LowEmissionAsphalt-136pg-WhitePaper-May2023

P a g e | 13 Think of economic and environmental value chains as if they will be accounted for under the “matching princip le ” in basic accounting. 21 Pavement system economics are the “revenue” and environmental impact the “expenses” in the new paradigm. As increasingly more stringent government regulations pressure our industry to prioritize sustainability, aligning the two will unlikely be voluntary . For example, if pavements are built to accommodate vehicles and aircraft and fees and taxes are assessed those using the pavements to fund the infrastructure, there can be no “opt out” along the environmental value chain. Carbon accounting 22 will follow the matching principle and tie them together. Scope 3 emissions make up the vast majority of systematic emissions, meaning they may technically fall outside a reporting subsector such as paving industry direct control. But this will not reduce regulatory accountability, unfortunately. Transportation industry emissions accounting is complex and hence daunting. But all participants in the economic value chain will be held to account. Defining the boundary: scopes 1, 2, and 3 emissions: In carbon accounting , the first step in quantifying GHGs is understanding that different GHG sources – which typically involve fuel combustion – fall into distinct categorical boundaries . These boundaries, also known as “scopes,” are part of the carbon accounting framework established by the World Resources Institute in the Greenhouse Gas Protocol (GSP) . 23 GSP has been adopted by the EPA since 2009 for certain industries; more recently by Standard & Poor’s 24 for public firm environmental impact reporting (ESG); and is expected to be expanded to EPD compliance across a multitude of industry verticals. Three distinct scopes exist within the framework, and the differences between scopes 1, 2, and 3 express varying levels of control and influence an organization or a sector has over the emissions source. 21 matching principle is a fundamental rule in accrual-based accounting which requires expenses to be recognized in the same period as the applicable revenue. In carbon accounting , economic value chains and environmental value chains will be aligned. 22 carbon accounting is the calculation of all relevant GHG emissions across all emissions scopes within a system. 23 www.ghgprotocol.org/ . 24 www.spglobal.com .