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 MEMORANDUM 

To: Docket EPA-HQ-OAR-2009-0925 

From: Lisa Grogan-McCulloch, EPA/Climate Change Division and 

 Ruth Mead and Amanda Baynham, ERG 

Date: March 5, 2010 

Subject: Review of Non-Federal Existing Greenhouse Gas Reporting Programs Requiring 

Reporting of Parent Company Ownership 

EPA has reviewed several non-federal reporting programs to determine whether they require 

facilities to provide information on their parent company or companies. These programs include 

one voluntary program (The Climate Registry (TCR)), two regional programs (The Regional 

Greenhouse Gas Initiative (RGGI) and Western Climate Initiative (WCI)), and two state 

programs (California and Delaware). The TCR reporting program is based in part on the 

reporting protocol developed by the World Resource Institute (WRI). EPA studied these 

programs to determine whether aspects of the ownership reporting requirements in each program 

could be adopted by the Federal Mandatory Greenhouse Gas Reporting Program. EPA was 

particularly interested in how each of these programs defined the corporate entity for reporting 

purposes. The results of this analysis are summarized in this memorandum. 

World Resource Institute and The Climate Registry

The World Resource Institute (WRI) in collaboration with the World Business Council for 

Sustainable Development (WBCSD), and representatives from industry, government, and nongovernment organizations developed a protocol for reporting greenhouse gases. The goal was to 

provide industry and governments with internationally accepted accounting and reporting 

standards for the reporting of greenhouse gas (GHG) emissions. The WRI protocol focuses on 

entity-wide reporting at the highest organizational level, rather than the facility-level reporting 

required in the final Mandatory Greenhouse Gas Reporting Rule. The complexity of many 

business relationships often makes it difficult to determine the organizational boundaries for 

reporting entity-wide emissions. To ensure a consistent approach is taken by all reporters, WRI 

developed two approaches for determining the organizational boundaries: the equity share 

approach and the control approach.1 The protocol recommends reporters select one of the two 

approaches and apply the same approach throughout their organization. 

Equity Share Approach: Reporters using the equity share approach report GHG emissions based 

on the equity share of the facilities. For facilities that are wholly owned, the reporter reports 

100% of the emissions. For facilities partially owned, emissions are reported based on its equity 

share in the business. For example, if Corporation X owns 40% of the shares in Company Y, 

then 40% of the emissions from Company Y are attributed to Corporation X. 

 

1

 World Resources Institute and World Business Council for Sustainable Development, “The Greenhouse Gas 

Protocol: A Corporate Accounting and Reporting Standard”, www.wri.org, February 1, 2010. 
2

Control Approach: Reporters using the control approach report all GHG emissions from 

facilities that are under their control (i.e., 100% of a facility’s emissions are attributed to the 

reporter if the reporter controls the facility and 0% of a facility’s emissions are attributed to the 

reporter if the reporter has an ownership interest in the facility but does not control the facility). 

Control is defined as either: 

• Operational Control: Where the reporter has full authority to introduce and 

implement its operating polices. 

• Financial Control: Where the reporter has the ability to direct the financial 

policies and has an interest in gaining economic benefits from the others 

activities. Financial control exists where the reporter has the right to the majority 

of the benefits of the operation, regardless of how those rights are conveyed. For 

example, reporters should report 100% of emissions from franchises and 

subsidiaries where they have financial control. For joint ventures, reporters 

should attribute the emissions based on their equity share. 

These two approaches were later adopted by The Climate Registry (TCR), which is a voluntary 

reporting program to which organizations report emissions from their facilities in the U.S., 

Canada, and Mexico. TCR allows any type of entity to report (e.g., corporations, institutions, 

organizations) and, consistent with the WRI protocol, recommends organizations report at the 

highest organizational level. Reporters must select from two reporting options. Under the first 

option, emissions are reported using both the equity control and financial control approaches 

recommended by the WRI protocol. Under the second option, emissions are reported using only 

the WRI control approach. Both options require facilities to report emissions using the WRI 

control approach in order to avoid double counting and enable comparisons between reports. 

