Corporate Net Zero Targets and The Ambiguous Paths to Get There
In the wake of COVID-19, corporate commitments to address climate change have not slowed. In fact, momentum for high-profile net zero pledges, or companies vowing to reduce all of their greenhouse gas emissions, has continued to increase. Just since June of 2020, Ford Motor Company and Unilever have joined the ranks of such companies with pledges of their own. In July, Amazon raised awareness for their net zero pledge by renaming the Seattle NHL arena the “Climate Pledge Arena.” According to the UNFCCC’s Race To Zero campaign, 995 businesses worldwide have committed to achieving net zero carbon emissions by 2050 at the latest. While an impressive number of cities, regions, organizations, investors and countries have also committed to net zero emissions, this article will focus on corporate commitments and the challenges of how companies will achieve and document their reductions.
Before we examine the ambiguity around net zero commitments, we’ll look at each Scope of emissions and the commonly accepted means of addressing or reducing them.
Scope 1 emissions refer to direct combustion onsite and Scope 2 includes electricity, heat or steam purchased by a company. Accounting for and neutralizing Scope 1 and 2 emissions is challenging, but can be accomplished through conversions of fleets to electric or compressed natural gas vehicles, use of biogas in virtual or direct contracts to replace onsite natural gas and other gas capture and destruction projects.
Scope 2 emissions can also be addressed through the purchase of instruments representing the environmental attributes of electricity, known as Energy Attribute Certificates (EACs). These can be used to compensate for megawatt-hours of non-renewable electricity purchases. Renewable Energy Certificates (RECs) are examples of EACs available in the North American market.
Scope 3 emissions are from facilities that are not directly owned or controlled by the company but that contribute to the company’s operations. These emissions can be the most challenging to reduce directly. Examples of Scope 3 emissions include employee commuting, business travel and supply chain emissions. While carbon offsets (verified tons of greenhouse gas reductions) can compensate for emissions from each Scope, they are a particularly good fit for Scope 3 emissions that can be difficult or impossible to reduce otherwise.
WHAT IS “NET” IN NET ZERO?
At the time of writing, there are no universally accepted standards and guidelines for how to achieve net zero carbon emissions. The PAS 2060 Carbon Neutrality guidelines developed by BSI are used in Europe, but this standard has not yet been adopted worldwide. As companies wade through the details of their pledges, several questions emerge. Do all reductions have to be within the company’s fence line? Do investments that produce emission reductions in a supply chain count? Can quantifiable investments in nature that remove carbon from the atmosphere be used towards a net zero goal? These questions center around a common theme: What can credibly be included as “net” in a net zero commitment?
Currently, the World Resources Institute’s Greenhouse Gas (GHG) Protocol forms the basis of how most companies account for and report on greenhouse gas inventories and goals. The GHG protocol, however, does not recognize investments in an offset project in its methodology—even though it does allow the use of EACs. Similarly, the Science-Based Targets Initiative (SBTi), which helps companies set and then approves targets commensurate with their relative Scope 1, 2 and 3 footprint, does not allow the use of offsets. It is currently in the process of being revised and may allow for carbon offsets from land-use projects, such as grasslands and forestry projects, in the future.
It is hard to imagine how companies will meet net zero targets without relying on offsets for some portion of the reductions. The only real question is what portion of reductions will be eligible for pairing with offsets. Could this be a percentage of the total footprint, similar to the California restrictions on offset use within the cap-and-trade program? Alternatively, could offsets be used for one or more Scopes of emissions? The role of offsets in net zero commitments needs further clarification and guidance.
THE MURKY AREA OF SCOPE 3 EMISSIONS
Another area in need of clearer guidance is Scope 3 emissions. Scope 3 emissions are inherently double counted, as many aspects of companies’ supply chains overlap. Should a net zero company be exclusively responsible for a reduction in their supply chain companies’ emissions that is commensurate with the amount of product they receive from each company? At what point should each company be responsible for its own emissions and what happens to offset efforts as this transition occurs? Likewise, what happens when and if the company is regulated at the national level?
The Gold Standard has started drafting Scope 3 Value Chain Interventions Guidance, but the guidance is meant to provide clarity on reductions within many different sectors of the economy in just one document. As compared to the offset market where there are hundreds of detailed protocols, this generic guidance may not be able to handle all of the nuances of Scope 3 emissions and was not written through the lens of providing guidance to companies trying to achieve net zero emissions.
In the absence of established guidance, The Climate Registry is creating a platform for companies to show their inventory, goals and actions to achieve those goals, such as REC or offset purchases. SecondNature has a platform for universities to do the same. While these are not standards that describe what qualifies for net zero, they will operate as such until greater clarity for all industries is developed.
