Emissions Accounting: Cooking the Books

Ready for a quick climate change quiz? See if you can identify the climate hero in the scenario below:

Jared and Annette arrive at a potluck, each bringing a mixed salad with the same ingredients. By a strange coincidence they’re also wearing identical Christmas sweaters. They compare notes, and it turns out that Annette’s salad ingredients were all bought from local farmers, while Jared’s are supermarket ingredients shipped thousands of miles from California, Mexico, and Chile. Annette’s sweater was knit by a local craftsperson using wool from a neighbor’s sheep. Jared’s came from Walmart, and was produced in a Chinese sweatshop using electricity from a coal-fired power plant.

Question: which one is doing their part to lower their greenhouse gas emissions?

Answer: Jared.

Crazy? Indeed. But because of the way emissions are usually counted, Jared appears to be the environmental hero, while Annette just isn’t “doing her part.”  That’s because most US states use “sector-based” or “territorial” accounting” to tally their emissions.  Where I live in Vermont, for example, emissions from various sectors of our economy are added up, and that’s our total. Anything produced within the state – like Annette’s sweater and salad ingredients – add to that total, but emissions from goods that came from outside Vermont are ignored. By that way of accounting, Jared’s supermarket and Walmart purchases – though loaded with greenhouse gas emissions – add nothing at all to Vermont’s total.

The emissions embedded in a sweater or salad may seem trivial, but even in a small state like Vermont they’ll be multiplied by hundreds of millions. Consider everything bought at chain stores – Walmart, Dollar General, Target, Home Depot, 7-Eleven, etc. Add to that all the fast food purchased at McDonalds, Burger King, Pizza Hut and Wendy’s, and all the coffee from Starbucks. Add in all the purchases from Amazon, eBay, and other online sellers. Little if any of this is produced in Vermont, and so the emissions from producing and transporting it all here are ignored. The same illogic applies to most of the industrial food in Vermont’s supermarkets: zero emissions, no matter how many tons of CO2 were emitted to grow, process, and transport it here. If you’re a US resident, the same insane accounting system is probably used where you live.

It’s hard to see how intelligent climate policies can be crafted using an emissions accounting system that implicitly favors imported goods over locally-produced goods. Even local food – which should be widely embraced as a climate strategy because of its lower food miles and reduced need for packaging – is a loser according to territorial accounting.

There’s an alternative accounting method that does incorporate consumption, and not surprisingly it’s called consumption-based accounting. It entails tallying up the emissions from everything consumed within the state’s or nation’s borders – gas, heating fuel, food, consumer products – no matter where it came from. (The emissions from exports would be excluded because those emissions are the responsibility of an end consumer elsewhere.)

How big a difference is there between territorial and consumption-based emissions accounting? At a national level, it’s huge: according to a WWF report, for example, fully half of the UK’s carbon footprint in 2017 was created abroad. That includes both the carbon embedded in imported goods, and emissions related to international travel and shipping (both of which are perversely excluded from any nation’s carbon accounting). Territorial accounting leads Britons to believe they are meeting their emissions-reductions targets; consumption-based accounting reveals that they are not even close.

Many governments prefer to avoid consumption-based accounting – perhaps because it challenges the bedrock belief that economies can and should grow forever. Most mainstream non-profits don’t use it either, maybe because their donor bases, including large corporations, want the climate “fixed” without changing the source of their wealth – the growth-driven consumer economy.

With consumption off the table, governments and large environmental NGOs look at climate change as a problem for which technofixes are the solution. And with sector-based accounting there’s a technofix for every sector: industrial renewables for the electricity sector, EVs for transport, heat pumps for thermal, etc. These technologies don’t require changing our consumer-based economic system; on the contrary, they represent huge profit-making opportunities for corporations and wealthy individuals.  As one Vermont renewable energy advocate put it, climate change is “the largest wealth creation opportunity of our lifetimes“.

Some will argue that asking citizens to rein in their consumption would be unfair to those who already live with little. But the upper-income levels are where reductions are most needed. A recent Oxfam report titled “Climate Equality: A Planet for the 99%” reveals that a “polluter elite” is responsible for a huge share of global emissions:  “it would take about 1,500 years for someone in the bottom 99% to produce as much carbon as the richest billionaires do in a year,” according to the report.

If we really care about the future of life on earth, we need to abandon the belief that the economy can grow forever. Making consumption reduction a key part of our climate strategy would have the added benefit of addressing looming resource shortages and the many other environmental problems we face – from plastic gyres and ‘dead zones’ in the oceans to the destructive impacts of mining.

It won’t be easy to overcome the opposition of powerful vested interests, but accounting for our emissions more honestly is a good place to start.