TCR recommends reporters use the first option and report emissions separately for the two 

approaches. Reporters using the second option are expected to submit a list of their equity 

investments where that information is already publicly available (e.g., publicly traded 

companies) and for which the reporter has ownership interest but does not have financial or 

operational control of the other entity. This list should include the percentage ownership and the 

identity of the legal entity that has control of the other entity. Although TCR encourages 

facilities to report at the highest organizational level, entities that are owned by other 

organizations may report emissions to TCR provided the entities that own them are not also 

reporting emissions to TCR (e.g., a subsidiary may report emissions where the parent company 

does not). In such situations, TCR requires the reporter to disclose its parent company and 

submit a corporate organization chart showing the reporter’s relationship to its parent company 

and other subsidiaries. 2 

The goals of the WRI and TCR approach differ from the goal of the Mandatory Greenhouse Gas 

Reporting Rule in that WRI and TCR are defining organizational boundaries within which 

greenhouse gas emissions will be reported. The goal of this proposed rule, on the other hand, is 

to determine the highest-level U.S. parent company or parent companies of a facility or supplier. 

Therefore, EPA determined that while the top down approach of WRI and TCR is appropriate for 

 

2

 The Climate Registry, “General Reporting Protocol for the Voluntary Reporting Program”, Version 1.1, May 2008. 
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their purposes, it could not be applied to the Mandatory Greenhouse Gas Reporting Rule’s 

bottom-up approach where emissions data is collected at the facility-level for direct emitters of 

GHGs. 

Regional GHG Reporting Programs

EPA reviewed two regional GHG reporting rules to determine whether these programs require 

reporting of company ownership. These included the Regional Greenhouse Gas Initiative 

(RGGI) and Western Climate Initiative (WCI). 

RGGI is a market-based CO2 trading program modeled on the Acid Rain Program, in which 

facilities must hold sufficient CO2 allowances at the end of each year to cover their CO2

emissions. There are currently ten participating states (Connecticut, Delaware, Maine, 

Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and 

Vermont). These states implement annual auctions in which entities (called applicants) may 

purchase CO2 allowances through a competitive bidding process. 

Although RGGI does not require individual facilities to report information on their parent 

company or ownership hierarchy, it does require some reporting of company ownership by those 

organizations that submit bids in the annual auctions. Under RGGI, applicants that want to bid 

in the auction must first disclose in their application any corporate associations (including U.S. 

and international companies) with other applicants participating in the bidding process. RGGI 

defines two types of corporate associations “direct” and “indirect”. An applicant has a “direct 

corporate association” with another applicant if one of the applicants: 

 Holds more than 20% of any class of listed shares, the right to acquire such shares, or 

any option to purchase such shares of the other applicant. 

 Holds or can appoint more than 20% of common directors of the other applicant. 

 Holds more than 20% of the voting power of the other applicant. 

 Controls more than 20% of the other applicant’s affairs through some other means. 

“Indirect” associations are defined as situations where applicant A has a direct corporate 

association with another party and the other party has a direct corporate association with 

applicant B. The purpose of requiring applicants to disclose corporate associations is to guard 

against any one corporation receiving more than 25% of the total annual CO2 allowances. 

Therefore, applicants that do not have a “direct” or “indirect” association with another applicant 

are not required to report their company affiliations. 3 

This approach is appropriate for RGGI where the purpose is to assure a fair and equitable auction 

of CO2 allowances. However, this approach would not necessarily yield information on the 

highest-level U.S. parent company. Therefore, it would not meet the needs of the Mandatory 

Greenhouse Gas Reporting Rule, where the purpose of the proposed reporting of parent 

companies is to enable emissions reported at the facility level to be aggregated at the U.S. parent 

company level. 

