The seminar on the Vulnerability of International Trade to the Carbon Footprint was held in Santiago, Chile, from 2-3 September 2010. It was organized by the UN Economic Commission for Latin America and the Caribbean (ECLAC), the Regional Cooperation Delegation for the Southern Cone and Brazil of the French Ministry of Foreign Affairs, and the European Commission. Approximately 200 participants from 15 countries attended the seminar, including government officials and representatives of international organizations, industry and non-governmental organizations, as well as carbon footprint experts.
The seminar provided an opportunity to engage in a regional dialogue over issues related to the use of carbon footprint regulations and their impacts on exports from Latin America. Presentations were made on national legislation and policy, as well as on private sector initiatives regarding the carbon footprint in Europe, the US, New Zealand and several Latin American countries. This provided participants with the opportunity to understand new regulations and debate the potential impacts and effects of these on exports from Latin America.
A BRIEF HISTORY OF THE CONCEPT OF THE CARBON FOOTPRINT IN INTERNATIONAL TRADE
A product’s carbon footprint is the overall amount of carbon dioxide (CO2) and other greenhouse gas emissions (e.g., methane) associated with the product along its supply chain and, including, sometimes, from use to end-of-life recovery and disposal. The concept of the carbon footprint is one aspect of the life-cycle assessment of a product, which normally addresses many of the product’s relevant environmental impacts.
The carbon footprint does not have a standardized scope. Therefore, methodologies vary in their consideration of different greenhouse gases (some only measure CO2, while others may measure the six greenhouse gases), as well as in their consideration of direct and indirect emissions within a product’s life cycle. The scope of the carbon footprint generally includes direct emissions, such as fuel used in production and product distribution. There are, however, wide variations regarding indirect emissions, such as those related to: electricity used by the facility, inputs, wastes, employee business flights, transportation and consumer use.
The growing concern over measures that consider the ‘carbon content’ of goods that may be agreed internationally or adopted nationally to address climate change mitigation have generated interest in deepening analysis of the appropriateness of using the carbon footprint in international trade. In particular, the concept of ‘carbon space’ questions why developing countries, responsible for less than 15% of historical carbon emissions and emitting far less per capita than developed nations (in some cases barely reaching 2% of per capita emissions in the US), should incur excess costs for labeling or see international demand for their products reduced if they prove to be higher in carbon intensity.
Latin America and the Caribbean is a region with a particular interest in the carbon footprint due to its export matrix, which relies in great measure on environmentally sensitive products, and thus would be affected by measures taken that discriminate products based on their carbon footprint. It is also a region particularly vulnerable to climate change, thus sharing an interest in contributing to a global agreement that may pave the way towards a low-carbon economy.
The carbon footprint concept is not yet part of international negotiations, but several countries have adopted, or are considering the adoption of, measures that take into account or require information on a product’s carbon footprint. In addition, voluntary labels identifying a product’s carbon footprint are also growing in importance.
Current debates address many aspects of measuring the carbon footprint, such as consideration of consumer responsibility (usually left out of carbon footprint evaluations), scope of greenhouse gases to be included in the evaluation, and scope of the product’s life-cycle analysis.
Identification of an export product’s carbon footprint is already mandatory for specific products in France and is being considered in draft legislation in other developed countries. Therefore, the carbon footprint is beginning to be considered more seriously, especially by exporting countries.
Considering these questions, ECLAC organized the first carbon footprint seminar on “The carbon footprint in the agrofood goods and services sector: A contribution to combating climate change,” held in Santiago on 18-19 June 2009, and promoted an interchange of information and experiences in Latin America and Europe on the development of carbon footprint criteria. This second seminar aims to encourage discussions and further debate on these issues.
REPORT OF THE SEMINAR
Alicia Bárcena, ECLAC Executive Secretary, opened the seminar on Thursday, 2 September 2010. She welcomed participants, thanking the European Union (EU) and the French Regional Cooperation Unit for their support to the event. She highlighted that the seminar provides an occasion to address the issue of climate change and the carbon footprint, and reflect on theoretical and practical aspects, as well as the impacts on the productive structures and exports of the Latin American and the Caribbean region. She cautioned that the concept of carbon footprint may lead to leveling the playing field for countries with different capacities and historical responsibilities regarding climate change. This, she said, creates an ethical and political question regarding the relevance of the principle of common but differentiated responsibilities when dealing with carbon footprint policies.
