GHG Accounting Principles

Definition

GHG Accounting Principles are general criteria to underpin high-quality GHG Accounting as defined by the GHG Protocol, , . The principles apply (with variations) to city-wide, corporate or project based reporting. Here they are presented in an integrated way.

The Relevance Principle

Projects

Use data, methods, criteria, and assumptions that are appropriate for the intended use of reported information

The quantification and reporting of GHG reductions should include only information that users—both internal and external to the GHG project—need for their decision-making. This information should thus fit the intended purpose of the GHG project and meet the expectations or requirements of its users. Data, methods, criteria, and assumptions that are misleading or that do not conform to Project Protocol requirements are not relevant and should not be included.

Companies

Ensure the GHG Inventory appropriately reflects the GHG Emissions of the company and serves the decision-making needs of users - both internal and external to the company.

For an organization's GHG Report to be relevant means that it contains the information that users —both internal and external to the company—need for their decision making. An important aspect of relevance is the selection of an appropriate GHG Inventory Boundary that reflects the substance and economic reality of the company’s business relationships, not merely its legal form. The choice of the inventory boundary is dependent on the characteristics of the company, the intended purpose of information, and the needs of the users. When choosing the inventory boundary, a number of factors should be considered, such as:

• Organizational structures: control (operational and financial), ownership, legal agreements, joint ventures, etc.
• Operational boundaries: on-site and off-site activities, processes, services, and impacts
• Business context: nature of activities, geographic locations, industry sector(s), purposes of information, and users of information

Cities

The reported GHG emissions shall appropriately reflect emissions occurring as a result of activities and consumption patterns of the city. The inventory will also serve the decision-making needs of the city, taking into consideration relevant local, subnational, and national regulations.

The principle of relevance applies when selecting data sources, and determining and prioritizing data collection improvements.

The Completeness Principle

Projects

Consider all relevant information that may affect the accounting and quantification of GHG reductions, and complete all requirements

All relevant information should be included in the quantification of GHG reductions. Among other things, this means that all the GHG effects of a GHG project should be considered and assessed, all relevant technologies or practices should be considered as baseline candidates, and all relevant baseline candidates should be considered when estimating base- line emissions. The GHG project’s monitoring plan should also specify how all data relevant to quantifying GHG reductions will be collected. Finally, notwithstanding areas where there is flexibility and discretion, all requirements within relevant chapters should be completed to quantify and report GHG reductions.

Companies

Account for and report on all GHG Emissions Sources and activities within the inventory boundary. Disclose and justify any specific exclusions

All relevant emissions sources within the chosen inventory boundary need to be accounted for so that a comprehensive and meaningful inventory is compiled. In practice, a lack of data or the cost of gathering data may be a limiting factor. Sometimes it is tempting to define a minimum emissions accounting threshold (often referred to as a GHG Materiality Threshold) stating that a source not exceeding a certain size can be omitted from the inventory. Technically, such a threshold is simply a predefined and accepted negative bias in estimates (i.e., an underestimate).

Although it appears useful in theory, the practical implementation of such a threshold is not compatible with the completeness principle of the GHG Protocol Corporate Standard. In order to utilize a materiality specification, the emissions from a particular source or activity would have to be quantified to ensure they were under the threshold. However, once emissions are quantified, most of the benefit of having a threshold is lost.

A threshold is often used to determine whether an error or omission is a material discrepancy or not. This is not the same as a de minimis for defining a complete inventory. Instead companies need to make a good faith effort to provide a complete, accurate, and consistent accounting of their GHG emissions. For cases where emissions have not been estimated, or estimated at an insufficient level of quality, it is important that this is transparently documented and justified. GHG Verification can determine the potential impact and relevance of the exclusion, or lack of quality, on the overall inventory report.

Cities

Cities shall account for all required emissions sources within the inventory boundary. Any exclusion of emission sources shall be justified and clearly explained. Notation keys shall be used when an emission source is excluded, and/or not occurring.

The Consistency Principle

Projects

Use data, methods, criteria, and assumptions that allow meaningful and valid comparisons

The credible quantification of GHG reductions requires that methods and procedures are always applied to a GHG project and its components in the same manner, that the same criteria and assumptions are used to evaluate significance and relevance, and that any data collected and reported will be compatible enough to allow meaningful comparisons over time.

Companies

Use consistent methodologies to allow for meaningful performance tracking of emissions over time. Transparently document any changes to the data, inventory boundary, methods, or any other relevant factors in the time series.

Users of GHG information will want to track and compare GHG emissions information over time in order to identify trends and to assess the performance of the reporting company. The consistent application of accounting approaches, inventory boundary, and GHG Calculation Methodology is essential to producing comparable GHG emissions data over time. The GHG information for all operations within an organization’s inventory boundary needs to be compiled in a manner that ensures that the aggregate information is internally consistent and comparable over time. If there are changes in the inventory boundary, methods, data or any other factors affecting emission estimates, they need to be transpar- ently documented and justified.

