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Ontario Public Service Guidance Document for Quantifying Projected and

Actual Greenhouse Gas Emission Reductions

Final Version 1

June 30, 2017

Prepared for:

Ontario Ministry of the Environment and Climate Change Program Planning and Implementation Branch

Prepared by:

Cheminfo Services Inc. 30 Centurian Drive, Suite 205 Markham, Ontario L3R 8B8

Phone: (905) 944-1160 Fax: (905) 944-1175

E-mail: info@cheminfoservices.com

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Table of Contents 1. GUIDANCESUMMARY 1

1.1 BACKGROUND 11.2 PURPOSEANDSCOPE 21.3 BASICCONCEPTS 31.4 PROJECTDESIGNANDQUANTIFICATIONPRINCIPLES 61.5 MANAGEMENTPROCESSFORQUANTIFYINGGHGREDUCTIONS 71.6 INITIATIVEPLANNING 91.7 PROJECTPLANNING 131.8 PROJECTIMPLEMENTATION 23

2. INTRODUCTION 28

2.1 BACKGROUND 282.2 PURPOSEANDSCOPE 29

3. KEYCONCEPTSANDPRINCIPLES 30

3.1 INTRODUCTION 303.2 KEYGHGPROJECTACCOUNTINGCONCEPTS 303.3 OPSINITIATIVEDESIGNPRINCIPLES 363.4 QUANTIFICATIONPRINCIPLES 433.5 MANAGEMENTPROCESSFORQUANTIFYINGGHGREDUCTIONS 47

4. INITIATIVEPLANNING 52

4.1 INTRODUCTION 524.2 SITUATIONALANALYSIS:HISTORICALGHGPERFORMANCE 524.3 IDENTIFYINGTARGETEDGHGSOURCES 544.4 DEFININGPROJECTTECHNOLOGIESANDPRACTICES 544.5 ESTABLISHINGREFERENCEYEARANDBAUFORECASTEMISSIONS 554.6 PREPARATIONOFHISTORICALANDREFERENCEYEARESTIMATES 584.7 PREPARATIONOFBUSINESS-AS-USUALFORECAST 604.8 PREPARATIONOFADOPTIONRATEOBJECTIVE 60

5. PROJECTPLANNING 62

5.1 INTRODUCTION 625.2 DEFININGTHEPROJECTSCOPEANDOBJECTIVE 625.3 SELECTIONOFAPPROPRIATEGHGREDUCTIONMETHODOLOGY 655.4 RIGOROUSAPPROACHOFEVALUATINGALLSOURCES/SINKS 665.5 ADAPTATIONOFEXISTINGGHGOFFSETPROJECTPROTOCOLS 775.6 SIMPLIFIEDCALCULATIONAPPROACH 795.7 ESTIMATEPROJECTEDGHGREDUCTIONS 815.8 DOCUMENTPROJECTPLANNING 825.9 QUALITYASSURANCEREVIEW 83

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6. PROJECTIMPLEMENTATION 84

6.1 INTRODUCTION 846.2 BASELINESCENARIOADJUSTMENTS 846.3 QUANTIFICATIONOFPROJECTACTIVITYLEVELPERFORMANCE 866.4 QUANTIFYPROJECTGHGREDUCTIONS 876.5 DOCUMENTPROJECTREPORT 876.6 QUALITYASSURANCEREVIEW 876.7 MANAGEMENTREVIEW 88

7. APPENDIXA-FACTORS 89

7.1 GREENHOUSEGASGLOBALWARMINGPOTENTIALS 907.2 DEFAULTENERGYEMISSIONFACTORS 91

8. APPENDIXB-GHGQUANTIFICATIONREFERENCES 93

9. APPENDIXC-SAMPLEPROJECTCALCULATIONS 95

9.1 PROJECTDESCRIPTION 959.2 PROJECTPLANNING 959.3 PROJECTIMPLEMENTATION 100

10. APPENDIXD-SURVEYSAMPLINGANDSTATISTICALANALYSIS 106

10.1 POPULATIONMEAN 10610.2 POPULATIONTOTAL 10810.3 POPULATIONPROPORTION 11010.4 STRATIFIEDSAMPLING 11110.5 CLUSTERSAMPLING 111

11. APPENDIXE–REFERENCESANDBIBLIOGRAPHY 112

12. APPENDIXF-DATABASES 115

13. APPENDIXG-AVAILABLEOFFSETPROTOCOLS 117

13.1 ALBERTAOFFSETPROTOCOLS 11713.2 CALIFORNIAOFFSETPROTOCOLS 11813.3 BRITISHCOLUMBIAOFFSETPROTOCOLS 11813.4 ONTARIO/QUEBECOFFSETPROTOCOLS(PLANNED) 11913.5 CLIMATEACTIONRESERVEOFFSETPROTOCOLS 119

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List of Tables TABLE1:GREENHOUSEGASESANDGLOBALWARMINGPOTENTIALS............................................................................3TABLE2:DEVELOPTHEBUSINESS-AS-USUALFORECASTFORTARGETPOPULATION.......................................................11TABLE3:ESTABLISHTECHNOLOGYADOPTIONOBJECTIVE.........................................................................................15TABLE4:ESTIMATINGPROJECTEDGHGREDUCTIONS..............................................................................................17TABLE5:NORTHAMERICANGHGOFFSETPROJECTPROTOCOLS...............................................................................19TABLE6:QUANTIFICATIONOFACTUALPROJECTPERFORMANCE................................................................................24TABLE7:QUANTIFICATIONOFACTUALPROJECTGHGREDUCTIONS...........................................................................25TABLE8:TYPICALSOURCESOFGHGEMISSIONS.....................................................................................................32TABLE9:ILLUSTRATIVEEXAMPLESOFBACKGROUNDINFORMATIONRELATEDTOTARGETPOPULATIONOFEMISSIONSOURCES

FORINITIATIVE........................................................................................................................................53TABLE10:NORTHAMERICANGHGOFFSETPROJECTPROTOCOLS.............................................................................77TABLE11:GHGGLOBALWARMINGPOTENTIALS...................................................................................................90TABLE12:DEFAULTENERGYGHGEMISSIONFACTORS............................................................................................92TABLE13:REFERENCEQUANTIFICATIONMETHODOLOGYRESOURCES.........................................................................93TABLE14:GHGEMISSIONRATESFORBASELINE&PROJECTSCENARIOS.....................................................................96TABLE15:BAUGHGFORECAST.........................................................................................................................98TABLE16:GHGPROJECTSCOPE-ADOPTIONRATEOBJECTIVEANDNUMBEROFTECHNOLOGYADOPTERS........................98TABLE17:CALCULATIONOFPROJECTEDGHGREDUCTIONSANDPROJECTEDGHGFORECAST.........................................98TABLE18:REVISEDBAUGHGFORECAST...........................................................................................................103TABLE19:GHGPROJECTSCOPE-ACTUALTECHNOLOGYADOPTERSANDCALCULATEDADOPTIONRATES.......................103TABLE20:CALCULATIONOFACTUALGHGREDUCTIONSANDACTUALGHGPERFORMANCE.........................................103TABLE21:USEFULDATABASES..........................................................................................................................115TABLE22:ALBERTAOFFSETPROTOCOLS.............................................................................................................117TABLE23:CALIFORNIAOFFSETPROTOCOLS.........................................................................................................118TABLE24:BRITISHCOLUMBIAOFFSETPROTOCOLS...............................................................................................118TABLE25:ONTARIO/QUEBECOFFSETPROTOCOLS(PLANNED)................................................................................119TABLE26:CLIMATEACTIONRESERVEOFFSETPROTOCOLS.....................................................................................119

List of Figures FIGURE1:SIMPLIFIEDGHGREDUCTIONQUANTIFICATIONMANAGEMENTPROCESS........................................................8FIGURE2:PROJECTPLANNING-SAMPLEPROJECTEDGHGREDUCTIONS.....................................................................26FIGURE3:PROJECTIMPLEMENTATION-SAMPLEACTUALGHGREDUCTIONS...............................................................26FIGURE4:DETAILEDGHGREDUCTIONMANAGEMENTPROCESS...............................................................................48FIGURE5:IDENTIFYINGANDSELECTINGGHGSOURCES/SINKS..................................................................................67FIGURE6:PROJECTPLANNING-SAMPLEPROJECTEDGHGREDUCTIONS...................................................................104FIGURE7:PROJECTIMPLEMENTATION-SAMPLEACTUALGHGREDUCTIONS.............................................................104

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AbbreviationsandAcronyms BAU Business-as-usual CCAP Climate Change Action PlanCH4 Methane CO2 Carbon dioxide CO2e Carbon dioxide equivalent EF EmissionFactorEPA U.S.EnvironmentalProtectionAgencyGGRA Greenhouse Gas Reduction Account GHG Greenhouse gas(es) GJ Gigajoule GWP Global warming potential HFC Hydrofluorocarbon HHV Higher Heating Value HistY Historical year IESO Independent Electricity System Operator IPCC Intergovernmental Panel on Climate Change ISO International Organization for Standardization IT Information technology J Joule kg Kilogram LHV Lower heating value M3 Cubic metre MBC Management Board Cabinet MJ Megajoules MW Megawatt MWh Megawatt-hour N2O Nitrous oxide NF3 Nitrogen trifluoride ODS Ozone depleting substance OPS Ontario Public Service PFC Perfluorocarbon PY Project year RefY Reference year Q Quantity SF6 Sulphur hexafluoride t Metric tonnes TB Treasury Board UNFCCC UnitedNationsFrameworkConventiononClimateChangeWBCSD WorldBusinessCouncilforSustainableDevelopmentWCI Western Climate Initiative Inc. WRI WorldResourcesInstitutey,yr Year

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1. Guidance Summary

1.1 Background Ontario’s Climate Change Strategy1 outlines a path to a low-carbon, climate resilient society by setting out the transformative change required to reduce greenhouse gas (GHG) emissions to meet target levels. The strategy provides GHG reduction targets of 15% by 2020, 37% by 2030, and 80% below 1990 levels by 2050. Ontario’s 2016 Climate Change Action Plan (CCAP) marks the first of a series of five-year plans focused on reducing GHG emissions to meet reduction targets, create a low-carbon economy, and support industry, businesses and households in making low-carbon choices.2 In support of the CCAP, the province has implemented a cap and trade program for which compliance obligations for emitters began January 1, 2017. Government proceeds from the program will be invested into initiatives that are projected to reduce or support the reduction of GHGs, as outlined in the Climate Change Mitigation and Low-carbon Economy Act of 2016.3 All proceeds from the program will be tracked in a designated purpose account called the Greenhouse Gas Reduction Account (GGRA). Proceeds will be applied to implement CCAP initiatives. Ontario Public Service (OPS) ministries will be managing funds for CCAP initiatives that will achieve GHG emission reductions among emitters in communities under their jurisdictions. The Minister of the Environment and Climate Change will review and evaluate investments for initiatives and provide the evaluation to Treasury Board and Management Board Cabinet (TB/MBC) prior to the release of GGRA funds to ministries. Credible estimates of GHG emission reductions are key components of OPS ministry submissions for funding initiatives. Such estimates will also be important for the management process in tracking progress and making continuous improvements to the design, implementation and ongoing funding of initiatives.

1 Government of Ontario (2016) Ontario’s Climate Change Strategy. https://www.ontario.ca/page/climate-change-strategy 2 Government of Ontario (2016) Climate Change Action Plan. https://www.ontario.ca/page/climate-change-action-plan 3 Government of Ontario (2016) Ontario Climate Change Mitigation and Low-carbon Economy Act, 2016 and Schedule 1 of Ontario Regulation 143/16. http://www.ontla.on.ca/bills/bills-files/41_Parliament/Session1/b172ra.pdf

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1.2 Purpose and Scope The purpose of this guidance document is to provide assistance to OPS ministries for their process of preparing and submitting estimates of projected and actual GHG emission reductions for CCAP projects. It may also be useful for GHG emitter community partners and stakeholders that are working with ministries to plan, implement and quantify achievements in reducing emissions. The guidance document describes principles and quantification methodologies, along with some of the supporting information and further resources that are likely to be needed. Applying the principles and methodologies outlined in this document should result in reduced effort and enhance the overall quality of submissions and reports on progress achieved by the initiatives. This Guidance Summary provides some basic concepts and then focuses on three phases involved in the process of estimating GHG emission reductions, namely:

• Initiative Planning; • Project Planning; and • Project Implementation.

The principles, methodologies and other suggested guidance in this document are meant to be voluntary for consideration by OPS ministries. Their application should facilitate the continuous improvement process for managing CCAP initiatives and their specific GHG reduction projects. There are a number of concepts and elements involved in estimating GHG emission reductions associated with projects. One way to help understand some of these concepts is to work through an example. For this Guidance Summary, a simple generic illustrative example is used to help explain the estimation logic. More detailed information on the project example is provided in the rest of the document and Appendix C. However, further guidance and information than that which is contained in this document will likely be needed in calculating GHG emission reductions resulting from projects. Depending on the complexities involved in calculating GHG emission reductions and the internal capabilities of OPS ministry staff, subject matter experts might also need to be consulted.

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1.3 Basic Concepts 1.3.1 Greenhouse Gases and Their Global Warming Potentials There are five greenhouse gases (GHGs) and two additional groups of chemicals that contribute to warming of the atmosphere. These GHGs are not all equal with respect to their contribution to atmospheric warming. A metric ton (tonne) of methane, nitrous oxide or other GHG is more potent than one tonne of carbon dioxide (CO2). The Intergovernmental Panel on Climate Change (IPCC) identifies the Global Warming Potential (GWP) factors for all GHGs in their Assessment Reports. GWPs are used to convert mass emissions of each GHG to carbon dioxide equivalent (CO2e) units. By converting to equivalent units, all GHG emissions can be summed on a consistent basis.

Table 1: GreenhouseGasesandGlobalWarmingPotentials Greenhouse Gases Formula GWP Carbon dioxide CO2 1 Methane CH4 25 Nitrous oxide N2O 298 Sulphur hexafluoride SF6 22,800 Nitrogen trifluoride NF3 17,200

Hydrofluorocarbons (HFCs) 19 GHG chemicals 53-14,800 See Appendix A

Perfluorocarbons (PFCs) 7 GHG chemicals 7,390-12,200 See Appendix A

Source: Environment and Climate Change Canada (2017) National Inventory Report 1990–2015: Greenhouse Gas Sources and Sinks in Canada, Table 1.1 (obtained from IPCC AR4 Report, 2007) Calculation Example: A vehicle consuming 10,000 litres of diesel fuel releases 26.90 tonnes of carbon dioxide (CO2), 0.0011 tonnes of methane (CH4), and 0.0015 tonnes of nitrous oxide (N2O). Using the GWPs above, these quantities can be multiplied by their GWPs and summed to estimate the total GHG emissions. CO2 26.90 x 1 = 26.90 tonnes-CO2e CH4 0.0011 x 25 = 0.03 tonnes-CO2e N2O 0.0015 x 298 = 0.45 tonnes-CO2e Total GHG = 27.38 tonnes-CO2e.

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1.3.2 GHG Sources and Sinks A GHG emission source is a physical unit or a process that releases a GHG into the atmosphere. Fossil fuel combustion sources are typically classified as: stationary fuel combustion (e.g., furnaces, boilers) and mobile equipment combustion (e.g., vehicles, heavy equipment). Flaring is a specialized case of fuel combustion. GHG emissions can occur directly from contained or natural sources through venting or fugitive emissions. GHG emissions can also be generated from industrial processes (e.g., chemical reactions), fertilizer use in soils, livestock, and organic waste. Emissions of fluorinated GHGs (HFCs, PFCs, SF6) usually come from generation or use of these gases. Biogenic CO2 emissions, which originate from biological carbon sources (produced by life processes), are deemed to have a net-zero contribution to global warming because they are part of the natural carbon cycle. In other words, emissions of CO2 generated from the combustion or decomposition of biomass or other biogenic sources are typically not considered to be anthropogenic (man-made) GHG emissions. However, it is still good practice to calculate biogenic CO2 emissions and report them separately as information items. CH4 and N2O emissions that may be generated from the combustion or decomposition of biomass and other biogenic sources are included as GHG emissions because they are created by man-made processes. There are no biogenic sources of SF6, NF3, HFCs, and PFCs. A GHG sink is a physical unit or process that removes a GHG from the atmosphere. These include biological sinks such as trees in forests, agricultural crops, and other vegetation. Manipulated biological systems, such as agricultural lands, forest tracts, and land converted to other uses, can be sinks as well as sources diffused over very large areas.4 CO2 that is removed from the atmosphere by man-made increases in biological sinks (e.g., afforestation, reforestation) are included as removals in GHG project accounting. 1.3.3 GHG Emission Reduction Projects In this guidance document, the term “GHG reductions” will be a general term that refers to both GHG emission reductions and GHG removal enhancements for simplicity. GHG emission reductions are achieved by emitters adopting technologies and making changes in behaviours and operating practices. GHG removal examples of technologies are: fuel switching to fuels that have lower carbon content per unit of energy released; higher efficiency furnaces; installation of insulation; and wind power. Examples of behaviours and operating practices are: reducing the temperature of the home thermostat; turning off lights when not needed; and, optimizing an industrial process to reduce energy use.

4 Environment and Climate Change Canada (2017) National Inventory Report 1990–2015: Greenhouse Gas Sources and Sinks in Canada, https://www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=83A34A7A-1

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GHG removal enhancements, which typically apply only to CO2, are achieved by capturing and storing man-made CO2 in a permanent reservoir, or increasing the amount of CO2 removed from the atmosphere by man-made increases in biological sinks such as forests or other land use changes. In developing GHG reduction estimates, it is important to explicitly identify the specific technologies, systems, behaviours and/or operating practices that reduce GHG emissions or increase GHG removals. In this guidance document, the term “technologies” will be a general term that refers to any technologies, systems, behaviours and/or operating practices causing a GHG reduction for simplicity. Government regulations, actions, programs, and specific incentives can encourage the adoption of technologies by emitting entities. In this guidance document, the term “initiatives” will be a collective term that refers to any regulations, actions, programs and specific incentives that would be managed by Ontario Public Service (OPS) ministries. An initiative is designed to induce one or more GHG reduction projects. GHG-reducing technologies are adopted by one or more emitting entities that can belong to a target population. In this guidance document, the term “project” is used as the basis for estimating GHG emission reductions. This is consistent with the term “GHG project” used in ISO 14064 Part 2 standard5 to denote the fundamental boundary for which a GHG reduction is estimated. A project consists of a set of GHG-emitting sources or GHG-removing sinks defined by the GHG reducing technologies that would not otherwise have been adopted in the absence of the influence of initiatives. GHG-emitting sources can be one piece of equipment (e.g., vehicle engine, home heating furnace) or complex systems (e.g., natural gas pipeline system). A GHG reduction project can consist of one or more technologies applied over one or more economic sectors (or segments) involving one or many emitting units, at one or more locations, over a period of time to achieve a projected GHG reduction objective. In developing estimates of GHG emission reductions it is important to clearly state the full scope or boundary of emitting units that are to adopt technologies encompassed by a project. A GHG emission reduction can only be calculated from a clearly-defined project and its unique baseline scenario. A baseline scenario is related directly to a defined project. A baseline scenario is a hypothetical reference case that is established in order to represent the conditions that would have occurred in the absence of the project. A project’s baseline scenario provides an equivalent level of product or service as that provided by the project

5 ISO 14064-2:2006. Greenhouse gases -- Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements. https://www.iso.org/standard/38382.html

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and therefore has a common level of activity as that of the project. A GHG emission reduction is a calculated decrease of GHG emissions between a baseline scenario and a project scenario. A GHG removal from the atmosphere (i.e., an increase of a sink – e.g., planting trees that sequester CO2 with growth) is a calculated increase in GHG removals between a baseline scenario and a project.

1.4 Project Design and Quantification Principles The body of the guidance document discusses the importance of applying certain principles in designing projects, and when quantifying GHG reductions. Some of these are listed below. Initiative / Project Design Principles6

• The GHG emissions reductions need to occur in Ontario. • GHG reductions should be demonstrated through quantification. • GHG reducing technologies adopted by emitters under the project should not result

in increases in GHG by emitters that were unaccounted for in the project scope or boundary. That is the project should account for all changes by emitters influenced by the initiative’s project.

• A project should result in GHG reductions that would not otherwise have occurred had the project not been implemented. Project accounting literature calls this concept “additionality”.

GHG quantification principles7

• Relevance. The target population or set of emitting units and their GHG sources that are the focus of the initiative and associated funding should be selected and well defined.

• Completeness. All the GHG emission changes that are influenced by the project should be taken into account and quantified. Very small changes in emissions should be at least considered and dismissed if deemed negligible.

• Consistency. GHG emission estimates need to be described and prepared to allow for meaningful comparisons between projected and actual project GHGs as well as comparisons of emission reduction performance over time.

6 Borrowed from: World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) (2003) The GHG Protocol for Project Accounting. Government of Alberta (2013) Technical Guidance for Offset Project Developers. 7 Borrowed from: International Standards Organization, ISO 14064 Part 2: Specification with Guidance at the Project Level for Quantification, Monitoring and Reporting of Greenhouse Gas Emission Reductions or Removal Enhancements, First Edition, Mar. 1, 2006; ISO14064-2:2006(E).

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• Transparency. In estimating GHG reductions for a project it is very important to ensure data sources, quantification methodologies, assumptions, unit conversions, calculation equations, results and references are clearly documented and transparent so that a reviewer can easily follow how the estimates were developed. Sufficient and appropriate information needs to be provided to allow intended users to make decisions with reasonable confidence.

• Accuracy. Diligence is required to ensure that GHG calculations have the precision needed for their intended use and provide reasonable assurance on the integrity of reported GHG information. Accuracy is usually satisfied by avoiding or eliminating bias from sources within estimations and reducing uncertainties as far as is practical.

• Conservativeness. It is best practice to apply conservative assumptions, and use values and procedures to ensure that GHG reductions resulting from initiatives are not over-estimated. The principle of conservativeness is particularly useful when data with high uncertainty and weak correlations may need to be employed.

1.5 Management Process for Quantifying GHG Reductions The proposed management process for the OPS initiative program has three phases: 1) Initiative planning, in which the initiative is developed into a tangible and specific

policy or program measure that can create one or more projects; 2) Project planning phase, which occurs before the start of any projects under the

initiative; and 3) Project implementation phase, which occurs in each reporting period after projects have

started. A simplified flow diagram illustrating the management process is presented on the next page.

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Figure 1: Simplified GHG Reduction Quantification Management Process

Define Target Populationfor the Initiative

ConductSituational Analysis

Develop Project Ideas

Prepare Business-As-UsualGHG Forecast

Define ProjectScope and Objectives

Determine Project'sBaseline Scenario

Develop QuantificationMethodology

Estimate and DocumentProjected GHG Reductions

Review/ValidateBaseline Scenario

Assumptions

Quantify ProjectActivity Variables

Quantify and DocumentActual GHG Reductions

ConductManagement Review

1. Initiative Planning 2. Project Planning(One-Time Before Project)

3. Project Implementation(Each Project Reporting Period)

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1.6 Initiative Planning Initiative planning involves several key steps that lead to the development of the business-as-usual (BAU) GHG forecast for the target population of GHG emitters that are to be influenced by the initiative. The key steps are as follows.

• Define and characterize the target population of GHG emitters. • Develop historical GHG estimates for target population. • Develop the business-as-usual GHG forecast for the target population.

Quantifying historical emissions and developing a business-as-usual (BAU) forecast of GHG emissions for the target population and/or specific emitting sources provides information that is fundamental to the process for managing such emissions and associated application of resources. Historical GHG emission estimates – often referred to as an “emissions inventory” – provide an understanding of the magnitude of the GHGs involved. GHG forecasts form the basis for identifying emission reduction opportunities, setting future reduction objectives, and tracking performance. 1.6.1 Define and Characterize the Target Population of GHG Emitters Achieving GHG reductions starts with the identification of a target population of GHG emitters. It is useful to characterize the target population of emitters and their emission sources in such a way as to facilitate the identification, prioritizing and/or selection of sources that represent the best target(s) to achieve reductions for the initiative. For example, background research and analysis may show it is more effective to prioritize on higher-emitting sources, such as homes that are over 35 years of age or have heating furnaces that are over 20 years of age. 1.6.2 Develop Historical GHG Estimates for Target Population Historical GHG emissions from the target population of Ontario emitters will very likely be encompassed by Canada’s National Inventory Report (NIR) of GHG emissions, which is quite comprehensive. It is prepared annually by Environment and Climate Change Canada (ECCC) and available at the following website.

• United Nations Framework Convention on Climate Change, National Inventory Submissions 2017. http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/10116.php

The most recent NIR (which contains historical emissions from 1990 to 2015) should be reviewed to seek out Ontario-specific information for the target population of emitters and their emission sources. The NIR documents definitional boundaries for numerous GHG

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emission source categories. For each category quantification methodologies are provided along with key assumptions, calculation equations, some activity data for emission sources, emission factors and emission rates applied, equations, conversion factors, GWP factors, references, and other useful information. While historical emissions from the target population of Ontario emitters may be encompassed by the NIR, the exact target population and their emission sources that are the focus of the initiative may or may not be explicitly available. If the target population and emission sources for the initiative’s project is the same as the emission source category in the NIR, then the NIR emissions can be used to establish the historical level of emissions. However, the NIR will not have data available for the most current calendar year8, which typically serves as the reference point for development of the BAU GHG forecast. While the NIR is comprehensive, the GHG emissions for the exact set of emission sources defined to be the target of the initiative, may not be available. In absence of useful NIR emissions data, research may need to be conducted to identify historical GHG emissions for the target emission sources and/or information to support development of estimates. GHG estimates may be available from focused studies and other emission inventories. For example, there are potential useful data available for a large number of Ontario’s Broader Public Sector (BPS) facilities and industrial facilities from the following websites.

• Energy use and greenhouse gas emissions for the Broader Public Sector https://www.ontario.ca/data/energy-use-and-greenhouse-gas-emissions-broader-public-sector?_ga=1.177031781.1722981371.1490034100

• Environment and Climate Change Canada, National Pollutant Release Inventory (NPRI). https://www.ec.gc.ca/inrp-npri/default.asp?lang=En&n=B85A1846-1

Additional research should be conducted on the subject matter related to the target population. Even if emission estimates matching the target population of emissions sources are not found, the results of the research may be useful. There may be useful information from other Canadian and international jurisdictions, which might help in preparing historical and forecast emission estimates for the targeted population of Ontario emission sources. 1.6.3 Develop the Business-as-Usual GHG Forecast It is useful to develop a BAU GHG emissions forecast for the target population of emitters to be influenced by the initiative. The BAU GHG forecasted emissions are those that would occur in the absence of any influence of the initiative. The BAU would include a forecast

8 The NIR is finalized in April of each year, providing estimates for calendar year ending 16 months prior. That is, the NIR for the year 2015 was made available in April 2017. Year 2016 emissions should be available in April 2018.

