Understanding Emission Categories and Their Role in Carbon Accounting
Direct and indirect emissions are categorized based on their source and the extent of a company’s control over them:
Direct Emissions (Scope 1):
- Emissions from sources that are owned or controlled by the company.
- Examples: On-site fuel combustion, company-owned vehicles, process-related emissions.
Indirect Emissions:
- Scope 2: Emissions from purchased electricity, steam, heating, and cooling.
- Scope 3: All other indirect emissions within a company’s value chain.
- Examples of Scope 3: Purchased goods and services, employee commuting, use of sold products.
In the context of the Carbon Border Adjustment Mechanism (CBAM):
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Direct Emissions:
- Emissions directly tied to the production process.
- Includes fuel combustion and process emissions.
- Always included in CBAM calculations.
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Indirect Emissions:
- Primarily focused on emissions from electricity consumption.
- Initially included only for certain sectors, like aluminum production.
- The EU plans to gradually expand the inclusion of indirect emissions in CBAM.
This distinction is important because it influences how emissions are accounted for and the resulting carbon price under CBAM regulations.