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Electrifying Everything: the EV Charging Network

Electric Car Charging

The UK automobile industry wants to see 2.3 million publicly available electric car chargers installed in that country by 2030. 2030 is the magic date, because that is the year the UK will end the sale of gasoline / diesel powered vehicles. So an electric charging infrastructure will need to be in place.

2.3 million seems like a lot of chargers, doesn’t it? For comparison purposes, as of 2019 the UK had just over 8,300 filling stations. Even if you suppose that each filling station has 8 pumps, and that recharging an electric vehicle will take 4x longer than refilling a gasoline vehicle, you still only end up with about 256,000 public charge points needed.

The truth is that we have no idea how many chargers are actually needed. In this (now dated) EV charging behavior study 8,300 EV drivers were tracked over three years, and 6 million charge events. The data showed that over 80% of charging was performed at home, even when public chargers were made widely available. This is a completely different behavior to filling a car with gasoline. After all, with gasoline there is no option to fill at home!

Similar circumstances, 1900

In the year 1900 New York City had a population of 100,000 horses on the streets which produced 2.5 million pounds of manure per day that had to be constantly removed. The tonnes of dried and pulverized manure attracted a steady population of disease carrying pests, not to mention the ever present layer of manure stuck to shoes.

Over 40 horses also died each day, and these had to be removed as well. And finally, feeding and stabling 100,000 horses was, in itself, a massive logistics problem.

By 1912, automobiles outnumbered horses on the streets of New York, and by 1917 the last horse car was retired. And with that retirement, the industry that housed, fed, used, and cleaned-up after the horses also faded into history. Disease rates fell, air and water quality improved, carriage houses became first garages, and then later prime Manhattan real estate.

Today’s disruption

We don’t yet understand the consequences of electrifying everything. But we do know that broadly adopted technologies, like the horse and buggy and then the automobile, inevitably create infrastructure to support them. History has also taught us that the infrastructure to support one wave of innovation may not be required in the next.

Widespread adoption of electric automobiles will impact fueling stations, the businesses attached to those stations like restaurants, corner stores, and repair shops, and many others. It will likely drive the cost of electricity higher, at least temporarily, as generation capacity catches up. The adoption of electric vehicles will also drive urban planning / zoning as homes will need to be upgraded to have suitable service to accommodate the extra power draw, and will also need to have suitable high voltage service installed in garages. Electrifying everything will create opportunities, but also eliminate other business types.

And that brings us back to the UK auto industries 2.3 million chargers. The number of chargers needed is, in the words of the recently deceased Donald Rumsfeld, a “known unknown”. We don’t know how many chargers will actually be needed, but it’s going to be a lot. 2.3 million still seems excessive, but who really knows today?

What we can’t see yet are the unknown unknowns. Time will reveal them to us, as well as the opportunities.

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Energy Equity

Solar panel row's

“Energy poverty” is lack of access to modern energy services. I became intrigued by the idea a few days ago listening to an episode of The Energy Gang podcast. The topic was the Equity Outcome of Decarbonization with guest Dr. Destenie Nock.

One tends to think of energy poverty as a developing nation problem. It’s true, after all, that the vast majority of those without access to energy (759M people) are in developing countries like Nigeria, Pakistan, the DRC, Ethiopia and India. For context, the entire generating capacity for sub-saharan Africa is approximately 58GW, spread across a population over a billion people. Annual electricity consumption is about 488 kWh per person, or about 5% of the United States. 600M people have no access whatsoever.

But is it just a developing country problem?

Dr. Nock challenged listeners to think about energy poverty in a different way. Are you energy poor if you live in a developed country? What if you spend a significant portion of your pay check on the power bill? Put on extra sweaters instead of turning the heat up in the winter? Or, as we have seen recently, suffer the extreme effects of a heat wave due to the high cost of electricity for cooling? Maybe even end up hospitalized, or dead.

Renewable energy, especially solar, is frequently put forward as an answer to energy poverty in the developing world. Off grid solutions promise to decentralize generation, and bring power to places that utilities can’t or won’t serve. Renewable energy also offers a route to weaning the developing world away from fossil fuels, coal especially.

