Irina Slav
Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.
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By Irina Slav – Jul 31, 2024, 6:00 PM CDT
- Only a small fraction of energy companies disclose investment-related Scope 3 emissions, despite regulatory pressure.
- Tracking Scope 3 emissions is challenging and resource-intensive, leading to reluctance from oil and gas companies to fully report them.
- Investor interest in detailed emissions reporting, including Scope 3, appears to be waning, with a shift towards more pragmatic energy and corporate strategies.
The tracking and disclosure of carbon dioxide emissions is at the heart of the energy transition as the first step towards reducing these same emissions. Yet for all the regulatory and activist effort to pressure businesses into full emissions disclosure, it has been tricky—because companies don’t want full emissions disclosure.
A recent study from ESG data provider Clarity AI has revealed that only a tenth of energy companies disclose emissions generated from oil and gas projects in which they participate as investors rather than operators. The study used data from emission tracker Climate TRACE to show that the great majority of the 20 largest oil and gas companies in the world did not report so-called investment Scope 3 emissions, suggesting this could be problematic for investors.
Scope 3 emissions are the bane of companies’ existence in the current regulatory environment that has prioritized carbon dioxide emissions almost above all else. The pressure to track and report all scopes of emissions is enormous but it is particularly significant in Scope 3: the indirect emissions a company gets on its “bill” from working with suppliers and selling products to clients.
Now, per that Clarity AI study, it emerges that Scope 3 emissions are also the ones generated from projects where companies are only an investor—and they, too, need to be tracked and reported. The idea appears to be that no single molecule of CO2 should go unreported in order to arrest changes in the Earth’s climate.
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For obvious reasons, oil and gas companies have been an especially big focus of Scope 3 emission disclosure and reduction efforts due to the nature of their activity, which abounds with all sorts of emissions. For equally obvious reasons, this focus has not made the industry happy, with the general argument being that responsibility for the emissions generated from the use of hydrocarbon products lies with everyone who uses them rather than the ones who produce them.
The reason that oil and gas companies do not want to report their Scope 3 emissions is pretty much the same as the reason for all other companies to be reluctant to do that—the massive amount of resources that would need to go into tracking all indirect emissions a company’s activities produce.