Designing For Comparability: A Foundational Principle of Analysis Missing In Carbon Reporting Systems

70 Pages Posted: 29 Oct 2022 Last revised: 27 Jul 2023

See all articles by Jimmy Jia

Jimmy Jia

Smith School for Enterprise and the Environment, Oxford University; Energy and Environmental Management Institute, George Washington University; UK Centre for Greening Finance and Investment

Nicola Ranger

World Bank

Abrar Chaudhury

University of Oxford

Date Written: October 25, 2022

Abstract

Market participants require comparability to make decisions, and policies aimed at using market mechanisms to address climate change relies on this ability. However, this paper shows that the commonly used GHG emission metrics are suitable for trend analysis, continuous improvement, and target setting, but not fit-for-purpose in making comparative assertions between multiple entities. Therefore, relying on contemporary greenhouse gas (GHG) emission metrics could limit policymaker’s efficacy in using market forces in climate change interventions. We propose three conditions for a metric system to make comparative assertions taken from three fields, accounting, engineering, and social science. As the scientific community continues to develop additional metric systems for biodiversity, nature, water, land use, and other environmental indicators, policy makers, regulators, and standard setters can use these necessary conditions to ensure that the new metric systems are fit-for-purpose for the financial sector.

Keywords: ESG accounting, GHG Protocol, comparability, classification systems, life cycle assessment

JEL Classification: Q57, M48, Q51

Suggested Citation

Jia, Jimmy and Ranger, Nicola and Chaudhury, Abrar, Designing For Comparability: A Foundational Principle of Analysis Missing In Carbon Reporting Systems (October 25, 2022). Available at SSRN: https://ssrn.com/abstract=4258460 or http://dx.doi.org/10.2139/ssrn.4258460

Jimmy Jia (Contact Author)

Smith School for Enterprise and the Environment, Oxford University ( email )

Oxford
United Kingdom
07729376962 (Phone)

Energy and Environmental Management Institute, George Washington University ( email )

Dept. of Engineering Mgmt & System Engineering
1776 G. Street NW
Washington, DC 20052
United States

UK Centre for Greening Finance and Investment ( email )

University of Oxford
South Parks Road
Oxford, OX1 3QY
United Kingdom

Nicola Ranger

World Bank

1818 H Street, NW
Washington, DC 20433
United States

Abrar Chaudhury

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

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