Carbone-4-NZI-Guidelines-april-2020-2.pdf

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94-publication-referentiel-nzi.pdf

Net Zero Initiative - Diving into the Net Zero Initiative Guidelines

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Cloud carbon footprint: Do Amazon, Microsoft and Google have their head in the clouds?

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Misconceptions about electric vehicles

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351-publication-strategy-scenario-analysis.pdf

Corporate strategy in the era of climatic emergency:  Are old recipes (still) viable?

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Preconceived ideas on aviation and climate

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270-publication-decoupling.pdf

*offer subject to conditions, within the limits of stocks available

Decoupling and  green growth*

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213-publication-2-infra-challenge-methodological-guide.pdf

Assessing infrastructure portfolios' alignment with the Paris Agreement

César is a senior manager at Carbone 4, co-heading the Public Debate Department. This department aims to offer technical expertise to change agents (NGO, associations, trade unions, CSE elected representatives, parliamentarians, foundations, media) to help make the climate arguments and analyses that feed their actions (climate litigation, campaigns, advocacy, etc.) more effective.Since his arrival in June 2016, César has supported some 50 public and private organizations in their climate action and participated in several structuring methodological projects. In particular, he co-created and co-directed the Net Zero Initiative, a project aimed at realigning private sector action with the goal of zero net global emissions. He was co-leader of the Carbon Neutral Department between 2019 and 2023.He is co-author of the study "Faire sa part?" (2019) and of the study used by Affaire du Siècle in its legal action before the Conseil d'État (2020, 2021). César also teaches at HEC and Sciences Po.&nbsp;

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Pierre is consultant at Carbone 4 in the Carbon neutrality practice.&nbsp;Since joining the company in January 2022, Pierre has been assisting clients to define their low-carbon strategy, with a particular focus on avoided emissions. Before joining Carbone 4, Pierre participated in various projects related to renewable energies, including a long-term internship with a professional association in the sector.

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Imported Emissions: From Co-Dependence to Co-operative Action A collective effort of G20 countries to reduce emissions “embodied” in trade can accelerate the decarbonisation of the global economyThis report was made in collaboration with the<a href="https://europeanclimate.org/"> European Climate Foundation.</a>

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The greenhouse gas emissions from the production of goods and commodities traded internationally have been growing for some time and accounted for approximately a quarter of global emissions, nearing 12.8 billion tonnes of CO2e in 2021. &nbsp;As countries and regions advance their decarbonisation efforts at different paces, changing their relative competitive positions, it is increasingly likely that one country’s reductions could lead to an increase in its trade partners’ emissions via carbon leakage. Behind the immediate economic gain for partners is also an added challenge on their way to reaching their climate mitigation objectives. This risk notwithstanding, embodied emissions are an established fact at the intersection of our globalised economies and global climate goal.With 81% of all imported emissions in the world, G20 countries’ imports represent the lion’s share of embodied emissions, through trade amongst themselves and with the rest of the world. Imports tend to be an important part of all G20 countries’ carbon footprints, even for the net exporters of GHG emissions.Trade partners could recognise their co-dependence (my imported consumption = your emissions) to develop, where possible, a cooperative agenda for sector-specific decarbonisation. The data on imported emissions show the pre-eminence of heavy materials and chemicals, agriculture, forestry and fishing, mining and quarrying in trade’s carbon footprint (including the indirect emissions from electricity and heat going in their production, and from international transport).While so-called unilateral trade measures, e.g. new market access rules to avoid carbon leakage, may be necessary to maintain mitigation efforts, cooperation on mitigation can further accelerate on both sides of trade flows. There are international efforts underway on heavy industry (e.g. the Climate Club, Leadership Group for Industry Transition, the Industrial Decarbonisation Initiative), but there will be value in the G20 boosting the policy profile of this issue. This could start with the acknowledgment of countries’ carbon mitigation co-dependence, more precise data on embodied carbon, and a possible consolidation of international initiatives around a cooperative mitigation goal. Countries may also wish to set voluntary and transparent objectives for the reduction of their imported emissions.Countries may also wish to tackle this question bilaterally, based on the most significant sectoral contributions to their traded emissions. This report provides robust data as a first step in this direction.

