Tag: ghg

GHG 101 – III What is a Carbon Negative Nation?

While most countries are trying for “net zero” status (the point at which their greenhouse gas emissions are balanced by removals), there are some that are currently carbon negative: they remove more carbon dioxide from the atmosphere than they emit.

Three nations have achieved this status: Bhutan, Suriname, and Panama.1

Bhutan, the world’s first officially carbon-negative country, absorbs approximately six tonnes of carbon dioxide per capita through its vast forests, while emitting two tonnes per capita (the nation’s constitution mandates that at least 60 percent of its land remain forested “for all time,” a commitment it reaffirmed at COP15 in Copenhagen in 2009 and again at COP21 in 2016).23 Suriname, the most forested country on Earth with 97 percent forest cover, absorbs roughly 8.8 million tons of carbon annually while emitting 7 million tons.4 Panama achieved carbon-negative status through a combination of bold energy sector transitions and conservation measures, with 65 percent of its territory covered in forest.5

But how do we know how much carbon they emit and how much they remove from the atmosphere? The answer is carbon accounting.

Carbon Accounting
Carbon accounting (also called greenhouse gas accounting) is the systematic method of measuring, recording, and reporting the greenhouse gas emissions generated by activities at the individual, organisational, or national level.

You can read more about it here, here, and also here (this is a technical post) in that order.

Understanding Carbon Negativity
In climate work, experts distinguish between production-based emissions and consumption-based emissions. This distinction can alter whether an entity appears to be carbon positive, neutral, or negative.6

  • Production-based emissions represent what’s emitted physically within a country’s borders. This is the usual approach taken by national greenhouse gas inventories following UNFCCC (United Nations Framework Convention on Climate Change) guidelines. This accounting is relatively straightforward: it estimates emissions from all the oil, coal, and gas consumed within a country by private households, industrial production, and electricity generation.7
  • Consumption-based emissions, are “all the greenhouse gas emissions needed, globally, to satisfy the final demand of residents of this country”. This approach acknowledges that occur in one location to produce goods and services consumed elsewhere.8

The standard formula for consumption-based emissions is:910

Consumption-based emissions = Production-based emissions + emissions from imports − emissions from exports

Consider the implications: if the United Kingdom closes its domestic steel industry and begins importing steel from China, UK production-based emissions fall while Chinese production-based emissions rise. Yet from a consumption perspective, those emissions still relate to UK-based consumption—the steel is still being used in Britain, regardless of where it was produced.

The difference between these two accounting methods can be substantial. When accounting for emissions on a consumption basis rather than territorial (production) level, United States emissions increase by 10.9 percent,11 while China’s emissions would decrease by substantially.11 For large European economies, net imported emissions represent 20–50% of consumption emissions;11 in Japan, they account for 17.8 percent, and in the United States, 10.8 percent.11

Accounting methods matter: whether a nation appears carbon negative may depend not just on physical realities but on how boundaries are drawn, what emissions are counted, and how carbon sinks are calculated.

The Macroeconomic perspective
From a macroeconomic perspective, production-based emissions align with a nation’s Gross Domestic Product (GDP). The national income identity expresses GDP as:12

GDP = C + I + G + (X − M)

where:

  • C = household (private) consumption
  • I = investment
  • G = government spending
  • X = exports
  • M = imports

Production‑based emissions follow the same logic as GDP: they count what is produced within a country’s borders, regardless of where those goods are ultimately consumed. In that sense, a country can run not only a financial trade surplus or deficit, but also a carbon trade surplus or deficit.

This concept is often framed through the Pollution Haven Hypothesis, which suggests that carbon-intensive production tends to migrate to jurisdictions with looser environmental regulations or lower energy costs (often developing nations), while cleaner, service-oriented economies (often developed nations) import the resulting goods.13

We can visualize this by mapping carbon flows against the standard macroeconomic identity for the trade balance (X – M):

  • The Carbon Exporter (Trade Surplus X > M): Countries like China or Russia often function as the world’s “smokestacks.” They run trade surpluses in manufactured goods, meaning their Production-Based Emissions are significantly higher than their Consumption-Based Emissions. They are effectively exporting the “embodied carbon” of steel, cement, and electronics to the rest of the world.14
  • The Carbon Importer (Trade Deficit X < M): Service-oriented economies like the UK or US often run trade deficits in goods. Their domestic factories are cleaner (or closed), lowering their territorial emissions. However, their consumption demands are met by imports, creating a “carbon trade deficit”: they consume far more emissions than they produce physically within their borders.15

This dynamic creates a “Carbon Loophole.” If the UK closes a steel mill to meet a “Net Zero” target but immediately starts importing steel from China, global atmospheric emissions haven’t changed—they have simply moved across a border. This leakage is the primary economic argument for policies like the European Union’s Carbon Border Adjustment Mechanism (CBAM), which attempts to tax the “embodied carbon” in imports, effectively reconciling the difference between production and consumption accounting at the border.1617

Consumption-Based Emissions
Consumption-based emissions take a fundamentally different approach. They represent “all the greenhouse gas emissions needed, globally, to satisfy the final demand of residents of this country”.11

The standard formula for consumption-based emissions is:18

Consumption-based emissions = Production-based emissions + emissions from imports − emissions from exports

More specifically:

  • Production-based emissions: what’s emitted within the country’s borders (the usual UNFCCC inventory)
  • Emissions from imports: emissions that happened abroad while producing goods and services that residents import and consume
  • Emissions from exports: emissions that happened domestically to produce goods that are consumed abroad; these are subtracted because they “belong” to foreign consumers in this method

Consumption-based accounting takes care of the problem that CO₂ emissions are mobile internationally through trade. A decrease in one country’s production-based emissions may be more or less directly related to an increase in another country’s emissions if production has simply shifted locations.19

Implications for Climate Policy and Carbon Negativity
The choice between production-based and consumption-based accounting has profound implications for assessing climate responsibility, setting reduction targets, and understanding whether a nation is truly carbon negative.

Consider again our carbon-negative exemplars: Bhutan, Suriname, and Panama. These countries achieve carbon-negative status through their vast forest cover, which acts as carbon sinks absorbing more CO₂ than their economies emit.

Using production-based accounting, these assessments are straightforward:

  • Bhutan emits 2 tonnes CO₂ per capita while its forests absorb 6 tonnes per capita
  • Suriname’s forests absorb 8.8 million tons annually while national production-based emissions are 7 million tons
  • Panama’s forests and conservation reserves create net carbon sequestration exceeding territorial emissions

But what if we applied consumption-based accounting? These nations, like all countries, import goods and services that embody emissions from production elsewhere.

The question essentially is, while the nation is carbon negative, are its citizens?

This question reveals the complexity of carbon accounting at the national level. A nation might be a net carbon sink based on territorial emissions and removals, yet still contribute to global emissions through its consumption patterns. Conversely, a nation with high production-based emissions might argue that much of its emissions serve to produce goods consumed elsewhere.

Which Accounting Method Should Prevail?
There is ongoing debate among climate policy experts about whether consumption-based or production-based accounting should be the primary basis for climate policy.

Arguments for production-based accounting:

  • It’s simpler to measure and verify
  • It aligns with territorial sovereignty and national control
  • Countries have direct policy leverage over production within their borders
  • It’s the basis for UNFCCC inventories and the Paris Agreement commitments

Arguments for consumption-based accounting:

  • It better reflects true climate responsibility
  • It prevents “carbon leakage” where emissions are simply offshored
  • It accounts for the full lifecycle of consumption patterns
  • It can inform more comprehensive climate policies including consumption measures and border adjustments

In practice, most climate policy continues to be based on production-based accounting through UNFCCC inventories, but consumption-based approaches are increasingly used to complement this picture and inform policy discussions about trade, consumption, and global equity.

The Path Forward
For nations aspiring to carbon neutrality or carbon negativity, the journey requires:

  1. Comprehensive measurement following standards like ISO 14064-1 to understand the full scope of emissions across all categories, including often-overlooked indirect emissions.
  2. Clear baseline establishment with robust base year policies and recalculation procedures to enable meaningful tracking of progress over time.
  3. Strategic mitigation through a combination of emissions reduction (shifting to renewable energy, improving efficiency, transforming industrial processes) and removal enhancement (protecting and expanding forests, implementing carbon capture, restoring degraded lands).
  4. Project-level quantification using frameworks like ISO 14064-2 to measure the specific impact of mitigation initiatives, with conservative assumptions and comprehensive accounting of all affected sources, sinks, and reservoirs.
  5. Independent verification following ISO 14064-3 to provide credible assurance to domestic and international stakeholders that reported emissions, removals, and reduction claims are accurate.
  6. Transparent reporting that discloses methodologies, boundaries, assumptions, data sources, and uncertainties, enabling users to understand and evaluate climate claims.
  7. Consistent application over time, with clear documentation of any methodological changes and appropriate recalculations to maintain comparability.

Carbon negativity represents a climate milestone that reflects a fundamental restructuring of an economy’s relationship with atmospheric carbon. Understanding how these countries achieve carbon negativity, helps us understand both, how climate responsibility is allocated in a globally interconnected economy, and what nations must do to achieve carbon negativity.

GHG Accounting: ISO 14064-1

Note: I know this is quite technical, but it’s about accounting, so that’s natural. Financial accounting tends to be technical too, right?

