Month: September 2022

Maximizing carbon displacement with power purchase agreements
Part 3: Using renewables to address value chain emissions

Maximizing the carbon displacement of your renewable energy project helps ensure that it generates the largest climate benefit possible. As more companies mobilize to take urgent climate action, carbon displacement value has become a bigger priority for many organizations. Given the heightened interest around this topic, we put together a three-part blog series that outlines strategies that organizations can take to maximize the carbon displacement of their power purchase agreements (PPAs). 

In part one, we looked into choosing your market and discussed how different renewable energy technologies intersect with the carbon intensity of a market over the hours they’re generating. In part two, we explored how alternative technologies, like battery storage, can be used for carbon arbitrage. 

In this third and final installment of our series, we’ll examine how organizations can expand their carbon displacement impact by incorporating renewables into their value chains, while also taking another look at an earlier strategy.

Reducing scope 3 electricity emissions

For most companies, scope 3 emissions—those emitted up and down the value chain—sum to a total far greater than their scope 1 (direct) and 2 (indirect, electricity) emissions. For this reason, after your scope 1 and 2 plans are set in motion, you’ll want to turn your attention to your value chain. Many companies already on this journey are finding that reducing value chain electricity use and increasing renewables are some of the most effective tools to reduce scope 3 emissions.

The proportion of a company’s scope 3 emissions that derive from value chain electricity use will differ widely from company to company, so a good first step will be to determine whether, and where, electricity represents a large emission source in your value chain. If you have value chain emissions data available, you can review your suppliers’ scope 2 emissions as well as downstream electricity use. If this data is not available, you can screen for it using a scope 3 screening tool to identify likely electricity hot spots. Nearly all manufacturing processes are electricity-heavy, as are cloud-based data services; these can be found by breaking down “purchased goods and services” emissions into finer categories, or from your own knowledge of the types of activities that occur along your value chain.

With even fairly basic data, you can take an important step in making the most of your supplier engagement processes: factor in carbon displacement potential when choosing where to focus your efforts. Specifically, identify groups or types of value chain partners that: 

  • Use a lot of electricity
  • Are located in countries or regions that have carbon-intensive grids 
  • Have choices in how their electricity is supplied  

Focusing on these types of partners creates a fertile environment for rapid emission reductions.

Designing your strategy

In parallel, your organization will need to determine how best to work with its partners to move toward cleaner energy supplies. Some approaches focus on education, data reporting, and recognition for progress; others focus on requirements and deadlines; and some companies choose to provide direct financial assistance or make purchases of renewable energy on behalf of value chain partners. In any case, by focusing your work with value chain partners in places where companies have renewable energy procurement options, you may be able to ask more of these partners than with a broad-based approach.

It’s helpful to remember here that the renewable energy implementation tactics available to value chain partners are largely the same tactics you’ve likely had to study for your own load. The concerns, risks, advantages, and disadvantages of the various choices will not be surprising. And, as renewable energy procurement demand has grown around the world, the ecosystem of transaction structures and knowledgeable supporting resources has similarly grown. 

By working specifically on electricity, you can design your engagement strategy to be appropriate to time, place, and your relationship to your value chain partners. For example, you might choose a two-step strategy:

  1. First, support suppliers who measure and report their electricity use with a short-term purchase of high-quality certificates made on their behalf.
  2. Then, with this data available, identify more impactful strategies for your suppliers to implement, given your relationships in the region.
    Can you combine your load with that of your suppliers to inspire custom renewable energy offers from energy providers? Can a PPA serve several supplier loads? Can you work across your industry to achieve economies of scale?  

There is no universally accepted wisdom on how to approach renewable supply within your plan to address scope 3 emissions. Your organization will need to weigh its goals, business needs, and value chain complexities to determine the best approach. 

Maximizing carbon displacement with renewables in your scope 3

Working across your value chain can be complex. For upstream emissions, most companies have found they need to help facilitate credible, standards-compliant electricity use and emissions reporting by their suppliers. You’ll need this to create an effective action strategy for your engagement, as well as for your own emissions reporting. 

If you have value chain partners in locations with impactful energy supply choices, you’ll have the opportunity to sculpt a program that can maximize carbon displacement. For example, you can follow our recommendations in part one of this series by recommending, choosing, or requiring that energy supplies originate from a more carbon intensive location and/or from a renewable energy technology that operates at times of day that correlate with the most carbon intensive hours in that location. 

