8.1 Introduction | DART – Deloitte Accounting Research Tool

When the revised edition of the Corporate Standard, the first of the GHG Protocol standards, was issued in March 2004, a second standard was being developed to address accounting for GHG reductions resulting from GHG mitigation projects. Originally referred to as the GHG Protocol Project Quantification Standard, this second standard was named the GHG Protocol for Project Accounting (the “Project Protocol”) when issued in November 2005.

The Corporate Standard differentiates itself from what would ultimately become the Project Protocol as follows:

Corporate Standard, Chapter 8, “Accounting for GHG Reductions,” Page 59

The GHG Protocol Corporate Standard focuses on accounting and reporting for GHG emissions at the company or organizational level. Reductions in corporate emissions are calculated by comparing changes in the company’s actual emissions inventory over time relative to a base year. Focusing on overall corporate or organizational level emissions has the advantage of helping companies manage their aggregate GHG risks and opportunities more effectively. It also helps focus resources on activities that result in the most cost-effective GHG reductions.

In contrast to corporate accounting, the forthcoming GHG Protocol Project Quantification Standard focuses on the quantification of GHG reductions from GHG mitigation projects that will be used as offsets. Offsets are discrete GHG reductions used to compensate for (i.e., offset) GHG emissions elsewhere, for example to meet a voluntary or mandatory GHG target or cap. Offsets are calculated relative to a baseline that represents a hypothetical scenario for what emissions would have been in the absence of the project.

The Project Protocol is a recommended but nonmandatory standard that provides what it describes as “specific principles, concepts, and methods for quantifying and reporting GHG reductions . . . from climate change mitigation projects.” The accounting approach under the Project Protocol (“project accounting”) is separate from that under the Corporate Standard (“corporate accounting”). However, the two accounting approaches overlap in that an offset resulting from quantification of GHG reductions under project accounting may be an input into a GHG emission inventory report prepared under corporate accounting if the reporting company elects to use offsets.

The remainder of this chapter focuses on considerations related to the calculation and reporting of GHG reductions.