Guidelines for Voluntary Greenhouse Gas Reporting, 15169-15192 [05-5607]

Agencies

• DEPARTMENT OF ENERGY

[Federal Register Volume 70, Number 56 (Thursday, March 24, 2005)]
[Rules and Regulations]
[Pages 15169-15192]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-5607]


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DEPARTMENT OF ENERGY

10 CFR Part 300

RIN 1901-AB11


Guidelines for Voluntary Greenhouse Gas Reporting

AGENCY: Office of Policy and International Affairs, U.S. Department of 
Energy.

ACTION: Interim final rule and opportunity for public comment; revised 
general guidelines.

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SUMMARY: Section 1605(b) of the Energy Policy Act of 1992 directed the 
Department of Energy (Department or DOE) to issue guidelines 
establishing a voluntary greenhouse gas reporting program. On February 
14, 2002, the President directed DOE, together with other involved 
Federal agencies, to recommend reforms to enhance the Voluntary 
Reporting of Greenhouse Gases Program established by DOE in 1994. DOE 
is today issuing interim final General Guidelines that incorporate the 
key elements of revised General Guidelines proposed by DOE on December 
5, 2003. DOE also is publishing in the ``Rules and Regulations'' 
section of today's issue of the Federal Register a notice of 
availability inviting public comment on draft Technical Guidelines that 
will, combined with these General Guidelines, fully implement the 
revised Voluntary Reporting of Greenhouse Gases Program.

DATES: The interim final rule will be effective September 20, 2005. The 
incorporation by reference of the Draft Technical Guidelines is 
approved by the Director of the Federal Register as of September 20, 
2005. Written comments should be submitted on or before May 23, 2005.

ADDRESSES: You may submit comment, identified by RIN Number 1901-AB11, 
by any of the following methods:
     E-mail: 1605bguidelines.comments@hq.doe.gov.
     Federal eRulemaking Portal: https://www.regulations.gov. 
Follow instructions for submitting comments.
     Mail: Mark Friedrichs, PI-40; Office of Policy and 
International Affairs; U.S. Department of Energy; 1000 Independence 
Ave., SW., Washington, DC 20585.
    Interested persons also may present oral views and data at public 
workshops DOE will hold for discussing both these interim final General 
Guidelines and the draft Technical Guidelines that DOE is making 
available today. The locations, times, and other details of the public 
workshops are set forth in the Notice of Availability for the draft 
Technical Guidelines published in the ``Rules and Regulations'' section 
of today's issue of the Federal Register.
    You may obtain electronic copies of this notice, the draft 
Technical Guidelines and other related documents, find additional 
information about the planned workshops, and review comments received 
by DOE and the workshop transcripts at the following Web site: https://
www.pi.energy.gov/enhancingGHGregistry/. Those without internet access 
may access this information by visiting the DOE Freedom of Information 
Reading Room, Rm. 1E-190, 1000 Independence Avenue, SW., Washington, 
DC, 202-586-3142, between the hours of 9 a.m. and 4 p.m., Monday to 
Friday, except Federal holidays.

FOR FURTHER INFORMATION CONTACT: Mark Friedrichs, PI-40, Office of 
Policy and International Affairs, U.S. Department of Energy, 1000 
Independence Ave., SW., Washington, DC 20585, or e-mail: 
1605bguidelines.comments@hq.doe.gov.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
    A. Background
    B. Process for Finalizing and Implementing Guidelines
II. Discussion of Revised General Guidelines
    A. Overview and Purpose
    B. Crosscutting Issues and Revisions
    1. Whether to provide for reporting on international emissions 
and reductions
    2. Whether to provide for registered emissions reductions
    3. Whether to modify the proposed basic requirements for 
registration
    a. Requiring large emitters to report entity-wide emissions and 
reductions
    b. Limiting registration to post-2002 reductions
    4. How to assign responsibility for reporting emissions and 
emissions reductions
    5. ``Transferable credits''
    6. Whether to include the General Guidelines in the Code of 
Federal Regulations
    C. Section-by-Section Discussion of the General Guidelines
    1. General (Sec.  300.1)
    2. Definitions (Sec.  300.2)
    3. Guidance for defining and naming the reporting entity (Sec.  
300.3)
    4. Selecting organizational boundaries (Sec.  300.4)
    5. Submission of an entity statement (Sec.  300.5)
    6. Emissions inventories (Sec.  300.6)
    7. Net entity-wide emission reductions (Sec.  300.7)
    8. Calculating emission reductions (Sec.  300.8)
    9. Reporting and recordkeeping requirements (Sec.  300.9)
    10. Certification of reports (Sec.  300.10)
    11. Independent verification (Sec.  300.11)
    12. Acceptance of reports and registration of entity emission 
reductions (Sec.  300.12)
    13. Incorporation by reference (Sec.  300.13)
III. Regulatory Review and Procedural Requirements
    A. Review Under Executive Order 12866
    B. Review Under the Regulatory Flexibility Act
    C. Review Under the Paperwork Reduction Act
    D. Review Under the National Environmental Policy Act
    E. Review Under Executive Order 13132
    F. Review Under the Treasury and General Government 
Appropriations Act, 2001

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    G. Review Under Executive Order 12988
    H. Review Under the Unfunded Mandates Reform Act of 1995
    I. Review Under the Treasury and General Government 
Appropriations Act, 1999
    J. Review Under Executive Order 13211
    K. Congressional Review

