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A new way to count greenhouse gas emissions

Regulators normally only keep tabs on the climate-bashing emissions produced within a country’s territory—discounting or even completely ignoring the carbon emitted during the manufacturing and shipping of imported goods. Sweden is bucking that trend with an ambitious new policy

Sweden’s plans may act as a catalyst for other markets to follow suit


SUPPORT POLICIES
Sweden’s plan to count consumption-based emissions requires supporting policies to reduce demand for high emitting products

SET AN EXAMPLE
Other countries considering similar packages will watch Sweden’s progress closely

KEY QUOTE
There is a very strong fairness argument to shift the current logic on its head and place the burden of mitigation on consumers—after all, demand for such products is what ultimately drives their production


Consumption-based emissions are the shadowy underbelly of climate policy. They are difficult to calculate, hard to regulate and provoke all sorts of questions about who is actually responsible for them. A lack of international standards on how to measure embodied carbon and the absence of legal frameworks in place either to discourage or ban imports that do not stack up to certain green credentials are only part of the problem. Data is either patchy or non-existent. However, the European Geosciences Union estimates that 22% of global CO2 emissions are produced by goods, which are then consumed in a different country. The scale of that problem and the uneven international response to joint obligations under the Paris Agreement mean that consumption-based emissions will quickly become an issue which governments will have to factor into their policymaking sooner rather than later. For countries that have already written net zero emission targets into law, it will be an even more pressing issue. Sweden is one of those countries and is firmly at the forefront of climate ambition, aiming to be net-zero emissions by 2045. In April 2022, it became the first country in the world to tackle the issue of consumption-based emissions. Under a plan supported by the parliament’s environment committee, imported and exported emissions will be included in Sweden’s climate accounting and will need to reach a net-zero level by 2045. It is estimated that around 60% of the country’s total emissions footprint is produced outside of Sweden, so lawmakers face a mighty challenge to get those figures off their books. Extra details about how to factor in the beneficial effect of Swedish exports, as well as international aviation and shipping, will still need to be worked out and adopted by the government.

POLICY DESIGN Naturskyddsföreningen, the Swedish Society for Nature Conservation, which has pushed the government to account for the country’s overseas impact for a number of years, described the decision as historical”. The society, however, warns that the package will be undermined if the government does not design policies that actually reduce demand for emissions-intensive imports. Everything from taxes on the most emitting products and tax exemptions on repairs to public procurement and extended producer responsibilities,” says Kristina Östman from the society. Swedes are well-placed to embrace attempts to change behaviour and consumption habits. According to a European Investment Bank survey from 2021, 76% of respondents are in favour of those kinds of climate policies—up from 70% just one year prior. The same poll finds that 66% are in favour of taxes on products and services that contribute most to global warming. Around 90% of Swedes want a minimum five-year-long warranty on all electronic goods and for short-haul flights to be substituted for train services.

INTERNATIONAL INFLUENCE Reaction to Sweden’s step into the unknown has been largely positive but the immediate analysis about what comes next and what knock-on effect it might have is rather mixed. Östman points out that consumption-based emissions will have to fall by between 66% and 77% for the net-zero target to be met, with the rest taken care of by Sweden’s green exports. While it’s true that exporting Swedish products with low emissions might reduce emissions somewhat elsewhere, it will not be possible to calculate exactly how big the supposed gain is,” Östman explains. Others have hailed the development. Ignacio Arroniz Velasco and Jonny Peters from environmental think tank E3G say Sweden’s plans are a tectonic shift in how mitigation responsibilities are allocated in international climate politics”. There is a very strong fairness argument to shift the current logic on its head and place the burden of mitigation on consumers—after all, demand for such products is what ultimately drives their production,” Peters and Velasco say. Behaviour change at home will be one prong of Sweden’s strategy while affecting climate policies in other countries will be the other, arguably more important and more challenging, prong. In Sweden’s case, nearly 60% of the emissions that originate overseas are embodied in products and materials shipped in from other EU countries. The current appetite in Brussels’ corridors of power for more ambitious green policies gives Stockholm’s lawmakers an opportunity to push for changes. Upcoming negotiations on renewable energy and energy efficiency targets, as well as policies such as emissions trading expansion into the transport sector and changes to how energy is taxed will be key battlefronts for the Swedes.

LIGHT THE PATH Whether Sweden’s new policy will be a catalyst for other countries to start tackling their overseas emissions is a bone of contention between energy experts. According to Velasco and Peters from E3G, there would be a significant shift if all EU countries follow Sweden’s example. But it seems that not many countries are at that stage yet. Simone Tagliapietra from Bruegel, a think tank, says, Emissions embedded in trade do represent an important issue. And while this is important to understand our carbon footprint, I do not see an appetite now to change official reporting.” However, Elisabetta Cornago from the Centre for European Reform, also a think tank, points out that ongoing talks on policies like emissions trading in the transport and heating sectors, plus energy taxation reform, are directly linked to consumption emissions. Debates on this may prompt a rethink of the way high-level emissions targets are set,” she says. As it increases ambition in climate action, it may nudge other countries that want to cast themselves as climate leaders to follow through,” she adds. Sweden’s neighbour and fellow green-policy advocate Denmark at first seems to fit that description. But according to Jacob Sørensen from Danish environmental group NOAH, the government is nowhere near designing or announcing a consumption-based target. He also rejects the idea that Denmark might seek to mirror Sweden’s policies. The introduction of aviation passenger tax in all our neighbouring countries, including Sweden, has for instance not led to its introduction in Denmark in spite of massive debate,” Sørensen explains.