In the developed world, rooftop solar is often seen as a way to reduce the power bill. However, some in California say that rooftop solar households are disproportionately wealthy and white, and have put the burden of the cost of the energy transition onto the shoulders of the poor. “Utilities are cynically playing the equity card”, they claim. The numbers seem to back them up, as wealthy households reap the double benefits of subsidies, and reduced utility costs.

Transitioning to a clean, renewable and global energy economy holds out huge promise. Let’s make sure we get the equity part of that promise right, and lift the neediest up at the same time. After all, if 1.1 billion poor Africans live in countries that are burning coal and oil to generate power, it won’t matter what we here in the west do. The planet will still get hotter.

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GREET your vehicle?

Automotive production line. Welding car body. Modern car Assembly plant

Most people know that the carbon footprint of an electric vehicle, in use, is lower than that of an internal combustion vehicle. Except in the rare case that the electricity used by the vehicle is all generated from coal-fired stations, all of the literature confirms this. But what about the emissions impact of manufacturing an all-electric vehicle compared to an internal combustion engine? Well, that turned out to be a bit of a rabbit hole.

The first thing to know is that neither the automobile industry, nor the research models themselves, report data on emissions solely created during manufacture. Argonne Labs (part of the US Dept of Energy), has a comprehensive model called GREET (The Greenhouse gases, Regulated Emissions, and Energy use in Technologies Model) which seems to be the gold standard for all research at this point. GREET has been in development since at least 1999, and models everything to do with vehicular transport. It specifically separates the world into a fuel-cycle model, and a vehicle-cycle model, and what we’re after is the vehicle-cycle, which includes everything from raw materials sourcing, to manufacture, end-of-life, and recycling if applicable.

There are two challenges with GREET.

  1. The output is a “levelized” model. What this means is that it produces a number which is emissions generated per distance travelled. Even though the emissions we are interested in are generated during manufacture, GREET apportions them over the expected life of the vehicle. It tries to answer the macro question of vehicle emissions, rather than helping us to understand the manufacturing emissions cost.
  2. The model itself is incredibly detailed. Although it contains a (large) database of assumptions for all kinds of vehicle types, these will vary from manufacturer to manufacturer. It cannot know, for example, where one manufacturer sources electricity versus another. Only the individual corporations will know that.

GREET is a useful framework. It is being maintained actively by Argonne National Labs and was most recently updated in 2020. Researchers have published papers which claim to use the models, but also (necessarily) make gross assumptions about sources of materials and fuels. The independent research, therefore, can’t tell us much either.

Some of the manufacturers themselves do appear to use the framework. For example, if you read Ford’s 2020 CDP disclosures you will find that they reference the GREET 2019 model in their calculation of Scope 3 up-stream emissions footprint. They simply do not report the results for individual vehicles, but rather report on emissions in aggregate. However, GM and Fiat-Chrysler‘s filings show that they use completely different methodologies at this point, at least for disclosure.

For me, this is an unsatisfying answer. It does illustrate, however, the complexity of analyzing scope 3 emissions, and the challenge that lies ahead in understanding the true emissions associated with products we purchase. It also begs for a consistent methodology to be used across industries.

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Renewables “On Fire”

Windmills at sunset

The theme that renewable energy is cheaper than some kinds of fossil fuels keeps recurring. The Guardian reported last week that solar and wind are often cheaper than coal, noting that the cost of solar and wind have dropped 85% and 56% respectively over the last decade. Last fall, the IEA said Solar is now the cheapest electricity in history. In January 2021, the US EIA forecast that 84% of new capacity would be zero carbon. In fact, according to IRENA (the International Renewable Energy Association) global installs of renewables last year hit a record. And finally, in the 3rd episode of the Big Switch, University of Texas post doc researcher Dr. Joshua Rhodes talked about how Texas (home of big oil!) now deploys the largest wind generation fleet in the United States.

The energy industry is building zero carbon capacity, and this will be a key factor in the effort to decarbonize global supply chains. Should we expect to see the entire grid become zero carbon? That’s probably unrealistic, for now.

