Accounting and reporting avoided emissions along the value chain

Annemarie Kerkhof
26/06/2014
Webinar: Accounting and
communicating avoided
emissions
– Senior Consultant

© ECOFYS | |
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

© ECOFYS | |
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

© ECOFYS | |
Use
What are avoided emissions?
Product X
Material
acquisition
UseProduction End-of-life
Material
acquisition
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.

© ECOFYS | |
Use
Example: Fuel-efficient car tyres
Additive for
car tires
Material
acquisition
Production End-of-life
Material
acquisition
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
Material
acquisition
Material
acquisition
Aircraft
by light-weight metal
Airline
Company
producing
specialty metals
and alloys
Picture © Paul Hemming

© ECOFYS | |
Use
Example: Insulated houses
Insulation
material
Material
acquisition
Material
acquisition
House
by insulation material
Construction
sector
Chemical company
Picture © Erwin Wodicka

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Example: Fuel-efficient ball bearings
Fuel-efficient
ball bearing
Material
acquisition
Wind mill
Ball bearing reduces
friction which enables
higher energy production
Wind farm
Company
producing ball
bearings
Use
Material
acquisition
Material
acquisition
ProductionProduction End-of-lifeEnd-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
Material
acquisition
Product A
Company A
Solution
provider
Emission reduction

© ECOFYS | |
Example SKF
> BeyondZero from SKF: 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/

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

© ECOFYS | |
How to calculate avoided emissions?
Use
Product X
Material
acquisition
Material
acquisition
Product A
Emission reduction
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

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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

© ECOFYS | |
Use
1. Selection of the baseline: issue
Product X
Material
acquisition
Material
acquisition
Product A
Company A
Solution
provider
Use
Material
acquisition
Production End-of-lifeBaseline
Baseline:
• Old product
• Product with same function in the market with high sales volume
• Industry average

© ECOFYS | |
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.

© ECOFYS | |
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
Product A
Company A
Use
Material
acquisition
Production End-of-lifeBaseline
Takes place in future years,
possibly >50 years
Takes place in past or present

© ECOFYS | |
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.

© ECOFYS | |
Use
3. Attribution of avoided emissions to value chain
partners: issue
Additive for
car tires
Material
acquisition
Material
acquisition
Car
Car manufacturer
Chemical company
Car tires
Material
acquisition
UseProduction End-of-lifeTyre 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:

© ECOFYS | |
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.

© ECOFYS | |
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

© ECOFYS | |
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

© ECOFYS | |
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.

© ECOFYS | |
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

© ECOFYS | |
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: a.kerkhof@ecofys.com
I: www.ecofys.com

Accounting and reporting avoided emissions along the value chain

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