GHG Emissions Reporting for Dummies

Eric A. Woodroof, Ph.D.

Spring 2010

WHY Measure GHGs:

If companies want to say they are "green", then they need to document their GHG inventory among other environmental performance measures (how much they recycled, etc.). In addition to “backing up” their marketing claims, if new legislation affects them- they will be in a better position to manage GHG emissions. Many of my clients have embraced "green" reporting because their customers are buying "green" products and services over "non-green" companies. Surprisingly, in the US, this motivator is greater than legislation, as the US has very little GHG legislation with respect to other countries.

Legislative Update: Some industries are now required to report their 2010 GHG emissions (actual reports must be filed in 2011). Very much like the US income tax payment process, some companies will have to identify and measure the emissions during 2010 and for years ahead. The EPA requires this from some emissions-heavy industries, but also from any facility that emits over 25,000 tons of Direct, Stationary Emissions. Direct Stationary Emissions are those that occur when a company combusts fuels on-site (such as boilers, coal or natural gas-fired electricity generators, etc.). According to the EPA estimates, less than 15,000 facilities in the US will be affected by this new regulation. Learn more about Legislative Updates.

HOW to Measure:

Several Tools from different organizations are available to quantify your GHG emissions. The good news is that because all of these tools must comply with the Kyoto Protocol, they are mostly the same despite being from different organizations. Examples include the General Reporting Protocol guidelines from TheClimateRegistry.org or the ISO Standards, etc.. These “guideline” documents are analogous to the IRS guidelines for reporting your taxes. Basically, if you follow the guidelines (or have a consultant do this for you), you should be able to satisfy the reporting requirements.

If you are just concerned with the EPA regulations, at this point in time, you only need to worry about your emissions from stationary combustion sources. However, if you want to report a complete GHG emissions inventory, you will have to include emissions from your fleet (Mobile Source Emissions), as well as emissions from refrigerant leaks and other “process emissions”. All of the emissions previously listed are called “Scope I” emissions because they occur from assets that your company owns.

Another category of emissions is called Scope II, which are also usually included in any company’s GHG inventory. For example, in any Kyoto compliant inventory (which is the primary compliance model world-wide), Scope I and II emissions reporting are mandatory. Within Scope II, a large part of your total emissions will be “Indirect Emissions” which come from the electricity you purchase. These are classified as “indirect” because the emissions don’t occur from your assets, but they do occur at the electric generator (usually owned by your utility). For many offices and light commercial businesses, Scope II emissions will comprise more than 75% of the emissions report.

A final category of emissions is called “Scope III”, which represent the emissions from activities that you may not be in control of, such as the emissions that occur from assets that you don’t own, but are related to your activities. For example, if your company assembles a product that has parts made by other companies, the emissions from these companies to make your parts would be called “Scope III”. Another example would be the emissions from private cars that are driven by students to get to a University. These emissions occur because the university exists, but the university really has no control over the emissions of its student’s cars. Learn more about Scope I, II & III emissions in a Carbon Accounting Course.

Should you Report?:

Unless you are a large utility in the US or have enough emissions to exceed the EPA limit, most formal reporting is voluntary. So for those companies that are seeking a strategic advantage, many will measure their emissions and not formally report, but analyze the emissions data for internal improvement opportunities.

If your company wants to publically report its emissions, usually you will report your GHG inventory to a “Registry” or alternatively a non-profit entity or even a trading platform, which keeps all of this data. When you report emissions formally, there is usually a verification step that is required, which should be performed by a 3^rd party. An analogy is when a company reports its income and a 3^rd party accountant checks the books to make sure that they are accurate.

As mentioned previously, reporting emissions is a very similar process to reporting taxes. However, beyond reporting your formal emissions, there is much more you can do such as marketing your year-to-year improvement. In addition, by incorporating reporting data into the decision-making process, you can have better accounting for future regulations (perhaps in your specific industry). Many clients have added “emissions impact” as a criterion for evaluating future projects (along with financial impact, ROI, etc.). In other words, projects can win or lose approval based on their impact to a company’s annual emissions.

At this time it is hard to predict what future emissions reporting requirements will exist. However it is likely to become more common as the Securities and Exchange Commission as well as several states (and other industry associations) have asked some companies to begin reporting so that consumers can better identify risks associated with specific companies. For these reasons, it is worth watching to see how the legislation evolves.

Once you have quantified your emissions, the next step may be to manage or reduce them, which I will cover in the next article.