RG Primer On GHG Emissions Management Systems August 2018
RG Primer On GHG Emissions Management Systems August 2018
RG Primer On GHG Emissions Management Systems August 2018
on Greenhouse
Gas Emissions
Management Systems
AUGUST 2018
A Primer for CPAs
on Greenhouse
Gas Emissions
Management Systems
AUGUST 2018
DISCLAIMER
This paper was prepared by the Chartered Professional Accountants of Canada
(CPA Canada) as non-authoritative guidance.
CPA Canada and the authors do not accept any responsibility or liability that might
occur directly or indirectly as a consequence of the use, application or reliance on
this material.
Table of Contents
Executive Summary 1
Government Responses 4
Conclusion 23
Executive Summary
This paper addresses the need to reduce and manage greenhouse gas (GHG)
emissions. Achieving global targets envisioned in the Paris Agreement will require
a cultural shift and the harnessing of markets, innovation and technology.
SECTION 1
Overview of Climate
Change Mitigation
This paper addresses the issue of managing the reduction of GHG emissions
(also known as climate change mitigation). While adapting to the impacts of
climate change is a significant and costly business issue, the focus of this paper
is on the need to reduce and manage GHG emissions in order to avoid costlier
impacts in the future and the associated roles for CPAs.
1 www.ibc.ca/nb/resources/media-centre/media-releases/severe-weather-natural-disasters-cause-record
-year-for-insurable-damage-in-canada
2 www.washingtonpost.com/amphtml/news/energy-environment/wp/2018/01/08/hurricanes-wildfires
-made-2017-the-most-costly-u-s-disaster-year-on-record/?noredirect=on
4 A Primer for CPAs on Greenhouse Gas Emissions Management Systems
Government Responses
3 www.canada.ca/en/environment-climate-change/services/climate-change/facts.html
4 https://climate.nasa.gov/scientific-consensus
5 www.nytimes.com/2017/01/18/science/earth-highest-temperature-record.html & www.theguardian.com/
environment/2017/nov/06/2017-set-to-be-one-of-top-three-hottest-years-on-record
6 www.accuweather.com/en/weather-news/nasa-reported-2017-was-the-warmest-year-on-record-without
-an-el-nino/70003912
7 http://unfccc.int/parties_and_observers/items/2704.php
8 https://unfccc.int/resource/docs/convkp/conveng.pdf
SECTION 1 | Overview of Climate Change Mitigation 5
Paris Agreement
On December 12, 2015, 197 Parties to the UNFCCC, including Canada, adopted
the Paris Agreement at the 21st Conference of the Parties (COP21).9 The Paris
Agreement established a consensus to limit the growth of GHG emissions glob-
ally to less than 2° Celsius above pre-industrial levels by 2050 and towards
1.5° Celsius in the latter half of the century.10
“This monumental agreement by the world’s governments in Paris marks a critical turning
point for the global economy. The deal is an unequivocal signal to investors to shift trillions
of dollars of capital to low-carbon solutions and to companies, in their turn, to invest in
developing and scaling up clean technologies. Those that do will surely be the winners in
the now inevitable transition to a low-carbon economy.”
Paul Simpson — CEO, Carbon Disclosure Project
Since the entry into force of the Paris Agreement, some challenges have arisen
which could impact its potential for success, notably:
• the stated intention of the U.S. to withdraw from the Paris Agreement
(However, the withdrawal of the U.S. at the national level, has led to signifi-
cantly increased activity at the city, state and regional levels as well as from
the private sector.)
• there is a gap between the current commitments by governments and
the stated goal of limiting average global warming to 2° Celsius
9 http://unfccc.int/paris_agreement/items/9444.php
10 http://bigpicture.unfccc.int
11 http://unfccc.int/paris_agreement/items/9485.php
6 A Primer for CPAs on Greenhouse Gas Emissions Management Systems
Figure 1 shows both historical and projected GHG emissions in Canada. Fig-
ure 1 also shows that Canada’s GHG emissions trajectory is estimated not to
peak in 2020; it is necessary to peak by this date, however, in order to meet
the Paris Agreement aspirations.
