Addressing Scope 3 emissions

While we recognize that end-use emissions must be reduced to meet global climate objectives, it is our view that supply-side constraints through Scope 3 targets for targeted North American and European oil and gas producers would be counterproductive in the absence of policy measures that address global demand. Curtailed supply would be replaced with production from less accountable operators and jurisdictions to meet transition demand. Scope 3 targets do not address demand and do not limit global production and in our view are ineffective in reducing global emissions.  

The drive of some non-governmental organization (NGO) and activist investors for Scope 3 targets is premised on a prescribed capital shift away from oil and gas which has been described in some financial sector climate frameworks. The Institutional Investors Group on Climate Change (IIGCC), for example, refers to ceasing oil and gas exploration and “running existing assets down.”³ Similarly, the Glasgow Financial Alliance for Net Zero (GFANZ) describes the importance of a “managed phaseout” of oil and gas.⁴ The push from activists for such phaseout does not appear to consider market and technology readiness, or related impacts to energy affordability and energy security.  

This approach also does not take into account the projection from Paris-aligned scenarios that oil and natural gas, produced from responsible operators, will be needed in the coming decades to meet transition demand. Proponents of Scope 3 targets seek to translate a global carbon budget that is science-based to broad sectoral and company allocations that are not. The imposition of Scope 3 targets for a prescribed capital shift to phase out production that best meets actual demand is not a realistic way to address energy transition, climate change or shareholder value.  

While a sector-wide reduction in demand for oil and natural gas products is foreseen as the transition progresses, our responsibility to shareholders is to strongly compete for transition demand by offering resilient, low cost of supply, low GHG emissions intensity production with goals for operational emissions, while also pursuing energy transition opportunities. This approach provides long-term shareholder value and supports an orderly energy transition that avoids large-scale energy price shocks. 

Other key considerations have also reinforced our rationale at ConocoPhillips not to set a Scope 3 target: 

E&P company versus integrated company   

Pure play exploration and production companies do not have the opportunities to influence end-use emissions that integrated oil and gas companies may hold through their ownership and control over the production and sale of end-use energy products. As an upstream producer, ConocoPhillips does not control how the commodities we sell into global markets are converted into different energy products or selected for use by consumers. 

Double counting 

Duplicative counting of end-use emissions along the oil and natural gas value chain makes accurate accounting and credible target-setting problematic. For example, the Scope 3 emissions from refining the oil we produce are a refiner’s Scope 1 emissions. The combustion of that oil in the form of an end-use product such as gasoline are also Scope 3 emissions for the producer of the oil, the refiner and the marketer. The combustion of gasoline is also a Scope 1 emission for distribution and transportation companies. Likewise, our Scope 3 emissions from the combustion of natural gas at a power station would be the electricity producer’s Scope 1 emissions and our own Scope 2 emissions for electricity purchased to run our operations.  

We believe that the most practical way to avoid double-counting of emissions and overlap of targets is for all companies to be compatible with the Paris Agreement and set targets for their Scope 1 and Scope 2 emissions.

Climate policy to address end-use demand and emissions

We have been clear since our first Climate Change Position in 2003 that end-use emissions must be addressed to meet global climate commitments. Climate policies along with advances in technology and consumer choice will ultimately drive demand and end-use emissions. We accept that in the absence of full carbon capture and sequestration, demand for energy must shift toward low-carbon and non-carbon sources, so we take responsibility for encouraging that shift by the most practical and effective means available — our vocal support for carbon pricing that would cause a change in the choices made by end users, which is detailed in the Public Policy Engagement section. Our constructive advocacy for effective carbon pricing policy began when we became the first U.S. oil and gas company to join the United States Climate Action Partnership in 2007 and continued in 2018 when we joined the Climate Leadership Council as a founding member. It is also reflected in the fact that our main industry associations have now adopted positions on carbon pricing and other climate policies that align with our public positions.  

However, we also recognize the policy trend in the U.S. toward a regulatory approach to emissions reductions, and we advocate for effective and efficient regulations and legislation to advance economic incentives and reduce GHG emissions. To that end, we are leading discussions around additional policy options, aligned with our principles, that address end-use emissions. 

Reporting

We calculate Scope 3 emissions using the Greenhouse Gas Protocol and the Ipieca 2016 Estimating Petroleum Industry Value Chain (Scope 3) Greenhouse Gas Emissions methodologies based on net equity production numbers. We report the four largest categories of Scope 3 emissions that apply to our operations. Scope 3 emissions include CO₂, methane (as CO₂e) and nitrous oxide (as CO₂e) for the four material categories of Scope 3 emissions that apply to our operations. 

For oil and natural gas exploration and production companies, Scope 3 emissions fall primarily into the “use of sold products” category. Though we do not control how our total production is ultimately processed into consumer products, we make the conservative assumption that the majority of production is ultimately burned as fuel by end users. We use the API Compendium GHG emissions factors for crude oil and natural gas burned as fuel. This method accounts for all possible GHG emissions that could be associated with end use of our production. Our assumptions and method are especially conservative when the “double counting” issues inherent in Scope 3 estimations for an exploration and production company are taken into account. 

We conservatively calculate the other three categories of Scope 3 emissions by taking our entire volume of crude and natural gas and applying the relevant transportation, distribution and processing emissions factors from academic life cycle analyses, including the 2022 S&P Global "The Right Measure: A Guidebook to Crude Oil Life-cycle GHG Emissions Estimation," and the 2024 National Petroleum Council "Charting the Course: Reducing Greenhouse Gas Emissions from the U.S. Natural Gas Supply Chain." While net production increased by approximately 5% in 2023, Scope 3 emissions only increased about 3% due to updated emissions factors from more recent lifecycle analysis studies.⁵