The second article in our series on calculating Greenhouse Gas (GHG) emissions deep dives into Scope 1 and Scope 2 emissions and how to calculate them in accordance with the GHG Protocol Standards.

AASB S2 Climate-related Disclosures prioritises the use of the GHG Protocol Standards unless otherwise required by law. Under AASB S2, Scope 1 and Scope 2 emissions must be disclosed separately, expressed as metric tonnes of CO² equivalent (CO²e). CO²e indicates the global warming potential of each of the seven reported GHGs expressed in terms of one unit/tonne of carbon dioxide. For example, if the global warming potential of methane is 25 times that of carbon dioxide, the CO²e for one tonne of methane is 25 tonnes.

Data collection

The collection of data can be a time-consuming process if your organisation does not currently have systems in place to capture the required information. Businesses need to understand what data is required to enable systems to be adapted to streamline the data capture process.

Examples of data that will be needed include litres of diesel fuel purchased, kWh of electricity consumed and GJ of natural gas consumed. This is known as activity data which provides the most accurate calculation of emissions.

We encourage businesses to start the data collection process early to ensure they are ready to meet any mandatory disclosure and audit obligations.

Emission factors

There are two types of emission factors: primary and industry.

Primary emissions factors are when suppliers provide specific emissions from activities within their organisation based on their own carbon assessment.

If this information is not available, then industry emissions factors will need to be used. Industry data is average data from published databases, government statistics and studies.

Activity data is multiplied by an emissions factor to determine the CO²e produced by the activity. The basic formula for calculating emissions is:

CO²e emissions = Activity Data (number of units) x Emissions Factor (kg CO²e/unit)

The scopes

Scope 1: Direct GHG emissions

Scope 1 relates to direct GHG emissions from sources owned or controlled by the organisation and includes four categories. The data requirements for each of the four categories vary as detailed below:

1.Generation of electricity, heat or steam – combustion of fuels in stationary sources (stationary combustion) such as boilers, furnaces, heaters and barbeques.

Activity information required: Number of units for each separate type of fuel used to run stationary assets (e.g. litres of diesel or unleaded; MJ of natural gas).

Note that this excludes purchased electricity which is disclosed as Scope 2 emissions.

Stationary Combustion = Activity Data (litres or MJ) x Emissions Factor (kg CO²e/L or MJ)

 

2. Physical or chemical processing – from the manufacture and processing of chemicals and materials such as cement and aluminium. This category is specific to certain activities where fumes are released as a result of the chemical transformation of raw materials.

Activity information required: Businesses within these industries should already have mechanisms in place to calculate emissions using a mass-balance approach or continuous emissions monitoring.

3. Transportation of materials, products, waste and employees – combustion of fuels in company owned or controlled vehicles including cars, trucks and airplanes (mobile combustion).

Activity information required: Litres of fuel consumed by fuel type or vehicle

If this data is unavailable the following information is required to make assumptions on the litres of fuel consumed, although this will result in less accurate information:

  • Dollar amount spent on fuel
  • Vehicle model and year
  • Type of fuel used
  • Distance travelled
Mobile Emissions = Activity Data (litres) x Emissions Factor (kg CO²e/L)

 

Note that emissions relating to recharging electric vehicles are disclosed as Scope 2 emissions.

4. Fugitive emissions – from the release of gasses, either intentional or unintentional, including hydrofluorocarbon (HFC) emissions from refrigeration and air conditioning equipment and methane emissions from gas transport or coal mines.

Data required for refrigerant emissions includes:

  • Type of refrigeration and air conditioning equipment
  • Number of units
  • Refrigerant or fire suppressant used in each unit
  • Total refrigerant or fire suppressant charge for the equipment (g)

The calculation for fugitive emissions takes into account the use and disposal of refrigeration and air conditioning equipment as refrigerant is often leaked during this process. A suggested formula for fugitive emissions is:

Fugitive Emissions = Estimated emissions from Installed Equipment + Known Gas Leaks + Operational Leaks + Equipment Disposed x Emissions Factor (kg CO²e/L)

 

Scope 2: Electricity indirect GHG emissions

Scope 2 GHG emissions result from the generation of purchased electricity that is consumed in an organisation. AASB S2 requires companies to disclose its location-based emissions and provide information about any contractual arrangements for the sale or purchase of energy that could inform users.

Location-based emissions are calculated as the average of the emissions intensity of electricity generation assets inside a specific geographical boundary. Emission factors differ per state in Australia and are based on the emissions intensity of the local grid.

Activity information required: MWh or kWh electricity purchased and consumed per location/state from invoices

Net Consumption of purchased electricity per location (kWh) x Emissions Factor for the specific location (kg CO²e/kWh)

 

Something to keep in mind is that solar energy generated by an organisation that is sold back to the grid does not reduce or offset the organisation’s own Scope 2 emissions.

In our next instalment relating to carbon accounting, we will explore calculating Scope 3 emissions which is significantly more challenging compared to calculating Scope 1 and 2 emissions.

HLB Mann Judd have partnered with Sumday whose carbon accounting software platform contains a database of publicly available emission factors. This allows our clients to streamline the process of identifying appropriate emission factors.

This article was authored by Rebecca Zuromski, Associate Director, ESG Advisory Adelaide. The article was first published in The Bottom Line, Issue 21.