The Race to Net-Zero
21% of the world's largest 2000 public companies have set net-zero commitments, what does it mean
The memo crosses your desk; your organization has just joined the exploding number of companies that have made a net-zero carbon commitment. Your CEO is quoted in the article, your investors are excited, your marketing team is working the social media channels. Then your phone rings; as the energy manager or sustainability director, we will need you to make sure we accomplish the goal we set today….. gulp….
Net-Zero commitments are important commitments that align with the Paris Climate Agreement. That agreement established a global strategy for organizations and governments to work together to accomplish these three goals:
First, limit the average global temperature rise to well below 2°C above preindustrial levels and pursue efforts to limit this increase to 1.5°C.
Second, increase the ability to adapt to the adverse effects of climate change and foster climate-resilient and low greenhouse gas emissions development in a manner that does not threaten food production.
Third, make financial flows consistent with a pathway toward low greenhouse gas emissions and climate-resilient development.
The centerpiece of that commitment is the realization that to reach the goal of limiting the increase to 1.5°C, state and nonstate entities across the globe will need to reduce their greenhouse gas emissions to zero by 2050. In 2018, the UN Intergovernmental Panel on Climate Change (IPCC) issued an alarming report that we had already increased 1°C from pre-industrial levels. The impacts were playing out in real-time. The need to enlist others in the goal to reach net-zero carbon by 2050 increased in urgency, with the concluding statement, “Every extra bit of warming matters… warming of 1.5°C or higher increases the risk associated with long-lasting or irreversible changes” The report highlights a number of climate change impacts that could be avoided by limiting global warming to 1.5°C compared to 2°C, or more. For instance, by 2100, global sea-level rise would be 10 cm lower with global warming of 1.5°C compared with 2°C. The likelihood of an Arctic Ocean free of sea ice in summer would be once per century with global warming of 1.5°C, compared with at least once per decade with 2°C. Coral reefs would decline by 70-90 percent with global warming of 1.5°C, whereas virtually all (> 99 percent) would be lost with 2°C. (Source)
So I get what net-zero carbon is - but how do I do it?
Getting to net-zero carbon emissions starts with understanding your consumption.
Generally, we will start with Scope 1 and Scope 2 emissions, so we start with the consumption of energy related to these scopes. Once develop a strategy around Scope 1 & Scope 2, we can evaluate Scope 3 as well.
The easiest way that I have encountered to explain Scope 1 & Scope 2 emissions is to envision “where is the flame?” Generally speaking, the energy from fossil fuels is released through burning “through the flame.” If you are using natural gas for heating, cooking, or even combined heat and power - you have Scope 1 emissions. The fuel is being burnt on your premises directly by you. As a sidenote, gas-powered vehicles and equipment owned by the company and used for company business are also Scope 1 emission - spark plug + fuel = internal combustion = flame.
When the flame isn’t on your property, but the fuel is still being burnt to generate energy for you, just off-site - that is Scope 2. Generally speaking, this is electrical production via coal or natural gas generation.
Understanding where the carbon emissions are coming from, we can then work to reduce or eliminate those emissions. The most obvious first step is don’t use fuel that you don’t need - as in, don’t waste it. Lights that are on, but no one is in the building, would be an example of wasting electricity. Using less efficient lighting, motors, HVAC equipment, and equipment that constantly runs, regardless of need, are other examples.
A couple of ways to address this is to go back to the fundamentals and obtain the data around the property consumption of energy. A hierarchy of needs can be established by going after the best opportunities first, those locations that are wasting more electricity than others. Benchmarking is an important tool for this process. Being able to compare the building against other like buildings, in the same climate zone, with similar attributes. It boils down to understanding what normal is. Then comparing your property against normal - is it higher (meaning it is more efficient) than normal or worse (meaning it is less efficient).
Once you know where to look, you need to actually look at the specific property. They say real estate is local, and in this case, this is definitely true. Even two identically built buildings across the street from one another may have different issues that are contributing to their inefficiency. While we can gather a lot of data from equipment lists, building automation systems, and other monitoring systems, at the end of the day, an engineer is going to need to walk the building to verify conditions and analyze the opportunities. That site visit should result in a list of energy efficiency measures (EEMs) that are specific to the property.
With a list of EEMs in hand, you can evaluate the returns, impacts, and incentives that are associated to determine which you will pursue. While ROI is important, keep in mind if the goal is to get to carbon net-neutral, the impact must also be considered.
As you can see, this is a bit of a process, but the process can be consistently applied across your portfolio: identifying the opportunities and executing the implementation of EEMs. In each case, tracking the measure's performance can also play an important role, both in verifying the effectiveness and building the case for additional measures.
