The science behind My Carbon Action: Calculating the lifestyle carbon footprint
October 29, 2021 16 minutes read
When it comes to calculating lifestyle carbon footprints, there is an urgent and unavoidable need to address lifestyles. That’s why we at Enfuce have created My Carbon Action: a state-of-the-art tool for calculating lifestyle carbon footprints from consumption.
Regulation around carbon scoping is getting more demanding. That’s why it’s important to make sure that the carbon footprint calculations are relevant and accurate for each user and location. This way, My Carbon Action can provide personalised guidance for more sustainable consumption.
In this article, we discuss the science behind our carbon footprint calculator, My Carbon Action. You’ll learn how it works, and what makes it an outstanding carbon calculation tool.
By reading this article, you’ll learn:
- The methodology of our lifestyle carbon footprint calculation
- The differences between common accounting methods – and why it matters
- Why banks should care about carbon footprints
Why should banks care about lifestyle carbon footprints?
Banks have a unique role in fighting climate change. We have previously discussed the how and why in this blog. But here’s a quick recap on why banks should care about helping their customers calculate and reduce their personal carbon footprints.
Meeting evolving consumer expectations
Consumers have expectations towards banks as their everyday financial service providers. Especially the younger generation customers are demanding banks do their share to mitigate the effects of the climate crisis and provide sustainable options for everyday banking services.
Access to and insights on consumption data
Because banks have access to their customers’ transaction data, they can collect insights on consumer behaviour, consumption patterns, and preferences. Then they can turn this knowledge into actionable advice and value-adding services. This helps them build stronger relationships with their climate-conscious customers.
The increasing regulation puts pressure on banks
Banking and customer preferences evolve, but so does the regulation around calculating greenhouse gas emissions. The political pressure around carbon cutting and sustainable change is increasing. This affects the banking landscape as well.
Sustainability efforts are a way to future-proof banking
Banks that choose to be forerunners will have an advantage in remaining future-proof in the evolving payments landscape. Some banks already have carbon reduction targets in their strategy, and they hold themselves accountable for reaching those targets.
One way to help bank customers consume more sustainably is deploying a carbon footprint calculation tool, like My Carbon Action. Next, we will describe the science behind its calculations.
Scoping the carbon footprint: Production vs. consumption-based accounting
There are various carbon footprint calculators on the market, but there are often major differences between their methodologies. Typically, the calculation models can be divided into two main groups: production-based accounting and consumption-based accounting.
Production-based accounting: Traditionally used in carbon footprint scoping
Production-based accounting only covers direct emissions from production activities within a country’s borders. These include greenhouse gas emissions from households, governments, and the private sector. This measurement is typically used when countries report their greenhouse gas emissions and set targets domestically and internationally.
The main limitation of this accounting is that it doesn’t consider indirect consumption-related emissions and those caused by imports, for example. As a result, the mitigation recommendations can be based on misleading or incomplete information. Additionally, a lot of emissions may be attributed to developing countries.
Consumption-based accounting: The chosen measurement for My Carbon Action
Consumption-based accounting covers both direct emissions and those caused by the production and distribution of products and services, including imports. This accounting reflects the global impact of consumption and takes individual lifestyle choices into account.
There are many benefits to this kind of accounting:
- It addresses the carbon leakage caused by international trade
- It promotes more options for mitigation efforts
- Developing countries are not burdened with excessive emission commitments
My Carbon Action is based on consumption-based accounting. It provides households and individuals with accurate insights on emissions related to their consumption. This kind of accounting focuses on the consumers’ daily activities and lifestyle choices. As a result, it helps clarify where and how carbon reductions can be made.
Methodology: How does My Carbon Action calculate the CO2 footprint?
1. What does it measure? Introduction to lifestyle carbon footprints
My Carbon Action is based on measuring lifestyle carbon footprints. It refers to greenhouse gas emissions directly or indirectly caused by all household consumption. This allows focusing on emissions caused by individual lifestyle choices.
Lifestyle carbon footprints also include embedded and indirect emissions. Those are driven by household demand and induced mid-production. Emissions induced by government consumption and capital formation are not considered.
This approach allows getting a better view of the entire lifecycle of goods and services.
2. What kind of lifestyle domains are included in the calculation?
The calculations are based on these six lifestyle domains:
- Nutrition: Including all food and drinks consumed either at home or at restaurants. Different products are considered in the calculation, such as fruits and vegetables, different types of meat, dairy products, and alcoholic beverages.
- Housing: Based on housing infrastructure and utilities, including construction, maintenance, water usage, heating, and source of electricity.
- Mobility: This area includes leisure travel, commuting, and other ways of getting from one place to another – either with own equipment or transportation services. Different modes of transportation, such as cars, motorbikes, public transport, air travel, and bicycles are considered.
- Shopping: Consumer goods and materials that are bought for personal use and are not included in the other categories. Examples include electronics, clothes, furniture, or daily consumer goods.
