What is Greenhouse Gas Accounting? Furnishing definitions

March 1, 2023, by Michael Gillenwater

Installment N.1

What is greenhouse gas (GHG) accounting, or more commonly labeled, carbon accounting? Do a quick web search (or treacherously ask ChatGPT) and you will get a load of vague yammering about corporations calculating emissions and maybe a mention of scope 1, 2, and 3, followed by a sales pitch to purchase a software product or consulting service.[1] How did we get here—not able to even rigorously define what we are doing?

This post is the first installment in a series that interrogates our fundamental understanding of GHG accounting.[2] Now, before reading further, I have what should be a simple request—that you accept the premise (and plenty of supporting evidence is available) that the current state of corporate GHG emissions disclosure is a mess. In this blog, I am skipping the step of substantiating the full nature and existence of this mess. I promise to do so more properly in forthcoming posts followed by a research article. But, in the meantime, if you need a taste of the problems leading to this mess you can sample here, here, here, here, and here.[3]

Ironically, we are at a point in time when, simultaneously, organizations have a growing awareness of the structural problems with corporate GHG reporting protocols WHILE powerful governmental regulators and non-governmental initiatives are newly, and rather blindly, adopting the same protocols. It is like watching a train wreck approaching in slow motion. To prevent it, there is so much to do. Yet, where do we start?

I argue we almost always have to start with definitions to enable the expert community to constructively communicate. Then with shared nomenclature, paired with thoughtful definitions, we can then catalog and scrutinize the various purposes of GHG accounting. In other words, what forms of GHG accounting are fit for a given purpose? Building a clear nomenclature and answering this question are prerequisites for properly attacking and resolving specific problems we are witnessing in the corporate GHG accounting space, such as comparing corporate reports, meaningfully quantifying GHG mitigation, scope 3 boundaries, and market-based allocation methods.

Let us begin by admitting that the term “accounting”—borrowed from business and finance—may not be ideal for use in an environmental management context. However, I contend that the term is, nevertheless, suitable, as it can be used to denote crucial conceptual distinctions. And, I am not aware of superior alternative terminology. With all that out of the way…let us get to the definitions.

Environmental accounting (including GHG accounting), by definition, is an exercise of constructing a time series. Any singular study that provides a momentary snapshot or analysis of GHG emissions or GHG impacts but is not designed to produce a consistent time series of quantities, is not GHG accounting. Such studies can certainly be informative and useful, but they fail to satisfy the narrower definition of GHG accounting. Otherwise, what is the point of “GHG accounting” as a term if it is simply a synonym for GHG quantification?

Next, I distinguish three major forms of GHG accounting: physical, performance, and economic. You will come to understand that these distinctions are on the critical path to cleaning up the mess that is the current status of corporate GHG disclosures.

Let us start at the bottom. Economic GHG accounting is largely the domain of environmental and ecological economists, as it entails monetary valuation (i.e., denoted in units of currency rather than tonnes), such as estimation of the costs from GHG emission impacts.[4] When it produces a time series of estimates, then it is a form of GHG accounting. However, I will not explore this form further, as our interests at GHGMI are primarily environmental, not economic.

Returning to the top, physical GHG accounting involves quantification of the mass of atmospheric GHG fluxes, including changes in fluxes.[5] It reflects the physical reality (ex post) or potential physical reality (ex ante) of the atmosphere. There are two forms of physical GHG accounting: attributional and consequential. By now, I hope you are familiar with the essential distinction between these two types of methods. If not, then please take a moment to read this article and then return.[6] For physical accounting, attributional and consequential methods should not be combined because then the resulting estimates will not have a tangible interpretation. Much of the current confusion and flawed thinking in corporate GHG reporting relates to conscious and unconscious attempts to hybridize attributional and consequential methods. This brings us to the third form of GHG accounting.

