<pubnumber>430K05005</pubnumber>
<title>Climate Leaders Greenhouse Gas Inventory Protocol Design Principles</title>
<pages>99</pages>
<pubyear>2005</pubyear>
<provider>NEPIS</provider>
<access>online</access>
<origin>PDF</origin>
<author></author>
<publisher></publisher>
<subject></subject>
<abstract></abstract>
<operator>mja</operator>
<scandate>08/06/09</scandate>
<type>single page tiff</type>
<keyword></keyword>
CLIMATE LEADERS GREENHOUSE GAS INVENTORY PROTOCOL
Design Principles
CLIMATEr
U.S. Environmental Protection Agency
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The Climate Leaders Greenhouse Gas Inventory Protocol is based on the Greenhouse Gas Protocol (GHG Protocol)
developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development
(WBCSD). The GHG Protocol consists of a corporate accounting and reporting standard and separate calculation
tools. The Climate Leaders Greenhouse Gas Inventory Protocol is an effort by EPA to enhance the GHG Protocol to
fit more precisely what is needed for Climate Leaders. The Climate Leaders Greenhouse Gas Protocol consists of the
following components:
• Design Principles
• Core Modules
• Optional Modules
All changes and additions to the GHG Protocol made by Climate Leaders are summarized in the Climate Leaders
Greenhouse Gas Inventory Protocol Design Principles.
For more information regarding the Climate Leaders Program, visit us on the web at www.epa.gov/climateleaders
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Design Principles
Table of Contents i
Abbreviations and Acronyms v
Introduction vii
Overview and Goals of the Climate Leaders Program vii
Overview of Climate Leaders Greenhouse Gas Inventory Protocol viii
Relationship to the WRI/WBCSD GHG Protocol viii
Changes ix
Additions x
Chapter 1: GHG Accounting and Reporting Principles 1
Relevance 1
Completeness 2
Consistency 3
Transparency 3
Accuracy 4
Chapter 2: Business Goals and Inventory Design 5
Chapter 3: Setting Organizational Boundaries 6
Equity Share Approach 6
Control Approach 8
Financial Control 8
Operational Control 8
Leased Assets, Outsourcing, and Franchises 9
Using Equity Approach or Financial Control 9
Using Operational Control 9
Consolidation at Multiple Levels 10
State-Ownership 10
Double Counting 10
Contracts That Cover GHG Emissions 10
Using the Equity Share or Control Approach 11
CLIMATE LEADERS GHG INVENTORY PROTOCOL •
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Design Principles
Chapter 4: Setting Operational Boundaries 15
Emissions Categorization 15
Core Emissions Reporting 16
Core Emissions Reporting - Direct Emissions 16
Core Emissions Reporting - Indirect Emissions 17
Optional Emissions Reporting 20
Double Counting 22
Chapter 5: Tracking Emissions Over Time 23
Choosing a 
Base
Year 23
Recalculating Base Year Emissions 23
Timing of Recalculations for Structural Changes 24
Recalculations for Changes in Calculation Methodology or Improvements in
Data Accuracy 24
No Base Year Emissions Recalculations for Facilities that Did Not Exist in the Base Year ...25
No Recalculation for "Outsourcing/Insourcing" if Reported Under Core Indirect and/or
Optional Emissions 25
No Recalculation for Organic Growth or Decline 25
Chapter 6: Identifying and Calculating GHG Emissions 3O
Identify GHG Emissions Sources 30
Select an Emissions Calculation Approach 30
Collect Activity Data and Choose Emissions Factors 31
Apply Quantification Methodology to Estimate GHG Emissions 32
Structure of Guidance Documents 32
CC>2-equivalent and Global Warming Potential 34
Chapter 7: Managing Inventory Quality 36
An Inventory Program Framework 36
Implementing an Inventory Management Plan 37
Practical Measures for Implementation 39
Inventory Quality and Inventory Uncertainty 41
Chapter 8: Tracking Progress Towards the
GHG Reduction Goal 44
Overview 44
Corporate-Wide GHG Emissions 44
Offsets 44
Accounting for Emissions from Electricity/Steam Sales 45
• CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Chapter 9: Reporting GHG Emissions 46
GHG Inventory Reporting Requirements Overview 46
Reporting Requirements and Technical Assistance 46
GHG Accounting Methods and Systems - Inventory Management Plan 48
Annual GHG Inventory Summary and Goal Tracking Form 48
Review Process 48
Third-Party Verification 50
Technical Assistance to Complete Base Year Reporting 52
Ongoing Technical Assistance 52
Corporate Data Management Approaches 53
Roll-Up GHG Emissions Data to Corporate Level 53
Centralized Approach: Individual Facilities Report Activity/Fuel Use Data 53
Decentralized Approach: Individual Facilities Calculate GHG Emissions Data 53
Chapter 1O: Verification of GHG Emissions 55
Internal Assurance 55
The Concept of Materiality 55
Selecting a Verifier 56
Preparing for GHG Verification 57
IMP Checklist 57
Chapter 11: Guidance on Setting a GHG Reduction Goal—58
Goal Evaluation Considerations 58
Goal Evaluation Methodology 58
Defining Projected Sector Benchmarks for GHG Emissions Performance 59
Choosing a Key Performance Indicator for Normalized Goals 59
Reporting and Goal Tracking 59
Absolute and Intensity Targets 60
Identifying GHG Reduction Opportunities 61
CLIMATE LEADERS GHG INVENTORY PROTOCOL •
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Design Principles
Appendices
1 GHG Emissions Sources by Sector 64
2 Unit Conversions 68
3 IMP Checklist 71
4 Annual GHG Inventory Summary and Goal Tracking Form 77
Glossary of Terms 81
Tables
3-1 Financial Accounting Categories 7
3-2 Holland Industries Organizational Structure and GHG Emissions Accounting 14
4-1 Relationship of Climate Leaders to GHG Protocol Reporting Scope Terminology 16
5-1 Basic Rules for Base Year Emissions Recalculations 26
6-1 Example Data Collection Roadmap 31
6-2 Overview of GHG Guidance Documents Currently Available Through
Climate Leaders 33
6-3 Gas Atmospheric Lifetime GWP 34
7-1 Fundamentals of Inventory Development 37
7-2 Generic Quality Management Measures 38
11-1 Comparison of Absolute and Intensity Targets 60
11-2 Steps in Setting and Tracking Performance Toward a GHG Target 63
Figures
3-1 Defining the Organizational Boundary of Holland Industries 13
4-1 Emissions Reporting From the Purchase and Subsequent Use or Sale of Electricity 18
4-2 GHG Accounting from the Sale and Purchase of Electricity 19
5-1 Base Year Emissions Recalculation for an Acquisition 27
5-2 Base Year Emissions Recalculation for a Divestment 28
5-3 Acquisition of a Facility That Came Into Existence After the Base Year Was Set 29
9-1 Reporting Requirements Flow 47
9-2 Sample Onsite IMP Review Schedule 51
11-1 Opportunities for GHG Reduction 61
iv • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Abbreviations and Acronyms
AC Air Conditioning
BLS Bureau of Labor Statistics
COM Clean Development Mechanism
CEMS Continuous Emission Monitoring System
CH4 Methane
CER Certified Emission Reduction
CCAR California Climate Action Registry
CCX Chicago Climate Exchange
CC>2 Carbon Dioxide
CC>2-eq Carbon Dioxide Equivalent
EF Emission Factor
EHS Environmental Health and Safety
EPA U.S. Environmental Protection Agency
EPER European Pollutant Emission Register
EU ETS European Union Emissions Allowance Trading Scheme
GHG Greenhouse Gas
GAAP Generally Accepted Accounting Principles
GWP Global Warming Potential
HFCs Hydrofluorocarbons
IMP Inventory Management Plan
IPCC Intergovernmental Panel on Climate Change
IPIECA International Petroleum Industry Environmental Conservation Association
IPM Integrated Planning Model
ISO International Standards Organization
JI Joint Implementation
KPI Key Performance Indicator
MWh Megawatt-hour
N20 Nitrous Oxide
NEMS National Energy Modeling System
NGO Non-Governmental Organization
NOX Nitrous Oxides
PFCs Perfluorocarbons
QA/QC Quality Assurance/Quality Control
SFg Sulfur Hexafluoride
T&D Transmission and Distribution
UKETS United Kingdom Emission Trading Scheme
UNFCCC United Nations Framework Convention on Climate Change
WBCSD World Business Council for Sustainable Development
WRI World Resources Institute
CLIMATE LEADERS GHG INVENTORY PROTOCOL • v
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Design Principles
Introduction
Overview and Goals
of the Climate
Leaders Program
Climate Leaders is an EPA industry-gov-
ernment partnership that works with
companies to develop long-term com-
prehensive climate change strategies. Partners
set a corporate-wide greenhouse gas (GHG)
reduction goal and inventory their emissions to
measure progress. By reporting inventory data
to EPA, Partners create a lasting record of their
accomplishments. Partners also identify them-
selves as corporate environmental leaders and
strategically position themselves as climate
change policy continues to unfold.
Climate Leaders Partners commit to:
• Develop a corporate-wide GHG inventory of
all sources of the six major gases (CC>2, CH4,
N20, HFCs, PFCs, and SF6) using the Climate
Leaders GHG Inventory Protocol.
• Set an aggressive corporate-wide GHG emis-
sions reduction goal to be achieved over the
next 5 to 10 years.
• Develop a corporate GHG inventory manage-
ment plan.
• Annually report inventory data and docu-
ment progress towards their reduction goal.
• Publicize their participation, reduction
pledge, and accomplishments achieved
through the program.
In return, EPA provides:
Recognition
• Press events
• Articles and public service announcements
in business and trade publications
• Speaking engagements at industry
conferences
• Case studies highlighting Partner
achievements
Technical Assistance
• Assistance developing a GHG inventory
• Review of Partner's inventory management
plan
• Assistance setting a GHG reduction goal
• Peer exchange through Climate Leaders
Partner meetings
Credibility
• A credible, transparent GHG reporting mech-
anism that will develop with the science
• Assurance that Partners have created a
high-quality GHG management process
CLIMATE LEADERS GHG INVENTORY PROTOCOL • vi
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Design Principles
Overview of Climate
Leaders Greenhouse
Gas Inventory
Protocol
The Climate Leaders GHG Inventory Protocol
defines how Partners inventory and report
their GHG emissions. The Protocol consists of
three major parts:
1. Climate Leaders Design Principles
(this document)
The Design Principles of the Protocol
include overall guidance on issues such as
defining inventory boundaries, identifying
GHG emission sources, defining and adjust-
ing a base year, reporting requirements, and
goal-setting guidance. The Design Principles
also define the minimum level of data
Partners must report under Climate Leaders
and various optional emission and reduc-
tion sources that a Partner may elect to
report.
2. Core Modules
(separate guidance documents)
The Core Modules have specific guidance
pertaining to the calculation and accounting
of GHG emissions from core emissions. Core
emissions include "direct" emission sources
(sources that a Partner owns or controls)
and "indirect" emissions associated with
electricity purchased. All Partners are
required, as a minimum, to report all core
emissions.
3. Optional Modules
(separate guidance documents)
The Optional Modules provide GHG
accounting guidance pertaining to other
emissions sources that the Partner has
some influence over but are beyond the
Partner's core emissions. These sources
may include activities such as employee
commuting programs, off-site waste
disposal, or carbon offsets investments.
Relationship to the
WRI/WBCSD GHG
Protocol
The Climate Leaders GHG Inventory Protocol is
based on an existing corporate GHG inventory
protocol developed by the World Resources
Institute (WRP) and the World Business Council
for Sustainable Development (WBCSD).
Through a collaborative process involving rep-
resentatives from industry, government, and
non-governmental organizations (NGOs), WRI
and WBCSD developed generally accepted
accounting practices for measuring and report-
ing corporate greenhouse gas emissions. The
WRI/WBCSD GHG Protocol Corporate Standard
(GHG Protocol) consists of a corporate
accounting and reporting standard and sepa-
rate calculation tools. The Design Principles are
based on the GHG Protocol corporate account-
ing and reporting standard. They provide
detailed guidance, enhanced clarity, and a
streamlined document to fit more precisely the
needs of the Climate Leaders program. These
Design Principles also include specific report-
ing requirements, and goal-setting guidance
specific to Climate Leaders Partners.
V I I
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Design Principles
All changes and additions to the GHG
Protocol made by EPA are identified using
italics beginning in Chapter 1 of this docu-
ment. These changes and additions are
summarized below:
Changes
• Merged standards and guidance sections to
eliminate redundancy, streamline, and focus
information.
• References to other reporting or trading
programs are removed.
• GHG Accounting and Reporting Principles
chapter:
* Defines goals as achieving GHG reduc-
tion goal
* Notes that the scope should be, at a
minimum, all U.S. operations
• Setting Organizational Boundaries chapter:
* Now includes section on leases
• Setting Operational Boundaries chapter:
* Introduces Climate Leaders core direct,
core indirect, and optional emissions
* Section on leases moved to Setting
Organizational Boundaries chapter
• Tracking Emissions Over Time chapter:
* Defines the base year as the most cur-
rent year that a Climate Leaders Partner
has data available
* Adds Table 5-1 to clarify rules for adjust-
ing base year emissions.
Identifying and Calculating GHG Emissions
chapter:
* Emphasizes Climate Leaders core and
optional module guidance instead of
GHG Protocol calculation tools
* Section on rolling up data moved to
Reporting chapter
* Table 6-1, Example Data Collection
Roadmap added
* Reference information on C02-equivalent
and Global Warming Potential added
Managing Inventory Quality chapter:
* Adds references for uncertainty analysis
* Adds Table 7-1 to efficiently present
information originally presented as text
in GHG Protocol
* Reorganizes chapter to streamline
material
Tracking Progress Towards the GHG
Reduction Goal chapter:
* Was previously titled Accounting for
GHG Reductions
* Expands the GHG Protocol section to
address achieving the reduction goal
and relevant accounting
* Adds a section on accounting for
project-based offsets
* Enhances offsets and credits for mean-
ingfulness and clarity
* Graphics added
CLIMATE LEADERS GHG INVENTORY PROTOCOL • ix
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Design Principles
Reporting GHG Emissions chapter:
* Clarifies Climate Leaders requirements
* Now includes roll-up of data to corpo-
rate level
Guidance on Setting a GHG Reduction
Goal chapter:
* Provides guidance specific to the
Climate Leaders program on the target
type, target base year, target time peri-
od, use of project offsets or credits,
target level, and progress against the
target
* Figure 11-1 added to illustrate methods
for achieving the goal
Appendix 1:
* Reflects the Climate Leaders Core and
Optional Modules
Additions
• New graphics to enhance clarity, meaning-
fulness, and usability
• A section on Climate Leaders Reporting
requirements
• Appendix 2: provides useful information on
unit conversion and fuel properties
• Appendix 3: Climate Leaders Inventory
Management Plan checklist
• Appendix 4: Climate Leaders Annual
Reporting Form
The Climate Leaders Core and Optional
Modules are based on the WRI/WBCSD calcula-
tion tools. The differences between the
modules and the tools are summarized below:
• All Climate Leaders Core Modules recom-
mend U.S. specific emission factors for U.S.
facilities, as opposed to the International
Panel on Climate Change (IPCC) factors
given by WRI/WBCSD.
• The Climate Leaders Modules provide, in
some instances, guidance on the preferred
choice of methods and activity data for
reporting under Climate Leaders.
x • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
GHG Accounting and Reporting
Principles
As with financial reporting, generally
accepted GHG accounting and report-
ing principles are intended to
underpin and guide GHG accounting and
reporting to ensure that the reported informa-
tion represents a faithful, true, and fair account
of an organization's GHG emissions.
GHG accounting and reporting practices are
evolving and are new to many businesses; how-
ever the principles are derived in part from
generally accepted financial accounting and
reporting principles. The principles, listed
below and described in more detail in this
chapter, reflect the outcome of a collaborative
process involving stakeholders from a wide
range of technical, environmental, and account-
ing disciplines.
• Relevance. Ensure the GHG inventory
appropriately reflects the GHG emissions of
the company and serves the decision-mak-
ing needs of users—both internal and
external to the company.
• Completeness. Account for and report all
GHG emissions sources and activities within
the chosen inventory boundary. Disclose
and justify any specific exclusions.
• Consistency. Use consistent methodologies
to allow meaningful comparison of emis-
sions over time. Transparently document
any changes to the data, inventory bound-
ary, methods, or any other relevant factors
in the time series.
• Transparency. Address all relevant issues in
a factual and coherent manner, based on a
clear audit trail. Disclose any relevant
assumptions and make appropriate refer-
ences to the accounting and calculation
methodologies and data sources used.
• Accuracy. Ensure that the quantification of
GHG emissions is systematically neither
over nor under true emissions, as far as can
be judged, and that uncertainties are
reduced as far as practicable. Achieve suffi-
cient accuracy to enable users to make
decisions with reasonable assurance as to
the integrity of the reported information.
Relevance
For an organization's GHG report to be relevant
means that it contains the information that
users—both internal and external to the com-
pany—need for their decision making. An
important aspect of relevance is the selection
of an appropriate inventory boundary that
reflects the substance and economic reality of
the company's business relationships, not
merely its legal form. The choice of the invento-
ry boundary is dependent on the
characteristics of the company, the intended
purpose of the information, and the needs of
the users. When choosing the inventory bound-
ary, a number of factors should be considered,
such as:
• Organizational structures: control (opera-
tional and financial), ownership, legal
agreements, joint ventures, etc. Climate
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 1
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Design Principles
Leaders Partners inventory GHG emissions
from all U.S. operations, and have the option
of including international operations as well.
• Operational boundaries: onsite and offsite
activities, processes, services, and impacts.
The Core and Optional Modules of the
Climate Leaders program provide guidance on
the types of operations that should be includ-
ed in your inventory.
• Business context: Partners are creating corpo-
rate inventories to design and achieve
entity-wide GHG emissions reduction goals.
Partners may find that the consistency of the
Climate Leaders program with other GHG
management or tracking programs facilitates
use of the inventory for other purposes as
well.
More information on setting appropriate bound-
aries is provided in:
• Chapter 3: Setting Organizational Boundaries
• Chapter 4: Setting Operational Boundaries
Completeness
All relevant emissions sources within the cho-
sen inventory boundary need to be included 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.
An essential component of a complete inventory
is a description of which greenhouse gases are
included. Partners include C02, CH4, N20, SF6,
PFCs, and HFCs to the extent that these gases
exist in their operations.
Sometimes it is tempting to define a minimum
emissions accounting threshold (often referred
to as a 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 underesti-
mate). Although it appears useful in theory, the
practical implementation of such a threshold is
not compatible with the completeness principle
of Climate Leaders. To utilize a materiality spec-
ification, the emissions from a particular source
or activity would have to be quantified to
ensure that 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.
This is not the same as a de minimus for defin-
ing a complete inventory. Instead, Partners need
to make a good faith effort to provide a com-
plete, accurate, and consistent accounting of
their GHG emissions. For cases where emis-
sions cannot be estimated, or are estimated at
an insufficient level of quality, it is important
that this is transparently documented and justi-
fied. Under the Climate Leaders Program, this
doesn't necessarily require a rigorous quantifica-
tion of all sources, but, at a minimum, an
estimate based on available data should be
developed for all sources. Verifiers can deter-
mine the potential impact and relevance of the
exclusion, or lack of quality, on the overall
inventory report. It is important to include as
much information as possible so that the process
of gathering quality data can be refined in later
years. To facilitate completeness, consistency,
and transparency in the data gathering process,
part of the Climate Leaders program includes the
development an Inventory Management Plan.
Development of this plan facilitates better moni-
toring and data gathering of GHG emissions
2 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
sources. More information on completeness is
provided in:
• Chapter 6: Identifying and Calculating GHG
Emissions
• Chapter 7: Managing Inventory Quality
• Chapter 10: Verification of GHG emissions
Consistency
Users of GHG information will want to track and
compare GHG emissions over time to identify
trends and assess the performance of the
reporting company. The consistent application
of accounting approaches, inventory boundary,
and calculation methodologies is essential to
producing comparable GHG emissions data
over time. The GHG information for all opera-
tions 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. A specific
format for reporting the corporate emissions sum-
mary is required for Climate Leaders' Partners so
that data reporting consistency can be main-
tained. Partners who choose to voluntarily report
their facility level data to the Climate Leaders
program may do so using any format they
choose.
More information on this is provided in:
• Chapter 5: Tracking Emissions Over Time
• Chapter 9: Reporting GHG Emissions
Transparency
Transparency relates to the degree to which
information on the processes, procedures,
assumptions, and limitations of the GHG inven-
tory 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, com-
piled, and analyzed in a way that would enable
internal reviewers and external verifiers to
attest to its credibility. Specific exclusions or
inclusions need to be clearly identified and jus-
tified, assumptions disclosed, and appropriate
references provided for the methodologies
applied and the data sources used. The infor-
mation 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 estab-
lished and documentation provided. The
Climate Leaders program provides an Inventory
Management Plan checklist to guide Partners
towards construction of a Inventory Management
Plan, which in turn, provides for a transparent,
verifiable inventory.
More information on this is provided in:
• Chapter 9: Reporting GHG Emissions
• Chapter 10: Verification of GHG Emissions
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 3
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Design Principles
Accuracy
Data should be sufficiently precise to enable
intended users to make decisions with reason-
able assurance that the reported information is
credible. GHG measurements, estimates, or cal-
culations should be systematically neither over
nor under the actual emissions value, as far as
can be judged, and that uncertainties are
reduced as far as practicable. The quantifica-
tion process should be conducted in a manner
that minimizes uncertainty. Use of the calcula-
tion guidance provided in the Climate Leaders
Core Modules, coupled with development of the
Climate Leaders Inventory Management Plan, can
significantly enhance data accuracy and trans-
parency as well as promote credibility.
More information on how to increase your
inventory's accuracy and on how to minimize
data uncertainties is provided in:
• Chapter 7: Managing Inventory Quality
4 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Business Goals and Inventory
Design
Improving your understanding of your com-
pany's GHG emissions by compiling a GHG
inventory makes good business sense.
Companies frequently cite the following five
business goals as reasons for compiling a GHG
inventory:
• Management of GHG risks and identifying
reduction opportunities
• Public reporting and participation in GHG
programs
• Participation in mandatory reporting
programs
• Participation in GHG markets
• Recognition for early voluntary action
Compiling a comprehensive GHG inventory
improves a company's understanding of its
emissions profile and any potential GHG liabili-
ty or "exposure." A company's GHG exposure is
increasingly becoming a management issue in
light of heightened scrutiny by the insurance
industry, shareholders, and the emergence of
environmental policies designed to reduce GHG
emissions. In this context, significant GHG emis-
sions in a company's value chain may result in
increased costs (upstream) or reduced sales
(downstream). Thus, investors may view signifi-
cant indirect emissions upstream or
downstream of a company's operations as
potential liabilities that need to be managed
and reduced. A limited focus on direct emis-
sions from a company's own operations may
miss major GHG risks and opportunities, while
leading to a misinterpretation of the company's
actual GHG exposure.
In general, what gets measured gets managed.
