Why is the current Carbon accounting system is flawed?

Why Today’s Carbon Accounting Is Fundamentally Imperfect And Why “System vs Surroundings” Changes Everything For over three decades, carbon accounting has been the cornerstone of global climate policy. Emissions are measured, classified, priced, offset, and reported with increasing sophistication. Yet despite this expanding machinery of accounting, atmospheric CO₂ concentrations continue to rise, extreme climate events accelerate, and confidence in “net-zero” claims steadily erodes. This is not a failure of intent. It is a failure of the framework. The core problem is simple yet profound: current carbon accounting fails to respect physical reality. It optimises administrative systems while ignoring what happens to carbon in the surrounding environment. Until this mismatch is addressed, no amount of refinement in reporting standards will deliver true sustainability. Carbon Accounting as It Exists Today Modern carbon accounting frameworks focus primarily on emissions events. They record when and where carbon dioxide is released and attribute responsibility to an organisation, asset, or activity. Boundaries are defined — Scope 1, 2, and 3 — and emissions are tallied annually. Where emissions cannot be eliminated, offsets or future removals are used to “balance” the ledger. This approach has practical value. It creates visibility and accountability where none existed before. But it is built on an implicit assumption: that carbon is a one-way waste stream. Once carbon crosses the system boundary and enters the atmosphere, accounting responsibility largely ends. The atmosphere becomes an unowned, unaccounted-for sink. From a physical perspective, this assumption is deeply flawed. The Missing Distinction: System vs Surroundings In thermodynamics, no analysis is valid unless the system and the surroundings are clearly defined. A system can be optimised endlessly — made more efficient, cleaner, or cheaper — but if its waste is simply dumped into the surroundings, the total problem is not solved. It is displaced. Carbon accounting makes precisely this mistake. The “system” is usually defined narrowly: a power plant, a company, a project, or a value chain. The “surroundings” — the atmosphere, oceans, biosphere, and future generations — are treated as externalities. Carbon leaving the system is recorded, but what happens afterward is largely ignored or assumed away. This leads to a dangerous illusion: a system can appear “net zero” while the surrounding environment continues to accumulate carbon. Key Loopholes Created by This Error 1. Boundary Manipulation By adjusting system boundaries, emissions can be shifted rather than eliminated. Hydrogen may appear clean while emissions are moved upstream. Bioenergy may appear neutral while land-use change is excluded. Carbon capture may appear effective while long-term storage risks are deferred to the future. The atmosphere still receives the carbon — just under a different accounting label. 2. Temporal Mismatch Carbon accounting operates on annual or project timeframes. Atmospheric carbon operates on centuries. Present emissions are often cancelled with future promises — offsets, removals, or assumed permanence. From a physical standpoint, this is invalid. A present mass balance cannot be negated by a future assumption. 3. Offsets Without Physical Coupling Most offsets occur in different locations, different carbon pools, and different time horizons from the original emissions. There is no physical linkage between the emitter and the offset activity — only a financial one. Accounting symmetry replaces physical symmetry. 4. Scope Fragmentation Scope 1, 2, and 3 reporting was meant to clarify responsibility but has fragmented accountability instead. Carbon molecules do not recognise scopes. They accumulate in the atmosphere regardless of which column they appear in on a spreadsheet. Why “Net Zero” Keeps Failing the Atmosphere The uncomfortable truth is this: net zero is often achieved on paper, not in physics. A system is declared successful when its emissions balance financially or administratively, not when carbon flow is physically closed. As a result, global carbon accounting can show progress while atmospheric concentrations continue to rise. This is not a paradox. It is a consequence of ignoring the surroundings. If carbon leaves the system and enters the atmosphere, the climate problem has not been solved — it has been outsourced. What a Physically Correct Carbon Accounting Framework Requires A framework aligned with reality must start from first principles: 1. Carbon is conserved. Carbon atoms do not disappear. They must be tracked through their full lifecycle. 2. System boundaries must include responsibility for the surroundings. If carbon enters the atmosphere, it remains part of the accounting problem until it is removed or recycled. 3. Carbon circulation must be distinguished from carbon release. Reusing carbon in a closed loop is fundamentally different from emitting it once and offsetting later. 4. Time must be treated honestly. Present emissions cannot be neutralised by uncertain future actions. Without these elements, carbon accounting remains a reporting exercise rather than a solution framework. Why This Matters Now The limits of the current system are becoming impossible to ignore. Climate impacts are overtaking accounting narratives. Investors, regulators, and the public are increasingly sceptical of claims that rely on offsets, scopes, or future promises rather than physical outcomes. This is why new approaches are emerging — not because they are fashionable, but because the existing accounting framework can no longer explain observed reality. Technologies and systems that explicitly define system boundaries, track carbon flows continuously, and prevent carbon escape into the surroundings do not merely comply with accounting rules. They render many of the debates unnecessary. When carbon is physically contained, measured, and recycled, accounting becomes a matter of measurement — not interpretation. Closing Thought Nature has never relied on offsets. It operates through closed loops. Until human energy systems do the same, carbon accounting will remain an imperfect proxy for sustainability rather than a reflection of it.