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Benjamin joined Carbone 4 in January 2023 as a consultant within the IT &amp; Digital practice. After an engineering degree at the Ecole Centrale de Nantes, he specialized in computer science with a master's degree at the Ecole Polytechnique de Bruxelles. &nbsp;At Carbone 4, Benjamin helps players of the ICT sector in their low-carbon transition and in the redefinition of their business model. &nbsp;Before joining the team, Benjamin worked in a digital transformation consulting firm, particularly on cloud-related topics. He is also involved in associations as a volunteer trainer on energy and climate issues.

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1178-publication-imported-emissions-en.pdf

A collective effort of G20 countries to reduce emissions “embodied” in trade can accelerate the decarbonisation of the global economy

Imported emissions: From co-dependence to co-operative action

<h3>Foreword/Context</h3>Representing between 3 and 4% of global greenhouse gas (GHG) emissions in 2020 <a class="footnoteLink" href="#footnote-1">[1]</a>, the digital sector shows no signs of slowing down its energy and resource consumption. Alphabet (Google) and Microsoft, two of the five largest companies of the sector, have recently caused a stir in the news by reporting significant increases in their carbon footprints for the 2023 financial year (+13 and 20%, respectively <a class="footnoteLink" href="#footnote-2">[2]</a><a class="footnoteLink" href="#footnote-3">[3]</a>); despite stated ambitions of being ‘net zero’ or ‘carbon-negative’ by 2030.All three bricks of the global IT system (devices, networks, and data centers) follow a similar trend. The number of devices being manufactured is increasing each year <a class="footnoteLink" href="#footnote-4">[4]</a>, and despite efficiency gains, the sheer growth of data traffic has caused the electricity consumption of networks to increase in recent years <a class="footnoteLink" href="#footnote-5">[5]</a>.Data centers, crucial for data storage and computing, now consume around 2% of the entire world’s electricity – roughly as much as countries such as France or Germany – with consumption doubling between 2015 and 2022 and expected to double yet again by 2026 <a class="footnoteLink" href="#footnote-6">[6]</a> with the continued rise of energy-intensive technologies such as artificial intelligence (AI) and blockchain.Cloud providers, such as Amazon Web Services (AWS), Microsoft Azure and Google Cloud Platform (GCP), have continued growing and taking over ‘traditional data centers’ since&nbsp;<a href="https://www.carbone4.com/en/analysis-carbon-footprint-cloud">our last article on the topic</a>. Their sheer size and influence should make them key players in the digital sector’s decarbonization. How has their climate strategy evolved in the past two years?&nbsp;With climate reporting regulations multiplying worldwide, reporting the GHG emissions of cloud services has become a key feature for companies. Do hyperscalers provide enough information to help their customers assess the emissions linked with their use of the cloud? This article aims at helping companies see through the hyperscalers’ claims and be fairly critical of their cloud carbon calculators.<h3>Introduction&nbsp;</h3>Companies’ computing and storage needs increasingly rely on cloud services. In 2023, approximately 75% of IT workloads were on-cloud <a class="footnoteLink" href="#footnote-7">[7]</a>, and that number is expected to grow to 90% in the next three years. Cloud storage solutions are also hosting more and more data as time goes by, as they provide scalable options for IT decision-makers. A recent survey led by Boavizta <a class="footnoteLink" href="#footnote-8">[8]</a> confirms these trends: a large majority of surveyed companies, no matter their size, predict an exponential increase of their public cloud usages of over 10% per year.The cloud market is still dominated by large-scale cloud providers (commonly referred to as Hyperscalers), such as the ‘Big Three’ – Amazon’s AWS, Microsoft’s Azure, and Google’s GCP.&nbsp;

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Figure 1 – Market share of different cloud service providers in the first quarter of 2024 

