Key Takeaways

• Scope 1 emissions are direct and controllable, making them a powerful starting point for decarbonization.
• Reducing scope 1 emissions can improve energy efficiency and lower operating costs.
• Reporting on scope 1 emissions is now required under new climate regulations, and companies that act now will gain an edge.

Why Scope 1 Emissions Matter Now

When we talk about corporate decarbonization, scope 2 and scope 3 emissions tend to take up the headlines, with a focus on renewable energy certificates (RECs) or challenges like complex supply chains. But scope 1 emissions, those produced directly from sources a company owns or controls, don’t get as much airtime. This is a missed opportunity. 

As AI data center growth pushes companies towards on-site power, more organizations are confronting scope 1 boundaries for the first time. Scope 1 emissions enable companies to take immediate, tangible action to cut carbon, drive operational efficiencies, and get ahead of growing regulatory pressure.

What Are Scope 1 Emissions?

Scope 1 emissions are the direct greenhouse gas (GHG) emissions from sources that a company owns or controls. They mostly come from activities where fuels are combusted on-site within an organization’s operations. For industries that combust high amounts of fuels within their operations (e.g., oil and gas, chemicals, manufacturing), scope 1 can represent a significant share of the company’s emissions. For industries that outsource most of their production, scope 1 can be a smaller share of the overall footprint.

Scope 1 emissions typically fall into four categories:

• Stationary combustion: Emissions from burning fuels on-site for heating, manufacturing, or electricity generation. This includes boilers, furnaces, and turbines at company facilities.
• Mobile combustion: Emissions from company-owned or operated vehicles and equipment, such as cars, aircraft, delivery fleets, ships, or construction machinery.
• Fugitive emissions: Unintentional leaks or releases of gases, often from refrigeration and air conditioning systems. These can have an outsized impact because many refrigerants have global warming potentials (GWPs) hundreds or even thousands of times greater than carbon dioxide.
• Self-produced energy: Emissions from electricity, heat, or steam generated on-site, such as through natural gas-fired generators or cogeneration plants, even when the energy is used internally.

Identifying and categorizing scope 1 emissions correctly are the first steps toward uncovering potential operational improvements and carbon reduction approaches.

On-Site Power for AI Data Centers

As AI pushes data center operators toward on-site (“behind-the-meter”) power, a high-stakes accounting question follows: are those behind-the-meter emissions scope 1 or scope 2? The answer comes down to control, not location. 

Under the GHG Protocol, emissions from on-site generation are scope 1 only when the reporting company owns or financially controls the generating asset (i.e., the self-produced energy category above). In most data center power deals, a third party owns and operates the generator and sells the electricity to the data center. In that structure, the company buying the power reports the emissions as scope 2, and the company generating the power reports the combustion as scope 1. Given the growth in emissions from the scale of AI infrastructure, getting the boundary right matters for corporate credibility. 

Why Scope 1 Emissions Are a Strategic Priority

While scope 3 is often talked about as the largest source of emissions for corporations, that isn’t the case for all industries. For heavy sectors like oil and gas, chemicals, and manufacturing, scope 1 emissions aren't just significant - they are the bedrock of the emissions story. Other industries depend on these sectors' outputs to operate their own businesses, meaning that decarbonizing heavy industries’ scope 1 emissions can also drive reductions across other organizations’ scope 3 emissions.

Since scope 1 emissions are typically within a company’s direct operational control, they present a great starting point for decarbonization. Unlike scope 3 emissions, which require influencing suppliers, customers, or partners, companies can take immediate action on scope 1 sources. Even for industries with relatively small scope 1 footprints, reductions can often happen more quickly through internal decisions, such as equipment upgrades, process improvements, or fuel switching.

Regulatory momentum is also making scope 1 management increasingly urgent. Policies like the European Union’s Corporate Sustainability Reporting Directive (CSRD), California’s Climate Corporate Data Accountability Act (SB 253), and global ISSB-aligned frameworks are requiring companies to measure and publicly disclose their scope 1 emissions. Even within voluntary frameworks, reporting on scope 1 emissions is getting tighter. Within the Science-Based Targets Initiative (SBTi)’s new draft Net Zero Standard, scope 1 emissions must now have a separate target from scope 2 emissions, and the boundary must cover 100% of scope 1 emissions whereas previously the boundary was 95% of emissions. These market shifts highlight the importance of reducing scope 1 emissions.

Operationally, reducing scope 1 emissions offers business value. Many scope 1 reduction strategies, such as upgrading to more efficient equipment or reducing fuel waste can lower energy bills, improve asset performance, and reduce maintenance costs. For companies focused on both sustainability and profitability, targeting scope 1 emissions delivers a strong return on investment.

How to Calculate Scope 1 Emissions

To reduce scope 1 emissions, companies need to know exactly what and how much they are emitting. Calculating scope 1 emissions starts with gathering the right data at the facility level and understanding the activities that generate emissions.

What to Measure

Scope 1 emissions come from activities such as fuel combustion in boilers or vehicle fleets, refrigerant leaks from cooling systems, and on-site energy generation. Ideally, companies should collect activity data, like gallons of diesel used, cubic meters of natural gas consumed, or kilograms of refrigerant leaked and replaced. In cases where direct measurement isn’t possible, companies often rely on estimations, using financial spend data or industry intensity metrics as a proxy for fuel consumption.

Where to Find the Data

Facility-level data is the backbone of comprehensive and comparable scope 1 accounting. Much of the required data can be sourced from utility bills, fuel receipts, maintenance logs for HVAC and refrigeration systems, and reports from on-site equipment operators. Increasingly, companies are deploying sensors to capture real-time data on fuel consumption, refrigerant leaks, and on-site energy generation, improving both accuracy and responsiveness.

How to Calculate the Emissions

Emissions are calculated by applying the emissions factors (i.e., the amount of greenhouse gases emitted per the quantity of fuel or refrigerant) to the collected activity data. Many companies use carbon accounting software to automate calculations, track emissions over time, and ensure consistency with recognized standards like the GHG Protocol. Expert support is often critical, especially for sectors with complex operations. Carbon accounting experts help ensure the data is complete, auditable, and aligned with evolving regulatory requirements.

Accurate scope 1 data builds a strong foundation for compliance as well as for setting credible reduction targets and tracking long-term performance.

How to Reduce Scope 1 Emissions

With scope 1 emissions data in hand, companies can begin identifying and implementing reduction strategies. Because these emissions are within the organization’s operational control, companies often have multiple levers they can pull.

