Glossary

What Are The Key Takeaways From The IPCC AR6 Report?

What Are The Key Takeaways From The IPCC AR6 Report?

What Are The Key Takeaways From The IPCC AR6 Report?


by: Caroline Kelleher | Analyst, Sustainability, Policy & Advisory | September 23, 2021




Amidst a year devastated by extreme weather, the UN’s Intergovernmental Panel on Climate Change (IPCC) delivered its sixth assessment report (AR6). The AR6 comes in time to be fresh on the minds of the climate leaders meeting this week at Climate Week NYC to discuss fulfilling and increasing the commitments made by businesses. It will be instrumental in driving conversations by governments ahead of COP26 in November. While the conclusions of AR6 remain consistent with the IPCC’s last major assessment in 2014, there is a window of opportunity to make the necessary changes to avoid a catastrophic future.


A 1.5C Warmer World Is On The Horizon

Restricting temperature rise to no more than 1.5C to 2C is thought to be the range that will minimize the likelihood of reaching critical environmental tipping points. When the Paris Agreement was signed in 2015, world leaders set the goal to limit temperature rise to 2C, with a preferred goal of a 1.5C increase. AR6 shows that 1.5C of warming is expected to occur by the mid-2030s, and without drastic change taken today, experts predict that roughly 3C of warming will occur by the end of the century.  

Source: IPCC report


Unprecedented Warming Leads To Unprecedented Changes

Compared to pre-industrial levels, temperatures are now around 1.1C warmer, heating the climate to a 100,000 year high. As a result, the planet is undergoing unprecedented changes in human history – carbon dioxide concentration in the atmosphere is the highest in 2 million years; sea level is rising at the fastest rate in 3000 years; glaciers are retreating at the fastest rate in 2000 years, and arctic sea ice area is at the lowest level in 1000 years.

Source: IPCC report


Attributing Weather Events To Climate Change

Prior to recent advancements, it was virtually impossible to attribute any weather event to climate change. Experts in the field of attribution science can now assess to what extent climate change played a role in the magnitude and frequency of extreme weather events. From the heavy rainfall and flooding in western Europe, and extreme heat in western North America this year, experts can now say with certainty that human-driven climate change is causing more frequent and severe weather events.


The Most Peer-Reviewed Science In History

Over 14 000 scientific papers were assessed by 234 AR6 authors from 65 countries to create a comprehensive summary of the drivers, impacts, risks, and mitigation strategies of climate change. The report was distributed for review by experts and received over 78 000 comments incorporated into the second draft. The final report was reviewed and approved by all 193 member states from the United Nations.


The Path Forward To Safety And Prosperity

A strong and sustained reduction in greenhouse gas emissions has the potential to rein in climate change, limiting global warming levels to manageable temperatures. Parties must take immediate action: with a decades-long delay to see the results of today’s emission reductions, the next several decades will show the impacts of our actions in the past. Any hope of stabilizing global temperature, improving air quality, and conducting business in the future, depends on the speed that radical changes can be taken today.

Leading A Low-Carbon Future

What does the AR6 mean for the growing number of businesses acting on climate change? Now more than ever, businesses play a critical role in galvanizing efforts to manage climate risk and monetize climate opportunities. From modeling resilience and asset exposure to developing projects at a scale that mitigate emissions and engaging in voluntary mechanisms, the corporate leaders of the 21st century will also be climate leaders. ClimeCo is a pioneer in climate strategy and has supported corporate leaders with climate expertise for over ten years. We are just getting started, and our team is ready to support clients in their transitions towards climate leadership.


 


About the Author

Caroline Kelleher is an Analyst on ClimeCo’s Sustainability, Policy, and Advisory team, where she advises clients on the development of carbon reduction and sustainability strategies. Caroline holds a Master of Science in Environmental Sustainability from the University of Pennsylvania and a Bachelor of Science in Geoscience from Trinity University.

