May 22 - Imagine you’re an urban planner. Now imagine your employer has recently committed to becoming net zero by 2050. On your desk is a major new project. Your material and technology needs are extensive, as are the options to hand. With your new carbon goals in mind, how do you judge which options will produce the least emissions over the long-term?

The answer, in short, is that currently you can’t. Or, at least, you can’t in a way that is scientifically robust or widely consistent. That could be set to change. Following their latest meeting in Sapporo, Japan, in late April, environment ministers from the G7 advanced economies gave their support for a “trusted mechanism” for assessing the comparable emissions profiles of different products and services, saying this could “mobilise financial resources to accelerate the deployment of solutions”.

The official communique comes with two important caveats. First, any such mechanism must be “reliable, comparable and verifiable”. Second, it must help advance actions by consumers, companies and investors to accelerate “efficient emission reductions”, i.e. not be used solely to sell more product.

Backing the case for such a mechanism is the World Business Council for Sustainable Development (WBCSD). The Geneva-based business network argues that it would aid manufacturers of low-carbon products to credibly differentiate their products from those of their less climate-friendly peers.

In an interview, Dominic Waughray, executive vice president at WBCSD, said the emphasis on avoiding rather than cutting emissions would unlock a competitive race for ever-smarter eco-innovations, which, in turn, would accelerate the drive to meet global climate targets.

“For the last 20 years, the policy approach for business and climate action has been around, ‘emit less carbon’, ‘reduce your emissions’, ‘set a reduction target’. Of course, we still need that. It’s absolutely vital,” Waughray said. “But the goal for a successful business is the total reverse of that kind of language. It’s about growth, innovation and creating more value – so, the additional drive for low-carbon innovation has been missing in the language here.”

Given WBCSD’s role as a co-founder of the Greenhouse Gas Protocol, the benchmark framework for modern corporate carbon accounting, Waughray’s enthusiasm for this new approach is significant. That said, he is anxious to clarify that any future mechanism for avoided emissions should be seen as adding to established methodologies, such as the GHG Protocol and the Science Based Targets initiative, not replacing them.

Pragmatism is at play here. According to data from the transparency specialist CDP, 26% of companies actively promoted at least one product or service as “low carbon” in 2021 – up from 16% in 2017. Some companies are already including avoided – or Scope 4 – emissions, in their greenhouse gas accounting. But with precious little guidance or regulation, the possibility for dubiously calculated claims, or outright greenwashing, around avoided emissions is high.

In an initial attempt to bring greater rigour to the subject, WBCSD released a 55-page guidance document ahead of the G7’s recent meeting in Japan. Produced in conjunction with the business-focused Net Zero Initiative, the guidance presents a tentative framework for how to assess, validate and communicate avoided emissions.

The document clarifies what constitutes avoided emissions (and what does not). Critical in this respect is that any avoidance relates to products or services sold by a company and arising as a direct result of that company’s “strategy and activities”. So that excludes offset schemes or companies claiming emissions reductions for following mandatory regulation.

Although endorsed by 19 of WBCSD’s more than 200 member companies (including Panasonic, Hitachi and Siemens), Waughray concedes that the guidance remains a work in progress. As yet, for example, there is no conceptualisation of how to account for new carbon-intensive products and services that add emissions to a reference scenario, rather than avoids them. Nor has a quantified indicator yet been developed to assess whether a solution that avoids emissions also aligns with scenarios aimed at keeping global heating within 1.5 degrees Celsius.

Hence, WBCSD’s intention to work with its partners in the coming months to develop a detailed protocol. It is initially envisioned that the new standard will be built around three core “stage gates”, according to Waughray. To qualify, the “avoided emissions” of a product or service will need to be:

(1) subject to a science-based methodology; (2) aligned with the latest climate scenarios from the Intergovernmental Panel on Climate Change, and (3) able to demonstrate clear additionality (ie the fact that avoided emissions derive directly from a company’s actions and not extraneous factors).

Despite the extensive consultation and feedback required, Waughray hopes that a final version will be ready ahead of the next United Nations climate change summit, scheduled for December 2023 in Dubai. If successful, he anticipates its significance could match that of the GHG Protocol, which, after its launch back in 2001, helped bring to an end a “wild west” period when “nobody understood how to account for carbon emissions,” Waughray says.

Other than product manufacturers and service providers, another avid audience for such clarity is the investment community, says Waughray. He points in particular to Wall Street investors, who at present have no firm way to evaluate the relative contributions of low-emissions solutions being developed on the back of the recent Inflation Reduction Act.

For much the same reason, public policymakers also appear on his list of potential beneficiaries. Take the allocation of public subsidies, he says: “Imagine you have an accounting device that will absolutely tell you which companies are moving quickest into producing zero-carbon goods and services. That way you can direct your subsidy to encourage these first movers.”

Arriving at an agreed mechanism for determining what constitutes an avoided emission will not be plain sailing. As a 2019 report by the World Resources Institute reveals, the methodological challenges are considerable. Most obviously, there is currently no agreed way of determining credible base cases against which a company’s products can be compared. To arrive at a consensus will require not only an agreed calculation method, but also consistent approaches to accounting and data collection.

Other technical hurdles include how to apportion the respective contributions of different value-chain actors to a company’s end product and how to aggregate results for claims at the level of product portfolios.

The biggest problem, however, will be winning over the critics. WBCSD may have persuaded the G7’s environment ministers of the merits of a formal mechanism for avoided emissions, but many others remain unconvinced.

Detractors are primarily concerned that the concept could shift the focus away from pursuing absolute emission reductions. This, in turn, could weaken or slow down existing decarbonisation scenarios, as well as bring confusion to the existing transition process.

“Aside from the obvious pitfalls of who decides what and how we measure these 'avoided emissions', this type of distraction is dangerous and plain ludicrous when the need for real, deep and urgent emission reductions is so pressing," argues Sara Shaw, co-ordinator for climate justice and energy at the environmental charity, Friends of the Earth International.

She also echoes concerns among climate activists that any step that legitimises a move away from calculating emission reductions according to historic inventories runs the risk of allowing “big polluters (to) greenwash themselves”.

It is a fair point. Under an avoided emissions scenario, a large oil company could feasibly claim it was contributing to the fight against climate change because it had developed a highly energy-efficient drilling technique, say, or installed an effective carbon capture system. Its relative emissions might have dropped, but its greenhouse gas footprint (particularly its indirect emissions linked to consumption of its final products) remains high.

Waughray counters that the greenwash argument only stands if the oil company in question was at the same time refusing to transition to renewable energy or otherwise reduce its indirect emissions ‒ an approach he says the protocol’s stage gate system is designed explicitly to prevent.

It is easy to see why the concept of avoided emissions might be palatable to a company bent on stealing a march on its competitors and growing its market share. If Waughray’s prediction of a booming market for low-carbon innovations proves true, however, the idea could see decarbonisation efforts accelerate and emissions rapidly fall. Will that happen? It’s a question that promises fierce discussion in the coming months. That much, at least, cannot be avoided.

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias. Ethical Corporation Magazine, a part of Reuters Professional, is owned by Thomson Reuters and operates independently of Reuters News.