Glossary

Accelerating Industrial Decarbonization

Every Technology is Needed in the Race to Eliminate Greenhouse Gas Emissions

by: Ken Chlapik, Global Market Manager, Johnson Matthey | August 23, 2023

Decarbonization at Scale Needs to Start Today

To achieve net-zero targets beyond this decade, we will need to convert the electrical grid to low-carbon renewable power, scale up, and adopt green technologies in industry. These green technologies include renewables, hydrogen electrolyzers, batteries, and fuel cells. Accelerating these technologies will require new materials, supply chains, and manufacturing capabilities. Multi-billion-dollar investments must be made to enable this long-term shift to net-zero. More than the pace, scale, and capabilities of these technologies need to be required to meet net-zero targets on their own. To curb global emissions, a technologically aggressive approach to reducing Greenhouse Gas (GHG) emissions that uses all the tools and technologies available is necessary.

Renewable Carbon Sources Sustain the Viability of Petrochemicals Into the Future

In the broader context, the chemical industry’s products contain carbon, which will continue, so a carbon-free chemical industry isn’t possible. However, the industry can and will find ways to use the carbon more efficiently, reducing carbon intensity and CO₂ emissions to levels. As part of this drive, the industry is considering making chemicals using renewable carbon sources, such as biomass, municipal solid waste, and captured CO₂. Combining this carbon with hydrogen generated through electrolysis powered by renewable electricity can create sustainable fuels and chemicals. For example, captured CO₂ and renewable hydrogen can be directly transformed into methanol or converted within the reverse water-gas shift reaction to a Synthetic Gas (syngas) containing CO, CO₂, and hydrogen. Syngas can be further processed through well-established Fischer-Tropsch synthesis processes to make chemicals and fuels. This is one route to make drop-in fuel for airplanes – Sustainable Aviation Fuel (SAF), critical to decarbonizing the aviation industry. In addition, syngas-based technologies can store and transport renewable energy in the form of methanol and ammonia. Low-carbon methanol and ammonia are also being proposed as fuels for sustainable shipping.

Progressing Projects With Sustainability & Longevity in Mind

When considering decarbonization solutions, factoring in the lifecycle emissions associated with implementing a new solution or technology is essential. To utilize hydrogen in the future, energy infrastructure and electric grids must be green. However, waiting for renewable energy to achieve a green electrical grid may be too late in some cases. Therefore, using solutions that decarbonize outside the grid allows the end-user to avoid competition for renewable energy with hard-to-abate sectors and enables significant carbon reductions to be achieved today.

Carbon Capture and Storage (CCS) is a key technology to reduce emissions in hard-to-abate sectors. CCS can be applied to reduce emissions from industrial flue stacks or combined with hydrogen production to create low-carbon hydrogen, replacing conventional fossil fuels. CCS-enabled (blue) hydrogen is a mature and available technology that provides a way to produce large volumes of low-carbon hydrogen. When the critical goal is to reduce emissions, the scalability of CCS-enabled hydrogen and its ability to supply industrial-level heat demand make it a valuable technology to explore in the industry.

Existing hydrogen plants can also be repurposed to create new sources of low-carbon H₂. For example, over 40% of the existing hydrogen plants built for refining clean fuels are less than 20 years old. These plants risk becoming stranded assets by waiting to establish renewable grids and electrolytic (green) hydrogen. CCS technologies can be used to expand the working life of existing syngas production assets. Plants can be further adjusted to meet even more stringent standards by utilizing renewable gas feeds from waste and biogenic sources to provide some of the lowest carbon intensity production.

An alternative view and approach are to replace aged assets with a single greenfield, CCS-enabled hydrogen plant for the most efficient and low-carbon syngas production for hydrogen and petrochemicals. The optimal pathway will be different for each plant as asset age, existing and future production requirements, and differences in capital cost between greenfield and retrofit projects all play a part in determining the best solution.

