Cutting Down Carbon Emissions: Differentiating Between Scope 1, Scope 2, and Scope 3 Emissions for A Corporate Entity
4PEL Staff
September 2024
WHAT ARE CARBON EMISSIONS?
Carbon emissions refer to the release of greenhouse gases (GHGs) such as carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O) into the atmosphere, primarily due to human activities. These emissions significantly contribute to global warming and climate change. To effectively mitigate and manage these emissions, companies use a framework known as "scopes" to categorize and track their emissions.
Through the course of this – we will attempt to break down the three scopes of emissions and explain how Fourth Partner Energy (FPEL) helps companies reduce their carbon footprint, and thereby move toward carbon neutrality.
Understanding the Three Scopes of Emissions
Scope 1: Direct Emissions
Scope 1 emissions are direct GHG emissions that a company produces while conducting business activities. These emissions come from sources owned or controlled by the company, such as machinery, equipment, vehicles, and buildings. Scope 1 emissions can include CO2, CH4, N2O, hydrofluorocarbons (HFCs), perfluorinated compounds (PFCs), sulphur hexafluoride (SF6), and nitrogen trifluoride (NF3).
Scope 1 emissions can be calculated by directly measuring greenhouse gas (GHG) emissions through monitoring concentration and flow rate. Alternatively, they can be calculated based on the quantities of commercial fuels purchased and the associated emissions factors.
Scope 2: Indirect Emissions (Owned)
Scope 2 emissions are indirect emissions from the generation of purchased energy, such as electricity, steam, heat, and cooling from a utility provider. For most organizations, electricity is the primary source of Scope 2 emissions.
Scope 2 can be calculated from metered electricity consumption and supplier-specific emissions factor, or the local grid or other general emissions factors can be used to calculate emissions starting from metered electricity or electricity bills.
Scope 3: Indirect Emissions (Not Owned)
Scope 3 emissions are GHGs that a company is indirectly responsible for but are not produced by the company itself or its assets. These emissions, also known as value chain emissions, can occur both upstream and downstream of a company's activities. Examples include emissions from the disposal of waste generated by a company's operations or emissions produced by customers as a result of a company's product. Scope 3 emissions usually constitute the largest share of an organization’s carbon footprint, covering emissions across 15 categories.
The best approach for calculating Scope 3 emissions involves using activity data such as fuel use or passenger miles, alongside published or third-party emissions factors. Source- or facility-specific emissions factors are preferred when available, as they provide more accurate data compared to generic or general emissions factors.
For smaller Scope 3 emissions contributors, a transaction-based method with general emissions factors can be employed to reduce costs and complexity without significantly compromising accuracy.
Why Measure Scope Emissions?
Carbon emissions account for 81% of overall GHG emissions, with businesses being major contributors. Many organizations are mandated to report on Scope 1 and Scope 2 emissions, while comprehensive reporting across the entire value chain is becoming the standard. Engaging with and understanding Scopes 1, 2, and 3 offers several benefits:
- Improved Transparency and Stakeholder Engagement: Clear reporting fosters trust and accountability.
- Regulatory Preparedness: Staying ahead of upcoming regulations avoids compliance issues.
- Climate Risk Identification: Recognizing climate risks across operations and the value chain helps in strategic planning.
- Resource-Saving Opportunities: Identifying and acting on resource-saving climate opportunities reduces costs and environmental impact.
While no single technology can achieve net-zero targets alone, some strategies offer immediate impact. One of the quickest ways to reduce carbon emissions is by adopting Renewable Energy. Solar power not only harnesses the sun's energy but also significantly shrinks carbon footprints, moving us towards a sustainable future.
The Impact of Solar Energy
Reducing Scope 2 Emissions with Renewable Energy Solar
Renewable Energy (RE) can significantly reduce Scope 2 emissions. Scope 2 emissions are indirect GHG emissions from the consumption of purchased electricity, steam, heat, and cooling. By replacing traditional grid power, which typically relies on fossil fuels, with clean, renewable energy generated onsite, businesses can substantially cut down their Scope 2 emissions.
Switching to zero-emission green energy helps avoid Scope 2 emissions, making it a crucial component of a company's climate action strategy. Not only does this reduce the carbon footprint prior to compensation, but it also positions the company as a sustainable leader in the industry.
Mitigating Scope 3 Emissions with RE
Scope 3 emissions, or value chain emissions, are indirect GHG emissions that occur both upstream and downstream of a company's activities. These emissions often constitute the largest share of an organization's carbon footprint. Solar energy can play a significant role in mitigating these emissions.
For the C&I sector, integrating solar energy can significantly reduce emissions. Installing solar panels to power high-energy equipment can decrease Scope 2 emissions, while encouraging suppliers to adopt renewable energy helps mitigate Scope 3 emissions. By incorporating solar energy, C&I companies can lower their carbon footprint and support the global energy transition.
With a 1.5 GW portfolio and the capability to offset nearly 21 lk tons of carbon emissions annually, FPEL is making a substantial impact on reducing global carbon emissions. We are committed to leading the charge in emission reduction through innovative renewable energy solutions. By partnering with us, companies in the C&I sector can significantly lower their carbon footprint, meet regulatory requirements, and position themselves as leaders in sustainability – and all this, while lowering their Electricity Costs.
"This is the official press release dated 6th August 2024, announcing the closure of FPEL’s equity fundraising from IFC, ADB & DEG.”