Achieving science-based net zero (w/ Karl Downey)

Q&A

John Mandyck: Does SBTi take into consideration the region or country a company is located when setting their targets? What if they’re in multiple regions?

Karl Downey: Until recently we didn’t do that. We were mostly using global pathways, but now for the building sector, what is new for the operational emission pathways is that they are broken down by country. In the U.S., it’s not just one country, it’s several regions and organized by building type. That will give companies much more granularity or something a bit closer to their real situation. What we’re working on now is the rules or guidance for how they would combine several pathways if their buildings are in several countries.

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John Mandyck: Next question about double counting. How do you avoid double counting emissions among different businesses? What’s the overall view of double counting and at the end of the day does it matter?

Karl Downey: The beauty of the greenhouse gas protocol is that for scope one and two they never overlap. They’re your own scope one and two. It doesn’t overlap with any other company. Scope three does overlap and indeed should overlap, but different companies are looking at them from their perspectives and trying to reduce. Overlapping isn’t really a problem, it’s a design feature of scope three. That works for all sectors, but as we discussed earlier, we need to keep clear guidance for how that works for the building sector because it does get a little bit complex due to the different relationships.

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John Mandyck: Do you see new tools or protocols evolving for scope three? How do you see it evolving over time from a measurement and data capturing standpoint?

Karl Downey: Yeah, scope three can definitely be a challenge. It’s not something that I’m working on personally, but the challenge is with getting the data. There’s another challenge, which is how do you link it to the carbon budget, but that’s a separate issue. From a company’s point of view, it’s about getting the data. There are tools and databases available, In the buildings project we have thought about referring to because for buildings it’s the embodied emissions that is the scope three challenge. The operational emissions just from energy and electricity use is easier to get the data, but the embodied emissions it’s more like the typical scope three challenge, which is model data from suppliers. There we should offer some guidance to companies on how they can try to calculate that.

According to the Greenhouse Gas Protocol, scope three has lower data quality requirements, so you start with the data you can get your hands on, and you improve it over time.

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John Mandyck: Do you see formal carbon accounting protocols being developed?

Karl Downey: Yeah. We rely on the greenhouse gas protocol, that’s the accounting rules. What we do is we put on top of those the target setting rules. For some of our projects we have to fill in gaps because the greenhouse gas protocol is cross-sector, so there’s some sector specific guidance built on the greenhouse gas protocol, but it doesn’t cover everything. We need to do a certain amount of interpretation and gap filling. I think there’s room for the greenhouse gas protocol to grow, there’s room for strengthening greenhouse gas accounting, and third party verification of greenhouse gas accounting.

In some ways we’re a little bit in the infancy on that, but in a number of years time we should have robust standards. We should also have experts, graduates who are just experts in greenhouse gas. There’s quite a lack of that right now. We even struggle with it ourselves, so it’s something that will hopefully improve and should improve.

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John Mandyck: Talk to us about the company verification. What is that process like, what is required? What do you look at for companies to verify their targets?

Karl Downey: Yeah, I should probably clear up a misconception about that first, which is that the specialized validation team validates companies targets.What they’re saying is that these targets are ambitious enough to be in line with the 1.5º goal. What we don’t do is verify the company’s progress towards those targets, although that’s something that we intend to do and we have a project specifically on that.

We’re checking that they’ve done their mission accounting right, they’re applying the right pathways that are specific to their sector, and they’ve calculated what their emission reduction should be. Then the output is a relatively simple thing, it’s a short number of sentences that have been validated by us saying that they will reduce by x percent between their base and their targets. We acquire evidence that demonstrates that, but we’re not doing independent third party verification of all of their operations to check that their emission accounting was correct. We’re validating the actual target that they’re publishing.

We do hold them somewhat accountable to their progress by asking them to publish annually their emissions thereafter. That way any interested stakeholder can compare their target to their annual emissions in the future years.

