CVEN 5019 · Integrated Core · Fall 2026 · Week 2
GHG Accounting:
Sources, Calculation & Verification
Building the quantitative foundation — the GHG Protocol, Scope 1/2/3 framework, emission factor methodology, and what credible third-party verification requires.
Instructor Carlo Salvinelli
GHG Accounting Assignment distributed this week
Workshop GHG calculation exercise — bring a laptop
Session Overview
Topics
- Why GHG accounting matters — regulatory, financial, strategic drivers
- Key greenhouse gases — GWP, CO₂e, and why they differ
- The GHG Protocol — the global standard explained
- Scope 1, 2, and 3 — definitions, examples, and strategic implications
- Calculation methodology — activity data, emission factors, tiered approaches
- Verification & assurance — why it matters and how it works
- Setting targets — absolute vs. intensity, SBTi requirements
- Mitigation hierarchy — Avoid → Reduce → Compensate
- Workshop: hands-on Scope 1, 2, 3 calculation for a sample company
Session Learning Objectives
- Distinguish Scope 1, 2, and 3 emissions and identify sources in each category
- Apply activity data × emission factor methodology to calculate GHG emissions
- Explain tiered approaches to emission factor selection (Tier 1–3)
- Describe the verification and assurance process and its standards
- Evaluate the difference between absolute and intensity-based reduction targets
- Apply the mitigation hierarchy to avoid over-reliance on offsets
Why GHG Accounting Matters
$40T+
ESG assets under management depend on reliable emissions data (2030 projection)
90%+
of Fortune 500 companies report GHG emissions under GHG Protocol
2024
SEC climate disclosure rules — mandatory Scope 1 & 2 for large accelerated filers
CSRD
EU Corporate Sustainability Reporting Directive — mandatory Scope 3 for large EU companies from 2025
"You can't manage what you don't measure." GHG accounting is now a core business capability — not just an environmental compliance exercise. For engineers, it drives design decisions at every stage of the value chain.
Key Greenhouse Gases & Global Warming Potential (GWP)
| Gas | GWP (20-yr) | GWP (100-yr) | Main source |
|---|
| CO₂ | 1 | 1 | Fossil fuel combustion, land use |
| CH₄ (methane) | 82.5 | 29.8 | Natural gas, livestock, landfills |
| N₂O (nitrous oxide) | 273 | 273 | Agriculture, fertilizers, combustion |
| HFCs (blends) | up to 14,800 | up to 14,800 | Refrigeration, air conditioning |
| PFCs | up to 17,340 | up to 17,340 | Aluminum smelting, semiconductors |
| SF₆ | 18,300 | 23,500 | Electrical switchgear, insulation |
| NF₃ | 13,400 | 17,400 | Electronics manufacturing |
- CO₂-equivalent (CO₂e): all GHG emissions expressed as a single number using GWP as a weighting factor
- 100-year vs. 20-year GWP: a critical methodological choice — CH₄ at 20-yr GWP is ~3× more potent than at 100-yr, making short-lived climate pollutants look much worse on a near-term basis
- IPCC AR6 (2021) updated GWP values — CH₄ increased from 28 to ~30 (fossil) — companies using older values may understate their footprint
- GHG Protocol uses 100-year GWP from IPCC AR5 by default; AR6 values increasingly adopted
The GHG Protocol — The Global Standard
- Developed jointly by WRI and WBCSD, first published 2001 — the most widely used international accounting tool
- Used by 90%+ of Fortune 500 companies and forms the basis of most national and sector-specific standards
- Five key accounting principles: Relevance, Completeness, Consistency, Transparency, Accuracy
- Four corporate standards:
Corporate Standard
Core framework for Scope 1, 2, 3 inventories — the starting point for all corporate GHG work
Scope 2 Guidance
Location-based vs. market-based methods for purchased electricity. Governs renewable energy certificate (REC) use.
Scope 3 Standard
15 Scope 3 categories covering the entire value chain — upstream and downstream
Product Standard
Cradle-to-gate and cradle-to-grave carbon footprinting for individual products and services
The GHG Protocol underpins CDP reporting, SBTi target validation, SEC disclosures, EU CSRD, and most voluntary commitments.
