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VINCENT DEMOURY GENERAL DELEGATE AT GIIGNL

As fossil energies are facing headwinds with the rise of renewables, mounting decarbonisation requirements, and the multiplication of net zero pledges, the phenomenon of carbon neutral energy transactions is emerging, i.e. transactions in which residual greenhouse gas (GHG) emissions associated with the product are offset through the purchase of carbon credits. In particular, carbon neutral LNG trade has gained traction since 2019. As of today, we know that approximately 30 carbon neutral LNG transactions have been performed, the vast majority of which in 2021. The cargoes were primarily delivered to Asian markets, in particular to China and Japan. Nevertheless, in 2021 carbon neutral LNG transactions still represented less than 1% of total annual LNG trade.

When looking into these transactions, GIIGNL realised that there were some inherent challenges to be solved.

The first challenge was to ensure that the GHG footprint of an LNG cargo was accurately and transparently calculated, based on homogeneous monitoring, reporting, and verification (MRV) principles. The second challenge related to the fact that LNG players had taken different approaches to carbon neutrality claims, leading to: a lack of consistency in the definition of carbon neutral LNG, notably due to a lack of homogeneity regarding the stages of the chain that were offset. Whereas most of the carbon neutral transactions did offset the full life cycle GHG emissions, some players who claimed to offer carbon neutral LNG did only offset a limited portion of the chain. GIIGNL also observed a lack of consistency and credibility in the characteristics and the quality of the carbon credits used. Given this context, GIIGNL decided that it was high time to lead a collaborative industry effort to try to set a common ground for what, until then, had been commonly referred to as carbon neutral LNG. To this effect, 50 experts representing 20 GIIGNL member companies and co-ordinated by a sustainability consultant, have been working to develop the ‘GIIGNL MRV and GHG Neutral Framework’ which was launched on 17 November 2021.

The GIIGNL MRV and GHG Neutral Framework aims to bring more transparency when accounting for and reducing GHG emissions associated with an LNG cargo, and promotes that emissions are avoided and reduced where possible. The offsetting mechanism is foreseen as a means to compensate for residual emissions that cannot otherwise be reduced or avoided.

The Framework does not seek to replace any established standards and methodologies for GHG emissions calculation, footprint determination, and offsetting. It has therefore been framed in a way that integrates established internationally agreed standards and methodologies and provides additional criteria for assessing and reporting GHG emissions associated with the specific case of an LNG cargo.

Unlike other MRV quantification methodologies or certification schemes, what is unique about the GIIGNL MRV and GHG Neutral Framework is that it considers the whole value chain, down to end use, in line with the most restrictive, up-to-date carbon footprint and carbon neutrality standards, such as the GHG Protocol and PAS2060 from the British Standards Institution. In this regard, it promotes verified and consistent quantification of GHG emissions across all segments of the LNG chain, from extraction of natural gas, liquefaction, shipping, and regasification to final consumption, and creates a transparent practice to declare GHG neutral cargoes through an independently verified Cargo Statement which includes reporting of both emissions and offsets.

To bring some clarity and homogeneity into the market, according to the Framework a ‘GHG neutral LNG cargo’ represents a full life cycle GHG footprint across the entire cargo value chain, based as much as possible on primary data, and supported by a long-term decarbonisation commitment, a delivered emission reduction plan, and fully netted with high quality offsets. However, given that there is still demand in the market for a partial life cycle footprint which will take from production through to either delivery or regasification, the Framework supports a number of other declarations to accommodate the various levels of readiness and commercial expectations within the LNG sector.

Finally, and in view of the LNG industry’s commitment to reduce methane emissions, another outstanding characteristic of the Framework is that it requires full accounting for methane emissions in addition to carbon dioxide and other applicable GHGs.

GIIGNL hopes that the Framework will serve the industry to drive further transparency and reduction of GHG emissions across the LNG chain and calls for early adoption of the Framework by LNG players across the different stages of the chain in an effort to promote LNG’s essential role in the energy transition and beyond.