The ISO 14064 series is a family of international standards by the International Organization for Standardization (ISO) for quantification, monitoring, reporting, and verification of GHG emissions. They were developed by Technical Committee ISO/TC 207 on Environmental Management, Subcommittee SC 7 on Greenhouse Gas Management, can be adopted across different sectors, regions, and organisational types.

The ISO 14064 series currently comprises four main parts:

  • ISO 14064-1:2018 – “Greenhouse gases – Part 1: Specification with guidance at the organisation level for quantification and reporting of greenhouse gas emissions and removals.” This standard enables organisations to measure and report their total greenhouse gas emissions and removals.
  • ISO 14064-2:2019 – “Greenhouse gases – Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements.” This standard applies to specific projects designed to reduce emissions or enhance carbon removals, such as renewable energy installations, energy efficiency retrofits, reforestation programs, or methane capture projects.
  • ISO 14064-3:2019 – “Greenhouse gases – Part 3: Specification with guidance for the verification and validation of greenhouse gas statements.” This standard provides the framework for independent third-party verification and validation of GHG claims. It is the assurance mechanism that gives stakeholders confidence in reported emissions data.
  • ISO/TS 14064-4:2025 – “Greenhouse gases – Part 4: Guidance for the application of ISO 14064-1.” This newest addition, published in November 2025, is a Technical Specification that provides practical, step-by-step guidance for implementing ISO 14064-1. It bridges the gap between the normative requirements of the standard and real-world application, with detailed examples and case studies for different organisational types and sectors.

Additionally, the broader ISO 14060 family includes ISO 14065:2020 (requirements for bodies validating and verifying GHG statements), ISO 14066:2023 (competence requirements for verifiers and validators), and ISO 14067:2018 (carbon footprint of products).

This ecosystem of standards creates a framework:

  1. Organisations use ISO 14064-1 and 14064-4 to calculate their emissions;
  2. Project developers use ISO 14064-2 to quantify project benefits;
  3. Independent verifiers use ISO 14064-3 to audit these claims; and a
  4. Accreditation bodies use ISO 14065 and 14066 to ensure the competence and impartiality of the verifiers themselves.

The Five Core Principles

  1. Relevance: Select the GHG sources, GHG sinks, GHG reservoirs, data and methodologies appropriate to the needs of the intended user.
  2. Completeness: Include all relevant GHG emissions and removals.
  3. Consistency: Enable meaningful comparisons in GHG-related information.
  4. Accuracy: Reduce bias and uncertainties as far as is practical.
  5. Transparency: Disclose sufficient and appropriate GHG-related information to allow intended users to make decisions with reasonable confidence.

As stated explicitly in ISO 14064-1, “The application of principles is fundamental to ensure that GHG-related information is a true and fair account. The principles are the basis for, and will guide the application of, the requirements in this document”.

Relevance: Appropriateness to User Needs
This principle recognises that GHG inventories and reports serve specific purposes and must be designed to meet the needs of those who will rely on the information to make decisions.

Relevance begins with clearly identifying the intended users of the GHG inventory and understanding their information needs. Intended users may include the organisation’s own management, investors, lenders, customers, regulators, GHG programme administrators, or other stakeholders. Different users may have different information needs. For example, investors may focus primarily on climate-related financial risks and opportunities, while regulators may require specific emissions data for compliance purposes.

The relevance principle requires organisations to make appropriate boundary decisions (determining which operations, facilities, and emissions sources to include in the inventory based on what is material and meaningful to intended users): an inventory that excludes significant emission sources or includes irrelevant information fails to serve user needs effectively.

In practice, applying the relevance principle means that organisations must engage with their stakeholders to understand what information they need and why, design inventory boundaries and methodologies to provide this information, focus effort on quantifying the most significant emissions sources, and regularly reassess whether the inventory continues to meet user needs as circumstances change.

Completeness: Including All Relevant Emissions
The completeness principle requires organisations to include all relevant GHG emissions and removals within the chosen inventory boundaries. This principle ensures that GHG inventories provide a comprehensive picture of an organisation’s climate impact rather than selectively reporting only favorable information.

Completeness operates at multiple levels. At the broadest level, it requires that organisations establish appropriate organisational and reporting boundaries and then include all sources and sinks within those boundaries. For organisational-level inventories under ISO 14064-1, this means accounting for all facilities and operations that fall within the defined organisational boundary, whether based on control or equity share. It also means including both direct emissions from sources owned or controlled by the organisation and indirect emissions that are consequences of organisational activities.

The 2018 revision fundamentally changed how organizations handle indirect emissions. Instead of treating “Scope 3” as a monolithic category, ISO now requires systematic evaluation across six specific categories. This shift reflects reality: a manufacturer’s supply chain emissions (Category 4) and product use-phase emissions (Category 5) are fundamentally different and require different strategies. Organisations must systematically identify potential sources of indirect emissions throughout their value chains and include those that are determined to be significant based on magnitude, influence, risk, and stakeholder concerns. The real problem here is data availability: an organisation might know its own production emissions precisely, but will struggle to get Scope 3 data from thousands of distributors, and this makes implementation messy and imprecise.

An important aspect of completeness is the treatment of exclusions. If specific emissions sources or greenhouse gases are excluded from the inventory, ISO 14064-1 requires organisations to disclose and justify these exclusions. Justifications must be based on legitimate reasons such as immateriality, lack of influence, or technical measurement challenges, not simply on a desire to report lower emissions.

For GHG projects under ISO 14064-2, completeness requires identifying and quantifying emissions and removals from all relevant sources, sinks, and reservoirs affected by the project, including controlled, related, and affected SSRs. Failure to account for emission increases from affected sources (often called leakage) would result in overstatement of project benefits.

Consistency: Enabling Meaningful Comparisons
The consistency principle requires that organisations enable meaningful comparisons in GHG-related information over time and, where relevant, across organisations. Consistency is essential for tracking progress toward emission reduction targets, assessing the effectiveness of mitigation initiatives, and enabling external stakeholders to compare performance across organisations or sectors.

Consistency has several dimensions. It requires using consistent methodologies, boundaries, and assumptions over time when quantifying and reporting emissions. When an organisation measures its emissions in one year using specific methodologies and emission factors, it should apply the same approaches in subsequent years to enable valid comparisons.

It is important to note that consistency does not mean organisations can never improve their methodologies or expand their boundaries. Organisations may and should refine their approaches over time to improve accuracy, expand scope, or respond to changing circumstances. However, when such changes occur, consistency requires transparent documentation of what changed and why, recalculation of prior years where necessary to maintain comparability, and clear explanation in reports so users understand the nature and impact of changes.

Case in point, the base year concept embodied in ISO 14064-1 is central to applying the consistency principle. Organisations select a specific historical period as their base year against which future emissions are compared. The base year serves as the reference point for measuring progress toward reduction targets. ISO 14064-1 requires organisations to establish policies for recalculating base year emissions when significant changes occur to organisational structure, boundaries, methodologies, or discovered errors. These recalculation policies ensure that year-over-year comparisons remain valid even as organisations evolve.

The recalculation policy is most commonly triggered by three types of organisational change. First, structural changes: acquisitions, divestitures, or mergers that materially alter the scope of operations. ISO 14064-1 and the GHG Protocol typically define “material” as changes exceeding 5% of Scope 1 and Scope 2 emissions in the base year. For example, if a retail company acquires a logistics provider representing an additional 6% of historical emissions, the base year must be recalculated to include that logistics provider, enabling fair year-on-year comparison. Second, methodology improvements: when an organisation discovers better data or more appropriate emission factors. If a facility previously used regional electricity emission factors but gains access to grid-specific data, or if a company previously estimated employee commuting emissions using averages but now collects actual commute data, these improvements warrant recalculation. The driver is not change for its own sake, but the principle that prior years should benefit from improved accuracy just as current years do. Third, discovered errors: when an organisation identifies that prior-year calculations were systematically wrong—either over or understating emissions—recalculation is not optional; it is mandatory. Transparency requires disclosing both the error and its magnitude, then correcting the historical record. Organisations often establish a threshold (commonly 5%) below which minor corrections do not trigger full recalculation; instead, they are noted as adjustments in the current year. 

Accuracy: Reducing Bias and Uncertainty
Accuracy involves reducing systematic bias and reducing uncertainty.

  • Systematic bias occurs when quantification methods consistently overstate or understate actual emissions. For example, using an emission factor that is inappropriately high or low for the specific activity being quantified would introduce bias. The accuracy principle requires ensuring that quantification approaches are systematically neither over nor under actual emissions, as far as can be judged.
  • Uncertainty refers to the range of possible values that could be reasonably attributed to a quantified amount. All emission estimates involve some degree of uncertainty arising from measurement imprecision, estimation methods, sampling approaches, lack of complete data, or natural variability. The accuracy principle requires reducing these uncertainties as far as is practical through using high-quality data, appropriate methodologies, and robust measurement and calculation procedures. ISO 14064-1 requires organisations to assess uncertainty in their GHG inventories, providing both quantitative estimates of the likely range of values and qualitative descriptions of the causes of uncertainty. This assessment helps organisations identify where improvements in data quality or methodology could most effectively reduce overall inventory uncertainty.

Achieving accuracy begins with selecting appropriate quantification approaches. ISO 14064-1 recognises multiple approaches to quantification, including direct measurement of emissions, mass balance calculations, and activity-based calculations using emission factors. The most accurate approach depends on the specific source, data availability, and the significance of the emission source.

