There are several different types of Greenhouse Gas accounting. If you’ve only ever prepared a corporate GHG inventory, you’re likely familiar with Attributional Accounting, and you may not be aware of other approaches. If we're going to move past inventories and empower businesses to make informed and effective decarbonization decisions, it's fundamental that we use the right tool for the job. Too often environmental professionals, policy-makers, and even authors of leading standards fail to distinguish the different GHG accounting methods, leading to misguided decisions.
Many companies, and even governments, struggle with their climate strategy, frequently finding their initiatives fail to have the impact they're looking for. Often this is because their decisions, while based in real data, were determined with the wrong methodology for the specific change they're trying to make. Understanding the differences between these different approaches is fundamental to effective strategy.
Attributional accounting is the form that most GHG accounting practitioners will be familiar with for creating corporate and national GHG inventories. It looks at emissions and exclusively assigns responsibility for them to an individual entity deemed "responsible" for causing these emissions.
While relatively simple to understand, it is a bit problematic when we start asking the question “Who is responsible for causing the emissions?” The answer to that question is rather subjective. Take your typical natural gas-fired power plant, which company is most directly responsible for the emissions from this power plant? The operator of the power plant? The oil and gas industry extracting the natural gas? The businesses that are consuming the electricity generated by that power plant? The strength and weakness of attributional accounting is that it places the “blame” for emissions exclusively on a single entity.
But where attributational accounting really falls apart is as a sole basis for decarbonization decision making. Attributational accounting, by design, only looks at emissions within the system boundaries. That is, it only looks at emissions a company, nation, or facility is responsible for. When it's used as the only guide to climate strategy, it's easy to make decisions that reduce emissions within the system boundaries, that also have the side- effect of increasing emissions outside the system boundaries.
Attributational accounting works best when focusing on measuring what has already happened, not what will happen. It allocates responsibility to entities for emissions (or removals), and helps us track those over time.
Consequential accounting lives in a world of “what-ifs”, it focuses on answering a single question: “How much would global greenhouse gas emissions increase or decrease if ______”. The “if” could be a proposed initiative (What will happen if...), or it could be a retrospective “if” (What would have happened if...) but in either case the goal is to focus on the consequences of a decision and we determine it by comparing to the next most likely scenario.
Consequential accounting is key to informed decision making; if we’re going to achieve net-zero emissions we need to identify what leavers to pull to lower greenhouse gas emissions. Unfortunately, this isn’t the easiest question to answer because we can never know what else might have happened, we can only speculate. This makes consequential accounting difficult and subjective, but it is a very useful tool as it significantly shifts how we think about solving the climate crisis.
Let’s look at an example: “What if we purchased rainforest land in Brazil to protect it from being harvested and burned”. Using attributional accounting methods, you can look at the emissions that would have been attributed to the land that was harvested call that the baseline, and defensibly claim you reduced the emissions for that land to zero by preventing that harvest. But if the outcome of your action is that the entity harvesting land simply harvests a different chunk of land, you haven’t changed global emissions at all. Under consequential accounting methods, there’s been no change at all in emissions.
Unlike attributional accounting, consequential accounting has no system boundary. It focuses on the global impact of a decision. A rookie mistake sometimes made by GHG accountants who are primarily experienced in attributional accounting is to only look at how a decision might impact their company's emissions and not the planet as a whole. Even when considering full Scope 1, 2 and 3 emissions, which is intended to include emissions elsewhere in the value chain, it's easy to overlook the consequences a decision might have outside of their company or country.
Consequential accounting can be an incredibly powerful tool for reducing emissions, because it's based in quantifying the impact of an intervention or policy. However since it's also based on comparison to a hypothetical next most likely scenario, it is inherently based in speculation.
Life-cycle assessment or life-cycle analysis (LCA) is another concept you’re likely familiar with. You may have heard of it as “cradle-to-grave” or similar metaphors. It asks the question “What are the total emissions attributed to a functional unit from its earliest existence to its ultimate demise?”
We typically talk about life-cycle assessments in the context of a product and attempt to include everything from emissions during the collection of raw materials needed to manufacture that product, to the manufacturing of that product, to emissions during the use of the product and ultimately the final disposal of the product. But LCA can be applied to other functional units as well.
Product LCAs can be a be done with both attributational and consequential approaches and concerningly are often done with a mix of both. Attributional approaches are often applied to emissions in the upstream, emissions that already occurred before the product was sold to the customer, while consequential approaches often get applied to the downstream, looking at the impact the product might have to emissions in the future.
Life-cycle analysis also suffer from being speculative. Particularly in cases where the functional unit is a commodity with multiple uses. A barrel of oil used as a lubricant is going to have significantly different emissions from one used as a fuel. The life-cycle emissions from a product can depend heavily on what the customer does with it.
Since LCAs can be done with both attributational and consequential approaches, when comparing LCAs its important to understand which approach was used, and not base decisions solely on which number is better.
Each of these approaches has a fundamental role to play in identifying the path to net zero. When used for their appropriate purpose, they can be useful tools. A concerning trend that we see is they're often mixed interchangeably and often aggregated in the same report. The current guidance from the GHG Protocol for Scope 3 encourages companies to apply attributational and consequential approaches, which when internally used and properly understood isn't necessarily an issue, but when stakeholders who don't understand the different approaches start aggregating attributational, consequential, and LCA numbers together they're frequently basing decisions on meaningless data.
The only way to combat this unintentional misuse is through education. The world is clamouring to find solutions to the climate crisis, and too frequently rushing to making decisions based on data that they don't fully understand.
If you are a practitioner responsible for preparing corporate GHG inventories, national GHG inventories, or traditional product life-cycle assessments, it is your role to educate stakeholders on how these different approaches work and what conclusions can be drawn.