Wednesday, February 5, 2014

How to go Carbon Neutral in a Simple Effective way

The Microsoft carbon fee: theory & practice (40 page pdf, Tamara “TJ” DiCaprio, Microsoft Corporation, Dec. 13 2013)

Also discussed here: A Carbon Fee For Your Business? Microsoft Can Help(Sustainable Business, Dec. 13, 2013)

And here: The Carbon Neutral Company

Today we review a plan and guide that Microsoft developed to make itself carbon neutral by the use of a carbon free and a process to make an inventory and monitor carbon use, collect a carbon fee and then invest it in ways that would accelerate the carbon neutral end state.

Although many forward looking companies and a few governments have put carbon pricing into their future plans, Microsoft is the first to actually implement such a plan. While carbon taxes and cap and trade approaches have been tried and generally failed, what makes the Microsoft plan appealing is its simplicity- the fee is flexible based on consumption of carbon use multiplied by a carbon price that is set externally. Another key feature is the use of targets which not only provides managers with a goal for carbon use but also an investment outlook with key revenue targets which can be used to purchase things that would accelerate the whole process. The bottom line is that Microsoft openly declares that they are doing this because it is good for the bottom line, promotes efficiency and transforms the company to a sustainable one – what is holding so many municipal and national governments back from emulating this?

 carbon fee  

Key Quotes:

 “A carbon fee internalizes the external cost of carbon pollution into the financial structure of an organization”

“The company [Microsoft] is modeling how a carbon tax would work were it ever to be adopted by the US. Other businesses, nonprofits and government agencies might well want to do the same, as a way of pushing this all-important climate change remedy forward.”

"Microsoft's model is based purely on consumption - there's nothing complicated to manage, no credits to track or trade. This simplicity is what makes the model so transferable. It can be adapted easily to fit other corporations, nonprofit groups and government agencies,"

"The basic formula is universal - carbon emissions multiplied by carbon price equals carbon fee. It's simply a matter of tweaking the model to fit an organization's structure, financial processes and individual goals."

  • “Organizational carbon reduction policy… investing in internal efficiency initiatives and green power, as well as carbon offset projects for our unavoidable carbon emissions.
  • Price on carbon. As part of our carbon neutral pledge, we set an annual internal carbon price, which is determined by our total investment strategy to reduce and offset our carbon emissions. …We use this price—which reflects true cost economics for carbon—to calculate a carbon fee that allocates the cost of reducing and offsetting the carbon emissions from our data centers…
  • Carbon fee fund investment strategy. The fees that we collect through the carbon fee model go into a central fund used to subsidize investments that enable Microsoft to reduce emissions and be net carbon neutral. “
“A carbon fee model is an excellent way to provide both the financial framework and the formal discipline to drive efficiency projects. By applying a financial cost to the carbon impact of operational practices, it provides justification to prioritize efficiency—and therefore cost reductions—across the organization.”

What carbon emissions to count:
  • "Emissions that your organization produces directly (such as through the use of carbon-based fuels)
  • Emissions that your organization incurs indirectly through the purchase of electricity, heat, or steam.
  • Emissions that your organization incurs indirectly beyond Scope 2 emissions (for example, emissions related to your supply chain, waste disposal, business travel, and employee commuting)."
“A carbon reduction target may be an absolute target (to reduce emissions by a specified amount within a specified timeframe) or an intensity target (for example, to reduce emissions per unit of revenue relative to a base year). Carbon reduction targets are particularly valuable if you plan to use your carbon fee to fund efficiency initiatives, as they provide a basis to guide investments in those initiatives.
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