Why current carbon accounting methods threaten to undo UK plans for net zero and a Green Industrial Revolution

Inappropriate carbon accounting choices are resulting in decision-makers selecting methods they mistakenly believe will reduce greenhouse gas (GHG) emissions when they will in fact increase them, says a new report, Net Zero Accounting for a Net Zero UK, by Professor Ian Thomson, Professor Penelope Tuck, Dr Charika Channuntapipat, Dr Robert Charnock, Dr Nana O. Bonsu and Dr Jennifer TyreeHageman at the University of Birmingham.

The success of the UK Government’s Green Industrial Revolution (GIR) relies on evidence produced from reliable and relevant GHG accounting methodologies that capture the GHG consequences across the life cycle of all programmes, policies, projects and actions. But there’s concern that the official UK Government GHG accounting methodology could act against these aspirations, conflicting with other carbon reporting guidelines in ways that need to be understood and resolved.

Net zero will not be achieved by uncoordinated individual choices, but rather from chains of decisions that require many institutions with different objectives to work collaboratively together. GHG accounts are critical to successfully coordinating these decision chains, but only if the right GHG accounts are used. So decision makers need the expertise to select the right accounting methods in order for the whole life cycle of emissions to be reduced. 

Unfortunately, many decision-makers lack the capacity and appropriate levels of climate literacy to make such choices. ‘Net zero’ is a term that is ambiguous and lacks a robust definition in all organisations outside government. Decision-makers will need to be able to justify their definition and account for how they are contributing to the UK climate targets and those of international climate conventions. Any GHG accounting that does not tackle climate risk holistically or adequately measure impact on a global level only passes the problem somewhere else along the chain and forward in time.  

Why is GHG accounting so important?

Imagine if every raw material, product or service came with its own account of GHGs attached as well as a price tag. The GHG account would identify every process, energy use, resource consumed or distance transported across the product’s life cycle. Just as with costs, decision-makers need to know the GHG emissions of anything they buy, sell and do – as well as understanding how much bigger (or smaller) they could become – if they’re to aspire to being net zero. 

Many organisations have managed to make significant dents in their GHG emissions by using appropriate GHG accounting methods, such as Science Based Targets, that consider the GHG associated with every aspect of their operations. These include: what you buy, who you buy from, how it gets to you, what you invest in, how you heat your buildings, how much you waste, how you design your product, how you make, sell and ship your product, how employees get to work, how you finance your operations, how and where you sell your product and what people do with your product. 

It’s important to identify what increases the GHG emissions of anything you are planning to buy or sell. Think about what has had to be done to transform that ‘thing’ from its origins somewhere on or within the planet to the ‘thing’ that turns up at your warehouse, office or shop floor. Every decision taken by you, your suppliers and your customers will impact on the actual GHG emitted into the atmosphere, which will warm the planet for thousands of years to come.

GHG accounts are critical to successfully coordinating these decision chains, but only if the right GHG accounts are used at the right time. This requires selecting appropriate GHG accounting methods for each decision in a way that aligns all the decisions in a chain. So it’s important that decision-makers are able to make meaningful choices as to which GHG measures to use in different contexts and are aware of the consequences of these choices. 

Inappropriate GHG accounting choices result in decision-makers selecting options they mistakenly believe will reduceGHGs when they in fact increase global GHGs. So the choice of how to account for GHGs cannot be left to chance. There is a need for urgent research and education programmes to communicate the biases and critical exclusions of different GHG measurements, in order to inform the choice of appropriate GHG accounts in different decision contexts. 

Our review concludes that the GHG accounting methods that represent the full life cycle of a business’ emissions across all four scopes specified in the UN’s GHG protocols (below) were more likely to provide appropriate evidence for any ‘net zero’ aspirations. But even this protocol does not include categories to account for the removal of GHG from the atmosphere, something which is under review.

