Greenhouse Gas Emissions Forecasting: Learning from International Best Practices

The NRTEE’s research and analysis of international best practices in GHG emissions forecasting leads it to conclude the following:

From a methodological perspective:

• Hybrid energy-economy models are more effective in producing accurate GHG emissions forecasts as they integrate the strengths of both the traditional bottom-up and top-down approaches to modelling emissions forecasts;
  
• The use of a consistent baseline from year-to-year (including baseline data), assumptions, and conditions across the board is fundamental to ensure emissions forecasts can be accurately compared from year to year;
  
• The use of consistent and agreed definitions of terms and concepts, such as for free ridership and additionality, across government departments involved in forecasting would ensure greater transparency of emission forecasts and facilitate assessment of the forecasts’ accuracy;
  
• There is need for an international perspective in the model so that it can respond appropriately to world events (since in most cases, Canada is a price taker for both commodities and energy, and a primary trader of goods and energy). Canada is acting in concert with other countries on climate policy and its forecasting approaches need to reflect this reality.

From a governance perspective:

• Use of an independent forecasting agency is preferable to provide more accurate and transparent emission forecasts for consideration by government policy makers, external analysts, and Parliamentarians and to facilitate ongoing audit and evaluation.
  
• Multi-source emissions forecasting from a group of individual government departments can be accurate, but works best both when centrally coordinated and with independent authority by the central coordinating department or agency to question other departmental forecasts.
  
• Regular independent reviews, audits and evaluations of government forecasts and forecasting methods by a third-party agency or process helps ensure accuracy of forecasts and that forecasting methodologies are up-to-date and robust.
  
• Forecasting must be sufficiently resourced and financed by governments to ensure data is up to date and most recent improvements in forecasting methodologies are incorporated for the benefit of policy makers taking decisions based on these forecasts.
  
• Regular, ongoing evaluation of past forecasts for accuracy and effectiveness is necessary to ensure continuous improvement of government forecasting methodologies and approaches.
  
• Ensure transparency and clarity with respect to key assumptions and methods.

Good climate change policy stems from accurate emissions forecasting. It is the first building block. The public must have confidence that their government’s GHG policies and measures will result in the emissions reductions promised by political leaders. The government has taken a significant step in the right direction with its 2008 KPIA Plan.

Most countries face similar challenges in producing accurate forecasts for emissions reductions from policies and measures. As highlighted in the introduction to this report, the NRTEE, recognizing that forecasting is difficult and challenging not only in Canada but in all countries, wanted to provide the federal government with examples of how other governments approach and produce emissions forecasts. The case studies show there are few countries that truly utilize all best practices, from both methodological and governance perspectives, in their approaches to emissions forecasting. However, there are best practices in other countries that could be applied to the Canadian context.

The NRTEE hopes that these international best practices can provide insight to the federal government on how best to address some of Canada’s forecasting challenges as identified in the 2007 KPIA Response -- those of transparency and clarity with respect to key assumptions and methods; the consideration of important sensitivities and uncertainties; the importance of consistency in approach across various departments, programs, and measures; and the need to integrate findings in a holistic framework. While the NRTEE appreciates the extent to which the federal government addressed these challenges in its 2008 KPIA Plan, it encourages the government to continue improving its methodology and governance in its approach to emissions forecasting.