Accounting for emissions can help identify the
most effective reduction opportunities. This
accounting can drive increased materials and
energy efficiencies as well as the development
of new products and services that reduce the
GHG impacts of customers or suppliers. This
can, in turn, reduce production costs and help
differentiate the company in an increasingly
environmentally conscious marketplace.
Conducting a rigorous GHG inventory is also a
prerequisite for setting an internal or public
GHG reduction target and for subsequently
measuring and reporting progress.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 5
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Design Principles
Setting Organizational
Boundaries
Business operations vary in their legal
and organizational structures; they
include wholly owned operations,
incorporated and non-incorporated joint ven-
tures, subsidiaries, and others. For the
purposes of financial accounting, they are treat-
ed according to established rules that depend
on the structure of the organization and the
relationships among the parties involved. In
setting organizational boundaries, a company
selects an approach for consolidating GHG
emissions and then consistently applies the
selected approach to define those businesses
and operations that constitute the company for
the purpose of accounting and reporting GHG
emissions.
For corporate reporting, two distinct approach-
es can be used to consolidate GHG emissions:
the equity share and the control approaches.
Partners shall account for and report their con-
solidated GHG data according to either
approach as presented below. Under the
Climate Leaders program, companies may
additionally choose to report using both
approaches, and additionally may include
facilities that are neither owned nor controlled.
If the reporting company wholly owns all its
operations, its organizational boundary will be
the same regardless of approach used. For com-
panies with joint operations, the organizational
boundary and the resulting emissions may dif-
fer depending on the approach used. However,
in both wholly owned and joint operations, the
choice of approach may change how emissions
are categorized when operational boundaries
are set (Chapter 4).
Equity Share
Approach
Under the equity share approach, a Partner
accounts for GHG emissions from operations
according to its share of equity in the opera-
tion. The equity share reflects economic
interest, which is the extent of rights a compa-
ny has to the risks and rewards flowing from an
operation. Typically, the share of economic
risks and rewards in an operation is aligned
with the company's percentage ownership of
that operation, and equity share will normally
be the same as the ownership percentage.
Where this is not the case, the economic sub-
stance of the relationship the company has
with the operation will always override the
legal ownership form to ensure that equity
share reflects the percentage of economic inter-
est. The principle of economic substance taking
precedent over legal form is consistent with
international financial reporting standards. The
staff preparing the inventory may therefore
need to consult with the Partner's accounting or
legal staff to ensure that the appropriate equity
share percentage is applied for each joint oper-
ation (refer to Table 3-1 for definitions of
financial accounting categories).
6 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Table 3-1: Financial Accounting Categories
Accounting for GHG Emissions
Control Approach
Accounting
Category
Group
Companies/
Subsidiaries
Associated/
Affiliated
Companies
Proportionally
Consolidated
Joint Ventures
(where partners
have joint finan-
cial control)
Fixed Asset
Investments
Franchises
Definition*
The parent company has the ability to direct the
financial and operating policies of the company
with a view of gaining economic benefits from its
activities. One hundred percent of the subsidiary's
income and expenses, and assets and liabilities are
taken into the parent company's profit and loss
account and balance sheet, respectively. Typically,
a subsidiary is a company whose voting stock is
more than 50 percent owned by another company
(the parent company).
Typically, the parent company owns less than 50 per-
cent of the affiliated company's stock (or otherwise
does not have financial control), but still has influ-
ence over its operations and financial policies. This
includes incorporated and non-incorporated joint
ventures and partnerships over which the parent
company has significant influence, but not financial
control.
A joint venture, partnership, or operation where
each partner accounts for their proportion of the
joint venture's income, expenses, assets, and liabil-
ities. Each partner has an equal financial share of
the operation.
The parent company has neither significant influ-
ence nor financial control. Typically financial
accounting applies the cost/dividend method to
these types of investments. This implies that only
dividends received are recognized as income and
the investment is carried at cost.
A franchise is a separate legal entity, usually not
under the financial or operational control of its fran-
chiser, which gives rights to sell a product or service.
Should the terms of a franchise grant financial or
operational control to the franchiser, then emis-
sions accounting should be consistent with the
rules provided above.
Equity Share
Approach
Equity share
of GHG
emissions
Equity share of
GHG emissions
Equity share of
GHG emissions
0 percent of
GHG emissions
Equity share of
GHG emissions
(if the franchis-
er has equity
rights)
Financial
Control
100 percent of
GHG emissions
0 percent of GHG
emissions
Equity share of
GHG emissions
(e.g., 50% if two
partners, 33.33% if
three partners,
etc.)
0 percent of GHG
emissions
100 percent of
GHG emissions (if
the franchiser has
financial control)
0 percent of
GHG emissions (if
the franchiser does
not have financial
control)
Operational
Control
100 percent of
GHG emissions (if
operational control)
0 percent of
GHG emissions (if no
operational control)
100 percent of
GHG emissions (if
operational control)
0 percent of
GHG emissions (if no
operational control)
100 percent of
GHG emissions (if
operational control)
0 percent of
GHG emissions (if no
operational control)
0 percent of GHG
emissions
100 percent of
GHG emissions (if
operational control)
0 percent of
GHG emissions (if no
operational control)
*http://www.ventureline.com/glossary.asp and the GHG Protocol
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 7
image:
Design Principles
Control Approach
Under the control approach, a Partner accounts
for 100 percent of the GHG emissions from
operations over which it has control. It does
not account for GHG emissions from operations
in which it owns an interest but has no control.
Control can be defined in either financial or
operational terms. When using the control
approach to consolidate GHG emissions, com-
panies shall choose between either the
operational or financial control criteria.
In most cases, whether an operation is con-
trolled by the company or not does not vary
based on whether the financial control or oper-
ational control criterion is used. A notable
exception is the oil and gas industry, which
often has complex ownership/operatorship
structures.
Financial Control
A Partner has financial control over the opera-
tion if the former has the ability to direct the
financial and operating policies of the latter
with a view to gaining economic benefits from
its activities. For example, financial control usu-
ally exists if the company has the right to the
majority of benefits of the operation, without
regard to the manner by which these rights are
conveyed. Similarly, a company is considered
to financially control an operation if it retains
the majority risks and rewards of ownership of
the operation's assets.
Under this criterion, the economic substance of
the relationship between the company and the
operation takes precedence over the legal own-
ership status, so that the company may have
financial control over the operation even if it
has less than a 50 percent interest in that
operation. In assessing the economic substance
of the relationship, the impact of potential
voting rights, including both those held by the
company and those held by other parties, is
also taken into account. This criterion is consis-
tent with international financial accounting
standards; therefore, a company has financial
control over an operation for GHG accounting
purposes if the operation is considered as a
group company for the purpose of financial
consolidation, i.e., if the operation is fully con-
solidated in financial accounts. If this criterion
is chosen to determine control, emissions from
joint ventures where partners have joint finan-
cial control are accounted for based on the
equity share approach (refer to Table 3-1 for
definitions of financial accounting categories).
Operational Control
A Partner has operational control over an oper-
ation if the former or one of its subsidiaries
(refer to Table 3-1 for definitions of financial
accounting categories) 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 facili-
ties, which they operate (i.e., for which they
hold the operating license). It is expected that,
except in very rare circumstances, if the com-
pany 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 percent of emissions from
operations over which it or one of its sub-
sidiaries has operational control.
8 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
image:
Design Principles
It should be emphasized that having opera-
tional control does not mean that a company
necessarily has authority to make all decisions
concerning an operation. For example, big capi-
tal investments will likely require the approval
of all the partners that have joint financial con-
trol. Operational control does mean that a
company has the authority to introduce and
implement its operating policies.
Sometimes a company can have joint financial
control over an operation, but not operational
control. In such cases, the company would
need to look at the contractual arrangements to
determine whether any one of the partners has
the authority to introduce and implement its
operating policies at the operation and thus
has the responsibility to report emissions
under operational control. If the operation itself
will introduce and implement its own operating
policies, the partners with joint financial con-
trol over the operation will not report any
emissions under operational control.
Table 3-2 on page 14 illustrates the selection of
a consolidation approach at the corporate level
and the identification of those joint operations
that should be in the organizational boundary
depending on the choice of the consolidation
approach.
Leased Assets,
Outsourcing, and
Franchises
The selected consolidation approach (equity
share or one of the control approaches) is also
applied to account for and characterize direct
and indirect GHG emissions from contractual
arrangements such as leased assets, outsourc-
ing, and franchises. Specific guidance on leased
assets is provided below:
Using Equity Approach or
Financial Control
A lessee only accounts for emissions from
leased assets that are treated as wholly owned
assets in financial accounting and are recorded
as such on the balance sheet (i.e., finance or
capital leases). A finance/capital lease is one
that transfers substantially all the risks and
rewards of ownership to the lessee. All leased
assets that do not meet the criteria for
finance/capital leases are considered operating
leases.
Guidance on which leased assets are consid-
ered operating leases and which are considered
finance/capital leases should be obtained from
the company accountant.
Using Operational Control
A lessee only accounts for emissions from
leased assets that it operates (i.e., if the opera-
tional control criterion applies). This applies to
both finance/capital leases and operating leases.
Climate Leaders assumes operational control of a
lease applies if the lessee has the ability to track
energy use and/or emissions from the lease.
The ability of a Partner to track energy use
and/or emissions from its leases includes the
following methods:
• The Partner pays the utility bill for leased
space or the fuel bill for leased vehicles and
has data on the actual amount of fuel and
electricity used by the lease.
• The Partner leases part of a larger building
and does not pay its own utility bill. However,
it can get the fuel and electricity use for the
entire building from the landlord, and there is
an accurate method to allocate total energy
use/emissions to the Partner's leased space
(e.g., separate electricity meter for the
Partner's space).
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 9
image:
Design Principles
• The Partner leases many homogeneous sites
(e.g., commercial and retail space) that repre-
sent a significant portion of their inventory
and for which the individual sites have data
on the amount of fuel and electricity used.
However, it would be difficult to get the data
from all the decentralized leased sites. In this
case, the Partner could do a statistical sam-
pling of sites to get emissions and extrapolate
those results to the remainder of its leased
sites.
For the last two methods, the Partner should be
careful when tracking changes in emissions for
these leases over time. In the case of allocating
energy use from the entire building, the alloca-
tion method should allow for tracking changes
made to the Partners leased space only (e.g., not
just allocating based on a percentage of total
building floor space). In the case of like sites, the
Partner should ensure that emissions reductions
or increases are actually happening in all sites
and not just the ones measured for the statistical
sample, or that the statistical sample and analy-
sis is accurate enough to account for differences
at different leased sites.
A Partner can also choose to include emissions
from leases that fall outside of its organizational
boundaries. These emissions would be report-
ed under the optional emissions source category
on the Climate Leaders Annual GHG Inventory
Summary and Goal Tracking Form.
Consolidation at
Multiple Levels
The consolidation of GHG emissions data will
only result in consistent data if all levels of the
organization follow the same consolidation
policy. In the first step, the management of
the parent company has to decide on a
consolidation approach (i.e., either the equity
share or the financial or operational control
approach). Once a corporate consolidation
policy has been selected, it is applied to all
levels of the organization.
State-Ownership
The rules provided in this chapter can also be
applied to account for GHG emissions from
industry joint operations that involve state
ownership or a mix of private/state ownership.
Double Counting
When two or more companies hold interests in
the same joint operation and use different con-
solidation approaches (e.g., Company A follows
the equity share approach while Company B
uses the financial control approach), emissions
from that joint operation could be double
counted. This may not matter for voluntary cor-
porate public reporting, including the Climate
Leaders program, as long as there is adequate
disclosure from the company on its consolida-
tion approach (via the Inventory Management
Plan).
Contracts That Cover
GHG Emissions
To clarify ownership (rights) and responsibility
(obligations) issues, companies involved in
joint operations may draw up contracts that
specify how the ownership of emissions or the
responsibility for managing emissions and asso-
ciated risk is distributed between the parties.
Where such arrangements exist, companies
may optionally provide a description of the
contractual arrangement and include informa-
tion on allocation of CC>2 related risks and
obligations (see Chapter 9).
10 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Using the Equity
Share or Control
Approach
Climate Leaders makes no recommendation as to
whether reporting should be based on the equity
share or control approach, however whichever
method is selected, it should be applied consis-
tently throughout the inventory. The reporting
method a Partner chooses should be clearly stat-
ed in the company's Inventory Management Plan.
Companies should decide on the approach best
suited to their business activities and GHG
accounting and reporting requirements.
Examples of how these may drive the choice of
approach include the following:
• Reflection of commercial reality. It can be
argued that a company that derives an eco-
nomic profit from a certain activity should
take ownership for any GHG emissions gen-
erated by the activity. This is achieved by
using the equity share approach, because
this approach assigns ownership for GHG
emissions on the basis of economic interest
in a business activity. The control approach-
es do not always reflect the full GHG
emissions portfolio of a company's business
activities, but have the advantage that a
company takes full ownership of all GHG
emissions that it can directly influence and
reduce.
• Liability and risk management. While
reporting and compliance with regulations
should most likely continue to be based
directly on operational control, the ultimate
financial liability will often rest with the
group company that holds an equity share
in the operation or has financial control
over it. Hence, for assessing risk, GHG
reporting on the basis of equity share and
financial control approaches provides a
more complete picture. The equity share
approach is likely to result in the most com-
prehensive coverage of liability and risks. In
the future, Partners might incur liabilities for
GHG emissions produced by joint operations
in which they have an interest, but over
which they do not have financial control.
For example, a company that is an equity
shareholder in an operation but has no
financial control over it might face demands
by the companies with a controlling share to
cover its requisite share of GHG compliance
costs.
Alignment with financial accounting.
Future financial accounting standards may
treat GHG emissions as liabilities and emis-
sions allowances/credits as assets. To
assess the assets and liabilities a company
creates by its joint operations, the same
consolidation rules that are used in financial
accounting should be applied in GHG
accounting. The equity share and financial
control approaches result in closer align-
ment between GHG accounting and financial
accounting.
Management information and performance
tracking. For the purpose of performance
tracking, the control approaches seem to be
more appropriate because managers can
only be held accountable for activities under
their control.
Cost of administration and data access. The
equity share approach can result in higher
administrative costs than the control
approach, since it can be difficult and time
consuming to collect GHG emissions data
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 11
image:
Design Principles
from joint operations not under the control
of the reporting company. Partners are likely
to have better access to operational data
(and, therefore, greater ability to ensure that
it meets minimum quality standards) when
reporting on the basis of control.
• Completeness of Reporting. Companies
might find it difficult to demonstrate com-
pleteness of reporting when the operational
control criterion is adopted, because there
are unlikely to be any matching records or
lists of financial assets to verify the opera-
tions that are included in the organizational
boundary.
The following example, illustrated in Figure 3-1
and Table 3-2, illustrates how to account for
GHG emissions from the various wholly owned
and joint operations under both the equity
share and control approaches.
Example
Holland Industries is a chemicals group
comprising a number of companies/joint
ventures active in the production and
marketing of chemicals.
In setting its organizational boundary,
Holland Industries first decides whether to
use the equity or control approach for con-
solidating GHG data at the corporate level.
It then determines which operations at the
corporate level meet its selected consolida-
tion approach. Based on the selected
consolidation approach, the consolidation
process is repeated for each lower opera-
tional level. In this process, GHG emissions
are first apportioned at the lower opera-
tional level (subsidiaries, associate, joint
ventures, etc.) before they are consolidated
at the corporate level. Figure 3-1 presents
the organizational boundary of Holland
Industries based on the equity share and
control approaches.
Note that in this example, Holland America
(not Holland Industries) holds a 50 percent
interest in BGB and a 75 percent interest in
IRW. If the activities of Holland Industries
itself produce GHG emissions (e.g., emis-
sions associated with electricity use at the
head office), then these emissions should
also be included in the consolidation at 100
percent.
12 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
image:
Design Principles
Figure 3-1: Defining the Organizational Boundary of
Holland Industries
HOLLAND
INDUSTRIES
... JP9%... -
..JOP.%....
100%
HOLLAND
SWITZERLAND
JPfW,,,.
100%
HOLLAND
AMERICA
BGB
(§0% OWNED]
33,3%
KAHUNA
CHEMICALS
J3',"a
QUICIFIX
NALLO
0%
SYNTAL
. B2 25%
100%
IRW
(75% OWNED)
— Equity share
— Operational control
•• Financial control
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 13
image:
D
esign Princi
pies
Table 3-2: Holland Industries Organizational
GHG Emissions Accounting
Structure and
Emissions Accounted for by
Holland Industries
Wholly
Owned and
Joint
Operations
of Holland
Holland
Switzerland
Holland
America
BGB
IRW
Kahuna
Chemicals
QuickFix
Nallo
Syntal
Legal Structure
and Partners
Incorporated
company
Incorporated
company
Joint venture,
partners have joint
financial control;
the other partner is
Rearden
Subsidiary of
Holland Industries
Non-incorporated
joint venture;
partners have joint
financial control;
two other partners:
ICT and BCSF
Incorporated joint
venture; the other
partner is Majox
Incorporated joint
venture; the other
partner is Nagua
Co.
Incorporated
company,
subsidiary of
Erewhon Co.
Economic
Interest
Held by
Holland
Industries
100%
83%
50%
owned by
Holland
America
75%
owned by
Holland
America
33.3%
43%
56%
1%
Control of
Operating
Policies
Holland
Industries
Holland
Industries
Rearden
Holland
America
(subsidiary
of Holland
Industries)
Holland
Industries
Holland
Industries
Nallo
Erewhon
Co.
Treatment in Holland
Industries' Financial
Accounts
Wholly owned subsidiary
Subsidiary
Via Holland America
Via Holland America
Proportionally
consolidated joint venture
Subsidiary
(Holland Industries has
financial control because it
treats QuickFix as a
subsidiary in its financial
accounts)
Associated company
(Holland Industries does
not have financial control
because it treats Nallo as
an associated company in
its financial accounts )
Fixed asset investment
Equity
Share
Approach
100%
83%
41.5%
(83% x
50%)
62.25%
(83% x
75%)
33.3%
43%
56%
0%
Control Approach
100% for
operational control
100% for financial
control
100% for
operational control
100% for financial
control
0% for operational
control
50% for financial
control (50% x
100%)
100% for
operational control
100% for financial
control
100% for
operational
control
33% for financial
control
100% for
operational
control
100% for financial
control
0% for operational
control
0% for financial
control
0% for operational
control
0% for financial
control
14 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Setting Operational
Boundaries
After a company has determined its
organizational boundaries in terms of
the operations that it owns or con-
trols, it then sets its operational boundaries.
This involves identifying the emissions associ-
ated with its operations and categorizing them
as core direct, core indirect, and optional emis-
sions. The Climate Leaders program requires
Partners to report, at a minimum, all core direct
and indirect emissions. Partners have the option
of including other emissions sources from
upstream and downstream activities (optional
emissions), if a credible emissions accounting
methodology exists.
The selected operational boundary is then uni-
formly applied to identify and categorize direct
and indirect emissions at each operational
level. The established organizational and opera-
tional boundaries together constitute a
Partner's inventory boundary.
Emissions
Categorization
Emissions may be either directly or indirectly
derived from Partner activities. Classifying emis-
sions as either direct or indirect is dependent
on the consolidation approach (equity share or
control) selected for setting the organizational
boundary (Chapter 3). Direct emissions versus
indirect emissions are defined as follows:
• Direct emissions are from sources that are
owned or controlled by the company, e.g.,
emissions from combustion in owned or
controlled boilers, furnaces, vehicles; emis-
sions from chemical production in owned or
controlled process equipment.
Direct CC>2 emissions from the combustion
of biomass or of GHG emissions not covered
by this protocol (e.g., chlorofluorocarbons
(CFCs), nitrous oxide (NOX), etc.) shall not
be included as part of core direct emissions,
but may be reported separately.
• Indirect emissions are a consequence of
the activities of the company, but occur at
sources owned or controlled by another
company. Indirect emissions for the
purchaser are characterized as direct
emissions for the facility where the
emissions are generated. An example of
indirect emissions is the emissions from
the generation of purchased electricity
consumed by a company.
Reporting for the Climate Leaders Program is
delineated by core and optional emissions as
described below. These categories are designed
to provide a uniform basis to allow companies to
compare their own performance over time, and
to enhance transparency. Core emissions include
those emissions included under Scope 1 and 2 of
the WRI/WBCSD GHG Protocol. Optional emis-
sions include those emissions included under
Scope 3 as well as under "optional" information
in the WRI/WBCSD GHG Protocol. Table 4-1
depicts this relationship. Partners shall separately
account for and report core direct and indirect
emissions at a minimum.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 15
image:
Design Principles
Table 4-1: Relationship of Climate Leaders to
GHG Protocol Reporting Scope Terminology
Climate Leaders
WRI/WBCSD GHG Protocol
Core Emissions (Direct and Indirect)
Scopes 1 and 2
Optional Emissions
Scope 3 and optional information
Core direct and indirect emissions are carefully
defined to ensure that two or more companies
do not account for the same emissions in the
same scope, as defined in the GHG protocol.
Core Emissions
Reporting
Core emissions reporting includes both direct and
indirect emissions. Core direct emissions result
from stationary, mobile, and process-related
sources at a facility. Core indirect emissions are
emitted as a consequence of the import of elec-
tricity, heating/cooling, or steam. Partners should
account for and report GHG information sepa-
rately for each emissions category. To facilitate
comparability over time or to aid transparency,
Partners are encouraged to further subdivide
emissions data, e.g., by business units/facilities,
country, source types (production of electricity
or steam, transportation, processes, etc.), and
activity type (production of electricity, con-
sumption of electricity, generation of purchased
electricity that is sold to end users, etc.).
The components of core direct and indirect emis-
sions are described in more detail below:
Core Emissions Reporting -
Direct Emissions
Core direct emissions are GHG emissions from
sources that are owned or controlled by the
reporting company. All Partner companies must
report core direct emissions according to their
chosen organizational boundary approach. Core
direct emissions are principally the result of the
following activities undertaken by the company:
• Generation of electricity, heat, or steam.
For example, fossil fuel combustion in
stationary sources such as boilers,
furnaces, turbines, or generators. These
emissions are reported without netting sale of
own-generated electricity to another reporting
company. These emissions do not include
emissions from the combustion of biomass,
those should be reported separately.
• Physical or chemical processing. Most of
these emissions result from manufacture
or processing of chemicals and other
materials, e.g., cement, aluminum, adipic
acid, waste processing, and ammonia
manufacture.
• Transportation of materials, products,
waste, and employees. These emissions
result from the combustion of fuels in com-
pany-owned/controlled mobile combustion
sources, such as trucks, trains, ships, air-
planes, buses, and cars (leased mobile
sources need to be evaluated as described
in Chapter 3).
• Fugitive emissions. These emissions result
from intentional or unintentional releases,
e.g., equipment leaks from joints, seals,
16 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
image:
Design Principles
packing, and gaskets; methane emissions
from coal mines and venting; HFC emissions
from refrigeration and air conditioning
equipment; and CH4 leakages from gas
transport.
Exported carbon content sequestered in products
should not be reported as core direct emissions.
Core Emissions Reporting -
Indirect Emissions
Core indirect emissions are associated with the
generation of GHG emissions from sources not
owned or controlled by the reporting company
and are specifically the result of the following
activities:
• Imported/purchased electricity,
heating/cooling, or steam that a company
purchases or otherwise brings into the
organizational boundaries of the reporting
company (i.e., not self-generated) for its
own use.