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of the number of emitting units in the target population, forecast of emission rates associated with their activities, and the resulting forecast of their GHG emissions. Since project GHG accounting typically includes the indirect GHG emission impacts of a project (such as from upstream energy, transportation and product supply lifecycle model9 stages), it is good practice to prepare a BAU GHG forecast that accounts for both direct and indirect emissions. This ensures that calculated project GHG reductions can be compared to the population’s BAU GHG forecast on the same basis. In the illustrative example, a population is observed to grow at 3% per year (e.g., from the historical year to the project reference year) and the simplifying assumption applied was that this growth rate would remain constant in the foreseeable future. The project reference year population is determined to be 20,000 emitters. In the example, the simplifying assumption is that the growth rate will remain constant. In reality, there may be a number of important economic, technical, regulatory and other drivers that should be taken into consideration in developing the BAU forecast for the targeted population.

Table 2: Develop the Business-As-Usual Forecast for Target Population

Unit of

Measure Historical

Year Reference

Year Project Year 1

Project Year 3

Project Year 5

Project Year 7

Calculation Code

BAU Forecast of Targeted Population

Number of Emitting Units 19,417 20,000 20,600 21,855 23,185 24,597 A

Average Direct GHG Emission Rate tCO2e/unit/year 3.90 3.90 3.90 3.90 3.90 3.90 B

Average Ontario Indirect GHG Emission Rate tCO2e/unit/year 0.60 0.60 0.60 0.60 0.60 0.60 C

Average Ontario Fuelcycle GHG Emission Rate

tCO2e/unit/year 4.50 4.50 4.50 4.50 4.50 4.50 D = B+C

BAU GHG Forecast tCO2e 87,379 90,000 92,700 98,345 104,335 110,689 E=A*D

Average emission rates (emissions released to the atmosphere per unit per time period) may be available or will need to be developed, and multiplied by the number of emitting units to establish the BAU GHG forecast for the target population. There will be direct and possibly significant indirect emissions. Direct emissions are those emitted from the emission source (e.g., a vehicle using gasoline, a furnace burning natural gas, an air conditioner leaking an HFC refrigerant). Indirect emissions (also referred to as upstream emissions) are those mostly associated with energy supply10 (e.g., fossil fuels, biofuels, electricity), refrigerants supply, and products supply. For the purposes of this document, the term “fuelcycle GHG emission rates” is applied to the sum of the direct plus indirect emission rates associated with fuels. As stated earlier, it is good practice to prepare a BAU

9 Fuelcycle stages are the portion of all lifecycle stages that are associated with fuels production and use. GHGenius 4.03 for Excel 2013 (2013), https://www.ghgenius.ca/downloads.php. 10 Supply would include the various stages of production and transportation.

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GHG forecast that accounts for both direct and indirect emissions occurring in Ontario for the target population of emitters. General guidance and helpful information are provided in the body of this document regarding how to estimate direct, Ontario fuelcycle emissions and other indirect fuelcycle emissions. Specific data and calculation methodologies, which will likely be unique for each combination of target population of emitters, emission sources, and technologies to be adopted, cannot be contained in the guidance document. These will need to be developed for each project by OPS ministries. While the simplifying assumption for the illustration example has been to keep the average emission rates constant between the historical year and the last project year, there may be BAU factors that drive changes over time. For example: vehicles may become more fuel efficient (reducing fuel consumption rates per kilometer travelled); biofuels may increase their market penetration (changing GHG emission factors); and air conditioner leakage rates might improve. These types of factors should be considered in establishing BAU emission rates over time. Emission rates can be developed from observed historical inventories (a top-down approach) or calculated using emitting activity levels and standard emission factors (a bottom-up approach). Examples of activity levels include: fuel consumption rates (e.g., standard cubic metres of natural gas consumed by a furnace per year, litres of diesel consumed per vehicle-kilometer-travelled); production rates (e.g., tonnes of cement produced per year); fertilizer application rates (kilograms of fertilizer applied per hectare); landfill loading (tonnes of waste sent to landfills each year); and electricity consumption. Emission factors are used to convert activity levels (fuel use, production, etc.) to GHG emissions. Standard emission factors are available to carry out these conversions. A set of emission factors for common fuels is provided in Appendix A. Direct GHG emission factors are provided for fuel combustion along with estimates of indirect GHG emission factors for fuel supply applicable to Ontario. Additional emission factors may need to be gathered from references or energy suppliers. Appendix A also documents the annual average electricity grid displacement factors associated with the mix of energy sources (i.e., nuclear, hydro, natural gas, diesel, wind, etc.) for generation and transmission/distribution11 for all regions of Ontario for 2015. These default electricity grid displacement factors are borrowed from Environment and Climate Change Canada, National Inventory Report.12 However, the emission factors for fuels and electricity to be applied in estimating GHG reductions should reflect project conditions. For example, where known or reasonable estimates can be developed, electricity grid displacement factors should take into account annual, seasonal, time-of-day, and/or significant regional

11 Accounts for transmission/distribution line losses and sulphur hexafluoride (SF6) dielectric fluid emissions. 12 Environment and Climate Change Canada (2017) National Inventory Report, 1990-2015, Table A13-7

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use and generation factors. These factors may change over the time horizon of the project. OPS ministries should consult with Ontario Ministry of Environment and Climate Change (MOECC), which will be working with stakeholders to develop appropriate GHG emission factors aligned with the Province’s long term energy plan.

1.7 Project Planning Project planning ultimately results in the development of projected GHG reductions expected for the project. Project planning encompasses the following steps. • Clearly define the GHG project scope and activity level objectives. • Select the most appropriate GHG reduction calculation methodology. • Estimate the projected GHG reductions attributable to the GHG project. • Document a Project Plan. 1.7.1 Defining the Project Scope and Objective A GHG project can consist of one or more technologies and practices to be adopted by a target population in one or more sectors (or segments), at one or more locations, over a specified period of time to achieve one projected GHG reduction objective. The definition of a project’s scope and GHG reduction objective is a key starting point in the project planning process and are typically found in the front sections of a Project Plan. The scope of a GHG project should be defined with the following elements. • Title. • Ownership, stewardship, or management responsibility. • Description. • Technologies or practices to be adopted to achieve a GHG reduction. • Specific greenhouse gases covered by technologies or practices. • Target population, sectors (or segments) in which the technologies or practices are to

be applied. • Location – geographical boundary of potential technologies or practices. • Timing – project start date, project duration, project reporting periods.

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1.7.1.1 GHG Technologies, Behaviours, Operating Practices GHG emission reductions are achieved by emitters adopting technologies and/or making changes in behaviours and operating practices. Examples of technologies would include, but not be limited to the following.

• Fuel switching to lower or zero fossil carbon fuels. • Installation of electricity generated from renewable sources (e.g., wind, solar). • Installation of new, more fuel-efficient equipment. • Adoption of electric vehicles. • Smaller, more efficient vehicle engines or other fuel combustion requirement. • Installing additional insulation to reduce heat loss with associated lower fuel use. • Planting trees to sequester carbon from the atmosphere. • Use of biogenic fuels made from renewable sources (e.g., biofuels from plants,

renewable natural gas). Examples of changes in behaviours and/or practices that can reduce GHG emissions are as follows.

• Aligning climate control to occupancy (reducing space heating and electricity use). • Reduce vehicle engine idling times. • Drive vehicles at slower speeds. • Shifting transport modes (e.g., use public transit). • Improved industrial process control to reduce heat, material and product losses.

In developing GHG emission reduction estimates, it is important to explicitly identify the specific technologies, behaviours and/or operating practices that are to be adopted by the target population of emitters to be influenced by the initiative and encompassed by the project. Each technology, behaviour and operating practice will have a GHG reduction potential relative to existing (in place) or alternative technologies. For example, natural gas may be able to reduce direct GHG emissions by 30-40% when replacing heating oil in furnaces. A new natural gas furnace may be 10-20% more efficient and therefore reduce GHG emission by the same percentage versus a less efficient natural gas furnace. GHG emission reduction potentials needs to be established and documented for the project.

1.7.1.2 Establish the Technology Adoption Rate Objective It is important to establish the number of GHG emitting units in the population that are expected to adopt the GHG reduction technologies. One way to do this is to develop an estimate of the technology adoption rate objective for the project. This can also be

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considered the potential market penetration of the GHG reduction technology among the target population. In the illustrative example, the technology adoption rate objective is to have 10% of the target population adopt the GHG reduction technology in project year 1, 50% by project year 3, and 95% by project year 7. Multiplying the technology adoption rate objective by the target population establishes the absolute number of expected adopters, which sets the boundary of the project. By difference, there will be the expected remaining population of emitters that do not adopt the technology.

Table 3: Establish Technology Adoption Objective Reference

Year Project Year 1

Project Year 3

Project Year 5

Project Year 7

Calculation Code

BAU Target Population emitting units 20,000 20,600 21,855 23,185 24,597 A Adoption Rate Objective % of units 0% 10% 50% 80% 95% F Expected Technology Adopters emitting units 0 2,060 10,927 18,548 23,368 G=A*F

Expected Remaining Population (non-adopters) emitting units 20,000 18,540 10,927 4,637 1,230

There are likely to be a number of factors that need to be studied and analyzed to establish the technology adoption rate objective. For example, the technology adoption rates can be influenced by the cost of the technology, turnover of existing technologies, technical performance, life of the GHG technology, and the magnitude of incentives to encourage technology adoption. Market survey work may be needed to identify the various factors and develop a credible basis on which to establish an estimate of the adoption rate. There may be uncertainties in developing the adoption rate objective, which should be taken into consideration and described. It is good practice to develop a conservative estimate (i.e., “at the lower end of the range”) for the technology adoption rate objective. This will reduce the risks associated with application of initiative resources for projects that may ultimately not meet high expectations. 1.7.2 Selection of GHG Reduction Methodology There are many methodologies available to calculate GHG reductions from GHG projects. This guidance document cannot outline or summarize all the possible methodologies. Since they can be project and technology specific. General guidance on the concepts and elements for estimating GHG reductions are provided. Three general approaches for estimating project GHG reductions are as follows. 1. Follow ISO 14064 Part 2 standard (rigorous approach). 2. Adapt existing GHG protocols for use in Ontario. 3. Apply a simplified calculation approach.

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This is typically a trade-off between accuracy and simplicity in calculating GHG reductions. Increased accuracy (lower uncertainty), completeness and transparency typically involves increased time and costs. Regardless of the approach applied, the aim is to develop the projected GHG reductions expected13 from the project. The projected GHG reductions are estimated as the difference between: 1) expected baseline scenario GHGs; and 2) expected project GHGs, both of which are estimated from the expected number of technology adopters defined in the project objective.

• The expected baseline scenario GHGs for the project are estimated from the number of project adopters and the expected baseline scenario direct and indirect Ontario GHG emission rates.

• The expected project GHGs are estimated from the number of project adopters and the expected project direct and indirect Ontario GHG emission rates.

• The project’s GHG reductions are calculated as the difference between the baseline scenario and project GHGs.

Once projected GHG reductions are estimated, a projected GHG forecast for the population can be prepared. The projected GHG forecast for the population is the difference between the BAU GHG forecast for the population and the projected GHG reductions expected from the project. If more than one project is applied to a target population, the projected GHG forecast for the population would be the difference between the BAU GHG forecast for the population and the sum of the projected GHG reductions expected from the projects. In the illustrative example, the calculation of the projected GHG reductions expected from the project and the resulting projected GHG forecast for the population are shown in the table on the next page. The primary focus of OPS initiatives is for GHG reductions occurring in Ontario. Therefore, project GHG reductions should account for direct GHG emissions and those indirect GHG emissions estimated to occur in Ontario. Out-of-province indirect GHG emissions can be estimated but should only be reported separately as co- or dis-benefit information items.

13 The term “expected” is used in project planning before the project so that these estimates can be later compared with “actual” emissions after project implementation.

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Table 4: Estimating Projected GHG Reductions

Historical Year

Reference Year

Project Year 1

Project Year 3

Project Year 5

Project Year 7

Calculation Code

BAU GHG Forecast tonnes-CO2e 87,379 90,000 92,700 98,345 104,335 110,689 E Expected Technology Adopters

emitting units 0 0 2,060 10,927 18,548 23,368 G

Expected Baseline Direct GHG Rate tCO2e/unit 3.90 3.90 3.90 3.90 3.90 3.90 H

Expected Baseline Ontario Indirect GHG Rate tCO2e/unit 0.60 0.60 0.60 0.60 0.60 0.60 I

Expected Baseline Ontario Fuelcycle GHG Rate tCO2e/unit 4.50 4.50 4.50 4.50 4.50 4.50 J=H+I

Expected Baseline Scenario GHGs tonnes-CO2e 0 0 9,270 49,173 83,468 105,154 K=G*J

Expected Project Direct GHG Rate tCO2e/unit 0.19 0.19 0.19 0.19 0.19 0.19 L

Expected Project Ontario Indirect GHG Rate tCO2e/unit 0.21 0.21 0.21 0.21 0.21 0.21 M

Expected Project Ontario Fuelcycle GHG Rate tCO2e/unit 0.40 0.40 0.40 0.40 0.40 0.40 N=L+M

Expected Project Scenario GHGs tonnes-CO2e 0 0 817 4,334 7,357 9,268 O=G*N

Projected GHG Reductions (from Project)

tonnes-CO2e 0 0 8,453 44,839 76,111 95,886 P=K-O

Projected GHG Forecast (for Population) tonnes-CO2e 87,379 90,000 84,247 53,507 28,224 14,802 Q=E-P

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1.7.3 Follow ISO 14064 Part 2 Standard (Rigorous Approach) The ISO 14064 Part 2 standard14 – the rigorous approach - is the ideal approach to GHG reduction quantification for projects. This approach requires a thorough and complete analysis of a project situation, which may require significant resources to perform. However, the benefit of this approach is a higher level of accuracy and reduced uncertainty, which can be important factors for users of the project results. The key steps, which are identified below, correspond to Sections 5.3 through 5.8 in the ISO 14064 Part 2 standard, namely: • Section 5.3 - Identifying GHG sources/sinks relevant to the project; • Section 5.4 - Determining the baseline scenario; • Section 5.5 - Identifying GHG sources/sinks for the baseline scenario; • Section 5.6 - Selecting relevant GHG sources/sinks for monitoring or estimating; • Section 5.7 - Quantifying GHG emissions or removals; and • Section 5.8 - Quantifying GHG reductions. Annex A of ISO 14064 Part 2 presents a logic flow diagram illustrating this approach, which is shown in Chapter 4 of this guidance document. Each of these steps are described briefly in Chapter 4. Full details, which are contained in the ISO standard, should be reviewed. 1.7.4 Adaption of Existing GHG Offset Project Protocols Rules or protocols have been established by various jurisdictions to outline the acceptable methodologies for estimating emission reductions for offset projects.15 These typically follow ISO 14064 Part 2. These protocols could be adapted for use by Ontario OPS ministry project proponents. For relevant types of projects, these protocols offer important potential advantages, since they have already:

• identified the sources/sinks in the projects; • identified the sources/sinks in baseline scenarios; • selected the relevant sources/sinks for which GHG emissions need to be quantified

(not all sources/sinks need will need to be quantified); and • established the logic and detailed quantification methodologies, including emission

factors, equations, models, etc.

14 ISO 14064-2:2006. Greenhouse gases -- Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements. https://www.iso.org/standard/38382.html 15 A GHG offset project is one implemented by an emitter that does not have a regulatory (e.g., cap and trade) obligation to reduce emissions. These emitters may incur costs to implement the project but can sell offset credits to enable other emitters to meet their regulatory compliance obligations.

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The table provides a summary of the number of offset protocols available in North America. These protocols are available from the jurisdictional websites. A list of protocols is included in Appendix G.

Table 5: North American GHG Offset Project Protocols

Project Type Category Alberta BC California Ontario, QuebecA

Climate Action

Reserve Agriculture 7 2 3 3 Energy Efficiency 6 2 Forestry/Land Use 1 1 2 4 4 Fuel Switching 1 1 Geological Sequestration 1 Industrial 4 9 1 1 2 Ozone Depleting Substances 1 2 1 Renewable Energy 6 Transportation 1 Waste Management 5 1 3 3 Total 32 14 6 13 13 Notes: A - under development Available protocols may be applicable to CCAP projects so that project GHG emission quantification methodologies contained could be adapted for Ontario-specific project conditions. The process of adapting an existing GHG offset project protocol would require the following steps. • Identify potential GHG offset project protocols that would apply to the GHG project

situation. • Select the most relevant existing GHG offset project protocol and justify the selection. • Extract the calculation methodology from selected protocol. If more than one

methodology is provided, select the most relevant and justify the selection. • Apply Ontario-specific criteria on eligible scope of sources/sinks for quantification to

adjust any calculation formulas. • Apply Ontario-specific factors to variables in calculation methodology.

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Some Ontario-specific and/or project-specific factors that would need to be used in place of default factors in an offset project protocol might include the following. • Direct combustion GHG emission factors for common fuels. • Indirect Ontario GHG emission factors for the Ontario sources in the fuel supply chain. • Electricity Grid Displacement Factors for Electricity Generation and Use - The Ontario

Electricity Grid Displacement Factor for Electricity End Use accounts for GHG emissions from the average mix of electric power generation in Ontario, line losses, and the average GHG emissions from the Ontario electricity transmission network. Project-specific grid displacement factors may be needed if significantly different that the average Ontario estimate.

• Any project-specific factors that might be used to estimate activity levels specific to Ontario.

A reference table of Ontario-specific default direct and indirect GHG emission factors appears in Appendix A. The Ontario-specific upstream fuelcycle default GHG emission factors were estimated based on the publicly-available GHGenius16 model available from Natural Resources Canada. Where known or where they can be reasonably estimated, project-specific direct and indirect emission factors, including electricity grid displacement factors should be applied. 1.7.5 Simplified Calculation Approach Applying all the steps in ISO 14064 Part 2 or in Ontario-adapted GHG offset protocols may present some challenges. There may be a lack of data, and too much time, work effort and associated costs involved in implementing all of the steps. In some cases, application of limited time and resources for applying all of the steps may not significantly improve the accuracy of the estimates generated. There may be uncertainties that cannot be significantly overcome by conducting a reasonable level of background analysis, data collection and applying all of the steps outlined in ISO 14064 Part 2 or in Ontario-adapted GHG offset protocols. For some such projects, it may be reasonable and acceptable to simplify the calculation methodology for estimating project GHG reductions by considering the following.

• Developing a BAU GHG forecast that is constant with historical GHG emissions. • Reducing background analysis that is used to justify technology adoption objective. • Excluding detailed analysis of all sources (and sinks) associated with project. • Dismissing indirect emissions, if they are roughly calculated or deemed to be small

or negligible. • Making simplifying assumptions.

16 GHGenius: A Model for Lifecycle Assessment of Transportation Fuels. https://ghgenius.ca/

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• Applying conservativeness factors (e.g., 80% or 0.8) to baseline scenarios to account for uncertainties that cannot easily be addressed (e.g., for technology GHG reducing potentials).

• Applying generic emission factors if Ontario-specific emission factors are not readily available.

• Borrowing expected results from similar projects in other jurisdictions. Some of these simplifications might be acceptable for some simple fuel switching or energy efficiency projects. A suggested calculation structure is presented in Section 5.6. 1.7.6 Estimate Projected GHG Reductions Once the calculation methodology is selected, the expected activity levels can be translated into projected GHG reductions. This projected GHG reduction(s) is the GHG reduction objective to be achieved by the project.

1.7.6.1 Determination of Activity Levels GHG emissions are usually estimated by quantifying activity levels and applying relevant GHG emission factors or emission rates. Activity levels can be estimated in three general ways, as follows:

• Monitoring - directly measuring, metering, or counting activity levels; • Sampling surveys - sampling activity level rates from a target population; or • Estimating - using judgment or reference data to choose an assumed activity level.

Monitoring is the most accurate quantification option but may be more costly to obtain activity level data directly from the relevant sources. When activity level variables are monitored, the monitored data records need to be kept to support activity level values used in GHG calculations. Sampling surveys can be used when it is impractical to directly measure activity levels, especially from large target populations. Simple random sampling can be used to characterize activity levels or proportions in one target population. Stratified random sampling can be used to characterize these parameters in several distinct segments in a target population. Cluster sampling can be used to reduce survey costs. The total activity level of adopters in a population can be estimated based on survey sample results and statistical analysis along with error bounds at a prescribed confidence level (typically 95%). The number of survey samples required to characterize a target population to within specified levels of accuracy (e.g. ± 5% or ± 2%) at a prescribed confidence level can be determined statistically using sample size formulas. The use of sampling surveys should

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be justified and documented in the Project Plan. Guidance on sampling surveys and statistical analysis is included in Appendix D. When activity level variables are estimated using best judgement or references, the assumptions should be stated clearly, referenced appropriately, and the estimation process justified. Any estimated variables should be conservative (i.e. low for baseline scenario variables, high for project variables) to minimize potential overestimation of GHG reductions.

1.7.6.2 Monitoring Plan A measurement and monitoring plan that addresses the requirements to support the GHG reduction calculations should be developed and included in the project planning documentation. The measurement and monitoring plan outlines the data collection strategies and tasks for calculation variables and their justification. Elements may include: • Methodologies, supporting studies and data; • Data collection strategies; • Monitoring and data processing tasks; • Sector-specific considerations; and • Sample calculations.

1.7.6.3 Calculation Transparency It is good practice to perform GHG reduction calculations and present summary-level results transparently to help the quality assurance review process. For full transparency, a GHG reduction calculation workbook should be designed with some of the following elements: 1) One summary page with time series of total GHG results of:

a) relevant Baseline Scenario source/sinks and subtotals; b) relevant Project source/sinks and subtotals; c) GHG reduction calculated as difference

2) Annual calculation sheets showing activity level values, activity level units, conversion factors applied, GHG emission factors, physical mass emissions of each gas (tonnes), gas GWPs (tCO2e/tonne gas), CO2 equivalent emissions of each gas (tonnes CO2e), total GHGs. Repeat using same structure for subsequent years.

3) Activity level sheets holding time series of project activity levels and corresponding baseline scenario activity levels and any assumptions, growth/decline factors used, all properly labeled and referenced.

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4) Factor sheets for all constant factors, including default emission factors, unit conversion factors, material property conversion factors (e.g. density, heating values).

1.7.7 Document Project Plan The relevant information in the project planning phase should be documented. It is good practice to produce a Project Plan, which is a formal document that describes the initiative, the project, adopted technologies and practices, expected activity levels, and expected GHG reductions. The Project Plan provides summary information about the project that should be reviewed in a quality assurance review and management reviews. 1.7.8 Quality Assurance Review It is good practice to conduct a quality assurance review of the Project Plan to provide assurance that the project is valid and the information provided supports the projected GHG reductions. This quality assurance review should be performed by an impartial reviewer.

1.8 Project Implementation The project implementation phase occurs after a project has started. Ideally, during this phase the OPS ministry managing the project should carry out the following steps that support quantification of GHG emission reductions. • Assess baseline scenario for potential changes.

§ perform baseline scenario adjustments, as needed. • Quantify project activity level performance using appropriate methodology.

§ monitor/measure/count emitter activities, technology adopters § survey sample of emitters and their activities § estimate total emitting activities of emitters, technology adopters

• Quantify project GHG reductions. • Prepare a Project Report. • Conduct a quality assurance review. • Conduct a management review. Ultimately, these steps support the quantification of the actual project GHG reduction. In assessing performance of the project to deliver GHG reductions, the actual GHG reduction can be compared to the following.

• BAU GHG Forecast • Revised BAU GHG Forecast • Actual Project Baseline Scenario GHGs • Expected Projected GHG Forecast

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1.8.1 Baseline Scenario Adjustments One of the realities regarding project GHG reductions is that baseline scenarios can quickly change over time. The movement of baseline scenarios may occur due to external seasonal and annual influences (e.g., temperature changes), regulatory changes (e.g., federal regulatory changes), technology changes, economic changes as well as broader sectoral and societal changes. The GHG project accounting literature identifies different types of adjustments that may be required to keep the baseline scenario as a conservative estimate of BAU conditions. These are discussed in the body of the guidance document. 1.8.2 Quantify Actual Project Activity Level Performance During the project implementation phase, actual GHG emissions need to be quantified by quantifying actual activity levels and applying relevant GHG emission factors or rates. As explained in Section 5.7, the measurement and monitoring plan developed in the project planning phase needs to be executed. Monitored data should be collected, subjected to quality control (i.e., using expert judgement to correct deviant values), compiled, and transferred for use in calculations. Survey samples may be needed, with results subjected to quality control (i.e. using expert judgement to correct deviant values). Statistical analysis can be performed to obtain desired calculation variables. Estimates need to be made for variables in which monitoring or sampling cannot be reasonably performed. Estimated values should be tested and adjusted based on any new information gathered during the reporting period. It should be recognized that estimated actual values for the reporting period are likely to be different than estimated values assumed during the project planning phase.

Table 6: Quantification of Actual Project Performance

Historical Year

Reference Year

Project Year 1

Project Year 3

Project Year 5

Calculation Code

Revised BAU Target Population emitting units 20,000 20,600 22,067 23,639 25,323 A*

Measured Technology Adopters emitting units 0 1,442 6,620 21,275 24,563 G*

Actual Adoption Rate % of units 0% 7% 30% 90% 97% F*=G/A Actual Remaining Population emitting units 20,000 19,158 15,447 2,364 760

* Asterisk indicates actual (versus planned).

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1.8.3 Quantify Actual Project GHG Reductions The quantification of actual GHG reductions should be executed based on the gathered actual activity level data, applicable factors, and models as outlined in the Project Plan. These steps are represented in the illustrative example, as shown below.

Table 7: Quantification of Actual Project GHG Reductions

Historical Year

Reference Year

Project Year 1

Project Year 3

Project Year 5

Project Year 7

Calculation Code

Revised BAU GHG Forecast tonnes-CO2e 87,379 90,000 90,846 93,463 96,155 98,925 R

Actual Technology Adopters

emitting units 0 0 1,442 6,620 21,275 24,563 S

Actual Baseline Direct GHG Rate tCO2e/unit 3.90 3.90 3.82 3.67 3.52 3.38 T

Actual Baseline Ontario Indirect GHG Rate tCO2e/unit 0.60 0.60 0.59 0.57 0.55 0.52 U

Actual Baseline Ontario Fuelcycle GHG Rate tCO2e/unit 4.50 4.50 4.41 4.24 4.07 3.91 V=T+U

Actual Project Baseline Scenario GHGs

tonnes-CO2e

0 0 6,359 28,038 86,539 95,957 W=S*V

Actual Project Direct GHG Rate tCO2e/unit 0.19 0.19 0.19 0.19 0.19 0.19 X

Actual Project Ontario Indirect GHG Rate tCO2e/unit 0.21 0.21 0.21 0.21 0.21 0.21 Y

Actual Project Ontario Fuelcycle GHG Rate tCO2e/unit 0.40 0.40 0.40 0.40 0.40 0.40 Z=X+Y

Actual Project GHGs tonnes-CO2e

0 0 572 2,626 8,438 9,742 AA=S*Z

Actual GHG Reductions (from Project)

tonnes-CO2e

0 0 5,787 25,412 78,101 86,215 AB=W-AA

Actual GHG Performance (for Population)

tonnes-CO2e 87,379 90,000 85,059 68,050 18,054 12,710 AC=R-AB

The key features of project implementation are discussed below and in greater detail in body of the guidance document. Line graphs of the project planning and project implementation results are shown on the next page. It should be noted in this illustration that the actual project adoption rate lags that of the plan in early years, but exceeds the plan in final years.

