An inventory of net zero pledges found gaps among the world’s biggest companies in their promises to reduce GHG emissions.

The Net Zero Tracker reported its latest review of climate pledges from nations, regions, and corporations. The initiative noted huge year-on-year increases in the number of entities that have made promises to cut their GHG emissions.

But an in-depth assessment revealed some shortcomings in those climate promises. For instance, in almost half of the cases, companies expressed plans to reduce emissions to net zero but without clear details on how.

Net Zero Tracker examines publicly available data for about 200 countries and large public companies. It’s run in part by the UK-based Energy and Climate Intelligence Unit (ECIU) and the University of Oxford.

Their 2022 annual inventory report covered 702 companies with net zero targets.

Net Zero Pledges Report Key Findings

The Net Zero Tracker report analyzed the net zero pledges of businesses and governments. It involves published plans on how they will achieve their goals, actions they are currently taking, and published progress reports.

Notably, the report found that firms responsible for high levels of emissions (oil companies) were more likely to declare net zero plans.

But only 38% of all those firms studied said their emissions reductions will cover all “Scope 3” emissions. Scope 3 emissions include the emissions produced by the end-use of a company’s product. It’s an important factor when assessing the climate impact of firms that produce oil, gas, and coal.

Here are the other major findings of the net zero pledges inventory for 2022.

Fossil fuel firms had the 2nd highest percentage of net zero goals, at 49% of the total.
Carbon offsetting or buying carbon credits for emissions reduced elsewhere is found dominant among corporate strategies.
About 40% of the Forbes 2000 companies with a net-zero target plan to use offsets, despite concerns about the lack of regulation.
702 companies on the Forbes Global 2000 now have net zero targets, up from 417 in 2020.
But 65% of those firms show lacking clear information about the GHG being measured, or how much they intend to rely on carbon offsets to meet their targets.
There’s a dramatic increase in the number of national laws and policies covering net zero targets. These went from covering 10% of national GHG emissions in 2020 to 65% in June 2022.
The number of big cities with a target doubled, up from 115 in 2020 to 235 now. But 900 large cities worldwide still have no net zero targets.

Given that analysis, John Lang, one of the authors noted that governments need to have legal standards and regulations in place to ensure net zero progress by companies. He also added that:

“At the moment, companies are confused about what’s needed from them… They don’t know what information has to be disclosed… We have to have mandatory, top-down regulations to guide them.”

Another author remarked that corporate ambitious interim targets are vital to delivering net zero and limiting cumulative emissions. He said that:

“Clear interim targets can be the solution to both the climate and energy crises; by providing the guardrails to accelerate the shift away from fossil fuels.”

Corporate Net Zero Commitments

During the Glasgow conference (COP26) last year, the UN formed an expert group to come up with net zero standards for the private sector. 

Article 6 of the Paris Agreement is at the top of each nation’s agenda at COP26. It governs the structure of carbon offsets and carbon credits as part of climate goals.

Large companies have been setting ambitious net zero pledges such as these major airlines, Chevron, Del Monte Foods, Disney, Stellantis, and more.

Some follow the world’s target to hit net zero emissions by 2050 while others set targets 10 years earlier. 

The firms believe that they have lofty climate goals already. But the report asserted that most of them have “unacceptably low” targets to be carbon neutral by 2050. Their long-term plans will not do much to halve emissions in the next 8 years that’s vital to stem climate change.

The diagram below shows the state of corporate climate commitments.

To help encourage action on corporate net zero targets, the UN again launched a group aimed at businesses, investors, cities, and regions last March 2022.

The goal is for the entities to make transparent and credible targets with stronger standards. It’s also to speed up the implementation of those plans.

Other initiatives were in a place like increased financial reporting requirements to boost and guide corporate net zero pledges. Examples are the Taskforce on Climate-Related Financial Disclosures and the proposed rules by the Securities and Exchange Commission.

Here’s the per sector ranking in terms of the most net zero pledges:

hospitality
fossil fuels 
materials such as steel and cement, 
transportation, 
food & beverage and 
agriculture

The UK and Italy have the most companies with at least some net zero goals like 72% and 70% of their businesses have targets, respectively. But in the U.S., only 36% of companies have made at least some net zero initiatives.