In 2022, Carbone 4 analyzed the climate strategies and communication of these three providers. The article concluded on the lack of maturity of hyperscalers’ corporate claims and highlighted the shortcomings of the carbon calculating tools provided to customers. These tools were not even transparent enough to allow said customers to comply to the legislation to date, even less to anticipate the&nbsp;<a href="https://www.carbone4.com/en/article-csrd-opportunity">European Corporate Sustainability Reporting Directive (CSRD</a>).With an ever-growing size, have hyperscalers raised their standards on climate action, or is the forecast still cloudy?<h3>‘Net Zero’ or ‘carbon neutral’ companies, still and always – despite poor results on emissions reduction</h3>The main cloud providers’ carbon neutrality claims have not matured much over the years: Amazon still wishes to reach ‘net-zero across its operations by 2040’, Microsoft are still committed to being ‘carbon negative by 2030’ ; despite the absence of a clear scientific definition for ‘carbon neutral’ company <a class="footnoteLink" href="#footnote-9">[9]</a> and the misleading nature of this terminology. Google has dropped its ‘carbon neutral since 2007’ claim in favor of a ‘net-zero by 2030’ objective. Other large-scale cloud providers such as Oracle and Alibaba Cloud aim for “carbon neutrality” by 2025 and 2030, respectively.&nbsp;These neutrality claims are perceived more and more negatively by their own customers: the aforementioned Boavizta study highlighted that 88% of surveyed AWS, Azure and GCP users either consider the objective of a ‘carbon-neutral cloud’ as illusory or not transparent enough.The&nbsp;<a href="https://www.net-zero-initiative.com/en">Net Zero Initiative</a> lays out the three ways by which a company can contribute to global carbon neutrality: reducing its own emissions, helping others reduce their emissions, and increasing carbon sinks. With carbon sinks potential capacity being limited <a class="footnoteLink" href="#footnote-10">[10]</a>, and IT companies’ decarbonizing effect yet to be proven <a class="footnoteLink" href="#footnote-11">[11]</a>, the first and foremost priority of hyperscalers should be the effective reduction of their own emissions.

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However, none of the three largest cloud providers have yet recorded significant reductions in their induced emissions&nbsp;(except in 2020, where reductions can be considered as strongly conjunctural with the Covid-19 pandemic). In 2022, Amazon and Microsoft have reported reductions of 0,7% and 0,5% respectively, roughly 10 times less than the required 5-7% yearly reductions to meet the Paris Agreement objectives, while Google’s emissions slightly grew. In 2023, while Amazon saw a sharper decrease (3%), Google and Microsoft reported large increases (13% and 20% respectively),&nbsp;driven by investments in hardware and infrastructures linked to the AI boom.To make matters worse, when looking at the Big Three’s carbon footprints using the location-based method&nbsp;for energy consumption, all have increased in 2023, sometimes spectacularly: +2% for Amazon, +12% for Google and +22% for Microsoft<a class="footnoteLink" href="#footnote-12"><a class="footnoteLink" href="#footnote-12">[12]</a></a>.

