Part 4: Projections template
4.1 DEVELOPING A “BUSINESS AS USUAL” PROJECTION
4.2 DEVELOPING A “WITH MEASURES” EMISSIONS
PROJECTION
You may be asked to estimate what future greenhouse gas emissions will be from your company or operating site. Such “emission projections” can be used to identify future greenhouse gas emission management challenges and opportunities, while also providing some of the information required to establish - and monitor progress toward - greenhouse gas emission reduction objectives.
A greenhouse gas emissions projection should be consistent with the GHG emissions inventory. Projections should address the same sources of GHG emissions (e.g., both direct and indirect emissions) and, to the extent possible, the projection should be disaggregated to the same degree. This may not be fully possible, but the greater the degree of disaggregation, the more informative the projection.
As with the greenhouse gas inventory, an estimate of future greenhouse gas emissions requires two pieces of information: (a) the amount of greenhouse gas emitting activity that will take place, and (b) the GHG intensity of that activity. When the GHG emitting activity is producing tonnes of product, the simplest formula for estimating future GHG emissions is:
GHG emissions = Tonnes of Production x (GHG emissions / tonne of
production)
The following sections describe the steps you should follow to calculate both a “business as usual” projection and a “with measures” projection.
4.1 Developing a “Business as Usual”
Projection
The first thing you will want to do is develop a “business as usual” (BAU) GHG emissions projection.
Let’s assume you have been asked to prepare a GHG emissions projection
for your company for the year 2005. We will also assume that your company produces
only one product, but production occurs at several different sites. Each site
uses a slightly different production process, with its own unique GHG intensity.
To prepare a BAU GHG estimate, you will need to do the following:
Step 1: Estimate Future Production Rates
While no one can predict the future, you can make a best estimate of what future production rates will be. These estimates will need to be made at the site level because production at each site has a unique GHG emissions intensity. Some of the key questions you will need to ask include:
1. What sites will be operating in 2005? Will some sites have been shut down? Will new sites be opened?
2. At each site you expect to be operational in 2005, do you expect production to be above, equal to, or below current rates?
Answering these questions will require you to make a number of key assumptions about the following factors that influence production:
• future commodity prices
• future demand and uses for the product
• future investment / expansion plans
• future costs of key inputs
There will be a tremendous amount of uncertainty inherent in the assumptions you make to estimate future production rates. In fact, the only thing you probably know for sure about the assumptions you make is that they will prove to be wrong. Accordingly, we encourage you to develop two different scenarios with respect to what future production rates might be at each facility – each based on a unique set of assumptions.
The key driver for future production rates is likely to be commodity prices. As a result, you might develop one BAU production rate that represents what would happen under a “high commodity price” scenario and another that would represent what might happen under a “low commodity price” scenario. These two scenarios then present the boundaries of a range of possible outcomes in terms of future production rates.
When presenting your range of BAU production rates, you might choose to identify one point in that range (and the assumptions upon which it is based) as the “most likely” outcome. It will also be important to clearly present all key assumptions made that do not provide information of a commercially confidential nature.
Step 2: Estimate Future GHG Intensity Levels
Now that you have made estimates of future production rates at each facility, you need to estimate what the GHG intensity of production at each of these facilities will be in 2005. Some of the key questions you will need to ask include:
1. Will the production process at the facility remain unchanged in 2005? Are there any major future process changes already committed to that can be expected to change the GHG intensity of production? For example, if one facility has recently implemented a new technology that will reduce GHG intensity, are there plans to employ similar technology at all other facilities?
2. Has there been a historical trend (increasing or decreasing) in GHG emissions intensity at the facility? For example, many mining companies have seen energy intensity of production decrease steadily for many years. Is it a reasonable assumption that such trends will continue into the future, regardless of what specific actions are taken to address climate change? What future trends can be assumed? (It is not realistic to assume that no changes in GHG emissions intensity will take place).