Scope 1, 2, and 3 — The Core Framework
Scope 1
Direct emissions from owned or controlled sources
Stationary combustion (boilers, furnaces, on-site generators) · Mobile combustion (company fleet, aircraft) · Process emissions (chemical reactions, industrial) · Fugitive emissions (refrigerant leaks, pipeline venting)
Scope 2
Indirect emissions from purchased energy
Purchased electricity · Purchased steam · Purchased heat · Purchased cooling — reported using location-based (grid average) OR market-based (contractual instruments: RECs, PPAs) method
Scope 3
All other indirect emissions in the value chain (15 categories)
Upstream (8): Purchased goods & services · Capital goods · Fuel & energy activities · Transportation & distribution · Waste · Business travel · Employee commuting · Leased assets
Downstream (7): Transportation & distribution · Processing of sold products · Use of sold products · End-of-life treatment · Leased assets · Franchises · Investments
Scope 3 — Why It Dominates (and Why It's Hard)
- Scope 3 accounts for 70–90% of most companies' total GHG footprint — often the largest category by far
- For a consumer goods company: ~80% of footprint is in purchased raw materials and ingredients (Cat. 1) and product use by consumers (Cat. 11)
- For a financial institution: ~99% of footprint is in financed emissions (Cat. 15) — loans, investments, underwriting
- SEC (2024) rules: large accelerated filers must disclose material Scope 3 with safe harbor — applicability depends on materiality assessment
- CSRD (EU): mandatory double materiality assessment and full value chain reporting for ~50,000 EU companies from 2024–2028 phase-in
Key Scope 3 Challenges
Data Availability
Primary supplier data is the gold standard but rarely available — most companies rely on spend-based estimates with high uncertainty
Double Counting
One company's Scope 3 is another's Scope 1/2 — GHG Protocol prevents double counting at portfolio level but not within a single inventory
Boundary Setting
When does the value chain end? Tier 1 suppliers? Tier 2? Full supply chain? Materiality guides boundary decisions
Verification Difficulty
Scope 3 data is harder to verify than Scope 1/2 — PCAF standard emerging for financial sector
Emission Factors & Activity Data
Emissions (kg CO₂e) = Activity Data × Emission Factor
Activity Data — what you measure
- Energy: kWh of electricity consumed, liters of natural gas, liters of diesel
- Transport: vehicle-km, passenger-km, tonne-km (freight)
- Materials: tonnes of steel, cement, plastics purchased
- Financial: spend ($) on goods/services — used for Scope 3 when physical data unavailable (spend-based approach)
- Data sources: utility bills, fuel receipts, fleet logs, purchase orders, travel expense systems
Emission Factors — published conversion rates
- US EPA (2023): 0.386 kg CO₂e/kWh (US grid average electricity)
- Natural gas combustion: 2.02 kg CO₂e/m³ (EPA)
- Diesel combustion: 2.68 kg CO₂e/liter (IPCC)
- Air travel (economy): ~0.255 kg CO₂e/passenger-km (DEFRA 2023, incl. radiative forcing)
- Spend-based (EEIO): kg CO₂e/$ by industry sector — higher uncertainty but broad coverage for Scope 3
- Sources: US EPA, IPCC, DEFRA (UK), IEA, EcoInvent database
Tiered Approaches to Calculation Quality
Tier 1
Default emission factors from IPCC or national inventories. Simple to apply, lower data requirements. Appropriate for minor sources or when supplier data is unavailable. Higher uncertainty (±50–100% for some categories). Example: using US grid average for all electricity regardless of utility or location.
Tier 2
Country-, region-, or supplier-specific emission factors. Better accuracy for electricity (use utility-specific emission rate), transport (fuel-specific EFs), or purchased materials (region-specific production data). Example: using Colorado Xcel Energy's published emission rate (0.23 kg CO₂e/kWh in 2023) rather than US average.
