GHG Protocol Revised PDF

A Corporate Accounting and Reporting Standard
R E V I S E D E D I T I O N
The Greenhouse Gas Protocol
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W O RL D
RESO U RC ES
I N ST I T U T E
GHG Pr ot oc ol I ni t i at i ve Team
Janet Ranganat han Worl d Resources Inst i t ut e
Laurent Corbi er Worl d Busi ness Counci l f or Sust ai nabl e Devel opment
Pankaj Bhat i a Worl d Resources Inst i t ut e
Si mon Schmi t z Worl d Busi ness Counci l f or Sust ai nabl e Devel opment
Pet er Gage Worl d Resources Inst i t ut e
Kj el l Oren Worl d Busi ness Counci l f or Sust ai nabl e Devel opment
Revi si on Wor k i ng Gr oup
Bri an Dawson & Mat t Spannagl e Aust ral i an Greenhouse Of f i ce
Mi ke McMahon BP
Pi erre Boi l eau Envi ronment Canada
Rob Frederi ck Ford Mot or Company
Bruno Vanderborght Hol ci m
Fraser Thomson Int ernat i onal Al umi num Inst i t ut e
Koi chi Ki t amura Kansai El ect ri c Power Company
Chi Mun Woo & Naseem Pankhi da KPMG
Rei d Mi ner Nat i onal Counci l f or Ai r and St ream Improvement
Laurent Segal en Pri cewat erhouseCoopers
Jasper Koch Shel l Gl obal Sol ut i ons Int ernat i onal B.V.
Somnat h Bhat t acharj ee The Energy Research Inst i t ut e
Cynt hi a Cummi s US Envi ronment al Prot ect i on Agency
Cl are Brei deni ch UNFCCC
Rebecca Eat on Worl d Wi l dl i f e Fund
Cor e Advi sor s
Mi chael Gi l l enwat er Independent Expert
Mel ani e Eddi s KPMG
Mari e Marache Pri cewat erhouseCoopers
Robert o Acost a UNFCCC
Vi ncent Camobreco US Envi ronment al Prot ect i on Agency
El i zabet h Cook Worl d Resources Inst i t ut e
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Table of Contents
G U I D A N C E S T A N D A R D
G U I D A N C E S T A N D A R D G U I D A N C E G U I D A N C E
G U I D A N C E
G U I D A N C E
G U I D A N C E
G U I D A N C E
G U I D A N C E
G U I D A N C E
S T A N D A R D
I nt r oduc t i on The Gr eenhouse Gas Pr ot oc ol I ni t i at i ve
Chapt er 1 GHG Ac c ount i ng and Repor t i ng Pr i nc i pl es
Chapt er 2 Busi ness Goal s and I nvent or y Desi gn
Chapt er 3 Set t i ng Or gani zat i onal Boundar i es
Chapt er 4 Set t i ng Oper at i onal Boundar i es
Chapt er 5 Tr ac k i ng Emi ssi ons Over Ti me
Chapt er 6 I dent i f yi ng and Cal c ul at i ng GHG Emi ssi ons
Chapt er 7 Managi ng I nvent or y Qual i t y
Chapt er 8 Ac c ount i ng f or GHG Reduc t i ons
Chapt er 9 Repor t i ng GHG Emi ssi ons
Chapt er 10 Ver i f i c at i on of GHG Emi ssi ons
Chapt er 11 Set t i ng GHG Tar get s
Appendi x A Ac c ount i ng f or I ndi r ec t Emi ssi ons f r om El ec t r i c i t y
Appendi x B Ac c ount i ng f or Sequest er ed At mospher i c Car bon
Appendi x C Over vi ew of GHG Pr ogr ams
Appendi x D I ndust r y Sec t or s and Sc opes
Ac r onyms
Gl ossar y
Ref er enc es
Cont r i but or s
he Greenhouse Gas Prot ocol Ini t i at i ve i s a mul t i - st akehol der part nershi p of
busi nesses, non- government al organi zat i ons (NGOs), government s, and ot hers
convened by t he Worl d Resources Inst i t ut e (WRI), a U.S.- based envi ronment al
NGO, and t he Worl d Busi ness Counci l f or Sust ai nabl e Devel opment (WBCSD), a
Geneva- based coal i t i on of 170 i nt ernat i onal compani es. Launched i n 1998, t he
Ini t i at i ves mi ssi on i s t o devel op i nt ernat i onal l y accept ed greenhouse gas (GHG)
account i ng and report i ng st andards f or busi ness and t o promot e t hei r broad adopt i on.
The GHG Pr ot ocol I ni t i at i ve compr i ses t wo separ at e but l i nked st andar ds:
GHG Pr ot ocol Cor por at e Account i ng and Repor t i ng St andar d (t hi s document , whi ch
provi des a st ep- by- st ep gui de f or compani es t o use i n quant i f yi ng and report i ng t hei r
GHG emi ssi ons)
GHG Pr ot ocol Pr oj ect Quant i f i cat i on St andar d (f ort hcomi ng; a gui de f or quant i f yi ng
reduct i ons f rom GHG mi t i gat i on proj ect s)
2
T
Introduction
The f i rst edi t i on of t he GHG Prot ocol Corporat e Account i ng and
Report i ng St andard (GHG Prot ocol Corporat e St andard), publ i shed i n
Sept ember 2001, enj oyed broad adopt i on and accept ance around t he
gl obe by busi nesses, NGOs, and government s. Many i ndust ry, NGO,
and government GHG programs
1
used t he st andard as a basi s f or
t hei r account i ng and report i ng syst ems. Indust ry groups, such
as t he Int ernat i onal Al umi num Inst i t ut e, t he Int ernat i onal Counci l
of Forest and Paper Associ at i ons, and t he WBCSD Cement
Sust ai nabi l i t y Ini t i at i ve, part nered wi t h t he GHG Prot ocol Ini t i at i ve
t o devel op compl ement ary i ndust ry- speci f i c cal cul at i on t ool s.
Wi despread adopt i on of t he st andard can be at t ri but ed t o t he i ncl u-
si on of many st akehol ders i n i t s devel opment and t o t he f act t hat
i t i s robust , pract i cal , and bui l ds on t he experi ence and expert i se of
numerous expert s and pract i t i oners.
Thi s revi sed edi t i on of t he GHG Prot ocol Corporat e St andard i s t he
cul mi nat i on of a t wo- year mul t i - st akehol der di al ogue, desi gned
t o bui l d on experi ence gai ned f rom usi ng t he f i rst edi t i on. It i ncl udes
addi t i onal gui dance, case st udi es, appendi ces, and a new chapt er
on set t i ng a GHG t arget . For t he most part , however, t he f i rst edi t i on
of t he Corporat e St andard has st ood t he t est of t i me, and t he
changes i n t hi s revi sed edi t i on wi l l not af f ect t he resul t s of most
GHG i nvent ori es.
Thi s GHG Pr ot ocol Cor por at e St andar d pr ovi des st andar ds and
gui dance f or compani es and ot her t ypes of or gani zat i ons
2
pr epar i ng a GHG emi ssi ons i nvent or y. It cover s t he account i ng
and r epor t i ng of t he si x gr eenhouse gases cover ed by t he Kyot o
Pr ot ocol car bon di oxi de ( CO
2
) , met hane ( CH
4
) , ni t r ous oxi de
(N
2
O), hydrof l uorocarbons (HFCs), perf l uorocarbons (PFCs),
and sul phur hexaf l uori de (SF
6
). The st andard and gui dance were
desi gned wi t h t he f ol l owi ng obj ect i ves i n mi nd:
To hel p compani es prepare a GHG i nvent ory t hat represent s
a t rue and f ai r account of t hei r emi ssi ons, t hrough t he use of
st andardi zed approaches and pri nci pl es
To si mpl i f y and reduce t he cost s of compi l i ng a GHG i nvent ory
To provi de busi ness wi t h i nf ormat i on t hat can be used t o bui l d
an ef f ect i ve st rat egy t o manage and reduce GHG emi ssi ons
To provi de i nf ormat i on t hat f aci l i t at es part i ci pat i on i n vol unt ary
and mandat ory GHG programs
To i ncrease consi st ency and t ransparency i n GHG account i ng
and report i ng among vari ous compani es and GHG programs.
Bot h busi ness and ot her st akehol ders benef i t f rom convergi ng
on a common st andard. For busi ness, i t reduces cost s i f t hei r GHG
i nvent ory i s capabl e of meet i ng di f f erent i nt ernal and ext ernal
i nf ormat i on requi rement s. For ot hers, i t i mproves t he consi st ency,
t ransparency, and underst andabi l i t y of report ed i nf ormat i on,
maki ng i t easi er t o t rack and compare progress over t i me.
The busi ness val ue of a GHG i nvent or y
Gl obal warmi ng and cl i mat e change have come t o t he f ore as a
key sust ai nabl e devel opment i ssue. Many government s are t aki ng
st eps t o reduce GHG emi ssi ons t hrough nat i onal pol i ci es t hat
i ncl ude t he i nt roduct i on of emi ssi ons t radi ng programs, vol unt ary
programs, carbon or energy t axes, and regul at i ons and st andards
on energy ef f i ci ency and emi ssi ons. As a resul t , compani es must
be abl e t o underst and and manage t hei r GHG ri sks i f t hey are t o
ensure l ong- t erm success i n a compet i t i ve busi ness envi ronment ,
and t o be prepared f or f ut ure nat i onal or regi onal cl i mat e pol i ci es.
A wel l - desi gned and mai nt ai ned corporat e GHG i nvent ory can
serve several busi ness goal s, i ncl udi ng:
Managi ng GHG ri sks and i dent i f yi ng reduct i on opport uni t i es
Publ i c report i ng and part i ci pat i on i n vol unt ary GHG programs
Part i ci pat i ng i n mandat ory report i ng programs
Part i ci pat i ng i n GHG market s
Recogni t i on f or earl y vol unt ary act i on.
Who shoul d use t hi s st andar d?
Thi s st andard i s wri t t en pri mari l y f rom t he perspect i ve of a busi -
ness devel opi ng a GHG i nvent ory. However, i t appl i es equal l y t o
ot her t ypes of organi zat i ons wi t h operat i ons t hat gi ve ri se t o GHG
emi ssi ons, e.g., NGOs, government agenci es, and uni versi t i es.
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It shoul d not be used t o quant i f y t he r educt i ons associ at ed wi t h
GHG mi t i gat i on pr oj ect s f or use as of f set s or cr edi t s t he
f or t hcomi ng GHG Pr ot ocol Pr oj ect Quant i f i cat i on St andar d wi l l
provi de st andards and gui dance f or t hi s purpose.
Pol i cy makers and archi t ect s of GHG programs can al so use rel e-
vant part s of t hi s st andard as a basi s f or t hei r own account i ng
and report i ng requi rement s.
I NTRODUC TI ON
3
Rel at i onshi p t o ot her GHG pr ogr ams
It i s i mport ant t o di st i ngui sh bet ween t he GHG Prot ocol Ini t i at i ve
and ot her GHG programs. The GHG Prot ocol Corporat e St andard
f ocuses onl y on t he account i ng and report i ng of emi ssi ons. It does
not requi re emi ssi ons i nf ormat i on t o be report ed t o WRI or WBCSD.
In addi t i on, whi l e t hi s st andard i s desi gned t o devel op a veri f i abl e
i nvent ory, i t does not provi de a st andard f or how t he veri f i cat i on
process shoul d be conduct ed.
The GHG Pr ot ocol Cor por at e St andar d has been desi gned t o be
program or pol i cy neut ral . However, many exi st i ng GHG programs
use i t f or t hei r own account i ng and report i ng requi rement s and i t
i s compat i bl e wi t h most of t hem, i ncl udi ng:
Vol unt ary GHG reduct i on programs, e.g., t he Worl d Wi l dl i f e Fund
(WWF) Cl i mat e Savers, t he U.S. Envi ronment al Prot ect i on
Agency (EPA) Cl i mat e Leaders, t he Cl i mat e Neut ral Net work,
and t he Busi ness Leaders Ini t i at i ve on Cl i mat e Change (BLICC)
GHG regi st ri es, e.g., Cal i f orni a Cl i mat e Act i on Regi st ry (CCAR),
Worl d Economi c Forum Gl obal GHG Regi st ry
Nat i onal and regi onal i ndust ry i ni t i at i ves, e.g., New Zeal and
Busi ness Counci l f or Sust ai nabl e Devel opment , Tai wan Busi ness
Counci l f or Sust ai nabl e Devel opment , Associ at i on des ent repri ses
pour l a rduct i on des gaz ef f et de serre (AERES)
GHG t radi ng programs,
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e.g., UK Emi ssi ons Tradi ng Scheme (UK
ETS), Chi cago Cl i mat e Exchange (CCX), and t he European Uni on
Greenhouse Gas Emi ssi ons Al l owance Tradi ng Scheme (EU ETS)
Sect or- speci f i c prot ocol s devel oped by a number of i ndust ry asso-
ci at i ons, e.g., Int ernat i onal Al umi num Inst i t ut e, Int ernat i onal
Counci l of Forest and Paper Associ at i ons, Int ernat i onal Iron and
St eel Inst i t ut e, t he WBCSD Cement Sust ai nabi l i t y Ini t i at i ve, and
t he Int ernat i onal Pet rol eum Indust ry Envi ronment al Conservat i on
Associ at i on (IPIECA).
Si nce GHG programs of t en have speci f i c account i ng and report i ng
requi rement s, compani es shoul d al ways check wi t h any rel evant
programs f or any addi t i onal requi rement s bef ore devel opi ng
t hei r i nvent ory.
GHG c al c ul at i on t ool s
To compl ement t he st andar d and gui dance pr ovi ded her e,
a number of cr oss- sect or and sect or- speci f i c cal cul at i on t ool s
ar e avai l abl e on t he GHG Pr ot ocol I ni t i at i ve websi t e
( www. ghgpr ot ocol . or g) , i ncl udi ng a gui de f or smal l of f i ce- based
organi zat i ons (see chapt er 6 f or f ul l l i st ). These t ool s provi de st ep-
by- st ep gui dance and el ect r oni c wor ksheet s t o hel p user s
cal cul at e GHG emi ssi ons f rom speci f i c sources or i ndust ri es. The
t ool s are consi st ent wi t h t hose proposed by t he Int ergovernment al
Panel on Cl i mat e Change ( IPCC) f or compi l at i on of emi ssi ons
at t he nat i onal l evel ( I PCC, 1996) . They have been r ef i ned t o be
user- f r i endl y f or non- t echni cal company st af f and t o i ncr ease t he
accur acy of emi ssi ons dat a at a company l evel . Thanks t o hel p
f r om many compani es, or gani zat i ons, and i ndi vi dual exper t s
t hr ough an i nt ensi ve r evi ew of t he t ool s, t hey ar e bel i eved t o
r epr esent cur r ent best pr act i ce.
Repor t i ng i n ac c or danc e wi t h t he
GHG Pr o t o c o l Co r p o r a t e St a n d a r d
The GHG Prot ocol Ini t i at i ve encourages t he use of t he GHG Prot ocol
Corporat e St andard by al l compani es regardl ess of t hei r experi ence
i n prepari ng a GHG i nvent ory. The t erm shal l i s used i n t he
chapt ers cont ai ni ng st andards t o cl ari f y what i s requi red t o prepare
and report a GHG i nvent ory i n accordance wi t h t he GHG Prot ocol
Corporat e St andard. Thi s i s i nt ended t o i mprove t he consi st ency
wi t h whi ch t he st andard i s appl i ed and t he resul t i ng i nf ormat i on
t hat i s publ i cl y report ed, wi t hout depart i ng f rom t he i ni t i al i nt ent of
t he f i rst edi t i on. It al so has t he advant age of provi di ng a veri f i abl e
st andard f or compani es i nt erest ed i n t aki ng t hi s addi t i onal st ep.
Over vi ew of mai n c hanges t o t he f i r st edi t i on
Thi s r evi sed edi t i on cont ai ns addi t i onal gui dance, case st udi es,
and annexes. A new gui dance chapt er on set t i ng GHG t ar get s
has been added i n r esponse t o many r equest s f r om compani es
t hat , havi ng devel oped an i nvent or y, want ed t o t ake t he
next st ep of set t i ng a t ar get . Appendi ces have been added on
account i ng f or i ndi r ect emi ssi ons f r om el ect r i ci t y and on
account i ng f or sequest er ed at mospher i c car bon.
Introduction
I NTRODUC TI ON
4
Changes t o speci f i c chapt ers i ncl ude:
C H A P TE R 1 : Mi nor rewordi ng of pri nci pl es.
C H A P TE R 2 : Goal - rel at ed i nf ormat i on on operat i onal bound-
ari es has been updat ed and consol i dat ed.
C H A P TE R 3 : Al t hough st i l l encouraged t o account f or
emi ssi ons usi ng bot h t he equi t y and cont rol
approaches, compani es may now report usi ng
one approach. Thi s change ref l ect s t he f act
t hat not al l compani es need bot h t ypes of i nf or-
mat i on t o achi eve t hei r busi ness goal s. New
gui dance has been provi ded on est abl i shi ng
cont rol . The mi ni mum equi t y t hreshol d f or
report i ng purposes has been removed t o enabl e
emi ssi ons t o be report ed when si gni f i cant .
C H A P TE R 4 : The def i ni t i on of scope 2 has been r evi sed t o
excl ude emi ssi ons f rom el ect ri ci t y purchased
f or resal e t hese are now i ncl uded i n scope 3.
Thi s pr event s t wo or mor e compani es f r om
doubl e count i ng t he same emi ssi ons i n t he
same scope. New gui dance has been added on
account i ng f or GHG emi ssi ons associ at ed wi t h
el ect ri ci t y t ransmi ssi on and di st ri but i on l osses.
Addi t i onal gui dance provi ded on Scope 3
cat egori es and l easi ng.
C H A P TE R 5 : The recommendat i on of pro- rat a adj ust ment s
was del et ed t o avoi d t he need f or t wo adj ust -
ment s. More gui dance has been added on
adj ust i ng base year emi ssi ons f or changes i n
cal cul at i on met hodol ogi es.
C H A P TE R 6 : The gui dance on choosi ng emi ssi on f act ors
has been i mproved.
C H A P TE R 7 : The gui dance on est abl i shi ng an i nvent ory
qual i t y management syst em and on t he appl i ca-
t i ons and l i mi t at i ons of uncert ai nt y assessment
has been expanded.
C H A P TE R 8 : Gui dance has been added on account i ng f or
and r epor t i ng pr oj ect r educt i ons and of f set s i n
or der t o cl ar i f y t he r el at i onshi p bet ween t he
GHG Pr ot ocol Cor por at e and Pr oj ect St andar ds.
C H A P TE R 9 : The requi red and opt i onal report i ng cat egori es
have been cl ari f i ed.
C H A P TE R 1 0 : Gui dance on t he concept s of mat eri al i t y and
mat eri al di screpancy has been expanded.
C H A P TE R 1 1 : New chapt er added on st eps i n set t i ng a t arget
and t racki ng and report i ng progress.
Fr equent l y ask ed quest i ons
Bel ow i s a l i st of f requent l y asked quest i ons, wi t h di rect i ons t o t he
rel evant chapt ers.
What shoul d I consi der when set t i ng out t o
account f or and report emi ssi ons? C H A P TE R 2
How do I deal wi t h compl ex company st ruct ures
and shared ownershi p? C H A P TE R 3
What i s t he di f f erence bet ween di rect and i ndi rect
emi ssi ons and what i s t hei r rel evance? C H A P TE R 4
Whi ch i ndi rect emi ssi ons shoul d I report ? C H A P TE R 4
How do I account f or and report out sourced and
l eased operat i ons? C H A P TE R 4
What i s a base year and why do I need one? C H A P TE R 5
My emi ssi ons change wi t h acqui si t i ons and
di vest i t ures. How do I account f or t hese? C H A P TE R 5
How do I i dent i f y my companys emi ssi on sources? C H A P TE R 6
What ki nds of t ool s are t here t o hel p me
cal cul at e emi ssi ons? C H A P TE R 6
What dat a col l ect i on act i vi t i es and dat a management
i ssues do my f aci l i t i es have t o deal wi t h? C H A P TE R 6
What det ermi nes t he qual i t y and credi bi l i t y of my
emi ssi ons i nf ormat i on? C H A P TE R 7
How shoul d I account f or and report GHG of f set s
t hat I sel l or purchase? C H A P TE R 8
What i nf ormat i on shoul d be i ncl uded i n a GHG
publ i c emi ssi ons report ? C H A P TE R 9
What dat a must be avai l abl e t o obt ai n ext ernal
veri f i cat i on of t he i nvent ory dat a? C H A P TE R 10
What i s i nvol ved i n set t i ng an emi ssi ons t arget and
how do I report perf ormance i n rel at i on t o my t arget ? C H A P TE R 11
I NTRODUC TI ON
5
N OTE S
1
GHG program i s a generi c t erm used t o ref er t o any vol unt ary or mandat ory
i nt ernat i onal , nat i onal , sub- nat i onal government or non- government al
aut hori t y t hat regi st ers, cert i f i es, or regul at es GHG emi ssi ons or removal s.
2
Throughout t he rest of t hi s document , t he t erm company or busi -
ness i s used as short hand f or compani es, busi nesses and ot her t ypes
of organi zat i ons.
3
For exampl e, WRI uses t he GHG Prot ocol Corporat e St andard t o publ i cl y
report i t s own emi ssi ons on an annual basi s and t o part i ci pat e i n t he
Chi cago Cl i mat e Exchange.
4
Tradi ng programs t hat operat e at t he l evel of f aci l i t i es pri mari l y use t he
GHG Prot ocol Ini t i at i ve cal cul at i on t ool s.
S
T
A
N
D
A
R
D
6
s wi t h f i nanci al account i ng and r epor t i ng, gener al l y accept ed GHG
a ccou n t i n g p r i n ci p l es a r e i n t en d ed t o u n d er p i n a n d g u i d e GHG
account i ng and r epor t i ng t o ensur e t hat t he r epor t ed i nf or mat i on r epr esent s a
f ai t hf ul , t r ue, and f ai r account of a companys GHG emi ssi ons.
A
1
GHG Accounting and Reporting Principles
G U I D A N C E
S T A N D A R D
GHG accounting and reporting shall be based on the following principles:
R E L E VA N C E Ensure the GHG inventory appropriately reflects the GHG emissions of the company and
serves the decision-making needs of users both internal and external to the company.
C OM P L E TE N E S S Account for and report on all GHG emission sources and activities within the chosen
inventory boundary. Disclose and justify any specific exclusions.
C ON S I S TE N C Y Use consistent methodologies to allow for meaningful comparisons of emissions over time.
Transparently document any changes to the data, inventory boundary, methods, or any other
relevant factors in the time series.
TR A N S P A R E N C Y Address all relevant issues in a factual and coherent manner, based on a clear audit trail.
Disclose any relevant assumptions and make appropriate references to the accounting and
calculation methodologies and data sources used.
A C C U R A C Y Ensure that the quantification of GHG emissions is systematically neither over nor under
actual emissions, as far as can be judged, and that uncertainties are reduced as far as
practicable. Achieve sufficient accuracy to enable users to make decisions with reasonable
assurance as to the integrity of the reported information.
C HAPTE R 1: GHG Accounting and Reporting Principles 7
S
T
A
N
D
A
R
D
GHG accounting and reporting practices are evolving and are new to many
businesses; however, the principles listed below are derived in part from
generally accepted financial accounting and reporting principles. They also
reflect the outcome of a collaborative process involving stakeholders from
a wide range of technical, environmental, and accounting disciplines.
G
U
I
D
A
N
C
E
C HAPTE R 1
8
GHG Accounting and Reporting Principles
hese principles are intended to underpin all aspects
of GHG accounting and reporting. Their application
will ensure that the GHG inventory constitutes a true
and fair representation of the companys GHG emissions.
Their primary function is to guide the implementation of
the GHGProtocol Corporate Standard, particularly when
the application of the standards to specific issues or situa-
tions is ambiguous.
Rel evanc e
For an organizations GHG report to be relevant means
that it contains the information that usersboth
internal and external to the companyneed for their
decision making. An important aspect of relevance is the
selection of an appropriate inventory boundary that
reflects the substance and economic reality of the
companys business relationships, not merely its legal
form. The choice of the inventory boundary is dependent
on the characteristics of the company, the intended
purpose of information, and the needs of the users. When
choosing the inventory boundary, a number of factors
should be considered, such as:
Organizational structures: control (operational
and financial), ownership, legal agreements, joint
ventures, etc.
Operational boundaries: on-site and off-site activities,
processes, services, and impacts
Business context: nature of activities, geographic loca-
tions, industry sector(s), purposes of information, and
users of information
More information on defining an appropriate inventory
boundary is provided in chapters 2, 3, and 4.
Compl et eness
All relevant emissions sources within the chosen
inventory boundary need to be accounted for so that a
comprehensive and meaningful inventory is compiled.
I n practice, a lack of data or the cost of gathering
data may be a limiting factor. Sometimes it is
tempting to define a minimum emissions accounting
threshold (often referred to as a materiality threshold)
stating that a source not exceeding a certain size
can be omitted from the inventory. Technically, such a
threshold is simply a predefined and accepted negative
bias in estimates (i.e., an underestimate). Although it
appears useful in theory, the practical implementation of
such a threshold is not compatible with the completeness
principle of the GHGProtocol Corporate Standard. I n order
to uti l i ze a materi al i ty speci fi cati on, the emi ssi ons
from a parti cul ar source or acti vi ty woul d have to be
quanti fi ed to ensure they were under the threshol d.
However, once emi ssi ons are quanti fi ed, most of the
benefi t of havi ng a threshol d i s l ost.
A threshold is often used to determine whether an error
or omi ssi on i s a materi al di screpancy or not. Thi s i s
not the same as a de mi ni mi s for defi ni ng a compl ete
inventory. I nstead companies need to make a good faith
effort to provide a complete, accurate, and consistent
accounting of their GHG emissions. For cases where
emissions have not been estimated, or estimated at an
insufficient level of quality, it is important that this is
transparently documented and justified. Verifiers can
determine the potential impact and relevance of the exclu-
sion, or lack of quality, on the overall inventory report.
More information on completeness is provided in chap-
ters 7 and 10.
Consi st enc y
Users of GHG information will want to track and
compare GHG emissions information over time in order
to identify trends and to assess the performance of
the reporting company. The consistent application of
accounting approaches, inventory boundary, and calcula-
tion methodologies is essential to producing comparable
GHG emissions data over time. The GHG information
for all operations within an organizations inventory
boundary needs to be compiled in a manner that ensures
that the aggregate information is internally consistent
and comparable over time. I f there are changes in the
inventory boundary, methods, data or any other factors
affecting emission estimates, they need to be transpar-
ently documented and justified.
More information on consistency is provided in
chapters 5 and 9.
T
Tr anspar enc y
Transparency relates to the degree to which information
on the processes, procedures, assumptions, and limita-
tions of the GHG inventory are disclosed in a clear,
factual, neutral, and understandable manner based on
clear documentation and archives (i.e., an audit trail).
I nformation needs to be recorded, compiled, and
analyzed in a way that enables internal reviewers and
external verifiers to attest to its credibility. Specific
exclusions or inclusions need to be clearly identified and
justified, assumptions disclosed, and appropriate refer-
ences provided for the methodologies applied and the
data sources used. The information should be sufficient
to enable a third party to derive the same results if
provided with the same source data. A transparent
report will provide a clear understanding of the issues in
the context of the reporting company and a meaningful
assessment of performance. An independent external
verification is a good way of ensuring transparency and
determining that an appropriate audit trail has been
established and documentation provided.
More information on transparency is provided in chap-
ters 9 and 10.
Ac c ur ac y
Data should be sufficiently precise to enable intended
users to make decisions with reasonable assurance that
the reported information is credible. GHG measure-
ments, estimates, or calculations should be systemically
neither over nor under the actual emissions value, as far
as can be judged, and that uncertainties are reduced as
far as practicable. The quantification process should be
conducted in a manner that minimizes uncertainty.
Reporting on measures taken to ensure accuracy in the
accounting of emissions can help promote credibility
while enhancing transparency.
More information on accuracy is provided in chapter 7.
As an i nt ernat i onal , val ues- dri ven ret ai l er of ski n, hai r, body care,
and make- up product s, t he Body Shop operat es nearl y 2,000 l oca-
t i ons, servi ng 51 count ri es i n 29 l anguages. Achi evi ng bot h
accuracy and compl et eness i n t he GHG i nvent ory process f or such
a l arge, di saggregat ed organi zat i on, i s a chal l enge. Unavai l abl e
dat a and cost l y measurement processes present si gni f i cant
obst acl es t o i mprovi ng emi ssi on dat a accuracy. For exampl e, i t i s
di f f i cul t t o di saggregat e energy consumpt i on i nf ormat i on f or
shops l ocat ed wi t hi n shoppi ng cent ers. Est i mat es f or t hese shops
are of t en i naccurat e, but excl udi ng sources due t o i naccuracy
creat es an i ncompl et e i nvent ory.
The Body Shop, wi t h hel p f rom t he Busi ness Leaders Ini t i at i ve on
Cl i mat e Change (BLICC) program, approached t hi s probl em wi t h
a t wo- t i ered sol ut i on. Fi rst , st ores were encouraged t o act i vel y
pursue di rect consumpt i on dat a t hrough di saggregat ed dat a or
di rect moni t ori ng. Second, i f unabl e t o obt ai n di rect consumpt i on
dat a, st ores were gi ven st andardi zed gui del i nes f or est i mat i ng
emi ssi ons based on f act ors such as square f oot age, equi pment
t ype, and usage hours. Thi s syst em repl aced t he pri or f ragment ary
appr oach, pr ovi ded gr eat er accur acy, and pr ovi ded a mor e
compl et e account of emi ssi ons by i ncl udi ng f aci l i t i es t hat previ -
ousl y were unabl e t o cal cul at e emi ssi ons. If such l i mi t at i ons i n
t he measurement processes are made t ransparent , users of t he
i nf ormat i on wi l l underst and t he basi s of t he dat a and t he t rade -
of f t hat has t aken pl ace.
The Body Shop: Sol vi ng t he t r ade- of f
bet ween ac c ur ac y and c ompl et eness
C HAPTE R 1 GHG Accounting and Reporting Principles 9
Vol kswagen i s a gl obal aut o manuf act ur er and t he l ar gest
aut omaker i n Eur ope. Whi l e wor ki ng on i t s GHG i nvent or y,
Vol kswagen real i zed t hat t he st ruct ure of i t s emi ssi on sources had
undergone consi derabl e changes over t he l ast seven years.
Emi ssi ons f rom product i on processes, whi ch were consi dered t o be
i rrel evant at a corporat e l evel i n 1996, t oday const i t ut e al most
20 percent of aggregat ed GHG emi ssi ons at t he rel evant pl ant
si t es. Exampl es of growi ng emi ssi ons sources are new si t es f or
engi ne t est i ng or t he i nvest ment i nt o magnesi um di e- cast i ng
equi pment at cert ai n product i on si t es. Thi s exampl e shows t hat
emi ssi ons sources have t o be regul arl y re- assessed t o mai nt ai n a
compl et e i nvent ory over t i me.
Vol k swagen:
Mai nt ai ni ng c ompl et eness over t i me
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mpr ovi ng your under st andi ng of your companys GHG emi ssi ons by compi l i ng
a GHG i nvent or y makes good busi ness sense. Compani es f r equent l y ci t e t he
f ol l owi ng f i ve busi ness goal s as r easons f or compi l i ng a GHG i nvent or y:
Managi ng GHG ri sks and i dent i f yi ng reduct i on opport uni t i es
Publ i c report i ng and part i ci pat i on i n vol unt ary GHG programs
Part i ci pat i ng i n mandat ory report i ng programs
Part i ci pat i ng i n GHG market s
Recogni t i on f or earl y vol unt ary act i on
I
2
Business Goals and Inventory Design
G U I D A N C E
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Companies generally want their GHG inventory to be
capable of serving multiple goals. I t therefore makes
sense to design the process from the outset to provide
information for a variety of different users and
usesboth current and future. The GHGProtocol
Corporate Standardhas been designed as a comprehensive
GHG accounting and reporting framework to provide
the information building blocks capable of serving most
business goals (see Box 1). Thus the inventory data
collected according to the GHGProtocol Corporate
Standardcan be aggregated and disaggregated for
various organizational and operational boundaries and
for different business geographic scales (state, country,
Annex 1 countries, non-Annex 1 countries, facility,
business unit, company, etc.).
Appendix C provides an overview of various GHG
programsmany of which are based on the GHGProtocol
Corporate Standard. The guidance sections of chapters 3
and 4 provide additional information on how to design
an inventory for different goals and uses.
Managi ng GHG r i sk s
and i dent i f yi ng r educ t i on oppor t uni t i es
Compi l i ng a comprehensi ve GHG i nventory i mproves
a companys understanding of its emissions profile
and any potential GHG liability or exposure. A
companys GHG exposure is increasingly becoming a
management issue in light of heightened scrutiny by the
insurance industry, shareholders, and the emergence of
environmental regulations/policies designed to reduce
GHG emissions.
I n the context of future GHG regulations, significant
GHG emissions in a companys value chain may result in
increased costs (upstream) or reduced sales (down-
stream), even if the company itself is not directly subject
to regulations. Thus investors may view significant indi-
rect emissions upstream or downstream of a companys
operations as potential liabilities that need to be
managed and reduced. A limited focus on direct emis-
sions from a companys own operations may miss major
GHG risks and opportunities, while leading to a misin-
terpretation of the companys actual GHG exposure.
On a more positive note, what gets measured gets
managed. Accounting for emissions can help identify
the most effective reduction opportunities. This can
drive increased materials and energy efficiency as well
as the development of new products and services that
reduce the GHG impacts of customers or suppliers. This
in turn can reduce production costs and help differen-
tiate the company in an increasingly environmentally
conscious marketplace. Conducting a rigorous GHG
inventory is also a prerequisite for setting an internal
or public GHG target and for subsequently measuring
and reporting progress.
C HAPTE R 2 Business Goals and Inventory Design 11
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B OX 1 . Busi ness goal s ser ved by GHG i nvent or i es
Managi ng GHG r i sk s and i dent i f yi ng r educ t i on oppor t uni t i es
Ident i f yi ng ri sks associ at ed wi t h GHG const rai nt s i n t he f ut ure
Ident i f yi ng cost ef f ect i ve reduct i on opport uni t i es
Set t i ng GHG t arget s, measuri ng and report i ng progress
Publ i c r epor t i ng and par t i c i pat i on i n vol unt ar y GHG pr ogr ams
Vol unt ary st akehol der report i ng of GHG emi ssi ons and progress
t owards GHG t arget s
Report i ng t o government and NGO report i ng programs,
i ncl udi ng GHG regi st ri es
Eco- l abel l i ng and GHG cert i f i cat i on
Par t i c i pat i ng i n mandat or y r epor t i ng pr ogr ams
Part i ci pat i ng i n government report i ng programs at t he nat i onal ,
regi onal , or l ocal l evel
Par t i c i pat i ng i n GHG mar k et s
Support i ng i nt ernal GHG t radi ng programs
Part i ci pat i ng i n ext ernal cap and t rade al l owance t radi ng programs
Cal cul at i ng carbon/ GHG t axes
Rec ogni t i on f or ear l y vol unt ar y ac t i on
Provi di ng i nf ormat i on t o support basel i ne prot ect i on and/ or
credi t f or earl y act i on
Publ i c r epor t i ng and par t i c i pat i on
i n vol unt ar y GHG pr ogr ams
As concerns over climate change grow, NGOs, investors,
and other stakeholders are increasingly calling for
greater corporate disclosure of GHG information. They
are interested in the actions companies are taking and
in how the companies are positioned relative to their
competitors in the face of emerging regulations. I n
response, a growing number of companies are preparing
stakeholder reports containing information on GHG
emissions. These may be stand-alone reports on GHG
emissions or broader environmental or sustainability
reports. For example, companies preparing sustainability
reports using the Global Reporting I nitiative guidelines
should include information on GHG emissions in accor-
dance with the GHGProtocol Corporate Standard(GRI ,
2002). Public reporting can also strengthen relation-
ships with other stakeholders. For instance, companies
can improve their standing with customers and with the
public by being recognized for participating in voluntary
GHG programs.
Some countries and states have established GHG
registries where companies can report GHG emissions
in a public database. Registries may be administered by
governments (e.g., U.S. Department of Energy 1605b
Voluntary Reporting Program), NGOs (e.g., California
Climate Action Registry), or industry groups (e.g., World
Economic Forum Global GHG Registry). Many GHG
programs also provide help to companies setting volun-
tary GHG targets.
Most voluntary GHG programs permit or require the
reporting of direct emissions from operations (including
all six GHGs), as well as indirect GHG emissions from
purchased electricity. A GHG inventory prepared
in accordance with the GHGProtocol Corporate Standard
will usually be compatible with most requirements
(Appendix C provides an overview of the reporting
requirements of some GHG programs). However, since
the accounting guidelines of many voluntary programs
are periodically updated, companies planning to partici-
pate are advised to contact the program administrator
to check the current requirements.
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C HAPTE R 2
12
Indi rect emi ssi ons associ at ed wi t h t he consumpt i on of purchased
el ect ri ci t y are a requi red el ement of any companys account i ng and
report i ng under t he GHG Prot ocol Corporat e St andard. Because
purchased el ect ri ci t y i s a maj or source of GHG emi ssi ons f or compa-
ni es, i t present s a si gni f i cant reduct i on opport uni t y. IBM, a maj or
i nf ormat i on t echnol ogy company and a member of t he WRIs Green
Power Market Devel opment Group, has syst emat i cal l y account ed f or
t hese i ndi rect emi ssi ons and t hus i dent i f i ed t he si gni f i cant pot ent i al
t o reduce t hem. The company has i mpl ement ed a vari et y of st rat egi es
t hat woul d reduce ei t her t hei r demand f or purchased energy or t he
GHG i nt ensi t y of t hat purchased energy. One st rat egy has been t o
pursue t he renewabl e energy market t o reduce t he GHG i nt ensi t y of i t s
purchased el ect ri ci t y.
IBM succeeded i n reduci ng i t s GHG emi ssi ons at i t s f aci l i t y i n
Aust i n, Texas, even as energy use st ayed rel at i vel y const ant , t hrough
a cont ract f or renewabl e el ect ri ci t y wi t h t he l ocal ut i l i t y company,
Aust i n Energy. St art i ng i n 2001, t hi s f i ve- year cont ract i s f or 5.25
mi l l i on kWhs of wi ndpower per year. Thi s zero emi ssi on power
l owered t he f aci l i t ys i nvent ory by more t han 4,100 t onnes of CO
2
compared t o t he previ ous year and represent s nearl y 5% of t he
f aci l i t ys t ot al el ect ri ci t y consumpt i on. Company- wi de, IBMs 2002
t ot al renewabl e energy procurement was 66.2 mi l l i on kWh, whi ch
represent ed 1.3% of i t s el ect ri ci t y consumpt i on worl dwi de and
31,550 t onnes of CO
2
compared t o t he previ ous year. Worl dwi de, IBM
purchased a vari et y of sources of renewabl e energy i ncl udi ng wi nd,
bi omass and sol ar.
By account i ng f or t hese i ndi rect emi ssi ons and l ooki ng f or associ -
at ed reduct i on opport uni t i es, IBM has successf ul l y reduced an
i mport ant source of i t s overal l GHG emi ssi ons.
I BM: The r ol e of r enewabl e ener gy
i n r educ i ng GHG emi ssi ons
Par t i c i pat i ng i n mandat or y r epor t i ng pr ogr ams
Some governments require GHG emitters to report their
emissions annually. These typically focus on direct emis-
sions from operations at operated or controlled facilities
in specific geographic jurisdictions. I n Europe, facilities
falling under the requirements of the I ntegrated
Pollution Prevention and Control (I PPC) Directive must
report emissions exceeding a specified threshold for each
of the six GHGs. The reported emissions are included in
a European Pollutant Emissions Register (EPER), a
publicly accessible internet-based database that permits
comparisons of emissions from individual facilities or
industrial sectors in different countries (EC-DGE, 2000).
I n Ontario, Ontario Regulation 127 requires the
reporting of GHG emissions (Ontario MOE, 2001).
Par t i c i pat i ng i n GHG mar k et s
Market-based approaches to reducing GHG emissions
are emergi ng i n some parts of the worl d. I n most
pl aces, they take the form of emi ssi ons tradi ng
programs, al though there are a number of other
approaches adopted by countries, such as the taxation
approach used in Norway. Trading programs can be
implemented on a mandatory (e.g., the forthcoming
EU ETS) or voluntary basis (e.g., CCX).
Although trading programs, which determine compliance
by comparing emissions with an emissions reduction
target or cap, typically require accounting only for
direct emissions, there are exceptions. The UK ETS, for
example, requires direct entry participants to account
for GHG emissions from the generation of purchased
electricity (DEFRA, 2003). The CCX allows its
members the option of counting indirect emissions asso-
ciated with electricity purchases as a supplemental
reduction commitment. Other types of indirect emissions
can be more difficult to verify and may present
challenges in terms of avoiding double counting. To
facilitate independent verification, emissions trading
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may require participating companies to establish an
audit trail for GHG information (see chapter 10).
GHG trading programs are likely to impose additional
layers of accounting specificity relating to which
approach is used for setting organizational boundaries;
which GHGs and sources are addressed; how base
years are established; the type of calculation method-
ology used; the choice of emission factors; and the
monitoring and verification approaches employed.
The broad participation and best practices incorporated
into the GHGProtocol Corporate Standardare likely
to inform the accounting requirements of emerging
programs, and have indeed done so in the past.
Rec ogni t i on f or ear l y vol unt ar y ac t i on
A credible inventory may help ensure that a corpora-
tions early, voluntary emissions reductions are
recognized in future regulatory programs. To illustrate,
suppose that in 2000 a company started reducing its
GHG emissions by shifting its on-site powerhouse boiler
fuel from coal to landfill gas. I f a mandatory GHG
reduction program is later established in 2005 and it
sets 2003 as the base against which reductions are to
be measured, the program might not allow the emissions
reductions achieved by the green power project prior to
2003 to count toward its target.
However, if a companys voluntary emissions reductions
have been accounted for and registered, they are more
likely to be recognized and taken into account when
regulations requiring reductions go into effect. For
instance, the state of California has stated that it will
use its best efforts to ensure that organizations that
register certified emission results with the California
Climate Action Registry receive appropriate considera-
tion under any future international, federal, or state
regulatory program relating to GHG emissions.
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C HAPTE R 2 14
For Tat a St eel , Asi as f i rst and Indi as l argest i nt egrat ed pri vat e
sect or st eel company, reduci ng i t s GHG emi ssi ons t hrough energy
ef f i ci ency i s a key el ement of i t s pri mary busi ness goal : t he
accept abi l i t y of i t s product i n i nt ernat i onal market s. Each year, i n
pursui t of t hi s goal , t he company l aunches several energy ef f i -
ci ency proj ect s and i nt roduces l ess- GHG- i nt ensi ve processes. The
company i s al so act i vel y pursui ng GHG t radi ng market s as a
means of f urt her i mprovi ng i t s GHG perf ormance. To succeed i n
t hese ef f ort s and be el i gi bl e f or emergi ng t radi ng schemes, Tat a
St eel must have an accurat e GHG i nvent ory t hat i ncl udes al l
processes and act i vi t i es, al l ows f or meani ngf ul benchmarki ng,
measures i mprovement s, and promot es credi bl e report i ng.
Tat a St eel has devel oped t he capaci t y t o measure i t s progress i n
reduci ng GHG emi ssi ons. Tat a St eel s managers have access t o
on- l i ne i nf ormat i on on energy usage, mat eri al usage, wast e and
byproduct generat i on, and ot her mat eri al st reams. Usi ng t hi s
dat a and t he GHG Prot ocol cal cul at i on t ool s, Tat a St eel generat es
t wo key l ong- t erm, st rat egi c perf ormance i ndi cat ors: speci f i c
energy consumpt i on (Gi ga cal ori e / t onne of crude st eel ) and GHG
i nt ensi t y (t onne of CO
2
equi val ent / t onne of crude st eel ). These
i ndi cat ors are key sust ai nabi l i t y met ri cs i n t he st eel sect or worl d-
wi de, and hel p ensure market accept abi l i t y and compet i t i veness.
Si nce t he company adopt ed t he GHG Prot ocol Corporat e St andard,
t racki ng perf ormance has become more st ruct ured and st ream-
l i ned. Thi s syst em al l ows Tat a St eel qui ck and easy access t o i t s
GHG i nvent ory and hel ps t he company maxi mi ze process and
mat eri al f l ow ef f i ci enci es.
Tat a St eel : Devel opment of i nst i t ut i onal
c apac i t y i n GHG ac c ount i ng and r epor t i ng
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When Ford Mot or Company, a gl obal aut omaker, embarked on an
ef f ort t o underst and and reduce i t s GHG i mpact s, i t want ed t o
t rack emi ssi ons wi t h enough accuracy and det ai l t o manage
t hem ef f ect i vel y. An i nt ernal cross- f unct i onal GHG i nvent ory t eam
was f ormed t o accompl i sh t hi s goal . Al t hough t he company was
al ready report i ng basi c energy and carbon di oxi de dat a at t he
corporat e l evel , a more det ai l ed underst andi ng of t hese emi s-
si ons was essent i al t o set and measure progress agai nst
perf ormance t arget s and eval uat e pot ent i al part i ci pat i on i n
ext ernal t radi ng schemes.
For several weeks, t he t eam worked on creat i ng a more compre-
hensi ve i nvent ory f or st at i onary combust i on sources, and qui ckl y
f ound a pat t ern emergi ng. Al l t oo of t en t eam members l ef t meet -
i ngs wi t h as many quest i ons as answers, and t he same quest i ons
kept comi ng up f r om one week t o t he next . How shoul d t hey
dr aw boundar i es? How do t hey account f or acqui si t i ons and
di vest i t ur es? What emi ssi on f act or s shoul d be used? And
per haps most i mport ant l y, how coul d t hei r met hodol ogy be
deemed credi bl e wi t h st akehol ders? Al t hough t he t eam had no
short age of opi ni ons, t here al so seemed t o be no cl earl y ri ght or
wrong answers.
