Tallying Emissions

An emission inventory is a key part of an effective corporate strategy for managing greenhouse gases

Now that the Russian Federation has ratified the Kyoto Protocol, mandatory greenhouse gas (GHG) reduction requirements will begin to take effect in those countries that have ratified the treaty. Under the Kyoto Protocol, specific nations are committed to reducing emissions -- or limiting emission growth -- to the extent that, collectively, their emissions will be 5 percent below 1990 levels in 2008 - 2012 timeframe. Although the United States maintains that it does not intend to join the international community in signing this accord, there are still sound reasons for U.S. corporations to consider developing a greenhouse gas management program. These reasons include requirements mandated for U.S. owned plants in other countries, shareholder concerns, public perception, cost savings, participation in domestic voluntary programs, and protection in the event of a shift in U.S. policy concerning mandatory GHG reduction requirements.

Getting Started
Once a company commits to developing a GHG management program, one of the first steps is to develop an inventory of its emissions. Such an inventory helps corporate personnel determine the extent of GHG emissions in their organization and can aid them in identifying options for future reductions. It also provides a foundation for tracking emissions performance over time. Building and managing an inventory is a sequential activity, with each action having its own set of considerations and action items.

Step 1 - Determining Goals
A company may have several goals as part of the inventory process. These goals can range from participating in GHG markets to reducing operational costs by using more energy-efficient technologies. Establishing these goals, and forming a team to direct the process, will assist in managing an inventory efficiently. The inventory team may include staff from the organization's production division as well as energy and environmental staff. For those familiar with the Title V permitting process required several years ago under the Clean Air Act, the team composition could be similar.

Step 2 - Setting the Ground Rules
Developing a GHG inventory can be challenging, especially for large firms. A company must decide if it should include subsidiaries, franchises, joint ventures, and other partnerships. Sometimes companies base their decision on the share of equity. Other times, the decision is based on whether the firm has financial or operational control. This is strictly an internal decision based on the philosophy and needs of the individual organization.

The next step is to identify and categorize the sources of emissions to determine if they are "direct" or "indirect." Direct emissions are produced by a source owed by the organization. Examples would include an industrial boiler or a production apparatus that produces emissions. As defined in the GHG Protocol developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), these are referred to as "Scope 1" emissions.

Indirect emissions are generated by sources not owned nor operated by the company. These emissions are designated as "Scope 2" emissions. A typical source in this category would be emissions produced by electricity purchased from a local utility. Other types of indirect emissions -- known as "Scope 3" -- include activities such as company travel and the potential use of the products manufactured by the company.

Different types of entities will have individual priorities for documenting emissions. For example, most of the emissions generated by a chemical refinery would be considered Scope 1. On the other hand, a company involved in retail operations would most likely have more indirect or Scope 2 emissions. A firm involved in producing energy saving products may consider capturing Scope 3 emissions in order to document emission reductions associated with the purchase and use of its products.

Another important decision in establishing an inventory program is to identify the GHGs of interest. Typically, the important players include carbon dioxide, methane, nitrous oxide, chlorofluorocarbons, and perfluorcarbons. When evaluating compounds for reduction strategies, it is advisable to consider the global warming potentials (GWP) of the GHGs. The GWP is based on the fact that each greenhouse gas differs in its ability to absorb heat in the atmosphere. For example, methane traps over 21 times more heat per molecule than carbon dioxide, and nitrous oxide absorbs 270 times more heat per molecule than carbon dioxide. The higher the GWP, the more attractive the compound is for identifying reduction alternatives.

Step 3 - Gathering Information and Calculating GHGs
To calculate GHG emissions, a company must first gather data concerning many items, such as fuel consumption, hours of operation, pollutant composition, and power consumption to name a few. Because of the number and types of facilities, many times it is important to prioritize this assessment. For example, one company may find that 25 percent of installations account for 95 percent of GHGs. In this case, there would be very little benefit in working outside the core facilities, at least for the initial investigation.

Another item for consideration is how the information will be obtained. The first option would be to have the individual sites calculate and report GHG emissions. The alternative option would be for individual sites to report only surrogate information such as fuel consumption, and a centralized group perform the actual emission calculations. In the second alternative, some organizations have had great success in having thei office in different locations input data into a Web-based database.

Selecting a base year for which reliable information is available is also important. This allows a firm to compare emissions over time. The most common base year selected has been 1990. This year figures prominently in the goals of international agreements to reduce GHG emissions. It is also an important date for the U.S. Clean Air Act Amendments.

Step 4 - Setting Targets
Like any other business activity, establishing a GHG target helps a firm to better focus its activities. There are basically two types of emission reduction goals or targets. The first is a numerical target to reduce emissions by a certain percentage below the base year by some year in the future. This type of goal is easy to understand and demonstrates a direct environmental benefit. The second type is an "intensity" target. Such a metric is a commitment to cut emissions relative to some measure of business activity. For example, a company may commit to reduce GHG emissions by 15 percent per unit product manufactured compared to the baseline year. Although embraced by many corporate and political interests (including the Bush Administration), this approach remains controversial in many environmental circles.

After the emissions have been documented and targets set, companies can be creative in the ways that they reduce GHG emissions. Generally speaking, the more comprehensive the emission inventory, the greater the likelihood that emissions reduction opportunities may be realized.

One point should be made relative to verification: Verifying a corporate inventory can improve data credibility and can demonstrate conclusively the correct accounting of emissions. Such an activity would include an internal review loop and potentially an outside third party.

Greenhouse gas reduction requirements have gained approval internationally, and many North American companies also believe that it's important to document their facilities' GHG emissions and make an effort to reduce them. A key to managing GHG emissions is constructing a sound emission inventory to help the company determine the extent of GHG emissions and identify options for future reductions. It will also provide a foundation for tracking emissions performance over time.

This article originally appeared in the 06/01/2005 issue of Environmental Protection.

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