UN’s full-scope GHG emissions protocols

Scope 3 upstream

Scope 2: purchase of energy

Scope 1: direct operational emissions

Scope 3 Downstream (after sale)

Purchased goods & services

Purchased electricity

Company facilities

Transportation & Distribution

Capital goods

Purchased Gas

Company Vehicles

Processing of product

Fuel & Energy

Purchased Heating

Fugitive Emissions

Use of product

Transportation & Distribution

Purchased Steam


End of life disposal

Waste from operations

Purchased Cooling


Leased assets

Business Travel



Employees commuting



Leased Assets


Sale of renewable energy

What is the definition of ‘net zero’?

All organisations operating in the UK will need to demonstrate how they plan to go ‘net zero’ and be clear what that means. This will require accurate and comprehensive measures of the size and sources of their GHG emissions, including their cumulative GHG debt and future liabilities. 

At a national level, ‘net zero’ is defined by international conventions or legislation that typically use the Paris Agreement’s definition of any country’s GHG emissions being balanced by the emissions removed from the atmosphere through carbon capture or off-setting schemes, like storing emissions underground or planting trees. The UK Government uses this limited definition for its GHG accounting, which we’ve labelled as the ‘NET ZERO UK’ method. 

But most organisations and individuals have no robust definition of ‘net zero’ at all. For instance, businesses often define net zero without including their historic GHG emissions or the current emissions incurred in any raw materials they use, their existing assets, business investments, purchase of new technology and any GHGs emitted after a product is sold. Net zero benchmarks in current corporate reporting protocols for GHG emissions, such as DEFRA’s 2019 GHG reporting protocols or the Stock Exchange listing requirements, are incomplete and if used inappropriately systematically distort the representation of corporate GHG emissions and any decisions where they are used. 

Examples of GHG Emission Reporting Protocols or Standards

UN GHG Protocols

Carbon Disclosure Project

Science Based Targets

Climate Disclosures Standard Board

Task Force for Carbon Disclosures

Department of Environment, Food and Rural Affairs (DEFRA)


EU Non-Financial Reporting Directive

Stock Exchange required disclosures


2 degree Investing

World Resources Institute

Carbon Tracker Initiative

World Benchmarking Alliance


Global Reporting Initiative

EU Taxonomy


For example, vertically integrated supermarkets like Co-op Food will have higher reported GHG emissions in their corporate reports simply because they grow much of their fruit and vegetables rather than buy them from independent suppliers. This is because most corporate reporting protocols for GHGs exclude the emissions of purchased goods or services. So according to DEFRA’s GHG reporting protocols, if you grow the food you sell then you have to report it. If you buy in the food you sell then you don’t have to report it, regardless of where or how it is produced. Nor do you have to report the GHG emissions in shipping it to the UK.

Even though the Co-op’s business model is more likely to result in lower global GHG emissions, using DEFRA’s GHG reporting protocols they will report higher GHG emissions than other supermarkets. Paradoxically the Co-op could appear to reduce their GHG emissions by closing down their farms and sourcing all fruit and vegetables from overseas – a course of action that flies in the face of the concepts underpinning the UK Government’s GIR as well as best practice in the field of net zero carbon management. 

It’s GHG accounting methods like this that allow multinational oil companies to legitimately claim to be ‘net zero’ while excluding the GHG emissions embedded in their products and released after use. That’s because each method was designed for a particular purpose aimed at a particular type of organisation with a specific group of stakeholders or users. DEFRA’s is to help investors, the FTSE’s reporting standards are to help compliance with stock market listing requirements, the Task Force for Carbon Disclosures targets the banking and finance sector, while OFWAT’s GHG measurements are specifically for the regulated UK Water and Sewage sector. 

They were never intended to be used outside of these decision contexts nor were they intended to be a complete representation of the GHG emissions an organisation was responsible for. Each of these protocols has specific rules and flexibility as to what is included and excluded in their GHG emission calculation, which was based on what was deemed appropriate for their original purpose. Problems arise when such GHG accounting methods or measures are used for a purpose or decision they were never intended for – such as for calculating a business’ net zero status. 

Decision-makers will need to be able to justify how they measure net zero, because powerful stakeholders will start to hold them to account for the consequences of their actions on GHG emissions, including the timeframe of these measurements and to what extent they are paying off their historic GHG debts. These stakeholders will expose politicians, regulators or businesses trying to find ‘smart’ ways to achieve net zero by employing creative GHG accounting techniques to avoid responsibility for their emissions and perpetuate the global game of GHGs pass-the-parcel.