Gerald Hatler, First Counselor, EU delegation to Chile, spoke of the broader context of the global climate change negotiations, in which the EU has committed to reducing its greenhouse gas (GHG) emissions by 20% by 2020 and 30% by 2020, if other major actors join in a similar commitment. He noted even as the negotiations proceed, consumers are already demanding information about the carbon footprint of products, and governments and the market are responding. He expressed the hope that this seminar would result in a biregional dialogue on how best to respond to such demands.
Recalling that France first approached ECLAC about the carbon footprint project two years ago, Laurent Bonneau, Chief of the French Regional Cooperation Delegation for the Southern Cone and Brazil, expressed his country’s satisfaction with the work so far and the level of participation in the current seminar. While noting differences in how countries approach the issue, he stressed that climate change is a common challenge, which all must work together to resolve.
Osvaldo Rosales, Director, ECLAC International Trade and Integration Division, underscored several challenges for economic and trade theory posed by calculating a product’s carbon footprint, including how best to address the climate as a global public good, as well as how to account properly for: externalities; long-term impacts; costs of inaction; and the possibility of severe and irreversible damage. Stressing that the optimum solution would be a multilateral one, he noted that, in its absence, many nations already are taking unilateral steps that may be well-intended, but result in protectionism. He hoped the seminar would lead to new analytical tools, greater consensus on the issue between Latin America and Europe, and more informed decisions in the context of the global climate change debate.
Joseluis Samaniego, Director, ECLAC Sustainable Development and Human Settlements Division, highlighted that ECLAC is studying the economic impacts of climate change in countries in Latin America and the Caribbean, and will present several country reports at the UN Climate Change Conference in Cancún in December 2010. He said understanding the impacts is the first requirement to being able to work on mitigation and adaptation.
Samaniego further explained the variables affecting a country’s carbon footprint, including carbon intensity of GDP and carbon intensity of energy production. He highlighted that, in the absence of a global agreement, the carbon footprint is placing the focus on consumption and not on the differentiation of capabilities and responsibilities that are traditional principles within the realm of the climate regime. He emphasized the need for Latin America to be more proactive on this issue, noting the region’s response to the latest financial crisis was a lost opportunity to promote countercyclical policies that promote green growth. In this respect, he urged the region to address the challenges placed on it by consumer-led climate policy and to participate more actively in carbon-footprint policy definition, for example in the design of European schemes and within the International Organization for Standardization (ISO).
REGULATIONS AND METHODOLOGIES DEVELOPED IN EUROPE
Via video conference, Pavel Misiga, Head of the Environment and Industry Unit, European Commission, explained that the EU’s work on the carbon footprint focuses on changing consumption patterns, and thus complements the EU’s existing production-oriented climate policy. He said the EU is experimenting with integrating carbon footprint calculations into its Ecolabel, its Eco-design Directive and other instruments intended to change consumption behavior. Noting concerns about divergent approaches taken by France, Germany and the UK, as well as private schemes, he said the Commission aims to promote EU harmonization, beginning with methodologies, then quality control and verification, and finally communication of the carbon footprint to consumers.
Asked about the role of certification and assurance, Misiga responded that this is important while methodologies differ, and even more so once methodologies are harmonized, in order to ensure that methodologies are applied correctly, labels and claims are comparable and consumers are not misled. Samaniego asked if the EU plans to distinguish when product inputs are from outside the EU. Misiga said he did not see a reason to do so, further noting that EU rules will not allow carbon footprint schemes to discriminate based on origin. Asked about the likelihood of mandatory product requirements based on the carbon footprint, Misiga replied it was unlikely and suggested the greater impact will likely be from companies voluntarily adjusting their own production processes and imposing certain demands on their supply chains.
