2050 : Success of the French Climate Trajectory!
This article first appeared three times on Reconcilions-nous.fr, on 13 june, 20 june et 27 june 2022.
How to remove climate-damaging greenhouse gases (measured as carbon dioxide equivalent or ‘carbon’) from the atmosphere. In our issue on the last Climate Convention in Glasgow we said it was like a school board where leaders bring their notebooks. The problem is that there are no notes in the notebooks because there is no common and reliable way to rate the carbon performance of products, companies, administrations, countries… Our hunch? The climate balance in 2050 requires counting carbon as well as money, and it is very possible! To share this intuition, we are telling a story in this and the next two issues: an anticipation that looks at our time from 2050. If this wink catches your eye, join those who are already working on this ambitious project.
How it all began
-Welcome to this chat. On Sunday, it was official: France is in climate balance! For this historic date, we are lucky to have with us Irina who, as everyone knows, started it all by inventing Universal Climate Accounting almost 30 years ago. Irina, can you tell us how this idea came about?
-I didn’t invent anything! We had known for years that we had to reduce the tons of carbon dioxide going into the atmosphere before 2050, and we even knew by how much. For years, big companies had been counting these tons in their carbon footprints…
-Including the one that employed you as an accountant!
-Of course, it was already making yoghurt. My enlightenment came one day when I was deeply depressed. I remember it very well, I had just done my carbon assessment on the ADEME website: I had seen where « my » 11 tons of carbon came from each year, the ones I was responsible for, and I was invited to test what I could gain by changing different things in my life.
-And that was depressing?
-Totally! Living like an Amish woman, I went from 11 tons to 9 tons, when I should have been at 2 tons! I was running on yoghurt at the time: empty fridge, I go down to buy some, and in the supermarket I find three brands with their price in euros but impossible to know their carbon cost, although I knew I was calculating it at work.
- Carbon labelling works, even if there are sceptics
-Wasn’t there a carbon cost display?
-You’re too young to remember, but in the early 1920s there was nothing! And then it hit me: if we could display the carbon cost to the end customer, it would be a huge step towards climate balance.
-What made you so sure? There were still a lot of climate sceptics, right?
-Mostly climate naysayers! But if you’re a company, the minute you hear that customers are going to be shown the carbon costs, you ask your engineers and suppliers to innovate to reduce them. You also ask your sales staff to review their sales pitches. For the same price, customers who are sensitive to the climate challenge will prefer the most carbon-efficient product, and that means more or less euros for the company.
-And it has worked far beyond your dreams! You were telling me the story of the gourd before the show…
-Yes, the day after the carbon costs were posted, the « free » premiums disappeared! The ecological gourd offered was no longer cool if the customer had to be shown its carbon cost, inflated with Chinese stainless steel heated with coal!
-And how did these costs come about in three years?
- Tracking carbons from the oil well to the individual
-Because we used accountants, those invisible little elves who count the costs in euros from the invoices. The accountants were going to enable humanity to meet the climate challenge by also counting the carbon costs to the nearest kilo of CO2, with their well-known precision.
-A fine mission!
-Yes, and a relatively simple one. In most cases, the accountant simply added up the carbon costs on his suppliers’ invoices and divided the total by his sales. If he collects 2 million carbons and sells 1 million euros, the company’s products contain 2 carbons per euro, and that’s what it will put on its invoices, and its customers will do the same, all the way down to the yogurt buyer!
-Is that all?
-Almost… Some companies are primary producers of carbon, more or less: oil companies, livestock farmers, managers of natural areas, producers of certain industrial processes… For them, the accountant validated that the company used an IPCC rule to calculate its carbon emissions according to the number of barrels of oil or cows. But they reused everything that already existed, adding a carbon number in the computer chains.
-And the carbons flowed nicely from the oil well to the customer.
-Yes, we only had to wait for the costs to arrive at the end of the chain, like when you prime a pump, to display the costs to individuals, but all over the world all the companies had moved up a gear.
-Thank you Irina. The carbon costs have been a great success in allowing everyone to make their carbon choices heard by producers. Next week you will tell us about a second success of carbon accounting: the precise calculation of carbon performance, which has enabled finance to reconcile carbon performance with money performance.
And finance was green
- No climate transition without climate finance
-Welcome back Irina. You told us about the Universal Carbon Accounting revolution that you started in the early 2020s. The arrival of a carbon content for each product allowed consumers to direct production towards the climate transition through their purchases. But that wasn’t enough…
-Indeed: consumers build the world of today but financiers build the world of tomorrow. Scientists and engineers can have great ideas for the climate, but the only projects that will see the light of day are those accepted by the financiers. In the 1920s, financiers relied on ONE number to select a good project: how much money it made, its financial results.
-Were they not interested in the climate?
-They talked about it a lot but didn’t know how to measure it. They had no reliable figures to compare two projects, two companies, two credits on their contribution to climate balance. So they did a lot of publicity, took beautiful photos and used green labels. Greenwashing was king…
- The end of greenwashing
-Yes, the word has disappeared. It meant making yourself look greener than you really are. Universal Carbon Accounting has given us a carbon performance that is as precise as the financial performance: the carbon contribution, the company’s contribution to the objective of removing carbon from the atmosphere over the period. And suddenly, the greenwashing of companies has disappeared…
-Why would Google continue to invest millions in its green image when every quarter its earnings release showed its carbon contribution, i.e. how much carbon its activity had added or removed from the atmosphere. Either its contribution was good, and there was no need to say more. Or it was bad, and it was even more useless! The whole Earth could measure Google’s carbon contribution every quarter, to the nearest kilo!
-Storm in the skulls!
