Carbon accounting standards allow companies to use several methods of determining the boundaries between Scope 1/Scope 2 and Scope 3 activities. Similar to most large companies, BHP Billiton (BHP) uses a GAAP-based definition: Scope 1/Scope 2 includes emissions at facilities that the company controls (i.e., consolidates). Equity-accounted joint ventures and equityaccounted associates are companies over which the reporting company has significant influence, but not control. Emissions by these companies are placed in Scope 3, Category 15 (investments). 

Required: 

The following activities of BHP, the Anglo-Australian mining company, result in greenhouse gas emissions. Classify them as contributing to Scope 1, Scope 2, or Scope 3. For Scope 3 emissions, identify in which of the 15 categories they should be placed. 

a. BHP operates mining equipment powered by diesel fuel. 

b. Coal mined in BHP’s operations in Western Australia is sold to Australian utilities, which burn it to produce electricity. 

c. BHP sends a high-level executive team to Seoul to negotiate an iron ore sales contract with Pohang Iron and Steel Corporation (POSCO). Flights and rental cars used by the team burn, respectively, aviation fuel and gasoline. 

d. BHP ships iron ore from Port Hedland to POSCO via a tanker, which burns fuel on its journey. The sales contract specifies FOB shipping point. Thus, title passes to POSCO in Port Hedland. 

e. POSCO uses the aforementioned iron ore to manufacture steel at its Gwangyang plant. This plant uses oil to fire its blast furnaces. 

f. BHP is a 47 percent joint venture partner with Alcoa in an aluminum smelter in São Luís, Brazil. The smelter purchases large quantities of electricity to power the Hall-Héroult process, which extracts aluminum from bauxite through electrolysis. 

g. BHP is also a 47 percent joint venture partner in an aluminum smelter in Maputo, Mozambique, that also consumes large quantities of electricity. BHP’s partners have much smaller stakes: Mitsubishi Corporation (25%), the Industrial Development Corporation of South Africa (24%), and the Government of Mozambique (4%). Applying IFRS 10, BHP’s accountants have determined that the company has effective control of the joint venture because it has the largest stake and exercises managerial control over day-to-day operations.