Limiting climate change due to global warming seems simple: reduce greenhouse gas (GHG) emissions. While this seems straightforward, it isn't. Unless there are radical changes to our entire energy supply, the demands for reduction will clash with the very foundations of our consumer society. Almost everything we eat, purchase, and consume requires energy for production, transportation, and storage and is responsible for releasing CO2 and other GHG. Recent studies suggest that simply cutting our emissions 80% or even 90% below 1990 levels by mid-century will not be enough to avoid serious climatic consequences .
This challenge is changing perceptions, will place new demands on companies, and require new ways of communicating with consumers. Measuring and releasing information regarding a product's carbon footprint is coming into vogue. Questions, however, abound. The difficulty for many companies is that there are many uncertainties regarding how they should measure their GHG and carbon footprints and how they should convey this information most effectively to consumers. Strategic considerations proliferate as to the nature of the future consumer and the role in which future regulations will affect consumption patterns. It is currently unclear whether consumers will become more environmentally conscious in the future or whether government regulation will be necessary to change consumption habits. The solutions to these challenges will affect businesses' strategic playing field over the next several years.
From the macro to the micro-level, ministries and companies are placing their efforts on analyzing their countries, regions, companies, and products' carbon footprints. This is leading to many vexing and puzzling issues regarding how one actually measures a carbon footprint. In December 2007, a preliminary study by a team led by the Oxford University professor Dieter Helm has pointed to troubling trend in GHG accounting at the national level. If you employ national production-based GHG accounting methods, countries like the United Kingdom can argue that they are cutting the amount of CO2 their countries are producing. Under this carbon accounting approach, the United Kingdom will meet its 2012 CO2 reduction target by cutting its emissions by 15% below 1990 levels. However, if you look at how much CO2 UK citizens are actually consuming, then CO2 emissions have actually increased. According to Helm's preliminary research, the UK's national consumption of CO2 actually rose by 19% from 1990 - 2003 . This is the result of many factors, including outsourcing production to less energy efficient factories in the developing world that need to be transported back to the UK.
Business sectors and companies have to contend with this problem. Biofuels are the most striking example of this conundrum. In the late 1990s and early 2000s, EU and US governments, businesses, and consumers hailed first generation biofuels - made primarily from foodstuffs - as a solution for cutting carbon emissions and reducing dependence on foreign oil. The EU has mandated that biofuels should constitute 5.75% of transport fuels by the end of 2008. In the United States, a proposed energy package will require that 15% of transport fuels be made with biofuels by 2022 . This despite the fact that if we took the entire American grain and soy production and used it to make biofuels, we would only be able to cover 12% of US fuel usage.
There is, however, a problem with biofuels' carbon accounting analysis. Studies neglected to account for changes in land use - the conversion of forest, swamp, and grasslands into biofuel production - as well as the impact of refining and transportation in their equations. For example, the conversion of 10 km2 of Brazilian rainforest for the production of soybeans releases over 700,000 kg of CO2. It would take 300 years for the savings generated from the resulting biodiesel to cancel out that release .
As the above example shows, the right and most effective energy savings practices are not always obvious and are oftentimes counter-intuitive. For individual companies and the consumer, this can be a struggle to overcome. Over the last several years, it has been widely assumed that consuming local produce and products is more environmentally friendly than consuming imported ones. The idea has gained so much prominence that the term "locavore" - someone who eats only locally produced products - entered the English language in 2007. There are several websites and books that promote this idea, such as "1 ton mindre" in Denmark, the "100-mile diet," etc.
While this is the case for many goods (bottled water, for example), this is not the case for all goods. The problem is that the distance that a product has traveled - often called "food" or "air" miles - does not take into account other factors that can be more environmentally costly in terms of amount of GHG released into the atmosphere. The food mile equation does not take into account land use, the types of transportation used, water usage, fertilizer usage, local climates, and types of energy sources used to make and package the product in question. This leads to some very counterintuitive findings:
Companies are likewise discovering the counterintuitive results of carbon footprinting. Innocent Drinks is a UK drinks maker that specializes in fruit smoothies. Before instituting a carbon footprint analysis, the company's founder believed that transporting tropical fruits from Central America to the United Kingdom would be the single largest source of emissions from their production process. They were wrong.
The individual plastic bottles made from petroleum products used to hold their smoothies were the dirtiest part of their manufacturing process because each plastic bottle was responsible for taking more oil out of the ground - a result that shocked the company's founder. In response, the company developed the first plastic bottle made from 100 percent recycled materials that cut emissions by 28 percent during the manufacturing process and 8.5 percent from the overall finished product .
