California is embarking on a serious carbon weight loss plan. The graph below tracks ambitious GHG emissions reduction targets through 2050 and our progress to date:
Annual emissions numbers come from California’s GHG inventory which clearly shows a decline in emissions since a peak in 2004. This is encouraging! But the inventory emphasizes GHG emissions produced within California. There are millions of tons of GHG emissions baked into imported goods we consume that don’t show up in these numbers. If we’re truly concerned about our contribution to global GHG emissions, this home-based carbon accounting is kind of like measuring GHG weight loss with one foot off the scale.Source
This recently published study suggests that current accounting practices could significantly underestimate California’s global carbon footprint. These findings have caught the attention of some California lawmakers who want to know: How different would our GHG emissions look if we tracked the emissions we consume (versus produce)?
We are what we eat (which is more than we make)
Before diving into this “consumption-based” accounting idea, let’s pay some due respect to the status quo. California’s current carbon accounting emphasizes in-state production (although it also estimates emissions from imported electricity and some imported transportation fuels). A redeeming quality of a “production-based” approach is that it is relatively straightforward to track GHG emissions coming out of our factories, power plants, and tailpipes.
Tracking the emissions baked into the goods we consume is a different story. Take your iPhone, for example. It was “designed by Apple in California”. The emissions required to keep the lights on and the espresso flowing in Apple’s Cupertino design headquarters show up in California’s production based GHG accounting. But emissions associated with the manufacture of the battery, screen, processor, camera, audio chip, plastic components etc. do not. These activities happen in China, Korea, Singapore, Japan, parts of Europe, other states, and who knows where else. Tracking these indirect emissions requires chasing GHG emissions up convoluted supply chains that span the country and the globe.
Justin Caron, Gilbert Metcalf, and John Reilly recently embarked on this kind of consumption-based accounting exercise. They estimate the direct and indirect CO2 content of domestic consumption. Their ambitious undertaking can be boiled down to three steps:
- Inputs to Outputs: They track inputs to production and trade flows across 113 countries and 50 U.S. states in 52 different sectors.
- Emissions intensity of production: They collect thousands of emissions factors (estimated tons of GHGs emitted per $ of output) from a variety of sources for each country/region/sector.
- Add it up: They combine (1) and (2) to estimate direct and indirect emissions associated with all the goods and services that Americans consume.
The figure below summarizes key results in per capita terms (using a base year of 2006).
Production versus Consumption-Based Emissions (per capita) by Region
The light blue bars show “production-based” CO2 emitted (per capita), including emissions from the production of goods that are ultimately exported outside a region. Unlike the California GHG inventory, these blue bars do not include emissions from out-of-state electricity or transportation fuel imports.
The bottom “consumption-based” bars subtract emissions embodied in exports and add CO2 emitted outside the region that is indirectly associated with consumption. One striking result: California’s total consumption-based CO2 emissions are estimated to be 100 MMT larger (27%) than emissions measured purely on a production basis because California imports more CO2 than it exports.
47 MMT of California’s carbon trade imbalance can be attributed to foreign imports, mostly in the form of manufacturing, vehicles, electronics, and transport equipment. The remainder is due to net imports from other U.S. states. It’s important to note, however, that a third of this intrastate trade imbalance (~18MMT) can be traced back to electricity imports which California already accounts for in its GHG inventory. (Thank you Justin Caron for helping me unpack these numbers!)
This important work clearly highlights the potential for California’s current carbon accounting approach to significantly underestimate our global carbon footprint. But behind these numbers are a slew of approximations and outdated assumptions. And these results tell us nothing about how this footprint has been shrinking (or growing) over time. Cue Assembly Bill 2726 which encourages California to wade further into the business of consumption-based accounting:
“We should create a full-economy consumption-based accounting of California’s GHG emissions… It would not be intended to be a device for enforcing policy, but rather a scorecard for honestly assessing how well the state is reducing its overall contribution to climate change.”
A little knowledge could be a dangerous thing?
As far as I can tell, AB 2726 supporters have in mind an exercise that builds on the state-of-the-art in consumption-based carbon accounting in order to track California’s global emissions. On the one hand, it’s hard to argue with bringing more information to this important question. On the other hand, consumption-based accounting comes with some major caveats:
- It’s crude: Input-output analysis lumps very different products into the same aggregate ‘sector’. “Electronics” can include everything from iPhones to large industrial electronics. So estimates of the inputs used to produce the goods we actually import can give us a very misleading number if our basket of imports is not representative of the larger sector.
- It’s messy: Estimating the emissions intensity of every sector in every country inevitably requires a lot of assumptions and guesswork. Even if we could precisely estimate sector-country-specific average emissions factors, the average can mask significant variation within sectors. This recent EI Working Paper shows that for the average manufacturing industry, the difference in output per ton of GHG emissions between the 90th percentile plant and the 10th percentile plant varies by more than 800%.
- It doesn’t do well with change: Estimates are based on past production processes and supply chain configurations. As the world changes (as it tends to do), so do production processes, factor inputs, trade flows. Outdated assumptions can lead to very skewed estimates.
The upshot is that even the best consumption-based accounting practices are blunt, very imprecise, and potentially misleading. The political arena does not do so well with this kind of nuance. Attempts to characterize the huge uncertainty in these estimates could get lost in the policy discourse shuffle. If California does move ahead with this accounting exercise, we’ll need to be very careful about how we consume a consumption-based inventory.