Carbon offsets are necessary, market needs to grow fast: B of A exec

Companies and governments are racing to release pledges and commitments to decarbonize. Those goals mean the markets for carbon offsets need to get massively bigger and more standardized very quickly.

So says Karen Fang, the Head of Global Sustainable Finance for Bank of America.

Right now, organizations are making best-faith estimates in their decarbonization plans — but they are only estimates, Fang told CNBC.

“I think the skepticism is always justified, because if anybody tells you today they know exactly every single technology, at what pace they’re going to develop, how much and how fast will it take green hydrogen to break even with fossil — I think that’s not credible,” Fang said. “Anybody who says they know the answer is not credible.”

Fang knows what organizations are dealing with because her team is working with clients across sectors to finance their decarbonization plans, which includes corporate clients, institutions, and municipalities it lends money to, invests in, or otherwise finances.

Bank of America’s goal is to achieve net zero greenhouse gas emissions in its financing activities, operations, and supply chain before 2050. 

“Every single client that gets money from, financing, or investment from Bank of America, their emissions matter to me,” Fang told CNBC. “We spend so much time talking to the C-suite or top management at every client, institution, organization, corporation, because their plan affects our plan.”

There are three levels of emissions that organizations track, called scope 1, 2 and 3.

Scope 1 emissions are the direct emissions that come from operations that are owned or controlled by the organization in question. Scope 2 emissions are the indirect emissions resulting from the generation of electricity, steam, heating, or cooling consumed by the organization.

Scope 3 emissions include all indirect emissions that come from the value chain or supply chain of the organization in question.

Tracking scope 3 emissions requires an organization to question everything: “Where is this piece of paper coming from? Where is the vendor? How is the vendor producing the product you’re using, like your pen?” Fang said.

To get to net zero, organizations may have to use carbon offsets, especially to compensate for scope 3 emissions.

That should be seen as the honest route, not a cop out, Fang said. But carbon accounting and offsets must be standardized.

“What is the most defendable, credible way of using offsets in your business in your scope, one, two and three reduction process, but without being seen as just taking the lazy way out? Fang said. “We’ve done everything we could — you still have that last bit. And we we’re not being laissez faire, we’re not being lazy. We’re actually saying, ‘We have everything we could, there was this residual bit, we want to basically offset'” that last bit.

Not only does the carbon offset market need clearer and more…