Category Archives: Carbon

Frequently Asked Questions about embodied emissions

A significant part of our work is analysing our client’s emissions and developing carbon footprints. With more and more attention being put on value chain emissions, embodied emissions are fast becoming a focal point.

However, there is much confusion about what embodied emissions are and how to measure them, so we thought it would be a good idea to publish our clients’ most frequently asked questions and our answers.

What are embodied emissions?

Embodied emissions are all greenhouse gas emissions that are released as part of making a product or service ready for your consumption or use.

Imagine buying a car. Let’s take two key components of a vehicle, metals and plastics. The raw minerals have to be mined and processed to form the metal and transported to the factory where the car is produced. Similarly, plastic is made from oil, which has to be extracted, refined, processed into plastic and transported to the factory for assembly.

The car is made from these and other components and shipped to distribution centres, from where it is transported to the point of sale. All along the way, greenhouse gas emissions are being produced, from extracting materials, manufacturing, assembly, transport and retail. This means that products and services you buy come with an associated carbon footprint. The more greenhouse gases that are released to produce the good or service, and get it to you, the more embodied emissions it contains.

Is there a difference between embodied and embedded emissions?

Typically, these two terms are used interchangeably.

What is the difference between operational and embodied emissions?

Operational emissions are released when you are using a product or a service. If you use a natural gas boiler to heat water, burning the gas causes the release of greenhouse gas emissions. If you drive a car with an internal combustion engine, greenhouse gases are similarly released. If you operate a building, you consume electricity, which in most cases causes the release of emissions at the power plants that produce the electricity.

This contrasts with embodied emissions, which are released before you even start using or consuming a product or service. If you construct a building, greenhouse gases were emitted during the production and shipping of materials such as cement, steel and glass. When you buy those products, you also ‘buy’ the associated greenhouse gas emissions (which in the absence of any carbon price means no one has to pay for these emissions).

In most cases, organisations focus on operational emissions when developing a greenhouse gas inventory, but climate action leaders also factor in embodied emissions in goods and services they buy.

Who in the supply chain accounts for emissions – our suppliers or their suppliers, or us?

Scope 3, or supply chain emissions are, by definition, the direct emissions of another organisation, which means that your scope 3 emissions are someone else’s scope 1 and scope 2 emissions.

If everyone in your supply chain accounted for (and balanced) their scope 1 and scope 2 emissions, you wouldn’t need to address your scope 3 emissions. However, it will be a while yet before everyone accounts for their greenhouse gase emissions, so many leading organisations are electing to take responsibility for their most significant scope 3 emissions themselves, rather than wait for this to occur.

If it happens that both you and your upstream suppliers are accounting for emissions, then both you and your suppliers can work on reducing these emissions, with each of you having different abatement levers available.

There are many advantages of developing a supply chain greenhouse gas inventory because you will better understand your overall emissions profile, including from upstream and downstream activities. Understanding your scope 3 emissions can help you plan for potential carbon price regulations and guide your procurement decisions and product design. It also allows you to communicate to your stakeholders the potential impacts of these emissions and your planned actions to reduce your greenhouse gas emissions and risks.

If both our suppliers and our company account for emissions, isn’t this double counting?

Double counting is an inherent part of scope 3 accounting. For instance, if a steel producer accounts for natural gas consumption under their scope 1 and for electricity consumption under their scope 2 – you would also account for the same emissions attributable to you, but under your scope 3. If the steel producer offsets emissions relating to their product, your scope 3 emissions from using their product will be zero.

The only thing you must be mindful of when it comes to double-counting is that you don’t double-count the same emission between companies within the same scope. The GHG Protocol carefully defines scopes 1 and 2 to ensure that two or more companies will not account for emissions in the same scope. I recommend you follow the rules of the GHG Protocol to ensure you are not double-counting the same emission or emission reduction.

How can I measure embodied emissions?

There are many ways to calculate embodied emissions, with trade-offs between accuracy and ease of calculation.

In an ideal world, everyone accounts for their emissions, and so accounting for your embodied emissions of your scope 3 sources would be an easy exercise. Imagine you are using environmentally friendly paper for printing your organisation’s magazine. If your paper supplier has determined the carbon footprint of their product, you could easily account for the embedded emissions in that paper.

