Author: Mark Mondik

Mark Mondik is the vice president for carbon markets at 3Degrees. In his role he helps organizations reduce their environmental impact by using the creative carbon solutions.

Tackling the Decarbonization of Transportation

electric buses fleet

By now, many of us have heard the statistics and news reports: organizations need to be moving at a much faster pace to address the global climate crisis and meet the Intergovernmental Panel on Climate Change (IPCC) report’s warning of limiting warming to no more than 1.5 degrees Celsius.

While this information might feel overwhelming, we don’t interpret it that way for two reasons. First, there has already been good progress made reducing Scope 2 emissions with increased investment in renewable energy. From utilities taking action to switch to cleaner fuels for their power plants, to companies stepping up to invest in increasingly cost-competitive renewable electricity, emissions from electric power usage have been on the steady decline. Next, we know exactly where we need to turn our collective efforts to have the biggest impact on reducing GHG emissions: the transportation sector.

Put simply, we have the map and know the road to take – now it’s a matter of mobilizing and taking action.

The road to reducing transportation emissions

In 2016, the transportation sector surpassed the power sector as the larger emitter of greenhouse gasses (GHG) in the U.S. (responsible for 27% of emissions), driven by changes in both consumer and business market behavior. A confluence of activities is resulting in a larger transportation carbon footprint: the growth of e-commerce, including international shipping, increased business travel as a result of globalization, and more.

While solutions to transportation emissions are within sight, they come with challenges. Most will take time to become fully practical to implement on a large scale, and will require a significant amount of financial investment and policy support to get there. The good news is that progress has already been made in a few notable areas, including fuel efficiency (vehicle manufacturers have made significant improvements in fuel economy) and advanced aerodynamics. However, the solution that will have the biggest impact on emissions is undoubtedly the transition to low-carbon transportation fuels (including renewable electricity).

Incentives can accelerate the transition to low-carbon fleets

Although low-carbon fuels, such as renewable power and renewable natural gas (RNG), are gaining traction, the transition to these fuels will take time. New vehicles and fueling infrastructure require large capital investments that are hard to justify before the billions of dollars of existing vehicles and infrastructure begin to wear out. There are, however, some levers available to help support the acceleration of these transitions, such as incentive programs like California’s Low Carbon Fuel Standard (LCFS) and the federal Renewable Fuel Standard (RFS). Market-based incentive programs were designed with the goal of decarbonizing the transportation fuel mix and can actually help fund fleet decarbonization and infrastructure roll-out, which may otherwise be cost-prohibitive to many businesses.

California, Oregon, and British Columbia have incentive programs for low-carbon transportation fuels, and several other states and provinces are considering them. California’s program requires providers of petroleum-based fuels to reduce the carbon intensity of their fuel mix by 20% by 2030, as compared to a 2010 baseline. The LCFS incentivizes low-carbon fueling in California by allowing alternative fuels, such as electricity or renewable natural gas, to generate credits that can then be sold in the LCFS market. Organizations already engaged in low-carbon fueling may be eligible to register those activities under what are referred to as LCFS “pathways”. For organizations that have yet to transition to low-carbon fuels, the LCFS can act as a financing mechanism to help fund the transition costs.

The role of carbon offsets

In addition to incentive programs, carbon offsets are another market mechanism that play a role on the road towards decarbonizing transportation. While they are not the end goal, carbon offsets can provide a funding mechanism for programs to decarbonize auto manufacturing, support the rollout of EV or biofuel infrastructure, or recycle vehicle waste.

 

We have a map of viable pathways for decarbonizing transportation. And there are many examples of organizations already taking action and mobilizing others to follow — but we’re going to need many more to start down this road if we’re going to make a true impact on lowering our transportation emissions. We hope that the growing availability of market-based incentives mentioned above encourages your organization to step up and take the wheel.

 

Uniting forces to foster environmental change

Group of dairy cows

The power of markets

I believe in the power of markets. Markets create incentives, and incentives change the way we behave. As my colleague Scott Eidson recently wrote, that’s why we we are excited to combine the market power of 3Degrees and Origin Climate into a single force for environmental change that creates economic prosperity and drives meaningful emissions reductions to tackle global climate change.

Having spent my early career in finance and in business school in New York City, I like to say I was “raised by capitalists.” But unlike many of those capitalists, my primary goal would become harnessing the power of markets for positive change rather than for self-gain.

Critics of market mechanisms like to focus on the element of self-gain. Money, an intrinsic part of most markets, is the “root of all evil,” they say. But it is the love of money that is the root of evil, not money itself. Money is just a mechanism used to store value, just like markets are simply mechanisms that help solve problems efficiently by allocating resources to where they are most effective.

Making markets work for the environment

And this is the aim of our environmental markets work at 3Degrees. Our customers understand that pollution has a real cost and that markets offer a real solution. In 2016 alone, our combined customer base channeled nearly $40 million into these markets, helping to fund the operating costs of over 400 renewable energy and other emission reduction projects—and hundreds of jobs—across the United States. And this doesn’t even count the $1+ billion in financial commitments our consulting clients have made directly to projects over the last couple years.

And our numbers are growing. Both 3Degrees and Origin Climate have grown steadily over the last three years as more buyers enter or increase their participation in this market. The combination of our firms will further accelerate this, as together we are equipped to provide a broader range of products that funnel cash into projects that literally change the world.

Dairy cow at a dairy digester

Turning waste into energy (and carbon offsets)

I have seen this change firsthand. For example, we work with more than a dozen family-owned dairy farms that, prior to having access to environmental markets, vented methane gas from livestock manure into the atmosphere while buying electricity from a grid powered by fossil fuels. Since the advent of products like renewable energy certificates (RECs) and carbon credits, these farms have been able to install technology that captures this methane and use it to generate their own electricity. It also reduces odor and groundwater pollution at the same time. So in the end what these markets are achieving is nothing short of transformation of entire industries.

There are many examples of this kind of industrial transformation. An environmental market that efficiently channels funding to projects like this and thus serves as an agent of change simply makes sense. Just like conservation of natural resources makes sense. In a world that sometimes feels devoid of common sense, this comes as a welcome sigh of relief.

More on 3Degrees + Carbon Markets

Originally published on  LinkedIn