Carbon Accounting Terminology – A Beginner’s Guide - Carbon Responsible
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Carbon Accounting, Net Zero & Decarbonisation - A Beginner's Guide

Getting the terms clear is half the battle when starting a carbon journey. Below we attempt to demystify the language of Carbon Accounting, review current best practices, hopefully leaving you better equipped to talk with anyone about your company's carbon.

net zero windfarm leading to decarbonisation and helping carbon accounting

The constantly changing terminology around Carbon Accounting and Net Zero roadmapping makes it increasingly difficult for companies to feel confident in their choice of phraseology and the focus of their sustainability strategy. This, coupled with the crackdown on ‘greenwashing’, often results in hesitancy or misdirected action. Carbon Responsible works to simplify and demystify carbon accounting practices to bring transparency to your business, develop meaningful emission reduction plans and help manage & augment reporting.

Carbon Accounting:

Carbon Accounting involves measuring and tracking the emissions of an individual, organisation. It provides a systematic framework for understanding the sources and quantities of GHG emissions within a company’s inventory. By accurately accounting for emissions, entities can identify areas for improvement, set targets, and develop effective decarbonisation strategies.

ESG (Environmental, Social, and Governance):

ESG refers to the three central factors used to measure the sustainability and ethical impact of an investment or business. Environmental factors focus on an organisation’s ecological impact, social factors assess its relationships with stakeholders, communities, and employees, while governance evaluates its internal policies, accountability, and transparency. ESG considerations play a crucial role in shaping responsible and sustainable practices. Climate reporting is an essential aspect of wider ESG reporting.

Greenhouse Gases (GHGs) and GHG Inventories:

GHGs are gases that trap heat in the Earth’s atmosphere, contributing to global warming. Carbon dioxide (CO2), methane (CH4), and nitrous oxide (N2O) are among the primary GHGs. GHG inventories are comprehensive accounts of an entity’s GHG emissions, typically categorised into three scopes.

GHG Scopes:

GHG Scopes categorise emissions based on their origin and control levels.

  • Scope 1 emissions are direct emissions from owned or controlled sources, such as on-site fossil fuel combustion.
  • Scope 2 emissions result from the consumption of purchased electricity, heating, or cooling.
  • Scope 3 emissions are indirect emissions from activities outside the organisation’s control, such as supply chain, transportation, and waste disposal.

Carbon Responsible offers tools and products to help a company’s understand their carbon emissions by scope. This makes it easier to lower emissions by isolating the source behind each emission output and identifying reduction potential. Carbon Responsible’s suite of tools are designed to make Scope 1 and 2 emission measurement as streamlined as possible and to facilitate accurate and robust Scope 3 measurement.

Regulatory Carbon Disclosure and ESG Reporting:

Regulatory carbon disclosure refers to the legal requirements imposed on organisations to disclose their carbon emissions and related information. ESG reporting encompasses a broader range of sustainability factors, including carbon emissions, social impact, and governance practices. Both frameworks aim to enhance transparency and accountability, enabling stakeholders to make informed decisions. Carbon Responsible’s tools and services are aligned to all major reporting frameworks and standards and support wider ESG reporting requirements.

Decarbonisation Strategy:

A decarbonisation strategy outlines a deliberate and systematic approach to reducing carbon emissions. It involves identifying emission sources, setting emission reduction targets, implementing sustainable practices, and transitioning to renewable energy sources. A robust decarbonisation strategy is essential for achieving Net Zero goals. Carbon Responsible works with its clients to develop actionable and achievable decarbonisation strategy, based on company-specific emission data and using in-house reduction modelling tools.

Net Zero emissions: Refers to achieving a balance between the greenhouse gases (GHGs) emitted into the atmosphere and those removed from it. It is the state where an entity’s emissions are fully compensated by the removal of an equivalent amount of GHGs from the atmosphere, resulting in no net increase in the overall concentration of GHGs. An important element of this state is that the company has taken action to reduce their GHG emissions as far as is reasonable and achievable before looking to capture or offset any residual emissions. Typically, Net Zero emission frameworks only allow for the offsetting of 10-20% of total GHG emissions.

