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Global Warming Potential is more important than you think


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Hmmm…   Global Warming Potential (GWP).  Time Value of Money (TVM).  Whaddya talking about?  This is torture.  All these acronyms involve math!  We hates ‘em!

These two concepts are really important though, and if you have any interest in fighting climate change, you’ll want to understand them both, or at least the general idea.  One of them you probably already understand, and I want to set it up as a comparison for the other.

More of us are familiar with the concept of a mortgage or credit card loan.  These are common and practical examples of Time Value of Money (TVM).  In a nutshell we get to buy stuff now without paying for it, and in exchange, pay back the original purchase price, plus interest.  The interest is a direct reflection of the TVM.  The broad principle is cash money in hand now is usually worth more than the same cash money amount in the future.  We pay interest on a loan because, by the time we repay the principle, the money is worth less.   There are all sorts of reasons this is generally so, but a few of the ways to think about it are a) the delayed gratification of the lender having the money in hand requires a reward beyond the principal value, b) the risk of not having the money in hand requires a reward or risk premium, and c) the risk of the underlying cash being absolutely worth less in the future (or inflation risk).  These all come together to form an interest rate, which in the end might even exceed the original principal value!  

You might summarize that a dollar right now is worth a dollar, and a promise of a dollar in a thousand years is worth almost nothing.  Interest rates are intended to compensate a lender for the delay.  What happens right now and in the near future are way more important than the distant future.  

Most climate fighters need to borrow money, and this is one reason TVM is important.  You may have heard that some off-shore wind producers cancelled mega-projects because interest rates were too high.

The other reason TVM is important is because it serves as a bridge to my comparison with Global Warming Potential, or GWP.  GWP measures both greenhouse gas emissions and when they occur.  Emissions right now are way more damaging than those that occur in a thousand years.  There are a couple of reasons for this.  First, greenhouse gases are “long-lived”, and once emitted into the environment, can stay in the air for hundreds or thousands of years.  For example, just like interest rates and TVM, every moment excess CO2 is in the air it exacts a cost in the form of Infrared Thermal Radiation that heats the earth, tipping us towards rapid climate change.  So, it is better to emit a unit of ghg a thousand years from now, than to emit the same unit today, because the overall thermal effect during the coming one thousand years is 1/1000th that of an emission today.  So by all means, even if you can delay emissions, this is better than emitting right now.    

Another key GWP principle is that every engineered CDR project “costs” ghg emissions.  In Woody Biomass Storage (WBS) for example, we expend emissions transporting wood to a burial chamber and excavating the earth.  These are examples of creating emissions now rather than later, and every CDR provider is doubly aware of the emissions they create for the greater good of sequestering carbon.  No project is exempt from this cost, and producers can/should/are aware of the ratio of emitted ghg to the ghg removed.  In WBS we strive for less than 5% and are reliably below this threshold in most cases.  

We all should increase our awareness of GWP.  In CDR, as we get more sophisticated, I personally believe it will come to replace misleading ideas related to the “permanence” or “durability” of carbon credits removed.  There are lots of “permanent” CDR solutions out there  emitting really high rates of ghg in the production process, and these emissions occur right now, when the GWP cost is highest.

So let’s make sure we think about Global Warming Potential when evaluating CDR pathways.  It’s a fuller picture, and more closely aligns with our objective to keep the planet cool.

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