I. Introduction

A. Background

    Section 1605(b) of the Energy Policy Act of 1992 (EPACT) directs 
the Department of Energy, with the Energy Information Administration 
(EIA), to establish a voluntary reporting program and database on 
emissions of greenhouse gases, reductions of these gases, and carbon 
sequestration activities (42 U.S.C. 13385(b)). Section 1605(b) requires 
that DOE's Guidelines provide for the ``accurate'' and ``voluntary'' 
reporting of information on: (1) Greenhouse gas emission levels for a 
baseline period (1987-1990) and thereafter, annually; (2) greenhouse 
gas emission reductions and carbon sequestration, regardless of the 
specific method used to achieve them; (3) greenhouse gas emission 
reductions achieved because of voluntary efforts, plant closings, or 
state or federal requirements; and (4) the aggregate calculation of 
greenhouse gas emissions by each reporting entity (42 U.S.C. 
13385(b)(1)(A)-(D)). Section 1605(b) contemplates a program whereby 
voluntary efforts to reduce greenhouse gas emissions can be recorded, 
with the specific purpose that this record can be used ``by the 
reporting entity to demonstrate achieved reductions of greenhouse 
gases'' (42 U.S.C. 13385(b)(4)).
    In 1994, after notice and public comment, DOE issued General 
Guidelines and sector-specific guidelines that established the 
Voluntary Reporting of Greenhouse Gases Program for recording 
voluntarily submitted data and information on greenhouse gas emissions 
and the results of actions to reduce, avoid or sequester greenhouse gas 
emissions. The 1994 General Guidelines and supporting documents may be 
accessed at https://www.eia.doe.gov/oiaf/1605/guidelns.html. The 
Guidelines were intentionally flexible to encourage the broadest 
possible participation. They permit participants to decide which 
greenhouse gases to report, and allow for a range of reporting options, 
including reporting of total emissions or emissions reductions or 
reporting of just a single activity undertaken to reduce part of their 
emissions. From its establishment in 1995 through the 2002 reporting 
year, 381 entities, including utilities, manufacturers, coal mine 
operators, landfill operators and others, have reported their 
greenhouse gas emissions and/or their emission reductions to EIA.
    On February 14, 2002, the President directed the Secretary of 
Energy, in consultation with the Secretary of Commerce, the Secretary 
of Agriculture, and the Administrator of the Environmental Protection 
Agency, to propose improvements to the current section 1605(b) 
Voluntary Reporting of Greenhouse Gases Program. These improvements are 
to enhance measurement accuracy, reliability, and verifiability, 
working with and taking into account emerging domestic and 
international approaches.
    On May 6, 2002, DOE published a Notice of Inquiry soliciting public 
comments on how best to improve the Voluntary Reporting of Greenhouse 
Gases Program (67 FR 30370). Written comments were received from 
electric utilities, representatives of energy, manufacturing and 
agricultural sectors, Federal and State legislators, State agencies, 
waste management companies, and environmental and other non-profit 
research and advocacy organizations.
    DOE held public workshops in Washington, DC, Chicago, San Francisco 
and Houston during November and December of 2002 to receive oral views 
and information from interested persons. In addition, the U.S. 
Department of Agriculture sponsored two workshops in January 2003 to 
solicit input on the accounting rules and guidelines for reporting 
greenhouse gas emissions in the forestry and agriculture sectors. These 
workshops explored in greater depth many of the issues raised in the 
Notice of Inquiry and addressed in the written comments. The public 
comments covered a broad range of issues and views diverged widely on 
some key issues. Generally, there was substantial support for revising 
the current General Guidelines to enhance their utility and to 
accomplish the President's climate change goals.
    On December 5, 2003, DOE proposed revised General Guidelines (68 FR 
68204). A public workshop was held on January 12, 2004, to discuss that 
proposal and to receive public comment. Approximately 200 persons 
attended the workshop. In addition, over 300 written comments were 
received by the close of the public comment period on February 17, 
2004.
    DOE is today issuing interim final revised General Guidelines and, 
in a notice of availability published elsewhere in this issue of the 
Federal Register, makes available for public comment the draft 
Technical Guidelines necessary to fully implement the revisions to the 
Voluntary Program. Together, the General and Technical Guidelines will, 
when effective, replace the guidelines for the Voluntary Reporting of 
Greenhouse Gases issued by DOE in October 1994.
    DOE previously indicated its intent to provide for further public 
comment on the General Guidelines, as revised after a round of public 
comments on the notice of proposed rulemaking published on December 5, 
2003, through a supplemental notice of proposed rulemaking. However, 
DOE subsequently decided to provide for further comment through the 
device of a notice of interim final rulemaking rather than a 
supplemental notice of proposed rulemaking. DOE opted for an interim 
final rule because, after considering the public comments, the main 
revisions to the initially proposed General Guidelines were relatively 
few, involved issues within the scope of the initial proposal, and were 
not significant enough to warrant a re-proposal as another notice of 
proposed rulemaking. DOE also took account of the unusually varied and 
robust opportunities for written and oral comment both before and after 
publication of the proposed General Guidelines. These opportunities for 
public comment make it less likely that members of the public will have 
substantially new or different comments or information to offer in a 
further round of public comments on the revised General Guidelines. DOE 
recognizes that there is a possibility that public review of the draft 
Technical Guidelines may suggest the need for further changes to the 
General Guidelines. By publishing the General Guidelines as an interim 
final rule with a 180-day effective date, DOE has provided for making 
such changes and finalizing the draft Technical Guidelines before the 
end of the 180-day period.
    The Secretary of Energy has approved issuance of this interim final 
rule.

B. Process for Finalizing and Implementing Guidelines

    After full consideration of the public comments received, DOE will 
finalize the General and Technical Guidelines. DOE has allowed 180 days 
after publication of the interim final General Guidelines so that there 
is sufficient time to consider and respond to all comments received. 
DOE will further delay the effective date of the revised General 
Guidelines if the 180-day period proves to be insufficient for 
considering public comments and finalizing the General and Technical 
Guidelines.

[[Page 15171]]

    Before the General and Technical Guidelines become effective, EIA 
will, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 
Chapter 35), solicit public comment on the reporting elements to be 
contained in the reporting forms to be used under the revised program 
Guidelines. With respect to the existing 1994 General Guidelines, DOE 
intends to publish a Federal Register notice of termination that will 
take effect and terminate the existing Guidelines immediately prior to 
the revised General and Technical Guidelines taking effect.

II. Discussion of Revised General Guidelines

    The following section summarizes changes made to the revised 
General Guidelines and responds to public comments on the December 5, 
2003 proposal.