However, you may be procuring tens of thousands of individual products and services. Only a fraction of those suppliers will be able to provide you with information about the embedded emissions in their products and services. And engaging with each individual supplier or looking up supplier-specific greenhouse gas information will be too time-consuming and costly, so you need to find a way to estimate embedded emissions.

Going back to the example of paper. If you don’t know the embedded emissions of your paper, you will need to apply more generic emission factors that translate from your activity data to associated carbon emissions. When it comes to activity data, you can use the weight of the paper, or you can just use its cost. Using the weight of the paper may give you more accurate results in terms of carbon emissions, but it is a bit harder to calculate the weight of the paper, as opposed to just using the expenditure.

What I’ve illustrated here with paper is the same for other products and services you buy. Several software solutions and publicly available data sources exist that translate from activity data or expenditure to associated emissions. Some of these translations may apply global data or data from another region or country that has done this analysis. If you are looking to become carbon neutral in Australia, you can use emission factors provided by Climate Active.

When you start out with accounting for embedded emissions, your data collection processes and your methods may not be very sophisticated. However, it’s important that you start somewhere. You can then work on making your carbon footprint calculation processes more rigorous each time you update your scope 3 carbon footprint. Initially, you may start accounting for embedded emissions relying on relatively low-accuracy data such as expenditure. However, over time, you can improve data quality, perhaps focusing on your biggest sources of emissions and your tier 1 suppliers.

Why do I have to account for professional services that I buy?

When you buy the services of a company, your supplier is most likely running an office and might travel to your place of business, all of which causes greenhouse emissions. By accounting for these emission sources, you are taking responsibility for these emissions. You can work on a plan to reduce these emissions, such as by reducing travel and switching to virtual meetings or by engaging your suppliers to encourage them to procure renewable energy, use energy-efficient vehicles or become carbon neutral certified, potentially under a program such as Climate Active.

If your professional service providers are certified carbon neutral, then their input into your organisation is carbon neutral, meaning that your carbon footprint reduces.

Given that most of the professional services firms we engage are local, does this improve the associated carbon footprint?

You would only be able to demonstrate emissions reduction if you work with your professional service providers to obtain their individual carbon footprint. Assuming that this is probably not the case and that you are most likely translating from expenditure to emissions, you won’t be able to reflect the fact that they are local in your emissions inventory at this time.

Why do I have to account for the food that I buy?

Food accounts for around a quarter of all supply chain emissions globally. Most emissions from food come from deforestation and agriculture. Freight and food manufacturing cause fewer emissions by comparison.

So, given that food production causes so many emissions, it’s considered good practice to include this in your greenhouse gas inventory.

What products and services have the most embodied emissions?

Eight supply chains account for more than half of all global greenhouse gas emissions. Food is one of the most carbon-intensive products. Construction has the next-biggest carbon footprint, at 10% of global emissions, followed by fashion, fast-moving consumer goods (FMCG), electronics, automotive production, professional services, and freight.

Raw material inputs from land use and heavy industries (including agriculture in the food supply chain, cement in construction, plastics in FMCG, and metals in automotive production) drive the majority of emissions.

Figure 1: Emission split in scopes 1, 2 and 3 upstream for selected industries. Source: Net-Zero Challenge: The supply chain opportunity

What construction materials contain the most embedded emissions? Which should I focus on in my data collection?

Our clients often enquire about the carbon impact of their capital works projects. Emissions are determined both by the energy requirements of the operations of a new asset (operational emissions) and the embedded emissions of construction inputs, such as steel or cement.

Due to the carbon-intensive material manufacturing processes and the use of fossil fuels before your construction materials even arrive at your building site, embodied emissions can make up a large part of the carbon footprint of an asset. And once a facility is built, nothing more can be done about embedded emissions.

Given that building new assets requires many different materials, our clients ask what input materials they should put the greatest emphasis on in terms of data collection and reduction efforts.

The most significant embodied emissions come from aluminium, cement, plastic, steel, paint and glass, so you should focus your data collection efforts on these input materials in the first instance, balanced with assessing quantities of these materials in your project. So if you are only using a little bit of aluminium, for example, it may not be relevant to focus on this material over others such as steel and concrete.

Where can you get help?

100% Renewables are experts in helping organisations develop their carbon footprint and emissions reduction strategies. If you need help with your Climate Action Strategy, please contact  Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.

