With COP27 in full swing in Egypt, the two hot topics are 'net zero' and 'loss and damage'. But what do they mean, and what do they mean for your business?
We were recently asked to calculate the greenhouse gas emissions from a virtual conference, so the conference organisers could 'offset' their emissions. Instead of following their brief, we advised them to ignore offsets and pay for 'loss and damage' instead. But what does that all mean?
The net in net zero
Firstly, it is important to understand what net zero means. Net zero is the position when your company stops contributing to worsening climate change. Technically, it is the situation when the total amount of greenhouse gas emissions you are pumping out (e.g. through burning fossil fuels) are balanced by the amount of greenhouse gases you are removing from the atmosphere (e.g. by creating new woodlands). Think of it as a bathtub that is about to overflow...
Because it isn't possible for all of us to plant enough trees to soak up all our emissions, we need to focus on reducing those emissions before relying on removals. But because many of our businesses can't reduce gross emissions to zero, we will always need some greenhouse gas removals. These are often referred to offsets.
Offsetting our guilt?
An offset is basically paying for somebody else to reduce their emissions or increase the amount greenhouse gases they are removing from the atmosphere. This seems reasonable, so why did we refuse to support our client in working out what they needed to buy?
Well, as this Economist special report makes clear, offsets are too cheap to be worthwhile. As the saying goes, you get what you pay for. If you are buying an offset for a tonne of carbon dioxide at £20 or £30, that is too cheap to be meaningful... that wouldn't even fill half a tank of petrol in a car.
In contrast, the UK government recently estimated the social cost of carbon, which is a measure of the cost of the impacts of a tonne of carbon dioxide pollution. And the current best estimate is £250 per tonne, around ten times as much as the current price of a purchased carbon credit offset.
Paying the price for pollution
So paying for the social cost of carbon is the 'fair' thing to do. My company's greenhouse gas pollution is making climate change slightly worse. That means that storms will be slightly worse, heatwaves slightly hotter and people will suffer slightly more because of my pollution. And other people need to pick up the pieces, which costs them money. So it is only fair that my business should transfer an amount of money to those who are suffering as a result of my greenhouse gas pollution. This transfer of payments is called 'loss and damage' payments at COP27.
Loss and damage
This topic is very contentious - not least because many countries and communities around the world are suffering terrible impacts from climate change, even though they have barely caused any of the pollution. For example, Pakistan (a country that hardly puts any greenhouse gas pollution into the atmosphere) suffered terrible floods earlier this year, only shortly after having experienced prolonged deadly heatwaves. It is widely acknowledged that these sorts of disasters have been made more frequent and more intense because of climate change.
So what did we do?
1) We calculated the greenhouse gas emissions from our client's virtual conference (note those emissions were very low - considerably lower than holding it face to face),
2) We calculated the total social cost of those emissions (using the UK government's £250 per tonne of carbon dioxide estimate and multiplying that by the total emissions from the conference)
3) We recommended that our client make a loss and damage payment to the DEC Pakistan Floods Appeal.
We're delighted that our client responded positively to our recommendation and made a loss and damage payment equivalent to the pollution created by their virtual conference.
If you need some help in working out how to reduce your emissions and how to pay losses and damage, do get in touch