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Emissions accounting in the food sector – an appetite for trade?

A 2019 special report by the Intergovernmental Panel on Climate Change (IPCC) estimated that food systems contribute around a third of global greenhouse gas emissions, much of it coming from crop and livestock production. By 2050, this figure is set to rise by 30-40%, driven largely by growing populations and incomes, along with changes in diets.

Clearly there is a need to reduce emissions in food systems if we are to effectively limit global warming. But in order to that, one would first need to know how much emissions are produced in which part of the food value chain – a process known as carbon or emissions accounting. According to the framework provided by the IPCC, countries report their emissions based on what is emitted at home – in other words, their ‘production-based’ or ‘territorial’ emissions.

While this concept might encourage countries to invest more in climate-smart technologies that lower emissions at the production stage, it misses out on one important element: trade. More often than not, crops and livestock consumed in one country are imported from elsewhere – sometimes through intermediary trading partners who do not consume the product but are profiting from the transaction and hence bear some responsibility in sourcing from less polluting producers. By not accounting for emissions embodied in traded products – a situation known as the ‘carbon loophole’, the individual responsibilities for countries to reduce emissions may not be accurately reflected, thus undermining the targets set under the Kyoto Protocol and Paris Agreement.

Shifting away from a ‘production-based’ perspective

This situation could be addressed if one were to consider trade and consumption patterns when reporting emissions. There are several ways one can do this. For example, the multi-regional input-output (MRIO) model uses a modelling approach that assigns trade flows to final consumption and thus more accurately reflects the ‘consumption-based’ concept. Another way is to use the bilateral trade input-output (BTIO) method, which more closely relates to monetary bilateral trade data and is thus more suited for assessing border tax adjustments, trade policies, and bilateral political agreements.

The new study in Nature Communications uses the latter approach to capture the roles of not only producers and consumers in the emissions accounting process, but also of intermediary trading countries since they too benefit from trade flows. This, the authors argue, would incentivise all three stages of the value chain to produce and source their goods more responsibly. A key concept underpinning the study’s findings is the term emission intensity, i.e. the amount of emissions embodied per unit of product – and that the relative emission intensities of trading partners are one of the key factors determining a country’s overall trade-adjusted emissions.

Diets also matter

While bringing intermediaries into the picture is an important step towards closing the carbon loophole, it does not, however, mean that consumers have a ‘lesser’ role to play in lowering emissions. On the contrary, sustainable diets with a lower carbon footprint and less associated food waste remain key in bringing about effective emission reductions. The study alludes to this – for example, it notes that ruminant meat and milk products constitute the largest share of emissions embodied in trade in most regions over the past three decades.

One overarching theme that emerges when talking about trade and diets is human health, and in particular nutrient access. A study in Nature Sustainability finds that international food trade enables less economically advanced countries to access nutrients to nourish their populations. In this light, efforts to safeguard nutrient access through trade could shape – and be shaped by – efforts to lower emissions embodied in trade, for better or worse. Ultimately this could have implications for food security, a particularly salient topic given the current disruptions in supply chains and ongoing conflicts in breadbasket regions.

A future for a new emissions accounting approach?

At the time of writing, there is yet to be an international standard in calculating trade-based or consumption-based emissions and incorporating these into climate targets. However, there are signs that this is beginning to change. Sweden, for example, recently announced its plan to include consumption-based emissions into its climate targets, being the first country in the world to do so, and this could potentially set the precedent for other countries to follow suit.

The details on how this could be done still need to be ironed out – in Sweden’s case, for example, it remains unclear how emissions embodied in exports and transport are dealt with. But as trade datasets and input-output models continue to be improved, and with the growing number of studies exploring the topic, we may see, in the not-too-distant future, the development of a more systematic approach towards emissions accounting that adequately reflects trade and consumption patterns – and with that, a real impetus towards cutting emissions across the value chain.

Read the study