Month: September 2020

Inspiration and Accountability from the B Corp Movement

remote worker on video call b corp mug

Here’s how the B Corp movement guides businesses like ours in the necessary work to do better.

3Degrees was recently recertified as a B Corporation, and we’ve been part of the movement to use business as a force for good for eight years and counting. It’s hard to imagine a more poignant time to receive this news than September 2020, when 3Degrees’ employees and our neighbors are facing challenges that continue to mount. After six months of working remotely during a global pandemic, many of our teammates are also dealing with kids going back to virtual school, the immediate threats of extreme weather, and so much more. 

I think it’s safe to say that all of us recognize a clear need to make things better. It’s clear that the devastating impacts of climate change are already here. It’s clear that workers need and deserve respect, care, and thoughtful leadership from their employers. It’s clear that we must build toward a better, more equitable future. 

The B Corp movement has been an important source of grounding, guidance, and inspiration for our company. Especially today, the commitment to positive action within our B Corp community gives me great hope for tomorrow.

Why B Corps Matter, Now More Than Ever

Sustainable Capitalism

The B Corp movement is about creating a new version of capitalism, one that sustains and even improves our society. The B Corp vision calls for more than financial gains for a few; Certified B Corporations commit to stakeholder capitalism, in which business serves not just shareholders but also stakeholders: customers, suppliers, employees, and communities. This is a vision recognized by nearly 200 Business Roundtable CEOs, representing major U.S. companies. And now is the time for businesses to commit to this vision.

3Degrees arrived at this vision partially because we started this business to create positive change. The climate emergency was clear to us when we founded 3Degrees, and when we learned about B Corp certification we didn’t hesitate to pursue it (read our full B Corp story here). Despite challenging financial times for our business, we invested in becoming a B Corp and were certified in 2012.  

As 3Degrees has worked to address climate impact around the world in recent years, we’re proud to see the B Corp model being embraced by global business leaders, and crucially, large companies as well. This month, four multinational B Corp companies launched the B Movement Builders initiative, challenging large companies with at least $1B in revenue to adopt the B Corp vision. It’s heartening to see other leaders stepping up in spite of, and because of, the challenges humans face today. 

As Hallvard Bremnes, Global Head of Sustainability at Givaudan, says: “The current situation has even more acutely shown the interdependence between performance and purpose and our need to play a role in changing the balance of this dynamic for Givaudan and beyond.”

Meaningful Climate Action

When your business becomes a B Corp, you declare that “business ought to be conducted as if people and place mattered. … and thus we are responsible for each other and future generations.”

3Degrees’ business is built around climate action, and we see the urgency for all businesses to do more to reduce their greenhouse gas emissions and negative climate impacts. That’s where the B Corp Climate Collective and its Net Zero challenge come into the picture. 

In December 2019, we joined 500+ B Corps in a pledge to reach Net Zero by 2030. That’s an aggressive goal for most companies – and 20 years short of the 2050 goals set in the Paris Climate Agreement. As if that wasn’t impressive enough, today the Net Zero by 2030 list is more than 700 companies long! We’re looking forward to the progress this strong coalition will make in the months and years to come.

Justice, Equity, Diversity, and Inclusion

There is no climate justice without social justice.

2020 is teaching us many lessons, and one of the most important lessons for me is that business leaders must fight for racial justice and equity.

The police killings of Black Americans, subsequent police violence at protests across the country, and so much more makes it impossible — and unconscionable — for people with privilege to ignore the continued racism and inequality in our institutions. 

At 3Degrees, we’ve been working to undo our own role in upholding inequitable systems. We’ve learned that meaningful climate action must be anti-racist and equitable. And now we’re learning how to practice these lessons. Once again the B Corp community helps guide us and hold ourselves accountable with climate justice resources, working groups, and more.

Businesses for a better future

If you’re still with me, and you’re in the business world, I want to challenge you to consider how your company can contribute to a better future. The turmoil around us makes it hard to see the forest for the trees, but it’s so important that you try. Because our current challenges only underscore the reasons why every business must take action now to be a part of something better. For 3Degrees, the B Corp community has helped us do that. Our B Corp certification has helped us achieve more than we thought possible, and we commit to doing even more in the future. 

I hope it can be a guide for you, too. The B Impact Assessment, a free tool to measure your business’s impact, is a great place to start.

Market-based incentives for transportation: Driving down emissions while generating revenue through the LCFS

low-carbon-fuel-standard

In 2016, transportation surpassed the power sector as the largest emitter of greenhouse gases in the U.S. Since then, reducing emissions from the transportation sector has become a policy priority.  As efforts to decarbonize transportation fuel emissions ramp up, so too does the development of market-based incentive programs and the regulatory frameworks to govern them.

