Measurement and Reporting Standards by b2oGBV

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									    Greenhouse Gas Protocol Initiative

  Corporate Greenhouse Gas Inventories:
Proposed Reporting Standard, Guidance and
             Estimation Tools


        November, 2000 Road Test Draft
         for public comment & testing
How to contact us?




Janet Ranganathan           David Moorcroft/Jasper Koch
World Resources Institute   World Business Council for Sustainable
10 G Street, NE             Development
Washington DC 20002, USA    160 Rte de Florissant
Tel +01 202 729 7656        1231Conches/Geneva, Switzerland
Fax +01 202 729 7637        Tel +41 22 839 31 97/21
E-mail: janetr@wri.org      Fax +41 22 839 31 31
                            E-mail: Moorcroft@wbcsd.ch
                            E-mail: Koch@wbcsd.ch
                                   Acknowledgements
           This draft standard, guidance and tools were developed by the
           voluntary contributions of many individuals and organizations
           drawn from business, governments and non-governrment
           organizations (see below).

           We would also like to thank the Energy Foundation, Spencer T.
           and Ann W. Olin Foundation, John D. and Catherine T. MacArthur
           Foundation, Charles Stewart Mott Foundation and the US
           Environmental Protection Agency for their generous funding.


Participants include:

500 PPM, Inc.                      Global Reporting            Tata Energy Research
Alcoa                                Initiative                  Institute
Alcan                              GrupoNueva                  Tellus Institute
Arthur D. Little, Inc              Holderbank                  Texaco
Australian Greenhouse Gas Office   ICF Consulting              The Climate Trust
BP                                 Imperial Chemical           ThermoRetec
Canadian Institute of Chartered     Industries plc             Tokyo Electric Power
Accountants                        Interface Research           Company Inc.
CEO Coalition to Advance             Corporation               Torrie Smith Associates
 Sustainable Technology            International Paper         Trexler & Associates, Inc
CERES                              M.J. Bradley &              UNEP
Center for Energy and Climate         Associates               US Department of Energy
 Solutions                         Nexant, Inc                 US Environmental
CH2M HILL                          Norsk Hydro                  Protection Agency
Clean Energy Group                 Pew Center on Global        US Postal Service
Climate Neutral Network              Climate Change            United Technologies
Consolidated Edison Company of     PowerGen                     Corporation
 New York                          Pricewaterhouse             WBCSD
Cumming Cockburn Limited             Coopers LLP               WRI
Det Norske Veritas                 Public Service Enterprise   World Wildlife Fund
Dow Chemical Company                 Group
EcoBalance                         Rocky Mountain Institute
EvTEC                              Ruddy Consultants
First Environment                  Shell International
Five Winds International           STMicroelectronics
General Motors                     Suncor
Global Environmental
 Management Initiative
TABLE OF CONTENTS
PARTICIPANTS ................................................................................................................... 3

TABLE OF CONTENTS ....................................................................................................... 4

OVERVIEW .......................................................................................................................... 6
   BACKGROUND .................................................................................................................... 6
   MEASUREMENT AND REPORTING .......................................................................................... 6
   MOVING TOWARDS A COMMON STANDARD ............................................................................ 6
   THE GHG PROTOCOL ......................................................................................................... 7
   RELATION TO INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE METHODOLOGIES .............. 7
   USING THIS STANDARD, GUIDANCE AND TOOLS .................................................................... 8
PART A: GREENHOUSE GAS INVENTORY & REPORTING STANDARD ......................... 9
   1.  GHG ACCOUNTING PRINCIPLES ................................................................................... 9
   2.  INVENTORY BOUNDARIES ............................................................................................. 9
     2.1 Accounting for Direct and Indirect Emissions (Scope)............................................ 9
     2.2 GHG Accounting when there is Shared Ownership (Ownership vs. Control) ....... 11
     2.3 Outsourcing ......................................................................................................... 11
   3. CORPORATE BASELINES ............................................................................................ 12
   4. INVENTORY REPORTING ............................................................................................ 12
PART B: GREENHOUSE GAS INVENTORY AND REPORTING GUIDANCE................... 13
   CORPORATE LEVEL GUIDANCE .......................................................................................... 13
   5. DEFINING YOUR INVENTORY GOALS ........................................................................... 13
   6. ESTABLISHING INVENTORY BOUNDARIES .................................................................... 14
     6.1 Accounting for Direct and Indirect Emissions (Scope).......................................... 14
     6.2 GHG Accounting When There is Shared Ownership............................................ 16
     6.3 Outsourcing ......................................................................................................... 18
   7. BASELINES ............................................................................................................... 19
   8. RATIO INDICATORS .................................................................................................... 20
   9. INVENTORY QUALITY & CREDIBILITY ........................................................................... 21
     9.1 Importance of Uncertainty in GHG Emissions Inventories .................................... 21
     9.2 Credibility............................................................................................................. 22
   10. ROLL-UP (AGGREGATION) OF FACILITY INFORMATION TO CORPORATE LEVEL ................ 23
   FACILITY LEVEL GUIDANCE ................................................................................................ 25
   12. GETTING STARTED: IDENTIFYING GHG SOURCES ....................................................... 25
   13. REPORTING INFORMATION TO THE CORPORATE LEVEL ................................................ 27
     13.1 Facilities Reporting Emissions to the Corporate level ...................................... 27
     13.2 Facilities Reporting Activity Data to the Corporate Level .................................. 28
   14. GUIDANCE FOR MEASURING AND ESTIMATING EMISSIONS DATA................................... 28
     14.1 Stationary (Non-transport) Combustion of Fossil Fuel ...................................... 28
     14.2 Transportation ................................................................................................. 29
     14.3 HFC Emissions from Coolants and Refrigeration ............................................. 32
     14.4 Aluminium Production ...................................................................................... 32
     14.5 Iron and Steel Production ................................................................................ 33
     14.6 Nitric Acid Production....................................................................................... 34
     14.7 Ammonia Production ....................................................................................... 34
     14.8 Adipic Acid Production ..................................................................................... 35

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       14.9 Cement Production .......................................................................................... 35
       14.10 Lime Production ............................................................................................... 36
PART C: GREENHOUSE GAS INVENTORY TOOLS ........................................................ 37
   15. COLLECTION & ESTIMATION OF EMISSIONS DATA ........................................................ 37
   16. MANAGING UNCERTAINTY .......................................................................................... 39
     16.1 Sources of Uncertainty..................................................................................... 39
     16.2 Characterising Uncertainty ............................................................................... 40
     16.3 Estimating or Calculating Uncertainty .............................................................. 40
GLOSSARY ........................................................................................................................ 45




                                                                                                                                       5
Overview
The Greenhouse Gas Protocol Initiative is an international, multi-stakeholder undertaking whose
mission is to promote the use of standardized methods for estimating and reporting business
greenhouse gas emissions (GHGs). The guidelines are presented at this time as a road-test draft for
public comment and road testing. They provide guidance on developing a corporate greenhouse gas
inventory and performance reporting, and comprise a number of proposed principles and standards,
together with guidance and accompanying tools to help with practical implementation. They embody
the contributions of many individuals from business, non-governmental organizations (NGOs) and
governments. They should be used in conjunction with the greenhouse gas estimation tools available
at the collaboration’s website: www.ghgprotocol.org. Based on feedback received before the end of
March 2001 they will be revised and re-released in May 2001.


Background
Climate change has steadily gained prominence as an issue in industrialized and developing
countries in recent years. At the last meeting of the World Economic Forum at Davos in Switzerland,
it was voted as one of the top issues of concern amongst business leaders.

The debate about climate change is further invigorated by the Kyoto Protocol, by which industrialized
countries (Annex 1 countries) are obliged to cut their GHG emissions by 5 percent relative to their
base-year emissions in 1990 by 2012. To comply with reduction commitments, governments will take
steps to reduce emissions through national policies, which could take the form of permit trading
systems, carbon or energy taxes, or regulations and standards on energy efficiency and emissions.
Consequently, businesses increasingly recognize the need to understand “carbon risk” and in looking
to the future, how to manage their GHG emissions.

Measurement and reporting
Performance measurement plays an essential role in developing strategy and evaluating the
achievement of organizational objectives. Non-financial measures are increasingly important in
decision-making and performance evaluation. At a strategic level, GHG performance measures may
be relevant to a company’s ‘license to operate’, competitive environment, ‘carbon risk,’ and issues of
corporate social responsibility. A credible GHG inventory may also be a pre-requisite for participating
in carbon trading markets under the Kyoto Protocol. At an operational level, GHG performance
measures may be relevant to dematerialization of products and processes, energy efficiency, and the
reduction of waste.

Moving towards a common standard
Apart from ensuring that GHG performance measures are relevant and useful, an important success
factor is to ensure that their expected benefits outweigh their costs. This, in part, means keeping the
time and cost of developing GHG inventories and reporting systems as low as possible. One of the
biggest cost-risks is implementing a company-wide system that turns out to be incompatible with
future requirements and standards. At present the diversity of practices increases this risk and
reduces the comparability, credibility, and utility of information. A common framework that builds on
the experience and knowledge of a broad range of practitioners and stakeholders will mitigate against
this. It will also enable better comparisons of performance over time, strengthen the capacity of
managers to make informed decisions to manage carbon risks, enable external verification of data
and provide external stakeholders with credible and objective information.


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The GHG Protocol
An important starting point for a company contemplating GHG performance measurement is to
understand where GHG performance measures link with the company’s business drivers, and their
relevance to company performance. This is also important for gaining buy-in to the system from
employees who may be faced with a range of competing objectives. Consequently, the guidelines
have been assembled to reflect these needs and to be suitable for a variety of organizations. The
guidelines comprise three parts:

A. Reporting Standards: A proposed set of international GHG accounting standards; covering
   GHG accounting principles, inventory boundaries; corporate baselines; and inventory reporting.
B. Estimation & Reporting Guidance: Corporate and facility level guidance that addresses:
   inventory goals, boundaries, baselines, ratio indicators, inventory quality/credibility, identifying
   GHG sources, aggregation of facility information and estimation methods.
C. Tools: A number of optional aids to help with implementation: collection and estimation of
   emissions, sector and cross sector GHG worksheets and guidance for estimating GHG emissions
   for different industrial sectors and processes and managing uncertainty. The GHG estimation
   guidance and tools are not included in this document, but may be downloaded free from the
   collaboration’s website at www.ghgprotocol.org.

These guidelines are the first of three planned outputs. Two other GHG estimation and reporting
modules will focus on Product Life Cycle and Carbon Sequestration.

Relation to Intergovernmental Panel on Climate Change Methodologies
The estimation tools in section C are consistent with those proposed by the Intergovernmental Panel
on Climate Change (IPCC), but many are refined to increase the accuracy of emissions data. The
IPCC guidelines are intended for ‘top down’ compilation of national inventories, while the GHG
Protocol Initiative is concerned with measuring emissions at the company level. Consequently, the
GHG Protocol Initiative covers a number of issues that are not dealt with by IPCC such as:

   Reporting of indirect emissions from the import or export of energy across company boundaries
   Impact of mergers, acquisitions, divestitures and internal growth on inventories and base-year
    emissions
   Accounting for GHG emissions when there is shared ownership and from outsourced activities.




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Using this Standard, Guidance and Tools
This section is intended to help you navigate through the document. It lists some commonly asked
inventory questions and then signposts you to the to the appropriate section(s) in the document that
address these questions.