The GHG Prot ocol Corporat e St andard hel ped answer many of
t hese quest i ons and t he Ford Mot or Company now has a more
robust GHG i nvent ory t hat can be cont i nual l y i mproved t o f ul f i l l
i t s rapi dl y emergi ng GHG management needs. Si nce adopt i ng t he
GHG Pr ot ocol Cor por at e St andar d, For d has expanded t he
coverage of i t s publ i c report i ng t o al l of i t s brands gl obal l y; i t now
i ncl udes di rect emi ssi ons f rom sources i t owns or cont rol s and
i ndi rect emi ssi ons resul t i ng f rom t he generat i on of purchased
el ect ri ci t y, heat , or st eam. In addi t i on, Ford i s a f oundi ng member
of t he Chi cago Cl i mat e Exchange, whi ch uses some of t he GHG
Pr ot ocol cal cul at i on t ool s f or emi ssi ons report i ng purposes.
For d Mot or Company: Exper i enc es
usi ng t he GHG Pr ot oc ol Cor por at e St andar d
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usi ness oper at i ons var y i n t hei r l egal and or gani zat i onal st r uct ur es;
t hey i ncl ude whol l y owned operat i ons, i ncorporat ed and non- i ncorporat ed
j oi nt vent ur es, subsi di ar i es, and ot her s. For t he pur poses of f i nanci al account i ng,
t hey ar e t r eat ed accor di ng t o est abl i shed r ul es t hat depend on t he st r uct ur e of t he
or gani zat i on and t he r el at i onshi ps among t he par t i es i nvol ved. In set t i ng or gani -
zat i onal boundar i es, a company sel ect s an appr oach f or consol i dat i ng GHG
emi ssi ons and t hen consi st ent l y appl i es t he sel ect ed appr oach t o def i ne t hose
busi nesses and oper at i ons t hat const i t ut e t he company f or t he pur pose of
account i ng and r epor t i ng GHG emi ssi ons.
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Setting Organizational Boundaries
G U I D A N C E
S T A N D A R D
For corporate reporting, two distinct approaches can be
used to consolidate GHG emissions: the equity share and
the control approaches. Companies shall account for and
report their consolidated GHG data according to either
the equity share or control approach as presented below.
I f the reporting company wholly owns all its operations,
its organizational boundary will be the same whichever
approach is used.
1
For companies with joint operations,
the organizational boundary and the resulting emissions
may di ffer dependi ng on the approach used. I n both
whol l y owned and joi nt operati ons, the choi ce of
approach may change how emissions are categorized
when operational boundaries are set (see chapter 4).
Equi t y shar e appr oac h
Under the equity share approach, a company accounts for
GHG emissions from operations according to its share of
equity in the operation. The equity share reflects economic
interest, which is the extent of rights a company has to the
risks and rewards flowing from an operation. Typically, the
share of economic risks and rewards in an operation is
aligned with the companys percentage ownership of that
operation, and equity share will normally be the same as
the ownership percentage. Where this is not the case, the
economic substance of the relationship the company has
with the operation always overrides the legal ownership
form to ensure that equity share reflects the percentage
of economic interest. The principle of economic
substance taking precedent over legal form is consistent
with international financial reporting standards. The
staff preparing the inventory may therefore need to
consult with the companys accounting or legal staff to
ensure that the appropriate equity share percentage is
applied for each joint operation (see Table 1 for definitions
of financial accounting categories).
Cont r ol appr oac h
Under the control approach, a company accounts for
100 percent of the GHG emissions from operations over
which it has control. I t does not account for GHG emis-
sions from operations in which it owns an interest but
has no control. Control can be defined in either financial
or operational terms. When using the control approach
to consolidate GHG emissions, companies shall choose
between either the operational control or financial
control criteria.
I n most cases, whether an operation is controlled by the
company or not does not vary based on whether the finan-
cial control or operational control criterion is used. A
notable exception is the oil and gas industry, which often
has complex ownership /operatorship structures. Thus,
the choice of control criterion in the oil and gas industry
can have substantial consequences for a companys GHG
inventory. I n making this choice, companies should
take into account how GHG emissions accounting and
reporting can best be geared to the requirements of
emissions reporting and trading schemes, how it can be
aligned with financial and environmental reporting,
and which criterion best reflects the companys actual
power of control.
Financial Control. The company has financial control
over the operation if the former has the ability to direct
the financial and operating policies of the latter with a
view to gaining economic benefits from its activities.
2
For example, financial control usually exists if the
company has the right to the majority of benefits of the
operation, however these rights are conveyed. Similarly,
a company is considered to financially control an
operation if it retains the majority risks and rewards
of ownership of the operations assets.
Under this criterion, the economic substance of the
relationship between the company and the operation
takes precedence over the legal ownership status, so
that the company may have financial control over the
operation even if it has less than a 50 percent interest
in that operation. I n assessing the economic substance
of the relationship, the impact of potential voting
rights, including both those held by the company and
those held by other parties, is also taken into account.
This criterion is consistent with international financial
accounting standards; therefore, a company has finan-
cial control over an operation for GHG accounting
purposes if the operation is considered as a group
company or subsidiary for the purpose of financial
C HAPTE R 3 Setting Organizational Boundaries 17
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consolidation, i.e., if the operation is fully consolidated
in financial accounts. I f this criterion is chosen to
determine control, emissions from joint ventures where
partners have joint financial control are accounted for
based on the equity share approach (see Table 1 for
definitions of financial accounting categories).
Operational Control. A company has operational
control over an operation if the former or one of its
subsidiaries (see Table 1 for definitions of financial
accounting categories) has the full authority to
introduce and implement its operating policies at the
operation. This criterion is consistent with the current
accounting and reporting practice of many compa-
nies that report on emissions from facilities, which
they operate (i.e., for which they hold the operating
license). I t is expected that except in very rare
circumstances, if the company or one of its
subsidiaries is the operator of a facility, it will have
the full authority to introduce and implement its
operating policies and thus has operational control.
Under the operational control approach, a company
accounts for 100% of emissions from operations over
which it or one of its subsidiaries has operational control.
I t shoul d be emphasi zed that havi ng operati onal
control does not mean that a company necessari l y
has authori ty to make al l deci si ons concerni ng an
operation. For example, big capital investments will
likely require the approval of all the partners that
have joint financial control. Operational control does
mean that a company has the authority to introduce
and implement its operating policies.
More information on the relevance and application
of the operational control criterion is provided in
petroleum industry guidelines for reporting GHG
emissions (I PI ECA, 2003).
Sometimes a company can have joint financial control
over an operation, but not operational control. I n such
cases, the company would need to look at the contractual
arrangements to determine whether any one of the part-
ners has the authority to introduce and implement its
operating policies at the operation and thus has the
responsibility to report emissions under operational
control. I f the operation itself will introduce and imple-
ment its own operating policies, the partners with joint
financial control over the operation will not report any
emissions under operational control.
Table 2 in the guidance section of this chapter illustrates
the selection of a consolidation approach at the corpo-
rate level and the identification of which joint operations
will be in the organizational boundary depending on the
choice of the consolidation approach.
Consol i dat i on at mul t i pl e l evel s
The consolidation of GHG emissions data will only result
in consistent data if all levels of the organization follow
the same consolidation policy. I n the first step, the
management of the parent company has to decide on a
consolidation approach (i.e., either the equity share or
the financial or operational control approach). Once a
corporate consolidation policy has been selected, it shall
be applied to all levels of the organization.
St at e- owner shi p
The rules provided in this chapter shall also be applied
to account for GHG emissions from industry joint
operations that involve state ownership or a mix of
private/state ownership.
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C HAPTE R 3 18
BP report s GHG emi ssi ons on an equi t y share basi s, i ncl udi ng
t hose operat i ons where BP has an i nt erest , but where BP i s not t he
operat or. In det ermi ni ng t he ext ent of t he equi t y share report i ng
boundary BP seeks t o achi eve cl ose al i gnment wi t h f i nanci al
account i ng procedures. BPs equi t y share boundary i ncl udes al l
operat i ons undert aken by BP and i t s subsi di ari es, j oi nt vent ures
and associ at ed undert aki ngs as det ermi ned by t hei r t reat ment i n
t he f i nanci al account s. Fi xed asset i nvest ment s, i .e., where BP
has l i mi t ed i nf l uence, are not i ncl uded.
GHG emi ssi ons f rom f aci l i t i es i n whi ch BP has an equi t y share
ar e est i mat ed accor di ng t o t he r equi r ement s of t he BP Gr oup
Report i ng Gui del i nes f or Envi ronment al Perf ormance (BP 2000).
In t hose f aci l i t i es where BP has an equi t y share but i s not t he
operat or, GHG emi ssi ons dat a may be obt ai ned di rect l y f rom t he
operat i ng company usi ng a met hodol ogy consi st ent wi t h t he BP
Gui del i nes, or i s cal cul at ed by BP usi ng act i vi t y dat a provi ded by
t he operat or.
BP r epor t s i t s equi t y shar e GHG emi ssi ons ever y year. Si nce
2000, i ndependent ext ernal audi t ors have expressed t he opi ni on
t hat t he report ed t ot al has been f ound t o be f ree f rom mat eri al
mi sst at ement when audi t ed agai nst t he BP Gui del i nes.
BP: Repor t i ng on t he basi s of equi t y shar e
TA B L E 1 . Fi nanc i al ac c ount i ng c at egor i es
A C C O U N T I N G
C A T E G O R Y
Gr oup c ompani es /
subsi di ar i es
Assoc i at ed /
af f i l i at ed
c ompani es
Non- i nc or por at ed
j oi nt vent ur es /
par t ner shi ps /
oper at i ons wher e
par t ner s have j oi nt
f i nanc i al c ont r ol
Fi xed asset
i nvest ment s
Fr anc hi ses
F I N A N C I A L A C C O U N T I N G D E F I N I T I O N
The parent company has t he abi l i t y t o di rect t he f i nanci al and
operat i ng pol i ci es of t he company wi t h a vi ew t o gai ni ng
economi c benef i t s f rom i t s act i vi t i es. Normal l y, t hi s cat egory
al so i ncl udes i ncorporat ed and non- i ncorporat ed j oi nt vent ures
and part nershi ps over whi ch t he parent company has f i nanci al
cont rol . Group compani es/ subsi di ari es are f ul l y consol i dat ed,
whi ch i mpl i es t hat 100 percent of t he subsi di arys i ncome,
expenses, asset s, and l i abi l i t i es are t aken i nt o t he parent
companys prof i t and l oss account and bal ance sheet , respec-
t i vel y. Where t he parent s i nt erest does not equal 100 percent ,
t he consol i dat ed prof i t and l oss account and bal ance sheet
shows a deduct i on f or t he prof i t s and net asset s bel ongi ng t o
mi nori t y owners.
The parent company has si gni f i cant i nf l uence over t he operat i ng
and f i nanci al pol i ci es of t he company, but does not have f i nan-
ci al cont rol . Normal l y, t hi s cat egory al so i ncl udes i ncorporat ed
and non- i ncorporat ed j oi nt vent ures and part nershi ps over whi ch
t he parent company has si gni f i cant i nf l uence, but not f i nanci al
cont rol . Fi nanci al account i ng appl i es t he equi t y share met hod
t o associ at ed / af f i l i at ed compani es, whi ch recogni zes t he parent
companys share of t he associ at es prof i t s and net asset s.
Joi nt vent ures / part nershi ps / operat i ons are proport i onal l y
consol i dat ed, i .e., each part ner account s f or t hei r propor-
t i onat e i nt erest of t he j oi nt vent ures i ncome, expenses,
asset s, and l i abi l i t i es.
The parent company has nei t her si gni f i cant i nf l uence nor f i nanci al
cont rol . Thi s cat egory al so i ncl udes i ncorporat ed and non-
i ncorporat ed j oi nt vent ures and part nershi ps over whi ch t he parent
company has nei t her si gni f i cant i nf l uence nor f i nanci al cont rol .
Fi nanci al account i ng appl i es t he cost / di vi dend met hod t o f i xed
asset i nvest ment s. Thi s i mpl i es t hat onl y di vi dends recei ved are
recogni zed as i ncome and t he i nvest ment i s carri ed at cost .
Franchi ses are separat e l egal ent i t i es. In most cases, t he f ran-
chi ser wi l l not have equi t y ri ght s or cont rol over t he f ranchi se.
Theref ore, f ranchi ses shoul d not be i ncl uded i n consol i dat i on of
GHG emi ssi ons dat a. However, i f t he f ranchi ser does have equi t y
ri ght s or operat i onal / f i nanci al cont rol , t hen t he same rul es
f or consol i dat i on under t he equi t y or cont rol approaches appl y.
ACCOUNTI NG F OR GHG EMI SSI ONS ACCORDI NG TO
GHG P ROTOCOL CORP ORATE STANDARD
B A S E D ON
E QU I TY S H A R E
Equi t y share of
GHG emi ssi ons
Equi t y share of
GHG emi ssi ons
Equi t y share of
GHG emi ssi ons
0%
Equi t y share of
GHG emi ssi ons
B A S E D ON
F I N A N C I A L C ON TR OL
100% of
GHG emi ssi ons
0% of
GHG emi ssi ons
Equi t y share of
GHG emi ssi ons
0%
100% of
GHG emi ssi ons
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NOTE: Tabl e 1 i s based on a compari son of UK, US, Net herl ands and Int ernat i onal Fi nanci al Report i ng St andards (KPMG, 2000).
hen planning the consolidation of GHG data, it is
important to distinguish between GHG accounting
and GHG reporting. GHG accounting concerns the
recognition and consolidation of GHG emissions from
operations in which a parent company holds an interest
(either control or equity) and linking the data to specific
operations, sites, geographic locations, business
processes, and owners. GHG reporting, on the other
hand, concerns the presentation of GHG data in formats
tailored to the needs of various reporting uses and users.
Most companies have several goals for GHG reporting,
e.g., official government reporting requirements, emissions
trading programs, or public reporting (see chapter 2).
I n developing a GHG accounting system, a fundamental
consideration is to ensure that the system is capable of
meeting a range of reporting requirements. Ensuring
that data are collected and recorded at a sufficiently
disaggregated level, and capable of being consolidated
in various forms, will provide companies with maximum
flexibility to meet a range of reporting requirements.
Doubl e c ount i ng
When two or more companies hold interests in the same
joint operation and use different consolidation approaches
(e.g., Company A follows the equity share approach while
Company B uses the financial control approach), emissions
from that joint operation could be double counted. This
may not matter for voluntary corporate public reporting
as long as there is adequate disclosure from the company
on its consolidation approach. However, double counting
of emissions needs to be avoided in trading schemes and
certain mandatory government reporting programs.
Repor t i ng goal s and l evel of c onsol i dat i on
Reporting requirements for GHG data exist at various
levels, from a specific local facility level to a more
aggregated corporate level. Examples of drivers for
various levels of reporting include:
Official government reporting programs or certain
emissions trading programs may require GHG data to
be reported at a facility level. I n these cases, consoli-
dation of GHG data at a corporate level is not relevant
Government reporting and trading programs may
require that data be consolidated within certain
geographic and operational boundaries (e.g., the U.K.
Emissions Trading Scheme)
To demonstrate the companys account to wider stake-
holders, companies may engage in voluntary public
reporting, consolidating GHG data at a corporate level
in order to show the GHG emissions of their entire
business activities.
Cont r ac t s t hat c over GHG emi ssi ons
To clarify ownership (rights) and responsibility (obliga-
tions) issues, companies involved in joint operations may
draw up contracts that specify how the ownership of
emissions or the responsibility for managing emissions
and associated risk is distributed between the parties.
Where such arrangements exist, companies may option-
ally provide a description of the contractual arrangement
and include information on allocation of CO
2
related
risks and obligations (see Chapter 9).
Usi ng t he equi t y shar e or c ont r ol appr oac h
Different inventory reporting goals may require different
data sets. Thus companies may need to account for their
GHG emissions using both the equity share and the
control approaches. The GHGProtocol Corporate Standard
makes no recommendation as to whether voluntary
public GHG emissions reporting should be based on the
equity share or any of the two control approaches, but
encourages companies to account for their emissions
applying the equity share and a control approach sepa-
rately. Companies need to decide on the approach best
suited to their business activities and GHG accounting
and reporting requirements. Examples of how these may
drive the choice of approach include the following:
Reflection of commercial reality. I t can be argued that
a company that derives an economic profit from a
certain activity should take ownership for any GHG
emissions generated by the activity. This is achieved
by using the equity share approach, since this
approach assigns ownership for GHG emissions on the
basis of economic interest in a business activity. The
control approaches do not always reflect the full GHG
emissions portfolio of a companys business activities,
but have the advantage that a company takes full
ownership of all GHG emissions that it can directly
influence and reduce.
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C HAPTE R 3 20
W
Government reporting and emissions trading programs.
Government regulatory programs will always need to
monitor and enforce compliance. Since compliance
responsibility generally falls to the operator (not
equity holders or the group company that has financial
control), governments will usually require reporting
on the basis of operational control, either through a
facility level-based system or involving the consolida-
tion of data within certain geographical boundaries
(e.g. the EU ETS will allocate emission permits to the
operators of certain installations).
Liability and risk management. While reporting and
compliance with regulations will most likely continue
to be based directly on operational control, the ulti-
mate financial liability will often rest with the group
company that holds an equity share in the operation or
has financial control over it. Hence, for assessing risk,
GHG reporting on the basis of the equity share and
financial control approaches provides a more complete
picture. The equity share approach is likely to result in
the most comprehensive coverage of liability and risks.
I n the future, companies might incur liabilities for
GHG emissions produced by joint operations in which
they have an interest, but over which they do not have
financial control. For example, a company that is an
equity shareholder in an operation but has no financial
control over it might face demands by the companies
with a controlling share to cover its requisite share of
GHG compliance costs.
Alignment with financial accounting. Future financial
accounting standards may treat GHG emissions as
liabilities and emissions allowances /credits as assets.
To assess the assets and liabilities a company creates
by its joint operations, the same consolidation rules
that are used in financial accounting should be applied
in GHG accounting. The equity share and financial
control approaches result in closer alignment between
GHG accounting and financial accounting.
Management information and performance tracking.
For the purpose of performance tracking, the control
approaches seem to be more appropriate since
managers can only be held accountable for activities
under their control.
Cost of administration and data access. The equity
share approach can result in higher administrative
costs than the control approach, since it can be diffi-
cult and time consuming to collect GHG emissions
data from joint operations not under the control of the
reporting company. Companies are likely to have
better access to operational data and therefore greater
ability to ensure that it meets minimum quality
standards when reporting on the basis of control.
Completeness of reporting. Companies might find it
difficult to demonstrate completeness of reporting
when the operati onal control cri teri on i s adopted,
since there are unlikely to be any matching records or
lists of financial assets to verify the operations that
are included in the organizational boundary.
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In t he oi l and gas i ndust ry, ownershi p and cont rol st ruct ures are
of t en compl ex. A group may own l ess t han 50 percent of a
vent ures equi t y capi t al but have operat i onal cont rol over t he
vent ure. On t he ot her hand, i n some si t uat i ons, a group may hol d
a maj ori t y i nt erest i n a vent ure wi t hout bei ng abl e t o exert opera-
t i onal cont rol , f or exampl e, when a mi nori t y part ner has a vet o
vot e at t he board l evel . Because of t hese compl ex ownershi p and
cont rol st ruct ures, Royal Dut ch/ Shel l , a gl obal group of energy
and pet rochemi cal compani es, has chosen t o report i t s GHG emi s-
si ons on t he basi s of operat i onal cont rol . By report i ng 100 percent
of GHG emi ssi ons f rom al l vent ures under i t s operat i onal cont rol ,
i rrespect i ve of i t s share i n t he vent ures equi t y capi t al , Royal
Dut ch/ Shel l can ensure t hat GHG emi ssi ons report i ng i s i n l i ne
wi t h i t s operat i onal pol i cy i ncl udi ng i t s Heal t h, Saf et y and
Envi ronment al Perf ormance Moni t ori ng and Report i ng Gui del i nes.
Usi ng t he operat i onal cont rol approach, t he group generat es dat a
t hat i s consi st ent , rel i abl e, and meet s i t s qual i t y st andards.
Royal Dut c h/ Shel l :
Repor t i ng on t he basi s of oper at i onal c ont r ol
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C HAPTE R 3 22
F I GU R E 1 . Def i ni ng t he or gani zat i onal boundar y of Hol l and I ndust r i es
HOLLAND
I NDUSTRI ES
HOLLAND
SWI TZ ERLAND
HOLLAND
AMERI CA
KAHUNA
CHEMI CALS
B GB
( 5 0 % OWNED)
I RW
( 7 5 % OWNED)
QUI CKF I X
NALLO
SYNTAL
1 0 0 %
1 0 0 %
1 0 0 %
8 3 %
1 0 0 %
1 0 0 %
3 3 . 3 %
1 0 0 %
3 3 . 3 %
4 3 %
1 0 0 %
1 0 0 %
5 6 %
0 %
0 %
0 %
0 %
0 %
Eq u i t y s h a r e
Op e r a t i o n a l c o n t r o l
F i n a n c i a l c o n t r o l
4 1 . 5 %
0 %
5 0 %
6 2 . 2 5 %
1 0 0 %
1 0 0 %
A N I L L U S TR ATI ON :
TH E E QU I TY S H A R E A N D C ON TR OL A P P R OA C H E S
Holland I ndustries is a chemicals group comprising
a number of companies/joint ventures active in the
production and marketing of chemicals. Table 2 outlines
the organizational structure of Holland I ndustries and
shows how GHG emissions from the various wholly
owned and joint operations are accounted for under
both the equity share and control approaches.
I n setting its organizational boundary, Holland
I ndustries first decides whether to use the equity or
control approach for consolidating GHG data at the
corporate level. I t then determines which operations at
the corporate level meet its selected consolidation
approach. Based on the selected consolidation approach,
the consolidation process is repeated for each lower
operational level. I n this process, GHG emissions are
first apportioned at the lower operational level
(subsidiaries, associate, joint ventures, etc.) before they
are consolidated at the corporate level. Figure 1 pres-
ents the organizational boundary of Holland I ndustries
based on the equity share and control approaches.
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In t hi s exampl e, Hol l and Amer i ca ( not Hol l and Indust r i es) hol ds
a 50 per cent i nt er est i n BGB and a 75 per cent i nt er est i n IRW. If
t he act i vi t i es of Hol l and Indust r i es i t sel f pr oduce GHG emi ssi ons
(e.g., emi ssi ons associ at ed wi t h el ect ri ci t y use at t he head of f i ce),
t hen t hese emi ssi ons shoul d al so be i ncl uded i n t he consol i dat i on
at 100 percent .
N OTE S
1
The t er m oper at i ons i s used her e as a gener i c t er m t o denot e any
ki nd of busi ness act i vi t y, i r r espect i ve of i t s or gani zat i onal , gover -
nance, or l egal st r uct ur es.
2
Fi nanci al account i ng st andards use t he generi c t erm cont rol f or what
i s denot ed as f i nanci al cont rol i n t hi s chapt er.
TA B L E 2 . Hol l and I ndust r i es - or gani zat i onal st r uc t ur e and GHG emi ssi ons ac c ount i ng
WHOLLY
OWNED AND
JOI NT
OP ERATI ONS
OF HOLLAND
Hol l and
Swi t zer l and
Hol l and
Amer i c a
BGB
I RW
Kahuna
Chemi c al s
Qui c k Fi x
Nal l o
Synt al
LEGAL
STRUCTURE
AND P ARTNERS
Incorporat ed
company
Incorporat ed
company
Joi nt vent ure,
part ners have
j oi nt f i nanci al
cont rol ot her
part ner Rearden
Subsi di ary of
Hol l and Ameri ca
Non- i ncorporat ed
j oi nt vent ure;
part ners have
j oi nt f i nanci al
cont rol ; t wo ot her
part ners: ICT
and BCSF
Incorporat ed j oi nt
vent ure, ot her
part ner Maj ox
Incorporat ed j oi nt
vent ure, ot her
part ner Nagua Co.
Incorporat ed
company,
subsi di ary of
Erewhon Co.
ECONOMI C
I NTEREST
HELD B Y
HOLLAND
I NDUSTRI ES
100%
83%
50% by
Hol l and
Ameri ca
75% by
Hol l and
Ameri ca
33.3%
43%
56%
1%
CONTROL
OF
OP ERATI NG
P OLI CI ES
Hol l and
Indust ri es
Hol l and
Indust ri es
Rearden
Hol l and
Ameri ca
Hol l and
Indust ri es
Hol l and
Indust ri es
Nal l o
Erewhon
Co.
TREATMENT I N
HOLLAND I NDUSTRI ES
F I NANCI AL ACCOUNTS
( SEE TAB LE 1 )
Whol l y owned subsi di ary
Subsi di ary
vi a Hol l and Ameri ca
vi a Hol l and Ameri ca
Proport i onal l y
consol i dat ed j oi nt vent ure
Subsi di ary
(Hol l and Indust ri es has
f i nanci al cont rol si nce
i t t reat s Qui ck Fi x as a
subsi di ary i n i t s f i nanci al
account s)
Associ at ed company
(Hol l and Indust ri es does
not have f i nanci al cont rol
si nce i t t reat s Nal l o as an
Associ at ed company i n i t s
f i nanci al account s)
Fi xed asset i nvest ment
EMI SSI ONS ACCOUNTED F OR AND REP ORTED
B Y HOLLAND I NDUSTRI ES
EQUI TY SHARE
AP P ROACH
100%
83%
41.5%
(83% x 50% )
62.25%
(83% x 75% )
33.3%
43%
56%
0%
CONTROL AP P ROACH
100% f or
operat i onal cont rol
100% f or
f i nanci al cont rol
100% f or
100% f or
0% f or
50% f or f i nanci al
cont rol (50% x 100% )
100% f or
100% f or
100% f or
33.3% f or
100% f or
100% f or
0% f or
0% f or
0% f or
0% f or
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f t er a company has det er mi ned i t s or gani zat i onal boundar i es i n t er ms
of t he oper at i ons t hat i t owns or cont r ol s, i t t hen set s i t s oper at i onal
boundar i es. Thi s i nvol ves i dent i f yi ng emi ssi ons associ at ed wi t h i t s oper at i ons,
cat egor i zi ng t hem as di r ect and i ndi r ect emi ssi ons, and choosi ng t he scope of
account i ng and r epor t i ng f or i ndi r ect emi ssi ons.
A
4
Setting Operational Boundaries
G U I D A N C E
S T A N D A R D
For effective and innovative GHG management, setting
operational boundaries that are comprehensive with
respect to direct and indirect emissions will help a
company better manage the full spectrum of GHG risks
and opportunities that exist along its value chain.
Direct GHG emissions are emissions from sources that
are owned or controlled by the company.
1
Indirect GHG emissions are emissions that are a
consequence of the activities of the company but occur
at sources owned or controlled by another company.
What is classified as direct and indirect emissions is
dependent on the consolidation approach (equity share
or control ) sel ected for setti ng the organi zati onal
boundary (see chapter 3). Fi gure 2 bel ow shows the
relationship between the organizational and operational
boundaries of a company.
I nt r oduc i ng t he c onc ept of sc ope
To help delineate direct and indirect emission sources,
improve transparency, and provide utility for different
types of organizations and different types of climate poli-
cies and business goals, three scopes (scope 1, scope
2, and scope 3) are defined for GHG accounting and
reporting purposes. Scopes 1 and 2 are carefully defined
in this standard to ensure that two or more companies
will not account for emissions in the same scope. This
makes the scopes amenable for use in GHG programs
where double counting matters.
Companies shall separately account for and report on
scopes 1 and 2 at a minimum.
Sc ope 1: Di r ec t GHG emi ssi ons
Di rect GHG emi ssi ons occur from sources that
are owned or control l ed by the company, for exampl e,
emi ssi ons from combusti on i n owned or control l ed
boilers, furnaces, vehicles, etc.; emissions from chemical
production in owned or controlled process equipment.
Direct CO
2
emissions from the combustion of biomass
shall not be included in scope 1 but reported separately
(see chapter 9).
GHG emissions not covered by the Kyoto Protocol, e.g.
CFCs, NOx, etc. shall not be included in scope 1 but may
be reported separately (see chapter 9).
Sc o p e 2 : El e c t r i c i t y i n d i r e c t GHG e mi s s i o n s
Scope 2 accounts for GHG emissions from the genera-
tion of purchased electricity
2
consumed by the company.
Purchased electricity is defined as electricity that is
purchased or otherwise brought into the organizational
boundary of the company. Scope 2 emissions physically
occur at the facility where electricity is generated.
Sc ope 3: Ot her i ndi r ec t GHG emi ssi ons
Scope 3 is an optional reporting category that allows
for the treatment of all other indirect emissions. Scope
3 emissions are a consequence of the activities of the
company, but occur from sources not owned or
controlled by the company. Some examples of scope 3
activities are extraction and production of purchased
materials; transportation of purchased fuels; and use of
sold products and services.
C HAPTE R 4 Setting Operational Boundaries 25
S
T
A
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D
A
R
D
F I GU R E 2 . Or gani zat i onal and oper at i onal boundar i es of a c ompany
P a r e n t Co m p a n y
Co m p a n y A
Shi p f l eet
Leased bui l di ng Di rect and i ndi rect emi ssi ons
Car f l eet Power
generat i on uni t
Leased f act ory Owned/
Cont rol l ed
bui l di ng
Owned/
Cont rol l ed
bui l di ng
Co m p a n y B Co m p a n y C Co m p a n y D
O
R
G
A
N
I
Z
A
T
I
O
N
A
L
B
O
U
N
D
A
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S
O
P
E
R
A
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I
O
N
A
L
B
O
U
N
D
A
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I
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S
}
}
n operational boundary defines the scope of direct
and indirect emissions for operations that fall within
a companys established organizational boundary.
The operational boundary (scope 1, scope 2, scope 3) is
decided at the corporate level after setting the organiza-
tional boundary. The selected operational boundary is then
uniformly applied to identify and categorize direct and
indirect emissions at each operational level (see Box 2).
The established organizational and operational bound-
aries together constitute a companys inventory boundary.
Ac c ount i ng and r epor t i ng on sc opes
Companies account for and report emissions from
scope 1 and 2 separately. Companies may further
subdivide emissions data within scopes where this aids
transparency or facilitates comparability over time.
For example, they may subdivide data by business
unit/facility, country, source type (stationary combustion,
process, fugitive, etc.), and activity type (production
of electricity, consumption of electricity, generation or
purchased electricity that is sold to end users, etc.).
I n addition to the six Kyoto gases, companies may also
provide emissions data for other GHGs (e.g., Montreal
Protocol gases) to give context to changes in emission
levels of Kyoto Protocol gases. Switching from a CFC
to HFC, for example, will increase emissions of Kyoto
Protocol gases. I nformation on emissions of GHGs other
than the six Kyoto gases may be reported separately
from the scopes in a GHG public report.
Together the three scopes provi de a comprehensi ve
accounti ng framework for managi ng and reduci ng
di rect and i ndi rect emi ssi ons. Fi gure 3 provi des an
overvi ew of the rel ati onshi p between the scopes and
the activities that generate direct and indirect emissions
along a companys value chain.
A company can benefit from efficiency gains throughout
the value chain. Even without any policy drivers,
accounting for GHG emissions along the value chain may
reveal potential for greater efficiency and lower costs
(e.g., the use of fly ash as a clinker substitute in the
manufacture of cement that reduces downstream emis-
sions from processing of waste fly ash, and upstream
26
C HAPTE R 4
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B OX 2 . Or gani zat i onal and oper at i onal boundar i es
Or gani zat i on X i s a par ent company t hat has f ul l owner shi p and
f i nanci al cont r ol of oper at i ons A and B, but onl y a 30% non-
oper at ed i nt er est and no f i nanci al cont r ol i n oper at i on C.
Set t i ng Or gani zat i onal Boundar y: X woul d deci de whet her t o
account f or GHG emi ssi ons by equi t y share or f i nanci al cont rol . If
t he choi ce i s equi t y share, X woul d i ncl ude A and B, as wel l as 30%
of Cs emi ssi ons. If t he approach chosen i s f i nanci al cont rol , X
woul d count onl y A and Bs emi ssi ons as rel evant and subj ect t o
consol i dat i on. Once t hi s has been deci ded, t he organi zat i onal
boundary has been def i ned.
Set t i ng Oper at i onal Boundar y: Once t he organi zat i onal boundary
i s set , X t hen needs t o deci de, on t he basi s of i t s busi ness goal s,
whet her t o account onl y f or scope 1 and scope 2, or whet her t o
i ncl ude rel evant scope 3 cat egori es f or i t s operat i ons.
Operat i ons A, B and C (i f t he equi t y approach i s sel ect ed) account
f or t he GHG emi ssi ons i n t he scopes chosen by X, i .e., t hey appl y t he
corporat e pol i cy i n drawi ng up t hei r operat i onal boundari es.
F I GU R E 3 . Over vi ew of sc opes and emi ssi ons ac r oss a val ue c hai n
SCOPE 2
INDIRECT
CO
2
SF
6
N
2
O CH
4
PFCs HFCs
SCOPE 1
DIRECT
SCOPE 3
INDIRECT
PURCHASEDELECTRICITY
FOROWNUSE
COMPANY OWNED
VEHICLES
FUELCOMBUSTION
PRODUCT
USE
OUTSOURCEDACTIVITIES
CONTRACTOROWNED
VEHICLES
WASTE DISPOSAL
EMPLOYEE BUSINESS TRAVEL
PRODUCTIONOF
PURCHASEDMATERIALS
A
A
d
o
p
t
e
d

f
r
o
m

N
Z
B
C
S
D
,

2
0
0
2
emissions from producing clinker). Even if such win-
win options are not available, indirect emissions
reductions may still be more cost effective to accomplish
than scope 1 reductions. Thus accounting for indirect
emissions can help identify where to allocate limited
resources in a way that maximizes GHG reduction and
return on investment.
Appendix D lists GHG sources and activities along the
value chain by scopes for various industry sectors.
Sc ope 1: Di r ec t GHG emi ssi ons
Companies report GHG emissions from sources they own
or control as scope 1. Direct GHG emissions are princi-
pally the result of the following types of activities
undertaken by the company:
Generation of electricity, heat, or steam. These emis-
sions result from combustion of fuels in stationary
sources, e.g., boilers, furnaces, turbines
Physical or chemical processing.
3
Most of these emis-
sions result from manufacture or processing of chemicals
and materials, e.g., cement, aluminum, adipic acid,
ammonia manufacture, and waste processing
Transportation of materials, products, waste, and
employees. These emissions result from the combus-
tion of fuels in company owned/controlled mobile
combustion sources (e.g., trucks, trains, ships,
airplanes, buses, and cars)
Fugitive emissions. These emissions result from inten-
tional or unintentional releases, e.g., equipment leaks
from joints, seals, packing, and gaskets; methane
emissions from coal mines and venting; hydrofluoro-
carbon (HFC) emissions during the use of refrigeration
and air conditioning equipment; and methane leakages
from gas transport.
S A L E OF OWN - GE N E R ATE D E L E C TR I C I TY
Emissions associated with the sale of own-generated
electricity to another company are not deducted/netted
from scope 1. This treatment of sold electricity is consis-
tent with how other sold GHG intensive products are
accounted, e.g., emissions from the production of sold
clinker by a cement company or the production of scrap
steel by an iron and steel company are not subtracted
from their scope 1 emissions. Emissions associated with
the sale/transfer of own-generated electricity may be
reported in optional information (see chapter 9).
Sc ope 2: El ec t r i c i t y i ndi r ec t GHG emi ssi ons
Companies report the emissions from the generation of
purchased electricity that is consumed in its owned or
controlled equipment or operations as scope 2. Scope 2
emissions are a special category of indirect emissions. For
many companies, purchased electricity represents one of
the largest sources of GHG emissions and the most signifi-
cant opportunity to reduce these emissions. Accounting
for scope 2 emissions allows companies to assess the risks
and opportunities associated with changing electricity and
GHG emissions costs. Another important reason for
companies to track these emissions is that the information
may be needed for some GHG programs.
Companies can reduce their use of electricity by investing
in energy efficient technologies and energy conservation.
Additionally, emerging green power markets
4
provide
opportunities for some companies to switch to less GHG
intensive sources of electricity. Companies can also install
an efficient on site co-generation plant, particularly if it
replaces the purchase of more GHG intensive electricity
from the grid or electricity supplier. Reporting of scope 2
emissions allows transparent accounting of GHG emis-
sions and reductions associated with such opportunities.
I N D I R E C T E M I S S I ON S
A S S OC I ATE D WI TH TR A N S M I S S I ON A N D D I S TR I B U TI ON
Electric utility companies often purchase electricity from
independent power generators or the grid and resell it to
end-consumers through a transmission and distribution
(T&D) system.
5
A portion of the electricity purchased
by a utility company is consumed (T&D loss) during its
transmission and distribution to end-consumers (see Box 3).
Consistent with the scope 2 definition, emissions from the
generation of purchased electricity that is consumed
during transmission and distribution are reported in
scope 2 by the company that owns or controls the T&D
operation. End consumers of the purchased electricity do
not report indirect emissions associated with T&D losses
in scope 2 because they do not own or control the T&D
operation where the electricity is consumed (T&D loss).
G
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B OX 3 . El ec t r i c i t y bal anc e
Pur c hased el ec t r i c i t y c onsumed
by t he ut i l i t y c ompany dur i ng T&D
+
Pur c hased el ec t r i c i t y c onsumed
by end c onsumer s
GE N E R ATE D
E L E C TR I C I TY
=
This approach ensures that there is no double counting
within scope 2 since only the T&D utility company will
account for indirect emissions associated with T&D
losses in scope 2. Another advantage of this approach is
that it adds simplicity to the reporting of scope 2 emis-
sions by allowing the use of commonly available emission
factors that in most cases do not include T&D losses.
End consumers may, however, report their indirect emis-
sions associated with T&D losses in scope 3 under the
category generation of electricity consumed in a T&D
system. Appendix A provides more guidance on
accounting for emissions associated with T&D losses.
OTH E R E L E C TR I C I TY- R E L ATE D I N D I R E C T E M I S S I ON S
I ndirect emissions from activities upstream of a
companys electricity provider (e.g., exploration, drilling,
flaring, transportation) are reported under scope 3.
Emissions from the generation of electricity that has been
purchased for resale to end-users are reported in scope 3
under the category generation of electricity that is
purchased and then resold to end users. Emissions from
the generation of purchased electricity for resale to non-
end-users (e.g., electricity traders) may be reported sepa-
rately from scope 3 in optional information.
The following two examples illustrate how GHG emissions
are accounted for from the generation, sale, and
purchase of electricity.
Example one (Figure 4): Company A is an independent
power generator that owns a power generation plant.
The power plant produces 100 MWh of electricity and
releases 20 tonnes of emissions per year. Company B
is an electricity trader and has a supply contract with
company A to purchase all its electricity. Company B re-
sells the purchased electricity (100 MWh) to company C,
a utility company that owns /controls the T&D system.
Company C consumes 5 MWh of electricity in its T&D
system and sells the remaining 95 MWh to company D.
Company D is an end user who consumes the purchased
electricity (95 MWh) in its own operations. Company A
reports its direct emissions from power generation
under scope 1. Company B reports emissions from the
purchased electricity sold to a non-end-user as optional
information separately from scope 3. Company C reports
the indirect emissions from the generation of the part of
the purchased electricity that is sold to the end-user
under scope 3 and the part of the purchased electricity
that it consumes in its T&D system under scope 2. End-
user D reports the indirect emissions associated with its
own consumption of purchased electricity under scope 2
and can optionally report emissions associated with
upstream T&D losses in scope 3. Figure 4 shows the
accounting of emissions associated with these transactions.
Example two: Company D installs a co-generation unit
and sells surplus electricity to a neighboring company E
for its consumption. Company D reports all direct emis-
sions from the co-generation unit under scope 1. I ndirect
emissions from the generation of electricity for export to
E are reported by D under optional information separately
G
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C HAPTE R 4 28
Seat t l e Ci t y Li ght (SCL), Seat t l es muni ci pal ut i l i t y company, sel l s
el ect ri ci t y t o i t s end- use cust omers t hat i s ei t her produced at i t s
own hydropower f aci l i t i es, purchased t hrough l ong- t erm cont ract s,
or purchased on t he short - t erm market . SCL used t he f i rst edi t i on of
t he GHG Prot ocol Corporat e St andard t o est i mat e i t s year 2000 and
year 2002 GHG emi ssi ons, and emi ssi ons associ at ed wi t h genera-
t i on of net purchased el ect ri ci t y sol d t o end- users was an i mport ant
component of t hat i nvent ory. SCL t racks and report s t he amount of
el ect ri ci t y sol d t o end- users on a mont hl y and annual basi s.
SCL cal cul at es net purchases f rom t he market (brokers and ot her
ut i l i t y compani es) by subt ract i ng sal es t o t he market f rom
purchases f rom t he market , measured i n MWh. Thi s al l ows a
compl et e account i ng of al l emi ssi ons i mpact s f rom i t s ent i re oper-
at i on, i ncl udi ng i nt eract i ons wi t h t he market and end- users. On an
annual basi s, SCL produces more el ect ri ci t y t han t here i s end- use
demand, but t he product i on does not mat ch l oad i n al l mont hs. So
SCL account s f or bot h purchases f rom t he market and sal es i nt o t he
market . SCL al so i ncl udes t he scope 3 upst ream emi ssi ons f rom
nat ural gas product i on and del i very, operat i on of SCL f aci l i t i es,
vehi cl e f uel use, and ai rl i ne t ravel .
SCL bel i eves t hat sal es t o end- users are a cri t i cal part of t he emi s-
si ons prof i l e f or an el ect ri c ut i l i t y company. Ut i l i t y compani es need
t o provi de i nf ormat i on on t hei r emi ssi ons prof i l e t o educat e end-
users and adequat el y represent t he i mpact of t hei r busi ness, t he
provi di ng of el ect ri ci t y. End- use cust omers need t o rel y on t hei r
ut i l i t y company t o provi de el ect ri ci t y, and except i n some i nst ances
(green power programs), do not have a choi ce i n where t hei r el ec-
t ri ci t y i s purchased. SCL meet s a cust omer need by provi di ng
emi ssi ons i nf ormat i on t o cust omers who are doi ng t hei r own emi s-
si ons i nvent ory.
Seat t l e Ci t y Li ght : Ac c ount i ng f or t he
pur c hase of el ec t r i c i t y sol d t o end user s
from scope 3. Company E reports indirect emissions
associated with the consumption of electricity purchased
from the company Ds co-generation unit under scope 2.
For more guidance, see Appendix A on accounting for
indirect emissions from purchased electricity.
Sc ope 3: Ot her i ndi r ec t GHG emi ssi ons
Scope 3 is optional, but it provides an opportunity to be
innovative in GHG management. Companies may want to
focus on accounting for and reporting those activities that
are relevant to their business and goals, and for which they
have reliable information. Since companies have discretion
over which categories they choose to report, scope 3 may
not lend itself well to comparisons across companies. This
section provides an indicative list of scope 3 categories
and includes case studies on some of the categories.
Some of these activities will be included under scope 1 if the
pertinent emission sources are owned or controlled by the
company (e.g., if the transportation of products is done in
vehicles owned or controlled by the company). To determine
if an activity falls within scope 1 or scope 3, the company
should refer to the selected consolidation approach (equity
or control) used in setting its organizational boundaries.
Extraction and production of purchased materials
and fuels
6
Transport-related activities
Transportation of purchased materials or goods
Transportation of purchased fuels
Employee business travel
Employees commuting to and from work
Transportation of sold products
Transportation of waste
Electricity-related activities not included in scope 2
(see Appendix A)
Extraction, production, and transportation of fuels
consumed in the generation of electricity (either
purchased or own generated by the reporting company)
Purchase of electricity that is sold to an end user
(reported by utility company)
Generation of electricity that is consumed in a T&D
system (reported by end-user)
Leased assets, franchises, and outsourced activities
emissions from such contractual arrangements are
only classified as scope 3 if the selected consolidation
approach (equity or control) does not apply to them.
Clarification on the classification of leased assets
should be obtained from the company accountant (see
section on leases below).
Use of sold products and services
Waste disposal
Disposal of waste generated in operations
Disposal of waste generated in the production of
purchased materials and fuels
Disposal of sold products at the end of their life
A C C OU N TI N G F OR S C OP E 3 E M I S S I ON S
Accounting for scope 3 emissions need not involve a
full-blown GHG life cycle analysis of all products and
operations. Usually it is valuable to focus on one or two
major GHG-generating activities. Although it is diffi-
cult to provide generic guidance on which scope 3
emissions to include in an inventory, some general steps
can be articulated:
G
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As Scope 1
emi ssi ons = 20t
emi ssi on f act or
= 0. 2 t / MWh
100 MWh 100 MWh 95 MWh
emi ssi on f act or
= 0. 2 t / MWh
emi ssi on f act or
= 0. 2 t / MWh
Bs Opt i onal Inf ormat i on = 20t Cs Scope 3 emi ssi ons = 19t Ds Scope 3 emi ssi ons = 1t
Cs Scope 2
emi ssi ons = 1t
Ds Scope 2
emi ssi ons = 19t
Gener at or A End- user D
El ec t r i c i t y
Tr ader B
Ut i l i t y
Company C
F I GU R E 4 . GHG ac c ount i ng f r om t he sal e and pur c hase of el ec t r i c i t y
1. Describe the value chain. Because the assessment of
scope 3 emissions does not require a full life cycle
assessment, it is important, for the sake of transparency,
to provide a general description of the value chain and
the associated GHG sources. For this step, the scope 3
categories listed can be used as a checklist. Companies
usually face choices on how many levels up- and down-
stream to include in scope 3. Consideration of the
companys inventory or business goals and relevance of
the various scope 3 categories will guide these choices.
2. Determine which scope 3 categories are relevant. Only
some types of upstream or downstream emissions cate-
gories might be relevant to the company. They may be
relevant for several reasons:
They are large (or believed to be large) relative to the
companys scope 1 and scope 2 emissions
They contribute to the companys GHG risk exposure
They are deemed critical by key stakeholders (e.g.,
feedback from customers, suppliers, investors, or
civil society)
There are potential emissions reductions that could be
undertaken or influenced by the company.