If you choose to encourage or facilitate PPAs, you’ll need to incorporate education on carbon displacement value into your supplier engagement plan. Let your suppliers know why carbon displacement value matters and provide tools and suggestions. You can also deliver educational sessions that help explain the relationship between renewable energy technologies and time of day, and how emerging technology options, like battery storage, can be incorporated.

Maximizing your carbon displacement to minimize your environmental impact

There are plenty of ways to maximize the carbon displacement value of PPAs that apply to both scope 2 and 3 electricity emissions. These actions will put your organization ahead of the curve and ensure that you’re taking the most impactful steps to minimize your environmental impact. 

If you have any follow-up questions or would like to discuss your organization’s renewable energy procurement strategy, please feel free to contact us.

Scope 3 and supply chain transparency: Sustainability LIVE London recap

Earlier this month, climate action luminaries met for another round of Sustainability LIVE London, following its inaugural launch in February. With its enormous, arched single span roof, the Business Design Centre seemed to be an ideal venue for inspiring change and echoed the notion that “the sky’s the limit” when approaching sustainability efforts.

On the first day of Sustainability LIVE London, 3Degrees was joined by executives from MSCI, Ecologi and Oxfam on the panel titled “Scope 3 and ESG: It’s All Our Problem?”.

Over 70 acclaimed corporate leaders from all over the world gathered to share insights on cleaner ways of doing business. Over the two days, speakers and panelists covered an array of topics, including DEI, net zero, ethical investment and finance, scope 3 emission reduction efforts, artificial intelligence, sustainable supply chains, and the B-Corp accreditation.

Ethical and sustainable supplier action

I helped 3Degrees kick off Day 1 of Sustainability LIVE by joining a discussion at the intersection of ESG and scope 3 emissions, along with executives from MSCI, Ecologi and Oxfam. The panel was titled, “Scope 3 and ESG: It’s All Our Problem?”. 

Participants were asked to consider whether individual companies are responsible for ensuring their suppliers are operating ethically and sustainably, or whether it is the responsibility of global governments to enforce this through legislation, among others. Another topic up for debate was the assurance of entities adhering to robust ESG strategies – who is responsible for holding third parties accountable and how can transparency be enforced?

An item that sparked a lot of conversation on the panel was whether we can enforce transparency in the supply chain, EU measures that are in effect currently or will be in effect in the near future that can help ensure this. One such proposal is the Carbon Border Adjustment Mechanism (CBAM), which will require importers of certain carbon-intensive goods to pay a fee on emissions released during the good’s production process, and be able to quantify emissions associated with imported materials. 

With this recent enactment in mind, it will be the responsibility of both companies and suppliers in developing countries to quantify and reduce emissions. For countries where options for reduction remain limited, an all-hands-on-deck approach could be used – including carbon project investment, onsite installation funding and other avenues. 

Adam Elman, Head of Sustainability for Google in EMEA talking about how Google is using their products and services to help people be more sustainable in their day to day.

In addition to CBAM, other legislation will be coming into effect, like the Corporate Sustainability Reporting Directive (CSRD), requiring greater transparency and accountability. Technology will be playing a key part in improving transparency in the supply chain and accessing data for scope 3 reporting. This was made readily apparent by the presence of technology firms like Google, Microsoft, Interos and Supply Shift at Sustainability LIVE.

Stronger scope 3 stance

The event, and panel, made it clear that addressing scope 3 is a top priority for organisations. And in order for a business to get its arms around its entire footprint, they will need to set concrete metrics around it, and include specific options to reduce or offset their scope 3 emissions. Scope 3 emissions present a significant opportunity to innovate and make change. The key word for beginning to tackle scope 3 emissions is measurement, specifically calculating impact and data from third party supply chains through a scope 3 screening. 

After understanding its scope 3 emissions, hot spots and material categories, an organisation can take additional steps to reduce or offset. Companies can perform value chain interventions, carbon insetting, and other directly funded reduction initiatives, like purchasing RECs/EACs to cover its supply chain’s scope 2 emissions. Supplier education and support programs can also go a long way when it comes to taking a strong scope 3 stance. This can include market-specific engagement and opportunities assessments, target setting, and aggregate PPAs.

The need for transparency in sustainability 

A takeaway from the panel was the importance of transparency and the essential role it will play in meeting sustainability goals, and making deep, lasting reductions at scale. I am grateful for the opportunity to have joined the critical dialogue around sustainability topics, and I look forward to seeing what action we can collectively take between now and the next Sustainability LIVE London conference. 