Operational Strategies

• Fuel switching: Replacing fossil fuels like natural gas or diesel with lower-carbon alternatives, like green hydrogen or renewable electricity, can significantly reduce direct emissions from stationary and mobile combustion. Depending on the switch, this could result in higher scope 2 emissions, but these can be more readily addressed through market-based instruments, thus lowering the overall footprint.
• Equipment upgrades: Modernizing boilers, generators, fleets, and other combustion-based equipment can improve energy efficiency and cut emissions. Newer technologies often perform better and emit less.
• Process innovation: In emissions-intensive industries like cement and steel production, rethinking industrial processes can yield dramatic reductions. Low-carbon production methods are increasingly becoming commercially viable.
• Leak detection and repair: Methane leaks from oil and gas operations and refrigerant leaks from cooling systems are major contributors to scope 1 emissions. Deploying monitoring technologies and maintaining rapid-response repair programs can fix leaks before they lead to large amounts of emissions.

Strategic Procurement

• Vendor selection: Companies can prioritize suppliers that offer lower-emissions alternatives for fuels, materials, and services.
• Fleet electrification: Procuring electric vehicles for delivery, service, and logistics fleets reduces both emissions and long-term fuel and maintenance costs.
• Equipment design: Working with suppliers to source modular, emissions-efficient machinery can reduce on-site fuel use and improve flexibility over time.

Driving Innovation Through R&D

• Low-carbon products: Research and development teams can design products and processes that inherently require less energy, or lower-carbon energy, to produce, lowering scope 1 emissions at the source.
• Material innovation: Developing new chemistries or alternative materials can avoid high-emission production methods, contributing to broader decarbonization goals.
• Closed-loop systems: Designing circular, waste-reducing systems can minimize both raw material use and the on-site emissions associated with production and disposal.

Reducing scope 1 emissions often requires up-front investment, whether it’s upgrading equipment, switching to alternative fuels, or embedding low-carbon principles into procurement and R&D strategies. While the initial costs can be substantial, they deliver long-term value through improved operational efficiency, reduced regulatory risk, lower energy expenses, and enhanced brand value in a marketplace that increasingly rewards climate leadership.

Frequently Asked Questions

What are the main categories of scope 1 emissions?

Scope 1 emissions fall into four categories: stationary combustion (fuels burned on-site in boilers, furnaces, or turbines), mobile combustion (company-owned or -operated vehicles and equipment), fugitive emissions (leaks of refrigerants or methane, which often carry outsized global warming potential), and self-produced energy (electricity, heat, or steam generated by equipment the company owns or controls).

Which regulations require companies to report scope 1 emissions, and when do they take effect?

The EU’s Corporate Sustainability Reporting Directive (CSRD) already requires scope 1 disclosure for companies in its first reporting waves. In the US, California’s SB 253 requires companies with over $1 billion in annual revenue doing business in California to report scope 1 and scope 2 emissions, with first reports due November 10, 2026. ISSB-aligned disclosure rules are extending similar requirements across other jurisdictions.

What’s the fastest way for a company to start reducing scope 1 emissions?

Start by measuring at the facility level, since this activity data shows where emissions concentrate. From there, the quickest wins are usually operational, such as repairing refrigerant and methane leaks, upgrading inefficient combustion equipment, and electrifying vehicle fleets, because they sit within the company’s direct control and often pay back through lower fuel and maintenance costs.

Is behind-the-meter power scope 1 or scope 2?

It depends on who controls the generating asset. If a company owns or financially controls its on-site generation, the emissions are scope 1. If a third party owns and operates the generator and sells the power- the structure behind most data center power deals- the buyer reports those emissions as scope 2 under the GHG Protocol’s Scope 2 Guidance.

Key Takeaways

• Carbon accounting is a regulatory and strategic necessity, with policies like the European Union’s Corporate Sustainability Reporting Directive (CSRD) and California’s SB 253 requiring emissions tracking. 
• Many companies track emissions inconsistently, underscoring the need for structured, repeatable carbon accounting to ensure accuracy and impact.
• Accurate carbon data drives efficiency and risk management, helping organizations reduce costs, streamline supply chains, and comply with climate regulations.
• Scope 2 emissions are increasingly challenging to quantify, especially for data centers and power-intensive operations. Grid-average emissions factors mask location-specific and time-specific variations that drive real procurement and siting decisions. Precise scope 2 accounting requires understanding which generators actually serve the load, when, and under what grid conditions.
• Scope 3 emissions have historically been a complex challenge, requiring better supplier engagement, standardized reporting, and expert guidance to support accuracy.

Carbon Accounting: More Than Compliance, a Strategic Advantage

Companies increasingly recognize the business value of reporting carbon emissions: it reduces regulatory risks, attracts sustainability-focused investors, enhances market competitiveness, and drives cost savings through efficiency. Transparent emissions reporting strengthens brand trust and aligns companies with global sustainability standards, ultimately turning climate accountability into a strategic advantage.

Yet, many companies struggle with incomplete and inconsistent tracking. According to the State of Corporate Climate Commitment, 80% of corporate professionals surveyed have tracked emissions at least once, but only 52% do so annually. Without a structured process and reliable data, businesses face compliance risks, financial penalties, and missed cost-saving opportunities. 

This guide provides a clear roadmap to effective carbon accounting, equipping businesses with the knowledge to navigate regulations, enhance data accuracy, and implement effective strategies for compliance and operational success.

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What Are the Benefits of Effective Carbon Accounting?

By embedding annual carbon accounting into operations, organizations can enhance sustainability efforts while achieving financial and strategic benefits. Key benefits include:

Enhancing Transparency and Accountability

By providing accurate and verifiable emissions data, companies can showcase corporate responsibility and build a foundation of transparency. Aligning with recognized standards like the GHG Protocol strengthens confidence among investors and regulators. As climate disclosure laws tighten globally, ensuring credible emissions reporting reduces regulatory risks and enhances stakeholder trust. This commitment to authenticity minimizes the risk of greenwashing and strengthens brand reputation.

Guiding Regulatory Compliance and Risk Mitigation

Businesses navigating evolving environmental regulations must proactively align with policies to avoid financial and legal risks. Mandated emissions reporting, under policies like the European Union’s Corporate Sustainability Reporting Directive (CSRD) and Carbon Border Adjustment Mechanism (CBAM) as well as California’s SB 253, ensures compliance and enhances corporate accountability. Staying ahead of these evolving requirements prepares businesses for future policy shifts and safeguards their long-term resilience.

Improving Operational Efficiency and Reducing Costs

By analyzing energy consumption patterns, organizations can identify operational inefficiencies, optimize supply chains, and implement cost-saving measures while reducing carbon emissions. For example, evo, an outdoor experiences company, collaborated with Relae (formerly Carbon Direct) to assess its carbon footprint. This analysis revealed opportunities to reduce emissions across facilities, products, and shipping. By promoting sustainable practices throughout their supply chain, evo enhanced both environmental performance and operational efficiency.

Building a Competitive Advantage in a Low-Carbon Economy

Building a competitive advantage in a low-carbon economy requires prioritizing emissions transparency and sustainability. Companies that integrate emissions transparency into their operations build stronger relationships with supply chain partners and meet consumer demand for responsible brands. Aligning corporate values with sustainability fosters long-term customer loyalty and enhances market positioning.

