Nature-Based Climate Solutions Are A Key Strategy to Reach Net Zero

The Private Sector Can Make Them Better

The Quick Rundown: 

Nature-based climate solutions are an increasingly utilized tool in the environmental arsenal.  They have also generated a lot of debate. So this week, we’re doing a deep dive into NCS, making the case for why we need them to reach the critical goal of a net-zero economy—one that emits no more carbon dioxide than it removes from the atmosphere. We also look at how three major companies are playing the offset game and offer our ideas on how they can do better.

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The Good, the Bad, the Buzz 

Nature-based climate solutions (NCS)—initiatives to use nature for absorbing and storing carbon from the atmosphere—have attracted a lot of buzz. Much of it is positive. Corporations are relying on NCS to make ambitious climate commitments. VCs are rushing to fund start-ups to boost supply. Mark Carney is leading a weighty taskforce to improve the market for offsets. 

But there’s negative buzz too. Journalists and activists are lambasting projects they say failed. Some prominent academics argue that NCS will never work. And there are activists who say the strategy is one more example of badly flawed “market-based approaches” to address the climate challenge.  

It probably comes as no surprise that I’m bullish on NCS. Full disclosure: I’ve been working on them for a long time. First, as CEO of the Nature Conservancy and now as an advisor to, and investor in, companies operating in this field. There are good reasons to be optimistic about their potential—most importantly, we likely need NCS to reach net zero. But I also recognize that there is room for improvement and important questions to resolve. Private sector leaders can and should step up to help the environmental community improve this climate strategy. It's in their interest to do so.

My Personal NCS Journey

The USCAP project was already underway when I joined TNC way back in July of 2008, so I began engaging with NCS almost immediately. The goal was to pass a federal cap-and-trade bill to reduce carbon emissions. My particular focus was a hard push for forest offsets to be included in the bill. Why? Offsets would lower the cost of emission reductions by increasing the supply of emission reduction opportunities.  There might be better technological breakthroughs down the road that allow for other low or even lower-cost ways to decarbonize— let's hope so—but NCS works right now and, if used at scale, buys us needed time. Lower costs mean less burden on the economy and allow for more political support. Ultimately, the USCAP project was unsuccessful; the bill passed in the House—known as Waxman Markey—but failed in the Senate. We learned a lot from the effort. One key lesson: do whatever it takes to keep the cost of emission reductions low. 

The next challenge I grappled with as CEO of TNC was this:  How could we raise enough money to protect nature on a large enough scale? We did everything we could to increase donations. We took our annual philanthropic fundraising up by about 3X to $750 million per year. That's a lot of money. (Thank you, donors)  But it wasn’t enough to meet ambitious conservation goals, and we knew it never would be.  

Our solution? Highlight the opportunity to invest in nature. Show society that in exchange for protecting nature you obtain valuable “ecosystem services” such as clean air to breathe, healthy water to drink, beautiful areas for recreation, habitat for biodiversity, and—importantly—sequestration of carbon. This is another important rationale for NCS—they raise capital for conservation that not only protects nature but also delivers valuable services to humankind (including carbon sequestration).  NCS makes it easier to build support for addressing climate.

Later in my tenure, I persuaded the TNC board to make the climate challenge our top priority. We asked: What's the most impactful way for a conservation organization to make a critical difference on climate? And the answer we came up with: Protecting ecosystems at scale. After all, that's what we’d been doing for more than 60 years. But how much carbon could we sequester this way?  

We put our scientists to work to find out. They teamed up with outside experts. And they published this peer-reviewed paper concluding that protecting nature could achieve as much as one-third of the carbon emission reductions the world needs by 2030.  That’s huge! Some in the science community disagree. But even half this amount would be enormous. Hence, another reason to support NCS—scale.

So, three big initial takeaways for me about NCS: 

1. They lower the cost of emission reductions.  

2. They fund conservation.

3. They can be deployed at a huge scale. 

But, as with everything else in the climate toolkit, there are complications we need to address. 

First, let’s distinguish between nature-based “climate solutions” and nature-based “offsets.”  

Nature-based climate solutions (NCS) are initiatives that protect, restore or create habitats and natural carbon sinks such as forests, peatlands, mangroves, savannahs, soils, and marine ecosystems. Such carbon sinks also support biodiversity, access to freshwater, improved livelihoods, and other positive “ecosystem services” nature inherently provides.  

