Emissions Scopes 1,2,3: What you need to know!

Get a better understanding of Emissions Scopes 1,2,and 3 from George Lin, Caterpillar's emissions expert.

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Transcript

Lou:  Good Day and welcome everyone to Power Bytes!  I am your host Lou Signorelli and Power Bytes is your destination Podcast for power generation conversations.  As always please know how much we appreciate you, our listeners.  We hope you find our topics helpful and interesting.  There are several ways for you to get in touch with the show. You can send us an email at powerbytes@cat.com, visit us at Cat Electric Power on Facebook or LinkedIn.  Please remember to subscribe, leave comments and like our show wherever you listen to your favorite podcast. 
 
Lou: Greenhouse gases are a key part of the Climate Change discussion and as part of that I thought it a good idea to get kind of a 'crash course' in the topic from our resident emissions expert George Lin 
 
George is a Mechanical Engineer from the University of British Columbia in Vancouver and is currently an engineering manager at Caterpillar in the Emissions and Product Regulatory Compliance group.  He has over 30 years of industry experience with engines ranging from performance to emissions, and with both diesel and natural gas. 
 
Lou: Thanks for joining us George!
 
Lou, it's great to be able to join you for a chat today.
 
Lou: George, can we start with a brief overview of what of the many gases in the world are considered 'greenhouse gases' and why?
 
Let me start at a very simple level and work my way up from there.
The sun emits solar radiation or heat that is absorbed by the earth's surface and thus warms the earth. As the earth warms, it also emits some of that absorbed heat along with some reflected heat from the sun.  Gases in the atmosphere can impact how much of this heat is lost into space vs reflected back to earth. Too little greenhouse gases and the earth freezes.  Too much greenhouse gases and the earth overheats.  So greenhouse gases have an impact in the regulation of the global temperatures.  We need GHGs, but we also don’t want to overdo it.
 
There are many different greenhouse gases, and most of them are not discussed under the topic of sustainability because those greenhouse gases are either naturally occurring (not man-made), for example water vapor, or have short lifespan, for example ground-level ozone.
 
So generally, when people talk about greenhouse gases in the context of sustainability, there are 5 main greenhouse gases or categories:

CO2 – Carbon dioxide
CH4 - methane
N2O - nitrous oxide
PFCs/HFCs - fluorocarbons
SF6 - sulfur hexafluoride
 
Lou: I'm hearing about different Scopes, like 1, 2, and 3.  What does this mean. 

If an entity or a company wants to control greenhouse gases, the first thing they will need to do is to understand where GHGs are being produced. i.e. visibility and awareness through assessment is the first step. In order to do this more effectively, an organization called “Greenhouse Gas Protocol” has developed different groupings of GHGs sources to better separate and organize the sources of those GHG emissions. 

“Scope 1” describes the GHG emissions that a company is directly responsible for producing.  For example, this would be fuel consumed, or wood burned by an entity.  All these activities directly release GHGs into the atmosphere. Emissions accounted for under Scope 1 by one entity is never counted under another entity’s Scope 1. i.e. Scope “1” is only counted “1” time. 

Scope 2: covers emissions that an entity has direct control over, but that doesn’t directly produce. This would include electricity, steam, heating, or cooling as long as the entity didn’t produce the emissions but instead purchased that “energy” from outside of that organization’s accounting boundaries. Someone might decide to turn on more lights, or increase the room temperature by turning on the hot-water radiator for more heat, or ask for a block of ice to cool down a hot swimming pool.  The entity using this energy has direct control over how much energy is used even though they did not produce the GHGs associated with that energy.  GHG emissions under Scope 2 are accounted for as Scope 1 by the entity generating the energy and once again under Scope 2 by the entity using the energy.  So for example, whatever GHGs were emitted by the electric company (Ameren here in central Illinois) to generate 1kWh of electricity, that same quantity of GHGs are also attributed as Scope 2 to the entity using the electricity. 


Again, the purpose of attributing GHGs to these “Scope” groupings is to help identify and understand both the sources and quantities of GHGs for the purpose of controlling or reducing them.

