The Financial Times recently covered the King’s Business School research paper, co-authored by Omnevue co-founder Dr Marc Lepere, exposing emission gaming.

‘The Greenhouse Gas Protocol (GHG), a carbon-counting tool dreamt up in the 1990s, underpins almost every climate disclosure in the world.

But this widely accepted sustainability data system has been built on shaky foundations, according to a research paper written by academics at King’s Business School in London and shared with Moral Money. Companies can “game” the system to appear to pollute less than they do, a rose-tinted picture which could in turn artificially inflate their share prices, it found.

And the potential for arbitrage is significant: using the most optimistic method available under the GHG could result in a carbon footprint between 4.6 and 6.7 times smaller than the most pessimistic method offered by the system.’

King’s Business School has shone a light on emission gaming and outlined recommendations for policymakers to help overcome the issue. The research paper states that ‘There is uncertainty in the application of the GHG Protocol; which combined with other incentives means that GHG emissions can (and likely are) gamed’.

The scholars ran a pilot study using proprietary activity data from three companies and found striking differences between the largest and smallest feasible emissions estimates using the calculation methods and databases permitted under the GHG Protocol.

On average across the three companies, the maximum estimate was between 4.6 and 6.7 times the minimum! If these firms are representative of the SME sector in the United Kingdom as a whole, the results suggest that this sector’s actual emissions could be materially higher than the 146 million tonnes (CO2e) currently reported.

The authors have outlined a number of recommendations that, taken together, would help to reduce uncertainty inherent in the GHG Protocol and mitigate incentives for emissions gaming. These are:

– Regulate preparers of GHG emissions calculations and require external audit.
– Introduce a new metric that requires reporting entities to disclose the proportion of all scopes that are covered and assured (ISAE 3000).
– Require reporting entities to disclose up-front methods and datasets used in calculations and to restate historical data to aid comparison.
– Require reporting entities to calculate and disclose emissions using datasets that are representative of where the emissions producing activity takes place.                  – Reporting entities should also report against different emission factor datasets, including both local and global.
– National agencies should investigate categories of emissions factors with large variances across datasets.

https://on.ft.com/3NALzAt

Full study https://www.kcl.ac.uk/business/assets/pdf/research-papers/kbs-research-impact-paper-1-emissions-gaming.pdf