What you need to know about the new Climate Active electricity carbon accounting rules

Are your electricity-based emissions zero because your business is based in the Australian Capital Territory, which buys 100% renewable electricity? Can you deduct the export from your 150 kW system from your electricity emissions? Can you claim the renewable energy proportion of your grid supply? Is the electricity that is being generated from your 99 kW solar system emissions-free, even though you availed yourself of the STC discount? Are your emissions from electricity zero because you just entered into a 100% renewable energy Power Purchase Agreement? Can you deduct GreenPower® purchases from your electricity emissions?

While there are no clear frameworks (other than the GHG Protocol) on how to properly account for electricity-based emissions and their reductions in some countries, we are in a much better position in Australia.

Here, we have the mandatory Renewable Energy Target, which provides the framework for Renewable Energy Certificate creation, and we have a mandatory (NGER) and voluntary (Climate Active) reporting system for emissions.

Climate Active has recently released guidance on how to account for electricity-based emissions and reduction measures, allowing you to get recognition for your renewable energy projects.

The Clean Energy Regulator, which administers the NGER system, is also consulting on the design of a new Corporate Emissions Reduction Transparency report (CERT). If you are a large emitter reporting under NGER, you will be able to show how you are meeting your emissions reduction goals.

Let’s have a look at the new Climate Active rules for accounting for electricity emissions and reduction measures.

New Climate Active rules for carbon accounting for electricity

The Climate Active team recently released a set of rules which are based on best-practice principles in the Greenhouse Gas Protocol Scope 2 Guidance and stakeholder consultation. The new framework applies to annual Climate Active reports from calendar year 2021 and financial year 2020/21 onwards.

One of the most significant changes is that you now need to report both your location and market-based electricity emissions, which is called ‘dual reporting’. If you are reporting under CDP, you will be familiar with this concept.

You must use dual reporting for Climate Active organisation, simple service, building, precinct and event certifications, while you can choose to use a dual reporting method for  product and complex service certifications. You can select either the location- or market-based approach as the primary electricity accounting method, which will determine the number of offsets required to go carbon neutral under Climate Active.

Location- and market-based approach to accounting for electricity emissions

In carbon accounting, one of the most important and largest sources of emissions is the consumption of electricity, which is accounted for under scope 2.

According to the Scope 2 Guidance of the GHG Protocol, there are two distinct methods for scope 2 accounting, which are both useful for different purposes. The methods used to calculate and report scope 2 emissions impact how a company assesses its performance and what mitigation actions are incentivised. When used together, they can provide a fuller documentation and assessment of risks, opportunities and changes to emissions from electricity consumption over time.

The location-based method

This method reflects the average emissions intensity of the grid, based on your company’s location. This method allows you to calculate emissions that you are physically emitting to the atmosphere. So, if your business is located in the ACT, which is 100% renewable, you will still have to apply the NSW grid’s emissions factor, as you are getting your electricity from NSW power plants. The location-based method does not allow for any claims of renewable electricity from grid-imported electricity use.

The only way you can reduce electricity emissions using the location-based method is to site your business in an area where the electricity from the grid has lower emissions (e.g. Tasmania, or New Zealand), to reduce your electricity consumption, or to install behind-the-meter renewable energy systems. Buying renewables will not be recognised under the location-based method.

The market-based method

The market-based method reflects the emissions that you are responsible for from the electricity you purchase, which may be different from the electricity that is generated locally. This method derives emission factors from contractual instruments, such as the purchase of GreenPower®, RECs/LGCs, or bundled renewable energy power purchase agreements. It uses a ‘residual mix factor’ (RMF) to allow for unique claims on the zero-emissions attribute of renewables without double-counting.

Under the market-based approach, you can reduce your electricity-based emissions by being more energy-efficient, by installing onsite renewables and shifting your electricity supply to renewables.

You can choose which method total – market-based, location-based or both—to use for performance tracking and must disclose this in your inventory.

The following sections go through the details of how to treat onsite generation, the export of renewables, the treatment of renewable energy certificates, the purchase of renewables and carbon-neutral electricity.

Treatment of Renewable Energy Certificates

Renewable Energy Certificates consist of Large-scale Generation Certificates (LGCs), from solar PV systems greater than 100 kW, and Small Technology Certificates (STCs), from small-scale solar PV systems of less than 100 kW.

