Carbon Responsibility and Embodied Emissions

Theory and Measurement

João F. D. Rodrigues, Tiago M. D. Domingos, Alexandra P.S. Marques

• Publisher: Routledge
• Year: 2010
• ISBN:
  9781136999703
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

Climate change policy and the reduction of greenhouse gas emissions are currently discussed at all scales, ranging from the Kyoto Protocol to the increasingly frequent advertisement of ''carbon neutrality'' in consumer products. However, the only policy option usually considered is the reduction of direct emissions. Another potential policy tool, currently neglected, is the reduction of indirect emissions, i.e., the emissions embodied in goods and services, or the payments thereof.

This book addresses the accounting of indirect carbon emissions (as embodied in international trade) within the framework of input-output analysis and derives an indicator of environmental responsibility as the average of consumer and producer responsibility. A global multi-regional input-output model is built, using databases on international trade and greenhouse gas emissions, from which embodied carbon emissions and carbon responsibilities are obtained.

Carbon Responsibility and Embodied Emissions consists of a theoretical part, concerning the choice of environmental indicators, and an applied part, reporting an environmental multi-regional input-output model. It will be of particular interest to postgraduate students and researchers in Ecological Economics, Environmental Input-Output Analysis, and Industrial Ecology.

1
Introduction

1.1 Motivation

1.1.1 Climate change policy

According to the International Panel on Climate Change (IPCC),

[t]he global atmospheric concentration of carbon dioxide has increased from a pre-industrial value of about 280 ppm to 379 ppm3 in 2005, while the global surface temperature rose 0.74±0.18° C and [t]he linear warming trend over the last 50 years (0.13 ± 0.03° C per decade) is nearly twice that for the last 100 years.

(IPCC 2007)

In the first decade of the twenty-first century, in spite of some dissenting voices (Schulte 2008), a consensus emerged among scientists, policymakers and the general public that climate change is taking place and that the main drivers of global warming are anthropogenic, the most important of them being the emission of greenhouse gases (GHG) from the burning of fossil fuels (Canadell et al. 2007, Hansen and Sato 2004, IPCC 2007).

The evidence of the anthropogenic role in global warming was mounting in the last decades of the twentieth century and, under the auspices of the United Nations, the United Nations Framework Convention on Climate Change (UNFCCC) was formed to coordinate efforts to mitigate global warming on a global scale. Under the UNFCCC, the Kyoto Protocol (UNFCCC 1998) was adopted in 1997, entered into force in 2005 and is due to expire in 2012.

Recognizing that developed countries are principally responsible for the current high levels of GHG emissions in the atmosphere as a result of more than 150 years of industrial activity, the Protocol places a heavier burden on developed nations under the principle of ‘common but differentiated responsibilities’.

(http://unfccc.int/kyoto_protocol/items/2830.php)

Thus, the Protocol commits developed countries to stabilize GHG emissions, while developing countries are only encouraged to do so.

1.1.2 Policy scales

Currently, initiatives to curb global warming are being implemented at all levels. On a national and global scale, there is the Kyoto Protocol, with its mechanisms of emissions trading, clean development mechanism (CDM) and joint implementation (JI). In order to cope with the Kyoto Protocol, the European Union established a cap-and-trade system the European Trading Scheme (ETS) for large emitters in the energy and industrial sectors (Grubb and Neuhoff 2006). Through the ETS, firms which don’t use all their permits can sell them to other firms. Several whole countries (Iceland, Norway, Costa Rica and New Zealand) are even aiming to become carbon neutral in the coming decades (Olafsson 2008).

On the smaller scale of specific sectors, the official policies being undertaken are too many to be enumerated. However, it is not just official institutions that are engaged in climate change policy. Some firms voluntarily report GHG inventories (WBCSD 2004) and are actively engaged in the reduction of their GHG emissions (Heal 2005), sometimes using ecological labels (Economist 2008, Muller 2007). There is currently a strong interest in the carbon footprint (EPLCA 2008) and the British patent office is advancing towards the publication of a standard for the quantification of GHG emissions embodied in products (BSI 2008).

Besides official institutions and firms, some consumers participate in climate change policy by neutralizing their carbon emissions (for example of airflights) via carbon offsetting schemes (Murray and Dey 2007).

1.1.3 Indirect emissions

The brief review in Section 1.1.2 shows that there is a genuine interest among policy levels, from national governments to firms and consumers, in reducing GHG emissions. These abatement schemes involve a mix of reductions in direct and indirect emissions.

At one extreme, the inventories of GHG emissions, used to assess the compliance of Annex I countries, are compiled on a territorial basis (IPCC 2007). At an intermediate level, the standard for corporate GHG accounting (WBCSD 2004) considers both direct emissions and indirect emissions associated with energy consumption. At the other extreme, the carbon footprint of products (ideally) accounts for all indirect emissions (BSI 2008, EPLCA 2008).

The accounting of indirect emissions poses both theoretical problems (because several indicators exist) and methodological problems (because they involve uncertainty and require more data and computation effort than direct emissions). However, the accounting of indirect emissions is necessary to the making of environmentally efficient policy decisions.