Driving Strategic Planning and Net-Zero Alignment

Setting and tracking net-zero commitments requires structured, data-driven carbon reduction roadmaps. Businesses that measure emissions annually are more likely to set public sustainability goals and take action. Carbon accounting supports clean energy transitions, fosters supply chain collaboration, and integrates carbon removal strategies to address residual emissions. By embedding emissions measurement into long-term planning, organizations facilitate resilience and profitability in an evolving business landscape.

Carbon emissions measurement correlates to climate action: 61% of companies that calculate their footprint annually have both set a public goal and begun working toward it.

What Is Carbon Accounting? The Basics You Need to Know

Carbon accounting is the systematic measurement, analysis, and reporting of an organization's greenhouse gas (GHG) emissions. Using standardized metrics like carbon dioxide equivalent (CO₂e), companies can assess emissions across operations and supply chains, identify high-impact areas, and set and track progress toward emissions reduction targets. When conducted annually, carbon accounting supports regulatory compliance, risk management, and decarbonization strategies essential for long-term sustainability.

The GHG Protocol is the most widely used framework for carbon accounting, setting the baseline for how organizations measure and report their emissions. It classifies emissions into three scopes: 

Keep in mind that scope 2 emissions are increasingly difficult to quantify using traditional methods, which fail to account for real-time grid fluctuations and locational energy variations. Cutting-edge, advanced carbon accounting methodologies now provide more precise tracking, particularly benefiting large power consumers like enterprise data centers and hyperscalers. 

Scope 3 emissions also continue to pose a great challenge, requiring extensive data collection and supplier coordination, complexities that are difficult to navigate without expert guidance.

The Corporate Carbon Accounting Process: A Step-by-Step Guide

The carbon accounting process involves systematically measuring, analyzing, and managing an organization’s greenhouse gas emissions across its operations, supply chain, or product life cycle. 

1. Collect emissions data across all three scopes (scope 1, scope 2, and scope 3).
2. Categorize and quantify emissions from each source to estimate the total impact. 
3. Verify data and report findings to promote compliance, accuracy, and transparency.
4. Develop and implement reduction strategies based on insights from the data.

Activity Data Versus Spend Data

Carbon measurement primarily relies on two data types: activity data and spend data.

• Activity data includes direct measurements reflecting the physical amount of an emitting source, such as fuel consumption (in liters or gallons) or travel distance (in kilometers or miles). It accurately represents emissions from a particular operational emission source and allows for measurable decarbonization strategies.
• Spend data serves as an alternative when activity data is unavailable. It estimates emissions based on financial expenditures related to goods, services, or travel. While less precise, it is useful for approximating scope 3 emissions, where direct measurement is often challenging.

Tips for Accurate Data Collection

Effective carbon accounting relies on seamless collaboration across departments, suppliers, and external data sources. Key strategies include:

• Stakeholder engagement: Finance, operations, procurement, and sustainability teams must coordinate to track and validate emissions data. Engaging suppliers is essential for capturing and reducing scope 3 emissions.
• Addressing data gaps: When data is unavailable, proxy data can be used to estimate emissions, but it should be a temporary solution while organizations work toward obtaining accurate, real-world data.
• Standardization and verification: Implementing consistent methodologies and third-party audits enhances the credibility of carbon reporting, building stakeholder trust.

By leveraging precise data, understanding emission scopes, and adopting structured data collection methods, organizations can create a transparent, science-based approach to carbon accounting and lay the foundation for meaningful climate action. 

Climate Standards Businesses Need to Know

Global standards and regulations define carbon accounting methodologies by establishing guidelines for how organizations set boundaries, measure, and disclose emissions. Several key frameworks and policies guide both the international and regulatory levels.

Guidance frameworks

GHG Protocol: The Foundation of Carbon Accounting

• The GHG Protocol is the most widely adopted framework for measuring and managing emissions across organizations globally.
• Developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), it provides common standards for businesses, governments, and supply chains.
• Sector-specific guidance has been developed for industries such as energy, finance, manufacturing, and agriculture, which face stricter reporting requirements than service-based sectors.
• The GHG Protocol is currently undergoing its first major revision since its launch. Partnering with the International Organization for Standardization (ISO) to co-develop a consolidated corporate standard that merges the Corporate Standard, Scope 2 Guidance, Scope 3 Standard, and Actions and Market Instruments standard with ISO 14064-1. As of mid-2026, the effort is in active technical development, with a draft opening for public consultation targeted for mid-2027 and a final published standard expected by the end of 2028. Current standards stay in effect until that replacement is finalized, so nothing changes for reporting yet.

ISO 14064: Standardized Emissions Quantification and Reporting

• The ISO 14064 series, created by the International Organization for Standardization (ISO), offers detailed methodologies for greenhouse gas accounting.
• It includes guidelines for organization-level emissions quantification, reporting, and reduction projects.
• ISO 14064 serves as the foundation for independent verification and compliance with voluntary carbon markets, enhancing the credibility of emissions reduction projects.

Policies

EU CSRD: Expanding Mandatory Climate Disclosure

• The Corporate Sustainability Reporting Directive (CSRD) enforces detailed sustainability reporting requirements for companies operating in the EU.
• Following the EU's 2025 to 2026 Omnibus simplification package, CSRD's scope narrowed sharply. It now applies to roughly 5,000 large companies, with new thresholds of more than 1,000 employees and more than 450 million euros in net turnover (up from the original 250 employees and 50 million euros)
• In scope companies must still report scope 1, 2, and 3 emissions data aligned with the EU Taxonomy and European Sustainability Reporting Standards (ESRS).

California SB 253: State-Level Mandatory Emissions Disclosures

• California’s SB 253 Climate Corporate Data Accountability Act sets strict emissions reporting mandates within the US.
• It applies to companies with over US$1 billion in revenue doing business in California, requiring scope 1 and 2 emissions reporting by November 2026..
• CARB has said scope 3 reporting and third-party assurance requirements will be addressed in a subsequent rulemaking covering 2027 and beyond.

EU CBAM: Preventing Carbon Leakage and Promoting Decarbonization 

• The Carbon Border Adjustment Mechanism Requirements (CBAM) requires importers of specific carbon-intensive goods to disclose embedded emissions to prevent carbon leakage and promote global decarbonization by ensuring that domestic and foreign producers face comparable carbon costs. 
• During the transitional phase (2023–2025), importers were required to submit quarterly reports on embedded emissions. 
• As of 2026, they must purchase CBAM certificates to compensate for the carbon footprint of imported goods.

Although carbon accounting requirements vary across regions and industries, they are all fundamentally rooted in the principles established by the GHG Protocol and ISO 14064. As global regulations like the EU CSRD and state-level legislation evolve, organizations must proactively align with these stricter standards to mitigate regulatory risks and support compliance with emerging sustainability expectations.

