By Ahmad Ali Shariati, PhD researcher at the University of Sussex, and Laurence Teillet, PhD candidate at the Nottingham Trent University.
In 2018, in the case of ‘People v. Arctic Oil’, Norwegian judges held that the State does not have “any duty to take measures to compensate from the effect from oil and gas exported to other countries” (Shapovalova 2020). This decision and its implications were a real earthquake in the sphere of International Climate Change Law.
The international climate change regime is composed of three significant agreements. The United Nations Framework Convention on Climate Change (UNFCCC), as its name indicates, is a framework convention laying down the main objectives of the international community in terms of climate action. The Conference of the Parties (COP) is the decision-making body of the UNFCCC and is convened every year. The implementation agreements of the UNFCCC (the two most important being the Kyoto Protocol in 1997 and the Paris Agreement in 2016) are negotiated and signed within its framework.
The main goal of the UNFCCC is straightforward: stabilising greenhouse gas (GHG) concentrations at a level that would prevent dangerous anthropogenic interference with the climate system. The Paris Agreement clarifies that, to meet this objective, it is necessary to hold global average temperature increase to well below 2°C above pre-industrial levels and pursue efforts to limit the temperature increase to 1.5°C above pre-industrial levels.
As rightly explained by Jing-Li Fan et al., “[…] accounting the national emission inventories for each country is not only essential to understand the source of GHG emissions but also helpful to provide a premise for carrying out climate negotiation agreements and mitigation actions.” (Fan et al. 2016). However, in an ultraliberal Global Village, it can be complex to allocate responsibility for emissions: a commodity can be produced in one country, travel the whole world, be consumed in another State, and be disposed of in yet another. Who should be held accountable for the GHG emissions linked to this commodity throughout its life?
To answer this question, the UNFCCC differentiates between three “scopes” of emissions (Franzen and Mader 2018). The expression “scope 1 emissions” covers the emissions linked to the initial production of the commodity. “Scope 2 emissions” relate to the emissions generated through the transportation of the commodity. Finally, “scope 3 emissions” are the ones arising from the final consumption of the latter. By distinguishing between different scopes of emissions, it is possible to allocate responsibility to different countries for the same commodity.
Who is held accountable for what? The UNFCCC, upon recommendation of the Intergovernmental Panel on Climate Change, has chosen a “production-based accountability” system. Under this model, the State producing a commodity (the ‘producer State’) will be held accountable for all the emissions linked to the initial production and transport of the latter (known, respectively, as scope 1 and scope 2 emissions). However, emissions related to the final consumption of this commodity (scope 3 emissions) are attributed to the State consuming the latter (the ‘consumer State’). This scheme has the advantage of simplicity and is in line with customary international environmental law: a State is responsible for what takes place within its own territory.
However, the production-based accountability system (PBA) is not without opponents. Jing-Li Fan et al. clarify the debate: “[…] the production-based accounting system has received much criticism and questioning due to its ignorance of carbon leakage issues in the international trade” (Fan et al. 2016). Opponents of the PBA often advocate for a switch to a consumption-based accountability system (CBA), where the consumer State would be held accountable for all three scopes of emissions linked to a commodity. This approach would lessen the burden on producer countries, which (arguably) have no use for the commodity produced.
Additionally, the PBA has been particularly discussed for its propensity to cause carbon leakage: developed counties can ‘offset’ their GHG emissions by transferring emission-intensive industries to developing States, which may use less clean production methods. An example would be a developed country from western Europe that would prefer to buy and import fossil fuel for its energy consumption or import goods and commodities rather than extracting, producing and refining those resources inside their home territories (the United Kingdom with gas, for instance – Roberts 2022; Office for National Statistics 2022). In this sense, the PBA system benefits producing countries in generating revenues. In contrast, consuming countries would be interested in receiving cheaper energy with less legal burden and accountability regarding the GHG emissions in the face of the international climate change regime.
The CBA, on the other hand, also gives rise to issues in terms of leakages. Indeed, a CBA approach would require the consuming country to measure emissions in all areas of the value chain, sometimes of entities (other States and corporations amongst others) distant from any form of control or influence by the consuming State (Shariati 2022, forthcoming; Patchell 2018). The calculation is also particularly complicated, making errors in the process more likely (Lui 2015).