A. Overview and Purpose

    The revised General Guidelines included in this interim final rule 
are designed to enhance the measurement accuracy, reliability and 
verifiability of information reported under the 1605(b) program and to 
contribute to the President's climate change goals. The key elements of 
the revised General Guidelines do the following:
     Enable larger emitters to register reductions if they 
provide entity-wide emissions data and can demonstrate they achieved 
entity-wide emission reductions after 2002 that contribute to the 
President's goal of reducing the greenhouse gas emissions of the U.S. 
economy.
     Provide for simplified procedures for small emitters to 
report and to register reductions.
     Provide for simplified reports from entities that do not 
want to register their reductions.
     Encourage companies and other reporting entities to report 
at the highest level.
     Require participants to ensure the accuracy and 
completeness of their reports, and encourage independent verification.
     Allow participants to report and register reductions 
achieved internationally.
    These key elements of the revised Guidelines, except for the last, 
were included in the December 2003 proposal and, after careful 
consideration by the Department of the public comments received, have 
been retained in the revised General Guidelines contained in this 
notice.
    The President specifically requested that DOE ``enhance measurement 
accuracy, reliability, and verifiability.'' DOE believes that today's 
interim final revised General Guidelines enhance:
     Measurement accuracy by creating a ranking system for 
methods to calculate emissions, incorporating the best available 
inventory methods, and enabling more sources to be covered;
     Reliability by creating a more systematic approach to 
reporting, stressing inventories and entity-wide reporting; and
     Verifiability by creating a more transparent reporting 
system for emissions and reductions, requiring recordkeeping and 
encouraging independent verification.
    The revised General Guidelines establish the basic requirements for 
the enhanced reporting and registration program. The draft Technical 
Guidelines, which are referred to in this preamble and in the text of 
the General Guidelines, when final, will provide the specificity 
necessary to fully implement the emissions inventory and emissions 
reduction guidelines set forth in section 300.6 and section 300.8 of 
the revised General Guidelines. As explained in the notice of 
availability published in the ``Rules and Regulations'' section of 
today's Federal Register, the draft Technical Guidelines have two major 
parts:
     Emissions Inventory Guidelines (Chapter 1), which includes 
detailed guidance on how to measure or estimate greenhouse gas 
emissions; and
     Emission Reductions Guidelines (Chapter 2), which includes 
guidance on the selection and application of methods used to calculate 
emission reductions, including the establishment and modifications of 
base periods and base values.
    After consideration of the hundreds of public comments received on 
the December 2003 proposal, DOE retained the key elements of the 
previously proposed General Guidelines, as described above. However, 
DOE has made a number of important changes, including the addition of 
guidelines to allow reporting and registration of international 
emissions and emission reductions, refinements in the procedures 
governing the definition of ``reporting entity,'' increased specificity 
regarding the requirements for registration, and a modification of the 
de minimis provision to permit the exclusion from emissions inventories 
of up to 3 percent of total emissions, with no quantitative maximum.
    In addition to the changes described above, DOE has made changes to 
reflect or incorporate the further guidance included in the draft 
Technical Guidelines. A few sections of today's revised General 
Guidelines, such as those on entity statements, recordkeeping and 
independent verification, have been expanded to provide additional 
guidance to reporters. In a few instances, the December 5, 2003 
proposed General Guidelines have been modified to reflect changes in 
the requirements for emissions inventories and emission reductions that 
are set forth in the draft Technical Guidelines.
    Once the revised General and Technical Guidelines take effect, the 
1605(b) program will serve as the primary public emission and emission 
reduction reporting mechanism for participants in EPA's Climate Leaders 
program and in DOE's Climate VISION program. The establishment of 
consistent reporting rules for all Federal greenhouse gas reporting 
programs was supported by many of the comments received by DOE. While 
the specific requirements of these other programs for reporting 
emissions and emission reductions may be more prescriptive in some 
areas than the requirements of the revised 1605(b) guidelines, these 
differences should not prevent the use of the 1605(b) program as the 
means by which participating entities publicly report on their 
emissions and emission reduction achievements under the Climate Leaders 
and Climate VISION programs. To support distinct program elements, each 
of these programs is likely, however, to have other additional 
reporting requirements.
    Most of the basic requirements in the December 5, 2003 proposed 
General Guidelines have not changed. To register emission reductions, 
reporting entities with substantial emissions (average annual emissions 
of 10,000 or more tons of carbon dioxide (CO2) equivalent) 
must provide an inventory of their total emissions and calculate the 
net reductions associated with entity-wide efforts to reduce emissions 
or sequester carbon. Entities with average annual emissions of less 
than 10,000 tons of CO2 equivalent (small emitters) are 
eligible, under certain conditions, to register emission reductions 
associated with specific activities without completing an entity-wide 
inventory or entity-wide reduction assessment. DOE believes that these 
registered emission reductions represent the types of ``real 
reductions'' for which the President indicated there should be special 
recognition.
    The revised General Guidelines enable entities to report (but not 
register) emission reductions achieved prior to 2003 as well as report 
emission reductions achieved during or after 2003 that do not qualify 
for registration. They also permit entities to report (but not

[[Page 15172]]

necessarily register) emission reductions associated with specific 
actions or with specific parts of the entity, even if these reports are 
not accompanied by entity-wide emissions and reductions reports.
    For convenience, the basic elements of the revised General 
Guidelines being issued today are graphically represented in Figure 1.

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B. Crosscutting Issues and Revisions