To understand your company’s scope 3 footprint and how your unique sustainability position can feed into the bigger climate action effort, please get in touch today. 

Transportation incentive programs are catalyzing emissions reductions across North America

No industry can escape transportation-related emissions. When it comes to climate impacts, the transportation sector simultaneously has the most room for improvement and is the best equipped to decarbonize. The proliferation of electrification and lower carbon fuels, particularly in regions with incentive-based programs in place, is helping to drive drastic emissions reductions from the transportation sector.

Local, state, and federal transportation incentive structures are taking shape across North America, and like any other market-based program, the prices and rules governing them can change rapidly. For example, at the recent Argus North American Biofuels, LCFS & Carbon Markets Summit that took place in Monterey, CA earlier this month, California Air Resources Board (CARB) officials affirmed they are set to increase the stringency of the state’s program known as the Low Carbon Fuel Standard or LCFS to at least a 25% reduction (from 20%) by 2030.

A Sea Change in Regulation

Right now, we are seeing a surge of regulatory change happening across all programs, and a race to set (and achieve) the biggest reduction in the shortest amount of time. British Columbia’s LCFS (BC-LCFS) requires fuel suppliers to progressively decrease the average carbon intensity (CI) of the fuels they supply to users, and their target has continued to rise over time. 

Recently B.C. announced that its suppliers must deliver a reduction of 30% by 2030—which is currently higher than California’s LCFS target. Prior to this expansion, B.C. had established a 20% CI reduction goal, in alignment with California’s targets. Next-door neighbor, Washington, is in the process of finalizing its own rigorous set of clean fuel standards. Healthy competition in transport GHG reductions is only becoming stronger as municipalities advance their CFP programs.  

In this blog, we’ll provide a brief summary of transportation market trends, regulation updates, and emerging news surrounding low carbon and alternative fuels.

California: Low Carbon Fuel Standard 

Pricing: LCFS Credits have been trading between $75 and $100 for the past several months, with a couple of slow cycles between those bounds. The forward curve of the market has moved into contango, meaning market participants expect credit prices to be higher in the future, after being backwardated for several years.

Regulation: California is continuing to lead the nation and planet, in many ways, in state-instituted transportation emissions reduction policy. CARB has been busy, having recently announced its commitment to 100% new zero-emission vehicle sales by 2035 and now finalizing its annual scoping plan that will outline the state’s pathway for achieving its greenhouse gas reduction targets, including achieving carbon neutrality by 2045. In the meantime, Governor Newsom has intervened in the process by providing direction to CARB and the state’s legislature to increase greenhouse gas reduction targets. CARB has indicated that it will begin a formal rulemaking process to update the LCFS once the Scoping Plan process is complete, with rules expected to take effect in 2024. This rulemaking will likely include raising the 2030 CI reduction target and providing longer-term targets past 2030.

Oregon: Clean Fuels Program

Pricing: After trending down with California, the Oregon market has begun to rebound after DEQ released data showing a net program deficit in Q1 2022. Credit prices in Oregon are currently around $120.

Regulation: Oregon’s Department of Environmental Quality (DEQ) is wrapping up a series of revisions to its Clean Fuels Program (CFP) following Governor Brown’s 2021 Executive Order (EO 20-04) directing the extension and expansion of the CFP. 

DEQ closed the final comment period for the draft rule in late July, which extends the program through 2035 and sets CI reduction targets of 20% by 2030 and 37% by 2035. Other proposed changes include adding new credit generation opportunities and clarifying the primary entity eligible to generate credits for different technologies. 

The DEQ met on Friday, September 23 to present proposed rules to expand the CFP’s CI reduction requirements beyond the currently adopted 10% reduction in average CI by 2025. The regulation was passed by commissioners making it the deepest CI reduction target of any state in the country.

Washington State: Clean Fuel Standard

Washington has entered the formal rulemaking to implement its Clean Fuel Standard (CFS) at the direction of a 2021 bill that called on a program to be in place by January 1, 2023, to reduce the CI of transportation fuels used in the state to 20% below 2017 levels by 2038. The program adopts many of the provisions of the Oregon CFP along with allowing infrastructure credit generation like California.

