	High Quality Emissions Data are Critical to the Integrity of Programs Intended to Limit Greenhouse Gas Emissions

The domestic and international experiences with market-based air  pollution control and climate change programs demonstrate that  comprehensive and accurate information on emissions is critical to a  program’s success. Since 1995, the United States has operated a cap-and- trade program to limit sulfur dioxide emissions, an air pollutant that  contributes to acid rain, from electric utilities. Prior GAO reports and independent studies have shown that strong data  collection, monitoring, reporting, and verification requirements have been  central to this program’s success. The European Union also has experience implementing a cap-and-trade  program that illustrates the importance of quality data in a market-based  system. As discussed in our November 2008 report, the European Union’s  Emissions Trading Scheme (ETS) relies on a cap-and-trade model similar  to that used in the U.S. acid rain program. While the first phase provided key lessons about emissions trading, its  cumulative effect on emissions is uncertain because of a lack of baseline  emissions data. In the first phase, each EU member state had to identify  which entities to regulate under the ETS (such as power plants, oil refineries,  and other manufacturing facilities), obtain baseline emissions data for the  covered entities, establish an emissions cap, and determine how many  allowances to distribute to each covered entity. The lack of facility-specific baseline data also affected the price of ETS  allowances. In 2006, the release of emissions data revealed that the supply of  allowances—the cap—exceeded the demand, and the allowance price  collapsed. These data can be used to estimate economy-wide carbon dioxide  emissions as well as facility-specific data on carbon dioxide emissions  from certain industrial sectors, such as power plants that have  participated in the US sulfur dioxide emissions trading program. Collecting Reliable Data on Greenhouse Gas Emissions Involves Key Considerations. Monitoring, reporting, and verification needs for reliable data on  greenhouse gas emissions depend first on the purpose and intended use of  the data; for example, the data required for a mandatory program to limit  emissions may vary substantially from that required for a business or  governmental entity that voluntarily tracks its emissions for public  relations or other purposes. monitoring, reporting, and verification activities—is  determined by the program’s point of regulation. An upstream mitigation  program would affect a relatively small population of regulated entities,  such as fuel importers and producers, whose products could be less  difficult to measure and report. However,  other regulated entities may face greater challenges in determining their  emissions due to limited monitoring data or a lack of reliable emissions  factors. Furthermore, the data requirements for a mitigation program become more  complex and challenging as the number and types of covered activities  increases. Of the six primary  greenhouse gases, emissions of some are better characterized than others. In some cases, existing emissions inventories and registries that have been  developed for a variety of purposes could help regulated entities in  meeting potential requirements to establish baseline emissions levels and  monitor, verify, and report their ongoing emissions. For example, the  United States Environmental Protection Agency prepares an official U.S.  greenhouse gas inventory each year to comply with its commitments  under the United Nations Framework Convention on Climate Change  (UNFCCC). This inventory provides national information on the activities  that cause emissions and removals, as well as background on the methods  used to make the calculations. In addition to the U.S. inventory, multi-state  emissions reduction programs, such as the Regional Greenhouse Gas  Initiative, a regulatory program targeting reductions in carbon dioxide  from electricity generators, have developed emissions inventories to guide  their programs. These existing inventories  and registries could assist in the development of a mandatory emissions  reduction program. Other emissions inventories and registries developed by government and  private entities also provide a useful starting point for understanding data  requirements for establishing emissions baselines and monitoring,  verifying, and reporting greenhouse gas emissions. For example, the Greenhouse Gas Protocol, a widely-used international  accounting system for quantifying and managing greenhouse gas  emissions, has developed accounting and reporting standards that are  compatible with most greenhouse gas inventory programs. This is a work of the U.S. government and is not subject to copyright protection in the  United States.
Why GAO Did This Study

Elevated levels of greenhouse gases in the atmosphere and the resulting effects on the earth's climate could have significant impacts in the United States and internationally. Potential impacts include a change in sea levels, ecosystems, and ice cover. The United States Congress is considering proposals to limit greenhouse gas emissions using market-based mechanisms that would place a price on emissions. Such programs would create an economic incentive for regulated entities to limit their emissions. Limiting greenhouse gas emissions requires an understanding of existing emissions as well as the development of a program to monitor, report, and verify emissions from entities that might be affected by a future regulatory program. A greenhouse gas mitigation program also requires an understanding of the numerous emissions sources and methods for calculating emissions of six major greenhouse gases--carbon dioxide, methane, nitrous oxide, and several synthetic gases. This testimony focuses on (1) the importance of quality data on emissions in the context of a program intended to limit greenhouse gas emissions, and (2) key considerations in developing reliable data on greenhouse gas emissions. This testimony is based on several prior GAO reports and a review of related literature.

What GAO Found

Quality data on emissions are essential to the development and implementation of a system intended to limit greenhouse gas emissions. Domestic and international experiences with cap-and-trade programs, which place a price on emissions, demonstrate the importance of data quality in establishing baselines, monitoring results, and maintaining the integrity of a program. Existing cap-and-trade programs establish an overall allowable level of emissions and distribute allowances to regulated entities, which in turn are able to buy or sell excess allowances. The United States has operated a cap-and-trade program to limit emissions of sulfur dioxide--a pollutant that contributes to acid rain-- from electric utilities since 1995. Based on prior GAO work and independent studies, the program has benefited from the development of an accurate emissions baseline for regulated entities as well as strong monitoring, verification, and reporting requirements. The European Union has also employed a cap-and-trade system to limit emissions of carbon dioxide--the most prevalent greenhouse gas--from electricity generators and certain industrial sectors since 2005. In November 2008, GAO reported that the program has faced challenges because of a lack of facility-specific data on baseline emissions. While the program has addressed many of these challenges, the European Union's experience demonstrates the importance of data quality in establishing a market-based program to limit greenhouse gas emissions. Key considerations in developing reliable data on greenhouse gas emissions revolve primarily around the purpose and intended use of the data. In cases where the data are used to develop or implement a program to limit emissions, key considerations include (1) the scope of the program across emissions sources, such as whether it affects all emission-producing activities or a specified subgroup, and (2) the program's coverage across the six primary greenhouse gases. These considerations depend on the point of regulation--namely, whether the program affects a small number of "upstream" emitters such as fossil fuel producers and importers or instead affects smaller "downstream" emitters such as individual industrial facilities. Overall, the challenges in establishing baseline emissions data, as well as in monitoring, reporting, and verifying ongoing emissions will increase as the number of regulated entities, activities, and greenhouse gases increase. In some cases, existing emissions inventories (typically at the national, state, or industrial sector level) and registries (typically at the facility or project level) provide a starting point for understanding the challenges in establishing baselines and tracking emissions over time. For example, the United States Environmental Protection Agency maintains an official U.S. emissions inventory that provides national-level emissions data and background on methods to calculate emissions. In addition, several inventories and registries maintained at the regional level or by private and nonprofit entities provide a useful starting point for understanding data needs and developing standards for monitoring, reporting, and verification.