A good example of the importance of indirect emissions is the recent debate surrounding biofuels. Biofuels were proposed as a renewable energy source, because carbon burned from a season’s harvest is again fixated, through photosynthesis, in the following season. However, the indirect GHG emissions associated with cultivation, harvesting, processing and land use change can, in some cases, lead to positive net emissions (Worldwatch Institute 2007).

1.2 What, why and who

1.2.1 What this book is about

This book is about the accounting of indirect carbon emissions. We are primarily interested in embodied carbon emissions, which are defined for economic flows (goods and services), and in carbon responsibility, which is defined for economic agents (such as countries or firms).

Embodied carbon emissions are a measure of the total GHG emissions occurring throughout the life cycle of products (EPLCA 2008). We shall distinguish upstream embodied emissions – those required to generate the product itself or occurring upstream in the product’s life cycle – and downstream embodied emissions – those required to generate the payment of the product or occurring downstream in the product’s life cycle.

Following a literature trend that began a decade ago (Kondo et al. 1998), we shall use the term ‘carbon responsibility’ to denote an indicator that assigns indirect emissions to an economic agent. Carbon responsibility is constructed using embodied emissions (Rodrigues and Domingos 2008), and is a measure of an agent’s share in total GHG emissions.

In the first part we shall address the theoretical problem of defining embodied emissions and carbon responsibility. In the second part we shall address the methodological problem of measuring them.

There are two complementary approaches for the accounting of embodied emissions: life-cycle analysis (LCA) (ISO 2006) and input–output (IO) analysis (UN 1999). Our focus will be on the latter technique, although our results also apply to the former.

We will attempt primarily to present rigorous results (within the limits of our abilities and data availability), but at some points we will indulge in some informal considerations (for example regarding policy implications and accounting uncertainties).

We will also present mainly the results of our own work. We review the work of others in the field but do not pretend to present a systematic review.

1.2.2 Why does it matter?

The accounting of embodied emissions and carbon responsibility is important, because these are potential tools for climate change policy, although they currently do not receive much attention. Carbon responsibility could be a useful instrument in environmental negotiations, fostering more involvement than the conventional use of direct emissions (Peters and Hertwich 2008b). Embodied emissions, with appropriate carbon labelling, offer an avenue for indirect abatement through the choice of inputs and outputs (Rodrigues and Domingos 2008).

However, the use of these indicators requires conceptual and methodological clarity as to what they mean and how they are measured. That is, measures of indirect emissions can only gain the trust of economic agents (consumers, firms, governments) if they are clear and accurate.

Currently, there is a lack of clarity in this field, due to a large disparity in terminology and diversity of indicators (e.g. carbon footprint, embedded emissions, embodied emissions).

There are also many uncertainties affecting the results. On the one hand there is a problem of data, as both IO and LCA methods require data that is often fragmentary and outdated. On the other hand it is difficult to estimate the uncertainty of these indicators, as the source data does not often report errors.

Thus with this work we also wish to bring some clarity to the field and raise awareness of the work that remains to be done.

1.2.3 Who should read this book

This book is intended primarily for those working in the fields of environmental IO analysis, LCA, industrial ecology and environmental/ecological economics, or anyone else who is interested in the accounting of embodied emissions and carbon responsibility.

Some knowledge of linear algebra and differential calculus is helpful but not essential for reading the book, as the more mathematical parts are self-contained, and the main results can be followed skipping the technicalities.

1.3 Overview

The main theoretical problem addressed here is which indicator ought to be chosen to define the carbon responsibility of an economic agent. Several such indicators have been proposed in the literature, and our approach to this problem is to define the properties that the indicator should possess and to construct an indicator which satisfies these properties. In this respect, our results are novel, because they draw attention to downstream embodied emissions, which are seldom addressed in the literature.

These theoretical problems are addressed in the first chapters of the book. In Chapter 2 we review the essentials of environmental IO analysis and derive the formulas that compute embodied emissions. In Chapter 3 we review existing carbon indicators, clarifying their practical and ethical implications. In Chapter 4 we discuss the requirements and implications of the properties of environmental indicators, presenting a set of formal properties that define carbon responsibility, and then derive the mathematical expression that defines it.

On the empirical side, we use the GTAP 6 database to present embodied emissions and carbon responsibilities for a world model of 87 regions and 57 sectors for the year 2001. Among other results, we observed that countries can be grouped in world regions, with regard to economic and environmental performance. For developed economies, Africa and Latin America carbon responsibility is higher than direct emissions, whereas for Fossil Fuel Exporters, Asia and Eastern Europe, the opposite is true. When considering individual countries greater variability is found; and for small o...

Table of contents

• Routledge Studies in Ecological Economics
• Contents
• Figures
• Tables
• Preface
• Acknowledgements
• 1 Introduction
• 2 Accounting indirect emissions
• 3 Carbon indicators
• 4 Carbon responsibility
• 5 Multi-regional IO model
• 6 Carbon responsibility of world regions
• 7 Discussion
• Appendix A
• Bibliography
• Index