GHG Reduction Projects Guidelines

Oil and Natural Gas Industry
Guidelines for
Greenhouse Gas Reduction Projects
Prepared by URS Corporation
March 2007
International Petroleum Industry Environmental Conservation Association
The International Petroleum Industry Environmental Conservation Association (IPIECA) was
founded in 1974 following the establishment of the United Nations Environment Programme
(UNEP). IPIECA provides one of the industrys principal channels of communication with the
United Nations.
IPIECA is the single global association representing both the upstream and downstream oil and
gas industry on key global environmental and social issues. IPIECAs programme takes full
account of international developments in these issues, serving as a forum for discussion and
cooperation involving industry and international organizations.
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and economically acceptable solutions to global environmental and social issues pertaining to the
oil and gas industry. IPIECA is not a lobbying organization, but provides a forum for
encouraging continuous improvement of industry performance.
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American Petroleum Institute
The American Petroleum Institute is the primary trade association in the United States
representing the oil and natural gas industry, and the only one representing all segments of the
industry. Representing one of the most technologically advanced industries in the world, APIs
membership includes more than 400 corporations involved in all aspects of the oil and gas
industry, including exploration and production, refining and marketing, marine and pipeline
transportation and service and supply companies to the oil and natural gas industry.
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members with representation on state issues in 33 states. API provides a forum for all segments
of the oil and natural gas industry to pursue public policy objectives and advance the interests of
the industry. API undertakes in-depth scientific, technical and economic research to assist in the
development of its positions, and develops standards and quality certification programs used
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March 2007 i
Table of Contents
Acknowledgements ..................................................................................................... iv
Executive Summary..................................................................................................... vi
Section 1. Introduction.............................................................................................. 1
1.1 Overarching Objectives of Program.............................................................................. 2
1.2 Approach ....................................................................................................................... 2
Section 2. GHG Reduction Project Concepts and Principles ................................ 4
2.1 GHG Reduction Project Principles................................................................................ 4
2.2 Quantifying Emission Reductions................................................................................. 5
2.3 Project Definition .......................................................................................................... 5
2.4 Baseline Scenario Determination .................................................................................. 6
2.4.1 Time frame ........................................................................................................ 7
2.4.2 Geographic Application..................................................................................... 8
2.4.3 Existing Versus New Operations....................................................................... 8
2.5 Assessment Boundary ................................................................................................... 9
2.6 Quantifying Emission Reductions............................................................................... 10
2.7 Monitoring, Reporting and Verification...................................................................... 12
2.7.1 Monitoring....................................................................................................... 12
2.7.2 Project Reporting............................................................................................. 13
2.7.3 Project Verification ......................................................................................... 14
Section 3. Policy Considerations........................................................................... 15
3.1 Criteria that May Impact GHG Reduction Project Eligibility..................................... 17
3.2 Policy Considerations that Impact GHG Reduction Project Accounting and
Baseline Scenario Determination............................................................................. 19
3.2.1 Common Practice Assessment ........................................................................ 21
3.2.2 Regulatory Assessment ................................................................................... 23
3.2.3 Barrier Assessment .......................................................................................... 24
3.2.4 Investment Ranking......................................................................................... 26
3.3 Assessment Boundary ................................................................................................. 27
Section 4. Overview of GHG Reduction Project Families .................................... 30
4.1 Cogeneration................................................................................................................ 30
4.2 Carbon Capture and Geological Storage ..................................................................... 31
4.3 Flare Reduction ........................................................................................................... 32
4.4 Fuel Switching............................................................................................................. 34
4.5 Energy Efficiency Improvements................................................................................ 36
Section 5. Cogeneration Project Family................................................................ 38
5.1 Overview ..................................................................................................................... 38
5.2 Introduction ................................................................................................................. 38
5.3 Project Definition ........................................................................................................ 38
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5.4 Baseline Scenarios....................................................................................................... 39
5.4.1 Baseline Candidates for Electricity Generation .............................................. 39
5.4.2 Steam Generation Baseline Candidate Considerations ................................... 40
5.5 Emission Sources and Assessment Boundary............................................................. 41
5.6 Emission Reductions ................................................................................................... 42
5.6.1 Quantifying GHG Reduction Project Emissions............................................. 42
5.6.2 Quantifying Baseline Emissions...................................................................... 43
5.7 Monitoring................................................................................................................... 44
5.8 Project Examples ......................................................................................................... 44
References ................................................................................................................. 45
Glossary ................................................................................................................. 47
Appendices
A-1 Summary of GHG Project-Based Emission Reduction Registries.................................... 53
A-2 Summary of GHG Project-Based Emission Reduction Inventories.................................. 57
B-1 Cogeneration Project Case Studies.................................................................................... 63
B-2 Baseline Methodologies for Grid-Displacement Reduction Projects................................ 89
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March 2007 iii
List of Tables
2-1 Steps for Quantifying Emission Reductions........................................................................ 5
3-1 Summary of Policy Requirements for Common Regimes ................................................ 16
3-2 Potential Barriers for Baseline Screening.......................................................................... 24
4-1 Potential Flaring Reduction Scenarios .............................................................................. 33
5-1 Potential Emission Sources within the Assessment Boundary.......................................... 41
5-2 Summary of Annual Emissions for EXHIBIT 5.1: Refinery builds a new cogeneration
unit to replace steam generation from an offsite steam boiler........................................... 50
5-3 Summary of Annual Emissions for EXHIBIT 5.2: Cogeneration with Increased
On-Site Energy Consumption............................................................................................ 55
5-4 Summary of Annual Emissions for EXHIBIT 5.3: Cogeneration with Increased
On-Site Energy Consumption Exceeding Baseline Capacity......................................... 61
List of Figures
2-1 Illustration of Emission Reductions Relative to Baseline Scenarios................................. 11
4-1a Illustration of Baseline Emission Rate Independent of Throughput ................................. 34
4-1b Illustration of Increasing Post-Project Emission Rate, Though at a Rate Reduced
from the Baseline............................................................................................................... 34
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March 2007 iv
Acknowledgements
These Project Guidelines are the work product of the IPIECA Joint Industry Task Force on
Greenhouse Gas (GHG) Reporting Guidelines. The Task Force was convened under the
auspices of the International Petroleum Industry Environmental Conservation Association
(IPIECA) Climate Change Work Group, in collaboration with the American Petroleum
Institute (API).
The Joint Industry Task Force formed a Drafting Committee to prepare the Project
Guidelines. This committee consists of:
Karin Ritter API
Tim Stileman and
Luke Warren
IPIECA
Co-Chairs:
Theresa Hochhalter
Susann Nordrum
ExxonMobil
Chevron
Project Guidance Experts:
Jonathan Grant
Mike McMahon
Roon Osman
Brigitte Poot
Anthony Webster
Chevron
BP
Shell
Total
Amerada Hess
Contractors:
Terri Shires,
Lisa Campbell, and
Mahesh Gundappa
URS Corporation
Much of the material in these Project Guidelines builds on developments from the World
Business Council for Sustainable Development and World Resources Institute GHG Protocol
for Project Accounting (WBCSD/WRI, 2005) and International Standards Organization
14064 Part 2 (ISO, 2006) that were occurring in parallel with this document.
Acknowledgements
Table of Contents
March 2007 v
The Drafting Committee wishes to acknowledge the industry members who provided
feedback on the interim draft document:
Mark Akhurst, BP Jean-Franois Lariv, CONCAWE
Alan Burns, Amerada Hess Arthur Lee, Chevron
Dag Christensen, Norsk Hydro Jamie Martin, RepsolYPF
Bruno Conti, EUROPIA Anne Morillon, Total
Pawel Chtkowski ORLEN SA Polski Koncern Naftowy ORLEN SA
Anthony DiNicola, Unocal Wishart Robson, Nexen
Luc De Marliave, Total Julie Roden, BG
Luis Fontanals, EUROPIA Peter Russell, Granherne
Rosanna Fusco, ENI Kathryn Scales, Petro-Canada
Jean-Michel Gires, Total Richard Sykes, Shell
Alain Heilbrunn, CONCAWE Bruce Wilcoxon, ConocoPhillips
Haroon Kheshgi, ExxonMobil
In addition, the Drafting Committee would also like to thank the following individuals and
organizations for reviewing and providing comments on the draft document:
Mahua Acharya World Business Council for Sustainable Development
Suzie Greenhalgh and Derik Broekhoff World Resources Institute GHG Protocol Initiative Team
Lisa Hanle US EPA Office of Air and Radiation
Miriam Lev-On The LEVON Group
Miguel Moyano ARPEL
API Legal
March 2007 vi
Executive Summary
Oil and natural gas companies are evaluating options for reducing greenhouse gas (GHG)
emissions, developing project plans, and implementing emission reduction projects either
voluntarily or to comply with regulatory requirements. At the same time, various domestic
and international organizations are developing guidance and procedures for quantifying,
reporting, and registering project-level GHG emission reductions. This presents a challenge
for oil and natural gas companies, where multi-national operations must be managed within a
variety of GHG programs. Guidance is needed that is suitable for a broad range of climate
change regimes or GHG registries and will serve the industrys global operations. This
document aims to provide this guidance by focusing on the technical aspects of reducing
GHG emissions separate from the policy considerations.
Although the requirements for creditable emission reductions continue to evolve, the technical
concepts associated with quantifying GHG emission reductions are grounded in the basic
principles of completeness, consistency, accuracy, transparency, relevance, and conservatism.
Key messages related to the technical focus of this document include recognition of the
following:
N Determination of emission reductions should be based on generally accepted principles
and sound technical considerations.
N Reported information should provide a faithful, true, and fair account of the reductions
achieved.
N For existing operations, historical conditions, which are distinctly different from historical
emissions, often provide the most realistic baseline scenario.
N For new operations, common practice is generally an objective and credible prediction of
what would have happened in the absence of the project.
N Companies may wish to quantify GHG emission reductions for many reasons, thus
methodologies for estimating and monitoring project reductions should be fit for their
purpose.
N Care must be taken in selecting the baseline scenario, particularly in the oil and natural
gas industry, where differences in oil field characteristics, age and other factors must be
considered.
N Methods used to select, reject, or rank baseline scenarios based on financial analyses are
not always objective.
N Excessive monitoring requirements may discourage participation without improving
measurement accuracy or reporting consistency.
While individual and public policy decisions can have a very significant effect on the
eligibility of GHG reductions for credits, actions that result in the reduction of GHG
Executive Summary
Executive Summary
March 2007 vii
emissions or the removal of GHGs from the atmosphere can be undertaken for a variety of
reasons. This guidance document provides a framework for quantifying GHG emission
reductions with sufficient transparency that the information can be used with reasonable
confidence.
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Section 1. Introduction
The oil and natural gas industry is addressing the challenge of meeting the worlds growing
energy demands in a responsible manner, including with respect to climate change. Real and
sustainable actions to reduce greenhouse gas (GHG) emissions can be one component of that
response. These Oil and Natural Gas Guidelines for Greenhouse Gas Emission Reduction
Projects (referred to as Project Guidelines) aim to support transparent and credible calculation
and reporting of GHG emission reductions from such activities in a comprehensive and
consistent manner.
With the Kyoto Protocol officially entering into force February 16, 2005, the incentives for
implementing GHG emission reduction projects and opportunities for gaining credits
associated with these projects are expected to grow, particularly in those countries which have
adopted the protocol. Even beyond the realm of commitments for Kyoto or other regulatory
programs, many companies are taking action to reduce GHG emissions for a variety of
reasons. Motives for implementing a GHG emission reduction project and reasons for
reporting emission reductions vary and may include any or all of the following examples:
N Financial benefits of the project with or without revenues from the sale of emission
reduction credits;
N Voluntary actions to reduce GHG emissions;
N Compliance with any applicable regulatory regime;
N Stakeholder reporting;
N Meeting internal company emission reduction targets; and/or
N Generating credits or offsets for an external reporting program.
At the same time, the policies associated with what is deemed an acceptable or creditable
emission reduction continue to evolve. Mandatory and voluntary GHG programs exist with
specific criteria for recognizing credits or with tools and guidance for quantifying GHG
reductions. These include decisions taken by the Clean Development Mechanism (CDM)
Executive Board, methodologies appropriate for the EU Emissions Trading Scheme (ETS),
General and Technical Guidelines for Voluntary Greenhouse Gas Reporting recently revised
by the US Department of Energy 1605(b), guidance published by the International Standards
Organization (ISO) 14064 Part 2, and the World Business Council for Sustainable
Development and World Resources Institute (WBCSD/WRI) GHG Protocol for Project
Accounting (referred to as the Project Protocol).
The purpose of this document is to provide oil and natural gas companies with voluntary
guidelines for documenting and reporting GHG emission reductions, i.e., decreases in GHG
March 2007 2
emissions or increases in removals and/or storage of GHGs
1
. The focus is on the technical
basis and considerations of emission reduction projects, recognizing that individual or public
policy decisions may have a significant impact on the application of these technical
principles. Regardless of the policy considerations, an emission reduction project is any
activity that reduces GHG emissions to the atmosphere. This is different from an eligible
emission reduction credit. Examining GHG emission reduction projects on a strictly technical
basis requires understanding the difference between the broad classification of credible GHG
emission reductions and the smaller sub-set of GHG reduction credits which meet specific
requirements of a climate change regime or GHG registry.
1.1 Overarching Objectives of Program
The purpose of this document is to:
1. Develop a voluntary framework for assessing GHG emission reductions associated
with specific types of oil and natural gas projects, including references to relevant
methodologies or guidance, and
2. Assist the oil and natural gas industry by providing guidelines on identifying,
assessing, and developing candidate projects that would lead to credible
(distinguished from creditable) emission reductions.
1.2 Approach
These guidelines address the technical aspects of GHG emission reduction activities. The
document is written from the perspective of the oil and natural gas industry, with examples
and considerations specific to oil and natural gas industry operations.
The document is currently organized into five sections:
N Introduction;
N Project Emission Reductions Principles and Quantification;
N Policy Considerations;
N Project Family Overview; and
N Cogeneration Project Family.
Section 2 outlines some overarching principles associated with quantifying and reporting
GHG emission reductions. Key concepts relating projects, baseline scenarios, and emission
reductions are defined in this section and a general methodology for quantifying emission
1
This guidance document is not intended to create any requirement or industry standards for GHG reduction
projects. Rather it is intended solely for the convenience and voluntary use of oil and natural gas companies that
may find it helpful. Nor is this document intended to imply a direct connection between GHG emissions from
the oil and natural gas industry and the phenomenon commonly referred to as climate change. To the contrary,
this guidance document recognizes that companies may undertake GHG reduction projects for a variety of
reasons.
March 2007 3
reductions is provided. The information in this section is potentially applicable to any project
type and can help establish the foundation for assessing any GHG reduction project activity.
Section 3 presents policy considerations in order to acknowledge the impact of non-technical
aspects and to characterize the distinction between emission reductions and credits. A
summary of several climate change regimes and GHG registries is provided in Appendix A to
assist the reader in determining if a particular emission reduction project may qualify as a
credit.
2
Section 4 presents an overview of key considerations for each of five broadly applicable
emissions reduction project families:
N Cogeneration;
N Carbon Capture and Geological Storage;
N Flare Reduction;
N Fuel Switching; and
N Energy Efficiency Improvements.
Section 5 delves into further detail for one of the project families Cogeneration and
illustrates the application of the general principles from Section 2. Examples are provided
based on industry experience for addressing the unique project considerations regarding
assessment boundary determination, baseline scenario selection, and policy considerations.
Additional chapters for each of the remaining project families will be added over time,
starting with Carbon Capture and Geological Storage.
This document is an initial attempt to provide guidelines specific to oil and natural gas
industry operations for common GHG emission reduction projects. The American Petroleum
Institute (API) and the International Petroleum Industry Environmental Conservation
Association (IPIECA) intend to update and revise the document as GHG emission reduction
programs and climate change regimes mature.
2
The American Petroleum Institute (API) and the International Petroleum Industry Environmental Conservation
Association (IPIECA) make no representation that use of this guidance document would satisfy any legal or
technical requirements of standards for creditable GHG reduction projects, or ensure compliance with any other
requirements, under any applicable regulatory regime. Any company that uses these Project Guidelines should
consult its own legal counsel as to any legal requirements that may apply to a project.
March 2007 4
Section 2. GHG Reduction Project Concepts and
Principles
These Project Guidelines explain key concepts for GHG reduction
project accounting and provide some consistent principles and
criteria for credible GHG emission reduction quantification.
Additional requirements may apply for reporting these reductions
through specific climate change regimes or GHG registries, or for
trading emission credits. This section presents general guidelines
that could be applied to any reduction project for quantifying GHG
emission reductions based on generally accepted principles and
sound technical considerations.
2.1 GHG Reduction Project Principles
Similar to GHG inventory accounting and reporting, GHG reductions, removals, or storage
should be based on generally accepted quantification and reporting principles to ensure that:
N The reported information represents a faithful, true, and fair account of the GHG emission
reductions achieved by implementing the reduction project; and
N The reported information is credible and unbiased in its treatment and presentation of
issues.
The procedures required to account and quantify the GHG reductions resulting from a GHG
reduction project are still evolving and new to many; however, the principles outlined below
are intended to:
a) Provide the first-order principles for defining GHG project accounting concepts,
such as identifying the baseline scenario and GHG assessment boundary, which
have no ready parallels in financial accounting; and
b) Guide project proponents, verifiers, and others when dealing with uncertainty
while accounting, quantifying, monitoring, reporting, and verifying GHG
reduction project emissions, removals, and storage.
In both cases, the principles outlined below become especially important if a climate change
regime or GHG registry is not available or has not clearly defined the terms, processes, and
methodologies required for GHG project accounting and quantification. Following these
principles should provide assurance to all parties involved that the processes by which the
GHG projects reduction is accounted and quantified are verifiable, replicable, and credible.
Relevance Select GHG sources, GHG sinks, GHG reservoirs, data and methodologies
appropriate to the scope of the project and needs of the intended user.
Completeness - Include all relevant GHG emissions, removals, and storage.
Throughout these Project
Guidelines, the term GHG
reduction refers to either a
reduction in GHG
emissions or an increase
in removals or storage of
GHG from the
atmosphere, relative to
baseline emissions.
Section 2. GHG Reduction Project Concepts and
Principles
Section 2. GHG Reduction Project Concepts and Principles
March 2007 5
Consistency - Enable meaningful comparisons in GHG-related information.
Accuracy - Reduce bias and uncertainties as far as practical.
Transparency - Disclose sufficient and appropriate GHG-related information to allow
intended users to make decisions with reasonable confidence.
Conservatism Where questions arise regarding uncertain parameters or data sources, or
where further analysis is not cost-effective, choose a conservative approach that is likely to
underestimate rather than overestimate the GHG reductions.
2.2 Quantifying Emission Reductions
Table 2-1 presents the primary steps for quantifying emission reductions. Each of these steps
will be discussed in more detail in the following sections.
Table 2-1. Steps for Quantifying Emission Reductions
Primary Steps Activities
Document
Reference
Step 1: Define Project N Describe the activity or set of activities
that reduce GHG emissions
Section 2.3
Step 2: Determine Baseline
Scenario
N Identify baseline candidates for each
project activity
N Determine the baseline scenario based
on sound, technical considerations and
guided by common practice
N Examine the geographic area and time
frame for which the baseline is
applicable
Section 2.4
Step 3: Determine Assessment
Boundary
N Identify potential sources, sinks, or
reservoirs controlled by, related to,
affected by, and relevant to the baseline
scenario
Section 2.5
Step 4: Quantify Emission
Reductions
N Quantify GHG emissions for the project
activity
N Estimate GHG emissions associated
with the baseline scenario
N Quantify the emission reductions:
Emission Reductions =
Baseline emissions Project emissions
Section 2.6
Where formal credit is sought for the reduction, additional or different steps may be dictated
by the crediting climate change regime or GHG registry (see Section 3).
2.3 Project Definition
A GHG reduction project is a recognizable and distinct activity or set of activities that reduce
global GHG emissions, increase the storage of carbon, or enhance GHG removals from the
March 2007 6
The WBCSD/WRI Project
Protocol presents two procedures
for estimating baselines
emissions: the project-specific
and performance standard
procedures. For the project
family types that the oil and
natural gas industry is currently
focusing on cogeneration and
carbon capture and storage the
project-specific approach is most
applicable.
Details on the performance
standard approach are available in
the WBCSD/WRI Project
Protocol. Application of this
method will be examined further
when the energy efficiency and
fuel switching project families are
developed.
atmosphere. A project activity is a specific action or intervention that changes GHG
emissions, removals, or storage
This document defines three fundamental principles for the quantification of emission
reductions:
1. A GHG reduction is the difference between the actual emissions resulting from the
implementation of a GHG project and the estimated baseline emissions.
2. The GHG project and baseline emissions must be evaluated on a comparable basis.
3. Reasonable account or consideration should be taken of emissions outside the
direct control of the GHG project, as appropriate. That is, sources related to or
affected by the GHG project may need to be assessed for their relevance to the
project.
Project definition refers to the description of the project activity or set of activities that result
in the reduction, removal, or storage of GHG emissions. The information included in the
definition is intended to provide the context for the GHG project. Climate change regimes or
GHG registries may identify specific information to be included in the project definition or
description.
2.4 Baseline Scenario Determination
GHG reductions must be quantified relative to a reference level
of GHG emissions, referred to as the baseline scenario. Potential
candidates for the baseline scenario represent situations or
conditions that plausibly would have occurred in the absence of
the reduction project. Determining the baselines scenario from
among these candidates is a complex task, which may involve
subjective and objective elements, as the baseline scenario is
always a hypothetical estimation of what would have happened
without the project. In general, identifying baseline candidates
should consider existing and alternative project types, activities,
and technologies that result in a product or service identical (or
nearly identical) to that of the project activity, and should be
credible over a range of assumptions for the duration of the
baseline application. For some climate change regimes, baseline
scenario determination may be directed by the policy
requirements of that regime. (See Section 3.)
Because the baseline scenario is a hypothetical situation, there may be multiple candidate
scenarios for what might have happened in the absence of the project. Determination of the
baseline scenario from two or more candidates should first be based on a sound, technical
basis, guided by commonly accepted practice. Common practice provides the most objective
means of identifying what would have happened in the absence of the project. Based on the
March 2007 7
specific details of the project, baseline candidates developed from common practice would
include consideration of:
N Similar operations in the local region;
N Comparable operating conditions and age;
N Identical or similar product, output, or service; and
N Similar social, environmental, financial, and technological circumstances.
This is particularly important for oil and natural gas industry operations, where determining
common practice is not always straightforward. For example, exploration and production
operations in the same geographic region may vary significantly due to the age of the
reservoir, oil to gas ratio, and recompression requirements. Similarly, refining operations can
vary significantly due to characteristics of the crude processed and the mix of products
generated.
Baseline scenario determination is demonstrated for the cogeneration reduction project
example in Section 5. As the example shows, the determination of the baseline scenario is
highly project-specific and dependent upon project type, industry sector, location, etc.
2.4.1 Time frame
Two elements of the time frame should be considered in determining the baseline scenario:
1. The time period from which to select relevant baseline candidates (defined as the
temporal range in the WBCSD/WRI Project Protocol); and
2. The period of time that the baseline scenario is applicable and justifiable.
The time frame applicable for determining baseline candidates considers installation,
implementation, or establishment times of various technologies, equipment or practices. This
is usually based on: recent plants, technologies, equipment, or recently established practices;
plants under construction; equipment, technologies, or practices being implemented; or
planned plants, technologies, equipment or proposed practices. The circumstances
surrounding the project activity influence the span of the temporal range, as well as the
principles of relevance and transparency.
Emission reductions will continue to occur for as long as the baseline scenario is applicable
and justifiable. The time frame for which the baseline scenario applies should therefore be
considered, such that anticipated changes can be factored in from the start, to the extent
possible. Establishing a finite period of time for which the baseline is valid can also increase
confidence in the certainty of the project. The length of this period may vary, depending on
technical and policy considerations, and on whether baseline emission estimates are static or
dynamic.
As common practice evolves or as a benchmark improves over time, the baseline scenario and
project activity may eventually converge. In addition, factors or conditions affecting the
project may change over time, such that the baseline scenario is no longer valid for the
March 2007 8
purpose of quantifying GHG reductions. For example, factors that may influence the
selection of the baseline scenario, or may require future revision to the baseline scenario,
include:
N The remaining life of equipment;
N An anticipated change in activity level relative to the baseline, where the effect of the
change is significant enough to warrant a change to the baseline scenario;
N Legislative or regulatory changes; and
N A change in available resources (e.g., a gas pipeline to the area).
The impact and timing of such changes will be specific to the conditions of the project
activity, and should be examined relative to the baseline scenario. For these situations, it may
be necessary to establish a new baseline scenario at the time that such a change occurs.
Emission reductions from this point forward would be evaluated against the new baseline
scenario. If such a change is anticipated, it may be beneficial to include review of these
conditions as part of the monitoring plan (discussed further in Section 2.6.1).
2.4.2 Geographic Application
The geographic area establishes the location of operations, equipment, or practices that are
included in the assessment of baseline candidates. Depending on the circumstances of the
project, the geographic area may be narrow (e.g., an area within a nation or an electric grid),
or broad (e.g., an international region or global area).
2.4.3 Existing Versus New Operations
Determination of the baseline scenario may also vary depending on whether the emission
reduction project is associated with existing operations (retrofit) or new operations.
Existing Operations
For existing operations, historical conditions
3
often provide the most realistic baseline
scenario, as it is generally reasonable to assume
the continuation of current activities in the
absence of the project. This assumption is most
credible for the time period immediately
following the initiation of the project activity,
but requires reevaluation in subsequent years.
The bulleted factors listed above should also be
considered to determine their potential impact
on the baseline scenario.
3
Historical conditions refer to the pre-project operating conditions as status quo (such as, burning coal), not the
pre-project emissions (i.e., estimated tonnes of emissions pre-project).
The terms best practices and best practice
standards are used here to differentiate from the
performance standards baselines approach
presented in the WBCSD/WRI Project Protocol.
In the context of these guidelines, best practice is
used as a reference for considering baseline
candidates where common practice is difficult to
define. It is not intended to imply the need for
rigorous statistical analysis or comparison against
a stringency level. For some climate change
regimes, best practices or a level of stringency
associated with a performance standard may be
directed by the policy requirements of that regime
(see Section 3).
March 2007 9
New Operations
For new operations, where GHG emissions associated with the project activity did not
previously exist, the baseline is established by evaluating what would have occurred in the
absence of the project. Common practice is the preferred approach for determining a credible
baseline scenario because it is generally the most objective prediction of what would have
happened in the absence of the project. Common practice refers to the predominant
technology(ies) or practice(s) in place in a specific region or sector.
Where common practice is difficult to determine or justify, the minimum requirements under
any applicable best practice standards could be adopted as the baseline scenario. These may
include best practice standards negotiated by a particular sector with a regulatory body, as
well as purely voluntary best practices that a single company or sector may have adopted. In
some situations, best practice standards for other industry sectors may provide a justifiable
scenario for oil and natural gas industry operations.
A disadvantage to this approach is that one or two operators or facilities in a region may bias
what is perceived as common practice or best practice, even if they are in the minority.
Another disadvantage is where an imposed Best Available Control Technology is used to
define the baseline, although this is likely to be a policy decision (see Section 3).
2.5 Assessment Boundary
After defining the project and determining the baseline scenario, the next step is to establish
the assessment boundary. The assessment boundary encompasses GHG emission sources,
sinks, and reservoirs:
1. Controlled by the project proponent - This includes sources under the direct
control or influence of the project proponent through financial, management, or
other means.
2. Related to the GHG reduction project - These are emission sources associated with
significant energy or material flows into or out of the project, such as imported
electricity or heat, or the transportation of materials, products, or wastes. These
sources can be either on or off the project site, and may include activities related to
design, construction and decommissioning of a project.
3. Affected by the GHG reduction project - These sources encompass an increase or
decrease in emissions resulting from changes in market demand or supply for
associated products or services, or through physical displacement of products or
services. For example, where natural gas is captured for sale as part of a flare
reduction project, the availability of that natural gas may impact the energy market
March 2007 10
for other energy consumers. Other climate change regimes may refer to these as
leakage
4
or secondary effects.
4. Relevant to the baseline scenario and reduction project Relevant relates to the
three assessment boundary considerations above and considers the needs of the
intended user. An emission source may be determined to be irrelevant if the
resulting emissions are not materially different for the project and the baseline
scenario. For example, where a CO
2
stream captured from an industrial process
replaces an underground-sourced CO
2
stream for enhanced oil recovery, emissions
from the capture and transport of the industrial stream may not be materially
different from the emissions associated with the extraction and transport of the
underground-sourced CO
2
.
This assessment may result in a number of potential emission sources. The practical
application of identifying and assessing the relevant GHG emission sources, sinks, and
reservoirs should consider:
N The ability to quantify/monitor the emissions;
N The significance of the source; and
N The ability to clearly attribute the emission sources, sinks or reservoirs to the project
activity or baseline scenario.
Narrowing down the potential GHG emission sources through these considerations results in
the assessment boundary. Documentation of those sources included in the assessment
boundary and those determined to not include (with a explanation) support transparent project
reporting.
The approach to determining the assessment boundary is applied for the cogeneration project
family examples provided in Section 5, as the technicalities associated with the specific
reduction projects are addressed. In addition, some reporting regimes have specific
requirements for defining the reduction project assessment boundary. These policy
considerations are addressed in Section 3.
2.6 Quantifying Emission Reductions
Greenhouse gas emission reductions are quantified as the difference between the baseline
emissions and the reduction project emissions, where baseline emissions are determined for
the same quantity of output as the project. Figure 2-1 illustrates the relation between the
project emissions and the baseline emissions for the baseline scenario determined through an
assessment of baseline candidates.
4
It should be noted here that the term leakage in this context refers to secondary emissions that are
accounted as part of a climate change regime or GHG registry requirements, as opposed to physical leakage
(escape) of GHG emissions to the atmosphere.
March 2007 11
Figure 2-1. Illustration of Emission Reductions Relative to Baseline Scenarios
Where the GHG reduction project consists of more than one project activity, the overall net
reduction is the sum of the GHG reductions from each individual activity. For example, the
reduction project may consist of energy efficiency improvements to several engines at a
facility. An emission reduction is determined for each engine based on the equipment-
specific baseline emissions and project emissions. These are then summed to result in an
aggregate emission reduction for the facility-level reduction project.
Quantifying Project Emissions
Greenhouse gas emissions associated with emission reduction projects can be estimated based
on expected or forecast activity data (ex-ante) or calculated based on actual operating
conditions (ex-post). These approaches are useful for specific purposes. For example,
predictive emission estimates are often used for planning purposes, while ex-post emissions
are more technically sound for quantifying emission reductions.
In quantifying the project emissions, the following recommendations are provided:
N Concentrate on the largest and/or most variable emission sources, sinks, and reservoirs;
Time
GHG
Emissions
Project
Start
Project
Reduction
Baseline
Scenario
Baseline
Candidates
Project Emissions
Time
GHG
Emissions
Project
Start
Project
Reduction
Baseline
Scenario
Baseline
Candidates
Baseline
Candidates
Project Emissions
GHG
Emissions
Baseline
Scenario
Project
Reduction
Project
Start
Time
Baseline
Candidates
Project Emissions
March 2007 12
N Use measured or metered activity data, where available, and actual operating conditions;
and
N Apply calculation methodologies such as those provided in the API Compendium where
appropriate/applicable.
The selection of a specific methodology to quantify the project emissions depends on the type
of project, the availability of activity data, and considerations of costs versus accuracy. Some
of these considerations are demonstrated in Section 5. The methodology may also be dictated
by a particular climate change regime or GHG registry, if applicable (refer to Section 3).
Estimating Baseline Emissions
The baseline emissions are the estimated tonnes
5
of GHG emissions for relevant emission
sources, sinks, and reservoirs corresponding to the baseline scenario. Because the baseline
emissions are representative of a hypothetical scenario, baseline emissions are only estimates.
Guidelines for estimating the baseline emissions are:
N First, identify the most suitable characteristic output for the project. For example, m
3
of
natural gas produced, bbl of crude intake to a refinery, or MW-hr of electricity generated.
N Then, estimate emissions for the relevant emission sources, sinks, and reservoirs
associated with the baseline scenario at the same characteristic output as the GHG
reduction project. This removes the effects of operational growth or decline and enables
the baseline and reduction project emissions to be assessed on a comparable activity basis.
N Apply calculation methodologies such as those provided in the API Compendium where
appropriate/applicable. Selecting a methodology will depend on specific conditions
related to the baseline scenario and the project activity.
2.7 Monitoring, Reporting and Verification
As a general rule, the cost of monitoring, reporting, and verification should not exceed the
value of the GHG emission reductions.
2.7.1 Monitoring
Monitoring provides the means for quantifying, reporting, and validating GHG emissions
and/or removals relevant to the project and baseline scenario and may include a combination
of measurements, modeling, and estimation techniques. Monitoring should be cost-effective,
with emphasis placed on those parameters that are highly variable and/or related to the most
significant emission sources. Monitoring is based on:
N Selecting appropriate parameters from which to gauge emissions controlled by, related to
and affected by the project activity, as well as relevant to the baseline scenario;
5
Metric tonnes = 1000 kg = 2204.62 lb
March 2007 13
N Determining the monitoring means (e.g., measurement or metering), frequency and
duration consistent with the variability of the parameter; and
N Examining changes in conditions that might impact the baseline scenario, such as new
regulations.
There are two types of parameters that may be monitored:
N Parameters that indicate the continued validity of certain assumptions. This includes
analyzing information to determine if the project is performing as expected and if
information used to estimate the baseline is still valid. If monitoring these parameters
indicates that a key assumption is no longer valid, then the project emissions may need to
be re-evaluated or the baseline scenario (or associated baseline emission estimate) may
need to be reconsidered.
N Parameters that help determine baseline emission estimates, such as emission factors or
other variables that directly determine baseline emissions over time.
Applying the points above and general GHG accounting principles, monitoring should
consider the following for each emission source, sink or reservoir that comprises the project
or baseline emissions:
N Measurements, modeling, calculation methodologies, or estimation approaches that apply
to data or parameters, and the associated level of estimation uncertainty; and
N Frequency of monitoring relative to the variability in the data or parameters.
Ideally, the plan for monitoring would be developed prior to the project being implemented.
This enables baseline data collection.
Specific monitoring requirements may be dictated by a particular climate change regime, if
applicable.
2.7.2 Project Reporting
Emission reductions are generally reported on an annual basis. The objective of reporting is
to provide sufficient transparency to enable the intended audience to make an informed
decision on the credibility of the emission reduction. A GHG emission reduction report
should provide a plausible and transparent account of the project, decisions, and assumptions.
A GHG emission reduction report should be supported by documentation maintained by the
project proponent.
A transparent emission reduction report supports validation or verification against a
monitoring plan if one existed, or against guidelines or standards such as this document, ISO
14064, WBCSD/WRI Project Protocol, API Compendium, etc. Specific reporting
requirements may be dictated by the particular climate change regime, if applicable.
Information that is generally reported include the following:
N Description of the project;
N Geographic location;
March 2007 14
N Start date of the project, and if different, the date when GHG emission reductions were
first generated;
N The identified baseline candidates, the process for assessing the baseline candidates, and
justification for the baseline scenario;
N Assessment boundary determination, and the project and baseline emission sources within
the assessment boundary;
N Estimated baseline emissions, quantified project emissions, and the resulting reductions;
N Calculation methods, monitored parameters, assumptions, and uncertainties.
2.7.3 Project Verification
Verification should focus on quality assurance with the objective of improving the overall
reliability of the reported emission reductions. Verification should provide the stakeholder or
user of the information assurance that the reported emission reduction is credible.
Specific verification requirements may be dictated by the particular climate change regime or
GHG registry, if applicable.
March 2007 15
Section 3. Policy Considerations
The purpose of this section is to highlight considerations regarding specific GHG policy
requirements. In some cases, this may require distinguishing between a quantified, credible
GHG emission reduction and a GHG reduction that meets any applicable criteria for
recognition as a tradable credit (a creditable reduction).
A GHG reduction project is a recognizable and distinct activity or set of activities that reduce
global GHG emissions. Section 2 outlines the general guidelines for assessing, quantifying,
and monitoring project-based emissions reductions, focused on the technical aspects of
quantifying emission reductions. In addition to tracking emission reductions, however, many
oil and natural gas companies seek to register or certify project-based activities that qualify as
creditable under specific climate change regimes or GHG registries (e.g., Clean Development
Mechanism or Joint Implementation under the Kyoto Protocol framework). To qualify as
creditable under a regime, there are specific policy-related considerations that may be
required in addition to those presented in Section 2.
In practice, an emission reduction is only considered creditable if it meets the requirements
of the particular climate change regime, GHG registry, or inventory program under which it is
being implemented. Typically, these requirements fall into two main categories: first, the
project activity must be eligible; and second, the screening process for determining the
baseline scenario should ensure that the reductions resulting from the GHG reduction project
would not have occurred anyway. Assessment boundary issues are also considered in this
section since they may be defined differently by the policies of different climate change
regimes, thus impacting the quantity of emission reduction credits.
Table 3-1 summarizes the eligibility and baseline scenario or additionality requirements (as of
August 2006) for several climate change regimes and GHG registries (listed in Appendix A).
6
These policy-related requirements are characterized as criteria that influence:
a) The eligibility of the GHG reduction project in terms of meeting specific
requirements for a particular climate change regime These requirements
influence whether the GHG reduction project qualifies as creditable under the
climate change regime, and may not have any impact on the accounting of the
GHG reductions. The most prevalent of these eligibility criteria are presented in
Section 3.1;
b) The determination of the baseline scenario that represents what would have
otherwise occurred The policy criteria that influence baseline determination have
6
As indicated in Footnote 2, this guidance document is not intended as an exhaustive or authoritative summary
of all applicable policy requirements. Any company that wishes to register or otherwise obtain credit for a GHG
reduction project should consult its own legal counsel as to any legal requirements that might apply to the
project.
March 2007 16
a direct impact on GHG reduction project accounting, as the magnitude of baseline
emissions sets the overall creditable emission reductions from the project activity.
Screening tests under various regimes for determining the baseline scenario are
discussed in Section 3.2; and
c) The determination of the assessment boundaries for monitoring the GHG reduction
project and corresponding baseline emissions As with baseline scenario
determination, policy driven requirements may dictate the assessment boundary.
A discussion of the considerations for establishing the assessment boundaries
under common climate change regimes is included in Section 3.3.
Policy criteria often differ among programs, and not all project activities will qualify for
creditable reductions. Many of the climate change regimes and GHG registries are in early
stages of implementation and the requirements/guidelines for GHG reduction project
eligibility may evolve over time. With the 2005 entry into force of the Kyoto Protocol, some
of the non-Kyoto oriented regimes [e.g., Clean Air Canada, Inc. (CACI)] are being phased
out. Due to this evolving framework, it is prudent for the project participant to understand the
specific requirements of the climate change regime under consideration (see footnote 6,
above).
Table 3-1. Summary of Policy Requirements for Common Climate Change Regimes
Category Potential Criteria for Creditable Emission Reductions
Geographical location of project activity
Stakeholder engagement, environmental impact assessment (EIA)
completed & host country approval
Contribution to sustainable development
Financial additionality
Impact on, or diversion of, Government Official Development Assistance
Timing of GHG reduction project implementation
Project activity type / technology
Proof of ownership of emission reduction credits
a) Criteria that may
impact GHG reduction
project eligibility
Emission reductions in excess of voluntary standards and policy guidelines
Prevailing practices in the region
Sector-specific benchmarks
Regulatory surplus (GHG reductions that exceed regulatory requirements
or GHG reductions that result from meeting regulatory requirements for
other emissions)
Barriers to GHG reduction project implementation
b) Criteria that may
impact baseline
scenario determination
Investment ranking to prioritize economic attractiveness of alternatives
March 2007 17
Table 3-1. Summary of Policy Requirements for Common Climate Change Regimes,
continued
Category Potential Criteria for Creditable Emission Reductions
Assessment boundary changes outside control of the project proponent
Inclusion of related emission sources (e.g., purchased electricity)
Life cycle impacts how far up the value chain that GHG emissions must
be examined
Activity shifting displacement of GHG generating activities to other
locations
Market leakage changes in commercial markets as a result of project
activities that cause changes in GHG emissions
Permanence
Sources, sinks and reservoirs under operational control of project
proponent
Significance / materiality of emissions outside assessment boundary
c) Criteria that may
impact assessment
boundary definition
Difficulty obtaining data
3.1 Criteria that May Impact GHG Reduction Project Eligibility
The criteria described here could impact whether or not a GHG reduction project is eligible to
register credits under various programs. Generally, these criteria are political in nature and
have little or no impact on GHG reduction project accounting.
Criteria required by some of the climate change regimes and GHG registries include:
N Geographical project activity location (e.g., Joint Implementation [JI] projects can only be
undertaken in Annex I countries);
N Host country approval (e.g., Clean Development Mechanism [CDM] requires approval by
the host country through the Designated National Authority);
N Environmental impact assessment of the project activity;
N Engagement of stakeholders (e.g., engagement or approval by different stakeholders may
be required for the issuance of credits);
N Contribution to sustainable development (e.g., CDM requires that all GHG reduction
projects must contribute to sustainable development. It is the prerogative of the host
country to determine the types of project activities that constitute sustainable development
within its jurisdiction);
N Separation of the project activity from official development assistance (ODA) funding
(referred to as financial additionality in CDM context);