One renewable energy certificate equates 1 MWh of renewable energy generation. You can find more information about these certificates in this blog post.

You can use LGCs to reduce reported electricity emissions under the market-based method, but not STCs.

Market-based method

  • You can use LGCs as a unique claim on the zero-emissions attribute of renewable generation within a Climate Active carbon account (meaning you can deduct retired LGCs from your electricity emissions).
  • You can only use LGCs to account for electricity-based emissions, e.g. direct grid-based electricity (scope 2) or indirect emissions sources (scope 3) consisting entirely of electricity, such as third-party operated data centres, or streetlighting.
  • You must retire LGCs on the Renewable Energy Certificate Registry, with evidence of their retirement, including serial numbers, provided to Climate Active.
  • You should directly retire LGCs in the name of the claimant, for example, ‘Retired on behalf of Company X for 2020 Climate Active carbon-neutral claim’.
  • You may retire LGCs indirectly on behalf of the claimant, for example, by GreenPower®. You should provide serial numbers to Climate Active.
  • In instances where you cannot provide discrete LGC serial numbers, Climate Active may consider accepting other evidence that LGCs have been retired, for example, certificates provided by an electricity generator or electricity bills listing accredited GreenPower® usage.
  • LGCs must have an issuance date of less than 36 months from the end of the reporting year; for example, a calendar year 2020 report (ending 31 December 2020) could use LGCs with an issuance date of no earlier than 1 January 2018.
  • You cannot use STCs to make renewable energy emission reduction claims for grid imported electricity consumption.

Location-based method

  • Neither LGCs nor STCs can be used to make renewable energy emission reduction claims for grid-imported electricity consumption.

Renewable Energy Target

The Renewable Energy Target (RET) is a legislated scheme designed to reduce emissions from the electricity sector and incentivise additional electricity generation from sustainable and renewable sources. The RET consists of two different schemes: the large-scale renewable energy target (LRET) and the small-scale renewable energy scheme (SRES). Your can account for your investments in the LRET under the market-based method.

Market-based method

  • The percentage of electricity consumption attributable to the LRET, as reflected by the Renewable Power Percentage, for a given reporting year, is assigned an emission factor of zero in the carbon account. For example, a business using a total of 1,000 MWh of electricity in 2019, lists 186 MWh as zero emissions (1,000*18.6% (RPP for 2019)).
  • This deduction is not available to you if you are exempt from the LRET (i.e. Emissions Intensive Trade Exposed Industries).

Location-based method

  • There is no separate accounting treatment for the LRET as it is already included in the state emissions factors.

GreenPower®

GreenPower® is an easy way to switch your electricity supply to renewables that are additional to the Renewable Energy Target. If you need more information on how GreenPower® works, please read the GreenPower Guide for Businesses we developed for the GreenPower® program.

You can also obtain accredited GreenPower® under your renewable energy PPA. For more information, please read our GreenPower® PPA blog post.

You can account for your GreenPower® purchases using the market-based method.

Market-based method

  • Accredited GreenPower® usage is assigned an emission factor of zero in your carbon account, regardless of the state in which you are using GreenPower®.
  • GreenPower® use in excess of what is required to account for your direct electricity usage may be used to reduce your other indirect entirely electricity-based emissions (e.g., data centre usage, streetlighting).
  • GreenPower® use in excess to what is required to account for your entire electricity usage cannot be used to offset other non-electricity emission sources in your carbon account (such as, for instance, emissions from your fleet).

Location-based method

  • You cannot use GreenPower® purchases to make zero-emission electricity claims under the location-based method.

Renewable energy Power Purchase Agreements

Renewable energy Power Purchase Agreements (PPAs) are a great way to cost-effectively increase the renewables proportion of your electricity supply. They also allow you to switch your entire electricity to 100% renewables, thus bringing your electricity-based emissions to zero. However, just like with LGCs described above, you need to retire LGCs associated with your PPA to be able to claim the emissions reduction and renewable energy generation.

Market-based method

  • You need to retire LGCs above any mandatory LRET obligations to claim zero emissions for your electricity consumption.
  • Where you cannot be listed on the REC Registry, you need to supply other evidence to the Climate Active team from the retiring body, such as certificates from the electricity provider.
  • You cannot use supplier-specific emissions factors.

