Operationalising a Carbon Regulator
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In July 2023, Energy Systems Catapult kicked off a two-year project that aimed to set out how our proposal for an economy-wide Carbon Regulator could be implemented. As part of the cross-Catapult Carbon Accounting Programme, funded by Innovate UK and led by the High Value Manufacturing Catapult, we worked to answer the question:
What does regulatory oversight for carbon accounting and emissions data look like in a Net Zero economy?
Reliable and trustworthy emissions data will be essential to the functioning of a Net Zero economy. While carbon accounting regulators already exist – for example, the Environment Agency is responsible for the UK Emissions Trading Scheme (UK ETS) – such regulators are disparate and specific to individual policy mechanisms. There is currently an absence of regulatory oversight for carbon accounting and the monitoring, reporting, and verification (MRV) of emissions to provide this consistently economy-wide.
We propose the introduction of an independent Carbon Regulator, economy-wide in scope, for carbon accounting and MRV. Regulatory oversight provides clarity, and innovation-friendly regulation can ensure a level playing field for innovators, cut investment risks, and build business and consumer confidence. An independent Carbon Regulator would support, streamlined reporting, credibility of emissions data, international leadership and alignment, and would level the playing field for competition. Read on to learn more.
Streamlined reporting – disclosing once reduces the administrative burden of reporting emissions. Doing so also establishes a single source of truth to be propagated for different carbon accounting use cases (e.g. life cycle assessments and corporate reporting). This can only be enabled by the regulation of data best practice and the effective coordination of digitalised reporting and accounting software.
Credibility of emissions data – regulation can help maintain the integrity of a system, while driving demand for credible emissions. This has advantages such as:
A level playing field for competition – independent regulation can mitigate conflicting claims between sectors that provide different products, but serve the same function (e.g. construction materials). In addition to providing customer guidance, this can promote fair competition and help businesses and sectors identify where best to target innovation to support Net Zero.
International leadership and alignment – a suitably empowered Carbon Regulator should seek consistency and clarity on carbon accounting on an international scale. In doing so, the Carbon Regulator can safeguard the competitiveness of UK businesses and ensure that they are well-placed to play their part in the race to Net Zero.
We examined several options for establishing the Carbon Regulator, including: setting up a new body, adding it to the role of a government department, or extending the remit of an existing regulator. Our recommendation is that the Audit, Reporting and Governance Authority (ARGA, currently the Financial Reporting Council) should be given the remit of economy-wide Carbon Regulator.
The Carbon Regulator should prioritise the following areas for regulation and standardisation:
Setting up a new Carbon Regulator
Making Carbon Count: Setting up a new Carbon Regulator, calls for government to take charge of how carbon emissions are measured and managed across the UK economy. The report argues that establishing a dedicated Carbon Regulator is key to unlocking innovation and growth by reducing the administrative burden businesses face when reporting on their greenhouse gas emissions. This will improve the credibility of emissions data and help UK businesses remain competitive as they decarbonise their activities.
Operationalising a Carbon Regulator – International Considerations for a Carbon Regulator
In this report, we identify international considerations for a Carbon Regulator and implications for UK exports based on a review of national policies. Firstly, this report considers the national policies of a select group of countries chosen based on their trade proximity to the UK. Secondly, the report outlines key considerations for a Carbon Regulator based on a review of international coordination initiatives across industrial sub-sectors. Finally, the report identifies opportunities for a Carbon Regulator to play a leading role in promoting international alignment in carbon accounting to support UK industry.
Operationalising a Carbon Regulator – Review of existing regulatory landscape
This report is the second in our Operationalising a Carbon Regulator series where we consider the feasibility of setting up an independent regulator to plug some of the gaps in carbon accounting regulation and move to a more robust, data driven Net Zero economy.The report highlights seven major gaps in carbon accounting regulation.
Operationalising a Carbon Regulator – Learning from other sectors
This report is the first in our Operationalising a Carbon Regulator series where we consider the feasibility of setting up an independent regulator to plug some of the gaps in carbon accounting regulation and move to a more robust, data driven Net Zero economy. The report draws on insights from existing regulated sectors and interviews with senior regulatory experts in industry and academia.
Carbon Accounting and Standards in Industry: A Framework for Innovation and Growth
Carbon accounting and standards in industry: A framework for innovation and growth, produced as part of the Innovate UK-funded cross-Catapult Carbon Accounting programme, proposes a carbon accounting framework to overcome the complexity and limitations of the existing regulatory ecosystem by considering options for robust monitoring, reporting, and verification (MRV).
Carbon Accounting in Industry: Learning from the South Wales Industrial Cluster
In this report, we review options for policymakers to support a more consistent and coherent approach to the monitoring, reporting and verification (MRV) and accounting of greenhouse gas (GHG) emissions in industry.
The Case for an Economy-Wide Carbon Regulator
In this report, The Case for an Economy-Wide Carbon Regulator, we make the case for a new regulator to oversee accurate and coherent monitoring, reporting, and verification (MRV) of greenhouse gas emissions reduction and removal across the economy.
Making Carbon Count – Dr. Danial Sturge
At Energy Systems Catapult we have spent several years seeking to address this challenge. In 2021 we advocated for an economy‐wide Carbon Regulator, and our subsequent research has explored how government can make this a reality by identifying key gaps that need to be filled.
We need a Carbon Regulator, but setting one up will not be without its challenges – Elle Butterworth
Despite all the challenges and trade-offs required to get the state of implementing regulation or even a new regulatory body, regulation is essential to economic success, sending clear signals to innovators on where to focus their efforts and gives more certainty to investors.
Without regulation the carbon accounting landscape will continue develop in a disjointed way, limiting the credibility of product claims and company disclosures, which in turn limits the confidence investors and customers have in products and services.
Carbon Accounting: The Future is Digital – Elle Butterworth
The ability to exchange, compare, track and trace emissions data through supply chains will be fundamental to the UK’s future low carbon economy. Complete and accurate data will support innovations relating to carbon intensive products and processes. Data will also support Government and consumers to make informed, low carbon, decisions.
Untangling a messy carbon accounting landscape – Elle Butterworth and Dr Danial Sturge
How do we know whether policies are achieving their decarbonisation aims? How can we hold companies to account for delivering their low carbon promises? How can we track and trace emissions through complex supply chains? The answer to all of these is having a well-regulated carbon accounting framework.
Carbon accounting is more than just numbers on a spreadsheet – Danial Sturge and Elle Butterworth
To achieve the decarbonisation of the whole energy system, it is important to develop a complete and quantifiable picture of GHG emissions that supports decision makers and track progress towards the UK’s Net Zero target. And do so in way that is transparent enough to identify feedbacks and unintended consequences at different levels of the system.
The Carbon Accounting Programme is building on the strengths of the best standards and techniques, working alongside industry and policymakers, to create a unified framework that is suitable for all UK manufacturers.
Find out moreNet Zero Carbon Policy is an Energy Systems Catapult thought leadership project, focusing on how the UK can develop an innovation-friendly, economy-wide framework for Net Zero.
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