ReportCounting carbon
in global trade
Why imported emissions
challenge the climate regime
and what might be done about it
An essay series
Edited by Aarti Krishnan and Simon Maxwell
May 2020

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Acknowledgements
This publication originated in a workshop on ‘Certification as a route to reducing the global carbon
footprint: Implications for developing countries’, held at ODI on 3 September 2019. We are grateful to
speakers and others for making papers available here and to all the participants in the workshop for
their contributions. We also wish to thank Sara Pantuliano, Chief Executive of ODI, for contributing
the foreword and the ClimateWorks Foundation for covering the cost of the publication. Special thanks
to Dirk Willem te Velde, Director of the ODI International Economic Development Group, for his
consistent encouragement and active support. We would like to thank the ODI Communications Team,
Elizabeth Tribone and Natalie Brighty, for their support, and Hannah Caddick for her editorial input.
Aarti Krishnan is grateful to the Economic and Social Research Council for support.
Aarti Krishnan and Simon Maxwell are alone responsible for errors and omissions.

List of authors
John Barrett, Professor in energy and climate policy, School of Earth and Environment, University ofLeeds.
Jonathan Beynon, Senior Economist, Climate and Environment Department, Department forInternational Development
Lina Fedirko, Senior Associate, Transportation, ClimateWorks Foundation
Rowland Hill, Sustainability, Marks & Spencer
David Joffe, Head of Carbon Budgets, Committee on Climate Change, UK
Hugh Jones, Managing Director Advisory, Carbon Trust
Jodie Keane, Senior Research Fellow, Overseas Development Institute
Aarti Krishnan, Hallsworth Research Fellow, University of Manchester
Simon Maxwell, Senior Research Associate, Overseas Development Institute
Surabi Menon, Vice President, Global Intelligence, ClimateWorks Foundation
Daniel Murray, Principal Consultant, Avieco
Sara Pantuliano, Chief Executive, Overseas Development Institute
Dan Plechaty, Program Manager, Global Intelligence, ClimateWorks Foundation
Andrew Scott, Director of Programme – Climate and Energy, Overseas Development InstituteGary Shanahan, Head, Business and Industrial Energy Efficiency, Tax & Reporting; Department for
Business, Energy and Industrial Strategy, UK Government
Jonathan Shopley, Managing Director, External Affairs, Natural Capital Partners
Martin Smith, Project Director, The Carbon Mark project
Dirk Willem te Velde, Director of Programme - International Economic Development Group,
Overseas Development InstituteEmily Wain, Head of Certification, Avieco
World Resources Institute3

Contents
Foreword9
Sara Pantuliano
Part A

Introduction

11

Chapter 1 Counting carbon in global trade: why imported emissions challenge the climate
regime and what might be done about it

12

Aarti Krishnan and Simon Maxwell
Part B

Setting the sceneChapter 2

21

Imported emissions: an overview and policy options22Standards and certification: an overview29

John Barrett
Chapter 3

Aarti Krishnan
Part C Certification in practice
Chapter 437

Lessons from the first decade of environmental footprints

38

The GHG Protocol

41

Rowland Hill
Chapter 5

World Resources Institute
Chapter 6 The power of carbon-neutral certifications to reduce embodied emissions ininternational trade

45

Jonathan Shopley
Chapter 7 Avieco’s Smart Sustainability certification

49

Emily Wain and Daniel Murray
Chapter 8 The carbon labelling journey

52

Hugh Jones
Chapter 9 Achieving robust, science-based measurement, reporting and certification ofcarbon emissions through artificial intelligence and machine learningMartin Smith

456

Part D Policy perspectives

59

Chapter 10 Consumption emissions in UK policy

60David Joffe
Chapter 11 Managing government regulation for carbon reporting and action

63

Gary Shanahan
Chapter 12 A new accountability framework to prepare for a new climate regime

67

Aarti Krishnan and Simon Maxwell
Chapter 13 Trade and climate: friends or foes?

70

Jodie Keane and Dirk Willem te Velde
Chapter 14 Development policy implications of carbon certification and border carbon
adjustments74
Jonathan Beynon
Chapter 15 Trading blame or exporting ambition? How trade can drive emissions andhow trade policy can be mobilised for climate action

77

Dan Plechaty, Lina Fedirko and Surabi Menon
Chapter 16 The measurement, reporting and certification of carbon emissions:
implications for developing countries
Andrew Scott5

81

List of boxes, tables and figures
Boxes
Box 3.1

Fair trade in the food sector

33

Box 5.1

Principles of GHG accounting and reporting41

Box 11.2

Principles for accounting for and reporting environmental impacts64

Box 11.1

Standard-setting, reporting and verification frameworks

64

Box 11.3

A process to determine the impacts upstream in the supply chain65

Box 15.1

Case study: Buy Clean California

78

Box 15.2

Case study: driving climate action with trade

79

Types of standard

30

Total and per capita GHG emissions, GtCO2e, 1990–2018

14

TablesTable 3.1

FiguresFigure 1.1

Figure 2.1 Average annual growth rates of key drivers of global CO2 emissions and components of
GHG emissions for OECD and non-OECD countries, % per year, 2009–2018

22

Figure 2.2 Territorial carbon emissions by world region, MtC, 1990–2018

23

Figure 2.3 Territorial and consumption-based carbon emissions, MtC, 1990–2016

24

Figure 2.4 Emissions (MtCO2e) associated with the 10 largest countries based on GDP

24

Figure 2.5

UK territorial and consumption emissions, CO2e, 1990–2016

25

Figure 2.6

Key drivers of consumption-based GHG emissions in the UK, MtCO2, 1997–2016

25

Figure 2.7

Embodied emissions in global trade: BCA possibilities, GtCO2

27

Figure 3.1

Environment-related requirements within standards

29

Figure 3.2

External and internal pressures supporting the proliferation of standards

31

Figure 3.3

Role of standards in value chains in low- and middle-income countries

32

Figure 5.2

Overview of scopes and emissions across a value chain

42

Figure 5.2

The five stages of a product life cycle

42

Figure 12.1

Paris Agreement transparency framework

68

Figure 16.1

Disparity between territorial and consumption emissions, selected countries

81

6

Acronyms
3Ps

performance, participation, progressive realisationAI

artificial intelligence

ATIS

Alliance for Telecommunication Industry Solutions

BCA

border carbon adjustment

CCC

Committee on Climate Change

CO2ecarbon dioxide equivalent

COP

Conference of the Parties

CSO

civil society organisation

CSR

corporate social responsibility

DFID

UK Department for International Development

EMAS

Eco-Management and Audit Scheme

ETS

Emissions Trading Scheme

EU

European Union

Eurofer European Steel Association
FAO

Food and Agriculture Organization of the United Nations

FDA

United States Food and Drug Administration

FRC

Financial Reporting Council

GDPgross domestic product

GHG

greenhouse gas

GtCO2egigatonnes of carbon dioxide equivalent

GVC

global value chain

HFChydrofluorocarbon

IPCC

Intergovernmental Panel on Climate Change

ISOInternational Organization for Standardization

ITC

International Trade Centre

KPI

key performance indicator

M&S

Marks & Spencer

MRVmeasurement, reporting and verification

MtCO2e megatonnes of carbon dioxide equivalent
NDC

nationally determined contribution

NGO

non-governmental organisation

OECD

Organisation for Economic Co-operation and Development

RTA

regional trade agreement

SBTI

Science Based Targets initiative

7

SDG

Sustainable Development Goal

SECR

Streamlined Energy and Carbon Reporting

SME

small and medium-sized enterprise

SPS

sanitary and phytosanitary

UK

United Kingdom

UN

United Nations

UNFCCC United Nations Framework Convention on Climate Change
UNFSS

United Nations Forum on Sustainability Standards

UNIDO

United Nations Industrial Development Organization

US

United States

USDA

United States Department of Agriculture

WBCSD World Business Council for Sustainable Development
WRAP

Waste and Resources Action Programme

WRIWorld Resources Institute

WTO

World Trade Organization

ZDHC

Zero Discharge of Hazardous Chemicals

Foreword
Sara Pantuliano
Covid-19 has diverted attention and resources.
But it goes without saying that climate changeremains both urgent and important. The world
has already warmed by 1°C since pre-industrial
times. If we do not act quickly, we will lose thechance to limit warming to 2°C, let alone ‘well
below 2°C’ or 1.5°C – the targets enshrinedin the Paris Agreement. Recent analysis showsthat global greenhouse gas emissions need tofall by 3% a year between now and 2030 tolimit warming to 2°C, and by 7% a year tolimit warming to 1.5°C. Even the 3% target
is unprecedented. Meanwhile, emissions arestill rising. It is impossible to overstate theurgency and scale of change required. The
ecological and human consequences of failure
are unimaginable.
For a think tank like ODI, this means all
hands on deck; the topic of climate change
is not just for climate specialists. Designing,
incentivising and implementing the right policy
responses, in both high- and low-income
countries, touches every area of our work
– in economics, politics and social policy, in
productive and social sectors, and in every
other field. At the heart of our work must be
a commitment to delivering global change inways that recognise the legitimate needs of thepoorest and of all social groups. Climate change,of course, is intimately linked to the otherSustainable Development Goals.
Traded emissions are only one piece of the
puzzle, but they are an important one. The shareof emissions linked to trade has grown sharply
and may be as high as 38% globally. The United
Kingdom provides a stark example: net imported
emissions now account for over 40% of thecountry’s total footprint and have risen to suchan extent that they now cancel out almost all
domestic, territorial reductions. In other words,
the UK as a country is producing much lesspollution within its borders but generating about

the same level through its consumption. This is
not only the result of deindustrialisation and theoffshoring of polluting industries: in fact, that
seems to be a minor factor. More important isthat we are richer than we were, so are spending
more, and there are more of us.
These shifts mean that traded emissions
need to feature more prominently in the
global climate regime. As they do so, issues ofmeasurement, reporting and certification become
crucial: they are the platform on which policy
can be built. Already, there is considerable
expertise on how to account for greenhousegas emissions in firms and in the production of
goods and services. In the essays in this volume,
there are authoritative accounts of both theunderlying standards and the different ways
in which they are being applied at all stagesof the value chain. The legal frameworks are
beginning to be put in place. The public–private
partnerships are impressive.
Low-income countries can benefit frombetter information of this kind and fromnew opportunities to acquire technology andpresent their goods in national and export
markets. However, there are costs involved– and risks. Most important is to make surethat these countries have voice and ownershipof new global standards and that producers
do not suffer from a ‘green squeeze’, whereby
costly imported standards devised elsewhereare imposed on poor farmers or workers.
Border taxes on the carbon content of trade,as proposed in some high-income countries,
could pose a significant risk to poor countries.
Here, then, is the task for development andother global policy actors: to understand thenature and scale of the problem; to devise
appropriate policy; and to support change.
Options for how to do this are to be found intechnology transfer, finance and government
regulation, and within international bodies like9the World Trade Organization and the United
Nations Framework Convention on Climate
Change. We do not yet have the answers,
but we hope this publication will encourage
further work.

I would like to express my personal thanks
to all the contributors, to the ClimateWorks
Foundation for its support with the publication
costs, and to Aarti Krishnan and Simon Maxwell
for editing the volume.

10

Part A

Introduction

Chapter 1 Counting carbon in global trade: why
imported emissions challenge the climate regime
and what might be done about it
Aarti Krishnan and Simon Maxwell
1.1 Introduction: a climate regime
under threat?

importers and emerging economies mostly net
exporters. Consequently, territorial emissions are
an increasingly unreliable guide to a country’s
climate footprint – and reductions in such
emissions an unreliable guide to a country’s
contribution to climate action. In the UK, forexample, both the absolute volume and theshare of imported emissions have grown, with
imported emissions now accounting for 43% of
the country’s total footprint (Barrett).
The second threat to the voluntaristic andnationally driven character of the climate regimeis the increasing focus on action to reduce thecarbon intensity of trade, including, of course,
exports from developing to developed countries.
The drivers include internal concern withincompanies and external pressure by civil society
organisations, but also a growing body oflegislation (Krishnan; Shanahan). Action is given
added impetus by the prominence of climate
and environment issues in trade negotiations(te Velde and Keane). For example, the European
Commission’s proposal for a ‘European Green
Deal’, published in December 2019, says that ‘theCommission will propose to make the respectof the Paris agreement an essential element for
all future comprehensive trade agreements’(European Commission, 2019). Further, theCommission will introduce carbon borderadjustments to ensure a level playing field in
the trade sphere and will appoint a chief tradeenforcement officer.
In the best case, developing countries may
find that the reshaping of the climate regime
acts to their benefit, for example, encouraging

For almost 30 years, the climate regime canbe characterised as having attempted to tackle
a global problem by means of voluntaristic,
nationally driven action. But the foundations of
this regime are now under threat, with significant
implications for developing countries.
The United Nations Framework Convention
on Climate Change (UNFCCC), adopted at
the Earth Summit in 1992, set out to ‘stabilize
greenhouse gas concentrations in the atmosphereat a level that would prevent dangerous
anthropogenic interference with the climate
system’ (UN, 1992). It would do this by virtueof national parties to the Convention agreeing
to ‘formulate, implement, publish and regularly
update national and, where appropriate,
regional programmes containing measures
to mitigate climate change by addressing
anthropogenic emissions’. This voluntaristic,bottom-up approach to decarbonisation has beensustained through successive rounds of climate
negotiations, most importantly in the 2015 Paris
Agreement (UN, 2015a). Under the terms of thisagreement, countries are required to submit andupdate national emissions reduction pledges in
the form of ‘nationally determined contributions’(NDCs) (UN, 2015b).
There are two main threats to this regime.
The first is the growing importance of emissions
traded across national borders, currently
accounting for up to 38% of global emissions(Barrett),1 with developed countries being net

1

All references in this form are to contributions in this volume.

12

faster progression to low-carbon output andopening new export opportunities for lowcarbon products. In the worst case, however,developing countries may find themselves
bearing increasing costs for monitoring andcertifying carbon content and perhaps being
at a competitive disadvantage in a low-carbon
trading system. This has been described as a‘green squeeze’ (Krishnan).
In this context, we aim to understand thechallenge to the current climate regime, and to
explore the implications for developing countries.
Together with a group of distinguished andexpert authors, we address five questions:

successful, they will see lower emissions in both
domestic and traded production.

1.2 The changing geography ofcarbon emissions
Three decades ago, most GHG emissions
originated in developed countries, and most wereassociated with domestic consumption. This is nolonger the case. As Barrett summarises, emissions
have grown rapidly in developing countries butwith a considerable share associated with exports.
Figure 1.1 illustrates the growth in emissions.
China now accounts for the largest share of total
emissions, with per capita emissions close to thoseof the European Union (EU). Barrett and Scottshow that the largest developed economies allimport more emissions embodied in goods andservices than they export. For example, Europe’s
consumption-based emissions are 10% higher
than its territorial emissions.
The UK is more ‘import-intensive’ than manyother developed countries. As Barrett shows,
this import intensity has risen significantly: in
2016, 43% of consumption-related emissions
were imported, compared with 15% in 1990.
Joffe notes that imports from non-EU countries
are more carbon-intensive than those from EU
countries, particularly food and constructionrelated goods (e.g. steel and cement).
It might be thought that the fall in territorial
emissions and the growth in the share of imported
emissions in the carbon footprint of developed
countries are mainly the result of deindustrialisationin those countries – in other words, ‘dirty’
industries have been outsourced to developing
countries. The offshoring of emissions and ‘carbon
leakage’ is certainly an issue (see, for example,
Plechaty et al., and a practical example fromKrishnan involving China and India offshoringtanning to Kenya, Tanzania and Uganda). However,
Barrett demonstrates for the UK that consumption
dynamics are more important. For example,
population growth and increases in total spend
have been the main drivers of higher consumptionbased emissions, offsetting improvements in boththe carbon intensity of energy and productionenergy efficiency. For the world as a whole (seeChapter 2), increases in gross domestic product,
and hence consumption, have outweighed

1. How and why is the geography of carbon
emissions changing?
2. How are carbon emissions measured andhow are the boundaries set?
3. What are the opportunities and challenges ofcarbon reporting and certification?
4. What are the implications for developing
countries?
5. How should the climate regime adjust toensure efficient and equitable outcomes?
We conclude that the fast-growing share of
traded emissions in the global total requiresa change to the climate regime, giving greaterattention to traded emissions and consumption
footprints than has been the case to date. There
are opportunities for developing countries toembed green approaches in careful accounting,reporting and certification of greenhousegas (GHG) emissions, at firm and possibly
product levels.
However, there are also many difficulties
and risks. The technical challenge of accurate
GHG measurement and reporting should not be
underestimated. There is also a significant danger
that developing country producers may have tobear considerable additional costs, or may evenfind themselves excluded from participation ina value chain if developed country actors alone
develop standards and drive them throughsupply chains.
Developing countries will require significant
support in rolling out accurate accounting andreporting, and in securing a voice that facilitates
the co-creation of standards; but, if efforts are

13

10

Total emissions (GtCO2e)

129Total and per capita greenhouse gas emissions, 1990–2018
25

China
US
EU-28
India
RussiaJapan
Int. Transport
Global20
Emissions per capita (tCO2e)

Figure 1.1

6

10

5

3

0
1990

15

2000

2010

0
1990

2018

2000

2010

2018

Notes: GtCO2e = gigatonnes of equivalent carbon dioxide
Source: UNEP (2019).

improvements in energy intensity, especially in nonOECD (Organisation for Economic Co-operation
and Development) countries.

they need to decide whether to count only theemissions included within their own directcontrol, or also those emissions generated in the
supply chain. As WRI explains, emissions areformally classified as falling into Scope 1, Scope 2
and Scope 3:

1.3 The measurement of carbon
emissions•

The national figures reported in the previous
section are mostly based on modelling, using
input-output tables. When it comes to products
and companies, more granular measurement isrequired – and this is by no means straightforward.
Yet accuracy is necessary, as a number of authors
remind us (Hill; Jones; Scott), especially ifcomparisons are to be made between products
made by different suppliers in different countries.
The World Resources Institute (WRI) provides
an introduction to measurement. For companies
to measure their own carbon emissions, or theemissions embodied in their products, theyneed to be able to define the boundaries of thecompany and to allocate emissions correctly
between subsidiaries, joint ventures and so on.
They need to decide whether to include end-oflife and recycling issues. And, most importantly,••

A Scope 1 inventory covers a reportingorganisation’s direct GHG emissions.
A Scope 2 inventory covers a reportingorganisation’s emissions associated with thegeneration of electricity, heating/cooling or
steam purchased for own consumption.
A Scope 3 inventory covers a reportingorganisation’s indirect emissions other thanthose covered in Scope 2.

It is easy to understand that measuring Scope 1
emissions is much more straightforward than
measuring those under Scope 3, and thatmeasuring company emissions is much lesscomplex than measuring the emissions of dozens
of different products, each of which contains
dozens of different materials. Measuring Scope 3
emissions is especially problematic when14

suppliers are widely scattered in remote locations
and when complex issues like land-use changes
have to be taken into account (Hill). Emissions
during product use and end-of-life impact
present further challenges and may, in fact, be
the main source of emissions (Scott).
The principles are clear: accounting shouldbe ‘relevant, complete, consistent, transparent
and accurate’ (WRI). Different standards havebeen developed to meet different needs, by the
GHG Protocol Initiative (WRI), the International
Organization for Standardization and the Carbon
Disclosure Project, as well as the Science Based
Targets initiative (WRI). Shopley provides
information about the CarbonNeutral Protocol.
Wain and Murray describe Avieco’s Smart
Sustainability Certification, working mainly withsmall and medium enterprises. Jones describes
the genesis of product carbon footprinting andlabelling from the perspective of the Carbon Trust– one of the early pioneers of this work. Smith,working with Imperial College London and
the Grantham Institute, discusses how artificial
intelligence (AI) and machine learning can help
us manage the large volumes of data involvedin certification. Pulling the various approaches
together in a country context, Shanahan describes
the range of options used in the UK.
In many countries, reporting is voluntary. In
others, including some developing countries,
there is legislation. Shopley cites Colombia andSouth Africa. Shanahan provides detail on UK
regulation, where reporting on Scope 1 andScope 2 emissions is mandatory and reportingon Scope 3 emissions is voluntary but strongly
encouraged. Recent legislation has extended thecoverage of reporting requirements from about
1,200 to more than 12,000 UK businesses.
There are some shortcuts. The UK guidelines,
for example, provide formulae for translating
financial information into GHG emissions(Shanahan). Hill cites the rule of thumb that
£1 billion of UK retail turnover on either
clothing or food equals emissions of half amillion tonnes of carbon dioxide equivalent(CO2e). But shortcuts are no substitute forcareful analysis.
Lastly, it is important to note thatmeasurement and accounting are strongly linked
to action, either in the context of direct orindirect emissions reductions or in relation tomeasures to offset emissions. Indeed, this is theraison d’être of all the certification approaches
reviewed here. None of the standards describeddemands immediate elimination of all emissions.
Instead, the focus is on having an action planand committing to gradual improvement. Take,for example, the UK Environmental Reporting
Guidelines cited by Shanahan. These guidelines
call for key performance indicators that can
include quantitative targets based on outcomes,
such as reduction of emissions or incidents;
quantitative or qualitative objectives in termsof inputs, such as completion of management
system initiatives by a planned date; annual
progress measured against a commitment
to continuous improvement; or case studies
providing evidence of programmes planned
across a specified period. The chapters by WRI,
Shopley, Wain and Murray, and Jones provide
numerous examples of this approach.

