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What actions are needed today to create the climate future we want for tomorrow? What actions are already underway, and how do initiatives like the First Movers Coalition help to realize that future?

These are questions we set to answer in hosting our virtual event, “Collaborate, Mitigate, Accelerate: Driving Climate Action through Carbon Management,” where we featured a three-part interview series with Kim Stanley Robinson, author of The Ministry for the Future; Nancy Gillis, Programme Head of the First Movers Coalition at the World Economic Forum; and Jonathan Goldberg, CEO of Carbon Direct. Our conversations ranged from how to apply “near-future science fiction” as a theoretical lens to drive climate action, to cross-sectoral partnerships to stimulate demand generation for carbon management, to the state of the carbon markets and the regulation needed to ensure quality standards.

WATCH THE RECORDING HERE

Bringing the Future to the Present

In the words of Kim Stanley Robinson, the time for dithering is over. Climate action has been spurred by both the very real, lived experience of climate change coupled with the pandemic. It has become clear in this time that carbon reduction will not suffice to meet our global climate goals outlined by the Paris Agreement. To limit global warming to just 1.5C above pre-industrial levels, we need to additionally account for both residual emissions (from hard-to-abate sectors like steel, cement, and aviation, to name a few) and historic emissions (dating back to the industrial era). 

“We are still going to have too much CO2 in the atmosphere even as we flatten out our carbon burn, so CO2 drawdown is simply going to become a necessary industry,” said Kim Stanley Robinson in his session. Robinson added that we have the technologies available to us now, and that it is the question of how those technologies will be scaled and implemented equitably through the global economy that remains. Capital must fund green labor, Robinson asserted, and that labor must be equitable in the consideration of job creation and mitigation of climate risk. 

First Movers Coalition: Accelerating the Demand for Climate Solutions

Nancy Gillis of the World Economic Forum reiterated Stanley’s points in her reflection on the First Movers Coalition theory of change. “What we’re trying to do is make these technologies commercially available by reducing a price premium,” said Gillis. “And one way to do so is to show that there is a market for them, and that is what the FMC is trying to do: leverage the purchasing power of companies as a demand function.”

This is particularly critical for carbon removal as one of the sectors added to the charter of the First Movers Coalition during the World Economic Forum at Davos in May 2022, a sector of which Carbon Direct is an Implementation Partner. Gillis cited the most recent IPCC report that states that carbon removal is critical to account for the gap between the emissions that can be reduced and the residual and historic emissions that remain, which “makes carbon removal a true, necessary part in mitigating climate change.” 

“If we don’t have these technologies by 2030,” Gillis reinforced, “we’re not going to have a prayer to get to these net-zero goals that we all talk about at the COPs by 2050.” 

State of the Carbon Market: Report from the Vanguard of High-Quality Carbon Management

But not all carbon removal is alike, as Jonathan Goldberg, CEO of Carbon Direct, outlined in his session “The State of the Carbon Market.” To drive effective action that actually contributes to these goals, you have to start with the science – and that begins with effective carbon accounting across each vertical, particularly within the hard-to-abate sectors outlined by the First Movers Coalition. 

“If you don’t bring technical expertise to the fore, you’re going to end up scaling the wrong solution – and wrong solutions don’t deliver the right climate benefits,” said Goldberg. 

Quality and the standardization of that quality by regulatory bodies is imperative in the functional scaling of the carbon management industry. That is why Carbon Direct has partnered with Microsoft to develop the Criteria for High-Quality Carbon Dioxide Removal: to improve the quality of carbon removal projects and provide buyers with guidance on how to select quality carbon removal projects. And while corporations are primarily making their climate pledges and pursuing climate management strategies in a voluntary capacity, this may change over time with governmental actions like the proposed SEC ruling on climate risk disclosure, which would mandate those activities. And this all must be supported, asserted Goldberg, by a robust scientific framework. 

Robinson concluded the event with a synthesis of the three sessions, reinforcing the necessity of carbon drawdown and the importance of both public-private cooperation and financing to realize carbon drawdown at the scale needed. He shared his excitement in the development of this new “lifesaver” industry that has accelerated over the past two years with organizations like Carbon Direct.

“Carbon Direct is in the right spot,” Robinson said. “It’s filling in the gaps with an effort to organize the very necessary work of carbon drawdown in all of its forms. I’m glad to know that the natural and mechanical means are on the docket for this new company, and my congratulations to all concerned.”

WATCH THE RECORDING HERE

To learn more about Carbon Direct’s work with the First Movers Coalition as an Implementation Partner and how to work with us, contact us at [email protected]

Acknowledgements

Written by ELISSE ROCHE, HEAD OF MARKETING

Announced today, Wednesday, May 25, 2022 at the World Economic Forum at Davos, Carbon Direct is joining the First Movers Coalition as an Implementation Partner to create and deliver high-quality, durable carbon removal by bringing together buyers and suppliers and building trust in the industry. We recognize that carbon removal is an essential part of meeting climate goals and will be working together with the First Movers Coalition to scale this technology.

The First Movers Coalition was launched in November 2021 by the World Economic Forum with U.S. Special Presidential Envoy for Climate Change John Kerry with the goal of creating supplies of clean products and services through corporate commitments. As a global initiative, the Coalition leverages the collective purchasing power from companies to send a clear demand signal to scale technologies that are essential for the net-zero transition, like direct air capture and biomass carbon removal and storage. With now over 50 corporate partners in the coalition, the Coalition has announced at Davos a new program to scale commercialization of carbon removal services, as well as near-zero emissions aluminum production.

We are joining the First Movers Coalition as an Implementation Partner for the Carbon Removal Sector. As a carbon management firm that is working to transform the global economy with science-backed advisory and software services, Carbon Direct leverages deep industry knowledge and technical expertise to inform the goals of the First Movers Coalition members. This will include: evaluating carbon removal supply development against their Criteria for High-Quality Carbon Dioxide Removal, developed in partnership with Microsoft; recruiting corporate members to the Coalition; helping secure and purchase durable CO2 removal supply; and consulting with Coalition partner companies to fulfill their climate pledges across hard-to-abate sectors, such as cement, aviation, shipping, and steel. 

“Carbon Direct is thrilled to work with the First Movers Coalition as an Implementation Partner of the Carbon Removal Sector,” says Jonathan Goldberg, CEO of Carbon Direct. “We will be working closely with partners like Microsoft to advance the science of carbon removal, support the development of high-quality supply, and ensure that that supply is reaching corporate buyers. This is a fundamental step towards taking action to realize the net-zero transition.”

LEARN MORE ABOUT CARBON DIRECT JOINING THE FIRST MOVERS COALITION HERE

In 2021, Carbon Direct and Microsoft released our joint Criteria for High-Quality Carbon Dioxide Removal. Our initial goal was to provide carbon removal project developers with expert guidance to improve the quality of their projects and their resulting removal credits. The impact and success of that document has far exceeded our expectations. It has led to numerous project developers across a range of carbon removal solutions reaching out for further guidance as to how to implement the Criteria. It has also led to corporate buyers of removals wanting to learn more about how they can utilize the Criteria to ensure the highest level of quality in their carbon credit portfolios.

In developing these Criteria, our intent was for them to be part of a living document, to be updated as the science progresses and as the carbon removal market evolves. And the carbon dioxide removal landscape is indeed evolving very rapidly – partly spurred by the recent scientific consensus in the 2022 IPCC 6th Assessment Report that asserts that carbon removals are “essential” to achieving global climate targets. 

As such, it is more important than ever that we continue to support the identification and standardization of high-quality criteria for carbon removal – which is why we are excited to release our first Criteria update. This update reflects the latest developments in carbon removal science as well as the new types of projects (like blue carbon) that are demonstrating significant potential for climate impact as part of our clients’ portfolios.

READ THE 2022 CRITERIA FOR HIGH-QUALITY CARBON DIOXIDE REMOVAL HERE

“The Criteria for High-Quality Removal provided valuable guidance to project developers that wanted to take part in Microsoft’s procurement efforts or any other corporate purchase,” said Rafael Broze, Carbon Removal Program Manager at Microsoft. “We’re pleased to have Carbon Direct continue to refine those criteria in an effort to strengthen common standards for both developers of projects to follow as well as educate buyers how to identify high-quality projects.”

“Microsoft and Carbon Direct have collaborated on the Criteria for High-Quality Carbon Dioxide Removal for two years now and we greatly value their leadership in maturing this market,” said Jonathan Goldberg, CEO of Carbon Direct. “The carbon removal market needs further standardization and stronger frameworks to take its next step forward and provide assurances to the next wave of buyers that come into this market. This document is a stepping stone to that end goal.”

The most substantial updates to the Criteria this year include: 

  • Mangrove Reforestation: Mangrove restoration is gaining traction globally as a carbon removal approach due in part to the co-benefits healthy mangrove ecosystems provide, including helping stabilize coastlines, shelter coastal communities from flooding, and providing nursery habitat for fish. We’ve added criteria specific to high-quality mangrove restoration projects to help inform buyers and project developers interested in this area.
  • Harms & Benefits: We’ve retitled the “Do no harm and pursue co-benefits” section as “Harms and Benefits.” This update was intended to ensure language matches reality. ‘Do no harm’ is an unrealistic bar if taken literally. All projects have consequences, both good and bad, beyond their quantified greenhouse gas impacts. This section acknowledges the complexity of the CO2 removal space, encourages the development of projects with environmental and community benefits, and requires vigorous accounting and remedy of potential project harms.
  • Environmental Justice: We’ve sharpened and streamlined our Environmental Justice criteria to include more vertical specific guidance to further clarify what is expected of project developers.

This Criteria update marks the first of many. Moving forward, Carbon Direct will refresh the Criteria as the carbon removal space matures, keeping pace with the rapidly evolving science and market.  We will add new sections as nascent CDR solutions emerge and become more prominent in the market. We will also continually sharpen our guidance on elements of project quality that have proven challenging for project developers, such as how to establish credible Environmental Justice and Climate Justice plans.

Looking ahead, our focus has expanded to include supporting and guiding candidate suppliers not only for Microsoft’s latest procurement cycle, but also for the carbon market more broadly. This is with the recognition that with the integration of this Criteria, carbon markets will be able to facilitate the deployment of high-quality carbon removal at the scale needed to meet our climate goals.

Acknowledgements

Written by JAMES BURBRIDGE, CLIENT PROJECT MANAGER

It has been a landmark year for carbon management. High-quality carbon reduction, utilization, and removal is more important than ever – particularly with respect to removals. In their latest Climate Change Mitigation report, the IPCC describes carbon removal as “essential” to meeting our climate goals. Meanwhile, U.S. federal support for carbon management has increased alongside corporate climate commitments. Yet there is still significant work to do. The IPCC estimates that 10 Gt of carbon removal is required annually by 2050 – today, we are at just 0.003 Gt. In considering these goalposts, it is important to standardize the monitoring of available supply and demand in carbon markets through databases like the U.C. Berkeley’s Voluntary Registry Offsets Database (VROD).

The VROD aggregates carbon management projects from the four largest voluntary offset project registries: American Carbon Registry (ACR), Climate Action Reserve (CAR), Gold Standard (GS), and Verra (VCS). Together, they total over 1.5bn tons issued across 5,000+ projects. In our inaugural 2021 Commentary on the Release of the Voluntary Registry Offsets Database, we underscored the importance of quality criteria, the need for carbon removal development, and the challenges of accurate tracking so as to avoid over-crediting. These challenges have only worsened over time with new mechanisms like blockchain-enabled retirements. 

