What is the difference between attributional and consequential accounting?

Attributional Accounting

Attributional accounting is pivotal in the GHG Protocol's methodology for Scope II emissions, which relate to indirect emissions from the consumption of purchased electricity, steam, heating, and cooling. This accounting method allocates emissions to entities based on their electricity consumption, ensuring that the sum of Scope II emissions reported by all entities matches the total Scope I (direct emissions) reported by electricity producers. It provides a "snapshot" of an entity's environmental impact, focusing on accurately distributing responsibility for emissions among different market participants without considering the broader implications of those emissions on global carbon levels.

Consequential Accounting

Consequential accounting, on the other hand, evaluates the impact of specific actions on overall carbon emissions. It is concerned with the change in emission levels that result from particular activities, such as investing in renewable energy projects, compared to a baseline scenario where such activities did not occur. This method requires that any claimed carbon reductions or offsets be additional, meaning they are a direct outcome of the activity encouraged by the carbon market. Consequential accounting is crucial for assessing the real-world impact of carbon abatement strategies and informing policy and investment decisions that aim to reduce global GHG emissions effectively.

Application in the GHG Protocol

The GHG Protocol recognizes the importance of both attributional and consequential accounting methods, particularly in the context of Scope II emissions and carbon offset projects.

• Market-Based Reporting Method: Under the Scope II Guidance of the GHG Protocol, entities can use RECs to claim reductions in their Scope II carbon footprint. By purchasing RECs, an entity essentially ensures that an equivalent amount of renewable energy has been added to the grid, offsetting the non-renewable portion of the electricity it consumes. This approach aligns with the attributional accounting principle, facilitating a transparent method for entities to report their renewable energy procurement and Scope II emissions reductions.

• Consequential Accounting for Carbon Offsets: The GHG Protocol also accommodates consequential accounting through its Policy and Action Standard and the GHG Protocol for Project Accounting. Projects that reduce emissions beyond business-as-usual scenarios—demonstrating additionality—can generate carbon offsets. These offsets, quantified using a consequential accounting framework, must be reported separately from Scope II emissions. This distinction emphasizes the additional impact of such projects on reducing overall GHG emissions, beyond merely reallocating emissions among market participants.