Specific Responses to Certain Elements of the Critique of E-liability Carbon Accounting posted on the World Resources Institute (WRI) Website
May 19, 2024
Media
- The Critique stated “E-liability is still evolving and subject to change.” No core principle of E-liability in the 2021 HBR article has changed since its publication. Our understanding and writing about the properties and implementation path of E-liability accounting principles has been deepened by the experience gained working with corporate, environmental, and policy-making audiences, including on numerous pilot projects. This experience has reinforced our confidence in the 2021 HBR article, and how its principles readily apply in all corporate, nonprofit, and governmental settings.
- The Critique stated that we have “reversed” our stance on downstream emissions. In our 2021 HBR paper, we observed that downstream emissions are (i) far more subjective and speculative to measure than upstream emissions, and (ii) far less controllable, if at all, by a corporation than its upstream emissions. Thus, we noted that downstream emissions cannot be included in a robust accounting-based system. This stance has not changed. In February 2024, we publicly released the fundamental principles and practices for disclosing downstream emissions. An edited version of this paper will be published in the July-August issue of Harvard Business Review. Our treatment of downstream emissions disclosure is wholly compatible with our original E-liability carbon accounting principles. The downstream emissions paper builds upon the fundamental differences between the measurement and auditing of emissions that have already occurred and the subjective estimates of emissions that have yet to occur.
- The Critique discusses our co-authored paper on measuring and accounting for carbon offsets when it stated: “No limit is set on the use of E-assets, meaning that a company could theoretically buy removal offsets for all its E-liabilities and never decarbonize.” Our logical analysis draws a different conclusion than this assertion. The principles in our carbon offset paper imply that any company that has purchased and recognized legitimate carbon removal offsets in excess of purchased and produced emissions has, by definition, decarbonized. Such a company, through its actions and purchases, has removed more CO2 molecules from the atmosphere than those it produced by its own operations and by the products and services it purchased.
- The Critique states: “Incentivizing an approach like E-liability where everyone looks at their own plates first risks slowing down the decarbonization of value chains.” Our analysis and experience suggest that the reverse is true. The current GHG Protocol expects a complying entity to measure not only its own (Scope 1) emissions but those of every direct and indirect supplier and customer, no matter how distantly linked. This is a tedious and incredibly complex (likely impossible) set of calculations to do accurately and verifiably. The E-liability algorithm, in contrast, expects companies to receive embedded carbon information only from Tier-1 suppliers, including those supplying electricity. The entity then adds its direct emissions to purchased emissions, and assigns, using accounting and environmental engineering principles, the total emissions to each of its output products. Finally, the algorithm iterates recursively when companies transmit the embedded carbon content in their output products to customers that directly purchase those products. The algorithm, when embedded in information technology now being developed, produces information that any company can use to reduce the carbon content in its purchased products, its own operations, and in the output products it sells to customers. The simplicity, accuracy, and reliability of the E-liability algorithm will accelerate companies’ journeys to decarbonize their supply chains.