Our Partnership with Cloverly

And some thinking about carbon markets

Today, WattCarbon and Cloverly announced a partnership that will provide an end-to-end solution for companies trying to decarbonize. On one end, companies need an automated way to track emissions in their buildings. On the other end, they need an automated way to purchase carbon offsets for those emissions. For most companies today, both of these ends require substantial time and money (mostly spent on consultants). Now, the path forward is simpler. As it should be. We need to make it as easy as possible to get to net-zero.

Many Paths to Net-Zero

Some might ask, aren’t carbon offsets just greenwashing? In some cases, this is almost certainly true. More or less, the lower the price of the offset, the more likely it is to be inconsequential for the decarbonization of the planet. More to the point, we haven’t passed the 420 ppm threshold of CO2 in the atmosphere just because we’ve cut down too many trees. Even though we will need to plant more trees, it’s the emissions in the first place that matter most.

Eliminating emissions from fossil fuel combustion will require a combination of building enough clean energy supply and transmission to meet our needs every hour of the day, plus electrifying all heating and transportation, and aligning demand for electricity with available clean supply. This is no small feat, and getting there will require an entire industry of specialized companies with compelling value propositions gaining a significant amount of traction in the market.

If someone wants to put resources toward a net-zero goal (i.e., accelerate decarbonization), what’s the best way to move the needle? How do we know where to look for decarbonization opportunities and how do we measure success along the way?

Digitalizing Carbon Emissions

Faster decarbonization requires a better view into the carbon emissions of the built environment. Every building, every vehicle, every device represents a potential opportunity to decarbonize. But in order to wrap our heads around how to value the decarbonization potential of the built environment, we need to move from digitizing carbon emissions to digitalizing carbon emissions.

Digitalization moves us beyond a simple counting exercise (or accounting exercise). It takes an entire operational ecosystem and turns it into data that can be leveraged to make better decisions.

Digitalizing carbon emissions means turning data into a time-series. We need to know what causes carbon emissions to rise and fall (is it more or less electricity use or higher or lower carbon intensity of the grid?). We need to be able to see changes over time, not just in terms of annual totals, but also in the form of sub-annual subtotals. We need to be able to generate the equivalent of financial documents - Profit and Loss statements, Pro Forma projections, Asset and Liability statements, etc.

Next Generation Carbon Markets

The next big phase in the decarbonization of the built environment will be the development of demand-side decarbonization markets. These will be different than what exists today in two respects. First, reducing carbon emissions is much more expensive than offsetting them. To truly move the needle, companies will need to spend a lot more money to offset their emissions. Second, new markets will allow us to be agnostic to particular technological solutions and open to new approaches to decarbonization. If a startup figures out how to build solar panels in hard-to-reach communities, or if a device manufacturer figures out how to avoid using energy during the dirtiest times of day, or if a scientist figures out how to make a better air-conditioner, the bottom line decarbonization value can still be measured and priced accordingly.

For organizations trying to maximize their impact on the planet (in a positive way), these will be exciting times. Imagine that instead of offsetting carbon emissions by purchasing the preservation of a stand of trees in a remote valley, that you instead purchased carbon reductions from schools where students were engaged in an energy conservation campaign to unplug devices at the end of the school day. This initiative might allow the school to sell back more solar power to the grid and reduce the demand for carbon-based energy during peak afternoon demand times. Or maybe you could purchase carbon emissions reductions from a company that specialized in swapping fuel-oil furnaces for air-source heat pumps. The carbon market value of the new heat pumps might be enough to expand the territory of the business, offer deeper discounts to customers, or train more workers to serve more customers.

Our partnership with Cloverly starts to hint at some of these possibilities. We’d love to hear from others who have been thinking about this potential.  What else is possible if we start to value actual decarbonization instead of just trying to offset what we are already emitting?