As the FT notes this morning:
Whenever companies address their climate impact, they tend to review their own immediate operations. But widely accepted science-based targets — emissions reduction goals based on the 2015 Paris climate change accord — also hold them responsible for the greenhouse gases that are generated in their supply chains. Not only does this widen the scope of measurement, but it also presents a much bigger challenge.
That problem is a quite straightforward one. Climate emissions do not happen in isolation. Just as one person's spending is another person's income, so too is one company's carbon output another company's carbon input. So, although the vast majority of the world's carbon outputs can be blamed on 100 or so companies around the world, the way in which these emissions eventually reached the consumer who, through their use of a product finally injects a significant part of that carbon into the atmosphere, is complex, and so hard to count.
This is an issue that I address in sustainable cost accounting. In it I suggest that all companies should be responsible for all their carbon emissions. by convention these are split into three types.
Scope one emissions or those created within a company in the course of its own activities. Scope two emissions are those implicit in bought-in energy. Scope 3 emissions are other bought-in emissions, but in addition, and most especially, those created as the consequences of the use of the products that the company creates.
As the FT also notes this morning:
At the end of 2020, only 10 per cent of the companies that Climate Action 100+ tracks had a target that included their most important Scope 3 emissions.
What is more, as the same article notes, many companies have little or no clue as to how to achieve this goal, and those that are trying to do so suggest that they are having difficulty.
My suggestion, which is implicit within sustainable cost accounting, is that this reflects the fact that what companies are being asked to do is a largely meaningless exercise. The fact is that we do not wish to measure the amount of carbon that is being injected into the atmosphere as if that is the way to solve our climate crisis. What we as a society want is that those emissions be radically reduced. In other words, the problem that businesses have to solve is not how they measure their carbon emissions, but how they eliminate them, and at what cost. Critically, whilst we know that measurement is subject to enormous degrees of gaming, not least by claiming offsets using technologies that do not exist, elimination is something tangible. It will either happen, or it will not. What people need to know is the cost implication of that success or failure.
So, to use one of my favourite examples, Gatwick Airport claims that it is a carbon-neutral business. It does so by entirely ignoring its scope 3 emissions. The fact that its entire business model is dependent upon sending aircraft down its runways, all of which will create large quantities of unnecessary carbon emissions, is something that they choose to ignore. If, however, they were required to eliminate their scope 3 emissions they would have two choices. They could make themselves an electric aircraft hub, if it could be shown that electric aircraft could ever be carbon neutral. Alternatively, they could admit that it is impossible for them to achieve their objective and they could declare themselves, in the words of sustainable cost accounting, carbon insolvent. They would then begin to plan the necessary winding up of their affairs as the world begins to recognise that the scale of consumption implicit in consumer air travel cannot be sustained into the future.
The FT is implying that the problem of carbon counting can be solved by cooperation. I doubt it. The problem that must be solved is carbon elimination. It is a completely different issue and many of the decisions that are required to achieve it do not require absolute precision in carbon counting. It is time that we focused on the important issues.
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In addition to the embodied energy, extending the life and making it easy to repair will also significantly reduce the actual CO2 emitted..
Agreed
Not sure you have thought his through properly – a lot of what you are proposing is either wholly impractical, some of it is just impossible and some of it simply unfair.
Firstly, how do you measure scope 3 emissions, given that they normally depend on amount of use? If you can’t measure them, then how are you going to fairly apply the cost to the company?
Then there is the question of fairness itself. Why should the company be paying for the scope 3 emissions. Surely the consumer or user should be, and paying dependent on the amount of use.
There is also the fact that most emissions simply cannot be eliminated directly. Most chemical processes and manufacturing can’t be done in any other way. Which is why offsetting is key. Though you seem against that.
What you are suggesting is that basically every company in the world should be bankrupted, because in practical terms there is no way they can account or bear for the total cost of emissions. This is clearly not a sensible solution. Do you think China will meekly shut down it’s economy because of an accounting rule?
But I would be interested to see how your plan would work in practice. A worked example maybe – I can’t seem to find one anywhere through google.
For your worked example, you would need to be able to accurately calculate scope 3 emissions, and also accurately calculate the cost of eliminating all emissions at source.
I doubt you can do that for even your own tiny company, let alone a proper business.
You do know that companies are existed to deliver net zero, and are saying they will?
Either they and I or right or you are
The evidence that you are talking nonsense is overwhelming
Companies are aiming for net zero through the use of offsetting. Something which you specifically disallow in your back of the envelope accounting standard.
Almost every industrial process causes some emissions, just by the intrinsic nature of the chemical reactions within them. They are therefore impossible to make zero emissions on a standalone basis. Which is something you don’t seem to recongnise.
