How to Make Net-Zero Pledges Climate-Radical, Business-Friendly, Socially Just and Fully Transparent—Part II
The Instigator is co-authored again this week by my friend Peter Ebsen. In our last post, Peter and I offered recommendations on how to improve corporate net-zero climate pledges, based on our recent submission to the Science Based Targets initiative. We asked for feedback and got it. Thank you. This week, we develop the “why” behind our recommendations and address some of the challenges we anticipate and some of the criticisms we have received.
Let’s pause for a moment of reflection. We have found common ground in the fight against climate change. We all agree that net-zero is the goal and 2050 is the deadline. That’s a solid foundation for us to build on.
Where we’re less clear are the specifics. How will we get there? What will it take? Who must act in what ways? Who must we protect? Without greater consensus, our efforts will never be as aligned and as powerful as they can be.
In our last post, Peter and I laid out a vision for a climate-radical, business-friendly, socially just, and fully transparent path to net-zero. It involved accelerated timelines for corporate commitments, detailed disclosures, and treating carbon removal as functionally equivalent to reducing emissions. We argued that this was necessary for two reasons:
It is not viable to reach net-zero by 2050 at the current pace of our efforts. Rather than kick the can further down the road, we’re asking for more action now by those who can afford to take it. And for those who cannot, show us your plan—with specific details—what you can do now and why you cannot do more.
It is the more just and equitable way to make climate progress. The costs of climate action get passed along to consumers, the impact of which will always be disproportionately borne by those with the least resources to spare. We favor a framework that delivers climate action at the lowest possible costs and stimulates innovation to bring these costs down even further. Furthermore, billions of people around the world are increasingly sharing in the benefits of prosperity that a select minority has had the privilege to enjoy for decades. For this to continue, climate action will need to be consistent with global economic growth.
Let’s first make our recommendations concrete.
What does a net-zero commitment look like in practice for a company?
Imagine you’re the CEO of a cement company. You’ve agreed to make a net-zero commitment for 2050. You’re not sure how the company will achieve that goal, but you take comfort in the fact that you have 29 years to do this. And of course, it will not be your responsibility alone, but that of several CEOs to follow. (You’re aware that the average tenure of sitting CEOs in the S&P 500 is about 6 years.)
What should you do? Your company is already energy efficient. You can’t find any easy or low-cost ways to reduce emissions. Further, your industry is very competitive. If you raise prices to cover higher costs, you’ll lose market share.
In our view, the following scenario is win-win in a world where we all agree that corporate action is desperately needed:
You state that your company will:
a. embrace the global transition to net-zero
b. ensure that all greenhouse gas emissions in its operations, supply, and value chain will be balanced with carbon dioxide removals
c. reach this goal as quickly as possible
You implement an advocacy strategy that helps regulators to create a level playing field for net-zero positive companies such as yours.
You analyze the greenhouse gas emissions in your company’s operations, supply, and value chain. What are the options to reduce them? What are the costs per ton of emission reduction?
You analyze the carbon dioxide removals in your company’s operations, supply, and value chain. What are the options to increase them? What are the costs per ton of carbon dioxide removal?
You implement a net-zero strategy that drives down the costs of your net emission reductions while actively pursuing net-zero transition growth opportunities in your supply and value chain and beyond.
You report on your progress. You are transparent about your goals, your situation, and your achievements. Your company will get better at net-zero fast. This will allow you to continually revise your goals and make them more and more ambitious.
This approach works for companies that are in a situation to move to net-zero immediately or during the next few years. But crucially it also works for companies who are not in that position. Some companies may require additional encouragement and support from others, such as regulators, their stakeholders, customers, and suppliers. That is fine. At this stage, the most important thing is that companies actively pursue a net-zero strategy and are transparent about their approach, goals, and obstacles.
Answering our Challengers
We’ve received some very thoughtful questions and pushback on our ideas. This is good. We want to have the difficult conversations, find the flaws in our logic, and leave no stone unturned in our quest to achieve net-zero.
We will address the challenges we’ve heard one by one. Our guiding framework is: what do we need to do now to realize our net-zero goal by 2050. The answer we keep coming back to? Waiting does not help.
We’ll try to show that our approach—while certainly no guarantee of success—should accelerate our ability to figure out now what will and won’t work and increase the odds of favorable outcomes.
The availability of nature-based carbon dioxide removal is severely limited by geographic constraints.
That’s possible. The fact is, we don’t really know. Just like we didn’t know a decade ago that the cost of solar and wind power would be driven down to today’s low levels. Just like we didn't know that Tesla and Impossible Foods would develop great climate-friendly electric cars and plant-based meats.
We can’t know a priori the extent to which increased demand for nature-based carbon dioxide removal will stimulate innovation and increase supply. The only way to find out is to get the marketplace going.
If we encourage removal now, we anticipate that such demand will lead to new supply at attractive costs.
And if we’re wrong and supply does not increase, that’s beneficial too. It means the cost of removal will rise, and such a price signal would incentivize emission reductions. Of course, the same demand function will reveal a lot about the availability and cost of technology-based removals too.
