A seismic shift is taking place in the conversation around how to incentivize industrial decarbonization. Within days of one another, the CBAM guidance and the ICC & Carbon Measures Landscape Review — two very different exercises — both highlighted the growing importance of standardization, comparability and product-level carbon accounting.

While our accounting experts are still reviewing the CBAM guidance in depth, it raises a broader question we’ve been thinking deeply about at Carbon Measures: as product-level carbon data becomes increasingly important to policy and markets, what accounting infrastructure is needed to make that data useful in practice? And to be clear, we are thinking about the same question with respect to all carbon policies out there. The emerging answer is that good carbon accounting is the foundational pillar for any carbon policy to effectively reduce carbon emissions.

Four things stand out:

• ‍Product-level carbon data needs “apples-to-apples comparison” to be precise and verifiable. The Commission calls for “more prescriptive and standardized calculation rules” to improve the comparability of embedded emissions. Markets need a credible way to measure and compare the carbon intensity of products. As the Landscape Review highlights, a range of product-level carbon accounting approaches exist today, each with different strengths and limitations, but the landscape remains fragmented, and quantification rules, in many instances, are too flexible. Understanding those nuances is an important step toward a more consistent approach. 
• ‍Better underlying data will help lower-carbon products compete on their actual performance and support investment plans. Product-level carbon information is moving from sustainability reporting toward something that can affect trade, market access, cost, and competitiveness. As the Landscape Review argues, CBAM and other product regulations require granular embedded-emissions information. This creates a commercial advantage and greater market access for producers that can provide better verified primary data proving the low(er) carbon intensity rather than relying heavily on default values. Companies are investing billions to produce lower-carbon steel, aluminum, cement, chemicals, and other industrial products. For those investments to have a positive ROI, and translate into a competitive advantage, buyers need to be able to credibly distinguish between products based on their carbon intensity. That reinforces why a globally consistent, generally accepted approach to product carbon accounting is a foundational imperative. 
• ‍Carbon accounting should ultimately become as natural to business as financial accounting. Markets rely on financial accounting as a common language for understanding and comparing financial performance. Businesses need the same thing for carbon. Product carbon accounting should become standard business practice informing supply chain management, investment decision making, and competitive strategy, while helping companies comply with policy requirements. 
• ‍A ledger-based approach can work alongside policy frameworks by providing the underlying carbon data infrastructure, while policymakers determine how that data is used for specific regulatory purposes. A company could maintain a consistent ledger that records emissions at their source and carries them through products and value chains. That data could then be mapped to the rules of different policies, producing accurate, comparable data for CBAM and other trade regime reporting requirements.

There is much more to unpack, but all signs are pointing to more standardized and comparable product-level carbon accounting.