Organisations should also prioritise primary data (data obtained from direct measurement or calculation based on direct measurements) over secondary data from generic databases. Site-specific data obtained within the organisational boundary is preferable to industry-average or regional data. However, the accuracy principle also recognises practical constraints—perfect accuracy is often unachievable and unnecessary, particularly for minor emission sources.

The requirement to separately report biogenic CO₂ from fossil fuel CO₂ in Category 1 may seem like a technical distinction, but it reflects a fundamental policy divergence emerging globally. Biogenic emissions arise from the combustion of biomass (wood, agricultural waste, biogas) and are considered part of the natural carbon cycle—the carbon released was recently absorbed by growing plants or waste decomposition. Fossil emissions, by contrast, release carbon that has been sequestered for millions of years. Regulatory frameworks increasingly treat these differently. The European Union’s Emissions Trading System (EU ETS) has updated its carbon accounting rules multiple times to refine biogenic CO₂ treatment; the GHG Protocol has issued separate guidance; and emerging carbon credit schemes apply different rules depending on biogenic versus fossil origin. An organisation that reports these separately today is insulated from tomorrow’s regulatory changes. If a company bundles biogenic and fossil emissions together, it cannot easily disaggregate them later without recalculating historical data. Practically, this means a biomass energy facility, a wastewater treatment plant using anaerobic digestion, or a manufacturer using wood waste for process heat must track biogenic emissions in their systems from the outset.

Transparency: Disclosing Sufficient Information
The transparency principle requires that organisations disclose sufficient and appropriate GHG-related information to allow intended users to make decisions with reasonable confidence. Transparency is fundamental to building trust and credibility in GHG reporting—it enables users to understand what was measured, how it was measured, and what limitations exist in the reported information.

Transparency requires that organisations address all relevant issues in a factual and coherent manner, based on a clear audit trail. This means documenting the assumptions, methodologies, data sources, and calculations used to quantify emissions such that an independent party could understand and reproduce the results.

The transparency principle requires that a reader—whether a regulator, investor, or internal stakeholder—could theoretically follow the same calculation path and reach the same answer. This demands more than good intentions; it requires structural discipline in documentation. In practice, an effective audit trail captures the decision journey, not just the numbers. It documents: which emissions sources were identified as material (and why), which were excluded (and why), what data was collected and from which sources, which assumptions were necessary (e.g., assumed product lifespans, allocation methods for shared facilities), what methodologies were applied, and crucially, where uncertainty remains. For example, a beverage manufacturer’s Scope 3 inventory might document that it obtained actual emissions data from 60% of direct suppliers (by volume) but relied on industry-average factors for the remaining 40%. That gap is not hidden; it is documented as a source of uncertainty in the overall inventory. This approach serves two audiences simultaneously. Internal management gains confidence that the number is defensible. External verifiers and stakeholders understand the methodology’s strengths and limitations, enabling better-informed decisions.

A clear audit trail is essential to transparency. Organisations should maintain robust documentation that traces emissions from source data through calculations to final reported totals. This documentation should include:

  • descriptions of organisational and reporting boundaries;
  • lists of emission sources and sinks included in the inventory;
  • methodologies and emission factors used for each source category;
  • activity data, sources of data, and data collection procedures;
  • calculations and any assumptions made; and
  • any exclusions and the justifications for excluding specific sources.

Transparency requires disclosing not only the final emission totals but also the information needed to understand and evaluate those totals. ISO 14064-1 specifies extensive requirements for what must be included in GHG reports, including both mandatory and recommended disclosures. These disclosures cover methodological choices, data quality, uncertainty, significant changes from previous years, verification status, and other information relevant to interpreting the reported emissions.

The transparency principle also requires acknowledging limitations and uncertainties in the reported information. Rather than implying false precision, organisations should clearly communicate where significant uncertainties exist, what assumptions were necessary, and what information was unavailable or excluded. This honest acknowledgment of limitations enhances rather than diminishes credibility, as it demonstrates rigorous and objective assessment.

Establishing Organisational Boundaries
The first step in developing a GHG inventory is determining organisational boundaries, which means that the organisation should define what operations, facilities, and entities are included in the inventory based on the organisation’s relationship to them.

ISO 14064-1 allows organisations to choose from two primary consolidation approaches:

  1. Equity share approach: The organisation accounts for its proportional share of GHG emissions and removals from facilities based on its ownership percentage. The equity share reflects economic interest, which is the extent of rights a company has to the risks and rewards flowing from an operation. Typically, the share of economic risks and rewards in an operation is aligned with the company’s percentage ownership of that operation, and equity share will normally be the same as the ownership percentage. Where this is not the case, the economic substance of the relationship the company has with the operation always overrides the legal ownership form to ensure that equity share reflects the percentage of economic interest.
  2. Control approach (financial or operational): The organisation accounts for 100% of GHG emissions and removals from facilities over which it has financial or operational control, and 0% from facilities it does not control.
    • Under the operational control approach, an organisation has operational control over a facility if the organisation or one of its subsidiaries has the authority to introduce and implement its operating policies at the facility. This is the most common approach, as it typically aligns best with what an organisation feels it is responsible for and often leads to the most comprehensive inclusion of assets in the inventory.
    • Under the financial control approach, an organisation has financial control over a facility if the organisation has the ability to direct the financial and operating policies of the facility with a view to gaining economic benefits from its activities. Industries with complex ownership structures may be more likely to follow the equity share approach to align the reporting boundary with stakeholder interests.

The choice of consolidation approach should be consistent with the intended use of the inventory and ideally align with how the organisation consolidates financial information. For example, an organisation that consolidates its financial statements based on operational control should typically use operational control for GHG inventory boundaries as well.

Boundary Consistency with Financial Reporting: Why It Matters
The ISO standard recommends (and increasingly, regulators require) that the consolidation approach used for GHG accounting align with the approach used for financial reporting. This is more than administrative convenience. When a company consolidates financial statements using operational control, its financial stakeholders are accustomed to seeing 100% of controlled operations reflected in results. If the GHG inventory uses a different boundary—say, equity share for a joint venture while the finance team uses operational control—the GHG data will seem inconsistent and raise credibility questions. More importantly, alignment simplifies assurance. An auditor examining both financial and GHG statements does not have to reconcile conflicting boundary interpretations. A company that uses control for finance but equity share for emissions is signalling (intentionally or not) that its GHG report is using a narrower or broader lens than its financial results, inviting scrutiny about whether the difference is justified or opportunistic. Alignment also supports integrated reporting. Increasingly, investors want to see how GHG emissions correlate with financial performance—emissions intensity (tonnes CO₂e per unit of revenue, per unit of asset, per FTE), carbon risk premium, or abatement costs. These correlations only make sense if the boundary is consistent.

Defining Reporting Boundaries: The Six-Category Structure
Once organisational boundaries are established, organisations must define their reporting boundaries—what types of emissions and removals are quantified and reported within the organisational boundary.

The 2018 revision of ISO 14064-1 introduced a significant innovation: a six-category structure for classifying emissions and removals. This structure evolved from and builds upon the GHG Protocol’s three-scope approach (Scope 1 for direct emissions, Scope 2 for energy indirect emissions, Scope 3 for all other indirect emissions). The ISO categories provide more granular classification of indirect emissions, facilitating identification and management of specific emission sources throughout the value chain.

Category 1: Direct GHG emissions and removals: Direct GHG emissions are emissions from GHG sources owned or controlled by the organisation. These are emissions that occur from operations under the organisation’s direct control—for example, emissions from combustion of fuels in company-owned vehicles or boilers, emissions from industrial processes at company facilities, or fugitive emissions from refrigeration equipment owned by the company. Organisations must quantify direct GHG emissions separately for CO₂, CH₄, N₂O, NF₃, SF₆, and other fluorinated gases. Additionally, ISO 14064-1 requires organisations to report biogenic CO₂ emissions separately from fossil fuel CO₂ emissions in Category 1. This separate reporting recognises that biogenic emissions may have different policy treatments, impacts, and implications than fossil emissions.

Category 2: Indirect GHG emissions from imported energy: This category includes indirect emissions from the generation of imported electricity, steam, heat, or cooling consumed by the organisation. When an organisation purchases electricity, the emissions from generating that electricity occur at the power plant (not owned by the organisation), but they are a consequence of the organisation’s decision to purchase and consume electricity. ISO 14064-1 requires organisations to report all Category 2 emissions, making this a mandatory category alongside Category 1.

Category 3: Indirect GHG emissions from transportation: This category includes emissions from transportation services used by the organisation but operated by third parties. Examples include emissions from business travel on commercial airlines, shipping of products by third-party logistics providers, and employee commuting.

Category 4: Indirect GHG emissions from products used by the organisation: This category includes emissions that occur during the production, transportation, and disposal of goods purchased by the organisation. Examples include emissions from the manufacturing of products the organisation buys, emissions from transporting materials used to make those products, and emissions from disposing of waste created by using those products. The boundary for Category 4 is “cradle-to-gate” from the supplier’s perspective—all emissions associated with producing and delivering products to the organisation.

Category 5: Indirect GHG emissions associated with the use of products from the organisation: This category includes emissions generated by the use and end-of-life treatment of the organisation’s products after their sale. When certain data on products’ final destination is not available, organisations develop plausible scenarios for each product. This category is particularly significant for manufacturers, as use-phase emissions from products often exceed emissions from manufacturing. For example, the emissions from operating a vehicle over its lifetime typically far exceed the emissions from manufacturing it.

