A proposal for carbon footprint development for products and materials

16.06.2021

Executive summary

Materials, manufactured products and construction contributed 32% of the EU’s total carbon footprint of 6.7 tonnes CO2 per person in 2019, and the share of imported materials and intermediate and final products was 15% – 1.0 tonnes/person (1).

Figure 1. Carbon footprint by product group amongst the EU-27, 2019 (kg per person)

The basic materials industries (iron and steel, cement, non-metallic minerals, basic chemicals, aluminium, and pulp and paper) are a cornerstone of Europe’s economic prosperity, increasing gross value added and providing about 2 million jobs, but they are also a major source of greenhouse gas emissions and represent the majority of the carbon footprint of all materials (2).

Accelerating the transition from energy-intensive basic materials industries to climate neutrality is becoming increasingly urgent. In the EU, direct (Scope 1) emissions from basic materials, such as iron and steel, cement and non-metallic minerals, basic chemicals, aluminium, and pulp and paper, account for approximately 16% of net annual greenhouse gas (GHG) emissions, while globally the amount is about 20% (3).

There are many policy options to speed up the development of low-carbon and carbon-neutral materials, such as tightening carbon footprint requirements or increasing quotas for climate-neutral materials in public procurement, creating financial incentives for producers and/or end-users and importers and allocating public funds for R&D. All these measures require high-quality, harmonised and standardised data on material/product-level carbon footprints, i.e. embedded emissions in upstream basic materials and intermediate and final products including the use and end-of-life phases. Today, the collection of these data in the EU is too slow for what is required.

This policy brief will describe the current status of carbon footprint measurement methods and the development of key progress indicators and dashboards, as well as the main requirements and proposals to accelerate them. Given the life cycles of resources within these industries, the EU target of climate neutrality by 2050 will need to be achieved within just one investment cycle.

The need for carbon footprints

Low carbon transformation requires considerable new investment. When considering an investment for a new product, companies typically ask the following three fundamental questions:

  1. Is there or will there be a demand for the new product or service?
  2. Is a long-term investment within the EU feasible and profitable, and is there a clear regulatory framework to support such an investment?
  3. Is the commercialisation of a new product or service feasible and incentivised within the EU with tolerable risk and at a competitive cost level?

There are effective policies in place with regard to questions b) and c) above. With regard to the second question, an effective carbon price will be the key factor in the long term. A mechanism like Carbon Contract for Difference would help with regard to the third question. These are described in detail in a paper by Oliver Sartor and Chris Bataille (4). Policies to address question a) require a number of improvements. In 1990, Finland became the first country in the world to introduce a carbon price (tax). However, from this policy it was learned that a carbon price alone, even a relatively high one, does not attract investment to produce alternatives to fossil transport fuels. Investments in biorefineries only came after the Finnish government introduced a minimum level of demand in 2008 – 2% initially (5).

The same logic, of forcing new demand, could also work well for materials and other new products. Public sector purchasers of materials, goods and services could introduce minimum quotas for low-carbon and carbon-neutral materials or use a gradually tightening carbon footprint as an award criterion. Tailored tax or other financial benefits could be implemented for materials that store biogenic carbon for long periods of time or have significant substitution impacts.

In the private sector, a growing number of companies and financial institutions are using Science Based Targets (6) – more than 1400 in May 2021 – and the recommendations of the Task Force on Climate Related Financial Disclosures – more than 2000 in May 2021 (7). Both methods address the carbon footprints of organisations’ individual operations, upstream supply chains and downstream value chains. A recent WBCSD report stated that: ‘End-to-end value chain transparency on greenhouse gas (GHG) emissions data will likely become a license to operate for organisations (8).’ Managing and decreasing the carbon footprint of value chains could also be used as a criterion for allocating public R&D support and green financing. In addition, it would support the EU taxonomy for sustainable activities.

Consumers are increasingly demanding sustainable products and information on the environmental impact of their purchases, especially with regard to CO2 emissions. Without product-specific data that are harmonised and standardised, it is difficult to advise consumers and reward them for climate-friendly purchases. That was why Korea started the product-specific carbon footprint development in 2010 (10). Consumers are encouraged to make low-carbon lifestyle choices and are rewarded for doing so via a Green Credit Card (11). By 2017, there were more than 15 million Green Credit Card users and close to 2000 products with carbon footprint labels.

As stated in a proposal by France (12), carbon footprint data would be vital if the Carbon Border Adjustment Mechanism (13) were to be used. Importers should pay the price of emission allowances corresponding to the carbon footprint of imported products. If carbon footprint data are unavailable, then national or sectoral average emissions of embedded carbon averages could be used as a baseline, but this would not incentivise companies outside the EU to reduce their carbon footprints.

Due to the requirements above, there is an urgent need for carbon footprints to be more widely used.

Current status of the carbon footprint development

The EU has established a methodological standard for Product Environmental Footprint (PEF) reporting, and during the pilot phase, environmental footprints have been developed for over 20 product categories (14). PEF includes Global Warming Potential (i.e. carbon footprint) as one of the main environmental impact categories, and the comparison between products is based on voluntary Product Category Rules (PCRs). An absence of sufficient strictly defined PCRs means that material producers and manufacturers are unable to harmonise how data are reported for CO2-intensive products (3).