For many companies, purchased electricity
represents one of the largest sources of
GHG emissions and the most significant
opportunities to reduce these emissions.
Companies can reduce their use of electrici-
ty by investing in energy efficient
technologies and energy conservation.
Additionally, emerging green power markets
(i.e., renewable energy sources such as
solar photovoltaic panels, geothermal ener-
gy, landfill gas, and wind turbines) provide
opportunities for some companies to switch
to less GHG intensive sources of electricity.
Companies can also install an efficient
onsite co-generation plant if it replaces the
purchase of more GHG intensive electricity
from the grid or electricity supplier. Core
indirect reporting facilitates the transparent
accounting of the GHG emissions and bene-
fits associated with such opportunities.
Transmission and Distribution. Electric util-
ity companies often purchase electricity
from independent power generators or the
grid and resell it to end-consumers through
a transmission and distribution (T&D) sys-
tem. A portion of the electricity purchased
by a utility company is consumed (T&D
loss) during its transmission and distribu-
tion to end-consumers.
The reporting company that owns the T&D
lines should report the emissions associat-
ed with the purchased electricity that is
consumed during T&D as core indirect
emissions (i.e., not reported by the end
users, as they do not own or control the
T&D operation where the electricity is con-
sumed, or, therefore, the T&D loss). This
approach ensures that there is no double
counting because only the T&D utility com-
pany will account for indirect emissions
associated with T&D losses.
End consumers may, however, report their
indirect emissions associated with T&D
losses in optional emissions as "generation
of electricity consumed in a T&D system."
GHG emissions from activities upstream of
the electricity provider (e.g., exploration,
drilling, flaring, transportation, and refining)
shall not be included with the core indirect
emissions reporting but may be reported as
optional emissions.
Purchase of electricity for sale to end-
users. Should not be reported under core
indirect emissions, but may be reported in
optional emissions.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 17
image:
Design Principles
• Purchase of electricity for resale. Also
referred to as trading transactions of elec-
tricity should not be reported under core
indirect emissions or optional emissions, but
may be reported under supplemental infor-
mation.
Figure 4-1 summarizes emissions reporting from
the sale and purchase of electricity.
Climate Leaders strongly encourages electric
utility Partners to include the emissions of
electricity purchased for sale to end users in their
GHG inventory and goal. This is especially true
for utilities that purchase power for a significant
portion of their end user demand.
Figure 4-1: Emissions Reporting From the Purchase and
Subsequent Use or Sale of Electricity
Own
Consumption
,^;
:;?<•
-£
Sate to
End
Intermediary
User}
ia
Optional
Emissions
Core
Indirect
_™_
Optional
Emissions
Core
indirect
Supplemental
v _______>'
1 f Core
i indirect
18 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
image:
Design Principles
Example: Reporting GHGs from Generation, Purchase, and
Sale of Electricity
Example one: Company A is an independent power generator that owns a power generation
plant. The power plant produces 100 MWh of electricity and releases 20 tons of emissions per
year. Company B is an electricity trader and has a supply contract with Company A to pur-
chase all of its electricity. Company B re-sells the purchased electricity (100 MWh) to Company
C, a utility company that owns/controls the T&D system. Company C consumes 5 MWh of elec-
tricity in its T&D system and sells the remaining 95 MWh to Company D. Company D is an end
user who consumes the purchased electricity (95 MWh) in its own operations.
Company A reports its direct emissions from power generation as core direct emissions.
Company B may optionally report emissions from the purchased electricity sold to a non-end-
user as supplemental information separately from optional emissions. Company C may report
the indirect emissions from the generation of the part of the electricity that is sold to the end-
user as optional emissions. However, Company C shall report the part of the purchased
electricity that it consumes in its T&D system as core indirect emissions. Company D (end-user)
reports the indirect emissions associated with its own consumption of purchased electricity
under core indirect emissions and can optionally report emissions associated with upstream
T&D losses as optional emissions.
Figure 4-2 shows the accounting of emissions associated with these transactions.
Example two: Company D installs a co-generation unit and sells surplus electricity to neighbor-
ing Company E for its consumption. Company D reports all direct emissions from the
co-generation unit as core direct emissions. Company D optionally reports indirect emissions
from the generation of electricity for export to Company E under supplemental information sep-
arate from optional emissions (see Chapter 8 on accounting for this in Climate Leaders goal
tracking). Company E reports indirect emissions associated with the consumption of electricity
purchased from the Company D's co-generation unit under core indirect emissions.
Figure 4-2: GHG Accounting from the Sale and
Purchase of Electricity
A's Core Direct
emissions = 20t
C's Core Indirect
emissions = 1t
100 MWh
100 MWh
emission factor
= 0.2 t/MWh
emission factor
= 0.2 l/MWh
95 MWh
—>
emission factor
= 0.2 t/MWh
D's Core Indirect
emissions = 19t
B's Supplemental Information = 20t C's Optional emissions = 19t
C's Optional emissions = 1t
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 19
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Design Principles
Optional Emissions Reporting
Optional emissions reporting allows for the
inclusion of emissions that are a consequence
of the activities of the reporting company, but
occur from sources not owned or controlled
by the reporting company, and are not part of
the reporting company's core emissions.
Partners may choose to report optional
emissions to take a leading role in achieving
comprehensive GHG reductions and environ-
mental stewardship.
Emissions reported under these optional emis-
sions sources should be adequately explained
and supported by data and evidence. It will not
be relevant or appropriate for companies to
report on all of the activities listed below.
Companies should report those activities that
are relevant to their business and goals, and for
which they have reliable information.
Such optional emission sources might include:
• Extraction and production of purchased
materials and fuels
• Transport-related activities:
* Transportation of purchased materials
or goods
* Transportation of purchased fuels
* Employee business travel
* Employees commuting to and from work
* Transportation of sold products
* Transportation of waste
• Electricity-related activities not included as
part of core indirect emissions:
* Extraction, production, and transporta-
tion of fuels consumed in the generation
of electricity (either purchased or self-
generated by the reporting company).
* Purchase of electricity that is sold to
an end-user (reported by the utility
company).
* Generation of electricity that is con-
sumed in a T&D system (reported by the
end-user).
• Leased assets, outsourced activities, and
franchises: Emissions from such contractual
arrangements are only classified as optional
emissions if the selected consolidation
approach (equity or control) does not apply
to them. Clarification on the classification of
leased assets should be obtained from the
company accountant (see guidance on
leased assets, outsourced activities, and
franchises in Chapter 3).
• Waste disposal
* Disposal of waste generated in
operations
* Disposal of waste generated in the pro-
duction of purchased materials and fuels
* Disposal of sold products at the end of
their life
Some activities mentioned above may be
included under core direct emissions if the per-
tinent emission sources are included in the
organizational boundaries of the reporting com-
pany (e.g., if the transportation of products is
done in vehicles owned or controlled by the
company). To determine if an activity falls with-
in core direct or indirect emissions, Partners
20 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
should refer to the selected consolidation
approach (equity or control) used in setting its
organizational boundaries (Chapter 3).
Accounting for optional emissions need not
involve a full-blown GHG life cycle analysis of
all products and operations. Usually it is valu-
able to focus on one or two major
GHG-generating activities. Although it is diffi-
cult to provide generic guidance on optional
emissions to include in an inventory, some gen-
eral steps include the following:
1. Describe the value chain. It is important,
for the sake of transparency, to provide a
general description of the value chain and
the associated GHG sources. Consideration
of the company's inventory or business
goals and relevance of the various optional
categories will guide the choice as to how
many levels upstream and downstream to
include in this category.
2. Consider the relevance of the various
optional emission categories. Only some
types of upstream or downstream emissions
categories might be relevant to the compa-
ny. They may be relevant for several
reasons: 1) they are or are believed to be of
significant magnitude relative to core emis-
sions, 2) they contribute to the GHG risk
exposure, 3) they are deemed critical by
stakeholders (e.g., feedback from cus-
tomers, suppliers, investors, or civil
society) or 4) there are potential emission
reductions that could be undertaken or
influenced by the company.
Examples include large manufacturing com-
panies that have significant freight
transport-related emissions or outsourced
activities (especially if the activity previous-
ly contributed to core emissions).
Commodity and consumer product compa-
nies may want to account for GHGs from
transporting raw materials, products, and
waste.
3. Identify and engage partners along the
value chain (that contribute potentially
significant amounts of GHGs), e.g.,
customers/users, product designers/
manufacturers, and energy providers.
This is important when trying to identify
sources, obtain relevant data, and
calculate emissions.
4. Quantify optional emissions. EPA encour-
ages Partners to report emissions from
optional sources to maximize opportunities
to meet a GHG reduction target. In some
cases, optional sources may be a significant
piece of a Partner's total climate footprint, so
including optional sources could greatly
increase the credibility of a company's inven-
tory. However, there are many sources of
optional emissions that are difficult to calcu-
late due to challenges in collecting data and
lack of standardized calculation methodolo-
gies. To maintain the accuracy and credibility
of Climate Leaders Partners' inventories, EPA
only allows Partners to report optional emis-
sions from sources for which a standardized
calculation methodology exists.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 21
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Design Principles
Double Counting
Core direct and core indirect emissions have
been carefully defined to ensure that two differ-
ent reporting companies will not account for
emissions in the same category, to avoid dou-
ble counting. Nonetheless, concern is often
expressed that accounting for indirect emis-
sions will lead to double counting when two
different companies include the same emissions
in their respective inventories. This depends on
how consistently companies with shared own-
ership choose the same approach (equity or
control) to set the organizational boundaries.
However, for GHG risk management and volun-
tary reporting, double counting is less
important. The inventories created for the
Climate Leaders program are designed to reflect
as accurately and transparently as possible
the emissions over which Partner companies
have control and can proactively implement
reductions.
Appendix 1 lists common GHG emissions
sources and activities by emission category and
industrial sector.
22 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Tracking Emissions
Over Time
The Climate Leaders program requires
participants to establish a historic per-
formance datum for comparing
emissions over time. This performance datum is
referred to as "base year emissions." Companies
often undergo significant structural changes
such as acquisitions, divestments, and mergers.
These changes will alter a company's historical
emission profile, making meaningful compar-
isons over time difficult. To maintain
consistency over time, or in other words,
to keep comparing "like with like," historic
emission data will have to be recalculated.
This chapter describes the process for
choosing and adjusting the base year.
Choosing a Base Year
A Climate Leaders Partner's base year is the most
recent year for which data is available when the
Partner joins the program. Data for years as far
back as 1990 may be reported to Climate
Leaders; however base year data is used for pur-
poses of assessing a company's progress towards
its emission reduction goal.
Recalculating Base
Year Emissions
Partners shall develop a base year emissions
recalculation policy (as documented in the
Inventory Management Plan), and clearly articu-
late the basis and context for any
recalculations. The policy shall state any "sig-
nificance threshold" applied for deciding on
historic emissions recalculation. "Significance
threshold" is a qualitative and/or quantitative
criterion used to define any significant change
to the data, inventory boundary, methods, or
any other relevant factors. It is the responsibili-
ty of the company to determine the
"significance threshold" that triggers base year
emissions recalculation and to disclose it. It is
the responsibility of the verifier to confirm the
company's adherence to its threshold policy.
The following cases shall trigger recalculation
of base year emissions:
• Structural changes in the reporting organi-
zation that have a significant impact on the
company's base year emissions. A structur-
al change involves the transfer of
ownership or control of emissions-generat-
ing activities or operations from one
company to another. While a single struc-
tural change might not have a significant
impact on the base year emissions, the
cumulative effect of a number of minor
structural changes can result in a significant
impact. Structural changes include:
* Mergers, acquisitions, and divestments
* Outsourcing and insourcing of emitting
activities
• Changes in status of leased assets (ending
leases or obtaining new leases)
• Changes in calculation methodology or
improvements in the accuracy of emission
factors or activity data that result in a sig-
nificant impact on the base year emissions
data
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 23
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Design Principles
• Discovery of significant errors, or a number
of cumulative errors, that are collectively
significant
Not all structural changes may turn out to be sig-
nificant. The concept of significance should be
used to judge whether a base year recalculation
is needed due to a structural change. It is the
responsibility of the Partner to use its best judge-
ment to define significance for considering base
year emissions adjustments. In most cases, deter-
mining an adjustment of the base year depends
on the intended use of the information, the char-
acteristics of the company, and the cumulative
effect of numerous structural changes.
In summary, base year emissions shall be
retroactively recalculated to reflect changes in
the company that would otherwise compromise
the consistency and relevance of the reported
GHG emissions information. Once a Partner has
determined its policy on how it will recalculate
base year emissions, it shall apply this policy in
a consistent manner. For example, it shall recal-
culate for both GHG emissions increases and
decreases.
Timing of
Recalculations for
Structural Changes
When significant structural changes occur dur-
ing the middle of a year, the base year
emissions should be recalculated for the entire
year, rather than only for the remainder of the
reporting period after the structural change
occurred. Recalculating the base year emis-
sions avoids having to recalculate base year
emissions again in the succeeding year.
Similarly, current year emissions should be
recalculated for the entire year to maintain
consistency with the base year recalculation. If
it is not possible to make a recalculation in the
year of the structural change (e.g., due to lack
of data for an acquired company), the base
year recalculation may be carried out in the fol-
lowing year.
Recalculations for
Changes in
Calculation
Methodology
or Improvements in
Data Accuracy
A Partner might report the same sources of
GHG emissions as in previous years, but meas-
ure or calculate them differently. For example, a
Partner might have used a national electric
power generation emissions factor to estimate
core indirect emissions in the first year of
reporting. In later years, the Partner may obtain
more accurate utility-specific emission factors
(for the current year as well as past years) that
better reflect the GHG emissions associated
with the electricity that it has purchased. If the
differences in emissions resulting from such a
change are significant, historic data is recalcu-
lated applying the new data and/or
methodology.
Sometimes the more accurate data input may
not be reasonably applied to all past years or
new data points may not be available for past
years. The Partner may then have to backcast
these data points, or the change in data source
may simply be acknowledged (i.e., via the
Inventory Management Plan) without recalcula-
tion. This acknowledgement should be made
each year to enhance transparency; otherwise,
new users of the report in the two or three
24 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
years after the change may make incorrect
assumptions about the performance of the
company.
Any changes in emission factor or activity
data that reflect real changes in emissions
(i.e., changes in fuel type or technology) do
not trigger a recalculation.
No Base Year
Emissions
Recalculations
for Facilities that Did
Not Exist in the Base
Year
Base year emissions are not recalculated if the
company makes an acquisition of (or
insources) operations that did not exist in its
base year. There should be a recalculation of
historic data back to the year in which the
acquired company came into existence. The
same applies to cases where the company
makes a divestment of (or outsources) opera-
tions that did not exist in the base year.
No Recalculation for
"Outsourcing/
Insourcing"
if Reported Under
Core Indirect and/or
Optional Emissions
Structural changes due to "outsourcing" or
"insourcing" do not trigger base year emissions
recalculation if the company is reporting its
indirect emissions from relevant outsourced or
insourced activities. For example, outsourcing
production of electricity, heat, or steam does
not trigger base year emissions recalculation,
because the Climate Leaders Design Principles
requires core indirect reporting. However, out-
sourcing/insourcing that shifts significant
emissions between core direct and optional
emissions reporting when optional emissions
are not reported does trigger base year emis-
sions recalculation (e.g., when a company
outsources the transportation of products).
No Recalculation for
Organic Growth or
Decline
Base year emissions and any historic data are
not recalculated for organic growth or decline.
Organic growth/decline refers to
increase/decrease in production output,
changes in product mix, and closures and open-
ings of operating units that are owned or
controlled by the company. The rationale for
this is that organic growth or decline results in
a change of emissions to the atmosphere and,
therefore, needs to be counted as an increase
or decrease in the company's emissions profile
over time. Change in lease status is not consid-
ered organic growth or decline, even if the
vacated lease goes unrented.
Climate Leaders tracks the originally established
base year emissions as well as subsequent
recalculated base year emissions to ensure trans-
parency. In addition, the Inventory Management
Plan documents the base year adjustment policy
developed by the Partner, the implementation of
which will be reviewed during the onsite IMP
review at the selected facility.
Table 5-1 presents basic rules that shall
be observed for base year emissions
recalculations.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 25
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Design Principles
Table 5-1: Basic Rules for Base Year
Emissions Recalculations
Condition
Base Year Recalculation Action
Mergers, Acquisitions, Divestitures
1. Acquisition of (or insourcing) a facility that existed
during the base year
2. Acquisition of (or insourcing) a facility that did not
exist during the base year
3. Divestiture of (or outsourcing) a facility that existed
during the base year
4. Divestiture of (or outsourcing) a facility that did not
exist during the base year
5. Transfer of ownership/control of emissions sources.
This includes changes in lease status.
Add the new facility's emissions generated during the base
year to overall entity base year emissions, unless the now
insourced operation was already included in the inventory as
an optional emission.
No base year recalculation is needed.
Subtract the divested facility's emissions generated during
the base year from overall entity base year emissions, unless
the now outsourced operation is still included in the invento-
ry as an optional emission.
No base year recalculation is needed.
Increased ownership shall be treated the same as a new
acquisition; decreased ownership shall be treated the same
as a divestiture. See 1-4 above.
Organic Growth and Decline
6. Organic growth:
• Increase in production output
• Changes in product mix resulting in increased
emissions
• Opening of new plants or operating units
7. Organic decline:
• Decrease in production output
• Changes in product mix resulting in decreased
emissions
• Closing of plants or operating units
No base year recalculation is needed.
No base year recalculation is needed.
Changes in Quantification Methodologies/Errors
8. Changes in emission factors or methodologies that No base year recalculation is needed.
reflect real changes in emissions (i.e., changes in fuel
type or technology)
9. Changes in measurement or quantification method-
ologies, improvements in the accuracy of emission
factors/activity data, or discovery of previous
errors/number of cumulative errors
Recalculate base year emissions to be consistent with new
approach or to correct errors.
26 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
CHAPTER 5
Example One:
Base Year Emissions Recalculation for an Acquisition
Company Gamma consists of two business units (A and B), as shown below in Figure 5-1. In its
base year (year one) each business unit emits 25 tons CC>2. In year two, the company under-
goes "organic growth," leading to an increase in emissions to 30 tons CC>2 per business unit,
i.e., 60 tons in total. The base year emissions are not recalculated in this case. At the beginning
of year three, the company acquires a production facility C from another company. The annual
emissions of facility C in year one were 15 tons CC>2, and 20 tons CC>2 in years two and three.
Figure 5-1: Base Year Emissions Recalculation
for an Acquisition
Facility C
emissions '•
i
15
20
'' Figures reported in respective years
•
,-•
i
.
Base Year Increase in Gamma
Production Acquires C
The total emission of company Gamma in year three, including facility C, are therefore 80 tons
CC>2. To maintain consistency over time, the company recalculates its base year emissions to
take into account the acquisition of facility C. The base year emissions increase by 15 tons
CC>2—the quantity of emissions produced by facility C during its base year. The adjusted base
year emissions are 65 tons CC>2. Gamma also reports 80 tons CC>2 as the recalculated emissions
for year two.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 27
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CHAPTER 5
Design Principles
Example Two:
Base Year Emissions Recalculation for a Divestment
Company Beta consists of three business units (A, B, and C), as shown in Figure 5-2. Each busi-
ness unit emits 25 tons CC>2 and the total emissions for the company are 75 tons CC>2 in the
base year (year one). In year two, the output of the company grows, leading to an increase in
emissions to 30 tons C02 per business unit, i.e., 90 tons C02 in total. At the beginning of year
three, Beta divests business unit C and its annual emissions are now 60 tons, representing an
apparent reduction of 15 tons relative to the base year emissions. However, to maintain consis-
tency over time, the company recalibrates its base year emissions to take into account the
divestment of business unit C. The base year emissions are lowered by 25 tons C02—the quan-
tity of emissions produced by the business unit C in the base year. The recalculated base year
emissions are 50 tons CC>2, and the emissions of company Beta are seen to have risen by 10
tons CC>2 over the three years. Beta also reports 60 tons CC>2 as the recalculated emissions for
year two.
Figure 5-2: Base Year Emissions Recalculation
for a Divestment
,, Figures reported in respective years
Base Year
Increase in
Production
30
t
Unit C
D Unit B
I Unit A
' Recalculated figures
Beta
Divests C
28 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
CHAPTER 5
Example Three:
Acquisition of a Facility That Came Into Existence After
the Base Year was Set
Company Teta consists of two business units (A and B). In its base year (year one), the compa-
ny emit 50 tons CC>2. In year two, the company undergoes organic growth, leading to an
increase in emissions to 30 tons CC>2 per business unit, i.e., 60 tons CC>2 in total. The base year
emissions are not recalculated in this case.
At the beginning of year three, Teta acquires a production facility C from another company.
Facility C came into existence in year two, its emissions being 15 tons CC>2 in year two and 20
tons CC>2 in year three. The total emissions of company Teta in year three, including facility C,
are therefore 80 tons CC>2. In this acquisition case, the base year emissions of company Teta do
not change because the acquired facility C did not exist in year one when the base year of Teta
was set. The base year emissions of Teta therefore remains at 50 tons CC>2. Teta also reports 75
tons as the recalculated figure for year two emissions.
Figure 5-3: Acquisition of a Facility That Came Into
Existence After the Base Year was Set
; 15 i
1 2 3
Base Year Increase in Teta
Production Acquires C
L
I Facility C
H Unit B
I Unit A
Figures reported in respective years
Recalculated figures
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 29
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Design Principles
Identifying and Calculating GHG
Emissions
Once the inventory boundary has been
established, companies generally cal-
culate GHG emissions via the
following steps:
1. Identify GHG emissions sources
2. Select an emissions calculation approach
3. Collect activity data and choose emissions
factors
4. Apply quantification methodology to esti-
mate GHG emissions
5. Roll-up emissions data to the corporate
level (covered in Chapter 9)
These steps are described in the following
sections. A short description of the Core
Module guidance developed by and available
from the Climate Leaders program is also
provided. Core Modules are available on
the Climate Leaders website at
http://www.epa.gov/climateleaders.
Identify GHG
Emissions Sources
The process of identifying emissions sources is
typically completed with the following three
steps:
1. Identify core direct emissions sources
2. Identify core indirect emissions sources
3. Identify optional emissions sources to the
extent desired
Refer to Chapter 4 for a refresher on common
sources of emissions and how they should be cat-
egorized [direct or indirect core emissions, or as
optional emissions). Every business has some
processes, products, or services that generate
direct and/or indirect emissions from one or
more broad source categories. Almost all busi-
nesses generate indirect emissions due to the
purchase of electricity for use in their process-
es or services. Appendix 1 provides an
overview of GHG emissions sources organized
by emission category and industry sector. The
appendix may be used as an initial guide to
identify your major GHG sources.
The emissions identification step should look for
emissions sources that result from both routine
and non-routine operations. Non-routine opera-
tions might include maintenance activities
(including turnarounds) and upset conditions. In
some cases, non-routine operations may be a sig-
nificant source of emissions.
