In our previous blog post, we began exploring the concept of avoided emissions and its role in progressing decarbonization goals. We discussed how avoided emissions represent the reduction in greenhouse gas (GHG) emissions that occurs as a result of the deployment of a solution (product or service) with inherently lower emissions than the current business-as-usual solution. Avoided emissions are not yet an established category under the Greenhouse Gas Protocol, however companies and investors are beginning to express more and more interest in reporting. In this blog, we’ll explore how avoided emissions fit into decarbonization strategies and present a few recent examples.
Multiple levers can be used to aid in global decarbonization, so it is important to first understand where avoided emissions fit in the broader carbon management schema. Actions can be taken both toward decreasing carbon emissions in the atmosphere and increasing carbon sinks out of the atmosphere. To reach global net zero emissions, companies will need to do more than reduce their inventory emissions, purchase offsets, and remove carbon from the atmosphere. Companies will also need to transform into low-carbon providers - or creators of avoided emissions. Avoided emissions are climate-positive solutions that offer low or zero carbon emissions.
The distinction isn’t always clear between avoided emissions and Scopes 1, 2, and 3 emission reductions. See Table 1 for an outline of some of these differences.
Potential examples of low carbon technologies where an analysis of avoided emissions would be relevant include:
For example, a manufacturer that develops motor oil that enables EVs to run longer on a single charge can use avoided emissions to illustrate the benefits of this new motor oil over standard motor oils. If this manufacturer previously provided standard motor oil and started producing this improved motor oil for EVs, they would also benefit from a Scope 3 reduction.
Both scopes 1-3 emissions reductions and avoided emissions are important for achieving global net zero. The former by reducing the environmental impact of existing operations and the latter by accelerating the transition to carbon free operations.
While the oil and gas industry has yet to publicly report avoided emissions, companies within the sector are actively working to develop and invest in low-carbon technologies. Comparing the impacts of avoided emissions amongst these low carbon technologies enables a clear understanding of which offer the largest reductions in GHGs. There are several resources that can aid in this evaluation, including the EPA’s AVoided Emissions and geneRation Tool (AVERT), the CRANE tool, and Project Drawdown.
Still, navigating avoided emissions in the oil and gas industry poses challenges due to the narrow applicability of credible claims. Notably, the WBCSD excludes solutions that involve fossil fuels, limiting opportunities for oil and gas companies to publicly claim avoided emissions. Despite these limitations on fossil fuels, companies should still perform a lifecycle analysis of all lower carbon solutions, as detailed in avoided emissions frameworks. Energy providers such as PG&E and Bloom Energy are reporting reduced emissions from integrated renewable energy sources, energy efficiency and electrification programs, electric vehicle fueling, and converting industrial customers to natural gas. Outside the energy industry, there are more companies reporting avoided emissions. From electric vehicle manufacturer Tesla to technology manufacturer Panasonic to furniture retailer IKEA, organizations across various industries are embracing the concept of avoided emissions and highlighting their efforts to promote decarbonization by offering lower-carbon alternatives.
The examples above highlight the growing trend among companies to showcase their contributions to decreasing emissions through solutions with avoided emissions. Furthermore, avoided emissions are often used as criteria in green bond financing. Green bonds enable companies to access financing for projects that are deemed to have positive environmental impacts. Some recent examples in the energy and utilities sector include Xcel Energy and Repsol. With more companies looking to address climate change, one can expect to see increased interest in green bonds which will also drive more assessment of avoided emissions.
Avoided emissions are a useful tool for oil & gas companies looking to communicate the positive impacts of their renewable energy and other emissions-free investments and initiatives. Operators should therefore be aware of the spectrum of reporting methodologies and clearly document the standards and assumptions used to ensure transparency and defensibility of their claims. More importantly, however, without high-resolution Scopes 1, 2 and 3 carbon accounting, focusing on avoided emissions is moot on an energy company’s journey to reduce carbon emissions. Calculating and communicating the company’s carbon across its value chain is a prerequisite to accounting and reporting avoided emissions.
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