N Timing of GHG reduction project implementation (e.g., emission reductions from JI
project activities are creditable starting in 2008);
March 2007 18
N Project activity type/technology certain regimes have restrictions on eligible project
activity types (e.g., many regimes exclude nuclear power generation projects); and
N Proof of ownership of the emission reduction credits.
In addition, the climate change regime may require a financial analysis to demonstrate the
following:
a. The GHG reduction project is not financially attractive without factoring the value
of potential credits. (Also referred to as investment or economic additionality.
The rationale is to demonstrate that without credits, the GHG reduction project
would not be undertaken because it would not be economically attractive.);
b. There are no financial barriers to the implementation of the identified baseline
scenario (for example, a financial barrier might be the high cost associated with a
technology that is not currently proven for the specific application).
c. The baseline scenario is the most financially attractive option (investment
ranking).
The first criterion deals with economic additionality of the GHG reduction project. The latter
two criteria relate to baseline scenario determination and are discussed in Section 3.2.
However, all three financial analysis criteria have complexities in their application, both in
general and for the oil and natural gas industry.
In determining what is financially attractive (or not), financial return is important, but other
factors may be equally relevant in making capital allocation decisions. Companies and
investors operate under capital constraints and the estimated financial returns of such GHG
reduction projects may not justify diverting capital from other higher return or more strategic
initiatives.
For the oil and natural gas industry, joint ventures are frequent. In many concession areas,
only the joint venture can make investment decisions, because outside parties are not able to
invest. In those situations, the only potential GHG reduction project proponents are the
existing partners whose return from the GHG reduction project might differ substantially
among each other (this is particularly true when the state is a partner or where gas pipelines
are owned by outside interests). Further, there exist cases in oil concessions where ownership
of the associated gas is different than that of the oil, and thus any GHG reduction project
economics could be different among partners. This is exemplified in the most extreme case
where the associated gas belongs exclusively to the state and the private partners would derive
no benefit from its sale; yet the legal requirement could well be that the partners must share
equally in all investments.
Due to these issues, financial analysis can be quite subjective.
March 2007 19
3.2 Policy Considerations that Impact GHG Reduction Project
Accounting and Baseline Scenario Determination
As mentioned above, a GHG reduction project is any activity (or activities) that reduces the
net GHG emissions to the atmosphere. A creditable GHG reduction project is one that meets
the applicable technical and policy requirements of the particular climate change regime.
Under specific regimes, there may be additional policy considerations that go beyond those
aspects addressed in Section 2 that must be taken into account for a GHG reduction project to
qualify as creditable. Some typical policy considerations that apply specifically to
determining a baseline scenario are addressed in this section.
For most GHG reduction projects, common practice in the sector and/or geographical region
provides a credible baseline candidate, as discussed in Section 2. However, under some
climate change regimes, other policy-related considerations may be required. One of the key
requirements of many climate change regimes is that project-based reductions are additional
to what would have occurred otherwise in the absence of the project activity. Some climate
change regimes will only recognize the reductions as additional if certain procedures are used
to determine the baseline scenario. For example, CDM requires that baseline methodologies
approved by the CDM Methodology Panel be used. Other climate change regimes have
identified assessments or screening procedures to assist in baseline determination.
The first step in baseline scenario determination is to identify all potential baseline candidates,
including the alternatives of continuing current activities and doing the project activity itself.
Then, one or more of the comparative assessments outlined below can be used to determine
the most appropriate baseline candidate among the alternatives. The most common
comparative assessments used to determine the baseline scenario include:
N Common practice test: Demonstrate that the baseline scenario is consistent with the
prevailing practices in the region.
N Benchmark assessment: Also referred to as a performance standard (see WBCSD/WRI
Project Protocol for additional information on applying this baseline procedure). This
procedure defines a rate of GHG emissions per unit of an output produced by all of the
baseline candidates, such as tCO2e/MWh.
N Policy and regulatory assessment: Demonstrate that the baseline scenario is consistent
with applicable laws or regulations;
N Barriers assessment: Demonstrate that other barriers (aside from regulatory) do not exist
that make the baseline scenario infeasible, and that the GHG reduction project faces
greater barriers to implementation than the baseline scenario.
N Investment ranking: Without considering the revenue from potential credits, demonstrate
that the baseline scenario is the most economically attractive alternative.
N Net benefits assessment: Identify the baseline scenario as the alternative that would
provide the greatest incentives (identified as benefits) to the decision-makers relative to
any disincentives (identified as barriers).
March 2007 20
The choice of comparative assessments used to determine the baseline scenario will depend
on the specific climate change regime. For example, where prescribed by an approved
methodology, the CDM requires some of these tests, in a specific order, in its tool for the
demonstration and assessment of additionality
7
. Through this process of baseline
determination, if the baseline scenario has a higher GHG emission profile than the project
activity, then the GHG reduction project is considered additional (i.e., resulting in the
reduction, removal, or storage of CO
2
emissions over what would have occurred in the
baseline scenario).
Each of the screening assessments is discussed further in the following subsections. Through
this filtering process, potential baseline candidates are ruled out, resulting in either:
1. Determining the most appropriate baseline scenario and demonstrating
additionality; or
2. Determining that the project activity is the baseline scenario and, therefore, is not
additional (with no creditable emission reductions resulting from the GHG
reduction project under the applicable climate change regime).
To illustrate how these assessments can be applied in practice, a flare elimination project is
presented as an example in the following subsections. The example is introduced below, with
subsequent illustrations of how each of the respective baseline screening tests might be
applied for this illustrative example. Further application of the process for baseline scenario
determination is provided in Section 5 for the cogeneration project family.
7
http://cdm.unfccc.int/methodologies/PAmethodologies/AdditionalityTools/Additionality_tool.pdf,
November2005.
March 2007 21
3.2.1 Common Practice Assessment
The common practice assessment provides a realistic and practical means to evaluate the
baseline candidates. The common practice assessment is applied to compare the existing
common practice in the region to the baseline candidates, including the project activity. An
analysis of any other activities implemented previously or that are currently underway that are
considered similar to the project activity (in the same region and/or rely on a similar
technology, comparable scale, comparable regulatory framework, etc.) are included in the
common practice assessment. Similarly, the evaluation includes geographic areas that exhibit
circumstances similar to those surrounding the project activity (e.g., technological, resource,
socioeconomic, or political circumstances).
The following sources of information may be useful for assessing common practice:
N Vendor surveys of technology penetration or use;
N Review of permit revisions for plants in construction or equipment installations;
N Review of permit applications for planned or proposed plants, technologies, equipment or
practices; and
N Expert opinion.
The common practice test is used either to: a) determine the baseline scenario based on
common practice; or b) assess the GHG reduction projects financial attractiveness and/or
applicable barriers to implementation (i.e., the most economically attractive alternative and/or
least barriers to implementation would nominally be expected to be consistent with common
practice), depending on any applicable climate change regime requirements.
Flare Elimination Project Example Identifying Potential Baseline Candidates
In this example, an oil production operation has historically utilized associated gas as fuel in on-site
production operations, but has flared the excess associated gas. With changing market conditions in the
regional area, facilities are installed at the existing production site to recover the previously flared
associated gas and export the gas to an independently owned power station. Therefore, the emission
reduction project entails installation of gas compression, dehydration, metering and pipeline facilities to
recover and sell the previously flared gas from the existing operations.
The first step in the baseline screening process is to identify all potential baseline candidates, including
continuing current activities and the project activity itself.
Baseline candidates for this example project include:
1. Continuation of current activities: Associated gas continues to be flared, and gas market
demand is supplied through other means;
2. Flare elimination is a regulatory requirement;
3. Project activity: Gas is recovered and transported for sale to local markets;
4. Gas is reinjected or utilized for gas lift;
5. Gas is recovered for LNG export to global markets; and
6. Gas liquids (e.g., GTL) are recovered for export to regional markets.
March 2007 22
What is considered a typical practice in the region? Are there industry best-practice
standards in place that clearly set out a baseline scenario?
If there is an industry best-practice standard or technology in practice in the region, then the
minimum requirements under the best-practice standard could arguably be adopted as the
most likely baseline scenario. Within a region, operations with similar gas to oil ratio (GOR)
and built at the same time would be expected to exhibit similarities that make common
practice a suitable baseline scenario. However, in practice, it may be difficult to apply
common practice due to operational variations even within the same geographical region. In
these cases, sectoral practices across similar technologies may be more appropriate than
geographical practices. This is particularly important for the oil and natural gas industry, since
oil and natural gas fields in the same geographical area may have widely different
characteristics.
Is the baseline scenario consistent with customary practices in the region or sector?
Through this assessment, a likely baseline scenario would be one that demonstrates the
average GHG emissions or establishes a benchmark from similar project activities. For some
Flare Elimination Project Example Applying the Common Practice Test
For this flare elimination example, the common practice test would include an analysis of other activities
in the region considered similar to the project activity. This analysis would need to consider aspects
such as:
N Oil and natural gas production activities in the same geographic area with similar reservoir
characteristics, such as gas to oil ratio (GOR) and maturity of field; and
N Similar access to natural gas pipeline infrastructure and/or end use.
A list of similar activities would then be developed and analyzed to determine common practice.
Relevant information to make such a common practice determination ideally might include the following
gas utilization characteristics related to similar oil and natural gas operations:
N Percentage of associated gas flared (or vented);
N Percentage of associated gas exported for sale;
N Percentage of associated gas reinjected or utilized for gas lift; and
N Percentage of associated gas used as on-site fuel gas.
Alternatively, data to determine total gas flared per barrel of oil equivalent (BOE) production may be
reported to the government and available for analysis. The average percentage of gas flared across
similar operations could arguably be determined to be common practice, hence an appropriate baseline.
In actuality, the lack of publicly available data (in terms of the proportion of gas utilized versus gas
flared) may impede application of this detailed theoretical approach.
A more practical approach to determine the appropriate baseline may be to broadly assess whether
flaring occurs routinely from other existing operations. Qualitative or semi-quantitative information may
be necessary to support this assessment, such as qualitative knowledge of operational differences
between fields/reservoirs. For example, a common practice test could show that in a particular region, it
is common for operators of existing facilities to flare excess un-utilized associated gas, but that new
projects are typically designed for zero routine flaring.
March 2007 23
GHG reduction projects, it may be possible to consider similar activities within other industry
sectors as part of the benchmark (for example, comparing cogeneration from a refinery to
electricity generated by an electric utility company). As noted above, developing a
benchmark is particularly difficult for exploration and production operations, since oil and
natural gas fields have different characteristics, which change during the production cycle.
A key disadvantage to benchmarking is the cost associated with gathering the necessary data
for recent project activities in order to develop the baseline candidates. These costs are likely
greatest for the first assessment of a particular project activity type. However, once the data
for GHG emissions from most recent project activities are collected, project proponents
undertaking subsequent project activities can benefit from this information. These costs can
be reduced if the program administrator develops the benchmark or performance standard.
This would lead to cost reductions and an increase in certainty for project proponents.
3.2.2 Regulatory Assessment
Are there regulations in place that require the reduction activity? Is the GHG
reduction project operational prior to the deadline for compliance with applicable
regulations? Are there government policies or goals that apply to the reduction
activity?
Regulations and government policies may directly affect the GHG emissions of the project
activity or a baseline candidate, or may affect GHG emissions indirectly as a consequence of
their implementation (e.g., NOx controls may result in increased N
2
O emissions). Both
regulations and policies should be considered when assessing a project activity or baseline
candidates.
If the project activity reduces emissions beyond minimum regulatory requirements, then the
project activity may be eligible as creditable reductions for the increment beyond the baseline
scenario. (Under some regimes, this is referred to as regulatory surplus.) If the GHG
reduction project is operational prior to the regulatory compliance deadline, then the baseline
scenario for the period prior to regulatory compliance may be less stringent (i.e., result in
higher baseline emissions) and provide greater opportunity for emission reduction credits.
Under the CDM tool for the demonstration and assessment of additionality
8
, the project
activity and baseline candidates must comply with all applicable legal and regulatory
requirements, even if these laws and regulations have objectives other than GHG reductions,
e.g., to mitigate local air pollution. The CDM screening, however, does not consider national
and local policies that are not legally binding, or that are systematically not enforced.
8
http://cdm.unfccc.int/methodologies/PAmethodologies/AdditionalityTools/Additionality_tool.pdf,
November2005.
March 2007 24
In some cases, identifying legal requirements relative to potential baseline candidates is
complicated. The enforcement of laws and regulations may be uneven or weak because of
financial and/or administrative constraints on enforcement or regulatory agencies. For
example, a regulation may have been promulgated at the national level, but implementation at
the regional level may be weak. The following sources of information may be useful for
understanding enforcement levels:
N Regulatory permits to see what companies undertaking similar activities are required to
do;
N Fines administered for not complying with a given law; and
N Surveys of technology penetration or use, compliance actions, etc.
3.2.3 Barrier Assessment
What barriers exist that could prevent implementation of the proposed baseline
scenario?
In this assessment, all baseline candidates are examined relative to each potential barrier that
would prevent or reduce the likelihood of implementation. Potential barriers are shown in
Table 3-2.
Table 3-2. Potential Barriers for Baseline Candidate Assessment
Barrier Category Barrier Description/Examples
Legal
N Unclear credit ownership rights
N Poor or inadequate enforcement of law
N Immature legal framework
N Negative environmental impact assessment
Financial/budgetary
N Poor risk/reward profile
N Limited access to capital
N Insufficient or unavailable debt funding
N Immature capital market
Technology
N Higher perceived risks associated with implementing new
technology
N Lack of trained personnel or expertise
N Lack of educational resources to train labor force
N Inadequate supply or transport infrastructure for raw materials or
products
Flare Elimination Project Example Regulatory Assessment
For the example flare elimination project, a well enforced government regulation on gas venting
and/or flaring in the region or country would affect the baseline scenario assessment. Any
baseline candidates that do not meet the minimum regulatory requirements would be eliminated
from the analysis as nonviable. All potential baseline candidates must meet existing regulatory
requirements, i.e. if flare elimination is required by an enforced law, then this effectively
becomes the baseline scenario.
March 2007 25
Table 3-2. Potential Barriers for Baseline Screening, continued
Barrier Category Barrier Description/Examples
Market structure
N Market distortions that favor other technology (e.g., the fiscal
regime may be designed for oil and thus provide de facto
disincentives for gas recovery or even assign the ownership of
the gas to a different entity than the operators of the field.)
N High transaction costs
N Slow rate of technology penetration
Institutional/social
N Unstable social and/or political environment
N Social or cultural traditions slow adoption of technology or
practices
N Institutional, social, or political opposition to the
implementation of the technology or practice
Resource availability
N Insufficient or irregular supply of resources
Adapted from WBCSD/WRI, The GHG Protocol for Project Accounting, Table 8.1.
The importance of the barriers is assessed relative to each other and for each baseline
candidate. The degree to which an identified barrier affects each baseline candidate may be
characterized qualitatively using descriptive explanations and relative rankings (e.g., high,
medium, or low). Rankings can be presented in a matrix to enable side-by-side comparison.
Baseline candidates are eliminated if it is determined that the barriers would prevent or
significantly reduce their likelihood of implementation. The baseline candidate that faces
fewer barriers to implementation than the other possible candidates can arguably be identified
as the most likely to occur.
Flare Elimination Project Example Barrier Assessment
In the barrier assessment process for the flare elimination example, barriers are identified that would
prevent or reduce the likelihood of implementation of baseline candidates. Some potential barriers related
to the flare elimination project include:
N Complex commercial situation for marketing associated gas, due to multiple stakeholders involved
in joint venture partnerships, third party operators, government policies, infrastructure owners,
etc.;
N Lack of infrastructure integration between consumers and producers (i.e., stranded gas with
limited to no access to gas pipeline infrastructure);
N Production Sharing Agreements (PSAs) that do not allow the costs associated with gas
infrastructure development to be recovered;
N Variability in production rates of associated gas, leading to uncertainties in supply;
N Ownership rights to associated gas (e.g., in many countries, the government has full ownership
rights to the associated gas);
N Market pricing influences, such as competing non-associated, produced gas and subsidies for
alternative fuels; and
N Financial risks associated with lack of payment guarantees from consumers, especially in
impoverished regions.
March 2007 26
3.2.4 Investment Ranking
Are there financial or economic incentives that make a particular baseline scenario a
more attractive investment option than other scenarios?
For screening baseline candidates, one assessment is to rank the candidates in accordance
with the investment requirements and attractiveness to investors. The investment ranking
analysis seeks to assess expected financial returns that may arise from implementing the GHG
reduction project or a baseline candidate without considering non-revenue benefits and
without accounting for identified barriers other than cost. Investment analysis excludes any
potential revenues associated with the sale of GHG reduction credits.
In establishing the investment ranking of baseline candidates, the following relevant costs
should be included:
N Investment costs;
N Operating and maintenance costs;
N Revenues; and
N Subsidies/fiscal incentives, where applicable.
Flare Elimination Project Example Barrier Assessment, continued
These barriers are assessed qualitatively relative to the baseline candidates in the following matrix.
Barriers
C
o
m
m
e
r
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i
a
l
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p
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x
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F
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a
n
c
i
a
l
r
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s
k
s
Overall Barrier
Assessment
M H M M H M M
Continuation of
current activities
NP NP NP NP NP NP NP
Flare elimination
project
P P P P P P P
Re-injection or
Gas lift
NP NP NP NP NP NP NP
Gas recovered for
LNG
P P P P P P P
Gas-to-liquids
P P P P P P P
P = barrier is present; NP = barrier is not present
H = significant barrier; M = moderately significant barrier; L = less significant barrier
GHG Guidelines FINAL 6.5 text 23/4/07 11:46 am Page 33
March 2007 27
Assumptions used for capital costs, fuel pricing, equipment lifetimes, discount rates or cost of
capital should be appropriate for the region or sector and transparently reported. The baseline
scenarios are ranked according to an appropriate financial indicator [e.g., internal rate of
return (IRR)], and the one that represents the most financially attractive option is considered
the most likely to occur and determined to be the baseline scenario. In practice, this
investment ranking can be difficult because financial return is only one of the relevant factors
in making financial decisions.
Annex C of the WBCSD/WRI Project Protocol provides further details on assessing net
benefits using investment analysis.
3.3 Assessment Boundary
The assessment boundary should capture all relevant effects of the project activity as
discussed in Section 2. The general guidance for determining the assessment boundary is to
expand the range as far as possible taking into consideration the relevant GHG emission
sources, sinks and reservoirs controlled by the project proponent, related to and/or affected by
the GHG reduction project. In practice, the ability to quantify and monitor emissions,
significance of the sources, or the ability to attribute the effects to the project activity are
considerations for inclusion within the assessment boundary.
Although the assessment boundary should capture all relevant effects of the project activity,
particular regimes may have specific requirements for defining the assessment boundary. For
example, CDM defines the GHG reduction project boundary as encompassing all
anthropogenic emissions by sources of greenhouse gases (GHG) under the control of the
project participants that are significant and reasonably attributable to the CDM project
Flare Elimination Project Example Investment Ranking
Investment ranking looks at the relative investment of the baseline candidates and ranks them
according to investment requirements and/or attractiveness to project investors. For the flare
elimination project example, some potential considerations are presented below.
For concessions in many regions, only joint ventures partners can make investment decisions and
outside parties may not be able invest. Thus, flare elimination projects may or may not be funded
depending on the investment priorities of the joint venture partners.
For evaluating baseline candidates (i.e., gas recovery and export to local market), investment
ranking considerations may include:
N Fuel pricing may be influenced by competing, lower cost fuel supply to market, hence
impacting project return; and/or
N Project investment the return on investment for taking gas to market may be marginal, at
best, due to high capital investment.
N For LNG or gas liquids recovery, the project return may be relatively high even though
capital investment is high, due to favorable product pricing in global or regional markets.
By ranking the results of the investment analysis for the project activity and baseline candidates, it
may be possible to show that the least cost option is to continue flaring, or that the flare elimination
project ranks lower than typical capital investments made by the operator.
March 2007 28
activity. Any emissions outside the control of the project proponent are termed leakage, also
referred to as secondary effects
9
in other programs (e.g., WBCSD/WRI Project Protocol).
The extent and detail to which secondary effects are included in the assessment boundary are
policy decisions of GHG registries and climate change regimes. Based on the policy
requirements, secondary effects may include:
N Life cycle impacts GHG emissions upstream or downstream of the intended change
caused by the project activity. These are referred to as secondary effects in the
WBCSD/WRI Project Protocol;
N Activity shifting the physical displacement of GHG generating activities that would
have occurred in the baseline scenario to other locations;
N Market leakage GHG emissions resulting from changes in supply or demand in
commercial markets as a result of the projects activities; and
N One-time effects GHG emissions resulting from one-time occurrences associated with
the project activity, generally construction, installation, commissioning, and/or
decommissioning phase activities.
Another assessment boundary consideration is permanence, or the ability of a GHG sink or
reservoir to store GHG emissions indefinitely, such as for a carbon capture and geological
storage (CCS) project. For CCS projects, the potential exists for stored carbon to be re-
emitted to the atmosphere at a later date. Different regimes have proposed methods to
account for the potential reversibility of stored sequestered emissions for CCS projects.