Net Zero target: Refers to having a practicable approach for businesses to reduce greenhouse-gas emissions in line with the 2015 Paris Agreement goal of limiting global warming to well below 2°C above pre-industrial levels by the end of the century.

Carbon Neutral, Carbon Negative, and Carbon Positive:

These terms are seen as largely outdated by the sustainability sector as they are not specifically focused on reduction of emissions and allow for the use of offsetting in the achievement of these claims.

  • Carbon neutral refers to achieving a balance between emitted and removed carbon emissions, resulting in zero net emissions.
  • Carbon negative goes a step further, removing more carbon emissions than are emitted, resulting in a net reduction.
  • Carbon positive refers to actively removing carbon from the atmosphere, thereby making a positive contribution to the overall reduction of GHGs.

The use of these claims without substantiate evidence brings the risk of greenwashing and can result in fines and investigations by the ASA. Carbon Responsible will work with you to ensure all claims are fully supported by required empirical evidence and advise you on current and applicable terminology.

Reduction Pathway and Net Zero Roadmap:

A reduction pathway is a strategic plan outlining the steps an entity will take to progressively reduce its carbon emissions over a specific timeline. A Net Zero roadmap expands on this concept, providing a detailed plan with milestones, targets, and actions necessary to achieve Net Zero status. Carbon Responsible works with its clients to evolve realistic and actionable reduction pathways, aligned to your Net Zero roadmap. We utilise in-house reduction modelling tools to assess the reduction potential of different policies and initiatives and undertake scenario analysis to determine the most commercially relevant reduction pathway for your business.

Science-Based Targets:

Science-based targets are emission reduction goals aligned with the level of decarbonisation required to limit global warming to well below 2 degrees Celsius or pursue efforts to limit it to 1.5 degrees Celsius above pre-industrial levels. These targets are set based on scientific research and provide a clear direction for organisations to contribute effectively to climate action.

Carbon Offsetting, Capture, Sequestration, and Tax:

Carbon Responsible provides up to date advice to our clients on the lowest risk mechanisms for emission reduction, helping to inform and shape your organisations carbon strategy with various stakeholders:

  • Carbon offsetting involves compensating for one’s emissions by investing in projects that aim to reduce GHG emissions elsewhere. Carbon offsetting projects should only be used to mitigate GHG emissions that cannot yet be reduced due to technological constraints or limited control over the emission source. A company should first identify emission reduction potential and focus on reducing their direct emission impact.
  • Carbon capture refers to technologies that capture carbon dioxide directly from the air or industrial processes.
  • Carbon sequestration involves storing captured carbon in long-term reservoirs. Carbon tax is a financial mechanism in which emitters pay a fee for each ton of CO2 emitted, encouraging emission reductions.

Carbon Emissions, Budget, and 1.5 Degrees Warming:

Carbon emissions refer to the release of carbon compounds, particularly CO2, into the atmosphere. A carbon budget represents the total amount of CO2 that can be emitted while keeping global warming within a specific threshold. Limiting warming to 1.5 degrees Celsius is a critical target to avoid catastrophic climate impacts, and staying within this limit requires a significant reduction in carbon emissions.

Embodied Carbon:

Embodied carbon refers to the total carbon emissions associated with the entire lifecycle of a product, including its production, use, and disposal. Understanding embodied carbon allows for more informed choices, encouraging the selection of low-carbon alternatives and promoting sustainable consumption.

Conclusion:

As we navigate the path towards a sustainable future, understanding the language and strategies surrounding Net Zero is becoming increasingly important. Through effective carbon accounting, ambitious decarbonisation strategies and responsible decision-making Carbon Responsible helps businesses contribute meaningfully to the collective effort to combat climate change.

This resource was authored by Aubrey Clark, Carbon Responsible’s 2023 Climate Analyst summer intern.

 

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