BSS Primer by AX Digital Palette Designs

Baseline Scenario Setting An Introduction on Producing National and Sectoral Baselines

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Imprint As a federally owned enterprise, we support the German Government in achieving its objectives in the field of international cooperation for sustainable development. Items from the named author does not necessarily reflect the views of the publisher. Published by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Philippine Climate Change Commission (CCC)

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http://mitigationpartnership.net/information-matters

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Authors Mary Martha Merilo Sandee Recabar Voltaire Acosta Mara Mendoza

Inputs from Ricardo Energy and Environment (formerly Ricardo-AEA)

Place and date of publication Manila, Philippines 2017

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Baseline Scenario Setting An Introduction on Producing National and Sectoral Baselines

A PUBLICATION BY THE DEUTSCHE GESELLSCHAFT FÃ&#x153;R INTERNATIONALE ZUSAMMENARBEIT (GIZ) GMBH AND THE PHILIPPINE CLIMATE CHANGE COMMISSION (CCC)

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Table of Contents List of Tables......................................................................................................................................................................iv List of Figures...................................................................................................................................................................iv Introduction..........................................................................................................................................................................1 Basic Concepts of Baselines.....................................................................................................................................2 Policy Scenario..........................................................................................................................................................2 Baseline Scenario....................................................................................................................................................2 Baseline Emissions................................................................................................................................................2 Base Year and Base Year Emissions...........................................................................................................3 Base Period and Base Period Emissions..................................................................................................4 Mitigation Goals.......................................................................................................................................................4 Baseline Scenario Goals.....................................................................................................................................4 Developing Baseline Scenarios................................................................................................................................7 Static and Dynamic Baseline Scenarios...................................................................................................7 Policies...........................................................................................................................................................................8 Measures.......................................................................................................................................................................8 Spatial Considerations.........................................................................................................................................9 Range of Baseline Scenarios...........................................................................................................................9 Determining Assessment boundary...........................................................................................................10 Application of Baselines...........................................................................................................................................11 GHG Assessments................................................................................................................................................11 Policy Development.............................................................................................................................................13 Producing Baselines.....................................................................................................................................................14 Select Base Year...................................................................................................................................................14 Determine Assumptions....................................................................................................................................14 Customize Projection Models........................................................................................................................15 Estimation Methodology...................................................................................................................................15 References..........................................................................................................................................................................22 Endnotes..............................................................................................................................................................................24

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List of Tables Table Table Table Table Table Table Table Table Table Table

1. Types of Mitigation Goals........................................................................................................................4 2. Selecting Mitigation goal types...........................................................................................................6 3. Examples of systems that use the different goal types.....................................................6 4. Assumptions of measures.......................................................................................................................9 5. Considerations for selecting a Base Year..................................................................................14 6. Levels of Complexity in Producing Projections.......................................................................16 7. Examples on selecting Emission Factors and Activity Data Levels.........................17 8. Available Data Per Sector for Baseline Formulation..........................................................18 9. Approaches to Data Gaps.....................................................................................................................19 10. Methods in Formulating Baseline Emissions.........................................................................20

List of Figures Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure Figure

1. Assessing GHG Impacts of Mitigation Efforts.......................................................................3 2. Base Year and Base Year Emissions...........................................................................................3 3. Single Year Goal.......................................................................................................................................5 4. Multi-Year Goal.........................................................................................................................................5 5. Baseline Emission Scenario..............................................................................................................7 6. Static and Dynamic Baseline Scenarios....................................................................................8 7. Implication of Policies..........................................................................................................................9 8. Range of Baseline Scenarios.........................................................................................................10 9. Mapping out GHG effects of policies and measures......................................................10 10. Example of ex-ante calculation for a single year base year goal.......................11 11. Example of assessing progress after the goal period (ex-post) for a single year base year goal................................................................................................11 12. Relationship between ex-ante and ex-post assessment............................................12 13. Example of assessing progress during the goal period for a single year base year goal................................................................................................12 14. Relationship between Policy and Evidence..........................................................................13 15. Choosing the appropriate Tier of Emission Factors & Grade of Activity Data......................................................................................................................................16 16. Simple approach....................................................................................................................................21

