May 2005 

Design Principles 

CLIMATE LEADERS GREENHOUSE G A S INVENTORY PROTOCOL 
The Climate Leaders Greenhouse Gas Inventory Protocol is based on the Greenhouse Gas Protocol (GHG Protocol) 

developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development 

(WBCSD). The GHG Protocol consists of a corporate accounting and reporting standard and separate calculation 

tools. The Climate Leaders Greenhouse Gas Inventory Protocol is an effort by EPA to enhance the GHG Protocol to 

fit more precisely what is needed for Climate Leaders. The Climate Leaders Greenhouse Gas Protocol consists of the 

following components: 

■ Design Principles 

■ Core Modules 

■ Optional Modules 

All changes and additions to the GHG Protocol made by Climate Leaders are summarized in the Climate Leaders 

Greenhouse Gas Inventory Protocol Design Principles. 

For more information regarding the Climate Leaders Program, visit us on the web at www.epa.gov/climateleaders 
D e s i g n P r i n c i p l e s Tab le of Contents 

Table of Contents ...................................................................i

Abbreviations and Acronyms ................................................v

Introduction.........................................................................vii

Overview and Goals of the Climate Leaders Program ............................................................vii

Overview of Climate Leaders Greenhouse Gas Inventory Protocol .....................................viii

Relationship to the WRI/WBCSD GHG Protocol .....................................................................viii

Changes ..........................................................................................................................................ix

Additions .........................................................................................................................................x

Chapter 1: GHG Accounting and Reporting Principles ..........1

Relevance .....................................................................................................................................1

Completeness................................................................................................................................2

Consistency...................................................................................................................................3

Transparency................................................................................................................................3

Accuracy .......................................................................................................................................4

Chapter 2: Business Goals and Inventory Design ..................5

Chapter 3: Setting Organizational Boundaries ......................6

Equity Share Approach................................................................................................................6

Control Approach.........................................................................................................................8

Financial Control ............................................................................................................................8

Operational Control .......................................................................................................................8

Leased Assets, Outsourcing, and Franchises ..............................................................................9

Using Equity Approach or Financial Control ..............................................................................9

Using Operational Control.............................................................................................................9

Consolidation at Multiple Levels...............................................................................................10


State-Ownership .........................................................................................................................10

Double Counting ........................................................................................................................10

Contracts That Cover GHG Emissions.......................................................................................10

Using the Equity Share or Control Approach...........................................................................11

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ i 
Tab le of Contents D e s i g n P r i n c i p l e s

Chapter 4: Setting Operational Boundaries .........................15

Emissions Categorization...........................................................................................................15

Core Emissions Reporting .........................................................................................................16

Core Emissions Reporting - Direct Emissions...........................................................................16

Core Emissions Reporting - Indirect Emissions........................................................................17

Optional Emissions Reporting ....................................................................................................20

Double Counting ...........................................................................................................................22

Chapter 5: Tracking Emissions Over Time ...........................23

Choosing a Base Year.................................................................................................................23

Recalculating Base Year Emissions ...........................................................................................23

Timing of Recalculations for Structural Changes ....................................................................24

Recalculations for Changes in Calculation Methodology or Improvements in


Data Accuracy.............................................................................................................................24

No Base Year Emissions Recalculations for Facilities that Did Not Exist in the Base Year ...25

No Recalculation for "Outsourcing/Insourcing" if Reported Under Core Indirect and/or


Optional Emissions.....................................................................................................................25

No Recalculation for Organic Growth or Decline ....................................................................25

Chapter 6: Identifying and Calculating GHG Emissions .......30

Identify GHG Emissions Sources...............................................................................................30

Select an Emissions Calculation Approach...............................................................................30

Collect Activity Data and Choose Emissions Factors ...............................................................31

Apply Quantification Methodology to Estimate GHG Emissions ............................................32

Structure of Guidance Documents .............................................................................................32

CO2-equivalent and Global Warming Potential .........................................................................34

Chapter 7: Managing Inventory Quality ..............................36

An Inventory Program Framework...........................................................................................36

Implementing an Inventory Management Plan........................................................................37

Practical Measures for Implementation....................................................................................39

Inventory Quality and Inventory Uncertainty .........................................................................41

Chapter 8: Tracking Progress Towards the 

GHG Reduction Goal............................................................44

Overview ....................................................................................................................................44

Corporate-Wide GHG Emissions................................................................................................44

Offsets .........................................................................................................................................44

Accounting for Emissions from Electricity/Steam Sales ..........................................................45

ii ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s Tab le of Contents 

Chapter 9: Reporting GHG Emissions ..................................46

GHG Inventory Reporting Requirements Overview ...............................................................46

Reporting Requirements and Technical Assistance.................................................................46

GHG Accounting Methods and Systems - Inventory Management Plan ................................48

Annual GHG Inventory Summary and Goal Tracking Form.....................................................48

Review Process .............................................................................................................................48

Third-Party Verification ...............................................................................................................50

Technical Assistance to Complete Base Year Reporting .........................................................52

Ongoing Technical Assistance ....................................................................................................52

Corporate Data Management Approaches ................................................................................53

Roll-Up GHG Emissions Data to Corporate Level .....................................................................53

Centralized Approach: Individual Facilities Report Activity/Fuel Use Data .........................53

Decentralized Approach: Individual Facilities Calculate GHG Emissions Data ....................53

Chapter 10: Verification of GHG Emissions .........................55

Internal Assurance .....................................................................................................................55

The Concept of Materiality .........................................................................................................55

Selecting a Verifier........................................................................................................................56

Preparing for GHG Verification ...................................................................................................57

IMP Checklist.................................................................................................................................57

Chapter 11: Guidance on Setting a GHG Reduction Goal ....58

Goal Evaluation Considerations ................................................................................................58


Goal Evaluation Methodology ...................................................................................................58


Defining Projected Sector Benchmarks for GHG Emissions Performance.............................59

Choosing a Key Performance Indicator for Normalized Goals...............................................59

Reporting and Goal Tracking ....................................................................................................59


Absolute and Intensity Targets .................................................................................................60


Identifying GHG Reduction Opportunities...............................................................................61

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ iii
Tab le of Contents D e s i g n P r i n c i p l e s 

Appendices 

1 GHG Emissions Sources by Sector ........................................................................................64

2 Unit Conversions ....................................................................................................................68

3 IMP Checklist..........................................................................................................................71

4 Annual GHG Inventory Summary and Goal Tracking Form...............................................77

Glossary of Terms................................................................81

Tables 

3-1 Financial Accounting Categories..........................................................................................7

3-2 Holland Industries Organizational Structure and GHG Emissions Accounting..............14

4-1 Relationship of Climate Leaders to GHG Protocol Reporting Scope Terminology ........16

5-1 Basic Rules for Base Year Emissions Recalculations ........................................................26

6-1 Example Data Collection Roadmap....................................................................................31

6-2 Overview of GHG Guidance Documents Currently Available Through 


Climate Leaders..........................................................................................................................33

6-3 Gas Atmospheric Lifetime GWP .........................................................................................34

7-1 Fundamentals of Inventory Development .........................................................................37

7-2 Generic Quality Management Measures ............................................................................38

11-1 Comparison of Absolute and Intensity Targets ...............................................................60

11-2 Steps in Setting and Tracking Performance Toward a GHG Target ..............................63

Figures 

3-1 Defining the Organizational Boundary of Holland Industries.........................................13

4-1 Emissions Reporting From the Purchase and Subsequent Use or Sale of Electricity.....18

4-2 GHG Accounting from the Sale and Purchase of Electricity............................................19

5-1 Base Year Emissions Recalculation for an Acquisition.....................................................27

5-2 Base Year Emissions Recalculation for a Divestment .......................................................28

5-3 Acquisition of a Facility That Came Into Existence After the Base Year Was Set ...........29

9-1 Reporting Requirements Flow ...........................................................................................47

9-2 Sample Onsite IMP Review Schedule.................................................................................51

11-1 Opportunities for GHG Reduction ...................................................................................61

iv ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles Abbreviations 

and Acronyms 

Abbreviations and Acronyms 

AC Air Conditioning 

BLS Bureau of Labor Statistics 

CDM Clean Development Mechanism 

CEMS Continuous Emission Monitoring System 

CH4 Methane 

CER Certified Emission Reduction 

CCAR California Climate Action Registry 

CCX Chicago Climate Exchange 

CO2 Carbon Dioxide 

CO2-eq Carbon Dioxide Equivalent 

EF Emission Factor 

EHS Environmental Health and Safety 

EPA U.S. Environmental Protection Agency 

EPER European Pollutant Emission Register 

EU ETS European Union Emissions Allowance Trading Scheme 

GHG Greenhouse Gas 

GAAP Generally Accepted Accounting Principles 

GWP Global Warming Potential 

HFCs Hydrofluorocarbons 

IMP Inventory Management Plan 

IPCC Intergovernmental Panel on Climate Change 

IPIECA International Petroleum Industry Environmental Conservation Association 

IPM Integrated Planning Model 

ISO International Standards Organization 

JI Joint Implementation 

KPI Key Performance Indicator 

MWh Megawatt-hour 

N2O Nitrous Oxide 

NEMS National Energy Modeling System 

NGO Non-Governmental Organization 

NOx Nitrous Oxides 

PFCs Perfluorocarbons 

QA/QC Quality Assurance/Quality Control 

SF6 Sulfur Hexafluoride 

T&D Transmission and Distribution 

UKETS United Kingdom Emission Trading Scheme 

UNFCCC United Nations Framework Convention on Climate Change 

WBCSD World Business Council for Sustainable Development 

WRI World Resources Institute 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ v 
D e s i g n P r i n c i p l e s INTRODUCTION

Introduction

Overview and Goals 

of the Climate 

Leaders Program 

Climate Leaders is an EPA industry-government partnership that works with 

companies to develop long-term comprehensive climate change strategies. Partners 

set a corporate-wide greenhouse gas (GHG) 

reduction goal and inventory their emissions to 

measure progress. By reporting inventory data 

to EPA, Partners create a lasting record of their 

accomplishments. Partners also identify themselves as corporate environmental leaders and 

strategically position themselves as climate 

change policy continues to unfold. 

Climate Leaders Partners commit to: 

■ Develop a corporate-wide GHG inventory of 

all sources of the six major gases (CO2, CH4, 

N2O, HFCs, PFCs, and SF6) using the Climate 

Leaders GHG Inventory Protocol. 

■ Set an aggressive corporate-wide GHG emissions reduction goal to be achieved over the 

next 5 to 10 years. 

■ Develop a corporate GHG inventory management plan. 

■ Annually report inventory data and document progress towards their reduction goal. 

■ Publicize their participation, reduction 

pledge, and accomplishments achieved 

through the program. 

In return, EPA provides: 

Recognition 

■ Press events 

■ Articles and public service announcements 

in business and trade publications 

■ Speaking engagements at industry 

conferences 

■ Case studies highlighting Partner 

achievements 

Technical Assistance 

■ Assistance developing a GHG inventory 

■ Review of Partner’s inventory management 

plan 

■ Assistance setting a GHG reduction goal 

■ Peer exchange through Climate Leaders 

Partner meetings 

Credibility 

■ A credible, transparent GHG reporting mechanism that will develop with the science 

■ Assurance that Partners have created a 

high-quality GHG management process 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ vii 
INTRODUCTION D e s i g n P r i n c i p l e s

Overview of Climate 

Leaders Greenhouse 

Gas Inventory 

Protocol 

The Climate Leaders GHG Inventory Protocol 

defines how Partners inventory and report 

their GHG emissions. The Protocol consists of 

three major parts: 

1.	 Climate Leaders Design Principles 

(this document) 

The Design Principles of the Protocol 

include overall guidance on issues such as 

defining inventory boundaries, identifying 

GHG emission sources, defining and adjusting a base year, reporting requirements, and 

goal-setting guidance. The Design Principles 

also define the minimum level of data 

Partners must report under Climate Leaders 

and various optional emission and reduction sources that a Partner may elect to 

report. 

2.	 Core Modules 

(separate guidance documents) 

The Core Modules have specific guidance 

pertaining to the calculation and accounting 

of GHG emissions from core emissions. Core 

emissions include “direct” emission sources 

(sources that a Partner owns or controls) 

and “indirect” emissions associated with 

electricity purchased. All Partners are 

required, as a minimum, to report all core 

emissions. 

3.	 Optional Modules 

(separate guidance documents) 

The Optional Modules provide GHG 

accounting guidance pertaining to other 

emissions sources that the Partner has 

some influence over but are beyond the 

Partner’s core emissions. These sources 

may include activities such as employee 

commuting programs, off-site waste 

disposal, or carbon offsets investments. 

Relationship to the 

WRI/WBCSD GHG 

Protocol 

The Climate Leaders GHG Inventory Protocol is 

based on an existing corporate GHG inventory 

protocol developed by the World Resources 

Institute (WRI) and the World Business Council 

for Sustainable Development (WBCSD). 

Through a collaborative process involving representatives from industry, government, and 

non-governmental organizations (NGOs), WRI 

and WBCSD developed generally accepted 

accounting practices for measuring and reporting corporate greenhouse gas emissions. The 

WRI/WBCSD GHG Protocol Corporate Standard 

(GHG Protocol) consists of a corporate 

accounting and reporting standard and separate calculation tools. The Design Principles are 

based on the GHG Protocol corporate accounting and reporting standard. They provide 

detailed guidance, enhanced clarity, and a 

streamlined document to fit more precisely the 

needs of the Climate Leaders program. These 

Design Principles also include specific reporting requirements, and goal-setting guidance 

specific to Climate Leaders Partners. 

viii ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles INTRODUCTION 

All changes and additions to the GHG ■ Identifying and Calculating GHG Emissions 

Protocol made by EPA are identified using chapter: 

italics beginning in Chapter 1 of this document. These changes and additions are ◆ Emphasizes Climate Leaders core and 

summarized below:	 optional module guidance instead of 

GHG Protocol calculation tools 

Changes ◆ Section on rolling up data moved to 

■ Merged standards and guidance sections to Reporting chapter 

eliminate redundancy, streamline, and focus ◆ Table 6-1, Example Data Collection information. Roadmap added 

■ References to other reporting or trading ◆ Reference information on CO2-equivalent 

programs are removed.	 and Global Warming Potential added 

■ GHG Accounting and Reporting Principles ■ Managing Inventory Quality chapter: 

chapter: 

◆ Adds references for uncertainty analysis 

◆ Defines goals as achieving GHG reduction goal ◆ Adds Table 7-1 to efficiently present 

information originally presented as text 

◆ Notes that the scope should be, at a in GHG Protocol


minimum, all U.S. operations


◆ Reorganizes chapter to streamline 

■ Setting Organizational Boundaries chapter: 	 material 

◆ Now includes section on leases ■ Tracking Progress Towards the GHG


Reduction Goal chapter:


■ Setting Operational Boundaries chapter: 

◆ Was previously titled Accounting for 

◆ Introduces Climate Leaders core direct, GHG Reductions


core indirect, and optional emissions


◆ Expands the GHG Protocol section to 

◆ Section on leases moved to Setting address achieving the reduction goal Organizational Boundaries chapter and relevant accounting 

■ Tracking Emissions Over Time chapter: ◆ Adds a section on accounting for 

◆ Defines the base year as the most cur- project-based offsets


rent year that a Climate Leaders Partner
 ◆ Enhances offsets and credits for meanhas data available ingfulness and clarity 

◆ Adds Table 5-1 to clarify rules for adjust- ◆ Graphics added


ing base year emissions.


CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ ix 
INTRODUCTION Design Principles 

■ Reporting GHG Emissions chapter:	 Additions 

◆ Clarifies Climate Leaders requirements ■ New graphics to enhance clarity, meaningfulness, and usability 

◆ Now includes roll-up of data to corporate level	 ■ A section on Climate Leaders Reporting 

requirements 

■ Guidance on Setting a GHG Reduction 

Goal chapter: 	 ■ Appendix 2: provides useful information on 

unit conversion and fuel properties 

◆ Provides guidance specific to the 

Climate Leaders program on the target ■ Appendix 3: Climate Leaders Inventory 

type, target base year, target time peri- Management Plan checklist 

od, use of project offsets or credits, 

target level, and progress against the ■ Appendix 4: Climate Leaders Annual 

target	 Reporting Form 

◆ Figure 11-1 added to illustrate methods	 The Climate Leaders Core and Optional 

for achieving the goal 	 Modules are based on the WRI/WBCSD calculation tools. The differences between the 

■ Appendix 1: modules and the tools are summarized below: 

◆ Reflects the Climate Leaders Core and 

■ All Climate Leaders Core Modules recomOptional Modules	 mend U.S. specific emission factors for U.S. 

facilities, as opposed to the International 

Panel on Climate Change (IPCC) factors 

given by WRI/WBCSD. 

■ The Climate Leaders Modules provide, in 

some instances, guidance on the preferred 

choice of methods and activity data for 

reporting under Climate Leaders. 

x ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles CHAPTER 1 

GHG Accounting and Reporting 

Principles 

As with financial reporting, generally 

accepted GHG accounting and reporting principles are intended to 

underpin and guide GHG accounting and 

reporting to ensure that the reported information represents a faithful, true, and fair account 

of an organization’s GHG emissions. 

GHG accounting and reporting practices are 

evolving and are new to many businesses; however the principles are derived in part from 

generally accepted financial accounting and 

reporting principles. The principles, listed 

below and described in more detail in this 

chapter, reflect the outcome of a collaborative 

process involving stakeholders from a wide 

range of technical, environmental, and accounting disciplines. 

■ Relevance. Ensure the GHG inventory 

appropriately reflects the GHG emissions of 

the company and serves the decision-making needs of users—both internal and 

external to the company. 

■ Completeness. Account for and report all 

GHG emissions sources and activities within 

the chosen inventory boundary. Disclose 

and justify any specific exclusions. 

■ Consistency. Use consistent methodologies 

to allow meaningful comparison of emissions over time. Transparently document 

any changes to the data, inventory boundary, methods, or any other relevant factors 

in the time series. 

■ Transparency. Address all relevant issues in 

a factual and coherent manner, based on a 

clear audit trail. Disclose any relevant 

assumptions and make appropriate references to the accounting and calculation 

methodologies and data sources used. 

■ Accuracy. Ensure that the quantification of 

GHG emissions is systematically neither 

over nor under true emissions, as far as can 

be judged, and that uncertainties are 

reduced as far as practicable. Achieve sufficient accuracy to enable users to make 

decisions with reasonable assurance as to 

the integrity of the reported information. 

Relevance 

For an organization’s GHG report to be relevant 

means that it contains the information that 

users—both internal and external to the company—need for their decision making. An 

important aspect of relevance is the selection 

of an appropriate inventory boundary that 

reflects the substance and economic reality of 

the company’s business relationships, not 

merely its legal form. The choice of the inventory boundary is dependent on the 

characteristics of the company, the intended 

purpose of the information, and the needs of 

the users. When choosing the inventory boundary, a number of factors should be considered, 

such as: 

■ Organizational structures: control (operational and financial), ownership, legal 

agreements, joint ventures, etc. Climate 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 1 
CHAPTER 1 Design Principles

Leaders Partners inventory GHG emissions 

from all U.S. operations, and have the option 

of including international operations as well. 

■ Operational boundaries: onsite and offsite 

activities, processes, services, and impacts. 

The Core and Optional Modules of the 

Climate Leaders program provide guidance on 

the types of operations that should be included in your inventory. 

■ Business context: Partners are creating corporate inventories to design and achieve 

entity-wide GHG emissions reduction goals. 

Partners may find that the consistency of the 

Climate Leaders program with other GHG 

management or tracking programs facilitates 

use of the inventory for other purposes as 

well. 

More information on setting appropriate boundaries is provided in: 

■ Chapter 3: Setting Organizational Boundaries 

■ Chapter 4: Setting Operational Boundaries 

Completeness 

All relevant emissions sources within the chosen inventory boundary need to be included so 

that a comprehensive and meaningful inventory 

is compiled. In practice, a lack of data or the 

cost of gathering data may be a limiting factor. 

An essential component of a complete inventory 

is a description of which greenhouse gases are 

included. Partners include CO2, CH4, N2O, SF6, 

PFCs, and HFCs to the extent that these gases 

exist in their operations. 

Sometimes it is tempting to define a minimum 

emissions accounting threshold (often referred 

to as a materiality threshold) stating that a 

source not exceeding a certain size can be 

omitted from the inventory. Technically, such a 

threshold is simply a predefined and accepted 

negative bias in estimates (i.e., an underestimate). Although it appears useful in theory, the 

practical implementation of such a threshold is 

not compatible with the completeness principle 

of Climate Leaders. To utilize a materiality specification, the emissions from a particular source 

or activity would have to be quantified to 

ensure that they were under the threshold. 

However, once emissions are quantified, most 

of the benefit of having a threshold is lost. 

A threshold is often used to determine whether 

an error or omission is a material discrepancy. 

This is not the same as a de minimus for defining a complete inventory. Instead, Partners need 

to make a good faith effort to provide a complete, accurate, and consistent accounting of 

their GHG emissions. For cases where emissions cannot be estimated, or are estimated at 

an insufficient level of quality, it is important 

that this is transparently documented and justified. Under the Climate Leaders Program, this 

doesn’t necessarily require a rigorous quantification of all sources, but, at a minimum, an 

estimate based on available data should be 

developed for all sources. Verifiers can determine the potential impact and relevance of the 

exclusion, or lack of quality, on the overall 

inventory report. It is important to include as 

much information as possible so that the process 

of gathering quality data can be refined in later 

years. To facilitate completeness, consistency, 

and transparency in the data gathering process, 

part of the Climate Leaders program includes the 

development an Inventory Management Plan. 

Development of this plan facilitates better monitoring and data gathering of GHG emissions 

2 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles

sources. More information on completeness is 

provided in: 

■ Chapter 6: Identifying and Calculating GHG 

Emissions 

■ Chapter 7: Managing Inventory Quality 

■ Chapter 10: Verification of GHG emissions 

Consistency 

Users of GHG information will want to track and 

compare GHG emissions over time to identify 

trends and assess the performance of the 

reporting company. The consistent application 

of accounting approaches, inventory boundary, 

and calculation methodologies is essential to 

producing comparable GHG emissions data 

over time. The GHG information for all operations within an organization’s inventory 

boundary needs to be compiled in a manner 

that ensures that the aggregate information is 

internally consistent and comparable over time. 

If there are changes in the inventory boundary, 

methods, data or any other factors affecting 

emission estimates, they need to be transparently documented and justified. A specific 

format for reporting the corporate emissions summary is required for Climate Leaders’ Partners so 

that data reporting consistency can be maintained. Partners who choose to voluntarily report 

their facility level data to the Climate Leaders 

program may do so using any format they 

choose. 

More information on this is provided in: 

■ Chapter 5: Tracking Emissions Over Time 

■ Chapter 9: Reporting GHG Emissions 

CHAPTER 1 

Transparency 

Transparency relates to the degree to which 

information on the processes, procedures, 

assumptions, and limitations of the GHG inventory are disclosed in a clear, factual, neutral 

and understandable manner based on clear 

documentation and archives (i.e., an audit 

trail). Information needs to be recorded, compiled, and analyzed in a way that would enable 

internal reviewers and external verifiers to 

attest to its credibility. Specific exclusions or 

inclusions need to be clearly identified and justified, assumptions disclosed, and appropriate 

references provided for the methodologies 

applied and the data sources used. The information should be sufficient to enable a third 

party to derive the same results if provided 

with the same source data. A ”transparent “ 

report will provide a clear understanding of the 

issues in the context of the reporting company 

and a meaningful assessment of performance. 

An independent external verification is a good 

way of ensuring transparency and determining 

that an appropriate audit trail has been established and documentation provided. The 

Climate Leaders program provides an Inventory 

Management Plan checklist to guide Partners 

towards construction of a Inventory Management 

Plan, which in turn, provides for a transparent, 

verifiable inventory. 

