he traditional carbon accounting framework has been pivotal so far in directing organisational strategies towards emission reductions. It divides emissions into three categories: Scope 1 deals with direct emissions from owned or controlled sources; Scope 2 concerns indirect emissions from the generation of purchased energy; and Scope 3 captures other indirect emissions, both upstream and downstream.

The advent of Scope 4, an unofficial term as yet, signals a paradigm shift by introducing the concept of “avoided emissions.”

Scope 4 accounting goes beyond traditional boundaries to accommodate lifecycle differences in emissions across various activities. For instance, switching from internal combustion engines to electric vehicles or installing a more efficient boiler can lead to reduced emissions. This falls under avoided emissions. Additionally, activities such as advertising that result in higher sales and, consequently, increased emissions, or legal services provided to high-emitting sectors are now being recognised under advertised and advised emissions, respectively.

A critical element of Scope 4 is its dual accounting framework: attributional and consequential accounting. The former offers a static inventory of absolute emissions, while the latter provides a comparative difference in emissions due to a decision or action, considering the broader systemic boundary.

Innovation and investment

The concept of avoided emissions raises pertinent questions about which innovations can lead to significant reduction in emissions. For a developing economy like Pakistan, this means making calculated decisions about where to channel investments. The economic repercussions of this are two-fold. On the one hand, investments in sustainable innovations promise long-term dividends by aligning with global sustainability targets. On the other, they have the potential to spur domestic industries focused on green technologies, generating employment and boosting economic growth.

Trade and commerce

With Scope 4 bringing in concepts like advised and advertised emissions, the repercussions for trade are profound. Companies might soon find themselves gauged not just on their direct carbon footprint but also the indirect implications of their services and advertisements. This could influence international trade dynamics, with countries and blocs preferring trade partners that align with Scope 4 accounting principles.

Shift in the energy dynamics

Pakistan, historically an energy-deficit nation, has an opportunity now to recalibrate its energy sources. The China-Pakistan Economic Corridor has brought numerous energy projects to the forefront. By employing Scope 4 accounting, Pakistan can prioritise projects that not only cater to its energy needs but also reduce or avoid emissions.

Sustainable energy innovations

As the world pivots to renewable energy sources, Pakistan’s focus on understanding and utilising avoided emissions can spearhead its journey towards a more sustainable energy matrix. This might translate to a greater emphasis on solar, wind and hydro energy projects.

Enhanced sustainability

With the dual accounting approach of Scope 4, considering both absolute emissions and the systemic boundary, Pakistan can achieve enhanced environmental sustainability. Avoided emissions, if correctly calculated, can lead to tangible environmental benefits, including reduced air pollution and conservation of natural habitats.

Alignment with global goals

By incorporating Scope 4 emissions in its environmental framework, Pakistan can align itself better with global environmental goals and commitments, bolstering its international image.

In associating the emergent discourse on Scope 4 emissions with the burgeoning global carbon markets, particularly the Carbon Border Adjustment Mechanism by the European Union, it unveils nuanced dimensions of international trade and climate policy. The CBAM is devised primarily to mitigate carbon leaks and incentivise global decarbonisation by imposing a carbon cost on imports from countries with less stringent climate policies.

With the expanded horizon of Scope 4 emissions, the dynamics of carbon accounting extend beyond the conventional scopes. This profound expansion underscores a more comprehensive accounting of emissions, including those engendered or averted through international trade and cross-border investments.

The juxtaposition of Scope 4 emissions and CBAM, thus, unveils a realm where international trade, carbon accounting and climate policy intersect. For Pakistan, which is striving to balance its economic growth with climate commitments, understanding and aligning with these nuanced dimensions could be instrumental in fostering a favourable trade environment with the EU and other trading blocs adhering to stringent climate regimes.

The nuanced carbon accounting under Scope 4 could potentially dovetail with the EU’s CBAM to forge a more robust and equitable global carbon market. By acknowledging and incentivising “avoided emissions,” Scope 4 emissions introduce a framework that could potentially harmonise with CBAM’s objective of levelling the playing field in international trade vis-à-vis carbon emissions.

