Glossary

Key Updates in Verra’s VCS Standard Version 4.5

Key Updates in Verra’s VCS Standard Version 4.5

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Key Updates in Verra’s VCS Standard Version 4.5

by: Andrew Primo | October 11, 2023

Key Updates in Verra’s VCS Standard Version 4.5 | ClimeCo

On August 29, 2023, Verra, a Voluntary Carbon Market (VCM) registry, released a major update to its Verified Carbon Standard (VCS) program, changing and expanding a host of program aspects, including project risk assessment, credit labeling, stakeholder engagement requirements, social and environmental safeguards, and methodology development. The update represents the most considerable change to the VCS program in several years. As the largest VCM registry, developments at Verra can significantly impact the broader market, particularly for nature-based climate projects like reforestation and avoided deforestation.

Much of the update was driven by Verra’s efforts to align its VCS program with the Integrity Council for the Voluntary Carbon Market’s (ICVCM) Core Carbon Principle (CCP) Assessment Framework, published earlier this year to set standards for credit quality and reinforce trust in the market.

Verra has published a list of 54 updates in v4.5 of the VCS Program. We have summarized three of the most significant updates below:

  • Agriculture, forestry, and other land-use (AFOLU) projects will have a higher average risk profile: Verra has updated its AFOLU Non-Permanence Risk Tool for the first time since 2019, including new project risk analyses based on projected future impacts from climate change, including sea level rise, fire, extreme weather, and pest and disease outbreaks. AFOLU projects will also need to assess risks related to host nations’ climate policy and history of political intervention in land or resource use, and all AFOLU projects will be required to have an adaptive management plan. Because the outcome of the tool’s risk analyses determines the number of credits that a project must contribute to the AFOLU buffer pool—a kind of insurance policy for projects that suffer loss of carbon stocks or access to project lands—many projects are likely to see a rise of buffer pool contributions. The permanence of carbon stocks in AFOLU projects must now be monitored for at least 40 years rather than the 30 years required previously.

  • All projects will require more analysis of project-related environmental, social, and economic risks, with a greater emphasis on stakeholder engagement for all projects: The “No Net Harm” clause in the VCS Standard has been significantly clarified and expanded. Beginning in March 2024, project proponents must formally analyze potential risks to multiple groups, including women and girls, children, minorities, and marginalized groups. Projects must also ensure compliance with a list of other specific social and environmental safeguards based on CCP requirements, including respecting human rights, providing equal pay for equal work, prohibiting forced and child labor, preventing relocation and economic displacement, and having no negative impacts on ecosystems.

    Verra has also expanded stakeholder engagement requirements to include stakeholder identification, risk analysis, and grievance redress procedure implementation for all projects. The new stakeholder engagement rules also require project proponents to obtain free, prior, and informed consent from all stakeholders to participate in the stakeholder engagement process.

  • Verified Carbon Units (VCUs) will be labeled based on whether they are greenhouse gas (GHG) reductions (avoided emissions) or carbon dioxide removals, as well as if they are compliant with Paris Agreement Article 6 accounting requirements: The VCS Program will require new projects and methodologies to quantify GHG reductions and carbon dioxide removals separately. VCUs issued by these projects will be labeled as either “reductions”—where GHG emissions are reduced or avoided—or “removals”—where carbon dioxide is removed from the atmosphere and stored in long-term carbon stocks (e.g., stable forests or geologic sequestration).

Verra also published its first Paris Agreement Article 6 Label Guidance as part of the update, detailing which credits are eligible for use against a country’s Nationally Determined Contribution (NDC) to Paris Agreement goals. While the reduction and removal labeling system will only go into effect for projects listed after March 1, 2024, the Article 6 labeling conventions are active immediately.

Verra hosted a series of webinars from September 12-28, reviewing different aspects of the VCS Program update. These webinars will be made available to the public on Verra’s Events site.

 

 
About Verra’s Verified Carbon Standard

Verra is a nonprofit organization that operates standards in environmental and social markets, including a leading carbon crediting program, the Verified Carbon Standard (VCS) Program. The VCS Program drives finance toward activities that reduce and remove emissions, improve livelihoods, and protect nature. VCS projects have reduced or removed more than one billion tons of carbon and other GHG emissions from the atmosphere. The VCS Program is a critical and evolving component in the ongoing effort to protect our shared environment. Learn more by visiting here.

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.

Contact us at +1 484.415.0501, info@climeco.com, or through our website climeco.com to learn more. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

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

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

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.       

 

What is the role of the IC-VCM?

What is the role of the IC-VCM?

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What is the role of the IC-VCM?


by: Jessica Campbell | April 19, 2023

What is the role of IC-VCM?