In addition, there are some sector-specific initiatives to collect data from materials – like BAMB, Buildings as Material Banks (15).

There is no centralised database or labelling system yet. The Circular Economy Action Plan and Sustainable Products Initiative (SPI) revising the Ecodesign Directive will address these issues. PEF has been proposed to substantiate claims on environmental performance by companies.

While it is excellent that the EU started the development of carbon footprint data years ago, it needs to be faster to meet various time-sensitive needs. In addition, current development is too fragmented, and methodologies and reporting methods are not sufficiently harmonised – the PEF itself is a harmonised system, but the Product Category Rules that provide more precise guidance on how to follow the PEF method are not sufficiently detailed for key CO2-intensive products. At the same time there are a large number of schemes for Environmental Product Declarations, e.g. EPD (16), and these should at least be coordinated to produce comparable results. With regard to PEF study reports and EPDs, there is no centralised database, or labelling system, to compare PEF results and EPDs with the performance of alternative suppliers within the value chain, making both benchmarking and competition over CO2 performance across suppliers difficult. A large share of suppliers are failing to produce PEFs or EPDs, which forces downstream producers to rely on national or sectoral average emission factors to evaluate the embedded carbon in their inputs, rather than select the best performers as suppliers. Often, average emission factors are also outdated.

Policy recommendations

CLC proposals to the EU:

  • Set clear objectives and a time schedule under the Sustainable Products Initiative legislation and related sectoral regulations for the provision of standardised, reliable and comparable life cycle carbon footprint information by all suppliers of the most CO2-intensive products and value chains.
  • Define missing methodologies, for example Product Category Rules, to mandate the wide use of standard methodologies and reporting methods and a labelling system with a product CO2-intensity database solution. Begin with the most CO2-intensive final products and their upstream value chains, and then expand to more product groups.
  • Work with international private sector groups, major trading partners and the WTO to enable the application of more precise CO2 footprint data reporting and passporting tools in the relevant value chains and to ensure reliable third-party certification of these new declarations to avoid greenwashing or carbon leakage.
  • Introduce declining embedded life cycle carbon footprint limits for material-intensive final products in public procurements and other suitable contexts, beginning with the key value chains mentioned above. Such limits are essential to motivate upstream input suppliers to improve their carbon footprint performance, agree on sufficiently precise new Product Category Rules for embedded carbon footprint reporting in a reasonable time frame and provide the necessary data on their carbon footprint in a timely manner.
  • Establish an EU-wide database on national sustainable product initiatives and carbon footprint information, building upon the EU Commission’s PEF initiative.

In addition, CLC believes that this area requires clear leadership at the EU level, which will synchronise the development projects, processes and organisations to work effectively towards the chosen objectives while the necessary methodologies, reporting methods, labelling system and database solution are completed.

References: 

  1. Greenhouse gas emission statistics – carbon footprints. Eurostat, February 2021.
  2. Breakthrough Strategies for Climate-Neutral Industry in Europe. Wido K. Witecka, Philipp D. Hauser, Oliver Sartor, Agora Energiewende, November 2020.
  3. Tomorrow’s markets today: Scaling up demand for climate neutral basic materials and products. Oliver Sartor (Agora Energiewende), Eliot Whittington (CISL), Sanna Markkanen (CISL), Corporate Leaders Group Europe, The University of Cambridge Institute for Sustainability Leadership, Agora Energiewende, May 2021.
  4. Decarbonising basic materials in Europe: How Carbon Contracts-for-Difference could help bring breakthrough technologies to market. Oliver Sartor, Chris Bataille, IDDRI, 2019.
  5. Laki biopolttoaineiden käytön edistämisestä liikenteessä – The law on the use of biofuels in transport. Finland, 2007.
  6. Science Based Targets. Carbon Disclosure Project, UN Global Compact, World Resources Institute, World Wildlife Fund.
  7. Task Force on Climate-related Financial Disclosures. The Task Force consisted of 31 members from across the G20.
  8. Value Chain Carbon Transparency Pathfinder Enabling decarbonization through Scope 3 emissions transparency. World Business Council on Sustainable Development.
  9. EU taxonomy for sustainable activities. EU Commission, 2020.
  10. Policy Handbook for Sustainable Consumption and Production of Korea. Ministry of Environment, KEITI – Korea Environmental Industry & Technology Institute.
  11. Green Credit Card. Republic of Korea, 2017.
  12. How the CBAM changes carbon pricing within EU. Stefan Ambec, Claude Crampes, Toulouse School of Economics, April 2021.
  13. Carbon border adjustment mechanism. EU Commission, 2021.
  14. Results and deliverables of the Environmental Footprint pilot phase. EU Commission, 2021.
  15. Buildings as Material Banks. A Horizon project by 15 partners from 7 European countries.
  16. The international EPD

More information: Juha Turkki, Development Director, Climate Leadership Coalition, juha.turkki@clc.fi, +358 45 3461925, Jouni Keronen, CEO, Climate Leadership Coalition, jouni.keronen@clc.fi , +358 50 4534881