Scope 3: are indirect GHGs. This is most abstract group of GHGs to quantify, the broadest coverage, and also the most complicated from an accounting perspective. Scope 3 GHGs can be counted multiple times in some cases.  As such, this group of GHGs isn’t as effective for describing how much GHGs are being produced but instead helps an entity better understand GHGs associated with products and services. Under Scope 3, there are 15 different categories or sub-groups to help with accounting and assessment. For example, if an employee rode the bus to get to work, there is a fraction of that buses’ GHG emissions that is attributable to that employee’s commute and ultimately attributable to an entity’s Scope 3 emissions. Even if the bus is electric, there is still some GHGs attributable because the electricity generated to power that bus likely produced some GHGs. We say that “Scope 3 Category 7: Employee Commuting” covers GHGs that are intended to account for the commuting of employees. Or if an entity purchases a car for one of its employees, there are GHGs attributable to the manufacturing of that car that are covered under “Scope 3 Category 2: Capital Goods”. This would include the energy for mining the ore, smelting the metal, forming and machining parts, assembly of the components, etc. 

 
Lou: Thanks George, now that better understand what greenhouse gases are can you give us an introduction as to who is responsible for those definitions
 
The Kyoto Protocol, which is the predecessor to the Paris Agreement, identified the greenhouse gases that we previously referred to.  Furthermore, the Kyoto Protocol and Paris Agreement are intended to establish greenhouse gas limits or reductions to reduce global warming temperature rises.
 
Lou: So, countries signed on to the Paris agreement, but from there is where it gets interesting.  Companies will be expected to make meaningful impact on GHG reductions.  So what mechanisms do governments have to influence the direction of corporations?
 
In the Paris Agreement, a country makes a pledge.  This pledge can be anything. So the country or government is stating some goal on limiting greenhouse gases to reduce the global warming rate. Some countries pledge to be "carbon neutral" which means the amount of greenhouse gases they plan to capture is equal to the greenhouse gases they emit. Yet other countries will say from a practical perspective that they plan to increase greenhouse gases by say 4 times.  Both are acceptable under the Paris Agreement.  It's a "say what you're planning to do" type of agreement.  For countries that pledge to be carbon neutral, they need to put programs in place to reduce greenhouse gases whether this is through reduced generation or increased capturing which is sometimes referred to as sequestration.  So in other words if a country pledges a greenhouse reduction, they necessarily need to extract this reduction from industry. Some companies see this as a change that is inevitable and they are implementing voluntary changes prior to mandates. Governments can also use a carrot approach by providing incentives, tax reductions (for example electric vehicle tax credits), or other funding mechanisms to hasten the adoption of lower greenhouse gas products and technologies. 
 
Lou: So, now we have governments offering incentives and/or passing laws. What can we expect going forward. 
 
The passage of the Inflation Reduction Act last year offered a number of production and investment tax credits in the energy space, as well as credits for carbon capture and Electric Vehicles.  In Europe, and we've seen similar incentive packages start to emerge there, too. We can expect that government policies, and the incentives around the energy transition, to continue to morph over time to address the areas where policymakers see a need for things to move faster.  It’s all about incentivizing the adoption of these newer technologies, including carbon capture and battery powered mobile machinery. 
 
Lou:  George, can you hone in on what this will mean for the Electric Power industry, specifically when we look at the grid?
 
There is a perception that electricity is zero emissions and products using electricity are also zero emissions. The reality is that it varies significantly around the world.  Some countries such as Norway and Sweden have electricity produced with very little greenhouse gases. Norway uses mostly hydro based generation whereas Sweden has a high percentage of hydro and nuclear.  Other countries produce electricity with a much higher greenhouse gas footprint such that driving electric vehicles can result in more emissions than a standard hybrid engine vehicle.  In the U.S., our Energy Information Administration has published that for 2022, at utility-scale level of electric generation, over 60% of our electricity is produced from fossil fuels. So the U.S. has some ways to go before electricity is carbon neutral. Since electricity is one of the main sources of energy use in the U.S., I expect that over the next 2 decades, the carbon intensity of electricity will need to decrease for our government to meet their pledge to reduce greenhouse gases.  I expect renewable sources of energy to increase significantly and thus our grid to have lower carbon intensity.  In addition, we have more technologies on the market that allow for infrastructure such as houses and buildings to operate local grids or even off-grid. Solar panels combined with Caterpillar's Energy Storage Systems for example, can create micro-grids with very low carbon intensity electricity.
 
 
Lou:  There you have it folks.  I’d like to thank George Lin for sharing his expertise with us today.  And thank you, our listeners.  If you’d like to continue this discussion, I encourage you to connect with your local Cat dealer. Don’t forget to like, share, and comment on this episode.  Until next time, I’m Lou Signorelli and this is Power Bytes.  Have a great rest of your day!