4.2 National inventories and accounting
4.2.1 National inventories and accounting under the Paris Agreement
Ideally, emission reductions and removals resulting from CCS activities, as well as any leakage or reversals, would be fully reflected in the national GHG inventories. CCS activities relating to fossil fuel combustion and industrial process emissions (e.g. from cement production) reduce emissions while BECCS (if based on sustainable biomass) and DACCS generate removals. National GHG inventories are used as the basis for national GHG accounting, that is, assessing progress towards achieving national mitigation targets, such as Nationally Determined Contributions (NDCs) under the Paris Agreement.
Under the Paris Agreement, Parties that engage in cooperation involving ITMOs must establish an emissions balance reflecting national emissions and removals covered by its NDC, adjusted for any transfers and acquisitions of ITMOs. To avoid double counting, countries that transfer ITMOs cannot count them towards their NDC while countries that acquire ITMOs can count these towards their NDC. At the EU level, the current EU regulation does not enable EU Member States to apply such corresponding adjustments.
Host countries may authorise real, additional and verified emission reductions or removals as ITMOs for various purposes: for use towards an NDC, for international mitigation purposes (e.g., compliance under the Carbon Offsetting and Reduction Scheme for International Aviation) and other purposes (e.g., voluntary offsetting).
In case of ITMOs authorised for other purposes, transfer can be defined as the authorisation, issuance or use of the ITMO. Such ITMOs represent a decrease in global net emissions relative to agreed targets, thus providing a legitimate basis for best-practice voluntary offsetting claims. Carbon credits that are not authorised as ITMOs and represent mitigation that is counted towards the host country’s NDC provide a legitimate basis for best-practice claims about national mitigation contributions by voluntary buyers. The Paris Agreement’s Article 6.4 Mechanism issues Article 6.4 Emission Reductions (A6.4ERs) which may or may not be authorised as ITMOs. Non-authorised A6.4ERs are referred to as “mitigation contribution A6.4ERs” and can be used, inter alia, “for results-based climate finance, domestic mitigation pricing schemes, or domestic price-based measures, for the purpose of contributing to the reduction of emission levels in the host Party”.
4.2.2 Links between national inventories and activity-level MRV, as well as corporate inventories
National GHG inventories must apply good practice methodologies accepted by the Intergovernmental Panel on Climate Change (IPCC). The current IPCC guidelines for national inventories enable to account for emission reductions and removals from CCS activities, including BECCS, to be reflected in the national GHG inventories. The treatment of DACCS in inventory reporting is currently unclear and may require additional IPCC guidance. IPCC guidance provides for three methodological tiers: Tier 1 is the basic method, Tier 2 intermediate and Tier 3 the highest in terms of complexity and data requirements. Generally speaking, Tier 3 captures the greatest level of detail.
Due to the generally higher level of aggregation, national GHG inventories do not necessarily fully capture activity-level emission reductions and removals. Only emission reductions and removals that are reflected in the national inventory help the country in achieving its mitigation target. Thus, countries have an interest in ensuring that emission reductions and removals show up in the national inventory, especially in cases where they are linked to national policies and incentives and/or transferred as ITMOs. This requires alignment between activity-level MRV and national inventory methodologies.
If mitigation outcomes authorised as ITMOs are not fully reflected in the national GHG inventory and are not fully within the scope of the national target, the required adjustments to the emissions balance would make the national target more difficult to achieve compared with the situation where no adjustments would be made. If, however, the underlying mitigation outcomes are truly additional and fully reflected in the national inventory, the required adjustments would not have an impact on the achievement of the national target. Countries may also choose to authorise only part of the mitigation outcomes of a specific activity as ITMOs, for example to reflect the extent to which they show up in the national inventory and/or they are financed by private sources.
Similar considerations of “inventory granularity” apply also to corporate-level GHG inventories. The Greenhouse Gas Protocol has developed a standard for estimating companies’ direct (scope 1) and indirect (scope 2 and scope 3) emissions and is developing guidance for corporate-level accounting and reporting of GHG emissions and removals from land management, land use change, biogenic products, carbon dioxide removal technologies, and related activities in their inventories. The draft guidance also has provisions for avoiding all forms of double counting.
