A Recommended Methodology for Estimating and Reporting the Potential Greenhouse Gas Emissions from Fossil Fuel Reservesby -
This working paper outlines a recommended methodology for estimating and reporting the potential emissions from fossil fuel reserves held by coal, oil, and gas companies. The overall goal is the availability of transparent, credible, and consistent data on potential emissions that help illuminate companies’ effects on the carbon budget and inform investment strategies and decisions to use reserves. While the methodology can be directly used by fossil fuel companies to disclose potential emissions data, other groups, such as civil society organizations, investors, and stock market listing authorities, can use the methodology indirectly to press for disclosure.
In the Paris Agreement national governments committed to limit temperature rise to well below 2 degrees Celsius (°C) and pursue efforts to limit temperature rise to 1.5°C. To meet even a 2°C target, anthropogenic activities could only emit 986 GtCO2 between 2011 and 2100. This number is our global emissions budget. Earth’s coal, oil, and gas reserves are key to this budget. The potential CO2 emissions from reserves currently held by the largest 200 public companies (by reserve size) is at least 1,541 GtCO2, easily exceeding the budget. The degree to which these reserves are exploited will therefore help shape the severity of climate change.
Despite the importance of the potential CO2 emissions from fossil fuel companies’ reserves, they are not currently disclosed by any company. Financial reporting and industry management standards focus on reserve size and do not include methods for calculating greenhouse gas (GHG) emissions. At the same time, corporate GHG reporting standards focus on historical emissions and thus neglect the most material portion of fossil fuel companies’ climate impact.
This working paper outlines a recommended methodology for the corporate accounting and disclosure of these emissions. The overall goal is the availability of transparent, credible, and consistent data on potential emissions that help illuminate companies’ effects on the carbon budget and inform investment strategies and decisions to use reserves. While the methodology can be directly used by fossil fuel companies to disclose potential emissions data, other groups, such as civil society organizations, investors, and stock market listing authorities, can use the methodology indirectly to press for disclosure.
A number of technical issues affect the credibility of potential emissions data. For example, multiple emissions sources may influence overall amounts of potential emissions. While the downstream combustion of sold fossil fuels generates most of the potential emissions from most reserves, fossil fuel production and processing operations can also be important, depending on the reserve type and technologies used. Further, not all of the carbon in reserves is necessarily emitted to the atmosphere; some may be stored in long-lived products or underground through carbon capture and storage (CCS) projects. Reasonable estimates of potential emissions may therefore require looking beyond the sales quantities reported in reserves estimates.
In addition, the estimates are forecasts of the aggregate emissions that could unfold over periods as long as several decades. They are based on assumptions about economic and regulatory conditions, as well as technologies, which can easily change over the productive life of individual deposits. The estimates therefore have relatively high uncertainty and are subject to change.
This paper outlines a recommended methodology for how fossil fuel companies should take these issues into account when estimating and disclosing potential emissions from fossil fuel reserves. Key recommendations include the following:
- As a starting point, use the Petroleum Resource Management System (for oil and gas) and the Committee for Mineral Reserves International Reporting Standards template (for coal), or consistent national codes, to quantify the size of fossil fuel reserves.
- For oil and gas: Add in the amounts of fossil fuels used as fuel in internal operations.
- Add in the amounts of fossil fuels lost from internal operations through flaring, venting, and fugitive activities.
- Use calculation methods detailed in body of this paper to estimate the GHG emissions from fossil fuel combustion and the CH4 emissions from leakage.
- Do not account for projected carbon storage from CCS projects.
- Separately report the potential emissions from proven and probable reserves.
- Report key assumptions and the sources of emissions factors used.