Performance GHG accounting is the domain of program and policy reporting and implementation. The accounting rules for this form selectively diverge from physical GHG accounting to address particular policy objectives, such as embedding incentives or penalties for particular GHG mitigation actions, adjustments to introduce estimation conservativeness, or including measures of non-GHG factors (e.g., environmental justice distributional factors). I refer to this form of GHG accounting, conceptually, as being score-based. Proper performance GHG accounting provides a meaningful metric for judging and tracking the performance of a subject (e.g., company, facility, project, or jurisdiction) over time, with respect to one or more GHG-related objectives, and is appropriate for tracking compliance with goals. But, its distinguishing feature is that it is not, nor does it claim to be, a true physical measure of atmospheric GHG fluxes! For example, a company could receive a higher score for reducing emissions in a disproportionately impacted community. Or, a company could improve its score through accepted environmental market-based transactions that are detached from its physical activities.[7][8] Performance GHG accounting can be built from a physical GHG accounting result that is then modified and amended throughout that time series by integrating other GHG (e.g., supply chain intervention impacts) and/or non-GHG scores (e.g., environmental or social co-benefits).

The distinction between physical and performance GHG accounting has many implications. Performance accounting provides flexibility to integrate many useful modifications to construct more practical and sophisticated accounting rules that can be the basis for incorporating incentives and disincentives for corporate action, as well as supporting other GHG or non-GHG environmental or social market mechanisms. For example, national GHG inventories prepared in keeping with IPCC guidelines[9] are an instance of physical GHG accounting at the country level. But, then the Kyoto Protocol’s compliance system established a parallel and distinct performance GHG accounting system that was scored in “units” versus tonnes of GHGs. It also introduced market-based accounting as well as other accounting rule adjustments to address particular land-use change political compromises. Similarly, for companies, performance GHG accounting offers pathways to address a number of objectives stakeholders have for corporate disclosures. For example, the potential to contend with the infamous GHG Protocol market-based method for reallocating scope 2 GHG emissions and establishing science-based target-inspired score-based budgets. However, we must accept that a move away from physical GHG accounting affects how we legitimately interpret concepts like carbon neutrality and net zero. Just because a company achieves a “good score,” for example, zero, under a performance GHG accounting method does not mean its physical activities involve zero physical GHG emissions. Although physical and performance accounting can be related, with the accounting rules of the latter drawing on and then modifying the results of the former, they are by definition two separate time series metrics.

As an amalgamated reference, this table provides rigorous definitions for each form of GHG accounting. I will note, the table includes some terminology that you will have to wait for coming blog posts for me to explain. In future posts and articles, I will be providing a deep exploration of attributional physical GHG accounting. There is far too much to explore on this question of “What is GHG accounting?” to address everything in one essay.

Forms of GHG Accounting[10]

Physical GHG accounting

Performance GHG accounting*

Economic GHG accounting

def. Estimating and/or measuring physical quantities (mass) of atmospheric GHG emissions and removals assigned to subjects, over time.

def. Quantifying and tracking rule-based GHG-associated scores of subjects over time for use in program or policy reporting.

Scores may deviate from physical quantities of emissions and removals from the atmosphere to facilitate programmatic or policy objectives, but will typically, in part, be derived from physical GHG accounting quantities. Scores can use a range of quantification methods, including hybrids that combine approaches from allocational and consequential accounting.

def. Estimating the economic value of GHG-associated emissions and removals and/or impacts over time.

Economic valuation calculations may employ, as input data, the results from allocational or consequential physical GHG accounting methods.

Allocational Attributional GHG accounting

Consequential GHG accounting

def. Regularly estimating and/or measuring physical quantities (mass) of atmospheric GHG emissions and removals allocated to subjects (e.g., facilities, organizations, jurisdictions, countries) over time with comparability between subjects’ estimates, time series consistency, completeness, and additivity to system-wide total emissions from the defined population of subjects. Allocation must entail physical (i.e., matter or energy) connection to the subject.** The quantification of GHG emissions for each time period in the time series is a GHG inventory.***

def. Estimating the time series of differences in physical quantities (mass) of atmospheric GHG emissions and removals between a baseline (i.e., non-intervention) scenario and an intervention scenario, with comparability between scenarios, so as to estimate the change in emissions and removals caused by an intervention. Also referred to as “intervention” accounting, as the subject of the accounting is an intervention.

Note: these definitions also apply to other applications of environmental accounting, such as for other non-GHG pollutants.
* WRI GHG Protocol crudely uses the term "target accounting" (see 2023 market-based survey background memo).
** The topics of subject and system-wide accounting boundaries, additivity, and accepted emission allocation will be addressed in a coming blog installment.
*** Colloquially, the term "GHG inventory" or more properly "GHG inventory of emissions from sources and removals from sinks" is also used to refer to a quantified time series of repeated single time period inventories.