The Role of Net-Zero in Corporate Strategy

The Role of Net-Zero in Corporate Strategy

The Role of Net-Zero in Corporate Strategy


by: David Prieto | Director, Climate Finance & Strategy | August 25, 2021

The Paris Agreement signed in 2015 ushered in a new era in corporate strategy. This new era is one where companies and investors play a fundamental role in addressing the key issue of our time – climate change. In our lifetime, the corporate sector has increasingly experienced the impact of climate risk – both physical and transitional. High-profile examples include the bankruptcy of PG&E after the 2018 wildfire season in California and the Volkswagen diesel emissions scandal from 2015. Nonetheless, corporate leaders realize that climate change is also the biggest wealth-creating opportunity in human history. It is, therefore, no surprise that investors are rewarding low-carbon business models with record valuations, such as Tesla and Beyond Meat.

In the absence of broad climate policy and regulation, corporate leaders have to navigate a growing landscape of voluntary initiatives designed to address many environmental, social, and governance (ESG) issues, including climate change. The rapid pace of change in ESG can be daunting to navigate for corporate leaders. Therefore, it is important to understand which voluntary initiatives best align with a company´s strategy and business model, from campaigns and commitments to methodologies, registries, and standards. This blog will discuss the latest development in ESG – Net-Zero – and why it plays a fundamental role in any corporate strategy.

The Science Behind Net-Zero

The goal of the Paris Agreement is to limit the rise in mean global temperature by 1.5°C above pre-industrial levels to avoid the most severe impacts of climate change. To succeed, global emissions of greenhouse gases (GHG) need to halve by 2030 and reach net-zero by 2050, according to a landmark study published in 2018 by the Intergovernmental Panel on Climate Change (IPCC). Achieving net-zero emissions will be a monumental challenge – human activities generate 55 GT of carbon dioxide (CO2) per year, resulting in a total carbon budget of 580 GT of CO2 before exceeding the 1.5°C threshold.

Establishing a Net-Zero Target

Net-zero is a state in time where corporates meet two conditions, according to the Science Based Targets initiative (SBTi). First, GHG emissions from a corporate value chain are abated at a rate consistent with a 1.5°C pathway. Second, residual emissions that cannot be eliminated for technical and economic reasons are compensated by an equivalent amount of carbon dioxide removals. During the transition to net-zero, a science-based target (SBT) informs whether the current rate of emissions abatement is aligned to a 1.5°C pathway. Establishing a net-zero target (NZT) is a commitment to the deep decarbonization of a business model and the resulting future emissions rate.

Deep decarbonization is complex work that requires a diverse set of policy, legal, technology, and market solutions that remain in development as outlined by various net-zero roadmaps, such as the IEA Net-Zero by 2050 and BNEF New Energy Outlook. Optional compensation measures play a key role during the transition to net-zero by neutralizing unabated emissions as the global economy aligns with climate science.

Graphical representation of a net-zero target, an interim science-based target, and optional
compensation alongside the taxonomy of climate mitigation tactics, Science Based Targets Initiative


Different Pathways to Net-Zero

The journey to net-zero is critical to corporate strategy because it entails a fundamental transformation across all sectors of the global economy for business models to operate in balance with the planet. Unfortunately, not all net-zero transformations are created equal, as the emissions profile of value chains vary significantly by sector. In particular, so-called hard-to-abate sectors, such as plastics and aviation, will take longer to decarbonize in the absence of low-carbon alternatives. Nonetheless, the complexity of business model decarbonization has not deterred the private sector that now has approved science-based targets encompassing 20% of total global market capitalization.

Sustainability Solutions for Net-Zero

Since our founding, ClimeCo has been a leading transformation partner to companies, investors, and governments pursuing a low-carbon future.  As a vertically integrated sustainability solutions provider, we have enabled our clients to go beyond business as usual. By developing frontier technology-based and nature-based carbon reduction projects, transacting voluntary and compulsory environmental credits, and advising on climate risk and disclosure, our team is dedicated to implementing decarbonization pathways tailored to our clients’ sector, business model, and balance sheet.

Cypress trees planted at a Climate Forward reforestation project in Louisiana, Restore the Earth Foundation


Commencing the Net-Zero Journey

From carbon neutral to net-zero and climate positive, any corporate climate strategy must follow a mitigation hierarchy. A mitigation hierarchy will inform whether a mitigation strategy effectively neutralizes a company’s impact on the climate, mitigating climate risk on the company, and incentivizing low-carbon capital allocation. At ClimeCo, our team aligns to the Blueprint for Corporate Action on Climate and Nature and recommends four priority interventions:

1. Account for and disclose emissions using internationally recognized frameworks, such as the GHG Protocol, CDP, and Task Force on Climate-related Financial Disclosure (TCFD),
2. Reduce value-chain emissions in line with a science-based target pathway, as defined by the Science Based Targets initiative (SBTi),
3. Quantify a financial commitment by pricing remaining emissions through an internal carbon price, and
4. Invest the financial commitment for impact to climate and nature to further emission reductions, unlock climate solutions, and source high-quality carbon credits.