Questions about getting started
How do we decide the right level of ambition for the inventory?    section 5
What should we report?                                             section 4

Questions about inventory boundaries
How are GHGs accounted for when there is shared ownership?         sections 2.2, 6.2
How are GHGs from outsourced activities handled?                   sections 2.3, 6.3
Should indirect emissions be included in the inventory?            sections 2.1, 6.1

Questions about measuring performance
How are baselines established?                                    sections 4, 7
What are appropriate ratio indicators for evaluating performance? section 8

Questions about inventory quality
What governs the quality/credibility of an inventory?              sections 1, 9
What is uncertainty and why is it important?                       section 9.1
How is uncertainty managed?                                        section 16

Questions about GHG estimation
Which sector or cross sector estimation tools should we use?       sections 12, 15
What information do facilities need to collect?                    section 13
How should information be rolled up from facilities?               section 10




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Part A: Greenhouse Gas Inventory & Reporting Standard
This is a voluntary standard that business and other organizations should adhere to when
establishing a greenhouse gas inventory and publicly reporting emissions data. In order to
accommodate the needs of different types of companies, it provides a structured yet flexible
approach, building on existing corporate practices, accounting standards and extensive dialogue
between experts and practitioners. It addresses the estimation and reporting of the six greenhouse
gases (GHGs) covered by the Kyoto Protocol: carbon dioxide (CO 2), methane (CH4), nitrous oxide
(N2O), Hydrofluorocarbons (HFCs), Perfluorcarbons (PFCs) and Sulphur Hexafluoride (SF 6). More
specific instructions on the implementation of this standard are included in section B.


1.      GHG Accounting Principles
The following recommended principles for developing and reporting a corporate GHG emission
inventory are informed by ‘Generally Accepted Accounting Principles’ established for financial
accounting and reporting.

Consistency: Inventory and reported data should be prepared in such a way that valid year to year
comparisons can be made. Any changes in the basis of reporting should derive from continuous
improvement of inventory quality. Changes should be clearly stated and documented to allow
continued year to year comparison.

Completeness: The choice of boundaries and scope of the inventory should be appropriate for, and
representative of, the business, operation or activity. All material sources within the chosen scope
should be included in the inventory.

Materiality: All sources of emissions that are significant in terms of the overall level of emissions of
the company, within the chosen scope and boundaries of measurement and reporting, should be
included. Any materiality assumptions and criteria that are applied to the inventory should be
documented.

Accuracy: Care should be taken to ensure systematic errors are avoided, random errors are
minimized through effective controls and uncertainties are quantified as far as practicable. Use of
default factors should be a last resort, as their higher range of deviation makes it difficult to
demonstrate the results of an emissions reduction programme.

Transparency/Verifiability: The basis of the reported data should be clear and should state any
assumptions made and the methodologies used. Records should be kept to provide a clear audit trail.


2.      Inventory Boundaries
Establishing appropriate inventory boundaries and deciding what to report involves making choices
about how to allocate ownership and responsibility for GHG emissions.

2.1     Accounting for Direct and Indirect Emissions (Scope)
Direct GHG emissions are emissions from sources that are owned or controlled by the company, e.g.,
emissions from company-owned vehicles, stacks, manufacturing processes, vents, etc. Indirect GHG


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emissions are emissions caused by the company, but physically occurring from sites or operations
owned or controlled by another organization, e.g., imported electricity, employee travel on vehicles
not owned or controlled by the company, product transport in vehicles not owned or controlled by the
company.

In order to accommodate the needs of different types of companies and organizations and to support
different uses of GHG emissions data a 3-scope reporting framework has been established (Figure 1).



             Figure 1: Accounting for Direct & Indirect GHGs


                                                             Annual Emissions From Core
                                                                     Operations
                                                             Scope I Scope 2 Scope 3
                 What is included?                                               
                 On-site emissions, CO2                         X        X         X
                 On-site emissions, other GHGs, if any          X        X         X
                 Net emissions from energy imports and
                                                                         X         X
                 exports (usually grid electricity)
                 Emissions from business travel, product
                                                                                   X
                 transport, outsourcing of core-operations




Scope 1: Direct GHG emissions – Company-owned (physical) GHG emissions including emissions
         from manufacturing processes and from company-owned transportation.
Scope 2: (scope 1) + net emissions from energy imports and exports, for example, imported and
         exported electricity and steam.
Scope 3: (scope 2) + other indirect GHG emissions, for example, employee business travel and
         product transport in vehicles not owned by the company, outsourcing of core activities and
         off-site waste disposal/management activities. Companies reporting a scope 3 should list
         the activities/sources they have included in their inventory of these other indirect GHG
         emissions.

The scopes are additive in that they capture an increasing proportion of emissions, but they do not
represent a progressive implementation, nor do they infer relative importance. Indirect emissions from
energy imports/exports are separated from other types of indirect emissions because energy use is
often the most significant source of indirect emissions for many companies. Information on energy
usage is also likely to be relatively easy to obtain, and of interest to management. The choice of
scope is voluntary and will depend on both the nature of the company’s GHG sources as well as the
goals of the inventory. Companies should clearly state which scope or scopes they are reporting,
state their reasons for the choice, and report separate totals for each scope. Companies electing to
report a scope 2 inventory should also report a separate scope 1 inventory. Companies reporting a
scope 3 inventory should report separate scope 1 and 2 inventories. To ensure maximum flexibility
and clarity companies are encouraged to report against all three scopes.




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2.2     GHG Accounting when there is Shared Ownership (Ownership vs. Control)

Businesses are varied in their legal and operational structures - these include joint ventures,
subsidiaries, partnerships, collaborations, alliances and others. When there is shared ownership of the
GHG source, businesses should report for one or both of the following definitions of control:

                                                             1
Management Control: Emissions from operated facilities are reported as part of a consolidated
emissions statement. Management control will normally mean the operator of a facility, since the
operator drives the business process.

Equity Share: GHG emissions are reported according to a pro-rata equity ownership basis. (Note: the
share basis should be clearly defined).

Companies should clearly indicate which approach they have adopted and explain their choice. If a
company chooses to use both approaches, they should report separate inventories for each method.
In situations (e.g., joint ventures or partnerships) where the allocation of GHGs has already been
defined by a contractual arrangement, this is the preferred method of emissions allocation and the
company should defer to this for the purposes of allocating responsibility for those sources of GHGs
governed by the contractual arrangement.


2.3     Outsourcing

Outsourcing is the contracting out of core business activities to other businesses. Sources of GHG
emissions from outsourced activities that are both significant and core to business operations (e.g.,
transportation in a shipping company, drilling in an oil company, generator contracts for a power
company) should be included in the inventory as follows:

If equity share is held in the company that is undertaking the outsourced activity and the equity share
approach is used for consolidating emissions, the resulting GHGs should be included in the scope 1
inventory.

If the reporting company has effective management control over the outsourced activities and the
management control approach is used for consolidating emissions, the resulting GHGs should be
included in the scope 1 inventory.

If neither equity nor effective management control exists in the company undertaking the
outsourcing, the emissions should be included in scope 3 as indirect emissions.

GHG emissions from outsourced activities that are not core to the business (e.g., office services,
construction activities, accounting and human resource services, etc.) should not be included in the
core operations inventory.

Companies should disclose the assumptions they make in regard to outsourced activities and the basis
on which they are derived. When a multinational company makes an intra-company shift of production
that cross national boundaries these emissions will continue to be reported by the parent company and
no change is needed.

1
  The use of the term “facility” also includes: site, operating unit, mine, feedlot where cattle are raised,
forest, farm, manufacturing or assembly plant.

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3.       Corporate Baselines
A baseline is a datum against which to measure emissions performance over time – usually annual
emissions against a selected base year. Companies should choose a base year for which reliable data
is available and specify their reasons for choosing that particular year.

The baseline should be consolidated periodically to maintain comparability over time – if significant
structural changes occur because of mergers, acquisitions, divestitures or any other significant
structural change. Adjustments should be limited to transfers (or a cumulative set of transfers within the
accounting period) that are material, in terms of increasing or decreasing total GHG emissions.
Companies should clearly articulate their policy and document a reasoned case for any such
adjustments. No baseline adjustments should be made for organic growth or decline (production
changes by existing facilities).

Once a company or organization has chosen to adjust their baseline it should be approached in a
consistent manner, for example, it should adjust for both increases and decreases.


4.       Inventory Reporting
A public GHG inventory report should include the following information:

    Absolute emissions: data for all six greenhouse gases (CO2, CH4, N2O, HFCs, PFCs, SF6) and in
     CO2 equivalents, separately totaled for each chosen scope, with clearly labeled units (preferably
     metric tons);
    Inventory characteristics: the sources included in each scope, basis of reporting (ownership vs.
     control), baselines, if appropriate and reporting period);
    Description of any facilities and/or sources excluded from the inventory;
    Other relevant characteristics of the reporting company or organization, including a contact
     person and any sources of additional information;
    Summary of methodologies chosen to estimate emissions and a summary of any changes to
     methodology or reporting boundary since a previous report;
    If appropriate, relevant ratio indicators and comparative information from previous years (this is
     optional).

The GHG accounting principles listed earlier recommend reporting emissions data that is complete and
accurate. However, it is also recognised that to withhold data until there is certainty that they are 100
percent accurate and complete could lead to misrepresentation of the reporting company’s
environmental position. In addition, for certain sources and types of GHGs, achieving 100 percent
accuracy and completeness may be technically impossible at this time. The guidelines therefore
recommend that GHG emissions reports:

    Are based on the best data available at the time of publication, while being open about their
     limitations
    Openly communicate any discrepancies identified in subsequent years




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Part B: Greenhouse Gas Inventory and Reporting Guidance
This section provides guidance on applying the GHG inventory and reporting standard. It describes the
rationale for the choices provided in the standard and indicates when one choice may be more
appropriate than another. The guidance is divided into two parts. The first part addresses issues that
are usually decided and dealt with by a corporate headquarters. The second part gives guidance on
tasks that are usually relevant at the facility level, where data is gathered to establish an inventory.


Corporate Level Guidance

5.      Defining Your Inventory Goals
Ideally GHG inventories should be designed and built to provide information for a variety of users and
uses. In practice, many companies especially those reporting for the first time will have to make trade-
offs because of the limited resources available to create their inventory. Consequently, choices about
inventory priorities will need to be made. It is therefore, important that the scope and quality of the
inventory be designed according to the intended objective(s) of the inventory.

Box 1 describes inventory goals that are frequently listed by companies as reasons for compiling an
inventory. This list is not exhaustive – you may have other important goals for your inventory.

                                                                    Information for internal management
 Box 1: Potential Inventory Goals                                   is a goal that will be common to all
                                                                    companies and organizations.
 Internal Management
                                                                    Preparing an inventory will help to
  Setting targets, measuring and reporting progress
                                                                    assess the sources and magnitude of
  Identifying cost effective reduction opportunities
                                                                    greenhouse gas emissions, and
  Developing process/product innovations
  Internal/external benchmarking                                   provide a valuable planning tool for
                                                                    developing mitigation strategies, or
 Emissions Markets & Policy Tools                                   assessing liabilities and opportunities
  Buying or selling emissions credits                              under different climate policy
  Baseline protection                                              scenarios.
  Cap & trade allowance trading programs
  Taxes
                                                                    In practice, most companies have
                                                                    multiple inventory goals. It therefore
 Reporting to Governments
                                                                    makes sense to design the inventory
  Reporting under national or local regulations
                                                                    from the outset to eventually be able
  Directives
                                                                    to provide information for a variety of
 Public Reporting                                                   different uses and users. This entails
  Stakeholder reporting                                            collecting information in ways that
  Voluntary programs.                                              can be subsequently aggregated and
                                                                    disaggregated for different scopes,
 Eco-labelling & Certification                                      corporate boundaries and business
  Marketing                                                        scales, e.g., state, country, facility,
  Climate Neutral services, products, companies
                                                                    business unit and company.
 

