Introduction

Organizations develop greenhouse gas (GHG) emissions inventories for various reasons, such as complying with regulations, finding ways to improve efficiency, and supporting corporate sustainability initiatives.

This fact file provides an overview of scope 1 and scope 2 GHG inventories.

Background

The Environmental Protection Agency (EPA) provides inventory guidance through many resources that are based on the Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (GHG Protocol Corporate Standard), the global standard for accounting for and reporting on GHG emissions at corporate organizations. The standard requires reporting on six major GHGs:

• Carbon dioxide (CO₂),
• Hydrofluorocarbons (HFCs),
• Methane (CH₄),
• Nitrous oxide (N₂O),
• Perfluorocarbons (PFCs), and
• Sulfur hexafluoride (SF₆).

EPA’s Simplified Guide to Greenhouse Gas Management for Organizations adds nitrogen trifluoride (NF₃) to the major GHGs covered by inventories and incorporates all seven major GHGs in its annual Inventory of U.S. Greenhouse Gas Emissions and Sinks.

Overview of GHG inventory scopes

The GHG Protocol Corporate Standard categorizes emissions from organizations into three scopes.

This Fact File focuses on scope 1 and scope 2.

Scope 1 vs. scope 2

The primary difference between scope 1 and scope 2 emissions is where the emissions actually occur. Scope 1 emissions are generated by equipment or operations owned or controlled by the organization, while scope 2 emissions are generated by equipment or operations at another entity not owned or controlled by the organization.

For example, an organization purchases electricity from a third-party power plant to power its manufacturing facility. Although the power plant generated the emissions to produce the electricity, the organization used that electricity to power its facility, so the emissions are a result of the organization’s operations.

Scope 1 emissions

Scope 1 emissions are direct GHG emissions from a source owned or controlled by the organization. EPA sorts scope 1 sources into five types:

• Stationary combustion (sources that combust fuel),
• Mobile source emissions (sources that burn fuel),
• Refrigeration and air conditioning (A/C) leakage (equipment that leaks chemicals with global warming impact),
• Fire suppression systems (sources that emit chemicals with global warming impact from fire suppression devices), and
• Purchased gases (industrial gases used for manufacturing and other processes).

Scope 1 sources may also include leased equipment and vehicles if the organization pays the fuel bills or has access to fuel-use data.

Organizations typically use a range of sources to collect emissions data for each scope 1 source.

Scope 2 emissions

Scope 2 emissions are indirect GHG emissions from energy generated by another entity that the organization uses in equipment or operations it owns or controls. Purchased energy is the largest source of indirect GHG emissions for many organizations.

EPA categorizes scope 2 emissions into two types:

• Purchases of electricity, and
• Purchases of steam or heat.

The GHG Protocol Corporate Standard requires organizations to report two scope 2 totals:

• The location-based total relies on average emission factors for the electricity grids from which an organization purchases electricity.
• The market-based total addresses the energy an organization obtains through contracts with specific sources (like renewable energy generators).

Organizations may use multiple sources to gather emissions data for each scope 2 source.

GHG inventory development process

EPA outlines a four-step process organizations can follow to develop the GHG inventory. It’s based on the GHG Protocol Corporate Standard.

1. Scope and plan the inventory

During this initial phase:

• Establish a base year of data against which future emissions will be compared,
• Determine the facilities (organizational boundaries) and sources within those facilities (operational boundaries) to include in the inventory, and
• Calculate the GHG emissions from each source included in the base year of data using accepted methodologies.

2. Collect data and quantify GHG emissions

In this part:

• Identify the sources that emit the seven GHGs and categorize them into scope 1 or scope 2 emissions;
• Develop the procedures, tools, and guidance to collect GHG emissions data from the sources using accepted methodologies;
• Collect the facility data and use estimates for any gaps in information;
• Set the emission factors; and
• Calculate the GHG emissions, applying global warming potentials (GWPs) to individual GHGs to convert all emissions into comparable units of carbon dioxide equivalent (CO₂e).

