(a) Choosing appropriate emission reduction calculation methods. (1) An entity must choose the method or methods it will use to calculate emission reductions from the list provided in paragraph (h) of this section. Each of the calculation methods has special characteristics that make it applicable to only certain types of emissions and activities. An entity should select the appropriate calculation method based on several factors, including:

(i) How the entity's subentities are defined;

(ii) How the reporter will gather and report emissions data; and

(iii) The availability of other types of data that might be needed, such as production or output data.

(2) For some entities, a single calculation method will be sufficient, but many entities may need to apply more than one method because discrete components of the entity require different calculation methods. In such a case, the entity will need to select a method for each subentity (or discrete component of the entity with identifiable emission or reductions). The emissions and output measure (generally a physical measure) of each subentity must be clearly distinguished and reported separately. Guidance on the selection and specification of calculation methods is provided in Chapter 2 of the Technical Guidelines (incorporated by reference, see § 300.13).

(b) Identifying subentities for calculating reductions. If more than one calculation method is to be used, an entity must specify the portion of the entity (the subentity) to which each method will be applied. Each subentity must be clearly identified. From time to time, it may be necessary to modify existing or create new subentities. The entity must provide to EIA a full description of such changes, together with an explanation of why they were required.

(c) Choosing a base period for calculating reductions. In general, the base period used in calculating emission reductions is the single year or up to four-year period average immediately preceding the first year of calculated emission reductions.

(d) Establishing base values. To calculate emission reductions, an entity must establish a base value against which to compare reporting year performance. The minimum requirements for base values for each type of calculation method are specified in Chapter 2 of the Technical Guidelines (incorporated by reference, see § 300.13). In most cases, an historic base value, derived from emissions or other data gathered during the base period, is the minimum requirement specified. Entities may, however, choose to establish base values that are more stringent than the base values derived from the methods specified in Chapter 2 of the Technical Guidelines as long as their report indicates the rationale for the alternative base value and demonstrates that it would result in a smaller quantity of emission reductions.

(e) Emission reduction and subentity statements. For each subentity, an entity must submit to EIA the following information:

(1) An identification and description of the method used to calculate emission reductions, including:

(i) The type of calculation method;

(ii) The measure of output used (if any); and

(iii) The method-specific base period for which any required base value will be calculated.

(2) The base period used in calculating reductions. When an entity starts to report, the base period used in calculating reductions must end in the start year. However, over time the reporting entity may find it necessary to revise or establish new base periods and base values in response to significant changes in processes or output of the subentity.

(3) A description of the subentity and its primary economic activity or activities, such as electricity generation, product manufacturing, service provider, freight transport, or household operation; and

(4) A description of the emission sources or sinks covered, such as fossil fuel power plants, manufacturing facilities, commercial office buildings or heavy-duty vehicles.

(f) Changes in calculation methods, base periods and base values. When significant changes occur in the composition or output of reporting entities, a reporting entity may need to change previously specified calculation methods, base periods or base values. A reporting entity should make such changes only if necessary and it should fully document the reasons for any changes. The Technical Guidelines (incorporated by reference, see § 300.13) describe when such changes should be made and what information on such changes must be provided to DOE. In general, such changes should not result in any alterations to previously reported or registered emission reductions. A reporting entity may alter previously reported or registered emission reductions only if necessary to correct significant errors.

(g) Continuous reporting. To ensure that the summation of entity annual reports accurately represents net, multi-year emission reductions, an entity must submit a report every year, beginning with the first reduction year. An entity may use a specific base period to determine emission reductions in a given future year only if the entity has submitted qualified reports for each intervening year. If an interruption occurs in the annual reports of an entity, the entity must subsequently report on all missing years prior to qualifying for the registration of additional emission reductions.

(h) Calculation methods. An entity must calculate any change in emissions, avoided emissions or sequestration using one or more of the methods described in this paragraph and in the Technical Guidelines (incorporated by reference, see § 300.13).

(1) Changes in emissions intensity. An entity may use emissions intensity as a basis for determining emission reductions as long as the entity selects a measure of output that is:

(i) A reasonable indicator of the output produced by the entity;

(ii) A reliable indicator of changes in the entity's activities;

(iii) Related to emissions levels; and

(iv) Any appropriate adjustments for acquisitions, divestitures, insourcing, outsourcing, or changes in products have been made, as described in the Technical Guidelines (incorporated by reference, see § 300.13).