Initially, begin with a simple assessment of the main sources of greenhouse gas emissions. This
information will be useful internally for identifying reduction opportunities and planning future emissions
management strategies. It may also be suffice for including in corporate environmental reports. Over

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time, the completeness and quality of the inventory can be improved. This may be important if the
emissions inventories will increasingly be used to influence the behaviour of companies in the market,
or for participating in GHG markets.


6.      Establishing Inventory Boundaries
A basic question that a corporation must address is how to define the boundaries of their GHG
inventory. It involves making choices about how to allocate ownership and responsibility for GHG
emissions. To improve consistency, transparency, and comparability, while accommodating the needs
of different types of organizations, the collaboration developed a structured, but flexible set of choices
for defining inventory boundaries.

Your inventory goals as well as the nature of emissions sources should inform the selection of
appropriate inventory boundaries. Drawing narrow boundaries may simplify the task of estimating
GHGs, but could also reduce the opportunities for identifying GHG reductions. When operations span
more than one country, companies should aim to report globally on their GHG emissions. For some
audiences it may be helpful to provide a separate break down of emissions by countries.

6.1     Accounting for Direct and Indirect Emissions (Scope)
6.1.1. Scopes and Intended Use of Inventory Data: Regulatory and market-based programs tend
to focus exclusively on direct emissions sources, although there are exceptions, e.g. energy efficiency
performance standards. Similarly, companies intending to use their inventory for participation in a cap
and trade system will need to produce a rigorous inventory of direct emissions. However, it would be
inappropriate for a company with significant sources of indirect emissions to report only its direct GHG
emissions. To identify emission liabilities and reduction opportunities, and for public reporting and eco-
certification, it is important to have information on the total greenhouse impact of your operations, i.e.
the inventory should include direct and indirect emissions. Table 1 summarizes the advantages and
disadvantages of each of the 3 inventory scopes.




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                                                   Table 1

    Boundary Approach             Advantages                             Disadvantages

    Scope 1                          Simplifies data collation and         For many companies this
    Direct GHG emissions              verification                           will be an incomplete
    only                             Relevant to compliance                 picture of their overall GHG
                                      regimes and carbon markets             footprint and the potential
                                      (e.g., emissions trading, credit       opportunities for reductions
                                      for early action)
                                     Avoids double counting


    Scope 2                          Truer ‘footprint’ of activities       Double counting
    Direct plus energy related       Upstream energy imports –             Accuracy of electricity
    indirect GHG emissions,           are a major source of                  emissions factors may be
    e.g., imported and                emissions for most companies           variable.
    exported electricity and         Relevant to management/               Data verification may be
    steam                             business decisions and                 more problematic
                                      strategies
                                     Data availability on energy use


    Scope 3                          Other indirect sources may be         Double counting
    Scope 2 plus other indirect       significant for some                  Data access & verification
    GHG emissions, e.g.,              companies                             Because this is not a life
    employee business travel,        Relevance to internal                  cycle module the number of
    product transport in              management and business                indirect GHG sources are
    vehicles not owned by the         decisions                              limited
    reporting company, and           Greater range of possibilities        Lack of accurate emissions
    off-site waste disposal           for GHG reductions                     factors


6.1.2. Double Counting: Concern is often expressed that accounting for indirect emissions –
emissions not physically occurring within a company’s boundary – will lead to double counting when
two different reporting entities include the same emissions in their respective inventories. Whether or
not double counting occurs depends on how consistently direct and indirect emissions are reported.
Whether or not double counting matters, depends on how the reported information is used.

     It is important to avoid double counting in national inventories. However, determination of national
      inventories is mostly a top down exercise using national activity data, rather than data from specific
      facilities or companies.
     Compliance regimes are more likely to focus on the ‘point of release’ of emissions and be more
      concerned about a company’s direct emissions.
     For participating in carbon markets, it would not be acceptable for two organizations to claim
      ownership of the same piece of commodity. However, it is not necessary to eliminate double
      counting for all uses of inventory information. In terms of identifying reduction opportunities and
      creating incentives, using the ‘point of control’ will be more effective at motivating reductions than
      the ‘point of release’.




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                           Box 2: Tracking Life Cycle GHG Emissions

    The collaboration recognizes that Scope 3 does not fully encompass all possible sources
    of indirect emissions. A wider set of GHG impacts cuts across a range of social actors. A
    Product Life-Cycle Task Force has been convened within the collaboration to explore the
    need and feasibility of developing a separate product life cycle module to supplement the
    core operations module. The product life cycle module would complement the core
    operations module and address GHG emissions throughout the life cycle of the product,
    including emissions from consumer use of finished products, embedded energy and GHG
    from raw materials, and other impacts associated with the value chain from consumer use
    of finished products.


Companies may want to report on other sources of indirect emissions not included in scope 3, such
as emissions from employee commuting. For comparability purposes these emissions should be
reported separately from the three scopes. The collaboration is exploring the feasibility of developing a
supplementary module to address other sources of indirect emissions currently not included in scope 3
(see Box 2).

6.1.3. Accounting for GHG reductions that are outside a company’s three scopes: there may be
instances when a company can take action to reduce GHG emissions that are not included in any of
their inventory’s three scopes, examples include:

     Substituting fossil fuel by waste derived fuel that might otherwise be landfilled or incinerated
      without energy recovery. In this case the substitution may have no direct effect on (or even
      increase) the company’s own GHG inventory, but result in savings elsewhere;
     Substituting mineral by-products and waste for limestone in the cement production process;
     Introducing an employee commuting ride share program;
     Improvements in energy efficiency of product performance, products that reduce energy usage;
     Purchasing a carbon offset project.

These reductions should not be included in your inventory report under this standard, but may be
reported separately. The rationale for their exclusion is three-fold. First, there may be significant
differences in the quality and integrity of these GHG estimates compared with emissions from a
company’s core operations. Second, the corporate inventory module is not a life cycle accounting
standard -- a separate module is being developed by the collaboration for this purpose. Finally, the
inclusion of such reduction sources would significantly increase the complexity of the inventory
accounting system, as issues like additionality, ownership, and accounting for the converse (emissions
increases) are addressed.


6.2       GHG Accounting When There is Shared Ownership

Companies may choose one or more of the following approaches for defining inventory and reporting
boundaries when there is shared ownership of GHG sources:

Management control: The rationale behind the management control approach is that the operator
usually has effective management control and controls the business process. The operator also has
access to the GHG emissions data. This approach is simple, accurate within the limits of its application,

                                                                                                            16
and consistent with current regulatory structures. Since the operator has ready access to data, it
presents a practical approach for many companies, especially with respect to data collection and
verification.

Pro-rata equity share (ownership): A pro-rata approach based on equity share, as with financial
accounting, is simple and logical with respect to ownership and economic activity. The guiding principle
is that GHG emissions should be apportioned relative to the benefits accrued through ownership or
other contractual agreements. This is analogous to the concept of the matching principle in financial
markets where costs are recorded by the entity receiving the benefit of the associated revenues.

Ownership may not always be synonymous with control because in some instances a minority owner
may be the operator. In some cases it may be more difficult to take actions to reduce emissions or
obtain and verify data from an unwilling operator. However, influencing other joint venture partners and
the operator to collect and provide information on GHG emissions could draw attention to, and benefit
other areas of operational performance. Over time, as more and more entities report GHG emissions,
barriers to reporting equity share are likely to reduce and reporting may naturally converge towards an
equity share approach.

The choice of approach will depend on the goals of the inventory. Management control may be the
most appropriate choice when reporting information to regulators, since their focus is usually on control
rather than ownership. Equity share may be more appropriate for audiences that are interested in
relating emissions to a firm’s economic activity, such as the financial community. If both approaches
are used, companies should report separate inventories for each method.

Contractual considerations: When there is a specific agreement or contractual arrangement
governing the allocation of GHG emissions in shared ownership arrangements this is the preferred
allocation method. In the majority of cases however, the allocation of GHG emissions is not covered by
contractual considerations. Table 2 summarizes the main advantages and disadvantages of each
approach.

                                                  Table 2
Boundary Approach                        Advantages                             Disadvantages

Management control                          Utility – information especially      Establishing who has
Report emissions when effective              relevant to regulators                 effective management
management control is exercised             Access to data is likely to be         control may be difficult
(At the facility level this is usually       easier
the holder of the operating
permit)


Ownership                                   Simple to apply & understand          May be problematic for
Pro-rata equity share                       More fully relates GHGs to one’s       minority shareholders (e.g.,
Report emissions in proportion to            business activity                      less than 20%)
the share of equity                         Consistent with financial             Data access
                                             accounting practices                  Data verification


Contractual considerations                  GHG emissions becomes a cost          Data verification
                                             factor                                Opportunity exists for
                                                                                    gaming


                                                                                                               17
6.3     Outsourcing

Outsourcing refers to contracting out business activities to other firms. Outsourcing on a significant
scale can create the illusion of reductions in a company’s GHG inventory when in reality they have not
occurred. This raises an important question. If a company outsources its operations, does it transfer
accountability for the associated GHG emissions to the other firm? Under financial accounting
standards, when a firm’s products or services are outsourced they are removed from a company’s
assets and are treated similarly to products and services that have been bought and sold in
consolidated financial statements. However, for GHG emissions the question cannot be readily
answered in a theoretical way.

In reality emissions simply move along a supply chain. Companies often exercise considerable control
over contracted out activities, especially if they are central to their core business activities (e.g. an
automotive manufacturer that outsources its engine manufacture may provide precise instructions to
the contractor on how the engine should be made and what materials should be used). In other cases
they do not.

Some concern has been expressed that the requirement to include emissions from outsourced
activities that are material and core to the business would impose a significant reporting burden on
some companies. The rationale for including emissions from these outsourced activities is two-fold.
Firstly, to avoid the situation where companies show paper reductions of GHGs, simply by outsourcing
major sources of emissions. Secondly, to encourage companies to look for reduction opportunities
beyond their fence lines. Table 3 summarizes the advantages and disadvantages of each approach.

                                                Table 3

 Approach                      Advantages                             Disadvantages

 Emissions from                    More representative of               May be areas of confidential
 outsourced activities              business activity                     business information
 included                          Facilitates activity based           May result in double
                                    comparability                         counting
                                                                         Access to data and data
                                                                          verification.


 Emissions from                    Simplifies data collection and       Outsourcing may create
 outsourced activities not          verification                          “paper reductions” of GHGs
 included                                                                Compromises comparability


Sources of GHG emissions from outsourced activities that are both significant and core to business
operations (e.g., transportation in a shipping company, drilling in an oil company) should be included in
the inventory as follows:

If equity share is held in the company that is undertaking the outsourced activity and the equity share
approach is used for consolidating emissions, the resulting GHGs should be included in the scope 1
inventory.




                                                                                                            18
If the reporting company has effective management control over the outsourced activities and the
management control approach is used for consolidating emissions, the resulting GHGs should be
included in the scope 1 inventory.

If neither equity nor effective management control exists in the company undertaking the
outsourcing, the emissions should be included in scope 3 as indirect emissions.

GHG emissions from outsourced activities that are not core to the business (e.g., office services,
construction activities, accounting and human resource services, etc.) should not be included in the
core operations inventory.

Companies should disclose the assumptions they make in regard to outsourced activities and the basis
on which they are derived. When a multinational company makes an intra-company shift of production
that crosses national boundaries these emissions will continue to be reported by the parent company
and no change is needed.


