The following is an article originally published Jan. 6, 2023, by Forbes.
How Businesses Can Take Advantage Of The Carbon Economy
By Shashi Menon, EcoEngineers
What’s your carbon intensity score? I think this will be an important question for businesses as carbon intensity (CI) and carbon neutralization create enormous business opportunities in the very near future spurred by the Inflation Reduction Act (IRA) recently signed into law.
In the landmark legislation, $369 billion will be devoted to climate and energy-related research and development, much of it in the form of high-tech solutions to reduce carbon emissions. Additionally, it expands clean energy tax credits and invests over $200 billion in clean energy manufacturing, energy efficiency and electric vehicle sales.
I see the American economy profoundly affected by the Inflation Reduction Act in the coming decade, and this is backed by the numbers as presented in a Credit Suisse report on the IRA. The report includes that the IRA’s total spending is likely to exceed $800 billion, with so many people and businesses predicted to use the tax credits.
This is where CI scores come in. The tax credits proposed in the IRA align payment amounts to carbon reduction by measuring CI scores of fuels and projects. This could be worth a lot for businesses that are ready to transform risk mitigation into opportunity.
All this won’t happen overnight, though, and there are permitting pain points, aging infrastructure and low agency staffing issues that are likely to slow down the rollout. But no matter where you stand on the global warming debate, the Inflation Reduction Act puts a lot of money on the table; and those who understand the in-and-outs of the ever-evolving clean-energy space and the language of carbon accounting and carbon markets can cash in.
Do you know how to seize the opportunity?
All of us, corporate leaders as well as average Americans and homeowners across the country, should lift our understanding of green policy, carbon offsets and more. It’s something known as carbon literacy. This is a necessary step to convert the financial risk of climate adaptation or risk mitigation into a neutral or even profitable scenario.
So, this begs the next question: where to begin?
Management models need to begin by recognizing the paradigm shift triggered by the IRA and by incorporating some healthy habits crucial to navigating the energy transition. My experience as a consultant in this space has uncovered six critical things you can do immediately to start:
1. Stay informed. With so much reported and written on carbon (oftentimes incorrectly), you will need a reliable source of curated information along with solid advice, interpretation and predictive models to enable you to make informed decisions on time.
2. Measure emissions. Life-cycle analysis (LCA) that measures emissions from operations, supply chains, end-of-life disposal and more is critical to the energy transition because you cannot reduce what you do not measure. You will need to adopt a proper methodology to measure emissions, compare them against a baseline and report it in a way that makes sense to the business, regulators and customers.
3. Engage with policy. The clean energy market is a rapidly evolving sector, yet regulatory requirements are often unclear. When you actively participate in the regulatory process, you better understand regulatory risks and can better determine a project’s viability. Usually, better laws and standards will also be implemented as a result.
4. Plan your future. Create a plan for your business to navigate the energy transition that includes seizing available market opportunities. These plans and project execution are complex and often require sound foundational knowledge across regulations, energy markets, technologies, carbon accounting and project management.
5. Measure and report. Measurement, verification and reporting must be transparent to create confidence in the marketplace. Identify how and why data represents risk, which data will support the move to derisking, and who is responsible for accurately monitoring this data.
6. Verify claims. The sixth and final healthy habit is to secure third-party verification of all your carbon reduction claims. We live in a fragmented and mostly unregulated marketplace for emissions reductions, and organizations that adopt clear and transparent measurement, verification and reporting standards will stand out from the pack.
Adopting these habits can allow your governing boards and executive teams to protect the financial future of the assets under your management as the pendulum swings away from unchecked energy consumption to controlled and sustainable development. Measuring your carbon intensity to get a tax credit might seem strange and new—just like it was strange and new when Netflix started mailing out DVDs or Apple started offering downloadable songs for sale. Today there is a whole generation of people who only know streaming entertainment. Similarly, I think CI scores will become ubiquitous in the near future and part of basic labeling.
So, what’s your CI score? If you don’t know, it may be time to find out.
For more information about the EcoEngineers and the services we offer, contact Shashi at email@example.com.