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Climate change

We must fundamentally rethink “net-zero” climate plans. Here are six ways.

Corporate climate plans are too often a mix of fuzzy math, flawed assumptions, and wishful thinking.

August 24, 2022
factory pumping out white smoke
Ms Tech | WhiteField Photo/Unsplash

In 2019, Amazon committed to achieving “net-zero carbon” across its businesses by 2040. The online retail behemoth’s company-wide emissions have soared by 40% since then, topping 70 million metric tons of carbon dioxide last year.

It’s a glaring example of the gulf between corporate pledges and climate progress, but far from the only one. Numerous studies and analyses have highlighted serious problems with the plans from many large companies to achieve what’s known as carbon neutrality or net-zero emissions.

These terms only mean that businesses will balance out their emissions of carbon dioxide or all greenhouse gases, respectively, by supporting various projects that prevent or remove climate pollution in equal proportion to the amount they release. In other words, they can continue to emit planet-warming gases, so long as they pay someone else, somewhere else to make up for it. And that’s where many of the problems arise.  

Most of these corporate climate plans rely heavily on investing in carbon offset projects like tree planting and forest preservation, or other efforts that purport to help the climate. But studies and investigative stories have repeatedly found that the benefits of these efforts can be wildly inflated.

A growing number of carbon market experts and corporate climate advisors now want companies to fundamentally rethink their climate strategies and aim higher than basic net-zero plans.

The truth is it’s incredibly difficult for most companies to completely cut their own emissions today. Climate pollution is intrinsic to their operations, whether through transportation, manufacturing, or running data centers. 

But the very nature of net-zero plans drives companies toward solutions that look quantifiable on paper. By embracing cheap offsets and other dubious tools, they can tally up a somewhat credible-seeming ton-for-ton decarbonization plan.

It’s time to stop that. (Even HBO’s John Oliver has taken to ridiculing offsets on his show.) Going forward, the purchase of such credits should at best be thought of as an act of climate philanthropy, but not as a realistic method for scratching off tons of emissions from corporate carbon ledgers.

Actually cutting operational emissions will mean investing heavily in research and development; supporting, testing, and scaling emerging solutions; and pushing for aggressive policies that will pressure suppliers and other business partners to strive for similar changes. 

These things may not earn credit within the confines of a net-zero plan anytime soon. But corporations need to achieve their long-term targets without questionable carbon accounting schemes.

The good news is that more and more companies and standards bodies are coming to recognize many of the flaws in current corporate climate plans and altering their practices or guidelines.

Here are six ways that companies can take real steps to tackle their pollution and help get industries on track to make much faster progress in the coming years.

Slash direct emissions

To be clear, net zero is a good goal for businesses pursuing it in good faith. Companies that have committed to achieving emissions targets approved by the Science Based Targets initiative’s Corporate Net-Zero Standard, which is considered a relatively rigorous set of guidelines, collectively cut emissions 29% between 2015 and 2020, the organization said in its 2021 progress report. Thousands of companies are working on such plans with the organization, which is a partnership between the United Nations Global Compact, the World Resources Institute, and other organizations.

The key is to focus on ways in which the companies can reduce emissions directly, even when that requires big changes in the way they do business. Depending on the sector, it may mean switching to an electric vehicle fleet, upgrading plants, switching to lower-emission fuels, or reinventing the core product.

But the process can quickly hit limits because it’s incredibly difficult for most companies in most industries to fully eliminate emissions today, says Dan Stein, chief economist at IDinsight and director of Giving Green, which evaluates the reliability of carbon removal and offset efforts and advises companies on climate programs. 

The electricity sector that powers offices, factories, data centers, and increasingly EVs hasn’t come close to eliminating fossil fuels. The aviation and shipping industries have yet to figure out how to slash emissions. 

Methods for cleaning up major industrial sectors, including those that produce building materials, chemicals, and clothes, are in the prototype phase. And we don’t know how to produce food for billions of people without relying heavily on fertilizers that pump out emissions during production, transportation, and use.

Cleaning up all these sectors will require huge investments, both in R&D and in capital expenditures. It’s far faster and cheaper to “just buy bargain-basement offsets from some broker, which probably don’t have any impact,” Stein says. “What you get is just a pretty hollow commitment.”

