III. Methodology
Net Unit Impact

Net Unit Impact at a Glance

∑ⁿ₁ (Cᵢ-Sᵢ) = Net Unit Impact

The formula above describes the process of adding the differences in emissions of all Solution Effects. The summation (∑) of unit emissions is calculated by adding up the difference in emissions between the solution (S) and incumbent (C) for each Solution Effect in a series (from 1 to n). The reader should understand which, if any, Solution Effects were excluded from quantification and why.

Net unit impact, often called unit impact, describes the overall difference in GHG emissions when comparing a solution to its incumbent counterpart over a specified period of time, assuming the solution would eventually displace the incumbent. Impact analysis, as defined by Frame, focuses on the differences in emissions, rather than absolute values, excluding GHG sources that are "equal" between the two. 

In solution effects analysis, analysts qualitatively evaluate emissions from both the incumbent and solution to isolate significant life cycle differences without fully quantifying every effect, as typically occurs in traditional Life Cycle Assessment (LCA). By focusing on significant differences early, analysts can streamline the process to serve decision-making. 

A solution effect can emerge by market segments, such as by geography or incumbent differentiations, and according to different stages of the solution’s life cycle. Considering all dimensions demonstrates the potential complexities of analysis. Analysis is further complicated when factoring in changes over time.

Potential Sources of Difference, by Life Cycle Stage

Pre-Use Emissions 

GHG emissions associated with extraction, production, manufacturing, transport, installation, and solution construction, up until its use, can be a source of Solution Effects. Pre-use emissions are equivalent to “cradle-to-gate” or “upstream emissions.” Pre-use emissions can be further segmented to distinguish the “design phase,” including production and assembly, from extraction and other activities furthest upstream stream.

Operational Emissions

Solution Effects are often associated with GHGs of a product or solution when it is in-use or operations. For example, products with longer lifespans may have lower annual emissions because their embodied emissions are spread over a more extended period. Energy use, product usage differences (discussed in market segmentation), and processes of degradation also affect operational emissions.

End of Life Emissions

GHG emissions associated with a product or solution’s end-of-life, including the disposal, de-installation, or recycling of a product after use, can be a source of Solution Effects.

5 Steps of Analysis

Step 1: List Solution Effects

• Solution Effect (narrative): Name or summarize each source of difference in emissions between the solution and incumbent, and explain why they are different.

• Life Cycle Category (limited choice): Identify the stage of the life cycle relevant to the effect (e.g., production, use, disposal).

• Emissions Source (narrative): Detail the specific source of emissions (e.g., fuel combustion for ICE vehicles, charging emissions for EVs).

• Sector (limited or multiple choice): Provide context by identifying the primary industry or sector involved (e.g., transportation, energy).

• Geography (limited choice): Define where the emissions occur and note differences between the incumbent and the new solution.

• Emissions Type (limited choice): Identify which GHGs are affected (e.g., CO2, CH4, NH3) and note any other relevant environmental impacts. This is essential for clarifying whether and how to incorporate different global warming potential (GWP) values.

• Frequency (limited choice): Classify the emissions effect as one-time, intermittent, or recurring to understand the regularity and predictability of the emissions. 

Step 2: Analyze the Associated Incumbent

Isolate and further evaluate emissions of the incumbent as it relates to the solution effect, including estimated amounts of emissions associated with the effect, trends, and rationales for the incumbent.

• Estimated Emissions Amount (value): Estimate the amount of GHGs associated with each effect. At this stage, calculation will be imprecise.

• Trend (limited choice): Evaluate whether emissions associated with the effect could change over time. Consider structuring this as a set of limited choice options.

• Trend-Rationale (narrative): Explain why conditions might change, providing insights into the factors driving these changes.

Step 3: Analyze the Associated Solution

Isolate and evaluate emissions of the solution on its own, including estimated amounts of emissions associated with the effect, trends, and rationales for the solution.

• Estimated Emissions Amount (quantitative): Estimate the amount of GHGs produced by each effect. At this stage, it will be imprecise.

• Trend (limited choice): Evaluate whether conditions, such as worse emissions, could change over time due to the incumbent effect. Consider structuring this as a set of limited choice options.

• Trend-Rationale (narrative): Explain why conditions might change, providing insights into the factors driving these changes.

Step 4: Compare the Solution and Incumbent

Conduct a final comparison between the solution and incumbent over time for each solution effect.

• Better or Worse Today? (narrative) Assess whether the solution effect results in better or worse conditions when compared to the incumbent today.

• Better or Worse in the Future? (narrative) Evaluate whether the solution results in better or worse conditions compared to the incumbent in the future, considering trends.

• GHG Impact (narrative): Compare the emissions estimates of the solution and the incumbent.

