Stakeholder Consultation

Overview of MRV under Compliance Mechanism

Indian Carbon Market

11/05/2023

Bureau of Energy Efficiency,

Ministry of Power
 Outline of the Presentation
• Section -1 : PAT Transition to GHG Compliance Mechanism
• Section -2: Compliance Mechanism Working
• Section -3 : Overview of Monitoring, Reporting and Verification
(Compliance Mechanism)
• 3.a Procedure for Establishing GHG Emission Baseline
• 3.b Procedure for Monitoring of emissions
• 3.c Verification of GHG Emissions

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Section - 1
PAT Transition to GHG Compliance Mechanism

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ICM – Proposed Mechanisms

1) Compliance mechanism
a. Compliance Mechanism – A mechanism under the Carbon Credit
Trading Scheme under which the obligated entities shall comply with
the prescribed GHG emission norms notified by the Central
Government;
Indian Carbon
Market
b. It will be transitioned from the existing PAT scheme i.e., currently an
energy efficiency-based compliance mechanism to a GHG emission-
intensity based compliance mechanism.

Voluntary Compliance
Mechanism Mechanism c. ‘Registered Entity’ means any entity, including designated consumers,
registered for carbon credit trading scheme specified under clause (w) of
Section 14 of the Act

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 Transition from PAT
The compliance mechanism for ICM to be build on existing PAT framework which
has been developed in last 10 years

• It covers large energy intensive sectors (around 37-40% of India’s GHG

emissions)
• It already has the key elements required for GHG emission-based compliance
mechanism
• In the last decade, the industry and stakeholders have achieved the required
awareness and capacity to implement PAT scheme (baseline, target setting,
verification, etc.)
• Transitioning PAT to GHG compliance mechanism will not burden industry
significantly
• It will provide additional options to decarbonize (beyond energy efficiency)
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 Transition from SEC to Specific GHG emissions (SGE)

SEC ~toe/t to SGE ~ tCO2e/t

Total energy consumed in the plant boundary (toe)
Current Approach SEC=
under PAT Equivalent Product or output (t)
Transition

Proposed for Compliance SGE= Total GHG Emissions from DCs (tCO2e)
Equivalent Product or output (t)

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 Key aspects of PAT Transition
• Build on the existing PAT Scheme framework
• Including the sectors/DCs as they complete their PAT cycle
• Updating certain aspects of MRV to enable GHG calculation
and verification and align with international standards
• Extensive capacity building for the industry to have a seamless
transition
• Developing procedures to enable effective MRV and
compliance
*PAT transition plan is under preparation

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Section -2
Compliance Mechanism Working

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 Key definitions
Compliance Mechanism: A mechanism under the Carbon Credit Trading Scheme under
which the obligated entities shall comply with the prescribed GHG emission norms notified by
the Government. (GHG Emission norms – target for GHG emission intensity reduction)

Obligated Entities: Registered entities that are notified under the Compliance Mechanism

Mandatory Carbon Credit Certificates (M-CCC): Certificates issued under the compliance
mechanism to the obligated entity.

Accredited Carbon Verifier (ACV): An agency accredited by the Bureau to carry out
validation/verification activities for the compliance and offset mechanism under the Indian
Carbon Market.

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 GHG Emission Norms
GHG Emissions Norms
• GHG emission norms will be in form of t CO2e/t product and will be
specific to the obligated entity
• The GHG emission norms will be notified by the MoEFCC
Compliance
• Based on performance evaluation (verification) against the GHG
emission norms, the obligated entities will be issued m-CCCs on
exceeding the norms or liable to purchase if not able to meet the norms
• The compliance will have to be achieved on an annual basis

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 Working of Scheme
Baseline Case I Case II

Credits to be purchased (t CO2e)

Credits to be issued (t CO2e) (0.2 t CO2e/t * Production)
2.5 t CO2e/t (0.2 t CO2e/t * Production)
2.2 t CO2e/t 2.4 t CO2e/t
Target reduction 2.2 t CO2e/t Shortfall in target
Reduction achieved
2.2 t CO2e/t (more than target)
Allowed (norm)

2.0 t CO2e/t
Baseline

Allowed
Allowed

Actual
Actual
Issuance/purchase of m-CCCs will be post verification
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Compliance Demonstration

Baseline CO2 Emission Intensity

Purchase
M-CCC
CO2 Emission Intensity Achieved SGE > Post Compliance
Reduction Target Target SGE
Achieved SGE <
Target SGE Compliance Penalty
M-CCC
PX Banked
Issued M-CCC

