Plug-in hybrids are better for the climate than 100% battery electric vehicles across the grid emissions spectrum and at every stage of the product lifecycle

Kumar

<h2>Is there a problem with how we are electrifying personal transport?</h2>
I recently came across Toyota&rsquo;s <a href="https://autos.yahoo.com/why-toyota-isnt-rushing-sell-154000759.html">claim</a> that the critical minerals needed to make a single battery electric vehicle (BEV) could be used instead to manufacture 6 plug-in hybrid electric vehicles (PHEVs) or 90 hybrid vehicles, which would save much more emissions over the vehicle lifetimes than the one BEV. Could this be true or is this a misleading claim by a company that has fallen behind in the EV race?&nbsp;
There is a broad understanding that EVs face three main challenges in the next decade: 
<ol>
<li>Some of the critical minerals needed for EV batteries could be supply-constrained by 2030</li>
<li> Mineral/battery supply chains are largely powered by fossil fuels today and produce significant emissions well before the EVs hit the roads</li>
<li>Grid electricity used to power the EVs is not carbon-free</li>
</ol>
All of these issues are expected to BE resolved in the <a href="https://www.ft.com/content/44230108-d980-446a-b5ca-81b175f8b47d">long term</a> as new mineral production comes online (increasingly powered by clean energy) and new battery chemistries go into production, while grid emissions continue to trend down with more solar and wind energy supported by utility-scale batteries.
But the short term is a different story. How should we think about the relative climate benefits of BEVs, PHEVs and even non-plugin hybrids? As a long-time practitioner of life-cycle assessment (LCA), I can&rsquo;t imagine a better method than LCAs to help answer this question.
<h2>What can life-cycle assessment tell us?</h2>
The simple LCA that I put together uses an internal combustion engine vehicle (ICEV) as a baseline and looks at the relative benefits of switching to a BEV or a PHEV using a range of electric grid emissions in the US and accounting for the grid gradually becoming cleaner between now and 2035. My goal was to create a framework to better inform policies and purchasing decisions that can drive emission reductions as much as possible by 2035.&nbsp;
All vehicles are assumed to be midsized cars manufactured today and driven in the US for 125,000 miles (200,000 km) between now and 2035. The global battery supply chain is assumed to be dominated currently by China based on IEA&rsquo;s <a href="https://www.iea.org/reports/global-ev-outlook-2022/executive-summary">2022 Global EV Outlook</a>. Grid emissions make a big difference, so the LCA looks at three distinct cases: the US, California (CA), and the US Midwest (MW) averages. CA represents the lower end of the grid emissions spectrum within the US while MW is near the high end. Grid emission factors represent annual averages in each region.
The details of the LCA are <a href="https://docs.google.com/spreadsheets/d/1T6uSmxr9k-m8nLBbU78C7pbUwUAi-2EPeWDQkorJDDE/edit?usp=sharing">here</a> in a spreadsheet for anyone interested in digging into the details. The results are consistent with the <a href="https://www.iea.org/data-and-statistics/charts/comparative-life-cycle-greenhouse-gas-emissions-of-a-mid-size-bev-and-ice-vehicle">comparative LCA</a> published by the IEA, but customized for US regions and using a realistic upper bound for the emissions from battery mineral production.
<h2>Plug-in hybrids are better for climate</h2>
I have captured the key results from the LCA in four charts. Figure 1 below shows that you would have to drive a BEV between 35,000 and 55,000 miles in the US just to reach breakeven emissions against an ICEV. This is mainly because of the higher embodied carbon in the lithium-ion battery (either <a href="https://www.sciencedirect.com/science/article/abs/pii/S0048969722001954">NCM or LFP battery chemistry</a>) from the production of minerals and battery assembly which are largely powered by fossil fuels in current-generation batteries. This &ldquo;carbon debt&rdquo; must be paid off before we see any benefit from the BEV.&nbsp;
The other reason is that the electric grid still depends on fossil fuels like coal and natural gas to generate about 60% of the electricity today in the US, which is expected to drop to 30% by 2035. Over a vehicle's lifetime of 125,000 miles over a period of 12+ years, the BEV reduces emissions by 41% (US average) compared to a gasoline-powered vehicle after considering the expected improvements in grid emissions in that period.
Figure 1. BEV vs ICEV, lifecycle GHG emissions comparison
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/3ca5eadb0af693c30db103086a01a1d8be0cefbc.png?" alt=" BEV vs ICEV, Lifecycle GHG Emissions Comparison" />
Figure 2 similarly compares a PHEV against both a non-plugin hybrid electric vehicle (HEV) and an ICEV. Breakeven against the ICEV happens at between 10,000 and 15,000 miles, much sooner than with a BEV. A midsized PHEV has a battery size that&rsquo;s just one-sixth of a BEV&rsquo;s (Toyota is correct on that point), so the emissions from battery production are also roughly one-sixth. The PHEV still uses grid power, and the analysis here assumes that it uses gasoline for 30% of the miles driven.
Even with that much fossil fuel in the use phase, the PHEV reduces lifetime emissions by 46% on average in the US -- slightly better performance than the BEV with a much lower dependence on critical minerals. The smaller battery and the hybrid technology make a big difference. The PHEV also largely beats the HEV on cutting emissions and the two are about even in the MW region where the grid emissions are high.
Figure 2. PHEV vs HEV vs ICEV, lifecycle GHG emissions comparison
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/9ce66d050a99d05fc1543f54202d20feb87d53c6.png?" alt="PHEV vs HEV vs ICEV, Lifecycle GHG Emissions Comparison" />
Figure 3 shows that PHEVs are simply better for climate than BEVs across the grid emissions spectrum and at every stage of the product lifecycle. BEVs begin to narrow the difference as the lifetime mileage increases but never reach parity with PHEVs within the 125,000 miles considered here. It is very difficult to work off the high embodied carbon in battery production when the use phase is powered by a grid that is still in a slow transition to clean energy.&nbsp;
Figure 3. PHEV vs BEV, lifecycle GHG emissions comparison
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/c2ee657ffacd7a7efe9cb1d688fe360dfd2ad284.png?" alt="PHEV vs BEV, Lifecycle GHG Emissions Comparison" />
Figure 4 breaks down the lifecycle emissions of the different technologies at the full 125,000 miles. While the use phase has traditionally dominated automobile emissions, BEVs reverse this trend by emitting 56% of their total lifecycle emissions during production. Mineral production and battery manufacture are holding back BEVs from realizing their full potential at present. It is worth noting that the results presented here could of course move around as the underlying assumptions in the LCA change but should nevertheless be directionally correct when comparing current vehicle technologies.
Figure 4. All vehicle technologies, lifecycle GHG emissions breakdown at 125,000 miles
<img style="display: block; margin-left: auto; margin-right: auto;" src="https://illuminem.b-cdn.net/articlebody/fcc8138a8a489a9681e9473b92f7d6a65618dd3f.png?" alt="All Vehicle Technologies, Lifecycle GHG Emissions Breakdown at 125,000 Miles" />
<h2>What about the supply of critical minerals?</h2>
A <a href="https://www.energy-transitions.org/wp-content/uploads/2023/07/ETC-Material-and-Resource-Requirements_vF_Updated.pdf">new report</a> from the Energy Transitions Commission concludes that, even with increased utilization rates and operating efficiency, up to 250 new mines could be required to meet the demand for critical minerals by 2030. Graphite, cobalt, lithium, and neodymium are the primary minerals that are likely to see supply constraints by then unless new production comes online rapidly. Recycling will not play a key role this decade because the number of EV batteries and similar products reaching their end of life will be relatively small compared to the demand for raw materials.
This tells us that we must treat critical minerals as a finite resource in the short term, at least through 2035, and think in terms of extracting the maximum climate benefit from each kg of minerals. This means smaller battery sizes and, in a rational world, a larger role for PHEVs. The longer term is less of a concern: known mineral deposits exceed the total projected demand for both energy transition and other uses through 2050, and technology will likely evolve well before we hit that date.
<h2>Plug-in hybrids are a logical intermediate technology</h2>
While the electrification of personal transport is necessary to get to net zero emissions by 2050, we could easily make the transition much harder by racing towards 100% electrification before we have sufficiently expanded, diversified, and cleaned up the mineral supply chains. A lifecycle perspective of transport solutions would suggest that electrification should be done in alignment with projected improvements in battery production as well as clean power generation. PHEVs are a logical intermediate technology in this transition that can deliver better climate benefits today while using critical resources more efficiently.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

Why plug-in hybrids are better for the climate than full EVs today

It is time to replace the “companies will fix it” narrative that we have heard for so long with “governments should fix it.”