Which definition of net zero should businesses be using?

For many, NET ZERO UK will be far too low a benchmark, particularly those that accept full or partial responsibility for their historic GHG emissions across their value chain. Going beyond NET ZERO UK or DEFRA’s GHG reporting protocols is much more likely to future-proof an organisation against the likely introduction of carbon rationing, predicted climate change trajectories and changing social attitudes. Narrowly defined net-zero benchmarks, such as NET ZERO UK or DEFRA’s, do not differentiate sustainable reductions to the global GHG in our atmosphere from those ‘off-balance sheeting’ these emissions. 

The time horizon of any GHG accounts is also critical. Given the planetary climate systems are already on a warming trajectory, stabilising the concentration of GHG emissions at present levels – something that would not even be achieved with NET ZERO UK or DEFRA’s GHG benchmarks – only stops a bad situation getting worse.

To illustrate this, we’ve identified four GHG accounting scenarios that quantify the emissions that need ‘zeroing’:

1.     NET ZERO UK Narrowly defined annual GHG emissions as per Paris Agreement from now onwards, based on a territorial GHG production approach (which excludes the emissions of goods used that are imported, as well as international air travel).

2.     FOOTPRINT UK FROM NOW Full-scope annual GHG emissions using all activities defined in UN GHG Protocol from now onward, based on a consumption-footprint approach.

3.     CUMULATIVE NET ZERO UK Narrowly defined annual and some historic GHG emissions as per the Paris Agreement, based on a territorial GHG production approach.

4.     CUMULATIVE FOOTPRINT UK Full-scope annual and historic GHG emissions using all activities defined in UN GHG Protocol, based on a consumption-footprint approach.

Scenarios 1 and 2 are variants of ‘net zero from now’, whereas scenarios 3 and 4 take into account the UK’s historic contribution to the GHG that are already in the atmosphere and likely to continue to blanket the Earth for the next 2,000 years. (Note: scenario 1 best represents the UK Government’s Net Zero strategy and targets.) 

 Screenshot 2021-10-21 at 09.51.06

It’s also necessary to consider the social consequences of achieving net zero in the UK, because reducing carbon emissions isn’t just about avoiding climate collapse in the near future, but tackling social inequality now. While the air pollution associated with GHG emissions and climate change affect the health and environment of everyone, air pollution impacts the poorest most severely. The majority of the 8 million deaths each year from air pollution are in developing countries, which also have the least resources to cope with extreme weather events. 

Moreover, notwithstanding that the increase in atmospheric carbon dioxide since the 18th century is attributed to the mass industrialisation of the affluent Western countries, the world’s richest 10% are still responsible for more than half of all GHG emissions through consumption today, while the poorest 50% create just 10%. The impacts of those emissions are felt unequally across countries with differing GDPs and across different income groups within a country. 

Given this, it is somewhat paradoxical that the compliance with international climate change conventions is measured using protocols that do not account for the consumption of goods and services. They only measure the production of GHG within national geographical territories. This tends to under-represent the GHG impact of those living in richer countries and over-represent the GHG emissions of those poorer countries producing the goods the rich consume. 

Much of this disparity comes about through an ‘out-of-sight-out-of-mind’ attitude to GHG emissions. GHG are largely invisible and their source difficult to prove, unlike physical waste such as plastic. There is no such thing as throwing ‘away’ a GHG. It all has to go into the atmosphere where it remains until it is removed and stored in natural carbon sinks. And while South East Asia might be far enough out of sight for the Global North not to worry about plastic pollution, the interconnectedness of life and its many systems – ecological, financial and socio-political – means we can never fully escape the consequences of emitting more than our fair share of GHG. 

If governments and businesses keep playing pass-the-parcel with their climate change risks by exporting or outsourcing their GHG, we will not make sufficient inroads towards a net zero world.  Even though creative GHG accounts may show we are making a difference, we are really stoking the flames for when the impacts of ‘off-balance sheet’ emissions return to bite governments, businesses and communities, whether directly or indirectly. Any net zero solutions or GHG accounting that doesn’t tackle climate risk holistically only passes the problem somewhere else along the chain and forward in time. And we are running out of space and time.