More information on this is provided in: 

■ Chapter 9: Reporting GHG Emissions 

■ Chapter 10: Verification of GHG Emissions 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 3 
CHAPTER 1 Design Principles

Accuracy 

Data should be sufficiently precise to enable 

intended users to make decisions with reasonable assurance that the reported information is 

credible. GHG measurements, estimates, or calculations should be systematically neither over 

nor under the actual emissions value, as far as 

can be judged, and that uncertainties are 

reduced as far as practicable. The quantification process should be conducted in a manner 

that minimizes uncertainty. Use of the calculation guidance provided in the Climate Leaders 

Core Modules, coupled with development of the 

Climate Leaders Inventory Management Plan, can 

significantly enhance data accuracy and transparency as well as promote credibility. 

More information on how to increase your 

inventory’s accuracy and on how to minimize 

data uncertainties is provided in: 

■ Chapter 7: Managing Inventory Quality 

4 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
I

Design Principles CHAPTER 2 

Business Goals and Inventory 

Design 

mproving your understanding of your company’s GHG emissions by compiling a GHG 

inventory makes good business sense. 

Companies frequently cite the following five 

business goals as reasons for compiling a GHG 

inventory: 

■ Management of GHG risks and identifying 

reduction opportunities 

■ Public reporting and participation in GHG 

programs 

■ Participation in mandatory reporting 

programs 

■ Participation in GHG markets 

■ Recognition for early voluntary action 

Compiling a comprehensive GHG inventory 

improves a company’s understanding of its 

emissions profile and any potential GHG liability or “exposure.” A company’s GHG exposure is 

increasingly becoming a management issue in 

light of heightened scrutiny by the insurance 

industry, shareholders, and the emergence of 

environmental policies designed to reduce GHG 

emissions. In this context, significant GHG emissions in a company’s value chain may result in 

increased costs (upstream) or reduced sales 

(downstream). Thus, investors may view significant indirect emissions upstream or 

downstream of a company’s operations as 

potential liabilities that need to be managed 

and reduced. A limited focus on direct emissions from a company’s own operations may 

miss major GHG risks and opportunities, while 

leading to a misinterpretation of the company’s 

actual GHG exposure. 

In general, what gets measured gets managed. 

Accounting for emissions can help identify the 

most effective reduction opportunities. This 

accounting can drive increased materials and 

energy efficiencies as well as the development 

of new products and services that reduce the 

GHG impacts of customers or suppliers. This 

can, in turn, reduce production costs and help 

differentiate the company in an increasingly 

environmentally conscious marketplace. 

Conducting a rigorous GHG inventory is also a 

prerequisite for setting an internal or public 

GHG reduction target and for subsequently 

measuring and reporting progress. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 5 
CHAPTER 3 Design Principles 

Setting Organizational 

Boundaries 

Business operations vary in their legal 

and organizational structures; they 

include wholly owned operations, 

incorporated and non-incorporated joint ventures, subsidiaries, and others. For the 

purposes of financial accounting, they are treated according to established rules that depend 

on the structure of the organization and the 

relationships among the parties involved. In 

setting organizational boundaries, a company 

selects an approach for consolidating GHG 

emissions and then consistently applies the 

selected approach to define those businesses 

and operations that constitute the company for 

the purpose of accounting and reporting GHG 

emissions. 

For corporate reporting, two distinct approaches can be used to consolidate GHG emissions: 

the equity share and the control approaches. 

Partners shall account for and report their consolidated GHG data according to either 

approach as presented below. Under the 

Climate Leaders program, companies may 

additionally choose to report using both 

approaches, and additionally may include 

facilities that are neither owned nor controlled. 

If the reporting company wholly owns all its 

operations, its organizational boundary will be 

the same regardless of approach used. For companies with joint operations, the organizational 

boundary and the resulting emissions may differ depending on the approach used. However, 

in both wholly owned and joint operations, the 

choice of approach may change how emissions 

are categorized when operational boundaries 

are set (Chapter 4). 

Equity Share 

Approach 

Under the equity share approach, a Partner 

accounts for GHG emissions from operations 

according to its share of equity in the operation. 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 will always override the 

legal ownership form to ensure that equity 

share reflects the percentage of economic interest. The principle of economic substance taking 

precedent over legal form is consistent with 

international financial reporting standards. The 

staff preparing the inventory may therefore 

need to consult with the Partner’s accounting or 

legal staff to ensure that the appropriate equity 

share percentage is applied for each joint operation (refer to Table 3-1 for definitions of 

financial accounting categories). 

6 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles CHAPTER 3 

Table 3-1: Financial Accounting Categories

Accounting for GHG Emissions 

Control Approach 

Accounting Equity Share Financial Operational 

Category Definition* Approach Control Control 

Group 

Companies/ 

Subsidiaries 

The parent company has the ability to direct the Equity share 100 percent of 

financial and operating policies of the company of GHG GHG emissions 

with a view of gaining economic benefits from its emissions 

activities. One hundred percent of the subsidiary's 

income and expenses, and assets and liabilities are 

taken into the parent company's profit and loss 

account and balance sheet, respectively. Typically, 

a subsidiary is a company whose voting stock is 

more than 50 percent owned by another company 

(the parent company). 

100 percent of 

GHG emissions (if 

operational control) 

0 percent of 

GHG emissions (if no 

operational control) 

Associated/ 

Affiliated 

Companies 

Typically, the parent company owns less than 50 per- Equity share of 0 percent of GHG 

cent of the affiliated company's stock (or otherwise GHG emissions emissions 

does not have financial control), but still has influence over its operations and financial policies. This 

includes incorporated and non-incorporated joint 

ventures and partnerships over which the parent 

company has significant influence, but not financial 

control. 

100 percent of 

GHG emissions (if 

operational control) 

0 percent of 

GHG emissions (if no 

operational control) 

Proportionally 

Consolidated 

Joint Ventures 

(where partners 

have joint financial control) 

A joint venture, partnership, or operation where Equity share of 

each partner accounts for their proportion of the GHG emissions 

joint venture's income, expenses, assets, and liabilities. Each partner has an equal financial share of 

the operation. 

Equity share of 

GHG emissions 

(e.g., 50% if two 

partners, 33.33% if 

three partners, 

etc.) 

100 percent of 

GHG emissions (if 

operational control) 

0 percent of 

GHG emissions (if no 

operational control) 

Fixed Asset The parent company has neither significant influ- 0 percent of 0 percent of GHG 0 percent of GHG 

Investments ence nor financial control. Typically financial GHG emissions emissions emissions 

accounting applies the cost/dividend method to 

these types of investments. This implies that only 

dividends received are recognized as income and 

the investment is carried at cost. 

Franchises A franchise is a separate legal entity, usually not Equity share of 100 percent of 100 percent of 

under the financial or operational control of its fran- GHG emissions GHG emissions (if GHG emissions (if 

chiser, which gives rights to sell a product or service. (if the franchis- the franchiser has operational control) 

Should the terms of a franchise grant financial or er has equity financial control) 

operational control to the franchiser, then emis- rights) 0 percent of 

sions accounting should be consistent with the 0 percent of GHG emissions (if no 

rules provided above. GHG emissions (if operational control) 

the franchiser does 

not have financial 

control) 

*http://www.ventureline.com/glossary.asp and the GHG Protocol 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 7 
CHAPTER 3 Design Principles

Control Approach 

Under the control approach, a Partner accounts 

for 100 percent of the GHG emissions from 

operations over which it has control. It does 

not account for GHG emissions from operations 

in which it owns an interest but has no control. 

Control can be defined in either financial or 

operational terms. When using the control 

approach to consolidate GHG emissions, companies shall choose between either the 

operational or financial control criteria. 

In most cases, whether an operation is controlled by the company or not does not vary 

based on whether the financial control or operational control criterion is used. A notable 

exception is the oil and gas industry, which 

often has complex ownership/operatorship 

structures. 

Financial Control 

A Partner has financial control over the operation if the former has the ability to direct the 

financial and operating policies of the latter 

with a view to gaining economic benefits from 

its activities. For example, financial control usually exists if the company has the right to the 

majority of benefits of the operation, without 

regard to the manner by which these rights are 

conveyed. Similarly, a company is considered 

to financially control an operation if it retains 

the majority risks and rewards of ownership of 

the operation’s assets. 

Under this criterion, the economic substance of 

the relationship between the company and the 

operation takes precedence over the legal ownership status, so that the company may have 

financial control over the operation even if it 

has less than a 50 percent interest in that 

operation. In assessing the economic substance 

of the relationship, the impact of potential 

voting rights, including both those held by the 

company and those held by other parties, is 

also taken into account. This criterion is consistent with international financial accounting 

standards; therefore, a company has financial 

control over an operation for GHG accounting 

purposes if the operation is considered as a 

group company for the purpose of financial 

consolidation, i.e., if the operation is fully consolidated in financial accounts. If this criterion 

is chosen to determine control, emissions from 

joint ventures where partners have joint financial control are accounted for based on the 

equity share approach (refer to Table 3-1 for 

definitions of financial accounting categories). 

Operational Control 

A Partner has operational control over an operation if the former or one of its subsidiaries 

(refer to Table 3-1 for definitions of financial 

accounting categories) has the full authority to 

introduce and implement its operating policies 

at the operation. 

This criterion is consistent with the current 

accounting and reporting practice of many 

companies that report on emissions from facilities, which they operate (i.e., for which they 

hold the operating license). It is expected that, 

except in very rare circumstances, if the company or one of its subsidiaries is the operator 

of a facility, it will have the full authority to 

introduce and implement its operating policies 

and thus has operational control. Under the 

operational control approach, a company 

accounts for 100 percent of emissions from 

operations over which it or one of its subsidiaries has operational control. 

8 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s

It should be emphasized that having operational control does not mean that a company 

necessarily has authority to make all decisions 

concerning an operation. For example, big capital investments will likely require the approval 

of all the partners that have joint financial control. Operational control does mean that a 

company has the authority to introduce and 

implement its operating policies. 

Sometimes a company can have joint financial 

control over an operation, but not operational 

control. In such cases, the company would 

need to look at the contractual arrangements to 

determine whether any one of the partners has 

the authority to introduce and implement its 

operating policies at the operation and thus 

has the responsibility to report emissions 

under operational control. If the operation itself 

will introduce and implement its own operating 

policies, the partners with joint financial control over the operation will not report any 

emissions under operational control. 

Table 3-2 on page 14 illustrates the selection of 

a consolidation approach at the corporate level 

and the identification of those joint operations 

that should be in the organizational boundary 

depending on the choice of the consolidation 

approach. 

Leased Assets, 

Outsourcing, and 

Franchises 

The selected consolidation approach (equity 

share or one of the control approaches) is also 

applied to account for and characterize direct 

and indirect GHG emissions from contractual 

arrangements such as leased assets, outsourcing, and franchises. Specific guidance on leased 

assets is provided below: 

CHAPTER 3 

Using Equity Approach or 

Financial Control 

A lessee only accounts for emissions from 

leased assets that are treated as wholly owned 

assets in financial accounting and are recorded 

as such on the balance sheet (i.e., finance or 

capital leases). A finance/capital lease is one 

that transfers substantially all the risks and 

rewards of ownership to the lessee. All leased 

assets that do not meet the criteria for 

finance/capital leases are considered operating 

leases. 

Guidance on which leased assets are considered operating leases and which are considered 

finance/capital leases should be obtained from 

the company accountant. 

Using Operational Control 

A lessee only accounts for emissions from 

leased assets that it operates (i.e., if the operational control criterion applies). This applies to 

both finance/capital leases and operating leases. 

Climate Leaders assumes operational control of a 

lease applies if the lessee has the ability to track 

energy use and/or emissions from the lease. 

The ability of a Partner to track energy use 

and/or emissions from its leases includes the 

following methods: 

■ The Partner pays the utility bill for leased 

space or the fuel bill for leased vehicles and 

has data on the actual amount of fuel and 

electricity used by the lease. 

■ The Partner leases part of a larger building 

and does not pay its own utility bill. However, 

it can get the fuel and electricity use for the 

entire building from the landlord, and there is 

an accurate method to allocate total energy 

use/emissions to the Partner’s leased space 

(e.g., separate electricity meter for the 

Partner’s space). 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 9 
CHAPTER 3 D e s i g n P r i n c i p l e s

■ The Partner leases many homogeneous sites 

(e.g., commercial and retail space) that represent a significant portion of their inventory 

and for which the individual sites have data 

on the amount of fuel and electricity used. 

However, it would be difficult to get the data 

from all the decentralized leased sites. In this 

case, the Partner could do a statistical sampling of sites to get emissions and extrapolate 

those results to the remainder of its leased 

sites. 

For the last two methods, the Partner should be 

careful when tracking changes in emissions for 

these leases over time. In the case of allocating 

energy use from the entire building, the allocation method should allow for tracking changes 

made to the Partners leased space only (e.g., not 

just allocating based on a percentage of total 

building floor space). In the case of like sites, the 

Partner should ensure that emissions reductions 

or increases are actually happening in all sites 

and not just the ones measured for the statistical 

sample, or that the statistical sample and analysis is accurate enough to account for differences 

at different leased sites. 

A Partner can also choose to include emissions 

from leases that fall outside of its organizational 

boundaries. These emissions would be reported under the optional emissions source category 

on the Climate Leaders Annual GHG Inventory 

Summary and Goal Tracking Form. 

Consolidation at 

Multiple Levels 

The consolidation of GHG emissions data will 

only result in consistent data if all levels of the 

organization follow the same consolidation 

policy. In the first step, the management of 

the parent company has to decide on a 

consolidation approach (i.e., either the equity 

share or the financial or operational control 

approach). Once a corporate consolidation 

policy has been selected, it is applied to all 

levels of the organization. 

State-Ownership 

The rules provided in this chapter can also be 

applied to account for GHG emissions from 

industry joint operations that involve state 

ownership or a mix of private/state ownership. 

Double Counting 

When two or more companies hold interests in 

the same joint operation and use different consolidation approaches (e.g., Company A follows 

the equity share approach while Company B 

uses the financial control approach), emissions 

from that joint operation could be double 

counted. This may not matter for voluntary corporate public reporting, including the Climate 

Leaders program, as long as there is adequate 

disclosure from the company on its consolidation approach (via the Inventory Management 

Plan). 

Contracts That Cover 

GHG Emissions 

To clarify ownership (rights) and responsibility 

(obligations) issues, companies involved in 

joint operations may draw up contracts that 

specify how the ownership of emissions or the 

responsibility for managing emissions and associated risk is distributed between the parties. 

Where such arrangements exist, companies 

may optionally provide a description of the 

contractual arrangement and include information on allocation of CO2 related risks and 

obligations (see Chapter 9). 

10 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles

Using the Equity 

Share or Control 

Approach 

Climate Leaders makes no recommendation as to 

whether reporting should be based on the equity 

share or control approach, however whichever 

method is selected, it should be applied consistently throughout the inventory. The reporting 

method a Partner chooses should be clearly stated in the company’s Inventory Management Plan. 

Companies should decide on the approach best 

suited to their business activities and GHG 

accounting and reporting requirements. 

Examples of how these may drive the choice of 

approach include the following: 

■ Reflection of commercial reality. It can be 

argued that a company that derives an economic profit from a certain activity should 

take ownership for any GHG emissions generated by the activity. This is achieved by 

using the equity share approach, because 

this approach assigns ownership for GHG 

emissions on the basis of economic interest 

in a business activity. The control approaches do not always reflect the full GHG 

emissions portfolio of a company’s business 

activities, but have the advantage that a 

company takes full ownership of all GHG 

emissions that it can directly influence and 

reduce. 

■ Liability and risk management. While 

reporting and compliance with regulations 

should most likely continue to be based 

directly on operational control, the ultimate 

financial liability will often rest with the 

group company that holds an equity share 

in the operation or has financial control 

CHAPTER 3 

over it. Hence, for assessing risk, GHG 

reporting on the basis of equity share and 

financial control approaches provides a 

more complete picture. The equity share 

approach is likely to result in the most comprehensive coverage of liability and risks. In 

the future, Partners might incur liabilities for 

GHG emissions produced by joint operations 

in which they have an interest, but over 

which they do not have financial control. 

For example, a company that is an equity 

shareholder in an operation but has no 

financial control over it might face demands 

by the companies with a controlling share to 

cover its requisite share of GHG compliance 

costs. 

■ Alignment with financial accounting. 

Future financial accounting standards may 

treat GHG emissions as liabilities and emissions allowances/credits as assets. To 

assess the assets and liabilities a company 

creates by its joint operations, the same 

consolidation rules that are used in financial 

accounting should be applied in GHG 

accounting. The equity share and financial 

control approaches result in closer alignment between GHG accounting and financial 

accounting. 

■ Management information and performance 

tracking. For the purpose of performance 

tracking, the control approaches seem to be 

more appropriate because managers can 

only be held accountable for activities under 

their control. 

■ Cost of administration and data access. The 

equity share approach can result in higher 

administrative costs than the control 

approach, since it can be difficult and time 

consuming to collect GHG emissions data 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 11 
CHAPTER 3 Design Principles

from joint operations not under the control 

of the reporting company. Partners are likely 

to have better access to operational data 

(and, therefore, greater ability to ensure that 

it meets minimum quality standards) when 

reporting on the basis of control. 

■ Completeness of Reporting. Companies 

might find it difficult to demonstrate completeness of reporting when the operational 

control criterion is adopted, because there 

are unlikely to be any matching records or 

lists of financial assets to verify the operations that are included in the organizational 

boundary. 

The following example, illustrated in Figure 3-1 

and Table 3-2, illustrates how to account for 

GHG emissions from the various wholly owned 

and joint operations under both the equity 

share and control approaches. 

Example 

Holland Industries is a chemicals group 

comprising a number of companies/joint 

ventures active in the production and 

marketing of chemicals. 

In setting its organizational boundary, 

Holland Industries first decides whether to 

use the equity or control approach for consolidating GHG data at the corporate level. 

It then determines which operations at the 

corporate level meet its selected consolidation approach. Based on the selected 

consolidation approach, the consolidation 

process is repeated for each lower operational level. In this process, GHG emissions 

are first apportioned at the lower operational level (subsidiaries, associate, joint 

ventures, etc.) before they are consolidated 

at the corporate level. Figure 3-1 presents 

the organizational boundary of Holland 

Industries based on the equity share and 

control approaches. 

Note that in this example, Holland America 

(not Holland Industries) holds a 50 percent 

interest in BGB and a 75 percent interest in 

IRW. If the activities of Holland Industries 

itself produce GHG emissions (e.g., emissions associated with electricity use at the 

head office), then these emissions should 

also be included in the consolidation at 100 

percent. 

12 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s CHAPTER 3 

Figure 3-1: Defining the Organizational Boundary of 

Holland Industries

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 13 
CHAPTER 3 D e s i g n P r i n c i p l e s

Table 3-2: Holland Industries Organizational Structure and 

GHG Emissions Accounting

Emissions Accounted for by 

Holland Industries 

Wholly Economic 

Owned and Interest 

Joint Held by Control of Treatment in Holland Equity 

Operations Legal Structure Holland Operating Industries’ Financial Share 

of Holland and Partners Industries Policies Accounts Approach Control Approach 

Holland Incorporated 100% Holland Wholly owned subsidiary 100% 100% for 

Switzerland company Industries operational control 

100% for financial 

control 

Holland Incorporated 83% Holland Subsidiary 83% 100% for 

America company Industries operational control 

100% for financial 

control 

BGB	 Joint venture, 50% 

partners have joint owned by 

financial control; Holland 

the other partner is America 

Rearden 

Rearden Via Holland America	 41.5% 0% for operational 

(83% x control 

50%)	 50% for financial 

control (50% x 

100%) 

IRW	 Subsidiary of 75% Holland Via Holland America 62.25% 100% for 

Holland Industries owned by America (83% x operational control 

Holland	 (subsidiary 75%) 100% for financial 

America	 of Holland control 

Industries) 

Kahuna	 Non-incorporated 33.3% 

Chemicals	 joint venture; 

partners have joint 

financial control; 

two other partners: 

ICT and BCSF 

Holland Proportionally 33.3% 100% for 

Industries consolidated joint venture operational 

control 

33% for financial 

control 

QuickFix	 Incorporated joint 43% Holland Subsidiary 43% 100% for 

venture; the other Industries (Holland Industries has operational 

partner is Majox financial control because it control 

treats QuickFix as a 100% for financial 

subsidiary in its financial control 

accounts) 

Nallo	 Incorporated joint 56% Nallo Associated company 56% 0% for operational 

venture; the other (Holland Industries does control 

partner is Nagua not have financial control 0% for financial 

Co. because it treats Nallo as control 

an associated company in 

its financial accounts ) 

Syntal	 Incorporated 1% Erewhon Fixed asset investment 0% 0% for operational 

company, Co. control 

subsidiary of	 0% for financial 

Erewhon Co.	 control 

14 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles CHAPTER 4 

Setting Operational 

Boundaries 

After a company has determined its 

organizational boundaries in terms of 

the operations that it owns or controls, it then sets its operational boundaries. 

This involves identifying the emissions associated with its operations and categorizing them 

as core direct, core indirect, and optional emissions. The Climate Leaders program requires 

Partners to report, at a minimum, all core direct 

and indirect emissions. Partners have the option 

of including other emissions sources from 

upstream and downstream activities (optional 

emissions), if a credible emissions accounting 

methodology exists. 

The selected operational boundary is then uniformly applied to identify and categorize direct 

and indirect emissions at each operational 

level. The established organizational and operational boundaries together constitute a 

Partner’s inventory boundary. 

Emissions 

Categorization 

Emissions may be either directly or indirectly 

derived from Partner activities. Classifying emissions as either direct or indirect is dependent 

on the consolidation approach (equity share or 

control) selected for setting the organizational 

boundary (Chapter 3). Direct emissions versus 

indirect emissions are defined as follows: 

■ Direct emissions are from sources that are 

owned or controlled by the company, e.g., 

emissions from combustion in owned or 

controlled boilers, furnaces, vehicles; emissions from chemical production in owned or 

controlled process equipment. 

Direct CO2 emissions from the combustion 

of biomass or of GHG emissions not covered 

by this protocol (e.g., chlorofluorocarbons 

(CFCs), nitrous oxide (NOx), etc.) shall not 

be included as part of core direct emissions, 

but may be reported separately. 

■ Indirect emissions are a consequence of 

the activities of the company, but occur at 

sources owned or controlled by another 

company. Indirect emissions for the 

purchaser are characterized as direct 

emissions for the facility where the 

emissions are generated. An example of 

indirect emissions is the emissions from 

the generation of purchased electricity 

consumed by a company. 

Reporting for the Climate Leaders Program is 

delineated by core and optional emissions as 

described below. These categories are designed 

to provide a uniform basis to allow companies to 

compare their own performance over time, and 

to enhance transparency. Core emissions include 

those emissions included under Scope 1 and 2 of 

the WRI/WBCSD GHG Protocol. Optional emissions include those emissions included under 

Scope 3 as well as under “optional” information 

in the WRI/WBCSD GHG Protocol. Table 4-1 

depicts this relationship. Partners shall separately 

account for and report core direct and indirect 

emissions at a minimum. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 15 
CHAPTER 4 D e s i g n P r i n c i p l e s

Table 4-1: Relationship of Climate Leaders to 

GHG Protocol Reporting Scope Terminology 

Climate Leaders	 WRI/WBCSD GHG Protocol 

Core Emissions (Direct and Indirect) Scopes 1 and 2 

Optional Emissions 	 Scope 3 and optional information 

Core direct and indirect emissions are carefully 

defined to ensure that two or more companies 

do not account for the same emissions in the 

same scope, as defined in the GHG protocol. 

Core Emissions 

Reporting 

Core emissions reporting includes both direct and 

indirect emissions. Core direct emissions result 

from stationary, mobile, and process-related 

sources at a facility. Core indirect emissions are 

emitted as a consequence of the import of electricity, heating/cooling, or steam. Partners should 

account for and report GHG information separately for each emissions category. To facilitate 

comparability over time or to aid transparency, 

Partners are encouraged to further subdivide 

emissions data, e.g., by business units/facilities, 

country, source types (production of electricity 

or steam, transportation, processes, etc.), and 

activity type (production of electricity, consumption of electricity, generation of purchased 

electricity that is sold to end users, etc.). 

The components of core direct and indirect emissions are described in more detail below: 

Core Emissions Reporting – 

Direct Emissions 

Core direct emissions are GHG emissions from 

sources that are owned or controlled by the 

reporting company. All Partner companies must 

report core direct emissions according to their 

chosen organizational boundary approach. Core 

direct emissions are principally the result of the 

following activities undertaken by the company: 

■ Generation of electricity, heat, or steam. 

