Read the full story from the Wall Street Journal.
Companies are eager to improve their measurement of carbon emissions captured in soil ahead of coming mandatory climate disclosure rules as they still largely rely on imperfect estimates.
Category: Carbon accounting
Accounting for Impact
The climate clock is ticking fast. Increasing temperatures have called for more ambitious emissions reduction goals. The latest report from the United Nations’ Intergovernmental Panel on Climate Change calls for more ambitious near-term 1.5°C goals and reduction actions.
Yet corporate carbon accounting practices still focus largely on assignment of emissions and less so on assessing the impact of climate action. As focus increasingly shifts from making ambitious targets to implementing them, companies have turned to novel business models for emissions reduction, some of which critics doubt have much real-world impact.
This insight brief details the importance of consequential accounting methods in evaluating and incentivizing a company’s emissions reduction efforts and demonstrating progress toward climate targets.
What if carbon border taxes applied to all carbon – fossil fuels, too?
by Joonha Kim, Rice University and Mark Finley, Rice University
The European Union is embarking on an experiment that will expand its climate policies to imports for the first time. It’s called a carbon border adjustment, and it aims to level the playing field for the EU’s domestic producers by taxing energy-intensive imports like steel and cement that are high in greenhouse gas emissions but aren’t already covered by climate policies in their home countries.
If the border adjustment works as planned, it could encourage the spread of climate policies around the world. But the EU plan, as well as most attempts to evaluate the impact of such policies, is missing an important source of cross-border carbon flows: trade in fossil fuels themselves.
As energy analysts, we decided to take a closer look at what including fossil fuels would mean.
In a newly released paper, we analyzed the impact and found that including fossil fuels in carbon border adjustments would significantly alter the balance of cross-border carbon flows.
For example, China is a major exporter of carbon-intensive manufactured goods, and its industries will face higher costs under the EU border adjustment if China doesn’t set sufficient climate policies for those industries. But when fossil fuels are considered, China becomes a net carbon importer, so setting its own comprehensive border adjustment could be to its energy producers’ benefit.
The U.S., on the other hand, could see harm to its domestic fuel producers if other countries imposed carbon border adjustments on fossil fuels. But the U.S. would still be a net carbon importer, and adding a border adjustment could help its domestic manufacturers.
What is a carbon border adjustment?
Carbon border adjustments are trade policies designed to avoid “carbon leakage” – the phenomenon in which manufacturers relocate their production to other countries to get around environmental regulations.
The idea is to impose a carbon “tax” on imports that is commensurate with the costs domestic companies face related to a country’s climate policy. The carbon border adjustment is imposed on imports from countries that do not have similar climate policies. In addition, countries can give rebates to exports to ensure domestic manufacturers remain competitive in the global market.
This is all still in the future. The EU plan phases in starting in 2023 but currently isn’t scheduled to fully go into effect until 2026. However, other countries are closely watching as they consider their own policies, including some members of the U.S. Congress who are considering carbon border adjustment legislation.
Capturing all cross-border carbon flows
One issue is that current discussions of carbon border taxes focus on “embodied” carbon – the carbon associated with the production of a good. For example, the EU proposal covers cement, aluminum, fertilizers, power generation, iron and steel.
But a comprehensive border adjustment, in theory, should seek to address all cross-border carbon flows. All the major analyses to date, however, leave out the carbon content of fossil fuels trade, which we refer to as “explicit” carbon.
In our analysis, we show that when only manufactured goods are considered, the U.S. and EU are portrayed as carbon importers because of their “embodied” carbon balance – they import a lot of high-carbon manufactured goods – while China is portrayed as a carbon exporter. That changes when fossil fuels are included.
The impact of including fossil fuels
By assessing the impact of a carbon border adjustment based only on embodied carbon flows, those involving manufactured goods, policymakers are missing a significant part of total carbon traded across their borders – in many cases, the largest part.