• Estimated GHG Impact (quantitative): Quantify the estimated difference in emissions between the solution and incumbent if the information is available. 

Step 5: Assess for Materiality

For each effect, determine if there is enough difference to carry it forward to detailed quantification.

• Emissions Significance: Advance towards assessing the materiality of each solution effect by rating the emissions impact on a scale or estimating its percentage of total estimated impact. Estimated emissions, while imprecise, should improve judgment in considering this question.

• Rating: This enables investors to begin assessing solution effects relative to one another in broader strokes. For example, a rating scale may be from 0 to 5 (with 5 representing the highest impact, either positive or negative). Establish internally what rating values mean for significance. 

• Percentage: The analyst may be able to apply a percentage of total estimated impact instead to qualify materiality. For example, allocations of 0-1%; 1-4%; 4-7%; 7-10%; 10-20%; 20-30%, and so forth, may help analysts see where impact is clustering. If they consistently find that solution effects often cluster on the very low and very high end, then effects less than 10% may not be material.  In contrast, if there are many effects in the 10% range, then they must be treated as material if their total may be significant.

• Carry Forward? (limited choice): Determine if there is enough difference to carry the effect forward into detailed analysis, considering both the current differences and potential future differences. (Eg, Yes, No, Unsure). If the analyst is not yet sure that the effect should be carried forward, they should cycle through analysis again. If they continue to remain unsure, the effect should move to thorough quantification.

• Materiality Rationale (narrative): Provide a brief description of why the effect is or is not carried forward, including what the significance of the differences identified are and how much it affects overall analysis.

In net unit impact quantification, analysts add up the unit impact of each solution effect today and over time. 

Unit emissions associated with both the solution and incumbent will change overtime, and many factors affect them both. Solution effects may also show up in the future that don’t exist today. While initial quantification is based on current parameters, such as the current year, projections require evaluating how emissions associated with the solution and incumbent will evolve over time and under different circumstances. 

Quantification requires deep research and meticulously organizing calculations to achieve high data accuracy, avoid basic errors, and display data to serve analysis, such as by applying different Global Warming Potential (GWP) values. The final result is a projection of the net unit impact for each year in the period of analysis, often under different scenarios of the future. Analysts should always document the timeframe over which unit impact will be considered. This should conform with the timeframe over which you will project GHG impact overall.

What is a “baseline?”

Baseline broadly refers to the status quo world, including changes to the status quo over time. 

At Frame, consider these rules of thumb:

• Baseline is often synonymous with incumbent unit emissions: Where incumbents exist, baseline often refers to their unit emissions and how they change over future years. We avoid using the term baseline here when we can be precise.

• Dynamic baseline: When the incumbent unit emissions changes over time.

• Static baseline: When incumbent unit emissions are held constant over time. Unit emissions are never constant, but analysts sometimes choose to simplify certain parameters where change can’t be reasonably projected.

Baseline scenario: This term refers to a general narrative of what may happen to the incumbent or status quo, including incumbent unit emissions, incumbent volume considerations and adjustment factors. Because unit emissions and volumes affect each other, baseline scenarios are often generally discussed in volume analyses or as part of an overall GHG impact story.

4 Steps of Analysis

Quantification is structured into four steps intended to produce a net unit impact curve or array that illuminates how unit impact will change over time. This includes considering changes in both solution and incumbent unit emissions.

Step 1: Collect Unit Emissions Data (Today)

Calculate emissions associated with the incumbent and solution in the first year for each solution effect. To do this, analysts collect relevant current data, such as emissions factors, associated with each effect. Emission factors are coefficients that quantify the emissions per unit of activities. These factors convert activity data into emissions, usually expressed as CO2e. This provides a starting point for future quantification.

Step 2: Quantify Net Unit Impact (Today)

Quantify the unit impact for each solution effect. Then sum all unit impacts for all solution effects for the current year to calculate today's net unit impact.

Step 3: Project Net Unit Impact Curve (Over Time)

Repeat calculations for each future year, projecting emissions from the incumbent and solution over time. This includes modulating unit emissions according to market segment as appropriate. The result is a curve representing net unit impact for each year over the analysis timeframe. 

Frame recommends analysts calculate net unit impact year-by-year, from year one to the final year of the timeframe over which assessment is occurring. It is possible to apply “top-down” approaches, such as by setting rates of change over time, where granular data is unreliable.

There are also many techniques to incorporate variability and unpredictability in projections, such as scenario analysis and sensitivity analysis. While Frame does not provide guidance on these topics, we believe the methodology lends itself well to integrating them. 

Step 4: Recalculate Periodically

Unit impact is not static. As companies evolve, the granularity of information available to quantify unit impact increases. By recalculating, the model reflects how evolving factors influence the net unit impact. Eventually, unit impact should be based on actual and detailed data on solution unit emissions.