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December 3, 2023
6 minute read
As the world meets in Dubai for COP28, the following is the second in a three-part series of thought pieces to provoke discussion and debate
CarbonAi’s tagline is “Driven by Impact” and it reflects our goal to have the greatest impact possible in the shortest period of time. This ethos largely dictates the projects we choose to pursue and the software, tools and applications we choose to develop.
The lens we use to gauge our impact is what we call Immediacy of Impact. We think this is a concept that warrants much greater attention from participants in the carbon space, including regulators, policy makers, project developers and, most importantly, project investors and buyers.
Immediacy of Impact: the NPV of climate impact
The concept behind Immediacy of Impact is quite simple and draws heavily from the foundational finance benchmark of net present value or NPV. The NPV basically accounts for the time value of money. It places greater value on a variable that is known today while placing less value, or a discount, on something that will happen later and is therefore less certain.
Why is this concept relevant to climate change? The simple answer is that greenhouse gas (GHG) reductions and removals that are delivered today are more valuable than those delivered two, three or ten years from now. Why? Well, much like the cumulative effect of compound interest in finance, a tonne of GHGs emitted today will continue to warm the planet not just this year but every year that it is in the atmosphere, creating a compounding effect.
Immediacy of Impact means placing a priority on those technologies and projects that can generate meaningful GHG reductions now instead of in the distant future. If your house is on fire, you don’t start shopping for fire alarms, you reach for the fire extinguisher, the garden hose or whatever you have at hand to put out the fire as quickly as possible. By the same token, we are currently in a five-alarm climate fire, and we need to use any and all tools at our disposal to start dousing it. And we do have tools at our disposal, right now.
Urgent times call for urgent (and practical) measures
Immediacy of Impact is particularly relevant now because in carbon market discussions there is currently an inordinate focus on emerging removal technologies like direct air capture (DAC). A number of high-profile groups are lobbying corporations and regulators to prohibit allowing GHG reduction (as opposed to removal) projects from being eligible for use for offsetting purposes. The problem is that, while industrial removal technologies will be an important piece of the climate mitigation toolkit in the medium to long term, they are not yet technologically or economically viable to meet the scale of reductions that we need today.
This is not to downplay the long-term role of DAC or other removal technologies. They will be critical in getting us to net zero. But to effectively address our current, very urgent GHG problem, we must focus on the projects and technologies that can deliver immediate reductions.
The reality that many in the climate change discourse have trouble accepting is that many of the highest impact mitigation opportunities are in industrialized sectors. The GHG-intensive fuels and industries that provide the economic stability we all rely on are not going anywhere soon (in GHG parlance, this is our actual baseline condition.) Accordingly, to effectively decarbonize the economy—as we urgently need to do—we need to decarbonize those fuels and industries, as much as possible, as quickly as possible.
This means that in order to bend the curve of emissions downwards immediately, as we need to do, we must deploy the tools, technologies and practices that are available, affordable, in use and proven to be effective. And this is what we mean by immediacy of impact: putting increased emphasis on eliminating the emissions that we are able to eliminate, right now, in a cost-effective way.
Immediacy of Impact: A shift in perspective and action
So, what does embracing Immediacy of Impact mean? Practically speaking, it means dealing with reality as it is today—difficult truths and all—as opposed to pegging our climate future on unproven, speculative scenarios that may never come to pass. It means placing greater value on reductions we can implement now, not those that may (or may not) occur 10, 20 or 30 years from now.
This requires a shift in thinking for many carbon market stakeholders. For ENGOs, it means not favouring one mitigation measure over another due to ideological biases. Rather, it entails recognizing the urgency of the issue and supporting an all-of-the-above GHG reduction approach.
For large corporations, it means not succumbing to pressure to put all of your GHG reduction eggs in the long-term, removals basket but instead taking a measured, diversified approach. It means ensuring that the GHG project portfolio includes projects that reduce emissions in the same time frame that they are created (that is, right now).
For financial institutions, it means that financing GHG reductions in the oil & gas sector should not be seen as contentious or controversial but as the most effective (and cost-efficient) way to create real, meaningful, demonstrable reductions. And for policy makers and regulators, it means using any and all of the policy tools available to achieve immediate reductions where they actually occur now, not favouring ideology or politics over results.
Finally, for project developers, Immediacy of Impact means emphasizing projects that deliver real, high-quality reductions today. This is precisely why CarbonAi’s Projects team is focused on large, flare gas conservation projects. We know that these projects deliver the largest-scale, most immediate impact possible, with no need for new, unproven, unaffordable technologies.
The added benefit of these projects is the additional GHG impact that comes with methane reduction projects. This will be the focus of the third piece in this series, “The Methane Mission.”