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Testimony: 

Before the Subcommittee on Energy and Environment, Committee on Science 
and Technology, House of Representatives: 

United States Government Accountability Office: 
GAO: 

For Release on Delivery: 
Expected at 10:00 a.m. EST:
Tuesday, February 24, 2009: 

Climate Change Science: 

High Quality Greenhouse Gas Emissions Data are a Cornerstone of 
Programs to Address Climate Change: 

Statement of John Stephenson, Director:
Natural Resources & Environment: 

GAO-09-423T: 

GAO Highlights: 

Highlights of GAO-423T, a testimony to the Subcommittee on Energy and 
Environment, Committee on Science and Technology, House of 
Representatives. 

Why GAO Did This Study: 

Elevated levels of greenhouse gases in the atmosphere and the resulting 
effects on the earth’s climate could have significant impacts in the 
United States and internationally. Potential impacts include a change 
in sea levels, ecosystems, and ice cover. The United States Congress is 
considering proposals to limit greenhouse gas emissions using market-
based mechanisms that would place a price on emissions. Such programs 
would create an economic incentive for regulated entities to limit 
their emissions. 

Limiting greenhouse gas emissions requires an understanding of existing 
emissions as well as the development of a program to monitor, report, 
and verify emissions from entities that might be affected by a future 
regulatory program. A greenhouse gas mitigation program also requires 
an understanding of the numerous emissions sources and methods for 
calculating emissions of six major greenhouse gases—carbon dioxide, 
methane, nitrous oxide, and several synthetic gases. 

This testimony focuses on (1) the importance of quality data on 
emissions in the context of a program intended to limit greenhouse gas 
emissions, and (2) key considerations in developing reliable data on 
greenhouse gas emissions. This testimony is based on several prior GAO 
reports and a review of related literature. 

What GAO Found: 

Quality data on emissions are essential to the development and 
implementation of a system intended to limit greenhouse gas emissions. 
Domestic and international experiences with cap-and-trade programs, 
which place a price on emissions, demonstrate the importance of data 
quality in establishing baselines, monitoring results, and maintaining 
the integrity of a program. Existing cap-and-trade programs establish 
an overall allowable level of emissions and distribute allowances to 
regulated entities, which in turn are able to buy or sell excess 
allowances. The United States has operated a cap-and-trade program to 
limit emissions of sulfur dioxide—a pollutant that contributes to acid 
rain— from electric utilities since 1995. Based on prior GAO work and 
independent studies, the program has benefited from the development of 
an accurate emissions baseline for regulated entities as well as strong 
monitoring, verification, and reporting requirements. The European 
Union has also employed a cap-and-trade system to limit emissions of 
carbon dioxide—the most prevalent greenhouse gas—from electricity 
generators and certain industrial sectors since 2005. In November 2008, 
GAO reported that the program has faced challenges because of a lack of 
facility-specific data on baseline emissions. While the program has 
addressed many of these challenges, the European Union’s experience 
demonstrates the importance of data quality in establishing a market-
based program to limit greenhouse gas emissions. 

Key considerations in developing reliable data on greenhouse gas 
emissions revolve primarily around the purpose and intended use of the 
data. In cases where the data are used to develop or implement a 
program to limit emissions, key considerations include (1) the scope of 
the program across emissions sources, such as whether it affects all 
emission-producing activities or a specified subgroup, and (2) the 
program’s coverage across the six primary greenhouse gases. These 
considerations depend on the point of regulation—namely, whether the 
program affects a small number of “upstream” emitters such as fossil 
fuel producers and importers or instead affects smaller “downstream” 
emitters such as individual industrial facilities. Overall, the 
challenges in establishing baseline emissions data, as well as in 
monitoring, reporting, and verifying ongoing emissions will increase as 
the number of regulated entities, activities, and greenhouse gases 
increase. In some cases, existing emissions inventories (typically at 
the national, state, or industrial sector level) and registries 
(typically at the facility or project level) provide a starting point 
for understanding the challenges in establishing baselines and tracking 
emissions over time. For example, the United States Environmental 
Protection Agency maintains an official U.S. emissions inventory that 
provides national-level emissions data and background on methods to 
calculate emissions. In addition, several inventories and registries 
maintained at the regional level or by private and nonprofit entities 
provide a useful starting point for understanding data needs and 
developing standards for monitoring, reporting, and verification. 