Net-Zero in a COVID World

The IPCC released the first part of the Sixth Assessment Report (AR6) this month and the science is clear – it is in our hands to limit the rise in global temperatures to 1.5°C. Global emissions must fall 7.6% per year between 2020 and 2030, roughly the same drop in emissions from the COVID-19 lockdowns. As a result, extreme weather and the failure of climate action have continued to dominate the long-term risks by likelihood among members of the World Economic Forum. However, COVID-19 has accelerated stakeholder pressure to transition to a low-carbon growth path that could deliver a direct economic gain of US $26 trillion through 2030, compared to business-as-usual. In his annual letter, BlackRock’s Larry Fink, succinctly points this out: “given how central the energy transition will be to every company’s growth prospects, we are asking companies to disclose a plan for how their business model will be compatible with a net-zero economy – that is, […] how this plan is incorporated into your long-term strategy and reviewed by your board of directors.” For leaders integrating net-zero into their corporate strategy, ClimeCo is ready to help.


About the Author

David Prieto serves as Director for Climate Finance & Strategy at ClimeCo, where he advises clients navigating the risks and opportunities associated with an increasingly changing climate. David holds a Master of Science from Columbia University and Bachelor of Arts from the University of London.

Cost-Saving Strategies for California and Quebec Regulated Emitters

Cost-Saving Strategies for California and Quebec Regulated Emitters

Cost-Saving Strategies for California and Quebec Regulated Emitters


by: Derek Six | Chief Business Officer | June 29, 2021


November 1, 2021, is the compliance deadline for emitters covered under the California and Quebec Cap-and-Trade programs. By November 1st, emitters are required to submit the compliance instruments representing their full triennial (2018-2020) emissions. One of the simplest compliance cost-saving strategies is for entities to take full advantage of their ability to substitute offsets for up to 8% of their total obligation. However, for the previous compliance period covering 2015-2017, California entities surrendered only 6.36% of the possible 8% offsets, and Quebec entities surrendered only 3.5% of the possible 8% offsets. Why did emitters leave so much potential savings on the table? With offsets currently selling at a historically large discount to allowances, will entities again leave substantial savings on the table, or will they utilize new offset buying options to help them realize all of the possible savings? 


Missing Out on Potential Savings
 

Allowances (permits for one metric ton of CO2e) are currently priced at approximately US$21.77.  Offsets are currently priced between US$13.00 and US$15.00, depending on type and risk profile, providing emitters a discount of 30-40%. It should be hard to ignore such significant cost savings, but there may be a few possible reasons emitters would choose not to maximize their savings: 

  1. In previous compliance periods, information about offsets may have not been available or widely understood 

  2. Market access to offsets may have been limited 

  3. Perceived risks may have prevented buyers from utilizing offsets

While the first two explanations may have been valid in the past as emitters became accustomed to the program, we suspect that it is the last possibility of perceived risks that had the greatest impact on offset utilization. Would-be buyers of offsets may have been dissuaded by the complexity of California’s invalidation rules, and their accounting departments may have warned them about the difficulty of accounting for the possibility of invalidation.  While less than 0.1% of California-issued offsets have been invalidated, such a possibility may have outweighed the cost savings for some buyers.


Understanding the Risk
 

Before emitters consider a solution, it is important for them to understand the various types of offset buying options that currently exist in the market: 

  1. Quebec-issued Offsets:  these offsets do not have buyer liability, but because Quebec has issued only 1.05 million offsets, this category is not an available buying choice. 

  2. California CCO-8s:  when initially issued, California has regulations that would allow them to invalidate offsets for up to 8 years if a regulatory compliance violation is later discovered. 

  3. California CCO-3s:  offsets whose invalidation period has been reduced to 3 years. 

  4. California GCCOs:  offsets exposed to invalidation risk but sold by a seller offering to replace them if they are ever invalidated. 

