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In this project, we will work on using the blockchain to provide trusted data on methane and transfer that data to fuel consumers to incentivize methane reduction at the point of production. The first part of the project will integrate data from different sources to arrive at the best estimate of the methane emissions of a facility. The second part of the project will use Value chain (scope 3) reporting standards to calculate the impact of methane emissions reduction on the fuel used by customers. It could then be used as part of the Supply Chain Decarbonization Project to incentivize the use of lower fuels with lower embedded emissions.
Through this we hope to help provide greater visiblity to the oil producers, their investors, and government agencies and NGO's involved in reducing methane flaring and leakage. We also hope to create an additional lever, where fuel consumers could actively participate in reducing methane emissions.
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The consumer could also reduce its carbon intensity (CI) by purchasing a certificate from a low CI producer. This certificate could come in two forms: A certificate of carbon intensity, which would help producers with lower carbon intensity to obtain greater value for their output, or an actual offset, to provide funding for producers with high carbon intensity to reduce it.
A certificate of carbon intensity is simply a transferrable claim of origin backed up by data. It is similar to a Renewable Energy Certificate (REC), but whereas a REC attests that electricity produced is from a renewable source, the certificate of carbon intensity attests the carbon intensity of the crude petroleum. It could then be transferred between two users of fuel so that a user which is looking to reduce its emissions footprint could pay for a lower carbon fuel, without physically taking delivery of it. This would require simultaneously subtracting the embedded emissions of the fuel inventory of the consumer and adding back it to the embedded emissions of the fuel inventory of the producer. In future transactions, the producer would have to attach a higher CI to the fuel it sells as it sells certificates of lower embedded emissions. This creates a mechanism for fuel consumers looking to reduce their emissions footprint to incentivize producers to reduce their carbon intensitywhere a producer of lower carbon fuels could monetize greater value for their output.
In contrast, an offset is an accounting of emissions reduction in return for an investment, such as equipment for capturing, storing, and transporting methane This creates an incentive to make capital investments at high carbon intensity producers to reduce them. To be valid, an offset must follow the general principles of carbon offsets, such as Additionality, Correct Baseline, Permanence, Real, and Leakage protection – In other words, the emissions reductions must not have occurred without the investment from the buyers of the offsets. The offset would be a token which would transfer the emissions reductions to the buyers of the offsets, which again could be a fuel user.
Figure 3 Architecture for verifying waste emission.
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