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Reductions reported in the past years are almost exclusively attributable to Scope 2 reductions, which comes as no surprise. Indeed, as highlighted previously <a class="footnoteLink" href="#footnote-13">[13]</a>, the hyperscalers’ main strategy to reduce emissions over the past years was through the purchase of electricity labeled as ‘renewable’, thanks to contracts such as power purchase agreements (PPAs) or unbundled guarantee of origin (GO) certificates. It is to be noted that hyperscalers also lack transparency on the nature of these ‘green electricity’ contracts, not disclosing the proportion of electricity coming each type of contractual instrument, although this information is required by the CSRD.Reporting Scope 2 emissions using the market-based accountability method allows the hyperscalers to associate zero Scope 2 emissions to every kilowatt-hour (kWh) of electricity purchased through PPAs or GOs.This raises several issues:<ul><li>PPAs and GOs do not guarantee spatial and temporal consistency between the purchased ‘green’ electricity and the electricity consumed by the customer <a class="footnoteLink" href="#footnote-14">[14]</a>. While these mechanisms can, with the right context <a class="footnoteLink" href="#footnote-15">[15]</a>, promote the development of new renewable energy facilities, the electricity physically consumed by the hyperscalers’ datacenters still relies on all other production facilities of the local electricity grid. Accounting for GHG emissions linked to electricity consumption as zero in a country such as Ireland where the average carbon intensity of electricity is nearly 400 gCO2e/kWh <a class="footnoteLink" href="#footnote-16">[16]</a> is highly misleading.<ul><li>The Net Zero Initiative has recently published a guidance on the accounting of energy purchases <a class="footnoteLink" href="#footnote-17"><a class="footnoteLink" href="#footnote-17">[17]</a></a>, highlighting how to rigorously report on the benefits of renewable energy purchases according to the types of contracts.</li></ul></li><li>Increasing electricity consumption and solely relying on the electricity’s decarbonation may lead way to competitions of use: there is no guarantee that there will be enough low-carbon electricity for all sectors, as the IPCC states that global climate objectives cannot be reached without sufficiency efforts.</li><li>Some countries such as France already impose accounting for emissions using the location-based method in its regulation. The Corporate Sustainability Reporting Directive (CSRD) <a class="footnoteLink" href="#footnote-18">[18]</a> adds an obligation for all companies reporting in the EU to report using the location-based method. More globally, compliance with the GHG Protocol requires to report using the location-based method as well if a market-based value for Scope 2 emissions is given.</li></ul>Even overlooking the debatable nature of these Scope 2 reductions&nbsp;claimed by the largest cloud providers thanks to market-based accountability, another problem arises: this reduction lever is nearing the end of its road. Scope 2 emissions now only represent a few percents of the hyperscalers’ total reported carbon footprints.With roughly 100% of electricity consumption covered by ‘green’ electricity purchases, Scope 2 emissions are no longer compressible&nbsp;(as they are close to zero) and can no longer carry the entire decarbonization strategy of the hyperscalers,&nbsp;as highlighted by the figure below.

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Figure 2 – Amazon’s reported emissions since 2019

Out of the Big Three, only Google still has room for Scope 2 reductions, as they have rightfully opted for a more precise accountability method: counting electricity consumption emissions as zero only when the purchased green electricity satisfies spatial and hourly temporal coherence<a class="footnoteLink" href="#footnote-19">[19]</a>.To reach their decarbonation objectives, hyperscalers must find another lever than green electricity purchases, as their physical impact on emissions reduction is questionable and their limits are already showing. Sufficiency efforts&nbsp;(such as questioning the necessity of the industry to invest so heavily in AI technology for instance), while long overlooked, should be integrated in the hyperscalers’ strategies if they really wish to get closer to their emissions reductions objectives.Beyond figuring out their own decarbonation, Cloud providers have another duty:&nbsp;providing precise tools for their customers to be able to report emissions linked to their purchase of cloud services. Current changes in regulations are going in this direction. In Europe, for example, the CSRD requires reporting companies to specifically communicate the carbon footprint of their cloud service purchases&nbsp;(as a subset of their total purchased goods &amp; services footprint) if they are significant.So, what is the current level of detail provided by the hyperscalers’ ‘carbon calculators’? Is it precise enough to help companies in their mandatory CSRD reporting?<h3>Carbon calculators have slightly improved</h3>Similarly to any purchased service, Cloud spendings rely on physical flows that emit greenhouse gases and must be included in the carbon footprint calculation of any company reporting on its emissions.The figure below shows the main emission sources of Cloud services and how to account for them, highlighting which category of the GHG Protocol it falls under depending on the point of view of the reporting company:&nbsp;

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Figure 3 – Non-exhaustive list of emission sources for cloud services

The largest cloud providers all provide carbon calculators to allow their customers to estimate their emissions linked to cloud service use. In 2022, Carbone 4 highlighted the flaws of these tools: lack of transparency on the methodology used to compute emissions and indicators, and insufficient perimeter coverage. Two years later, the overall quality of these calculators has slightly improved:

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Figure 4 - Overview of Cloud provider’s carbon calculator tools