For instance, Pakistani industries investing in green technologies, which lead to significant emissions avoidance, could potentially find a more favourable footing in a CBAM-imposed trade regime, provided that the emissions avoidance is verifiably accounted for and recognised. This synergy between Scope 4 emissions and CBAM not only epitomises a progressive stride towards global sustainability but also delineates a pathway for developing economies like Pakistan to navigate through the complex global carbon market landscape.

The institutionalisation of Scope 4 emissions, therefore, merits a strategic deliberation in Pakistan’s policy circles, aligning the nation’s economic and environmental objectives with the evolving global carbon market frameworks. Through this lens, the narrative of Scope 4 emissions transcends the national boundary and ingrains itself within the broader discourse of global trade, carbon markets and climate policy.

The way forward

The multifaceted nature of Scope 4 emissions, which transcend traditional greenhouse gas accounting to incorporate avoided emissions, necessitates a collaborative and strategic approach. To chart a successful path, a tripartite alliance of government, industry and stakeholders is imperative.

1. Governmental leadership and institutionalisation:

As the custodian of national policies and a representative of international commitments, the following steps are recommended for the government:

Legislation: Enact laws that mandate the incorporation of Scope 4 emissions in environmental and industrial reporting, providing a legal basis for compliance.

Capacity building: Organise workshops, training programmes and knowledge-sharing sessions for various departments to understand and operationalise Scope 4 emissions. Collaborations with international agencies can bring global best practices to Pakistan.

Transparency mechanisms: Develop and deploy modern technologies, like blockchain, to ensure transparency in emissions reporting, allowing for real-time verification and monitoring.

Regulatory independence: Set up an independent regulatory authority. May be the Security and Exchange Commission of Pakistan can be empowered to take over this role to ensure verification, measure, regulate and monitor the carbon emissions in industrial processes and regulations around carbon market in Pakistan.

2. Industrial acclimatisation and collaboration:

Industries, being the primary actors in the economic arena, have a significant role:

Internal audit and adaptation: Industries should conduct an internal review of their processes to understand the implications of Scope 4 emissions. This review will highlight areas of potential avoided emissions.

Inter-industry collaborations: Industries within similar sectors can collaborate to develop best practices for emissions reductions, pooling resources to fund research and innovation.

Engagement with international partners: Pakistani industries can partner with their international counterparts to leverage global innovations and technologies in the domain of avoided emissions.

3. Stakeholder engagement and advocacy: Civil society, academia and environmental groups, often seen as watchdogs, have a multi-pronged role:

Accountability drives: Organise regular audits and reviews of governmental and industrial reports to ensure adherence to Scope 4 emissions guidelines.

Public education campaigns: Develop and deploy nationwide campaigns to educate the masses about the importance and implications of Scope 4 emissions. Harnessing the power of media, both traditional and digital, can create a ripple effect in public understanding and demand for sustainable practices.

Research and knowledge dissemination: Engage academic institutions to conduct research on the potential impacts and benefits of Scope 4 emissions in Pakistan’s unique socio-economic context. Such research can provide data-driven insights to shape policies and industrial strategies.

Collaboration with international NGOs: Partner with global environmental and sustainability-focused organisations. This would bring international expertise, potential funding opportunities and a global perspective to Pakistan’s efforts in Scope 4 emissions.

The discourse around Scope 4 emissions has opened a novel vista in the interplay of energy, economy and environmental stewardship, positioning Pakistan at a consequential crossroads. Conventional accounting has served as a basis for navigating the climate-economy nexus. The notion of avoided emissions can propel the discourse into a more comprehensive domain. The economic ramifications of the new approach stretch from investment and innovation in sustainable technologies to international trade.

The adaptation and integration of Scope 4 emissions accounting could serve as a linchpin for aligning Pakistan’s economic, energy and environmental aspirations.

The writer is a research fellow at Sustainable Development Policy Institute. He can be reached at khalidwaleed@sdpi.org; his X handle @Khalidwaleed_