For example, fossil fuel combustion in 

stationary sources such as boilers, 

furnaces, turbines, or generators. These 

emissions are reported without netting sale of 

own-generated electricity to another reporting 

company. These emissions do not include 

emissions from the combustion of biomass, 

those should be reported separately. 

■ Physical or chemical processing. Most of 

these emissions result from manufacture 

or processing of chemicals and other 

materials, e.g., cement, aluminum, adipic 

acid, waste processing, and ammonia 

manufacture. 

■ Transportation of materials, products, 

waste, and employees. These emissions 

result from the combustion of fuels in company-owned/controlled mobile combustion 

sources, such as trucks, trains, ships, airplanes, buses, and cars (leased mobile 

sources need to be evaluated as described 

in Chapter 3). 

■ Fugitive emissions. These emissions result 

from intentional or unintentional releases, 

e.g., equipment leaks from joints, seals, 

16 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles

packing, and gaskets; methane emissions 

from coal mines and venting; HFC emissions 

from refrigeration and air conditioning 

equipment; and CH4 leakages from gas 

transport. 

Exported carbon content sequestered in products 

should not be reported as core direct emissions. 

Core Emissions Reporting – 

Indirect Emissions 

Core indirect emissions are associated with the 

generation of GHG emissions from sources not 

owned or controlled by the reporting company 

and are specifically the result of the following 

activities: 

■ Imported/purchased electricity, 

heating/cooling, or steam that a company 

purchases or otherwise brings into the 

organizational boundaries of the reporting 

company (i.e., not self-generated) for its 

own use. 

For many companies, purchased electricity 

represents one of the largest sources of 

GHG emissions and the most significant 

opportunities to reduce these emissions. 

Companies can reduce their use of electricity by investing in energy efficient 

technologies and energy conservation. 

Additionally, emerging green power markets 

(i.e., renewable energy sources such as 

solar photovoltaic panels, geothermal energy, landfill gas, and wind turbines) provide 

opportunities for some companies to switch 

to less GHG intensive sources of electricity. 

Companies can also install an efficient 

onsite co-generation plant if it replaces the 

purchase of more GHG intensive electricity 

from the grid or electricity supplier. Core 

indirect reporting facilitates the transparent 

CHAPTER 4 

accounting of the GHG emissions and benefits associated with such opportunities. 

■ Transmission and Distribution. Electric utility companies often purchase electricity 

from independent power generators or the 

grid and resell it to end-consumers through 

a transmission and distribution (T&D) system. A portion of the electricity purchased 

by a utility company is consumed (T&D 

loss) during its transmission and distribution to end-consumers. 

The reporting company that owns the T&D 

lines should report the emissions associated with the purchased electricity that is 

consumed during T&D as core indirect 

emissions (i.e., not reported by the end 

users, as they do not own or control the 

T&D operation where the electricity is consumed, or, therefore, the T&D loss). This 

approach ensures that there is no double 

counting because only the T&D utility company will account for indirect emissions 

associated with T&D losses. 

End consumers may, however, report their 

indirect emissions associated with T&D 

losses in optional emissions as “generation 

of electricity consumed in a T&D system.” 

■ GHG emissions from activities upstream of 

the electricity provider (e.g., exploration, 

drilling, flaring, transportation, and refining) 

shall not be included with the core indirect 

emissions reporting but may be reported as 

optional emissions. 

■ Purchase of electricity for sale to endusers. Should not be reported under core 

indirect emissions, but may be reported in 

optional emissions. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 17 
CHAPTER 4 

■ Purchase of electricity for resale. Also 

referred to as trading transactions of electricity should not be reported under core 

indirect emissions or optional emissions, but 

may be reported under supplemental information. 

Figure 4-1 summarizes emissions reporting from 

the sale and purchase of electricity. 

D e s i g n P r i n c i p l e s

Climate Leaders strongly encourages electric 

utility Partners to include the emissions of 

electricity purchased for sale to end users in their 

GHG inventory and goal. This is especially true 

for utilities that purchase power for a significant 

portion of their end user demand. 

Figure 4-1: Emissions Reporting From the Purchase and 

Subsequent Use or Sale of Electricity

18 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s CHAPTER 4 

Example: Reporting GHGs from Generation, Purchase, and 

Sale of Electricity 

Example one: Company A is an independent power generator that owns a power generation 

plant. The power plant produces 100 MWh of electricity and releases 20 tons of emissions per 

year. Company B is an electricity trader and has a supply contract with Company A to purchase all of its electricity. Company B re-sells the purchased electricity (100 MWh) to Company 

C, a utility company that owns/controls the T&D system. Company C consumes 5 MWh of electricity in its T&D system and sells the remaining 95 MWh to Company D. Company D is an end 

user who consumes the purchased electricity (95 MWh) in its own operations. 

Company A reports its direct emissions from power generation as core direct emissions. 

Company B may optionally report emissions from the purchased electricity sold to a non-enduser as supplemental information separately from optional emissions. Company C may report 

the indirect emissions from the generation of the part of the electricity that is sold to the enduser as optional emissions. However, Company C shall report the part of the purchased 

electricity that it consumes in its T&D system as core indirect emissions. Company D (end-user) 

reports the indirect emissions associated with its own consumption of purchased electricity 

under core indirect emissions and can optionally report emissions associated with upstream 

T&D losses as optional emissions. 

Figure 4-2 shows the accounting of emissions associated with these transactions. 

Example two: Company D installs a co-generation unit and sells surplus electricity to neighboring Company E for its consumption. Company D reports all direct emissions from the 

co-generation unit as core direct emissions. Company D optionally reports indirect emissions 

from the generation of electricity for export to Company E under supplemental information separate from optional emissions (see Chapter 8 on accounting for this in Climate Leaders goal 

tracking). Company E reports indirect emissions associated with the consumption of electricity 

purchased from the Company D’s co-generation unit under core indirect emissions. 

Figure 4-2: GHG Accounting from the Sale and 

Purchase of Electricity

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 19 
CHAPTER 4 Design Principles

Optional Emissions Reporting 

Optional emissions reporting allows for the 

inclusion of emissions that are a consequence 

of the activities of the reporting company, but 

occur from sources not owned or controlled 

by the reporting company, and are not part of 

the reporting company’s core emissions. 

Partners may choose to report optional 

emissions to take a leading role in achieving 

comprehensive GHG reductions and environmental stewardship. 

Emissions reported under these optional emissions sources should be adequately explained 

and supported by data and evidence. It will not 

be relevant or appropriate for companies to 

report on all of the activities listed below. 

Companies should report those activities that 

are relevant to their business and goals, and for 

which they have reliable information. 

Such optional emission sources might include: 

■ Extraction and production of purchased 

materials and fuels 

■ Transport-related activities: 

◆ Transportation of purchased materials 

or goods 

◆ Transportation of purchased fuels 

◆ Employee business travel 

◆ Employees commuting to and from work 

◆ Transportation of sold products 

◆ Transportation of waste 

■ Electricity-related activities not included as 

part of core indirect emissions: 

◆ Extraction, production, and transportation of fuels consumed in the generation 

of electricity (either purchased or selfgenerated by the reporting company). 

◆ Purchase of electricity that is sold to 

an end-user (reported by the utility 

company). 

◆ Generation of electricity that is consumed in a T&D system (reported by the 

end-user). 

■ Leased assets, outsourced activities, and 

franchises: Emissions from such contractual 

arrangements are only classified as optional 

emissions if the selected consolidation 

approach (equity or control) does not apply 

to them. Clarification on the classification of 

leased assets should be obtained from the 

company accountant (see guidance on 

leased assets, outsourced activities, and 

franchises in Chapter 3). 

■ Waste disposal 

◆ Disposal of waste generated in 


operations


◆ Disposal of waste generated in the production of purchased materials and fuels 

◆ Disposal of sold products at the end of 

their life 

Some activities mentioned above may be 

included under core direct emissions if the pertinent emission sources are included in the 

organizational boundaries of the reporting company (e.g., if the transportation of products is 

done in vehicles owned or controlled by the 

company). To determine if an activity falls within core direct or indirect emissions, Partners 

20 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles

should refer to the selected consolidation 

approach (equity or control) used in setting its 

organizational boundaries (Chapter 3). 

Accounting for optional emissions need not 

involve a full-blown GHG life cycle analysis of 

all products and operations. Usually it is valuable to focus on one or two major 

GHG-generating activities. Although it is difficult to provide generic guidance on optional 

emissions to include in an inventory, some general steps include the following: 

1.	 Describe the value chain. It is important, 

for the sake of transparency, to provide a 

general description of the value chain and 

the associated GHG sources. Consideration 

of the company’s inventory or business 

goals and relevance of the various optional 

categories will guide the choice as to how 

many levels upstream and downstream to 

include in this category. 

2.	 Consider the relevance of the various 

optional emission categories. Only some 

types of upstream or downstream emissions 

categories might be relevant to the company. They may be relevant for several 

reasons: 1) they are or are believed to be of 

significant magnitude relative to core emissions, 2) they contribute to the GHG risk 

exposure, 3) they are deemed critical by 

stakeholders (e.g., feedback from customers, suppliers, investors, or civil 

society) or 4) there are potential emission 

reductions that could be undertaken or 

influenced by the company. 

Examples include large manufacturing companies that have significant freight 

CHAPTER 4 

transport-related emissions or outsourced 

activities (especially if the activity previously contributed to core emissions). 

Commodity and consumer product companies may want to account for GHGs from 

transporting raw materials, products, and 

waste. 

3.	 Identify and engage partners along the 

value chain (that contribute potentially 

significant amounts of GHGs), e.g., 

customers/users, product designers/ 

manufacturers, and energy providers. 

This is important when trying to identify 

sources, obtain relevant data, and 

calculate emissions. 

4.	 Quantify optional emissions. EPA encourages Partners to report emissions from 

optional sources to maximize opportunities 

to meet a GHG reduction target. In some 

cases, optional sources may be a significant 

piece of a Partner’s total climate footprint, so 

including optional sources could greatly 

increase the credibility of a company’s inventory. However, there are many sources of 

optional emissions that are difficult to calculate due to challenges in collecting data and 

lack of standardized calculation methodologies. To maintain the accuracy and credibility 

of Climate Leaders Partners’ inventories, EPA 

only allows Partners to report optional emissions from sources for which a standardized 

calculation methodology exists. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 21 
CHAPTER 4 Design Principles

Double Counting 

Core direct and core indirect emissions have 

been carefully defined to ensure that two different reporting companies will not account for 

emissions in the same category, to avoid double counting. Nonetheless, concern is often 

expressed that accounting for indirect emissions will lead to double counting when two 

different companies include the same emissions 

in their respective inventories. This depends on 

how consistently companies with shared ownership choose the same approach (equity or 

control) to set the organizational boundaries. 

However, for GHG risk management and voluntary reporting, double counting is less 

important. The inventories created for the 

Climate Leaders program are designed to reflect 

as accurately and transparently as possible 

the emissions over which Partner companies 

have control and can proactively implement 

reductions. 

Appendix 1 lists common GHG emissions 

sources and activities by emission category and 

industrial sector. 

22 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s CHAPTER 5 

Tracking Emissions 

Over Time 

The Climate Leaders program requires 

participants to establish a historic performance datum for comparing 

emissions over time. This performance datum is 

referred to as “base year emissions.” Companies 

often undergo significant structural changes 

such as acquisitions, divestments, and mergers. 

These changes will alter a company’s historical 

emission profile, making meaningful comparisons over time difficult. To maintain 

consistency over time, or in other words, 

to keep comparing “like with like,” historic 

emission data will have to be recalculated. 

This chapter describes the process for 

choosing and adjusting the base year. 

Choosing a Base Year 

A Climate Leaders Partner’s base year is the most 

recent year for which data is available when the 

Partner joins the program. Data for years as far 

back as 1990 may be reported to Climate 

Leaders; however base year data is used for purposes of assessing a company’s progress towards 

its emission reduction goal. 

Recalculating Base 

Year Emissions 

Partners shall develop a base year emissions 

recalculation policy (as documented in the 

Inventory Management Plan), and clearly articulate the basis and context for any 

recalculations. The policy shall state any “significance threshold” applied for deciding on 

historic emissions recalculation. “Significance 

threshold” is a qualitative and/or quantitative 

criterion used to define any significant change 

to the data, inventory boundary, methods, or 

any other relevant factors. It is the responsibility of the company to determine the 

“significance threshold” that triggers base year 

emissions recalculation and to disclose it. It is 

the responsibility of the verifier to confirm the 

company’s adherence to its threshold policy. 

The following cases shall trigger recalculation 

of base year emissions: 

■ Structural changes in the reporting organization that have a significant impact on the 

company’s base year emissions. A structural change involves the transfer of 

ownership or control of emissions-generating activities or operations from one 

company to another. While a single structural change might not have a significant 

impact on the base year emissions, the 

cumulative effect of a number of minor 

structural changes can result in a significant 

impact. Structural changes include: 

◆ Mergers, acquisitions, and divestments 

◆ Outsourcing and insourcing of emitting 

activities 

■ Changes in status of leased assets (ending 

leases or obtaining new leases) 

■ Changes in calculation methodology or 

improvements in the accuracy of emission 

factors or activity data that result in a significant impact on the base year emissions 

data 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 23 
CHAPTER 5 D e s i g n P r i n c i p l e s

■ Discovery of significant errors, or a number 

of cumulative errors, that are collectively 

significant 

Not all structural changes may turn out to be significant. The concept of significance should be 

used to judge whether a base year recalculation 

is needed due to a structural change. It is the 

responsibility of the Partner to use its best judgement to define significance for considering base 

year emissions adjustments. In most cases, determining an adjustment of the base year depends 

on the intended use of the information, the characteristics of the company, and the cumulative 

effect of numerous structural changes. 

In summary, base year emissions shall be 

retroactively recalculated to reflect changes in 

the company that would otherwise compromise 

the consistency and relevance of the reported 

GHG emissions information. Once a Partner has 

determined its policy on how it will recalculate 

base year emissions, it shall apply this policy in 

a consistent manner. For example, it shall recalculate for both GHG emissions increases and 

decreases. 

Timing of 

Recalculations for 

Structural Changes 

When significant structural changes occur during the middle of a year, the base year 

emissions should be recalculated for the entire 

year, rather than only for the remainder of the 

reporting period after the structural change 

occurred. Recalculating the base year emissions avoids having to recalculate base year 

emissions again in the succeeding year. 

Similarly, current year emissions should be 

recalculated for the entire year to maintain 

consistency with the base year recalculation. If 

it is not possible to make a recalculation in the 

year of the structural change (e.g., due to lack 

of data for an acquired company), the base 

year recalculation may be carried out in the following year. 

Recalculations for 

Changes in 

Calculation 

Methodology 

or Improvements in 

Data Accuracy 

A Partner might report the same sources of 

GHG emissions as in previous years, but measure or calculate them differently. For example, a 

Partner might have used a national electric 

power generation emissions factor to estimate 

core indirect emissions in the first year of 

reporting. In later years, the Partner may obtain 

more accurate utility-specific emission factors 

(for the current year as well as past years) that 

better reflect the GHG emissions associated 

with the electricity that it has purchased. If the 

differences in emissions resulting from such a 

change are significant, historic data is recalculated applying the new data and/or 

methodology. 

Sometimes the more accurate data input may 

not be reasonably applied to all past years or 

new data points may not be available for past 

years. The Partner may then have to backcast 

these data points, or the change in data source 

may simply be acknowledged (i.e., via the 

Inventory Management Plan) without recalculation. This acknowledgement should be made 

each year to enhance transparency; otherwise, 

new users of the report in the two or three 

24 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s

years after the change may make incorrect 

assumptions about the performance of the 

company. 

Any changes in emission factor or activity 

data that reflect real changes in emissions 

(i.e., changes in fuel type or technology) do 

not trigger a recalculation. 

No Base Year 

Emissions 

Recalculations 

for Facilities that Did 

Not Exist in the Base 

Year 

Base year emissions are not recalculated if the 

company makes an acquisition of (or 

insources) operations that did not exist in its 

base year. There should be a recalculation of 

historic data back to the year in which the 

acquired company came into existence. The 

same applies to cases where the company 

makes a divestment of (or outsources) operations that did not exist in the base year. 

No Recalculation for 

“Outsourcing/ 

Insourcing” 

if Reported Under 

Core Indirect and/or 

Optional Emissions 

Structural changes due to “outsourcing” or 

“insourcing” do not trigger base year emissions 

recalculation if the company is reporting its 

indirect emissions from relevant outsourced or 

insourced activities. For example, outsourcing 

production of electricity, heat, or steam does 

CHAPTER 5 

not trigger base year emissions recalculation, 

because the Climate Leaders Design Principles 

requires core indirect reporting. However, outsourcing/insourcing that shifts significant 

emissions between core direct and optional 

emissions reporting when optional emissions 

are not reported does trigger base year emissions recalculation (e.g., when a company 

outsources the transportation of products). 

No Recalculation for 

Organic Growth or 

Decline 

Base year emissions and any historic data are 

not recalculated for organic growth or decline. 

Organic growth/decline refers to 

increase/decrease in production output, 

changes in product mix, and closures and openings of operating units that are owned or 

controlled by the company. The rationale for 

this is that organic growth or decline results in 

a change of emissions to the atmosphere and, 

therefore, needs to be counted as an increase 

or decrease in the company’s emissions profile 

over time. Change in lease status is not considered organic growth or decline, even if the 

vacated lease goes unrented. 

Climate Leaders tracks the originally established 

base year emissions as well as subsequent 

recalculated base year emissions to ensure transparency. In addition, the Inventory Management 

Plan documents the base year adjustment policy 

developed by the Partner, the implementation of 

which will be reviewed during the onsite IMP 

review at the selected facility. 

Table 5-1 presents basic rules that shall 

be observed for base year emissions 

recalculations. 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 25 
CHAPTER 5 Design Principles

Table 5-1: Basic Rules for Base Year 

Emissions Recalculations

Condition Base Year Recalculation Action 

Mergers, Acquisitions, Divestitures 

1. Acquisition of (or insourcing) a facility that existed Add the new facility’s emissions generated during the base 

during the base year year to overall entity base year emissions, unless the now 

insourced operation was already included in the inventory as 

an optional emission. 

2. Acquisition of (or insourcing) a facility that did not No base year recalculation is needed. 

exist during the base year 

3. Divestiture of (or outsourcing) a facility that existed Subtract the divested facility’s emissions generated during 

during the base year the base year from overall entity base year emissions, unless 

the now outsourced operation is still included in the inventory as an optional emission. 

4. Divestiture of (or outsourcing) a facility that did not No base year recalculation is needed. 

exist during the base year 

5. Transfer of ownership/control of emissions sources. Increased ownership shall be treated the same as a new 

This includes changes in lease status. acquisition; decreased ownership shall be treated the same 

as a divestiture. See 1-4 above. 

Organic Growth and Decline 

6. Organic growth: 

■ Increase in production output 

■ Changes in product mix resulting in increased 

emissions 

■ Opening of new plants or operating units 

No base year recalculation is needed. 

7. Organic decline: 

■ Decrease in production output 

■ Changes in product mix resulting in decreased 

emissions 

■ Closing of plants or operating units 

No base year recalculation is needed. 

Changes in Quantification Methodologies/Errors 

8. Changes in emission factors or methodologies that No base year recalculation is needed. 

reflect real changes in emissions (i.e., changes in fuel 

type or technology) 

9. Changes in measurement or quantification method-	 Recalculate base year emissions to be consistent with new 

ologies, improvements in the accuracy of emission approach or to correct errors. 

factors/activity data, or discovery of previous 

errors/number of cumulative errors 

26 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s CHAPTER 5 

Example One: 

base year (year one) each business unit emits 25 tons CO2. In year two, the company under2 per business unit, 

2, and 20 tons CO2 

CO2

CO2

2 2 

for year two. 

for an Acquisition 

Base Year Emissions Recalculation for an Acquisition 

Company Gamma consists of two business units (A and B), as shown below in Figure 5-1. In its 

goes “organic growth,” leading to an increase in emissions to 30 tons CO

i.e., 60 tons in total. The base year emissions are not recalculated in this case. At the beginning 

of year three, the company acquires a production facility C from another company. The annual 

emissions of facility C in year one were 15 tons CO in years two and three. 

The total emission of company Gamma in year three, including facility C, are therefore 80 tons 

. To maintain consistency over time, the company recalculates its base year emissions to 

take into account the acquisition of facility C. The base year emissions increase by 15 tons 

—the quantity of emissions produced by facility C during its base year. The adjusted base 

year emissions are 65 tons CO . Gamma also reports 80 tons CO as the recalculated emissions 

Figure 5-1: Base Year Emissions Recalculation 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 2 7
CHAPTER 5 D e s i g n P r i n c i p l e s

Example Two: 

ness unit emits 25 tons CO2 2 in the 

emissions to 30 tons CO2 per business unit, i.e., 90 tons CO2 in total. At the beginning of year 

2—the quan2

tons CO2 2 

year two. 

for a Divestment 

Base Year Emissions Recalculation for a Divestment 

Company Beta consists of three business units (A, B, and C), as shown in Figure 5-2. Each busiand the total emissions for the company are 75 tons CO

base year (year one). In year two, the output of the company grows, leading to an increase in 

three, Beta divests business unit C and its annual emissions are now 60 tons, representing an 

apparent reduction of 15 tons relative to the base year emissions. However, to maintain consistency over time, the company recalibrates its base year emissions to take into account the 

divestment of business unit C. The base year emissions are lowered by 25 tons CO

tity of emissions produced by the business unit C in the base year. The recalculated base year 

emissions are 50 tons CO , and the emissions of company Beta are seen to have risen by 10 

over the three years. Beta also reports 60 tons CO as the recalculated emissions for 

Figure 5-2: Base Year Emissions Recalculation 

28 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s CHAPTER 5 

Example Three: 

Acquisition of a Facility That Came Into Existence After 

ny emit 50 tons CO2

2 2 in total. The base year 

Facility C came into existence in year two, its emissions being 15 tons CO2 in year two and 20 

tons CO2 

2

2

Figure 5-3: Acquisition of a Facility That Came Into 

the Base Year was Set 

Company Teta consists of two business units (A and B). In its base year (year one), the compa-

. In year two, the company undergoes organic growth, leading to an 

increase in emissions to 30 tons CO per business unit, i.e., 60 tons CO

emissions are not recalculated in this case. 

At the beginning of year three, Teta acquires a production facility C from another company. 

in year three. The total emissions of company Teta in year three, including facility C, 

are therefore 80 tons CO . In this acquisition case, the base year emissions of company Teta do 

not change because the acquired facility C did not exist in year one when the base year of Teta 

was set. The base year emissions of Teta therefore remains at 50 tons CO . Teta also reports 75 

tons as the recalculated figure for year two emissions. 

Existence After the Base Year was Set 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 2 9
CHAPTER 6 D e s i g n P r i n c i p l e s

Identifying and Calculating GHG 

Emissions 

Once the inventory boundary has been 

established, companies generally calculate GHG emissions via the 

following steps: 

1. Identify GHG emissions sources 

2. Select an emissions calculation approach 

3. Collect activity data and choose emissions 

factors 

4. Apply quantification methodology to estimate GHG emissions 

5. Roll-up emissions data to the corporate 

level (covered in Chapter 9) 

These steps are described in the following 

sections. A short description of the Core 

Module guidance developed by and available 

from the Climate Leaders program is also 

provided. Core Modules are available on 

the Climate Leaders website at 

http://www.epa.gov/climateleaders. 

Identify GHG 

Emissions Sources 

The process of identifying emissions sources is 

typically completed with the following three 

steps: 

1. Identify core direct emissions sources 

2. Identify core indirect emissions sources 

3. Identify optional emissions sources to the 

extent desired 

Refer to Chapter 4 for a refresher on common 

sources of emissions and how they should be categorized (direct or indirect core emissions, or as 

optional emissions). Every business has some 

processes, products, or services that generate 

direct and/or indirect emissions from one or 

more broad source categories. Almost all businesses generate indirect emissions due to the 

purchase of electricity for use in their processes or services. Appendix 1 provides an 

overview of GHG emissions sources organized 

by emission category and industry sector. The 

appendix may be used as an initial guide to 

identify your major GHG sources. 

