ClimatePULSE: Who owns these greenhouse gas emissions?

CC_logo_small.jpgProtocols for corporate greenhouse gas accounting that are based on the ISO 14064 standards, such as the WBCSD/WRI GHG Protocol, use the term “scope” to distinguish between different greenhouse gas emissions sources. There are three categories; Scope 1, Scope 2, and Scope 3. For most registry’s or reporting agencies Scopes 1 and 2 are considered mandatory while Scope 3 is considered optional.
Scope 1 emissions, also known as direct emissions, include any emissions that occur on-site or from company-owned assets. This includes the combustion of fuels, process emissions, and refrigerant leakage. These emissions are aggregated on a facility-level, with the company’s vehicle fleet considered as one “facility.”

Scope 2 emissions, also known as indirect emissions, include any emissions created directly on behalf of the company in the generation of electricity or the delivery of energy via hot water or steam. The reason for accepting responsibility for these emissions is because the company has ultimate control over “turning on the light switch” and they directly benefit from it. Under California’s AB-32 Global Warming Solutions Act utility companies are regulated based on all of their emissions, including those from electricity that is sold to consumers. This results in double-counting in terms of the regulated utility emissions and non-regulated Scope 2, company-based emissions from their electricity use. However, regulating the aggregated emissions at a utility-level makes sense from a regulatory perspective and quantifying indirect greenhouse gas emissions from electricity use makes sense to individual companies because it is so closely tied to cost-saving efforts from energy efficiency projects. This example should start to demonstrate how complicated GHG legislation can become when ownership of emissions is itself a difficult concept to grasp.
The final scope, Scope 3, is a catch-all for remaining emissions that result from the activities of the company. While some protocols recommend Scope 3 emissions sources worth including, what is ultimately included is entirely optional. Many companies choose not to account for and report their Scope 3 emissions and most that do only include emissions from business travel. Some potential emissions sources that can fall under Scope 3 are the shipping of goods (inbound and outbound), emissions from contracted activities (outsourced production, etc.), and even the emissions from resource extraction and product disposal.
This cradle-to-grave analysis, while uncommon, is highly valuable. Most of the emissions that occur in a company’s value chain are either upstream or downstream of the company. It’s straight-forward to see the benefit that a company gets from calculating emissions sources throughout its supply chain, including Scope 3 sources. Because of the close correlation between emissions and fossil fuel use understanding a company’s upstream emissions helps to understand its exposure to risk from volatility in the global energy markets. Downstream emissions; emissions from the distribution, use, and disposal of products are also important to understand.
However, from a regulated point of view, what happens when a company’s distribution contractors are also regulated? One company’s Scope 3 emissions become another company’s Scope 1 emissions – once again, the threat of double-counting emerges. This is the main reason that Scope 3 emissions are voluntary.
From an environmental perspective the benefit of quantifying greenhouse gas emissions is clear, but the economic benefits are also becoming clear. At ClimateCHECK we strongly believe in this double dividend approach and we guiding our clients through this valuable activity, which often includes a detailed understanding of all 3 emissions Scopes. More and more companies are turning the threat of looming climate change legislation into an opportunity by acting early, getting ahead of their competition, and encouraging optimization throughout the supply chain.

8 responses

  1. So if I am following you on all this, if utility companies are regulated and so are gasoline companies, than wouldn’t everyone else (home owners, vehicle drivers, and most businesses not in the energy and fuel business) be “off-the-hook”? Isn’t this also just putting the true cost of energy out on the table – whoever gets in that business must pay the actual cost, not the “preferred” cost of climate change denialism? OK – but then no behavior change is required just higher prices because everyone else in the world is scope 3 except for these jerks who have been ripping off the world (especially the 3rd world) for generations. See: There Will Be Blood or Syriana.
    OK, I get it. Scopes are there to aknowledge the true culprit without making them pay for the damage they’ve done – instead we’ll all take care of our Scope 3 emissions because we “care a lot”.

  2. From a document released in June 2008 by the California Air Resources Board on a draft local government protocol:
    “GHG accounting programs recognize that the indirect emissions reported by one entity may also be reported as direct emissions by another entity. For example, the indirect emissions from electricity use reported by a local government may also be reported as direct emissions by the regionally-serving utility that produced the electricity. This dual reporting does not constitute double counting of emissions as the entities report the emissions associated with the electricity production and use in different scopes (Scope 1 for the regionally-serving utility and Scope 2 for the local government).
    Emissions can only be aggregated meaningfully within a scope, not across scopes. By definition, Scope 2 emissions will always be accounted for by another entity as Scope 1 emissions. Therefore, Scope 1 and 2 emissions must be accounted for separately.
    Reporting both Scope 1 and Scope 2 emissions helps ensure that local governments provide a
    comprehensive emissions profile reflecting the decisions and activities of their operations.”

  3. Just what is the comprehensive US theory on the ownership of oil and gas reserves? It seems to be split. On public lands – BLM, continental shelf ocean reseerves, Alaskan lands, etc. there seems to be some element of oil as a resource held in common. Yet in Texas, Oklahoma, etc. it seeems that oil is very privately owned even though oil companies may take oil from vast reserves outside of the privately owned oir leased land where they are actually drilling. Where is a source for properly understaning the big picture.

  4. Pingback: Mixing Commuting CO2 Reporting with Creative Recycling for Business Sustainability | Efficient Data Centers
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