Category 8 Upstream Leased Assets – The best calculation guidance

Category 8 Upstream Leased Assets

Category description – Category 8 Upstream Leased Assets includes emissions from the operation of assets that are leased by the reporting company in the reporting year and not already included in the reporting company’s scope 1 or scope 2 inventories. This category is applicable only to companies that operate leased assets (i.e., lessees). For companies that own and lease assets to others (i.e., lessors), see category 13 (Downstream leased assets).

Overview – Category 8 Upstream Leased Assets

Reporting on emissions for Category 8 Upstream Leased Assets involves documenting and disclosing the greenhouse gas (GHG) emissions associated with activities related to upstream oil and gas operations that are conducted through leased assets. This category typically includes activities such as exploration, extraction, and production of oil and gas resources.

Here’s an overview of reporting on emissions for Category 8 Upstream Leased Assets:Upstream Leased Assets

Purpose of Reporting:

The purpose of reporting emissions in Category 8 Upstream Leased Assets serves several important functions:

  1. Transparency and Accountability: Reporting on emissions provides transparency into the environmental impact of upstream oil and gas operations conducted through leased assets. This transparency fosters accountability by allowing stakeholders, including investors, regulators, and communities, to understand the emissions profile of companies and hold them accountable for their environmental performance.
  2. Risk Management: Emissions reporting helps companies identify and manage climate-related risks associated with upstream leased assets. By quantifying emissions and assessing associated risks, companies can better understand potential regulatory changes, physical impacts of climate change (such as extreme weather events), and shifts in market demand for fossil fuels. This enables proactive risk mitigation strategies and enhances long-term resilience.
  3. Performance Tracking: Reporting enables companies to track trends in emissions over time and assess the effectiveness of emission reduction measures. Performance metrics such as emissions intensity (emissions per unit of production) and reduction targets allow companies to benchmark their performance against industry peers and evaluate progress toward sustainability goals.
  4. Investor and Stakeholder Confidence: Comprehensive reporting builds investor and stakeholder confidence by demonstrating a company’s commitment to environmental stewardship and sustainability. Transparent disclosure of emissions data, methodologies, and performance metrics helps investors make informed decisions about the environmental risks and opportunities associated with their investments.
  5. Regulatory Compliance: Reporting on emissions helps companies comply with regulatory requirements related to greenhouse gas emissions. Many jurisdictions have reporting obligations or emission reduction targets that companies must meet, and accurate emissions reporting is essential for demonstrating compliance with these regulations.
  6. Market Differentiation: Companies that proactively report on emissions and demonstrate a commitment to reducing their carbon footprint may gain a competitive advantage in the market. Increasingly, investors, customers, and other stakeholders are placing value on companies with strong environmental performance and may preferentially support businesses that prioritize sustainability.
  7. Driving Innovation and Efficiency: Emissions reporting can drive innovation and efficiency by identifying opportunities for emission reduction and operational optimization. By quantifying emissions and analyzing emission sources, companies can identify areas for improvement, invest in cleaner technologies, and implement best practices to minimize environmental impact and enhance operational efficiency.

Components of Reporting:

Reporting on emissions for Category 8 Upstream Leased Assets involves several key components to provide comprehensive and transparent information about the greenhouse gas (GHG) emissions associated with oil and gas operations conducted through leased assets. Here are the main components:

  1. Emission Sources Identification:
    • Identify and categorize the various sources of GHG emissions associated with upstream oil and gas operations conducted through leased assets. This includes sources such as combustion of fossil fuels in equipment, flaring and venting of associated gas, methane emissions from leaks, and other sources of emissions.
  2. Data Collection and Measurement:
    • Collect relevant data on activities and operations that contribute to GHG emissions from upstream leased assets. This may include data on fuel consumption, production volumes, equipment operation hours, and other relevant parameters.
    • Utilize appropriate measurement techniques, such as direct monitoring using sensors and meters, as well as estimation methods based on engineering calculations and emission factors, to quantify emissions accurately.
  3. Emission Factors and Calculations:
    • Use established emission factors and calculation methodologies to convert activity data into CO2-equivalent emissions for each emission source. These factors may vary depending on factors such as the type of equipment, fuel type, operating conditions, and efficiency.
    • Perform calculations to determine the total GHG emissions associated with upstream leased assets, broken down by emission source and emission type (e.g., CO2, methane).
  4. Reporting Boundaries and Scopes:
    • Define the reporting boundaries and scopes in alignment with internationally recognized standards such as the Greenhouse Gas Protocol. Determine which emissions fall under Scope 1 (direct emissions from owned or controlled sources) and Scope 2 (indirect emissions from purchased electricity, heat, or steam).
    • Consider including Scope 3 emissions (indirect emissions from sources not owned or controlled by the reporting entity but associated with its activities) if relevant and feasible.
  5. Verification and Assurance:
    • Undergo third-party verification or assurance processes to validate the accuracy and completeness of emissions data. Independent auditors may assess data collection methodologies, emission calculations, and reporting practices to provide stakeholders with confidence in the reported emissions figures.
    • Disclose information about the verification or assurance process and the qualifications of the verifying entity.
  6. Performance Metrics and Targets:
    • Define performance metrics such as emissions intensity (e.g., emissions per unit of production), energy efficiency indicators, and emission reduction targets to track progress over time and benchmark performance against industry peers.
    • Provide context for performance metrics by comparing current performance to historical data and explaining factors influencing emissions trends.
  7. Disclosure and Transparency:
    • Prepare a comprehensive emissions inventory report detailing the methodologies used, emission sources identified, emission calculations, and resulting emissions data.
    • Disclose emissions data and related information in annual sustainability reports, financial filings, or dedicated emissions inventories published on company websites.
    • Provide transparent explanations of data uncertainties, limitations, and assumptions used in emissions calculations to facilitate understanding and interpretation by stakeholders.
  8. Risk Assessment and Mitigation Strategies:
    • Conduct a risk assessment to identify climate-related risks associated with GHG emissions from upstream leased assets, such as regulatory changes, physical impacts of climate change, and market shifts.
    • Develop and implement mitigation strategies to address identified risks, including investments in cleaner technologies, operational improvements, and adaptation measures to enhance resilience.

Reporting on emissions for Category 8 Upstream Leased Assets

  1. Scope of Reporting:
  2. Data Collection and Measurement:
    • Gathering data on emissions involves tracking various sources of GHG emissions within the upstream leased assets, including but not limited to:
      • Combustion of fossil fuels in equipment such as drilling rigs, pumps, compressors, and generators.
      • Flaring and venting of associated gas during oil production.
      • Methane emissions from leaks in equipment and infrastructure.
    • Measurement methodologies may include direct monitoring of emissions using sensors and meters, as well as estimation techniques based on engineering calculations and emission factors.
  3. Emission Factors and Calculations:
    • Emission factors are used to convert activity data (e.g., fuel consumption, production volumes) into CO2-equivalent emissions.
    • These factors may be specific to the type of equipment or process, taking into account factors such as fuel type, operating conditions, and efficiency.
    • Calculation of emissions involves multiplying activity data (e.g., fuel consumption in liters or cubic meters) by the corresponding emission factor to derive CO2-equivalent emissions.
  4. Reporting Standards and Frameworks:
    • Reporting on emissions for Category 8 Upstream Leased Assets often aligns with internationally recognized standards and frameworks, such as the Greenhouse Gas Protocol, the Carbon Disclosure Project (CDP), or jurisdiction-specific reporting requirements.
    • Companies may also voluntarily disclose emissions data through initiatives like the Task Force on Climate-related Financial Disclosures (TCFD) to provide investors and stakeholders with a comprehensive view of their climate-related risks and opportunities.
  5. Verification and Assurance:
    • Many companies undergo third-party verification or assurance processes to validate the accuracy and completeness of their emissions data.
    • Verification may involve independent auditors assessing data collection methodologies, emission calculations, and reporting practices to provide stakeholders with confidence in the reported emissions figures.
  6. Trends and Performance Analysis:
    • Reporting on emissions allows companies to track trends in their emissions over time and assess the effectiveness of emission reduction measures.
    • Performance metrics such as emissions intensity (e.g., emissions per unit of production) and reduction targets help companies set goals and benchmark their performance against industry peers.
  7. Disclosure and Transparency:
    • Transparent disclosure of emissions data, methodologies, and performance metrics is essential for building trust with stakeholders, including investors, regulators, communities, and civil society organizations.
    • Comprehensive reporting may include detailed disclosures in annual sustainability reports, financial filings, and dedicated emissions inventories published on company websites.
  8. Risk Management and Mitigation:
    • Understanding and reporting on emissions from upstream leased assets enables companies to identify climate-related risks, such as regulatory changes, physical impacts of climate change, and shifts in market demand for fossil fuels.
    • By quantifying emissions and assessing associated risks, companies can develop mitigation strategies, invest in cleaner technologies, and transition towards low-carbon energy sources to reduce their carbon footprint and enhance long-term resilience.