The best example to illustrate the difference between the PBA and the CBA is probably China. As China exports a lot of its production, its national emission inventory changes significantly depending on which GHG emissions accounting method is chosen. Indeed, it is accountable for 24.4% of global CO2 emissions under the PBA. In comparison, it would be only responsible for 20.8% under the CBA (Fan et al. 2016) – which is almost 4 points lower, a dramatic difference in practice, knowing that it corresponds to more than the annual emissions of countries like Japan or Brazil (respectively 2,6% and 2,1% of worldwide greenhouse gas emissions contribution – Center for Climate and Energy Solutions 2021). China is taken here as an example to demonstrate the difference that changing accounting methods makes but has never publicly advocated for a switch.
Therefore, producing countries might have an interest in switching accounting methods. The People v. Arctic Oil case perfectly illustrates this growing movement: Norway does not want to be held accountable for the emissions linked to the oil and gas exported to other countries since it is not consuming the latter. However, this decision does not conform with the international climate change regime, and the CBA rationale presents many limits. The most salient problem, apart from the pure calculation complexity of this approach, is that it would remove all sense of responsibility from producer States. Jeremy Moss rightly mentions that “[i]f it is the case that exported fossil fuels are exported in the knowledge that they cause significant harm to human interests and the practice could be avoided, then resource-exporting nations have a prima facie responsibility for the harms that they cause through the export of resources” (Moss 2016).
However, and it highlights the subject’s topicality, the literature has demonstrated that the CBA approach could encourage producing counties’ global participation in mitigation efforts and stimulate involvement in Conferences of the Parties (Afionis 2016). Indeed, with less blame and shame for their exports, producing countries might be more inclined to take on domestic mitigation targets for what they actually consume within their own territory only. Some groups of countries are known for being particularly tough during climate negotiations, blocking substantial advancements – the Like-minded developing countries group, composed, for instance, of Saudi Arabia and China, is a textbook example. While they did not explicitly mention their interest in switching accounting methods, their declarations during COP26 in 2021 could hint at this.
COP26’s results were underwhelming. While there were real hopes for an agreement mentioning a phaseout of coal objective, the final version only mentions the necessity of continuing efforts to phasedown unabated coal. Despite this rejection of the coal phaseout, especially by producing countries, many countries pledged to reach net zero in the coming decades. One of the surprises was Saudi Arabia’s pledge to reach net-zero emissions by 2060 while also maintaining its role as a leading oil and gas producer (Al-Atrush 2021). Saudi Arabia has already declared that it would not take responsibility for the carbon emitted when the energy it produces is consumed (Al-Atrush 2021) – which is when the vast majority of emissions are generated. Therefore, it has confirmed applying at least a PBA approach. However, given the audacity of Saudi Arabia’s pledge, we can wonder if it will not advocate or switch to a CBA system in the coming years, which would be less burdensome on its national emission inventories given that it exports most of its energy production. One could argue that, without this switch, Saudi Arabia’s net zero pledge is illusory for two reasons. First, Climate Action Tracker rates the country’s pledges as highly insufficient to meet the Paris Agreement’s goal. Second, it highlights the lack of information about the net zero target, for it cannot be satisfied with the current commitments of Saudi Arabia.
Not only has the CBA been discussed for its propensity to generate more engagement in climate negotiations from producing countries but also because it would enable the international community to understand and acknowledge how commerce affects global emissions (Afionis 2016). It would also address the issue of developed countries reducing their overall emissions by simply transferring their emission-intensive industries to other countries (Afionis 2016). Additionally, it has been argued that a CBA would force consuming countries to assume responsibility for emissions arising from aviation (excluded from national GHG inventories under the PBA) by resolving uncertainties associated with allocating responsibility for the international transport of goods (Afionis 2016).
This piece does not aim to advocate for a switch to the CBA system – which also presents many difficulties. Instead, its goal is to demonstrate that the question has been overlooked. At the same time, we believe that opening the debate about various accountability systems (PBA and CBA only being the two most famous ones) could create a renewed investment from States in climate negotiations. Allocating responsibility, deciding who should be responsible for what, is a political choice. Accountability methods are not immutable and deserve to be openly debated.