7.      Baselines
A baseline is a reference case or datum against which to measure emissions performance over time –
usually annual emissions for a selected base year. If a business creates a baseline for GHG emissions
and then measures future emissions performance against this, a number of variables can account for
the change in emissions level, e.g., organic growth, outsourcing, mergers, acquisitions, divestitures,
changes in production, and product portfolio. Globalization and competition means that industry is
going through major changes and consolidation in many key sectors, particularly the energy and
electric power industries. This makes the process of tracking progress over time a dynamic one, which
can be a challenging prospect. This is especially important when companies have publicly committed to
targets based on absolute emissions in a historical base year.

Three approaches to adjusting baselines to maintain their integrity and validity were initially considered
by the collaboration:

Baselines set - no adjustment (not adopted): This would make accounting simple and it is similar to
the approach adopted under the Kyoto Protocol, where 1990 is defined as the base year. However, it
would lead to somewhat irrelevant performance measurement, since it would not take into account the
dynamics of growth, decline and renewal of companies and structural changes in industry.

Adjustment for organic growth -- changes in production levels (not adopted): This was not
considered a condition for baseline adjustment since decoupling organic growth from emissions is a
key aspect of performance.

Adjustment for structural changes (adopted): This adds some complexity to the accounting
process, but it is better aligned with financial accounting practices. It provides a meaningful foundation
for measuring performance over time and it is consistent with approaches such as eco-efficiency
metrics. Since it adjusts primarily for transfer of emissions ownership occurring through acquisitions
and divestitures, it does not distort performance with respect to absolute emissions. This was the
approach adopted by the standard.




                                                                                                             19
The following examples provide an illustration of how the standard should be applied:

    When the sale of an operating unit or business results in a material change in a company’s total
     GHG emissions, the baseline may be lowered by the percentage change in emissions. Generally
     accepted accounting principles suggest a value of five to ten percent as a guideline for defining
     materiality.
    When the acquisition of an existing business or operating unit results in a material increase in the
     company’s total GHG emissions the baseline may be increased by the percentage change in
     emissions.
    When an operating unit is shut down, but not sold there will be no adjustment to the baseline.
    For incremental production increases, such as opening a new facility, the baseline should not be
     adjusted.


8.       Ratio Indicators
There are two principal aspects of interest to management and stakeholders. One concerns the
‘footprint’ of a company or organization – that is the level of absolute GHG emissions. The other
concerns the performance in reducing GHG emissions, measured in ratio indicators. Ratio indicators
provide information on the efficiency of an activity, on the intensity of an impact or on the quality of a
value or achievement. Ratios facilitate comparison between similar products or processes. They can
relate performance and achievements of one firm, business unit or company to another for better
understanding and interpretation of these achievements. Ratio indicators provide information on the
efficiency of an activity, on the intensity of an impact or on the quality of a value or achievement. There
are various possibilities to form relationships between different data, including:

    looking at performance over time, i.e. relating figures from different years, and in relation to targets
     and base years;
    forming a relation between figures from different categories or aspects, e.g. relating the value that
     an action can provide to its impact on society or on the environment;
    normalizing figures with the size of the business or the operation in order to make them better
     comparable, i.e. bringing impact of differently sized businesses to the same scale.

Corporations should form ratios with their performance data that make sense for their business and
support their decision-making. They should select ratios for external reporting that permit a better
understanding and interpretation of their performance to their stakeholders. Corporations should think
about what ratio indicators could best capture the benefits and impacts of their business, i.e. its
operations, its products and its effects in the marketplace and in the entire economy. Some examples
of different ratio indicators are provided below:

Productivity/Efficiency Ratios: Productivity/efficiency ratios express the value or achievement of a
business related to its GHG impact. Increasing efficiency ratios reflect a positive performance
improvement. Examples of productivity/efficiency ratios include resource productivity (e.g. sales per
GHG); and process eco-efficiency (e.g. production volume per amount of GHGs, net sales per GHG
emissions).

Intensity Ratios: Intensity ratios express GHG impact per unit of activity or unit of value. A declining
intensity ratio reflects a positive performance improvement. Many companies historically tracked
environmental performance with intensity ratios. Intensity ratios are often called ‘normalized’


                                                                                                                20
environmental impact data. Examples of intensity ratios include: emission intensity (e.g. tons of CO 2
emissions per electricity generated); waste intensity (e.g. amount of emissions per production volume)
and resource intensity (e.g. GHG emissions per function or per service)

Percentages: A percentage indicator is a ratio between two similar issues (with the same physical unit
in numerator and denominator). Examples of percentages that can be meaningful for use in
performance reports, include: input/output ratios (e.g. process yields).

The following is a short list of further sources of information on ratio indicators, which are related to
corporate sustainability performance. It is certainly not complete and also not well balanced, as the
examples are all on eco-efficiency or environmental issues only:

World Business Council for Sustainable Development (WBCSD): Measuring Eco-efficiency: A
Guide to Reporting Company Performance (http://www.wbcsd.org)
Canadian National Roundtable for Economy and Ecology (NRTEE): Energy and Materials Intensity
Indicators
European Environment Agency (EEA): Resource Productivity Concept
Friedrich Schmidt-Bleek and Wuppertal Institute: The MIPS Concept (materials input per service
intensity)


9.        Inventory Quality & Credibility
When communicating the results of the GHG inventory with external stakeholders it may be helpful to
state the GHG accounting principles that guided the inventory. The principles are useful to those who
design and evaluate corporate GHG inventories and also serve as criteria for judging the quality of the
reported information.

9.1       Importance of Uncertainty in GHG Emissions Inventories

Emissions totals reported by companies are usually point estimates with implicit or explicit confidence
intervals suggesting a range. For example, reported total emissions of 125,000 tons of CO 2 equivalent
could be more accurately phrased as “total emissions likely to be between 115,000 and 135,000 tons,”
or “total emissions are 125,000 tons plus or minus 10%”. The degree of uncertainty will vary widely for
different emissions estimates, depending upon the emission source, the calculation method, and the
level of effort expended to gather and validate data.

There are several reasons why companies should gauge the degree of uncertainty involved in their
inventories:

         to temper their decisions and conclusions with appropriate caution when numbers are “soft”
         to identify opportunities to improve accuracy of their inventory;
         to provide defensible estimates of relative certainty when and if these are required by
          government regulation, emissions trading plans, or eco-labelling programs.

For purposes of public reporting, it may be sufficient to document inventory assumptions and note
major sources of uncertainty. Other corporate purposes may require calculation and reporting of
relative uncertainty. For cap and trade systems, participation in the market may be limited to those
firms that can meet minimum inventory and baseline standards because performance against a target
is impossible to gauge if either the baseline or inventory is unreliable. Alternatively, reductions achieved

                                                                                                               21
by those with more uncertain inventories may be heavily discounted in credit based trading. Eco-
certification and labeling may demand a higher accuracy than general stakeholder reporting because
the success of such programs depends on the ability to reliably differentiate between smaller changes
in environmental performance, and between companies competing in the same markets.

9.2      Credibility

The credibility of a GHG inventory (i.e. reported information about GHGs) is a measure of the extent to
which it meets known expectations of users of the inventory – including expectations about its
accuracy, reliability, completeness, and consistency. In other words, to be “credible” a GHG Inventory
must be believed by its users to have been drawn up and reported in accordance with the inventory
measurement and reporting principles.

Options for achieving the desired level of credibility: The range of options for achieving the desired
level of credibility includes:

     using appropriate skills and systems to design and implement GHG measuring and reporting
      processes, such that management and boards of directors are confident in them;
     having periodic internal audits and reviews carried out on measurement and reporting processes
      and systems;
     having full-scale independent external audits or verification of reported inventories (which will
      necessitate examination of underlying systems and processes). Independent external audits or
      verifications may rely to an appropriate extent on the quality and scope of any internal auditing
      carried out.

The choice among the various options and approaches depends upon the expectations of the users of
the reported inventory information.

Elements and qualities of verification that enhance credibility: The extent to which verification may
enhance credibility depends in turn on certain attributes of the verification process and provider. The
verification process is more effective and credible when conducted in accordance with a widely
accepted and appropriate set of standards guiding such matters as the:

     scope of examination;
     nature and extent of evidence to be obtained;
     extent of reliance on controls in measurement and recording processes and data systems;
     reliance on internal auditing, and the form and content of the verifier’s report.

The suitability of the verifier’s expertise and qualifications for conducting an inventory verification is an
important consideration, as is the relationship of the verifier with the reporting entity and subject matter
(inventory and underlying systems) – independence and objectivity are essential qualities for optimal
credibility in external verification.

Transparency/Verifiability: Without this principle being applied, i.e. guaranteeing the existence,
quality and retention of documentation so as to create an audit trail of how the inventory was compiled,
it will not be possible for either internal or independent external verifiers to carry out an adequate
examination for the purpose of providing assurance about (i.e. add credibility to) the reported inventory.
When designing and implementing the processes and procedures for creating a GHG inventory,
reporting entities should thus pay careful attention to the transparency/verifiability principle. It is also

                                                                                                                22
important to pay attention to how the presentation of reported GHG information might influence its
interpretation by users/decision makers. As an example, if your corporate GHG inventory has reduced
relative to a previous year because of a divestiture, it will be helpful to note this in your report. This is
analogous to the financial accounting concept of material misstatement.


10.     Roll-up (aggregation) of Facility Information to Corporate Level

In addition to calculating greenhouse gas emissions for specific activities, many corporations will have
to gather and summarise data from multiple sites, possibly in different countries and different business
divisions. This data gathering effort may be consistent with or may be added to existing mechanisms
for gathering and summarising performance data. A corporate plan must address the questions of
what data to ask of each site, and how to collect this data.

What data to collect from each site?

Figure 2 illustrates two different approaches for rolling up CO 2 emissions from the combustion of fuel
(which for most small and medium sized enterprises will be their major source of GHGs). The
difference between these approaches is where the emissions calculation (multiplication times factors)
occurs. Should individual sites be asked to calculate and report their global warming emissions? Or
should they merely report totals for fuels and transport activities and the occasional process emission --
leaving corporate staff to complete the calculations?

                        Figure 2
                                                            These two approaches should produce the
 Corporate           X factors =       Corporate Total      same result and they are not mutually
 Total of Activities                   Emissions            exclusive. Thus companies desiring a
                                                            consistency check on site-level calculations
                                                            can follow both approaches and compare the
        add                                   add
                                                            results. This means collecting from sites:
      across                                across
       sites                                 sites          activity totals, emissions totals, and any site-
                                                            specific emissions factors sites used in their
                                                            calculations.
 Site Activities    X factors =        Site Emissions
                                                             Asking facilities to calculate emissions may
                                                             increase their awareness and understanding.
It also could reduce the amount of detail that must be transmitted to the corporate level. However, it
could also lead to resistance, higher training needs, more calculation errors, and a greater need for
auditing of calculations. Corporations have taken different approaches. BP gives sites a calculation
protocol, asks them to calculate and report their total greenhouse gas emissions, and follows up with
audits to ensure calculations are correct and documented. United Technologies Corporation asks its
sites to report fuel and travel details, leaving the factors and calculations to corporate staff.

Yes answers to the following questions support a decision to ask site-level staff to calculate emissions:

    1) Do emissions from process require mass balance calculations or other types of information,
       which are not standard across a number of facilities?
    2) Are there resources to train facility staff to conduct these calculations and to audit them?
    3) Is a user-friendly reporting tool available to simplify the calculation task for site-level staff?




