Greenhouse Gas Emissions Measurement and Reporting: Obstacles and Solutions
As pressure to decarbonize energy systems mounts, it’s critical to be able to accurately measure GHG emissions and compare the emissions footprint of energy supply
As the push for decarbonization continues to gain steam around the world, the greenhouse gas (GHG) footprint of energy in general—and various fuel sources in particular—is becoming as important as price and flexibility of supply. In the global imperative to reduce or eliminate GHG emissions wherever possible, the GHG intensity of fuel supplies is becoming critical to their acceptability and value.
Energy buyers and sellers are set to improve their GHG measurement and reporting practices as a growing number of regulations, incentives, and environmental, social, and governance (ESG)-related disclosure requirements push companies to abate GHG emissions and/or choose cleaner suppliers. The first step in doing so involves accurate analysis and quantification of their GHG footprints.
These efforts will not only help companies avoid costly GHG emissions penalties, but also create value by differentiating cleaner products that merit premium pricing.
Current GHG Emissions Measurement Pressures and Challenges
Energy companies face significant challenges to effectively measure and report the full scope of their GHG emissions, including ongoing difficulties collecting quality data from supply chain partners.
Despite the challenges, energy companies are actively focusing on GHG measurement, reporting, and verification (MRV) for two key reasons:
- New regulations spotlight GHG abatement and reporting. Governments across the globe are taking steps to both incentivize and penalize energy companies to encourage effective GHG abatement and measurement. Some programs are intended to assign a “value” to carbon and methane emissions:
- In the US, starting in 2024, methane emissions are charged per ton, increasing from $900 to $1,500 from 2026 onward.
- In the European Union (EU), energy and industrial products derived from fuel supplies are subject to increasing GHG fees such as the carbon prices set by the EU’s Emissions Trading System.
- New EU regulations will require the fossil fuel industry to measure, monitor, report, and reduce methane emissions to the highest standards, marking the first law of its kind and highlighting the need to assess the full supply chain’s GHG emissions for imported fuels.
- Pressure from public and private markets, investors, and financial institutions. Companies’ upstream supply chains and downstream customer GHG emission intensities are increasingly measured for purposes of corporate ESG goals and compliance, social licenses to operate, and debt- and equity capital-raising. Virtually all corporate sustainability reporting standards and initiatives (e.g., European Sustainability Reporting Standards, International Financial Reporting Standards, Securities and Exchange Commission’s Climate Disclosure Rules) require measurements of full supply chain GHG emissions. Major banks and financial institutions are also seeking to align their financing portfolios to global decarbonization targets (e.g., the Carbon Compass from JP Morgan Chase & Co.).
GHG MRV faces its own challenges:
- Data availability and quality hurdles. Obtaining quality data from partners along the supply chain—especially smaller players who may not yet measure their GHG emissions or face compliance obligations that require them to do so—is a real obstacle.
Fortunately, progress is being made on a global scale, particularly when it comes to methane emissions data in the oil, gas, and coal industries—for example, via the International Methane Emissions Observatory, MethaneSAT, or Carbon Mapper. The abovementioned EU legislation would also build a methane transparency database to make imported methane emissions data public. - No unified standards in place. Disclosure, measurement, and reporting standards include the GHG Protocol and ISO 14046 measurement guidance to the Global Reporting Initiative and International Sustainability Standards Board reporting standards, among others. Many overlap, several are evolving, and all require an in-depth understanding of the latest methods and metrics.
- A lack of transparency, engagement, and collaboration across supply chains. The consequence of disparate standards and data unavailability is an overall lack of transparency throughout the supply chain.
Again, however, new initiatives aim to address this issue: for instance, the United Nations’ Oil & Gas Methane Partnership provides a comprehensive, measurement-based international reporting framework.
How to Measure and Compare GHG Footprints: A Case Study
The critical first step to decarbonizing energy systems is to accurately measure and quantify the GHG emissions of various fuel sources in a standardized manner. As noted, doing so is complicated by a variety of factors, such as a lack of quality data.