Flexible & Resilient Solutions for Maximizing CO₂ Capture Amid Uncertainty

Against this backdrop of conditions and challenges, a technology suite stands out as suited to generate low-carbon hydrogen at scale. Autothermal Reformer (ATR) and Gas-Heated Reformer (GHR) technologies provide a single, high-pressure CO₂ stream that makes it easy and economical to capture with very high efficiency (i.e., up to 99%+). These technologies have been used at an industrial scale for decades and remove the need for a separate stream of methane fuel to generate the heat to drive the syngas production reactions. This eliminates the low-pressure, dilute CO₂ stream from fossil fuel combustion that generates heat for the process, a characteristic of the Steam Methane Reformer (SMR) technology predominant today.

ATR and GHR technologies can be used in both greenfield and retrofit applications. As a retrofit, they are integrated to “bolt-on” to existing syngas production assets. This minimizes plot plan, equipment, and resource usage to maximize capital efficiency for reducing high levels of carbon dioxide emissions. For greenfield plants, an ATR-GHR combination is ideal for producing gigawatt-scale hydrogen at the lowest cost and carbon intensity, enabling the replacement of fossil fuel combustion at a scale that is not yet possible for electrolytic hydrogen to achieve. Both applications have a role in reducing the overall carbon intensity of petrochemical production processes and sites.

Starting in the 19th century, around the time of the industrial revolution (1760-1840), the industrial-scale production of chemicals, and later, petrochemicals, has been an influential part of societal change. Since their early beginnings, these industries have constantly evolved, adopting novel processes, technology, and equipment to drive efficiency improvements, increases in quality, and cost reductions. Now the world faces new challenges. As the effects of climate change amplify, a growing number of companies and countries recognize the urgent action needed to reduce human impact on the environment.

Partnerships: The Key to Driving Change

The scale and immediacy of climate change have created a global threat that requires unprecedented levels of collaboration to overcome. To enable change, operators and technology providers must cultivate deep partnerships to a level that hasn’t been seen before. Although we are seeing the seeds of this evolution begin to blossom, more needs to happen to execute the pace and scale of the decarbonization required. Regulation, incentives, and infrastructure are the key factors determining whether this trend continues to grow or is shattered by the realities of uncertain subsidies and the complexity of meeting changing legislation. While these factors are out of an operator’s control, building actionable roadmaps with the right partners can ensure they are prepared for future challenges. The petrochemical industry must adopt ready-now technology that can make an impact today while building the ecosystem for future sustainable production.

About Johnson Matthey & ClimeCo’s Partnership

For over 200 years, Johnson Matthey (JM) has led market transformations and been at the forefront of implementing sustainable change across industries. JM has partnered with ClimeCo to accelerate the adoption of advanced carbon capture solutions in industries, specifically synthesis gas (syngas) producers. Their technology is at the heart of the energy transition, enabling its customers across the petrochemical industry to tackle their decarbonization challenges. As a provider of vital components and technologies for low-carbon hydrogen production and a suite of solutions for SAF and sustainable fuels, JM is a key partner for customers on their journey to net-zero.

About the Author

Ken Chlapik, Global Market Manager for Johnson Matthey’s Low Carbon Solutions, spearheads the development of CLEANPACE™ and ADVANCED REFORMING™ technologies and is a recognized authority in industrial decarbonization. Ken’s career has contributed to tripling SMR-based hydrogen capacity for clean fuels in oil refining during the energy transition, a role recognized by the Peter G. Andrews Lifetime Service Award. His deep expertise, rooted in a Chemical Engineering degree from Northwestern University, is exemplified in published articles and contributions to the ICAC and AFPM, accelerating decarbonization in refining and petrochemicals around the world.

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

by: Jessica Campbell | April 26, 2023

The Need

The scaling of Carbon Capture and Storage (CCS) globally is now widely accepted as necessary (rather than desired) when it comes to achieving net-zero commitments and the targets set out in the Paris Agreement. McKinsey & Company estimated that we need to reach at least 4.2 gigatons of storage per annum (GTPA) by 2050, which represents a growth of 120 times current activity level [1]. Estimates by other groups, including the International Energy Agency (IEA), place the volumetric need anywhere between 3 – 10 GTPA to get us 5 – 10% of the way to net-zero. The International Panel on Climate Change (IPCC) has indicated that under ideal economic conditions, CCS has the potential to contribute between 15–55% of the cumulative mitigation efforts required to stay within 1.5 degrees. However, for this economic potential to be reached (i.e., to achieve economies of scale), “several hundreds of thousands of [carbon dioxide] CO₂ capture systems would need to be installed over the coming century, each capturing some 1 – 5 MTCO2 per year” [2]. This represents a deployment of projects and technology that is unprecedented in its rate and scale. All this to say, no matter which source you look at, the message is clear; we need tremendous amounts of geologic CO2 storage, and we need it at pace.