1.4 Reporting and certificationin practice
GHG or carbon certification can draw on a
wealth of experience in other sectors, reviewed
in this volume by Krishnan, who identifies as
many as 246 voluntary sustainability standards
in the world, many focused on environmental
sustainability. These are in addition to
mandatory standards, for example related tofood safety.
As is the case with GHG reporting,sustainability standards reflect the commitmentof companies to corporate social responsibility
and help companies manage reputational risk.
They also respond to external pressures, suchas campaigns mounted by non-governmentalorganisations on issues like child labour or union
representation, and environmental concerns.
Krishnan makes clear that standards present
opportunities but also risks for developing
countries, concluding that ‘it is good to be
optimistic about standards but with caution’.
Standards can help spread best practice alongsupply chains and can create local spillovers, forexample, in technology or management practice(see also Keane and te Velde). On the flip side,
the application of standards can be difficult and15

costly. Often, standards are adopted in developed
countries and then pushed down the supply
chain to second- and third-tier suppliers, offering
few opportunities for consultation, and entailing
additional costs – described as a ‘green squeeze’
on suppliers. Furthermore, Krishnan notes, there
can be trade-offs between different standards,
for example, between environmental and social
objectives. And there are problems with ‘label
overload’ as suppliers try to meet multiple
demands (Jones).
Most of these concerns are also strongly
reflected in the discussion about carbon
reporting and accounting. Several of theauthors, such as Wain and Murray, note the cost
implications of full carbon accounting. Alongwith Jones, Wain and Murray discuss the dangerof focusing on GHG emissions to the exclusionof wider environmental concerns. There may berisks in over-complicating reporting (Scott), but
Wain and Murray conclude that ‘overlooking
other sustainability issues represents a missed
opportunity’. Keane and te Velde are among
those emphasising the opportunity of using
standards to improve technology and efficiency
within global value chains. Jones discusses the
problem of label overload.
There are then implications for the design
and implementation of carbon standards.
From the general literature, Krishnan proposes
three steps to promote win–win outcomes: (1)better standard design; (2) refocusing to deliverenvironmental justice; and (3) using financial
incentives and disincentives (e.g. border carbon
adjustment (BCA) taxes) along with standards.
She emphasises the importance of voice andparticipation in designing standards, and theneed to think of standards in process terms,
as gradually improving and tightening overtime: this is the idea of ‘progressive realisation’familiar from the lexicon of human rights.
In the field of GHG and carbon certification,
there is great attention to detailed and pragmaticstandard design, by the GHG Protocol Initiative,
Natural Capital Partners, Avieco, the Carbon
Trust, governments (such as the UK) and others
not represented here. WRI, Shopley, Wain andMurray, and Jones all discuss the need to build
action into standards: Shopley talks about‘promoting immediate action to support deeper

and wider transformation’. There are also
developments in the field of labelling. Jones
observes that:
B2B and B2C communication requiredifferent approaches. Generally, B2B
labels need to carry specific numbers,
whereas a simpler message is often
required for consumers, showing a
direction of travel (reducing CO2)
or a positioning (CO2 measured),
for example. In some cases, fuller
supporting detail can be madeavailable on a website, potentiallythrough scanning a QR code or via
a weblink on packaging.
The AI approaches Smith describes can be
useful here.
Perhaps the biggest gap relates to discussionof the voice and participation of suppliers
in developing countries in the design andimplementation of standards. There are hints,
however, that options exist. Krishnan refers to
the fair-trade standards, for example, whichemphasise producer ownership and participation.
Shopley describes how the company
Betty & Taylors works on environmental issues
with tea and coffee suppliers in Kenya, Malawi
and Uganda. No doubt there are many such
examples in the certification world.
Accounting, reporting and certification
are constantly evolving. An important point
several contributors make is that, after initial
enthusiasm, interest in this area waned in
the 2010s. Hill ascribes this decline partly tothe complexity of the calculations and to thelabelling challenges but is optimistic about the‘second decade’ of environmental footprints.
Jones agrees, adding that consumer interest has
not always been sufficient. He also makes a point
about critical mass: ‘Without a critical mass oflabelled products, within a specific retail category
for example, consumers have nothing against
which to compare a product footprint.’ Still, theincreasingly higher profile of the climate agenda
leads to consensus in the contributions here thatpublic interest and regulation are combining tomean the issue is now regaining momentum.

161.5 The implications for developing
countries

It also means being flexible andresponsive, avoiding lock-in to carbonintensive patterns of production andenergy generation and building capability
for climate smart development.

Developing countries will not be able toescape the growing enthusiasm for accounting
and reporting GHG emissions. Nor should
they. Jones emphasises the value of carbon
footprinting as a business information anddecision-making tool and observes that ‘manyorganisations have realised that they can use
carbon footprinting as a platform to help
solve cost, risk and strategy questions for theirbusinesses, for example in scenario modelling fortheir supply chains.’ Enterprises in developing
countries increasingly face the same combinationof internal and external pressures that Krishnan
describes as applying to businesses in general.
For Beynon, this is a matter of ‘self-interest’.
For Plechaty et al., recognising that trade policy
can be a lever in global decarbonisation meansthat benefits will accrue to developing as well as
developed countries, in equity and environmental
integrity, among other things.
Furthermore, and as Krishnan notes, standardsetting in global value chains can help businesses
in developing countries learn lessons, search
for new technology and benefit from spillover
effects. Keane and te Velde specifically emphasise
this point and warn against restricting trade.
Openness, they say, ‘is key for innovation in
general, and innovation is correlated withenergy efficiency … Trade can be a friend of
the environment.’
It seems obvious, then, that developing
countries should engage with the carbon reporting
agenda, if not embrace it. In so doing, they should
pay attention to the 3Ps articulated by Krishnan:
performance, participation and progressive
realisation. Essentially, this means being cocreators of rules and standards, rather than simply
rule-takers. As Beynon suggests, this involves:

Of course, being active in this way is notstraightforward, especially when capacity islimited, resources are constrained, technology
is carefully guarded and power is concentrated
elsewhere. As Wain and Murray point out:
Certification in developing countries… would need to provide support
to businesses to help them overcome
these challenges. Any scheme needs
to be consistent so as to provide clear
expectations, to level the playing field
between businesses and to reduce thelikelihood of greenwashing. Funding
would also likely be required to enablesignificant business uptake in thecertification scheme.
This has implications for aid donors. Barrett
points to the importance of technology being
shared. Beynon discusses the need to support
low carbon development, but also to ‘support
the critical if unglamorous process of improving
carbon certification and tracking schemes anddeveloping countries’ capability to comply withthem’. Plechaty et al. have interesting ideas about
how philanthropy can help catalyse action,
including specific proposals related to tacklingcarbon leakage, using public procurement anddeveloping ‘climate clubs’. As Beynon suggests,
carrots rather than sticks – that is, rewards rather
than punishments – may have more potential tofacilitate and accelerate the necessary changes.
Say, however, that progress is slow, for one
reason or another. In this case, developing
countries are likely to face the kind of carbon
taxes mentioned in the EU Green Deal
proposals, with potentially highly deleterious
effects. These carbon taxes will probably bemuch harder to implement than often thought(Scott), with multiple exemptions, as Barrett
explores. Keane and te Velde look at the issue
in more detail, identifying the key sectors at
risk (especially steel and aluminium), and at

Better integrating macroeconomic,
climate and trade policies within a
medium- to long-term framework thattakes account of rapidly changing, but
still uncertain, markets for energy andcarbon, as well as for the goods andservices (and associated opportunities
for trade) in which they are embodied.

17the developing country exporters most likely
to be affected (China, Brazil and South Africa,
among others). They make the point that thoseadvocating border carbon adjustments (BCAs)
may find a way not to contravene World Trade
Organization rules but may struggle morewith possible contravention of the climate
action principle of Common But DifferentiatedResponsibility, which means that developing
countries should take action only insofar as they
are able, with developed countries assuming
most of the adjustment costs. There are also
many technicalities involved in calculating
the appropriate level of BCAs, given theheterogeneity among firms within a given sector:‘taxes will only work properly if each importbatch has associated information on carbon
intensity’ (Keane and te Velde). Keane andte Velde point to the potential of blockchain
technology to make tracking data easier; there isa link here to Smith’s work on AI.
One further area should concern developing
countries: the impact of changes in consumption
on their export markets. Barrett, for example,emphasises the role that increased material
efficiency can play, with impacts on importsof commodities like steel and cement. He alsostresses that climate targets will not be met unlessconsumption patterns change. Joffe makes thesame argument about materials efficiency andpoints also to the need to cut consumption ofcarbon-intensive products like red meat anddairy. The UK’s net-zero action plan for 2050
is predicated in part on a 20% reduction in the
consumption of these commodities. To the extent
that these items are imported from developing
countries, exports will be reduced, reinforcing
Beynon’s point that developing country planners
should pay close attention to the prospects fortheir main export markets.

1.6

important part, along with regulation. Domestic,
territorial and within-business accounting
has had a dominant role, but there is strong
recognition of transboundary issues and increasing
acknowledgement that imported emissions need
to be on the agenda. For entities in developed
countries, Scope 3 emissions will be a large factor
in the future development of carbon reporting. For
the moment, Scope 3 emissions reporting remains
largely voluntary. This will surely change.
In this context, it is surprising that theinternational climate regime remains so strongly
focused on territorial emissions rather than on
consumption emissions and total footprints. The
UK again provides a case study. As Joffe makes
clear, the independent UK Committee on Climate
Change has ‘focused principally, and consistent
with its mandate, on policies to reduce UK
territorial emissions’. Nevertheless, it has noted
the rise in imported emissions and accepted that
consumption emissions are rightly a key area of
stakeholder interest. Indeed, Joffe reports that
the Science and Technology Select Committee ofthe UK House of Commons has called for greater
prominence of consumption emission statistics in
its publications and demanded that progress in
reducing territorial emissions not be achieved by‘offshoring’ emissions.
The Select Committee goes further inconcluding, ‘We do not accept that territorial
emissions should be the sole basis forinternational negotiations.’ This seems animportant point for the UNFCCC, given the
renewed urgency of climate action and theemphasis in 2020 on renewing NDCs withgreater ambition. The question is whether theUnited Nations Framework Convention on
Climate Change (UNFCCC), at an appropriate
time, should consider asking countries submitting
revised NDCs to also report on traded emissions
and propose how these might be reduced.
This could include action on aviation andshipping, as Keane and te Velde recommend,
but also on various actions linked to technology
transfer, finance and trade. Krishnan andMaxwell examine the scope for an enhanced
accountability framework in the UNFCCC.

Next-generation climate regime

The evidence cited here illustrates evolution andintensification of efforts to account for carbon
emissions, report on them and take action to
reduce them. Voluntary standards have played an

18

References
European Commission (2019) The European Green Deal. Communication from the Commission to
the European Parliament, the European Council, the Council, the European Economic and Social
Committee and the Committee of the Regions. COM(2019) 640 final. Brussels: European Commission(https://ec.europa.eu/info/sites/info/files/european-green-deal-communication_en.pdf)
UN – United Nations (1992) United Nations Framework Convention on Climate Change. UN Doc. FCCC/
INFORMAL/84. Bonn, Germany: UNFCCC (https://unfccc.int/resource/docs/convkp/conveng.pdf)
UN (2015a) ‘The Paris Agreement’. Bonn, Germany: UNFCCC (https://unfccc.int/process-and-meetings/
the-paris-agreement/the-paris-agreement)
UN (2015b) ‘Nationally determined contributions (NDCs)’. Bonn, Germany: UNFCCC(https://unfccc.int/process-and-meetings/the-paris-agreement/nationally-determined-contributions-ndcs)
UNEP – United Nations Environment Programme (2019) Emissions gap report 2019. Geneva,
Switzerland: UNEP

19

20

Part B

Setting the sceneChapter 2 Imported emissions: an overview andpolicy options
John Barrett
2.1 Why imported emissions matter

displaced fossil fuels, but simply provided for
an increase in energy demand. In turn, global
energy demand is closely linked to the continued
growth of consumption. Energy intensity is
falling but, overall, there is no evidence thatenergy demand has been decoupled from global
economic growth (Hickel and Kallis, 2019;
Sakai et al., 2019). Figure 2.1 illustrates recent
trends for OECD and non-OECD countries.

Greenhouse gas emissions are rising –mainly because of increases in Asia
Emissions of global greenhouse gases(GHGs) continue to rise, having increased byapproximately 4.2% between 2017 and 2019
alone (Peters et al., 2019). The reason for thecontinued increase is that renewables have not

Figure 2.1 Average annual growth rates of key drivers of global CO2 emissions and components ofgreenhouse gas emissions
Growth rate OECD: 2009–2018

Growth rate non-OECD: 2009–2018

6

Average annual growth rate (% per year)

5
4
3
2
1
0
–1

s
se

O
or

ina
t

ed

ga

2

N

4

CH

G
GH

UC
w/
oL
2

CO

en
sit
y

Flu

Ca

rb

on

int

en
sit
y
yi
nt

En
er
g

im
ar
Pr

GD

P

(P

ye
ne
rg

PP

y

)

–2

Notes: GDP = gross domestic product; PPP = purchasing power parity; LUC = land-use changes; GHG = greenhouse gas;
CH4 = methane; N2O = nitrous oxide
Source: UNEP (2019), reproduced with permission.

22

From a geographical perspective, while GHG
emissions are declining slowly in Europe, they
continued to increase between 1990 and 2018
in Asia, North and South America and Africa(Figure 2.2). The substantial growth in GHG
emissions has occurred in Asia, where they are
now three times higher than they were in 1990
and continue to grow, with a 3.3% increase
between 2017 and 2018.

However, GHG emissions can also be
calculated from a consumption perspective,
which estimates the emissions associated withthe consumption of a country, irrespective of
where the goods and services were produced.
Conceptually, consumption emissions canbe described as: consumption = productionbased emissions − emissions embodied inexports + emissions embodied in imports(Barrett, et al., 2013).
One consistent finding in the literature isthat industrialised nations tend to import more
emissions, embodied in the foreign-made productsthat they consume, than they export, consequently
becoming net importers (Sakai and Barrett,2016). Therefore, the rise in emissions from Asia
is considerably more complex than providing forincreased demand within the country; increasingly,
Asia has become the ‘factory of the world’,
exporting materials and products to consumer-led
markets in North America and Europe.

But traded emissions are also important
The above figures are calculated on a territorial
basis, where emissions occurring within the
country are allocated to the country. The United
Nations Framework Convention on Climate
Change requires countries to report theirannual GHG emissions on this basis, definedas ‘emissions and removals taking place within
national (included administered) territories
and offshore areas over which the country has
jurisdiction’ (IPCC, 1996: 5).

Figure 2.2
Asia

Territorial carbon emissions by world region, 1990–2018
Rest of world

EuropeMiddle East

North America

5,000
4,500
4,000

Carbon emissions (MtC)

3,500
3,000
2,500
2,000
1,500
1,000
500
0

1990

1992

1994

1996

1998

2000

2002

Source: Friedlingstein et al. (2019); Peters et al. (2019).

23

2004

2006

2008

2010

2012

2014

2016

2018

Figure 2.3 shows the variation in territorial
and consumption in Asia, Europe and North
America, accounting for the large majority of
global GHG emissions.
Europe’s consumption-based emissions
are 10% higher than its territorial emissions.
For Asia, emissions reduce by 6% under the
consumption accounting approach. Figure 2.4

Figure 2.3

breaks this down for the 10 largest countries
in terms of gross domestic product (GDP),
representing two-thirds of the global economy.
The UK provides a powerful example of thedifference between territorial and consumption
emissions. As Figure 2.5 shows, net territorial
emissions in 2016 amounted to 473 megatonnesof carbon dioxide equivalent (MtCO2e) andTerritorial and consumption-based carbon emissions, 1990–2016

Consumption-based emissions
Asia
North America

EuropeTerritorial emissions
Asia
North America

Europe5,000

Carbon emissions (MtC)

4,500
4,000
3,500
3,000
2,500
2,000
1,500
1,000
1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

Source: Friedlingstein et al. (2019); Peters et al. (2019).

Figure 2.4
Territorial

Emissions associated with the 10 largest countries based on GDP
Imports – exports
CanadaBrazilItaly
FranceUK
India
Germany
Japan
China
US

–10,000–5,0000

5,000

10,00015,00020,000Emissions (MtCO2e)

Source: Friedlingstein et al. (2019); Peters et al. (2019).

24

25,00030,00035,00040,000imported emissions to 364 MtCO2e. Adding
these together gives total consumption emissionsof 837 MtCO2e, of which 43% was imported.
The figure also shows that the share of imported
emissions has been rising, largely offsetting falls
in territorial emissions.
In the UK case, again illustrating a global
trend, the main drivers have been rising

Figure 2.5

population and rising income, clearly offsetting
domestic improvements in production energy
efficiency and in the carbon intensity of energy(Figure 2.6). An important point on this evidence
is that deindustrialisation in the UK is not amajor driver.

UK territorial and consumption emissions, 1990–2016

UK consumption emissions

UK territorial emissions

1,200,000

Carbon emissions (MtCO2e)

1,000,000
800,000
600,000
400,000
200,000
0
1990

1993

1997

2001

2005

2009

2013

2016

Source: Spaiseret al. (2019).

Figure 2.6

Key drivers of consumption-based greenhouse gas emissions in the UK, 1997–2016

Production energy efficiency
Total spend
Population

Carbon intensity of energy
Total

Imports need

Changed need

250
200

Emissions (MtCO2)

150
100
50
0
–50
–100
–150
–200

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Source: Barett et al. (2019)25

Traded emissions account for up to 38%
of the global total – with China having thelargest share

To compensate for varying taxation regimes,
and to ensure a level playing field, industry has
widely called for BCAs. The reality, however,is that BCAs are highly complex to implement.
This is clearly known by industry in Europe,
leading it to argue for a low carbon price within
the EU Emissions Trading Scheme. As Figure 2.4
shows, the largest implications of any BCA
would be in China. There is a danger that any
measure to place a carbon price on imports
from China would be seen as protectionism.
There is widespread acceptance that a BCA
would be acceptable under international tradelaw. However, it would clearly affect relations
between countries such as the US and China,
which are currently placing additional tariffs on
traded goods.
While it may be legally possible, the practicalimplementation of any scheme would therefore
be highly challenging. As outlined by Sakai andBarrett (2016), the intent of a BCA is that theprice of imports reflect the carbon price imposedby the importing country. This is very difficult, asestablishing the carbon intensity of production
is complex. While some imports will be of a
specific material, like steel, that is universally
produced using the same production method
globally, the majority of imports will be products
made of hundreds of different materials, withcomplex global supply chains. There is also theissue of whether country-level carbon intensity
per material or product applies or whether
the carbon intensity associated with a specificfactory is used.
Another difficulty relates to the fact that imports
could be subjected only to the same carbon priceimposed on domestically produced products.
Therefore, if a country has an emissions trading
scheme, this would need to be taken into account.
The difference in the carbon price between the two
schemes would have to be applied.

To put the global numbers into context, global
growth in GDP has been closely coupled withgrowth in global trade, meaning there is an everincreasing disconnection between the locationof production and that of consumption. Whenconsidering the emissions embodied in all globallytraded products, one of the most comprehensive
studies suggests that, in 2008, they accounted for
26% of global emissions, increasing from 20% in
1990 (Peters and Hertwich, 2008). More recent
analysis, using models with further disaggregationof countries, suggests this figure could be as highas 38% of global emissions (ibid.). Further, theproportion of global emissions embodied in trade
is remaining constant. China has, by some margin,
the greatest embodied emissions in trade. They areso significant that they represent over half of net
global traded emissions.

2.2 What might be done?
The aim of any policy to address the emissions
embodied in trade must be either to improve theenergy efficiency or carbon intensity of production
or to reduce the consumption of the most carbonintensive materials and products. The key policy
options are taxation, technology transfer andaction on consumption.

Border carbon adjustments look attractive, but
are difficult …
Ideally, there would be a consistent global climate
policy in place that ensures each country is
reducing its emissions to achieve globally agreed
targets. However, this is clearly not the case.
Current commitments by countries fail to achieve
the globally agreed targets and there is variationin the level of ambition (Scott et al., 2018).
Further, there is no global carbon price that isuniversally applied. In this context, industries incountries with a more stringent climate regime
unsurprisingly raise the concern that they are
economically disadvantaged. Such pressures in theEU, for example, have led to the free allocationof carbon allowances under the EU Emissions
Trading Scheme, actively undermining progress onemissions reduction.

… and may have limited scope
A further problem is that BCAs may have limited
scope, given the exemptions built into possible
schemes, including for least developed countries,
with respect to those emitters using ‘best available
technologies’ and for sectors that account for lessthan 5% of a country’s exports. Sakai and Barrett(2016) show that in the EU, of nearly 3 GtCO2e

26

of imported emissions from mostly developing
countries (see Figure 2.7: ‘non-Annex B’), only asmall proportion can realistically be taxed.
Thus, we have to question whether imposing
a BCA would make a substantial difference interms of ensuring the global target of reducing
GHG emissions to net-zero by 2050 is met.
Placing a carbon price on industry in Europe
with the EU Emissions Trading Scheme has beenshown to have very little effect on emissions
reduction. The scheme has been plagued with
political interference and lobbying, ensuring thecarbon price has remained low. The market has,historically, completely collapsed, undermining
investment in low-carbon alternatives. A carbon
price has generally been used to ensure mitigation
options that have a small additional cost become
economically viable. However, small reductions
in emissions over a long period are entirely
inconsistent with the need for rapid reductions
in emissions.

demand for materials and products. One potential
policy that could be implemented without any
international agreement is a resource consumption
strategy that seeks to use materials and products
more efficiently to reduce the total use ofmaterials. This directly addresses the key driver:unsustainable patterns of consumption. There isconsiderable evidence that policies that make theeconomy more circular – extending the lifetimeof products, increasing the utilisation rate ofcarbon-intensive products (e.g. a car) and replacing
goods with services – can have a substantial
effect on GHG emissions (Scott et al., 2018). This
could involve a range of policy instruments, fromproduct standards to innovation funds for new
business models. In relation to product standards,
within the EU there is the possibility of extending
the Eco-Design Directive to incorporate standards
for the embodied energy of products, as well as theoperational energy of energy-using products.
Certification and labelling can play a partin incentivising greater material efficiency, atleast for consumer products. It is worth noting,however, that this approach does not work sowell for products that are not consumer-facing.

Focus on material efficiency and consumption
As previously mentioned, the increase in carbonintensive imports relates to increases in the
Figure 2.7

Embodied emissions in global trade: border carbon adjustments possibilities

3.5
3.0

Emissions (GtCO2)

2.5

Imported emissions
not coveredin the scheme

2.0
Lost due to BAT
1.5
1.0

Hypothetical scope(imported emissions
from non-Annex Bthat could potentiallybe covered)

0.5
0.0

Imports from non-Annex B

Lost due to 5%
criterion
Excludingleast developed
countries

Electricity
Other priced sectors
Trade-exposed sectors

Final demandIntermediate demand

Potential losses

Potentially taxed(by sector)

Potentially taxed(by type of product)

Notes: ‘Non-Annex B’ refers to those countries not included in Annex B of the Kyoto Protocol, which lists industrialised
countries and economies in transition that have their GHG emissions capped under the Kyoto Protocol.
Source: Sakai and Barrett (2016).

27

For example, the construction sector is a major
source of emissions in the UK.
As far as developing countries are concerned,
funds could be made available to ensure thatthe best available technology is installed in highproducing countries. This could take the form of
direct funding, the sharing of new technologies
and shared innovation funds between countries. In
essence, it could provide a collaborative approachto addressing inefficiencies and the more rapid
replacement of outdated high-carbon technologies.
In the end, the trade of materials and products
highlights the key driver of global emissions –consumption. Improvements in technology andthe efficiency of production are highly unlikely
to deliver the required emissions reduction.
Therefore, domestic resource consumption

strategies that fundamentally change our useof products are required to reduce the total
throughput of materials and products.

2.3 Conclusion
The current mitigation options have been unable toachieve the scale of change required to truly address
the climate crisis. Therefore, the fact that materials
and products are traded offers an additional pointof intervention to deliver low-carbon products.
While BCAs may be highly problematic, otheroptions are available that encompass a morecollaborative approach to ensure future industrial
development does rely on low-carbon technologies.
Achieving carbon targets will also require action to
reduce consumption.