Harald

From the very early days of climate discussions, a basic premise around decarbonization has been that we can only &ldquo;manage what we can measure.&rdquo; So, we started measuring in earnest with model-based emission calculations and other snazzy tools &ndash; and got really good at it &ndash; but after more than two decades, we are still waiting for the much-anticipated managing part to happen.
<h2>The intractability of scope 3 emissions</h2>
Emissions accounting and disclosures have now exploded into a large and growing industry of SaaS platforms, data providers, consultants and ESG ratings services. In the US, the upcoming <a href="https://www.wsj.com/articles/secs-climate-disclosure-rule-isnt-here-but-it-may-as-well-be-many-businesses-say-854789bd">SEC climate disclosure rules</a> will essentially codify the &ldquo;scope 1-2-3&rdquo; reporting standard for all public companies. Since scopes 1 and 2 are relatively trivial to track and report, most of the cost and effort in climate disclosures are going, and will increasingly go, into scope 3 which can exceed 80-90% of the total emissions in many industries.
Since supply-chain data is hard to get &ndash; even for large companies &ndash; most scope 3 estimates use secondary or industry-average data for material production and processing. This alone makes the estimates impossible to interpret or to act on because the numbers have no plausible link to specific suppliers or even geographies. Now, even if a company were able to get precise data from its suppliers (a big &lsquo;if&rsquo;, we think), it should be kept in mind that reducing scope 3 emissions can only be achieved by convincing suppliers to implement vast, disruptive, and costly changes to how they run their companies &ndash; for which they have neither the incentives nor the capabilities.
This <a href="https://illuminem.com/illuminemvoices/corporate-net-zero-is-a-heavy-lift-emission-reduction-pools-could-help">intractability of scope 3 emissions</a> is the fundamental reason that there are few, if any, cases (at least none that we can confidently cite) of large companies that have significantly slashed their supply-chain emissions &ndash; in other words, where measuring scope 3 emissions of a particular company led to a significant, identifiable reduction in those emissions.
Let us talk hypothetically for a moment. What if every company in the world simply focused on its own scopes 1 and 2 so that there would be no need to account for or reduce supply-chain emissions? Everyone&rsquo;s scope 1 and 2 is someone else&rsquo;s scope 3 after all. What would that do &ndash; could that be a solution? Well, it would greatly simplify the reporting. Good news! But it would not get us any closer to decarbonization.
This is because the world of decarbonization is not a conveniently siloed ecosystem of companies that operates separately from society. We should keep in mind that behind all &lsquo;scope 3 emissions&rsquo; there are&hellip; people! Consumers like you. And us. We drive cars, we fly to Bali, we import avocados from Chile, we use air conditioning, we live and work in buildings made of steel and cement. All these activities rely on economic systems &ndash; power, industry, agriculture, transportation, the built environment &ndash; that are hideously complex, driven by enormous and growing demand from all eight billion of us global citizens, and cannot simply switch energy sources overnight. In other words, at the end of the day, the world&rsquo;s consumers are responsible for scope 3 emissions and if we think we can solve this problem by demanding that all companies reduce scope 1 and 2 emissions then we are deluding ourselves.&nbsp;
<h2>Scope 3 reporting has not led to decarbonization</h2>
Three things to note:&nbsp;
<ul>
<li style="font-weight: 400;" aria-level="1">This demand for stuff, travel, housing, and food is not going to decline anytime soon, no matter what advocates of degrowth (that we have a lot of sympathy for) might say. And even if consumers, acting in concert, somehow manage to force some of the production away from the most destructive products (as one of us recently <a href="https://illuminem.com/illuminemvoices/to-address-the-climate-crisis-consumers-must-meet-the-technology-halfway">suggested</a>), companies worldwide will still need to produce huge quantities of products &ndash; products that would then perhaps be marginally less carbon-intensive, but this would never be enough to move the needle as much as it needs to be moved.</li>
<li style="font-weight: 400;" aria-level="1">Individual companies operating within &ndash; and embedded in &ndash; these economic systems can do very little to influence the emissions attributable to their own operations. They would have to take extreme steps, such as seriously slashing production, to get to any serious emission reductions, in which case other companies would simply step in to meet the demand &ndash; so the net result would be zero change to emissions.</li>
<li style="font-weight: 400;" aria-level="1">These complex international economic systems can effectively only be changed through public policies &ndash; i.e., government actions &ndash; that address both supply and demand, through taxes, laws, subsidies, and spurring innovation in low-carbon technologies. This is why governments, not companies, are the signatories to the Paris Agreement, and why academics, thinktanks and trackers who try to determine if we as a planet are in line with Paris goals look almost exclusively at government plans (NDCs, in Paris jargon) to tax, regulate, subsidize and innovate, and do not look at all at companies&rsquo; scope 3 reduction targets or transition plans.</li>
</ul>
All of this brings us back to this simple point. Despite the good intentions, reporting scope 3 emissions has not been a starting point for decarbonization but has largely proven to be a dead end. It is premised on the idea that whoever the emissions can be attributed to can also get rid of them. They can&rsquo;t and won&rsquo;t.
<h2>Decarbonization does not require scope 3 emission disclosures</h2>
We already know how to slow down the emissions trajectory and eventually get to net zero &ndash; this does not require more &lsquo;scope 3 emissions&rsquo; information. And the emissions information that is needed &ndash; at the systems level, not at the company level &ndash; is available. In the US, the <a href="https://www.wri.org/insights/inflation-reduction-act-benefits">Inflation Reduction Act</a> is a clear example of how policies and incentives can turbocharge investments in electrification, renewable energy, batteries, and grid upgrades. It was introduced not a year ago and is already beginning to initiate decarbonization at scale. How much did the IRA depend on scope 3 emissions information disclosed by companies? Zero point zero.&nbsp;
Yet, we are wasting so much valuable time forcing companies to disclose their &ldquo;full&rdquo; emissions and then to commit to &ldquo;net zero&rdquo; targets when they in fact have neither the tools nor the incentives to fix the climate problem on their own. Companies, after all, exist to provide specific goods and services to their customers, and they should be allowed to do exactly that while operating within net zero roadmaps established by governments representing all of us.&nbsp;
In other words, it is time to replace the &ldquo;companies will fix it&rdquo; narrative that we have heard for so long with &ldquo;governments should fix it.&rdquo;
<h2>A smarter strategy: go directly to decarbonization</h2>
A much smarter decarbonization strategy would bypass scope 3 emission disclosures altogether and use laws like the IRA as a template to accelerate decarbonization across economic systems. These incentives would need to be combined with strict standards for direct emissions from critical sectors like <a href="https://www.theguardian.com/environment/2023/may/11/new-rules-us-fossil-fuel-power-plant-emissions">power plants</a> and <a href="https://www.epa.gov/newsreleases/biden-harris-administration-proposes-strongest-ever-pollution-standards-cars-and">transportation</a>. Just imagine the simplicity of being able to set national emission reduction targets &ndash; the models here are the 26 countries that already have <a href="https://eciu.net/netzerotracker">net zero enshrined in law</a> &ndash; and then put in place policies to make the private sector do the actual work of getting us there.&nbsp;
No disclosures required. Go directly to decarbonization.
A closing note: If we let companies off the hook on emission disclosures, how will we assess their climate risk? We will have more to say on that topic in an upcoming piece in which we will make the case that a company&rsquo;s scope 3 emissions bear little or no relation to its physical or transition risk.
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illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.
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The 4 D’s of accelerating the transition: Ditch Disclosures, go Directly to Decarbonization

What would most of us be willing to do for the sake of a planet that is gasping for air?