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Figure 2: Project Planning - Sample Projected GHG Reductions

Figure 3: Project Implementation - Sample Actual GHG Reductions

0

20000

40000

60000

80000

100000

120000

HistY RefY PY1 PY2 PY3 PY4 PY5 PY6 PY7

GHGEmissions(tonnes-CO2e)

GHGEmissions- ProjectPlanning

BAUGHGForecast ProjectedGHGReductions ProjectedGHGForecast

0

20000

40000

60000

80000

100000

120000

HistY RefY PY1 PY2 PY3 PY4 PY5 PY6 PY7

GHGEmissions(tonnes-CO2e)

GHGEmissions- ProjectImplementation

RevisedBAUGHGForecast ActualGHGReductions ActualGHGPerformance

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1.8.4 Document Project Report The relevant information in the project implementation phase should be documented. Project reporting should align with reporting requirements for OPS initiatives. It is good practice to produce a Project Report for each reporting period. A Project Report is suggested as a formal document that describes the initiative, the project, adopted technologies and practices, actual measured or sampled activity levels, and actual GHG reductions. The project report provides summary information about the project performance that could be examined in a quality assurance review and management reviews. 1.8.5 Quality Assurance Review It is good practice to conduct a quality assurance review of a Project Report to verify the GHG reductions calculated for the project and to provide assurance that the project performance is accurate and the information provided supports the actual GHG reductions. This is not a mandatory requirement, but is recommended to reduce the risk of errors in data and calculations. It also supports the process of continuous improvement. This quality assurance review should be performed by an impartial reviewer.

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2. Introduction 2.1 Background Ontario’s Climate Change Strategy17 outlines a path to a low-carbon, climate resilient society by setting out the transformative change required to reduce greenhouse gas (GHG) emissions to meet target levels. The strategy provides GHG reduction targets of 15 per cent by 2020, 37 per cent by 2030, and 80 per cent below 1990 levels by 2050. The strategy will be supported by a series of five-year climate change action plans to reach GHG reduction targets. Ontario’s 2016 Climate Change Action Plan (CCAP) marks the first of a series of five-year plans focused on reducing GHG emissions to meet reduction targets, create a low-carbon economy, and support industry, businesses and households in making low-carbon choices. 18 In support of the CCAP, the province has implemented a cap and trade program for which compliance obligations for emitters began January 1, 2017. Government proceeds from the cap and trade program will be invested in a transparent and accountable way into initiatives that are reasonably likely to reduce, or support the reduction of greenhouse gases, as outlined in the Climate Change Mitigation and Low-carbon Economy Act of 2016.19 All proceeds from the program will be tracked in a designated purpose account called the Greenhouse Gas Reduction Account (GGRA). Ontario Public Service (OPS) ministries will be managing funds for initiatives that will achieve GHG emission reductions among emitters in communities under their jurisdictions. The Minister of the Environment and Climate Change will review and evaluate initiatives and provide the evaluation to Treasury Board and Management Board Cabinet (TB/MBC) prior to the release of GGRA funds. Credible estimates of GHG emission reductions are key components of OPS initiative submissions for funding under GGRA and equally important for the management process in tracking progress and making continuous improvements to the design, implementation and funding of the initiatives program.

17 Government of Ontario (2016) Ontario’s Climate Change Strategy. https://www.ontario.ca/page/climate-change-strategy 18 Government of Ontario (2016) Climate Change Action Plan. https://www.ontario.ca/page/climate-change-action-plan 19 Government of Ontario (2016) Ontario Climate Change Mitigation and Low-carbon Economy Act, 2016 and Schedule 1 of Ontario Regulation 143/16. http://www.ontla.on.ca/bills/bills-files/41_Parliament/Session1/b172ra.pdf

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2.2 Purpose and Scope The purpose of this guidance document is to provide assistance to OPS ministries for their process of preparing and submitting estimates of projected and actual GHG emission reductions for CCAP projects. It may also be useful for GHG emitter community partners and stakeholders that are working with ministries to plan, implement and quantify achievements in reducing emissions. The guidance document describes principles and quantification methodologies, along with some of the supporting information and further resources that are likely to be needed. Applying the principles and methodologies outlined in this document should result in reduced effort and enhance the overall quality of submissions and reports on progress achieved by the initiatives. The guidance document provides some basic concepts and then focuses on three phases involved in the process of estimating GHG emission reductions, namely:

• Initiative Planning; • Project Planning; and • Project Implementation.

The principles, methodologies and other suggested guidance provided in this document are meant to be voluntary for consideration by OPS ministries. Their application should facilitate the continuous improvement process for managing CCAP initiatives and their specific GHG reduction projects. There are a number of concepts and elements involved in estimating GHG emission reductions associated with projects. One way to help understand some of these concepts is to work through the illustrative examples, which have been provided in the body and Appendix C. However, further guidance and information than that which is contained in this document and examples will likely be needed in calculating GHG emission reductions resulting from projects. Depending on the complexities involved in calculating GHG emission reductions and the internal capabilities of OPS ministry staff, subject matter experts might also need to be consulted.

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3. Key Concepts and Principles 3.1 Introduction This chapter describes key concepts and guiding principles that underpin good GHG emission reduction quantification methods. The chapter contains four sections:

1) Key GHG project accounting concepts; 2) ISO 14064 Part 2 principles of good project accounting; 3) Ontario Public Service initiative design principles; and 4) Management process for quantifying GHG reductions.

3.2 Key GHG Project Accounting Concepts 3.2.1 Greenhouse Gas (GHG) There are five greenhouse gases (GHGs) and two additional groups of GHGs that have potential to contribute to warming of the atmosphere, and are typically included in emissions quantification. These are:

• carbon dioxide (CO2); • methane (CH4); • nitrous oxide (N2O); • sulphur hexafluoride (SF6); • nitrogen trifluoride (NF3); • hydrofluorocarbons (HFCs); and • perfluorocarbons (PFCs).20

A list of the five individual GHGs, 19 specific HFCs, and 7 specific PFCs is provided in a table in Appendix A. Comprehensive lists of GHGs and their GWPs are available from Intergovernmental Panel on Climate Change21 references cited in Appendix A.

20 The Government of Ontario defines these as greenhouse gases in Section 5 of the Ontario Climate Change Mitigation and Low-carbon Economy Act, 2016 and Schedule 1 of Ontario Regulation 143/16 (Quantification, Reporting and Verification of Greenhouse Gas Emissions Regulation). Schedule 1 lists 19 specific HFCs and 7 specific PFCs. 21 IPCC, http://www.ipcc.ch/index.htm

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3.2.2 Global Warming Potentials (GWPs) GHGs are not all equal with respect to their contribution to atmospheric warming, since each GHG has a unique atmospheric lifetime and heat-trapping potential. Methane (CH4), nitrous oxide (N2O), and all fluorinated GHGs (HFCs, PFCs, NF3, SF6), are more potent than CO2, in terms of their capacity to absorb energy (radiative forcing)22 and this difference must be accounted for when GHGs are totaled. The GWP of a non-CO2 gas can be interpreted as the number of equivalent mass of CO2 that has the same radiative forcing effect of one mass unit of the non-CO2 gas. GWPs are used when converting mass emissions of each GHG to carbon dioxide equivalent (CO2e) units for total GHG reporting. For consistency, it is suggested that OPS ministries calculate and report GHG emissions in mass units of metric tonnes, denoted with the acronym “CO2e” as follows: • Long form - tonnes-CO2e; or • Short form - tCO2e. The IPCC identifies the Global Warming Potential (GWP) factors for all greenhouse gases in their Assessment Reports. Ontario uses two sets of GHG GWPs: • One set for GHG reporting under Ontario Regulation 143/16 - Quantification,

Reporting and Verification of Greenhouse Gas Emissions. The GWPs that appear under Schedule 1 of this regulation were taken from the IPCC Second Assessment Report (SAR, 1995)23 and are consistent with GWPs used by Western Climate Initiative jurisdictions.

• One set for GHG forecasts aligned with GWPs adopted by Environment and Climate Change Canada. The GWPs that appear in the ECCC National Inventory Report have been adopted from the IPCC Fourth Assessment Report (AR4, 2007)24.

Both sets of GHG GWPs are provided in a table in Appendix A. The MOECC suggests that the GWPs used for calculation of GHG reductions resulting from OPS initiatives should be those from the IPCC Fourth Assessment Report (AR4), which are consistent with those used by ECCC. Appendix A also documents GWPs established by the IPCC in the Fifth Assessment Report (AR5). 25 If AR5 or other GWPs are applied, MOECC may require explanation.

22 The term “radiative forcing” can be used, which refers to the amount of heat-trapping potential for any given GHG. It is measured in units of power (watts) per unit of area (metres squared). 23 IPCC (2007). IPCC Fourth Assessment Report (AR4): Climate Change 2007. Working Group I: The Physical Science Basis; Table 2.14; http://www.ipcc.ch/publications_and_data/ar4/wg1/en/ch2s2- 10-2.html 24 IPCC (2007). IPCC Fourth Assessment Report (AR4): Climate Change 2007. Working Group I: The Physical Science Basis; Table 2.14; http://www.ipcc.ch/publications_and_data/ar4/wg1/en/ch2s2- 10-2.html 25 IPCC (2013) IPCC Fifth Assessment Report (AR5): Climate Change 2013 - The Physical Science Basis, Chapter 8: Anthropogenic and Natural Radiative Forcing.

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Calculation Example: Using default combustion emission factors from Appendix A, a vehicle consuming 10,000 litres of diesel fuel releases 26.90 tonnes of carbon dioxide (CO2), 0.0011 tonnes of methane (CH4), and 0.0015 tonnes of nitrous oxide (N2O). Using the GWPs above, these quantities can be multiplied by their GWPs and summed to estimate the total GHG emissions. CO2 26.90 x 1 = 26.90 tonnes-CO2e CH4 0.0011 x 25 = 0.03 tonnes-CO2e N2O 0.0015 x 298 = 0.45 tonnes-CO2e Total GHG = 27.38 tonnes-CO2e. 3.2.3 GHG Sources and Sinks A GHG emission source is a physical unit (e.g., furnace, vent, vehicle engine) or a process that releases a GHG into the atmosphere. Common GHG sources include combustion equipment or vehicles. Combustion processes are typically classified as stationary combustion, combustion in mobile equipment, and flaring. GHG emissions can also be created from industrial processes, fertilizers, livestock, and waste or wastewater processing. Emissions of fluorinated GHGs (HFCs, PFCs, SF6) usually come from the use of industrial gases. The table below shows some of the basic sources of the seven greenhouse gases.

Table 8: Typical Sources of GHG Emissions

Greenhouse Gases Fossil Fuel Combustion

Biomass Combustion/

Decomposition

Agriculture (Animals,

Fertilizers)

Industrial Processes, Wastes, Gas Uses

Carbon dioxide x x Methane x x x x Nitrous oxide x x x x Sulphur hexafluoride x Nitrogen trifluoride x Hydrofluorocarbons x Perfluorocarbons x

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It should be noted that emissions of CO2 generated from the combustion or decomposition of biomass are, by IPCC convention, not included in final GHG accounting totals. Biogenic CO2 emissions, which originate from biological carbon sources (produced by life processes), are deemed to have a net-zero contribution to global warming because they are part of the natural carbon cycle. In other words, emissions of CO2 generated from the combustion or decomposition of biomass or other biogenic sources are typically not considered to be anthropogenic (man-made) GHG emissions. However, it is still good practice to calculate biogenic CO2 emissions and report them separately as information items. CH4 and N2O emissions that may be generated from the combustion or decomposition of biomass and other biogenic sources are included as GHG emissions because they are created by man-made processes. There are no biogenic sources of SF6, NF3, HFCs, and PFCs. A GHG sink is a physical unit or process that removes a GHG from the atmosphere. These include biological sinks such as trees in forests, agricultural crops, and other vegetation. Manipulated biological systems, such as agricultural lands, forest tracts, and land converted to other uses, can be sinks as well as sources diffused over very large areas.26 CO2 that is removed from the atmosphere by man-made increases in biological sinks (e.g. afforestation, reforestation) are included as removals in GHG project accounting. 3.2.4 GHG Emissions, Removals and Reductions The mass flows of GHGs to and from the atmosphere are known as emissions and removals. These are typically quantified for a specified period of time, months or years. The goal of GHG initiatives and specific projects is to achieve GHG emission reductions or GHG removal enhancements. International project accounting protocols use both terms (emission reductions and removal enhancements) to describe all possible climate change project scenarios. A GHG emission reduction or GHG removal enhancement can only be calculated from a clearly-defined project and its unique baseline scenario, which is a hypothetical scenario that is deemed to occur in the absence of the project. A GHG emission reduction is a calculated decrease of GHG emissions between a project’s baseline scenario and the project. A GHG removal enhancement is a calculated increase in GHG removals between a project’s baseline scenario and the project. The following equations apply: GHG emission reduction = Project’s baseline scenario GHG emission - Project GHG emissions GHG removal enhancement = Project GHG removals - Project’s baseline scenario GHG removals

26 Environment and Climate Change Canada (2016) National Inventory Report 1990–2014: Greenhouse Gas Sources and Sinks in Canada, https://www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=83A34A7A-1

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Examples of Emissions, Reductions and Removals GHG emission: GHGs from fuel combustion; CH4 from organic waste decomposition; GHG emission reduction: GHGs reduced in a GHG project by reducing fuel combustion or switching to a lower carbon-intensity fuel; CH4 destruction (conversion to CO2) by combustion of collected CH4 from waste decomposition GHG removal: CO2 sequestered by biomass growth; CO2 stored in permanent underground reservoir; GHG removal enhancement: an increase in CO2 sequestered through increased biomass growth in newly-planted trees in a GHG project; an increase in CO2 sequestered through the addition of new underground CO2 injection projects. “GHG reduction”: term used in this guidance document for either a GHG emission reduction or a GHG removal enhancement. 3.2.5 GHG Projects Climate change initiatives may encompass one or more specific GHG projects that will result in quantifiable GHG reductions. Quantifiable GHG reductions require one or more specific GHG projects to be implemented. A GHG project infers activities (increased adoption of technologies, changes in practices, creation of new GHG removal systems) that alter the conditions identified in a baseline scenario. The changed activities cause a GHG reduction. A GHG project is a set of all relevant sources/sinks that creates a GHG reduction. A GHG project can consist of one or many technologies and practices and cover one or many sources/sinks. To calculate GHG reductions, a unique GHG baseline scenario (defined below) needs to be established in contrast to the conditions of the GHG project. 3.2.6 GHG Baseline Scenario A GHG baseline scenario is related directly to a defined project. In project accounting theory, a unique but hypothetical GHG baseline scenario for the project always needs to be developed as a reference case in order to represent the conditions that would have occurred in the absence of the project implementation. A GHG reduction can only be calculated as the difference between the higher GHG emissions that would have occurred in a project’s baseline scenario and the lower GHG emissions achieved by the project scenario.27

27 For GHG removals, a GHG removal enhancements is the difference between the higher GHG removals achieved in the project and the lower GHG removals that would have occurred in the baseline scenario.

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3.2.7 Business-As-Usual (BAU) GHG Forecast For each OPS initiative, a business-as-usual (BAU) forecast should be constructed to serve as a reference case over which the entire initiative can be evaluated. The BAU forecast is a high-level, long-term projection of the GHG emissions and the underlying activity level (i.e. activity quantities) for the initiative’s target population. The population refers to the total number of GHG-emitting entities (e.g. industrial facilities, hospitals, schools, households, vehicles, passengers, etc.) that are broadly identified as potential technology adopters under the initiative. The scope of the BAU forecast should ideally match the scope of the sector or segment to which the initiative’s funding is targeted. Only one BAU forecast needs to be determined for each initiative. Note of Clarification: A BAU GHG forecast should not be confused with a project’s baseline scenario (described above). A BAU GHG forecast is a projection of business-as-usual GHG emissions for an entire target population. Baseline scenario GHGs are only calculated based on the specific activity levels of a project and are only used in the calculation of a project’s GHG reduction for the reporting period. 3.2.8 Initiative Adoption Rate Objectives One method of translating initiatives into GHG projects is to use adoption rate objectives. This may also be referred to as market adoption or market penetration for the population of emitters. An adoption rate objective is the fraction of a defined set of GHG emitters that would be expected to adopt the GHG-reducing technologies/practices established under a project or initiative. The adoption rate objective is a concept that is more commonly applied when an initiative is created to induce changes among a large number of similar entities within a receptive population in a sector or segment (e.g. furnace replacements for all detached houses older than 30 years; automobile commuters shifting to public transit systems). The adoption rate objective is a critical variable that can be used to define the expected scope of a project. The application of an adoption rate objective to the target population establishes the expected level of adoption in the project.

3.3 OPS Initiative Design Principles Government regulations, actions, programs and specific incentives can encourage the adoption of technologies by emitting entities. In this guidance document, the term “initiative” is a collective term that refers to any action, program or specific incentive that might be funded by the Greenhouse Gas Reduction Account (GGRA) and would be managed by Ontario Public Service (OPS) ministries under the Climate Change Action Plan in one of seven CCAP Action Areas. Initiatives could be of different types, including

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primary initiatives, supporting initiatives, and enabling initiatives. Initiatives might be grouped together into a bundled initiative. Examples of Initiative Types Primary Initiative - a low-carbon technology fund directed at buildings Supporting Initiative - building technology research funding; Enabling Initiative - funding for building professional services Bundled Initiative - all of the above The following are some key design principles that might apply to OPS initiatives. • Demonstrable, quantifiable GHG Reductions • Complete; No Leakage • GHG reductions occur in Ontario; • Additional GHG Reductions • Permanent GHG Reductions • Actual performance is measurable • Assumptions are objective and unbiased • Calculations should balance uncertainty with conservativeness • GHG reductions calculations should be transparent and verifiable • Accountability • Timely Reporting of Project Performance The following sections describe each in more detail. 3.3.1 Demonstrable, Quantifiable GHG Reductions The project activities induced by OPS initiatives need to result in GHG emission reductions. GHG reductions result from clearly-identified, demonstrable actions or decisions within a project. A proponent should be able to demonstrate, ideally with evidence, that project actions result in GHG reductions. GHG reductions need to be quantified using accurate and conservative methodologies that appropriately account for all relevant greenhouse gas sources and sinks and leakage risks. The GHG reductions associated with project activities need to be quantifiable in order to establish a high level of assurance that projected GHG reductions are achievable (before the project begins) and that the actual GHG reductions were achieved (after the project has started). The quantification of actual GHG reductions is required to assess the effectiveness of the OPS initiatives.

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Consideration for Research, Training and other Supporting/Enabling Initiatives Investments in certain types of initiatives and projects that support or enable GHG reductions, such as research and training, are important for transitioning to a low-carbon economy. Some of the initiatives may involve very high levels of uncertainty associated with estimates of: technology or training effectiveness; the time horizon for technology development; adoption rate by emitters; and total reductions anticipated. The suggested guidance in this document may not be applicable to some of these initiatives and that special considerations may be required. MOECC will work with individual ministries to develop appropriate methodologies for quantifying or dealing with GHG reductions anticipated from certain research, training and other supporting/enabling initiatives.

3.3.2 Complete; No Leakage GHG reductions should account for all incremental GHG emissions or removals that may occur from sources or sinks elsewhere due to the project activity. Some project accounting references call this concept “leakage” and some call it “secondary effects.” The no leakage principle is an expression of the quantification principles of completeness and relevance. This principle requires a complete accounting for all sources/sinks that could be considered relevant to a project. The literature describes three types of GHG sources or sinks associated with projects: 28 • Controlled - These are sources/sinks that are under the direct control of the project

proponent and usually generate direct GHG emissions at the project location during the project.

• Related - These are sources/sinks that are related to the project through the lifecycle of facilities (before, after project) or material and energy flows (upstream, downstream from project) associated with the project activity. GHG sources associated with upstream energy supply to a project are the most common “related” sources and are often referred to as “indirect” or “lifecycle” sources.

• Affected - These are off-site sources/sinks that are influenced by a project, through changes in market demand or supply for associated products or services, or through physical displacement.

Leakage occurs when related or affected sources/sinks that are not accounted for in the project generate changes in GHG emissions. Leakage is minimized by performing a complete assessment of all sources/sinks and selection of those most relevant to the project condition.

28 These are described in more detail in Section 5.4.1.

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Leakage Example: Conversion of freight truck fleet from petroleum diesel to biodiesel Baseline scenario sources • Controlled - petroleum diesel fuel use by a freight company’s trucks; company diesel

fuel storage and dispensing. • Related - all sources related to the supply of petroleum diesel fuel to the trucks (crude

oil production and transmission, crude oil refining to diesel fuel, regional diesel fuel distribution and storage).

• Affected - petroleum diesel fuel use by other freight trucking companies. Project scenario sources • Controlled - biodiesel fuel use by a freight company’s trucks; company biodiesel

storage and dispensing. • Related - all sources related to the supply of biodiesel to the trucks (fertilizer

production, canola and methanol production, land use change, biodiesel production, biodiesel distribution and storage, biodiesel fuel dispensing).

• Affected - petroleum diesel fuel use by other freight trucking companies (demand impact based on potential market price changes).

3.3.3 GHG Reductions Occur in Ontario Ontario’s Climate Change Mitigation and Low-carbon Economy Act of 2016 sets GHG reduction targets for Ontario of 15% by 2020, 37% by 2030, and 80% below 1990 levels by 2050. GHG reductions to be achieved from project activities induced by OPS initiatives need to occur in Ontario. The boundary established for quantification purposes should be Ontario. It is good practice to quantify the GHG reductions for direct emissions occurring in Ontario as well as the indirect emissions that are expected to occur in the province. 3.3.4 Additional GHG Reductions There needs to be a net benefit in GHG emission reductions or removal enhancements that would not otherwise have occurred had the project activities not been implemented. Project accounting literature calls this concept “additionality.” Additionality is achieved by the careful and conservative selection of the baseline scenario that is associated with any project. A project’s baseline scenario can be established using conservative sector-specific or activity-specific performance standards or the development of a project-specific baseline. A baseline scenario should use conservative assumptions and a project may have to meet various additionality tests to justify that the project is beyond business-as-usual or sector common practices. The following are some of the additionality tests cited in project accounting literature.

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• Timing - Some programs require that a GHG project begin after a specified initiative or program date to demonstrate that the project is motivated by the GHG reductions.

• Legal and Regulatory - A GHG project should perform at a level that is below minimum legal or regulatory requirements. If a project is already required by existing law or regulation, it is not additional. A regulatory example might be the CAFE fleet fuel efficiency standards for light-duty vehicles.

• Technology - A GHG project should use a technology that would not likely be adopted for reasons other than GHG reduction.

• Common Practice - A GHG project should reduce GHG emissions below levels produced by “common practice” technologies that produce the same products or services as the project. Some jurisdictions set market penetration thresholds that define when a technology is deemed to be in “common practice.”

• Financial - If a GHG project is already financially attractive without potential funding support, it might not be additional. A GHG project should be able to demonstrate that it would not proceed without the requested government financial support.

3.3.5 Permanent GHG Reductions The GHG reductions generated by OPS initiatives should be permanent. Certain types of GHG reductions or removal enhancements may have a risk of future reversal. The most likely scenarios where GHG reduction reversals might occur are: • the reduction or cessation of certain assumed practices in an activity-based project

where direct measurement of the on-going activity level is not involved; or • the reduction of permanent carbon storage in reservoirs (e.g. bio-reservoirs such as

above-ground vegetation or below-ground layers; geological formation reservoirs). A conservative approach to account for the risk of potential reversals is to apply a risk-based assurance factor to reduce the eligibility of any GHG reductions calculated from activity-based emissions or removals by reservoirs in a project to levels that are considered conservative estimates based on the permanence risk level and overall contribution of the applicable sources/sinks. Examples: A community project shows projected GHG reductions of 20,000 tCO2e/y based on a survey showing that 5,000 car commuters intend to switch to public transit in future years. A risk-based assurance factor of 60% is applied to the projected GHG reductions (20,000 tCO2e x 60% = 12,000 tCO2e/y) to account for the risk of reversal in declared practice. A new forest project shows projected GHG reductions29 of 20,000 tCO2e/y based on a growth forecast. A risk-based assurance factor of 95% is applied to the projected GHG reductions (20,000 tCO2e/y x 95% = 19,000 tCO2e/y) to account for the risk of reversal from forest fire.

29 These would be GHG removal enhancements, which are called “GHG reductions” for simplicity.

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3.3.6 Measurable Performance Ideally, the quantification of actual GHG reductions should be based on measurement or monitoring of key variables from significant sources/sinks. Estimation of project variables is less accurate than direct measurement, so estimation should only be allowed for non-significant sources/sinks. The uncertainty of a project’s performance increases with the number of sources/sinks for which estimation is the basis for quantification. The measurements or monitoring data should be supported with documentation that would allow a quality assurance review (i.e. pre-project validation or post-project performance verification) to occur. 3.3.7 Objectivity In the estimation of projected GHG reductions or the quantification of actual GHG reductions, it is preferable to have results prepared in a manner that does not compromise perceptions of objectivity or independence. Performance rates and assumptions (e.g., technical effectiveness of GHG reduction technologies) should be based on unbiased evidence rather than relying solely on input from individuals or parties (e.g. technology vendors) with possible vested interests in the magnitude of the GHG reductions. Steps that can be taken to help ensure objectivity include: • conduct research regarding a range of possible inputs for the GHG emission

calculations; • obtain input from experts and data sources that would not directly benefit from the

initiative (e.g., sector associations, scientific panels, technology vendors not participating in a market);

• perform statistical analyses on range of key performance rates and select a performance standard at a certain percentile that provides a conservative estimate.

3.3.8 Calculation Balances Accuracy and Conservativeness GHG reductions need to be quantified as accurately as possible based on best available methodologies to reduce bias and uncertainty, but there will always be some uncertainty. Where uncertainty exists in the quantification, GHG reductions should be stated conservatively (lower than the initial calculations indicate) to balance out the potential uncertainty levels. Conservative GHG reductions are produced through the selection of relevant sources/sinks, activity levels, and factors that produce conservative results.