To help more clearly distinguish generic forms of GHG quantification and analysis that do not satisfy the narrower criteria for GHG accounting, here is a contrasting descriptive definition of those terms.


GHG analysis or GHG quantification

def. A single scientific or technical study of the physical quantities, economic values, or other metrics related to GHG emissions and/or removals not necessarily conducted in an intentional manner to produce a regular and consistent time series of results.

An overarching strategic question for the GHG Protocol’s Corporate Accounting and Reporting Standard is whether its post-update future is to serve: i) as an attributional method of physical GHG accounting that results in reporting of a company’s assigned responsibility for physical emissions to the atmosphere, ii) as a more complex, but potentially more influential, performance GHG accounting method, or iii) as both by establishing parallel, but separate, sets of corporate GHG accounts. More than one performance GHG accounting metric could also be established for different objectives or industries. The option that would be technically illegitimate is to conclude the GHG Protocol update process with the belief that both physical GHG accounting and performance GHG accounting purposes can be achieved within one set of accounting rules.

Now, you should have also been asking ‘Why has Michael been writing “attributional” with a strikethrough? Is this an HTML coding error on the webpage?’ Well, no, it is intentional. Although we have been educating the GHG expert community on the essential distinction between attributional and consequential GHG accounting, we now recognize one problem. Like many other problems in the messy corporate GHG reporting space, this problem originates in the progenitor mess that is life cycle assessment (LCA). I will have much more to say on this topic of setting GHG accounting boundaries. For now, I strongly argue that “attributional” should be replaced with the more suitably descriptive term “allocational”.[11] Correctly understood, the purpose of this form of GHG accounting is to allocate (i.e., assign) a total system-wide amount of emissions to individual subjects, such as companies, facilities, or countries. In contrast, the verb “to attribute” breeds flawed thinking because it introduces causal notions and thereby fosters conflation with interventions and consequential methods. Allocating responsibility is not the same thing as demonstrating causation. And the governing justification for setting boundaries in allocational GHG accounting should not spark arguments over causation or influence. Again, future installments will explain this mistake and justify why you should upgrade your professional vocabulary to this improved nomenclature of “allocational GHG accounting.” With your help, we can begin repairing the intellectual damage by thinking attributional GHG accounting assigns causation and a quantification impact. The words we choose to use do matter.[12]

Allocate (v)Attribute (v)

1: to apportion for a specific purpose or to particular persons or things: distribute
…allocate tasks among human and automated components
2: to set apart or earmark: designate
…allocate a section of the building for special research purposes

1: to explain (something) by indicating a cause
He attributed his success to hard work.
2a: to regard as a characteristic of a person or thing
…should not attribute adult reasoning to children.
2b: to reckon as made or originated in an indicated fashion
..attributed the invention to a Russian.
2c: classify, designate

Note: definitions provided by Merriam-Webster. See allocate and attribute.

The next question you should be asking is if corporate GHG inventories are to be properly considered an allocational method of physical GHG accounting, then what are acceptable conventions for governing allocation? The answer to this question has decisive implications for how we adjudicate market-based approaches to corporate GHG accounting. Stay tuned for future installments.

To close, I will confess that these concepts sound theoretical and can be confusing. Why do we need a bunch of new words for things we are already doing and communicating about? Returning to the opening premise of this post, what we are doing currently with corporate GHG disclosures is not working. Further, it is so flawed that the problems with it are on a trajectory towards considerably worse disclosures, rather than better. We have to think deeper and be open to advancements if we expect to achieve meaningful corporate GHG accounting. That is the purpose of this series…to foster deeper thinking and modernize our expert community.

Click here to all the installments in the “What is GHG accounting?” series


I am thankful for the insightful comments from and discussions with my colleagues Matthew Brander (University of Edinburgh), Derik Broekhoff (SEI),  Alissa Benchimol (GHGMI), and Molly White (GHGMI).

Recommended Citation

Gillenwater, M., (2023). What is Greenhouse Gas Accounting? Furnishing definitions (N.1). Seattle, WA. Greenhouse Gas Management Institute, March 2023. [https://ghginstitute.org/2023/03/01/what-is-greenhouse-gas-accounting-furnishing-definitions/]

[1] A thorough review of the academic literature, unfortunately, will not resolve this state of ambiguity. If you dive deep into this literature, especially on life cycle analysis (LCA), then reach out and we can establish an emotional support group. A light in the depths is the work by Dr. Matthew Brander. For a wide-ranging survey of information related to “carbon accounting” see the newly updated Wikipedia article by David Tetta.