    Many of the comments received on the December 5, 2003 proposed 
General Guidelines were directed at crosscutting issues that affect a 
number of different provisions. A discussion of these issues and DOE's 
response to major comments regarding these issues follows.
1. Whether To Provide for Reporting on International Emissions and 
Reductions
    In the December 5, 2003 proposed General Guidelines, DOE did not 
propose provisions for the reporting or registration of emissions and 
emission reductions occurring outside the United States, but it 
solicited public comment on whether entities should be permitted to 
report and/or register non-U.S. emissions and reductions. DOE also 
solicited comments on other, more specific issues related to the 
inclusion of non-U.S. activities. A large number of commenters 
responded to this request, both at the public workshop and in written 
comments. The vast majority of comments favored the inclusion of 
international emissions and reductions, both for reporting and 
registration. Some comments, however, raised concern about the 
reliability of reports on non-U.S. emissions and reductions, and the 
potential for double-counting reductions that are also recognized or 
credited by other countries.
    DOE has responded to the comments by allowing entities to both 
report and register emissions and emission reductions occurring outside 
the United States, subject to certain requirements. To register such 
international emission reductions, entities must first report on their 
domestic U.S. operations and meet all requirements for registration. 
Entities intending to register emission reductions derived from non-
U.S. operations or offsets must meet all of the requirements for 
registering reductions from U.S. operations. For example, a large 
emitter will have to submit an emissions inventory for all non-U.S. 
operations covered by the entity's report. Registered emission 
reductions must reflect net reductions, based on an entity-wide 
assessment of changes in all emissions, including changes in 
sequestration and avoided emissions. A person or organization without 
domestic U.S. operations is not allowed to report or register 
international emissions and emission reductions, although that person 
or organization's non-U.S. emission reductions may be reported as an 
offset reduction by an entity participating in the 1605(b) program. 
Emissions reductions credited or required under the greenhouse gas 
programs of other countries must be specifically identified as such. 
Because of the need for this disclosure and other national differences, 
all reports on international emissions and emission reductions must be 
compiled and reported on a country-specific basis.
    An entity that chooses to report on some portion of its non-U.S. 
operations must do so in a manner that is consistent with the 
definition of the entity, as set forth in its entity statement (see 
Sec.  300.5). In this regard, the entity's coverage of non-U.S. 
operations must be done in way that is fully consistent with its 
management structure. For example, if an entity chooses to report on 
multiple elements of its North American operations, including some 
elements outside the U.S., then all such operations must be included. 
An entity may register emissions reductions in a portion of the 
countries in which it has operations only if the decision to include or 
exclude countries follows the entity's organizational structure. This 
approach is consistent with how the revised General Guidelines treat 
all parent or holding company relationships with subsidiaries.
2. Whether To Provide for Registered Emissions Reductions
    In the December 5, 2003 proposed General Guidelines, DOE proposed 
to allow reporters to ``register'' reductions if they met specific, 
more stringent, reporting requirements designed to increase the 
credibility of reported emissions and emission reductions. DOE 
explained that allowing the option of registration would provide 
special recognition to those entities that were willing to meet 
additional requirements, while ensuring that all of the program 
elements set forth in section 1605(b) of EPACT would remain available 
to participants that did not choose to register their reductions.
    Public comment on the registration option was mixed. There was some 
support for allowing an option to provide more comprehensive data to 
DOE, but other comments expressed concern that a system that 
differentiated between entities simply reporting and those registering 
would automatically devalue all reductions not registered. Many 
supported only one type of recognition, either reporting alone or 
registration alone, but not two classes of reporting. After considering 
the comments, DOE nevertheless has retained the distinction between 
reporting and registering in the revised General Guidelines. DOE 
continues to believe this is the most effective method for improving 
the program, including improving the accuracy of the reports, as 
directed by the President, while continuing to cover all of the program 
elements required by the statute. The main distinction between 
registering and reporting under the revised guidelines concerns the 
degree to which individual reports cover all of the entity's emissions 
and emission reductions. Under the revised guidelines, large emitters 
interested in ``registering'' reductions must submit entity-wide 
emission inventories and will be recognized only for net reductions in 
their entity-wide emissions. DOE believes that data that reflects 
entity-wide emissions and reductions are better indicators of the 
entity's overall contribution to greenhouse gas reductions and should, 
therefore, be clearly distinguished from reports that are not entity-
wide. DOE believes this characteristic, together with the other 
additional requirements specified in the guidelines, are sufficiently 
significant to warrant a unique designation. Comments on the issue of 
registration were often linked to the issue of transferable credits, 
which is addressed below (II.B.4).
3. Whether To Modify the Proposed Basic Requirements for Registration
    In addition to the general comments received on the desirability of 
allowing reductions to be ``registered,'' a number of more specific 
comments addressed two of the key requirements for registration: (1) 
The requirement for entity-wide reports by large emitters, and (2) the 
limiting of registered emission reductions to only those that were 
achieved after 2002.
    a. Requiring large emitters to report entity-wide emissions and 
reductions. As a prerequisite for registration, DOE proposed to require 
large emitters to submit an inventory of their total emissions and to 
complete an entity-wide assessment of emission reductions. Many 
comments opposed one or both of these requirements. In particular, many 
commenters advocated a change to permit the registration of emission 
reductions resulting from individual projects (or actions), rather than 
reserving registration for those entities that could demonstrate net, 
entity-wide emission reductions.
    Most of the emission reductions that have been reported under the 
existing program are based on identifiable ``projects'' or actions. 
Over 3,000 distinct projects have been reported to DOE since the 
inception of the program. The actions to reduce emissions vary widely 
and include recovery of landfill methane, improved energy efficiency, 
recycling, switching from coal or oil to natural gas, and the 
generation of electricity from nuclear power or

[[Page 15175]]

