Carbon Sense

Image: World Bank

Making sense of carbon markets, reporting, mandates, and accounting is a steep learning curve. There seems to be three different goals in both voluntary and involuntary ways: making amends, cleaning up better, and doing things differently. So many acronyms (33 to start and counting) and much more pattern matching to be done beyond my first attempt below. One thing I know for certain: some of these acronyms can likely be in multiple boxes, and some lines are blurred.

Image: My first draft with highlights and not comprehensive by any stretch

Public Claims

How do people and companies even keep score with what accounting units in order to make comparable public claims? Some notables include:

• Greenhouse Gas (GHG) reporting with recent SEC mandates for Scope 1, 2, and 3. Net Zero Tracker provides an overview of the 2,000 largest publicly-traded companies in the world by revenue with net zero targets.

• Partnership for Carbon Accounting Financials (PCAF) is an industry-led partnership to facilitate transparency and accountability of the financial industry. This PCAF report on the “Navigating through the cluster of climate initiatives” gives a good acronym to workflow mapping.

• Sustainability Accounting Standards Board (SASB) provides guidelines for the disclosure of financially material sustainability information by companies to their investors for 77 industries.

• Global Real Estate Sustainability Benchmark (GRESB) and movement towards investor-grade reports in the building industry.

• Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA) is United Nations effort to manage aviation emissions.

• Nationally Determined Contributions (NDC) supporting developing countries with offsets matched with Corporates paired with National Adaptation Plans (NAP). Sustainable Development Goals (SDG) seem to be overlapping with NDC. Least Developed Countries (LDC) climate action to be accommodated. Climate Results based finance (RBF) also comes into play.

• Unfair Commercial Practices Directive (UCPD) for prevention of consumer product greenwashing.

• Nature Based Solutions (NbS) and Natural Climate Solutions (NCS) to provide offsets.

• Reducing Emissions from Deforestation and forest Degradation (REDD+).

• The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (TCFD) to improve and increase reporting of climate-related financial information.

Source: PCAF

Ecosystem Enablement

How are the carbon markets and general ecosystem organized and enabled to meet a mutual goal? The various carbon markets and coalitions are a start.

• Climate Tech VC article provides a great summary of both legacy and currently evolving voluntary carbon markets (VCM). Voluntary Carbon Markets Integrity (VCMI) initiative and Phases of Voluntary Carbon Markets are examples of coalitions being built. A McKinsey scaling carbon markets report provides some additional perspectives.

Source: Climate Tech VC

• European Union Emissions Trading Systems (ETS) and its regulated allowance.

• Carbon markets, many as one offering in a bigger commodities market, include AirCarbon Exchange, CBL, and Carbon TradeXchange (CTX).

• Standard accounting units include Verified Carbon Standard (VCS) by Verra and Gold Standard; Verra is tracking the evolution of VCS along with an interactive map.

• Certified Emission Reductions (CER) are a type of emissions unit (or carbon credits) issued by the Clean Development Mechanism (CDM) Executive Board for emission reductions achieved by CDM projects.

• Carbon Disclosure Project (CDP) is a not-for-profit that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.

• Science Based Targets initiative (SBTi) is a collaboration of companies.

Local Preservation

What laws and regulations are in place to ensure that local populations are included and ecology is nurtured? More social pressure combined with financial incentives are needed.

• Environmental Protection Agency (EPA) GHG tracker for inventories and levels are in place, EPA Production Tax Credit (PTC) is an incentive example.

• Occupational Safety and Health Administration (OSHA) and the beginnings of protection of workers due to high heat conditions is an example.

Good Citizen

Carbon capture and sequestration seems to be gaining momentum to get it from pilot to production scales.

• The Intergovernmental Panel on Climate Change (IPCC) is the United Nations body for assessing the science related to climate change; the 2022 working group mitigation report provides policy and other guidance.

• International Organization for Standardization (ISO) for carbon capture and storage (CCS), transportation, and geological storage seems in early days.

Directed Early Adoption

Mandates and regulations seem to be most prevalent in the building and construction industry when it comes to doing things differently. Retrofits are hard. Design wins with clean energy will have benefits for decades.

• Getting the math aligned with design is work in progress for California Zero Net Energy (ZNE) efficiency construction and CA Residential Title 24 Building Energy Efficiency

• NYC Local Law 97 that requires existing buildings over 25,000 square feet in New York City to reduce their emissions by 40% by 2030 with clear financial penalties if standards are not met.

• Federal Energy Regulatory Commission (FERC) for wholesale electricity markets (not retail markets) FERC Carbon Pricing, Order 784 is for accounting NO equivalent for carbon offsets? Order 841 for storage participation. Order 2222 for Distributed Energy Resources (DER).

• Global accounting firms like KPMG and PWC have growing practices around Smart Buildings and emerging FASB mandates.

Corporate Ambition

The world is becoming more digital and interconnected by data, so datacenters 100% powered by renewables seem like a solid foundational element.

• Power Purchase Agreement (PPA) with guaranteed offsets and offtakes in exchange for predictable revenue or secured financing to grow startups.

• Amazon has stated their vision of a carbon system of record starting with Carbon Footprint initiative, putting funds to ambition with their Climate Pledge Fund.

• Google corporate ambition of 100% clean energy powering datacenters and its policy reform initiatives along with Time-based Energy Attribute Certificates (T-EACs).

• American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) is a key group in 50 states to build standards around smart buildings. ASHRAE has great influence on the policy of the estimated 250 Public Utility Commissioners across the US.

• Frontier advanced market commitment fund (i.e. money to develop new products in exchange for tons CO2 avoided while meeting its energy demand) headed by Nan Ransohoff at Stripe Climate; other companies include Google, Shopify, and McKinsey.

The mental model for combating climate change by Nan Ransohoff keeps the bigger picture in mind when it comes to supply and demand sides for energy and subsequent emissions.

Source: ECOFYS

I feel the need, the need for speed in making carbon sense seem common sense.