                                                                                                                23
If facilities calculate and report their own emissions, they should also submit detail on the net electricity
use and the factors they used to estimate associated CO2 equivalent emissions.

To maximize value and minimize reporting burdens, some companies use both approaches. A small
number of large, complex sites with process emissions are asked to calculate their emissions at the
site level, and these calculations are carefully reviewed. Larger numbers of small sites with fairly
uniform emissions from standard sources are only asked to report fuel use and travel activity. Then the
corporate database or the reporting tool calculates total emissions for each of these standard activities,
so that site-level managers can understand where their emissions are coming from.

Even when facilities do calculate their own emissions, corporate may still wish to roll-up data on fuel
and electricity use and travel, to double-check calculations and to better understand the opportunities
for emissions reductions. Corporate staff should also verify that facility-reported data is based on
approved reporting periods, units, and inventory boundaries.
.
How to collect this data?
Ideally, corporations will integrate GHG reporting with existing reporting tools and processes, and take
advantage of any relevant data already reported by sites to division or corporate offices. In practice,
however, many corporations handle GHG in a separate reporting process, at least initially.

The method chosen for sites to report data will depend upon information and communication
infrastructure (i.e., how easy it is for data to be added to a corporate database), and also upon the
amount of detail that corporate wants reported from sites. Information roll-up tools could include:

    1) Secure databases available over the company intranet or internet, for direct entry by sites of
       their activity data and/or emissions results
    2) spreadsheet templates filled out and e-mailed to a corporate or division office where their data
       is manually or automatically extracted
    3) paper reporting forms faxed to a corporate or division office where data is re-entered in a
       corporate database (this method is likely to increase the likelihood of error).




                                                                                                                24
Facility Level Guidance

12.     Getting Started: Identifying GHG Sources
At the outset, entities should undertake an exercise to develop a first pass estimate of all direct and
indirect sources of GHG emissions from their facilities. Often companies are surprised to realize that
significant amounts of emissions come from sources not initially apparent (Box 3).



                                                     Box 3
Back in 1996, the team responsible for setting boundary conditions for UTC's new Natural Resource
Conservation, Energy and Water Use Reporting program met to decide what sources of energy were
going to be included in the program's annual report of energy consumption. The team decided to
include jet fuel in the annual report; jet fuel was used by a number of UTC divisions for engine and
flight hardware testing and test firing. Although the amount of jet fuel used in any given year was
subject to wide variability due to changing test schedules, the total amount consumed in an average
year was not expected to be large. Jet fuel consumption reports, however, proved that UTC’s initial
belief was wrong. Jet fuel has accounted for between 9.0% and 13% of the corporation's total annual
use of energy since the program commenced. Had UTC not included the use of jet fuel in annual data
collection efforts, a very significant energy source would have been overlooked.



Table 4 provides a sector-by-sector overview on major and secondary emissions sources. When
developing an emissions inventory for the first time, it might be easier to first concentrate on the major
emissions sources by developing a priority list.




                                                                                                             25
                                                  Table 4
Sector                  Major emissions sources                   Secondary emissions sources

Metal production            -                                         -
Aluminium                   -   Stationary combustion CO2             -   Stationary combustion CH4 and
                                emissions (purchase of energy,            N2O emissions (purchase of
                                generation of energy on-site)             energy, generation of energy
                            -   Process related CO2 emissions             on-site)
                            -   Process related PFC emissions         -   Transportation
                                                                      -   HFC use (air-conditioning)
Other non ferrous
metals
Iron and steel

Chemicals
Nitric acid
production
Ammonia                 -   Stationary combustion CO2 emissions   -   Stationary combustion CH4 and N2O
Production                  (purchase of energy, generation of        emissions (purchase of energy,
                            energy on-site)                           generation of energy on-site)
                        -   Process related CH4 emissions         -   Transportation
                                                                  -   HFC use (air-conditioning)
Adipic acid
Production
Urea
Caprolactum
Carbides
Mineral products
Cement
Lime
Energy industry
Oil and gas industry
Coal mining
Other
Pulp and paper
Food and drink
production
HFC, PFC, SF6,
HCFC-22 production
Retailing               -   Transportation                        Stationary combustion CH4 and N2O
                        -   Stationary combustion CO2 emissions   emissions
Food retailing          -   Transportation                        -    Stationary combustion CH4 and N2O
                        -   Stationary combustion CO2 emissions        emissions (refrigeration)
                            (refrigeration)
                        -   HFC use (refrigeration)
Water service           -   Waste CH4 emissions (waste water)     -   Stationary combustion CH4 and N2O
company                 -   Stationary combustion CO2 emissions       emissions (premises)
Service sector/         -   Stationary combustion CO2 emissions   -   Stationary combustion CH4 and N2O
financial institution       (premises)                                emissions (premises)
                        -   Transportation (employee business
                            travel)
                        -   HFC use (air-conditioning)

                                                                                                           26
13.     Reporting Information to the Corporate Level
The following guidance is separated into two parts. Section 13.1 guides facilities that are reporting
GHG emissions to the corporate level. Section 13.2 is for facilities that are reporting activity data to the
corporate level (refer to section 10 on roll up of information for an explanation on these two
approaches).

13.1    Facilities Reporting Emissions to the Corporate level

For consistency of data recording and transparency/verifiability, it is recommended that facilities and
sites report the following information to the corporate level each year. Data records should be
maintained for a number of years to allow cross checks.

   Absolute emissions data for all six greenhouse gases (CO2, CH4, N2O, HFCs, PFCs, SF6)
   Absolute emissions in CO2 equivalents
   List of any sources excluded from the inventory and justification for their exclusion, list of sources
    considered outside the scope of reporting and justification for their inclusion
   Methodologies chosen to calculate the emissions, details on any data references used during
    calculation, plus details of changes to methodology used since last data submission (where
    applicable)
   When standard factors are used these can be referenced. Where different and site-specific factors
    are used, these should be described. It is especially important to describe how factors are
    selected for electricity use
   Clear records of calculations undertaken to derive emissions data
   Relevant ratio indicators so that changes to emissions year on year can be judged against these
    factors
   Inventory quality
   Reporting period
   Supporting text on annual performances as defined below

Supporting text: Besides reporting emissions data, each facility should provide some background
information, covering the following issues:

   Describe and explain major changes (including acquisition, divestiture or closure) compared with
    previous years
   Detail any changes in emissions estimation methodology where this would create numbers different from
    those which would be expected using the previous methodology
   Describe progress towards any business targets
   Describe and explain trends seen in the data
   Provide any information on emission mitigation measures that helps put data or targets into context




                                                                                                               27
13.2    Facilities Reporting Activity Data to the Corporate Level

For consistency of data recording and transparency/verifiability, it is recommended that facilities and
sites report the following information to the corporate level each year. Data records should be
maintained for a number of years to allow cross checks.

   Fuel use data (electricity, natural gas, diesel, gasoline, coal, wood, solar, other fuels)
   Activity data (passenger miles (auto), passenger miles (train), passenger miles (navigation),
    passenger miles (airplane), freight (road), freight (train), freight (navigation), freight (air), waste
    landfilled, relevant activity data for any process emissions)
   List of any sources excluded from the inventory and justification for their exclusion, list of sources
    considered outside the scope of reporting and justification for their inclusion
   Relevant ratio indicators so that changes to emissions year on year can be judged against these
    factors
   Reporting period
   Supporting text on annual performance as defined below

Supporting text: Besides reporting activity data, each facility should provide some background
information, covering the following issues:

   Describe and explain major changes (including acquisition, divestiture or closure) compared with
    previous years
   Describe progress towards any business targets
   Describe and explain trends seen in the data


14.     Guidance for Measuring and Estimating Emissions Data
This section outlines suggested measurement approaches for different kinds of emission sources. The
cross sector and sector-specific guidelines provided in the ‘Tools’ part of this document are based on
these suggested approaches. The methodologies outlined in this section do not represent the only
possible way to measure emissions data and the guidelines encourage companies to use approaches
most appropriate to the local conditions. Companies or organizations that choose not to follow the
approaches outlined should clearly state the alternative methodology used and explain the
assumptions behind the preferred methodology.


14.1    Stationary (Non-transport) Combustion of Fossil Fuel

The amount of CO2 emitted is in principal independent of the equipment and depends only on the
quantity and quality of the fuel fired. However, a small fraction of the carbon is not emitted but remains
as unoxidized carbon as ash or soot, and this fraction is determined by the equipment used. N 2O and
CH4 emissions vary significantly with the type of fuel and equipment used.

CO2 emissions can be measured by using energy data or by using mass data. The choice of method
depends on the information available for input. N2O and CH4 emissions can only be measured by
applying the approach based on energy data.

CO2, N2O and CH4 emissions - using energy data: Each type of fuel consumed within the assessment
period is converted to an equivalent energy input in GJ using net calorific values of the fuel. The CO 2


                                                                                                              28
emissions are then calculated by multiplying the total energy input for each fuel type by a CO 2 emission
factor for that fuel. The emission factor should be calculated based on actual fuel properties. Where
fuel property data is not available, default factors should be used. However, default factors of any kind
should only be used where fuel property data are not available, and in preference to reporting no data.
N2O and CH4 emissions are calculated by multiplying the total energy input for each fuel type by N 2O
and CH4 emissions factors specific to the type of technology and fuel used.

CO2 emissions - using mass data: CO2 emissions are calculated by multiplying the mass of fuel burnt
by the carbon content of the fuel burnt.

Indirect emissions account for the import or export of energy (electricity and steam) across the
boundary of the reporting facility. The carbon content of electricity varies with season, time of day and
supplier, and the evolution of cross-border energy markets is making it difficult to determine the most
appropriate emissions factor to use. Several options for selecting an electricity emissions factor are
listed in order of preference below. Accuracy will decrease as you move from option 1 to option 3.

1. If electricity suppliers can provide an emissions factor this is the preferred choice. This is usually an
   average factor (CO2/kWh) derived from annual totals of fuels consumed. Alternatively, companies
   may decide to work with suppliers to develop an emissions factor that more closely matches the
   time of use pattern, actual fuel fired and technology employed by the generator.

2. Use a default emissions factor that has been published by the government in the country where the
   facility is located. Government statistics may be aggregated by region or state.

3. Use the appropriate national average factor for the entire country’s grid. Information on CO2 per
   kWh for Annex I countries (1988-1998) is provided in the guidelines on stationary combustion.

14.2    Transportation

CO2, N2O and CH4 are emitted as a result of burning fuels, combustible gases. and residues where the
main purpose is the generation of heat and power. The amount of CO 2 emitted is in principal
independent of the equipment and depends only on the quantity and quality of the fuel fired. However,
a certain fraction of the carbon is not emitted but remains as unoxidized carbon as ash or soot, and this
fraction is determined by the equipment used. The amount of N2O and CH4 emissions varies
significantly with the type of fuel and equipment used.

For some categories of mobile sources, it is possible to apply a top-down and a bottom-up approach for
inventorying emissions. Top-down approaches use highly aggregated data, such as total fuel use, and
a single emission factor. Bottom-up approaches use activity data that is disaggregated by vehicle or
aircraft type, and apply emission factors that are specific to those narrower categories of technologies.

Where both top-down and bottom-up approaches are available, the top-down approach is always
recommended for estimating direct emissions of CO2, and the bottom-up method is recommended for
estimating direct emissions of N2O and CH4. A top-down approach is recommended for CO2 because
CO2 emissions depend almost exclusively on the carbon content of the fuel. By contrast, N 2O and CH4
emissions vary depending on the combustion process, the control technologies in place, and operating
conditions. In most cases, the methods for estimating indirect emissions of all gases are top-down
methods because it is likely that detailed data on vehicle types will not be available for sources that a
company neither owns nor operates. However, if it is possible to obtain such data and indirect

                                                                                                               29
emissions from mobile sources comprise a significant portion of the inventory, it is recommended that
the bottom-up approach be used to estimate indirect as well as direct emissions of N 2O and CH4.

