How do you adjust for inflation in spend-based emissions calculations?

We calculate spend-based emissions using emission factors sourced from a range of environmentally extended input-output models. These models do not provide coverage for every country, so in some cases we use the closest available country proxy.

Because emission factors are defined for a specific currency and year, reported spend must be aligned to that same basis before calculation.

Our approach is:

1. Select the emission factor based on the country of spend
2. Convert spend into the currency of the emission factor
3. Deflate spend to the year of the emission factor
4. Calculate emissions by multiplyling adjusted spend by the emission factor

This ensures that spend and factor are expressed on a like-for-like monetary basis.

Why we adjust spend

Emission factors represent emissions per unit of economic value within a specific country and year.

If spend is reported in a different year or currency, it cannot be directly multiplied by the factor without adjustment. We therefore restate spend to match:

• the currency of the factor
• the price year of the factor

We adjust the spend rather than the factor. This keeps the source factor unchanged and provides a clear and auditable calculation.

Calculation logic

At a high level, the calculation is:

1. Convert reported spend into the factor currency
2. Deflate that spend back to the factor year
3. Multiply by the emission factor

Inflation indices used

Use an index aligned to the emission factor currency and economy:

Worked examples (illustrative values only)

Example 1: USD spend + USD emission factor

Inputs

100,000 × (100 ÷ 116) = 86,207 USD (in 2022 terms)

Step 2: Apply emission factor

86,207 USD × 0.40 kgCO₂e per USD = 34,483 kgCO₂e

Example 2: AUD spend + AUD emission factor

Inputs

150,000 × (100 ÷ 112) = 133,929 AUD (in 2022 terms)

Step 2: Apply emission factor

133,929 AUD × 0.55 kgCO₂e per AUD = 73,661 kgCO₂e

Example 3: AUD spend + EUR emission factor

Inputs 

150,000 × 0.61 = 91,500 EUR

Step 2: Adjust spend for inflation

91,500 × (100 ÷ 109) = 83,945 EUR (in 2022 terms)

Step 3: Apply emission factor

83,945 EUR × 0.60 kgCO₂e per EUR = 50,367 kgCO₂e

Example 4: USD spend + AUD emission factor 

Inputs

Step 2: Adjust spend for inflation

150,000 × (100 ÷ 112) = 133,929 AUD (in 2022 terms)

Step 3: Apply emission factor

133,929 AUD × 0.55 kgCO₂e per AUD = 73,661 kgCO₂e

Handling differences in inflation between countries

In some cases, spend may originate in a country with very different inflation dynamics to the country of the emission factor. For example, spend may be recorded in Indian rupee while the selected emission factor is derived from Australia. Inflation over the period may be low in Australia but significantly higher in India.

In this situation, inflation is applied based on the country of the emission factor, not the country where the spend originated.

Why this approach is used

Once an emission factor is selected, it defines the economic context of the calculation. A spend based emission factor represents emissions per unit of economic value within a specific country, currency, and year.

Using an Australian emission factor means the calculation is anchored to the Australian economic system. All monetary adjustments must remain consistent with that system.

Applying Indian inflation in this case would create a mismatch:

• the spend would be adjusted using Indian price changes

• the emission factor would reflect Australian economic relationships

This mixes two different economic systems and reduces the internal consistency of the calculation.

How the adjustment works

Where a proxy emission factor is used:

1. Convert spend into the currency of the emission factor

2. Deflate spend using the inflation index of the emission factor country

3. Apply the emission factor

Currency conversion answers the question of what the spend is worth in the factor country. Inflation adjustment then restates that value into the factor year within the same economic context.

Using a proxy country emission factor means the result reflects the emissions intensity of that proxy economy, not the actual production location. Differences in inflation between countries do not change this. They are not incorporated into the calculation, because the objective is to align spend with the emission factor dataset rather than to reflect local price movements.

Key points to remember

• Emission factors are selected based on country of spend
• Spend must be aligned to the currency and year of the factor
• We convert currency first, then deflate to the factor year
• Inflation is always based on the emission factor country
• The emission factor is used as published, without adjustment

This ensures calculations are transparent and reproducible.