For many product-based companies, Category 5 is the elephant in the room. An automotive manufacturer might account for 15–20% of its footprint in manufacturing emissions (Category 1) and another 10% in supply chain emissions (Category 4), but 50%+ in the use phase (Category 5). A household appliance manufacturer faces a similar dynamic—the electricity consumed by an appliance over its 15-year lifespan vastly exceeds the emissions from manufacturing. This creates strategic tension. The organisation has direct control over manufacturing efficiency—it can redesign processes, source renewable energy, or substitute materials. But use-phase emissions depend on the consumer’s electricity grid (which it does not control) and user behaviour (how often and how long the appliance runs). Yet ISO 14064-1 requires organisations to quantify these use-phase emissions and report them transparently, because stakeholders—particularly investors and policymakers—need to understand the full climate footprint of the products being sold. When data on product final destination is unavailable (e.g., a smartphone manufacturer doesn’t know where each unit is sold, or how long consumers keep it), ISO 14064-1 allows organisations to develop “plausible scenarios”—reasonable assumptions about usage patterns, product lifetime, and grid composition. These scenarios must be documented and justified, and they should be reassessed as more data becomes available or as circumstances change (e.g., grid decarbonisation).

Category 6: Indirect GHG emissions from other sources: This category captures any indirect emissions that do not fall into Categories 2-5. It serves as a catch-all to ensure completeness while avoiding double-counting. Organisations must be careful not to count the same emissions in multiple categories—for example, if emissions from a vehicle are included in Category 3 (transportation), they should not also be included in Category 4 (products) if the vehicle was used to transport a product.

Quantifying Emissions: Global Warming Potential and CO₂ Equivalent

Read more about this here.

GWP values are periodically updated by the IPCC based on improved scientific understanding. Different Assessment Reports have published different GWP values for the same gases. Organisations using ISO 14064 must select which GWP values to use (typically the most recent IPCC values or values specified by applicable GHG programmes) and apply them consistently over time.

ISO 14064-1 requires organisations to report total GHG emissions and removals in tonnes of CO₂e and to document which GWP values are used. This ensures transparency and enables users of the information to understand how totals were calculated.

ISO 14064-1 helps transform scattered information into decision-useful climate information that stakeholders can trust. For organisations beginning their GHG accounting journey, the five principles and boundary-setting framework provide both a philosophy and a roadmap. They clarify that accurate climate disclosure is not primarily a technical problem to be solved by better software, but a governance challenge for setting up a recurring system that works under regular work-stress.

However, the standard’s greatest implementation challenge is operational, not conceptual. While Category 1 and 2 emissions (direct operations and purchased energy) are typically quantifiable using utility bills and fuel receipts, Category 4 and 5 emissions (purchased goods and product use-phase) often represent 70-90% of an organisation’s footprint yet rely on supplier data that is unavailable, forcing reliance on spend-based estimates or industry averages. ISO 14064-1 requires transparency about these limitations but doesn’t eliminate them. Expect your first inventory to expose data gaps; continuous improvement means systematically upgrading from generic to supplier-specific data over successive reporting cycles. In a later post I do plan to look at operational challenges.

Source

  1. ISO 14064-I

GHG Accounting: ISO 14064-1

Note: I know this is quite technical, but it’s about accounting, so that’s natural. Financial accounting tends to be technical too, right?

The ISO 14064 series is a family of international standards by the International Organization for Standardization (ISO) for quantification, monitoring, reporting, and verification of GHG emissions. They were developed by Technical Committee ISO/TC 207 on Environmental Management, Subcommittee SC 7 on Greenhouse Gas Management, can be adopted across different sectors, regions, and organisational types.

The ISO 14064 series currently comprises four main parts:

  • ISO 14064-1:2018 – “Greenhouse gases – Part 1: Specification with guidance at the organisation level for quantification and reporting of greenhouse gas emissions and removals.” This standard enables organisations to measure and report their total greenhouse gas emissions and removals.
  • ISO 14064-2:2019 – “Greenhouse gases – Part 2: Specification with guidance at the project level for quantification, monitoring and reporting of greenhouse gas emission reductions or removal enhancements.” This standard applies to specific projects designed to reduce emissions or enhance carbon removals, such as renewable energy installations, energy efficiency retrofits, reforestation programs, or methane capture projects.
  • ISO 14064-3:2019 – “Greenhouse gases – Part 3: Specification with guidance for the verification and validation of greenhouse gas statements.” This standard provides the framework for independent third-party verification and validation of GHG claims. It is the assurance mechanism that gives stakeholders confidence in reported emissions data.
  • ISO/TS 14064-4:2025 – “Greenhouse gases – Part 4: Guidance for the application of ISO 14064-1.” This newest addition, published in November 2025, is a Technical Specification that provides practical, step-by-step guidance for implementing ISO 14064-1. It bridges the gap between the normative requirements of the standard and real-world application, with detailed examples and case studies for different organisational types and sectors.

Additionally, the broader ISO 14060 family includes ISO 14065:2020 (requirements for bodies validating and verifying GHG statements), ISO 14066:2023 (competence requirements for verifiers and validators), and ISO 14067:2018 (carbon footprint of products).

This ecosystem of standards creates a framework:

  1. Organisations use ISO 14064-1 and 14064-4 to calculate their emissions;
  2. Project developers use ISO 14064-2 to quantify project benefits;
  3. Independent verifiers use ISO 14064-3 to audit these claims; and a
  4. Accreditation bodies use ISO 14065 and 14066 to ensure the competence and impartiality of the verifiers themselves.

The Five Core Principles

  1. Relevance: Select the GHG sources, GHG sinks, GHG reservoirs, data and methodologies appropriate to the needs of the intended user.
  2. Completeness: Include all relevant GHG emissions and removals.
  3. Consistency: Enable meaningful comparisons in GHG-related information.
  4. Accuracy: Reduce bias and uncertainties as far as is practical.
  5. Transparency: Disclose sufficient and appropriate GHG-related information to allow intended users to make decisions with reasonable confidence.

As stated explicitly in ISO 14064-1, “The application of principles is fundamental to ensure that GHG-related information is a true and fair account. The principles are the basis for, and will guide the application of, the requirements in this document”.

Relevance: Appropriateness to User Needs
This principle recognises that GHG inventories and reports serve specific purposes and must be designed to meet the needs of those who will rely on the information to make decisions.

Relevance begins with clearly identifying the intended users of the GHG inventory and understanding their information needs. Intended users may include the organisation’s own management, investors, lenders, customers, regulators, GHG programme administrators, or other stakeholders. Different users may have different information needs. For example, investors may focus primarily on climate-related financial risks and opportunities, while regulators may require specific emissions data for compliance purposes.

The relevance principle requires organisations to make appropriate boundary decisions (determining which operations, facilities, and emissions sources to include in the inventory based on what is material and meaningful to intended users): an inventory that excludes significant emission sources or includes irrelevant information fails to serve user needs effectively.

In practice, applying the relevance principle means that organisations must engage with their stakeholders to understand what information they need and why, design inventory boundaries and methodologies to provide this information, focus effort on quantifying the most significant emissions sources, and regularly reassess whether the inventory continues to meet user needs as circumstances change.

Completeness: Including All Relevant Emissions
The completeness principle requires organisations to include all relevant GHG emissions and removals within the chosen inventory boundaries. This principle ensures that GHG inventories provide a comprehensive picture of an organisation’s climate impact rather than selectively reporting only favorable information.

Completeness operates at multiple levels. At the broadest level, it requires that organisations establish appropriate organisational and reporting boundaries and then include all sources and sinks within those boundaries. For organisational-level inventories under ISO 14064-1, this means accounting for all facilities and operations that fall within the defined organisational boundary, whether based on control or equity share. It also means including both direct emissions from sources owned or controlled by the organisation and indirect emissions that are consequences of organisational activities.

The 2018 revision fundamentally changed how organizations handle indirect emissions. Instead of treating “Scope 3” as a monolithic category, ISO now requires systematic evaluation across six specific categories. This shift reflects reality: a manufacturer’s supply chain emissions (Category 4) and product use-phase emissions (Category 5) are fundamentally different and require different strategies. Organisations must systematically identify potential sources of indirect emissions throughout their value chains and include those that are determined to be significant based on magnitude, influence, risk, and stakeholder concerns. The real problem here is data availability: an organisation might know its own production emissions precisely, but will struggle to get Scope 3 data from thousands of distributors, and this makes implementation messy and imprecise.

An important aspect of completeness is the treatment of exclusions. If specific emissions sources or greenhouse gases are excluded from the inventory, ISO 14064-1 requires organisations to disclose and justify these exclusions. Justifications must be based on legitimate reasons such as immateriality, lack of influence, or technical measurement challenges, not simply on a desire to report lower emissions.

For GHG projects under ISO 14064-2, completeness requires identifying and quantifying emissions and removals from all relevant sources, sinks, and reservoirs affected by the project, including controlled, related, and affected SSRs. Failure to account for emission increases from affected sources (often called leakage) would result in overstatement of project benefits.

Consistency: Enabling Meaningful Comparisons
The consistency principle requires that organisations enable meaningful comparisons in GHG-related information over time and, where relevant, across organisations. Consistency is essential for tracking progress toward emission reduction targets, assessing the effectiveness of mitigation initiatives, and enabling external stakeholders to compare performance across organisations or sectors.

Consistency has several dimensions. It requires using consistent methodologies, boundaries, and assumptions over time when quantifying and reporting emissions. When an organisation measures its emissions in one year using specific methodologies and emission factors, it should apply the same approaches in subsequent years to enable valid comparisons.