<h2>Chugging along</h2>
As <a href="https://www.nytimes.com/live/2023/06/07/us/canada-wildfires-air-quality-smoke">smoke-filled air</a> from Canadian wildfires blanketed large parts of North America and major insurers just <a href="https://www.cbsnews.com/news/allstate-insurance-state-farm-california/">stopped writing new home insurance policies</a> in California to limit their exposure to climate-induced catastrophes, our consumer economy continued to hum along without a hitch in an eerie contrast.&nbsp;
US <a href="https://www.faa.gov/air_traffic/by_the_numbers">air traffic controllers</a> continued to handle 45,000 flights a day, with over 5000 airplanes in the sky during peak times. Americans collectively drove <a href="https://www.fhwa.dot.gov/policyinformation/travel_monitoring/23martvt/page2.cfm">more than three trillion miles</a> in the last 12 months. The US produced <a href="https://www.ers.usda.gov/data-products/livestock-and-meat-domestic-data/">106 billion pounds of red meat and poultry</a> in the past year. These staggering numbers from the world&rsquo;s largest economy are important because transportation and food production are among the <a href="https://www.epa.gov/system/files/documents/2023-04/Data-Highlights-1990-2021.pdf">largest sources of greenhouse gas emissions</a> and are directly related to our lifestyles.
<h2>The bleak future</h2>
<a href="https://www.oregonlive.com/opinion/2011/12/sustainable_consumption_for_al.html">Sustainable consumption</a> was a common theme in the early days of cleantech more than a dozen years ago. Climate change seemed real but distant, and the hope was that consumers would be part of the solution by consuming thoughtfully. This idea has fallen by the wayside as the climate crisis has become more immediate. It is no longer a future crisis; it is already here. We are now thinking instead about wearing <a href="https://www.nytimes.com/2023/06/07/us/masks-wildfire-smoke-air-quality.html">N95 masks</a> to protect against routine smoke from wildfires and bracing ourselves for the heat waves and power outages to come in the summer.&nbsp;
Climate change that is already in progress is largely <a href="https://www.unep.org/news-and-stories/press-release/temperature-rise-locked-coming-decades-arctic">baked in</a> for the next two decades, but the decades beyond that could go in any number of directions. The<a href="https://news.climate.columbia.edu/2023/01/12/what-uncertainties-remain-in-climate-science/"> biggest uncertainty</a> in climate projections doesn&rsquo;t come from the physics of the planet but is rooted in our own behavior. The trajectory of future climate is still in our control for now, barring any tipping points that may push it over a cliff.
The question that is gnawing at my mind, and maybe at yours too, is what most of us would be willing to do for the sake of a planet that is gasping for air.
<h2>Not all hope is lost</h2>
We still need shelter that is comfortable and a car for transportation in many places. We need these things to be not only efficient but also electrified and then to be supplied with renewable electricity so that the energy we consume daily is carbon-free. This of course means major changes in the energy and transport sectors, which are well in progress. The government incentives that we&rsquo;ve long waited for are here and US private sector investments in renewable energy will <a href="https://www.woodmac.com/news/opinion/us-inflation-reduction-act-set-to-make-climate-history/">double</a> by the end of the decade.
But like most complex problems, the solutions to the climate crisis are not that simple. Yes, we have gotten off to an encouraging start on electrifying buildings and transportation. In order to stay within a 1.5-degree<a href="https://www.un.org/en/climatechange/net-zero-coalition#:~:text=To%20keep%20global%20warming%20to,reach%20net%20zero%20by%202050.">&nbsp;C</a> average temperature rise, we still need to figure out how we&rsquo;ll produce<a href="https://www.iea.org/reports/renewable-electricity"> 60% of global electricity from renewables by 2030</a> and overcome the challenges of <a href="https://www.nytimes.com/2023/02/23/climate/renewable-energy-us-electrical-grid.html">connecting</a> it to the grid.&nbsp;
We also need to find a way to expand worldwide grid-scale battery storage <a href="https://www.iea.org/reports/grid-scale-storage">44-fold</a> by 2030, while also building increasingly large batteries for electric vehicles which could account for half of all auto sales by then in both the <a href="https://www.bls.gov/opub/btn/volume-12/charging-into-the-future-the-transition-to-electric-vehicles.htm">US</a> and <a href="https://think.ing.com/articles/dominant-chinese-electric-car-market-is-slowing/">China</a>. And we need to do all of this while the critical minerals needed for batteries could be in <a href="https://www.energypolicy.columbia.edu/qa-critical-minerals-demand-growth-in-the-net-zero-scenario/">short supply</a> as early as 2025.
The longer-term beyond 2030 is more worrying. The US Energy Information Agency <a href="https://www.eia.gov/outlooks/aeo/pdf/AEO2023_Release_Presentation.pdf">projects</a> that natural gas will continue to supply about 20% of US electricity by 2050. Worldwide, the International Energy Agency <a href="https://www.iea.org/reports/world-energy-outlook-2022/executive-summary">expects</a> energy-related CO2 emissions to decline just 13% by 2050 based on today&rsquo;s policies. If government policies stick only to incentives and do not utilize other tools like emission caps or carbon taxes (as it seems likely), then we may have to rely on unproven and costly technologies like <a href="https://www.c2es.org/document/engineered-carbon-dioxide-removal-scalability-and-durability/">engineered carbon removal</a> to have any chance of preserving a barely livable planet.
This brings us to one of the biggest climate opportunities that we have left on the table so far: modifying our consumption habits to align with what the planet can sustain.
<h2>Change from within</h2>
For version 2.0 of sustainable consumption to have an impact while the climate crisis is accelerating, it will have to be different from the first go-around. Rather than a laundry list of small consumer actions, the focus must be on a few critical solutions that have a clear chance of moving the needle. These solutions must be implemented at scale, which means many of us doing the exact same things every day in order to send the right market signals. Companies will produce what we are willing to consume, so it is up to us to force changes in production.
The Center for Sustainable Systems at the University of Michigan <a href="https://css.umich.edu/sites/default/files/2022-09/Carbon%20Footprint_CSS09-05.pdf">identifies</a> home energy use, personal transportation and food as the three main sources of a US household&rsquo;s carbon footprint. This suggests a roadmap for how consumers acting in concert could change the emissions trajectory.&nbsp;
For starters, this means treating every kWh of electricity and every gram of critical minerals as precious resources, assuming we are already working towards electrifying heating and transportation. We can commit to getting a home energy audit and fixing the energy leaks that are a drain on the electric grid. We can shift our heaviest electricity use, such as drying clothes or charging cars, to <a href="https://portlandgeneral.com/save-money/save-money-home/peak-time-rebates?utm_source=video&amp;utm_medium=social-ad&amp;utm_campaign=Peak-time-rebates&amp;utm_content=2023-ptr-peak-time-rebates-invideo">midday</a> when solar energy peaks and electric grids are at their cleanest.&nbsp;
We can drive the smallest possible electric vehicles to save both energy and critical minerals. We can combine trips and reduce the number of miles we drive. Those of us who are fortunate to have a work-from-home option can use it to take a big bite out of our energy use and emissions from transportation. Typical emissions generated by multiple Zoom meetings each day are <a href="https://kvenkatm.medium.com/should-you-be-worried-about-your-digital-carbon-footprint-f3e67ddb8de1">insignificant</a> compared to driving to the office.
There are other large emission sources in our personal lives for which there are no easy technological solutions. Chief among these are air travel and meat consumption, neither of which can be addressed without confronting our lifestyles more fundamentally. We would have to consciously choose to fly less frequently and eat significantly less red meat.
Explicitly thinking about consuming as few resources as possible is not going to be easy or natural for most of us after a lifetime of consumption limited only by what we could afford financially. The climate crisis, however, cannot be solved with any certainty without a change to that mindset. The challenge now is to figure out how we can maintain a basic standard of living without exceeding our ecological means. Technology can help, but we as consumers should be in the game and meet the technology halfway.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