References
Barrett, J.R., Peters, G., Weidmann, T., Scott, K., Lenzen, M., Roelich, K. and Le Quéré, C. (2013)‘Consumption-based GHG emissions accounting in climate policy: a UK case study’ Climate Policy
13(4): 451–470
Friedlingstein, P., Jones, M., O’Sullivan, M., Andrews, R.M., Hauck, J., Peters, G.P., … and Zaehle, S.
(2019) ‘Global carbon budget’ Earth System Science Data 11: 1783–1838 (https://doi.org/10.5194/
essd-11-1783-2019)
Hickel, J. and Kallis, G. (2019) ‘Is green growth possible?’ New Political Economy(https://doi.org/10.1080/13563467.2019.1598964)
IPCC – Intergovernmental Panel on Climate Change (1996) IPCC guidelines for national greenhousegas inventories. Geneva, Switzerland: IPCC
Peters, G. and Hertwich, E. (2008) ‘CO2 embodied in international trade with implications for global
climate policy’ Environmental Science & Technology 42(5): 1401–1407
Peters, G., Andrew, R., Canadell, J.G., Friedlingstein, P., Jackson, R.B., Korsbakken, J.I., Le Quéré, C.
and Peregon, A. (2019) ‘Carbon dioxide emissions continue to grow amidst slowly emerging climate
policies’ Nature Climate Change 10: 3–4
Sakai, M. and Barrett, J. (2016) ‘Border carbon adjustments: addressing emissions embodied in trade’
Energy Policy 92: 102–110
Sakai, M., Brockway, P., Barrett, J. and Taylor, P. (2019) ‘Thermodynamic efficiency gains and theirrole as a key “engine of economic growth”’ Energies 12: 110 (https://doi.org/10.3390/en12010110)
Scott, K., Owen, A., Giesekam, J. and Barrett, J. (2018) ‘Bridging the climate mitigation gap witheconomy-wide material productivity’ Journal of Industrial Ecology 23(4): 918–931(https://doi.org/10.1111/jiec.12831)
UNEP – United Nations Environment Programme (2019) Emissions Gap Report 2019. Geneva,
Switzerland: UNEP

28

Chapter 3 Standards and certification: an overview
Aarti Krishnan
Created by a multiplicity of actors

Carbon standards and carbon certification are
special cases of standard-setting and certification
more generally. This chapter explores the lessonsof wider experience for work on reducing
carbon emissions. It identifies the pitfalls andthe risk of a ‘green squeeze’ on suppliers indeveloping countries. It concludes with a callfor carbon standard-setting and certification
to focus on performance, participation andprogressive realisation.

3.1

There are two broad categories of standard –mandatory and voluntary. Mandatory standards
include public standards (government/national)
and intergovernmental (e.g. sanitary andphytosanitary (SPS)); voluntary standards can be
led by the private sector, an industry association/
consortium, individual non-governmentalorganisations (NGOs), an alliance of NGOs,
the public sector or collaborative agreements, as
Table 3.1 shows.

Introduction

There are many standards operating in theinternational system

Figure 3.1 Environment-related requirements
within standards

Globalisation has led to the fragmentation of
production and a change in the trade flows ofcapital, intermediary and final goods, fostering
global value chains (GVCs) and global production
networks. Heightened environmental awareness,
combined with activism from civil society
organisations (CSOs), is increasing pressure onlead firms to take responsibility for the ecologicalfootprint along entire GVCs. Simultaneously,
many firms in GVCs seek to gain competitive
advantage from ‘going green’. This has led to a
proliferation of standards and certification.
According to the International Trade Centre(ITC) Standards Map, there are over 246
voluntary sustainability standards in the world,with many applicable across multiple sectors:
30% of sustainability standards are related toagriculture and food processing, 15% to textile
and garments, 14% within consumer electronics
and 8% in the energy sector. The remainder
are distributed across services, fisheries, mining
and forestry. Digging deeper, the environmental
dimension features heavily within thesestandards, with most focusing on waste andwater management, followed by biodiversity,
soil management and carbon and climatechange (Figure 3.1).

Carbon and climate change

Renewable energies

Biodiversity

Soil management

Animal welfare

Use of chemicals

Forest management

Waste management

Organic production

Water management

Source: Author’s own, based on ITC data.

29

Table 3.1

Types of standard

Mandatory/
voluntary

Standard design/leadstakeholders

Standard

Monitoringi

ExampleMandatory

Intergovernmental, e.g. World
Trade Organization, Food andAgriculture Organization of theUnited Nations

SPS, Codex Alimentarius

Carried out by
firms involved

Food sector

National – US Department ofAgriculture (USDA)

US Food and Drug Administration Carried out by
food safety and modernisation
UDSA

Food traceability

Private sector

Company-led standards/codesof conduct

First, second
party

Starbucks – CAFÉ, Unilever –Sustainable Agriculture CodeIndustry consortium of private
firms

Industry association or group led

First, second
and third party

Global GAP, British Retail
Consortium, Eurofer, ATIS

NGOs

NGO-ledThird party

Fairtrade, Rainforest Alliance

Alliance of NGOs/CSOs

Group of NGOs come together todevelop a standard

Third party

Clean Clothes Campaign, Buy
Clean, ISO 9001/14001

Public sector-led voluntarystandards

Government-led standards withThird party
support from NGOs and business

UDSA Organic, Green Building
CouncilCollaborative agreements/
multi-stakeholder

Jointly governed by NGOs andbusiness

Forest Stewardship Council (FSC),
Roundtable on Sustainable Palm
Oil, GHG Protocol, Extractive
Industries Transparency Initiative

Voluntary

Second, third
party

Notes: i First-party monitoring is an internal audit that an organisation performs on itself; second-party monitoring is anexternal audit that an organisation performs on a supplier of goods or services; and third-party monitoring involves anexternal audit that is conducted by an independent organisation upon another.
Source: Author’s own, adapted from UNFSS (2018).

Standards are proliferating as a result ofinternal and external forcesin the fashion industry, where many global
brands decided to commit fully to the reduction
or elimination of hazardous materials in
the production of clothes. This included thedevelopment of institutional agreements, suchas the creation of the ZDHC (Zero Dischargeof Hazardous Chemicals) Foundation in 2011,
which comprised firms such as Marks & Spencer,
Nike, Levi Strauss, Arvind Limited and C&A.
Regional and national governments play
an important role in setting environmental
regulation – see, for instance, the proposed
Green New Deal in the US and the European
Green Deal in the EU, both of which support
investment in green infrastructure and financeacross pollution-intensive sectors. National
governments have developed mandatoryenvironmental standards, such as the US Foodand Drug Administration (FDA) food-safety
rules, which make food traceability mandatory
within the US. Other examples are compulsory
greenhouse gas (GHG) reporting for firms inStandards have not proliferated in a vacuum
but are driven by external and internalpressures. External pressures include consumers,social movements, NGOs and civil society,governments and other policy actors. For
instance, environmental justice movements,
like Extinction Rebellion and Climate Justice
Action, are groups committed to taking action toprevent catastrophic climate change, including
demanding change in the patterns of production
and consumption. In the same vein, alliances ofNGOs and labour unions have come together
to promote sustainable agendas like the Clean
Clothes Campaign and the Blue Green Alliance(Buy Clean). These involve labour unions andNGOs focusing on the improvement of working
conditions in the garment and sportswear
industries (Clean Clothes Campaign, n.d).
There are also NGO-led campaigns, like theDetox Campaign that Greenpeace promoted

30

the UK, and effluents and emissions standards
in India and China to curb resource-intensive
activities in manufacturing sectors.
Furthermore, supranational organisations
such as the World Trade Organization (WTO)
require compliance with mandatory SPS rulesthat set minimum requirements for food safety
standards and pro-environmental enhancement.
Another globally governed mandatory standard
is the UN Food and Agriculture Organization of
the United Nations (FAO) Codex Alimentarius,
which is a collection of internationally recognised
standards, codes of practice, guidelines andother recommendations relating to food, foodproduction and food safety.
Standards also play an important role inrealising trade deals. For instance, several
multilateral trade agreements, such as the
Maputo Convention on the Protection of Nature
and Natural Resources (adopted in 2003),
provide a pathway to using standards as a means
to environmental protection. There are also
specific regional and bilateral deals, such as the
EU–Japan Economic Partnership Agreement,
which has a sustainable-development chapter

Figure 3.2

encompassing the environment, and the EU and
Caribbean agreements on ‘poverty reductionand environmental protection’, which support
sustainable development.
Internal drivers include corporate social
responsibility (CSR) (environmental/social
governance) and a search for productdifferentiation. For instance, conglomerates
such as Unilever, Tata and Nestlé have dedicated
CSR reports, delineating their CSR initiatives,
milestones and outcomes. Another source ofinter-firm activity is industry associations orbusiness consortia, such as the British Retail
Consortium and the European Steel Association,
Eurofer, which provide impetus to develop
sustainability standards that can be used acrossa sector, as well as to create a level playing field
across firms.
Some of the key risks these external andinternal pressures aim to mitigate are linked
to the reputational capital of firms, enhancing
accountability and transparency, achieving
equitable social and economic outcomes,
and improving environmental protection andconservation (Figure 3.2).

External and internal pressures supporting the proliferation of standards
External pressure

Socialmovements

NGO-ledAlliance of
associations

National
goverment

CSO-driven

Regional
government
Policy-makers

Globalorganisation

Risk mitigation• Reputational capital• Product quality• Accountability• Transparency• Equitable outcomes• Environmental
protection

Internal pressure

Business
consortium(inter-firm)

Corporate social
responsibility(intra-firm)

Green comparativeadvantage(intra-firm)31

3.2 Benefits and risks of standards

The onerous ‘green’ demands from standards
created by developed countries are often pushed
down the value chain to second- and third-tiersuppliers (e.g. micro and small enterprises, farmers)
in low- and middle-income countries, creating a
top-down ‘green supplier squeeze’ (Ponte, 2019).
Southern suppliers also face additional costs
through ‘certification overload’, with suppliers
required to adhere to different labels, so they are
crowded onto packaging. From a trade perspective,
certification can cause trade distortions andoverburden trade agreements. It may also, insome cases, be incompatible with WTO rules. And
there can be unrecognised trade-offs between the
different objectives of certification.
Furthermore, the proclaimed goal ofsustainability standards is to create win–winsituations, by reconciling environmental(e.g. adapting to climate change, increasing
biodiversity), social (e.g. women’s empowerment,
paying fair wages, building capacities of farmers
and workers) and economic (e.g. promoting
industrial growth) policy objectives. This suggests
standards need to ‘synergistically’ achieve positive
economic, social and environmental outcomes(Krishnan and Foster, 2018; Ponte, 2019). But
synergies are often difficult to achieve, as theparameters of attaining economic versus social
versus environmental outcomes vary significantly.
Internationally, there are trade-offs that arise
with mounting pressures to go green. Rather thanStandards can potentially benefit low- andmiddle-income countries
In terms of global trade, standards can play various
roles across and within a GVC, especially when
considering low- and middle-income countries.
They can be used as instruments to govern or
regulate value chains, facilitate trade opportunities,
transfer best practices, build trust between multiple
actors across a value chain and create local
spillovers (Figure 3.3). If standards are leveraged
optimally, they can potentially reduce transaction
costs within a value chain, reduce coordination
failures and complement national policies of green
transformation.

However, standards can create a green squeeze
on low- and middle-income country suppliers
Low- and middle-income countries canbenefit from standards, for example via
increased opportunities for value addition anddiversification, better worker rights and achieving
net-zero emissions for product lines (Bush et al.,2015; UNFSS, 2018). But at the same time, thehigh costs of certification (audit costs), the need tolearn complex practices and lack of transparency
in the modus operandi of standards (Krauss andKrishnan, 2016) can lead to marginalisation of thepoorest suppliers in the GVC (Evers et al., 2014;
Lambin and Thorlakson, 2018).
Figure 3.3

Role of standards in value chains in low- and middle-income countries
Regulatory instrument
Filling a public governance gap

RegulatorTradefacilitator or
inhibitor

Trade facilitator or barrier
Complex requirements, high costs and coordination failures

Trust
gaining
or losing

Trust gaining or losing
Earning and maintaining trust between value-chain actors;
credibility of brands

Role ofstandards in
GVCs

Tech
transfer

Technology transfer
New capabilities and learning potential

Source: Author’s own.

32Towards best practice in standard-setting
and certification

leading to systemic change towards net-zero, they
can lead to ‘pollution-shifting’. For example, aban on domestic tanning factories led to India
and China importing raw and tanned leather
from Ethiopia, Kenya and Uganda, thereby
decreasing territorial pollution but increasing
imported pollution and effectively externalising
environmental costs (Krishnan et al., 2018).
Overall, it is good to be optimistic aboutstandards, but with caution.
Research across different sectors – agriculture
and agro-processing, wood and paper (including
furniture), extractive industries (oil, gas, precious
metals and metals), textiles and apparel, leather
and electronics – suggests that standards support
an increased probability of suppliers in low- andmiddle-income countries achieving positive
economic outcomes in terms of productivity
enhancements, value addition, improved quality
and, in some cases, diversification. However, theresults in relation to social and environmental
outcomes are mixed (Krishnan, 2018; UNFSS,2018). The key social outcomes highlighted arestruggles related to gaining workers’ rights andbargaining power in value chains, impinging on
negotiations for better contracts, job stability
and wage levels. The environmental outcomes
highlighted are poor resource use, increased
GHG emissions and biodiversity loss.
Box 3.1 provides an example of standards thathave created net benefits.

Box 3.1

For standards to be effective, there is a need tocreate not only equitable win–win outcomes
across value-chain actors but also outcomes thatwork across very different economic, social andenvironmental dimensions. Three steps are needed
to promote win–win outcomes: (1) participatory
standard design; (2) refocusing to deliverenvironmental justice; and (3) using financial
incentives and disincentives (e.g. border carbon
adjustment (BCA) taxes) along with standards.
Each of these ranges from smaller changes oralterations to standards to more radical solutions
that require structural change.
Participatory standard design. Most voluntarystandards are set by actors based in developed
countries (Ponte, 2019). These actors have thepower to design the control points within astandard. Their design is affected by regulation
within the developed-country and the demands
made by developed country consumers andbusinesses (Nadvi, 2008). This precludes actors
in supplier countries (low- and middle-income
countries) from participating in the design anddecision-making process of standards with which
they need to comply. Thus, there is an asymmetricpower imbalance in favour of developed countries.
Significant research alludes to the contestations
that arise when implementing standards are
imposed in the Global South, because of the failure
to incorporate local norms and cultures into thestandards (e.g. Barrientos, 2019; Gereffi, 2019).
Therefore, those who are setting standards mustensure that the design process is participatory,
open and consensus-driven to enable smoothuptake and compliance implementation.
Environmental justice. Most GHG standards
focus on the firm or enterprise as a unit ofanalysis, without considering the implications
for environmental justice. Justice needs to beviewed through a lens of fairness, so that all
members of society can use the environment
equally. Conforming to environmental justicerequires a society to care collectively for theenvironment and to participate in the development,
implementation and enforcement of environmental
laws, regulations and policies (Mohai et al., 2009).
Incorporating distributive and environmental
justice aspects into GHG standards can reorient

Fair trade in the food sector

Fair trade certification aims to provide
farmers with guaranteed prices andpremium payments that can be used to
improve productivity and to support
producer organisations. Studies haveshown that its use in the cocoa sectorin Ghana, Côte d’Ivoire and Nicaragua
has led to an average increase of 20%
in the income of farmers, an 18%
increase in cocoa yields, an increaseof 12% in farmers able to diversify toother products and greater knowledgetransfer on good agricultural practices(Krauss, 2017; Barrientos, 2019).

33

3.3

them to better capture the implications for themost vulnerable actors in GVCs.
In keeping with the need to incorporate
environmental justice into standards, standard
design could attempt to separate climate
certifications from wider sustainability
standards and, thus, focus on a carbon (net‑zeroemissions) standard as a standalone certification
rather than as part of an all-inclusive
sustainability certification.
The modus operandi of climate certification
varies from sustainability standards. For instance,
carbon-related standards, such as Science Based
Targets, Buy Clean, ISO 14001 and the GHG
Protocol, that focus on net-zero emissions are a
special case of sustainability standard. These GHG
standards have been applied across multinational
corporations in the Global North and Southand have led to zero-emissions product lines by
increasing the efficiency of production processes.
However, implementing GHG standards is
expensive, with significant investment required
to map the value chain and measure direct andindirect emissions (GHG Protocol, 2019).
Financial incentives and disincentives. The
usefulness of command and control measures hasoften been depicted in terms of the polluter-pays
principle. Here, those who produce pollution
should bear the costs of managing it, to prevent
damage to human health or the environment(Schwartz, 2018). Ongoing incentives include cap
and trade, while recent discussions have centred on
BCAs. BCAs are based on the idea that a country
may impose domestic taxes and charges onimports and exempt or reimburse them on exports(Mehling et al., 2019). On the one hand, BCAs cancontribute to an environmentally just approach byequalising the emissions; on the other, they can act
as a trade barrier and prevent economic growth inlow- and middle-income countries.

Conclusion

When designing and implementing standards, the
3Ps – performance, participation and progressive
realisation – need to be considered.
Performance. Standards have been shown
to reduce transactions costs and improvefunctioning in a value chain, and they canbe a source of positive economic, social andenvironmental outcomes. However, high costs,
the complexity of standards and label overload
can often constrain the transformative potential.
Participation. Low- and middle-income
suppliers often find themselves subjected tostandards or reporting requirements, with little
scope for participation or ‘voice’, and oftenwith different priorities to those they themselves
would choose. There is a risk of a top-down‘green squeeze’ on these suppliers, which may
affect their ability to continue to participate invalue chains. There is a need to design standards
that are participatory at the outset, which cancreate win–win situations for all involved.
Progressive realisation. Every standard has
different implications for different actors, thus
devising incremental changes to tackle challenges
as they emerge can facilitate the design of aneffective standard. For instance, standards need
to be flexible and normative enough so they
can be modified and adapted to suit specificneeds and contexts. For instance, standards canbe developed to have a ‘modular’ approach, tostart from incremental and simpler requirementsthat can be achieved with less asset-specificinvestment and complex knowledge andeventually move to more stringent environmental
requirements. This allows firms that adopt
environmental standards to progressively
realise environmental goals, in a structured andsystematic fashion.

34

References
Barrientos, S. (2019) Gender and work in global value chains: capturing the gains? Cambridge, UK:
Cambridge University Press
Bush, S.R., Oosterveer, P., Bailey, M. and Mol, A.P. (2015) ‘Sustainability governance of chains andnetworks: a review and future outlook’ Journal of Cleaner Production 107: 8–19
Clean Clothes Campaign (n.d.) ‘Who we are’. Clean Clothes Campaign webpage(https://cleanclothes.org/about)Evers, B.J., Amoding, F. and Krishnan, A. (2014) Social and economic upgrading in floriculture global
value chains: flowers and cuttings GVCs in Uganda. Working Paper No. 42. Manchester, UK:
Capturing the Gains, University of Manchester
Gereffi, G. (2019) ‘Economic upgrading in global value chains’ in S. Ponte, G. Gereffi and R. RajReichert (eds) Handbook on global value chains. Cheltenham, UK: Edward Elgar Publishing
Krauss, J. (2017) ‘What is cocoa sustainability? Mapping stakeholders’ socio-economic, environmental,
and commercial constellations of priorities’ Enterprise Development and Microfinance 28(3): 228–250
Krauss, J. and Krishnan, A. (2016) Global decisions and local realities: priorities and producers’
upgrading opportunities in agricultural global production networks. Discussion Paper No. 7.
Geneva: United Nations Forum on Sustainability Standards
Krishnan, A. (2018) ‘The origin and expansion of regional value chains: the case of Kenyan
horticulture’ Global Networks 18(2), 238–263
Krishnan, A. and Foster, C. (2018) ‘A quantitative approach to innovation in agricultural value chains:evidence from Kenyan horticulture’ European Journal of Development Reseach 30(1): 108–135
Krishnan, A., te Velde, D.W. and Were, A. (2018) Kenya-UK trade and investment relations: taking
stock and promoting exports to the UK. SET Report. London: Overseas Development InstituteLambin, E.F. and Thorlakson, T. (2018) ‘Sustainability standards: interactions between private actors,
civil society, and governments’ Annual Review of Environment and Resources 43: 369–393
Mehling, M.A., van Asselt, H., Das, K., Droege, S. and Verkuijl, C. (2019) ‘Designing border carbon
adjustments for enhanced climate action’ American Journal of International Law 113(3): 433–481
Mohai, P., Pellow, D. and Roberts, J.T. (2009) ‘Environmental justice’ Annual Review of Environment
and Resources 34: 405–430
Nadvi, K. (2008) ‘Global standards, global governance and the organization of global value chains’
Journal of Economic Geography 8(3): 323–343
Ponte, S. (2019) ‘Green capital accumulation: business and sustainability management in a world ofglobal value chains’ New Political Economy 25(1): 72–84
Roemer, J.E. (1998) Theories of distributive justice. Cambridge MA: Harvard University Press
Schwartz, P. (2018) ‘The polluter-pays principle’ in M. Faure (ed.) Elgar encyclopedia of environmental law.
Cheltenham, UK: Edward Elgar Publishing Limited
UNFSS – United Nations Forum on Sustainability Standards (2018) Voluntary sustainability
standards, trade and sustainable development. Third Flagship Report. Geneva: UNFSS

35

36

Part C Certification in practiceChapter 4 Lessons from the first decade ofenvironmental footprints
Rowland Hill
4.1 How I met environmental
footprints

In an environmental profit-and-loss analysis
with Forum for the Future in 2000, M&S
undertook product life-cycle assessments withEnvironmental Resource Management in 2001
and 2002 and a full value-chain carbon footprint
assessment in 2010. We made our operations
carbon neutral and PAS 2060-compliant in 2012
with Natural Capital Partners, and made our
products carbon neutral in 2013. We were thefirst retailer to: (a) hold all three Carbon Trust
Standards in 2014; (b) adopt dual (market- andlocation based) reporting; (c) conduct footprintsof online retailing options in 2015; (d) win the
UN Momentum for Climate Change Solutions
Award in 2017; and (e) adopt the Science Based
Targets Initiative.
We really have been through the full setof T-shirts!
While the maths had already been aroundfor two decades, it was in the years after 2009that corporates and policy-makers had the first
decade of environmental footprints.
Walmart was instrumental in funding The
Sustainability Consortium from 2009.2 Widely
described at the time as the world’s greenlabelling scheme (a description Walmart itself
loathed), the Consortium considered nineenvironmental impacts plus human rights.
A series of similar initiatives sprang up aroundthe world, with the government-funded Waste
and Resources Action Programme (WRAP)
managing the UK’s main protagonist, the ProductSustainability Forum. The Forum focused on four
environmental impacts and for a while also acted
as a global coordinator (WRAP, n.d.).
In 2010, the French government even got
close to passing legislation mandating productI started my working career as a Marks &Spencer (M&S) store manager. That was nearly
40 years ago, in the days before IT platforms,
when everything was managed by counting up
and comparing. Do jumpers or coats sell best?
Red or blue first? All decided by numbers.
When I started the second part of my career, insustainability, I couldn’t believe how little evidence
was available for decision-making. Fortunately,a relatively new science, known variously as
environmental footprinting, life-cycle assessment
or carbon accounting, was developing quickly andwas, for the first time, offering up the opportunity
to generate robust numbers.
I first encountered environmental footprints inthe mid-1990s when, for the M&S board, I got
hold of 12 floppy discs (remember them?) from
Going Green, the UK government’s environmental
education programme. You stuck the floppy
disc in your new-fangled size-of-a-small-housecomputer, answered questions about yourlifestyle and an underwhelming graphic told
you how many planets would be required if
everyone lived like you. Converting consumption
into a calculation of land area. That was it:
I was hooked.