Select an Emissions
Calculation Approach
Direct measurement of GHG emissions by moni-
toring concentration and flow rate is not
common. More often, emissions are calculated
based on a mass balance or stoichiometric
basis specific to a facility or process. The most
common approach for calculating GHG emis-
sions is through the application of documented
emission factors. These factors are calculated
ratios relating GHG emissions to a proxy meas-
ure of activity at an emissions source. The
30 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
revised IPCC Guidelines for National GHG
Inventories refer to a hierarchy of calculation
approaches and techniques ranging from the
application of generic emission factors to direct
monitoring.
In many cases, particularly when direct moni-
toring is either unavailable or prohibitively
expensive, accurate emission data can be calcu-
lated from fuel use data. Even small users
usually know both the amount of fuel con-
sumed and have access to data on the carbon
content of the fuel through default carbon con-
tent coefficients or through more accurate
periodic fuel sampling. Companies should use
the most accurate calculation approach that is
available to them and that is appropriate for
their reporting context.
Collect Activity Data
and Choose Emissions
Factors
The third step in identifying and calculating
emissions is to collect the data necessary to
complete the quantification method selected in
the previous step. To facilitate completion of
this step, the reporting entity should list the
quantification method and relevant data
required to quantify each emission source.
Table 6-1 presents an example. Documentation
of these data elements is part of the Inventory
Table 6-1: Example Data Collection Road map
Emission Source
Quantification
Method
Data Required
Data Sources *
Onsite stationary
combustion sources
Insert selected method
here, e.g., fuel use times
fuel - specific emission
factor (EF)
Fuel use measured in mass, volume,
or energy units
Fuel-specific emission factor.
Insert specific data source
here
Imported electricity
use
Electricity use times source Electricity use
specific EF Source-specific (or regional grid)
emission factor
Insert specific data source
here
Process specific:
Ex. Production of
adipic acid
Calculate N-fi emissions by Adipic acid production (tonnes)
multiplying the amount of
adipic acid produced by
the N20 emissions factor;
deduct fraction abated
Emission factor (tonnes ofN20/tonnes
of adipic acid produced)
Fraction abated (%)-percent of emis-
sions abated by reduction technologies
and practices
Utilization factor (%) - percent of time
abatement technology was in use
Insert specific data source
here
Continue list of
reporter-specific
emission sources or
groups of emission
sources
Continue list of
relevant quantification
methodology
Continue list of data needs unique
to the selected quantification
methodology
Continue list of data needs
unique to the selected
quantification methodology
*For ease of data collection and to facilitate the verification exercise, the data sources should include specification of where
the required data can be derived, e.g., AP 42 emission factor, fuel use data from plant site-specific data collection system, etc.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 31
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Design Principles
Management Plan submittal required under the
Climate Leaders program. Documentation of
these data elements helps to facilitate the data
collection activity, enhance data verifiability, and
identify opportunities for further improvement in
inventory accuracy and efficiency.
For most small- to medium-sized companies
and for many larger companies, core direct
emissions should be calculated based on the
purchased quantities of commercial fuels (such
as natural gas and heating oil) multiplied by
relevant published emissions factors. Core indi-
rect emissions should typically be calculated
from metered electricity consumption and sup-
plier-specific, local grid, or other published
emission factors. Optional emissions should
be calculated from activity factors such as
passenger miles and published or third-party
emissions factors. In all of these cases, if
source/facility-specific emissions factors are
available, it is preferable that they be used.
Climate Leaders provides source-specific guide-
lines to help facilitate the emissions estimation
approach.
Industrial companies, such as those involved in
fuels extraction and processing, chemicals, min-
erals, pulp and paper, waste management, and
primary metals, will be faced with a wider
range of alternative approaches/methodologies.
These companies should seek guidance from the
Climate Leaders sector-specific guidelines (where
available) or from their industry associations,
e.g., International Aluminum Institute, American
Petroleum Institute, WBCSD project: Toward a
Sustainable Cement Industry, etc.
In some cases, unit conversions will be required
to adjust activity data to the same units used in
emission factors. Selected unit conversions are
presented in Appendix 2.
Apply Quantification
Methodology to
Estimate GHG
Emissions
This section provides an overview of the
Climate Leaders GHG Inventory Protocol Core
Module guidance documents. Companies may
use their own GHG calculation tools, provided
they are consistent with the approaches
described in the respective sector guidelines.
There are two main categories of guidance
documents:
• Cross-sector guidance that can be applied
to many different sectors: stationary com-
bustion, indirect electricity, mobile
combustion, and HFC use in refrigeration
and air-conditioning
• Sector-specific guidance, e.g., aluminum,
iron and steel, cement, etc.
Most companies will need to refer to more than
one guidance document to cover all of their
GHG sources. For example, to calculate GHG
emissions from an aluminum smelter, the com-
pany would use the calculations for aluminum
production, stationary combustion (for any
generation of energy on-site), and mobile com-
bustion (for owned transportation of materials
and products, and vehicles employed on-site).
Structure of Guidance
Documents
All cross-sector and sector-specific core
module guidance documents are based on
a similar structure and offer step-by-step
guidance on measuring and calculating
emissions data.
32 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
The general structure of the guidance section is
as follows:
• Overview: provides a description of pur-
pose and scope, the calculation method
recommended, and a process description
• Calculation methods: describes different
calculation methods depending on the avail-
ability of site-specific activity data and
emissions factors
• Choosing activity data and emissions fac-
tors: provides good practice guidance and
references for default emissions factors
• Quality control: provides good practice
guidance
• Internal reporting and documentation: pro-
vides guidance on internal documentation
to support emissions calculations
Default emissions factors are provided, but it
is also possible to use customized emissions
factors if more accurate emissions factors are
available. The emissions of different GHGs are
calculated separately and then converted to
CCVequivalents on the basis of their global
warming potential.
Some of the guidance takes a tiered approach,
offering a choice between a simple and a more
advanced calculation approach. The more
advanced approach results in more accurate
emissions data, but usually requires a higher
level of data detail and a more thorough under-
standing of the technologies used in the
business operations.
Table 6-2 provides an overview of the calculation
guidance documents available from the Climate
Leaders program, and their main features.
Table 6-2: Overview of GHG Guidance Documents
Currently Available Through Climate Leaders *
Guidance Documents
Main Features
Stationary Combustion
i Calculates direct GHG emissions from combustion of fuels in stationary equipment
i Default emission factors provided for different fuels
Indirect Electricity • Calculates indirect GHG emissions from purchased electricity
• Default emission factors provided for grid electricity
• Provides guidance for allocating emissions from a cogeneration facility to the separate
steam and electricity outputs
Mobile Combustion
Refrigeration and Air
Conditioning (AC) Unit Use
Municipal Solid Waste
Landfilling
i Calculates direct GHG emissions from mobile sources, including road, air, water, and rail
transport
i Default emission factors provided
i Calculates emissions resulting from leaks ofHFCs and PFCs from refrigeration and AC
units
i Found in industrial and commercial facilities as well as mobile sources
i Calculates direct GHG emissions from landfill gas emissions at owned/operated munici-
pal solid waste landfill sites
Iron and Steel (DRAFT)
Cement Manufacturing
(DRAFT)
i CC>2 and other GHG emissions (direct and indirect) associated with the manufacturing of
iron and steel
i Process CO^ and other GHG emissions associated with the manufacturing of cement
Refrigeration and AC Unit
Mfg. (DRAFT)
i Calculates emissions resulting from leaks ofHFCs and PFCs from refrigeration and AC
unit manufacturing
*Additional calculation guidance modules are in development.
CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
CO2-equivalent and Global
Warming Potential
EPA has adopted the convention forwarded by
the United Nations Framework Convention on
Climate Change (UNFCCC) and the IPCC of com-
paring the radiative forcing ability of individual
gases by using a relative measure for each GHG,
termed its global warming potential (GWP). GWP
is the ability of each greenhouse gas to trap heat
in the atmosphere relative to carbon dioxide,
which serves as the reference gas. Table 6-3 lists
GWPs for the primary recognized GHGs.
Partners can report emissions of other GHGs (i.e.,
those listed in the IPCC Third Assessment Report)
as optional emissions.
Table
Greenhouse Gas
Carbon dioxide
Methane*
Nitrous oxide
Sulfur hexafloride
MFCs:
HFC-23
HFC-32
HFC-41
HFC-125
HFC-134
HFC-134a
HFC-143
HFC-143a
HFC-152a
HFC-227ea
HFC-236fa
HFC-245ca
HFC-4310mee
PFCs:
PFC-14
PFC-116
PFC-218
PFC-3-1-10
PFC-C318
PFC-4-1-12
PFC-5-1-14
6-3: Gas Atmospheric Lifetime GWP3
Formula
C02
CH4
N20
SF6
CHF3
CH2F2
CH-F
C2HF5
C2H2F4
C2H2F4
c2n/3
C2H/3
C2H4F2
C3HF7
Cflfe
CsH/s
C5H2F]0
CF4
C2F6
Cfs
Cfiw
c-C4F8
C5F12
C^FU
Atmospheric Lifetime
(years)
50 — 200
12+/-3
120
3,200
264
5.6
3.7
32.6
10.6
14.6
3.8
48.3
1.5
36.5
209
6.6
17.1
50,000
10,000
2,600
2,600
3,200
4,100
3,200
Global Warming
Potential
1
21
310
23,900
11,700
650
150
2,800
1,000
1,300
300
3,800
140
2,900
6,300
560
1,300
6,500
9,200
7,000
7,000
8,700
7,500
7,400
Source: IPCC Second Assessment Report (SAR)
a 100-year time horizon
b The methane GWP includes the direct effects and those indirect effects due to the production of tropospheric ozone and stratospheric
water vapor. The indirect effect due to the production of CO2 is not included
34 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
To provide consistency within the inventory, the
Partner's GHG inventory should be based on
metric tonnes of CO^equivalents (CO^eq).
CO^equivalents are calculated by multiplying
tonnes of any particular GHG times its relevant
GWP. The following example illustrates this
approach.
Example:
Calculating CO2-equivalents
A Partner's GHG inventory contains 7,000,000 tonnes/yr of CO2 emissions, 400,000 tonnes/yr of
C7/4 emissions, and 700 tonnes/yr ofN20 emissions.
Total CO^eq = tonnes C02(GWP[C02]) + tonnes CH4(GWP[CH4]) + tonnes N20(GWP[N20])=
7,000,000 (1) + 400,000 (21) + 700 (310) = 15,617,000 metric tonnes CO^eq
Other useful conversion factors for units of measure and fuel characteristics can be found in
Appendix 2.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 35
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Design Principles
Managing Inventory
Quality
For the purposes of reporting for the
Climate Leaders program, it is sufficient
to document inventory assumptions and
to note major sources of uncertainty (i.e., as part
of the Inventory Management Plan). An uncer-
tainty analysis is not required.
A corporate GHG inventory management plan
(IMP) includes all institutional, managerial, and
technical arrangements made for the collection
of data, preparation of the inventory, and imple-
mentation of steps to manage the quality of the
inventory. An IMP provides a systematic
process for preventing and correcting errors,
and identifies areas where investments will
likely lead to the greatest improvement in
overall inventory quality. However, the primary
objective of an IMP is ensuring the credibility of
a company's GHG inventory information.
Chapter 1 outlines five accounting principles
that set an implicit standard for the faithful rep-
resentation of a company's GHG emissions
through its technical, accounting, and reporting
efforts. Putting these principles into practice
will result in a credible and unbiased treatment
and presentation of issues and data. The goal of
an IMP is to ensure that these principles are put
into practice.
This chapter addresses the implementation of
an IMP, practical inventory quality measures for
implementation, as well as inventory quality
and inventory uncertainty (i.e., types and limi-
tations of uncertainty estimates).
An Inventory Program
Framework
A practical framework is needed to help compa-
nies conceptualize and design a quality
management system and plan for future
improvements. This framework focuses on the
following institutional, managerial, and techni-
cal components of an inventory. Climate
Leaders calls this framework an Inventory
Management Plan. An effective and efficient
Inventory Management Plan should address the
following four fundamentals.
• Methods
• Data
• Inventory processes and systems
• Documentation
Table 7-1 summarizes the four fundamentals
of inventory development. The exact inventory
management plan components, the associated
detail required, and issues to consider for
each component are outlined in more detail in
Chapter 9 and Appendix 3.
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Table 7-1: Fundamentals of Inventory Development
Methods - the technical aspects
of inventory preparation
i Define inventory boundaries, treatment of joint ventures, identify
sources, etc. Chapters 3, 4, and 6 help with this.
i Identify methodologies for estimating emissions (Climate Leaders
provides many default methods and Protocols to help
companies with this effort.)
i Establish procedures for applying and updating inventory
methodologies in response to new business activities, new
technical information, or new reporting requirements.
Data - the basic information on
activity levels, emission factors,
processes, and operations
i Develop approach, and assign roles and responsibilities to facilitate
collection of high quality inventory data.
i Create process for the maintenance and improvement of data
collection procedures.
Inventory processes and
systems - the institutional,
managerial, and technical
procedures for preparing GHG
inventories
i Define all institutional, managerial, and formal procedural aspects
required to develop and maintain a GHG inventory that meets the
Climate Leaders accounting and reporting standards.
i Whenever reasonable, integrate these processes with other corporate
processes.
Documentation - the record of
methods, data, processes, sys-
tems, assumptions, and
estimates used to prepare an
inventory
i Identify internal and external audiences and develop procedures to
document information intended for their use.
i Establish documentation sufficient for an inventory development team
to accurately and efficiently continue preparing and improving all four
fundamentals in the company's inventory.
i Ensure that documentation provides sufficient transparency to facilitate
potential internal or external verification.
Implementing an
Inventory
Management Plan
An IMP for a company's program should
address all four of the components described
above. To implement the system, a company
should take the following steps:
1. Establish an inventory team. This team
should be responsible for implementing the
IMP, and continually improving inventory
quality, as well as coordinating activities
between relevant business units and facili-
ties.
2. Develop an IMP that describes the
steps the company is taking in the
implementation of calculating an inventory.
The plan should include procedures for all
organizational levels and inventory develop-
ment processes (i.e., from initial data
collection to final reporting of accounts).
For efficiency and comprehensiveness,
Partners are encouraged to consider the
integration of their inventory management
plan with their overall corporate and envi-
ronmental information management
systems, including any procedures in place
as part of their International Standards
Organization (ISO) 9000 (Quality
Management) or ISO 14001 (Environmental
Management) certifications.
3. Perform generic quality checks. Generic
quality checking procedures applicable to
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 37
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Design Principles
inventory data and processes at all levels
(i.e., data handling, documentation, and
emission calculation activities, as noted in
further detail in Table 7-2).
4. Perform source category-specific quality
checks. This includes more rigorous investi-
gations into the appropriate application of
boundaries, recalculation procedures, and
adherence to accounting and reporting
principles for specific source categories, as
well as the quality of the data input used,
and a qualitative description of the major
causes of uncertainty in the data (see sec-
tion on implementation below).
5. Review final inventory estimates and
reports, including internal technical and
managerial reviews and potential external
verification.
6. Institutionalize formal feedback loops so
that errors are corrected and improvements
are made following quality checks, investiga-
tions, and reviews.
7. Establish reporting, documentation, and
archiving procedures, including internal
recordkeeping procedures, information for
external stakeholders, etc. These proce-
dures should also include formal feedback
mechanisms.
Table 7-2: Generic Quality Management Measures
Data Gathering,
Input, and
Handling
Activities
i Check a sample of input data for transcription errors
i Identify spreadsheet modifications that could provide additional controls or checks
on quality
i Ensure that adequate version control procedures for electronic files have been
implemented
i Others
Data • Confirm that bibliographical data references are included in spreadsheets for all pri-
Documentation mary data
• Check that copies of cited references have been archived
• Check that assumptions and criteria for selection of methods, activity data, emis-
sion factors, and other parameters are documented
• Check that changes in data or methodology are documented
• Others
Calculating • Check whether emission units, parameters, and conversion factors are appropriate-
Emissions and ly labeled
Checking • Check if units are properly labeled and correctly carried through from beginning to
Calculations end of calculations
• Check that conversion factors are correct
• Check the data processing steps (e.g., equations) in the spreadsheets
• Check that spreadsheet input data and calculated data are clearly differentiated
• Check a representative sample of calculations, by hand or electronically
• Check some calculations with abbreviated calculations (i.e., back of the envelope
checks)
• Check the aggregation of data across source categories, business units, etc.
• When methods or data have changed, check consistency of time series inputs and
calculations
• Others
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As part of Climate Leaders, EPA assists Partners
by providing technical assistance on completing
their inventory and IMP. This includes desktop
reviews that encompass some of the quality man-
agement checks listed in Table 7-2. For more
details on technical assistance refer to Chapter 9.
Practical Measures
for Implementation
Although principles and broad program design
guidelines are important, any guidance on
inventory management would be incomplete
without a discussion of practical inventory
management measures. A company should
implement these measures at multiple levels
within the company, from the point of primary
data collection to the final corporate inventory
approval process. It is important to implement
these measures at points in the inventory pro-
gram where errors are most likely to occur,
such as the initial data collection phase and
during calculation and data aggregation. While
corporate-level inventory quality may initially
be emphasized, it is important to ensure quality
measures are implemented at all levels of disag-
gregation (e.g., facility, process, geographical,
according to a particular category of emission,
etc.).
Companies also need to ensure the quality of
their historical emission estimates and trend
data. They can achieve this by employing
inventory quality measures to minimize biases
that can arise from changes in the characteris-
tics of the data or methods used to calculate
historical emission estimates.
Step 3 in implementing an IMP is to perform
generic quality checking measures, which apply
to all source categories and all stages of inven-
tory preparation. Table 7-2 provides a sample
list of such measures.
Step 4 in implementing an IMP is source
category-specific data quality investigations.1
The following discussion addresses the types of
source-specific quality measures that can be
employed for emission factors, activity data,
and emission estimates.
Emission Factors and Other
Parameters
For a particular source category, emissions cal-
culations will generally rely on emission factors
and other parameters (e.g., utilization factors,
oxidation rates, and methane conversion fac-
tors)2. These factors and parameters may be
published or default factors, based on compa-
ny-specific data, site-specific data, or direct
emission or other measurements. For fuel con-
sumption, published emission factors based on
fuel energy content are generally more accurate
than those based on mass or volume, except
when mass-based or volume-based factors have
been measured at a company-specific or site-
specific level. Quality investigations need to
assess the representative data and applicability
of emission factors and other parameters to the
specific characteristics of a company.
Differences between measured and default val-
ues need to be qualitatively explained and
justified based upon the company's operational
characteristics.
1 The information gathered from these investigations is to be used in the assessment of data uncertainty (see section on uncertainty
in Chapter 7).
2 Some emission estimates may be derived using mass or energy balances, engineering calculations, or computer simulation models.
In addition to investigating the input data to these models, companies should also consider whether the internal assumptions
(including assumed parameters in the model) are appropriate to the nature of the company's operations.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 39
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Design Principles
Activity Data
The collection of high quality activity data will
often be the most significant limitation for cor-
porate GHG inventories. Therefore, establishing
robust data collection procedures needs to be a
priority in the design of any company's invento-
ry program. The following are useful measures
for ensuring the quality of activity data:
• Develop data collection procedures that
allow the same data to be efficiently collect-
ed in future years.
• Fuel consumption data should be converted
to energy units before applying carbon con-
tent emission factors, which may be better
correlated to a fuel's energy content than its
mass. The CO^ emissions from burning a unit
of a specific fuel will be more accurately
determined if the amount of energy units
burned is used to calculate emissions.
• Current year data should be compared with
previous year's data and historical trends. If
data do not exhibit relatively consistent
changes from year to year, but rather under-
go sharp increases or decreases, then the
causes for this pattern should be investigated
(e.g., changes of over 10 percent from year to
year may warrant further investigation).
• Activity data from multiple reference
sources (e.g., government survey data or
data compiled by trade associations)
should be compared with corporate data
when possible. Although all data may have
the same origin, such checks can ensure
that consistent data is being reported to all
parties. Data can also be compared among
facilities within a company.
• Investigate activity data that is generated
for purposes other than preparing a GHG
inventory. In doing so, companies will need
to check the applicability of this data to
inventory purposes, including complete-
ness, consistency with the source category
definition, and consistency with the emis-
sion factors used. For example, data from
different facilities may be examined for
inconsistent measurement techniques, oper-
ating conditions, or technologies. Quality
control measures (e.g., ISO) may have
already been conducted during the data's
original preparation. These measures can
be integrated with the company's inventory
quality management system.
Check that base year recalculation proce-
dures have been followed consistently and
correctly.
Check that operational and organizational
boundary decisions have been applied cor-
rectly and consistently to the collection of
activity data.
Partners should investigate whether biases
or other characteristics that could affect
the data quality have already been previ-
ously identified (e.g., by communicating
with experts at a particular facility or else-
where). For example, a bias could be the
unintentional exclusion of operations at
smaller facilities or data that does not cor-
respond exactly with the company's
organizational boundaries.
If Partners are using additional data to esti-
mate emission intensities or other ratios
(i.e., sales, production, etc.), quality man-
agement measures should also extend to
these additional data.
If Partners are reporting data to the EPA for
other reporting purposes, such as reporting
under Title IV or Title V of the U.S. Clean Air
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Design Principles
Act, then the same data should form the basis
for Climate Leaders reporting.
Title V of the U.S. Clean Air Act requires an oper-
ating permit for each industrial facility that is a
"major source" of air pollution. Under this operat-
ing permits program, a facility is considered a
major source when it emits minimum levels of a
specific air pollutant. This can be a little as 10
tons per year. Data collected under Title V that
may be relevant to GHG reporting includes identi-
fication of sources of emissions at a facility and
potentially data on energy flows.
Title IV of the U.S. Clean Air Act requires owners
or operators of affected units to measure and
report sulfur dioxide (SO2), nitrogen oxide (NO*),
and CC>2 emissions under the U.S. EPA's Acid
Rain Program. Data on CC>2 emissions reported
under Title IV can be used directly in the Climate
Leaders program.
Emission Estimates
Estimated emissions for a source category can
be compared with historical data or other esti-
mates to ensure that they fall within a
reasonable range. Potentially unreasonable esti-
mates provide cause for checking emission
factors or activity data and determining
whether changes in methodology, market
forces, or other events are sufficient reasons
for the change. In situations where actual emis-
sion monitoring occurs (e.g., power plant CC>2
emissions), the data from monitors can be com-
pared with estimated emissions using activity
data and emission factors.
If any of the above emission factor, activity
data, emission estimate, or other parameter
checks indicate a problem, Climate Leaders
encourages Partners to consider more detailed
investigations into the accuracy of the data or
appropriateness of the methods to reduce
inventory error. These more detailed investiga-
tions can also be utilized to better assess the
quality of data. One potential measure of data
quality is a quantitative and qualitative assess-
ment of their uncertainty.
Inventory Quality and
Inventory Uncertainty
Preparing a GHG inventory is inherently both
an accounting and a scientific exercise. Most
applications for company-level emissions and
removal estimates require that these data be
reported in a format similar to financial
accounting data. In financial accounting, it is
standard practice to report individual point
estimates (i.e., a single value versus a range of
possible values). In contrast, the standard prac-
tice for most scientific studies of GHG and
other emissions is to report quantitative data
with estimated error bounds (i.e., uncertainty).