What Are the Industry-Specific Challenges of Carbon Accounting?

Carbon accounting presents unique challenges across industries due to varying operational structures, emissions sources, and reporting requirements. While the challenges outlined below focus on financial services, data centers, and philanthropies, similar complexities exist across manufacturing, transportation, healthcare, and other sectors. Tailored strategies are essential to effectively addressing these complexities. 

Data Centers: Measuring and Reducing Scope 2 and 3 Emissions

Data center operators consume vast amounts of electricity making scope 2 emissions a major concern. In addition, data center developers and owners face significant scope 3 emissions from embodied carbon from the building materials and the IT hardware required to develop these assets. Effective strategies to reduce data center emissions include:

• Optimizing computing needs and power usage: Use real-time metering and AI-powered analytics to optimize electricity usage across time and locations.
• Procuring low-carbon electricity: Secure long-term access to compliant low-carbon electricity through power purchase agreements (PPAs) or high-impact renewable energy credits (RECs).
• Tracking life cycle emissions: To provide a comprehensive emissions assessment, account for embodied carbon in server manufacturing and end-of-life disposal.

Financial Services: Assessing Emissions From Investments and Portfolios

Financial institutions face significant challenges in evaluating scope 3 financed emissions from investments, loans, and asset portfolios. Key strategies to address these challenges include:

• Adopting industry standards: Frameworks like the Partnership for Carbon Accounting Financials (PCAF) can be used to standardize emissions calculations.
• Understanding asset level data: To accurately report on financed emissions, investors need visibility of emissions data, ideally at the company level.
• Prioritizing green investment strategies: Shift toward sustainable finance by integrating sustainability criteria and emphasizing green bonds or low-carbon funds or investments.
• Ensuring regulatory compliance: To enhance transparency, align with global disclosure frameworks like the International Sustainability Standards Board's (ISSB) IFRS S2 climate-related disclosure standard.

Philanthropies: Managing Emissions From Private Financing

Philanthropic organizations face challenges in tracking emissions across diverse funding activities, operational footprints, and investment portfolios. Effective strategies include:

• Assessing grantmaking impact: Many philanthropies support climate initiatives but may not track the carbon impact of grantees or funded projects. Establishing emissions metrics for grants can enhance transparency and effectiveness.
• Measuring operational emissions: While some philanthropies have relatively low direct emissions, travel, events, and office space still contribute to their carbon footprint. Implementing sustainable operations policies can help reduce emissions.
• Decarbonizing investment portfolios: Endowments and investment funds often hold assets with varying GHG emissions. Aligning investments with sustainability goals and engaging with asset managers on emissions reduction can drive impact.

Organizations across these sectors can enhance emissions transparency, improve sustainability efforts, and align with global climate goals by implementing industry-specific carbon accounting methods. 

Navigating Evolving Standards and Scope 2 Complexity

Carbon accounting standards are actively evolving. In October 2025, the GHG Protocol released two proposals for scope 2 accounting revisions, with final standards expected by 2027. The proposals shift toward hourly and regional renewable energy matching, moving away from today's annual, region-agnostic approach. They also introduce consequential methodology that calculates actual emissions displaced by renewable projects, which varies significantly by region.

For organizations with 2030 climate targets, timing matters. Existing long-term contracts are expected to be grandfathered in under new rules. Meanwhile, new renewable projects face interconnection delays of 3 to 5 years, and the US power grid is experiencing sustained demand growth driven largely by data centers. These pressures converge: power demand is rising while new clean electricity supply is constrained.

Navigating these changes requires understanding emerging methodologies and their strategic implications. See our companion pieces on Navigating Scope 2 Accounting Changes and Scope 2 Emissions Explained for detailed context.

Frequently Asked Questions

How long does carbon accounting implementation take?

Initial measurement typically takes 3 to 6 months, depending on data availability and organizational coordination. Starting with data you already have (utility bills, fuel records) accelerates the process. Scope 2 and scope 3 require more extensive work than scope 1, so actual timelines vary based on which scopes are your focus.

What are the biggest obstacles to getting accurate emissions data?
Data siloes across departments (finance, operations, procurement track separately). For scope 2, grid-average factors mask location- and time-specific variations that actually drive emissions. For scope 3, extensive data collection and supplier coordination are required. Seamless collaboration across departments is essential.

Do we need to measure all three scopes to start?
Yes. Organizations should measure all three scopes. Start where your business is most materially affected, but eventually measure all three for compliance and complete visibility into your emissions sources.

Key Takeaways

• Voice your opinion: The Greenhouse Gas (GHG) Protocol is updating its scope 2 guidance with final standards expected in 2027, which may require hourly and regional matching of renewable energy certificates (RECs), potentially changing how companies claim their electricity-related emission reductions. 
• Act now to secure renewable energy contracts: Companies should move forward with their scope 2 climate commitments today. The GHG Protocol is expected to grandfather in contracts entered into under existing rules.
• Beyond the megawatt hour (MWh): High-impact forward REC contracts measure impact beyond the current annual MWh match requirement, maximizing near-term carbon abatement and social impact for every dollar invested.

Why 2027 Rule Changes Matter for 2030 Targets

Companies racing to meet 2030 climate targets face converging pressures: surging electricity demand, constrained renewable energy supply, and scope 2 accounting rules that could undergo significant changes by 2027.

In a recent webinar, power market experts from Relae (formerly Carbon Direct) and Ever.green explored these changes. Patti Smith, former Electricity Decarbonization Lead at Relae; Julia Millot, Senior Power Decarbonization Manager at Relae; and Liz Pearce, Chief Revenue Officer at Ever.green, unpacked what's changing and how companies can respond.

The stakes are high. Based on GHG Protocol Scope 2 Public Consultation materials, companies may need to match RECs to electricity consumption on an hourly and locational basis as early as 2028. However, we expect the GHG Protocol to grandfather forward REC contracts signed before new rules take effect, enabling companies to continue advancing toward 2030 targets amid rule uncertainty.

Big Changes to the Power Grid

The US power grid is entering sustained demand growth for the first time in decades. "Over the next five years, data centers alone are going to put [the equivalent] of four New York Cities onto the grid," Smith explains, citing forecasts that project around 200 terawatt hours of new data center load through 2030 (i.e. cumulative energy consumption). That demand growth also shows up in near-term grid planning. NERC's January 2026 Long-Term Reliability Assessment forecasts North American summer peak demand rising by 224 gigawatts—a 24% increase—over the next decade, with new data centers cited as the primary driver. These figures highlight that peak capacity and total energy consumption are directly impacted by the data center boom.

Meanwhile, new renewable projects face headwinds. Smith points to interconnection queue delays: "Solar and battery projects are taking three to five years from initial request to operation." At the same time, clean energy tax credits, which were driving wind and solar expansion, have been curtailed. New restrictions on foreign supply chain materials, which are critical to renewable project development, are further hampering the development of new clean electricity projects.