Sell
M-CCC

Obligated Entity A Obligated Entity B Obligated Entity A Obligated Entity B

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 Compliance Cycle
• Compliance Period – Financial Year (FY) 01st April 20XX– 30th March 20XY
• Verification within three months of completion of FY
• Issuance with six months of completion of FY
• Demonstration of compliance with nine months of completion of FY

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 Key Difference between EU ETS vs Compliance mechanism

Particulars EU ETS Compliance under Remarks

ICM
Type of Credits Emission Carbon Credit The EU ETS uses the terminology as
Permits/Allowance Certificates emission permit or allowance which gives
right to emit 1 t CO2
Credit Issuance Ex – Ante - at start of Ex-Post – at end of Under EU ETS, the emission allowance are
compliance period compliance period surrendered or bought based on emissions
(through free allocation based on performance
or auction) evaluation
Type of Absolute emissions Intensity emissions Under EU ETS, the emission allowance are
Emission (t CO2) (t CO2/t) issued based free allocation based on
regulated benchmarking and through auction. The
free allocation will be phased out eventually
by 2034 for all sectors

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Section -3
Monitoring, Reporting and Verification
(Compliance Mechanism)

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 Compliance Mechanism - Coverage
• GHGs to be included : CO2, CH4 and N2O
• Question for stakeholders – How to monitor CH4 and N2O from
combustion or use default ?
GHGs Combustion Process

• Direct Emissions (from sources owned and controlled by the entity) –

energy and non-energy-related (process) CO2 Yes Yes

• Indirect Emissions (energy-related) (from sources not owned and CH4 Yes -
controlled by the entity but is a consequence of an organization’s
operations and activities N2 O Yes -

• Reporting by entities PFC - Yes

a) Total GHG Emissions
b) Direct GHG Emissions
c) Indirect GHG Emissions
d) GHG Emission Intensity
e) Biogenic Emissions
Direct and Indirect Definition – ISO 14064-1: 2018
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 Procedure for Compliance Mechanism
• Establishing GHG Emission norms
• Target Setting
• Procedure for Establishing GHG Emission Baseline
• Boundary
• GHG calculation methods Stakeholder consultation will be
• Conversion/emission factors conducted on procedures
• Inclusions/Exclusions
• Procedure for Monitoring and Reporting
• Procedure for Verification (Assessment of Performance)
• Procedure for issuance or liability to purchase
• Procedure for compliance
• Procedure for check verification/independent review
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Section -3a
Procedure for Establishing GHG Emission Baseline

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Procedure for Establishment of GHG Emission Norms
Inclusion of emission sources
Consider all forms of GHG
emission sources from energy
use
Emissions from Solid Fuel use
Emissions from liquid fuel use
Emissions from Gaseous fuel use
Emissions from indirect energy
Consider all form of process
related GHG emissions
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Exclusions
GHG emissions from biomass or
biogenic source of energy
Energy from renewable energy
sources
GHG emissions if captured or
utilized by the plant
Emissions resulting from energy
consumed in colony attached to
the plant,
Temporary or major construction
work
Emissions from refrigerant
leakages in office building and
processes..
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 GHG emission monitoring - methods
For each emission source and source stream following method can be
applied

1. Standard Emission Estimation methodology

• Emission estimated by multiplying the activity data (AD) related to the amount
of fuel combusted (in energy based on NCV), by the corresponding emission
factor EF ( in t CO2/toe), and the corresponding oxidation factor (OF)
2. Mass Balance Estimation methodology
• Under the mass balance methodology, the emission is estimated using the mass
(entering and leaving the system under balance) with the fuel's or material's
carbon content multiplied by 3.664 t CO2/t Carbon (44/12)

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 Standard - GHG Calculation
Activity data refers to
the data associated with Amount of carbon in
an activity that generates fuel that is burnt during
GHG emissions, such as combustion process
TOE of coal consumed (fraction)
GHG Emissions (t CO2e)

Global Warming Carbon dioxide equivalent (CO2e) of

Activity data X Emission Factor X Oxidation Factor X =
Potential emissions

A factor allowing GHG GHG GWP

Radiative forcing impact
emissions to be
of one unit of GHG Carbon Dioxide (CO2) 1
estimated from a unit of
(CO2e) relative to CO2
available activity data Methane (CH4) 21
(e.g t CO2/toe)
Nitrous Oxide (N2O) 310
Hydro-fluoro carbon (HFC) 1-12,500
Data Required Series
Fuel consumption (kg) Per-fluoro Carbons (PFC) 6,500-9,200
% Total Carbon in fuel Sulphur Hexafluoride (SF6) 23,900
Fuel NCV (kCal/kg) NF3 12,200
Oxidation Factor
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 Gap in Current PAT Proforma
Particulars (for GHG calculation) Data required In Current PAT Proforma