Carbon offsets are certificates demonstrating the reduction, removal, or avoidance of one metric ton of CO2e. An offset can be achieved through projects like renewable energy or methane capture, or—our focus here—nature-based initiatives. The idea is that a carbon emitter can pay for carbon reduction efforts anywhere in the world to offset its own emissions. Such payments fund NCS.  Here’s a good overview on offsets from Vox.  

Now, let’s ask: why do we need NCS?

Because we are nowhere close to reducing carbon levels enough to limit temperature increases to the global 2-degree target, let alone the more ambitious 1.5 degrees goal.  We have a very long way to go.

And because we’ll never reach critical goals like net-zero by 2050 without carbon removal.

First, look at the near term—the period between now and 2030. What do we need to do over this decade to be confident we are on track to reach our longer-term 2050 goals? Every year the UN Environment Program prepares an “Emissions Gap Report” (here’s the executive summary for 2020). It's bleak reading. In 2020, global greenhouse gas emissions were about 52 gigatons (Gt) of equivalent carbon dioxide. Our current trajectory will take us to about 59 Gt by 2030. Not good; wrong direction. If instead we somehow start doing better and achieve the conditional NDCs from the Paris Agreement—a very big if, based on where we are today—annual emissions would settle at about 53Gt by 2030. Again, not even close to what we need to do. In order to reach the 2-degree pathway, annual Gt emissions somehow need to be slashed to 41Gt by 2030. For the 1.5C scenario, we need to be at 25Gt.  We need every carbon strategy we can get—including nature-based offsets and carbon removal. 

What about longer-term goals—say, the generally agreed-upon and critical need to reach net-zero by 2050. There is room for a bit of optimism here. The following G20 countries now have net-zero emission goals: France, UK, EU, China (by 2060), Canada, South Africa, Argentina, and Mexico. President Biden says he plans for the US to join the club, and many companies are making similar commitments. But for these goals to be reached, we need to accelerate progress exponentially. Remember that the “net” in net-zero refers to the fact that fossil fuels will still be used (only where there is no alternative) and other greenhouse gas emissions will occur as far out as 2050, so we’ll need two things: first, no emissions that can be avoided; second, carbon removal to net our way to zero.

Third, we should continue to encourage ambitious corporate climate commitments. It's one of the best things we have going. While we wait for the sweeping regulatory measures we ultimately will need, voluntary corporate commitments are important.  And companies are certainly bolder about making such commitments when they know they can use NCS. But these voluntary commitments need to improve. Avoided emissions NCS can be celebrated but not counted against a company’s direct emission reductions. Direct emission reductions must be prioritized, supplemented by NCS that removes carbon from the atmosphere.

See Larry Fink’s annual letter to CEOs released this week: “There is no company whose business model won’t be profoundly affected by the transition to a net zero economy—one that emits no more carbon dioxide than it removes from the atmosphere by 2050...Companies with a well-articulated long-term strategy, and a clear plan to address the transition to net zero, will distinguish themselves...But companies that are not quickly preparing themselves will see their businesses and valuations suffer…”  Companies should listen to the world’s largest shareholder. It's time to put together your plans to reach net zero.

Fourth, keeping costs down matters. A lot. Some environmental advocates don’t agree that this is important. They think companies and their shareholders should just absorb the higher costs caused by emission reductions. But it usually doesn't work that way.  Such costs are passed on to customers, hurting them economically—especially the less well off—and eroding political support for climate action. In order to meet the enormously ambitious and politically difficult goal of net-zero, we’ll need to do so in the lowest-cost way possible.

Okay, that was pretty convincing. Now tell me about the challenges for NCS. 

First, any effort to protect and restore nature is complicated. Natural systems are dynamic, managing them is tricky, and getting outcomes right for both people and nature is never easy. We should be humble about such undertakings. But, broadly speaking, knowledge and experience here are strong. Conservation organizations and government agencies have been doing this work successfully for decades. And the state-of-art keeps improving. For the most part, nature-based climate solutions are not controversial and are broadly supported.

But when we declare such conservation initiatives are “offsets,” rather than just “solutions,” concerns arise. By definition, an “offset” means the action is equivalent to another—in this case reducing emissions. For this to true, we need to ensure that offsets: 

• cause emission reductions that would otherwise not occur. In the offset world, we call this “additionality.” Say an offset pays for the protection of a standing forest (so-called “avoided deforestation”). We need to believe that the forest is at risk and would otherwise be degraded or eliminated. Such forecasting isn't easy.  It requires making confident predictions about unknowable future scenarios. (It's easier to establish additionality if the offset pays to restore a degraded forest or to plant a new forest since these actions would not occur without the demand for offsets).