The Landscape

Despite the scientific consensus on the need for CCS, the path to implementing projects at scale comes with challenges. For one, the regulatory landscape of countries and jurisdictions to deploy CCS at scale are at varying readiness levels, with most falling in the ‘dismally unprepared’ category. Fortunately, there are many regions throughout Europe, the US, and Canada, where the regulatory frameworks are well developed due to decades-long oil and gas activity, including some dedicated geologic CO₂ storage and its relative – Enhanced Oil Recovery (EOR). Even with more advanced regulatory frameworks, CCS projects still face a series of other challenges, including (but not limited to): 1. mineral rights ownership and disputes, 2. back-logs and long lead times for appropriate well permitting (i.e., Class VI in the US), 3. lack of CO₂ transport and pipeline infrastructure, and 4. public opinion/acceptance.

The last one, ‘public opinion and acceptance’, often does not receive the attention it deserves as a potential disruptor and real threat to progress on scaling CCS. In just one example, an open letter to the US and Canadian governments was signed by over 500 groups in 2021, calling for a halt to all support for CCS projects [3]. Due to the complex nature of our energy systems, how they interface with society, and an unfortunate history of ecosystem and environmental justice abuses, it should not come as a surprise that CCS is caught in the crosshairs given the size and the wide variety of potential applications for the projects, cross-sectoral and economy-wide. It will take a cohesive, patient, and relationship-based approach to help educate and repair some of the damage done. Unfortunately, it is a common misconception that CCS is a band-aid solution that will distract from the energy transition and investment in alternate fuels. The reality is that CCS will enable the energy transition, with the key word being transition. CCS will allow the production of lower-cost low-CI hydrogen and other alternate fuels needed to reduce emissions in hard-to-abate sectors. Short-term access to these fuels is critical to achieving emission reductions now and allows time for the supply of renewable fuels and energy sources to ramp up to meet the ever-growing demand.

Regarding environmental markets, CCS projects are considered an emissions avoidance rather than a removal since the CO₂ never actually enters the atmosphere. Logically, the prevention emissions should be valued equally compared to removing them after the fact. Nevertheless, a false dichotomy occurs in the market, where removal-based credits are viewed as superior to (i.e., trading at 2–3 times the price) avoidance credits and activities. The value differential is a function of capital cost – direct air capture (DAC) and other carbon removal technologies and activities are currently more expensive to implement. Still, there is also a component associated with optics, which is unfortunate. Analogous to a bathtub full of water, the bath would never drain if one pulled the plug but kept the tap running. Removals are an exciting technology development associated with vital natural system restoration projects and activities. However, we are still too early in the energy transition to focus our attention too squarely on removals – we still need high-quality avoidance projects that have the potential to mitigate emissions on the gigaton scale, which includes CCS. As is a common theme throughout this blog, we need more of both, not either/or.

Despite the regulatory challenges and bumpy road ahead, hundreds of companies have either proposed CCS projects or are evaluating opportunities, including many of ClimeCo’s clients. In this valiant pursuit, ClimeCo has accepted the challenge and is working to support our clients through strategic advisory services and de-risking investment through partnerships and optimization of multiple potential revenue streams.

The Opportunity

The recent changes to the Inflation Reduction Act (IRA) and the opportunities it has created for CCS are generally understood – albeit in theory. Projects that plan to sequester CO₂ in secure, geologic formations can receive up to $85 per tonne of CO₂ injected under the 45Q tax credit. What is often less clear are the opportunities for additional revenue streams, specifically within the voluntary carbon market (VCM), and the rules around stacking the various available incentives. Opportunities for value creation outside of the VCM arise from low-carbon fuel markets and green premiums for low-carbon products. How these fit together within an optimized organizational strategy while achieving broader emission reduction goals can be challenging to navigate. Although ClimeCo takes a holistic approach to value creation via all channels, the paragraphs below will highlight the recent developments that will open pathways in the VCM.

