FAQ
Common questions about the CQ500 Index and how the Carbon Quotient Ratio is calculated.
What is the Carbon Quotient Ratio?
The Carbon Quotient Ratio (CQR) measures the risk of premature climate-related obsolescence of long-lived tangible assets, using company-reported financial and emissions data, to inform capital allocation decisions by corporate managers and investors. A low (or negative) CQR is better. See Methodology for the CQR equation.
What does it mean that NRG Energy has a Carbon Quotient Ratio of 9.24?
The Carbon Quotient Ratio is a risk indicator, not a booked accounting liability or contra asset like accumulated depreciation. NRG Energy tops the index at CQR = 9.24 — meaning unrealized carbon expense is over 9x the company’s long-lived tangible assets. CQR is a measure of climate-related asset impairment risk — i.e., what happens if NRG’s assets become prematurely obsolete due to the energy transition?
Why is unrealized carbon expense treated as a contra asset?
Assets are capitalized because they represent probable future economic benefits. Unrealized carbon expense cuts the probability that those benefits will be realized.
What are long-lived tangible assets?
Long-lived tangible assets are physical items like power plants, refineries, factories, machinery, buildings, and vehicles owned by a company that have a useful life of more than one year. These assets appear on the balance sheet as Property, Plant, and Equipment at historical cost less accumulated depreciation — PPE, in the terms these formulas use. The useful life of long-lived tangible assets other than land typically ranges from 3 years to 50 years. Long-lived tangible assets are the primary source of direct (Scope 1) greenhouse gas emissions.
How is useful life measured?
The average remaining useful life of a company’s long-lived tangible assets (PPE Life) is calculated by dividing PPE by current year depreciation (or DD&A) expense.
Are “depreciation” and “depreciation, depletion and amortization” the same?
No. Depreciation is one component of “depreciation, depletion and amortization,” or DD&A. Many non-industrial companies do not separately disclose depreciation. In these instances, the index uses DD&A instead. This has the effect of marginally reducing PPE Life and the Carbon Quotient Ratio (i.e., understating the risk) for companies that don’t disclose a separate depreciation figure.
What is asset impairment?
Asset impairment is an accounting term for when an asset loses value so that its true market or recoverable value drops below the PPE value listed on the balance sheet. This drop requires the company to write down the asset’s value and record an asset impairment loss. Premature obsolescence is a primary cause of asset impairment: when technology, market demand, or operational methods shift suddenly, an asset can lose its economic usefulness much faster than planned. The Carbon Quotient Ratio is a measure of asset impairment risk arising from the global transition to a low-carbon economy.
What is the CQ500 Index?
The CQ500 Index measures the weighted-average Carbon Quotient Ratio across the U.S. economy. Over time, as the economy decarbonizes, the index will decline toward zero. The CQ500 constituency is comprised of companies in the Reference Index — 500 U.S. large-cap publicly traded firms — that disclosed the data needed to compute a Carbon Quotient Ratio for the prior fiscal year.
What companies are excluded and why?
For the 2024 base year, the CQ500 Index includes 439 of the 500 Reference Index companies (87.8%); 61 (12.2%) are excluded because they didn’t disclose the data needed to calculate a Carbon Quotient Ratio — either Scope 1 emissions, or the financial-statement fields (PPE, and either Depreciation or combined DD&A) needed to compute PPE Life.
Exclusions are concentrated, not evenly spread:
| Sector | Total | Excluded | % of sector missing | % of all exclusions |
|---|---|---|---|---|
| Financials | 63 | 21 | 33.3% | 34.4% |
| Communication Services | 12 | 4 | 33.3% | 6.6% |
| Information Technology | 88 | 12 | 13.6% | 19.7% |
| Consumer Discretionary | 54 | 7 | 13.0% | 11.5% |
| Industrials | 88 | 8 | 9.1% | 13.1% |
| Consumer Staples | 33 | 3 | 9.1% | 4.9% |
| Real Estate | 30 | 2 | 6.7% | 3.3% |
| Utilities | 32 | 2 | 6.3% | 3.3% |
| Materials | 24 | 1 | 4.2% | 1.6% |
| Health Care | 56 | 1 | 1.8% | 1.6% |
| Energy | 20 | 0 | 0.0% | 0.0% |
Financials is the standout: a third of the sector is excluded, more than any other. Real Estate — REITs in particular — used to look similarly exposed in an earlier pull, but that turned out to be a data-collection gap (REITs tag their real property under different XBRL concepts than the standard PPE fields), not a real disclosure shortfall; fixed, it now sits at 6.7%, in line with the Reference Index overall.