Tier 3
Direct monitoring, process-specific data, or site-level measurements. Highest accuracy. Required for large Scope 1 sources in regulated industries. Examples: continuous emissions monitoring systems (CEMS) on industrial stacks, primary supplier LCA data, IoT sensor-based DMRV (→ covered in Week 3). Most credible for third-party verification.
Choice of tier is a strategic decision — higher tiers cost more but provide better data for decision-making and are more defensible to investors and regulators.
Verification & Assurance — Making the Data Credible
- Why verify? Credibility with investors, regulators, and customers; required for CDP submission, SBTi validation, and EU CSRD; reduces greenwashing risk
- Limited assurance (review): lower cost, negative conclusion format — "nothing came to our attention that suggests material misstatement." Sufficient for voluntary disclosure.
- Reasonable assurance (audit): more rigorous, positive conclusion format — "in our opinion, the inventory is fairly presented." Required for regulatory reporting and some investors.
- Verification standards: ISO 14064-3 (most widely used), ISAE 3410 (financial audit firms), AA1000AS (stakeholder engagement focus)
Verification Process
1. Planning
Define scope, materiality threshold, verification criteria. Identify high-risk sources.
2. Risk Assessment
Assess data quality, calculation methodology, and internal controls. Prioritize effort on material sources.
3. Evidence Gathering
Document review, site visits, interviews, recalculation testing, cross-checks with public data.
4. Opinion & Report
Issue verification statement. Qualified vs. unqualified opinion. Recommendations for improvement.
Major verifiers: ERM CVS, SGS, Bureau Veritas, SCS Global Services, PwC, EY, Deloitte.
Setting Credible Reduction Targets
Absolute vs. Intensity Targets
- Absolute target: reduce total emissions by X% from base year — e.g., "50% reduction in Scope 1+2 by 2030 vs. 2019." Preferred by investors and SBTi because it reflects real-world impact.
- Intensity target: reduce emissions per unit of output — e.g., "40% reduction in kg CO₂e per ton of product." Allows absolute emissions to grow if production grows. Less climate-relevant.
- Science Based Targets (SBTi): companies must set near-term targets (5–10 yr, 50% Scope 1+2+3 reduction by 2030 for 1.5°C) AND long-term net zero target (≥90% absolute reduction by 2050)
- Base year selection matters: most recent year with reliable data, typically 2018–2019 pre-COVID; must be recalculated when significant structural changes occur
SBTi Requirements Summary
Near-term (by 2030)
≥50% absolute reduction in Scope 1+2. Coverage of Scope 3 if >40% of total. 1.5°C-aligned.
Long-term (by 2050)
≥90% absolute reduction across all scopes. Residual emissions must be neutralized by carbon removal.
Validation
SBTi reviews methodology, data coverage, and ambition level. Process takes ~6 months, $9,500–$14,500 fee.
Progress reporting
Annual CDP or TCFD-aligned disclosure. Targets are publicly listed on SBTi website.
Mitigation Hierarchy & Carbon Offsets
1. Avoid
Redesign products and processes to eliminate emissions entirely. Highest priority — the most credible action.
→
2. Reduce
Where avoidance isn't feasible, cut emissions as much as technically and economically possible. Energy efficiency, fuel switching, electrification.
→
3. Compensate
Only for unavoidable residual emissions. Purchase high-quality carbon credits — not as a shortcut to skip steps 1–2.
- Carbon credit quality criteria: Additionality (would not have occurred without carbon finance), Permanence (emissions stay sequestered), No leakage, Measurability, Independent verification
- Voluntary market standards: Verra/VCS (largest by volume), Gold Standard (highest co-benefits), ACR, Plan Vivo (community-based)
- Controversy: Multiple studies (e.g., Science, 2023) found 90%+ of REDD+ forest offset credits overestimated sequestration — quality and additionality are serious issues in voluntary markets
- SBTi position: offsets do NOT count toward near-term Scope 1/2/3 reduction targets — only toward neutralization of residual emissions after 90%+ absolute reduction
🔬
Week 2 · GHG Calculation Workshop (30 min)
Calculate the Scope 1, 2, and key Scope 3 footprint of "Boulder Manufacturing Co." — a 50-person precision manufacturing company.