4.2 The first decade ofenvironmental footprinting
Through my work at M&S we became oneof the first companies anywhere in the world
to perform environmental assessments withattributable emission numbers.

2

www.tsc10.sustainabilityconsortium.org

38

carbon labels as part of the Grenelle II process.
And in 2011, the European Commission
embarked on what is now a very long series oftrials on Product Environmental Footprints,
which considers up to 16 environmental
impacts, and Operational Environmental
Footprints, which is a sum total of products
and operations put together. The original idea
was that the results might form the basis of EU
environmental policy, but after eight years oftrials, it is more likely to become attached to the
Eco-Management and Audit Scheme (EMAS)
environmental management standard (European
Commission, n.d.).
However, around 2012, efforts stalled. And all
this potential legislation and labelling vanished as
quickly as it had arrived.

4.3

accountabilities within the business models of
running a shop.
So, imagine the complexity when it comes tomulti-tier global supply chains.

Interpreting the results
For companies, seemingly small details make ahuge difference. Supermarket chain Tesco had anambitious plan to carbon footprint label all its
products but found that the results were often
confusing, with apparently similar products
turning out to have widely different footprints
because of what looked like a small detail. In
one case, for instance, the source of heating forgreenhouse tomatoes was decisive. Sometimes
the figures also exposed irreconcilable trade-offs.
Low carbon/high water impacts compared withhigh carbon/low water impacts – which is best?

Why it all stalled

Which to choose?

A question of accountability

Consumers could not understand the labelling.
What exactly did 10g CO2 mean on the side of abottle of a carbonated drink that just happened
to contain CO2 as an ingredient?

Even with protocols, standards and audits, thenumbers are never an exact science and rarely
comparable. The standard originally developedby the World Business Council for Sustainable
Development and the World Resources Institute(WRI) in the late 1990s is based on a pragmatic
apportioning of accountability.
For instance, in the UK, accountable emissions
have been reduced to around 300 million tonnes
but, in truth, about the same again has been
‘offshored’, with someone else now accountable
for much of the nation’s consumption. In thecorporate world, some fabulous examples haveappeared in sustainability reports over the years,
where both partners in shared facilities haveclaimed that the other is accountable.
Working out who is accountable iscomplicated. Take, for example, the carbon
footprint of a shop. If I run a shop and pay theutility bills, I am accountable for emissions. If I
run a shop and utilities are provided as a service,
the service provider is accountable for some ofthe emissions. If I have a 50% share in the shop,
I am 50% accountable; if I turn the shop into afranchise and get someone else to run it, I am notaccountable at all. In total, there are roughly 10
different permutations of calculating the carbon
footprint of a shop. They are all legitimate;they just reflect different decision-making

Too many variables
Lastly, policy-makers struggled to make senseof this multi-option, multi-variable decisionmaking matrix, opting instead for the simpler
decisions offered by the circular economy, where
judgements are based largely on assessmentsof physical waste. Far less considered, but
understandable.

4.4

What the numbers told us

For all these challenges, we have learnt a lot.
In the retail sector, for example, we now know
several important things:
•

•

•

39

Stores, offices, warehouses and delivery
fleets account for less than 5% of our total
footprint.
£1 billion of UK retail turnover on clothingor food equals half a million tonnes of carbon
dioxide equivalent (CO2e). Look at yourfavourite retailers’ turnover and you canwork it out.
On average, at least 50% of emissions will beoutside the UK, much outside the EU.

•

•
•
•
•

•
•

The largest emissions are concentrated
in raw‑material sourcing and processing(which for a retailer is often the second or
third tier of the supply chain and sometimes
commoditised).
Including the direct emissions from land use
can add 20% to emission numbers.
Including indirect emissions from land use
can add 80% to emission numbers.
The numbers have power only if they areshared and understood.
None of us can afford wastage, because it has
already accounted for emissions right acrossthe value chain: 1% waste equals 1% of theentire carbon footprint being lost.
We have little direct influence on many of the
key supply-chain impacts.
It is becoming clearer that entire systems needto change – and, in many cases, this system isoutside the UK.

that there is some truth in the old Benjamin
Disraeli/Mark Twain adage: lies, damned lies andstatistics. Statistics are valid only if you take thetrouble to understand what they mean.
Today, the whole concept of footprinting lives
on in three main forms. First, as operationaleco‑standards, such as the International
Organization for Standardization (ISO) and
EMAS, where figures can be more accurate.
Second, in the new vogue for science-basedtargets, which, for me, still seems to have manyof the same weaknesses. And third, in the loftierconcept of natural capital accounting – anattempt to wrap habitats and land use into aneven bigger set of all-encompassing ‘big data’.
The climate emergency means that, in the next
decade, we have no option but to learn how to
use this data much more effectively. I would liketo see the ‘more four’:
1. more collaboration and sharing of data,
which is not an end in itself
2. more sector partnerships with policymakers to make fundamental changes to
consumption
3. more policy balance and a zero-carbon
circular economy
4. more acceptance of the need for transitional
mitigation arrangements (carbon credits).

4.5 Hopes for the second decade ofenvironmental footprints
In what I would call the first decade of productfootprinting just gone (2009–2019), we learned
that we could calculate emissions and that theygave us valuable information to help us act, butthat they rarely provided simple answers. And

References
European Commission (n.d.) ‘The development of the PEF and OEF methods’. European Commission
webpage (https://ec.europa.eu/environment/eussd/smgp/dev_methods.htm)
WRAP – Waste and Resources Action Programme (n.d.) ‘Product Sustainability Forum (PSF)’.
WRAP webpage (www.wrap.org.uk/content/product-sustainability-forum-psf)

40

Chapter 5

The GHG Protocol

World Resources Institute3
The monitoring, reporting and certification ofemissions by public and private entities has
become something of an industry. There are manydifferent standards and certificates available,
driven by internal and external forces, including
government regulation.
Much of this work is underpinned by the suiteof standards developed by the Greenhouse Gas(GHG) Protocol.4 Launched in 1998, the GHG
Protocol is a partnership between the World
Resources Institute (WRI), a global environmental
non-governmental organisation (NGO), and
the World Business Council for Sustainable
Development (WBCSD), a Geneva-based
coalition of 170 international companies. The
GHG Protocol provides comprehensive global
standardised frameworks to measure and manage

Box 5.1

GHG emissions from private- and public-sector
operations, value chains and mitigation actions.
Core principles underpin all the standards.
These are that accounting and reporting should
be relevant, complete, consistent, transparent andaccurate (Table 5.1).

5.1 Defining the scope: emissions
across a value chain
There are many technicalities to do with definitions
and procedures. A key issue, however, is that ofboundaries. Do reporting entities, in particularcompanies, stop measuring, so to speak, at thefactory gate? Or do they take responsibility also forreporting GHG emissions along the supply chain –and, indeed, for product disposal at the end of life?

Principles of GHG accounting and reporting

Relevance – Ensure the GHG inventory appropriately reflects the GHG emissions of the company
and serves the decision-making needs of users – both internal and external to the company.
Completeness – Account for and report on all GHG emission sources and activities within thechosen inventory boundary. Disclose and justify any specific exclusions.
Consistency – Use consistent methodologies to allow for meaningful comparisons of emissions
over time. Transparently document any changes to the data, inventory boundary, methods, or
any other relevant factors in the time series.
Transparency – Address all relevant issues in a factual and coherent manner, based on a clear
audit trail. Disclose any relevant assumptions and make appropriate references to the accounting
and calculation methodologies and data sources used.
Accuracy – Ensure that the quantification of GHG emissions is systematically neither overnor under actual emissions, as far as can be judged, and that uncertainties are reduced as far
as practicable. Achieve sufficient accuracy to enable users to make decisions with reasonableassurance as to the integrity of the reported information.
Source: WBCSD/WRI (2004).

3

Derived, with assistance from WRI colleagues, from material on the GHG Protocol website: http://ghgprotocol.org.
Section 5.3 on implications for developing countries added by the editors.

4

See http://ghgprotocol.org.

41

Formally, emissions are classified as falling into
Scope 1, Scope 2 and Scope 3 (Figure 5.1):•••

Typically, companies separately account for andreport on Scope 1 and Scope 2 at a minimum.5
When it comes to products, there are again
many technicalities, for example, related to whether
a product is an intermediate or a final good.
However, the core of the GHG protocol is to takea life-cycle approach, from material acquisition
through to end-of-life disposal (Figure 5.2).
The GHG Protocol’s Product Standard is intended
specifically to support performance tracking
of a product’s GHG inventory and emissions
reductions over time. Additional prescriptiveness

A Scope 1 inventory covers a reportingorganisation’s direct GHG emissions.
A Scope 2 inventory covers a reportingorganisation’s emissions associated with thegeneration of electricity, heating/cooling or
steam purchased for own consumption.
A Scope 3 inventory covers a reportingorganisation’s indirect emissions other thanthose covered in Scope 2.

Figure 5.1

Overview of scopes and emissions across a value chain

CO2

SF6

CH3

N2O
Scope 1
DirectScope 2
Indirect

HFCs

PFCs

Scope 3
IndirectPurchased electricity
for own use

Employee businesstravel

Production ofpurchased materials
Waste disposal
Product use
Company-owned
vehiclesFuel consumption

Outsourced activities

Contractor-owned
vehicles

Source: Adapted from WBCSD/WRI (2004).

Figure 5.2

The five stages of a product life cycle
NatureNatureMaterial acquisition andpre-processing

Material acquisition andpre-processing
Production

Production
Distribution and storage

Distribution and storage
Use

Use
Returned to nature

Recycled/reused intoanother product life cycle

End of life

Source: WBCSD/WRI (2011b).
5

For more on Scope 3 and value-chain reporting and accounting, see WBCSD/WRI (2011a).

42

End of life

on the accounting methodology, such as allocation
choices and data sources, is needed for productlabelling, performance claims, consumer andbusiness decision-making based on comparison of
two or more products, and other types of productcomparison based on GHG impacts. The ProductStandard does not support claims regarding theoverall environmental superiority or equivalence of
one product versus a competing product.

energy consumption (gigacalories per tonne ofcrude steel) and GHG intensity (tonne of carbon
dioxide equivalent (CO2e) per tonne of crude
steel). These indicators are key sustainability
metrics in the steel sector worldwide and help toensure market acceptability and competitiveness.
As an example of a product-level exercise,10consider the case of Swire Beverages. As one of
the Coca-Cola anchor bottlers, Swire Beverages
manufactures, sells and distributes Coca-Colaproducts. The company conducted life-cycle
GHG studies for nine of the Coca-Cola-branded
products produced in mainland China. The
results showed that packaging and refrigeration
by retailers were the processes that generated
the most significant GHG emissions and risks,
especially for small and medium-sized products.
Swire Beverages either leases or sells
refrigerators at a discount to retailers. Following
completion of the inventory and evaluation of
reduction opportunities, the company installed
energy-efficient refrigerator equipment andaggressively pursued hydrofluorocarbon (HFC)
recovery and HFC-free technologies. The new
equipment uses 35% to 40% less electricity while
reducing the usage of HFC134a, a refrigerantwith high global warming potential. Swire also
calculated that, if all retailers installed the newrefrigerators, it would save 5% to 16% of thelife-cycle GHG emissions of drinking products,
depending on their size.
Swire Beverages and Coca-Cola also identified
packaging reduction as a key climate mitigation
strategy and rolled out a new packaging design
for a bottled water product in China. The newplastic bottle design reduces packaging material
weight by 34% and is estimated to reduce GHG
emissions by 11% over the product life cycle.
The new design also helps Swire Beverages saveon the procurement cost of packaging materials.
Product-level certification is difficult, however.
It tends to be time-consuming and expensive

5.2 Applying the GHG Protocol
standards
The GHG Protocol has been used to inform the
preparation of related standards, like those of theInternational Organization for Standardization,6
the Carbon Disclosure Project7 and the Science
Based Targets initiative.8 There are also many
examples of successful application of the Protocol
standards, especially by companies making use of
the standards to set targets and measure progress.
For example, at company level,9 Tata Steel, Asia’s
first and India’s largest integrated private-sector
steel company, sees reducing its GHG emissions
through energy-efficiency as a key element of
its primary business goal: the acceptability of its
product in international markets. Each year, inpursuit of this goal, the company launches several
energy efficiency projects and introduces less-GHGintensive processes.
To succeed in these efforts and be eligible for
emerging trading schemes, Tata Steel must havean accurate GHG inventory that includes allprocesses and activities, allows for meaningfulbenchmarking, measures improvements andpromotes credible reporting. Tata Steel’s managers
now have access to online information on energy
usage, material usage, waste and by-productgeneration and other material streams. Using
this data and the GHG Protocol calculation
tools, Tata Steel generates two key long-term,
strategic performance indicators: specific6

For example, ISO 14044 on life-cycle assessment (ISO, 2006).

7

See www.cdp.net/en.

8

See https://sciencebasedtargets.org.

9

For the GHG Protocol Corporate Standards, see WBCSD/WRI (2015).

10 For the GHG Product Standard, see WBCSD/WRI (2011b).

43

to prepare, does not easily enable comparison
between products and is not internationallyharmonised. Furthermore, many product analyses
have little stakeholder engagement and are notpublicly available. Thus, the future of carbon
footprint labelling for products is uncertain.

shifts increasingly to Scope 3 measurement
and monitoring.
Third, developing countries may need to
be able to report accurately on emissions inorder to claim exemption from border carbon
adjustments imposed by developed countries,
such as those the EU is currently preparing.
Fourth, to the extent that carbon footprintlabelling continues to evolve, developing-country
exporters may face consumer pressure to
improve measurement and reporting.
Finally, of course, GHG measurement,
reporting and certification are also domestic
issues in developing countries. The pressures
to match international standards are likely toincrease as countries submit revised nationallydetermined contributions as part of the Paris
Agreement. New pledges with higher ambition
have been strongly encouraged for the Glasgow
Conference of the Parties,originally scheduled for
2020, and now due to take place in 2021, andwill be required in future on five-year cycles.

5.3 Implications for developing
countries
Nevertheless, the emphasis on measuring, reportingand certifying GHG emissions in developed
countries has implications for developing-country
suppliers wishing to participate in those markets.
First, if action on GHGs results in lower costs,
then developing-country suppliers will be at acompetitive disadvantage if they fail to set targets
and reduce emissions.
Second, developing-country suppliers may facedemands for higher standards of reporting withrespect to final or intermediate goods shipped
to developed countries, particularly as attention

References
ISO – International Organization for Standardization (2006) ISO 14044:2006 – life-cycle assessment:
requirements and guidelines. Geneva, Switzerland: ISO
WBCSD and WRI – World Business Council for Sustainable Development and World Resources
Institute (2004) The Greenhouse Gas Protocol: a corporate accounting and reporting standard –revised edition. Geneva, Switzerland: WBCSD; Washington DC: WRI (https://ghgprotocol.org/sites/
default/files/standards/ghg-protocol-revised.pdf)
WBCSD and WRI (2011a) GHG Protocol Corporate Value Chain (Scope 3) Accounting andReporting Standard. Geneva, Switzerland: WBCSD; Washington DC: WRI (https://ghgprotocol.org/
standards/scope-3-standard)
WBCSD and WRI (2011b) GHG Protocol Product Life Cycle Accounting and Reporting Standard.
Geneva, Switzerland: WBCSD; Washington DC: WRI (https://ghgprotocol.org/product-standard)
WBCSD and WRI (2015) GHG Protocol Corporate Accounting and Reporting Standard –revised edition. Geneva, Switzerland: WBCSD; Washington DC: WRI (https://ghgprotocol.org/
corporate-standard)

44

Chapter 6 The power of carbon-neutral
certifications to reduce embodied emissions ininternational trade
Jonathan Shopley
6.1 Product certification solutions
for embedded emissions in theinternational trade of goods andservicesclasses of certification: entities, products andservices, and activities.
This chapter explains how the Protocol’s
principles and five-step approach support
CarbonNeutral® product and service
certifications. It presents a case study on how
voluntary certification works in practice andexplores how carbon neutrality could become amainstream mechanism to account for climate
impacts across world trade.

World trade transcends national boundaries
and has a dominant influence on greenhousegas (GHG) emission patterns across the global
economy. This has encouraged some national
governments and regional blocs, such as theEuropean Union, to explore whether bordercarbon tax adjustments could be an effective
approach to accounting for the emissions
embedded in internationally traded products
and services.
Climate-progressive companies, for their part,are seeking readily available, credible and easily
understood information about embedded GHG
emissions associated with products and services
to help consumers take meaningful action on
their growing preference for climate-compatible
consumption. This has led an increasing numberof corporations to measure, reduce and offset
unabated emissions associated with the life cycleof their products and services to make claims ofcarbon neutrality or net-zero.
Carbon-neutral certifications communicate
their voluntary climate action to consumers,
enabling them to make informed decisions inline with their purchasing preferences. The
CarbonNeutral Protocol11 is an open-source
guide for businesses that commit to carbon
neutrality. It provides businesses with the option
to carry a CarbonNeutral® logo across three

6.2 The making of aCarbonNeutral® certification
Three broad principles underpin the
CarbonNeutral® Protocol, clarifying its purpose,approach and value to businesses taking action
ahead of and beyond compliance to achievecarbon neutrality immediately and in line with a
net-zero global economy by 2050.
Promoting immediate action to support deeper
and widespread transformation
Carbon neutrality is a voluntary action
taken immediately by an entity to fullycompensate for the global-warming impact
of its GHG emissions. When entities act
ahead of and beyond regulation, it accelerates
transformation to a sustainable and resilient
net-zero economy. Carbon-neutral entities
reduce emissions under their direct control
and enable mitigation activities elsewherethat require finance to deliver mitigationin line with Intergovernmental Panel on
Climate Change (IPCC) guidance and the

11 The CarbonNeutral Protocol (Natural Capital Partners, 2020) has been developed and is managed by Natural CapitalPartners (www.naturalcapitalpartners.com).

45

2. M
 easure the subject’s GHG emissions toprovide a complete and accurate GHG
inventory over a relevant timescale.
The Protocol provides guidance as to which
independent third-party measurement
standards can be used (including theGreenhouse Gas Management Corporate andProduct Protocols, ISO 14064 and the British
Standard Institute’s PAS 2050).
3. Confirm a target to achieve carbon neutrality
for the certification period, delivered throughinternal abatement of GHG emissions andthe retirement of environmental instruments(carbon credits and renewable energy
certificates) to compensate for unabatedemissions. The balance between abatement(that is, measures to reduce emissions
internally) and offsetting varies across different
businesses over time depending on theiroperating and business models. It is a core
principle of carbon neutrality in support ofa net-zero global economy that abatement
must increase over time. Approaches to setting
abatement targets (such as those definedby the Science Based Targets initiative)12
are recommended to ensure gross or actual
emissions decrease over time, in line withclimate science.
4. Achieve the target through a cost-effective
combination of internal emission reductions
and the use of external environmental
instruments. Unabated Scope 1 and Scope 3
emissions are netted out by retiring carbon
credits from emission-reduction projects
established under credible third-party
standards, including the Gold Standard for
the Global Goals, Verra’s Verified Carbon
Standard or the American Carbon Registry.
Scope 2 emissions may be netted out by
retiring carbon credits or may be zero-rated
through the retirement of energy attributecertificates (including Renewable Energy
Certificates and Guarantees of Origin).
5. Communicate carbon-neutral status andadvocate for wider transformation to a netzero global economy. The CarbonNeutral®

United Nations Framework Convention on
Climate Change goals and in ways that deliver
against the United Nations’ (UN) Sustainable
Development Goals (SDGs). Carbon neutrality
under the CarbonNeutral® Protocol is achieved
when the net GHG emissions associated withan entity, product or activity are zero for adefined duration.
Built on conservative estimation, best practice,transparency and continuous improvement.
Public claims of carbon neutrality accountfor GHG emissions and the compensating
emission reductions in accordance with best-inclass, third-party standards. This ensures thatclaims have integrity and the same meaning
throughout the global economy. Entities making
public claims of carbon neutrality commit toconservative approaches and to disclosing thebasis (methodologies, standards, protocols)
underpinning their claims.
Committed to pragmatism and impact
Achieving carbon neutrality is an actionable,
understandable and pragmatic responsethat any entity can adopt to meet its climate
objectives and play a meaningful role in drivingcarbon-emission reductions across the global
economy. A CarbonNeutral® logo enables
entities to communicate to key stakeholders
their commitment to carbon neutrality, sothey may be recognised and rewarded for theirprogressive action.
The CarbonNeutral® Protocol sets out a fivestep process to carbon-neutral certification:
1. D
 efine the subject that will be certified
CarbonNeutral®. This can be an entity,
product or service, or activity and may
be distinct from the legal entity seeking
the certification. The Protocol sets out
the Scope 1, 2 and 3 emission sources
required or recommended to be included
in a subject’s GHG assessment andCarbonNeutral® certification.

12 https://sciencebasedtargets.org.

46

certification logo is the primary mechanism
by which clients communicate their carbonneutral status and advocate for a wider
transformation to a net-zero global economy13.

co-benefits that build resilience within andacross supply-chain communities.
For example, in Kenya, the company’s carbon
finance incentivises smallholder tea farmers toplant trees on their land, which improves soil
health, creates new income from fruits and nuts,
provides shade for tea plants and introduces
conservation farming techniques to increase
productivity. Betty & Taylors’ reforestation
programme is led by tea farmers so that thesolutions work for their specific needs. In Malawi,
where forest cover has reduced by 32% in
less than 40 years, Taylors’ carbon finance for
efficient cookstove projects enables smallholder
tea farmers to reduce the rate of deforestation
for fuel use, save time and money collectingor purchasing fuel and reduce indoor air
pollution, which affects family health. Similarly,
in the coffee-growing region of Mount Elgon in
Uganda, many households still rely on open fires
in the home for cooking, leading to dangerous
levels of indoor air pollution. Taylors is funding
a project to introduce efficient cookstoves tocommunities to reduce the risk of illness and savethe money previously spent on fuel, and to reduce
deforestation from the collection of firewood.
In aggregate, the purchase and retirementof third-party verified carbon credits fromthese projects for the CarbonNeutral®
tea and coffee brands have resulted in
the planting of 1.5 million trees and the
distribution of 10,000 cookstoves, with theprogramme already engaging 70,000 people insmallholder communities.