Over the past year, substantive changes to the voluntary carbon market prompted new questions about the offset market and its ability to deliver carbon reductions and removals. In assessing the new data, we find that:

  • Removals are too scarce on the four largest voluntary market registries where very few credits are removals and none are durable.
  • The Voluntary Carbon Market (VCM) has a quality problem with the continued proliferation of risky project types. 
  • The average age of retired offsets is increasing as buyers purchase older credits.
    Issuances continue to outpace retirements, indicating that supply has grown faster than demand.
  • Blockchain-based applications are increasing low-quality risk as they drive the retirements of older, low-quality offsets in the market.

In this blog post, we provide an overview of offsets and the voluntary carbon market and a summary of each of these findings regarding the state of the voluntary carbon market in 2022. For more substantive information on the findings, see our full report on the 2022 Release of the Voluntary Registry Offsets Database.

An Overview of Offsets and the Voluntary Carbon Market

There are two overlapping carbon markets: voluntary, where individuals and entities can purchase carbon offsets by choice in support of their climate commitments; and compliance, with credits that can be used by entities that are required by national governments or regulatory bodies to account for their carbon emissions. We focus here on the voluntary carbon market.

Offsets – defined by the UN Race to Zero as “credits that reduce GHG emissions or increase GHG removals in order to compensate for GHG emissions” – are the common currency in the voluntary carbon market. Corporations or individuals most commonly use carbon credits to “offset” or “cancel out” emissions from their operations. By buying and retiring an offset ton, an offset purchaser seeks to undo the impact of a ton emitted or planned. The purpose of offsets is to avoid, reduce, or remove GHG emissions.[1]The term offset can be confusing and misleading. Carbon Direct believes market participants should be clear about the service provided – avoided, reduced, or removed emissions. Unfortunately, these goals are not commonly met by projects in today’s voluntary carbon market.

No true regulations exist on the voluntary carbon market. In most cases, retiring parties can purchase offset tons and account for the carbon offset without oversight. Responsibility for the quality of those offsets often come from public scrutiny[2]The Real Trees Delivering Fake Corporate Climate Progress, How to Avoid Buying Dodgy Carbon Offsets. Carbon Offsets Have an Integrity Problem. COP26 May Help Fix It or internal bars set on quality, such as by companies such as Microsoft or Shopify.[3]Microsoft process, Shopify process A lack of oversight in this area is why we partnered with Microsoft to develop the Criteria for High-Quality Carbon Removal and provide a broadly applicable set of benchmarks to encourage market standardization moving forwards. While new developments like new, standardized offset programs and the proposed SEC draft ruling may drive transparency, at this point in time they have not significantly improved carbon markets.

A Note on the SEC Ruling
On March 21st, the U.S. Securities and Exchange Commission (SEC) approved a proposed rule[4]U.S. Securities and Exchange Commission (2022), Factsheet: Enhancement and Standardization of Climate-Related Disclosures. https://www.sec.gov/files/33-11042-fact-sheet.pdf that would require all registrants, including foreign-based firms, to disclose in their annual financial statements the climate-related risks that:

  1. Have had or will have a material impact on its business in the short-, medium-, or long-term,
  2. That have or are likely to result from the registrant’s strategy, business model, and outlook,
  3. The registrant’s processes for identifying, assessing, and managing these climate-related risks, and 
  4. The registrant’s climate-related risk management strategy.

The passage of this proposal is historic. If it is adopted, it will be the first time the SEC is requiring its registrants to report on the climate risks associated with their business operations and management. 

For more on recent U.S. policy and carbon management, see our blog “U.S. Federal Support Increases for Carbon Removal.”

As carbon markets continue to mature, it is increasingly important to assess the types of carbon credits entering and retiring from the registries to determine whether the market is performing as it should. Berkeley’s Voluntary Registry Offsets Database (VROD) offers a robust database from which to draw insight.

Very Few Credits Are Carbon Removals – None Are Durable Removals

Pure removal projects made up only 3% of all projects issuing credits over 2021 and 2022 YTD, while projects that tend to include a mix of removals and reductions represented 13%. No credits were issued in 2021 for durable removals, the only type of offset that can effectively cancel the impacts of carbon dioxide released into the atmosphere in a functional reversal of emitting carbon dioxide. Carbon storage options with high risk of reversal, while important in the short term, must operate as a bridge to longer-term storage options even if high in quality. Overall, the carbon offset market would benefit from the addition of more options with low-risk, durable storage.

Figure 1: 2021 and Q1 2022 carbon offsetting project types, number of projects[5] Removals include only Afforestation/ Reforestation projects. Mixed includes Improved forest management, Wetland restoration, sustainable agriculture, compost addition to rangeland, REDD+, … Continue reading

The Voluntary Carbon Market has a Quality Problem

Our most recent analysis of the VROD shows that the most prevalent project types in both issuances and retirements are renewable energy (RE) and Reducing Emissions from Deforestation and (forest) Degradation (REDD+), which bear a range of risks related to offset quality.

Figure 2: Issuances and retirements, by project type (Mt)

In 2021, avoided deforestation (also listed as REDD+) and grid-scale RE, accounted for the majority of both issuances (77%) and retirements (79%). Many RE credits are non-additional – in other words, many of these projects may have or would have happened even without the help of finance from carbon offset sales[6]Cames, M., Harthan, R. O., Füssler, J., Lazarus, M., Lee, C. M., Erickson, P., & Spalding-Fecher, R. (2016). How additional is the Clean Development Mechanism? … Continue reading. As renewable power generation becomes more and more cost competitive with coal and gas, this risk will increase[7]Reback, S., 2019. Solar, Wind Provide Cheapest Power for Two-Thirds of Globe. Bloomberg.. Meanwhile, the effects of REDD+ projects can be difficult to assess due to uncertainty in project baselines and potential leakage, which may lead to risks of overcrediting; REDD+ projects also risk causing negative impacts on local communities[8]Berk, N., & Lungungu, P. (2020). REDD-Minus: The Rhetoric and Reality of the Mai Ndombe REDD+ Programme. APEM & Rainforest Foundation UK. … Continue reading. These challenges mean that many renewable energy and REDD+ projects do not deliver real abatement or deliver less abatement than credited in terms of avoided, reduced, or removed emissions.

Our findings here on quality risks with the most prevalent project types on today’s market echo findings of other efforts to track quality issues in carbon offset markets. Studies have found very high rates of over-crediting by all major offset programs that have developed offset protocols  with credits available on the VCM, including the UN’s Clean Development Mechanism[9]Cames, M., Harthan, R. O., Füssler, J., Lazarus, M., Lee, C. M., Erickson, P., & Spalding-Fecher, R. (2016). How additional is the Clean Development Mechanism? … Continue reading, California’s offset program[10]Badgley, G., Freeman, J., Hamman, J. J., Haya, B., Trugman, A. T., Anderegg, W. R. L., & Cullenward, D. (2021). Systematic over‐crediting in California’s forest carbon offsets program. Global … Continue reading, and a range of project types developed by the voluntary market registries, including soil carbon, improved cookstoves, and improved forest management[11]Zelikova, J., Chay, F.,  Freeman, J., & Cullenward, D. (2021). A buyer’s guide to soil carbon offsets.  CarbonPlan. https://carbonplan.org/research/soil-protocols-explainer; Bailis, R., … Continue reading.

The Average Age of Retired Offsets is Increasing

Figure 3: Average years from vintage to retirement by registry

The average vintage age rose to 6.1 yrs in 2021 compared to 4.7 yrs in 2019 and 5.3 years in 2020. Retirement of older credits, including avoided deforestation projects older than ten years and renewable energy projects as old as fifteen years, drove this trend. Older projects often come from less mature protocols, can have weaker additionality claims given offset financing did not arrive until years later, and drive less immediate climate impact than new offset projects. 

Offset Issuances Outpace Retirements

Figure 4: Issuances vs. retirements, Mt/ year

In 2021 suppliers issued nearly 300 Mt of carbon offsets, while retirers retired 161 M. This signal indicates that supply is growing faster than demand. This is complicated somewhat by non-retirement purchasing. Some buyers purchase credits for future use or reselling rather than for immediate retirement; as of April 2022, about half of 2020 purchases on the VCS remained unretired. Though not indicative of any quality issues on carbon offsets, it is important to note that retirement volumes are not the only demand signal to pay attention to.

Blockchain-based Applications are Increasing Quality Risk

Figure 7: Retirements by source and project type in Q4 2021/Q1 2022 on Verra

This new retirement type has driven significant retirement volume (representing ~40% of all retirements in Q4 of 2021). As some recent articles have noted, Blockchain’s retirement of old credits has not improved market quality[12]Crypto bubble: The hype machine behind a $70,000 carbon credit; The Biggest Crypto Effort to End Useless Carbon Offsets Is Backfiring;Zombies on the blockchain. For example, blockchain retirements in Toucan have largely featured older credits (mean retirement vintage of 2012) and composed primarily of renewable energy and forestry (~78%). In some instances, blockchain has enabled mass retirements of industrial manufacturing credits (such as large retirements from defunct version of the HFC-23 protocol which has been found to generate perverse incentives)[13]Cames, M., Harthan, R. O., Füssler, J., Lazarus, M., Lee, C. M., Erickson, P., & Spalding-Fecher, R. (2016). How additional is the Clean Development Mechanism? … Continue reading.

The overall message is clear: the voluntary carbon market largely consists of projects of questionable quality with few removal options available. That trend has not yet reversed, but rather are made worse through blockchain programs as they currently exist.

What the State of the Voluntary Carbon Market Means for Climate Impact

Overall, these trends represent cause for concern as the offset market develops and matures. If the carbon offset credits lose widespread trust due to quality concerns, carbon markets cannot fulfill their key function: to drive capital to credible carbon reduction or carbon removal efforts. An offset market based on poor quality credits will erode the VCM’s long-term ability to turn voluntary purchasing into an engine for effective carbon management. In 2022 and across the next decade, actors on the voluntary carbon market must take actions to develop, issue, and retire high-quality carbon offsets and reverse the quality issues we see in the market today. 

Instead, actors in the voluntary carbon market must work together to create a robust carbon market. We see the following actions as key to supporting a robust voluntary carbon market: 

  • Suppliers and developers of avoided, reduced, and removed greenhouse-gases need to diversify their offerings and create high quality, trusted projects. 
  • Similarly, purchasers of offset credits must seek and procure categories of carbon abatement  with fewer documented carbon accounting issues while diligently vetting for quality. 
  • Blockchain could still evolve to provide many market benefits, including transparency and access. That said, pioneers in blockchain retirements must act to improve credit quality, especially in commingled pools, to reap these benefits.

As 2030 and 2050 approach, we must adapt protocols and registries on the VCM to provide a platform that grows removal categories. Furthermore, credit retirers must seek to retire removals with greater long-term durability and quality. They should also retire younger projects (e.g., <5 years vintage) to increase additionality and overall quality carbon offsetting projects. 

At Carbon Direct, our mission is to help drive quality in carbon markets. As we continue to monitor the voluntary carbon market, we welcome the opportunity to serve the many participants and stakeholders seeking to realize climate benefits through carbon management.

Acknowledgements

Written by AUSTIN HONG, CLIENT PROJECT MANAGER. WITH INPUT FROM THE CARBON DIRECT SCIENCE TEAM.