California’s Low Carbon Fuel Standard (LCFS) is the most developed market-based incentive program, and it is successfully working to help reduce state-wide transportation emissions by incentivizing reductions in the carbon intensity (CI) of fuels used in the state. Other regions have created LCFS-like programs, or are considering adopting similar initiatives. Oregon and British Columbia, for example, have enacted clean fuel programs, and Washington and New York have proposed legislation for similar state-wide initiatives. The concept of a federal LCFS-like program has also been floated by several different stakeholders — specifically, the House Select Committee on Climate Crisis has recommended it in their congressional action plan. For these reasons and more, these types of market-based incentives are poised for continued growth and are likely to be adopted in many other regions across the country and around the world.

HOW DO LCFS PROGRAMS WORK?

California created the LCFS in 2010 with an initial goal of reducing the CI transportation emissions by 10% by the year 2020; that goal was later updated in 2019 to target a 20% reduction by 2030. Administered by the California Air Resources Board (ARB), the LCFS rewards the use of fuels with a lower CI than conventional fossil fuels, in an effort to incentivize innovation in transportation fuel, reduce greenhouse gas (GHG) emissions, and improve the state’s air quality.

<img=”https://3degreesinc.com/wp-content/uploads/2020/09/Graph-LCFS-3D-2.png”>LCFS-transporation-emissionsSource: https://ww2.arb.ca.gov/sites/default/files/2020-05/basics-notes.pdf

From extraction to combustion, the LCFS’s focus on CI covers all aspects of the transport fuels’ lifecycle. The state-mandated 20% reduction target applies to both producers and importers of transportation fuel sold or dispensed in California. By comparing their fuel’s CI to the state’s benchmark, entities generate either credits or deficits. Entities that produce or import fuels above the benchmark, such as gasoline or diesel, generate deficits. These deficits must be offset by credits, which can either be generated through the development of their own low-CI fuels or purchased from others who have generated credits for low-CI fuel distribution. Examples of low-CI fuels include ethanol, renewable diesel, natural gas, and electricity.

An LCFS credit is an environmental commodity that represents the use of a low-CI fuel in California. These credits are sold on the open market, so their value is dictated by standard market factors like supply and demand, and therefore fluctuates.

LCFS credit generating vehicles

Credits are issued in units of metric tonnes of CO2e based on the difference between the lifecycle emissions of the low-CI fuel and the annual CI target

HOW TO BEST UTILIZE LCFS PROGRAMS

Any organization with a transportation or operational footprint in California, or any other region with similar incentive programs in place, can benefit from the LCFS and should take advantage of the opportunity to help further decarbonize their fleets. 

California’s LCFS program incentivizes reducing transportation emissions by recognizing the value of low-CI transportation fuel. Electric vehicles can generate credits using grid power, however, using renewable power further increases LCFS credit generation. The use of renewable power can be from either on-site renewables or use of eligible renewable energy, including purchases of renewable energy certificates (RECs).  EV charging matched with renewable energy increases LCFS credit generation by >30% as compared to using  standard grid power. Over the past year the value of increased LCFS credit generation is about 3-4 times the cost of the REC. 

With few exceptions, the revenue generated from the LCFS by EVs must be reinvested into further EV adoption, and ARB requires annual reports to show how funds are spent.

GUIDANCE FOR NAVIGATING LCFS PROGRAMS

LCFS compliance is uncharted territory for many organizations, as carbon accounting and state program administration is generally not a core function of many businesses. Credit generation and monetization involves knowing the regulatory and reporting requirements, as well as market participants and opportunities. To ensure your organization is maximizing the benefit from these programs — and doesn’t make any inadvertent missteps — third-party advisers can take on the administrative load from pathway eligibility and vehicle registration, quarterly and annual reporting, implementation of carbon intensity enhancements, and credit monetization.  

For organizations interested in leveraging the LCFS to reduce their transportation footprint and subsidize further transportation decarbonization within their California operations, a trusted advisor can offer many benefits, including:

  • Aggregating your organization’s credits to help realize a higher market price
  • Helping your organization gain access to eligible zero-CI green power to increase credit generation
  • Providing your organization with a network of corporate buyers to tap into to improve selling power.
  • Helping your organization mitigate regulatory risk by providing a deep understanding of the regulatory landscape, incentive changes, pricing trends, and custom credit sales agreements

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If you’re interested in exploring LCFS programs, 3Degrees can help you navigate the process.

 

Corporate PPA performance in Europe during market change

field with distant wind turbines

Since Germany enacted the first Feed-in Tariff (FiT) for renewable energy back in 1991, the growth of renewables in Europe has been largely dominated by the FiT structure and country-specific renewable mandates. In recent years, political support for FiTs has diminished as the levelized cost of energy from renewables has dropped. As a result, competitive auctions have taken hold and corporate customers have entered the market to directly procure renewables with a goal to achieve more aggressive emissions reduction targets than those set by the European Union’s 2016 revised Renewable Energy Directive (“RED II”, 32% renewable energy by 2030).  