6.3 A case study: Bettys & Taylors
takes its coffee and tea brands
CarbonNeutral® and supports
resilient livelihoods in Africa
Bettys & Taylors, which markets some of the
UK’s top-selling tea (Yorkshire Tea) and coffee
brands (Taylors of Harrogate), launched its
carbon-neutral products in 2019. The way it did
so provides a model example of how carbonneutral products can:•••help build supply-chain resilience by
providing sustainable sources of finance tosupply-chain initiatives that deliver against
climate mitigation, adaptation and selected
SDG priorities
put a price on carbon (i.e. the cost of the
carbon credits), which helps the company
find the right balance between internalabatement and compensation: abatement
opportunities that can reduce emissions at alower cost than carbon credits will tend to
be prioritised
use a simple and easy-to-understand claimof carbon neutrality to communicate withcustomers in ways that deliver differentiationand increase preference and loyalty.

6.4 Future of carbon-neutral
certifications in global trade

The Bettys & Taylors carbon-neutral products
draw on the CarbonNeutral® Protocol’s
certification to communicate its actions to
consumers. The company purchases its carbon
credits from emission-reduction projects within
its supply chain to compensate for its unabatedemissions across Scopes 1 to 3. The projects
generate emission reductions in the form ofverified carbon credits, as well as a range ofAs countries contemplate border carbon tax
adjustments to account for the embedded
carbon in imported goods and services, carbonneutral products and services have the potential
to generate a move from voluntary action
by progressive corporations to mainstream
responses to national and regional compliance

13 Carbon-neutral companies that currently use CarbonNeutral® certification to communicate their carbon neutrality toconsumers and key stakeholders include Microsoft (for 825,000 Xbox consoles), Logitech (for all its gaming products),
Sky (company), Neal’s Yard Remedies (company) and Bulldog (product).

47

requirements. Countries where the option of
offsetting has been incorporated into national
compliance regimes include Colombia and South
Africa, which have enacted domestic carbon tax
legislation that allows entities to reduce their
exposure to the carbon tax when emissions areoffset with permissible carbon credits.
With the International Organization forStandardization considering an ISO standard

for carbon neutrality, there is real potential forthe pioneering work by companies like Bettys& Taylors to evolve into a compliance-grade
approach to certification that enables carbonneutral certified products to seek exemption
from border carbon taxes. This will enable a
pragmatic response to the control and reductionof embedded carbon in the international trade ofgoods and services.

References
Natural Capital Partners (2020) The CarbonNeutral Protocol: the global standard for carbon neutral
programmes. London and New York: Natural Capital Partners (https://carbonneutral.com/pdfs/
The_CarbonNeutral_Protocol_Jan_2020.pdf)
Taylors of Harrogate (2019) ‘Carbon neutral tea and coffee’. Taylors of Harrogate, 26 April(www.taylorsofharrogate.co.uk/carbon-neutral-tea-and-coffee)
Taylors of Harrogate (2020) Taylors Sustainability Report 2019. Harrogate, UK: Taylors of Harrogate(https://report.taylorsimpact.com)

48Chapter 7 Avieco’s Smart Sustainability certification
Emily Wain and Daniel Murray
7.1 Working with clients to tackle
their sustainability challenges

sustainability action and certification moreaccessible to smaller businesses at a lower costthan international standards.
Approximately half of the SMEs that we haveworked with approached us directly. However, we
identified early on that, even with costs kept to aminimum, for some SMEs expense was still going
to be a sticking point. We, therefore, exploredfunding, which has been provided by trade
membership and public bodies. Trade membershipbodies often want to make an environmental
offering available to their members, which allows
them to be competitive and acts as added value forthe membership body. Public funding has comethrough programmes financed by the European
Regional Development Fund and local authorities,
which typically provide 12 hours of free support
to help SMEs understand and reduce theirenvironmental impact and costs.

Sustainability means something different forevery business. For some, it is a matter ofcompliance; for others, it means seeking acompetitive advantage within their market. At
Avieco, we work with clients of all shapes andsizes across a range of industries to provide
bespoke solutions to their sustainability
challenges. These solutions include carbon
reporting, sustainability strategies, verification
and assurance, energy and waste management,
renewable energy, a responsible supply chain andpackaging. Many of our clients are household
names, including Google, Royal Mail Group,
ASOS and Amnesty International. However, wehave also worked with hundreds of small andmedium-sized enterprises (SMEs).
Regulatory mechanisms, such as Streamlined
Energy and Carbon Reporting (SECR), andincreasing expectations from stakeholders have
driven large business uptake on sustainability
reporting, leading to the exploration of wider
sustainability issues. Action on sustainability
is, however, still largely voluntary for SMEs.
And internal expertise is usually limited, withvery restricted resources available to progress
the agenda. Avieco has, therefore, launched acertification scheme aimed specifically at SMEs.

7.3 Allowing SMEs to go beyond
carbon with sustainability
Given the drive towards business sustainability,
and the time and resource constraints
facing SMEs with regard to acting on eachsustainability topic separately, Avieco has
broadened the scope of certification to
include a wider range of key sustainability
topics. These are: carbon footprinting, waste
management, social responsibility, sustainableprocurement and sustainability of products.
Carbon reduction is still of huge importance,but overlooking other sustainability topics
represents a missed opportunity. For example,
social responsibility does not feature as part of acarbon footprint, but is significant for a businessworking in or with industries at high risk ofmodern slavery. SMEs can now achieve a wider
sustainability certification from Avieco: Smart
Sustainability certification.

7.2 Supporting SMEs todemonstrate action in sustainability
Avieco has supported over 1,500 SMEs withcarbon certification for more than 10 years,
providing a simple, affordable and efficient
way to quantify, understand and reduce theirenvironmental impacts, manage energy costs andcommunicate positive action and achievements
to their stakeholders. Avieco aims to make49

7.4 Smart Sustainability supports
SMEs on their sustainability journey•

Most important to SMEs is being able todemonstrate to their stakeholders, particularly
customers, that they are taking credible action to
become sustainable. Smart Sustainability allows
SMEs to follow a four-step process, providing
a framework of sustainability action across the
key topics:
1.
2.
3.
4.

7.6 Environmental certification for
SMEs comes with challenges
Challenge 1: Lack of resources
Both Avieco and our clients have come acrossmultiple challenges. One of the biggest challenges
is a lack of resources, in terms of capital input,
time, capacity and, therefore, commitment. Most
SMEs have a limited number of hours available
to focus on sustainability issues and certification.
For many, the priority has to be developing andwinning business, meaning that capacity for acertification scheme is restricted. Most SMEs also
have limited capital available for a certification,with their primary focus on keeping the business
up and running.
Over the past 10 years of deliveringcertification to SMEs, Avieco has evolved thecertification with solutions to these challenges
in mind. Keeping the cost of certification down,
by providing detailed guidance documents andframeworks and through structured one-on-one
advice sessions, ensures its accessibility to themajority of SMEs. We have also addressed thechallenge of capacity and commitment by making
stakeholder engagement a mandatory componentof the certification requirements. For example,
certification requires senior management signoff on policies and action plans, which ensures
top-level management commitment from eachparticipating business.
A lack of resources is likely to be particularly
prevalent for SMEs in developing countries
that are setting out to achieve an environmental
certification. This will be the case whether thecertification is voluntary or mandatory. However,
if mandatory, SMEs in developing countries
could be threatened by the requirements ofinvestment in a certification when they are trying
to make ends meet and may ‘squeeze’ them outof an already competitive market within their
supplier value chain. This is referred to as the‘green squeeze’.

baseline measurement
set intent
take action
measure success.

This process supports businesses in following a
guided sustainability journey, tailored to SMEs,
to demonstrate improvement over time. For any
business, becoming sustainable does not happen
overnight; Smart Sustainability encourages
SMEs to set out what they plan to achieve, taketangible action, measure progress against targets
and constantly improve.
There are three levels to the Smart Sustainability
certification: bronze, silver and gold. Each requires
increased action and demonstrable success against
targets. This incentivises SMEs to increase action
in sustainability across the multiple topics.

7.5 Why SMEs pursue carbon andsustainability certification
During Avieco’s work with SMEs, we have found
the following to be the main drivers of pursuingcarbon or sustainability certification:
•

•

•

•

action but have no statement of achievement
to demonstrate this to stakeholders.
Process provides direction on action. SMEs
are often time- and resource-constrained.
Certification provides a framework fortangible action and measurement.

Meeting tender requirements. SMEs havereported winning increased work throughtenders by holding a carbon certification.
Standing up to competitors. In a competitivemarket, SMEs are increasingly expected todemonstrate their business as responsible toits customers.
Driving operational efficiency. The
certification process identifies significant
areas for improvement, which often drives
efficiency, resource and cost savings.
Legitimising existing efforts. Many SMEs are
already taking a certain level of sustainable

50Challenge 2: Ensuring certification rewards
and drives action

lack of resources, the risk of greenwashingand the challenge of ensuring tangible action– that are likely to be more prevalent indeveloping countries.
Most environmental certifications arevoluntary, and this is also the case for the Avieco
Smart Sustainability certification. However, any
mandatory certification in developing countries,
or for cross-border trade, would need to provide
support to businesses to help them overcome
these challenges. Any scheme needs to beconsistent so as to provide clear expectations, tolevel the playing field between businesses and to
reduce the likelihood of greenwashing. Funding
would also likely be required to enable significant
business uptake in the certification scheme.
Avieco has worked with membership bodies,councils and other funding bodies to support
SME environmental implementation and has
found that on-the-ground, in-person support ismost effective. Local delivery partners providing
support and advice to businesses can ensure thatany potential certification scheme is widespreadand correctly implemented. One additional
benefit of this approach is skills development
within local communities. This has beenrecognised within the world of carbon offsetting,for example, where voluntary offsets are now
typically aligned with Sustainable Development
Goal co-benefits. For example, tree planting
projects in Kenya have been designed such that
local women farmers contributing to the project
are given access to leadership courses, with the
project subsequently being aligned with SDG 5
on Gender Equality.
Environmental certification has multiple
benefits for businesses, so a more widespread
approach for developing countries should
be considered. However, known challenges
are likely to be exacerbated in developing
countries and, therefore, support for any
potential environmental certification scheme
should be carefully considered, implemented
and monitored.

Both SMEs obtaining the certification and theircustomers are aware of the risk of greenwashing.
With Smart Sustainability, Avieco aims to
incentivise transparent disclosure of sustainability
action through disclosure agreements, ensuring
the business provides accurate information on its
sustainability agenda.
In previous years, it has been enough forbusinesses to report on their sustainability metrics
and current situation. This is no longer the case:tangible action demonstrated through continuous
improvement over time is now widely expected.
Smart Sustainability certification incentivises action
with rewards at three levels of achievement, as
well as rewarding improvement over time throughmetric measurement against a target or baseline.
Transparent disclosure could be even morechallenging to incentivise in developing countries,
where corporate transparency is typically lesswell established. One way to address this, andto improve the credibility of any environmental
certification scheme in a developing country,
is through improved audits, assurance andverification. These concepts are firmly establishedwithin the financial accounting community.
However, implementing this would require theinvolvement of regulatory bodies and, therefore,
capital input.

7.7 Support for an environmental
scheme in developing countries
would need to be carefully
considered
Environmental certifications come with benefits
and challenges, to both the certifying businesses
and the certification providers. SMEs participate
in voluntary environmental certifications formany reasons, all of which are as applicablein developing countries as they are in the UK.
There are, however, many challenges – primarily

51

Chapter 8

The carbon labelling journey

Hugh Jones
The recent launch of the Quorn ‘Take a step inthe right direction’ campaign promises to heralda significant shift in consumer carbon awareness(Quorn, n.d.). The campaign features TV
advertising centred around the food’s carbon andclimate impact; certified ‘farm-to-shop’ carbon
footprint information for 30 of the best-selling
products available on the company’s website;and carbon footprint labels citing specific figures
for product life-cycle carbon dioxide equivalent(CO2e) appearing on pack in 2020.
It comes at a time of mounting consumer
and corporate interest in product carbon
footprinting. For example, two-thirds ofconsumers questioned in a April 2019 YouGov
survey supported the idea of a recognisablecarbon label to demonstrate that products havebeen made with a commitment to measuring andreducing their carbon footprint (Carbon Trust,2019). A similar majority (66%) said they would
feel more positive about suppliers that could
demonstrate they were making efforts to reducethe carbon footprint of their products (ibid.).
The survey questioned over 9,000 consumers inseven European and North American countries;
the level of support for carbon footprintlabelling was higher than in comparable surveys
across the previous decade.

8.1

A number of factors conspired to damp
interest in on-pack footprint labelling:
•
•

•

•

Consumers were not deemed sufficiently
interested in a product’s carbon footprint.
Carbon footprinting itself, despite theemergence of agreed technical standards, wasand is complex. It requires boundaries andassumptions to be expertly set, otherwise
the footprints for two similar products
may not be easily comparable; if pragmaticboundaries are not agreed, the exercise ofcarbon footprinting and labelling can becomplex and expensive.
For many retail products, there is limited
pack space on which to carry a carbon label,especially given the prominence of otherinformation, such as nutrition labels onfood packaging.
Without a critical mass of labelled products,
within a specific retail category, for example,
consumers have nothing against which tocompare a product footprint.

Carbon was also increasingly perceived asa somewhat narrow indicator of a brand or
product’s sustainability, and other environmental
factors – such as water stewardship andbiodiversity – came under consideration. This
list of other factors has continued to grow toinclude a company’s work practices and use ofchild labour, for example; the nutritional valueof food products, especially the sugar content
and how heavily processed it is; and issues
around plastic pollution and packaging waste
in general – a growing public concern in the UK
since the broadcasting of Blue Planet II by the
BBC in 2017. Carbon emissions are just one

A shift in interest

In 2007, the Carbon Trust launched the world’s
first carbon footprint label and, around this time,companies such as Tesco and PepsiCo carriedlabels on packs for prominent product lines.14
But interest in product carbon footprint labelling
dipped following its initial success between 2008
and 2011.

14 For more information on the Carbon Trust, wee www.carbontrust.com.

52

aspect of sustainability and there can be complex
relationships and trade-offs between them, given
the carbon impacts of alternative materials andresource reuse.
However, even when the initial surge inlabelling demand started to wane, interest
persisted in carbon footprinting as a businessinformation and decision-making tool and thisinterest remains high. Many organisations haverealised that they can use carbon footprinting asa platform to help solve cost, risk and strategy
questions for their businesses, for example, in
scenario-modelling for their supply chains in aconstrained carbon future.
This has been amplified as supply chains
have come under increasing scrutiny and as
the ambition to reduce environmental impacts
across the full value chain has grown. In someindustries, reducing in-use or end-of-life impact
has become an emerging focus in product design.
Business-to-business communication of carbon
footprinting data has been steadily rising.

8.2

The three concepts, of ‘measuring’ a product’s
carbon footprint, ‘reducing’ a product’s own
carbon footprint over time and being a productwith a ‘lower’ carbon footprint than market
alternatives, can each be used appropriately forlabelling depending on the sector.

8.3

Policy and corporate alignment

Since the Paris Agreement in 2015 and theformation of the Science Based Targets initiative(SBTI) in 2015, carbon’s position as a key concern
for all leading businesses has been growing, and
it is now near the top of the business agenda.
More than 800 companies have committed tosetting stretching and consequential carbon targets
through the SBTI, with impacts on thousands
more organisations through their supply chains.
Now we are seeing policy and corporate
agendas for carbon targets converge again.
National targets for net-zero emissions have been
declared in a number of jurisdictions, including
the UK, and companies are setting equivalenttargets in the corporate context. Although thisis an area where there is yet to be a formallyagreed standard, it seems likely that a corporate
net-zero-by-2050 target will involve a stretching
1.5°C science-based target trajectory across
a company’s entire value chain, coupled withcertified greenhouse gas removals. These removals
will require significant technology developmentsin the intervening years, such as direct air
capture with carbon storage or long-term soil
sequestration with biochar. This may also shine
a light on different qualities of carbon offsets, as
more companies look to define and neutralise theircurrent, future and even historical carbon impacts.
Meanwhile, the Task Force on Climate-related
Financial Disclosures is reflecting the call for an
increasing level of climate risk analysis at board
level. This is raising the importance of carbon interms of both corporate strategy and investment
finance allocation.
The increased focus on climate change has also
helped bring carbon back as the main businessindicator in the field of sustainability: there
are 16 Sustainable Development Goals (SDGs)
beyond climate action – but if climate change
is not adequately addressed, many of the other
SDGs will be so much harder to achieve.

Ongoing label interest

Some companies have continued to carry a label
because, with so few other products doing so,
communicating a footprint reduction (or evensimply the act of footprinting) is itself positive
evidence of environmental responsibility. Plus,
growing public demand for transparency,
sometimes driven by specific events (e.g. thehorsemeat scandal in the UK food industry), has
led to heightened consumer interest in productinformation, including carbon footprints.
Progressive businesses, looking for a
distinctive narrative, have also shown interest in
specialised claims and labels. Some businesses
have reduced selected product footprints andoffset the balance, allowing them to carry acarbon-neutral label (e.g. Danone; see Carbon
Trust, n.d.a); others have sought to compare
selected products with an ‘industry average’to demonstrate they have a ‘lower carbon’
alternative (e.g. Sichuan Qianwei Fengsheng
Paper Industry; see Carbon Trust, n.d.b). The
latter is perhaps the closest carbon labellinghas got to the example of energy performancelabelling of white goods in terms of seeking to
inform consumer choice.

53

8.4

Trends in labelling•

As a result of these shifts in the policy andcorporate landscapes, the Carbon Trust has seenin the past six months a material upsurge incorporate interest in carbon footprint labellingfor both products and packaging. Labels often
reflect emission reductions from innovation,such as through circularity or bio-content in
manufacturing (e.g. Tetra Pak).
We are finding that business-to-business andbusiness-to-consumer communications requiredifferent approaches. Generally, business-tobusiness labels need to carry specific numbers
whereas a simpler message is often requiredfor consumers, showing a direction of travel(reducing CO2) or a positioning (CO2 measured),
for example. In some cases, fuller supporting
detail can be made available on a website,
potentially through scanning a QR code or via a
weblink on packaging.
From a policy perspective, carbon labellingis primarily voluntary, with the potential
for broader sector-based adoption, such as
Environmental Product Declarations in theconstruction industry. Nevertheless, with the
UK’s policy advisor, the Committee on Climate
Change, pointing to the climate benefits of dietsthat move away from carbon-intensive animal
products, there is a potential policy link tocarbon footprint labelling for at least certain
food types.
Other trends we expect to see continue areas follows:••

Technologies are continually being explored,
ranging from image recognition (to give theconsumer the ability to access ‘live footprint’
information for a product via a smartphone)
to artificial intelligence (for rapid category or
product real-time footprint estimation).

The 2019 YouGov survey showed that the
proportion of respondents who do not consider
the carbon footprint of a product when selecting
a purchase had reduced to just over half; 21%
took carbon into account. It remains to be seen
how quickly this growing proportion can become
the majority.

8.5

International labelling schemes

Over the past decade, public bodies in a numberof countries have set up and promoted carbon
labelling schemes.
Thailand’s government-backed carbonreduction labelling scheme had one of thelargest uptakes, including among food products,
whereas schemes in other countries, ranging
from Japan to Switzerland to Brazil, haveexperienced varying degrees of success. Our viewis that scheme uptake levels have been strongly
influenced by the degree of external funding
available. The European Union has funded pilots
around its Product Environmental Footprintconcept, and developments are awaited withinterest.
More broadly, the key underlying technicalstandards in common use (PAS 2050 and
ISO 14067) have relatively few differences –mainly in their approaches to disclosure rather
than in their approaches to calculation. Thismeans that, for companies that really want toprogress in this area, the technical landscapeis something that can be navigated. With
continuous improvement to enhance their value,
footprint certification and labelling have a placein an increasing number of company plans.

Carbon labelling, as it currently exists,
remains a highly technical exercise, which islikely to remain the prerogative of current
and aspiring sustainability leaders.
Some companies continue to explore
multi-criteria labelling, factoring in otherenvironmental and social indicators.

54

References
Carbon Trust (n.d.a) ‘Danone – carbon neutral certification and labelling for Evian’. Carbon Trust webpage(www.carbontrust.com/our-projects/danone-carbon-neutral-certification-and-labelling-for-evian)
Carbon Trust (n.d.b) ‘Lower Carbon Label’. Carbon Trust webpage (www.carbontrust.com/what-we-do/
assurance-and-certification/product-footprint-certification/lower-carbon-label)
Carbon Trust (2019) ‘Research reveals consumer demand for climate change labelling’.
Carbon Trust Press Release, 3 April (www.carbontrust.com/news-and-events/news/
research-reveals-consumer-demand-for-climate-change-labelling)
Quorn (n.d.) ‘Carbon emissions: food for thought’. Quorn webpage (www.quorn.co.uk/carbon-footprint)

55

Chapter 9 Achieving robust, science-based
measurement, reporting and certification of carbon
emissions through artificial intelligence andmachine learning
Martin Smith
The next 10 years will determine whether or
not we, as global citizens, make a successfultransition to sustainable growth and avoid theworst effects of climate change. However, current
indications are that we will fall short of meeting
this challenge and of keeping global warming
below 1.5°C to 2°C, which is considered thethreshold of catastrophe. In spite of all the global
climate advocacy and the legislation and progresson green energy, we have produced more
emissions in the past 20 years than we did in theprevious 20. Clearly, the scale and urgency of thechallenge we now face requires an acceleration ofaction and the pursuit of new tools and avenues
to address the crisis.
Of all the alternatives, the consumer products
and services sector offers the most potential. It isa massive segment, responsible for more than
60% of CO2 emissions worldwide. Moreover,growth in consumption shows little sign ofabating. It is predicted that by 2021 Chinaalone will add $1.8 trillion in new consumption– roughly the size of Germany’s consumer
economy (Walters, 2017). Clearly, concerted
international efforts to curb emissions from thegoods we all buy would make a sizable difference
to global emissions.
While much has been achieved through themeasurement, reporting and certification of
products and services, as yet it hasn’t beenpossible to calculate or estimate ‘full life-cycle
emissions’ at product level. This is owing
primarily to the size of the global sector andthe complexity of manufacturing processes andtheir supply chains. However, recent advances in
artificial intelligence (AI) and machine learning,

coupled with the rise of big data, have given us
an opportunity to tackle carbon pollution fromthis sector on a global scale.

