Energy and Climate ChangeMemorandum submitted by Small World Consulting Ltd.

Executive Summary

1. Small World Consulting has a sophisticated understanding of the issues pertaining to this inquiry, based on a wealth of experience of developing and using consumption-based greenhouse gas metrics.

2. The greenhouse gas emissions embodied in international trade are highly significant and are not covered by current production-based carbon metrics. Their omission creates a seriously distorted perspective and perverse incentive for harmful policy measures.

3. The adoption of consumption-based carbon metrics is practical. By using well established techniques and existing data sets the resources required will be modest. Further improvements will also be possible and practical over time.

4. There is growing awareness among local governments, businesses and the public of the need for the UK to adopt consumption-based metrics.

5. The benefits include:

dramatically improved ability to track the UK’s progress towards a low carbon economy;

significantly improved information to guide national policy;

encouraging and enabling local governments, businesses and others to develop consumption-based metrics and budgets and relate these to national context; and

making visible the environmental case for increased UK procurement of many goods and services, with potential benefits for the UK economy.

All of the above will better enable the UK’s movement towards an efficient, resilient and low carbon economy.

6. Adopting a robust yet practical approach will entail being transparent over the relatively high uncertainty that is inherent in consumption-based metrics.

7. Production-based metrics will still have their place alongside consumption-based measures.

Our Experience of Consumption-Based Greenhouse Gas Accounting

8. Small World Consulting has a wealth of experience in delivering consumption-based greenhouse gas metrics to organisations and helping them use this to develop value-adding carbon mitigation measures. It is clear from our work with diverse organisations that consumption-based greenhouse gas metrics are (a) practical, (b) increasingly widely seen to be important and (c) are an essential metric for informing climate change strategy.

9. Organisations we have delivered consumption-based greenhouse gas metrics for include Manchester City Council (the “total footprint” of residents and industry in Greater Manchester), West Sussex County Council (the “total footprint” of residents, industry and the County Council itself), the Lake District National Park Authority (residents and visitors), E.H Booths (The footprint of operations and foods for this supermarket chain), Taylor Wimpey (operations and supply chains for this major UK house builder), The National Trust, the London Science Museum (the footprint of an Exhibition project), over 100 SMEs. With most of these organisations we are engaged in the development of carbon mitigation strategy. We have also delivered household consumption-based metrics for several community climate challenge projects, and developed the numbers behind such online calculators as My 1010, “Show me the Carbon” (Eden Project), and the Guardian on-line. We conduct research with Lancaster University and independently into consumption-based greenhouse gas metric methodologies and their practical application. We therefore have a sophisticated understanding of the issues pertaining to this inquiry.

How do assessments of the UK’s greenhouse gas emissions differ when measured on consumption rather than a production basis?

10. Current production-based carbon metrics do not take account of net emissions embodied in international trade. This is highly significant, especially since the trend in the UK has been to import an increasing proportion of goods that have high embodied energy and carbon.

11. Very often when we import goods rather than producing them in the UK, we not only remove the embodied carbon from the UK’s production-based carbon account, but we also increase the total level of global emissions. This is because we often import from countries that have significantly more carbon intensive energy and significantly less energy efficient industries. To give one simple illustration of how this comes about, Chinese primary energy has roughly three times the carbon per monetary unit as UK primary energy (coal being both a cheaper and a more carbon-intensive form of energy than oil, gas, nuclear or renewable energy).

Is it possible to develop a robust methodology for measuring emissions on a consumption rather than production basis and what are the challenges that need to be overcome to deliver this?

12. It is considerably more difficult to make accurate estimates of carbon on a consumption basis than on a production basis. It will be important to be clear about the inherent uncertainties involved in consumption-based metrics. However, the uncertainty is more than compensated for by the improved relevance of the measure as a surrogate for UK climate change impacts.

13. Adequate techniques and data exist to make it both realistic and very practical to create usable consumption-based metrics. Several models already exist, (including one developed by Small World Consulting with Lancaster University, based upon UK government statistics).i Despite small methodological differences, each of these models offers a dramatically better surrogate measure of the climate change impact of the UK economy and society than can be achieved through production-based measures.

14. The central technique of environmentally extended input-output analysis that is used for this is well established. At its simplest, even using only UK data and applying the basic approximation that the global economy has the same structure as the UK economy, it is possible to generate a dramatically more realistic assessment of the climate change impact of UK activities and policy options than can be achieved through purely production-based carbon metrics.

15. It is also possible to do much better than this. Credible models already exist that use international data sets to quantify international carbon flows.ii Various projects are underway to develop this work further and these will be even better able to reflect the impacts of net imports from different countries and regions.

