The isolated development of carbon accounting regulations and associated guidance risks limiting the national picture of emissions and increasing the complexity of the regulatory landscape, finds a new report from Energy Systems Catapult.

Operationalising a Carbon Regulator: Review of Existing Regulatory Landscape provides a comprehensive assessment of existing UK carbon accounting regulations, and the regulators engaged in their delivery, to reveal the gaps in regulatory functions which prevent credible emissions data from driving Net Zero decision making.

The report highlights seven major gaps in carbon accounting regulation:

• Lack of coordination between regulators and government
• Absence of detailed methodologies and calculations guidance within existing regulations and standards
• Lack of third-party verification requirements on disclosures and claims, and inconsistent verification processes
• Limited action on misleading claims. Lack of mediation for competing claims on the carbon intensity of products and/or services
• Lack of standardised emissions factor datasets and significant gaps in availability of Scope 3 emissions factors
• No standardised qualifications/accreditations for carbon accountants
• No digital oversight to encourage interoperability and data sharing

Taken together, these gaps in the carbon accounting landscape create a complex web with disjointed standards and practices, which limit the transparency of emissions as they move through supply chains, reducing our ability to pinpoint emissions hotspots.

The gaps risk exposing industry to an increased administrative burden, with multiple points of disclosure and inconsistent reporting requirements, creating barriers to entry for small and medium sized enterprises (SMEs) who may lack the resources needed to navigate the regulatory maze. These challenges are preventing the carbon accounting regulatory environment from scaling and maturing at the pace required to meet head-on the challenges of a data-driven, Net Zero economy.

Elle Butterworth, Senior Digital Consultant at Energy Systems Catapult, said:

“The gaps revealed by our latest report are indicative of a broader challenge facing the UK – a lack of coordination, oversight, and consistency. The future Net Zero economy must be supported by a robust regulatory framework that acts as an enabler for credible emissions data to be disclosed, shared, and aggregated to meet the needs of industry actors.”

In a bid to overcome these regulatory gaps and challenges, the report sets a series of proposed regulatory functions that a carbon regulator could support:

• Improve alignment between existing regulators
• Oversee third-party verification requirements and accreditation of verifiers
• Support the Competition and Markets Authority and the Advertising Standards Authority in investigating green claims
• Issue guidance on accurate emissions factor use and set requirements on dataset owners to keep them updated and aligned.
• Support bodies such as the Carbon Accounting Alliance in developing qualifications for carbon accountants
• Data best practice guidance and open data licensing conditions could be developed or coordinated by a proposed regulator to improve exchange of emissions data.

These proposals will be explored further as part of the Catapult’s Net Zero Carbon Policy thought leadership programme.

Elle continued:

“The existing web of carbon accounting principles, rules, regulations, and guidelines is not conducive to the creation of a mature regulatory landscape fit for a Net Zero future. It is disjointed, complex, and limits accountability and transparency. We can overcome this by designing a regulatory environment that levels the playing field for innovation and better enables low carbon investment decisions.

“We have an opportunity to set the global standard on carbon accounting regulations. We must be bold and decisive in our actions to establish a carbon accounting framework that supports decarbonisation and accelerates Net Zero energy innovation.”

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.