For starters, there will always be a need for a reliable energy source that can be turned off and on at will. Large scale energy storage solutions, such as massive battery systems, will get us part of the way there. However, unless new technology, or new nuclear installs, bring us the instantaneous generation that fossil fuels offer it’s unlikely fossil fuels will go away completely. We will need fossil fuel or nuclear generation, and then appropriate abatement strategies.

In addition to the reliable energy source need, the grid itself is constructed around a paradigm of centralized generation, and then transmission to substations, and then homes. It’s a forward feed system that presumes we will truck fuel to generation sites, generate power, and then distribute the power forward for consumption. The impact of this is that generation tends to be placed close to consumption sites, in order to minimize transmission losses. But you can’t truck the wind, or the sun, to a convenient place to generate power. The other challenge is reverse flow. Feeding energy bi-directionally into the grid from what are today’s consumption sites creates a whole new set of problems. It’s likely the grid itself will need to be updated.

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Batteries Part 2

EV (electric vehicle) Li-Ion battery concept. Close up view. 3d rendering.
rendering.

Last week’s piece on batteries generated questions from readers. Specifically two:

  1. What about the environmental impact of disposing of the battery?
  2. What is the carbon impact to manufacture an electric vehicle (EV)? How does it compare with a conventional vehicle with an internal combustion engine (ICE)?

Let’s start with the Battery Disposal and Recycling. I’ll have more on the supply chain footprint for vehicles in a future post.

Battery Disposal / Recycling

The short answers are that we haven’t needed to dispose of or recycle EV batteries at scale, yet; and we also can’t do it yet, at scale.

Batteries which reach end-of-life as automotive batteries haven’t actually reached “end of life”. Most have between 50% and 80% of their useful capacity left. However the batteries become slower to charge, slower to deliver power impacting performance of the vehicle, and reduce the range. So the batteries are currently being given a “second life”. Manufacturers are using them in applications, like storage walls and utility grid storage.

Recycling is not only desirable, but it also makes sense economically, and most of the battery is recoverable. Up to 90% of the battery can be recovered.

Currently, according to this IEA report from 2020 (page 183) we have the global capacity to recycle 180,000 tons of batteries annually. In the same report, the IEA forecasts the demand will grow by a factor of 50 by 2030, and by a factor of 650 by 2040. So, it’s not a concern for today, but it will be tomorrow. A lot of voices are being raised about this right now. The Union of Concerned Scientists has written calling for public policy to be established, National Geographic has written a lengthy piece about the need to build recycling capacity, and the BBC has also recently reported on battery recycling.

We haven’t needed to do it because EV’s are relatively new to the market, and because the batteries are lasting longer than anticipated. Tesla, for example, warranties their batteries for 120,000 miles. However, according to Tesla CEO Elon Musk himself, the batteries in the Model 3 are good for 1,500 charge / discharge cycles which he estimates to be between 300,000 and 500,000 miles.

Real-world driving has shown these claims likely to be true. It appears, for example, that the Model 3 and Model Y will probably be able to travel 400,000 miles before experiencing degradation of 20%.

But when we do need to start recycling at scale, there are multiple options available, and continuing research to improve.

And the last point, of course, is that we should have confidence that recycling capacity will come on line at scale. Not only does it make sense environmentally, but at $45k/ton cobalt (to name just one of the minerals required) is simply too valuable to discard it.

Last thought: warranties and recycling / end-of-life policies will likely vary by manufacturer. When considering the purchase of an EV, also consider the manufacturers battery disposal policy as you make your decision.

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Batteries

Electric Car Charging

Electric vehicle critics will often tell you that the environmental cost of the batteries is the “dirty little secret” that nobody is telling you about. The claim is that the manufacturing impact of the batteries is so high that we might as well just keep burning gasoline. The origin of this statement is an early and flawed study from 2017.

Let’s examine their claim in more detail.

