Understanding Emission Accounting

As the world continues to grapple with climate change and its impacts, more companies are recognizing the need to reduce their greenhouse gas (GHG) emissions. Calculating the emission is the main foundation for every organization or company to start their effort to tackle the climate change issue.??

What is Emission Accounting?

Emission accounting is a process, framework, or method used to measure, track, and calculate an organization's contribution to GHG directly and indirectly. Governments, businesses, and individuals do this activity in calculating GHG, and the total of it is known as their carbon footprint. Emission accounting is essential as it provides insights into identifying opportunities for decarbonization, optimizing ESG performance, aligning with changing rules, requirements, and regulations, and making businesses future-proof against the rising cost of climate risk.

The Greenhouse Gas Protocol (GHGP)

The Greenhouse Gas Protocol (GHGP) is an internationally recognized standards for measuring and reporting GHG emissions. The GHGP provides a step-by-step guidelines for companies to use in quantifying and reporting their GHG emissions.

Three Scopes are defined in calculating emissions directly and indirectly within the GHG accounting and reporting to improve transparency and align with the business goal. The defined Scopes are Scopes 1, 2, and 3, as seen in Figure 1.?

Emission accounting involves categorizing GHG emissions into three distinct scopes:

Scope 1 focuses on direct emissions from sources owned or controlled by the company, such as fossil fuel combustion activity and industrial processes. Specific sectors like mining and oil and gas companies have unique sources of emissions like explosion and flaring activities.

Scope 2 deals with GHG emissions from the generation of purchased energy, mainly electricity, consumed by the company.

Scope 3 concerns other indirect GHG emissions that arise from the company's activities but occur from sources not owned or controlled by the company. GHG protocol lists 15 categories of them starting from the supply chain to how the consumer uses the company’s products.?

Conducting Emission Accounting 101

In conducting emission accounting, companies must adhere to 5 principles: relevance, completeness, consistency, transparency, and accuracy.

To track emissions over time, a company must choose a base year as a reference point for tracking reductions.

For instance, the United Kingdom Emission Trading Scheme (UK ETS) uses the average emissions from 1998 to 2000 as a reference point for tracking reductions. In addition to this, companies must define inventory boundary, which includes the Scopes of direct and indirect emissions from operations that fall within the organizational boundary of the company (Scope 1, Scope 2, Scope 3).

The process of conducting emission accounting involves several steps, as seen in Figure 2.

The first step is to categorize the GHG sources within the company’s boundaries. GHG emissions typically occur from stationary and mobile combustion, process emissions, and fugitive emissions. Next, the company must identify their Scope 1 emissions by undertaking an exercise to identify their direct emission, Scope 2 emissions from the consumption of purchased electricity, heat, or steam, and Scope 3 emissions from the company's value chain.

Once the sources of GHG emissions have been categorized, the company must select a calculation approach. The most common approach for calculating GHG emissions is to apply documented emission factors, which are ratios between the amount of pollution generated and the amount of raw material processed.

The emission factors may be derived from published scientific studies or journals, or it can also be sourced from company-specific data, site-specific data, direct emission, or other measurements. Another approach is through mass balance or stoichiometric basis specific to a facility or process and direct measurement of GHG emissions by monitoring concentration and flow rate.?

The next step is to collect activity data and choose appropriate emission factors for each Scope. GHG emissions from Scope 1 are calculated based on purchased quantities of commercial fuels using published emission factors. Scope 2 GHG emissions will primarily be calculated from metered electricity consumption, supplier-specific, local grid, or other published emission factors. Scope 3 emissions are calculated primarily from activity data such as fuel use or passenger miles and published or third-party emission factors.

Companies can also utilize calculation tools available through the GHG protocol website to determine their own specific GHG calculation methods. The calculation tools can be divided into two main categories:

• Cross-sector tools that can be applied to different sectors
• 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, and office-based organization.

In addition to the calculation tools provided by the GHG protocol website, companies can also leverage specialized emission accounting programs like TruCount to accurately identify and quantify their GHG emissions, ensuring compliance with GHGP and any other applicable standards.

Once all the steps have been completed, companies can roll up GHG emissions data to the corporate level. Large scale companies might need to gather and compile data from multiple facilities, possibly across different countries and business divisions. Data collection and management tools commonly include secure databases, spreadsheet templates, and paper reporting forms faxed to a corporate or division. The process of gathering and compiling GHG emissions data from multiple facilities across countries and business divisions using traditional data collection and management tools can be time-consuming and error-prone. Emission accounting programs like TruCount can help companies streamline this process to support decision makers in making efficient and sustainable business decisions.

Emission accounting is a crucial step for any company looking to reduce its impact on the environment and combat climate change. By understanding and measuring their greenhouse gas emissions, organizations can identify opportunities for decarbonization, optimize their ESG performance, and future-proof their businesses against the rising cost of climate risk.

Written by: Kautsar Muhammad Iqbal

If your company is looking to get started on emission accounting or needs assistance with the process, contact us today through our LinkedIn or Website!