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Carbon budgeting is essential business


Over the years I have learned by experience that budgeting is the basis for all business success. It helps with both planning and control of the finances of the business. If there is no control over spending, planning is futile and if there is no planning there are no business objectives to achieve.


I also learned by experience that successful businesses allocate time in their financial accounting to create and manage budgets, prepare and review business plans and regularly monitor their financial situation and business performance.


It is no different when it comes to carbon accounting. Commercial operations with foresight are instituting carbon budgeting measures to ensure ongoing viability, but, is it fast enough?

For a 66% chance of limiting warming to 1.5°C, IPCC’s 2022 AR6 report stated that the world has a remaining carbon budget of 360GtCO2 – or nine years of current emissions of carbon dioxide. If all greenhouse gas emissions are included, the budget totals 540GtCO2 equivalent. This year alone there have been emissions of 58GtCO2 equivalent (reference: https://worldemissions.io/), the largest annual level ever recorded.


This means that the world, which has heated by 1.15°C to date since the start of the industrial revolution, needs to cut greenhouse gas emissions to no more than 18GT per annum to 2050. The World Meteorological Organization has estimated that there is a one-in-four chance that the world will exceed 1.5C for at least one year by 2025.


The Emissions Gap Report 2022: The Closing Window – Climate crisis calls for rapid transformation of societies (https://www.unep.org/resources/) finds that the international community is falling far short of the Paris goals, with no credible pathway to 1.5°C in place. Only an urgent system-wide transformation can avoid climate disaster.


Further, if current economic growth, demography, and emissions intensity trends continue, the level of emissions will continue to rise, reaching 62 GT by 2030.


Meanwhile, scientists from the University of Technology Sydney (UTS) have developed energy-related carbon budgets for industries including the aluminium, steel, and chemical industries and the car and aviation industries. The research shows that it is still possible to limit global warming to 1.5˚C and implement the Paris Climate Agreement. This, however, requires timely climate action by the energy-intensive industries supported by the finance sector, backed by reliable and long-term policies from governments.


The recommendations derived from the UTS research include:

  1. Setting and implementing investment, lending, and underwriting portfolio decarbonizations targets in line with 1.5˚C no/low overshoot.

  2. Stop investing in new oil, coal, and gas projects.

  3. Ensure coal phase-out by 2030 in OECD countries, between 2030 and 2040 all regions should phase out coal.

  4. Manufacturing stop for passenger cars with oil-fuelled internal combustion engines by 2030.

  5. Governments to provide detailed transition plans to net zero.


The recommendations also include the condition that companies disclose their climate mitigation strategies, mid-term target setting, target achievements, and investments in renewable energies and climate solutions. An essential component of this recommendation is the development of carbon budgets.


Ecoprofit suggests the carbon budget should be a plan to:

  • Control the greenhouse gas emissions of the business.

  • Evaluate the options for renewables and energy-efficient upgrades.

  • Evaluate the return on investment and greenhouse gas reductions for each option.

  • Ensure that the business can fund its proposed upgrade proposals.

  • Devote resources to the calculation of supplier greenhouse gas emissions and processes to reduce embedded emissions in acquired products and services.

  • Devote resources to calculating emissions downstream such as emissions arising from the use of sold products.

  • Allocating resources to carbon management accounting within the organisation and within its value chain.

  • Assist with meeting impending financial disclosure requirements on climate risk and ESG.

  • Evaluate carbon offset acquisition or development.

Finally, the carbon budget should include carbon emission reduction options that align with global emissions requirements in terms of setting and implementing investment and decarbonization targets in line with a global 1.5˚C target.


Have a happy, prosperous and carbon reduced 2023.

Author: The Carbonator





CTI courses hosted by Ecoprofit

As climate change events increase in number and ferocity, so does climate change risk for businesses and organisations. To remove or control this risk, organisations need to be equipped with the right practical knowledge.


Carbon Training International (CTI) offers courses that give clear direction to understand how to deal with climate change risk, including a comprehensive understanding of the term net zero.


CTI courses include Strategic Carbon Management, Carbon Accounting, Carbon Offsetting, Carbon Accounting/Offsetting combined, Applied Energy Efficiency and Reducing Fleet Emissions.


You can easily enrol in one of CTI’s online webinar courses at:


Just choose your preferred course and course start date. Extra course dates can be arranged.


Note: Over the Christmas/New Year break we are running the speed dating version of our Carbon Accounting course. Running from Monday to Friday, 9th to 13th January, the course is made up of 5 webinars of 1.5 hours each starting at 9.30am AEDT each day. Learner guide and workbook supplied.


To enrol in the crash course go to:

https://www.ecoprofit.com.au/product-page/understand-carbon-accounting-in-one-week

The good news: carbon emissions and business costs are linked. The more an organisation reduces its carbon emissions the more it reduces its costs.



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