Greenhouse Gas Emissions Scope 1: Direct Company Emissions

Is Your Business Ready to Measure and Report Its Greenhouse Gas Emissions?

Managing and controlling greenhouse gas (GHG) emissions can be a win-win situation for companies, stockholders and the world. Managing GHGs starts by assessing current practices, finding a baseline, and then identifying ways to reduce and offset emissions. Companies need to address direct and indirect emissions. In this document, we discuss why doing a GHG inventory can be beneficial to your company, how to recognize direct emissions and separate them from indirect emissions, and how to create a GHG emissions inventory and reduce GHG emissions.

Why Do a GHG Inventory?

A GHG inventory is an opportunity to look for savings — in time, money and energy — and identify opportunities to improve efficiency and inform decision-making. The Greenhouse Gas Protocol has developed accounting and reporting standards for businesses. Its Corporate Accounting and Reporting Standard cites five main reasons for engaging with an inventory process:

1. Managing risk and identifying reduction opportunities
2. Public reporting and participation in voluntary GHG programs
3. Mandatory reporting
4. Taking part in GHG markets
5. Early voluntary action

The first steps in a GHG inventory include understanding the three different types of emissions and current practices, setting boundaries, and deciding on a model for evaluating emissions. The three types of emissions are called scopes, and they account for upstream emissions (Scope 2), direct emissions (Scope 1) and downstream emissions (Scope 3).

Because potential crossovers exist between the three scopes, it is important to understand each one separately to avoid double counting.

What Are Scope 1 Emissions?

Scope 1 emissions are direct emissions from a company-owned source. These are most often associated with fire suppression and burning of fuels for heat, transportation, and fugitive emissions from air conditioning. The Environmental Protection Agency defines Scope 1 emissions as stationary and mobile combustion sources and fugitive emissions from refrigeration, air conditioning, fire suppression and industrial gases.

Stationary combustion sources arise from the burning of carbon-based fuels to power boilers, heaters, furnaces, ovens and other equipment powered by combustion. Stationary emissions are sources of carbon dioxide, methane and nitrous oxide. A large majority of stationary combustion fuels are fossil fuels, but biomass and waste-derived fuels are also used in stationary combustion applications. Biomass is derived from plants, forestry and agricultural sources, while waste-derived fuels include tires, landfill gas and hazardous and municipal wastes. GHG inventories account for both biomass and waste-derived fuels like they do fossil fuels. Carbon dioxide generated from biomass sources can be tracked and reported separately from fossil fuels. Tracking the source of carbon dioxide emissions may be beneficial to the company’s perception by consumers and stakeholders.

Similar to stationary combustion sources, Scope 1 emissions for mobile combustion sources also produce carbon dioxide, methane and nitrous oxide when fuels are burned. Mobile sources stem from transportation of goods by owned or leased mobile sources. The primary fuels are carbon-based fuels, such as gasoline, diesel fuel, fuel oil and kerosene jet fuel.

Fugitive emissions result from the direct release — usually through leakages — of GHG from refrigeration and air conditioning, fire suppression systems, and industrial gases. Fugitive emissions usually happen during installation, use or disposal. The gases emitted vary widely depending on industry but are most frequently carbon dioxide, methane and other hydrocarbons, hydrofluorocarbons, and ammonia. Despite having much higher global warming potentials, they absorb a lot of radiation to keep it from escaping the earth’s atmosphere. Hydrofluorocarbons, hydrocarbons and ammonia gases are often omitted from GHG inventories because they are also responsible for ozone depletion, are regulated and are being phased out by the Clean Air Act. Companies should still be aware of them and seek ways to mitigate their release.

Four Steps to Manage GHGs for Organizations

There are four essential steps to manage GHG emissions and take advantage of the resulting business opportunities. The first is to create an inventory plan, collect the data and quantify GHG emissions. From this, an organization should prepare a GHG management plan and identify emissions tracking and reduction goals.

Source: The GHG Inventory Development Process, United States Environmental Protection Agency

Step 1: Setting organizational and operational boundaries for GHG inventories

The first step is setting the organizational and operational boundaries for the business. There are two common approaches to organizational boundaries: equity share and control. In equity share, the company determines its organizational boundaries based upon economic interests — the right to the risk and rewards from an operation. Generally, this is aligned with the percent ownership.

