A lifecycle-integrated GHG management framework: Long-term allocation mechanism to prevent abatement misreporting

While emission trading schemes (ETSs) have contributed to greenhouse gas (GHG) emission abatement achievement in some countries, current free allocation systems still contain baseline problems caused by measuring differences between baseline settings and actual emissions. Notably, existing grandparenting and benchmarking methodologies for the baseline setting would induce market participants to inflate their project baselines to overestimate emission reduction allowances. To mitigate overreporting risks above, this study introduces a GHG allocation model (GMD) applying the Macaulay duration (MD) financial concept. It addresses to incentivize honest GHG disclosure and promote carbon neutrality approaches, by avoiding limitations of traditional baseline setting. Suggested GMD model focuses on the GHG emission lifecycle similar to issuance and redemption of bonds. Mathematical derivation of the model is designed gradual emission reductions throughout project lifecycles. And honest disclosure of actual emissions represents the optimal strategy for agents. This model has two key novelties compared with other mechanisms: preventing baseline overestimation and ensuring continuous progress toward carbon neutrality. And additional simulation using initial realistic emission data shows how GMD model induces accurate emission reporting while naturally decreasing allowances over time. The simulation suggest that GMD model is more effective to avoid misreporting while maintaining flexibility by each project characteristic. Furthermore, policymakers can adjust project GHG emissions by setting simple GMD values according to operational periods. This presents a pathway enabling economic subjects to establish emission plans autonomously while achieving long-term abatement. GMD framework and modeling provides lifecycle-integrated GHG management for accurate report and net zero action. • GHG management of long-term projects need ensuring equity of abatement performances. • An allocation methodology need preventing strategic misreports to expend quotas. • It develops GMD to advance baseline-setting issues using Macaulay Duration model. • GMD allows to mitigate oversupply of allowances and incentivize proactive abatement. • GMD enables autonomous allocation and honest baseline declaration within policy-goal.