Antonin Vergez, French Ministry of Ecology, Energy, Sustainable Development and the Sea, provided an overview of the process leading to France’s adoption of legislation on mandatory environmental labeling known as the “Grenelle de l’Environnement.” He highlighted the emphasis on providing consumers with relevant information on the environmental impact of products. He said the first phase of carbon footprint labeling is set to start in July 2011 for a one-year trial period for domestic products only. Noting sixteen industrial sectors are advancing at different paces, he detailed some of the methodologies, scope and indicators developed by the food sector, which include GHGs, water pollution and biodiversity loss.
Sujeesh Krishnan, Head of Footprinting, CarbonTrust, presented on the PAS 2050, a voluntary public specification for the assessment of life-cycle GHG emissions of goods and services. He emphasized the need to establish a global accord on carbon footprint methodologies. He noted that when the carbon footprint of imported goods is accounted for, the UK increases its overall emissions, and highlighted that the largest flow of carbon emissions embedded in products is currently from China to the US and Europe. Regarding Latin America’s concern over the impact of transport on carbon footprints, he said their experience pointed to a much larger weight of industrial and consumer emissions on the footprint, providing the example of strawberries from UK greenhouses that had a much larger footprint than imported ones.
Claudia Cerda, Chilean National Institute of Normalization, explained the process for the elaboration and adoption of ISO rules, focusing on the development of standards currently underway at ISO. She explained the current status of negotiations of Norms ISO-CD 14067-1 and 14067-2, which look at carbon footprint calculations and communication.
QUESTIONS AND DISCUSSION: Krishnan replied to a question on mandatory requirements within the UK, saying these are not expected as there is still a long way to go in terms of studying, quantifying and reporting on emissions nationally.
On the impact of transport on carbon footprints, Vergez noted that experience up to now does not indicate that international transport would have such a large impact on footprints, as production methods generally carry the largest weight. Cerda stressed that work on comparability across labeling schemes is key and noted that ISO is working on issuing guidelines for the communication of carbon footprints. Lastly, Verges and Krishnan highlighted that including multi-criteria footprints is important to address those cases when reduced emissions may result in increased water pollution or biodiversity loss.
Vergez said it would be too complex to consider the carbon footprint of capital goods. He stressed that the key question still to be resolved is where to draw the line in determining the carbon footprint’s scope. Regarding concerns about impacts on Latin American exports, he stressed that the French platform is open and anyone can contribute, but so far stakeholders from outside the EU have not participated.
On comparability among schemes, Cerda said it is up to the ISO member organizations to decide what products to include, what limits to impose on calculating the footprint and how the footprint can be compared to other products in their category. She said if they choose to, the organizations can require partial calculations or the footprint of the entire supply chain for a product.
ROUNDTABLE: VISION OF LATIN AMERICAN COUNTRIES: WHAT DOES LATIN AMERICA DO WITH RESPECT TO CARBON FOOTPRINT?
Heloisa Schneider, moderator, introduced the roundtable. Marcio Macedo da Costa, Brazilian Development Bank, noted Brazil is working on developing carbon inventories at the sectoral and national levels. He emphasized the private sector’s concern over GHG certification and the potential for discrimination against products. He gave the example of sugarcane ethanol exported to the US. In this case, original estimates rendered ethanol from Brazil as not achieving the minimum GHG savings necessary to be labeled as ‘renewable.’ However, data based on actual Brazilian production methods provided by the Brazilian government, and lobbying of the US Congress, led to the recognition of a much higher level of GHG savings.
Guillermo Donoso, Director of Chile’s Agricultural Research Institute (INIA), explained that Chile aims to make its agricultural production carbon neutral, and its action plan calls for determining the carbon footprint of all of its agriculture and livestock production. He said three areas are being analyzed: animals and their wastes; emissions during production; and post-production emissions (i.e., cold storage, warehouses, bottling of wines).
Alejandro Ordoñez, National Planning Directorate (DNP), Colombia, explained the broad context for his country’s work on the carbon footprint, including analysis and planning regarding climate change impacts on key sectors. He said DNP is looking at how the global push to provide consumers with cleaner products will affect Colombian trade. Diana Barba Patiño, Ministry of Environment, Housing and Territorial Development, Colombia, explained that Colombia has low carbon intensity and is carbon-efficient, and the government has determined that staying so can offer Colombia a competitive advantage. She said the government is now identifying opportunities and appropriate incentives for key sectors, helping the business sector prepare carbon footprint inventories, and designing strategies to assist exporters, especially small- and medium-sized enterprises (SMEs).