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Introduction

aselines serve as a reference point from which results or changes achieved over time can be observed and reported. These baselines are widely used in various sectors and programs including the design of policies, development programs, and activities by the national government; assessment of biodiversity preservation and conservation initiatives in the forestry and wildlife sector; and modification of strategies towards increasing financial inflow in the banking industry, among others. In the context of climate change reporting, baselines are utilized as reference points upon which1 climate change mitigation goals are set; mitigation options are designed, analyzed, and selected; and progress of mitigation actions are assessed. In addition, baselines in the context of emissions projections are required by the United Nations Framework Convention for Climate Change (UNFCCC) especially for Annex I Parties or developed countries2. As the Philippines continues its climate change mitigation initiatives towards low carbon development, baselines help to design and assess the progress and effectiveness of mitigation policies and actions by comparing its program goals and milestones against baselines information through the use of indicators. Setting a reference point for designing and implementing mitigation goals also allows for efficient utilization of resources and a more focused and sustainable approach towards achieving these goals. The consequential attainment of these goals not only addresses the challenge of reducing GHG concentration in the atmosphere but also facilitates economic advancement and promotes environmental preservation and human well-being. This Primer on Baselines Scenario Setting seeks to provide relevant sectors guidance in formulating and setting national and sectoral baselines in line with the country’s initiatives to design and monitor its climate change mitigation actions and policies. The Philippine Climate Change Commission (CCC) and the Deutsche Gesselschaft fur Internationale Zussamenarbeit (GIZ) GmbH jointly developed this Primer based on the presentations and outputs of Ricardo Energy and the Environment (formerly Ricardo AEA) commissioned to conduct capacity building activities and provide technical support for the project Information Matters: Capacity Building for Enhanced Reporting and Facilitation of International Mutual Learning through Peer-to-Peer Exchange (Information Matters Project). Supported by the International Climate Initiative of the German Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB), the Information Matters Project aims to build the institutional capacity of the Philippine government through the CCC on international climate reporting especially in the preparation of National Communications (NCs) and Biennial Update Reports (BURs) in line with the country’s commitment to the UNFCCC as Party to the Convention. The Project covered four countries, namely: Chile, Dominican Republic, Ghana, and the Philippines through the support and cooperation of the United Nations Development Program – Low Emission Capacity Building Program (UNDPLECB), National Communication Support Program (NCSP), United Nations Environment Programme (UNEP), World Resource Institute (WRI), and the International Partnership on Mitigation and MRV (IMMA). Activities undertaken under the Project include Gap Analyses, Capacity Building Missions, Backstopping and Technical Support, and Peer-to-Peer Exchanges. For more information on the Project Implementation in the Philippines: http://climate.gov.ph/index. php/projects/mitigation/information-matters For further information on the global implementation of the Project and to access different tools and knowledge products under the Project: http://mitigationpartnership.net/information-matters 1

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Baseline Scenario Setting

Basic Concepts of Baselines In assessing the potential GHG effect of a mitigation policy or measure, two scenarios are utilized: the policy scenario and baseline scenario.

POLICY SCENARIO Through the use of carefully identified assumptions and data, policy scenarios form a picture of what is most likely to happen or occur should the policy or measure in review is implementediii.

BASELINE SCENARIO Baseline scenarios, on the other hand, form a picture, through the use of carefully identified assumptions and data, of what is most likely to happen or occur should the policy or measure in review is not implemented1. Baseline scenarios are used as reference cases upon which policy scenarios are compared with, and are also usually referred to as counterfactual, reference case, reference scenario, or business-as-usual (BAU) scenario. In the context of climate change mitigation, baselines on GHG emissions are fundamental inputs in setting baseline scenarios.

