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New tokenTypeId for NET network: fuel/feedstock unrealized emissions #372

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brioux opened this issue Dec 2, 2021 · 12 comments
Open

New tokenTypeId for NET network: fuel/feedstock unrealized emissions #372

brioux opened this issue Dec 2, 2021 · 12 comments
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emissions-tokens enhancement New feature or request methane scope-3-emissions

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@brioux
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brioux commented Dec 2, 2021 •
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This is a proposal for adding a new tokenTypeId to NET.
tokeTypeId 4: unrealized carbon emissions in traded fuels and feedstocks (e.g., oil, gas, coal, biomass).

The purpose of this (fungible) carbon token is to track the gradual release of GHG across a supply chain by different industries/end users.

The tokens have the following characteristics

  • Minted by registered energy producers (new NET role), representing unrealized (downstream scope 3) emissions.
  • Transferred downstream to registered industries/consumers as commitment to tracking emission across the supply chain.
  • Transfers require approval from both parties (e.g., receiver approves transfer limit for fuel orders executed by sender)
  • Energy producer/industry retains carbon tokens and voluntarily burn them representing direct emissions (e.g., exploration and production, processing, ...)
  • Burnt tokens are linked to Audited Emission Tokens of industry/consumer that minted as part of the utility emissions channel. (Note: Utility channel to be modified/refactored to account for different emissions types)
  • Burnt carbon are subject to governance/reputation mechanisms as part of the auditing process. Includes retroactive adjustments that impact the trustworthiness of actors, and compliance with climate policies.
  • Incoming and outgoing transactions linked to burnt/retired token balances allow the tracking of Audited Emission Tokens across the supply chain.
    • producers track scope 3 to identify emission reduction opportunities to minimize their scope 3 impact
    • consumers track upstream embodied emissions of energy/materials purchased to support carbon footprint Life Cycle Assessment
@brioux brioux self-assigned this Dec 2, 2021
@brioux
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brioux commented Dec 2, 2021

Token types recap

  1. Renewable Energy Certificate (Fungible)
  2. Carbon Emissions Offset (Fungible/semi-fungible ?) - used downstream
  3. Audited Emissions (Non-fungible) - used midstream/downstream
  4. Carbon token/tracker (Fungible) - used upstream/midstream

@sichen1234
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sichen1234 commented Dec 3, 2021 via email

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brioux commented Dec 6, 2021

@sichen1234 thanks for the feedback. Responses:

  1. yes and referenced within a traditional bill of sales/receipt.

  2. Yes for a power plant but not true for many industries that partially convert incoming fuel (tokens) into emissions. E.g., refinery transforms raw crude/gas into fuel and products (chemical/plastics) that are still sold. Also, not all products may be intended for combustion but still carry an an emission 'potential'. This supports digital tracking of plastic/chemicals as potential carbon waste that could be recycled (e.g. used oil/biodiesel) or should be carefully disposed of.

  3. I try and elaborate/justify the burning process by producer and industry below

This new token is a voluntary registry/ inventory of total carbon extracted by producers and used by industry.

A producer vents or flares some gases and consumes fuels during the exploration and production (E&P) process - "burnt" tokens are used to identify these operations within a facility, providing a carbon footprint 'lens'

Burnt carbon tokens reference minted/incoming and outgoing carbon transactions. They act as an embodied emission intensity tag for fuels and other carbon feedstocks (live tokens) sold. The embodied emissions are implicit to each token transfers, and require no additional transactions.

While carbon tokens (live or burnt) are voluntary they can be subject to auditing, including adjustments to transaction balances by authorized 3rd parties. This process creates a separate audited emission certificate (existing token type supported by the fabric network) that can now be transferred to consumers. The original burnt token 'trail' makes it easy to bundle these audited emissions certificates from different stages in the supply chain for the final consumer. E.g., emissions certificates for a flight accounts for not only the combusted jet fuel, but the E&P, refining, and transportation emissions as well. For refined fuels other upstream emissions can range from 20%-40% of the total, making a case for lower carbon intensity supply chains.

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brioux commented Dec 6, 2021 •
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as pointed out by my colleague this extended token ecosystem supports forensic carbon accounting.
Forensic Accounting Carbon Tokens (FACTs)

@NothingToContribute
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as pointed out by my colleague this extended token ecosystem supports forensic carbon accounting. Forensic Accounting Carbon Tokens (FACTs)

Technically, you are creating a double-entry accounting ledger, with a corresponding credit/debit for each transaction.
Strangely, this would allow you to leverage much of the existing generally accepted accounting practices (GAAP), or international financial reporting standards (IFRS). Double-entry is helpful, in that it helps find errors (intentional or unintentional) in tracking. I will read what you have above, and think some more on this topic.