Just like financial figures in a profit and loss or
bank account statement, point estimates in a
corporate emission inventory have obvious
uses. However, the addition of some quantita-
tive measure of uncertainty to an emission
inventory may also have some uses.
In an ideal situation, in which a company had
perfect quantitative information on the uncer-
tainty of its emission estimates at all levels, the
primary use of this information would almost
certainly be comparative. Such comparisons
might be made across companies, across busi-
ness units, across source categories, or through
time. In this situation, inventory estimates
could be rated or discounted based on their
quality before they were used, with uncertainty
being the objective quantitative metric for qual-
ity. Unfortunately, such objective uncertainty
estimates rarely exist.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 41
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Design Principles
Types of Uncertainties
Uncertainties associated with GHG inventories
can be broadly categorized into scientific
uncertainty and estimation uncertainty.
Scientific uncertainty arises when the science
of the actual emission and/or removal process
is not completely understood. For example,
many of the direct and indirect factors associat-
ed with GWP values that are used to combine
emission estimates for various GHGs involve
significant scientific uncertainty. Analyzing and
quantifying such scientific uncertainty is
extremely problematic and is likely to be
beyond the scope of most company inventory
programs.
Estimation uncertainty arises any time GHG
emissions are quantified. Therefore all emission
or removal estimates are associated with esti-
mation uncertainty. Estimation uncertainty can
be further classified into two types: model
uncertainty and parameter uncertainty3.
Model uncertainty refers to the uncertainty
associated with the mathematical equations
(i.e., models) used to characterize the relation-
ships between various parameters and
emission processes. For example, model uncer-
tainty may arise either due to the use of an
incorrect mathematical model or inappropriate
input into the model. As with scientific uncer-
tainty, estimating model uncertainty is also
likely to be beyond most company's inventory
efforts; however, some companies may wish to
utilize their unique scientific and engineering
expertise to evaluate the uncertainty in their
emission estimation models.
Parameter uncertainty refers to the uncertain-
ty associated with quantifying the parameters
used as inputs (e.g., activity data and emission
factors) into estimation models. Parameter
uncertainties can be evaluated through statisti-
cal analysis, measurement equipment precision
determinations, and expert judgment.
Quantifying parameter uncertainties and then
estimating source category uncertainties based
on these parameter uncertainties will be the
primary focus of companies that choose to
investigate uncertainty in their emission
inventories.
Limitations of Uncertainty
Estimates
Given that only parameter uncertainties are
within the feasible scope of most companies,
uncertainty estimates for corporate GHG inven-
tories will, of necessity, be imperfect. Complete
and robust sample data will not always be avail-
able to assess the statistical uncertainty in
every parameter. For most parameters (e.g.,
liters of gasoline purchased or tons of lime-
stone consumed), only a single data point may
be available. In some cases, companies can uti-
lize instrument precision or calibration
information to inform their assessment of sta-
tistical uncertainty. However, to quantify some
of the systematic uncertainties (defined below)
associated with parameters and to supplement
statistical uncertainty estimates, companies
will usually have to rely on expert judgement4.
The problem with expert judgement, though, is
that it is difficult to obtain in a comparable (i.e.,
unbiased) and consistent manner across
parameters, source categories, or companies.
3 Emissions estimated from direct emission monitoring will generally only involve parameter uncertainty (e.g., equipment measurement
error).
4 The role of expert judgement in the assessment of the parameter can be twofold: Firstly, expert judgement can be the source of the data
that are necessary to estimate the parameter. Secondly, expert judgement can help (in combination with data quality investigations)
identify, explain, and quantify both statistical and systematic uncertainties (see following section).
42 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
For these reasons, almost all comprehensive
estimates of uncertainty for GHG inventories
will be not only imperfect but also have a sub-
jective component and, despite the most
thorough efforts, are themselves considered
highly uncertain. In most cases, uncertainty
estimates cannot be interpreted as objective
measures of quality, nor can they be used to
compare the quality of emission estimates
between source categories or companies.
An exception to this includes the following case in
which it is assumed that either statistical or
instrument precision data are available to objec-
tively estimate each parameter's statistical
uncertainty (i.e., expert judgement is not needed):
• When two operationally similar facilities use
identical estimation methodologies, the dif-
ferences in scientific or model uncertainties
can, for the most part, be ignored. Then
quantified estimates of statistical uncertain-
ty can be treated as being comparable
between facilities. This type of comparabili-
ty is what is aimed for in some trading
programs that prescribe specific monitor-
ing, estimation, and measurement
requirements. However, even in this situa-
tion, the degree of comparability depends
on the flexibility that participants are given
for estimating emissions, the homogeneity
across facilities, as well as the level of
enforcement and review of the methodolo-
gies used.
Given these limitations, the role of uncertainty
assessments in developing GHG inventories
includes:
• Promoting a broader learning and quality
feedback process.
• Supporting efforts to qualitatively under-
stand and document the causes of
uncertainty and help identify ways of
improving inventory quality. For example,
collecting the information needed to deter-
mine the statistical properties of activity
data and emission factors forces one to ask
hard questions and to carefully and system-
atically investigate data quality.
• Establishing lines of communication and
feedback with data suppliers to identify spe-
cific opportunities to improve the quality of
the data and methods used.
• Providing valuable information to reviewers,
verifiers, and managers for setting invest-
ment priorities to improve data sources and
methodologies.
The GHG Protocol has developed a supplemen-
tary guidance on uncertainty assessments
("Guidance on uncertainty assessment in GHG
inventories and calculating statistical parame-
ter uncertainty") along with an uncertainty
calculation tool, both of which are available on
the GHG Protocol website. The guidance docu-
ment describes how to use the calculation tool
in aggregating uncertainties. It also discusses in
more depth the different types of uncertainties,
the limitations of quantitative uncertainty
assessment, and how uncertainty estimates
should be properly interpreted.
Additional guidance and information on assess-
ing uncertainty—including optional approaches
to developing quantitative uncertainty estimates
and eliciting judgments from experts—can be
found in Volume VI of EPA's Emissions Inventory
Improvement Program documents on Quality
Assurance/Quality Control and in chapter 6 of
the IPCC's Good Practice Guidance and
Uncertainty Management in National
Greenhouse Gas Inventories.
Characterizing uncertainty is not required under
Climate Leaders.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 43
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Tracking Progress Towards the
GHG Reduction Goal
As described in Chapter 11, Climate
Leaders Partners establish corporate-
wide GHG reduction goals. Tracking
progress towards that goal entails comparing cur-
rent corporate-wide emissions to base year
emissions. The final Climate Leaders goal evalua-
tion is a comparison of corporate-wide GHG
emissions in the goal year vs. the base year emis-
sions. Climate Leaders goal accounting does not
set requirements for interim years. While emis-
sions increases may occur at individual sources,
ideally a Partner's overall emissions profile
should be reduced over time in a clearly verifi-
able progression toward the reduction goal. GHG
reductions can be measured by comparing
absolute changes in the company's overall GHG
emissions over time, or by developing ratio indi-
cators to track relative performance.
Overview
Focusing on the overall company GHG impact
has the advantage of helping companies more
effectively manage their aggregate GHG risks
and opportunities. It also helps guide the trans-
fer of resources to activities resulting in the
most effective GHG emission savings.
This chapter provides guidance on tracking
progress toward the reduction goal. The
Climate Leaders Partner's goal should be
achieved by reducing overall corporate
emissions or emissions rate; and may also
include successful completion of emission
reduction "offset" projects.
Corporate-Wide GHG
Emissions
Climate Leaders recommends calculating GHG
emissions using a bottom-up approach. This
involves calculating emissions at the level of an
individual source and then rolling this up via
facilities to the corporate level. This approach
enables companies to scrutinize their GHG
emissions information at different scales,
thereby allowing enhanced understanding of
their GHG emissions profile. This approach
best allows companies to isolate, evaluate,
and prioritize emission saving opportunities.
Progress towards a goal can then be measured
by comparing emissions over time on a facility-
specific, nationwide or even global basis. The
Climate Leaders program requires comparison of
summed corporate-wide emissions from all U.S.
operations at a minimum.
Offsets
In some cases, companies may find that they can
obtain lower-cost emission reductions by invest-
ing in offset projects. Offsets are reductions of
direct or indirect emissions that occur outside the
boundaries of the reporting company and occur
as a result of projects that either reduce GHG
emissions or through activities that promote car-
bon sequestration. Some example offset projects
might include:
Example 1: Coal mine methane emission reduc-
tions: offset investment by a
company other than the coal mine
operator or owner.
Example 2: Replacing diesel fuel-fired genera-
tor with a photovoltaic system:
offset investment by a company
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Design Principles
other than the solar system manu-
facturer or distributor, or the
electricity generator or user.
Example 3: Replacement of old HVAC systems
with more energy-efficient systems
in schools: offset investment by an
entity other than the school system
Offsets may be generated through a variety of
activities such as energy efficiency, low carbon
no carbon energy projects, process emission
reductions, or carbon sequestration activities.
Fundamentally, offsets are generated by investing
in projects that result in verifiable emissions
reductions or in removing GHGs from the atmos-
phere (e.g., enhancing carbon sinks).
Appropriate supporting information addressing
the validity and credibility of purchased offsets
must be included. Key elements in quantifying and
reporting emissions from offset projects include:
• Determining the project temporal, spatial,
and operational boundaries.
• Establishing the baseline. The baseline emis-
sions scenario provides a reference point for
what emissions would have been without the
project intervention.
• Confirming project environmental additionality
and regulatory surplus: Offset activities must
result in GHG reductions that are additional to
any that would otherwise occur in the absence
of the offset project activity. Activities must be
surplus to those that are required by any type
of regulation (GHG, criteria pollutants, or
other).
• Examining project leakage. Leakage relates
to increases or decreases of GHG emissions
elsewhere as a result of a project.
• Permanence, saturation, and duration in car-
bon sequestration projects.
• Monitoring and verification guidelines.
Climate Leaders allows Partners to invest in offset
projects as a way to meet their GHG reduction
goal. Of paramount importance is the delineation
of offset project reductions with a robust, valid,
and quantifiable accounting system that provides
credible and verifiable data. The WRIand WBCSD
are currently co-convening an effort to develop a
guidance module for accounting for project-based
emission reductions that is robust and consistent
with the potential financial value and integrity of
any commodity that may be attached to reduc-
tions. Climate Leaders will provide offset
guidance consistent with that evolving standard to
the extent practicable. Climate Leader offset guid-
ance is currently under development.
Accounting for
Emissions from
Electricity/Steam
Sales
Non-utility Partners may sell a portion of their
own generated electricity and/or steam output to
another company directly or to the grid. The
emissions from these energy sales are not includ-
ed when calculating a Partner's progress towards
their Climate Leader's normalized GHG reduction
goal. Partners first include the emissions associat-
ed with energy production as direct emissions in
their inventory. They then calculate the emissions
associated with only the sales of electricity
and/or steam and report them separately as
absolute emissions (as per the Climate Leaders
guidance for Indirect Emissions from
Purchases/Sales of Electricity and Steam). These
emissions are normalized using the Partner's nor-
malization factor and listed as an emission
reduction. These emission reductions from sold
electricity and/or steam are not netted with total
direct emissions but are accounted for when eval-
uating a Partners progress towards meeting their
reduction goal and can be use to meet a normal-
ized reduction target.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 45
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Design Principles
Reporting GHG Emissions
The Climate Leaders GHG inventory
reporting requirements are designed to
provide credibility and promote continu-
ous improvement in corporate emissions
accounting procedures.
This chapter provides guidance to Partners, third-
party verifiers, and other interested parties on the
steps needed to fulfill the Climate Leaders reporting
requirements. It is not intended to provide EPA
guidance on GHG inventory verification. However,
EPA allows Partners who wish to undertake a rigor-
ous third-party verification of their GHG inventories
to submit a verification report certifying that, at a
minimum, the requirements of the Climate Leaders
GHG inventory review have been met.
GHG Inventory
Reporting Requirements
Overview
All Climate Leaders Partners can receive free
technical assistance from EPA's team of experts
to complete the program's reporting require-
ments. The reporting requirements consist of
three major components:
1. Partners complete and maintain an Inventory
Management Plan (IMP) — or a similar col-
lection of Standard Operating Procedures —
that describes the process for completing a
high quality, corporate entity-wide inventory.
2. Partners complete and submit to EPA on a
yearly basis the Annual GHG Inventory
Summary and Goal Tracking Form that
reports GHG emissions at a corporate level
and details progress towards meeting their
GHG reduction goal.
3. EPA conducts the following reviews:
• A desktop review of the Partner's GHG account-
ing methods and systems as detailed in their
IMP.
• A desktop review of the Partner's corporate GHG
inventory data as reported in their Annual GHG
Inventory Summary and Goal Tracking Form.
• An optional desktop review of the Partner's facil-
ity-level GHG data.
• One on-site visit to review facility-level imple-
mentation of the IMP.
An initial review is conducted for the Partner's
IMP and base year inventory. A follow-up is then
conducted for the goal year inventory to provide
assurance that the goal is met. Interim year
inventories are reviewed; however, the IMP is
reviewed only when there have been major revi-
sions or updates.
A flow chart describing the reporting process is
provided in Figure 9-1.
Reporting Requirements
and Technical
Assistance
The major components of the Climate Leaders
reporting requirements consist of the IMP, the
Annual GHG Inventory Summary and Goal
Tracking Form, and the review process as
described in further detail below. Technical assis-
tance is available to Partners as they develop
and document their IMP and complete their
inventory, as well as during their EPA review
process. Technical assistance is also described in
further detail below.
46 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Figure 9-1: Reporting Requirements Flow
Year 1 - Base Year Data
Partner Joins
Climate Leaders
Partner
Reports based
on 3rd Party
Verification
Yes
Partner Submits 3rd Party Auditor Report and
Inventory Summary tor Review
Feedback on 3rd Party Auditor Report Provided
to Partner
Partner Makes any Changes and Submits Final
Base Year Inventory Summary and 3"1 Party
Verification Report
No
EPA Provides Technical Support on Inventory and
Inventory Management Plan (IMP), as Needed
Partner Submits Draft IMP Documentation and
Draft Inventory Summary for Review
EPA Conducts Desktop Review of Corporate Leva!
Data and Offers Desktop Review of Facility Level
Data
Feedback on Draft IMP Documentation and Draft
Inventory Summary Provided to Partner
Partner and EPA Select One Site For On-Site IMP
Review
On-Site IMP Review
Feedback on On-Sto IMP Review Provided to
Partner
Partner Makes any Appropriate Changes and
Submits Final Base Year Inventory Summary and
IMP Docum^ntafion
Year 2 Through
Year
»
Partner Submits Current Year Inventory
Summary and 3!e Party Verification Report in
Goal Year
Are There
Outstanding Required
IMP Components
Yes
T
Partner Submits New IMP Documentation and Draft
Current Year Inventory Summary for Review
Feedback on New IMP Documentation and
Inventory Summary Provided to Partner
Partner Submits Any Changes to IMP and Current
Year Inventory Summary
No
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 47
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Design Principles
GHG Accounting Methods
and Systems - Inventory
Management Plan
Partners complete and maintain an IMP that
describes their process for completing a high-
quality, corporate-wide inventory. Companies use
an IMP to institutionalize a process for collecting,
calculating, and maintaining GHG data. A
detailed IMP checklist describing the individual
components and level of detail necessary is
attached as Appendix 3 (Columns 1 & 2).
Partners may have a single IMP document that
addresses all of the elements that go into devel-
oping their corporate inventory, or they might
have an equivalent collection of procedures and
other relevant information. EPA expects the criti-
cal elements of an IMP to be developed within
one year of a Partner joining the program, while
other elements can be phased in over time (as
noted in Appendix 3). The seven major sections
of the IMP are described below.
• Partner Information: company name,
address, and inventory contact information
• Boundary Conditions: organizational and
operational boundary descriptions
• Emissions Quantification: quantification
methodologies and emissions factors
• Data Management: data sources, collection
process, and quality assurance
• Base Year: base year adjustments for struc-
tural and methodology changes
• Management Tools: roles and responsibili-
ties, training, and file maintenance
• Auditing & Verification: auditing, manage-
ment review, and corrective action
The IMP is an internal process for the Partner to
institutionalize the completion of a high quality
inventory. The IMP should be designed with this
in mind, not strictly as a reporting requirement to
EPA. The checklist in Appendix 3 outlines what
should be included in an IMP and can be used as
a guide for creating an IMP or pulling together
existing documents. The checklist does not repre-
sent, and should not be used as a substitute for
an IMP
Annual GHG Inventory
Summary and Goal Tracking
Form
Partners complete and submit the Annual GHG
Inventory Summary and Goal Tracking Form to
EPA each year. This form describes emissions in
terms of total CO ^equivalent at a corporate level,
broken out by emission source type — core direct
(e.g., stationary, process, and mobile sources),
core indirect (e.g., electricity or steam purchas-
es), optional (e.g., offsite waste disposal, product
transport), and offsets (e.g., sequestration, renew-
ables) — for both domestic and international (if
applicable) sources. The form also includes his-
torical totals and a performance indicator (if
applicable) that is used to track progress toward
a reduction goal.
The Annual GHG Inventory Summary and Goal
Tracking Form is attached as Appendix 4.
Review Process
EPA provides a desktop review of both the
Partner's IMP and its corporate GHG inventory
data. EPA also offers a desktop review of facility-
level GHG data for interested Partners. Many
Partners have found the facility-level data review
to be helpful in improving the quality of their
inventory. One site visit is also conducted to
ensure accurate facility-level implementation of
the Partner's IMP.
48 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Desktop Review of the Inventory
Management Plan
EPA conducts a desktop review of the Partner's
GHG accounting methods and systems as
detailed in the IMP Checklist.
A complete list of issues to consider for the desk-
top review is attached as Appendix 3 (Column
3). Once the desktop review of the IMP is com-
pleted, EPA informs the Partner whether their
IMP meets or is below expectations for each item
on the IMP Checklist. The desktop review also
identifies required areas for improvement,
optional areas for improvement, and best prac-
tices. For required areas for improvement,
Partners submit a revised IMP to correct the defi-
ciency. Optional areas for improvement are
recommendations to the Partner that could help
improve the accuracy, efficiency, or relevance of
their inventories. Best practices are also noted
and compiled into a database that will enable
EPA to highlight and share innovative IMP prac-
tices with Partners in the future.
Desktop Review of Corporate
GHG Inventory Data
The desktop review of the Partner's GHG invento-
ry covers a review of corporate inventory data
disaggregated to the categories broken out in the
Annual GHG Inventory Summary and Goal
Tracking Form. The desktop GHG inventory
review of corporate data includes identifying
issues such as:
• Boundary Conditions. Are all emission
source types within operational boundaries
included as specified in IMP? Are all signifi-
cant differences in the annual emissions
profile explained?
• Base Year. If structural or methodology
changes are reported: Do changes appear to
be reflected in adjustments to base year emis-
sions? Do changes appear to be consistent
with changes in annual inventory from the
previous year's inventory?
• Data Management/Goals. Does the invento-
ry adequately provide data that allows the
Partner to evaluate facility- and entity-wide
progress against their Climate Leaders goal?
Does the inventory appear to be on track for
achieving reduction goal? What percentage of
emissions and emissions reductions are
occurring domestically vs. outside the U.S.?
What percentage of reductions is occurring
through offsets vs. emissions reductions?
Based on the desktop review of corporate inven-
tory data, EPA provides the Partner with findings
and recommendations to improve the accuracy
and relevance of their inventory.
Desktop Review of Facility-Level
GHG Inventory Data
While not a requirement, EPA's preference is to
see facility level data; however, EPA recognizes
that some Partners have confidentiality concerns
with reporting at this level of disaggregation. If
confidentiality is a concern, EPA can review the
data at the Partner site. Many Partners have
found the facility-level data review to be helpful
in improving the quality of their inventory.
The desktop GHG inventory review of facility
data includes identifying issues such as:
• Boundary Conditions. Are all facilities
identified in the IMP included? Are emission
source types at each facility consistent with
the IMP? Do emission totals appear consistent
between facilities based on magnitude and
type of operations?
• Data Management/Goals. Are emissions of
each GHG correctly converted to CO^equiva-
lents? Are calculations outlined in the IMP
correctly completed for each emission type at
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 49
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Design Principles
each facility? Does activity data used reflect
that specified in the IMP? Do facility subtotals
sum to the reported corporate totals?
Based on the desktop review of facility inventory
data, EPA provides the Partner with findings and
recommendations to improve the accuracy and
relevance of their inventory.
On-Site Review of IMP
Implementation
Once the desktop reviews have been completed,
one on-site visit is conducted to review facility-
level implementation of the IMP. This on-site
review is designed to give confidence in the cred-
ibility of the data reported to EPA, as well as to
foster continuous improvement in the emissions
accounting and reporting procedures of Climate
Leaders Partners. The goal of the review is to
determine whether there are ways to improve the
accuracy, efficiency, and relevance of the inven-
tory created by the IMP. To accomplish this, the
inventory performance at the site should be sig-
nificant to the overall inventory and notably
relevant to other facilities. EPA, in consultation
with its Partners, determines the most appropri-
ate site to visit based on the following factors:
• Risk. EPA strives to review facilities with the
greatest overall contribution to corporate
emissions, or those with emissions profiles
that are the most representative of corporate
emissions
• Potential Benefit to Partners. EPA strives to
review facilities that offer the best opportuni-
ty for technical assistance to benefit Partners'
inventory efforts.
Ideally, a site that is a large emitter, has many of
the largest emission types, and represents the
most common business activity, data manage-
ment system, and environmental/quality
management system is identified. Where process
emissions are a large fraction of the total corpo-
rate inventory, preference is given to these sites,
especially in cases where sector-specific guidance
is not available from EPA.
Once a site is selected, EPA conducts a telephone
conference with the Partner to identify the GHG
emissions sources at the site, key personnel at the
site, data sources to review, equipment/
processes to be visited, safety/security issues, and
other logistics. It is anticipated that most site visits
will last one day, but more complicated facilities
may require more time. An example of a typical
schedule for an onsite visit is shown in Figure 9-2.
The site review includes sampling source data,
tracing data through the entire data management
chain, and checking calculations. A complete list
of issues to consider for the on-site review is
attached as Appendix 3 (Column 4). Once the site
review is complete, EPA informs the Partner
whether their IMP implementation at the site
meets expectations or requires improvement for
each item on the IMP Checklist. The site review
also identifies optional areas for improvement, as
well as best practices. For required areas for
improvement, Partners submit additional docu-
mentation detailing the steps taken to address
these issues. The optional areas for improvement
are recommendations to the Partner that could
help improve the accuracy, efficiency, or relevance
of their inventory management systems. Best prac-
tices are also noted and compiled into a database
that will enable EPA to highlight and share innova-
tive IMP practices with Partners in the future.
Third-Party Verification
Many Climate Leaders Partners have completed
or are considering third-party verification of their
inventories. As an alternative to the primary
reporting option, EPA allows Partners that under-
take a rigorous third-party verification of their
GHG inventories to submit a verification report
50 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Figure 9-2: Sample Onsite IMP Review Schedule
Typical Schedule for Climate Leaders Onsite IMP Review
This schedule assumes that a facility of moderate complexity would be visited. Very complex facili-
ties may require a longer agenda; very small or noncomplex facilities may require a shorter agenda.