View [hyperlink, http://www.gao.gov/products/GAO-423T] or key 
components. For more information, contact John Stephenson, (202) 512-
3841, stephensonj@gao.gov. 

[End of section] 

Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to discuss the importance of high quality 
data on greenhouse gas emissions in the development and implementation 
of programs intended to address climate change. In recent years, key 
scientific assessments have underscored the importance of reducing or 
stabilizing emissions of carbon dioxide and other greenhouse gases-- 
including methane, nitrous oxide, and several synthetic gases--to 
mitigate the adverse effects of climate change. According to the 
National Academy of Sciences, global temperatures have already risen 
1.4 degrees Fahrenheit since the start of the 20th century--with much 
of this warming occurring in the last 30 years--and temperatures will 
likely rise at least another 2 degrees Fahrenheit, and potentially more 
than 11 degrees, over the next 100 years. Most scientists agree that 
the warming in recent decades has been caused primarily by human 
activities that have increased the amount of greenhouse gases in the 
atmosphere. This warming will cause significant changes in sea level, 
ecosystems, and ice cover, among other impacts. In the Arctic region, 
temperatures have increased almost twice as much as the global average, 
and the landscape is changing rapidly. Figure 1 below identifies the 
contribution of carbon dioxide emissions, the most prevalent greenhouse 
gas, from various sources in the United States. 

Figure 1: Contribution of Various Sources to Total U.S. Carbon Dioxide 
Emissions: 

[Refer to PDF for image] 

This figure is a pie-chart depicting the following data: 

Contribution of Various Sources to Total U.S. Carbon Dioxide Emissions: 

Transportation: 32.3%; 
Coal fired power plants: 31.0%; 
Industrial: 14.4%; 
Other fossil fuel power plants (e.g., natural gas): 6.6%; 
All other: 6.6%; 
Residential: 5.5%; 
Commercial: 3.5%. 

Source: GAO analysis of data Environmental Protection Agency, Inventory 
of U.S. Greenhouse Gas Emissions and Sinks: 1990-2006 (April 2008). 

[End of figure] 

The Congress is currently considering various proposals to address or 
mitigate the adverse effects of climate change, including actions to 
limit greenhouse gas emissions. In the United States, most debate over 
mitigation options generally focuses on market-based programs--such as 
carbon tax or cap-and-trade system--that would create a price on 
emissions of greenhouse gases. For either program, the point of 
regulation may occur (1) "upstream" and cover sources of carbon dioxide 
when they first enter the economy, such as fossil fuel producers; (2) 
"downstream" and cover direct and indirect emitters, such as power 
plants; or (3) at a combination of upstream and downstream sources. 

In general, under a cap-and-trade program, the government would limit 
the overall amount of greenhouse gas emissions from regulated entities. 
These entities would need to hold allowances for their emissions, and 
each allowance would entitle them to emit a specific amount of a 
greenhouse gas. Under such a program, the government could sell the 
allowances, give them away, or some combination of the two. Firms that 
find ways to reduce their carbon dioxide emissions to below their 
allowed limit could sell their excess allowances to firms that emit 
more than their limits, effectively creating a market for allowance 
trading and establishing a price for a ton of emissions based on supply 
and demand. 

Another possible mitigation policy is a tax on greenhouse gas 
emissions. A tax would establish a direct price on emissions by levying 
a charge on every ton of carbon dioxide emitted, creating an economic 
incentive for emitters of greenhouse gases to decrease their emissions 
by, for example, using fossil fuels more efficiently. Unlike a cap-and- 
trade program, a tax would provide more certainty as to the cost of 
emitting greenhouse gas emissions, but the precise effect of the tax in 
reducing emissions would depend on the extent to which producers and 
consumers respond to higher prices. 