Activity Data
Energy Content - Calorific Value
Carbon Content of Fuel (to estimate Total % Carbon in Fuel
GHG emission factor)
Oxidation Factor for fuel
Fuel Consumption data (tons or The data is monitored and reported in form of Solid,
kL or SCM) liquid and gaseous fuel
Net Calorific Value (kCal/kg) Currently Gross Calorific value is monitored and
reported, but data on NCV is required for GHG
calculation
The current information is not captured, but as per PAT
M&V – Ultimate Analysis is to be undertaken for coal
samples through accredited National Accreditation
Board for Testing and Calibration Laboratories (NABL)
accredited Laboratory and to be provided in verification
report
Oxidation Factor (%) Not monitored and reported

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 Approach to Emission Factors
Emission Source Site Specific IPCC Default Remarks
(EF) (EF)
Solid Fuel Yes Yes Site-specific is preferred but in case of
non availability, default shall be referred

Liquid Fuel Yes -

Gaseous Fuel Yes -
Process Emissions Yes Yes Site-specific is preferred but in case of
non availability, default shall be referred

Methane Emissions (combustion) Yes Difficult to monitor and measure

N2O Emissions (combustion) Yes Difficult to monitor and measure

Electricity (purchased) - Yes Grid factor to be applied, in case of IPP (if

through PPA) IPP specific factor

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 Summary (inclusion in Emissions reporting)
Fuel CO2 (combustion) CH4 (Combustion) N2O (Combustion)

Solid (Fossil) Yes Yes Yes

Liquid (fossil) Yes Yes Yes

Gaseous (fossil) Yes Yes Yes

Biomass (non fossil) No Yes Yes

For mixed waste (such as hazardous, MSW) to claim benefit Biomass fraction (fossil and non fossil carbon
fraction) analysis may be required

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 Sample – PAT Proforma
• Cement (click here to access file)
• Fuel Combustion
• Process emissions (calcination)
• Grid Electricity
• Aluminium Cement (click here to access file)
• Fuel combustion
• Smelting Process (PFC)
• Anode Plant (CO2 process)
• Grid Electricity

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 Discussion points on Emission calculation
1. Whether to include CH4 and N2O and how to monitor these emissions?

2. Indirect Energy (emissions) is proposed to be included in emissions

calculation, any views on inclusions?

3. Challenges in monitoring oxidation factor or refer default value ~ 1?

4. Challenges in monitoring %C (total carbon) for solid fuels?

5. Challenges in monitoring process emissions ?

6. How to increase the accuracy and transparency in GHG calculation? (any

best practices) ?
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Section -3b
Procedure for Monitoring of emissions

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 Procedure for compliance mechanism
• It is proposed that the monitoring plan for GHG emissions to be prepared by obligated
entity
• Monitoring plan to include
• Emission Sources
• Emission source stream
• Activity data measurement
• Information on traceable and verifiable reference of activity data
• Activity data measurement points /equipment
• Calibration frequency
• Process flow diagram highlighting emission sources and stream
• Sampling frequency
• Quality Testing (internal and external)
• Data flow and control

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 Quarterly and Yearly Reporting
• Preparation and maintenance of quarterly and yearly data reports by the
obligated entity covering at least the following
• On the performance of the plant and production processes.
• On the internal fuels audits of plants and production processes for the purpose
of identification of various opportunities and measures to reduce GHG
emissions and improve performance.
• Production achieved, energy consumed, GHG emissions, and specific GHG
emissions, measures adopted for GHG reduction/mitigation and quantity of GHG
emissions reduced
• Form 1 – submission (Similar to PAT)

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 Sampling Procedure fuel
• For the emission calculation derived basis the fuel and material quality, the obligated entity shall
have a sampling plan in form of a written procedure, which contains the information on
• Procedure on preparation of samples
• Locations for sample collection,
• Frequencies of collection,
• Quantity,
• Storage and transport of samples
• The obligated entity shall ensure that coal samples are picked up from the auto-sampler at every
20,000 tonne or at least once in a month for laboratory testing
• The obligated entity shall also implement sampling procedure for material analysis for emission
estimation as required.

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 Laboratory testing
• The obligated entity shall undertake the sample analysis for
demonstration of conversion factors at internal lab at obligated entity
premises and also at the National Accreditation Board for Testing and
Calibration Laboratories (NABL) accredited laboratory for Net
Calorific Value (NCV) and ultimate/proximate analysis of coal and
material

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 Discussion points on Monitoring
1. Will having a monitoring plan be effective or will it be added burden?