The emissions identification step should look for 

emissions sources that result from both routine 

and non-routine operations. Non-routine operations might include maintenance activities 

(including turnarounds) and upset conditions. In 

some cases, non-routine operations may be a significant source of emissions. 

Select an Emissions 

Calculation Approach 

Direct measurement of GHG emissions by monitoring concentration and flow rate is not 

common. More often, emissions are calculated 

based on a mass balance or stoichiometric 

basis specific to a facility or process. The most 

common approach for calculating GHG emissions is through the application of documented 

emission factors. These factors are calculated 

ratios relating GHG emissions to a proxy measure of activity at an emissions source. The 

30 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s

revised IPCC Guidelines for National GHG 

Inventories refer to a hierarchy of calculation 

approaches and techniques ranging from the 

application of generic emission factors to direct 

monitoring. 

In many cases, particularly when direct monitoring is either unavailable or prohibitively 

expensive, accurate emission data can be calculated from fuel use data. Even small users 

usually know both the amount of fuel consumed and have access to data on the carbon 

content of the fuel through default carbon content coefficients or through more accurate 

periodic fuel sampling. Companies should use 

the most accurate calculation approach that is 

CHAPTER 6 

available to them and that is appropriate for 

their reporting context. 

Collect Activity Data 

and Choose Emissions 

Factors 

The third step in identifying and calculating 

emissions is to collect the data necessary to 

complete the quantification method selected in 

the previous step. To facilitate completion of 

this step, the reporting entity should list the 

quantification method and relevant data 

required to quantify each emission source. 

Table 6-1 presents an example. Documentation 

of these data elements is part of the Inventory 

Table 6-1: Example Data Collection Roadmap

Emission Source Quantification Data Required Data Sources* 

Method 

Onsite stationary 

combustion sources 

Insert selected method 

here, e.g., fuel use times 

fuel – specific emission 

factor (EF) 

Fuel use measured in mass, volume, 

or energy units 

Fuel-specific emission factor. 

Insert specific data source 

here 

Imported electricity Electricity use times source Electricity use Insert specific data source 

use specific EF Source-specific (or regional grid) here 

emission factor 

Process specific: Calculate N2O emissions by Adipic acid production (tonnes) Insert specific data source 

Ex. Production of 

adipic acid 

multiplying the amount of 

adipic acid produced by 

the N2O emissions factor; 

deduct fraction abated 

Emission factor (tonnes of N2O/tonnes 

of adipic acid produced) 

Fraction abated (%) – percent of emissions abated by reduction technologies 

here 

and practices 

Utilization factor (%) – percent of time 

abatement technology was in use 

Continue list of Continue list of Continue list of data needs unique Continue list of data needs 

reporter-specific relevant quantification to the selected quantification unique to the selected 

emission sources or methodology methodology quantification methodology 

groups of emission 

sources 

*For ease of data collection and to facilitate the verification exercise, the data sources should include specification of where 

the required data can be derived, e.g., AP 42 emission factor, fuel use data from plant site-specific data collection system, etc. 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 31 
CHAPTER 6 D e s i g n P r i n c i p l e s

Management Plan submittal required under the 

Climate Leaders program. Documentation of 

these data elements helps to facilitate the data 

collection activity, enhance data verifiability, and 

identify opportunities for further improvement in 

inventory accuracy and efficiency. 

For most small- to medium-sized companies 

and for many larger companies, core direct 

emissions should be calculated based on the 

purchased quantities of commercial fuels (such 

as natural gas and heating oil) multiplied by 

relevant published emissions factors. Core indirect emissions should typically be calculated 

from metered electricity consumption and supplier-specific, local grid, or other published 

emission factors. Optional emissions should 

be calculated from activity factors such as 

passenger miles and published or third-party 

emissions factors. In all of these cases, if 

source/facility-specific emissions factors are 

available, it is preferable that they be used. 

Climate Leaders provides source-specific guidelines to help facilitate the emissions estimation 

approach. 

Industrial companies, such as those involved in 

fuels extraction and processing, chemicals, minerals, pulp and paper, waste management, and 

primary metals, will be faced with a wider 

range of alternative approaches/methodologies. 

These companies should seek guidance from the 

Climate Leaders sector-specific guidelines (where 

available) or from their industry associations, 

e.g., International Aluminum Institute, American 

Petroleum Institute, WBCSD project: Toward a 

Sustainable Cement Industry, etc. 

In some cases, unit conversions will be required 

to adjust activity data to the same units used in 

emission factors. Selected unit conversions are 

presented in Appendix 2. 

Apply Quantification 

Methodology to 

Estimate GHG 

Emissions 

This section provides an overview of the 

Climate Leaders GHG Inventory Protocol Core 

Module guidance documents. Companies may 

use their own GHG calculation tools, provided 

they are consistent with the approaches 

described in the respective sector guidelines. 

There are two main categories of guidance 

documents: 

■ Cross-sector guidance that can be applied 

to many different sectors: stationary combustion, indirect electricity, mobile 

combustion, and HFC use in refrigeration 

and air-conditioning 

■ Sector-specific guidance, e.g., aluminum, 

iron and steel, cement, etc. 

Most companies will need to refer to more than 

one guidance document to cover all of their 

GHG sources. For example, to calculate GHG 

emissions from an aluminum smelter, the company would use the calculations for aluminum 

production, stationary combustion (for any 

generation of energy on-site), and mobile combustion (for owned transportation of materials 

and products, and vehicles employed on-site). 

Structure of Guidance 

Documents 

All cross-sector and sector-specific core 

module guidance documents are based on 

a similar structure and offer step-by-step 

guidance on measuring and calculating 

emissions data. 

32 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s

The general structure of the guidance section is 

as follows: 

■ Overview: provides a description of purpose and scope, the calculation method 

recommended, and a process description 

■ Calculation methods: describes different 

calculation methods depending on the availability of site-specific activity data and 

emissions factors 

■ Choosing activity data and emissions factors: provides good practice guidance and 

references for default emissions factors 

■ Quality control: provides good practice 

guidance 

■ Internal reporting and documentation: provides guidance on internal documentation 

to support emissions calculations 

CHAPTER 6 

Default emissions factors are provided, but it 

is also possible to use customized emissions 

factors if more accurate emissions factors are 

available. The emissions of different GHGs are 

calculated separately and then converted to 

CO2-equivalents on the basis of their global 

warming potential. 

Some of the guidance takes a tiered approach, 

offering a choice between a simple and a more 

advanced calculation approach. The more 

advanced approach results in more accurate 

emissions data, but usually requires a higher 

level of data detail and a more thorough understanding of the technologies used in the 

business operations. 

Table 6-2 provides an overview of the calculation 

guidance documents available from the Climate 

Leaders program, and their main features. 

Table 6-2: Overview of GHG Guidance Documents 

Currently Available Through Climate Leaders*

Guidance Documents Main Features 

Stationary Combustion ■ Calculates direct GHG emissions from combustion of fuels in stationary equipment 

■ Default emission factors provided for different fuels 

Indirect Electricity ■ Calculates indirect GHG emissions from purchased electricity 

■ Default emission factors provided for grid electricity 

■ Provides guidance for allocating emissions from a cogeneration facility to the separate 

steam and electricity outputs 

Mobile Combustion ■ Calculates direct GHG emissions from mobile sources, including road, air, water, and rail 

transport 

■ Default emission factors provided 

Refrigeration and Air ■ Calculates emissions resulting from leaks of HFCs and PFCs from refrigeration and AC 

Conditioning (AC) Unit Use units 

■ Found in industrial and commercial facilities as well as mobile sources 

Municipal Solid Waste ■ Calculates direct GHG emissions from landfill gas emissions at owned/operated municiLandfilling pal solid waste landfill sites 

Iron and Steel (DRAFT) ■ CO2 and other GHG emissions (direct and indirect) associated with the manufacturing of 

iron and steel 

Cement Manufacturing ■ Process CO2 and other GHG emissions associated with the manufacturing of cement 

(DRAFT) 

Refrigeration and AC Unit ■ Calculates emissions resulting from leaks of HFCs and PFCs from refrigeration and AC 

Mfg. (DRAFT) unit manufacturing 

*Additional calculation guidance modules are in development. 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 33 
CHAPTER 6 

CO2-equivalent and Global 

Warming Potential 

EPA has adopted the convention forwarded by 

the United Nations Framework Convention on 

Climate Change (UNFCCC) and the IPCC of comparing the radiative forcing ability of individual 

gases by using a relative measure for each GHG, 

termed its global warming potential (GWP). GWP 

D e s i g n P r i n c i p l e s

is the ability of each greenhouse gas to trap heat 

in the atmosphere relative to carbon dioxide, 

which serves as the reference gas. Table 6-3 lists 

GWPs for the primary recognized GHGs. 

Partners can report emissions of other GHGs (i.e., 

those listed in the IPCC Third Assessment Report) 

as optional emissions. 

Table 6-3: Gas Atmospheric Lifetime GWPa 

Greenhouse Gas Formula Atmospheric Lifetime Global Warming 

(years) Potential 

Carbon dioxide CO2 50 — 200 1 

Methaneb CH4 12 +/- 3 21 

Nitrous oxide N2O 120 310 

Sulfur hexafloride SF6 3,200 23,900 

HFCs: 

HFC-23 CHF3 264 11,700 

HFC-32 CH2F2 5.6 650 

HFC-41 CH3F 3.7 150 

HFC-125 C2HF5 32.6 2,800 

HFC-134 C2H2F4 10.6 1,000 

HFC-134a C2H2F4 14.6 1,300 

HFC-143 C2H3F3 3.8 300 

HFC-143a C2H3F3 48.3 3,800 

HFC-152a C2H4F2 1.5 140 

HFC-227ea C3HF7 36.5 2,900 

HFC-236fa C3H2F6 209 6,300 

HFC-245ca C3H3F5 6.6 560 

HFC-4310mee C5H2F10 17.1 1,300 

PFCs: 

PFC-14 CF4 50,000 6,500 

PFC-116 C2F6 10,000 9,200 

PFC-218 C3F8 2,600 7,000 

PFC-3-1-10 C4F10 2,600 7,000 

PFC-c318 c-C4F8 3,200 8,700 

PFC-4-1-12 C5F12 4,100 7,500 

PFC-5-1-14 C6F14 3,200 7,400 

Source: IPCC Second Assessment Report (SAR)


a 100-year time horizon


b The methane GWP includes the direct effects and those indirect effects due to the production of tropospheric ozone and stratospheric


water vapor. The indirect effect due to the production of CO2 is not included 

34 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles CHAPTER 6 

To provide consistency within the inventory, the 

Partner’s GHG inventory should be based on 

metric tonnes of CO2-equivalents (CO2-eq). 

CO2-equivalents are calculated by multiplying 

tonnes of any particular GHG times its relevant 

GWP. The following example illustrates this 

approach. 

Example: 

Calculating CO2-equivalents

A Partner’s GHG inventory contains 7,000,000 tonnes/yr of CO2 emissions, 400,000 tonnes/yr of 

CH4 emissions, and 700 tonnes/yr of N2O emissions. 

Total CO2-eq = tonnes CO2(GWP[CO2]) + tonnes CH4(GWP[CH4]) + tonnes N2O(GWP[N2O])= 

7,000,000 (1) + 400,000 (21) + 700 (310) = 15,617,000 metric tonnes CO2-eq 

Other useful conversion factors for units of measure and fuel characteristics can be found in


Appendix 2.


CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 35 
CHAPTER 7 Design Principles 

Managing Inventory 

Quality 

For the purposes of reporting for the 

Climate Leaders program, it is sufficient 

to document inventory assumptions and 

to note major sources of uncertainty (i.e., as part 

of the Inventory Management Plan). An uncertainty analysis is not required. 

A corporate GHG inventory management plan 

(IMP) includes all institutional, managerial, and 

technical arrangements made for the collection 

of data, preparation of the inventory, and implementation of steps to manage the quality of the 

inventory. An IMP provides a systematic 

process for preventing and correcting errors, 

and identifies areas where investments will 

likely lead to the greatest improvement in 

overall inventory quality. However, the primary 

objective of an IMP is ensuring the credibility of 

a company’s GHG inventory information. 

Chapter 1 outlines five accounting principles 

that set an implicit standard for the faithful representation of a company’s GHG emissions 

through its technical, accounting, and reporting 

efforts. Putting these principles into practice 

will result in a credible and unbiased treatment 

and presentation of issues and data. The goal of 

an IMP is to ensure that these principles are put 

into practice. 

This chapter addresses the implementation of 

an IMP, practical inventory quality measures for 

implementation, as well as inventory quality 

and inventory uncertainty (i.e., types and limitations of uncertainty estimates). 

An Inventory Program 

Framework 

A practical framework is needed to help companies conceptualize and design a quality 

management system and plan for future 

improvements. This framework focuses on the 

following institutional, managerial, and technical components of an inventory. Climate 

Leaders calls this framework an Inventory 

Management Plan. An effective and efficient 

Inventory Management Plan should address the 

following four fundamentals. 

■ Methods 

■ Data 

■ Inventory processes and systems 

■ Documentation 

Table 7-1 summarizes the four fundamentals 

of inventory development. The exact inventory 

management plan components, the associated 

detail required, and issues to consider for 

each component are outlined in more detail in 

Chapter 9 and Appendix 3. 

36 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s CHAPTER 7 

Table 7-1: Fundamentals of Inventory Development

Methods – the technical aspects 

of inventory preparation 

■ Define inventory boundaries, treatment of joint ventures, identify 

sources, etc. Chapters 3, 4, and 6 help with this. 

■ Identify methodologies for estimating emissions (Climate Leaders 

provides many default methods and Protocols to help 

companies with this effort.) 

■ Establish procedures for applying and updating inventory 

methodologies in response to new business activities, new 

technical information, or new reporting requirements. 

Data – the basic information on ■ Develop approach, and assign roles and responsibilities to facilitate


activity levels, emission factors, collection of high quality inventory data.


processes, and operations ■ Create process for the maintenance and improvement of data 


collection procedures. 

Inventory processes and ■ Define all institutional, managerial, and formal procedural aspects 

systems – the institutional, required to develop and maintain a GHG inventory that meets the 

managerial, and technical Climate Leaders accounting and reporting standards. 

procedures for preparing GHG ■ Whenever reasonable, integrate these processes with other corporate 

inventories processes. 

Documentation – the record of 

methods, data, processes, systems, assumptions, and 

estimates used to prepare an 

inventory 

■ Identify internal and external audiences and develop procedures to 

document information intended for their use. 

■ Establish documentation sufficient for an inventory development team 

to accurately and efficiently continue preparing and improving all four 

fundamentals in the company’s inventory. 

■ Ensure that documentation provides sufficient transparency to facilitate 

potential internal or external verification. 

implementation of calculating an inventory. Implementing an 

Inventory 

Management Plan 

An IMP for a company’s program should 

The plan should include procedures for all 

organizational levels and inventory development processes (i.e., from initial data 

collection to final reporting of accounts). 

address all four of the components described For efficiency and comprehensiveness, 

above. To implement the system, a company Partners are encouraged to consider the 

should take the following steps: integration of their inventory management 

plan with their overall corporate and envi1.	 Establish an inventory team. This team ronmental information management 

should be responsible for implementing the systems, including any procedures in place 

IMP, and continually improving inventory as part of their International Standards 

quality, as well as coordinating activities Organization (ISO) 9000 (Quality 

between relevant business units and facili- Management) or ISO 14001 (Environmental 

ties. 	 Management) certifications. 

2.	 Develop an IMP that describes the 3. Perform generic quality checks. Generic 

steps the company is taking in the quality checking procedures applicable to 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 37 
CHAPTER 7 Design Principles

inventory data and processes at all levels


(i.e., data handling, documentation, and


emission calculation activities, as noted in


further detail in Table 7-2).


5.	 Review final inventory estimates and 

reports, including internal technical and 

managerial reviews and potential external 

verification. 

4.	 Perform source category-specific quality 6. Institutionalize formal feedback loops so 

checks. This includes more rigorous investi- that errors are corrected and improvements 

gations into the appropriate application of are made following quality checks, investigaboundaries, recalculation procedures, and tions, and reviews. 

adherence to accounting and reporting 

principles for specific source categories, as 7. Establish reporting, documentation, and 

well as the quality of the data input used, archiving procedures, including internal 

and a qualitative description of the major recordkeeping procedures, information for 

causes of uncertainty in the data (see sec- external stakeholders, etc. These procetion on implementation below). 	 dures should also include formal feedback 

mechanisms. 

Table 7-2: Generic Quality Management Measures

Data Gathering, ■ Check a sample of input data for transcription errors 

Input, and ■ Identify spreadsheet modifications that could provide additional controls or checks 

Handling on quality 

Activities ■ Ensure that adequate version control procedures for electronic files have been 

implemented 

■ Others 

Data 

Documentation 

■ Confirm that bibliographical data references are included in spreadsheets for all primary data 

■ Check that copies of cited references have been archived 

■ Check that assumptions and criteria for selection of methods, activity data, emission factors, and other parameters are documented 

■ Check that changes in data or methodology are documented 

■ Others 

Calculating 

Emissions and 

Checking 

Calculations 

■ Check whether emission units, parameters, and conversion factors are appropriately labeled 

■ Check if units are properly labeled and correctly carried through from beginning to 

end of calculations 

■ Check that conversion factors are correct 

■ Check the data processing steps (e.g., equations) in the spreadsheets 

■ Check that spreadsheet input data and calculated data are clearly differentiated 

■ Check a representative sample of calculations, by hand or electronically 

■ Check some calculations with abbreviated calculations (i.e., back of the envelope 

checks) 

■ Check the aggregation of data across source categories, business units, etc. 

■ When methods or data have changed, check consistency of time series inputs and 

calculations 

■ Others 

38 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s

As part of Climate Leaders, EPA assists Partners 

by providing technical assistance on completing 

their inventory and IMP. This includes desktop 

reviews that encompass some of the quality management checks listed in Table 7-2. For more 

details on technical assistance refer to Chapter 9. 

Practical Measures 

for Implementation 

Although principles and broad program design 

guidelines are important, any guidance on 

inventory management would be incomplete 

without a discussion of practical inventory 

management measures. A company should 

implement these measures at multiple levels 

within the company, from the point of primary 

data collection to the final corporate inventory 

approval process. It is important to implement 

these measures at points in the inventory program where errors are most likely to occur, 

such as the initial data collection phase and 

during calculation and data aggregation. While 

corporate-level inventory quality may initially 

be emphasized, it is important to ensure quality 

measures are implemented at all levels of disaggregation (e.g., facility, process, geographical, 

according to a particular category of emission, 

etc.). 

Companies also need to ensure the quality of 

their historical emission estimates and trend 

data. They can achieve this by employing 

inventory quality measures to minimize biases 

that can arise from changes in the characteristics of the data or methods used to calculate 

historical emission estimates. 

CHAPTER 7 

Step 3 in implementing an IMP is to perform 

generic quality checking measures, which apply 

to all source categories and all stages of inventory preparation. Table 7-2 provides a sample 

list of such measures. 

Step 4 in implementing an IMP is source 

category-specific data quality investigations.1 

The following discussion addresses the types of 

source-specific quality measures that can be 

employed for emission factors, activity data, 

and emission estimates. 

Emission Factors and Other 

Parameters 

For a particular source category, emissions calculations will generally rely on emission factors 

and other parameters (e.g., utilization factors, 

oxidation rates, and methane conversion factors)2. These factors and parameters may be 

published or default factors, based on company-specific data, site-specific data, or direct 

emission or other measurements. For fuel consumption, published emission factors based on 

fuel energy content are generally more accurate 

than those based on mass or volume, except 

when mass-based or volume-based factors have 

been measured at a company-specific or sitespecific level. Quality investigations need to 

assess the representative data and applicability 

of emission factors and other parameters to the 

specific characteristics of a company. 

Differences between measured and default values need to be qualitatively explained and 

justified based upon the company’s operational 

characteristics. 

1 The information gathered from these investigations is to be used in the assessment of data uncertainty (see section on uncertainty 

in Chapter 7). 

2 Some emission estimates may be derived using mass or energy balances, engineering calculations, or computer simulation models. 

In addition to investigating the input data to these models, companies should also consider whether the internal assumptions 

(including assumed parameters in the model) are appropriate to the nature of the company's operations. 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 39 
CHAPTER 7 Design Principles

Activity Data 

The collection of high quality activity data will 

often be the most significant limitation for corporate GHG inventories. Therefore, establishing 

robust data collection procedures needs to be a 

priority in the design of any company’s inventory program. The following are useful measures 

for ensuring the quality of activity data: 

■ Develop data collection procedures that 

allow the same data to be efficiently collected in future years. 

■ Fuel consumption data should be converted 

to energy units before applying carbon content emission factors, which may be better 

correlated to a fuel’s energy content than its 

mass. The CO2 emissions from burning a unit 

of a specific fuel will be more accurately 

determined if the amount of energy units 

burned is used to calculate emissions. 

■ Current year data should be compared with 

previous year’s data and historical trends. If 

data do not exhibit relatively consistent 

changes from year to year, but rather undergo sharp increases or decreases, then the 

causes for this pattern should be investigated 

(e.g., changes of over 10 percent from year to 

year may warrant further investigation). 

■ Activity data from multiple reference 

sources (e.g., government survey data or 

data compiled by trade associations) 

should be compared with corporate data 

when possible. Although all data may have 

the same origin, such checks can ensure 

that consistent data is being reported to all 

parties. Data can also be compared among 

facilities within a company. 

■ Investigate activity data that is generated 

for purposes other than preparing a GHG 

inventory. In doing so, companies will need 

to check the applicability of this data to 

inventory purposes, including completeness, consistency with the source category 

definition, and consistency with the emission factors used. For example, data from 

different facilities may be examined for 

inconsistent measurement techniques, operating conditions, or technologies. Quality 

control measures (e.g., ISO) may have 

already been conducted during the data’s 

original preparation. These measures can 

be integrated with the company’s inventory 

quality management system. 

■ Check that base year recalculation procedures have been followed consistently and 

correctly. 

■ Check that operational and organizational 

boundary decisions have been applied correctly and consistently to the collection of 

activity data. 

■ Partners should investigate whether biases 

or other characteristics that could affect 

the data quality have already been previously identified (e.g., by communicating 

with experts at a particular facility or elsewhere). For example, a bias could be the 

unintentional exclusion of operations at 

smaller facilities or data that does not correspond exactly with the company’s 

organizational boundaries. 

■ If Partners are using additional data to estimate emission intensities or other ratios 

(i.e., sales, production, etc.), quality management measures should also extend to 

these additional data. 

■ If Partners are reporting data to the EPA for 

other reporting purposes, such as reporting 

under Title IV or Title V of the U.S. Clean Air 

40 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles

Act, then the same data should form the basis 

for Climate Leaders reporting. 

Title V of the U.S. Clean Air Act requires an operating permit for each industrial facility that is a 

“major source” of air pollution. Under this operating permits program, a facility is considered a 

major source when it emits minimum levels of a 

specific air pollutant. This can be a little as 10 

tons per year. Data collected under Title V that 

may be relevant to GHG reporting includes identification of sources of emissions at a facility and 

potentially data on energy flows. 

Title IV of the U.S. Clean Air Act requires owners 

or operators of affected units to measure and 

report sulfur dioxide (SO2), nitrogen oxide (NOx), 

and CO2 emissions under the U.S. EPA’s Acid 

Rain Program. Data on CO2 emissions reported 

under Title IV can be used directly in the Climate 

Leaders program. 

Emission Estimates 

Estimated emissions for a source category can 

be compared with historical data or other estimates to ensure that they fall within a 

reasonable range. Potentially unreasonable estimates provide cause for checking emission 

factors or activity data and determining 

whether changes in methodology, market 

forces, or other events are sufficient reasons 

for the change. In situations where actual emission monitoring occurs (e.g., power plant CO2 

emissions), the data from monitors can be compared with estimated emissions using activity 

data and emission factors. 