[2] GHG accounting is only one instance of the broader exercise of environmental accounting for other pollutants or environmental impacts. Although this series focuses on GHG accounting, the concepts and definitions should be applicable to the broader exercise of environmental accounting.

[3] I would argue, you can judge whether a colleague is “well-informed” regarding corporate GHG estimates, reports, and targets by whether they at least recognize the numerous problems with it.

[4] For example, the social cost of pollution can differ by geography due to a number of factors (e.g., willingness to pay, purchasing power differences).

[5] Emissions flux is the scientific term referring to both emissions and removals.

[6] As with GHG inventories of emissions and removals, results from the consequential GHG accounting method are also properly presented as a time series, in the latter case as changes (i.e., impacts) relative to a baseline scenario’s time series.

[7] A non-GHG, but environmental accounting example is under Renewable Portfolio Standard compliance rules that allow, in some States, 1 MWh of generated energy to be credited as more than 1 MWh because it furthers a particular policy objective. In Massachusetts’ Clean Peak Energy Standard, renewable sources pared with storage systems are awarded a 1.5× multiplier. Though, no one is arguing that attaching a battery to a solar panel magically creates an extra 0.5 MWh of energy.

[8] In a coming blog installment and research paper, I will be elaborating a proposal for largely replacing scope 3 reporting, which you will see violates the definition of physical GHG accounting, with performance GHG accounting methods for quantifying the GHG impact scores of recognized value-chain interventions.

[9] Intergovernmental Panel on Climate Change (IPCC), see guidelines here.

[10] All forms can be applied ex ante or ex post.

[11] Before you ask, yes it is an actual word.

[12] In anticipation of arguments, the allocation is conceptual and is related to the principle of additivity. It does not mean that GHG system-wide total (e.g., global) emissions are quantified and then distributed out to each company or other subject. Emissions are typically estimated “bottom-up”, but the expectation is that the estimated results are theoretically equivalent to or an approximation of allocating total system-wide emissions. Such is the case with national GHG accounting, which theoretically are intended to equal global anthropogenic GHG fluxes (when international transport bunkers are included).

7 responses to “What is Greenhouse Gas Accounting? Furnishing definitions”

  1. Claire Wigg says:

    Very interesting! A few random points:
    1. I prefer “quantification” to accounting, but perhaps that wouldn’t help.
    2. Have you read Jimmy Jia’s paper here: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4258460
    3. Agree words matter and “allocational” would be good.
    4. Will you be working towards concrete solutions that can be presented to GHGP?

    • Michael Gillenwater says:

      Thanks Claire.
      Happy to say that Jimmy and I have been connected on these issues for some years. And yes, I commented on an early draft of his paper.

      And yes, we are already engaging with GHGP and other partners on practical solutions. But, we argue that we need to mature our conceptual thinking before we jump straight to accounting rule changes. Next week’s blog installment will attack the next step in this conceptual journey and focus on being more precise on the functions we are trying to satisfy with different kinds of GHG accounting.

  2. SAWADOGO Gueswindé says:

    article très intéressant

  3. George Tarus says:

    Very interesting perspective, indeed the GHG space has a degree of confusion.
    Looking forward to the next series

  4. Rogelio Campos says:

    Very interesting and necessary article.

    Regarding the term “allocation”, does its use refer to the importance of including indirect emissions from the organizations’ value chain?

    I understand that the term “attributional” could be more linked to direct emissions and those indirect ones associated with the company’s operations (electricity consumption) but less linked to the activities of suppliers or end users.

    • Michael Gillenwater says:

      The term “allocation” would imply more of a concept of “exclusively” assigning emissions. Indirect emissions, as currently defined in the GHG Protocol, are by definition accounted for by more than one organization. There could be ways around this, which will be addressed by the 3rd installment in this series.

      But, I would not interpret the conceptual differences of using “attribute” versus “allocate” as mapping onto direct versus indirect. At least that is not how I am thinking about it. But, these are good points. I’ll add this into my discussion in the coming installment on allocation rules.


  5. David Tetta says:

    *Well structured. Smoothly weaves together definitional concepts and real world issues.
    *The distinctions between physical and performance accounting are spot on.
    * Agree that “allocational” is a more suitable term.
    * Nice to see a call to community at the end.

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