Ninel Escobar, National Ecology Institute (INE), Mexico, explained her country’s efforts to inventory greenhouse gas emissions, followed by sectoral and corporate reduction targets. She mentioned private programmes, such as Pronatura’s “Neutraliza tu empresa,” which helps companies quantify their emissions, set reduction goals and compensate through carbon bonds. She noted INE promotes advantages in accounting for carbon emissions, advises on different methodologies and promotes improvements in product processes.
Walter Oyhantcabal, Ministry of Livestock, Agriculture and Fisheries (MGAP), Uruguay, explained that the carbon footprint is an important part of his Ministry’s climate change mitigation strategy. He expressed Uruguay’s apprehension of possible “climate protectionism,” and noted his country’s decision to be proactive, by creating working groups to calculate the footprint of key product groups such as meat, dairy and grains intended for export. He explained their calculations include not only life-cycle emissions, but also offsets through carbon sequestration. He said MGAP considers that the carbon footprint can be a tool towards achieving a more competitive and sustainable agriculture.
QUESTIONS AND DISCUSSION: During the question and answer session, Emile Rojas, Advisor to the Vice President, Costa Rica, described his country’s challenges in trying to achieve carbon neutrality, noting public policy is needed to support the private sector in addressing these challenges. Donoso clarified that Chile’s goal to achieve carbon neutrality in agriculture includes offsetting emissions with increasing carbon removal by forests and preserving carbon in soil.
Responding to a question, Macedo da Costa explained that the recent public tender process for wind energy in Brazil showed that wind energy is already at a competitive price with biofuels.
Regarding emissions in the agricultural sector, Oyhantcabal clarified that some emission factors were developed at the national level, but most resorted to proxies or values taken from the Intergovernmental Panel on Climate Change (IPCC).
Donoso also explained that one of the effects of calculating the carbon footprint for specific sectors like wine is the identification of inefficiencies within the production process, allowing some winemakers to halve their carbon footprint as a result of the exercise.
Samaniego urged considering the need for regional coordination for countries to benefit from methodological progress made by other countries in the region. He also noted that an interesting aspect to consider is the possibility to compensate sectoral carbon emissions with carbon sequestration, for example by accounting for increased forest cover in order to reduce a sector’s footprint.
CARBON FOOTPRINT AND CHALLENGES IN TRADE POLICIES
During this segment, an introduction was provided by ECLAC, followed by an open discussion with participants. Sebastián Herreros, ECLAC International Trade and Integration Division, presented on the implications of carbon footprint policies on international trade law, noting that in general terms, the carbon footprint issue is more likely in the near term than the consideration of carbon tariffs or other carbon-related border measures. He highlighted the vulnerability of some exports from Latin America (frozen foods and live flowers), and cautioned that many methodologies are made with a bias towards production methods in industrialized countries and may overestimate emissions of products in developing countries. He thus called for proactive participation by Latin America in methodological discussions. He also mentioned opportunities presented by negotiations on environmental goods and services within the World Trade Organization to promote transfer of technologies and market access to green products from the region.
Participants then discussed whether Latin America should address the attribution of emissions, whereby consumer countries should be responsible for the emissions embedded in products they consume. Participants also discussed the costs and benefits of using carbon footprint policies in achieving mitigation, with Donoso questioning the efficacy of labels for seasonal products that do not allow for consumer choices during certain times of the year. Marcelo LaFleur, ECLAC, asked whether the impacts and costs of carbon labeling on mitigation are being studied. He offered, as an example, cases where different production methods, or countries of origin, may render minuscule differences in overall emissions, calling into question the usefulness of labeling to achieve mitigation. He also raised the possibility that consumers may not be interested in the label information.