Considerations regarding permanence are addressed further in the CCS Project Family
example presented in Section 6 (released as a separate document).
9
A secondary effect refers to an unintended change in GHG emissions, removals, or storage caused by a project
activity, while a primary effect refers to the intended change in GHG emissions, removals, or storage caused by
the project activity (WBCSD/WRI, Project Protocol, 2005).
March 2007 29
Flare Elimination Project Example Assessment Boundary
Sources within the assessment boundary should be identified consistent with Section 2.5. However,
some regimes require a specific assessment boundary. For the flare elimination project example, the
assessment boundary definition under some regimes, such as the CDM, would include all process
operations relevant to the project and baseline that are under the control of the project proponent. In
this instance, the assessment boundary would include:
N Emission sources from on-site operations associated with gas flaring, recovery, processing,
compression, and metering; and
N Emission sources from off-site operations associated with pipeline transport, under the control
of the project proponent.
(These emission sources would be associated with the primary effects under the WBCSD/WRI Project
Protocol.)
The secondary effects associated with the flare elimination project example might include:
N Life-cycle impacts: Downstream utilization of the associated gas;
N Market leakage: Increase in gas demand as a result of the project; and
N One-time effects: Emissions associated with construction and/or start-up of the new process
equipment.
Flare
meter
Vapor recovery
compressor
Oil well
with
associated
gas
Separator(s)
Heater/ Treater
Oil stock tank
Fuel gas
Water tank
M&R Station or
LNG Plant
Natural gas or
LNG to market or
end use
combustion
dehydrator
Acid Gas
Removal
cooler
Compressor
SO
2
Regenerator
vent
Flare
meter
Vapor recovery
compressor
Oil well
with
associated
gas
Separator(s)
Heater/ Treater
Oil stock tank
Fuel gas
Water tank
Assessment
Boundary
M&R Station or
LNG Plant
Natural gas or
LNG to market or
end use
combustion
dehydrator
Acid Gas
Removal
cooler
Compressor
SO
2
Regenerator
vent
March 2007 30
S
This section provides a brief overview of key considerations for several GHG reduction
project families applicable to oil and natural gas industry operations. The project families
considered cogeneration, carbon capture and geological storage, flare reduction, fuel
switching, and energy efficiency improvements are of particular interest to the oil and
natural gas industry due to their potential for substantive reductions in GHG emissions from
industry operations.
4.1 Cogeneration
Cogeneration, also known as combined heat and power (CHP), is the simultaneous production
of electricity and process heat from the same fuel. Cogeneration projects have the potential to
reduce GHG emissions in two ways:
1. The cogeneration system represents an improvement in overall energy efficiency
compared to the separate generation of electricity and steam; and
2. The cogeneration fuel source may replace or displace other more carbon intensive
fuel sources, in relation to steam generation, electricity generation, or both. This
impact is essentially a fuel switch project activity, which is addressed separately
in Section 4.4.
For the oil and natural gas industry, cogeneration projects provide an efficient means of
generating steam and electricity needed for refinery operations or for steam-flood in enhanced
oil recovery operations. However, specific issues and challenges related to quantifying GHG
emission reductions associated with a cogeneration project include the following:
N Calculation of GHG reductions Where the cogeneration project replaces previously
imported electricity and/or steam, an increase in direct emissions due to onsite fuel
combustion results. However, quantifying the emission reductions must consider the net
change in GHG emissions from the imported energy streams in the baseline scenario
relative to the cogeneration emission sources created from the GHG reduction project.
There are numerous methodologies to do so, some requiring more data and complexity
than others. The choice will depend on the data availability, as well as the goal for
demonstrating emission reductions, whether for credits, internal reporting, etc. Specific
regimes or registries may require a particular approach. For example, to determine
baseline emissions associated with grid-supplied electricity, different baseline scenario
methodologies have been used or are considered acceptable.
N Variability in Grid Mix Due to frequent changes in the generation mix for grid-supplied
electricity, the baseline emission factor will likely change over time. Ex-post assessment
of the baseline emissions should utilize information on the actual generation mix for the
Section 4. Overview of GHG Reduction Project Families
Section 4. Overview of Reduction Project Families
March 2007 31
relevant time period. The frequency of adjusting the baseline emission factor may also be
dictated by the climate change regime or GHG registry.
N Policy Considerations Cogeneration facilities enable refineries to be power suppliers.
This is often overlooked where policy considerations focus on the electric generation
industry. Organizations such as the American Petroleum Institute (API) and the
International Petroleum Industry Environmental Conservation Association (IPIECA)
advocate for representation of the petroleum industrys position in policy decisions.
However, a project proponent may need to work with the climate change regime or GHG
registry to adapt program components for petroleum industry cogeneration applications.
N Additionality A complication for the steam generation portion of the cogeneration
project is the difficulty in justifying why cogeneration is not common practice for new
facilities with large steam loads, even if excess electricity is exported to satisfy the
internal steam load. From a technical perspective, cogeneration is likely to reduce
emissions from current or previous forms of steam generation, and therefore result in a
credible emission reduction. Whether or not this activity is determined to be common
practice, and therefore becomes the baseline scenario, is a policy matter established by the
climate change regime or GHG registry.
N Ownership and Potential Double Counting of Emission Reductions Ownership of the
emission reductions normally reside with the entity responsible for the investment in the
project. For a cogeneration unit, this would generally be the entity that owns or controls
the unit. However, there is a potential for multiple parties to claim credit for emission
reductions associated with utilizing the energy streams in place of less efficient sources of
electricity or heat/steam.
4.2 Carbon Capture and Geological Storage
Carbon dioxide (CO
2
) capture and geological storage (CCS) refers to the chain of processes to
collect or capture a CO
2
gas stream, transport the CO
2
to a storage location, and inject the CO
2
into a geological formation
10
for long-term isolation from the atmosphere. Compared with
other emission reduction projects, CCS involves the generation of CO
2
gas, but emissions to
the atmosphere are avoided because the CO
2
is injected and ultimately stored in a geological
formation on a permanent basis. Examples of geological formations suitable for storage
include depleted oil and natural gas reservoirs, unmineable coal seams, deep saline
formations, etc. Candidates for CO
2
capture are separation from natural gas if the CO
2
content is larger than the sales gas specifications or for the natural gas to be used for LNG,
large stationary sources, such as from electric power plants and other large industrial
facilities.
Application of CCS for climate change mitigation builds on existing operations, in particular
large-scale CO
2
injection and storage in depleted oil fields is already taking place as a result
10
For the purpose of this project family, geologic storage reservoirs explicitly exclude ocean sequestration.
March 2007 32
of enhanced oil recovery (EOR) operations. Geologic structural and stratigraphic traps have
demonstrated the ability of reservoirs to seal and store hydrocarbons for millions of years.
The mechanisms that initially trapped these hydrocarbons remain intact as fluids are extracted
from or injected into these reservoirs. The proven ability for hydrocarbon reservoirs to
successfully trap and store fluids for several million years demonstrates the viability of these
formations for long-term CO
2
storage. This is further enhanced by other mechanisms that
more readily retain CO
2
in the subsurface than hydrocarbons (i.e., capillary trapping,
dissolution in water, and mineralization).
In order to create a GHG emission reduction, CCS projects must result in the long-term
confinement of CO
2
away from the atmosphere. The project family for CCS addresses risk
management in terms of site selection, as well as monitoring to provide assurance that the
CCS project is performing as expected. Technical and policy issues associated with
quantifying GHG emission reductions from CCS include the following:
N Permanence/Reversibility Although CCS projects will be selected and operated to avoid
physical leakage, there exists a small probability that physical leakage may occur and
remediation methods will be needed, either to stop the leak or to prevent/minimize
impacts. Should physical leakage occur, net emission reductions should be adjusted
accordingly.
N Eligibility In some regimes, geological sequestration projects may not be eligible as a
candidate GHG reduction project.
N Additionality Also in some regimes, the eligibility of a GHG reduction project as a
candidate for emissions reduction credits may be dependent on the financial viability of
the project activity without the revenues from the sale of CERs. The project proponent
may need to demonstrate that the project activity is not a financially attractive investment
even with the increased oil production (or methane production from enhanced coal bed
methane [ECBM] or enhanced gas recovery [EGR] operations).
N Calculation of GHG reductions The assessment boundary should consider emissions
associated with CO
2
co-produced with oil and/or gas, and its disposition. Policy decisions
from some climate change regimes may require accounting for emissions that result from
the combustion of oil or natural gas produced from EOR, ECBM, and/or EGR operations.
N Ownership Multiple parties may be involved in the operation or control of the different
elements of the CCS chain, or multiple parties may use the same geological structure for
storing CO
2
or for producing hydrocarbons. These arrangements complicate the
allocation of benefits or the assignment of liability.
4.3 Flare Reduction
Reduced flaring of gas associated with the extraction of crude oil minimizes the waste of
resources and contributes to reducing GHG emissions. Potential options for utilizing
otherwise flared natural gas are shown in Table 4-1.
March 2007 33
Table 4-1. Potential Flaring Reduction Scenarios
GHG Reduction
Project type Baseline Candidate Conditions Project Activity
Existing Operation No gas export route - all excess
gas flared
Associated gas is reinjected for disposal or field
pressure maintenance
Associated gas is exported to market
Existing Operation No gas export route Entrained liquids are recovered rather than flared
and added to crude export line - remaining gas
flared
Existing Operation Gas export route - high
operational flaring
Operational improvements (e.g. minimize
compressor downtime or flame-out) reduce the
volume of gas flared
New Operation Associated gas reinjected
Associated gas exported to market
Entrained liquids are recovered rather than flared
and added to crude export line - remaining gas
flared
Specific issues and challenges related to quantifying GHG emission reductions associated
with flaring reductions include the following:
N Variability - In production fields, more energy is required to produce a barrel of crude as
the field is depleted. In such cases, an emission reduction project activity may reduce
emissions relative to the baseline scenario, yet still increase over time. This is illustrated
in Figures 4-1a and 4-1b. This issue will be addressed through the Flare Reduction
Project Family (planned for development in 2007).
N Additionality For flare reduction projects in countries or regions that have targets,
guidelines, or other non-enforceable policies associated with flaring activities, specific
climate change regimes may require the project proponent to demonstrate that the flare
reduction project is not business as usual. In addition, for a GHG reduction project where
the flared gas is captured and reinjected into the production field, policy requirements for
particular climate change regimes may require the project proponent to demonstrate that
the reinjection was not implemented to maintain oil production.
N Permanence For reinjection in particular, the permanence of the emission reductions
may need to be addressed based on the specific characteristics of the GHG reduction
project and the reservoir. A consideration of the suitability of the reservoir for long-term
gas storage may be required under specific climate change regimes.
N Affected Sources, Sinks, and Reservoirs A potential issue for flaring reduction projects
is the impact on oil production and energy demand in downstream markets. This applies to
re-injection, which can be used to enhance oil production, as well as the capture of
previously flared gas streams for transport and consumption in local markets.
The Global Gas Flaring Reduction program provides guidance on addressing these types of
specific concerns related to flare reduction project activities (GGFR, 2004).
F
March 2007 34
T
Figure 4-1a. Illustration of Baseline
Emission Rate Independent of
Throughput
Figure 4-1b. Illustration of Increasing
Project Emission Rate, Though at a
Rate Reduced from the Baseline
Scenario
4.4 Fuel Switching
For the purposes of this document, the distinction between a fuel switching project and an
energy efficiency improvement project is that fuel switching entails the use of a different fuel.
Fuel switching projects may also include retrofit of burners, changes in the fuel supply system
at the facility, changes in the combustion air delivery system, etc.
Combustion efficiency may change with different fuels, requiring more or less fuel to
generate the same energy. As such, a fuel switching retrofit may result in changes in system
efficiency, and potentially an overall change in system capacity and/or output due to the
retrofit project activity. Fuel switching retrofit installations may also result in an overall
extension of the life of the equipment.
with fuel switching reductions include the following:
N Ownership Ownership of the emission reductions attributable to a fuel switching project
will normally reside with the entity responsible for the investment in the project, which is
generally the owner/operator of the combustion equipment where the fuel replacement is
being made.
T
G
H
G
e
m
i
s
s
i
o
n
s
o
r
t
h
r
o
u
g
h
p
u
t
Time
Throughput
Baseline
emissions
G
H
G
e
m
i
s
s
i
o
n
s
o
r
t
h
r
o
u
g
h
p
u
t
Time
Throughput
Baseline
emissions
Post-project
emissions
Project emission rate <
Baseline emission rate
March 2007 35
However, potential scenarios may arise in the oil and natural gas industry related to the
supply of natural gas, rather than the consumption of the gas. An example is where a
company makes natural gas available and shoulders the financial risk, including
infrastructure investment and demand/price risks, of supplying the gas to a downstream
consumer. The gas supplier has no equity interest or operational control over the
downstream combustion of the gas, but may invest in the equipment upgrades or retrofit
of existing third party combustion equipment to maximize the availability of gas. In these
scenarios, the ownership of the emission reduction credits may not be straightforward in
the absence of legally binding contractual ownership rights.
N Baseline Scenario Assessment As discussed in Section 3, comparative assessments used
to determine the baseline scenario may include an assessment of barriers to the project or
economic incentives/disincentives. For example, in some regimes, such as CDM, the
eligibility of a fuel switching project as a candidate GHG reduction project may be
dependent on the financial viability of the project activity without the revenues from the
sale of Certified Emission Reductions (CERs). In this case, the project proponent would
need to demonstrate that the GHG reduction project is not a financially attractive
investment without the CER revenues, and therefore is not considered business as usual.
The argument is that if the fuel switching project is financially viable on its own merit,
then it would have happened anyway.
For most fuel switching projects, the financial integrity of the GHG reduction project is
dependent on somewhat uncertain and subjective fuel price projections for the
replacement and historic fuels, respectively. For fuel switching project methodologies
approved by the CDM Executive Board (UNFCCC, CDM EB), the monitoring
methodology integrates a requirement to monitor the fuel pricing of both the replacement
fuel and the historic fuel in the local region of the project activity. As long as the
replacement fuel is more expensive than the historic fuel, the baseline scenario of the
historic fuel is considered appropriate. If the price of the replacement fuel becomes lower
than the historic fuel, then the GHG reduction project itself would be considered the
baseline scenario.
Another baseline scenario consideration is how the economic assessment may be altered
by other project activities of its type. If the project activity is considered new technology
in the region, representing the first of its kind, it may ultimately have an influence over the
use of that technology in the future by the availability of the replacement fuel. An
example is a GHG reduction project that uses new technology to switch fuel use from coal
to natural gas, where coal represents the most widely used technology and gas
infrastructure is not adequate to deliver the required amount of fuel to the project activity
site. This condition of an insufficient gas supply network is a resource barrier that must
be overcome. At this point in time, the GHG reduction project is an early adopter, and
would be considered additional under the CDM. As more plants switch to gas, more
pipelines are built, access to the fuel is easier, and the effect of the barrier decreases.
March 2007 36
After a certain point, the lack of gas infrastructure may no longer be a resource barrier as a
critical number of plants have switched to gas and additional pipelines have been built to
supply these plants. For the newer plants, the financial analysis will be different than for
earlier plants and the baseline scenario assessment will need to reflect current conditions.
N Additionality In some regimes, fuel switching may be necessary to meet certain NOx or
particulate emission regulatory requirements. The eligibility of the resulting GHG
emissions reductions must be considered in the context of additionality requirements
associated with the specific climate change regime.
4.5 Energy Efficiency Improvements
Overall efficiency can be improved in two ways: by improving the efficiency of an individual
piece of equipment or group of equipment, or by improving process efficiency.
with energy efficiency improvements include the following:
N Variability in Operations Due to the dynamic nature of oil and natural gas industry
operations, the energy requirements are also variable over time. This is especially true in
heat transfer equipment where fouling requires more energy to produce the required heat
duty. In such cases, a GHG reduction project may reduce emissions relative to the
baseline scenario, yet still increase over time (refer to Figure 4-1). In some cases, the
project activity may decrease the rate at which emissions increase with time. For example
an energy efficiency project may reduce fouling in a heat exchanger. The exchanger still
fouls, but at a much lower rate, thus decreasing energy used and, consequently, GHG
emissions. These are examples of dynamic baselines.
For these situations where operations vary over time, the baseline and project emissions
may be best expressed on a normalized basis, such as emissions per unit of energy output.
In addition, the valid time length for the baseline scenario should reflect this variability.
N Efficiency Degradation Just as efficiency can deteriorate over time for the project
activity conditions, in the absence of the GHG reduction project, the efficiency of the
existing equipment would also have deteriorated over time. This is another example of a
dynamic baseline. Baseline scenario efficiency information may be available through the
equipment manufacturer. Where the equipment is properly maintained, the impact of the
efficiency deterioration is likely immaterial. Where this impact is material, the change in
baseline emissions should be accounted for.
N Equipment Capacity Variable energy demands may impact what would have happened
in the absence of the GHG reduction project. A potential scenario involves delaying the
need for additional capacity by implementing energy efficiency improvements. When the
energy efficiency improvements are no longer sufficient to meet the capacity
requirements, a new baseline scenario is required. This baseline scenario should consider
March 2007 37
what would have happened in the absence of the project activity at the higher capacity.
Several potential options include:
N The addition of a small package plant or equipment;
N Importing the additional energy from another location; or
N Replacing the old equipment with new equipment.
The GHG reductions going forward are then evaluated against this new baseline scenario.
N Ownership Ownership of the emission reductions attributable to an energy efficiency
project will normally reside with the entity responsible for the investment in the project
activity. Complications can occur where energy efficiency improvements reduce
electricity consumption, an indirect emission source. Generally efficiency improvements
in the generation of electricity are considered to be owned by the entity generating the
electricity, while efficiency improvements in the use of electricity are considered owned
by the specific user that implemented the improvement.
N Baseline Scenario Assessment Regulations may exist that require equipment tuning to
maintain efficiency and minimize other air emissions. In this situation, the eligibility of
the resulting GHG emissions reductions must be considered in the context of additionality
requirements associated with the climate change regime of interest.
March 2007 38
S
5.1 Overview
This section presents the first of five greenhouse gas (GHG) reduction project families.
Guidelines are provided for evaluating emission reductions associated with replacing the
separate generation of electricity and steam with a cogeneration unit. This section follows the
framework for quantifying emission reductions, as presented in Section 2, Table 2-1. In
addition, issues and challenges are addressed through case studies demonstrating the technical
analysis for three potential applications (provided in Appendix B-1).
5.2 Introduction
Cogeneration, also known as combined heat and power (CHP), is the simultaneous production
of electricity and process heat from the same fuel, generally natural gas. In these units, the
heat produced from the electricity generating process (e.g., from the exhaust systems of gas
turbines or from conventional boilers with steam turbines) is captured and used for process
steam, furnace applications, hot water heating, space heating, and/or other thermal needs.
The most common application of cogeneration for the oil and natural gas industry is where a
new cogeneration unit is installed to replace a dedicated steam boiler(s) within an existing
refinery or crude production operation. For this type of application, the cogeneration unit
generally replaces imported electricity from the grid and may produce excess electricity
and/or steam for export. Other applications include installing a new cogeneration unit as part
of a new refinery operation or retrofitting an existing fully integrated cogeneration unit with
newer, more efficient technology.
5.3 Project Definition
As indicated in Section 4.1, cogeneration projects have the potential to reduce GHG emissions
in two ways:
1. The cogeneration system represents an improvement in overall energy efficiency
compared to the separate generation of electricity and steam; and
2. The cogeneration fuel source may replace or displace other more carbon intensive
fuel sources, in relation to steam generation, electricity generation, or both. This
impact is essentially a fuel switching project activity, which is planned as a
separate Project Family.
There are two common configurations for CHP systems. The first, shown in Figure 5-1(a),
utilizes a boiler to make high-pressure steam that is fed to a turbine to produce electricity.
The turbine is designed so that a stream of low-pressure steam is available to feed an
industrial process. Thus, one fuel input to the boiler supplies electric and thermal energy by
Section 5. Cogeneration Project Family
March 2007 39
extracting uncondensed steam from the turbine driving the electric generator. This
boiler/turbine CHP approach has been the most widely used CHP system to date
(WRI/WBCSD, 2006). The second CHP approach, illustrated in Figure 5-1(b), utilizes a
combustion turbine or reciprocating engine to drive an electric generator, and thermal energy
is recovered from the exhaust stream to make steam or supply thermal energy.
(a)
(b)
Figure 5-1. Typical CHP Configurations
Direct emissions, thermal energy and electricity demands, and indirect energy imports and
energy exports are all key considerations for determining cogeneration project GHG emission
reductions.
5.4 Baseline Scenarios
As described in Section 2.3, potential baseline candidates represent situations or conditions
that plausibly would have occurred in the absence of the GHG reduction project. For a
cogeneration project, this requires separate consideration of the steam and electricity
generation aspects, resulting in a separate baseline scenario for each of the two energy
streams.
5.4.1 Baseline Candidates for Electricity Generation
A common baseline candidate for the electricity generation component of the cogeneration
project is grid-connected electricity import. However, the grid-connected electricity sector is
complex. Electricity can be generated from many different sources and fuels, and GHG
emissions can vary from zero (renewable sources) to high emitters. Because demand for
electricity varies minute by minute, grids operate with a mix of generating plants including
baseload plants that operate continuously because there is always some demand, and load-
following or peak load plants whose output varies as demand changes.
Baseload plants operate during both peak and off-peak periods either because of the nature of
the generation technology (run-of-river hydro) or the low cost energy source (coal-fired plant
Boiler
Fuel
High Pressure
Steam
Electricity
Steam
Turbine
Water
Steam to
Process
Generator
Boiler
Fuel
High Pressure
Steam
Electricity
Steam
Turbine
Water
Steam to
Process
Generator Generator
Heat
Recovery
Boiler
Water
Steam to
Process
Combustion
Turbine Fuel
Hot Exhaust
Gases
Electricity
Generator
Heat
Recovery
Boiler
Water
Steam to
Process
Combustion
Turbine Fuel
Hot Exhaust
Gases
Electricity
Generator Generator
March 2007 40
located near the mine). Baseload plants are the last to be shutdown in response to decreases
in power demand. Load-following plants are generally smaller plants, often gas-fired, oil or
small hydro (except run-of-river hydro) stations. Power generation plants may also be
referred to as firm or non-firm. Generating plants whose output can be controlled supply firm
power, while sources that fluctuate depending on natural conditions, such as wind, supply