The tremendous growth of corporate power purchase agreements (PPA) seen in the U.S. since 2015 appears to be spreading to Europe and other regions as corporates increasingly address their Scope 2 emissions globally. No two markets are alike in Europe, so let’s take a closer look at the available markets and assess which ones represent the best value for corporate PPA transactions.

The European Union is composed of 28 countries and the energy market is diverse and complex. Today, renewable energy PPAs are available to corporate customers in the following countries: the UK, Ireland, Netherlands, Nordics (Denmark, Sweden, Norway, Finland), Spain, France, Germany, and Poland. A recent survey by Bloomberg New Energy Finance on the best PPA prices across the European market found that the best prices for onshore wind exist in Sweden and Spain has the best prices for solar. 

However,  price surveys alone do not reflect the underlying value represented by these PPAs.  Many corporate customers are seeking to gain the necessary level of sophistication to analyze future market scenarios to support informed decision making. 3Degrees believes that the key to success includes realistic and rigorous analytics of market fundamentals affecting wholesale prices now, and in the future. To assess the best value for PPAs, key questions to ask include: 

  • How are evolving local renewable energy development policies and interconnection guidelines shifting the project development landscape and optimal choices for corporate customers?
  • How are EU-based PPAs in Europe considered in the context of cross-border RE100 claims and Guarantee of Origin (GO) registry transfers within AIB-member countries?
  • What is the existing fuel mix in each country and how much does the cost of the EU carbon trading scheme (EU ETS) influence wholesale electricity prices?

The answer to the first question above certainly impacts where future energy development is likely to occur and where PPAs will be an option in the future. But the second two questions are more likely to dictate the net value of a PPA to a customer.

As stated in a previous article on U.S. VPPA market fundamentals in the context of COVID-19, the global pandemic has also introduced volatility into the European energy markets this year. Through September, the largest markets in Europe witnessed a reduction in demand ranging from 10% (Germany) to 25% (Spain and Italy) relative to historical seasonal averages. Rising COVID-19 case counts across Europe also signal potential future lockdowns with energy forward contracts weakening in response. We take these black swan scenarios into account when analyzing the value (or cost) potential of VPPAs. While no renewable energy advisor can predict when or how dramatic the downside will be, it’s critical to incorporate such potential impacts in the value analysis of a long-term PPA.  

Setting aside the volatility of 2020 for a moment, we can derive potential value of renewable energy PPAs by country with a lookback at historical prices from 2017-2019 and available PPA rates by technology, as shown in the graphic below (values are rounded). The common evaluation metric in this scenario is €/GO, the commodity a corporate purchaser receives in a standard VPPA transaction. Red values in parentheses show a net cost per GO, while values in black show a net positive value.

EU-PPA-chart

It is logical to wonder why developers are willing to settle at below market given these potential project values. The answer? It’s the corporate buyer that is taking on the wholesale market price risk, not the developers or financiers. In order to secure fixed revenue streams from a credit-worthy buyer and, in turn secure financing to build the project, developers are willing to forego potential upside seen here to eliminate cash flow volatility for their equity and debt investors.  

Additionally, PPA prices are only one part of the equation corporate buyers need to consider.  Real value is derived from a careful analysis of not only historical wholesale prices, but also the confluence of factors unique to each market across Europe. We see strong near-term opportunities in certain markets for corporate buyers to achieve their emission reduction goals. As we witness more buyers entering the European PPA market over the coming years, market supply and demand fundamentals will continue to evolve along with the unique value propositions represented by country and renewable energy technology.  

3Degrees’ team of experts is monitoring and analyzing the impact of these changes in real time. If you would like to discuss your goals and see how we can help define or execute on your European PPA procurement strategy, please connect with us.

Pathways to Net Zero Emissions

Since the 2018 release of the Intergovernmental Panel on Climate Change (IPCC)’s special report on ways to limit global warming to 1.5°C, which stated the need to reach global “net zero” emissions by 2050, many organizations have either started or stepped up their carbon reduction commitments to take action to achieve this goal. But committing to reach net zero emissions and understanding how to undertake that effort are two very different things.

This Pathways to Net Zero Emissions white paper covers:

  • A comprehensive assessment of net zero and why it’s important
  • The variety of options available to address Scope 1, 2, and 3 emissions
  • The actions that companies can take to get started immediately, no matter its size or budget

Explore this white paper to learn more about net zero and how your organization can reduce emissions as much as possible, as soon as possible.