2. How to build capacity in industry for regular monitoring and reporting

of GHG emissions?

3. Will there by any special consideration for process emissions ? (other

than data capturing ?

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Section -3c
Verification of GHG Emissions

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 Verification Process
• Every obligated entity, within three months of the conclusion of the target year from the baseline year
shall submit the performance assessment document in Form ‘A’ covering the performance for the
relevant compliance cycle specifying the compliance with GHG emission reduction norms, duly
verified together with certificate in Form ‘B’ given by the accredited carbon verifier

Completion of Compliance Year

Performance
Verification activity Assessment Document Demonstration of
Appointment of ACV
(site visit) (Form A) and Verification Compliance
Certificate (Form B)

Annual Verification process

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 Verification Activity by ACV

Agreement Assessment Verificaiton

on - Development of Data and Submission
Strategic Appointment
objectives, of Verification (Proforma, Evaluation of of Verificaiton
Analysis of Team
scope and plan energy, GHG, GHG Documents
activites systems) performance

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 Verification Activities by ACV
(1) The accredited carbon verifier, in order to assess the correctness of the information provided by the obligated entity
regarding the compliance with GHG Emission norms shall –
a) assess the data and information systems, IT systems, data flow activities, control activities, control systems and
procedures for control activities
b) verify the emission source and source stream coverage
c) apply standard auditing and verification techniques.
d) sampling techniques in relation to data sampling and checking the control activities
e) verify the data against the primary and secondary data sources and can conduct additional verification checks to
determine the reliability of the data sources
f) verify the emission calculation methodology for each of the emission sources of the eligible entity including estimation
and analysis of net calorific value, GHG emission factor, oxidation factor, energy consumption and other relevant
information
g) document review, involving- review of data and its source, and information to verify the correctness, credibility and
interpretation of presented information
h) follow up action, involving- site visits, interviews with personnel responsible in the obligated entity’ plant; cross-check of
information provided by interviewed personnel to ensure that no relevant information has been omitted or, over or under
valued
i) verify the fuel and material analysis process to determine the emission factor
j) verify the GHG emission measures implemented by the obligated entity
k) integrate all aspects of verification, and certification functions.
l) make independent technical review of the opinion and decision of the verification team.
m) review of the application of formulae and calculations, and reporting of the findings in the verification report.
n) also take into consideration, a situation where a particular activity may or may not form part of the activities related to
the compliance with the GHG Emission norms

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 Verification Report
• The accredited carbon verifier shall submit verification report
highlighting
• The summary of the verification process, results of assessment and his opinion
along with the supporting documents.

• The details of verification activities carried out in order to arrive at the conclusion
and opinion, including the details captured during the verification process and
conclusion relating to compliance with GHG Emission norms,

• The record of interaction, if any, between the accredited carbon verifier and the
obligated entity as well as any change made in his assessment because of the
clarifications, if any, given by the obligated entity.

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 ACV – Opinion on verification
(1) If the accredited carbon verifier identifies any fluctuations, discrepancy, inconsistency, missing information,
misrepresentation, data gaps or non-compliance with the rules, the verifier shall document such information
and obtain explanations from the eligible entities supported by additional relevant evidence or explanation

(2) If the accredited carbon verifier records a positive opinion in his verification report, the Bureau shall consider
that all the requirements with regard to the compliance with GHG emission reduction norms, entitlement about
issue or liability to purchase - Carbon Credit Certificate have been met.

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 Check Verification/Independent Review
• BEE if required can also initiate the check verification for some entities
• For check verification, the ACV shall be appointed by BEE
• Check verification will follow a similar approach as verification
• The accredited carbon verifier in charge of independent review shall submit his review report with
due certification in ‘Form C’ to the Bureau and the concerned State Designated Agency.
• Where the verification report given by the accredited carbon verifier secures an unfair or undue gain
due to the deficiencies or inconsistencies or errors or misrepresentations by the designated consumer,
the quantum of such gain shall be calculated

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 Discussion points on Verification
1. What aspects should be included to strengthen verification process?
2. What actions are required for enabling AEAs to participate in verification?
3. How can the transparency be built into system?
4. Should there be assurance statement by verifiers (in certification) ? (for e.g.
limited assurance)
5. How to ensure that verification activity cost are competitive ?
6. What challenges you foresee for yearly verification ? And what actions you
recommend to overcome the challenges?
7. How to ensure compliance within the time frame? (say six months after
completion of Financial Year)
8. How to address the uncertainty in data ? (uncertainty analysis/thresholds)?

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Thank You