Measuring carbon intensity: The first step to emissions reduction and net-zero goals

Everywhere you look right now companies are talking about emissions abatement, reaching net-zero targets, and buying carbon credits to offset their emissions. But how do organizations figure out exactly how much carbon they are reducing or offsetting?

This is where carbon intensity comes in.

Carbon Intensity is the measure of how much CO2 and the CO2 equivalent of other greenhouse gases are emitted per unit of production, and it is how organizations can assess the total footprint and impact of their operations.

So how do organizations go about figuring out what their carbon intensity and therefore overall emissions is?

First of all, it's worth noting that a portion of emissions are calculated, rather than measured. Despite how important it is to have a solid understanding of the carbon footprint of operations, emissions are often extremely difficult to measure.

When we measure the flow of crude oil or the weight of a mined commodity, these generally flow through or onto something that allows accurate measurement. With emissions, whether we are talking about carbon dioxide, methane, or any other greenhouse gas, once they have been emitted into the atmosphere, they become harder to track.

There are also multiple sources of emissions in any given process, so while there can be sensors placed at known emissions outlets, the scale of measuring emissions can also be a challenge, particularly if there are leakages in places where there are no sensors.

Satellite data

There are a growing number of tools to mitigate this problem. S&P Global Commodity Insights has been incorporating the use of satellite data into our Carbon Intensity assessments, which we began publishing in October 2021. Satellites can see where upstream oil and gas facilities are flaring, and the CO2 associated from this combustion can be directly attributed to different fields. We also use satellites in our analysis to understand methane emissions.

Methane is emitted from a multitude of different activities, including upstream oil and gas, refineries and petrochemical facilities, pipelines, LNG facilities, mines, and in agriculture. With such a wide range of contributing processes, identifying the exact source of methane needs to focus in specifically on the areas and assets being evaluated, and satellite resolution continues to be improved to address this challenge. Methane is also very susceptible to weather and temperature changes, further complicating that challenge. Real-time satellite monitoring allows S&P Global to focus in on specific operating regions and identify the methane intensity of that region.

For our Carbon Intensity assessments, this top-down measured data is incorporated into a bottom-up approach. The underlying operation and performance of the assets are combined to calculate the overall carbon intensity.

For upstream oil and gas operations, the inputs that influence carbon intensity include the number of wells, and how those wells are operated. Carbon intensity is also impacted by production enhancements like water and steam injection to produce the oil and gas, as well as the age of the field, and any processing that needs to happen to the oil, gas and water before it is sold, as well as any flaring associated with the operations.

For oil products, a refinery's configuration, slate of crude grades and allocation of throughput are some of the key aspects that factor into the carbon intensity of the resulting output.

Relative performance

Transparency and standards are key to ensure a common understanding as companies and industry assess and move to reduce their carbon footprints. As the focus on emissions reductions continues to grow, companies will be looking to prove their performance relative to a standard.

Relative performance enables companies to consider different actions. For some, it supports investment in emissions reduction activities, like carbon capture utilization and storage (CCUS). For others, it enables an assessment of how fuel substitutions, such as using hydrogen in place of gas, impact overall emissions, or how reducing venting/flaring and leaks can reduce emissions. And for all companies it enables an independent calculation of their total footprint, determining the volume and cost of carbon credits needed to offset their footprint.

As carbon accounting and pricing continues to grow, the cost to offset will itself become a driver of investment in emissions reduction and avoidance strategies. The cheapest ton is likely to become the one you don't emit.

What is clear is that low carbon differentiated commodities will start to play a larger role in the overall trading of global commodities. Starting with a standard benchmark of carbon intensity for different traded commodities is key, whether it is a barrel of WTI or Brent crude oil, or the difference between gasoline produced in the US Gulf Coast or Northwest Europe. And while the market will continue to refine measurements and calculations of all sources and types of emissions, carbon intensity is here to stay.

How is the carbon intensity of refined products measured?

A refined product like gasoline, diesel or jet fuel is the final output of the oil refining process in which emissions are generated from a number of sources, mainly from heat or fuel combustion, and the remaining from electricity usage, various process emissions, hydrogen and flaring.

Here is an example of the sources of emissions in the production of each refined product. You will notice that gasoline has a higher carbon intensity because it goes through the most amount of energy intensive processing in an oil refinery, while jet fuel needs the least amount of processing.

Regional refinery configurations impact carbon intensity

We have modelled hypothetical refinery configurations representing existing capacity found in each key region. For Southeast Asia, this includes hydroskimming, cracking/hydrocracking and coking configurations.

The more complex the refinery, the higher the energy consumption/emissions. Coking refineries can have an emissions footprint more than two times than that of a hydroskimming refinery.

Crude oil grades used as feedstock impact carbon intensity

Crude grades are selected based on the typical composition processed by the refinery (i.e., light/sweet, heavy/sour) for widely traded crude grades in that region. Changes in crude slate are assessed every quarter.

Crude properties such as API, sulfur can influence the level of processing needed. More processing means higher carbon intensity.

Low API/heavy crudes tend to require more processing/energy input to upgrade heavy bottoms to light/middle distillates in a deep conversion refinery, while sour crudes increase the hydrotreating/H2 demand.

Refined product yield impacts carbon intensity

Regional product yields have been set by a combination of calibrated values against in-house data and in-built model values which have been validated.

Yields can impact the allocations of emissions to the different refined products.

Regional electricity supply impacts carbon intensity

We assume 100% imported power under scope 2 emissions, and take the regional average electricity grid carbon intensity.

Key takeaways

• A single carbon intensity number/premium is calculated for the different refined products in each region. The carbon intensity number represents a weighted average of the different refinery types and typical crude grades processed in that region.
• For oil products, a refinery's configuration, slate of crude grades and allocation of throughput are some of the key aspects that factor into the carbon intensity of the resulting output.

This article first appeared as part of S&P Global Commodity Insights' special report Energy in the New Era