If any of the above emission factor, activity 

data, emission estimate, or other parameter 

checks indicate a problem, Climate Leaders 

encourages Partners to consider more detailed 

investigations into the accuracy of the data or 

appropriateness of the methods to reduce 

CHAPTER 7 

inventory error. These more detailed investigations can also be utilized to better assess the 

quality of data. One potential measure of data 

quality is a quantitative and qualitative assessment of their uncertainty. 

Inventory Quality and 

Inventory Uncertainty 

Preparing a GHG inventory is inherently both 

an accounting and a scientific exercise. Most 

applications for company-level emissions and 

removal estimates require that these data be 

reported in a format similar to financial 

accounting data. In financial accounting, it is 

standard practice to report individual point 

estimates (i.e., a single value versus a range of 

possible values). In contrast, the standard practice for most scientific studies of GHG and 

other emissions is to report quantitative data 

with estimated error bounds (i.e., uncertainty). 

Just like financial figures in a profit and loss or 

bank account statement, point estimates in a 

corporate emission inventory have obvious 

uses. However, the addition of some quantitative measure of uncertainty to an emission 

inventory may also have some uses. 

In an ideal situation, in which a company had 

perfect quantitative information on the uncertainty of its emission estimates at all levels, the 

primary use of this information would almost 

certainly be comparative. Such comparisons 

might be made across companies, across business units, across source categories, or through 

time. In this situation, inventory estimates 

could be rated or discounted based on their 

quality before they were used, with uncertainty 

being the objective quantitative metric for quality. Unfortunately, such objective uncertainty 

estimates rarely exist. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 41 
CHAPTER 7 Design Principles

Types of Uncertainties 

Uncertainties associated with GHG inventories 

can be broadly categorized into scientific 

uncertainty and estimation uncertainty. 

Scientific uncertainty arises when the science 

of the actual emission and/or removal process 

is not completely understood. For example, 

many of the direct and indirect factors associated with GWP values that are used to combine 

emission estimates for various GHGs involve 

significant scientific uncertainty. Analyzing and 

quantifying such scientific uncertainty is 

extremely problematic and is likely to be 

beyond the scope of most company inventory 

programs. 

Estimation uncertainty arises any time GHG 

emissions are quantified. Therefore all emission 

or removal estimates are associated with estimation uncertainty. Estimation uncertainty can 

be further classified into two types: model 

uncertainty and parameter uncertainty3. 

Model uncertainty refers to the uncertainty 

associated with the mathematical equations 

(i.e., models) used to characterize the relationships between various parameters and 

emission processes. For example, model uncertainty may arise either due to the use of an 

incorrect mathematical model or inappropriate 

input into the model. As with scientific uncertainty, estimating model uncertainty is also 

likely to be beyond most company’s inventory 

efforts; however, some companies may wish to 

utilize their unique scientific and engineering 

expertise to evaluate the uncertainty in their 

emission estimation models. 

Parameter uncertainty refers to the uncertainty associated with quantifying the parameters 

used as inputs (e.g., activity data and emission 

factors) into estimation models. Parameter 

uncertainties can be evaluated through statistical analysis, measurement equipment precision 

determinations, and expert judgment. 

Quantifying parameter uncertainties and then 

estimating source category uncertainties based 

on these parameter uncertainties will be the 

primary focus of companies that choose to 

investigate uncertainty in their emission 

inventories. 

Limitations of Uncertainty 

Estimates 

Given that only parameter uncertainties are 

within the feasible scope of most companies, 

uncertainty estimates for corporate GHG inventories will, of necessity, be imperfect. Complete 

and robust sample data will not always be available to assess the statistical uncertainty in 

every parameter. For most parameters (e.g., 

liters of gasoline purchased or tons of limestone consumed), only a single data point may 

be available. In some cases, companies can utilize instrument precision or calibration 

information to inform their assessment of statistical uncertainty. However, to quantify some 

of the systematic uncertainties (defined below) 

associated with parameters and to supplement 

statistical uncertainty estimates, companies 

will usually have to rely on expert judgement4. 

The problem with expert judgement, though, is 

that it is difficult to obtain in a comparable (i.e., 

unbiased) and consistent manner across 

parameters, source categories, or companies. 

3	 Emissions estimated from direct emission monitoring will generally only involve parameter uncertainty (e.g., equipment measurement 

error). 

4	 The role of expert judgement in the assessment of the parameter can be twofold: Firstly, expert judgement can be the source of the data 

that are necessary to estimate the parameter. Secondly, expert judgement can help (in combination with data quality investigations) 

identify, explain, and quantify both statistical and systematic uncertainties (see following section). 

42 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles

For these reasons, almost all comprehensive 

estimates of uncertainty for GHG inventories 

will be not only imperfect but also have a subjective component and, despite the most 

thorough efforts, are themselves considered 

highly uncertain. In most cases, uncertainty 

estimates cannot be interpreted as objective 

measures of quality, nor can they be used to 

compare the quality of emission estimates 

between source categories or companies. 

An exception to this includes the following case in 

which it is assumed that either statistical or 

instrument precision data are available to objectively estimate each parameter’s statistical 

uncertainty (i.e., expert judgement is not needed): 

■ When two operationally similar facilities use 

identical estimation methodologies, the differences in scientific or model uncertainties 

can, for the most part, be ignored. Then 

quantified estimates of statistical uncertainty can be treated as being comparable 

between facilities. This type of comparability is what is aimed for in some trading 

programs that prescribe specific monitoring, estimation, and measurement 

requirements. However, even in this situation, the degree of comparability depends 

on the flexibility that participants are given 

for estimating emissions, the homogeneity 

across facilities, as well as the level of 

enforcement and review of the methodologies used. 

Given these limitations, the role of uncertainty 

assessments in developing GHG inventories 

includes: 

■ Promoting a broader learning and quality 

feedback process. 

■ Supporting efforts to qualitatively understand and document the causes of 

CHAPTER 7 

uncertainty and help identify ways of 

improving inventory quality. For example, 

collecting the information needed to determine the statistical properties of activity 

data and emission factors forces one to ask 

hard questions and to carefully and systematically investigate data quality. 

■ Establishing lines of communication and 

feedback with data suppliers to identify specific opportunities to improve the quality of 

the data and methods used. 

■ Providing valuable information to reviewers, 

verifiers, and managers for setting investment priorities to improve data sources and 

methodologies. 

The GHG Protocol has developed a supplementary guidance on uncertainty assessments 

(“Guidance on uncertainty assessment in GHG 

inventories and calculating statistical parameter uncertainty”) along with an uncertainty 

calculation tool, both of which are available on 

the GHG Protocol website. The guidance document describes how to use the calculation tool 

in aggregating uncertainties. It also discusses in 

more depth the different types of uncertainties, 

the limitations of quantitative uncertainty 

assessment, and how uncertainty estimates 

should be properly interpreted. 

Additional guidance and information on assessing uncertainty—including optional approaches 

to developing quantitative uncertainty estimates 

and eliciting judgments from experts—can be 

found in Volume VI of EPA’s Emissions Inventory 

Improvement Program documents on Quality 

Assurance/Quality Control and in chapter 6 of 

the IPCC’s Good Practice Guidance and 

Uncertainty Management in National 

Greenhouse Gas Inventories. 

Characterizing uncertainty is not required under 

Climate Leaders. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 43 
CHAPTER 8 D e s i g n P r i n c i p l e s

Tracking Progress Towards the 

GHG Reduction Goal 

As described in Chapter 11, Climate 

Leaders Partners establish corporatewide GHG reduction goals. Tracking 

progress towards that goal entails comparing current corporate-wide emissions to base year 

emissions. The final Climate Leaders goal evaluation is a comparison of corporate-wide GHG 

emissions in the goal year vs. the base year emissions. Climate Leaders goal accounting does not 

set requirements for interim years. While emissions increases may occur at individual sources, 

ideally a Partner’s overall emissions profile 

should be reduced over time in a clearly verifiable progression toward the reduction goal. GHG 

reductions can be measured by comparing 

absolute changes in the company’s overall GHG 

emissions over time, or by developing ratio indicators to track relative performance. 

Overview 

Focusing on the overall company GHG impact 

has the advantage of helping companies more 

effectively manage their aggregate GHG risks 

and opportunities. It also helps guide the transfer of resources to activities resulting in the 

most effective GHG emission savings. 

This chapter provides guidance on tracking 

progress toward the reduction goal. The 

Climate Leaders Partner’s goal should be 

achieved by reducing overall corporate 

emissions or emissions rate; and may also 

include successful completion of emission 

reduction “offset” projects. 

Corporate-Wide GHG 

Emissions 

Climate Leaders recommends calculating GHG 

emissions using a bottom-up approach. This 

involves calculating emissions at the level of an 

individual source and then rolling this up via 

facilities to the corporate level. This approach 

enables companies to scrutinize their GHG 

emissions information at different scales, 

thereby allowing enhanced understanding of 

their GHG emissions profile. This approach 

best allows companies to isolate, evaluate, 

and prioritize emission saving opportunities. 

Progress towards a goal can then be measured 

by comparing emissions over time on a facilityspecific, nationwide or even global basis. The 

Climate Leaders program requires comparison of 

summed corporate-wide emissions from all U.S. 

operations at a minimum. 

Offsets 

In some cases, companies may find that they can 

obtain lower-cost emission reductions by investing in offset projects. Offsets are reductions of 

direct or indirect emissions that occur outside the 

boundaries of the reporting company and occur 

as a result of projects that either reduce GHG 

emissions or through activities that promote carbon sequestration. Some example offset projects 

might include: 

Example 1: Coal mine methane emission reductions: offset investment by a 

company other than the coal mine 

operator or owner. 

Example 2: Replacing diesel fuel-fired generator with a photovoltaic system: 

offset investment by a company 

44 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles

other than the solar system manufacturer or distributor, or the 

electricity generator or user. 

Example 3: 	 Replacement of old HVAC systems 

with more energy-efficient systems 

in schools: offset investment by an 

entity other than the school system 

Offsets may be generated through a variety of 

activities such as energy efficiency, low carbon 

no carbon energy projects, process emission 

reductions, or carbon sequestration activities. 

Fundamentally, offsets are generated by investing 

in projects that result in verifiable emissions 

reductions or in removing GHGs from the atmosphere (e.g., enhancing carbon sinks). 

Appropriate supporting information addressing 

the validity and credibility of purchased offsets 

must be included. Key elements in quantifying and 

reporting emissions from offset projects include: 

■ Determining the project temporal, spatial, 

and operational boundaries. 

■ Establishing the baseline. The baseline emissions scenario provides a reference point for 

what emissions would have been without the 

project intervention. 

■ Confirming project environmental additionality 

and regulatory surplus: Offset activities must 

result in GHG reductions that are additional to 

any that would otherwise occur in the absence 

of the offset project activity. Activities must be 

surplus to those that are required by any type 

of regulation (GHG, criteria pollutants, or 

other). 

■ Examining project leakage. Leakage relates 

to increases or decreases of GHG emissions 

elsewhere as a result of a project. 

■ Permanence, saturation, and duration in carbon sequestration projects. 

■ Monitoring and verification guidelines. 

CHAPTER 8 

Climate Leaders allows Partners to invest in offset 

projects as a way to meet their GHG reduction 

goal. Of paramount importance is the delineation 

of offset project reductions with a robust, valid, 

and quantifiable accounting system that provides 

credible and verifiable data. The WRI and WBCSD 

are currently co-convening an effort to develop a 

guidance module for accounting for project-based 

emission reductions that is robust and consistent 

with the potential financial value and integrity of 

any commodity that may be attached to reductions. Climate Leaders will provide offset 

guidance consistent with that evolving standard to 

the extent practicable. Climate Leader offset guidance is currently under development. 

Accounting for 

Emissions from 

Electricity/Steam 

Sales 

Non-utility Partners may sell a portion of their 

own generated electricity and/or steam output to 

another company directly or to the grid. The 

emissions from these energy sales are not included when calculating a Partner’s progress towards 

their Climate Leader’s normalized GHG reduction 

goal. Partners first include the emissions associated with energy production as direct emissions in 

their inventory. They then calculate the emissions 

associated with only the sales of electricity 

and/or steam and report them separately as 

absolute emissions (as per the Climate Leaders 

guidance for Indirect Emissions from 

Purchases/Sales of Electricity and Steam). These 

emissions are normalized using the Partner’s normalization factor and listed as an emission 

reduction. These emission reductions from sold 

electricity and/or steam are not netted with total 

direct emissions but are accounted for when evaluating a Partners progress towards meeting their 

reduction goal and can be use to meet a normalized reduction target. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 45 
CHAPTER 9 D e s i g n P r i n c i p l e s

Reporting GHG Emissions

The Climate Leaders GHG inventory 

reporting requirements are designed to 

provide credibility and promote continuous improvement in corporate emissions 

accounting procedures. 

This chapter provides guidance to Partners, thirdparty verifiers, and other interested parties on the 

steps needed to fulfill the Climate Leaders reporting 

requirements. It is not intended to provide EPA 

guidance on GHG inventory verification. However, 

EPA allows Partners who wish to undertake a rigorous third-party verification of their GHG inventories 

to submit a verification report certifying that, at a 

minimum, the requirements of the Climate Leaders 

GHG inventory review have been met. 

GHG Inventory 

Reporting Requirements 

Overview 

All Climate Leaders Partners can receive free 

technical assistance from EPA’s team of experts 

to complete the program’s reporting requirements. The reporting requirements consist of 

three major components: 

1. Partners complete and maintain an Inventory 

Management Plan (IMP) — or a similar collection of Standard Operating Procedures — 

that describes the process for completing a 

high quality, corporate entity-wide inventory. 

2. Partners complete and submit to EPA on a 

yearly basis the Annual GHG Inventory 

Summary and Goal Tracking Form that 

reports GHG emissions at a corporate level 

and details progress towards meeting their 

GHG reduction goal. 

3.	 EPA conducts the following reviews: 

■ A desktop review of the Partner’s GHG accounting methods and systems as detailed in their 

IMP. 

■ A desktop review of the Partner’s corporate GHG 

inventory data as reported in their Annual GHG 

Inventory Summary and Goal Tracking Form. 

■ An optional desktop review of the Partner’s facility-level GHG data. 

■ One on-site visit to review facility-level implementation of the IMP. 

An initial review is conducted for the Partner’s 

IMP and base year inventory. A follow-up is then 

conducted for the goal year inventory to provide 

assurance that the goal is met. Interim year 

inventories are reviewed; however, the IMP is 

reviewed only when there have been major revisions or updates. 

A flow chart describing the reporting process is 

provided in Figure 9-1. 

Reporting Requirements 

and Technical 

Assistance 

The major components of the Climate Leaders 

reporting requirements consist of the IMP, the 

Annual GHG Inventory Summary and Goal 

Tracking Form, and the review process as 

described in further detail below. Technical assistance is available to Partners as they develop 

and document their IMP and complete their 

inventory, as well as during their EPA review 

process. Technical assistance is also described in 

further detail below. 

46 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles CHAPTER 9 

Figure 9-1: Reporting Requirements Flow 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 4 7
CHAPTER 9 D e s i g n P r i n c i p l e s

GHG Accounting Methods 

and Systems – Inventory 

Management Plan 

Partners complete and maintain an IMP that 

describes their process for completing a highquality, corporate-wide inventory. Companies use 

an IMP to institutionalize a process for collecting, 

calculating, and maintaining GHG data. A 

detailed IMP checklist describing the individual 

components and level of detail necessary is 

attached as Appendix 3 (Columns 1 & 2). 

Partners may have a single IMP document that 

addresses all of the elements that go into developing their corporate inventory, or they might 

have an equivalent collection of procedures and 

other relevant information. EPA expects the critical elements of an IMP to be developed within 

one year of a Partner joining the program, while 

other elements can be phased in over time (as 

noted in Appendix 3). The seven major sections 

of the IMP are described below. 

■ Partner Information: company name, 

address, and inventory contact information 

■ Boundary Conditions: organizational and 

operational boundary descriptions 

■ Emissions Quantification: quantification 

methodologies and emissions factors 

■ Data Management: data sources, collection 

process, and quality assurance 

■ Base Year: base year adjustments for structural and methodology changes 

■ Management Tools: roles and responsibilities, training, and file maintenance 

■ Auditing & Verification: auditing, management review, and corrective action 

The IMP is an internal process for the Partner to 

institutionalize the completion of a high quality 

inventory. The IMP should be designed with this 

in mind, not strictly as a reporting requirement to 

EPA. The checklist in Appendix 3 outlines what 

should be included in an IMP and can be used as 

a guide for creating an IMP or pulling together 

existing documents. The checklist does not represent, and should not be used as a substitute for 

an IMP 

Annual GHG Inventory 

Summary and Goal Tracking 

Form 

Partners complete and submit the Annual GHG 

Inventory Summary and Goal Tracking Form to 

EPA each year. This form describes emissions in 

terms of total CO2-equivalent at a corporate level, 

broken out by emission source type — core direct 

(e.g., stationary, process, and mobile sources), 

core indirect (e.g., electricity or steam purchases), optional (e.g., offsite waste disposal, product 

transport), and offsets (e.g., sequestration, renewables) — for both domestic and international (if 

applicable) sources. The form also includes historical totals and a performance indicator (if 

applicable) that is used to track progress toward 

a reduction goal. 

The Annual GHG Inventory Summary and Goal 

Tracking Form is attached as Appendix 4. 

Review Process 

EPA provides a desktop review of both the 

Partner’s IMP and its corporate GHG inventory 

data. EPA also offers a desktop review of facilitylevel GHG data for interested Partners. Many 

Partners have found the facility-level data review 

to be helpful in improving the quality of their 

inventory. One site visit is also conducted to 

ensure accurate facility-level implementation of 

the Partner’s IMP. 

48 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s

Desktop Review of the Inventory 

Management Plan 

EPA conducts a desktop review of the Partner’s 

GHG accounting methods and systems as 

detailed in the IMP Checklist. 

A complete list of issues to consider for the desktop review is attached as Appendix 3 (Column 

3). Once the desktop review of the IMP is completed, EPA informs the Partner whether their 

IMP meets or is below expectations for each item 

on the IMP Checklist. The desktop review also 

identifies required areas for improvement, 

optional areas for improvement, and best practices. For required areas for improvement, 

Partners submit a revised IMP to correct the deficiency. Optional areas for improvement are 

recommendations to the Partner that could help 

improve the accuracy, efficiency, or relevance of 

their inventories. Best practices are also noted 

and compiled into a database that will enable 

EPA to highlight and share innovative IMP practices with Partners in the future. 

Desktop Review of Corporate 

GHG Inventory Data 

The desktop review of the Partner’s GHG inventory covers a review of corporate inventory data 

disaggregated to the categories broken out in the 

Annual GHG Inventory Summary and Goal 

Tracking Form. The desktop GHG inventory 

review of corporate data includes identifying 

issues such as: 

■ Boundary Conditions. Are all emission 

source types within operational boundaries 

included as specified in IMP? Are all significant differences in the annual emissions 

profile explained? 

■ Base Year. If structural or methodology 

changes are reported: Do changes appear to 

be reflected in adjustments to base year emisCHAPTER 9 

sions? Do changes appear to be consistent 

with changes in annual inventory from the 

previous year’s inventory? 

■ Data Management/Goals. Does the inventory adequately provide data that allows the 

Partner to evaluate facility- and entity-wide 

progress against their Climate Leaders goal? 

Does the inventory appear to be on track for 

achieving reduction goal? What percentage of 

emissions and emissions reductions are 

occurring domestically vs. outside the U.S.? 

What percentage of reductions is occurring 

through offsets vs. emissions reductions? 

Based on the desktop review of corporate inventory data, EPA provides the Partner with findings 

and recommendations to improve the accuracy 

and relevance of their inventory. 

Desktop Review of Facility-Level 

GHG Inventory Data 

While not a requirement, EPA’s preference is to 

see facility level data; however, EPA recognizes 

that some Partners have confidentiality concerns 

with reporting at this level of disaggregation. If 

confidentiality is a concern, EPA can review the 

data at the Partner site. Many Partners have 

found the facility-level data review to be helpful 

in improving the quality of their inventory. 

The desktop GHG inventory review of facility 

data includes identifying issues such as: 

■ Boundary Conditions. Are all facilities 

identified in the IMP included? Are emission 

source types at each facility consistent with 

the IMP? Do emission totals appear consistent 

between facilities based on magnitude and 

type of operations? 

■ Data Management/Goals. Are emissions of 

each GHG correctly converted to CO2-equivalents? Are calculations outlined in the IMP 

correctly completed for each emission type at 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 49 
CHAPTER 9 Design Principles

each facility? Does activity data used reflect 

that specified in the IMP? Do facility subtotals 

sum to the reported corporate totals? 

Based on the desktop review of facility inventory 

data, EPA provides the Partner with findings and 

recommendations to improve the accuracy and 

relevance of their inventory. 

On-Site Review of IMP 

Implementation 

Once the desktop reviews have been completed, 

one on-site visit is conducted to review facilitylevel implementation of the IMP. This on-site 

review is designed to give confidence in the credibility of the data reported to EPA, as well as to 

foster continuous improvement in the emissions 

accounting and reporting procedures of Climate 

Leaders Partners. The goal of the review is to 

determine whether there are ways to improve the 

accuracy, efficiency, and relevance of the inventory created by the IMP. To accomplish this, the 

inventory performance at the site should be significant to the overall inventory and notably 

relevant to other facilities. EPA, in consultation 

with its Partners, determines the most appropriate site to visit based on the following factors: 

■ Risk. EPA strives to review facilities with the 

greatest overall contribution to corporate 

emissions, or those with emissions profiles 

that are the most representative of corporate 

emissions 

■ Potential Benefit to Partners. EPA strives to 

review facilities that offer the best opportunity for technical assistance to benefit Partners’ 

inventory efforts. 

Ideally, a site that is a large emitter, has many of 

the largest emission types, and represents the 

most common business activity, data management system, and environmental/quality 

management system is identified. Where process 

emissions are a large fraction of the total corporate inventory, preference is given to these sites, 

especially in cases where sector-specific guidance 

is not available from EPA. 

Once a site is selected, EPA conducts a telephone 

conference with the Partner to identify the GHG 

emissions sources at the site, key personnel at the 

site, data sources to review, equipment/ 

processes to be visited, safety/security issues, and 

other logistics. It is anticipated that most site visits 

will last one day, but more complicated facilities 

may require more time. An example of a typical 

schedule for an onsite visit is shown in Figure 9-2. 

The site review includes sampling source data, 

tracing data through the entire data management 

chain, and checking calculations. A complete list 

of issues to consider for the on-site review is 

attached as Appendix 3 (Column 4). Once the site 

review is complete, EPA informs the Partner 

whether their IMP implementation at the site 

meets expectations or requires improvement for 

each item on the IMP Checklist. The site review 

also identifies optional areas for improvement, as 

well as best practices. For required areas for 

improvement, Partners submit additional documentation detailing the steps taken to address 

these issues. The optional areas for improvement 

are recommendations to the Partner that could 

help improve the accuracy, efficiency, or relevance 

of their inventory management systems. Best practices are also noted and compiled into a database 

that will enable EPA to highlight and share innovative IMP practices with Partners in the future. 

Third-Party Verification 

Many Climate Leaders Partners have completed 

or are considering third-party verification of their 

inventories. As an alternative to the primary 

reporting option, EPA allows Partners that undertake a rigorous third-party verification of their 

GHG inventories to submit a verification report 

50 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s CHAPTER 9 

Figure 9-2: Sample Onsite IMP Review Schedule 

Typical Schedule for Climate Leaders Onsite IMP Review 

This schedule assumes that a facility of moderate complexity would be visited. Very complex facilities may require a longer agenda; very small or noncomplex facilities may require a shorter agenda. 

1-2 Weeks in Advance 

EPA and Partner discuss source types included at the facility, business/product divisions within the 

facility, partner personnel required during the visit, safety procedures, and logistics. The partner representative ensures that required personnel will be available. 

Day of the Onsite Review 

8:00-8:30 am 

The reviewer arrives onsite, clears security, attends required safety briefing (if any). Data confidentiality is discussed. (Note: reviewers are not allowed to sign non-disclosure agreements). 