FIGURE 1: CA
CANADA’S
C DOMESTIC EMISSIONS PROJECTIONS IN 2020 AND 2030
(Mt CO2 eq)13
850
747
800
790
750
742
700
697
731
650
720
600
500
2005 2010 2015 2020 2025 2030
12 www.oag-bvg.gc.ca/internet/English/parl_cesd_201710_00_e_42488.html
13 www.canada.ca/en/environment-climate-change/services/climate-change/publications/2016-greenhouse
-gas-emissions-case.html
SECTION 1 | Overview of Climate Change Mitigation 7
By the end of 2018, all jurisdictions (including those that have not yet signed
onto the Framework16) must have carbon pricing. According to the Framework,
jurisdictions must have instituted one of the following systems:
• an explicit price-based system (i.e., carbon tax) where the explicit price
must be at least:
— $20 per tonne in 2019
— $30 per tonne in 2020
— $40 per tonne in 2021
— $50 per tonne in 2022
• a cap-and-trade system whereby 2030 emissions must be reduced to at
least 30% below 2005 levels and with declining “annual caps to at least
2022 that correspond, at a minimum, to the projected emission reductions
resulting from the carbon price that year in price-based systems.”17
The federal government has indicated that by early 2022 it will review the
comparative effectiveness of the carbon pricing systems.
14 www.canada.ca/content/dam/themes/environment/documents/weather1/20170125-en.pdf
15 Ibid.
16 At the time of writing, only Saskatchewan has not signed on to the Framework.
17 www.canada.ca/en/services/environment/weather/climatechange/pan-canadian-framework.html
8 A Primer for CPAs on Greenhouse Gas Emissions Management Systems
Provincial Responses
Table 1 summarizes the current carbon pricing elements in existing federal and
provincial programs in Canada.18
British Columbia24 Carbon Tax: The carbon tax was established in 2008 and is
• 33% below 2007 currently set at $30/tCO2e;25 starting April 1, 2018, it increases
GHG emission levels by $5/tCO2e per year to $50/tCO2e in 2021. 26
by 2020
Reporting: Annual GHG emissions reporting is mandatory for
• 80% below 2007
facilities emitting greater than 10,000 tCO2e per year and
GHG emission levels
facilities that have emitted more than 10,000 tCO2e in any of
by 2050
the previous three years. 27
18 At the time of writing, Ontario announced its intention to eliminate the existing cap-and-trade system,
withdraw from the Western Climate Initiative (WCI) and challenge the federal government’s jurisdiction to
impose a national carbon price. However, Ontario still remains a member of the Framework at the time
of writing.
19 Compliance requirements for third-party verification of GHG emissions reports vary by jurisdiction.
For additional information, refer to the relevant government legislation.
20 www4.unfccc.int/submissions/INDC/Published%20Documents/Canada/1/INDC%20-%20Canada%20-%20
English.pdf
21 https://unfccc.int/files/focus/long-term_strategies/application/pdf/canadas_mid-century_long-term_
strategy.pdf
22 Ibid.
23 www.canada.ca/en/environment-climate-change/services/climate-change/greenhouse-gas-emissions/
facility-reporting.html
24 www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/legislation
25 www2.gov.bc.ca/gov/content/environment/climate-change/planning-and-action/carbon-tax
26 www2.gov.bc.ca/gov/content/taxes/tax-changes/budget-changes
27 www2.gov.bc.ca/gov/content/environment/climate-change/industry/reporting
28 www.alberta.ca/climate-leadership-plan.aspx
29 http://aep.alberta.ca/climate-change/guidelines-legislation/specified-gas-reporting-regulation/default.aspx
SECTION 1 | Overview of Climate Change Mitigation 9
33
Quebec Cap and Trade: The cap-and-trade program was established
• 20% below 1990 here in 2013 with mandatory participation for facilities emit-
GHG emission levels ting greater than 25,000 tCO2e per year. A voluntary opt-in
by 2020 provision is available for facilities emitting between 10,000 and
• 37.5% below 1990 25,000 tCO2e per year. The cap-and-trade policy has been
GHG emission levels linked with the Western Climate Initiative since inception. 34
by 2030
Reporting: Annual GHG emissions reporting is mandatory
• 80 to 95% below
for facilities and petroleum producers emitting greater than
1990 GHG emission
10,000 tCO2e per year. 35
levels by 2050
30 www.gov.mb.ca/sd/annual-reports/sdif/mb-climate-change-green-economy-action-plan.pdf
31 www.gov.mb.ca/asset_library/en/climatechange/climategreenplandiscussionpaper.pdf
