The importance of embodied carbon
Not all carbon is made equal.
From a chemistry perspective, this might be obvious to many, but I am talking about temporal and methodological diversities here.
But let’s not rush. First of all, what the heck is embodied carbon? Academics have enjoyed long conversations, going with a fine-tooth comb through definitions (and there’s merit in that too — we need to know we’re all talking about the same stuff!). But in essence, embodied carbon is the sum of greenhouse gas emissions associated with, or released during, raw material extraction, transportation, manufacturing, assembly, maintenance, repair, and final disposal for a product or system.
Usually, to get a whole-life picture of carbon emissions, we look at operational carbon, which is the sum of the emissions linked to the energy needed to ‘run’ or ‘operate’ that product or system. Easy examples to get to grip on this concept are a car or a house. Users are in charge of operational carbon generally (think of refuelling or recharging your car, or paying your energy bills) and that’s why embodied carbon has gone vastly unnoticed to society at large.
But there’s no salvation from the climate crisis without seriously addressing embodied carbon, and forget all your net zero plans if your solutions to the climate emergency are only EVs and heat pumps.
Embodied carbon is a messy, multi-faceted, fragmented beast. Think of EVs, for instance. If we imagine a not-so-desirable magic wand that transforms the global fleet of road vehicles into EVs, you have *in theory* solved the emissions problem from road transport. Or have you? This would be a clear case of burden shifting: all the components for these zillion new EVs would come from globally fragmented and dispersed supply chains, geolocated in countries that are far away and with diverse (and rather dirty) energy mixes. The embodied carbon of this unthinkable quantity of EVs would be huge. But as users we wouldn’t see it — and likely citizens and politicians would partake in patting one another’s backs for having saved the world.
Embodied carbon is particularly problematic for startups and scaleups. For these organisations, due to their very own nature and stage in their development journey, the emissions graph goes somewhat like this.
Startups and scaleups, particularly in deep-tech, need to build prototypes, then pilot plants, then full-scale plants, in order to replace current alternatives of products and systems that are based on the dinosaur-old fossil fuel economy.
Now I am sure we will all have seen what needs to happen to save the planet. And the emissions chart is more like this.
Science-based target initiatives, Paris-aligned trajectories, IPCC reports, all agree that emissions must go down. So how do we reconcile the idea of climate tech ventures that are founded as impact-driven missions to fight the climate crisis with these apparently contradictory paths?
We don’t, is my answer. But we also don’t have any other choice, really. In fact, we have the degrowth option but the behavioural and societal change needed for it to work is so monumental that it’s unlikely to pan out any time soon — we need to keep working on both!
The current products and systems are what led us all into the mess we’re in today. And the only way out is to phase out these obsolete products, systems, and wasteful ways of thinking about society and the economy. This simply won’t happen unless there are viable alternatives to kick in (and kick ass!). Some of these alternatives exist already (think of PVs and wind turbines) but many others just don’t.
The IEA has shown that most of the technologies that will transform our society and contribute to solving the climate crisis are still in embryonic stages.
These technologies will need to scale, we have no choice but to give them credit and build those pilots and then full-scale plants. It’s a risky (emissions) game, and we have no choice but to play. Think of it as a happy version of Russian roulette: the empty chambers in the cylinders are the innovations which won’t work or won’t scale. But the lucky ones are those giving us baseload renewable and fossil-free energy, or the carbon-free heat that we desperately need for processes where electricity just doesn’t work (fire has been with us for a looooong time, if there was an obvious better choice I am sure smarter people before us would have figured that out already).
But how do we know how the risky game is going from a carbon perspective? We need two key concepts, the embodied carbon premium and the carbon payback period. Let’s imagine a company whose product massively reduces operational carbon emissions. But in order for this product to go to market the company needs to build a first full-scale plant. This is the embodied carbon premium (a simplified version of it, let’s be clear).
And how does it link to the carbon payback period? Well, not much differently from how you would normally do a payback period analysis of any investment. In this case, it’s the planet and our children’s future that we’re borrowing from.
The embodied carbon premium is where you start off, and the annual reduction of increasingly deploying the virtuous company’s products (that displace fossil-fuel alternatives) is how you pay it back.
The sooner the better: for the planet and actually also for those investing in that company (as it means the scaling and adoption have gone pretty well!).
Understanding the importance of embodied carbon tells us something worthwhile in the current whirlwind of climate tech funds and impact investing: if you don’t include embodied carbon in your calculations for projected savings, impact reductions, emissions avoidance (etc) your numbers are way off. If you want to grasp how foolish this is, the equivalent would be a business plan for a new AirBnB property you’re thinking of getting where you only capture the rental income and not the cost of buying a property. A bank wouldn’t lend a penny to such a plan (so well done if your LPs haven’t figured that out yet and flooded you with cash anyway!).
At Extantia, embodied carbon considerations are key — not just in their quantitative evaluation within the Carbon Math assessment — but also as a qualitative guide for scoping. For instance, companies and technologies that work with existing infrastructure and offer a retrofit solution for the status quo yield a double benefit. On the one hand, they de-risk the scaling process and offer a quicker time-to-impact. On the other hand, they don’t incur as much embodied carbon as solutions that require their infrastructure to scale as they grow. The former benefits VCs, the latter benefits the planet.
The savvy reader, when seeing things going into the future will have already thought about global decarbonisation efforts, which brings us to the concept of time value of carbon. If you’re not familiar with this concept, it’s quite simple: it’s better to reduce the emissions today than tomorrow (not to be confused with the more famous egg today vs. chicken tomorrow — this is very much like egg today vs. egg tomorrow, who would wait?). Or visually put: the blue path is better than the other two.
But why so? They all lead to “ world saved ✅” outcome in the end.
To understand it, we need a bit of climate science but you’re in luck as Zickfeld and colleagues worded it beautifully: “The findings of this study imply that offsetting positive CO2 emissions with negative emissions of the same magnitude could result in a different climate outcome than avoiding the CO2 emissions.” Once greenhouse gases are in the atmosphere, they kick off climate loops that might survive the gases themselves, and since we don’t exactly know where we stand with these climate loops that we are lightheartedly triggering (after all, it is uncharted waters we’re in), it is much better avoiding emitting in the first place. That’s why the blue path is so much better because we start to avoid emitting much earlier than in the other two scenarios.
In the climate debate, the blue line generally goes along with something like this: significant, global, and urgent investments in emission reduction strategies and technologies able to yield a drastic reduction in the global emission rate in the near future. Do you get a sense of speed? So do I. And what do VCs like? A lot of speed as far as I understand.
So as a scientist, it is for me reassuring to see that the wants of private capital and the needs of mother Earth are, for once, temporally aligned.