non-firm power.
Defining the grid may also be complicated. The grid may encompass an entire nation or it
may reflect electricity generation for a region, where a region can range from a small, well-
defined area to an area that crosses national borders.
The inherent complexity of the grid can make it difficult to determine exactly what source(s)
will be displaced by a new grid-connected electricity project. Appendix B-2 summarizes
different baseline scenario methodologies available for examining grid-displacement
reduction projects. The appendix table also indicates programs where the different
approaches have been applied or accepted. The baseline scenario methodology will depend
on the specific GHG reduction project situation, including, the goal of demonstrating
reductions (i.e., internal reporting, credits, etc.), the availability of data, costs, and the
acceptability of the chosen approach by the GHG registry or climate change regime. For
example, it may be a policy decision by the specific GHG program or climate change regime
whether the cogeneration project will be evaluated in the context of average emission factors
that are applicable to the electric generation mix currently serving the region, or relative to
marginal emission factors that are representative of newer generation technologies in the local
market.
In addition, due to frequent changes in the generation mix for grid-supplied electricity, the
baseline scenario will change with time and should be reevaluated periodically as appropriate
for the particular location or GHG reduction project situation. The frequency of evaluating
the baseline scenario may also be dictated by the climate change regime.
5.4.2 Steam Generation Baseline Candidate Considerations
Common baseline candidates for steam generation include on- or off-site steam production in
less efficient steam boilers. In addition to the efficiency improvement for steam generation in
a cogeneration unit, the steam generation portion of the GHG reduction project may also
represent a fuel switch over the baseline scenario to a less carbon intensive fuel.
A complexity for the steam component of the baseline scenario occurs where the steam output
from the cogeneration unit exceeds the capacity of the old steam generation equipment being
replaced. For the incremental capacity beyond that for the replaced boilers, the baseline
candidate corresponds to what would have happened in the absence of the GHG reduction
project at the higher capacity. Several potential options include (but are not limited to):
N The addition of a small package boiler;
N Importing the additional steam from another location;
N Replacing the old boiler or turbine with new equipment; or
March 2007 41
N Replacing the old boiler or turbine with a cogeneration unit.
For the incremental energy that exceeds the capacity of the baseline equipment, the baseline
scenario would be identical to that for a new project activity.
Similarly, where excess steam is produced by the cogeneration project and exported to a third
party, the baseline conditions for the incremental steam that is exported should be considered
relative to other methods of generating this steam. The options listed above would apply here
also.
5.5 Emission Sources and Assessment Boundary
As discussed in Section 2.2.1, the consideration of potential emission sources within the
assessment boundary should include those that are controlled by the project proponent, related
to the cogeneration project, or affected by the cogeneration project. The assessment boundary
includes both project activity and baseline sources that are considered for determining an
emission reduction. In addition, the assessment boundary also includes changes in emissions
from displaced electricity generation in the electric grid.
A checklist of potential sources is provided in Table 5-1. GHG emissions occur from the
combustion of fossil fuels in the CHP plant to generate multiple energy streams. The GHG
emissions of interest include carbon dioxide (CO
2
), methane (CH
4
) and nitrous oxide (N
2
O).
Table 5-1. Potential Emission Sources within the Assessment Boundary
Potential Emission Sources
Relation to the
Project
Proponent Considerations
Baseline
Scenario
' CO
2
, CH
4
and N
2
O emissions from offsite
cogeneration fuel combustion allocated to
onsite electricity or steam usage
Related ' Baseline emissions allocated
to imported and exported
electricity will be dependent
on the chosen methodology
(see Appendix B-2)
' CO
2
, and to a lesser extent, CH
4
and N
2
O
emissions from onsite fuel combustion
associated with on-site steam generation
Controlled ' CH
4
and N
2
O emissions are
likely de minimis.
' Vented and fugitive CH
4
emissions, as
well as CO
2
, CH
4
and N
2
O combustion
emissions, associated with extraction,
processing, and transport of natural gas to
the electricity and/or steam generation
facility
Controlled,
Related or
Affected
' CH
4
emissions from
extraction, processing, and
transport sources may be
considered irrelevant if they
are the same in the GHG
reduction project and
baseline, or if the difference
is not material.
Project
Activity
' CO
2
4
and N
2
O
emissions from onsite fuel combustion
associated with electricity and/or steam
generation
Controlled or
Related
' CH
4
and N
2
O emissions are
likely de minimis.
' CH
4
emissions from vented or fugitive
sources within the facility associated with
natural gas fuel used to generate
electricity and/or steam
Controlled or
Related
' Data to estimate CH
4
emissions may not be
available. These emissions
are likely de minimis.
March 2007 42
Relation to the
Project
Project
Activity
' CO
2
, CH
4
and N
2
O emissions displaced
by the GHG reduction project through the
exported electricity and/or steam
Affected
' CO
2
, CH
4
and N
2
O emissions allocated to
imported electricity and/or steam
Related
4
emissions, as
well as CO
2
, CH
4
and N
2
O combustion
the cogeneration facility.
Controlled,
Related or
Affected
' CH
4
emissions from
extraction, processing, and
transport sources may be
considered irrelevant if they
are the same in the GHG
reduction project and
baseline, or if the difference
is not material.
' Cogeneration construction phase
emissions
Controlled or
Related
' Construction phase
emissions are likely de
minimis.
' Changes in product output for
neighboring energy users and associated
emissions caused by increased supply or
demand of steam and electricity.
Affected ' The effects of exported or
imported energy streams
from a single GHG
reduction project on the
existing market place are
usually difficult to assess
The cogeneration facility might exist within the fence of a refinery or production field or
outside the physical boundaries of the oil and natural gas companys facility. In addition, the
cogeneration facility might be wholly owned and operated by the oil and natural gas
company, or might be constructed/operated through a joint venture arrangement or by a third
party. Each of these arrangements impacts the evaluation of emission sources controlled by,
related to, and affected by the GHG reduction project. The checklist provided in Table 5-1
should be evaluated relative to the specific GHG reduction project conditions.
5.6 Emission Reductions
Emission reductions result from the difference between baseline emissions and GHG
reduction project emissions for a given time period, typically on an annual basis. This section
provides a general discussion on the quantification of GHG reduction project and baseline
emissions for a cogeneration project. This is illustrated further in the examples provided in
Appendix B-1.
5.6.1 Quantifying GHG Reduction Project Emissions
Emissions for a cogeneration project are primarily CO
2
emissions resulting from associated
fuel combustion. The API Compendium recommends estimating these combustion emissions
based on the quantity of fuel consumed and the fuel carbon content. Ex-post GHG reduction
project emissions should be based on metered fuel consumption rates and fuel-specific carbon
March 2007 43
contents from onsite measurements or from the fuel supplier. Produced energy, exported
energy streams, and on-site energy usage should be metered.
To a lesser extent, fuel combustion also produces CH
4
and N
2
O emissions. Section 4.3 of the
API Compendium provides CH
4
and N
2
O emission factors for stationary combustion sources.
These emissions may not be material.
Non-combustion CH
4
emissions may also result from vented and fugitive emission sources
associated with the natural gas supply to the cogeneration equipment. Emissions from these
sources are generally small compared to CO
2
emissions from combustion. Where specific
approaches for estimating these emissions are not provided by the particular climate change
regime or GHG registry, general emission factors for distribution sector vented and fugitive
emission sources can be applied to the natural gas equipment within the assessment boundary
for the cogeneration unit. Alternatively, these emission sources may be excluded from the
assessment due to their small impact relative to combustion emissions. The examples shown
in Appendix B-1 demonstrate the insignificance of CH
4
and N
2
O emissions relative to CO
2
for sources common to cogeneration projects.
5.6.2 Quantifying Baseline Emissions
Baseline emissions are the quantified tonnes of GHG emissions (in CO
2
equivalents) for the
relevant emission sources, sinks, and reservoirs corresponding to the baseline scenario.
For on-site energy generation displaced by the cogeneration project, information should be
available to quantify the baseline scenario emission rates for steam (tonnes CO
2
e/ MMBtu)
and electricity (tonnes CO
2
e/MW-hr) production. Generally this would include historical fuel
composition information, metered fuel consumption rates, metered electricity, and measured
steam properties and quantity.
Imported electricity and steam rates should be metered and/or tracked through energy
purchase records. For imported electricity or steam, the baseline emissions should be
quantified using fuel consumption rates and carbon content for the fuels used to produce the
imported energy streams, if known. Otherwise, emission factors corresponding to the specific
fuel and energy generation methods can be applied (refer to Section 4 of the API
Compendium). Where a grid average emissions methodology is appropriate, grid-based
emission factors should be used. The methodologies provided in Appendix B-2 apply to
quantifying baseline emissions for electricity grid displacement.
As in quantifying GHG reduction project emissions, the baseline emissions for a cogeneration
project are primarily CO
2
. Methane and N
2
O emissions also result from fuel combustion used
to generate electricity and steam, though these emissions are generally small compared to
CO
2
. Non-combustion CH
4
emissions may also result from vented and fugitive emission
sources associated with natural gas usage in the baseline scenario. These emissions are also
generally small compared to CO
2
emissions, and may be offset by similar emissions
associated with the GHG reduction project.
March 2007 44
5.7 Monitoring
As discussed in Section 2.7, monitoring should encompass appropriate parameters from which
to gauge emissions controlled by, related to and affected by the project activity, as well as
relevant to the baseline scenario. Monitoring may consist of measurements, modeling,
calculation methodologies, or estimation approaches.
For a CHP reduction project, monitoring would generally involve the following parameters:
N Data to determine the quantity of electricity generated and the quantity and characteristics
of steam generated;
N Data to determine emissions from fossil fuel combustion due to the project activity;
N Data to determine the electric grid emission factor; and
N Data to determine baseline emissions due to the displacement of thermal energy at the
project site.
Actual monitoring requirements are dependent on the specific project characteristics. In
addition, specific monitoring requirements may be dictated by a particular climate change
regime, if applicable.
5.8 Project Examples
Appendix B-1 provides three examples to demonstrate the application of procedures for
quantifying GHG reductions from hypothetical cogeneration projects for a one-year period.
The approach, emission factors, and assumptions used in these examples reflect the
methodology selected by the fictional project proponent based on the defined GHG reduction
project site-specific conditions and do not universally apply in all situations. For example, in
Exhibit 5.1 baseline emissions associated with imported and exported electricity are evaluated
using the combined margin approach (discussed further in Appendix B-2) based on the
availability of data and the project proponents assessment that it best reflects the grid
characteristics in the absence of the GHG reduction project. If adequate data are unavailable
or the same GHG reduction project is developed in another location, other approaches may be
appropriately used (e.g., a grid-averaged emission factor approach).
March 2007 45
References
API, 2004. Compendium of Greenhouse Gas Emissions Methodologies for the Oil and Gas
Industry, American Petroleum Institute, Washington, DC, February 2004.
http://www.api.org/ehs/climate/new/upload/2004_COMPENDIUM.pdf
DOE, 2006. Guidelines for Voluntary Greenhouse Gas Reporting, Office of Policy and
International Affairs, U.S. Department of Energy, Final Rule, 10 CFR Part 3000, RIN
1901-AB11, June 2006.
http://www.eia.doe.gov/oiaf/1605/FinalGenGuidelines041306.pdf
DOE, 2006. Technical Guidelines, Voluntary Reporting of Greenhouse Gases (1605(b))
Program, Office of Policy and International Affairs, U.S. Department of Energy,
March 2006.
http://www.eia.doe.gov/oiaf/1605/TechnicalGuidelines_March2006.pdf
EPA, 2004. Indirect Emissions from Purchases/Sales of Electricity and Steam, Climate
Leaders Greenhouse Gas Inventory Protocol Core Module Guidance, U.S.
Environmental Protection Agency, Climate Leaders, October 2004.
http://www.epa.gov/climateleaders/docs/indirectelectricityguidance.pdf
EPA EGRID. Emissions & Generation Resource Integrated Database, U.S. Environmental
Protection Agency, Washington, DC.
http://www.epa.gov/cleanenergy/egrid/index.htm
GGFR, 2004. A Voluntary Standard for Global Gas Flaring and Venting Reduction, Global
Gas Flaring Reduction (GGFR) A public Private Partnership, Report Number 4, World
Bank Group, May 2004
http://siteresources.worldbank.org/INTGGFR/Resources/gfrmethodologyno6revised.p
df
ISO, 2006. Greenhouse gases Part 2: Specification with guidance at the project level for
quantification, monitoring, and reporting of greenhouse gas emission reductions or
removal enhancements, International Standards Organization, IOS 14064-2, First
Edition, March 2006.
http://www.iso.ch/iso/en/commcentre/pressreleases/2006/Ref994.html
IPIECA/OGP/API, 2003. Petroleum Industry Guidelines for Reporting Greenhouse Gas
Emissions, International Petroleum Industry Environmental Conservation Association,
International, Association of Oil and gas Producers, and American Petroleum Institute,
December 2003.
http://www.ipieca.org/downloads/climate_change/GHG_Reporting_Guidelines.pdf
UNFCCC CDM EB. Baseline Methodologies for CDM Project Activities, Clean
Development Mechanism Executive Board, United Nations Framework Convention
References
References
March 2007 46
on Climate Change (UNFCCC).
http://cdm.unfccc.int/methodologies/PAmethodologies
WBCSD/WRI, 2005. The Greenhouse Gas Protocol: The GHG Protocol for Project
Accounting, World Business Council for Sustainable Development and World
Resources Institute, November 2005.
http://www.ghgprotocol.org/DocRoot/UnEDEUW9XBk2ifqHRglZ/GHG_Project_Proto
col.pdf
WBCSD/WRI, 2006. Allocation of GHG Emissions from a Combined Heat and Power (CHP)
Plant. Guide to calculation worksheets, Version 1.0, A WRI/WBCSD GHG Protocol
Initiative calculation tool, September 2006.
http://www.ghgprotocol.org/templates/GHG5/layout.asp?type=p&MenuId=OTAx
March 2007 47
Glossary
Activity Factor
The numeric value representing any action or operation that causes or influences the release
of GHG emissions (e.g., amount of fuel consumed or counts of emission sources); absolute
GHG emissions result when related to the rate of emissions from the action.
Additionality
A criterion often applied to GHG reduction projects, stipulating that project-based GHG
reductions should only be quantified if the project activity would not have otherwise
happened (i.e., that the project activity is distinctly different from the baseline scenario and/or
that project activity emissions are lower than the baseline emissions). (Adapted from
WBCSD/WRI Project Guidelines)
Affected Sources, Sinks, and Reservoirs
A GHG source, sink or reservoir materially influenced by a project activity, through changes
in market demand or supply for associated products or services, or through physical
displacement. (Taken from ISO 14064 Part 2)
Assessment Boundary
Encompasses all primary effects and significant secondary effects associated with the GHG
reduction project. Where the GHG reduction project involves more than one project activity,
the primary and significant secondary effects from all project activities are included in the
assessment boundary. (Taken from WBCSD/WRI Project Guidelines)
Baseline Candidates
Alternative technologies or practices within a specific geographic area and temporal range
that could provide the same product or service as the project activity. (Taken from
Baseline Emissions
An estimate of GHG emissions, removals, or storage associated with a baseline scenario or
derived using a performance standard (see baseline procedures). (Taken from WBCSD/WRI
Project Guidelines)
Baseline Procedures
Methods used to estimate baseline emissions. These Project Guidelines generally apply a
project-specific approach. Additional information on this method and on an alternative
method, the performance standard procedure, is provided in the WBCSD/WRI Project
Guidelines.
Glossary
Glossary
March 2007 48
Baseline Scenario
A hypothetical description of what would have most likely occurred in the absence of any
considerations about climate change mitigation. (Taken from WBCSD/WRI Project
Guidelines)
Benchmark
A reference level of emissions from an activity based on an assessment of a similar activities.
(Benchmarking The process of assessing relative performance against a group of peers)
Carbon Dioxide Equivalent (CO
2
Eq.)
The mass of a GHG species multiplied by the global warming potential (GWP) for that
species. It is used to evaluate the impacts of releasing (or avoiding the release of) different
GHGs on a common basisthe mass of CO
2
emitted that would have an equivalent warming
effect. (Adapted from the API Compendium)
Climate Change Regime
A generic term for (1) any mandatory, government or non-government initiative, system or
program that registers, reports, or certifies GHG emissions or reductions; or (2) any parties
responsible for developing or administering such initiatives, systems or programs. (Adapted
from WBCSD/WRI Project Guidelines definition of registry)
Co-generation unit/Combined Heat and Power (CHP)
A facility producing both electricity and steam/heat using the same fuel supply. (Taken from
the API Compendium)
Common Practice
The predominant technology(ies) implemented or practice(s) undertaken in a particular
geographical region or industrial sector. (Adapted from WBCSD/WRI Project Guidelines)
Controlled Sources, Sinks, and Reservoirs
A GHG source, sink or reservoir whose operation is under the direction and influence of the
project proponent through financial, policy, management, or other instruments. (Taken from
ISO 14064 Part 2)
Direct Emissions
Greenhouse gas emissions (or removals) from sources (or sinks) that are owned or controlled
by the reporting entity. (Adapted from the API Compendium)
Dynamic Baseline Emissions
Baseline emission estimates that change over the valid time length of the baseline scenario.
(Taken from WBCSD/WRI Project Guidelines)
Eligibility Criteria
Conditions that a GHG reduction project must meet irrespective of how its baseline scenario
is determined, how emission reductions are quantified, or how additionality is determined.
Glossary
March 2007 49
Emission Factor
The emission rate for a particular emission source per unit of the source, when related to the
activity data (e.g., amount of fuel consumed or counts of emission sources) results in absolute
GHG emissions. (Taken from the API Compendium)
Emissions
The intentional or unintentional release of greenhouse gases into the atmosphere. (Taken from
the API Compendium)
Enhanced Oil Recovery (EOR)
Artificial methods used to recover more oil after primary production by the natural reservoir
drive and, possibly, water-flooding. Common EOR methods include thermal (cyclic steam
stimulation, steam-flooding, and in-situ combustion), chemical (polymer, micellarpolymer,
and alkaline flooding), and gas miscible (cyclic, carbon dioxide stimulation, carbon dioxide
flooding, and nitrogen flooding). (Taken from the API Compendium)
Ex Ante Emissions
A predicted estimate of a project activitys performance (and possibly how baseline emissions
may change). (Adapted from WBCSD/WRI Project Guidelines)
Ex Post Emissions
Quantification of a project activitys performance based on actual data or information
collected over a period of time following the projects implementation. (Adapted from
Fuel Switching
Using an alternative fuel (usually of lower carbon intensity) to produce required energy.
(Taken from WBCSD/WRI Project Guidelines)
Fugitive Emissions
Releases of GHGs from pressurized equipment, such as joints, seals, packings, and gaskets.
Fugitive emissions also include evaporative or non-point sources, such as wastewater
treatment. (Taken from the API Compendium)
GHG Reduction
A decrease in GHG emissions (or an increase in removal or storage of GHGs) from the
atmosphere relative to the baseline emissions. Where the GHG reduction project consists of
more than one activity, the overall net reduction is the sum of the GHG reductions from each
individual activity. (Adapted from WBCSD/WRI Project Guidelines)
GHG Reduction Project
A specific activity or set of activities intended to reduce GHG emissions, increase the storage
of GHG emissions, or enhance GHG removals from the atmosphere. (Adapted from
Glossary
March 2007 50
GHG Registry
A generic term for: (1) any voluntary, government or non-government initiative, system or
program that registers, reports, or certifies GHG emissions or reductions; or (2) any parties
responsible for developing or administering such initiatives, systems or programs. (Adapted
from WBCSD/WRI Project Guidelines)
Global Warming Potential (GWP)
An index used to relate the level of emissions of various GHGs to a common measure. The
GWP is defined as the ratio of the amount of global warming or radiative forcing produced by
a given gas relative to the global warming produced by the reference gas CO
2
, for a specified
time period. As the reference gas, CO
2
has a GWP value of 1. The current GWP for methane
is 21, based on a 100-year time period, as recommended by the Intergovernmental Panel for
Climate Change (EPA, 1998). Therefore, one mass unit of methane has the same impact on
global warming as 21 mass units of carbon dioxide over a 100-year time period. (Taken from
the API Compendium)
Greenhouse Gas (GHG)
Any gas that absorbs infrared radiation in the atmosphere. Greenhouse gases include water
vapor, carbon dioxide, methane, nitrous oxide (N
2
O), hydrochlorofluorocarbons (HCFCs),
ozone (O
3
), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and sulfur hexafluoride
(SF
6
). (Taken from the API Compendium)
Indirect Emissions
The release of GHG emissions as a consequence of operations of the reporting company, but
physically occurring at sources owned or operated by another organization (e.g., purchased
electricity). (Taken from the API Compendium)
Intended User
An individual or organization identified by those reporting GHG-related information as being
the one who relies on that information to make decisions. (Taken from ISO 14064 Part 2)
Leakage
Emissions outside of the assessment boundary that are measurable and attributable to the
project. (Adapted from GGFR)
Materiality
A threshold for determining whether an error or omission in the estimated emissions (or
reduced emissions) results in the reported quantity being different from the true value to the
extent that it will influence decisions (Adapted from WBCSD/WRI Project Guidelines and
EPAs Climate Leaders).
Glossary
March 2007 51
Methane (CH
4
)
A hydrocarbon that is a greenhouse gas. Methane is released to the atmosphere through
anaerobic (without air) decomposition of waste, animal digestion, production and distribution
of oil and natural gas, coal production, and incomplete fossil fuel combustion. (Taken from
the API Compendium)
Monitoring
The assessment of GHG emissions and removals or other GHG-related data. (Adapted from
ISO 14064 Part 2)
Performance Standard
A GHG emission rate used to determine baseline emissions for a particular type of project
activity. A performance standard may be used to estimate baseline emissions for any number
of similar project activities in the same geographic area. (Taken from WBCSD/WRI Project
Guidelines)
Permanence
The state or condition at which removed or stored carbon would not be returned to the
atmosphere during the crediting period of the project. (Adapted from reversibility from EPA
Climate Leaders)
Policy Criteria
Requirements that must be met to qualify for creditable GHG reductions.
Primary Effect
The intended change caused by a project activity. Each project activity will generally have
only one primary effect. (Adapted from WBCSD/WRI Project Guidelines)
Project Activity
A specific action or intervention targeted at changing GHG emissions, removals, or storage.
It may include modifications or alterations to existing systems/processes, as well as the
introduction of new systems/processes. (Adapted from WBCSD/WRI Project Guidelines)
Project Proponent
A person, company, or organization developing a GHG reduction project (Adapted from
Related Sources, Sinks, and Reservoirs
GHG source, sink or reservoir that has material or energy flows into, out of, or within the
project. (Taken from ISO 14064 Part 2)
Reservoir
Any physical unit or component of the biosphere, geosphere, or hydrosphere with the
capability to store or accumulate a GHG removed from the atmosphere by a GHG sink or a
GHG captured from a GHG source. (Taken from ISO 14064 Part 2)
Glossary
March 2007 52
Secondary Effect
An unintended change in GHG emissions, removals or storage caused by a project activity.
Secondary effects may be positive (i.e., resulting in GHG reductions) or negative (i.e.,
resulting in GHG emissions). (Adapted from WBCSD/WRI Project Guidelines).
Sink
Any physical unit or process that removes GHG emissions from the atmosphere and stores
them. (Combination of ISO 14064 Part 2 and WBCSD/WRI Project Guidelines)
Source
Any physical unit or process that releases GHGS into the atmosphere. (Combination of ISO
14064 Part 2 and WBCSD/WRI Project Guidelines)
Static Baseline Emissions
Baseline emission estimates that do not change over the valid time length of the baseline
scenario. (Taken from WBCSD/WRI Project Guidelines)
Temporal Boundary
A contiguous time period that helps define the baseline candidates. The temporal range may
be defined by a number of factors, such as the dominance of a single technology for an
extended period of time, the diversity of options in a sector or region, and/or a discrete change
in an locations policy, technology, practice, or resource. (Adapted from WBCSD/WRI
Project Guidelines)
Ton
A short ton is equivalent to 2,000 US pounds. (Taken from the API Compendium)
Tonnes
A metric tonne is equivalent to 1,000 kg and 2,205 US pounds. Metric tonnes are the
standard convention for reporting greenhouse gas equivalent emissions used by IPCC and
other international climate change organizations. (Taken from the API Compendium)
Uncertainty
The range around a reported value in which the true value can be expected to fall. (Taken
from the API Compendium)
Appendix A
Summary of Climate Change Regimes
A
p
p
e
n
d
i
x