Battery trends

Battery technology is advancing rapidly. You can see this in the price curve. In December of last year, Bloomberg NEF reported the first instances of vehicle batteries priced at below $100/kWh. At $100, most analyses show EVs priced equivalently to internal combustion engines. For comparison, a decade early that price was $1100/kWh. That means that 10 years ago, the price of the 53 kWh battery in Tesla’s original roadster was over $50,000. It’s no wonder those early Roadsters were so expensive!

The environmental cost of manufacturing vehicle batteries is also falling. A recent study estimated the manufacturing impact of current battery technology at 75 kg CO2e/kWh of battery capacity, down from 89 kg in 2019.

Analysis

The assertion made by the EV industry is that the increased environmental impact of manufacturing the vehicle is offset by the decreased impact of using the vehicle. Is that true?

To figure out the answer to that question, we need to know the CO2e impact of running a conventional vehicle vs an EV. Then, let’s add in the CO2e impact of the battery pack, divided over the expected lifetime of the battery, and we should have our answer.

For the sake of simplicity, let’s assume that the manufacturing impact of a conventional vehicle and an EV is roughly the same, excepting that the EV has the added impact of the battery pack. It’s not entirely true, because the conventional vehicle has a higher carbon cost to build than the EV (without the battery), but for the sake of simplification, let’s assume that they are the same.

My previous vehicle, a 2015 Ford Fusion, averaged about 23 mpg in actual usage. Ford rated it for 28 mpg, but I tracked my gasoline purchases over the lifetime of the vehicle, and it was roughly 23 mpg. I may have a bit of a lead foot. Gasoline combustion produces an estimated 18.95 lbs of CO2e per gallon used. Annually, I drive around 10,000 miles, which means that car was producing 8,226 lbs of CO2e annually.

My new vehicle, the Tesla Model Y AWD, is rated by the EPA for 28 kWh / 100 miles of driving. The Tesla should use about 2,800 kWh of electricity to drive the 10,000 miles I drive in a year. Now all we need to know is the CO2e costs to generate the electricity. According to the EPA, in the United States, the electricity industry as a whole produced an average of 0.92 lbs of CO2e per kWh of electricity generated. So, assuming that my power utility emits the same CO2e as the EPA average electrical utility, my CO2e costs will be 2,576 lbs. More on that in a minute…

FordTesla
Miles Driven10,00010,000
Electricity Used0 kWh2,800 kWh
Fuel Used435 gal0 gal
Unit Emissions18.95 lbs / gal0.92 lbs / kWh
CO2e Emitted8,226 lbs2,576 lbs
Annual operating emissions comparison

So for me, my old Ford emitted 5,650 lbs more CO2e annually than my new Tesla does.

Now let’s get back to that battery pack. Recall that the manufacturing CO2e impact of a battery is about 75 kg CO2e / kWh of capacity. So manufacturing the Tesla’s 75 kWh battery will emit about 5,625 kg of CO2e, which converted to lbs is 12,375 lbs. And then we have a simple calculation. 

Years to "break even" = Battery Manufacturing CO2e / Annual CO2e savings.

So, for me, it will take about 2.2 years before the manufacturing impact of the battery is recovered completely.

My Utility is PSE

I buy my energy from Puget Sound Energy here in the King County, WA area. PSE’s generation mix is roughly 1/3 renewable, 1/3 coal, and 1/3 gas.

SourceEmissions
Coal2.2 lbs / kWh
Natural Gas1.0 lbs / kWh
Renewable0 lbs / kWh
Blend1.06 lbs / kWh

Compared to the national average, PSE is actually a pretty dirty utility. My Tesla driving will generate 2,968 lbs of CO2e annually. And my emissions “payback” will extend to 2.35 years. What a calamity!

Fortunately, PSE has a green energy option, which we have chosen for our household. For an extra $.01/kWh (about $15/mo) we buy an energy mix which is generated 95% from solar and wind, and 5% from biogas. Biogas has about the same emissions profile as NG, which means that the PSE clean energy option produces about 0.05 lbs CO2e / kWh. Some folks consider biogas neutral environmentally, but let’s leave that for another day. In any case, my new Tesla’s CO2e footprint using PSE green energy is now reduced to just 140 lbs CO2e annually, and the “pay back” time for the battery is now just 1.5 years.

