Climate Dividends can only be issued to companies that help avoid emissions or remove them, not to those that have made emission reductions. Removing emissions is quite straight forward — taking GHGs out from the air. However, avoided emissions and the notion of carbon footprint reduction (especially scope 3) is more nuanced.
Here’s how they differ:
🦶 For carbon footprint reduction, the perspective is that of the company and, more specifically, GHG inventory accounting, where the emissions from each category of the GHG inventory are compared year-on-year.
➡️ For avoided emissions, the perspective is that of the customer, where the emissions in two situations are compared, one with the company’s solution and the other, the most likely situation without the solution (i.e., with another company's solution or with a completely different solution that meets the same customer's functional needs).
As a result, even if the low-carbon solutions can reduce the company's GHG inventory(e.g., if the company replaces its carbon-intensive solutions with these low-carbon solutions), the quantification of the decarbonization impact is different. Both metrics are complementary but lead to different accounting and a different lens on climatei mpact.
For more information on avoided emissions, you can have a look at the ICE report or the WBCSD Guidance on Avoided Emissions and for more specific information on what qualifies for climate dividends, please read our Protocol.
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