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Sensitivity and Uncertainty Analysis Estimating GHG emission reductions will likely require using a variety of data, variables and application of a number of assumptions, combined in a complex set of calculations – all of which will involve some levels of uncertainty. It is not always clear how the uncertainties associated with the data, variables and multiple assumptions will impact the accuracy or uncertainty of the estimated GHG reductions. In setting up calculation tools (e.g., spreadsheets, models), it is good practice to consider the application of sensitivity and quantitative uncertainty analyses. These will help to better understand the contributions of the uncertainties for the various calculation inputs on the uncertainty of the results. Furthermore, sensitivity and uncertainty analyses are important in making transparent the risks involved and the associated range of potential results. These types of analyses may be simple (e.g., confidence intervals), or more rigorous (e.g., “error propagation method”, Monte Carlo simulation). There are a number of sources of information on the various techniques that can be used to conduct sensitivity and uncertainty analyses. The IPCC provides a useful reference. • 2006 IPCC Guidelines for National Greenhouse Gas Inventories, Volume 1:

General Guidance and Reporting. Chapter 3: Uncertainties30 http://www.ipcc-nggip.iges.or.jp/public/2006gl/pdf/1_Volume1/V1_3_Ch3_Uncertainties.pdf

3.3.9 Transparent and Verifiable GHG reductions should be quantified and reported with full supporting information, referencing, and assumption justification to allow project validation (before the project) and project verification (after the project). Records should be kept to support project planning and project performance reporting. Transparency is the key principle that provides users of the information with a reasonable level of confidence in the results. The quantified actual GHG reductions should be able to be reproduced independently and verifiable in order to establish a high level of assurance that the reductions have occurred. 3.3.10 Accountability OPS initiatives should be accountable and have an assigned management responsibility for stewardship.

30 Intergovernmental Panel on Climate Change (2006) 2006 IPCC Guidelines for National Greenhouse Gas Inventories, Volume 1: General Guidance and Reporting. Chapter 3: Uncertainties

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3.3.11 Timely Reporting of Project Performance Initial projected GHG reductions are likely to change for a number of reasons, including: improved knowledge regarding the total population; effectiveness of the initiative, more or better data; correction of errors; and market conditions (e.g., changes in energy prices). Improvements that involve significant changes to the actual GHG reductions should be undertaken and communicated for the management process in a timely manner. It is good practice to report at a minimum frequency of once per year. Steps that can be taken to help ensure timely reporting of changes to GHG emission reduction estimates include: • Monitor data sources to assess if changes to input data and assumptions for estimating

GHG emissions are warranted; • Have a third party review initial estimates and periodically review calculations for

material changes that should be reported; and • Establish measurement and monitoring program to routinely provide input on change

factors and progress, with more frequent reviews early in the implementation phase.

3.4 Quantification Principles This Guidance Document is aligned with the framework, principles, and concepts of the ISO 14064 Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements standard.31 The ISO 14064 Part 2 standard focuses on GHG projects or project-based activities specifically designed to reduce GHG emissions or increase GHG removals. It includes principles and requirements for determining reasonable project baseline scenarios and for monitoring, quantifying and reporting project performance relative to the baseline scenario. The following six quantification principles are outlined in the ISO 14064 Part 2 standard: 1. Relevance - Select the GHG sources and sinks, data and methodologies appropriate to

the project definition. 2. Completeness - Include all relevant GHG emissions in the calculations. Include all

relevant information to support program requirements and procedures. 3. Consistency - Enable meaningful comparisons in GHG-related information,

particularly between a project and its baseline scenario, between expected projections and actual performance, and calculation methods in a time-series.

31 International Standards Organization, ISO 14064 Part 2: Specification with Guidance at the Project Level for Quantification, Monitoring and Reporting of Greenhouse Gas Emission Reductions or Removal Enhancements, First Edition, Mar. 1, 2006; ISO14064-2:2006(E). Several sections extracted.

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4. Accuracy - Reduce bias and uncertainties GHG reduction quantification as far as is practical.

5. Transparency - Disclose sufficient and appropriate GHG-related information to allow users to evaluate the results with reasonable confidence.

6. Conservativeness - Use conservative assumptions, values and procedures to ensure that GHG emission reductions or removal enhancements are not over-estimated.

Each of these principles is discussed briefly in the sections below. 3.4.1 Relevance The relevance principle ensures that the scope or set of GHG emission sources that comprise the project and its baseline scenario are well defined and well- quantified. Relevance is important in the context of selection of: • GHG sources/sinks of the GHG project and the baseline scenario; • considering representative baseline scenarios within the relevant sector, geographic

areas, and time periods; and • procedures to quantify, monitor or estimate GHG sources/sinks. Relevant sources in a project and its baseline are those for which GHG changes are associated with project activity. Calculation logic should be relevant to the selected sources and sinks. 3.4.2 Completeness Completeness involves taking into consideration all the sources and emissions that are associated with project activity. This involves a description and accounting of all significant decreases and increases in GHG emissions that are attributable to a project. Negligible GHG emission changes and other exclusions should be identified and justified. Completeness is usually satisfied by: • identifying all GHG sources and sinks controlled, related to, or affected by the GHG

project and the corresponding baseline scenario; • estimating GHG sources, sinks and reservoirs not regularly monitored; • ensuring that all relevant information appears in reported GHG data or information

consistent with established project and baseline scenarios, time period and reporting objectives

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3.4.3 Consistency GHG emission estimates need to be described and prepared to allow for meaningful comparisons of projected and actual GHG emissions, as well as comparisons of emission reduction performance over time. Steps that can be taken to ensure consistency include: • using uniform estimating procedures between:

o a project and its baseline scenario; o a project’s projected GHG reductions and actual GHG reductions; o a population’s BAU forecast, total GHG reductions, and resulting GHG

forecasts • using functionally equivalent product or service units in the project and its baseline

scenario (i.e. the same level of product or service is provided by the project and the); • applying tests and assumptions equally across potential baseline scenarios; and • ensuring the equivalent application of expert judgement, internally and externally, over

time and among projects. The principle of consistency is not intended to prevent the use of more accurate data or methodologies as they become available. However, changes to the scope or set of emission sources and methods of estimating emissions need to be documented and clearly communicated to enable valid comparisons. Previous estimates of baseline levels, or projected and actual GHG emissions should be corrected to maintain consistency. 3.4.4 Accuracy Diligence is required to ensure that GHG calculations have the precision needed for their intended use and provide reasonable assurance on the integrity of reported GHG information. Accuracy is usually satisfied by avoiding or eliminating bias from sources within estimations, and through describing and improving precision and uncertainties as far as is practical. Project proponents should pursue accuracy insofar as possible, but the hypothetical nature of baselines, the high cost of monitoring of some types of GHG emissions and removals, and other limitations make accuracy unattainable in many cases. In these cases, conservativeness serves as a moderator to accuracy in order to maintain the credibility of project GHG quantification. Accuracy and conservativeness are interrelated principles. Once a project proponent has reduced uncertainty to the extent practical, the value chosen within that range should result in a conservative estimate of the GHG emission or removal. 3.4.5 Transparency Data source references, quantification methodologies, assumptions, unit conversions, calculation equations, and results for historical, projected and actual GHG emission estimates need to be clearly documented so that an impartial reviewer can easily follow

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how the emission estimates were developed. Furthermore, sufficient and appropriate information needs to be provided to allow intended users to make decisions with reasonable confidence. Specific steps that can be taken to enhance transparency include: • clearly and explicitly state and document all assumptions; • clearly reference background material; • document all calculations and methodologies; • clearly identify all changes in documentation; • compile and document information to facilitate independent review; • document the application of principles (e.g. in selecting the baseline scenario); • explain/justify and document choices of procedures, methodologies, parameters, data

sources, key factors, assumptions); • justify and document any selection criteria (e.g. determination of additionality); • document assumptions, references and methodologies for reproduction of reported

data; and • document any external factors that may affect the decisions of intended users. 3.4.6 Conservativeness It is best practice to apply conservative assumptions, and use values and procedures to ensure that baseline GHG emissions and reductions resulting from initiatives are not over estimated. The principle of conservativeness is particularly useful when highly uncertain data sources and correlations may need to be employed. However, using the conservativeness principle does not always mean the use of the “most” conservative choice of assumptions or methodologies. Explanations of how assumptions and choices are conservative should be provided in project documentation. The implementation of the conservativeness principle is frequently a matter of balance (e.g. between accuracy, relevance, and cost-effectiveness). When less accurate methods are chosen, more conservative assumptions and methodologies should be applied. Conservativeness is usually satisfied by: • the appropriate choice of the path of technological development and the rate of adoption

in the relevant sector (or segment), location (region), and time periods in the absence of the project,

• taking into account the impact of the initiative on the path of development and rate of adoption in the relevant sector (or segment), location (region), and time periods;

• the appropriate choice of parameters affecting the project's GHG emissions, removals, sources, sinks and reservoirs; and

• providing reliable results maintained over a range of probable assumptions.

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3.5 Management Process for Quantifying GHG Reductions The proposed management process for the OPS initiative program has three phases: 1) Initiative planning, in which the initiative is developed into a tangible and specific

policy or program measure that can create one or more projects; 2) Project planning phase, which occurs before the start of any projects under the

initiative; and 3) Project implementation phase, which occurs each reporting period after projects have

started. A flow diagram illustrating detailed elements of the management process is presented on the next page.

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Figure 4: Detailed GHG Reduction Management Process

Define TargetPopulation

Structure/ManagementTargets/CriteriaFunding ValueTimingRecipients

Situational AnalysisHistorical DataMarket AnalysisGrowth ForecastsSimilar InitiativesTechnology Trends

Implement Initiative:Project Activity Starts

Quantify RelevantActivity/Variables

Measure/MonitorSurvey SampleEstimate(justify assumptions)

1. Initiative Planning 3. Project Implementation

BaselineScenario

Still Valid?

Quantify ActualGHG Reductions

Measured ActualActivity/VariablesActual GHG Reduction= Actual Baseline GHGs- Actual Project GHGs

Baseline ScenarioAdjustments:

Routine (annual)Non-Routine (one-time)

No

Yes

Estimate ProjectedGHG Reductions

Expected ActivityProjected GHG Reduction= Expected Baseline GHGs- Expected Project GHGs

2. Project Planning

Define Project ScopeTechnologiesSector/Segment(s)Location, TimeExpected Activity

Identify RelevantProject Sources/Sinks

Controlled (Direct)Related (Indirect)Affected (Market)

Determine Project'sBaseline Scenario

Functionally EquivalentConservativeAdjustments

Identify BaselineScenario Sources/Sinks

Select Relevant Sourcesfor Quantification

ConservativenessSignificant Sources:

Develop QuantificationMethodology

Rigorous ApproachAdapt ProtocolsUse Simplifications

Prepare Project PlanObjectiveProject DescriptionProject & BaselineSources/SinksQuantification MethodExpected Results

Prepare Project ReportObjectiveProject DescriptionProject Sources/SinksBaseline ScenarioSources/SinksQuantification MethodActual Results

Management ReviewAssess AdoptionInitiative IssuesProject IssuesActions/Adjustments

Perform QA Review

Perform QA Review

Develop Project IdeasSector/Segment(s)Technologies/PracticesManagement

Prepare BAU Forecastfor Target Population

Sector/Segment(s)GHG EmissionsActivity Level(s)

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3.5.1 Initiative Planning The initiative planning phase represents the development and definition of the OPS initiative. An extensive situational analysis may be required to gather all the relevant input information that will allow an assessment of business-as-usual conditions and the potential changes that could occur. The products from the initiative planning process should include: • A detailed description of the initiative that contains information about its structure,

scope, size, and intended projects; • A BAU forecast for the sector and/or segment(s) of interest that describes the total

population that could be influenced by an initiative. The BAU forecast includes GHG emissions and some indicators of underlying activity level;

• The potential GHG-reduction technologies that would define one or more selected projects induced by the measures in the initiative;

3.5.2 Project Planning The project planning phase is the period after the initiative has been developed, described, refined, focused and then translated into one or more expected projects. The project planning phase specifies the adoption rate objective for the project’s technologies or practices, the project conditions, the baseline scenario (associated with the project), and the projected GHG reduction is calculated. A thorough examination of all the relevant project sources/sinks is the best method to define the project GHG emissions accurately and reduce potential leakage. A corresponding analysis of the baseline scenario sources/sinks that would produce GHG emissions/removals in the absence of the project is required. A quantification methodology for project GHGs and baseline scenario GHG needs to then be established. This is called the “rigorous” approach which is outlined in Section 5.4. In the absence of a rigorous source/sinks approach, the methodologies found in existing GHG offset protocols could be adapted to Ontario conditions. GHG offset protocols are available for specific project types and they have already undertaken a formal analysis of project technologies, sources/sinks, and quantification methods. If offset protocols are not available or not relevant, then estimation of projected GHG reductions can be performed using simplifications and best available information. In this guidance document, a distinction is made between “estimation” of projected GHG reductions (before they occur) and “quantification” of actual GHG reductions (after they occur). In the Project Planning phase, project and baseline scenario GHG emissions are “estimated” before project implementation, based on expected project activity level objectives. The calculated GHG reductions between baseline scenario and project are

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called “projected” GHG reductions to indicate the forecasted nature of GHG reductions from a planning perspective. The relevant information in the project planning phase should be documented. It is good practice to produce a Project Plan, which should include: • A definition of the project, including:

§ Project title, purpose and objective; § Target sector/segment(s); § Project type; § Description of technology or practice and how it will achieve GHG reductions; § Project location details, including geographic and physical boundaries; § Conditions prior to project initiation;

• Expected objective of project activity: § Adoption rate objective; or § Expected activity level (number of adoptions of technology or practice).

• Projected GHG reductions associated with the expected performance of the project; • Expected project schedule including:

§ Project start dates and duration (end dates, if applicable); § Quantification frequency and schedule; § Management review milestones;

• Identification of risks that may significantly affect project GHG reductions: § Internal project uncertainties and risks; § External initiatives that could impact project behaviours; § External regulations that could reduce additivity of a project’s GHG reductions.

• Project management roles and responsibilities It is good practice to conduct some form of a quality assurance review of a planned project to provide assurance that the project is valid and the information provided supports the projected GHG reductions. This is not a mandatory requirement, but is recommended to reduce the risk of errors in data and calculations. This quality assurance review can be performed by an impartial internal reviewer or by an external validator. “Validation” is the term used in the ISO 14064 Part 3 Standard: Specification with guidance for the validation and verification of greenhouse gas assertion32 - for a formal evaluation of a GHG project plan prior to the start of a project. 3.5.3 Project Implementation The project implementation phase is the period after the start of the project(s) of the initiative. At periodic intervals (reporting periods) during the implementation phase, the performance of the project and the quantified GHG reductions should be documented. It is 32 International Standards Organization, (2006) ISO 14064 Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions.

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good practice to report at a minimum frequency of once per year. It is also good practice to produce a Project Report each reporting period. In the Project Implementation phase, project and baseline scenario GHG emissions are “quantified” after project implementation, based on actual monitoring data. Estimates for some minor variables can be provided, where necessary. Actual GHG reductions are defined as the calculated decrease of GHG emissions or increase in GHG removals between an actual project and its baseline scenario. The calculated GHG reductions are called “actual” GHG reductions to indicate that they are based on actual project activity and performance. It is good practice to periodically review the assumptions made in determining the baseline scenario for any project to ensure that project additionality is maintained. Adjustments may have to be made to the baseline scenario to ensure that the project activities are still “additional” to (or beyond what would have happened otherwise in) the baseline scenario. Baseline scenario adjustments can be: • Routine - adjustments for environmental factors that influence energy consumption

levels; or • Non-Routine - step-change adjustments to correct for one-time changes in underlying

project structure, activity, or constraints (e.g. project activity additions/changes, new regulations, complementary initiatives).

It is also good practice to conduct a quality assurance review of a Project Report to provide assurance that the Project performance is accurate and the information provided supports the actual GHG reductions. Again, this quality assurance review can be performed by an impartial internal reviewer or by an external verifier. “Verification” is the term used in the ISO 14064 Part 3 standard for an evaluation of a GHG project report after an actual GHG reduction has occurred. Management is responsible for reviewing the GHG reduction results of a project against its Project Plan and making any necessary changes. A broader management review compares the performance of one or more projects to the initial BAU forecast for the initiative to assess the performance of the initiative. These stages are further explained in the following chapters of the guidance document: Chapter 4 - Initiative Planning; Chapter 5 - Project Planning; and Chapter 6 - Project Implementation.

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4. Initiative Planning

4.1 Introduction Quantifying GHG emissions from emitting sources provides information that is foundational to the process for managing such emissions. GHG emission estimates – often referred to as an “emissions inventory” – provide organizations, managers, analysts, and external stakeholders with an understanding of the magnitude of the GHGs involved. Such estimates form the basis for identifying and achieving emission reduction opportunities, setting reduction targets, and tracking performance. Emission reduction estimates also support other elements of the management process, including, but would not be limited to: preparation of costs and savings involved with reducing emissions; comparing the cost-effectiveness (e.g., $/tonne-CO2e reduced) of changes in fuels, technologies, practices and behaviours that need to be adopted to bring about emission reductions. Realizing these benefits requires that estimates are prepared using good practices,33 and standard methodologies when available. This section of the guidance document provides steps for:

• Situational analysis of target population; • Identifying and selecting the targeted GHG sources for the initiative; • Identifying the target market and emitter groups that will adopt the GHG reducing

technologies and practices; and • Establishing the historical baseline, project reference year, and business-as-usual

(BAU) forecast conditions.

4.2 Situational Analysis: Historical GHG Performance It is useful to conduct a situational analysis and develop a description of the GHG emission sources of all or the portion of emissions that are to be influenced by the initiative. This analysis should include:

• the scope of the emitting population; • types of emitters or segments in the population; • trends for GHG reducing technologies and practices employed by the emitters; • fossil fuels used and other sources of emissions; and • historical estimates of GHG emissions.

33 World Resources Institute (2014) GHG Protocol Agricultural Guidance. http://www.ghgprotocol.org/standards/agriculture-guidance

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It is valuable to describe the target population of emission sources that is the focus of the initiative. This analysis should provide sufficient context to understand the portion of the total population of such sources. Steps and information that can be presented and examples of these are provided in the table below. The illustrative example deals with an initiative aimed at reducing GHG emissions from heavy-duty gasoline trucks (defined under Class 2B to 8B).

Table 9: Illustrative Examples of Background Information Related to Target Population of Emission Sources for Initiative

Information to be Provided

Steps Illustrative Examples

Total number of emitting sources

Conduct background research and

Total number of vehicles in Ontario that use gasoline (8.4 million) Total gasoline used by all vehicles.

Portion of total number of sources that are the focus of initiative

Find segment data Number of heavy-duty gasoline trucks (HDGT) in 2015 in Ontario were 300,000.

Historical market trends Get data from ECCC/ Transport Canada

Trend in the annual increase or decrease in number of HDGT (3.6% per year increase from 1990 to 2015) Average distances travelled by HDGT.

Historical technology trends Obtain data and input from Transport Canada

Efficiency changes in HDGT. (e.g., litres per 100 kilometres–travelled).

Drivers that influence trends Conduct research

Growth projections for manufacturing/commercial sectors Fuel efficiency regulations Gasoline price forecasts; carbon tax schedules

Historical GHG emissions Get data from ECCC

1.4 megatonnes-CO2e in 2015. 3% of total Ontario on-road transportation emissions. Average annual growth of 2.6% from 1990 to 2015.

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4.3 Identifying Targeted GHG Sources Initiatives may encompass a broad or narrowly defined set of GHG emitting sources. For example, promoting home energy audits may encompass the broad set of “single family homes”. However, within this broad set there are different ages of homes with different overall energy efficiencies (e.g., depending on insulation levels, etc.), heating fuels (e.g., natural gas, propane, heating oil, wood), and emission equipment characteristics (e.g., age and efficiency of heating furnace). To the degree possible, it is useful to the GHG estimation process to segment and describe the emission sources in such a way as to facilitate the identification, prioritizing and/or selection of sources that represent the best target(s) for the initiative. For example, background research and analysis may show it is preferable to target homes that are over 35 years of age and/or have heating furnaces that are over 20 years of age. Whether the selection of the target emission sources for the initiative is broad or narrow, the basis on which the GHG reductions are to be calculated should be clearly defined. In selecting the target set of emitters, an important step is to assess the availability and costs of acquiring credible data to support the quantification of their GHG emissions reductions. If there is insufficient data or the costs to support GHG quantification are unreasonably high it may not be feasible to demonstrate reductions achieved.

4.4 Defining Project Technologies and Practices GHG emission reductions are achieved by emitters adopting technologies and undertaking changes in practices. Technologies examples can include:

• fuel switching to lower or zero fossil carbon fuels; • installation and adoption of electricity generated from renewable sources (e.g.,

wind, solar); • installing of new, more fuel-efficient equipment; • adoption of electric vehicles; • smaller, more efficient vehicle engines; • installing additional insulation to reduce heat loss with associated lower fuel use; • planting trees to sequester carbon; • use of fuels made from renewable sources (e.g., biofuels, renewable natural gas,

etc.).

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Examples of changes in practices that can reduce GHG emissions are:

• lowering winter home thermostat temperatures, especially during periods when home is empty;

• reduce vehicle engine idling times; • drive vehicles at slower speeds; • reduce vehicle driving distances by sharing rides or using alternative transportation

(bicycles, walking); and • careful monitoring of industrial process parameters to reduce heat, material and

product losses. In developing GHG emission reduction estimates, it is important to explicitly identify the specific technologies, behaviours and/or operating practices34 that are to be adopted by the targeted set of emission sources to be influenced by the initiative. There are a great many technology options. Each will likely have a different technical potential and market penetration potential to reduce emissions. For example, switching from furnace heating oil to natural gas furnaces will lower emissions more than switching to furnaces using propane. Furthermore, options may already have been partially adopted. As examples: most homes already have some insulation installed; and many people already drive vehicles with small efficient engines; biofuels, such as ethanol and biodiesel already make up a portion of the transportation fuels market in Ontario. Given the above context there is a requirement to explicitly identify the technology options that are to the adopted by the target population of emission sources influenced by the initiative. Once this is done, a baseline forecast of emissions from which emission reduction projections to be achieved by the initiative can be developed.

4.5 Establishing Reference Year and BAU Forecast Emissions Once the set of target GHG sources and reduction technologies to be encouraged have been identified, then historical year GHG emissions, project reference year (most current year before project starts) GHG emissions, and a BAU forecast of future GHG emissions should be developed for the target population. GHG reductions achieved by the initiative can then be compared to this BAU forecast as well as historical levels.

34 Hereafter behaviours and operating practices may be commonly referred to as “technologies” in the rest of the guidance document.

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4.5.1 Gather Historical Emission Data Historical emissions from the target set of Ontario emitters will very likely be encompassed by Canada’s National Inventory Report (NIR) of GHG emissions and sinks, which is quite comprehensive. It is prepared annually by Environment and Climate Change Canada (ECCC) and submitted to the United Nations under the Framework Convention on Climate Change (UNFCCC). Canada’s National Inventory Reports are available at the following websites.

• United Nations Framework Convention on Climate Change, National Inventory Submissions 2017, http://unfccc.int/national_reports/annex_i_ghg_inventories/national_inventories_submissions/items/10116.php

• Environment and Climate Change Canada (2017) National Inventory Report 1990–2015: Greenhouse Gas Sources and Sinks in Canada https://www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=83A34A7A-1

• Emissions data files are available for download: http://donnees.ec.gc.ca/data/substances/monitor/national-and-provincial-territorial-greenhouse-gas-emission-tables/?lang=en

A useful early step in the process for developing historical and reference year GHG emissions is to review the most recent NIR and seek out Ontario-specific information for the target emission sources. The NIR documents definitional boundaries for numerous GHG emission source categories and sinks. For each category quantification methodologies are provided along with key assumptions, calculation equations, emission factors applied, references, and other useful information. While historical emissions from the target set of Ontario emitters may be encompassed by the NIR, the exact set of target emission sources that is the focus of the initiative may or may not be explicitly available. If the target set of emission sources for the initiative is the same as the emission source category in the NIR, then the NIR emissions can be used to establish the historical level of emissions. However, the NIR will not have data available for the most current calendar years35, which typically serves as the reference point for the forecast of future BAU emissions. Estimates should be prepared for these years. While the NIR is comprehensive, the GHG emissions for the exact set of emission sources defined to be the target of the initiative, may in all likelihood not be available. For example, while total GHG emissions for the source category: “Energy: Stationary Combustion Sources, Commercial and Institutional” are provided, there is no segmentation available in the NIR for the different fuels, types, ages, sizes or location of commercial and institutional

35 The NIR is finalized in April of each year, providing estimates for calendar year ending 16 months prior. That is April 2017, the NIR for the year 2015 will be available. Year 2016 emissions should be available in April 2018.

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buildings. Therefore, if an initiative was focused on Ontario schools, hospitals or government buildings, GHG estimates would need to be prepared for these. One reason for the lack of disaggregation in the NIR is the top-down method of estimating fuel-related emissions, which involves use of aggregated fuel consumption data as collected and made available from Statistics Canada. In developing the NIR, which in part is for UNFCCC reporting purposes, ECCC does not collect data (e.g., through custom surveys or other research methods) to develop detailed segment data for all emission source categories. In absence of useful NIR emissions data, research may be conducted to identify historical GHG emissions for the target emission sources and/or information to support development of estimates. GHG estimates may be available from focused studies and other emission inventories. For example, there are potential useful data available for a large number of Ontario’s Broader Public Sector (BPS) facilities. As per the requirements of Ontario Regulation 397/11: Energy Conservation and Demand Management Plans (under Green Energy Act, 2009), BPS organizations required to report include: municipalities, municipal water and sewage treatment facilities, school boards, universities, colleges and hospitals. Reported data include: types of facility, locations, annual fuel use (by type of fuel), electricity consumption, annual GHG emissions, activity data (e.g., square metres of internal space, hours of operation) and other potentially useful information. Under the regulation, there is also a need to develop a five-year conservation plan and publish the plan on their websites every five years. This and additional sources of GHG emissions and other data are available from the following websites.

• Energy use and greenhouse gas emissions for the Broader Public Sector https://www.ontario.ca/data/energy-use-and-greenhouse-gas-emissions-broader-public-sector?_ga=1.177031781.1722981371.1490034100

• Environment and Climate Change Canada, National Pollutant Release Inventory (NPRI) https://www.ec.gc.ca/inrp-npri/default.asp?lang=En&n=B85A1846-1

Additional research on the subject matter of the initiative should be conducted. Even if emission estimates matching the target set of emissions sources are not found, the results of the research may be useful. For example, there may be useful information from other Canadian and international jurisdictions, which might help in preparing emission estimates for the Ontario set of emission sources.

