By Siddarth Shrikanth
Averting catastrophic climate change will require deep and broad decarbonization. The literature is clear: among other levers, we will have to massively expand renewable power generation and storage; improve efficiency across the board; electrify transportation; and decarbonize heavy industry with alternative fuels and processes.
Unfortunately, not everything in the modern economy can be decarbonized, and a fair proportion of emissions will simply be too expensive to eliminate even with a significant carbon price. With nearly every sub-1.5C pathway considered by the IPCC implying that we will have to achieve net-zero emissions by around the year 2050, negative emissions – either through technological or natural means – will be essential to meeting our climate goals. But as it stands, direct air carbon capture is expensive, with estimates (that assume significant technological advancements) ranging from $95-$230 per tCO2. As such, few projects have progressed beyond pilot scale. The alternative is to rely on nature’s ability to capture and store carbon – not necessarily over geological timescales, but as a vital buffer over the next 50-100 years until we can find more permanent ways to lock away the carbon emitted since the Industrial Revolution. Natural climate solutions have therefore become an important focus for governments, major companies and non-profits seeking to accelerate climate action, and can have important co-benefits for biodiversity, human health and local livelihoods.
Investing in Nature: Research and Rationale
As the COVID-19 crisis hit and the best-laid summer internship plans were disrupted, I was fortunate to find two complementary opportunities to explore these topics.
For the first half of the summer, I worked on a research project led by Professor Joe Aldy on designing green stimulus measures in the aftermath of the pandemic. We looked back at the experience of the 2009 Recovery Act to identify lessons that might guide policymaking in the latest round of green stimulus, as well as the ways in which such policies could dovetail with long-term decarbonization pathways in the US and elsewhere.
Having sharpened my understanding of the economic literature, I sought to go deeper into world of natural climate solutions through an independent research effort aimed at policymakers in Southeast Asia. The project, funded generously by the Roy Family Summer Environmental Internship Program, let me explore a number of important questions in this space.
Several insights stood out.
- First, it was clear that voluntary carbon markets – the ones used by companies and individuals, rather than mandated by governmental schemes – had experienced a surge in interest and demand over the last two years. With a number of major corporates making large financial commitments to offset their emissions and invest in nature, market participants were scrambling to scale up offset projects and get them verified and marketed. Equally, carbon pricing systems were steadily covering more of the world’s emissions, and California had just approved a new standard to eventually integrate tropical forest offsets into their cap-and-trade program.
- Second, I identified a number of initiatives that were seeking to address longstanding shortcomings of these offsets. Updated standards were raising the bar on permanence, transparency and leakage and covering non-forest sources of offsets such as soil and blue carbon, and policy frameworks were beginning to integrate project-level offsets with state or national-level “jurisdictional” efforts.
- Third, I interviewed a number of innovative projects that were leveraging the power of technology – from remote-sensing satellites, to drone-mounted LIDAR, to Internet of Things sensors and eDNA monitoring – to reduce the cost and increase the speed of verification.
- Finally, a new of investors were taking a “natural capital” approach that could value and invest in ecosystem goods and services beyond carbon sequestration. While several bottlenecks remained, it was clear that the sector was rapidly maturing and scaling up.
To me, this work was also personal. As an undergraduate studying biology, I had been fascinated by the science of conservation, but frustrated by the pace of policy action on protecting the natural world. I now realize this emerging field of natural climate solutions could provide the economic rationale needed to channel funding into forests, wetlands and reefs that teem with biodiversity, while simultaneously helping provide livelihoods and income to communities that depend on these ecosystems.
This summer’s work also provided the inspiration for a business book proposal on investing in nature: a topic I realized was well-covered by experts and academics but remained largely unknown to general audiences. I was thrilled to find out recently that my proposal, “Money Trees: Making the Business Case for Nature,” had made the final three of the Financial Times’ and McKinsey’s 2020 Bracken Bower Prize.
As I enter the second half of my joint degree program, I plan to dive deeper into this field. I’m hoping to build on existing academic scholarship on environmental economics, engage with leading practitioners, and lean on the guidance of my faculty mentors – to find some way to bring these ideas to fruition.
Siddarth Shrikanth is a joint MPP/MBA candidate at Harvard Kennedy School and the Stanford Graduate School of Business.