Many companies such as Tesco, Walkers, and Timberland have been publicizing their efforts to demonstrate their environmental credentials. Tesco, one of the UK's largest retailers, has announced that among other initiatives it will develop carbon labeling that will help consumers understand the ecological impact their consumption habits have on the environment.
Walkers Crisps in collaboration with the UK's Carbon Trust, for example, have developed a carbon footprint for the average package of potato chips. From the field to production, transportation, sale, consumption and ultimately disposal (of the bag) in a landfill, the carbon footprint for Walkers Crisps' is approximately 75 grams CO2. In the absence of proper guidelines, however, consumers have little on which to base their decisions. They lack the knowledge to put this information into context and to determine whether 75g of CO2 is a lot or a little.
This, however, is only part of the problem. Having more information is no guarantee that consumers will change their consumption habits. We currently have more information regarding the nutritional and calorie content of the foods we eat than we have ever had before. We can also see the overall effects that this has had on our eating habits. Although many people are eating healthier, the overall trend is pointing to an obesity epidemic in Europe and the United States. This casts severe doubts on our ability to rely on changes in consumer habits alone. In addition, there is currently no regulatory agency that ensures that companies are measuring their carbon footprints accurately.
To meet this challenge, researchers at Oxford University's Environmental Change Institute have recommended implementing a personal carbon allowance (PCA) - an idea that the German Chancellor Angela Merkel endorses. The PCA is type of personal carbon emitting permit that gives every individual the right to emit a limited amount of CO2, say two tons a year. Each time you purchased electricity, filled up your vehicle with fuel, or bought a flight the amount of CO2 this would release would be deducted from your allowance until it was fully expended. Once the PCA is exceeded, the end-user would be able to purchase more credits from more energy frugal individuals or pay a carbon tax. In this way consumers would become aware of the impacts that their energy consumption habits have on the global environment .
Expect arguments and confusion regarding carbon footprints.
As companies and retailers rush to provide a carbon accounting for their products, discussions rage back and forth over what is the correct method for measuring a carbon footprint. Should footprints include individual consumers as well as average carbon expenditures in production and transportation?
CNW Marketing Research, an American automobile consulting firm, developed its own dubious lifecycle analysis model - the "dust to dust" model. With this model, the CNW argued that SUVs were more climate friendly than hybrids. This claim has lead to widespread criticism from such environmental groups as the Rocky Mountain Institute and the Pacific Institute regarding the company's methods, approach, and assumptions. This report also led to confusion among the general public as to what is a more environmentally friendly vehicle.
In the future, similar arguments will arise between companies, environmental groups and governments. There is currently no legally binding requirements for producers of consumer goods to measure or provide their carbon footprint. In the future many more companies will make various claims as to improve their environmental credentials that will not hold up to scrutiny - so called "green washing." Consumer confusion will only increase. Governments will also use variations of carbon footprinting to protect domestic industries from international competition through environmental regulation. The WTO is currently not up to this future challenge.
The number of choices that consumers are forced to make are increasing. Today, an individual consumer takes into consideration the amount of calories in a particular food, its nutritional contents, and ingredients, but in the future, he/she will also be forced to take its carbon content into consideration as well.
Consumer choices will become more difficult as the consumer - especially the ethical one - is forced to rationalize between what is best for the individual, the environment, and what is socially acceptable. For example, as a consumer in Denmark, do I purchase the locally produced tomato because I think it tastes best, is ecological and is therefore healthier? Or, do I purchase a tomato that is grown in Spain, is picked while immature, and shipped to Denmark, but has a smaller carbon footprint (Danish tomatoes are typically grown in greenhouses, which are not very energy efficient and have relatively large carbon footprints)? The ensuing debate will cause many consumers to just purchase what is easiest or best fits their ethical priorities.
In the future, the PCA idea may expand to include not only energy purchases, but all consumer purchases as well. The aforementioned UK consumption example calls our consumption habits into question. Even though many Western European countries produce less CO2 today than they did in 1990, European consumers are consuming increasingly larger amounts of CO2 than they did a decade ago - the result of outsourcing production to less energy efficient factories in the developing world where the goods need to be transported back to Europe. In order to shift this trend, governments could institute personal carbon allowances for all consumer products. If a consumer wants to buy a product, the CO2 cost would have to be factored in as well as the sticker price. If you exceed your PCA, a carbon tax corresponding to the cost of carbon pollution that the product releases into the environment could be levied.