A Novel and Scalable Carbon Management Strategy for a Just Energy Transition

Abstract

Abstract A novel carbon credit supply stream at the center of the energy transition is presented that converts future plug and abandonment liabilities into assets. This approach offers unique benefits when compared to industry standard operating practices including reductions in Scope 1, 2 and 3 greenhouse gas emissions (GHG) and reduced methane intensities. A macroeconomic study of U.S. hydrocarbon production was used to demonstrate the total addressable market and potential impact of the decarbonization strategy if deployed at scale. To facilitate scaled deployment of this carbon management approach the application of distributed ledger technology, a blockchain, is proposed. This technology must be coupled with trustworthy and reliable engineering assessments to satisfy the requirements within the voluntary carbon market. A case study is used to describe the economic and operational assessments an operator may take to apply the approach in practice. The study shows the opportunity to generate 1 GtCO2e per year of carbon credits while improving the efficiency of U.S. oil and gas production. This is roughly equivalent to the GHG emissions of Japan, or 50% of the anticipated voluntary carbon market volume in 2030. (Crippa, 2022) The adaptation of best practice geoscience and engineering can be used to accurately assess the permanence and quantities of oil and gas eligible for crediting. The use of a blockchain to anchor the outcomes of the approach digitally in a meta-registry not only eliminates the possibility of double counting and provides transparency but also results in the world's first blockchain native carbon credit; a valuable offering within the voluntary carbon market. A case study shows that upstream suppliers of carbon credits could apply this approach and generate carbon credits with competitive breakeven price on the voluntary carbon market, meanwhile reducing their abandonment liabilities on their balance sheet. This novel carbon management strategy coupled with scalable technology deployment defines the future of a just energy transition. The paper presents the combination of two novel approaches in service of accelerating the energy transition. It is the first of its kind to demonstrate the impact of advancing the cessation of production from oil and gas wells in return for carbon credits. Additionally, by marrying this approach with blockchain technology it provides a unique solution to allow this decarbonization strategy to be deployed at scale while fulfilling the requirements of the voluntary carbon markets.