The following examples may help decide which scope 3
categories are relevant to the company.
I f fossil fuel or electricity is required to use the
companys products, product use phase emissions may
be a relevant category to report. This may be espe-
cially important if the company can influence product
design attributes (e.g., energy efficiency) or customer
behavior in ways that reduce GHG emissions during
the use of the products.
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C HAPTE R 4 30
F I GU R E 5 . Ac c ount i ng of emi ssi ons f r om l eased asset s
P a r e n t Co m p a n y
Co m p a n y A
Sc ope 1 Sc ope 1 Sc ope 2 Sc ope 3
Leased c ar f l eet
(sel ect ed consol i dat i on
cri t eri on appl i es)
Leased bui l di ng
(sel ect ed consol i dat i on
cri t eri on appl i es)
Leased c ar f l eet
(sel ect ed consol i dat i on cri t eri on
does not appl y)
Co m p a n y B
O
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B
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}
}
As a maj or t ransport at i on and l ogi st i cs company i n nort hern Europe,
DHL Express Nordi c serves l arge l oads and speci al t ransport needs
as wel l as worl d wi de express package and document del i veri es and
of f ers couri er, express, parcel , syst emi zed and speci al t y busi ness
servi ces. Through part i ci pat i on i n t he Busi ness Leaders Ini t i at i ve on
Cl i mat e Change, t he company f ound t hat 98 percent of i t s emi ssi ons
i n Sweden ori gi nat e f rom t he t ransport of goods vi a out sourced
part ner t ransport at i on f i rms. Each part ner i s requi red, as an el ement
of t he subcont ract payment scheme, t o ent er dat a on vehi cl es used,
di st ance t ravel ed, f uel ef f i ci ency, and background dat a. Thi s dat a i s
used t o cal cul at e t ot al emi ssi ons vi a a t ai l ored cal cul at i on t ool f or
out sourced t ransport at i on whi ch gi ves a det ai l ed pi ct ure of i t s scope
3 emi ssi ons. Li nki ng dat a t o speci f i c carri ers al l ows t he company t o
screen i ndi vi dual carri ers f or envi ronment al perf ormance and af f ect
deci si ons based on each carri ers emi ssi ons perf ormance, whi ch i s
seen t hrough scope 3 as DHLs own perf ormance.
By i ncl udi ng scope 3 and promot i ng GHG reduct i ons t hroughout t he
val ue chai n, DHL Express Nordi c i ncreased t he rel evance of i t s
emi ssi ons f oot pri nt , expanded opport uni t i es f or reduci ng i t s
i mpact s and i mproved i t s abi l i t y t o recogni ze cost savi ng opport u-
ni t i es. Wi t hout scope 3, DHL Express Nordi c woul d have l acked
much of t he i nf ormat i on needed t o be abl e t o underst and and ef f ec-
t i vel y manage i t s emi ssi ons.
S C OP E
Scope 1
Scope 2
Scope 3
Tot al
E M I S S I ON S ( t C O
2
)
DHL Nor di c Expr ess: The busi ness c ase f or
ac c ount i ng f or out sour c ed t r anspor t at i on ser vi c es
7,265
52
327,634
334,951
Outsourced activities are often candidates for scope 3
emissions assessments. I t may be particularly important
to include these when a previously outsourced activity
contributed significantly to a companys scope 1 or
scope 2 emissions.
I f GHG-intensive materials represent a significant
fraction of the weight or composition of a product
used or manufactured (e.g., cement, aluminum),
companies may want to examine whether there are
opportunities to reduce their consumption of the
product or to substitute less GHG-intensive materials.
Large manufacturing companies may have significant
emissions related to transporting purchased materials
to centralized production facilities.
Commodity and consumer product companies may
want to account for GHGs from transporting raw
materials, products, and waste.
Service sector companies may want to report on emis-
sions from employee business travel; this emissions
source is not as likely to be significant for other kinds
of companies (e.g., manufacturing companies).
3. Identify partners along the value chain.
I denti fy any partners that contri bute potenti al l y
si gni fi cant amounts of GHGs al ong the val ue chai n
(e.g., customers/users, product desi gners/manufac-
turers, energy provi ders, etc.). Thi s i s i mportant when
tryi ng to i denti fy sources, obtai n rel evant data, and
cal cul ate emi ssi ons.
4. Quantify scope 3 emissions. While data availability
and reliability may influence which scope 3 activities
are included in the inventory, it is accepted that data
accuracy may be lower. I t may be more important
to understand the relative magnitude of and possible
changes to scope 3 activities. Emission estimates are
acceptable as long as there is transparency with regard
to the estimation approach, and the data used for the
analysis are adequate to support the objectives of the
inventory. Verification of scope 3 emissions will often
be difficult and may only be considered if data is of
reliable quality.
Leased asset s, out sour c i ng, and f r anc hi ses
The selected consolidation approach (equity share or one
of the control approaches) is also applied to account for
and categorize direct and indirect GHG emissions from
contractual arrangements such as leased assets,
outsourcing, and franchises. I f the selected equity or
control approach does not apply, then the company may
account for emissions from the leased assets,
outsourcing, and franchises under scope 3. Specific guid-
ance on leased assets is provided below:
USI NG EQUI TY SHARE OR F I NANCI AL CONTROL : The
lessee only accounts for emissions from leased assets
that are treated as wholly owned assets in financial
accounting and are recorded as such on the balance
sheet (i.e., finance or capital leases).
IKEA, an i nt ernat i onal home f urni t ure and f urni shi ngs ret ai l er,
deci ded t o i ncl ude scope 3 emi ssi ons f rom cust omer t ravel when
i t became cl ear, t hrough part i ci pat i on i n t he Busi ness Leaders
Ini t i at i ve on Cl i mat e Change (BLICC) program, t hat t hese emi s-
si ons were l arge rel at i ve i t s scope 1 and scope 2 emi ssi ons.
Furt hermore, t hese emi ssi ons are part i cul arl y rel evant t o IKEAs
st ore busi ness model . Cust omer t ravel t o i t s st ores, of t en f rom
l ong di st ances, i s di rect l y af f ect ed by IKEAs choi ce of st ore l oca-
t i on and t he warehouse shoppi ng concept .
Cust omer t ransport at i on emi ssi on cal cul at i ons were based on
cust omer surveys at sel ect ed st ores. Cust omers were asked f or
t he di st ance t hey t ravel ed t o t he st ore (based on home post al
code), t he number of cust omers i n t hei r car, t he number of ot her
st ores t hey i nt ended t o vi si t at t hat shoppi ng cent er t hat day, and
whet her t hey had access t o publ i c t ransport at i on t o t he st ore.
Ext rapol at i ng t hi s dat a t o al l IKEA st ores and mul t i pl yi ng di st ance
by average vehi cl e ef f i ci enci es f or each count ry, t he company
cal cul at ed t hat 66 percent of i t s emi ssi ons i nvent ory was f rom
scope 3 cust omer t ravel . Based on t hi s i nf ormat i on, IKEA wi l l have
si gni f i cant i nf l uence over f ut ure scope 3 emi ssi ons by consi deri ng
GHG emi ssi ons when devel opi ng publ i c t ransport at i on opt i ons
and home del i very servi ces f or i t s exi st i ng and new st ores.
I KEA: Cust omer t r anspor t at i on
t o and f r om i t s r et ai l st or es
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C HAPTE R 4 32
U S I N G OP E R ATI ON A L C ON TR OL : The lessee only
accounts for emissions from leased assets that it oper-
ates (i.e., if the operational control criterion applies).
Guidance on which leased assets are operating and
which are finance leases should be obtained from the
company accountant. I n general, in a finance lease, an
organization assumes all rewards and risks from the
leased asset, and the asset is treated as wholly owned
and is recorded as such on the balance sheet. All
leased assets that do not meet those criteria are oper-
ating leases. Figure 5 illustrates the application of
consolidation criteria to account for emissions from
leased assets.
Doubl e c ount i ng
Concern is often expressed that accounting for indirect
emissions will lead to double counting when two
different companies include the same emissions in their
respective inventories. Whether or not double counting
occurs depends on how consistently companies with
shared ownership or trading program administrators
choose the same approach (equity or control) to set the
organizational boundaries. Whether or not double
counting matters, depends on how the reported informa-
tion is used.
Double counting needs to be avoided when compiling
national (country) inventories under the Kyoto Protocol,
but these are usually compiled via a top-down exercise
using national economic data, rather than aggregation
of bottom-up company data. Compliance regimes are
more likely to focus on the point of release of emis-
sions (i.e., direct emissions) and/or indirect emissions
from use of electricity. For GHG risk management and
voluntary reporting, double counting is less important.
The Worl d Resources Inst i t ut e has a l ong- st andi ng commi t ment t o
reduce i t s annual GHG emi ssi ons t o net zero t hrough a combi nat i on
of i nt ernal reduct i on ef f ort s and ext ernal of f set purchases. WRIs
emi ssi ons i nvent ory i ncl udes scope 2 i ndi rect emi ssi ons associ -
at ed wi t h t he consumpt i on of purchased el ect ri ci t y and scope 3
i ndi rect emi ssi ons associ at ed wi t h busi ness ai r t ravel , empl oyee
commut i ng, and paper use. WRI has no scope 1 di rect emi ssi ons.
Col l ect i ng empl oyee commut i ng act i vi t y dat a f rom WRIs 140 st af f
can be chal l engi ng. The met hod used i s t o survey empl oyees once
each year about t hei r average commut i ng habi t s. In t he f i rst t wo
year s of t he i ni t i at i ve, WRI used an Excel spr eadsheet accessi bl e
t o al l empl oyees on a shar ed i nt er nal net wor k, but onl y achi eved
a 48 percent part i ci pat i on rat e. A si mpl i f i ed, web- based survey
t hat downl oaded i nt o a spr eadsheet i mpr oved par t i ci pat i on t o
65 percent i n t he t hi rd year. Usi ng f eedback on t he survey desi gn,
WRI f urt her si mpl i f i ed and ref i ned survey quest i ons, i mproved user
f ri endl i ness, and reduced t he t i me needed t o compl et e t he survey t o
l ess t han a mi nut e. Empl oyee part i ci pat i on rat e rose t o 88 percent .
Desi gni ng a survey t hat was easi l y navi gabl e and had cl earl y art i c-
ul at ed quest i ons si gni f i cant l y i mpr oved t he compl et eness and
accur acy of t he empl oyee commut i ng act i vi t y dat a. An added
benef i t was t hat empl oyees f el t a cert ai n amount of pri de at havi ng
cont ri but ed t o t he i nvent ory devel opment process. The experi ence
al so provi ded a posi t i ve i nt ernal communi cat i ons opport uni t y.
WRI has devel oped a gui de consi st ent wi t h GHG Prot ocol Corporat e
St andar d t o hel p of f i ce- based or gani zat i ons under st and how t o
t rack and manage t hei r emi ssi ons. Worki ng 9 t o 5 on Cl i mat e Change:
An Of f i ce Gui de i s accompani ed by a sui t e of cal cul at i on t ool s,
i ncl udi ng one f or usi ng a survey met hod t o est i mat e empl oyee
commut i ng emi ssi ons. The Gui de and t ool s can be downl oaded f rom
t he GHG Prot ocol Ini t i at i ve websi t e (www.ghgprot ocol .org).
Transport at i on- rel at ed emi ssi ons are t he f ast est growi ng GHG
emi ssi ons cat egory i n t he Uni t ed St at es. Thi s i ncl udes commerci al ,
busi ness, and personal t ravel as wel l as commut i ng. By account i ng
f or commut i ng emi ssi ons, compani es may f i nd t hat several
pract i cal opport uni t i es exi st f or reduci ng t hem. For exampl e, when
WRI moved t o new of f i ce space, i t sel ect ed a bui l di ng l ocat ed cl ose
t o publ i c t ransport at i on, reduci ng t he need f or empl oyees t o dri ve
t o wor k. I n i t s l ease, WRI al so negot i at ed access t o a l ocked bi ke
r oom f or t hose empl oyees who cycl e t o wor k. Fi nal l y, t el ewor k
programs si gni f i cant l y reduce commut i ng emi ssi ons by avoi di ng or
decreasi ng t he need t o t ravel .
Wor l d Resour c es I nst i t ut e:
I nnovat i ons i n est i mat i ng empl oyee c ommut i ng emi ssi ons
For participating in GHG markets or obtaining GHG
credits, it would be unacceptable for two organizations
to claim ownership of the same emissions commodity
and it is therefore necessary to make sufficient
provisions to ensure that this does not occur between
participating companies (see chapter 11).
S C OP E S A N D D OU B L E C OU N TI N G
The GHGProtocol Corporate Standardis designed to
prevent double counting of emissions between different
compani es wi thi n scope 1 and 2. For exampl e, the
scope 1 emi ssi ons of company A (generator of
electricity) can be counted as the scope 2 emissions of
company B (end-user of electricity) but company As
scope 1 emissions cannot be counted as scope 1 emis-
sions by company C (a partner organization of
company A) as long as company A and company C
consistently apply the same control or equity share
approach when consolidating emissions.
Similarly, the definition of scope 2 does not allow double
counting of emissions within scope 2, i.e., two different
companies cannot both count scope 2 emissions from
the purchase of the same electricity. Avoiding this type
of double counting within scope 2 emissions makes it a
useful accounting category for GHG trading programs
that regulate end users of electricity.
When used in external initiatives such as GHG trading,
the robustness of the scope 1 and 2 definitions combined
with the consistent application of either the control or
equity share approach for defining organizational bound-
aries allows only one company to exercise ownership of
scope 1 or scope 2 emissions.
ABB, an energy and aut omat i on t echnol ogy company based i n
Swi t zerl and, produces a vari et y of appl i ances and equi pment ,
such as ci rcui t breakers and el ect ri cal dri ves, f or i ndust ri al appl i -
cat i ons. ABB has a st at ed goal t o i ssue Envi ronment al Product
Decl arat i ons (EPDs) f or al l i t s core product s based on l i f e cycl e
assessment . As a part of i t s commi t t ment , ABB report s bot h
manuf act uri ng and product use phase GHG emi ssi ons f or a
vari et y of i t s product s usi ng a st andardi zed cal cul at i on met hod
and set of assumpt i ons. For exampl e, product use phase cal cul a-
t i ons f or ABBs 4 kW Dri veIT Low Vol t age AC dri ve are based on a
15- year expect ed l i f et i me and an average of 5,000 annual oper-
at i ng hour s. Thi s act i vi t y dat a i s mul t i pl i ed by t he aver age
el ect ri ci t y emi ssi on f act or f or OECD count ri es t o produce t ot al
l i f et i me product use emi ssi ons.
Compared wi t h manuf act uri ng emi ssi ons, product use phase
emi ssi ons account f or about 99 percent of t ot al l i f e cycl e emi s-
si ons f or t hi s t ype of dri ve. The magni t ude of t hese emi ssi ons and
ABBs cont rol of t he desi gn and perf ormance of t hi s equi pment
cl earl y gi ve t he company si gni f i cant l everage on i t s cust omers
emi ssi ons by i mprovi ng product ef f i ci ency or hel pi ng cust omers
desi gn bet t er overal l syst ems i n whi ch ABBs product s are
i nvol ved. By cl earl y def i ni ng and quant i f yi ng si gni f i cant val ue
chai n emi ssi ons, ABB has gai ned i nsi ght i nt o and i nf l uence over
i t s emi ssi ons f oot pri nt .
ABB: Cal c ul at i ng pr oduc t use phase
emi ssi ons assoc i at ed wi t h el ec t r i c al appl i anc es
N OTE S
1
The t erms di rect and i ndi rect as used i n t hi s document shoul d not
be conf used wi t h t hei r use i n nat i onal GHG i nvent ori es where di rect
ref ers t o t he si x Kyot o gases and i ndi rect ref ers t o t he precursors NOx,
NMVOC, and CO.
2
The t erm el ect ri ci t y i s used i n t hi s chapt er as short hand f or el ec-
t ri ci t y, st eam, and heat i ng/ cool i ng.
3
For some i nt egrat ed manuf act uri ng processes, such as ammoni a manu-
f act ure, i t may not be possi bl e t o di st i ngui sh bet ween GHG emi ssi ons f rom
t he process and t hose f rom t he product i on of el ect ri ci t y, heat , or st eam.
4
Green power i ncl udes renewabl e energy sources and speci f i c cl ean energy
t echnol ogi es t hat reduce GHG emi ssi ons rel at i ve t o ot her sources of energy
t hat suppl y t he el ect ri c gri d, e.g., sol ar phot ovol t ai c panel s, geot hermal
energy, l andf i l l gas, and wi nd t urbi nes.
5
A T&D syst em i ncl udes T&D l i nes and ot her T&D equi pment
(e.g., t ransf ormers).
6
Purchased mat eri al s and f uel s i s def i ned as mat eri al or f uel t hat i s
purchased or ot herwi se brought i nt o t he organi zat i onal boundary of
t he company.
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omp a n i es of t en u n d er g o si g n i f i ca n t st r u ct u r a l ch a n g es su ch a s
a cq u i si t i on s, d i vest men t s, a n d mer g er s. Th ese ch a n g es wi l l a l t er a
comp a n ys h i st or i ca l emi ssi on p r of i l e, ma ki n g mea n i n g f u l comp a r i son s over
t i me d i f f i cu l t . I n or d er t o ma i n t a i n con si st en cy over t i me, or i n ot h er wor d s,
t o k eep c om p a r i n g l i k e wi t h l i k e , h i s t or i c em i s s i on d a t a wi l l h a v e t o
b e r eca l cu l a t ed .
C
Tracking Emissions Over Time
G U I D A N C E
S T A N D A R D
5
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Companies may need to track emissions over time in
response to a variety of business goals, including:
Public reporting
Establishing GHG targets
Managing risks and opportunities
Addressing the needs of investors and other stakeholders
A meaningful and consistent comparison of emissions
over time requires that companies set a performance
datum with which to compare current emissions. This
performance datum is referred to as the base year
1
emissions. For consistent tracking of emissions over
time, the base year emissions may need to be recalcu-
lated as companies undergo significant structural
changes such as acquisitions, divestments, and mergers.
The first step in tracking emissions, however, is the selec-
tion of a base year.
Choosi ng a base year
Companies shall choose and report a base year for which
verifiable emissions data are available and specify their
reasons for choosing that particular year.
Most companies select a single year as their base year.
However, it is also possible to choose an average of
annual emissions over several consecutive years. For
example, the U.K. ETS specifies an average of
19982000 emissions as the reference point for tracking
reductions. A multi-year average may help smooth out
unusual fluctuations in GHG emissions that would make
a single years data unrepresentative of the companys
typical emissions profile.
The inventory base year can also be used as a basis for
setting and tracking progress towards a GHG target in
which case it is referred to as a target base year (see
chapter 11).
Rec al c ul at i ng base year emi ssi ons
Companies shall develop a base year emissions recalcu-
lation policy, and clearly articulate the basis and
context for any recalculations. I f applicable, the policy
shall state any significance threshold applied for
deciding on historic emissions recalculation. Significance
threshold is a qualitative and/or quantitative criterion
used to define any significant change to the data, inven-
tory boundary, methods, or any other relevant factors.
I t is the responsibility of the company to determine
the significance threshold that triggers base year
emissions recalculation and to disclose it. I t is the
responsibility of the verifier to confirm the companys
adherence to its threshold policy. The following cases
shall trigger recalculation of base year emissions:
Structural changes in the reporting organization that
have a significant impact on the companys base year
emissions. A structural change involves the transfer
of ownership or control of emissions-generating activ-
ities or operations from one company to another.
While a single structural change might not have a
significant impact on the base year emissions, the
cumulative effect of a number of minor structural
changes can result in a significant impact. Structural
changes include:
Mergers, acquisitions, and divestments
Outsourcing and insourcing of emitting activities
Changes in calculation methodology or improvements
in the accuracy of emission factors or activity data
that result in a significant impact on the base year
emissions data
Discovery of significant errors, or a number of cumu-
lative errors, that are collectively significant.
I n summary, base year emissions shall be retroactively
recalculated to reflect changes in the company that
would otherwise compromise the consistency and rele-
vance of the reported GHG emissions information. Once
a company has determined its policy on how it will recal-
culate base year emissions, it shall apply this policy in a
consistent manner. For example, it shall recalculate for
both GHG emissions increases and decreases.
C HAPTE R 5 Tracking Emissions Over Time 35
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el ecti on and recal cul ati on of a base year shoul d
rel ate to the busi ness goal s and the parti cul ar
context of the company:
For the purpose of reporting progress towards volun-
tary public GHG targets, companies may follow the
standards and guidance in this chapter
A company subject to an external GHG program may
face external rules governing the choice and recalcu-
lation of base year emissions
For internal management goals, the company may
follow the rules and guidelines recommended in this
document, or it may develop its own approach, which
should be followed consistently.
Choosi ng a base year
Companies should choose as a base year the earliest rele-
vant point in time for which they have reliable data.
Some organizations have adopted 1990 as a base year in
order to be consistent with the Kyoto Protocol. However,
obtaining reliable and verifiable data for historical base
years such as 1990 can be very challenging.
I f a company continues to grow through acquisitions, it
may adopt a policy that shifts or rolls the base year
forward by a number of years at regular intervals.
Chapter 11 contains a description of such a rolling
base year, including a comparison with the fixed base
year approach described in this chapter. A fixed base
year has the advantage of allowing emissions data to be
compared on a like-with-like basis over a longer time
period than a rolling base year approach. Most emis-
sions trading and registry programs require a fixed base
year policy to be implemented.
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F I GU R E 6 . Base year emi ssi ons r ec al c ul at i on f or an ac qui si t i on
Base Year I nc r ease i n
Pr oduc t i on
Gamma
Ac qui r es C
1 2 3
Company Gamma consi st s of t wo busi ness uni t s (A and B). In i t s base year (year one), each busi ness uni t emi t s 25 t onnes CO
2
. In year t wo,
t he company undergoes organi c growt h, l eadi ng t o an i ncrease i n emi ssi ons t o 30 t onnes CO
2
per busi ness uni t , i .e., 60 t onnes CO
2
i n
t ot al . The base year emi ssi ons are not recal cul at ed i n t hi s case. At t he begi nni ng of year t hree, t he company acqui res product i on f aci l i t y C
f rom anot her company. The annual emi ssi ons of f aci l i t y C i n year one were 15 t onnes CO
2
, and 20 t onnes CO
2
i n years t wo and t hree. The
t ot al emi ssi on of company Gamma i n year t hree, i ncl udi ng f aci l i t y C, are t heref ore 80 t onnes CO
2
. To mai nt ai n consi st ency over t i me, t he
company recal cul at es i t s base year emi ssi ons t o t ake i nt o account t he acqui si t i on of f aci l i t y C. The base year emi ssi ons i ncrease by
15 t onnes CO
2
t he quant i t y of emi ssi ons produced by f aci l i t y C i n Gammas base year. The recal cul at ed base year emi ssi ons are
65 t onnes CO
2
. Gamma al so (opt i onal l y) report s 80 t onnes CO
2
as t he recal cul at ed emi ssi ons f or year t wo.
25
25
30
30
30
20
20 20
15
30
25
15
20 20
25
30
30
30
30
Fi gures report ed i n respect i ve years
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M
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S
Recal cul at ed Fi gures
Faci l i t y C
Uni t B
Uni t A
1 2 3
C HAPTE R 5
S
Faci l i t y C
emi ssi ons
Si gni f i c anc e t hr eshol ds f or r ec al c ul at i ons
Whether base year emissions are recalculated depends
on the significance of the changes. The determination of
a significant change may require taking into account the
cumulative effect on base year emissions of a number
of small acquisitions or divestments. The GHGProtocol
Corporate Standardmakes no specific recommenda-
tions as to what constitutes significant. However,
some GHG programs do specify numerical significance
thresholds, e.g., the California Climate Action
Registry, where the change threshold is 10 percent of
the base year emissions, determined on a cumulative
basis from the time the base year is established.
Base year emi ssi ons
r ec al c ul at i on f or st r uc t ur al c hanges
Structural changes trigger recalculation because they
merely transfer emissions from one company to another
without any change of emissions released to the atmos-
phere, for example, an acquisition or divestment only
transfers existing GHG emissions from one companys
inventory to another.
Figures 6 and 7 illustrate the effect of structural
changes and the application of this standard on recalcu-
lation of base year emissions.
Ti mi ng of r ec al c ul at i ons f or st r uc t ur al c hanges
When significant structural changes occur during the
middle of the year, the base year emissions should be
recalculated for the entire year, rather than only for the
remainder of the reporting period after the structural
change occurred. This avoids having to recalculate base
year emissions again in the succeeding year. Similarly,
current year emissions should be recalculated for the
entire year to maintain consistency with the base year
recalculation. I f it is not possible to make a recalcula-
tion in the year of the structural change (e.g., due to
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F I GU R E 7 . Base year emi ssi ons r ec al c ul at i on f or a di vest ment
Pr oduc t i on
Bet a
Di vest s C
1 2 3
25
25
25
30
30
30
30
30
30
30
25
25
30
30
30
30
Fi gures report ed i n respect i ve years
Recal cul at ed f i gures
Uni t C
Uni t B
Uni t A
1 2 3
Company Bet a consi st s of t hree busi ness uni t s (A, B, and C). Each busi ness uni t emi t s 25 t onnes CO
2
and t he t ot al emi ssi ons f or t he
company are 75 t onnes CO
2
i n t he base year (year one). In year t wo, t he out put of t he company grows, l eadi ng t o an i ncrease i n emi ssi ons
t o 30 t onnes CO
2
2
i n t ot al . At t he begi nni ng of year t hree, Bet a di vest s busi ness uni t C and i t s annual
emi ssi ons are now 60 t onnes, represent i ng an apparent reduct i on of 15 t onnes rel at i ve t o t he base year emi ssi ons. However, t o mai nt ai n
consi st ency over t i me, t he company recal cul at es i t s base year emi ssi ons t o t ake i nt o account t he di vest ment of busi ness uni t C. The base
year emi ssi ons are l owered by 25 t onnes CO
2
t he quant i t y of emi ssi ons produced by t he busi ness uni t C i n t he base year. The recal cu-
l at ed base year emi ssi ons are 50 t onnes CO
2
, and t he emi ssi ons of company Bet a are seen t o have ri sen by 10 t onnes CO
2
over t he t hree
years. Bet a (opt i onal l y) report s 60 t onnes CO
2
as t he recal cul at ed emi ssi ons f or year t wo.
B
E
T
A

E
M
I
S
S
I
O
N
S
lack of data for an acquired company), the recalculation
may be carried out in the following year.
2
Rec al c ul at i ons f or c hanges i n c al c ul at i on
met hodol ogy or i mpr ovement s i n dat a ac c ur ac y
A company might report the same sources of GHG emis-
sions as in previous years, but measure or calculate
them differently. For example, a company might have
used a national electric power generation emissions
factor to estimate scope 2 emissions in year one of
reporting. I n later years, it may obtain more accurate
utility-specific emission factors (for the current as well
as past years) that better reflect the GHG emissions
associated with the electricity that it has purchased.
I f the differences in emissions resulting from such a
change are significant, historic data is recalculated
applying the new data and/or methodology.
Sometimes the more accurate data input may not reason-
ably be applied to all past years or new data points may
not be available for past years. The company may then
have to backcast these data points, or the change in data
source may simply be acknowledged without recalcula-
tion. This acknowledgement should be made in the report
each year in order to enhance transparency; otherwise,
new users of the report in the two or three years after the
change may make incorrect assumptions about the
performance of the company.
Any changes in emission factor or activity data that
reflect real changes in emissions (i.e., changes in fuel
type or technology) do not trigger a recalculation.
Opt i onal r epor t i ng f or r ec al c ul at i ons
Optional information that companies may report on
recalculations includes:
The recalculated GHG emissions data for all years
between the base year and the reporting year
All actual emissions as reported in respective years in
the past, i.e., the figures that have not been recalcu-
lated. Reporting the original figures in addition to the
recalculated figures contributes to transparency since
it illustrates the evolution of the companys structure
over time.
No base year emi ssi ons r ec al c ul at i ons
f or f ac i l i t i es t hat di d not exi st i n t he base year
Base year emissions are not recalculated if the company
makes an acquisition of (or insources) operations that
did not exist in its base year. There may only be a recal-
culation of historic data back to the year in which the
acquired company came into existence. The same applies
to cases where the company makes a divestment of (or
outsources) operations that did not exist in the base year.
Figure 8 illustrates a situation where no recalculation of
base year emissions is required, since the acquired
facility came into existence after the base year was set.
No r ec al c ul at i on f or out sour c i ng/ i nsour c i ng
i f r epor t ed under sc ope 2 and/ or sc ope 3
Structural changes due to outsourcing or insourcing
do not trigger base year emissions recalculation if the
company is reporting its indirect emissions from relevant
outsourced or insourced activities. For example,
outsourcing production of electricity, heat, or steam
does not trigger base year emissions recalculation, since
the GHGProtocol Corporate Standardrequires scope 2
reporting. However, outsourcing/insourcing that shifts
significant emissions between scope 1 and scope 3 when
scope 3 is not reported does trigger a base year emis-
sions recalculation (e.g., when a company outsources
the transportation of products).
I n case a company decides to track emissions over time
separately for different scopes, and has separate base
years for each scope, base year emissions recalculation
for outsourcing or insourcing is made.
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The GHG Prot ocol Corporat e St andard requi res set t i ng a base year f or
compari ng emi ssi ons over t i me. To be abl e t o compare over t i me, t he
base year emi ssi ons must be recal cul at ed i f any st ruct ural changes
occur i n t he company. In a deal compl et ed January 2002, t he
ENDESA Group, a power generat i on company based i n Spai n, sol d i t s
87.5 percent hol di ng i n Vi esgo, a part of i t s Spani sh power genera-
t i on busi ness, t o ENEL, an It al i an power company. To account f or t hi s
st ruct ural change, hi st ori cal emi ssi ons f rom t he si x power pl ant s
i ncl uded i n t he sal e were no l onger account ed f or i n t he Endesa GHG
i nvent ory and t heref ore removed f rom i t s base year emi ssi ons. Thi s
recal cul at i on provi des ENDESA wi t h a compl et e and comparabl e
pi ct ure of i t s hi st ori cal emi ssi ons.
ENDESA: Rec al c ul at i on of base year
emi ssi ons bec ause of st r uc t ur al c hanges
No r ec al c ul at i on f or or gani c gr owt h or dec l i ne
Base year emissions and any historic data are not
recalculated for organic growth or decline. Organic
growth/decline refers to increases or decreases in
production output, changes in product mix, and closures
and openings of operating units that are owned or
controlled by the company. The rationale for this is
that organic growth or decline results in a change of
emissions to the atmosphere and therefore needs to be
counted as an increase or decrease in the companys
emissions profile over time.
F I GU R E 8 . Ac qui si t i on of a f ac i l i t y t hat c ame i nt o exi st enc e af t er t he base year was set
Pr oduc t i on
Tet a
Ac qui r es C
1 2 3
25
20
25
30
30
30
15
30
25
25
30
15
30
30
20
30
Fi gures report ed i n respect i ve years Recal cul at ed f i gures
Faci l i t y C
Uni t B
Uni t A
1 2 3
Company Tet a consi st s of t wo busi ness uni t s ( A and B) . In i t s base year ( year one) , t he company emi t s 50 t onnes CO
2.
In year t wo, t he
company under goes or gani c gr owt h, l eadi ng t o an i ncr ease i n emi ssi ons t o 30 t onnes CO
2
2
i n t ot al .
The base year emi ssi ons ar e not r ecal cul at ed i n t hi s case. At t he begi nni ng of year t hr ee, Tet a acqui r es a pr oduct i on f aci l i t y C f r om
anot her company. Faci l i t y C came i nt o exi st ence i n year t wo, i t s emi ssi ons bei ng 15 t onnes CO
2
i n year t wo and 20 t onnes CO
2
i n year
t hr ee. The t ot al emi ssi ons of company Tet a i n year t hr ee, i ncl udi ng f aci l i t y C, ar e t her ef or e 80 t onnes CO
2
. In t hi s acqui si t i on case, t he
base year emi ssi ons of company Tet a do not change because t he acqui r ed f aci l i t y C di d not exi st i n year one when t he base year of Tet a
was set . The base year emi ssi ons of Tet a t her ef or e r emai n at 50 t onnes CO
2
. Tet a ( opt i onal l y) r epor t s 75 t onnes as t he r ecal cul at ed f i gur e
f or year t wo emi ssi ons.
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N OTE S
1
Termi nol ogy on t hi s t opi c can be conf usi ng. Base year emi ssi ons shoul d
be di f f erent i at ed f rom t he t erm basel i ne, whi ch i s most l y used i n t he
cont ext of pr oj ect - based account i ng. The t er m base year f ocuses on a
compar i son of emi ssi ons over t i me, whi l e a basel i ne i s a hypot het i cal
scenar i o f or what GHG emi ssi ons woul d have been i n t he absence of
a GHG reduct i on proj ect or act i vi t y.
2
For mor e i nf or mat i on on t he t i mi ng of base year emi ssi ons r ecal cul a-
t i ons, see t he gui dance document Base year r ecal cul at i on
met hodol ogi es f or st ruct ural changes on t he GHG Prot ocol websi t e
(www.ghgprot ocol .org).
20
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40
nce t he i nvent ory boundary has been est abl i shed, compani es general l y
cal cul at e GHG emi ssi ons usi ng t he f ol l owi ng st eps:
1. I dent i f y GHG emi ssi ons sour ces
2. Sel ect a GHG emi ssi ons cal cul at i on appr oach
3. Col l ect act i vi t y dat a and choose emi ssi on f act or s
4. Appl y cal cul at i on t ool s
5. Rol l - up GHG emi ssi ons dat a t o cor por at e l evel .
Thi s chapt er descri bes t hese st eps and t he cal cul at i on t ool s devel oped by t he GHG
Prot ocol . The cal cul at i on t ool s are avai l abl e on t he GHG Prot ocol Ini t i at i ve websi t e
at www.ghgprot ocol .org.
O
Identifying and Calculating GHG Emissions
G U I D A N C E
6
To create an accurate account of thei r emi ssi ons,
companies have found it useful to divide overall emis-
si ons i nto speci fi c categori es. Thi s al l ows a company
to use specifically developed methodologies to accu-
ratel y cal cul ate the emi ssi ons from each sector and
source category.
I dent i f y GHG emi ssi ons sour c es
The first of the five steps in identifying and calculating
a companys emissions as outlined in Figure 9 is to
categorize the GHG sources within that companys
boundaries. GHG emissions typically occur from the
following source categories:
Stationary combustion: combustion of fuels in
stationary equipment such as boilers, furnaces,
burners, turbines, heaters, incinerators, engines,
flares, etc.
Mobile combustion: combustion of fuels in trans-
portation devices such as automobiles, trucks, buses,
trains, airplanes, boats, ships, barges, vessels, etc.
Process emissions: emissions from physical or chem-
ical processes such as CO
2
from the calcination step
in cement manufacturing, CO
2
from catalytic cracking
in petrochemical processing, PFC emissions from
aluminum smelting, etc.
Fugitive emissions: intentional and unintentional
releases such as equipment leaks from joints, seals,
packing, gaskets, as well as fugitive emissions from
coal piles, wastewater treatment, pits, cooling towers,
gas processing facilities, etc.
Every business has processes, products, or services that
generate direct and/or indirect emissions from one or
more of the above broad source categories. The GHG
Protocol calculation tools are organized based on these
categories. Appendix D provides an overview of direct
and indirect GHG emission sources organized by scopes
and industry sectors that may be used as an initial guide
to identify major GHG emission sources.
I D E N TI F Y S C OP E 1 E M I S S I ON S
As a first step, a company should undertake an exer-
cise to identify its direct emission sources in each of
the four source categories listed above. Process emis-
sions are usually only relevant to certain industry
sectors like oil and gas, aluminum, cement, etc.
Manufacturing companies that generate process emis-
sions and own or control a power production facility will
likely have direct emissions from all the main source
categories. Office-based organizations may not have any
direct GHG emissions except in cases where they own or
operate a vehicle, combustion device, or refrigeration
and air-conditioning equipment. Often companies are
surprised to realize that significant emissions come
from sources that are not initially obvious (see United
Technologies case study).
The next step is to identify indirect emission sources from
the consumption of purchased electricity, heat, or steam.
Almost all businesses generate indirect emissions due to the
purchase of electricity for use in their processes or services.
This optional step involves identification of other indirect
emissions from a companys upstream and downstream
acti vi ti es as wel l as emi ssi ons associ ated wi th
outsourced/contract manufacturing, leases, or franchises
not included in scope 1 or scope 2.
The inclusion of scope 3 emissions allows businesses to
expand their inventory boundary along their value chain
and to identify all relevant GHG emissions. This provides
a broad overview of various business linkages and
possible opportunities for significant GHG emission
reductions that may exist upstream or downstream of a
companys immediate operations (see chapter 4 for an
overview of activities that can generate GHG emissions
along a companys value chain).
C HAPTE R 6 Identifying and Calculating GHG Emissions 41
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F I GU R E 9 .
St eps i n i dent i f yi ng and c al c ul at i ng GHG emi ssi ons
I dent i f y Sour c es
Sel ec t Cal c ul at i on Appr oac h
Col l ec t Dat a and Choose Emi ssi on Fac t or s
Appl y Cal c ul at i on Tool s
Rol l - up Dat a t o Cor por at e Level
Sel ec t a c al c ul at i on appr oac h
Direct measurement of GHG emissions by monitoring
concentration and flow rate is not common. More often,
emissions may be calculated based on a mass balance or
stoichiometric basis specific to a facility or process.
However, the most common approach for calculating
GHG emissions is through the application of documented
emission factors. These factors are calculated ratios
relating GHG emissions to a proxy measure of activity at
an emissions source. The I PCC guidelines (I PCC, 1996)
refer to a hierarchy of calculation approaches and tech-
niques ranging from the application of generic emission
factors to direct monitoring.
I n many cases, particularly when direct monitoring is
either unavailable or prohibitively expensive, accurate
emission data can be calculated from fuel use data. Even
small users usually know both the amount of fuel
consumed and have access to data on the carbon content
of the fuel through default carbon content coefficients or
through more accurate periodic fuel sampling.
Companies should use the most accurate calculation
approach available to them and that is appropriate for
their reporting context.
Col l ec t ac t i vi t y dat a
and c hoose emi ssi on f ac t or s
For most small to medium-sized companies and for many
larger companies, scope 1 GHG emissions will be calcu-
lated based on the purchased quantities of commercial
fuels (such as natural gas and heating oil) using
published emission factors. Scope 2 GHG emissions will
primarily be calculated from metered electricity
consumption and supplier-specific, local grid, or other
published emission factors. Scope 3 GHG emissions will
primarily be calculated from activity data such as fuel
use or passenger miles and published or third-party
emission factors. I n most cases, if source- or facility-
specific emission factors are available, they are
preferable to more generic or general emission factors.
I ndustrial companies may be faced with a wider range
of approaches and methodologies. They should seek
guidance from the sector-specific guidelines on the
GHG Protocol website (if available) or from their
industry associations (e.g., I nternational Aluminum
I nstitute, I nternational I ron and Steel I nstitute,
American Petroleum I nstitute, WBCSD Sustainable
Cement I nitiative, I nternational Petroleum I ndustry
Environmental Conservation Association).
Appl y c al c ul at i on t ool s
This section provides an overview of the GHG calcula-
tion tools and guidance available on the GHG Protocol
I nitiative website (www.ghgprotocol.org). Use of these
tools is encouraged as they have been peer reviewed
by experts and industry leaders, are regularly updated,
and are believed to be the best available. The tools,
however, are optional. Companies may substitute their
own GHG calculation methods, provided they are
more accurate than or are at least consistent with the
GHGProtocol Corporate Standards approaches.
There are two main categories of calculation tools:
Cross-sector tools that can be applied to different
sectors. These include stationary combustion, mobile
combustion, HFC use in refrigeration and air condi-
tioning, and measurement and estimation uncertainty.
Sector-specific tools that are designed to calculate
emissions in specific sectors such as aluminum, iron
and steel, cement, oil and gas, pulp and paper, office-
based organizations.
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Identif ying and Calculating GHG Emissions
C HAPTE R 6 42
In 1996, Uni t ed Technol ogi es Corporat i on (UTC), a gl obal aero-
space and bui l di ng syst ems t echnol ogy corporat i on, appoi nt ed a
t eam t o set boundari es f or t he companys new Nat ural Resource
Conservat i on, Energy and Wat er Use Report i ng Program. The t eam
f ocused on what sources of energy shoul d be i ncl uded i n t he
program' s annual report of energy consumpt i on. The t eam
deci ded j et f uel needed t o be report ed i n t he annual report ; j et f uel
was used by a number of UTC di vi si ons f or engi ne and f l i ght hard-
ware t est i ng and f or t est f i ri ng. Al t hough t he amount of j et f uel
used i n any gi ven year was subj ect t o wi de vari at i on due t o
changi ng t est schedul es, t he t ot al amount consumed i n an
average year was bel i eved t o be l arge and pot ent i al l y smal l
enough t o be speci f i cal l y excl uded. However, j et f uel consumpt i on
report s proved t hat i ni t i al bel i ef i ncorrect . Jet f uel has account ed
f or bet ween 9 and 13 percent of t he corporat i on' s t ot al annual use
of energy si nce t he program commenced. Had UTC not i ncl uded
t he use of j et f uel i n annual dat a col l ect i on ef f ort s, a si gni f i cant
emi ssi ons source woul d have been overl ooked.
Uni t ed Tec hnol ogi es Cor por at i on:
Mor e t han meet s t he eye
Most companies will need to use more than one calcu-
lati on tool to cover al l thei r GHG emi ssi on sources.
For exampl e, to cal cul ate GHG emi ssi ons from an
al umi num producti on faci l i ty, the company woul d use
the cal cul ati on tool s for al umi num producti on,
stati onary combusti on (for any consumpti on of
purchased electricity, generation of energy on-site, etc),
mobile combustion (for transportation of materials and
products by train, vehicles employed on-site, employee
business travel, etc), and HFC use (for refrigeration,
etc). See Table 3 for the full list of tools.
S TR U C TU R E OF GH G P R OTOC OL C A L C U L ATI ON TOOL S
Each of the cross-sector and sector-specific calculation
tools on the website share a common format and
include step-by-step guidance on measuring and calcu-
lating emissions data. Each tool consists of a guidance
section and automated worksheets with explanations on
how to use them.
The guidance for each calculation tool includes the
following sections:
Overview: provides an overview of the purpose and
content of the tool, the calculation method used in the
tool, and a process description
Choosing activity data and emission factors: provides
sector-specific good practice guidance and references
for default emission factors
Calculation methods: describes different calculation
methods depending on the availability of site-specific
activity data and emission factors
Quality control: provides good practice guidance
Internal reporting and documentation: provides
guidance on internal documentation to support
emissions calculations.
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ChevronTexaco, a gl obal energy company, has devel oped and i mpl e-
ment ed ener gy ut i l i zat i on and GHG est i mat i on and r epor t i ng
sof t ware consi st ent wi t h t he GHG Prot ocol Corporat e St andard. Thi s
sof t ware i s avai l abl e f ree of charge and makes i t easi er, more accu-
rat e, and l ess cost l y t o i nst i t ut e a corporat e- wi de GHG account i ng
and report i ng syst em i n t he oi l and gas sect or. Cal l ed t he SANGEA
Energy and Greenhouse Gas Emi ssi ons Est i mat i ng Syst em, i t i s
current l y i n use at al l ChevronTexaco f aci l i t i es worl dwi de, compri si ng
more t han 70 report i ng ent i t i es.
The syst em i s an audi t abl e, Excel - and- Vi sual - Basi c- based t ool f or
est i mat i ng GHG emi ssi ons and energy ut i l i zat i on. It st reaml i nes corpo-
rat e- l evel dat a consol i dat i on by al l owi ng t he i nvent ory coordi nat or at
each f aci l i t y t o conf i gure a spreadsheet , ent er mont hl y dat a, and send
quart erl y report s t o a cent ral i zed dat abase.
In pr act i ce, t he SANGEA
syst em empl oys a var i et y of st r at egi es t o

ensur e consi st ent cal cul at i on met hods and ease company- wi de
st andar di zat i on:
Spreadsheet conf i gurat i on and mat eri al i nput i nf ormat i on f or
speci f i c f aci l i t i es can be carri ed over f rom year t o year. Invent ory
speci al i st s can easi l y modi f y conf i gurat i ons as a f aci l i t y changes
(due t o new const ruct i on, ret i rement of uni t s, et c.).
Updat es are ef f i ci ent . Met hodol ogi es f or est i mat i ng emi ssi ons,
emi ssi on f act ors, and cal cul at i on equat i ons are st ored cent ral l y i n
t he sof t ware, easi ng updat es when met hodol ogi es or def aul t
f act ors change. Updat es t o t hi s cent ral ref erence are aut omat i -
cal l y appl i ed t o t he exi st i ng conf i gurat i on and i nput dat a.
Updat es wi l l mi rror t he t i mi ng and cont ent of updat es t o t he
Ameri can Pet rol eum Inst i t ut e Compendi um of GHG emi ssi on est i -
mat i ng met hodol ogi es.
The syst em i s audi t abl e. The sof t ware requi res det ai l ed audi t t rai l
i nf ormat i on on dat a i nput s and syst em users. There i s docu-
ment ed account abi l i t y of who made any change t o t he syst em.
Usi ng one syst em saves money. Si gni f i cant cost savi ngs are
achi eved by usi ng t he same syst em i n al l f aci l i t i es, as compared
t o convent i onal , di sparat e syst ems.
ChevronTexacos one- of f i nvest ment i n devel opi ng t he SANGEA
syst em
has al ready shown resul t s: A rough cost est i mat e f or ChevronTexaco' s
Ri chmond, Cal i f orni a, ref i nery i ndi cat es savi ngs of more t han 70
percent over a f i ve- year peri od compared wi t h t he convent i onal
approaches based on l ocal l y devel oped report i ng syst ems. SANGEA
i s
expect ed t o reduce t he l ong t erm expenses of mai nt ai ni ng a l egacy
syst em and hi ri ng i ndependent consul t ant s. Empl oyi ng a combi nat i on
of t he GHG Prot ocol Corporat e St andards and SANGEA
cal cul at i on
sof t ware t o repl ace a di verse and conf usi ng set of account i ng and
report i ng t empl at es yi el ds si gni f i cant ef f i ci ency and accuracy gai ns,
and al l ows t he company t o more accurat el y manage GHG emi ssi ons
and i nst i t ut e speci f i c emi ssi ons i mprovement s.
