From the coalface - greenhouse gas accounting is simple?

AT A VERY BASIC LEVEL, the idea of multiplying activity data, like electricity consumption, by an emission factor to calculate greenhouse gas emissions means that greenhouse gas accounting (GHG) is simple. But in real life, this is a gross over-simplification of the detail that goes into each and every calculation.

Following the announcement of mandatory greenhouse gas reporting for UK LSE-listed firms in June 2012, I’ve been speaking to many people about greenhouse gas accounting from all walks of life: accountants, company secretaries, FDs, legal professionals, CSR managers, sales people, marketers, PR firms, my neighbours and even my parents. A common theme in these conversations is that, while most agree that GHG accounting is now “a serious business”, they believe that, surely, it’s all quite simple because “it’s just some maths”?

Making an example of emissions

To answer this question, I use a simple example, that of electricity consumption. I start by asking, “How many individual calculations are needed to get the tonnes of carbon dioxide equivalent relating to a single electricity consumption data point (in say kWh)?” Yes, you’re right – you need 14 individual calculation steps to do this properly, at a minimum. If you don’t actually have your data in the right units or for the right time period, further conversion steps are needed. All of this needs to be calculated, documented and presented in a suitable format to an auditor.

The calculations required for one single data point (1,660,884 kWh) include: emissions factors, the global warming potentials, and the references. Transmission and distribution losses are separated from direct generation emissions and reported in the required scopes. Uncertainty of data and emission factors should be quantified, with all the calculations performed on a single data point.

Now, if you take that electricity example and think about all of the possible emissions sources for all greenhouse gases for all parts of an organisation across the globe, you can imagine that an accurate annual greenhouse gas account can become rather complex. A typical corporate client requires about 6,000 individual calculations for one set of annual GHG accounts. And that’s just for an office-based organisation, like a professional services firm.

At the technical end of the spectrum, GHG analysts can have even more fun. Consider syngases (synthesis gases) – blends of carbon-based fuels and hydrogen that are commonly used in petrochemical industries. Remember your A-level chemistry?

Good, because you’ll need it. A bit of stoichiometry is required here, so you can work out the emission intensity of the actual fuel being combusted, based on the molecular weight of the fossil carbon atoms within the fuel (not the biogenic ones) that oxidise to CO2 in the combustion process.

Remember that nothing other than water vapour and heat are generated if you combust hydrogen, so it doesn’t have a Kyoto greenhouse gas impact and should be excluded from your calculated emission intensity (@ any scientists reading: yes, I know that water vapour is also a greenhouse gas but it isn’t a Kyoto greenhouse gas and is therefore not part of mandatory GHG reporting).

Fractional accounting

These two quick examples reveal a tiny fraction of the calculation detail needed for accurate GHG accounting, but the realities of corporate greenhouse gas accounting call for an awful lot of additional expertise even beyond this. It’s based on a simple premise of routine maths, but the underlying detail can be fiendishly complicated.

Whether it’s scoping a client’s operations to include the correct emissions sources, navigating scope “grey areas”, providing pragmatic solutions to data problems, supplying technical advice on the calculations, carrying out quality assurance checks on the results, working with the external auditors, or explaining what the results mean, it’s just part of what the future could hold for corporates now set for a future where mandatory reporting of GHG will have to become just as streamlined and auditable as regularly reporting the latest financial performance.

Gary Davis is co-founder and operations director of Ecometrica