Designed with input from the financial and regulatory communities, the largest oil and gas trading group in the United States has deployed a standardized template for member companies to report their greenhouse gas emissions starting this year.
The one-page Excel spreadsheet allows companies to report their Scope 1 and Scope 2 greenhouse gas emissions in a standardized format, the American Petroleum Institute, or API, said on June 24, offering investors a better way to compare one company to another.
The model does not include Scope 3 emissions, nor emissions from customers using oil and gas products, although the trade group has left open the possibility of adding Scope 3 numbers in subsequent updates to the model. . Scope 1 and 2 emissions come from a company’s operations and supply chains.
The introduction of the API model for its member companies comes as the US SEC may tighten its disclosure requirements, while outside the US, developed countries are mandating climate change disclosures as part of the process. ” a column developed by the Working Group on Climate-Related Financial Disclosures.
“With this model, we meet a need that has not yet been fully realized by these other frameworks and which is a standardized report for a concise set of [greenhouse gas] indicators to provide comparable reports by individual companies, âsaid Aaron Padilla, API manager for climate and ESG policy.
Raymond James & Associates’ oil, gas and renewables analyst Pavel Molchanov said the standardized model would prove useful and the lack of Scope 3 digits is not fatal for measuring progress environmental, social and governance issues for shareholders.
âWill the guidelines help? Yes, because they provide a common model and methodology that allows for direct comparison between companies, âMolchanov said. âThe guidelines are a basis – sole proprietorships can, and in fact should, provide broader disclosure, including Scope 3, when requested by the investment community. “
Padilla said that while Scope 3 emissions make up the bulk of oil and gas emissions, limiting the demand for oil and gas and the use of its products is beyond a company’s control. âSimply reporting Scope 3 emissions does not reduce consumer demand and does not reduce [greenhouse gas] emissions, âsaid Padilla.
âWhat will reduce the emissions associated with our use of hydrocarbons are carbon pricing, public policy instrumentsâ¦ important features of our climate action framework,â said Padilla.
Leaving Scope 3 emissions aside, oil and gas companies are ignoring their greatest risk in any transition to a low-carbon future, according to Robert Schuwerk, North America director of the Carbon Tracker Initiative, a think tank based in London which analyzes the financial risks of an energy transition.
“Scope 3 emissions represent roughly 90% of emissions from upstream oil and gas companies, and every major investor-led group working on climate change expects these companies to report them, so leaving that aside is. a glaring omission, âsaid Schuwerk. âYou would think that upstream oil and gas companies would focus almost exclusively on Scope 3 emissions, not only because they account for 90% of emissions, but because the use of their products causes the [greenhouse gas] emissions.
âThere is no way around this. Since the world is trying to zero [greenhouse gas] emissions are not a secondary ESG issue; it is a clear and unequivocal market risk, âsaid Schuwerk.