The result: Power demand is rising while new renewable electricity supply is getting throttled. 

The Messy Reality of Electricity Emissions Accounting

Quantifying the emissions from an individual power plant is straightforward. Allocating those emissions to the companies that consume power is far more complicated. 

Grid-supplied electricity comes from many generators that shift constantly, sometimes even second to second. Companies can’t directly measure emissions from a grid-connected load because the generators serving it continuously change. 

Without direct measurement, companies need rules to estimate the emissions they are responsible for. The GHG Protocol’s Scope 2 Guidance provides that framework, establishing how companies estimate electricity-related emissions and how to reduce them through renewable energy purchases.

How Companies Currently Claim Renewable Energy

For the past decade, companies have used renewable energy purchases to achieve their scope 2 emission reduction goals. The most widely used mechanism is the REC, each representing clean energy attributes for one MWh of renewable electricity generated and added to the grid. Currently, when a company buys RECs equal to its annual electricity consumption, it can claim 100% renewable electricity. Under current rules, companies can use purchased renewable energy from anywhere in North America and apply it to any load in North America at any time during the year. 

Importantly, emissions from different power grids vary widely across North America depending on time of day, time of year, and the power grid makeup.

This flexibility allows companies to match a REC from a clean grid against electricity consumption from a dirtier one, creating a potential mismatch between emissions claimed and actual emissions avoided. This gap has drawn scrutiny, contributing to the motivations for the scope 2 rules rewrite.

What's Changing in GHG Protocol Scope 2 Accounting?

On October 19, 2025, after years of consultation, the GHG Protocol released two separate proposals for public consultation: 

1. Scope 2 changes: Moving away from annual REC matching to an ‘hourly and regional’ REC matching requirement.

2. New consequential methodology: A new approach to estimating emissions caused by a company’s consumption and avoided by its renewable energy contracts. 

The hourly matching proposal (24/7): Companies would match RECs to consumption hour by hour within the same grid region, rather than annually across any North American grid. 

"A REC generated on a Texas wind farm would not be able to be used for electricity consumed in New York," Millot explains.

The consequential approach: This proposes a carbon matching methodology, which estimates emissions caused by a load and estimates the emissions a renewable project displaces. 

"Projects in the Carolinas are avoiding 0.6 or 0.7 tons of CO₂ per megawatt hour, whereas a California project is probably closer to 0.2 or 0.3," Smith explains. 

Projects in the Carolinas deliver more than double the climate impact per REC under the consequential rules. In this methodology, the load and generator do not need to be located in the same region.

While the proposed rules and new methodologies work through the public consultation process, it will be important for companies to start to anticipate the potential impacts on their climate goals and strategies. 

Timeline for Scope 2 Accounting Changes

Both the Scope 2 and Consequential Electricity-Sector Emissions consultations closed January 31, 2026, after GHG Protocol extended the original deadline. The GHG Protocol is analyzing feedback with a second consultation and final standards expected by 2027, though the exact timeline is still being finalized.

Companies are encouraged to participate in the public consultation. The GHG Protocol is asking for comments on critical questions, such as: 

• Should proposed rules apply to energy consumers of all sizes? 
• Which geographical boundaries should be used for locational matching? 
• Should existing contracts be grandfathered in? 

The public consultation period is an opportunity to shape the standards that will govern electricity-related emission accounting for years to come.

Why Act Now Instead of Waiting

With final rules still in development, companies with scope 2 emission reduction goals or science-based targets face a decision: Wait for clarity or act now.

Several factors favor early action:

• Inclusion of legacy contracts. "There are a lot of indications from the committees that existing long-term contracts will be grandfathered in," Pearce notes. The draft considers a legacy clause that would allow organizations to apply pre-existing contractual agreements, even if they don’t comply with new rules. 
• Throttled renewable project development. Interconnection delays for new renewable energy projects, elimination of clean energy tax credits by 2028, and limitations on foreign materials needed to develop renewable energy project components mean that new REC supply may be harder to access in future years.
• Renewable project development timelines. "There's generally a lag, sometimes six to 18 months" between contract signing and project operation, Pearce explains. That means even if you sign today, the RECs won’t be generated for up to 18 months from the signing date.
• High-impact opportunity. Through careful project selection, renewable energy investment can go beyond the annual energy match requirement and incorporate additional impactful metrics, such as higher avoided emissions and positive social impacts.

Renewable Energy Buying Options for Companies

Previously, companies have been able to buy renewable energy through the following three paths; however, they all come with their own tradeoffs.

Traditional REC Buying Options

1. REC spot markets make up most corporate renewable procurement. However, they mainly come from existing projects rather than financing new development, which is critical to expanding renewable energy supply to meet rising decarbonization needs.
2. Virtual power purchase agreements (VPPAs) are highly impactful but require large power loads and the ability to manage long-term financial risks. Unavailable to most companies.
3. Utility green tariffs have limited availability throughout the US (depending on the utility(s) that serve your load) and vary in quality. 

Alternative REC Procurement Approach

For companies that want to go beyond the REC spot market and are not large enough to pursue a VPPA, there’s an alternative procurement option available: a high-impact forward REC contract. These multi-year contracts commit to purchasing RECs from specific new projects before they're built, providing the upfront revenue certainty developers need to secure financing at a fraction of the scale and complexity of a VPPA.

Comparing Renewable Energy Procurement Options

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The Path Forward

Despite rapidly increasing grid demand, renewable project headwinds, and changing accounting rules, companies can still meet 2030 scope 2 goals. 

What companies should do now:

• Watch for the next round of GHG Protocol consultation on Scope 2 revisions
• Evaluate forward REC contracts to lock in terms before rule changes
• Prioritize high-impact RECs that deliver measurable climate and social benefits

Key Takeaways

• Accelerated phase-out schedules for key clean energy and decarbonization tax credits will shorten the runway for project development, which could stall or cancel projects.
• Urgency is paramount, and qualified projects should expedite construction and operational timelines to secure eligibility for existing credits.
• A more complicated policy landscape requires concerted effort to navigate, including with the support of policy professionals.

Reconciliation Rolls Back Much of the IRA

On Friday, July 4, 2025, the President signed a sweeping reconciliation bill, H.R. 1, that will add at least $3.3 trillion to the national debt and marks a pivotal, contentious moment for US clean energy policy. The law was enacted through the complex legislative process known as budget reconciliation, requiring only a simple majority of votes in the House and Senate. The new law substantially modifies or terminates many of the Inflation Reduction Act of 2022 (IRA)'s clean energy incentives and has extensive implications for the economic viability of American energy and manufacturing projects.  