1-2 Weeks in Advance
EPA and Partner discuss source types included at the facility, business/product divisions within the
facility, partner personnel required during the visit, safety procedures, and logistics. The partner rep-
resentative ensures that required personnel will be available.
Day of the Onsite Review
8:00-8:30 am
The reviewer arrives onsite, clears security, attends required safety briefing (if any). Data confiden-
tiality is discussed. (Note: reviewers are not allowed to sign non-disclosure agreements).
8:30 -9:00 am
The reviewer meets with the Climate Leaders representative, local (define) EHS representative, and
facility management (as appropriate) to discuss objectives for site visit, to review major operations
and processes used at the facility, and to identify specific areas of interest for the onsite review.
9:00 -11:00 am
Tour of facility. The reviewer will be attempting to understand chemical/manufacturing/generating
processes used at the plant in order to review the completeness of the emission source list and to
understand the specific mode of operation for these sources. Discussions occur with facility operators
during the tour.
11:00 am-12:00 pm
The reviewer and EHS representative meet with facility staff responsible for tracking electrical,
steam, and fuel purchases (non-utilities) or for quality assurance/quality control (QA/QC) of
Continuous Emissions Monitoring System (CEMS) data and Title IV reporting (utilities). Review of
activity data used for this estimate and discussion of any unit conversions/'calculations/'QC of data
performed by the Environmental Health and Safety (EHS) representative. Use of any data manage-
ment tools and data review by other personnel are also discussed.
12:00-1:00 pm
Working lunch, onsite or offsite. As necessary, the reviewer and the Partner further discuss types of
emission sources, business divisions, and key performance indicator (KPI) tracking.
1:00 - 3:00
The reviewer and the EHS representative meet with personnel responsible for tracking of activity
data from other processes or emission sources, tracking of KPI (if performed at facility level), and for
management and QA/QC of data.
3:00-4:00
The reviewer and the Partner's representative discuss preliminary findings and any areas of concern.
Approximately 1 Week After Visit
Formal report provided by EPA to the Partner.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 51
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Design Principles
certifying that, at a minimum, the requirements of
the Climate Leaders GHG inventory review have
been met. Partners choosing to submit to EPA a
third-party verification report are not required to
submit an IMP to EPA, nor are the IMP desktop
review and on-site review by EPA required.
However, Partners are still required to submit the
Annual GHG Inventory Summary and Goal
Tracking Form to EPA each year.
The third-party verification report must certify
that the requirements of the Climate Leaders GHG
inventory review process have been met. This
includes a minimum of one on-site visit, although
more may be appropriate. The third-party verifi-
cation report must address all of the required IMP
checklist components, both in a desktop review
and during the site visit(s). EPA is available via
telephone conference to answer Partner's or
third-party verifier's questions on these require-
ments. When Partners choose to use third-party
verification in lieu of submitting an IMP, then
third-party verification is required for the
Partner's base year inventory and for its goal
year inventory.
Partners interested in third-party verification are
encouraged to discuss this with EPA to better
understand verification options and other consid-
erations.
Technical Assistance to
Complete Base Year
Reporting
EPA provides up to 80 hours of technical assis-
tance to each Partner as they develop and
document their IMP and complete their base-year
inventory. Technical assistance encompasses all
aspects of creating a credible GHG inventory,
including creating and implementing GHG
accounting methods, and measuring, tracking,
and reporting GHG emissions. EPA also provides
an inventory review process to offer constructive
feedback on improving the accuracy, efficiency,
and relevance of Partners' GHG inventory data
and management systems. The level of assistance
involved will vary by the needs of the Partner.
Ongoing Technical
Assistance
After the completion of a Partner's base year
inventory, EPA experts continue to provide up to
10 hours annually of technical assistance in sub-
sequent years to help Partners update their IMP,
adjust their base year inventory for significant
changes, and calculate new emission sources.
Types of technical assistance available include:
• Assistance in understanding the Climate
Leaders GHG Inventory Protocol, which
includes the Design Principles, cross-sector
modules, and sector-specific modules.
• Guidance on selecting organizational and
operational boundaries.
• Assistance identifying sector-specific emis-
sions sources.
• Assistance identifying methods, types of data
needed, and emission factors used to calcu-
late emissions.
• Help defining estimation methods for small
sources of emissions to minimize unneces-
sary data collection.
• Support in creating a GHG management sys-
tem or IMP based on best practices.
• One onsite visit to review implementation of
the IMP.
• On-call support for technical queries.
52 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Corporate Data
Management
Approaches
The following describes various corporate GHG
data management approaches.
Roll-Up GHG Emissions Data
to Corporate Level
To report a corporation's total GHG emissions,
companies usually need to gather and summa-
rize data from multiple facilities, possibly in
different countries and business divisions. It is
important to plan this process carefully to mini-
mize the reporting burden, reduce the risk of
errors that might occur while compiling data,
and ensure that all facilities are collecting infor-
mation on an approved, consistent basis.
Ideally, corporations will integrate GHG report-
ing with their existing reporting tools and
processes, and take advantage of any relevant
data already collected and reported by facilities
to division or corporate offices, regulators, or
other stakeholders.
For internal reporting up to the corporate level,
it is recommended that standardized reporting
formats be used to ensure that data received
from different business units and facilities is
comparable, and that internal reporting rules
are observed. Standardized formats can signifi-
cantly reduce the risk of errors. Common
differences between sites that can result in errors
in the corporate inventory include:
• Different emission factors and quantification
methodologies used by each site
• Sites reporting data in different units of meas-
ure that then go uncorrected
• Different interpretation of what constitutes de
minimus
• Unclear roles and responsibilities resulting in
incomplete data sets sent to corporate
• Different interpretation of how to establish
organizational and operational boundaries
• Availability of activity or other measured
data necessary to do emissions calculations
• Differences in reporting periods
The reporting under the Climate Leaders program
will help to ensure that there is a process in
place for meeting GHG data standards. It will also
provide suggestions for ongoing improvements
and efficiencies in GHG inventory development
through the corporate-wide IMPsubmittal and
desktop review, as well as through the onsite IMP
review, as documented above.
Centralized Approach:
Individual Facilities Report
Activity/Fuel Use Data
This approach may be particularly suitable for
office-based organizations. Requesting that
facilities report their activity/fuel use data may
be the preferred option if:
• The staff at the corporate or division
level can calculate emissions data in a
straightforward manner on the basis of
activity/fuel-use data; and
• Emissions calculations are standard across a
number of facilities.
Decentralized Approach:
Individual Facilities Calculate
GHG Emissions Data
Asking facilities to calculate GHG emissions
themselves will help to increase their awareness
and understanding of the issue. However, it may
also lead to resistance, increased training needs,
an increase in calculation errors, and a greater
need for auditing of calculations. Requesting
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 53
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Design Principles
that facilities calculate GHG emissions them-
selves may be the preferred option if:
• GHG emission calculations require detailed
knowledge of the kind of equipment being
used at facilities.
• GHG emission calculations methods vary
across a number of facilities.
• Process emissions (in contrast to emissions
from burning fossil fuels) make up an
important share of total GHG emissions.
• Resources are available to train facility staff
to conduct these calculations and to audit
them, or a user-friendly tool is available to
simplify the calculation and reporting task
for facility-level staff.
• Local regulations require reporting of GHG
emissions at a facility level.
The choice of collection approach depends on
the needs and characteristics of the reporting
company. To maximize accuracy and minimize
reporting burdens, some companies use a com-
bination of two approaches. Complex facilities
with process emissions calculate their emis-
sions at the facility level, while facilities with
uniform emissions from standard sources only
report fuel use, electricity consumption, and
travel activity. The corporate database or
reporting tool then calculates total GHG emis-
sions for each of these standard activities.
The two approaches are not mutually exclusive
and should produce the same result. Thus com-
panies desiring a consistency check on
facility-level calculations can follow both
approaches and compare the results. Even
when facilities calculate their own GHG emis-
sions, corporate staff may still wish to gather
activity/fuel use data to double-check calcula-
tions and explore opportunities for emissions
reductions. These data should be available and
transparent to staff at all corporate levels.
Corporate staff should also verify that facility-
reported data are based on well-defined,
consistent, and approved inventory bound-
aries, reporting periods, calculation
methodologies, etc.
Whether final GHG emissions figures are
derived at the facility or corporate level, the
data specified at the beginning of this chapter
must be collected and supplied for the final
report. The Climate Leaders program requires
that Partners report corporate-level emissions
data and prefers that Partners provide supporting
information for each facility, as detailed above.
54 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Verification of
GHG Emissions
Climate Leaders Partners may choose
to pursue third-party verification.
However, Partners are still required
to submit the Annual GHG Inventory Summary
and Goal Tracking Form to EPA each year (as
described in Chapter 9).
Verification is an objective assessment of the
accuracy and completeness of reported GHG
information to pre-established GHG accounting
and reporting principles. Although the practice
of verifying corporate GHG inventories is still
evolving, the emergence of widely accepted
standards, such as the GHG Protocol Corporate
Standard and the forthcoming GHG Protocol
Project Quantification Standard, should help
GHG verification become more uniform, credi-
ble, and widely accepted.
Verification involves an assessment of the risks
of material discrepancies in reported data.
Discrepancies relate to differences between
reported data and data generated from the
proper application of the relevant standards
and methodologies. In practice, verification
involves the prioritization of effort by the
verifier toward the data and associated systems
that have the greatest impact on overall data
quality.
This section provides guidance on conducting
an independent verification of a GHG inventory.
It is highly recommended that a company
develops its inventory in such a way that verifi-
cation can be easily conducted. The Climate
Leaders program provides an IMP checklist (IMP
elements, as discussed in Chapter 9) that delin-
eates the components that must be included
when Partners opt for third-party verification
(Appendix 3).
Internal Assurance
While verification is often undertaken by an
independent, external third party, this may not
always be the case. Many companies interested
in improving their GHG inventories may subject
their information to internal verification by per-
sonnel who are independent of the GHG
accounting and reporting process. Both internal
and external verification should follow similar
procedures and processes. Independent inter-
nal verifications can provide valuable
assurance over the reliability of information.
Internal verification can be a worthwhile learn-
ing experience for a company prior to
commissioning an external verification by a
third party. It can also provide external verifiers
with useful information to begin their work.
The Concept of Materiality
The concept of "materiality" is essential to
understanding the process of verification.
Chapter 1 provides a useful interpretation of
the relationship between the principle of com-
pleteness and the concept of materiality.
Information is considered to be material if, by
its inclusion or exclusion, it can be seen to
influence any decisions or actions taken by the
users of it. A material discrepancy is an error
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 55
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Design Principles
(e.g., from an oversight, omission, or miscalcu-
lation) that results in a reported quantity or
statement being significantly different from the
true value or meaning. To express an opinion
on data or information, a verifier would need to
form a view on the materiality of all identified
errors or uncertainties.
While the concept of materiality involves a
value judgement, the point at which a discrep-
ancy becomes material (materiality threshold)
is often pre-defined. As a rule of thumb, an
error is considered to be materially misleading
if the value exceeds 5 percent of the total inven-
tory for the part of the organization being
verified.
The verifier needs to assess an error or omis-
sion in the full context within which the
information is presented. For example, if a 2
percent error prevents a company from achiev-
ing its corporate target then this would most
likely be considered material. Understanding
how verifiers apply a materiality threshold will
enable companies to more readily establish
whether the omissions of an individual source
or activity from their inventory is likely to raise
questions of materiality.
A specific materiality threshold will not be
defined under the Climate Leaders program; it is
left up to the discretion of the Partner and/or ver-
ifier. Partners need to at least make an estimate
for all sources, facilities, and operations and
include the estimates in the inventory. The esti-
mates can be approximate, and Partners can
work with EPA to determine the potential impact
on the inventory. Sources can be excluded from
the inventory only if it is justified that they repre-
sent an insignificant amount of a Partner's total
emissions AND either: 1) there is insufficient
scientific understanding to develop a reliable
method for estimating emissions, or 2) an estima-
tion method exists but data are not available (or
would require excessive cost to the Partner to
acquire) to estimate emissions.
Selecting a Verifier
When Partners choose to use external verifica-
tion to meet EPA's reporting requirements, the
verifier should be an independent, third-party
verifier.
Some factors to consider when selecting a
verifier include their:
• Previous experience and competence in
undertaking GHG verifications
• Understanding of GHG issues, including
calculation methodologies
• Understanding of the company's operations
and industry
• Objectivity, credibility, and independence
It is important to recognize that the knowledge
and qualifications of the individual(s) conduct-
ing the verification can be more important
than those of the organization(s) they come
from. Companies should select organizations
based on the knowledge and qualifications of
their actual verifiers and ensure that the lead
verifier assigned to them is appropriately
experienced. Effective verification of GHG
inventories often requires a mix of specialized
skills, not only at the technical level (e.g., engi-
neering experience or an industry specialist)
but also at a business level (e.g., verification
and industry specialization).
56 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Preparing for GHG
Verification
Preparation of the IMP (as described in Chapter
9) allows Partners to prepare for the verification.
The third-party verification report must certify
that the requirements of the Climate Leaders GHG
inventory review process have been met.
Appropriate documentation needs to be avail-
able to support the GHG inventory being
subjected to external verification. Statements
made by management for which there is no
available supporting documentation cannot be
verified. Where a Partner has not yet imple-
mented systems for routinely accounting and
recording GHG emissions data, an external veri-
fication will be difficult and may result in the
verifier being unable to issue an opinion. Under
these circumstances, the verifiers may make
recommendations on how current data collec-
tion and collation process should be improved
so that an opinion can be obtained in future
years.
Partners are responsible for ensuring the exis-
tence, quality, and retention of documentation
so as to create an audit trail of how the invento-
ry was compiled. If a Partner issues a specific
base year against which it assesses its GHG
performance, it should retain all relevant
historical records to support the base year
data. These issues should be borne in mind
when designing and implementing GHG data
processes and procedures.
IMP Checklist
When verification is undertaken to meet Climate
Leaders reporting requirements, then the verifica-
tion should address each of the elements of the
IMP, which is located in Appendix 3.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 57
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Design Principles
Guidance on Setting a GHG
Reduction Goal
EPA offers flexibility in goal setting
because every company has a unique set
of GHG emissions sources and reduction
opportunities. Once Partners have completed
their base year GHG inventory, EPA works closely
with Partners to set an individualized GHG reduc-
tion goal. This goal must be:
• Corporate-wide (including at least all U.S.
operations)
• Based on the most recent base year for which
data are available
• Achieved over 5 to 10 years
• Expressed as an absolute GHG reduction or
as a decrease in GHG intensity
• Aggressive compared to the projected GHG
performance for the Partner's sector
Goal Evaluation
Considera tions
Partners represent a diverse group of companies,
including energy producers, manufacturers, and
service-oriented businesses. What EPA considers
an aggressive goal may vary for different sectors
and for different companies depending on a vari-
ety of factors:
• Sector Issues. Historically, GHG intensity
tends to decrease over time in most sectors
as equipment is replaced with newer, more
efficient technology. This trend can be rapid
in sectors where capital stock turns over
quickly, and much slower in traditional
manufacturing sectors. The rate of intensity
improvement can also be affected by the
growth rate of the sector.
• Company Issues. Partners within the same
sector can have different GHG emissions
sources and a wide range of reduction oppor-
tunities. In addition, some Partners have
undertaken GHG reduction activities prior to
joining Climate Leaders. These actions are
taken into consideration when evaluating a
Partner's proposed goal.
Goal Evaluation
Methodology
EPA individually evaluates each proposed GHG
reduction goal through the following process:
• The goal is evaluated against a projected
benchmark GHG emissions improvement rate
for each Partner's sector. In cases where a
Partner operates in multiple sectors, a weight-
ed average is used. The benchmark is a
combination of projected average energy
intensity improvement and any projected
process-related emissions intensity changes.
EPA expects every goal to be markedly better
than the projected benchmark performance
for the Partner's sector.
• EPA also considers a Partner's current emis-
sions intensity when evaluating its GHG
reduction goal. By comparing the Partner's
current performance to its sector, EPA recog-
nizes that many companies have already
made significant reductions in their GHG
58 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
emissions or GHG intensity. Companies that
are currently very efficient for their sector
will not be expected to commit to a reduction
goal that is as aggressive as companies that
are less efficient than their sector average.
Defining Projected
Sector Benchmarks
for GHG Emissions
Performance
The first step in evaluating a Partner's goal is to
create a benchmark for comparison. EPA current-
ly uses the following models to help develop an
appropriate benchmark:
• For commercial and industrial companies,
EPA uses both the U.S. Department of
Energy's National Energy Modeling System
(NEMS) and the Bureau of Labor Statistics'
(BLS) forecast input/output tables for the U.S.
economy to project benchmark energy inten-
sity improvement by sector.
• To project GHG emissions from electric gener-
ators, EPA uses the Integrated Planning Model
(IPM) developed by ICF Resources Inc.
In cases where emissions from industrial process-
es are a significant source of a Partner's
inventory (such as cement or semiconductor
manufacturing), EPA performs additional analysis
based on sector-specific sources of process-relat-
ed emissions data and projections. These data
are then combined with the projected energy
intensity improvement to develop a benchmark
GHG emissions improvement rate for the
Partner's sector.
Choosing a Key
Performance Indicator
for Normalized Goals
EPA allows goals to be expressed as an absolute
GHG emissions reduction or as a decrease in
GHG intensity. Absolute GHG reduction goals
compare total GHG emissions in the goal year to
those in a base year. GHG intensity goals allow a
company to account for increases or decreases in
production over time. The ratio of GHG emissions
over an appropriate normalizing factor becomes
the Partner's key performance indicator to meas-
ure GHG intensity. Normalizing factors are
typically measured in physical units (e.g., tons of
steel) or economic units (e.g., value of ship-
ments). Due to the large variability in economic
metrics, Climate Leaders generally prefers met-
rics based on physical values, which track
year-to-year changes in emissions intensity more
accurately. However, for companies that produce
a wide diversity of products, using an economic
metric might be more appropriate. EPA offers
technical assistance to help Partners choose a
suitable key performance indicator.
Reporting and Goal
Tracking
Climate Leaders Partners report annual GHG
inventory data to EPA to document progress
towards their reduction goal. Partners with a
worldwide goal report domestic and international
emissions separately as well as reporting a
worldwide total. This system allows EPA to
ensure that Partners are demonstrating leader-
ship through achieving a portion of their GHG
reductions in the United States. Once Partners
meet their initial Climate Leaders goal, EPA will
work with them to set a new reduction goal.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 59
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Design Principles
Absolute and
Intensity Targets
Partners may select either an absolute emissions
target or an intensity target. Absolute targets
track reductions in the total emissions of an
organization. Intensity targets track reductions
per unit of output of the organization, and may
be applicable where growth of the organization
may offset efficiency improvements or other
reductions. Table 11-1 compares the two types
of targets.
Table 11-1: Comparison of Absolute and Intensity Targets
Parameter
Absolute Target
Intensity Target
Reduction Type
Specified quantity of
reductions to the
atmosphere.
Reductions per a business metric.
No guarantee that there will be less GHG emissions
to the atmosphere - absolute emissions may rise
even if intensity goes down (and output increases).
Metric Definition Not applicable
May be difficult to define a single common business
metric for companies with diverse operations.
If a monetary variable is used for the business met-
ric (i.e., dollar of revenue or sales), it should be
adjusted for changes in product prices, product
mix, and inflation - adds complexity to the tracking
process.
Confidentiality
Not applicable—no
business metric
assigned to target
May be an issue—data on the business metric
needs to be reported
Effects from Base
Year
Recalculations
Relation to
Organic Growth
or Decline
Comparisons of
GHG Intensity/
Efficiency
Significant structural GHG changes due to production fluctuations are
changes add complexi- usually not required
ty to tracking progress
over time
Recognizes a company Unrelated
for reducing GHGs by
decreasing production
or output
Does not allow for
comparison of GHG
performance between
companies, if they
choose to do so
Comparability of GHG performance between com-
panies may be increased
60 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
CHAPTER 1 1
Identifying GHG
Reduction
Opportunities
Partners may find it easiest to begin the process
of meeting a goal by examining their Climate
Leaders GHG inventory and developing a list of
emission reduction activities. Figure 11-1 illus-
trates the broad palette of emission reduction
choices individual companies and facilities might
consider. Once the Partner has assembled an
array of emission reduction opportunities, the
firm should consider establishing evaluation crite-
ria to prioritize the reduction activities. Such
evaluation criteria might include:
• Cost to implement
• Collateral benefits to the firm, the environ-
ment, and the community
• Net Return on Investment
• Time to implement
• Contribution to core business
• Contribution to brand image
• Obstacles to implementation
With an evaluation protocol in place, the compa-
ny can then best evaluate top preferences for
emission reduction activities over the 5 to 10
year time horizon and construct a defensible,
credible, achievable GHG reduction goal.
In addition to considering emission reduction
opportunities within a company's direct and
indirect core emissions inventory and
upstream/downstream optional emissions
inventory, companies may also use emission
offset projects towards completion of their
GHG reduction goal.
As depicted in Figure 11-1, emission reduction (or
sequestration) opportunities generally fall into
four main categories:
Figure 11-1: Opportunities for GHG Reduction
Forest Products Enhanced Land
Management
Agricultural Conservation Tillage
Etc.
Carbon
Sequestration
-Afforestation
- Reforestation
- Forest Conservation
-Etc.
Process Waste as Fuel Source
- Biomass Waste Fuel in Pulp Mills
- By-product Gas Use in Iron Steel
-Etc.
Process Energy Reduction
Process
Improvements
- Process Emissions
Reductions
- Chemicals
- Cement
-Aluminum
-Etc.
- Waste Miniminization
Energy
Efficiency
- Blag Energy Systems
- Industrial Energy Systems
- Vehicle Fuel Efficiency
- Energy Mgmt. Systems
Low Carbon
Energy Use
- Renewable Energy
- Coal Mine Methane
- Landfill Gas
- Sewage Treatment Gas
Combined Heat & Power
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 61
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Design Principles
• Energy Efficiency
* Low Carbon or No Carbon Energy Use
* Process Optimization
• Carbon Sequestration
The emissions associated with the generation of
imported electricity, heat, or steam are a special
case of indirect emissions. For many companies,
electricity usage represents one of the most signif-
icant opportunities to reduce GHG emissions.
Companies can reduce their use of electricity
and/or use it more efficiently by investing in
energy efficient technologies. Additionally, emerg-
ing green power markets enable some companies
to switch to less GHG-intensive electricity suppli-
ers. Companies can also install an efficient
co-generation plant onsite to replace the import
of more GHG-intensive electricity from the grid.
Incorporating indirect emissions from electricity,
heat, and steam usage into the core emissions
reporting facilitates the transparent accounting of
such choices.
Process optimization can result in directly
reduced GHG and conventional pollutant emis-
sions. In addition to these direct emission
reductions, indirect emission reductions may
occur from improvements in energy efficiency,
resource efficiency, waste minimization, and
emissions reductions.
Carbon can be sequestered in sinks including
soil, woody debris, living plants, and even wood
products. Challenges inherent in inventorying
sequestered carbon include scientific uncertainty
in measurement accuracy and precision, and
questions about permanence, duration, and
leakage.