BASELINE EMISSIONS Baseline emissions are projected GHG emissions and removals based on assumptions and historical data in the absence of the policy or action in review and are necessary in forming the baseline scenario. Once the baseline scenario has been set, the formulation of baseline scenario goals can be undertaken. Emissions can be quantified annually or cumulatively. Annual Emissions Annual emissions refer to the “quantity of emissions that occur during one year”. As such, it looks at GHG released in the atmosphere every year which helps in identifying specific sectors that contributed much to the increase or reduction of emissionsiv. Cumulative Emissions Cumulative emissions as showed in Figure 1, refer to the “quantity of emissions that occur over a longer period of time, typically the sum of annual emissions over a multi-year period.” This provides the trajectory of emission pathways and could be utilized in monitoring emissions throughout the goal period.ii

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Baseline Scenario Setting

Cumulative emissions Target year emissions

GHG EMISSIONS (Mt CO2e)

Base year emissions

X% reduction from the base year emissions

BASE YEAR

TARGET YEAR

Figure 1. Assessing GHG impacts of mitigation efforts Source: John Watterson, Judith Bates, “Overview of baselines – Part 1 of 2” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

Identifying the starting point for tracking emissions is an essential process in baselines scenario setting. This can be done either by setting a base year or establishing a base period. Both forms serve as a comparison point for assessing if the emission reduction goal has been reached.

BASE YEAR AND BASE YEAR EMISSIONS The base year sets a singular year as reference point from which emissions tracking begin. Emissions calculated in the base year are referred to as base year emissions (Figure 2).

Target year emissions

GHG EMISSIONS (Mt CO2e)

Base year emissions

X% reduction from the base year emissions

BASE YEAR

TARGET YEAR

Figure 2. Base year and base year emissions Source: John Watterson, Judith Bates, “Overview of baselines – Part 1 of 2” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

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Baseline Scenario Setting

BASE PERIOD AND BASE PERIOD EMISSIONS The base period, on the other hand, calculates average GHG emissions over the course of multiple years, and is useful should there be fluctuations or outliers in emissions over the years to be analyzed. Emissions calculated in the base period are referred to as base period emissions.

MITIGATION GOALS Goals set the pace for the implementation of mitigation actions. Some goals focus solely on emission reduction while some goals also consider economic, social, environmental, and other sustainable development indicators. Depending on GHG emissions reductions or sequestration upsurge, mitigation goals can be relative and classified according to a base year, intensity, baseline scenario, and reference level. Table 1 provides descriptions on the types mitigation goals. Table 1. Types of Mitigation Goals TYPE

DESCRIPTION

Base year goals

Reductions in emissions relative to a base year or base period

Intensity goals

Reductions in emissions intensity (emissions per unit of output) relative to a base year or base period

Baseline scenario goals

Reductions in emissions relative to a baseline scenario

Fixed level goals

Reductions in emissions to a fixed level of emissions

Source: John Watterson, Ross Hunter and Glen Thistlethwaite, â&#x20AC;&#x153;Basic Concepts of Baselinesâ&#x20AC;? (presentation, Information Matters Project Training-Workshop on MRV Domestic Architecture and Baselines Scenario Setting, Manila, Philippines, April 24-25 and 28-30, 2014)

BASELINE SCENARIO GOALS Baseline scenario goals are often expressed as percentage or relative reduction of baseline emissions in a target year or target periodii. These are set depending on target emission reductions and emissions intensity and timeframe. Others express it as deviation below a projected baseline or BAU scenario. Goal Period The goal period usually refers to the period between the base year and the target year or target period which may either be short or long termii. Short goal periods help in speeding up planning and implementation of measuresii. However, risks of losing momentum in the implementation of the climate change mitigation actions could arise when a new goal has been set after the previous goal has been reachedii. On the other hand, long goal periods allow for further improvement of measures throughout the period thereby increasing the possibility of achieving the goals even if setbacks in the implementation (i.e. natural disasters) occurii. However, given the long period to achieve the targets, actions are often at risk of delays and procrastinationii.

