How the new land-sector carbon accounting rules will impact your company

One of the biggest holes in the carbon rulebook was plugged last week when the Greenhouse Gas Protocol finalized its standard for land-sector emissions and removals. 

The 133-page document, which was five years in the making, has implications for companies in food, agriculture, apparel and other industries. The new rules are being widely hailed as a welcome step forward, but they are also generating questions about how they will work in practice.

The protocol’s Land Sector and Removals Standard details accounting rules for the many scenarios by which land-sector activities generate and remove greenhouse gases — from emissions in bovine burps and tractor tailpipes to carbon-capture by soil microbes, crops and trees. Overseen by the protocol’s backers, the World Resources Institute and the World Business Council for Sustainable Development, it received input from more than 300 external reviewers.

Uncertainty about how to account for these processes in emissions disclosures has been blamed for limiting investment in projects that reduce land-sector emissions. “This is not just a standard, this is a catalyst for transformation the sector urgently needs,” said Christopher Schwarz, associate director for implementation at South Pole, a consultancy.

More flexible accounting — to a point

Identifying precisely where the wheat in your breakfast cereal was harvested is often all but impossible; like many other ingredients, it is aggregated from multiple farms during processing. This makes it difficult for buyers to claim the benefits of supporting suppliers that cut fertilizer use or take other emissions-reduction measures.

The new standard helps by giving the green light to an approach known as “mass balance.” This allows conventional and low-carbon crops to be mixed in supply chains, provided the emissions savings are claimed by an appropriate proportion of the resulting products. The approach, which was not included in the previous draft of the standard, provides welcome flexibility, particularly because it allows for mixing across sites in a supply chain, said Alice Chang, senior manager for sustainability standards at Indigo, a sustainable agriculture company.

Yet the protocol stopped short of including an even more flexible accounting mechanism, known as “book and claim,” in which the environmental benefits associated with an ingredient can be traded independently of the ingredient itself. Advocates for such market-based mechanisms emphasize that integration with existing standards, including the protocol, is essential to the success of the approach. Another important standard-setter, the Science Based Targets initiative, opened the door to these mechanisms in a recent update.

The decision will likely not be the final word from the protocol on the debate, however. A separate workstream within the organization, tasked with tackling what the protocol calls “Actions and Markets Instruments,” released a white paper in December outlining how book-and-claim and related mechanisms might be used. The land-sector document notes at several points that the standard may be amended when the workstream publishes its recommendations.

Yes to removals — but with indefinite monitoring

Many companies want to cut their carbon footprints by investing in on-farm projects that capture carbon dioxide from the atmosphere, such as integrating trees into cropland. The emissions savings can be sizeable: Nestlé plans to remove 13 million metric tons of carbon dioxide equivalent emissions from the atmosphere annually to hit its target of halving emissions by 2030.

The good news for companies with such plans is that the new standard provides detailed instructions on how to include removals in emissions inventories. The more problematic issue is what happens next. Because carbon absorbed by soil and vegetation can be released back to the atmosphere, someone needs to take responsibility for monitoring such “reversals.” The standard requires that the company that claims the benefit does that monitoring — and it does not specify when that liability expires.

“They were very staunchly rooted in this idea that the permanence period needs to be infinite, and if at any point you aren’t able to continue monitoring, you need to assume a full reversal,” said Chang.

Being asked to assume a perpetual liability might seem like a deal-breaker, but these rules are also likely to evolve. Satellite imagery is increasingly being used to lower the cost of monitoring removals projects, for example. And stakeholders can collaborate on monitoring. “It does not need to be done by the reporting company; it can be performed by the farmer, a third party, a national monitoring program or other mechanisms,” said Pankaj Bhatia, GHG Protocol global director at the World Resources Institute. More details will be provided in a guidance document due to be published next quarter, he added.

The protocol punts on forests

“Both science and feasibility are core design principles of GHG Protocol standards, and more time is required to ensure that both are appropriately met,” the protocol wrote in an FAQ accompanying the new standard. Organizers will now ask stakeholders for further input in the hopes of including forest rules in a future version of the standard.

Advisors working on the standard have for years been split on the carbon accounting rules for forests. Points of contention include challenges with separating anthropogenic from natural changes, establishing baseline emission scenarios and allocating responsibility to different parts of forest value chains. An independent advisory board within the protocol tasked with resolving these issues failed to do so.

In any case, some advisors to the protocol may be done waiting for an official ruling.

“My hopes aren’t high that the existing governance structure or forces behind the scenes can produce a workable result,” Vaughan Andrews, a senior sustainability manager at forests company Weyerhaeuser who is one such advisor, wrote on LinkedIn. “Instead, I believe it is time for a fresh approach.” 

“It’s a shame GHGP couldn’t manage to accept what its stakeholders were telling it, but that doesn’t mean we have to stop,” added another advisor, Nathan Truitt, executive vice president at the nonprofit American Forest Foundation. “We now know how to do this right, I don’t think we need permission from the GHGP!”