Carbon accounting and reporting are essential when it comes to reducing greenhouse gas emissions and helping the world transition to a low-carbon economy. But since these concepts can be quite complex and involve lots of technical jargon, many business owners and operators may struggle to understand them.
To account for the carbon emissions of your business, you must track the amount of CO2 your company produces either directly through combustion or indirectly through electricity usage. If your organization falls into one of several key industries—such as manufacturing, mining, or transportation—you’ll also likely need to abide by additional reporting standards for greenhouse gases (GHGs). This article will introduce you to carbon accounting and reporting: the primary methods used to measure carbon emissions and document them for third parties. Read on to learn more about this topic.
What is Carbon Accounting?
Carbon accounting is the process of measuring and analyzing greenhouse gas emissions by calculating the amount of carbon dioxide (CO2) produced. Many organizations now use carbon accounting systems to track their emissions and determine the most cost-effective ways to reduce them. Carbon accounting also refers to the process of tracking and recording the emissions from a particular activity. The result of this tracking and recording process is often referred to as a carbon account.
Carbon accounting is critical to understanding how business activities affect the environment and whether they are likely to be regulated. It can be used to track greenhouse gas (GHG) emissions and other environmental impacts. These GHG emissions are largely generated during the production of electricity and fuel, industrial processes, dense server racks, data centers, agricultural practices, and the extraction and transport of raw materials.
Types of Carbon Accounting
There are two primary methods of measuring and tracking carbon emissions: accounting and auditing. Accounting is generally used when someone is interested in tracking their own carbon emissions. Auditing, on the other hand, is used when a third party is interested in examining your emissions—for example if you’re in an industry that has to report its GHG emissions.
When you’re calculating your own emissions, accounting methods are generally preferred over auditing methods, as they are much simpler to execute and report. The accounting method is based on the concept of carbon intensity—the amount of CO2 emitted for every unit of production. Accounting methods often include assumptions about the future impact of emissions on society.
The auditing method quantifies actual emissions using a standardized approach. It’s important to understand that these measurements can only be used to compare one company’s performance with another company’s performance. They cannot be used to make predictions about the future.
Defining Key Terms and Vocabulary
Carbon Footprint: A measure of how much CO2 is produced as a result of an activity or product.
Carbon Intensity: The amount of CO2 emissions per unit of production. For example, if you produce 10 widgets and it takes you one hour to make them, your carbon intensity would be 10 widgets per hour.
Carbon Offset: A reduction in carbon emissions that occurs in one place as a result of an increase in emissions in another.
Carbon Sink: An environmental process (such as storing carbon in soil) that removes CO2 from the atmosphere.
Carbon Tax: A tax levied on the carbon content of fuels or electricity.
Carbon Trading: A market-based approach to CO2 emissions reduction where one party purchases the right to emit carbon, while another party either reduces its emissions or buys the right to keep its own emissions at their current level.
GHG Reporting Basics
If your organization falls into one of several key industries—such as manufacturing, mining, or transportation—you may need to abide by additional reporting standards for greenhouse gases (GHGs). These industries are responsible for a large proportion of global emissions, and it’s important for them to reduce their GHG emissions as much as possible.
There are two main types of GHG reporting — greenhouse gas inventories and carbon emissions inventories. Greenhouse gas inventories measure the amount of CO2 and other GHGs emitted by a company. Carbon emissions inventories measure the amount of CO2 emitted by a company. If you are required to report your GHG emissions, you will likely use one of these two reporting methods.
Summing up
Carbon accounts and reporting are crucial for understanding the emissions produced by your business and for understanding how best to reduce them. While this information can be somewhat technical, it’s important to have a basic understanding of the concepts behind it. As a business owner, it’s your responsibility to understand the impact your operations have on the environment and to reduce your organization’s carbon footprint as much as possible.