No specific process for constructing a reduction
goal is required by the Climate Leaders program.
However, Table 11-2 lays out a recommended
strategy and describes the typical steps to effi-
ciently create a credible, achievable goal.
62 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Table 11-2: Steps in Setting and Tracking Performance
Toward a GHG Target
Obtain senior management commitment.
Implementing a reduction target is likely to necessitate changes in behavior and decision-making
throughout the organization, and requires establishing an internal accountability and
incentive system, as well as adequate resources.
Decide on the target type (absolute vs. intensity).
An absolute target is expressed in terms of a reduction over time in a specified quantify of GHG
emissions to the atmosphere (i.e., tons of C02-equivalents), whereas an intensity target is
expressed as a reduction in the ratio of GHG emissions relative to another business metric
(i.e., tons of C02-equivalents per ton of product, per kWh, ton-mileage, etc) or some other
metric such as sales, revenues, or office space.
Decide on the target boundary.
Under the Climate Leaders program, targets must be for reduction of C02-equivalents on a absolute or
intensity basis, for a minimum of core direct and indirect emissions from U.S. operations.
Choose the target base year.
Under the Climate Leaders program, for the purpose of assessing a company's performance against
its emission reduction goal, the most current year that a Partner has data available
should be its base year (fixed base year).
Define the target time period.
Under the Climate Leaders program, the goals should be based on prospective reductions
beginning with the base year and looking 5-10 years into the future.
Decide on the use of project offsets or credits.
A GHG target can be met from internal reductions at sources included in the target boundary, or
through additionally using offsets that are generated from GHG reduction projects that reduce emis-
sions at sources outside the target boundary. It is important to ensure credibility of the offsets (see
Chapter 8), specify the origin and nature of the offsets when reporting, as well as to check that the
offsets have not also been counted toward another organization's target (i.e., via contract).
Establish a target double counting policy.
For example, the policy must ensure that a GHG offset is not counted toward the target by
both the selling and purchasing organizations. For an internal reduction project, the
missions need to be added back to the inventory if the reductions are subsequently "sold"
as an offset to another company.
Decide on the target level.
In addition to the guidelines and requirements from Steps 1 through 7, considerations include
understanding key drivers affecting GHG emissions, developing reductions strategies, looking at
the future of the company, factoring relevant growth factors, evaluating existing environmental
plans or energy plans that will affect GHG emissions, and benchmarking GHG emissions with
similar organizations.
Track and report progress against the target.
EPA Annual GHG Inventory Summary and Goal Tracking Form tracks progress against the target.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 63
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Design Principles
GHG Emissions Sources by
A
ppendix 1 indicates examples of GHG
emissions by emission category and
industry sectors. These examples are
not exhaustive and the reporting company
should refer to Chapter 4 and interpret the rele-
vant emissions for its own situation.
Sector
Core Direct
Emission Sources
Core Indirect
Emission
Sources
Optional Emission
Sources
Energy
Energy • Stationary combustion (boilers
Generation and turbines used in the
production of electricity, heat or
steam, fuel pumps, fuel cells,
flaring)
• Mobile combustion (trucks,
barges and trains for
transportation of fuels)
• Fugitive emissions (Cfy leakage
from transmission and storage
facilities, HFC emissions from
LPG storage facilities, SFg
emissions from transmission
and distribution)
i Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
i Stationary combustion (mining
and extraction of fuels, energy
for refining or processing fuels)
i Process emissions (production of
fuels, SFg emissions)
i Mobile combustion
(transportation of fuels/ waste,
employee business travel,
employee commuting)
i Fugitive emissions (Cfy and CC>2
from waste landfills, pipelines,
SFg emissions)
Oil and Gas • Stationary combustion (process
Industry heaters, engines, turbines,
flares, incinerators, oxidizers,
production of electricity, heat
and steam)
• Process emissions (process
vents, equipment vents,
maintenance/ turnaround
activities, non-routine activities)
• Mobile combustion
(transportation of raw
materials/products/waste;
company owned vehicles)
• Fugitive emissions (leaks from
pressurized equipment,
wastewater treatment, surface
impoundments)
i Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
i Stationary combustion (product
use as fuel or combustion for the
production of purchased
materials)
i Mobile combustion
(transportation of raw
materials/products/waste,
employee business travel,
employee commuting, product
use as fuel)
i Process emissions (product use
as feedstock or emissions from
the production of purchased
materials)
i Fugitive emissions (Cfy and CC>2
from waste landfills or from the
production of purchased
materials)
64 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Sector
Core Direct
Emission Sources
Core Indirect
Emission
Sources
Optional Emission
Sources
Energy (continued)
Coal Mining
• Stationary combustion
(methane flaring and use, use of
explosives, mine fires)
• Mobile combustion (mining
equipment, transportation of
coal)
• Fugitive emissions (CH4
emissions from coal mines and
coal piles)
• Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
• Stationary combustion (product
use as fuel)
• Mobile combustion
(transportation of coal/waste,
employee business travel,
employee commuting)
• Process emissions (gasification)
Metals
Aluminum
• Stationary combustion (bauxite
to aluminum processing, coke
baking, lime, soda ash and fuel
use, on-site CHP)
• Process emissions (carbon
anode oxidation, electrolysis,
PFC)
• Mobile combustion (pre- and
post-smelting transportation,
ore haulers)
• Fugitive emissions (fuel line
CH4, HFC and PFC, SF6 cover
gas)
• Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
• Stationary combustion (raw
material processing and coke
production by second party
suppliers, manufacture of
production line machinery)
• Mobile combustion
(transportation services,
business travel, employee
commuting)
• Process emissions (during
production of purchased
materials)
• Fugitive emissions (mining and
landfill CH4 and CC>2, outsourced
process emissions)
Chemicals
Nitric acid, • Stationary combustion (boilers,
Ammonia, flaring, reductive furnaces,
Adipic acid, flame reactors, steam
Urea, and reformers)
Petro- • Process emissions
chemicals (oxidation/reduction of
substrates, impurity removal,
N20 byproducts, catalytic
cracking, myriad other
emissions individual to each
process)
• Mobile combustion
(transportation of raw
materials/products/waste)
• Fugitive emissions (HFC use,
storage tank leakage)
i Stationary
combustion
(consumption of
purchased
electricity heat
or steam)
i Stationary combustion
(production of purchased
materials, waste combustion)
i Process emissions (production
of purchased materials)
i Mobile combustion
(transportation of raw
materials/products/waste,
employee business travel,
employee commuting)
i Fugitive emissions (CH4 and CC>2
from waste landfills and
pipelines)
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 65
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Design Principles
Sector
Core Direct
Emission Sources
Core Indirect
Emission
Sources
Optional Emission
Sources
Minerals
Cement and
Lime
• Process emissions (calcination
of limestone)
• Stationary combustion (clinker
kiln, drying of raw materials,
production of electricity)
• Mobile combustion (quarry
operations, on-site
transportation)
• Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
• Stationary combustion
(production of purchased
materials, waste combustion)
• Process emissions (production of
purchased clinker and lime)
• Mobile combustion
(transportation of raw
materials/products/waste,
employee business travel,
employee commuting)
• Fugitive emissions (mining and
landfill CH4 and CC>2, outsourced
process emissions)
Waste
Landfills,
Waste
combustion,
Water service
• Stationary combustion
(incinerators, boilers, flaring)
• Process emissions (sewage
treatment, nitrogen loading)
• Fugitive emissions (Cfy
emissions from waste and
animal product decomposition)
• Mobile combustion
(transportation of
waste/products)
• Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
• Stationary combustion (recycled
waste used as a fuel)
• Process emissions (recycled
waste used as a feedstock)
• Mobile combustion
(transportation of waste/
products, employee business
travel, employee commuting)
Pulp and Paper
Pulp and
paper
• Stationary combustion
(production of steam and
electricity, fossil fuel-derived
emissions from calcination of
calcium carbonate in lime kilns,
drying products with infrared
dryers fired with fossil fuels)
• Mobile combustion
(transportation of raw
materials, products, and
wastes, operation of harvesting
equipment)
• Fugitive emissions (CH4 and
CC>2 from waste)
• Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
• Stationary combustion
(production of purchased
materials, waste combustion)
• Process emissions (production
of purchased materials)
• Mobile combustion
(transportation of raw
materials/products/waste,
employee business travel,
employee commuting)
• Fugitive emissions (landfill CH4
and CC>2 emissions)
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Design Principles
Core Direct
Sector Emission Sources
HFC, RFC, SF4,
HCFC 22 •
production
•
•
•
and HCFC 22 Production
Stationary combustion
(production of electricity, heat
or steam)
Process emissions (HFC
venting)
Mobile combustion
(transportation of raw
materials/products/waste)
Fugitive emissions (HFC use)
Core Indirect
Emission
Sources
• Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
Optional Emission
Sources
• Stationary combustion (production
of purchased materials)
• Process emissions (production of
purchased materials)
• Mobile combustion (transportation
of raw materialsproducts/waste,
employee business travel,
employee commuting)
• Fugitive emissions(fugitive leaks in
product use, CH4 and CC>2 from
waste landfills)
Semiconductor Production
Semi- •
conductor
production
•
•
•
Process emissions (C^Fe, CH4,
CHF3) SF6) NF3) C3F8) C4F8) N20
used in wafer fabrication, CF4
created from C2Fg and CsFg
processing)
Stationary combustion
(oxidation of volatile organic
waste, production of
electricity, heat or steam)
Fugitive emissions (process
gas storage leaks, container
remainders/heel leakage)
Mobile combustion
(transportation of raw
materials/products/waste)
• Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
• Stationary combustion (production
of imported materials, waste
combustion, upstream T&D losses
of purchased electricity)
• Process emissions (production of
purchased materials, outsourced
disposal of returned process gases
and container remainder/heel)
• Mobile combustion (transportation
of raw materials/products/waste,
employee business travel,
employee commuting)
• Fugitive emissions (landfill CH4 and
CC>2 emissions, downstream
process gas container
remainder/heel leakage)
Other Sectors*
Service •
sector/Office-
based
organizations •
•
Stationary combustion
(production of electricity, heat
or steam)
Mobile combustion
(transportation of raw
materials/waste)
Fugitive emissions (mainly
HFC emissions during use of
refrigeration and air-
conditioning equipment)
• Stationary
combustion
(consumption of
purchased
electricity, heat
or steam)
• Stationary combustion (production
of purchased materials)
• Process emissions (production of
purchased materials)
• Mobile combustion (transportation
of raw materials/ products/ waste,
employee business travel,
employee commuting)
Businesses in "other sectors" can estimate GHG emissions using cross-sectoral estimation tools—
stationary combustion, mobile (transportation) combustion, HFC use, measurement and estimation
uncertainty, and waste.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 67
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Design Principles
Unit Conversions
This appendix provides useful informa-
tion on conversion factors for basic
units of measure and fundamental fuel
characteristics. Unless otherwise referenced,
material is drawn from the American Petroleum
Institute Compendium of Greenhouse Gas
Emissions Estimation Methodologies for the Oil
and Gas Industry, February 2001.
Global warming potentials for various green-
house gases are presented in Figure 6-3 of
Chapter 6.
Table A2-1: Conversion Factors
Mass
1 pound (Ib)
1 kilogram
1 short ton (ton)
1 metric tonne (tonne)
Volume
1 cubic foot (ft3)
1 cubic foot (ft3)
1 gallon (gal)
1 barrel (bbl)
Length
1 inch (in)
1 foot (ft)
1 mile
Power
1 horsepower (hp)
Energy
1 horsepower-hour
(hp-hr)
1 kilowatt-hour
1 megawatt (106 W)
IBtu
1 million Btu (106 Btu)
Heating Value
1 pound/million Btu
(lb/106 Btu)
Pressure
1 atmosphere (atm)
1 atmosphere (atm)
1 pound per square inch (psi)
= 453.6 grams (g)
= 2.205 pounds (Ib)
= 2000 pounds (Ib)
= 2205 pounds (Ib)
= 1.1025 tons
= 7.4805 gallons
= 28.32 liters (L)
= 3.785 liters (L)
= 42 gallons (gal)
= 2.540 centimeters
= 0.3048 meters (m)
= 1.609 kilometers
= 0.707 Btu/second
= 2545 Btu
= 3412 Btu
= 1000 kilowatts (103W)
= 1055 Joules (J)
= 293 kilowatt-hours
= 430 grams/giga-Joule (g/109 J)
14.696 pounds per square
inch (psia)
101.325 kilo-Pascals (103 Pa)
51.71 millimeters mercury (Hg)
0.4536 kilograms
1000 grams (g)
907.2 kilograms
1000 kilograms
= 0.02832 cubic meters (m3)
= 158.99 liters (L)
= 0.7457 kilowatts (103W)
= 0.7457 kilowatt-hour
= 3600 kilo-Joules (103 J)
= 760 millimeters mercury (Hg)
Notes:
psig = Gauge pressure.
psia = Absolute pressure (note psia = psig -
atmospheric pressure).
68 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
SI Units
Unit/Symbol
peta (P)
tera (T)
giga (G)
mega (M)
kilo (k)
hecto (h)
deka (da)
deci (d)
centi (c)
milli (m)
micro (m)
nano (n)
pico (p)
Table A:
Factor
1015
1012
109
106
103
102
101
ID'1
io-2
io-3
io-6
ID'9
io-12
2-2: Unit Prefixes
US Designation
Unit/Symbol
quadrillion (Q)
trillion (T)
billion (B)
million (MM)
thousand (k or M)
Factor
IO15
IO12
IO9
IO6
IO3
Table A2-3: Power Output to Energy Input Conversions
Fuel/Service
Large uncontrolled natural gas turbine
Large uncontrolled gas turbine firing fuel oil (distillate)
Natural gas prime mover: turbine
Natural gas prime mover: 2-cycle lean burn
Natural gas prime mover: 4-cycle lean burn
Natural gas prime mover: 4-cycle rich burn
Gasoline industrial engine
Diesel industrial engine
Large (>600 hp) Diesel Engine
Dual (natural gas/diesel) engine
Btu/hp-hr
8,000
7,700
7,800
7,700
8,600
7,000
Data Source
AP-42, Table 3. 1-1
(10/96)
AP-42, Table 3.2-1
(10/96)
AP-42, Table 3.3-1
(10/96)
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 69
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Design Principles
Table A2-4: Conversion from Weight Percents to Mole
Percents in Mixtures
Mole%i = Wt%, x
MWMixture
MWj
# compounds
100
Y (Mole%,
*-^
1=1
# compounds
= 100 +
wt%
1=1
Mole%j = individual weight percentage
xture = Molecular weight of the mixture
j = individual molecular weights
70 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
IMP Checklist
The Inventory Management Plan (IMP) is an internal
process for the Partner to institutionalize the completion of
a high quality inventory. The IMP should be designed with
this in mind, not strictly as a reporting requirement to EPA.
The IMP checklist outlines what components should be
included in an IMP and can be used as a guide for creating
an IMP or pulling together existing documents. The check-
list does not represent, and should not be used as a
substitute for an IMP. Partners may either have a single for-
mal IMP document that addresses all of these components,
or Partners may have a collection of Standard Operating
Procedures (SOPs) and other relevant information that
address these components when taken in total.
For the most current version of the IMP checklist see
the Climate Leaders website at:
http://www.epa.gov/climateleaders.
IMP Component
Corporate Level Detail
Required
Corporate Desktop Review: Issues to
Consider
On-site IMP Review Issues to
Consider
Partner Information
1.
2.
3.
4.
Company Name
Corporate Address
Inventory Contact
Inventory Contact
Information
Legal name of entity
Physical and mailing
address
Contact name and title
Contact information
(telephone/fax/ email)
Boundary Conditions
Organizational
5.
6.
Inclusion of
Partially Owned or
Controlled Assets
Facilities List
The basis for reporting
emissions data from
partially owned or con-
trolled assets:
- Equity Approach
- Control Approach:
- Financial control cri-
terion
- Operational control
criterion
A list of all facilities
with location, % owner-
ship, or % control.
Define if inventory is
U.S. only or includes
optional non-U.S. opera-
tions.
Is the approach consistent with the
Climate Leaders Design Principles? If
applicable, how is operational control
defined? How is equity defined (e.g.,
based on financial ownership or value
derived from company)?
Are leases adequately addressed?
List should be complete and include all
facilities (including leases if applica-
ble). Fleet vehicles should also be
included if not assigned to a facility.
How does the list compare to other
public sources listing company hold-
ings? Has the Partner demonstrated
due diligence on determining the accu-
racy of the list? What is the method for
ongoing review of the list?
Identify all business units or
major divisions at site.
Confirm that all business units
at the site are either included
or specifically excluded.
Consider shared, co-located, or
outsourced operations.
Is control demonstrated as
documented?
N/A
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 71
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Design Principles
IMP Component
Corporate Level Detail
Required
Corporate Desktop Review: Issues to
Consider
On-site IMP Review Issues to
Consider
Boundary Conditions (continued)
Operational
7.
8.
9.
10.
11.
GHG List
Emission Source
Identification
Procedure
Direct Sources
Indirect Sources -
Energy
Import/Export
Optional Sources
A list of GHGs included
in inventory.
A description of the
procedure/method used
to identify direct and
indirect emission
sources.
A list of groups of
sources by emission
category for each facili-
ty or reporting unit.
(e.g., under stationary
combustion: thermal
oxidizers, engines,
flares, etc.).
It is not necessary to
enumerate each piece
of equipment.
A list of energy imports
or exports that are
reflected in the invento-
ry (e.g., steam,
electricity, hot water,
etc.).
A list of other optional
emission sources that
are accounted for in the
inventory (e.g., out-
sourced activities,
upstream or down-
stream activities, etc.)
If there are no releases of any of the six
major GHGs (C02, CH4, N20, HFCs,
PFCs, and SFg) this should be docu-
mented to insure there is no oversight.
Small sources of a GHG should not be
excluded.
How does this compare to the list of
emission sources specified in #9 and
#10?
Is the procedure likely to identify all
significant sources? Does the proce-
dure capture all stationary, mobile,
indirect, process, and fugitive sources?
Including small sources (e.g., HFC emis-
sions from refrigeration/ AC equipment
use, etc.)?
Does the procedure include networking
with all the appropriate people, whose
roles and responsibilities are defined in
#24?
Are all direct emission sources includ-
ed (stationary, mobile, fugitive, and
process)?
How does this list compare with other
company sources of emissions (e.g.,
Title V air permit)?
Are all indirect emission sources
included (purchased electricity, steam,
and hot water)?
Are optional sources included accu-
rately (i.e., entire emissions source
accounted for and not just the reduc-
tions)?
How does this list compare to company
profile (e.g., company has a lot of 3rd
party shipping but only employee com-
muting reported)?
Is the list of GHGs consistent
with the IMP?
Confirm all sources of GHGs
are included in the inventory,
as consistent with IMP.
Is it likely that all emission
sources will be captured? Is
there an existing inventorying
process, permitting process
(like Title V), or other mecha-
nism to help most efficiently
identify direct and indirect
emission sources?
List all GHG emission source
types identified.
Confirm each source type
included in the inventory, as
consistent with IMP.
List all GHG emission source
types identified. Confirm each
source type included in the
inventory, as consistent with
IMP.
If an optional source is includ-
ed in the inventory, does the
inventory capture the entire
emission type?
Is there evidence of similar
optional sources which
should also be included for
consistency?
72 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
IMP Component
Corporate Level Detail
Required
Corporate Desktop
Review: Issues to
Consider
On-site IMP Review Issues to Consider
Emissions Quantification
12.
13.
Quantification
Method
Emission Factors
and Other
Constants
A description of the emis-
sion quantification
methodologies and refer-
ence for each emission and
offset category.
Where multiple methods
are used, specify which
facility/source uses the
respective method.
A list of emission factors
and other constants and
reference for factors and
constants (i.e., conversion
factors) for each emission
category.
Descriptions of the process
for how external references
are kept current.
Where multiple factors are
used, specify which facili-
ty/source uses the
respective factor.
Are the correct quantifica-
tion methodologies being
used?
Are the methods based on
reliable accurate and cur-
rent references?
How do the methods com-
pare to the Climate
Leaders guidance docu-
ments?
Are the correct emission
factors being used, based
on reliable accurate and
current references? Are
factors updated annually?
How do the factors com-
pare to default values in
the Climate Leaders guid-
ance documents (e.g., do
stationary combustion
CC>2 factors account for
carbon oxidation)?
What do electricity pro-
duction emission factors
represent?
Check a sample of each GHG related cal-
culation that takes place at the site by
confirming the algorithm and factors
match those documented in the IMP, and
recalculating no more than three of each
computation type. Such calculations may
include converting units, summing
monthly totals to annual totals, comput-
ing emissions by source, converting to
CC>2-eq, totaling facility CC>2-eq, or other
computations.
If GHG calculations are performed onsite,
is there an existing process for communi-
cation of changes from the corporate
level to this site? If past changes were
made, were they indeed communicated?
If facility-specific emission factors are
used, does facility have documentation
to support (e.g., carbon content of fuels,
supplier-provided emission factors for
electricity)?
If default factors are used, does the facili-
ty have adequate information to develop
specific emission factors to use instead?
If activity data conversions are per-
formed onsite, is there an existing
process for communication of changes
from the corporate level to this site? If
past changes were made, were they
indeed communicated?
Data Management
14.
Activity Data
A description/name of the
source of activity data doc-
uments or processes
required to complete quan-
tification methodology
(e.g., monthly fuel pur-
chase records, fuel meter,
internal tracking and aggre-
gation documents, etc.) for
each item of activity data.
Where multiple data
sources are used, specify
which facility/source uses
the respective data source.
Is activity data based on
appropriate sources?
Is the right activity data
being collected for the
quantification method
described in #12?
Is activity data the most
accurate available (e.g.,
fuel purchases adjusted
for stock, fuel use based
on physical units not $)?
Does the ultimate source and type of
activity data collected for each emission
type match that described in the IMP?
Are any unit conversions, other than as
described in the IMP, performed on the
data before reporting?
Is a better (more efficient, more accu-
rate) source of activity data available?
If the partner provided facility-level
inventory data, does the reported facility
total match that indicated by the activity
data, conversion factors, and quantifica-
tion method?
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 73
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Design Principles
IMP Component
Corporate Level Detail
Required
Corporate Desktop Review:
Issues to Consider
On-site IMP Review Issues to
Consider
Data Management (continued)
15.
Data Management
[Roles and respon-
sibilities can be
defined over time]
A description of the
process flow for collect-
ing and processing
activity or monitoring
data from its original
source to the final emis-
sion data entered into
the inventory.
Includes a description
of roles and
responsibilities.
Is the process likely to avoid
data errors in computing final
rolled up inventory totals?
Are roles and responsibilities
properly defined?
Is the process adequately
defined and institutionalized?
Are the person/persons respon-
sible for collecting data
identified?
Does the process flow match that
described in the IMP?
Does each representative understand
their role and responsibilities?
More efficient method possible for
data collection and processing? Where
are likely areas for data corruption and
how can error be minimized (from raw
data to incorporation into the invento-
ry)? Determine whether opportunities
exist to integrate GHG data collection
and management with other existing
facility reporting tools.
Trace approximately two (2) data
points for each data type to confirm
that raw data was correctly entered
into data management system, calcula-
tion tool, or hand calculation.
16.
