Attribution key
In the Climate Dividends Protocol, defining and applying an attribution key is mandatory, particularly to avoid double counting.
👉 since we assess avoided/removed CO2e emissions from cradle-to-grave - we assess them along an entire value chain.
👉 therefore, if multiple stakeholders along the value chain claim the same avoided/removed CO2e emissions, there is a high risk of double counting.
Official requirements in the Protocol
When multiple stages/stakeholders are involved in the development of the Solution, an attribution key must be used to allocate the positive climate impact (avoided or/and removed emissions) to the different stages/stakeholders in the Solution’s value chain.
Attribution serves three main purposes:
It allows for the measurement of each player’s unique contribution within a value chain;
It helps prevent double-counting, such as when an investor holds stakes in multiple companies within the same value chain;
It enables smaller players in decarbonization efforts to claim an impact that accurately reflects their contribution.
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The Climate Dividends Protocol [...] recommends allocating the positive climate impact to each stage/stakeholder according to the following attribution hierarchy:
The preferred allocation key is based on the financial cost of the Solution (total cost over the value chain). These costs are the easiest to capture for most actors along the value chain and are a reliable piece of information as to where the share of efforts and major investments lie. For physical product, the total cost of ownership (TCO) is often a good approach;
If the financial cost is not an available solution, the attribution key can be determined based on the added value of each stakeholder (the solution’s worth assessed by the market);
In the case where the aforementioned solutions are not available, and if a consensus is reached among all stakeholders on the attribution key, this last attribution method may be used. This is a last resort methodology because a consensus approach decreases the comparability between solutions and might not be negotiated on a fair basis.
The Contributing Entity must do its best to reflect in its Claim the different attribution keys based on its different (if applicable) involvements in the development of the Solution. To do so, it must calculate sub-Claims (one per attribution key) and sum them to calculate a consolidated Claim.
Have you excluded some stakeholders in the value chain? If yes, justify why according to the Protocol guidelines. *
It's not necessary to include all the stakeholders of the value chain in the attribution key, and upon proper justification, it's possible to exclude some of them.
The overall approach is to include:
all elements in the value chain that differ from the baseline
all sub-elements with a legitimate contribution (i.e. decarbonizing, direct and significant impact)
Official requirements in the Protocol
The concept of attribution, sometimes called horizontal attribution or value chain adjustments, allows marginal elements within a value chain to be recognized, enabling them to claim Climate Dividends. However, it might be hard to determine which elements should be included. Similarly, each element can be subdivided many times before reaching a “core”, indivisible component (e.g. should we consider a solar PV panel, the modules inside it or the silicon that is used for its manufacturing.)
The Climate Dividends Protocol aligns and refines the WBCSD's gate 3 on "contribution legitimacy" that requires solutions to have a decarbonizing, direct and significant impact and proposes the following: all value chain elements that differ significantly between the project scenario and baseline should be included in the attribution key and all sub-elements with a legitimate contribution (following the WBCSD approach) are included.
Ultimately, these rules will need to be detailed in the sectoral applications for each type of solution.
The 3 methods are presented in order of recommendation which means that:
if you're able to apply the financial cost attribution, then you should use it
if you're not able to apply the financial cost attribution, only then can you consider using the added value method
if you're not able to apply the added value method, only then can you consider using the stakeholders consensus.
What is the attribution key based on? *
As mentioned in the Protocol, you can choose between 3 methods to determine the attribution key: financial cost, added value or stakeholders consensus.
Financial cost attribution
This method is the preferred one. The idea is to assess the cost of the Solution along the entire value chain and to apply the same split to the stakeholders included in the Attribution key.
A good approach to the financial cost of the Solution is the notion of Total Cost of Ownership (TCO), which is used in business analysis to account for all direct and indirect costs.
There is no fixed definition of the TCO, but it usually includes:
Purchase price;
Cost incurred: transport, packaging, customs duties, payment terms;
Cost of acquisition: procurement department operations;
Cost of ownership: stock management, depreciation cost;
Cost of maintenance: spare parts, servicing;
Cost of usage: use value, operation, services;
Cost of poor quality: deadline compliance, non-compliance processes;
Cost of disposal: recycling, resale, destruction.
Source: Manutan
How to attribute avoided emissions when some stakeholders are excluded?
In certain contexts, some stakeholders can be excluded of the attribution key, notably if:
their contribution is not legitimate
their "step" in the value chain is the same in the baseline and the Solution scenario
In that case, these stakeholders can be excluded of the attribution key.
👉This implies to normalize the share of the costs between the stakeholders that are included in the attribution key.
For instance: the value chain is composed of 5 companies, but not all of them are inlcuded in the attribution key (because their contribution is similar in the baseline and the reference scenario):
Company #1 - 30% of the total cost - included in the attribution key
Company #2 - 70% of the total cost - not in the attribution key
Only company 1 is included in the attribution key, and when we normalize avoided/removed emissions it therefore gets 100% of the avoided/removed emissions.
Added value attribution
If it's not possible to gather the split of the total cost of the Solution, it's then possible to apply the same approach as for the financial cost but using the added value. The added value is defined as "the product’s/service’s worth assessed by the market" (source: Mission Innovation - Net Zero Compatible Innovations Initiative - Module 2)
Stakeholders consensus
If neither the financial cost nor the added value approaches can be applied, only then can the stakeholders consensus can be used. The consensus should:
be concluded between all the stakeholders that are included in the attribution key
be negotiated as fairly as possible to avoid as much as possible the over-representation of one stakeholder
be based, as much as possible, on the logic of the financial cost (using an archetypal cost split)
You can use the dedicated template to present and justify the attribution key(s) that you are using for your claim(s).
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