As with estimates of production rates, answering these questions will require you to make a number of key assumptions. For example, questions about the production process itself will need to reflect assumptions about the uptake of current and future technologies and their likely impact on energy-related, process-related and fugitive GHG emissions. Questions related to GHG emissions intensity from fossil fuel emission sources will need to consider:
• the depth of mining operations;
• the efficiency of energy use in the production process; and
• the mix of energy sources used in the production process (e.g. are you likely to use more or less natural gas in the future?).
We have assumed that changes in production rates are likely to have a higher
degree of uncertainty than projected changes in GHG emissions intensity. As
a result, it is not recommended that you develop alternative scenarios in this
area. Instead, only one set of assumptions related to GHG emissions intensity
should be made for each facility.
You now need to combine the information developed in the first two steps to produce a GHG emissions projection for your company in the year 2005. In this example, you would complete the following steps to calculate future GHG emissions under a “high commodity price” scenario.
1. Multiply production rates at each facility under a “high commodity
price” by the relevant GHG emissions intensity projected for that facility.
This will provide an estimate of GHG emissions at each facility in the year
2005.
2. Add together the GHG emissions estimate from each facility to develop an aggregate GHG emissions projection for the company under the “high commodity price” scenario.
4.2 Developing a “With Measures” Emissions Projection
The BAU GHG emissions projection you have developed provides an estimate of where corporate GHG emissions will be in 2005 if no new actions are taken within the company to address climate change. It is more than likely, however, that your company has identified a set of discrete actions that it plans to take as part of its greenhouse gas emission reduction action plan.
To develop a “with measures” GHG emissions projection, the following steps need to be taken.
Step 1: Clearly Identify the Specific Actions that Make Up the “With Measures” Projection
Your company will likely take many actions that will reduce GHG emissions. It is not worth the effort to try to identify all of them, assess their impact on GHG emissions, and include them in the “With Measures” projection. Rather, you need to identify the key actions that will have the largest impact on GHG emissions and work with those. In this case, you should clearly note that the “With Measures” projection does not include all actions being taken to address climate change – just the major ones.
There are likely to be some cases where your company is implementing several measures that are designed to work in a synergistic manner to reduce GHG emissions. When this is the case, you should group these measures as one for the purpose of making an estimate of their impact on GHG emissions, rather than addressing each measure individually.
Step 2: Ensure that the Impact of These Actions on GHG Emissions are not Reflected in the BAU GHG Emissions Projection
This step is necessary to ensure that you are not “double-counting” the benefits of actions you are taking to reduce GHG emissions. For example, if one of your key measures is to install a small hydropower facility, this can only appear in either the BAU or With Measures scenarios – it cannot appear in both.
Step 3: Estimate the Projected Impact of Each Key Measure on GHG Emissions
Part 5 describes the steps required to estimate the impact of specific actions on GHG emissions at a particular point in time. This information is the foundation upon which a “With Measures” projection can be constructed – but more work is required.
This difference is because the absolute level of GHG emissions reduction generated by an action at a point in time is not helpful in developing the With Measures projection. After all, you are interested in knowing what will happen in the future. Accordingly, the piece of information you need is how implementation of the action has reduced the GHG emissions intensity of the production process (this should be relatively easy to calculate).
Once you know how a specific action has reduced GHG intensity of a production
process, you can estimate the impact of the measure in the future by doing the
following:
GHG emission reductions generated in 2005 by the measure = (GHG intensity without the measure – GHG intensity with the measure) X production rates in 2005
When performing these calculations, you should start with the most significant
measure and subsequently assess less significant measures. Your assessment of
less significant measures should take into account the impact of the previous
measures you assessed. For example, if the first measure assessed would reduce
GHG emissions intensity by 2%, your assessment of a second measure should assume
that the GHG intensity without the measure is 2% below what it was for estimating
the impact of the first measure. The impact of each measure on all the other
measures must be considered to avoid double counting.
Once you have used this process to estimate the impact on GHG emissions in 2005 of each of your key measures, you should add together the numbers to develop an aggregate estimate of the projected impact of key measures on future GHG emission levels. This number can then be subtracted from your BAU GHG emission projections to produce your “With Measures” emissions scenario.
Section 6.2 includes a template to be used for reporting your GHG emissions
projections to MAC.