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Baseline Scenario Setting

Single year and Multi-year Goals Goals can either be single-year or multi-year depending on the amount of time the targets are intended to be monitored and achievedii. Single year goals as shown in Figure 3, intend to reduce emissions in a specified target year while multi-year goals are set to limit or reduce emissions over several years. Thus, the latter, as presented in Figure 4, entails a target period of when limits and reductions of emissions should be completed. This could be done by setting average targets or specific target amount annually or cumulatively.

Target year emissions

GHG EMISSIONS (Mt CO2e)

Base year emissions

X% reduction from the base year emissions

BASE YEAR

TARGET YEAR (2025)

Figure 3. Single Year Goal Source: John Watterson, Judith Bates, “Overview of baselines – Part 1 of 2” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

GHG EMISSIONS (Mt CO2e)

Base year emissions

X% reduction from the base year emissions

Target period emissions

BASE YEAR

TARGET PERIOD (2021-2025)

Figure 4. Multi-Year Goal Source: John Watterson, Judith Bates, “Overview of baselines – Part 1 of 2” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015

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Baseline Scenario Setting

Table 2 provides guidance in selecting mitigation goal types while Table 3 presents examples of systems that use different goal types. Table 2. Selecting Mitigation goal types AIM

TYPE OF GOAL TO CHOOSE

Achieve absolute reduction in GHGs (e.g. Kyoto Protocol commitment)

• Base year and fixed level goals • Environmentally “robust” goals – even if there is great economic

Accommodate growth in economy or populations

• intensity goal rather than a baseline scenario goal – there is

growth, the goal still needs to be achieved

less uncertainty associated with intensity goals as these require assumptions for only one variable in addition to emissions (as opposed to projections that require assumptions about several variables as inputs to models)

Source: John Watterson, Ross Hunter and Glen Thistlethwaite, “Basic Concepts of Baselines” (presentation, Information Matters Project Training-Workshop on MRV Domestic Architecture and Baselines Scenario Setting, Manila, Philippines, April 24-25 and 28-30, 2014)

Table 3. Examples of systems that use the different goal types EXAMPLE

UNFCCC Kyoto Protocol

APPROACH (MOST LIKE)

• Cumulative multi-year goals

inform average multi-year goals of nations

NOTES

• Complex modalities • Trading mechanisms used (ETS, JI, CDM) • Emphasis on global total, longtimescales and cumulative atmospheric ppm

European Union Effort Sharing Decision

• Single year goal to set target

UK National Carbon budgets

• Cumulative multi-year goal • Corresponds to Kyoto targets

UK Wales

year emissions • Annual multi-year goal to set trajectory

and average multi-year goal in climate change act (80% 2050)

• Complex modalities • Trading mechanisms and emission banking allowed

• Average reduction to be achieved over 5-year periods

• Trading mechanismsand emission banking allowed

• Annual multi-year goal (3%/year) • Traded sector not included in target • Average multi-year goal (40% (except electricity) so no trading 2020) sets trajectory

mechanisms

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Baseline Scenario Setting

Developing Baseline Scenarios

GHG EMISSIONS (Mt CO2e)

As a reference point in designing and prioritizing climate change mitigation strategies, setting up mitigation goals, and tracking progress of mitigation actions in reducing emissions, baseline scenarios provide a snapshot of how GHG emissions would most likely be in the absence of policies or measures. This baseline scenario can serve as a reference point in designing and prioritizing climate change mitigation strategies, setting up mitigation goals, and tracking progress of mitigation actions in reducing emissions. This would entail identifying assumptions, methodological aspects and spatial considerations, in addition to historical activity and emissions data ii in order to capture almost entirely the conditions surrounding the baseline scenario. Therein, baseline scenario goals which are oftentimes referred to as a percent reduction below baseline scenario emissions in a target year or target period ii could be set with the baseline scenario as reference (Figure 5).