3. Develop a GHG Inventory Management Plan (IMP)

A GHG IMP documents and standardizes the processes used to compile the GHG inventory, ensuring that inventories are reported consistently. The GHG IMP includes:

• Organizational information;
• Descriptions of the organizational and operational boundaries;
• The methods and emission factors to calculate GHG emissions;
• The sources of data and collection and quality assurance processes;
• How to adjust data (including base year) for changes in structure and methodology, if needed;
• Inventory management, including roles and responsibilities, training, and file maintenance; and
• The processes for audits, management reviews, and corrective actions.

4. Set a GHG emission reduction target and track and report progress

A report aligned with the GHG Protocol Corporate Standard includes:

• Descriptions of the organization, inventory boundaries, and the reporting period;
• Emissions data for the six major GHGs;
• Specific measurements of scope 1 and scope 2 data;
• Base year information;
• Data for direct CO2 emissions from biologically sequestered carbon;
• Measurement and calculation methodologies (including calculation tools); and
• Any specific exclusions of sources, facilities, and/or operations.

The GHG inventory report may also include optional information, such as scope 3 emissions data and additional GHGs not covered by the Kyoto Protocol (e.g., NF₃).

Greenhouse Gas Reporting Program

EPA’s Greenhouse Gas Reporting Program (GHGRP) requires large sources of GHG emissions to report scope 1 emissions data annually. The GHGRP covers:

• Large GHG emission sources (direct emitters),
• Fuel and industrial gas suppliers, and
• CO2 injection sites.

Direct emitters subject to the GHGRP are considered scope 1 sources because they report direct GHG emissions at the facility level. Suppliers report information at the corporate level and are, therefore, considered scope 3 sources. Further, the GHGRP doesn’t cover scope 2 emissions.

Applicable laws & regulations

40 CFR 98 — Mandatory greenhouse gas reporting

Related definitions

Emission factor means a representative value that tries to relate the quantity of pollutants emitted into the air from a process to a specific activity associated with generating those emissions. It’s used to estimate emissions from an operating process or activity where direct measurements are unavailable.

Greenhouse gas (GHG) inventory means a list of emission sources and the GHG emissions they generate that are quantified using standardized methods.

Scope 1 emissions are direct GHG emissions generated by sources controlled or owned by the reporting organization.

Scope 2 emissions are indirect GHG emissions related to an organization’s purchase of energy, including electricity, steam, heat, and cooling. The GHG emissions are generated at sources not owned by the reporting organization (like at a power plant) and then used by the reporting organization to power operations and equipment it owns.

Scope 3 emissions are GHG emissions related to the activities of assets not owned or controlled by the reporting organization but that the organization indirectly affects in its value chain (like employees using personal vehicles to drive to and from work). Scope 3 includes all emissions outside of scopes 1 and 2.

Key to remember

A greenhouse gas (GHG) inventory accounts for the GHG emissions an organization’s operations and equipment generate, including direct (scope 1) and indirect (scopes 2 and 3) emissions. EPA requires large sources to report scope 1 emissions data annually through the GHG Reporting Program.

Real-world example

EPA’s GHGRP requires three types of entities to submit annual reports of GHG emissions from the prior calendar year. One type is direct emitters, which are facilities that emit large amounts of GHGs directly from their facilities through onsite combustion or processing. The annual GHGRP reports that direct emitters submit are scope 1 emissions inventories.

Generally, a facility is subject to the GHGRP requirements as a direct emitter if it’s within a covered source category (industry type) and emits more than 25,000 metric tons of CO2e of GHGs annually. The GHGRP categorizes reporters by source categories, such as iron and steel production, food processing, and refineries. Each covered facility must report GHG emissions for all applicable source categories.

The regulations at 40 CFR Part 98 prescribe the methodologies facilities may use to calculate emissions. All covered entities must submit GHGRP reports through the Electronic Greenhouse Gas Reporting Tool (e-GGRT) by March 31 each year.