An initiative to accurately measure the climate transition
Jean-Marc Béguin, Jérôme Cazes, José-Luc Leban, François Meunier, Alain Minczeles, Antoine Paille
This article was published on 17/10/2022 on Variances.eu
A prerequisite for mobilising against climate change is a precise measurement of the carbon footprint of each decision, and therefore of each product. This is impossible if each producer has to measure the entire upstream footprint alone. Cooperation between producers, experts (accountants and carbon experts) and public authorities can unblock everything. The upstream carbon footprint of a product is added to its invoice. Primary carbon producers (oil companies, foresters, etc.) indicate this on their invoices. Then the system feeds itself to the end customer: the producer’s accountant adds up the carbons on the supplier invoices and breaks them down on the customer invoices, as costs. Importers use a customs carbon scale or certified experts.
This article defends a simple idea: we will only succeed in a general mobilisation against climate change if everyone knows, in his or her personal life as well as at work, what each decision emits in carbon, as easily as we know how much it costs in euros. The idea is to build the missing link by completing monetary accounting with equally rigorous and sincere carbon accounting.
This initiative is underway. It still raises many questions, but it will be continuously enriched by the many discussions it will generate. Everyone can contribute to it on carbons-factures.org.
The double success on climate change
The harmful concentration in the atmosphere of greenhouse gases (GHGs) emitted by humans has been achieved over 10 generations (250 years). The last two generations have achieved two encouraging successes.
- The danger is understood
By disrupting the climate, GHGs degrade the Earth’s ecosystem (gradual reduction in the efficiency of natural carbon sinks, unpredictable sudden deteriorations such as the melting of the poles or the acidification of the oceans, etc.) and they degrade people’s lives (less efficient agriculture, degraded health, sudden migrations, heavy equipment such as dykes or air conditioning).
- Governments are mobilised
Most governments have committed to reducing annual net GHG emissions below what the ecosystem can absorb. The European Union countries want to achieve this within a generation (2050): through the 2019 Green Deal, each country has committed to the necessary annual reductions in its carbon footprint, the 2050 Trajectory.
The carbon footprint measures the net additions of GHGs to the atmosphere by a human activity: we will speak of the footprint of humanity, or the footprint of a supply (what it took to produce it), or of a person, a company, a country (what its actions have added or removed in a certain period). The unit is the kilo of CO2 equivalent, which takes into account all greenhouse gases (or the million tonnes of CO2 equivalent or MtC).
WARNING, there are two ways of calculating the carbon footprint of a country and its evolution, its trajectory. The political approach of the Paris Agreement or the Green Deal is concerned with the location of GHG emissions (in France, for example). The economic approach focuses on the location of demand (the demand of the French). The demand approach is the one used in the carbon footprints of companies and in this article: it better reflects a country’s contribution to the global carbon footprint. It is higher than the territory’s contribution because France has been relocating the production of the most carbon-intensive products for 30 years, mainly to Asia.
The demand trajectory is changed to the territorial trajectory by adding the footprint of French exports (what is manufactured in France for other countries) and removing the footprint of French imports (what is manufactured in other countries for French demand).
The 2050 Trajectory assumes a complete break in the evolution of the national footprint
Between 1995 and 2017 (the last year accurately estimated), the carbon footprint of French demand remained roughly stable: from 650 MtC to 633 MtC. The Trajectoire 2050 aims to reduce the footprint to 80 MtC by 2050, a level that scientists believe can be absorbed by the ecosystem. This is a division by 8!
The latest provisional estimate (2020) shows a clear drop to 552 MtC. It remains to be confirmed post-Covid 19 and to achieve an additional reduction of 16 MtC for each of the next 30 years.
Rapid general mobilisation is essential but impossible without the right information
Some GHGs remain in the atmosphere for hundreds of years. The quality of life of future generations will therefore inevitably suffer from the degradation we are already experiencing, from the inevitable degradation associated with the 2050 trajectory itself and from any delay in this trajectory. The 2050 Trajectory must therefore be respected every year, since any delay will burden the following years.
However, collective mobilisation is only possible if each actor has a precise and sincere measure of the GHGs it uses. One condition for this is that each offer must display its carbon footprint, i.e. its producer must calculate its footprint and make it known. Producer » is understood in the broadest sense of the term: company, farmer, bank, administration, etc.
This is impossible today. A producer cannot calculate the accurate and truthful carbon footprint of his offer, nor can he easily communicate it. Indeed, to do so, he needs to know the footprint of his suppliers, and they themselves need the footprint of their own suppliers, and so on. It’s a vicious circle, and making approximations (like the large producers who produce carbon footprints) removes the precision and makes one doubt the sincerity of the measurement.
Transposing the universal language of monetary accounting
The strength of monetary accounting figures is that they are both individually consistent (company or household accounts) and collectively consistent (national accounts, economic policies, etc.). At both levels, the figures come full circle, one person’s expenditure is another person’s income, one person’s savings are another person’s investment, and the accounts are reconciled with each other. Professionals in statistics, accounting and finance are dedicated to producing and controlling these figures, which enable all actors to count monetary exchanges.
Although this universal accounting measure has certain shortcomings (which are not the subject of this article), it ensures the establishment of prices and allows decentralised decisions on production, consumption and financing by 8 billion human beings and hundreds of millions of institutions.