Boyertown, Pennsylvania (April 19, 2023) –
The Integrity Council for the Voluntary Carbon Market (IC-VCM) emerged last year as one of the recommendations of the task force on scaling the voluntary carbon markets (TSVCM). The TSVCM recognized the power of the VCM and its potential to play a more significant role in the mitigation of climate change but suggested that there needed to be increased standardization across the market to reach its full potential and achieve maximum benefit. The mandate of the IC-VCM is, therefore, to ‘build integrity and scale will follow.’ After holding a public engagement period during the latter half of 2022, the IC-VCM launched its updated Core Carbon Principles (CCPs) in March 2023.

The recent launch is considered ‘Release One’ and includes the finalized list of the 10 CCPs and the Programme-level Assessment Framework. Using the Programme-level Assessment Framework, GHG registries, and programs can now start to prepare their applications to be CCP eligible. The IC-VCM has recognized the overlap between the programme-level assessment and CORSIA’s rigorous assessment process that most programs have already undergone. Therefore, CORSIA-eligible programs will only need to demonstrate compliance with some additional criteria rather than the whole framework.

The remaining part of the Assessment Framework will determine the eligible credit categories and will be released in Q2. At that point, both the eligible programs and credit categories can be assessed. The IC-VCM has indicated that it expects decisions on which credits can be labeled CCP-compliant as early as the end of 2023.

The 10 CCPs have not changed significantly since the draft release but are now grouped into three main categories:

  1. Governance – effective governance at the credit programme-level, tracking of credits through a registry system, transparency, third-party validation, and verification
  2. Emissions Impact – additionality, permanence, robust quantification, and no double counting
  3. Sustainable Development – social and environmental safeguards, and avoid locking in technologies or practices that are incompatible with reaching net zero GHG emissions by mid-century

There will also be three voluntary attributes that a project can apply for:

  1. Host country authorization pursuant to Article 6 of the Paris Agreement
  2. Share of Proceeds for Adaptation
  3. Quantified Positive SDG Impacts 

ClimeCo is confident that the projects and registries we work with represent the highest quality in the market and are part of a market ecosystem that strives to make continuous improvements, regardless of the work of the IC-VCM. We are hopeful that the IC-VCM’s assessment will highlight the positive impact those programs and projects are having and the high standards that are already adhered to. 

Although we generally agree with the evaluation criteria for governance and emissions impact, there remains some uncertainty about how the IC-VCM will ultimately evaluate projects under category 3 – Sustainable Development. As the CCP label is a binary decision (pass/fail), we hope there is recognition of the highly variable opportunities and constraints based on a project’s geography and category, as well as the importance of supporting transition technologies today which will lead us down the path of continuous innovation.    

For more information or to discuss how ClimeCo can drive value for your organization, contact us through our website or info@climeco.com.

 


About the Integrity Council for the Voluntary Carbon Market

The Integrity Council for the Voluntary Carbon Market (Integrity Council) is an independent governance body for the voluntary carbon market.

They do this by setting and enforcing definitive global threshold standards, drawing on the best science and expertise available, so high-quality carbon credits channel finance towards genuine and additional greenhouse gas reductions and removals that go above and beyond what can otherwise be achieved, and contribute to climate resilient development.

For more information visit their website

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.

Contact us at +1 484.415.0501info@climeco.com, or through our website climeco.com to learn more. Be sure to follow us on LinkedIn, Facebook, Instagram, and Twitter using our handle, @ClimeCo.

Experiencing COP26

Experiencing COP26

Experiencing COP26


by: Zach Harmer | Strategic Policy & Markets Manager | November 30, 2021

 
Experiencing COP26

I had the honor of attending the Conference of Parties 26th (COP26) meeting in Glasgow, UK, on behalf of ClimeCo. Upon arrival, I was pleasantly surprised to see how Glasgow had wholly transformed to facilitate the arrival of over 30,000 participants. From airport and train station signage to rapid antigen test procurement sites spread throughout the city, it’s safe to say that there was much preparation to ensure the welcome for the global community was as smooth as possible. The effort put forth allowed attendees to focus on the power of coming together to discuss and make climate commitments.

About COP26

If you are unfamiliar with COP26, it is a United Nationals Climate Change conference that brings parties together to accelerate action towards the goals of the Paris Agreement. It is organized into three core areas: the Blue Zone, the Green Zone, and then side events, such as the New York Times Climate Hub (NYT Hub). The Blue Zone is dedicated for delegates and select leaders of the business world to provide space for the negotiations that led to the agreement on the Glasgow Pact. The Green Zone is open to the public, focusing on education and a plethora of side events that offered the opportunity to listen to world-renowned speakers and network with other attendees.