renewable energy, and many others. Because most large companies and 
institutions regularly take actions that have as one of their effects 
the reduction of greenhouse gas emissions, there are always many 
candidates for project-based emission reductions. But the net effect of 
such project-based reductions on an entity's total emissions is often 
questioned, because large entities may be taking actions that reduce 
certain emissions, while simultaneously taking other actions that 
increase other emissions. Furthermore, it is impossible to evaluate the 
significance of a particular entity's actions to reduce emissions 
unless the total emissions of that entity are known. For these reasons, 
a number of commenters favored retaining the entity-wide focus of the 
proposed revisions to the General Guidelines. DOE continues to find 
these arguments persuasive, and therefore has retained the provision 
requiring large emitters who register to complete an entity-wide 
inventory of emissions and to calculate emission reductions on the 
basis of an entity-assessment of changes in emissions.
    The focus on entity-wide emission reductions does not, however, 
preclude entities from including in their entity-wide assessment the 
effects of ``projects,'' whether they are captured indirectly in 
measures of changes in greenhouse gas emissions intensity or their 
total emissions, or directly through the calculation of increased 
carbon storage resulting from tree plantings, increased avoided 
emissions from nuclear power and renewable energy generation, or 
reductions calculated using various action-specific methods, such as 
the recovery of landfill methane, that are specified in the draft 
Technical Guidelines.
    b. Limiting registration to post-2002 reductions.
    In the December 5, 2003 proposed General Guidelines, DOE proposed 
to permit the registration of only those emission reductions achieved 
after 2002. Most public comments opposed restricting registration to 
post-2002 reductions. Most argued that the revised guidelines should 
provide full recognition to any reduction achieved after the statutory 
base year of 1990, as long as the entity complied with the requirements 
of the revised guidelines. DOE has retained this restriction, however, 
because it believes the arguments against such restriction are contrary 
to the intended focus of the revised Guidelines. The restriction is 
intended to focus the program on recent and future efforts to reduce 
greenhouse gas emissions, rather than on actions taken many years ago. 
Limiting registered reductions to those achieved after 2002 will also 
provide an indication of reporting entities' contributions to the 
President's goal of reducing the greenhouse gas emissions intensity of 
the U.S. economy by 18 percent between 2002 and 2012. In addition, this 
forward-looking focus helps enhance the transparency and verifiability 
of the reported data. Even if the guidelines permitted entities to 
register reductions achieved prior to 2003, DOE believes it is unlikely 
that most entities would be technically capable of meeting all of the 
requirements of the revised guidelines for earlier years, unless they 
already had extensive emission measurement and recordkeeping processes 
in place. The revised General Guidelines still permit reporting of 
historical activity, however, and therefore fully comply with the 
statutory requirements of section 1605(b).
4. How To Assign Responsibility for Reporting Emissions and Emission 
Reductions
    In the December 5, 2003 proposed General Guidelines, DOE proposed 
that: emission inventories cover all emissions from stationary or 
mobile sources within the organizational boundaries of the entity 
(proposed section 300.6(b)); and the entity responsible for emission 
reductions, avoided emissions or sequestered carbon would be the legal 
owner of the facility, land or vehicle which generated the affected 
emission, generated the energy that was sold so as to avoid other 
emissions, or was the place where the sequestration action occurred 
(proposed section 300.8(e)).
    Few comments were received on these proposals and the revised 
General Guidelines contain provisions that closely parallel those 
included in the December 5 proposal (see sections 300.6(d) and 
300.8(k)).
    The draft Technical Guidelines further amplify the revised General 
Guidelines provisions and, in some cases, identify exceptions to these 
general rules. The relevant technical guidance falls into the following 
categories: indirect emissions, biogenic (or natural) emissions, 
avoided emissions, emissions from manufactured products and transfers 
of greenhouse gases to other entities.
    Indirect Emissions: The draft Technical Guidelines specify that 
both the users and generators of electricity, steam and hot/chilled 
water report the emissions associated with these forms of distributed 
energy, and that each report a portion of the associated reductions. 
The guidelines recognize that the emission inventories associated with 
indirect emissions will overlap with those associated with the 
generation of electricity and other forms of distributed energy. This 
overlap is explicit and will be clearly identified in EIA's database of 
entity reports. With respect to emission reductions, the draft 
Technical Guidelines specify methods that will attribute reductions 
associated with the declines in the emissions intensity of generation 
to the owners of the energy generating facilities that resulted in 
these declines. Emission reductions associated with reductions in the 
use of electricity or other forms energy would be attributed to the end 
users.
    Biogenic (or natural) Emissions: Emissions associated with the 
combustion or decay of biomass is another area where the draft 
Technical Guidelines would establish some special rules. Most of the 
carbon sequestered in growing trees is eventually reemitted after the 
trees have been harvested. These emissions occur at many sites: on the 
land where the trees grew, at lumber mills and other wood processing 
facilities, at landfills, and some in waste-to-energy plants or in 
plants burning methane recovered from landfills. Since entities that 
grow trees would report the reductions associated with sequestration 
but most of such sequestered carbon eventually would be reemitted if 
the trees were harvested, the guidelines would assign most of the 
responsibility for such emissions to the tree growers, rather than to 
the users or disposers of wood products. The guidelines would require 
most users and disposers of wood products to treat any resulting carbon 
emissions as biogenic. For example, any entity that directly combusted 
wood or wood products would treat the resulting emissions of carbon 
dioxide as biogenic. However, there is a further exception to this 
rule. The guidelines specify that increased production and distribution 
of methane recovered from landfills should be presumed to substitute 
for natural gas, based on its heat content. Note that methane emissions 
from landfills would be considered anthropogenic, while the carbon 
dioxide produced by the flaring of such methane would be considered 
biogenic.
    Avoided Emissions: ``Changes in avoided emissions'' is one of the 
five methods of calculating emission reductions. While avoided 
emissions are not included in emission inventories, the draft Technical 
Guidelines would enable entities that increase the generation of 
electricity or other forms of distributed energy to account for the 
effects of this increased generation on the emissions of other 
generators. For example, the owner of the wind farm or

[[Page 15176]]

nuclear power plant may qualify to register the avoided emissions 
associated with these facilities, while the competing generator (that 
reduces its total generation and emissions directly), the utility that 
distributes the renewable or nuclear power to users, and the ultimate 
user may not register reductions resulting from the actions of the wind 
farm or nuclear power plant owner.
    Emissions from Manufactured Products: A number of manufactured 
products or materials contain anthropogenic greenhouse gases that are 
emitted to the atmosphere during their normal life cycle. In general, 
the draft Technical Guidelines require the owner, rather than the 
manufacturer, of the product or material to report as part of its 
emissions inventory these emissions at the time the emissions occur.
    Transfers of Greenhouse Gases to Other Entities: Entities that 
capture greenhouse gases and sell or otherwise transfer them to another 
entity usually would have to report such transactions, but their total 
emissions inventory would reflect only those gases actually released by 
the reporting entity, not those quantities transferred. Entities that 
purchase or otherwise receive greenhouse gases from other entities 
would also have to report such transactions, but should also include in 
their emissions inventory only those quantities of gases actually 
released. The receiving entity should also record the amount of 
transferred gas either destroyed or permanently sequestered. To qualify 
for a registered emission reduction in such cases, an entity would have 
to increase the net quantity of emissions destroyed or permanently 
sequestered relative to its base period. The entity responsible for the 
destruction or sequestration may report or register such reductions, or 
may assign the reporting rights for such reductions to other entities, 
such as the entity that initially captured the gas.
5. ``Transferable Credits''
    DOE received many public comments on whether the December 5, 2003 
proposed General Guidelines would faithfully carry out the President's 
February 14, 2002 statement that the Government would give 
``transferable credits'' to entities that can show real reductions of 
greenhouse gas emissions. Although there appears to be a deeply felt 
disagreement on this question, the disagreement seems to be completely 
over form, and not substance. There is substantial if not complete 
agreement among the commenters on the permissible reach of the 
Guidelines, on what the President intended the Guidelines to 
accomplish, and on the extent of and limitations on the Guidelines' 
ability to provide protection to reporting entities in some future 
potential greenhouse gas legal or regulatory regime.
    No commenter on the December 5, 2003 proposal argued that DOE has 
the legal authority to give emissions reductions that are reported or 
registered in the 1605(b) program a regulatory or financial value under 
some future climate policy. For example, the Edison Electric Institute 
(EEI), which has argued that DOE's Guidelines should do something more 
to award ``transferable credits'' (and ``baseline protection'') to 
entities reporting or registering reductions in the 1605(b) program, 
has also stated that the 1605(b) program can only provide ``a 
nonbinding hedge against current and future climate regulatory 
policy.'' (EEI, Feb. 17, 2004). EEI incorporated earlier written 
comments of the Electric Power Industry Climate Initiative (EPICI) that 
also reflected the view that DOE may not issue ``transferable credits'' 
guaranteed to have value under a future climate policy:

    [W]e know of no plans by the President, in calling for these 
distinctly different reforms [transferable credits and baseline 
protection], to attempt by guidelines to bind a future President or 
Congress, and we are not suggesting that he attempt to do so. A 
recognition or certification by DOE of reductions reported 
accurately pursuant to revised 1605 guidelines could not be said to 
have such a binding effect.

