Carbon Accounting, Meaning, Purpose, Methods, Challenges

Carbon accounting is the systematic method of measuring, recording, and reporting greenhouse gas (GHG) emissions generated by activities at the individual, organizational, or national level. With climate change becoming a critical global issue, carbon accounting helps monitor and mitigate environmental impact. According to the IPCC Sixth Assessment Report 2023, global CO₂ emissions must fall by 48% by 2030 as compared to 2019, to limit warming to 1.5°C. In India, carbon accounting is integral to achieving its Nationally Determined Contributions (NDCs) under the Paris Agreement. 

Carbon Accounting

Carbon accounting, also called Greenhouse Gas Accounting, involves calculating the amount of carbon dioxide (CO₂) and other GHGs emitted by human activities. It includes direct emissions from fuel combustion, indirect emissions from electricity use, and other indirect emissions across supply chains. Carbon accounting enables transparent reporting and informed decision-making for sustainability initiatives.

Carbon Accounting Purpose

The primary purposes of carbon accounting are listed below. According to the Global ESG Data Survey 2022, over 66% of Indian companies now disclose emissions data, showing rising adoption of carbon accounting.

• To measure environmental impact accurately and identify emission hotspots.
• To support policy formulation and compliance with national and international climate agreements.
• To enable organizations to participate in carbon credit markets and trading.
• To promote corporate social responsibility (CSR) and ESG reporting.
• To reduce costs by improving energy efficiency and adopting low-carbon technologies.

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Carbon Accounting Methods

Various methodologies are used for carbon accounting:

1. GHG Protocol Corporate Standard– For organizations to report Scope 1, 2, and 3 emissions.
2. ISO 14064 Standard– International standard for quantifying, reporting, and verifying GHG emissions.
3. Life Cycle Assessment (LCA)– Calculates emissions across the entire lifecycle of products or services.
4. Carbon Footprint Calculators– Used by individuals or small organizations to estimate emissions.
5. Activity-Based Accounting– Emissions are calculated based on energy usage, transport, and material consumption.

Carbon Accounting Process

Carbon accounting divides emissions into three scopes as per the GHG Protocol:

Carbon Accounting Standards

Carbon accounting follows globally recognized standards to ensure consistency and transparency. According to MoEFCC 2023, India encourages ISO 14064 certification for organizations reporting emissions under voluntary programs.

• GHG Protocol– Developed by the World Resources Institute (WRI) and World Business Council for Sustainable Development (WBCSD), widely used for corporate reporting.
• ISO 14064– Provides international guidelines for GHG quantification, reporting, and verification.
• PAS 2050– UK-based standard for product carbon footprinting.
• CDP (Carbon Disclosure Project)– Encourages companies to publicly disclose emissions and climate risks.

Applications of Carbon Accounting

Carbon accounting is applied across sectors in India and globally:

• Corporate Reporting- Companies like Infosys, Tata Steel, and Reliance Industries disclose emissions for ESG compliance.
• Renewable Energy Planning- Tracks carbon reductions in solar, wind, and hydro energy projects.
• Agriculture- Estimates emissions from fertilizers, livestock, and crop management.
• Transport- Monitors vehicle fleet and logistics emissions to implement greener mobility.
• Policy and Governance- Supports India’s climate targets under NDCs and promotes low-carbon development.

Carbon Accounting Advantages and Disadvantages

There are several advantages and disadvantages of Carbon accounting:

• Advantages of Carbon Accounting:
  • Helps reduce environmental impact and GHG emissions.
  • Supports compliance with national and international climate regulations.
  • Enables participation in carbon credit and trading markets.
  • Improves operational efficiency and cost savings.
  • Enhances corporate image and investor confidence through ESG reporting.
• Disadvantages of Carbon Accounting:
  • Requires technical expertise and trained personnel.
  • Implementation can be costly, especially for SMEs.
  • Data collection may be difficult in supply chains or small industries.
  • Lack of uniform standards in some sectors can create reporting inconsistencies.

Carbon Accounting Challenges

The Carbon Accounting has various challenges in the process and implementation as given below:

Challenges:

• Data Gaps- Limited availability of accurate emissions data.
• Technical Expertise- Shortage of trained professionals.
• High Costs- Monitoring and reporting expenses are significant.
• Policy Integration- Difficulties in linking carbon accounting with regulations.

Way Forward:

• Capacity Building- Train professionals in carbon auditing and GHG reporting.
• Standardization- Align reporting with GHG Protocol and ISO 14064.
• Digital Monitoring- Use AI, IoT, and blockchain for real-time emission tracking.
• Incentives- Provide subsidies or tax benefits for implementing carbon accounting.
• Policy Integration- Link accounting with carbon credit systems and renewable energy targets.

Carbon Footprints

A carbon footprint is the total GHG emissions caused directly or indirectly by an individual, organization, or product. It is measured in CO₂-equivalent (CO₂e). Carbon footprints help identify high-emission activities and guide reduction strategies. According to the International Energy Agency, India’s per capita carbon emission is 1.776 tonnes CO₂e, below the global average of 4.8 tonnes.

Need for Carbon Accounting

India aims to reduce emissions intensity of GDP by 45% by 2030 from 2005 levels (NDC target). Accurate carbon accounting is crucial to monitor progress. The major requirement for the Carbon Accounting is listed below:

• To meet India’s Paris Agreement targets.
• To identify emission hotspots and take mitigation measures.
• To access global carbon markets and attract sustainable investment.
• To improve corporate sustainability reporting and stakeholder trust.

Carbon Accounting in India

India uses carbon accounting for both voluntary and regulatory purposes. Carbon accounting helps India track emission reductions and plan climate-resilient strategies. Key highlights:

Global Aspects of Carbon Accounting

Globally, carbon accounting is integral to climate policy and international agreements.

• Top Emission Reporting Countries- USA, EU, China, Japan have mandatory corporate and national emissions reporting.
• Carbon Credit Mechanisms- Accurate carbon accounting allows participation in emissions trading systems (ETS).
• International Standards- ISO, GHG Protocol, CDP reporting ensure transparency and comparability across borders.

Carbon Accounting UPSC

India has made notable progress in integrating carbon accounting into its policies and business practices, strengthening transparency, compliance, and alignment with global standards. Several key initiatives in recent years have advanced India’s carbon management framework. Key Developments:

• Carbon Credit Trading Scheme (CCTS)- July 2024: Government adopted detailed regulations introducing a compliance-based carbon market.
• Emissions Trading System (ETS): Rate-based ETS launched under CCTS, covering nine energy-intensive industrial sectors, with expansion planned by mid-2026.
• PCAF India Chapter- September 2025: Partnership for Carbon Accounting Financials launched guidelines for financial institutions to measure and disclose Scope 3 emissions.

Focus on Transparency and Accountability: These initiatives enhance accurate reporting, align India with global standards, and support national climate goals.