-Yes, reputational risk had become the number one risk for every major company on the planet, and most of them discovered that their carbon contribution was poor, and that it wasn’t going to improve on its own! They suddenly stopped investing in green marketing and instead put the turbo on investing in innovations that would improve their carbon contribution, or by encouraging their customers to adopt less carbon-intensive products. Google, like the others, has had to suddenly review the choice of projects financed, but has managed to rebalance its carbon contribution and its financial profits…
- The carbon contribution balances the financial profit
-And the financiers who advise individuals?
-They quickly adapted to equity investments. The carbon contribution of a company share was that of the company and it worked like the financial result: universal, secured by accountants, easy to calculate on a portfolio … and easy to explain to individuals who saw the carbon contribution of their equity investments appear alongside the financial return. As with products, everyone was able to choose the best carbon performance for the same financial performance.
-A great incentive to finance innovation.
-Yes, it was. That’s when we started talking about « carbon sinks », these start-ups that attracted huge amounts of funding by disseminating the most efficient techniques for trapping carbon, in the same way as natural carbon sinks, the sea, forests, etc. The whole of finance was looking for what they offered: efficient innovations, disseminated rapidly thanks to free licences, and a huge carbon contribution to their shareholders.
- Banks at the service of carbon performance
-But that wasn’t enough to make finance green…
-And no… Greenwasing was still rampant in lending: every bank advertised its loans as green but neither they nor anyone else had a simple way to check. I remember a scandal in the early 1920s. A billion-dollar loan, labelled green by a major US agency: the lucky recipient was a supermarket chain whose flagship product was to put an indoor ski slope and penguins fed on fresh Norwegian fish flown in from Dubai, Shanghai and Cairo in every shop. All the big names in banking were splashed.
-And a simple measure from Universal Carbon Accounting provided the solution…
-Yes. Banks were asked to « score » each loan to a company with its carbon contribution. We were immediately able to evaluate each loan and all the loans of a bank, from quarter to quarter. At last, the same carbon compass was shared for all loans on the planet. The greenwashing disappeared for Deutsche Bank as it had for Google. And the penguin loan trick became impossible: a brown company could no longer have its green projects financed by the banks and finance its brown projects itself.
-Thank you very much Irina, it was fascinating! Universal Carbon Accounting has reconciled finance and the climate. Next week you will tell us how it has also reconciled politics and the climate.
Policies are synchronised
- No successful climate transition without political consensus
-Welcome Irina. You told us about the Universal Carbon Accounting (UCA) revolution you started in the early 2020s. Individuals, banks and companies measured their contribution to the climate balance, but that was not enough…
-No, in the 1920s, the topic of transition was very partisan, between those who thought we were not doing much and those who thought we were already doing too much. The CCU has reconciled politics and climate.
-What made this miracle possible?
-All citizens were asking for « less communication and more measurable results ». The CCU made it possible. The display of the carbon content of public services has replaced greenwashing communication, as for large companies, as we talked about last week. And this content had indeed become as easy to calculate for public services as it was for companies: all the public accountant had to do was add up the carbons contained in public purchases.
- The carbon content of a school
-Yes, and the obligation to publish public information did the rest.
-Exactly! Everyone could easily compare the carbon efficiency per euro of the budget of two cities, two regions, or two countries. Or the carbon content of a school, its construction, its maintenance, and ask the elected officials why some were much more efficient than others, for the same number of children.
–Clearly, sharing the same compass, the same indicators, has simplified the political debate on climate balance.
-Yes, especially as the UCD appealed to the two main ideological families of the time:
– To the political family that advocated individual responsibility, it provided a decentralised measure of carbon contribution that left everyone free to decide.
– To the political family that advocated collective solidarity, it provided a common measurable objective and the measurement of contributions to this objective.
- The 2027 referendum, when the powerful put their money where their mouths are for the climate
–But there was still a big political question mark! We knew where we needed to be in 2050, but how could we be sure that the sum of the contributions of each person, each company, each nation, would miraculously bring us to the target?
-Yes, there had to be a political constraint somewhere. The genius idea of the politicians of the time in France was, despite the urgency, to give the debate a chance by announcing four years of discussions concluded by a referendum between the different possible answers; and also to give freedom a chance, by announcing that the constraints would only come into play if, despite the CCU and the responsibility of all the players, we strayed from the French trajectory for 2050.
-What convinced us to give the debate time?
-In any case, three years were needed to set up the CCU, and another two years to find out where we stood in relation to the right trajectory: this left plenty of time for discussion and for gradually arriving at four answers that had sufficient political support.
The first three answers were well known even before the debate started.
– Consumption bans: should we impose frugal consumption from above, ban travel, cap the number of square metres of living space per person…
– Taxing all carbons, at the risk of hurting the weak and making the powerful less responsible.
– Taxation of wealth to finance a climate transition decided from above.
-Three answers that are both divisive and complex… I understand better why « Fourth answer » has passed into common parlance as the consensual answer to a challenge!
-Yes. The Fourth Response was aimed at the institutions that build our future through their financing: the banks and the very large companies. I explained last week how the CCU was enabling banks to track the carbon contribution of every loan they make, of every project they finance. And how they were now looking to improve their overall carbon contribution, quarter on quarter. The Fourth Response stated that if the 2050 trajectory was not met, governments would require the large laggards to accelerate, while leaving them free to decide who to lend to or what to invest in. This was in keeping with the UCD logic of decentralised choices and collective intelligence.
-The rest, even the youngest like me remember, because it is part of the history of France and the history of the Earth: the tidal wave of votes in France in favour of the Fourth Response, its adoption in the wake by the European Union and by all the major countries, including China, the real start of the climate transition…
-The best part is that we never had to activate this famous Fourth Response!