To address the climate crisis, consumers must meet the technology halfway

The idea of net zero is only about a decade old and followed the IPCC report which stated in 2013 that net anthropogenic emissions of CO2 would have to reach zero in order to eventually stop global warming. Between 2015 and 2020, countries like Sweden and the UK incorporated midcentury net zero targets into law. Today net zero pledges cover 91% of the global economy and 2050 is the universal target year by which all of these pledges must turn into actual net zero emissions. But getting to that endpoint or even to the near-term target of 20–40% reduction in the next decade is a heavy lift for many companies.

The idea of <a href="https://zerotracker.net/insights/net-zero-short-history">net zero</a>&nbsp;is only about a decade old and followed the&nbsp;<a href="https://www.ipcc.ch/assessment-report/ar5/">IPCC report</a>&nbsp;which stated in 2013 that net anthropogenic emissions of CO2 would have to reach zero in order to eventually stop global warming. Between 2015 and 2020, countries like Sweden and the UK incorporated midcentury net zero targets into law. Today <a href="https://zerotracker.net/insights/pr-net-zero-stocktake-2022">net zero pledges</a>&nbsp;cover 91% of the global economy and 2050 is the universal&nbsp;<a href="https://www.iea.org/reports/net-zero-by-2050">target year</a>&nbsp;by which all of these pledges must turn into actual net zero emissions. But getting to that endpoint or even to the near-term target of&nbsp;<a href="https://sciencebasedtargets.org/resources/files/Net-Zero-Getting-Started-Guide.pdf">20&ndash;40% reduction</a>&nbsp;in the next decade is a heavy lift for many companies.
<h2>Going from planet-level to country-level net zero emissions</h2>
The IPCC report was referring to net emissions for the planet as a whole. Major greenhouse gases such as CO2 and methane are <a href="https://earthobservatory.nasa.gov/blogs/earthmatters/2016/12/05/reader-question-does-co2-disperse-evenly-around-the-earth/">well-mixed in the atmosphere</a>, and thus a unit of emission reduction or carbon removal anywhere in the world contributes equally toward the net zero target. This was the logic behind the original <a href="https://cdm.unfccc.int/">Clean Development Mechanism</a>, which allowed industrialized countries to meet their emission reduction targets by funding projects located in developing countries where the cost of carbon abatement might be lower.
The Paris Agreement includes a similar market mechanism in <a href="https://www.abatable.com/blog/article-6-4">Article 6.4</a>&nbsp;that countries can use to trade emission reduction credits. A classic <a href="https://www.wri.org/insights/what-you-need-know-about-article-6-paris-agreement">example</a>&nbsp;is where one country benefits from switching to more abundant clean energy while another country gets credit for the emission reductions by financing that energy transition. The IETA&nbsp;<a href="https://www.ieta.org/resources/International_WG/Article6/CLPC_A6%20report_no%20crops.pdf">estimates</a>&nbsp;that trading in carbon credits could reduce the cost of meeting national targets by $250 billion per year by 2030 (provided of course that these reductions meet <a href="https://ercst.org/wp-content/uploads/2021/02/20190801-Perspectives_2019_Ensuring_Additionality_in_Article_6_eng.pdf#:~:text=Under%20Article%206.4%2C%20the%20Supervisory%20Body%20can%20define,to%20be%20checked%2C%20preferably%20by%20the%20Supervisory%20Body.">additionality</a>&nbsp;and other criteria). A carbon trading regime creates a pool of countries with a larger menu of emission reduction options compared to individual countries.
<h2>How the corporate net zero problem is framed today</h2>
The economics of emission reductions are well understood and have been a part of international climate agreements for decades. But this logic hasn&rsquo;t extended to companies and organizations.
Lacking a universal cap-and-trade scheme, many companies are now setting emission reduction targets in a silo using the <a href="https://sciencebasedtargets.org/resources/files/Net-Zero-Getting-Started-Guide.pdf">net-zero standard</a>&nbsp;from the Science Based Targets initiative (SBTi) with no clear path to achieving those reductions. As much smaller entities than countries, companies naturally have fewer ways of reducing emissions and a significantly reduced ability to finance those reductions. Since the standard requires emission reductions to occur within a company and its value chain &mdash; with carbon credits used only to neutralize&nbsp;<a href="https://www.mckinsey.com/business-functions/sustainability/our-insights/sustainability-blog/now-the-ipcc-has-recognized-that-carbon-removals-are-critical-to-addressing-climate-change-its-time-to-act">residual emissions of 5&ndash;10%</a>&nbsp;&mdash; there is no pooling effect here analogous to what we might have at the country level.
So, what can companies do to meet this target? They can of course electrify heating and transportation, become more energy efficient, switch to renewable electricity that meets <a href="https://illuminem.com/illuminemvoices/c652a34b-c70c-4b84-9bd2-01108034cddf">additionality</a> criteria, etc., within their own corporate boundaries. These steps could address their scope 1 and scope 2 emissions, which are typically not more than 10&ndash;15% of total emissions.
Scope 3 emissions dominate the greenhouse gas inventories for companies that depend on supply chains to produce and distribute their products. Scope 3 reductions will have every company looking up and down its value chain and often finding very few ways to make big cuts. Companies generally use secondary data to model purchased materials in their emissions inventories because primary data from suppliers is hard to come by. This use of industry-average or typical data makes it difficult to choose between different suppliers with any confidence that scope 3 emissions would decline as a result. Even if the data problem could be fixed, simply switching between suppliers is <a href="https://illuminem.com/illuminemvoices/c652a34b-c70c-4b84-9bd2-01108034cddf">unlikely to lead to immediate and additional emission reductions</a>.
Can companies work with existing suppliers to reduce upstream emissions? Actual experience with consumer product companies of all sizes suggests that it is challenging to even identify the exact source and production methods associated with most of the raw materials and ingredients sourced by these companies, let alone reduce the emissions associated with the sourcing. A case in point is the effort by some of the world&rsquo;s largest food and beverage companies to reach <a href="https://www.nytimes.com/2021/12/02/climate/companies-net-zero-deforestation.html">net-zero deforestation</a>&nbsp;in their supply chains by 2020, which produced decidedly mixed results. Mars, one of the largest users of cocoa, was able to trace only 43% of its cocoa to specific farms after a decade of effort. In the meantime, agriculture-driven deforestation continued in the tropics with a <a href="https://www.nytimes.com/2021/03/31/climate/deforestation-amazon-brazil.html">12% year-over-year increase in 2020</a>.
For companies in the retail sector that source most of their non-food merchandise from countries like China, greening the supply chain depends so much on the climate and energy policies of those countries. Scope 3 emission reductions are largely dependent on how fast those countries transition to renewable energy and electrification. Downstream emissions in the distribution and use of a company&rsquo;s products are generally not actionable at all except by radically redesigning those products to minimize energy consumption in refrigeration, cooking, and other product use.
