Company Valuation – Carbon reporting

Company Valuation – Carbon reporting


When carrying out human activities, companies and industries, such processes as fuel combustion, transport use, construction, resource extraction, production, waste generation, agriculture, etc. are integral.

All these processes produce greenhouse gases: water vapor, carbon dioxide, methane, ozone, etc. They have the greatest impact on changes in the natural environment and global climate change. To understand how destructive the result of such anthropogenic activity is, we can estimate the carbon footprint. Carbon footprint is the amount of greenhouse gas emissions generated as a result of human activity.


Why evaluate companies and determine the carbon footprint?


By disclosing information about policies and measures aimed at reducing greenhouse gas emissions, participating in solutions to the problems of climate change, forest reduction, as well as the deterioration of water resources, both in quantitative and qualitative characteristics, Companies declare their openness, about doing business not only in accordance with the principles of economic expediency, but also about paying great attention to sustainability and environmental conservation. The companies confirm that their activities comply with the objectives set out in the Paris Agreement.

The carbon footprint assessment provides complete information on the amount of greenhouse gas emissions and removals (in carbon units). It is customary to measure different greenhouse gases by a single equivalent in carbon units – the equivalent of 1 ton of carbon dioxide (CO2) emissions. For example, 1 ton of methane has the equivalent of 28 tons of carbon dioxide.


Voluntary carbon reporting programs


Carbon reporting is now mandatory for individual sectors and companies in several dozen countries. At the same time, the number of companies voluntarily disclosing information about their emissions and carbon footprint is increasing.

Voluntary carbon reporting is carried out using standards describing methodologies and processes for disclosing information on greenhouse gas emissions. Organizations evaluate greenhouse gas emissions. The results are collected in an electronic database and turned into a register containing information on corporate greenhouse gas emissions.

There are various carbon reporting programs and organizations involved in the development and implementation of emission calculation methodologies. Independent international voluntary carbon reporting is represented by GHG Protocol Corporate Standard, Gold Standard, Verified Carbon Standard (VERRA), American Carbon Registry, Voluntary Offset Standard, Climate Action Reserve, Plan Vivo, CarbonFix Standard, Green-e Standard, CDP, NU ETS, DAO IPCI (Climate Initiative Integration Platform), National Programs.

Organizations and programs implement various tasks, for example:


GHG Protocol presents a methodology for calculating emissions for different production sectors (pulp and paper, woodworking industry), different operational processes (from the operation of thermal power plants, refrigeration equipment, etc.), production of products taking into account the country of production (aluminum, ammonia, cement, iron and steel, etc.)

American Carbon Registry performs registration and verification of carbon offset projects based on approved methodologies.

CDP (Carbon Disclosure Project) is a global information disclosure system that allows companies, cities and regions to measure and manage environmental impacts.


A bit of history: the evolution of greenhouse gas reduction issues


Framework Convention on Climate Change (UNFCCC) The UN was developed as a key instrument of international cooperation to mitigate the negative effects of climate change and reduce anthropogenic pressure on the Earth’s atmosphere. It was opened for signature on June 4, 1992, and entered into force on March 21, 1994. Since the Convention defines only general areas of action to combat global climate change, it is of a framework nature. The UNFCCC has become the first international agreement aimed at combating global climate change and its consequences.

The Kyoto Protocol, being an international agreement, has become an additional document to the UNFCCC. It was adopted in December 1997 and obliges developed countries and countries with economies in transition to reduce or stabilize greenhouse gas emissions.


The Paris Agreement

An agreement within the framework of the UN Framework Convention on Climate Change regulating measures to reduce carbon dioxide in the atmosphere from 2020. The agreement was prepared to replace the Kyoto Protocol, adopted by consensus on December 12, 2015, and signed on April 22, 2016.

Problems of regulation and reduction of greenhouse gas emissions in Russia


At the official level, it actually appeared together with the country’s accession to the Kyoto Protocol (ratified by Russia in 2004). By signing the Kyoto Protocol, Russia has committed itself to quantitative reduction of greenhouse gases. In 2009, the Climate Doctrine of the Russian Federation was adopted with the general approaches of the state to the problem of climate change. In 2011, the Government approved the “Comprehensive Plan for the Implementation of the Climate Doctrine of the Russian Federation for the period up to 2020”. In 2013, simultaneously with the refusal to commit to the second stage of the Kyoto Protocol, Russia set its own goals to reduce greenhouse gas emissions. In addition to the approval of the Energy Efficiency and Energy Development program in 2013, the Decree of the President of the Russian Federation dated September 30, 2013 No. 752 “On reducing greenhouse gas emissions” was issued, which prescribed that by 2020 the Russian economy should reduce emissions to no more than 75% of 1990.

According to the plan of preparation of the Russian Federation for the ratification of the Paris Agreement, the development of a draft law on state regulation of emissions is scheduled for June 2019.


Trends in the development of carbon reporting in Russia

In March 2018, the Ministry of Economy sent a draft concept of the federal law on the regulation of greenhouse gas emissions to the departments for approval. Its goal is to create a mechanism to support projects in the field of emission reduction (primarily energy efficiency programs) through tax incentives and loans.

The concept of the draft federal law “On regulation of greenhouse Gas emissions” is being developed by the Ministry of Economy according to the “Plan to ensure a reduction in greenhouse gas (GHG) emissions to no more than 75% by 2020 from 1990” (approved in April 2014).


The concept assumes, first of all, support for projects to reduce emissions, as well as initiatives in the forest sector (increasing the absorption of greenhouse gases) — through tax cuts, tax credits and lowering coefficients for depreciation of equipment. Energy efficiency is supposed to be considered as the main tool. The Ministry of Economy has proposed to change the requirements for energy saving programs, including reporting on reducing CO2 emissions for regulated industries.

Finally, the concept of the Ministry of Economy involves the launch of a system of monitoring, reporting and verification of emissions for large emitters of greenhouse gases.

Trading of greenhouse gas emissions quotas at the international level


The system of trading quotas for greenhouse gas emissions in the EU

It appeared in 2005, its effect initially extended to ground structures: power plants, factories, industrial enterprises. A few years later, the aviation industry was also included in the EU ETS (Emission trading system): at the moment it operates for airlines flying within the European Union.

The EU ETS system does not suit air carriers. For example, the International Air Transport Association (IATA – International Air Transport Association) believes that the overall goal should be to reduce the amount of aviation emissions, and not to buy permits for them.


GMBM Program

Developed by the ICAO (International Civil Aviation Organization), it proposes to regulate the amount of CO2 emissions with the help of compensations: from 2021, the airline must pay monetary compensation if the 2020 emissions level is exceeded. For the first three years, participation in the agreement will be voluntary for all countries, then it will become mandatory for countries with a large fleet. An exception is made for small island States, countries that almost do not use aviation, and small landlocked countries. Technical details and regulations for the implementation of this project are under development. The experimental stage of the agreement was supported by 65 states, Russia did not join it.


HPBS Services:

HPBS is an independent expert organization that evaluates companies in order to determine the carbon footprint. Such an assessment of companies and industries involves the implementation of the following tasks:

  • Preparation of criteria for assessing the carbon footprint of the company and production. Conducting a voluntary assessment.
  • Conducting an environmental assessment of the company in accordance with the Carbon Disclosure Project information disclosure standard
  • Development of solutions to reduce CO2 emissions for industries and companies

Calculation of the Carbon Footprint

Verification of Greenhouse Gas Reporting