In summary, reporting on emissions for Category 8 Upstream Leased Assets involves comprehensive data collection, measurement, and disclosure of GHG emissions associated with oil and gas operations conducted through leased assets. This reporting supports transparency, risk management, and the transition to a low-carbon economy in alignment with global climate goals.

Leased assets may be included in a company’s scope 1 or scope 2 inventory depending on the type of lease and the consolidation approach the company uses to define its organizational boundaries (see section 5.2 of the Scope 3 Standard).

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If the reporting company leases an asset for only part of the reporting year, it should account for emissions for the portion of the year that the asset was leased. A reporting company’s scope 3 emissions from upstream leased assets include the scope 1 and scope 2 emissions of lessors (depending on the lessor’s consolidation approach).

See Appendix A of the Scope 3 Standard for more information on accounting for emissions from leased assets.

Category 8 Upstream Leased Assets – Calculating emissions from leased assets

Figure 8.1 (below) shows a decision tree for selecting a calculation method for emissions from upstream leased assets.

Companies may use one of the following methods:

Companies may also calculate the life cycle emissions associated with manufacturing or constructing leased assets.

decision tree for selecting a calculation method for emissions from upstream leased assets

Asset-specific method

This method involves collecting asset-specific (e.g., site-specific) fuel and energy and/or scope 1 and scope 2 emissions data from individual leased assets.

Activity data needed

Companies should collect scope 1 and scope 2 emissions data, or activity data on:

Emission factors needed

Companies should collect:

  • Site or regionally specific emission factors for energy sources (e.g., electricity and fuels) per unit of consumption (e.g., kg CO2e/kWh for electricity, kg CO2e/liter for diesel)
  • Emission factors of fugitive and process emissions

To optionally calculate emissions associated with manufacturing or construction of leased assets, companies should use life cycle emission factors that include manufacturing and construction.

Data collection guidance

Data sources for activity data may include:

  • Utility bills
  • Purchase records
  • Meter readings
  • Internal IT systems.

Data sources for emission factors include:

To calculate scope 3 emissions from leased assets, aggregate the scope 1 and scope 2 emissions across all of the reporting company’s leased assets, using this formula:

Calculation formula [8.1] Asset-specific method

CO2e emissions from upstream leased assets =

calculate the scope 1 and scope 2 emissions associated with each leased asset:

scope 1 emissions of leased asset

= ∑ (quantity of fuel consumed (e.g., liter) × emission factor for fuel source (e.g., kg CO2e/liter)) + ∑ ((quantity of refrigerant leakage (kg) × emission factor for refrigerant (kg CO2e/kg)) + process emissions)

scope 2 emissions of leased asset

= ∑ (quantity of electricity, steam, heating, cooling consumed (e.g., kWh) × emission factor for electricity, steam, heating, cooling (e.g., kg CO2e/kWh))

then sum across leased assets:

scope 1 and scope 2 emissions of each leased asset

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Companies that lease a portion of a building (e.g., an office building) where energy use is not separately sub-metered by the tenant may estimate energy consumed using the reporting company’s share of the building’s total floor space and total building energy use, following this formula.