Nonetheless, most of these tools remain strongly lacking overall, often providing only market-based emissions for electricity consumption and excluding important emission sources.Notably, Azure and AWS’s omission of upstream of energy (emissions linked to the construction and maintenance of electricity production facilities, transportation of electricity, etc.) coupled with market-based accountability practicallyerase all emissions linked to electricity consumption.By also omitting IT equipment manufacturing (and all Scope 3 items for that matter), AWS and Oracle’s carbon calculators give near-zero emissions as a result, creating an illusion of an impact-free service. This makes it very difficult for the customer to comply with the CSRD reporting, le grasp an idea of the dependency of their cloud usage on carbon emissions.Finally, AWS and Azure put forward avoided emissions indicators built upon these very low results, and under the assumption that customers would have hosted their activities on less efficient, on-premises architectures and with ‘regular’ electricity had it not been for their service. These misleading indicators ignore the WBSCD and NZI’s good practices regarding avoided emissions claims transparency and credibility. They also ignore the sectoral best practices described in the&nbsp;<a href="https://www.carbone4.com/publication-nzi-it">Net Zero Initiative’s guidance on avoided emissions for IT solutions</a>. For instance, whilst cloud services may, for a constant level of IT activity, present efficiency gains compared to on-premises equivalents, they can also be responsible for rebound effects, which are not considered in these indicators.On the flipside, GCP still provides live location-based emission factors for electricity consumption and now includes important items such as server manufacturing.OVHcloud’s calculator covers a wide perimeter and is very transparent on the methodology used to compute emissions, re-allocating nearly every item of their own carbon footprint to their customers and allowing them to understand their carbon dependencies.In parallel, some initiatives from nonprofit organizations are emerging in order to estimate the energy consumption necessary for certain cloud services when it is not made clear by the providers, such as&nbsp;<a href="https://github.com/Boavizta/cloud-scanner">Boavizta’s Cloud Scanner tool for AWS</a>.If you would like to keep informed on Carbone's 4 work on this topic :

<h3>Reduction tips remain timorous regarding sufficiency</h3>AWS, Azure and GCP provide frameworks with best practices for a sustainable usage of their services. The underlying tips mostly concern efficiency – the amount of energy that will be required for a given service: use the appropriate services to answer a given need, set data retention policies, optimize software and architecture to run workloads, etc.Concerning the carbon intensity of consumed electricity, GCP insists on the importance of choosing regions with low location-based&nbsp;electricity emission factors and puts forward mechanisms such as wind and sun-based workload scheduling.One reduction lever is absent, however: sufficiency. While there are plenty of guidelines on how to answer a given need with the most efficient architecture, none mention the necessity to question needs in the first place. The diagnosis remains: hyperscalers are not on track for the 5 to 7% yearly reductions in emissions implied by the Paris agreement and aren’t likely to get on track without rethinking business models with incentives to sufficiency.<h3>Conclusion</h3>With well-optimized buildings and mutualized machines, Cloud datacenters can be a relevant tool to reduce the emissions linked to organizations’ IT activity as long as rebound effects are contained. From a cloud customer’s perspective, the main elements to keep in mind when undergoing a cloud migration or aiming at reducing emissions linked to cloud usage are highlighted in the&nbsp;<a href="https://www.carbone4.com/publication-nzi-it">Net Zero Initiative’s guidance on the IT sector</a>:&nbsp;<ul><li>Choosing a region with reliable access to low-carbon electricity – in other words, with a low location-based emission factor for electricity&nbsp;– to host activities,</li><li>Questioning needs, limiting the growth of IT activity (data storage volumes, CPU usage, expected latency, etc.) – prioritizing setting reduction targets in absolute rather than in intensity may help.</li></ul>From the provider’s perspective, Amazon and Microsoft must drastically improve the quality of their carbon calculator&nbsp;tools to allow customers to better manage their emissions and comply with the CSRD reporting, and all hyperscalers must give way to more sustainable, less rebound-prone business models.Customers of Cloud services can play a role as well,&nbsp;by contacting their providers and asking for more transparency and detail on the emissions linked to their purchases. In the meantime, when the covered perimeter of carbon calculators is insufficient, emissions must be re-estimated with hypotheses to be more representative&nbsp;of the actual carbon dependencies at stake.&nbsp;

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The Shift Project, 2021; This figure includes production and use of terminals, data centers and networks.

Google Sustainability, 2024 Environmental Report, 2024.

