When measuring climate impact, #CO2 is the most important #GHG and, according to Robert Kleinberg, we’re able to account for those emissions pretty accurately. But methane? Despite being the 2nd most important #GHG, it’s much, much harder to measure.
If you missed our April lunch seminar about this topic, you can watch it here.
Almost three years ago, IMAP submitted comments to the Securities and Exchange Commission (SEC) in response to their draft proposal to regulate climate disclosures. As of March 6, 2024, the SEC has finalized their ruling and will now require businesses to disclose certain climate-related information.
While the final ruling is less extensive than originally proposed, we applaud the SEC for taking these initial steps, which we believe will help to better inform investors about corporate climate risks.
See our original comments here.
For our April 4 lunch seminar, we’re hosting IMAP Senior Fellow, Robert Kleinberg, to talk about the need to adopt measurement, reporting, and verification (MRV) standards for embodied greenhouse gases. This talk will focus on methane emissions.
Get more info and register here.
Our March 21 lunch seminar is about how to better evaluate the pharma industry’s efforts to improve global access to medicines and other health products.
Peter Rockers, of the Boston University School of Public Health will talk about his project to develop a framework for stakeholders, including country governments and investors, who are interested in pharma’s role in these access efforts.
Join us online or in person. Register here.
Our March lunch seminar is all about the pharmaceutical industry’s role in supporting universal health coverage. BU associate professor Peter Rockers will discuss his work on creating a process to engage stakeholders in this effort. Check out the details here and join us online or in person at BU.
By Alicia Zhang, PhD Candidate, in Earth & Environment at Boston University
I attended the 70th North American Meeting of the Regional Science Association International in San Diego, California, to present findings from a current IMAP project that aims to construct a predictive model of energy generation asset retirements and additions. This project is a part of a larger body of work to determine whether corporations will achieve their future carbon targets. Using logistic regression models and a machine-learning based variable selection technique, we constructed econometric models to determine which energy generation plans will occur ‘on time,’ and what the results mean in terms of net carbon emission reductions.
My presentation sparked conversations and prompted advice on available datasets used frequently by respective audience members, that could sharpen our predictive models. One audience member suggested that the electric market structure of the state, i.e. whether they have a ‘deregulated’ electricity market or a ‘regulated’ one, could influence the completion of energy generation assets. This comment gave rise to further discussion of regulatory delays in interconnection on the federal level, as delays in the queue would hinder getting new renewable energy generation assets ‘online’ and, by extension, retiring fossil fuel-based generation fleets.
I was joined by three other presenters who discussed energy transitions from different perspectives. A postdoctoral student from West Virginia University is using similar econometric techniques to analyze the effect of state net metering mandates on residential solar adoption within utilities. The other two presenters focused on energy transitions in the transportation industry: A fellow PhD student from George Mason University seeks to survey the usage and policies that aim to transition public transit buses to a zero-emission fleet. Finally, a researcher from the National Renewable Energy Laboratory discussed preliminary findings from a joint project with Volpe National Transportation Systems Center, which seeks to construct a model of how alternative maritime fuels can support fuel demand, using the Port of Seattle as a first case study.
Despite some differences, the presented papers all demonstrated that energy issues are complex and thus challenging to model. However, more detailed and thorough data are increasingly becoming available that can help researchers construct more sophisticated and more accurate models. For example, an audience member recommended recently published data by the Census Bureau on energy consumption data for the manufacturing sector for use in our model, while a fellow presenter referred to data by the Lawrence Berkeley Laboratory, which tracks and projects energy policies.
The annual national conference provided an ideal environment to present and discuss our work, as attendees were academics and practitioners with years of experience in the energy industry and economic modelling. Particularly, the conference showcased innovative research that aims to model urban and regional issues in North America and across the globe. Topics included rural development, economic effects of disasters, transportation accessibility, labor market dynamics, and the economics of electric vehicles.