Another strategy, which is gaining traction rapidly, is to remove the flame altogether. Through the electrification process, appliances and equipment that operate on natural gas are replaced with equipment that operates on electricity. In most buildings, this means addressing gas-fired boilers, furnaces, domestic water heating equipment, and potentially gas associated with cooking or laundry drying. There was a time when gas was more efficient than electric, but the arrival of heat pump technology and induction cooktops rapidly exceeded the efficiency of gas. I dove deeper into both topics with this article on induction cooktops and this article on heat pumps.
The first step should always be the removal of waste through improved efficiency and electrification where feasible. However, this strategy alone will not get you to Carbon net-neutral in most cases. This is where we have to turn to procurement or other alternative energy sources.
When it comes to procurement of energy, you definitely have an advantage in a deregulated electric state. In most cases, just through a more informed buying process, you can reduce the carbon impact by buying cleaner energy. In some cases, 100% renewable sourced energy can be purchased for distribution to your property. In that case, you have arrived at carbon net-zero.
Like efficiency, there is a second strategy here as well, and you don’t have to be in a deregulated state to leverage this one. That is either on-site or community solar participation. In both cases, the more of your property you can offset, the better. Initially (and still in some states), unfortunately, this meant solar for the common areas, but if the tenants were directly metered, they couldn’t participate. But then came along virtual net metering. Through this strategy, the tenants can also participate, potentially gaining reduced electrical delivery costs while the owner can significantly increase the property’s cash flow. This strategy definitely requires partnering with an organization with a strong legal department, familiar with utility regulations to ensure proper implementation.
In many cases, you might still need a bit more to get to carbon net-neutral. This is when RECs can play an important role. Much like the relief specialist the baseball team manager turns to in the ninth inning, RECs can typically be an effective strategy to get you across the finish line.
When I mention RECs, many of us in sustainability assume a defensive posture. There is good reason for this; this was a tool sometimes employed to greenwash in the past. By buying RECs, some organizations simply tried to write a check in order to claim they were making a positive impact but did nothing to alter their operations. But to assume all RECs are bad would be a mistake.
It is important to make sure we remember what exactly a REC is. According to the EPA, a REC is “a tradeable, market-based instrument that represents the legal property rights to the “renewable- ness”— or all non-power attributes— of renewable electricity generation. A REC is issued for every megawatt- hour (MWh) of electricity generated and delivered to the electric grid from a renewable energy resource.”
While many of us understand it is a market-based instrument, we have to also remember why a REC exists. The REC market is generally set up to support the state’s attempt to require utilities to generate a portion of their electrical generation from renewable sources. The instrument, when purchased, is generally set up to help fund the development of additional renewable energy generation within the state. Because many utilities cannot meet the requirements of their state, they purchase the RECs for compliance. The money used builds additional renewable generation, which in turn provides those utilities the opportunity to purchase a greater percentage of energy generation from renewable sources in the future.
So a REC itself is not bad; in fact, it is vital for states to increase the number of facilities generating energy from renewable sources.
This video provides some additional insight into why RECs are so important. In fact, even if you are generating your own electricity with on-site solar, your simply using your own RECs…
By following the strategy laid out here, you also avoid the risk of greenwashing because you did not simply purchase RECs and claim you were reducing your impact. You have established a clear path of leveraging efficiency to the extent possible and supplementing clean energy procurement where opportunities exist. Only after these two strategies are exhausted did you turn to RECs as the reliever to bring your property across the finish line to Carbon Net-Neutral.
Once this process is laid out and the steps understood, it can be applied across a portfolio in a methodical approach that prioritizes based on opportunity.
You can help reduce the impact of the built environment by sharing this blog with your peers. Together we can impact the 39% of greenhouse gasses attributed to the built environment. It starts with awareness, and we succeed with teamwork.
Stay well!
Chris Laughman is the ThirtyNine Blog author, a blog dedicated to reducing the built environment's impact. When not blogging, Chris is helping the real estate industry reduce energy and water impact as the Vice President of Sustainability for Conservice, the Utility Experts. Whether Multifamily, Single Family, Student Housing, Commercial, or Military, we simplify utility billing and expense management by doing it for you. Our insight into your utility consumption provides an opportunity to identify risks. Leveraging innovation and experience, we ignite solutions that have real impacts and track performance to ensure the trendline stays laser-focused on the goal. To get there, we must build relationships within our organizations and outside of our organizations building the critical mass needed to truly make a difference. We have before us a tremendous opportunity. Standing shoulder to shoulder, we will get this done. Contact me at claughman@conservice.com for more information.