How does all this impact the UK Government’s Green Industrial Revolution?

In May 2019, the UK Government’s Committee on Climate Change recommended a new emissions target for the UK: net-zero greenhouse gases by 2050. Underpinning this aspirational target is an assemblage of policy interventions, taxation and subsidies, investment incentives, infrastructure plans and behavioural change projects, brought together in the Prime Minister’s Ten Point Plan for a Green Industrial Revolution (GIR), which covers everything from decarbonisation of energy and encouraging active transport to carbon capture and protection for the natural environment. 

Our study has identified at least 45 decision contexts connected with the GIR that need to be aligned and co-ordinated through careful GHG accounting choices. Each of the 10 action points describe a multi-stage, multi-level, multi-actor strategy, originating with a government initiative that cascades down to other institutions, passing through key project gateways and critical evaluation stages. As each stage is ‘passed’ the project evolves with different actors, criteria, priorities and conflicts becoming involved. A decision chain can be seen to consist of two stages: the first seeks to enable GHG reduction activities and the second is the GHG-reducing activity itself, with high levels of interdependencies between these project life cycle stages. 

There is a clear need for different methods of calculating GHG emissions for different purposes, but there is also a need to ensure the integrity of a decision chain so that the necessary reductions of GHGs in the atmosphere are achieved. Our research suggests that decision outcomes are highly sensitive to choices in the application of different GHG accounting methods. The assumption that all GHG accounting methods produce reliable, certain, relevant, comprehensive or comparable figures is highly problematic. 

Prior research suggests that different actors in different ‘net zero’ implementation decisions are likely to use different ways of measuring GHG emissions or evaluating climate risks, which could distort decision outcomes. This problem is compounded by decision-makers’ limited levels of climate literacy and lack of transparency as to what categories of GHG emissions, the accounting entity, and timescale are included in any calculations. This creates major risks of misinterpretation or misapplication of GHG emissions data in critical decisions. 

While ‘net zero’ works wonderfully as a soundbite, it is difficult to operationalise at the different levels of analysis and decision contexts associated with the GIR. The Office of National Statistics produces five official measures of UK Greenhouse Gas Emissions used for different regulatory and policy formulation processes. These are illustrated in the figure below, which also demonstrates the range of GHG emissions data that can be used as the benchmark for balancing off or ‘zeroing’ GHG emissions. Four of these measures adopt a territorial production approach to attributing GHG to the UK with relatively minor variations. While one (the consumption footprint-based measure we’ll call FOOTPRINT UK) calculates UK GHG emissions based on the UK’s consumption of resources, i.e. imports of goods and services adjusted for UK exports.  

In 2016 the smallest measure was 473 million tonnes of CO2e and the largest was 784 million tonnes of CO2e. This equates to a 66% difference in one year. Even the FOOTPRINT UK measure is incomplete as it excludes emissions from the burning of biomass and emissions captured by UK-based natural systems, such as forests or peatlands. The UK Government has chosen to adopt the smallest GHG measure as their ‘net zero’ benchmark, labelled as ‘Climate Change Act’ in the figure below. 

Official estimates of greenhouse gas emissions according to different domestic and international bases, UK 2016 (source: ONS 2019)

Official estimates of greenhouse gas emissions according to different domestic and international bases, UK 2016 (source- ONS 2019)

The Committee on Climate Change notes that production-based GHG accounts such as NET ZERO UK allow the possibility of the transfer of GHG emissions rather than an absolute reduction, and as such should be subject to constant review with further research on improving consumption-based measures. Our analysis suggests that none of the four production-based UK GHG emission measures adequately model the GHG consequences of the decision chains associated with the GIR. Of the five options, the footprint-consumption (or FOOTPRINT UK) measure offers the greater potential to model the GHG emissions the UK is responsible for. 