EPICI, Sept. 25, 2002, at 16. Similarly, the Competitive Enterprise 
Institute (CEI), the Natural Resources Defense Council (NRDC), and 
several other commenters who urged that the Guidelines either could not 
or should not do anything further with respect to ``transferable 
credits'' also conclude that DOE lacks the authority to provide credits 
that would have a regulatory or financial value under a future climate 
policy. CEI, Jan. 9, 2004; NRDC, Feb. 17, 2004; NESCAUM, Feb. 16, 2004; 
Pew Center, Feb. 11, 2004; and State of New Jersey, Feb. 17, 2004.
    DOE has carefully considered all of these comments and has decided 
that its revised General Guidelines and draft Technical Guidelines 
appropriately meet the objectives the President sought to accomplish on 
this point. In particular, the Guidelines provide more detail on the 
criteria by which reporting entities can be credited with ``registered 
reductions''. DOE believes that its substantial revisions to the 
1605(b) General Guidelines, accompanied by the detailed Technical 
Guidelines, including the provisions regarding registered reductions, 
fully carry out the President's objectives for improvements to the 
program.
    As stated by the Chairman of the Council on Environmental Quality 
in his opening remarks at the Washington workshop on the Notice of 
Inquiry in this proceeding, the revised 1605(b) Guidelines can ``create 
a building block of recognition that * * * will be acknowledged and 
recognized with respect to any future climate policy'' (Transcript 3-4, 
November 18, 2002). By establishing a more credible database of 
emission inventories and net, entity-wide emission reductions, the 
reductions that may be registered under the revised General Guidelines 
and draft Technical Guidelines appropriately carry out the policy 
objectives set forth by the President's statement. It is important to 
note that under both current law and the President's policy, the 
decisions to make and report emission reductions remain voluntary.
6. Whether To Include the General Guidelines in the Code of Federal 
Regulations
    Some commenters argued that it is unlawful or inappropriate for DOE 
to issue the revised General Guidelines as a proposed rule and, when 
final, place them in the Code of Federal Regulations. One commenter 
wrote to the Director of the Federal Register, who oversees the 
publication of both the Federal Register and the Code of Federal 
Regulations, asserting that it is unlawful and inappropriate to codify 
the General Guidelines. The Director responded in a letter that has 
been added to the other public comments filed in this proceeding (see 
Letter, Raymond A. Mosley, Director of the Federal Register, to William 
L. Fang, January 23, 2004).
    DOE has considered these comments, but continues to believe it is 
both lawful and desirable that the revised General Guidelines be 
included in the Code of Federal Regulations. The revised General 
Guidelines clearly are a ``rule'' within the meaning of that term in 
the Administrative Procedure Act (5 U.S.C. 551(4)), and they were 
properly classified as a ``rule document'' by the Office of the Federal 
Register. The Director of the Federal Register also concluded that it 
is proper under the Federal Register Act (44 U.S.C. 1501-1511) for DOE 
to include the revised General Guidelines in the Code of Federal 
Regulations. The revised General Guidelines will be more accessible to 
the public if they are preserved in the Code of Federal Regulations. 
Placing the General Guidelines in the Code of Federal

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Regulations also will not affect the rights of reporting entities 
because codification of rule documents does not affect their nature as 
substantive or procedural or legally-binding or non-binding. Lastly, 
codification is handled by the Office of the Federal Register, and it 
will not add any time to the notice and comment process required by 
section 1605(b).

C. Section by-Section Discussion of the General Guidelines

1. General (Sec.  300.1)
    A new paragraph (f) has been added to this section to indicate that 
DOE intends to periodically review and update the General Guidelines 
and the Technical Guidelines. These periodic reviews would consider 
possible additions to the list of covered greenhouse gases, changes to 
the minimum, quantity-weighted quality rating for emission inventories, 
modifications to the benchmarks specified by DOE, changes to the 
minimum requirements for registered emission reductions, and other 
possible changes to the General and Technical Guidelines. DOE intends 
to coordinate any changes to the Guidelines in order to minimize the 
number of times such changes are made and to ensure that such changes 
are made only after a thorough, public review by DOE and interested 
stakeholders.
2. Definitions (Sec.  300.2)
    The Definitions section of the revised General Guidelines defines 
the key terms used in the General Guidelines. The draft Technical 
Guidelines contain a Glossary that references all of the terms defined 
in the General Guidelines and contains additional terms used only in 
the draft Technical Guidelines. Although comparatively few changes have 
been made to the definitions contained in the proposed General 
Guidelines published on December 5, 2003 a few new terms have been 
added in response to public comments on the proposal and the completion 
of the draft Technical Guidelines. The new terms defined in today's 
revised General Guidelines are: ``aggregator,'' ``start year,'' ``base 
period,'' and ``base value.'' The definitions of other terms have been 
modified to improve their clarity.
    Aggregator. Under the existing program, a number of organizations 
have aggregated the emission reductions of many small entities and 
submitted a single report to EIA. Some comments suggested that a role 
for such aggregators be more clearly defined under the revised General 
Guidelines. In response to these comments, DOE has defined and used the 
term ``aggregator'' in the revised General Guidelines. As defined, an 
aggregator might be any trade association, company or organization that 
collects or compiles information and reports to EIA on behalf of 
businesses, organizations, households or other entities that could 
report directly, but have chosen not to do so. Because the aggregator 
would be the entity reporting to EIA, EIA would recognize the 
aggregator as the entity responsible for any registered emission 
reductions. An aggregator may be a small or a large emitter and must 
report on its own emissions in accordance with whatever rules are 
applicable to its entity type, except that an aggregator that is a 
small emitter may choose not to report on any of its own emissions. In 
reporting on behalf of third-party businesses, organizations, or 
households, the aggregator must follow the reporting rules that would 
apply to those entities if they had themselves reported. DOE encourages 
trade associations and other organizations to serve as aggregators or 
to assist third parties to report directly.
    Start year. ``Start year'' is a new term introduced to identify 
when an entity begins to report under the revised guidelines and to 
establish more clearly the first year for which an entity reports an 
emissions inventory. The start year is the last year of the base 
period(s) initially established by an entity and the year immediately 
preceding the first year for which an entity reports emissions 
reductions. For a particular entity, the start year remains fixed, even 
if changes in the entity require adjustments in base periods or base 
values.
    Base period and Base value. In the December 5, 2003 proposed 
General Guidelines, the terms ``base year'' and ``base period'' were 
used, but definitions for those terms were not included in section 
300.2. ``Base year'' was a single year upon which emission reduction 
calculations were often based. ``Base period'' was a period of 2-4 
years that might also be the basis for emission reduction calculations. 
In today's revised General Guidelines, the term ``base year'' has been 
dropped and the term ``base period'' has been modified to include time 
periods of 1-4 years. Consequently, the term ``base period'' now 
encompasses the meanings originally given to both terms. DOE also has 
included a definition for the term ``base value,'' which is used to 
specify the quantitative value (e.g., emissions, emissions intensity, 
megawatt hours (MWhs), carbon stock) used to calculate reductions. This 
value is usually derived from emissions and/or performance of an entity 
(or subentity) during the base period. The following graphic depicts 
the relationships between a start year, base period, first reduction 
year and reporting years.