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4.5.2 Assess Available GHG Emission Estimates Available GHG emissions estimates should be assessed to ensure they are suitable to meet the purposes of the initiative. Criteria of assessment can be prepared based on the principles discussed above. Examples are as follows. • Are the available emissions relevant - having the same boundary and definition as the

emission sources targeted by the initiative? • Are the available emissions comprehensive with respect to the six GHGs and total

possible emissions? • Are the available emissions sufficiently accurate to meet the needs of the initiative? • Is there sufficient transparency to understand how the emissions were developed? • Were the emissions prepared in a consistent manner across time periods? • Were the emissions prepared in an objective manner? If GHG emission estimates are not available for the target sources, estimates will need to be prepared.

4.6 Preparation of Historical and Reference Year Estimates There are four steps involved in the preparation of historical and reference year GHG emission estimates. Applying these steps may save time and costs as well as facilitate next stages of the process. 1. Develop a plan 2. Gather input and data 3. Calculate the emissions 4. Document the process, assumptions, calculations and results The key tasks to preparing estimates are provided below. 4.6.1 Planning Activities It will be useful to develop a plan to facilitate the process of estimating emissions. Elements of the plan can include:

• Identification of a manager and/or personnel undertaking the work; • Identification of key tasks and assignment of personnel to each; • Financial and human resources required; • Project schedule, with the deadlines; • Quality control / quality assurance procedures.

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The plan should identify the people that will be responsible for managing the process and undertaking the work. Technical abilities and knowledge regarding fuels, energy efficiency, emissions equipment, unit conversions, surveying methods, quantitative, uncertainty analysis, spreadsheets, databases and computer modelling are useful in the process. 4.6.2 Gather input and collect data The activity level variables that contribute to calculated reference GHG emissions should be identified and their data sources consulted. Industry experts and stakeholders can be consulted to gather sector-specific factors or data sources. The data collection focus should be on direct fuel use, electricity use, and other activity level estimates within a sector. Estimates into indirect emissions are useful to provide the additional scope that is covered by project GHG reductions. A set of activity level data that contribute to GHG emissions should be developed. This can include fuel use, electricity use, and sector (or segment) population counts. Reference sources that can be used include National GHG Inventory Reports, sector-specific guidance documents, sector GHG protocols, sector GHG calculation workbooks (e.g. cement, pulp & paper), and calculation models (e.g. landfills). 4.6.3 Calculate GHG emissions Recall: In calculating a project’s GHG reductions, it is good practice to quantify the GHG reductions for direct emissions occurring in Ontario and any indirect emissions that are deemed to occur within Ontario. Section 3.3.3. In preparing sector-wide GHG emission estimates for target populations that might have potential to adopt technologies in specific GHG projects, it is good practice to develop estimates of GHG emissions that account for both direct and indirect Ontario emissions. This means that it is good practice to estimate direct and indirect Ontario emissions for historical year, project reference year, and BAU forecasts for the target population. This extended scope of GHG emissions is useful because a proper accounting of GHG reductions calculated from GHG projects includes both direct and indirect Ontario emissions. The development and use of a structured GHG calculation system (formalized, customized GHG workbooks, or calculation database) is useful for reducing GHG calculation risks and communicating the GHG calculation system internally and externally for quality assurance reviews.

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4.6.4 Documentation It is good practice to document the GHG calculation logic, methodologies, and data and information sources for transparency. This helps in management reviews, audit reviews, and when transferring internal responsibility for policy files.

4.7 Preparation of Business-As-Usual Forecast For each OPS initiative, a business-as-usual (BAU) forecast should be constructed to serve as a reference case for the target population over which the entire initiative can be evaluated. Recall: The BAU forecast is a high-level, long-term projection of the GHG emissions and the underlying activity level (i.e., quantity) of the initiative’s target population. The target population is a statistical concept that refers to the total number of entities (e.g. facilities, households, vehicles, passengers, etc.) that are broadly targeted for change by an initiative. The scope of the BAU forecast should ideally match the scope of the sector to which the initiative’s funding is targeted. Only one BAU forecast should be determined for each initiative. It is a forecast that is developed in the planning phase and based only on the normal and expected rate of adoption of technologies and practices over time by the target population. The BAU forecast will be used with the concept of the Adoption Rate Objective (defined below) to estimate the projected number of adopters for any technologies or practices of a potential project. The BAU forecast should match the duration of any initiatives applied to the target population. The situational analysis should consider historical performance, macroeconomic indicators, technical trends, informed and justified assumptions, and best judgement of ministry and/or other experts.

4.8 Preparation of Adoption Rate Objective One method of translating initiatives into specific projects is to use adoption rate objectives. An adoption rate objective is the fraction of a target population that would be expected to adopt the technologies/practices defined under a project following the start of an initiative. The adoption rate objective is a concept that is more commonly applied when an initiative is created to induce changes among a large number of similar entities within a target population in a sector or segment (e.g. furnace replacements for all detached houses older than 30 years; automobile commuters shifting to public transit systems). The adoption rate objective is a critical variable that can be used to define the expected scope of a project.

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The application of an adoption rate objective to the target population establishes the expected level of adoption in the project. When an initiative is developed, focused and specific adoption rate objectives should be set to define the expected scope of the project. There can be one or many adoption rate objectives for an initiative, depending on the initiative design and how many specific projects are covered by the initiative. The adoption rate objective can be a simple static value (e.g. 10% of target population each year) or a dynamic value (e.g. 5% in first year, growing exponentially every year). Situational analysis supported by research and analysis is required to determine the most reasonable and achievable adoption rate objective for an initiative. The adoption rate is a key parameter that determines the effectiveness of an initiative.

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5. Project Planning 5.1 Introduction The project planning phase occurs after the initiative has been planned but before any projects are started. Ideally, in the project planning phase for each project that is induced by an initiative, a Proponent should: • clearly define the GHG project scope and activity level objectives; • select the most appropriate GHG reduction calculation methodology; • estimate the projected GHG reductions attributable to the GHG project; and • document a Project Plan. Each of these elements is discussed in the sections that follow.

5.2 Defining the Project Scope and Objective A GHG project can consist of one or more technologies and practices applied over one or more sectors (or segments) in one or more locations, over a period of time to achieve one projected GHG reduction objective. The definition of a project’s scope and activity level objectives is a key starting point in the project planning process and are typically found in the front sections of a Project Plan. 5.2.1 GHG Project Scope The scope of a GHG project should be defined with the following elements: • Title; • Ownership, stewardship, or management responsibility; • Description; • Eligibility under initiative; • Technologies or practices to be adopted to achieve a GHG reduction; • Specific greenhouse gases covered by technologies or practices; • Sectors (or segments) in which the technologies or practices are to be applied; • Location – geographical boundary of potential technologies or practices; • Timing – project start date, project duration, project reporting periods. If more than one technology or practice, sector, or location is combined in a GHG project, the scope should fully explain how each element will be combined to achieve the projected GHG reduction objective.

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The GHG project title should be descriptive enough to explain what it covers but not be excessively long. Key elements in the title should include, at minimum, the technology/practice and the target sector (or segment). A clear description of the responsibilities for the project should be provided. The project responsibilities (e.g. funding, planning, implementation coordination) may be shared between several parties and these should be documented to establish the network of stewardship expected for the project. A clear concise project description is helpful to explain the project scope and activities to all internal and external parties related to the project. A good project description typically is a set of paragraphs that explain the baseline condition (brief history and situational description), the proposed project technologies or practices and their GHG-reduction mechanism, the sectors (or segments) covered, and the project timing. Additional information on the activity level objectives and projected GHG reductions can be added to the project description, once determined. Over time, minimum eligibility criteria for GHG reduction projects may be established by the Ontario Public Service. Such eligibility criteria might include: • time limits (actions occur on or after specified dates); • geographical limits (e.g., actions occurring in Ontario); • demonstrable, quantifiable, verifiable; • unique (GHG reductions not double-counted with other projects); • additional (resulting from actions not required by law and beyond business-as-usual or

sector common practice); • permanent (have a low risk of reversal or provisions to manage potential reversals); • a clearly-established management responsibility. If any project eligibility criteria exist, the project scope should include a section that demonstrates that the project is valid and eligible under the initiative. The technologies or practices that are expected to generate GHG reductions should be identified and their performance characteristics and GHG reduction mechanisms described in simplified terms. If more than one technology or practice generates GHG reductions in a project, then their contributions to the projected GHG reductions should be noted. Specific greenhouse gases expected to be reduced should be identified. GHG reductions from combustion sources reduce CO2, CH4, and N2O. Projects focused on specific technologies or sectors may target specific greenhouse gases. Sectors where the product’s technologies or practices are applied should be identified and described. The target sector should be characterized in terms of the total potential activity

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level (number of locations, unit counts) in the sector where GHG reductions could be achieved and the known or estimated historical GHG emissions. It is good practice to segment the target sectors according to the technologies or practices that are to be applied. The geographical boundary over which the project activities are expected to occur should be identified and described, if applicable. The project timing should be identified in terms of the start date of project implementation, significant milestones (if any), and the expected project life over which projected GHG reductions are to be calculated. 5.2.2 Project Activity Level Objective The objective of a project is to generate a change in activity level that results in calculated GHG reductions. A project’s activity level objective can be set before the estimation of GHG reductions, which are dependent on the selected GHG reduction methodology. The technologies or practices that are expected to be adopted in the implementation of a GHG project should be defined as the first part of a project’s objective. The activity level objective is typically expressed as an absolute number of locations, adopters, unit counts that are expected to adopt a technology or practice over time. This expected activity level can be estimated as an exact count of units within the direct control of the project proponent or as an estimated fraction of a target population that are expected to be induced to change. A GHG project activity level objective may have the following elements: • Identification, description and timelines (e.g., market penetration rates over time) of

associated technologies and practices to be adopted by the target sector/segment. • A risk assessment for technology and practices (e.g., risks to adoption rate, technology

functionality, life of technology/practice) to identify and communicate potential factors that could reduce the effectiveness of the project;

• A methodology along with supporting studies and data for estimating project activity levels resulting from the expected adoption of technologies and/or practices;

• Sector-specific considerations; • Sample calculations

5.2.2.1 Activity Levels within Proponent Control When a project proponent has direct control over the scope of a project, the expected project activity level can usually be determined as an absolute number estimate with a high degree of certainty.

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5.2.2.2 Activity Levels Outside of Proponent Control When a project proponent does not have direct control over the scope of a project, the expected project activity level should be estimated based on best available market information. The estimation of expected activity level is one of the most difficult steps in project planning. The accuracy of the estimate is usually directly proportional to the knowledge of the target sector and degree of research applied in the situational analysis. Several methods can be used to estimate the project activity level: 1) Application of historical results from similar projects undertaken in similar situations;

a) from known projects/sectors/jurisdictions; b) from literature sources on unknown, but similar projects.

2) Direct research of expected target sector behavior; a) indirect intelligence from associations, sector groups; b) direct intelligence from sector survey.

Surveys are a good method of gathering expected behavior information from a target sector. If surveys are considered to gather information about potential sector activity, Appendix D provides some guidance on the sample surveys, sample sizes, and statistical analysis to estimate population parameters and uncertainty levels, expressed as confidence intervals. Regardless of the approach used to estimate the project activity level, the methodology used should be justified and fully explained.

5.3 Selection of Appropriate GHG Reduction Methodology There are a variety of potential methodologies available to calculate GHG reductions from GHG projects. This guidance document cannot outline or summarize all potential GHG reduction methodologies, but rather is intended to provide general guidance on the concepts and elements of GHG reduction estimation and quantification. This guidance document provides three general approaches for estimating GHG reductions: 1. Rigorous approach of evaluating all sources/sinks in project and baseline condition; 2. Adaptation of existing GHG offset project protocols for use in Ontario; 3. Simplified calculation approach. Each of these approaches is described in the sections below.

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5.4 Rigorous Approach of Evaluating All Sources/Sinks The rigorous approach is presented first as the ideal approach to GHG reduction quantification. It follows the ISO 14064 Part 2 process for defining a project and its associated baseline scenario and the selection of relevant sources/sinks for monitoring or estimation. This approach requires a thorough and complete analysis of a project situation, which may require significant resources to perform. However, the benefit of this approach is a higher level of accuracy and reduced uncertainty, which can be important factors for users of the project results. The key steps in the rigorous method described below correspond to Sections 5.3 through 5.8 in the ISO 14064 Part 2 standard: • Section 5.3 - Identifying GHG sources/sinks relevant to the project; • Section 5.4 - Determining the baseline scenario; • Section 5.5 - Identifying GHG sources/sinks for the baseline scenario; • Section 5.6 - Selecting relevant GHG sources/sinks for monitoring or estimating • Section 5.7 - Quantifying GHG emissions or removals; • Section 5.8 - Quantifying GHG reductions. Annex A of ISO 14064 Part 2 presents a logic flow diagram illustrating this method, which is shown on the next page. Each of these steps is described briefly in the sections below.

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Figure 5: Identifying and Selecting GHG Sources/Sinks

Source: ISO 14064 Part2, Figure A.2

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5.4.1 Identify Relevant Project Sources/Sinks Project planning begins by identifying the sources and sinks that are associated with the project activity. There is no formal process to identify project sources and sinks: they simply represent all activities that are created, ceased, or undergo change when a project is implemented.

5.4.1.1 Types of Sources and Sinks The literature describes three types of GHG sources or sinks associated with projects: • Controlled - These are direct emissions or removals that occur at the project location

during the project (or in the baseline condition). ISO14064-2 calls these “controlled” emissions or removals because they are under the direct control of the project proponent. Examples of controlled sources/sinks might include: project fuel use and project electricity use.

• Related - These are sources/sinks that are related to the project through the lifecycle of

facilities, materials, or energy associated with the project. Related sources/sinks are either: o sources/sinks existing upstream or downstream of a baseline scenario or project as

related to the lifecycle material or energy flows into, out of, or within the project. The most common examples of lifecycle sources/sinks in existing offset project protocols are those associated with the upstream production and supply of fossil fuels, biofuels, or electricity.

o sources/sinks occurring during, before, or after the project in respect to the time dimension. These are typically “one-time sources/sinks (e.g. construction, equipment procurement & delivery, site decommissioning) occurring before or after the project. When “one-time” sources/sinks are evaluated for monitoring, measurement, or estimation (in a subsequent step), they are usually excluded from project quantification because their contribution is very low (compared to controlled and lifecycle related sources/sinks) and the difficulty in measurement.

• Affected - These are sources/sinks, generally located off-site, that are influenced by a project, through changes in market demand or supply for associated products or services, or through physical displacement. For example, a project’s reduction in the consumption of energy or material may reduce the price of that energy or material and induce the market to consume more of it. If a project reduces Ontario production of a product, the product supply would likely be provided by increased production elsewhere and the principle of functional equivalence would require external supply sources/sinks to be included in the project. Most common project protocols exclude affected sources/sinks because the project provides functional equivalence and the market impacts are too small to significantly influence supply or demand.

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Note of Clarification: Some GHG protocol literature refers to GHG sources as Scope 1, Scope 2, and Scope 3. These terms are defined by The Greenhouse Gas Protocol (2004)36 in the context of quantifying GHG inventories for organizations. Organizations may include multi-national corporations, companies, sector associations, networks, energy systems (such as gas pipelines or electricity transmission systems) single facilities. GHG inventories for organizations are prepared for a specific time period and may include both sources and sinks. • Scope 1: Direct GHG Emissions - Direct GHG emissions occur from sources that are

owned or controlled by the organization. • Scope 2: Electricity indirect GHG emissions - Scope 2 accounts for GHG emissions

from the generation of purchased electricity consumed in the boundary of the organization. Scope 2 emissions occur at the site of the generation of the electricity.

• Scope 3: Other indirect GHG emissions - Scope 3 is an optional reporting category that allows for the treatment of all other indirect emissions. Scope 3 emissions are a consequence of the activities of the organization, but occur from sources not owned or controlled by the organization.

These terms are not used in GHG project accounting. They are not used in the ISO 14064 Part 2 Standard for quantifying GHG reductions from projects. The WBCSD/WRI also publishes The GHG Protocol for Project Accounting (2004)37 and these terms do not appear in this protocol. The terms “Scope 1”, “Scope 2”, and “Scope 3” should not be used when calculating GHG reductions.

5.4.1.2 Leakage Leakage is a term that is used by some project guidance literature (e.g. AB Offset Protocol Guidance, Kyoto Clean Development Mechanism) to refer to an increase or decrease in GHG emissions beyond the project boundary that may result from the project.38 Positive leakage would be a reduction in GHG emissions from related or affected sources/sinks and negative leakage would be an increase in GHG emissions from related or affected sources/sinks. An example of positive leakage would be a decrease in upstream emissions from natural gas production, processing, transmission and distribution due to a lower natural gas demand caused at a project. An example of negative leakage would be an increase in upstream GHG emissions from electric power generation due to a higher electricity demand by a project. The project proponent should identify and account for all

36 World Business Council for Sustainable Development (WBCSD) and World Resources Institute (WRI) (2004) The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard. 37 World Business Council for Sustainable Development (WBCSD) and World Resources Institute (WRI), (2003), The GHG Protocol for Project Accounting. 38 The WBCSD/WRI GHG Project Protocol uses a different term, “secondary effects,” for the same concept.

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external sources/sinks that may be affected by the project through increases or decreases in material/energy flows or market impacts so as to reduce the potential for “leakage.” ISO 14064 Part 2 does not use the term “leakage,” but focuses instead on the proper identification of sources/sinks that are “relevant” to the project because they are either controlled, related or affected. The best approach for managing potential leakage is to follow the ISO 14064-2 approach of conducting a complete assessment of all sources/sinks and selection of those most relevant to the project condition. Leakage management tools include: • A complete assessment of all sources and sinks and selection of those most relevant to

the project condition; • Selection of baseline scenario sources/sinks that provide a conservative scenario; • The use of minimum project boundaries for certain types of projects; • The use of reasonable fuelcycle or full lifecycle emission factors to estimate upstream

GHG impacts from energy supply; and • The use of conservative emission factors. 5.4.2 Determine Reasonable Baseline Scenario The determination of a reasonable baseline scenario is a critical step in project planning because it sets the most appropriate hypothetical condition against which a project performance should be compared. A baseline scenario must be directly related to the context of the project’s operation and application. Baseline scenarios are always hypothetical; they will not actually occur because the project will occur instead. Theoretically, the ideal approach to selecting the best baseline scenario is through the identification and assessment of several alternative baseline scenario candidates (all of which provide an equivalent type or level of product or service), from which the most appropriate baseline scenario is selected. The project accounting literature outlines two general approaches for determining a project’s baseline scenario: • Performance standard approach - selection of a conservative benchmark performance

rate; or • Project-specific approach - selection from alternative baseline candidates developed

specifically for the project using an assessment process.

5.4.2.1 Performance Standard Approach The performance standard approach estimates the baseline scenario emissions using a conservative performance rate selected from a comparison of performance data obtained from a range of alternative technologies or practices (baseline scenario candidates) that can

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provide an equivalent product or service as the proposed project. This selected performance rate is a performance standard to which the project performance is compared. Performance standards can be classified into two main types: activity-based; or time-based. Activity-based performance standards express the rate of GHG emissions (or an associated input variable) per unit of project’s output variable.39 Examples of activity-based performance standards include: • GJ natural gas per MWh of electricity generated; • GJ of natural gas per tonne steam generated; • L of gasoline per vehicle-km traveled; and • Litres of diesel fuel per passenger-km traveled for a specific transit mode. Time-based performance standards express the rate of GHG emissions or removals (or an associated input variable) per unit of time. Examples of time-based performance standards include: • GJ natural gas per square metre (m2) of building floor space per year; • tonnes of biomass grown per hectare per year; and • tonnes methane per cubic metre (m3) of vintage year landfilled waste per year. There may be one or more performance standards required for a project, depending on the number of key sources/sinks (and their input variables) that describe project performance. Performance standards can be static (constant values that do not change over time) or dynamic (values that change over time), depending on the nature and complexity of the project. The process of selecting a conservative performance standard typically involves the identification of several alternative baseline scenario candidates and a comparison of the performance rates of each, followed by a selection of a conservative performance rate as a standard. Information can be compiled from a variety of sources, including technology vendors, pilot or demonstration studies, commercial data, and historical performance data segmented by technology. Statistical analysis based on sample mean, median, and percentile can provide help in documentation.

5.4.2.2 Project-Specific Approach The project-specific approach estimates baseline scenario emissions through the selection of a customized baseline scenario linked to the unique situation found in a project. The baseline scenario is selected using a structured analysis of the project activity and various 39 Most activity-based performance standards assume direct proportionality between an input variable and a dynamic output activity variable so that a time dimension is not required.

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alternative baseline candidates. This structured analysis assesses (qualitatively or quantitatively, if possible) the following potential barriers that each baseline scenario candidate faces, typically in a matrix format: • investment (high capital costs, low access to capital, high project risks); • technology operation and maintenance (lack of training resources); • resource availability (lack of resources required for project); • infrastructure (poor infrastructure for supply, storage, disposition of materials, energy); • market structure (barriers to market adoption of technology); and • political/social/cultural (barriers to awareness and understanding). Once barriers are assessed, the baseline scenario candidate having the least level of aggregated barriers is selected as the baseline scenario. This approach is more rigorous than the performance standard approach and may require more information, resources, and time to complete. For the project-specific approach, which involves a comprehensive analysis of sources/sinks associated with the project, stringency is related to the weight of evidence required to identify a particular baseline scenario. For the performance standard approach, stringency is related to how low the performance standard (e.g., GHG emission rate) is relative to the average standard of similar technologies or practices.

5.4.2.3 Baseline Scenario Selection Principle - Functional Equivalence Functional equivalence is the concept that the baseline scenario must provide an equivalent type or level of product or service or use the same underlying activity level parameter as the project, in order to ensure a proper comparison of project conditions to baseline scenario conditions. Functional equivalence is the principle that sets the magnitude of the project’s baseline scenario, since the baseline scenario GHG emissions are usually quantified based on a project’s output variable level. Example: Functional equivalence A freight trucking company replaces 30 trucks, (30% of its existing fleet of diesel-powered trucks) with new trucks that run on 100% biodiesel. The new trucks may have a different fuel volume consumption rate than the existing trucks due to fuel characteristics and engine design parameters. The total freight load carried by these 300 truck in one year is 45 million tonne-km. The level of service for this project is defined as 45 million tonne-km of freight load. The consumption of biodiesel in the project must be measured over the performance of this service level and the baseline scenario should be calculated based on conservative assumptions about the petroleum diesel use required to perform the same service level.

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Functional equivalence also ensures that projects do not “leak” their GHG emissions via product displacement. Some examples of the products or services or activity level parameters associated with projects include: • Industrial energy efficiency project - facility production output (tonnes product); • Building energy efficiency project - area of occupied floor space (m2); • Fuel switching project - thermal energy output (GJ); • Freight transport mode switch project - freight mass x distance traveled (tonne-km); • Public transit switch project - passengers x distance traveled (passenger-km); and • Land use change project - use of land area (hectares).

5.4.2.4 Baseline Scenario Selection Principle - Conservativeness The selection of baseline scenario should demonstrate that the potential GHG reductions are not overestimated. The selection of a baseline scenario from a range of alternatives has the potential to increase or decrease GHG reductions, depending on the level of conservativeness. A high degree of conservativism in baseline selection could result in understated GHG reductions but a low degree of conservativism in baseline selection could result in overstated GHG reductions. There is no correct level for a conservative performance standard or a conservative project-specific baseline scenario. The selection of a baseline scenario should be based on an appropriate level of “stringency” that reflects various trends in factors such as: • Minimum regulatory requirements - regulatory requirements typically set a ceiling on

baseline scenarios; • Recent and planned investments - new investments can shift the likelihood of

occurrence of certain alternative baseline candidates; • Degree of technology penetration - technology penetration can provide weighting in

the assessment of likely baseline candidates. • Organizational policies and practices - shifts in investment strategies can signal a

potential technology adoption path. The level of stringency involves a trade-off between program participation and environmental performance: 1) Lenient (less conservative) baseline scenarios (e.g. higher baseline performance

standards set against low project performance rates) would likely generate more “non-additional” (false positive) GHG reductions (that might have happened anyway), but potentially increase the number of eligible projects.

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2) Stringent (more conservative) baseline scenarios (e.g. lower baseline performance standards vs. low project performance rates) would likely reduce the non-additional GHG reductions (more true positives, or true additional projects) but potentially decrease unnecessarily the number of eligible projects.

The stringency of a performance standard is determined by how low the selected performance rate is relative to the average GHG emission rate of similar technologies or practices. Program authorities could specify a minimum percentile level from among a range of performance rates of baseline scenario candidates. The stringency of a project-specific standard is set by the amount of information and tested evidence required to justify the scenario as conservative. Program authorities could specify a specific assessment structure for the comparison of baseline scenario candidates. The above factors also signal the fact that baseline scenarios will likely change over time as new regulations are implemented, more new technologies are adopted, and investment barriers are reduced.

5.4.2.5 Project Confirmation Principle - Additionality Once a baseline scenario is established, a proponent should demonstrate and justify with evidence that its project performance results in GHG reductions that are additional to what would otherwise have occurred in the baseline scenario, and not “what would have happened anyway.” This justification should be part of the Project Plan. There is no standard method for this additionality justification; it is simply the development of a persuasive argument that should be supported by evidence to validate project eligibility. The underlying assumption for additional projects is that certain barriers (technology, financial, common practice) exist that have prevented the implementation of GHG reduction projects and that the financial benefit provided by initiative funding partially or fully is required for implementation. It is good practice to demonstrate and justify additionality through an analysis of the project and its baseline scenario. Project accounting literature provides a number of potential “additionality tests” (some formalized into a sequence) that can be used to justify a project’s additionality to the baseline scenario. The following sequence of additionality tests has been adapted from additionality tests found in the WBCSD/WRI GHG Protocol for Project Accounting40 and the Pacific Carbon Trust Guidance Document to the BC Emission Offsets Regulation.

40 World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) (2003) The GHG Protocol for Project Accounting.

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1. Timing - Commercial operation of the project should begin after a prescribed policy start date. This test assumes that projects implemented before a policy start date were not motivated primarily by the financial benefits of GHG reductions.

2. Regulatory - The project must not be required by existing regulations. The project must have a performance that exceeds existing regulations. This test is mandatory for project eligibility.

3. Common Practice Technologies - The project should reduce GHG emissions below levels produced by “common practice” technologies that produce the same products and services as the GHG project. Some jurisdictions define “common practice” with a maximum sector adoption rate threshold, beyond which a technology or practice becomes “commonplace” and therefore non-additional.41

4. Barriers or Obstacles Tests - Several tests can be made to assess the stringency of the barriers faced by a potential project. Additionality is typically supported by the assessed stringency of the barriers faced by a potential project. As the stringency of a project’s barriers increases, the more likely the project will be additional.

a. Investment Barriers - the project would have a low rate of return without financial incentives required for, or generated from, GHG reductions. A GHG project having a high rate of return could still be additional, but it would need to demonstrate barriers in other areas. Supporting evidence would include financial analysis including project income statements, cash flow analysis, financing terms, applicable carbon pricing mechanisms.

b. Technology Barriers - the technology is new, or not widely adopted, and not likely to be adopted for reasons other than reducing GHG emissions. Supporting evidence would include a clear explanation of the technology and its expected performance, and a market assessment of the technology adoption.

c. Other (technical knowledge, training resources, infrastructure, political/social/ cultural). Each barrier to a project should be explained and justified.

