Greenhouse gas accounting at project and portfolio level 

Explanation

The Asian Development Bank has different GHG reporting regimes for different sectors. In the energy sector, the ADB currently tracks GHG reductions at project level, with specific guidelines for clean energy projects. For transport investments, the transport-specific greenhouse gas guidelines agreed in 2016 state that all projects will be “screened in terms of their gross GHG emissions and that more detailed analysis be conducted if a certain threshold is exceeded”. The Safeguard Policy Statement states that the significance threshold across all projects is 100,000 tonnes CO2e/year”. This is relatively high compared to some other MDBs but it is welcome that this is applied across the board. 

Recommendation: The ADB should lower its significance threshold to 25,000 tonnes CO2e/year in line with other MDBs such as Inter-American Development Bank. 

Regarding methodology, the ADB’s approach involves comparing project emissions to a ‘without project’ scenario. This is a hypothetical scenario that aims to represent the GHG emissions that would occur in the absence of the ADB project. ADB guidance on absolute emissions is currently under review. 

As for the IFIs’ common agreed methodology, this aims to take into account emissions resulting from the longer project lifespan as emissions are estimated for a representative year of operation. However, energy efficiency rehabilitation or retrofit projects often involve an increase of output related to increased capacity and extended operating life – and the methodology assumes that this displaces production from new capacity that would have been built in the country or elsewhere.  This shows that estimated GHG reductions are often dependent on a range of assumptions made about the without-project baseline. 

In December 2019, the ADB published a guidance note: “Greenhouse Gas Emissions Accounting for ADB Energy Project Economic Analysis”, which focuses on the economic analysis of greenhouse gas emissions effects of projects in the energy sector. Recommendations seek to make practices consistent across cost-benefit calculations.  As economic analysis needs to use a consistent set of scenarios across benefit streams, the note recommends and illustrates the use of a without project scenario for calculating emissions effects in project economic analysis.  

The ADB was the first MDB to set a target date to peak portfolio emissions. The ADB set “2030 at the latest” as the date for doing this, although it is unclear how much progress has been made as there is a lack of publicly available information. Although ambitious, the ADB itself recognises that earlier peaking would be the “optimal course of action”. 

Recommendation: The ADB should be explicit with its target for peaking emissions and bring its target forward (it is currently 2030 at the latest), as it has already indicated this would be ‘optimal’.