8:30 -9:00 am

The reviewer meets with the Climate Leaders representative, local (define) EHS representative, and 

facility management (as appropriate) to discuss objectives for site visit, to review major operations 

and processes used at the facility, and to identify specific areas of interest for the onsite review. 

9:00 - 11:00 am

Tour of facility. The reviewer will be attempting to understand chemical/manufacturing/generating 

processes used at the plant in order to review the completeness of the emission source list and to 

understand the specific mode of operation for these sources. Discussions occur with facility operators 

during the tour. 

11:00 am - 12:00 pm

The reviewer and EHS representative meet with facility staff responsible for tracking electrical, 

steam, and fuel purchases (non-utilities) or for quality assurance/quality control (QA/QC) of 

Continuous Emissions Monitoring System (CEMS) data and Title IV reporting (utilities). Review of 

activity data used for this estimate and discussion of any unit conversions/calculations/QC of data 

performed by the Environmental Health and Safety (EHS) representative. Use of any data management tools and data review by other personnel are also discussed. 

12:00 - 1:00 pm

Working lunch, onsite or offsite. As necessary, the reviewer and the Partner further discuss types of 

emission sources, business divisions, and key performance indicator (KPI) tracking. 

1:00 - 3:00

The reviewer and the EHS representative meet with personnel responsible for tracking of activity 

data from other processes or emission sources, tracking of KPI (if performed at facility level), and for 

management and QA/QC of data. 

3:00 - 4:00

The reviewer and the Partner’s representative discuss preliminary findings and any areas of concern. 

Approximately 1 Week After Visit 

Formal report provided by EPA to the Partner. 

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CHAPTER 9 D e s i g n P r i n c i p l e s

certifying that, at a minimum, the requirements of 

the Climate Leaders GHG inventory review have 

been met. Partners choosing to submit to EPA a 

third-party verification report are not required to 

submit an IMP to EPA, nor are the IMP desktop 

review and on-site review by EPA required. 

However, Partners are still required to submit the 

Annual GHG Inventory Summary and Goal 

Tracking Form to EPA each year. 

The third-party verification report must certify 

that the requirements of the Climate Leaders GHG 

inventory review process have been met. This 

includes a minimum of one on-site visit, although 

more may be appropriate. The third-party verification report must address all of the required IMP 

checklist components, both in a desktop review 

and during the site visit(s). EPA is available via 

telephone conference to answer Partner’s or 

third-party verifier’s questions on these requirements. When Partners choose to use third-party 

verification in lieu of submitting an IMP, then 

third-party verification is required for the 

Partner’s base year inventory and for its goal 

year inventory. 

Partners interested in third-party verification are 

encouraged to discuss this with EPA to better 

understand verification options and other considerations. 

Technical Assistance to 

Complete Base Year 

Reporting 

EPA provides up to 80 hours of technical assistance to each Partner as they develop and 

document their IMP and complete their base-year 

inventory. Technical assistance encompasses all 

aspects of creating a credible GHG inventory, 

including creating and implementing GHG 

accounting methods, and measuring, tracking, 

and reporting GHG emissions. EPA also provides 

an inventory review process to offer constructive 

feedback on improving the accuracy, efficiency, 

and relevance of Partners’ GHG inventory data 

and management systems. The level of assistance 

involved will vary by the needs of the Partner. 

Ongoing Technical 

Assistance 

After the completion of a Partner’s base year 

inventory, EPA experts continue to provide up to 

10 hours annually of technical assistance in subsequent years to help Partners update their IMP, 

adjust their base year inventory for significant 

changes, and calculate new emission sources. 

Types of technical assistance available include: 

■ Assistance in understanding the Climate 

Leaders GHG Inventory Protocol, which 

includes the Design Principles, cross-sector 

modules, and sector-specific modules. 

■ Guidance on selecting organizational and 

operational boundaries. 

■ Assistance identifying sector-specific emissions sources. 

■ Assistance identifying methods, types of data 

needed, and emission factors used to calculate emissions. 

■ Help defining estimation methods for small 

sources of emissions to minimize unnecessary data collection. 

■ Support in creating a GHG management system or IMP based on best practices. 

■ One onsite visit to review implementation of 

the IMP. 

■ On-call support for technical queries. 

52 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s

Corporate Data 

Management 

Approaches 

The following describes various corporate GHG 

data management approaches. 

Roll-Up GHG Emissions Data 

to Corporate Level 

To report a corporation’s total GHG emissions, 

companies usually need to gather and summarize data from multiple facilities, possibly in 

different countries and business divisions. It is 

important to plan this process carefully to minimize the reporting burden, reduce the risk of 

errors that might occur while compiling data, 

and ensure that all facilities are collecting information on an approved, consistent basis. 

Ideally, corporations will integrate GHG reporting with their existing reporting tools and 

processes, and take advantage of any relevant 

data already collected and reported by facilities 

to division or corporate offices, regulators, or 

other stakeholders. 

For internal reporting up to the corporate level, 

it is recommended that standardized reporting 

formats be used to ensure that data received 

from different business units and facilities is 

comparable, and that internal reporting rules 

are observed. Standardized formats can significantly reduce the risk of errors. Common 

differences between sites that can result in errors 

in the corporate inventory include: 

■ Different emission factors and quantification 

methodologies used by each site 

■ Sites reporting data in different units of measure that then go uncorrected 

■ Different interpretation of what constitutes de 

minimus 

CHAPTER 9 

■ Unclear roles and responsibilities resulting in 

incomplete data sets sent to corporate 

■ Different interpretation of how to establish 

organizational and operational boundaries 

■ Availability of activity or other measured 

data necessary to do emissions calculations 

■ Differences in reporting periods 

The reporting under the Climate Leaders program 

will help to ensure that there is a process in 

place for meeting GHG data standards. It will also 

provide suggestions for ongoing improvements 

and efficiencies in GHG inventory development 

through the corporate-wide IMP submittal and 

desktop review, as well as through the onsite IMP 

review, as documented above. 

Centralized Approach: 

Individual Facilities Report 

Activity/Fuel Use Data 

This approach may be particularly suitable for 

office-based organizations. Requesting that 

facilities report their activity/fuel use data may 

be the preferred option if: 

■ The staff at the corporate or division 

level can calculate emissions data in a 

straightforward manner on the basis of 

activity/fuel-use data; and 

■ Emissions calculations are standard across a 

number of facilities. 

Decentralized Approach: 

Individual Facilities Calculate 

GHG Emissions Data 

Asking facilities to calculate GHG emissions 

themselves will help to increase their awareness 

and understanding of the issue. However, it may 

also lead to resistance, increased training needs, 

an increase in calculation errors, and a greater 

need for auditing of calculations. Requesting 

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CHAPTER 9 Design Principles

that facilities calculate GHG emissions themselves may be the preferred option if: 

■ GHG emission calculations require detailed 

knowledge of the kind of equipment being 

used at facilities. 

■ GHG emission calculations methods vary 

across a number of facilities. 

■ Process emissions (in contrast to emissions 

from burning fossil fuels) make up an 

important share of total GHG emissions. 

■ Resources are available to train facility staff 

to conduct these calculations and to audit 

them, or a user-friendly tool is available to 

simplify the calculation and reporting task 

for facility-level staff. 

■ Local regulations require reporting of GHG 

emissions at a facility level. 

The choice of collection approach depends on 

the needs and characteristics of the reporting 

company. To maximize accuracy and minimize 

reporting burdens, some companies use a combination of two approaches. Complex facilities 

with process emissions calculate their emissions at the facility level, while facilities with 

uniform emissions from standard sources only 

report fuel use, electricity consumption, and 

travel activity. The corporate database or 

reporting tool then calculates total GHG emissions for each of these standard activities. 

The two approaches are not mutually exclusive 

and should produce the same result. Thus companies desiring a consistency check on 

facility-level calculations can follow both 

approaches and compare the results. Even 

when facilities calculate their own GHG emissions, corporate staff may still wish to gather 

activity/fuel use data to double-check calculations and explore opportunities for emissions 

reductions. These data should be available and 

transparent to staff at all corporate levels. 

Corporate staff should also verify that facilityreported data are based on well-defined, 

consistent, and approved inventory boundaries, reporting periods, calculation 

methodologies, etc. 

Whether final GHG emissions figures are 

derived at the facility or corporate level, the 

data specified at the beginning of this chapter 

must be collected and supplied for the final 

report. The Climate Leaders program requires 

that Partners report corporate-level emissions 

data and prefers that Partners provide supporting 

information for each facility, as detailed above. 

54 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s CHAPTER 10 

Verification of 

GHG Emissions

Climate Leaders Partners may choose 

to pursue third-party verification. 

However, Partners are still required 

to submit the Annual GHG Inventory Summary 

and Goal Tracking Form to EPA each year (as 

described in Chapter 9). 

Verification is an objective assessment of the 

accuracy and completeness of reported GHG 

information to pre-established GHG accounting 

and reporting principles. Although the practice 

of verifying corporate GHG inventories is still 

evolving, the emergence of widely accepted 

standards, such as the GHG Protocol Corporate 

Standard and the forthcoming GHG Protocol 

Project Quantification Standard, should help 

GHG verification become more uniform, credible, and widely accepted. 

Verification involves an assessment of the risks 

of material discrepancies in reported data. 

Discrepancies relate to differences between 

reported data and data generated from the 

proper application of the relevant standards 

and methodologies. In practice, verification 

involves the prioritization of effort by the 

verifier toward the data and associated systems 

that have the greatest impact on overall data 

quality. 

This section provides guidance on conducting 

an independent verification of a GHG inventory. 

It is highly recommended that a company 

develops its inventory in such a way that verification can be easily conducted. The Climate 

Leaders program provides an IMP checklist (IMP 

elements, as discussed in Chapter 9) that delineates the components that must be included 

when Partners opt for third-party verification 

(Appendix 3). 

Internal Assurance 

While verification is often undertaken by an 

independent, external third party, this may not 

always be the case. Many companies interested 

in improving their GHG inventories may subject 

their information to internal verification by personnel who are independent of the GHG 

accounting and reporting process. Both internal 

and external verification should follow similar 

procedures and processes. Independent internal verifications can provide valuable 

assurance over the reliability of information. 

Internal verification can be a worthwhile learning experience for a company prior to 

commissioning an external verification by a 

third party. It can also provide external verifiers 

with useful information to begin their work. 

The Concept of Materiality 

The concept of “materiality” is essential to 

understanding the process of verification. 

Chapter 1 provides a useful interpretation of 

the relationship between the principle of completeness and the concept of materiality. 

Information is considered to be material if, by 

its inclusion or exclusion, it can be seen to 

influence any decisions or actions taken by the 

users of it. A material discrepancy is an error 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 55 
CHAPTER 10 Design Principles

(e.g., from an oversight, omission, or miscalculation) that results in a reported quantity or 

statement being significantly different from the 

true value or meaning. To express an opinion 

on data or information, a verifier would need to 

form a view on the materiality of all identified 

errors or uncertainties. 

While the concept of materiality involves a 

value judgement, the point at which a discrepancy becomes material (materiality threshold) 

is often pre-defined. As a rule of thumb, an 

error is considered to be materially misleading 

if the value exceeds 5 percent of the total inventory for the part of the organization being 

verified. 

The verifier needs to assess an error or omission in the full context within which the 

information is presented. For example, if a 2 

percent error prevents a company from achieving its corporate target then this would most 

likely be considered material. Understanding 

how verifiers apply a materiality threshold will 

enable companies to more readily establish 

whether the omissions of an individual source 

or activity from their inventory is likely to raise 

questions of materiality. 

A specific materiality threshold will not be 

defined under the Climate Leaders program; it is 

left up to the discretion of the Partner and/or verifier. Partners need to at least make an estimate 

for all sources, facilities, and operations and 

include the estimates in the inventory. The estimates can be approximate, and Partners can 

work with EPA to determine the potential impact 

on the inventory. Sources can be excluded from 

the inventory only if it is justified that they represent an insignificant amount of a Partner’s total 

emissions AND either: 1) there is insufficient 

scientific understanding to develop a reliable 

method for estimating emissions, or 2) an estimation method exists but data are not available (or 

would require excessive cost to the Partner to 

acquire) to estimate emissions. 

Selecting a Verifier 

When Partners choose to use external verification to meet EPA’s reporting requirements, the 

verifier should be an independent, third-party 

verifier. 

Some factors to consider when selecting a 

verifier include their: 

■ Previous experience and competence in 

undertaking GHG verifications 

■ Understanding of GHG issues, including 

calculation methodologies 

■ Understanding of the company’s operations 

and industry 

■ Objectivity, credibility, and independence 

It is important to recognize that the knowledge 

and qualifications of the individual(s) conducting the verification can be more important 

than those of the organization(s) they come 

from. Companies should select organizations 

based on the knowledge and qualifications of 

their actual verifiers and ensure that the lead 

verifier assigned to them is appropriately 

experienced. Effective verification of GHG 

inventories often requires a mix of specialized 

skills, not only at the technical level (e.g., engineering experience or an industry specialist) 

but also at a business level (e.g., verification 

and industry specialization). 

56 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles CHAPTER 10 

Preparing for GHG 

Verification 

Preparation of the IMP (as described in Chapter 

9) allows Partners to prepare for the verification. 

The third-party verification report must certify 

that the requirements of the Climate Leaders GHG 

inventory review process have been met. 

Appropriate documentation needs to be available to support the GHG inventory being 

subjected to external verification. Statements 

made by management for which there is no 

available supporting documentation cannot be 

verified. Where a Partner has not yet implemented systems for routinely accounting and 

recording GHG emissions data, an external verification will be difficult and may result in the 

verifier being unable to issue an opinion. Under 

these circumstances, the verifiers may make 

recommendations on how current data collection and collation process should be improved 

so that an opinion can be obtained in future 

years. 

Partners are responsible for ensuring the existence, quality, and retention of documentation 

so as to create an audit trail of how the inventory was compiled. If a Partner issues a specific 

base year against which it assesses its GHG 

performance, it should retain all relevant 

historical records to support the base year 

data. These issues should be borne in mind 

when designing and implementing GHG data 

processes and procedures. 

IMP Checklist 

When verification is undertaken to meet Climate 

Leaders reporting requirements, then the verification should address each of the elements of the 

IMP, which is located in Appendix 3. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 57 
CHAPTER 11 D e s i g n P r i n c i p l e s

Guidance on Setting a GHG 

Reduction Goal 

EPA offers flexibility in goal setting 

because every company has a unique set 

of GHG emissions sources and reduction 

opportunities. Once Partners have completed 

their base year GHG inventory, EPA works closely 

with Partners to set an individualized GHG reduction goal. This goal must be: 

■ Corporate-wide (including at least all U.S. 

operations) 

■ Based on the most recent base year for which 

data are available 

■ Achieved over 5 to 10 years 

■ Expressed as an absolute GHG reduction or 

as a decrease in GHG intensity 

■ Aggressive compared to the projected GHG 

performance for the Partner’s sector 

Goal Evaluation 

Considerations 

Partners represent a diverse group of companies, 

including energy producers, manufacturers, and 

service-oriented businesses. What EPA considers 

an aggressive goal may vary for different sectors 

and for different companies depending on a variety of factors: 

■ Sector Issues. Historically, GHG intensity 

tends to decrease over time in most sectors 

as equipment is replaced with newer, more 

efficient technology. This trend can be rapid 

in sectors where capital stock turns over 

quickly, and much slower in traditional 

manufacturing sectors. The rate of intensity 

improvement can also be affected by the 

growth rate of the sector. 

■ Company Issues. Partners within the same 

sector can have different GHG emissions 

sources and a wide range of reduction opportunities. In addition, some Partners have 

undertaken GHG reduction activities prior to 

joining Climate Leaders. These actions are 

taken into consideration when evaluating a 

Partner’s proposed goal. 

Goal Evaluation 

Methodology 

EPA individually evaluates each proposed GHG 

reduction goal through the following process: 

■ The goal is evaluated against a projected 

benchmark GHG emissions improvement rate 

for each Partner’s sector. In cases where a 

Partner operates in multiple sectors, a weighted average is used. The benchmark is a 

combination of projected average energy 

intensity improvement and any projected 

process-related emissions intensity changes. 

EPA expects every goal to be markedly better 

than the projected benchmark performance 

for the Partner’s sector. 

■ EPA also considers a Partner’s current emissions intensity when evaluating its GHG 

reduction goal. By comparing the Partner’s 

current performance to its sector, EPA recognizes that many companies have already 

made significant reductions in their GHG 

58 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s

emissions or GHG intensity. Companies that 

are currently very efficient for their sector 

will not be expected to commit to a reduction 

goal that is as aggressive as companies that 

are less efficient than their sector average. 

Defining Projected 

Sector Benchmarks 

for GHG Emissions 

Performance 

The first step in evaluating a Partner’s goal is to 

create a benchmark for comparison. EPA currently uses the following models to help develop an 

appropriate benchmark: 

■ For commercial and industrial companies, 

EPA uses both the U.S. Department of 

Energy’s National Energy Modeling System 

(NEMS) and the Bureau of Labor Statistics’ 

(BLS) forecast input/output tables for the U.S. 

economy to project benchmark energy intensity improvement by sector. 

■ To project GHG emissions from electric generators, EPA uses the Integrated Planning Model 

(IPM) developed by ICF Resources Inc. 

In cases where emissions from industrial processes are a significant source of a Partner’s 

inventory (such as cement or semiconductor 

manufacturing), EPA performs additional analysis 

based on sector-specific sources of process-related emissions data and projections. These data 

are then combined with the projected energy 

intensity improvement to develop a benchmark 

GHG emissions improvement rate for the 

Partner’s sector. 

CHAPTER 11 

Choosing a Key 

Performance Indicator 

for Normalized Goals 

EPA allows goals to be expressed as an absolute 

GHG emissions reduction or as a decrease in 

GHG intensity. Absolute GHG reduction goals 

compare total GHG emissions in the goal year to 

those in a base year. GHG intensity goals allow a 

company to account for increases or decreases in 

production over time. The ratio of GHG emissions 

over an appropriate normalizing factor becomes 

the Partner’s key performance indicator to measure GHG intensity. Normalizing factors are 

typically measured in physical units (e.g., tons of 

steel) or economic units (e.g., value of shipments). Due to the large variability in economic 

metrics, Climate Leaders generally prefers metrics based on physical values, which track 

year-to-year changes in emissions intensity more 

accurately. However, for companies that produce 

a wide diversity of products, using an economic 

metric might be more appropriate. EPA offers 

technical assistance to help Partners choose a 

suitable key performance indicator. 

Reporting and Goal 

Tracking 

Climate Leaders Partners report annual GHG 

inventory data to EPA to document progress 

towards their reduction goal. Partners with a 

worldwide goal report domestic and international 

emissions separately as well as reporting a 

worldwide total. This system allows EPA to 

ensure that Partners are demonstrating leadership through achieving a portion of their GHG 

reductions in the United States. Once Partners 

meet their initial Climate Leaders goal, EPA will 

work with them to set a new reduction goal. 

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CHAPTER 11 D e s i g n P r i n c i p l e s 

Absolute and organization. Intensity targets track reductions 

Intensity Targets per unit of output of the organization, and may 

be applicable where growth of the organization 

Partners may select either an absolute emissions may offset efficiency improvements or other 

target or an intensity target. Absolute targets reductions. Table 11-1 compares the two types 

track reductions in the total emissions of an of targets. 

Table 11-1: Comparison of Absolute and Intensity Targets

Parameter Absolute Target Intensity Target 

Reduction Type Specified quantity of Reductions per a business metric. 

reductions to the 

atmosphere. No guarantee that there will be less GHG emissions 

to the atmosphere – absolute emissions may rise 

even if intensity goes down (and output increases). 

Metric Definition Not applicable May be difficult to define a single common business 

metric for companies with diverse operations. 

If a monetary variable is used for the business metric (i.e., dollar of revenue or sales), it should be 

adjusted for changes in product prices, product 

mix, and inflation – adds complexity to the tracking 

process. 

Confidentiality Not applicable—no May be an issue—data on the business metric 

business metric needs to be reported 

assigned to target 

Effects from Base Significant structural GHG changes due to production fluctuations are 

Year changes add complexi- usually not required 

Recalculations ty to tracking progress 

over time 

Relation to Recognizes a company Unrelated 

Organic Growth for reducing GHGs by 

or Decline decreasing production 

or output 

Comparisons of Does not allow for Comparability of GHG performance between comGHG Intensity/ comparison of GHG panies may be increased 

Efficiency performance between 

companies, if they 

choose to do so 

60 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
D e s i g n P r i n c i p l e s

Identifying GHG 

Reduction 

Opportunities 

Partners may find it easiest to begin the process 

of meeting a goal by examining their Climate 

Leaders GHG inventory and developing a list of 

emission reduction activities. Figure 11-1 illustrates the broad palette of emission reduction 

choices individual companies and facilities might 

consider. Once the Partner has assembled an 

array of emission reduction opportunities, the 

firm should consider establishing evaluation criteria to prioritize the reduction activities. Such 

evaluation criteria might include: 

■ Cost to implement 

■ Collateral benefits to the firm, the environment, and the community 

■ Net Return on Investment 

■ Time to implement 

CHAPTER 11 

■ Contribution to core business 

■ Contribution to brand image 

■ Obstacles to implementation 

With an evaluation protocol in place, the company can then best evaluate top preferences for 

emission reduction activities over the 5 to 10 

year time horizon and construct a defensible, 

credible, achievable GHG reduction goal. 

In addition to considering emission reduction 

opportunities within a company’s direct and 

indirect core emissions inventory and 

upstream/downstream optional emissions 

inventory, companies may also use emission 

offset projects towards completion of their 

GHG reduction goal. 

As depicted in Figure 11-1, emission reduction (or 

sequestration) opportunities generally fall into 

four main categories: 

Figure 11-1: Opportunities for GHG Reduction 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 61 
CHAPTER 11 Design Principles

■ Energy Efficiency 

■ Low Carbon or No Carbon Energy Use 

■ Process Optimization 

■ Carbon Sequestration 

The emissions associated with the generation of 

imported electricity, heat, or steam are a special 

case of indirect emissions. For many companies, 

electricity usage represents one of the most significant opportunities to reduce GHG emissions. 

Companies can reduce their use of electricity 

and/or use it more efficiently by investing in 

energy efficient technologies. Additionally, emerging green power markets enable some companies 

to switch to less GHG-intensive electricity suppliers. Companies can also install an efficient 

co-generation plant onsite to replace the import 

of more GHG-intensive electricity from the grid. 

Incorporating indirect emissions from electricity, 

heat, and steam usage into the core emissions 

reporting facilitates the transparent accounting of 

such choices. 

Process optimization can result in directly 

reduced GHG and conventional pollutant emissions. In addition to these direct emission 

reductions, indirect emission reductions may 

occur from improvements in energy efficiency, 

resource efficiency, waste minimization, and 

emissions reductions. 

Carbon can be sequestered in sinks including 

soil, woody debris, living plants, and even wood 

products. Challenges inherent in inventorying 

sequestered carbon include scientific uncertainty 

in measurement accuracy and precision, and 

questions about permanence, duration, and 

leakage. 

No specific process for constructing a reduction 

goal is required by the Climate Leaders program. 

However, Table 11-2 lays out a recommended 

strategy and describes the typical steps to efficiently create a credible, achievable goal. 

62 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s CHAPTER 11 

Table 11-2: Steps in Setting and Tracking Performance

Toward a GHG Target

Obtain senior management commitment. 

Implementing a reduction target is likely to necessitate changes in behavior and decision-making 

throughout the organization, and requires establishing an internal accountability and 

incentive system, as well as adequate resources. 

Decide on the target type (absolute vs. intensity). 

An absolute target is expressed in terms of a reduction over time in a specified quantify of GHG 

emissions to the atmosphere (i.e., tons of CO2-equivalents), whereas an intensity target is 

expressed as a reduction in the ratio of GHG emissions relative to another business metric 

(i.e., tons of CO2-equivalents per ton of product, per kWh, ton-mileage, etc) or some other 

metric such as sales, revenues, or office space. 

Decide on the target boundary. 

Under the Climate Leaders program, targets must be for reduction of CO2-equivalents on a absolute or 

intensity basis, for a minimum of core direct and indirect emissions from U.S. operations. 

Choose the target base year. 