References

References
1 The term offset can be confusing and misleading. Carbon Direct believes market participants should be clear about the service provided – avoided, reduced, or removed emissions.
2 The Real Trees Delivering Fake Corporate Climate Progress, How to Avoid Buying Dodgy Carbon Offsets. Carbon Offsets Have an Integrity Problem. COP26 May Help Fix It
3 Microsoft process, Shopify process
4 U.S. Securities and Exchange Commission (2022), Factsheet: Enhancement and Standardization of Climate-Related Disclosures. https://www.sec.gov/files/33-11042-fact-sheet.pdf
5  Removals include only Afforestation/ Reforestation projects. Mixed includes Improved forest management, Wetland restoration, sustainable agriculture, compost addition to rangeland, REDD+, sustainable grassland management. Avoided/ reduced covers all else. Avoidance/reduction projects with higher-risk storage included avoided forest and grassland conversions.
6 Cames, M., Harthan, R. O., Füssler, J., Lazarus, M., Lee, C. M., Erickson, P., & Spalding-Fecher, R. (2016). How additional is the Clean Development Mechanism? https://ec.europa.eu/clima/system/files/2017-04/clean_dev_mechanism_en.pdf

Fearnside, P. M. (2013). Credit for climate mitigation by Amazonian dams: Loopholes and impacts illustrated by Brazil’s Jirau Hydroelectric Project. Carbon Management, 4(6), 681–696. https://doi.org/10.4155/cmt.13.57

Haya, B. (2010). Carbon Offsetting: An Efficient Way to Reduce Emissions or to Avoid Reducing Emissions? An Investigation and Analysis of Offsetting Design and Practice in India and China [(Doctoral dissertation) Energy & Resources Group, University of California]. https://escholarship.org/content/qt7jk7v95t/qt7jk7v95t.pdf

Haya, B., & Parekh, P. (2011). Hydropower in the CDM: Examining Additionality and Criteria for Sustainability (Energy and Resources Group Working Paper, ER-11-001). University of California, Berkeley.

He, G., & Morse, R. (2014). Addressing Carbon Offsetters’ Paradox: Lessons from Chinese Wind CDM. Energy Policy, 63, 1051–1055. https://doi.org/10.1016/j.enpol.2013.09.021

7 Reback, S., 2019. Solar, Wind Provide Cheapest Power for Two-Thirds of Globe. Bloomberg.
8 Berk, N., & Lungungu, P. (2020). REDD-Minus: The Rhetoric and Reality of the Mai Ndombe REDD+ Programme. APEM & Rainforest Foundation UK. https://www.rainforestfoundationuk.org/media.ashx/redd-minus.pdf;

Devine, J. (2014). Counterinsurgency Ecotourism in Guatemala’s Maya Biosphere Reserve. Environment and Planning D: Society and Space, 32(6), 984–1001. https://doi.org/10.1068/d13043p;

Mertz, O., Grogan, K., Pflugmacher, D., Lestrelin, G., Castella, J.-C., Vongvisouk, T., Hett, C., Fensholt, R., Sun, Z., Berry, N., & Müller, D. (2018). Uncertainty in establishing forest reference levels and predicting future forest-based carbon stocks for REDD+. Journal of Land Use Science, 13(1–2), 1–15. https://doi.org/10.1080/1747423X.2017.1410242;

Milne, S., Mahanty, S., To, P., Dressler, W., Kanowski, P., & Thavat, M. (2019). Learning From “Actually Existing” REDD+: A Synthesis of Ethnographic Findings. Conservation and Society, 17(1), 84. https://doi.org/10.4103/cs.cs_18_13;

West, T. A. P., Börner, J., Sills, E. O., & Kontoleon, A. (2020). Overstated carbon emission reductions from voluntary REDD+ projects in the Brazilian Amazon. Proceedings of the National Academy of Sciences, 117(39), 24188.https://doi.org/10.1073/pnas.2004334117;

9 Cames, M., Harthan, R. O., Füssler, J., Lazarus, M., Lee, C. M., Erickson, P., & Spalding-Fecher, R. (2016). How additional is the Clean Development Mechanism? https://ec.europa.eu/clima/system/files/2017-04/clean_dev_mechanism_en.pdf
10 Badgley, G., Freeman, J., Hamman, J. J., Haya, B., Trugman, A. T., Anderegg, W. R. L., & Cullenward, D. (2021). Systematic over‐crediting in California’s forest carbon offsets program. Global Change Biology, gcb.15943. https://doi.org/10.1111/gcb.15943;

Haya, B. (2019). The California Air Resources Board’s U.S. Forest offset protocol underestimates leakage. University of California, Berkeley. https://gspp.berkeley.edu/assets/uploads/research/pdf/Policy_Brief-US_Forest_Projects-Leakage-Haya_4.pdf

11 Zelikova, J., Chay, F.,  Freeman, J., & Cullenward, D. (2021). A buyer’s guide to soil carbon offsets.  CarbonPlan. https://carbonplan.org/research/soil-protocols-explainer;

Bailis, R., Wang, Y., Drigo, R., Ghilardi, A. & Masera, O. (2017). Getting the numbers right: Revisiting woodfuel sustainability in the developing world. Environmental Research Letters, 12(11). https://doi.org/10.1088/1748-9326/aa83ed;

Van Kooten, G. C., Bogle, T. N., & de Vries, F. P. (2014). Forest Carbon Offsets Revisited: Shedding Light on Darkwoods. Forest Science, 61(6), 370–380. https://doi.org/10.5849/forsci.13-183

12 Crypto bubble: The hype machine behind a $70,000 carbon credit; The Biggest Crypto Effort to End Useless Carbon Offsets Is Backfiring;Zombies on the blockchain
13 Cames, M., Harthan, R. O., Füssler, J., Lazarus, M., Lee, C. M., Erickson, P., & Spalding-Fecher, R. (2016). How additional is the Clean Development Mechanism? https://ec.europa.eu/clima/system/files/2017-04/clean_dev_mechanism_en.pdf

The IPCC outlines how impacts of climate change are already upon us, affecting billions of people around the world and threatening to cause major disruptions to economic, social, and environmental systems. Despite real signs of progress in the clean energy transition, collective global efforts to date are frankly inadequate to avoid the worst impacts from climate change and reverse an increase in carbon emissions. Global society stands at a crossroads and must ratchet up its ambition to tackle climate change and usher in a more clean, prosperous, and secure future for all. Rapid and deep reductions in global emissions are a first-order priority, but must now be augmented by a concerted effort to scale up to remove large quantities of carbon dioxide from the air and to rapidly and profoundly decarbonize key energy sectors to achieve globally shared climate goals. 

The findings of the Working Group III Sixth Assessment Report reflect this reality, a reality that is also the driving mission of Carbon Direct Inc. We are a science-first organization backed by a team of over 40 of the world’s leading carbon scientists with expertise in all areas of carbon management. Together, we are working to decarbonize the global economy across our client advisory services and software solutions. We manage millions of tonnes of CO2 for our clients, from carbon footprinting to carbon removal procurement, and are driven by a singular goal: real climate impact. 

The following commentary is our own analysis of the AR6 WGIII Report’s key findings and their implications for carbon management.

Introduction to Our Commentary on the AR6 WGIII IPCC Report

The Intergovernmental Panel on Climate Change (IPCC) Working Group II (WGII) released a sobering assessment of the impacts of climate change on human and natural systems in February. This Sixth Assessment Report (AR6) found found that climate change is already causing major adverse disruptions to both of these systems around the world through a range of extreme weather and climatic events, of which some of the negative impacts are likely to be irreversible. Moreover, the most vulnerable populations and ecosystems are experiencing impacts to a greater extent – roughly half the world’s population (3.5 billion people) and millions of species live in “highly vulnerable” areas.

On the heels of that report comes the IPCC’s Working Group (WGIII) contribution to AR6, released this week against the backdrop of Russia’s invasion of Ukraine: Climate Change 2022: Mitigation of Climate Change. It details the state of knowledge around mitigation options for both reducing greenhouse gas (GHG) emissions into the atmosphere and also removing carbon dioxide (CO2) from the atmosphere. 

One important finding is immediately clear: we need more actions and solutions.

  • Despite real progress in clean energy innovation, technology, and cost breakthroughs, and the growth and strengthening of climate targets across the public and private sectors, the world remains far off course from reaching the goals of the Paris Agreement.[1] To limit global warming to no more than 2°C above pre-industrial levels, with further ambition to limit warming to no more than 1.5°C.  The 2015 Paris Agreement requires that for future climate neutrality a balance of sources and sinks must need to be achieved, where each single tonne of anthropogenic CO2 equivalent (CO2e) residual emissions into the atmosphere will have to be neutralized by a tonne of CO2 removed from the atmosphere. 
  • Emissions are still on the rise. Although a temporary drop in global emissions was observed with the COVID-19 pandemic, energy-related CO2 emissions rebounded and rose by 6% in 2021 – the largest absolute annual increase ever recorded, to the highest emission level ever – due to an economic recovery that saw greater use of coal to provide energy services.
  • Half of the emissions reductions required for 1.5˚C stabilization must come from industrial sectors (steel, cement, chemicals) and non-CO2 greenhouse gases (methane, nitrous oxides, fluorinated gases). 

This reality illustrates the enormous challenge of the energy transition and efforts to reach global net-zero emissions. Society must explore all possible options now to bring global emissions to near zero and actively remove large quantities of historical CO2 emissions from the atmosphere to stave off the worst impacts from climate change. 

This new report identifies and delineates many key pathways that are now well understood and already under way, such as growth in renewable power, the progress toward greater energy efficiency, and vehicle electrification. What’s noteworthy and new in the report is that it includes emphasis on two additional key pathways: carbon removal and industrial decarbonization. The report also highlights the central importance of combining large-scale capital investment with technological innovation.

State of Climate Action: Successes and Remaining Challenges

Despite the recent growth in global emissions and increasingly severe climate impacts being experienced around the world, awareness of climate change and societal support for taking action to address the problem is also on the rise (IPCC WGIII Technical Summary). The new report provides evidence that society is making progress toward mobilizing proper policies and investments to support the clean energy transition and climate mitigation (deep abatement through avoidance, reduction, and removal of greenhouse gas emissions), listed in Table 1.

Table 1. Notable Progress on Climate Change
Indicator Description
Global emissions Although global emissions increased by their highest absolute level in 2021, the average rate of growth decreased from 2.1 percent per year during the period 2000-2009 to 1.3 percent per year during the period 2010-2019 through factors such as energy efficiency improvements, fuel-switching, and reduced expansion of coal capacity. 
Country-level emissions reductions An estimated 24 countries reportedly reduced both jurisdictional and consumption-based CO2 emissions (in absolute terms) for a period of at least 10 years.
Embodied emissions The carbon intensity of goods traded around the world has declined, owing to cleaner methods of production.
Public policies and social awareness Net-zero targets by mid-century across the public and private sectors have rapidly proliferated. At the national level, economy-wide climate targets covered around 90 percent of global emissions in 2020 compared to only 49 percent in 2010. Carbon pricing schemes now cover more than 20 percent of global CO2 emissions. Civic engagement in climate-related causes is on the rise.
Buildings sector The global building stock is rapidly shifting away from high-carbon fuel  use to provide energy services such as space heating.
Forestry sector Deforestation has declined and net forest cover has increased since 2010.
Industry sector Multiple clean energy technologies have demonstrated effectiveness in reducing industrial emissions including electrification, clean hydrogen, carbon capture and storage, and materials reuse and recycling.
Power sector There have been notable cost declines, performance increases, and large-scale deployment of clean electricity generation resources including solar PV, onshore and offshore wind, and battery storage. The rate of emissions from the global fleet of coal-fired power plants has slowed since 2010 along with a notable amount of canceled plans for new coal plants. However, deployment rates for nuclear energy and carbon capture and storage are below what is anticipated as necessary in climate stabilization scenarios.
Transportation sector Electrification of various modes of transportation is increasing, particularly for light-duty vehicles but also public transportation services such as buses. Electric vehicles are currently the fastest growing segment of the automotive industry.

Source: IPCC WGIII Technical Summary

However, there remain major challenges to ensuring that global emissions start to decline as soon as possible and reach near zero by mid-century. During the period 2010-2019, the world recorded its highest decadal average emissions level on record at 56 billion metric tonnes of carbon dioxide equivalent (GtCO2e) per year, which also included increases in emissions across all economic sectors (particularly transportation and industry) and different types of GHG emissions (beyond just CO2). [2] The two major drivers of these emissions trends over the last decade are first and foremost increased Gross Domestic Product per capita followed by population growth.   

