Background information about the availability of imported emissions data

There is increasingly detailed emissions data available for major emitting sources - at the level of individual power plants, ships, oil rigs, and manufacturing facilities. Climate TRACE leads on this direct observation of activities where emissions occur, and has just released a 2021 dataset (1).

This has not yet translated to up-to-date data on imported emissions. Attributing the direct emissions of sources through the value chain of actors that go on to use the electricity, products and services generated by the sources is far more difficult: “the difficulty of tracking emissions from multiple suppliers and customers across multi-tier value chains makes it virtually impossible for a company to reliably estimate its [upstream and downstream emissions] numbers” (2). 

It is for this reason that, while countries do collect granular data on the volume of trade in goods and services across borders, they do not collect any data on the emissions of these goods and services. Therefore, most analysis of imported emissions relies on estimations from economic trade models and carbon intensity datasets to translate that economic activity into emissions. Unfortunately, the relevant economic models are not updated frequently. For example, our analysis of imported emissions is based on data released by the OECD in 2018 that models the global economy in 2015. The OECD has only recently updated this model, and we will look to update our analysis based on this new data-set. Even this update only looks at the economy in 2018. 

This lack of emissions data from a consumption perspective is a massive problem. But encouragingly, the political and business worlds are realising that this attribution of emissions through supply chains is vital for further progress with decarbonisation. Without it, even if some governments ban new fossil fuel projects, their countries could continue to consume fossil fuels by importing goods and products from countries where the government continues to permit companies to produce and burn fossil fuels, with many fossil fuel reliant states having no economic incentive to keep them in the ground.

The International Sustainability Standards Board (ISSB), an initiative of the global financial accounting rule-setter the IFRS Foundation, the EU, the United States Securities and Exchange Commission and the UK Treasury have all proposed rules requiring large companies to disclose “material” Scope 3 emissions in their annual reports. 

Together these present a fantastic opportunity: one major obstacle to implementing policies that reduce imported emissions, the lack of readily available accurate data about supply chain emissions, could be reduced by investor- and government-led efforts for great transparency about climate risk.

But there is another dimension to these disclosure initiatives that could mean there is a finite window for reducing the supply chain emissions. It is hard for companies to get accurate data about their supply chain emissions. Unless there is a real incentive for the data to be accurate, disclosure efforts may not make it through the final hurdles of regulatory approval or they may be watered down or poorly or slowly implemented. 

Management guru Peter Drucker once said, “If you can't measure it, you can't manage it.” But we might say that despite all the talk of disclosure: it won’t be measured (accurately) if it doesn’t matter. In other words, it might be that until there are real incentives for companies to act on supply chain emissions, no significant supply chain disclosure will happen and emissions will continue to grow in places where emissions are neither declared nor verified. If legislation to reduce supply chain emissions doesn’t happen now, in tandem with efforts to mandate disclosure, those efforts to mandate disclosure may fail, which would in turn cause people to conclude that legislation to reduce supply chain emissions is impossible because of the data it would require.

The methodology for our analysis

As explained, there is no precise way to measure imported emissions. The data we present is, instead, a best estimate of imported emissions. Our analysis uses a ‘top-down’ allocation of emissions based on trade data and carbon factors, as described above. This is not as accurate as a full ‘bottom-up’ whole life carbon assessment of every product or service purchased in the UK, but sadly this data is not available. However, the analysis here gives a high level estimate of where UK imported emissions are concentrated, and the key trade relationships and trends that we might seek to influence. The use of different databases for trade data, emissions factors and intensities will inevitably result in imprecision when estimating the overall picture. But these imprecisions have been minimised to the best of our abilities and our analysis is directionally safe.

The data for our analysis

At a high-level, the results are produced from an Extended Multi Regional Input Output (EMRIO) model with inputs from OECD's Inter-Country Input-Output tables for the world economy in 2015, which was published in 2018, and databases of emissions factors / intensities for 2015 from the likes of FAOSTAT, EUROSTAT, and UNFCCC.

A more detailed explanation would say that the model extends the OECD Inter-Country Input-Output tables with databases e.g. FAOSTAT, EUROSTAT, and UNFCCC emission inventory data to provide emissions factors or intensities that estimate the quantity of greenhouse gas emissions per unit of economic output per sector and country. Each factor in the model is an intensity of greenhouse gas emissions (in CO2e) per sector country pairing. 

EMRIO analysis is an established methodology for measuring the relationships between trade, economic output and its associated footprint, in this case greenhouse gas emissions. The EMRIO model was developed using the statistical software R, following the established and conventional methodologies. Intensities were developed for the first tier (A Matrix) and total (Leontief). For a complete worked example of these calculations, please see the EORA26 structure xls. Further information on the mathematics can be found in Miller and Blair’s Input-Output Analysis Foundations and Extensions.

Further notes on how we have presented our analysis

The model outputs are presented by:

• Origin country - where emissions were created to produce a UK good or service. The results are presented for the ten countries responsible for the greatest imported emissions. 

• Origin sector - the sector in which emissions were created to produce a good or service consumed in the UK. The original dataset uses ISIC 4.0 categorization for sectors, which we renamed and grouped for the purposes of clarity.

• Destination sector - the UK industry or area which paid for the good or service that created imported emissions. Again, the original dataset uses ISIC 4.0 categorization for sectors, which we have renamed and grouped for the purposes of clarity.

We combined our imported emission outputs with assessments of each origin country against a series of other metrics:

• Progress on climate action. We used the latest Climate Action Tracker ratings, presenting both “overall rating” and “policies & action”, using “overall rating” unless stated otherwise. The overall rating combines an assessment of a country’s: targets against a 1.5 degree scenario and a fair share allocation, policies and actions, and climate finance. Most countries’ ratings have been updated in 2022. A description of how these are assessed can be found here.
  Source for the data: © Climate Analytics and NewClimate Institute, 2009-2022, Countries, link

• Worker rights assessment from the Global Rights Index 2022. This considers countries’ compliance with collective labour rights and document violations by governments and employers of internationally recognised rights. Data is the 2022 rating with the exception of Russia for which we used the 2021 rating because it has not been given a 2022 rating. A description of how these are assessed can be found here.
  Source for the data: Global Rights Index, 2022, Countries, link

• UK spend data for specific imported commodities for 2021. This is based on monthly and annual import country-by-commodity data on the UK's trade in goods, non-seasonally adjusted and reported by the UK Office of National Statistics. Full data and descriptions can be found here.
  Source for the data: UK Office of National Statistics, Trade in goods: country-by-commodity imports, 2022, link

Our dataset

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References

(1) Climate TRACE, 2022, More than 70,000 of the highest emitting greenhouse gas sources identified in largest available global emissions inventory, link

(2) Kaplan and Ramanna, 2021, Accounting for Climate Change, Harvard Business Review, link