5.4.3 Identify Baseline Sources/Sinks Identify all sources/sinks that are associated with the baseline scenario. The process is the same as that described for project sources/sinks, where all controlled (direct), related (lifecycle), and affected (market) sources and sinks associated with the existing provision of products or services are identified. Baseline scenario sources/sinks are often different than project sources/sinks if a project has fundamentally different activities than the existing baseline activities (e.g. fuel switching, mode switching projects). Baseline scenario sources/sinks can be the same as project sources/sinks if the same activities are occurring in the project situation but with lower activity levels (e.g. energy efficiency projects).

41 For example, if Ontario ownership of electric vehicles were to exceed a pre-determined threshold (say, 50%) of the driver population, the adoption of electric vehicles might be declared an ineligible GHG reduction project.

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5.4.4 Select Relevant Sources/Sinks for Monitoring or Estimation Once the structure of the project scenario and the baseline scenario have been established, the most relevant sources and sinks should be selected for quantification. The important factors to assess in this step are: • source/sink contribution to total GHG emissions (significant/insignificant); • measurable activity level (fixed/variable; discrete/continuous; supplier/user); • difficulty in obtaining available data: affects degree of monitoring or estimation

required for key variables Not all identified sources/sinks have a significant impact on project GHG reductions. While there may be several controlled, related, or affected sources/sinks identified for a project and its baseline scenario, their GHGs may have a very low or negligible contribution to the total project GHGs or the project’s baseline scenario GHGs. Furthermore, the project GHGs and the baseline scenario GHGs could be the same and, therefore, not contribute to a GHG reduction. A higher number of sources/sinks selected may contribute to a more accurate GHG reduction estimate, but these may be more difficult or costly to quantify due to lack of information. This key step of determining the “relevant” sources/sinks for quantification is an exercise of balancing the most significant sources/sinks against the ability to quantify them. 5.4.5 Quantify GHG Emissions/Removals and GHG Reductions Once the quantifiable sources and sinks in the calculation structure of the project are established, the calculation methodologies should be established to estimate GHG emissions (or removals) from the project and its baseline scenario. If multiple calculation methods are available, then criteria and procedures should be established to select the relevant calculation methodology from the options available. Higher-accuracy calculation methods should be used for more significant sources/sinks. GHG emission (or removal) totals for a specified time period should be calculated for the baseline scenario and the project condition. The GHG reductions for a specified time period are the difference between the baseline scenario GHG emissions (or removals) and project GHG emissions (or removals). For more detail on quantification of GHG emissions/removals and GHG reductions, please see Section 5.7.

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5.5 Adaptation of Existing GHG Offset Project Protocols Offset project protocols have already performed the rigorous process of defining a project and its associated baseline condition and selecting the relevant sources/sinks for quantification. Quantification methods and equations have already been developed, reviewed, and approved by stakeholders. Some protocols recognize the complex of certain project situations and offer flexibility mechanisms for monitoring and quantification. There are several jurisdictions in North America that have already developed offset project protocols for specific project types and more protocols will be developed in the future. Alberta has developed the widest variety of offset project protocols but other jurisdictions such as California and B.C. have developed protocols for selected project types. The Climate Action Reserve is a leading North American organization that has developed 13 generic offset project protocols that various jurisdictions can use in compliance offset systems. The Climate Action Reserve is currently (2017) developing offset project protocols for Ontario and Quebec in 13 project areas, but these will not likely be fully developed and available for use until 2018. The table below summarizes the Several GHG offset project protocols have been developed for North American jurisdictions.

Table 10: North American GHG Offset Project Protocols Project Type Category Alberta BC California ON/QCA CARB Agriculture 7 2 3 3 Energy Efficiency 6 2 Forestry/Land Use 1 1 2 4 4 Fuel Switching 1 1 Geological Sequestration 1 Industrial 4 9 1 1 2 Ozone Depleting Substances 1 2 1 Renewable Energy 6 Transportation 1 Waste Management 5 1 3 3 Total 32 14 6 13 13 Notes: A - under development; B - Climate Action Reserve

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5.5.1 Protocol Adaptation Process The process of adapting an existing GHG offset project protocol would require the following steps: • Identify potential GHG offset project protocols that would apply to the GHG project

situation; • Select the most relevant existing GHG offset project protocol and justify the selection; • Extract the calculation methodology from selected protocol. If more than one

methodologies are provided, select the most relevant and justify the selection • Apply any applicable Ontario-specific criteria on eligible scope of sources/sinks for

quantification to adjust any calculation formulas. • Apply Ontario-specific factors (and project-specific) to variables in calculation

methodology. 5.5.2 Ontario Specific Factors Some Ontario-specific factors that would need to be used in place of default factors in an offset project protocol might include: • Electricity Grid Displacement Factor for Electricity Use - Electricity use in Ontario

generates GHG emissions from its generation and transmission and any changes in this use causes upstream changes in generation and transmission GHGs. An Ontario Electricity Grid Displacement Factor for Electricity Use would account for the GHG emissions from the average mix of electric power generation in Ontario and the average GHG emissions from the Ontario electricity transmission network.

• Electricity Grid Displacement Factor for Electricity Generation - Any alternative electricity generation from a project would displace the existing GHG emissions from electric power generation in Ontario, but likely not the GHG emissions from transmission. An Ontario Electricity Grid Displacement Factor for Electricity Generation would account only for the GHG emissions from the average mix of electric power generation in Ontario.

• Natural gas CO2 emission factor - based on typical Ontario natural gas. Environment and Climate Change Canada (ECCC) provides province-specific natural gas CO2 emission factors in its National Inventory Report.

• Upstream (fuelcycle) GHG emission factors for fuel production, processing, blending, and distribution - If required in a calculation methodology, the upstream GHG intensity of natural gas and refined petroleum products (propane, gasoline, diesel, fuel oils) will be different in Ontario than in other jurisdictions, so estimated Ontario factors should be used.

• Any project-specific factors that might be used to estimate activity levels specific to Ontario.

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A reference table of Ontario-specific default direct GHG emission factors and upstream fuelcycle GHG emission factors has been prepared and appears in Appendix A. The indirect GHG emission factors were prepared using the publicly-available GHGenius model (Natural Resources Canada) based on Ontario defaults for 2017. The indirect GHG emission factors have been separated into two sets based on an analysis of the fuelcycle stages of each fuel:

• the portion of upstream GHG emissions occurring from sources in Ontario; and • the portion of upstream GHG emissions occurring from sources outside of Ontario.

The OPS may wish to prepare a separate handbook of direct and indirect factors applicable for GHG reduction projects that gets updated periodically with new information.

5.6 Simplified Calculation Approach Applying all the steps in ISO 14064 Part 2 or in Ontario-adapted GHG offset protocols may present some challenges. There may be a lack of data, and too much time, work effort and associated costs involved in implementing all of the steps. In some cases, application of limited time and resources for applying all of the steps may not significantly improve the accuracy of the estimates generated. There may be uncertainties that cannot be significantly overcome by conducting a reasonable level of background analysis, data collection and applying all of the steps outlined in ISO 14064 Part 2 or in Ontario-adapted GHG offset protocols. For some such projects, it may be reasonable and acceptable to simplify the calculation methodology for estimating project GHG reductions by considering the following. • Developing a BAU GHG forecast that is constant with historical GHG emissions. • Reduce background analysis that is used to justify technology adoption objective. • Excluding detailed analysis of all sources (and sinks) associated with project. • Dismissing indirect emissions, if they are roughly calculated or deemed to be small or

negligible. • Making simplifying assumptions. • Applying conservativeness factors (e.g., 80% or 0.8) to baseline scenarios to account

for uncertainties that cannot easily be addressed (e.g., for technology GHG reducing potentials).

• Apply generic emission factors if Ontario-specific emission factors are not readily available.

• Borrow expected results from similar projects in other jurisdictions

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Some of these simplifications might be acceptable for some simple energy efficiency or fuel switching projects that likely account for majority of GHG reduction projects. The following calculation structure is suggested for: 1. Energy efficiency projects - reduced activity levels of existing fuels and electricity use;

and 2. Fuel switching projects - switch from one fuel to another fuel or electricity. The basic concept in fuel switching and energy efficiency GHG reduction projects is to account for all direct and upstream fuel GHG emissions plus upstream GHG emissions associated with direct electricity use. Insignificant controlled sources/sinks are excluded. Related sources/sinks not associated with upstream fuel or electricity are excluded. The key equations are as follows. GHG Reduction = Baseline GHG Emissions - Project GHG Emissions Baseline GHG = EDirFuel,B + EIndFuel,B + EElec,B Project GHG = EDirFuel,P + EIndFuel,P + EElec,P EDirFuel,B = Baseline direct fuel GHGs = QFuel,B x EFFuel,Dir EDirFuel,P = Project direct fuel GHGs = QFuel,P x EFFuel,Dir EIndFuel,B = Baseline indirect fuel GHGs = QFuel,B x EFFuel,Ind EIndFuel,P = Project indirect fuel GHGs = QFuel,P x EFFuel,Ind EElec,B = Baseline electricity supply GHGs = QElec,B x EFEGDF(EU) EElec,P = Project electricity supply GHGs = QElec,P x EFEGDF(EU) where: QFuel,B = Baseline fuel use quantity (L) QFuel,P = Project fuel use quantity (L) QElec,B = Baseline electricity use (kWh) QElec,P = Project electricity use (kWh) EFFuel,Dir = Direct fuel GHG emission factor (gCO2e/L) EFFuel,Ind = Indirect fuel GHG emission factor (gCO2e/L) EFEGDF(EU) = Indirect electricity grid displacement factor (end use) (gCO2e/kWh) A GHG reduction calculation that follows this approach is presented in Appendix C. The calculation uses default direct and indirect Ontario GHG emission factors provided in Appendix A.

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5.7 Estimate Projected GHG Reductions Once the calculation methodology is selected, the expected activity levels can be translated into projected GHG reductions. This “estimate” of projected GHG reductions is the GHG reduction objective for the project. 5.7.1 Determination of Activity Levels GHG emissions/removals are usually estimated by quantifying activity levels and applying relevant GHG emission/removal factors or rates. Activity levels can be estimated in three general ways: • Monitoring - directly measuring, metering, or counting activity levels; • Sampling surveys - sampling activity level rates from a target population; or • Estimating - using judgement or reference data to choose an assumed activity level; Monitoring is the most accurate quantification option but may be more costly to obtain activity level data directly from the relevant source/sink. When activity level variables are monitored, the monitored data records need to be kept to support activity level values used in GHG calculations. Sampling surveys can be used when it is impractical to directly measure activity levels, especially from large target populations. Simple random sampling can be used to characterize activity levels or proportions in one target population or stratified random sampling can be used to characterize these parameters in several distinct segments in a target population. The total activity level of adopters in a population can be estimated based on survey sample results and statistical analysis along with error bounds at a prescribed confidence level (typically 95%). The number of survey samples required to characterize a target population to within specified levels of accuracy (e.g. +/- 5% or +/- 2%) at a prescribed confidence level can be determined statistically using sample size formulas. The use of sampling surveys should be justified and documented in the Project Plan. The sampling survey and statistical analysis process can be included in an Appendix. When activity level variables are estimated, the assumptions should be stated clearly, referenced appropriately, and the estimation process justified. Any estimated variables should be conservative (i.e. low for baseline scenario variables, high for project variables) to minimize potential overestimation of GHG reductions. 5.7.2 Monitoring Plan A measurement and monitoring plan that addresses the requirements to support the GHG reduction calculations should be developed and included in the Project Plan. The

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measurement and monitoring plan outlines the data collection strategies and tasks for calculation variables and their justification. Elements may include: • Methodologies, supporting studies and data • Data collection strategies • Monitoring and data processing tasks • Sector-specific considerations • Sample calculations

5.7.3 Calculation Transparency It is good practice to perform GHG reduction calculations and present summary-level results transparently to help the quality assurance review process. The design of a GHG reduction calculation workbook calculation should include some of the following elements: 1) One summary page with time series of total GHG results of:

a) relevant Baseline Scenario source/sinks and subtotals (top section); b) relevant Project source/sinks and subtotals (below Baseline Scenario section; c) GHG reduction calculated as difference (below Project section)

2) Annual calculation sheets showing activity level values, activity level units, conversion factors applied, GHG emission factors, physical mass emissions of each gas (tonnes), gas GWPs (tCO2e/tonne gas), CO2 equivalent emissions of each gas (tonnes-CO2e), total GHGs. Repeat using same structure for subsequent years.

3) Activity level sheets holding time series of project activity levels and corresponding baseline scenario activity levels and any assumptions, growth/decline factors used, all properly labeled and referenced.

4) Factor sheets for all constant factors, including default emission factors, unit conversion factors, material property conversion factors (e.g. density, heating values).

5.8 Document Project Planning The relevant information in the project planning phase should be documented. It is good practice to produce a Project Plan, which is a formal document that describes the initiative, the project, adopted technologies and practices, expected activity levels, and expected GHG reductions. The Project Plan provides summary information about the project that should be reviewed in a quality assurance review and management reviews. Some key elements in a proposed outline of a project plan were provided in Section 3.5.2. Project Plans could also be adapted from project plan templates available in other jurisdictions.42 42 Alberta Environment and Park (2013), Sample Offset Project Plan Template; http://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-emitters-

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5.9 Quality Assurance Review It is good practice to conduct a quality assurance review of a Project Plan to provide assurance that the Project is valid and the information provided supports the projected GHG reductions. This is not a mandatory requirement, but is recommended to reduce the risk of errors in data and calculations. This quality assurance review could be performed by an impartial internal reviewer or by an external validator. “Validation” is the term used in the ISO 14064 Part 3 standard for a formal evaluation of a GHG project plan prior to the start of a project. If a quality assurance review is performed, it is recommended that the following elements be tested: • Selection and justification of calculation methodology approach; • Identification of project sources and sinks; • Assessment and selection of the baseline scenario; • Justification for project additionality; • Calculation structure and logic; • Justification of quantification methodologies used; • Review of data and calculations; • Review of information systems and controls Note of Clarification: Materiality Materiality is the concept that refers to errors, omissions, or misrepresentations (generally known as discrepancies) that affect the projected GHG reduction assertion as stated in the Project Plan. It is used in a quality assurance review to determine whether any discrepancies found are “serious” or not. Discrepancies could influence decisions of intended users. Quantitative materiality refers to discrepancies of a numerical nature, which are usually expressed as a percentage of the reported assertion value. Typically, program authorities set a quantitative materiality threshold of 5%. This threshold is a level beyond which discrepancies are considered serious enough to require a reworking of a project’s calculations. Qualitative materiality refers to serious discrepancies of a non-numerical nature, such as misleading decisions or presentations of circumstances, unsupported justifications, or not providing required information.

regulation/documents/OffsetProjectPlan-Feb2013.pdfhttp://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-emitters-regulation/documents/OffsetProjectPlan-Feb2013.pdf

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6. Project Implementation 6.1 Introduction The project implementation phase occurs after a project is started. Ideally, in the project implementation phase for each project that is induced by an initiative, a Proponent should: • assess baseline scenario for potential changes

o perform routine baseline scenario adjustments o perform non-routine baseline scenario adjustments;

• quantify project activity level performance using appropriate methodology; o monitor/measure/count; o survey sample; o estimate

• quantify project GHG reductions • document a Project Report; • conduct a quality assurance review; • conduct a management review. Each of these elements is discussed in the sections that follow.

6.2 Baseline Scenario Adjustments One of the key realities regarding project GHG reductions is that baseline scenarios can change over time. The movement of baseline scenarios occurs due to external seasonal and annual influences, as well as broader sector and societal shifts. The GHG project accounting literature identifies two general adjustments that are required to keep the baseline scenario as a conservative estimate of business-as-usual conditions. • Routine adjustments; and • Non-routine adjustments. 6.2.1 Routine Adjustments On-going variations in external factors that influence project activity and GHG emissions on a seasonal or annual basis are the main reason for requiring routine baseline scenario adjustments. Operating parameters or external environmental factors can vary seasonally and annually and influence project activity levels.

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Example of Adjustment A project has installed energy conservation measures in a building. The project plan established a baseline performance standard for natural gas consumed for building heat in a particularly cold winter, which resulted in a high expected fuel consumption rate. In Year 1 of the project, an unusually warm winter resulted in very low fuel consumption. It would be unfair to attribute all the GHG reductions calculated for Year 1 to the project, since the change in an environmental factor (ambient temperature) was partially responsible for lower natural gas use. To remedy this, a routine baseline adjustment that corrects the ambient environment influence by applying a “Actual-to-Baseline” ratio of heating degree-days43 would be needed in the calculation structure to isolate the contribution of project activity on GHG reductions. Project operating factors can include many variable-rate factors, such as production levels, transport loading, and ambient heating degree-days. The influence of these variable factors on project activity levels should be identified in the project planning phase when establishing the GHG reduction calculation methodology. A time series of expected variable factors should be assumed as the basis for projected GHG emissions in the project planning phase. The measurement of the actual variable factors should occur in each reporting period. 6.2.2 Non-Routine Adjustments The concept of “what-would-have-happened-anyway” can change from one period to the next as consumers, sectors, and society gradually shift toward lower GHG emission technology investments and practices. There is an expectation that the adoption of a project’s technologies or practices will gradually increase over time and eventually become “commonplace.” As a result of these shifts in the business as usual condition, a project’s baseline scenario also should move over time. The rate at which a project’s technologies or practices are adopted in a sector is a key issue because it impacts the life and quantity of GHG reductions that can be attributed to a project. These changes are called non-routine because they are not variable factors that can influence project activity, but can occur in any pattern or rate; continuously or in discrete step-changes. Some significant examples of non-routine changes include: • Changes to regulatory requirements that result in the mandatory application of certain

technologies at a point in time. If the technology or practice that must be adopted is the same as the technology or practice used in the project; this can eliminate or reduce the

43 Environment Canada defines heating degree-days as the annual accumulated daily differences between a heating threshold temperature of 18°C and the mean daily ambient temperatures over a one-year period. In a one-day period, each mean degree Celsius below 18°C is considered as one degree-day.

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eligible GHG reductions attributable to the project after the point in time that the change is mandated.

• Material changes to industry or sector average emission information. In many cases, sector average emissions drop over time as new technologies and practices are "naturally" adopted over time or penetrate the market. This can be modeled as a annual decline rate applied continuously over time or as a series of known step-changes based on sector knowledge.

• Changes to the social acceptability or availability of a product or service that increases its general use.

• Changes to investment incentives, perhaps through other government initiatives, outside of the OPS initiatives program, that make the project more attractive. GHG reduction initiatives need to take into consideration potential overlaps with other initiatives.

• Changes to infrastructure that open the market for the project’s technology or product. Planning for baseline movement can be challenging when there might be future regulations that would affect the status of the baseline. In these cases, the likelihood and immediacy of the regulation needs to be considered and assumptions made and justified. If the implementation of the impending regulation is highly probable and the timeline of implementation of the impending regulation is within the project period, the impending regulation should be considered in both the baseline scenario (for baseline movement purposes) and in the project (for compliance purposes).

6.3 Quantification of Project Activity Level Performance During the project implementation phase, GHG emissions/removals should be quantified by quantifying activity levels and applying relevant GHG emission/removal factors or rates. As explained in Section 5.7, the measurement and monitoring plan developed in the project planning phase needs to be executed. Monitored data should be collected, subjected to quality control (i.e. using expert judgement to correct deviant values), compiled, and transferred for use in calculations. Survey samples should be executed and their results subjected to quality control (i.e. using expert judgement to correct deviant values). Statistical analysis should be performed to obtain desired calculation variables. Estimates should be made for variables in which monitoring or sampling cannot be reasonably performed. Estimated values should be tested and adjusted based on any new information gathered during the reporting period. Estimated values for the reporting period can be different than estimated values assumed during the project planning phase.

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6.4 Quantify Project GHG Reductions The quantification of GHG reductions should be executed based on the gathered activity level data, applicable factors, and models as outlined in the Project Plan.

6.5 Document Project Report The relevant information in the project implementation phase should be documented. Project reporting should align with reporting requirements for OPS initiatives. It is good practice to produce a Project Report for each reporting period. A Project Report is suggested as a formal document that describes the initiative, the project, adopted technologies and practices, actual measured or sampled activity levels, and actual GHG reductions. The project report provides summary information about the project performance that could be examined in a quality assurance review and management reviews. Some key elements in a proposed Project Report can be found in publicly-available Offset Reports (Alberta, CSA Registries) or project report templates available in other jurisdictions.44

6.6 Quality Assurance Review It is good practice to conduct a quality assurance review of a Project Report to verify the GHG reductions calculated for the project and to provide assurance that the project performance is accurate and the information provided supports the actual GHG reductions. This is not a mandatory requirement, but is recommended to reduce the risk of errors in data and calculations. This quality assurance review could be performed by an impartial internal reviewer or by an external verifier. “Verification” is the term used in the ISO 14064 Part 3 standard for a formal evaluation of a GHG project report after an actual GHG reduction has occurred.

44 Alberta Environment and Park (2013), Sample Offset Project Report Template; http://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-emitters-regulation/documents/OffsetProjectReport-Feb2013.pdf

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If a quality assurance review of the Project Plan has been performed, then the review of the Project Report should focus: • less on the baseline selection process, the additionality of the project, and the

information systems and controls; and • more on the appropriateness of the baseline scenario for the reporting year, the

monitoring methodology and its effectiveness, and the quantification data and calculations.

The project report and supporting information are reviewed and the following elements should typically be tested: • routine and non-routine adjustments to baseline scenario; • activity level quantification methodology and effectiveness; and • review of data and calculations. Note of Clarification: Materiality As described in Section 5.9.3, materiality is the concept that refers to errors, omissions, or misrepresentations (discrepancies) that affect the actual reported GHG reduction assertion as stated in the Project Report. In a formal verification, quantitative and qualitative discrepancies are assessed against program criteria and the quantitative materiality threshold to determine whether the Project Report provides a fair and accurate presentation of project performance, following the requirements of ISO 14064 Part 3.

6.7 Management Review Once the project performance is reported, a management review should be conducted to assess the effectiveness of the project and the broader OPS Initiative. This management review should be an on-going process that occurs for every project reporting period. The management review would follow the guidelines of program management set out by the Ontario government. A typical management review would include the following tasks:

• Assessing the factors contributing to differences between expected GHG reductions and actual GHG reductions achieved;

• Assessing the appropriateness of the project’s baseline scenario, based on a review of external factors such as regulatory developments, new program initiatives, technology trends, and societal factors.

• Examining sources of uncertainty in quantification methods; • Making improvements to data collection and quantification methodologies, • Establishing new, updated objectives.

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7. Appendix A - Factors

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7.1 Greenhouse Gas Global Warming Potentials

Ontario uses two sets of GWPs (SAR and AR4, as footnoted below). For OPS initiatives, the MOECC suggests that IPCC AR4 GWPs be used to calculate GHG reductions. If other GWPs are applied, MOECC may require explanation. The table below is a partial list of GHGs. Please see the comprehensive list of gases and their GWPs in the IPCC references cited, if required.

Table 11: GHG Global Warming Potentials (100-Year GWPs)

Gases Formula IPCC SAR45 IPCC AR446 IPCC AR547 Carbon dioxide CO2 1 1 1 Methane CH4 21 25 28 Nitrous oxide N2O 310 298 265 Sulphur hexafluoride SF6 23,900 22,800 23,500 Nitrogen trifluoride NF3 17,200 17,200 16,100 Hydrofluorocarbons (HFCs) HFC-23 CHF3 11,700 14,800 12,400 HFC-32 CH2F2 650 675 677 HFC-41 CH3F 150 92 116 HFC-43-10mee CF3CHFCHFCF2CF3 1,300 1,640 1,650 HFC-125 CHF2CF3 2,800 3,500 3,170 HFC-134 CHF2CHF2 1,000 1,100 1,120 HFC-134a CH2FCF3 1,300 1,430 1,300 HFC-143 CH2FCHF2 300 353 328 HFC-143a CH3CF3 3,800 4,470 4,800 HFC-152 CH2FCH2F 43 53 16 HFC-152a CH3CHF2 140 124 138 HFC-161 CH3CH2F 12 12 4 HFC-227ea CF3CHFCF3 2,900 3,220 3,350 HFC-236cb CH2FCF2CF3 1,300 1,340 1,210 HFC-236ea CHF2CHFCF3 1,200 1,370 1,330 HFC-236fa CF3CH2CF3 6,300 9,810 8,060 HFC-245ca CH2FCF2CHF2 560 693 716 HFC-245fa CHF2CH2CF3 950 1,030 858 HFC-365mfc CH3CF2CH2CF3 890 794 804 Perfluorocarbons (PFCs) Perfluoromethane CF4 6,500 7,390 6,630 Perfluoroethane C2F6 9,200 12,200 11,100 Perfluoropropane C3F8 7,000 8,830 8,900 Perfluorobutane C4F10 7,000 8,860 9,200 Perfluorocyclobutane c-C4F8 8,700 10,300 9,540 Perfluoropentane C5F12 7,500 9,160 8,550 Perfluorohexane C6F14 7,400 9,300 7,910

Source: List of substances from Ontario Regulation 143/16; Quantification, Reporting and Verification of Greenhouse Gas Emissions, Schedule 1 (from IPCC SAR); Environment and Climate Change Canada (2017) National Inventory Report 1990–2015: Greenhouse Gas Sources and Sinks in Canada (from IPCC AR4) - (These are used for Ontario GHG forecasts.)

45 IPCC (1995). IPCC Second Assessment Report (SAR). A Report of the Intergovernmental Panel on Climate Change. The Science of Climate Change. Contribution of Working Group I to the IPCC SAR; Table 4; http://www.ipcc.ch/ipccreports/sar/wg_I/ipcc_sar_wg_I_full_report.pdf 46 IPCC (2007). IPCC Fourth Assessment Report (AR4): Climate Change 2007. Working Group I: The Physical Science Basis; Table 2.14; https://www.ipcc.ch/pdf/assessment-report/ar4/wg1/ar4-wg1-chapter2.pdf 47 IPCC (2013) IPCC Fifth Assessment Report (AR5): Climate Change 2013 - The Physical Science Basis, Chapter 8: Anthropogenic and Natural Radiative Forcing.

