IT infrastructure-related carbon emissions reporting is slowly becoming a global regulatory requirement.
The International Financial Reporting Standards (IFRS) have incorporated climate-related financial disclosure requirements, including obligations to inventory and report Scope 1, 2, and 3 emissions.
Individual countries – including Australia, Brazil, China, Hong Kong, Japan, New Zealand, Singapore, and the United Kingdom, as well as the European Union and the State of California (United States) – have enacted these standards into law, although some countries have delayed or minimised Scope 3 reporting.
Emissions reporting is subject to strict accounting and audit requirements, with fines and reputational risk for those firms whose reporting does not comply with the applicable standards.
For many companies, emissions associated with IT infrastructure operations account for a significant part or even most of their total emissions inventory. With operations typically spread across owned, colo, and cloud data centres, capturing a complete energy use and emissions inventory depends on the data available from cloud and colocation service providers.
Cloud emissions data
Cloud service providers have significantly improved their emissions dashboards over the past several years. They allocate Scope 1, location- and market-based Scope 2, and limited Scope 3 emissions related to their public cloud operations (see Table 1). Emissions estimates, with some exceptions, are based on metered resource or energy use and location-specific or regional emissions standards. The data provided should be sufficient to meet customer and regulatory emissions reporting obligations.
Scope 1 emissions
Oracle is the only cloud provider that does not report Scope 1 emissions. Most Scope 1 emissions result from the operation of standby generators. They are typically less than 1% of a data centre’s Scope 1 and Scope 2 operating emissions.
Where a data centre is supplied by behind-the-meter generation or is required to provide grid support for several hundred hours or more each year (for example, as mandated in Ireland and Texas), Scope 1 direct emissions will become a larger percentage of the reported emissions.
Scope 1 emissions are more difficult to offset. Offsets derived from direct CO2 capture through biological, chemical, and/or mechanical means are required. Environmental attribute credits (EACs) cannot be used. Where a facility depends on a captive fossil-fuel generation plant for power, achieving net-zero emissions will become more difficult and expensive.
Scope 2 emissions
Operators provide location- and market-based emissions for their public cloud offerings. Each provider uses a slightly different calculation method for energy and resource use and associated emissions factors. Still, each reporting system provides a reasonable approximation of emissions associated with a customer’s operations.
Location-based emissions
AWS, Google, and Microsoft estimate emissions based on energy use for computing resources and regional emissions factors aggregated from measured or grid-level location-specific emissions. AWS data is limited to specific public cloud offerings.
Oracle and IBM base emissions estimates on measured customer energy use and regional emissions factors, with Oracle applying a spend-based allocation method for services without energy measurements. IBM Cloud only provides location-based emissions data.
Emissions estimates for cloud services such as Office 365 and Oracle software-as-a-service offerings are typically based on service usage levels combined with regional emissions factors. These estimates have greater uncertainty than those for cloud infrastructure usage.
Market-based emissions
Market-based emissions reporting is a black box, often reporting an emissions value of zero because many hyperscalers claim they match all their electricity consumption with carbon-free generation.
However, they do not provide details on the number of EACs applied and associated emissions avoided, which makes it impossible to validate calculations. In many cases, cloud service customers cannot get a reasonable assurance audit of their market-based cloud emissions because the auditor cannot review the EAC details associated with the cloud providers emission data.
As a result, some operators apply EACs to their cloud service emissions to achieve their net-zero goals. The double application wastes EACs and financial resources because emissions are offset twice.
Cloud operations in a colocation data centre
All five cloud operators use a mix of owned and wholesale and retail colocation facilities to deliver public cloud services. Emissions calculations for the many colocation facilities are less transparent and more uncertain than for owned facilities. Because cloud providers often do not directly control these data centre operations, nor energy procurement, emissions calculations may be based on regional emission factors and energy-use models.
Scope 3 emissions
Cloud providers allocate a limited number of Scope 3 categories to their customers. These emissions have little inherent value, as they are typically small and not material to the inventory. None of the providers allocate their full Scope 3 inventory, because public cloud operations are just one of many business line services within supply chains. Much overall Scope 3 inventory is irrelevant to public cloud services.
AWS, Google, and Microsoft report ‘Other Energy-Related Emissions’ associated with energy losses in transmission and distribution systems. These emissions are typically 1% to 8% of a given region’s emissions.
AWS allocates the embedded carbon in equipment and building systems. These emissions are one-time, highly uncertain emissions over which customers have little or no control. It is meaningless for customers to account for these emissions.
IT Operations in colocation facilities
IT operators face similar emissions accounting challenges in colocation data centres. Most colocation operators are well behind cloud service providers, with few offering an online calculator or data portal to estimate energy use and associated GHG (greenhouse gas) emissions.
While reliable information on contract terms and conditions is limited, conversations with colocation operators indicate few currently have contract terms for a regulatory-mandated data exchange with tenants covering GHG emissions and other regulatory mandated data.
Location-based emissions
Most operators have access to data on their IT electricity use and the facility PUE under the terms of the contract. They also know the location of the colocation data centre. This knowledge enables them to apply utility, energy supplier, or regional emission factors to their energy use to calculate location-based emissions.
Market-based emissions
Getting a usable market-based emissions estimate is more difficult and mirrors the problems with information supplied by the cloud providers. While many colocation providers will attest they match carbon-free EACs to all their electricity consumption, they do not provide the number of EACs, their avoided emissions value, and a reasonable assurance certification of the market-based claim that their tenants can use to audit and certify their GHG emissions inventory.
The role of IT efficiency in emissions reporting
While accurate emissions accounting is important, the primary purpose of a GHG management programme should be to reduce energy use and associated emissions from IT operations. Uptime Institute survey data reveals that more than 50% of IT operators do not prioritise IT efficiency in their cloud and colocation-based IT operations. This suggests more can be done.
Discussions with IT operators and consultants who offer cloud and IT optimisation services indicate that many operators can reduce their energy use and associated GHG emissions by up to 40%. These reductions can be achieved through steps such as right-sizing IT assets, including proper balancing of CPU and memory capacity, and using virtualisation and workload management and placement software.
Operators should invest in improving energy efficiency in their IT infrastructure before investing in EACs and offsets to reduce their GHG emissions inventory.
Next steps
Emissions reporting by cloud service and colocation providers has improved markedly over the past five years. Several steps remain to improve these processes further.
The industry needs to develop a standard method for allocating Scope 2 and Scope 3 operational emissions to operators and tenants in colocation facilities. Currently, 3 or 4 allocation methods are in use, reducing the usability and accuracy of data across IT and colocation operators.
Standard contract language should be developed to manage the exchange of data between public cloud and colocation service providers and their customers. This language should include standard methods to calculate and report energy use and emissions factors.
Cloud and colocation service providers should publish the emissions factors they use by facility and region, the quantity of carbon-free energy consumed by a given facility or within a region, and the number of EACS and avoided emissions used in market-based calculations.
IT operators should focus on minimising IT energy use to reduce emissions before embarking on a detailed accounting exercise. They should prioritise investments in real emission reductions.
