The Aldersgate Group - a coalition of some green groups, quangos and a smattering of MPs and businesses - are circulating an open letter to Gordon Brown calling for the rapid introduction of mandatory carbon reporting. Their press release can be found here (DOC).
The Aldersgate Group’s call to bring forward mandatory carbon reporting should be given short shrift. Rapidly implementing a requirement for carbon accounting would significantly increase the burden of regulation on businesses and, if the standard is not properly considered, could provide a distorted picture of the emissions and broader environmental impacts created by a given company’s activities. Any significant UK contribution to reducing emissions is dependent on demonstrating to other countries, which emit more, that it is possible to reduce emissions affordably. Ineffective and costly measures will not do that.
The Carbon Trust currently charges the smallest businesses £1,000 for certification of their emissions. Firms that consume more energy (over £50,000 worth) are charged significantly more. The Trust also advises firms to “set aside sufficient resource to be able to complete the application form, collate the evidence required and arrange site visit(s) with the assessor as necessary”. The application form and “footprint calculation” spreadsheet involve dozens of questions about everything from the amount of electricity a company has consumed (in kWh) to their number of passenger kilometres of business travel by mode of travel. Some of those questions may be difficult for a firm to answer (e.g. it is easy to imagine they may not know how many kilometres their staff travelled by plane).
The European Union Emissions Trading Scheme already imposes a substantial regulatory burden. The Regulatory Impact Assessment suggests (PDF) that it costs British firms and public sector bodies £62 million per year. Further regulation will mean increased costs for business and these are likely to be passed on to consumers, where possible, or undermine competitiveness. Some members of the Aldersgate Group may benefit if companies need help to jump through the administrative hoops this regulation would create but the broader economy would be worse off. At a time when so many businesses are struggling the last thing they need is additional regulations to comply with.
The administrative burden can be reduced by operating a simple standard to calculate emissions but that approach risks misrepresenting a firm’s emissions performance. A classic example of the complexities of carbon accounting, which Tesco has faced in attempting to put CO2 labels on its produce, is trying to compare dry and cooked chickpeas. It takes less energy to produce dried chickpeas and deliver them to the consumer but more energy is used by the consumer at home in turning them into an edible meal. There is no magic formula that can be used to simply, effectively and precisely calculate the emissions produced by a complex international supply chain.
Even if a firm’s emissions can be calculated precisely, and affordably, there are other social and environmental priorities that would not be reflected in a carbon report. Encouraging a focus on a single environmental objective, at the expense of a more holistic understanding of the environmental impacts of a particular product or technique, invariably creates new environmental problems. For example, producing paper – as a substitute for plastics – results in a massive increase in water pollution. Biofuel targets have encouraged widespread habitat destruction.
The intention of mandating carbon reporting is clearly to affect the behaviour of investors. Biasing investment on the basis of potentially misleading carbon reports would obviously be a mistake as it could create an incentive to game the reporting standard rather than genuinely seeking to improve efficiency.
Britain can only make a significant contribution to reducing global emissions if it demonstrates to other countries, which emit more, that it is possible to reduce emissions without imposing too high a burden on their economies. Rushing to push through carbon reporting standards might achieve precisely the opposite, while placing a new burden on business, and should be avoided.
