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That Carbon Sinking Feeling

Updated: Jun 21, 2021

The European Union loves an epic negotiation. Last month, negotiators hammered out a deal on the European Climate Law after 14 hours of talks. Broadly speaking: members of the European Parliament were at odds with national states, which aren’t ready to go as far on climate commitments.

Nation-state representatives in the Council of Ministers didn’t agree to make their 2050 goal a legal obligation: instead, it’s an objective — and a collective one for the EU as a whole rather than one imposed on every member state. Another defeat for the Greens: demands for access to energy subsidies were dropped.

But the biggest fight? The 2030 target, which was hammered out to a net greenhouse gas emission reduction of at least 55% by 2030. (That comparison is with 1990 levels.)

This is now a legal obligation for the EU and its member states. But, as investors track environmental, social and governance (ESG) issues, what exactly is a “net” greenhouse gas emission for the purposes of sustainability analytics? Something has to be a negative emission, offsetting some of the positive, or gross, emissions.

That something is the concept of a carbon sink. In this case, it’s forestry and agriculture that get the credit. CO2-hungry plant life sucks carbon out of the atmosphere.

Of course, the forests have to stay forests, and not catch fire or be sent to the pulp mill. That danger is part of what makes them controversial when treated as carbon reservoirs. One might think that forest-rich countries on the EU’s less-urbanized periphery like Finland and Poland would see carbon sinks as a boon, but in fact both countries have key logging industries — and have received repeated warnings from the EU about the accuracy and transparency of how they calculate carbon sinks.

The Greens think carbon sinks amount to an accounting trick, a distraction from focusing on how to stop emissions from entering the atmosphere in the first place. The gross emission target, which amounts to 52.8%, doesn’t satisfy them, and they were unmoved after EU member states made a concession that caps the use of carbon sinks for the net figure.

The European People’s Party — the grouping that includes German Chancellor Angela Merkel’s pro-business CDU, which environmentalists have criticized for being too cozy with automakers — took a different view.

As political actors tussle over carbon sinks, it’s important to realise that there is considerable technological innovation going on in the world of carbon capture: a carbon sink by another name. Usually, the extracted carbon is stored underground. The World Economic Forum has pointed out there is potential for other processes, such as biochar burial or depositing crushed minerals on the soil or in coastal waters, and techno-optimists shouldn’t put all their eggs in one basket.

  • Biochar burial is particularly interesting: biomass is cooked at high temperature in an oxygen-deficient atmosphere, resulting in a form of charcoal that is less susceptible to remineralization into CO2.

With technologies still at a relatively early stage, and political tussles over the natural world’s carbon sinks unlikely to ease soon, watching ESG data and monitoring the progress of patents will be key. Companies that know where to look for that information will be ahead of the game.


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