A

M
a
r
c
h

2
0
0
7

5
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i
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.

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e

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Appendix B-1
Cogeneration Project Case Studies
Appendix B
March 2007 65
Cogeneration Project Case Study #1:
New Cogeneration Unit To Replace Steam Generation From An
Offsite Steam Boiler
Project Definition
Refinery AXA constructs a cogeneration facility in the Electric Reliability Council of Texas
(ERCOT), a sub-group of the North American Electricity Reliability Council (NERC).
Table 1 summarizes information available from EPAs E-GRID database for ERCOT.
Table 1. ERCOT Emission Factor Information
Emission Rate for
Fossil Fuel Generation
Fossil Fuel
Generation, Net Generation,
Total CO
2
Emissions,
Year
lb CO
2
/
MW-hr
kg CO
2
/
10
6
J MW-hr 10
16
J MW-hr 10
16
J tonnes
2003 1607.199 0.2025 274,748,781 98.91 313,658,556 112.9 200,359,541
2002 1619.2 0.204 259,515,579 93.43 297,548,850 107.1 190,512,295
2001 1637.469 0.206 255,989,521 92.16 296,042,502 106.6 190,243,112
2000 1896.136 0.2389 188,302,822 67.79 280,592,586 101.0 189,324,882
Total 978,556,703 352.3 1,187,842,493 427.6 770,439,831
The cogeneration facility consists of three natural gas fired combustion turbines and three heat
recovery steam generators with supplemental duct firing capability and three steam turbines.
A simplified schematic of the project activity is shown in Figure 1.
Figure 1. Project Illustration of Cogeneration Operations
Refinery Operations
Cogen Facility
electricity
steam
Fuel
input
Excess electricity
sold to grid
Other fuel and
refinery inputs
Refinery
products
Generating Grid
Project emissions
Process additions resulting from the project
Legend
GHG Emissions
from cogen fuel
combustion
Grid electricity
Other grid customers
Assessment Boundary
Refinery Operations
Cogen Facility
electricity
steam
Fuel
input
Excess electricity
sold to grid
Other fuel and
refinery inputs
Refinery
products
Generating Grid
Project emissions
Legend
Project emissions
Legend
GHG Emissions
from cogen fuel
combustion
Grid electricity
Assessment Boundary
Appendix B
March 2007 66
Once operating, the cogeneration facility consumes 15.5710
15
J (14,760,000 million BTU) of
natural gas, producing 5.48310
15
J (1,523,000 megawatt-hr) of electricity (gross) with a
parasitic load of 138.610
12
J (38,500 MW-hr) on an annual basis. The facility uses
90010
12
J (250,000 MW-hr) of electricity and the remainder is sold to the grid
(4444.210
12
J). 1.3210
15
J/yr (1,250,000 MMBtu/yr) of steam [equivalent to approximately
488,973 tonnes at 360 C (680 F), 3.99910
6
Pa (580 psig)] is generated by the cogeneration
unit and used by the refinery, resulting in the decommissioning of the industrial facilitys
coal-fired spreader stoker boilers. The cogeneration operation is illustrated in Figure 2.
Figure 2. Case Study #1 Cogeneration Operations
The project proponent would like to report the emission reductions associated with this GHG
reduction project as part of a corporate initiative. The project proponent decides to use the
Combined Margin Method (described in Appendix B-2). The Combined Margin method uses
the average of the operating margin and build margin for the power grid. The Operating
Margin is determined based on a generation-weighted average emission rate, excluding
nuclear, hydro, geothermal, wind, low cost biomass, and solar generation. The Build Margin
is determined from a weighted average emission rate for new capacity.
Assumptions for this example include the following:
- Prior to the installation of the cogeneration unit, the refinery imported electricity from the
grid and purchased steam from a nearby industrial facility, which generated the steam
using coal-fired spreader stoker boilers.
- CO
2
emissions associated with the coal used by the industrial facility are calculated based
on the average carbon content and heating value of the coal, which is assumed to = 0.098
tonnes CO
2
/MMBtu (LHV) = 9.28910
-11
tonnes CO
2
/J. The coal heating value is
assumed to be = 11,800 Btu (LHV)/lb = 2.74510
10
J/tonne.
Heat
Recovery
Steam
Generator
Water
Saturated Steam
488,973 tonnes/yr
360 C, 3.999 x10
6
Pa
=1.32 x10
15
J/yr
equivalent
Combustion
Turbine
Fuel
Hot Exhaust
Gases
Electricity
Generator
Natural Gas
15.57x10
15
J/yr
5.483 x10
15
J/yr Gross:
1038.6 x10
12
J/yr used onsite
4444.2 x10
12
J/yr exported
Heat
Recovery
Steam
Generator
Water
Saturated Steam
488,973 tonnes/yr
360 C, 3.999 x10
6
Pa
=1.32 x10
15
J/yr
equivalent
Combustion
Turbine
Fuel
Hot Exhaust
Gases
Electricity
Generator Generator
Natural Gas
15.57x10
15
J/yr
5.483 x10
15
J/yr Gross:
1038.6 x10
12
J/yr used onsite
4444.2 x10
12
J/yr exported
Appendix B
March 2007 67
Baseline Scenario Selection
The baseline scenario represents the situation or conditions that plausibly would have
occurred in the absence of the project. For this example, there are two aspects to the baseline
scenario: the generation of the electricity and the generation of the steam. Plausible
candidates for the baseline scenario are identified in Table 2.
Table 2. Baseline Candidates
Potential Baseline Candidates for Electricity
Generation
Potential Baseline Candidates for Steam
Generation
Candidate 1: Continuation of current activities
electricity purchased/imported from the grid.
Candidate 2: The refinery adds a small dedicated
generator.
Candidate 3: Electricity purchased from a dedicated
generator.
Candidate 4: The project activity, where a
cogeneration unit is installed to generate electricity and
steam.
Candidate A: Continuation of current activities
steam is purchased/imported from another location.
Candidate B: The refinery adds a small package
boiler.
Candidate C: The industrial facility replaces the coal-
fired stoker boilers with a new, more efficient natural
gas boiler
Candidate D: The project activity, where a
steam.
Table 3 applies some common tests or screening procedures to assist in evaluating the
baseline candidates.
Table 3. Baseline Scenario Assessment
Baseline Scenario
Alternatives Investment Ranking Technology
Policy/
Regulatory Benchmarking
Candidate 1:
Continuation of current
activities
No additional costs No additional
technology
requirements
Common
practice
Candidate 2: Refinery
adds an electric
generator
High
Candidate 3:
Electricity purchased
from a dedicated
electric generator
No direct costs for the
refinery. Requires
commitment from an
electricity provider
E
l
e
c
t
r
i
c
i
t
y

