Carbon Budgets

Graph 1: Time series of UK consumption emissions, 1992-2025. Source: Carbon Trust [5]

4. Outsourced emissions pose a fundamental challenge to existing attempts by the UK to reduce our contribution to global greenhouse gas concentrations and arrest the pace of climate change. Their continued growth undermines what is being done domestically to reach carbon targets and stay within carbon budgets. As a December 2010 briefing prepared for Defra Ministers on the 4th carbon budget, released under the Freedom of Information Act, states: "increased emissions from UK consumption could cancel out the progress that we have made in reducing domestic carbon emissions." [6]

Allowing the impacts of British consumption patterns and import trends to continue increasing unabated could mean the UK playing little to no role in slowing global warming, and in the worst case, continuing to drive it. As a DECC Ministerial briefing from January 2010 puts it, "The energy that goes into making many consumer goods might be used in another country, but by purchasing these products, we are contributing to that energy consumption." [7] Needless to say, the atmosphere does not care where greenhouse gases are emitted.

5. Outsourced emissions have important global justice implications. The present situation results in the UK and other developed nations effectively depositing responsibility for cleaning up production processes onto developing countries, without paying the full ecological costs for the products we consume.

6. Without addressing outsourced emissions, the UK cannot maintain its reputation as a global leader in tackling climate change. The UK possesses one of the most progressive pieces of climate legislation in the world, the Climate Change Act, and has recently become the first nation to set binding carbon targets beyond 2020. But once it is understood that the UK’s successes to date in reducing emissions stem substantially from the outsourcing of industry and agriculture (and hence emissions) overseas, particularly to developing countries, these successes appear hollow. Many western countries have significant levels of outsourced emissions; but the UK’s performance is particularly poor – our consumption emissions are 34% higher than our production emissions, a ratio that puts us ahead of Germany, Japan and the USA, although behind France and Sweden. [8] Being seen as one of the countries doing most to dump the problem on other nations is a less desirable accolade, but it is one the UK may acquire if it fails to tackle the problem.

7. The continued outsourcing of emissions to developing countries comprises not only an injustice but a stumbling block to achieving a strong international climate agreement. Disagreement over how to divide responsibility for emissions between developed and developing countries continues to hamstring the UNFCCC process. China is now the world’s largest emitter, but between 23% and 34% of its emissions result from exporting goods to the rest of world. [9] Steven Davis of the Carnegie Institution of Sciences, who has conducted analysis of outsourced emissions, argues that "allocating responsibility for some portion of these emissions to final consumers elsewhere may represent an opportunity for compromise." [10] With the Kyoto Protocol set to expire in 2012, precious little negotiating time remains to agree on a successor treaty. The UK should play a leading role in helping break the deadlock by taking greater responsibility for its outsourced emissions.

8. Outsourced emissions are a problem that the government is well aware of, but has so far failed to adequately address – or even acknowledge publicly. Documents PIRC has obtained under FOI show that civil servants have been looking at this issue since at least 2004. [11] The extent of government awareness, and the breadth of advice it has received urging action on outsourced emissions, is summarised below. We follow with a short assessment of the adequacy of its policy responses to date.

9. The Committee on Climate Change’s advice for the 4th carbon budget recognises outsourced emissions are a major problem and recommends further investigation. Their report states: "Our assessment of emissions reduction from diet rebalancing raises broader questions about production- versus consumption-based emissions accounting approaches, which we believe it would be useful for the Committee to investigate in detail, both as regards agriculture and more generally." [12] A Defra Ministerial briefing on the 4th carbon budget from December 2010 states: "The Government should commission the CCC to look into the implications of considering UK emissions on a consumption rather than a production basis." [13] The Committee has also shown a long-standing interest in the issue, as its meeting minutes attest. Yet to date the government has repeatedly refused to ask the CCC to investigate the matter: at first stating it would wait to see the outcome of Copenhagen, [14] then claiming the Committee was too busy to undertake such work, [15] and most recently – in response to Parliamentary Questions from Joan Walley MP – simply refusing outright. [16]

10. Defra’s Sustainable Consumption and Production (SCP) team is a small unit whose responsibilities include accounting for the global impact of UK consumption patterns. To date, the SCP team have commissioned two pieces of research into outsourced emissions and consumption-based emissions accounting. The first of these, a study by Stockholm Environment Institute (SEI), showed the UK’s total emissions rose by 19% between 1992-2004. Though completed by January 2008, it was not released until July that year, and some controversy surrounds the delay in its release. [17] PIRC understands that a Ministerial Special Advisor attempted to block its release. To Defra’s credit, the report was published and a follow-up analysis into key drivers in consumption emissions commissioned, and finally released in October 2010. The first report recommended that "an 'embedded CO2 indicator' showing a time series of CO2 emissions from a consumption perspective (‘carbon consumption’) should be considered for publication with official UK statistics, alongside already existing greenhouse gas emission trends. This would give a more complete picture of emissions induced by UK economic activity." For two years and a half years, this recommendation was not acted upon. However, in December 2010, a contract was let to SEI to "monitor the greenhouse gas emissions associated with UK consumption" for the next five years. [18] But uncertainty remains around whether this indicator will actually be published alongside the National Greenhouse Gas Inventory each year.

