From Business Models to Market Growth

Physical procurement of products with lower embodied carbon is the most direct way to support green markets and reduce supply chain emissions. It should be the procurement method of choice when it is available. However, direct procurement can face practical challenges, especially in the early stages of developing a low-emissions commodity market. Geographic limits on low-emissions supply and disconnects between suppliers and buyers in complex supply chains strain the ability to keep environmental attributes connected to physical gas.

When direct procurement of low-emissions material is not feasible, purchasing EACs can offer a short-term viable alternative. Central to the concept of an EAC is the “book and claim” chain of custody model, in which supply of a low-emissions product is produced or “booked” and the attributes of that product are separately “claimed” in the form of an EAC. EACs can allow the environmental attributes to be unbundled from the physical product, transparently tracked, and delivered separately through a standardized certificate system, as outlined in Catalytic Procurement: How Corporates Can Lead the Green Commodity Transition. But these instruments must adhere to strict integrity guardrails with rigorous transparency standards and measurement, reporting, and verification protocols to avoid double counting, inflated baselines and unverified claims.

There is a great deal of discussion today about how to employ EACs as a procurement tool for accelerating emissions reductions across high-emitting sectors, including aviation, steel, and cement.¹⁵ As carbon accounting and target-setting standards evolve, they continue to prioritize direct mitigation that can be linked to specific activities in a company’s supply chain and traced through the system while selectively using unbundled EACs to enable further decarbonization in complex value chains. This prioritization reflects concerns around “additionality” in unbundled purchases – in other words, whether the credited action results in emissions reductions beyond business-as-usual. It also reflects broader credibility considerations, including avoiding double counting, establishing accepted baselines and emissions thresholds, and ensuring transparent claims and reporting. When designed with strong guardrails, unbundled EACs can broaden the demand pool and channel capital toward verified low-emissions production, creating critical early-market signals to support emerging technologies where direct procurement pathways are not yet fully available. Well-constructed unbundled EACs formalize source attribution criteria that can then be used to build direct tracing and procurement pathways subsequently.

The market for low-leakage gas is in early stages today. In certain complex supply chains a constrained book and claim can help increase demand for low-leak gas. In some cases there are multiple vendors between a prospective gas buyer and the original producer, posing a challenge for robust tracing through the full value chain. Unbundled EACs can provide transitional value to increase confidence in the methane abated during upstream production while the certificates market matures toward bundled procurement. For more details on this approach, see RMI’s recent report, All Eyes on Implementation: The European Union Methane Emissions Regulations.

Low-leakage assets can show up differently in emissions inventories depending on the company type and its role in the gas market. However, buyers are not yet ready to pay a price premium to manage low-leakage assets since they are uncertain if or how low-leakage gas contributes to emissions goals.

With the right methane measurement and monitoring tools in place, gas sellers can directly attribute their abatement efforts in their Scope 1 emissions reporting. However, a robust low-leakage gas market can develop only when gas purchasers are able to 1) establish robust emissions baselines and reduction measurement standards, and 2) reliably claim gas sellers’ Scope 1 abatement against their own Scope 3 emissions targets.

Increasingly measured and independent evidence shows old yet common generic upstream methane leak assumptions of less than 1% are far too low, yet questions remain on how high to go. Baseline methane emissions are not always well-defined for an upstream operator’s assets in a given production area, making it difficult to quantify reductions. Baselines can be established using a variety of methods ranging in complexity and granularity. Emissions estimates can be generated by:

• Scaling gas production volumes or operator-collected activity data by generic emission factors,
• Aggregating source-level emissions determined by measurements or the use of measurement-based emission factors, or
• Reconciling source-level emissions with site-level estimates based on measurements using techniques such as aircraft flyovers or satellite retrievals.

Each method has pros and cons, but what is important is that all reduction claims use the same baselining methodology to ensure all emissions reduction calculations start from a level playing field.

Furthermore, making reduction claims against baselines requires establishing methane monitoring, measurement, reporting, and verification (MMRV) minimum standards. Emissions estimates can vary widely depending on how often monitoring takes place, the location of measuring technology, and the level of emissions sensitivity of monitoring tools, among other factors. Recognizing this, operators and standard setters are at work to define the best measurement and monitoring practices, and organizations such as the Oil and Gas Decarbonization Charter (OGDC) are helping upstream companies share MMRV best practices.

Carbon accounting frameworks have not kept pace with emerging market mechanisms, creating uncertainty around what constitutes credible emissions claims, especially around whether low-leakage gas certificates are eligible for Scope 3 accounting or target achievement. Clear, science-aligned protocols can tie EACs to verified, additional methane abatement, especially when harmonized across Scope 3 accounting standards. Major carbon accounting standards setters, including the Greenhouse Gas Protocol (GHGP), Science Based Targets Initiative (SBTi), and International Organization for Standardization (ISO), are revising their methodologies and may clarify the conditions under which such instruments may be recognized. ¹⁶

These revisions present an opportunity for clarification of low-leakage gas certificate eligibility and could alleviate buyer hesitancy and skepticism by:

• Requiring thorough Scope 3 methane emissions reporting, including data quality transparency, the most up-to-date emissions factors, and when needed separately reporting methane intensity in supply chain hotspots;
• Encouraging companies to set methane-specific targets where they have material emissions;
• Promoting the use of primary, measurement-based emissions data to strengthen accuracy and credibility of methane accounting;
• Harmonizing guidance on Scope 3 reporting and accounting standards (already underway as evidenced by the announced GHGP and ISO partnership); and
• Defining clear guidance on eligibility for claiming market-based instruments, including low-leakage gas certificates, toward category-specific abatement targets.