  5. California CCO-0s:  offsets whose invalidation period has expired. 

Confusing, no doubt, and definitely likely to dissuade many buyers. However, one option in this list is relatively new to buyers that offers no risk and a simple transaction.


Consider California CCO-0s
 

California CCO-0s, the final category in our list above, are California compliance offsets that are not exposed to the possibility of invalidation because their invalidation period has expired.  CCO-0s are the most expensive of the quality levels, currently at US$15.00 or a 30% discount to allowances, but they cannot be invalidated.  Because the risk period has expired, there is no need to enter into complicated GCCO (Golden/Guaranteed California Compliance Offset) contracts where the buyer relies on the contractual promises of the seller and the quality of the seller’s financial credit.  CCO-0 purchase contracts are simple and easy to execute. 

Some buyers will find that the price savings of purchasing CCO-8s or CCO-3s outweigh the risks, but the CCO-0 offsets represent an exciting new opportunity to reduce upcoming compliance costs for many emitters. 

If you would like to learn more about your options or purchase CCO-0s, please feel free to contact us.  We are happy to help and currently have CCO-0s available for purchase.


About the Author

Derek Six serves as Chief Business Officer at ClimeCo, where he leads the company’s cross-cutting business functions, the firm’s ODS management program, and a private equity fund ClimeCo manages. He holds an MBA in Investment Management and Portfolio Analysis from Pennsylvania State University’s Smeal College of Business.

The Need for Trees

The Need for Trees

The Need for Trees


by: Taylor Marshall, Director of Sustainable Programs, Restore the Earth Foundation | May 27, 2021

When we talk about all the ways to combat greenhouse gasses, one method that is gaining a lot of attention recently is reforestation.  Not only does reforestation help sequester future carbon, but it provides many additional benefits for surrounding communities that make reforestation a win/win type of project.  Planting trees adds vital nutrients to the soil, enabling other vegetation to thrive; they also create a habitat for animals to flourish in, protect waterways, prevent flooding, and create a healthier ecosystem.  It seems simple to plant trees, but in order to achieve the large scale and long-term permanence required to realize the greatest impact and value, it takes partnerships, a major funding investment, and resources to make it happen.


restore the earth foundation

Procuring Funding and Partners

So, we need trees, but how do we pay for them? How do we find partners who want to support a reforestation project?  This is where Restore the Earth Foundation, Inc. (REF) steps in.  REF is a not-for-profit organization with a mission to restore the Earth’s essential forest and wetland ecosystems. They work together with partners to bring solid solutions to deliver successful restoration projects that meet strategic environmental, social, and economic objectives.

Many people know that the United States Department of Agriculture’s (USDA) Natural Resource Conservation Service (NRCS) is on the ground in every region in the U.S., working with conservation partners. These partners consist of private industry, non-government organizations, Native tribes, state and local governments, soil and water conservation districts, and universities.  The Regional Conservation Partnership Program (RCPP) is a standalone program that offers $330 million yearly to support locally-driven partnerships that address climate change, improve water quality, combat drought, enhance soil health, support wildlife habitat, and protect agricultural viability in the United States.  Each year, only 85 projects are selected to receive this money.  In 2020, REF focused on applying to this program to pilot its private/public investment model to reforest 1 million acres in the Mississippi River Basin, the third-largest watershed on Earth.  We are pleased to announce that in April 2021, REF was awarded $7.4 million in grant money from RCPP.

“RCPP is a public-private partnership working at its best,” said Terry Cosby, Acting Chief for USDA’s NRCS.  “These new projects will harness the power of partnership to help bring about solutions to natural resource concerns across the country while supporting our efforts to combat the climate crisis.”

In addition to the grant, REF secured additional private investment partners to match and amplify the grant funding for a total of $19 million.  Their hard work to find funding and the right partners has paid off. Now, REF can support a unique pilot project that will extend permanent conservation easements to reforest and protect critical land.  This additional funding increases impact and provides measurable environmental, social, and economic outcomes.

Developing the Project

The funds secured will support restoring 5,000 acres of marginal land in a floodplain in Arkansas to its previous forested condition.  With this pilot project, REF and the NRCS will apply innovative approaches to the wetland reserve easement process to engage more landowners, focusing on overcoming historically underserved landowner participation barriers.  Conservation easements restore and protect land for future generations, while allowing landowners to retain private property rights, enabling them to live on and use their land at the same time. 