Avoid offsets

Studies and investigative articles have repeatedly cast a skeptical eye on cheap, nature-based offset programs.

The programs have paid for forest preservation that was likely to have occurred anyway. Companies have figured out ways to game the programs in ways that inflate the climate benefits. Accrediting agencies are rushing ahead to approve new ways of generating credits before the science is settled on what really works and how much additional carbon they take up and store away.

shadows of trees on factory fence
MS TECH | ANDREY RUDAKOV/BLOOMBERG VIA GETTY

Climate change itself is further undermining the dependability of carbon offsets, creating drier soils that give up carbon more freely, warmer ocean waters that can wipe out carbon-absorbing kelp forests, and hotter conditions that increase wildfire risks. When trees burn down or otherwise die, much of the carbon simply goes back into the air, potentially wiping out years of climate progress in days.

The second major issue with offsets is telegraphed right there in the name: at their very best, they merely make up for the fact that the purchaser is not actually cleaning up its emissions.

Offsets often sidestep the essential problem, particularly for heavy industrial sectors that still have to fundamentally reinvent the way they do business, says Danny Cullenward, policy director at CarbonPlan, which evaluates the scientific integrity of carbon removal and advises organizations on climate programs.

What’s more, the heavy use of offsets can grant companies unfair advantages over businesses that are paying the higher costs to address corporate pollution directly, as Michael LeMonds, vice president of government affairs for the cement and concrete company Holcim, warned during a June meeting of the US Commodity Futures Trading Commission. That can undermine the incentive to make such investments, particularly in a highly competitive, commodity business like building materials.

“Unverified [carbon] credits and deceptive market practices only hinder our efforts to decarbonize,” he said. 

For all these reasons, a growing number of observers argue that companies should stop pretending that buying a carbon offset negates the warming effect of pumping a ton of carbon dioxide into the atmosphere, where it can last for hundreds to thousands of years.

The Science Based Targets initiative’s Corporate Net-Zero Standard states plainly: “Carbon credits do not count as reductions toward meeting your science-based targets. Companies should only account for reductions that occur within their operations and value chain.”

Similarly, in a recent post, Giving Green argued that businesses should “view buying offsets as philanthropic contributions to pro-climate projects rather than as vehicles to neutralize emissions.”

Invest in permanent carbon removal 

In the longer term, even as companies strive to cut their emissions, investments in future technologies will also be critical to achieving sustainable corporate policies and climate goals.

There’s a major drive underway to build up an industry that can suck down billions of tons of carbon dioxide per year in the coming decades. It’s being propelled by the growing body of science finding that this is what may be needed to prevent the planet from soaring past 2 ˚C or pull it back from beyond that threshold. It may also be required to balance out the emissions sources we still haven’t figured out ways of affordably addressing by around the middle of the century.

There are a variety of potential ways to do this, including building direct-air-capture machines, deploying reactive minerals that can tie up the carbon dioxide, and converting plants into bio-oil and then injecting it deep underground.

The general promise is that these approaches can suck down and store away carbon dioxide in reliable ways and for a very long time (although some of these ideas are in their infancy, and not yet proven).

This sort of long-term carbon removal can cost hundreds to thousands of dollars per ton, compared with as little as $10 for tree planting. But requiring companies to recognize the true cost of permanent carbon removal has an important added bonus: it underscores the point that cutting emissions directly is often the cheaper way for a corporation to clean up its business, especially considering you only have to fix the problem once.

At the same time, there’s a slippery-slope risk for carbon removal as well. It’s best to think of it as an essential tool to help us fix the really difficult, really expensive last parts of the problem. But it can’t cover up for an economy still running at the most fundamental level on fossil fuels. And thus, we can’t afford to allow the pursuit of carbon removal tools to distract from the essential task of overhauling our industries.

Fund research and development

There are all sorts of areas where the world has yet to figure out how to effectively, affordably, and rapidly slash emissions, including aviation, maritime shipping, fertilizer, cattle farming, steel, and cement. 

