Avoided emissions are a counterfactual, and every input is a choice. The worked case shows each choice and why the result sits next to Scope 1 to 3, never inside them.
Avoided emissions are the lifecycle emissions of a reference scenario, what customers would have used instead, minus the lifecycle emissions of the company's product, multiplied by units sold. For an illustrative heat pump maker selling 12,000 units a year in place of gas boilers, each unit avoids 23.80 tonnes of CO2e over 15 years, so the year's sales avoid 285,600 tonnes. That figure is reported next to the company's own footprint, never subtracted from it.
Worked in full in The ESG Manager in Private Equity by Julian R. Sterling, with every figure reproduced in a free workbook.See the book on Amazon →
Some limited partners ask climate and impact funds for avoided emissions, and deal teams like the number because it is large. It is also the easiest ESG metric to inflate, because almost every input is a choice: the reference product, its efficiency, the grid factor, the lifetime. The calculation below makes each choice visible so it can be challenged.
| Input | Value |
|---|---|
| Units sold in the year | 12,000 |
| Heat demand per home a year | 12,000 kWh |
| Reference: new gas boiler, seasonal efficiency | 90% |
| Gas emission factor | 0.183 kg CO2e/kWh |
| Heat pump seasonal coefficient of performance (SCOP) | 3.0 |
| Grid emission factor, today | 0.200 kg CO2e/kWh |
| Product lifetime | 15 years |
| Embodied emissions, heat pump / boiler | 1.2 t / 0.4 t |
| Fund's ownership stake | 40% |
Avoided per unit = (reference use-phase + reference embodied) − (solution use-phase + solution embodied)
Use-phase = annual energy × emission factor × lifetime
Avoided by the year's sales = avoided per unit × units sold
In Excel, with heat demand in B1, boiler efficiency in B2, gas factor in B3, SCOP in B4, grid factor in B5, lifetime in B6: =(B1/B2*B3-B1/B4*B5)*B6/1000-(1.2-0.4) returns 23.80 tonnes.
Step 1, the reference scenario. A 90 per cent efficient boiler burns 13,333 kWh of gas to deliver 12,000 kWh of heat, emitting 2,440 kg of CO2e a year, or 36.6 tonnes over 15 years.
Step 2, the solution. At a SCOP of 3.0 the heat pump draws 4,000 kWh of electricity. At 0.200 kg per kWh that is 800 kg a year, 12.0 tonnes over its life.
Step 3, embodied emissions. The heat pump takes more to manufacture than the boiler: 0.8 tonnes more per unit. It is a small item here, but it belongs in the comparison because the reference scenario is a whole product, not just its fuel.
Step 4, net and scale. 36.6 − 12.0 − 0.8 = 23.80 tonnes per unit. Across 12,000 units: 285,600 tonnes over the products' lives, of which 19,680 tonnes in the first year of use.
| Item | Tonnes |
|---|---|
| Reference scenario, 12,000 boilers | 439,200 |
| Heat pumps in use | 144,000 |
| Extra embodied emissions | 9,600 |
| Avoided emissions | 285,600 |
| Company footprint: Scope 1 and 2 | 6,000 |
| Scope 3, upstream and other categories | 30,000 |
| Scope 3 category 11, use of sold products | 144,000 |
| Company footprint | 180,000 |
The heat pumps' electricity appears twice, by design. It is the largest line of the company's own inventory, Scope 3 category 11, and it is the solution side of the avoided emissions sum. The GHG Protocol inventory and the avoided emissions claim answer different questions, so the two are reported side by side: 285,600 tonnes avoided against a footprint of 180,000 tonnes, a ratio of 1.59. Subtracting one from the other to report a "net" 105,600 tonnes is the error to avoid. The WBCSD's Guidance on Avoided Emissions, the main reference for this metric, makes the same point: avoided emissions are reported separately from the Scope 1, 2 and 3 inventory, are not netted against it and do not count towards the company's own reduction targets. It also sets conditions before a company makes a claim at all, including that it is reducing its own emissions.
If the fund reports an attributable share, 40 per cent of 285,600 is 114,240 tonnes. Say so explicitly, use the same attribution as for financed emissions, and do not add avoided tonnes across portfolio companies whose products substitute for each other.
| Grid factor | SCOP 2.5 | SCOP 3.0 | SCOP 3.5 |
|---|---|---|---|
| 0.05 | 32.2 | 32.8 | 33.2 |
| 0.20 | 21.4 | 23.8 | 25.5 |
| 0.40 | 7.0 | 11.8 | 15.2 |
On a carbon-intensive grid a poorly installed heat pump avoids less than a quarter of what a good one does on a clean grid. That is why the grid factor and the performance assumption must be disclosed with the number, and why a single global figure for a product sold in several countries is rarely defensible.
Two other choices move the answer. A forward-looking grid factor that falls 5 per cent a year, to 0.098 by year 15, raises the per-unit figure to 27.21 tonnes, 14.3 per cent more. Choosing the average installed boiler, at 80 per cent efficiency, as the reference instead of a new one raises it to 28.37 tonnes, 19.2 per cent more. Both may be legitimate; neither should be chosen because it gives the bigger number. A defensible reference is the alternative a buyer in that market would realistically use instead, documented with the reason for choosing it.
Set the reference scenario, run both sides on the same lifetime, subtract and multiply by units: 23.80 tonnes per heat pump and 285,600 tonnes for the year, shown beside a 180,000-tonne footprint, not netted from it. The ESG Manager in Private Equity is a practical career and implementation guide to the role, and the free workbook for this case holds the book's worked cases. For the inventory side, see financed emissions for a private equity fund and abatement cost per tonne.
No. The GHG Protocol inventory records emissions that occur; avoided emissions compare against a scenario that did not happen. WBCSD guidance says to report them separately, never netted. In the illustrative heat pump case, 285,600 tonnes avoided sit beside a 180,000-tonne footprint, and the heat pumps' own electricity, 144,000 tonnes, appears in both: as Scope 3 category 11 and as the solution side of the comparison.
The product a customer would realistically buy instead, today, in the same market. Choosing an older, less efficient alternative inflates the result: replacing a new 90 per cent boiler gives 23.80 tonnes per heat pump, an average 80 per cent installed boiler gives 28.37 tonnes, 19.2 per cent more. Disclose the reference and the reason for it.
Practice varies and there is no single rule. If it does, it should say so and use the same attribution as for financed emissions. At a 40 per cent stake, the illustrative company's 285,600 tonnes become 114,240 attributable tonnes. Avoid summing avoided emissions across portfolio companies whose products compete or substitute for each other, which double counts.
This article is one calculation from The ESG Manager in Private Equity. The book takes the same case from first principles to the decision, chapter by chapter, and every figure it prints is a live formula in the free companion workbooks.
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