Despite flaws and credibility gaps, one more author stated that it’s still possible that the flood of net zero promises can create a virtuous cycle. According to him:

“It requires companies to step up, regulators to step up, civil society to be ready and researchers so that this really improves over time.”

The Net Zero Tracker 2022 report analyzed the inventory of net zero pledges from its database of more than 4,000 entities.

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The U.S.’s largest utility, Pacific Gas and Electric (PG&E), revealed its multi-decade pledge that aims to rapidly reduce its GHG emissions and reach net zero by 2040 while still using natural gas to produce power.

PG&E net zero pledge is five years earlier than the goal of its home state of California.

The utility’s climate strategy also calls for more ambitious interim 2030 goals and long-term targets. At a glance, here’s how the company commits itself to heal the planet:

A climate- and nature-positive energy system by 2050
A net zero energy system in 2040
A series of 2030 climate goals to reduce PG&E’s operational carbon footprint and enable customers and communities to reduce their carbon footprints:

Reduce Scope 1 and 2 emissions by 50% from 2015 levels
Reduce Scope 3 emissions by 25% from 2015 levels
Achieve “Scope 4” goals to enable customer emission reductions

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In today’s hotter world, reducing carbon emissions has been the name of the game for everyone. So how does this apply to businesses?

An increasing number of companies are looking at ways to reduce their carbon footprint as climate change becomes a major threat to the earth.

There are over a thousand businesses that measured and reported their CO2 footprint. Most of them also set targets on how to cut down their emissions.

And if you’re also thinking about how your business can cut its own carbon emissions, then this guide will help you. You’ll learn the 3 best ways and some common initiatives under them that work in reducing corporate carbon emissions.

But first things first, why it’s a must to reduce emissions?

Why Companies Must Cut Carbon Emissions?

With mounting pressure from stakeholders and regulators, the number of firms finding means to reduce their emissions will rise even more this decade.

The effects of carbon and other greenhouse gas emissions from human activities are getting worst. Rapidly changing weather patterns and rising temperatures are undeniable. We can feel them.

Climate scientists can also measure them. In fact, the total GHG emissions we dumped into the air reaches 36.3 gigatonnes (Gt) in 2021 (up 6% from 2020 levels). They’re from CO2 emissions by energy combustion and industrial processes.

To make it clearer, the chart below plots the increasing trend of human-caused CO2 emissions from 1900 up to 2021.

Source: IEA, 2022

Carbon emissions have a lasting negative impact on our living environment. And if we do nothing about it, we’re putting the world at risk of immense climate effects.

So slashing emissions is critical, particularly for companies in the high emitting sectors. And so the Paris Agreement obliged businesses and governments alike to strive to reach net zero emissions by 2050.

Being at net zero emissions means the GHG emissions released by humans into the air are balanced by the emissions removed from the air.

In other words, getting to net zero means entities can still generate some emissions. But as long as they are offset by initiatives that reduce GHG already in the air. Otherwise, the world will see more severe weather changes and their drastic effects.

So, here are the top 3 tips that work for companies wanting to cut down their carbon emissions to fight climate change.

Option #1: Avoiding Emissions

Avoiding carbon emissions is different from reducing them. The former involves preventing carbon or its equivalent from entering the atmosphere while the latter means opting for ways that lower the amount of CO2 emitted.

Here are some of the widely used initiatives for businesses to avoid emissions.

Shifting to Renewable Energy

A big chunk of the greenhouse gases that blanket the Earth is due to energy production. In particular, it’s by burning fossil fuels to produce electricity and heat.

Fossil fuels like oil and gas are by far the largest contributor to climate change. It accounts for over 75% of global GHG emissions and nearly 90% of all CO2 emissions.

And so stopping the use of fossil fuels to generate electricity and power is a must for the world to cut back emissions.

Shifting to the use of renewable energy offers the best solution to that and there are great reasons why.

Renewable energy sources are abundant. Renewable energy sources – the sun, wind, water, waste, and heat – are available in all countries. Meaning businesses can easily tap them.