Among other drivers, the growing importance of capturing methane emissions, which are over 80 times more harmful per ton than carbon dioxide—is driving the rapid development of new measurement technologies. These include everything from ground monitors and aerial drones to satellite emissions monitoring.
The critical first step to decarbonizing energy systems is to accurately measure and quantify the GHG emissions of various fuel sources in a standardized manner.
Drawing on these new devices, as well as robust methodologies, enhanced data quality, and rigorous measurement and analysis of GHG emissions, BRG professionals conducted an independent lifecycle analysis of GHG emissions (both carbon and methane) of the full supply chain of US liquefied natural gas (USLNG) and competing fossil fuels used for power generation in thirteen destination markets[1] in 2022 (see Figure 1).
This study employed a bottom-up methodology using actual emissions data (to the extent possible) to arrive at a comprehensive comparison of the emissions intensity of primary fuels for a specific period (2022) and specific trade corridors and supply chain segments.
The results presented in Figures 2 and 3 indicate that the average GHG emissions intensity[2] of:
- Coal was over twice as high as USLNG in both Europe and Asia.[3]
- Pipeline gas in Europe was about three-quarters of USLNG for gas coming from Norway but more than one-third higher than USLNG for gas coming from Russia.
- Pipeline gas in Asia was more than four times higher than USLNG in the case of pipeline gas from Turkmenistan and slightly higher than USLNG for pipeline gas from Russia.
The study findings were unique among other recent studies, which typically have found that the GHG emissions intensity—a metric used to provide “apples to apples” comparisons between the emissions of various supply chains—of USNLG is greater than that of coal when used to produce electricity. The difference lies on the methodology and data used by BRG, where actual emissions data and specific trade corridors were evaluated; whereas other studies analyzed aggregated emission factors to develop general theoretical conclusions.
The study findings were unique among other recent studies, which typically have found that the GHG emissions intensity—a metric used to provide “apples to apples” comparisons between the emissions of various supply chains—of USNLG is greater than that of coal when used to produce electricity. The difference lies on the methodology and data used by BRG, where actual emissions data and specific trade corridors were evaluated.
The Value of Effective GHG Measurement and Abatement
Gathering accurate GHG emission information, such as in the study cited above, can help energy companies improve emissions transparency across the value chain and make informed decisions related to emissions targets and benchmarks, GHG abatement strategies and programs, and energy supplier selection.
GHG MRV combined with the cost of GHG emissions and growing regulatory penalties will not only help organizations avoid negative economic, legal, and reputational consequences. They also present a vital economic opportunity.
For example, the IEA suggests that for 2023, 52 percent of methane emissions from the oil and gas sectors globally could have been avoided at no net cost, while a revenue of $12.5 billion could have been generated by selling the abated methane in global markets. Even in the coal sector, where methane abatement is more challenging, the IEA found that in 2023, 53 percent of methane emissions were technically abatable, with 15 percent of them avoided at no net cost; revenue from saved methane sales in this sector could have been up to $6 billion.
Similarly, carbon abatement costs are lower than potential penalties as carbon capture, utilization, and storage technologies have started to reach economies of scale. A market for captured carbon is forming, as these emissions can be used in many ways, including enhanced oil recovery and conversion into chemicals or industrial applications and advanced materials such as carbon fiber.
Mastering GHG MRV is the first step in understanding and incorporating the value of GHG emissions information in companies’ overall business strategies and staying abreast of international initiatives geared toward establishing unified standards.
[1] The destination markets included are the top thirteen importers of US LNG by volume: France, Germany, Italy, Netherlands, Poland, Spain, Turkiye, United Kingdom, China, India, Japan, South Korea, and Taiwan.
[2] GHG emissions intensity is defined as the amount of CO2 and methane emissions in kilograms (kg) emitted throughout the supply chain of each fuel to produce one 1 megawatt-hour (MWh) of electricity in the destination country.
[3] The BRG study refers to France, Germany, Italy, Netherlands, Poland, Spain, Turkiye, and the United Kingdom as “Europe” and China, India, Japan, South Korea, and Taiwan as “Asia” for the purposes of the analysis.
