What is Decarbonization?
Decarbonization aims to lower the amount of CO2 emitted from human activity, with the ultimate goal of eliminating all human-made CO2 emissions in their entirety.
The impetus for decarbonization is the Paris Agreement, the international treaty adopted in 2015 with ambitions to limit global warming to 1.5 degrees Celsius from pre-industrial levels. To meet climate targets set by the Paris Agreement, many countries and organizations across the world have been adopting and implementing decarbonization strategies to help them reach ‘net zero’ by 2050. Net zero essentially means the reduction of all carbon emissions to zero, with any unavoidable emissions balanced out by the absorption or reduction of an equivalent amount of CO2 elsewhere.
Reducing greenhouse gas emissions will curb global temperatures, which have been steadily increasing since the Industrial Revolution and rising at a rate of 0.20 degrees Celsius every decade since 1982. The ten warmest years on record have all occurred within the last decade, with 2023 being the hottest. Rising global temperatures have caused extreme weather, rising sea levels, ecosystem disruptions, and threats to food, water, and health. These impacts destabilize economies, worsen inequality, and displace communities, posing a serious threat to both people and the planet.
While reducing our use of fossil fuels is the best way to meet the goals of the Paris Agreement, the Intergovernmental Panel on Climate Change (IPCC) has stipulated that removing carbon from the atmosphere also has to be an intrinsic part of decarbonization strategies. The CO2 that is already in the air can remain in the atmosphere for centuries, affecting the climate.
What role do businesses play in global decarbonization?
Businesses play an important role in global decarbonization -- without them it is simply not possible. While individuals should do their best to minimize their own carbon footprint and governments should enact policies that incentivize and mandate reduction in greenhouse gas emissions, it is absolutely vital for businesses to voluntarily decarbonize. This needs to be done in order for the world to meet the goals set out by the Paris Agreement.
This is especially true for large companies. The Intergovernmental Panel on Climate Change (IPCC) found that around 70 percent of all human-caused carbon dioxide emissions come from just 100 companies worldwide.
There is an ethical responsibility for companies to lower their emissions, and many companies across the world have set goals to become net zero within the coming decades. Decarbonization is absolutely critical for achieving net zero, and this will require an incredible overhaul of systems, supply chains, processes, and more to make them carbon-free.
Examples of decarbonization
The process of decarbonization is twofold. The first aspect concerns the reduction of carbon dioxide generated by fossil fuels. The second involves removing carbon that is already in the atmosphere.
Decarbonization through carbon dioxide reduction
A key component of decarbonization is reducing the amount of CO2 released into the atmosphere. Companies contribute to carbon reduction through various strategies and activities, including:
Renewable energy: Transition to renewable energy sources, such as solar, wind, or hydroelectric power, to reduce reliance on fossil fuels.
Energy efficiency: Improve energy efficiency by upgrading to energy-efficient lighting, equipment, and appliances. Implement smart systems to optimize heating, cooling, and lighting in buildings.
Sustainable transportation: Encourage the use of electric vehicles, carpooling, public transportation, or biking. Offer incentives for remote work or hybrid work models to reduce travel emissions.
Waste Reduction and Recycling: Minimize waste generation, implement recycling programs, and encourage the use of eco-friendly materials in manufacturing and packaging.
Supply chain management: Work with suppliers that prioritize sustainability and use low-carbon materials. Optimize logistics to reduce transportation emissions.
Carbon credits: Invest in carbon credits to offset emissions that cannot be easily reduced.
Process optimization: Optimize production processes to use less energy and produce fewer emissions, including using cleaner technologies.
Each of these strategies can contribute to a significant reduction in a company's carbon footprint.
Decarbonization through carbon removal
The other component of decarbonization involves removing carbon dioxide already in the atmosphere, which can be achieved through nature-based removal solutions and engineered removal solutions.
Nature-based solutions leverage natural ecosystems to absorb and store carbon while also promoting biodiversity and ecosystem health. These include:
Afforestation and reforestation: Planting new forests and restoring degraded ones to capture CO₂ through photosynthesis.
Wetland restoration: Restoring wetlands, such as peatlands and mangroves, which are highly effective carbon sinks.
Soil carbon sequestration: Enhancing soil's ability to store carbon by using sustainable agricultural practices, like no-till farming and cover cropping.
Agroforestry: Integrating trees into agricultural landscapes, which captures CO₂ and improves biodiversity.
Blue carbon solutions: Protecting and restoring marine ecosystems, such as seagrass beds and kelp forests, which absorb CO₂ from the atmosphere.
Engineered carbon removal approaches use technology to capture and store CO₂ from the atmosphere. These include:
Direct air capture (DAC): Machines that extract CO₂ directly from the air, which can then be stored underground or used in products.