Calculation formula [8.2] Allocating emissions from leased buildings that are not sub-metered

energy use from leased space (kWh) =

(reporting company’s area (m2)) / (building’s total area (m2) × building’s occupancy rate (e.g., 0.75)) × building’s total energy use (kWh)

Example [8.1] Calculating emissions from upstream leased assets using the asset-specific method

Company B leases an entire floor of office space from Company D for one year. Company B is able to collect data on the fuel, electricity, and fugitive emissions of the entire building for the reporting year. Company B leases 200 m2 of the building’s total area of 2,000 m2. The occupancy rate of the building is 75%.

Data is summarized in the table below:

Category 8 Upstream Leased Assets

Total natural gas allocation to company B:

(reporting company’s area (m2)

building’s total area (m2) × building’s occupancy rate (e.g., 0.75) × building’s total natural gas use

= 200 / (2000 × 0.75) × 1500

= 200 kWh

total electricity allocation to company B:

reporting company’s area (m2)

building’s total area (m2) × building’s occupancy rate (e.g., 0.75) × building’s total electricity use

= (200 / (2000 × 0.75) × 3000

= 400 kWh

total fugitives allocation to company B:

reporting company’s area (m2)

building’s total area (m2) building’s occupancy rate (e.g., 0.75) × building’s total fugitive emissions

= (200 / (2000 × 0.75) × 5

= 0.67 kg

total emissions of leased asset:

= (200 × 0.2) + (400 × 0.7) + (0.67 × 1500)

= 1,325 kg CO2e

Reporting and Documentation:
  • Document the calculation methodology, including the data sources, emission factors used, and any assumptions made.
  • Include the calculated emissions in the emissions inventory report for the specific drilling rig, along with relevant operational details and any other emission sources associated with the asset.

Considerations:

  • The Asset-specific method provides a more granular and accurate estimation of emissions by accounting for the specific characteristics and operating conditions of individual assets.
  • It requires access to detailed operational data for each asset, which may involve additional data collection efforts compared to aggregated methods.
  • Regular monitoring and documentation of operational data, as well as updates to emission calculations as equipment or operating conditions change, are essential for maintaining the accuracy of emissions reporting using this method.

Lessor-specific method

The lessor-specific method involves collecting the scope 1 and scope 2 emissions from lessor(s) and allocating emissions to the relevant leased asset(s). This method is relevant in cases where, for example, office space is leased in a building that is not sub-metered. If the lessor company has data available at the building- or company-level, allocation techniques can be used to apportion emissions to the office space leased by the reporting company.

Activity data needed

Companies should collect lessors’ total scope 1 and scope 2 emissions data, or activity data on:

Emission factors needed

  • Site or regionally specific emission factors for energy sources (e.g., electricity and fuels) per unit of consumption (e.g., kg CO2e/kWh for electricity, kg CO2e/liter for diesel)
  • Emission factors of fugitive and process emissions.

To allocate emissions, companies should collect data on:

  • Total area/volume/quantity of lessors’ assets
  • Total area/volume/quantity of the reporting company’s leased assets.

For guidance on allocating emissions, refer to chapter 8 of the Scope 3 Standard.