Historically, North America’s only VCM methodologies for generating carbon credits from CO₂ sequestration activities were specifically designed for and limited to EOR. The absence of a methodology for geologic storage was just a symptom of the economic realities of pure geological storage projects – most would just not pencil at previous incentives levels, even with stackable carbon credits. However, the new IRA is a game changer, placing hundreds of millions more tonnes per annum within the realm of potentially economical or marginal. The VCM is ramping up to help projects falling in the ‘uneconomic’ or ‘marginal’ categories to be economic and to de-risk the investments by diversifying the revenue streams. The cost of CCS projects varies widely by industry. Those in hard-to-abate sectors have a particularly high cost of capture to low purity and/or concentration of CO₂ streams. Fortunately, there will be at least one, if not two, new VCM methodologies available in the near term that will allow for the creation of voluntary carbon credits from CCS. This opportunity will be particularly advantageous for those in hard-to-abate sectors where the $85 per tonne alone is not enough.

The American Carbon Registry (ACR) is in the process of finalizing its methodology that would allow for carbon credits created from the following activities: geologic storage, direct air capture (DAC), EOR, and bioenergy with CCS (BECCS). We expect the methodology to be available by the end of 2023.

Verra is working with the CCS+ Initiative to develop a series of modules for CCS projects for credit creation in the VCM. Verra has indicated that the first module will allow for crediting of the same activities as under the ACR methodology; however, it needs to be clarified as to whether any negative emissions (i.e., removals) associated with BECCS will be included in the first release.

For organizations at various stages in the CCS project development journey, it will be necessary to understand all the potential revenue streams associated with the project, including voluntary carbon credits as well as other value-creation opportunities in low-carbon fuel markets, compliance markets, and additional government grants and funding and the associated value, risks, challenges, and optimization opportunities. It is also important to understand how utilizing the VCM fits within the broader organizational strategy, emission reduction targets, and a product’s value in the market (i.e., green premiums).

[1] McKinsey & Company, Scaling the CCUS Industry to Achieve Net-Zero Emissions
[2] Intergovernmental Panel on Climate Change (IPCC), Carbon Dioxide Capture and Storage
[3] Oil Change International, Open Letter to US and Canadian Governments

About the Author

Jessica Campbell, Director of Energy Innovations, leads ClimeCo’s CCS and Low Carbon Fuels Program. She is passionate about the power of utilizing environmental markets to expedite decarbonization goals and supporting our clients through the energy transition.

Plastic Footprint Part I: Insights from a Case Study

by: Leticia Socal | March 22, 2023

ClimeCo’s Plastic Project Partner, The Way Project, Cote d’Ivoire

At this point, we all know there is a global crisis of plastic waste. Consumers rank plastic pollution among the top three environmental issues [1] and have started associating plastic and packaging with environmental degradation. Consumers’ expectations of companies to shift to more sustainable practices have grown. Companies started committing to plastic reduction, recyclability, recycled content, and eliminating problematic plastic. There is so much to do, but where do we begin?

Once a company understands how plastics flow in and out of its value chain, it’s easier to work on plastic mitigation strategies. Plastic footprints are a fast-evolving starter to waste mitigation. They help a company achieve its commitments and plastic-focused ESG (Environmental, Social, Governance) targets. A plastic footprint measures the total amount of plastic used, calculating the baseline against which progress can be measured. Despite its straightforwardness, application, and approach may vary depending on goals, purpose, and scope. Is the footprint measuring an entire company’s operations, or only focusing on one product, or could a company want to understand the plastic footprint of a one-off event? Defining the proper scope and determining which areas of plastic usage are included or excluded at the very beginning of the process is extremely important.