British Columbia 

BC-LCFS was updated by the Low Carbon Fuels Act, which was signed into law on June 2, 2022. British Columbia’s Ministry of Energy, Mines, and Low Carbon Innovation plans to issue the primary set of regulations during 2023 that would be effective on January 1, 2024. The new law sets up the LCFS to be in effect through 2030 and beyond by improving clarity, strengthening administrative provisions, and enabling additional GHG reductions, including increasing the reduction target to 30% by 2030 from the current target of 20%


By 2030, the Program is set to decrease the CI of transportation fuels used in Canada by 15% compared to 2016 levels and is expected to reduce GHG emissions by 26 million tons. The program similarly establishes a credit market that allows obligated entities to meet the CI target by taking actions to reduce the lifecycle emissions of fossil fuels, supply low-carbon fuels to conventional vehicles, or supply low-carbon fuels to alternative technology vehicles (e.g. EVs).

Stay Up to Date

​​It can be challenging to stay on top of the latest regulations and policy changes concerning the transportation sector, which is exactly why we created our market report. To have these updates delivered to your inbox, sign up for our transportation markets quarterly newsletter.

For gas utilities, voluntary RNG programs can play an important role on the path to decarbonization

Renewable Natural Gas programs

Many natural gas utilities are currently developing strategic plans to reduce their greenhouse gas emissions or realize they will be asked to do so soon. Integrating renewable natural gas (RNG) is an important component of every utility’s plan to decarbonize, and many are considering whether to offer RNG as a voluntary, premium product to customers. We’ve traveled the country and engaged in conversations with key stakeholders from numerous gas utilities over the past year and, understandably, they are grappling with some significant strategic questions:

  • How do we know a voluntary RNG program is the right approach as we think about decarbonization?
  • It’s very early in the conversation and the landscape is quickly evolving. Would we be better suited to sit on the sidelines for a bit and wait to see how this pans out before making a decision about a voluntary RNG program?

While voluntary programs are not a substitute for a comprehensive approach to decarbonization, they can play an important role for any utility looking to lead. And, while the above questions are completely valid, our perspective is this: well-designed and implemented voluntary programs offer many benefits to gas utilities and can be a “no regrets” investment, even if the utilities’ broader decarbonization strategies are not fully cemented yet. Here are a few reasons why…

Address Customer Needs and Drive Increased Satisfaction

For utilities that are beginning to hear from their customers about desire for lower-carbon options, a voluntary program will make sense whether or not mandates for RNG are on the horizon. This is a lesson learned from the voluntary green power market — voluntary customers want to be leaders and mandated percentages of cleaner fuels will not be enough to keep leaders happy. For example, a municipal or corporate customer that has a set goal to be carbon neutral by 2040 is going to want to decarbonize a large percentage (even 100%) of its natural gas supply quickly, not be told there is a 5% mandate for RNG by 2030. In this way, voluntary programs complement mandates — they allow leaders to lead, and the rest of the customer base pays only for smaller, mandated volumes.

In addition, a voluntary RNG program can meet the needs of a utility’s residential customers. These programs provide residential customers with choice, which they value, and the data shows that when these customers are offered options, their CSAT scores jump. Thanks to successful green power programs on the electric side, we can be confident that there is a residential market for premium, green products from a gas utility.

Build a Platform for Learning and Development

Customers who participate in utility voluntary renewable programs are willing to pay a premium to move the market forward. At first, that may mean that the voluntary program enables the utility to gain operational experience procuring or developing RNG supply. As the program grows, it could also provide an additional vehicle to fund the development of new local projects or to support not-yet-mature technologies with pilot funding.

Exhibit Environmental Leadership

Given the broad range of options for gas utilities considering a decarbonization strategy, developing and launching a voluntary RNG program is fairly proactive. These utilities have the opportunity to help frame the nascent conversation about the role of gas with respect to decarbonization; additionally, talking about an alternative to fossil-based gas naturally leads to broader conversations with customers, stakeholders, and commissioners. A voluntary program broadens a utility’s overall decarbonization strategy, which is likely to include efficiency, pipeline upgrades, and possibly rate-based RNG over time.

Is a voluntary RNG program the be-all-end-all solution for gas utilities as they tackle decarbonization? Likely not. But for forward-thinking utilities, there isn’t going to be a single approach or solution, and a voluntary program can play an important, strategic role in a gas utility’s comprehensive decarbonization plan.

If you are interested in launching a voluntary RNG program in service to the strategic plan for your utility, please contact us