Chevr onTexac o: The SANGEA
TM
ac c ount i ng and r epor t i ng syst em
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St at i onar y Combust i on
Mobi l e Combust i on
HFC f r om Ai r Condi t i oni ng
and Ref r i ger at i on Use
Measur ement and Est i mat i on
Unc er t ai nt y f or GHG Emi ssi ons
Al umi num and ot her non-
Fer r ous Met al s Pr oduc t i on
I r on and St eel
Ni t r i c Ac i d Manuf ac t ur e
Ammoni a Manuf ac t ur e
Adi pi c Ac i d Manuf ac t ur e
Cement
Li me
HFC- 23 f r om
HCFC- 22 Pr oduc t i on
Pul p and Paper
Semi - Conduc t or
Waf er Pr oduc t i on
Gui de f or Smal l
Of f i c e- Based Or gani zat i ons
Cal cul at es di rect and i ndi rect CO
2
emi ssi ons f rom f uel combust i on i n st at i onary equi pment
Provi des t wo opt i ons f or al l ocat i ng GHG emi ssi ons f rom a co- generat i on f aci l i t y
Provi des def aul t f uel and nat i onal average el ect ri ci t y emi ssi on f act ors
Cal cul at es di rect and i ndi rect CO
2
emi ssi ons f rom f uel combust i on i n mobi l e sources
Provi des cal cul at i ons and emi ssi on f act ors f or road, ai r, wat er, and rai l t ransport
Cal cul at es di rect HFC emi ssi ons duri ng manuf act ure, use and di sposal of ref ri gerat i on and ai r-
condi t i oni ng equi pment i n commerci al appl i cat i ons
Provi des t hree cal cul at i on met hodol ogi es: a sal es- based approach, a l i f e cycl e st age based
approach, and an emi ssi on f act or based approach
Int roduces t he f undament al s of uncert ai nt y anal ysi s and quant i f i cat i on
Cal cul at es st at i st i cal par amet er uncer t ai nt i es due t o r andom er r or s r el at ed t o cal cul at i on of
GHG emi ssi ons
Aut omat es t he aggregat i on st eps i nvol ved i n devel opi ng a basi c uncert ai nt y assessment f or GHG
i nvent ory dat a
Cal cul at es di rect GHG emi ssi ons f rom al umi num product i on (CO
2
f rom anode oxi dat i on, PFC emi s-
si ons f rom t he anode ef f ect , and SF
6
used i n non- f errous met al s product i on as a cover gas)
Cal cul at es di rect GHG emi ssi ons (CO
2
) f rom oxi dat i on of t he reduci ng agent , f rom t he cal ci nat i on
of t he f l ux used i n st eel product i on, and f rom t he removal of carbon f rom t he i ron ore and scrap
st eel used
Cal cul at es di rect GHG emi ssi ons (N
2
O) f rom t he product i on of ni t ri c aci d
Cal cul at es di rect GHG emi ssi ons (CO
2
) f rom ammoni a product i on. Thi s i s f or t he removal of
carbon f rom t he f eedst ock st ream onl y; combust i on emi ssi ons are cal cul at ed wi t h t he st at i onary
combust i on modul e
Cal cul at es di rect GHG emi ssi ons (N
2
O) f rom adi pi c aci d product i on
Cal cul at es di rect CO
2
emi ssi ons f rom t he cal ci nat i on process i n cement manuf act uri ng (WBCSD
t ool al so cal cul at es combust i on emi ssi ons)
Provi des t wo cal cul at i on met hodol ogi es: t he cement - based approach and t he cl i nker- based approach
Cal cul at es di rect GHG emi ssi ons f rom l i me manuf act uri ng (CO
2
f rom t he cal ci nat i on process)
Cal cul at es di rect HFC- 23 emi ssi ons f rom product i on of HCFC- 22
2
, CH
4
, and N
2
O emi ssi ons f rom product i on of pul p and paper. Thi s i ncl udes
cal cul at i on of di rect and i ndi rect CO
2
emi ssi ons f rom combust i on of f ossi l f uel s, bi o- f uel s, and
wast e product s i n st at i onary equi pment
Cal cul at es PFC emi ssi on f rom t he product i on of semi - conduct or waf ers
2
emi ssi ons f rom f uel use, i ndi rect CO
2
emi ssi ons f rom el ect ri ci t y
consumpt i on, and ot her i ndi rect CO
2
emi ssi ons f rom busi ness t ravel and commut i ng
TA B L E 3 . Over vi ew of GHG c al c ul at i on t ool s avai l abl e on t he GHG Pr ot oc ol websi t e
C
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C A L C U L A T I O N T O O L S M A I N F E A T U R E S .
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I n the automated worksheet section, it is only necessary
to insert activity data into the worksheets and to select
an appropriate emission factor or factors. Default emis-
sion factors are provided for the sectors covered, but it is
also possible to insert customized emission factors that
are more representative of the reporting companys oper-
ations. The emissions of each GHG (CO
2
, CH
4
, N
2
O, etc.)
are calculated separately and then converted to CO
2
equivalents on the basis of their global warming potential.
Some tools, such as the iron and steel sector tool and the
HFC cross-sector tool, take a tiered approach, offering a
choice between a simple and a more advanced calculation
methodology. The more advanced methods are expected
to produce more accurate emissions estimates but usually
require collection of more detailed data and a more
thorough understanding of a companys technologies.
Rol l - up GHG emi ssi ons dat a t o c or por at e l evel
To report a corporations total GHG emissions, compa-
nies will usually need to gather and summarize data
from multiple facilities, possibly in different countries
and busi ness di vi si ons. I t i s i mportant to pl an thi s
process careful l y to mi ni mi ze the reporti ng burden,
reduce the ri sk of errors that mi ght occur whi l e
compi l i ng data, and ensure that al l faci l i ti es are
collecting information on an approved, consistent basis.
I deally, corporations will integrate GHG reporting with
their existing reporting tools and processes, and take
advantage of any relevant data already collected and
reported by facilities to division or corporate offices,
regulators or other stakeholders.
The tools and processes chosen to report data will
depend upon the information and communication infra-
structure already in place (i.e., how easy is it to include
new data categories in corporate databases). I t will also
depend upon the amount of detail that corporate head-
quarters wishes to be reported from facilities. Data
collection and management tools could include:
Secure databases available over the company intranet
or internet, for direct data entry by facilities
Spreadsheet templates filled out and e-mailed to a corpo-
rate or division office, where data is processed further
Paper reporting forms faxed to a corporate or division
office where data is re-entered in a corporate data-
base. However, this method may increase the
likelihood of errors if there are not sufficient checks in
place to ensure the accurate transfer of the data.
For internal reporting up to the corporate level, it is
recommended that standardized reporting formats
be used to ensure that data received from different
business units and facilities is comparable, and that
internal reporting rules are observed (see BP case
study). Standardized formats can significantly reduce
the risk of errors.
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BP, a gl obal energy company, has been col l ect i ng GHG dat a f rom
t he di f f erent part s of i t s operat i ons si nce 1997 and has consol i -
dat ed i t s i nt ernal report i ng processes i nt o one cent ral dat abase
syst em. The responsi bi l i t y f or report i ng envi ronment al emi ssi ons
l i es wi t h about 320 i ndi vi dual BP f aci l i t i es and busi ness depart -
ment s, whi ch are t ermed report i ng uni t s. Al l report i ng uni t s have
t o compl et e a st andard Excel pro- f orma spreadsheet every quart er,
st at i ng act ual emi ssi ons f or t he precedi ng t hree mont hs and
updat es t o f orecast s f or t he current year and t he next t wo years. In
addi t i on, report i ng uni t s are asked t o account f or al l si gni f i cant
vari ances, i ncl udi ng sust ai nabl e reduct i ons. The report i ng uni t s al l
use t he same BP GHG Report i ng Gui del i nes Prot ocol (BP, 2000)
f or quant i f yi ng t hei r emi ssi ons of carbon di oxi de and met hane.
Al l pro- f orma spreadsheet s are e- mai l ed aut omat i cal l y by t he
cent ral dat abase t o t he report i ng uni t s, and t he compl et ed e- mai l
ret urns are upl oaded i nt o t he dat abase by a corporat e t eam, who
check t he qual i t y of t he i ncomi ng dat a. The dat a are t hen compi l ed,
by t he end of t he mont h f ol l owi ng each quart er end, t o provi de t he
t ot al emi ssi on i nvent ory and f orecast s f or anal ysi s agai nst BPs
GHG t arget . Fi nal l y, t he i nvent ory i s revi ewed by a t eam of i nde-
pendent ext ernal audi t ors t o provi de assurance on t he qual i t y and
accuracy of t he dat a.
BP: A st andar di zed syst em
f or i nt er nal r epor t i ng of GHGs
Appr oac hes f or r ol l i ng up
GHG emi ssi ons dat a t o c or por at e l evel
There are two basic approaches for gathering data on GHG
emissions from a corporations facilities (Figure 10):
Centralized: individual facilities report activity/fuel
use data (such as quantity of fuel used) to the corpo-
rate level, where GHG emissions are calculated.
Decentralized: individual facilities collect activity/fuel
use data, directly calculate their GHG emissions
using approved methods, and report this data to the
corporate level.
The difference between these two approaches is in where
the emissions calculations occur (i.e., where activity data
is multiplied by the appropriate emission factors) and in
what type of quality management procedures must be put
in place at each level of the corporation. Facility-level
staff is generally responsible for initial data collection
under both approaches.
Under both approaches, staff at corporate and lower
levels of consolidation should take care to identify and
exclude any scope 2 or 3 emissions that are also
accounted for as scope 1 emissions by other facilities,
business units, or companies included in the emissions
inventory consolidation.
C E N TR A L I Z E D A P P R OA C H :
I NDI VI DUAL FACI L I TI ES REP ORT ACTI VI TY/ F UEL USE DATA
This approach may be particularly suitable for office-
based organizations. Requesting that facilities report
their activity/fuel use data may be the preferred option if:
The staff at the corporate or division level can calcu-
late emissions data in a straightforward manner on
the basis of activity/fuel use data; and
Emissions calculations are standard across a number
of facilities.
D E C E N TR A L I Z E D A P P R OA C H :
I NDI VI DUAL FACI L I TI ES CAL CUL ATE GHG EM I SSI ONS DATA
Asking facilities to calculate GHG emissions themselves
will help to increase their awareness and understanding
of the issue. However, it may also lead to resistance,
increased training needs, an increase in calculation
errors, and a greater need for auditing of calculations.
Requesting that facilities calculate GHG emissions
themselves may be the preferred option if:
GHG emission calculations require detailed knowledge
of the kind of equipment being used at facilities;
GHG emission calculation methods vary across a
number of facilities;
Process emissions (in contrast to emissions from
burning fossil fuels) make up an important share of
total GHG emissions;
Resources are available to train facility staff to
conduct these calculations and to audit them;
A user-friendly tool is available to simplify the calcu-
lation and reporting task for facility-level staff; or
Local regulations require reporting of GHG emissions
at a facility level.
The choice of collection approach depends on the needs
and characteristics of the reporting company. For
example, United Technologies Corporation uses the
centralized approach, leaving the choice of emission
factors and calculations to corporate staff, while BP uses
the decentralized approach and follows up with audits to
ensure calculations are correct, documented, and follow
approved methods. To maximize accuracy and minimize
reporting burdens, some companies use a combination of
the two approaches. Complex facilities with process
emissions calculate their emissions at the facility level,
while facilities with uniform emissions from standard
sources only report fuel use, electricity consumption, and
travel activity. The corporate database or reporting tool
then calculates total GHG emissions for each of these
standard activities.
The two approaches are not mutually exclusive and
should produce the same result. Thus companies
desiring a consistency check on facility-level calcula-
tions can follow both approaches and compare the
results. Even when facilities calculate their own GHG
emissions, corporate staff may still wish to gather
activity/fuel use data to double-check calculations and
explore opportunities for emissions reductions. These
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C HAPTE R 6 46
Act i vi t y dat a
Act i vi t y dat a x
emi ssi on f act or
=
GHG emi ssi ons
Si t es report GHG emi ssi ons
Si t es report act i vi t y dat a
(GHG emi ssi ons cal cul at ed at
corporat e l evel : act i vi t y dat a x
emi ssi ons f act or = GHG emi ssi ons)
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S I TE L E V E L C OR P OR ATE L E V E L
F I GU R E 1 0 . Appr oac hes t o gat her i ng dat a
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data should be available and transparent to staff at all
corporate levels. Corporate staff should also verify that
facility-reported data are based on well defined, consis-
tent, and approved inventory boundaries, reporting
periods, calculation methodologies, etc.
Common gui danc e on r epor t i ng t o c or por at e l evel
Reports from facility level to corporate or division
offices should include all relevant information as speci-
fied in chapter 9. Some reporting categories are
common to both the centralized and decentralized
approaches and should be reported by facilities to their
corporate offices. These include:
A brief description of the emission sources
A list and justification of specific exclusion or inclu-
sion of sources
Comparative information from previous years
The reporting period covered
Any trends evident in the data
Progress towards any business targets
A discussion of uncertainties in activity/fuel use or
emissions data reported, their likely cause, and recom-
mendations for how data can be improved
A description of events and changes that have an impact
on reported data (acquisitions, divestitures, closures,
technology upgrades, changes of reporting boundaries
or calculation methodologies applied, etc.).
R E P OR TI N G F OR TH E C E N TR A L I Z E D A P P R OA C H
I n addition to the activity/fuel use data and aforemen-
tioned common categories of reporting data, facilities
following the centralized approach by reporting
activity/fuel use data to the corporate level should also
report the following:
Activity data for freight and passenger transport
activities (e.g., freight transport in tonne-kilometers)
Activity data for process emissions (e.g., tonnes of
fertilizer produced, tonnes of waste in landfills)
Clear records of any calculations undertaken to derive
activity/fuel use data
Local emission factors necessary to translate fuel use
and/or electricity consumption into CO
2
emissions.
R E P OR TI N G F OR TH E D E C E N TR A L I Z E D A P P R OA C H
I n addition to the GHG emissions data and aforemen-
tioned common categories of reporting data, individual
facilities following the decentralized approach by
reporting calculated GHG emissions to the corporate
level should also report the following:
A description of GHG calculation methodologies and
any changes made to those methodologies relative to
previous reporting periods
Ratio indicators (see chapter 9)
Details on any data references used for the calculations,
in particular information on emission factors used.
Clear records of calculations undertaken to derive
emissions data should be kept for any future internal or
external verification.
ompani es have di f f er ent r easons f or managi ng t he qual i t y of t hei r
GHG emi ssi ons i nvent or y, r angi ng f r om i dent i f yi ng oppor t uni t i es f or
i mpr ovement t o st akehol der demand t o pr epar at i on f or r egul at i on. The GHG
Pr ot ocol Cor por at e St andar d r ecogni zes t hat t hese r easons ar e a f unct i on of a
companys goal s and i t s expect at i ons f or t he f ut ur e. A companys goal s f or and
vi si on of t he evol ut i on of t he GHG emi ssi ons i ssue shoul d gui de t he desi gn of
i t s cor por at e i nvent or y, t he i mpl ement at i on of a qual i t y management syst em,
and t he t r eat ment of uncer t ai nt y wi t hi n i t s i nvent or y.
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C
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Managing Inventory Quality
G U I D A N C E
A corporate GHG inventory program includes all institu-
tional, managerial, and technical arrangements made for
the collection of data, preparation of the inventory, and
implementation of steps to manage the quality of the
inventory.
1
The guidance in this chapter is intended to
help companies develop and implement a quality
management system for their inventory.
Given an uncertain future, high quality information will
have greater value and more uses, while low quality
information may have little or no value or use and may
even incur penalties. For example, a company may
currently be focusing on a voluntary GHG program but
also want its inventory data to meet the anticipated
requi rements of a future when emi ssi ons may have
monetary val ue. A qual i ty management system
i s essenti al to ensuri ng that an i nventory conti nues
to meet the pri nci pl es of the GHGProtocol Corporate
Standardand anti ci pates the requi rements of future
GHG emissions programs.
Even if a company is not anticipating a future regulatory
mechanism, internal and external stakeholders will
demand high quality inventory information. Therefore,
the implementation of some type of quality management
system is important. However, the GHGProtocol Corporate
Standardrecognizes that companies do not have unlim-
ited resources, and, unlike financial accounting,
corporate GHG inventories involve a level of scientific
and engineering complexity. Therefore, companies should
develop their inventory program and quality manage-
ment system as a cumulative effort in keeping with their
resources, the broader evolution of policy, and their own
corporate vision.
A quality management system provides a systematic
process for preventing and correcting errors, and
identifies areas where investments will likely lead to
the greatest improvement in overall inventory quality.
However, the primary objective of quality management
is ensuring the credibility of a companys GHG inven-
tory information. The first step towards achieving this
objective is defining inventory quality.
Def i ni ng i nvent or y qual i t y
The GHGProtocol Corporate Standardoutlines five
accounting principles that set an implicit standard for
the faithful representation of a companys GHG emission
through its technical, accounting, and reporting efforts
(see chapter 1). Putting these principles into practice
will result in a credible and unbiased treatment and pres-
entation of issues and data. For a company to follow
these principles, quality management needs to be an
integral part of its corporate inventory program. The
goal of a quality management system is to ensure that
these principles are put into practice.
C HAPTE R 7 Managing Inventory Quality 49
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KPMG, a gl obal servi ces company, f ound t hat a key f act or i n t he
deri vat i on of rel i abl e, veri f i abl e GHG dat a i s t he i nt egrat i on of
GHG dat a management and report i ng mechani sms wi t h compa-
ni es core operat i onal management and assurance processes.
Thi s i s because:
It i s more ef f i ci ent t o wi den t he scope of exi st i ng embedded
management and assurance processes t han t o devel op a separat e
f unct i on responsi bl e f or generat i ng and report i ng GHG i nf ormat i on.
As GHG i nf ormat i on becomes i ncreasi ngl y monet i zed, i t wi l l
at t ract t he same at t ent i on as ot her key perf ormance i ndi cat ors
of busi nesses. Theref ore, management wi l l need t o ensure
adequat e procedures are i n pl ace t o report rel i abl e dat a. These
procedures can most ef f ect i vel y be i mpl ement ed by f unct i ons
wi t hi n t he organi zat i on t hat oversee corporat e governance,
i nt ernal audi t , IT, and company report i ng.
Anot her f act or t hat i s of t en not gi ven suf f i ci ent emphasi s i s
t rai ni ng of personnel and communi cat i on of GHG obj ect i ves. Dat a
generat i on and report i ng syst ems are onl y as rel i abl e as t he
peopl e who operat e t hem. Many wel l - desi gned syst ems f ai l
because t he preci se report i ng needs of t he company are not
adequat el y expl ai ned t o t he peopl e who have t o i nt erpret a
report i ng st andard and cal cul at i on t ool s. Gi ven t he compl exi t y of
account i ng boundari es and an el ement of subj ect i vi t y t hat must
accompany source i ncl usi on and equi t y share, i nconsi st ent i nt er-
pr et at i on of r epor t i ng r equi r ement s i s a r eal r i sk. It i s al so
i mport ant t hat t hose responsi bl e f or suppl yi ng i nput dat a are
aware of i t s use. The onl y way t o mi ni mi ze t hi s ri sk i s t hrough
cl ear communi cat i on, adequat e t rai ni ng and knowl edge shari ng.
KPMG: The val ue of i nt egr at i ng
GHG management wi t h exi st i ng syst ems
An i nvent or y pr ogr am f r amewor k
A practical framework is needed to help companies
conceptualize and design a quality management system
and to help plan for future improvements. This frame-
work focuses on the following institutional, managerial,
and technical components of an inventory (Figure 11):
M E TH OD S : These are the technical aspects of inventory
preparation. Companies should select or develop method-
ologies for estimating emissions that accurately represent
the characteristics of their source categories. The GHG
Protocol provides many default methods and calculation
tools to help with this effort. The design of an inventory
program and quality management system should provide
for the selection, application, and updating of inventory
methodologies as new research becomes available,
changes are made to business operations, or the impor-
tance of inventory reporting is elevated.
D ATA : This is the basic information on activity levels,
emission factors, processes, and operations. Although
methodologies need to be appropriately rigorous and
detailed, data quality is more important. No method-
ology can compensate for poor quality input data. The
design of a corporate inventory program should facilitate
the collection of high quality inventory data and the
maintenance and improvement of collection procedures.
I N V E N TORY P R OC E S S E S A N D S Y S TE M S : These are the
institutional, managerial, and technical procedures for
preparing GHG inventories. They include the team and
processes charged with the goal of producing a high
quality inventory. To streamline GHG inventory quality
management, these processes and systems may be inte-
grated, where appropriate, with other corporate
processes related to quality.
D OC U M E N TATI ON : This is the record of methods, data,
processes, systems, assumptions, and estimates used to
prepare an inventory. I t includes everything employees
need to prepare and improve a companys inventory.
Since estimating GHG emissions is inherently technical
(involving engineering and science), high quality, trans-
parent documentation is particularly important to
credibility. I f information is not credible, or fails to be
effectively communicated to either internal or external
stakeholders, it will not have value.
Companies should seek to ensure the quality of these
components at every level of their inventory design.
I mpl ement i ng an
i nvent or y qual i t y management syst em
A quality management system for a companys inventory
program should address all four of the inventory compo-
nents described above. To implement the system, a
company should take the following steps:
1. Establish an inventory quality team. This team should
be responsible for implementing a quality manage-
ment system, and continually improving inventory
qual i ty. The team or manager shoul d coordi nate
i nteracti ons between rel evant busi ness uni ts,
facilities and external entities such as government
agency programs, research institutions, verifiers, or
consulting firms.
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50
F I GU R E 1 1 : I nvent or y qual i t y management syst em
7. Report , Document , and Archi ve 2. Devel op Qual i t y Management Pl an
6. Inst i t ut i onal i ze Formal Feedback Loops 3. Perf orm Generi c Qual i t y Checks
5. Revi ew Fi nal Invent ory Est i mat es and Report s 4. Perf orm Source- Speci f i c Qual i t y Checks
D ATA
M E TH OD S
S Y S TE M S
D OC U M E N TATI ON
1. Est abl i sh Invent ory Qual i t y Team
I N V E N T O R Y Q U A L I T Y M A N A G E M E N T S Y S T E M
F E E D B A C K
C HAPTE R 7
2. Develop a quality management plan. This plan
describes the steps a company is taking to implement
its quality management system, which should be
incorporated into the design of its inventory program
from the beginning, although further rigor and
coverage of certain procedures may be phased in
over multiple years. The plan should include proce-
dures for all organizational levels and inventory
development processesfrom initial data collection
to final reporting of accounts. For efficiency and
comprehensiveness, companies should integrate (and
extend as appropriate) existing quality systems to
cover GHG management and reporting, such as any
I SO procedures. To ensure accuracy, the bulk of the
plan should focus on practical measures for imple-
menting the quality management system, as
described in steps three and four.
3. Perform generic quality checks. These apply to data
and processes across the entire inventory, focusing on
appropriately rigorous quality checks on data handling,
documentation, and emission calculation activities
(e.g., ensuring that correct unit conversions are used).
Guidance on quality checking procedures is provided
in the section on implementation below (see table 4).
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TA B L E 4 . Gener i c qual i t y management measur es
D ATA GATH E R I N G, I N P U T, A N D H A N D L I N G A C TI V I TI E S
Check a sampl e of i nput dat a f or t ranscri pt i on errors
Ident i f y spreadsheet modi f i cat i ons t hat coul d provi de addi t i onal cont rol s or checks on qual i t y
Ensure t hat adequat e versi on cont rol procedures f or el ect roni c f i l es have been i mpl ement ed
Ot hers
D A T A D O C U M E N T A T I O N
Conf i rm t hat bi bl i ographi cal dat a ref erences are i ncl uded i n spreadsheet s f or al l pri mary dat a
Check t hat copi es of ci t ed ref erences have been archi ved
Check t hat assumpt i ons and cri t eri a f or sel ect i on of boundari es, base years, met hods, act i vi t y dat a, emi ssi on f act ors, and ot her
paramet ers are document ed
Check t hat changes i n dat a or met hodol ogy are document ed
Ot hers
C A L C U L A T I N G E M I S S I O N S A N D C H E C K I N G C A L C U L A T I O N S
Check whet her emi ssi on uni t s, paramet ers, and conversi on f act ors are appropri at el y l abel ed
Check i f uni t s are properl y l abel ed and correct l y carri ed t hrough f rom begi nni ng t o end of cal cul at i ons
Check t hat conversi on f act ors are correct
Check t he dat a processi ng st eps (e.g., equat i ons) i n t he spreadsheet s
Check t hat spreadsheet i nput dat a and cal cul at ed dat a are cl earl y di f f erent i at ed
Check a represent at i ve sampl e of cal cul at i ons, by hand or el ect roni cal l y
Check some cal cul at i ons wi t h abbrevi at ed cal cul at i ons (i .e., back of t he envel ope cal cul at i ons)
Check t he aggregat i on of dat a across source cat egori es, busi ness uni t s, et c.
Check consi st ency of t i me seri es i nput s and cal cul at i ons
Ot hers
4. Perform source-category-specific quality checks. This
includes more rigorous investigations into the appro-
priate application of boundaries, recalculation
procedures, and adherence to accounting and
reporting principles for specific source categories, as
well as the quality of the data input used (e.g.,
whether electricity bills or meter readings are the best
source of consumption data) and a qualitative descrip-
tion of the major causes of uncertainty in the data.
The information from these investigations can also be
used to support a quantitative assessment of uncer-
tainty. Guidance on these investigations is provided in
the section on implementation below.
5. Review final inventory estimates and reports. After
the inventory is completed, an internal techni cal
revi ew shoul d focus on i ts engi neeri ng, sci enti fi c,
and other techni cal aspects. Subsequentl y, an
internal managerial review should focus on securing
official corporate approval of and support for the
inventory. A third type of review involving experts
external to the companys inventory program is
addressed in chapter 10.
6. Institutionalize formal feedback loops. The results of
the reviews in step five, as well as the results of every
other component of a companys quality management
system, should be fed back via formal feedback proce-
dures to the person or team identified in step one.
Errors should be corrected and improvements imple-
mented based on this feedback.
7. Establish reporting, documentation, and archiving
procedures. The system should contain record keeping
procedures that specify what information will be docu-
mented for internal purposes, how that information
should be archived, and what information is to be
reported for external stakeholders. Like internal and
external reviews, these record keeping procedures
include formal feedback mechanisms.
A companys quality management system and overall
inventory program should be treated as evolving, in
keeping with a companys reasons for preparing an
inventory. The plan should address the companys
strategy for a multi-year implementation (i.e., recognize
that inventories are a long-term effort), including steps
to ensure that all quality control findings from previous
years are adequately addressed.
Pr ac t i c al measur es f or i mpl ement at i on
Although principles and broad program design guidelines
are important, any guidance on quality management
would be incomplete without a discussion of practical
inventory quality measures. A company should imple-
ment these measures at multiple levels within the company,
from the point of primary data collection to the final
corporate inventory approval process. I t is important to
implement these measures at points in the inventory
program where errors are mostly likely to occur, such as
the initial data collection phase and during calculation and
data aggregation. While corporate level inventory quality
may initially be emphasized, it is important to ensure
quality measures are implemented at all levels of disaggre-
gation (e.g., facility, process, geographical, according to a
particular scope, etc) to be better prepared for GHG
markets or regulatory rules in the future.
Companies also need to ensure the quality of their histor-
ical emission estimates and trend data. They can achieve
this by employing inventory quality measures to mini-
mize biases that can arise from changes in the
characteristics of the data or methods used to calculate
historical emission estimates, and by following the stan-
dards and guidance of chapter 5.
The third step of a quality management system, as
described above, is to implement generic quality
checking measures. These measures apply to all source
categories and all levels of inventory preparation.
Table 4 provides a sample list of such measures.
The fourth step of a quality management system is
source category-specific data quality investigations. The
information gathered from these investigations can also
be used for the quantitative and qualitative assessment
of data uncertainty (see section on uncertainty).
Addressed below are the types of source-specific quality
measures that can be employed for emission factors,
activity data, and emission estimates.
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E M I S S I ON F A C TOR S A N D OTH E R P A R A M E TE R S
For a particular source category, emissions calculations
will generally rely on emission factors and other parame-
ters (e.g., utilization factors, oxidation rates, methane
conversion factors).
2
These factors and parameters may
be published or default factors, based on company-
specific data, site-specific data, or direct emission or
other measurements. For fuel consumption, published
emission factors based on fuel energy content are gener-
ally more accurate than those based on mass or volume,
except when mass or volume based factors have been
measured at the company- or site-specific level. Quality
investigations need to assess the representativeness and
applicability of emission factors and other parameters to
the specific characteristics of a company. Differences
between measured and default values need to be qualita-
tively explained and justified based upon the companys
operational characteristics.
A C TI V I TY D ATA
The collection of high quality activity data will often be
the most significant limitation for corporate GHG inven-
tories. Therefore, establishing robust data collection
procedures needs to be a priority in the design of any
companys inventory program. The following are useful
measures for ensuring the quality of activity data:
Develop data collection procedures that allow the same
data to be efficiently collected in future years.
Convert fuel consumption data to energy units before
applying carbon content emission factors, which may be
better correlated to a fuels energy content than its mass.
Compare current year data with historical trends. I f
data do not exhibit relatively consistent changes from
year to year then the causes for these patterns should
be investigated (e.g., changes of over 10 percent from
year to year may warrant further investigation).
Compare activity data from multiple reference sources
(e.g., government survey data or data compiled by
trade associations) with corporate data when possible.
Such checks can ensure that consistent data is being
reported to all parties. Data can also be compared
among facilities within a company.
I nvestigate activity data that is generated for purposes
other than preparing a GHG inventory. I n doing so,
companies will need to check the applicability of this
data to inventory purposes, including completeness,
consistency with the source category definition, and
consistency with the emission factors used. For
example, data from different facilities may be exam-
ined for inconsistent measurement techniques,
operating conditions, or technologies. Quality control
measures (e.g., I SO) may have already been conducted
during the datas original preparation. These measures
can be integrated with the companys inventory quality
management system.
Check that base year recalculation procedures have
been followed consistently and correctly (see chapter 5).
Check that operational and organizational boundary
decisions have been applied correctly and consistently
to the collection of activity data (see chapters 3 and 4).
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Int erf ace, Inc., i s t he worl ds l argest manuf act urer of carpet t i l es
and uphol st ery f abri cs f or commerci al i nt eri ors. The company has
est abl i shed an envi ronment al dat a syst em t hat mi rrors i t s corpo-
rat e f i nanci al dat a report i ng. The Int erf ace EcoMet ri cs syst em i s
desi gned t o provi de act i vi t y and mat eri al f l ow dat a f rom busi ness
uni t s i n a number of count r i es ( t he Uni t ed St at es, Canada,
Aust ral i a, t he Uni t ed Ki ngdom, Thai l and and t hroughout Europe)
and provi des met ri cs f or measuri ng progress on envi ronment al
i ssues such as GHG emi ssi ons. Usi ng company- wi de account i ng
gui del i nes and st andards, energy and mat eri al i nput dat a are
report ed t o a cent ral dat abase each quart er and made avai l abl e
t o sust ai nabi l i t y per sonnel . These dat a ar e t he f oundat i on of
I nt er f aces annual i nvent or y and enabl e dat a compar i son over
t i me i n t he pursui t of i mproved qual i t y.
Basi ng emi ssi ons dat a syst ems on f i nanci al report i ng hel ps
Int erf ace i mprove i t s dat a qual i t y. Just as f i nanci al dat a need t o
be document ed and def ensi bl e, Int erf aces emi ssi ons dat a are
hel d t o st andards t hat promot e an i ncreasi ngl y t ransparent ,
accurat e, and hi gh- qual i t y i nvent ory. Int egrat i ng i t s f i nanci al and
emi ssi ons dat a syst ems has made Int erf aces GHG account i ng
and r epor t i ng mor e usef ul as i t st r i ves t o be a compl et el y
sust ai nabl e company by 2020.
I nt er f ac e: I nt egr at i on of emi ssi ons
and busi ness dat a syst ems
I nvestigate whether biases or other characteristics that
could affect data quality have been previously identi-
fied (e.g., by communicating with experts at a
particular facility or elsewhere). For example, a bias
could be the unintentional exclusion of operations at
smaller facilities or data that do not correspond
exactly with the companys organizational boundaries.
Extend quality management measures to cover any
additional data (sales, production, etc.) used to esti-
mate emission intensities or other ratios.
E M I S S I ON E S TI M ATE S
Estimated emissions for a source category can be
compared with historical data or other estimates to
ensure they fall within a reasonable range. Potentially
unreasonable estimates provide cause for checking
emission factors or activity data and determining
whether changes in methodology, market forces, or
other events are sufficient reasons for the change. I n
situations where actual emission monitoring occurs
(e.g., power plant CO
2
emissions), the data from moni-
tors can be compared with calculated emissions using
activity data and emission factors.
I f any of the above emission factor, activity data, emis-
sion estimate, or other parameter checks indicate a
problem, more detailed investigations into the accuracy
of the data or appropriateness of the methods may be
required. These more detailed investigations can also
be utilized to better assess the quality of data. One
potential measure of data quality is a quantitative and
qualitative assessment of their uncertainty.
I nvent or y qual i t y and i nvent or y unc er t ai nt y
Preparing a GHG inventory is inherently both an
accounting and a scientific exercise. Most applications
for company-level emissions and removal estimates
require that these data be reported in a format similar to
financial accounting data. I n financial accounting, it is
standard practice to report individual point estimates
(i.e., single value versus a range of possible values). I n
contrast, the standard practice for most scientific studies
of GHG and other emissions is to report quantitative
data with estimated error bounds (i.e., uncertainty). Just
like financial figures in a profit and loss or bank account
statement, point estimates in a corporate emission inven-
tory have obvious uses. However, how would or should
the addition of some quantitative measure of uncertainty
to an emission inventory be used?
I n an ideal situation, in which a company had perfect
quantitative information on the uncertainty of its emis-
sion estimates at all levels, the primary use of this
information would almost certainly be comparative.
Such comparisons might be made across companies,
across business units, across source categories, or
through time. I n this situation, inventory estimates could
even be rated or discounted based on their quality
before they were used, with uncertainty being the objec-
tive quantitative metric for quality. Unfortunately, such
objective uncertainty estimates rarely exist.
TY P E S OF U N C E R TA I N TI E S
Uncertai nti es associ ated wi th GHG i nventori es can
be broadl y categori zed i nto scientific uncertaintyand
estimation uncertainty. Sci enti fi c uncertai nty ari ses
when the science of the actual emission and/or removal
process is not completely understood. For example,
many direct and indirect factors associated with global
warming potential (GWP) values that are used to
combine emission estimates for various GHGs involve
significant scientific uncertainty. Analyzing and quanti-
fying such scientific uncertainty is extremely problematic
and is likely to be beyond the capacity of most company
inventory programs.
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C HAPTE R 7 54
The exper i ence of t he U. K. aut omot i ve manuf act ur er Vauxhal
Mot or s i l l ust r at es t he i mpor t ance of at t ent i on t o det ai l i n
set t i ng up GHG i nf or mat i on col l ect i on syst ems. The company
wi shed t o cal cul at e GHG emi ssi ons f r om st af f ai r t r avel .
However, when det er mi ni ng t he i mpact of f l i ght t r avel , i t i s
i mpor t ant t o make sur e t hat t he r ound t r i p di st ance i s used
when cal cul at i ng emi ssi ons. For t unat el y, Vauxhal l s r evi ew of
i t s assumpt i ons and cal cul at i on met hodol ogi es r eveal ed t hi s
f act and avoi ded r epor t i ng emi ssi ons t hat wer e 50 per cent
l ower t han t he act ual val ue.
Vauxhal l Mot or s:
The i mpor t anc e of ac c ur ac y c hec k s
Estimation uncertainty arises any time GHG emissions
are quantified. Therefore all emissions or removal esti-
mates are associated with estimation uncertainty.
Estimation uncertainty can be further classified into two
types: model uncertainty and parameter uncertainty.
3
Model uncertainty refers to the uncertainty associated
with the mathematical equations (i.e., models) used to
characterize the relationships between various parame-
ters and emission processes. For example, model
uncertainty may arise either due to the use of an incor-
rect mathematical model or inappropriate input into
the model. As with scientific uncertainty, estimating
model uncertainty is likely to be beyond most
companys inventory efforts; however, some companies
may wish to utilize their unique scientific and engi-
neering expertise to evaluate the uncertainty in their
emission estimation models.
Parameter uncertainty refers to the uncertainty associ-
ated with quantifying the parameters used as inputs
(e.g., activity data and emission factors) into estima-
tion models. Parameter uncertainties can be evaluated
through statistical analysis, measurement equipment
precision determinations, and expert judgment.
Quantifying parameter uncertainties and then esti-
mating source category uncertainties based on these
parameter uncertainties will be the primary focus of
companies that choose to investigate the uncertainty in
their emission inventories.
L I M I TATI ON S OF U N C E R TA I N TY E S TI M ATE S
Given that only parameter uncertainties are within the
feasible scope of most companies, uncertainty estimates
for corporate GHG inventories will, of necessity, be
imperfect. Complete and robust sample data will not
always be available to assess the statistical uncertainty
4
in every parameter. For most parameters (e.g., liters of
gasoline purchased or tonnes of limestone consumed),
only a single data point may be available. I n some
cases, companies can utilize instrument precision or
calibration information to inform their assessment of
statistical uncertainty. However, to quantify some of the
systematic uncertainties
5
associated with parameters
and to supplement statistical
uncertainty estimates, companies will usually have
to rely on expert judgment.
6
The problem with expert
judgment, though, is that it is difficult to obtain in a
comparable (i.e., unbiased) and consistent manner
across parameters, source categories, or companies.
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For these reasons, almost all comprehensive estimates of
uncertainty for GHG inventories will be not only imper-
fect but also have a subjectivecomponent and, despite
the most thorough efforts, are themselves considered
highly uncertain. I n most cases, uncertainty estimates
cannot be interpreted as an objective measure of quality.
Nor can they be used to compare the quality of emission
estimates between source categories or companies.
Exceptions to this include the following cases in which it
is assumed that either statistical or instrument precision
data are available to objectively estimate each para-
meters statistical uncertainty (i.e., expert judgment is
not needed):
When two operationally similar facilities use identical
emission estimation methodologies, the differences in
scientific or model uncertainties can, for the most
part, be ignored. Then quantified estimates of statis-
tical uncertainty can be treated as being comparable
between facilities. This type of comparability is what is
aimed for in some trading programs that prescribe
specific monitoring, estimation, and measurement
requirements. However, even in this situation, the
degree of comparability depends on the flexibility that
participants are given for estimating emissions, the
homogeneity across facilities, as well as the level of
enforcement and review of the methodologies used.
Similarly, when a single facility uses the same estima-
tion methodology each year, the systematic parameter
uncertaintiesin addition to scientific and model
uncertaintiesin a sources emission estimates for
two years are, for the most part, identical.
7
Because
the systematic parameter uncertainties then cancel
out, the uncertainty in an emission trend (e.g., the
difference between the estimates for two years) is
generally less than the uncertainty in total emissions
for a single year. I n such a situation, quantified uncer-
tainty estimates can be treated as being comparable
over time and used to track relative changes in the
quality of a facilitys emission estimates for that
source category. Such estimates of uncertainty in
emission trends can also be used as a guide to setting
a facilitys emissions reduction target. Trend uncer-
tainty estimates are likely to be less useful for setting
broader (e.g., company-wide) targets (see chapter 11)
because of the general problems with comparability
between uncertainty estimates across gases, sources,
and facilities.
Given these limitations, the role of qualitative and quan-
titative uncertainty assessments in developing GHG
inventories include:
Promoti ng a broader l earni ng and qual i ty
feedback process.
Supporting efforts to qualitatively understand and
document the causes of uncertainty and help identify
ways of improving inventory quality. For example,
collecting the information needed to determine the
statistical properties of activity data and emission
factors forces one to ask hard questions and to care-
fully and systematically investigate data quality.
Establishing lines of communication and feedback
with data suppliers to identify specific opportunities
to improve quality of the data and methods used.
Providing valuable information to reviewers, verifiers,
and managers for setting priorities for investments
into improving data sources and methodologies.
The GHGProtocol Corporate Standardhas developed a
supplementary guidance document on uncertainty assess-
ments ( Guidance on uncertainty assessment in GHG
inventories and calculating statistical parameter uncer-
tainty ) along with an uncertainty calculation tool, both
of which are available on the GHG Protocol website. The
guidance document describes how to use the calculation
tool in aggregating uncertainties. I t also discusses in
more depth different types of uncertainties, the limita-
tions of quantitative uncertainty assessment, and how
uncertainty estimates should be properly interpreted.
Additional guidance and information on assessing
uncertaintyincluding optional approaches to devel-
oping quantitative uncertainty estimates and eliciting
judgments from expertscan also be found in EPA's
Emissions I nventory I mprovement Program, Volume VI :
Quality Assurance/Quality Control (1999) and in
chapter 6 of the I PCCs Good Practice Guidance (2000a).
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C HAPTE R 7 56
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N OTE S
1
Al t hough t he t erm emi ssi ons i nvent ory i s used t hroughout t hi s chapt er,
t he gui dance equal l y appl i es t o est i mat es of removal s due t o si nk cat e-
gori es (e.g., f orest carbon sequest rat i on).
2
Some emi ssi on est i mat es may be der i ved usi ng mass or ener gy
bal ances, engi neer i ng cal cul at i ons, or comput er si mul at i on model s. In
addi t i on t o i nvest i gat i ng t he i nput dat a t o t hese model s, compani es
shoul d al so consi der whet her t he i nt er nal assumpt i ons ( i ncl udi ng
assumed par amet er s i n t he model ) ar e appr opr i at e t o t he nat ur e of t he
companys oper at i ons.
3
Emi ssi ons est i mat ed f rom di rect emi ssi ons moni t ori ng wi l l general l y onl y
i nvol ve paramet er uncert ai nt y (e.g., equi pment measurement error).
4
St at i st i cal uncert ai nt y resul t s f rom nat ural vari at i ons (e.g., random
human errors i n t he measurement process and f l uct uat i ons i n measure-
ment equi pment ). St at i st i cal uncert ai nt y can be det ect ed t hrough
repeat ed experi ment s or sampl i ng of dat a.
5
Syst emat i c paramet er uncert ai nt y occurs i f dat a are syst emat i cal l y
bi ased. In ot her words, t he average of t he measured or est i mat ed val ue i s
al ways l ess or great er t han t he t rue val ue. Bi ases ari se, f or exampl e,
because emi ssi on f act ors are const ruct ed f rom non- represent at i ve
sampl es, al l rel evant source act i vi t i es or cat egori es have not been i dent i -
f i ed, or i ncorrect or i ncompl et e est i mat i on met hods or f aul t y measurement
equi pment have been used. Because t he t rue val ue i s unknown, such
syst emat i c bi ases cannot be det ect ed t hrough repeat ed experi ment s and,
t heref ore, cannot be quant i f i ed t hrough st at i st i cal anal ysi s. However, i t i s
possi bl e t o i dent i f y bi ases and, somet i mes, t o quant i f y t hem t hrough dat a
qual i t y i nvest i gat i ons and expert j udgment s.
6
The rol e of expert j udgment can be t wof ol d: Fi rst , i t can provi de t he dat a
necessary t o est i mat e t he paramet er. Second, i t can hel p (i n combi nat i on
wi t h dat a qual i t y i nvest i gat i ons) i dent i f y, expl ai n, and quant i f y bot h
st at i st i cal and syst emat i c uncert ai nt i es.
7
It shoul d be recogni zed, however, t hat bi ases may not be const ant f rom
year t o year but i nst ead may exhi bi t a pat t ern over t i me (e.g., may be
growi ng or f al l i ng). For exampl e, a company t hat cont i nues t o di si nvest i n
col l ect i ng hi gh qual i t y dat a may creat e a si t uat i on i n whi ch t he bi ases i n
i t s dat a get worse each year. These t ypes of dat a qual i t y i ssues are
ext remel y probl emat i c because of t he ef f ect t hey can have on cal cul at ed
emi ssi on t rends. In such cases, syst emat i c paramet er uncert ai nt i es
cannot be i gnored.
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58
s vol unt ar y r epor t i ng, ext er nal GHG pr ogr ams, and emi ssi on t r adi ng
syst ems evol ve, i t i s becomi ng mor e and mor e essent i al f or compa-
ni es t o under st and t he i mpl i cat i ons of account i ng f or GHG emi ssi ons changes
over t i me on t he one hand, and, on t he ot her hand, account i ng f or of f set s or
cr edi t s t hat r esul t f r om GHG r educt i on pr oj ect s. Thi s chapt er el abor at es on t he
di f f er ent i ssues associ at ed wi t h t he t er m GHG r educt i ons.
A
8
Accounting for GHG Reductions
G U I D A N C E
The GHGProtocol Corporate Standardfocuses on
accounting and reporting for GHG emissions at the
company or organizational level. Reductions in corpo-
rate emissions are calculated by comparing changes
in the companys actual emissions inventory over time
relative to a base year. Focusing on overall corporate
or organizational level emissions has the advantage of
helping companies manage their aggregate GHG risks
and opportuni ti es more effecti vel y. I t al so hel ps focus
resources on acti vi ti es that resul t i n the most cost-
effecti ve GHG reducti ons.
I n contrast to corporate accounti ng, the forthcomi ng
GHGProtocol Project Quantification Standardfocuses on
the quantification of GHG reductions from GHG miti-
gation projects that will be used as offsets. Offsets are
discrete GHG reductions used to compensate for (i.e.,
offset) GHG emissions elsewhere, for example to meet
a voluntary or mandatory GHG target or cap. Offsets
are calculated relative to a baseline that represents a
hypothetical scenario for what emissions would have
been in the absence of the project.