Unfortunately, current climate pledges at the country level remain wholly inadequate to align society with a temperature trajectory that limits warming to no more than 1.5°C (and are minimally compliant with a likely chance to limit warming to no more than 2°C) (IPCC WGIII Technical Summary; Glynn et al. 2022). In other words, the current nationally determined contributions will result in an overshoot above 1.5°C (the “emissions gap”) absent more stringent climate policies that are supported by actual project finance and rapid deployment (the “implementation gap”). The remaining carbon budget for a likely chance of remaining below 1.5°C of warming is estimated at around 400 GtCO2, which is equivalent to the cumulative net CO2 emissions from 2010-2019.

Furthermore, expected future emissions from existing fossil fuel infrastructure (“locked in emissions”) already exceeds the remaining carbon budget for 1.5°C with limited (or no) temperature overshoot (IPCC WGIII Technical Summary). Mitigation pathways that might limit warming to no more than 1.5°C or 2°C are therefore extremely ambitious, requiring profound reductions over the next several decades (Table 2).

Table 2. Mitigation Pathways Likely Compliant with 1.5°C or 2°C Warming
Mitigation Pathway Timeline to achieve a 50% reduction in emissions from 2019 GHG tonnage reduction required by 2030 if no CO2 removal is allowed Timeline to achieve net-zero emissions
1.5°C 2030s 30-49 Gt/y CO2e 2050s
2°C 2040s 21-36 Gt/y CO2e 2070s

Source: IPCC WGIII Technical Summary

A selection of specific actions and strategies that need to occur to help realize the clean energy transition and achieve climate goals are shown below (IPCC WGIII Technical Summary). These include reducing energy demand through conservation and efficiency; reducing fossil fuel consumption; shifting investment to clean energy and increasing production of low- and zero-carbon energy resources; and increased electrification across all sectors. A few recommended actions stand out as relatively new and part of a comprehensive net-zero strategy:

  • Increased use of alternative energy carriers and clean fuels such as hydrogen and ammonia
  • Near elimination of unabated coal use (i.e., without carbon capture and storage [CCS]) 
  • Achievement of net-zero emissions in the agriculture, forestry and other land use sector between 2020 and 2070
  • Increase in forest cover
  • Atmospheric carbon removal at large scale

Closing the Emissions Gap with Carbon Removal

Both the IPCC WGIII Report and its Special Report on Global Warming of 1.5°C assert with strong evidence that carbon dioxide removal (CDR) is now necessary to meet our global climate goals. The Physical Science Basis Report from Working Group I substantiated that point: anthropogenic CDR has the potential to remove and durably store CO2 from the atmosphere and thus may contribute to mitigation, notably to the increased probability of avoiding low-likelihood, high-impact and “tipping points” outcomes possible with higher global warming levels.

This is a significant evolution from the IPCC’s 2018 report, which indicated that reliance on large-scale deployment of CDR would be a “major risk” to achieving the goal of less than 1.5°C of warming, given the uncertainties at that time in how quickly CDR can be deployed at scale. The current report substantiates the fact that sufficient CDR progress has been made to lower that risk significantly.

All likely scenarios for 1.5°C and 2°C stabilization include many billions of tons annually of CDR (Figure 1) cumulatively reaching hundreds of billions of tons by the end of the century. Nor is this limited just to balancing CO2 emissions – the authors state specifically that “reaching net zero GHG emissions requires net negative CO2 emissions to balance residual CH4, N2O and F-gas emissions” as a clear and unambiguous case for CDR. This acknowledged need for net-zero GHG, not just net-zero CO2, leads the authors to generate a specific scenario and set of modules detailing a pathway with “Extensive use of net negative emissions (IMP-Neg).”

Developed in tandem with aggressive GHG reduction efforts, CDR serves critical roles to achieve net-zero global emissions that include: 1) lowering net emissions in the near term, by removing atmospheric CO2 to balance out a portion of ongoing emissions to the atmosphere, 2) balancing residual GHG emissions from sectors that may be too technically challenging and/or expensive to fully eliminate from the economy in the foreseeable future, and 3) in the long term, achieving net negative global emissions, which would begin to remove the accumulated stock of atmospheric CO2 from human activities historically. This final role might be particularly important if global temperatures overshoot the 2°C target, a scenario that is certainly possible given the insufficient global progress to date on emissions reduction.[3]Estimates from the IPCC suggest a cumulative need for carbon removal at a level of 100-1,000 billion metric tonnes of CO2 by the end of this century in order to limit (or avoid) temperature overshoot … Continue reading

Large-scale CDR is an essential pillar of strategies to limit warming to no more than 1.5°C and a crucial tool for scenarios that limit warming to no more than 2°C by 2100. Therefore, a rapid scale-up and massive deployment of all viable methods will be required despite a very limited state of commercial deployment at present (IPCC WGIII Technical Summary). Any overshoot above these temperature thresholds will require even more carbon removal; the greater the temperature overshoot, the greater the reliance on additional carbon removal to counterbalance the warming. Similarly, arithmetic requires that any net-zero commitment employs CDR to balance any emissions from any sector (Friedmann et al., 2021). Acknowledging that arithmetic, the 2021 IPCC report by Working Group I (physical science) also included a characterisation of CDR methods and their technical sequestration potential.

Figure 1: Mitigation pathways that limit warming to 1.5°C, or 2°C, involve deep, rapid and sustained emissions reductions. Net zero CO2 and net zero GHG emissions are possible through different mitigation portfolios. Source: WGII TS, figure TS-10a & TS-10d.

The IPCC authors have used their considerable expert knowledge to produce high-quality estimates of the technical potential for carbon removal to scale up as a material part of global climate strategy and the associated costs.[4]Since the last working group three report in 2014 (AR5), the scientific community has improved its model representation of many CDR approaches, including reforestation, direct air capture, and … Continue reading Carbon removal methods with some of the largest estimated cumulative removal contributions by 2100  include BECCS (328 GtCO2, range of 168-763 GtCO2), CO2 removed on managed land (252 GtCO2, range of 20-418 GtCO2), and DACCS (29 GtCO2, range of 0-339 GtCO2) (IPCC WGIII Technical Summary). The authors find that these methods should be complemented by other approaches such as improving soil carbon management practices, despite their lower carbon storage durability[5] Durability can refer to either the planned duration of carbon storage, often referred to as “permanence”, or the risk of reversal before that time is up.   and potential rate of carbon removal. Overall, the report recommends aggressive development and deployment of a balanced portfolio of carbon removal methods that considers cost, life cycle assessment of net emissions, durability of carbon storage, ecosystem impacts, co-benefits, governance issues, and social acceptance. This recommendation is important because it acknowledges the difference in durability, scalability, and cost across the spectrum of carbon removal approaches and the need to improve and deploy all methods.

In the climate response and equilibrium models, assessed carbon removal options are mostly limited to BECCS, afforestation & land-use improvements, and direct air CO2 capture and storage (DACCS). Although these modules have improved, this limit highlights the need for both improvement/updating of these modules and creation of additional modules for analysis. For example, report authors acknowledge that carbon removal through some agriculture, forestry, and other land use (AFOLU) measures can be maintained for decades but not over centuries, as these sinks will ultimately saturate and overturn (a key finding from a 2019 IPCC report on Climate and Land-Use Change). As another example, the annual carbon removal from DACCS in the new report, 20 Mt/y, is much, much lower than other recent estimates for the same climate targets (e.g., the IEA Net-Zero analysis (2021) demands 1Gt/y DACS – 50x more flux).

Table 3. Cumulative Carbon Removal Needs to Likely Limit Warming to 2°C, 2020-2100
CDR method Cumulative to 2100

GT CO2

Annual 2050 

GT CO2 /a 

BECCS 328 (168 –763)  2.75 (0.52 –9.45)
CO2 removal on managed land (including A/R) 252 11 (20 –418) 2.98 (0.23 –6.38) 
DACCS  29 (0 –339) 0.02 (0 -1.74)

The new report also highlights the substantial annual removal potential of currently limited deployed DACCS, enhanced weathering (EW) and ocean-based carbon removal methods (including ocean alkalinity enhancement and ocean fertilization) and their limitations. With the options to further develop these methods to unlock their potential.

Table 4. Estimated Removal Potential for Select Carbon Removal Approaches
Potential 

GTCO2/a

Costs

$/ton

Limitations Technical Readiness
DACCS  5 –40  100 -300 

(full range: 84 –386) 

low -carbon energy requirements and cost  medium
Enhanced  weathering (EW)  2 –4 

(full range:

 <1 to ~100 ) 

50 to 200 

(full range: 24 –578)

side -effects on impacted ecosystems low
Ocean -based CDR   1 –100  40 –500  side -effects on the marine environment low

The Voluntary Carbon Market and Policy Needs

The voluntary carbon market (VCM) presents an important mechanism to scale high-quality carbon removal through the creation and sale of credits from carbon removal projects. This market is currently experiencing rapid growth, and reached a total value of more than $1 billion in 2021 through the sale of more than 300 million metric tonnes of CO2e worth of carbon credits across different project types. By 2030, estimates suggest that the VCM could scale to well over $100 billion per year depending on market dynamics and pricing scenarios (despite the VCM currently being dwarfed by the size of compliance markets which generated $53 billion in revenue in 2020). Nonetheless, the rapid growth and anticipated scale up of the VCM is not sufficient to scale and deploy carbon removal to needed levels. The IPCC authors state that deep and sustained public policy support at national and subnational levels is necessary to achieve the needed cumulative tonnage of carbon removal by midcentury and beyond.

Political climate targets and associated policy frameworks need to include carbon removal formally to help incentivize early and ongoing commercial deployment and to support earlier stage research, development, and demonstration. Public policy support will also be needed to help improve the commercial readiness and lower costs for engineered carbon removal approaches that are capable of storing CO2 on timescales from centuries to millennia. The vast majority of credits sold on the VCM today only guarantee carbon storage on a decadal timescale, mostly through forestry projects. This has a climate effect similar to delaying emissions into the atmosphere given that storage in the biosphere is only temporary but can still help delay more severe climate impacts and reduce peak warming. Carbon storage considerations raise the questions of durability and the risk of reversal, and how to use short-term storage as part of robust offsetting claims – all of which we explore in our blog “Accounting for Short-Term Durability in Carbon Offsetting.” However, biophysical limits of natural ecosystems means that these carbon sinks will eventually approach saturation limits and negate the ability for additional carbon storage (for which carbon storage in the biosphere is also prone to physical reversal through events such as wildfires). It is therefore crucial that more carbon removal solutions are pursued that provide highly durable carbon storage opportunities such as direct air capture and storage, carbon mineralization, and ocean alkalinity enhancement.

Importantly, policy and governance frameworks associated with mitigation efforts can help inform integration planning and deployment considerations for carbon removal. A key finding of the new report is that this is doable (IPCC WGIII Technical Summary). Specifically, the authors recommend adapting other successful governance and policy frameworks to accommodate and enable rapid and profound carbon removal deployment and scale-up (e.g., contract for differences for offshore wind; deployment mandates for renewable power). Ocean carbon removal methods require special attention in this regard, and governments should prioritize new governance structures and legal frameworks around it.[6] For example, amendment of the London Convention of the Sea to allow for CDR operations.  