Data provided (on Canvas worksheet):
• Scope 1: 85,000 liters diesel consumed by fleet + 12,000 m³ natural gas for heating
• Scope 2: 420,000 kWh electricity from Xcel Energy Colorado grid (0.23 kg CO₂e/kWh)
• Scope 3 Cat 6 (Business travel): 180 flights averaging 1,200 km economy class
• Scope 3 Cat 7 (Employee commuting): 50 employees, 22 km average daily round trip, 240 workdays, 60% by gasoline car
Tasks:
1. Calculate emissions for each scope/category using EPA emission factors (provided)
2. Express results in tonnes CO₂e
3. Identify the highest-impact category
4. Suggest the most effective lever to reduce the footprint by 30%
Use EPA GHG Calculator or provided Excel template. Work in pairs. Results discussed in plenary.
Key Takeaways — Week 2
- GHG accounting is now a core business and engineering capability — driven by SEC, CSRD, SBTi, CDP, and investor pressure. Not optional for sustainability professionals.
- Scope 3 dominates most organizations' total footprint (70–90%) — this is where supply chain decisions and procurement choices have the biggest leverage.
- Emissions = Activity Data × Emission Factor — conceptually simple, but data quality and methodology choices determine credibility.
- Tier selection matters: Tier 3 (direct monitoring/DMRV) is increasingly expected for large, material Scope 1 sources and is the subject of next week's session.
- Third-party verification transforms self-reported data into credible information. Limited vs. reasonable assurance is a strategic choice based on audience and regulatory requirements.
- Offsets are not a shortcut — they sit at the bottom of the mitigation hierarchy and cannot substitute for genuine emission reductions. SBTi does not count offsets toward targets.
- GHG accounting builds on systems thinking from Week 1 — stocks (atmospheric CO₂) are changed by flows (emission inflows and removal outflows). Accounting quantifies those flows.
Next week: DMRV — how digital tools (IoT sensors, satellites, AI) are automating and transforming the measurement layer of GHG accounting — and why it matters for credibility. Integration Day this week.
Real-World Example: Microsoft's FY2023 Carbon Inventory
- Total: ~13.8 million tonnes CO₂e — up 30% since 2020 despite commitments (driven by data center growth for AI)
- Scope 1: ~130,000 t CO₂e — natural gas in data centers and offices (~1% of total)
- Scope 2 (market-based): near zero — 100% renewable electricity through PPAs and RECs
- Scope 3: ~13.7 million t CO₂e (~99% of total) — dominated by purchased goods/services (Cat 1: hardware manufacturing) and use of sold products (Cat 11: customer energy use)
- Microsoft's "carbon negative by 2030" commitment means Scope 1+2+3 net negative — requires massive supply chain transformation and DAC carbon removal
Lessons for Engineers & Business Students
For Engineers
Hardware design choices (chip efficiency, server lifetime, material selection) directly drive Cat 1 and Cat 11 Scope 3 — engineering decisions are carbon decisions.
For Business Students
Procurement decisions (who supplies chips, where servers are manufactured) drive Cat 1 Scope 3. Supplier engagement is a core decarbonization strategy.
Shared challenge
AI's energy intensity is creating a tension between digital innovation and climate commitments — a real design challenge this course equips you to navigate.
📋
GHG Accounting Assignment — Distributed This Week
Conduct a Scope 1, 2, and material Scope 3 GHG inventory for an organization of your choice — and recommend the highest-leverage reduction strategy.
Assignment requirements:
• Select an organization (employer, local company, campus department, startup) — must be able to obtain reasonable activity data
• Define organizational boundary and base year (justify your choices)
• Calculate Scope 1, 2, and at least 3 material Scope 3 categories
• Document data sources, emission factors used, and methodology tier for each category
• Identify the top 3 emission hotspots
• Recommend a reduction strategy aligned with Scope 3 Category breakdown
• Apply the mitigation hierarchy — where do offsets (if any) fit?
Deliverable: 8–10 page report + summary dashboard (template provided). Due end of Week 5.
Engineering students: focus on process-level analysis. Business students: focus on supply chain and procurement strategy. Both should address equity implications of proposed interventions.