Demystifying Avoided Emissions, Part 1

What are avoided emissions?

Companies may look to report avoided - also known as “Scope 4” or “comparative” - emissions when they find they are limited by only reporting Scope 1, 2 and 3 greenhouse (GHG) emissions. Avoided emissions are reductions that occur as a result of the use of a solution (product or service) that has lower GHG emissions compared to the current standard solution. While oil and gas companies are not publicly reporting avoided emissions today, examples could include low carbon fuels and technologies, such as biofuels, wind, solar, and electric vehicles.  Note, for some companies avoided emissions may be non-existant or negligible.

Avoided emissions are not part of the GHG Protocol nor are they required to be reported by any government. Therefore companies have varying definitions and use inconsistent methodologies to report avoided emissions. While still in early stages, both the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD) - which led the development of the GHG Protocol - have released guidance documents on avoided emissions; WRI in 2019 and WBCSD in 2023. Additionally, Mission Innovation (MI) has published an Avoided Emissions Framework and provides an excellent overview of the history of avoided emissions.

Why avoided emissions matter

Assessing avoided emissions drives innovation and investment in low carbon solutions by quantifying impacts of a solution outside a company’s value chain. Quantifying only Scopes 1-3 emissions limits analysts to evaluating a company’s direct, and indirect emissions - excluding the positive impacts of providing low carbon solutions that aid in global decarbonization.

It’s also worthy to note that during the G7’s last meeting in April 2023, they endorsed the role of avoided emissions in assessing decarbonization solutions. They stated “[t]here is also value in acknowledging the contribution of a certain entity to emission reductions of other entities by providing decarbonization solutions in a given system, in other words ‘avoided emissions.’” As a result of this endorsement by G7, investors have been increasingly focused on avoided emissions.

Making avoided emissions claims

While quantifying avoided emissions can be an important part of a company’s sustainability strategy, there are concerns about overstating their impact. To address these concerns, companies need to be transparent with accurate and verifiable data about their avoided emissions. Companies can refer to avoided emissions guidance to ensure they are making credible claims.

WBCSD’s guidance provides a framework by which companies can identify, quantify, and report avoided emissions. Per the WBCSD: “avoided emissions refer to the positive impact to society when comparing GHG emissions of a solution to an alternative reference scenario.” The WRI, WBCSD, and MI guidance on avoided emissions all document the importance of incorporating a full life cycle analysis (see Figure 1). Additionally, all state that while avoided emissions and Scope 1-3 emissions are complimentary, they are not the same. Avoided emissions should not be used to offset Scope 1-3. Furthermore, a company should have a robust understanding of its actual emissions before reporting on avoided emissions.

Figure 2 highlights the various pathways that a corporation can have on global net zero and illustrates the focus of the WBCSD guidance. It is important to note that this guidance states that any solution incorporating fossil fuels is not eligible for an avoided emissions claim. Because this guidance was only just released in March 2023, no companies have yet adopted its framework. So examples of companies including fossil fuel-related solutions as claims as avoided emissions (e.g., replacing coal with natural gas) are fairly common.

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Conclusion

While Scopes 1-3 emissions should be a company’s first priority, avoided emissions can be an important tool to reduce the global carbon footprint. To ensure accuracy and transparency, companies can leverage the WBCSD, WRI, and MI framework to identify and quantify avoided emissions as well as find guidance on reporting. By focusing on technologies and solutions that inherently avoid emissions and documenting progress, companies can demonstrate their commitment to sustainability and responsible business practices.