To accomplish this, REF will develop an easement template with NRCS to emphasize water quality and acknowledge carbon sequestration while amplifying wildlife and biodiversity benefits.  The project envisions accelerating the easement process and resources, providing more landowner participation to restore the land to the previous native forested condition.  NRCS will hold the easements to assure the integrity, permanence, and long-term benefits of the investment. 

The Benefits

As a result of this reforestation, NRCS will address climate change and achieve significant environmental, social, and economic co-benefits beyond their regular funding.  High-yielding croplands will not be taken out of production.

In addition to the restoration of the forest, the newly planted native trees will generate 1,000,000 mt (CO2e) of carbon emission reductions.  REF will recapture funds through revenues generated by ClimeCo, which will market the greenhouse gas reductions.  In addition to a payment for the easements and reforested land, participating landowners will receive a share of these revenues. The balance will be reinvested by REF into additional projects to scale the program.

“Through the USDA’s Regional Conservation Partnership Program, we’re excited to be engaging more of those interested landowners to ensure that wildlife, habitat, and communities are enhanced in a restored, healthy, self-sustaining system,” said PJ Marshall REF, Co-Founder and Executive Director.  “The restored ecological systems provide for public benefits that include erosion control, improved soil and water quality, wildlife habitat, groundwater recharge, flood reduction, and carbon sequestration.”

Arkansas has a substantial backlog of landowners interested in conservation easements; this project will help make a meaningful dent in the backlog.  Project partners have committed to purchasing carbon emission reductions in the form of Forecasted Mitigation Units (FMUs) or credits associated with project activities.  

We are excited about this project.  Both REF and ClimeCo believe that these large-scale, collaborative projects, focusing on regional water quality, carbon sequestration, and local impacts, provide a tangible path for achieving big-picture climate solutions.  These projects also go beyond environmental improvements to provide significant regional and local benefits through ground engagement.  

To learn more about this project or if you have an Arkansas Landowner interested in participating in this project, please contact Taylor Marshall, tam@restoretheearth.org.


About the Author

Taylor Marshall is the Director of Sustainable Programs at REF.  She has dedicated her professional life to identifying and promoting solutions and opportunities to address national and international environmental issues.  Taylor manages partner relationships, represents REF at local, national and international workshops, meetings and conferences.  She has been responsible for securing major grants and funding for REF and is the chief “in the mud” coordinator of all of REF’s corporate and community volunteer planting events. Taylor fills a key role in coordinating with all REF’s partners in implementing strategic communications, outreach and educational plans related to all projects. 

Prior to joining Restore the Earth, Taylor was with The Water Institute of the Gulf in Baton Rouge, Louisiana, where she applied her expertise in integrated water resource management to develop and promote community-based approaches to protecting and restoring the Gulf coast communities from storm risk and land loss and enhancing community resilience.

Taylor has a Masters of Science from McGill University in BioResource Engineering with a concentration in Integrated Water Resource Management (IWRM).

A Story About Circular Restoration

A Story About Circular Restoration

A Story About Circular Restoration

by: Chris Parker, Director of Plastics Program | April 28, 2021

This blog provides a fictional story about a town called San Maya on the Central American Caribbean coast.  Even though the town is fictional, as well as the project in this story, it is based on real activities that are currently happening in different locations all around the world.  We have combined these activities into a single story to provide you a glimpse into what it could look like if we used innovation, determination, and cooperation together to address our plastic waste problem. 


The Story of San Maya

For generations, the small town of San Maya on the Central American Caribbean coast made its living from fishing.  In the 1990s, tourists from all over the world began coming to experience the local culture, scuba dive, bird watch, and fish.  Residents enjoyed new employment opportunities and rising incomes.  During the 2000s, they were able to build a new school, clinic, and water treatment plant.  Plans were put in place to protect the mangrove forests, waterways, and reefs, as these were the economic resources providing new prosperity.