The credible quantification of GHG reductions requires that methods and procedures are always applied to a GHG project and its components in the same manner, that the same criteria and assumptions are used to evaluate significance and relevance, and that any data collected and reported will be compatible enough to allow meaningful comparisons over time.

Cities

Emissions calculations shall be consistent in approach, boundary, and methodology. Using consistent methodologies for calculating GHG emissions enables meaningful documentation of emission changes over time, trend analysis, and comparisons between cities.

Calculating emissions should follow the methodological approaches provided by the GPC. Any deviation from the preferred methodologies shall be disclosed and justified.

The Transparency Principle

Projects

Provide clear and sufficient information for reviewers to assess the credibility and reliability of GHG reduction claims

Transparency is critical for quantifying and reporting GHG reductions, particularly given the flexibility and policy-relevance of many GHG accounting decisions. GHG project information should be compiled, analysed, and documented clearly and coherently so that reviewers may evaluate its credibility. Specific exclusions or inclusions should be clearly identified, assumptions should be explained, and appropriate references should be provided for both data and assumptions. Information relating to the GHG assessment boundary, the identification of baseline candidates, and the estimation of baseline emissions should be sufficient to enable reviewers to understand how all conclusions were reached. A transparent report will provide a clear understanding of all assessments supporting GHG reduction accounting and quantification. This should be supported by comprehensive documentation of any underlying evidence to confirm and substantiate the data, methods, criteria, and assumptions used.

Companies

Address all relevant issues in a factual and coherent manner, based on a clear audit trail. Disclose any relevant assumptions and make appropriate references to the accounting and calculation methodologies and data sources used.

Transparency relates to the degree to which information on the processes, procedures, assumptions, and limita- tions of the GHG inventory are disclosed in a clear, factual, neutral, and understandable manner based on clear documentation and archives (i.e., an Audit Trail).

• Information needs to be recorded, compiled, and analyzed in a way that enables internal reviewers and external verifiers to attest to its credibility.
• Specific exclusions or inclusions need to be clearly identified and justified
• Assumptions disclosed, and
• Appropriate references provided for the methodologies applied and the data sources used.

The information should be sufficient to enable a third party to derive the same results if provided with the same source data. A transparent report will provide a clear understanding of the issues in the context of the reporting company and a meaningful assessment of performance. An independent external verification is a good way of ensuring transparency and determining that an appropriate audit trail has been established and documentation provided.

Cities

Activity Data, GHG Emissions Sources, emission factors, and accounting methodologies require adequate documentation and disclosure to enable verification. The information should be sufficient to allow individuals outside of the inventory process to use the same source data and derive the same results. All exclusions shall be clearly identified, disclosed and justified.

The Accuracy Principle

Projects

Reduce uncertainties as much as is practical.

Uncertainties with respect to GHG measurements, estimates, or calculations should be reduced as much as is practical, and measurement and estimation methods should avoid bias. Acceptable levels of uncertainty will depend on the objectives for implementing a GHG project and the intended use of quantified GHG reductions. Greater accuracy will generally ensure greater credibility for any GHG reduction claim. Where accuracy is sacrificed, data and estimates used to quantify GHG reductions should be conservative.

Companies

Ensure that the quantification of GHG emissions is systematically neither over nor under actual emissions, as far as can be judged, and that uncertainties are reduced as far as practicable. Achieve sufficient accuracy to enable users to make decisions with reasonable confidence as to the integrity of the reported information.

Data should be sufficiently precise to enable intended users to make decisions with reasonable assurance that the reported information is credible. GHG measurements, estimates, or calculations should be systemically neither over nor under the actual emissions value, as far as can be judged, and that uncertainties are reduced as far as practicable. The quantification process should be conducted in a manner that minimizes uncertainty. Reporting on measures taken to ensure accuracy in the accounting of emissions can help promote credibility while enhancing transparency.

Cities

The calculation of GHG emissions shall not systematically overstate or understate actual GHG emissions. Accuracy should be sufficient enough to give decision makers and the public reasonable assurance of the integrity of the reported information. Uncertainties in the quantification process shall be reduced to the extent that it is possible and practical.

The Conservatism Principle

Use conservative assumptions, values, and procedures when GHG Accounting Uncertainty is high

GHG reductions should not be overestimated. Where data and assumptions are uncertain and where the cost of measures to reduce uncertainty is not worth the increase in accuracy, conservative values and assumptions should be used. Conservative values and assumptions are those that are more likely to underestimate than overestimate GHG reductions.

Issues and Challenges

• Tradeoffs: Within the requirements of the GHG Protocol standard, an entity will need to make important decisions in terms of setting the inventory boundary, choosing calculation methods, deciding whether to include additional scope 3 sources, etc. Tradeoffs between the principles may be required based on the objectives or needs of the entity and its operating context. For example, achieving a complete inventory may at times require using less accurate data. Over time, as both the accuracy and completeness of GHG data increase, the need for tradeoffs between these accounting principles will likely diminish.
• Conservatism: is explicitly only a principle of Project Protocol. Subsequent Standards (Corporate / Financial Institutions) have removed the conservatism principle

See Also

• PCAF GHG Accounting and Reporting Requirements