Cor por at e GHG r educ t i ons
at f ac i l i t y or c ount r y l evel
From the perspective of the earth's atmosphere, it does not
matter where GHG emissions or reductions occur. From
the perspective of national and international policymakers
addressing global warming, the location where GHG
reductions are achieved is relevant, since policies usually
focus on achieving reductions within specific countries
or regions, as spelled out, for example, in the Kyoto
Protocol. Thus companies with global operations will
have to respond to an array of state, national, or regional
regulations and requirements that address GHGs from
operations or facilities within a specific geographic area.
The GHGProtocol Corporate Standardcalculates GHG
emissions using a bottom-up approach. This involves
calculating emissions at the level of an individual source
or facility and then rolling this up to the corporate level.
Thus a companys overall emissions may decrease, even
if increases occur at specific sources, facilities, or opera-
tions and vice-versa. This bottom-up approach enables
companies to report GHG emissions information at
different scales, e.g., by individual sources or facilities,
or by a collection of facilities within a given country.
Companies can meet an array of government require-
ments or voluntary commitments by comparing actual
emissions over time for the relevant scale. On a corpo-
rate-wide scale, this information can also be used when
setting and reporting progress towards a corporate-wide
GHG target (see chapter 11).
I n order to track and explain changes in GHG emissions
over time, companies may find it useful to provide
information on the nature of these changes. For
example, BP asks each of its reporting units to provide
such information in an accounting movement format
using the following categories (BP 2000):
Acquisitions and divestments
Closure
Real reductions (e.g., efficiency improvements,
material or fuel substitution)
Change in production level
Changes in estimation methodology
Other
This type of information can be summarized at the
corporate level to provide an overview of the companys
performance over time.
Reduc t i ons i n i ndi r ec t emi ssi ons
Reductions in indirect emissions (changes in scope 2 or 3
emissions over time) may not always capture the actual
emissions reduction accurately. This is because there is
not always a direct cause-effect relationship between the
activity of the reporting company and the resulting GHG
emissions. For example, a reduction in air travel would
reduce a companys scope 3 emissions. This reduction is
usually quantified based on an average emission factor
of fuel use per passenger. However, how this reduction
actually translates into a change in GHG emissions to
the atmosphere would depend on a number of factors,
including whether another person takes the empty seat
or whether this unused seat contributes to reduced air
traffic over the longer term. Similarly, reductions
in scope 2 emissions calculated with an average grid
emissions factor may over- or underestimate the actual
reduction depending on the nature of the grid.
Generally, as long as the accounting of indirect emissions
over time recognizes activities that in aggregate change
global emissions, any such concerns over accuracy
should not inhibit companies from reporting their indi-
rect emissions. I n cases where accuracy is more
important, it may be appropriate to undertake a more
C HAPTE R 8 Accounting for GHG Reductions 59
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detailed assessment of the actual reduction using a
project quantification methodology.
Pr oj ec t based r educ t i ons and of f set s/ c r edi t s
Project reductions that are to be used as offsets should
be quantified using a project quantification method, such
as the forthcoming GHGProtocol Project Quantification
Standard, that addresses the following accounting issues:
SELECTI ON OF A B ASELI NE SCENARI O AND EMI SSI ON.
The basel i ne scenari o represents what woul d have
happened i n the absence of the project. Basel i ne
emi ssi ons are the hypotheti cal emi ssi ons associ ated
wi th thi s scenari o. The sel ecti on of a basel i ne
scenari o al ways i nvol ves uncertai nty because i t
represents a hypotheti cal scenari o for what woul d
have happened wi thout the project. The project
reducti on i s cal cul ated as the di fference between
the baseline and project emissions. This differs from
the way corporate or organizational reductions are
measured in this document, i.e., in relation to an
actual historical base year.
D E M ON S TR ATI ON OF A D D I TI ON A L I TY. This relates to
whether the project has resulted in emission reductions
or removals in addition to what would have happened in
the absence of the project. I f the project reduction is
used as an offset, the quantification procedure should
address additionality and demonstrate that the project
itself is not the baseline and that project emissions are
less than baseline emissions. Additionality ensures the
integrity of the fixed cap or target for which the offset is
used. Each reduction unit from a project used as an
offset allows the organization or facility with a cap or
target one additional unit of emissions. I f the project
were going to happen anyway (i.e., is non-additional),
global emissions will be higher by the number of reduc-
tion units issued to the project.
I D E N TI F I C ATI ON A N D QU A N TI F I C ATI ON OF R E L E VA N T
S E C ON D A RY E F F E C TS . These are GHG emissions
changes resulting from the project not captured by the
primary effect(s).
1
Secondary effects are typically the
small, unintended GHG consequences of a project and
include leakage (changes in the availability or quan-
tity of a product or service that results in changes in
GHG emissions elsewhere) as well as changes in GHG
emissions up- and downstream of the project. I f rele-
vant, secondary effects should be incorporated into
the calculation of the project reduction.
C ON S I D E R ATI ON OF R E V E R S I B I L I TY. Some projects
achieve reductions in atmospheric carbon dioxide
levels by capturing, removing and/or storing carbon
or GHGs in biological or non-biological sinks (e.g.,
forestry, land use management, underground reser-
voirs). These reductions may be temporary in that
the removed carbon dioxide may be returned to the
atmosphere at some point in the future through
intentional activities or accidental occurrences
such as harvesting of forestland or forest fires, etc.
2
The risk of reversibility should be assessed, together
with any mitigation or compensation measures
included in the project design.
AV OI D A N C E OF D OU B L E C OU N TI N G. To avoid double
counting, the reductions giving rise to the offset must
occur at sources or sinks not included in the target or
cap for which the offset is used. Also, if the reductions
occur at sources or sinks owned or controlled by
someone other than the parties to the project (i.e.,
they are indirect), the ownership of the reduction
should be clarified to avoid double counting.
Offsets may be converted into credits when used to meet
an externally imposed target. Credits are convertible and
transferable instruments usually bestowed by an external
GHG program. They are typically generated from an
activity such as an emissions reduction project and then
used to meet a target in an otherwise closed system, such
as a group of facilities with an absolute emissions cap
placed across them. Although a credit is usually based on
the underlying reduction calculation, the conversion of an
offset into a credit is usually subject to strict rules, which
may differ from program to program. For example, a
Certified Emission Reduction (CER) is a credit issued by
the Kyoto Protocol Clean Development Mechanism. Once
issued, this credit can be traded and ultimately used to
meet Kyoto Protocol targets. Experience from the pre-
compliance market in GHG credits highlights the
importance of delineating project reductions that are to
be used as offsets with a credible quantification method
capable of providing verifiable data.
Repor t i ng pr oj ec t based r educ t i ons
I t is important for companies to report their physical
inventory emissions for their chosen inventory bound-
aries separately and independently of any GHG trades
they undertake. GHG trades
3
should be reported in its
public GHG report under optional informationeither
in relation to a target (see chapter 11) or corporate
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Accounting f or GHG Reductions
C HAPTE R 8 60
inventory (see chapter 9). Appropriate information
addressing the credibility of purchased or sold offsets or
credits should be included.
When companies implement internal projects that reduce
GHGs from their operations, the resulting reductions are
usually captured in their inventorys boundaries. These
reductions need not be reported separately unless they are
sold, traded externally, or otherwise used as an offset or
credit. However, some companies may be able to make
changes to their own operations that result in GHG
emissions changes at sources not included in their own
inventory boundary, or not captured by comparing
emissions changes over time. For example:
Substituting fossil fuel with waste-derived fuel that
might otherwise be used as landfill or incinerated
without energy recovery. Such substitution may have
no direct effect on (or may even increase) a
companys own GHG emissions. However, it could
result in emissions reductions elsewhere by another
organization, e.g., through avoiding landfill gas and
fossil fuel use.
I nstalling an on-site power generation plant (e.g., a
combined heat and power, or CHP, plant) that
provides surplus electricity to other companies may
increase a companys direct emissions, while
displacing the consumption of grid electricity by the
companies supplied. Any resulting emissions reduc-
tions at the plants where this electricity would have
otherwise been produced will not be captured in the
inventory of the company installing the on-site plant.
Substituting purchased grid electricity with an on-site
power generation plant (e.g., CHP) may increase a
companys direct GHG emissions, while reducing the
GHG emissions associated with the generation of grid
electricity. Depending on the GHG intensity and the
supply structure of the electricity grid, this reduction
may be over- or underestimated when merely
comparing scope 2 emissions over time, if the latter
are quantified using an average grid emission factor.
These reductions may be separately quantified, for
example using the GHGProtocol Project Quantification
Standard, and reported in a companys public GHG
report under optional information in the same way as
GHG trades described above.
C HAPTE R 8 Accounting for GHG Reductions 61
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Al coa, a gl obal manuf act urer of al umi num, i s i mpl ement i ng a
vari et y of st rat egi es t o reduce i t s GHG emi ssi ons. One approach
has been t o purchase renewabl e energy cert i f i cat es, or RECs, t o
of f set some of t he companys GHG emi ssi ons. RECs, whi ch repre-
sent t he envi ronment al benef i t s of renewabl e energy unbundl ed
f rom t he act ual f l ow of el ect rons, are an i nnovat i ve met hod of
provi di ng renewabl e energy t o i ndi vi dual cust omers. RECs repre-
sent t he unbundl ed envi ronment al benef i t s, such as avoi ded CO
2
emi ssi ons, generat ed by produci ng el ect ri ci t y f rom renewabl e
rat her t han f ossi l sources. RECs can be sol d bundl ed wi t h t he
el ect ri ci t y (as green power) or separat el y t o cust omers i nt erest ed
i n support i ng renewabl e energy.
Al coa f ound t hat RECs of f er a vari et y of advant ages, i ncl udi ng
di rect access t o t he benef i t s of renewabl e energy f or f aci l i t i es t hat
may have l i mi t ed renewabl e energy procurement opt i ons. In
Oct ober 2003, Al coa began purchasi ng RECs equi val ent t o 100%
of t he el ect ri ci t y used annual l y at f our corporat e of f i ces i n Tennessee,
Pennsyl vani a, and New York. The RECs Al coa i s purchasi ng ef f ec-
t i vel y mean t hat t he f our corporat e cent ers are now operat i ng on
el ect ri ci t y generat ed by proj ect s t hat produce el ect ri ci t y f rom l and-
f i l l gas, avoi di ng t he emi ssi on of more t han 6.3 mi l l i on ki l ograms
(13.9 mi l l i on pounds) of carbon di oxi de annual l y. Al coa chose
RECs i n part because t he suppl i er was abl e t o provi de RECs t o al l
f our f aci l i t i es t hrough one cont ract . Thi s f l exi bi l i t y l owered t he
admi ni st rat i ve cost of purchasi ng renewabl e energy f or mul t i pl e
f aci l i t i es t hat are served by di f f erent ut i l i t i es.
For mor e i nf or mat i on on RECs, see t he Gr een Power Mar ket
Devel opment Groups Corporat e Gui de t o Green Power Market s:
Inst al l ment #5 (WRI, 2003).
Al c oa: Tak i ng advant age
of r enewabl e ener gy c er t i f i c at es
N OTE S
1
Pri mary ef f ect s are t he speci f i c GHG reduci ng el ement s or act i vi t i es
(reduci ng GHG emi ssi ons, carbon st orage, or enhanci ng GHG removal s)
t hat t he proj ect i s i nt ended t o achi eve.
2
Thi s probl em wi t h t he t emporary nat ure of GHG reduct i ons i s somet i mes
ref erred t o as t he permanence i ssue.
3
The t erm GHG t rades ref ers t o al l purchases or sal es of al l owances,
of f set s, and credi t s.
62
cr ed i b l e GHG emi ssi on s r ep or t p r esen t s r el eva n t i n f or ma t i on t h a t
i s comp l et e, con si st en t , a ccu r a t e a n d t r a n sp a r en t . Wh i l e i t t a kes
t i me t o devel op a r i gor ous and compl et e cor por at e i nvent or y of GHG emi ssi ons,
knowl edge wi l l i mpr ove wi t h exper i ence i n cal cul at i ng and r epor t i ng dat a. I t i s
t her ef or e r ecommended t hat a publ i c GHG r epor t :
Be based on t he best dat a avai l abl e at t he t i me of publ i cat i on, whi l e bei ng
t r anspar ent about i t s l i mi t at i ons
Communi cat e any mat er i al di scr epanci es i dent i f i ed i n pr evi ous year s
I ncl ude t he companys gr oss emi ssi ons f or i t s chosen i nvent or y boundar y
separ at e f r om and i ndependent of any GHG t r ades i t mi ght engage i n.
A
Reporting GHG Emissions
G U I D A N C E
S T A N D A R D
S
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9
Reported information shall be relevant, complete,
consistent, transparent and accurate. The GHGProtocol
Corporate Standard requires reporting a minimum of
scope 1 and scope 2 emissions.
Requi r ed i nf or mat i on
A public GHG emissions report that is in accordance
with the GHGProtocol Corporate Standardshall include
the following information:
DESCRI P TI ON OF THE COMP ANY AND I NVENTORY B OUNDARY
An outline of the organizational boundaries chosen,
including the chosen consolidation approach.
An outline of the operational boundaries chosen, and if
scope 3 is included, a list specifying which types of
activities are covered.
The reporting period covered.
I N F OR M ATI ON ON E M I S S I ON S
Total scope 1 and 2 emissions independent of any
GHG trades such as sales, purchases, transfers, or
banking of allowances.
Emissions data separately for each scope.
Emissions data for all six GHGs separately (CO
2
, CH
4
,
N
2
O, HFCs, PFCs, SF
6
) in metric tonnes and in tonnes
of CO
2
equivalent.
Year chosen as base year, and an emissions profile over
time that is consistent with and clarifies the chosen
policy for making base year emissions recalculations.
Appropriate context for any significant emissions
changes that trigger base year emissions recalculation
(acquisitions/divestitures, outsourcing/insourcing,
changes in reporting boundaries or calculation
methodologies, etc.).
Emissions data for direct CO
2
emissions from biologi-
cally sequestered carbon (e.g., CO
2
from burning
biomass/biofuels), reported separately from the scopes.
Methodologies used to calculate or measure emissions,
providing a reference or link to any calculation tools used.
Any specific exclusions of sources, facilities,
and/or operations.
Opt i onal i nf or mat i on
A public GHG emissions report should include, when
applicable, the following additional information:
I N F OR M ATI ON ON E M I S S I ON S A N D P E R F OR M A N C E
Emissions data from relevant scope 3 emissions activi-
ties for which reliable data can be obtained.
Emissions data further subdivided, where this aids
transparency, by business units/facilities, country,
source types (stationary combustion, process, fugitive,
etc.), and activity types (production of electricity,
transportation, generation of purchased electricity
that is sold to end users, etc.).
Emissions attributable to own generation of elec-
tricity, heat, or steam that is sold or transferred to
another organization (see chapter 4).
Emissions attributable to the generation of electricity,
heat or steam that is purchased for re-sale to non-end
users (see chapter 4).
A description of performance measured against
internal and external benchmarks.
Emissions from GHGs not covered by the Kyoto
Protocol (e.g., CFCs, NO
x
,), reported separately
from scopes.
Relevant ratio performance indicators (e.g. emissions
per kilowatt-hour generated, tonne of material
production, or sales).
An outline of any GHG management/reduction
programs or strategies.
I nformation on any contractual provisions addressing
GHG-related risks and obligations.
An outline of any external assurance provided and a
copy of any verification statement, if applicable, of the
reported emissions data.
C HAPTE R 9 Reporting GHG Emissions 63
S
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D
I nformation on the causes of emissions changes that
did not trigger a base year emissions recalculation
(e.g., process changes, efficiency improvements,
plant closures).
GHG emissions data for all years between the base
year and the reporting year (including details of and
reasons for recalculations, if appropriate)
I nformation on the quality of the inventory (e.g., infor-
mation on the causes and magnitude of uncertainties
in emission estimates) and an outline of policies in
place to improve inventory quality. (see chapter 7).
I nformation on any GHG sequestration.
A list of facilities included in the inventory.
A contact person.
I N F OR M ATI ON ON OF F S E TS
I nformation on offsets that have been purchased or
developed outside the inventory boundary, subdivided
by GHG storage/removals and emissions reduction
projects. Specify if the offsets are verified/certified
(see chapter 8) and/or approved by an external GHG
program (e.g., the Clean Development Mechanism,
Joint I mplementation).
I nformation on reductions at sources inside the inven-
tory boundary that have been sold/transferred as
offsets to a third party. Specify if the reduction has
been verified/certified and/or approved by an external
GHG program (see chapter 8).
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C HAPTE R 9
64
y following the GHGProtocol Corporate Standard
reporting requirements, users adopt a compre-
hensive standard with the necessary detail and
transparency for credi bl e publ i c reporti ng. The
appropriate level of reporting of optional information
categories can be determined by the objectives and
intended audience for the report. For national or
voluntary GHG programs, or for internal management
purposes, reporting requirements may vary (Appendix C
summarizes the requirements of various GHG programs).
For public reporting, it is important to differentiate
between a summary of a public report that is, for
example, published on the I nternet or in Sustainability/
Corporate Soci al Responsi bi l i ty reporti ng (e.g.,
Gl obal Reporti ng I ni ti ati ve) and a ful l publ i c report
that contains all the necessary data as specified by the
reporti ng standard spel l ed out i n thi s vol ume. Not
every ci rcul ated report must contai n al l i nformati on
as speci fi ed by thi s standard, but a l i nk or reference
needs to be made to a publ i cl y avai l abl e ful l report
where all information is available.
For some companies, providing emissions data for
specific GHGs or facilities/business units, or reporting
ratio indicators, may compromise business confiden-
tiality. I f this is the case, the data need not be publicly
reported, but can be made available to those auditing the
GHG emissions data, assuming confidentiality is secured.
Companies should strive to create a report that is as
transparent, accurate, consistent and complete as
possible. Structurally, this may be achieved by adopting
the reporting categories of the standard (e.g., required
description of the company and inventory boundary,
required information on corporate emissions, optional
i nformati on on emi ssi ons and performance, and
optional information on offsets) as a basis of the report.
Qual i tati vel y, i ncl udi ng a di scussi on of the reporti ng
companys strategy and goal s for GHG accounti ng,
any parti cul ar chal l enges or tradeoffs faced, the
context of decisions on boundaries and other accounting
parameters, and an anal ysi s of emi ssi ons trends
may hel p provi de a compl ete pi cture of the companys
i nventory efforts.
Doubl e Count i ng
Companies should take care to identify and exclude from
reporting any scope 2 or scope 3 emissions that are
also reported as scope 1 emissions by other facilities,
business units, or companies included in the emissions
inventory consolidation (see chapter 6).
Use of r at i o i ndi c at or s
Two principal aspects of GHG performance are of
interest to management and stakeholders. One concerns
the overall GHG impact of a companythat is the
absolute quantity of GHG emissions released to the
atmosphere. The other concerns the companys GHG
emissions normalized by some business metric that
results in a ratio indicator. The GHGProtocol Corporate
Standardrequires reporting of absolute emissions;
reporting of ratio indicators is optional.
Ratio indicators provide information on performance
relative to a business type and can facilitate compar-
isons between similar products and processes over time.
Companies may choose to report GHG ratio indicators
in order to:
Evaluate performance over time (e.g., relate figures
from different years, identify trends in the data, and
show performance in relation to targets and base
years (see chapter 11).
Establish a relationship between data from different
categories. For example, a company may want to
establish a relationship between the value that an
action provides (e.g., price of a tonne of product) and
its impact on society or on the environment (e.g.,
emissions from product manufacturing).
I mprove comparability between different sizes of busi-
ness and operations by normalizing figures (e.g., by
assessing the impact of different sized businesses on
the same scale).
I t is important to recognize that the inherent diversity
of busi nesses and the ci rcumstances of i ndi vi dual
compani es can resul t i n mi sl eadi ng i ndi cators.
Apparently minor differences in process, product, or
location can be significant in terms of environmental
effect. Therefore, it is necessary to know the business
context in order to be able to design and interpret
ratio indicators correctly.
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B
Compani es may devel op rati os that make most sense
for thei r busi ness and are rel evant to thei r deci si on-
maki ng needs. They may sel ect rati os for external
reporti ng that i mprove the understandi ng and cl ari fy
the i nterpretati on of thei r performance for thei r
stakehol ders. I t i s i mportant to provi de some perspec-
ti ve on i ssues such as scal e and l i mi tati ons of
i ndi cators i n a way that users understand the nature
of the i nformati on provi ded. Compani es shoul d
consi der what rati o i ndi cators best capture the bene-
fi ts and i mpacts of thei r busi ness, i .e., i ts operati ons,
i ts products, and i ts effects on the marketpl ace and on
the enti re economy. Some exampl es of di fferent rati o
i ndi cators are provi ded here.
P R OD U C TI V I TY / E F F I C I E N C Y R ATI OS .
Producti vi ty/effi ci ency rati os express the val ue or
achievement of a business divided by its GHG impact.
I ncreasing efficiency ratios reflect a positive perform-
ance improvement. Examples of productivity/efficiency
rati os i ncl ude resource producti vi ty (e.g., sal es per
GHG) and process eco-effi ci ency (e.g., producti on
vol ume per amount of GHG).
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C HAPTE R 9 66
Mi dAmeri can Energy Hol di ngs Company, an energy company
based i n Iowa, want ed a met hod t o t rack a power pl ant s GHG
i nt ensi t y, whi l e al so bei ng abl e t o r ol l i ndi vi dual pl ant r esul t s
i nt o a cor por at e gener at i on por t f ol i o GHG i nt ensi t y i ndi cat or.
Mi dAmeri can al so want ed t o be abl e t o t ake i nt o account t he GHG
benef i t s f rom pl anned renewabl e generat i on, as wel l as measure
t he i mpact s of ot her changes t o i t s generat i on port f ol i o over t i me
(e.g., uni t ret i rement s or new const ruct i on). The company adopt ed
a GHG i nt ensi t y i ndi cat or t hat speci f i cal l y measures pounds of
di rect emi ssi ons over t ot al megawat t hours generat ed (l bs/ MWh).
To measure i t s di rect emi ssi ons, t he company l everages dat a
current l y gat hered t o sat i sf y exi st i ng regul at ory requi rement s
and, where gaps mi ght exi st , uses f uel cal cul at i ons. For coal -
f i red uni t s, t hat means mai nl y usi ng cont i nuous emi ssi ons
moni t ori ng (CEM) dat a and t he U.S. Envi ronment al Prot ect i on
Agencys emi ssi on f act ors f or nat ural gas- and f uel oi l - f i red
uni t s. Usi ng t he GHG Prot ocol Corporat e St andard, t he company
compl et es an annual emi ssi on i nvent ory f or each of i t s f ossi l -
f i red pl ant s, gat heri ng t oget her a) f uel vol ume and heat i nput
dat a, b) megawat t product i on dat a, c) CEMs dat a, and d) f uel
cal cul at i ons usi ng appropri at e emi ssi on f act ors.
For exampl e, i n 2001, usi ng CEM dat a and f uel cal cul at i ons, t he
companys Iowa ut i l i t y busi ness emi t t ed roughl y 23 mi l l i on t onnes
of CO
2
, whi l e generat i ng approxi mat el y 21 mi l l i on megawat t hours.
It s 2001 GHG i nt ensi t y i ndi cat or cal cul at es t o approxi mat el y
2,177 l bs/ MWh of CO
2
, ref l ect i ng t he Iowa ut i l i t y companys rel i ance
on t radi t i onal coal - f i red generat i on.
By 2008, t he Iowa ut i l i t y company wi l l have const ruct ed a new
790 MW coal - f uel ed pl ant , a 540 MW combi ned- cycl e nat ural gas
pl ant , and a 310 MW wi nd- t urbi ne f arm and added t hem t o i t s
generat i on port f ol i o. The ut i l i t y companys overal l CO
2
emi ssi ons
wi l l i ncrease, but so wi l l i t s megawat t product i on. The combi ned
emi ssi ons f rom t he new coal - and gas- f i red pl ant s wi l l be added
t o t he GHG i nt ensi t y i ndi cat ors numerat or, whi l e t he megawat t
product i on dat a f rom al l t hree f aci l i t i es wi l l be added t o t he i ndi -
cat ors denomi nat or. More i mport ant l y, and t he rat i o i ndi cat or
i l l ust rat es t hi s, over t i me Mi dAmeri cans GHG i nt ensi t y wi l l
decl i ne as more ef f i ci ent generat i on i s brought onl i ne and ol der
power pl ant s are used l ess or ret i red al t oget her.
Mi dAmer i c an:
Set t i ng r at i o i ndi c at or s f or a ut i l i t y c ompany
I N TE N S I TY R ATI OS . I ntensity ratios express GHG
impact per unit of physical activity or unit of economic
output. A physical intensity ratio is suitable when aggre-
gating or comparing across businesses that have similar
products. An economic intensity ratio is suitable when
aggregating or comparing across businesses that
produce different products. A declining intensity ratio
reflects a positive performance improvement. Many
companies historically tracked environmental perform-
ance with intensity ratios. I ntensity ratios are often
called normalized environmental impact data.
Examples of intensity ratios include product emission
intensity (e.g., tonnes of CO
2
emissions per electricity
generated); service intensity (e.g., GHG emissions per
function or per service); and sales intensity (e.g., emis-
sions per sales).
P E R C E N TA GE S . A percentage indicator is a ratio
between two similar issues (with the same physical unit
in the numerator and the denominator). Examples of
percentages that can be meaningful in performance
reports include current GHG emissions expressed as a
percentage of base year GHG emissions.
For further guidance on ratio indicators refer to CCAR,
2003; GRI , 2002; Verfaillie and Bidwell, 2000.
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er i f i cat i on i s an obj ect i ve assessment of t he accur acy and compl et eness
of r epor t ed GHG i nf or mat i on and t he conf or mi t y of t hi s i nf or mat i on t o
pr e- est abl i shed GHG account i ng and r epor t i ng pr i nci pl es. Al t hough t he pr act i ce
of ver i f yi ng cor por at e GHG i nvent or i es i s st i l l evol vi ng t he emer gence of wi del y
accept ed st andar ds, such as t he GHG Pr ot ocol Cor por at e St andar d and t he f or t h-
comi ng GHG Prot ocol Proj ect Quant i f i cat i on St andard, shoul d hel p GHG veri f i cat i on
become more uni f orm, credi bl e, and wi del y accept ed.
V
10
Verification of GHG Emissions
G U I D A N C E
This chapter provides an overview of the key elements of
a GHG verification process. I t is relevant to companies
who are developing GHG inventories and have planned
for, or are considering, obtaining an independent verifi-
cation of their results and systems. Furthermore, as the
process of developing a verifiable inventory is largely the
same as that for obtaining reliable and defensible data,
this chapter is also relevant to all companies regardless
of any intention to commission a GHG verification.
Verification involves an assessment of the risks of mate-
rial discrepancies in reported data. Discrepancies relate
to differences between reported data and data generated
from the proper application of the relevant standards
and methodologies. I n practice, verification involves the
prioritization of effort by the verifier towards the data
and associated systems that have the greatest impact on
overall data quality.
Rel evanc e of GHG pr i nc i pl es
The primary aim of verification is to provide confidence
to users that the reported information and associated
statements represent a faithful, true, and fair account of
a companys GHG emissions. Ensuring transparency and
verifiability of the inventory data is crucial for verifica-
tion. The more transparent, well controlled and well
documented a companys emissions data and systems
are, the more efficient it will be to verify. As outlined in
chapter 1, there are a number of GHG accounting and
reporting principles that need to be adhered to when
compiling a GHG inventory. Adherence to these princi-
ples and the presence of a transparent, well-documented
system (sometimes referred to as an audit trail) is the
basis of a successful verification.
Goal s
Before commissioning an independent verification, a
company should clearly define its goals and decide
whether they are best met by an external verification.
Common reasons for undertaking a verification include:
I ncreased credibility of publicly reported emissions
information and progress towards GHG targets,
leading to enhanced stakeholder trust
I ncreased senior management confidence in reported
information on which to base investment and target-
setting decisions
I mprovement of i nternal accounti ng and reporti ng
practices (e.g., calculation, recording and internal
reporting systems, and the application of GHG
accounting and reporting principles), and facilitating
learning and knowledge transfer within the company
Preparation for mandatory verification requirements
of GHG programs.
I nt er nal assur anc e
While verification is often undertaken by an independent,
external third party, this may not always be the case.
Many compani es i nterested i n i mprovi ng thei r GHG
i nventori es may subject thei r i nformati on to i nternal
veri fi cati on by personnel who are i ndependent of
the GHG accounti ng and reporti ng process. Both
internal and external verification should follow similar
procedures and processes. For external stakeholders,
external third part verification is likely to significantly
increase the credibility of the GHG inventory. However,
independent internal verifications can also provide
valuable assurance over the reliability of information.
I nternal verification can be a worthwhile learning expe-
rience for a company prior to commissioning an external
verification by a third party. I t can also provide external
verifiers with useful information to begin their work.
The c onc ept of mat er i al i t y
The concept of materiality is essential to understanding
the process of verification. Chapter 1 provides a useful
interpretation of the relationship between the principle of
completeness and the concept of materiality. I nformation
is considered to be material if, by its inclusion or exclu-
sion, it can be seen to influence any decisions or actions
taken by users of it. A material discrepancy is an error
(for example, from an oversight, omission or miscalcula-
tion) that results in a reported quantity or statement
being significantly different to the true value or meaning.
I n order to express an opinion on data or information, a
verifier would need to form a view on the materiality of
all identified errors or uncertainties.
While the concept of materiality involves a value judg-
ment, the point at which a discrepancy becomes material
(materiality threshold) is usually pre-defined. As a rule of
thumb, an error is considered to be materially misleading
C HAPTE R 10 Verification of GHG Emissions 69
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70
if its value exceeds 5% of the total inventory for the part
of the organization being verified.
The verifier needs to assess an error or omission in the
full context within which information is presented. For
example, if a 2% error prevents a company from
achieving its corporate target then this would most likely
be considered material. Understanding how verifiers
apply a materiality threshold will enable companies to
more readily establish whether the omissions of an indi-
vidual source or activity from their inventory is likely to
raise questions of materiality.
Materiality thresholds may also be outlined in the
requirements of a specific GHG program or determined
by a national verification standard, depending on who
is requiring the verification and for what reasons. A
materiality threshold provides guidance to verifiers on
what may be an immaterial discrepancy so that they can
concentrate thei r work on areas that are more l i kel y
to lead to materially misleading errors. A materiality
threshold is not the same as de minimis emissions, or
a permissible quantity of emissions that a company can
leave out of its inventory.
Assessi ng t he r i sk of mat er i al di sc r epanc y
Verifiers need to assess the risk of material discrepancy
of each component of the GHG information collection and
reporting process. This assessment is used to plan and
direct the verification process. I n assessing this risk, they
will consider a number of factors, including:
The structure of the organization and the approach
used to assign responsibility for monitoring and
reporting GHG emissions
The approach and commitment of management to
GHG monitoring and reporting
Development and implementation of policies and
processes for monitoring and reporting (including
documented methods explaining how data is generated
and evaluated)
Processes used to check and review calculation
methodologies
Complexity and nature of operations
Complexity of the computer information system used
to process the information
The state of calibration and maintenance of meters
used, and the types of meters used
Reliability and availability of input data
Assumptions and estimations applied
Aggregation of data from different sources
Other assurance processes to which the systems and
data are subjected (e.g., internal audit, external
reviews and certifications).
Est abl i shi ng t he ver i f i c at i on par amet er s
The scope of an independent verification and the level of
assurance it provides will be influenced by the company's
goals and/or any specific jurisdictional requirements. I t
is possible to verify the entire GHG inventory or specific
parts of it. Discrete parts may be specified in terms of
geographic location, business units, facilities, and type of
emissions. The verification process may also examine
more general managerial issues, such as quality manage-
ment procedures, managerial awareness, availability of
resources, clearly defined responsibilities, segregation of
duties, and internal review procedures.
The company and verifier should reach an agreement up-
front on the scope, level and objective of the verification.
This agreement (often referred to as the scope of work) will
address issues such as which information is to be included
in the verification (e.g., head office consolidation only or
information from all sites), the level of scrutiny to which
selected data will be subjected (e.g., desk top review or
on-site review), and the intended use of the results of the
verification). The materiality threshold is another item to
be considered in the scope of work. I t will be of key consid-
eration for both the verifier and the company, and is linked
to the objectives of the verification.
The scope of work is influenced by what the verifier actu-
ally finds once the verification commences and, as a result,
the scope of work must remain sufficiently flexible to
enable the verifier to adequately complete the verification.
A clearly defined scope of work is not only important
to the company and verifier, but also for external
stakeholders to be able to make informed and appro-
priate decisions. Verifiers will ensure that specific
exclusions have not been made solely to improve the
companys performance. To enhance transparency and
credibility companies should make the scope of work
publicly available.
C HAPTE R 10
Si t e vi si t s
Depending on the level of assurance required from
verification, verifiers may need to visit a number of sites
to enable them to obtain sufficient, appropriate evidence
over the completeness, accuracy and reliability of
reported information. The sites visited should be repre-
sentative of the organization as a whole. The selection of
sites to be visited will be based on consideration of a
number of factors, including:
Nature of the operations and GHG sources at each site
Complexity of the emissions data collection and
calculation process
Percentage contribution to total GHG emissions from
each site
The risk that the data from sites will be
materially misstated
Competencies and training of key personnel
Results of previous reviews, verifications, and
uncertainty analyses.
Ti mi ng of t he ver i f i c at i on
The engagement of a verifier can occur at various points
during the GHG preparation and reporting process.
Some companies may establish a semi-permanent
internal verification team to ensure that GHG data stan-
dards are being met and improved on an on-going basis.
Verification that occurs during a reporting period allows
for any reporting deficiencies or data issues to be
addressed before the final report is prepared. This may
be particularly useful for companies preparing high
profile public reports. However, some GHG programs
may require, often on a random selection basis, an inde-
pendent verification of the GHG inventory following the
submission of a report (e.g., World Economic Forum
Global GHG Registry, Greenhouse Challenge program in
Australia, EU ETS). I n both cases the verification
cannot be closed out until the final data for the period
has been submitted.
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Pri cewat erhouseCoopers (PwC), a gl obal servi ces company, has
been conduct i ng GHG emi ssi ons veri f i cat i ons f or t he past 10 years
i n vari ous sect ors, i ncl udi ng energy, chemi cal s, met al s, semi con-
duct ors, and pul p and paper. PwCs veri f i cat i on process i nvol ves
t wo key st eps:
1. An eval uat i on of whet her t he GHG account i ng and report i ng
met hodol ogy (e.g., GHG Pr ot ocol Cor por at e St andar d) has been
correct l y i mpl ement ed
2. Ident i f i cat i on of any mat eri al di screpanci es.
The GHG Pr ot ocol Cor por at e St andar d has been cruci al i n hel pi ng
PwC t o desi gn an ef f ect i ve GHG veri f i cat i on met hodol ogy. Si nce t he
publ i cat i on of t he f i rst edi t i on, PwC has wi t nessed rapi d i mprove-
ment s i n t he qual i t y and veri f i abi l i t y of GHG dat a report ed. In
part i cul ar t he quant i f i cat i on on non- CO
2
GHGs and combust i on
emi ssi ons has dramat i cal l y i mproved. Cement sect or emi ssi ons
veri f i cat i on has been made easi er by t he rel ease of t he WBCSD
cement sect or t ool . GHG emi ssi ons f rom purchased el ect ri ci t y are
al so easy t o veri f y si nce most compani es have rel i abl e dat a on MWh
consumed and emi ssi on f act ors are publ i cl y avai l abl e.
However, experi ence has shown t hat f or most compani es, GHG dat a
f or 1990 i s t oo unrel i abl e t o provi de a veri f i abl e base year f or t he
purposes of t racki ng emi ssi ons over t i me or set t i ng a GHG t arget .
Chal l enges al so remai n i n audi t i ng GHG emi ssi ons embedded i n
wast e f uel s, co- generat i on, passenger t ravel , and shi ppi ng.
Over t he past 3 year s PwC has not i ced a gr adual evol ut i on of
GHG ver i f i cat i on pr act i ces f r om cust omi zed and vol unt ar y t o
st andar di zed and mandat or y. The Cal i f or ni a Cl i mat e Act i on
Regi st r y, Wor l d Economi c For um Gl obal GHG Regi st r y and t he
f or t hcomi ng EU ETS ( cover i ng 12,000 i ndust r i al si t es i n Eur ope)
r equi r e some f or m of emi ssi ons ver i f i cat i on. In t he EU ETS GHG
ver i f i er s wi l l l i kel y have t o be accr edi t ed by a nat i onal body. GHG
ver i f i er accr edi t at i on pr ocesses have al r eady been est abl i shed i n
t he UK f or i t s domest i c t r adi ng scheme, and i n Cal i f or ni a f or r egi s-
t er i ng emi ssi ons i n t he CCAR.
Pr i c ewat er houseCooper s:
GHG i nvent or y ver i f i c at i on l essons f r om t he f i el d
Sel ec t i ng a ver i f i er
Some factors to consider when selecting a verifier
include their:
previous experience and competence in undertaking
GHG verifications
understanding of GHG issues including calculation
methodologies
understanding of the companys operations and
industry
objectivity, credibility, and independence.
I t is important to recognize that the knowledge and qual-
ifications of the individual(s) conducting the verification
can be more important than those of the organization(s)
they come from. Companies should select organizations
based on the knowledge and qualifications of their actual
verifiers and ensure that the lead verifier assigned to
them is appropriately experienced. Effective verification
of GHG inventories often requires a mix of specialized
skills, not only at a technical level (e.g., engineering
experience, industry specialists) but also at a business
level (e.g., verification and industry specialists).
Pr epar i ng f or a GHG ver i f i c at i on
The internal processes described in chapter 7 are likely
to be similar to those followed by an independent veri-
fier. Therefore, the materials that the verifiers need are
similar. I nformation required by an external verifier is
likely to include the following:
I nformation about the company's main activities and
GHG emissions (types of GHG produced, description
of activity that causes GHG emissions)
I nformati on about the company/groups/organi za-
ti on (l i st of subsi di ari es and thei r geographi c
l ocati on, ownershi p structure, fi nanci al enti ti es
wi thi n the organi zati on)
Details of any changes to the companys organiza-
tional boundaries or processes during the period,
including justification for the effects of these changes
on emissions data
Details of joint venture agreements, outsourcing and
contractor agreements, production sharing agree-
ments, emissions rights and other legal or contractual
documents that determine the organizational and
operational boundaries
Documented procedures for i denti fyi ng sources of
emi ssi ons wi thi n the organi zati onal and operati onal
boundari es
I nformation on other assurance processes to which the
systems and data are subjected (e.g. internal audit,
external reviews and certifications)
Data used for calculating GHG emissions. This might,
for example, include:
Energy consumption data (invoices, delivery notes,
weigh-bridge tickets, meter readings: electricity,
gas pipes, steam, and hot water, etc.)
Production data (tonnes of material produced, kWh
of electricity produced, etc.)
Raw material consumption data for mass balance
calculations (invoices, delivery notes, weighbridge
tickets, etc.)
Emission factors (laboratory analysis etc.).
Description of how GHG emissions data have
been calculated:
Emission factors and other parameters used and
their justification
Assumptions on which estimations are based
I nformation on the measurement accuracy of
meters and weigh-bridges (e.g., calibration records),
and other measurement techniques
Equity share allocations and their alignment with
financial reporting
Documentation on what, if any, GHG sources or
activities are excluded due to, for example, tech-
nical or cost reasons.
I nformation gathering process:
Description of the procedures and systems used to
collect, document and process GHG emissions data
at the facility and corporate level
Description of quality control procedures applied
(internal audits, comparison with last years data,
recalculation by second person, etc.).
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Verif ication of GHG Emissions
C HAPTE R 10 72
Other information:
Selected consolidation approach as defined in
chapter 3
list of (and access to) persons responsible for
collecting GHG emissions data at each site and at
the corporate level (name, title, e-mail, and tele-
phone numbers)
information on uncertainties, qualitative and if
available, quantitative.
Appropriate documentation needs to be available to
support the GHG inventory being subjected to external
verification. Statements made by management for which
there is no available supporting documentation cannot be
verified. Where a reporting company has not yet imple-
mented systems for routinely accounting and recording
GHG emissions data, an external verification will be
difficult and may result in the verifier being unable to
issue an opinion. Under these circumstances, the veri-
fiers may make recommendations on how current data
collection and collation process should be improved so
that an opinion can be obtained in future years.
Companies are responsible for ensuring the existence,
quality and retention of documentation so as to create
an audit trail of how the inventory was compiled. I f
a company issues a specific base year against which it
assesses its GHG performance, it should retain all
relevant historical records to support the base year data.
These issues should be born in mind when designing and
implementing GHG data processes and procedures.
Usi ng t he ver i f i c at i on f i ndi ngs
Before the verifiers will verify that an inventory has met
the relevant quality standard, they may require the
company to adjust any material errors that they identi-
fied during the course of the verification. I f the verifiers
and the company cannot come to an agreement
regarding adjustments, then the verifier may not be able
to provide the company with an unqualified opinion. All
material errors (individually or in aggregate) need to be
amended prior to the final verification sign off.
As well as issuing an opinion on whether the reported
information is free from material discrepancy, the veri-
fiers may, depending on the agreed scope of work, also
issue a verification report containing a number of recom-
mendations for future improvements. The process of
verification should be viewed as a valuable input to the
process of continual improvement. Whether verification
is undertaken for the purposes of internal review, public
reporting or to certify compliance with a particular
GHG program, it will likely contain useful information
and guidance on how to improve and enhance a
companys GHG accounting and reporting system.
Si mi l ar to the process of sel ecti ng a veri fi er, those
sel ected to be responsi bl e for assessi ng and i mpl e-
menti ng responses to the veri fi cati on fi ndi ngs shoul d
al so have the appropri ate ski l l s and understandi ng of
GHG accounti ng and reporti ng i ssues.
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74
et t i ng t ar get s i s a r out i ne busi ness pr act i ce t hat hel ps ensur e t hat
an i ssue i s kept on seni or management s r adar scr een and f act or ed
i nt o r el evant deci si ons about what pr oduct s and ser vi ces t o pr ovi de and what
mat er i al s and t echnol ogi es t o use. Of t en, a cor por at e GHG emi ssi on r educt i on
t ar get i s t he l ogi cal f ol l ow- up t o devel opi ng a GHG i nvent or y.
S
11
Setting a GHG Target
G U I D A N C E
This chapter provides guidance on the process of setting
and reporti ng on a corporate GHG target. Al though
the chapter focuses on emi ssi ons, many of the consi d-
erati ons equal l y appl y to GHG sequestrati on (see
Appendix B). I t is not the purpose of this chapter to
prescribe what a companys target should be, rather the
focus is on the steps involved, the choices to be made,
and the implications of those choices.
Why Set a GHG Tar get ?
Any robust business strategy requires setting targets for
revenues, sales, and other core business indicators, as
well as tracking performance against those targets.
Likewise, effective GHG management involves setting
a GHG target. As companies develop strategies to reduce
the GHG emissions of their products and operations,
corporate-wide GHG targets are often key elements of
these efforts, even if some parts of the company are
or will be subject to mandatory GHG limits. Common
drivers for setting a GHG target include:
M I N I M I Z I N G A N D M A N A GI N G GH G R I S K S
While developing a GHG inventory is an important
step towards identifying GHG risks and opportunities,
a GHG target is a planning tool that can actually drive
GHG reductions. A GHG target will help raise internal
awareness about the risks and opportunities presented
by climate change and ensure the issue is on the busi-
ness agenda. This can serve to minimize and more
effectively manage the business risks associated with
climate change.
A C H I E V I N G C OS T S AV I N GS
A N D S TI M U L ATI N G I N N OVATI ON
I mplementing a GHG target can result in cost savings
by driving improvements in process innovation and
resource efficiency. Targets that apply to products can
drive R&D, which in turn creates products and serv-
ices that can increase market share and reduce
emissions associated with the use of products.
P R E P A R I N G F OR F U TU R E R E GU L ATI ON S
I nternal accountability and incentive mechanisms that
are established to support a targets implementation
can also equip companies to respond more effectively
to future GHG regulations. For example, some compa-
nies have found that experimenting with internal GHG
trading programs has allowed them to better under-
stand the possible impacts of future trading programs
on the company.
C HAPTE R 11 Setting a GHG Target 75
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F I GU R E 1 2 . St eps i n set t i ng a GHG t ar get
1. Obt ai n seni or management c ommi t ment

2. Dec i de on t he t ar get t ype
Set an absol ut e or i nt ensi t y t arget ?
3. Dec i de on t he t ar get boundar y
Whi ch GHGs t o i ncl ude?
Whi ch di rect and i ndi rect emi ssi ons?
Whi ch geographi cal operat i ons?
Treat busi ness t ypes separat el y?
4. Choose t he t ar get base year
Use a f i xed or rol l i ng approach?
Use a si ngl e or mul t i - year approach?
5. Def i ne t he t ar get c ompl et i on dat e
Set a l ong- or short - t erm t arget ?
6. Def i ne t he l engt h of t he t ar get c ommi t ment per i od
Set a one- year or mul t i - year commi t ment peri od?
7. Dec i de on t he use of of f set s or c r edi t s
8. Est abl i sh a t ar get doubl e c ount i ng pol i c y
How t o deal wi t h doubl e count i ng of reduct i ons across compani es?
How does GHG t radi ng af f ect t arget perf ormance?
9. Dec i de on t he t ar get l evel
What i s busi ness- as- usual ? How f ar t o go beyond t hat ?
How do al l t he above st eps i nf l uence t he deci si on?
10. Tr ac k and r epor t pr ogr ess
Make regul ar perf ormance checks
Report i nf ormat i on i n rel at i on t o t he t arget
D E M ON S TR ATI N G L E A D E R S H I P
A N D C OR P OR ATE R E S P ON S I B I L I TY
With the emergence of GHG regulations in many parts
of the world, as well as growing concern about the
effects of climate change, a commitment such as
setting a public corporate GHG target demonstrates
leadership and corporate responsibility. This can
improve a companys standing with customers,
employees, investors, business partners, and the public,
and enhance brand reputation.