Microsoft, 2024 Environmental Sustainability Report, 2024.

While laptops and smartphones’ numbers are stabilizing, IoT devices connections are rapidly growing.

IEA, <a href="https://www.iea.org/energy-system/buildings/data-centres-and-data-transmission-networks">Data centres and data transmission networks</a>, 2023.

AIE, <a href="https://iea.blob.core.windows.net/assets/6b2fd954-2017-408e-bf08-952fdd62118a/Electricity2024-Analysisandforecastto2026.pdf">Electricity 2024 – Analysis and forecast to 2026</a>, 2024.

Rackspace, <a href="https://www.rackspace.com/sites/default/files/2023-06/Rackspace-Cloud-Modernization-Report-2023.pdf">The 2023 Cloud Modernization Research Report</a>, 2023.

Boavizta, <a href="https://boavizta.org/blog/evaluation-empreinte-environnementale-cloud-public">Évaluation de l’empreinte environnementale du cloud public</a>, 2024.

See <a href="https://www.net-zero-initiative.com/">Net Zero Initiative</a> by Carbone 4.

<a href="https://www.carbone4.com/publication-nzi-pilier-c">Net Zero Initiative – Pillar C guidance</a>, 2023.

See General statement of <a href="https://www.carbone4.com/files/Publication_NZI_4_IT_Carbone_4.pdf?_ga=2.27810748.1253441245.1722528814-601452010.1674578034&amp;_gl=1*dyzukz*_gcl_au*NjYxODUwNTA1LjE3MTY0NzQ5OTI.*_ga*NjAxNDUyMDEwLjE2NzQ1NzgwMzQ.*_ga_DDFFFJ3G7F*MTcyMjUyODgxNC4yMjIuMS4xNzIyNTI5Nzk5LjUyLjAuMA..">Net Zero Initiative for IT</a>, 2024.

Note that these metrics do not appear as-is in any of the three companies’ sustainability reports; they were re-calculated based on separately communicated location-based Scope 2 emissions. The CSRD requires companies to report their full aggregated carbon footprint (Scopes 1 + 2 + 3) using the location-based method.

Carbone 4, <a href="https://www.carbone4.com/en/analysis-carbon-footprint-cloud">Cloud carbon footprint: Do Amazon, Microsoft and Google have their head in the clouds?</a>, 2022.

The means of electricity production can be located thousands of kilometers from the place of consumption or produce electricity in the middle of the day for consumption at night. The energy produced is therefore not physically linked to the energy consumed.

Carbone 4, <a href="https://www.carbone4.com/files/Publication_Electricite_verte.pdf">Électricité “verte” : un outil pertinent pour les entreprises ?</a>, 2018.

<a href="https://app.electricitymaps.com/map">ElectricityMaps</a> value for Ireland in 2023: 372 gCO2e/kWh

<a href="https://www.carbone4.com/nzi-for-energy-publication">Net Zero Initiative for Energy</a>, 2024

See Carbone 4, <a href="https://www.carbone4.com/en/article-csrd-who-is-affected">Corporate Sustainability Reporting Directive (CSRD): Who is affected, and when?</a>, 2023

Meaning when the consumed kilowatt-hour of electricity was matched with the injection of a renewable kilowatt-hour of electricity on the same grid within the hour.

The carbon forecast of AWS, Azure and GCP

Digital report: Cloudy with a chance of hidden emissions

Arthur is a biodiversity expert at Carbone 4. A specialist in living organisms and nature-based solutions, he works with companies on issues such as biodiversity, carbon sequestration and sustainable agriculture.Before joining Carbone 4 in early 2021, Arthur worked for two years as a CSR strategy consultant, and three and a half years in the development of carbon projects (reforestation, agroforestry, conservation and ecosystem restoration) and sustainable agriculture. This led him to work in the field in more than 15 countries in Latin America, Africa and South Asia.&nbsp;