Beyond undertaking research, the SCP team has supported the development of a product carbon footprinting standard (PAS 2050) and produced a number of ‘product roadmaps’ mapping out how industry can reduce the impacts of their goods and services. However, it is now clearer than ever that these policies are inadequate to the scale of the challenge posed by outsourced emissions. Furthermore, the SCP is, in the words of a recent Green Alliance report, "significantly under-resourced relative to the scale of the challenge". [19] It is not clear how far recent budget cuts within Defra have affected the SCP’s capacity further.

11. The Chief Scientific Advisors at both DECC and Defra have spoken out on the subject of outsourced emissions in the recent past. Prof Bob Watson, Defra CSA, confirmed that total UK emissions had risen and urged that "We’ve got to be more open about this" in an interview in September 2010. [20] Prof David MacKay, prior to being appointed DECC CSA, wrote about outsourced emissions in his popular book Sustainable Energy Without the Hot Air, arguing in his chapter on manufactured goods: "Should we ignore the energy cost of making the gizmo, because it’s imported? I don’t think so." His own estimates of the scale of outsourced emissions are "in the same ballpark" as an independent study by Dieter Helm, and in excess of the estimates in the Defra-SEI 2008 report. [21]

12. Both the Carbon Trust and WRAP have produced research into outsourced emissions, as discussed previously in paragraph (3). The Carbon Trust concludes that its analysis "demonstrates the importance of compiling consumption-based emission inventories and quantifying the emissions associated with international trade on a regular basis." [22]

13. The Government’s 2005 Sustainable Development Strategy enshrined the principle that "There would be little value in reducing the environmental impacts [of a product] within the UK if the results were merely to displace those impacts overseas or close off benefits at home or abroad." [23] Whether this principle has been adhered to in ensuing policy is questionable. The current Coalition government has not indicated it will be issuing an updated or replacement sustainable development strategy.

14. An extensive and increasing evidence base regarding outsourced emissions now exists, upon which the government is able to draw to develop policy. Recent academic papers on the subject include studies by the Universities of Stanford, [24] Oxford, [25] and Surrey; [26] by Stockholm Environment Institute; [27] and by researchers collaborating between institutions. [28] NGOs and think tanks who have produced analysis of outsourced emissions include Policy Exchange, [29] Green Alliance, [30] WWF, [31] and the New Economics Foundation. [32] Former Government Chief Scientific Advisor Sir David King is currently preparing research on outsourced emissions for publication in June 2011. [33] Lord Stern has spoken of his concern about the issue; [34] Lord Giddens has written about it; [35] whilst Lord Teverson introduced a Private Members’ Bill into the Lords in January 2010 to measure and reduce emissions from consumption. [36]

15. This is an issue which the Environmental Audit Committee has touched upon in the past, although it has not yet investigated it in detail. In 2008, the National Audit Office produced a report for the EAC on greenhouse gas reporting, in which it suggested: "Issues which the Environmental Audit Committee might be interested in pursuing include …. the degree to which UK policy could or should take account of consumption-based emissions estimates – bearing in mind international reporting requirements, and the lack of reliable data and additional uncertainties involved in such estimates". [37]

16. Inadequacy of the government’s policy response to date. It is plain that, despite the weight of evidence and quantity of sound advice it has received to date on outsourced emissions, the government has failed to respond adequately. DECC appear to have no civil servants working on the issue. Defra’s SCP team are under-resourced and their activities incommensurate to the scale of the problem. The government now possesses no detailed overarching sustainable development strategy that could embody the principle of taking outsourced emissions into account, and with the closure of the Sustainable Development Commission, no body to hold it such principles. Though the Green Economy Roadmap may yet enshrine such a principle, there is no certainty it will, and its release has already been delayed. The government’s repeated refusal to mandate the Committee on Climate Change to investigate is worrying and unacceptable. The Carbon Trust’s research into outsourced emissions has been invaluable but since its budget has been cut by 40%, there is no guarantee its work here will continue. Defra’s decision to commission SEI to measure total UK emissions, including those from consumption, is a welcome development – though these do need to be published alongside the National Greenhouse Gas Inventory. Lastly, and most importantly, accepting the problem of outsourced emissions exists is of course only the first step: we then, collectively, have to actually reduce them.

Recommendations

Actions in the UK

1. The government must mandate the Committee on Climate Change to undertake a full investigation into outsourced emissions. The Committee is the body best placed to advise on whether outsourced emissions should be included in future carbon budgets, and how they can be reduced.

2. DECC needs to develop a policy response on outsourced emissions as part of its updated Carbon Plan, to be published by November 2011. It must begin to devote resources to tackling outsourced emissions. Defra’s Sustainable Consumption and Production team must be given more resources adequate to the task of addressing outsourced emissions, or its responsibilities moved into DECC.

3. Government must publish measurements of the UK’s outsourced emissions annually alongside the National Greenhouse Gas Inventory.

4. The forthcoming Green Economy Roadmap and White Paper on the Natural Environment should both enshrine the principle of taking responsibility for the global impacts of UK consumption, including outsourced emissions, and not just emissions that occur within UK territorial borders. In future, all government policies need to be assessed not simply for their impact on emissions in the UK, but whether they will reduce or increase emissions overseas as well.

5. We would also welcome a dedicated inquiry into the subject of outsourced emissions by the Environmental Audit Committee.

6 June 2011