It is important to note that consistency does not mean organisations can never improve their methodologies or expand their boundaries. Organisations may and should refine their approaches over time to improve accuracy, expand scope, or respond to changing circumstances. However, when such changes occur, consistency requires transparent documentation of what changed and why, recalculation of prior years where necessary to maintain comparability, and clear explanation in reports so users understand the nature and impact of changes.

Case in point, the base year concept embodied in ISO 14064-1 is central to applying the consistency principle. Organisations select a specific historical period as their base year against which future emissions are compared. The base year serves as the reference point for measuring progress toward reduction targets. ISO 14064-1 requires organisations to establish policies for recalculating base year emissions when significant changes occur to organisational structure, boundaries, methodologies, or discovered errors. These recalculation policies ensure that year-over-year comparisons remain valid even as organisations evolve.

The recalculation policy is most commonly triggered by three types of organisational change. First, structural changes: acquisitions, divestitures, or mergers that materially alter the scope of operations. ISO 14064-1 and the GHG Protocol typically define “material” as changes exceeding 5% of Scope 1 and Scope 2 emissions in the base year. For example, if a retail company acquires a logistics provider representing an additional 6% of historical emissions, the base year must be recalculated to include that logistics provider, enabling fair year-on-year comparison. Second, methodology improvements: when an organisation discovers better data or more appropriate emission factors. If a facility previously used regional electricity emission factors but gains access to grid-specific data, or if a company previously estimated employee commuting emissions using averages but now collects actual commute data, these improvements warrant recalculation. The driver is not change for its own sake, but the principle that prior years should benefit from improved accuracy just as current years do. Third, discovered errors: when an organisation identifies that prior-year calculations were systematically wrong—either over or understating emissions—recalculation is not optional; it is mandatory. Transparency requires disclosing both the error and its magnitude, then correcting the historical record. Organisations often establish a threshold (commonly 5%) below which minor corrections do not trigger full recalculation; instead, they are noted as adjustments in the current year. 

Accuracy: Reducing Bias and Uncertainty
Accuracy involves reducing systematic bias and reducing uncertainty.

  • Systematic bias occurs when quantification methods consistently overstate or understate actual emissions. For example, using an emission factor that is inappropriately high or low for the specific activity being quantified would introduce bias. The accuracy principle requires ensuring that quantification approaches are systematically neither over nor under actual emissions, as far as can be judged.
  • Uncertainty refers to the range of possible values that could be reasonably attributed to a quantified amount. All emission estimates involve some degree of uncertainty arising from measurement imprecision, estimation methods, sampling approaches, lack of complete data, or natural variability. The accuracy principle requires reducing these uncertainties as far as is practical through using high-quality data, appropriate methodologies, and robust measurement and calculation procedures. ISO 14064-1 requires organisations to assess uncertainty in their GHG inventories, providing both quantitative estimates of the likely range of values and qualitative descriptions of the causes of uncertainty. This assessment helps organisations identify where improvements in data quality or methodology could most effectively reduce overall inventory uncertainty.

Achieving accuracy begins with selecting appropriate quantification approaches. ISO 14064-1 recognises multiple approaches to quantification, including direct measurement of emissions, mass balance calculations, and activity-based calculations using emission factors. The most accurate approach depends on the specific source, data availability, and the significance of the emission source.

Organisations should also prioritise primary data (data obtained from direct measurement or calculation based on direct measurements) over secondary data from generic databases. Site-specific data obtained within the organisational boundary is preferable to industry-average or regional data. However, the accuracy principle also recognises practical constraints—perfect accuracy is often unachievable and unnecessary, particularly for minor emission sources.

The requirement to separately report biogenic CO₂ from fossil fuel CO₂ in Category 1 may seem like a technical distinction, but it reflects a fundamental policy divergence emerging globally. Biogenic emissions arise from the combustion of biomass (wood, agricultural waste, biogas) and are considered part of the natural carbon cycle—the carbon released was recently absorbed by growing plants or waste decomposition. Fossil emissions, by contrast, release carbon that has been sequestered for millions of years. Regulatory frameworks increasingly treat these differently. The European Union’s Emissions Trading System (EU ETS) has updated its carbon accounting rules multiple times to refine biogenic CO₂ treatment; the GHG Protocol has issued separate guidance; and emerging carbon credit schemes apply different rules depending on biogenic versus fossil origin. An organisation that reports these separately today is insulated from tomorrow’s regulatory changes. If a company bundles biogenic and fossil emissions together, it cannot easily disaggregate them later without recalculating historical data. Practically, this means a biomass energy facility, a wastewater treatment plant using anaerobic digestion, or a manufacturer using wood waste for process heat must track biogenic emissions in their systems from the outset.

Transparency: Disclosing Sufficient Information
The transparency principle requires that organisations disclose sufficient and appropriate GHG-related information to allow intended users to make decisions with reasonable confidence. Transparency is fundamental to building trust and credibility in GHG reporting—it enables users to understand what was measured, how it was measured, and what limitations exist in the reported information.

Transparency requires that organisations address all relevant issues in a factual and coherent manner, based on a clear audit trail. This means documenting the assumptions, methodologies, data sources, and calculations used to quantify emissions such that an independent party could understand and reproduce the results.

The transparency principle requires that a reader—whether a regulator, investor, or internal stakeholder—could theoretically follow the same calculation path and reach the same answer. This demands more than good intentions; it requires structural discipline in documentation. In practice, an effective audit trail captures the decision journey, not just the numbers. It documents: which emissions sources were identified as material (and why), which were excluded (and why), what data was collected and from which sources, which assumptions were necessary (e.g., assumed product lifespans, allocation methods for shared facilities), what methodologies were applied, and crucially, where uncertainty remains. For example, a beverage manufacturer’s Scope 3 inventory might document that it obtained actual emissions data from 60% of direct suppliers (by volume) but relied on industry-average factors for the remaining 40%. That gap is not hidden; it is documented as a source of uncertainty in the overall inventory. This approach serves two audiences simultaneously. Internal management gains confidence that the number is defensible. External verifiers and stakeholders understand the methodology’s strengths and limitations, enabling better-informed decisions.

A clear audit trail is essential to transparency. Organisations should maintain robust documentation that traces emissions from source data through calculations to final reported totals. This documentation should include:

  • descriptions of organisational and reporting boundaries;
  • lists of emission sources and sinks included in the inventory;
  • methodologies and emission factors used for each source category;
  • activity data, sources of data, and data collection procedures;
  • calculations and any assumptions made; and
  • any exclusions and the justifications for excluding specific sources.

Transparency requires disclosing not only the final emission totals but also the information needed to understand and evaluate those totals. ISO 14064-1 specifies extensive requirements for what must be included in GHG reports, including both mandatory and recommended disclosures. These disclosures cover methodological choices, data quality, uncertainty, significant changes from previous years, verification status, and other information relevant to interpreting the reported emissions.

The transparency principle also requires acknowledging limitations and uncertainties in the reported information. Rather than implying false precision, organisations should clearly communicate where significant uncertainties exist, what assumptions were necessary, and what information was unavailable or excluded. This honest acknowledgment of limitations enhances rather than diminishes credibility, as it demonstrates rigorous and objective assessment.

Establishing Organisational Boundaries
The first step in developing a GHG inventory is determining organisational boundaries, which means that the organisation should define what operations, facilities, and entities are included in the inventory based on the organisation’s relationship to them.

ISO 14064-1 allows organisations to choose from two primary consolidation approaches:

  1. Equity share approach: The organisation accounts for its proportional share of GHG emissions and removals from facilities based on its ownership percentage. The equity share reflects economic interest, which is the extent of rights a company has to the risks and rewards flowing from an operation. Typically, the share of economic risks and rewards in an operation is aligned with the company’s percentage ownership of that operation, and equity share will normally be the same as the ownership percentage. Where this is not the case, the economic substance of the relationship the company has with the operation always overrides the legal ownership form to ensure that equity share reflects the percentage of economic interest.
  2. Control approach (financial or operational): The organisation accounts for 100% of GHG emissions and removals from facilities over which it has financial or operational control, and 0% from facilities it does not control.
    • Under the operational control approach, an organisation has operational control over a facility if the organisation or one of its subsidiaries has the authority to introduce and implement its operating policies at the facility. This is the most common approach, as it typically aligns best with what an organisation feels it is responsible for and often leads to the most comprehensive inclusion of assets in the inventory.
    • Under the financial control approach, an organisation has financial control over a facility if the organisation has the ability to direct the financial and operating policies of the facility with a view to gaining economic benefits from its activities. Industries with complex ownership structures may be more likely to follow the equity share approach to align the reporting boundary with stakeholder interests.

The choice of consolidation approach should be consistent with the intended use of the inventory and ideally align with how the organisation consolidates financial information. For example, an organisation that consolidates its financial statements based on operational control should typically use operational control for GHG inventory boundaries as well.

Boundary Consistency with Financial Reporting: Why It Matters
The ISO standard recommends (and increasingly, regulators require) that the consolidation approach used for GHG accounting align with the approach used for financial reporting. This is more than administrative convenience. When a company consolidates financial statements using operational control, its financial stakeholders are accustomed to seeing 100% of controlled operations reflected in results. If the GHG inventory uses a different boundary—say, equity share for a joint venture while the finance team uses operational control—the GHG data will seem inconsistent and raise credibility questions. More importantly, alignment simplifies assurance. An auditor examining both financial and GHG statements does not have to reconcile conflicting boundary interpretations. A company that uses control for finance but equity share for emissions is signalling (intentionally or not) that its GHG report is using a narrower or broader lens than its financial results, inviting scrutiny about whether the difference is justified or opportunistic. Alignment also supports integrated reporting. Increasingly, investors want to see how GHG emissions correlate with financial performance—emissions intensity (tonnes CO₂e per unit of revenue, per unit of asset, per FTE), carbon risk premium, or abatement costs. These correlations only make sense if the boundary is consistent.

