Assessing uncertainty under NGER

23 Jun 2010Archived News Climate Change Matters

Uncertainty assessments will be an NGER compliance requirement from 2010/11 reporting period.

Following a two year grace period, reporting an ‘uncertainty level’ for your Scope 1 emissions total (not Scope 2 – electricity and / or steam) will be a National Greenhouse and Energy Reporting (NGER) compliance requirement from the 2010/2011 reporting period.

Guidance for performing uncertainty assessment has been provided within the NGER (Measurement) Determination for Method 1 emissions calculations and reporters are directed to the Greenhouse Gas Protocol Guidance on Uncertainty Assessment if performing higher order emissions calculations. The DCCEE has recently advised that a field will be provided in the Online System for Comprehensive Activity Data Reporting (OSCAR) for organisations to enter their calculated corporate group uncertainty level.

The uncertainty assessment process can vary in complexity, depending upon facility structure and the nature of your data quality and emissions estimation calculations, particularly in cases where higher order methods are being applied.

What are uncertainty levels?

The result from the uncertainty assessment process is an overall uncertainty level for the corporate group, expressed as +/-%. This figure is reached through aggregating all uncertainties from the emission source level within each facility and then aggregating facility-level uncertainty levels up to the corporate group level.

It is an NGER requirement that reporters have 95% confidence in the uncertainty level that they calculate. This is commonly misinterpreted to mean that reporters are obliged to have uncertainty levels of +/-5% when in fact, an organisation is compliant if it has an uncertainty level of +/- 150%, as long as it has 95% confidence in that calculated figure.

Energetics has worked with many clients to assist with the completion of uncertainty assessments as part of their applications for assistance under Emissions Intensive Trade Exposed (EITE) scheme or due to early preparation for this aspect of NGER compliance. Throughout this process Energetics has observed clients experiencing additional benefits from performing uncertainty assessments, aside from just meeting government requirements. We have highlighted these additional benefits below.

Uncertainty Assessment prepares you for external audit

Performing an uncertainty assessment requires reporters to closely examine all Scope 1 emissions calculations. This allows for detailed cross checking of calculations against NGER requirements and confirmation of all measurement methods (measurement criteria) for energy consumption.

Errors and misinterpretations can often be identified internally as uncertainty assessment is rolled out and it allows for additional assurance prior to external NGER audit. In addition, the uncertainty assessment process can assist in reducing the length of external audit by correcting errors and oversights pre-audit.

Energetics recommends that uncertainty assessments comprise part of internal audit for 2009/2010, in preparation for external audit and 2010/2011 compliance requirements.

Uncertainty assessment allows corporations to prioritise improvements in emissions measurement

Energetics has observed that with the completion of corporate group uncertainty assessments, the resulting information can be useful for identifying and prioritising areas for improvement in emissions measurement.

To illustrate, Figure 1 below presents the emissions totals of five facilities within a corporate group and the associated uncertainty levels for each of those facilities, expressed via error bars.

It is clear that Facility 2 has a considerably large uncertainty range, with the true Scope 1 emissions value sitting between 350,000 tCO2-e and 850,000 tCO2-e. Therefore the greatest opportunities for increasing the accuracy of the corporate group emissions total through improved measurement are likely to sit within that facility. Note however, that improved accuracy could lead to either an increase or decrease of reported emissions and this should be tested and understood prior to the roll out of initiatives to improve measurement.

Opportunities to improve measurement by employing higher order methods and steering away from the default factors that contain numerous assumptions (in particular those for industrial activities such as oil and gas production and fugitive emissions from open cut coal mining) should also be considered when compiling carbon abatement curves. It does not make sense to undertake extensive abatement activity when an organisation is unsure of its exact emissions inventory.

Uncertainty Assessment provides senior management with greater insight into the quality of emissions datasets prior to sign-off

With the completion and submission of annual NGER data in OSCAR, the CEOs of reporting organisations are then required to sign-off on Part A of the OSCAR output report. Presenting an uncertainty level alongside annual emissions totals can provide senior management with confidence in the accuracy of the dataset of their corporate group. This is particularly useful when communicating with senior personnel without a strong knowledge of emissions accounting principles.

Could uncertainty assessments inform permit liability under an emissions trading scheme?

While there has been no suggestion that uncertainty related to Method 1 measurement might impact on potential carbon liability, there is a genuine question as to the possibility of rewarding organisations for more accurate reporting. For example, is it fair for two reporting organisations with the same emissions total using higher order methods but significantly contrasting uncertainty levels to have the same permit liability, especially if the reporting organisation with the lower uncertainty range has invested in improved emissions measurement?

There are examples under other carbon schemes, such as NSW Greenhouse Gas Abatement Scheme (GGAS), where organisations with accurate data are being financially rewarded. The GGAS scheme assigns a confidence factor to organisations creating Large User Abatement Certificates (LUACs) for sale. If the base data for LUAC creation is comprised of estimates, the LUAC creator is likely to be allocated less certificates for sale than a LUAC creator with a robust dataset.

Conclusion

We know that a price on carbon is likely to arrive in the next 3-5 years however we cannot be sure that uncertainty assessment will inform carbon costs for reporting organisations. However what we can be certain about are the additional benefits, aside from NGER compliance, that can be drawn from uncertainty assessment. There are clear benefits in relation to preparation for external audit, prioritisation of emissions measurement improvements and provision of confidence in annual emissions data to senior management.

By Harriet Kater, Senior Consultant at Energetics 

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