In discussing the emissions data required for a climate change 
mitigation program, it also is useful to distinguish between emissions 
inventories and emissions registries. Emissions inventories aggregate 
emissions data on a high level--for example, by state, industrial 
sector or country. Inventories generally account for greenhouse gases 
emitted and removed from the atmosphere over a specific timeframe. An 
emissions registry, on the other hand, is a tool for collecting, 
verifying, and tracking emissions data from individual facilities or 
projects. Because registries can serve a variety of purposes, their 
structures may vary substantially. For example, registries may vary in 
terms of the gases monitored, the timing of data collection, and the 
method of data verification. 

In this context, my testimony today discusses (1) the need for high 
quality data on emissions in the context of a program intended to limit 
greenhouse gas emissions, and (2) key considerations in developing 
reliable data on greenhouse gas emissions. This testimony is based on 
our previously issued work and a review of relevant literature. 
[Footnote 1] 

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

The domestic and international experiences with market-based air 
pollution control and climate change programs demonstrate that 
comprehensive and accurate information on emissions is critical to a 
program's success. Since 1995, the United States has operated a cap- 
and-trade program to limit sulfur dioxide emissions, an air pollutant 
that contributes to acid rain, from electric utilities. Under Title IV 
of the Clean Air Act Amendments of 1990, this program has reduced 
sulfur dioxide emissions by capping total emissions, distributing 
allowances to emit sulfur dioxide through a combination of free 
allocation and auctions, and allowing electric utilities to buy and 
sell allowances as needed to cover their emissions. 

Prior GAO reports and independent studies have shown that strong data 
collection, monitoring, reporting, and verification requirements have 
been central to this program's success. First, with respect to setting 
a baseline level of emissions from regulated entities, the program 
relied on data spanning several years rather than any one year in 
particular. Specifically, it used historical average emissions from 
1985 to 1987 as the baseline against which to measure reductions 
required to begin in 1995 and 2000. The use of historical data reduced 
the covered entities' incentive to increase emissions prior to the 
program's establishment to obtain a greater allowance allocation--the 
baseline years occurred too far before the announcement of the program. 
[Footnote 2] Averaging these data across several years also helped to 
ensure that the baseline reflected changes in emissions that can result 
in a given year due to economic and other conditions. As a result, the 
program achieved greater assurances that it reduced emissions from 
historical levels. In addition, electricity generating units regulated 
under Title IV of the Clean Air Act Amendments of 1990 are required to 
monitor and report their sulfur dioxide, nitrogen oxide, and carbon 
dioxide emissions, among other data. The monitoring and reporting 
requirement has ensured a high degree of compliance and overall program 
integrity. It is important to note that regulating a single pollutant, 
such as sulfur dioxide, from a largely homogeneous population of 
electric utilities is less complicated than monitoring, reporting, and 
verifying emissions of up to six different greenhouse gases from 
diverse types of facilities. 

The European Union also has experience implementing a cap-and-trade 
program that illustrates the importance of quality data in a market- 
based system. As discussed in our November 2008 report, the European 
Union's Emissions Trading Scheme (ETS) relies on a cap-and-trade model 
similar to that used in the U.S. acid rain program.[Footnote 3] The ETS 
began with a learning period--phase I--to gain experience with 
emissions trading from 2005 to 2007. Phase I included approximately 
11,000 electric power and industrial installations in 25 member states, 
which accounted for about half of the EU's carbon dioxide emissions. 

While the first phase provided key lessons about emissions trading, its 
cumulative effect on emissions is uncertain because of a lack of 
baseline emissions data. In the first phase, each EU member state had 
to identify which entities to regulate under the ETS (such as power 
plants, oil refineries, and other manufacturing facilities), obtain 
baseline emissions data for the covered entities, establish an 
emissions cap, and determine how many allowances to distribute to each 
covered entity. At the time, most member states had high-level, 
aggregated estimates on carbon dioxide emissions that accounted for 
sources within and outside the scope of the ETS, but did not have 
baseline data on a facility-specific basis. This facility-specific data 
was necessary to determine both the total emissions released by all 
entities covered under the ETS--a downstream program--as well as how 
many allowances each particular entity would need to cover its annual 
emissions. In addition, some member states had limited authority to 
collect data because they did not yet have in place a national law or 
regulation mandating submission of emissions data. Accordingly, member 
states based their emissions caps and allocation decisions on business- 
as-usual emissions projections and baseline data voluntarily submitted 
by covered entities. 