Why is Financials (66.7% coverage) still the most-excluded sector?
Unlike most of the Reference Index, Financials isn’t primarily an emissions-disclosure problem — of the 21 excluded companies, 9 are missing Scope 1 data and 14 are missing PPE or a Depreciation/DD&A figure to compute PPE Life instead (2 are missing both). That's a fair reflection of the business for banks, insurers, and asset managers: PPE is a minor line item on a balance sheet built from financial instruments, not physical plant, so a meaningful share genuinely don't carry a figure under any PPE-family concept.
How does the Carbon Quotient Ratio vary by sector?
The sector pattern is the story. Mean Carbon Quotient Ratio by sector runs from 0.005 (Financials) up to 1.43 (Utilities) — a roughly 297x spread. The top 15 CQR names are almost entirely fossil-fuel power generators (NRG, Vistra, AES, Evergy, PPL, Entergy, DTE, CMS, Alliant, Southern, American Electric Power, WEC Energy Group), plus CF Industries (fertilizer/ammonia), Delta (aviation), and CRH (cement). The bottom is asset-light software, financial-data, and platform companies (Akamai, Meta, Salesforce, PayPal, Moody’s, S&P Global, CME). Power generation carries orders of magnitude more balance-sheet climate risk than tech.
Do Carbon Quotient Ratio scores vary between companies in the same sector?
The Carbon Quotient Ratio is driven by how a company earns its keep, not by its GICS classification. Utilities that still own and operate generation — burning coal or gas to make electricity — carry direct Scope 1 emissions per dollar of assets that can run more than 10x higher than utilities that primarily transmit and distribute power generated by others. Duke Energy and Dominion Energy both still operate large fossil generation fleets; Consolidated Edison and Eversource Energy both exited merchant generation years ago and now function mainly as delivery companies. The same GICS sub-industry label can therefore describe two very different emissions profiles — which is exactly the distinction CQR is designed to surface.
Carbon Intensity and PPE Life are multiplied together to get CQR — are they correlated? Doesn’t that double-count the same risk?
It depends on the level you look at, and the two directions point opposite ways. Across the 11 GICS sectors, a sector’s average Carbon Intensity and average PPE Life are positively correlated (0.53 on a log scale): Utilities and Energy score high on both at once — a power plant or refinery is simultaneously carbon-intensive per dollar of assets and long-lived — while Financials and Real Estate score low on both. Since the Carbon Quotient Ratio is the product of the two, sectors that are elevated on both dimensions compound rather than merely add, which is a real driver of the roughly 297x sector spread reported above — that spread is larger than it would be if the two factors moved independently. Within a sector, the relationship flips: comparing two companies in the same sector, higher-than-typical Carbon Intensity tends to pair with a shorter-than-typical PPE Life, a weak negative correlation (−0.17). Some of that within-sector effect is likely mechanical rather than behavioral — Carbon Intensity divides by PPE and PPE Life multiplies by it, so noise in a company’s PPE figure alone can push the two in opposite directions. Pooling all 439 companies without accounting for sector membership makes the correlation look negligible, because the strong cross-sector effect and the weaker within-sector effect are pulling against each other — that pooled number isn’t the one to read for what’s actually going on.
Why $100/ton?
The Carbon Quotient Ratio is calculated using the company’s own disclosures. The only judgment is the assumed price to permanently remove CO2 from the ambient environment. Once greenhouse gases are emitted into the atmosphere, the cost to prevent (abate) those emissions is irrelevant — the cat is out of the bag, so to speak. The current cost to permanently remove one ton of CO2 from the ambient atmosphere varies significantly depending on the method used, from $500 to $1,000. The index conservatively uses $100 per tCO2e as a long-term goal for the industry. Users can choose any price to calculate CQR at the company or sector level (e.g., at $500/ton, NRG’s CQR would be 46 rather than 9.24). NRG’s CQR, along with every other company’s, scales in direct proportion to the carbon removal price — doubling the price doubles the CQR. To ensure comparability across companies and sectors, the carbon removal price must be the same for all.
