What is a carbon footprint, and how to understand it

March 2023, 9 minute read

What you’ll learn

• What is a carbon footprint?
• How’s an average carbon footprint calculated?
• Where do greenhouse gas emissions come from?
  
• How do lifestyle choices affect your estimated carbon footprint?
  
• How do your financial transactions affect your estimated carbon footprint?
• How does your estimated carbon footprint compare to others?

1.  What is a carbon footprint?

A carbon footprint measures the amount of greenhouse gases (including CO₂, methane and other greenhouse gases) released into the atmosphere due to day-to-day human activities. It represents impacts on climate change from the indirect and direct emissions generated by daily activity and decisions on the goods and services we consume and use.

Knowing this impact can be a significant step to assist in making decisions to live more sustainably.

Carbon footprints take into account the global warming potential of greenhouse gases, including CO₂ and methane, and their relative contributions. For example, one ton of methane emissions equals about 29.8 tons of CO₂e because methane has a stronger global warming potential than CO₂.

Why’s it important to understand your estimated carbon footprint?

The carbon footprint concept is all about providing information that can potentially help identify the activities in your life that may contribute to your overall carbon emissions.

Understanding the estimated carbon footprint of your transactions may help you consider ways that could reduce your personal carbon emissions.

Is it the same thing as an ecological footprint?

No, a carbon footprint relates to the impact created on the climate as we go about our daily lives. In contrast, an ecological footprint is an environmental impact, expressed as the amount of land required to sustain the use of natural resources.

2.   How's an average carbon footprint calculated?

Individual and collective actions all count towards your average carbon footprint. While there are different methodologies to calculate it, it's important to remember that although it's a science, it's not perfect.

How does the Westpac App calculate estimated carbon footprints?

The Westpac App uses two pieces of data to calculate an estimated monthly carbon footprint:

• The transaction amount
• The transaction’s industry category, which has an associated emissions factor based on Australian industry average data.
  

The Tracker analyses eligible transactions from included Westpac accounts and allocates a specific industry type to these transactions depending on the merchant type (for example, fashion, groceries, or insurance).

Each eligible transaction is multiplied by an 'emissions factor' (how much carbon dioxide equivalents (CO₂e) that type of activity emits per dollar spent) to work out the estimated carbon footprint for that transaction. For example, every time you use a Westpac card (linked to an eligible Westpac account) at a petrol station or supermarket, you’ll see the estimated emissions associated with that purchase. These individual transactions are then combined into a monthly view of an individual's estimated carbon footprint.

How accurate are the results?

Since we can’t see the specific items you purchase or any of your lifestyle choices, such as your diet (e.g., if you’re vegetarian) or energy consumption choices (e.g., if you’ve selected ‘green energy’ from your provider), we apply an average Australian emissions factor to your purchases to give you an estimated carbon footprint associated with that transaction.

While we do our best to link eligible transactions to the correct categories in the Carbon Footprint Tracker, sometimes we may get it wrong or are unable to categorise certain transactions. For example, you may have gone to the petrol station and purchased lunch rather than fuel, or a transaction on your transaction listing displays as ‘Uncategorised’. You know your spending activities best, so we recommend reviewing your transactions regularly. Re-categorising them or assigning an ‘Uncategorised’ transaction to a specific category may help give you a more accurate estimate of your carbon footprint.

3.  Where do greenhouse gas emissions come from?

Emissions come from a wide variety of sources, including electricity generation, transportation, forestry, manufacturing, and agriculture, to name a few. Certain industries and companies are more sustainable than others and have lower carbon emissions. For example, in Australia, higher emitting industries today include energy (gas, electricity and petrol), flights, and other modes of transport relying on fossil fuels.

Having the information to start to understand the impact of different activities could help you identify how you could make changes to or be more conscious of your activities in certain areas and reduce your average carbon footprint.

Examples of sources of carbon emissions for individuals include:

Transportation

Your mode of transportation and how often you travel may significantly impact your carbon emissions. Driving a car, flying on a plane, and even taking public transport contribute to your carbon footprint. To put it in perspective, cycling 10km instead of driving an average passenger car over the same distance, equals an estimated 1.5kg CO₂e saved^*.

Energy consumption at home

Carbon emissions are generated when producing the energy that you use to power your home, such as electricity and natural gas. Heating, cooling, lighting, and appliances contribute to your carbon footprint. Using energy efficient lighting and appliances could reduce the amount of energy you consume.

Diet

The foods you eat also contribute to your carbon footprint. The production and transportation of animal products, such as meat and dairy products, typically generate higher emissions than plant-based alternatives. Removing an average of two days’ worth of meat purchases that you’d normally add to your weekly grocery shop may reduce the estimated carbon emissions from your grocery bill by approximately 4.5kg CO₂e^*.

Consumption of goods

The goods you buy, including clothing, electronics, and other consumer products, are often produced, and transported using carbon-intensive processes. Global fashion supply chains may be emissions intensive, especially in the production of new fashion items, which involves resource extraction, transportation, and manufacturing activities. Spending $50 on a second-hand clothing item instead of purchasing a new item is estimated to save approximately 20kg CO₂e for that specific purchase*.