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John Mandyck: Good. Thanks for clearing that up. How do you respond to the contention that carbon capture technology is beneficial during the time buildings are trying to achieve long term goals in order to capture the carbon in the interim? Do you support compliance passes that use sequestration in the short and medium term until long term goals can be achieved?

Karl Downey: That’s an interesting question. In principle, carbon capture and permanent geological storage can be counted as an emission reduction towards meeting Earth’s science-based target. It’s within your value chain because the greenhouse gasses never entered the atmosphere. Where we get into slightly less clear territory is when we talk about carbon capture and use, so where the CO2 is then used in a product that may have a short life or a long life. It might be a very short life, like a fuel, or it might be a longer life like mineralization into building products. The category rules are not really written yet.

We say that that’s not a hindrance to setting targets, you can still work on innovation projects that would put in place carbon capture and use. It’s definitely going to have some value. What we still haven’t got very clear is if you did sell your carbon on to another user and they admitted it, it would go from your scope one to your scope three, but what kind of saving would the user be able to claim? Those are accounting issues that haven’t been quite resolved. For now, we are on the side of caution in terms of accounting, but not to say that the topic shouldn’t be worked on and and the accounting rules shouldn’t be improved.

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John Mandyck: Do you see the future of science based targets being integrated into official government policy, or do you think keeping this within the private sector is a better approach?

Karl Downey: There’s two views on this. My personal view is that when we have binding legislation that is good enough to enforce emission reductions in line with the 1.5º goal, then maybe we won’t need science based targets or a voluntary private sector initiative. There is the intermediary world, which is where either government legislation refers to initiatives like science based targets and asks suppliers to use it, or they refer to the same set of decarbonization pathways that we’re using that come from third parties often like the IEA, the International Energy Agency. Then we are sure that they are implementing legislation that is calling for emission reductions that are really as ambitious as required. I suppose my short answer is it can be a bit of both, but ideally we should be transitioning towards more stringent legislation.

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John Mandyck: Where have you seen the greatest pushback to your work?

Karl Downey: We get critiques all the time. For example, in our expert advisory groups, industry often calls for less ambition. They say that it’s too difficult, not realistic, not feasible to reduce as much as we’re asking for. That’s to be expected. For the building sector, the pushback is more about what is the scope that needs to be included because the more you include, the more reporting burden that they have and the difficulty with data arises. We get a little bit of pushback on that.

I’d say in general, the companies that we talked to understand the need to do this so that they’re not pushing back on the principles. We get critiques from other NGOs who are asking us to be more ambitious, which, of course, are very welcome comments to receive as well that help us up our ambition and help us balance against pushback from industry.

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John Mandyck: Can you speak about the SBTi approach to renewable natural gas and hydrogen?

Karl Downey: Good question. I’m not an expert on renewable natural gas. We do have bioenergy criteria which safeguards where you could account for bio sourced energy as being carbon neutral. Normally the case is that you would have to report the removals from the atmosphere through the growth and the combustion emissions that happen at your plant or at your site, and show that they match if you’re going to claim carbon neutrality. In addition to that, you need to include all of the emissions associated with the land use, land use change, and deforestation that could be happening in the value chain of that bioenergy. That’s in your scope three, so it’s difficult to claim 100% carbon neutrality of such fuels and the same would go for biomaterials.

I think there is a need for better guidance on the bioenergy question. For hydrogen, I think everybody is aware of the different types of hydrogen, whether it’s green or gray or whether it’s coming from renewable sources or not. It’s relevant for some of our sectors, like the steel sector, but we don’t have detailed guidance on that. It’s kind of a cross-sector issue.

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John Mandyck: How would you convince a person that thinks there is no way we can meet SBTi, or specifically 1.5º?

Karl Downey: The argument we often hear is that a company is located in a location where the political environment is not supportive of them decarbonizing, and therefore SBTi’s requirements are too difficult and they can’t meet them. What I always say in those kinds of cases is you should be setting an aspirational science-based target, even if you don’t know all of the details of how you’re going to achieve it, as a way of demonstrating ambition and credibility to your governments, and using that to lobby for a more supportive legislative environment. That goes for other things, not just governments. It goes for convincing your suppliers or getting your supply chain aligned. I would be optimistic in that regard.