The inherent uncertainty about business-as-usual projections--i.e., how 
actual emissions compare to the emissions that would have occurred in 
the absence of the ETS--was compounded by the assumptions underlying 
the models used by member states to forecast emissions. The models 
incorporated assumptions about factors that influence business-as- 
usual emissions projections, such as economic growth and relative fuel 
prices. Some member states made relatively optimistic assumptions about 
economic growth, which resulted in higher projections of emissions. As 
such, while the first phase provided key lessons about emissions 
trading, the lack of facility-specific baseline data means its 
cumulative effect on emissions is uncertain. 

The lack of facility-specific baseline data also affected the price of 
ETS allowances. Under the ETS, covered entities are required to report 
emissions data that have been verified by third parties to their member 
states. In 2006, the release of emissions data revealed that the supply 
of allowances--the cap--exceeded the demand, and the allowance price 
collapsed. This illustrated the problems that can arise when a program 
relies on poor baseline emissions data and highlighted the need for 
accurate baseline data in setting an effective emissions cap and 
achieving the intended environmental objectives. See figure 2 for a 
graph displaying the allowance price trends in phase I. 

Figure 2: EUA 2007 Prices: 

[Refer to PDF for image] 

This figure is a line graph depicting the following data in 2007 U.S. 
dollars: 

Date: January 2005: 
Price: $10.40. 

Date: April 2005: 
Price: $19.19. 

Date: July 2005: 
Price: $32.63. 

Date: October 2005: 
Price: $27.72. 

Date: January 2006: 
Price: $27.77. 

Date: April 2006: 
Price: $33.65. 

Date: July 2006: 
Price: $19.93. 

Date: October 2006: 
Price: $14.83. 

Date: January 2007: 
Price: $6.53. 

Date: April 2007: 
Price: $1.16. 

Date: July 2007: 
Price: $0.16. 

Date: October 2007: 
Price: $0.092807 

Date: December 2007: 
Price: $0.03. 

Source: Point Carbon (2007). 

[End of figure] 

As we reported in our prior work on lessons learned from the 
international climate change programs, many experts participating on a 
panel we assembled in cooperation with the National Academy of Sciences 
would not expect the United States to encounter the data challenges 
experienced in the EU's first trading phase because some baseline 
emissions data are already available.[Footnote 4] Several experts also 
stated that existing data on fossil fuel consumption are sufficient to 
establish an emissions trading program. These data can be used to 
estimate economy-wide carbon dioxide emissions as well as facility- 
specific data on carbon dioxide emissions from certain industrial 
sectors, such as power plants that have participated in the US sulfur 
dioxide emissions trading program. 

Collecting and reporting emissions data can also provide benefits 
beyond ensuring the integrity and results achieved through a greenhouse 
gas reduction program. Such data can be used by researchers to analyze 
environmental conditions and trends, create atmospheric and economic 
models, and provide early warning of potential environmental problems. 
It can also help inform and direct environmental management efforts. 
The availability of emissions data may aid strategic planning in the 
private sector, enabling individual firms to make better-informed 
decisions pertaining to capital investments and energy use. Because 
many states, municipalities, and private firms have established 
voluntary climate goals, emissions data will enable these organizations 
to assess progress and better account for performance. Finally, the 
availability of emissions data can provide a consistent and transparent 
basis for comparison between countries, industries, and individual 
firms and enhance public understanding of emissions sources. 

Collecting Reliable Data on Greenhouse Gas Emissions Involves Key 
Considerations. 

Monitoring, reporting, and verification needs for reliable data on 
greenhouse gas emissions depend first on the purpose and intended use 
of the data; for example, the data required for a mandatory program to 
limit emissions may vary substantially from that required for a 
business or governmental entity that voluntarily tracks its emissions 
for public relations or other purposes. 