In fact, preferring renewable sources of energy can help companies deal with import dependency on fossil fuels. This is especially true in the case of European firms that heavily rely on oil and gas imports from Russia.

So companies will not only cut their carbon emissions but can also diversify their business economies.

Renewable energy is cheaper. Renewable energy also is the cheapest power option in most parts of the world today. In fact, prices for renewable energy technologies are falling rapidly.

The cost of electricity from solar power fell by 85% between 2010 and 2020. Meanwhile, costs of onshore and offshore wind energy are also down by 56% and 48% respectively.

Falling prices make renewable energy even more attractive for companies to invest in.

More importantly, cheap electricity from renewable sources can provide 65% of the world’s total electricity supply by 2030. It can also decarbonize 90% of the power sector by 2050, massively cutting carbon emissions.

Here’s how much GHG emissions are avoided by using renewable energy sources.

Source: German Environment Agency, 2022

Billions of dollars were invested by large companies already transitioning their energy production using renewables.

Using Clean Hydrogen

Same with renewable energy use, clean or low-carbon hydrogen also plays a vital role in achieving corporate net zero emissions. It’s reflected in its growing share in cumulative emission reduction capacity, representing 6% of total cumulative emissions reductions.

Here’s the projected global hydrogen demand by sector in the Net Zero Scenario from 2020 to 2030 in metric tonnes.

NZE = Net Zero Emissions by 2050 Scenario

Currently, hydrogen is mainly used in the refining and chemical sectors. Clean hydrogen (produced using renewables), in particular, can help decarbonize firms operating in various sectors. These include companies in long-haul transport, chemicals, iron, and steel, where avoiding emissions is difficult.

Hydrogen can also support the integration of variable renewables in a firm’s electricity system. After all, it’s one of the very few options for storing to store electricity over days, weeks, or even months.

Scale-up will be crucial to bringing down the costs of technologies for producing and using clean hydrogen, such as electrolyzers, fuel cells, and hydrogen production with carbon capture, utilization, and storage.

Other CO2 Emission Avoidance Strategies

For other types of companies, reducing food waste in production is another proven way to cut carbon emissions.

Take for instance the case of Del Monte Foods that’s operating in the food industry. A big part of its net zero initiatives is reducing food waste which involves diverting over 25 million pounds of food from landfills.

Such effort can help avoid emissions. In fact, the EPA estimated that each year, food waste in the US alone represents 170 million tons of CO2e emissions. That is equal to the annual CO2 emissions of 42 coal-fired power plants.

So, a simple yet impactful way of cutting food waste also helps businesses in avoiding the release of CO2 into the atmosphere.

Option #2: Reducing Emissions

Improved energy efficiency has become a key component of corporate climate change and net zero strategies. Most companies pledge to double their energy productivity (dollar of output per unit of energy). This has the potential to save more than $2 trillion globally by 2030.

Large firms that give more attention to energy efficiency report billions of dollars in savings and millions of tons of avoided carbon emissions. Efficiency strategies can encompass internal operations, supply chains, products and services, and cross-cutting issues.

Usually, businesses can become more energy efficient by determining their overall carbon footprint first. Only then they can plan for ways how to cut back on their footprint accounting for huge emissions.

Some examples of how to reduce emissions through energy efficiency include:

Making offices smarter (reducing scopes 1 & 2). This initiative involves using fewer resources and energy-efficient lighting and HVAC systems. It allows a company’s building offices to reduce their carbon footprint.
Managing technology sustainably (reducing scopes 1, 2). An example of this is developing and delivering sustainable IT solutions. Areas to explore are e-waste recycling, maintaining energy-efficient data centers, and reducing physical infrastructure.
Greening pantries (reducing scope 2). Stop single-use plastics in office pantries and ask workers to bring their own water bottles and mugs.
Adding automation and other technologies that reduced waste and improve production efficiency. An example is installing a water recycling system that reduces energy and water use.
Reducing packaging footprint. The goal of this initiative is to use lower pounds of materials for packaging while opting for a packaging design that uses more recycled materials.