Today, San Maya’s beaches, estuaries, and reefs are covered with plastic waste that flows down the Rio Jaguar river from the city.  The mangroves are dying from the combination of plastic toxicity, climate change, and removal.  Tourists stopped arriving a few years ago due to the town’s inability to manage the volume of plastic from the river, which litters the community.  With the loss of tourism income, local anglers returned to their boats for commercial fishing, yet most of their trips resulted in catching more plastic than fish.  Today, the people are moving away from San Maya in search of work; they have become plastic refugees.

A Time to Restore

The future of San Maya depends on the restoration of its fishery ecosystem.  This requires removing plastic waste from its environment, diverting future ocean-bound plastic, and creating a waste management infrastructure.  San Maya’s plastic waste has unrealized value and, once it becomes valued, the city can help create a more circular economy in the region. 

The emergence of the plastic credit market has created an opportunity to help San Maya.  ClimeCo can work with the community to fund the removal of plastic waste and start a recycling operation to upcycle collected material into next-use construction products while helping to restore the mangrove forests.  Local industry can be approached to solicit their support in the project to reduce the business risk associated with increased economic and societal disruption from plastic waste.  Because this local industry is currently focused on new carbon neutrality commitments and goals for addressing their plastic footprint, this represents a unique opportunity for them.

Creating the Rio Jaguar Project

The upfront funding from ClimeCo’s partnering company can be used to build a small recycling facility and hire San Maya residents to collect, measure, sort, and record the recovered plastic – thus creating the Rio Jaguar Project.  From the project’s plastic collection and recycling operations, ClimeCo would develop and register new plastic credits through Verra’s Plastic Waste Reduction Program.  Each credit represents one tonne of recovered or recycled plastic, which upon issuance, a company can purchase to support frontline efforts tackling the plastic waste crisis. 

Part of the agreement with our Rio Jaguar project’s industry partner is that they will receive a portion of the generated plastic credits, which can be used to offset part of their plastic footprint.  ClimeCo will sell the remaining credits, and the proceeds can fund the purchase of a river trap to collect ocean-bound plastic debris, as well as the expansion of the San Maya recycling facility.  As the area’s ecosystem gets restored, the Rio Jaguar project will move into phase 2 – ClimeCo providing capital to hire additional workers to plant thousands of mangrove seedlings.

Mangroves are very efficient at sequestering and storing carbon compared to their terrestrial counterparts, up to 10 times better.  ClimeCo will develop and register carbon offsets through Verra’s Blue Carbon Conservation methodology from the new mangrove plantings.  As part of our industry partner’s carbon neutrality program, they will purchase a portion of the mangrove-issued carbon offsets, which will be used to help address its manufacturing facility’s greenhouse gas emissions.

Conclusion and Potential Co-Benefits

Plastic credit projects can address various interrelated problems: ecosystem degradation, inadequate waste management, biodiversity loss, health and economic risks, and carbon-fueled climate change.  These projects can also support a menu of UN Sustainable Development Goals, including:

  • No Poverty
  • Decent Work & Economic Growth
  • Industry, Innovation & Infrastructure
  • Sustainable Cities & Communities
  • Climate Action
  • Life Below Water
  • Partnerships for Goals

Success for these types of projects requires establishing working partnerships to the benefit of all stakeholders.  Unfortunately, the problems seen in this story are being replicated all over the globe, yet the efforts of government and philanthropy are not matching the scale of these problems.  One key component is for private sector companies to use their vision and capital to initiate circular economics.  The development of plastic credits and carbon offsets in this story gave our industrial partner the market-based financing mechanisms to deploy its capital and help create relationships to benefit its ESG programs.  Plastic recovery and mangrove restoration provide the value to move a restoration and circular business economy forward.  Partnerships will make it sustainable.  

To learn more about plastic waste, Verra’s Plastic Waste Reduction Program, or discuss an idea for a project, please feel free to contact us.  We would love to help you become part of a circular restoration project.


About the Author

Chris Parker has 20+ years of experience in energy and commodity markets, sustainability, conservation, and ESG. He leads ClimeCo’s plastic market program, which partners with projects worldwide to recover and recycle plastic waste.  Prior to joining ClimeCo, Chris had been consulting and leading projects in both the corporate and environmental nonprofit sectors to create business solutions for a sustainable economy.  Chris holds a Bachelor of Science in Corporate Finance & Investment Management from the University of Alabama.  He loves to spend his free time surfing, climbing, fishing, and playing chess.