The World Can’t Delay Decarbonization

Near-term avoided emissions must be our collective North Star

By Stephen Lamm

At Bloom Energy we focus on the energy transition every day, which gives us a unique perspective on the economic and technical realities of energy projects. We work on the zero carbon and renewable solutions of the future, such as hydrogen, biogas, and CCUS (carbon capture, utilization and storage) applications, to drive emission reductions today with our fuel cell solutions. And, with each emission reduction we can achieve now, we have an outsized climate impact because of the time value of carbon.

The time value of carbon concept states that greenhouse gas emissions reduced today are worth more than reductions promised in the future due to the escalating risks associated with the pace and extent of climate change. The concept has a long history, but recently?it has been championed ?by environmental, social, and governance (ESG) focused investors, whose work depends on accurately assessing the value that companies can create far into the future, based on assets and liabilities they have today.

Like investors, policymakers also need to convert concerns about climate urgency into an actionable variable. As climate impacts worsen and governments and institutions strive for net-zero emissions by 2050, emissions reductions or CO2 removals from the atmosphere in the years approaching 2050 could become irrelevant. Why? Because those reductions may come too late to avoid climate tipping points and therefore may not help us align with our preferred warming trajectories. Current carbon reductions should be weighed more heavily than future projections.

Load growth still rising

Reducing emissions is most certainly urgent. Despite all the attention, pronouncements, and policy action, CO2 emissions have continued to rise. In fact, global energy-related emissions reached a new high of over?36.8 Gt in 2022 . There is a potent mix of issues coming together to prevent rapid decarbonization of the energy sector. First, load growth continues to increase, with massive expansion expected to continue as buildings and the transportation sector embrace electrification and extreme weather intensifies.?Incentives under the Inflation Reduction Act?are expected to increase ?demand for electricity 30% by 2030.?Secondly, we’ve?underinvested in the infrastructure ?needed to integrate more renewables and new forms of low-carbon power quickly.?And third, the reduction in clean firm baseload power driven by nuclear retirements and underperforming hydro assets is not easily replaced with?intermittent generation sources .

In the United States, the increasing lack of reliability of the electric grid, unrealistic optimism about the rate of renewable penetration and resulting expansion of dirty back-up solutions have created a confused policy and regulatory environment and exposed considerable uncertainty around decarbonization timelines. While policymakers grapple with the realities of a challenging energy transition, they should all be able to align around the importance of near-term carbon reductions.

To date, we’ve used support for renewables as a proxy for decarbonization, but as the energy transition unfolds, it’s clear that type of blunt characterization is insufficient to support the necessary sector transformation. We need low carbon power in specific places at specific times. We need to deeply understand transmission constraints and develop sophisticated siting strategies. And most of all, we need to understand what really happens on the grid in response to new capacity additions or changes in demand.

For too long, the world has embraced carbon accounting systems, leadership programs, and environmental instruments that don’t reflect the avoided emissions of their activities. That has to change if companies and policymakers want to drive real emissions reductions in the near-term or consider the time value of carbon. Knowing the emissions impacts of any particular project or intervention is deeply empowering and allows leaders to break free of ideology to seek out the most transformative solutions.

Policymakers need to consider the impacts of new electrification policies, including those related to building electrification, EV incentives, and hydrogen production through the lens of the “emissionality.” Emissionality is a concept?pioneered by WattTime ?that stresses the importance of understanding the variability in marginal emissions by region and time and encourages us to precisely consider avoided emissions driven by new energy projects.

Corporate plans should factor in emissionality

Emissionality isn’t just relevant for policymaking. The voluntary procurement of clean energy by corporates has and will continue to be an important driver of energy sector transformation. Corporates and other parties should also consider the emissionality of their investments to maximize the potential climate benefit and transformation potential of their energy procurement. A?white paper ?recently published by energy consulting firm TCR, investigates the emissions impacts of various procurement strategies and advocates for use of emissionality in decision making and carbon-matching in market-based procurement. Some companies have already begun this journey, but the lack of avoided emissions reporting capability in Scope 2 inventories will be a barrier for wider adoption.

Fortunately, the GHG Protocol Standards are entering a significant revision period and we, along with other?industry leaders , are recommending that avoided emissions reporting be institutionalized in the new guidance.?Bloom Energy has for many years worked with research partners to produce project-based avoided emissions assessments from our distributed fuel cell projects. That’s why we take the step in our?sustainability reporting ?to disclose both absolute and avoided emissions to highlight the near-term impact of our solutions on their local grids.

Near-term avoided emissions must be our collective north star as we strive to create a flexible energy system capable of arming policymakers and market participants with the most sophisticated tools to drive the most immediate emissions reductions today.

Stephen Lamm is Bloom Energy’s Senior Director of Sustainability

Subscribe for more stories like this on Bloom Energy's newsroom .