Regarding the overabundance of methodologies in European countries, Vergez said this is a dynamic process where countries are advancing individually, but are likely to converge at some point. Krishnan, Carbon Trust, compared the carbon footprint situation to that of nutrition labels 30 years ago, and noted that while there is still much we do not understand about nutrition, the labels that eventually evolved provide consumers with useful points of comparison. Herreros raised the quandary of how to make labels simple enough for consumers to understand without losing sight of the complexities, such as margins of error or key assumptions. Sujeesh Krishnan explained this is why the Carbon Trust emphasizes the reduction commitment, provides a public registry with all the details on how the footprint was calculated, and promotes labels informing consumers on how they can help reduce emissions through their product-use practices.
Several participants debated who is the relevant target consumer for such exercises – all consumers or just those in Europe and North America – and whether Latin American consumers would pay attention to such labeling without some fiscal or price incentive to do so.
Guillermo Donoso, Chile, noted debate in his country over who should certify carbon footprints. A participant from Ernst and Young questioned whether something so intangible, with so many possible methodologies, could ever be properly verified or certified. Senator Yeidckol Polevnsky Gurwitz, Mexico, urged looking at carbon footprints in a broader economic and social context.
John Doyle, Ministry of Agriculture and Forestry, New Zealand, highlighted that most information on carbon footprint is used by companies for branding purposes. Verena Radulovic, US Environmental Protection Agency (EPA), said federal legislation on this topic is unlikely at this stage in her country, but noted significant movement on carbon labeling at the corporate level, and in specific states like California. She said consumers are most interested in multi-attribute labels covering emissions, biodiversity and water use.
SUMMARY OF DAY ONE
On Friday, 3 September, Pascal Martínez, French Cooperation/ECLAC, provided a synthesis of the previous day’s work, highlighting significant advances in public policy and private sector inventories since the first meeting held last year. He noted trade and competitiveness concerns still require clarification and depend on the development of policies and legislation.
ROUNDTABLE: PROCESSES RELATED TO CARBON FOOTPRINT IN OTHER COUNTRIES
This roundtable was moderated by Heloisa Schneider. Olivier Jan, Consultant, Bio Intelligence Service, France, presented on retail business and importer initiatives and said half of France’s emissions are linked to product-related emissions, thus highlighting the role of consumers in contributing to mitigation. He noted that the methodologies available, such as ISO 14067, ADEME-AFNOR X30-323, PAS 2050 and GHG Protocol, are not intrinsically different, and allow a relatively simple export of data from one to the other. He also identified eco-labeling initiatives by the Walmart, Tesco and Casino supermarket chains, emphasizing their power to impose sustainable practices on their suppliers, which number in the hundreds of thousands and are located all over the world. In terms of consumer preferences, he noted a marked preference towards information on the footprint of food rather than of manufactured products, associating this with the perception of consumers of the links between environmental quality and personal health. He also called for all countries to participate in groups developing methodologies for carbon and water footprints.
Rasmus Priess, Project Manager, Product Carbon Footprint (PCF) Project Germany and PCF World Forum, via video conference, explained the PCF Project is a consortium of German firms and other stakeholders to share practical business experiences in applying PCF and to consider their implications for the development of suitable instruments. He highlighted their work on communicating PCF credibly and contributing to climate-conscious consumption. He explained the PCF World Forum was created to foster dialogue with other initiatives around the world in the hopes of developing common methodologies and a common understanding regarding communication responsibilities within the product chain.
Responding to questions, Priess said the Project uses IPCC figures for global warming potential and said that sooner or later the issue of GHG emissions embedded in imported products will have to be addressed. He also noted the Project’s tools would not work for assessing infrastructure investment projects, but they might be useful in guiding the development of similar tools for such assessments.
John Doyle, New Zealand, discussed his country’s GHG Footprint Strategy, which aims to enable industries to operate in markets with credibility and, where necessary, use internationally recognized, transparent and validated GHG footprint methodologies. He explained the Strategy has three prongs: supply chain projects, focusing on assessing the GHG footprint of product chains such as dairy, beef, forestry, wool, lamb and wine; national projects aimed at capacity building; and international engagements, primarily focused on PAS 2050, the GHG Protocol and ISO. He stressed that the Strategy does not look at labeling or trade issues, and focuses not just on carbon, but also on industries’ water footprint. He said the Strategy’s largest challenge has been producers’ concerns about retailers using the GHG footprint numbers generated by the Strategy.