Normalization
Factor(s) Selection
[Only necessary if
Partner chooses to
set goal based on
an intensity tar-
get]
A description of the
normalization factor
(units of product, $ rev-
enue, etc.) used to
calculate emissions
intensity.
Document how the nor-
malization factor was
selected.
Does the normalization factor
and associated intensity value
reasonably represent the emis-
sions management
performance?
Is the normalization factor and intensi-
ty value relevant for tracking
performance at this facility? Is there a
better normalization factor for this
facility?
Is the normalization factor and
intensity value well communicated?
17.
Data Collection
Process -
Normalization
Factor
[Only necessary if
Partner chooses to
set goal based on
an intensity tar-
get]
A description of the
process flow for collect-
ing and processing
activity or monitoring
data to obtain the final
normalization factor
data entered into the
inventory.
Is the process likely to avoid
data errors in computing final
normalization factor and inten-
sity value totals?
Is the process likely to avoid data
errors in computing final normaliza-
tion factor and intensity value totals?
18.
Data Collection
Process - Quality
Assurance
A description of the
major sources of uncer-
tainty and quality
assurance measures for
the data process flow.
This includes informa-
tion on how
measurement system
accuracy is assessed.
Is there a process for minimiz-
ing error?
Are all likely error sources con-
sidered?
How are uncertainties being
addressed?
Are QC checks performed as described
in the IMP? Are key staff aware of pos-
sible sources of error and means for
minimizing that have not been consid-
ered in the IMP?
Are reported uncertainty estimates for
measurement devices realistic? Are
measurement devices regularly
calibrated?
74 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
IMP Component
Corporate Level Detail
Required
Corporate Desktop Review:
Issues to Consider
On-site IMP Review Issues to
Consider
Data Management (continued)
19.
20.
21.
Data Collection
System Security
[Can be defined
over time]
Integrated Tools
[OPTIONAL]
Frequency
A description of how
data collection system
security is maintained.
A description of how
GHG reporting and pro-
cessing is integrated
with other reporting
tools.
The frequency for
reporting facility data
to the corporate level.
How likely are errors to occur
within the data collection and
management system due to
spreadsheets being damaged or
otherwise transformed, unau-
thorized access to databases,
and other information system
problems?
Are tools integrated to enhance
efficiency?
Is the reporting frequency suffi-
cient to avoid significant errors
in annual reporting (i.e., at least
annual reporting)?
Are safeguards implemented as
described in the IMP?
Are there opportunities for further
improving data collection security?
Are there opportunities for combining
reporting systems to improve efficien-
cy and consistency? Look for
opportunities to leverage systems,
schedules, data, etc.
Is data reported at frequency
described in the IMP? Would alternate
frequencies improve site-level efficien-
cy (for example matching GHG
reporting timing to follow Title V
reporting or GRI reporting.)
Base Year
22.
23.
Adjustment -
Structural
Changes
Adjustment -
Methodology
Changes
A description of the
approach for adjusting
base year emissions for
mergers, acquisitions,
divestitures, and out-
sourcing.
This includes defining
the process for deter-
mining when changes
are necessary.
A description of the
approach for adjusting
base year emissions for
changes in calculation
methodologies, emis-
sion factors, or error
correction.
This includes defining
the process for deter-
mining when changes
are necessary.
Is there an effective and accu-
rate process for adjusting base
year emissions for structural
changes? What triggers
changes?
Are the changes implemented
consistently (for emissions
decreases as well as increas-
es)?
How is this linked to #5
(method) and #6 (list) of
facilities?
Is there an effective and accu-
rate process for adjusting the
base year emissions for
methodology changes? What
triggers changes?
How is this linked to #12
(method) and #13 (factors) for
calculating emissions?
Were structural changes incorporated
in base year inventory, if appropriate
based on IMP?
Are organizational/operational
boundary changes (if applicable)
communicated to the site?
Is there an effective and accurate
process for adjusting the base year
emissions for methodology changes?
Are methodology changes (if applica-
ble) communicated to the site?
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 75
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Design Principles
IMP Component
Corporate Level Detail
Required
Corporate Desktop Review:
Issues to Consider
On-site IMP Review Issues to
Consider
Management Tools
24.
Roles and
Responsibilities
[Can be defined
over time]
A description of overall
roles and responsibili-
ties for corporate GHG
inventory development
and maintenance,
include discussion of
management role(s).
Are roles and responsibilities
sufficiently spelled out to ensure
that tasks are completed?
Are roles and responsibilities
adequately defined and institu-
tionalized?
Do facility personnel feel that
they adequately understand their
responsibilities?
25.
Training
[Can be defined
over time]
A description of inven-
tory development
training received by
inventory development
team members.
Is sufficient training provided to
ensure that tasks are completed
accurately?
Are new staff properly trained
and aware of their roles and
responsibilities?
Does training received match that
described in the IMP?
Based on discussions with facility
personnel, is the training is appropri-
ate, or can it be improved?
Determine if roles are adequately
institutionalized to ensure proper
implementation.
26.
Document
Retention and
Control Policy
[Can be defined
over time]
A description of how
version control is main-
tained for GHG
inventory management
guidelines.
A description of the
Partner's document
retention policy.
Is there a reasonable process for
ensuring that all participants are
working to the same IMP guide-
lines?
Does document retention policy
insure data is maintained long
enough to adjust base year emis-
sions in goal year if needed?
Are document retention and control
policies understood and implemented
as described in IMP?
Auditing & Verification
27. Internal Auditing
A description of the
internal audit process.
Timing of the audit.
Is there an audit process that is
likely to identify gaps and errors
in inventory management?
Are auditor roles and responsi-
bilities properly defined in #24?
Have audits occurred as described in
IMP? Have any corrective actions
resulted?
External
Validation and/or
Verification
[OPTIONAL]
If applicable, a descrip-
tion of the process for
external review.
Timing of the audit.
What protocol was the external
validation/verification per-
formed to?
What were the overall results of
the validation/verification?
Have audits occurred as described in
IMP? Have any corrective actions
resulted?
29.
Management
Review
[Can be defined
over time]
A description of the
senior management
review process.
Are senior managers involved in
signing off on the inventory?
Are manager roles and responsi-
bilities properly defined in #24?
Are facility management reviewing
inventory performance as 00
described in the IMP?
30.
Corrective Action
[Can be defined
over time]
A description of the
process for implement-
ing and documenting
corrective actions for
all internal and external
reviews.
Is there a process for correcting
errors or problems found?
Is it clear who is responsible for
correcting problem, when the
problem should be solved, and
how the correction process is
tracked?
Is the process to ensure corrective
actions are addressed appropriately
(i.e., by the appropriate staff) and in
a timely fashion occurring as
described in the IMP? Can this
process be improved based on
findings onsite?
76 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Annual GHG Inventory Summary
and Goal Tracking Form
For the most current version of
the Annual GHG Inventory Summary
and Goal Tracking Form see the
Climate Leaders website at:
http://www.epa.gov/climateleaders.
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Design Principles
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Design Principles
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Design Principles
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80 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
image:
Design Principles
Glossary of Terms
Absolute target. A target defined by reduction in
absolute emissions over time, e.g., reduces CC>2
emissions by 25 percent below 1994 levels by 2010.
Additionality. A criterion for assessing whether a
project has resulted in GHG emission reductions or
removals in addition to what would have occurred in
its absence. This is an important criterion when the
goal of the project is to offset emissions elsewhere.
Allowance. A commodity giving its holder the right
to emit a certain quantity of GHGs.
Associated/affiliated company. The parent compa-
ny has significant influence over the operating and
financial policies of the associated/affiliated compa-
ny, but not financial control.
Audit Trail. Well organized and transparent histori-
cal records documented how an inventory was
completed.
Baseline. A hypothetical scenario for what GHG
emissions, removals or storage would have been in
the absence of the GHG project or project activity.
Base year. A historic datum (a specific year) against
which a company's emissions are tracked over time.
Base year emissions. GHG emissions in the base
year.
Base year emissions recalculation. Recalculation of
emissions in the base year to reflect a change in the
structure of the company, or to reflect a change in
the accounting methodology used. This ensures
data consistency over time, i.e., comparisons of like
with like over time.
Biofuels. Fuel made from plant material, e.g., wood,
straw, and ethanol from plant matter.
Boundaries. GHG accounting and reporting bound-
aries can have several dimensions, i.e.,
organizational, operational, geographic, business
unit, and target boundaries. The inventory boundary
determines which emissions are accounted and
reported by the company.
Cap and trade system. A system that sets an overall
emissions limit, allocates emissions allowances to
participants, and allows them to trade emissions
credits with each other.
Capital Lease. A lease which transfers substantially
all the risks and rewards of ownership to the lessee
and is accounted for as an asset on the balance
sheet of the lessee. Also known as a Financial or
Finance Lease. Leases other than
Capital/Financial/Finance leases are Operating leas-
es. Consult an accountant for further detail as
definitions of lease types differ between various
accepted financial standards.
Carbon sequestration. The uptake of CC>2 and stor-
age of carbon in biological sinks.
Co-generation unit/combined heat and power
(CHP). A facility producing both electricity and
steam/heat using the same fuel supply.
Consolidation. Combination of GHG emissions data
from separate operations that form part of one com-
pany or group of companies.
Control. The ability of a company to direct the oper-
ating policies of another operation. More specifically,
it is defined as either operational control (the organi-
zation or one of its subsidiaries has the full authority
to introduce and implement its operating policies at
the operation) or financial control (the organization
has the ability to direct the financial and operating
policies of the operation with a view to gaining eco-
nomic benefits from its activities).
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 81
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Design Principles
Corporate inventory program. A program to pro-
duce annual corporate inventories that are keeping
with the principles, standards, and guidance of the
GHG Protocol Corporate Standard. This includes all
institutional, managerial, and technical arrangements
made for the collection of data, preparation of a GHG
inventory, and implementation of the steps taken to
manage the quality of their emission inventory.
CCVequivalent (CCVeq). The universal unit of
measurement to indicate the global warming poten-
tial (GWP) of each of the six greenhouse gases,
expressed in terms of the GWP of one unit of carbon
dioxide. It is used to evaluate releasing (or avoiding
releasing) different greenhouse gases against a com-
mon basis.
Cross-sector calculation tool. A GHG calculation tool
that addresses GHG sources common to various sec-
tors, e.g., emissions from stationary or mobile
combustion (see also calculation tools).
Direct GHG emissions. Emissions from sources that
are owned or controlled by the reporting company.
Direct monitoring. Direct monitoring of exhaust
stream contents in the form of continuous emissions
monitoring (CEM) or periodic sampling.
Double counting Two or more reporting companies
take ownership of the same emissions or reductions.
Emissions. The release of GHGs into the
atmosphere.
Emission factor. A factor allowing GHG emissions to
be estimated from a unit of available activity data
(e.g., tons of fuel consumed, tons of product pro-
duced) and absolute GHG emissions.
Equity share. The equity share reflects economic
interest, which is the extent of rights a company has
to the risks and rewards flowing from an operation.
Typically, the share of economic risks and rewards
in an operation is aligned with the company's per-
centage ownership of that operation, and equity
share will normally be the same as the ownership
percentage.
Emission Uncertainty. Uncertainty that arises when-
ever GHG emissions are quantified, due to
uncertainty in data inputs and calculation method-
ologies used to quantify GHG emissions.
Finance lease. A lease which transfers substantially
all the risks and rewards of ownership to the lessee
and is accounted for as an asset on the balance
sheet of the lessee. Also known as a Capital or
Financial Lease. Leases other than
Capital/Financial/Finance leases are Operating leas-
es. Consult an accountant for further detail as
definitions of lease types differ between various
accepted accounting principles.
Fixed asset investment. Equipment, land, stocks,
property, incorporated and non-incorporated joint
ventures, and partnerships over which the parent
company has neither significant influence or control.
Fugitive emissions. Emissions that are not physical-
ly controlled but result from the intentional or
unintentional releases of GHGs. They commonly
arise from the production, processing transmission
storage and use of fuels and other chemicals, often
through joints, seals, packing, gaskets, etc.
Green power. A generic term for renewable energy
sources and specific clean energy technologies that
emit fewer GHG emissions relative to other sources
of energy that supply the electric grid. Includes
solar photovoltaic panels, solar thermal energy,
geothermal energy, landfill gas, low-impact
hydropower, and wind turbines.
82 * CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Greenhouse gases (GHGs). For the purposes of this
standard, GHGs are the following six gases: carbon
dioxide (C02), methane (CH4), nitrous oxide (N20),
hydroflurocarbons (HFCs), perfluorocarbons (PFCs),
and sulfur hexafluoride (SFg).
GHG capture. Collection of GHG emissions from a
GHG source for storage in a sink.
GHG credit. GHG offsets can be converted into GHG
credits when used to meet an externally imposed
target. A GHG credit is a convertible and transfer-
able instrument usually bestowed by a GHG
program.
GHG offset. Offsets are discrete GHG reductions
used to compensate for (i.e., offset) GHG emissions
elsewhere, for example to meet a voluntary GHG tar-
get or cap. Offsets are calculated relative to a
baseline that represents a hypothetical scenario for
what emissions would have been in the absence of
the mitigation project that generates the offsets. To
avoid double counting, the reduction giving rise to
the offset must occur at sources or sinks not includ-
ed in the target or cap for which it is used.
GHG program. A generic term used to refer to any
voluntary or mandatory international, national, sub-
national, government, or non-governmental
authority that registers, certifies, or regulates GHG
emissions or removals outside the company, e.g.,
COM, EU ETS, CCX, and CCAR.
GHG project. A specific project or activity designed
to achieve GHG emission reductions, storage of car-
bon, or enhancement of GHG removals from the
atmosphere. GHG projects may be stand-alone proj-
ects, or specific activities or elements within a larger
non-GHG related project.
GHG Protocol Initiative. A multi-stakeholder collab-
oration convened by the World Resources Institute
and the World Business Council for Sustainable
Development to design, develop, and promote the
use of accounting and reporting standards for busi-
ness. It comprises two separate but linked standards
- the GHG Protocol Corporate Accounting and
Reporting Standard and the GHG Protocol Project
Quantification Standard.
GHG Protocol Project Quantification Standard. An
additional module of the GHG Protocol Initiative
addressing the quantification of GHG reduction proj-
ects. This includes projects that will be used to
offset emissions elsewhere and/or generate credits.
GHG removal. Absorbtion or sequestration of GHGs
from the atmosphere.
GHG sink. Any physical unit or process that stores
GHGs; usually refers to forests and
underground/deep sea reservoirs of C02.
GHG source. A factor describing the radiative forc-
ing impact (degree of harm to the atmosphere) of
one unit of a given GHG relative to one unit of C02.
Global warming potential (GWP). A factor describ-
ing the radiative forcing impact (degree of harm to
the atmosphere) of one unit of a given GHG relative
to one unit of C02.
Group company/subsidiary. The parent company
has the ability to direct the financial and operating
policies of the group company/subsidiary with a
view to gaining economic benefits from its activities.
Heating value. The amount of energy released when
a fuel is burned completely. Care must be taken not
to confuse higher heating values (HHVs), used in the
U.S. and Canada, and lower heating values, used in
all other countries (for further details refer to the
calculation tool for stationary combustion available
at www.ghgprotocol.org).
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 83
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Design Principles
Indirect emissions. Emissions that are a conse-
quence of the operations of the reporting company,
but occur from sources owned or controlled by
another company, e.g., as a consequence of the
import of electricity, heat, or steam.
Insourcing. The administration of ancillary business
activities, formally performed outside of the compa-
ny, using resources within a company.
Intensity ratios. Ratios that express GHG impact per
unit of physical activity or unit of economic value
(e.g., tons of CC>2 emissions per electricity generat-
ed). Intensity ratios are the inverse of
productivity/efficiency ratios.
Intensity target. A target defined by reduction in the
ratio of emissions and a business metric over time,
e.g., reduce CC>2 per ton of cement by 12 percent
between 2000 and 2008.
Intergovernmental Panel on Climate Change
(IPCQ. International body of climate change scien-
tists. The role of the IPCC is to assess the scientific,
technical and socio-economic information relevant
to the understanding of the risk of human-induced
climate change (www.ipcc.ch).
Inventory. A quantified list of an organization's GHG
emissions and sources.
Inventory boundary. An imaginary line that encom-
passes the direct and indirect emissions included in
the inventory. It results from the chosen organiza-
tional and operational boundaries.
Inventory quality. The extent to which an inventory
provides a faithful, true, and fair account of an orga-
nization's GHG emissions.
Leakage (Secondary effect). Leakage occurs when a
project changes the availability or quantity of a
product or service that results in changes in GHG
emissions elsewhere.
Life cycle analysis. Assessment of the sum of a
product's effects (e.g., GHG emissions) at each step
in its life cycle, including resource extraction, pro-
duction, use phase and waste disposal.
Material discrepancy. An error (for example from an
oversight, omission, or miscalculation) that results
in the reported quantity being significantly different
to the true value to an extent that will influence per-
formance or decisions. Also known as material
misstatement.
Materiality threshold. A concept employed in the
process of verification. It is often used to determine
whether an error or omission is a material discrep-
ancy or not. It should not be viewed as a de
minimus for defining a complete inventory.
Mobile combustion. Burning of fuels by transporta-
tion devices such as cars, trucks, trains, airplanes,
ships, etc.
Model uncertainty. GHG quantification uncertainty
associated with mathematical equations used to
characterize the relationship between various
parameters and emission processes.
Operation. A generic term used to denote any kind
of business, irrespective or its organizational, gover-
nance, or legal structures. An operation can be a
facility, subsidiary, affiliated company or other form
of joint venture.
Operating lease. A lease which does not transfer the
risks and rewards of ownership to the lessee and is
not recorded as an asset in the balance sheet of the
lessee. Leases other than Operating leases are
Capital/Financial/Finance leases. Consult an account-
ant for further detail as definitions of lease types
differ between various accepted financial standards.
84 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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Design Principles
Operational boundaries. The boundaries that deter-
mine the core direct and indirect emissions
associated with operations owned or controlled by
the reporting company. This assessment allows a
company to establish which operations and sources
cause direct and indirect emissions, and to decide
which optional emissions to include that are a con-
sequence of its operations.
Optional emissions. Emissions that are a conse-
quence of the activities of the reporting company, but
are not part of the reporting companies core direct or
indirect emissions as defined by Climate Leaders (e.g.,
employee commuting).
Organic growth/decline. Increases or decreases in
GHG emissions as a result of changes in production
output, product mix, plant closures, and the opening
of new plants.
Organizational boundaries. The boundaries that
determine the operations owned or controlled by
the reporting company, depending on the consolida-
tion approach taken (equity or control approach).
Outsourcing. The contracting out of activities to
other businesses.
Parameter uncertainty. GHG quantification uncer-
tainty associated with quantifying the parameters
used as inputs to estimation models.
Primary effects. The specific GHG reducing ele-
ments or activities (reducing GHG emissions, carbon
storage, or enhancing GHG removals) that the proj-
ect is intended to achieve.
Process emissions. Emissions generated from manu-
facturing processes, such as cement or ammonia
production.
Productivity/efficiency ratios. Ratios that express
the value or achievement of a business divided by
its GHG impact. Increasing efficiency ratios reflect a
positive performance improvement, e.g., resource
productivity (sales per ton of GHG).
Ratio indicator. Indicators providing information on
relative performance such as intensity ratios or pro-
ductivity/efficiency ratios.
Renewable energy. Energy taken from sources that
are inexhaustible, e.g., wind, water, solar, geothermal
energy, and biofuels.
Reporting. Presenting data to internal management
and external users such as regulators, shareholders,
the general public or specific stakeholder groups.
Reversibility of reductions. This occurs when
reductions are temporary, or where removed or
stored carbon may be returned to the atmosphere at
some point in the future.
Scientific Uncertainty. Uncertainty that arises when
the science of the actual emission and/or removal
process is not completely understood.
Scope. Defines the operational boundaries in rela-
tion to indirect and direct GHG emissions.
Scope of work. An up-front specification that indi-
cates the type of verification to be undertaken and
the level of assurance to be provided between the
reporting company and the verifier during the verifi-
cation process.
Secondary effects (Leakage). GHG emissions
changes resulting from the project not captured by
the primary effect(s). These are typically the small,
unintended GHG consequences of a project.
Sequestered atmospheric carbon. Carbon removed
from the atmosphere by biological sinks and stored
in plant tissue. Sequestered atmospheric carbon
does not include GHGs captured through carbon
capture and storage.
CLIMATE LEADERS GHG INVENTORY PROTOCOL • 85
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Design Principles
Significance threshold. A qualitative or quantitative
criteria used to define a significance structural
change. It is the responsibility of the company/verifi-
er to determine the "significance threshold" for
considering base year emissions recalculation. In
most cases the "significance threshold" depends on
the use of the information, the characteristics of the
company, and the features of structural changes.
Stationary combustion. Burning of fuels to generate
electricity, steam, heat, or power in stationary
equipment such as boilers, furnaces, etc.
Structural change. A change in the organizational or
operational boundaries of a company that result
from a transfer of ownership or control of emissions
from one company to another. Structural changes
usually result from a transfer of ownership of emis-
sions, such as mergers, acquisitions, divestitures,
but can also include outsourcing/insourcing.
Target base year. The base year used for defining a
GHG target, e.g., to reduce CC>2 emissions 25 percent
below the target base year levels specified by the
target base year 2010.
Target boundary. The boundary that defines which
GHGs, geographic operations, sources and activities
are covered by the target.
Target commitment period. The period of time dur-
ing which emissions performance is actually
measured against the target. It ends with the target
completion date.
Target completion date. The date that defines the
end of the target commitment period and deter-
mines whether the target is relatively short- or
long-term.
Target double counting policy. The policy that
determines how double counting of GHG reductions
or other instruments, such as allowances issued by
external trading programs, is dealt with under a
GHG target. It applies only to companies that engage
in trading (sale or purchase) of offsets or whose cor-
porate target boundaries interface with other
companies' targets or external programs.
Uncertainty. 1. Statistical Definition: A parameter
associated with the result of a measurement that
characterizes the dispersion of the values that could
be reasonably attributed to the measured quality
(e.g., the sample variance or coefficient of variation)
(Chapter 9).
2. Inventory Definition: A general and imprecise
term which refers to the lack of certainty in emis-
sions-related data resulting from any casual factor,
such as the application of non-representative factors
or methods, incomplete data on sources and sinks,
lack of transparency, etc. Reported uncertainty
information typically specifies a quantitative esti-
mate of the likely or perceived difference between a
reported value and a qualitative description of the
likely causes of the difference.
United Nations Framework Convention on Climate
Change (UNFCCQ. Signed in 1992 at the Rio Earth
Summit, the UNFCCC is a milestone Convention on
Climate Change treaty that provides an overall
framework for international efforts to (UNFCCC) mit-
igate climate change.
Value chain emissions. Emissions from the
upstream and downstream activities associated with
the operations of a reporting company.
Verification. An independent assessment of the reli-
ability (considering completeness and accuracy) of
a GHG inventory.
86 • CLIMATE LEADERS GHG INVENTORY PROTOCOL
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United States
Environmental Protection
Agency
Office of Air and Radiation (6202J)
EPA430-K-05-005
May 2005
www.epa.gov/climateleaders
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