The focus on net-zero targets has intensified scrutiny on measurement and disclosure of greenhouse gas emissions. But carbon accounting is a young art, explains Dr Matthew Brander, senior lecturer at the University of Edinburgh.
The arrival of formal net-zero targets has revolutionised the way countries and companies are looking at and reporting their greenhouse gas emissions (GHGs). But for the targets to be meaningful, stakeholders need to comfortable that recording is taking place in way that is rigorous and fair.
In this Q&A, Dr Matthew Brander, senior lecturer in carbon accounting at the University of Edinburgh sets out the boundaries carbon accountants are working within, and highlights areas where commonly accepted practice might be falling short.
How comfortable are you with the accuracy of carbon data companies publish in their accounts?
It depends what the data is being used for, and that will determine an appropriate margin. For corporate accounting and mitigation planning, it is useful for companies to focus on their major sources of emissions, but you do not need absolute precision. If you carry out a corporate inventory and you have massive emissions from your fleet, you know you need to make changes.
However, your calculations could be out by as much as 20 per cent and it won’t alter the decisions you need to make. If you are concerned about understating your emissions, when the purpose is to buy the requisite number of offsets, you can always increase your purchases of offsets or even double offsets to address it.
In my view, the question about accuracy is less critical than understanding the value of your offset strategy. Is it distracting you from undertaking abatement? Or is it leading you to a high emissions pathway because you can offset cheaply, potentially leaving you exposed to regulatory risk if carbon pricing is extended to your industry?
There is increasing interest in using corporate GHG data to assess climate-related risk and, for investors making impact investment decisions, to select low-carbon companies. There are lots of issues around comparability, and whether choosing a company with a low-carbon footprint will actually change emissions in the real economy. Maybe the company with a larger footprint needs the capital more, to decarbonise?
That brings us to another question: Where can you find quality in the offset market?
Yes – there is lots of debate in this area, most recently around corresponding adjustments. If you buy a carbon adjustment from a country, is the government also counting the value of the offset project within its own target, which undermines the additionality?
To some extent the issue depends on what you want that carbon credit for. For users who want hard-and-fast “we have neutralised emissions” claims, you might want to buy an offset credit from methane capture and destruction project which is likely to be additional, and check the project has a corresponding adjustment reflected in the national GHG accounts.
Others buying credits have different motivations and might just want to do something good, with social and environmental co-benefits as well, such as avoiding deforestation and enhancing biodiversity.
Can a lay person read a company’s financial accounts and understand the carbon management strategy?
That would be hard, although companies do write narrative reports to explain what they have done and why, with a lay audience in mind. Perhaps we could draw a parallel with health messaging on food packaging? Most people do not understand what the numbers mean, and I think it is the same with carbon information. Learning to understand all this information is difficult.
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