Gas pipeline firms accused of misleading investors on climate using CDP reporting rules

The CDP’s reporting requirements have come under fire in a report by the Institute for Energy Economics and Financial Analysis (IEEFA), for enabling European pipeline companies to market themselves as low-carbon businesses and avoid reporting on the climate effects of the natural gas they transport.

‘This loophole makes it much easier for TSOs to market themselves as leaders of the energy transition, aligned with European Union emission reduction targets’

Snam, GRTgaz, Enagas, National Grid, and Fluxys are all accused of using a “loophole” in the CDP’s recommendations, which means they don’t have to consider ‘final use’ emissions: despite transporting and storing gas, they do not sell it, and therefore don’t have to account for it in their Scope 3 emissions under the CDP’s rules. Instead, their Scope 3 reporting focuses on their supply chain or employee business travel, resulting in the firms under-reporting their emissions by a factor of at least 100, IEEFA claims in the report. 

It says this can be misleading for investors searching for greener investment opportunities.

“This loophole makes it much easier for TSOs to market themselves as leaders of the energy transition, aligned with EU emission reduction targets,” said Arjun Flora, an IEEFA Energy Finance Analyst and co-author of the report. 

Pedro Faria, Strategic Adviser at CDP, told RI: “Our guidance and technical note for the Oil & Gas sector provides a lot of detail on Scope 3 reporting, but is currently mainly focused on Oil & Gas producers, rather than those working in transportation and storage.”

In response to the report, the National Grid told RI that its “reporting is fully aligned to industry standards and subject to third-party assurance each year”, adding that it only reports on Scope 3 emissions in the US, where it sells gas.

Snam’s spokesperson told RI that its Net Zero Policy refers to Scope 1 and 2 emissions, but that it is committed to reducing its Scope 3 emissions. 

Enagás told RI: “To calculate Scope 3 emissions Enagás follows international standards, specifically the GHG Protocol as it is the most internationally recognized standard, thus ensuring that best practices in GHG calculation and reporting are considered in our carbon footprint. Since 2013, Enagás has been analysing, calculating and reporting its scope 3 indirect emissions as part of our Carbon Footprint which is verified by an independent third party with the maximum level of assurance (reasonable assurance level) showing leadership in terms of transparency and data accuracy."

 GRTgaz said it "is committed to implementing transparent extra-financial communication on the issues related to climate change, taking into consideration the entire gas chain beyond our direct impacts alone. In our 2019 Extra-Financial Performance Statement, available on our website, the decarbonisation of natural gas is our industry's first strategic challenge". 

 Fluxys Belgium said: "We do not buy or sell the gas we transport, store and regassify in our infrastructure. In light of the above, determining and publishing, under scope 3, final use emissions of the gas transmitted through our network is totally irrelevant (and out of scope of the CDP reporting). On top of that, we have no view whatsoever as to how exactly final customers connected to our network … utilise the gas once delivered to their premises… and we are therefore not in a position to accurately determine any emissions produced by their gas use. And if we were to do so, we would undoubtedly count emissions twice, as other players of the gas value chain already report (or should report) with direct knowledge of the matter Scope 3 emissions related to their own molecule-related activities."

IEEFA is urging sustainability assessment bodies like CDP to update their rules so that full emissions are disclosed by midstream gas companies.

“TSOs are really missing an opportunity to demonstrate their commitment to energy transition,” said Flora. “By providing full disclosure they could set meaningful targets and demonstrate a successful transition to zero-carbon gases over the coming decades.”