Carbon Intensity? and why it matters to us?

EcoVision
Nov 17
2 min read

Carbon intensity is a measure of how much carbon dioxide (CO₂) (or CO₂-equivalent greenhouse gases) is emitted per unit of output.

It shows how efficiently a company, product, or economy generates value while managing its emissions. In business terms, it’s the ratio between GHG emissions and a relevant activity or economic unit, such as revenue, energy produced, or product manufactured.

Formal Definition

Carbon Intensity = Total GHG Emissions (in CO₂e) ÷ Unit of Output

Depending on the context, the “unit of output” can vary (look at the deminator)— for example:

Sector	Example Output Metric	Formula Example
Power generation	Megawatt-hour (MWh) of electricity	CO₂e tons / MWh
Manufacturing	Metric ton of product	CO₂e tons / ton produced
Transportation	Distance or volume of goods transported	CO₂e tons / ton-km
Financial (corporate)	Revenue generated	CO₂e tons / $ million revenue
Real estate	Square meter of floor area	CO₂e tons / m²
Nation/ Economy	Gross domestic product (GDP)	CO₂e tons / $ GDP

Why It Matters

Shows efficiency improvements and decarbonization progress over time (i.e. trend analysis)
Enables comparability between similar entities in the same sector.
Often used in ESG reporting frameworks (like TCFD, ISSB, SASB).
Helps set science-based targets (SBTi) and measure net-zero pathways.

Some Professional Examples

1. Power Sector Example

Company: National Grid (Utility)
Metric: Carbon intensity of electricity generation = total emissions ÷ electricity generated.
Example:
- 2023: 250 gCO₂e/kWh
- 2024: 200 gCO₂e/kWh
  
  → Shows improvement due to transition to renewable energy sources.

2. Manufacturing Sector Example

Company: ArcelorMittal (Steel Production)
Metric: tCO₂e per ton of crude steel.
Example:
- Current: 1.85 tCO₂e / ton steel
- Target: 1.30 tCO₂e / ton steel by 2030 (−30%)
  
  → Reflects efforts to use green hydrogen and scrap recycling.

3. Financial Sector Example

Company: HSBC (Banking & Investment)
Metric: Financed emissions intensity = portfolio GHG ÷ total financed value.
Example:
- Financed emissions = 5.2 MtCO₂e per $ billion of lending in oil & gas.
- Target reduction: 75% by 2030.
  
  → Measures indirect (“Scope 3, Category 15”) financed emissions.

4. Transportation Example

Company: Maersk (Shipping)
Metric: CO₂e per container-kilometer moved.
Example:
- 2020: 15 gCO₂e per ton-km
- 2030 target: 5 gCO₂e per ton-km via biofuels and methanol vessels.

5. Economy-Level Example

Country: United Kingdom
Metric: CO₂e emissions per unit of GDP.
Example:
- 2005: 0.38 kg CO₂e per USD of GDP
- 2023: 0.17 kg CO₂e per USD of GDP
  
  → Indicates a strong decoupling between economic growth and emissions.

How Companies Use It

Companies report carbon intensity to:

Track Scope 1, 2, and sometimes 3 emissions performance.
Benchmark against industry peers.
Integrate intensity data into Sustainability-Linked Loans (SLLs) and Green Bonds.
Demonstrate trajectory toward Science-Based Targets (SBTi).
Example: Reporting Format

Indicator	Unit	2023	2024 Target	2030 Goal
Scope 1 + 2 Emissions	MtCO₂e	10	9	5
Production Volume	Mt product	5	5	5
Carbon Intensity	tCO₂e / t product	2.0	1.8	1.0