The shift can come if the international law finds it appropriate and regulates the proposed theory of modifications in the international agreements. However, this should not be disregarded that, like any other discipline, sometimes one size does not fit all legal issues as well, and especially when it comes to apportioning responsibility for GHG emissions. The debates around this topic could potentially conclude that given the primacy of issues like energy security, climate justice and the goals that the world pursues together (e.g., resilience (Yarina 2018), adaptation (United Nations 2022), and mitigation (UNEP 2022)), international agreements on climate change could be revisited to endorse the model that works the best.
If countries ultimately decided to change accountability methods in the future, it would impact all States: it is not an individual decision. More research is necessary to develop an accountability method addressing the issues linked to PBA and CBA and allocating responsibility fairly and equitably. It is in this sense that interdisciplinary scholarship has developed, inter alia, the extended responsibility scheme (Pouikli 2020), the beneficiary pays policy (Kirby 2016), the income-based accountability method (Marques at al. 2012), the shared producer and consumer responsibility (Gallego and Lenzen 2006) and other different and middle-ground approaches.
What were we expecting from COP27 on greenhouse gas emissions accountability? In October 2022, members of the European Parliament presented a motion for a resolution on COP27. This motion recalled the importance of the full involvement of all Parties in the need to limit the global average temperature to 1.5°C, which requires addressing the issue of vested or conflicting interests. As mentioned above, one way to mobilise producing countries is to open at least a debate about accountability methods (Afionis 2016) – as People v. Arctic Oil and Saudi Arabia’s pledge can demonstrate. However, this possibility did not seem envisaged by this motion from the European Parliament. While it did mention the necessity for consumer countries to acknowledge the emissions embedded in the commodity they are importing (scope 1 and scope 2), the European Parliament’s motion seemed to prefer a carbon tax on imports rather than opening the debate around accountability systems. This stance is not surprising, for the European Union would not benefit from this switch since most of the union members are consumer States reliant on the products imported from other countries. Nevertheless, with Norway leading the discussion on the topic and being part of the European Economic Area (Shapovalova 2020) and Denmark and Luxemburg experimenting with different accounting methods internally (Caro et al. 2015; Lenzen et al. 2007), we were expecting more conversations in COP27 – especially if it triggers more involvement from producing countries.
One must clarify, however, that despite Norway’s case and Denmark and Luxemburg’s national experiments on a voluntary basis, no switch in the accountability system has taken place internationally. The rules regarding national GHG emissions inventories remain based on a PBA system for all States. Even if a switch of accountability methods occurred, it would affect all countries’ reporting to ensure cohesion: it would be a collective decision with a collective impact.
COP27’s agenda did not pay much attention to accountability. If some sessions were dedicated to reporting and enhanced transparency (see for instance the ‘Enabling Universal Participation in the Enhanced Transparency Framework’ and ‘Supporting National Reporting under the Paris Agreement’ sessions), a reform of States’ GHG emissions’ responsibilities was definitely not prioritised. Yet, the inclusion or exclusion of scope 3 emissions in greenhouse gas emissions inventories was addressed in at least one sector: corporations’ GHG emissions reporting (Oxfam 2022; Shariati 2022, forthcoming).
The number of articles, from academic publications to companies’ internal statements and NGOs reports, mentioning the need for corporations to engage across the entire value chain, reduce and report their scope 3 emissions is uncountable. This question seemed to be at the very core of COP27’s discussions around businesses’ responsibilities: for instance, Emitwise mentioned that “[…] success at COP27 looks like mandatory Scope 3” and the EU financial services chief Mairead McGuinness declared, in Reuters, “I think there is a clear recognition of the fact that companies cannot, or investors will not be able to fully understand the risks without Scope 3”. All this attention around the private sector may be a precursor to broader discussions about States’ accountability. COP27 did not seize this opportunity. However, we strongly believe that it is a matter of years until the subject becomes central: full involvement of State parties is essential to reach the highest level of climate action, and this can only be achieved if the allocation of responsibilities is considered fair by countries. Yet, as mentioned above, we can notice the first signs of hesitation by different States: interdisciplinary scholarship, therefore, needs to step in, popularise and simplify the topic of accountability and anticipate debates to ensure qualitative discussions in future COPs.
Photo by Chris Leboutillier, White and black ship on sea under white clouds (2022, Unsplash)
Greenhouse gases emissions are a problem that should be tackled with at least at COP28 in 2023. Thank you 🙏🌍
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