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John Mandyck: What are the steps a company should take if they want to declare SBTi targets?

Karl Downey: The first step is to sign a commitment letter, which gives you two years to prepare your targets before having to submit them. Some companies skip that step or they sign a letter, but then submit their targets quite soon. The advantage of the commitment letter is that they can say they’re committed and they appear on our website which holds them accountable to submitting targets.

Then they submit their targets. There is a bit of, waiting list at the moment, but companies will normally get a validation slot within a couple of months. The validation turnaround is 30 to 60 days, depending on the sector. We require commitment from the company to respond to our queries in a timely fashion if they want validation turnaround to be met. Lastly, we have certain requirements about how and when they may publish their targets as being SBTi validated.

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John Mandyck: What are some of the benefits of joining SBTi? Particularly this question is asking about public relations, but in general, how have you seen companies turn their commitments into benefits?

Karl Downey: It can be a good news story for companies, they can use it in their communications, but they can also use it in much more specific ways. They can include it in sustainability rating schemes, they can even apply for sustainability linked loans, talk to their investors, and protect themselves against the court cases from civil society. There’s a lot of very specific ways, as well as the general kind of communications benefits and the one I mentioned earlier where companies do have lobbying objectives to get a more supportive political environment for their objectives. Having a validated SBTi can help them with that.

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John Mandyck: Are there companies in New York that are signing up for SBTi standards?

Karl Downey: Yes, absolutely. I believe there are several in the real estate sector. You can find these on our website. There’s a web page called Companies Taking Action and it lists all of the companies. It also has the target wording, whether it’s 1.5° aligned near-term or long term. All of the information is there and that should be the first resource, rather than relying on sometimes less clear communications from companies where they mix their validated targets with other types of information.

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John Mandyck: Does each company set their own target or are some targets shared across sectors?

Karl Downey: Each company sets their own target. What’s shared across sectors is the methodology, so the reduction rate pathways can be sector specific, but each company sets its own target and won’t be the same for every company.

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John Mandyck: Let’s talk about those pathways just a little bit more. Are you saying that the rate of reduction to 2030 and the rate of reduction to 2050 will vary across industries based on their approach to 1.5°?

Karl Downey: Yeah. We get the pathways from scientific literature, including the IEA. The IEA has a whole integrated model that looks at the different sectors’ possibilities to decarbonize, including how much is going to cost them. They’re not predictions, they’re scenarios for ways to get to a 1.5° world. Those scenarios therefore lead to different pathways or decarbonization rates for different sectors according to how challenging it is. We take those and they become the pathways that we are asking companies to be complying with.

We have a cross-sector pathway as well which is actually in absolute terms, so it’s absolute emission reductions required by the company. Then our sector specific pathways tend to be in emission intensity terms, so kilos of CO2 per unit of product or per meter squared as is the case for buildings. That just allows better comparability. The absolute emissions are still important and they’re part of the calculation, but in that way you would see different types of targets being expressed by different types of companies.

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John Mandyck: Does the standard account for carbon from using electricity during peak demand periods, for example, high carbon peaking power plants turning on?

Karl Downey: If you’re familiar with the greenhouse gas protocol, you’ll know that it’s the location based approach for emissions from electricity, which is basically the emission intensity of your local electricity grid. Then there’s the market based approach, which is about, specifically buying renewable energy certificates and so on. In a sense, that’s where your emission factors come from. I would assume that things like peak shaving strategies, or demand response strategies that can be implemented in buildings should be reflected then in the emission factor of the grid.

We don’t, but it’s an interesting point. We don’t have specific guidance on that for individual buildings. Although maybe it’s something we should look at, to see if individual buildings are encouraging a better use of the renewable energy supply in the grid, they should somehow be incentivized to do that. It’s an interesting point.