It is also the point that most companies aim to make their scope 1 and 2 emissions neutral. Not their scope 3 – which they have no control over. Again, something you seem unwilling to recognise.
How, my I ask, are you going to make your own business zero emissions? I doubt you can even calculate the emissions you create, let alone have any idea of your scope 3 emissions. Yet you are saying that every other business must somehow manage this issue.
I’m sure at this point you will come up with some excuse – like only large businesses will count, or certain businesses will get a pass from the accounting standards from government. So at this point the system is not fair because it is not equitable – some businesses will have to suffer and go bankrupt but because they are forced into this standard, while others are not.
Which makes the whole idea a totally unworkable joke. Though when the creator of such an idea can’t even properly explain or show a worked example of his accounting standard in practice, you have to wonder if he is at all serious or is just fishing around for ways to fill his own pockets.
And you will notice no one thinks offsetting claims are credible
And you are trolling
I am asking you serious questions.
There is no way to produce steel, cement, plastics or even any meat product without creating some emissions. It is chemically impossible to do so.
So are you saying that all such industries be shut down?
It is also ridiculous to say that because there is skepticism regarding offsetting that it shouldn’t be allowed. Net zero ONLY works if offsetting is allowed. Unless you idea is to take the world back to the dark ages.
I also don’t think it is trolling to ask how you can calculate or measure scope 3 emissions accurately – which they would need to be if you are going to bankrupt companies based on these figures. Or indeed why the company and not the end user should not be responsible for those emissions.
I also notice that this leads to the very great possibility of double counting – one companies scope 3 emissions are likely to be another one’s scope 1 or 2. Something else you clearly haven’t thought about.
Nor is it trolling to ask someone who is proposing a very egregious set of accounting standards to produce a worked example of such. Even for a simple company, I cannot find anything approaching such a thing. If the author of such a set of standards can’t practically show how they work, why should anyone take him or those standards seriously?
I doubt you could even produce a worked example for your own company. I doubt you can calculate your scope 1 or two 2 emissions, and your scope 3 emissions are a total unknown. Then you would have to cost the removal of those emissions and place them on the company balance sheet. Which would no doubt bankrupt your company.
I highly doubt you are capable of this – even for a company as simple as your own. More to the point, I doubt you would find a way to make the whole company net zero without offsetting, so that would also prove cause to wind the company up, by your own set of rules.
At which point no doubt you will prove hypocritical and make some claims about how easy it is to do (yet not do it) or the rules somehow don’t apply to you. Which once again brings up the aspect of fairness and equal treatment.
All of which makes your set of accounting standards laughable. I can’t think of any other reason for them to exist other than as a stunt for you to jump on the green bandwagon and try and leech some funding from some unsuspecting charity or other. Really, when it comes to it, the main purpose of your accounting standards is for you to fill your own pockets.
See blog now posted
The EU is pretty keen on Carbon offsetting and thinks its very credible.
Only a few skeptics really think it isn’t.
I’m not sure how you are claiming what you are.
If you actually read what I say, I say offset is allowed if 1) the technology has been proven and 2) the actual resources to control offset are owned.
In other words I say no claims can be made to offset until the claim to do so is proven to be true.
Now, you tall me what is wrong with that prudent approach?
Or, to be candid, do you prefer greenwash?
I read what you said and it is utterly nonsensical.
It doesn’t matter who owns the means of offsetting. It would actually be very harmful to both economies and net zero targets if you forced companies to own their means of offsetting.
This is why he EU brought in the emissions trading scheme.
As for proving the technology: most of the “technology” as you call it is carbon capture and storage by the simplest and oldest of means – trees.
I am not sure how you are being prudent by trying to create a system where only a very few large companies would be able to survive, only those big enough to buy enough land to offset emissions. Which would also force the price of land up for everyone dramatically. Then you would bankrupt the rest.
Forcing the world backwards economically is not going to make people vote for it. Which means it will never happen, and therefore has zero chance of success. Hardly prudent in my book.
See blog now posted
You’re on the right track with resource accounting Richard – don’t let ’em put you off.
What we don’t need in this debate is any agnosticism of any kind in my view.
If you lack knowledge on something, for fuck’s sake go and get it!
Don’t assume that it simply does not exist – all too often a convenient reductionist basis of practice in accounting and economics of all kinds.
“No-one thinks that offsetting claims are credible?”
That’s quite a bold v,dim, given the importance and use of offsetting from multiple governments and corporates all over the world.
Where is the evidence that ‘no-one thinks offsetting claims are credible’?
Start with Mark Carney
Is the following too simple or just unrealistic?