The sooner we do this, the faster we’ll have those answers.
There are nature-based removals available today at scale and at reasonable costs, such as soil carbon from regenerative agriculture in the US, afforestation projects in China, agro-forestry projects in Laos, and forestry plantations in Paraguay. We expect that as prices for nature-based removals increase, more and more such projects will become affordable around the world.
It will be very difficult to monitor and verify carbon removal projects to ensure that they are working as promised.
To be sure, this will be a challenging task. But society has demonstrated that we can do this in other situations, such as tax, financial auditing, and social welfare regimes. Any of these are vastly more complex tasks than monitoring carbon dioxide removals. The European Emissions Trading Scheme—currently, the largest of the regulatory carbon trading schemes—has successfully monitored large volumes of carbon dioxide emissions since 2005. Monitoring carbon dioxide emissions is different but not fundamentally more difficult than monitoring carbon dioxide removals. This is something that can be done.
Regardless of past success, we don’t have much alternative. The IPCC is certain that carbon dioxide removals will be necessary. So let's develop and get the oversight we need in place now. The faster we develop such a regime, the more time we have to improve it. We don’t see how waiting will help us.
How can we have confidence that the removals are not harmful in other ways?
People legitimately worry about the negative impacts of nature-based removal projects on vulnerable communities, biodiversity, agriculture, and more. It is very important to minimize unintended side effects from nature-based removal projects. We must put structures in place to do so. And not just for removal projects, but for anything we do. Let’s develop the procedures and rule books to do this in the best way. It will take time to get it right. We should get started now.
Your proposal does not allow corporate support for forest protection to count against net-zero commitments because they are “avoided emissions.” How will we protect the world’s forests? We need them to reach climate goals?
We absolutely agree that protecting forests is essential to reaching our climate goals. Further, protecting forests is also vitally important for community, biodiversity, and ecosystem service goals. It's hard to think of a higher priority.
But the logic of net-zero as recommended by the IPCC is that for every ton of carbon dioxide equivalent we put into the atmosphere, we need to take a ton of carbon dioxide out. And we urgently need to get started with reducing net emissions using this approach and logic. Supporting the protection of forests, as laudable as it may be, does not contribute to taking out carbon dioxide from the atmosphere in this way. Helping to reduce emissions is different than removing carbon dioxide. Companies should financially support the protection of forests, but they should not claim that this is a way to balance their emissions in the context of a net-zero logic.
So how can we protect our forests? In addition to seeking government aid and philanthropic support for well-designed projects, we think companies—especially ones that have been responsible for past forest degradation—should be encouraged to donate funding for such activities. We also think they should fully realize their commitments to eliminate deforestation in their supply chains. And they’re getting close. See the update on the New York Forest Declaration (even if behind schedule).
Have you ever heard the advice to students to start an assignment on the same day it is given, even if it’s just doing a little bit? Deadlines have a way of sneaking up on you quickly. The best way to avoid cramming it all in at the end, or facing unexpected obstacles at the last minute, is to start early, build momentum and pace your work.
Climate action is no different. 2050 may seem a long way off with plenty of time to get it right. But if we’re serious about achieving our results, we need to really get started now. That way, if—when—we run into challenges, we’ll have a real shot of solving them without missing our targets.
Good summary here of eight trends that will drive sustainable business, tech, and science in 2021 from @TheTripleBottom. These predictions all sound about right to me. Wdyt is missing?
Robinson Meyer’s newsletter “The Weekly Planet” is always a worthwhile read. In this issue, he interviews political philosopher Olúfẹ́mi O. Táíwò on climate reparations, carbon removal, and more. Really interesting. I think it's good (and urgent) to broaden who participates in the discussion and debate about how to address the climate challenge.
I am a big fan of so-called “impact capital,” but it means different things to different people. Some say that investors can have their cake and eat it too; i.e., achieve great social impact while also earning full market rates of return. I have no objection to this concept. But when I was CEO of TNC, and the actual user of the capital, I needed to keep our costs as low as possible to maximize that impact. I wanted to pay below-market financial terms and provide most of the return in positive environmental outcomes. I think this idea has great potential. Bridgespan calls this “impact-first” capital, and their report on the concept is worth a read.
One Last Thing
Okay Instigators, who has been paying close attention to Bitcoin and its energy consumption? I’ll admit I’ve been lazy here. The “Bitcoin Energy Consumption Index” (by digiconomist) provides the latest estimates. Bitcoin mining’s enormous energy consumption seems very problematic to me. Further, much of it takes place in China, so it's likely relying on coal-based power. Is this as big a problem as it looks? Am I missing something?
You’re correct about Bitcoin using extraordinary amounts of energy to mine new bitcoins. And that most of it occurs in China where coal is heavily utilized (hydro is also used seasonally). Bitcoin advocates argue that the mining is shifting toward renewable energy, but any such shift is too little too late. They should be held accountable in the same way as countries, corporations, and individuals that are contributing negatively and disproportionately to climate change.