Climate Mitigation Targets and GHG Benchmarks
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Questions and Answers

What is the primary rationale for selecting 2017 as the common base year (BY) for this study?

  • 2017 was the year with the highest total emissions reported across all companies, providing a robust baseline for comparison.
  • 2017 was the latest year with complete data available for all companies, enabling comprehensive analysis. (correct)
  • 2017 marked the year when the CDP (Carbon Disclosure Project) first gathered emissions data from all participating companies.
  • 2017 represented a significant turning point in greenhouse gas (GHG) emissions trends across the companies studied.

According to the provided information, what is the primary reason that 2017 has the highest data availability compared to 2016?

  • Companies were more willing to disclose their emissions data in 2017, leading to a higher reporting rate.
  • 2017 saw a significant increase in the number of companies participating in the CDP, leading to a higher data collection rate.
  • The dataset used for the study included more companies that reported emissions data for 2017 than 2016. (correct)
  • The study's methodology specifically focused on 2017, incentivizing companies to provide data for that year.

What is the significance of the statement "The presented harmonization procedure can also be applied to more recent and future datasets and to different target scopes"?

  • The study's methodology is scalable and adaptable to accommodate future changes in the data landscape. (correct)
  • The study's methodology is limited in its applicability and requires further development to handle future datasets and target scopes.
  • The study's results are applicable only to the dataset analyzed and cannot be generalized to other contexts or future years.
  • The study acknowledges limitations regarding its application to future datasets and suggests potential future research directions.

Based on the provided information, what is the minimum period required to derive sectorial benchmarks?

<p>The data must cover a complete year, and the BY and TY should be within the same calendar year. (B)</p> Signup and view all the answers

What does the term "%RSC" refer to in the equation provided?

<p>The percentage reduction in emissions targeted from the BY for a given scope of emissions. (D)</p> Signup and view all the answers

How does the study ensure that the derived benchmarks are robust and reliable?

<p>By using a rigorous methodological framework that harmonizes data and addresses inconsistencies. (C)</p> Signup and view all the answers

What is the primary focus of this study, as evidenced by the provided content?

<p>Developing a methodology for deriving robust and reliable benchmarks for GHG emissions. (A)</p> Signup and view all the answers

What does the term "εTY" represent in the equation provided for deriving sectorial benchmarks?

<p>The total annual greenhouse gas emissions for scope 1 and scope 2 in tons of CO2 equivalent (tCO2e) for the target year. (B)</p> Signup and view all the answers

Which sector has the highest percentage among the given data for the 6th entry?

<p>Mineral extraction (A)</p> Signup and view all the answers

In the provided data, which sector shows the least percentage increase from the 1st to the 6th entry?

<p>Apparel (A)</p> Signup and view all the answers

Which sector has its highest value listed in the 3rd entry?

<p>Mineral extraction (C)</p> Signup and view all the answers

Which sector consistently has values above 50% from the 4th entry to the 6th entry?

<p>Fossil Fuels (D)</p> Signup and view all the answers

What is the percentage value of Services in the 5th entry?

<p>48% (D)</p> Signup and view all the answers

Identify the sector with the lowest percentage in the 10th entry.

<p>Fossil Fuels (C)</p> Signup and view all the answers

In the overall percentages, which sector has the highest value in the 5th entry?

<p>Materials (C)</p> Signup and view all the answers

What is the value for Apparel in the 12th entry?

<p>29% (B)</p> Signup and view all the answers

What is a common characteristic associated with intensity targets in performance improvement?

<p>They focus on target determinants without emphasizing results. (B)</p> Signup and view all the answers

Which financial measures are commonly recommended for assessing corporate performance towards climate mitigation?

<p>Revenue and enterprise value (D)</p> Signup and view all the answers

What is a critical limitation found in previous studies regarding corporate climate targets?

<p>Insufficient harmonization of scopes and timeframes. (D)</p> Signup and view all the answers

Which intensity metric is recommended for homogenous sectors to mitigate price volatility effects?

<p>Physical intensity metrics (D)</p> Signup and view all the answers

What is the primary objective of the study mentioned in terms of GHG benchmarks?

<p>To develop benchmarks with a wide sectoral representation. (A)</p> Signup and view all the answers

What gap did previous studies reveal when analyzing corporate climate mitigation targets?