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<h2>Executive summary</h2><h3>Certificates for biodiversity</h3>As reminded by the IPBES reports, urgent action is needed to reverse the decline in biodiversity. The global framework that emerged from COP15 in Kunming-Montreal sets global objectives for this action.&nbsp;To achieve them, we will need to mobilise funding.&nbsp; This is the content of target 19, which calls for "a significant and progressive increase in financial resources [...] including private resources". It explicitly mentions the promotion of "innovative schemes", including "biodiversity credits".&nbsp;Businesses, financial institutions, and public authorities have an important role to play in achieving these objectives. In line with the emergency underlined by the IPBES and the rising expectations of their stakeholders, the issue of biodiversity is becoming increasingly important for these organisations. They are looking for tools to implement their contribution to global objectives, and biodiversity certificates/credits may be part of the solution.&nbsp;They can be used, for example, as part of CSR strategies, for sustainable finance, or for public policies to preserve biodiversity.&nbsp;Certificates/credits are therefore associated with major opportunities, both for nature and for organisations. However, various observers, particularly from science and NGOs, are warning of the risks associated with their use. In particular, they point out that it can generate harmful rebound effects for biodiversity, which could jeopardize the overall value of their contribution to global objectives.&nbsp;The implementation and informed use of biodiversity certificates/credits requires in-depth knowledge of these two aspects. Risk analysis is essential to avoid perverse effects and to design a mechanism that is genuinely favourable to biodiversity. Analysis of the opportunities is essential to identify the potential and design a mechanism that attracts the interest of the various stakeholders. The aim of this document is to carry out this analysis of the risks and opportunities associated with biodiversity certificates/credits, based on the state of the art of the science and the expertise available.&nbsp;&nbsp;<h3>Context</h3>To cover all the issues, risks and opportunities, we consider these mechanisms in the general sense: voluntary or regulatory, compensation or contribution, for conservation and/or restoration.&nbsp; In the following, we prefer the term "certificates" to "credits" because the term "credit" is implicitly associated with an offset mechanism, whereas the term "certificate" is more general.&nbsp;We also believe that the aim of a biodiversity certificate mechanism is to make a credible and significant contribution to the global objectives for biodiversity, while being fair in socio-economic terms.&nbsp;

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<h3>Risk mapping</h3>Nine categories of risk relating to the real value of certificates for biodiversity have been identified:

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<ul><li>For compensation mechanisms; risk of undermining the mitigation hierarchy.&nbsp;Compensation may be detrimental to mitigation efforts, as the possibility of "cancelling" impacts reduces the incentive to avoid and reduce them.</li><li>Risks of "greenwashing": communication about good practice concealing negative impacts generated elsewhere.&nbsp;</li><li>For voluntary mechanisms; risk of regulatory disruption:&nbsp;that they may disrupt or delay the emergence of environmental regulations that meet the challenges, because the legislator considers that the market "has&nbsp;things&nbsp;under&nbsp;control".</li><li>Risks relating to the evaluation of biodiversity gains:&nbsp;biodiversity is a complex entity that is difficult to capture using a single metric.&nbsp;Risk that there are weaknesses in the evaluation and monitoring of biodiversity gains, linked in particular to i) the characteristics of the evaluation method ii) uncertainty about&nbsp;the&nbsp;reference&nbsp;scenarios&nbsp;iii)&nbsp;double&nbsp;accounting&nbsp;of&nbsp;biodiversity&nbsp;gains.&nbsp;</li><li>Risks relating to the reliability of control processes,&nbsp;reinforced by conflicts of interest and inherent in the position&nbsp;of&nbsp;certifier.&nbsp;</li><li>Risk associated with the failure to promote existing good practice&nbsp;and landscape features that are already&nbsp;conducive&nbsp;to&nbsp;biodiversity.&nbsp;</li><li>Risks&nbsp;associated&nbsp;with&nbsp;the&nbsp;non-permanence&nbsp;of&nbsp;biodiversity&nbsp;gains.</li><li>Risks associated with the displacement of impacts&nbsp;outside the certified area (leakage).</li></ul>&nbsp;<h3>Analysis of supply and demand</h3>To achieve its objectives, the mechanism must first guarantee the quality of the certificates. It must then achieve a certain scale, so that its contribution to the overall objectives is "significant". This scale will depend on supply and demand, which were analysed based on interviews and a review of independent publications.&nbsp;Five main demand use cases, both regulatory and voluntary, have been identified. They are presented in the diagram below:

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Most of the sources consulted consider that demand will be the main limiting factor for the scale of the mechanism. However, the role of supply should not be underestimated.&nbsp;<h3>Drivers of supply</h3>The main determinants of supply are linked to the adaptation of the mechanism to the reality of local stakeholders.&nbsp;In particular: its compatibility with their issues and needs, including taking account of local knowledge and understanding of biodiversity, the involvement of local stakeholders at the various levels of the mechanism, the fair distribution of roles and revenues, and funding capacity and security.&nbsp;The involvement of intermediaries between local stakeholders and end buyers can catalyse supply and facilitate the link with demand. This is particularly true of project developers, who can provide the technical and financial capabilities that are essential to project development.&nbsp;&nbsp;<h3>Drivers of demand</h3>The "regulatory"&nbsp;demand will be determined mainly by the characteristics of the regulations from which it is derived.&nbsp;“Voluntary" demand will depend mainly on the reference levels defined by the mechanism, its credibility, the simplicity of internal management, the potential for external promotion of the certificates and their price.

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<h3>Discussion</h3>Regulatory vs. Voluntary&nbsp;Only a mandatory regulatory mechanism can truly guarantee a certain level of demand. However, the recent increase in the importance of CSR and biodiversity issues makes voluntary demand a credible option. However, without regulation, this demand will probably remain insignificant compared to the estimated financing needs for the preservation of biodiversity. The question of the link between a voluntary mechanism and regulation will therefore be crucial: it will have to be designed to encourage the emergence of ambitious legislation, and to link up effectively with existing systems.&nbsp;&nbsp;Compensation vs. ContributionThe concept of "biodiversity offsetting" raises many criticisms. In addition to those already raised for carbon offsetting, the essentially local nature of biodiversity and the absence of a reference metric make the issue even more delicate for biodiversity.&nbsp;It seems difficult to rigorously define equivalences between "negative impacts" on the one hand, and "positive impacts" generated elsewhere: restoration or conservation projects may generate "biodiversity gains", but it is difficult to demonstrate that they "cancel out" destruction.&nbsp;This does not mean that regulatory biodiversity offsetting mechanisms cannot have beneficial effects. In some cases, a certain level of "biodiversity destruction" may be deemed socially desirable to achieve economic and social objectives. If they are well designed, these mechanisms can make it possible to control and limit such destruction, while also imposing restoration obligations.&nbsp;On the other hand, a "voluntary" offsetting mechanism cannot have a coercive effect on the reduction of negative impacts.&nbsp;It would be more likely to create opportunity effects, where stakeholders would favour the purchase of credits over the reduction of impacts when this would be less costly. Its real value for biodiversity would therefore be subject to significant risks. Moreover, for the same reason, it would probably be the target of criticism, particularly from the scientific world and NGOs, which would weaken the demand.&nbsp;&nbsp;It therefore seems preferable, when designing a biodiversity certificate mechanism, not to rely on the principle of voluntary offsetting. This is to guard against the risks mentioned, but also because this contested use case could undermine the credibility of biodiversity certificates in general, which nevertheless offer promising prospects.

&nbsp;<a href="https://www.carbone4.com/files/Biodiversity_certificates_risks_and_opportunities.pdf">Download the publication</a>

Biodiversity certificates - risks and opportunities.pdf

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Biodiversity certificates: Risks and opportunities

Zenon has been a consultant at Carbone 4 since February 2019 and is now manager. After studying, Zénon created a start-up for the desalination of seawater with renewable energies. He then launched L’<a target="_blank" href="https://vasselinzenon.wixsite.com/linparable/">Inparable</a>&nbsp;to help engineers in search of meaning to take the first steps towards a profession with a strong positive impact.At Carbone 4, he now develops the expertise of the Group in the environmental footprint of the digital sector and helps pure players reduce their emissions. More broadly, he has guided around twenty organizations in all sectors in their climate strategy.He gladly facilitates training sessions or presents the stakes of global carbon neutrality in conferences.

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