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A Review of Climate Science Based GHG Target Setting Methodologies for Companies

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Abstract

Most companies are currently not setting the emissions targets necessary to meet the global goal of a 2⁰C temperature increase from pre-industrial levels. Science-based target setting methodologies attempt to quantify the “fair share” of emissions each company is responsible for reducing. This report compares different methodologies available for this purpose. It focus on three main approaches: linear reductions from base year to a pre-defined target (LEHRY); value added methods (GEVA and C-FACT); and the Sectoral Decarbonization Approach (SDA). The analysis consisted of comparing emissions reductions trajectories for different methodologies and sectors as well as case studies examining what company targets would be by applying these methodologies. The way emissions are allocated to the company level creates a number of issues regarding determining the appropriateness of targets and how progress towards those targets can be tracked. The science-based targets methodologies analyzed fell into two types: compression and convergence. LEHRY, GEVA and C-FACT use compression target methods, which define absolute emission reductions to companies based on generic 2⁰C pathways applied to all companies. The SDA uses both compression and convergence target setting. For sectors with homogenous activities it uses a convergence method which establishes convergence intensity pathways as a preliminary step to absolute emission targets. For sectors whose activities are heterogeneous, it uses a compression approach. The specific 2⁰C scenario used as an input parameter is highly relevant. GEVA and C-FACT use the same formula but different scenarios as the starting point. The SDA approach discriminates 2⁰C scenarios on a sector/activity level. This is likely to be more acceptable by energy-intensive industries as it should produce more realistically achievable targets for companies. This paper will inform decisions on changes to CDP climate change questionnaire to track and incentivize science-based targets starting in 2016.

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... They also independently validate targets set by companies, certifying them as correctly following prescribed methodologies (https://sciencebasedtargets.org). To further entrench SBTs within private sector climate governance, in 2016 the CDP added SBT disclosures to its already vast climate disclosure questionnaire and scoring system (Faria & Labutong, 2015). As of June 2019, according to the SBTi website, 568 businesses globally have committed to setting an SBT through the SBTi platform, with 222 of those having a third-party-validated target in place. ...
... Three main approaches toward setting SBTs exist, the absolute-based approach, the economic-based approach, and the sector-based approach (see Faria and Labutong (2015) for a technical discussion of each). The first, absolute-based SBTs, is the most straightforward. ...
... To account for economic growth, scholars and practitioners have devised economic-based SBTs, viewed as more business friendly. Underlying this method is an apportioning of the remaining carbon budget under the 2 C warming scenario relative to a company's expected or anticipated future contributions to global gross domestic product (GDP) (Faria & Labutong, 2015, 2019. Two key methodologies comprise economic-based approaches, C-FACT, and GEVA (GHG emissions per unit value added). ...
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