U.S. proposal would change the way Canadian companies report emissions

The U.S. Securities and Exchange Commission’s proposal — which at this point has not been enacted and faces stiff opposition from industry groups and conservative lawmakers — would require publicly listed companies to account for their total “life-cycle” greenhouse gas emissions.

The rules would apply not only to publicly listed companies south of the border, but also to the more than 230 Canadian companies that are listed on U.S. stock exchanges. (Among these are Canadian energy giants like Enbridge Inc., Suncor Energy Inc., Imperial Oil Ltd. and Canadian Natural Resources Ltd.)

Under the new proposal, companies would have to disclose their Scope One and Scope Two emissions (terms that encompass the greenhouse gases produced directly by a company’s operations, as well as indirectly through the generation of energy the company purchases such as electricity to power the business).

But they would also have to publicly account for their Scope Three emissions, meaning all the other greenhouse gases they produce indirectly, including emissions produced by customers when they use a company’s product.

In other words, for oil producers, Scope One and Two emissions are the emissions the company makes itself (the methane emitted directly from a well, for example, or the electricity an oilsands producer uses to power its massive facilities). Scope Three emissions are the emissions an oil company causes when it sells its product (when a driver burns gasoline in a car, for example).

“The moment we ask companies to report Scope Three, we’re now focusing on the carbon intensity of the product itself,” said Tima Bansal, Canada research chair in business sustainability at the University of Western Ontario’s Ivey Business School.”It’s not the carbon intensity of their process – which they can reduce and can reduce quite substantially — it’s the carbon intensity of their product.”

Many Canadian energy producers have begun reporting their Scope One and Scope Two emissions in the years since the 2015 U.N. Paris agreement on climate change.

These numbers often form the basis of some of the industry’s own aggressive emissions reduction targets, such as Pathways to Net Zero — an alliance of the country’s biggest oilsands producers that have jointly set the goal of reaching net-zero carbon emissions by 2050.

The companies behind that initiative (Suncor, Cenovus, CNRL, Imperial, MEG Energy, and ConocoPhillips Canada) have laid out a road map to net-zero that includes the large-scale deployment of carbon capture and storage technology, and they’re asking for government support to help do it.

However, their plan only addresses Scope One and Two emissions. In fact, the oil and gas industry as whole has been very reluctant to talk about the emissions produced by the combustion of its product itself.

“Reporting Scope 3 emissions continues to be a challenge at this time and will prove difficult to provide in a timely manner, if at all,” wrote the Canadian Association of Petroleum Producers in a recent submission to the Canadian Securities Administrators. (The CSA is currently mulling its own set of proposed climate disclosure rules, though the Canadian version would allow companies to opt out of Scope 2 and 3 disclosures as long as they explain their reason for doing so.)

“We believe this (Scope 3 disclosure) would not only add additional burden to industry, but is also not practical in that upstream oil and gas producers don’t have knowledge or control over the end use of their sales products,” the industry lobby group wrote.

While only a very small minority of Canadian oil and gas firms are even attempting to report Scope 3 emissions right now, it’s already apparent that having to disclose these numbers would massively increase the size of the carbon footprint that companies must report to investors and the public.

(Canadian Press)