Conference attendees were geographically, institutionally, and disciplinarily diverse, providing unique perspectives to common issues. Researchers hailed from across North America, as well as across international waters, with presenters from Glasgow, Scotland to Peñalolén, Chile to Seoul, South Korea. While many academic researchers attended, practitioners from governmental and non-governmental entities, such as the Federal Reserve Bank of Chicago, the National Renewable Energy Laboratory, and the National Science Foundation, also showcased their respective work and imparted industry knowledge. What united the attendees was a shared interest to collaborate and to share ideas and knowledge; there was an atmosphere of friendliness, excitement, and curiosity.
The North America meeting provided a preview of the future of energy and economic modelling, and inspired many researchers, including myself, to challenge barriers and advance our understanding of our impact on the rapidly changing world. I look forward to continued conversations about the next stages of economic energy modelling.
The Need for Better ESG Data
Investment communities are searching for reliable sources of data in the environmental, social, and governance (ESG) spheres. These data can aid wise allocation of capital, to the benefit of individual market participants and the economy as a whole. However, difficulties in finding and weighing ESG data have, to a certain extent, cast doubt on the entire ESG scoring enterprise.
Standards for Embodied Greenhouse Gases
A similar problem is beginning to infect international trade. Globally important trading blocs, such as the European Union and East Asian nations led by Japan, Korea, and Australia, are seeking to reduce embodied greenhouse gas emissions across the supply chains of important internationally traded commodities such as liquefied natural gas. However, there are at present no generally accepted standards for the measurement, reporting, and verification (MRV) of embodied greenhouse gases. I argue here that the adoption of common MRV standards in the European Union and the United States would benefit international trade in general, perhaps U.S. fossil fuel exporters in particular, and investment communities at large.
International Agreements and European Regulations
International agreements through which the nations of the world are pledging to reduce their greenhouse gas emissions are growing in scope. The Paris Agreement of 2015 has been signed by 197 countries and the European Union. Recognizing that methane is the second most important greenhouse gas after carbon dioxide, the United States and the European Union announced the Global Methane Pledge in 2021, and since then 150 participants have joined.
These agreements are voluntary and do not in themselves have the force of law. However, they can prompt actions that influence international trade. Since the 1990s the European Union has taken the lead in using its market power to influence production practices in nations from which it imports goods.
The Carbon Border Adjustment Mechanism (CBAM) is a European Union regulatory mechanism that entered into force in transitional form on 1 October 2023, after which greenhouse gas emissions associated with the supplies of imported cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen must be reported to the EU. After 2026, a greater range of imports will be subject to fees levied according to the greenhouse gases emitted in their respective supply chains.
EU Methane Regulation Announcement
Although CBAM does not explicitly apply to methane associated with fossil fuel imports, the EU has clearly signaled its intention to impose a similar system in that domain. The European Commission has proposed, and the Council of the European Union and the European Parliament have separately approved (with amendments) draft legislation on methane emissions reduction in the energy sector with a path to extraterritorial effect. On 15 November 2023, the Council announced that a final agreement between it and the Parliament which would elevate the proposal to EU Law was imminent.
U.S. Can Benefit
The Russian invasion of Ukraine and the resulting reorganization of the international trade in fuels, gives the United States an opportunity to influence, and potentially benefit from, a European focus on greenhouse gas emissions embodied in its imports, most particularly of natural gas. If U.S. inventories of greenhouse gas emissions – particularly of methane – are based on physics-based measurements, it is likely to be found that the United States is a world leader in the clean production of fossil fuels. However, in the absence of empirical data, that claim cannot be made. On 15 November 2023, a few hours after the European Union announced progress on finalizing its law on methane emissions in the international trade in fossil fuels, the U.S. Department of Energy announced the formation of an international working group to establish a framework for measurement, monitoring, reporting, and verification of supply chain emissions of greenhouse gases.