<p>Only a few companies were studied per sector. (B)</p> Signup and view all the answers

Which study is noted for focusing specifically on the retail sector in relation to corporate climate targets?

<p>Sullivan and Gouldson (2016) (A)</p> Signup and view all the answers

Which of the following best describes economic intensity metrics?

<p>They are less effective in diversified sectors. (B)</p> Signup and view all the answers

What percentage of targets share the same base year (BY) and start year?

<p>36% (A)</p> Signup and view all the answers

What is the median annualized absolute emission reduction across all sectors from the reported base year to 2017?

<p>1.76% (C)</p> Signup and view all the answers

What share of companies did not report a climate mitigation target?

<p>27% (C)</p> Signup and view all the answers

How many companies achieved their most long-term target by 2017 among the studied companies?

<p>22% (D)</p> Signup and view all the answers

What percentage of the assessed targets were deemed complete and accurate?

<p>44% (C)</p> Signup and view all the answers

Which sectors had more than 30% of their companies achieving climate mitigation targets?

<p>Hospitality, Fossil Fuels, and Infrastructure (C)</p> Signup and view all the answers

What compliance credits or offsets amount did companies report purchasing?

<p>10.5 MtCO2e (D)</p> Signup and view all the answers

How many companies were assessed in the discussed study, marking a substantial increase from previous studies?

<p>2607 companies (A)</p> Signup and view all the answers

Which of the following is NOT a type of corporate climate mitigation target?

<p>Absolute targeted percentage reductions without passing by absolute GHG emissions (C)</p> Signup and view all the answers

What is the significance of the 'global carbon equivalent budget' in relation to absolute GHG metrics?

<p>It defines the maximum amount of GHG emissions allowed to achieve a specific climate goal. (A)</p> Signup and view all the answers

Which of the following is a major concern with using intensity metrics (e.g., GHG intensity per revenue) when measuring companies' GHG emissions?

<p>They may be influenced by changes in revenue or other factors unrelated to climate initiatives. (C)</p> Signup and view all the answers

Which of the following best describes the purpose of 'Scope 3' emissions under the Greenhouse Gas Protocol?

<p>Emissions from the company's upstream and downstream value chain. (D)</p> Signup and view all the answers

The text proposes a second objective for the study, which is to assess companies' progress towards their GHG reduction targets. What is the main methodology used to determine this progress?

<p>Analyzing industry-specific benchmarks to assess companies' target ambition. (D)</p> Signup and view all the answers

What is the primary reason for analyzing companies' progress towards their GHG reduction targets?

<p>To set more ambitious and realistic targets for future reductions. (B)</p> Signup and view all the answers

What is the main benefit of using harmonized metrics for assessing corporate climate mitigation targets?

<p>It allows for accurate comparisons of targets across different companies. (C)</p> Signup and view all the answers

What is the key distinction between the default case and the sensitivity analysis in the absolute benchmarks scenario?

<p>The default case uses a conditional interpolation, while the sensitivity analysis uses a linear interpolation. (C)</p> Signup and view all the answers

What does the sensitivity analysis in the absolute benchmarks scenario aim to do?

<p>Evaluate the impact of different interpolation methods on the results. (A)</p> Signup and view all the answers

How are the absolute benchmarks scenario results harmonized?

<p>By encompassing both scope 1 and 2 emissions, using 2017 as a common base year. (A)</p> Signup and view all the answers

What is the basis for the financial extrapolation in the default case of the revenue-based intensity benchmarks?

<p>A linear regression model. (B)</p> Signup and view all the answers

What does the sensitivity analysis in the revenue-based intensity benchmarks rely on?

<p>A discontinuous piecewise linear regression model. (C)</p> Signup and view all the answers

How do the revenue-based intensity benchmarks differ from the absolute benchmarks?

<p>Revenue-based benchmarks focus on emissions per unit of revenue, while absolute benchmarks consider total emissions. (C)</p> Signup and view all the answers

Why might there be differences in sector ranking between the benchmarks?

<p>The consideration of economic parameters in the absolute benchmarks but not in the revenue-based benchmarks. (B)</p> Signup and view all the answers

Flashcards

Absolute GHG emissions

The total amount of carbon equivalent emissions a company produces.

