Reference Approach vs Sectoral Approach

The Reference Approach and the Sectoral Approach often give different results because the Reference Approach is a top-down approach using a country's energy supply data and has no detailed information on how the individual fuels are used in each sector.

The Reference Approach provides estimates of CO2 to compare with estimates derived using a Sectoral Approach. Theoretically, it indicates an upper bound to the Sectoral Approach "1A fuel combustion", because some of the carbon in the fuel is not combusted but will be emitted as fugitive emissions (as leakage or evaporation in the production and/or transformation stage).

Calculating CO2 emissions inventories with the two approaches can lead to different results for some countries. In general the gap between the two approaches is relatively small (5 per cent or less) when compared to the total carbon flows involved. In cases where 1) fugitive emissions are proportional to the mass flows entering production and/or transformation processes, 2) stock changes at the level of the final consumer are not significant and 3) statistical differences in the energy data are limited, the Reference Approach and the Sectoral Approach should lead to similar evaluations of the CO2 emissions trends.

When significant discrepancies and/or large time-series deviations do occur, they may be due to various reasons such as:

Large statistical differences between the energy supply and the energy consumption in the basic energy data. Statistical differences arise from the collection of data from different parts of the fuel flow from its supply origins to the various stages of downstream conversion and use. They are a normal part of a fuel balance. Large random statistical differences must always be examined to determine the reason for the difference, but equally importantly smaller statistical differences which systematically show an excess of supply over demand (or vice versa) should be pursued.

Significant mass imbalances between crude oil and other feedstock entering refineries and the (gross) petroleum products manufactured.

The use of aggregate net calorific and carbon content values for primary fuels which are converted rather than combusted. For example, it may appear that there is not conservation of energy or carbon depending on the calorific value and/or the carbon content chosen for the crude oil entering refineries and for the mix of products produced from the refinery for a particular year. This may cause an overestimation or underestimation of the emissions associated with the Reference Approach.

The misallocation of the quantities of fuels used for conversion into derived products (other than power or heat) or quantities combusted in the energy sector. When reconciling differences between the Reference Approach and a Sectoral Approach it is important to ensure that the quantities reported in the transformation and energy sectors (e.g. for coke ovens) reflect correctly the quantities used for conversion and for fuel use, respectively, and that no misallocation has occurred. Note that the quantities of fuels converted to derived products should have been reported in the transformation sector of the energy balance. If any derived products are used to fuel the conversion process, the amounts involved should have been reported in the energy sector of the energy balance. In a Sectoral Approach the inputs to the transformation sector should not be included in the activity data used to estimate emissions.

Missing information on certain transformation outputs. Emissions from combustion of secondary fuels produced in integrated processes (for example, coke oven gas) may be overlooked in a Tier 1 Sectoral Approach if data are poor or unavailable. The use of secondary fuels (the output from the transformation process) should be included in the Sectoral Approach. Failure to do so will result in an underestimation of the Sectoral Approach.

Simplifications in the Reference Approach. Certain quantities of carbon should be included in the Reference Approach because their emissions fall under fuel combustion. These quantities have been excluded where the flows are small or not represented by a major statistic available within energy data. Examples of quantities not accounted for in the Reference Approach include lubricants used in two-stroke engines, blast furnace and other by-product gases which are used for fuel combustion outside their source category of production and combustion of waxed products in waste plants with heat recovery. On the other hand, certain flows of carbon should be excluded from the Reference Approach, but for reasons similar to the above no practical means can be found to exclude them without over complicating the calculations. These include coals and other hydrocarbons injected into blast furnaces as well as cokes used as reductants in the manufacture of inorganic chemicals. These simplifications will determine discrepancies between the Reference Approach and a Sectoral Approach. If data are available, the magnitudes of these effects can be estimated.

Missing information on stock changes that may occur at the final consumer level. The relevance of consumer stocks depends on the method used for the Sectoral Approach. If delivery figures are used (this is often the case) then changes in consumers' stocks are irrelevant. If, however, the Sectoral Approach is using actual consumption of the fuel, then this could cause either an overestimation or an underestimation of the Reference Approach.

High distribution losses or unrecorded consumption for gas may mean that the emissions are overestimated by the Reference Approach or underestimated by the Sectoral Approach.

The treatment of transfers and reclassifications of energy products may cause a difference in the Sectoral Approach estimation since different net calorific values and emission factors may be used depending on how the fuel is classified.

It is possible to use the IEA CO2 estimates for comparison with the greenhouse gas inventories reported by countries to the UNFCCC Secretariat. In this way, problems in methods, input data or emission factors may become apparent. However, care should be used in interpreting the results of any comparison since the IEA estimates may differ from a country's official submission for many reasons.

A recent comparison of the IEA estimates with the inventories submitted to the UNFCCC showed that for most Annex II countries, the two calculations were within 5%. For some EIT and Non-Annex I countries, differences between the IEA estimates and national inventories were larger. In some of the countries the underlying energy data were different; suggesting that more work is needed on the collecting and reporting of energy statistics for those countries.

Some countries have incorrectly defined bunkers as fuel used abroad by their own ships and planes. Still other countries have made calculation errors for carbon oxidation or have included international bunkers in their totals. Since all of the above will affect the national totals of CO2 emissions from fuel combustion, a systematic comparison with the IEA estimates would allow countries to verify their calculations and produce more internationally comparable inventories.

In addition, the main bias in the energy data and emission factors will probably be systematic and not random. This means that the emission trends will usually be more reliable than the absolute emission levels. By comparing trends in the IEA estimates with trends in emissions as reported to the UNFCCC, it should be possible to identify definition problems or changes in the calculations, which were not reflected in the base year.

For many reasons the IEA estimates may differ from the numbers that a country submits to the UNFCCC, even if a country has accounted for all of its energy use and correctly applied the IPCC Guidelines. No attempt has been made to quantify the effects of these differences. In most cases these differences will be relatively small. Some of the reasons for these differences are:

The IEA uses a Tier 1 Sectoral Approach based on the 1996 IPCC Guidelines. Countries may be using a Tier 2 or Tier 3 method that takes into account different technologies.

• The IEA is using the 1996 IPCC Guidelines.

The IEA is still using the 1996 IPCC Guidelines. Some countries may have already started using the 2006 IPCC Guidelines.

• Energy activity data are extracted from the IEA energy balances and may differ from those used for the UNFCCC calculations.

Countries often have several "official" sources of data such as a Ministry, a Central Bureau of Statistics, a nationalised electricity company, etc. Data can also be collected from the energy suppliers, the energy consumers or customs statistics. The IEA tries to collect the most accurate data, but does not necessarily have access to the complete data set that may be available to national experts calculating emission inventories for the UNFCCC. In addition to different sources, the methodology used by the national bodies providing the data to the IEA and to the UNFCCC may differ. For example, general surveys, specific surveys, questionnaires, estimations, combined methods and classifications of data used in national statistics and in their subsequent reclassification according to international standards may result in different series.

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