[GRAPHIC] [TIFF OMITTED] TR24MR05.001


[[Page 15178]]


    De minimis emissions. The revised General Guidelines include a de 
minimis provision that allows reporters to omit emissions from their 
inventories that are, in total, less than 3 percent of the entity's 
emissions. This provision spares reporters the sometimes 
disproportionate cost of accounting for small emission quantities whose 
contribution to total emissions is small. The definition has been 
changed from the initial proposal as a result of public comment. Public 
comments supported a variety of modifications to the earlier proposal 
to allow exclusion of 3 percent or 10,000 tons, whichever is less. Some 
favored expanding the de minimis level to 5 percent of total emissions, 
although some also endorsed the 3 percent de minimis level, with no 
physical maximum, and a few opposed any de minimis exclusion. The 
revised General Guidelines retain the 3 percent level, but eliminate 
the 10,000-ton maximum exclusion. The 3 percent level appears to be the 
minimum level considered practical by many potential reporters. Given 
the inherent uncertainty of some of the measurement and estimation 
methods specified in the guidelines, emissions representing less than 3 
percent of an entity's total could be considered immaterial. This 
approach ensures that all reporters may exclude the same percentage 
share of their total emissions. The revised General Guidelines also 
make clear that a large emitter, when starting to report, must provide 
an estimate of the emissions that are being excluded, and that de 
minimis emissions must be periodically re-estimated, at least every 
five years, to ensure that they do not exceed the 3 percent maximum. 
The de minimis exemption would not be applicable to small emitters that 
choose to report on the emissions of specific activities, rather than 
on their total, entity-wide emissions.
    Greenhouse gases. This definition has been slightly modified from 
the proposal to indicate that entities may report on other gases or 
particles that have been demonstrated to have significant, quantifiable 
climate forcing effects when released to the atmosphere in significant 
quantities only if DOE has established or approved methods for 
estimating the emissions and emission reductions associated with such 
greenhouse gases. DOE will consider public recommendations on 
appropriate methods for estimating the emissions and emission 
reductions associated with any gases that have significant, 
quantifiable climate forcing effects. Once DOE has concluded that an 
anthropogenic emission meets the definition of greenhouse gases 
specified in the guidelines and has modified the Technical Guidelines 
to establish methods for accurately quantifying such emissions, DOE 
will begin accepting reports on such emissions and will initiate the 
interagency and public review process necessary to add the new emission 
to the list of gases in section 300.5 of the General Guidelines. Only 
after DOE has formally added the identified emission to the list of 
greenhouse gases specifically identified in the General Guidelines 
would entities be permitted to register reductions associated with such 
emissions.
3. Guidance for Defining and Naming the Reporting Entity (Sec.  300.3)
    Public comments on this section of the revised General Guidelines 
varied widely. Some advocated that DOE require entities to report only 
at the highest meaningful level of aggregation, while others 
recommended that entities be given more flexibility in determining how 
best to define themselves. As revised, this section of the General 
Guidelines now addresses three distinct issues: (1) The basis for 
defining entities; (2) the level of aggregation; and (3) the choice of 
an entity name. This section also has been modified from the December 
5, 2003 proposal to accommodate entities with non-U.S. operations that 
report reductions from those operations.
    With respect to the basis for defining entities, public comments 
have suggested that DOE consider a variety of different bases, both 
more general and more specific than the ``legal basis'' originally 
proposed and now included in the definition of ``entity'' in section 
300.2. DOE has made no change in this section because it continues to 
believe that the basis for defining a reporting entity should be found 
in existing Federal, State, or local law. DOE believes it is reasonable 
to define entities according to their legal status because that status 
provides a definable, identifiable basis for determining reporting 
parameters.
    A variety of comments were also submitted on DOE's guidance 
regarding the appropriate level of aggregation of entities. DOE had 
proposed to encourage entities to report at the highest meaningful 
level of aggregation, but to provide entities with the flexibility to 
choose an appropriate level of aggregation. Some comments supported 
requiring that entities report at the highest level of aggregation, 
such as parent or holding company, while others wanted the flexibility 
to define their entity at the subsidiary or plant level. DOE is 
allowing reporting entities to decide on the level of aggregation, 
subject to the condition that they report at the next higher level of 
aggregation any time they choose to report on two or more subsidiaries 
of that level. For example, an entity may be the aggregation of three 
subsidiary entities: A, B, and C. If A and B want to report together, 
then they must also include C. DOE chose this approach because it 
permits entities some flexibility in determining how to define 
themselves, while at the same time it discourages entities from 
reporting only on those subsidiaries that had achieved significant 
reductions in emissions.
    Finally, this section now includes guidance on the selection of a 
name for reporting entities, which previously appeared in the 
requirements for the Entity Statement.
4. Selecting Organizational Boundaries (Sec.  300.4)
    Because many entities are involved in joint or shared financial 
and/or managerial operations, such as joint ventures, partnerships, 
leases, and parent/subsidiary relationships, guidelines are needed for 
defining entity boundaries. DOE has considered several options, 
including operational control; financial control; and equity share, as 
these terms are used in the Greenhouse Gas Protocol developed by the 
World Business Council for Sustainable Development/World Resources 
Institute (WBCSD/WRI). Public comments voiced support for all the 
options, though the comments provided little input on ways to preserve 
flexibility in the establishment of boundaries while also preventing or 
further discouraging the shifting of emissions to non-reporting parts 
of the entity in order to create the appearance of net emission 
reductions. Some comments argued in favor of fixed rules for deciding 
whether to include leased and partially owned operations, while others 
argued that the choice should be left to the discretion of the 
reporting entity. Commenters also raised concerns regarding the 
differences between the terminology used in DOE's proposed General 
Guidelines and the terms used in the WBCSD/WRI Protocol.
    A number of changes have been made to respond to these comments. 
The term ``operational'' used in the DOE's original proposal has been 
changed to ``organizational'' in the revised General Guidelines. The 
section now indicates that the primary basis for defining 
organizational boundaries should be financial control, although 
entities retain the flexibility to use other approaches, such as equity 
share or operational control if necessary. DOE believes that financial 
control should be

