Taking Climate into Account - Carbon Management Tools for Investment Decisions and Progress Tracking at an Energy Company

Sammanfattning: Background: Climate change is becoming a more urgent issue, where global agreements and regulations are putting pressure on companies to calculate and disclose their greenhouse gas emissions to combat the problem. Other driving forces of carbon disclosure for companies include social, economic, and financial pressure, as well as firm specific internal factors. Carbon calculations within companies are increasing in frequency and importance, both in practice and as a research topic. However, there is a lack of research regarding how companies can use their carbon emission calculations for internal steering. Purpose: This thesis aims to identify different carbon management tools and analyze them from the perspective of their relevance for an energy company. Both tools for investment decision-making and progress tracking will be assessed. Additionally, this thesis aims to describe different aspects of implementation of carbon management tools within companies. Research questions: R1: What is a suitable tool for energy companies to use for integration of climate impact into decision making? R2: What is a suitable tool for energy companies to use for progress tracking of total carbon emissions? R3: What are important aspects to consider when implementing these tools? Method: To initially address the research questions, information was gathered through a study of previous research around carbon accounting. Current methods and standards for carbon emission calculations were also investigated, as well as theory around change management. Through the literature study three potential tools were identified, and in two cases modified. The Swedish energy company Öresundskraft was used as a case company to answer the research questions. Interviews and a workshop were held with employees at Öresundskraft to understand their desires, needs and thoughts about the selected tools. Also, external interviews were held to gain an understanding around for instance carbon calculations and the owner Helsingborgs Stad’s perspective. A selection of the results from interviews and a workshop that was considered relevant was then compiled. Together with the literature study this provided the basis for the evaluation of the selected tools which resulted in the final recommendations. Conclusions Conclusions regarding research questions: • R1: An internal shadow price on carbon is a suitable tool for energy companies to use when integrating climate impact into investment decision-making. This since it o has a clear connection to economic figures and provides strong steering capabilities o can take long-term climate benefits on system level into account by relying on carbon emission calculations o has a clear focus on climate effects • R2: A Carbon Intensity Ratio is a suitable tool for energy companies to use for progress tracking of total emissions. An appropriate denominator for the metric is capital employed. • R3: Aspects to consider when implementing the suggested carbon management tools are presented through a 7-step roadmap. The identified steps are: 1) Communicate the change 2) Establish a responsible project group 3) Hire additional employees or making sure sufficient resources exist 4) Establish structures for carbon emission calculations if these does not already exist 5) Report Carbon Intensity Ratios 6) Implement an internal carbon price 7) Evaluate the process and adjust thereafter. Additional insights are: o Additional resources might be needed to implement the carbon accounting tools. o Top management commitment and dialogue with the owner about economic pressure enable implementation. Conclusions regarding carbon emission calculations: • The consequence perspective should be used for carbon emission calculations for decision-making. • Both the accounting perspective and the consequence perspective can be used for progress tracking of carbon emission. • The calculations that will be required by the EU directive CSRD will not be sufficient for decision-making. Keywords: Carbon accounting, carbon disclosure, carbon management, carbon management tools, environmental change management, internal carbon price