GHG Accounting Operational Control Approach

Definition

Under the control approach, a company accounts for 100 percent of the GHG Emissions from operations over which it has control. It does not account for GHG emis- sions from operations in which it owns an interest but has no control. Control can be defined in either financial or operational terms.

In most cases, whether an operation is controlled by the company or not does not vary based on whether the financial control or operational control criterion is used. A notable exception is the oil and gas industry, which often has complex ownership / operatorship structures. Thus, the choice of control criterion in the oil and gas industry can have substantial consequences for a company’s GHG Inventory. In making this choice, companies should take into account how GHG emissions accounting and reporting can best be geared to the requirements of emissions reporting and trading schemes, how it can be aligned with financial and environmental reporting, and which criterion best reflects the company’s actual power of control.

A company has operational control over an operation if the former or one of its subsidiaries has the full authority to introduce and implement its operating policies at the operation. This criterion is consistent with the current accounting and reporting practice of many companies that report on emissions from facilities, which they operate (i.e., for which they hold the operating license). It is expected that except in very rare circumstances, if the company or one of its subsidiaries is the operator of a facility, it will have the full authority to introduce and implement its operating policies and thus has operational control.

Under the operational control approach, a company accounts for 100% of emissions from operations over which it or one of its subsidiaries has operational control.

It should be emphasized that having operational control does not mean that a company necessarily has authority to make all decisions concerning an operation. For example, big capital investments will likely require the approval of all the partners that have joint financial control. Operational control does mean that a company has the authority to introduce and implement its operating policies.

More information on the relevance and application of the operational control criterion is provided in petroleum industry guidelines for reporting GHG emissions (IPIECA, 2003).

See Also

• GHG Accounting Equity Approach
• GHG Accounting Consolidation Approach