Under the Climate Leaders program, for the purpose of assessing a company’s performance against 

its emission reduction goal, the most current year that a Partner has data available 

should be its base year (fixed base year). 

Define the target time period. 

Under the Climate Leaders program, the goals should be based on prospective reductions 

beginning with the base year and looking 5-10 years into the future. 

Decide on the use of project offsets or credits. 

A GHG target can be met from internal reductions at sources included in the target boundary, or 

through additionally using offsets that are generated from GHG reduction projects that reduce emissions at sources outside the target boundary. It is important to ensure credibility of the offsets (see 

Chapter 8), specify the origin and nature of the offsets when reporting, as well as to check that the 

offsets have not also been counted toward another organization’s target (i.e., via contract). 

Establish a target double counting policy. 

For example, the policy must ensure that a GHG offset is not counted toward the target by 

both the selling and purchasing organizations. For an internal reduction project, the 

missions need to be added back to the inventory if the reductions are subsequently “sold” 

as an offset to another company. 

Decide on the target level. 

In addition to the guidelines and requirements from Steps 1 through 7, considerations include 

understanding key drivers affecting GHG emissions, developing reductions strategies, looking at 

the future of the company, factoring relevant growth factors, evaluating existing environmental 

plans or energy plans that will affect GHG emissions, and benchmarking GHG emissions with 

similar organizations. 

Track and report progress against the target. 

EPA Annual GHG Inventory Summary and Goal Tracking Form tracks progress against the target. 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 63 
APPENDIX 1 Design Principles 

GHG Emissions Sources by 

Sector 

Appendix 1 indicates examples of GHG not exhaustive and the reporting company 

emissions by emission category and should refer to Chapter 4 and interpret the releindustry sectors. These examples are vant emissions for its own situation. 

Sector 

Core Direct 

Emission Sources 

Core Indirect 

Emission 

Sources 

Optional Emission 

Sources 

Energy 

Energy ■ Stationary combustion (boilers ■ Stationary ■ Stationary combustion (mining 

Generation and turbines used in the combustion and extraction of fuels, energy 

production of electricity, heat or (consumption of for refining or processing fuels) 

steam, fuel pumps, fuel cells, 

flaring) 

■ Mobile combustion (trucks, 

purchased 

electricity, heat 

or steam) 

■ Process emissions (production of 

fuels, SF6 emissions) 

■ Mobile combustion 

barges and trains for 

transportation of fuels) 

(transportation of fuels/ waste, 

employee business travel, 

■ Fugitive emissions (CH4 leakage employee commuting) 

from transmission and storage 

facilities, HFC emissions from 

LPG storage facilities, SF6 

emissions from transmission 

■ Fugitive emissions (CH4 and CO2 

from waste landfills, pipelines, 

SF6 emissions) 

and distribution) 

Oil and Gas ■ Stationary combustion (process ■ Stationary ■ Stationary combustion (product 

Industry heaters, engines, turbines, combustion use as fuel or combustion for the 

flares, incinerators, oxidizers, (consumption of production of purchased 

production of electricity, heat purchased materials) 

and steam) electricity, heat ■ Mobile combustion 

■ Process emissions (process or steam) (transportation of raw 

vents, equipment vents, materials/products/waste, 

maintenance/ turnaround employee business travel, 

activities, non-routine activities) employee commuting, product 

■ Mobile combustion use as fuel) 

(transportation of raw ■ Process emissions (product use 

materials/products/waste; as feedstock or emissions from 

company owned vehicles) the production of purchased 

■ Fugitive emissions (leaks from materials) 

pressurized equipment, ■ Fugitive emissions (CH4 and CO2 

wastewater treatment, surface from waste landfills or from the 

impoundments) production of purchased 

materials) 

64 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles APPENDIX 1 

Core Indirect 

Core Direct Emission Optional Emission 

Sector Emission Sources Sources Sources 

Energy (continued) 

Coal Mining ■ Stationary combustion ■ Stationary ■ Stationary combustion (product 

(methane flaring and use, use of combustion use as fuel) 

explosives, mine fires) (consumption of ■ Mobile combustion 

■ Mobile combustion (mining purchased (transportation of coal/waste, 

equipment, transportation of electricity, heat employee business travel, 

coal) or steam) employee commuting) 

■ Fugitive emissions (CH4 ■ Process emissions (gasification) 

emissions from coal mines and 

coal piles) 

Metals 

Aluminum ■ Stationary combustion (bauxite 

to aluminum processing, coke 

baking, lime, soda ash and fuel 

use, on-site CHP) 

■ Process emissions (carbon 

anode oxidation, electrolysis, 

PFC) 

■ Mobile combustion (pre- and 

post-smelting transportation, 

ore haulers) 

■ Fugitive emissions (fuel line 

CH4, HFC and PFC, SF6 cover 

gas) 

■ Stationary 

combustion 

(consumption of 

purchased 

electricity, heat 

or steam) 

■ Stationary combustion (raw 

material processing and coke 

production by second party 

suppliers, manufacture of 

production line machinery) 

■ Mobile combustion 

(transportation services, 

business travel, employee 

commuting) 

■ Process emissions (during 

production of purchased 

materials) 

■ Fugitive emissions (mining and 

landfill CH4 and CO2, outsourced 

process emissions) 

Chemicals 

Nitric acid, 

Ammonia, 

Adipic acid, 

Urea, and 

Petrochemicals 

■ Stationary combustion (boilers, 

flaring, reductive furnaces, 

flame reactors, steam 

reformers) 

■ Process emissions 

(oxidation/reduction of 

substrates, impurity removal, 

N2O byproducts, catalytic 

cracking, myriad other 

emissions individual to each 

■ Stationary 

combustion 

(consumption of 

purchased 

electricity heat 

or steam) 

process) 

■ Mobile combustion 

(transportation of raw 

materials/products/waste) 

■ Fugitive emissions (HFC use, 

storage tank leakage) 

■ Stationary combustion 

(production of purchased 

materials, waste combustion) 

■ Process emissions (production 

of purchased materials) 

■ Mobile combustion 

(transportation of raw 

materials/products/waste, 

employee business travel, 

employee commuting) 

■ Fugitive emissions (CH4 and CO2 

from waste landfills and 

pipelines) 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 65 
APPENDIX 1 Design Principles

Core Indirect 

Core Direct Emission Optional Emission 

Sector Emission Sources Sources Sources 

Minerals 

Cement and 

Lime 

Waste 

■ Process emissions (calcination 

of limestone) 

■ Stationary combustion (clinker 

kiln, drying of raw materials, 

production of electricity) 

■ Mobile combustion (quarry 

operations, on-site 

transportation) 

■ Stationary 

combustion 

(consumption of 

purchased 

electricity, heat 

or steam) 

■ Stationary combustion 

(production of purchased 

materials, waste combustion) 

■ Process emissions (production of 

purchased clinker and lime) 

■ Mobile combustion 

(transportation of raw 

materials/products/waste, 

employee business travel, 

employee commuting) 

■ Fugitive emissions (mining and 

landfill CH4 and CO2, outsourced 

process emissions) 

Landfills, 

Waste 

combustion, 

Water service 

■ Stationary combustion 

(incinerators, boilers, flaring) 

■ Process emissions (sewage 

treatment, nitrogen loading) 

■ Fugitive emissions (CH4 

emissions from waste and 

animal product decomposition) 

■ Mobile combustion 

(transportation of 

waste/products) 

■ Stationary 

combustion 

(consumption of 

purchased 

electricity, heat 

or steam) 

■ Stationary combustion (recycled 

waste used as a fuel) 

■ Process emissions (recycled 

waste used as a feedstock) 

■ Mobile combustion 

(transportation of waste/ 

products, employee business 

travel, employee commuting) 

Pulp and Paper 

Pulp and 

paper 

■ Stationary combustion 

(production of steam and 

electricity, fossil fuel-derived 

emissions from calcination of 

calcium carbonate in lime kilns, 

drying products with infrared 

dryers fired with fossil fuels) 

■ Stationary 

combustion 

(consumption of 

purchased 

electricity, heat 

or steam) 

■ Mobile combustion 

(transportation of raw 

materials, products, and 

wastes, operation of harvesting 

equipment) 

■ Fugitive emissions (CH4 and 

CO2 from waste) 

■ Stationary combustion 

(production of purchased 

materials, waste combustion) 

■ Process emissions (production 

of purchased materials) 

■ Mobile combustion 

(transportation of raw 

materials/products/waste, 

employee business travel, 

employee commuting) 

■ Fugitive emissions (landfill CH4 

and CO2 emissions) 

66 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles APPENDIX 1 

Core Indirect 

Core Direct Emission Optional Emission 

Sector Emission Sources Sources Sources 

HFC, PFC, SF4, and HCFC 22 Production 

HCFC 22 

production 

■ Stationary combustion 

(production of electricity, heat 

or steam) 

■ Process emissions (HFC 

venting) 

■ Mobile combustion 

(transportation of raw 

materials/products/waste) 

■ Fugitive emissions (HFC use) 

■ Stationary 

combustion 

(consumption of 

purchased 

electricity, heat 

or steam) 

■ Stationary combustion (production 

of purchased materials) 

■ Process emissions (production of 

purchased materials) 

■ Mobile combustion (transportation 

of raw materialsproducts/waste, 

employee business travel, 

employee commuting) 

■ Fugitive emissions(fugitive leaks in 

product use, CH4 and CO2 from 

waste landfills) 

Semiconductor Production 

Semiconductor ■ Process emissions (C2F6, CH4, 

CHF3, SF6, NF3, C3F8, C4F8, N2O 

■ Stationary 

combustion 

production used in wafer fabrication, CF4 

created from C2F6 and C3F8 

processing) 

■ Stationary combustion 

(oxidation of volatile organic 

waste, production of 

electricity, heat or steam) 

(consumption of 

purchased 

electricity, heat 

or steam) 

■ Fugitive emissions (process 

gas storage leaks, container 

remainders/heel leakage) 

■ Mobile combustion 

(transportation of raw 

materials/products/waste) 

■ Stationary combustion (production 

of imported materials, waste 

combustion, upstream T&D losses 

of purchased electricity) 

■ Process emissions (production of 

purchased materials, outsourced 

disposal of returned process gases 

and container remainder/heel) 

■ Mobile combustion (transportation 

of raw materials/products/waste, 

employee business travel, 

employee commuting) 

■ Fugitive emissions (landfill CH4 and 

CO2 emissions, downstream 

process gas container 

remainder/heel leakage) 

Other Sectors* 

Service 

sector/Officebased 

organizations 

■ Stationary combustion 

(production of electricity, heat 

or steam) 

■ Mobile combustion 

(transportation of raw 

materials/waste) 

■ Fugitive emissions (mainly 

HFC emissions during use of 

refrigeration and airconditioning equipment) 

■ Stationary 

combustion 

(consumption of 

purchased 

electricity, heat 

or steam) 

■ Stationary combustion (production 

of purchased materials) 

■ Process emissions (production of 

purchased materials) 

■ Mobile combustion (transportation 

of raw materials/ products/ waste, 

employee business travel, 

employee commuting) 

* Businesses in “other sectors” can estimate GHG emissions using cross-sectoral estimation tools— 

stationary combustion, mobile (transportation) combustion, HFC use, measurement and estimation 

uncertainty, and waste. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 67 
APPENDIX 2 Design Principles 

Unit Conversions

This appendix provides useful informa- Emissions Estimation Methodologies for the Oil 

tion on conversion factors for basic and Gas Industry, February 2001. 

units of measure and fundamental fuel 

characteristics. Unless otherwise referenced, Global warming potentials for various greenmaterial is drawn from the American Petroleum house gases are presented in Figure 6-3 of 

Institute Compendium of Greenhouse Gas Chapter 6. 

Table A2-1: Conversion Factors 

Mass 

1 pound (lb) = 453.6 grams (g) = 0.4536 kilograms 

1 kilogram = 2.205 pounds (lb) = 1000 grams (g) 

1 short ton (ton) = 2000 pounds (lb) = 907.2 kilograms 

1 metric tonne (tonne) = 2205 pounds (lb) = 1000 kilograms 

= 1.1025 tons 

Volume 

1 cubic foot (ft3) = 7.4805 gallons 

1 cubic foot (ft3) = 28.32 liters (L) = 0.02832 cubic meters (m3) 

1 gallon (gal) = 3.785 liters (L) 

1 barrel (bbl) = 42 gallons (gal) = 158.99 liters (L) 

Length 

1 inch (in) = 2.540 centimeters 

1 foot (ft) = 0.3048 meters (m) 

1 mile = 1.609 kilometers 

Power 

1 horsepower (hp) = 0.707 Btu/second = 0.7457 kilowatts (103 W) 

Energy 

1 horsepower-hour = 2545 Btu = 0.7457 kilowatt-hour 

(hp-hr) 

1 kilowatt-hour = 3412 Btu = 3600 kilo-Joules (103 J) 

1 megawatt (106 W) = 1000 kilowatts (103 W) 

1 Btu = 1055 Joules (J) 

1 million Btu (106 Btu) = 293 kilowatt-hours 

Heating Value 

1 pound/million Btu = 430 grams/giga-Joule (g/109 J) 

(lb/106 Btu) 

Pressure 

1 atmosphere (atm) = 14.696 pounds per square = 760 millimeters mercury (Hg) 

inch (psia) 

1 atmosphere (atm) = 101.325 kilo-Pascals (103 Pa) 

1 pound per square inch (psi) = 51.71 millimeters mercury (Hg) 

Notes: 

psig = Gauge pressure.


psia = Absolute pressure (note psia = psig + atmospheric pressure).


68 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
D e s i g n P r i n c i p l e s APPENDIX 2 

Table A2-2: Unit Prefixes 

SI Units US Designation 

Unit/Symbol Factor Unit/Symbol Factor 

peta (P) 1015 quadrillion (Q) 1015 

tera (T) 1012 trillion (T) 1012 

giga (G) 109 billion (B) 109 

mega (M) 106 million (MM) 106 

kilo (k) 103 thousand (k or M) 103 

hecto (h) 102 

deka (da) 101 

deci (d) 10-1 

centi (c) 10-2 

milli (m) 10-3 

micro (m) 10-6 

nano (n) 10-9 

pico (p) 10-12 

Table A2-3: Power Output to Energy Input Conversions 

Fuel/Service Btu/hp-hr Data Source 

Large uncontrolled natural gas turbine 8,000 AP-42, Table 3.1-1 

Large uncontrolled gas turbine firing fuel oil (distillate) (10/96) 

Natural gas prime mover: turbine 7,700 AP-42, Table 3.2-1 

Natural gas prime mover: 2-cycle lean burn 7,800 (10/96) 

Natural gas prime mover: 4-cycle lean burn 7,700 

Natural gas prime mover: 4-cycle rich burn 8,600 

Gasoline industrial engine 7,000 AP-42, Table 3.3-1 

Diesel industrial engine (10/96) 

Large (>600 hp) Diesel Engine 

Dual (natural gas/diesel) engine 

C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L ■ 69 
APPENDIX 2 D e s i g n P r i n c i p l e s

Table A2-4: Conversion from Weight Percents to Mole

Percents in Mixtures 

MWMixture 

Mole%i = Wt%i × 

MWi 

# compounds

1 

MWMixture = × ∑ (Mole%i × MWi) 

100 i =1 

# compounds Wt%i 

MWMixture = 100 ÷ ∑ MWi i =1 

Mole%i = individual weight percentage 

MWMixture = Molecular weight of the mixture 

MWi = individual molecular weights 

70 ■ C L I M A T E L E A D E R S G H G I N V E N T O R Y P R O T O C O L 
Design Principles APPENDIX 3 

IMP Checklist

The Inventory Management Plan (IMP) is an internal 

process for the Partner to institutionalize the completion of 

a high quality inventory. The IMP should be designed with 

this in mind, not strictly as a reporting requirement to EPA. 

The IMP checklist outlines what components should be 

included in an IMP and can be used as a guide for creating 

an IMP or pulling together existing documents. The checklist does not represent, and should not be used as a 

substitute for an IMP. Partners may either have a single formal IMP document that addresses all of these components, 

or Partners may have a collection of Standard Operating 

Procedures (SOPs) and other relevant information that 

address these components when taken in total. 

For the most current version of the IMP checklist see 

the Climate Leaders website at: 

http://www.epa.gov/climateleaders. 

Corporate Level Detail Corporate Desktop Review: Issues to On-site IMP Review Issues to 

IMP Component Required Consider Consider 

Partner Information 

1. Company Name Legal name of entity 

2. Corporate Address Physical and mailing 

address 

3. Inventory Contact Contact name and title 

4. Inventory Contact Contact information 

Information (telephone/fax/ email) 

Boundary Conditions 

Organizational 

5. Inclusion of The basis for reporting Is the approach consistent with the Identify all business units or 

Partially Owned or emissions data from Climate Leaders Design Principles? If major divisions at site. 

Controlled Assets partially owned or con- applicable, how is operational control Confirm that all business units 

trolled assets: defined? How is equity defined (e.g., at the site are either included 

– Equity Approach 

– Control Approach: 

– Financial control cribased on financial ownership or value 

derived from company)? 

Are leases adequately addressed? 

or specifically excluded. 

Consider shared, co-located, or 

outsourced operations. 

terion Is control demonstrated as 

– Operational control documented? 

criterion 

6. Facilities List A list of all facilities 

with location, % ownership, or % control. 

Define if inventory is 

U.S. only or includes 

optional non-U.S. operations. 

List should be complete and include all 

facilities (including leases if applicable). Fleet vehicles should also be 

included if not assigned to a facility. 

How does the list compare to other 

public sources listing company holdings? Has the Partner demonstrated 

due diligence on determining the accuracy of the list? What is the method for 

ongoing review of the list? 

N/A 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 71 
APPENDIX 3 Design Principles

IMP Component 

Corporate Level Detail 

Required 

Corporate Desktop Review: Issues to 

Consider 

On-site IMP Review Issues to 

Consider 

Boundary Conditions (continued) 

Operational 

7. GHG List A list of GHGs included 

in inventory. 

If there are no releases of any of the six 

major GHGs (CO2, CH4, N2O, HFCs, 

PFCs, and SF6) this should be documented to insure there is no oversight. 

Small sources of a GHG should not be 

excluded. 

How does this compare to the list of 

emission sources specified in #9 and 

#10? 

Is the list of GHGs consistent 

with the IMP? 

Confirm all sources of GHGs 

are included in the inventory, 

as consistent with IMP. 

8. Emission Source 

Identification 

Procedure 

A description of the 

procedure/method used 

to identify direct and 

indirect emission 

sources. 

Is the procedure likely to identify all 

significant sources? Does the procedure capture all stationary, mobile, 

indirect, process, and fugitive sources? 

Including small sources (e.g., HFC emissions from refrigeration/AC equipment 

use, etc.)? 

Does the procedure include networking 

with all the appropriate people, whose 

roles and responsibilities are defined in 

#24? 

Is it likely that all emission 

sources will be captured? Is 

there an existing inventorying 

process, permitting process 

(like Title V), or other mechanism to help most efficiently 

identify direct and indirect 

emission sources? 

9. Direct Sources A list of groups of 

sources by emission 

category for each facility or reporting unit. 

(e.g., under stationary 

combustion: thermal 

oxidizers, engines, 

flares, etc.). 

It is not necessary to 

enumerate each piece 

of equipment. 

Are all direct emission sources included (stationary, mobile, fugitive, and 

process)? 

How does this list compare with other 

company sources of emissions (e.g., 

Title V air permit)? 

List all GHG emission source 

types identified. 

Confirm each source type 

included in the inventory, as 

consistent with IMP. 

10. Indirect Sources – 

Energy 

Import/Export 

A list of energy imports 

or exports that are 

reflected in the inventory (e.g., steam, 

electricity, hot water, 

etc.). 

Are all indirect emission sources 

included (purchased electricity, steam, 

and hot water)? 

List all GHG emission source 

types identified. Confirm each 

source type included in the 

inventory, as consistent with 

IMP. 

11. Optional Sources A list of other optional 

emission sources that 

are accounted for in the 

inventory (e.g., outsourced activities, 

upstream or downstream activities, etc.) 

Are optional sources included accurately (i.e., entire emissions source 

accounted for and not just the reductions)? 

How does this list compare to company 

profile (e.g., company has a lot of 3rd 

party shipping but only employee commuting reported)? 

If an optional source is included in the inventory, does the 

inventory capture the entire 

emission type? 

Is there evidence of similar 

optional sources which 

should also be included for 

consistency? 

72 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles APPENDIX 3 

IMP Component 

Corporate Level Detail 

Required 

Corporate Desktop 

Review: Issues to 

Consider 

On-site IMP Review Issues to Consider 

Emissions Quantification 

12. Quantification 

Method 

A description of the emission quantification 

methodologies and reference for each emission and 

offset category. 

Where multiple methods 

are used, specify which 

facility/source uses the 

respective method. 

Are the correct quantification methodologies being 

used? 

Are the methods based on 

reliable accurate and current references? 

How do the methods compare to the Climate 

Leaders guidance documents? 

Check a sample of each GHG related calculation that takes place at the site by 

confirming the algorithm and factors 

match those documented in the IMP, and 

recalculating no more than three of each 

computation type. Such calculations may 

include converting units, summing 

monthly totals to annual totals, computing emissions by source, converting to 

CO2-eq, totaling facility CO2-eq, or other 

computations. 

If GHG calculations are performed onsite, 

is there an existing process for communication of changes from the corporate 

level to this site? If past changes were 

made, were they indeed communicated? 

13. Emission Factors 

and Other 

Constants 

A list of emission factors 

and other constants and 

reference for factors and 

constants (i.e., conversion 

factors) for each emission 

category. 

Descriptions of the process 

for how external references 

are kept current. 

Where multiple factors are 

used, specify which facility/source uses the 

respective factor. 

Are the correct emission 

factors being used, based 

on reliable accurate and 

current references? Are 

factors updated annually? 

How do the factors compare to default values in 

the Climate Leaders guidance documents (e.g., do 

stationary combustion 

CO2 factors account for 

carbon oxidation)? 

What do electricity production emission factors 

represent? 

If facility-specific emission factors are 

used, does facility have documentation 

to support (e.g., carbon content of fuels, 

supplier-provided emission factors for 

electricity)? 

If default factors are used, does the facility have adequate information to develop 

specific emission factors to use instead? 

If activity data conversions are performed onsite, is there an existing 

process for communication of changes 

from the corporate level to this site? If 

past changes were made, were they 

indeed communicated? 

Data Management 

14. Activity Data A description/name of the 

source of activity data documents or processes 

required to complete quantification methodology 

(e.g., monthly fuel purchase records, fuel meter, 

internal tracking and aggregation documents, etc.) for 

each item of activity data. 

Where multiple data 

sources are used, specify 

which facility/source uses 

the respective data source. 

Is activity data based on 

appropriate sources? 

Is the right activity data 

being collected for the 

quantification method 

described in #12? 

Is activity data the most 

accurate available (e.g., 

fuel purchases adjusted 

for stock, fuel use based 

on physical units not $)? 

Does the ultimate source and type of 

activity data collected for each emission 

type match that described in the IMP? 

Are any unit conversions, other than as 

described in the IMP, performed on the 

data before reporting? 

Is a better (more efficient, more accurate) source of activity data available? 

If the partner provided facility-level 

inventory data, does the reported facility 

total match that indicated by the activity 

data, conversion factors, and quantification method? 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 73 
APPENDIX 3 Design Principles

IMP Component 

Corporate Level Detail 

Required 

Corporate Desktop Review: 

Issues to Consider 

On-site IMP Review Issues to 

Consider 

Data Management (continued) 

15. Data Management 

[Roles and responsibilities can be 

defined over time] 

A description of the 

process flow for collecting and processing 

activity or monitoring 

data from its original 

source to the final emission data entered into 

the inventory. 

Includes a description 

of roles and 

responsibilities. 

Is the process likely to avoid 

data errors in computing final 

rolled up inventory totals? 

Are roles and responsibilities 

properly defined? 

Is the process adequately 

defined and institutionalized? 

Are the person/persons responsible for collecting data 

identified? 

Does the process flow match that 

described in the IMP? 

Does each representative understand 

their role and responsibilities? 

