Accounting and reporting avoided emissions along the value chain

Annemarie Kerkhof 26/06/2014

Webinar: Accounting and communicating avoided emissions

– Senior Consultant

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Content

> What are avoided emissions?

> Why communicate about avoided emissions?

> How to calculate avoided emissions? > The guidelines for the chemical industry developed by WBCSD

(World Business Council for Sustainable Development) and ICCA (International Council of Chemical Associations) with support of Ecofys

> Sectors with high potential for avoiding emissions

26/06/2014 Annemarie Kerkhof

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Avoided emissions

Scope 1, 2 & 3

Activities of companies to reduce their emissions


Company

Emission reduction at the facilities of the company itself

Emission reduction in the company’s value chain

Emission reduction enabled by green product portfolios

Low-carbon economy

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Use

What are avoided emissions?


Product X

Material acquisition

Use Production End-of-life



Product A

Emission reduction enabled by product X

Company A

Solution provider

Avoided emissions are emission reductions that occur outside of a product’s life cycle or value chain, but as a result of the use of that product.

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Use

Example: Fuel-efficient car tyres


Additive for car tires


Production End-of-life



Car

Emission reduction enabled by chemical additive

Car manufacturer

Chemical company

Picture: freeimages.com © ColinBroug

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Use

Example: Light-weighted aircraft


Lightweight specialty metal





Aircraft

Emission reduction enabled by light-weight metal

Airline

Company

producing

specialty metals

and alloys

Picture © Paul Hemming

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Use

Example: Insulated houses


Insulation material





House

Emission reduction enabled by insulation material

Construction

sector

Chemical company

Picture © Erwin Wodicka

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Example: Fuel-efficient ball bearings


Fuel-efficient ball bearing



Wind mill

Ball bearing reduces friction which enables

higher energy production

Wind farm

Company

producing ball

bearings

Use Material

acquisition

Material

acquisition Production Production End-of-life End-of-life

Picture © Ecofys

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Terminology

> The term “Avoided emissions” was introduced in the GHG protocol Scope 3 Corporate Value Chain (Scope 3) Accounting and Reporting Standard of WRI (World Resource Institute) and WBCSD (2011)

> “Climate Positive Products” refer to the same concept and is used in the WWF Climate Savers Program

> “Enabling effect” is used in the report of GeSI (2008)

> The term “Scope 4” is also sometimes used to refer to avoided emissions (Ecofys, 2012)


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Why communicating about avoided emissions?


Benefits of communicating avoided emissions • Marketing of products. Emission savings (and cost savings)

is a feature of the product in addition to quality and price • Differentiate from competitors by communicating the total

amount of avoided emissions related to the company’s green product portfolio

• Raising awareness at value chain partners, stakeholders and policy makers

Use

Product X

Material acquisition Production End-of-life

Material acquisition Use Production End-of-life

Product A

Company A

Solution

provider


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Example SKF

> BeyondZero from SKF: http://www.beyondzero.com/


http://www.beyondzero.com/

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Example Dutch Telecom Company KPN

> Easy to communicate and interactive web-based tool: http://www.kpnbespaarmeter.nl/


http://www.kpnbespaarmeter.nl/

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Example of Goodyear

> Goodyear: fuel-saving calculator http://www.goodyear.com/en-US/tires/assurance-fuel-max


http://www.goodyear.com/en-US/tires/assurance-fuel-max

http://www.goodyear.com/en-US/tires/assurance-fuel-max

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How to calculate avoided emissions?


Use

Product X

Material acquisition Production End-of-life

Material acquisition Use Production End-of-life

Product A


Company A

Calculating avoided emissions • Based on Life Cycle Assessment (LCA) • Difference between the life cycle GHG emissions

from two alternative solutions for achieving the same user benefit

• Methodological challenges: • Choice of reference situation/baseline • Uncertainty in future developments • Distribute benefits among value chain partners • Include multiple environmental impacts

Solution

provider

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Standards & Guidelines

> Credibility of results is highly important > Standards and guidelines have been developed to avoid green

washing


ICT (GeSI) Chemical sector (WBCSD/ICCA)

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Guidelines WBCSD & ICCA

> Developed by 20 leading chemical companies and under the umbrella of WBCSD and ICCA, and supported by Ecofys

> Developed between July 2012 and June 2013

> Published on October 14, 2013 at http://www.icca-chem.org/avoidedemissions and http://www.wbcsd.org/chemicals.aspx

> Seek to improve comparability and credibility in measurement and communication of avoided emissions


http://www.icca-chem.org/avoidedemissions

http://www.icca-chem.org/avoidedemissions

http://www.wbcsd.org/chemicals.aspx

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Methodological issues addressed in the guidelines

1. Selection of the baseline

2. Uncertainty in future developments

3. Attribution of avoided emissions to value chain partners

4. Simplified calculation methodology

5. Inclusion of multiple environmental impacts


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Use

1. Selection of the baseline: issue


Product X





Product A

Company A

Solution provider

Use Material

acquisition Production End-of-life Baseline

Baseline: • Old product • Product with same function in the market with high sales volume • Industry average

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1. Selection of the baseline: guidelines

> Guidelines WBCSD & ICCA: first decide at what level in the value chain the study focuses: – Chemical product level: reduction in emissions of a product

relative to an alternative (chemical) product or the industry average

– End-use level: contribution of chemical product to emissions avoided by the use of a certain low-carbon technology, relative to the currently implemented (mix of) technologies


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Example: Different levels in the value chain of wind electricity generation and relevant alternatives that satisfy the same user benefit

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> Solutions to be compared shall: – Be at the same level in the value chain – Deliver the same function to the user – Be used in the same application – Be distributed/used on the market, and not in the process of being banned,

in the reference time period and geographic region. – For the solutions to be compared at a specific level in the value chain this

implies: ● If the study is conducted at the chemical product level any alternative

established product(s) with a high (combined) market share, based on sales volume in the reference year, shall be used. A sufficiently high market share is normally considered to be 20% and above.