Over the 5 years I owned the Fusion, I estimate my emissions at about 41,000 lbs CO2e. I expect the Tesla to be a third of that. Automobiles have a lifetime of about 200,000 miles. Over 200,000 miles the Ford will emit 165,000 lbs CO2e. And if I own the Tesla that long? 15,000.

Your numbers will vary, but the calculation is not hard to do. And no matter how you do the numbers, there simply is no case that the environmental impact of EV battery manufacture outweighs the benefit of not burning gasoline to run a vehicle.

Case closed.

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Replace Carbon Taxes with Emission Trading

“Why not just put a tax on carbon?”, asked my Dad last Sunday. It was Father’s Day. We had organized a family video call, and somehow ended up talking about climate.

Economists believe pricing schemes are an important tool to fight climate change. They advocate for the use of market mechanisms which reduce emissions by pricing the costs of those emissions at the source. In other words, polluters should pay for the negative impact their emissions have on the planet.

According to the World Bank, at the start of 2021, globally there were 61 carbon pricing schemes in operation or planned. The largest planned is in China, which will come online fully in December of this year. As you might expect, the sheer number of schemes means there are many variations.

Carbon Pricing Approaches

There are two broad approaches to pricing carbon that are in common use today. These are carbon taxes, and emissions trading systems.

Carbon taxes are consumption taxation models. They encourage consumers to choose products that are more emissions efficient by levying a tax on those that aren’t. Need a litre of fuel? Maybe it will cost an additional 15% in tax. The taxing jurisdiction promises to put that money back into energy efficient or climate transition projects, further accelerating the transition to a decarbonized economy. In some jurisdictions (British Columbia, Canada for example) the carbon tax collected is offset by a reduction in other taxes. The promise is that the carbon tax will be revenue neutral, which satisfies at least some of the folks who object to new taxes.

Emissions trading systems (sometimes called “Cap and Trade” systems) use a different approach to driving emissions reductions. Emissions trading systems price the emissions directly. The government sets a cap on the total emissions permissible in a given period, and then allocates emissions quotas to companies that need them. Stiff penalties are imposed for exceeding the quota. Companies can then choose to become more emissions efficient, or continue to emit. If they continue to emit, they can purchase unused quota from another emitter who may be more efficient or pay the penalty. Over time, the government reduces the cap which creates pressure to be more efficient.

Sometimes emissions trading systems are also connected with an auction, as I wrote about Nova Scotia last week. When an auction is used, the quota allocation is done via auction rather than through some other scheme, which should lead to more optimal outcomes. An auction also has the benefit that it raises money for the government to spend on climate transition or energy efficiency projects, just as a carbon tax does.

Which is better?

So why choose one over the other? There are some major differences.

  1. Carbon taxes are easy, broad, blunt tools. If you’re buying fuel, they make a lot of sense. But how do you tax the carbon content of a new home, a car, a pair of jeans, or even a carrot? Each will have differing Scope 1,2, and 3 emissions depending on the efficiency of the producers supply chain. To tax the carbon content of a consumer product accurately, you need to know the contributions at each stage of the manufacturing process. We can’t do that accurately today. Emissions trading systems overcome that limitation. Each company in the supply chain has a quota for emissions, and has to live within the quota. (note: in today’s early stage emission trading systems it’s common to only make the largest emitters comply. Hopefully that will change.)
  2. Carbon taxes may also not be an accurate reflection of the true carbon emissions cost of a given product or service. They are simply implemented as a percentage of the end retail price. An emissions trading scheme allows the market to set the price. To return to the Nova Scotia example from last week, the government set a reserve price of $21 per ton, but the actual price paid was 74% higher, reflecting market demand.
  3. Carbon taxes are also impractical to implement across borders. How should we tax two vehicles, one made in China in a factory powered by coal/electric, and the other made in Detroit? One of China’s competitive advantages has been their willingness to use cheap, and dirty, coal power to power industry. Again, emissions trading schemes make this easier, since they target the emitters directly.
  4. And finally, carbon taxes do not create direct incentives to reduce emissions because there is no cap on emissions. With a carbon tax, you could conceivably have a rapidly growing economy with growing emissions. So long as the rate of growth is high enough, then the emissions tax is simply another tax. In a cap and trade emissions market, the government sets the amount of carbon allowed, and reduces that allowance each year, which creates incentives for companies to emit less.