• are “permanent.” Current thinking is that offsets should endure for at least 100 years. This is tricky because life is full of surprises. 100 years is a long time. Who is to say—especially in a climate-stressed world—that our protected forest won’t catch on fire? If so, goodbye carbon benefits. (Of course, you can buy protection against this risk through buffer zones or insurance, but that raises costs).

• don’t cause “leakage.” If our offsets stop a timber operation to save a forest, how do we make sure that the same timber activity doesn't just relocate somewhere else?

• don’t cause bad side effects. As the “butterfly effect” warns, not all latent consequences can be predicted, such as compromising an ecosystem, hurting biodiversity, or negatively impacting local communities.

As the market gets more active, other important issues are arising: 

• When should we encourage companies to use offsets? Environmentalists agree that the top priority for companies addressing climate is to reduce their own emissions. Generally, as a company does so, it will start with the emissions that are least expensive to eliminate. As they cut more, costs rise. When on this cost curve is it appropriate to substitute an offset for a direct reduction? Maybe using offsets is a good way to buy some time and achieve emission reductions now that otherwise are not doable. Who should determine this and how? How transparent should companies be about these costs? And how concerned should we be that the availability of low-cost offsets might discourage companies from engaging in additional direct reductions?

• How should we distinguish offsets that avoid emissions from ones that remove carbon from the atmosphere? This distinction is hugely important and in my view will be getting much more attention in the period immediately ahead.

  Take avoided emission opportunities, for example. Shouldn’t we prefer that such emissions be avoided the old-fashioned way— i.e., directly eliminated—rather than through offsets? For example, instead of paying to protect a standing forest, should we instead pursue the same outcome by pushing for more ambitious supply chain management? That higher standard is necessary in a net-zero world.

  On the other hand, NCS that removes carbon from the atmosphere—say an ambitious project to restore a badly-degraded forest—seem much better. Easier to establish additionality, less leakage risk, and hard to see how otherwise you can make this happen.  

  Ultimately, we need net-zero emissions (most experts say we need to get there no later than 2050, and we should get halfway there by 2030). That means somehow we’ll need to make all possible emission reductions by 2050. In such an economy, there can be no allowance for offsetting emissions by paying for avoided emissions elsewhere.

  But even in that very positive net-zero scenario, there will still be greenhouse gas emissions that can’t be eliminated—methane from agriculture; jet fuel; etc. How might such emissions be removed? Perhaps cost-effective direct air capture or other technology-based methods will be ready and affordable by that time. Let's hope so. But we can't count on it. We don’t know when these tech dreams will be realized. We do know, in contrast, that carbon removal NCS works right now.  

• How differently should we feel about offsets when used in voluntary programs vs compulsory regulatory-driven regimes? Today most offsets are purchased voluntarily. You could almost view these purchases as a kind of charitable giving. Hard to complain about that. But when companies make bold claims that their offset purchases are reducing their emissions, do they go too far? Should we be using different terminology? Should corporate offset purchases be called something else— say, “climate positive social investments” or “climate abating social responsibility?” And should environmentalists push less for grand “carbon neutral” statements now and more for longer-term and credible “net zero” commitments? That will mean more detailed plans for direct emission cuts, much greater transparency, and NCS aimed exclusively at carbon removal.  

Looking ahead, with net-zero goals in mind, I hope companies will continue to support conservation-positive and climate-addressing philanthropic projects that, for example, protect standing forests and other ecosystems and avoid emissions at the same time. These are worthy initiatives to support. But such projects and associated avoided emissions—which will be fine to record, disclose, and celebrate—should not count toward a company’s emission reduction goals. Only removal projects should.

And who oversees all of this?

To date, we have relied on carbon offset verifiers to ensure integrity by certifying that offsets will work as promised. The verifiers are on the ground where the offset projects are happening, checking out the sites, reviewing methodologies, determining if the projects are a good fit for local communities and compatible with ecosystem health.  It's a lot of work, but it will get easier as technology is better harnessed (think satellites to monitor forest cover, as several startups are doing) and more economic as projects grow in size. These organizations also manage registries to make sure offsets don’t get double-counted.

I admire these organizations and think they do a good job. It's difficult to be on the front lines developing standards for new and complex markets.  