Location-based method

  • You cannot use retired LGCs, including under PPAs, to make zero-emissions claims under the location-based method.

Local renewable energy generation

One of the best ways to reduce electricity consumption other than reducing your consumption is to install solar panels or other renewable energy generation systems where your circumstances allow it. If you directly consume electricity from a renewable energy system, it is called a ‘behind the meter’ system.

You can account for behind-the-meter use of renewable generation systems under both the location- and the market-based method. However, you can only account for exported electricity under the market-based method.

Market-based method

  • Behind-the-meter use of electricity from large scale systems may be reported and assigned an emissions factor of zero in your carbon account, only if you retire any LGCs associated with that generation or not create any. An example of when you don’t create any LGCs is when you install a large-scale system, and you choose not to generate any LGCs.
  • If you are creating and selling LGCs, you must treat behind-the-meter usage from large-scale systems the same as electricity consumption from the grid (that is, treated as residual electricity).
  • You may report and assign behind-the-meter use of electricity from small-scale systems an emissions factor of zero in your carbon account, regardless of whether you have created, transferred or sold any STCs associated with this generation.
  • You need to convert exported electricity from renewable systems into an emissions reduction equivalent and net from gross emissions. You can achieve this by multiplying exported electricity by the national scope 2 electricity factor only (to account for transmission losses) for the year of the generation. You must retire any LGCs or not create any. You don’t need to retire any STCs associated with this generation.

Location-based method

  • You may report behind-the-meter use of electricity from large scale systems as zero emissions in your carbon account, provided you retired any LGCs associated with that generation or did not create any.
  • If you create and sell LGCs, you must treat behind-the-meter use from large scale systems the same as electricity consumption from the grid.
  • You may report behind-the-meter use of electricity from small-scale systems as zero emissions in your carbon account, regardless of whether you have created, transferred or sold any STCs associated with this generation.
  • Under the location-based method, you can’t use exported electricity as a reduction in electricity emissions.

Jurisdictional renewable energy targets

Market-based method

  • If you are operating in a jurisdiction where the government retires LGCs (such as, for instance, in the ACT), you can claim the corresponding percentage of emissions impact on your electricity consumption as zero, provided that the LGCs are retired on behalf of the jurisdictions’ citizens and the claim is auditable for the given reporting year.

Location-based method

  • There is no separate accounting treatment, as the emissions benefit is already included in the state factors used to convert electricity consumption into its emissions equivalent.

Climate Active certified carbon-neutral electricity

Market-based method

  • You can convert Climate Active certified carbon neutral electricity into its emissions equivalent and deduct it from the gross carbon account offset liability.
  • You can convert by applying the relevant emission factor for the particular brand of carbon-neutral power.

Location-based method

  • Same rules

Grid-imported (residual) electricity

Market-based method

  • You need to convert electricity usage not matched by zero-emissions electricity attribute claims (residual electricity) into t CO2-e using the RMF according to the below formula: RMF = National EF / (1 – RPP) RMF (residual mix factor), EF (emission factor), RPP (renewable power percentage), e.g. in 2019, the RMF equals: = 0.88 (national scope 2 and 3 EF)/ 0.814 (18.6% RPP) = 1.08 Financial year reports will use the average of the RMF across the relevant calendar years, reflecting the RPP of each 6-month period. While this sounds complicated, Climate Active have electricity calculators that help with calculating the associated emissions.

Location-based method

  • You need to convert electricity use in each state of your operations into t CO2-e using the relevant state NGA factor (either scope 2 and scope 3; or the full fuel cycle factor).
  • The emissions factor used should correspond to the reporting year where possible, i.e. a 2018 reporting year should use the 2018 NGA factors.

If you are interested in the development of a Climate Active carbon inventory for your organisation that takes into account scope 3 emissions and properly accounts for electricity-based emissions/reductions, please consider contacting us. Two of our staff are registered consultants with Climate Active, and we can guide you through the process of achieving certification or developing a Climate Active-ready carbon inventory. If you would like more information, please download our Climate Active brochure, or contact Barbara or Patrick.

Feel free to use an excerpt of this blog on your own site, newsletter, blog, etc. Just send us a copy or link and include the following text at the end of the excerpt: “This content is reprinted from 100% Renewables Pty Ltd’s blog.