The Concept Of Scope 3 Greenhouse Gas Emissions, And How To Measure Them For Carbon Management By Fossil Energy And Other Companies. Part 2.

There is a growing need for companies to adopt carbon management, meaning to reduce their greenhouse gas (GHG) emissions. Bankers and public stakeholders are demanding it. Worldwide investments in ESG-focused funds in 2021 were 2.3 times larger than they were in 2019.

Fossil fuel companies are being pulled into this. Oil and gas companies may have Scope 3 emissions that are 75% of total emissions, or greater. If it’s not important now, it will be in their near future because these companies are responsible for making the oil and gas that are sold and burned as fuel.

Some of these companies have committed to reducing Scope 1 and 2 emissions, which they can control. But Scope 3 emissions are a bit of mystery because they are emissions from products a company sells, such as oil for car gasoline and gas/coal for power plants, and which is partly beyond their control.

High-tech companies like Google and Microsoft are leaning in to Scope 3 emissions as are a few oil and gas companies. This article series will define Scope 3 emissions and explain their importance to climate goals such as net-zero emissions by 2050. How Scope 3 emissions can be measured is a critical part of knowing when/how to reduce these emissions in buildings, businesses, and communities.

Article 1 defines Scope 1, 2 and 3 emissions, why they are important, and what they look like for a typical oil and gas company.

Article 2 below gives applications of measurement in homes, buildings, companies and communities.

Below is the second part of an interview with Josh Weber, co-founder of nZero.

BIO: Josh Weber founded nZero (then called Ledger8760) with Josh Griffin in 2017. At that time, he was practicing as an energy and regulatory attorney focused on electric and natural gas regulation, renewables development and policy, and customer-driven sustainability initiatives. His experience in regulatory and market issues shaped nZero’s approach to building accessible, accurate, and transparent data to drive decarbonization and guide customer strategy.

5. Please give an example of Scope 1, 2, and 3 emissions for a typical US home.

The average US family burns gasoline in the car, natural gas in the kitchen, and perhaps also for heating. Homes that are air-conditioned are likely serviced every few years and may be topped off with refrigerant. Greenhouse gases created by burning gasoline and natural gas and the refrigerant that has slowly escaped into the atmosphere make up most of my Scope 1 emissions. Most US households also use a lot of electricity which is Scope 2, and the greenhouse gas impact of this activity varies depending on your region and what time of day electricity is used.

Each household also has upstream and downstream Scope 3 effects. Obvious items may include the emissions caused by producing food and household products consumed, including the energy intensive packaging, purchasing an airline flight or two, and the footprint of water and waste treatment.

However, this leaves out the “full life” Scope 3 impact of building the home itself, and perhaps the family car. Producing or constructing these durable goods creates very significant amounts of emissions. Because a family may keep a car or a home for a long period of time, it is easier to see and count the tailpipe emissions from the furnace or the vehicle. However, for complete carbon accounting, it’s important to understand the carbon burden of building the house or the car and averaging that additional footprint out over the years that the house or car is used.

6. For the oil and gas industry, especially upstream, can you estimate what fraction (or range) of total emissions is Scope 3?

Again, nZero doesn’t have any special access to the methodologies or reporting standards of the major oil and gas companies you mention, but a simple review of the 2020 annual report for one of the major companies you mention above indicates that Scope 3 may be close to 95% of overall emissions.

When your business model is built around selling GHG emitting fuels, your Scope 3 cannot help but be extremely high. If you take a look at the annual report, the company documents an emissions decrease of nearly 10% for Scope 1 and Scope 2 between 2019 and 2020, but that decrease doesn’t even move the needle in context of overall emissions when Scope 3 is factored in.

7. How should oil and gas companies, especially upstream companies, reduce their scope 3 emissions in a practical way – such as GHG emissions that come from burning company products like gasoline in cars and natural gas in power plants?

If use of a company’s products emits greenhouse gasses there are really only a few ways to reduce impact: incentivize customers to use less of your product, offer replacement products, or offset the use by capturing GHG from company outlets or removing GHGs from the atmosphere (direct air capture) and storing it underground. It’s my opinion that the only viable answer is all of the above. As much as some would like GHG capture and storage to be a silver bullet, I’ve seen little evidence that current carbon offsets or capture is anywhere near up to the task. Let’s hope that changes, and these companies will invest in that future.

But we come again to the fact that every time I fill up my fuel tank, the oil & gas industry’s Scope 3 becomes my Scope 1, and that’s how oil & gas companies get paid. So the question becomes, how can the oil & gas industry help me reduce my Scope 1 emissions? To help meet this challenge I think we need serious investment in three areas: (1) making cars more efficient so they use less fuel, (2) cars that use clean hydrogen and clean biofuels (keep in mind that not all hydrogen or all biofuels are equally clean), and (3) electric vehicles that use clean electric energy.

We have to be clear that each of these alternatives continues to have a climate impact, but that impact can be less than it is today. That’s why nZero exists. We use our insights to help customers make data-driven decisions about decarbonization. We are working with ethanol plants to calculate the Scope 3 burden of an individual gallon of biofuels. We do 24/7 monitoring of grid intensity so that you can make an educated decision about when to charge an EV using low carbon resources. The examples go on and on, but in short, these upstream companies need to invest in change, and they need data to drive that change.

8. Briefly, how does nZero actually measure or calculate Scope 1, 2, and 3 emissions?

For Scope 1, nZero automates and syncs any available Scope 1 data relevant to a client defining and calculating emissions sources following the GHG Protocol methodology and ISO 14064-1.

If nZero was to calculate an organization’s fleet data, for example, we would first gather a client’s pre-existing telematics data, or utilize client provided data (including fuel reports, purchasing reports, fleet inventory, etc). We then establish a vehicle’s classification (type, weight, year) and engine type. All of this background information is imperative to then correctly calculate the carbon emissions based on distance traveled.

For Scope 2, nZero’s technology is able to report down to an hourly level, offering both Market- and Location-based reporting with 24/7 hourly granularity. Having an hourly view is incredibly important with Scope 2 because it gives clients the ability to identify the impact of the actual generators that met their needs. When organizations do not have an hourly view and are utilizing averages to calculate Scope 2 emissions, they cannot efficiently optimize their renewable energy mix and lower their operational carbon impact.

To calculate a client’s Scope 2 emissions, we intake a tremendous amount of data regarding each hour’s electric use, the financial instruments (tariffs or power purchase agreements) that they used to acquire their electricity, as well as data regarding what resources were operating each hour, and then reassemble a picture of each hour of each day – all year long. This allows us to then calculate the hourly carbon intensity of each kilowatt used.

For Scope 3, we help the client identify the most material and impactful Scope 3 categories for their operations. When we do not have access to client’s first-party data, we source emission factors from databases/data sets that have been developed by reporting agencies, researchers, or other bodies. Where possible, we develop better, first-hand data by working with a client’s vendor or supplier to understand that vendor/supplier’s scope 1 and 2 data, which becomes our customer’s scope 3. Many customers are also understanding the importance of moving to full-life emissions, discussed above, and we help them on that journey.