Decarbonization: Definition, Examples, and Why It’s Needed

Decarbonization is crucial for the global race toward net zero as outlined in The Paris Agreement. Current action is not enough, with global average atmospheric carbon dioxide hitting a new high in 2021, The world continues to produce carbon much faster than nature can absorb it, resulting in an excess of the greenhouse effect rapidly warming the earth.

Decarbonization today is commonly associated with high-profile commitments from large corporations and is usually followed by reports on progress towards those commitments. This includes pledges from larger companies like General Motors and PepsiCo. However, it’s a long road ahead until many of these commitments are realized.

Decarbonization efforts need to come from various stakeholders, from large corporations to governments to individual citizens, if we expect to make an impact sufficient to limit the most catastrophic effects of climate change.

This guide will give a brief overview of decarbonization, examples, and why businesses should decarbonize.

How Does Decarbonization Work, in Simple Terms?

Total decarbonization requires eliminating the production of carbon and removing carbon currently in the atmosphere.

Steps towards decarbonization can include any number of methods, like when a company temporarily invests in carbon offsets while they work on reducing their emissions in the long term. However, short-term solutions alone like offsets don’t address the underlying emissions from an organization and subsequently aren’t sufficient to permanently decarbonize an organization. This is where comprehensive decarbonization comes in.

What Is Comprehensive Decarbonization?

Comprehensive decarbonization specifically focuses on long-term solutions to reduce and remove carbon.

This is achieved through large-scale changes, such as governments mandating renewable energy usage over fossil fuels or customers and investors prioritizing mission-aligned companies. Changes like these ensure that decarbonization methods will stay in place and result in (ideally) permanent reductions.

For example, reforestation on its own can create positive change. However, corporations paying to plant trees or stop deforestation without reducing their own emissions won’t be sufficient in the long term. There is a finite amount of space for forests, along with issues of double-counting, additionality, and loss of biodiversity. Investing in these projects also doesn’t guarantee any reductions in a company’s emissions.

Instead, comprehensive decarbonization focuses on ways companies can become more efficient over time to reduce emissions. For example, a retail distributor investing in electrification, efficiency, and renewable energy across all warehouses could reduce its dependence on fossil fuels and overall emissions.

What Role Do Businesses Play in Global Decarbonization?

Businesses play a major role in global decarbonization as many large corporations contribute significant global greenhouse gas (GHG) emissions.

The Carbon Disclosure Project’s (CDP) 2017 Carbon Majors Report found that 26 corporate and state-producing entities generate 51% of global industrial GHG emissions. This includes American oil and gas company ExxonMobil, Russian energy corporation Gazprom, and British energy company Shell. It is important to recognize that these larger producers are driving the emissions of the customers (including other corporations) purchasing and using the energy for their day-to-day activities.

In addition to large corporations, businesses of all sizes have a role to play in the global effort to decarbonize — both as contributors and as those affected by climate change. The United Nations Human Rights Office of the High Commissioner (UN OHCHR) says that businesses play a “central role” in climate change since a high amount of carbon dioxide emissions come from business-related economic activities.

Businesses also aren’t immune to the negative impacts of climate change. For example, Deloitte’s 2021 Climate Check survey found that 27% of executives point to the operational impact of climate-related disasters as the biggest climate change issue currently impacting or threatening their organizations.

What Are Common Strategies for Decarbonization?

Decarbonization strategies include switching to low-carbon energy, improving energy usage and process efficiency, and removing and storing carbon. The strategies vary between sectors and may include a combination of strategies.

For example, cement is used for many types of infrastructure but emits 0.9 pounds of carbon dioxide for every pound of cement. A study published in “Joule” suggests better waste heat recovery and digitalization to improve cement production efficiency as ways to reduce emissions.

Below are just a few broad examples of long-term decarbonization strategies:

• Transition to low-carbon fuels and alternative energy sources to reduce the generation of GHG emissions.
• Use “greener” materials for manufacturing and construction, like certified wood, that is better for energy conservation and require less ongoing maintenance compared to high emitting materials.
• Improve energy efficiency, through measures like LED lighting or HVAC upgrades, to reduce overall energy usage and loss.
• Invest in research and development of new technologies and systems to accelerate decarbonization.
• Increase electrification to reduce and eventually eliminate the reliance on fossil fuels.
• Move towards decentralized energy systems to improve access to energy and to support the move to electrification.
• Create incentive programs to encourage consumers and companies to reduce emissions on the individual and organizational levels.
• Increase climate change education and resources on all levels so that everyone, from consumers to governments, can understand the realities of climate change and the need to decarbonize.
• Push for legislation, carbon reporting mandates, and other changes to put pressure on all sectors to decarbonize now.

In addition to the above tactics, using carbon offsets and carbon capture, utilization, and storage (CCUS) are also options to offset the balance of emissions that cannot be eliminated through operational changes.

• Invest in CCUS where feasible to remove and store carbon currently in the atmosphere.
• Allocate resources towards renewable energy certificates that can count towards GHG inventory accounting.
• Invest in carbon offsets to make short-term progress on carbon reductions while progressing toward long-term changes.