So companies looking to accelerate their path to zero emissions and maximize their impact on climate change should also fund the early-stage research, development, and scale-up efforts needed, whether through their own R&D departments, external research grants, or investments in startups. 

Some companies are doing this in various ways. In 2020, for example, Amazon set up the $2 billion Climate Pledge Fund to develop technologies and services that can help it and other companies achieve climate goals. It’s invested in companies like Infinium, which is developing renewable electrofuels to clean up aviation; Beta Technologies, a maker of electric vertical take-off and landing aircraft; and CMC Machinery, which produces boxes customized for specific  products, reducing waste and the need for plastic air pillows.

Each of these investments could potentially help Amazon reduce its materials and emissions as it moves massive amounts of products around the world. 

Microsoft operates a similar venture effort through its $1 billion Climate Innovation Fund.

Move beyond renewable-energy credits 

One of the biggest emissions sources for most companies is electricity. But businesses generally don’t clean up their power consumption by directly sourcing carbon-free electricity, since most have limited sway over the mix of sources on their local grid.

As a workaround, many simply purchase renewable-energy credits that provide additional revenue to wind, solar, geothermal, or other clean energy projects. The basic idea is that the added support helps projects get built, so carbon-free electricity is generated that wouldn’t have been otherwise. Thus, the credits can be counted against the share of a company’s overall power consumption that isn’t clean.

a single wind turbine spins next to exhaust from a coal-fired industrial plant
MS TECH | CARSTEN KOALL/GETTY IMAGES

But while these credits may be beneficial in various ways, notably signaling to utilities that there’s growing demand for clean electricity, it’s becoming harder to claim that they’re effectively cleaning up the power consumption of a company that isn’t actually drawing electricity from the plants in question. Such projects often aren’t even operating on the same grids, or capable of producing electricity across all the hours the companies are consuming it.

The argument that renewable projects wouldn’t have happened without the added revenue from renewable-energy credits is less and less convincing in a world where solar and wind farms have become low-cost, competitive electricity sources, says Emily Grubert, a civil engineer and associate professor at Notre Dame who focuses on decarbonization in the power sector. If the purchase of a credit didn’t alter reality in a way that reduced carbon emissions, it can’t realistically cancel out a company’s dirty power consumption elsewhere, she says. 

Plus, the really critical part of cleaning up the power sector is not simply adding renewables, but eliminating the pollution from fossil-fuel plants, Grubert adds.

Some companies, including Google, are going considerably further.

In 2020, it committed to achieving a goal of “24/7 carbon-free energy” by 2030, which means “matching each hour of our electricity consumption with carbon-free electricity sources on every grid where we operate.”

The company has been signing some deals that directly supply carbon-free electricity to its data centers, and others that specifically support new development, energy storage projects like battery plants, and portfolios of renewable-energy operations that peak and ebb at different points in the day. Google is also supporting emerging technologies that can provide carbon-free power around the clock, not just when the wind is blowing and the sun is shining. Among other measures, it struck an agreement with enhanced geothermal power company Fervo to power its facilities in Nevada. Much of this promises to help reduce demand for dirty power sources.

Finally, Google says, it’s directly advocating for policies to accelerate the decarbonization of the power sector, and working to build company coalitions pushing for that goal.

Push for policy

It may be idealistic to argue that corporations should lobby for climate policies that would force them to undertake expensive changes. Companies traditionally advocate for rules that directly benefit their bottom line, and support politicians that protect their corporate interests. 

But I’m going to assert we’re in a new era and that corporations need to champion strict climate rules, back legislators advancing such policies, and push trade groups to support them as well.

Robust government policies can bring about systemic change across industries far faster than any voluntary carbon pledges, says Lucia Simonelli, senior climate researcher for Giving Green. And taking a progressive stance on climate policies can actually work in a company’s self-interest.

The long history of environmental regulations demonstrates again and again that it’s the more technologically advanced and innovative companies that quickly adapt and flourish. A common set of policies ensures that companies will be competing on a level playing field in an era of climate disruption, reducing the competitive risks for those that take real steps to drive down emissions. 

Plus, the more we collectively do to drive climate action today, the more productive and prosperous economies, businesses, and communities will all be in the future.

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