The final barrier for most companies embarking on the net zero journey is cost. Emission reductions, like anything else in business, are not free and will require investment. While carbon credits play only a minor role in the SBTi net zero standard, companies &mdash; at least in the near term &mdash; are scouring the carbon offset market to find good quality credits at an affordable price. This is an indicator that their internal cost of carbon abatement is higher than the market price of offsets at the present time, and therefore the cost of making a company carbon neutral through offsets can be seen as a floor for the cost of net zero.
At a modest price of $15 per tonne of CO2 equivalents, the cost of full carbon neutrality ranges anywhere from <a href="https://kvenkatm.medium.com/who-will-pay-to-make-companies-carbon-neutral-8c09ce918004">0.5% to 3% of gross revenue</a>&nbsp;for companies in consumer sectors such as food, clothing, and personal care products. This will only increase as the demand for carbon credits grows and buyers chase a limited supply of high-quality credits. The cost of carbon neutrality &mdash; and net zero in the long run &mdash; will be a non-trivial impact to a company&rsquo;s bottom line and a significant business risk if it is not proactively addressed.
<h2>Is there a viable path for companies to reach net zero emissions?</h2>
Given the intractability of reducing scope 3 emissions &mdash; which typically make up upwards of 85% of total emissions for many companies &mdash; and the fact that emission reductions will require real investments, it is fair to ask if there is a viable path for most companies to get to a sizable emission reduction in the next decade and reach net zero by 2050.
Companies could always benefit from larger changes in the economy. Depending on the implementation of the <a href="https://www.nytimes.com/interactive/2022/08/02/climate/manchin-deal-emissions-cuts.html">Inflation Reduction Act</a> passed last year, the US as a whole could see a 40% reduction in emissions by 2030 (relative to 2005 levels) through incentives in areas like cleaner electricity, electrification of transportation and heating, carbon capture technologies, and hydrogen fuels. These incentives could help pay for a part of the scope 1 and scope 2 reductions for many US-based companies as well as some scope 3 reductions if suppliers are located within the US. But supply chains are global in many cases and companies that are serious about their net zero targets will need more definitive tools to help them get there.
<h2>Collaboration could be key to reaching net zero targets</h2>
One way to find a path forward is to discard the model of companies working on emission reductions in silos of their own and revisit the proven logic of creating large pools of participants. Companies could form consortiums in order to create and expand emission-reduction pools, with standards-based commitments to reduction targets for 2030 and 2050. Consortiums could be regional, national, or even international &mdash; the geographic locations of member companies would not matter.
Member companies would cap their total emissions in alignment with consortium-level targets and then trade verified emission reduction credits amongst themselves, effectively seeking the lowest-cost emission reduction pathways within the consortium. Companies that are able to exceed their reduction targets could monetize the excess reductions by making those opportunities available to fellow members. Other companies could buy these credits if they are unable to cut emissions on their own at a lower cost &ndash; just like how <a href="https://www.worldbank.org/en/news/feature/2022/05/17/what-you-need-to-know-about-article-6-of-the-paris-agreement">countries can meet their targets at the lowest cost by trading carbon credits</a>.
Companies would also be able to use&nbsp;<a href="https://native.eco/2018/01/carbon-insetting-what-it-is-how-it-works/">insetting</a>&nbsp;projects within their organizations or supply chains to both meet their own reduction targets as well as generate credits for sale to other members. If companies across the supply chain join a consortium, that would enable sharing of primary data between companies and potential supply-chain optimizations that would otherwise be difficult to undertake.
Ideally all annual company-level emissions inventories and emission reduction calculations within the consortium would be done using a common set of tools and protocols. The same group of internal or external experts would run the calculations for all companies, and another independent group would conduct peer reviews. This would increase standardization and transparency while alleviating the reporting burdens on member companies.
What if a consortium needed an infusion of lower-cost credits to help members meet their targets? The combined purchasing power of the consortium could be used to fund vetted&nbsp;<a href="https://www.energy.gov/fecm/carbon-dioxide-removal">carbon removal</a>&nbsp;projects in parts of the world where it makes economic sense. Member companies would simply buy into these projects and pay for verified carbon credits. This also means that net-zero standards would need to provide more flexibility around the use of carbon removal credits for meeting targets.
Consortiums could also address the procurement of&nbsp;renewable electricity, which is often a poorly understood tool. Purchase of renewable energy certificates is easy but does not provide any guarantees of additionality. Consortiums could use their size and purchasing power to directly negotiate&nbsp;<a href="https://www.epa.gov/sites/default/files/2016-09/documents/webinar_kent_20160928.pdf">power purchase agreements</a>&nbsp;(PPAs) for procuring renewable energy in bulk, which would allow member companies to address their scope 2 emissions with more confidence. A concrete example of this is Walmart&rsquo;s renewable energy accelerator known as&nbsp;<a href="https://gigatonppa.com/">Gigaton PPA</a>&nbsp;which puts together aggregated PPAs that Walmart&rsquo;s suppliers can participate in. Suppliers will eventually be able to claim scope 2 emission reductions as the PPA projects are implemented while Walmart will benefit from the aggregated scope 3 emission reductions as a result.
In addition, consortiums could trade verified carbon credits with other similar groups, dramatically scaling up the effective size of the pools and the available emission reduction opportunities. Management and governance of the consortiums would of course need care and attention.
<h2>How much of a paradigm shift is this?</h2>
The paradigm shift I am proposing here is that most companies would no longer work toward net zero on their own but would collaborate with other companies &mdash; big and small, in the same or different industries &mdash; to tackle a huge, common, and previously intractable problem. This is not a new paradigm for reducing emissions &mdash; it has been tested and proven at the country level dating back to the&nbsp;<a href="https://unfccc.int/kyoto_protocol">Kyoto Protocol</a>. In the absence of a global cap-and-trade scheme, adapting this model to create large pools of companies voluntarily working together to achieve net zero could be a practical and viable solution, but one that has been largely overlooked so far.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

Corporate net zero is a heavy lift - emission reduction pools could help

More than a third of the world’s largest companies now have net-zero targets, which generally means they have all committed to cutting emissions in half by about 2030 and then driving their net emissions to zero by 2050. The true climate impacts of these actions will depend on whether the reductions are additional and immediate or potentially in the future. It turns out that the problem of additionality is not limited to carbon offsets but is pervasive in the decarbonization space.