What Are Examples of Decarbonization?

There are many examples of decarbonization in different contexts and scales. Decarbonization from cities to companies to homes can look vastly different.

Decarbonization for Cities

The World Resources Institute (WRI) says decarbonization is one of three steps to thriving zero-carbon cities. The Organisation for Economic Co-operation and Development (OECD) explains that regulation, monitoring, evaluation, and even raising awareness are key actions for decarbonization.

Santa Cruz’s Climate Action Program (CAP) aims to reduce community-wide GHG emissions by 30% by 2020 and 80% by 2050 (compared to levels in 1990). In their 2019 progress update, they summarized their progress, the milestones they’ve achieved, on track to be achieved, and not on track at that time based on their 2008 base year. Below are a few examples:

• Achieved: Retained 200 certified Santa Cruz Green Businesses.
• On track: Use renewables to meet 30% of the city’s energy load.
• Not on track: 75% waste diversion (city cited only 65% at the time of reporting).

The city of Santa Cruz met its 2020 GHG emissions goals and is on track for its 2050 goals at the time of reporting.

Decarbonization for Companies

Decarbonizing a company can include reducing employee commute, improving operational efficiencies, and verifying progress from independent auditing companies.

For example, chemical company Indorama Ventures (IVL) uses a variety of tactics in its decarbonization strategy, including:

• Using recycled and bio-based feedstocks in place of fossil fuel-based ones.
• Partnering with a third party to annually verify emissions data to align with ISO 14064-1 and ISO 14064-3 requirements.
• Incorporating renewable energy on- and off-site to decarbonize energy usage.

IVL also displays numbers in a digestible format on its website, including their audited scope 1, 2, and 3 emissions, while also making additional information available.

Decarbonization for Commercial Buildings

A study published in Resources, Conservation and Recycling says that by 2060, integrated power generation, electricity decarbonization, and energy efficiency can achieve 31%, 45%, and 10% of carbon abatement in the U.S., respectively.

Canada is one example of how a government can support building decarbonization. Canada has committed $150 million to the Canada Green Buildings Strategy to create more climate-resilient buildings, among other goals. Key actions in this strategy include retrofitting federal buildings, expanding funding to support efforts like union-based apprenticeship training in jobs related to decarbonizing buildings, and using federal funding to support green building objectives.

Decarbonization for Homes

There are also many ways to decarbonize homes. Improved ventilation and insulation, energy-efficient electric appliances and equipment, on-site solar or geothermal power, and on-site energy controls are a few ways today’s homes can generate less carbon.

Energy-efficient homes can also benefit homeowners and residents with lower utility costs and increased overall safety. However, making these upgrades may not be financially accessible to all residents. Recognizing that, many municipalities have developed incentive programs to make energy efficiency projects more affordable.

The U.S. Department of Energy’s (DOE) Weatherization Assistance Program (WAP) is another example of how a government can support low-income households to increase energy efficiency. WAP’s retrofit funding focuses on the entire home, with improvements like upgrading electrical appliances and installing insulation.

What Sectors Are Hardest to Decarbonize?

Plastic, cement, and shipping are among the most difficult sectors to decarbonize. According to the Environmental Protection Agency (EPA), these sectors contribute to generating the most GHG emissions in the U.S. They have also been included among the top “hard-to-abate” sectors, like in the Energy Transitions Commission's (ETC) report Mission Possible: Reaching net-zero carbon emissions from harder-to-abate sectors.

These sectors are difficult to decarbonize due to factors like long-term reliance on fossil fuels, rising demand, and the complexity of resolving economic and other changes.

For example, using fewer fossil fuels inevitably results in a decrease in fossil fuel-related jobs. In the most recent U.S. Energy & Employment Report (USEER), the U.S. DOE reported that fossil fuel jobs accounted for the most fuel jobs lost. Those jobs were down 3.1% from 2020 to 2021 with 29,270 jobs lost. On the other hand, the energy efficiency sectors saw a 2.7% increase from 2020 to 2021, with a total increase of 57,741 jobs.

This is one example of how the transition to renewable energy isn’t a simple change. Improving existing systems, finding vocational solutions for employees in fossil-fuel-reliant industries, and implementing legislation to encourage changes require effort on multiple fronts.

The International Energy Association’s (IEA) Net Zero by 2050: A Roadmap for the Global Energy Sector outlines a proposed pathway but emphasizes that everyone from governments to citizens must take action each year to achieve it.

What Are Common Challenges with Decarbonization?

Cooperation on a global scale, legislation changes, and barriers to investment are a few challenges organizations face with decarbonization.

Companies nowadays understand the value of decarbonization and other sustainability initiatives — 40% of respondents to a recent McKinsey & Company survey say that they expect sustainability programs to create value in the next five years.

The Deloitte 2022 CxO Sustainability Report surveyed 2,000 C-suite executives and also shows how companies understand the importance of decarbonization:

• 79% of respondents see the world at “a tipping point for responding to climate change,” compared to 59% eight months before the survey.
• 67% plan to reach net zero by 2030.