(2) Changes in absolute emissions. An entity may use changes in the absolute (actual) emissions (direct and/or indirect) as a basis for determining net emission reductions as long as the entity makes only those adjustments required by the Technical Guidelines (incorporated by reference, see § 300.13). An entity intending to register emission reductions may use this method only if the entity demonstrates in its report that any reductions derived from such changes were not achieved as a result of reductions in the output of the entity, and certifies that emission reductions are not the result of major shifts in the types of products or services produced. Entities may report, but not register, such reductions even if the output associated with such emissions is declining.

(3) Changes in carbon storage (for actions within entity boundaries). An entity may use changes in carbon storage as a basis for determining net emission reductions as long as the entity uses estimation and measurement methods that comply with the Technical Guidelines (incorporated by reference, see § 300.13), and has included an assessment of the net changes in all sinks in its inventory.

(4) Changes in avoided emissions (for actions within entity boundaries). An entity may use changes in avoided emissions to determine its emission reductions. Avoided emissions eligible to be included in the calculation of net emission reductions that qualify for registration include those associated with the sale of electricity, steam, hot water or chilled water generated from non-emitting or low-emitting sources as a basis for determining net emission reductions as long as:

(i) The measurement and calculation methods used comply with the Technical Guidelines (incorporated by reference, see § 300.13);

(ii) The entity certifies that any increased sales were not attributable to the acquisition of a generating facility that had been previously operated, unless the entity's base period includes generation values from the acquired facility's operation prior to its acquisition; and

(iii) Generators of distributed energy that have net emissions in their base period and intend to report reductions resulting from changes in eligible avoided emissions, use a method specified in the Technical Guidelines (incorporated by reference, see § 300.13) that integrates the calculation of reductions resulting from both changes in emissions intensity and changes in avoided emissions.

(5) Action-specific emission reductions (for actions within entity boundaries). A number of source- or situation-specific methods are provided in the Technical Guidelines and these methods must be used to assess the annual changes in emissions for the specific sources or situation addressed by these methods. In addition, a generic action-specific method is identified in the Technical Guidelines. An entity intending to register reductions may use the generic action-specific approach only if it is not possible to measure accurately emission changes by using one of the methods identified in paragraphs (h)(1) through (h)(4) of this section. Entities that intend to register reductions and that use the generic action-specific approach must explain why it is not possible to use any of these other methods. An entity not intending to register reductions may use the generic action-specific method to determine emission reductions, as long as the entity demonstrates that the estimate is based on analysis that:

(i) Uses output, utilization and other factors that are consistent, to the maximum extent practicable, with the action's actual performance in the year for which reductions are being reported;

(ii) Excludes any emission reductions that might have resulted from reduced output or were caused by actions likely to be associated with increases in emissions elsewhere within the entity's operations; and

(iii) Uses methods that are in compliance with the Technical Guidelines (incorporated by reference, see § 300.13).

(i) Summary description of actions taken to reduce emissions. Each reported emission reduction must be accompanied by an identification of the types of actions that were the likely cause of the reductions achieved. Entities are also encouraged to include in their reports information on the benefits and costs of the actions taken to reduce greenhouse gas emissions, such as the expected rates of return, life cycle costs or benefit to cost ratios, using appropriate discount rates.

(j) Emission reductions associated with plant closings, voluntary actions and government (including non-U.S. regulatory regimes) requirements. (1) Each report of emission reductions must indicate whether the reported emission reductions were the result, in whole or in part, of plant closings, voluntary actions, or government requirements. EIA will presume that reductions that were not the result of plant closings or government requirements are the result of voluntary actions.

(2) If emission reductions were, in whole or in part, the direct result of plant closings that caused a decline in output, the report must identify the reductions as such; these reductions do not qualify for registration. EIA will presume that reductions calculated using the emissions intensity method do not result from a decline in output.

(3) If the reductions were associated, in whole or part, with U.S. or non-U.S. government requirements, the report should identify the government requirement involved and the effect these requirements had on the reported emission reductions. If, as a result of the reduction, a non-U.S. government issued to the reporting entity a credit or other financial benefit or regulatory relief, the report should identify the government requirement involved and describe the specific form of benefit or relief provided.

(k) Determining the entity responsible for emission reductions. The entity that EIA will presume to be responsible for emission reduction, avoided emission or sequestered carbon is the entity with financial control of the facility, land or vehicle which generated the reported emissions, generated the energy that was sold so as to avoid other emissions, or was the place where the sequestration action occurred. If control is shared, reporting of the associated emission reductions should be determined by agreement between the entities involved so as to avoid double-counting; this agreement must be reflected in the entity statement and in any report of emission reductions. EIA will presume that an entity is not responsible for any emission reductions associated with a facility, property or vehicle excluded from its entity statement.