More than a third of the world&rsquo;s largest companies now have <a href="https://zerotracker.net/insights/pr-net-zero-stocktake-2022">net-zero targets</a>, which generally means they have all committed to cutting emissions in half by about 2030 and then driving their <a href="https://sciencebasedtargets.org/net-zero">net emissions to zero by 2050</a>. The true climate impacts of these actions will depend on whether the reductions are additional and immediate or potentially in the future. It turns out that the problem of <a href="https://www.offsetguide.org/wp-content/uploads/2020/03/Carbon-Offset-Guide_3122020.pdf">additionality</a> is not limited to carbon offsets but is pervasive in the decarbonization space.
If we could hypothetically measure the GHG emissions to the atmosphere from the operation of a single company, it is unlikely that we would see the same reductions in emissions that the company might be reporting in its annual disclosures. Many emission reduction claims are not additional in the sense that they do not reduce emissions relative to a business-as-usual baseline &ndash; at least not in the short term &ndash; so a company could take credit for a reduction this year that may have no climate impact for years to come.
<h2>Energy efficiencies and electrification lead to additional and immediate emission reductions</h2>
Let us say a company weatherizes all of its buildings, so it is using less natural gas to heat the buildings in the winter and less electricity for air conditioning in the summer. Right off the bat, that begins to reduce the company&rsquo;s direct (scope 1) emissions from natural gas combustion. Indirect (scope 2) emissions from purchased electricity will also decrease because lower electricity use can translate in almost real-time to less fossil fuel burnt at power plants. Both of these emission reductions are immediate and additional and would be picked up by our hypothetical measurement system.
If the company replaces some of the fossil fuels it uses in heating and transportation through electrification, that will further reduce its scope 1 emissions from the combustion of the fuels while increasing its scope 2 emissions from purchased electricity. On balance, electrification generally (though not always) leads to more efficient use of energy and lower overall emissions. These reductions are immediate and additional as well.
<h2>Renewable energy purchases open the door to non-additionality</h2>
Outside of the direct use of fuels and electricity, emission reductions get trickier. Companies generally cut their scope 2 emissions by buying renewable electricity to compensate for each MWh of grid power consumed and then using <a href="https://ghgprotocol.org/top-ten-questions-about-scope-2-guidance">market-based accounting</a> to take credit for it. Nearly <a href="https://data.nrel.gov/submissions/196">44% of all voluntary renewable electricity purchases</a> in the US are in the form of unbundled renewable energy certificates (RECs). These are just the environmental attributes of renewable electricity that has already been produced and sold into the grid, and the emission benefits have already been realized.
The theory of change here is that the revenue from REC purchases can help incentivize additional renewable power generation capacity in the future. But the price of RECs in the voluntary market has been&nbsp;<a href="https://www.nrel.gov/docs/fy22osti/81141.pdf">highly variable</a>&nbsp;lately and is&nbsp;<a href="https://clearloop.us/wp-content/uploads/2021/02/Solar-in-the-Shadows-Part-2-_Clearing-the-Pathway-for-Private-Sector-Action-to-Accelerate-Americas-Clean-Energy-Transition.pdf">not significant or reliable enough</a>&nbsp;to drive new capacity, while solar and wind have already become the <a href="https://www.iea.org/news/renewable-power-s-growth-is-being-turbocharged-as-countries-seek-to-strengthen-energy-security">cheapest options for new electricity generation</a>. If we define <a href="https://www.smartenergydecisions.com/upload/whitepapers/researchdocuments/additionality_rce_4_18_17.pdf">additionality</a> in green power markets as the active displacement of fossil fuel based electricity on the grid by new electricity from clean sources as a direct result of the electricity purchase, then unbundled RECs will fail the additionality test.
A company using these RECs to reduce its scope 2 emissions will have no discernible effect on the GHG emissions entering the atmosphere. A recent <a href="https://www.nature.com/articles/s41558-022-01379-5">study</a> estimates that 42% of committed scope 2 emission reductions will not result in real-world mitigation because they depend on RECs. <a href="https://www.bloomberg.com/news/features/2022-11-01/intel-p-g-cisco-among-major-companies-exaggerating-climate-progress?leadSource=uverify%20wall">Bloomberg</a>&nbsp;reports that S&amp;P 500 companies bought 32.7 million MWhs of unbundled RECs in 2020, which calls into question the emission reduction claims of major technology and consumer product companies.
<a href="https://19january2021snapshot.epa.gov/sites/static/files/2016-09/documents/webinar_kent_20160928.pdf">Power purchase agreements</a> (PPAs), which are long-term contracts and account for about 30% of voluntary renewable electricity purchases in the US, have a reasonable claim to additionality and are likely to replace existing grid electricity with new renewable electricity faster than business-as-usual. But they can be&nbsp;complex and require significant expertise&nbsp;as well as financial wherewithal to put together.
Another <a href="https://kvenkatm.medium.com/we-need-a-better-way-of-purchasing-and-accounting-for-renewable-electricity-34c0ee66070e">glaring issue</a> with any renewable electricity purchase is that the location and timing of power generation may be very different from the location and timing of power consumption. Matching a MWh of generation by way of a REC (unbundled or obtained through a PPA) to a MWh of consumption &mdash; as companies are doing today using market-based accounting &mdash; says nothing about the net reduction in emissions as a result of the purchase. Google, one of the largest purchasers of renewable electricity, recognizes that 100% renewable does not mean zero carbon and is working toward&nbsp;<a href="https://www.gstatic.com/gumdrop/sustainability/24-7-explainer.pdf">24x7 carbon-free energy</a>.
<h2>Many scope 3 emission reductions are non-additional &ndash; with some clear exceptions</h2>
The lack of additionality extends to many other emission reduction actions in the scope 3 category which covers the upstream/downstream value chain.
Consider a company that is replacing virgin raw materials with recycled materials which have lower life-cycle emissions. If the company increases its purchase of recycled materials, then other buyers in the market will see a lower supply of recycled materials and will have to use more virgin materials in their own products. All of these materials have already been produced and the <a href="https://www.environmentalleader.com/2023/01/not-all-emission-reductions-are-created-equal/">resulting emissions are baked in</a>, so this change will not result in any detectable reduction in actual emissions at the time that the company takes credit for using the recycled materials.
A similar argument applies to many other emission reduction activities in the value chain. If a company reduces business travel in order to cut emissions, the same number of airplanes are still going to be flying unless a large number of travelers decide to stop flying. Companies shifting the menus in their on-site cafeterias in favor of plant-based options must confront the fact that meat production (which can be highly emissions intensive) is unlikely to slow down without a mass movement toward meatless foods.
In the short term, the primary effect of a single company changing its purchasing choices is to reallocate a fixed emissions pie across all market participants. If some businesses reduce their carbon footprints, then others will be saddled with higher footprints (this is explicit in the market-based accounting rules for electricity purchases and is implicit in other cases such as material purchases in the value chain). Many purchasers acting in concert, however, could change the future production decisions of suppliers and potentially reduce the size of the total emissions pie down the road &ndash; but that will require significant <a href="https://kvenkatm.medium.com/not-all-corporate-emission-reductions-are-equal-30e1fe94bc67">market alignment</a> among a large number of market participants which we haven&rsquo;t seen yet.
That said, there are certainly some clear exceptions that do not depend on collective action. If a company works directly with its existing suppliers to reduce emissions in the supply chain and if those suppliers achieve additional and immediate scope 1 and scope 2 reductions, then the company&rsquo;s scope 3 reductions are additional and immediate as well. This is also the case with downstream emission reductions in the use phase of products as more efficient products replace older designs in the market.
<h2>How to strengthen the integrity of corporate emission reduction claims</h2>
The GHG Protocol&rsquo;s <a href="https://ghgprotocol.org/blog/top-ten-questions-about-scope-2-guidance">scope 2 guidance</a> makes it clear that this widely accepted corporate GHG accounting framework is based on&nbsp;<a href="https://consequential-lca.org/clca/why-and-when/">attributional</a>&nbsp;accounting and aims to accurately allocate existing emissions to end users. The <a href="https://ghgprotocol.org/sites/default/files/standards/Scope%202%20Guidance.pdf">basis of both scope 2 and scope 3 accounting</a> is the idea that individual purchases can ultimately drive collective impact through aggregate demand, but there is not necessarily an immediate shrinking of the total emissions pie.
This framework is not designed to fully quantify the&nbsp;real impacts of climate actions taken by a specific company in a given year. However, targeted changes to the accounting rules could significantly enhance the integrity of the emission reduction numbers reported by companies.
Let us start with scope 2 emission reductions. Excluding all unbundled RECs from being used as zero-carbon MWhs on additionality grounds would go a long way toward restoring credibility to scope 2 accounting. Moreover, accurate scope 2 accounting would need to consider the avoided emissions when and where the renewable energy was added to the local grid, and the induced emissions when and where the energy was consumed (for example, using the&nbsp;<a href="https://www.watttime.org/app/uploads/2022/09/WattTime-AccountingForImpact-202209-vFinal2.pdf">impact accounting method</a>&nbsp;proposed by WattTime). This improved accounting framework will be able to support additional optimizations such as <a href="https://www.carboncollective.co/sustainable-investing/demand-side-management-dsm">demand side management</a>.
Moving on to scope 3, companies could continue taking immediate credit for specific types of emission reductions that can be shown to be additional and immediate, such as those related to existing supply chains and product use phases. When it comes to changes in purchasing decisions which can only lead to collective, long-term impact at best, individual companies shouldn&rsquo;t be able to use the imputed emission reductions from those actions to claim progress toward their emission reduction targets. It would make more sense to report these &ldquo;emission reductions&rdquo; separately so that companies can be recognized for contributing to the collective effort without undermining the credibility of the accounting process.
Corporate emissions reporting and reduction strategies are at a critical juncture. As we look at the remainder of this decade as the defining period for emission reductions in order to stay on a <a href="https://www.pbs.org/newshour/world/study-finds-nations-can-keep-global-warming-to-2-degrees-if-pledges-are-met">2&deg;C climate trajectory</a>, the question of whether a particular corporate climate action results in an immediate and additional emission reduction or not should be of paramount importance. Without a more nuanced approach to reporting the impacts of a company&rsquo;s actions, the logic of emission reduction claims will remain shaky and questionable.
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

