Carbon Emissions Reporting
Climate change is one of the greatest challenges of our time, threatening to affect environments and societies across the world. Currently rising global temperatures have been attributed to increased atmospheric levels of greenhouse gases (GHGs), which absorb thermal radiation from the earth’s surface and then re-radiate some of it back downward, causing the planet and lower atmosphere to heat up. Of these GHGs, the most prevalent generated by human activity is carbon dioxide, which is emitted primarily from the burning of fossil fuels for energy.
Because climate change does not recognise national boundaries, it is significant that a wide variety of organisations, from national governments to local groups, are starting to report their own GHG emissions. This helps governments, companies and individuals keep track of where the greatest problems lie. Knowledge is power: if a problem can be measured and understood, then it can be addressed. For example, figures released in 2008 show that China was the leading producer of carbon dioxide in 2007, accounting for just over 22 per cent of the global total, with the US as runner-up at just over 19 per cent. In third place was India (5.5 per cent), followed by Russia (5.24 per cent) and Japan (4.28 per cent). Interestingly, on a per capita basis, the US was still the greater emitter.
Of course, measuring and reporting carbon emissions with the aim of reducing them is not a new idea. Automobile manufacturers, for instance, have reduced emissions in new vehicle designs in response to legislation, and utilities that generate electricity from, for example, coal burning power plants have been regulated for some time now in order to reduce localised pollution and other environmental hazards such as acid rain. But as international emissions reduction targets – and the schemes for their realisation – proliferate, the need for accurate, reliable, standardised and comparable emissions reporting is now more acute than ever.
The Kyoto Protocol, an international treaty which came into force in 2005, sets binding targets for the emissions of carbon dioxide and five other major greenhouse gases, and also suggests three flexible market mechanisms – the Clean Development Mechanism (CDM), Joint Implementation (JI) and emissions trading – to encourage emission reductions where they are economically cheapest. The EU, meanwhile, has set targets and policies under its European Climate Change Programme (ECCP) that extend beyond the original ambition of the Kyoto Protocol, in an effort to prevent temperatures from increasing by more than 2°C above pre-industrial levels. By 2020, the ECCP’s aim is to have achieved:
• a 20 per cent reduction (rising to 30 per cent in the event of an adequate international agreement) in GHG emissions from 1990 levels;
• a 20 per cent improvement in energy efficiency; and
• an increase in energy from renewable sources to 20 per cent of all energy.
To meet these targets, different policy measures have been adopted, in particular the EU Emissions Trading System. Launched in 2005, it is the largest emissions trading scheme in the world, covering more than 10,000 installations in the energy and industrial sectors which are collectively responsible for close to half of the EU’s CO2 emissions. It is based on the ‘cap and trade’ principle: companies are encouraged to emit less by being able to sell on, or store up, their surplus yearly emissions allowances.
On a national level, the UK government’s 2003 Energy White Paper commits this country to reducing carbon emissions by 60 per cent by 2050 and to making significant progress toward that goal by 2020. To this end, the Carbon Reduction Commitment (CRC) Energy Efficiency Scheme, announced by the government in its 2007 Energy White Paper, is a mandatory carbon emissions reporting and pricing scheme to cover all organisations using more than 6,000 megawatt hours per year of electricity (equivalent to an annual electricity bill of about £500,000). Collectively, these organisations generate over 10 per cent of UK CO2 emissions, at around 55 million tonnes of CO2 per year – a quantity the scheme aims to reduce by at least four million by 2020.
Under the UK’s 2008 Climate Change Act, a long-term framework has been established to achieve reductions in GHG emissions of at least 34 per cent below the 1990 baseline by 2020, and of at least 80 per cent by 2050. Under a system of carbon budgets, every tonne of greenhouse gas emitted between now and 2050 will count. Where emissions rise in one sector, corresponding falls in another sector will have to be achieved.
But for all these market mechanisms and restrictions to work, uniformity of measuring and reporting is necessary to allow effective comparisons and decisions to be made. For example, the preferred unit for measuring different GHG emissions, tonnes of carbon dioxide equivalent (tCO2e), allows them to be compared in terms of their potential effects on global warming. Different methods, both technological and statistical, may then be used to take the measurements themselves – scrubbers on smoke stacks, for example, or extrapolations from observed motor vehicle usage habits.
These methods differ in accuracy, cost and usability; added to which they are applied differently across countries, notwithstanding guidelines prescribed by the UN Framework Convention on Climate Change (UNFCCC). In an attempt to rectify the latter problem, the World Resources Institute introduced its Greenhouse Gas Protocol. Today, the GHG Protocol is the most widely used international accounting tool for business leaders to quantify and manage their companies’ GHG emissions. In 2007, CorporateRegister.com reported that 63 per cent of the Fortune 500 companies had aligned their corporate responsibility reports with the GHG Protocol, and this figure seems to have risen since.
Addressing corporate emissions is vital. For the 1,000 large businesses submitting CO2e emissions figures last year, the total was over six billion tonnes of CO2e, approximately equivalent to the annual figure for the whole of . Moreover, as the world becomes more industrialised, corporate GHG emissions are only likely to increase. In theory, as climate change makes itself felt, corporate accountability for carbon emissions should become as vital in maintaining business competitiveness as it is in combating climate change. Yet the mainstreaming of corporate carbon accounting is often neglected by business owners, not least because it is perceived as creating a drag in production and increasing costs. Added to which is the fear that if they reported their carbon emissions they would face increased scrutiny from environmentally conscious consumers.
In the US several attempts have been made to institute legislation around mandatory reporting, but none so far has passed Congress. As a result of increasing leadership by the US on climate change, not to mention the BP oil crisis in the Gulf of Mexico and increasing social awareness about the environment, the Environmental Protection Agency (EPA) has initiated the Greenhouse Gas Reporting Program. The programme, which became law on 1 January 2010, provides guidelines for reporting which help standardise information by sector across the country. As a result, 85 per cent of the nation’s leading emitters were this year required to report their annual carbon emissions from 2010. The plan is to increase this proportion until eventually 100 per cent of major US emitters are required to report. And while the legislation in no way mandates that these companies reduce their emissions, it is hoped that they will be more inclined to lower, or somehow offset, their emissions if they are forced to disclose them.
But while it may seem as though much is being done with respect to the measuring and reporting of carbon emissions, it is still not enough. As illustrated above, governments are failing to enact any legislation that has ‘teeth’; meanwhile, with market mechanisms for corporate self-regulation few and far between, businesses are likewise failing to act at the necessary pace and scale.
Consequently, there is a growing and urgent need for consumers to understand the environmental impact of their purchasing decisions. This is evidenced by a move toward ‘eco-friendly’ goods and services, as well as the emergence of some product-level and, more recently, brand-level carbon ratings. Since consumers are, after all, micro-investors in their favourite brands, what they think and feel about these brands and the companies behind them can effectively make or break the latter – BP being the perfect example.
If governments and businesses are failing to make their actions count, then perhaps it is time for consumers to ensure that this changes – it is, after all, their way of life that is under threat. Governments, corporations and consumers are all able to make decisive low carbon choices, but only if they have the right information right in front of them.
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