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7.2 Default Energy Emission Factors GHG reductions for many projects are based on the calculation of fuel combustion or electricity use. For convenience, default GHG emission factors for the combustion of various fuels can be used to quantify GHG reductions through their use in equations for baseline scenario GHGs and project GHGs. GHG emissions are calculated by multiplying activity levels of fuel use by default GHG emission factors. Default GHG emission factors for some common fuels are provided in the table on the next page. The table presents two types of GHG emission factors: 1) Direct GHG emission factors; and 2) Indirect Ontario GHG emission factors. Direct GHG emission factors are used to calculate direct GHG emissions from sources that are directly under control of the project, such as fuel use. These direct GHG emission factors have been extracted from Environment and Climate Change Canada’s National Inventory Report, 1990-2015.48 Total GHG emission factors have been calculated based on the applicable GWPs for CO2, CH4, and N2O. Default fuel energy contents (known as higher heating values, HHV) used by Statistics Canada49 have also been provided to convert emission factors expressed on a physical unit basis to emission factors expressed on an energy basis. Indirect Ontario GHG emission factors are provided as estimates of fuelcycle GHG emissions resulting from the supply of fuel or electricity in Ontario to a project. When fuel or electricity are used in a project, there are indirect GHG emissions associated with the upstream supply of that fuel or electricity to the project. Indirect GHG emission factors were estimated for various common fuels (e.g. natural gas, propane, gasoline, diesel, fuel oils) based on the most recent publicly-available version of the GHGenius model50 using Ontario default settings for the year 2017. The GHGenius model was developed by Natural Resources Canada between 2005 and 2013 and is recognized as a comprehensive and applicable fuelcycle analysis tool that quantifies the GHG impacts of a fuel over 11 stages in the fuel supply chain to the end user. The Ontario portion of the fuelcycle indirect GHG emissions was estimated by selecting those fuelcycle stages assumed most likely to occur in Ontario. The “outside-of-Ontario” portion of the fuelcycle indirect GHG emissions is also included as a reference in the table but should not be included in GHG reduction calculations. These may be reported separately as co- or dis-benefits for a project. It should be noted that indirect GHG emission factors have a higher level of uncertainty than direct GHG emission factors and it is good practice to apply conservative assumptions when they are used for GHG reduction quantification.

48 Environment and Climate Change Canada (2017), Canada’s National Inventory Report, 1990-2015, Annex 6. 49 Statistics Canada (2017), Report on Energy Supply and Demand in Canada, 2015 Preliminary, page 122. 50 GHGenius 4.03 for Excel 2013 (2013), https://www.ghgenius.ca/downloads.php. Fuelcycle stages are the portion of all lifecycle stages that are associated with fuels production and use.

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Table 12: Default Energy GHG Emission Factors Units of

Measure HHV BioCO2A

(GWP=0)

CO2 (GWP=1)

CH4 (GWP=25)

N2O (GWP=298) Total Direct GHG Estimated Ontario

Indirect GHGB Estimated Ex-Ontario

Indirect GHGC Stationary Sources Gaseous Fuels (MJ/m3) (g/m3) (g/m3) (g/m3) (g/m3) (gCO2e/m3) (gCO2e/MJ) (gCO2e/m3) (gCO2e/MJ) (gCO2e/m3) (gCO2e/MJ) Natural Gas m3 38.00 0 1,888 0.037 0.033 1,899 50.0 67 1.8 397 10.4 Liquid Fuels (MJ/L) (g/L) (g/L) (g/L) (g/L) (gCO2e/L) (gCO2e/MJ) (gCO2e/L) (gCO2e/MJ) (gCO2e/L) (gCO2e/MJ) Propane L 25.31 0 1,515 0.024 0.108 1,548 61.2 71 2.8 293 11.6 Gasoline L 35.00 0 2,316 0.100 0.020 2,324 66.4 375 10.7 406 11.6 Kerosene L 37.68 0 2,560 0.006 0.031 2,569 68.2 276 7.3 441 11.7 Diesel L 38.30 0 2,690 0.133 0.400 2,813 73.4 392 10.2 451 11.8 Light Fuel Oil L 38.80 0 2,753 0.006 0.031 2,762 71.2 103 2.7 469 12.1 Heavy Fuel Oil L 42.50 0 3,156 0.120 0.064 3,178 74.8 113 2.7 514 12.1 Solid Fuels (MJ/kg) (g/kg) (g/kg) (g/kg) (g/kg) (gCO2e/L) (gCO2e/MJ) (gCO2e/L) (gCO2e/MJ) (gCO2e/L) (gCO2e/MJ) U.S. Bitum. Coal kg 29.82 0 2,662 0.030 0.020 2,669 89.5 0 0.0 190 6.4 Wood Waste - Ind. dry kg 20.94 1,680 0 0.180 0.120 40 1.9 0 0.0 0 0.0 Wood Waste - Res. dry kg 20.37 1,900 0 7.284 0.148 226 11.1 0 0.0 0 0.0 Mobile Sources Liquid Fuels (MJ/L) (g/L) (g/L) (g/L) (g/L) (gCO2e/L) (gCO2e/MJ) (gCO2e/L) (gCO2e/MJ) (gCO2e/L) (gCO2e/MJ) Propane L 25.31 0 1,515 0.640 0.028 1,539 60.8 71 2.8 293 11.6 GasolineD L 35.00 0 2,316 0.140 0.022 2,326 66.5 375 10.7 406 11.6 Turbo Jet L 37.68 0 2,560 0.029 0.071 2,582 68.5 276 7.3 441 11.7 DieselE L 38.30 0 2,690 0.110 0.151 2,738 71.5 392 10.2 451 11.8 Bioethanol (Corn) L 21.04 1,509 0 0.140 0.022 10 0.5 945 44.9 50 2.4 Biodiesel (Canola) L 32.06 2,474 0 0.110 0.151 48 1.5 727 22.7 143 4.5 Electricity Grid Displacement Factors (EGDF) (MJ/kWh) (gCO2e/kWh) (gCO2e/MJ) (gCO2e/kWh) (gCO2e/MJ) (gCO2e/kWh) (gCO2e/MJ) GenerationF kWh 3.60 0 0.0 40.0 11.1 0 0.0 End UseF kWh 3.60 0 0.0 43.0 11.9 0 0.0

Sources: GHG Emission Factors - Environment and Climate Change Canada, National Inventory Report 1990-2015, Annex 6; HHVs - Statistics Canada Report on Energy Supply/Demand 57-003 2015; Biofuel HHVs - Ontario Guideline for Quantification, Reporting and Verification of GHG Emissions, Jan. 2017, Table 20-1; Indirect GHGs - estimated with GHGenius 4.03a (Ontario; 2017). Notes: A - Biogenic CO2 is not included in Total GHGs; should be reported separately as information-only item;

B - Ontario Indirect GHGs are from selected fuelcycle stages assumed to occur within Ontario and should be included in GHG reduction calculations; C - Ex-Ontario Indirect GHGs represent remaining fuelcycle stages; Should not be included in GHG reduction calculations and only be reported as information-only co- or dis-benefits; D - Tier 2 Light Duty Gasoline Vehicles assumed; E - Advanced Control Heavy-Duty Diesel Vehicles assumed; F - EGDF (Generation and EGDF (End Use) - Environment and Climate Change Canada, National Inventory Report 1990-2015, Table A13-7 (accounts for line losses and SF6)

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8. Appendix B - GHG Quantification References

Table 13 lists technical references that contain emission factors, conversion factors, and other useful information for calculating GHG emissions. These technical references may be modified from time to time, and as such, it is the responsibility of the person(s) calculating annual emissions to obtain and use the most up-to-date versions of the documents.

Table 13: Reference Quantification Methodology Resources Quantification Method Resources Link Alberta Infrastructure and Transportation (2003) Quantification of Greenhouse Gases Produced by the Road Transportation Sector in Alberta Using a Traffic Volume Methodology

http://www.transportation.alberta.ca/Content/docType57/Production/GHG-Produced.pdf

Ontario Ministry of the Environment and Climate Change (January 2017) Guideline for Quantification, Reporting and Verification of Greenhouse Gas Emissions

http://www.downloads.ene.gov.on.ca/envision/env_reg/er/documents/2016/012-6837_Final%20Guideline.pdf

Environment Canada, Sector Specific Protocols and Guidance Manuals https://www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=07B0E55A-1

Intergovernmental Panel on Climate Change (2006) 2006 IPCC Guidelines for National Greenhouse Gas Inventories - Volume 3 -Industrial Processes and Product Use

http://www.ipcc-nggip.iges.or.jp/public/2006gl/vol3.html

Intergovernmental Panel on Climate Change (IPCC) (2006) IPCC Guidelines for National Greenhouse Gas Inventories

http://www.ipcc-nggip.iges.or.jp/public/2006gl/

Intergovernmental Panel on Climate Change (IPCC), Good Practice Guidance and Uncertainty Management in National Greenhouse Gas Inventories

http://www.ipcc-nggip.iges.or.jp/public/2006gl/

International Standards Organization, ISO 14064-1, Greenhouse Gases: Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals.

http://www.iso.org/iso/

International Standards Organization, ISO 14064-2, Greenhouse gases -- Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements

http://www.iso.org/iso/

International Standards Organization, ISO 14064-3: Greenhouse gases — Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions.

http://www.iso.org/iso/

International Standards Organization, ISO 14065:2013 - Greenhouse gases - Requirements for greenhouse gas validation and verification bodies for use in accreditation or other forms of recognition; Second Edition.

http://www.iso.org/iso/

Ontario Power Authority, Independent Electricity Service Operator (IESO) (2015) Evaluation, Measurement and Verification (EM&V) Protocols. V2.0

https://cms.powerauthority.on.ca/sites/default/files/conservation/Conservation-First-EMandV-Protocols-and-Requirements-2015-2020-Apr29-2015.pdf

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Quantification Method Resources Link

The Climate Registry (TCR), (May 2008) General Reporting Protocol (GRP) for the Voluntary Reporting Program

https://www.theclimateregistry.org/tools-resources/reporting-protocols/general-reporting-protocol/

U.S. EPA, 40 CFR Part 98, Mandatory Greenhouse Gas Reporting, Subparts A to Subpart PP http://www.epa.gov/ghgreporting.

U.S. EPA, Mandatory Reporting of Greenhouse Gases, Final Rule, 40 CFR 98, Oct. 30, 2009.

http://www.epa.gov/sites/production/files/2014-09/documents/ghg-mrr-finalrule.pdf

WCI (Dec. 21, 2011) Final Essential Requirements of Mandatory Reporting 2011 Amendments for Harmonization of Reporting in Canadian Jurisdictions

http://www.westernclimateinitiative.org/component/remository/Reporting-Committee-Documents/

WCI (Nov. 12, 2010) Harmonization of Essential Requirements for Mandatory Reporting in U.S. Jurisdictions with EPA Mandatory Reporting Rule.

http://www.westernclimateinitiative.org/component/remository/Reporting-Committee-Documents/

WCI (2010) Final Harmonization of Essential Reporting Requirements in Canadian Jurisdictions (Quantification Methods)

http://www.westernclimateinitiative.org/component/remository/Reporting-Committee-Documents/

WCI (2013) Revised Canadian Quantification Methods http://www.westernclimateinitiative.org/component/remository/Reporting-Committee-Documents/

WCI, (2011) Final Essential Requirements for Mandatory Reporting, 2011 Amendments for Harmonization of Reporting in Canadian Jurisdictions

http://www.westernclimateinitiative.org/component/remository/Reporting-Committee-Documents/

Note: Some web links may not be current.

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9. Appendix C - Sample Project Calculations

9.1 Project Description This section presents calculations used to estimate and quantify GHG reductions from a generic sample project. An OPS initiative has been developed that focuses on a targeted population (in a sector or segment) of emitting unit entities that use gasoline and diesel fuel in combustion sources. Existing GHG emissions are created by the combustion of gasoline and diesel fuel. The Initiative starts in a project reference year and is assumed to apply for a finite period of seven years. Over time, the initiative is planned to induce an increasing portion of the targeted population to convert their fuel combustion sources to systems powered by purchased electricity and natural gas. The new technology that consumes electricity and natural gas provides an equivalent product/service to each unit compared to the old technology that consumed gasoline and diesel fuel for combustion, but at a higher energy efficiency. The details or mechanics of the initiative or the technologies are not relevant to this example, other than the fact that project/service equivalence has been established.

9.2 Project Planning Project planning occurs before the project reference year, which is the last year before project activity begins. The project duration is set as 7 years based on the initiative funding. The target population is defined as a finite number of emitting units determined in the project reference year. A growth rate for target population over the project duration of 7 years is assumed based on best available information. The following project assumptions have been determined through analysis and market research: • Project reference year target population = 20,000 “emitting units”; • Expected population growth rate = 3% growth per year; • Existing average gasoline use rate = 1,200 litres per unit per year; • Existing average diesel use rate = 394 litres per unit per year; • Existing fuel use rates are expected to remain constant over time; • Expected electricity use rate for new technology = 4,651 kWh per unit per year; • Expected natural gas use rate for new technology = 100 standard cubic metre (m3) per unit per

year; • Expected electricity and natural gas use rates are expected to remain constant over time. GHG emission rates per unit are calculated from this information, using default emission factors provided in Appendix A. Both direct and indirect GHG emissions are included in

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the calculation, since there are indirect GHGs generated in Ontario from the supply of fuels and electricity. The following table summarizes the calculation of GHG emission rates to be used for the baseline scenario and the project scenario.

Table 14: GHG Emission Rates for Baseline & Project Scenarios

Energy Use Rate

GHG Emission Factors GHG Emission Rates (tCO2e/unit/y)

Direct Ontario Indirect

Ontario Fuelcycle Direct Ontario

Indirect Ontario

Fuelcycle Baseline Scenario: (L/unit/y) (gCO2e/L) (tonneCO2e/unit/y)

Expected Gasoline Use 1,200 2,324 375 2,699 2.79 0.45 3.24 Expected Diesel Use 394 2,813 392 3,204 1.11 0.15 1.26 Expected Total Energy 3.90 0.60 4.50 Project Scenario: (kWh/unit/y) (gCO2e/kWh) (tonneCO2e/unit/y)

Expected Electricity Use 3,692 0 54.2 54.2 0.00 0.20 0.20 (m3/unit/y) (gCO2e/m3) Expected Natural Gas Use 100 1,899 67 1,966 0.19 0.01 0.20 Expected Total Energy 0.19 0.21 0.40

9.2.1 Business-As-Usual (BAU) GHG Forecast The BAU GHG forecast is an estimate of the GHG emissions that would be provided by the target population assuming business-as-usual conditions. It can be estimated on a top-down basis from sector or segment market and GHG data or estimated from the bottom up based on the number of units in a target population. For this example, the BAU forecast is estimated based on the existing fuel consumption rates assumed for the target population, taking into account the expected growth of the target population. This is the overall GHG picture against which the GHG reductions created by the project are to be compared. A table showing the BAU GHG forecast for the target population appears two pages following. 9.2.2 Project Scope Based on market research and analysis (that may include sample surveying), the adoption rate objective is set as a time series of the cumulative portion of units in the target population that are expected to adopt the technology. This time series is applied to the forecast target population and the resulting expected number of adopters defines the scope of the project, which increases in size over time. A table showing the calculation of the expected number of adopters from the target population appears two pages following.

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9.2.3 Project GHG Sources The GHG sources identified and selected as relevant for the project include:

1) the use of electricity directly by the technology adopter; 2) the use of natural gas directly by the technology adopter; 3) the upstream Ontario generation of electricity supplied; and 4) the upstream Ontario portion of GHG sources for natural gas supply.

The first source has measureable electricity consumption but no direct GHG emissions. The second source has direct GHG emissions. The third and fourth sources are indirect sources in Ontario that emit GHGs based on the supply of electricity and natural gas to the adopters. Additional potential sources such as GHG emissions associated with technology manufacture, delivery, on-going maintenance, and final disposal have been excluded as negligible. The project GHGs are estimated as the sum of GHG emissions from these four sources. In this example, for simplicity, expected project GHG emissions are calculated from the number of adopters and the average direct and indirect Ontario GHG project emission rates established in the GHG Emission Rates table above. The calculation of one direct and one indirect average project GHG rate accounts for all four of these sources, since they are based on both electricity and natural gas use rates and default direct and indirect Ontario emission factors from Appendix A. In more complex projects, expected project GHG emissions may have to be calculated from each relevant project source individually and all the sources summed. Once a technology is adopted by an emitting unit (who becomes an adopter), GHG reductions are assumed to continue each year (for the life of the technology). It is also assumed that adoption decisions are permanent during the life of the project. Since the project activity level data (number of adopters) is presented on a cumulative basis, the GHG reduction results are presented as cumulative GHG reductions. These are calculated and appear in the Calculation of Projected GHG Reductions table on the next page. 9.2.4 Baseline Scenario The baseline Scenario is the hypothetical scenario in which the technology adopters are assumed to continue to emit GHGs at the rates that they would have incurred in the absence of adopting the technology. It is good practice to conduct a rigorous evaluation of possible baseline scenario candidates and select and justify which candidate provides the most conservative scenario to ensure project GHG reductions are always additional. However, this step has not been done in this example and a simplified assumption is applied: the adopters are assumed to continue to consume fuel at historical average rates unchanged for all future years.

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Table 15: BAU GHG Forecast

HistYear RefYear PY1 PY2 PY3 PY4 PY5 PY6 PY7 BAU Target Population (units) 19,417 20,000 20,600 21,218 21,855 22,510 23,185 23,881 24,597 Expected Population Growth Rate (%/y) 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Baseline GHG Emission Rate (tCO2e/unit/y) 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 BAU GHG Forecast (tCO2e) 87,379 90,000 92,700 95,481 98,345 101,296 104,335 107,465 110,689

Table 16: GHG Project Scope - Adoption Rate Objective and Number of Technology Adopters

HistYear RefYear PY1 PY2 PY3 PY4 PY5 PY6 PY7 BAU Target Population (units) 19,417 20,000 20,600 21,218 21,855 22,510 23,185 23,881 24,597 Adoption Rate Objective (cumulative %) 0% 0% 10% 30% 50% 70% 80% 90% 95% Expected Technology Adopters 0 0 2,060 6,365 10,927 15,757 18,548 21,493 23,368

Table 17: Calculation of Projected GHG Reductions and Projected GHG Forecast

HistYear RefYear PY1 PY2 PY3 PY4 PY5 PY6 PY7 Expected Technology Adopters (cumulative) 0 0 2,060 6,365 10,927 15,757 18,548 21,493 23,368 Expected Direct Baseline GHG Rate (tCO2e/unit/y) 3.90 3.90 3.90 3.90 3.90 3.90 3.90 3.90 3.90 Expected Indirect Ontario Baseline GHG Rate (tCO2e/unit/y) 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60 0.60

Expected Ontario Fuelcycle Baseline GHG Rate (tCO2e/unit/y) 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50 4.50

Expected Baseline Scenario GHGs (tCO2e) 0 0 9,270 28,644 49,173 70,907 83,468 96,718 105,154 Expected Direct Project GHG Rate (tCO2e/unit/y) 0.19 0.19 0.19 0.19 0.19 0.19 0.19 0.19 0.19 Expected Indirect Ontario Project GHG Rate (tCO2e/unit/y) 0.21 0.21 0.21 0.21 0.21 0.21 0.21 0.21 0.21

Expected Ontario Fuelcycle Project GHG Rate (tCO2e/unit/y) 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40

Expected Project Scenario GHGs (tCO2e) 0 0 817 2,525 4,334 6,250 7,357 8,524 9,268 Projected GHG Reductions (tCO2e) 0 0 8,453 26,120 44,839 64,657 76,111 88,194 95,886 Projected GHG Forecast (tCO2e) (BAU GHG Forecast - Projected GHG Reductions) 87,379 90,000 84,247 69,361 53,507 36,638 28,224 19,271 14,802

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The GHG sources identified and selected as relevant for the Baseline Scenario include:

1) the use of gasoline directly by the technology adopter; 2) the use of diesel directly by the technology adopter; 3) the upstream Ontario portion of GHG sources for gasoline supply; and 4) the upstream Ontario portion of GHG sources for diesel supply.

Additional potential sources such as GHG emissions associated with equipment manufacture, on-going maintenance, and final disposal have been excluded as negligible. The first two sources have measureable fuel rate consumption and direct GHG emissions. The last two sources are upstream supply sources which generate indirect GHG emissions in Ontario as a result of the fuel demand. The baseline scenario GHGs are estimated as the sum of GHG emissions from these four sources. In this example, expected baseline scenario GHG emissions are calculated from the number of adopters and the average direct and indirect Ontario GHG baseline scenario emission rates established in the GHG Emission Rates table above. The calculation of one direct and one indirect average baseline scenario GHG rate accounts for all four of these sources, since they are based on both existing gasoline and diesel use rates and default direct and indirect Ontario emission factors from Appendix A. In more complex projects, expected baseline scenario GHG emissions may have to be calculated from each relevant baseline source individually and all the sources summed. The baseline scenario GHGs are calculated and shown in the Calculation of GHG Reductions table on the previous page. 9.2.5 Projected GHG Reductions Projected GHG reductions are calculated as the difference between baseline scenario GHGs and project GHGs. The projected GHG reductions show a forecasted time series extending out seven years from the project reference year. 9.2.6 Projected GHG Forecast Once the projected GHG reductions from a project are calculated, a projected GHG forecast can be prepared based on the difference between the BAU GHG forecast and the projected GHG reductions from a project. If more than one project is applied to a target population, the projected GHG forecast would have to account for all projected GHG reductions from these projects.

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9.3 Project Implementation After an OPS initiative begins and a project is implemented through the adoption of technologies, the quantification of project GHG reductions begins. Ideally, quantification is based on actual measurements (or accurate estimates derived from survey samples) of significant activity variables. Estimations of activity level variables should only be permitted for non-significant variables because of higher uncertainty. Measurements should be performed as defined in the Measurement Plan contained in a Project Plan document. Actual GHG reductions should be quantified on a scheduled frequency of performance reporting periods. 9.3.1 Revised BAU GHG Forecast Continuing research about the target population and its fuel consumption patterns provides new information concluding that: • The Target Population is growing more quickly than expected, at an average rate of

3.5% per year, not 3.0% per year as in the Project Plan; • The average baseline scenario GHG emission rate of 4.5 tonnes CO2e per unit per year

is not constant, but is declining annually at an assumed conservative rate of 0.2% per year due to on-going energy efficiency improvements in the conventional technology.

The BAU GHG forecast is impacted with this new information, since the forecast of the target population is increasing more quickly while the expected GHG emissions rate is declining. A revised BAU GHG forecast should be prepared to include this new population growth and GHG rate decline information. The revised BAU GHG forecast is presented in the first table on the next page. The higher target population growth also increases the number of adopters required to achieve the adoption rate objective. 9.3.2 Baseline Scenario Adjustments The decline of the expected GHG emissions rate will impact the baseline scenario for the project. To respect conservativeness and additionality principles, the revised expected GHG emissions rates now presents a more conservative baseline scenario for each year of a project and it should be used in place of the original baseline scenario assumption (constant GHG rate of 4.5 t/unit/y). This is an example of a non-routine adjustment - a one-time change that is made to a set of forecasted baseline GHG rate values based on one piece of new information that changes an assumption basis. This non-routine adjustment is applied to the baseline scenario value for each project year to better reflect the hypothetical alternative GHGs for each reporting year. Routine baseline scenario adjustments have not been included in this project example. An example of a routine baseline scenario adjustment might be the application of a correction factor to the baseline fuel use rates to reflect changes in year to year activity.

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9.3.3 Quantify Project Activity The measurement requirements for the project are to determine, for each reporting period, the actual value of the significant variables used to calculate project GHG emissions. For this example project, the units within the target population that have demonstrated adoption of the technology are measured. Ideally, this is done by measuring the entire set of adopters through the use of such methods as vendor accounting records, a central registration log, or validated adoption certificates or forms. If this is not possible, then a sample survey should be designed to first estimate the proportion of adopters from a target population within a certain acceptable limit of accuracy and then this proportion is applied to the known target population to calculate an absolute number of technology adopters. Direct measurement of the number of adopters determine the actual adoption rates by calculation (adopters as a fraction of the target population). The sample survey approach reverses this calculation, since the proportion of adopters is estimated first. The actual adoption rates can be compared to the adoption rate objective that was established in the Project Plan. The measurement of the number of adopters and the calculation of the actual adoption rates is shown in the table above. The following is a useful supporting document that provides details regarding methods for determining activity values, especially for projects involving electricity savings.

• Ontario Power Authority, Independent Electricity Service Operator (IESO) (2015) Evaluation, Measurement and Verification (EM&V) Protocols. V2.0. Available at: https://cms.powerauthority.on.ca/sites/default/files/conservation/Conservation-First-EMandV-Protocols-and-Requirements-2015-2020-Apr29-2015.pdf

9.3.4 Actual GHG Reductions The actual GHG reductions achieved by the project are calculated for each reporting period during the project based on measured performance. The baseline scenario GHGs are calculated based on the actual activity levels measured (or estimated) for the project and the various applicable baseline scenario assumptions. The baseline scenario GHGs are the product of the measured actual number of adopters and the (revised) declining baseline fuelcycle GHG emission rates established above. The results are shown in the table above. The Project GHGs are calculated based on the actual activity levels measured (or estimated) for the Project and the various applicable project assumptions. In the project, changes may occur to the expected electricity or fuel use rates as new information is gathered. Any changes in the project condition occurring after the Project Plan was developed should be accounted for when actual Project GHGs are calculated. The actual GHG reductions are calculated as the difference between Baseline Scenario GHGs and Project GHGs for any reporting period. The results are shown in the table above.

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A management review of the results would be performed on the results as they are developed. It would show that changes in various factors (population growth, GHG baseline rates, and project GHG rates) have resulted in actual GHG reductions that are slightly lower than expected GHG reductions.