32 Ibid.
33 www.mddelcc.gouv.qc.ca/changementsclimatiques/engagement-quebec-en.asp
34 www.mddelcc.gouv.qc.ca/changements/carbone/documents-spede/in-brief.pdf
35 www.mddelcc.gouv.qc.ca/air/declar_contaminants/index-en.htm
10 A Primer for CPAs on Greenhouse Gas Emissions Management Systems
It is estimated that from 2020 onward at least $200 billion of public and
$800 billion of private resources in climate action each year is necessary. 36
Much of this spending will come from businesses seeking to achieve competi-
tive advantage in this new economic landscape.
36 www.mission2020.global
11
SECTION 2
Some GHGs are more potent and short-lived in the atmosphere; others are
less potent but remain in the atmosphere for a longer period. To simplify emis-
sions reporting by organizations and governments internationally, reporting
protocols require that the global warming potential (GWP) of each GHG be
expressed in tonnes of carbon dioxide equivalents (tCO2e). Determining the
total tCO2e emissions of a reporting entity then becomes a simple matter of
multiplying the tonnes of each gas emitted in a given year by its GWP value.
For example, the impact of reducing one tonne of carbon dioxide would be
measured as a reduction of 1 tCO2e, whereas the reduction of one tonne of
methane would be measured as 25 tCO2e.
12 A Primer for CPAs on Greenhouse Gas Emissions Management Systems
Global
Warming Illustrative
GHG Potential Examples
Emission (GWP) of Sources
37 www.epa.gov/ghgemissions/overview-greenhouse-gases
SECTION 2 | The Need for GHG Emissions Management 13
Standard /
Protocol Description and Use Cases
ISO 14064 The International Standards Organizations (ISO) Greenhouse Gas Stan-
dard 14064 (ISO 14064: Parts 1, 2 and 3) is globally recognized and widely
accepted and used across the private and public sectors for measuring,
reporting and managing GHG emissions. It was developed and initially
released in 2006 as a globally applicable standard. There are three parts
to ISO 14064:
• Part 1: Specification with guidance at the organizational level for
quantification and reporting of greenhouse gas emissions and
removals: requirements for the design, development, management,
38
reporting and verification of an organization’s GHG inventory.
• Part 2: Specification with guidance at the project level for quantifica-
tion, monitoring and reporting of greenhouse gas emission reductions
or removal enhancements: requirements for planning a GHG project,
identifying and selecting GHG sources, sinks and reservoirs, develop-
ing a baseline scenario, monitoring, quantifying, documenting and
reporting GHG project performance. 39
• Part 3: Specification with guidance for the validation and verification
of GHG assertions: requirements for verifying an organization’s GHG
inventory (under ISO 14064-1) and GHG project quantification (under
ISO 14064-2).40
GHG Protocol The World Resources Institute (WRI) and the World Business Council for
Sustainable Development (WBCSD) jointly developed the GHG Protocol
in 2001. The GHG Protocol establishes comprehensive global standardized
frameworks to measure and manage GHG emissions from private and
public sector operations, value chains and mitigation actions.41
The GHG Protocol has developed seven separate GHG Standards,
including:42
• Corporate Accounting and Reporting Standard
• GHG Protocol for Cities
• Mitigation Goal Standard
• Corporate Value Chain (Scope 3) Standard
• Policy and Action Standard
• Product Standard
• GHG Project Protocol
38 www.iso.org/standard/38381.html
39 www.iso.org/standard/38382.html
40 www.iso.org/standard/38700.html
41 www.ghgprotocol.org/about-us
42 www.ghgprotocol.org/standards
14 A Primer for CPAs on Greenhouse Gas Emissions Management Systems
1. What are the relevant regulatory requirements for GHG emissions reporting?
In order to determine reporting obligations, a jurisdictional scan of exist-
ing and planned GHG emissions reporting regulation is a prudent first
step. It is worthwhile noting that GHG emissions reporting regulations
vary significantly within Canada; each province and territory may have its
own approach. Companies should understand the policies in all jurisdic-
tions where they have operating facilities, not only the jurisdiction where
head office is located.