Modeled after its precursor, the carbon footprint, the plastic footprint reflects a similar model—measuring, mitigating, and investing [2]. This topic has gained more attention in recent years, followed by a spike in plastic pacts, agreements, bans, and zero-tolerance statements [3]. Global trends reveal that a growing number of countries are responding to customer demand, requiring more “environmental considerations into their products [4].” Perhaps the spike is fueled by fear, opportunity, or hope. Whatever the reason, the inspiration to act, and be successful, requires a baseline from which to set a foundation. Studying a success story here is meant to guide, educate, and inspire your plastic footprint on the first step on your journey to plastic ESG.

Case Study: Plastic Footprint for a Cosmetic Business

ClimeCo examined the process and corresponding results from conducting a plastic footprint for a cosmetic business whose mission is to provide clean products with ingredient transparency and zero or low waste in its operations. Plastic footprint assessments provide the baseline for action, valuable insight for informed decisions, long-term cost savings, and partnership opportunities across the value chain.

Let’s dive deep into the process of making one of its products: a body lotion. The steps of this exercise were:

Assessing the internal plastic footprint
Designing and defining (where needed) mitigation measures
Enhancing product offering and marketing
Creating opportunities to connect more with customers and/or existing suppliers

Like a carbon footprint assessment, the first step is defining the scope. In this case, ClimeCo looked at the inflow, operational, and outflow of plastic in the company’s value chain.

Inflow plastic is the packaging that enters the company’s operations attached to a product and leaves it as waste. (In this case: ingredient packaging)
Operational plastic, like industrial plastic, is used and disposed of during a company’s operations (In this case: plastic gloves, stirring tools, and storage containers)
Outflow plastic is attached to a product within a company’s operational boundaries and leaves together with the product. (In this case: the primary packaging, outer box, marketing and instructional materials, and decorative add-ons)

After a detailed survey, we clearly defined the picture of the plastic flowing throughout the company’s operations. An assessment of the type and form of plastic packaging and material usage (single use vs. durable) was done, detailing all important data and highlighting hotspots for action. Local waste management and partnership opportunities were included in the data analysis as well. This data built a roadmap with short, mid, and long-term actions.

With zero investment, the company reduced waste sent to landfill from 62% to 30%. Reducing waste to landfill was achieved with immediate, internal changes, such as proper on-site sorting and disposal, leveraging available waste management, and a local recycling center. Improved employee training and adequate labeling of waste bins were also vital in increasing landfill diversion and reducing recycling stream contamination with non-recyclables. Changes to the product packaging were made, reducing the outflow plastic footprint from 64% diversion to zero, as part of a 100% reusable and recyclable packaging program.

Next, the company took the following external steps to mitigate its footprint further while enhancing its relationships with suppliers and customers:

Initiating upstream partnerships with suppliers to return and reuse shipping containers and packaging, reducing inflow packaging.
Offering refill and takeback programs to customers in exchange for discounts and rewards. This is only possible because the product packaging is now durable, washable, and can be sanitized with every use.
Evaluating operation-related and product-related certifications such as waste diversion, plastic-free seals, and recyclability.
Educating customers by adding information on the takeback program, disposal options, certifications, and the plastic footprint to product marketing.
Improving landfill diversion through local haulers and recyclers outreach (new goal is from 30% to less than 10%).
Offsetting the unavoidable plastic by investing in collection & recycling activities through verified plastic credits.

Aside from enhancing product messaging, customer engagement, and reportable ESG metrics for stakeholders, the cosmetic company saw a 10% increase in overall sales and positive customer feedback. Moving forward, plans for this company include expanding the plastic footprint exercise to other products, which is an easy task to implement due to the availability of initial footprint data.

With a quantified baseline and a coherent action plan laid out, the most challenging part of creating a successful plastic ESG plan is complete. The benefits of this plan go beyond reducing pollution. You can now create value that was unattainable before.

The next step requires answering questions such as:

How much money are you saving by making plastic-conscious choices?
What are the new marketing opportunities available?
What is the ROI of changing your operations to be more sustainable?

Part II of this blog will answer these questions. Actions like these will appeal to your senior management, investors, and customers alike. There is a small window available where you can act, stand out from the competition, and be a part of creating the solution. Stay tuned for our next blog, where we outline the data you need to make a case for preventing inaction.