The shaky logic of corporate emission reduction claims

The organic industry is attempting to lead the way in carbon sequestration through regenerative farming methods. National environmental organizations such as NRDC are advocating for regenerative agriculture. Major food companies are committing to it as part of their climate strategies. New certifications are emerging to help define and codify the term “regenerative”.

And yet, for all the buzz around regenerative farming in climate circles, a look at the science under the surface reveals a number of serious problems that would have to be solved before it is ready to take on the climate challenge at scale.

Soil carbon sequestration is central to the recent IPCC <a href="https://www.ipcc.ch/srccl/">special report</a> on climate change and land. The OECD <a href="https://www.oecd.org/publications/soil-carbon-sequestration-by-agriculture-63ef3841-en.htm">estimates</a> that net soil carbon sequestration could offset 4% of average annual global greenhouse gas (GHG) emissions over the rest of the century. The organic industry is attempting to lead the way in carbon sequestration through <a href="https://civileats.com/2020/12/15/can-organic-farming-solve-the-climate-crisis/">regenerative</a> farming methods. National environmental organizations such as <a href="https://www.nrdc.org/resources/regenerative-agriculture">NRDC</a> are advocating for regenerative agriculture. <a href="https://www.npr.org/2022/11/03/1131679803/big-food-companies-commit-to-regenerative-agriculture-but-skepticism-remains">Major food companies</a> are committing to it as part of their climate strategies. New <a href="https://regenorganic.org/">certifications</a> are emerging to help define and codify the term &ldquo;regenerative&rdquo;.
And yet, for all the buzz around regenerative farming in climate circles, a look at the science under the surface reveals a number of serious problems that would have to be solved before it is ready to take on the climate challenge at scale.
<h2>Regenerative or organic?</h2>
Let us start with some terminology and definitions to help the rest of the discussion. The explicit <a href="https://regenerationinternational.org/why-regenerative-agriculture/">goal</a> of regenerative agriculture is to reverse climate change by rebuilding soil organic matter which can sequester carbon in the soil. There are other potential benefits such as restoring soil biodiversity and improving the water cycle. The practice of regenerative farming looks very much like organic farming as far as conservation tillage, cover cropping, crop rotations and the use of amendments like compost and manure.
Both organic and regenerative systems use nitrogen-fixing cover crops and legumes in crop rotations to supply much of the nitrogen required by the next crops. The cover crops, along with compost and manure, do double duty by helping to build soil organic carbon pools while also serving as the principal nitrogen sources.
While buying &ldquo;organically&rdquo; produced food can assure you that the land on which it was grown was managed without the use of most synthetic fertilizers and pesticides, &ldquo;regenerative&rdquo; focuses on the state of the soil as an outcome of the same or similar agricultural practices. Certifications like <a href="https://regenorganic.org/">Regenerative Organic Certified</a> make this connection explicit. &ldquo;Organic&rdquo; is the established term in much of the research literature, and we will use &ldquo;organic&rdquo; and &ldquo;regenerative&rdquo; interchangeably in this article.
<h2>Why are organic yields consistently lower than conventional?</h2>
Multiple studies over the years have shown that organics have consistently lower yields than conventionally grown crops. A <a href="https://www.nature.com/articles/nature11069">meta-analysis</a> in 2012 found that organically grown grains and vegetables have a significantly lower yield (26&ndash;33% lower) than conventionally grown crops, but fruits and oil seeds show a much smaller difference (3&ndash;11%).
One reason for this is that organics in general are nitrogen-limited because the release of <a href="https://catalog.extension.oregonstate.edu/sites/catalog/files/project/pdf/em9217.pdf">plant-available mineral nitrogen</a> from cover crops, compost or animal manure is slow and often does not keep pace with the high nitrogen demand during the peak growth period. Perennials perform better than annuals because their extensive root systems and longer growth periods allow them to align growth with nitrogen availability much better than annuals. Legumes perform better than non-legumes because of their ability to fix nitrogen through their root systems.
Looking at farming systems across multiple crops, a second limitation becomes clearer. As much as <a href="https://www.researchgate.net/publication/284694099_Transition_from_conventional_to_low-input_agriculture_changes_soil_fertility_and_biology">85% of the nitrogen</a>in organic farming systems comes from cover crops or leguminous food crops (the other 15% may come from inputs like compost and manure). When legumes are grown as cover crops (to be plowed under later) explicitly for the purpose of adding nitrogen to the system, the <a href="https://www.sciencedirect.com/science/article/pii/S0308521X1100182X">average yield of food crops over the entire rotation is reduced</a> because the land is not producing food crops for some period of time. This is a <a href="https://www.nature.com/articles/s41467-019-12622-7">farming system-level effect</a> that is not captured in crop-level yield comparisons of organics and conventionals, but must be included in the larger impacts of switching to organic/regenerative farming at scale.
A 2019 <a href="https://www.nature.com/articles/s41467-019-12622-7">study</a> did exactly this when examining the effects of hypothetically converting all food production in England and Wales to organic methods, and found that this switch would increase net GHG emissions even after accounting for soil carbon sequestration because the lower organic yields would trigger additional food imports which in turn would require more land to be cleared for agriculture in other parts of the world.
GHG emission <a href="https://www.tandfonline.com/doi/abs/10.1080/10440046.2012.672378">comparisons</a> of organic and conventional crops using life-cycle assessment (LCA) typically account for the crop-level yield loss due to nitrogen limitations, but not the system-level yield losses due to fertility-building cover crops or leys. This system boundary issue in the modeling can make organics look better in LCA comparisons than they really are.
<h2>The missing nitrous oxide (N2O) emissions</h2>
LCA studies of organic and conventional crop production will generally include the N2O emissions generated by the soil <a href="https://byjus.com/biology/difference-between-nitrification-and-denitrification/">denitrification</a> process as part of the nitrogen cycle. But the system boundary limitation mentioned above comes into play again, keeping the nitrogen added to the soil by previous crops in the rotation outside the scope of a given crop-level LCA. This means that LCAs have been routinely underestimating the total GHG emissions per unit of organic production in two ways that are related: by not considering the loss of system-level yield due to the need to grow cover crops, and by excluding the additional N2O emissions triggered by the nitrogen added by those cover crops and previous leguminous food crops.
Even with these underestimated emissions, LCA <a href="https://www.tandfonline.com/doi/abs/10.1080/10440046.2012.672378">studies</a> do not show that long-term organic crops have a clear climate advantage over conventional crops. Once we factor in the system-level effects across multiple crops in a rotation, organics at scale will look even worse from a climate perspective. The one saving grace could be carbon sequestration in agricultural soils, but that brings with it a new set of issues.
