Calculate Emissions Forecasts and Carbon Credits
Learning Objectives
After completing this unit, you’ll be able to:
- Explain how emissions forecasts are calculated.
- Explain the calculations for forecasting emissions from scope 2 stationary assets.
- Explain how carbon credits are calculated.
Understanding Emissions Forecast Calculations
Sipping her coffee, Safiya wonders what really goes on behind forecast calculations. She wants to know how they’re calculated and reaches out to Sam. Let’s follow along as Sam explains the calculations.
Emissions forecasts in Net Zero Cloud are first computed for emissions activities at the lowest level. The emissions are then summarized by scope, and then the scope-level emissions are summed up at the All Emissions level.
Sum (Emissions at lowest level of emissions activities) per scope → Scope-level emissions
Sum (Scope-level emissions) → All Emissions
The calculation of emissions forecasts for the lowest level of emissions activities has two stages.
- Emissions intensity is determined for the previous year by using that year’s actual emissions data and business metric value.
Emissions Intensity = Actual Emissions (tCO₂e)/Business Metric - Emissions forecasts are calculated for a future year by multiplying the emissions intensity by the associated business metric value for that future year.
Forecasted Emissions (tCo2e) for a future year = Emissions Intensity * Business metric for future year
So if you’re doing forecast calculations in 2022 for an emissions activity for year 2026, here’s what you need.
- Actual emissions intensity in the previous year (2021)
- Actual emissions (2021)
- Business metric value (2021)
- Business metric value for the future year (2026)
Calculate Emissions Forecasts for Scope 3 Business Travel
Emissions forecasts for Scope 3 Business Travel emissions activity are driven by the Revenue business metric.
Let’s take an example assuming we’re in 2022 and want to calculate for the year 2026. If Actual Emissions (tCO₂e) for previous year 2021 = 75
And Revenue for 2021 = 120
Then Emissions Intensity for 2021 = 75/120 = 0.625, which is rounded off to 0.63
Now consider Revenue for 2026 = 200
Then Forecasted Emissions (tCO₂e) for 2026 = 200 * 0.63 = 126
Emissions forecasts for all emissions activities are calculated in this manner except for Scope 2 Stationary Assets Commercial Buildings and Data Centers. Let’s understand their calculations.
Calculate Emissions Forecasts for Scope 2 Stationary Assets
Emissions forecasts for Scope 2 Stationary Assets are based on the Total Floor Area business metric. And they factor in the renewable energy proportion of the total energy consumption of the stationary asset.
Here’s what happens in the background.
- Actual nonrenewable energy consumption for the previous year is computed by deducting the renewable energy consumption from total energy consumption.
Actual Nonrenewable Energy Consumption (kWh) = Actual Energy Consumption (kWh) - (Actual Renewable Energy Consumption Percentage/100) - Emissions intensity for the previous year is calculated.
Emissions Intensity = Actual Emissions/Actual Nonrenewable Energy Consumption - Total energy consumption for future years is calculated using the energy usage for the previous year and the total floor area for previous and future years.
Total Energy Consumption (kWh) in future year = Actual Energy Consumption (Kwh)/Total Floor Area (sqft) * Total Floor Area (sqft) in future year - Of the forecasted total energy consumption value, the nonrenewable energy consumption is calculated by deducting the renewable energy consumption for the future year.
Forecasted Nonrenewable Energy Consumption (kWh) in future year = Total Energy Consumption (kWh) - Forecasted Renewable Energy Consumption Percentage/100
Forecasted Renewable Energy Consumption Percentage is a user-specified value similar to the Total Floor Area business metric value. - Emissions forecasts are calculated for a future year by multiplying the emissions intensity value by the nonrenewable energy consumption value for the future year.
Forecasted Emissions (tCo2e) for a future year = Emissions Intensity * Forecasted Nonrenewable Energy Consumption (kWh) for future year
Let’s take an example assuming we’re in 2022 and want to calculate for the year 2026.
For the previous year 2021, consider the following measure values from the annual emissions inventory.
Actual Emissions (tCO₂e) = 100
Actual Energy Consumption (kWh) = 1000
Actual Renewable Energy Consumption Percentage = 20%
Total Floor Area (sq ft) for 2021 = 20
Total Floor Area for 2026 = 24
Forecasted Renewable Energy Consumption Percentage for 2026 = 30%
Now, let’s look at the calculations.
- Actual Nonrenewable Energy Consumption for 2021
= Actual Energy Consumption - Actual Renewable Energy Consumption
= 1000 - (1000 * 20/100)
= 800 - Emissions Intensity for 2021
= Actual Emissions / Actual Nonrenewable Energy Consumption
= 100/800
= 0.125 - Total Energy Consumption (kWh) for 2026
= Actual Energy Consumption (Kwh) / Total Floor Area (sqft) for 2021 * Total Floor Area (sqft) for 2026
= 1000 / 20 * 24
= 1200 - Forecasted Nonrenewable Energy Consumption (kWh) for 2026
= Total Energy Consumption (kWh) - (Forecasted Renewable Energy Consumption Percentage/100)
= 1200 - (1200 * 30/100)
= 1200 - 360
= 840 - Forecasted Emissions (tCo2e) for 2026
= Emissions Intensity * Forecasted Nonrenewable Energy Consumption (kWh) for 2026
= 0.125 * 840
= 105
If the ratio of renewable energy increases over time, the emissions reduce even though the total energy consumption increases. That’s because emissions from renewable energy sources are zero. For example, if NTO goes 100% solar, the emissions will continue to be zero even though energy consumption increases.
Calculate Carbon Credits
The forecasting process also calculates carbon credits that Sam can purchase in the future to meet net zero targets. Carbon credits are predicted at the All Emissions level, which represents the overall emissions of the company.
They’re calculated as follows.
Required Carbon Credits (tCo2e) = Final Forecasted Emissions - Target Compensated Emissions
Target Compensated Emissions is automatically retrieved from the emissions reduction target record that’s created with Target type = Net Zero Emissions Target and Emissions Activity = All Emissions.
Furthermore, Sam can get the required carbon credit investments for a year by providing the carbon credits cost for that year.
The forecasting process automatically calculates the required carbon credit investments by multiplying the required carbon credits with the specified carbon credit cost.
Carbon Credits Investment for a future year = Required Carbon Credits * Carbon Credit Cost
For example, assuming the required carbon credits for 2026 are 177651, and the carbon credit cost is 13, then the Carbon Credits Investment for 2026
= 177651 * 13
= 2309463
Safiya’s impressed! She now understands how Net Zero Cloud calculates forecasts.
Wrap It Up
Safiya and Sam are quite happy with Net Zero Cloud’s advanced forecasting ability and the ease with which they could set it up. Follow their example and help your organization to forecast and track its emissions.