Corporate energy efficiency strategies are most effective when they become an integral part of the firms’ strategic planning. And if the company invests substantial resources into efficiency measures.

Liquefied Natural Gas

With the world’s move to phase out fossil fuels, particularly that of the EU bloc, more attention is given to liquefied natural gas (LNG).

LNG is by far the cleanest fossil fuel; it emits the least amount of CO2 into the air when combusted.

In the context of the current energy transition, LNG represents an excellent alternative fuel to reduce emissions and help combat global warming.

By opting for LNG – particularly for the industry and transport sectors – companies can significantly cut back their carbon emissions.

Major oil firms like Shell, Chevron, Total, ExxonMobil, and others have been considering using carbon neutral LNG.

In comparison with diesel, LNG provides the following reductions in various GHG emissions:

a 25% reduction in carbon dioxide (CO2),
an 80% reduction in nitrogen oxide (NOx), and
a 97% reduction in carbon monoxide (CO) emissions.

Likewise, a thermal power plant fuelled by natural gas rather than coal can achieve these massive emissions reductions:

an 81% reduction in carbon dioxide (CO2),
an 8% reduction in nitrogen oxide (NOx), and
a 100% reduction in sulfur (SO2) and fine particle emissions.

Estimates also show that LNG costs less than other fossil fuels. As such, the use of this fuel will be more widespread as firms strive to reduce emissions and reach net zero targets.

Companies in the aviation, logistics, and shipping industries will greatly benefit from preferring LNG over oil or coal.

Apart from LNG, firms can also use other alternatives like lower emissions fuel, biofuels, and bio components in making products. The goal may not be to totally avoid emissions but the amount of carbon and other GHG emitted is lower.  

For business operations where carbon emissions are not possible, the last way offers companies a great option to deal with CO2 footprints: carbon offsetting.

Option #3: Offsetting Emissions

If avoiding or directly reducing emissions is not possible, companies can offset their footprint by buying carbon credits.

Carbon offsets are tradeable credits that prove that one ton of CO2 or its GHG equivalent has been removed from (or not released into) the atmosphere.

One carbon offset = one metric ton of carbon or other (GHG).

Offset credits are available both in the compliance (regulated) and voluntary carbon market (VCM).

Offsets in the compliance market are born out of the laws mandating emission reductions. It’s managed by emission trading systems (ETS) such as the EU ETS.

On the other hand, offsets in the voluntary market are created through various projects that reduce or remove CO2 from the air. In 2021, annual credit generation in the VCM was a record $1 billion.

Firms can choose from different types of projects that produce carbon offset credits. Common examples include the following:

Carbon reduction offsets:

Community-based energy efficiency: bio-based energy sources like biogas and clean cooking solutions.
Renewable energy: replacement for fossil fuel energy sources (hydro, solar, wind, and geothermal).
Forestry-based avoidance (REDD+): management and conservation of forests to cut emissions.

Offsets from carbon removal:

Afforestation/reforestation
Soil carbon sequestration
Blue carbon habitat restoration
Technological removal and storage/use
Direct air capture (DAC) and storage/use
Biochar
Bioenergy with carbon capture and storage (BECCS)

Carbon credit offsets can also have co-benefits such as job creation, water conservation, flood prevention, and preservation of biodiversity.

To ensure the quality of the credits, third-party certifying bodies like Verra and Gold Standard verify the offset projects.

There are numerous top carbon exchanges that companies can tap to buy credits to offset their emissions. The exchanges work the same way as different stock and commodity exchanges.

Almost all Fortune 500 companies have been offsetting their carbon emissions by buying credits from various projects around the world. In fact, carbon offset credits form a big part of their path to net zero emissions.

Billions of dollars have been invested in those projects that generate carbon offsets to help firms reduce their hard-to-abate footprint.

So, if you’re company is looking to cut down carbon emissions, you can try one or two, or even all the options mentioned here. They’re all proven to work in helping businesses abate their carbon footprint.

You can further learn how offsetting emissions works in this guide. Or you can know more about which carbon offset credits are the best to buy here.

The post Best Ways Companies Can Cut Carbon Emissions (3 Tips That Work) appeared first on Carbon Credits.