SEEKING CLARITY AND ACCOUNTABILITY
Customers and stakeholders deserve to know that corporate net zero pledges are backed by real action that has been vetted for rigor, measurability and transparency. Clarity on the questions raised in this article, as well as where commitments and progress towards them will reside in the public domain, is needed now as companies begin to position themselves to comply with new reduction targets. While many net zero commitments target 2050, others like Microsoft’s will be achieved within a decade. As ambitious businesses pioneer the net zero territory on their own, they set a high bar for companies with newer pledges and increasingly demonstrate the need for additional guidance.
The corporate commitment landscape is constantly changing, and it can be hard to keep up. Bluesource’s advisory group guides you through greenhouse gas reductions and net zero guidance. We provide you with valuable information about the price of instruments like RECs, offsets and renewable natural gas to help your organization achieve its goals within your budget. Environmental action can feel overwhelming, but we make it easy.
WHAT’S NEW AT BLUE
Did you know that Bluesource has an entire business unit dedicated to creating methane reductions in the oil and gas industry? The Alberta-based team, which focuses on replacing high-bleed pneumatic valves with low-bleed alternatives, won the 2020 Suzanne West Environmental Excellence Award in June and the Energy Excellence Award – Industry Accelerator from the Daily Oil Bulletin in May of 2019.
Renewable Natural Gas: A Compliance and Voluntary Solution to Lower Greenhouse Gases
SEPTEMBER 29, 2020 | 10:00 – 11:00 a.m. PT
Renewable natural gas (RNG) from food waste, wastewater plants, manure digesters and landfills has become a lucrative commodity as it qualifies for both Renewable Identification Numbers (RINs) under the federal Renewable Fuels Standard 2 and LCFS credits under California’s Low Carbon Fuel Standard. Additionally, businesses trying to reduce their greenhouse gas footprints have begun sourcing RNG to mitigate their Scope 1 emissions. Join us to learn more about RNG markets and how they have created a gold rush for manure digester projects. You’ll also hear about new standards and tracking systems for RNG sales.
An Updated Look at COVID-19’s Impact on Environmental Markets
SEPTEMBER 1, 2020
Join Bluesource, Verra and Bank of America for an in-depth look at how the COVID-19 crisis has affected the demand for offsets from both unregulated corporate buyers and regulated compliance entities. We’ll also discuss potential future impacts on these markets as we move forward in the new, post-crisis landscape. Kevin Townsend, Chief Commercial Officer of Bluesource, will discuss the impacts on the California cap-and-trade, RIN and LCFS markets. David Antonioli, Chief Executive Officer of Verra, will describe the effect that COVID-19 has had to date on voluntary markets. Beth Wytiaz, SVP, Global Environmental Operations Director at Bank of America, will explain how a company with an ambitious greenhouse gas reduction goal is navigating this current landscape.
CORSIA Insights: How Airlines and Carbon Markets are Preparing and the Role of Sustainable Aviation Fuel
APRIL 9, 2020
We were pleased to have 300 people register for our webinar on CORSIA. We discussed how airlines and carbon markets are preparing to meet reduction targets under the guidelines. Hear and see the presentations and Q+A with United Airlines, CBL Markets, Ocean Park Advisors and Bluesource by clicking the link below.
Kootznoowoo Improved Forest Management Project
In the spring of 2020, over 100,000 new credits were issued from our Kootznoowoo Improved Forest Management Project in Alaska. This project offers a sustainable economic engine for the Kootznoowoo Alaska Native Village Corporation to continue safeguarding their land and preserving their cultural heritage for the long term. The carbon revenue allows the Tlingit people to avoid aggressive timber extraction and support projects important to their community, including an educational fund and a small hydro project that displaces diesel, provides clean electricity and improves local air quality.
The project protects 20,159 acres of forest, including 8,000 acres of old growth, in the Dolomi and Dora Bay tracts of Prince of Wales Island. Until now, this area was a significant timber source for the Japanese market. The project location includes several different ecosystems, from beach to high elevation. The diverse land hosts many different types of berries and animal habitats such as Sitka black-tailed deer, black bear, mountain goat, moose, beaver, weasel, land otter and red fox. The area also includes 12 fish-bearing streams that boast sockeye salmon, Coho salmon, chum salmon, pink salmon and steelhead trout.
WHERE TO MEET US
(provided it is safe to travel)
Verge | October 27-29 | San Jose, CA
California Dairy Sustainability Summit | November 2-6 | Sacramento, CA
Sustainable Brands, Global Flagship Conference | Nov 30 – Dec 3 | Long Beach, CA