Market initiatives are being developed across the globe, the most prevalent being the carbon-neutral LNG framework of the International Group of Liquefied Natural Gas Importers (GIIGNL Framework).
The voluntary framework for less carbon-intensive fossil fuels, such as LNG, is relatively well developed. mandatory regulation: the carbon-neutral label However, as the markets for other green products have matured, the trend has shifted to a more top-down approach, whether via legislation or consensual self-regulation. That situation typifies how other green products, such as green bonds, have tended to come to market and attract new entrants by enabling them to apply a green label without having to navigate a myriad of regulations to do so. Market participants have only voluntary carbon-neutral standards to go on, with limited market consensus or prescription as to what the label should require and little cross-over between different types of fossil fuels. This will be key to creating a credible carbon-neutral label, avoiding claims of greenwashing, and enabling comparability/fungibility of carbon-neutral products offered by different market actors.Ī key question that underlies those issues is whether the carbon-neutral fossil fuels market can gain credibility and scale up through adherence to industry-driven voluntary initiatives or standards, or whether the time is now or in the near future for the market to be subject to mandatory regulation. These are all very much live issues in this nascent market, and the growth of the carbon-neutral fossil fuels market will no doubt be linked to whether consensus, or at least a majority view, is reached on them.
There is much debate about what the carbon-neutral label should specifically require in this context, and there is a spectrum of views on what types of emissions it should cover (some or all of scope 1, 2, and 3 emissions), how we should measure emissions, and whether reduction at source before resorting to offsetting the balance of emissions should be required. Needless to say, the use of the carbon-neutral label in this context is potentially dangerous territory. “Carbon neutral” or “GHG neutral” in the context of a fossil fuel product broadly refers to the reduction and/or offsetting of carbon dioxide (and carbon dioxide equivalent greenhouse gases) emissions occurring as a result of the production, transportation, and use of the product in order to achieve a net-zero emissions outcome.
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