The verifiers are also starting to get help from private sector market participants. See recent announcements by corporate offset buyers Microsoft, Stripe, and Shopify. They are pledging total transparency about offset purchases, using external advisors (Carbon Plan, Carbon Direct) to vet them, and insisting that they will pay up for high quality. My suggestion to these players - each a leader in the tech sector: acknowledge that nature is another technology that can achieve carbon removal. Indeed, NCS works better today than the products on the drawing board that tech engineers are working on.

As demand for NCS increases, of course, suppliers are responding to these market signals. It's exciting to see new companies emerge—often backed by prominent VCs—aiming to provide ever-higher quality offsets at good prices. And, as you’d expect, financial institutions are lining up to provide the capital to take the marketplace for NCS to scale.

NGOs will keep playing an important role too. Many of these projects are new variations of traditional conservation initiatives. The NGOs have key skills to make these projects succeed and partnering with private sector players will make them even better.

Finally, of course, we can always also count on critics. (One of our favorite sayings at The Instigator is, “Our critics are our friends.”)  These watchdogs play a role that reminds me of what security analysts, CNBC, and short-sellers do for financial markets. They’ll balk when projects fall short of goals and draw attention to bad practices. They’ll keep the pressure on for high quality. And importantly, I hope, they’ll start focusing even more on the frameworks and rules that we’ll need to guide private sector players on the journey to net-zero.

In sum, I’m optimistic about all of this. Thinking on NCS needs to improve, and I think it will.

Alright, so where do things stand right now?

I write this newsletter sitting in Washington, DC with our newly elected President just having taken office. Early actions suggest improvements in climate policy are ahead.  But not the far-reaching regulatory policy we really need. In this circumstance, as noted, voluntary corporate commitments are important. They add up to real progress in reducing emissions; the example of leaders allows us to pressure laggard companies to follow, and corporate engagement builds momentum for the across-the-board regulations we ultimately need.

Let's look at some examples of how companies view offsets. I applaud these three companies for being in the game, trying to figure out how they can be climate leaders, and putting forth their plans. I note below ideas on how these programs can be improved, but I want to emphasize that I admire this leadership. It's hard to get all of this right. But it allows for learning and adds to progress. Bravo to the leaders.

United Airlines: I think it makes sense for airlines to use offsets. After all, other than maximizing the currently limited opportunities available to them—such as using more efficient aircraft and sustainable biofuels—they’re stuck burning fossil fuels when they fly. The airline industry and the UN teamed up and put forth broad plans to address their emissions mainly by using offsets.  

I was interested therefore to read recently how United’s new CEO Scott Kirby plans for his airline to be “100% green” by 2050. He gets the importance of net-zero and says that all of United’s emissions will be removed permanently through direct air capture technology. He also announced that the airline will be an investor in a direct air capture startup. And he talks about the greater use of sustainable fuels. That all sounds good; bold, even.   

But that's it. United provides no more details. No statement about what United will do about emissions between now and 2050, let alone by 2030. Not even a commitment to buy direct air capture carbon removals (if they're available).

And—so far as I can tell, for no very good reason—the CEO also makes unnecessary criticisms of nature-based offsets. He calls them “flashy, empty gestures” and suggests that peer airlines shouldn’t be using them.

It's admirable for United to be ambitious about direct air capture, and it's great to see the CEO out front leading the charge. I hope his bet on direct air capture works. I also think it's okay to identify opportunities to improve NCS (as this newsletter seeks to do). But it’s less helpful to just criticize those who use them. After all, unless his direct air capture dream succeeds sooner than many expect, United itself might need to use NCS. 

My recommendation: 

1. Determine and disclose emission reduction goals to be achieved by 2030, and the strategies that will get the airline there. Do the same for longer-term net-zero goals.

2. Establish interim milestones for management and outsiders to gauge progress.

3. Explain more clearly what carbon removal or avoidance strategies you will use. 

Your investors, customers, (and, most likely, your employees too) will insist on this. As for nature-based offsets, go ahead and share your thoughts on how you think they should be improved.

Procter & Gamble: The consumer goods giant recently announced plans to reach carbon neutrality through a number of initiatives including paying for forest protection projects with Conservation International and WWF. It also announced a number of other impressive sustainability commitments. But the company said little about efforts to reduce deforestation in its supply chain (which includes operations in Canada’s precious boreal forest). Of course, critics immediately pounced, calling the forest offset projects “greenwashing,” insisting that the company reduce direct emissions caused by deforestation in its supply system before using offsets. It's hard to know exactly where things stand here without more information. P&G should address this quickly; if it does, I don’t think it will be too difficult for the company to get on a better trajectory.  