Why doesn’t the Carbon Quotient Ratio consider Scope 2 and Scope 3 emissions?
The Carbon Quotient Ratio is built specifically around the physical correlation between long-lived tangible assets and the direct emissions those assets produce — which is a Scope 1 concept by definition. Scope 2 (purchased electricity) and Scope 3 (everything in a company’s value chain, including how customers use its products) don’t have that same direct link to a company’s own balance sheet, and they’re far less consistently or reliably disclosed across the Reference Index today. Including them would trade CQR’s core design principle — that every input is drawn directly from a company’s own required disclosures, with no estimation or third-party modeling — for a broader but far less verifiable and less comparable number. This means CQR understates full climate exposure for sectors, like oil and gas, whose primary impact is downstream. Expanding coverage of Scope 3 product-use emissions for oil and gas producers, using data reported under SEC Regulation S-K, is on our roadmap.
Does Carbon Quotient measure physical risk?
Long-lived tangible assets, even those that produce zero carbon emissions, are at risk of impairment from the physical effects of a warming climate. Carbon Quotient does not presently measure physical risk, but it’s on our roadmap.
Why doesn’t the Carbon Quotient Ratio net out purchased carbon offsets?
The Carbon Quotient Ratio is calculated with no deduction for offsets a company may have purchased or retired. This reflects both a data constraint and a definitional one.
The data constraint: there is no standardized, machine-readable disclosure of offset purchases and retirements in SEC filings comparable to the financial data the index already draws from EDGAR. Building a reliable, auditable offset figure for 500 companies would require pulling from voluntary registries with inconsistent reporting formats and no common assurance standard — a level of third-party verification the index’s source-responsibility principle is designed to avoid.
The definitional reason goes deeper. An offset, as the term is generally used, represents a claim that emissions were avoided or reduced somewhere else in the economy — not that the ton of CO2 a company put into the atmosphere this year was taken back out. Realized Emissions measures a physical event: greenhouse gases added to the atmosphere in the current period. An offset purchase does not undo that event; it is a separate transaction, often for a different gas, in a different place, verified against a different baseline. Netting the two together in a single number would conflate a physical quantity with a financial and contractual one.
Isn’t it more accurate to show a company’s emissions net of the offsets it paid for?
“Accurate” depends on what the number is meant to represent. If the goal is to estimate a company’s exposure to the future cost of its own emissions — which is what the Carbon Quotient framework is designed to do — then the relevant fact is how much CO2 the company put into the atmosphere this period, full stop. That figure doesn’t change based on what the company purchased elsewhere. Offsets vary widely in what they actually represent: some fund reductions that would likely have happened anyway (a challenge often called “additionality”), some are tied to protection or reduction commitments that can be reversed by a future fire, drought, or change in land use (a challenge often called “permanence”), and independent researchers, journalists, and regulators have repeatedly found that claimed reduction volumes in various offset programs do not hold up under scrutiny. Given that variability, a single company-reported offset total cannot reliably be treated as equivalent to a ton of emissions genuinely and permanently removed from the atmosphere.
What is the difference between an “offset” and “removal,” and why does that distinction matter for this index?
Removal means physically extracting CO2 that is already in the atmosphere and storing it durably — through, for example, direct air capture with geological sequestration, or reforestation verified over a long enough horizon to be reasonably called permanent. An offset, in contrast, is typically a credit purchased against an avoided or reduced emission elsewhere — a solar farm displacing coal power, a forest that wasn’t cut down — which does not remove any existing atmospheric carbon and does not reverse the emissions a company generated this year. The Carbon Quotient framework explicitly defines Carbon Price as the cost to remove carbon from the atmosphere at scale, not the market price of an offset credit. The two are not interchangeable, and the price gap between them is itself informative: durable removal technologies today cost meaningfully more than the credits typically labeled “offsets” in voluntary markets. Treating a low-cost offset purchase as equivalent to the higher cost of genuine removal would understate the real economic exposure the index is designed to surface.
Does this mean the index treats all corporate offset purchases as worthless?
No. The index takes no position on the value or integrity of any individual company’s offset portfolio — that determination would require the kind of case-by-case verification the index’s methodology is deliberately built to avoid. What the index does do is decline to assume, by default, that a reported offset purchase is equivalent to a permanent reduction in the company’s realized emissions. Companies and investors who want to evaluate specific offset claims on their own merits remain free to do so; the index simply isn’t the vehicle for that analysis.
