions. MOE has correctly positioned O. Reg. 452/09 as a necessary precursor to the introduction of a cap- and-trade system in Ontario. Anticipating that a North American-wide tradable permit system will be implemented sometime in the future, MOE has stressed repeatedly the need to link and harmonize with similar trading systems being contemplated in other provincial, state, national and international contexts.
As of June 2010, however, it seems doubtful that the approval and implementation of a U.S. congressionally sanctioned cap-and-trade system will happen anytime soon. Moreover, while the WCI is still intent on a January 2012 launch for its tradable permit system, it now appears that it will do so with fewer participating states. These developments reinforce concerns raised in the ECO’s 2008/2009 Annual Greenhouse Gas Progress Report regarding the Ontario government’s heavy reliance on a future cap-and-trade regime to deliver on its 2020 GHG reduction targets “where key decisions about a future trading regime are largely in the hands of other jurisdictions.” While O. Reg. 452/09 is a necessary precursor to the establishment of a cap-and-trade system in Ontario, it could be argued that this goal is secondary to another equally important policy objective.
The development of future carbon trading systems notwithstanding, the ECO sees considerable merit in having accurate and reliable GHG emissions data available to establish fair and transparent baseline emissions levels for various Ontario industries. With these in place, the province will have the basis for making regulations to reduce greenhouse gas emissions “without being limited to emissions trading” to enhance its ability to protect the environment.
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| This is an article from the 2009/10 Annual Report to the Legislature from the Environmental Commissioner of Ontario. |
Citing This Article:
Environmental Commissioner of Ontario. 2010. "Mandatory GHG Reporting: What gets Measured gets Managed." Redefining Conservation, ECO Annual Report, 2009/10. Toronto, ON : Environmental Commissioner of Ontario. 24-27.