For those reasons, emissions trading systems are preferable to carbon tax systems. Your thoughts?

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Why I am encouraged

“From January through November 2020, investors in mutual funds and ETFs invested $288 billion globally in sustainable assets, a 96% increase over the whole of 2019. I believe that this is the beginning of a long but rapidly accelerating transition – one that will unfold over many years and reshape asset prices of every type. We know that climate risk is investment risk. But we also believe the climate transition presents a historic investment opportunity.”

2021 letter to CEOs, Larry Fink, Chairman and CEO BlackRock Investments, Jan 2021

There is no company or individual anywhere which will not be profoundly impacted by the transition to a net zero emissions economy.  Today, investors have finally gotten comfortable with that fact. The pace of sustainable investments has accelerated dramatically, and so has the pace of adoption of sustainable products.2020 hit multiple new records for global investment in energy transition, despite the existence of a global pandemic.  

For the first time ever, annual investment in decarbonization passed a half a trillion dollars as companies and governments put record sums of money into everything from renewable energy capacity ($303B) to electric vehicles and charge infrastructure ($139B), energy efficient heat pumps ($50B), storage technologies ($3B) and more. 

On June 10th, 2021, Bloomberg reported that a cumulative $3T in sustainable debt has been issued.  It had taken 12 years for the first trillion to be issued, two years for the second, and just 8 months for the third. This is significant because debt is typically used to finance infrastructure.

In 2019, $16B was invested in climate-tech companies, representing 6% of the VC pie that year and growing at an annual rate of 84%. $60B has been invested cumulative since 2013, growing 3,750% since then. Investors have been richly rewarded.  Today, there are 43 climate-tech unicorn companies.

Similarly, this month the number of passenger EVs on the road hit 12 million, globally.  1% of the vehicles on the roads on planet Earth are now electric.  70% of those vehicles were sold in the last three years.  EVs have hit the “hockey stick” curve, as the number of vehicles on the road is now doubling every 18 months.

Businesses in many markets are approaching the climate transition inflection point now.   Sustainability has become a business opportunity, and not just an ESG “speed-bump” that must be managed.

There is still much to be done. But what’s happening is encouraging.

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Nova Scotia Carbon Lots Price at 74% Premium

Nova Scotia has implemented a “cap and trade” program in order to price emissions. Twice a year, the province auctions off emissions allowances, which give the purchasers the rights to emit a fixed amount of green house gases. Each allowance is equivalent to one ton of emitted CO2. As a business you may emit up to the limit of the allowances you purchased. Any emissions beyond that are priced at a stiff 3x price of the auction price. The funds from the auction are paid into the provincial Green Fund, which is then used to make investments into sustainability projects.

Over time, the allowances made available reduce in number, increasing the price of emissions and providing the emitters an incentive to run cleaner business. This paper from Osler has more details.

  • 13,683,000 in 2019
  • 12,725,000 in 2020
  • 12,258,000 in 2021
  • 12,148,000 in 2022

That’s how it works.

On Wednesday, the province announced the results of their July 9 auction, which is the third since the program was implemented. The headline was that the settlement price was C$36.71/ton, a premium of 74% over the reserve price of $21.09. Two other facts:

  • 767,000 allowances were offered.
  • There were an average of 1.23 bids per allowance.

Although this is an encouraging result, it is also a very limited experiment. Three ways that Nova Scotia could improve their program are:

  • As mentioned above, Nova Scotia’s program creates a fixed number of allowance’s annually, but distributes most of them free of charge to qualifying companies. Only 6.25% of 2021’s allowances went to auction. However, this is also increasing over time. A year ago, at the July 10, 2020 auction, 640,000 allowances were offered which represented 5.1% of the annual allowances. It appears that the province is creating fewer allowances, and charging for more of them, which is driving the auction price to market competitive levels.
  • Link their carbon market with other carbon markets like California and Quebec, so that a more open market for emissions can be created. Right now, Nova Scotia’s program is limited to the province.
  • Expand the scope of companies covered. At this point, only businesses emitting more than 50,000 tons of CO2e in any year are required to participate.