If mobile sources comprise a significant source of a company’s direct emissions, it is recommended to
compile custom emission factors that accurately reflect the specific technologies that are owned or
operated and their actual operation and maintenance. This would represent the most accurate
approach if reliable, technology-specific emission parameters are available or can be developed. (For
example, USEPA or California certification standard should be used for estimating N2O emissions from
US vehicles.) Similarly, if indirect emissions from mobile sources comprise a significant portion of a
company’s inventory, it is recommended to coordinate with the relevant service provider(s) to obtain
more accurate information on emissions from their vehicles.

14.2.1. Indirect Emissions

Table 5 shows how emissions from mobile sources should be allocated among the scopes of direct and
indirect emissions, depending on whether effective management control or ownership is selected as
the criterion for delineating the corporate boundary. Corporate boundary criteria should be applied
consistently across categories of mobile sources that are included in a company’s inventory.

                                                          Table 5
 Corporate       Direct (Scope I)       Indirect (Scope II)   Indirect (Scope III)                          Optional
 Boundary                                                                                                   (in addition to
 Criterion                                                                                                  I, II, and III)
 Effective            emissions from       emissions from          emissions from product transport in          emissions
 management        all vehicles and       electricity             vehicles not operated by the company*        from employee
 control           other mobile           purchased to               emissions from business travel in        commuting
                   sources that are       operate railways        vehicles not operated by the company*
                   operated and           or vehicles                emissions from other non-operated
                   maintained by the      operated by the         mobile sources used to provide services
                   company                company                 to the company
 Ownership            emissions from       emissions from          emissions from product transport in         emissions
                   all vehicles and       electricity             vehicles not owned by the company*            from employee
                   other mobile           purchased to               emissions from business travel in         commuting
                   sources owned          operate railways        vehicles not owned by the company*
                   by the company         or vehicles owned          emissions from other non-owned
                                          by the company          mobile sources used to provide services
                                                                  to the company

* Emissions from leased or employee-owned and maintained vehicles that are used for business purposes should be included if
this is a significant source.


Where vehicles are used by many companies simultaneously, the share of the vehicles’ energy use
(broken down by fuel type) has to be estimated that is attributable to the reporting company. Ideally,
service providers will be able to provide an estimate of fuel use for the quantity of services that is
purchased. If not, a rough estimate of fuel use can be calculated by using activity data (person-
kilometers travelled or ton-kilometers of freight shipped) or expenditures on transport services.

14.2.2. Road Transport

CO2, N2O and CH4 emissions - top-down approach: The fuel consumed within the assessment period is
converted to an equivalent energy input in GJ using net calorific values of the fuel. The CO 2 emissions
are then calculated by multiplying the total energy input for each fuel type by a CO 2 emission factor for
that fuel. The emission factor should be calculated based on actual fuel properties. Where fuel property
data is not available, default factors should be used. However, default factors of any kind should only
be used where fuel property data are not available, and in preference to reporting no data. N2O and



                                                                                                                                30
CH4 emissions are then calculated by multiplying the total energy input for each fuel type by default
N2O and CH4 emissions factors.

CO2, N2O and CH4 emissions - bottom-up approach: The bottom-up approach makes use of emission
factors that are specific to basic categories of vehicle technology. This approach requires data on
energy use or distance travelled by vehicle type. Accordingly, companies have to apply emission
factors based on energy used by vehicle type or on kilometers travelled by vehicle type. It is
recommended that companies choose between the types of factors based on the quality of activity data
and other information available to them.


14.2.3. Air Transport

(The air transport guidelines are still under development) CO2, N2O and CH4 emissions - top-down
approach: The fuel consumed within the assessment period is converted to an equivalent energy input
in GJ using net calorific values of the fuel. The CO2 emissions are then calculated by multiplying the
total energy input for each fuel type by a CO2 emission factor for that fuel. The emission factor should
be calculated based on actual fuel properties. Where fuel property data is not available, default factors
should be used. However, default factors of any kind should only be used where fuel property data are
not available, and in preference to reporting no data. N2O and CH4 emissions are then calculated by
multiplying the total energy input for each fuel type by N2O and CH4 emissions factors.

CO2, N2O and CH4 emissions – bottom-up approach: The bottom-up approach calculates total
emissions from individual aircraft. In addition to fuel use, it is necessary to have information on the
number of flights taken by each type of aircraft. In a first step, the total fuel consumption by each type
of aircraft (in metric tons) within the assessment period is allocated to the landing/take off cycles and
the cruising time undertaken by the aircraft. The CO2 emissions are then calculated by multiplying the
fuel consumption during LTO cycles and cruising time respectively by the appropriate CO 2 emission
factors. The emission factors should incorporate specific information including the type of aircraft and
the increased fuel consumption during LTO cycles. Although default values can be applied, companies
are encouraged to develop their own set of factors. N2O and CH4 emissions are then calculated by
multiplying the total energy consumption by N2O and CH4 emissions factors specific to the type of
aircraft used.

14.2.4. Navigation

CO2, N2O and CH4 emissions - top-down approach: The fuel consumed within the assessment period is
converted to an equivalent energy input in GJ using net calorific values of the fuel. The CO 2 emissions
are then calculated by multiplying the total energy input for each fuel type by a CO2 emission factor for
that fuel. The emission factor should be calculated based on actual fuel properties. Where fuel property
data is not available, default factors should be used. However, default factors of any kind should only
be used where fuel property data are not available, and in preference to reporting no data. N 2O and
CH4 emissions are then calculated by multiplying the total energy input for each fuel type by default
N2O and CH4 emissions factors.

If non-CO2 emissions from navigation comprise a significant portion of a company's overall GHG
inventory, it is recommended to use more accurate, technology-specific emission factors for estimating
non-CO2 GHG emissions from different types of vessels if the factors can be developed or identified.



                                                                                                             31
14.2.5. Rail Transport

CO2, N2O and CH4 emissions - top-down approach: The fuel consumed within the assessment period is
converted to an equivalent energy input in GJ using net calorific values of the fuel. The CO 2 emissions
are then calculated by multiplying the total energy input for each fuel type by a CO 2 emission factor for
that fuel. The emission factor should be calculated based on actual fuel properties. Where fuel property
data is not available, default factors should be used. However, default factors of any kind should only
be used where fuel property data are not available, and in preference to reporting no data. N 2O and
CH4 emissions are then calculated by multiplying the total energy input for each fuel type by default
N2O and CH4 emissions factors.

Companies are encouraged to use more accurate, technology-specific emission factors for estimating
non-CO2 GHG emissions from different types of trains and locomotives if they can be developed or
identified.



14.3    HFC Emissions from Coolants and Refrigeration

HFC emissions from the refrigeration and air-conditioning sector result from the manufacturing process,
from leakage over the operational life of the equipment, and from disposal at the end of the useful life
of the equipment.

HFC emissions from manufacturing of refrigeration and air-conditioning equipment are calculated by
multiplying the quantity of refrigerant charge used to produce a certain type of product by an emissions
factor describing HFC emissions occurring during the production of that kind of product type.

HFC emissions from the operation of commercial refrigeration and air-conditioning are calculated by
multiplying the quantity of refrigerant charge contained in a certain type of equipment by an emissions
factor describing the annual HFC leakage rate for that kind of product type.



14.4    Aluminium Production
The production of aluminum results in CO2 and PFC (Perfluorocarbon) emissions. CO2 and PFC
emissions vary significantly with the type of technology used. Some plants may also have SF6
emissions. The production of aluminum requires substantial energy input in the form of electricity and
thus leads to significant emissions if electricity is generated by the combustion of fossil fuel. This
guidance does not cover emissions from stationary combustion, since associated methodologies are
included elsewhere.

CO2 emissions: CO2 is generated from the reaction of the carbon anode with alumina, but some is
formed as the anode reacts with other sources of oxygen (especially air). This occurs during cell
operation and, in the case of prebaked electrodes, during anode production at the aluminum plant. Two
methodologies exist to measure CO2 emissions:

   If the quantity of the reducing agent is known, the CO2 emissions should be calculated by using
    emission factors specific to the type of reducing agent used. This approach usually leads to very
    accurate emission estimates.



                                                                                                             32
   If the quantity of the reducing agent is not known, technology specific emission factors should be
    applied to calculate CO2 emissions per ton of aluminum produced.

PFC emissions: Two PFCs, CF4 (carbon tetrafluoride also called perfluoromethane), and C 2F6 (carbon
hexafluoride also called perfluoroethane), are emitted from the process of primary aluminum smelting.
PFC emissions increase with frequency, intensity and duration of anode effects. Several methods can
be applied to measure PFC emissions, depending on the type of data available.

   Continuous emissions monitoring provide most accurate results. When choosing this approach it is
    recommended to follow the IPCC good practice guidelines.
   Periodic sampling and measurement avoids time consuming and expensive continuous monitoring,
    and allows to establish smelter-specific relationships between the frequency and duration of anode
    effects and the operating parameters. By using the slope method or the over-voltage method,
    smelter specific PFC emission factors can be established that allow calculation of emissions per
    ton of aluminum produced.
   If no data from continuous measurement or limited sampling exist, default emission factors can be
    used to calculate PFC emissions on the basis of the quantity of aluminum produced. However, it is
    recommended to use technology-specific default factors only as the last resort, since the PFC
    emissions greatly depend on smelter operating conditions.

SF6 emissions: In the aluminum industry SF6 is used as a cover gas for particular foundry products.
Since SF6 is assumed to be inert, emissions should equal SF6 consumption.

14.5    Iron and Steel Production

The production of iron and steel results in CO2 emissions. Except for a small amount of carbon, which
is retained in the iron and steel, CO2 emissions only depend on the quantity and quality of the reducing
agent (mostly coke, hard coal, natural gas or oil) and the carbonate fluxes (limestone or dolomite)
used.

Because carbon plays the dual role of fuel and reducing agent, it is important not to double-count CO2
emissions from the use of fossil fuels. This means that fossil fuels used as reducing agent for the
production of iron and steel are to be subtracted from fossil fuels used specifically as fuel in the iron
and steel production and accounted for under stationary combustion.

CO2 emissions – quantity of reducing agent known: Where the quantity and quality of the reducing
agent and the carbonate fluxes used are known, CO2 emissions are calculated by multiplying the
quantity of the reducing agent and of the carbonate fluxes utilised during the reporting period with the
respective CO2 emissions factors specific to the types of reducing agent and fluxes employed. Default
values can be used but should only be applied where no site-specific data are available.

CO2 emissions – quantity of reducing agent unknown: Where the quantity and quality of the reducing
agent used is not known, CO2 emissions from the use of reducing agents can be calculated on the
basis of the quantity of iron and steel produced. CO2 emissions from the use of carbonate fluxes can
be calculated on the basis of the quantity of carbonate fluxes employed. However, it is recommended
to use activity based emission factors only as the last resort, since since CO2 emissions depend on the
quantity and quality of the reducing agent employed.




                                                                                                            33
To refine the above calculation and to account for carbon retained in the iron and steel, the quantity of
carbon retained in the iron and steel produced has to be subtracted from the quantity of carbon in the
ore used as feedstock. The resulting value has to be added to the CO 2 emissions generated by utilising
reducing agents and carbonate fluxes. Where specific site data are not available, default factors can be
used to determine the carbon content of ore, iron and steel.

