A (too) brief history of carbon performance measurement






The IPCC at the root of everything

Attention to the measurement of greenhouse gases, or carbons, began when scientists identified the link between these gases and climate imbalance (notably with Jean Jouzel’s seminal article in 1987), followed by the creation of the IPCC in 1988 (Intergovernmental Panel on Climate Change), followed in 1994 by the United Nations Framework Convention on Climate Change, whose participating countries meet once a year in COPs (Conferences of the Parties).

The need for performance measures arose with the third COP in 1997, which saw the signing of the Kyoto Protocol: the first international agreement setting a decarbonation target for each signatory country and for Europe. Targets mean performance monitoring

Scientists have defined a universal measure of weight common to all greenhouse gases: the kilo of CO2 equivalent. This measurement has become an international standard, and this is what we mean when we talk about “carbons” for short.

Since then, the link between climate and carbon made by the IPCC has been extended to the main environmental imbalances, in particular the water cycle and the extinction of species (biodiversity).

Decarbonation means measuring decarbonation performance

Since the problem stems from the accumulation of carbon in the atmosphere, the Kyoto Protocol sets out national commitments to “decarbonation”, i.e. to reduce by a certain amount each year the flow of carbon from the country into the atmosphere.

We know which carbons are linked to a direct emission, for example a car or a boiler that burns a carbon-based fuel, and we can therefore measure all the carbons emitted by the players in a country. But how do you get down to a finer level?

On the production side, we have defined two decarbonation performances, one at product level, the other at producer level.

Measuring product performance and carbon weight

The product’s performance is the cumulative carbon weight of all the emissions that have been necessary (by going back up the tree of suppliers from which the product originates) to arrive at the product as it is delivered to the customer.

Measurement of the carbon weight of products began earlier, with counting protocols based on the 1996 environmental management standards (ISO 14000) and a Life Cycle Assessment (LCA). They record the physical flow of materials and energy, and therefore carbon, throughout the life of a product. They give good orders of magnitude, but they suffer from the shortcomings of monographic studies: they are cumbersome, too cumbersome to be generalisable and annual; given the infinite complexity of a tree of suppliers, they have to make estimates very quickly in the chain based on other monographic studies, which makes them too flexible to give comparable weights from one producer to another and therefore imprecise to converge on the true weights.

Measuring the producer’s performance, changing its footprint

The producer’s performance is its contribution to collective decarbonation. It is measured as the variation in the producer’s carbon footprint, i.e. the variation in the weight of its production.

The main means of measurement has been producer performance, particularly on the initiative of financiers, who have started to track the footprint of the companies they finance over time, with the idea that this would give their performance. This demand from financiers has been reinforced in some countries by the authorities (BEGES in France).

Protocols for counting the carbon footprint of organisations have been put in place, notably around the GHG Protocol, created in 2001, and the Carbon Balance Protocol created in 2002 by ADEME. They use the same monographic approach as LCAs, but with the same drawbacks. Above all, they do not measure an organisation’s decarbonation performance from one year to the next.

Other producer performances

Organisations also use so-called multi-capital accounting methods, such as triple-capital accounting or the Care method, which give companies a broader measure of their performance by adding natural capital and social capital to financial capital. Their handicap is the complexity of implementation.

Household carbon performance

Households lack reliable and accurate performance measures to help them in their purchasing choices, in their choice of savings products or in their choice of citizens.

The carbon performance of public authorities

-Public authorities lack the measures to optimise their decarbonation interventions, whether in terms of efficiency or equity, hence the various initiatives calling for improved measurement of the decarbonation performance of products and organisations. This is particularly true of the carbon account method or carbon taxation methods such as the Climate Citizens Lobby or the Carbon Tax.

At regional level, the lack of performance measures for organisations makes it impossible to measure the region’s decarbonation performance. Field surveys collect direct emissions measurements, but we are still a long way from a reliable measure that adds up the decarbonation performance of the various players to obtain what the scientists measure.

The birth of the idea of “counting carbons like money

The shortcomings of monographic calculation methods have become increasingly apparent as we have sought to get a more accurate idea of a company’s footprint by counting not only its direct emissions but also the energy it burns (the so-called scope 1) and the electricity it purchases (scope 2) but to go as far up the production chain as possible, as in product analysis.

At the same time, the idea has emerged in a number of countries to draw inspiration from accountants’ methods of tracing product costs, measuring product performance and deriving producer performance (changes in the company’s footprint).

In Switzerland, Jacques André Eberhard, founder and director of the IT company Open Net, had the idea of transposing monetary accounting software to carbon in 2021 (see video presentation). In 2023, the project was extended to local authorities around Benoit Chambourdon and MycityCO2.

In the United Kingdom and the United States, teachers Karthik Ramanna and Robert Kaplan published in November 2021 in the Harvard Business Review a method known as E-liability, which for carbon replicates the method of measuring and verifying product costs through collaboration between accountants and management controllers along the invoicing chain. The method can be used to calculate the emissions of any product or service. The method is available through Oxford’s E-liability Institute. This approach has led to a number of academic articles, including those by Ulf von Kalkreuth and Stefan Reichenstahl.

In France, the same idea of collaboration along the billing chain emerged independently in 2022 around exchanges between François Meunier and a group of volunteers from Réconcilions-nous ! (R !). This is illustrated by François Meunier’s article, the publications of R! (2050: Success of the French Climate Trajectory!) and the creation of Carbon on invoices, a community dedicated to the idea of using invoices to move weights upstream and downstream. The year 2023 saw an increasing number of references to this approach: in forums (tribune des Echos signed by Jérôme Cazes, Alain Grandjean, Emmanuel Millard, François Meunier and Katheline Schubert, op-ed by Emmanuel Millard and François Stagier); in Carbon accounting across the board, a publication by François Meunier for the Messine Institute; in various articles in Variances magazine signed by the same authors and by Alain Minczeles, José-Luc Leban and Jean-Marc Béguin; in a communication on carbon on invoices Anne Beaufumé at the CNIS 2023 conference Mesurer la transition écologique. The approach is welcomed by the Pisani-Ferry Mahfouz report from France Stratégie for the Prime Minister and in an INSEE publication by Sylvain Larrieu on the statistics accompanying the climate transition.


Enlarged carbon accounting

By the end of 2023, the method for calculating production performance will be complete, encompassing weight performance and producer decarbonation (the variation in their footprint). A collective article specifies the formula for calculating decarbonation, which corrects the shortcomings of the current measure. The whole is described as enlarged accounting that applies separate carbon weights and monetary prices to the same quantities, using the same methods. The term “enlarged economy” is used more generally, since this approach can extend from production to consumption, from company or public authority accounting to national accounting, management and finance, and finally to the whole of microeconomics and macroeconomics.

The contribution of enlarged accounting to current carbon counting methods

The methods cited for counting decarbonation all benefit from enlarged accounting.

-The protocols for counting product and company footprints have been adopted in principle by the enlarged accounting system. This makes them simpler, more comparable and more reliable.

-Methods such as Triple Capital or Care see the enlarged economy as respecting their approach of separating the monetary and environmental components, and simplify their collection of information thanks to enlarged accounting measures.