G
e
n
e
r
a
t
i
o
n

Candidate 4: The
project activity
Cogeneration unit
High
Existing
technologies Consistent
with current,
applicable
laws or
regulations
Commercial in
some
applications
Appendix B
March 2007 68
Table 3. Baseline Scenario Assessment, continued
Baseline Scenario
Policy/
Candidate A:
activities
technology
requirements
Common
practice in region
Candidate B: Addition
of a small package
boiler
Moderate to high costs Existing
technologies
Commercial
applications
Candidate C:
Replacement of the
coal-fired stoker boilers
refinery. Moderate
costs for the industrial
provider.
Commercial
applications
S
t
e
a
m

G
e
n
e
r
a
t
i
o
n

Candidate D: The
project activity -
Cogeneration unit
High
Existing
technologies
Consistent
with current,
applicable
laws or
regulations
Commercial
applications
Based on comparing the baseline candidates presented above:
- Candidates 2 and B require additional capital expenditures by the refinery. Since the
refinery uses both electricity and steam, it is unlikely that separate generation units would
be constructed.
- Candidate 3 would require a third party to install an electric generation facility and
distribution to the refinery. Under certain circumstances, this option could occur.
However, for this example, it is assumed that this is not viable.
- Candidate C would require the industrial facility to replace the existing boilers. Under
certain circumstances, this option could occur. For example, the industrial facility may
implement such a project in an effort to improve energy efficiency. However, for this
example, it is assumed that this is not viable.
- Candidates 4 and D (the project activity) require significant investment for the refinery.
As a result of this analysis, Candidates 1 and A, which represent the continuation of current
activities are the most probable baseline scenarios. Figure 3 provides a simple schematic of
the baseline scenario.
Project Assessment Boundary
After defining the project and determining the baseline scenario, the next step is to determine
sinks, and reservoirs, controlled by the project proponent, related to the GHG reduction
project, affected by the GHG reduction projects, and relevant to the baseline scenario.
Figures 1 and 3 illustrate the energy streams within the assessment boundary for both the
project activity and the baseline scenario, respectively. Table 4 examines potential emission
sources within the assessment boundary and compares the baseline scenario to the project
activity.
Appendix B
March 2007 69
Figure 3. Baseline Illustration
Table 4. Assessment Boundary Determination
Relation to the
Project
Baseline
Scenario
' CO
2
, CH
4
and N
2
O combustion emissions
from boilers and prime movers at the
industrial facility used to produce and
transport the steam
Related
' CO
2
, CH
4
and N
2
O emissions associated
with electricity generation capacity on the
grid
Related
4
emissions, as
well as CO
2
, CH
4
and N
2
O combustion
processing, and transport of coal to the
industrial facility
Affected ' These emissions are
assumed to be offset by the
life-cycle emissions of the
natural gas used by the
cogeneration unit
Refinery Operations
Generating Grid
Steam Boiler
Steam to the
refinery
Coal input
Other fuel and
refinery inputs
Grid electricity
Refinery
products
Baseline emission sources
Legend
GHG Emissions
from fuel combustion
to generate steam
for refinery
GHG Emissions
from fuel
combustion to
generate
electricity for
refinery
Electricity to
the refinery
Assessment Boundary
Refinery Operations
Generating Grid
Steam Boiler
Steam to the
refinery
Coal input
Other fuel and
refinery inputs
Grid electricity
Refinery
products
Baseline emission sources
Legend
GHG Emissions
from fuel combustion
to generate steam
for refinery
GHG Emissions
from fuel
combustion to
generate
electricity for
refinery
Electricity to
the refinery
Assessment Boundary
Appendix B
March 2007 70
Table 4. Assessment Boundary Determination, continued
Relation to the
Project
Project
Activity
' CO
2
4
and N
2
O
emissions from combustion turbines and
duct burners associated with the
cogeneration unit
' Controlled
' CH
4
sources within the refinery associated
with natural gas fuel used to generate
electricity and steam
' Controlled ' These emissions are
assumed to be negligible
due to the minimal number
of sources
' CO
2
, CH
4
and N
2
exported electricity
' Affected
4
emissions, as
well as CO
2
, CH
4
and N
2
O combustion
' Affected ' These emissions are
coal used by the industrial
facility
emissions
' Controlled
or Related
minimis.
' Affected ' It is rarely possible to
quantify the market impact
of a single cogeneration
project on the demand for
associated energy supply
through market affects such
as the impact of additional
supply on product output or
price.
Quantifying Emission Reductions
The following Exhibit demonstrates the emission estimation methods for the baseline scenario
and project activity. Emission reductions are quantified as the difference between the
baseline and project emissions.
Appendix B
March 2007 71
EXHIBIT 5.1: Refinery builds a new cogeneration unit to replace steam
generation from an offsite steam boiler.
Known information (based on hypothetical data)
- The cogeneration facility consumes 15.5710
15
J (14,760,000 million BTU) of natural gas, producing
5.4810
15
J (1,523,000 megawatt-hr) of electricity (gross) with a parasitic load of 138.610
12
J (38,500 MW-
hr) on an annual basis
- The facility uses 90010
12
J (250,000 MW-hr) of electricity and the remainder is sold to the grid
- 1.3210
15
J (1,250,000 MMBtu) of steam [equivalent to 488,973 tonnes (539,000 tons) at 360C (680 F),
3.99910
6
Pa (580 psig)] is generated by the cogeneration unit and used by the refinery
- The gas composition results in 72.27 wt% carbon and heating value of 37.7210
6
J/m
3
(1012.36 Btu
(HHV)/scf), and the molecular weight of the gas is 16.84 kg/kgmol (16.84 lb/lbmol)
Project Emissions
The project emissions are equivalent to the combustion emissions from the cogeneration unit.
Based on the gas composition information, a CO
2
emission factor can be calculated:
J / CO tonnes 10 99 . 4
kg 1000
tonne
C C/lbmole kg 12
CO /lbmole CO kg 44
gas kg
C kg 0.7227
gas kgmole
gas kg 84 . 16
m 23.685
gas kgmole
J 10 37.72
gas m
2
11
2 2
3 6
3
Project CO
2
emissions =
2
2
11
15
CO tonnes 776,943
gas J
CO tonnes 10 99 . 4
gas J 10 15.57 =
CH
4
and N
2
O emissions are determined based on industry accepted emission factors for
natural gas combustion in turbines (API Compendium Table 4-5).
CH
4
EF = 0.0037 tonnes/10
12
J(HHV)
Project CH
4
emissions =
4 12
4 15
CH tonnes 57.6
gas J 10
CH tonnes 0.0037
gas J 10 15.57 =
N
2
O EF (SCR controlled) = 0.013 tonnes/10
12
J(HHV)
Project N
2
O emissions =
O N tonnes 202
gas J 10
O N tonnes 0.013
gas J 10 15.57
2
12
2 15
=
The total CO
2
equivalent emissions for the Project are:
776,943 tonnes CO
2
+(2157.6 tonnes CH
4
) + (310202 tonnes N
2
O)
= 840,773 tonnes CO
2
Eq./yr
Appendix B
March 2007 72
generation from an offsite steam boiler, continued
Baseline Emissions
The baseline emissions consist of those emissions that would have occurred to separately
generate the electricity and steam used by the refinery.
Electricity Baseline Emissions
For this example, the project proponent decides to use the Combined Margin method to
develop the grid-based emission factor, which will be used to represent the emissions that
would have occurred had the refinery purchased electricity from the grid. The Combined
Margin method uses the average of the Operating Margin and the Build Margin for the power
grid.
Using the ERCOT information presented in Table 1, the Operating Margin is:
( )
/MWhr) CO tonnes (0.7593 J 10 / CO tonnes 00021 . 0
kg 1000
tonne
J Total
J
J
CO kg
Generation Fuel Fossil Total
Generation Fuel Fossil Rate Emission Generation Fuel Fossil
2
6
2
#
1
i
i
2
#
1
i i
=
=
_
_
=
=
years
i
years
i
The Build Margin is based on the weighted average emissions of the 5 most recent plants.
Using information available in the E-GRID database, the Build Margin
= 1.39210
-4
tonne/10
6
J (0.5012 tonnes CO
2
/MW-hr)
The Combined Margin CO
2
Baseline Emission Rate for Electricity
= 1.750610
-4
tonne/10
6
J (0.63025 tonnes CO
2
/MW-hr)
The CO
2
emissions for the electricity baseline are therefore:
2 6
2
4
12
2
CO tonnes 157,554
J 10
CO tonnes 10 7506 . 1
J 10 900 : CO =
EPAs E-GRID system does not track CH

4
and N
2
O emission factors. However, EPAs
Climate Leaders provides CH
4
and N
2
O emission factors for each eGRID subregion. Although
EPA does not report information to the level of detail necessary to determine the CH
4
, and
N
2
O emission factors on a Combined Margin basis, this difference is believed to be
insignificant, particularly given the small contribution of CH
4
and N
2
O emission relative to
CO
2
, as demonstrated below.
Appendix B
March 2007 73
From EPAs Climate Leaders Purchases/Sales of Electricity and Steam Guidance for ERCOT,
CH
4
EF = 0.0207 lbs/MW-hr = 2.6110
-15
tonnes CH
4
/J
The CH
4
emissions for the electricity baseline are:
4
4
15
12
4
CH tonnes 2.35
J
CH tonnes 10 61 . 2
J 10 900 : CH =
N
2
O EF = 0.134 lb N
2
O/MW-hr= 1.68810
-14
tonnes N
2
O/J
The N
2
O emissions for the electricity baseline are:
O N tonnes 15.2
J
O N tonnes 10 688 . 1
J 10 900 : O N
2
2
14
12
2
=
The total CO
2
equivalent emissions for the Electricity Baseline
= 157,554 tonnes CO
2
+ +(212.35 tonnes CH
4
) + (31015.2 tonnes N
2
O)
= 162,315 tonnes CO
2
Eq./yr
Steam Baseline Emissions
The baseline scenario for exported steam must consider the previous generation methods or a
plausible replacement scenario for steam that is being supplied by the cogeneration plant. For
this example, the previous generation method for the exported steam was via coal-fired stoker
boilers at the adjacent industrial facility (which were subsequently retired with the
cogeneration project's operation).
The coal consumption to generate the 1.3210
15
J of exported steam is determined based on
the 80% thermal efficiency of the coal-fired stoker boilers at the industrial facility.
Estimated Coal Usage:
fired coal (LHV) J 10 1.65
Exported Steam J 10 32 . 1
generated steam J 0.80
input heat (LHV) J 1
15
15
=

Appendix B
March 2007 74
CO
2
emissions resulting from the combustion of this coal are calculated based on the average
carbon content and heating value of the coal previously used in the industrial facility
= 9.28910
-11
tonnes CO
2
/J (LHV)
2
2
11
15
2
CO tonnes 153,268
coal (LHV) J
CO tonnes 10 289 . 9
coal J 10 1.65 : CO =
CH
4
and N
2
O emission are determined based on measured emissions data, if available, or
industry-accepted emission factors for coal-fired boilers (API Compendium Table 4-4b). In
applying emission factors, the coal heating value is needed to convert energy units to a mass
basis = 2.74510
10
J/tonne.
CH
4
EF = 3.010
-5
tonnes/tonne
CH
4
Baseline Emissions for Steam =
4
4
5
10
15
4
CH tonnes 8 . 1
coal tonne
CH tonnes 10 0 . 3
J 10 2.745
coal tonne
coal J 10 1.65 CH
=
N
2
O EF = 2.010
-5
tonnes/tonne
N
2
O Baseline Emissions for Steam =
O N tonnes 2 . 1
coal tonne
O N tonnes 10 0 . 2
J 10 2.745
coal tonne
coal J 10 1.65 O N
2
2
5
10
15
2
=
The total CO
2
equivalent emissions for the Baseline Steam
= 153,268 tonnes CO
2
+ +(211.8 tonnes CH
4
) + (3101.2 tonnes N
2
O)
= 153,678 tonnes CO
2
Eq./yr
The final aspect of this example is the reduction in emissions associated with exporting the
electricity not used by the refinery to the grid, which displaces electricity that would have
been generated by other means. This is equivalent to (5482.8-138.6-900)10
12
J of electricity
= 4444.2 10
12
J
As shown above, the CO
2
emission factor for the grid is represented by the Combined Margin
emission factor. So, the CO
2
grid emissions displaced by the exported electricity are:
2
6
2
4
12
2
CO tonnes 778,002
J 10
CO tonnes 10 7506 . 1
J 10 444.2 4 : CO =

Appendix B
March 2007 75
The CH
4
grid emissions displaced by the exported electricity =
4
4
15
12
4
CH tonnes 11.6
J
CH tonnes 10 61 . 2
J 10 4444.2 : CH =
The N
2
O grid emissions displaced by the exported electricity =
O N tonnes 75
J
O N tonnes 10 688 . 1
J 10 444.2 4 : O N
2
2
14
12
2
=
The total CO
2
equivalent emissions displaced by the exported electricity
= 778,002 tonnes CO
2
+ +(2111.6 tonnes CH
4
) + (31075 tonnes N
2
O)
= 801,496 tonnes CO
2
Eq./yr
Emission Reduction Calculation:
Overall emission reductions are determined by the difference between the GHG reduction
project emissions and the baseline emissions, as shown in Table 5.
Table 5. Summary of Annual Emissions for EXHIBIT 5.1: Refinery builds a new
cogeneration unit to replace steam generation from an offsite steam boiler.
Tonnes CO
2
Eq.
Electricity Equivalent Emissions 162,315 Baseline
Scenario Electricity Grid Displacement 801,496
Steam Equivalent Emissions 153,678
Total Baseline Emissions 1,117,489
GHG
Reduction
Project
Total Direct Emissions 840,773
Annual Net GHG Reductions 276,716
Appendix B
March 2007 76
Cogeneration with Increased On-Site Energy Consumption
This case study examines a facility that has installed a cogeneration unit to improve an
existing facility's overall efficiency. For this example, previously imported energy is replaced
with on-site generation. Excess electricity is exported to grid. Post-project energy use is
higher than the baseline scenario due to organic growth. However, for this example, the
increased steam capacity occurring post-project is within the physical capabilities of the
baseline boiler.
Project Definition
Prior to installation of the GHG reduction project, a refinery located in Thailand purchases
7.1210
14
J (198,000 MW-hr) of electricity from the national grid and generates 2.8610
15
J
(LHV) (2,710,000 million Btu) of steam on-site. The on-site steam is produced by a diesel-
fired boiler using 190,785 m
3
(1.210
6
barrels) of fuel (3.8210
10
J/m
3
HHV, 3.6210
10
J/m
3
LHV).
To improve the existing facility's overall energy efficiency, the refinery installs a
cogeneration facility consisting of three natural gas fired combustion turbines and three heat
recovery steam generators with supplemental duct firing capability and steam turbines.
After installation of the cogeneration facility, electricity is no longer purchased from the grid.
The cogeneration facility consumes 8.5810
15
J (8,131,500 million Btu) of natural gas,
producing 3.8110
15
J (3,614,000 million Btu) steam and 3.9610
15
J (1,100,600 megawatt-
hr) of electricity (gross) on an annual basis. After installation of the cogeneration plant, the
refinery uses all of the generated steam and 9.910
14
J (275,000 MW-hr) of electricity. The
facility parasitic load is 138.610
12
J (38,500 MW-hr), with the net electricity sold to the grid
(2.8310
15
J). The cogeneration operation is illustrated in Figure 4.
Figure 4. Case Study #2 Cogeneration Operations
Heat
Recovery
Steam
Generators
Water
Saturated Steam
3.81 x10
15
J equivalent
Combustion
Turbines
Fuel
Hot Exhaust
Gases
Electricity
Generators
Natural Gas
8.58x10
15
J
3.96 x10
15
J Gross:
1.129 x10
15
J used onsite
2.83 x10
15
J exported
Heat
Recovery
Steam
Generators
Water
Saturated Steam
3.81 x10
15
J equivalent
Combustion
Turbines
Fuel
Hot Exhaust
Gases
Electricity
Generators Generators
Natural Gas
8.58x10
15
J
3.96 x10
15
J Gross:
1.129 x10
15
J used onsite
2.83 x10
15
J exported
Appendix B
March 2007 77
The project proponent would like to report the GHG reductions associated with these project
activities to meet internal emission reduction targets.
Plausible candidates for the baseline scenario are identified in Table 6.
Potential Baseline Candidates for Electricity
Generation
Potential Baseline Candidates for Steam
Generation
Candidate 1: Continuation of current activities
electricity purchased/imported from the grid.
Candidate 2: The refinery adds a small dedicated
generator.
Candidate 3: Electricity purchased from a dedicated
generator.
Candidate 4: The project activity, where a
steam.
Candidate A: Continuation of current activities
steam is generated onsite using a diesel-fired boiler.
Candidate B: The refinery replaces the diesel boiler
with a more efficient unit
Candidate C: The refinery purchases steam
Candidate D: The project activity, where a
steam.
Table 7 applies some common tests or screening procedures to assist in evaluating the
baseline candidates.
Baseline Scenario
Policy/
Candidate 1:
activities
technology
requirements
Common
practice
Candidate 2: Refinery
adds an electric
generator
High
Candidate 3:
Electricity purchased
from a dedicated
electric generator
refinery. Requires
commitment from an
electricity provider
E
l
e
c
t
r
i
c
i
t
y

G
e
n
e
r
a
t
i
o
n

Candidate 4: The
project activity
Cogeneration unit
High
Existing
technologies Consistent
with current,
applicable
laws or
regulations
Commercial in
some
applications
Candidate A:
activities
technology
requirements
Common
practice in region
Candidate B:
Replacement of the
diesel boiler
Moderate costs Existing
technologies
Commercial
applications
Candidate C: Refinery
purchases steam
refinery. Requires an
outside supplier for
steam
Commercial in
some
applications
S
t
e
a
m