Bioenergy with carbon capture and storage (BECCS): Biomass (like wood or crops) is used to generate energy, and the resulting CO₂ is captured and stored underground.
Enhanced weathering: Spreading minerals, like olivine, that chemically react with CO₂ and store it in solid form.
Carbon capture, utilization, and storage (CCUS): Capturing CO₂ emissions from industrial processes and either storing it underground or converting it into useful products like concrete or fuels.
These engineered solutions aim to complement nature-based removal methods to significantly reduce atmospheric CO₂ levels. By utilizing removal and reduction strategies, we will achieve the net zero ambitions outlined by the Paris Agreement.
Decarbonization benefits for companies
There are many benefits to decarbonizing a business. Decarbonizing can lead to greater cost-efficiency and financial stability by switching from fossil fuels to renewable energy, especially as markets begin to favor renewables.
This in turn can lead to an improved public image, which can foster continued customer loyalty. Studies have found that some 45 percent of the general public would choose products or services from companies that measure their carbon footprint rather than those that do not. Consumers are now also expecting more action on climate change from companies and for them to be moving towards net zero.
In addition, decarbonization initiatives can boost employee morale and attract talent, while also meeting the growing expectations of shareholders for sustainability and social responsibility. Investing in sustainable technologies and practices drives innovation and can give companies a competitive edge in emerging green markets.
Proactively reducing carbon emissions also helps companies comply with increasing regulations and avoid potential fines or penalties related to carbon taxes or emissions limits, while also addressing long-term climate-related risks.
How quickly should companies decarbonize?
The rate at which companies should be decarbonizing varies from industry to industry, as well as by each company’s individual emissions targets.
PwC’s Net Zero Economy Index, however, suggests a year-on-year global decarbonization rate of 17.2 percent is needed to meet the goals of the Paris Agreement. This would be an increase of more than 12 times the average yearly decarbonization level from the last twenty years.
Unfortunately, no G20 nation has been able to meet the required decarbonization level since the year 2000. Now more than ever it is vital for every organization to do their part in decarbonizing so that we can limit global warming to 1.5 degrees Celsius from pre-industrial levels.
The biggest challenges with decarbonization
Despite its necessity for mitigating climate change, decarbonization faces a number of challenges that make it complex and gradual:
High costs: Transitioning to low-carbon technologies, such as renewable energy and electric infrastructure, requires significant upfront investment.
Technological limitations: Some sectors, like heavy industry and aviation, lack fully developed low-carbon alternatives, making emissions reductions difficult.
Infrastructure limitations: Many regions lack the infrastructure for large-scale renewable energy, electrification, or carbon capture systems, requiring extensive upgrades.
Political resistance: Policy changes to support decarbonization can face opposition from industries, governments, and communities due to perceived economic risks. Effective decarbonization requires global cooperation, but differing national priorities, capacities, and commitments hinder unified efforts.
Social resistance: Shifting consumer habits towards sustainable practices, like transportation options and energy consumption patterns, can be challenging and can take decades for consumers to embrace.
Sectors that are the hardest to decarbonize
Steel, cement, and petrochemicals are among the top carbon emitting industries and are also the most difficult to decarbonize. Altogether industrial emissions account for about 30 percent of the world’s greenhouse gas emissions. There are numerous reasons for this, one is that these industries all need an enormous amount of heat to produce their products, which makes them inherently reliant on a lot of energy.
The process for creating cement, for example, involves heating limestone to extreme temperatures. Aside from the energy needed to reach those temperatures, the process also releases carbon from the stone, which becomes CO2 when it enters the atmosphere. It is an unavoidable part of producing cement.
There are economic reasons as well. Many of these industries tend to have slim profit margins and to decarbonize could be slow and costly if not done correctly.
None of this means it is impossible to decarbonize these hard-to-abate industries. What it does mean is that it will be a challenge. It is important to note that the goals of the Paris Agreement likely cannot be met without industrial decarbonization. To do this requires innovation and the funding of new technologies and research.
How to develop a decarbonization strategy
Link your business decisions with sustainability goals
Whenever business decisions are made ensure your company’s sustainability and decarbonization goals are brought into the mix early on and are a priority, not an afterthought.
Involve stakeholders
Engage your investors, clients, and employees with your decarbonization goals.
Seek out partnerships with those who are also decarbonizing
Team up with clients, suppliers, or investors who are also decarbonizing their businesses.
Track your progress
Use data to monitor your progress and share that data with your stakeholders. Transparency creates trust and further incentive for progress.
Allow your strategy to change
The low-carbon economy is constantly changing. Allow your decarbonization strategy to change with it. Revisit your goals and processes and update them as new technologies and breakthroughs become available.
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