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This sounds good. Just a few thoughts: 1. I see the flow as the embedded emissions token is transferred from the producer to the consumer when fuel is purchased, so it could be attached to the units of fuel. 2. When the fuel is consumed (or for simplicity's sake, just as it is purchased), it becomes Scope 1 emissions of the consumer and Scope 3 emissions of the producer. 3. I don't think the producer needs to burn the tokens to represent their direct emissions. The emissions of their operations, such as exploration, drilling, and corporate overhead, are their own Scope 1 and 2 emissions. Would they transfer them as additional tokens to their customers, the same way all suppliers would transfer emissions to customers?
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On Thu, Dec 2, 2021 at 5:31 AM Bertrand Rioux @.***> wrote: Token types recap 1. Renewable Energy Certificate (Fungible) 2. Carbon Emissions Offset (Fungible/semi-fungible ?) - used downstream 3. Audited Emissions (Non-fungible) - used midstream/downstream 4. Carbon token/tracker (Fungible) - used upstream/midstream — You are receiving this because you are subscribed to this thread. Reply to this email directly, view it on GitHub <#372 (comment)>, or unsubscribe https://github.com/notifications/unsubscribe-auth/AANAS4INSFFN6TRB7NNPKI3UO5YJNANCNFSM5JHBLPKA . Triage notifications on the go with GitHub Mobile for iOS https://apps.apple.com/app/apple-store/id1477376905?ct=notification-email&mt=8&pt=524675 or Android https://play.google.com/store/apps/details?id=com.github.android&referrer=utm_campaign%3Dnotification-email%26utm_medium%3Demail%26utm_source%3Dgithub.

Weird idea: if we are talking about expanding the token types, can't we just make ones that follow the scopes directly?
Scope 1 (primary fuel), Scope 2 (electricity/heat), Scope 3 (products)
Every incoming token, of any type, generates an outgoing Scope 3 token that can be passed along
If you wanted to track the total carbon in the system, just measure the scope 1 (as scope 2 and 3 are ultimately driven by this)

This kinda solves the double counting issue (My Scope 2 is his Scope 1, etc.) - I have not gone through all the weird bits of how this would work yet, just wondering what you think...

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brioux commented Dec 8, 2021 •
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@NothingToContribute
I have thought of this. I think what your are describing is already in the works.

  • The supply side carbon token is scope 3 downstream - yet to be burnt.
  • Once burnt it becomes holders scope 1. burnt carbon token are transformed into a new audited emission certificate/token.
  • These can be sent as indirect scope 2 and other upstream scope 3 to consumers. The utility emissions channel of this project enables the minting scope 2 tokens. @sichen1234 and co are working on generalizing this.
  • I believe the GHG protocol defines 15 categories of other scope 3.

The indirect scope will also depend on who holds the token (inferred from tx data).
Industry A receives scope 2 (electricity purchases) and could:

  1. transfer these to another customer (Industry/consumer B), where it is other indirect scope 3.
  2. Claim ownership of scope 2, but offsets and include it in the pricing structure for industry B

@sichen1234
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@brioux I see what you're saying.

When some of the fuel is burnt during the production process it does add to the carbon intensity of the final product, and burning the tokens is the right thing to do there.

What about other emissions in the exploration and production process, such as electricity for office buildings and gasoline or diesel for vehicles, or energy used by drilling equipment? Should those be accounted for as Scope 1 and 2 emissions of the producers, and then transferred to the consumers?

It's also interesting that you say plastics contain embedded emissions. At what point are the emissions in plastics released as GHG?

@brioux
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brioux commented Dec 9, 2021 •
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@sichen1234
The transfer of total emissions (for E&P and or other industrial fuel processing) to consumers is based on need, application and optics in the carbon cycle:

  1. Needs to be limits on the optics.. focus on largest primary/secondary emission impacts for E&P/fuel processing.

    • Direct emissions from fuel used by vehicles/equipment, gas leakage/flaring
    • Major audited emissions (indirect scope 2/3). Use Utility emissions channel, track embodied emissions of fuels.
    • Other minor scope 3 are negligible (such as employee energy use) may be negligible or not applicable

  2. Theses are collected into pools tagged with an outgoing carbon tx (unburnt fuel).

  3. Tx referencing provides a data trail for carbon emission intensity

  4. Transferring full supply-chain emissions certificates to consumers is a question of choice/need.

    • A consumer may choose to hold certificates for indirect scope 2 on electricity purchases, or full cycle emissions.
    • Consumer may only need an intensity label (no transfer of certificates).
    • Labels inform decisions and enable tools to sell low carbon goods for a premium, e.g., Methane performance certificates as producer incentive to reduce upstream carbon intensity.

Regarding emissions from plastics, pyrolysis is used for conversion to liquid energy, and there are incineration methods. Or plastics are disposed as solid waste and some degrading plastics emit GHGs.

Hydrocarbon-based materials occur everywhere: solar panel modules, carbon fibers in wind turbine blades, synthetic fabrics in clothings. This is A good read by the Pulitzer prize winning author Daniel Yergin on the energy transition challenge and understanding oil and gas dependency

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sichen1234 commented Dec 10, 2021 via email

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brioux commented Dec 13, 2021 •
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@sichen1234
I'll dig for some refs on lifecycle emissions of plastics.
Regarding realized emission of residual carbon (plastic) tokens. As with fuel, burning is an option of the holder(s).
Accumulation of unburnt carbon is a sign that a company is not actively managing waste (plastic) associated with its sales (could be the plastic producer, wholesaler, distributor or a consumer/municipal aggregator) .

Companies can use residual carbon tokens to track and claim efforts to process equivalent amounts of waste. A new recycled plastic token could be added to NET, documenting conversion of residual token into valued products:

  • recycle into new materials: plastic waste carbon -> recycled plastic token -> ...

  • conversion to liquid energy: plastic waste carbon -> outgoing fuel carbon + recycled plastic token ->

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sichen1234 commented Dec 13, 2021 via email

This was referenced Dec 29, 2021
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