43 CDP (formerly the Carbon Disclosure Project) is an international not-for-profit organization providing
a global system for companies and cities to measure, manage and share environmental information.
44 In Canada, listed companies must disclose material information, including material climate change informa-
tion, in their securities regulatory filings. Further guidance can be found in CSA 51-333: Environmental
Reporting Guidance: www.osc.gov.on.ca/documents/en/Securities-Category5/csa_20101027_51-333_
environmental-reporting.pdf.
17
SECTION 3
The table below outlines appropriate roles for CPAs in GHG emissions manage-
ment activities. These roles illustrate some of the ways CPAs can support their
organizations as they mitigate GHG emissions.
18 A Primer for CPAs on Greenhouse Gas Emissions Management Systems
Respond to
Roles for Motivate Plan Implement Assess
Market and
CPAs Action Action Action Performance
Stakeholders
CPAs in Examples:
Leadership • Ensure board is educated about GHG emissions management.
Positions • Comment on policy alternatives.
• Integrate GHG emissions mitigation considerations into organizational strategy,
risk management and decision-making.
• Set GHG emissions reduction targets and develop organization-wide action plans.
• Establish accountability structures for mitigation goals and targets.
• Embed GHG mitigation into business functions and processes, including compensation.
This includes the development of mitigation action plans with key performance
indicators to assess performance against goals. CPAs in leadership roles can
also embed mitigation considerations into existing business processes, such as
enterprise risk management systems, financial and operational reporting systems,
asset management, supply chain management, and procurement policies, to
name a few.
“CPAs in leadership positions, such as the CFO, have an opportunity to set the tone for
the organization when it comes to investing in climate change mitigation and adaptation
actions. As accountants, we are uniquely positioned to lead the business case for GHG
emissions management activities. We bring the skills and rigor required to ensure that
investments to reduce GHG emissions align with overall risk management and strategy.”
Robert Siddall — FCPA, FCA, Chief Financial Officer of Metrolinx
46 www.cpacanada.ca/en/business-and-accounting-resources/financial-and-non-financial-reporting/
sustainability-environmental-and-social-reporting/publications/the-2030-agenda-for-sustainable
-development
20 A Primer for CPAs on Greenhouse Gas Emissions Management Systems
Motivate Action
As a starting point, most organizations will seek to understand their GHG
emissions inventory, also known as a carbon footprint, and evaluate whether
government reporting is required and whether reductions are necessary for
compliance purposes and/or advisable in the context of their business model
and strategy. CPAs can help to identify mitigation risks and opportunities and
build the business case for reducing GHG emissions by developing quantita-
tive and qualitative analyses to support decision-making. CPAs in leadership
roles can identify and analyze business drivers for GHG emissions manage-
ment, such as a changing regulatory environment and evolving stakeholder
expectations.
Plan Action
In evaluating responses to identified risks and opportunities, CPAs can support
their organizations in estimating the costs and benefits of mitigation options
and prioritizing activities to achieve high-impact emissions reductions. CPAs
can also support the development of GHG emission reduction targets by using
scenario modelling to forecast financial and operational outcomes of alternate
mitigation actions.
Implement Action
CPAs may be engaged in carbon markets as part of trading and compliance
activities related to cap-and-trade systems. This could include accounting for
assets, liabilities, revenue and expenses associated with cap-and-trade transac-
tions. For additional information on this topic, refer to a recent CPA Canada
publication titled Accounting for Cap and Trade Systems in Appendix A.
Assess Performance
Measurement is an essential tool for evaluating progress toward GHG emission-
reduction targets and reporting externally to the market and stakeholders.
CPAs working in business are well positioned to help their organizations with
performance measurement and management of mitigation efforts. Accoun-
tants can play a critical role by establishing key performance indicators for
SECTION 3 | Roles for CPAs 21
mitigation action plans used for internal decision-making and external com-
munications. CPAs can support the design and implementation of systems and
internal controls for collecting and validating GHG emissions data.
Conclusion
Appendix A—Where to
Find More Information
This appendix provides useful resources in relation to the issue of GHG emissions
management and reporting.