Carbon reporting requirements for energy sector
We are facing unprecedented uncertainties in energy markets due to the impact of policies and technologies related to the low carbon energy transition. The reduction of greenhouse gas (GHG) emissions has increasingly become a priority for the business community, including companies active in the oil and gas supply chain.
In Upstream Exploration and Production (E&P) activities, the majority of emissions are associated with the venting, flaring and fugitive emissions of natural gas, and the energy associated with the production of oil and processing of natural gas, which releases significant amounts of carbon dioxide (CO2) and methane (CH4) emissions into the atmosphere. While CO2 and CH4 have significantly different GHG impacts, their combined effects can be aggregated as a single unit measured in tonnes of CO2 equivalent (tCO2e) and referred to as ‘carbon’ emissions.
Climate and carbon-related risks to oil and gas include litigation, threats to infrastructure, and most notably reduced demand. Significant cost reductions in renewables energy over the last decade, quicker and greater than anyone expected, means the oil and gas industry must be responsive to compete with climate policies and societal choices. Investors consider these above-ground risks seriously, compounding recent oil price fluctuations on the opportunity costs associated with the long-term future value of their investment. Clarifying the potential impact of the low carbon energy transition on oil and gas investments is critical.
Many companies, regulators and markets are therefore using Carbon Intensity (CI) as a key metric to determine carbon and climate performance. The CI of oil and gas is a key reporting metric (the amount of CO2 equivalent emissions per unit of energy produced) to assess the carbon performance of oil and gas producers and make more informed choices. As institutional investors and private investment funds are requesting oil, gas and energy companies to evaluate and disclose carbon emissions impacts and climate-related risks to their portfolios, it is becoming an imperative for oil and gas companies to do more CI-related portfolio analysis. Whether it be direct mandatory requirements or a request from investors, CI is moving into the mainstream of ESG reporting requirements.
No matter what size of company, CI needs to be considered alongside other financial and Health Safety Environmental (HSE) performance metrics. CI is one of the key capacity pillars of GaffneyCline’s Carbon Management practice. GaffneyCline is at the forefront of CI reporting in terms of assisting our clients to understand business risk and to safeguard or add value.