Adopting Common Reporting Standards Helps Everyone
Investment communities face a challenge similar to that of the European Union: they need realistic and effective pathways to improve the environmental footprints of their portfolios. According to PIMCO, a well-regarded buy-side investment house, “Clear, ambitious methane regulations can assist investors, such as PIMCO, to better execute a more effective transition risk-mitigation strategy, as a predictable regulatory landscape is likely to lead to increasingly dependable capex guidance and improved data transparency.”
Without broadly-agreed-upon measures of environmental, social, and governance performance, it is difficult or impossible to score the relative sustainability performance of corporate entities, even within industrial sectors. Regulatory and investment communities can aid one another by adopting common standards of greenhouse gas emission reporting. Agreement on these standards between European Union and United States authorities would send the strongest possible message that greenhouse gas emissions measurements can be a reliable cornerstone of environmental assessment.
Seven BU researchers. Six-minute lightening talks on the topic of measuring corporate impacts on the environment and society. Mingling over hors d’oeuvres and drinks.
This was the set up for the recent IMAP-hosted Research on Tap, organized by BU’s Office of Research. IMAP Director, Nalin Kulatilaka welcomed the attendees and pointed out that what made this event somewhat unique is that it was from the point of view of businesses, whose actions affect us all in both good ways – and bad. He highlighted IMAP’s Corporate Carbon Risk project and pointed out that many corporations are publicizing plans to reduce their carbon emissions, but, he said, “Not all these targets are met and not meeting these targets impose risks to the companies as well as society.” IMAP’s Corporate Carbon Risk project is visualizing targets versus actual emissions, and creating a model to predict whether a utility will meet its future carbon emissions targets.
Jonathan Buonocore of the School of Public Health talked about developing tools like COBE to incorporate health data into corporate sustainability reports that show things like CO2 emissions, water usage, and waste generated to provide a measurement of the impact of corporate activities on public health, climate, the environment, and other outcomes as a way of creating a framework to aid decision-making.
Eddie Riedl, of the accounting department at the Questrom School of Business, explained that ESG metrics are likely to be the next major regulatory movement in accounting and discussed his research which looked at how consistent companies current 10-K filings are with SASB recommendations on ESG disclosures. He concluded the strongest predictor of current ESG risk disclosures is what the largest companies within an industry are disclosing, rather than what SASB recommends.
Keith Ericson, of Questrom’s markets, public policy and law department, discussed his research into determining shareholders’ desired balance between maximizing profits versus enhancing ESG objectives. He found that shareholders want firms to place some weight on consumer benefits and that, in the trade-off between profit and environment, the importance assigned to the environment is two times that desired for consumers.
Jesse Chan, of Questrom’s accounting department, is looking at how financial markets integrate ESG metrics, including how stakeholders are consuming ESG data, how firms are communicating ESG-related metrics, and how ESG issues affect market participant behavior. There’s an increased standardization in ESG reporting, a growing role of the use of advanced technologies in ESG reporting, and an increased divergence in how people view ESG issues and reporting, including some backlash.
Shuba Srinivasan, of Questrom’s marketing department, talked about her research into how to predict when sociopolitical controversies will impact a company. Her research looks at low effort responses (deny, issue a statement or apology, or no response) versus high effort responses (curtailing the offending action, offering employee training, terminating an offender, suspending operations, settling lawsuits). Firms with high effort responses were shown to do better at mitigating negative talk on social media and also had a positive effect on stock returns.
Suchi Gopal, of Earth & Environment, is using satellite data to examine deforestation associated with both small and large palm oil plantations in Indonesia. With this data, she can both calculate the amount of carbon released, and identify the specific suppliers of palm oil in the supply chain that may not be following sustainable palm oil practices.
IMAP Affiliated Faculty, Suchi Gopal, will give the keynote lecture at the November 6 New England Chapter of the Urban and Regional Information Systems Association (NEURISA) conference in Worcester, MA.
She’ll be talking about how the integration of Artificial Intelligence (AI) and Deep Learning with Spatial Analytics has revolutionized the field of Geospatial Intelligence and will delve into a comprehensive examination of diverse case studies that highlight the practical applications of this integration.
Check out the NEURISA Day 2023 details here.