First, as we have previously reported, the scope of a data collection 
effort--i.e. monitoring, reporting, and verification activities--is 
determined by the program's point of regulation. An upstream mitigation 
program would affect a relatively small population of regulated 
entities, such as fuel importers and producers, whose products could be 
less difficult to measure and report. The quantity of emissions 
associated with those products could be calculated using available 
emissions factors.[Footnote 5] Under a cap-and-trade program, each 
importer or producer would have to hold an allowance for each ton of 
carbon dioxide emissions associated with its products. Alternatively, 
under an emissions tax, each regulated entity would have to pay the 
government a pre-determined amount of money for each ton of emissions 
associated with the combustion of its products. Under either system, 
accurate reporting and verification of emissions would help ensure the 
integrity of the program, and accurate and reliable baseline data would 
be necessary to track progress. 

On the other hand, data collection, monitoring, and verification 
requirements become more substantial under a downstream program because 
it could affect a larger population of regulated entities, potentially 
including industrial facilities, agricultural operations, mobile and 
other fuel combustion sources, and users of refrigerants. Again, each 
regulated entity would need to have accurate and reliable data on 
historical and current emissions, and in some cases, gathering such 
information would be relatively straightforward. For example, 
electricity generating units regulated under Title IV of the Clean Air 
Act Amendments of 1990 are required to monitor and report their carbon 
dioxide emissions. However, other regulated entities may face greater 
challenges in determining their emissions due to limited monitoring 
data or a lack of reliable emissions factors. 

Furthermore, the data requirements for a mitigation program become more 
complex and challenging as the number and types of covered activities 
increases.[Footnote 6] This challenge may be of particular concern in a 
downstream program that covers emissions from diffuse sources. Of the 
six primary greenhouse gases, emissions of some are better 
characterized than others.[Footnote 7] For example, carbon dioxide 
emissions from energy-related activities and cement processing are 
relatively easy to estimate with a high degree of accuracy, whereas 
measuring the emissions of other greenhouse gases stemming from other 
types of activities is more challenging. Specifically, there may be 
insufficient scientific understanding to develop a data collection 
methodology, data may be incomplete or missing, or emissions factors 
may not be sufficiently developed. For instance, nitrous oxide 
emissions occur from the production of caprolactam--a chemical used to 
produce a polymer--but there are currently not enough data on the 
production of caprolactam to estimate these emissions in the United 
States. 

In some cases, existing emissions inventories and registries that have 
been developed for a variety of purposes could help regulated entities 
in meeting potential requirements to establish baseline emissions 
levels and monitor, verify, and report their ongoing emissions. For 
example, the United States Environmental Protection Agency prepares an 
official U.S. greenhouse gas inventory each year to comply with its 
commitments under the United Nations Framework Convention on Climate 
Change (UNFCCC). This inventory provides national information on the 
activities that cause emissions and removals, as well as background on 
the methods used to make the calculations. In addition to the U.S. 
inventory, multi-state emissions reduction programs, such as the 
Regional Greenhouse Gas Initiative, a regulatory program targeting 
reductions in carbon dioxide from electricity generators, have 
developed emissions inventories to guide their programs. Many 
individual states also prepare greenhouse gas inventories using 
guidance provided by EPA. These existing inventories and registries 
could assist in the development of a mandatory emissions reduction 
program. 

Other emissions inventories and registries developed by government and 
private entities also provide a useful starting point for understanding 
data requirements for establishing emissions baselines and monitoring, 
verifying, and reporting greenhouse gas emissions.[Footnote 8] For 
example, the Department of Energy's Voluntary Reporting of Greenhouse 
Gases Program encourages corporations, government agencies, non-profit 
organizations, households, and other private and public entities to 
annually report their greenhouse gas emissions, emission reductions, 
and sequestration activities to a registry using consistent 
standards.[Footnote 9] In addition, EPA's Climate Leaders Program, an 
EPA industry-government partnership that works with companies to 
develop comprehensive climate change strategies, has developed 
standards to measure and monitor emissions reductions from certain 
types of projects. 