More efficient method possible for 

data collection and processing? Where 

are likely areas for data corruption and 

how can error be minimized (from raw 

data to incorporation into the inventory)? Determine whether opportunities 

exist to integrate GHG data collection 

and management with other existing 

facility reporting tools. 

Trace approximately two (2) data 

points for each data type to confirm 

that raw data was correctly entered 

into data management system, calculation tool, or hand calculation. 

16. Normalization 

Factor(s) Selection 

[Only necessary if 

Partner chooses to 

set goal based on 

an intensity target] 

A description of the 

normalization factor 

(units of product, $ revenue, etc.) used to 

calculate emissions 

intensity. 

Document how the normalization factor was 

selected. 

Does the normalization factor 

and associated intensity value 

reasonably represent the emissions management 

performance? 

Is the normalization factor and intensity value relevant for tracking 

performance at this facility? Is there a 

better normalization factor for this 

facility? 

Is the normalization factor and 

intensity value well communicated? 

17. Data Collection 

Process – 

Normalization 

Factor 

[Only necessary if 

Partner chooses to 

set goal based on 

an intensity target] 

A description of the 

process flow for collecting and processing 

activity or monitoring 

data to obtain the final 

normalization factor 

data entered into the 

inventory. 

Is the process likely to avoid 

data errors in computing final 

normalization factor and intensity value totals? 

Is the process likely to avoid data 

errors in computing final normalization factor and intensity value totals? 

18. Data Collection 

Process – Quality 

Assurance 

A description of the 

major sources of uncertainty and quality 

assurance measures for 

the data process flow. 

This includes information on how 

measurement system 

accuracy is assessed. 

Is there a process for minimizing error? 

Are all likely error sources considered? 

How are uncertainties being 

addressed? 

Are QC checks performed as described 

in the IMP? Are key staff aware of possible sources of error and means for 

minimizing that have not been considered in the IMP? 

Are reported uncertainty estimates for 

measurement devices realistic? Are 

measurement devices regularly 

calibrated? 

74 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles APPENDIX 3 

IMP Component 

Corporate Level Detail 

Required 

Corporate Desktop Review: 

Issues to Consider 

On-site IMP Review Issues to 

Consider 

Data Management (continued) 

19. Data Collection 

System Security 

[Can be defined 

over time] 

A description of how 

data collection system 

security is maintained. 

How likely are errors to occur 

within the data collection and 

management system due to 

spreadsheets being damaged or 

otherwise transformed, unauthorized access to databases, 

and other information system 

problems? 

Are safeguards implemented as 

described in the IMP? 

Are there opportunities for further 

improving data collection security? 

20. Integrated Tools 

[OPTIONAL] 

A description of how 

GHG reporting and processing is integrated 

with other reporting 

tools. 

Are tools integrated to enhance 

efficiency? 

Are there opportunities for combining 

reporting systems to improve efficiency and consistency? Look for 

opportunities to leverage systems, 

schedules, data, etc. 

21. Frequency The frequency for 

reporting facility data 

to the corporate level. 

Is the reporting frequency sufficient to avoid significant errors 

in annual reporting (i.e., at least 

annual reporting)? 

Is data reported at frequency 

described in the IMP? Would alternate 

frequencies improve site-level efficiency (for example matching GHG 

reporting timing to follow Title V 

reporting or GRI reporting.) 

Base Year 

22. Adjustment – 

Structural 

Changes 

A description of the 

approach for adjusting 

base year emissions for 

mergers, acquisitions, 

divestitures, and outsourcing. 

This includes defining 

the process for determining when changes 

are necessary. 

Is there an effective and accurate process for adjusting base 

year emissions for structural 

changes? What triggers 

changes? 

Are the changes implemented 

consistently (for emissions 

decreases as well as increases)? 

How is this linked to #5 

(method) and #6 (list) of 

facilities? 

Were structural changes incorporated 

in base year inventory, if appropriate 

based on IMP? 

Are organizational/operational 

boundary changes (if applicable) 

communicated to the site? 

23. Adjustment – 

Methodology 

Changes 

A description of the 

approach for adjusting 

base year emissions for 

changes in calculation 

methodologies, emission factors, or error 

correction. 

This includes defining 

the process for determining when changes 

are necessary. 

Is there an effective and accurate process for adjusting the 

base year emissions for 

methodology changes? What 

triggers changes? 

How is this linked to #12 

(method) and #13 (factors) for 

calculating emissions? 

Is there an effective and accurate 

process for adjusting the base year 

emissions for methodology changes? 

Are methodology changes (if applicable) communicated to the site? 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 75 
APPENDIX 3 Design Principles

IMP Component 

Corporate Level Detail 

Required 

Corporate Desktop Review: 

Issues to Consider 

On-site IMP Review Issues to 

Consider 

Management Tools 

24. Roles and 

Responsibilities 

[Can be defined 

over time] 

A description of overall 

roles and responsibilities for corporate GHG 

inventory development 

and maintenance, 

include discussion of 

management role(s). 

Are roles and responsibilities 

sufficiently spelled out to ensure 

that tasks are completed? 

Are roles and responsibilities 

adequately defined and institutionalized? 

Do facility personnel feel that 

they adequately understand their 

responsibilities? 

25. Training 

[Can be defined 

over time] 

A description of inventory development 

training received by 

inventory development 

team members. 

Is sufficient training provided to 

ensure that tasks are completed 

accurately? 

Are new staff properly trained 

and aware of their roles and 

responsibilities? 

Does training received match that 

described in the IMP? 

Based on discussions with facility 

personnel, is the training is appropriate, or can it be improved? 

Determine if roles are adequately 

institutionalized to ensure proper 

implementation. 

26. Document 

Retention and 

Control Policy 

[Can be defined 

over time] 

A description of how 

version control is maintained for GHG 

inventory management 

guidelines. 

A description of the 

Partner’s document 

retention policy. 

Is there a reasonable process for 

ensuring that all participants are 

working to the same IMP guidelines? 

Does document retention policy 

insure data is maintained long 

enough to adjust base year emissions in goal year if needed? 

Are document retention and control 

policies understood and implemented 

as described in IMP? 

Auditing & Verification 

27. Internal Auditing A description of the 

internal audit process. 

Timing of the audit. 

Is there an audit process that is 

likely to identify gaps and errors 

in inventory management? 

Are auditor roles and responsibilities properly defined in #24? 

Have audits occurred as described in 

IMP? Have any corrective actions 

resulted? 

28. External 

Validation and/or 

Verification 

[OPTIONAL] 

If applicable, a description of the process for 

external review. 

Timing of the audit. 

What protocol was the external 

validation/verification performed to? 

What were the overall results of 

the validation/verification? 

Have audits occurred as described in 

IMP? Have any corrective actions 

resulted? 

29. Management 

Review 

[Can be defined 

over time] 

A description of the 

senior management 

review process. 

Are senior managers involved in 

signing off on the inventory? 

Are manager roles and responsibilities properly defined in #24? 

Are facility management reviewing 

inventory performance as (if) 

described in the IMP? 

30. Corrective Action 

[Can be defined 

over time] 

A description of the 

process for implementing and documenting 

corrective actions for 

all internal and external 

reviews. 

Is there a process for correcting 

errors or problems found? 

Is it clear who is responsible for 

correcting problem, when the 

problem should be solved, and 

how the correction process is 

tracked? 

Is the process to ensure corrective 

actions are addressed appropriately 

(i.e., by the appropriate staff) and in 

a timely fashion occurring as 

described in the IMP? Can this 

process be improved based on 

findings onsite? 

76 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles APPENDIX 4 

Annual GHG Inventory Summary 

and Goal Tracking Form 

Climate Leaders website at: 

For the most current version of 

the Annual GHG Inventory Summary 

and Goal Tracking Form see the 

http://www.epa.gov/climateleaders. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 77 
APPENDIX 4 Design Principles

78 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles APPENDIX 4 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 7 9
APPENDIX 4 Design Principles

80 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles GLOSSARY 

Glossary of Terms

Absolute target. A target defined by reduction in 

absolute emissions over time, e.g., reduces CO2 

emissions by 25 percent below 1994 levels by 2010. 

Additionality. A criterion for assessing whether a 

project has resulted in GHG emission reductions or 

removals in addition to what would have occurred in 

its absence. This is an important criterion when the 

goal of the project is to offset emissions elsewhere. 

Allowance. A commodity giving its holder the right 

to emit a certain quantity of GHGs. 

Associated/affiliated company. The parent company has significant influence over the operating and 

financial policies of the associated/affiliated company, but not financial control. 

Audit Trail. Well organized and transparent historical records documented how an inventory was 

completed. 

Baseline. A hypothetical scenario for what GHG 

emissions, removals or storage would have been in 

the absence of the GHG project or project activity. 

Base year. A historic datum (a specific year) against 

which a company’s emissions are tracked over time. 

Base year emissions. GHG emissions in the base 

year. 

Base year emissions recalculation. Recalculation of 

emissions in the base year to reflect a change in the 

structure of the company, or to reflect a change in 

the accounting methodology used. This ensures 

data consistency over time, i.e., comparisons of like 

with like over time. 

Biofuels. Fuel made from plant material, e.g., wood, 

straw, and ethanol from plant matter. 

Boundaries. GHG accounting and reporting boundaries can have several dimensions, i.e., 

organizational, operational, geographic, business 

unit, and target boundaries. The inventory boundary 

determines which emissions are accounted and 

reported by the company. 

Cap and trade system. A system that sets an overall 

emissions limit, allocates emissions allowances to 

participants, and allows them to trade emissions 

credits with each other. 

Capital Lease. A lease which transfers substantially 

all the risks and rewards of ownership to the lessee 

and is accounted for as an asset on the balance 

sheet of the lessee. Also known as a Financial or 

Finance Lease. Leases other than 

Capital/Financial/Finance leases are Operating leases. Consult an accountant for further detail as 

definitions of lease types differ between various 

accepted financial standards. 

Carbon sequestration. The uptake of CO2 and storage of carbon in biological sinks. 

Co-generation unit/combined heat and power 

(CHP). A facility producing both electricity and 

steam/heat using the same fuel supply. 

Consolidation. Combination of GHG emissions data 

from separate operations that form part of one company or group of companies. 

Control. The ability of a company to direct the operating policies of another operation. More specifically, 

it is defined as either operational control (the organization or one of its subsidiaries has the full authority 

to introduce and implement its operating policies at 

the operation) or financial control (the organization 

has the ability to direct the financial and operating 

policies of the operation with a view to gaining economic benefits from its activities). 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 81 
GLOSSARY 

Corporate inventory program. A program to produce annual corporate inventories that are keeping 

with the principles, standards, and guidance of the 

GHG Protocol Corporate Standard. This includes all 

institutional, managerial, and technical arrangements 

made for the collection of data, preparation of a GHG 

inventory, and implementation of the steps taken to 

manage the quality of their emission inventory. 

CO2-equivalent (CO2-eq). The universal unit of 

measurement to indicate the global warming potential (GWP) of each of the six greenhouse gases, 

expressed in terms of the GWP of one unit of carbon 

dioxide. It is used to evaluate releasing (or avoiding 

releasing) different greenhouse gases against a common basis. 

Cross-sector calculation tool. A GHG calculation tool 

that addresses GHG sources common to various sectors, e.g., emissions from stationary or mobile 

combustion (see also calculation tools). 

Direct GHG emissions. Emissions from sources that 

are owned or controlled by the reporting company. 

Direct monitoring. Direct monitoring of exhaust 

stream contents in the form of continuous emissions 

monitoring (CEM) or periodic sampling. 

Double counting Two or more reporting companies 

take ownership of the same emissions or reductions. 

Emissions. The release of GHGs into the 

atmosphere. 

Emission factor. A factor allowing GHG emissions to 

be estimated from a unit of available activity data 

(e.g., tons of fuel consumed, tons of product produced) and absolute GHG emissions. 

Design Principles

Equity share. 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. 

Emission Uncertainty. Uncertainty that arises whenever GHG emissions are quantified, due to 

uncertainty in data inputs and calculation methodologies used to quantify GHG emissions. 

Finance lease. A lease which transfers substantially 

all the risks and rewards of ownership to the lessee 

and is accounted for as an asset on the balance 

sheet of the lessee. Also known as a Capital or 

Financial Lease. Leases other than 

Capital/Financial/Finance leases are Operating leases. Consult an accountant for further detail as 

definitions of lease types differ between various 

accepted accounting principles. 

Fixed asset investment. Equipment, land, stocks, 

property, incorporated and non-incorporated joint 

ventures, and partnerships over which the parent 

company has neither significant influence or control. 

Fugitive emissions. Emissions that are not physically controlled but result from the intentional or 

unintentional releases of GHGs. They commonly 

arise from the production, processing transmission 

storage and use of fuels and other chemicals, often 

through joints, seals, packing, gaskets, etc. 

Green power. A generic term for renewable energy 

sources and specific clean energy technologies that 

emit fewer GHG emissions relative to other sources 

of energy that supply the electric grid. Includes 

solar photovoltaic panels, solar thermal energy, 

geothermal energy, landfill gas, low-impact 

hydropower, and wind turbines. 

82 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles

Greenhouse gases (GHGs). For the purposes of this 

standard, GHGs are the following six gases: carbon 

dioxide (CO2), methane (CH4), nitrous oxide (N2O), 

hydroflurocarbons (HFCs), perfluorocarbons (PFCs), 

and sulfur hexafluoride (SF6). 

GHG capture. Collection of GHG emissions from a 

GHG source for storage in a sink. 

GHG credit. GHG offsets can be converted into GHG 

credits when used to meet an externally imposed 

target. A GHG credit is a convertible and transferable instrument usually bestowed by a GHG 

program. 

GHG offset. Offsets are discrete GHG reductions 

used to compensate for (i.e., offset) GHG emissions 

elsewhere, for example to meet a voluntary 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 mitigation project that generates the offsets. To 

avoid double counting, the reduction giving rise to 

the offset must occur at sources or sinks not included in the target or cap for which it is used. 

GHG program. A generic term used to refer to any 

voluntary or mandatory international, national, subnational, government, or non-governmental 

authority that registers, certifies, or regulates GHG 

emissions or removals outside the company, e.g., 

CDM, EU ETS, CCX, and CCAR. 

GHG project. A specific project or activity designed 

to achieve GHG emission reductions, storage of carbon, or enhancement of GHG removals from the 

atmosphere. GHG projects may be stand-alone projects, or specific activities or elements within a larger 

non-GHG related project. 

GLOSSARY 

GHG Protocol Initiative. A multi-stakeholder collaboration convened by the World Resources Institute 

and the World Business Council for Sustainable 

Development to design, develop, and promote the 

use of accounting and reporting standards for business. It comprises two separate but linked standards 

– the GHG Protocol Corporate Accounting and 

Reporting Standard and the GHG Protocol Project 

Quantification Standard. 

GHG Protocol Project Quantification Standard. An 

additional module of the GHG Protocol Initiative 

addressing the quantification of GHG reduction projects. This includes projects that will be used to 

offset emissions elsewhere and/or generate credits. 

GHG removal. Absorbtion or sequestration of GHGs 

from the atmosphere. 

GHG sink. Any physical unit or process that stores 

GHGs; usually refers to forests and 

underground/deep sea reservoirs of CO2. 

GHG source. A factor describing the radiative forcing impact (degree of harm to the atmosphere) of 

one unit of a given GHG relative to one unit of CO2. 

Global warming potential (GWP). A factor describing the radiative forcing impact (degree of harm to 

the atmosphere) of one unit of a given GHG relative 

to one unit of CO2. 

Group company/subsidiary. The parent company 

has the ability to direct the financial and operating 

policies of the group company/subsidiary with a 

view to gaining economic benefits from its activities. 

Heating value. The amount of energy released when 

a fuel is burned completely. Care must be taken not 

to confuse higher heating values (HHVs), used in the 

U.S. and Canada, and lower heating values, used in

all other countries (for further details refer to the 

calculation tool for stationary combustion available 

at www.ghgprotocol.org). 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 83 
GLOSSARY Design Principles

Indirect emissions. Emissions that are a consequence of the operations of the reporting company, 

but occur from sources owned or controlled by 

another company, e.g., as a consequence of the 

import of electricity, heat, or steam. 

Insourcing. The administration of ancillary business 

activities, formally performed outside of the company, using resources within a company. 

Intensity ratios. Ratios that express GHG impact per 

unit of physical activity or unit of economic value 

(e.g., tons of CO2 emissions per electricity generated). Intensity ratios are the inverse of 

productivity/efficiency ratios. 

Intensity target. A target defined by reduction in the 

ratio of emissions and a business metric over time, 

e.g., reduce CO2 per ton of cement by 12 percent 

between 2000 and 2008. 

Intergovernmental Panel on Climate Change 

(IPCC). International body of climate change scientists. The role of the IPCC is to assess the scientific, 

technical and socio-economic information relevant 

to the understanding of the risk of human-induced 

climate change (www.ipcc.ch). 

Inventory. A quantified list of an organization’s GHG 

emissions and sources. 

Inventory boundary. An imaginary line that encompasses the direct and indirect emissions included in 

the inventory. It results from the chosen organizational and operational boundaries. 

Inventory quality. The extent to which an inventory 

provides a faithful, true, and fair account of an organization’s GHG emissions. 

Leakage (Secondary effect). Leakage occurs when a 

project changes the availability or quantity of a 

product or service that results in changes in GHG 

emissions elsewhere. 

Life cycle analysis. Assessment of the sum of a 

product’s effects (e.g., GHG emissions) at each step 

in its life cycle, including resource extraction, production, use phase and waste disposal. 

Material discrepancy. An error (for example from an 

oversight, omission, or miscalculation) that results 

in the reported quantity being significantly different 

to the true value to an extent that will influence performance or decisions. Also known as material 

misstatement. 

Materiality threshold. A concept employed in the 

process of verification. It is often used to determine 

whether an error or omission is a material discrepancy or not. It should not be viewed as a de 

minimus for defining a complete inventory. 

Mobile combustion. Burning of fuels by transportation devices such as cars, trucks, trains, airplanes, 

ships, etc. 

Model uncertainty. GHG quantification uncertainty 

associated with mathematical equations used to 

characterize the relationship between various 

parameters and emission processes. 

Operation. A generic term used to denote any kind 

of business, irrespective or its organizational, governance, or legal structures. An operation can be a 

facility, subsidiary, affiliated company or other form 

of joint venture. 

Operating lease. A lease which does not transfer the 

risks and rewards of ownership to the lessee and is 

not recorded as an asset in the balance sheet of the 

lessee. Leases other than Operating leases are 

Capital/Financial/Finance leases. Consult an accountant for further detail as definitions of lease types 

differ between various accepted financial standards. 

84 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 
Design Principles

Operational boundaries. The boundaries that determine the core direct and indirect emissions 

associated with operations owned or controlled by 

the reporting company. This assessment allows a 

company to establish which operations and sources 

cause direct and indirect emissions, and to decide 

which optional emissions to include that are a consequence of its operations. 

Optional emissions. Emissions that are a consequence of the activities of the reporting company, but 

are not part of the reporting companies core direct or 

indirect emissions as defined by Climate Leaders (e.g., 

employee commuting). 

Organic growth/decline. Increases or decreases in 

GHG emissions as a result of changes in production 

output, product mix, plant closures, and the opening 

of new plants. 

Organizational boundaries. The boundaries that 

determine the operations owned or controlled by 

the reporting company, depending on the consolidation approach taken (equity or control approach). 

Outsourcing. The contracting out of activities to 

other businesses. 

Parameter uncertainty. GHG quantification uncertainty associated with quantifying the parameters 

used as inputs to estimation models. 

Primary effects. The specific GHG reducing elements or activities (reducing GHG emissions, carbon 

storage, or enhancing GHG removals) that the project is intended to achieve. 

Process emissions. Emissions generated from manufacturing processes, such as cement or ammonia 

production. 

Productivity/efficiency ratios. Ratios that express 

the value or achievement of a business divided by 

its GHG impact. Increasing efficiency ratios reflect a 

positive performance improvement, e.g., resource 

productivity (sales per ton of GHG). 

GLOSSARY 

Ratio indicator. Indicators providing information on 

relative performance such as intensity ratios or productivity/efficiency ratios. 

Renewable energy. Energy taken from sources that 

are inexhaustible, e.g., wind, water, solar, geothermal 

energy, and biofuels. 

Reporting. Presenting data to internal management 

and external users such as regulators, shareholders, 

the general public or specific stakeholder groups. 

Reversibility of reductions. This occurs when 

reductions are temporary, or where removed or 

stored carbon may be returned to the atmosphere at 

some point in the future. 

Scientific Uncertainty. Uncertainty that arises when 

the science of the actual emission and/or removal 

process is not completely understood. 

Scope. Defines the operational boundaries in relation to indirect and direct GHG emissions. 

Scope of work. An up-front specification that indicates the type of verification to be undertaken and 

the level of assurance to be provided between the 

reporting company and the verifier during the verification process. 

Secondary effects (Leakage). GHG emissions 

changes resulting from the project not captured by 

the primary effect(s). These are typically the small, 

unintended GHG consequences of a project. 

Sequestered atmospheric carbon. Carbon removed 

from the atmosphere by biological sinks and stored 

in plant tissue. Sequestered atmospheric carbon 

does not include GHGs captured through carbon 

capture and storage. 

CLIMATE LEADERS GHG INVENTORY PROTOCOL ■ 85 
GLOSSARY Design Principles

Significance threshold. A qualitative or quantitative 

criteria used to define a significance structural 

change. It is the responsibility of the company/verifier to determine the “significance threshold“ for 

considering base year emissions recalculation. In 

most cases the “significance threshold“ depends on 

the use of the information, the characteristics of the 

company, and the features of structural changes. 

Stationary combustion. Burning of fuels to generate 

electricity, steam, heat, or power in stationary 

equipment such as boilers, furnaces, etc. 

Structural change. A change in the organizational or 

operational boundaries of a company that result 

from a transfer of ownership or control of emissions 

from one company to another. Structural changes 

usually result from a transfer of ownership of emissions, such as mergers, acquisitions, divestitures, 

but can also include outsourcing/insourcing. 

Target base year. The base year used for defining a 

GHG target, e.g., to reduce CO2 emissions 25 percent 

below the target base year levels specified by the 

target base year 2010. 

Target boundary. The boundary that defines which 

GHGs, geographic operations, sources and activities 

are covered by the target. 

Target commitment period. The period of time during which emissions performance is actually 

measured against the target. It ends with the target 

completion date. 

Target completion date. The date that defines the 

end of the target commitment period and determines whether the target is relatively short- or 

long-term. 

Target double counting policy. The policy that 

determines how double counting of GHG reductions 

or other instruments, such as allowances issued by 

external trading programs, is dealt with under a 

GHG target. It applies only to companies that engage 

in trading (sale or purchase) of offsets or whose corporate target boundaries interface with other 

companies’ targets or external programs. 

Uncertainty. 1. Statistical Definition: A parameter 

associated with the result of a measurement that 

characterizes the dispersion of the values that could 

be reasonably attributed to the measured quality 

(e.g., the sample variance or coefficient of variation) 

(Chapter 9). 

2. Inventory Definition: A general and imprecise 

term which refers to the lack of certainty in emissions-related data resulting from any casual factor, 

such as the application of non-representative factors 

or methods, incomplete data on sources and sinks, 

lack of transparency, etc. Reported uncertainty 

information typically specifies a quantitative estimate of the likely or perceived difference between a 

reported value and a qualitative description of the 

likely causes of the difference. 

United Nations Framework Convention on Climate 

Change (UNFCCC). Signed in 1992 at the Rio Earth 

Summit, the UNFCCC is a milestone Convention on 

Climate Change treaty that provides an overall 

framework for international efforts to (UNFCCC) mitigate climate change. 

Value chain emissions. Emissions from the 

upstream and downstream activities associated with 

the operations of a reporting company. 

Verification. An independent assessment of the reliability (considering completeness and accuracy) of 

a GHG inventory. 

86 ■ CLIMATE LEADERS GHG INVENTORY PROTOCOL 

Office of Air and Radiation (6202J)

EPA430-K-05-005

May 2005

www.epa.gov/climateleaders

2 Recycled/Recyclable—Printed with Vegetable Oil Based Inks on 100% (Minimum 50% postconsumer) Recycled Paper