9.1 The AI solution to the carbon
footprint of everything
For the past three years, a collaboration ofscientists, researchers and leaders in the fieldof product life-cycle assessment have beenworking to overcome one of the most importantbarriers to curbing global carbon emissions,
namely: ‘Is it possible to calculate the carbon
emissions of all consumer goods?’ This has
culminated in Imperial College London, theproject’s expert academic partner, successfully
devising an unprecedented method that uses big
data and machine learning to calculate instantly
the carbon emissions of all consumer goods,
taking into account their full life cycle, and torank comparable goods accordingly. A growing
consortium is coming together to develop thiswork into a functioning mechanic. While thistask will not be easy, the initiative’s goal issimple: ‘To give it to the world to use for free’.
Currently, calculating footprints is an
essentially manual, data-heavy and prohibitively
costly process. However, as computer sciencehas evolved to give us software that learns
from experience, adapts to new inputs andcompletes tasks – at extraordinary speed – that
resemble human intelligence, it is now possible toautomate the task of carbon footprinting.
Imperial College London and the Grantham
Institute have concluded that such a system
could, for the first time:

56

•

•
•

•
•

•

•
•

have the potential to calculate or estimate
more accurately than any extant system thecarbon footprint of any consumer product,
and to instantly compare and rank goods
within product ranges
reduce the cost of footprinting, across all
sectors, to a fraction of today’s levels
go far beyond any existing automatedmechanism for calculating carbon footprints
by calculating or estimating the whole life
cycle of consumer products
employ a high level of automation
have the capacity to incorporate other resourceefficiency priorities within the algorithms in the
future (water usage, toxins, etc.)
be able to compare and rank products within
price ranges, allowing consumers to buy theleast ‘carbon-intensive’ goods within theirbudgetcalculate or estimate emissions at any point ina given product’s supply chain
estimate the ‘uncertainty of results’ thatcurrent manual approaches are not capable ofrevealing.

are deployed. These will fill in the missing values
so that the system can ensure the footprints
of different products can be calculated in
the most similar way possible, thus enablingcomparability. The result is a system that will
be able to instantly calculate and compare
footprints of all consumer products with a degreeof accuracy unparalleled by any other means.
Moreover, as the system evolves and incorporates
more data over time, its accuracy will improve.

9.3 Quick and ambitious carbon
reductions
The importance of the successful developmentof an AI system capable of instantly calculating
and ranking the emissions of goods cannot
be understated. This will give governments,
businesses and citizens an unprecedentedly
accurate mechanism for tackling global
greenhouse gas emissions. Incorporated withinapplications such as e-commerce search engines
or procurement platforms, it could be used byanyone whose goal is sustainable purchasing– consumers, procurement professionals andmanufacturers. Currently, 1.8 billion people shop
online (Clement, 2019). Public procurement
spends $9.5 trillion on goods and services every
year (World Bank, 2018). In other words, theimpact of their combined purchasing power toreduce carbon emissions is massive.
The mechanism can provide solutions for
multiple stakeholders.

9.2 A basic overview of the
proposed mechanism
The system relies on building two distinct
databases. The first will combine multiple
existing international databases that holdthousands of records pertaining to the carbon
emissions (carbon footprint) of materials,
processes and manufacturing. The second, which
will be unique to the project, will identify andstore sets of product features, which can beused to identify the most important features interms of carbon impact. The system can thenautomatically calculate a carbon footprint
by incorporating multiple data from the first
database over the chosen features of the productdescribed in the second.
However, Imperial’s design goes much further.
This is because much of the information needed
to describe a product will be unavailable (e.g.
a manufacturer may not have released all the
specifications of a product, or the composite
parts have been sourced from multiple countries).
This is when the machine‑learning algorithms

GovernanceAs leaders raise their ambition on tacklingclimate change, successful implementation ofthis project can give them a new and significant
addition to their portfolio of mitigation
resources. This will enable governments to:
•
•
•

•

57

drive new, sustainable economic growth
support low-carbon development fordeveloping countries
take account of the emissions embodied
in imports and, thus, of total consumption
emissions
impose new tariffs, such as border carbon
adjustment schemes

•

•

•

•
•

support policy initiatives, such as ‘trafficlight’ labelling systems for CO2 and otherpollutants on consumer goods
make significant emissions cuts through more
informed procurement choices; in 2015, theUK’s public procurement market alone wasvalued at over £260 billion – 13.6% of grossdomestic product (Institute for Government,2019), yet making effective emissions cuts fromthis sector has, until now, been unobtainable
provide an answer to the challenge frequently
put to climate-change leaders by concerned
citizens and businesses: ‘Tell us what we can do.’•••consumer search engines, apps and devices
supporting full life-cycle environmental
certification, reporting and labelling
procurement and supply-chain platforms
industry and manufacturing footprinting tools
consumer-facing footprinting, publicengagement and behavioural-change tools.

Consumers
Historically, engaging the public to act onenvironmental issues quickly and en masse has
been very challenging. Barriers, including cost,time and inconvenience, or knowing which
actions are most important or how to take them,mean ‘calls to action’ often go unanswered.
This project can give people the opportunity tohelp make significant cuts to global emissions
by using their combined purchasing power totransform our materials economy, and at no costto themselves.

Business
By making the system’s core algorithms freely
available globally to entrepreneurs and businesses
to incorporate into the products, services andapplications they provide, we can spark a newwave of sustainability-based innovation andtechnology. Furthermore, while many companies
want to be more sustainable in their consumption
and production, there are currently few financial
incentives to encourage them to do so. By being
able to rank goods according to their CO2
impact and by making the results available foruse on consumer-facing applications, such as
online marketplaces, we can give companies real
incentives to improve the sustainability of theirproducts. They will have a new means of increasing
their sales other than price – namely, improving
their products’ carbon emissions and, consequently,
their rankings. Other uses of the system include:

9.4

Conclusion

New technology must lead the way if we are tomeet the Paris Agreement goals. At the vanguardof that effort, AI has the greatest potential tobring about systematic change to ‘business as
usual’ without inflicting economic devastation on
the sector. As it stands, virtually nobody is aware,with any accuracy, of the implications of thepurchasing decisions they make. Recent advancesin AI and machine learning, coupled with the riseof big data, can change that.

References
Clement, J. (2019) ‘E-commerce worldwide – statistics & facts’. Statista, 12 March(www.statista.com/topics/871/online-shopping)
Institute for Government (2019) ‘Procurement after Brexit’. Institute for Government, 22 May(www.instituteforgovernment.org.uk/explainers/public-procurement)
Walters, J., Gao, H., Hui, V., Wang, A., Yang, J. and Lyu, Z. (2017) ‘Five profiles that explain China’s
consumer economy’. Boston Consulting Group, 27 June (www.bcg.com/publications/2017/globalizationaccelerating-growth-consumer-products-five-profiles-that-explain-chinas-consumer-economy.aspx)
World Bank (2018) ‘Why modern, fair and open public procurement systems matter for the private sector
in developing countries’. World Bank, 22 May (www.worldbank.org/en/news/feature/2018/05/16/
why-modern-fair-and-open-public-procurement-systems-matter-for-developing-countries)

58

Part D

Policy perspectives

Chapter 10 Consumption emissions in UK policy
David Joffe
The UK was the first country to legislate forclimate targets, with the Climate Change Act 2008,
which originally set out a commitment to an 80%
reduction in greenhouse gas (GHG) emissions by
2050 from a 1990 base, later updated to netzero GHG emissions by 2050 (CCC, n.d.a). The
Act mandated the creation of the independent
Committee on Climate Change (CCC) to ensurethat emissions targets were evidence-based andindependently assessed.15 It also required thegovernment to set legally binding carbon budgets
that capped GHG emissions over a five-year
period. Five of these have so far been legislated,running up to 2032 (CCC, n.d.b). The sixth(2033–2037) will be recommended in 2020.
The Committee also reports annually on
progress, most recently in July 2019 (CCC, 2019a).
It publishes analytical reports, for example, thereviews of hydrogen, biomass and land use (allNovember 2018), and advice at the government’s
request, for example, the May 2019 report ‘Net
zero: the UK’s contribution to stopping global
warming’ (the ‘Net Zero’ report) (CCC, 2019b).
It is fair to say that, historically, the CCC
has focused principally, as is consistent with its
mandate, on policies to reduce UK territorial
emissions. The Committee has placed a lesser
focus on consumption footprints and on
imported emissions, although we did publish areport on ‘Reducing the UK’s carbon footprint’(CCC, 2013) and continue to consider theseissues within our approach and our reports.
In its 2019 advice on setting the net-zero target(CCC, 2019a), the Committee highlighted that:

efficiency that cut emissions fromproduction overseas as well as in the
UK. However, consumption emissions
will only reach net-zero once the restof the world’s territorial emissions
are also reduced to net-zero. At thispoint the UK can expect to pay slightly
more to cover the costs of low-carbon
production of the goods we import.
Within that advice, the fact that the UK’s
consumption emissions are significantly higher
than its production emissions was one of thejustifications for an earlier recommended datefor UK GHG emissions to reach net-zero on
a production basis (2050) compared with theworld as a whole (2070).
The Net Zero report (CCC, 2019b) also
noted that changes to demand – including theconsumption of still-high-carbon goods, with ahigh share of imports such as industrial products
and food – would mean that reducing the UK’s
production emissions to net-zero would also
reduce emissions in other countries:
The changes required to reduce UK
GHG emissions to net-zero would also
support reductions in emissions outside
the UK, by reducing the UK’s importsof high-carbon goods and services. It
will be important to monitor estimatesof UK consumption emissions closelyand ensure that, as a minimum, the gap
between consumption and territorial
emissions does not widen. Should it doso this may require further UK action
to reduce emissions. Overall, it is likelythat the reduction in UK territorial
emissions in our scenarios would result

The scenarios [to reach net-zero]
involve additional reductions in
the UK’s consumption emissions as
they include measures like resource

15 www.theccc.org.uk.

60

in a larger reduction in global emissions,particularly if policy is developed withlife-cycle emissions in mind.

such as using steel and cement-based
products more efficiently and eatinga diet with a lower proportion of redmeat and dairy products.

The Committee’s 2019 progress report(CCC, 2019a) has a section on consumptionbased accounting, referencing data produced
for the Department of the Environment, Foodand Rural Affairs.16 It notes, among otherthings, that:

Within the UK, and in respect of territorial
emissions, regulation and product standards
have played an important part in driving
change. The 2019 Progress Report discusses
the impact of regulation in such areas as homeheating, renewable energy, vehicle emissions andbuilding regulations.
The question then arises as to whether
regulation, and particularly the measurement,
reporting and certification of carbon content, hasa key role in reducing imported emissions. This isa question that has become more pertinent
with the UK’s exit from the European Union.
The country will, for example, be responsible
for producing its own nationally determined
contribution for the next round of climate
pledges. Of course, the UK was due to host the
postponed climate talks in Glasgow in 2020.
The CCC has consistently constructed its
scenarios to assume that production remains
in the UK and is decarbonised, and to ensurethat all measures included lead to genuine
emission reductions from a global as well as a
UK perspective. It has also consistently pushed
for mechanisms to ensure UK producers are notput at a competitive disadvantage as a result ofpolicies to reduce emissions.
Setting UK emission reduction targets on
a production basis remains appropriate for anumber of reasons:Whilst the UK-produced part of ourconsumption emissions has fallen (-156
MtCO2e) since 1997, the imported parthas risen (+79 MtCO2e) particularly inthe decade prior to 2007.
The historical profile of consumption
emissions is driven by imported
emissions from non-EU countries: asof 2016 they are responsible for 79%
of total UK imported emissions. Thisis despite only 45% of UK imports
originating from these countries,
implying that more carbon-intensive
products tend to be imported fromoutside the EU.
If the data are disaggregated byproduct and sector, then emissions
arising during the production ofagricultural goods, including food,have the largest contribution (27MtCO2e) to total imported emissions,followed by emissions released during
the generation of electricity to makeimported goods (25 MtCO2e), and thenemissions arising in the constructionindustry (21 MtCO2e in 2016).
There are certain goods which the
UK imports in substantial volumes andwhose production or use is currently
more difficult to decarbonise. Suchgoods include fossil fuels, industrial
products (steel and cement) and foods
such as red meat and dairy … In our
Net Zero report we identified a numberof measures that could be taken to
reduce consumption of these goods,•••

This measure most closely maps to the levers
under the UK’s control.
It is the basis of international emissions
accounting as set by the UNFCCC.
It is simple and transparent, which isimportant in understanding where progress in
reducing emissions is being made.

Some have supported supplementing thetargets on a production basis with targets for
consumption emissions. The House of Commons

16 See contribution by John Barrett in this volume.

61

Science and Technology Committee concluded inJuly 2019 that:is to reduce its territorial emissions on the path tonet-zero emissions by 2050. The policy levers toachieve this are in UK hands.
Second, the issue of imported emissions clearlymatters, given their substantial share of the UK
consumption emissions footprint. As the UK
seeks to end its contribution to rising global
temperatures, it will be important to bear downon these emissions as well.
Third, consumption changes have a part to play.
For example, the Committee has included a 20%
cut in the consumption of red meat and dairy
in its net-zero scenario for 2050 (CCC, 2019b).
Broadly speaking, the greater the role of thedemand side in achieving net-zero emissions, thegreater the reduction will be in its consumption
emissions footprint.
Fourth, to the extent that costs ofdecarbonisation could make UK production
uncompetitive with imports that face lesser
pressure to reduce emissions, a mechanism to limit
the emissions intensity will also have the benefit ofproviding a level playing field to UK production.
Consumption emissions are rightly a key areaof stakeholder interest. The CCC will consider
this to the extent we can during another busy year
in which we are recommending statutory targets
for production emissions, and it will remain a key
issue going forward.

Progress against the UK’s emissions
reductions targets must not be achievedby ‘offshoring’ UK industry anddisplacing the UK’s territorial emissions
to be counted instead in its consumption
emissions. The Government should
do more to meet its commitment toincrease the prominence of consumption
emissions statistics in its publications.
The Government … should consider the
impact of all policies on consumption
emissions as well as territorial emissions,and ensure that progress is not achievedby ‘offshoring’ emissions to othercountries to the detriment of the global
environment. We do not accept that
territorial emissions should be the solebasis for international negotiations.
The United Kingdom’s decarbonisation
targets should also include consumption
emissions (STC, 2019: para. 16).
In the coming years, there is a need for the UK toconsider the following for a carbon-neutral 2050.
First, the greatest contribution the UK can maketo reducing its consumption emissions footprint

References
CCC – Committee on Climate Change (n.d.a) ‘UK regulations: the Climate Change Act’. Committeeon Climate Change webpage (www.theccc.org.uk/tackling-climate-change/the-legal-landscape/the-climate-change-act)
CCC (n.d.b) ‘Carbon budgets: how we monitor emissions targets’. Committee on Climate Change webpage(www.theccc.org.uk/tackling-climate-change/reducing-carbon-emissions/carbon-budgets-and-targets)
CCC (2013) Reducing the UK’s carbon footprint and managing competitiveness risks. London: Committeeon Climate Change (www.theccc.org.uk/publication/carbon-footprint-and-competitiveness)
CCC (2019a) Reducing UK emissions: 2019 progress report to Parliament. London: Committee on Climate
Change (www.theccc.org.uk/publication/reducing-uk-emissions-2019-progress-report-to-parliament)
CCC (2019b) Net zero: the UK’s contribution to stopping global warming. London: Committee on Climate
Change (www.theccc.org.uk/publication/net-zero-the-uks-contribution-to-stopping-global-warming)
STC – Science and Technology Committee (2019) Clean growth: technologies for meeting the UK’semissions reduction targets – Twentieth Report of Session 2017–19. London: House of Commons(https://publications.parliament.uk/pa/cm201719/cmselect/cmsctech/1454/1454.pdf)

62

Chapter 11 Managing government regulation for
carbon reporting and action
Gary Shanahan
The UK experience provides a case study of
how regulation can be used to drive bothreporting and action on greenhouse gas (GHG)
emissions and energy reduction, especially by theprivate sector. At present, this is mandatory for
Scope 1 and 2 emissions and voluntary, thoughstrongly encouraged, for Scope 3 emissions.
The last of these, in particular, is relevant todeveloping‑country participants in supply chains.
Since 1 October 2013, the Companies Act
2006 (Strategic Report and Directors’ Report)
Regulations 2013 have required all UK‑quoted
companies to report on their global GHG
emissions as part of their annual directors’ report(UK Government, 2013a). From 1 April 2019,
following the implementation of Streamlined
Energy and Carbon Reporting (SECR) throughthe Companies (Directors’ Report) and Limited
Liability Partnerships (Energy and Carbon
Report) Regulations 2018, all large UK
businesses must disclose in their annual directors’
report the UK annual energy use and GHG
emissions from gas, electricity and transport(including business travel) for which they are
responsible and the key energy-efficiency actions
taken over the year (UK Government, 2018).
The 2018 Regulations also extend the obligations
on quoted UK companies to disclosure of energy
consumption and a report of the key energyefficiency actions they have taken in this regard(ibid). The government encourages all othercompanies to report similarly, although thisremains voluntary.
The government also publishes conversion
factors for GHG reporting on an annual
basis, which are suitable for use by UK-basedorganisations of all sizes and for internationalorganisations reporting on UK operations (UKGovernment, 2013b).
The government encourages organisations
to submit their disclosures electronically using
the SECR taxonomy published by the Financial
Reporting Council (FRC) in December 2019
(FRC, 2019; UKAP, 2019). The taxonomy is anaddition to the FRC taxonomies suite. While it is
not mandatory to tag SECR data, the government
is keen to enable companies that file their annual
reports digitally to be able to report their SECR
data in the same way, to ensure the same level oftransparency is available to external users.
Environmental Reporting Guidelines
provide detailed guidance on both mandatory
and voluntary reporting, covering a range ofenvironmental impacts as well as GHGs (UKGovernment, 2019). In addition to technicalinformation on how to set the boundaries of anorganisation and how to manage the mechanicsof reporting, the Guidelines describe the use of
key performance indicators (KPIs) to set targets
and monitor improvement. These can include
quantitative targets based on outcomes, such as the
reduction of emissions or incidents; quantitative or
qualitative objectives in terms of inputs, such as thecompletion of management‑system initiatives by aplanned date; annual progress measured against acommitment to continuous improvement; or casestudies providing evidence of programmes planned
across a specified period.
The Guidelines build on numerous standardsetting, reporting and verification frameworks(Box 11.1).
Box 11.2 summarises the core principles ofenvironmental reporting. Note especially theemphasis on comparability and transparency.

63

Box 11.1

Standard-setting, reporting and verification frameworks

Three types of formal environmental management systems are recognised in the UK: ISO 14001(BSI, 2015); the European Union (EU) Eco-Management and Audit Scheme (European
Commission, n.d.); and BS 8555 (BSI, 2016).
The Climate Disclosure Standards Board’si Climate Change Reporting Framework sets out
an approach to boundary-setting that seeks to align with the boundaries used for financial
reporting. Although it has been written for reporting climate impacts, it can be used forreporting other impacts.
There are two internationally recognised standards for the verification of sustainability reports,
ideally used together, as they complement one another. The first is the International Audit andAssurance Standards Board’s ISAE3000 ‘Assurance engagements other than audits or reviews ofhistorical financial information’. The second is AA1000AS13 from AccountAbility (the Instituteof Social and Ethical AccountAbility). AA1000AS is a free, open-source set of principles that
addresses sustainability and corporate social responsibility aspects of reports. ISO 14064-3 andISAE 3410 are widely used standards for the verification of GHG emissions reports.
The Guidelines also refer to the GHG Protocol, especially the Corporate Accounting Standard(WBCSD/WRI, 2015).
Source: UK Government (2019).
i

www.cdsb.net.

Box 11.2

Principles for accounting for and reporting environmental impacts

The following principles should be applied when collecting and reporting on environmental impacts:
Relevant. Ensure the data collected and reported appropriately reflect the environmental impactsof your organisation and serve the decision-making needs of users – both internal and external toyour organisation.
Quantitative. KPIs need to be measurable.
Accurate. Seek to reduce uncertainties in your reported figures where practical. Achieve sufficientaccuracy to enable users to make decisions with reasonable confidence as to the integrity of thereported information.
Complete. Quantify and report on all sources of environmental impact within the reporting
boundary you have defined. Disclose and justify any specific exclusions.
Consistent. Use consistent methodologies to allow for meaningful comparisons of environmental
impact over time.
Comparable. Companies should report data using accepted KPIs rather than inventing their own
versions of potentially standard indicators.
Transparent. This is essential to producing a credible report. Address all relevant issues in a factualand coherent manner, keeping a record of all assumptions, calculations and methodologies used.
Source: UK Government (2019).

The guidance on Scope 2 and Scope 3 follows
these principles.
For Scope 2 emissions, while explicit reportingon renewable energy and associated emissions is

not a mandatory requirement under the SECR
legislation, organisations are encouraged touse ‘dual reporting’ if they wish to reflect theirconsumption of renewable energy. Organisations

64

are encouraged to use location-based grid
average emission factors to reflect their physicalconsumption of electricity and, where they wish
to reflect their purchases of renewable energy, they
may additionally report a ‘market-based’ figure.
In doing so, organisations are also recommended
to seek to specify whether the renewable energy
is additional, subsidised and supplied directly,
including through on-site generation or througha third party. A similar ‘dual reporting’ approachshould be taken for biogas and biomethane(including ‘green gas’).
The guidance on Scope 3 reporting is basedon the GHG Protocol Corporate Accounting andReporting Standard (the ‘Corporate Standard’) andso corresponds with many widely used national
and international voluntary schemes such as ISO
14064-1, the Carbon Disclosure Project and the
Climate Disclosure Standards Board’s Climate
Change Reporting Framework. This guidanceis also based on a second standard from the
GHG Protocol team: the Corporate Value Chain(Scope 3) Standard (WBCSD/WRI, 2011). This isreferred to as the ‘GHG Protocol Scope 3’ standard.
An especially useful section of the GHG protocol
describes how to estimate Scope 3 emissions
using financial information. The Guidelines note,however, that financial information should be used
only to gain an overview of emissions in a supply
chain in cases where the only data available are
how much money has been spent on a particularBox 11.3

item. It should not be used in cases where thekilowatt-hours (kWh) of electricity generated
from a particular fuel type/distance travelled inparticular types of transport is known, or whereenvironmental information for compliance underschemes such as the EU Emissions Trading System
is provided; using these data will give moreaccurate figures.
Overall action in this area is summarised inBox 11.3, emphasising engagement with suppliers
and procurement decision-making.
It is too early to assess fully the impact of
the new SECR framework, as the first company
annual reports including the required SECR
disclosures (for businesses with reporting yearsof 1 April–31 March) are not expected to be
filed before the second quarter of 2020. What isclear is that there is already increasing interestin the new requirements, which have expanded
the number of organisations required to report
10-fold, from around 1,200 quoted UK companies
to around 12,000 large or quoted UK businesses.
It is also clear that there is increasing interest fromstakeholders in the consistency and transparencyof disclosures and from the financial sector inassessing the climate-related impacts and risks
of investments.
For the future, the UK government has legislated
to set a net-zero obligation by 2050, underpinned
by a trajectory of carbon budgets alreadyestablished in law to 2032. The government has

A process to determine the impacts upstream in the supply chain• Identify companies from which goods and services are purchased.
• Categorise your expenditure/emissions into sector groupings.
• Assess the typical environmental impacts and risks for each sector.
• Determine where to focus your efforts. Clearly, some suppliers, even in the same sector, havemore significant environmental impacts than others. It is important to prioritise your suppliersin a way that takes into account both the amount of money you spend with them and relativeenvironmental impact.
• Engage with your suppliers. Encourage your suppliers to report on the key impacts.
• Influence purchasing decisions with the information gathered. Improvements in yoursuppliers’ environmental performance will be more likely if they know that this is a factor inyour organisation’s buying decisions.
• Consider post-contract supplier development to focus on engaging suppliers in continuous
improvement in environmental management.
Source: UK Government (2019).