14.6    Nitric Acid Production

The production of nitric acid results in N2O emissions, which vary significantly from one nitric acid plant
to the other. The N2O emissions depend very much on site-specific factors such as plant design,
process conditions and abatement technologies employed.

N2O emissions – direct monitoring: Very accurate emissions data can be obtained by directly
monitoring emissions. Precise direct monitoring of N2O emissions requires measurement of both the
exit stream and the uncontrolled stream. However, data quality is satisfactory even where
measurement data are available only for the exit stream. N2O emissions data are usually obtained on
the basis of continuous monitoring. Where monitoring is not done continuously, it is necessary to
conduct sampling and analysis whenever a plant makes any significant process changes that would
affect the generation rate of N2O and sufficiently often otherwise to ensure that operating conditions are
constant.

N2O emissions – site-specific emission factors: Where site-specific emission factors are available, N2O
emissions can be calculated by multiplying the quantity of nitric acid produced in the reporting period by
a site-specific emissions factor. Where N2O emissions are reduced by means of abatement systems,
their effectiveness has to be calculated by taking into account the N2O destruction factor of the
technology and its utilisation factor.

N2O emissions – default emission factors: If site-specific emission factors are not available, default
emission factors can be used. However, default factors should only be used as the last resort, since
N2O emissions depend very much on site-specific factors such as plant design, process conditions and
abatement technologies employed.

14.7    Ammonia Production

All carbon contained in the feedstock used for ammonia production is emitted to the air in the form of
CO2, which means that the CO2 emissions only depend on the quantity and quality of the fuel used as
feedstock. The quantity of natural gas (or other kind of fossil fuel) used as feedstock in the production
process does not include fuel burned in combustion processes during the production of ammonia.
Fossil fuels used for stationary combustion have to be accounted for under stationary combustion.

CO2 emissions can be measured by using energy data, mass data or site-specific and default emission
factors. Measuring CO2 emissions on the basis of energy data or mass data are the preferred
approaches, emission factors should only be used where fuel consumption is not known.

CO2 emissions - using energy data: Each type of fuel consumed within the assessment period is
converted to an equivalent energy input in GJ using net calorific values of the fuel. The CO 2 emissions
are then calculated by multiplying the total energy input for each fuel type by a CO 2 emission factor for
that fuel. The emission factor should be calculated based on actual fuel properties. Where fuel property



                                                                                                              34
data is not available, default factors should be used. However, default factors of any kind should only
be used where fuel property data are not available, and in preference to reporting no data.

CO2 emissions - using mass data: CO2 emissions are calculated by multiplying the mass of fuel burnt
by the carbon content of the fuel burnt.

CO2 emissions – site-specific or default emission factors: If the quantity of gas (or other kind of fossil
fuel) used as feedstock in the production process is not known, the CO 2 emissions can be calculated
from the tons of ammonia produced by means of plant-specific or default values. Since the emissions
vary with the plant design, the default emission factors can only deliver rough emission estimates and
do not reflect the actual emission performance of individual plants. The use of by-product hydrogen
from other production processes as feedstock for ammonia production reduces CO2 emissions.

14.8    Adipic Acid Production

The production of adipic acid results in N2O emissions, which vary according to plant design and
abatement technologies employed.

N2O emissions – direct monitoring: Very accurate emissions data can be obtained by directly
monitoring emissions. Precise direct monitoring of N2O emissions requires measurement of both the
exit stream and the uncontrolled stream. However, data quality is satisfactory even where
measurement data are available only for the exit stream. N2O emissions data are usually obtained on
the basis of continuous monitoring. Where monitoring is not done continuously, it is necessary to
conduct sampling and analysis whenever a plant makes any significant process changes that would
affect the generation rate of N2O and sufficiently often otherwise to ensure that operating conditions are
constant.

N2O emissions – site-specific emission factors: Where site-specific emission factors are available, N2O
emissions can be calculated by multiplying the quantity of adipic acid produced in the reporting period
by a site-specific emissions factor. Where N2O emissions are reduced by means of abatement
systems, their effectiveness has to be calculated by taking into account the N 2O destruction factor of
the technology and its utilisation factor.

N2O emissions – default emission factors: If site-specific emission factors are not available, default
emission factors can be used. However, default factors should only be used as the last resort, since
N2O emissions depend on site-specific factors such as plant design, process conditions and abatement
technologies employed.

14.9    Cement Production

The production of cement results in CO2 emissions, which are caused by the calcination process. A
small amount of CO2 may also result from Cement Kiln Dust (CKD) that is not recycled, used for other
purposes, or disposed to landfills. Some quantity of CKD is produced in all cement kilns, but the actual
amount varies according to plant-specific technologies and operating conditions.

Emissions from additional lime production associated with masonry cement should also be considered
if the facility manufactures its own lime, using the guidelines on lime production.




                                                                                                             35
CO2 emissions from clinker should be calculated by multiplying the amount of clinker produced by the
CaO- and MgO contents of clinker. The emission factor should be corrected for non-carbonate CaO
and MgO entering the kiln (for instance, alternative fossil fuels and raw materials with a relevant CaO-
content, such as fly ash).

Default values can be used and provide rather accurate emissions estimations, but wherever possible,
plant-specific values should be applied.

14.10 Lime Production

The calcination of limestone (mostly calcium carbonate (CaCO 3)) to produce quick lime (CaO) results in
CO2 emissions.

CO2 emissions should be measured by multiplying the quantity of lime produced in the reporting period
by the stoichiometric ratio of CO2 to lime and by the lime content. Lime production and lime content
should be available from the facility. Where site-specific emission factors are not available, default
emission factors can be used. However, default factors should only be used where site-specific data
are not available, and in preference to reporting no data.




                                                                                                           36
Part C: Greenhouse Gas Inventory Tools
The section provides estimation tools for calculating GHG emissions from a variety of sources. It also
provides guidance on managing uncertainty. We encourage the use of these tools as they have been
peer reviewed by experts and industry leaders and are believed to be the best available. The tools,
however, are optional. You may substitute your own GHG estimation tools, providing they are
consistent with the approaches described.

The guidance on managing inventory quality is also optional. You may prefer to apply one of the more
sophisticated approaches referenced in the text. Alternatively you may decide not to calculate a
quantitative uncertainty ranking for your GHG sources, but focus on documenting sources of
uncertainty in your inventory.

15.     Collection & Estimation of Emissions Data
This section provides step by step guidance on how to measure GHG emissions. The estimation
guidelines and tools may be downloaded from the collaboration’s website www.ghgprotocol.org (listed
under the section on core operations module). The principles behind each estimation tool are described
in section 14 of the facility level guidance. The cross sector guidelines deal with emissions that can be
found in virtually all industrial sectors, for example, emissions from stationary and mobile combustion
sources. The second group contains sector-specific guidelines that cover emissions from industrial
processes that are unique to particular sectors, e.g. aluminium production, ammonia production or
cement manufacture. In the majority of cases, it is therefore necessary to employ more than one
guideline to cover all emissions from a facility or company. For example, a fictional company active in
aluminium production might have to employ the guidelines for aluminium production, stationary
combustion (import of electricity for aluminium production and lighting, generation of energy on-site for
aluminium production and office heating) and transportation (shipment of final products by train,
vehicles employed on-site, business travel of employees).




                                                                                                            37
The flow diagram below helps to determine what guidelines need to be used to capture all emissions
from a specific facility or company.


                          Step 1
                          Determine which industry-specific activities                  Apply sector-specific
                          can be found in the company or at the production              guideline(s)
                          site and choose the appropriate sector-specific
                          guideline(s).


                          Step 2
                          Do the business operations involve the                 Yes   Apply cross-sectoral
                          stationary combustion of fossil fuel? Examples               guideline for stationary
                          for stationary combustion of fossil fuel include the         combustion of fossil fuel
                          production of heat for chemical processes,
                          electricity generation or the heating of office
                          buildings.


                          Step 3
                          Do the business operations involve                     Yes   Apply cross-sectoral
                          transportation activities? Examples for                      guideline for
                          transportation include freight delivery or business          transportation
                          travel.


                          Step 4
                          Do the business operations involve the                 Yes   Apply cross-sectoral
                          temporary or long-term storage of solid waste                guideline for waste
                          material?


                          Step 5
                          Do the business operations involve the use of          Yes   Apply cross-sectoral
                          HFC for air-conditioning? This includes air-                 guideline for use of HFC
                          conditioning in buildings, for commercial
                          purposes and in vehicles.



All cross-sector and sector-specific guidelines are based on a similar structure and offer a step-by-step
guidance on measuring and calculating emissions data. Each guideline comprises automated
worksheets and explanations on how to use them. In most cases it is only necessary to insert
production data into the worksheets and to select the appropriate emissions factors. Default emissions
factors are provided for the sectors covered, but it is possible to insert customised emissions factors if
more accurate data is available. The emissions of different greenhouse gases are first calculated
separately and later converted to CO2 equivalents on the basis of their global warming potential, so that
both can be reported.

Some of the guidelines contain a two-tier approach, offering a choice between a simple and a more
advanced approach. The more advanced approach results in more accurate emission estimates but
usually require a higher level of data detail and a thorough understanding of the technologies used in
the business operations.




                                                                                                                   38
Table 6 provides a list of guidelines currently available or under development.

                                                 Table 6
                                             Under                 Peer Review          Road Test
    Guideline
                                             Development           Draft                Draft
    Cross sector guidance
    Stationary Combustion                                                                       x
                                      2
    Mobile Combustion/transportation                                                            x
    HFC from coolants & refrigeration                                                           x
    Landfilled waste                                                        x

    Metal Production
    Aluminium                                                                                   x
    Other non ferrous metals                          x
    Iron and Steel                                                          x

    Chemicals
    Nitric Acid manufacture                                                 x
    Ammonia manufacture                                                     x
    Adipic Acid manufacture                                                 x
    Urea
    Caprolactum
    Carbides

    Mineral Products
    Cement                                                                  x
    Lime                                                                                        x

    Energy Industry
    Oil & Gas
    Coal mining

    Other
    Pulp & Paper                                      x
    Food & Drink
    HFC-23 from HCFC-22 production                    x



16.     Managing Uncertainty

16.1    Sources of Uncertainty

Even when the best available calculation methodologies are used, there are many sources of
uncertainty for GHG emissions totals:

   deliberate estimation to compensate for missing data (e.g. non-reporting facilities, or missing fuel bills);
   imprecise measurement of emissions-producing activity (e.g. miles travelled in air planes or rental
    vehicles, hours per year specific equipment is used);




                                                                                                                   39
   human errors of calculation and omission;
   use of “average case” factors not perfectly matched to specific and varying circumstances (e.g., average
    miles per gallon, average C02/kWh generated);
   assumptions that simplify estimation of emissions from highly complex processes; and
   use of factors that are poorly researched and uncertain (e.g., factors for Methane and N20 from
    combustion processes).

16.2    Characterising Uncertainty

Companies can choose among three different ways of characterising uncertainty of emissions totals.
These could be applied to specific line items, subtotals, or grand totals in an emissions inventory.

1) Use numerical estimates for confidence intervals (e.g. plus or minus 7%). These may be best
   guesses based on professional experience, or they may be calculated from available statistics.
2) Use an ordinal ranking system, such as:
     High certainty - actual emissions likely to be within 5% of reported total (likely=90% odds)
    Good certainty - actual emissions likely to be within 15% of reported number
    Fair certainty - actual emissions likely to be within 30% of reported total
    Poor certainty - actual emissions could vary by more than 30% from reported total.
3) Abandon all efforts to rank uncertainty, and merely note major sources of uncertainty in the
   inventory.