Winning the Climate War with Industrial Emissions

The clearest point for reducing CO2 and other GHG emissions is in the industrial sectors – what Bill Gates calls “how we make things” (Gates 2021). Emissions from industrial sectors have grown faster than power, transportation, buildings, and land-use. In fact, material intensity (defined as the “in-use stock of manufactured capital” in tonnes per unit GDP) is increasing today.[7] In short, we’re making more stuff.   This is in part because some of these industries have been sheltered from climate policies and emissions reduction mandates. In part, this is because global consumption has grown. In part, this is because industrial sectors have few technology options and are expensive to mitigate (ETC, 2018), compounded by the fact that the existing capital stock of industrial facilities is generally young, will be long lived, and cannot readily undergo electrification.

The Working Group III report has many findings and recommendations for industrial decarbonization (Figure 2), including reduction of material consumption and improved energy efficiency. However, three options stand out, especially in the context of the existing capital stocks:

  • Clean Fuels: Since steel, methanol, and cement plants cannot readily be electrified with green electricity, they must operate with clean fuels. This is particularly important in providing high-quality, high-temperature heat on demand. The authors elevate two clean fuels as critical pathways for the next two decades: sustainable biomass, including biogas and waste biomass gasification and pyrolysis, and clean synthetic fuels, including low-carbon hydrogen[8]This includes electrolysis of water with zero-carbon electricity (green hydrogen), fossil-fuel hydrogen with carbon capture and low fugitive emissions (blue hydrogen), and biomass-derived hydrogen … Continue reading and synthetic fuels derived from low-carbon hydrogen.[9] This includes ammonia, low-carbon methanol, and synthetic jet fuel.   These fuels can substitute for fossil fuels in short order and substantially reduce emissions locally.
  • Carbon Capture: For many existing plants, which present a major risk of emissions lock-in, the lowest cost and fastest path will be CCS retrofits (IPCC WGIII Technical Summary). This is particularly important for those industrial production systems that generate byproduct CO2 from the chemistry of manufacturing, such as cement kilns and primary iron and steel from blast furnaces, which cannot be abated by any other means. CCS provides the largest potential for abatement, and in many cases at the lowest cost (Figure 2).
  • Circularity: The report authors identify circular industrial ecosystems as a means to reduce material intensity. They also recognize, for the first time, the substantial potential for CO2 recycling as a circular feedstock for chemicals, fuels, and building materials. While these approaches face many challenges, including cost and infrastructure, their potential abatement is many gigatons at minimal to zero costs today (Bhardwaj et al., 2021).

Figure 2: Decarbonization contribution to three key industrial sectors. Source: WGIII AR6 Technical Summary, figure TS-17.

The specific sections on industrial decarbonization, like the rest of the report, balance factual detail, numerical accuracy, and daunting scale with a clear-eyed but realistic assessment of the full range of possibilities and opportunities to a conclusion that net zero CO2 industrial sector emissions are possible (but challenging). Even for industrial production that is expensive to decarbonize with high business-to-business production costs increases, the final additional costs to consumers and finished goods are relatively small – often just 0.5-3% total product cost increases.

Beyond the IPCC Report: Scaling Carbon Removal for Climate Change Mitigation

Successful mitigation strategies will require coordinated planning across all levels of governance, and need to consider the interrelated nature of economic, socio-cultural, and environmental systems to best speed the transition to a low-carbon economy. Some progress demonstrates that possibility – the WGIII report finds that 24 nations have reduced their emissions for the past 10 years.

Much more is required. Some of this is about planning; specifically, the authors state success “requires purposeful and increasingly coordinated planning and decisions at many scales of governance” (IPCC WGIII Technical Summary). This is another way of stating that governments and industry must be both mindful and timely in their response. They must also be broad and inclusive: “pathways relying on a broad portfolio of mitigation strategies are more robust and resilient,” essential to a successful, sustained campaign of action (IPCC WGIII Technical Summary).

One clear example from the IPCC of needed investments is for infrastructure. The new report speaks of infrastructure 64 times, including the need for new electricity transmission (electrification, green hydrogen, pipeline infrastructure (CO2 storage, hydrogen), fueling infrastructure (ports, charging stations) and manufacturing capacity. This will require trillions of dollars of investment around the world, rooted in communities and geographies that themselves will require attention and consideration (e.g., around environmental justice). Financing of infrastructure can flow from regulatory policy, direct government investment, business incentives and subsidies, and revenues from border carbon adjustments and carbon pricing systems.

Profound increases in investment must also support innovation. The WGIII report finds that innovations are needed to deliver deeper abatement, lower costs, increase performance of solutions, and avoid shocks. The authors include investment in innovation by companies and governments to be at least as essential as public engagement and movement building. The range of topics that merit attention is again broad and inclusive, ranging from efficiency gains to electrochemistry of CO2 recycling and including batteries (for vehicles and grid), CO2 removal technology, and synthetic fuels.

It cannot be overstated how hard all of this will be. The Working Group III 6th Assessment Report suffers no illusions in that regard. For example, it explains that despite great progress on some zero-carbon electricity (good), global deployment rates are grossly insufficient (hard). Similarly, despite great increases in civic and public engagement (good), the authors find “there is no conclusive evidence that an increase in engagement results in overall pro-mitigation outcomes” (hard). The combination of clear-eyed, cold arithmetic and enthusiasm for the solutions in hand and over the horizon makes this report bracing reading, similar to its sister reports on the Physical Science and on Impacts, Adaptation and Vulnerability. This presents a clarion call to global society that more action is needed (and fast) to achieve our shared climate goals. Substantial progress is required to dramatically reduce emissions across all economic sectors in the coming decades and simultaneously scale global carbon removal capacity in a rapid manner across multiple approaches. We hope that with these insights from the IPCC, decision makers in government, industry, and civil society use its urgent recommendations to accelerate development and deployment of all reduction and removal mitigation options.

Acknowledgements

Written by DR. JULIO FRIEDMANN, CHIEF SCIENTIST;  Dr. Wilfried Maas, CHIEF CARBON TECHNOLOGY STRATEGIST; DR. COLIN MCCORMICK, CHIEF INNOVATION OFFICER, AND TIM BUSHMAN, SCIENCE ANALYST.

References

References
1 To limit global warming to no more than 2°C above pre-industrial levels, with further ambition to limit warming to no more than 1.5°C. 
2 The two major drivers of these emissions trends over the last decade are first and foremost increased Gross Domestic Product per capita followed by population growth. 
3 Estimates from the IPCC suggest a cumulative need for carbon removal at a level of 100-1,000 billion metric tonnes of CO2 by the end of this century in order to limit (or avoid) temperature overshoot beyond 1.5°C specified in the Paris Agreement. According to the National Academies of Sciences, Engineering, and Medicine, annual carbon removal rates will need to approach 10 billion metric tonnes of CO2 per year by mid-century and twice that amount by the end of the century to meet global climate goals. 
4 Since the last working group three report in 2014 (AR5), the scientific community has improved its model representation of many CDR approaches, including reforestation, direct air capture, and bio-energy with CCS. 
5 Durability can refer to either the planned duration of carbon storage, often referred to as “permanence”, or the risk of reversal before that time is up.  
6 For example, amendment of the London Convention of the Sea to allow for CDR operations.  
7 In short, we’re making more stuff.  
8 This includes electrolysis of water with zero-carbon electricity (green hydrogen), fossil-fuel hydrogen with carbon capture and low fugitive emissions (blue hydrogen), and biomass-derived hydrogen (with or without carbon capture).  
9 This includes ammonia, low-carbon methanol, and synthetic jet fuel.  

In January, the European Union hosted the inaugural Sustainable Carbon Cycles Conference to gather decision-makers, industry experts, and practitioners to discuss carbon removal pathways in advance of upcoming regulation on quality and certification. As a practitioner with over 30 years of experience in energy and carbon management, I was invited to the panel on the deployment of industrial carbon removal solutions within the EU. 

The conference itself was a direct action from the European Commission’s Communication on Sustainable Carbon Cycles, part of the European Green Deal, delineating how to increase the removal of atmospheric CO2. To summarize this report in brief: the EU will need to drastically reduce reliance on fossil fuel consumption, expand “carbon farming” to store more carbon in nature (also referred to as “nature-based solutions”), and scale industrial solutions. These actions are paramount to achieving the EU’s compliance-based commitment to become climate neutral by 2050 where, each single tonne of CO2eq emitted into the atmosphere will have to be neutralized by a tonne of CO2 permanently removed from the atmosphere.

Across any type of carbon removal, quality is critical. At Carbon Direct, where I am Chief Carbon Technology Strategist, we have worked with fellow scientists to outline standards for quality in Microsoft’s “Criteria for High Quality Carbon Dioxide Removal.” These include: additionality and baselines; carbon accounting methods; monitoring, reporting, and verification (MRV); do no harm and pursuit of co-benefits; durability; leakage; and environmental justice. In attending the Sustainable Cycles Conference, I aimed to bring this science-backed perspective to the forefront of the EU policy discussions.

Climate Policy and Carbon Removal in the EU

The guiding legislation for climate neutrality is codified by the European Climate Law. Passed in March 2020, this legally binding regulation outlines two key goals: 1) the EU is to achieve climate neutrality by 2050; and 2) the EU is to reduce GHG emissions by 55% by 2030, as compared to 1990. 

Notably, the latter goal includes a capped contribution of 225M tons from carbon removal – yet the EU currently only formally recognizes removals in the form of land-use and land-change sinks. These sinks are not sufficient to meet that 225M ton allocation. As such, the Climate Law addresses the need to develop both natural and technological removals. It proposes the development of a regulatory framework that will certify carbon removals. It is also important to note that as part of their carbon removal action plan, the Climate Law includes an agreement to achieve negative emissions after 2050. This indicates a need to go beyond Net-Zero in order to reach the 1.5°C target of warming outlined by the Paris Agreement[1]Climateworks: https://www.climateworks.org/blog/innovative-european-union-climate-law/

Another important callout from the Climate Law is its separation of carbon reduction and carbon removal goals. In discussions on the role of carbon removal, the question of a moral hazard is raised – that is, can the mobilization of carbon removal technologies delay emission reduction or condone high-emission practices? The now separate targets for emission reduction and removal help to mitigate this by taking action on emission reduction strategies while also funding the innovation needed to deploy high-quality carbon removal. 

This is critical in that we need high-quality carbon removal to limit warming and to account for target overshoots as we work towards decarbonizing industries around the world. The IPCC Physical Science Basis report substantiates that anthropogenic CO2 removal has the potential to both remove and durably store CO2 from the atmosphere, and therefore may help to mitigate potential climate “tipping points” like ice sheet disintegration and permafrost loss.

Deploying Industrial Carbon Removal Solutions

To assess the implications of the Climate Law legislation as well as how to effectively mobilize the development of industrial carbon removal solutions, the Sustainable Carbon Cycles Conference session on Industrial Solutions posed three guiding questions: what industrial carbon removal solutions are currently available? What potential do they offer for carbon removal? And what are the main opportunities and challenges of deploying such solutions in the EU?

Christian Holzleitner of the European Commission framed the core challenge for policymakers to engage in effective short-term action while assessing the long-term development of a scaling carbon market. Paul Hugues, Energy Analyst and Modeler at the International Energy Agency (IEA), responded by presenting a series of conclusions from the IEA’s Net Zero Scenarios, underscoring the critical need for carbon removal technologies to scale up for deployment to balance the approximate 2 Gt per annum of hard-to-abate energy sector emissions by 2050 – a target that ladders up to the broader 7.6 Gt per annum carbon capture, utilization, and storage (CCUS) goal. The fewer emission reductions realized, the more carbon removal required.

