Is carbon neutral enough?

Can corporates play a role in accelerating the momentum to a carbon negative economy? 

Today: carbon offsetting for carbon neutral goals

Carbon offsetting to date has provided an option for those companies that face challenges abating their emissions at source, or who simply seek an alternative to doing so. By offsetting its emissions, a company can claim it has reduced its contribution to climate change – even without making any changes to its practices. 

For many companies, offsetting has become a typical component of the journey to carbon neutral. But there is increasing skepticism about the contribution that corporate carbon neutral targets are able to make to wider global climate action, and the limited role they are able to play in the attainment of a 1.5 °C target. This is strongly linked to the limitations and risks involved in offsetting. 

Many companies adhere to the British Standards Institution’s PAS 2060 Standard, which outlines a credible path to carbon neutrality for organisations. To achieve the Standard, companies must provide a Carbon Management Plan to show how its emissions are being reduced. The standard, among other details, requires that all Scope 1 and 2 emissions (and those Scope 3 activities that represent more than 1% of the total footprint) are covered by the target. It also offers a list of approved sources of carbon offsets. 

Not all companies making carbon neutral claims adhere to this guidance, but there is also increasing awareness of the limitations of the guidance itself. There is no minimum level of ambition for corporate carbon reduction, meaning in theory carbon neutrality could be achieved in full through offsetting – with no cuts to emissions taking place. 

In addition, offsets vary significantly in their ability to neutralise a company’s carbon footprint. Offsets are currently sold as carbon credits, generated through projects that either reduce or remove emissions. Many of the credits sold represent projects in which emissions have been reduced, for example by sponsoring renewable energy infrastructure, improving energy efficiency, or preventing deforestation – to name a few examples. By contrast, carbon removal credits are generated from projects that physically extract carbon from the atmosphere, rather than simply preventing its release.

There are essential distinctions between emissions reductions credits and carbon removal ones. While emissions reductions are crucial, there is a real issue in using these former credits to compensate for reductions that have failed to take place elsewhere. When carbon removal credits are used to balance a company’s emissions, the outcome in theory is no net impact on the atmosphere (although there are important conditions to this claim). Meanwhile, when emissions reduction credits are used against corporate emissions, they still lead to carbon being added to the atmosphere. The prevention of emissions arising through the offset project is not able to cancel out emissions released by a company, in the same way a carbon removal project can.


Tomorrow: carbon removal for carbon negative goals

By 2050, large amounts of carbon removal will be needed globally to balance any residual emissions. At a company level, this means using carbon removal to treat any emissions that are prohibitively difficult to abate at source. This sets carbon removal apart from offsetting, which at present can be used to treat anywhere between 0 and 100% of a company’s emissions, regardless of their nature. Carbon removal, distinctly, needs to be deployed in a manner that is consistent with maximising the reduction of emissions at source. 

Approaches that balance emissions out, rather than preventing their release, are inherently more risky. By relying too heavily on offsetting or indeed carbon removal, we will likely experience more severe impacts of climate change. What is more, companies that do not transition to more sustainable business models will likely not fare as well in a future low-carbon economy. Nonetheless, by using true carbon removal credits to treat residual emissions, in addition to deep cuts to emissions across the economy, we stand a much better chance of limiting warming to 1.5 °C.


Building a carbon removal market

Globally, humans emit approximately 40 GtCO2e each year, and yet natural systems can only assimilate about half of this. Overall, it is suggested that between 100 and 1000 Gt of CO2 will need to be removed from the atmosphere this century, in order to neutralise the impact of the carbon we have already emitted and will inevitably emit – even after taking account of deep emissions reductions across the economy.

Source: The Emissions Gap Report 2017, UNEP

It is thought that if substantial and comprehensive emissions reductions in addition to large-scale carbon removal can be realised, we can reach a state in which society releases no carbon overall, meaning our impact would be ‘net-zero’. 

While a range of options are available for the removal of carbon, including biological, mineral and engineered methods, many of these have not yet been tested at large-scale. Huge amounts of investment will need to be mobilised in order to scale these technologies to levels compatible with the amount of removal needed. This includes innovation and R&D into processes that remove carbon, but also the development of management frameworks to facilitate this – to incentivise, regulate, monitor and measure how this burgeoning but invariably enormous sector evolves. 

