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To regional carbon neutrality and beyond

2021-11-15 Santtu Karhinen and Saana Springare

For climate efforts to bear fruit, reliable calculation and monitoring of emissions is required

Finland's goal is carbon neutrality and becoming the first fossil-free welfare state by 2035. To achieve this goal, emissions need to be rapidly reduced and carbon sinks strengthened. While the state and international agreements direct Finland’s climate policies, municipalities and regions play a significant role in reducing emissions, as concrete measures are typically implemented at the regional level.

Most of the municipalities in Finland have set ambitious emission reduction targets for themselves. For example, the Towards Carbon Neutral Municipalities (Hinku) network’s 80 municipalities are aiming to reduce emissions by 80 per cent between 2007 and 2030. You can monitor the progress on reaching the targets using the Finnish Environment Institute SYKE’s annually implemented usage-based Hinku calculation method, which has a territory-based starting point.

We also follow how Finland is doing in reaching carbon-neutrality targets using the national greenhouse gas inventory calculated at the regional level. The origin and volume of emissions can, however, be inspected from various perspectives, which often causes confusion.

Consumption-based emission calculation shifts the focus on domestic and public consumption

The principles of emission calculation can be divided into two main approaches: territory- and consumption-based. Typically, territory-based calculation methods are used, which are concerned with emissions directly created by fossil fuel consumption within the geographical borders of a region, for example. On the other hand, the calculations do not account for whether the goods produced are consumed domestically or abroad.

In consumption-based calculation, the focus is directed on domestic and public consumption behaviour, and regional emissions include all emissions created during the production chain of goods and services consumed in an area, both domestically and abroad.

For instance, emissions created during milk production are allocated completely to the municipality of production in the territory-based calculation method, whereas the consumption-based calculation method allocates the emission to the municipalities where the milk is consumed. In the same way, consumption-based calculation links the emissions related to construction to the municipality where the construction takes place. Emissions from the production of imported goods, such as mobile phones, are allocated to a municipality in Finland, not abroad, in the consumption-based calculation method.

However, consumption-based calculation is fairly complex as a calculation method when compared to territory-based calculation. Due to large demands on part of data, the calculation is laborious and uncertainties are linked to the calculation due to the data’s roughness, even at the national level.

At the municipality level, the situation is even more challenging. Compiling emission data for a set geographical is much simpler than assessing emissions for the entire production chain of a product or service. Therefore, it is easy to understand why the territory-based model has gained a strong foothold both in the calculation of national and regional emission inventories.

Consumption-based emission calculation is needed alongside production-based emission calculation

Focusing solely on emissions based on production may yield too one-sided results regarding regional emissions and mask the global emission impact of actions. Due to territory-based calculation not accounting for all emissions related to trade outside the region, there is a danger that some of the emissions are allocated outside the municipality area domestically or abroad. In such a case, emission reductions in a certain area may lead to increased emissions elsewhere, despite steady or even increased rates of consumption in the area in question.

The most recent consumption-based emission calculation in Finland describes the situation in 2015, according to which emissions calculated on a consumption basis are 33 per cent higher than what the official greenhouse gas inventory total emission indicates (Nissinen and Savolainen, 2019).

Regional differences in, for example, economic structure also affect how the emissions differ according to different methods of calculation. In the C40 report, emissions based on the consumption of 79 cities were around 60 per cent larger than using a territory-based approach (C40 Cities, 2018).

On the basis of the results, cities could be divided into two categories. The territory-based emissions of the so-called producer cities were larger than consumption-based due to the large export volume. The so-called consumer cities were more dependent on imports, and their consumption-based emissions were larger than territory-based emissions.

The users of the end product are therefore not always where the production takes place. For example, regions with a large role in primary production (e.g. agriculture in South Ostrobothnia) rarely make up the total number of the end product users. From a regional standpoint, region- and consumption-based calculation methods can be seen as somewhat unfair. We should not draw straightforward conclusions on the basis of territory-based emissions when assessing the responsibilities and roles of regional operators in mitigating climate change.

The objective of climate policy should be to reduce emissions by managing actions so that they lead towards reduced emissions in one region and prevent emissions from increasing in another. Decisions made on the basis of territory-based calculations are not necessarily in service of this goal, which is why understanding is needed also regarding consumption-based emissions.

Consumption-based calculation of emissions as part of the ALas calculation system

The Canemure project coordinated by the Finnish Environment Institute is developing a calculation method for reporting consumption-based greenhouse gas emissions. Calculations supplementing the ALas calculation system will be based on the environmentally expanded ENVIMAT regional economy models and surveyed regional private and public consumption.

In addition to greenhouse gas emissions, the model yields data on natural resources consumed as well as regional economy indicators. In connection with the calculation, scenario analysis functionalities related to consumption behaviour will be developed.

Consumption-based calculation will be implemented every few years as the necessary source material is updated. The current consumption-based annual monitoring of emissions according to the ALas model will, however, be used also in the future as the principal tool of monitoring emissions in municipalities and regions.

Santtu Karhinen and Saana Springare
Finnish Environment Institute SYKE

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