<h2>The limits of soil carbon sequestration</h2>
Land management practices such as reduced or no till &mdash; combined with the addition of organic inputs to the soil in the form of crop residues, compost, or manure &mdash; can in principle add to or preserve the soil organic carbon in soils. But soil is not an infinite carbon sink. Under the right management practices and conditions, soil organic carbon content will increase up to a point (depending on the soil type, climate zone, tillage practices, etc.) and then reach equilibrium as illustrated below. Under the <a href="https://www.cleanmetrics.com/blog/2020/12/31/modeling-soil-emissions-and-carbon-sequestration-in-lcas/">IPCC tier 1 model</a> used in most LCAs, the default time period for stock changes is nominally 20 years and management practice is generally assumed to influence stocks to a depth of 30 cm.
<img src="https://illuminem.b-cdn.net/articlebody/2403c3629d94a2a339432bfa00f813849a4d5d1d.webp" alt="Typical soil carbon profile during a transition from conventional to organic farming methods." />
There is, however, <a href="https://www.researchgate.net/publication/295242836_Improving_the_accounting_of_field_emissions_in_the_carbon_footprint_of_agricultural_products_a_comparison_of_default_IPCC_methods_with_readily_available_medium-effort_modeling_approaches">wide variability and crop specificity in field measurements</a> of soil carbon stocks and evidence that the soil carbon on cropland producing annual crops may have been systematically overestimated in LCAs, thus overstating the benefits of soil carbon sequestration in many of the common organic crop production systems.
Two other concerns revolve around the fact that <a href="https://www.nature.com/articles/nclimate2292">reduced or no till</a> plays a key role in the carbon sequestration. Much of the increase in soil organic carbon from no-till appears to be a redistribution of the carbon rather than a net increase. A <a href="https://www.sciencedirect.com/science/article/abs/pii/S0167880910002094">meta-analysis</a> comparing 69 sets of paired data for no-till and conventional till, with sampling down to a 40 cm depth, showed no overall increase in soil carbon stocks under no-till: larger carbon stocks in the top 20 cm were balanced by smaller quantities in the next 20 cm layer.
Moreover, any carbon that is actually added to the soil under reduced/no-till is mainly in labile forms that would be lost through decomposition of soil organic matter if a farmer discontinued the no-till management and went back to conventional tillage. The permanence risk of this carbon capture method is very significant.
<h2>Will manure turn into a scarce resource?</h2>
Animal manure has been the traditional go-to source to supplement the nitrogen produced on-farm using nitrogen-fixing cover crops and legumes. <a href="https://www.academia.edu/29519994/Organically_grown_crops_do_not_a_cropping_system_make_and_nor_can_organic_agriculture_nearly_feed_the_world">Historically</a> animals were confined at night to deposit manure in specific areas being prepared for the next cropping cycle. This practice continues to this day in small, integrated farming systems. As stated earlier, about 15% of the nitrogen required by organic crops is generally supplied by soil amendments like compost and manure. Because organic crops are often nitrogen-limited, these amendments would need to be high in nitrogen content (<a href="https://catalog.extension.oregonstate.edu/em9217/html#:~:text=Interpreting%20Compost%20Analyses%201%20Choosing%20a%20laboratory%20Selecting,micronutrients%20...%205%20Compost%20maturity%20and%20stability%20">at least 2% nitrogen by dry weight</a> in order to replace synthetic fertilizers) which generally requires manure composts with a <a href="https://catalog.extension.oregonstate.edu/pnw533">C/N ratio not exceeding 10</a>.
Organic crops targeting high yields will require large supplies of manure, mostly from intensive animal farming. This dependence is problematic considering that animal farming is responsible for <a href="https://ourworldindata.org/food-ghg-emissions">64% of agricultural emissions</a> and our diets would need to be much more plant-based in the future for climate reasons alone. In addition, the crops that are used as animal feed to produce manure need land, water and other resources and will generate their own GHG emissions.
If organic farming expands rapidly, there may well come a point where the supply of manure becomes a limiting factor. Manure is a bulky and difficult-to-handle substance that is suited for use close to where it is produced. It is generally the case that <a href="https://www.sciencedirect.com/science/article/pii/S0264837717309882">manure would not be transported over long distances</a> from livestock dominated regions to arable regions due to transport costs, increased disease transmission risk and odor. If it were somehow feasible to transport it, the large GHG emissions from transport alone would make the resulting organic crop significantly worse than comparable conventional crops. The production and transport constraints of manure could limit the growth of organic farming in the future.
<h2>Can regenerative agriculture go from hype to solution?</h2>
For organic/regenerative farming to be a viable climate solution, yields need to be shored up across the board while keeping soil-related emissions to a minimum. Cover cropping and crop rotations play a key role in supplying much of the nitrogen needed by the next crops while also helping to build up soil carbon stocks. However, it is clear from the data that organic crops are often nitrogen limited and the mineralization rates of organic nitrogen do not keep up with the demand in the peak growth phase.
One possible solution might be to use synthetic nitrogen as a supplement in the growth period to match the demand. This would allow for more precise control of plant-available nitrogen, increasing it above a baseline when needed and then dialing it down when it is not needed in order to reduce costs as well as N2O emissions from the soil. Synthetic nitrogen as a supplement could also alleviate any future constraints in the supply and availability of manure. Crop systems using this approach would of course no longer qualify as &ldquo;organic&rdquo;, but they could very well be &ldquo;regenerative&rdquo; because of the continuing use of cover crops, crop rotations and the use of available organic amendments to build healthy carbon-rich soils.
There is, of course, more to this than just the science. For regenerative farming to scale up as a major climate solution, many of the <a href="https://climate.mit.edu/explainers/soil-based-carbon-sequestration">hundreds of millions of small farmers</a> in the world would need to change the way they farm in the next few decades. This would be a social and economic change at an unprecedented scale and pace for agriculture and would only be feasible if farmers are confident that there would be no yield losses compared to conventional farming methods.
Feeding the world in 2050 and beyond will require producing more from the same agricultural lands while definitively tackling climate change. Regenerative farming still has a way to go before it can truly be part of the solution.
This article is also published on the <a href="https://kvenkatm.medium.com/is-regenerative-farming-being-oversold-as-a-climate-solution-fad1deb2b2c0">author's blog</a>. illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

Kumar Venkat

Kumar Venkat

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