GHG Protocol Clarifies Distinction Between Inventory and Project Accounting Methods

The Greenhouse Gas Protocol released a comparative technical review explaining the fundamental differences between inventory accounting and project accounting for greenhouse gas emissions. The guidance addresses growing stakeholder interest in incorporating project-based avoided emissions into corporate GHG reporting, while maintaining the primacy of inventory accounting for regulatory compliance.

Inventory accounting, as defined in the GHG Protocol Corporate Standard, tracks emissions within an organisation's defined operational and organisational boundary, forming the basis for science-based target programmes and mandatory disclosure regimes including the ESRS, California's Climate Corporate Data Accountability Act and the proposed US SEC rules. Project accounting, by contrast, estimates the change in system-wide emissions resulting from a specific intervention relative to a counterfactual baseline, which is the method used in carbon market programmes and offset quantification.

GHG Protocol identifies two critical distinctions between the methods: the assessment boundary and the reliance on observed versus counterfactual data. Inventory accounting uses emissions sources owned or controlled by the reporting entity and its value chain, while project accounting captures all primary and secondary system-wide impacts of an intervention. A consequence is that inventory accounting can theoretically be summed to national totals, whereas project accounting does not allocate total system emissions and cannot substitute for inventory accounting in regulatory disclosures.

Stakeholder feedback in GHG Protocol's current standards update process has indicated growing corporate interest in including project-based avoided emissions in GHG reporting to incentivise climate-positive investments. GHG Protocol intends to develop additional guidance on how each method should be used within target-setting programmes and mandatory disclosures. The Scope 2 Guidance already requires avoided emissions, if reported, to be disclosed separately from scope 2 inventory totals, a principle the updated standards are expected to extend to other emission categories.

Key figure — GHG Protocol Corporate Standard first published in 2001, revised in 2004