Wouldn’t it be simplest to just require all prices and accounts to be dual, one counting £, and the other tC02e? A firm is already tallying all its costs and comparing those with sales to produce the profit and loss account. The £ prices and accounts are as now. The tCO2e price for a good or service is calculated by the firm by adding up all its input tCO2e costs and dividing the total amongst the units of good or service sold (in a dynamic fashion). Since the tCO2e accounting structure pretty much mirrors the existing £ accounting structure, with the difference that there is no profit or loss, merely pass-through, it should be relatively easy for firms to produce them.
There would be one special category of producers for whom tCO2e would be more than the sum of their tCO2e costs – the fossil fuel producers. They would add in the tCO2e produced assuming their fuel were combusted – this is a simplification but not that inaccurate. There could be a second special category of producers for whom there is a reduction in their output tCO2e figures – if in their operations they sequester carbon long-term, or they do not fully combust the fossil fuels they use (e.g., production of naptha for plastics).
This could also easily be the basis for a levelling-up carbon dividend via a carbon tax. The £ paid for a good or service would be the sum of the £ price and the tax on the tCO2e “price”. If this carbon tax were prominently displayed it would also instantly alert buyers (from consumers to procurement professionals) as to the embodied carbon in the good or service. The tax collected then would be hypothecated to become a levelling-up dividend distributed on a per-capita basis.
I realise this only addresses carbon release from fossil fuel combustion. Other sources such as land-use changes or methane leakage might be more difficult. But it would be a good place to start.
I live in the real world and I admit I see no chance of that happening in that space
Sorry
You are asking fir a carbon tax I think
You can frame it like that
If you do you must address the fact it will be regressive
“ If you do you must address the fact it will be regressive”.
Hmmm. If it’s redistributed on a per capita basis, is it not progressive, given the the well established correlation between income and energy use?
I am not sure I follow – but I also admit that I am feeling under the weather this morning
Once upon a time, smoking was acceptable in all places and the sale of tobacco unregulated. In many countries it still is but in the UK we restricted the sale of tobacco, taxed it heavily then banned advertising and finally banned its use in public spaces. At each stage there was opposition (banning adverts was an attack of “free speech”; banning smoking in restaurants would drive them out of business etc.) but seriously, who would reverse any of those rules now?
I would note that (a) vested interests always oppose change and (b) change lags public opinion (c) governments need to legislate for change
Eg, the ban on smoking in pubs was opposed by vested interests and would not have happened without legislation. Some claimed it would be unenforceable… but it held because, in reality, the public wanted it.
I don’t disagree with anything you say on Sustainable Cost/Carbon Accounting but, to use your Gatwick example, surely we just need government to put a cap on the annual number of flights.
We do
It’s really not hard either
Apply it to passports and require that a person with multiple passports (me) link then by law
I am not sure I agree that the negative comments amounted to trolling. They certainly don’t contribute to the style of constructive discussion we want to see here and so terminating their involvement is necessary, but their motivation is something worth a passing thought. Our society in general is very quick to dismiss and trivialise macro or holistic analyses of the great questions of any era as unrealistic or utopian and the protagonists as living in bubbles. Hence, the magic money tree, “every housewife knows” and cloud cuckoo land, among the myriad linguistic insults available. All are designed firstly, to avoid the discussion and, secondly destroy the (public) credibility of the advocate.
Since these ‘great questions’ invariably threaten vested interests, this process is led by whatever establishment feels under attack, but supported by its battalions, not just in the media, but within a fundamentally conservative society that, quite naturally, finds profound change discomforting. Returning to your trolls, Richard, the articulate middle classes are invariably desperate to extol their own professionalism, grasp of ‘life’s realities’ and the art of the possible, all personalised excuses for failing to engage with the essence of problems and rejecting the arguments of those that, as they see it, DARE to suggest there are solutions.
The issue of air travel encapsulates this precisely since, in the absence of viable, near carbon neutral flying machines, we are forced to discuss the curtailment of a vast, global industry involving huge changes at both corporate and personal levels. On one level, all of the insults alluded to above are entirely accurate, because one can realistically believe the problem is indeed insoluble and therefore best not addressed. Unless, of course, one truly accepts Attenborough’s ruthless, science based logic that ONLY by dealing decisively with carbon levels can we try to re-stabilise the Earth’s climate. Your ‘trolls’ cannot do that and are unwilling to try. However, I think I am more sympathetic to that difficulty than you are. Nonetheless, if we do not undertake the achievement of these ‘utopian’ changes, the consequence is a global catastrophe of unprecedented proportions. The contributor who denies THAT point is indeed just a troll.
See blog just posted
If offsetting is supposed to be by extra tree planting, then companies engaging in this need to be absolutely certain that the forestry company or commission has the land and the tree nurseries to supply the saplings. If this information is not watertight then the whole thing is a scam and complete greenwash. What reliable monitoring is there for this? Very shaky I imagine if at all if it is whizz kids in the City running these schemes.