Carbon Neutrality: what can companies afford to pay?
1 cup Optimism; 1 cup Pragmatism; Mix and Serve!
So… we’re talking pragmatic climate optimism. Well where do we start? Let’s pick a topic that has been all the rage as of late… corporate carbon neutral pledges.
Corporate Carbon Neutral Pledges
For folks who haven’t heard of these, they essentially consist of a big company saying…
“Hey, I can’t switch all my operations to zero-carbon sources today, but let me purchase carbon offsets (e.g., plant trees, pay for carbon capture) to play my part”
So how does pragmatic optimism apply here? Allow me to illustrate through two companies that we all know: United Airlines and Google.
When a company thinks about paying for carbon offsets or new technology to reduce its footprint, its ultimately working with the bounds of its existing business. The natural question is then… how much can I afford to pay to be carbon neutral?
The answers boils down to a very simple equation… profits ÷ emissions. With a reasonable budget for carbon neutrality being 2-3% of profits. (in line with philanthropic contributions)
So… if we do some searching, we find out that for United Airlines (a business that relies on burning fossil fuels to meet the worlds well-placed travel needs) in 2019, that number is ~$150/tonne of CO2. 2-3% of that number, the “budget”, at $3-5/t-CO2.
On the other end of the spectrum, Google (a business with minimal fossil fuel needs and ambitions for renewable-power data centers), that number is ~$30,000/t-CO2, or a budget of $600-900/t-CO2.
As a helpful reference, this number for an average consumer who emits 20 t-CO2 per year, with a salary of $60K and expenses of $30K is ~$1,500/t-CO2, or $30-50/t-CO2 budget.
That’s a 200x difference. WOW. Essentially, this is the difference between being able to support avoided deforestation projects (aka “REDD+”, notably a very important and worthy cause!) and being able to support extremely early / niche projects like direct air capture (aka DAC)
So, what do we do with our newly formed perspectives?
Allow me to offer a few suggestions…
First, let’s all hold our favorite brands up to a fair, and reasonable bar. Personally, I would expect Google to only be buying the highest quality carbon offsets (e.g., direct air capture at $600/t). And acknowledging my desire to travel, I would expect airlines like United to search for more affordable offsets, or spend their dollars driving sustainability in other ways (e.g., tech investments, demand-side signals)
Second, let’s think critically about the implications of implementing and distributing a carbon pricing / trading mechanism (note – I believe this is a when, not if question). Unless the world is willing to give up carbon-dependent luxuries (e.g., air travel), the proceeds from industries who can easily afford to abate their footprint should go towards those industries that cannot.
Third, now that we all know our personal consumer budget is $30-50/t-CO2, don’t be afraid to pitch in and find a way to offset your own personal carbon footprint from credible and high quality sources. (more to come on this point in future posts)
In future posts, I’ll dive into a couple important sub-components of this thread – including carbon offsetting types, airline decarbonization mechanisms, and the implications of data centers & high-powered computing on the world’s global footprint.
Until next time…