In the EU, our findings largely reinforce the current motivation behind a carbon border adjustment, since the bloc is an importer of both explicit carbon and embodied carbon. [view graph of EU carbon border adjustment data]
For the U.S., however, the results are mixed. A carbon border adjustment could protect domestic manufacturers but harm the international competitiveness of domestic fossil fuels, and at a time when Russia’s invasion of Ukraine is placing renewed importance on the U.S. as a global energy supplier. [view graph of U.S. carbon border adjustment data]
The Chinese economy, as an exporter of embodied carbon in manufactured goods, would suffer if its trading partners imposed a carbon border adjustment on China’s products. On the other hand, a Chinese domestic border adjustment could benefit Chinese domestic energy producers at the expense of foreign competitors who fail to adopt similar policies. [view graph of China carbon border adjustment data]
Interestingly, our analysis suggests that, by including explicit carbon flows, the U.S., EU and China are all net importers of carbon. All three key players could be on the same side of the discussion, which could improve the prospects for future climate negotiations – if all parties recognize their common interests.
Joonha Kim, Graduate fellow, Baker Institute, Rice University and Mark Finley, Fellow in Energy and Global Oil, Baker Institute for Public Policy, Rice University
This article is republished from The Conversation under a Creative Commons license. Read the original article.
The Business Guide to Carbon Accounting
The need to deliver high-quality data to validate environmental claims and take action on climate has never been greater. Pressure from investors, employees, customers, and communities means that increasingly, sustainability is tied to financial, reputational, and operational risks for companies. Organizations that proactively prioritize sustainable solutions not only foster positive stakeholder sentiment in the short term, but also set themselves up for long-term success by minimizing risk, capturing new opportunities, and gaining competitive advantage.
In this guide, you’ll gain a strong understanding of what carbon accounting is and how to account for carbon emissions throughout your value chain. You’ll also learn how to analyze the results and use these insights to inform your climate action priorities. Additionally, we have created a step-by-step process that describes how to account for your organization’s carbon footprint and how to streamline the calculation process.
Federal suppliers to be required to report carbon emissions
Read the full story at Bloomberg Law.
The Biden administration will soon propose a rule requiring major companies that supply goods and services to the federal government to disclose their greenhouse gas emissions, a White House official said Wednesday.
The rule will be distinct from—but similar to—the US Securities and Exchange Commission’s March proposal that requires publicly-traded companies to report their carbon emissions in their registration statements and annual reports, according to Andrew Mayock, federal chief sustainability officer at the Council on Environmental Quality.
He provided few details about the proposal, except to say it will require suppliers to report on greenhouse gases, “report on climate risk, and required to set science-based targets,” and that it will be issued “in the very near future.”
Webinar: Complying with SEC-Mandated Carbon Emissions Reporting
Jun 14, 2022, noon CDT
Register here
The recent SEC proposed rule that would require public companies to include certain climate-related information is being seen as a game-changer in ESG reporting. It also stands to accelerate boards of directors and the C-suite to hone their products, processes and business models to meet this new era of transparency and disclosure.
In this conversation, Workiva and Persefoni, both of which have combined expertise in ESG and carbon emissions accounting, will provide the insider perspective on how global regulations are shaping the ESG disclosure field, as well as how companies are streamlining their reporting processes to include carbon emissions per SEC mandate.
Among the things you’ll learn:
- What outcomes might we expect from the SEC’s recent proposed rule?
- How does this proposal rule compare and contrast with other emerging ESG requirements across the globe?
- What are the leading examples of effective, efficient, reliable, timely and assurable ESG disclosure?
- How should companies prepare? What should they do now?
Moderator:
- Joel Makower, Co-Founder & Chairman, GreenBiz Group
Speakers:
- Kristina Wyatt, SVP Global Regulatory Climate Disclosure, Persefoni
- Steve Soter, Senior Director, Accounting Industry Principal, Workiva
If you can’t tune in live, please register and we will email you a link to access the webcast recording and resources, available to you on-demand after the live webcast.
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