Waste disposal

How you dispose of waste, including food waste, paper products, and plastic, can increase or reduce your carbon footprint. When organic waste decomposes in a landfill, it produces methane, a potent greenhouse gas. It is estimated that composting 10kg of household food waste instead of sending it to a landfill may save approximately 20kg CO₂e^*.

4.   How do lifestyle choices affect your estimated carbon footprint?

Currently, the Westpac Carbon Footprint Tracker doesn’t consider all your environmental or lifestyle choices that may reduce your carbon footprint. The Tracker uses Australian industry data that is supplied by our partner Cogo, to calculate the estimated carbon footprint associated with eligible transactions.

Currently, the following assumptions are made in the Westpac App for the categories below:

Groceries

We can't see the individual grocery items you purchase or your specific dietary choices. Therefore, we use an average Australian grocery emissions factor to calculate your estimated carbon footprint for this category.

Dining

As we don’t receive information regarding your specific meal, we use an average Australian dining-out diet emissions factor to calculate your estimated carbon footprint for this category. The estimated average operational carbon footprint of a business in this category (which includes restaurants, cafes and take-away businesses) also includes emissions from the utilities, fuel etc., generated to operate that business.

Energy and Electricity

While we can see the energy or electricity provider you use, we can’t see whether you're buying just electricity or natural gas or whether you’ve selected energy from a renewable source with your provider. We use average Australian emissions factors, which are high due to Australia's overall reliance on coal and other non-renewable energy sources.

Shopping

Because we can't see the exact items or brands you purchase, we use average emissions factors based on the type of shopping category (e.g., fashion) to calculate your estimated carbon footprint, taking into account the global supply chain.

In this context, the global supply chain refers to the raw materials being used and transported between countries to create a finished product. The finished product is also generally transported between countries until it reaches the final consumer.

For Australia, most fashion items we consume are manufactured overseas, with materials sourced from across the globe. Due to the global nature of fashion, the estimated emissions factor we use represents an average weighted estimate associated with where the fashion item was made. Even fashion which is advertised as ‘made in Australia’, will likely source fabrics manufactured overseas.

Flying

The carbon footprint of flying incorporates more than just the fuel the aircraft uses. It includes the airline supply chain (i.e., processes involved to manufacture, maintain and operate the aircraft), and considers the increased emissions of having an aircraft that flies at a higher altitude.

Do all transaction categories in the Westpac App have an associated carbon footprint?

All identified categories have an estimated carbon footprint attributed to them. For transactions where the Tracker can't identify a category, it’ll be listed as ‘Uncategorised’, with an estimated Australian average emissions factor applied, due to its specific category being unknown. This estimate is made up of a weighted average emissions factor based on the emissions intensity of all sectors in the Australian economy. It’s a good idea to re-categorise your purchase to the most relevant category to improve the accuracy of the estimate.

5.  How do your financial transactions affect your estimated carbon footprint?

With online withdrawals and transfers between accounts, transaction data indicates that typical transactions in this category involve moving money between accounts, meaning they could incur a zero carbon footprint or one that is relatively smaller than transactions in other categories.

While with other financial transactions like mortgages and loan repayments, rent, ATM withdrawals and financial services, they’ll be allocated an estimated carbon footprint as follows:

Mortgages, Loans & Rent Payments

Take into account the carbon footprint of the organisation (the bank or your landlord) you're paying money to, including their operating costs, capital expenditure, and investments. All of these services have a carbon footprint.

Withdrawals from ATMs

We’re not able to see what you buy with the money you withdraw from an ATM, so we use an emissions factor based on average Australian household spending. To increase the accuracy of the estimate, we encourage you to re-categorise your ATM withdrawals to show the most relevant category for that transaction.

Investments & Shares

We don't have visibility over what your money is invested in, so this calculation is based on the estimated average emissions of entities that our partner Cogo considers forming part of the Australian financial services industry. We assign this emissions factor to transactions that are categorised as ‘Investments & Shares’ in your transactions list.

6.  How does your estimated carbon footprint compare to others?

To compare your estimated carbon emissions in the Westpac App for any transaction category, the Carbon Footprint Tracker provides averages for both Australian individuals and households that Cogo has sourced.

The important thing to note is that taking small, positive actions can help if you are interested in understanding the potential to reduce your carbon footprint.

What steps can you take to lower your estimated carbon footprint?

To give you an idea, every $2 spent at an Australian fashion retailer creates, on average, 1kg CO₂e, the equivalent of driving an average car 5.5km*. Certain industries and companies are more sustainable than others and have lower carbon emissions. For example, renewable energy providers and second-hand fashion retailers have a much lower impact on your footprint than non-renewable energy providers and buying new clothes.

By understanding how your spending contributes to your carbon footprint, you'll be equipped with the information needed to make spending choices that may help manage your carbon footprint.