Carbon credits, net zero strategies and the Swiss Glacier Initiative

Civil society schemes like the Swiss Glacier Initiative elevate transition opportunities – and risks

Switzerland is not famous for its fossil fuel industry. It is famous for its mountains, glaciers and crystal clear lakes. After Swiss voters rejected a climate law in 2021, the Swiss Association for Climate Protection created the Glacier Initiative. The idea was to energize voters to support a new climate law, by educating them about the impacts of melting glaciers. In 2022 Switzerland lost an incredible 6.2% of glacial ice volume, according to research group Glamos. It's not just a question of a shorter ski season or lower-altitude ski resorts closing. Insufficient glacial meltwater in the summer is a problem for the Swiss agricultural sector and for river navigation on the Rhine. With support from the business community, the law passed in June 2023. Swiss voters approved 2050 as the net zero goal for the country, with the law releasing $3.2 billion in financial support over 10 years to replace residential natural gas appliances and to subsidize the reduced use of fossil fuels in industry. Looking at the example of Switzerland, businesses should develop country-specific climate policy scenarios as part of their transition risk analyses.

Booming carbon dioxide removal (CDR) market reflects a carbon credit flight to quality

Since direct air capture (DAC) pioneer Climeworks raised $650 million in April 2022 to scale its business, there has been a surge of investment in the newly minted 'carbon dioxide removal' market – especially in the engineered solutions segment. In June 2023 Charm Industrial raised $100 million in a Series B round to build out its carbon sequestration model. Project owners and tech developers are clearly trying to differentiate between low-quality 'avoided' carbon credits – which have been the bane of the voluntary carbon market from a reputational standpoint – and high-quality 'removal' credits, which range from nature-based projects like reforestation to bio-energy with carbon capture and storage (BECCS) techniques. Corporates with deep pockets, such as BCG (see next article) and Microsoft, are fully supportive. In May this year Climeworks announced a long-term contract with JP Morgan worth $20 million. Two factors are driving the CDR market. First, the flight to quality in voluntary carbon markets, where ‘emissions avoidance’ credits are becoming toxic for consumer brands. Second, the unavoidable need for firms to fund compensating carbon reduction projects to meet net zero goals. ????????

Lessons learnt from the detail on BCG’s net zero strategy

In 2022, global consulting firm BCG had revenues of $11.7 billion and more than 30,000 employees. The firm intends to operate with net zero emissions by 2030. Under the headline pledge, what is BCG’s implementation plan? It has four workstreams. For Scope 1, the firm will reduce reliance on natural gas for its offices. Scope 1 emissions fell from 5,000 tCO2e in the baseline year of 2018 to 3,000 tCO2e in 2022. Good progress. For Scope 2 (electricity), BCG in 2019 switched to renewable energy tariffs and unbundled Renewable Energy Certificates (RECs), to compensate for emissions of 25,000 tCO2e in 2018. However, this practice of using RECs as part of a net zero plan is coming under increasing scrutiny, as unbundled RECs do not result in additional renewable energy investment. In its third workstream, BCG has a wide range of initiatives to cut emissions from business travel. Showing that change is possible, the firm lowered its business travel CO2 emissions per FTE by 60% between 2018 and 2022. Fifty per cent of the reductions came from changing travel choices, 9% from improved aviation fuel efficiency and 1% from sustainable aviation fuel (SAF) partnerships with the likes of United Airlines. In its fourth workstream, BCG paid an average of $16 per carbon credit (tCO2e) to compensate for its residual emissions, implying an overall spend of $6.5 million. By 2030, the firm intends for all of its carbon credits to be classified as carbon dioxide removal, envisages a future carbon price of $200/tCO2e, and plans to work closely with Sylvera to provide assurance of carbon project integrity. What does this tell us? BCG is moving from a PR-driven, low-cost, 'carbon neutral certified' approach to an operationally robust, higher-cost, 'net zero certified' model.?

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