Verena Radulovic, US, highlighted some examples of GHG monitoring in the US, including a federal order that requires all federal agencies to inventory their emissions with a view to reducing emissions related to federal work and procurement. She also noted a program whereby the largest GHG emitters in the US will be required to report on their emissions to the EPA. She said that, in the absence of a cap and trade bill, this information will be relevant for the EPA to regulate GHGs as pollutants, for example by requiring the use of best available technology for abatement when building new facilities and plants. She also highlighted state-level and private sector initiatives, which are currently the main drivers of action on climate mitigation in the US.
QUESTIONS AND DISCUSSION: Samaniego asked whether New Zealand, in estimating GHG emissions of agricultural products, accounted for emission abatement through carbon absorption within these sectors, with Doyle replying it had not been considered. A participant questioned the disproportionate attention given to the carbon footprint of agricultural products, in comparison with electronic and manufactured products, highlighting concerns over disguised agricultural protectionism behind such schemes. Vergez said he did not believe protection of agriculture was behind the French law, noting that French farmers in fact opposed the adoption of such regulations.
PERSPECTIVES AND SEMINAR CONCLUSIONS
Joseluis Samaniego, ECLAC, moderated this session and invited participants to make their final comments, highlighting the interesting exchange of opinions on whether carbon footprint policies may have protectionist trade implications, and information on private sector advances in reducing carbon footprints. Escobar, Mexico, noted the growing importance of the carbon footprint in international trade and the need to restructure the whole economy, including the internal operations of firms to allow them not only to confront the challenges of inventorying carbon emissions, but also to take advantage of opportunities low-carbon policies may present.
Macedo da Costa, Brazil, said current inventorying efforts will be key to generating a global map of emissions at the sectoral level. He said this will illustrate more clearly the differences in technological levels among countries, and allow for a better allocation of costs to achieve mitigation.
Oyhantcabal, Uruguay, cautioned against allowing the carbon footprint to become a trade barrier or raise costs for exporters, especially food exporters because of the need to promote global food security. He urged careful consideration of not just trade aspects, but also of the linkages with policies on innovation, research and development, and technology transfer, since these will be essential for reducing the carbon footprint in agriculture. Oyhantcabal also suggested considering how to account for carbon sequestration in carbon footprints. He recommended ECLAC create a platform for participants to dialogue between seminars about experiences, policies, programs, concerns and findings.
Eda Rossi, Foreign Affairs Ministry, Chile, said the seminar had left her with fewer concerns about the trade impact of carbon footprint initiatives. She urged developed countries to fully take into account developing country views and concerns when fashioning their measures. She noted that the Chilean government has formed a “Carbon Table” of relevant ministries and the private sector to discuss issues such as the carbon footprint.
Alejandro Ordoñez, Colombia, agreed that the seminar had removed some doubts and concerns. He identified two challenges going forward with the carbon footprint project in Colombia: identifying what technical support is needed; and including all sectors. Diana Barba, Colombia, urged more South-South cooperation regarding technologies that can reduce the carbon footprint. She said Colombian efforts on the issue seek to start with small but sure steps, focused first on the export sector and on building capacities and information, and particularly assisting SMEs.
Emile Rojas, Costa Rica, noted his country is tackling the carbon footprint as part of its overall commitment to become carbon neutral, and that there are two draft decrees under discussion by the new administration. He said Costa Rica sees the carbon footprint as an opportunity and work on it is already underway in the tourism sector.
Samaniego closed the seminar, thanking participants and highlighting the call for a collective approach as a region to participate more widely in carbon footprint standard setting. He noted there are regular regional meetings between the EU and Latin America and the Caribbean where this issue could be introduced. He also underscored the need to build an agenda that contributes to enhancing regional and subregional coordination, rather than advancing in a fragmented manner. He closed the meeting, reflecting on the need for a profound change to achieve global mitigation objectives. The seminar adjourned at 1:55 pm.
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