Defining Reporting Boundaries: The Six-Category Structure
Once organisational boundaries are established, organisations must define their reporting boundaries—what types of emissions and removals are quantified and reported within the organisational boundary.

The 2018 revision of ISO 14064-1 introduced a significant innovation: a six-category structure for classifying emissions and removals. This structure evolved from and builds upon the GHG Protocol’s three-scope approach (Scope 1 for direct emissions, Scope 2 for energy indirect emissions, Scope 3 for all other indirect emissions). The ISO categories provide more granular classification of indirect emissions, facilitating identification and management of specific emission sources throughout the value chain.

Category 1: Direct GHG emissions and removals: Direct GHG emissions are emissions from GHG sources owned or controlled by the organisation. These are emissions that occur from operations under the organisation’s direct control—for example, emissions from combustion of fuels in company-owned vehicles or boilers, emissions from industrial processes at company facilities, or fugitive emissions from refrigeration equipment owned by the company. Organisations must quantify direct GHG emissions separately for CO₂, CH₄, N₂O, NF₃, SF₆, and other fluorinated gases. Additionally, ISO 14064-1 requires organisations to report biogenic CO₂ emissions separately from fossil fuel CO₂ emissions in Category 1. This separate reporting recognises that biogenic emissions may have different policy treatments, impacts, and implications than fossil emissions.

Category 2: Indirect GHG emissions from imported energy: This category includes indirect emissions from the generation of imported electricity, steam, heat, or cooling consumed by the organisation. When an organisation purchases electricity, the emissions from generating that electricity occur at the power plant (not owned by the organisation), but they are a consequence of the organisation’s decision to purchase and consume electricity. ISO 14064-1 requires organisations to report all Category 2 emissions, making this a mandatory category alongside Category 1.

Category 3: Indirect GHG emissions from transportation: This category includes emissions from transportation services used by the organisation but operated by third parties. Examples include emissions from business travel on commercial airlines, shipping of products by third-party logistics providers, and employee commuting.

Category 4: Indirect GHG emissions from products used by the organisation: This category includes emissions that occur during the production, transportation, and disposal of goods purchased by the organisation. Examples include emissions from the manufacturing of products the organisation buys, emissions from transporting materials used to make those products, and emissions from disposing of waste created by using those products. The boundary for Category 4 is “cradle-to-gate” from the supplier’s perspective—all emissions associated with producing and delivering products to the organisation.

Category 5: Indirect GHG emissions associated with the use of products from the organisation: This category includes emissions generated by the use and end-of-life treatment of the organisation’s products after their sale. When certain data on products’ final destination is not available, organisations develop plausible scenarios for each product. This category is particularly significant for manufacturers, as use-phase emissions from products often exceed emissions from manufacturing. For example, the emissions from operating a vehicle over its lifetime typically far exceed the emissions from manufacturing it.

For many product-based companies, Category 5 is the elephant in the room. An automotive manufacturer might account for 15–20% of its footprint in manufacturing emissions (Category 1) and another 10% in supply chain emissions (Category 4), but 50%+ in the use phase (Category 5). A household appliance manufacturer faces a similar dynamic—the electricity consumed by an appliance over its 15-year lifespan vastly exceeds the emissions from manufacturing. This creates strategic tension. The organisation has direct control over manufacturing efficiency—it can redesign processes, source renewable energy, or substitute materials. But use-phase emissions depend on the consumer’s electricity grid (which it does not control) and user behaviour (how often and how long the appliance runs). Yet ISO 14064-1 requires organisations to quantify these use-phase emissions and report them transparently, because stakeholders—particularly investors and policymakers—need to understand the full climate footprint of the products being sold. When data on product final destination is unavailable (e.g., a smartphone manufacturer doesn’t know where each unit is sold, or how long consumers keep it), ISO 14064-1 allows organisations to develop “plausible scenarios”—reasonable assumptions about usage patterns, product lifetime, and grid composition. These scenarios must be documented and justified, and they should be reassessed as more data becomes available or as circumstances change (e.g., grid decarbonisation).

Category 6: Indirect GHG emissions from other sources: This category captures any indirect emissions that do not fall into Categories 2-5. It serves as a catch-all to ensure completeness while avoiding double-counting. Organisations must be careful not to count the same emissions in multiple categories—for example, if emissions from a vehicle are included in Category 3 (transportation), they should not also be included in Category 4 (products) if the vehicle was used to transport a product.

Quantifying Emissions: Global Warming Potential and CO₂ Equivalent

Read more about this here.

GWP values are periodically updated by the IPCC based on improved scientific understanding. Different Assessment Reports have published different GWP values for the same gases. Organisations using ISO 14064 must select which GWP values to use (typically the most recent IPCC values or values specified by applicable GHG programmes) and apply them consistently over time.

ISO 14064-1 requires organisations to report total GHG emissions and removals in tonnes of CO₂e and to document which GWP values are used. This ensures transparency and enables users of the information to understand how totals were calculated.

ISO 14064-1 helps transform scattered information into decision-useful climate information that stakeholders can trust. For organisations beginning their GHG accounting journey, the five principles and boundary-setting framework provide both a philosophy and a roadmap. They clarify that accurate climate disclosure is not primarily a technical problem to be solved by better software, but a governance challenge for setting up a recurring system that works under regular work-stress.

However, the standard’s greatest implementation challenge is operational, not conceptual. While Category 1 and 2 emissions (direct operations and purchased energy) are typically quantifiable using utility bills and fuel receipts, Category 4 and 5 emissions (purchased goods and product use-phase) often represent 70-90% of an organisation’s footprint yet rely on supplier data that is unavailable, forcing reliance on spend-based estimates or industry averages. ISO 14064-1 requires transparency about these limitations but doesn’t eliminate them. Expect your first inventory to expose data gaps; continuous improvement means systematically upgrading from generic to supplier-specific data over successive reporting cycles. In a later post I do plan to look at operational challenges.

Source

  1. ISO 14064-I

Greenhouse gas emissions 101 – I

Before we begin, if you want to understand the general big picture about what climate is, Earth’s climate history, and/or about climate change, you can read this very comprehensive post.

A greenhouse is a structure, made of glass or plastic, which captures heat inside it so that it’s insides are warmer and drier than the atmosphere outdoors. Greenhouses are situated outdoors so they have a regular supply of sunlight. We’ve all experienced closed indoor spaces with glass façades that heat up due to receiving sunlight, and require specific cooling solutions that encourage air flow, or artificial cooling through air conditioners, such as sitting inside a car or a room with all its windows closed on warm days. These hot-car experiences are also due to the greenhouse effect.

This effect happens because sunlight, which is primarily composed of (a tiny amount of) ultraviolet (UV) light, visible light, and near-infrared (NIR) radiation, easily passes through greenhouse covers (glass or plastic) into the inside of greenhouse, where the objects, plants, and soil absorb the heat, and become warmer. These warmed up objects now radiate heat in the form of long-wavelength thermal infrared (IR) radiation, which, unlike the incoming shortwave radiation (UV, visible light, NIR) is absorbed into the greenhouse envelope (a building’s envelope is the skin of the building- all the outside walls). Since the building envelop has now absorbed the heat, the structure and its insides warm up and stay warm. In short: this effect allows heat energy inside, but doesn’t allow all of it to escape.12

Similarly, greenhouse gases are gas molecules in Earth’s atmosphere that absorb heat emanating from the planet’s surface- that is, they act sort of like the transparent skin of a greenhouse which absorbs heat so that the plants inside can be warm in cold weather.12

Here’s how it works: Solar energy travels through the atmosphere and warms Earth’s surface. As the planet radiates this heat back toward space, it does so primarily as long-wavelength infrared radiation, which is the same form of heat that gets trapped in a physical greenhouse. Greenhouse gases in the atmosphere absorb this infrared radiation. Instead of letting it escape to space, they re-radiate it in all directions, with much of it directed back downward toward Earth’s surface. This creates a second source of heating (the first being our Sun), amplifying the warming effect and keeping our planet warmer than it would otherwise be.12

A point to note is that in an actual greenhouse building, the warm air inside cannot mix with the cooler air outside it. Similarly, because there is nothing to mix with, the air inside the planet cannot be diluted with cooler air.

The greenhouse effect has directly caused life as we know it now to exist on this planet (other forms of life could still exist without it, who knows), as without this natural greenhouse effect, Earth would be a frozen, inhospitable world. Temperatures would average around -18°C instead of the habitable 15°C we currently enjoy.12 But we’re now enjoying too much of a good thing, and the planet is now heating up more than is good for the life that evolved to live in it when the average temperature was the aforementioned the habitable 15°C: it’s not that no life will survive, it’s just that much of it won’t, leading to general ecosystem collapse, and life will be very uncomfortable for the humans who do make it to the hotter planet.345678910

What does parts per million/ billion/ trillion mean?11
ppm/ ppb/ ppt are notations scientists who study climate use to understand how much of the greenhouse gases in question is present in the atmosphere. Different greenhouse gases are measured in different units depending on their concentration levels. Carbon dioxide, which is relatively abundant in the atmosphere, is measured in parts per million. Methane, which exists in much lower concentrations, is measured in parts per billion. The most potent synthetic gases, such as the fluorinated gases like SF₆ and NF₃, are measured in parts per trillion, because even seemingly insignificant amounts have significant warming effects.

