2. Carbon Market: A Way to Support Climate Action
Man-made GHG emissions are the primary driving force of climate change, as they act like greenhouse glass through trapping infrared radiation from the sun and preventing heat from escaping into space. Excess GHG emissions are responsible for rising average temperatures and radical shifts in weather patterns worldwide for an extended period 
. Climate change, caused by elevated temperature, leads to stronger heat waves, heavier precipitation events, more prolonged droughts that fuel wildfires, ocean acidification, rising sea levels, and declining biodiversity 
Climate extremes have dire consequences for food and water security. Floods and droughts limit access to vital resources, leading to increased malnutrition and insecurity in terms of food and water. Meanwhile, extreme heat events result in increased human morbidity and deaths 
. Since 1950, natural forces alone have been insufficient to explain climate change and anthropogenic forces are believed to be predominantly responsible for the observed temperature anomaly 
. GHGs emitted by human activities are to blame for the elevated global temperature, making humans not only climate refugees but also climate persecutors.
Under the Kyoto Protocol, six GHGs were identified as significant contributors to climate change, namely, carbon dioxide, nitrous oxide, methane, perfluorocarbons, hydrofluorocarbons, and sulfur hexafluoride. Among these, the food system alone accounts for approximately 21–37 percent of man-made GHG emissions, including agricultural production, processing, transportation, and food waste 
. The food industry is a significant contributor to global GHG emissions and is now receiving more attention. As the carbon market gains prominence, the reduction of carbon emissions will become an increasingly relevant topic for the food industry.
To address climate issues, representatives from 197 countries established the UNFCCC, which convened regularly for COP. Figure 1
illustrates a chronological sequence of various human efforts in addressing climate change. The concepts of carbon markets, carbon taxes, carbon offsets, and carbon neutrality were subsequently introduced. The first global carbon market was developed under the United Nations’ 1997 Kyoto Protocol at COP 3. However, the initial implementation of the carbon market concept was fraught with difficulties and eventually imploded with extensive allegations of fraud and abuse of power. The carbon market mechanism was strengthened with the introduction of the Paris Agreement at COP 21, but flaws persisted until modifications were made by national representatives at COP 26. In October 2023, the European Union will introduce the Carbon Boundary Adjustment Mechanism (CBAM), which imposes a carbon tariff on importers whose goods surpass the carbon standards of the importing country 
. CBAM initially targets five industries, including cement, electric power, fertilizer, steel, and aluminum, with the possibility of including more industries after its formal implementation in 2026. As a significant contributor to global GHG emissions, the food industry is now receiving increased attention. Discussions on its environmental impacts and potential solutions took place at the UN Food Systems Summit and the UNFCCC COP 26 sessions 
. Therefore, reducing carbon emissions in response to the carbon market will become an increasingly relevant and crucial topic for the food industry.
Figure 1. A chronological sequence of various human efforts in addressing climate change.
The carbon market is a policy tool that constrains man-made GHGs through assigning economic value to carbon dioxide (CO2
), thereby creating a new environmental commodity that can be traded internationally. Business owners are required to pay the associated costs for their GHG emissions. Carbon dioxide is the primary man-made GHG blamed for inducing global warming 
, and it serves as the tradable unit in the carbon market. Other non-CO2
GHGs can be transacted on the carbon market at their CO2
-equivalent values, calculated based on the notion of “global warming potential”.
3. Emission Hotspots in the Food Industry
The evolving carbon market is placing greater emphasis on GHG verification, which is considered the most technically demanding aspect of the emissions trading system. GHG verification entails assessing an organization’s precise GHG emissions, reporting GHG emissions, and identifying emission hotspots through a set of standardized procedures. Through identifying these emission hotspots, companies can steer toward and adopt more efficient and cost-effective emission abatement strategies 
The food system, spanning from farming to post-production, is responsible for producing massive amounts of man-made GHG emissions 
. During the farm stage, emissions primarily arise from agricultural and livestock production, as well as corresponding land use changes (LUCs). In the manufacturing phase, GHGs primarily come from food manufacturing processes, including processing, packaging, and transportation. Post-production processes, such as retail, consumer travel, household consumption, and food waste disposal, also contribute to GHG generation. According to a study conducted by Tubiello et al. 
, there was a significant decrease of approximately 30 percent in GHG emissions from LUCs in the food system between 1990 and 2018. It can be inferred that emissions from energy consumption beyond the farm stage, particularly from the food manufacturing industry, will increasingly account for a larger proportion of the entire food system’s emissions in the foreseeable future.