4.2.3 Cross-border and EU considerations
For cross-border CCS activities, where CO2 is captured in one country and stored in another, participating Parties need to cooperate on a robust approach to ensure consistency across their national inventories and accounting and avoid double counting. They also need to agree on accounting and liability provisions in case of any reversals or leakage.
At the EU level, the collective nature of the EU Member States’ pledge to the Paris Agreement, as well as EU-level targets and related regulation for different sectors, warrant further consideration. The EU’s economy-wide pledge to the Paris Agreement consists of distinct EU-level targets for emissions within and outside of the EU ETS, as well as for the LULUCF sector. The EU ETS target is EU-wide, while non-ETS emissions will be allocated between Member States. Forthcoming EU regulation will specify accounting details for these targets.
The EU CCS and EU ETS Directives apply to CCS cases where both the capture and storage take place within the EU and EEA (including Norway and Iceland). As explained in section 2.6, EU ETS installations do not need to surrender allowances for CO2 emissions that are captured, subject to the intent of durable storage within the EU/EEA. In order to make the calculation consistent in the case of several installations together performing the capture, transport and geological storage of CO2, the receiving installation has to add that CO2 to its emissions, before it may again subtract the amount transferred to the next installation or to the storage site. Consequently, the liability for emissions caused by the operation of CO2 capture, transport or storage in the CO2 value-chain is transferred from one ETS installation to the other, without regard to the EEA country they are located in. Any leakage from storage is thus accounted as an emission by the storage operator, and also reported by the country where the storage site is located, in its national GHG inventory.
Each EU ETS installation (operator) will have in place an emissions monitoring plan, approved by the Competent Authority, which forms part of its GHG emission permit. The operator will also need to submit an annual verified emissions report be it from operations or from leakages during the processing or the transport of CO2, if any. An overview of London Protocol requirements in the context of the Legal Framework in the EEA published by the European Commission, presents guidance regarding additional topics identified relevant to CO2 import/export in the EU. In this context, the Commission recommends that the relevant competent authorities of the EEA countries concerned should foresee the exchange of emissions monitoring plans and reports of relevant ETS installations. The Commission, furthermore, notes that information exchanges between the inventory compilers of the respective CO2 import and export EEA countries would allow for alignment of the respective amounts and to avoid cross-border double-counting.
As already mentioned in section 2.6, the EU ETS covers biomass emissions. However, biomass emissions that result from sustainable biomass count as zero and no allowances need to be surrendered for these emissions. Installations that use 100 percent biomass are therefore excluded from the EU ETS. Emissions from non-sustainable biomass are, on the other hand, treated like fossil fuel-based emissions. In its proposal for the revision of the EU ETS Directive, the Commission has proposed that it “should be empowered to adopt implementing acts to specify how to account for the storage of emissions from mixes of zero-rated biomass and biomass that is not from zero-rated sources”.
Accounting is less clear for removals from DACCS and sustainable biomass-based BECCS, since they capture carbon dioxide that does not show up in current national inventories. DACCS is currently outside the scope of EU climate policy.
Since the EU ETS does not cover removals from BECCS, some experts argue that they should be accounted under the so-called effort-sharing regulation, ESR while others argue they should be accounted under the LULUCF sector. Current EU regulation, including the newly adopted regulations and decisions on the ESR, LULUCF and the EU ETS, does not specify where BECCS should be accounted. According to the new ESR, an analysis about the accounting of permanently stored CO2 (“safely and permanently stored carbon removals”) under Union law can be made after the EU carbon removal certification framework (see section 4.1.3) has entered into force. The LULUCF regulation mentions BECCS as a technical CDR method that may be needed to attain the level of GHG removals necessary within the Union to reach net-zero emissions by 2050 and net-negative emissions thereafter. No further guidance concerning the accounting of BECCS can be found in the LULUCF regulation.
It is likely that the issue of BECCS will have a more prominent role in upcoming negotiations on targets and architecture for the EU's climate policy after 2030, which are expected to begin as early as 2023. There are great uncertainties about the architecture of the EU's climate policy after 2030. For example, the Commission has previously proposed to merge LULUCF with the agricultural sector into an AFOLU sector after 2030 and cease having an ESR with national targets. Such a development would mean that an accounting of BECCS in the ESR would only be a solution until 2030. There are also other possible solutions that would be difficult to reconcile with current legislation and architecture, for example a new sector only for different types of removals.