Besides, saying “the atmosphere contains 0.000194 of a percent of methane” is far less convenient than saying “the atmosphere contains 1,942 ppb of methane”.

Thus, if a scientist is measuring how many molecules of CO2 are present in our vast atmosphere, and if the atmospheric concentration of CO2 is measured to be 400 ppm, this means that out of every 1 million air molecules, 400 are CO2 molecules, and the remaining 999,600 molecules are other gases. The same principle applies to measuring ppb and ppt. The conversion between these units is the same as for regular numbers:

  • 1 ppm = 1,000 ppb
  • 1 ppm = 1,000,000 ppt
  • 1 ppb = 1,000 ppt

Here’s how Global Warming Potential is measured1213
GWP measures how much heat a greenhouse gas traps in the atmosphere typically calculated over a 100-year time horizon, in comparison to the amount of heat trapped in the atmosphere by CO2. It’s calculated by the Intergovernmental Panel on Climate Change (IPCC) based on the intensity of infrared absorption by each gas and how long emissions remain in the atmosphere. The unit of measurement is called Carbon Dioxide Equivalent (CO₂e).

Carbon Dioxide Equivalents (CO₂e) provide a standardised way to express the impact of different greenhouse gases using a single, comparable metric. CO₂e is calculated by multiplying the quantity of a greenhouse gas emitted by its Global Warming Potential. The formula is:​

CO2e = Mass of GHG emitted × GWP of the gas

For example, if you emit one million metric tons of methane (with a GWP of 30) and one million metric tons of nitrous oxide (GWP of 273), this is equivalent to 30 million and 273 million metric tons of CO₂, respectively.14​

This standardisation is crucial for several reasons because it allows comparison across GHGs and amounts of emissions, so no matter the gas that has been emitted or the amount of it emitted, it is easy to understand for everyone the effect it will have on the planet. It will also help compare emissions reduction opportunities across different sectors and gases, and help compile comprehensive national and corporate GHG inventories that include all greenhouse gases. Essentially, it provides a common language for understanding greenhouse gas emissions.

Radiative Forcing Vs. GWP1516
Radiative forcing (RF) is a measure of how much a substance or factor disrupts the balance of energy entering and leaving Earth’s atmosphere. It is expressed in watts per square meter (W/m²), representing the amount of energy imbalance imposed on the climate system: it quantifies how much extra energy is being trapped in the atmosphere by a given agent (greenhouse gas, aerosol, or solar change). Therefore,

  • Positive radiative forcing = warming effect (energy trapped)
  • Negative radiative forcing = cooling effect (energy lost to space)

In comparison, GWP is a simplified index that converts radiative forcing into a single comparable number by expressing it relative to CO₂.

GWP = Total radiative forcing from 1 kg of substance over time horizon / Total radiative forcing from 1 kg of CO₂

This formula is asking if 1 kilo of a substance is released into the atmosphere, how many kilograms of CO₂ would produce the same total warming effect.

Radiative forcing tells you the immediate, direct physics of climate impact. It’s precise but complex because each substance has a different RF value. GWP is a policy-friendly simplification that lets users compare “apples to apples”, so that if 1 million tons of methane (GWP 30) are emitted, vs. 1 million tons of N₂O (GWP 273), it is instantly known that the N₂O causes ~9× more warming.

Let’s take a look at the main GHGs
You can read more about pollution (natural and anthropogenic here).

Carbon Dioxide (CO₂)17 is the most abundant and significant human-caused greenhouse gas, accounting for approximately three-quarters of all anthropogenic GHG emissions. Before the Industrial Revolution, atmospheric CO₂ concentration was about 280 parts per million (ppm). By May 2023, it had reached a record 424 ppm, which is a level not seen in approximately three million years.​ Aside from it’s abundance in the atmosphere, CO₂ is also a particularly concerning GHG because of its atmospheric persistence. While about 50% of emitted CO₂ is absorbed by land and ocean sinks within roughly 30 years, about 80% of the excess persists in the atmosphere for centuries to millennia, with some fractions remaining for tens of thousands of years. This means that the CO₂ we emit today will continue warming the planet for generations.​

Methane (CH₄)17 is the second most important greenhouse gas after carbon dioxide. Although it exists in much smaller quantities than CO₂, methane is extraordinarily potent: one ton of methane traps as much heat as 30 tons of carbon dioxide.​14

Methane is emitted from both natural and human sources. Natural sources include wetlands, tundra, and oceans, accounting for about 36% of total methane emissions. Human activities produce the remaining 64%, with the largest contributions coming from agriculture, particularly livestock farming through enteric fermentation (this is a digestive processes in ruminant animals where microbes in their gut ferment food, producing methane as a byproduct) and rice cultivation. Other significant sources include landfills, biomass burning, and fugitive emissions from oil and gas production (unintentional, uncontrolled leaks of gases and vapors that escape the control equipment, sometimes due to poorly maintained infrastructure).13

The good news about methane is its relatively short atmospheric lifetime of approximately 12 years. This means that reducing methane emissions can have a more immediate impact on slowing global warming compared to CO₂, even though its effects are less persistent over the long term.​

Nitrous Oxide (N₂O), also known as laughing gas, is a long-lived and potent greenhouse gas with a Global Warming Potential 273 times higher than CO₂. It has an average atmospheric lifetime of 109-132 years.​14

Nitrous oxide emissions come from both natural and anthropogenic sources. Major natural sources include soils under natural vegetation, tundra, and the oceans. Human sources, which account for over one-third of total emissions, primarily stem from agricultural practices—especially the use of synthetic and organic fertilisers, soil cultivation, and livestock manure management.131417 Additional sources include biomass or fossil fuel combustion, industrial processes, and wastewater treatment.​131417

Fluorinated Gases18 represent a family of synthetic, powerful greenhouse gases including hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF₆), and nitrogen trifluoride (NF₃). These gases are emitted from various household, commercial, and industrial applications, particularly as refrigerants and in electrical transmission equipment.​

While fluorinated gases are present in much smaller quantities than CO₂, methane, or nitrous oxide, they are extraordinarily potent. Some have Global Warming Potentials thousands of times higher than CO₂. For example, SF₆ has a GWP of 24,300, and some HFCs have GWPs exceeding 10,000. Additionally, many fluorinated gases have extremely long atmospheric lifetimes, ranging from 16 years to over 500 years for certain CFCs, meaning they persist in the atmosphere for decades or even centuries.​14

Water Vapor (H₂O) is technically the strongest and most abundant greenhouse gas. However, its concentration is largely controlled by atmospheric temperature rather than direct human emissions. As air becomes warmer, it can hold more moisture, creating a feedback loop: warming from other greenhouse gases increases water vapor, which in turn amplifies warming. This makes water vapor a climate feedback mechanism rather than a primary driver of climate change.1219

