Energy Systems Catapult has released a pivotal report providing insights into the international landscape of carbon accounting and implications for a UK Carbon Regulator. The report, produced by Baringa at the direction of the Catapult, is aimed at guiding the development of a robust regulatory framework for carbon accounting in the UK, with a specific focus on global cooperation, regulatory harmonisation, and the competitiveness of UK exports.

As the UK drives towards its Net Zero target, this report outlines essential steps for aligning national policies with international standards to ensure effective emissions regulation.

Key findings and recommendations:

1. Harmonisation of global carbon accounting standards:
   The report underscores the urgent need for harmonised methodologies in global carbon accounting. Diverging international standards increase the administrative burden on UK companies and make it difficult to compare emissions data across borders. A UK Carbon Regulator could work alongside global stakeholders to standardise reporting frameworks, thereby ensuring UK businesses can meet international requirements without additional complexity.
2. Promotion of digital interoperability:
   One of the major barriers identified is the lack of interoperable digital tools for tracking emissions data across supply chains. The report advocates for the development and promotion of digital platforms based on standardised frameworks, which would allow for seamless data exchange between companies, suppliers, and international regulators. These platforms would enhance transparency and trust in emissions reporting.
3. Addressing verification and governance challenges:
   Current international governance structures lack consistency in how emissions data is verified and managed. A UK Carbon Regulator could help streamline and standardise the accreditation of verification bodies, promoting the credibility of UK-reported emissions data on the global stage. This would not only build trust but also ensure UK industries are well-positioned for international trade.
4. Supporting UK exports in a low carbon economy:
   UK businesses face increasing complexity in satisfying various international emissions standards, particularly in key export markets. The report warns of risks, including reduced customer demand and restricted access to finance for companies that cannot meet these diverse requirements. A UK Carbon Regulator should support exporters by aligning UK policies with international low carbon product standards, safeguarding the global competitiveness of UK goods.

International engagement and leadership:

The report highlights the UK’s leadership role in international carbon accounting initiatives. However, further engagement is essential. By establishing a Carbon Regulator, the UK could position itself as a global leader in promoting aligned standards and best practices, ensuring that UK policies reflect global trends while mitigating risks for UK industries.

To achieve this, the Carbon Regulator must be empowered with a clear mandate for ongoing international engagement. This should be supported by other governmental bodies such as the Department for Business and Trade, ensuring a coordinated approach to tackling carbon accounting challenges at home and abroad.

Implications for policymakers:

A regulatory framework that aligns with international standards and addresses the identified challenges will be key to ensuring that UK businesses remain competitive in a global low carbon economy. In particular:

• International coordination is vital to prevent the fragmentation of carbon reporting requirements.
• Digital innovation will play a critical role in simplifying the compliance process for UK industries.
• Verification standards must be consistent to support the credibility of UK emissions reporting.

“Credible and transparent emissions data is a vital building block for a Net Zero economy. As a result, we are seeing significant development in carbon accounting requirements internationally”, said Elle Butterworth, Senior Digital Consultant at Energy Systems Catapult.

Butterworth continued, “Developing a robust and internationally aligned framework for carbon accounting is not just a matter of regulatory compliance – it’s about ensuring UK industries can thrive in a global low carbon economy. By working closely with our international partners, we can harmonise standards, reduce complexity, and position the UK as a leader in clean growth.”

Hugh Greene, Director at Baringa, said: “It’s critical for the UK to play a lead role in harmonising and improving carbon reporting standards that drive the right behaviours and recognise good performance, without over-burdening British businesses or hamstringing their efforts to deliver a just transition and compete globally. We believe that an internationally engaged Carbon Regulator, with the right mandate and resources, is key to achieving that goal.”

This report provides actionable insights for decision-makers to ensure that UK industries are not left behind in the global transition to a low carbon future.

Notes:

The Innovate UK funded Carbon Accounting programme is led by High Value Manufacturing Catapult in collaboration with Connected Places Catapult, Digital Catapult, Satellite Applications Catapult, and Energy Systems Catapult. The programme makes the case for a policy and regulatory environment that:

• Supports creating a comprehensive UK framework for greenhouse gas (GHG) emissions, with agreed standards and tools for accounting, tracking, and reporting GHG emissions through supply chains to accelerate industrial decarbonisation.
• Unlocks investment and creates an environment where UK industry excels on the global stage as a destination for low carbon manufacturing.

As part of this programme, Energy Systems Catapult is reviewing the policy and regulatory environment needed to support a data driven Net Zero economy. Credible, science-based emissions data will be essential to inform investment and innovation decisions for industry and the wider economy. Regulation is an important part of the policy toolkit to help standardise reporting practices and increase the credibility of emissions data.

About Baringa

Baringa is a global management consultancy operating across sectors including energy, financial services, consumer products and services and government.

We set out to build the world’s most trusted consulting firm – creating lasting impact for clients and pioneering a positive, people-first way of working. We work with everyone from FTSE 100 names to bright new start-ups, in every sector. You’ll find us collaborating shoulder-to-shoulder with our clients, from the big picture right down to the detail: helping them define their strategy, deliver complex change, spot the right commercial opportunities, manage risk or bring their purpose and sustainability goals to life. As a Certified B Corporation®, we’ve proven that we’ve built social and environmental good into every bit of what we do.