Getting the method right: consumption-based GHG accounting to determine our personal Climate Footprints

Measuring and reducing CO₂ emissions – we hear that pretty much everywhere by now. However, measuring CO₂ is not enough. We need to take all greenhouse gas (GHG) emissions into account, not just CO₂. Yes, CO₂ is the biggest chunk but still, there are about 25% more to account for the entire GHG emissions and thus the entire climate impact.¹ In addition to what you measure, the how you measure it is also relevant - so it’s important to choose the right GHG accounting method. That way mitigation action can be taken based on fully appropriate and complete information.

Different accounting methods are used to address different circumstances and goals. In general two approaches can be distinguished: the territorial and the consumption-based perspective. The first one considers all emissions that occur inside a specific territory like a country and is the standard accounting method. China for instance has the highest Climate Footprint as a country as it is producing products on a massive scale for themselves and the world with an emission intensity which is about 3 times higher than in Europe.² That accounting method is more precise and more interesting for politics which - although having only control within its own territory - can set certain limits and production standard very directly for instance. We at eco.income contributed to research in this field of territorial-based accounting in a conference paper: Comparison and selection of the greenhouse gas accounting method for a model region in Germany.

The latter – consumption-based accounting – extends the territorial-based accounting by including cross-border trade, i.e. emissions embedded in products that we import from other countries. It focuses on the final demand of goods and services generated by an economy in a global world instead of emissions strictly within a territory. Final demand - and thus mainly us consumers - is the main driver behind most economic activity and accordingly most industrial emissions, also somewhere abroad, can be related to it. In that sense, consumption-based accounting stresses to sharpen our understanding of emissions responsibility. It’s not just governments and companies that need to do something but we as consumers are also responsible to choose and demand differently.

Technically the accounting includes domestic production for domestic use as well as imports and it excludes domestic production for exports (as these products are demanded abroad). So a T-shirt produced in China or a piece of furniture produced even across several global locations but demanded in Germany would also be allocated to Germany’s emissions. As in western industrialized nations the production tends to be cleaner than elsewhere, we in Europe export products with low embedded emissions and import products with comparably higher embedded emissions. Such measurement across borders plays a significant role today as production facilities are relocated away from industrialized nations and embedded emissions of imports tend to grow.

So the consumption-based perspective is the right choice for consumers who want to know the Climate Footprint of their consumption in a world with highly interconnected global trade and supply chains. But the embedded emissions are also those that companies need to deal with when calculating their often big scope 3 emissions of the corporate footprint according to the recommendations of the GHG protocol. Thus the consumption perspective is also very useful to determine the consumption-based Climate Footprint of companies or any kind of organization. Both end consumers and companies who buy products in a global economy have no direct influence on better production standards and shifting industries but - after having the appropriate information basis with the consumption perspective - they can influence them indirectly by looking for and choosing green alternatives.

Due to the rising importance of consumption-based accounting and the nature of our solution we at eco.income are using this approach. We use the most extensive databases worldwide such as EXIOBASE and apply to it state-of-the-art Environmentally-extended multi-regional Input-Output-Analysis. That way we can determine the Climate Footprint of a Euro spent in any consumption category - from electronics over hotels to mobility services - and differentiate between countries. To account for individual lifestyles and consumption habits we also work with effective modifers in relevant categories such as food or clothing.

Finally, you might wonder, how do the two accounting methods differ in the numbers? Well, comparing different methods is not an easy and straightforward task and there will be a certain unavoidable inaccuracy in the numbers. Our research shows that for Germany for example the difference is 8-18 % (measured between 1990-2019), so your consumption-based personal Climate Footprint would be 8-18 % higher than measuring it with territorial-based accounting.

Footnotes

1. Our World In Data: Global greenhouse gas emisssions by gas, visited on 11.12.2021
2. Measured in kg CO₂ per $ GDP. Our World In Data: Carbon intensity in China’s recent history – Politics matters a lot in achieving both prosperity and sustainability, visited on 11.12.2021
   

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