However, many companies have found that the road to decarbonization isn’t straightforward. A Workiva report surveying ESG decision-makers found that 63% of respondents feel unprepared to meet their organization’s ESG goals and fulfill mandated reporting.

Here are some examples of decarbonization challenges that organizations face:

• Large upfront investments for changes can deter decision-makers who may prefer prioritizing funding in other areas that have a track record of benefits or profit, like sales or new technology.
• Pushback and legislative protection of fossil fuel industries can make it difficult to legally eliminate fossil fuel usage in certain areas.
• New technologies and research costs can make necessary change inaccessible for companies lacking resources.
• Lack of climate education and buy-in at all levels can create a lot of red tape for individuals who need capital and support to enact changes.
• Cooperation on a global scale is difficult when managing the various needs, values, and accessibility to resources of different countries and jurisdictions.
• Balancing policies like carbon taxes with the impact on citizens is necessary since families and individuals may be inadvertently affected by factors like high costs.

Other Questions Related to Decarbonization

Below we’ll answer a few other questions businesses and professionals may have about decarbonization.

What Scope Is the Hardest to Decarbonize?

Scope 3 emissions are especially difficult to decarbonize since those emissions are out of an organization’s direct control. Decarbonizing scope 3 requires organizations to engage with others - such as suppliers, shippers, and end users - along their value chain.

Engagement could range from offering incentives to change or divesting from vendors in favor of more efficient options. Decarbonizing this scope is especially crucial since it typically encompasses most of an organization's emissions.

What Are Examples of Organizations That Promote Decarbonization?

Initiatives from for-profit companies to government programs are working to promote decarbonization for different organizations. These are a few examples of organizations that are supporting global decarbonization efforts:

• Decarbonization Partners makes investments in early-stage companies focused on next-generation mobility and renewable technology.
• Net Zero Labs Pilot Initiative is a new program focused on decarbonizing four of the DOE’s National Laboratories to reduce their own emissions and research clean energy solutions for the U.S.
• The Deep Decarbonization Pathways initiative consists of research teams worldwide who suggest realistic decarbonization pathways to help governments and non-state actors.

How Fast Do We Need to Decarbonize?

The world needs to reduce emissions by 45% in 2030 to reach net zero by 2050, according to the United Nations (UN) Net Zero Coalition. If we don’t make an effort to tackle climate change, the world will likely begin to see severe negative impacts, some of which we’ve already seen today. Extreme events like Hurricane Harvey, California’s 2022 heat waves and wildfires, and Super Typhoon Noru are a few devastating examples of the effects of climate change.

The UN warns about rising sea levels (putting some major cities underwater) and severe weather. These environmental issues can lead to geopolitical and socioeconomic crises, like food insecurity and mass displacement as early as 2050.

The United Nations Framework Convention on Climate Change (UNFCCC) National Determined Contributions (NDCs) Synthesis Report found that global GHG emissions without land use, land-use change, and forestry (LULUCF) are on track to be 16% higher in 2030 compared to 2010 levels. That’s a red flag indicating that we are not moving in the right direction.

On top of that, a report from the WRI found that China, the European Union, and the United States contribute to 46% of the world’s emissions. This is why the Net Zero Coalition says that governments of the largest emitters should be the first to improve their NDCs, in addition to efforts from all other governments.

Although today's numbers are severe, there’s still time to turn things around with a global effort to reduce emissions. The World Economic Forum’s (WEF) Global Risks Report for 2022 says that the most optimistic global temperature scenario by 2100 holds to 1.8℃, assuming full implementation of announced targets, including NDCs and net zero targets. WEF says in that report that the global capacity to mitigate and adapt will decline without stronger action.

Why Should Companies Decarbonize?

Companies should prioritize decarbonization to get ahead of reporting mandates, improve trust and transparency with customers, investors, and other stakeholders, and make necessary contributions to the international effort to fight global warming.

Tracking your company’s carbon emissions now is crucial for many reasons. Carbon disclosure mandates are becoming more prominent, and it won’t be long until most companies are required to disclose their emissions. This can range from requirements to disclose climate risk to investors to federal mandates to report your complete scope 1, 2, and 3 emissions to your local governments.

Regardless of mandates, investors, customers, employees, and other stakeholders also want to know about a company’s current emissions and its plans to manage them. In addition to aligning with reporting requirements, companies must also have information readily available for the general public — or deal with the consequences.

The 2021 EY Global Institutional Investor Survey found that 86% of surveyed investors said investing in companies with aggressive carbon reduction programs is an important part of their strategy.

Legalities and business goals aside, reducing emissions should be each company’s utmost priority to do their part to reduce global emissions. The data is clear that the world is not on the right track and that it’ll take a combined global effort to avoid the worst. However, initiatives like the Inflation Reduction Act (IRA) of 2022 are being implemented to stimulate renewable energy development and support other sustainable initiatives.

In a sea of data, it can be overwhelming to get granular information to set long-term decarbonization targets. Learn more about how Persefoni can help create decarbonization strategies tailored to your business.