Lessons for Scope 2 Greenhouse Gas Emissions Accounting from the Debate Over Non-GAAP Earnings and the SEC’s Regulation G

John E. Parsons

February 2026

Many companies report their Greenhouse Gas (GHG) emissions in accordance with the accounting criteria laid out in the Greenhouse Gas Protocol’s (the Protocol) Corporate Standard. For a number of years, a debate has been brewing concerning the best way to report on the indirect emissions from the generation of purchased electricity, which falls into the Protocol’s Scope 2 category. Currently, the Protocol includes two metrics. One is location-based, in which the reported emissions reflect the average emissions intensity of the electric grid where the electricity is consumed. Another is market-based, in which the reported emissions reflect the emissions intensity of the generation contracted to supply the company’s consumption. Both metrics attempt to inventory emissions directly attributable to the company’s electric load, subject to the constraints of available data. A competing alternative, known as ‘consequential’ or ‘impact accounting’, looks beyond the boundary of the company’s own operations, and attempts to include the impact of its actions on the larger system’s emissions. This research commentary contributes to the debate by means of a review of the history of an analogous debate in corporate financial accounting standards, which can be helpful for identifying lessons that can instruct the discussion on inventory and consequential accounting for Scope 2 emissions.