The SEC will require all public companies to disclose their emissions | by Mike Hassaballa | March 2022
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The United States Securities and Exchange Commission (SEC) has published a proposal that would require public companies to disclose their exposure to climate risks . This includes reporting greenhouse gas (GHG) emissions. Including scope 1, 2 and 3 broadcasts.
What is the SEC and what does it do?
The SEC is a regulatory agency of the federal government of the United States, which was created in the aftermath of the 1929 financial crisis. The primary role of the SEC is to enforce the law against market manipulation, protect investors , to promote fairness in the securities markets and to share information about companies and investment professionals.
What are emission perimeters?
The Emission Scopes concept identifies the boundaries of the emissions challenge, it’s like wrapping your hands around an area and determining how much greenhouse gases (GHGs) are being produced. Emission scopes were developed by Greenhouse Gas Protocol in 2016 for buildings. However, we believe they are still useful as a general concept that can be extended to other areas. These emission scopes identify the location of emissions among other important aspects.
The idea of emissions scope is very important because some technology advocates may argue that certain technologies such as hydrogen, electric vehicles (EVs) in certain locations do not produce emissions where the energy is consumed , when in fact the use of these technologies will not mitigate or reduce GHGs. shows in general. For example, electric cars or hydrogen combustion technologies are targeted as emissions mitigation technologies by the companies that produce them, however, the use of these technologies may not mitigate emissions because the emission fields are not fully taken into account. Now, let’s explore the concept of emission scopes.
Scope 1 Emissions are direct emissions. If a consumer uses an electric car, or heats a building entirely with electricity, or melts steel in a factory using an electric induction furnace, Scope 1 (site emissions) is zero. When accounting for emissions, a zero scope 1 emission is generally good for local air quality and human health. This helps reduce air pollution in some regions, but it’s not necessarily enough to solve the climate crisis or reduce global GHGs. This is because there are upstream activities associated with the energy supply chain that may contain emissions before the energy reaches the site of consumption. For the SEC, they defined Scope 1 emissions in its proposal as follows:
Scope 1 emissions as direct GHG emissions from operations owned or controlled by a registrant; Source: SEC
The simplest example of this dilemma is the burning of coal to generate electricity in a power station which feeds into the power grid and then the electricity is used to charge electric cars/buses/trains which consumers can use . Although there are no emissions from an electric car on the road, in this example GHGs are still released into the atmosphere at the power generation site when coal is burned at the power plant electricity, it’s just that the consumer does not experience local GHG emissions on the roads. A simple way to avoid this misunderstanding is to ask; “where does the energy I originally use come from?”
A a simple way to avoid this misunderstanding is to ask; “where does the energy I originally use come from?” mike hassaballa
Litter 2 emissions are indirect emissions associated with the production and transportation of energy prior to consumption, here we begin to consider where the energy originally comes from. Using the previous example as a reference, scope 2 emissions will consider whether the electricity used in electric cars is generated from coal or natural gas, in which case, although it sounds odd, driving of an electric car can have associated emissions.
The SEC defined Scope 2 emissions in its proposal as follows:
Scope 2 emissions as indirect GHG emissions from the production of purchased or acquired electricity, steam, heat, or cooling that is consumed by operations owned or controlled by a registrant; Source: SEC
Litter 3 emissions are all other indirect emissions, this includes all upstream and past emissions that are associated with human activity. This may be referred to as embodied emissions when considering buildings, and may include emissions released during resource extraction for manufacturing, or released in manufacturing processes to produce a consumed product.
The SEC defined Scope 3 emissions in its proposal as follows:
Scope 3 emissions are all indirect GHG emissions not otherwise included in a reporter’s Scope 2 emissions that occur in activities up and down the chain. value of a reporter.401 Upstream emissions include emissions attributable to goods. Source: SEC
If you want to learn more about the basics of low carbon processing, read here and here.
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