Carbon accounting is the systematic tracking of greenhouse gas emissions produced by human activity. It is essential for managing environmental impact, developing climate strategies, and meeting regulatory and voluntary reporting obligations. Rising global temperatures, sea level rise, and intensified natural disasters are direct results of accumulated greenhouse gases in the atmosphere. According to the IPCC, human activity is extremely likely to be the primary driver of these changes. Accurate carbon measurement is now a baseline requirement for corporate and national climate action.
Historical Context and Global Commitments
Since the Industrial Revolution, atmospheric CO2 concentrations have risen from approximately 280 parts per million to over 400. Without mitigation, projections suggest concentrations could exceed 680 parts per million by 2100, with potential global temperature increases of more than four degrees Celsius.
The United Nations Framework Convention on Climate Change (UNFCCC) classifies countries into Annex One (industrialized) and Non-Annex One (developing) categories. All parties are now required to submit emissions inventories biennially under the Paris Agreement. Events like COP 26 have spurred efforts to mobilize capital and establish global standards for climate disclosure.
The Role of Carbon Accounting in Climate Strategy
Carbon accounting allows companies, governments, and individuals to:
- Quantify direct and indirect emissions
- Set reduction targets
- Monitor progress toward net zero goals
- Participate in carbon markets and offset schemes
- Comply with disclosure frameworks such as TCFD, SASB, and ISSB
Nearly half of the world’s largest firms have adopted internal carbon pricing. Reporting on net zero or carbon-neutral goals is rising rapidly, with S&P 500 firms showing strong alignment with TCFD principles.
Emission Categories and Scope Definitions
Carbon accounting uses three emission scopes:
- Scope one includes direct emissions from sources under operational control (e.g. company vehicles, on-site fuel combustion)
- Scope two covers indirect emissions from purchased energy (e.g. electricity, heating, cooling)
- Scope three includes all other indirect emissions across the value chain (e.g. commuting, procurement, business travel, upstream and downstream logistics)
Accurate categorization helps prevent double counting and clarifies organizational responsibilities.
Emission Estimation and Activity Data
Because greenhouse gases are imperceptible and widespread, most emissions are not measured directly.
Estimation is based on:
- Activity data: metrics such as fuel consumption, industrial output, or kilometers traveled
- Emission factors: coefficients that translate activity into CO2-equivalent emissions
Selecting context-specific, updated emission factors is essential for accurate inventories. These factors differ by geography, technology, and production method.
Inventory and Reporting Approaches
There are two main approaches to carbon accounting:
- Territorial inventories: required by governments, these assess emissions within geographic borders and support national climate targets
- Footprint accounting: used by companies and individuals, this assesses emissions based on production and consumption across supply chains
Footprints can be organizational, product-specific, or territorial. Each approach serves different policy, compliance, or communication purposes.