A US version of the Carbon Border Adjustment Mechanism (CBAM) was introduced in Congress by Senator Whitehouse and colleagues to boost domestic manufacturers and address climate change.

The Clean Competition Act is legislation aimed at making domestic companies in the US more competitive in the global market. The bill is also for tackling the key sources of GHG emissions.

The US CBAM proposal aims to help reduce emissions across carbon-intensive industries at home and abroad.

The legislation is cosponsored by Senators Chris Coons, Brian Schatz, and Martin Heinrich.

Why Introduce US CBAM Bill?

A CBAM is an environmental trade policy that sets fees on imports from high-polluting sectors.

The Clean Competition Act is a form of CBAM that aims to promote decarbonization in the US. It’s similar to the EU CBAM in that they both will give the revenues to developing countries, for example. They also introduce charges for CO2 emissions for imported goods coming into each country.

But the US CBAM is unique in that it levies a fee for emissions not only for importers but for domestic manufacturers, too.

Also, instead of an economy-wide fee, domestic companies will pay the carbon price only on emissions that go beyond the industry average.

The bill’s key author, Sen. Whitehouse, said that it’s also to comply with the World Trade Organization protectionism rules. He stated that:

“This is an effort at carbon pricing, having there be a cost for polluting, but it’s probably a considerably easier lift than a full-on carbon price.”

He further commented that American manufacturers doing the right things on climate are often at a disadvantage compared to foreign competitors.

And so the bill is to make them become competitive while helping steer the planet to climate safety.

American manufacturers are on average less carbon-intensive than most of their foreign competitors. In particular, the U.S. economy is almost 50% less carbon-intensive than its trading partners like China (3x more) and India (4x more).

Sen. Coons on the US CBAM bill:

“I’ve been a longtime advocate of border carbon adjustments because they will lower carbon emissions around the world. This and providing a competitive advantage to American companies doing their part to address climate change.”

Coons also said that aligning US climate and trade policies with its allies will help the nation reduce both its emissions and reliance on foreign fuels.

What are the Main Provisions of the Act?

The Clean Competition Act would impose a carbon border adjustment on energy-intensive imports.

The starting price of carbon will be $55/t and will be up by 5% above inflation each year. Domestic producers of raw materials covered by the proposed US CBAM will receive export discounts. While covered imports from least developed countries would be exempt from any tax charges.

Starting in 2024, the adjustment would apply to carbon-intensive products of domestic producers and importers. These include the following:

fossil fuels
refined petroleum products
petrochemicals
fertilizer
hydrogen
adipic acid
cement
iron and steel
aluminum
glass
pulp and paper
ethanol

On the other hand, the EU CBAM applies to the import of electricity and 5 major goods only. These are steel, iron, cement, fertilizer, and aluminum sectors.

In 2026, US CBAM would be extended to include imported finished goods containing at least 500 pounds (226kg) of covered energy-intensive primary goods.

In 2028, the minimum amount of raw materials for coverage would be down to 100 pounds.

Calculating how much the taxpayer would pay depends on various factors.

Here’s how the calculation is done:

Importers would only pay the levy based on the fraction of emissions that exceed the comparable U.S. carbon intensity baseline.

To get the baseline, the subjected producers must submit data to the US Treasury. However, that’s not a replacement but an addition to the annual GHGRP (EPA’s Greenhouse Gas Reporting Program) CO2 emissions report. The data for submission include:

CO2 emissions,
annual electricity consumption and
annual primary output.

Based on the reported information, the Treasury computes the average carbon capacity under Scopes 1 and 2 for each carbon-intensive industry.

At the same time, the baseline indicators will decline by 2.5% annually from 2025 to 2028. Periods after that will see a 5% decrease in US CBAM price annually.

Lastly, 75% of revenues raised each year by the tax would fund a competitive grant program for each of the covered industries. This will further stimulate investment in the new technologies necessary to reduce carbon footprint.

The remaining 25% of revenues will be for helping developing countries to decarbonize and reach net zero emissions.

Here’s the full copy of the introduced US CBAM, the Clean Competition Act.

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