3 minutes

To Effectively Address Climate Change, We Need Innovative Greenhouse Gas (GHG) and Energy Accounting Methods

Published By
Max Pinnola
April 22, 2022
Authors: Max Pinnola - ESG Lead, Envision Blockchain; Paul Breslow - Innovation Director, EDF


For Earth Day 2022 our goal is to share voices from the Hedera community highlighting ways we can address climate change and explore uses of Hedera to support monitoring or mitigating technologies to climate impacts, including exchanging of liabilities for greenhouse gas emissions or for improved energy accounting. We want to thank our authors Max Pinnola of Envision Blockchain and Paul Breslow of Electricite de France for sharing their views in this blog post.


Can we  rely on climate and GHG claims if they are based on 2-year old emissions data, double counted renewable energy benefits, and lack proper validation and verification?  

In this article, we will detail some of the current data quality and management challenges related to measuring greenhouse gas (GHG) emissions, and ultimately achieving carbon neutrality. In addition, we will discuss how innovative Distributed Ledger Technology (DLT) technology can be used to solve these issues and more effectively measure, verify, and track GHG emissions and renewable energy, and digitally decarbonize the energy sector and beyond. Hedera’s highly energy-efficient DLT can be a key factor in building trust into energy and carbon markets by managing MRV (Measurable, Reportable, Verifiable) data in a  decentralized, immutable, auditable, transparent, and streamlined environment. The Guardian is a solution that enables the streamlining and automation of data validation and verification in a fully transparent and decentralized environment.  

To be more specific, The Guardian is a modular open-source solution that includes best-in-class identity management and decentralized ledger technology (DLT) libraries. At the heart of the Guardian solution is a sophisticated Policy Workflow Engine (PWE) that enables applications to offer a requirements-based tokenization implementation. The Guardian can be used to model and track verification processes and tokenize MRV data based on standardized requirements in a decentralized, transparent, and immutable environment.  


Time is Running Out to Act on Climate Change, But are our Current Standards and Methodologies Robust Enough? 

According to the Intergovernmental Panel on Climate Change (IPCC), in order to avoid potentially irreversible impacts of climate change, global GHG emissions should be reduced  by approximately 45% by 2030 and achieve net zero by around 2050 (relative to 2010 levels). Therefore, it comes as no surprise that the largest companies in the world are increasingly aligning their GHG reduction targets with the latest scientific models, in an effort to both exhibit their commitment to sustainability, as well as to remain viable in a low-carbon future. The number of companies working with the Science Based Targets initiative (SBTi) has increased nearly 1,900% between 2015 and 2020, with 1,039 cumulatively committed companies representing nearly 20% of global market capitalization (over $20.5 trillion USD). In addition, over 130 countries have made or are considering net zero or carbon neutral climate commitments.

The current process for establishing carbon neutrality generally involves 4 key stages; measure, reduce, offset, and document/validate.  


Measuring is typically conducted in accordance with the GHG Protocol, but there are other standards such as the International Standards Organization's GHG emissions reporting standard (ISO 14064-1). ISO 14064-1 is generally consistent with the GHG Protocol Corporate Standard. 


Emission reductions can be achieved through informed procurement changes, operational changes such as logistics optimization, the adoption of renewable energy or alternative fuels, or energy efficiency upgrades. Further, emissions from purchased electricity can be reduced through contractual instruments such as Renewable Energy Certificates (RECs)—also known as Guarantee of Origin (GOs) in the EU, and Renewable Energy Guarantees of Origin (REGO) in the UK. RECs are a type of Energy Attribute Certificate (EAC), which is a certificate that provides information about the environmental attributes of one megawatt hour (MWh) of electricity (e.g., generated from wind power). In addition to RECs, there are also Emissions Free Energy Certificates (EFECs) from nuclear projects, whose [zero carbon] attributes could also be tracked and certified.  


Carbon offsets allow companies to further reduce net emissions and support projects that remove carbon from the atmosphere. Carbon offsets are certificates representing the reduction or removal of 1 metric ton of carbon equivalent (mtCO2e) from the atmosphere. Offsets are generated by projects that reduce or remove CO2e (e.g., forestry, sustainable agriculture, etc.) and can be purchased and retired by companies to reduce their net emissions.


Finally the corresponding documentation is provided along with a declaration that the standard has been met. PAS 2060, one of the leading carbon neutrality standards, requires public disclosure of documentation and one of three types of validation: self-validation, validation by other parties, or independent third-party validation. Note: in this article, validation indicates the confirmation that the requirements of a standard have been met, while verification indicates the proof of accuracy in data and claims. 

While climate commitments are quickly aligning with science, accurately measuring and tracking GHG emissions is still more of an art than a science. Accurate GHG inventory methodologies and standards have not yet been widely adopted or even fully developed. Issues such as double counting emissions and reductions are (to some degree) unavoidable based on common practices, and industry standards are still in the process of adapting to address these complications. 

Beyond the methodologies and standards themselves, corporate GHG emissions are generally self-reported and often lack third-party verification. According to an EPA study assessing 565 companies within the S&P500 and Fortune 500, reporting to the CDP, only about 50% have had their scope 1 and 2 GHG emissions verified by a third-party. The study added that “most companies pursue third-party verification to at least a limited level of assurance, whereas reasonable levels of assurance from an accredited third-party verifier is activity typically seen only in advanced companies.”

To download the full report, access it on Docsend here.