July 7, 2021

What is Carbon Accounting?

What is Carbon Accounting?

We are in a global shift towards net zero carbon emissions and if you are wondering what carbon accounting is and how to tackle it, educating your company on how to move forward is a valuable next step. 

This Science Direct article defines carbon accounting as:

"... a means of measuring the direct and indirect emissions to the Earth’s biosphere of carbon dioxide and its equivalent gases from industrial activities." If a company is allocated a certain amount of units they can buy from others to use more or sell to another company if they use less. This type of accounting also applies to other greenhouse gases (GHGs).

Tracking carbon emissions and administering accounting can be done with national inventories, carbon footprint calculators, and software. This is a crucial step in knowing how much carbon emissions each company is putting into the environment and how to offset it or rather take it away completely. Is it really green to be buying more emissions units from another company and using more than your share? Per the Paris Agreement, by 2050 as many nations as possible should be at net zero carbon emissions. So far, over 110 countries have signed the agreement. Does this mean the countries that haven't should be able to use even more carbon emissions and negate what more responsible ones have achieved? 

As the negotiations can be tedious regarding national laws and resources available to your company, knowing how to proceed and what the future will look like will put you ahead. We're all hoping for a carbon-free, safer world all while still profiting and be able to live comfortable lives and do business smoothly. While there may be sacrifices involved, tremendous technologies are being built that help with tracking your carbon emissions and even accounting for them. Let's break down what is in progress with global negotiations and answer some questions about how we are going to achieve a better environmental impact strategy.

skyview of buildings polluting in gold and grey tones
Image source: Marcin Jozwiak on Unsplash

What does the Paris Agreement say?

The World Resources Institute sites many of the rules from the Paris Agreement regarding carbon accounting:

"As part of the Rulebook, countries are negotiating three separate elements related to how countries cooperate:

  1. The Agreement specifies that countries may engage in the use of Internationally Transferred Mitigation Outcomes (ITMOs) toward nationally determined contributions (NDCs). When doing so, countries must promote sustainable development, ensure environmental integrity and transparency, and apply robust accounting to ensure emissions are not counted twice, known as double counting.
  2. The Paris Agreement established a mechanism that credits emissions reductions that countries can use toward their NDCs. The mechanism will deliver overall mitigation of global emissions, and a share of proceeds from this mechanism will assist vulnerable developing countries.
  3. Countries may also choose to pursue non market approaches in implementing their NDCs. In Katowice, countries did not agree to the guidelines for any of these three elements, including on how to avoid double counting."

Double counting happens when one nation counts a reduction in their target amounts but then they sell that reduction to another nation and the result is it isn't really offset and could be cheating if it isn't caught. Gold Standard carbon credits can be manipulated if not thoroughly watched over time.

What are IMTOs? 

The International Institute for Sustainable Development (IISD) explains, "Internationally transferred mitigation outcomes (ITMOs) use a carbon dioxide equivalent (CO2e) metric for a new set of market provisions or other greenhouse gas mitigation outcomes that are defined under Article 6 of the Paris Agreement."

IMTOs are not easily categorized yet and are still under discussion. They are meant to replace other former carbon credits from the Kyoto Protocol of the 90s. They also may be scaled globally to assist developing countries with offsets. 

Analyzing what kind of carbon emissions a company is emitting such as various foresting emissions, fuel, transportation, energy sources, and more, and calculating them with reliable software in real-time will help with carbon accounting properly. Using the wrong method will only lead to miscalculation. It is important to corporations as well as investors and the government due to increased regulations and improving their environmental impact. 

forest with grass and blue cloudy sky
Image source: Guy Bowden on Unsplash

Should we carbon trade? 

This TIME article states that carbon trading could just be a "loophole for polluters" or might be a progressively positive approach. Under Article 6 of the Paris Agreement if one nation doesn't use emissions another one could come along and buy those units. What isn't clear is how much would be allotted.

"If the rules governing the emissions trading market are lax, it could become a “massive loophole” for emitters, allowing them to continue polluting at home without taking serious action, says Gilles Dufrasne, policy officer at Carbon Markets Watch, an international NGO."

On the other hand, the Environmental Defense Fund claims that this trading may reduce carbon emissions by half by 2035 and they are optimistic this approach will keep global warming under 2C. There are still open, international negotiations being made and continuing to progress regarding the controversial Article 6 of the Paris Agreement. The main concern is that some heavily polluting nations will take advantage of other countries making tremendous effort to do their part and the result will not be what they are striving for and that the environmental impact will be null. 

Protesters have even taken to Article 6 wondering if this will become another money-making market including carbon taxes (and these taxes go for any GHGs). The idea is to limit emissions by taxing them but at the same time, the government and traders are also making money off of the taxes and trading, especially in the EU and California. There is social and political conflict over how strict these tradings will be and if they should even be allowed. Carbon Market Watch says there may be 4 billion carbon credits out on the world by 2020 and if there is no restriction as to when or how they can be used, it will only undermine the progress the Paris Agreement is attempting to make. In fact, the credits are so cheap that it would weaken the positive contributions already made. 

Should we practice carbon offsetting? 

Carbon Market Watch also reports,

"Increasing the pace of emission reductions over time is at the core of the Paris Agreement and must be reflected in the implementation of Article 6. Carbon offsetting is (at best) a zero-sum game and does not lead to global emission reductions since greenhouse gas reductions in one place are cancelled out by continued carbon pollution elsewhere."

Carbon offsetting should be a last resort in your positive environmental impact strategy. However, emissions reduction until complete emissions eradication is a necessary and progressive step in the right direction. In order to keep the atmosphere at net zero and as a bonus, making carbon accounting easier, the correct answer is to reduce emissions and eventually eliminate them if possible so there aren't any carbon emissions lingering in the atmosphere waiting to be offset. 

How can we move forward?

The first step in carbon accounting is having a reliable software system that can accurately track carbon emissions in real-time. Net0's remarkable dashboard with breakdowns of where emissions are coming from i.e., transport or energy, emissions by vendors, and an offset calculator, is easy-to-use for monitoring your environmental impact. Calculating your carbon footprint and viewing your options to offset is all in one place. Setting targets with Net0's simple software to assist your company with achieving net zero goals is very doable with our investor-grade reporting that complies with all government regulations. The data integration process can be done easily into the dashboard to give you a stress-free experience achieving your targets.

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