Cap and trade programs make sense, versus carbon taxes. A carbon tax is a blunt tool, penalizing consumers for the emissions of the business they’re buying from. Proponents of carbon taxes like to point out that they can be used to fund governmental green energy initiatives, which is true. Cap and trade programs, however, create incentives for the business to reduce emissions directly and also raise money for green initiatives, which is a double benefit. Nova Scotia is moving in the right direction.

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Scope. 1, 2, 3

Getting to a zero carbon footprint, globally, is a hard concept to wrap your mind around. The scale of what’s required is intimidating!

Today’s post is about a carbon accounting concept called emissions scope. Emissions scope helps businesses to account for where emissions occur in supply chains. Then they can focus on where improvements are possible. Businesses that want to perform carbon accounting use these concepts, but we as individuals can also use this them as a framework to think about decarbonizing our own lives.

Emissions Scope. Scope 1 emissions are associated with the operations of the business directly. Scope 2 emissions are from the energy used to run the business. Scope 3 are emissions upstream from business inputs and procured products, and downstream from the use of the products.
Emissions Scope

Definition

  • Scope 1 emissions are from the direct operation of the business, and the assets that the business owns or controls. Scope 1 emissions include the operation of facilities, manufacturing plants and more. They can also include emissions from fuel combustion used to run operations.
  • Scope 2 emissions are from energy purchased to run the business. Buying power or heat from a utility creates scope 2 emissions.
  • Scope 3 emissions come in two categories: upstream and downstream. Upstream emissions are from the inputs needed to run the business — the raw materials used to build products, the capital expenditures to buy equipment, and even the transport of those supplies to the business. Downstream emissions are created after the outputs of the business leave the business — the emissions from the transport of the products to market, the usage of the sold products, and even the disposal of those products.

Impact

When world leaders talk about getting to zero, they are talking about decarbonizing these supply chains. Commitments like the NDCs, and individual country level regulatory actions are fairly blunt tools. They create a framework for businesses to operate within, but ultimately businesses face the hard work of gathering scope level emission data, building governance and reporting into processes, and delivering sustainable products. It’s a daunting transformation. The good news is that these kinds of transformations appear to be achievable with very little impact on the final price for products that we consumers pay. According to World Economic Forum Net Zero Supply Chain analysis, many businesses can get to a net zero supply chain with an impact of between 1% and 4% on final consumer price.

As individuals, and families, we can also apply the same kind of thinking. Scope 2 emissions would be emissions from the energy we purchase to use in our day to day lives. Scope 3 emissions would be from the things we buy, and the things that we throw away. And if you heat or cook with wood, oil or natural gas, or run a creative business like woodworking from your home, these are the actions which are creating scope 1 emissions.

So what can we as individuals do? Here are two suggestions:

  1. We can assess our own carbon footprints. Our scope 1 emissions are likely to be small, because most of us don’t build products ourselves. But we all have scope 2 emissions. All of us consume energy at home. So what are the emissions associated with our own lives? How can we reduce them? Can we buy clean energy instead?
  2. We can make choices about scope 3 emissions in our lives. When we purchase products — cars, houses, computers, food — we can choose to look at the emissions content of the products we are buying. For example, buying locally grown food creates fewer emissions than buying fruits and vegetables out of season from distant countries, which then have to be transported to us. Choosing to bring reusable shopping bags to carry our purchases home reduces plastic waste, and hence emissions. Those are easy and obvious. But the next time you go to make a major purchase, look at the sustainability of the products you are buying, and the commitment of the company to sustainability. More companies are starting to publish reports like this one from Microsoft. More and more, business is responding to customers who “vote” at the cash register for a cleaner future.

Getting to Carbon Zero is a huge task for human society. We all have a role. Let’s not leave it to government, or to business alone. Let’s also reduce at home, and shift our purchasing dollars to companies that value sustainability.