What are the benefits and disadvantages associated with taking a consumption-based rather than production-based approach to greenhouse gas emissions accounting?

16. Consumption-based carbon metrics, even based only on UK data, provide a dramatically better surrogate measure of the climate change impact of activities on every scale, from the individual and business unit to the UK as a whole.

17. Small World Consulting has first hand evidence that this is increasingly understood by a people, by businesses and by local governments.

18. As evidence of local government understanding of the importance of consumption-based metrics, Small World Consulting has been commissioned to provide consumption-based carbon metrics for Manchester City Council (covering Greater Manchester residents and industry), by West Sussex County Council (covering residents, industry and, within that, the council itself), and by the Lake District National Park Authority (covering residents and visitors).iii These metrics have led to or are leading to the adoption of consumption-based local carbon budgets and these in turn contribute to the UK’s efforts to build an efficient, resilient and low carbon economy.

19. Increasingly widespread understanding among businesses of the importance of a consumption-based approach is reflected, for example, in our corporate work, including for Booths Supermarkets, Taylor Wimpey Plc and many others. Our client base represents only a small part of the momentum gathering throughout UK industry for consumption-based metrics. For many businesses, the vast majority of emissions are embedded in their supply chains, and their inclusion in carbon analysis dramatically open up the scope for mitigation action, including supply chain management, sustainable procurement and resource efficiency.

20. At an individual level, the public has an instinctive understanding of the need to attribute indirect carbon to activities, items and lifestyles. One strand of evidence for this has come to me personally through the ample feedback on my book “How Bad Are Bananas? The Carbon Footprint of Everything”,iv and through numerous public speaking events. It is clear from this that the concept of consumption-based accounting is almost universally accepted. In fact it is instinctive to include both direct and embodied emissions when considering carbon footprints. Three examples of the many organisations that actively reinforce this perspective are the Eden Project, the Guardian and 10:10.v It is also clear that the inadequacies of the UK’s production-based carbon account as a measure of the UK’s climate change impact are increasingly popularly understood.

21. As the UK takes increasing steps to reduce its carbon emissions, production-based metrics, used on their own, will provide an increasingly perverse incentive to off-shore our impacts and in doing so, we both hide them and often multiply them.

22. There is a strong environmental case for more local sourcing of many goods and services, compared to existing importing arrangements. Consumption-based metrics make this case visible and make the environmental case for increased UK sourcing easier to defend. This has potential to bring significant benefits for the UK economy.

23. UK consumption-based metrics will help to provide a coherent framework into which businesses, local government and others can position their own emerging consumption-based carbon metrics. Even individuals will be better placed to understand how their lives fit into the national and global picture. The adoption of national consumption-based metrics will, therefore, assist carbon literacy and carbon management at every scale.

24. Production-based metrics are still useful for some purposes and it will be useful to continue these alongside production-based approaches.

October 2011

References

i Other examples include those developed by Tim Jackson at the University of Surrey and by the Stockholm Environment Institute.

ii “The Supply Chain of CO2 Emissions”, 2011, Steven J Davis, Glen P Peters, Ken Caldeira, Proceedings of the National Academy of Sciences (PNAS),
http://supplychainco2.stanford.edu/
The study was conducted by researchers at the Department of Global Ecology, Carnegie Institution of Washington, Stanford, USA and the Center for International Climate and Environmental Research—Oslo (CICERO).
Contact: Glen P Peters, Center for International Climate and Environmental Research—Oslo (CICERO), Norway; Mobile: +47 9289 1638, E-mail: <glen.peters@cicero.uio.no
Also: Carbon Trust: Global Flows
http://www.carbontrust.co.uk/policy-legislation/international-carbon-flows/global-flows/Pages/global-flows.aspx
Also “Growth in emission transfers via international trade from 1990 to 2008”, 2011, Glen P. Peters, Jan C Minx, Christopher L. Weber and Ottmar Edenhofer, PNAS early edition.
www.pnas.org/cgi/10.1073/pnas.10063888108

iii A Carbon Budget for the Lake District National Park, 2010, Lake District National Park Authority
http://www.lakedistrict.gov.uk/a_carbon_budget_for_the_ldnp_v2.pdf

iv Available and reviewed at, for example,
http://www.amazon.co.uk/How-Bad-Are-Bananas-everything/dp/1846688914

v As part of their message, these organisations all have on-line tools that promote consumption based accounting for individuals: Eden Project
http://www.edenproject.com/whats-it-all-about/climate-and-environment/show-me-the-carbon.php
The Guardian
http://www.guardian.co.uk/environment/interactive/2009/oct/20/guardian-quick-carbon-calculator
10:10: http://www.1010global.org/uk/people/carboncalculator

Prepared 16th April 2012