Carbon Measures Tackles Carbon Accounting Double-Counting

A new coalition – made up of BlackRock's Global Infrastructure Partners ExxonMobil and Santander – has been formed to establish a new framework for measuring carbon emissions.

The group, Carbon Measures, aims to eliminate the double-counting of carbon pollution in reporting and create new standards for measuring the carbon intensity of specific products and supply chains.

The initiative will be led by Amy Brachio, former Global Vice Chair for Sustainability at EY, who is now the CEO of Carbon Measures.

Carbon Measures' backers also include chemicals giant BASF SE, consultancy EY, industrial gas company Linde and Japanese conglomerate Mitsui.

This collaboration of major companies signals a potential change in how emissions reporting is conducted.

Existing carbon reporting challenges

Carbon Measures' approach represents a departure from the GHG Protocol, which is the current global standard used by the vast majority of S&P 500 companies for emissions reporting.

Critics of the current system, such as BlackRock and Exxon, argue that the framework developed in the late 1990s allows for the same carbon dioxide molecules to be counted by multiple actors in a value chain.

In contrast, those responsible for the GHG Protocol's design state that this double-counting is one of the framework's "greatest strengths" as it promotes "comprehensive" greenhouse gas management.

Carbon Measures will instead support the development of a ledger-based framework that functions similarly to traditional financial accounting.

This will track emissions as products move through complex supply chains.

"If you are buying a tonne of steel, you need to understand how much carbon went into producing that tonne of steel so that when it's sold, you're not only selling the asset of the steel but you're selling the liability – so to speak – of the carbon emissions that go along with it," Amy explains.

The framework's development is expected to take two years, with a further five to seven years to reach scale.

Amy says the group aims to expand from around 20 backers to approximately 100 with a focus on attracting companies from high-carbon industries.

Regulatory context and new standards

The initiative arrives as regulations such as Europe's carbon border adjustment mechanism apply increasing pressure on companies and investors to manage their carbon footprints.

For manufacturers, this places a greater emphasis on accurately tracking the embodied carbon in their products.

Carbon Measures plans to help design carbon intensity standards for key industrial products that are responsible for the majority of global emissions, including electricity, fuel, steel, concrete and chemicals.

Carbon Measures will also advocate for government policies that support emissions reductions and encourage the adoption of carbon intensity standards that could be used to inform corporate policies.

This could provide a clearer pathway for manufacturers to invest in decarbonisation efforts and report their progress.

Heavy industry and finance alignment

The push for a new system has found common ground between heavy industry and the financial sector.

Ana Botin, Executive Chair of Santander, says that accurate and transparent calculation of carbon emissions "is the foundation for meaningful climate action".

This sentiment is echoed by leaders in industrial sectors.

Francois Jackow, CEO of Air Liquide – another backer of the initiative – says harmonised product-level carbon intensity standards will enable investors "to reward low-carbon solutions".

Exxon's CEO Darren Woods believes that "the first step to reducing global emissions is to know where they're coming from," he adds, "Today we don't have an accurate system to do this."

The oil major has been a proponent of a global system for measuring the carbon intensity of different products for several years.

While BlackRock's GIP declines to comment, its website states that it views the clean-energy transition as the "single biggest investment opportunity" and intends to use its relationships with businesses and governments to help promote decarbonisation.

For Amy, "precise and comparable data has proven something of a holy grail" in emissions tracking.

She argues that the current approach "simply won't be sufficient going forward".

The debate over double-counting in carbon accounting remains contentious.

Proponents argue it encourages multiple parties to take action on emissions, not just one.

The ability of Carbon Measures to reconcile these different views while achieving the necessary scale of industry participation will be a key factor in its success.