Principles for accurate GHG inventories and options for market-based accounting

Purpose: Market-based GHG accounting allows companies to report their emissions based on the purchase of emission attributes. This practice is widespread for reporting ‘scope 2’ electricity emissions and has recently been proposed for both ‘scope 1’ (direct) and ‘scope 3’ (other value chain) emission sources. However, the market-based method has been criticised for undermining the accuracy of GHG disclosures, and it is therefore highly important to explore the requirements for accurate GHG inventories and the solutions to market-based accounting. Methods: This paper uses two methods: firstly, thought experiments are used to identify principles for accurate corporate GHG inventories and, secondly, formal prescriptions are developed for possible solutions to market-based accounting. Results and discussion: The findings identify six principles for accurate corporate GHG inventories, which are then used to inform the development of two possible solutions. The first solution is to report changes in emissions caused by company actions separately from the GHG inventory, including any changes caused by the purchase of emission attribute certificates. The second solution proposes a causality requirement for the use of emission attributes in GHG inventories. Although the analysis focuses on corporate or organisational GHG inventories, the principles and solutions apply equally to attributional product carbon footprinting and life cycle assessment more broadly. Conclusions: We emphasise that inventories are only one form of accounting method, and their accuracy should not be undermined by attempting to fulfil functions that are best served by other methods

A comparative prospective life cycle assessment of coal-fired power plants in the US with MEA/MOF-based carbon capture

The adoption of carbon capture technology in coal-fired power plants is expected to play a pivotal role in the energy transition. This study conducted consequential life cycle assessments (CLCAs) of coal-fired power generation in the United States using policy-level accounting. Monoethanolamine (MEA)-based and Mg-MOF-74-based carbon capture have been introduced, with a comparative analysis conducted on the emissions reduction potential of these two materials through their respective mechanisms of absorption and adsorption. The results indicate that carbon capture based on MEA or Mg-MOF-74 can significantly reduce emissions from coal-fired power generation, decreasing from 779.5 Mt CO2e to 50.1 Mt CO2e and 61.1 Mt CO2e in 2050, respectively. The introduction of ultra-supercritical power plants and carbon capture reduced direct emissions from 92% to 51%. MEA outperforms Mg-MOF-74 slightly, with lower emissions due to solvents and cleaning processes. Deviations in Mg-MOF-74's adsorption capacity and degradation rate could lead to 4%-6% model outcome variations. It is also concluded that the stability of MEA's marginal emissions depends on a steady expansion of existing production capacity, while the marginal emissions of Mg-MOF-74 are anticipated to remain unchanged. This study emphasizes carbon capture's potential but stresses the need for prompt implementation and comprehensive assessments before deployment decisions

Methods that equate temporary carbon storage with permanent CO2 emission reductions lead to false claims on temperature alignment

AbstractThere has been renewed interest in equating temporary carbon storage with permanent CO2 emission reductions, both within corporate GHG inventories and for carbon offset accounting. Proposed methods discount future emissions, such that carbon stored temporarily can be accounted for as (some fraction of) a permanent reduction in emissions. These approaches are problematic as long-term temperature change is primarily caused by cumulative CO2 emissions and delayed emissions accumulate in the atmosphere the same as any other emission of CO2. This perspective article uses illustrative examples to show how discounting future emissions results in false temperature alignment and net zero claims. We recommend that emissions and removals should be reported without discounting to ensure that GHG accounts accurately reflect contribution to cumulative emissions. There is value in temporarily storing carbon, e.g. it can reduce peak warming and buy time to implement permanent mitigation measures, but it cannot be treated as equivalent to permanent mitigation, and alternative approaches should be used to convey the value of temporary storage

Creative accounting : a critical perspective on the market-based method for reporting purchased electricity (scope 2) emissions

