Corporate emissions tracking and reporting has recently gone mainstream. C-suites and shareholders are now used to reviewing sustainability statistics alongside financial performance metrics. Many large corporations, including major energy companies, have set emission reduction or net-zero targets and are working through waterfall graphs of annual emission reductions. This is good.
But what kind of figures are they looking at? Various greenhouse gas (GHG) emissions are measured, calculated, or estimated in metric tons to make up an organization’s emissions inventory. To create a single headline figure (and, ideally, an emission reduction road map to go with it), these different numbers are then converted to the familiar “carbon dioxide equivalence (CO2-eq)” figure and combined to form a single GHG footprint.
Metric tons of CO2-eq are the global currency of emissions accounting. The US dollar of emissions economics. It runs through everything from emissions intensity to abatement cost figures. Its role in how we view the costs and benefits of individual climate actions cannot be underestimated. But, as most people working on and with emissions data know, it’s fundamentally flawed.
Calculating equivalence: The concern with Global Warming Potential
CO2-eq is calculated using a simple formula: Metric tons of a GHG multiplied by its “Global Warming Potential” (GWP). A GHG’s Global Warming Potential is an attempt to express the differences in the warming effect of each gas—how much heat it traps while it’s in the atmosphere. Crucially, it does this over a specific time frame. The most used time frame is 100 years (GWP100).
The problem is that different GHGs have different life spans in the atmosphere, so the time frame chosen really matters. Methane, for example, has a heat-trapping effect that is around 120 times as much as CO2, but it only lasts in the atmosphere for about 12 years. Looking at it through a 100-year lens means the 88 years of no effect softens the 12 years of extreme effect. That is why GWP20 is sometimes used to show the impact of shorter-lived gases. The issue is that all major guidance for corporate emissions accounting (e.g., from the Intergovernmental Panel on Climate Change and GHG Protocol) has converged around GWP100. And it’s obscuring urgent opportunities to slow global heating.
The true cost of false equivalence
Is this a mere technicality? You might think that, ultimately, as long as a clear standard is followed and formulas behind figures are declared, we should focus on urgent action, rather than lose time on questions around metrics. But allow me to share with you an example that highlights why an honest debate about metrics is the very foundation of urgent action.
The International Energy Agency (IEA) estimates the oil and gas industry’s direct GHG emissions to be around 5.1 Gt CO2-eq (in 2022), of which 2.4 Gt CO2-eq is methane. The latter figure is based on the 80 Mt of fugitive methane emissions (e.g., leaks, venting, and incomplete combustion) the IEA estimates our industry to be responsible for and is calculated based on a GWP100 for methane of 30 (rounded up from the official 28).
The simple chart on the left shows the figures I have just referenced: a split between methane and CO2 (plus other GHGs) as a share of the oil and gas industry’s total direct emissions based on a GWP100 of 30 for methane. On the right is what the same chart would look like if the methane CO2-eq figure was based on GWP20, which is 84 rather than 30.
Using the (perfectly appropriate) GWP20 for methane in this example nearly doubled the total CO2-eq figure to 9.42 Gt (from 5.1 Gt) and, crucially, now shows methane as making up more than two-thirds of all direct emissions.
These are the types of headlining figures energy company executives and their shareholders look at. If I told them that the big methane problem depicted on the right is also among the cheapest to abate (some of it could even be abated at a profit by selling methane that’s not leaked), the strategic decision to prioritize eliminating methane emissions would be made very easily. And that’s without mentioning that the usual metric for comparing abatement cost across different emissions and their causes is also based on CO2-eq, thereby inflating the cost per metric ton of CO2-eq of methane abated by a factor of three.
A shift to better metrics is possible
So, where does this leave us? The current approach to ensuring methane receives urgent attention is to look at and address it separately, in a sprint that aims to see 75% of direct methane emissions from the oil and gas industry eliminated by 2030. This is driven by the IEA and United Nations Environmental Program and supported by major regulatory efforts underway in the US and Europe.
But there is also scope for the introduction of a better GWP metric—one that overcomes some of the current flaws in the figures we use to compare impact and track progress. The climate science community has been debating alternatives to GWP for over 20 years and new candidates emerge frequently. So far, none of them were able to shake the fundamental issue at the heart of GWP: the choosing of a time frame that determines what’s in and what’s out.
And yet, if a candidate were to emerge, it would be reasonably straightforward to pivot. Emission accounting standards allow for better metrics to be applied and baselines to be recalculated. And because the problem lies with a single metric (GWP), a better version can simply be dropped in. We’d still measure and estimate in metric tons of gas, just with the conversion mechanism changed.
A simple idea based on something we’re all familiar with
Better metrics are available. A team around my colleague, Drew Pomerantz, has proposed an alternative for GWP called Present Global Warming. It builds on a simple idea that’s already widely used in other areas of climate policy: discounting. It offers a way to determine the impact of future climate effects by using a set discount rate that gives each successive year incrementally less weight.
Present Global Warming deploys discounting to elegantly resolve the one big issue of GWP: the arbitrary time frame selection that leads to separate metrics for the short and long term. Instead, the new metric allows us to consider short- and long-term effects simultaneously.
This is not a novel idea. Discounting is widely applied in economics by both governments and corporations. It’s even been discussed in the context of GWP on occasion. In their peer-reviewed paper, Drew and his team make a comprehensive case for discounting, showing how it paints a more useful picture of climate effects across the different GHGs than GWP does.
It’s a viable new metric. A metric that addresses the current issues yet is reassuringly familiar. Most important, it gives executives a more balanced view of both the impacts of their emissions over various time frames and their abatement costs. To drive the right action.
Metrics do matter
This issue is bigger than the oil and gas industry, but it’s where the quickest wins can be had. Addressing the key flaw that currently runs through virtually all corporate emissions metrics would instantly flag just how urgent a priority cutting methane emissions is. It would move those emissions to the top of the executive agenda as an opportunity to make a quick, real, and lasting difference in the global effort to slow warming.
It’s the biggest shot we’ve got, and it’s right there. So, let’s make sure we see it—and grasp it.