In the Senate, three Republicans crossed party lines to vote against the bill, requiring Vice President JD Vance to break the tie. In the House, only two Republicans broke ranks to vote against final passage. While some of the more complex provisions of the bill, such as new foreign entity of concern (FEOC) restrictions, will require more time to fully assess, we've prepared a rapid run-down of key alterations to IRA incentives for carbon management, hydrogen, and clean fuel technologies.

What Is the 2025 Reconciliation Bill?

While the 2025 reconciliation bill is staggering in length, scope, and severity, containing provisions to cut Medicaid, reduce nutrition assistance, raise the debt limit, and cut taxes primarily for the wealthy, some of the most drastic sections of the bill modify tax incentives and other public funding for clean energy and emissions reductions.

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Many of the incentives to deploy clean energy that were created or enhanced under the IRA will be phased out early or repealed altogether. Credits with accelerated phase-out schedules include the newly created 45Y clean electricity production tax credit, which will no longer support wind or solar projects after 2027, and the 45V credit for clean hydrogen production for which projects must now commence construction before Jan 1, 2028 (moved up from Jan 1, 2033). 

Since the passage of the reconciliation package, there has been active litigation on several provisions, including an order from a federal district court to vacate IRS guidance that would have prohibited certain wind and solar projects from securing safe harbor.  The table below provides a detailed breakdown of key changes to major tax credits between the original IRA, the draft that moved through Committees in the House, and the final text that was passed by the Senate and signed into law.

Major Tax Credit Changes in the Reconciliation Law

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How FEOC Restrictions Threaten Clean Energy Supply Chains

Many clean energy tax credits include ambiguous language restricting projects connected to FEOC, complicating supply chains and creating new problems for developers of clean energy projects. The law also introduces a complex matrix of new definitions, such as "Prohibited Foreign Entities," which includes both "Specified Foreign Entities" and "Foreign-Influenced Entities."

The FEOC restrictions embedded in the reconciliation bill represent a seismic shift for clean energy developers. These new rules, designed to limit the influence of Covered Nations (China, Russia, North Korea, and Iran), will disqualify projects from receiving tax credits if they source components, minerals, or intellectual property from entities tied to these nations. In other instances, the partial ownership or investment of an entity with financial ties to a Prohibited Foreign Entity may also disqualify a project from qualifying for tax credits.

This FEOC language matters for developers and investors because of the resulting global supply chain disruptions, investment uncertainty, and compliance burdens. The clean energy sector is deeply reliant on global supply chains, especially for solar panels, batteries, and wind components, industries where China currently dominates. The IRA intended to counter this by moving the manufacturing and production of these supply chains to the US. Project developers must now thoroughly review their supply chains and capital providers, and may need to quickly pivot to compliant resources. 

In February 2026, the IRS released interim guidance on the FEOC provisions to provide safe harbor guidance for clean energy manufacturing, investment, and production credits to help taxpayers gauge whether material assistance was provided by a prohibited foreign entity. 

Other Major Rollbacks to the IRA

Beyond clean energy tax credits, the reconciliation package also repeals and rescinds many other IRA provisions. This includes a full rescission of all unobligated IRA appropriated balances at the Department of Energy's Loan Programs Office, and several other programs, including:

• The Tribal Energy Loan Guarantee Program
• Greenhouse Gas Reduction Fund
• Transmission Facility Financing

A complete list of rescissions of energy-related funding is outlined in Sections 60001-60024 and 50402 of the law. These rescissions represent tens of billions of dollars in lost climate investments made under the IRA, which would have provided funds to state, local, and Tribal governments, federal agencies, non-profits, and commercial project developers to reduce emissions and update critical infrastructure.

What Can Project Developers and Other Companies Do?

Developers will need to act quickly to meet updated commence construction and place into service requirements, though circumstances are technology specific (e.g., safe harbor updates to 48E and 45Y). Tax credits generally have advanced commence construction and operational deadlines, resulting in a strong first-movers advantage. Companies should also review their supply chains and revise equipment and material procurement sourcing plans as necessary to address restrictions presented in the reconciliation bill.

An executive order from President Donald Trump issued on July 7 will further complicate how companies proceed. In the EO, the President directs his administration to "strictly enforce the termination of […] 45Y and 48E […] for wind and solar facilities." The Administration will likely issue extremely strict interpretations of "commence construction" clauses and FEOC requirements in forthcoming tax credit guidance issued by the Treasury Department, though these moves are quite likely to face litigation.

The new restrictions being proposed by the Administration, including specific details on FEOC, qualified equipment, commence construction, and other reporting requirements, will require additional guidance from the IRS and provide an opportunity for engagement through public comment. It is important that impacted companies weigh in during these public comment periods, not only to help inform and influence the final rules issued by the Administration, but also to build an administrative record that could support litigation efforts to strike down the final rules.

Staying Ahead of Policy Changes

Given the rapidly shifting landscape of energy policy, it's paramount that companies stay abreast of the latest changes and dedicate resources to understanding how they may be affected. Policy professionals, including the experts at Relae (formerly Carbon Direct), can support organizations as they engage in the regulatory process, anticipate and prepare for new legislation, and navigate the requirements to access essential tax credits and incentives. Even under new constraints, expert guidance can help maximize impact and minimize disruption.

Frequently Asked Questions

How does the reconciliation bill change the timelines for major clean energy tax credits?
Most clean energy tax credits saw their windows shortened relative to the original IRA: 

• The 45Y and 48E credits now terminate entirely for wind and solar facilities placed in service after December 31, 2027, with a separate phase-down (75% in 2034, 50% in 2035, 0% after) for other technologies. 
• The 45V clean hydrogen credit's "commence construction" deadline moved from December 31, 2032 to December 31, 2027. 
• The 45Z clean fuel credit now ends on December 31, 2029 (versus 2027 in the original IRA, but bonuses for SAF have been removed and new emissions-calculation methods favor corn ethanol). 
• Notably, the 45Q carbon capture credit saw little change and retained transferability, with credit values for enhanced oil recovery and utilization raised to match secure geological storage.

What are the FEOC restrictions, and why do they matter so much for developers?
FEOC ("Foreign Entity of Concern") restrictions disqualify projects from tax credits if they source components, minerals, or intellectual property from entities tied to China, Russia, North Korea, or Iran. Even partial ownership or investment ties to a "Prohibited Foreign Entity" can trigger disqualification. The definitions are complex and still being clarified through IRS guidance, meaning developers need to review supply chains and capital providers carefully and may need to pivot to compliant sourcing.

What should project developers do now in response to these changes?
Developers should move quickly to meet the earlier "commence construction" and "placed in service" deadlines, since credits now benefit early actors. This includes reviewing and potentially restructuring supply chains and procurement plans to address FEOC restrictions, and closely monitoring forthcoming IRS/Treasury guidance. 