16.3    Estimating or Calculating Uncertainty

A facility’s reported emissions total is usually computed by adding together several single source
subtotals such as: emissions from electricity use, emissions from combustion of natural gas, emissions
from vehicle fleet operation. Certainty judgements can be made for each reported subtotal and for the
grand total. (If a firm has multiple sites, its corporate total is the result of further addition across sites).
Companies that try to calculate or rank certainty therefore need two methods - one for single-source
subtotals, the other for sums combining these subtotals.

Estimating certainty for single-source emissions

Directly measured emissions
In the rare cases when companies can directly measure emitted gasses, statistical methods may be
used to calculate the confidence interval for an annual total based on sampling intervals, variations
among samples, and instrument calibration. When the standard deviation of a set of samples is
known, and certain assumptions are not violated, the 95% confidence level is the sample average plus
or minus 1.96 times the standard deviation. The same approach could be used to determine
confidence intervals for estimates based on sampling, for example, to estimate fleet mileage from a
10% sample, or to estimate an average value for a non-reporting site based on an average for similar
sites.

Calculated or inferred emissions
Most single-source emissions subtotals will be calculated by multiplication. Emissions will be the
product of an activity or substance multiplied times an emissions factor. For example:

        Electricity purchased times a factor for generation CO2/kwh
        Rental sedan miles driven times a factor of CO2/vehicle mile

                                                                                                                   40
       Tons of cement sold times a factor of CO2/ton cement.

The resulting emissions result has two dimensions of uncertainty: the measurement of the activity, and
the accuracy of the factor. Uncertainty is compounded by the multiplication; the resulting emissions
estimate will be less certain than its least certain component (this phrase can be called the
compounded uncertainty principle). For example, a firm may compile a highly certain total of kWh from
its electrical bills. However, the best available CO2/kwh factor for generation and transmission may be a
national grid annual average poorly reflective of seasonal and hourly fluctuations in generation fuel mix
corresponding to the firm’s load profile. The kWh measurement has ‘high’ certainty, but the CO 2 factor
could easily be off by as much as 20%, thus the emissions subtotal for electricity can only be labelled
with ‘fair’ certainty.

For companies that characterise uncertainty numerically, a sum of squares approach may be used to
                                                                         3
calculate the confidence interval for the product of two or more factors . The relative confidence
interval (the plus or minus percent) of the product is the square root of the sum of the squares of the
relative (percent) confidence intervals of each factor.



Multiplying Uncertainties:         where:      A +/-a% X B +/-b% = C +/-c%

                                                  c  a2  b2


The above equation shows how companies using an ordinal scale could apply the compounded
uncertainty principle. The certainty rank in each cell of the table cannot be higher than the lowest rank
of its components. In the four cells where two possible ranks are given, companies should choose the
higher rank only if they judge the lowest component to be in the more certain end of its range.

Table 7. Applying the principle of compounded uncertainty for single-source emissions estimates,
when an ordinal ranking scale is used.

                                                              Table 7




3
  The relatively simple formulas presented here are defensible when no factor in a multiplication is
raised to a power, and when a normal distribution of probabilities within the confidence interval is
assumed. For information on handling more complex situations, see EPA, Emission Inventory
Improvement Project Volume VI: Quality Assurance/Quality Control, at
www.epa.gov/ttn/chief/eiip/techrep.htm Chapter 4 covers all approaches to inventory uncertainty
analysis, or Frey, H. et al., Quantitative Analysis of Variability and Uncertainty in Emissions Estimates,
at www4.ncsu.edu/~frey/freytech.html Evaluation of uncertainties in activity levels and emission factors,
both stationary and mobile sources.

                                                                                                             41
               Likely certainty             Certainty of Measurement for Source
               Ratings for Single-              Activity/Substance/Process
               Source Subtotals             High        Good          Fair         Poor



                 Appropriateness
                                   High     H,G           G             F            P
                   Accuracy/

                    of Factor
                                   Good       G          G,F          F,P            P
                                   Fair       F          F,P           P             P
                                   Poor       P           P            P             P

Table 8 gives certainty rankings that are typically the best attained by facilities and firms that have
recently assembled emissions inventories. Lower levels of effort and poorer data could lead to lower
rankings.

                                                  Table 8
Major Emissions Category Subtotal                   Best Attainable Certainty Ranking
On-site fuel combustion, stationary sources            High – Delivery records and bills make
                                                        measurement easy and accurate; carbon
                                                        content is almost standard so emissions
                                                        factors are accurate. (Carbon per ton coal
                                                        varies; using an average default factor for
                                                        coal may yield a GOOD total)
Process Emissions                                      High - mass balance calculations
                                                        combined with accurate input records can
                                                        yield highly accurate totals.
                                                       Fair or Poor if by-products are calculated
                                                        from production totals times industry
                                                        average factors. Leaks of unmeasured
                                                        gasses are a problem.
Directly-controlled vehicles                           High if complete fuel use records are
                                                        tallied and multiplied by fuel factors.
                                                       Fair if distance by equipment type is
                                                        multiplied by average fuel use per distance
                                                        factors.
                                                       Poor if distance is only roughly estimated.
Net electricity use                                    High if one fuel is used for generation, or if
                                                        marginal generation fuel can be matched
                                                        to facility load profile.
                                                       Fair if annual average is used for a grid
                                                        with multiple fuel sources.
                                                       Fair or Poor if electricity use is not metered
                                                        and must be estimated from equipment
                                                        and time of use.
In-bound freight, Out-bound freight                    Good if a few well-documented modes or
                                                        routes are used,
                                                       otherwise FAIR at best.

                                                                                                          42
Employee job-related travel                                  Fair if miles are accurately tallied.
                                                             Poor if trips are roughly categorised as
                                                              short or long, etc.
Waste disposed to landfill                                   Fair at best. Waste amounts may be well
                                                              measured, but composition of waste and
                                                              decomposition conditions may vary widely.

Uncertainty for summary totals

If line items in an inventory have been labeled for their relative certainty, companies can determine
uncertainty estimates for subtotals and totals. The certainty rank for any summary total should be
assigned taking into account the relative certainty of each of its constituents, using a weighted average
approach. The additive uncertainty can be estimated using a calculation method outlined as follows.
Alternatively, best judgement of those familiar with data types and factors can be used. Numeric
uncertainties are combined using root-sum-of-squares techniques, using the absolute values to adjust
for the relative weight of each addend.



Adding Uncertainties:              where:     A +/-a% + B +/-b% = C +/-c%


                                                ( A  a ) 2  ( B  b) 2
                                             c
                                                           C

Say our inventory has two sources of CO2 calculated as 200 ± 5% and 100 ± 30% tonnes. The
inventory total is then 300 tonnes with an uncertainty of:

                        2      2
             ± Sqrt [ 10 + 30 ] 31.62
         u = ------------------------- = -------- = ± 10.5%
                   200 + 100              300

With the over-simplifying assumption that a single numerical value can be assigned to each ranking,
this weighted average approach can be applied to the four certainty rankings by determining what
percentage of the summary total has been ranked high, good, fair, and poor. Under conservative
             4
assumptions a rank for the summary total may be computed using the spreadsheet below, which is
based on the formula presented above (double click on it if viewing this document electronically).




4
    Estimates ranked High, Good and Fair are conservatively assumed to vary at 80% of their range
    limit value, i.e. High~+/-4%, Good~ +/- 12%, and Fair at +/-24%. Those ranked poor are assumed to
    vary at +-50%.

                                                                                                            43
Calculating precision ranking for a summary total
            A            B            C            D
Percent of total       Assumed       Assumed     Variance
that was ranked*:     +/- interval   variance    Squared
                                       C=A*B           C*C   Confidence interval
High         55   %          4.0%          2.2       4.84    for total is:
Good          0   %       12.0%             0           0                  +/- 11.0%
Fair         45   %       24.0%           10.8    116.64     Precision rank
Poor          0   %       50.0%             0           0    for total is:     Good
Total       100 %                          0
* Enter percents as whole integer, i.e. "70"




                                                                                       44
Glossary5
Baseline                     A datum against which to measure GHG emissions performance over
                             time, usually annual emissions in a selected base year.

Cogeneration                 The use of waste heat from electricity generation, such as exhaust
                             from gas turbines.

Carbon sequestration         The uptake and storage of carbon. Examples include, forests, oceans,
                             soils, and underground.

Cross-sector protocol        A GHG estimation methodology that addresses GHG sources that are
                             common across different industrial sectors, e.g., stationary
                             combustion, mobile combustion, solid waste, HFCs from air
                             conditioning and refrigeration.

Direct GHG emissions         Emissions from sources that are owned or controlled by the company,
                             e.g., emissions from company owned vehicles, stacks, manufacturing
                             processes vents, etc.

Emissions                    The release of GHGs into the atmosphere.

Equity Share                 A boundary approach that allocates GHGs from sources that are only
                             partly owned by a company. GHG emissions are reported according to
                             a pro-rata equity ownership basis.

GHG                          (Greenhouse gas) For the purposes of this guidance GHGs are the six
                             gases listed in the Kyoto Protocol: carbon dioxide, methane, nitrous
                             oxide, hydroflurocarbons, perfluorocarbons and sulphur hexafluoride.

GHG Protocol Initiative      A multi-stakeholder collaboration convened by the World Resources
                             Institute and World Business Council for Sustainable Development to
                             design, develop and promote the use of an international protocol for
                             measuring & reporting business GHGs

Indirect GHG emissions       Emissions caused by the company, but physically occurring from sites
                             or operations owned or controlled by another organization, e.g.,
                             imported electricity, employee travel on vehicles not owned or
                             controlled, product transport in vehicles not owned or controlled by the
                             company

Inventory quality            The extent to which an inventory provides reliable information.
                             Reliability is a function of several different dimensions of quality,
                             including consistency, completeness, transparency/verifiability, and
                             accuracy (degree of uncertainty) for estimates of emissions.


Kyoto Protocol               An international agreement that on entry into force would require
                             countries listed in its Annex B (developed nations) to meet reduction
                             targets of GHG emissions relative to their 1990 levels during the
                             period 2008-12. It was adopted by all Parties to the Climate
                             Convention in Kyoto, Japan in December 1997.




5
 Adapted from UNFCCC glossary, US EPA’s State & Local Climate Change Resources Glossary,
IPIECA Climate Change Glossary

                                                                                                        45
Management control          A boundary approach that measures and reports emissions from
                            sources that are controlled by the company. This usually means the
                            operator of the facility.

Outsourcing                 The contracting out of core business activities to other businesses.

Product life cycle module   A module of the GHG protocol Initiative that provides guidance on
                            estimating and reporting GHG emissions over the entire life cycle of a
                            product.

Scope                       Defines the measurement and reporting boundaries in relation to
                            indirect and direct GHG emissions.

Scope 1 inventory           A reporting organization’s direct GHG emissions.

Scope 2 inventory           A reporting organization’s direct GHG emissions plus net emissions
                            from energy imports & exports.

Scope 3 Inventory           A reporting organization’s direct GHG emissions plus net emissions
                            from energy imports & exports plus other indirect emissions from
                            employee travel, solid waste disposal off-site and product
                            transportation.

Sector specific protocol    A GHG estimation methodology that addresses GHG sources that are
                            unique to certain sectors, e.g., process emissions from cement, lime,
                            adipic acid, nitric acid, Aluminium, iron, steel, HCFC-22 production.

Sink                        Any process or activity, which removes a GHG from the atmosphere.

Source                      Any process or activity, which releases a GHG into the atmosphere.




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