Reducing Methane Leakage and Flaring through Supply Chain Tokens

Innovation Tagline: Using the blockchain to create supply chain incentive to help reduce up to 1 Gt CO2e of Greenhouse Gas emissions per year.

Project Keywords: #NFT #TokenEconomy #ValueChain #CarbonEmissions #Flaring #Scope3

Project Members

Problem

Under any reasonable scenario, the oil and gas industry will remain a significant and important part of the global energy system for several decades to come. During this transition, however, we must do everything possible to reduce the climate impact from continued use of fossil fuels.

The first priority should be reducing the amount of methane that is leaked and flared during the production of oil and natural gas. Flaring, and venting, of natural gas at oil wells happens because methane is trapped in the geological formations of the oil wells. During the extraction of oil and gas, it must be removed to keep the well operating safely. In some wells, this methane is captured and sold as natural gas. In other wells, such as those located in remote areas, the lack of pipelines or other infrastructure to transport the natural gas makes it uneconomical to do so. In those cases, it is simply burned (flared) or worse still, released directly to the atmosphere.

Because methane has 25 times the climate impact of CO2, this methane leakage and flaring is a major source of global Greenhouse Gas (GHG) emissions. The Environmental Defense Fund estimates the total global oil and gas methane leakage and flaring at between 250 Mt to 1 Gt CO2e per year (Figure 1). The latter amount is greater than the total emissions of Germany and all the world's airlines combined.

Figure 1 Annual flaring and associated gas use, from EDF (2021)

In recent years, there has been a concerted effort on the part of The Environmental Defense Fund, the Oil and Gas Climate Initiative, major international oil companies, international organizations such as the United Nations Environmental Program, and institutional investors to reduce methane leakage and flaring. Nevertheless, this remains a difficult goal to achieve because of a lack of data and proper financial incentives. Many oil wells do not have equipment to record how they are handling excess underground methane, and many companies do not report on the level of the methane that is released. As a result, even though methane is a valuable commodity (natural gas), it is not possible to estimate the value that could be captured from the leaked or flared methane and therefore determine the returns from investing in infrastructure to capture them.

In this project, we will work on using the blockchain to provide trusted data on methane and transfer that data to fuel consumers to incentivize methane reduction at the point of production.

Value chain (scope 3) reporting standards help identify these type of indirect impacts. According to the Carbon Disclosure Project (CDP) value chain reporting has not been very successful in reducing emissions (Patchell 2018).

Value chain reporting may use the Life Cycle Assessment (LCA) practice, which can be difficult for organizations to implement on their:

Access the credible metrics restricted by data silos across emission measurement, reporting and verification (MRV) systems
Rely on historic data based that may be several years old
Employ of on model estimates that may be subjective and hard to validate

LCA applied to fuel carbon intensity standards have no been very effective in mitigating emissions (Plevin et al 2017).

Waste emission tracking tools

EDF 2021 urges investors to engage energy companies to improve flaring transparency, requiring collaboration to establish clear metrics, and several new data sources ranging from satellite imagery to instrumentation at oil wells will be coming online to improve the data. Several independent tracking tools are being introduced (GGFR, Flaring Monitor, MethaneSat, UNEP IMEO,flare-intel) for waste emissions.

Converting this data into useful fuel value chain metrics require integration with production data. Flaring Monitor has made some progress on this, and will provide key part of our solution to bridge reporting silos for waste emissions. (this effort could align with the World Bank's Imported Flared Gas Index).

Solution

We propose a non-fungible token (NFT) contract to track waste emissions.

The carbon tracker NFT (C-NFT) has been implemented using the ERC-721 standard, as part of the Net Emission Token (NET) network to issue, transfer, and retire carbon tokens by different accounts:

Voluntary Carbon Tracker Token (VCT) used by industry dealers
Audited Emission Certificate (AEC) assigned to industry/consumers by auditors
Emission Offset Credit (EOC) and Renewable Energy Credit (REC) dealers

A C-NFT provides a digital emission profile for accounts owned by facilities, e.g., oil and gas field, power plant, refinery (Figure 2).

Figure 2 C-NFT illustration

Each profile (reporting "silo") consists of inputs and outputs as NET transaction values - Carbon Dioxide equivalent (CO₂e) emissions.

Inputs are retired NETs for direct (scope 1) or indirect (scope 2/3) emissions.
Outputs are tokens transferred downstream.
- VCT are transferred as the CO₂e of fuels sold to consumers (used in commercial trade).
- AEC are indirect emissions, e.g., from selling electricity/heat

Emission profiles can explicitly reference a source C-NFT (arrows in Figure 2) to track embedded emissions.

In practice a supplier/emission dealer announces to its customer, I am sending emissions tokens (e.g. VCT) from this facility's emission profile (NFT). This allows organizations to connect the internal boundaries of traditional silos.

The consumer (e.g., Fuel user) can identify waste emissions through public view functions of the NFT, such as carbon intensity metrics:

CI of oil & gas supplied (Fuel trade out) -> flared gas + leakage / fuel outputs
CI of Refined fuel trade -> other emissions (e.g., electricity/heat, flue gases) / refined fuel out
The example also subtracts offset credits purchased from a dealer (green box)

The next step will involve building tools to pull in different data sources to support independent auditing and verification (MRV cycle):

company voluntary reports/ ERP sensors (gas flaring)
independent tracking service focusing on Flaring Monitor

Figure 3 Architecture for verifying waste emission.

Figure 3 depicts an ongoing effort by the blockchain carbon accounting team to collect emission data points into a database (orbitDB) using IPFS or Fabric. These are connected to Ethereum contracts (NET/C-NFT) using a ChainLink oracle service or DAO.

Other Value chain scope 3 tools/services

To our knowledge there is no system focused designed to bridge the MRV systems used by organizations to direclty identify value chain emissions.

The GHG Protocol provides a free tool to help measures cross-sector value-chain impacts. It provides inputs typically used in LCA practices, which may only provide historic/aggregate data from several years ago. It is more focused on providing measures for individual organizations as opposed to connecting reporting activities.

CarbonChain is a comparable solution to help organizations assess emission impacts across commodity supply chains. However, it operates as a centralized services, focusing on gathering data into a bigger silo not connecting them.

Minimum viable product

Our target product is a portal where and oil&gas producer:

registers as an industry dealer of the NET network
construct a (voluntary) emission profile (C-NFT) for current inventories (using VCT)
connects its C-NFT profile to the waste emission verification system (Figure 3)
list inventories as digital VCT that can be transferred to other industry/consumer accounts.

Accomplishment and Team

Our team-members has been working on the Supply Chain Decarbonization Project for some time, with the Operating System for Climate Action providing much of the underlying code needed for this challenge.

Bertrand WILLIAMSRIOUX is an energy economist, engineer and programmer, putting together a startup to provide carbon accounting and management services for energy and energy intensive commodities

Si Chen is the founder of Open Source Strategies, Inc. and coordinates the Carbon Accounting and Certification WG of the hyplerledger Climate Action and Accounting (CA2 SIG.

Woody Moore is currently acting Co-chair of the Climate Action and Accounting Special Interest Group (CA2SIG). He holds a Masters in Business Administration with 10+ years of experience planning and executing Go-to-Market strategies for early stage tech start-ups. He also has expertise in the field of internet governance, where he supports ICANN's (Internet Corporation for Assigned Names and Numbers) multistakeholder decision-making model to help the global community reach consensus around the protocols, standards and policies needed to support the security, stability and resiliency of the internet's Domain Name System.

b. Identify talent/resource gaps and needs (Do you need more support developing the blockchain solution? Do you need support with front end development? Do you need support developing the business model?)