By Andrew Shuffer, MBA ’25
This article was written in response to a seminar given by Trevor Best, Co-Founder & CEO, Syzygy Plasmonics, in an EDGE Seminar at Duke University’s Fuqua School of Business in Fall 2023. This article voices one student’s perspective and does not necessarily represent the views of either Duke University or the seminar speaker.
Trevor Best, CEO of Syzygy Plasmonics, gave a fascinating presentation on carbon accounting. Making the bold claim that carbon accounting is the most important topic of our day when discussing climate change, he explained how current standards used to measure a company’s carbon emissions account for only a fraction of the total carbon emissions emitted over the lifecycle of a company’s product.
Current carbon accounting standards vary across political boundaries. This variance hinders society’s ability to use carbon accounting to effectively measure whether efforts to reduce carbon emissions are making an impact. Furthermore, today’s standards for carbon accounting are vague and often left to interpretation by users of the standard. Best indicated that work is being done to harmonize standards and improve policies that define carbon accounting. While I agree that carbon accounting is a critical tool to measuring progress towards net zero goals, I am skeptical that adjusting carbon accounting policies will drive carbon accounting’s success. Rather, I believe that carbon accounting needs to be a mechanism for measuring the conversion of carbon as waste into carbon as an asset. Treating carbon emissions as an asset will foster the correct incentives for companies to reduce emissions.
Our capitalist society does not possess a philosophy for waste management to incentivize companies and organizations to better manage their waste. For example, the campaign to increase recycling in the United States worked – until China stopped purchasing our trash. It is often more expensive to use recycled materials than it is to throw items away. The reason why recycling scaled over the last thirty years was because recycling was profitable. Over time, waste became a profitable asset to someone else. Society did not recycle for altruistic reasons; the profit motive drove society to recycle at scale. As such, carbon accounting will only work if it is profitable for companies to account for their carbon emissions. Until then, carbon accounting’s efficacy in accounting for global carbon emissions will remain capped.
Today, carbon accounting reports generated by companies act as opportunities for companies to selectively report their emissions. According to Kaplan and Ramanna (2022), Microsoft and Google, pioneers in reporting carbon emissions, have been criticized for their differing methods of accounting for indirect carbon emissions. Current standards make provisions for companies to use emissions reports as a form of marketing to improve the company’s public image to customers and investors.
The question then, is this: What can we do to induce an intrinsic motivation to companies to conduct accurate carbon accounting? I’ll ask a second question: What would happen if we could convert carbon from being managed as waste into being treated as an asset? If carbon and other forms of waste can be collected and used in profitable business operations, then companies will be incentivized to use an efficient method of carbon accounting.
Capturing value from carbon dioxide
Some companies are finding innovative ways to use carbon to create valuable resources. For instance, NetPower is a technology company that combusts natural gas with pure oxygen to produce water and carbon dioxide. The company captures carbon dioxide, most of which is sequestered into storage. The rest of the carbon dioxide is cooled to a supercritical state. In a supercritical state, carbon dioxide flows like a fluid and occupies space like a gas. NetPower uses this carbon “fluid” to spin a turbine that generates electricity for the grid. In fact, supercritical carbon is twice as dense and easier to compress than conventional steam, making it a more efficient working fluid to spin a turbine to generate electricity.
In another example, Sierra Energy has introduced technology that converts municipal waste into jet fuel. Instead of sending trash generated by consumers at airports to landfill, where it emits carbon emissions and does not create value, it can be processed into jet fuel. Sierra Energy’s gasification process extends the value creation potential of the products consumed in the operation of an airline. While it is justified to still be concerned about the airplane’s carbon emissions, the production of jet fuel from landfill waste foreshadows a future in which waste is converted into an asset.
These companies demonstrate how value can be found within a wider range of a product’s lifecycle, converting what would be waste into an asset. These companies begin to address the issue of carbon accounting as accounting for waste.
In the end, I am thankful that carbon accounting is in a nascent state. It indicates that there is plenty of growth ahead. While I do not know for certain how carbon accounting will evolve, I firmly believe that the next generation of carbon accounting policies must utilize the corporate profit motive to reduce carbon emissions. Harnessing this profit motive will occur when carbon is accepted by firms to be an asset that can create future value, not waste that is forcibly managed. I agree with Trevor; carbon accounting is the most important topic of our day. Carbon accounting presents a rare opportunity for our society to create a system in which waste is accounted as an asset.
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