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Scope 4, avoided emissions, what are we talking about?

scope 4 article

The fight against climate change inevitably involves reducing global emissions. Everyone must take action and set targets for reducing their own emissions. Climate neutrality is planned for 2050!

For this approach to be optimal, each company should carry out its Greenhouse Gas (GHG) Assessment. The latter allows a complete evaluation of the quantity of emissions emitted by the company or the community. It is in fact a precise and detailed inventory respecting an official methodology (ISO or GHG Protocol or Bilan Carbone method).

In order to meet the challenges of climate change, the complete balance sheet requires the consideration of the 3 regulatory emission scopes:

  • Scope 1: Direct emissions
  • Scope 2: Indirect energy emissions
  • Scope 3: Other significant indirect emissions that result from the operations and activities of the legal entity and, where applicable, from the use of the goods and services it produces

A few years ago, the GHG Protocol raised the idea of a Scope 4, in order to enable the calculation of avoided emissions. Subsequently, various methodologies and international standards have addressed this subject.

This article aims to review the different definitions, methodologies and reporting methods currently available in the regulations.

1. Avoided emissions, Scope 4, same definition? 

2. Methodology for calculating avoided emissions?

2.1. Avoided emissions: how are they calculated?

2.2 Avoided emissions vs. reduced emissions: not to be confused

3. Managing avoided emissions and aligning carbon reporting

Managing avoided emissions: a communications challenge

Avoided emissions and reporting: methodologies and alignment

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Avoided emissions, Scope 4, same definition?

Scope 4, as defined by the GHG Protocol, covers emissions avoided when a product is used as a substitute for other goods or services, fulfilling the same functions but with a lower carbon intensity. The GHG Protocol also takes into account emissions avoided when a product is recycled.

The French regulatory method supported by ADEME (through ABC), the GHG inventory® method and ISO standards do not use the term Scope 4, but only refer to "avoided emissions".

According toADEME and the GHG inventory® method, these emissions represent the reductions in carbon footprint achieved by a company's activities, products and/or services, when these reductions take place outside its scope of activity. A company can thus avoid emissions by offering low-carbon solutions or services, as well as financing projects.

By definition, scope 4 represents onlya portion of avoided emissions as defined by the French regulatory method and the ISO 14069 standard.

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Methodology for calculating avoided emissions

By quantifying avoided emissions, a company has the opportunity to value the climate impact benefits of its products and services over their entire life cycle.

It offers its customers total transparency and visibility on the carbon footprint of its products, enabling them to better understand their environmental footprint.

For a company that is growing rapidly and therefore facing an increase in its scope 3, calculating its avoided emissions can allow it to position itself positively as a low-carbon player.

📊Avoided emissions: how are they calculated?

Several reference frameworks have expressed definitions and methods for calculating avoided emissions, such as the GHG Protocol, the ISO 14069 standard, the French regulatory method, and the GHG inventory® method. In addition, the Net Zero Initiative and Carbone 4 have also published a guide detailing the methodology to be used when calculating avoided emissions, as well as advice on reporting and communication.

The scope for each of the standards is shown in the table below.

Referential Perimeter
GHG Protocol Products that replace other, more emissions-intensive products
Products that reduce emissions elsewhere.
ADEME/French regulatory method Production and supply of low-carbon solutions or services
Financing of "low-carbon" projects
BC method Recovering material/energy from waste
Producing renewable energy/steam
Selling products whose use and end-of-life allow for the reduction of greenhouse gas emissions
Financing carbon offset projects
ISO 14069 Sale of low-carbon products and services
Financing of carbon offset projects
NZI Contribution to solutions marketed by companies in which the company has invested
Financial contribution to emission reduction/avoidance projects

Despite a perimeter that may differ slightly from one benchmark to another, the calculation method is very similar.

Indeed, these are evaluated by the difference between the emissions related to the new solution (called "low-carbon" solution) and the emissions related to a reference solution that would have occurred if the low-carbon solution/service/project had not existed.

As stated in the carbon footprint methodology, this baseline scenario must answer the question "What would have happened if my solution had not been implemented? ISO 14069 advises the organization to determine this baseline scenario based on its business sector and the nature of its solution.

🌿 Avoided emissions VS reduced emissions: don't confuse them

It is important to emphasize the difference between reduced emissions, which are the result of an actual reduction in a company's greenhouse gas (GHG) emissions over a fixed period following the implementation of an action plan to reduce its carbon footprint, and avoided emissions, determined by comparing a low-carbon product or service with a reference scenario.

Avoided emissions can take two forms:

➡️ Emissions reductions if the reference scenario corresponds to the previous situation.

➡️ A lower increase in emissions when projects enable a lower increase than the counterfactual scenario.

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Managing avoided emissions and aligning carbon reporting

📢 Managing avoided emissions: a communication challenge

ISO 14069 calls the accounting of avoided emissions "intervention accounting". Different from carbon accounting, these emissions must never be combined with or subtracted from the greenhouse gas (GHG) balance sheet. In fact, the GHG Protocol, the GHG inventory® method and the French regulatory method indicate the importance of reporting avoided emissions separately from the greenhouse gas (GHG) emissions inventory.

The communication of avoided emissions must also be carefully thought out, so as not to discredit their measurement. The Pilier B guide, written by the Net Zero Initiative and Carbone 4, stresses the importance of linking avoided emissions to a company result. For example, the company can communicate the percentage of sales linked to the quantity of emissions avoided.

⚙️ Avoided emissions and reporting: methodologies and alignment

Providing transparency and visibility for an organization, avoided emissions help to highlight its contribution to low-carbon products or projects. Although the scope of the calculations may differ from one reference system to another, they are very similar, comparing the emissions of two scenarios with the same technical characteristics, but with one scenario offering a low-carbon solution. These standards are also aligned in terms of reporting. Avoided emissions must never be accounted for or declared in the greenhouse gas balance sheet. So whether you're talking about Scope 4 or avoided emissions, the calculation methodology and emissions reporting are similar. Only the scope of these emissions may differ slightly, since the term Scope 4 is only used by the GHG Protocol.

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