Economic GHG Intensity

The amount of greenhouse gas emissions per unit of economic activity, like revenue or enterprise value.

Physical GHG Intensity

The amount of greenhouse gas emissions per unit of physical activity, specific to certain industries.

Scope 1 emissions

Direct emissions from a company's own operations, like burning fuel.

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Scope 2 emissions

Indirect emissions from purchased electricity, which can be calculated based on the average grid emissions or the specific emission factors of the electricity supplier.

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Scope 3 emissions

All other emissions that occur in a company's value chain, from raw materials to end-of-life products.

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Targeted percentage reduction

A target to reduce GHG emissions by a certain percentage without specifying the actual amount of emissions.

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GHG reduction target progress assessment

Comparing a company's GHG emissions to industry benchmarks to see how they are performing relative to their peers.

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Intensity Targets

Targets that aim to improve performance without necessarily leading to significant reductions in overall emissions.

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Economic Intensity Metrics

Measuring a company's performance by dividing emissions by a financial metric like revenue or market capitalization.

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Physical Intensity Metrics

Measuring a company's performance by dividing emissions by a physical metric like production output or units sold.

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Science-Based Targets (SBTs)

A set of guidelines for companies to set emission reduction targets aligned with the Paris Agreement's goal of keeping global warming below 2 degrees Celsius.

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Harmonized Scopes, Target Metrics and Timeframes

A set of criteria and standards used to assess the quality and consistency of corporate climate mitigation targets.

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Scope 1, 2, and 3 Emissions

A company's overall emissions, including direct emissions from its own operations and indirect emissions from electricity use and purchased goods and services.

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Absolute Emission Targets

Targets that focus on reducing absolute emissions by a specific amount or percentage.

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Prospective GHG Benchmarks

A set of benchmarks for comparing the environmental performance of different companies or sectors.

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What is the common baseline year (BY) for this study?

The year chosen as the common baseline year for comparing GHG emissions across different organizations. It was chosen because 2017 is the latest year with most available data.

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What does TY refer to?

The year for which the company reports its annual emissions.

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What is εBY?

The total annual emissions of a company for scope 1 and 2, calculated for the baseline year.

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What is εTY?

The total annual emissions of a company for scope 1 and 2, calculated for the target year.

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What is %RSCBY?

The percentage of emissions reduction targeted by a company from the baseline year.

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What is %SC?

The percentage of a given scope (e.g., Scope 1, Scope 2) covered by the company's emissions data.

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What is εSC BY?

The annual emissions of a company for the specified scope covered for the baseline year.

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What is Equation 1?

The formula used to calculate sectorial benchmarks based on the inputs like εTY, εBY, %RSC, and %SC.

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Capex Outlook

The percentage of companies in a sector that expect to see an increase in capex over the next 12 months. It indicates the general investment sentiment and confidence level within the sector.

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Overall Capex Outlook

The average percentage change in capex expected across all sectors. It provides an overall picture of the investment climate.

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Sector with Highest Capex Outlook

The sector with the highest percentage of companies expecting increased capex. This sector is likely to see significant growth and expansion.

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Sector with Lowest Capex Outlook

The sector with the lowest percentage of companies expecting increased capex. This sector might be facing challenges or slower growth.

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Sector Specific Capex Outlook

The percentage of companies within a specific sector that anticipate increasing their capital expenditures. This figure indicates the sector's investment confidence for the coming year.

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Average Capex Change

The average percentage change in capex expected for a particular sector over the next 12 months. It reflects the overall investment trend within the sector.

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Capex Outlook Trend

The change happening over time within the capex outlook, from the initial month to the final month. It indicates the overall growth trend.

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Capex Outlook Difference

The difference between the initial capex outlook for a sector and the final capex outlook. It indicates the magnitude of change in the sector's investment sentiment.

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No Emission Reductions

The percentage of companies that haven't reduced emissions since their baseline year. This means their emissions have stayed the same or even increased.

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Baseline Year (BY)

The starting point for measuring emission reductions. This is the year companies use to compare their current emissions to.

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Achieved Emission Targets

The percentage of companies that have already achieved their emissions reduction targets by 2017.

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Median Annualized Absolute Emission Reductions

The average change in emissions between the baseline year and 2017 across all companies.

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Difference in Baseline Years

The difference in years between the baseline year used for the study and the one reported by companies.

