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I have been studying environmental economics since I was a student, and I have witnessed Taiwan's green transformation from anti-nuclear, energy saving, green energy, cradle to cradle, and circular economy. Recently, the media has been talking about ESG and carbon neutral stocks. In every era, there is always a group of people with good intentions, hoping to talk about business opportunities and business models to attract more people to invest in them.

At the same time, there is another group of people who think the exact opposite. In the past few months, Green Institute has visited nearly 100 large electricity consumers, mostly in the high carbon emission manufacturing industry. They don't want to be this cow, so they decided to wait for the change and write a plan to cope with it first, because after all these years, few policies have really succeeded.

Which of these two groups has the right strategy? Is it better to use a strategy that is positive but eventually goes off course, or is it safer to use a strategy that is negative but nothing will change?

Talking about energy saving or green energy can be converted into an internal rate of return (IRR), which is good for examining whether the decision is reasonable from a financial point of view. But what we are facing next is the invisible and untouchable "carbon", which is not physically traded, short selling, and very much like a fraud.

Energy and carbon are almost twins, and since energy is Green Academy's specialty, several of our green leaders have decided to collaborate across borders and move towards the "carbon management vernacular movement". All enterprises that want to make changes, including those who are looking for opportunities in the green industry, workers, entrepreneurs, and policy makers.

Therefore, carbon reduction is not for the love of the earth, but for the collective control of risk, to ensure that you and I can continue to live a happy life with dignity.

In the Paris Agreement adopted in 2015, set the global environmental goal of an average temperature rise of no more than 2°C by the end of the century; but according to various international think tanks, the temperature increase will soon exceed 2°C! Therefore, countries must achieve net zero emissions by 2050, otherwise the economic loss alone will be a serious blow to all countries. For example, for Taiwan, the total loss due to warming from 2020 to 2100 is estimated to be at least NT$3 to 9 trillion under different warming scenarios (Note 1).

This is a high amount, but you probably don't feel anything when you look at it. Think about it this way: How much extra money has your company spent recently to deal with the water shortage caused by climate change? Every six minutes, a water truck is needed to keep production going, and wells have to be drilled, so the money that didn't need to be spent is now being spent for the environmental problems caused by carbon emissions.

This is why enterprises will feel the pressure of waves after waves, before the replacement of the ice and water host to do energy-saving can be, and then also to install solar panels to be considered CSR, now also have to pay carbon fees. In the past, the cost of the environmental department was internalized into the company's financial bills.

People have a tendency to avoid losses, if we can reduce losses to save money, is to make money. The country, enterprises and individuals to take action to reduce carbon, just like the epidemic prevention, is to collectively control the risk, to reduce the loss, the country will have dignity, enterprises will be more profitable, you and I do not have to be bored at home every day can not go out to play.

Although green power is one of the key elements to achieve the goal of carbon neutrality, it will not be possible to achieve carbon neutrality in a hundred years if we keep on promoting the use of green power in enterprises.

At this point, many companies are saying, "I've joined RE100. Isn't green power zero carbon? If we buy a green power certificate, our company will be carbon neutral, right? But I can't buy a green power certificate, and the carbon rights have been taken away by Taipower, so you blame me for not being able to do it?

This is a big misunderstanding! The carbon emissions from solar energy and other green power are very low or even zero, so it can be called zero carbon. Buying green power certificates and using 100% green power in factories is to offset the carbon emissions generated by electricity, but carbon neutrality means that a country or an enterprise removes the "man-made extra" carbon emissions emitted into the atmosphere through tree planting or engineering technology, or uses carbon trading and other means to obtain carbon rights to offset them, so as to achieve a positive and negative balance. Nominally, no additional carbon is produced. If you want to be carbon neutral just by relying on solar and wind power, you are not forcing companies to do so, you are forcing green energy to die!

Carbon neutral only focuses on the balance of carbon dioxide, which is still simple, but net zero emissions goes much further, including carbon dioxide and other greenhouse gases, we have to remove all the greenhouse gases emitted into the atmosphere, instead of using carbon trading to obtain carbon credits, nominally do not create additional greenhouse gases, only net zero emissions.

Green power can only offset the carbon emissions generated by your "electricity use", but the company's business and production activities are quite complex, and emissions from other sources must be combined with negative carbon technologies and other policy tools to achieve carbon neutrality.

No, my company's carbon emissions are only from electricity, so how can we say that we can't offset them with green electricity? Your company's business and production activities are more complex than you think. There are three internationally recognized areas for calculating carbon emissions (Note 2).

Area 1: Direct carbon emissions from factory production, including fugitive emissions from process gases, emergency generators, fuel used in public vehicles, or other activities, including carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), sulfur hexafluoride (SF6), and nitrogen trifluoride (NF3). (NF3). The green electricity you buy is not even offsetting this part of the carbon emissions.

Area 2: Indirect carbon emissions from purchased electricity, that is, the electricity you bought from Taipower, the main greenhouse gas emissions are carbon dioxide. The so-called green power certificate and the use of 100% green power in factories means that you can claim 100% green power by buying the same amount of green power as the number of kilowatt hours you bought from Taipower, and then deducting the carbon emissions generated by the use of electricity. If you think that using green electricity means zero carbon emissions, you may use more electricity and produce more carbon emissions, which is not helpful to the environment.

Area 3: Other indirect carbon emissions, including supplier production and transportation, waste disposal, and employee commuting and travel, etc. The green electricity you buy naturally does not offset this part of carbon emissions, but if the company wants to declare carbon neutral, this part must also be dealt with.

After reading this article, I believe it will help you to get rid of your half-understanding and stop relying on absorbing fragmented knowledge or information to interpret carbon neutrality in a one-sided way. Next, we will talk about what policy tools to support carbon reduction.

(Note 1) "A Simulation Analysis of the Social Cost of Carbon in Taiwan," by Chieh-Liang Liu and Pei-Ying Wu, Chinese Academy of Economic Research Press, 2021.

(Note 2) For the convenience of understanding, we will follow the emission directions (Scope 1, Scope 2, and Scope 3) defined by the "Organizational Boundary" in ISO 14064-1:2006. In the new version of ISO 14064-1:2018, the original organization boundary is changed to "reporting boundary", and the original scope 1 and scope 2 remain unchanged, while scope 3 is further broken down into 4 sub-schemes, so that 3 become 6, refining the classification of emission sources in the original version.

Source: Business Week https://www.businessweekly.com.tw/carbon-reduction/blog/3007644?fbclid= IwAR0LM1CsLzHX89MaHkNJfKYqaftHsVvdAzTav52cersGZLIZ8Sl7O8zY6ZA