Key Takeaways

• Inventory before you calculate: carbon accounting means collecting activity or spend data across scope 1 (direct), scope 2 (purchased energy), and scope 3 (value chain) emissions for a full year of operations, then converting the results into CO2e using GHG Protocol-aligned emission factors.
• Measurement matters even as rules shift: disclosure requirements like California's SB253 and the EU's CSRD keep evolving, but many companies measure and report emissions voluntarily anyway, to set a baseline for climate targets and meet investor and customer expectations.
• Scope 2 is getting more complex: rising electricity demand from AI and data centers, combined with upcoming GHG Protocol changes to how renewable energy purchases are counted, make an accurate, current scope 2 measurement more valuable than ever.
• Verify before you report: independent review, internal or external, catches errors like double counting and miscategorization before emissions data goes to stakeholders or regulators.
• Annual measurement is what makes the strategy real: repeating the process every year turns a one-time emissions snapshot into a carbon management plan you can track, report, and act on over time.

What Is the Carbon Accounting Process?

Carbon measurement, or carbon accounting, is the process of estimating the greenhouse gas (GHG) emissions from business activities by taking an inventory of a company’s operations. The process calculates greenhouse gas emissions, measured in metric tonnes of CO2 equivalent (CO2e), to provide a holistic picture of emissions over an entire year of operations.

Why Measure Your Greenhouse Gas Emissions?

Climate disclosure regulations continue to shift. California's SB253 is now active law, with an initial scope 1 and scope 2 reporting deadline in November 2026. The EU's CSRD remains in effect, though 2026 reforms narrowed which companies fall under it. In the US, the SEC's 2024 climate disclosure rule is now the subject of a formal rescission proposal. Even as these rules evolve, many companies continue to measure and report emissions voluntarily to meet investor and customer expectations.

Scope 2 accounting for purchased electricity is entering its own period of change. AI and data center growth is driving unprecedented demand on the grid: NERC's January 2026 Long-Term Reliability Assessment projects North American summer peak demand rising 24% (224 gigawatts) over the next decade, with new data centers cited as the primary driver. At the same time, the GHG Protocol is revising its scope 2 guidance toward hourly, regional matching of renewable energy purchases, with final standards expected by 2027. A clear, current measurement of your scope 2 emissions puts you in a stronger position to adapt your electricity and renewable energy strategy as these rules take shape.

Measuring emissions also provides a baseline for setting climate targets and deciding where to start reducing emissions. Repeating the measurement process annually allows you to track and report progress in a clear, transparent way to ensure that stakeholders—regulators, employees, investors, and customers—are informed about your climate action and impact.

How to Measure Your Carbon Emissions

Step 1: Collect Data

A company’s emissions represent the greenhouse gases emitted from everyday activities such as heating an office, shipping merchandise, traveling to a conference, or producing a physical product.

Emissions Sources: Scope 1, 2, and 3

To calculate your organization’s carbon emissions, you’ll need to collect data from all emissions-generating sources. These sources are divided into three categories, defined by scopes, according to the GHG Protocol:

• Direct emissions (scope 1): Produced from owned or controlled sources such as fuel purchased and consumed onsite for operating facilities and vehicles.
• Indirect emissions (scope 2): Generated from purchased energy such as purchased electricity for powering offices and facilities.
• Value-chain emissions (scope 3): Generated from the direct and indirect emissions from upstream and downstream value chains including purchased goods and services, business travel and employee commutes, and investments.

Types of Emissions Data

For all three emissions categories, there are two broad types of data to collect: activity data and financial spend data:

• Activity data uses units of measurement associated with the emissions-generating activity. For example, the liters of fuel consumed in a year, or the number of kilowatt-hours of energy used.
• Financial spend data, typically sourced from accounting teams and software systems, is used to estimate emissions from spending. Financial spend data may, for example, use the amount spent on business travel to estimate emissions.

Sourcing both activity data and spend data typically requires the help of a range of stakeholders across an organization. For example, facilities and office managers may provide fuel and electricity bills, while a company’s accountant may provide financial data.

While both approaches are valid under the GHG Protocol, there can be costs and benefits to the organization associated with different data sources and methodologies. You must weigh these carefully before aligning on an approach. Not all companies have the data infrastructure in place to support activity data across all of the scopes. While spend data is generally more accessible, it may not deliver a complete picture of emissions reductions—for example, if a company’s employees traveled fewer miles this year than last, but spent more on flights, using a spend data approach might result in an overestimate of emissions compared to an activity data approach.

Step 2: Calculate Your Emissions

To start calculating your emissions, you’ll need to determine the emission factor—the ratio between pollutants emitted and activity conducted or amount spent. For example: Because a gallon of gasoline emits 8.78 kg of CO2 when burned in an engine, the emissions factor would be 8.78 kg CO2 per gallon of gasoline.

Emissions factors are then multiplied by the associated activity or spend data, and the results are summed to estimate a company’s total emissions. To ensure consistent year-on-year reporting and auditability, the emissions factors used should be carefully documented and aligned with the GHG Protocol.

Step 3: Verify Data and Report Your Results

Once calculations are ready, the final step is to verify your information. Have a second internal team or an external expert carefully review the data to check for gaps and ensure it is correctly categorized by emissions source. This can help avoid errors like double counting and miscategorization. Under certain reporting requirements such as CSRD, an external audit is required.

Once data is verified, you can report your findings to internal stakeholders, and disclose it externally if you choose. This information should be presented in a clear, consistent format that includes both emissions data and final calculations broken down by source, as well as links to relevant data to back up your claims.

Step 4: Take Action and Track Progress

Now that you’ve reported the results, your internal stakeholders will be armed with the data they need to do the most critical next step: Set climate targets and take action. Reporting carbon emissions estimates establishes the climate impact of your business activities, allowing you to set realistic, informed targets.

From there, you might compare your total emissions with your competitors and identify your top emissions sources. Reports also help you identify the most achievable reduction opportunities and consider how to address your harder-to-abate emissions, helping you develop a comprehensive carbon management plan.

The carbon accounting process doesn’t stop once you’ve set your plan in motion: Tracking progress requires ongoing emissions measurement to produce annual emissions reports. Action coupled with ongoing carbon measurement is the foundation of an integrated carbon management strategy: It’s what allows you to assess, adapt, and optimize your sustainable transition plan. This gives you the data you need to see and prove your long-term progress, and confidently share your results with customers and investors.

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Key Takeaways

• The GHG Protocol's Actions and Market Instruments (AMI) proposal introduces a four-statement reporting framework that will give companies an official place to report carbon dioxide removal (CDR), book-and-claim environmental attribute certificates (EACs), and financed reductions, actions that cannot currently count toward scope 1, 2, or 3 emissions reporting.
• The AMI proposal’s four-statement framework will put current emissions and mitigation efforts side by side in the same report, in the same units, giving sustainability teams a clear, defensible way to make a business case for every major decarbonization investment.
• A full draft standard is expected in 2027/2028. Companies that audit their portfolios against emerging quality criteria and engage now will have time to identify gaps and be best positioned when the standard takes effect.