65

also set an ambition for businesses to improve theirefficiency by at least 20% by 2030, helping savecompanies an estimated £6 billion in energy costs
annually in 2030 and contributing up to 22 million
tonnes of carbon dioxide equivalent (MtCO2e)of non-traded carbon savings towards the fifthcarbon budget.
The government has also published a Green
Finance Strategy that recognises the role of thefinancial sector in delivering strong, sustainable

and balanced growth alongside global anddomestic climate and environmental objectives.
The Strategy sets out the proposals for putting
green finance at the heart of delivering the UK’s
Clean Growth Strategy, 25-Year Environment
Plan and Industrial Strategy. In the Strategy, thegovernment also commits to review progressin 2020 on greening the UK’s financial systemand on Task Force on Climate-related Financial
Disclosures implementation.

References
BSI – British Standards Institution (2015) ISO 14001:2015 – environmental management. London: BSI(www.bsigroup.com/en-GB/iso-14001-environmental-management)
BSI (2016) BS 8555:2016 – environmental management systems. London: BSI (https://shop.bsigroup.
com/ProductDetail?pid=000000000030339300)
European Commission (n.d.) ‘Policy: EMAS Regulation’. European Commission webpage (https://
ec.europa.eu/environment/emas/emas_publications/policy_en.htm)
FRC – Financial Reporting Council (2019) ‘The Streamlined Energy & Carbon Reporting(SECR) Taxonomy’. FRC webpage, 17 December (www.frc.org.uk/news/december-2019-(1)/the-streamlined-energy-carbon-reporting-(secr)-tax)
UK Government (2013a) The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations
2013 (www.legislation.gov.uk/ukdsi/2013/9780111540169/contents)
UK Government (2013b) ‘Government emission conversion factors for greenhouse gas company
reporting’. gov.uk webpage, updated 4 June 2019 (https://www.gov.uk/government/collections/
government-conversion-factors-for-company-reporting)
UK Government (2018) The Companies (Directors’ Report) and Limited Liability Partnerships (Energy
and Carbon Report) Regulations 2018 (www.legislation.gov.uk/uksi/2018/1155/contents/made)
UK Government (2019) Environmental reporting guidelines: including streamlined energy and carbon
reporting guidance (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/
attachment_data/file/850130/Env-reporting-guidance_inc_SECR_31March.pdf)
UKAP – UK Accounting Plus (2019) ‘FRC publishes a streamlined energy & carbon reporting(SECR) taxonomy’. UKAP webpage, 19 December (www.iasplus.com/en-gb/news/2019/12/
the-streamlined-energy-carbon-reporting-secr-taxonomy)
WBCSD and WRI – World Business Council for Sustainable Development and World Resources Institute(2011) GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard. Geneva,
Switzerland: WBCSD; Washington DC: WRI (https://ghgprotocol.org/standards/scope-3-standard)
WBCSD and WRI (2015) GHG Protocol Corporate Accounting and Reporting Standard –revised edition. Geneva, Switzerland: WBCSD; Washington DC: WRI (https://ghgprotocol.org/
corporate-standard)

66

Chapter 12 A new accountability framework to
prepare for a new climate regime
Aarti Krishnan and Simon Maxwell17
12.1 ‘Trust’ is central to attaining
climate resilience …

at the national level through a measurement,
reporting and verification (MRV) framework(UNFCCC, n.d.a).
In 2015, the Paris Agreement establishedan enhanced transparency framework, thecore arrangements of which are presented in
Figure 12.1. In sum, the framework makes it
possible to track the progress of implementationand the achievement of nationally determined
contributions, through reporting, technical expert
reviews and multilateral capacity-building support.
However, two critical aspects have been to someextent overlooked in the new MRV framework.
First, it focuses more on the geographical – inother words, national – ‘scope’ of emissions,as opposed to ‘traded’ or consumption-based
emissions. Second, although it articulates the need
to be transparent, accountability also needs to
be included within the framework, so that, alongwith visibility, an individual or organisation has
a duty to answer in some way for how they haveconducted their affairs (Hood, 2010).
Thus, the current framework, which hinges
on territorial scope, suggests that organisationsare ‘accountable’ only for emissions taking
place within a geographical boundary, negating
the possible accountability required when
considering ‘consumption and traded emissions’.
Accountability needs to be considered throughthe entire value chain, and there needs to begreater recognition of the merit of climate action
undertaken outside the geographical boundary ofpoint source reduction.

There has been a gradual erosion of trust in
global and national institutions in relation toachieving climate-neutral growth. Power (1997)
coined the term ‘audit society’ as a response to a
general loss of trust in institutions such as the law
and the legal system, government, multinational
corporations and the media. The ‘audit society’describes a world in which central institutions
submit to more extensive reporting obligations.
This implies the need to develop overarching legal
and social mechanisms that regulate internal andexternal organisational relationships.
Global ‘watchdogs’ such as the United Nations
Framework Convention on Climate Change(UNFCCC) conform to this model, setting
universal goals, providing space for negotiation,pressuring the powerful and elite to support
the less developed and providing a scientificbasis for measuring climate progress. The
UNFCCC entered into force on 21 March 1994.
Today, it has near-universal membership, with
ratification by 197 countries, known as Parties
to the Convention. The UNFCCC provides
the foundation for intergovernmental action
to combat climate change and its impacts onhumanity and ecosystems. Under it, all Parties
are obliged to increase transparency18 and tocommunicate to the Conference of the Parties(COP) information relevant to adaption andmitigation of greenhouse gas (GHG) emissions

17 This note draws on material from and informal conversations with staff members of the United Nations Framework
Convention on Climate Change (UNFCCC).
18 Measures to significantly enhance transparency of action and support under the Convention were adopted as part of the Bali
Action Plan at the 13th Conference of the Parties (COP 13) and elaborated in decisions adopted at subsequent COP sessions.

67

Figure 12.1

Paris Agreement transparency framework

Reporting

All parties (shall )• National greenhouse gas (GHG) inventory report{Article 13. 7(a)}• Progress made in implementing and achieving
nationally determined contribution (NDC){Article 13. 7(b)}All parties (should, as appropriate)

Technical
expert review

Multilateralfacilitative
consideration

Developed country parties (shall ) and otherparties that provided support (should )• Financial, technology transfer and capacitybuilding support provided to developing country
Parties under Articles 9, 10 and 11 {Article 13. 9}
Developing country parties (should )• Climate change impacts and adaptation{Article 13.8}• Financial, technology transfer and capacitybuilding support needed and received under
Articles 9, 10 and 11 {Article 13. 10}

All parties (shall )Developed country parties (shall )• Undergo technical expert review of information
submitted under Articles 13.7 {Article 13.11}• Undergo technical expert review of information
submitted under Articles 13.9 {Article 13.11}

All parties (shall )• Multilateral facilitative consideration of progress with respect to efforts under Article 9, and its respective
consideration implementation and achievement of its NDCs {Article 13.11}

Notes: The transparency framework shall provide flexibility in the implementation of the provisions of this Article to thosedeveloping country parties that need it in the light of their capacities {Article 13.2); The transparency framework shallrecognize the special circumstances of the least developed countries and small island developing States {Article 13.3}.
Source: UNFCCC (n.d.a).

12.2 Principles for a new
accountability framework

value-chain approach. For instance, accountingof consumption-based emissions can include
sectors such as aviation and shipping.

A new accountability framework consisting offour key elements is needed. These elements are
as follows.

Emissions related to technology transfer
These include climate technologies that help
reduce GHGs, such as renewable energies likewind energy, solar power and hydropower. To
adapt to the adverse effects of climate change,
we use climate technologies, such as droughtresistant crops, early warning systems and sea
walls. There are also ‘soft’ climate technologies,
like energy-efficient practices or training forusing equipment (UNFCCC, n.d.b).
It is important to create an accountability
framework that puts the onus on developed
countries exporting the technology, not to export
fossil fuel-based technologies to developing
countries. The UNFCCC has a Technology
Mechanism (accelerating and enhancing
climate technology development and transfer),
which works through a Technology Executive
Committee and the Climate Technology
Centre and Network (UNFCCC, n.d.c). These

Territorial or geographical emissions‘These include emissions and removals taking place
within national (including administered) territories
and offshore areas over which the country has
jurisdiction’ (IPCC, 1996: 5). However, GHG
emissions that arise in international territories,
including those from international aviation andshipping, are reported only as a memo and notallocated to individual countries. Such a system canbe called a ‘territorial-based emissions inventory’(Barrett et al., 2013).

Consumption and traded emissions
These are especially important in the context
of cities, which are both production andconsumption centres. Consumption and tradedemissions are harder to measure and require a

68

12.3

provide technical assistance to developing
countries, create access to knowledge on
climate technologies and foster collaboration
among climate technology stakeholders. They
also support technology needs assessment,
help build national capacity and facilitate
the implementation of prioritised climate
technologies. However, there is still a need tonuance the ‘type of technology’ that crosses
borders to ensure it supports climate-change
mitigation. Developed countries that intend to
pursue a net-zero target should be accountable
if they export technologies that do not engenderachieving the net-zero agenda worldwide.

What the UNFCCC can do

The UNFCCC primarily supports parties
during negotiation and facilitates dialogue
between parties so they find convergence in theirdeliberations, while also providing technical andmeasurement expertise. The UNFCCC Secretariat
has developed a distinct competence in each of
the four types of accountability. Furthermore, it
has significant expertise in supporting non-party
stakeholders, such as subnational governments,
non-governmental organisations and corporates,
so they can align activities with long-term goals
and measure their impacts. The UNFCCC actsby harmonising and cooperating with World
Trade Organization plurilateral rules with the
UNFCCC multilateral agreements.
Accountability is intrinsically linked tothe ‘intention’ and the moral compass of
stakeholders. A new accountability framework
distributes onus onto the actors that are thecentres of power and enables the debate toengage more broadly with a gamut of issues
beyond territory, to include consumption and thewider ecosystem of finance and technology.

Climate finance accountability
Countries need to be ‘accountable’ when, forinstance, investing in the upstream part of a
fossil-fuel value chain, especially if there is a will
to decarbonise. This recognises the influenceand power of multinational corporations anddeveloped-country governments, which can leadto more or less in terms of emissions, dependingon the type of technology transferred and thelevel of investment.

References
Barrett, J.R., Peters, G., Wiedmann, T., Scott, K., Lenzen, M., Roelich, K. and Le Quéré, C. (2013)‘Consumption-based GHG emission accounting: a UK case study’ Climate Policy 13(4): 451–470
Hood, C. (2010) ‘Accountability and transparency: Siamese twins, matching parts, awkward couple?’
West European Politics 33(5): 989–1009
IPCC – Intergovernmental Panel on Climate Change (1996) ‘Guidelines for national greenhouse gas
inventories: reference manual’. Cambridge, UK: Cambridge University Press
Power, M. (1997) The audit society. Oxford, UK: Oxford University Press
UNFCCC – United Nations Framework Convention on Climate Change (n.d.a) ‘What is transparency andreporting?’. UNFCCC webpage (https://unfccc.int/process-and-meetings/transparency-and-reporting/the-big-picture/what-is-transparency-and-reporting)
UNFCCC (n.d.b) ‘What is technology development and transfer?’. UNFCCC webpage (https://unfccc.int/
topics/climate-technology/the-big-picture/what-is-technology-development-and-transfer)
UNFCCC (n.d.c) ‘Technology mechanism’. UNFCCC TT Clear webpage (https://unfccc.int/ttclear/
support/technology-mechanism.html)

69

Chapter 13

Trade and climate: friends or foes?

Jodie Keane and Dirk Willem te Velde
There is an environmental crisis. And only atransformed economic system can provide apattern of economic growth that is consistent
with environmental sustainability. Policy-makers
are also reconsidering the role of trade policyin this context. The creation of a level playing
field with third countries through border carbon
adjustments (BCAs) aims to incentivise exporting
countries to adjust their carbon footprint to thesame level of the importing country. However,restricting trade will also lead to weaker
incentives for innovation and energy efficiency
and the potential for trade diversion.

Scheme (ETS), are not put at a competitive
disadvantage to other traders – because they
are taking actions to mitigate climate change,such as reducing emissions through improving
technology or purchasing carbon credits – theEuropean Commission is ready to apply BCAs if
required. This situation may arise in such cases
where carbon-intensive products from sectors
such as steelworks and the production of iron,aluminium, metals, cement, lime, glass, ceramics,
pulp and paper19 are imported from countries
without comparable emissions reductions schemes
to the EU; for example, if producers within the EU
shift production to countries without emissions
reductions schemes (known as carbon leakage).
The imposition of a BCA (a tariff applied toimports based on carbon content) is intended
to ensure the cost of imported goods increases
relative to that of domestic goods and, therefore,
to level the playing field between EU producers,which must reduce the emissions associated withproduction, and those exporters that may not be
doing so. Some of the main concerns regarding
the imposition of BCAs relate to equity andthe principle of Common but DifferentiatedResponsibility within the United Nations
Framework Convention on Climate Change.
Under this principle, the burden of emissions
reductions must fall primarily on developed
economies. However, the EU’s BCA will beapplied regardless of country classification inorder to ensure European producers are not put
at a competitive disadvantage.
While the full details of the proposed BCAs
remain to be worked out, steel, cement andaluminium are the sectors most likely to beaffected. Developing-country exporters of theseproducts, such as Brazil, China, Russia andSouth Africa, will be required to purchase carbon

13.1 Border carbon adjustments
and the emissions trading system
At the end of 2019, the European Commission
sent its clearest intentions to back up its Green
Deal with punitive BCA measures (European
Commission, 2019); these will be imposed on
trading partners that are deemed not to be taking
appropriate actions to mitigate climate change.
Because of the continued challenges regarding
the inclusion of land use change within carbon
accounting measures, the EU’s BCAs will target
manufacturing exporters. This essay explores
which traders are likely to be hit and how
they might adapt; how such measures could bechallenged within the World Trade Organization(WTO); and whether BCAs are not actuallycounterproductive.
Since the adoption of the Paris Agreement in2015, policy-makers have been charged withtaking all necessary action now to address
climate change (UNFCCC, 2015). To support
the EU’s ambitious Green Deal and to ensurethat European producers, especially thoseparticipating in the EU’s Emissions Trading

19 The EU’s ETS has expanded in its sectoral coverage over time (European Commission, n.d.).

70

allowances or face a carbon-related tariff and,
therefore, to de facto participate in the EU’s ETS.
The extent to which a BCA will affect consumer
demand will depend on the price elasticity
of demand and the nature of value-chain
governance. For example, there is evidence that,for Organisation for Economic Co-operation
and Development countries, the cost increase
associated with a $100 per ton carbon tax is
usually fairly small, within the range of around
1%–5% of production value (Ellis et al., 2010).

number of allowances available to reduce GHG
emissions. While theoretical discussions usually
portray carbon taxes and emissions trading
schemes as alternatives, in practice, a jurisdiction
often implements both instruments to address
emissions by different sources (Haites, 2018).
The EU’s reform of its ETS will include thescrapping of free allowances to some sectors(e.g. airlines) while others will continue tobenefit, and will expand the mechanism’s sectoral
coverage (e.g. to include maritime transport).20
Countries seeking to defend their tradeinterests from BCAs may point out that they dohave equivalent measures in place; these could
include an ETS. Indeed, in the most recent decade,the European Commission has been instrumental
in establishing emissions trading schemes withina number of developing countries (e.g. China)(European Commission, 2018). Alignmenthas been achieved between the ETS of the EU
and Switzerland, and equivalence secured. But
the EU’s tougher stance is likely to heat up an
already tense global trading landscape, given
ongoing disputes between the EU and the US
and in view of the current US administration’s
intention to withdraw from the Paris Agreementby 4 November 2020 (a day after the presidential
election – although individual states such as
California and Quebec will continue their own
carbon emissions-reductions schemes).
The EU’s actions, should they come tofruition, may present particular challenges at
the multilateral level and within the WTO –though, naturally, the Commission seeks to
avoid these. The global trading system relies
on not only trust and goodwill among trading
partners but also two founding principles:most-favoured nation and non-discrimination.
Equal treatment is required of like products andany discrimination between foreign and domestic
producers contravenes these principles. However,a degree of constructive ambiguity remains, since
Article 20 on General Exemptions of the General
Agreement on Tariffs and Trade provides somespace for governments to address environmental
concerns, as long as certain conditions are met.
These conditions will invariably increase the13.2 Practical challenges in theimplementation of BCAs
There are practical challenges regarding theimplementation of BCAs. For example, trade
data and tariffs relate to product categories. If acertain product is imported, it will face a certain
tariff. However, different companies may trade thesame type of product but produce it under very
different conditions using different technologies.
The evidence suggests there is considerable
heterogeneity among firms within a given sector
with respect to energy efficiency (see, e.g., UNIDO,2019). The taxes will work properly only if each
import batch has associated information on
carbon intensity. Currently, these measures do notexist at scale. However, it may be possible to rollout blockchain and digital pilots that do this well.
A really important task is to promote convergenceof energy efficiency across firms.
While a carbon tax within the EU acrossproducers may be preferable to use of a
BCA – which is a ‘unilaterally decided tradebarrier’ (Horn and Sapir, 2019) – this is likely
to be rejected by European governments,
which have not (yet) conferred these decisionmaking powers on the Commission. Over time,
however, it is likely that some form of carbon
tax will be required as reform of the current
ETS proceeds (the existing mechanism dates
back to the Kyoto Protocol). The EU’s ETS
remains the world’s largest mechanism of its
type, accounting for over three-quarters ofinternational carbon trading. It operates as a
cap-and-trade system, with a limit on the total

20 See European Commission (n.d.) and European Commission (2019).

7113.3 Would border carbon
adjustments be counterproductive?

complexity of a BCA and include: (1) carefulconsideration of how importing countries’
domestic policy measures address climate change;and (2) enabling individual foreign producers toprove their energy efficiency (Crosby, 2008).
One area that deserves far greater attention is
the pricing of carbon and its measurement within
production (and consumption). Ultimately, it is
the price of carbon that will determine the valueof the BCA; the EU can be seen to be clearly
establishing itself as the rule-maker within thissphere and remains unchallenged at the current
time. However, carbon markets themselves areunlikely to cover many of the costs that will
enable countries to engage in carbon trading,including financial and legal institutions andessential MRV systems at the national level(Keane et al., 2010). It is the latter of thesethat ultimately underpin all emissions trading
schemes. Given the complexity of CO2 valuation
across all products and services, future tradedisputes are likely to be related to the price ofcarbon itself.

Finally, but perhaps most importantly, we should
also consider whether a BCA would not in fact
be counterproductive. Currently, it is productionthat produces by far the most emissions; a small
share comes from transport (ships, trucks, etc.),
although this can be greened as well. This means
that, ultimately, the most important thing is toincrease production efficiencies. Trade barriers bycountry A on imports from country B could simply
lead to the diversion of trade from country A tocountry C. Further, trade and openness are key toinnovation in general, and innovation is correlatedwith energy efficiency (Cantore et al., 2016).
A major concern is that limiting trade willlead to worse conditions for innovation and for
improving production efficiencies. And mostgains can be made by addressing construction
and transport sectors at home. Therefore, weneed to consider the behavioural incentives togreen production that come from creating a levelplaying field with third countries, as opposed tothose that weaken incentives for innovation andthat generate the potential for trade diversion.
Trade can be a friend to the environment; perhaps
a well-thought-out pilot that provides information
on carbon footprinting through blockchain, scaled
up when it works, could make it also less of a foe.

References
Cantore, N., Calì, M. and te Velde, D.W. (2016) ‘Does energy efficiency improve technological change
and economic growth in developing countries’ Energy Policy 92(C): 279–285
Crosby, A. (2008) ‘Border carbon adjustment’. Prepared for Seminar on Trade and Climate Change,
Copenhagen, 18–20 June
Ellis, K., Cantore, N., Keane, J., Peskett, L., Brown, D. and te Velde, D.W. (2010) Growth in a carbon
constrained global economy. ODI Research Report. London: Overseas Development InstituteEuropean Commission (n.d.) ‘EU Emissions Trading System (EU ETS)’. European Commission webpage(https://ec.europa.eu/clima/policies/ets_en)
European Commission (2018) ‘Emissions trading: European Commission and China hold first policy
dialogue’. European Commission Climate Action News, 26 April (https://ec.europa.eu/clima/news/
emissions-trading-european-commission-and-china-hold-first-policy-dialogue_en)
European Commission (2019) The European Green Deal. Communication from the Commission to theEuropean Parliament, the European Council, the Council, the European Economic and Social Committee
and the Committee of the Regions. COM(2019) 640 final. Brussels: European Commission(https://ec.europa.eu/info/sites/info/files/european-green-deal-communication_en.pdf)

72Haites, E. (2018) ‘Carbon taxes and greenhouse gas emissions trading systems: what have we learned?’
Climate Policy 18: 955–966
Keane, J., MacGregor, J., Page, S., Peskett, L. and Thorstensen, V. (2010) Development, trade and carbon
reduction: designing coexistence to promote development. ODI Working Paper. London: Overseas
Development InstituteHorn, H. and Sapir, A. (2019) ‘Border carbon tariffs: giving up on trade to save the climate’. Bruegel
Institute, 29 August (https://bruegel.org/2019/08/border-carbon-tariffs-giving-up-on-trade-to-save-theclimate)
UNFCCC – United Nations Framework Convention on Climate Change (2015) Adoption of the Paris
Agreement. UN Doc. FCCC/CP/2015/L.9/Rev.1. Bonn, Germany: UNFCCC (https://unfccc.int/
resource/docs/2015/cop21/eng/l09r01.pdf)
UNIDO – United Nations Industrial Development Organization (2019) Industrial Development Report2020. Vienna: UNIDO

73

Chapter 14 Development policy implications ofcarbon certification and border carbon adjustments
Jonathan Beynon
14.1

Introduction and context

the UK pledged to double its international climate
finance to £11.6 billion over the next five-year
period (2021/22–2025/26). DFID, together with
the Department for Business, Energy and Industrial
Strategy and the Department of Agriculture,
Environment and Rural Affairs, is currently
preparing a new climate and environment strategy
to ensure these funds are spent to best effect.