Greenhouse GasAtmospheric Concentration1718Global Warming Potential (100-yr)14Warming Contribution17Primary Sources & Their Contributions20
Carbon Dioxide (CO₂)Pre-industrial: 280 ppm | Current: 423.9 ppm (↑152%)1 (baseline)~74.5% of total GHG emissions; 42% of radiative forcing increase since 1990Fossil fuel combustion: 74.5% of total – Electricity/heat: 29% – Transportation: 15% – Industry: 24% – Deforestation: 6.5-12%
Methane (CH₄) – non-fossilPre-industrial: 730 ppb | Current: 1,942 ppb (↑166%)27.0~17.9% of total GHG emissions; 16% of warming from long-lived GHGsAgriculture: 42% (livestock 27%, rice 9%) – Fossil fuel extraction: 23% – Landfills/waste: 16% – Natural wetlands: 36%
Methane (CH₄) – fossil*—29.8—Fossil fuel fugitive emissions from oil & gas systems and coal mining
Nitrous Oxide (N₂O)Pre-industrial: 270 ppb | Current: 338 ppb (↑25%)273~4.8% of total GHG emissions; third most important long-lived GHGAgriculture: 74-75% (synthetic fertilisers 30-50% of agricultural emissions) – Industrial processes – Biomass burning
Water Vapor (H₂O)Pre-industrial: 0-4% (variable) | Current: 0-4% (variable), increasing 1-2%/decadeNot directly comparable (feedback amplifier)41-67% of total greenhouse effect (but as feedback, not primary driver)Natural evaporation from oceans/land – Acts as feedback amplifier (increases 7% per 1°C warming) – Not directly emitted by humans
Tropospheric Ozone (O₃)Pre-industrial: 20-25 ppb | Current: 20-100 ppb (varies by location)Varies regionallyThird most important GHG after CO₂ and CH₄; significant regional warmingNot directly emitted – Forms from: NOx + VOCs + sunlight – Sources: Transportation, industry, biomass burning
HFC-134aPre-industrial: 0 ppt | Current: 96.9 ppt1,530Part of 2.8% F-gases contributionRefrigeration and air conditioning: largest use – Aerosol propellants – Foam blowing – Summer emissions 2-3× winter
HFC-23Pre-industrial: 0 ppt | Current: Low but significant14,600Highest CO₂-eq among HFCs despite low concentrationByproduct of HCFC-22 production – Industrial processes
HCFC-22Pre-industrial: 0 ppt | Current: Declining post-ban1,960Part of declining HCFC contributionRefrigeration/Air Conditioning: primary source (97% of HCFC use) – Being phased out under Montreal Protocol
HFC-152aPre-industrial: 0 ppt | Current: 9.93 ppt164Part of 2.8% F-gases contributionAerosol propellants – Foam blowing – Refrigeration
Sulfur Hexafluoride (SF₆)Pre-industrial: Near 0 ppt | Current: 6.7 ppt24,300Part of 2.8% F-gases contribution; Highest CO₂-eq among all FGHGsElectrical equipment: switchgear, transformers – Magnesium production – Semiconductor manufacturing
Perfluoromethane (CF₄)Pre-industrial: 34.7 ppt | Current: 76 ppt7,380Part of 2.8% F-gases contributionAluminum production – Semiconductor manufacturing – Small natural sources: ~10 tonnes/year
Perfluoroethane (C₂F₆)Pre-industrial: Near 0 ppt | Current: 2.9 ppt12,400Part of 2.8% F-gases contributionSemiconductor manufacturing: 1,800 tonnes/year – Aluminum smelting
Nitrogen Trifluoride (NF₃)Pre-industrial: 0 ppt | Current: Growing17,400Part of 2.8% F-gases contributionSemiconductor/electronics manufacturing – Flat panel displays
CFC-12Pre-industrial: 0 ppt | Current: Declining (banned)12,500Declining contribution; negative forcing from ozone depletionPreviously: refrigeration (primary), aerosols – Now banned; emissions from existing equipment
CFC-11Pre-industrial: 0 ppt | Current: Declining (banned)6,230Declining contribution; negative forcing from ozone depletionPreviously: refrigeration, foam, aerosols – Now banned; emissions from existing equipment/foams
Black Carbon (BC/Soot)2122Pre-industrial: Low natural levels | Current: No direct measurement in ppm/ppb450–900 (100-yr GWP)*Second or third most important climate forcer after CO₂ in some regionsDiesel engines – Coal power plants – Biomass burning: wood, agricultural waste (67% of human emissions) – Residential cooking/heating – Wildfires – Ranking: Fossil fuel > biofuel > biomass burning
CFCs (Total)Pre-industrial: 0 ppt | Current: Declining overall6,230–12,500Negative forcing due to ozone depletion (cooling effect)Banned under Montreal Protocol – Residual emissions from existing equipment/foams
HFCs (Total)Pre-industrial: 0 ppt | Current: 89 ppt total164–14,600~2.8% combined with PFCs and SF₆; grown 310% since 1990Refrigeration/AC sector: largest source (replacing CFCs/HCFCs) – Increased 310% since 1990
PFCs (Total)Pre-industrial: 34.7 ppt | Current: 82 ppt total7,380–12,400~2.8% combined with HFCs and SF₆Industrial processes – Aluminum production – Semiconductor manufacturing
HCFCs (Total)Pre-industrial: 0 ppt | Current: Declining90–1,960Declining; negative forcing from ozone depletion offset by GHG warmingTransitional CFC replacement being phased out – HCFC-22 and HCFC-141b represent 97% of HCFC use
Some important Greenhouse Gases and how they contribute to global warming. Specific GWP values come from IPCC assessments and may be updated as science advances.

Key:

  • ppm = parts per million; ppb = parts per billion; ppt = parts per trillion
  • GWP (Global Warming Potential) is measured relative to CO₂ over a 100-year timeframe (IPCC AR6, August 2024)14
  • F-gases (fluorinated gases) collectively contribute 2.8% of total greenhouse gas emissions but have grown 310% since 1990
  • Water vapor is technically the most abundant greenhouse gas but acts primarily as a feedback mechanism rather than a forcing agent
  • Black carbon is not measured in atmospheric concentration like other GHGs because it’s a particulate (soot) rather than a gas, and has a very short atmospheric lifetime (days to weeks). The GWP range reflects uncertainty in mixing state and location; IPCC AR6 provides radiative forcing (+0.44 W/m²) rather than a formal GWP.
  • *Methane split: IPCC AR6 differentiates between fossil and non-fossil methane due to different atmospheric fates. Use CH₄ non-fossil (27.0) for biogenic sources and combustion; use CH₄ fossil (29.8) for fugitive emissions from oil & gas and coal mining where the carbon is of fossil origin.1423 This is because fossil methane (GWP 29.8) adds carbon that was locked underground for millions of years to the active carbon cycle, representing a net addition of CO₂ when oxidised, whereas biogenic methane (GWP 27.0) comes from carbon that was recently in the atmosphere (absorbed by plants, eaten by livestock, etc.), so its oxidation just adds back the same carbon that was already in the atmosphere until recently and there is no net addition in the long term.24

Sources of GHG emissions

  1. The Energy Sector is the largest contributor to greenhouse gas emissions, producing approximately 34% of total net anthropogenic GHG emissions in 2019.25 Within this sector, electricity and heat generation are the single largest emitters, accounting for over 25% of global emissions, with coal-fired power stations alone responsible for about 20% of global greenhouse gas emissions.26 In 2022, 60% of electricity in many countries still came from burning fossil fuels, primarily coal and natural gas.27 And of course, energy underpins every other sector, whether through fuel for agricultural tractors, for building space conditioning, or any other mechanical activity.
  2. ​Industrial activities come next at 24% of global emissions. These emissions are usually from one of two sources: energy consumption for manufacturing processes, and direct emissions from chemical reactions necessary to produce goods from raw materials.2528 Within industry, cement production and metal production, especially steel, are particularly emission-intensive.28 Since 1990, industrial processes have grown by a massive 225%, the fastest growth rate of any emissions source, driven by rapid industrialisation in developing countries.20
  3. Agriculture, Forestry, and Land Use contributed approximately 22% of global emissions in 2019.25 This is an interesting sector because it’s a major source of non-CO₂ greenhouse gases.29 Agriculture is the largest contributor to methane emissions globally, primarily from livestock farming and rice cultivation, which occurs in flooded fields where anaerobic conditions produce methane.29 The sector also produces significant nitrous oxide emissions, primarily from the application of synthetic and organic fertilisers to soils.29 Additionally, deforestation and land-use changes release stored carbon when forests are cleared for agriculture or development.29​
  4. Transportation accounts for approximately 15% of global emissions in 2019.25 The vast majority of transportation emissions come from road vehicles (cars, trucks, buses, motorcycles, etc.) which rely overwhelmingly on petroleum-based fuels.30 Aviation and maritime shipping also contribute significantly, with international aviation and shipping representing growing sources of emissions as global trade and travel expand.30 Since 1990, transportation emissions have grown by 66%, making it one of the fastest-growing sources of greenhouse gases.2030 The sector’s heavy dependence on fossil fuels and the long replacement cycles for vehicles make it particularly challenging to decarbonise quickly.30
  5. And finally, Buildings, whether Commercial or Residential, directly contribute approximately 6% of global emissions through fossil fuels burned for heating and cooling, as well as refrigerants used in air conditioning systems.25 However, when indirect emissions from electricity use are included, buildings account for a much larger share, which is about 28% in the United States, because buildings consume approximately 75% of electricity generated, primarily for heating, ventilation, air conditioning, lighting, and appliances.3132

Sources

  1. IRENA – Power to Heat and Cooling: Status
  2. What is the greenhouse effect?
  3. The Greenhouse Effect
  4. 1.5 Degrees C Target Explained
  5. IPCC AR6 Working Group II – Chapter 2
  6. Science Magazine – Climate Study
  7. What does the latest IPCC report mean for wildlife?
  8. Nature – Climate Research Article
  9. Is Earth becoming too hot for humans? Climate change facts & risks
  10. Too Hot to Handle: How Climate Change May Make Some Places Too Hot to Live
  11. Taylor & Francis Online – Climate Research
  12. EPA – Global Greenhouse Gas Overview
  13. UNFCCC – Global Warming Potentials
  14. EPA – Understanding Global Warming Potentials
  15. GHG Protocol – IPCC Global Warming Potential Values
  16. EPA – Climate Change Indicators: Climate Forcing
  17. IPCC – TAR Chapter 6: Radiative Forcing of Climate Change
  18. IPCC AR6 Synthesis Report – Longer Report
  19. IPCC AR6 Updated GWP Values for HFCs and HFOs
  20. OpenLearn – Climate Change and Renewable Energy
  21. World Resources Institute – 4 Charts Explain Greenhouse Gas Emissions by Sector
  22. Climate and Clean Air Coalition – Black Carbon
  23. Visualizing Energy – Global Black Carbon Emissions 1750-2022
  24. IPCC AR6 WGIII – Annex II: Definitions, Units and Conventions
  25. Carbon Brief – Q&A: What the ‘controversial’ GWP* methane metric means for farming emissions
  26. IPCC AR6 Working Group III – Chapter 2: Emissions Trends and Drivers
  27. World Nuclear Association – Carbon Dioxide Emissions From Electricity
  28. Visual Capitalist – Coal Still Dominates Global Electricity Generation
  29. UNECE – Pathways to Carbon-Neutrality in Energy-Intensive Steel
  30. IPCC AR6 Working Group III – Chapter 7: Agriculture, Forestry, and Other Land Uses
  31. UNFCCC – Greenhouse Gas Data Booklet
  32. EIA – U.S. Electricity Generation by Energy Source