The news is full of new terms to describe efforts to reduce greenhouse gas (GHG) emissions. One term we will be seeing more in the future is net zero carbon. Many publicly traded companies are announcing net zero carbon targets for their operations. Net zero carbon refers to actions taken to offset GHGs emitted into the atmosphere with the avoidance or removal from the atmosphere of an equal (or greater) amount of GHGs.
The need to use fossil fuels while the world transitions to a low carbon future has prompted many companies to voluntarily reduce their GHG emissions or to offset their GHG emissions using carbon offsets. Reduce GHG emissions where feasible and offset the balance.
Scope 1, 2 and 3 Emissions
Business GHG emissions are typically divided into Scope 1, 2 and 3 emissions.
Scope 1, 2 and 3 GHG emissions from the oil and natural gas industry include:
- Scope 1 direct emissions from onsite combustion of fossil fuels and methane venting.
- Scope 2 indirect emissions from purchased electricity, heat and steam.
- Scope 3 value chain emissions from use of sold products (e.g., gasoline/diesel fuel refined from crude oil and natural gas fuel used by utilities, homeowners), product transport, employee business travel and employee commuting. For oil and gas operators, Scope 3 emissions will be much greater than Scope 1 and 2 emissions.
At this time, most companies announcing net zero carbon targets are focused on reducing Scope 1 and 2 emissions.
Net Zero Options
Ways for the oil and natural gas industry to achieve a net zero carbon operation include:
- Reduce Scope 1 operational emissions.
- Comply with future methane reduction regulations (proposed NSPS OOOOb/c).
- Implement voluntary programs to reduce methane emissions.
- Identify and reduce GHG emissions from selected emission sources (e.g., storage tanks, glycol dehydration units, flares, enclosed combustors, etc.) that are not required by regulation.
- Reduce Scope 2 emissions by purchasing electricity (for offices, warehouses, manufacturing) from renewable energy sources.
- Offset emissions by purchasing carbon credits or offsets from voluntary markets.
The USEPA has proposed regulations (NSPS OOOOb/c) that will further tighten requirements to reduce methane emissions from the oil and natural gas industry. Also, several states (e.g., Colorado, New York) have proposals to require methane reductions from oil and natural gas operations.
These proposed regulations include exemptions for low emitting sources. Emissions from these emission sources may be an opportunity for voluntary GHG reductions.
Voluntary Programs to Reduce Methane Emissions
Many oil and natural gas companies actively participate in voluntary programs to reduce methane emissions. These programs include:
- The Environmental Partnership https://theenvironmentalpartnership.org/
- ONE Future Coalition https://onefuture.us/
- USEPA’s Voluntary Methane Programs for the Oil and Natural Gas Industry https://www.epa.gov/natural-gas-star-program
Carbon Credits and Carbon Offsets
Often, the terms carbon credit and carbon offset are used interchangeably.
A carbon credit is an instrument/permit representing ownership of one metric ton of carbon dioxide equivalent (CO2e) that can be traded, sold or retired. Carbon credits are used in compliance cap and trade systems (California Cap-and-Trade Program).
Carbon offsets is the term used in the voluntary GHG offset market. Buyers in voluntary markets are mostly companies wanting GHG reductions to reduce their carbon footprint. A carbon offset is a reduction of GHG emissions from a defined project (lowers CO2 emissions or sequesters CO2). In most cases, carbon offsets create reductions outside the normal operations of a company. The typical unit of measure is CO2e for carbon offsets.
The general types of carbon offset projects include:
- Renewable energy: Hydro, solar, tidal, wind, biomass, geothermal
- Energy efficiency: Transport modal shifting, fuel switching, EE supply/demand side
- Forestry: Afforestation, reforestation, avoided deforestation
- Methane capture/avoidance, waste management: Landfill gas, agriculture/livestock, coal bed/mine methane
- Other: Direct air capture, geological sequestration/carbon capture & storage (CCS)
Carbon Offset and Credit Markets
Carbon offset/credit sellers include:
- 3Degrees – offsets for businesses
- TerraPass – offsets for individuals and businesses
- atmosfair – offsets for GHGs from aircraft, cruise ships, long-distance coaches, and events.
- Cool Effect – worldwide sourced offsets for businesses
- Native – offsets for individuals and businesses.
- Carbonfund – offsets for individuals and businesses.
There are also brokers that can locate carbon offsets for companies.
Companies purchasing carbon credits or offsets should thoroughly evaluate the carbon offset supplier and the quality of the carbon credits/offsets purchased.
Tracking Net Zero Progress
- Determine which Scope emissions will be reduced/offset.
- Determine baseline year for the net zero carbon goal.
- Prepare the baseline annual GHG emission inventory for Scope 1 and 2 emissions.
- Note: USEPA Mandatory GHG reporting does not include Scope 2 emissions and does not include operations that do not trigger annual reporting.
- Review the baseline GHG report to identify opportunities to reduce GHGs.
- Set a target date to meet the net zero carbon goal.
- Set up a system to track and quantify GHG emissions, GHG reductions and offsets.
- Reduce operation GHG emissions and document reductions.
- Find and purchase carbon credits or carbon offsets.
- Track ongoing progress toward net zero carbon goals and adjust as needed.
Carbon Credit and Offset Pricing
The price of carbon credits and offsets vary depending on project geographic location, project quality and market forces.
- California carbon credits pricing in U.S. dollars per metric ton CO2e: $30+
- Carbon offsets pricing in U.S. dollars per metric ton CO2e: $3 to $35+
Companies implementing net zero carbon strategies are expected to increase in the future. Market forces, government mandates and public pressure will drive companies to offset their GHG emissions. ESG reporting of GHG emissions and associated climate risks will also increase the need to offset GHG emissions. Companies that implement a system to track and reduce their GHG emissions will improve their ESG scores and enhance their reputation, attract more capital investors and reduce operational risks.
Cimarron – Who We Are
Cimarron’s overall goal is to reduce GHG emissions for all industries as we work with our clients to create a cleaner environment.
The company engineers and manufactures environmental, production and process equipment for the upstream, midstream and downstream energy industries, as well as environmental control solutions for biogas at wastewater facilities, digester tanks and landfills.
Cimarron offers our customers the know-how and environmental expertise to meet the environmental standards of today and tomorrow. Cimarron is committed to bring value to the Energy industry and their shareholders based on our financial strength, experienced personnel, and engineering capabilities.
As a company, we strive every day to make a difference through innovation (e.g. ESG), customer focus, and operational efficiency. In addition to being present in all major regions in the US, Cimarron serves more than 45 countries around the world, ranging from offshore to desert. From key operational centers in the United States, Italy and the United Arab Emirates, Cimarron offers ongoing service and support through its own field service personnel and strategic third-party partners, creating a cleaner environment for our customers and their shareholders.
Since its founding in the mid-1970’s in Oklahoma, the company’s product offering has expanded from production equipment to include the largest line of environmental solutions that capture or incinerate fugitive vapors. With the acquisitions of HY-BON/EDI in 2019 and AEREON (including Jordan Technologies) in 2020, Cimarron has added strong brands, products, and services to its portfolio.
Please contact us to learn more about our products and services and about all our ESG solutions at email@example.com or visit our website www.cimarron.com.