How can double counting occur?

Based on a review of the existing literature and UNFCCC submissions (Hood et al., 2014;

Prag, Hood, et al., 2011; Prag et al., 2013; UNFCCC, 2012c; World Resources Institute, 2013a, 2013b), we identify three ways of how double counting can occur:

1. Double issuance, which occurs if more than one unit is issued for the same emission or emission reduction. This leads to double counting of emission reductions if two or more units, representing the same emissions or emission reductions, are used to attain mitigation pledges;

2. Double claiming, which occurs if the same emission reduction is counted twice towards attaining mitigation pledges: once through a GHG inventory by the country where the reduction occurs and once again by the country using a corresponding emission reduction unit. More specifically, double claiming will occur if:

a. an emission reduction falls within the scope of a country’s mitigation pledge;

b. the emission reduction is reflected in the country’s GHG inventory;

c. the same emission reduction is also reflected in a unit that is transferred to another country;

d. the transferred emission reduction unit is not accounted for by the transferring country (i.e. either by adding the unit transferred to its reported emissions or subtracting it from its emissions budget); and

e. the country acquiring the unit uses it to attain its own mitigation pledge; and 3. Double use, which refers to the situation where the same issued unit is used twice to

attain a mitigation pledge, either twice by the same country or once each by two different countries. Double use may occur, for example, if a unit is duplicated in registries, or if one country uses the same unit in two different years to attain mitigation pledges.

Below we further explore how double issuance and double claiming can arise.

3.2.1 Double issuance

Issuing two units for the same emission or emission reduction under a single mechanism is the simplest and most obvious form of double issuance, and hence also easiest to address. In a fragmented carbon market, with multiple mechanisms under international, bilateral, national or non-governmental governance, there is a risk that two different mechanisms could issue a unit for the same emission or emission reduction (Table 3-1).

Table 3-1 Overview of ways in which double issuance can occur Mechanism(s) each issued a unit under the same mechanism for the

Double issuance can involve one or two mechanisms and one or two entities. Indirect forms of double issuance can arise if mechanisms issue units for indirect emissions that occur upstream or downstream of the entities receiving the units. Crediting mechanisms often award credit to those entities that undertake the mitigation actions, while the actual emission reductions occur elsewhere. This makes crediting mechanisms more vulnerable to double issuance than cap-and-trade mechanisms, for which the emission sources falling under the cap are clearly defined from the outset and any overlap with another cap-and-trade mechanisms could be easily identified and avoided.

For example, the CDM issues credits to renewable power plant operators, while emissions are reduced in fossil fuel fired power plants, or to composting facilities for avoiding the dumping of waste on a landfill, while the emission reductions occur at the landfill sites. In some cases, the ownership of the emission reductions is not obvious, and different entities could potentially claim units for the same emission reductions. For example, in a project to promote efficient lighting in households, the households could claim the emission reductions, but so could an energy service company distributing efficient lamps, as could the producers of those lamps.

Double issuance due to the accounting of indirect emissions can become particularly challenging where crediting mechanisms account for life-cycle emissions that may occur far upstream or downstream of where the mitigation activity is implemented. Imagine, for example, a project producing biofuels and another abating N2O from nitric acid production, both under the CDM. The biofuels project uses nitrogen fertilizer in growing its feedstock crops. Due to the biofuels projects, more fertilizer is consumed and hence more nitric acid is produced. The project abating N2O from nitric acid production can claim more credits due to the increased biofuel production. Double issuance would occur if the biofuels project used the actual N2O emission factor observed at the nitric acid plant to calculate upstream project emissions from nitric acid production. In this case, both projects would indirectly claim for the same reductions. Double issuance would be avoided if the biofuel project would use the unabated N2O emission factor to calculate project emissions.

This example illustrates the challenges of identifying and addressing rather indirect forms of double issuance. An important hurdle is that information on where the emission reductions occur (e.g. at which nitric acid plant or landfill site) is sometimes not readily available. In some instances, double issuance may be difficult to identify at all.

3.2.2 Double claiming

Double claiming is controversially discussed in the context of transfer of units from developing to developed countries in the context of the Cancun pledges for 2020 (UNFCCC, 2012c). Under the UNFCCC, developed countries can reflect in their biannual reporting the number of units that they intend to use (UNFCCC, 2012a). However, there are no reporting provisions for developing countries with regard to units issued, transferred, or used to attain mitigation pledges. Double claiming would occur if a seller country does not account for units issued for emissions or emissions reductions within its jurisdiction and internationally transferred (e.g. by adding them to its emissions inventory, or subtracting them from its emissions budget), and if the buyer country uses the units for attaining its mitigation pledge. This form of double counting could range from 0.4 to more than 1 Gt CO2e in 2020 (Erickson & Lazarus, 2013; UNEP, 2013).

As with double issuance, double claiming can occur in more indirect ways when mechanisms account for indirect emissions. Imagine, for example, a country that pledges to reduce emissions from deforestation, and also hosts an efficient cook-stove project under the CDM reducing the use of non-renewable biomass. The resulting emission reductions might be used for pledge attainment by both the host country and the country buying the credits from the cook-stove project. Another indirect form of double claiming can occur due to international trade of electricity, fuels, feedstocks and technologies, if the mitigation actions are taken in one country while the emission reductions occur in another.