ine

Basel

rio scena

ions

emiss

Target year emissions

X% reduction from the base year emissions

TARGET YEAR

Figure 5. Baseline Emission Scenario Source: John Watterson, Judith Bates, “Overview of baselines – Part 1 of 2” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

STATIC AND DYNAMIC BASELINE SCENARIOS Baseline scenarios can be static or dynamic. Static baseline scenario goals are fixed, hence, not updated over time. Since emissions are tracked based on an unchanging target, efforts in reaching the intended reductions towards the target year can easily be tracked. Since the target does not change, there could be a guarantee that the goal will be achieved in the target year. Moreover, emissions level towards meeting the goal can be calculated exante. On the other hand, dynamic baseline scenario goals are updated based on changes in emission drivers, and thus reflect the latest “business-as-usual” scenario. However, dynamic baseline scenario goals cannot reflect the level of effort towards reaching the goal as they are consistently being updated, thus calculations for emissions at the start of the goal period exante cannot be undertaken. Moreover, since the goal changes through time, there could be no guarantee that the goal will be reached at the target year. The difference between the two baseline scenarios are illustrated in Figure 6.

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Baseline Scenario Setting

20% reduction from the base year emissions

GHG EMISSIONS (Mt CO2e)

Static baseline scenario

20% reduction from the base year emissions

Dynamic baseline scenario

Target year emissions associated with static baseline scenario goal

Original baseline scenario Baseline scenario update #1 Baseline scenario update #2

START YEAR OF BASELINE SCENARIO

TARGET YEAR GOAL PERIOD

Target year emissions associated with dynamic baseline scenario goal

Figure 6. Static and Dynamic Baseline Scenarios Source: John Watterson, Judith Bates, “Overview of baselines – Part 1 of 2” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

Baseline scenarios incorporate assumptions in providing a picture of the potential GHG effects if there is no policy or measure in place. These assumptions or emission drivers could be other policies and measures which are foreseen to have an impact on GHG emissions and removals.

POLICIES Policies, especially in the form of regulations, drive GHG emissions and help determine the trajectory of emission goals. Using a casual chain or map is recommended in analyzing the impact of policies to emissions in each sector (Figure 7), whether for static or dynamic baseline scenarios.

MEASURES Analyzing measures is useful in examining the capacity of mitigation options to meet the intended target emission reduction. These measures could be present in each sector and implemented in a national level. Table 4 describes various assumptions of measures. An analysis of existing measures vis-à-vis additional measures provides an overview of the mitigation potential of mitigation actions to be implemented or already being implemented.

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Baseline Scenario Setting

D TE

IMPLE

D NNE

Based on UNFCCC, “Review of implementation of the commitments and of other provisions of the Convention: UNFCCC guidelines on reporting and review,” FCCC/ CP/1999/7, 2000, http://unfccc.int/files/national_reports/ annes_i_natcom/guidelines_for_ai_nat_comm/application/ pdf/01_unfccc_reporting_guidelines_pg_80-100.pdf

Planned

Policies and actions are those that are currently in effect (a) relevant legislation or regulation is in force; (b) one or more voluntary agreements have been established; (c) financial resources have been allocated; or (d) human resources have been mobilized

ME N

Implemented

Policies and actions are options under discussion and having a realistic chance of being adopted and implemented in future, but that have not yet been adopted or implemented

“In reporting, Parties may entitle their without measures projection as a baseline or reference projection, for example, if preferred, but should explain the nature of this projection.”

A D O PT E D

See also http://unfccc.int/files/national_reports/annex_i_natcom/ application/pdf/nc5outline.pdf (see section V.A. Projections)

Adopted Policies and actions are those for which an official government decision has been made and there is a clear commitment to proceed with implementation, but that have not yet been implemented.