Several private and nonprofit efforts also provide data collection 
services. For example, the Greenhouse Gas Protocol, a widely-used 
international accounting system for quantifying and managing greenhouse 
gas emissions, has developed accounting and reporting standards that 
are compatible with most greenhouse gas inventory programs.[Footnote 
10] Another effort, the Climate Registry, is a nonprofit collaboration 
involving U.S. states and Canadian provinces that has developed 
standards to calculate, verify, and report greenhouse gas emissions. 
Both voluntary and mandatory programs can use the Climate Registry's 
standards and publicly report their emissions through its website. 
Other private initiatives, such as the Chicago Climate Exchange (CCX), 
a voluntary emission reduction and trading system, requires 
participants to establish emissions baselines and track their progress 
towards emissions reduction goals. Emissions reductions through CCX 
must be confirmed by an independent, third party verifier. Finally, an 
entire industry of companies exists to help companies track and monitor 
their greenhouse gas emissions and many have developed protocols and 
best practices for measuring baseline emissions levels and tracking 
reductions. Many of these companies also provide external third-party 
verification services to help industrial and other facilities ensure 
the accuracy of their emissions accounting practices. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 
respond to any questions that you or other Members of the Subcommittee 
may have at this time. 

Contact and Staff Acknowledgments: 

Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this statement. For further 
information about this testimony, please contact John Stephenson, 
Director, Natural Resources and Environment at (202) 512-3941 or 
stephensonj@gao.gov. Key contributors to this statement were Michael 
Hix (Assistant Director), Kate Cardamone, Jessica Lemke, Alison 
O'Neill, and Joseph Thompson. Chuck Bausell, Cindy Gilbert, Richard P. 
Johnson, Carol Kolarik, Micah McMillan, and Jeanette Soares also made 
important contributions. 

[End of section] 

Footnotes: 

[1] We conducted our work in accordance with all sections of GAO's 
Quality Assurance Framework that were subject to the objectives of each 
engagement. The framework requires that we plan and perform each 
engagement to obtain sufficient and appropriate evidence to meet our 
stated objectives and to discuss any limitations in our work. We 
believe that the information and data obtained, and the analyses 
conducted, provided a reasonable basis for the findings and conclusions 
in these reports. 

[2] See GAO, Air Pollution: Allowance Trading Offers an Opportunity to 
Reduce Emissions at Less Cost, [hyperlink, 
http://www.gao.gov/products/GAO/RCED-95-30] (Washington, D.C.: Dec. 16, 
1994). 

[3] See GAO, International Climate Change Programs: Lessons Learned 
from the European Union's Emissions Trading Scheme and the Kyoto 
Protocol's Clean Development Mechanism, [hyperlink, 
http://www.gao.gov/products/GAO-09-151] (Washington, D.C.: Nov. 18, 
2008). 

[4] See [hyperlink, http://www.gao.gov/products/GAO-09-151]. 

[5] An emissions factor is a representative value that attempts to 
relate the quantity of a pollutant released to the atmosphere with an 
activity associated with the release of that pollutant. These factors 
are usually expressed as the weight of pollutant divided by a unit 
weight, volume, distance, or duration of the activity emitting the 
pollutant (e.g., kilograms of particulate emitted per megagram of coal 
burned). Such factors facilitate estimation of emissions from various 
sources of air pollution. See, for example, EPA's AP-42 emissions 
factors, available at [hyperlink, http://www.epa.gov/ttn/chief/ap42/]. 

[6] See [hyperlink, http://www.gao.gov/products/GAO-09-151]. 

[7] See U.S. EPA, Inventory of U.S. Greenhouse Gas Emissions and Sinks: 
1990-2006 (April 2008), [hyperlink, 
http://www.epa.gov/climatechange/emissions/usinventoryreport.html]. 

[8] Pub. L. No. 110-161, tit. II, 121 Stat. 1844, 2128 (2007) directs 
EPA to develop a rule requiring mandatory reporting of greenhouse gas 
emissions from all sectors of the economy. 

[9] Sequestration activities refer to biological projects that pull 
carbon dioxide out of the air by, for example, planting trees or 
enhancing the management of agricultural soils, and geological projects 
that capture and store carbon dioxide in underground formations. 

[10] The Greenhouse Gas Protocol was developed by the World Resources 
Institute, a U.S. nongovernmental organization, and the World Business 
Council for Sustainable Development, a Geneva-based coalition of 170 
international companies. 

[End of section] 

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