My Favorite Speaker


I was excited to be able to attend the Green Zone as well as several side events. Of the various presentations I attended, the one speaker that resonated with me the most, Vanessa Nakate, spoke on a panel at the NYT Hub. If you have never heard of Vanessa, she is well known as a climate activist from Uganda. She is the founder of the Rise up Climate Movement, which aims to amplify the voices of activists from Africa. During her presentation, Vanessa provided the following powerful statement on global temperature rise: 

“It’s important for people to know that even at 1.2 degrees, it has been hell for so many communities in my country… the climate crisis has been ravaging vast parts of the African continent, many people have lost their farms, many people are losing their businesses, many people have lost their lives… this is what is happening at 1.2. The weather patterns are changing, they’re being disrupted… this is one of the disconnections that I have been talking about. We think that 1.5 is our salvation, and yet, still at 1.5, it won’t be safe for very many communities.” NYT, Full Recording of Session 

To me, her comment brings light to a common misconception that I see frequently in the media – that limiting global temperature increase to 1.5 degrees Celsius above preindustrial levels is not a universal solution to climate change. The 1.5 degrees is a threshold defined by the Intergovernmental Panel on Climate Change (IPCC) that, if crossed, will bring “catastrophic and irreversible effects of climate change.” (Check out ClimeCo’s recent blog on the Key Takeaways from the most recent IPCC report).

Many of the world’s most vulnerable populations are already experiencing significant effects from the global temperature rise, which further emphasizes the urgency of the worldwide community to work together to reduce emissions and support those in need.

My Key Takeaways From The Pact

The Glasgow Climate Pact (Pact) was underscored by a commitment by all parties to the 1.5-degree target. With that, there is an urgent need to drastically scale up funding for developing countries to assist with the costs associated with mitigation and adaptation for climate change. Additionally, for the first time, there was an explicit reference for the need to phase out fossil fuel usage, though the requirement for coal was downgraded from a “phase-out” to a “phase-down” at the last minute due to pressures from China and India. 

Another notable outcome from the Pact was the announcement of the intention to form a stand-alone organization to provide financial support and technical advice to developing countries seeking to mitigate loss and damages from climate change. Despite some of the successes of COP26, participant countries were unable to deliver on the $100 billion climate finance target set in the year leading up to COP26. In response, members of the Pact committed to reaching the $100 billion target and to match the amount annually up until 2025.1 Alongside the commitments was the agreement on the rules of Article 6 of the Paris Agreement.


Article 6 Overview

A significant achievement of the Glasgow Pact was the approval of the rules for implementing Article 6 of the Paris Climate Agreement. Article 6 was ratified in 2016 along with the rest of the Paris Agreement; however, agreeing on the rules for implementation proved to be a challenging exercise. The main components of the Article are briefly highlighted below: 

  • Article 6.2: establishes an accounting framework for country-level cooperation. The purpose of this article is for linking the emissions-trading schemes of two or more countries (but not for business-level transactions). This “treaty” framework will also allow the international transfer of Internationally Traded Mitigation Outcomes (ITMOs). 
  • Article 6.4: establishes a United Nations-centralized mechanism to trade emission reduction credits (referred to as “A6.4ERs”) generated through projects that will contribute to reducing emissions in developing countries. This mechanism would issue A6.4ERs to developers of clean energy projects, where the developers can either be foreign countries or private entities. 
  • Article 6.8: is meant to guide the implementation of the framework for non-market approaches in implementing parties’ Nationally Determined Contributions (NDC). Article 6.8 is not instrumental in the implementation of an emission trading system. Examples include, but are not limited to, the application of taxes or other relevant initiatives to discourage emissions.  

Conclusions

It is no easy feat to bring over 200 delegates together from around the world in a time where COVID-19 is ever-present, let alone to get all delegates to agree on a plan to limit temperature rise to 1.5 degrees. Though there may be criticisms from both sides on the intricacies of the Pact, progress has been made on one of the biggest challenges we have ever faced as a global community. As I reflect on my visit to COP26, I am left with these two thoughts: 

  1. No action is too small; everything starts with the individual. Every action you can take to reduce your emissions and waste footprint helps. I encourage you to look into actions you can take to reduce your daily footprint, such as reviewing your city’s waste, organics and recycling rules. 
  2. Climate change is here and is already affecting the world’s most vulnerable populations. We must continue to encourage our leaders to drive emissions reductions from both inside and outside their borders. 

It will be interesting to see what the delegates of our world will do to meet the commitments they made at COP26. At ClimeCo, we strive to continually work with our partners to reduce emissions and go beyond business-as-usual. I am looking forward to helping our partners navigate the multiple paths available to them to reach their goals/commitments.  

 
Watch #TeamClimeCo at COP26 on our Instagram.


About the Author

Zach Harmer is the Strategic Policy and Markets Manager at ClimeCo Canada, based in the Calgary office. At ClimeCo, Zach leads the tracking and analyses of regulatory and market updates in California and Canada’s carbon programs. Zach earned his Master of Public Policy from the University of Calgary’s School of Public Policy and his Bachelor of Arts from the University of Alberta in Political Science and French Language and Literature.

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.