P A R TI C I P ATI N G I N V OL U N TA RY P R OGR A M S
A growing number of voluntary GHG programs are
emerging to encourage and assist companies in
setting, implementing, and tracking progress toward
GHG targets. Participation in voluntary programs
can result in public recognition, may facilitate recog-
nition of early action by future regulations, and
enhance a companys GHG accounting and reporting
capacity and understanding.
St eps i n Set t i ng a Tar get
Setting a GHG target involves making choices among
various strategies for defining and achieving a GHG
reducti on. The busi ness goal s, any rel evant pol i cy
context, and stakehol der di scussi ons shoul d i nform
these choi ces.
The following sections outline the ten steps involved.
Although presented sequentially, in practice target
setting involves cycling back and forth between the steps.
I t is assumed that the company has developed a GHG
inventory before implementing these steps. Figure 12
summarizes the steps.
1. Obt ai n seni or management c ommi t ment
As with any corporate wide target, senior management
buy-in and commitment particularly at the board/CEO
level is a prerequisite for a successful GHG reduction
program. I mplementing a reduction target is likely to
necessitate changes in behavior and decision-making
throughout the organization. I t also requires estab-
lishing an internal accountability and incentive system
and providing adequate resources to achieve the target.
This will be difficult, if not impossible, without senior
management commitment.
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C HAPTE R 11 76
B OX 4 . Compar i ng absol ut e and i nt ensi t y t ar get s
A B S OL U TE TA R GE TS reduce absol ut e emi ssi ons over t i me
(Exampl e: reduce CO
2
by 25 percent bel ow 1994 l evel s by 2010)
Advant ages
Desi gned t o achi eve a reduct i on i n a speci f i ed quant i t y of GHGs
emi t t ed t o t he at mosphere
Envi ronment al l y robust as i t ent ai l s a commi t ment t o reduce GHGs by
a speci f i ed amount
Transparent l y addresses pot ent i al st akehol der concerns about
t he need t o manage absol ut e emi ssi ons
Di sadvant ages
Target base year recal cul at i ons f or si gni f i cant st ruct ural changes
t o t he organi zat i on add compl exi t y t o t racki ng progress over t i me
Does not al l ow compari sons of GHG i nt ensi t y/ ef f i ci ency
Recogni zes a company f or reduci ng GHGs by decreasi ng produc-
t i on or out put (organi c decl i ne, see chapt er 5)
May be di f f i cul t t o achi eve i f t he company grows unexpect edl y
and growt h i s l i nked t o GHG emi ssi ons
I N TE N S I TY TA R GE TS reduce t he rat i o of emi ssi ons rel at i ve t o
a busi ness met ri c over t i me (Exampl e: reduce CO
2
by 12 percent per
t onne of cl i nker bet ween 2000 and 2008)
Advant ages
Ref l ect s GHG perf ormance i mprovement s i ndependent of organi c
growt h or decl i ne
Target base year recal cul at i ons f or st ruct ural changes are
usual l y not requi red (see st ep 4)
May i ncrease t he comparabi l i t y of GHG perf ormance among compani es
Di sadvant ages
No guar ant ee t hat GHG emi ssi ons t o t he at mospher e wi l l be
r educed absol ut e emi ssi ons may r i se even i f i nt ensi t y goes
down and out put i ncr eases
Compani es wi t h di verse operat i ons may f i nd i t di f f i cul t t o def i ne
a si ngl e common busi ness met ri c
If a monet ary vari abl e i s used f or t he busi ness met ri c, such as
dol l ar of revenue or sal es, i t must be recal cul at ed f or changes i n
product pri ces and product mi x, as wel l as i nf l at i on, addi ng
compl exi t y t o t he t racki ng process
TY P E OF TA R GE T
Reduce absol ut e emi ssi ons
MP: not normal l y const rai ned
Reduce GHG i nt ensi t y
Improve BPE
(ef f i ci ency)
Improve PE
(ef f i ci ency)
L E V E L OF D E C I S I ON - M A K I N G
( I N GE N E R A L A N D ON TA R GE T)
Corporat e
Al l l evel s dependi ng on scal e
(e.g. new vent ure, new pl ant , operat i onal )
Busi ness i n consul t at i on wi t h corporat e
Busi ness
Busi ness
Faci l i t y, support ed by Shel l Gl obal Sol ut i ons Energi se
TM
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The Royal Dut ch/ Shel l Group, a gl obal energy corporat i on, di scovered when i mpl ement i ng i t s vol unt ary GHG reduct i on t arget t hat one of
t he bi ggest chal l enges was t o cascade t he t arget down t o t he act i ons of al l empl oyees who i nf l uence t arget perf ormance. It was concl uded
t hat successf ul i mpl ement at i on requi red di f f erent t arget s at di f f erent l evel s of t he company. Thi s i s because each of t he component s t hat
underl i e absol ut e GHG emi ssi ons i s i nf l uenced by deci si on- maki ng at vari ous management l evel s (f rom t he corporat e l evel down t o i ndi -
vi dual busi nesses and f aci l i t i es).
Ab s o l u t e GHG e mi s s i o n s a t a p l a n t ( t o n n e s o f CO
2
- e . ) = Fu n c t i o n ( MP x BPE x PE)
MP Quant i t y of product manuf act ured by a f aci l i t y. Thi s i s f undament al t o t he need t o grow and i s t heref ore cont rol l ed at corporat e
l evel . GHG emi ssi ons are t ypi cal l y not managed by l i mi t i ng t hi s component .
BPE Best process energy use per t onne. The opt i mal (or t heoret i cal ) energy consumed (t ransl at es t o emi ssi ons) by a part i cul ar
desi gn of pl ant . The t ype of pl ant bui l t i s a busi ness- l evel deci si on. Si gni f i cant capi t al deci si ons may be i nvol ved i n bui l di ng a
new pl ant i ncorporat i ng new t echnol ogy. For exi st i ng pl ant s, BPE i s i mproved by si gni f i cant desi gn change and ret rof i t t i ng. Thi s
coul d al so i nvol ve l arge capi t al expendi t ure.
PE Pl ant ef f i ci ency i ndex. An i ndex t hat i ndi cat es how t he pl ant i s act ual l y perf ormi ng rel at i ve t o BPE. PE i s a resul t of day- t o- day
deci si ons t aken by pl ant operat ors and t echni ci ans. It i s i mproved al so by t he Shel l Gl obal Sol ut i ons Energi se
TM
programme,
whi ch t ypi cal l y requi res l ow capi t al expendi t ure t o i mpl ement .
Royal Dut ch/ Shel l f ound t hat whi l e t hi s model i s probabl y an oversi mpl i f i cat i on when i t comes t o expl orat i on and product i on f aci l i t i es, i t
i s sui t abl e f or manuf act uri ng f aci l i t i es (e.g., ref i neri es and chemi cal pl ant s). It i l l ust rat es t hat an absol ut e t arget coul d onl y be set at t he
corporat e l evel , whi l e l ower l evel s requi re i nt ensi t y or ef f i ci ency t arget s.
Royal Dut c h/ Shel l : The t ar get c asc ade
A C TI ON S TH AT
R E D U C E E M I S S I ON S
See bel ow
- - - - - - - -
See bel ow
Bui l di ng new pl ant s
wi t h new t echnol ogy
Ret rof i t t i ng and changi ng
desi gn of pl ant s
Increase pl ant
operat i ng ef f i ci ency
2. Dec i de on t he t ar get t ype
There are two broad types of GHG targets: absolute and
intensity-based. An absolute target is usually expressed
in terms of a reduction over time in a specified quantity
of GHG emissions to the atmosphere, the unit typically
being tonnes of CO
2
- e. An intensity target is usually
expressed as a reduction in the ratio of GHG emissions
relative to another business metric.
1
The comparative
metric should be carefully selected. I t can be the output
of the company (e.g. tonne CO
2
- e per tonne product, per
kWh, per tonne mileage) or some other metric such as
sales, revenues or office space. To facilitate transparency,
companies using an intensity target should also report the
absolute emissions from sources covered by the target.
Box 4 summari zes the advantages and di sadvantages
of each type of target. Some compani es have both an
absolute and an intensity target. Box 5 provides exam-
ples of corporate GHG targets. The Royal Dutch/Shell
case study illustrates how a corporate wide absolute
target can be i mpl emented by formul ati ng a combi na-
ti on of i ntensi ty targets at l ower l evel s of
deci si on-maki ng wi thi n the company.
3. Dec i de on t he t ar get boundar y
The target boundary defines which GHGs, geographic oper-
ations, sources, and activities are covered by the target.
The target and inventory boundary can be identical, or
the target may address a specified subset of the sources
included in the company inventory. The quality of the GHG
inventory should be a key factor informing this choice. The
questions to be addressed in this step include the following:
WH I C H GH GS ? Targets usually include one or more of
the six major GHGs covered by the Kyoto Protocol.
For companies with significant non-CO
2
GHG sources
it usually makes sense to include these to increase the
range of reduction opportunities. However, practical
monitoring limitations may apply to smaller sources.
WH I C H GE OGR A P H I C A L OP E R ATI ON S ? Only country
or regional operations with reliable GHG inventory
data should be included in the target. For companies
with global operations, it makes sense to limit the
targets geographical scope until a robust and reli-
able inventory has been developed for all operations.
Compani es that parti ci pate i n GHG programs
involving trading
2
will need to decide whether or not
to include the emissions sources covered in the trading
program in their corporate target. I f common sources
are included, i.e., if there is overlap in sources covered
between the corporate target and the trading program,
companies should consider how they will address
any double counting resulting from the trading of
GHG reductions in the trading program (see step 8).
WH I C H D I R E C T A N D I N D I R E C T E M I S S I ON S OU R C E S ?
I ncluding indirect GHG emissions in a target will
facilitate more cost-effective reductions by increasing
the reduction opportunities available. However,
indirect emissions are generally harder to measure
accurately and verify than direct emissions although
some categories, such as scope 2 emissions from
purchased electricity, may be amenable to accurate
measurement and verification. I ncluding indirect
emissions can raise issues with regard to ownership
and double counting of reductions, as indirect emis-
sions are by definition someone elses direct emissions
(see step 8).
SEPARATE TARGETS FOR DI FFERENT TYPES OF BUSI NESSES?
For companies with diverse operations it may make
more sense to define separate GHG targets for
different core businesses, especially when using an
intensity target, where the most meaningful business
metric for defining the target varies across business
units (e.g., GHGs per tonne of cement produced or
barrel of oil refined).
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C HAPTE R 11 78
B OX 5 . Sel ec t ed c or por at e GHG t ar get s
A B S OL U TE TA R GE TS
ABB Reduce GHGs by 1 percent each year f rom 1998 t hrough 2005
Al c oa Reduce GHGs by 25 percent f rom 1990 l evel s by 2010, and
50 percent f rom 1990 l evel s over same peri od, i f i nert anode t ech-
nol ogy succeeds
BP Hol d net GHGs st abl e at 1990 l evel s t hrough 2012
Dupont Reduce GHGs by 65 percent f rom 1990 l evel s by 2010
Ent er gy St abi l i ze CO
2
f rom U.S. generat i ng f aci l i t i es at 2000
l evel s t hrough 2005
For d Reduce CO
2
by 4 per cent over 2003- 2006 t i mef r ame
based upon aver age 1998- 2001 basel i ne as par t of Chi cago
Cl i mat e Exchange
I nt el Reduce PFCs by 10 percent f rom 1995 l evel s by 2010
Johnson & Johnson Reduce GHGs by 7 percent f rom 1990 l evel s by
2010, wi t h i nt eri m goal of 4 percent bel ow 1990 l evel s by 2005
Pol ar oi d Reduce CO
2
emi ssi ons 20 per cent bel ow i t s 1994
emi ssi ons by year- end 2005; 25 per cent by 2010
Royal Dut c h/ Shel l Manage GHG emi ssi ons so t hat t hey are st i l l
5 percent or more bel ow t he 1990 basel i ne by 2010, even whi l e
growi ng t he busi ness
Tr ansal t a Reduce GHGs t o 1990 l evel s by 2000. Achi eve zero net
GHGs f rom Canadi an operat i ons by 2024
I N TE N S I TY TA R GE TS
Hol c i m Lt d. Reduce by t he year 2010 t he Group average speci f i c
3
net CO
2
emi ssi ons by 20 percent f rom t he ref erence year 1990
Kansai El ec t r i c Power Company Reduce CO
2
emi ssi ons per kWh
sol d i n f i scal 2010 t o approx. 0.34 kg- CO
2
/ kWh
Mi l l er Br ewi ng Company Reduce GHGs by 18 percent per barrel
of product i on f rom 2001 t o 2006
Nat i onal Renewabl e Ener gy Labor at or y Reduce GHGs by 10
percent per square f oot f rom 2000 t o 2005
C OM B I N E D A B S OL U TE & I N TE N S I TY TA R GE TS
SC Johnson GHG emi ssi ons i nt ensi t y r educt i on of 23 per cent
by 2005, whi ch r epr esent s an absol ut e or act ual GHG r educt i on
of 8 per cent
Laf ar ge Reduce absol ut e gross CO
2
emi ssi ons i n Annex I count ri es
10 percent bel ow 1990 l evel s by t he year 2010. Reduce worl dwi de
average speci f i c net CO
2
emi ssi ons 20 percent bel ow 1990 l evel s
by t he year 2010
3
4. Choose t he t ar get base year
For a target to be credible, it has to be transparent how
target emissions are defined in relation to past emissions.
Two general approaches are available: a fixed target base
year or a rolling target base year.
U S I N G A F I X E D TA R GE T B A S E Y E A R . Most GHG
targets are defined as a percentage reduction in emis-
sions below a fixed target base year (e.g., reduce CO
2
emissions 25 percent below 1994 levels by 2010).
Chapter 5 describes how companies should track emis-
sions in their inventory over time in reference to a
fixed base year. Although it is possible to use different
years for the inventory base year and the target base
year, to streamline the inventory and target reporting
process, it usually makes sense to use the same year
for both. As with the inventory base year, it is impor-
tant to ensure that the emissions data for the target
base year are reliable and verifiable. I t is possible to
use a multi-year average target base year. The same
considerations as described for multi-year average
base years in chapter 5 apply.
Chapter 5 provides standards on when and how to
recalculate base year emissions in order to ensure
like-with-like comparisons over time when structural
changes (e.g., acquisitions/divestitures) or changes in
measurement and calculation methodologies alter the
emissions profile over time. I n most cases, this will
also be an appropriate approach for recalculating data
for a fixed target base year.
U S I N G A R OL L I N G TA R GE T B A S E Y E A R . Companies
may consider using a rolling target base year if
obtaining and maintaining reliable and verifiable data
for a fixed target base year is likely to be challenging
(for example, due to frequent acquisitions). With a
rolling target base year, the base year rolls forward at
regular time intervals, usually one year, so that emis-
sions are always compared against the previous year.
4
However, emission reductions can still be collectively
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TA B L E 5 . Compar i ng t ar get s wi t h r ol l i ng and f i xed base year s
How mi ght t he t ar get be st at ed?
What i s t he t ar get base year ?
How f ar bac k i s l i k e- wi t h- l i k e
c ompar i son possi bl e?
What i s t he basi s f or c ompar i ng
emi ssi ons bet ween t he t ar get
base year and c ompl et i on year ?
(see al so Fi gur e 14)
How f ar bac k ar e
r ec al c ul at i ons made?
How r el i abl e ar e t he t ar get
base year emi ssi ons?
When ar e r ec al c ul at i ons made?
F I X E D TA R GE T B A S E Y E A R
A t arget mi ght t ake t he f orm we wi l l
emi t X% l ess i n year B t han i n year A
A f i xed ref erence year i n t he past
The t i me seri es of absol ut e emi ssi ons
wi l l compare l i ke wi t h l i ke
The compari son over t i me i s based on
what i s owned/ cont rol l ed by t he company
i n t he t arget compl et i on year.
Emi ssi ons are recal cul at ed f or al l years
back t o t he f i xed t arget base year
If a company wi t h a t arget acqui res a
company t hat di d not have rel i abl e GHG
dat a i n t he t arget base year; back-
cast i ng of emi ssi ons becomes necessary,
reduci ng t he rel i abi l i t y of t he base year
R OL L I N G TA R GE T B A S E Y E A R
A t arget mi ght t ake t he f orm of over t he next X
years we wi l l reduce emi ssi ons every year by Y%
compared t o t he previ ous year
5
The previ ous year
If t here have been si gni f i cant st ruct ural changes t he
t i me seri es of absol ut e emi ssi ons wi l l not compare
l i ke wi t h l i ke over more t han t wo years at a t i me
The compari son over t i me i s based on what was
owned/ cont rol l ed by t he company i n t he years t he
i nf ormat i on was report ed
6
Emi ssi ons are recal cul at ed onl y f or t he year pri or
t o t he st ruct ural change, or ex- post f or t he year
of t he st ruct ural change whi ch t hen becomes t he
base year.
Dat a f rom an acqui red companys GHG emi ssi ons
are onl y necessary f or t he year bef ore t he acqui si -
t i on (or even onl y f rom t he acqui si t i on onwards),
reduci ng or el i mi nat i ng t he need f or backcast i ng
The ci rcumst ances whi ch t ri gger recal cul at i ons f or st ruct ural changes et c. (see chapt er 5) are
t he same under bot h approaches
stated over several years. An example would be from
2001 through 2012, emissions will be reduced by one
percent every year, compared to the previous year.
When structural or methodological changes occur,
recalculations only need to be made to the previous
year.
7
As a result, like-with-like comparisons of
emissions in the target starting year (2001 in the
example) and target completion year (2012)
cannot be made because emissions are not recalcu-
lated for all years back to the target starting year.
The definition of what triggers a base-year emissions
recalculation is the same as under the fixed base year
approach. The difference lies in how far back emissions
are recalculated. Table 5 compares targets using the
rolling and fixed base year approaches while Figure 14
illustrates one of the key differences.
R E C A L C U L ATI ON S U N D E R I N TE N S I TY TA R GE TS
Whi l e the standard i n chapter 5 appl i es to absol ute
i nventory emi ssi ons of compani es usi ng i ntensi ty
targets, recal cul ati ons for structural changes for the
purposes of the target are not usually needed unless the
structural change results in a significant change in the
GHG intensity. However, if recalculations for structural
changes are made for the purposes of the target, they
should be made for both the absolute emissions and the
business metric. I f the target business metric becomes
irrelevant through a structural change, a reformulation
of the target mi ght be needed (e.g., when a company
refocuses on a di fferent i ndustry but had used an
i ndustry-speci fi c busi ness metri c before).
5. Def i ne t he t ar get c ompl et i on dat e
The target completion date determines whether the
target is relatively short- or long-term. Long-term
targets (e.g., with a completion year ten years from the
time the target is set) facilitate long-term planning for
large capital investments with GHG benefits. However,
they might encourage later phase-outs of less efficient
equipment. Generally, long-term targets depend on
uncertain future developments, which can have opportu-
nities as well as risks, which is illustrated in Figure 13.
A five-year target period may be more practical for
organizations with shorter planning cycles.
6. Def i ne t he l engt h of t he c ommi t ment per i od
The target commitment period is the period of time
during which emissions performance is actually measured
against the target. I t ends with the target completion
date. Many companies use single-year commitment
periods, whereas the Kyoto Protocol, for example, speci-
fies a multi-year first commitment period of five years
(2008 2012). The length of the target commitment
period is an important factor in determining a companys
level of commitment. Generally, the longer the target
commitment period, the longer the period during which
emissions performance counts towards the target.
E X A M P L E OF A S I N GL E Y E A R C OM M I TM E N T P E R I OD .
Company Beta has a target of reducing emissions by
10 percent compared to its target base year 2000, by
the commitment year 2010. For Beta to meet its target,
it is sufficient for its emissions to be, in the year 2010,
no more than 90 percent of year 2000 emissions.
E X A M P L E OF A M U L TI - Y E A R C OM M I TM E N T P E R I OD .
Company Gamma has a target of reducing emissions
by 10 percent, compared to its target base year 2000,
by the commitment period 20082012. For Gamma
to meet i ts target, i ts sum total emi ssi ons from
20082012 must not exceed 90 percent of year
2000 emi ssi ons ti mes fi ve (number of years i n the
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C HAPTE R 11 80
F I GU R E 1 3 . Def i ni ng t he t ar get c ompl et i on dat e
Shor t - t er m
Long- t er m
Uncert ai nt y range
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FI GURE 14. Compar i ng a st abi l i zat i on t ar get under t he f i xed and r ol l i ng t ar get base year appr oac h
Company
B
Company
A
A aqui res B at
t he st art of year 3
1 2 3
Company A
N O C H A N GE
N O C H A N GE
I N C R E A S E
Company A
Fi xed base year
Rol l i ng base year
1 2 3
1 2 2 3
A st abi l i zat i on t ar get i s one t hat ai ms t o keep emi ssi ons const ant over t i me. In t hi s exampl e, company A acqui r es company B, whi ch has
exper i enced or gani c GHG gr owt h si nce t he t ar get base year ( or st ar t i ng year ) . Under t he r ol l i ng appr oach, emi ssi ons gr owt h i n t he
acqui r ed company ( B) f r om year 1 t o year 2 does not appear as an emi ssi ons i ncr ease i n r el at i on t o t he t ar get of t he acqui r i ng company
( A) . Thus company A woul d meet i t s st abi l i zat i on t ar get when usi ng t he r ol l i ng appr oach but not when usi ng t he f i xed appr oach. In par al l el
t o t he exampl e i n chapt er 5, past GHG gr owt h or decl i ne i n di vest ed f aci l i t i es ( GHG changes bef or e t he di vest ment ) woul d af f ect t he t ar get
per f or mance under t he r ol l i ng appr oach, whi l e i t woul d not be count ed under t he f i xed appr oach.
commitment period). I n other words, its average
emissions over those five years must not exceed
90 percent of year 2000 emissions.
Target commitment periods longer than one year can
be used to mitigate the risk of unpredictable events in
one particular year influencing performance against
the target. Figure 15 shows that the length of the
target commitment period determines how many emis-
sions are actually relevant for target performance.
For a target using a rolling base year, the commitment
period applies throughout: emission performance is
continuously being measured against the target every
year from when the target is set until the target
completion date.
7. Dec i de on t he use of GHG of f set s or c r edi t s
8
A GHG target can be met entirely from internal reduc-
tions at sources included in the target boundary or
through additionally using offsets that are generated
from GHG reduction projects that reduce emissions at
sources (or enhance sinks) external to the target
boundary.
9
The use of offsets may be appropriate when
F I GU R E 1 5 . Shor t vs. l ong c ommi t ment per i ods
1 year
5 year s
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S
the cost of internal reductions is high, opportunities for
reductions limited, or the company is unable to meet its
target because of unexpected circumstances. When
reporting on the target, it should be specified whether
offsets are used and how much of the target reduction
was achieved using them.
C R E D I B I L I TY OF OF F S E TS A N D TR A N S P A R E N C Y
There are currently no generally accepted methodologies
for quantifying GHG offsets. The uncertainties that
surround GHG project accounting make it difficult to
establish that an offset is equivalent in magnitude to the
internal emissions it is offsetting.
10
This is why compa-
nies should always report their own internal emissions
in separate accounts from offsets used to meet the
target, rather than providing a net figure (see step 10).
I t is also important to carefully assess the credibility of
offsets used to meet a target and to specify the origin
and nature of the offsets when reporting. I nformation
needed includes:
the type of project
geographic and organizational origin
how offsets have been quantified
whether they have been recognized by external
programs (CDM, JI , etc.)
One important way to ensure the credibility of offsets is
to demonstrate that the quantification methodology
adequately addresses all of the key project accounting
challenges in chapter 8. Taking these challenges into
account, the forthcoming GHGProtocol Project
Quantification Standardaims to improve the consistency,
credibility, and rigor of project accounting.
Additionally, it is important to check that offsets have
not also been counted towards another organizations
GHG target. This might involve a contract between the
buyer and seller that transfers ownership of the offset.
Step 8 provides more information on accounting for
GHG trades in relation to a corporate target, including
establishing a policy on double counting.
OF F S E TS A N D I N TE N S I TY TA R GE TS
When using offsets under intensity targets, all the above
considerations apply. I n order to determine compliance
with the target, the offsets can be subtracted from the
figure used for absolute emissions (the numerator); the
resulting difference is then divided by the corresponding
metric. I t is important, however, that absolute emissions
are still reported separately both from offsets and the
business metric (see step 9 below).
8. Est abl i sh a t ar get doubl e c ount i ng pol i c y
This step addresses double counting of GHG reductions
and offsets, as well as allowances issued by external
trading programs. I t applies only to companies that
engage in trading (sale or purchase) of GHG offsets or
whose corporate target boundaries interface with other
companies targets or external programs.
Given that there is currently no consensus on how such
double counting issues should be addressed, companies
should develop their own Target Double Counting
Policy. This should specify how reductions and trades
related to other targets and programs will be reconciled
with their corporate target, and accordingly which types
of double counting situations are regarded as relevant.
Listed here are some examples of double counting that
might need to be addressed in the policy.
D OU B L E C OU N TI N G OF OF F S E TS . This can occur when
a GHG offset is counted towards the target by both the
selling and purchasing organizations. For example,
company A undertakes an internal reduction project
that reduces GHGs at sources included in its own
target. Company A then sells this project reduction to
company B to use as an offset towards its target, while
still counting it toward its own target. I n this case,
reductions are counted by two different organizations
against targets that cover different emissions sources.
Trading programs address this by using registries that
allocate a serial number to all traded offsets or credits
and ensuring the serial numbers are retired once
they are used. I n the absence of registries this could
be addressed by a contract between seller and buyer.
D O U B L E C O U N T I N G D U E T O T A R G E T O V E R L A P.
1 1
This can occur when sources included under a
companys corporate target are also subject to limits
by an external program or another companys target.
Two examples:
Company A has a corporate target that includes
GHG sources that are also regulated under a trading
program. I n this case, reductions at the common
sources are used by company A to meet both its
corporate target and the trading program target.
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Company B has a corporate target to reduce its
direct emissions from the generation of electricity.
12
Company C who purchases electricity directly from
company B also has a corporate target that
includes indirect emissions from the purchase of
electricity (scope 2). Company C undertakes energy
efficiency measures to reduce its indirect emissions
from the use of the electricity. These will usually
show up as reductions in both companies targets.
13
These two examples illustrate that double counting is
inherent when the GHG sources where the reductions occur
are included in more than one target of the same or
different organizations. Without limiting the scope of
targets it may be difficult to avoid this type of double
counting and it probably does not matter if the double
counting is restricted to the organizations sharing the same
sources in their targets (i.e., when the two targets overlap).
D OU B L E C OU N TI N G OF A L L OWA N C E S TR A D E D I N
E X TE R N A L P R OGR A M S . This occurs when a corporate
target overlaps with an external trading program and
allowances that cover the common sources are sold in
the trading program for use by another organization
and reconciled with the regulatory target, but not
reconciled with the corporate target. This example
differs from the previous example in that double
counting occurs across two targets that are not over-
lapping (i.e., they do not cover the same sources).
This type of double counting could be avoided if the
company selling the allowances reconciles the trade
with its corporate target (see Holcim case study).
Whatever the company decides to do in this situation,
in order to maintain credibility, it should address
buying and selling of allowances in trading programs
in a consistent way. For example, if it decides not to
reconcile allowances that it sells in a trading program
with its corporate target, it should also not count any
allowances of the same type that it purchases to meet
its corporate target.
I deally a company should try to avoid double counting in
its corporate target if this undermines the environmental
integrity of the target. Also, any prevented double
counting between two organizations provides an addi-
tional incentive for one of these companies to further
reduce emissions. However, in practice the avoidance of
double counting can be quite challenging, particularly
for companies subject to multiple external programs and
when indirect GHG emissions are included in the target.
Companies should therefore be transparent about their
double counting policy and state any reasons for
choosing not to address some double counting situations.
The Holcim case study describes how one company has
chosen to track performance towards its target and
address double counting issues.
9. Dec i de on t he t ar get l evel
The decision on setting the target level should be
informed by all the previous steps. Other considerations
to take into account include:
Understanding the key drivers affecting GHG emis-
sions by examining the relationship between GHG
emissions and other business metrics, such as produc-
tion, square footage of manufacturing space, number
of employees, sales, revenue, etc.
Developing different reduction strategies based on the
major reduction opportunities available and examining
their effects on total GHG emissions. I nvestigate how
emissions projections change with different mitigation
strategies.
Looking at the future of the company as it relates to
GHG emissions.
Factoring in relevant growth factors such as production
plans, revenue or sales targets, and Return on I nvestment
(ROI ) of other criteria that drive investment strategy.
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Hol c i m: Usi ng a GHG bal anc e sheet
t o t r ac k per f or manc e t owar ds t he t ar get
Hol ci m, a gl obal cement pr oducer, t r acks i t s per f or mance i n
r el at i on t o i t s vol unt ar y cor por at e t ar get usi ng a GHG bal ance
sheet . Thi s bal ance sheet shows, f or each commi t ment per i od
and f or each count r y busi ness, on one si de t he act ual GHG
emi ssi ons and on t he ot her si de t he GHG asset s and
i nst r ument s. These asset s and i nst r ument s consi st of t he
vol unt ar y GHG t ar get i t sel f ( t he vol unt ar y cap ; i n ot her
wor ds, t he al l owances t hat Hol ci m pr ovi des f or i t sel f ) , a r egu-
l at or y t ar get ( cap ) i f appl i cabl e, pl us t he CDM cr edi t s
pur chased ( added) or sol d ( subt r act ed) , and any r egul at or y
emi ssi ons t r adi ng al l owances pur chased ( added) or sol d
( subt r act ed) . Thus i f any count r y busi ness sel l s CDM cr edi t s
( gener at ed at sour ces i nsi de t he vol unt ar y t ar get boundar y) , i t
i s ensur ed t hat onl y t he buyi ng or gani zat i on count s t he cr edi t
( see f i r st exampl e of doubl e count i ng i n st ep 8) .
At t he end of t he commi t ment peri od, every count ry busi ness
must demonst rat e a neut ral or posi t i ve bal ance t owards Hol ci ms
t arget . Those compani es whose vol unt ary cap overl aps wi t h a
regul at ory cap (e.g., i n Europe) must al so demonst rat e a
neut ral or posi t i ve bal ance t owards t he regul at ory cap. GHG
reduct i ons i n Europe are t hus report ed t owards bot h t arget s
(see second exampl e of doubl e count i ng i n st ep 8).
Bot h si des of t he count ry busi ness bal ance sheet s are consol i -
dat ed t o group l evel . Credi t s and al l owances t raded wi t hi n t he
group si mpl y cancel out i n t he asset col umn of t he consol i -
dat ed corporat e l evel GHG bal ance sheet . Any credi t s or
al l owances t raded ext ernal l y are reconci l ed wi t h bot h t he
vol unt ary and regul at ory caps at t he bot t om l i ne of t he asset
col umn of t he bal ance sheet . Thi s ensures t hat any sol d
al l owance i s onl y count ed by t he buyi ng organi zat i on (when
Hol ci ms t arget and t hat of t he buyi ng organi zat i on do not
overl ap). A purchased al l owance or credi t i s count ed t owards
bot h t he vol unt ary and regul at ory t arget s of t he European busi -
ness (t hese t wo t arget s overl ap).
GH G A S S E TS & I N S TR U M E N TS
Vol unt ary cap (di rect emi ssi ons)
Regul at ory cap (di rect emi ssi ons)
Reg. al l owances purchased (+ ) or sol d (- )
CDM credi t s purchased (+ ) or sol d (- )
Sum of vol unt ary cap, reg. al l owances & credi t s
Sum of regul at ory cap, reg. al l owances & credi t s
Vol unt ary cap
CDM credi t s purchased (+ ) or sol d (- )
Sum of vol unt ary cap & credi t s
Sum of vol unt ary cap, reg. al l owances & credi t s
GH G E M I S S I ON S
Emi ssi ons, di rect , i ndi rect + bi omass
Sum of di rect emi ssi ons
Sum of di rect emi ssi ons, accordi ng t o EU ETS
Emi ssi ons, di rect , i ndi rect + bi omass
Ho l c i m Gr o u p
Hol c i m (c ount r y A i n Eur ope)
Ho l c i m ( c o u n t r y X i n La t i n Ame r i c a )
GHG b a l a n c e s h e e t ( Al l val ues i n t onnes CO
2
- e/ year )
Considering whether there are any existing environmental
or energy plans, capital investments, product/service
changes, or targets that will affect GHG emissions.
Are there pl ans al ready i n pl ace for fuel swi tchi ng,
on site power generation, and/or renewable energy
investments that affect the future GHG trajectory?
Benchmarking GHG emissions with similar
organi zati ons. General l y, organi zati ons that have
not previously invested in energy and other GHG
reductions should be capable of meeting more aggres-
sive reduction levels because they would have more
cost-effective reduction opportunities.
10. Tr ac k and r epor t pr ogr ess
Once the target has been set, i t i s necessary to track
performance against it in order to check compliance,
and alsoin order to maintain credibilityto report
emissions and any external reductions in a consistent,
complete and transparent manner.
CARRY OUT REGUL AR P ERF ORM ANCE CHECKS. I n order
to track performance against a target, it is important
to link the target to the annual GHG inventory process
and make regular checks of emissions in relation to
the target. Some companies use interim targets for
this purpose (a target using a rolling target base year
automatically includes interim targets every year).
R E P OR T I N F OR M ATI ON I N R E L ATI ON TO TH E TA R GE T.
Companies should include the following information when
setting and reporting progress in relation to a target:
1. Description of the target
Provide an outline of the target boundaries chosen
Specify target type, target base year, target
completion date, and length of commitment period
Specify whether offsets can be used to meet the
target; if yes, specify the type and amount
Describe the target double counting policy
Specify target level.
2. I nformation on emissions and performance in rela-
tion to the target
Report emissions from sources inside the target
boundary separately from any GHG trades
I f using an intensity target, report absolute emis-
sions from within the target boundary separately,
both from any GHG trades and the business metric
Report GHG trades that are relevant to
compliance with the target (including how many
offsets were used to meet the target)
Report any internal project reductions sold or
transferred to another organization for use as
an offset
Report overall performance in relation to
the target.
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1
Some compani es may f ormul at e GHG ef f i ci ency t arget s by f ormul at i ng
t hi s rat i o t he ot her way around.
2
Exampl es i ncl ude t he U.K. ETS, t he CCX, and t he EU ETS.
3
Hol ci ms and Laf arges t arget have been f ormul at ed usi ng t he t ermi -
nol ogy of t he WBCSD Cement CO
2
Prot ocol (WBCSD, 2001), whi ch
uses speci f i c t o denot e emi ssi ons per t onne of cement produced.
4
It i s possi bl e t o use an i nt erval ot her t han one year. However, t he l onger
t he i nt erval at whi ch t he base year rol l s f orward, t he more t hi s approach
becomes l i ke a f i xed t arget base year. Thi s di scussi on i s based on a
rol l i ng t arget base year t hat moves f orward at annual i nt erval s.
5
Not e t hat si mpl y addi ng t he yearl y emi ssi ons changes under t he rol l i ng
base year yi el ds a di f f erent resul t f rom t he compari son over t i me made
wi t h a f i xed base year, even wi t hout st ruct ural changes. In absol ut e
t erms, an X% reduct i on every year over 5 years (compared t o t he
previ ous year) i s not t he same as an (X t i mes 5) reduct i on i n year 5
compared t o year 1.
6
Dependi ng on whi ch recal cul at i on met hodol ogy i s used when appl yi ng
t he rol l i ng base year, t he compari son over t i me can i ncl ude emi ssi ons
t hat occurred when t he company di d not own or cont rol t he emi ssi on
sources. However, t he i ncl usi on of t hi s t ype of i nf ormat i on i s mi ni -
mi zed. See al so t he gui dance document Base year recal cul at i on
met hodol ogi es f or st ruct ural changes on t he GHG Prot ocol websi t e
7
For f urt her det ai l s on di f f erent recal cul at i on met hodol ogi es, see t he
gui dance document Base year recal cul at i on met hodol ogi es f or st ruc-
t ural changes on t he GHG Prot ocol websi t e (www.ghgprot ocol .org).
8
As not ed i n chapt er 8, of f set s can be convert ed t o credi t s. Credi t s are
t hus underst ood t o be a subset of of f set s. Thi s chapt er uses t he t erm
of f set s as a generi c t erm.
9
For t he purposes of t hi s chapt er, t he t erms i nt ernal and ext ernal
ref er t o whet her t he reduct i ons occur at sources i nsi de (i nt ernal ) or
out si de (ext ernal ) t he t arget boundary.
10
Thi s equi val ence i s somet i mes ref erred t o as f ungi bi l i t y. However,
f ungi bi l i t y can al so ref er t o equi val ence i n t erms of t he val ue i n
meet i ng a t arget (t wo f ungi bl e of f set s have t he same val ue i n meet i ng
a t arget , i .e., t hey can bot h be appl i ed t o t he same t arget ).
11
Overl ap here ref ers t o a si t uat i on when t wo or more t arget s i ncl ude t he
same sources i n t hei r t arget boundari es.
12
Si mi l arl y, company A i n t hi s exampl e coul d be subj ect t o a mandat ory
cap on i t s di rect emi ssi ons under a t radi ng program and engage i n
t radi ng al l owances coveri ng t he common sources i t shares wi t h
company B. In t hi s case, t he exampl e i n t he sect i on Doubl e count i ng
of al l owances t raded i n ext ernal programs i s more rel evant .
13
The energy ef f i ci ency measures i mpl ement ed by company C may not
al ways resul t i n an act ual reduct i on of company Bs emi ssi ons. See
chapt er 8 f or f urt her det ai l s on reduct i ons i n i ndi rect emi ssi ons.
N OTE S
his appendix provides guidance on how to account
for and report indirect emissions associated with
the purchase of electricity. Figure A1 provides
an overview of the transactions associated with
purchased electricity and the corresponding emissions.
Pur c hased el ec t r i c i t y f or own c onsumpt i on
Emissions associated with the generation of purchased
electricity that is consumed by the reporting company
are reported in scope 2. Scope 2 only accounts for the
portion of the direct emissions from generating elec-
tricity that is actually consumed by the company. A
company that purchases electricity and transports it in a
transmission and distribution (T&D) system that it owns
or controls reports the emissions associated with T&D
losses under scope 2. However, if the reporting company
owns or controls the T&D system but generates (rather
than purchases) the electricity transmitted through its
wires, the emissions associated with T&D losses are
not reported under scope 2, as they would already be
accounted for under scope 1. This is the case when
generation, transmission, and distribution systems are
vertically integrated and owned or controlled by the
same company.
Pur c hased el ec t r i c i t y f or r esal e t o end- user s
Emissions from the generation of purchased electricity
for resale to end-users, for example purchases by a
utility company, may be reported under scope 3 in the
category generation of purchased electricity that is
sold to end-users. This reporting category is particu-
larly relevant for utility companies that purchase
wholesale electricity supplied by independent power
producers for resale to their customers. Since utility
companies and electricity suppliers often exercise
choice over where they purchase electricity, this
provides them with an important
GHG reduction opportunity (see Seattle City Light case
study in chapter 4). Since scope 3 is optional, companies
that are unable to track their electricity sales in terms of
end users and non-end users can choose not to report
these emissions in scope 3. I nstead, they can report the
total emissions associated with purchased electricity that
is sold to both end- and non-end-users under optional
information in the category generation of purchased
electricity, heat, or steam for re-sale to non-end users.
Pur c hased el ec t r i c i t y f or r esal e t o i nt er medi ar i es
Emissions associated with the generation of purchased
electricity that is resold to an intermediary (e.g.,
trading transactions) may be reported under optional
information under the category Generation of
purchased electricity, heat, or steam for re-sale to non-
end users. Examples of trading transactions include
brokerage/trading room transactions involving purchased
electricity or any other transaction in which electricity is
purchased directly from one source or the spot market
and then resold to an intermediary (e.g., a non-end user).
These emissions are reported under optional information
separately from scope 3 because there could be a
number of trading transactions before the electricity
finally reaches the end-user. This may cause duplicative
reporting of indirect emissions from a series of electricity
trading transactions for the same electricity.
86
Own c onsumpt i on
Resal e t o end- user s
Resal e t o
i nt er medi ar i es
Sc ope 2
Indi rect emi ssi ons f rom own consumpt i on of purchased el ect ri ci t y
Sc ope 3
Indi rect emi ssi ons f rom purchased el ect ri ci t y sol d t o end users
Opt i onal I nf or mat i on
Emi ssi ons f rom purchased el ect ri ci t y sol d t o non end users
F I GU R E A 1 . Ac c ount i ng f or t he i ndi r ec t GHG emi ssi ons assoc i at ed wi t h pur c hased el ec t r i c i t y
Pur c hased El ec t r i c i t y
T
A
P
P
E
N
D
I
X
Accounting for Indirect Emissions from Purchased Electricity
A
APPENDI X A
87
GHG emissions upstream
of the generation of electricity
Emissions associated with the extraction and production
of fuels consumed in the generation of purchased
electricity may be reported in scope 3 under the cate-
gory extraction, production, and transportation of
fuels consumed in the generation of electricity. These
emissions occur upstream of the generation of electricity.
Examples include emissions from mining of coal,
refining of gasoline, extraction of natural gas, and
production of hydrogen (if used as a fuel).
Choosing electricity emission factors
To quantify scope 2 emissions, the GHG Protocol
Corporate Standard recommends that companies obtain
source/supplier specific emission factors for the elec-
tricity purchased. If these are not available, regional
or grid emission factors should be used. For more
information on choosing emission factors, see the
relevant GHG Protocol calculation tools available
on the GHG Protocol website (www.ghgprotocol.org).
GHG emissions associated
with the consumption of electricity in T&D
Emissions from the generation of electricity that is
consumed in a T&D system may be reported in scope 3
under the category generation of electricity that is
consumed in a T&D system by end-users. Published
electricity grid emission factors do not usually include
T&D losses. To calculate these emissions, it may be
necessary to apply supplier or location specific T&D loss
factors. Companies that purchase electricity and trans-
port it in their own T&D systems would report the
portion of electricity consumed in T&D under scope 2.
Accounting for indirect emissions
associated with T&D losses
There are two types of electricity emission factors:
Emission factor at generation (EFG) and Emissions
factor at consumption (EFC). EFG is calculated from
CO
2
emissions from generation of electricity divided
by amount of electricity generated. EFC is calculated
from CO
2
emissions from generation divided by amount
of electricity consumed.
EFC and EFG are related as shown below.
As these equations indicate, EFC multiplied by the amount
of consumed electricity yields the sum of emissions attrib-
utable to electricity consumed during end use and
transmission and distribution. In contrast, EFG multiplied
by the amount of consumed electricity yields emissions
attributable to electricity consumed during end use only.
Consistent with the scope 2 definition (see chapter 4),
the GHG Protocol Corporate Standard requires the use
of EFG to calculate scope 2 emissions. The use of
EFG ensures internal consistency in the treatment of
electricity related upstream emissions categories and
avoids double counting in scope 2. Additionally, there
are several other advantages in using EFG:
1) It is simpler to calculate and widely available in
published regional, national, and international sources.
2) It is based on a commonly used approach to calculate
emissions intensity, i.e., emissions per unit of produc-
tion output.
3) It ensures transparency in reporting of indirect emis-
sions from T&D losses.
The formula to account for emissions associated with
T&D losses is the following:
In some countries such as Japan, local regulations may
require utility companies to provide both EFG and EFC to
its consumers, and consumers may be required to use EFC
to calculate indirect emissions from the consumption of
purchased electricity. In this case, a company still needs to
use EFG to report its scope 2 emissions for a GHG report
prepared in accordance with GHG Protocol Corporate Standard.
A
P
P
E
N
D
I
X

A
EFC x ELECTRI CI TY CONSUMED
=
EFG x ( EL ECT RI CI T Y CONSUMED + T &D L OSSES)
T &D L OSSES
ELECTRI CI TY CONSUMED
EFG =
EFC =
T OTAL CO
2
EMI SSI ONS FROM GENERATI ON
ELECTRI CI TY GENERATED
T OTAL CO
2
EMI SSI ONS FROM GENERATI ON
ELECTRI CI TY CONSUMED
( )
INDIRECT EMISSIONS
FROM CONSUMPTION OF
ELECTRICITY DURING T&D
EFG x
ELECTRICITY CONSUMED
DURING T&D
=
EFC = EFG x 1 +
key purpose of the GHGProtocol Corporate Standard
is to provide companies with guidance on how to
develop inventories that provide an accurate and
complete picture of their GHG emissions both from
their direct operations as well as those along the value
chain.
1
For some types of companies, this is not
possible without addressing the companys impacts on
sequestered atmospheric carbon.
2
Sequest er ed at mospher i c c ar bon
During photosynthesis, plants remove carbon (as CO
2
)
from the atmosphere and store it in plant tissue. Until
this carbon is cycled back into the atmosphere, it
resides in one of a number of carbon pools. These
pools include (a) above ground biomass (e.g., vegeta-
tion) in forests, farmland, and other terrestrial
environments, (b) below ground biomass (e.g., roots),
and (c) biomass-based products (e.g., wood products)
both while in use and when stored in a landfill.
Carbon can remain in some of these pools for long
periods of time, sometimes for centuries. An increase in
the stock of sequestered carbon stored in these pools
represents a net removal of carbon from the atmos-
phere; a decrease in the stock represents a net addition
of carbon to the atmosphere.
Why i nc l ude i mpac t s on sequest er ed c ar bon
i n c or por at e GHG i nvent or i es?
I t is generally recognized that changes in stocks of
sequestered carbon and the associated exchanges of
carbon with the atmosphere are important to national
level GHG emissions inventories, and consequently, these
impacts on sequestered carbon are commonly addressed
in national inventories (UNFCCC, 2000). Similarly, for
companies in biomass-based industries, such as the forest
products industry, some of the most significant aspects of
a companys overall impact on atmospheric CO
2
levels
will occur as a result of impacts on sequestered carbon in
their direct operations as well as along their value chain.
Some forest product companies have begun to address
this aspect of their GHG footprint within their corporate
GHG inventories (Georgia Pacific, 2002). Moreover,
WBCSDs Sustainable Forest Products I ndustry Working
Groupwhich represents a significant cluster of inte-
grated forestry companies operating internationallyis
developing a project that will further investigate carbon
measurement, accounting, reporting, and ownership
issues associated with the forest products value chain.