G
e
n
e
r
a
t
i
o
n

Candidate D: The
project activity -
Cogeneration unit
High
Existing
technologies
Consistent
with current,
applicable
laws or
regulations
Commercial in
some
applications
Appendix B
March 2007 78
- Candidates 2 and B require additional capital expenditures by the refinery. For energy
efficiency improvements, the refinery may upgrade or replace the diesel boilers.
However, for this example, it is assumed that this is not viable.
- Candidates 3 and C would require third party suppliers to install the electricity or steam
generation facility and distribution to the refinery. Under certain circumstances, this
option could occur. However, for this example, it is assumed that this is not viable.
- Candidates 4 and D (the project activity) require significant investment for the refinery.
As a result of this analysis, Candidates 1 and A, which represent the continuation of current
activities are the most probable baseline scenarios.
After defining the project and determining the baseline scenario, the next step is to determine
sinks, and reservoirs, controlled by the project proponent, related to the GHG reduction
project, affected by the GHG reduction projects, and relevant to the baseline scenario.
Figures 1 and 3 illustrate the energy streams within the assessment boundary for both the
project activity and the baseline scenario, respectively. Table 8 examines potential emission
sources within the assessment boundary and compares the baseline scenario to the project
activity.
Relation to the
Project
Baseline
Scenario
' CO
2
, CH
4
and N
2
from the diesel boiler used to produce the
steam
Controlled
' CO
2
, CH
4
and N
2
O emissions associated
with electricity generation capacity on the
grid
Related
4
emissions, as
well as CO
2
, CH
4
and N
2
O combustion
emissions, associated with processing the
diesel
Controlled ' These emissions are
cogeneration unit
Appendix B
March 2007 79
Table 8. Assessment Boundary Determination, continued
Relation to the
Project
Project
Activity
' CO
2
4
and N
2
O
emissions from combustion turbines and
duct burners associated with the
cogeneration unit
' Controlled
' CH
4
sources within the refinery associated
with natural gas fuel used to generate
electricity and steam
' Controlled ' These emissions are
assumed to be negligible
due to the minimal number
of sources
' CO
2
, CH
4
and N
2
exported electricity
' Affected
4
emissions, as
well as CO
2
, CH
4
and N
2
O combustion
' Affected ' These emissions are
emissions associated with
the production of diesel in
the baseline
emissions
' Controlled
or Related
minimis.
' Affected ' It is rarely possible to
quantify the market impact
of a single cogeneration
project on the demand for
associated energy supply
through market affects such
as the impact of additional
supply on product output or
price.
The following Exhibit demonstrates the emission estimation methods for the baseline scenario
and project activity. Emission reductions are quantified as the difference between the
baseline and project emissions.
EXHIBIT 5.2: Cogeneration With Increased On-Site Energy Consumption
- The cogeneration facility consumes 8.58710
15
J (8,131,500 million BTU) of natural gas, producing
3.9610
15
J (1,100,600 megawatt-hr) of electricity (gross) with a parasitic load of 138.610
12
J (38,500
MW-hr) on an annual basis
- The facility uses 9.910
14
J (275,000 MW-hr) of electricity and the remainder, 2.8310
15
J (786,100 MW-
hr) is sold to the grid
- 3.8110
15
J (3,614,000 MMBtu) of steam is generated by the cogeneration unit and used by the refinery
Appendix B
March 2007 80
EXHIBIT 5.2 Cogeneration With Increased On-Site Energy Consumption,
Continued
- The gas composition results in 72.27 wt% carbon and heating value of 37.7210
6
J/m
3
(1012.36 Btu
(HHV)/scf), and the molecular weight of the gas is 16.84 kg/kgmol (16.84 lb/lbmol)
- The project proponent decides to use national grid emission factors to calculate emission rates associated
with imported and exported electricity.
Project Emissions
For the cogeneration unit, the project emissions are determined based on the metered gas
usage and measured composition. From Exhibit 5.1, the CO
2
EF associated with the natural
gas = 4.9910
11
tonnes CO
2
/J (0.0527 tonnes CO
2
/MMBtu).
Project CO
2
Emissions =
2
2
11
15
2
CO tonnes 428,142
gas natural J
CO tonnes 10 99 . 4
J 10 8.58 : CO =
CH
4
and N
2
natural gas combustion in turbines (API Compendium Table 4-5).
CH
4
EF = 0.0037 tonnes/10
12
J(HHV)
Project CH
4
emissions =
4
12
4 15
CH tonnes 31.7
gas J 10
CH tonnes 0.0037
gas J 10 8.58 =
N
2
O EF (SCR controlled) = 0.013 tonnes/10
12
J(HHV)
Project N
2
O emissions =
O N tonnes 111.5
gas J 10
O N tonnes 0.013
gas J 10 8.58
2
12
2 15
=
The total CO
2
428,142 tonnes CO
2
+(2131.7 tonnes CH
4
) + (310111.5 tonnes N
2
O)
= 463,373 tonnes CO
2
Eq./yr
Baseline Emissions
Baseline emissions consist of those emissions that would have occurred to separately
generate the electricity and steam used by the refinery.
The baseline emission rate for steam generated from a diesel boiler is based on the fuel
properties and efficiency of the equipment. For this example, the diesel fuel properties result
in the following CO
2
emission factor.
CO
2
Baseline Emission Rate for Steam = 7.40210
-11
tonnes CO
2
/J (LHV)
Appendix B
March 2007 81
Continued
CO
2
emissions associated with generating the baseline scenario steam are calculated for the
diesel-fired boiler using the 80% thermal efficiency of the boiler:
CO
2
Baseline Emissions for Steam:
2
2
11
15
2
CO tonnes 352,520
(LHV) J
out J 0.80
(LHV) in J
out steam J 10 3.81 : CO
=
CH
4
and N
2
diesel (distillate) industrial boilers (API Compendium Table 4-4a). Emission factors for CH
4
and N
2
O are per unit volume of diesel combusted. The heating value of the diesel is needed
to estimate the volume of diesel required to generate the project-level quantity of steam.
CH
4
EF = 6.210
-6
tonnes/m
3
CH
4
4 3
4
6 -
10
3
15
4
CH tonnes 0.816
diesel m
CH tonnes 10 6.2
(LHV) J 10 3.62
diesel m
out J 0.8
(LHV) in J
out steam J 10 3.81 : CH
=

N
2
O EF = 3.110
-5
tonnes/m
3
N
2
O N tonnes 4.08
diesel m
O N tonnes 10 3.1
(LHV) J 10 62 . 3
diesel m
out J 0.8
(LHV) in J
out steam J 10 3.81 : O N
2
3
2
5 -
10
3
15
2
=

The total CO
2
equivalent emissions for the Steam Baseline are:
352,520 tonnes CO
2
+(210.816 tonnes CH
4
) + (3104.08 tonnes N
2
O)
= 353,802 tonnes CO
2
Eq./yr
Appendix B
March 2007 82
Continued
Baseline electricity emission rates are required for the electricity that was imported prior to
the GHG reduction project. The CO
2
emission factor for the Thailand national grid is,
CO
2
EF = 1.3910
-10
tonnes CO
2
/J
The CO
2
Baseline Emissions for Onsite Electricity Consumption =
( )
2
2
10
14
2
CO tonnes 875 , 156
J
CO tonnes 10 39 . 1
J 10 386 . 1 9.9 : CO =
Thailand national grid CH

4
EF = 2.4810
-15
tonnes/J
CH
4
Baseline Emissions for Onsite Electricity Consumption =
( )
4
4
15
14
4
CH tonnes 2.80
J
CH tonnes 10 48 . 2
J 10 386 . 1 9.9 : CH =
N
2
O EF = 1.43610
-14
tonnes/J
N
2
O Baseline Emissions for Onsite Electricity Consumption =
( ) O N tonnes 16.21
J
CH tonnes 10 436 . 1
J 10 386 . 1 9.9 : O N
2
4
14
14
2
=
The CO2 equivalent emissions for Electricity Baseline are:

156,875 tonnes CO
2
+(212.80 tonnes CH
4
) + (31016.21 tonnes N
2
O)
= 161,959 tonnes CO
2
Eq./yr
The final aspect of this example is the reduction in emissions associated with exporting the
electricity not used by the refinery to the grid, which displaces electricity that would have
been generated by other means. This is equivalent to 2.8310
15
J of electricity
As shown above, the CO
2
emission factor for the Thailand national grid is
CO
2
EF = 1.3910
-10
tonnes CO
2
/J
So, the CO
2
grid emissions displaced by the exported electricity are:
2
2
10
15
2
CO tonnes 393,370
J
CO tonnes 10 39 . 1
J 10 2.83 : CO =
The CH
4
grid emissions displaced by the exported electricity =
4
4
15
15
4
CH tonnes 7.02
J
CH tonnes 10 48 . 2
J 10 2.83 : CH =

Appendix B
March 2007 83
Continued
The N
2
O grid emissions displaced by the exported electricity =
O N tonnes 40.6
J
O N tonnes 10 436 . 1
J 10 2.83 : O N
2
2
14
15
2
=
The total CO
2
= 393,370 tonnes CO
2
+(217.02 tonnes CH
4
) + (31040.6 tonnes N
2
O)
= 406,103 tonnes CO
2
Eq./yr
Table 9 summarizes the results of the cogeneration case study where the GHG reduction
project on-site energy consumption increases over the baseline scenario.
Table 9. Summary of Annual Emissions for EXHIBIT 5.2: Cogeneration with Increased
On-Site Energy Consumption
Tonnes CO
2
Eq.
Electricity Equivalent Emissions 161,959 Baseline
Scenario Electricity Grid Displacement 406,103
Steam Equivalent Emissions 353,802
Total Baseline Emissions 921,864
GHG
Reduction
Project
Appendix B
March 2007 84
Cogeneration with Increased On-Site Energy Consumption
Exceeding Baseline Scenario Capacity
This example is a continuation of Case Study #2. Here, the steam boiler has reached its
maximum capacity at the baseline scenario conditions. As a result, an additional baseline
emission rate is needed to compare to the additional steam capacity at the GHG reduction
project conditions.
Project Definition
Prior to installation of the cogeneration facility, a refinery in Thailand purchases 7.41610
14
J
(206,000 megawatt-hr) of electricity from the grid and generates 2.8610
15
J (2,710,000
million Btu) of steam on-site. The on-site steam is produced by a diesel-fired boiler using
190,785 m
3
(1.210
6
barrels) of fuel (3.8210
10
J/m
3
HHV, 3.6210
10
J/m
3
LHV). The diesel
boiler is operating at its maximum capacity.
To meet expanding energy needs and to improve the existing facility's overall energy
efficiency, the refinery installs a cogeneration facility consisting of three natural gas fired
combustion turbines and three heat recovery steam generators with supplemental duct firing
capability and steam turbines.
After installation of the cogeneration facility, electricity is no longer purchased from the grid.
The cogeneration facility consumes 8.5810
15
J (HHV) (8,131,500 million Btu) of natural
gas, producing 3.8110
15
J (3,614,000 million Btu) steam and 3.9610
15
J (1,100,600
megawatt-hr) of electricity (gross) on an annual basis. After installation of the cogeneration
plant, the refinery uses all of the generated steam and 9.910
14
J (275,000 MW-hr) of
electricity. The facility parasitic load is 1.38610
14
J (38,500 MW-hr), with the net electricity
sold to the grid (2.8310
15
J).
Plausible candidates for the baseline scenario are identified in Table 10. Note that a third
baseline component is included for the incremental steam requirement at the project activity
level.
The baseline scenario assessment for the steam and electricity generation are the same as were
presented in Table 7. Table 11 applies the screening procedures to assist in evaluating the
incremental steam component of this case study.
Appendix B
March 2007 85
Potential Baseline
Candidates for Electricity
Generation
Potential Baseline Candidates
for Steam Generation to
Maximum Capacity
Potential Baseline Candidates
for Incremental Steam
Generation
Candidate 1: Continuation of
current activities electricity
purchased/imported from the
grid.
Candidate 2: The refinery
adds a small dedicated
generator.
Candidate 3: Electricity
purchased from a dedicated
generator.
Candidate 4: The project
activity, where a cogeneration
unit is installed to generate
electricity and steam.
Candidate A: Continuation of current
activities steam is generated onsite
using a diesel-fired boiler.
Candidate B: The refinery replaces
the diesel boiler with a more efficient
unit
Candidate C: The refinery purchases
steam
Candidate D: The project activity,
where a cogeneration unit is installed
to generate electricity and steam.
Candidate I: The refinery adds a
small package boiler to produce the
extra steam
Candidate II: The refinery imports
the extra steam
Candidate III: The refinery replaces
the diesel boiler with new equipment
that can produce the extra steam
Candidate IV: The project activity,
where a cogeneration unit is installed
to generate electricity and steam.
Baseline Scenario
Policy/
Candidate I: Small
package boiler
Moderate costs Commercial
applications
Candidate II: Imports
the extra steam
refinery. Requires an
outside supplier for
steam
Commercial in
some
applications
Candidate III: Replace
the diesel boiler
Moderate to high costs Commercial
applications
I
n
c
r
e
m
e
n
t
a
l

S
t
e
a
m

G
e
n
e
r
a
t
i
o
n

Candidate IV: The
project activity -
Cogeneration unit
High
Existing
technologies
Consistent
with current,
applicable
laws or
regulations
Commercial in
some
applications
- Candidates I and III require additional capital expenditures by the refinery.
- Candidate III may be justified if there is significant additional demand for steam.
- Candidate II requires a third party supplier to generate the additional steam at the required
flow rate and conditions. Under certain circumstances, this option could occur. However,
for this example, it is assumed that this is not viable.
- Candidate IV (the project activity) requires significant investment for the refinery.
For this example, Candidate 1, meeting the incremental steam demand through the addition of
a small package boiler, is determined to be the most probable scenario.
Appendix B
March 2007 86
Table 12 examines potential baseline scenario emission sources for the incremental steam
demand. Emission sources listed in Table 8 would also apply to the baseline scenario and
project activity.
Relation to the
Project
Baseline
Scenario
' CO
2
, CH
4
and N
2
from the small package boiler that would
have been used to generate the
incremental steam
Controlled
4
emissions, as
well as CO
2
, CH
4
and N
2
O combustion
emissions, associated with producing the
fuel needed for the small boiler
Controlled or
Related
' These emissions are
cogeneration unit
The following Exhibit builds on Case Study #2 by demonstrating the emission estimation
methods for the baseline scenario and project activity associated with the incremental steam
demand.
EXHIBIT 5.3: Cogeneration With Increased On-Site Energy Consumption
Exceeding Baseline Scenario Capacity
- The baseline scenario for the added steam capacity is based on a natural gas-fired package boiler.
- The natural gas composition results in 72.27 wt.% carbon, 33.9510
6
J/m
3
LHV (911 BTU/scf) and the
molecular weight of the gas is 16.84 kg/kgmol. The calculated natural gas CO
2
emission factor was shown
in Exhibit 5.1.
- Diesel fuel properties result in the following CO
2
emission factor: 7.40210
-11
tonnes CO
2
/J (LHV)
Project Emissions
The project emissions are the same as shown for Exhibit 5.2.
The total CO
2
428,142 tonnes CO
2
+(2131.7 tonnes CH
4
) + (310111.5 tonnes N
2
O)
= 463,373 tonnes CO
2
Eq./yr
Appendix B
March 2007 87
EXHIBIT 5.3 Cogeneration With Increased On-Site Energy Consumption
Exceeding Baseline Scenario Capacity, Continued
Baseline Emissions
Two baseline emission estimates are needed for the steam in this example. The first
corresponds to the steam generation at the baseline scenario capacity limits. The second
corresponds to the additional steam generated at the GHG reduction project conditions.
CO
2
emissions associated with generating the baseline scenario steam are calculated for the
diesel-fired boiler using the 80% thermal efficiency of the boiler and the diesel fuel emission
factor:
CO
2
Baseline Emissions for Steam:
2
2
11
15
2
CO tonnes 264,622
(LHV) J
out J 0.80
(LHV) in J
out steam J 10 2.86 : CO
=
CH
4
and N
2
O baseline emissions associated with the steam are calculated similar to Exhibit
5.2.
CH
4
EF = 6.210
-6
tonnes/m
3
CH
4
4
3
4
6 -
10
3
15
4
CH tonnes 0.612
diesel m
CH tonnes 10 6.2
(LHV) J 10 3.62
diesel m
out J 0.8
(LHV) in J
out steam J 10 2.86 : CH
=

N
2
O EF = 3.110
-5
tonnes/m
3
N
2
O N tonnes 3.06
diesel m
O N tonnes 10 3.1
(LHV) J 10 62 . 3
diesel m
out J 0.8
(LHV) in J
out steam J 10 2.86 : O N
2
3
2
5 -
10
3
15
2
=

The total CO
2
equivalent emissions for the Steam Baseline are:
264,622 tonnes CO
2
+(210.612 tonnes CH
4
) + (3103.06 tonnes N
2
O)
= 265,583 tonnes CO
2
Eq./yr
Appendix B
March 2007 88
The baseline scenario for the added steam capacity is based on a natural gas-fired package
boiler. Baseline emissions are determined from the natural gas fuel properties and the
efficiency of the boiler. Here the calculated natural gas CO
2
emission factor is based on the
lower heating value of the fuel.
(LHV) J / CO tonnes 10 55 . 5
kg 1000
tonne
C C/lbmole kg 12
CO /lbmole CO kg 44
gas kg
C kg 0.7227
gas kgmole
gas kg 84 . 16
m 23.685
gas kgmole
J(LHV) 10 33.95
gas m
2
11
2 2
3 6
3
The thermal efficiency of the natural gas-fired boiler is 85%. CO

2
emissions associated with
generating the additional steam for a natural gas-fired boiler are:
( )
2
2
11
15
2
CO tonnes 62,029
(LHV) J
CO tonnes 10 55 . 5
out Btu 0.85
(LHV) in Btu
out steam J 10 2.86 - 3.81 : CO
=
CH
4
and N
2
natural gas combustion in a steam boiler (API Compendium Table 4-4a).
CH
4
EF = 1.110
-3
tonnes/10
12
J (LHV)
CH
4
Baseline Emissions for Additional Steam =
( )
4
12
4
3
15
4
CH tonnes 1.23
(LHV) gas natural J 10
CH tonnes 10 1 . 1
out Btu 0.85
(LHV) in Btu
out steam J 10 2.86 - 3.81 : CH
=
N
2
O EF (controlled) = 2.810
-4
tonnes/10
12
J (LHV)
N
2
O Baseline Emissions for Additional Steam =
( )
O N tonnes 0.31
(LHV) gas natural J 10
O N tonnes 10 8 . 2
out Btu 0.85
(LHV) in Btu
out steam J 10 2.86 - 3.81 : O N
2
12
2
4
15
2
=
The total CO
2
equivalent emissions for the Additional Steam are:
62,029 tonnes CO
2
+(211.23 tonnes CH
4
) + (3100.31 tonnes N
2
O)
= 62,151 tonnes CO
2
Eq./yr
Appendix B
March 2007 89
As for Exhibit 5.2, baseline electricity emissions are calculated for the electricity that was
imported prior to the GHG reduction project. The emissions associated with the electricity
baseline are the same as shown in Exhibit 5.2.
The CO2 equivalent emissions for Electricity Baseline are:
156,875 tonnes CO
2
+(212.80 tonnes CH
4
) + (31016.21 tonnes N
2
O)
= 161,959 tonnes CO
2
Eq./yr
Displaced Electricity
Likewise, the emissions associated with exporting the electricity not used by the refinery to
the grid are the same as shown in Exhibit 5.2.
The total CO
2
= 393,370 tonnes CO
2
+(217.02 tonnes CH
4
) + (31040.6 tonnes N
2
O)
= 406,103 tonnes CO
2
Eq./yr
Table 13 summarizes the results of the cogeneration case study where the on-site energy
consumption increased for the GHG reduction project and exceeded the baseline scenario
steam boiler capacity.
Table 13. Summary of Annual Emissions for EXHIBIT 5.3: Cogeneration with
Increased On-Site Energy Consumption Exceeding Baseline Scenario Capacity
Tonnes CO
2
Eq.
Baseline
Scenario
Refinery steam for baseline scenario
capacity
265,583
Refinery steam for incremental capacity 62,151
Electricity Equivalent Emissions 161,959
Electricity Grid Displacement 406,103
Total Baseline Emissions 895,796
GHG
Reduction
Project
Appendix B-2
Baseline Methodologies for Grid-
Displacement GHG Reduction Projects
A
p
p
e
n
d
i
x

B

M
a
r
c
h

2
0
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i
x

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i
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p
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1
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International Petroleum Industry Environmental Conservation Association
American Petroleum Institute

GHG Reduction Projects Guidelines

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EPAs E-GRID system does not track CH

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Thailand national grid CH

The CO2 equivalent emissions for Electricity Baseline are:

GHG Guidelines text v6.5 19/4/07 11:07 am Page 89

The thermal efficiency of the natural gas-fired boiler is 85%. CO

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