FRENCH FANCY Germany and France, two of Europe’s largest economies, make or break climate policy within the bloc. The Bundesrepublik has tended to view emissions accounting as an EU-level issue. However, Olaf Scholz’s new government, which includes the Green party, may yet have a rethink in the coming months. Meanwhile, France’s High Council on Climate, an independent executive body created by President Emmanuel Macron in 2019, recently published its own report on French climate policies and it sheds some light on how consumption-based emissions are treated. The report estimates that France’s total emissions are about 70% higher when imports are factored in and that those emissions have been steadily rising since 1995. Although the council stops short of recommending that the government set a target similar to Sweden’s, it does make a number of suggestions that will probably be adopted following Macron’s re-election on a platform that leans heavily on climate promises. Those recommendations include making sure that EU trade deals include mirror clauses that guarantee imports are produced to the same standards as domestic wares, as well as developing a carbon score” that would tell consumers how green their purchases are. The council estimates that only 25% of France’s imports are from countries that have a carbon-neutrality goal, so trade patterns either have to shift or diplomacy efforts must focus on convincing commercial partners to match the EUs ambition.

TRANSPORT TARGETS To meet its Paris Agreement obligations, France should also make sure that international aviation and shipping are included in its 2050 target. Sweden is one of the only countries to have gone that far, according to shipping expert Faïg Abbasov from clean mobility group T&E. The geographical scope, namely 50% of inbound and outbound emissions, is well-chosen [by Sweden] and will create enough incentives for other nations to follow suit. Sometimes you need just one brave country to lead the way and it seems like Sweden might be the flagbearer on this ambition,” Abbasov says. The United Kingdom was also advised by its climate council to take into account shipping and aviation emissions in its sixth carbon budget, which will run from 2033 to 2037 and which was given the green light by parliament last year. According to Velasco and Peters from E3G, it is feasible the UK might be the best-placed country to follow in Sweden’s footsteps when it comes to taking into account consumption-based emissions. Sweden was an early leader with its net-zero target. The UK followed them in 2019, and the EU after that. So you could envisage a similar pattern if the inclusion of consumption emissions is viewed as part of the logical trajectory of net-zero policymaking,” they suggest. Annika Hedberg from the European Policy Centre believes targets like Sweden’s would encourage measuring the problem and progress on achieving it.” Measuring the problem, though, is currently a problem in itself.

NUMBER CRUNCHING A major issue with consumption-based emissions counting is the lack of data and international standards to govern what countries monitor and record. Sweden’s environmental parliamentary committee suggests the country’s national statistics office should collect all the necessary data and that the Swedish Environmental Protection Agency should be tasked with working out the right methodology. The two authorities would also be in charge of compiling annual reports on the impact of Swedish exports on global emissions. Those records would then be used to work out the net size of Sweden’s full emission footprint. France’s government has also been advised by its climate council to contribute to standardisation efforts and attempts to set methodologies. The council’s report explains that an exhaustive assessment is currently impossible” due to lack of data but backs initiatives that seek to curb the import of products linked to legal and illegal deforestation, for instance. An EU plan to ban those kinds of products from the single market is currently running the gauntlet of the bloc’s legislative cycle and as the current chair of the council of ministers, France is doing its utmost to broker a deal that is high in ambition. The EUs monitoring, reporting and verification (MRV) regulation might also help unlock how data is collected, as it obligates shippers to record their fuel consumption, CO2 emissions and average energy efficiency, so Brussels can keep tabs on the sector. Abbasov says the MRV shows that creating a functioning framework to collect good quality data is not a tall order” and that the main block is not technical but political. Indeed, the MRV might end up being a template for other climate-linked datasets, especially if the EU is able to provide technical assistance and open-source resources for other countries or even regions.

HEAVY HITTERS Further afield, a new partnership between the EU and United States, primarily aimed at tackling China’s overproduction of materials like steel and aluminium, might also have a role to play. The two sides have agreed to share data and work together on setting a common standard for how embodied carbon is calculated. This will feed into other policies such as the EUs carbon border adjustment mechanism (CBAM), an environmental anti-dumping scheme that will slap levies on certain imports that do not meet certain sustainability criteria. Mohammed Chachim, a Dutch MEP in charge of leading the European Parliament’s work on the CBAM proposal, believes it is positive that consumption-based emissions are getting more attention but points out that there are many more hurdles to overcome. Unfortunately, these emissions are extremely complex. Parts and materials often leave and re-enter a country multiple times before ending in a final product,” Chachim explains, citing his homeland as a case in point due to its big international ports. Instead, the MEP believes that policies like the CBAM are the way forward. This is an excellent way to start and then we can, later on, extend this system to finished goods,” he says. The draft policy would cover materials like steel, iron, aluminium and cement. This is where Chachim sees a real role for the EU as a standard-setter. The EU can definitely increase efforts in looking for internationally-recognised methodologies with trading partners. A next step would be to develop a reliable consumption-based accounting standard,” he says. Chachim’s work on carbon border taxation bore its first fruit in late April when the Parliament’s influential environment committee voted in favour of his report, which will extend the initiative to other imports such as ammonia and hydrogen. A full sitting of MEPs is expected to rubber-stamp it in June 2022, before talks with governments start in September. •


TEXT Sam Morgan