Special Section: The Energy Transition: The Importance of Carbon Intensity and Compliance to Meet Decarbonization Goals

Determining a product’s carbon intensity is the first step in understanding the value of that product and taking advantage of the carbon markets and carbon credits available to companies today.

The long road to net-zero carbon emissions is necessarily a collaborative effort between policymakers, industry, and consumers (Figure 1). To achieve this broad and ambitious goal, it will take considerable time to develop a framework for stakeholders to adopt. The U.S. Clean Air Act began reducing greenhouse gas emissions decades ago and opened the way for future environmental initiatives, and with each proposal came further refinement of the tools needed to measure and report emissions.

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▲Figure 1. Achieving net-zero carbon emissions will require collaborative work between government, industry, citizens, and investors. There is no simple solution to achieving “net zero.” Instead, a complicated framework involving policy, technology, and cross-cutting initiatives will be necessary.

With regulations often changing, it is likely that many stakeholders take a forward look at the carbon markets and forget how much progress has already been made. The names involved in some of the most important milestones may sound somewhat anachronistic; remember, California’s Low Carbon Fuel Standard was signed into law by Governor Arnold Schwarzenegger and the Renewable Fuel Standard was signed into law by President George W. Bush. This era of incremental progress included the Kyoto Protocol, which created a carbon emissions trading market; and the Paris Agreement in 2015, which, after the readmission of the U.S., covers over 98% of human emissions and marked the strongest global commitment to net-zero carbon emissions. California’s Low Carbon Fuel Standard in particular can be considered an environmental policy juggernaut. This program puts a price on altruistic commitments, and that price hinges on two important details for anyone in the transportation fuel supply chain that wants to participate in the program: carbon intensity (CI) and compliance.

Reducing the CI, or decarbonizing, the global supply chain will require bigger partnerships between investors, manufacturers, and shippers. Nearly everyone in the supply chain will have to be involved because everyone will be auditable for their contribution to a final product’s CI. “Responsibility” in this context will account for more than direct emissions. Consider the breadth of those responsibilities involved in the following emissions:

• Scope 1 emissions are direct greenhouse gas emissions that occur from sources that are controlled or owned by an organization (e.g., emissions associated with fuel combustion in boilers, furnaces, vehicles).
• Scope 2 emissions are indirect greenhouse gas emissions associated with the purchase of electricity, steam, heat, or cooling.
• Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain like business travel, water, and waste treatment...