My recommendation: 

1. Hire a credible third party to determine what the company can do to end deforestation in its supply chain. 

2. Make this information public. This issue is not going to go away, it will only get worse unless addressed, best to deal with it now.  

3. Work carefully with NGOs to ensure that the forest protection projects really deliver everything they promise. And celebrate any success here that you realize.  But don't count these avoided emissions as offsets against the company’s footprint (especially emissions that result from deforestation in the supply chain).

4. Be as transparent as possible about every aspect of these programs—good and bad—every step of the way.

Microsoft:  The tech giant has been a sustainability leader for a long time, and its recent commitments keep the company at the head of the pack. Among many other commitments, Microsoft promises to draw down more carbon than it emits by 2030 and by 2050 to draw down enough to offset all company emissions since its founding in 1975. Read the company’s announcement for yourself—it's inspiring. Peers like Apple and Google are doing very well along the same lines too. But let's ask ourselves—can Microsoft do even more? (Remember, we have a long way to go to reach our climate goals. And we need to ask for a lot from our leaders).

My recommendation:

1. Take it to the next level, Microsoft. Keep ratcheting up your commitments so that it's harder for lagging companies to sit this out. For example, imagine what would be required if the company’s commitments were not voluntary but mandatory by law. What reporting and disclosure would be required? Do that. 

2. Also, please tell us more about the costs of direct emission reductions vs offsets.  And think more about your supply chain—can you get your suppliers to match your commitments? 

3. Finally, consider regulating yourself—can you lock in these commitments in a binding way?

Final Thoughts

I’m very encouraged by all of the activity building in the carbon offset marketplace.  Yes, it's a bit messy, everything doesn't work perfectly, and it's unclear where everything will land. But that's how new products and new markets get started. And this one is especially important.

My advice for companies that aspire to be climate leaders: 

1. Set very ambitious emission reduction goals. Report annually on progress. Disclose what you can about the cost of your direct emissions. Present your plans—even if only preliminary ones for now—on how you will get to net zero.

2. If you use NCS, bravo; now disclose. Disclose everything you can about the projects—costs, progress, and all co-benefits and side effects. Celebrate success. Don’t make bold claims, however, that avoided emission offsets take you to net zero (they don’t). 

3. Be open to criticism. As we move forward in this area, we keep learning more and keep finding ways to make more progress.

I’ve said my piece. What’s your take on nature-based climate solutions? 

The Index

• It’s been a great week for progress on carbon removal.  First, Larry Fink’s letter to CEOs was published on Tuesday (see link above). And just as I finished writing this newsletter on Thursday afternoon, I received Microsoft’s brand new and superb white paper on carbon removal. It’s as if they were responding to what I wrote above. I wanted Microsoft to do two things: 1) acknowledge that nature can be an effective nature-based carbon removal technology; and 2) take their carbon removal strategy “to the next level.”  Microsoft’s white paper shows they are doing both.  Bravo!

• A Princeton study backs up what we mostly already know: a big but affordable effort needed for America to reach net-zero emissions by 2050.  

• “Biden ushers in historical turn on clean energy and climate change.”  Amy Harder of Axios has been one of the very best journalists in our space. I always read her early morning newsletter with great interest. This is her final story for Axios—and it's another good one. I can’t wait to see what she does next from her new perch at Breakthrough Energy.

• Speaking of Breakthrough Energy, here’s an excerpt from a soon-to-be-published book by Amy’s new boss Bill Gates, How to Avoid A Climate Disaster. Bill writes about how we’ll need innovation to reach net-zero emissions. He emphasizes, just like we do, that it's critical to decarbonize in the lowest cost way we can. I look forward to reading Bill’s book. I know he is a fan of technology. Great, we need that. But I hope Bill also acknowledges the importance of “green technology”—i.e., nature-based carbon removals—as we pursue low-cost decarbonization.

  

  One Last Thing

  We’re all about long-term thinking here at The Instigator. And great books too.  Read this great interview with philosopher Roman Krznaric about the best books on how to elongate your thinking. Solving the climate catastrophe requires such brainpower. While you’re at it, pick up his provocative book, The Good Ancestor: How to Think Long-Term in a Short-Term World.

  Onward,