Climate change requires investment in such decentralised, universal and rigorous accounting. It would make it possible to count carbon exchanges with the ecosystem, and to establish carbon footprints as precise as monetary prices. The simplest way to do this is to use monetary accounting as a model.
The Carbon on the Invoice initiative applies the solutions of monetary accounting to carbon accounting
If producers cooperate in measuring their footprints, everyone can easily recover the precise carbon footprint of their production.
1. Primary carbons are produced by a minority of producers (hydrocarbons, livestock, etc.): they are measured according to scientific rules.
2. Imported carbons are measured from a customs carbon scale (or from accredited experts) built from bases such as those of the Agence de l’Environnement et de la Maitrise de l’Energie.
3. All the other carbons come from suppliers: if the producer’s accountant adds up all the carbons to break them down on the customer’s invoices, the footprint circulates on the invoices (soon to be all electronic) all the way to the final customer.
Two precautions are necessary. To ensure a rapid and equitable roll-out, it is in the interest of the community to compensate for the extra accounting work for SMEs. And if each producer transmits the upstream footprint of its production (what specialists call the upstream scope 3), hydrocarbon producers also count the downstream footprint of carbons burned further down the cycle.
So a gas buyer already has all the carbons that gas can give off in his invoice and he automatically passes them on to his own customers, whether he burns the gas or sells it. And if he insulates his plant better, he reduces his gas invoice and his footprint.
The producer’s accountant adds the carbon footprint to the monetary accounting information, in a new framework, that of Universal Carbon Accounting or UCA, a new branch of accounting (see the article by François Meunier).
All the accounting rules applied to monetary flows are transposed to carbon flows: from the depreciation of a machine’s carbons over several years, to the consolidation of a subsidiary’s carbon accounts, to the cost accounting rules that break down costs between products.
For the system to feed through invoices, the input carbon footprint must be integrated into the standard electronic invoice record (scheduled for full roll-out to all VAT-registered businesses by 1 January 2026).
Producers and consumers measure their annual contribution to the 2050 Trajectory and could continuously improve it
Attaching their footprint to all products or services supports the decisions of all actors. It also provides them with a measure of their annual climate contribution to the 2050 Trajectory, positive or negative.
- The producer’s climate contribution
Its accounting gives the producer the annual footprint of its production, which is the footprint of its sales. Is the annual variation of this footprint the producer’s annual contribution to the 2050 Trajectory? For some this is obvious, for others it deserves a collective debate. There are three ways in which a producer can reduce its footprint from one year to the next: by lowering the carbon content of each product in its range, by increasing the share of its sales of the least carbon-intensive products, or by reducing its sales volume. The first two ways have a positive impact on Trajectory 2050: the producer’s action is good for the community. This is not the case for the third way, which would justify measuring the carbon performance of a producer by removing the variation in its sales volume.
Consider a producer of one million desserts at 10 carbons per piece and one million desserts at 20 carbons per piece. The producer can improve its footprint by lowering the carbon content of each product, or by encouraging its salespeople to offer the first product instead of the second. In both cases, this effort will be reflected in the collective trajectory: the performance measure has been aligned with the collective interest. The producer can also sell less, but there is no longer alignment. Apart from the fact that it seems difficult to mobilise a producer on a drop in sales, it is not certain that this drop is good for the 2050 Trajectory: everything depends on what replaces his production in the budget of the customer who has stopped buying his dessert: it could be another dessert at 30 carbons a pop.
- The consumer’s climate contribution
Bank statements give each consumer the footprint of his or her consumption and therefore its variation over the previous year: it is sufficient for electronic card payments to include the footprint of what is paid. This variation is his annual contribution to the Trajectoire 2050. Each individual is made responsible for preferring the same product with less carbon (one pot of yoghurt rather than another…) or for replacing one product with another that has less carbon (saving money by driving less quickly…).
Publicising annual footprints and contributions triggers a virtuous competition of carbon reputation, particularly between large institutions
The competition of carbon reputation leads a producer to pay attention to the ambition of its annual contributions (especially for large institutions). As a consumer, it leads individuals to favour the brands and institutions with the most ambitious annual contributions. And as a citizen, it leads him to orient his votes according to the footprint of the administrations and the annual tax contribution, which can easily be calculated from the invoices of the administrations’ suppliers.
The role of politicians
It is up to politicians to build the collective agreement to take on the costs of this new accounting component. These costs are marginal in relation to the challenge of the climate transition.
It is also up to politicians to imagine and build the compromises that this accounting makes possible with all the players. Courageous compromises are impossible as long as we do not correctly measure the contributions of everyone, especially the most powerful players: it is therefore the slow race of selfishness. A precise and sincere measurement of contributions unblocks compromises. In particular, it allows for dated commitments with constraints in case of delay.
At the international level, the strength of this approach is that it can be applied to only one country, that it can be transposed to Europe and then to all the other countries, and that it helps the countries of the South to do their share, since the North assumes its responsibility for their carbon exports linked to its demand.
One limitation of the approach is that it synchronises production and consumption decisions around the 2050 Trajectory, but that this is insufficient: the Trajectory can only succeed if all financing decisions are also synchronised. This is the subject of another article.
(sources: Insee, Citepa, Eurostat, Customs)