Figure 1: IEA Net-Zero Emission scenario for global CO2 removals in the energy sector. Source: IEA

A large share of these removals is anticipated to come from the private sector. Coming from the perspective of Carbon Direct, where we work with corporate clients to fulfill their carbon management commitments, I spoke to the challenges faced by these corporations. They have turned to the voluntary carbon market (VCM) for carbon removals in order to realize their Net-Zero pledges. And in doing so within a market that has little to no formal regulation, they face the following challenges:  

  1. Differentiation of carbon removal credits from emissions avoidance and emissions reductions credits
  2. Identification  of “onsets” with atmospheric storage into the biosphere and “insets[2]Source: Carbon Wrangler, Medium” with storage into the geosphere with their differences in storage permanence.
  3. Procurement of high-quality removals where supply is limited, and therefore prices are high
A Note on Carbon Farming and Soil Carbon 
Outside of the Industrial Solutions session, the Sustainable Cycles Conference positioned carbon farming also as a strategy that can meet both environmental and social goals. Dr. Pete Smith, Science Advisor at Carbon Direct, added that soil carbon as a removal solution has substantial co-benefits for soil health and productivity, and therefore can contribute to the EU Soils Mission as well as to its Farm-to-Fork strategy. 

He drew from his 25+ years of research on soil carbon sequestration in agriculture, where he has quantified potentials and assessed co-benefits and trade-offs of actions to increase soil carbon levels. Another important opportunity is that carbon farming can build on ongoing H2020 projects, such as the ClieNFarms project, which involves researchers from across Europe to progress climate neutral farming– and the forthcoming projects under the ongoing Horizon Europe program (such as the recent call for projects on CDR), which positions soil carbon as one of the “natural climate solutions.”

Looking Ahead: Defining Carbon Standards and Scaling Industrial Carbon Removal

All of the aforementioned challenges to the VCM can be connected to climate policy and the need for standardization. This need is now being addressed in the EU through the proposed EU Carbon Removal Certification Mechanism (CRC-M), which aims to create a common EU standard with a reliable integrity certification framework. When developed in tandem with quality, it can enable and increase the deployment of both nature-based and industrial solutions by establishing a quality floor for credits from different sources and sinks. When CRC-M is implemented in a meaningful way, it can support the necessary “social license” for carbon removal – this is to say: governmental action can promote trust and support by the general public, which will in turn bring confidence to market actors for further deployment and scale up of carbon removals.

The mobilization of a certification process across the entirety of the EU will ensure that the carbon trade is accounted for with accuracy across all sectors, and that the certificates may be applied for cross-border trade. This certification process can also help to account for double-counting (when a carbon credit is applied to multiple emissions from different actors), which is another key challenge of the VCM.
Looking ahead, the EU Carbon Removal Certification Mechanism in tandem with other initiatives like the Innovation Fund – which has allocated €25B in support for the demonstration of innovative low-carbon technologies between 2020 and 2030 – can help to create the ecosystem we need to scale carbon removal solutions across the VCM and beyond. 

In the meantime, we must continue to define (and standardize) criteria for high-quality carbon removal and invest in the development of high-potential carbon removal technologies – both of which we are doing at Carbon Direct. 

From carbon footprinting to risk mitigation to carbon removal procurement, learn more about Carbon Direct Inc.’s advisory services here

Acknowledgements

Written by Dr. Wilfried Maas, CHIEF CARBON TECHNOLOGY STRATEGIST.
with input from the Carbon Direct science team.

References

References
1 Climateworks: https://www.climateworks.org/blog/innovative-european-union-climate-law/
2 Source: Carbon Wrangler, Medium

On March 10th, the United States (U.S.) Senate passed the Consolidated Appropriations Act, 2022 that will fund the federal government through fiscal year 2022. This omnibus legislation provides the largest increase in non-defense funding in four years, allocating $1.5 trillion across the U.S. federal government. The passage of this policy will unlock funding for many of the programs in the bipartisan Infrastructure Investment and Jobs Act (IIJA) – providing additional support for hydrogen projects, carbon dioxide removal (CDR) projects, and carbon management infrastructure. This funding is critical to scale and advance the carbon removal market in the United States – and has been long awaited.

Why We Need Policy Support for Decarbonization

In 2018, the Intergovernmental Panel on Climate Change (IPCC) released a special report on the projected impacts of global warming and an analysis of carbon reduction and mitigation pathways. This report finds that “all pathways that limit global warming to 1.5C with limited or no overshoot project the use of CDR on the order of 100 to 1000 Gt CO2 over the 21st century.” This scale of removal is attainable, but the current global rate of CDR deployment and the implementation of emissions reductions strategies are falling short of meeting the goals established in the Paris Agreement

Public policy plays a key role in advancing the CDR market in that it can provide fiscal incentives that increase profitability of CDR projects, standardize emissions analyses across sectors and organizations, provide support for research, development and deployment of CDR novel technologies, and regulate the quality of CDR projects across the market. Examples of strong public policies that support CDR and carbon management in the U.S. include California’s Low Carbon Fuel Standard and the Carbon Sequestration Tax Credit under Section 45Q of the U.S. Tax Code.

How the Infrastructure Investment and Jobs Act Paves the Road to Net-Zero

The IIJA, enacted in November 2021, provides the largest federal government investment in climate solutions in U.S. history. This legislation dedicates $62 billion for the U.S. Department of Energy (DOE) for the advancement of an equitable clean energy future. Among the allocations, it will provide about $6.5 billion for carbon management projects, specifically direct air capture (DAC) and carbon capture, utilization, and sequestration (CCUS) projects, between fiscal years 2022-2026. Over the same time period, this Act will provide an additional $3.5 billion for large carbon capture pilots and demonstrations and $8 billion for hydrogen hubs. In addition, $3.5 billion will be dedicated to supporting four regional DAC Hubs, $115 million for a DAC Technology Prize Competition, $310 million for a Carbon Utilization Program, and $2.1 billion for carbon dioxide transportation infrastructure.

In addition to being the largest federal government investment in climate solutions in U.S. history, this legislation is notable in that it demonstrates the federal government’s strong support for CDR, which will be essential for meeting the country’s net-zero by 2050 goals. The investments in carbon storage, utilization, and carbon transport infrastructure will improve the durability of removed carbon, therefore improving overall quality of connected CDR projects.

Over the past two decades, the majority of the investment in CDR technologies and carbon reduction pathways in the U.S. was led by the voluntary actions of private organizations in tandem with regional and state initiatives. While great progress has been made, cooperation across the private and public sectors at all levels is critical. The support for CDR and carbon reduction pathways in these two recent legislations will accelerate the country’s progress towards its climate goals.

What the Consolidated Appropriations Act Means for Carbon Removal

Building on the IIJA, this omnibus legislation will direct $2 billion towards the deployment or improvement of existing and new fossil-fueled electric generating plants that utilize carbon sequestration and utilization systems. Until September 30, 2023, $825 million will be allocated to the Department of Energy’s Office of Fossil Energy and Carbon Management (FECM) for the advancement of carbon reduction and mitigation pathways and technologies. This amount is dedicated to the research and development of a number of carbon capture and removal pathways, including oceans-based CDR, bioenergy with carbon capture and storage (BECCS), carbon-neutral methanol, and carbon utilization. Hydrogen fuel cell technologies and hydrogen transport infrastructure received the largest allocation of the FECM budget, which dedicated $105 million for research, development and deployment. It is important to note that some of the funds in this new legislation cannot be spent until the start of fiscal year 2022 (October 1st).

Area of Investment Funding (million USD)
Carbon Capture 99
Carbon Utilization 29
Carbon Storage 97
Carbon Dioxide Removal (Formerly “Negative Emissions Technologies”) 49
Advanced Energy Systems (“Advanced Energy and Hydrogen Systems” in FY 2022 Request and House bill) 94
Crosscutting Research 33

Table 1: Enacted FY 2022 appropriations for the US Department of Energy: Office of Fossil Energy and Carbon Management (FECM) Source: Adapted from the Carbon Capture Coalition. 

Looking Ahead: Deploying Decarbonization at Scale

Prior to the passage of these policies, the most influential U.S. federal policy that supports carbon capture and sequestration (CCS) is Section 45Q of the U.S. Tax Code, which allocates up to $50 per ton for the geological sequestration of carbon dioxide. President Biden’s Build Back Better Act, which passed the U.S. House in November 2021 and is awaiting approval in the U.S. Senate, includes a proposal to increase the value of this tax credit to $85 per ton for carbon sequestration. Additionally, this Act would introduce a production tax credit of $3 per kilogram of clean hydrogen and an investment tax credit that would cover up to 30% of the cost of equipment needed to produce clean hydrogen. The absence of these incentives in the IIJA and the omnibus bill was a missed opportunity to make CCS and hydrogen more profitable, particularly as the likelihood of the Build Back Better Act passing decreases. 

Not only do these policies provide the necessary support for advancing the CDR market, they also demonstrate the federal government’s commitment to its climate and decarbonization goals. These policies have elevated the profitability of the CDR market in the U.S., a profitability that will only increase with the recent SEC climate-related risk disclosure proposal. While the IIJA and the omnibus budget package are historical in scale of investment, this should only be the beginning of the federal government’s long-term investment in the CDR market. The World Resources Institute determined that the U.S. “must make large-scale investments in carbon removal – up to $6 billion per year in federal funding over the next 10 years, with continued support for scaled deployment beyond 2030”.[1]World Resources Institute (2020), CarbonShot: Federal Policy Options for Carbon Removal in the United States. … Continue reading

A Note on the SEC Climate-Related Risk Disclosure Ruling
On March 21st, the U.S. Securities and Exchange Commission (SEC) approved a proposed rule[2]U.S. Securities and Exchange Commission (2022), Factsheet: Enhancement and Standardization of Climate-Related Disclosures. https://www.sec.gov/files/33-11042-fact-sheet.pdf that would require all registrants, including foreign-based firms, to disclose in their annual financial statements the climate-related risks that:

  1. Have had or will have a material impact on its business in the short-, medium-, or long-term,
  2. That have or are likely to result from the registrant’s strategy, business model, and outlook,
  3. The registrant’s processes for identifying, assessing, and managing these climate-related risks, and 
  4. The registrant’s climate-related risk management strategy.

The SEC modeled the climate-risk disclosure framework in this proposal from that of the Task Force on Climate-Related Financial Disclosures (TCFD). All registrants are to report their direct (Scope 1) and indirect (Scope 2) GHG emissions, as defined by the Greenhouse Gas Protocol. Some registrants may be exempt from including their indirect emissions from upstream and downstream activities (Scope 3). If applicable, this rule would also require the registrant to disclose internal carbon prices and details on the registrant’s public-facing climate-related targets or goals (including the purchase of carbon offsets or renewable energy certificates (RECs)).

This proposal is now undergoing public comment. If the proposal is adopted by December 2022, the requirement of climate-related risk disclosures in annual financial statements will be phased in beginning with all disclosures, including GHG emissions Scope 1 and 2. An extended period will be granted for the inclusion of Scope 3 emissions. See the SEC’s fact sheet for an overview of the proposal’s phase-in periods. 

The passage of this proposal is historic. If it is adopted, it will be the first time the SEC is requiring its registrants to report on the climate risks associated with their business operations and management. 

The intentions behind this proposal are to protect investors by enhancing and standardizing climate-related risk disclosures, but the CDR industry as a whole will benefit from this rule as transparency will increase demand for high quality CDR projects. Additionally, this demand will lead to significant growth in the emissions accounting industry. This is a landmark example of how a government agency can simultaneously protect private interests and guide stakeholders on a path towards a clean transition in an efficient and effective manner.

As a carbon management firm that advises corporations on how to most effectively realize their carbon commitments, Carbon Direct has paid close attention to policy developments that support carbon management in the U.S. and abroad. The latest ruling from the SEC underscores the importance of high-quality carbon removal more than ever – as corporations move towards disclosing their Scope 1 and 2 emissions, they must then neutralize them. That is why we believe that frameworks like our Criteria for High-Quality Carbon Dioxide Removal, developed in partnership with Microsoft, can help to inform both state-level and federal regulation.