[[Page 15179]]

used where feasible because it is the best indicator of which entity is 
most likely to control both the operational and investment decisions 
necessary to affect greenhouse gas emissions. The use of a single 
method, financial control, also minimizes potential conflicts between 
different entities that share ownership of a facility. In such 
situations, the use of different methods for determining organization 
boundaries might lead to conflicting claims regarding reported emission 
reductions.
5. Submission of an Entity Statement (Sec.  300.5)
    A range of comments touched on DOE's proposed requirements for the 
entity statement, including some that advocated differentiating among 
large emitters intent on registering emissions reductions, small 
emitters intent on registration, and entities that do not intend to 
register emission reductions. In response to these comments and in an 
effort to more clearly define the early steps in the reporting process, 
DOE has made a number of changes to this section.
    Two new sub-sections, ``Choosing a start year'' and ``Determining 
the type of reporting entity,'' have been added to more clearly define 
the first steps in the reporting process, and the requirements for 
entity statements have been differentiated for each of the three major 
categories of reporters.
    DOE solicited comments concerning whether, and at what cutoff 
level, small emitters should be allowed to report emissions and 
register emissions reductions without having to meet all of the 
requirements for large emitters. Little feedback was received. DOE has 
retained the simplified reporting requirements for small emitters in 
the revised General Guidelines. EIA will provide a method that entities 
can use to quickly and inexpensively estimate their emissions to 
determine whether they qualify as small emitters. This method, the 
Simplified Emissions Inventory Tool (SEIT), will enable entities to 
prepare a rough estimate of their emissions inventory based on readily 
available quantities of fuel use, land type, livestock, or type and 
size of building(s) owned, although such rough estimates would not meet 
the minimum requirements for an emissions inventory. The SEIT is 
defined and referenced in the revised General Guidelines and discussed 
in Chapter 1 of the draft Technical Guidelines.
6. Emissions Inventories (Sec.  300.6)
    A number of comments were received on this section of the proposed 
General Guidelines. Some opposed the requirement for entity-wide 
inventories as a precondition to the registration of emission 
reductions, while many others favored some type of inventory 
requirement. Because emission inventories provide a comprehensive 
assessment of an entity's total emissions in a given year, DOE is 
proposing to retain the requirement that large emitters complete an 
emissions inventory if they intend to register emission reductions. The 
major changes to section 300.6 involve the emissions estimation method 
rating system.
    DOE has modified this section of the revised General Guidelines to 
reflect the quality rating system incorporated into Greenhouse Gas 
Emissions Inventory Guidelines (Chapter 1 of the draft Technical 
Guidelines). The emissions rating system is designed to: (1) Help 
achieve the President's stated objective of improving the ``accuracy, 
reliability, and verifiability'' of reported emissions; (2) ensure that 
the bulk of reported emissions that meet this standard are as accurate 
as available estimation methods permit; (3) create an incentive for 
reporters to use more accurate methods over time; and (4) be cost-
effective and practical to implement.
    The rating system is based on DOE rankings of available emissions 
and sequestration estimation methods by considering accuracy, 
reliability, verifiability, and practical application. Using these 
criteria, the best available methods are usually rated ``A,'' and given 
a value of 4 points. The next best methods are usually rated ``B'' and 
given a value of 3 points; the next best rated ``C'' and given a value 
of 2 points; and the least desirable methods rated ``D'' and given a 
value of 1 point. The revised General Guidelines require the weighted 
average rating of all reported emissions and sequestration to be 3.0 or 
higher to qualify for registration. This provision reflects DOE's 
belief that methods given an A or B rating are sufficiently accurate to 
serve as the basis for entity-wide reporting, while methods given a C 
or D rating should be used only for those gases or sources that 
represent a small share of the reporting entity's total emissions.
    The emissions rating system is an ordinal rating system in the 
sense that while an A rating is considered better than a B rating, and 
B is better than C, the rating system doesn't specify how much better A 
is than B. Similarly, two ``A'' rated methods for different sources may 
not be of comparable quality. Both will be the best method available 
for a given source, but they may vary in degree of accuracy, 
reliability, verifiability or cost.
    Paragraph (c) of section 300.6 permits and describes how reporters 
may obtain approval for the use of estimation methods not included in 
the Technical Guidelines. DOE encourages reporters to improve their 
emissions inventory methods over time, and DOE will periodically 
consider the desirability of raising the minimum acceptable weighted 
average.
7. Net Entity-Wide Emission Reductions (Sec.  300.7)
    A number of comments addressed entity-wide reductions, including 
the requirement for entity-wide assessments of emission reductions by 
large emitters, the simplified requirements proposed for small 
emitters, the procedures for third party emission reductions (offsets), 
and adjusting for year-to-year increases in net emissions. After full 
consideration of these comments, DOE has made changes to its original 
proposal.
    DOE proposed to allow the reporting of third party emissions 
reductions, referred to as offsets, because it would encourage large 
emitters to actively support emission reductions by non-reporting 
entities, especially small emitters. Comments were received both in 
support of and in opposition to DOE's proposal. Some advocated that DOE 
permit reporting entities to register the ``project-based'' emission 
reductions achieved by third parties, without requiring those third 
parties to meet the requirements of reporting directly to the program. 
Others felt that offset reductions, especially if based on individual 
projects, should meet ``additionality'' tests, to try to ensure that 
the reductions would not have occurred anyway, or at least that there 
be some assurance that the third party did not have net increasing 
emissions.
    DOE has retained the provision allowing reporters to register the 
emission reductions achieved by third parties, as long as those third 
parties meet the requirements of reporting directly to the program. DOE 
believes that this provision will provide an incentive for emitters 
with limited options for reducing their own emissions to support other 
efforts to reduce or sequester greenhouse gas emissions. The revised 
General Guidelines state that the third party achieving the offset 
reductions cannot also report directly to the program, at least not in 
the same year as the offset reductions are reported (see related 
discussion on Aggregators in II.B.4 of this preamble).
    The provision that requires entities to adjust for year-to-year 
increases in net

[[Page 15180]]

emissions has been modified and expanded to improve its clarity.
8. Calculating Emission Reductions (Sec.  300.8)
    A number of comments were received on this section. In response to 
these comments and its own further analysis, DOE has significantly 
expanded this section in order to more clearly define the necessary 
steps in the process of calculating emission reductions. It now begins 
with guidance on the selection of the appropriate calculation methods 
and the establishment of subentities for the purpose of calculating 
reductions.
    The revised General Guidelines are now clearer about how 
subentities are defined and used in the calculation of emissions 
reduc