How innovative carbon offset nonprofit Climate Vault plans to ‘superch

Carbon offsetting has become a valuable tool for companies taking much-needed climate action, and yet the model has major drawbacks.

It still grants companies a free pass to continue emitting. And there’s little transparency as to how much companies are actually offsetting because there are an array of carbon registries, each with different rules and standards.

But emissions reductions are essential, so Climate Vault has developed an innovative business model to take advantage of offset markets to help cut emissions and fund the growing carbon removal industry, cutting and removing emissions in one transaction.

Using funds from its partner businesses and organizations, Climate Vault buys carbon allowances from markets, reducing the amount of carbon available. Then it invests into pioneering carbon removal technologies, reasoning that reduction alone isn’t enough—that we need to remove historic emissions from the Earth.

Climate Vault was founded in December 2020 by Michael Greenstone, who was chief economist for the Council of Economic Advisers for the Obama administration.

Stakeholders are increasingly demanding robust climate plans from businesses and organizations: Investors are concerned with ESG (environmental, social, and governance) ratings, customers are making purchasing decisions based on companies’ sustainability track records, and employees have a growing interest in working for eco-conscious enterprises.

Climate action is becoming essential not just for protecting the planet but also for “future-proofing business,” says Gary Schueller, Climate Vault’s head of marketing.

Climate Vault was a finalist in Fast Company’s 2022 World Changing Ideas Awards. As part of those awards, Fast Company offers one company a chance  to work with global services firm Genpact and use its digital transformation expertise to create even more impact.

The company plans to use that partnership to scale, given the demand, and to achieve its goal of reducing 10 million metric tons of emissions by the end of 2025.

“We can’t keep up with the increase in the business that we have,” Schueller says. Climate Vault’s work with Genpact will use Genpact’s AI, data, and tech insights to streamline processes, achieve real-time pricing and analytics for its partners, reach a wider segment of the market, and work with more and bigger industries. “With this partnership, we’ll just be able to have appeal to an entirely different scale of organization that can come in and use our model,” he says.

Sanjay Srivastava, Genpact’s chief digital strategist, says: “We are passionate about driving digital transformation that helps to fundamentally reverse climate change. Genpact’s expertise in data, technology, and AI will help create a platform for carbon reduction and removal that makes carbon neutrality accessible at scale across the industry, in a transparent and verifiable fashion.”

Climate Vault’s process has two main stages. “We call it the one-two punch to knock out carbon,” Schueller says.

First, on behalf of its partners, the nonprofit buys carbon allowances—permits that allow an entity regulated by international or national carbon markets to emit one metric ton of carbon dioxide or equivalent greenhouse gas. If a company purchased these allowances, it could use them to emit more carbon; but Climate Vault locks up that carbon in a “figurative vault,” reducing the total amount of legally permissible emissions.

As opposed to the voluntary markets, where much offsetting occurs, the group views these compliance markets as much more transparent because of the stringent regional, national, or international regulation—making the organization an “antidote to everything that was flawed and fractured in the voluntary markets,” Schueller says, noting that in this model “There’s no ambiguity about whether or not a ton of carbon has been reduced.”

So far, with for-profit and nonprofit partners including Gemini, TPG, Morningstar, and Vanderbilt University, Climate Vault reports having reduced 750,000 metric tons of carbon.

In the next phase, that same transaction also invests into carbon removal startups focusing on the elimination of built-up carbon from the atmosphere. “When you do the reduction work with Climate Vault, we automatically put you in line to get access to these technologies,” Schueller says. Climate Vault exchanges the carbon allowances in the market to fund the purchase of equivalent tons of future carbon removal.

Carbon removal is a nascent field, making it hard to track projects with the most impact. So Greenstone formed a “technology chamber,” a collection of energy and economic experts headed by Ernest Moniz, Obama’s former secretary of energy, to review applications from these companies and select the best ones to receive their grants. It views the carbon removal aspect as vital.

“Reduction is a great start, but it’s woefully inadequate,” Schueller says. “We can stop emitting today, and it still wouldn’t be enough to avert climate change and rising temperatures if we don’t pull the historical emissions out.” It’s only once the technology chamber is confident that the removal startups are actually functional that the company resells the offsets its been holding and puts them into removal, so all the emissions end up fully removed by the end of the transaction.

As the climate crisis worsens and businesses are reimagining their climate action plans, Schueller stresses the importance of the model at this very moment in time—and for the Genpact partnership to help “supercharge” it: “Something transformative is coming from this partnership.”

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