Climate change is one the greatest challenges we face today. As this is becoming more alarming globally, countries are realizing the impact of their current habits. In June 2021, the European Union adopted a European Climate Law, establishing the aim of reaching net zero greenhouse gas emissions (GHG) in the EU by 2050. Later this autumn the COP26 meeting in Glasgow was held. One of the interesting outcomes from COP26 is that countries agreed to close off the double counting of emission cuts by two different countries or groups. While this outcome is a step in the right direction, it highlights one key challenge yet to be solved

How can we bookkeep emissions?

To empower consumers into making the best possible decisions they need access to information of the total climate impact of a certain product or service. Price tags are an integral part of most buyers decision when comparing between products. But in the future one could imagine a carbon emissions “price tag”  on products that makes it easy for consumers to compare alternatives and hence make better choices. To achieve this you need a carbon emission bookkeeping system with a transactional granularity. Unlike the financial bookkeeping system which had has centuries to develop the carbon emission bookkeeping is just in its infancy.

But are there any practical solutions?

ERP – as an emission calculator. What if there were a way of measuring the consumption of resources in every part of a companies processes? And what if most companies already had these type of system in place? One of the ways in which a existing infrastructure could be leverage is by adding C02 as a consumption resource to a companies ERP solution. Much like costs are calculated today. By doing this companies would be able to find the hot spots of C02 emissions in there business processes and calculate the cumulative C02 emissions for each product. This information could be passed on to the buyers who would be able to actively consider the alternatives. Most ERP vendors such as SAP and Microsoft are currently developing tools and products to calculate transaction based C02 emissions. This could be one possible solution on how to bookkeep emissions.

Blockchain – as an emission contract

A drawback of the ERP approach is that you need some sort of intermediary trusted third party that verifies the emission calculations are correct, much like a tax authority for emissions. Another way of building trust could be to leverage blockchains. A blockchain is essentially a digital ledger of transactions which consists of a decentralised network of computers that verifies the block of transactions. The ‘block’ refers to the individual record of each transaction, while the ‘chain’ refers to the fact that those records are linked in one chain. This could be a solution on how to calculate carbon emissions across a supply chain and or different parties without the need of a centralised trusted third-party. Emissions are added to the ledger and becoming traceable and transparent throughout the block chain.

Eskil Rehme, Data Scientist @Implema