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Carbon Offsets

A method companies use to offset emissions by purchasing credits or investing in projects that reduce greenhouse gas emissions.

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Reduced Emissions (2017)

The total amount of carbon dioxide equivalent (CO2e) emissions reduced from the baseline year to 2017.

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Sectors

The different categories of companies that report their emissions data.

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Financial extrapolation sensitivity analysis

A sensitivity analysis investigates how changes in one or more input factors can impact the outcome of a model or scenario. In financial extrapolation, the sensitivity analysis focuses on the method used to project future financial values.

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Default case in financial extrapolation

The default case in this context refers to the standard or baseline method employed in financial extrapolation. The sensitivity analysis compares different methods to this default approach.

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Linear interpolation in sensitivity analysis

The sensitivity analysis uses a linear interpolation method to project future values. This means it assumes a steady and predictable rate of change between the starting point and the target year.

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Sensitivity analysis in financial extrapolation

The sensitivity analysis in financial extrapolation is a method for determining how different variations in the extrapolation method might affect the overall outcome of the financial projection.

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Last segment of a discontinuous piecewise linear regression model

In the context of financial extrapolation, the 'last segment of a discontinuous piecewise linear regression model' implies that the extrapolation is based on the most recent trend observed in the data, which is often a more realistic approach than simply extending a straight line.

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Financial benchmarks in sensitivity analysis

The sensitivity analysis evaluates the effects of different extrapolation methods on financial benchmarks, which measure a company's performance against certain financial targets or metrics, like cost per unit of production.

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Sector ranking in sensitivity analysis

The sensitivity analysis examines the impact of financial extrapolation on the ranking of different companies across various sectors. By using different extrapolation methods, it can lead to changes in the relative performance of companies within their industries.

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Financial performance metrics in sensitivity analysis

Companies' financial performance is measured through a combination of various financial metrics, including revenue, profit margins, and debt levels. The sensitivity analysis explores how different extrapolation methods can affect these metrics, providing a more nuanced understanding of a company's financial health.

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Study Notes

Sectoral GHG Benchmarks

  • Sector-level prospective GHG benchmarks are needed to assess corporate climate mitigation targets.
  • Existing benchmarks lack sectoral coverage or harmonization of target metrics, scope, and timeframes.
  • A harmonization process was developed. This allows for calculation of sector-level GHG benchmarks using absolute or intensity metrics.
  • 1697 companies reporting in 2018 CDP questionnaires, across 13 sectors, were harmonized using 2017 as a common reference year.

Climate Mitigation Targets

  • Climate change is recognized as a financial risk.
  • Shareholders demand benchmarks for future climate risks based on corporate climate mitigation targets.
  • Existing studies focus on target determinants, target setting, and science-based targets.
  • Corporate climate mitigation targets are usually expressed as percentage reductions in GHG emissions in a specific scope (1,2,3) between a base year and a target year.

Methodology

  • The process involves harmonizing scopes, metrics, and timeframes of targets.

  • The study used 2017 as a common base year for all targets.

  • Linear interpolation was used to estimate emissions in each year between the base year and the target year if no trajectory information was provided by the company.

  • If a company's emissions were already reduced below the target level by 2017 a constant emission level was assumed until the target year.

  • Intensity benchmarks were calculated for physical and economic metrics.

    • Physical intensity calculated per unit of production (e.g., kWh, tonnes of steel).
    • Economic intensity was calculated per financial measure (e.g., revenue, enterprise value).

  • Absolute emissions and intensity reductions were compared. Harmonization of target scopes and timeframes is crucial to compare targets across companies.

Results

  • Comparing sectoral absolute reductions in 2030, the lowest and highest medians are -9% (fossil fuels) and -36% (power generation).
  • Target progress was also assessed to identify potential instances of greenwashing or lack of ambition.
  • In 14% of the cases, targets were already achieved by the time the company announced the target.

Funding

  • The research did not receive any external grant funding from public, commercial, or non-profit agencies.

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Prospective Sectoral GHG Benchmarks (PDF)

Description

Explore the essential aspects of sectoral greenhouse gas (GHG) benchmarks and corporate climate mitigation targets. This quiz delves into harmonization processes and methodologies used to assess climate risks and corporate performance. Understand how benchmarks can influence corporate strategies in combating climate change.

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