Decarbonisation
Glossary

A carbon credit is a transferable credit verified by government or independent bodies which represents an emission of one metric tonne of CO2. Carbon credits are used by companies to counterbalance unabated CO2 emissions.

The global goal of achieving zero carbon dioxide emissions by 2050 is referred to as “net zero CO2 emissions”. “Net zero” itself describes a situation in which no additional greenhouse gases are being added to the atmosphere. The “net” in “net zero” refers to the fact that in addition to making immediate and significant reductions in emissions, carbon credits can be used to counterbalance unabated CO2 emissions.

Going “net zero” for a company entails quantifying their greenhouse gas footprint as well as lowering and removing their emissions in line with the SBTi. For unabated emissions, companies can fall back on high-quality long-term carbon removal solutions. To reach net zero, the company’s emissions are counterbalanced with the company’s removals over a specific period. 

These scopes are correlated to “ownership” of the emissions and the degree of control that can be used to alter the emission levels at each stage. For businesses, measuring their impact and setting reduction goals is made simpler by grouping different kinds of emissions. Scope 1 includes greenhouse gas emissions from sources like buildings and operations that an organisation directly owns or controls. Scope 2 includes greenhouse gas emissions caused by the electricity, heating, cooling, or steam needed to power an organisation’s buildings and other facilities. Scope 3 includes greenhouse gas emissions caused by upstream and downstream activities in the company’s supply chain.

Climate solutions create positive incentives that change the traditional economic reasons which make ecosystems worth more dead than alive. Increasing the demand for such solutions can spur much-needed action to test effective and socially responsible projects and then scale them up globally through policy reforms.

Carbon neutral describes the situation where – on the journey to net zero – a company compensates for their entire carbon footprint. If a company advertises carbon neutrality which it has usually achieved with the help of CO2 offsets, it must be aware of the associated risk of greenwashing allegations. Compensating for unabated residual emissions with high-quality nature-based carbon credits helps on the way to decarbonisation, but should not entitle companies to continuingly pollute the environment.

Nature-based solutions are initiatives that protect, restore, or manage natural and semi-natural ecosystems in a sustainable way, or create new ecosystems. These initiatives are based on biodiversity and carried out with the full participation and agreement of local communities. Additionally to removing carbon emissions, nature-based solutions preserve existing ecosystems, create economic opportunities for local communities, boost ecosystem’s resilience and promote healthier lifestyles.

By saving our wetlands, we reduce the release of methane and slow the warming of our planet. Peatlands are a type of wetland where the soil is too wet for dead plants to break down completely. Over many thousands of years, thick layers of peat build up and trap a lot of carbon. Peatlands need to be protected, managed in a way that is good for the environment, and brought back to life as soon as possible all over the world.

Biochar is a type of charcoal that is added to soils to increase its soil organic carbon content. It is made by heating plant and animal matter like crop waste, forest waste, and animal manure in the absence of oxygen in a pyrolysis facility. Compared to other soil carbon sequestration techniques, biochar offers a better long-term solution for carbon storage.

Trees are one of the best resources to capture and store carbon. Woods and forests absorb atmospheric carbon through the process of photosynthesis and store it for centuries, acting as significant carbon sinks. Forests also control the flow of water and keep coastal communities safe from extreme weather events and rising sea levels.

Additionality describes the fact that a project must reduce emissions “above what would be expected from business as usual.” That means that the emission reduction or removal wouldn’t have happened if the project hadn’t been put into action. Reduction or removal projects are only additional if they have little or no financial attractiveness apart from selling carbon credits.

It is crucial that we not only minimise our carbon emissions but also ensure that any effort made in this direction is long-lasting. Permanent carbon removal solutions cannot be undone and the removed carbon cannot be added back into the atmosphere for a long time.

The term insetting describes the reduction of a company’s emissions through a project executed within its own value chain. Such a project should be subject to the same standards as other climate solutions with the difference being that the company has the ownership of the project. Through insetting projects, a company can lower its emissions overall and forecast long-term decarbonisation costs. Insetting projects typically address scope 3 emissions.

Companies use CO2 offsets to make a compensation claim, i.e., to claim that emitted emissions have been neutralised through the purchase of carbon credits. This compensation claim is often stated to emphasise that the entire company or some of its individual products are CO2-neutral. The CO2-neutrality claim is problematic because in reality it often only applies only to a subset of its operations or footprint and not accurately to its entirety. Therefore it exposes companies to accusations of greenwashing.

Mitigation contributions have been on everyone’s lips since COP27 and are a  “counterpart” to traditional carbon offsets. Although carbon credits are bought in both cases and climate projects are financed with them, different claims are being made. With the mitigation contribution, a company doesn’t claim to be CO2neutral but rather declares to voluntarily contribute to a country’s climate efforts. Mitigation contributions fit particularly well to counterbalance unabated scope 3 emissions.

MRV stands for the Measurement, Reporting and Verification of climate projects and carbon credits. MRV processes measure and analyse the effectiveness and credibility of climate projects. The better the MRV process works, the more precisely environmental impacts can be tracked. The exact quantification of emissions reductions and removals allows for precise issuance of carbon credits and counterbalancing of emitted emissions, ultimately allowing for credible climate action and contribution. The digitization of the MRV processes (dMRV) with technologies such as remote sensing, AI, blockchain, edge-computing and sensor networks helps meet the challenges of the carbon market.

Carbon removals can be used to counterbalance a company’s unabated emissions. Carbon removal projects focus on getting rid of carbon emissions that are already in the atmosphere. Usually, carbon removal projects are nature-based solutions, as the name suggests, that use natural processes like biomass growth to pull carbon out of the air. Since climate change is a global issue, climate solutions can be implemented anywhere on the planet.

A company can reduce overall costs, enhance resilience with respect to upcoming regulatory changes, strengthen investors’ confidence, secure carbon streams, increase innovation as well as competitiveness and improve brand reputation.

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