Figure 7.Implication of Policies Source: John Watterson, Judith Bates, “Overview of baselines – Part 1 of 2” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

Table 4. Assumptions of measures ASSUMPTION OF MEASURES

DESCRIPTION

Without measures

excludes all policies and measures implemented, adopted or planned after the base year

With (existing) measures

encompasses currently implemented and adopted policies and measures

With additional measures

encompasses planned policies and measures but includes an estimate of the impact of additional mitigation measures

Source: United Nations Framework Convention on Climate Change, adapted by John Watterson, Judith Bates, “Producing Baselines” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

SPATIAL CONSIDERATIONS Setting the physical boundary for policies and measures helps clearly set the boundaries of baseline scenario goals. This refers to the scale of implementation, i.e. national, regional, or local ii. These boundaries define the extent or scope of tracking emissions and enhance attribution of consequent results to the mitigation actions implemented within the boundary.

RANGE OF BASELINE SCENARIOS Given the number of drivers which could have potential impacts to GHG emissions, a number of baseline scenarios can be developed. As illustrated in Figure 8, this can be expressed in a range which indicates minimum and maximum values of emissions resulting

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Baseline Scenario Setting

from different pathways as influenced by drivers such as the economy, demographics, and technology ii. Thus, events most likely to happen and the corresponding impacts to emissions can be derived from the different types of baseline scenarios formulatedii.

GHG EMISSIONS (Mt CO2e)

Average baseline scenario

Baseline scenario range

Most conservative baseline scenario

Lower bound of baseline scenario range Upper bound of baseline scenario range START YEAR OF GOAL PERIOD

TARGET YEAR

Figure 8. Range of Baseline Scenarios Source: United Nations Framework Convention on Climate Change, adapted by John Watterson, Judith Bates, “Producing Baselines” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

DETERMINING ASSESSMENT BOUNDARY After formulating the set of assumptions, comes assessing the impact of measures and policies in order to identify the GHG effects. Through a causal map or chain, the series of events to take place will be outlined which includes components which shall produce GHG results as in the case presented in Figure 9. These GHG effects shall be assessed whether or not they shall be included in the GHG assessment boundary through a given criteria such as likelihood to be produced and magnitude of the effect towards the set goal.

Light-duty fuel efficiency strandard

FIRST STAGE

SECOND STAGE

Lower cost of mentoring

Increased traffic due to ‘rebound effect’

Increased unit cost of vehicles

Reduced overall vehicles sales

Higher transport emissions as old models kept on road for longer?

Increased proportion of sales of low carbon vehicles

Reduced average tailpipe CO2 emissions

Lower transport CO2 emissions

Greater number of Electric vehicles

Increased electricity demand

Increased power sector emissions

Greater number of diesel vehicles

Increased air pollution

Health impacts

More lightweight vehicles

Improved safety

1st tier impacts 2nd tier impacts 3rd tier impacts

THIRD STAGE

FOURTH STAGE

Increased congestion, accidents, noise, air pollution Higher transport emissions

Figure 9. Mapping out GHG effects of policies and measures Source: John Watterson, Judith Bates, “Overview of baselines – Part 2 of 2” (presentation, Information Matters Project Training-Workshop on Producing Sectoral and National Climate Change Mitigation Baselines – Baselines Part II, Manila, Philippines, February 3-5, 2015)

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Deutsche Gesellschaft fĂźr Internationale Zusammenarbeit (GIZ) GmbH Registered offices Bonn and Eschborn, Germany 9th Floor PDCP Bank Centre, Rufino corner Leviste Streets, Salcedo Village, 1227 Makati City, Philippines Contact Dr. Bjoern Surborg Principal Advisor Support to the Philippines in Shaping and Implementing the International Climate Regime (SupportCCC II) Project Tel. +63 2 426 0726 Fax +62 2 426 0726 Email: bjoern.surborg@giz.de www.giz.de

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