Electricity generation accounts for approximately 25% of global greenhouse gas (GHG) emissions, with more than two-thirds of this electricity consumed by commercial or industrial users. To reduce electricity consumption-related emissions effectively at the level of individual firms, it is essential that they are measured accurately and that decision-relevant information is provided to managers, consumers, regulators and investors. However, an emergent GHG accounting method for corporate electricity consumption (the ‘market-based’ method) fails to meet these criteria and therefore is likely to lead to a misallocation of climate change mitigation efforts. We identify two interrelated problems with the market-based method: 1. purchasing contractual emission factors is very unlikely to increase the amount of renewable electricity generation; and 2. the method fails to provide accurate or relevant information in GHG reports. We also identify reasons why the method has nonetheless been accepted by many stakeholders, and provide recommendations for the revision of international standards for GHG accounting. The case is important given the magnitude of emissions attributable to commercial/industrial electricity consumption, and it also provides broader lessons for other forms of GHG accounting. © 2017 The Author

EU’s sustainable finance disclosure regulation:Does the hybrid reporting regime undermine the goal to reorient capital to climate action?

Disclosure and reporting are cornerstones of the European Union’s sustainable finance agenda with the goals of reorienting capital flows towards climate and other sustainable investments and minimizing greenwashing. A key component of the regulatory framework is the Sustainable Finance Disclosure Regulation (SFDR), which requires fund managers to calculate and disclose a ‘sustainable investment’ (SI) percentage, aggregating exposure to activities contributing to climate mitigation and adaptation and the other environmental and social sustainability objectives of the European Union. In turn, financial advisors must use SI percentages when advising customers under the Markets in Financial Instruments Directive II. Defining ‘sustainable investments’ in a robust and consistent way is crucial to the effectiveness of SFDR. Based on a review of the regulatory texts and financial sector participant observations this policy analysis article explores the overlapping guidelines framing how market participants are allowed to define sustainable investments, and the implications for achieving the goals of the sustainable finance agenda. The analysis suggests that the ‘unintentionally hybrid’ SFDR regime may perversely incentivize fund managers to forgo the use of the highly detailed EU Taxonomy rules-based approach that precisely defines climate-related ‘substantial contributions’ and apply the vague principles-based approach found in SFDR Article 2.17. This would allow each financial actor to define and determine independently what constitutes a sustainable investment, circumventing the robust, if imperfect, climate-related rules of the EU Taxonomy. The SFDR regime therefore risks undermining the European Commission’s stated goals of increasing capital allocation to sustainable activities and eliminating greenwashing. A sustainability disclosure regime allowing the choice between robust rules and vague principles risks creating opportunities for greenwashing and reduced comparability. Fund managers are likely to select definitions that are least difficult to apply and maximize Sustainable Investment percentages. The current EU regime risks tacitly sanctioning the use of weak metrics, in turn slowing the reorientation of capital towards climate-related and other sustainable investments. The EU must at a minimum provide binding guidance on interpreting Article 2.17, require equal prominence for both SI percentages and EU Taxonomy-alignment scores, as well as address the usability issues of the existing Taxonomy.</p

Coupling attributional and consequential life cycle assessment:A matter of social responsibility

A long-running debate within the life cycle assessment literature concerns the appropriate uses for attributional and consequential forms of life cycle assessment. A recently published contribution to this debate suggests that social responsibility necessarily requires a consequential perspective, and that taking an attributional perspective is optional, but not necessary. The present paper critiques this suggestion by exploring two limitations with only taking a consequential perspective. First, consequential assessments are not additive, in the sense that when added they do not approximate to total aggregate environmental burdens. Second, consequential assessments are not suitable for creating an initial scope of responsibility, as the number of possible decisions available to an agent may be intractably large, and the notion of ‘role’ responsibility is not defined by specific decisions and consequences. This second limitation is derived from a previously identified parallel between attributional and consequential methods and the normative ethical theories of deontology and consequentialism. Based on the exploration of the two limitations, a coupled accounting solution is proposed which uses both consequential and attributional approaches for different but complementary purposes. The paper concludes by suggesting that although the debate on attributional versus consequential methods has occurred largely within the field of life cycle assessment, the proposed coupled accounting solution has broader applicability to other areas of social and environmental accounting.The first author would like to acknowledge the UK’s Economic and Social Research Council, in partnership with the Society for the Advancement of Management Studies (SAMS) and the UK Commission for Employment and Skills (UKCES), for their support through the Management and Business Development Fellowship Scheme, and also Macquarie University for a Visiting Fellowship, and Mona Vale Library