As part of the net-zero transition, companies now need to take action and mitigate climate change beyond the scope of their value chains. EcoAct Senior Consultant, Lau Tambjerg looks at the emerging concept of avoided emissions and how it could benefit your company.
The Science Based Targets initiative’s (SBTi) global standard for setting net-zero targets was launched just before COP26 last year. This Net-Zero Standard establishes best-practice for companies to set emissions reductions targets and remove residual emissions. Rapid and significant reductions in operational and value-chain emissions are essential for limiting global temperature rise to 1.5°C. EcoAct’s 2021 research of publicly listed companies found that almost two thirds (65%) are committed to net-zero but much more action is needed to avoid the worst impacts of climate change.
Now in addition to setting reductions target for emissions within the value chain, the SBTi is asking companies to consider their ability to reduce society’s emissions beyond their Scope 3. The WRI defines these ‘avoided emissions’ as emission reductions that occur outside of a product’s life cycle or value chain, but as a result of the use of that product. This can include activities such as manufacturing a catalyst to improve production efficiency, providing services enabling energy savings, or selling digital technologies that reduce the need for business travel. These types of activities lead to avoided emissions as they reduce, or avoid completely, emissions from activities that fall outside the company’s Scope 3. Other terms used for avoided emissions include Carbon Handprint, Scope 4, and Climate Positive.
Actively setting targets for avoided emissions has several benefits:
Currently, there is no set standard for calculating avoided emissions or for setting avoided emissions targets. Therefore, companies interested in defining their own targets rely on varying guidance. Here are two examples and their implications for setting avoided emissions targets:
1 . The Avoided Emissions Framework – Mission Innovation
The Avoided Emissions Framework (AEF ) developed by Mission Innovation provides an excellent overview of the calculation methodology for avoided emissions along with several useful references.
In its most basic form, the calculation of avoided emissions takes the same form as any other carbon footprint calculation. This is multiplying activity data (“volume”) with an “avoidance factor” to determine the total GHG emissions avoided. The “avoidance emissions factor” reflects the net avoided emissions per unit of activity. This approach is taken for each solution, product and service which avoids emissions.
Figure 1: Basic CO2e Avoidance Calculation
The calculation of the avoidance factor is complex and should be based on existing academic or industry studies, or otherwise based on relevant data and reasonable assumptions. The AEF identifies eight general steps for quantifying avoided emissions. It is illustrated linearly, but in practice is likely to be an iterative process in collecting and refining data and identifying applicable studies and methodologies.
In the calculation, the AEF expects the assessment of avoided emissions to follow the GHG Protocol accounting and reporting principles of relevance, accuracy, completeness, consistency, and transparency. This in turn follows the principles of Life Cycle Assessment (LCA) as set out in ISO 14040 and ISO 14044.
The net avoided emissions factor is determined by enabling effects and rebound effects as illustrated below:
Enabling effects cover two main aspects:
The avoided emissions factor always include primary enabling effects. Secondary enabling effects and rebound effects can be included if these can be robustly measured and monitored over time, but should be acknowledged and documented.
2. World Resources Institute (WRI) – Estimating and reporting the comparative emissions impacts of products
This paper from WRI provides procedures, recommendations, and guidance for estimating individual products and the comparative emissions of these and hence the avoided emissions from the use of such products.
The guidance discusses many of the methodological challenges associated with calculating avoided emissions and a number of key recommendations for dealing with these.
Additionally, 4 types of targets are identified by WRI as:
No set method for setting these targets exist and it therefore depends on the nature of the company and the preferences of stakeholders in terms of the type and terminology of the target.
The different types of targets have various pros and cons. For example
The nature of the target should therefore be carefully considered when setting it, as this will identify which employees will engage with the target and in what manner. Similarly, the different targets will also be understood differently by various external stakeholders. It is important also to consider what internal requirements and resources are needed to measure, track and meet the target.
As no standard is available to directly reference when establishing an avoided emissions target, we believe it is important to clearly document and potentially communicate the emissions calculation and target methodology. BASF for example provide a summary of their method and Walmart has published an extensive accounting methodology. Within this target methodology we recommend considering and articulating as a minimum:
Many different companies have set targets for and communicated their avoided emissions. Below are some well-known and interesting approaches:
In conclusion, avoided emissions can represent a way your company can do more for the global transition to a net-zero world beyond reducing your own Scope 1, 2 and 3 emissions. Setting a target for doing this can provide an effective way of demonstrating leadership, accelerating climate action, encouraging innovation, and your value chain.
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