Investment should also focus on an end goal of delivering permanent, verifiable, affordable, sustainable and scalable carbon removal within the next several decades. Technologies chosen for investment should demonstrate potential to come down in cost and improve in efficiency over climate-relevant timescales.  

A carbon removal market could be a key lever to drive these developments. To be successful, this market must learn from past experiences with offsetting. 


The role of corporates in carbon removal

“We can’t wait until everything is proven and economically feasible. We have to invest now, in the earliest stages, to make sure that these promising technologies become mainstream and don’t die at the pilot stage.”

Source: Shopify, a corporate supporter of carbon removal and sequestration solutions

The carbon removal space is severely underfunded, and yet by mid-century it will need to become one of the biggest economic sectors in the UK – starting almost from scratch. As with other climate solutions, private and public investment will be critical for advancing research, demonstration and deployment (RD&D) of game-changing solutions.

Mechanisms need to be put into place to accelerate deployment, such as direct funding from research bodies, and government support to establish a functional carbon removal market. Robust frameworks are also needed to improve awareness and engagement in order to foster social acceptance.

Different actors will clearly play different roles in supporting carbon removal scaling. Corporates will have a critical role, given their influence over the mitigation agenda, and their ability to provide resources and advocacy towards shaping this landscape. Other push factors for corporate engagement with the carbon removal sector could be that:

  • Certain corporates have made large historical contributions to climate change.

  • Corporates may wish to develop business models around what promises to be a large and potentially profitable sector.

  • Corporates may wish to enable solutions that will reduce the risks they face in a net-zero economy.

  • Corporates will benefit from improved visibility and enhanced credibility. 

It is important to note that corporates themselves will play different roles in supporting carbon removal – with some being driven by a need to facilitate solutions to treat their own residual emissions, and others to simply help enable a 1.5 C target in a wider sense. Corporate support for carbon removal will be vital regardless of source. Therefore, it may not be helpful to be excessively prescriptive about the use of removal to treat residual emissions, as all funding will be useful to scale nascent technologies over the coming decades.

A number of companies are already engaging with carbon removal by apportioning sustainability budgets in order to buy carbon removals at any price. These early purchases provide critical capital for research, development and demonstration of technologies at different points along the cost curve, as well as providing revenue certainty to support further investment and build market confidence. The more funding and interest is generated for carbon removal solutions, the more we foster innovation to make these solutions accessible sooner rather than later, which will also attract more interest from corporates in helping solve for climate – a snowball effect attracting more investment in solutions from other funding sources.

Corporates looking to engage with the carbon removal sector will likely now be facing questions about which aspects of carbon removal to support and what form this support could take. But there is also much uncertainty surrounding what kind of returns corporate investors might seek to gain from their support. Should companies that don’t face major barriers to decarbonisation use the carbon removals provided through their funding to attain a ‘carbon negative’ status for their business? Or should the generated removals be used elsewhere? Is target setting a relevant or useful framing, or can corporates play a more holistic, enabling role in climate action, that is not always framed in terms of their own carbon balance sheets?

Source: Carbon Brief chart based on the IPCC SR15 report – The later we act, the more agressive we’ll need to be.

How can we get corporates to proactively invest in carbon removal solutions?

The market is of course not the only means to drive forward carbon removal. Companies like Microsoft, Shopify and Stripe are early adopters of the carbon removal purchasing approach, investing in carbon removal to treat their own footprint. While this market-based approach mobilises much-needed funding, there is uncertainty as to whether this allows funding to be allocated most effectively (for example, channelling support to promising but not yet cost-effective technologies). 

A hybrid approach, combining market-based and policy-based approaches will likely be required. Policies will need to be put in place that, for example, make it mandatory for corporates to have a sufficiently ambitious climate plan before they are able to engage with carbon removal. In addition, significant work will need to be done to raise awareness amongst corporates, governments and communities, of how crucial carbon removal is and what action needs to be taken across society.


What’s in it for corporates and the climate?

Corporates also benefit from indirect positive effects of investing in carbon removal. Supporting the scale-up of this much-needed sector could signal an authentic interest in moving towards responsible and purpose-led business, which could enhance business credibility and even viability into the future.

We can’t put all the burden on businesses to save humankind and the Earth’s other inhabitants. However, under the right conditions, corporates can play an important role in moving the needle towards more effective climate action. Such is the importance of meaningfully engaging corporates in the carbon removal discussion.

The Carbon Removal Centre is supporting work to build capacity for carbon removal in the corporate sector. More information about the project can be found here.