● If the study is conducted at the end-use level, the weighted average based on shares of all currently implemented technologies for the same user benefit (including the studied end-use solution to which the chemical product contributes) shall be used.

– Be exchangeable for the typical customer in the selected market in terms of quality criteria

– Be as consistent as possible with the solution of the reporting company in terms of data quality, methodology, assumptions etc.


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2. Uncertainty in future developments: issue

> For some products the use phase can be very long, e.g. the use phase of a building can be 50 years, the use phase of a wind mill can be 20 years

> Future uncertainties include changes in energy-efficiency, energy mix, end-of-life treatment and user behavior, which can change the estimated avoided emissions


Use Material

acquisition Production End-of-life

Product A

Company A

Use Material

acquisition Production End-of-life Baseline

Takes place in future years, possibly >50 years

Takes place in past or present

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2. Uncertainty in future developments: guidelines

> Guidelines WBCSD & ICCA: – First calculate the baseline that assumes no future changes

(i.e. use latest actual data) – For products with a long use phase, e.g. more than 10 years,

the reporting company should provide a qualitative scenario analysis, explaining how each key parameter might change in the future and how this influences the calculated avoided emissions.

– Instead of performing a qualitative analysis, the reporting company may calculate an alternative scenario using a discount factor.


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Use

3. Attribution of avoided emissions to value chain partners: issue


Additive for car tires





Car

Car manufacturer

Chemical company

Car tires


Use Production End-of-life Tyre manufacturer

How to attribute avoided emissions to value chain partners? Important to avoid double counting.

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3. Attribution of avoided emissions to value chain partners: guidelines

> The reporting company must clarify its role in realizing the avoided emissions in the value chain, by using the table below:


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3. Attribution of avoided emissions to value chain partners: guidelines

> The reporting company shall report total emissions avoided along the complete value chain and

> shall report the significance of the contribution of its product to the end-use solution according to the functionality approach as presented in the table of the previous slide.

> In addition, the reporting company shall describe the specific role of its product in such a way that the reader understands how it is related to the GHG emission avoiding function of the end-use solution.


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4. Simplified calculation: issue

> Limited data availability with regard to end-use solutions such as a house or an automobile.

> The solutions to compare might have identical phases or processes in their life cycles that contribute equal amounts of GHG emissions to each solution.


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4. Simplified calculation methodology: guidelines

> Whenever possible, the full life cycle should be considered when calculating avoided emissions, in order to comply with the requirements of ISO 14044.

> Simplified approach omits identical parts or processes in the life cycle of the solutions to be compared


GHG emissions expressed in CO2e/functional unit

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5. Inclusion of multiple environmental impacts: issue

> The guidelines focus on GHG emissions, while other environmental impacts can be important as well.

> Trade-offs can take place when at the same time GHG emissions are reduced while other environmental impacts are increased.

> Ideally, avoided emissions accounting takes all life cycle impact categories into account.


GHG emissions

Other environmental impacts, e.g. water depletion, toxicity

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5. Inclusion of multiple environmental impacts: guidelines

> If a full LCA study is not possible initially, companies may start with an analysis restricted to greenhouse gases as a first step

> The reporting company shall check if trade-offs with other environmental impacts exist by doing a screening LCA

> If trade-offs are identified, the reporting company shall report on these environmental impact categories in the same way as it reports on GHG emissions and should consider not reporting avoided emissions at all.


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Use of the Guidelines of chemical sector

> The guidelines aim to improve comparability and credibility of communication on avoided emissions enabled by chemical products

> Recommended to be used by all chemical companies globally and interested stakeholders

> Consistent reporting will increase the credibility of the entire chemical industry as a solution provider for climate change mitigation

> Should be regarded as a first global effort and not as final guidelines

> Fair reporting needs coordination with value chain partners: feedback on the guidelines from value chain partners and others highly welcomed


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Sectors with potential for avoiding emissions


Number NACE

1 Chemicals and chemical products

2 Renting of machinery and equipment and O.

3 Electricity, gas and water supply

4 Electrical and Optical equipments

5 Manufacturing n.e.c.; recycling

6 Post and Telecommunication

7 Rubber and Plastics

8 Construction

9 Machinery and Equipment n.e.c.

10 Other supporting and Auxiliary Transport Ac.

Source: Ecofys, 2012

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Conclusions

> Strengths Focus on solutions instead of focusing on reducing problems. It can be an incentive for companies to start thinking of innovative low-carbon solutions.

> Weaknesses Without proper standardization there is a risk of green washing. An international standard may increase the credibility of avoided emissions values.


Annemarie Kerkhof Senior consultant Kanaalweg 15-G | 3526 KL Utrecht | The Netherlands T: +31 (0)30 662 3047 M: +31 (0)6 21469834 E: [email protected] I: www.ecofys.com

mailto:[email protected]

http://www.ecofys.com/

Accounting and reporting avoided emissions along the value chain

Technology

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