 

3

 Regional Greenhouse Gas Initiative, “Auction Notice for CO2 Allowance Auction 7 on March 10, 2010”, January 

12, 2010. 
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Similar to RGGI, WCI is a regional program that when fully implemented will use a marketbased cap and trade program to reduce GHG emissions. WCI is a partnership of U.S. states, 

Canadian provinces, and Mexican states. Currently, seven U.S. states and four Canadian 

provinces have committed to the program, with a further six U.S. states, two Canadian provinces, 

and six Mexican states as observers. WCI started a GHG reporting program in 2010; however, 

the cap and trade program is still in the planning stages and is expected to begin in January 2012. 

WCI members finalized a greenhouse gas reporting rule in 2009, which has been adopted by 

member states. Under the WCI reporting rule, the “owner and operator” of a facility would be 

required to report GHG emissions annually. The rule does not define the term “owner and 

operator” and does not currently require reporting of either parent company or company 

ownership hierarchy.4 

State Mandatory GHG Reporting

Currently, only two states, California and Delaware, require reporting of parent company 

information. Both the California and Delaware mandatory reporting programs are similar to the 

federal mandatory reporting program in that they require reporting of emissions at the facility 

level for direct emitters of greenhouse gases. Although both require reporting of parent company 

information, neither rule limits reporting to the U.S. parent company. The California reporting 

rule requires facilities to report the parent company or parent companies for the facility. In 

addition to this information, the annual report must also include a list of all other California 

facilities that emit greenhouse gas emissions from fuel combustion (excluding combustion for 

space heating) that are owned or operated by the parent company. This list can be provided 

either by the individual facilities or by the parent company. The list must include both facilities 

that are directly owned and operated by the parent company and facilities that are owned and 

operated through a subsidiary of the parent company (see §95104(a)(8) of title 17, California 

Code of Regulations). The rule does not include a definition of parent company. However, 

California advises facilities to report the highest level parent company in the ownership 

hierarchy.5 Because of the larger number and greater diversity of facilities reporting under the 

Mandatory Greenhouse Gas Reporting Rule, EPA decided a definition should be included in the 

proposed rule amendments to the Mandatory Greenhouse Gas Reporting Rule to ensure 

consistency in reporting. 

In the Delaware reporting program, the parent company reported in annual facility emissions 

reports is the highest level company that directly owns at least 50% of the voting stock.6 This 

definition is similar to the definition of parent company used in the Toxics Release Inventory 

(TRI) program under the Emergency Planning and Community Right-to-Know. However, EPA 

is concerned that adopting this definition may lead to confusion in situations where no single 

 

4

 Western Climate Initiative, “Final Draft Essential Requirements for Mandatory Reporting”, May 7, 2009 

(http://www.westernclimateinitiative.org/component/remository/Reporting-Committee-Documents/Draft-EssentialRequirements-for-Mandatory-Reporting---Final-Draft-(May-7-2009)/, accessed March 2, 2010). 

5

 Correspondence with Mr. Douglas Thompson, California Air Resources Board, Climate Change Reporting 

Section, February 1, 2010. 

6

 Delaware Department of Natural Resources and Environmental Control, Division of Air and Waste Management 

Quality, Air Quality Management Section, “Emissions Inventory Definitions and Structure”, revised March 7, 2006

(http://www.awm.delaware.gov/AQM/Pages/AQMEmissionInventory.aspx,.accessed March 2, 2010). 
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company owns 50% or more of a business entity. For example, this definition would not address 

a situation where a facility is owned by multiple owners none of whom own 50% or more of the 

voting stock. As discussed in greater detail in the preamble to the proposed rule amendments, 

because the definition does not address all possible ownership situations, EPA believes this 

definition would lead to reporting inconsistencies. 

Conclusion

After reviewing the various approaches to ownership reporting under these five non-federal 

reporting programs, EPA concluded that none of them provided an approach that would meet all 

of the goals of this proposed rule amendment. As discussed in greater detail in the preamble to 

the proposed rule amendments, EPA concluded that the approach taken by the TRI program 

represented the best model for meeting the specific goals of the federal reporting program, and is 

therefore proposing a slightly modified definition of U.S. parent company from that of the TRI 

program.