The scale and urgency of the climate challenge isbecoming ever more apparent, with the poorest
developing countries least responsible yet hardest
hit. Climate change threatens to undo recent
development gains, with 100 million people atrisk of being pushed into poverty by climatechange by 2030 and 720 million by 2050 (World
Bank, 2015; Granoff et al., 2015). After years
of progress, the number of people sufferingfrom hunger is already on the rise, with adverse
weather conditions among the key drivers of thistrend. Between 2030 and 2050, climate change
is expected to cause approximately 250,000
additional deaths per year from malnutrition,
malaria, diarrhoea and heat stress (WHO, 2014).
By 2025, 1.8 billion people will be living incountries or regions facing absolute water scarcity(UN-Water, n.d.). And, while estimates of theeconomic damages caused by climate changeremain uncertain and contested, some forecasts
anticipate a 75% fall in gross domestic productfor the poorest countries by the end of the century
in a ‘business-as-usual’ scenario as a result ofclimate change (Global Finance, 2019).

14.2

14.3 Development and climatechange: policy challenges
In any such strategy, the following are widely
recognised:••

Recent UK commitments

In 2019, the UK government committed both toachieve net-zero emissions by 2050 and to ensurethat all its official development assistance wasaligned with the 2015 Paris Agreement. The ‘Planet’
has become more prominent: it is one of five
objectives in the UK Department for International
Development’s (DFID) new Single Departmental
plan, with a focus on supporting efforts tomitigate and adapt to climate change and prevent
environmental degradation (DFID, 2019). And at
the UN Climate Action Summit in September 2019,•74

Future effort and climate finance will needto continue to focus on both mitigation andadaptation. Without mitigation, there arerisks of irreversible change to which it will
be impossible or extremely costly to adapt.
Without adaptation, the ability of poor people
to cope with the by then unavoidable effects ofclimate change will be compromised.
At a macro level, economic developmentthat raises growth and prosperity remain
key to the enhanced resilience of developing
countries, while the poor should not bemade to ‘pay for the planet’ by having theirdevelopment options unduly constrained.
At the same time, the rapidly changing
economics of renewable energy and othertechnological innovations are transforming
prospects for low-carbon development.
Policy and regulatory reforms, nationallyand internationally, are vital to creating thenecessary incentives that will accelerate theneeded transition to a carbon-neutral world.
Carbon pricing, fossil-fuel subsidy reform,
efficiency standards and environmental

protections are all needed. It is not all, or
only, about spending money.

be possible for the poorest countries (analogous
to the advantages that least developed countries
enjoy through, for example, the EU’s Everything
But Arms trade arrangements) – at least in the
short to medium term. However, there are no
guarantees that these exemptions would be inleast developed countries’ long-term interest, as
global patterns of demand change.

14.4 Border carbon adjustments
and certification
To date, the potential for border carbon
adjustments (BCAs), and the certificationneeded to underpin them, as part of thosepolicy and regulatory reforms has appeared
limited. It has been constrained by both politicalconcerns about compliance with World Trade
Organization (WTO) rules and protectionist
abuse, and practical concerns about measuring
and certifying the carbon content of different
goods on which such taxes might be levied.
However, most legal scholars judge BCAs to becompatible with the WTO, while new technology
opens new possibilities for carbon certificationand tracking. The political space for BCAs is
opening up and consumer attitudes in favour of
local, lower-carbon products are also shifting.
The experience of plastics in the wake of the David
Attenborough Blue Planet series illustrates how
rapidly public opinion and political action canchange. Demand for certification will only grow.
For many developing countries, BCAs andcertification present both threats, for which they
may need help preparing, and opportunities,
which they may need help exploiting. For
example, the technical requirements of complying
with new certification rules and trading
standards are likely to be significant and beyond
the current capability of many developing
countries, while the carbon costs of freight
may further disadvantage developing countries
already facing higher costs of trade.
On the other hand, less carbon-intensive
patterns of production and the potential toleapfrog advanced economies in a switch
to lower-carbon technologies may confer
advantages over more carbon-intensive rivals.
Moreover, it is possible that exemptions from
BCAs or carbon certification requirements may

14.5

Policy implications

For developing countries, there is a need tobetter integrate macroeconomic, climate andtrade policies within a medium- to long-term
framework that takes account of rapidlychanging, but still uncertain, markets for energy
and carbon, as well as the goods and services(and associated opportunities for trade) in which
they are embodied. It also means being flexible
and responsive, avoiding locking into carbonintensive patterns of production and energy
generation and building capability for climatesmart development.
For donors, this means supporting low-carbon
development in, and technology transfer to,developing countries, ensuring that both are at
the heart of country development diagnostics
and strategies. It means further mainstreaming
climate-smart development into development
policies and practice. It also means being willingto support the critical if unglamorous processof improving carbon certification and tracking
schemes and developing countries’ capability tocomply with them.
These measures are increasingly important
both for the global good and for national
self-interest.
But, given continued political and practicaldifficulties in the application of BCAs and carbon
certification, it is likely that carrots, rather thansticks, will offer more potential to facilitate andaccelerate the necessary changes in greenhousegas emissions.

75

References
DFID – UK Department for International Development (2019) Department for International Development
single departmental plan. London: DFID (www.gov.uk/government/publications/departmentfor-international-development-single-departmental-plan/department-for-international-development-singledepartmental-plan--2)
Global Finance (2019) ‘Poorest countries in the world 2019’. Global Finance, 17 April 2019(https://www.gfmag.com/global-data/economic-data/the-poorest-countries-in-the-world)
Granoff, I., Eis, J., McFarland, W., Hoy, C., Watson, C., de Battista, G., Marijs, C., Khan, A. and Grist, N.
(2015) Zero poverty, zero emissions: eradicating extreme poverty in the climate crisis. London, ODI(www.odi.org/publications/9690-zero-poverty-zero-emissions-eradicating-extreme-poverty-climate-crisis)
World Bank (2015) ‘Shockwaves: managing the impacts of climate change on poverty’. Webpage. WorldBank (www.worldbank.org/en/news/feature/2015/11/08/rapid-climate-informed-development-needed-tokeep-climate-change-from-pushing-more-than-100-million-people-into-poverty-by-2030)
World Bank (n.d.) ‘Climate Change’. Webpage. World Bank (https://www.worldbank.org/en/topic/
climatechange/overview)
WHO – World Health Organization (2014) Quantitative risk assessment of the effects of climate change
on selected causes of death, 2030s and 2050s. Geneva, Switzerland: WHO (https://apps.who.int/iris/handle/10665/134014)
UN-Water (n.d.) ‘International Decade for Action ‘WATER FOR LIFE’ 2005–2015’. Webpage. New Yorkand Geneva, Switzerland: United Nations Department for Economic and Social Affairs (UNDESA) and
UN-Water76

Chapter 15 Trading blame or exporting ambition?
How trade can drive emissions and how trade policy
can be mobilised for climate action
Dan Plechaty, Lina Fedirko and Surabi Menon
The relationship between international trade andgreenhouse gas (GHG) emissions is not simple:
trade is both exacerbating the climate crisis insome sectors and spreading clean technologies
in others. The sheer volume of traded goods
and services and the varied policy regimes they
are subject to offer the potential both for clean
procurement and, conversely, for carbon leakage.
In this context, trade policy is a tool that can bemobilised for climate action. We propose four
options for action and philanthropic support.

The decarbonisation of the global economy
requires a truly unprecedented effort toaccelerate transition away from incumbent
energy sources and manufacturing processes,
as well as the end-use consumption outcomesthat result. These systems and the global trade
networks that support them have been optimised
over many decades and will require the shiftof a staggering quantity of resources towards
the research, development, demonstration anddeployment of cleaner alternatives. Trade policy
can make a significant contribution to rapid
decarbonisation. The benefits will accrue to bothdeveloped and developing countries in termsof mitigation outcomes, equity, environmental
integrity, technology diffusion and low-costclimate finance.

15.1 Accounting for trade impacts
and the contribution trade policy can
makeInternational climate negotiations and national
climate policies focus almost exclusively on
accounting for territorial GHG emissions, which
are bound to countries’ borders and are thebasis of agreements formed under the aegis of
the United Nations Framework Convention
on Climate Change. While consumption-based
accounting methods are more complex, they
offer an alternative perspective on the impact
each country has on global GHG emissions.
Assessing consumption flows rather thanjust production reveals that many countries
with export-oriented economies consume lessthemselves than their territorial emissions
might imply (e.g. China) and import-oriented
economies have a higher impact than otherwise
assumed (e.g. many EU Member States). The
lack of transparency across global supply chains
can hide the overall carbon intensity of certain
activities from the consumer and give a false
sense of progress on curtailing GHG emissions
within a nation’s borders.

15.2 Policy levers andopportunities for philanthropy
Given the vast reach of trade, there is a need toassess how and where to advocate for policies that
help realise its potential to drive decarbonisation.
Philanthropic resources deployed for public good
have the power to catalyse action and accelerate
solutions. We highlight a few trade-related areas ofengagement where philanthropic support can help
early action.

Tackling carbon leakage
Carbon leakage is the transfer of carbon
emissions from developed to developing
countries. It can be difficult to quantify, as lax
environmental standards in developing countries
are often correlated with other factors that makeoutsourcing attractive, such as low-cost labourand raw materials. Moreover, more stringent

77

environmental standards in developed countries
can drive greater leakage. One approach thathas been debated is the adoption of a bordercarbon adjustment (BCA) on imported goods,
based on their carbon intensity. This would, intheory, disincentivise leakage to countries withlow environmental standards. While promising,
the approach would likely run into many legal
and logistical challenges (Morris, 2018). Whilejurisdictions such as the EU have adopted
suboptimal workarounds, such as free allocationof pollution permits to EU producers and indirect
cost recovery for higher-priced inputs (likeelectricity), there is an opportunity to weigh inon potential improvements in policy mechanisms.
Working on carbon-leakage issues would require
national policy-level engagement.
In this case, early support throughphilanthropy could be used to:goods. In the absence of tailored policy, their netzero targets may be undermined by indirect land
use change and emissions from their demand forfood and fuel. Examples of successful efforts inthis area are:•••

Philanthropy can engage by:
•
•

•

•
•

fund research that looks at ways to quantify
carbon leakage and model impacts from lessto more stringent environmental standards
support civil society engagement on policy
mechanisms for BCA
fund feasibility studies of various policy
mechanisms that target carbon leakage.

•

supporting the transfer of Buy Clean to other
US states and other countries
broadening the scope of the original Buy
Clean policy to span more sectors
supporting civil society’s development ofrobust accounting frameworks to encourage
cities and private sector to incorporate
Scope 2 and 3 emissions in the formulation of
their net-zero targets.

Climate clubs

Public procurement, the private sector andsupply chains

A blunt but potentially effective measure
would be the creation of climate clubs(Nordhaus, 2015), in which group(s) ofprogressive countries with substantive purchasing
power agree to take emission-reduction measuresin concert with each other and to sanction
non-participants via trade restrictions or pricing
adjustments. This could create incentives toimprove environmental standards for markets tomaintain competitiveness and access.

Countries, states and businesses can use theirprocurement expenditures to reward andincentivise the production of goods and services
by cleaner means. Individual cities that set netzero targets can also use their purchasing power
to drive beneficial changes, as they often procure
from outside their borders a larger percentageof their food, energy and other carbon-intensive

Box 15.1

the minimum performance standards in
California’s Buy Clean legislation (Box 15.1)(State of California, n.d.)sustainability metrics in public procurementscorecards in the Netherlands (OECD, 2016)
Scope 3 emissions in business inventories,
which can have the same effect in concert
with internal Science Based Targets.

Case study: Buy Clean California

The Buy Clean campaign was initiated in 2016 to advance polices that aligned California’s
procurement processes for infrastructure with the state’s goals to reduce GHG emissions.
The Buy Clean effort brought together a coalition of labour and environmental groups, withlegislation signed into law by Governor Jerry Brown in 2017. Philanthropy was instrumental inaligning stakeholders to achieve a first-of-its-kind policy win.

78

Philanthropy can support:••

concern about fairness and equity in trade,
evident by the rising number of WTO disputes.
A more feasible approach in this area is toadvance climate outcomes through regional
trade agreements (RTAs). RTAs include a limited
number of countries that already have a baselinealignment around their original agreement,
thus making it easier and more likely to reachalignment on climate goals. Many RTAs alreadyinclude environmental provisions (e.g. theCanada–EU Comprehensive Economic and Trade
Agreement and the Trans-Pacific Partnership),which can be further strengthened. RTAs also
include unfavourable provisions that can beremoved, such as the Investor–State Dispute
Settlement provision, which the fossil‑fuelindustry has used to block environmental
and climate-related regulations and laws
(Podesta et al., 2019).
Box 15.2 describes the case of the EU–
Mercosur free trade agreement.
Philanthropy can support:

governance and architecture of climate clubsthat facilitate low-cost climate finance andenhanced technological diffusion within
members of the clubstudies that look at how carbon clubs,World Trade Organization (WTO) rules,
free trade or regional trade agreements
operate with each other and maintainenvironmental integrity while enhancing
mitigation outcomes.

Trade regulatory approaches
The preamble establishing the agreement that
underpins the WTO discusses the trade of theworld’s resources in accordance with sustainable
development. Despite this key language, theavenues for leveraging pathways for climatefriendly trade have to date been limited, because
expanding the WTO language in favour ofclimate outcomes would require hard-to-achieve
universal support of all WTO members. Instead,debates on environmental protection and trade
have played out through the WTO’s disputesettlement mechanism, which has recently comeunder attack (Baschuk, 2019). Along withincreasing volumes of trade, there has beenBox 15.2••

civil society on the design and developmentof trade agreements that ensure fairness andequity principles are incorporated
transparency and accountability regarding
climate outcomes in trade agreements.

Case study: driving climate action with trade

The most recent example of attempted climate leverage in trade is the EU–Mercosur free trade
agreement, finalised in Osaka in 2019 after 20 years of negotiation. The deal covers 780 million
people and aims to save over $4.5 billion worth of duties every year by eliminating 93% oftariffs on imports to the EU on products such as beef, poultry, sugar and ethanol and 91% oftariffs on imports to Mercosur such as cars, car parts, chemicals and machinery. The agreement
received attention for including a joint commitment of both trade partners to implement theParis Agreement, as well as a sustainable development provision that emphasises sustainable
forest management and conservation as well as protection for labour rights, and responsible
business conduct. Despite a climate clause, the agreement does not actually outline pathways
for tracking compliance and accountability and leaves climate action at the discretion of themember states (Abdenur, 2019).

79References
Abdenur, A.E. (2019) ‘A double-edged sword: the climate politics of the Mercosur-EU Agreement’. Climate
Diplomacy, 20 August (www.climate-diplomacy.org/news/double-edged-sword-climate-politicsmercosur-eu-agreement)
Baschuk, B. (2019) ‘What’s next for the WTO after sabotage by the U.S.’. Bloomberg Quick Take, 26 July
(www.bloomberg.com/news/articles/2019-07-26/how-a-global-trade-slump-might-soon-sink-intochaos-quicktake)
Morris, A. (2018) Making border carbon adjustments work in law and practice. Washington DC: Tax
Policy Center
Nordhaus, W. (2015) ‘Climate clubs: overcoming free-riding in international climate policy’ American
Economic Review 105(4): 1339–1370
OECD – Organisation for Economic Co-operation and Development (2016) Country case: green public
procurement in the Netherlands. Paris: OECD Publishing
Podesta, J., Goldfuss, C., Higgins, T., Bhattacharyya, B. and Yu, A. (2019) A 100 percent clean future.
Washington DC: Center for American ProgressState of California (n.d.) ‘Buy Clean California Act’. State of California webpage (www.dgs.ca.gov/PD/
Resources/Page-Content/Procurement-Division-Resources-List-Folder/Buy-Clean-California-Act#@
ViewBag.JumpTo)

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Chapter 16 The measurement, reporting andcertification of carbon emissions: implications fordeveloping countries
Andrew Scott
The world’s climate emergency needs to beaddressed by using every tool at our disposal.
To achieve the 1.5°C global heating goal,
greenhouse gas (GHG) emissions must reduceat an unprecedented rate – 7.6% a year – every
year for the next decade (UNEP, 2019).21 The
focus in international negotiations on reducing
territorial (or production) emissions clearly has
not resulted in the reductions required to avert
potentially catastrophic climate change. Tools toachieve emission reductions on the demand sidethat focus on consumption emissions, including

certification schemes, could complement action
to reduce territorial emissions.
In a world where traded goods account for
20% to 25% of CO2 emissions (Davis andCaldeira, 2010), disparity between countries’
territorial emissions and consumption emissions(Figure 16.1) raises several questions. How
should consumption emissions be measured in aconsistent and transparent way across countries?
Who is responsible for emissions and taking
action to reduce them – producers or consumers?
How can global action to address the climate

Figure 16.1 Disparity between territorial and consumption emissions, selected countries

Emissions (GtCO2e)825

Consumption Territorial
China
China
US
US
EU-28
EU-28
India
India

Consumption
20
Emissions per capita (tCO2e)

10

6

4

2

Territorial

15

10

5

0

0
1992

1997

2002

2007

2012

1992

2017

1997

2002

2007

2012

2017

Source: UNEP (2019).
21 To achieve the 2°C goal in the Paris Agreement, emissions must reduce by 2.7% a year between 2020 and 2030 (UNEP, 2019).

81

crisis be taken fairly, given that the net flow ofemissions embodied in traded goods is fromdeveloping to developed countries?
Certification schemes may have a role toplay in measuring consumption emissions.
There is a multiplicity of existing schemes,22
established by various organisations – mostly
non-government and voluntary – for various
reasons, not necessarily related to climatechange. For the measurement of GHG emissions(carbon intensity), the key considerations for acertification scheme are its primary purpose –that is, whose behaviour the certificate intends
to change (consumers, retailers, producers)– and the unit that is to be certified (product,
company or sector).
Certification schemes can be used to informconsumer choice and persuade them to go
for a specific option; to drive negotiations
within supply chains and improve operational
efficiency; and to ensure accountability andsecure finance or meet regulations. Certification
can also be used by different stakeholders
for risk management. But would a voluntary
certification scheme for the carbon intensityof imports make a significant difference to the
behaviour of producers in exporting countries
or consumers in importing countries? Many ofthese schemes have been developed by companies
and organisations in industrialised countries withlimited input from developing countries (Beuchelt
and Virchow, 2011). They may be biased
towards certain sectors or in favour of large-scale
producers that benefit from economies of scalein the cost of certification, putting small-scalebusinesses and farmers at a disadvantage.
Existing environmental certification andcarbon offsetting schemes are widening theirscope to include social and economic factors suchas labour conditions and poverty reduction. They
may aim to capture progress towards a broader
sustainable development objective, but this could
distract from GHG emissions accounting. Whenthe aim of certification is to influence consumer
behaviour, simple messages, such as carbon

neutrality or comparisons with competitor
products, may be more effective than a label
specifying carbon content.
Certification schemes can apply to products
or businesses. Consumption-based emissions
accounting, attributing consumption emissions
in a country,23 is likely to have a product focus.
The quality and consistency of consumptionbased emission accounts could be affected byuncertainties in data (e.g. input–output tables andtrade statistics) and by variations in methodology(IPCC, 2014). Certification schemes could
require a large amount of detailed information
about a product’s value chain and would have toaccommodate wide variation in the emissions fromdifferent producers. The cost and complexity ofrobust product certification could be a challenge
for many producers in developing countries, who
may require technical assistance to be able toparticipate in certification schemes (Beynon).
What is included in the certification (orstandard) and where in the value chain
certification is applied could affect measuresintended to reduce emissions, because theemissions embodied in different goods canoccur at different stages of the product life cycle(Broekhoff et al., 2019). For example, a large
share of the life-cycle emissions of manufactured
goods, such as electrical appliances, can occur
during the use of the product or, in the case ofplastics, at the end of its life.
The EU is actively pursuing border carbon
adjustments (BCA), which would require a formof certification of the carbon content of traded
goods as a measure to reduce consumption
emissions (Keane and te Velde). Because a BCA
is a regulatory measure and not a voluntary
certification scheme, agreement will be required
between governments about how to measure thecarbon intensity of goods produced in importingand exporting countries. Trade negotiations are
typically slow moving, and it is likely to take years
to reach agreement before BCAs can be introduced,
let alone achieve changes in consumption or
production. But we have only 10 years to halve

22 Krishnan (this volume) notes 246 schemes listed by the International Trade Centre Standards Map. Eco Label Index lists
463 eco-labels including 33 (www.ecolabelindex.com).
23 For city-based consumption emissions, see C40 (2018).

82

global GHG emissions and to have a chance of
averting catastrophic climate change.
The potential limitations of BCAs, as a tool
to reduce GHG emissions rapidly need to beweighed alongside the question of whether
developed countries addressing embodied
emissions in traded goods is the most effective
way to reduce their consumption emissions.
Perhaps their focus should be on the carbon
intensity of all consumption – domestic
goods and services as well as imports. A large
proportion of product life-cycle emissions
occurs at the use stage, after goods have been
manufactured or imported (Moran et al., 2018).

This includes emissions from energy
consumption, transport and buildings, which
lend themselves to territorial emissions
accounting (Broekhoff et al., 2019).
A major challenge in achieving emission
reduction pathways consistent with the 1.5°C goal
will lie in growing resource-intensive consumption(IPCC, 2018). A consumption-based approach toemissions reduction, which could be assisted byvoluntary certification schemes, would provide
insights into the fundamental drivers of emissions(Gulati and Naudé, 2017) and the changes in
consumer behaviour necessary to achieve the scaleof emission reductions required.

References
Beuchelt, T. and Virchow, D. (2011) ‘Carbon labels – pitfalls for developing countries?’ Rural21 5(2): 39–41
Broekhoff, D., Erickson, P. and Piggott, G. (2019) Estimating consumption-based greenhouse gas
emissions at the city scale: a guide for local governments. Stockholm: Stockholm Environment InstituteC40 (2018) Consumption-based GHG emissions of C40 cities (www.c40.org/researches/
consumption-based-emissions)
Davis, S.J. and Caldeira, K. (2010) ‘Consumption-based accounting of CO2 emissions’ PNAS 107(12):5687–5692
Gulati, M. and Naudé, L. (2017) Chewing over consumption-based carbon emissions accounting.
Stellenbosch: WWF South Africa
IPCC – Intergovernmental Panel on Climate Change (2014) AR5 synthesis report. Cambridge, UK:
Cambridge University Press
IPCC (2018) Global Warming of 1.5C Special Report. Cambridge, UK: Cambridge University Press
Moran, D., Wood, R., Hertwich, E., Mattson, K., Rodriguez, J.F.D., Schanes, K. and Barrett, J. (2018)‘Quantifying the potential for consumer-oriented policy to reduce European and foreign carbon
emissions’ Climate Policy 20(S1): S28–S38 (https://doi.org/10.1080/14693062.2018.1551186)
UNEP – United Nations Environment Programme (2019) Emissions Gap Report 2019. Vienna: UNEP

83

Evidence.
Ideas.
Change.

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harness the power of evidence and ideas
through research and partnership to
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