What Problem Does the AMI Proposal Solve? 

Companies that have purchased carbon dioxide removal (CDR) credits, invested in book-and-claim environmental attribute certificates (EACs) for low-carbon materials, or funded a carbon capture and storage (CCS) project outside of their value chain have probably heard some version of the same question from their board, employees, or investors: "Where does this show up in our GHG Protocol Scopes?" Until now, the answer has been: it doesn’t.  

The current GHG Protocol Corporate Standard was built around a single organization’s emissions inventory. It has no recognized home for CDR, EACs for materials, or financed reductions that occur outside of a company’s operational boundaries (they must be “reported separately”). Companies making real climate investments, therefore, have had no standard way to show it within the Corporate Standard.

The GHG Protocol's Actions and Market Instruments (AMI) proposal aims to fundamentally change that.

What Is the AMI Proposal's Four-Statement Framework?

The GHG Protocol's AMI proposal will replace the single corporate inventory with four distinct Statements, all housed within a single GHG Report:

• Statement 1: A company’s traditional GHG inventory, including operational emissions across scope 1, scope 2 (location-based only), and scope 3.
• Statement 2: Market-based emissions accounting across scopes 1, 2, and 3 using EACs for energy, materials, and other purchased goods. While this is well established for electricity, it will be the first time that similar book-and-claim arrangements for low-carbon steel, concrete, sustainable aviation fuel (SAF), and renewable natural gas can be directly recognized.
• Statement 3: Beyond-value-chain mitigation and CDR. This is the reporting home for CDR credits, superpollutant credits, and financed reductions that mitigate emissions outside a company’s value chain.
• Statement 4: Co-benefits and additional climate impacts, capturing non-GHG benefits arising from corporate action and value that do not fit neatly into emissions accounting.

This change is more than just a rearrangement of reporting - it’s a fundamental expansion of scope. The introduction of Statements 2 and 3 will allow companies to report their mitigation activities in tonnes of CO₂e - the same unit as their emissions. For the first time, a company will be able to show its emissions and its climate investments side by side, in the same language, in the same report.

Why Does This Matter Now?

Today, companies investing in CDR, book-and-claim EACs (other than electricity), and financed emissions reductions face a persistent credibility gap. The investments are real. The climate impact is real. However, since no recognized reporting framework captures them, they are functionally invisible within corporate disclosures. This makes it harder to justify the spend internally and harder to communicate the value externally.

The AMI framework will remove that barrier across every major decarbonization category:

• A company purchasing a book-and-claim EAC for the low-carbon attribute of low-carbon concrete or steel would report the carbon intensity benefit in Statement 2 under scope 3.1. Statement 2 is the appropriate reporting location, rather than Statement 1, because the physical low-carbon concrete/steel product is not actually used by the company.
• An airline or corporate traveler using SAF via a book-and-claim arrangement could report the emissions benefit in Statement 2. Similarly, the airline could now report biogenic emissions from SAF if applicable in Statement 2, scope 1. Corporate travelers would report improvements in Statement 2, scope 3, category 6. Since the SAF does not physically enter the airline’s planes, the benefit is reportable only in everyone’s Statement 2 reports. If the airline can prove physical delivery of SAF onto its airplanes, then the benefits are shifted into everyone’s Statement 1 reports.
• A technology company funding a third-party carbon capture and storage project that receives verified reduction credits would report them in Statement 3, because the CCS project is outside of the technology company’s value chain and the technology company is not buying any goods or services from the CCS project. The third party that operates the CCS project would report lower scope 1 emissions in Statement 1 than they did pre-CCS, since the project impacts their direct emissions.
• A company buying CDR credits from CDR projects outside of their own value chain would report the removals in Statement 3, directly alongside the company’s Statement 1 and 2 emissions. This differs from the previous example because the company is not funding a project; it is buying a service - a CDR credit.

The practical effect will be significant. When clients ask whether a given investment "counts" under the GHG Protocol, the answer will shift from "probably not" to "yes, and here is which statement it belongs in."

What Does This Mean for Hard-to-Abate Sectors?

For sectors like cement, steel, chemicals, shipping, and aviation—where full decarbonization will be extremely challenging—the AMI proposal’s framework offers something that has not previously existed: a multi-faceted reporting strategy.

Companies in these sectors will be able to combine Statement 2 (EAC-based carbon intensity swaps for purchased goods) with Statement 3 (financed reduction credits) to demonstrate near-term progress, while long-term abatement technology matures. A cement buyer, for example, would procure low-carbon cement EACs under a book-and-claim arrangement and report the emissions benefit in Statement 2, while simultaneously funding a CCS project and reporting the resulting reduction credits in Statement 3.

For data centers and large power consumers, the framework adds a new layer to existing scope 2 electricity strategies: the ability to report the embodied carbon benefits of low-carbon materials used in construction and infrastructure, via Statement 2. Lower-carbon natural gas for power procured with EACs would also now be reportable in Statement 2.

For financial institutions and asset managers, the new statements create a richer disclosure environment for both internal reporting and structuring sustainability-linked financial products tied to Statement 2 and 3 performance.

How to Prepare Now

A full draft standard is expected in 2027/2028. Between now and then, the GHG Protocol will define the eligibility and quality guardrails that determine what activities qualify for Statements 2 and 3. Those criteria will matter enormously: they will shape which CDR credits, EAC programs, and financed reduction projects meet the bar for official reporting recognition.

Companies should not wait for final rules to begin preparing. Here are the most important steps to take now:

• Review existing portfolios against the emerging quality criteria for Statements 2 and 3. Not every credit or EAC program will qualify, and identifying the gaps early creates time to act.
• Map current decarbonization investments to the four statements. This exercise alone will reveal reporting opportunities and gaps that are not visible under the current single-inventory framework.

Frequently Asked Questions

What is the AMI proposal, and how does it work? 

The GHG Protocol’s Actions and Market Instruments (AMI) proposal would allow organizations to report: their emissions (statement 1); their market-based emissions across all scopes (statement 2); GHG emissions reductions, avoidance, and removals resulting from their actions (statement 3); and other relevant metrics (statement 4). 

How does AMI compare to the TCAT and/or AIM framework? 

The AMI proposal is very similar to the Task Force for Corporate Action Transparency (TCAT) Mitigation Action Accounting and Reporting Guidance and the Advanced and Indirect Mitigation (AIM) Standard & Guidance. The AMI standard is not finalized, but many concepts from TCAT and AIM (including sector association tests) could be included in the final standard.

Can any climate action really count for the AMI proposal? 

As of September 2026, the AMI standard is not finalized. However, if the final standard adopts the proposed structure, then any verified, high-quality climate action is reportable. Look for guidance from the GHG Protocol to determine verification and quality requirements.