From carbon footprinting to risk mitigation to carbon removal procurement, learn more about Carbon Direct Inc.’s advisory services here

Acknowledgements

Written by Sarah Braverman, with input from the Carbon Direct science team.

References

References
1 World Resources Institute (2020), CarbonShot: Federal Policy Options for Carbon Removal in the United States. https://www.wri.org/research/carbonshot-federal-policy-options-carbon-removal-united-states
2 U.S. Securities and Exchange Commission (2022), Factsheet: Enhancement and Standardization of Climate-Related Disclosures. https://www.sec.gov/files/33-11042-fact-sheet.pdf

Imagine you have a device that sucks CO2 out of the air and stores it in balloons. Balloon materials vary in lifespan, or durability, though – let’s say there are two types: one holds the CO2 for exactly 20 years before popping, another for thousands of years with an innovative new material.  How do you measure the climate impact of storing captured CO2 for 20 years vs. thousands of years? And what carbon offset claims would you make for each?

Although a little simplistic, this analogy highlights one of the most important complexities in carbon offsetting: durability. The field hasn’t yet agreed upon frameworks for comparing the climate benefit of a tonne of CO2 stored in soil for 20 years with a tonne that is permanently mineralized. On the market today, both are sold as “one tonne of carbon credit” and the buyer has to do the hard work of figuring out how they differ in efficacy. The basic questions are:

What is the role of carbon storage that only lasts a decade or two relative to storage that lasts for thousands of years?

How can we use short-term storage as part of robust offsetting claims?

Defining Durability

Durability can refer to either the planned duration of carbon storage or the risk of reversal before that time is up. This post focuses on the former, which is also often referred to as “permanence.”

At Carbon Direct, we use the term “durability” because it is less absolute than “permanence” and acknowledges the temporal variability inherent to most forms of carbon storage.

The Function of Carbon Offsets

There isn’t clear agreement on what a carbon offset should do. In the purest conceptualization, a carbon removal offset is one tonne of removed CO2 that cancels out one tonne of emitted CO2. One tonne is added to the atmosphere and one tonne is removed forever, so the net effect on the climate is zero. Functionally, this is the same as the emission never having occurred in the first place. Frameworks like the Science Based Targets Initiative refer to this as “neutralization” of emitted carbon.

The challenge is this: for CO2 emissions to be fully neutralized, carbon must be stored permanently.[1]¹ Irrespective of the lifetime of CO2 in the atmosphere, any reversal of a carbon offset constitutes a net emission of CO2. Even adding a  tonne of CO2 to the atmosphere in 1000 years still … Continue reading Any release of stored carbon—e.g., when that 20-year balloon pops—causes a net increase of atmospheric CO2, terminating the interim efficacy of the carbon offset. Engineered carbon removal solutions, like mineralization or direct air carbon capture and storage, can store CO2 in geologic reservoirs for thousands of years. Unfortunately, current supply of permanent storage is limited to thousands, not millions, of tonnes CO2 removed. These solutions will scale in the coming decade but often cost over $100 per tonne of CO2 — more than most buyers are willing to pay today for the attribute of high durability. 

As of 2022, the vast majority of carbon removal credits sold in the voluntary carbon market only guarantee carbon storage for decades to a century. This is functionally the same as delaying emissions.[2]² A. Levasseur, et al., Valuing temporary carbon storage. Nat. Clim. Chang. 2, 6–8 (2012).   Temporary carbon storage does provide value. It can expand the pool of available carbon removal through short-term contracts that make it easier for landowners to enroll in carbon projects. It can also help to delay climate impacts, reduce peak warming, avoid climate tipping points, buy time for technology advances, and generate co-benefits like ecosystem services.[3]³  E. Marshall, A. Kelly, The Time Value of Carbon and Carbon Storage: Clarifying the Terms and the Policy Implications of the Debate. SSRN Electron. J., 1–23 (2012). Ecosystem services like biodiversity, provision of clean water, nutrient cycling, and other community benefits also deserve recognition in their own right—not just through carbon credits.

But those attributes are not durable carbon removal itself. Moreover, attributing value to these benefits is complex and inherently uncertain in the context of the carbon market. As the number of net-zero commitments made by corporations skyrockets, corporations are being forced to think creatively about how to meet their climate goals in ways that are valid. One of the greatest risks of short-term solutions is that they might be seen as fully offsetting emissions and, because of this, be used as justification to keep emitting. It is critical that pathways to meet climate goals be both transparent and effective.

Carbon Removal and Risk of Reversal

This commentary discusses durability in the context of carbon removal offsets, which is our focus at Carbon Direct. Reduced and avoided emissions offsets have different durability considerations that we do not include in this commentary.

We also assume here that carbon offsets last exactly as long as they are claimed to. In reality, the risk of premature reversal (e.g., via a wildfire or leaky reservoirs) and possibilities of carbon storage beyond the official term of an offset (e.g., in long-lived wood products) are important factors in durability. 

Accounting for Durability: Vertical and Horizontal Stacking

If carbon removal offsets are claiming to essentially cancel out emissions, are there ways that temporary carbon storage can help us to do this? There are two broad solutions that have been investigated in the scientific literature, which we have synthesized into the following strategies: 

  1. Horizontal stacking: Sequentially buying offsets as they expire to permanently offset a tonne of CO2. Firms seeking to neutralize their emissions in this way horizontally stack credits to create a continuous sequence of one tonne stored over time. 
  2. Vertical stacking: Buying multiple short-term tonnes up front to offset one tonne of CO2 emitted today. Firms can fully or partially compensate for the lifetime climate impacts of emissions today by overbuying short-term tonnes up front, i.e., by vertically stacking credits.

Horizontal Stacking

Horizontally stacking credits over time has a certain simplicity to it: if I buy a 20-year credit in 2021, I need to replace that credit in 2041. The replacement credit could represent truly permanent storage, or could be another 20-year credit, in which case the cycle continues. [4]⁴ This idea was articulated in a slightly different formulation by: Herzog, H, K Caldeira, J Reilly. (2003) “An issue of permanence: assessing the effectiveness of temporary carbon storage. … Continue reading In this example, the 20-year purchases are like an offset lease or rental – the credit provides a service that eventually must be renewed or replaced. If not, emissions are effectively delayed, but not neutralized. The challenge here is that if a firm goes bankrupt, for example, its emissions will persist long after there is someone to keep a record of those emissions and re-buy offset credits. Horizontal stacking requires consistent responsibility over long periods of time, which isn’t easy to manage.

One strategy, which we are pursuing now with Carbon Direct’s own offset procurement, is to buy future geologic storage credits (ex-ante) alongside short-term forestry credits (ex-post) to bridge a gap in availability.[5] Ex-ante credits are expected to be delivered in the future. Ex-post credits are credits that exist today, representing a climate benefit that has already been delivered.   The geologic storage will be fully available by 2025 and has a duration of thousands of years; the short-term forestation storage is available now. We structured our offsets in such a way that by the time the short-term credits expire, the longer term storage will have been executed, offsetting our emissions continuously. Using this bridge approach, we have offset our emissions from today into perpetuity.[6]⁶ Provided the engineered storage lasts as long as it is supposed to. It wasn’t cheap, but we know that we have fully neutralized our emissions while supporting both a beneficial forestry project and scaling engineered carbon removal.

Vertical Stacking

Vertically stacking credits is a bit harder to get right. With this approach, a firm would have to buy multiple 20-year credits this year to offset a single tonne of emitted CO2 forever. The result is disproportionate climate benefits for the next 20 years, followed by a spike in emissions as that carbon is released in year 20. In general, vertical stacking provides oversized near-term benefits, but those benefits come at the cost of potential climate impacts in the future.

An example of vertical stacking. Vertical stacking says that outsized near-term climate benefits (green area) can compensate for long-term climate impacts (gray area).[7]⁷ In this case, the long-term impacts are greater than if we had not offset the original emission at all. There are two reasons for this. In RCP 6.0, a tonne emitted in the future has a greater … Continue reading Here, we used the climate model FAIR (RCP 6.0) to show the outcome from one Gt of CO2 emissions offset by six Gt of CO2 removal that lasts 25 years before being re-emitted. The equivalence value of 6:1 for RCP 6.0 is suggested in a recent working paper (Groom & Venmans, 2021). We show the counterfactual of one Gt emitted without offsetting (dashed line) for comparison.

A key challenge with vertical stacking is knowing how tall the stack needs to be. Several approaches have been suggested to approximate that equivalence value by comparing short-term climate benefits with long-term climate impacts.[8]⁸ Groom, B, F Venmans. (2021) “The social value of offsets.”; Parisa, Z,  et al. (2021) “The Time Value of Carbon Storage.”; Cullenward, D, F Chay, G Badgley (2022) “A critique of … Continue reading They all have some fundamental similarities:

  • They all require models and assumptions about the climate system that introduce uncertainty. These approaches are built on an understanding of how emitted CO2 behaves in the atmosphere and can produce very different equivalence values depending on which assumptions are made. In some cases, they incorporate economic considerations as well, through time preference (discounting) or by translating CO2 emissions to climate-related economic impacts.[9]⁹ Discounting future costs and benefits is standard practice in economics, but it is not always straightforward. For example, high discount rates can make even catastrophic damages in the distant … Continue reading Ultimately, these assumptions force us to figure out what sort of impacts we care about most: e.g., warming, economic damages, tipping points, intergenerational equity, etc. The wrong assumptions could lead us toward actions that do more harm than good in the long run.
  • Each approach to estimating equivalence serves to calculate the fractional value of short-term carbon storage relative to a longer time horizon (e.g., 1000 years). For example, one model result might find that 50 years of storage achieves 25% of the climate benefit that 1000 years does. This implicitly leads to vertical stacking: if that 50-year credit equates to 0.25 of a permanent credit, buying four today could make up for the difference. Buying four credits today, however, might also end up being more expensive than one permanent credit.

Another challenge, beyond the size of the stack, is knowing how and when vertical stacking is an appropriate approach to carbon offsetting. Namely, when is it necessary  to fully neutralize emissions? And when are alternative approaches—like vertical stacking—acceptable? There aren’t easy answers to these questions.[10]¹⁰ Some academics have suggested that offsetting fossil fuel emissions with nature-based solutions represents a mismatch that fundamentally increases the active carbon pool. For example, see: … Continue reading Vertical stacking forces us to weigh climate benefits today against potential climate impacts tomorrow while considering all sorts of factors, like the extent to which vertical stacking may help us avoid climate tipping points or buy us time to decarbonize emissions.

Finally, and critically: high-quality carbon removals, even temporary ones, are in short supply in today’s market. Vertical stacking requires overbuying up front. If there isn’t enough supply to even meet baseline demand without overbuying, it may be very difficult to find the extra credits needed for vertical stacking.

Looking Ahead: Scaling Durability and Quality

Directly reducing emissions should be the first step of any organization’s carbon management plan. But beyond this we must also remove carbon from the atmosphere, and do so in ways that give carbon neutrality claims integrity — which must take into account durability. Temporary carbon storage solutions have an important role to play alongside permanent solutions, but that role is poorly articulated in the offsets market. 

Ideally, carbon offsetting will completely neutralize a tonne of emitted carbon through removal into perpetuity. This is the least ambiguous interpretation of “net zero.” But in today’s market, there isn’t sufficient supply of permanent storage solutions to meet even a fraction of the demand for carbon offsets. Similarly, there is a limited supply of high-quality short-term carbon removal credits to overbuy in a way that might approximate permanent storage (e.g., vertical stacking). This means an important strategy is to grow the supply  more permanent CO2 removal systems (e.g., direct air capture with CCS or carbon mineralization) as part of a portfolio that also includes high-quality short-term carbon removal a strategy that Microsoft[11]¹¹ One year later: The path to carbon negative – a progress report on our climate ‘moonshot’ and others have adopted.