I nformation on a companys impacts on sequestered
atmospheric carbon can be used for strategic planning, for
educating stakeholders, and for identifying opportunities
for improving the companys GHG profile. Opportunities
may also exist to create value from reductions created
along the value chain by companies acting alone or in
partnership with raw material providers or customers.
Ac c ount i ng f or sequest er ed c ar bon i n t he
c ont ext of t he GHG Pr ot oc ol Cor por at e St andar d
Consensus methods have yet to be developed under the
GHGProtocol Corporate Standardfor accounting of
sequestered atmospheric carbon as it moves through the
value chain of biomass-based industries. Nonetheless,
some issues that would need to be addressed when
addressing impacts on sequestered carbon in corporate
inventories can be examined in the context of existing
guidance provided by the GHGProtocol Corporate
Standardas highlighted below.
S E TTI N G OR GA N I Z ATI ON A L B OU N D A R I E S
The GHGProtocol Corporate Standardoutlines two
approaches for consolidating GHG datathe equity share
approach and the control approach. I n some cases, it
may be possible to apply these approaches directly to
emissions/removals associated with sequestered atmos-
pheric carbon. Among the issues that may need to be
examined is the ownership of sequestered carbon under
the different types of contractual arrangements
involving land and wood ownership, harvesting rights,
and control of land management and harvesting deci-
sions. The transfer of ownership as carbon moves
through the value chain may also need to be addressed.
I n some cases, as part of a risk management program
for instance, companies may be interested in performing
value chain assessments of sequestered carbon without
regard to ownership or control just as they might do for
scope 2 and 3 emissions.
S E TTI N G OP E R ATI ON A L B OU N D A R I E S
As with GHG emissions accounting, setting operational
boundaries for sequestered carbon inventories would help
companies transparently report their impacts on
sequestered carbon along their value chain. Companies
may, for example, provide a description of the value
chain capturing impacts that are material to the results
of the analysis. This should include which pools are
88
Accounting for Sequestered Atmospheric Carbon
A
P
P
E
N
D
I
X
B
A
included in the analysis, which are not, and the
rationale for the selections. Until consensus methods
are developed for characterizing impacts on
sequestered atmospheric carbon along the value chain,
this information can be included in the optional
information section of a GHG inventory compiled
using the GHGProtocol Corporate Standard.
TR A C K I N G R E M OVA L S OV E R TI M E
As is sometimes the case with accounting for GHG emis-
sions, base year data for impacts on sequestered carbon
may need to be averaged over multiple years to accom-
modate the year-to-year variability expected of these
systems. The temporal scale used in sequestered carbon
accounting will often be closely tied to the spatial scale
over which the accounting is done. The question of how
to recalculate base years to account for land acquisition
and divestment, land use changes, and other activities
also needs to be addressed.
I D E N TI F Y I N G A N D C A L C U L ATI N G GH G R E M OVA L S
The GHGProtocol Corporate Standarddoes not include
consensus methods for sequestered carbon quantifica-
tion. Companies should, therefore, explain the methods
used. I n some instances, quantification methods used
in national inventories can be adapted for corporate-
level quantification of sequestered carbon. I PCC
(1997; 2000b) provides useful information on how to
do this. I n 2004, I PCC is expected to issue Good
Practice Guidance for Land Use, Land Use Change
and Forestry, with information on methods for quan-
tification of sequestered carbon in forests and forest
products. Companies may also find it useful to consult
the methods used to prepare national inventories for
those countries where significant parts of their
companys value chain reside.
I n addition, although corporate inventory accounting
differs from project-based accounting (as discussed
below), it may be possible to use some of the calculation
and monitoring methods derived from project level
accounting of sequestration projects.
A C C OU N TI N G F OR R E M OVA L E N H A N C E M E N TS
A corporate inventory can be used to account for yearly
removal s wi thi n the corporate i nventory boundary.
I n contrast, the forthcomi ng GHGProtocol Project
Quantification Standard is designed to calculate project
reductions that will be used as offsets, relative to a hypo-
thetical baseline scenario for what would have happened
without the project. I n the forestry sector, projects take the
form of removal enhancements.
Chapter 8 in this document addresses some of the issues
that must be addressed when accounting for offsets
from GHG reduction projects. Much of this guidance is
also applicable to removal enhancement projects. One
example is the issue of reversibility of removals also
briefly described in chapter 8.
R E P OR TI N G GH G R E M OVA L S
Until consensus methods are developed for character-
izing impacts on sequestered atmospheric carbon along
the value chain, this information can be included in
the optional information section of the inventory (See
chapter 9). I nformation on sequestered carbon in the
companys inventory boundary should be kept separate
from project-based reductions at sources that are not in
the inventory boundary. Where removal enhancement
projects take place within a companys inventory
boundary they would normally show up as an increase in
carbon removals over time, but can also be reported in
optional information. However, they should also be iden-
tified separately to ensure that they are not double
counted. This is especially important when they are sold
as offsets or credits to a third party.
As companies develop experience using various
methods for characterizing impacts on sequestered
carbon, more information will become available on the
level of accuracy to expect from these methods. I n the
early stages of developing this experience, however,
compani es may fi nd i t di ffi cul t to assess the uncer-
tainty associated with the estimates and therefore may
need to give special care to how the estimates are
represented to stakeholders.
89
APPE NDI X B
N OTE S
1
In t hi s Appendi x, val ue chai n means a seri es of operat i ons and
ent i t i es, st art i ng wi t h t he f orest and ext endi ng t hrough end- of - l i f e
management , t hat (a) suppl y or add val ue t o raw mat eri al s and i nt er-
medi at e product s t o produce f i nal product s f or t he market pl ace and (b)
are i nvol ved i n t he use and end- of - l i f e management of t hese product s.
2
In t hi s Appendi x t he t erm sequest ered at mospheri c carbon ref ers
excl usi vel y t o sequest rat i on by bi ol ogi cal si nks.
F OC U S
( Or gani zat i on,
pr oj ect , f aci l i t y)
Organi zat i on
(Proj ect s possi bl e
i n 2004)
Organi zat i on
Organi zat i on
Organi zat i on
Faci l i t y
Faci l i t y
Organi zat i on
and proj ect
Organi zat i on
GA S E S C OV E R E D
Organi zat i ons report
CO
2
f or f i rst t hree
years of part i ci pa-
t i on, al l si x
GHGs t hereaf t er.
Si x
CO
2
Si x
Si x
Si x Kyot o gases
as wel l as ot her
pol l ut ant s
Si x
Si x
OR GA N I Z ATI ON A L
P R OJE C T B OU N D A R I E S
Equi t y share or cont rol f or
Cal i f orni a or US operat i ons
Equi t y share or cont rol
f or US operat i ons
at a mi ni mum
Equi t y share or cont rol
f or worl dwi de operat i ons
worl dwi de operat i ons
Faci l i t i es i n
sel ect ed sect ors
Faci l i t i es t hat f al l under
EU IPPC di rect i ve
Equi t y share
worl dwi de operat i ons
A
P
P
E
N
D
I
X
90
C
Overview of GHG Programs Overview of GHG Programs
N A M E OF P R OGR A M
Cal i f or ni a Cl i mat e Ac t i on Regi st r y
www.cl i mat er egi st y.or g
US EPA Cl i mat e Leader s
www.epa.gov/ cl i mat el eader s
WWF Cl i mat e Saver s
www.worl dwi l dl i f e.org/ cl i mat esavers
Wor l d Ec onomi c For um
Gl obal GHG Regi st er
www.wef or um.or g
EU GHG Emi ssi ons Al l owanc e
Tr adi ng Sc heme
www.europa.eu.i nt / comm/ envi ronment /
Eur opean Pol l ut ant
Emi ssi on Regi st r y
www.europa.eu.i nt / comm/ envi ron-
ment / i ppc/ eper/ i ndex.ht m
Chi c ago Cl i mat e Exc hange
www.chi cagocl i mat eexchange.com
Respec t Eur ope BLI CC
www.r espect eur ope.com/ r t 2/ bl i cc/
TY P E OF P R OGR A M
Vol unt ary regi st ry
Vol unt ary reduct i on
program
Mandat ory al l owance
t radi ng scheme
Mandat ory regi st ry
f or l arge i ndust ri al
f aci l i t i es
Vol unt ary al l owance
t radi ng scheme
Vol unt ary reduct i on
program
OP E R ATI ON A L
B OU N D A R I E S
Scope 1 and 2
requi red, scope 3
t o be deci ded
Scope 1 and 2
requi red, scope 3
opt i onal
Scope 1 and 2
requi red, scope 3
opt i onal
Scope 1 and 2
requi red, scope 3
opt i onal
Scope 1
Scope 1 requi red
Di rect combust i on
and process emi s-
si on sources and
i ndi rect emi ssi ons
opt i onal .
Scope 1 and 2
requi red, scope 3
st rongl y
encouraged
N ATU R E / P U R P OS E
OF P R OGR A M
Basel i ne prot ect i on,
publ i c report i ng,
possi bl e f ut ure t arget s
Publ i c recogni t i on,
assi st ance set t i ng
t arget s and
achi evi ng reduct i ons
Achi eve t arget s,
publ i c recogni t i on,
expert assi st ance
Basel i ne prot ect i on,
publ i c report i ng,
t arget s encouraged
but opt i onal
Achi eve annual caps
t hrough t radabl e
al l owance market ,
i ni t i al peri od f rom
2005 t o 2007
Permi t i ndi vi dual
i ndust ri al f aci l i t i es
Achi eve annual
t arget s t hrough t rad-
abl e al l owance market
Achi eve t arget s,
publ i c recogni t i on,
expert assi st ance
B A S E Y E A R
Speci f i c t o each
organi zat i on, recal cul at i on
consi st ent wi t h GHG Prot ocol
Corporat e St andard requi red
Year t hat organi zat i on j oi ns
program, recal cul at i on
Chosen year si nce 1990, speci f i c
t o each organi zat i on, recal cul a-
t i on consi st ent wi t h GHG Prot ocol
Chosen year si nce 1990, speci f i c
t o each organi zat i on, recal cul a-
t i on consi st ent wi t h GHG Prot ocol
Det ermi ned by member count ry
f or al l owance al l ocat i on
Not appl i cabl e
Average of 1998 t hrough 2001
Speci f i c t o each
organi zat i on, recal cul at i on
TA R GE T
Encouraged but opt i onal
Requi red, speci f i c t o
each organi zat i on
Requi red, speci f i c t o
Encouraged but opt i onal
Annual compl i ance wi t h
al l ocat ed and t raded
al l owances, EU
commi t t ed t o 8% overal l
reduct i on bel ow 1990
Not appl i cabl e
1% bel ow i t s basel i ne i n
2003, 2% bel ow basel i ne
i n 2004, 3% bel ow base-
l i ne i n 2005 and 4%
bel ow basel i ne i n 2006
Mandat ory, speci f i c t o
V E R I F I C ATI ON
Requi red t hrough cert i -
f i ed t hi rd part y veri f i er
Opt i onal , provi des
gui dance and checkl i st
of component s t hat
shoul d be i ncl uded
i f undert aken
Thi rd part y veri f i er
or spot checks
by WEF
Local permi t t i ng
aut hori t y
APPE NDI X C
91
92
Industry Sectors and Scopes
A
P
P
E
N
D
I
X
D
SCOP E 1 EMI SSI ON SOURCES
St at i onary combust i on (boi l ers and t urbi nes used
i n t he product i on of el ect ri ci t y, heat or st eam, f uel
pumps, f uel cel l s, f l ari ng)
Mobi l e combust i on (t rucks, barges and t rai ns f or
t ransport at i on of f uel s)
Fugi t i ve emi ssi ons (CH
4
l eakage f rom t ransmi ssi on
and st orage f aci l i t i es, HFC emi ssi ons f rom LPG st orage
f aci l i t i es, SF
6
emi ssi ons f rom t ransmi ssi on and di st ri -
but i on equi pment )
St at i onary combust i on (process heat ers, engi nes,
t urbi nes, f l ares, i nci nerat ors, oxi di zers, product i on of
el ect ri ci t y, heat and st eam)
Process emissions (process vent s, equipment vent s,
maint enance/ t urnaround act ivit ies, non- rout ine act ivit ies)
Mobi l e combust i on (t ransport at i on of raw
mat eri al s/ product s/ wast e; company owned vehi cl es)
Fugi t i ve emi ssi ons (l eaks f rom pressuri zed equi pment ,
wast ewat er t reat ment , surf ace i mpoundment s)
St at i onary combust i on (met hane f l ari ng and use, use
of expl osi ves, mi ne f i res)
Mobi l e combust i on (mi ni ng equi pment , t ransport at i on
of coal )
4
emi ssi ons f rom coal mi nes
and coal pi l es)
St at i onary combust i on (bauxi t e t o al umi num processi ng,
coke baki ng, l i me, soda ash and f uel use, on- si t e CHP)
Process emi ssi ons (carbon anode oxi dat i on, el ect rol -
ysi s, PFC)
Mobi l e combust i on (pre- and post - smel t i ng t rans-
port at i on, ore haul ers)
Fugi t i ve emi ssi ons (f uel l i ne CH
4
, HFC and PFC, SF
6
cover gas)
St at i onary combust i on (coke, coal and carbonat e
f l uxes, boi l ers, f l ares)
Process emi ssi ons (crude i ron oxi dat i on, consumpt i on of
reduci ng agent , carbon cont ent of crude i ron/ f erroal l oys)
Mobi l e combust i on (on- si t e t ransport at i on)
Fugi t i ve emi ssi on (CH
4
, N
2
O)
St at i onary combust i on (boi l ers, f l ari ng, reduct i ve
f urnaces, f l ame react ors, st eam ref ormers)
Process emi ssi ons (oxi dat i on/ reduct i on of subst rat es,
i mpuri t y removal , N
2
O byproduct s, cat al yt i c cracki ng,
myri ad ot her emi ssi ons i ndi vi dual t o each process)
mat eri al s/ product s/ wast e)
Fugi t i ve emi ssi ons (HFC use, st orage t ank l eakage)
SCOP E 2
EMI SSI ON SOURCES
St at i onary combust i on
(consumpt i on of
purchased el ect ri ci t y,
heat or st eam)
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
1
St at i onary combust i on (mi ni ng and ext ract i on of f uel s,
energy f or ref i ni ng or processi ng f uel s)
Process emi ssi ons (product i on of f uel s, SF
6
emi ssi ons
2
)
Mobi l e combust i on (t ransport at i on of f uel s/ wast e,
empl oyee busi ness t ravel , empl oyee commut i ng)
4
and CO
2
f rom wast e l andf i l l s,
pi pel i nes, SF
6
emi ssi ons)
St at i onary combust i on (product use as f uel or combus-
t i on f or t he product i on of purchased mat eri al s)
mat eri al s/ product s/ wast e, empl oyee busi ness t ravel ,
empl oyee commut i ng, product use as f uel )
Process emi ssi ons (product use as f eedst ock or emi s-
si ons f rom t he product i on of purchased mat eri al s)
4
and CO
2
f rom wast e l andf i l l s
or f rom t he product i on of purchased mat eri al s)
St at i onary combust i on (product use as f uel )
Mobi l e combust i on (t ransport at i on of coal / wast e,
Process emi ssi ons (gasi f i cat i on)
St at i onary combust i on (raw mat eri al processi ng and
coke product i on by second part y suppl i ers, manuf act ure
of product i on l i ne machi nery)
Mobi l e combust i on (t ransport at i on servi ces, busi ness
t ravel , empl oyee commut i ng)
Process emi ssi ons (duri ng product i on of purchased
mat eri al s)
Fugi t i ve emi ssi ons (mi ni ng and l andf i l l CH
4
and CO
2
,
out sourced process emi ssi ons)
St at i onary combust i on (mi ni ng equi pment , product i on
of purchased mat eri al s)
Process emi ssi ons (product i on of f erroal l oys)
mat eri al s/ product s/ wast e and i nt ermedi at e product s)
4
and CO
2
f rom wast e l andf i l l s)
St at i onary combust i on (product i on of purchased mat e-
ri al s, wast e combust i on)
Process emi ssi ons (product i on of purchased mat eri al s)
empl oyee commut i ng)
4
and CO
2
f rom wast e l andf i l l s
and pi pel i nes)
S E C TOR
E N E R GY
Ener gy
Gener at i on
Oi l and Gas
3
Coal Mi ni ng
M E TA L S
Al umi num
4
I r on and St eel
5
CHEMI CALS
Ni t r i c ac i d,
Ammoni a, Adi pi c
ac i d, Ur ea, and
Pet r oc hemi c al s
APPE NDI X D
93
Process emi ssi ons (cal ci nat i on of l i mest one)
St at i onary combust i on (cl i nker ki l n, dryi ng of
raw mat eri al s, product i on of el ect ri ci t y)
Mobi l e combust i on (quarry operat i ons,
on- si t e t ransport at i on)
St at i onary combust i on (i nci nerat ors, boi l ers, f l ari ng)
Process emi ssi ons (sewage t reat ment , ni t rogen l oadi ng)
4
and CO
2
emi ssi ons f rom
wast e and ani mal product decomposi t i on)
Mobi l e combust i on (t ransport at i on of wast e/ product s)
St at i onary combust i on (product i on of st eam and el ec-
t ri ci t y, f ossi l f uel - deri ved emi ssi ons f rom cal ci nat i on
of cal ci um carbonat e i n l i me ki l ns, dryi ng product s wi t h
i nf rared dri ers f i red wi t h f ossi l f uel s)
Mobile combust ion (t ransport at ion of raw mat erials, prod-
uct s, and wast es, operat ion of harvest ing equipment )
4
and CO
2
f rom wast e)
St at i onary combust i on(product i on of el ect ri ci t y,
heat or st eam)
Process emi ssi ons (HFC vent i ng)
Fugi t i ve emi ssi ons (HFC use)
Process emi ssi ons (C
2
F
6
, CH
4
, CHF
3
, SF
6
, NF
3
, C
3
F
8
,
C
4
F
8
, N
2
O used i n waf er f abri cat i on, CF
4
creat ed f rom
C
2
F
6
and C
3
F
8
processi ng)
St at i onary combust i on (oxi dat i on of vol at i l e organi c
wast e, product i on of el ect ri ci t y, heat or st eam)
Fugi t i ve emi ssi ons (process gas st orage l eaks,
cont ai ner remai nders/ heel l eakage)
Stationary combustion (production of electricity, heat or steam)
mat eri al s/ wast e)
Fugi t i ve emi ssi ons (mai nl y HFC emi ssi ons duri ng use
of ref ri gerat i on and ai r- condi t i oni ng equi pment )
SCOP E 2
EMI SSI ON SOURCES
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
(consumpt i on of
heat or st eam)
Process emissions (production of purchased clinker and lime)
Fugi t i ve emi ssi ons (mi ni ng and l andf i l l CH
4
and CO
2
,
out sourced process emi ssi ons)
St at i onary combust i on(recycl ed wast e used as a f uel )
Process emi ssi ons (recycl ed wast e used as a f eedst ock)
Mobi l e combust i on (t ransport at i on of wast e/ product s,
Fugi t i ve emi ssi ons (l andf i l l CH
4
and CO
2
emi ssi ons)
HFC, PFC, SF6 & HCFC 22 product i on
St at ionary combust ion (product ion of purchased mat erials)
Mobi l e combust i on (t ransport at i on of raw mat eri al s/ prod-
ucts/waste, employee business travel, employee commuting)
Fugi t i ve emi ssi ons(f ugi t i ve l eaks i n product use, CH
4
and CO
2
f rom wast e l andf i l l s)
St at i onary combust i on (product i on of i mport ed mat e-
ri al s, wast e combust i on, upst ream T&D l osses of
purchased el ect ri ci t y)
Process emi ssi ons (product i on of purchased mat eri al s,
out sourced di sposal of ret urned process gases and
cont ai ner remai nder /heel )
Mobi l e combust i on (t ransport at i on of raw mat eri al s/ prod-
ucts/waste, employee business travel, employee commuting)
Fugi t i ve emi ssi ons (l andf i l l CH
4
and CO
2
emi ssi ons, down-
st ream process gas cont ai ner remai nder / heel l eakage)
Ot her Sect ors
St at ionary combust ion (product ion of purchased mat erials)
S E C TOR
M I N E R A L S
Cement and
Li me
6
WASTE
7
Landf i l l s, Wast e
c ombust i on,
Wat er ser vi c es
PULP & PAPER
Pul p and Paper
8
HCFC 22
pr oduc t i on
Semi c onduc t or
pr oduc t i on
Ser vi c e sec t or /
Of f i c e based
or gani zat i ons
10
H F C , P F C , S F
6
& H C F C 2 2 P R OD U C TI ON
9
S E M I C ON D U C TOR P R OD U C TI ON
OTH E R S E C TOR S
10
Appendix D
94
1
Scope 3 act i vi t i es of out sourci ng, cont ract manuf act uri ng, and f ran-
chi ses are not addressed i n t hi s t abl e because t he i ncl usi on of speci f i c
GHG sources wi l l depend on t he nat ure of t he out sourci ng.
2
Gui del i nes on uni nt ent i onal SF
6
process emi ssi ons are t o be devel oped.
3
The Ameri can Pet rol eum Inst i t ut es Compendi um of Greenhouse Gas
Emi ssi ons Met hodol ogi es f or t he Oi l and Gas Indust ry (2004) provi des
gui del i nes and cal cul at i on met hodol ogy f or cal cul at i ng GHG emi ssi ons
f rom t he oi l and gas sect or.
4
The Int er nat i onal Al umi num Inst i t ut es Al umi num Sect or Gr eenhouse
Gas Pr ot ocol ( 2003) , i n cooper at i on wi t h WRI and WBCSD, pr ovi des
gui del i nes and t ool s f or cal cul at i ng GHG emi ssi ons f r om t he
al umi num sect or.
5
The Int ernat i onal Iron and St eel Inst i t ut e' s Iron and St eel sect or gui de-
l i nes, i n cooperat i on wi t h WRI and WBCSD, are under devel opment .
6
The WBCSD Worki ng Group Cement : Toward a Sust ai nabl e Cement
Indust ry has devel oped The Cement CO
2
Prot ocol : CO
2
Emi ssi ons
Moni t ori ng and Report i ng Prot ocol f or t he Cement Indust ry (2002),
whi ch i ncl udes gui del i nes and t ool s t o cal cul at e GHG emi ssi ons f rom
t he cement sect or.
7
Gui del i nes f or wast e sect or are t o be devel oped.
8
The Cl i mat e Change Worki ng Group of t he Int ernat i onal Counci l of
Forest and Paper Associ at i ons has devel oped Cal cul at i on Tool s f or
Est i mat i ng Greenhouse Gas Emi ssi ons f rom Pul p and Paper Mi l l s
(2002), whi ch i ncl udes gui del i nes and t ool s t o cal cul at e GHG emi ssi ons
f rom t he pul p and paper sect or.
9
Gui del i nes f or PFC and SF
6
product i on are t o be devel oped.
10
Busi nesses i n ot her sect ors can est i mat e GHG emi ssi ons usi ng
cr oss- sect or al est i mat i on t ool s st at i onar y combust i on, mobi l e
( t r anspor t at i on) combust i on, HFC use, measur ement and est i mat i on
uncer t ai nt y, and wast e.
11
WRI has devel oped Wor ki ng 9 t o 5 on Cl i mat e Change: An Of f i ce
Gui de ( 2002) and www. Saf ecl i mat e. net , whi ch i ncl ude gui del i nes
and cal cul at i on t ool s f or cal cul at i ng GHG emi ssi ons f r om of f i ce-
based or gani zat i ons.
N OTE S
95
Acronyms
C D M Clean Development Mechanism
C E M Continuous Emission Monitoring
C H
4
Methane
C E R Certified Emission Reduction
C C A R California Climate Action Registry
C C X Chicago Climate Exchange
C O
2
Carbon Dioxide
C O
2
- e Carbon Dioxide Equivalent
E P E R European Pollutant Emission Register
E U E TS European Union Emissions Allowance Trading Scheme
GH G Greenhouse Gas
GA A P Generally Accepted Accounting Principles
H F C s Hydrofluorocarbons
I P C C I ntergovernmental Panel on Climate Change
I P I E C A I nternational Petroleum I ndustry
Environmental Conservation Association
I S O I nternational Standards Organization
JI Joint I mplementation
N
4
O Nitrous Oxide
N GO Non-Governmental Organization
P F C s Perfluorocarbons
S F
6
Sulfur Hexafluoride
T& D Transmission and Distribution
U K E TS United Kingdom Emission Trading Scheme
WB C S D World Business Council
for Sustainable Development
WR I World Resources I nstitute
Absol ut e t ar get A t arget def i ned by reduct i on i n absol ut e emi ssi ons over t i me e.g., reduces CO
2
emi ssi ons by 25%
bel ow 1994 l evel s by 2010. (Chapt er 11)
Addi t i onal i t y A cri t eri on f or assessi ng whet her a proj ect has resul t ed i n GHG emi ssi on reduct i ons or removal s i n
addi t i on t o what woul d have occurred i n i t s absence. Thi s i s an i mport ant cri t eri on when t he goal of
t he proj ect i s t o of f set emi ssi ons el sewhere. (Chapt er 8)
Al l owanc e A commodi t y gi vi ng i t s hol der t he ri ght t o emi t a cert ai n quant i t y of GHG. (Chapt er 11)
Annex 1 c ount r i es Def i ned i n t he Int ernat i onal Cl i mat e Change Convent i on as t hose count ri es t aki ng on emi ssi ons
reduct i on obl i gat i ons: Aust ral i a; Aust ri a; Bel gi um; Bel arus; Bul gari a; Canada; Croat i a; Czech
Republ i c; Denmark; Est oni a; Fi nl and; France; Germany; Greece; Hungary; Icel and; Irel and; It al y; Japan;
Lat vi a; Li echt enst ei n; Li t huani a; Luxembourg; Monaco; Net herl ands; New Zeal and; Norway; Pol and;
Port ugal ; Romani a; Russi an Federat i on; Sl ovaki a; Sl oveni a; Spai n; Sweden; Swi t zerl and; Ukrai ne;
Uni t ed Ki ngdom; USA.
Assoc i at ed/ af f i l i at ed c ompany The parent company has si gni f i cant i nf l uence over t he operat i ng and f i nanci al pol i ci es of t he
associ at ed/ af f i l i at ed company, but not f i nanci al cont rol . (Chapt er 3)
Audi t Tr ai l Wel l organi zed and t ransparent hi st ori cal records document i ng how an i nvent ory was compi l ed.
Basel i ne A hypot het i cal scenari o f or what GHG emi ssi ons, removal s or st orage woul d have been i n t he absence
of t he GHG proj ect or proj ect act i vi t y. (Chapt er 8)
Base year A hi st ori c dat um (a speci f i c year or an average over mul t i pl e years) agai nst whi ch a companys
emi ssi ons are t racked over t i me. (Chapt er 5)
Base year emi ssi ons GHG emi ssi ons i n t he base year. (Chapt er 5)
Base year emi ssi ons r ecal cul at i on Recal cul at i on of emi ssi ons i n t he base year t o ref l ect a change i n t he st ruct ure of t he company, or
t o ref l ect a change i n t he account i ng met hodol ogy used. Thi s ensures dat a consi st ency over t i me, i .e.,
compari sons of l i ke wi t h l i ke over t i me. (Chapt er 5, 11)
Bi of uel s Fuel made f rom pl ant mat eri al , e.g. wood, st raw and et hanol f rom pl ant mat t er (Chapt er 4, 9, Appendi x B)
Boundar i es GHG account i ng and report i ng boundari es can have several di mensi ons, i .e. organi zat i onal , opera-
t i onal , geographi c, busi ness uni t , and t arget boundari es. The i nvent ory boundary det ermi nes whi ch
emi ssi ons are account ed and report ed by t he company. (Chapt er 3, 4, 11)
Cap and t r ade syst em A syst em t hat set s an overal l emi ssi ons l i mi t , al l ocat es emi ssi ons al l owances t o part i ci pant s, and
al l ows t hem t o t rade al l owances and emi ssi on credi t s wi t h each ot her. (Chapt er 2, 8, 11)
Capi t al Lease A l ease whi ch t ransf ers subst ant i al l y al l t he ri sks and rewards of ownershi p t o t he l essee and i s
account ed f or as an asset on t he bal ance sheet of t he l essee. Al so known as a Fi nanci al or Fi nance
Lease. Leases ot her t han Capi t al / Fi nanci al / Fi nance l eases are Operat i ng l eases. Consul t an
account ant f or f urt her det ai l as def i ni t i ons of l ease t ypes di f f er bet ween vari ous accept ed f i nanci al
st andards. (Chapt er 4)
Car bon sequest r at i on The upt ake of CO
2
and st orage of carbon i n bi ol ogi cal si nks.
Clean Development Mechanism A mechani sm est abl i shed by Art i cl e 12 of t he Kyot o Prot ocol f or proj ect - based emi ssi on reduct i on
(CDM) act i vi t i es i n devel opi ng count ri es. The CDM i s desi gned t o meet t wo mai n obj ect i ves: t o address t he
sust ai nabi l i t y needs of t he host count ry and t o i ncrease t he opport uni t i es avai l abl e t o Annex 1 Part i es
t o meet t hei r GHG reduct i on commi t ment s. The CDM al l ows f or t he creat i on, acqui si t i on and t ransf er
of CERs f rom cl i mat e change mi t i gat i on proj ect s undert aken i n non- Annex 1 count ri es.
Glossary
96
Cer t i f i ed Emi ssi on Reduct i ons A uni t of emi ssi on reduct i on generat ed by a CDM proj ect . CERs are t radabl e commodi t i es t hat can be
(CERs) used by Annex 1 count ri es t o meet t hei r commi t ment s under t he Kyot o Prot ocol .
Co- gener at i on uni t / Combi ned A f aci l i t y produci ng bot h el ect ri ci t y and st eam/ heat usi ng t he same f uel suppl y. (Chapt er 3)
heat and power (CHP)
Consol i dat i on Combi nat i on of GHG emi ssi ons dat a f rom separat e operat i ons t hat f orm part of one company or group
of compani es. (Chapt er 3, 4)
Cont r ol The abi l i t y of a company t o di rect t he pol i ci es of anot her operat i on. More speci f i cal l y, i t i s def i ned as
ei t her operat i onal cont rol (t he organi zat i on or one of i t s subsi di ari es has t he f ul l aut hori t y t o i nt roduce
and i mpl ement i t s operat i ng pol i ci es at t he operat i on) or f i nanci al cont rol (t he organi zat i on has t he
abi l i t y t o di rect t he f i nanci al and operat i ng pol i ci es of t he operat i on wi t h a vi ew t o gai ni ng economi c
benef i t s f rom i t s act i vi t i es). (Chapt er 3)
Cor por at e i nvent or y pr ogr am A program t o produce annual corporat e i nvent ori es t hat are i n keepi ng wi t h t he pri nci pl es, st andards,
and gui dance of t he GHG Pr ot ocol Cor por at e St andar d. Thi s i ncl udes al l i nst i t ut i onal , manageri al and
t echni cal arrangement s made f or t he col l ect i on of dat a, preparat i on of a GHG i nvent ory, and i mpl e-
ment at i on of t he st eps t aken t o manage t he qual i t y of t hei r emi ssi on i nvent ory.
CO
2
equi val ent (CO
2
- e) The uni versal uni t of measurement t o i ndi cat e t he gl obal warmi ng pot ent i al (GWP) of each of t he si x
greenhouse gases, expressed i n t erms of t he GWP of one uni t of carbon di oxi de. It i s used t o eval uat e
rel easi ng (or avoi di ng rel easi ng) di f f erent greenhouse gases agai nst a common basi s.
Cr oss- sec t or c al c ul at i on t ool A GHG Prot ocol cal cul at i on t ool t hat addresses GHG sources common t o vari ous sect ors, e.g.
emi ssi ons f rom st at i onary or mobi l e combust i on. See al so GHG Prot ocol cal cul at i on t ool s
Di r ec t GHG emi ssi ons Emi ssi ons f rom sources t hat are owned or cont rol l ed by t he report i ng company. (Chapt er 4)
Di r ec t moni t or i ng Di rect moni t ori ng of exhaust st ream cont ent s i n t he f orm of cont i nuous emi ssi ons moni t ori ng (CEM)
or peri odi c sampl i ng. (Chapt er 6)
Doubl e c ount i ng Two or more report i ng compani es t ake ownershi p of t he same emi ssi ons or reduct i ons. (Chapt er 3, 4, 8, 11)
Emi ssi ons The rel ease of GHG i nt o t he at mosphere.
Emi ssi on f ac t or A f act or al l owi ng GHG emi ssi ons t o be est i mat ed f rom a uni t of avai l abl e act i vi t y dat a (e.g. t onnes of
f uel consumed, t onnes of product produced) and absol ut e GHG emi ssi ons. (Chapt er 6)
Emi ssi on Reduc t i on Uni t (ERU) A uni t of emi ssi on reduct i on generat ed by a Joi nt Impl ement at i on (JI) proj ect . ERUs are t radabl e
commodi t i es whi ch can be used by Annex 1 count ri es t o hel p t hem meet t hei r commi t ment under t he
Kyot o Prot ocol .
Equi t y shar e The equi t y share ref l ect s economi c i nt erest , whi ch i s t he ext ent of ri ght s a company has t o t he ri sks
and rewards f l owi ng f rom an operat i on. Typi cal l y, t he share of economi c ri sks and rewards i n an oper-
at i on i s al i gned wi t h t he company' s percent age ownershi p of t hat operat i on, and equi t y share wi l l
normal l y be t he same as t he ownershi p percent age. (Chapt er 3)
Est i mat i on unc er t ai nt y Uncert ai nt y t hat ari ses whenever GHG emi ssi ons are quant i f i ed, due t o uncert ai nt y i n dat a i nput s and
cal cul at i on met hodol ogi es used t o quant i f y GHG emi ssi ons. (Chapt er 7)
Fi nanc e l ease A l ease whi ch t ransf ers subst ant i al l y al l t he ri sks and rewards of ownershi p t o t he l essee and i s
account ed f or as an asset on t he bal ance sheet of t he l essee. Al so known as a Capi t al or Fi nanci al
Lease. Leases ot her t han Capi t al / Fi nanci al / Fi nance l eases are Operat i ng l eases. Consul t an
account ant f or f urt her det ai l as def i ni t i ons of l ease t ypes di f f er bet ween vari ous accept ed account i ng
pri nci pl es. (Chapt er 4)
GLOS S ARY
97
Fi xed asset i nvest ment Equi pment , l and, st ocks, propert y, i ncorporat ed and non- i ncorporat ed j oi nt vent ures, and part nershi ps
over whi ch t he parent company has nei t her si gni f i cant i nf l uence nor cont rol . (Chapt er 3)
Fugi t i ve emi ssi ons Emi ssi ons t hat are not physi cal l y cont rol l ed but resul t f rom t he i nt ent i onal or uni nt ent i onal rel eases
of GHGs. They commonl y ari se f rom t he product i on, processi ng t ransmi ssi on st orage and use of f uel s
and ot her chemi cal s, of t en t hrough j oi nt s, seal s, packi ng, gasket s, et c. (Chapt er 4, 6)
Gr een power A generi c t erm f or renewabl e energy sources and speci f i c cl ean energy t echnol ogi es t hat emi t f ewer
GHG emi ssi ons rel at i ve t o ot her sources of energy t hat suppl y t he el ect ri c gri d. Incl udes sol ar
phot ovol t ai c panel s, sol ar t hermal energy, geot hermal energy, l andf i l l gas, l ow- i mpact hydropower,
and wi nd t urbi nes. (Chapt er 4)
Gr eenhouse gases (GHG) For t he purposes of t hi s st andard, GHGs are t he si x gases l i st ed i n t he Kyot o Prot ocol : carbon di oxi de
(CO
2
); met hane (CH
4
); ni t rous oxi de (N
2
O); hydrof l uorocarbons (HFCs); perf l uorocarbons (PFCs); and
sul phur hexaf l uori de (SF
6
).
GHG c apt ur e Col l ect i on of GHG emi ssi ons f rom a GHG source f or st orage i n a si nk.
GHG c r edi t GHG of f set s can be convert ed i nt o GHG credi t s when used t o meet an ext ernal l y i mposed t arget .
A GHG credi t i s a convert i bl e and t ransf erabl e i nst rument usual l y best owed by a GHG program.
(Chapt er 8, 11)
GHG of f set Of f set s are di scret e GHG reduct i ons used t o compensat e f or (i .e., of f set ) GHG emi ssi ons el sewhere, f or
exampl e t o meet a vol unt ar y or mandat or y GHG t ar get or cap. Of f set s ar e cal cul at ed r el at i ve t o a
basel i ne t hat represent s a hypot het i cal scenari o f or what emi ssi ons woul d have been i n t he absence
of t he mi t i gat i on proj ect t hat generat es t he of f set s. To avoi d doubl e count i ng, t he reduct i on gi vi ng
ri se t o t he of f set must occur at sources or si nks not i ncl uded i n t he t arget or cap f or whi ch i t i s used.
GHG pr ogr am A generi c t erm used t o ref er t o any vol unt ary or mandat ory i nt ernat i onal , nat i onal , sub- nat i onal ,
government or non- government al aut hori t y t hat regi st ers, cert i f i es, or regul at es GHG emi ssi ons or
removal s out si de t he company. e.g. CDM, EU ETS, CCX, and CCAR.
GHG pr oj ec t A speci f i c proj ect or act i vi t y desi gned t o achi eve GHG emi ssi on reduct i ons, st orage of carbon, or
enhancement of GHG removal s f rom t he at mosphere. GHG proj ect s may be st and- al one proj ect s,
or speci f i c act i vi t i es or el ement s wi t hi n a l arger non- GHG rel at ed proj ect . (Chapt er 8, 11)
GHG Pr ot oc ol c al c ul at i on t ool s A number of cross- sect or and sect or- speci f i c t ool s t hat cal cul at e GHG emi ssi ons on t he basi s of
act i vi t y dat a and emi ssi on f act ors (avai l abl e at www.ghgprot ocol .org).
GHG Pr ot oc ol I ni t i at i ve A mul t i - st akehol der col l aborat i on convened by t he Worl d Resources Inst i t ut e and Worl d Busi ness Counci l
f or Sust ai nabl e Devel opment t o desi gn, devel op and promot e t he use of account i ng and report i ng
st andards f or busi ness. It compri ses of t wo separat e but l i nked st andards t he GHG Prot ocol Corporat e
Account i ng and Report i ng St andard and t he GHG Prot ocol Proj ect Quant i f i cat i on St andard.
GHG Pr ot oc ol Pr oj ec t An addi t i onal modul e of t he GHG Prot ocol Ini t i at i ve addressi ng t he quant i f i cat i on of GHG
Quant i f i c at i on St andar d reduct i on proj ect s. Thi s i ncl udes proj ect s t hat wi l l be used t o of f set emi ssi ons el sewhere and/ or
generat e credi t s. More i nf ormat i on avai l abl e at www.ghgprot ocol .org. (Chapt er 8, 11)
GHG Pr ot oc ol sec t or spec i f i c A GHG cal cul at i on t ool t hat addresses GHG sources t hat are uni que t o cert ai n sect ors, e.g., process
c al c ul at i on t ool s emi ssi ons f rom al umi num product i on. (see al so GHG Prot ocol Cal cul at i on t ool s)
GHG publ i c r epor t Provi des, among ot her det ai l s, t he report i ng companys physi cal emi ssi ons f or i t s chosen i nvent ory
boundary. (Chapt er 9)
98
Glossary
GHG r egi st r y A publ i c dat abase of organi zat i onal GHG emi ssi ons and/ or proj ect reduct i ons. For exampl e, t he US
Depart ment of Energy 1605b Vol unt ary GHG Report i ng Program, CCAR, Worl d Economi c Forums Gl obal
GHG Regi st ry. Each regi st ry has i t s own rul es regardi ng what and how i nf ormat i on i s report ed.
(Int roduct i on, Chapt er 2, 5, 8, 10)
GHG r emoval Absorbt i on or sequest rat i on of GHGs f rom t he at mosphere.
GHG si nk Any physi cal uni t or process t hat st ores GHGs; usual l y ref ers t o f orest s and underground/ deep sea
reservoi rs of CO
2
.
GHG sour c e Any physi cal uni t or process whi ch rel eases GHG i nt o t he at mosphere.
GHG t r ades Al l purchases or sal es of GHG emi ssi on al l owances, of f set s, and credi t s.
Gl obal War mi ng Pot ent i al (GWP) A f act or descri bi ng t he radi at i ve f orci ng i mpact (degree of harm t o t he at mosphere) of one uni t of a
gi ven GHG rel at i ve t o one uni t of CO
2
.
Gr oup c ompany / subsi di ar y The parent company has t he abi l i t y t o di rect t he f i nanci al and operat i ng pol i ci es of a group
company/ subsi di ary wi t h a vi ew t o gai ni ng economi c benef i t s f rom i t s act i vi t i es. (Chapt er 3)
Heat i ng val ue The amount of energy rel eased when a f uel i s burned compl et el y. Care must be t aken not t o conf use
hi gher heat i ng val ues (HHVs), used i n t he US and Canada, and l ower heat i ng val ues, used i n al l ot her
count ri es (f or f urt her det ai l s ref er t o t he cal cul at i on t ool f or st at i onary combust i on avai l abl e at
www.ghgprot ocol .org).
I ndi r ec t GHG emi ssi ons Emi ssi ons t hat are a consequence of t he operat i ons of t he report i ng company, but occur at sources
owned or cont rol l ed by anot her company. (Chapt er 4)
I nsour c i ng The admi ni st rat i on of anci l l ary busi ness act i vi t i es, f ormal l y perf ormed out si de of t he company, usi ng
resources wi t hi n a company. (Chapt er 3, 4, 5, 9)
I nt ensi t y r at i os Rat i os t hat express GHG i mpact per uni t of physi cal act i vi t y or uni t of economi c val ue (e.g. t onnes of
CO
2
emi ssi ons per uni t of el ect ri ci t y generat ed). Int ensi t y rat i os are t he i nverse of product i vi t y/ ef f i -
ci ency rat i os. (Chapt er 9, 11)
I nt ensi t y t ar get A t arget def i ned by reduct i on i n t he rat i o of emi ssi ons and a busi ness met ri c over t i me e.g., reduce
CO
2
per t onne of cement by 12% bet ween 2000 and 2008. (Chapt er 11)
I nt er gover nment al Panel on Int ernat i onal body of cl i mat e change sci ent i st s. The rol e of t he IPCC i s t o assess t he sci ent i f i c,
Cl i mat e Change (I PCC) t echni cal and soci o- economi c i nf ormat i on rel evant t o t he underst andi ng of t he ri sk of human- i nduced
cl i mat e change (www.i pcc.ch).
I nvent or y A quant i f i ed l i st of an organi zat i ons GHG emi ssi ons and sources.
I nvent or y boundar y An i magi nary l i ne t hat encompasses t he di rect and i ndi rect emi ssi ons t hat are i ncl uded i n t he i nven-
t ory. It resul t s f rom t he chosen organi zat i onal and operat i onal boundari es. (Chapt er 3, 4)
I nvent or y qual i t y The ext ent t o whi ch an i nvent ory provi des a f ai t hf ul , t rue and f ai r account of an organi zat i ons GHG
emi ssi ons. (Chapt er 7)
Joi nt I mpl ement at i on (JI ) The JI mechani sm was est abl i shed i n Art i cl e 6 of t he Kyot o Prot ocol and ref ers t o cl i mat e change mi t i -
gat i on proj ect s i mpl ement ed bet ween t wo Annex 1 count ri es. JI al l ows f or t he creat i on, acqui si t i on
and t ransf er of emi ssi on reduct i on uni t s (ERUs).
Kyot o Pr ot oc ol A prot ocol t o t he Uni t ed Nat i ons Framework Convent i on on Cl i mat e Change (UNFCCC). Once ent ered
i nt o f orce i t wi l l requi re count ri es l i st ed i n i t s Annex B (devel oped nat i ons) t o meet reduct i on t arget s
of GHG emi ssi ons rel at i ve t o t hei r 1990 l evel s duri ng t he peri od of 2008 12.
GLOS S ARY
99
Glossary
100
Leak age (Sec ondar y ef f ec t ) Leakage occurs when a proj ect changes t he avai l abi l i t y or quant i t y of a product or servi ce t hat resul t s
i n changes i n GHG emi ssi ons el sewhere. (Chapt er 8)
Li f e Cyc l e Anal ysi s Assessment of t he sum of a product s ef f ect s (e.g. GHG emi ssi ons) at each st ep i n i t s l i f e cycl e,
i ncl udi ng resource ext ract i on, product i on, use and wast e di sposal . (Chapt er 4)
Mat er i al di sc r epanc y An error (f or exampl e f rom an oversi ght , omi ssi on, or mi scal cul at i on) t hat resul t s i n t he report ed
quant i t y bei ng si gni f i cant l y di f f erent t o t he t rue val ue t o an ext ent t hat wi l l i nf l uence perf ormance or
deci si ons. Al so known as mat eri al mi sst at ement .(Chapt er 10)
Mat er i al i t y t hr eshol d A concept empl oyed i n t he process of veri f i cat i on. It i s of t en used t o det ermi ne whet her an error or
omi ssi on i s a mat eri al di screpancy or not . It shoul d not be vi ewed as a de mi ni mus f or def i ni ng a
compl et e i nvent ory. (Chapt er 10)
Mobi l e c ombust i on Burni ng of f uel s by t ransport at i on devi ces such as cars, t rucks, t rai ns, ai rpl anes, shi ps et c. (Chapt er 6)
Model unc er t ai nt y GHG quant i f i cat i on uncert ai nt y associ at ed wi t h mat hemat i cal equat i ons used t o charact eri ze t he
rel at i onshi p bet ween vari ous paramet ers and emi ssi on processes. (Chapt er 7)
Non- Annex 1 c ount r i es Count ri es t hat have rat i f i ed or acceded t o t he UNFCC but are not l i st ed under Annex 1 and are t here-
f ore not under any emi ssi on reduct i on obl i gat i on (see al so Annex 1 count ri es).
