Target setting for decarbonisation

Background

This article is aimed at organisations with genuinely high ambition to gain all of the business and societal benefits of a decarbonisation strategy aligned with the latest climate science.

Firstly, it is necessary to understand that global heating, and consequent climate change, is caused by direct emissions of greenhouse gases (GHGs). These are often referred to as scope 1 emissions. Decarbonisation strategies need to have a strong focus on scope 1 emissions, often the elimination or near elimination of fossil fuels from the organisation's operations and also the near elimination of process GHG emissions. Close to 75% of all GHGs are from the consumption of energy.

Reduction of scope 2 and 3, indirect emissions, will have an indirect impact on the reduction of scope 1 emissions from others.

The Paris Agreement committed all signatories to limiting global heating to well below 2ºC above pre-industrial values. Each country is required to produce targets and plans to reduce scope 1 emissions aligned with this agreement. These targets and plan are designated as Nationally Declared Contributions (NDCs).

Decarbonisation Strategies

The upcoming ISO 50100 (decarbonisation of energy related GHGs) gives detailed requirements for organisations wishing to achieve verified decarbonisation plans and achievements.

The main points of an effective decarbonisation strategy are:

1. Establish strong leadership within the organisation to drive the transformation toward a low-carbon organisation. Identify barriers, benefits, and the necessary change management.

2. Develop baseline emissions for each scope. This is not complex for scopes 1 and 2.

3. Set long term targets for each scope to achieve near zero GHG emissions and then set shorter term intermediate targets, again, for each scope separately. This article outlines how to set these targets.

4. Develop plans to reduce GHG emissions for each scope to meet its targets. The various actions should be prioritized in terms of cost savings and other benefits and also in terms of barriers to their implementation. This topic will be the subject of a future article. These plans will include energy efficiency and renewable energy measures.

5. Implement the measures and monitor the reduction in emissions. Take corrective action when it is apparent that targets might not be met.

The organisation needs access to effective data analytics and technical and managerial skills in order to meet the unique challenges of decarbonisation.

Target Setting

There are many complexities and nuances around the topic of target setting but this is an attempt to clarify some basic aspects.

All targets need to be expressed in units of absolute emissions in units of tCO2e. The use of carbon intensity-based units is a significant barrier to decarbonisation.

Scope 1 Targets

As mentioned earlier, scope 1 emissions need the highest level of effort in most organisations. If the NDCs for the country(ies) where the organisation operates meet the requirements of the Paris Agreement, then those NDCs should be the basis of target setting for the sector(s) in which the organisation operates. If the NDC does not meet the requirements of the Paris Agreement (which is the case in most countries currently), then ambitious organisations will exceed those NDC targets.

An example of an industrial organisation based in the EU might have a scope 1 target of 44% reduction by 2030 compared with a baseline of 2019 and a near zero target by 2039.

Scope 1 targets should be of the form of a carbon budget, i.e. the total tCO2e that the organisation will emit in the future. The rate of reduction can be controlled by the organisation.

Scope 2 Targets

Scope 2 emissions are those from imported energy, primarily electricity. As the national electrical grids are decarbonised, then the scope 2 emissions of organisations will fall, all other things being equal.

Organisations could set scope 2 targets to match their grid targets from the NDC again in absolute terms. An example might be to reduce scope 2 emissions by 80% by 2030 compared to 2019 levels and be near zero by 2039.

The measures an organisation can take to meet those targets include:

• Reduction of electricity consumption
• Demand flexibility and storage
• Renewable electricity sourcing

Careful planning is needed as processes are electrified, tending to increase electricity consumption.

Scope 3 Targets

Scope 3 emissions can be broken down into different types requiring different approaches to decarbonisation:

1. Energy related scope 3 emissions will automatically reduce as scope 1 and scope 2 emissions are reduced.
2. Scope 3 emissions under the direct control of the organisation, e.g. business travel, should be eliminated or minimised.
3. Scope 3 emissions not under the direct control of the organisation will typically require collaboration with suppliers and customers to achieve reductions.
4. There is a special case for outsourced processes such as manufacturing. These are categorised as scope 3 emissions. They are scope 1 emissions for the organisation producing them. These producers are often significantly less profitable and less able to invest in decarbonisation measures. They should be supported financially and technically by their customers.

Next Steps

With data and factors, the total carbon footprint is calculated. The subsequent analysis identifies the main emission sources within the organisation.

1. Get a strong top management commitment to beginning or accelerating your decarbonisation journey.
2. Learn about the NDCs for your country and sector and try to evaluate if they meet the requirements of the Paris Agreement.
3. Calculate scope 1 and scope 2 base period emissions of your organisation.
4. Based on your scope 1 and scope 2 targets, calculated your remaining scope 1 and scope 2 budgets.
5. Develop action plans to achieve these budgets.