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EVALUATING EFFECTIVE DECARBONIZATION FROM THE LENS OF NET PRESENT VALUE—RELATING EMISSIONS TO ECONOMICS FOR SUSTAINABLE DECISION-MAKING

    • Author: Simon Brooks (Villanova University Sustainable Engineering)

    • Abstract:

    • Across all large or small companies, federal or local governments, communities, families, and individuals, every action we take is fundamentally answering the decision-making question of how we should spend our limited time on Earth. The answer to this penultimate question will decide for how long humanity will survive, and to what extent society will operate on the optimal pathway—one that sustains life on Earth equitably and justly for all people and all species of Earth’s biodiversity, today, and for all time. We are at a critical time in history that demands all decisions to be sustainable decisions, particularly decisions that have the potential to reduce our greenhouse gas (GHG) emissions. The science is clear: we need to stop emitting CO2 and start removing the over-abundant CO2 in our atmosphere. Fundamentally, this is the only way we will harmonize our social, technological, political, economic, and environmental systems to justly support and sustain life for all people while adapting to the very real current climate consequences of our past decisions (extreme heat, flooding, etc.). If you were asked to allocate $100 million to fund carbon reduction projects, all with promising potential to better sustain life on Earth, what is the optimal allocation of these funds? How could you better approach this decision? With high pressure to move fast in emissions reduction efforts, which project should we prioritize to start first, and why? Making a sustainable decision requires comprehensive acknowledgement of the interconnectedness and complexity of our systems; all critical systems must be analyzed. The bulk of this presentation walks through a novel tool that quantifies the net present value (NPV) of carbon dioxide (CO2) emission reductions—also described as “effective decarbonization”—that will assist in more efficiently comparing potential actions’ direct impact on our economic and environmental systems, and indirect impact on our social, technological, and political systems. An effective “discount rate” for CO2 emissions was set at 3.3%, aligning with prior published work and the 100-year global warming potential (GWP) of CO2. It was determined that 1 ton of CO2 permanently removed annually has a NPV of 31.3 tons of CO2 permanently removed today. A series of case study examples are described assisting the decision-making process for implementing commonly discussed decarbonization projects, such as: installing solar panels, driving an electric vehicle, replacing lawn with grassy meadow, and swapping from steam heating to a heat pump. Quantitative results are assessed considering climate risk, the Science-Based Target Initiative (SBTi), and the social cost of carbon (US EPA valuation). This presentation describes why integrating NPV where the fundamental unit is CO2, not currency, as a decision-making tool is critical for the decarbonization process.