Using the control approach, the company assumes 100 percent of the GHG emissions from any operations over which it has either financial or operational control. Financial control exists if a company holds the right to most of the benefits, while operational control implies that the company can introduce and implement operating policies.

Operational boundaries involve identifying emissions associated with direct and indirect emissions. This is where the idea of scopes enters the picture. Once a business identifies which type of boundary accounting to use, it can then categorize emissions from operations into Scope 1, 2 and 3 emissions.

Step 2: Collect data

After organizational and operational boundaries have been set and emissions have been categorized into different scopes, the next step is to select a calculation approach. Measuring GHGs directly is rare, so input sources or fuel use (which are more easily measured) are used to calculate carbon dioxide emissions, and non-carbon dioxide emissions are estimated as carbon dioxide equivalents (CO2e). In the case of Scope 1, a company will most frequently calculate its emissions based on purchased quantities of fuel.

Many calculators are available — some can calculate stationary, mobile and fugitive emissions for nonindustrial emitters, while others are specific to the industry concerned.

Step 3: Develop an inventory management plan

It is essential to set company-wide standards to reduce GHG emissions and eliminate double counting. An inventory management plan should have the following: organization information, boundary conditions, emissions quantification, data management, base year, management tools and auditing/verification.

Step 4: Set reduction targets

The Science Based Targets initiative (SBti) provides businesses with tools for how to set aggressive and achievable targets for GHG emissions. To be considered science-based, targets must align with the current climate science (limiting global warming to 1.5 degrees Celsius above preindustrial levels) and be designed to meet the goals of the Paris Agreement.

Best practices suggest that announcing targets publicly increases transparency, accountability and credibility. Further, targets should have clear starting and ending years and a specified percentage of change over a fixed set of years (ex. 25 percent over 10 years). Targets should also address all three scopes.

An example of a publicly announced target adhering to these best practices might be that a company commits to a 15 percent absolute reduction of Scope 1, 2 and 3 emissions from 2022 levels by 2032.

How to Reduce Scope 1 Emissions?

Because Scope 1 emissions are under a company’s direct control, the business should look for the major sources of these emissions; places where technology would not only reduce emissions but may save money. Investments in energy-efficient vehicles, such as hybrids, is one way to reduce the dependence on transportation-related emissions. Perhaps on-site renewable energy sources, such as solar cells and fuel cells, can be used to power an electric fleet of vehicles.

Changing business processes, finding new efficiencies and adapting strategies to reduce emissions takes time. Carbon offsets are a way to help reduce the overall carbon footprint of the business while working toward the target goal. In these cases, you provide the financing to another institution that is sequestering carbon dioxide, like investments in forestry and agriculture, where trees and plants help remove carbon dioxide from the atmosphere.

How Can Weaver Help?

Whether your company is just beginning to consider the benefits of getting involved in green energy segments or you’re a current player seeking to expand your markets, Weaver has the perspective and capability to help you succeed.

The environmental programs we assist with are rooted in managing the human impact on the environment, reducing GHG emissions and increasing sustainability.

Our team of energy professionals brings a wide variety of backgrounds to help clients solve problems. In addition to the certified public accountants (CPAs) you would expect, for example, we employ registered professional engineers, chemists and environmental lawyers. They combine long experience in traditional oil and gas with up-to-the-minute understanding of emerging renewable markets.

Within the renewable fuels industry, our Energy Compliance Services team is a dominant force, helping businesses navigate compliance with regulations from agencies such as the EPA, Environment and Climate Change Canada, U.S. Customs and Border Protection Agency and the California Air Resources Board, as well as agencies in other states and provinces. We help companies of all sizes understand regulatory requirements, maintain corporate compliance, and identify and maximize benefits that might be available under green programs.

Many of the world’s leading energy companies, across all segments of the industry, are our clients. We understand the regulatory and technical issues related to sustainable or low-carbon energy as well as the financial issues involved in carbon sequestration tax credits and green finance.

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Weaver’s Greenhouse Gas Emissions series takes a deep dive into the three different types of emissions, called “scopes” used to delineate direct and indirect sources of greenhouse gas emissions. This is one in a series of related posts:

• Is Your Business Ready to Measure and Report Its Greenhouse Gas Emissions?
• Greenhouse Gas Emissions Scope 2: Indirect Emissions From Purchased Energy
• Greenhouse Gas Emissions Scope 3: Upstream and Downstream Emissions