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Table 18: Revised BAU GHG Forecast

HistYr RefYr PY1 PY2 PY3 PY4 PY5 PY6 PY7 BAU Target Population (units) 19,417 20,000 20,600 21,321 22,067 22,840 23,639 24,466 25,323 Actual Population Growth Rate (%/y) 3.0% 3.0% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% 3.5% Baseline GHG Emission Rate (tCO2e/unit/y) 4.50 4.50 4.41 4.32 4.24 4.15 4.07 3.99 3.91 Revised BAU GHG Forecast (tCO2e) 87,379 90,000 90,846 92,145 93,463 94,799 96,155 97,530 98,925

Table 19: GHG Project Scope - Actual Technology Adopters and Calculated Adoption Rates

HistYr RefYr PY1 PY2 PY3 PY4 PY5 PY6 PY7 BAU Target Population (units) 19,417 20,000 20,600 21,321 22,067 22,840 23,639 24,466 25,323 Measured Technology Adopters 0 0 1,442 3,198 6,620 15,988 21,275 23,243 24,563 Calculated Adoption Rate (cumulative %) 0% 0% 7% 15% 30% 70% 90% 95% 97%

Table 20: Calculation of Actual GHG Reductions and Actual GHG Performance

HistYear RefYear PY1 PY2 PY3 PY4 PY5 PY6 PY7 Actual Technology Adopters (cumulative) 0 0 1,442 3,198 6,620 15,988 21,275 23,243 24,563 Actual Direct Baseline GHG Rate (tCO2e/unit/y) 3.90 3.90 3.82 3.74 3.67 3.59 3.52 3.45 3.38 Actual Indirect Baseline GHG Rate (tCO2e/unit/y) 0.60 0.60 0.59 0.58 0.57 0.56 0.55 0.53 0.52 Actual Ontario Fuelcycle Baseline GHG Rate (tCO2e/unit/y) 4.50 4.50 4.41 4.32 4.24 4.15 4.07 3.99 3.91

Actual Baseline Scenario GHGs (tCO2e) 0 0 6,359 13,821 28,038 66,361 86,539 92,653 95,957 Actual Direct Project GHG Rate (tCO2e/unit/y) 0.19 0.19 0.19 0.19 0.19 0.19 0.19 0.19 0.19 Actual Indirect Ontario Project GHG Rate (tCO2e/unit/y) 0.21 0.21 0.21 0.21 0.21 0.21 0.21 0.21 0.21

Actual Ontario Fuelcycle Project GHG Rate (tCO2e/unit/y) 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40

Actual Project Scenario GHGs (tCO2e) 0 0 572 1,268 2,626 6,341 8,438 9,219 9,742 Actual GHG Reductions (tCO2e) 0 0 5,787 12,553 25,412 60,020 78,101 83,435 86,215 Actual GHG Performance (tCO2e) (Revised BAU Forecast - Actual GHG Reductions) 87,379 90,000 85,059 79,592 68,050 34,780 18,054 14,095 12,710

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Figure 6: Project Planning - Sample Projected GHG Reductions

Figure 7: Project Implementation - Sample Actual GHG Reductions

0

20000

40000

60000

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HistY RefY PY1 PY2 PY3 PY4 PY5 PY6 PY7

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9.3.5 Actual GHG Performance Once the actual GHG reductions from a project have been calculated, an actual GHG performance time series can be prepared based on the difference between the revised BAU GHG forecast and the actual GHG reductions from a project. If more than one project has been applied to a target population, the actual GHG forecast would have to account for all actual GHG reductions from these projects. The management review process is an on-going comparison of actual GHG performance to the projected GHG forecast established in the project planning phase. This is only one method of estimating the actual GHG performance for a target population. Alternative methods include on-going analysis of top-down GHG inventories or other bottom-up methods to estimate the GHG activities within the segments within a target population.

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10. Appendix D - Survey Sampling and Statistical Analysis

When actual measurement of the parameters of a target population that will adopt, or have adopted, a technology is not possible, then survey sampling can be used as a tool to provide an estimate of these desired values. The common objectives of survey sampling are to estimate one or more of three general parameters about a target population: • population mean (µ); • population total (τ ); and • population proportion (p). The following guidance for survey sampling has been extracted and summarized from relevant sections of a standard statistics textbook.51

10.1 Population Mean The population mean (µ) is used to estimate a single value that characterizes a variable about a population. An example might be the estimation of the mean fuel volume use rate within a target population. 10.1.1 Population Mean Formula The standard statistical formula for the estimation of a population mean is provided by:

x = nxiå

where: xi = the value of each sampling unit; n = the number of sampling units When the sample size (n) is large compared to the population (N) (i.e. typically > 1% of population), the standard errors of the estimators of the population mean (µ) and population proportion (p) should be multiplied by the Finite Population Correction Factor:

FPCF = NnN -

51 McClave, J.T. and Benson, P.G (1982), Statistics for Business and Economics, Second Edition, Dellen Publishing, San Francisco.

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10.1.2 Population Mean 95% Confidence Interval Formula At a 95% confidence level (where α=5% and zα/2 ≈ 1.96), the estimated bound on the error of estimation (corrected for finite population) is:

!".$%σ' ≈ 1.96,-

. − -.

where:

s = sample standard deviation = ( )1

2

-

-ån

xxi

N = number of sampling units in the population n = number of sampling units in the sample Therefore, an approximation of the 95% confidence interval for the population mean is:

012$% = 4 ± %5.2z σ' ≈ 4 ± 1.96,-

. − -.

10.1.3 Population Mean Sample Size Formula The 95% confidence interval for the population mean (without the Finite Population Correction Factor) is: 012$% = 4 ± %5.2z σ' ≈ 4 ± 1.96

,-

If the Target Error bound on the error of estimation (the desired uncertainty) on a population mean is represented by the percentage TE (e.g. TE=5% of the population mean), then solving for the sample size, n, produces the following formula:

296.1÷øö

çèæ

××

=TExs

n

10.1.4 Population Mean Example One hundred (100) emitter units in a target population of 20,000 emitter units were sampled to determine annual gasoline volume use. The sum of all the annual gasoline volumes recorded (Σxi) in the survey sample was 12,000 L per year. The standard deviation (s) of all 100 sample results was calculated as 500 L per year. The following parameters can be calculated from this information:

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Population Mean: x = L/unit/y200,1100000,12

==ånxi

95% Confidence Interval:

012$% = 4 ± 1.96,-= 1,200 ± 1.96

500100

= 1,200 ± 98<=>?@, = 1,200 ± 8.2%

Sample Size Required to achieve Target Error of ±5%:

unitsemitter267%5200,150096.196.1

22

=÷ø

öçè

æ××

=÷øö

çèæ

××

=TExs

n

It should be noted that a minimum sample size of 30 sampling units is recommended because the Central Limit Theorem states that a sampling distribution of this size will approximate a normal distribution.

10.2 Population Total The population total (τ ) is used to estimate the total activity that might occur within a population. An example might be the estimation of the total fuel use volume in a target population. An estimator of the population total (τ) is provided by (τ ) based on a known total number of units in a population and the measured sample mean of the population. 10.2.1 Population Total Formula The standard statistical formula for the estimation of a population total is provided by: τ = xN where: N = number of sampling units in the population n = number of sampling units in the sample x = the sample mean 10.2.2 Population Total 95% Confidence Level Formula At a 95% confidence level (where α=5% and zα/2 ≈ 2.0), the estimated bound on the error of estimation (corrected for finite population) is:

z".$%σ C ≈ 2 ." ∙,"

-∙. − -.

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where:

s2 = the sample variance = ( )1x 2

-

-ånxi

Therefore, an approximation of the 95% confidence interval for the population total is:

012$% = τ ± %5.2z σC ≈ τ± 1.96 ." ∙,"

-∙. − -.

10.2.3 Population Total Sample Size Formula The 95% confidence interval for the population total (without the Finite Population Correction Factor) is:

012$% = τ ± %5.2z σC ≈ τ± 1.96 ." ∙,"

-

If the Target Error bound on the error of estimation on a population total is represented by the percentage TE (e.g. TE=5% of the population total), then solving for the sample size, n, produces the following formula:

- =1.96 ∙ . ∙ ,F ∙ GH

"

10.2.4 Population Total Example Based on the previous example, the following parameters can be calculated from this information: Population Total: τ = Litres000,000,24200,1000,20 =×=xN 95% Confidence Interval:

012$% = τ± 1.96 ." ∙,"

-= 24.0J ± 1.96 20,000" ∙

500"

100= 24.0J ± 1.96J

Sample Size Required to achieve Target Error of ±5%:

- =1.96 ∙ . ∙ ,F ∙ GH

"

=1.96 ∙ 20,000 ∙ 50024,000,000 ∙ 5%

"

= 267emitterunits

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10.3 Population Proportion The population proportion (p) is used to estimate the fraction of a population that has some attribute. An example might be the estimation of the proportion of a target population that has adopted a specific technology. An estimator of the population proportion (p) is provided by provided by (p), based on the fraction of a sample that has a specific attribute. 10.3.1 Population Proportion Formula The standard statistical formula for the estimation of a population proportion is:

p = nx

where x is the number of sampling units that possess a specific attribute amongst n sampling units that were sampled. 10.3.2 Population Proportion 95% Confidence Level Formula At a 95% confidence level (where α=5% and zα/2 ≈ 2), the estimated bound on the error of estimation (corrected for finite population) is:

z".$%σ T ≅ 1.96V(1 − V)

-∙. − -.

where: N = number of sampling units in the population n = number of sampling units in the sample Therefore, the 95% confidence interval for the population proportion is:

012$% = p ± %5.2z σT ≈ V± 1.96V(1 − V)

-∙. − -.

10.3.3 Population Proportion Sample Size Formula The 95% confidence interval for the population proportion (without the Finite Population Correction Factor) is:

012$% = p ± %5.2z σT ≈ V± 1.96V(1 − V)

-

If the Target Error bound on the error of estimation on a population proportion is represented by the percentage TE (e.g. TE=5% of the population proportion), then solving for the sample size, n, produces the following formula:

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- =1.96V ∙ GH

"

∙ V ∙ 1 − V

10.3.4 Population Proportion Example Based on the information in the previous example, a survey of 100 emitter units in project year 1 determined that 10 emitter units had adopted the technology. The following parameters can be calculated from this information:

Population Proportion: p = %101.010010

===nx

95% Confidence Limit:

012$% = V ± 1.96V(1 − V)

-= 0.1 ± 1.96 ∙

0.1 ∙ 1 − 0.1100

= 0.1 ± 0.06 = 0.1 ± 59%

Sample Size Required to achieve Target Error of ±5%:

- =1.96V ∙ GH

"

∙ V ∙ 1 − V = 13,830emitterunits

At low levels of adoption, the number of samples required to establish an accurate (±5%) estimate of adoption rate is very high, but this number falls as levels of adoption increase. Please see the following table that shows the number of samples (n) required to achieve a 5% target error at various levels of adoption (p). No. of Samples Taken (n) 100 100 100 100 100 100 100 No. of Samples having attribute (x) 10 20 30 50 70 80 90 Population Proportion (p) (fraction) 0.1 0.2 0.3 0.5 0.7 0.8 0.9 95% Confidence Limit (CI95%; fraction) 0.06 0.08 0.09 0.10 0.09 0.08 0.06 Estimated Error Bound (±%) 59% 39% 30% 20% 13% 10% 7% Sample Size (for 5% Target Error) 13,830 6,147 3,585 1,537 659 384 171

10.4 Stratified Sampling Stratified random sampling is a sampling method the can be used when a total population has more than one relatively homogenous segments (“strata”). Estimates for each homogeneous strata have lower variability and can reduce overall sampling costs. Stratified sampling theory is not provided here.

10.5 Cluster Sampling Cluster sampling is cost-effective way of reducing sampling efforts by focusing sampling on clusters of elements. Cluster sampling theory is not provided here.

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11. Appendix E – References and Bibliography

• Alberta Environment and Parks (2008) Offset Credit Project Guidance Document • Alberta Environment and Parks (2013), Sample Offset Project Plan Template; • http://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-emitters-

regulation/documents/OffsetProjectPlan-Feb2013.pdfhttp://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-emitters-regulation/documents/OffsetProjectPlan-Feb2013.pdf

• Alberta Environment and Parks (2013), Sample Offset Project Report Template; • http://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-emitters-

regulation/documents/OffsetProjectReport-Feb2013.pdf • California Air Pollution Control Officers Association (2010) Quantifying

Greenhouse Gas Mitigation Measures. A Resource for Local Government to Assess Emission Reductions from Greenhouse Gas Mitigation Measures

• Entreprises pour l'Environnement (EpE) (2013) Protocol for the quantification of greenhouse gas emissions from waste management activities

• Environment and Climate Change Canada (2015) Facility Greenhouse Gas Emissions Reporting - Technical Guidance on Reporting Greenhouse Gas Emissions

• Environment and Climate Change Canada (2017) National Inventory Report 1990-2015: Greenhouse Gas Sources and Sinks in Canada, https://www.ec.gc.ca/ges-ghg/default.asp?lang=En&n=83A34A7A-1

• Environment and Climate Change Canada (2017) National Inventory Report 1990-2015: Greenhouse Gas Sources and Sinks in Canada

• Environmental Defense Fund (2014) Crediting Greenhouse Gas Emission Reductions from Energy Efficiency Investments

• European Network of Construction Companies for Research and Development (ENCORD) (2012) Construction CO2e Measurement Protocol: A Guide to reporting against the Green House Gas Protocol for construction companies

• Federation of Canadian Municipalities (undated) Model Climate Change Action Plan: A template for completing a greenhouse gas reduction plan in the Partners for Climate Protection

• GHGenius: A Model for Lifecycle Assessment of Transportation Fuels. https://ghgenius.ca/

• Government of Alberta (2013) Technical Guidance for Offset Project Developers. http://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-emitters-regulation/documents/TechnicalGuideOffsetProject-Feb2013.pdf

• Government of Manitoba, (undated) Manitoba Guide to Developing Greenhouse Gas Emissions Reduction Proxies

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• Government of Ontario (2016) Climate Change Action Plan. https://www.ontario.ca/page/climate-change-action-plan

• Government of Ontario (2016) Ontario Climate Change Mitigation and Low-carbon Economy Act, 2016 and Schedule 1 of Ontario Regulation 143/16

• Government of Ontario (2016) Ontario's Climate Change Strategy. https://www.ontario.ca/page/climate-change-strategy

• Government of Ontario (July 2012) Regulatory Impact Analysis: A Practical Guide to Assessing the Costs and Benefits of Regulatory Proposals

• Government of Ontario, Environmental Protection Act, Ontario Regulation 452/09, Greenhouse Gas Emissions Reporting - Consolidation Period - From January 1, 2016 to the e-Laws Currency Date - Last Amendment - O. Reg. 398/15.

• Government of Quebec, Regulation respecting mandatory reporting of certain emissions of contaminants into the atmosphere

• Government of the United Kingdom, Valuation of energy use and greenhouse gas (GHG) emissions

• Intergovernmental Panel on Climate Change (2006) Guidelines for National Greenhouse Gas Inventories

• International Standards Organization (2006) ISO 14064 Part 1: Specification with guidance at the organizational level for quantification and reporting of greenhouse gas emissions and removals, First Edition.

• International Standards Organization (2006) ISO 14064-2:2006. 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, (2006) ISO 14064 Part 3: Specification with guidance for the validation and verification of greenhouse gas assertions

• IPCC (2007). IPCC Fourth Assessment Report (AR4): Climate Change 2007. Working Group I: The Physical Science Basis; Table 2.14; http://www.ipcc.ch/publications_and_data/ar4/wg1/en/ch2s2?10?2.html

• IPCC (2006) 2006 IPCC Guidelines for National Greenhouse Gas Inventories, Volume 1: General Guidance and Reporting. Chapter 3: Uncertainties

• IPCC (2013) IPCC Fifth Assessment Report (AR5): Climate Change 2013 - The Physical Science Basis, Chapter 8: Anthropogenic and Natural Radiative Forcing.

• McClave, J.T. and Benson, P.G (1982), Statistics for Business and Economics, Second Edition, Dellen Publishing, San Francisco.

• National Energy Board (2016) Canada's Energy Future. https://www.neb-one.gc.ca/nrg/ntgrtd/ftr/index-eng.html

• National Energy Board (2016) Marketable Natural Gas Production in Canada. https://www.neb-one.gc.ca/nrg/sttstc/ntrlgs/stt/mrktblntrlgsprdctn-eng.html

• Ontario Ministry of the Environment and Climate Change (May, 2016) Guideline for Quantification, Reporting and Verification of Greenhouse Gas Emissions - Effective January, 2017.

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• Ontario Power Authority, Independent Electricity Service Operator (IESO) (2015) Evaluation, Measurement and Verification (EM&V) Protocols. V2.0. https://cms.powerauthority.on.ca/sites/default/files/conservation/Conservation-First-EMandV-Protocols-and-Requirements-2015-2020-Apr29-2015.pdfPacific Carbon Trust (2012) Guidance Document to the BC Emission Offsets Regulation

• Statistics Canada (annual) Report on Energy Supply and Demand in Canada (Report 57-003)

• US Environmental Protection Agency (EPA), Mandatory Reporting of Greenhouse Gases, https://www.epa.gov/ghgreporting

• US EPA (2005) Design Principles: Guide to Developing Greenhouse Gas Emissions Reduction Proxies

• US EPA, Transportation and Climate Division Office of Transportation and Air Quality (2014) Estimating Emission Reductions from Travel Efficiency Strategies

• Western Climate Initiative (December, 2010) Final Essential Requirements for Mandatory Reporting - Amended for Canadian Harmonization.

• Western Climate Initiative (December, 2011) Final Essential Requirements of Mandatory Reporting - 2011 Amendments for Harmonization of Reporting in Canadian Jurisdictions

• Western Climate Initiative (WCI, 2010), Offset System Essential Elements Final Recommendations Paper, July 2010.

• World Business Council for Sustainable Development (WBCSD) and World Resources Institute (WRI), (2003), The GHG Protocol for Project Accounting.

• World Business Council for Sustainable Development (WBCSD) and World Resources Institute (WRI), (2004), The GHG Protocol: A Corporate Accounting and Reporting Standard.

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12. Appendix F - Databases There are a number of datasets available to assist OPS ministries. These can provide:

• Energy, fuel data; • Emission factors and emission rates; • Activity data; and • Economic data and forecasts.

Table 21: Useful Databases Statistics Canada https://www.canada.ca/en/statistics-canada.html • CANSIM database http://www5.statcan.gc.ca/cansim/ Natural Resources Canada http://www.nrcan.gc.ca/home • National Energy Use

Database http://oee.nrcan.gc.ca/corporate/statistics/neud/dpa/menus/trends/comprehensive_tables/list.cfm

§ Comprehensive Energy Use Database

These tables contain most of the energy, GHG, activity and price data used by the Office of Energy Efficiency for its analysis. The data is presented by region (and for some sectors, by province) as well as for Canada.

§ Survey of Household Energy Use (SHEU-2011) Data Tables

These tables contain representative data on the energy and physical characteristics of private dwellings in Canada and on the household use of energy resources for the SHEU target population

§ Energy Consumption of Major Household Appliances Shipped in Canada, 1990-2014 Data Tables

These tables outline changes in the energy consumption and other characteristics of major household appliances shipped in Canada between 1990 and 2014

§ Industrial Consumption of Energy (ICE) Survey – Energy Use in the Canadian Manufacturing Sector, 1995-2014 Data Tables

These tables provide details of energy consumption and energy intensity for the Manufacturing sector as a whole, as well as for the seven most energy-consuming subsectors. They also compare energy sources used in the sector from 1995 to 2014.

§ Survey of Commercial and Institutional Energy Use (SCIEU) - Buildings 2009 Data Tables

These tables provide estimates of the number of buildings, floor space, energy consumption and energy intensity at a disaggregated level for the target population of the SCIEU survey.

§ Directory of Energy Efficiency and Alternative Energy Programs in Canada –

This Programs Directory provides information on the energy efficiency and alternative energy programs of the Canadian, provincial and territorial governments, major electric and gas utilities and major municipalities in Canada.

• GHGenius

A lifecycle (and fuelcycle) analysis model for transportation fuels. http://www.nrcan.gc.ca/energy/efficiency/transportation/7597

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National Energy Board Historical energy data and forecasts. Transport Canada https://www.neb-one.gc.ca/index-eng.html Canadian Industrial Energy End-Use Data and Analysis Centre (CIEEDAC)

Industrial electricity and fuel use, production, GHG emissions, economic data and indicators. Reports. http://www.sfu.ca/cieedac.html

• Canadian Renewable Energy Database

Contains information on over 2100 individual renewable energy sources

• Canadian Cogeneration Database

• District Energy

Identifies size (capacity, MWe), location and thermal host of industrial cogeneration facilities in Canada as well as commercial / institutional and district energy cogeneration systems.

US EPA: AP-42: Compilation of Air Emission Factors

Emissions factors, quantification guidance, tools (models). https://www.epa.gov/air-emissions-factors-and-quantification/ap-42-compilation-air-emission-factors

Environment and Climate Change Canada

Emissions factors, quantification guidance, tools, reports. https://www.ec.gc.ca/GES-GHG/default.asp?lang=En&n=1357A041-1

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13. Appendix G - Available Offset Protocols

Some North American jurisdictions and other organizations have developed, or are in the process of developing, GHG quantification protocols for offset projects.

13.1 Alberta Offset Protocols

Table 22: Alberta Offset Protocols

Alberta Project Type Title / Subject Matter Version Date Status Agriculture - Soil Conservation Cropping v1.0 Apr-12 Active Agriculture - Soil Agriculture N2O Reductions v2.0 Sep-15 Active Agriculture - Livestock Beef Cattle Reduced Age at Harvest v2.0 Jul-11 Active Agriculture - Livestock Beef Cattle Low Residual Feed Intake v1.0 Apr-12 Active Agriculture - Livestock Dairy Cattle Feed Emission Reduction v3.0 Feb-16 Active Agriculture - Materials Ag. Materials Anaerobic Decomposition v1.0 Sep-07 Suspended* Energy Efficiency Energy Efficiency v1.0 Sep-07 Suspended* Energy Efficiency Engine Fuel Management/Vent Gas Capture v1.0 Oct-09 Suspended* Energy Efficiency Waste Heat Recovery v1.0 Sep-07 Suspended* Energy Efficiency Waste Heat Recovery (streamlined) v1.0 Sep-07 Suspended* Energy Efficiency Energy Efficiency in Buildings v1.0 Feb-10 Suspended* Fuel Switching Drilling Rig Power Conversion v1.0 Feb-12 Suspended* Forestry Afforestation Retracted Forestry Forest Harvest Practice Changes v1.0 Jun-11 Suspended* Geological Sequestr'n Enhanced Oil Recovery v1.0 Oct-07 Retracted Geological Sequestr'n Enhanced Oil Recovery (streamlined) v1.0 Oct-07 Retracted Geological Sequestr'n CO2 Capture & Permanent Storage v1.0 Jun-15 Active Waste Management Waste Aerobic Composting v2.0 Jan-17 Suspended* Waste Management Landfill Aerobic Bioreactor v2.0 Sep-16 Active Waste Management Landfill Gas Capture and Combustion v1.0 Sep-07 Suspended* Waste Management Waste Thermal Conversion to Biogas v1.0 Nov-08 Suspended* Waste Management Wastewater Anaerobic Treatment v1.0 May-09 Suspended* Renewable Energy Biofuel Production and Usage v2.0 Oct-14 Active Renewable Energy Biomass Waste Combustion Energy v2.0 Apr-14 Suspended* Renewable Energy Run-of-River or Reservoir EPG v1.0 May-08 Active Renewable Energy Solar EPG v1.0 May-08 Active Renewable Energy Wind-Powered EPG v1.0 May-08 Active Renewable Energy Distributed Renewable EPG (<1MW) v1.0 Mar-13 Active Transportation Gravel Road Rehabilitation v1.0 May-08 Suspended* Transportation Fuel Switching in Mobile Equipment v1.0 Feb-13 Suspended* Industrial N2O Abatement - Nitric Acid Production v1.0 Oct-09 Active Industrial Hot Mix Asphalt Production & Use v1.0 Oct-09 Suspended* Industrial Solution Gas Conservation v1.0 Feb-12 Active Industrial Pneumatic Devices v1.0 Jan-17 Active

Source: Alberta Environment and Parks, Offset Credit System Protocols. http://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-emitters-regulation/offset-credit-system-protocols.aspx. * Temporarily suspended to review potential carbon tax double-counting

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13.2 California Offset Protocols

Table 23: California Offset Protocols California Air Resources Board

Project Type Title / Subject Matter Version Date Fuel Use Mine Methane Capture v1.1 Oct-12 Forestry U.S. Forest v3.3 Nov-12 Ozone Depleting Substances Ozone Depleting Substances v2.0 Jun-12 Agriculture - Soil Rice Cultivation v1.1 Jun-13 Forestry Urban Forest Projects v1.0 Jun-14 Agriculture - Livestock Livestock v4.0 Jan-13

Source: California Air Resources Board, Compliance Offset Program, http://www.arb.ca.gov/cc/capandtrade/protocols/

13.3 British Columbia Offset Protocols

Table 24: British Columbia Offset Protocols British Columbia

Project Type Title / Subject Matter Version Date Fuel Use Fuel Switching v3.0D May-16 Forestry Forest Carbon Sequestration v1.0 Jan-12 Waste Management Landfill Gas Management v1.0 Mar-13 Energy Efficiency Green Building v1.0 Jan-13 Energy Efficiency Greenhouse Growers v1.0 Oct-12 Industrial O&G Meta - Introduction v1.1 Mar-11 Industrial O&G Meta - Electrification v1.1 Mar-11 Industrial O&G Meta - Engine Fuel Management v1.1 Mar-11 Industrial O&G Meta - Gas Pipeline Blowdown v1.1 Apr-11 Industrial O&G Meta - Pneumatic Device Bleed Rate v1.1 Mar-11 Industrial O&G Meta - Pneumatic Device Gas-to-Air v1.1 Mar-11 Industrial O&G Meta - Pump Conversion v1.1 Mar-11 Industrial O&G Meta - Vent Gas Capture v1.1 Mar-11

Source: Pacific Carbon Trust https://www.biv.com/article/2013/11/pacific-carbon-trust-to-be-shut-down/

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13.4 Ontario/Quebec Offset Protocols (Planned)

Table 25: Ontario/Quebec Offset Protocols (Planned) Ontario/Quebec (Planned)

Project Type Title / Subject Matter Date Agriculture - Soil N2O Reductions from Fertilizer Management 2018 Agriculture - Livestock

Emission Reductions from Livestock 2018

Agriculture - Soil Conservation Cropping 2018 Forestry/Land Use Forest (reforestation, avoided conversion, mgmt) 2018 Forestry/Land Use Afforestation 2018 Forestry/Land Use Urban Forest 2018 Forestry/Land Use Grassland 2018 Waste Management Organic Waste Digestion 2018 Waste Management Organic Waste Management 2018 Waste Management Landfill Gas Capture and Destruction 2017 Industrial Mine Methane Capture and Destruction 2017 ODS ODS Capture and Destruction 2017 ODS Refrigeration Systems 2018

13.5 Climate Action Reserve Offset Protocols

Table 26: Climate Action Reserve Offset Protocols

Project Type Title / Subject Matter Date Agriculture - Soil Nitrogen Management Jan-13 Agriculture - Soil Rice Cultivation Jun-13 Agriculture - Livestock U.S. Livestock Jan-13 Forestry Forest Nov-12 Forestry Grassland Jan-17 Forestry Urban Forest Management Jun-14 Forestry Urban Tree Planting Jun-14 Waste Management U.S. Landfill Jun-11 Waste Management Organic Waste Composting Jul-13 Waste Management Organic Waste Digestion Jan-14 ODS Ozone Depleting Substances Jun-12 Industrial - Fertilizers Nitric Acid Production Jun-16 Fugitives Coal Mine Methane Oct-12