Can a company lower its Carbon Quotient Ratio by investing in low-emissions assets?
Yes, and two companies in the current index show it clearly. NextEra Energy holds the largest asset base of any electric utility in the CQ500 — larger than Southern Company, American Electric Power, or Dominion Energy — yet its Carbon Quotient Ratio of 0.79 sits well below all three. Since CQR is emissions per dollar of assets, a bigger balance sheet can’t explain a lower score; NextEra’s fleet genuinely emits less per dollar of assets, consistent with its long-running shift toward wind and solar and Florida Power & Light’s coal retirements. Constellation Energy tells a related story: spun off from Exelon in 2022 specifically to isolate a largely nuclear generation fleet, it’s now marketed as the largest producer of carbon-free power in the U.S., and its CQR (0.76) lands almost identically to NextEra’s. CQR isn’t a static snapshot of legacy infrastructure — it moves as companies change what they generate power with.
Why don’t oil and gas companies have high Carbon Quotient Ratio scores?
It’s not that oil and gas companies have low emissions — several, like ExxonMobil (104 million tCO2e) and Chevron (53 million tCO2e), report higher absolute Scope 1 emissions than any utility in the index. The reason their Carbon Quotient Ratio is low is the denominator: oil and gas producers carry enormous asset bases relative to their direct operational emissions. ExxonMobil’s $453 billion in assets is more than twice Duke Energy’s $186 billion, so even with higher absolute emissions, ExxonMobil’s CQR (0.44) comes in well below Duke’s (1.26). More fundamentally, an oil and gas company’s core emissions-producing event — combustion — mostly doesn’t happen on its own balance sheet. Extracting, refining, and transporting fuel produces direct (Scope 1) emissions, but the much larger climate impact comes when a customer burns the product, which is a Scope 2 or Scope 3 emission for that customer, not a Scope 1 emission for the producer. CQR, built on Scope 1 data, captures the asset risk of generating energy directly — which is why utilities, not oil and gas producers, dominate the top of the index.
How current/comparable are the underlying emissions figures across companies?
An overwhelming majority of disclosing Reference Index companies use the Greenhouse Gas Protocol (specifically the Corporate Standard), the world’s most widely used global standardized framework, to calculate and disclose Scope 1 emissions. Audited emissions disclosures are not required by the U.S. Securities and Exchange Commission (SEC). Accordingly, timing, report format, internal control, and independent assurance are not uniform.
Who verifies the numbers — you, the company, or a third party?
We calculate the numbers using self-disclosed corporate data and open-source formulas. We disclose the input data and our calculations are transparent, consistent, and reproducible. Errors, if any, are due to mistakes in corporate disclosures or in our data collection process. We invite member companies to identify data errors and submit them to us for correction — see Methodology for sourcing.
What’s Greg Rogers' relationship with Cambridge Judge Business School — is this an academic index or a commercial one?
Rogers is a Fellow with Cambridge Judge Business School. Carbon Quotient is an independent commercial enterprise owned and operated by Rogers. It has no affiliation with Cambridge. See About.
Is this free, and if so, what’s the business model?
Rogers previously published the Carbon Quotient methodology. The CQ500 Index and related measurements are free. The business objective is to build awareness of Carbon Quotient® climate risk analytics, thereby increasing brand value in a collection of public ideas. Access to AI-assisted development has made it possible to build and operate the CQ500 data portal without need for revenue.
How does this compare to what Bloomberg/MSCI/S&P already publish?
Bloomberg, MSCI, and S&P Global all provide backward-looking carbon intensity ratios (such as Scope 1, 2, and 3 emissions relative to sales or enterprise value) as a foundational baseline measure of climate transition risk. The shortcoming of these metrics is that they consider only current-period emissions — akin to assessing the lifetime maintenance costs of a new car based on the assumption that it will last only one year. By accounting solely for current-period emissions, standard carbon intensity ratios omit consideration of the unrealized emissions baked into long-lived tangible assets. They overlook “the future that has already happened.”
Can I get the company-level data behind this chart?
Yes, all the input data and calculations are provided for each member company. This data can be easily downloaded or screen captured.