February 8th, 2010, by John Shideler

International standards published in 2006 define principles for greenhouse gas (GHG) accounting. Five principles are provided in ISO 14064 Part 1, Greenhouse gases – Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals:
• Relevance
Select the GHG sources, GHG sinks, GHG reservoirs, data and methodologies appropriate to the needs of the intended user.
• Completeness
Include all relevant GHG emissions and removals.
• Consistency
Enable meaningful comparisons in GHG-related information.
• Accuracy
Reduce bias and uncertainties as far as is practical.
• Transparency
Disclose sufficient and appropriate GHG-related information to allow intended users to make decisions with reasonable confidence.

These five characteristics of GHG accounting are principles, rather than requirements, because they are aspirational in nature. In some cases trade-offs are either explicitly stated or strongly implied. The first principle of relevance is explained by reference to a process of selection. It is expected, therefore, that an inventory manager will make choices concerning the identification of sources, sinks and reservoirs, data sources, and quantification methodologies in establishing the inventory. Even when a choice does not compromise the principle of completeness, it may imply some arbitrary decision making. An example could be selecting an appropriate degree of aggregation for individual sources. Relevance, therefore, guides the inventory manager in pursuing the next principle, completeness.

In theory, organizations should strive for 100% completeness in reporting. In practice, some sources will be reported at higher or lower levels of detail, and some may even be missed, especially when an inventory is first established. The relevance principle is not intended to permit organizations to underreport their emissions, but rather to acknowledge that 100% completeness is not likely to be achieved. For example, organizations may have trees on their properties. It is rare among organizations, except those with large numbers of trees under professional management, to account for the changes in carbon stocks in their inventories.

Consistency refers to the manner in which GHG emissions information is stated, both in terms of data aggregation and consolidation practices within an organization’s inventory for a single reporting period, and with respect to the application of accounting methodologies from one reporting period to the next. This principle may on occasion be at odds with the accuracy principle, which exhorts inventory managers to reduce bias and uncertainties. Why would such a tension arise? In the case where an inventory manager decided to revise the organization’s accounting methods in a subsequent year for quality improvement purposes, the emissions accounting would no longer be consistent with prior year reporting. Inventory managers may in reality make such choices, but they should not do so casually, and the facts of any significant accounting methods changes should be fully disclosed. In some cases, restatements of prior year emission accounts may be called for. Another application of the principle of consistency is the adjustment of an organization’s base year. Triggered by acquisitions and divestitures, base year adjustment ensures the consistency of reports from one reporting period to the next.

The principle of accuracy seems self evident. Organizations should neither underreport nor overreport their GHG emissions. ISO 14064-1 introduces the concept of “practicality” in this principle, however, because in reality it is no more possible to be 100% accurate than it is to be 100% complete in reporting emissions. The principle of accuracy is tempered by the concept of materiality, which recognizes that coming close to the “true number” is good enough. Common reasons for not achieving 100% accuracy may arise due to limitations of measurement devices or to the application of intermittent measurement instead of continuous measurement. Or it may be due to the use of emissions factors, which are based upon the averaging of values.

The last principle, transparency, challenges organizations to gather and report GHG information in sufficient detail so that intended users can properly evaluate it. This is not normally an issue when an inventory manager gathers information and reports it internally. Questions typically only arise when an organization has to decide how much detail to include in publicly disclosed reports. This involves choices, and the exercise of judgment. Other business considerations may come into play, such as not wanting to report information in such detail as to disclose appropriately confidential business information.

The principles of quantifying and reporting greenhouse gas emissions at the organization level were designed as guideposts for inventory managers, not straitjackets. The use of common sense in their application is recommended. In cases where it appears necessary to compromise a principle, the reasons for the divergence should be explained.

In addition to the five principles described above, a sixth principle, conservativeness, applies to greenhouse gas projects. This principle is found in ISO 14064 Part 2, Greenhouse gases – Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements, and is presented in the following terms:

• Conservativeness
Use conservative assumptions, values and procedures to ensure that GHG emission reductions or removal enhancements are not over-estimated.

Conservativeness is appropriate for project accounting because verified emission reductions must have environmental integrity to sustain environmental markets. The principle is most often applied where uncertainty has been identified in project accounting methodologies. By applying the principle of conservativeness, confidence is increased for those who may purchase GHG emission reductions or removal enhancements.

© 2010 Futurepast: Inc.

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