Calculation formula [8.3] Lessor-specific method

CO2e emissions from leased assets =

calculate the scope 1 and scope 2 emissions associated with each lessor:

scope 1 emissions of lessor

= ∑ (quantity of fuel consumed (e.g., liter) × emission factor for fuel source (e.g., kg CO2e/liter)) + ∑ (quantity of refrigerant leakage (kg) × emission factor for refrigerant (kg CO2e/kg)) + process emissions

scope 2 emissions of lessor

= ∑ (quantity of electricity, steam, heating, cooling consumed (e.g., kWh) × emission factor for electricity, steam, heating, cooling (e.g., kg CO2e/kWh)) then allocate emissions from each lessor and then sum across lessors

Category 8 Upstream Leased Assets

A worked example – Leased drilling rigs over a given period

The Lessor-specific method for calculating emissions involves estimating greenhouse gas (GHG) emissions associated with leased assets by considering the emissions intensity of assets owned by the lessor or by using data provided by the lessor. Here’s an example calculation for emissions using the Lessor-specific method:

Assumptions:

  • We’ll focus on estimating Scope 1 emissions associated with leased drilling rigs over a given period.
  • The calculation will consider only CO2 emissions from diesel combustion.
  • The lessor provides emissions intensity data for their drilling rigs, representing emissions per unit of operational activity.Category 8 Upstream Leased Assets
  • We’ll use actual operational data for the leased drilling rigs to calculate emissions.

Steps for the Calculation:

  1. Data Collection:
    • Obtain operational data for the leased drilling rigs, including:
      • Total diesel fuel consumption (in liters) during the reporting period.
      • Total operating hours of the drilling rigs during the same period.
    • This data can be collected from fuel purchase records, equipment logs, or operational databases.
  2. Obtain Emissions Intensity Data:
    • Obtain emissions intensity data from the lessor, representing emissions per unit of operational activity for their drilling rigs.
    • This data may be provided in the form of emissions per hour of operation, emissions per unit of production, or another relevant metric.
  3. Calculate Emissions:
    • Use the emissions intensity data provided by the lessor to estimate CO2 emissions from the leased drilling rigs.
    • Multiply the total operational activity (e.g., operating hours) of each drilling rig by the corresponding emissions intensity to calculate emissions for each rig.
    • Sum the emissions from all leased drilling rigs to obtain the total CO2 emissions associated with leased assets for the reporting period.
  4. Example Calculation:
    • Suppose we have two leased drilling rigs:
      • Rig A operated for 500 hours, with an emissions intensity of 50 kg CO2 per hour.
      • Rig B operated for 700 hours, with an emissions intensity of 60 kg CO2 per hour.
    • Using the provided emissions intensity data:
      • Emissions from Rig A = 500 hours × 50 kg CO2/hour = 25,000 kg CO2
      • Emissions from Rig B = 700 hours × 60 kg CO2/hour = 42,000 kg CO2
    • Total emissions = 25,000 kg CO2 (from Rig A) + 42,000 kg CO2 (from Rig B) = 67,000 kg CO2
  5. Reporting and Documentation:
    • Document the calculation methodology, including the data sources, emissions intensity data provided by the lessor, and any assumptions made.
    • Include the calculated emissions in the emissions inventory report for the leased assets, along with relevant operational details and any other emission sources associated with the assets.

Considerations:

  • The Lessor-specific method relies on emissions intensity data provided by the lessor, which may require collaboration and communication between lessors and lessees.
  • It provides a streamlined approach to estimating emissions for leased assets based on lessor-provided data, reducing the burden of data collection and calculations on lessees.
  • Regular communication with lessors and verification of emissions intensity data are important for ensuring the accuracy and reliability of emissions estimates using this method.

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Average-data method

The average-data method involves estimating emissions for each leased asset, or groups of leased assets, based on average statistics and secondary data, such as average emissions per asset type or floor space. The average-data method should be used when purchase records, electricity bills, or meter readings of fuel or energy use are not available or applicable. Approaches include:

  • Estimated emissions based on occupied floor space by asset/building type (for leased buildings)
  • Estimated emissions based on number and type of leased assets.

Note that the average-data method is less accurate than the lessor-specific method and limits the ability of companies to track their performance of GHG reduction actions.

