Thriving in the Carbon-Aware Market: How to Account for Emissions in the Era of Carbon-Centered Trade Policies

Emerging global policies, such as the European Union's enacted Carbon Border Adjustment Mechanism and similar policies under development in Canada, Australia and the United Kingdom, will place a premium on goods traded into their territories with higher embedded emissions than those produced domestically. U.S. manufacturers could stand to benefit from such policies; given the investments U.S. industry has made to reduce the energy and emission intensities of its operations. For example, the overall GHG intensity of U.S. steel production in 2019 was ~0.96 t CO2/t steel, less than half that of China (~1.97 t CO2/t steel), and bested only by Italy. To realize these benefits, transparent, accurate, interoperable and accepted embedded emissions accounting and calculation methods are required. Achieving this requires overcoming challenges related to data availability, boundary definitions, and product definitions among others, both at individual facilities as well as through value chains. We will present technical findings on methodology considerations and data-availability constraints for determining the emissions of traded goods, using steel as a pilot and leveraging publicly available data. Issues such as determining the appropriate scope for emissions accounting, implications of the specificity of product chosen, emissions allocation in multi-product facilities, and enumeration of emissions for products manufactured across multiple facilities will be discussed. By sharing the results of our efforts, we aim to inform the development and execution of embedded emissions accounting methods from a technical perspective such that U.S. manufacturers can thrive in emerging global markets.