The current food system heavily relies on fossil fuels. It is responsible for approximately 30 percent of the world’s energy consumption and significant GHG emissions, with the food manufacturing and post-production stages alone accounting for 70 percent of the total energy usage within the system 
. During the food manufacturing stage, emissions from packaging and transportation have exhibited the highest upward trend, with a 67% increase from 1990 to 2015. It is worth noting that transportation emissions mainly arise from automobiles and trains, rather than ships and aircraft 
Conducting GHG verification is essential for quantifying these emissions and identifying hotspots. Several international standards are applicable for measuring, managing, and reporting GHG emissions, including the Greenhouse Gas Protocol (GHG Protocol), ISO 14064 
, ISO 14067 
, PAS 2050 
, and PAS 2060 
. These documents serve distinct purposes and focus on different areas. A comparison of GHG verification guidelines between the GHG Protocol and ISO 14064 is presented in Figure 2
. The GHG Protocol, being the first developed protocol for GHG accounting, provides a comprehensive framework that addresses the concept of Scope 1, Scope 2, and Scope 3 emissions. It enables the understanding and identification of direct and indirect GHG sources across the entire food industry’s value chain. Scope 1 refers to direct emissions that a company can control, while Scope 2 encompasses indirect emissions generated from purchased energy sources. On the other hand, Scope 3 comprises indirect emissions from sources throughout a company’s value chain that are beyond its direct control. Scope 3 emissions can be further divided into fifteen distinct categories. ISO 14064 is developed based on the GHG Protocol. ISO 14067 serves as a supplementary component to ISO 14064 and focuses on providing guidelines for quantifying and reporting product carbon footprints. ISO 14064 classifies a company’s emission sources into six categories, which differ from the Scope 1–3 classifications but share some relevance. Figure 2
illustrates a comparison between the two, showing that Scope 1 corresponds to Category 1 (ISO 14064), Scope 2 corresponds to Category 2 (ISO 14064), and Categories 3–5 (ISO 14064) align with the 15 categories of Scope 3 emissions. PAS 2050 is designed specifically to assess the GHG emissions of product life cycles, while PAS 2060 can be pursued to achieve carbon neutrality for specific products or operations 
. The usefulness of these approaches depends on the specific goals, resources, and commitment to sustainability and emissions reduction of food industry stakeholders.
Figure 2. A comparison of GHG verification guidelines between GHG Protocol and ISO 14064.
These guidelines provide a framework for the food industry to develop strategies for reducing emissions. The GHG Protocol’s GHG verification guideline categorizes emission sources across the entire food manufacturing industry’s value chain into three scopes. Taking milk powder production as an example (Figure 3), the upstream of Scope 3 covers GHG emissions generated during raw milk production and transportation to the milk factory. Scope 1 encompasses emissions that the food factory directly controls, such as milk processing, milk powder packaging, and logistics for sending products to retail locations. Scope 2 refers to emissions from energy outsourced by the food factory, and the downstream of Scope 3 involves emissions generated by retail locations, consumers, and packaging disposal after the final product leaves the factory.
Figure 3. Possible emission sources during milk powder production according to the GHG Protocol’s GHG verification guideline.
Figure 3 provides a detailed illustration of emissions sources ranging from Scope 3 upstream to Scope 3 downstream. Scope 3 upstream emissions include GHG emissions generated during feed crop cultivation, mechanized farming, as well as nitrous oxide and methane emissions from manure and cattle digestion. Furthermore, emissions result from mechanical milking and the transportation of raw milk to the factory. On the other hand, emissions arising from pasteurizing and spray-drying raw milk into milk powder, packaging, and transporting the final products using company-owned vehicles are classified as Scope 1 emissions. The emissions associated with the factory’s purchased energy sources are categorized as Scope 2 emissions. Scope 3 downstream emissions arise from selling activities such as lighting and air conditioning in retail locations, customer activities involving the brewing of milk powder, and the disposal of packaging waste.
Considering the high energy consumption and heavy reliance on petroleum and coal in the food manufacturing industry 
, it is commonly assumed that the product processing and post-production stages are the primary sources of emissions in the food system. However, in reality, it is the farm stage that serves as the main contributor to GHG emissions. This is mainly attributed to significant agricultural production (e.g., methane emissions from enteric fermentation in livestock), land use (e.g., CO2
released from land management practice), and LUC activities (e.g., CO2
emissions resulting from deforestation for land conversion).
Reports from the 50 largest global food companies, such as Nestlé headquartered in Switzerland, as well as Cargill and Coca-Cola, both headquartered in the USA, indicate that almost 90 percent of all disclosed emissions are attributable to Scope 3 emissions, with crop cultivation, land use, and LUC being the largest sources. Unfortunately, Scope 3 disclosure is often insufficient and unreliable, and over 30 percent of disclosed Scope 3 emissions are not addressed by companies’ emissions mitigation goals 
. As a result, it is practically challenging for food manufacturing companies to intervene in farm management and minimize Scope 3 emissions.