[1] Shelton Group, Waking the Sleeping Giant: What Middle America knows about plastic waste and how they’re taking action
[2] ClimateTrade, The evolution of carbon footprint measurement
[3] Reuters, Big brands call for a global pact to cut plastic production
[4] The Ellen MacArthur Foundation, The rise of single-use plastic packaging avoiders

About the Author

Leticia Socal is a chemist and seasoned plastic industry professional with over 15 years of experience spanning R&D, intellectual property, market research & strategy. Leticia is a certified TRUE Zero Waste advisor and a Blue Consultant. She holds a Bachelor of Science in Industrial Chemistry, a Master of Science in Materials Engineering, and a Ph.D. in Polymer Science.

“We cannot change what we are not aware of, and once we are aware, we cannot help but change.” Sheryl Sandberg, Lean In: Women, Work, and the Will to Lead

ClimeCo Responds to the Greenhouse Gas Protocol’s Surveys for Standard and Guidance Updates

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ClimeCo Responds to the Greenhouse Gas Protocol’s Surveys for Standard and Guidance Updates

Our experts weigh in on recommended updates to the global greenhouse gas accounting standard.

by: Garrett Keraga | March 20, 2023

Boyertown, Pennsylvania (March 20, 2023) – In 2023, the Greenhouse Gas Protocol (GHG Protocol) invited stakeholders to recommend updates to its widely-used standards and guidance for measuring greenhouse gas inventories. This presents a rare opportunity to help shape the way that companies report on emissions, track them over time, and use market-based mechanisms to support global decarbonization efforts. The ClimeCo team gathered leaders from around the company with expertise in measuring inventories, developing environmental commodities, and helping companies lower their emissions. We’ve crafted a response to help push the industry forward constructively and mindfully.

In the survey for the Corporate Accounting and Reporting Standard, we indicated a high level of satisfaction with the existing material and provided a range of minor tweaks to improve fidelity. This included suggestions like improved guidance on emission factor databases and leased asset accounting, improved accounting procedures for companies or portfolio managers with high levels of inorganic growth, and a clear recommendation on a baseline recalculation threshold.

Our responses for Scope 2 and Scope 3 similarly indicated satisfaction with the current guidance but suggested several more areas of improvement. Within Scope 2, we requested clearer guidance around renewable energy certificate (REC) boundaries and improved residual mix emission factor availability globally. We did not see a current need for revisions to the REC market that incorporate proof of total change in low-carbon supply. Our Scope 3 suggestions included creation of a remote work emissions category: consistent allocation of upstream versus downstream emissions, additional industry specific guidance for several categories, and guidance around market-based mechanisms within Scope 3.

Our experts had numerous suggestions for the future of market-based accounting, including expanding market-based accounting into Scope 1 and Scope 3 through inset credits, mass-balance certification, and book and claim certificates. We advised the GHG Protocol to establish systems that use the same principles as the current market-based Scope 2 reporting. Our team believes the voluntary market will continue incentivizing fast-paced, cost-effective progress toward net-zero, regardless of physical limitations. The graphic below explains how this system might work with a book and claim approach for a shipping company.

About ClimeCo

ClimeCo is a respected global advisor, transaction facilitator, trader, and developer of environmental commodity market products and related solutions. We specialize in voluntary carbon, regulated carbon, renewable energy credits, plastics credits, and regional criteria pollutant trading programs. Complimenting these programs is a team of professionals skilled in providing sustainability program management solutions and developing and financing of GHG abatement and mitigation systems.

For more information or to discuss how ClimeCo can drive value for your organization, contact us at +1 484.415.0501, info@climeco.com, or through our website climeco.com. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

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.

« Older Entries

Glossary

Accelerating Industrial Decarbonization

Accelerating Industrial Decarbonization

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

Plastic Footprint Part I: Insights from a Case Study

Plastic Footprint Part I: Insights from a Case Study

ClimeCo Responds to the Greenhouse Gas Protocol’s Surveys for Standard and Guidance Updates

ClimeCo Responds to the Greenhouse Gas Protocol’s Surveys for Standard and Guidance Updates

The Role of Net-Zero in Corporate Strategy

The Role of Net-Zero in Corporate Strategy

Sources

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