Oper at i on A generi c t erm used t o denot e any ki nd of busi ness, i rrespect i ve of i t s organi zat i onal , governance, or
l egal st ruct ures. An operat i on can be a f aci l i t y, subsi di ary, af f i l i at ed company or ot her f orm of j oi nt
vent ure. (Chapt er 3, 4)
Oper at i ng l ease A l ease whi ch does not t ransf er t he ri sks and rewards of ownershi p t o t he l essee and i s not recorded
as an asset i n t he bal ance sheet of t he l essee. Leases ot her t han Operat i ng l eases are
Capi t al / Fi nanci al / Fi nance l eases. Consul t an account ant f or f urt her det ai l as def i ni t i ons of l ease
t ypes di f f er bet ween vari ous accept ed f i nanci al st andards. (Chapt er 4)
Oper at i onal boundar i es The boundari es t hat det ermi ne t he di rect and i ndi rect emi ssi ons associ at ed wi t h operat i ons owned or
cont rol l ed by t he report i ng company. Thi s assessment al l ows a company t o est abl i sh whi ch operat i ons
and sources cause di rect and i ndi rect emi ssi ons, and t o deci de whi ch i ndi rect emi ssi ons t o i ncl ude
t hat are a consequence of i t s operat i ons. (Chapt er 4)
Or gani c gr owt h/ dec l i ne Increases or decreases i n GHG emi ssi ons as a resul t of changes i n product i on out put , product mi x,
pl ant cl osures and t he openi ng of new pl ant s. (Chapt er 5)
Or gani zat i onal boundar i es The boundari es t hat det ermi ne t he operat i ons owned or cont rol l ed by t he report i ng company,
dependi ng on t he consol i dat i on approach t aken (equi t y or cont rol approach). (Chapt er 3)
Out sour c i ng The cont ract i ng out of act i vi t i es t o ot her busi nesses. (Chapt er 3, 4, 5)
Par amet er unc er t ai nt y GHG quant i f i cat i on uncert ai nt y associ at ed wi t h quant i f yi ng t he paramet ers used as i nput s t o est i ma-
t i on model s. (Chapt er 7)
Pr i mar y ef f ec t s The speci f i c GHG reduci ng el ement s or act i vi t i es (reduci ng GHG emi ssi ons, carbon st orage, or
enhanci ng GHG removal s) t hat t he proj ect i s i nt ended t o achi eve. (Chapt er 8)
Pr oc ess emi ssi ons Emi ssi ons generat ed f rom manuf act uri ng processes, such as t he CO
2
t hat i s ari ses f rom t he break-
down of cal ci um carbonat e (CaCO
3
) duri ng cement manuf act ure. (Chapt er 4, Appendi x D)
Pr oduc t i vi t y / ef f i c i enc y r at i os Rat i os t hat express t he val ue or achi evement of a busi ness di vi ded by i t s GHG i mpact . Increasi ng ef f i -
ci ency rat i os ref l ect a posi t i ve perf ormance i mprovement . e.g. resource product i vi t y(sal es per t onne
GHG). Product i vi t y/ ef f i ci ency rat i os are t he i nverse of i nt ensi t y rat i os. (Chapt er 9)
Rat i o i ndi c at or Indi cat ors provi di ng i nf ormat i on on rel at i ve perf ormance such as i nt ensi t y rat i os or product i vi t y/ ef f i -
ci ency rat i os. (Chapt er 9)
Renewabl e ener gy Energy t aken f rom sources t hat are i nexhaust i bl e, e.g. wi nd, wat er, sol ar, geot hermal energy, and bi of uel s.
Repor t i ng Present i ng dat a t o i nt ernal management and ext ernal users such as regul at ors, sharehol ders, t he
general publ i c or speci f i c st akehol der groups. (Chapt er 9)
Rever si bi l i t y of r educ t i ons Thi s occurs when reduct i ons are t emporary, or where removed or st ored carbon may be ret urned t o t he
at mosphere at some poi nt i n t he f ut ure. (Chapt er 8)
Rol l i ng base year The process of shi f t i ng or rol l i ng t he base year f orward by a cert ai n number of years at regul ar i nt er-
val s of t i me. (Chapt er 5, 11)
Sc i ent i f i c Unc er t ai nt y Uncert ai nt y t hat ari ses when t he sci ence of t he act ual emi ssi on and/ or removal process i s not
compl et el y underst ood. (Chapt er 7)
Sc ope Def i nes t he operat i onal boundari es i n rel at i on t o i ndi rect and di rect GHG emi ssi ons. (Chapt er 4)
Sc ope 1 i nvent or y A report i ng organi zat i ons di rect GHG emi ssi ons. (Chapt er 4)
Sc ope 2 i nvent or y A report i ng organi zat i ons emi ssi ons associ at ed wi t h t he generat i on of el ect ri ci t y, heat i ng / cool i ng, or
st eam purchased f or own consumpt i on. (Chapt er 4)
Sc ope 3 i nvent or y A report i ng organi zat i ons i ndi rect emi ssi ons ot her t han t hose covered i n scope 2. (Chapt er 4)
Sc ope of wor k s An up- f ront speci f i cat i on t hat i ndi cat es t he t ype of veri f i cat i on t o be undert aken and t he l evel of
assurance t o be provi ded bet ween t he report i ng company and t he veri f i er duri ng t he veri f i cat i on
process. (Chapt er 10)
Sec ondar y ef f ec t s (Leak age) GHG emi ssi ons changes resul t i ng f rom t he proj ect not capt ured by t he pri mary ef f ect (s). These are
t ypi cal l y t he smal l , uni nt ended GHG consequences of a proj ect . (Chapt er 8)
Sequest er ed at mospher i c c ar bon Carbon removed f rom t he at mosphere by bi ol ogi cal si nks and st ored i n pl ant t i ssue. Sequest ered
at mospheri c carbon does not i ncl ude GHGs capt ured t hrough carbon capt ure and st orage.
Si gni f i c anc e t hr eshol d A qual i t at i ve or quant i t at i ve cri t eri a used t o def i ne a si gni f i cant st ruct ural change. It i s t he responsi -
bi l i t y of t he company/ veri f i er t o det ermi ne t he si gni f i cance t hreshol d f or consi deri ng base year
emi ssi ons recal cul at i on. In most cases t he si gni f i cance t hreshol d depends on t he use of t he i nf or-
mat i on, t he charact eri st i cs of t he company, and t he f eat ures of st ruct ural changes. (Chapt er 5)
St at i onar y Combust i on Burni ng of f uel s t o generat e el ect ri ci t y, st eam, heat , or power i n st at i onary equi pment such as boi l ers,
f urnaces et c.
St r uc t ur al c hange A change i n t he organi zat i onal or operat i onal boundari es of a company t hat resul t i n t he t ransf er of
ownershi p or cont rol of emi ssi ons f rom one company t o anot her. St ruct ural changes usual l y resul t
f rom a t ransf er of ownershi p of emi ssi ons, such as mergers, acqui si t i ons, di vest i t ures, but can al so
i ncl ude out sourci ng/ i nsourci ng. (Chapt er 5)
Tar get base year The base year used f or def i ni ng a GHG t arget , e.g. t o reduce CO
2
emi ssi ons 25% bel ow t he t arget base
year l evel s by t he t arget base year 2000 by t he year 2010. (Chapt er 11)
Tar get boundar y The boundary t hat def i nes whi ch GHGs, geographi c operat i ons, sources and act i vi t i es are covered by
t he t arget . (Chapt er 11)
Tar get c ommi t ment per i od The peri od of t i me duri ng whi ch emi ssi ons perf ormance i s act ual l y measured agai nst t he t arget . It
ends wi t h t he t arget compl et i on dat e. (Chapt er 11)
Tar get c ompl et i on dat e The dat e t hat def i nes t he end of t he t arget commi t ment peri od and det ermi nes whet her t he t arget i s
rel at i vel y short - or l ong- t erm. (Chapt er 11)
GLOS S ARY
101
Glossary
102
Tar get doubl e c ount i ng pol i c y A pol i cy t hat det ermi nes how doubl e count i ng of GHG reduct i ons or ot her i nst rument s, such as
al l owances i ssued by ext ernal t radi ng programs, i s deal t wi t h under a GHG t arget . It appl i es onl y t o
compani es t hat engage i n t radi ng (sal e or purchase) of of f set s or whose corporat e t arget boundari es
i nt erf ace wi t h ot her compani es t arget s or ext ernal programs. (Chapt er 11)
Unc er t ai nt y 1. St at i st i cal def i ni t i on: A paramet er associ at ed wi t h t he resul t of a measurement t hat charact eri zes
t he di spersi on of t he val ues t hat coul d be reasonabl y at t ri but ed t o t he measured quant i t y. (e.g., t he
sampl e vari ance or coef f i ci ent of vari at i on). (Chapt er 7)
2. Invent ory def i ni t i on: A general and i mpreci se t erm whi ch ref ers t o t he l ack of cert ai nt y i n emi ssi ons-
rel at ed dat a resul t i ng f rom any causal f act or, such as t he appl i cat i on of non- represent at i ve f act ors or
met hods, i ncompl et e dat a on sources and si nks, l ack of t ransparency et c. Report ed uncert ai nt y
i nf ormat i on t ypi cal l y speci f i es a quant i t at i ve est i mat es of t he l i kel y or percei ved di f f erence bet ween
a report ed val ue and a qual i t at i ve descri pt i on of t he l i kel y causes of t he di f f erence. (Chapt er 7).
Uni t ed Nat i ons Fr amewor k Si gned i n 1992 at t he Ri o Eart h Summi t , t he UNFCCC i s a mi l est one Convent i on on Cl i mat e Change
Convent i on on Cl i mat e Change t reat y t hat provi des an overal l f ramework f or i nt ernat i onal ef f ort s t o (UNFCCC) mi t i gat e cl i mat e
(UNFCCC) change. The Kyot o Prot ocol i s a prot ocol t o t he UNFCCC.
Val ue c hai n emi ssi ons Emi ssi ons f rom t he upst ream and downst ream act i vi t i es associ at ed wi t h t he operat i ons of t he
report i ng company. (Chapt er 4)
Ver i f i c at i on An i ndependent assessment of t he rel i abi l i t y (consi deri ng compl et eness and accuracy) of a GHG
i nvent ory. (Chapt er 10)
103
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Busi ness Counci l f or Sust ai nabl e Devel opment : Worki ng Group
Cement , Geneva
WRI (2002), Wor ki ng 9 t o 5 on Cl i mat e Change: An Of f i ce Gui de,
Worl d Resources Inst i t ut e, Washi ngt on, DC
WRI (2003), Renewabl e Ener gy Cer t i f i cat es: An At t r act i ve Means
f or Cor por at e Cust omer s t o Pur chase Renewabl e Ener gy, Worl d
Resources Inst i t ut e, Washi ngt on, DC
Ast raZeneca
Bi rka Energi
East man Kodak Co.
ENDESA
IKEA Int ernat i onal A / S
Int erf ace, Inc.
Kansai El ect ri c Power Company
Ni ke, Inc.
Norsk Hydro
N.V. Nuon Renewabl e Energy
Phi l i ps & Yami ng Co., Lt d.
Seat t l e Ci t y Li ght
Si mpl ex Mi l l s Co. Lt d.
Sony Corporat i on
STMi croel ect roni cs
Tat a Iron & St eel Company Lt d.
Tokyo El ect ri c Power Company
Tokyo Gas Co. Lt d.
We Energi es
Contributors
104
St r uc t ur ed Feedbac k Compani es ( R E V I S E D E D I TI ON )
Bri an Smi t h Innovat i on Associ at es
Hans Aksel Haugen Norsk Hydro
Vi cki Arroyo Pew Cent er on Cl i mat e Change
Ai dan J. Murphy Royal Dut ch / Shel l
Suj at a Gupt a The Energy Research Inst i t ut e
Yasuo Hosoya Tokyo El ect ri c Power Company
Rebecca Eat on Worl d Wi l dl i f e Fund
Pr oj ec t Management Team ( F I R S T E D I TI ON )
Baxt er Int ernat i onal
BP
CODELCO
Duncans Indust ri es
Dupont Company
Ford Mot or Company
Fort um Power and Heat
General Mot ors Corporat i on
Hi ndal co Indust ri es
IBM Corporat i on
Mai har Cement
Ni ke, Inc.
Norsk Hydro
Ont ari o Power Generat i on
Pet ro- Canada
Pri cewat erhouseCoopers road t est ed wi t h European
compani es i n t he non- f errous met al sect or
Publ i c Servi ce El ect ri c and Gas
Shree Cement
Shel l Canada
Suncor Energy
Tokyo El ect ri c Power Company
Vol kswagen
Worl d Busi ness Counci l f or Sust ai nabl e Devel opment
Worl d Resources Inst i t ut e
500 PPM road t est ed wi t h several smal l and medi um
compani es i n Germany
Road Test er s ( F I R S T E D I TI ON )
Janet Ranganat han Worl d Resources Inst i t ut e
Pankaj Bhat i a Worl d Resources Inst i t ut e
Davi d Moorcrof t Worl d Busi ness Counci l
f or Sust ai nabl e Devel opment
Jasper Koch Worl d Busi ness Counci l
WRI & WBCSD GHG Pr ot oc ol I ni t i at i ve Team ( F I R S T E D I TI ON )
Heat her Tansey 3M Corporat i on
Ingo Puhl 500 PPM
Dawn Fent on ABB
Chri st i an Korneval l ABB
Paul - Ant oi ne Lacour AFOCEL
Kennet h Mart chek Al coa
Vi nce Van Son Al coa
Ron Ni el sen Al can
St eve Pomper Al can
Pat Qui nn Al l egheny Energy
Joe Casci o Booz Al l en & Hami l t on Inc.
Davi d Jaber Al l i ance t o Save Energy
Al ai n Bi l l Al st om Power Envi ronment
Robert Greco Ameri can Pet rol eum Inst i t ut e
Wal t er C. Ret zsch Ameri can Pet rol eum Inst i t ut e
Karen Ri t t er Ameri can Pet rol eum Inst i t ut e
Tom Cart er Ameri can Port l and Cement Al l i ance
Dal e Louda Ameri can Port l and Cement Al l i ance
Ted Gul l i son Anova
J Dougl as Akerson Aon Ri sk Servi ces of Texas Inc
John Mol burg Argonne Nat i onal Laborat ory
Sophi e Jabonski Art hur Anderson
Fi ona Gadd Art hur Andersen
Chri st ophe Schei t zky Art hur Andersen
Scot Fost er Art hur D. Li t t l e
Mi ke Isenberg Art hur D. Li t t l e
Bi l l Wescot t Art hur D. Li t t l e
Kei t h Moore Ast raZeneca
Bi rgi t a Thorsi n Ast raZeneca
Thomas E. Werkem At of i na Chemi cal s
Jean- Bernard Carrasco Aust ral i an Greenhouse Of f i ce
Davi d Harri son Aust ral i an Greenhouse Of f i ce
Bronwyn Pol l ock Aust ral i an Greenhouse Of f i ce
Li nda Powel l Aust ral i an Greenhouse Of f i ce
James Shevl i n Aust ral i an Greenhouse Of f i ce
Chri s Loret i Bat t el l e Memori al Inst i t ut e
Ronal d E. Mei ssen Baxt er Int ernat i onal
Gran Andersson Bi rka Energi
Sof i Harms- Ri ngdahl Bi rka Energi
Bri t t Sahl est rom Bi rka Energi
Davi d Evans BP
Ni ck Hughes BP
Tasmi n Li shman BP
Mark Bart hel Bri t i sh St andards Inst i t ut i on
JoAnna Bul l ock Busi ness f or Soci al Responsi bi l i t y
Robyn Camp Cal i f orni a Cl i mat e Act i on Regi st ry
Ji l l Gravender Cal i f orni a Cl i mat e Act i on Regi st ry
Di anne Wi t t enberg Cal i f orni a Cl i mat e Act i on Regi st ry
Davi d Cahn Cal i f orni a Port l and Cement
Paul Bl ackl ock Cal or Gas Li mi t ed
Jul i e Chi araval l i Cameron- Col e
Conni e Sasal a Cameron- Col e
Evan Jones Canadas Cl i mat e Change Vol unt ary
Chal l enge and Regi st ry Inc.
Al an D. Wi l l i s Canadi an Inst i t ut e of
Chart ered Account ant s
Mi guel A Gonzal ez CEMEX
Carl os Manuel CEMEX
Duart e Ol i vei ra
Inna Gri t sevi ch CENEf
(Cent er f or Energy Ef f i ci ency)
El l i na Levi na Cent er f or Cl ean Ai r Pol i cy
St eve Wi nkel man Cent er f or Cl ean Ai r Pol i cy
Al eg Cherp Cent ral European Uni versi t y (Hungary)
and ECOLOGIA
Mark Fal l on CH2M Hi l l
Li sa Nel owet Gri ce CH2M Hi l l
Art hur Lee ChevronTexaco
Wi l l i am C. McLeod ChevronTexaco
Susann Nordrum ChevronTexaco
Al i ce LeBl anc Chi cago Cl i mat e Exchange
Charl ene R. Garl and Cl ean Ai r- Cool Pl anet
Donna Boysen Cl ean Energy Group
Jenni f er DuBose Cl i mat e Neut ral Net work
Sue Hal l Cl i mat e Neut ral Net work
Karen Meadows Cl i mat e Neut ral Net work
Mi chael Burnet t Cl i mat e Trust
Davi d Ol sen Cl i pper Wi ndpower
Marco Bedoya Ci mpor
Jose Gui maraes Ci mpor
C ONTRI BUTORS
105
Cont r i but or s
El i zabet h Arner CO2e.com/ Cant or Fi t zgeral d
Fernando E. Tol edo CODELCO
Bruce St ei ner Col l i er Shannon Scot t
Lynn Prest on Col l i ns & Ai kman
Anni ck Carpent i er Conf ederat i on of
European Paper Indust ri es
K.P. Nyat i Conf ederat i on of Indi an Indust ry
Sonal Pandya Conservat i on Int ernat i onal
Mi chael Tot t en Conservat i on Int ernat i onal
Domi ni ck J. Mormi l e Consol i dat ed Edi son Company
John Kessel s CRL Energy Lt d.
Ian Lewi s Cummi ng Cockburn Li mi t ed
Raymond P. Cot e Dal housi e Uni versi t y
Ol i vi a Hart ri dge DEFRA/ European Commi ssi on
Robert Casament o Del oi t t e & Touche
Markus Lehni Del oi t t e & Touche
Fl emmi ng Tost Del oi t t e & Touche
Phi l i p Comer Det Norske Veri t as
Si mon Dawes Det Norske Veri t as
Trygve Roed Larsen Det Norske Veri t as
Ei nar Tel nes Det Norske Veri t as
Kal i pada Chat t erj ee Devel opment Al t ernat i ves
Vi vek Kumar Devel opment Al t ernat i ves
Samrat Sengupt a Devel opment Al t ernat i ves
Francesco Bal occo The Dow Chemi cal Company
Paul Ci ci o The Dow Chemi cal Company
Frank Farf one The Dow Chemi cal Company
Pet er Mol i naro The Dow Chemi cal Company
Scot t Noesen The Dow Chemi cal Company
St ephen Rose The Dow Chemi cal Company
Jorma Sal mi ki vi The Dow Chemi cal Company
Don Hames The Dow Chemi cal Company
R. Swarup Duncans Indust ri es
John B. Carberry DuPont Company
Davi d Chi l ds DuPont Company
John C. DeRuyt er Dupont Company
Tom Jacob DuPont Company
Mack McFarl and DuPont Company
Ed Mongan DuPont Company
Ron Rei mer DuPont Company
Paul Tebo DuPont Company
Fred Whi t i ng DuPont Company
Roy Wood East man Kodak Co.
Jochen Harni sch ECOFYS
Al an Tat e Ecos Corporat i on
Pedro Moura Cost a EcoSecuri t i es
Just i n Guest EcoSecuri t i es
D. Gary Madden Emi ssi on Credi t LLC
Kyl e L. Davi s Edi son Mi ssi on Energy/
Mi dAmeri can Energy Hol di ngs Co.
Mari a Ant oni a ENDESA
Abad Purt ol as
Davi d Corregi dor Sanz ENDESA
El vi ra El so Torral ba ENDESA
Joel Bl uest ei n Energy & Envi ronment al Anal ysi s, Inc.
Y P Abbi The Energy Research Inst i t ut e
Gi ri sh Set hi The Energy Research Inst i t ut e
Vi vek Sharma The Energy Research Inst i t ut e
Crosbi e Bal uch Energet i cs Pt y. Lt d.
Marcus Schnei der Energy Foundat i on
Davi d Crossl ey Energy Fut ures Aust ral i a Pt y Lt d
Pat ri ck Nol l et Ent repri ses pour l ' Envi ronnement
James L. Wol f Envi nt a
Kennet h Ol sen Envi ronment Canada
Adri an St eenkamer Envi ronment Canada
Mi l l i e Chu Bai rd Envi ronment al Def ense
Sarah Wade Envi ronment al Def ense
Sat i sh Kumar Envi ronment al Energy Technol ogi es
John Cowan Envi ronment al Int erf ace
Edward W. Repa Envi ronment al Research
and Educat i on Foundat i on
Tat i ana Bost eel s Envi ronment al Resources Management
Wi l l i am B. Wei l Envi ronment al Resources Management
Wi l ey Barbour Envi ronment al Resources Trust
Barney Brannen Envi ronment al Resources Trust
Ben Fel dman Envi ronment al Resources Trust
Al Dai l y Envi ronment al Synergy
Ani t a M. Cel dran Envi ronment al Technol ogy
Eval uat i on Cent er
Wi l l i am E. Ki rksey Envi ronment al Technol ogy
Eval uat i on Cent er
Contributors
106
James Bradbury EPOTEC
Al an B. Reed EPOTEC
Dani el e Agost i ni Ernst & Young
Juerg Fuessl er Ernst Basl er & Part ners
St ef an Larsson ESAB
Lut z Bl ank European Bank f or Reconst ruct i on
and Devel opment
Al ke Schmi dt European Bank f or Reconst ruct i on
and Devel opment
Pet er Vi s European Commi ssi on
Chri s Evers European Commi ssi on
Yun Yang ExxonMobi l Research
& Engi neeri ng Company
Urs Brodmann Fact or Consul t i ng and Management
M.A. J. Jeyaseel an Federat i on of Indi an Chambers
of Commerce & Indust ry
Anu Karessuo Fi nni sh Forest Indust ri es Federat i on
Tod Del aney Fi rst Envi ronment
Bri an Gl azebrook Fi rst Envi ronment
James D. Heeren Fi rst Envi ronment
James T. Wi nt ergreen Fi rst Envi ronment
Kevi n Brady Fi ve Wi nds Int ernat i onal
Duncan Nobl e Fi ve Wi nds Int ernat i onal
St even Young Fi ve Wi nds Int ernat i onal
Larry Merri t t Ford Mot or Company
Chad McInt osh Ford Mot or Company
John Sul l i van Ford Mot or Company
Debbi e Zemke Ford Mot or Company
Dan Bl omst er Fort um Power and Heat
Art o Hei kki nen Fort um Power and Heat
Jussi Nykanen Fort um Power and Heat
St even Hel l em Gl obal Envi ronment
Management Ini t i at i ve
Judi t h M. Mul l i ns General Mot ors Corporat i on
Terry Pri t chet t General Mot ors Corporat i on
Ri chard Schnei der General Mot ors Corporat i on
Robert St ephens General Mot ors Corporat i on
Kri st i n Zi mmerman General Mot ors Corporat i on
Mark St ari k George Washi ngt on Uni versi t y
Mi chael Rumberg Gerl i ng Group of Insurances
Jef f rey C. Frost GHG Spaces
T. Imai Gl obal Envi ronment and Energy Group
Joseph Romm Gl obal Envi ronment
and Technol ogy Foundat i on
Art hur H Rosenf el d Gl obal Envi ronment
and Technol ogy Foundat i on
Di l i p Bi swas Government of Indi a Mi ni st ry
of Envi ronment & Forest s
Mat t hew DeLuca Green Mount ai n Energy
Ri chard Ti pper Greenergy ECCM
Ral ph Tayl or Greenl eaf Compost i ng Company
Gl enna Ford GreenWare Envi ronment al Syst ems
Ni ckol ai Deni sov GRID- Arendal / Hi ndal co Indust ri es
Y.K. Saxena Guj arat Ambuj a Cement
Mi hi r Moi t ra Hi ndal co Indust ri es Lt d.
Cl aude Cul em Hol ci m
Adri enne Wi l l i ams Hol ci m
Mo Loya Honeywel l Al l i ed Si gnal
Edan Di onne IBM Corporat i on
Ravi Kuchi bhot l a IBM Corporat i on
Thomas A. Cort i na ICCP
Paul E. Bai l ey ICF Consul t i ng
Anne Choat e ICF Consul t i ng
Crai g Ebert ICF Consul t i ng
Marci a M. Gowen ICF Consul t i ng
Kamal a R. Jayaraman ICF Consul t i ng
Ri chard Lee ICF Consul t i ng
Di ana Paper ICF Consul t i ng
Frances Sussman ICF Consul t i ng
Mol l y Ti rpak ICF Consul t i ng
Thomas Bergmark IKEA Int ernat i onal A / S
Eva May Lawson IKEA Int ernat i onal A / S
Mona Ni l sson IKEA Int ernat i onal A / S
Ot hmar Schwank INFRAS
Roel Hammerschl ag Inst i t ut e f or Li f ecycl e Energy Anal ysi s
Shannon Cox Int erf ace Inc.
Buddy Hay Int erf ace Inc.
Al yssa Ti ppens Int erf ace Inc.
Mel i ssa Vernon Int erf ace Inc.
Wi l l y Bj erke Int ernat i onal Al umi num Inst i t ut e
Jerry Marks Int ernat i onal Al umi num Inst i t ut e
Robert Dornau Int ernat i onal Emi ssi ons
Tradi ng Associ at i on
C ONTRI BUTORS
107
Andrei Marcu Int ernat i onal Emi ssi ons
Tradi ng Associ at i on
Aki ra Tanabe Int ernat i onal Fi nance Corporat i on
George Thomas Int ernat i onal Fi nance Corporat i on
Danny L. Adams Int ernat i onal Paper Company
Jul i e C. Braut i gam Int ernat i onal Paper Company
Carl Gagl i ardi Int ernat i onal Paper Company
Thomas C. Jorl i ng Int ernat i onal Paper Company
Mark E. Bat eman Invest or Responsi bi l i t y Research Cent er
S.K. Bezbaroa ITC Lt d.
H.D. Kul kami ITC Lt d.
Mi chael Nesbi t JAN Consul t ant s
Chri s Hunt er Johnson & Johnson Int ernat i onal
Harry Kauf man Johnson & Johnson Int ernat i onal
Dani el Usas Johnson & Johnson Worl dwi de
Engi neeri ng Servi ces
Shi nt aro Yokokawa Kansai El ect ri c Power Co.
Iai n Al exander KPMG
Gi ul i a Gal l ucci o KPMG
Li sa Gi bson KPMG
Jed Jones KPMG
Sophi e Punt e KPMG
Mi chel e Sanders KPMG
Chri s Boyd Laf arge Corporat i on
Davi d W. Carrol l Laf arge Corporat i on
Ed Vi ne Lawrence Berkel ey Nat i onal Laborat ory
Ri chard Kahl e Li ncol n El ect ri c Servi ce
Mi chael E. Canes Logi st i cs Management Inst i t ut e
Eri k Brej l a The Loui s Berger Group
Mi chael J. Bradl ey M.J. Bradl ey & Associ at es
Bri an Jones M.J. Bradl ey & Associ at es
Crai g McBerni e McBerni e QERL
Tracy Dyson Meri di an Energy Li mi t ed
Ti m Meal ey Meri di an Inst i t ut e
Mari a Wel l i sch MWA Consul t ant s
Margri et Kui j per NAM
Sukumar Devot t a Nat i onal Chemi cal Laborat ory
Nei l B. Cohn Nat source
Gart h Edward Nat source
Robert Youngman Nat source
Dal e S. Bryk Nat ural Resources Def ense Counci l
Jef f Fi edl er Nat ural Resources Def ense Counci l
Brad Upt on NCASI
Ti mot hy J. Roskel l ey NESCAUM
Mat t hew W. Addi son Nexant
At ul ya Dhungana Nexant
Davi d H. Ki ng Ni agara Mohawk Power Corporat i on
Mart i n A. Smi t h Ni agara Mohawk Power Corporat i on
Ji m Goddard Ni ke Inc.
Let a Wi nst on Ni ke Inc.
Ami t Meri dor NILIT
Kari na Aas Norsk Hydro
Jos van Danne Norsk Hydro
Hans Goosens Norsk Hydro
Jon Ryt t er Hasl e Norsk Hydro
Tore K. Jenssen Norsk Hydro
Hal vor Kvande Norsk Hydro
Bernt Mal me Norsk Hydro
Li l l i an Skogen Norsk Hydro
Jost ei n Sorei de Norsk Hydro
Lasse Nord Norsk Hydro
Thor Lobben Norske Skogi ndust ri er ASA
Mort on A. Barl az Nort h Carol i na St at e Uni versi t y
Gei r Husdal Novat ech
Gard Pedersen Novat ech
Ron Oei Nuon N.V.
Jan Corf ee- Morl ot OECD
St ephane Wi l l ems OECD
Anda Kal vi ns Ont ari o Power Generat i on
Mi kako Koki t su Osaka Gas Co.
Greg San Mart i n Paci f i c Gas and El ect ri c Company
Ken Humphreys Paci f i c Nort hwest Nat i onal Laborat ory
Mi chael Bet z PE Europe GmbH
Kat hy Scal es Pet ro- Canada
Judi t h Greenwal d Pew Cent er
Naomi Pena Pew Cent er
Dani el L. Chart i er PG&E Generat i ng
Zhang Fan Phi l i ps & Yami ng Co. Lt d.
Xue Gongren Phi l i ps & Yami ng Co. Lt d.
Orest es R. Anast asi a Pl anni ng and Devel opment
Col l aborat i ve Int ernat i onal
Contributors
L I S T OF C ONTRI BUTORS
108
Robert Hal l Pl at t s Research and Consul t i ng
Nei l Kol wey Pl at t s Research and Consul t i ng
Davi d B. Sussman Poubel l e Associ at es
Bi l l Kyt e Powergen
Suroj i t Bose Pri cewat erhouseCoopers
Mel i ssa Carri ngt on Pri cewat erhouseCoopers
Rachel Cummi ns Pri cewat erhouseCoopers
Len Eddy Pri cewat erhouseCoopers
Denni s Jenni ngs Pri cewat erhouseCoopers
Terj e Kronen Pri cewat erhouseCoopers
Crai g McBurni e Pri cewat erhouseCoopers
Ol i vi er Mul l er Pri cewat erhouseCoopers
Dorj e Mundl e Pri cewat erhouseCoopers
Thi erry Raes Pri cewat erhouseCoopers
Al ai n Schi l l i Pri cewat erhouseCoopers
Hans Warmenhoven Pri cewat erhouseCoopers
Pedro Mal donado PRIEN
Al f redo Munoz PRIEN
Mark S. Brownst ei n PSEG
James Hough PSEG
Samuel Wol f e PSEG
Vi nayak Khanol kar Pudumj ee Pul p & Paper Mi l l s Lt d.
Federi ca Ranghi eri Ranghi eri & Associ at es
Jenni f er Lee Resources f or t he Fut ure
Kaj Embren Respect Europe
Mei Li Han Respect Europe
Davi d W. Cross The RETEC Group
Al an St ei nbeck Ri o Ti nt o
Kat i e Smi t h RMC Group
Ri ck Heede Rocky Mount ai n Inst i t ut e
Chri s Lot spei ch Rocky Mount ai n Inst i t ut e
Ani t a M. Burke Royal Dut ch / Shel l
Davi d Hone Royal Dut ch / Shel l
Thomas Ruddy Ruddy Consul t ant s
Jul i e Dohert y Sci ence Appl i cat i ons Int l . Corp.
Ri chard Y. Ri chards Sci ence Appl i cat i ons Int l . Corp.
Cori nne Grande Seat t l e Ci t y Li ght
Doug Howel l Seat t l e Ci t y Li ght
Edwi n Aal ders SGS
Irma Lubrecht SGS
Garet h Phi l l i ps SGS
Ant oi ne de SGS
La Rochef ordi re
Murray G. Jones Shel l Canada
Sean Kol l ee Shel l Canada
Ri ck Wei del Shel l Canada
Pi pope Si ri pat ananon Si am Cement
J.P. Semwal Si mpl ex Mi l l s Co. Lt d.
Ros Tapl i n SMEC Envi ronment
Robert K. Ham Sol i d & Hazardous
Wast e Engi neeri ng
Jeremy K. O Bri en Sol i d Wast e Associ at i on
of Nort h Ameri ca
Hi demi Tomi t a Sony Corporat i on
Gwen Parker St anf ord Uni versi t y
Georges August e STMi croel ect roni cs
Ivonne Bert onci ni STMi croel ect roni cs
Gi ul i ano Boccal l et t i STMi croel ect roni cs
Eugeni o Ferro STMi croel ect roni cs
Phi l i ppe Levavasseur STMi croel ect roni cs
Geof f rey Johns Suncor Energy
Manuel e de Gennaro Swi ss Federal Inst i t ut e of Technol ogy,
ETH Zuri ch
Markus Ohndorf Swi ss Federal Inst i t ut e of Technol ogy,
ETH Zuri ch
Mat t hi as Gysl er Swi ss Federal Of f i ce f or Energy
Chri st opher T. Swi ss Rei nsurance Co.
Wal ker
Gregory A. Norri s Syl vat i ca
GS Basu Tat a Iron & St eel Company Lt d.
RP Sharma Tat a Iron & St eel Company Lt d.
Robert Graf f Tel l us Inst i t ut e
Si van Kart ha Tel l us Inst i t ut e
Mi chael Lazarus Tel l us Inst i t ut e
Al l en L. Whi t e Tel l us Inst i t ut e
Wi l l Gi bson Tet ra Tech Em Incorporat ed
Sat i sh Mal i k Tet ra Tech Em Incorporat ed
Fred Zobri st Tet ra Tech Em Incorporat ed
Sonal Agrawal Tet ra Tech Indi a
Ranj ana Gangul y Tet ra Tech Indi a
Ashwani Zut shi Tet ra Tech Indi a
Mark D. Crowdi s Thi nk Energy
C ONTRI BUTORS
109
Ti nus Pul l es TNO MEP
Yasushi Hi eda Tokyo El ect ri c Power Co. Lt d
Mi dori Sasaki Tokyo El ect ri c Power Co. Lt d.
Tsuj i Yoshi yuki Tokyo El ect ri c Power Co. Lt d.
Hi roshi Hashi mot o Tokyo Gas Co. Lt d.
Takahi ro Nagat a Tokyo Gas Co. Lt d
Kent aro Suzawa Tokyo Gas Co. Lt d.
Sat oshi Yoshi da Tokyo Gas Co. Lt d.
Ral ph Torri e Torri e Smi t h Associ at es
Manuel a Oj an Toyot a Mot or Company
Eugene Smi t hart Trane Company
Laura Kosl of f Trexl er & Associ at es
Mark Trexl er Trexl er & Associ at es
Wal t er Greer Tri ni t y Consul t ant s
Jochen Mundi nger Uni versi t y of Cambri dge
Hannu Ni l sen UPM- Kymmene Corporat i on
Nao Ikemot o U.S. Asi a Envi ronment al Part nershi p
St ephen Cal opedi s U.S. Depart ment of Energy
Gregory H. Kat s U.S. Depart ment of Energy
Di ck Ri chards U.S. Depart ment of Energy
Art hur Rosenf el d U.S. Depart ment of Energy
Art hur Rypi nski U.S. Depart ment of Energy
Moni sha Shah U.S. Depart ment of Energy
Tat i ana St raj ni c U.S. Depart ment of Energy
Kennet h Andrasko U.S. Envi ronment al Prot ect i on Agency
Jan Cant erbury U.S. Envi ronment al Prot ect i on Agency
Ed Coe U.S. Envi ronment al Prot ect i on Agency
Li sa H. Chang U.S. Envi ronment al Prot ect i on Agency
Andrea Denny U.S. Envi ronment al Prot ect i on Agency
Bob Doyl e U.S. Envi ronment al Prot ect i on Agency
Henry Ferl and U.S. Envi ronment al Prot ect i on Agency
Dave Godwi n U.S. Envi ronment al Prot ect i on Agency
Kat heri ne Grover U.S. Envi ronment al Prot ect i on Agency
John Hal l U.S. Envi ronment al Prot ect i on Agency
Li sa Hanl e U.S. Envi ronment al Prot ect i on Agency
Rei d Harvey U.S. Envi ronment al Prot ect i on Agency
Kat hl een Hogan U.S. Envi ronment al Prot ect i on Agency
Roy Hunt l ey U.S. Envi ronment al Prot ect i on Agency
Bi l l N. Irvi ng U.S. Envi ronment al Prot ect i on Agency
Di na Kruger U.S. Envi ronment al Prot ect i on Agency
Ski p Lai t ner U.S. Envi ronment al Prot ect i on Agency
Joseph Mangi no U.S. Envi ronment al Prot ect i on Agency
Pam Herman Mi l moe U.S. Envi ronment al Prot ect i on Agency
Bet h Murray U.S. Envi ronment al Prot ect i on Agency
Deborah Ot t i nger U.S. Envi ronment al Prot ect i on Agency
Paul St ol pman U.S. Envi ronment al Prot ect i on Agency
Susan Thornel oe U.S. Envi ronment al Prot ect i on Agency
Chl oe Wei l U.S. Envi ronment al Prot ect i on Agency
Phi l J. Wi rdzek U.S. Envi ronment al Prot ect i on Agency
Tom Wi rt h U.S. Envi ronment al Prot ect i on Agency
Mi chael Savoni s U.S. Federal Hi ghway Admi ni st rat i on
M. Mi chael Mi l l er U.S. Geol ogi cal Survey
Hendri k G. van Oss U.S. Geol ogi cal Survey
Val ent i n V. Tepordei U.S. Geol ogi cal Survey
Margueri t e Downey U.S. Post al Servi ce
Hussei n Abaza UNEP
Lambert Kui j pers UNEP
Gary Nakarado UNEP
Mark Radka UNEP
St el i os Pesmaj ogl ou UNFCCC
Al den Meyer Uni on of Concerned Sci ent i st s
Judi t h Bayer Uni t ed Technol ogi es Corporat i on
Fred Kel l er Uni t ed Technol ogi es Corporat i on
Paul Pat l i s Uni t ed Technol ogi es Corporat i on
El l en J. Qui nn Uni t ed Technol ogi es Corporat i on
Bi l l Wal t ers Uni t ed Technol ogi es Corporat i on
Gary Bul l Uni versi t y of Bri t i sh Col ombi a
Zoe Harki n Uni versi t y of Bri t i sh Col umbi a
Gerard Al l eng Uni versi t y of Del aware
Jacob Park Uni versi t y of Maryl and
Terri Shi res URS Corporat i on
Angel a Crooks USAID
Vi rgi ni a Gorsevski USAID
Carri e St okes USAID
Sandeep Tandon USAID
A.K. Ghose Vam Organosys Lt d.
Cyri l Coi l l ot Vi vendi Envi ronment
Eri c Lesueur Vi vendi Envi ronment
Contributors
110
Mi chael Di l l man Vol kswagen
St ephan Herbst Vol kswagen
Herbert Forst er Vot orant i m
Cl aude Gri nf eder Vot orant i m
Mahua Acharya Worl d Busi ness Counci l
Chri st i ne El l eboode Worl d Busi ness Counci l
Margaret Fl ahert y Worl d Busi ness Counci l
Al Fry Worl d Busi ness Counci l
Susanne Haef el i Worl d Busi ness Counci l
Ki j a Kummer Worl d Busi ness Counci l
Hei di Sundi n Worl d Busi ness Counci l
Donna Dani hel We Energi es
Gary Ri sner Weyerhauser
Thomas F. Cat ani a Whi rl pool Corporat i on
Eri c Ol af son Wi l l i ams Company
Johannes Hei st er Worl d Bank
Aj ay Mat hur Worl d Bank
Ri chard Samans Worl d Economi c Forum
Andrew Aul i si Worl d Resources Inst i t ut e
Kevi n Baumert Worl d Resources Inst i t ut e
Carey Byl i n Worl d Resources Inst i t ut e
Fl orence Davi et Worl d Resources Inst i t ut e
Manmi t a Dut t a Worl d Resources Inst i t ut e
Suzi e Greenhal gh Worl d Resources Inst i t ut e
Crai g Hanson Worl d Resources Inst i t ut e
Fran Irwi n Worl d Resources Inst i t ut e
Davi d Jhi rad Worl d Resources Inst i t ut e
Nancy Ket e Worl d Resources Inst i t ut e
Bi l l LaRocque Worl d Resources Inst i t ut e
Ji m MacKenzi e Worl d Resources Inst i t ut e
Emi l y Mat t hews Worl d Resources Inst i t ut e
Sri devi Nanj undaram Worl d Resources Inst i t ut e
Ji m Perkaus Worl d Resources Inst i t ut e
Jonat han Pershi ng Worl d Resources Inst i t ut e
Samant ha Worl d Resources Inst i t ut e
Put t del Pi no
Anand Rao Worl d Resources Inst i t ut e
Lee Schi pper Worl d Resources Inst i t ut e
Jason Snyder Worl d Resources Inst i t ut e
Jenni f er Morgan Worl d Wi l dl i f e Fund
WRI and WBCSD woul d al so l i ke t o t hank t he f ol l owi ng i ndi vi dual s
and organi zat i ons f or t hei r generous f i nanci al support : Energy
Foundat i on, Spencer T. and Ann W. Ol i n Foundat i on, John D. and
Cat heri ne T. MacArt hur Foundat i on, Charl es St ewart Mot t
Foundat i on, t he US Agency f or Int ernat i onal Devel opment , t he US
Envi ronment al Prot ect i on Agency, Art hur Lee, Angl o Ameri can,
Baxt er Int ernat i onal , BP, Det Norske Veri t as, DuPont , Ford, General
Mot ors, Laf arge, Int ernat i onal Paper, Norsk Hydro, Ont ari o Power
Generat i on, Pet ro- Canada, PowerGen, S.C.Johnson, SGS, Shel l ,
St at oi l , STMi croel ect roni cs, Sul zer, Suncor, Swi ss Re, Texaco, The
Dow Chemi cal Company, Tokyo El ect ri c Power Company, Toyot a,
TransAl t a and Vol kswagen.
C ONTRI BUTORS
111
Desi gn: Al st on Taggart , Barbi eri and Green
112
Di sc l ai mer
This document, designed to promote best practice GHG
accounting and reporting, has been developed through a
unique multi-stakeholder consultative process involving
representatives of reporters and report-users from around
the world. While WBCSD and WRI encourage use of the
GHG Protocol Corporate Standard by all corporations
and organizations, the preparation and publication of
reports based fully or partially on the GHG Protocol is the
full responsibility of those producing them. Neither the
WBCSD and WRI , nor other individuals who contributed
to this standard assume responsibility for any conse-
quences or damages resulting directly or indirectly from
its use in the preparation of reports or the use of reports
based on the GHG Protocol Corporate Standard.
Or der i ng publ i c at i ons
WBCSD
WBCSD, c/o Earthprint Limited
Tel: (44 1438) 748 111
Fax: (44 1438) 748 844
wbcsd@earthprint.com
Publications are available at:
www.wbcsd.org
www.earthpri nt.com
WRI
Hopkins Fulfillment Service
Tel: (1 410) 516 6956
Fax: (1 410) 516 6998
e-mail: hfscustserv@mail.press.jhu.edu
Publications can be ordered from WRI s secure online
store: http://www.wri store.com
Copyright World Resources I nstitute and World Business Council
for Sustainable Development, March 2004
I SBN 1-56973-568-9
Printed in USA
T
Pri nt ed on Phoeno St ar (20% post consumer wast e,
chl ori ne- f ree pul p processed paper) wi t h soy- based i nks.
About WBCSD
The Worl d Busi ness Counci l f or Sust ai nabl e Devel opment (WBCSD)
i s a coal i t i on of 170 i nt ernat i onal compani es uni t ed by a shared
commi t ment t o sust ai nabl e devel opment vi a t he t hree pi l l ars of
economi c growt h, ecol ogi cal bal ance and soci al progress. Our
members are drawn f rom more t han 35 count ri es and 20 maj or
i ndust r i al sect or s. We al so benef i t f r om a gl obal net wor k of
48 nat i onal and r egi onal busi ness counci l s and par t ner or gani -
zat i ons i nvol vi ng some 1, 000 busi ness l eader s gl obal l y.
About WRI
Wor l d Resour ces Inst i t ut e i s an i ndependent nonpr of i t or gani zat i on
wi t h a st af f of mor e t han 100 sci ent i st s, economi st s, pol i cy
exper t s, busi ness anal yst s, st at i st i cal anal yst s, mapmaker s, and
communi cat or s wor ki ng t o pr ot ect t he Ear t h and i mpr ove peopl es
l i ves. The GHG Pr ot ocol Ini t i at i ve i s managed by WRIs Sust ai nabl e
Ent er pr i se Pr ogr am whi ch f or mor e t han a decade, has har nessed
t he power of busi ness t o cr eat e pr of i t abl e sol ut i ons t o envi r onment
and devel opment chal l enges. WRI i s t he onl y or gani zat i on t hat
br i ngs t oget her f our i nf l uent i al f or ces t o accel er at e change i n
busi ness pr act i ce: cor por at i ons, ent r epr eneur s, i nvest or s, and
busi ness school s.
WO R L D
R ESO U R C ES
I N ST I T U T E
10 G Street, NE (Suite 800)
Washington, DC 20002
USA
Tel: (1 202) 729 76 00
Fax: (1 202) 729 76 10
E-mail: sepinfo@wri.org
I nternet: www.wri .org
4, chemin de Conches
1231 Conches-Geneva
Switzerland
Tel: (41 22) 839 31 00
Fax: (41 22) 839 31 31
E-mail: info@wbcsd.org
I nternet: www.wbcsd.org

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A Corporate Accounting and Reporting Standard

syst em empl oys a var i et y of st r at egi es t o

F I GU R E 1 2 . St eps i n set t i ng a GHG t ar get

1. Obt ai n seni or management c ommi t ment

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