One particular challenge of decarbonizing core industries is that the products — commodity materials like steel, cement, and base chemicals — are bulky: They’re difficult and expensive to move around. And the more you move them, the worse the carbon footprint becomes. For downstream customers with ambitions to procure sustainable materials, this bulk factor limits availability to certain locations: You have to be near enough to a low-carbon manufacturing facility to obtain the product. A separate but significant challenge is that the final customers that are willing to pay a green premium often come into the transaction chain too late to influence materials-sourcing decisions. But what if you could decouple the environmental attributes of a material from the physical product and purchase those attributes in a fungible manner?
Recently, Microsoft announced its intent to purchase environmental attribute certificates (EACs) from near-zero-carbon cement producer Sublime Systems, which is developing a novel electrochemical process in Massachusetts. In essence, Microsoft would have a right to claim a more sustainable footprint in its facilities, presumably data centers, without actually using Sublime Systems’ cement in the buildings. Then, when Sublime Systems sold the batch of cement associated with those EACs, it would have to advertise it as conventional, high-emitting cement. (Similar systems exist in other sectors, such as sustainable aviation fuel and Attributes of Recycled Content for plastic recycling.) This financial innovation offers the potential to massively expand the pool of buyers for low-carbon materials, spurring further investments to decarbonize manufacturing. Indeed, Microsoft asserts that such EAC purchases should meet three criteria: verifiable, additional, and catalytic. The prospect of decoupling physical products and environmental attributes is tantalizing and, from my experience analyzing the cement and steel industries, would be a huge boost to startups scaling up transformational manufacturing processes. Novel yet impactful technologies will not compete on price with their first commercial facilities and will seek sites near low-cost feedstocks and energy sources, not necessarily near major demand centers (cities and industrial zones).
Two other approaches (at least!) are emerging alongside the EAC concept to improve the financial incentives for early stage, low-carbon concrete innovations. Innovate U.K. has organized a consortium called the Concrete Commitment Cohort to develop an Advanced Market Commitment (AMC) scheme: binding agreements to purchase future quantities of low-carbon cement. The guaranteed offtake agreements reduce risk for innovators and should make qualified startups more attractive to investors. Climate Action Reserve, a U.S.-based nonprofit organization, in collaboration with a broad group of stakeholders, has developed a protocol for issuing voluntary carbon credits based on cement emissions abatement. Unlike carbon credits from CO2 utilization technologies, this protocol allows companies to sell credits for producing low-carbon cement blends with nonstandard supplementary cementitious materials (SCMs), for example, ground glass pozzolans or calcined clay.
Comparing these three approaches, I like the geographic flexibility of EACs and carbon credits; expanding the pool of potential customers will allow startups to earn a green premium while they are scaling up and waiting for more impactful policy. In markets without a carbon price, like the U.S., it’s important to have these mechanisms to create value from emissions reduction. However, SCMs are not a solution for net-zero emissions in cement and concrete. I hope that the SCM-derived carbon credits spur action in the short term but phase out in the long term as that approach becomes table stakes. The AMC is probably the best incentive as a clear and binding creation of the future market, but it’s also tough to arrange. It’s a commitment!
My main concern with EACs is whether the general public will accept them. You can’t really explain this concept on a bumper sticker, and it bears a resemblance to mass balancing, which is under attack as a form of greenwashing. In the rarefied air of corporate sustainability reports, this concept is likely to get a favorable reception, but consumers tend to be allergic to “on paper” sustainability claims. My secondary concern is about the conflict between EACs and the current claims system centered on environmental product declarations (and thus the risk of double claiming).
Ultimately, the EAC approach is a good idea but not as an industry-wide solution for cement and concrete; it should be limited to helping transformational decarbonization technologies (those that can achieve emissions reductions of >90%) cross the valley of death. Aside from those technologies, it’s better to allow conventional market forces to shape the investment and scale-up decisions of innovators. Exposure to price competition is healthy for technologies with a pathway to compete on cost in the near term, and geographic matching of buyers and sellers will be an important aspect of the market eventually.