How are emission factors converted using exchange rates and CPI?
Emission factors are often published for different regions, currencies, and years. Over time, factors can quickly become outdated due to changes in currency exchange rates and inflation (CPI) variations between countries.
To keep emission factors accurate and comparable, Sumday follows a standard adjustment process:
- Deflate to a 2010 Baseline: All spending-based emission factors are adjusted to a baseline year of 2010 using the CPI from the World Bank.
- Convert to USD: Next, we convert these 2010-based factors to USD using 2010 exchange rates from the Federal Reserve Bank of America.
- Convert to Local Currency and Inflate: For each organization, we convert the factor to the local currency and adjust it to the current assessment year using local CPI.
Example of emissions factor conversion
When an organisation is created in Sumday, a primary location is selected which informs the CPI that should be used and the currency of the transactions used in the assessment. The date of the transactions is also identified by the assessment period.
If we start with an emission factor for oranges in 2018 of 0.40kg of CO2e per USD, we can deflate it to 2010 USD using the cumulative CPI for the US between 2010 and 2018 of 1.3419 resulting in an emission factor of 0.5368kg of CO2e per USD (0.40kg of CO2e per USD x 1.3419).
We can then convert this to NZD using the 2010 USD to NZD exchange rate of 1.3858 (1 USD = 1.3858 NZD) the emission factor becomes 0.3874 Kg of CO2e per NZD (0.5368 Kg of CO2e per USD / 1.3858).
Now if we inflate the emission factor to 2023 using the cumulative CPI for New Zealand between 2010 and 2023 of 1.2944 this results in an emission factor of 0.2993 Kg of CO2e per NZD (0.3874 Kg of CO2e per NZD / 1.2944).
Now we can multiply the 2023 NZD emission factor for oranges of 0.2993kg of CO2e per NZD by a transaction amount of 150 NZD and we get a total emissions of 44.89kg of CO2e.
In this way we have been able to calculate the emissions of 150 NZD spent on oranges in 2023 using an emission factor published by the United States in 2018, while accounting for all CPI and exchange rate implications.