- Leisure: Free-time activities that take place outside the home, such as sports, culture, entertainment, hotel services.
- Services: Services for personal purposes, such as insurance, phone and internet services, ceremonies, cleaning, and public baths.
3. Why My Carbon Action uses country-specific data sets on household consumption
Consumer behaviours, preferences, and individual lifestyle choices vary between countries. Hence, the main sources of carbon emissions are also unique in each location.
To ensure accuracy and relevance in each use location, the calculations are always based on country-specific data sets. The data is then complemented with the users’ own inputs regarding their lifestyles.
4. From product category data to domains and consumer-level carbon footprint
Traditionally, carbon footprint calculations have been based on monetary estimations, like euros spent. These calculations use fixed factors based on the Merchant Category Code (MCC). Carbon emissions towards each euro spent are defined through global averages.
My Carbon Action uses country-specific physical consumption data. In other words, the calculation collects information from the product level instead of merchant category level estimates. The product-level data includes typical products that consumers tend to buy. Those are grouped into categories, which are then mapped into the lifestyle domains.
With My Carbon Action, the user can calculate the carbon footprint in kilograms towards each euro spent, based on product category level carbon footprint data.
5. The impact of user inputs on the calculations
When a consumer starts using My Carbon Action, the calculations are based on a country-specific average basket of goods, with a country-specific factor.
The users can make a data input to specify their own lifestyles. Consumers can for example specify their dietary preferences – whether they’re vegan or meat-lovers. Through this input, the carbon footprint calculation becomes more personalised and accurate.
6. The calculation process: step-by-step
To summarise the previous sections, the calculation process follows these six steps:
- Country-specific data is collected to define the average consumption for each of the domains. This includes for example units of food weight, transport distances, energy consumption, or service expenditure. The users can then compare their consumption against the national average.
- Country-specific lifecycle inventory databases or other available data are used to determine carbon intensity values of goods and activities.
- The carbon footprint is calculated for each product or service category, for instance “plant-based foods” or “clothing”. This is done by giving each included product or service a percentage weight, and multiplying it with the right carbon intensity value.
- Each transaction is mapped to one or multiple product or service categories based on the merchant category information. The carbon footprint is then calculated based on the monetary value of the transaction.
- Each incoming transaction is also classified into one or multiple domains based on the Merchant Category Code. If multiple domains are assigned, a percentage share assumption for each domain is defined.
- If lifestyle information about e.g. diet or housing is available, a specific factor is applied for the respective domain. If lifestyle information is not available, a country-specific average is used instead.
How does it work in practice?
The uniqueness of the methodology behind My Carbon Action affects the results in three ways: through user inputs, country-specific data, and the use of physical amounts instead of monetary estimates.
Here are two concrete examples of how My Carbon Action works.
1. User lifestyle input
My Carbon Action generates an example basket of goods. Unless a lifestyle input is made, the contents of the basket are based on a country-specific average. A country-specific factor is assigned to it. If the user gives input on their dietary preferences, the factor for the purchase is adjusted.
Let’s take a look at a €100 basket of goods at the grocery store. 90% of the purchase is assumed to be food. The remaining 10% is other common household items, such as paper towels.
A vegan user’s €100 basket of goods at the grocery store is assigned a different code and factor than a meat lover’s basket with the same monetary value. Hence, the resulting carbon footprint is also different and reflects the user’s own lifestyle better.
2. Country-specific data
My Carbon Action can calculate the footprint of the average basket of goods if the carbon footprint of a consumption category is known. The footprint is always country-specific and can be adjusted to account for personal lifestyle preferences.
Then, if the user consumes more meat (or less) than the average consumer, the calculation is adjusted accordingly.
What makes My Carbon Action an excellent carbon footprint calculation tool?
1. Focus on the individual lifestyles
My Carbon Action focuses on what individual consumers can do to live more sustainably – unlike the most common carbon footprint calculators on the market. The calculations are based on their own transaction data. This ensures that the recommendations are provided in a meaningful and helpful way.
2. Always relevant in each country and for each user
The country-specific scientific data models ensure that the information is relevant in each use location.
This data is then complemented with users’ own input on their lifestyle choices. This means My Carbon Action calculates a truly personal carbon footprint.
When banks combine their transaction information with their customers’ lifestyle choice data, they can provide more targeted and relevant advice on sustainable consumption.
3. The methodology ensures higher accuracy
My Carbon Action’s carbon footprint calculations start from the product level. This means that the calculations also include indirect emissions and consider actual physical consumption instead of monetary estimates.
This allows providing more detailed and accurate information on the actual emissions caused by individual lifestyle choices. This makes the recommendations on reducing carbon emissions also more relevant.
This combination of country-specific data, the users’ own inputs, and the resulting advice is what sets My Carbon Action apart from any other carbon footprint calculator on the market.
Learn more about My Carbon Action and make sure you are among the future thought leaders in banking!
Watch this webinar recording to learn how you can help your customers live more sustainably, and why you should do it.