A summary of the accounting differences is presented in the table below, which demonstrates the potential misrepresentation of global GHG emissions under NET ZERO UK and how the substantive contribution of a UK business towards reducing global GHGs, such as an electric vehicle (EV) manufacturer, would be rejected if a FOOTPRINT UK account wasn’t used.  

Comparison of NET ZERO UK and FOOTPRINT UK accounting




GHG emissions relating to all imported components or raw materials production and their shipping 



GHG emission saving from the procurement or component re-design or the adoption of low carbon shipping.



GHG emissions relating to production activities and UK based construction.



Reductions in GHG emissions from sales to UK customers. 

(over life of EV)



All international shipping GHG emissions for exports 




GHG emissions adjusted for the production of EV’s exported 




Reductions in GHG emissions from use of exported EVs. 

(over life of EV)



Why are multiple GHG accounting methods such a problem for responsible businesses?

While the UK Government has five official GHG emission measures, other institutions such as businesses are largely free to choose their own methods of calculating and disclosing GHG emissions. GHG accounting and reporting has been critiqued as producing inconsistent and irreconcilable numbers and narratives with the potential to undermine the confidence in actions intended to address climate change. A major concern of our research is that the selective attribution of GHG to corporations does not measure all the GHG emissions resulting from corporate actions. 

The corporate GHG accounting research literature concludes that narrowly defined GHG emissions are problematic for most business decision-making processes. Imagine an investor looking to rebalance their portfolio towards low-carbon businesses making their decision based on DEFRA’s GHG emissions protocol, which only account for around a third of emissions and excludes the main drivers of climate risks. It would be like valuing a business without taking account most of their costs, the assets they own, their investments, their products, their sales, their customers or future liabilities. 

To illustrate this, the figure below shows the reported GHG emissions of 10 S&P 500 Companies by Scopes 1, 2 and 3 in 2019. The use of DEFRA’s GHG reporting protocol would mean making decisions on the carbon-emitting performance of each company by ignoring all the grey bars!

emission reporting chart 1

Narrowly defined GHG accounting methods, which do not capture all the GHG consequences of a company or scenario, can increase rather than decrease global GHG emissions. In most cases choosing a life cycle consequential calculation that includes Scope 3 emissions will improve the chances of making decisions that will reduce GHG emissions.  

To illustrate the problems of inappropriately calculated GHG emissions for responsible businesses wanting to help realise the UK Government’s GIR aspirations, take this hypothetical example of a business working in partnership with a local authority to reduce their GHG emissions through a staff active travel project. They want to encourage employees to commute by bicycle or foot, as well as rewilding their car park and building safe bike storage facilities and staff changing rooms. 

Using DEFRA’s GHG measuring protocol, they’ll be surprised to learn that employee commuting isn’t even included. This means that any reduction in these GHGs will not impact on their overall emissions figure as it is effectively ‘off-balance sheeted’. This also means that any business decision that is likely to increase GHGs from commuting, such as changing shift patterns, are also excluded. DEFRA’s measure assumes that businesses are not accountable or responsible for how their employees get to work. Moreover, while any investment and emissions reductions from rewilding, bike storage and changing rooms will be excluded from the GHG calculations, any energy usage from the showers and facilities will be included.

Overall, this active travel project is likely to result in a slight increase in the their GHG emissions as measured by DEFRA, resulting in a negative appraisal of its GHG impact. This is despite this project actually reducing GHG emissions as measured by NET ZERO UK, FOOTPRINT UK and global GHG emissions. In this case the evaluation of the project is highly sensitive to the choice of GHG accounting used. If the decision makers in this company trust the DEFRA GHG calculations they have to use for corporate disclosure purposes then there is a risk they would reject this proposal. This risk will be multiplied if their bonus or performance appraisal is dependent on these partial measures, rather than reducing global GHGs overall.

The nature of the climate emergency is such that we have a responsibility to ensure that any GHG accounting used is aligned with the latest thinking and research in this field. The underlying message of our whole report is that how GHG is measured and accounted for matters. It is not trivial, geeky or unimportant. It is something we need to constantly strive to ensure we get it right as often as possible. Because the consequences of getting this wrong are potentially catastrophic.

Download a copy of the full report here