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Understanding Key Terms of Carbon Accounting
Carbon or GreenHouse Gas (GHG) Accounting is the process by which organizations quantify and track their direct and indirect GHG emissions in order to understand climate impacts, set goals, reduce emissions, and report to external entities. One might also hear this process referred to as quantifying a carbon or greenhouse gas inventory. An organization’s emissions are its carbon inventory, which can be reduced or netted against carbon improvements or offsets. This is also commonly referred to as an organization’s carbon footprint. It is important to understand basic key terms before diving into more of the nuances of GHG accounting and other calculation intricacies of carbon markets and net zero economies.
This article will explore basic concepts and terminology of carbon accounting, carbon markets, and climate finance.
The de facto global accounting method for measuring an entity’s direct, downstream, and upstream GHG emissions. This protocol defines methodologies for calculating and defining the scope of emissions, as well as informing the standard-setting criteria of many other sustainability reporting frameworks such as CDP, GRI, TCFD, SASB, and SBTi.
Emissions are classified into 3 different scopes for differentiating between direct and indirect emissions of a business and for more accurate measurement and reporting overall.
- Scope 1 (direct emissions):
- Emissions released into the atmosphere that are a direct result of sources that are owned or controlled by the company. This constitutes the direct emissions from facility-level activities like manufacturing processes, or the onsite production of electricity by burning coal.
- 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.
- Scope 2 (indirect emissions):
- Emissions released into the atmosphere from purchased electricity, steam, heating, and cooling. These are indirect emissions. The two methodologies recommended for accounting scope 2 emissions are the market-based approach and location-based (grid-based) approach.
- Scope 3 (indirect emissions):
- Indirect emissions other than scope 2 that may be a consequence of activities of the company, but occur from sources not owned or controlled by the company itself both upstream and downstream in the supply chain. These emissions are often referred to as ‘supply chain emissions’ or ‘embodied carbon’. Supply chain emissions account for 5.5 times more emissions on average than a company’s direct emissions.
Greenhouse Gases (GHG) and Carbon:
Greenhouse gases are gases contributing to the greenhouse effect (atmosphere warming) by absorbing infrared radiation. Carbon is the most common greenhouse gas emitted by human activities and is therefore used in shorthand to refer to a number of other greenhouse gases.
Carbon (CO2) is one of several GHG gases that is often used as the equivalent metric for quantifying other gases, known as CO2 equivalents or CO2e. CO2 as the reference gas, therefore, has a global warming potential of 1. A quantity of GHG can be expressed as CO2e by multiplying the amount of GHG by its Global Warming Potential.
Global Warming Potentials:
The Global Warming Potential (GWP) was developed to allow comparisons of the global warming impacts of different gases. Specifically, it is a measure of how much energy the emissions of 1 ton of a gas will absorb over a given period of time, relative to the emissions of 1 ton of CO2.
An emission factor (EF) is a coefficient that describes the rate at which a given activity releases GHG gases into the atmosphere. They are also referred to as conversion factors, emission intensity, and carbon intensity. For example, there is a given emissions factor for converting used natural gas energy into equivalent carbon emissions for accounting purposes.
These include pure accounting methods for current emissions and do not necessarily regard emissions reduction strategies. Approaches include Life Cycle Assessment methods and Carbon Accounting. Carbon accounting is the process of quantifying the amount of greenhouse gases produced directly and indirectly from a business or organization’s activities within a set of boundaries.
There are many sustainability reporting frameworks, such as CDP, GRI, TCFD, GRESG, and ENERGY STAR Portfolio Manager. They provide a standardized method of reporting emissions data to be released by a company.
These allow businesses, who cannot reasonably reduce or halt their own emissions, to balance out the total emitted greenhouse gases in the atmosphere to zero by purchasing the active emissions reductions of another party elsewhere. Offsets are calculated relative to a baseline that represents a hypothetical scenario for what emissions would have been in the absence of the project.
A carbon sink is anything, natural or otherwise, that accumulates and stores some carbon-containing chemical compound for an indefinite period and thereby removes carbon dioxide from the atmosphere. Corporations may acquire land rights for designated areas of carbon sinks such as forests or seagrass meadows, or contribute to restoring these natural areas in order to qualify the area as an offset.
Controlling your organization’s greenhouse gas emissions is one of the biggest ways you can combat climate change and respond to the growing number of consumers who want companies to be more sustainable. WatchWire provides full-service carbon accounting, tracking Scope 1, 2, and 3 emissions, renewable energy credits (RECs), global warming potential, and more.
To discover more about WatchWire and its capabilities, you can visit our website, blog, or resource library, request a demo, or follow us on LinkedIn, Instagram, or Twitter to keep up-to-date on the latest energy and sustainability insights, news, and resources.
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