Activity data needed

Companies should collect data on:

  • Floor space of each leased building
  • Number of leased buildings, by building type (e.g., office, retail, warehouse, factory, etc.)
  • Number and type of leased assets other than buildings that give rise to scope 1 or scope 2 emissions (e.g., company cars, trucks)

Emission factors needed

Companies should collect:

  • Average emission factors by floor space, expressed in units of emissions per square meter, square foot occupied (e.g., kg CO2e/m2/year)
  • Average emission factors by building type, expressed in units of emissions per building (e.g., kg CO2e/small office block/year)
  • Emission factors by asset type, expressed in units of emissions per asset (e.g., kg CO2e/car/year).

Data collection guidance

The U.S. Energy Information Administration has developed a dataset on average energy use by building type. Commercial Buildings Energy Consumption Survey, at: http://www.eia.doe.gov/emeu/cbecs

Calculation formula [8.4] Average-data method for leased buildings (where floor space data is available

CO2e emissions from leased assets

sum across building types:

∑ (total floor space of building type (m2) × average emission factor for building type (kg CO2e/m2/year))

Calculation formula [8.5] Average-data method for leased assets other than buildings and for leased buildings where floor space data is unavailable

CO2e emissions from leased assets =

sum across asset types:

∑ (number of assets x average emissions per asset type (kg CO2e/asset type/year)

A worked example – Leased drilling rigs over a given period

The Average-data method for calculating emissions involves estimating greenhouse gas (GHG) emissions associated with leased assets by using average emission factors or activity data based on industry benchmarks or historical data. Here’s an example calculation for emissions using the Average-data method:

Assumptions:

  • We’ll focus on estimating Scope 1 emissions associated with leased drilling rigs over a given period.leased drilling rigs over a given period
  • The calculation will consider only CO2 emissions from diesel combustion.
  • We’ll use industry-average emission factors for diesel combustion in drilling rigs or average activity data based on historical performance.
  • Operational data for the leased drilling rigs is not available, and emissions intensity data from the lessor is not provided.

Steps for the Calculation:

  1. Obtain Average Emission Factors or Activity Data:
    • Obtain industry-average emission factors for diesel combustion in drilling rigs or average activity data based on historical performance within the industry.
    • These average data points may be available from industry associations, emissions databases, or regulatory agencies.
  2. Estimate Operational Activity:
    • Estimate the operational activity of the leased drilling rigs for the reporting period. This could be based on factors such as the average number of drilling hours per rig per month or the average fuel consumption per unit of production.
  3. Calculate Emissions:
    • Use the average emission factors or activity data to estimate CO2 emissions from the leased drilling rigs.
    • Multiply the estimated operational activity (e.g., drilling hours or fuel consumption) by the corresponding average emission factor to calculate emissions for each rig.
    • Sum the emissions from all leased drilling rigs to obtain the total CO2 emissions associated with leased assets for the reporting period.
  4. Example Calculation:
    • Suppose the average emission factor for diesel combustion in drilling rigs is 2.7 kg CO2 per liter of diesel.
    • Based on industry benchmarks, the average drilling hours per month for each leased rig is estimated to be 500 hours.
    • Assume there are two leased drilling rigs.
    • Using the provided average emission factor:
      • Estimated emissions from Rig A = 500 hours × (average fuel consumption rate in liters per hour) × 2.7 kg CO2/liter
      • Estimated emissions from Rig B = 500 hours × (average fuel consumption rate in liters per hour) × 2.7 kg CO2/liter
    • Total emissions = (Estimated emissions from Rig A) + (Estimated emissions from Rig B)
  5. Reporting and Documentation:
    • Document the calculation methodology, including the sources of average emission factors or activity data used.
    • Include the calculated emissions in the emissions inventory report for the leased assets, along with relevant details on the assumptions made and any limitations of the data.

Considerations:

  • The Average-data method provides a simplified approach to estimating emissions for leased assets when detailed operational data or emissions intensity data are not available.
  • It relies on average emission factors or activity data, which may not accurately represent the specific characteristics or performance of individual leased assets.
  • Regular monitoring and verification of emissions data, as well as updates to emission calculations based on actual operational data, are important for improving the accuracy of emissions estimates over time.

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