That is why we at Carbon Direct are increasingly focused on helping bring quality supply online in the coming years. Meanwhile, we’re continuing to explore both horizontal and vertical stacking approaches to develop guidance for when and how to use each approach. Our aim is to help carbon offset buyers construct offset portfolios that are scientifically sound, practical, and flexible enough to adapt to advances in our collective understanding of these complex issues.

From life cycle assessments to emissions abatement strategies, learn more about our CO2 Management services here.

Acknowledgements
Written by Bodie Cabiyo and Alex Dolginow, with extensive input from the Carbon Direct science team.
Illustrations
Julian Theberge, John Dees, and Bodie Cabiyo

References

References
1 ¹ Irrespective of the lifetime of CO2 in the atmosphere, any reversal of a carbon offset constitutes a net emission of CO2. Even adding a  tonne of CO2 to the atmosphere in 1000 years still increases the atmospheric pool by one tonne. 
2 ² A. Levasseur, et al., Valuing temporary carbon storage. Nat. Clim. Chang. 2, 6–8 (2012).
3 ³  E. Marshall, A. Kelly, The Time Value of Carbon and Carbon Storage: Clarifying the Terms and the Policy Implications of the Debate. SSRN Electron. J., 1–23 (2012).
4 ⁴ This idea was articulated in a slightly different formulation by: Herzog, H, K Caldeira, J Reilly. (2003) “An issue of permanence: assessing the effectiveness of temporary carbon storage. Climatic Change. It was recently made accessible through CarbonPlan’s handy Permanence Calculator.  
5  Ex-ante credits are expected to be delivered in the future. Ex-post credits are credits that exist today, representing a climate benefit that has already been delivered.
6 ⁶ Provided the engineered storage lasts as long as it is supposed to.
7 In this case, the long-term impacts are greater than if we had not offset the original emission at all. There are two reasons for this. In RCP 6.0, a tonne emitted in the future has a greater impact on climate than a tonne emitted today.  And when we remove CO2 from the atmosphere, natural sinks respond by sequestering less.
8 ⁸ Groom, B, F Venmans. (2021) “The social value of offsets.”; Parisa, Z,  et al. (2021) “The Time Value of Carbon Storage.”; Cullenward, D, F Chay, G Badgley (2022) “A critique of NCX’s carbon accounting methods.”; Chay, F, et al. (2022) “Unpacking ton-year accounting.” 
9 ⁹ Discounting future costs and benefits is standard practice in economics, but it is not always straightforward. For example, high discount rates can make even catastrophic damages in the distant future seem insignificant in net present value-terms.
10 ¹⁰ Some academics have suggested that offsetting fossil fuel emissions with nature-based solutions represents a mismatch that fundamentally increases the active carbon pool. For example, see: Cartonne, W, JF Lund, K Dooley. (2021). “Undoing equivalence: rethinking carbon accounting for just carbon removal.” Frontiers in Climate.
11 ¹¹ One year later: The path to carbon negative – a progress report on our climate ‘moonshot’
U.S. House of Representatives Committee on Science, Space, & Technology
Julio Friedmann

Chief Scientist and Carbon Wrangler

On Thursday, February 17th, I was pleased and proud to provide written and oral testimony before the House Science, Space, and Technology Committee. The hearing, convened by the Subcommittee on Energy, explored questions around how hydrogen can expedite the energy transition, decarbonize the U.S., and create both jobs and opportunities for economic development. The discussion focused on how federal investment in innovation can help to catalyze all of the above, and also ranged from topics on climate equity to global competition. 

My assertion: hydrogen has immense potential to deliver clean energy throughout the economy — especially in areas like industry and heavy duty transportation that are hard to decarbonize. It can stimulate growth and trade, and reduce both conventional and carbon pollution economically and equitably. To do so will require investment in innovation — starting with and expanding upon the historic $9.5 billion of investments in the Infrastructure Investment and Jobs Act  — from novel materials to integrated systems. It also requires close attention to emerging challenges like risk of leakage, development of human capital, and infrastructure build out.

As Chief Scientist at Carbon Direct, I was profoundly honored to serve on a panel with distinguished experts from industry, academia, government, and civil society, placing science at the forefront of these important national subjects. I was impressed with the Committee itself, whose members are deeply interested in these complicated subjects, and their sustained presence and interest throughout the hours of the testimony itself.  And in sharing this testimony, I hope to continue to underscore the extraordinary opportunity that awaits in hydrogen production, one that will help to secure clean energy for decades to come in the realization of climate goals.

READ THE FULL TESTIMONY HERE

At a time when remote work has become part of our daily lives, in-person events take on increased importance for many companies. In October, we held an all-company retreat in New York City with a large portion of our remote team attending. The event was invaluable for building team cohesion, establishing goals, and making new connections. However, it’s important to recognize that our event — like all events — also came with a carbon cost.

Our commitment at Carbon Direct is to take responsibility for our own carbon emissions, and to help others that are committed to the same journey. In this blog, we discuss how Carbon Direct calculated and mitigated the carbon footprint of our offsite and how we can help make carbon management accessible to any business.

Measuring Our Carbon Footprint

The first step to carbon accountability is measurement. To calculate our offsite’s carbon footprint, we tapped one of our distinguished scientists who specializes in atmospheric carbon removal, Dr. Peter Psarras, to lead a full life-cycle assessment across multiple data sources. Dr. Psarras tabulated employee surveys on travel details and bookings, industry-standard calculations on transportation (EIO-LCA models†), and any indirect emissions from other goods and services. 

This is easier said than done. Sometimes, the data was clear, as in the case of the number of air miles traveled. Other times, the team drew on scientifically grounded assumptions to calculate emissions with this simplified formula: 

CO2e = A * EF CO2e = total of direct CO2 emissions and their equivalents

A = activity (type of train, square footage of venue, etc.) 

EF = emission factor, linking the activity to associated emissions 

It is important to note that the most influential variable in this calculation is the emission factor. The emission factor accounts for any and all CO2 over a specified timeframe so as to quantify a product life cycle into measurable units. 

Whatever the activity, it is critical that the anatomy of an emission factor (and any underlying assumptions) be outlined so as to account for any contributing factors to CO2. We leveraged our teams across the many sectors of carbon removal to employ this approach across the entire life cycle of our offsite, calculating a total of 51.9 tCO2e. This included both the conference emissions and radiative forcing factor, as defined below:

Conference Emissions Radiative Forcing Factor
Includes carbon estimates based on the emission factors of travel, hotel, and food services Accounts for contrails, the condensation clouds created by aircraft that trap heat from the earth’s surface, creating a temporary warming effect 
24.2 tCO2e 27.7 tCO2e

Here, we optimized for accuracy. And to be accurate, you need expertise. Dr. Psarras and team validated initial estimates of our carbon footprint and projections against their own research so as to contextualize situational carbon impact. This is where intuition meets science. For example, using an economic calculation for an offsite in New York City may result in outsized carbon estimates because it is so expensive relative to national averages. This, however, does not take into account the cleaner grid of New York City that has a greater proportion of renewables relative to national averages, and therefore a lower carbon impact. 

To Offset or Not to Offset?

Having a CO2 number is the foundational step in carbon accountability. The end goal is to take action with carbon removal

We recognize that this is no simple (or inexpensive) task. Finding high-quality, affordable, and durable solutions that actually eliminate CO2 from the atmosphere is a challenge. Therefore, to strategize and execute an effective carbon removal strategy requires expertise informed by the latest in carbon science. This is Carbon Direct’s specialty.

Our team of world-class scientists research a range of technologies, from nature-based solutions like forest management to technical solutions like direct air capture. Their knowledge informed our own approach to this case study on carbon offsets, and it is their knowledge that we are bringing to our clients through our software and advisory services. 

A Note on Offsets

While carbon offsets play an important role in climate change accountability, the quality of those credits are up for debate. Companies and climate-conscious individuals looking to negate their carbon footprint want to have a real impact.

At Carbon Direct, our science team is actively working on developing data-driven tools for quality control. We offer our clients only the highest caliber offsets for their portfolios so that they can trust that carbon offsets are actually doing the work. 

Learn more about our approach to quality validation from one of our clients, Microsoft, in the article: “Microsoft’s Million-Tonne CO2-Removal Purchase — Lessons for Net Zero.”

A Quality Carbon Removal Portfolio

Following the guidance of Dr. Psarras and fellow Carbon Direct scientists – like Dr. Matthew Potts, Professor at UC Berkeley and specialist in Forest Management – we built a world-class and replicable portfolio that targets long-term carbon removal technologies. 

Using our leading datasets, we curated an array of nature-based, technical, and hybrid solutions, and balanced our investment in those solutions relative to available supply. We needed to account for two emission types with different durability requirements: 

  • The carbon emissions from the offsite (24.2 tCO2e); and 
  • The radiative forcing factor from contrails (27.7 tCO2e)

The radiative forcing factor for contrails comes from math that explicitly compares the short-term effect of contrails to 100 years of CO2 impact. We can reapply this math such that our forestation credits directly counterbalance these short-term impacts. Conversely, the CO2 emissions from the offsite require long-term carbon removal that is durable for hundreds of years. Many of these solutions, however, are still in their infancy – meaning we may not be able to purchase a tonne of CO2 removal for a few years. When the effects of emissions are felt immediately, solutions that are available now are critical for climate stability.

To achieve both immediate CO2 removal and removal durable for hundreds of years, we purchased nature-based offsets from forestation projects that are currently available, and then purchased another mix of high-durability offsets (direct air capture, biomass carbon removal to storage) that will go into effect between 2023 and 2025. This increased our total purchase from the estimated 51.9 tCO2e to 69 tCO2e of removal. Think of the forestation offsets as a kind of bridge to the longer-term sequestration technology that will last for hundreds or even thousands of years. 

Carbon Direct’s Offsite Portfolio (69 tCO2e)

Type: Forestation

Impact: Immediate & Short-Term Removal

Duration: 54 Years

Purchase: 44 tCO2de

Type: Biochar

Impact: Medium-Term Removal & Sequestration

Duration: 100s of years

Purchase: 10 tCO2de

Type: Direct Air Capture 

Impact: Long-Term Removal & Sequestration

Duration: 1000s of Years

Purchase: 10 tCO2de

Type: Biomass 

Impact: Long-Term Removal & Sequestration

Duration: 1000s of years

Purchase: 5 tCO2de

Looking Ahead: Carbon Management for All

The carbon assessment of just this case study underscores a critical need in the evolving carbon market: accessibility. Every organization, no matter their size or budget, requires baseline accounting for their carbon footprint, high-quality portfolios, and streamlined purchasing to quantify their carbon commitment and take action. 

With this in mind, we are working to scale our approach through software solutions built on scientific expertise and best-in-class carbon management data. These solutions will complement our existing client work and build a verifiable foundation for the carbon marketplace so that we can achieve our ultimate goal: to stabilize the climate for generations to come.

We know CO2 management is not easy, but we are here to make it easier — one carbon removal strategy at a time. From life cycle assessments to emissions abatement strategies, learn more about our CO2 Management services here.

 

Footnotes
 “The Economic Input Output-Life Cycle Assessment software traces out the various economic transactions, resource requirements and environmental emissions required for a particular product or service” (EIOLCA.net)
This is a sample portfolio and not representative of our total carbon removal offerings, numbering over 350 suppliers. We intentionally are not including the names of the suppliers in this portfolio given the smaller scope of this project that is inherently limiting. Our selection of these suppliers does not indicate a preference for those suppliers over others, but rather suitability for the size of this specific carbon calculation.