Government warned that muddied carbon accounting will slow industrial decarbonisation

THE UK’s Energy Systems Catapult has warned there are “inconsistencies” in carbon accounting that will make it difficult to achieve meaningful decarbonisation across industry and makes mechanisms vulnerable to “greenwashing”.

The Catapult says that industry was responsible for up to 16% of total emissions (72m t CO2e) in the UK in 2021. The Catapult says to help achieve deep decarbonisation of industry and help the UK reach its net zero target, it is important to have a clear picture of industrial greenhouse gas (GHG) emissions to enable decision makers and track progress towards the UK’s goal.

In its report, the Catapult highlights several inconsistencies in the monitoring, reporting, and verification used to support emissions reduction in industry. Among these are that operational levels can be discretely reported or aggregated (e.g. project level, corporate level, national level); coverage ranges from direct emissions (Scope 1) to emissions from energy use (Scope 2) and throughout the supply chain (Scope 3); temporal and spatial boundaries, especially for offsets, which do not match attributed emission timescales; and reductions, removals, atmospheric avoidance, and offsets, and the stage at which they are accounted for.

It says aggregating emissions data may protect sensitive operational data, as most accounting mechanisms do not require full transparency. However, this can lead to a lack of clarity in how the data was aggregated.

As well as impacting industrial decarbonisation, the centre said these variations increase the administrative burden that industry faces in reporting its emissions and exposes mechanisms to unintended consequences, such as double counting. It says the burden results from varying, and sometimes overlapping reporting mechanisms and managing these differences is becoming increasingly complex.

The Catapult notes that while some flexibility in accounting approaches will be essential to supporting decarbonisation and encouraging partnerships across sectors, a “delicate balance” has to be achieved between consistency and flexibility that requires clear, industry-wide guidance. It adds that imposing a blanket set of accounting standards and definitions would not be feasible due to legitimate variations in objectives and the operation of different decarbonisation mechanisms.

It recommends that the framework should be developed in a way that encourages innovation, with policies enabling open and competitive markets that unlock the value of clean energy resources and technologies, and that understands business needs, with emphasis on reducing administrative burden of carbon policies where possible to ensure that industry can thrive in a low-carbon economy. Also, a whole systems approach should be adopted that uses industry expertise to support economy-wide decarbonisation, facilitate regional partnerships, promote international best practice, and encourage reshoring of industry while preventing further offshoring.

The centre says there are four components required for a simpler, consistent and coherent approach to carbon accounting. It says that monitoring, reporting, and verification should be used at the installation level. It defines an installation as a stationary technical unit “where one or more activities under the scope of EU ETS and any other directly associated activities…could have an effect on emissions and pollution”. This monitoring, reporting, and verification should be supported by expansion of UK ETS and carbon standards.

Other components include digitalisation for simplifying reporting and verification, and increasing emissions data transparency, regulatory oversight, and a complementary package of compliance-based carbon mechanisms, anchored by UK ETS. Further, the Catapult proposes a timeline for achieving the framework aligned to the Industrial Decarbonisation Strategy.

Finally, the Catapult makes recommendations that will allow Government to develop more consistent and coherent national accounting framework for industry. These include committing to establishing such frameworks, and funding the development of an integrated carbon accounting framework for subsets of industry subsectors and industrial clusters. It adds that Government should improve digitalisation and explore establishing carbon monitoring, reporting, and verification and an accounting regulator that could support accounting in industry.