Co-authored by Robert Höglund, Climate Advisor at Marginal Carbon AB and Milkywire, and Eli Mitchell-Larson, Chief Science & Advocacy Officer and Co-Founder at Carbon Gap, this report presents a framework for defining and quantifying the ambition gap between companies’ ‘ability to pay’ for external climate solutions like carbon removal and the commitments that are actually made.
The ‘ability to pay’ for external climate projects is dependent both on a company’s profits per ton emitted and the investment required for its internal emissions reduction efforts.
We analyse a sample of the world’s largest companies, showing that low-emitting industries have the greatest ability to catalyse carbon removal. In our dataset, 85% of total corporate earnings are generated by companies that are responsible for less than 15% of emissions. Many of them have profits per ton emitted in the $10k-100k range, making it possible to support high-durability carbon removal at a high price range. Companies with lower emissions, for example in the tech and finance sector, can therefore play a pioneering role in the development of carbon removal.
Key findings include:
- Low-emitting industries can contribute the most money – The vast majority of global profits are generated by a small cohort of companies with relatively low emissions, many with profits per ton emitted in the $10k-100k range.
- The potential for impact is large – over 27 billion USD could be generated in climate finance yearly if just 141 high-profit companies spent 100 USD per ton they emit, representing a small percentage of profits. This is 2 to 3 times more than total spend on global climate philanthropy annually, but less than 1% of what is estimated to be needed to finance the global green transition.
- Companies’ willingness to pay is far less than their ability to contribute – very few companies are currently spending sums above single digit USD per ton of CO2, typically representing less than 0.1% of their profits. This corporate “ambition gap” must be closed through a combination of policy change, voluntary guidance, and peer pressure to change norms within industry.
- Those who pollute the most can afford to pay the least – a small percentage of heavy-emitting companies sampled (utilities, air travel, cement, etc.) comprise the majority of emissions, but generate profits of less than $100 / tCO2 of emissions. Their ability to procure large amounts of higher-durability carbon removal is limited. A modest contribution from this cohort in $ / tCO2 terms could move the needle, and virtually all companies in the sample have sufficient profits to compensate for 10% of their emissions at a price of $100 / tCO2.
- Internal climate investment needs differ – Companies that can reduce their own emissions through investment or purchase decisions should do so as a first priority. Typically, companies with high profits and a low emission intensity have fewer such opportunities and could instead spend on external climate projects like carbon removal.
- Corporates’ fair share contribution to climate is context-dependent – To be able to compare climate efforts, contributions can simultaneously be evaluated as a percentage of revenues, percentage of profits, and absolute dollar amount per ton of CO2 emitted.
- Policy must complement voluntary corporate contributions – Scaling nascent carbon removal methods requires policy to complement voluntary action. Early support from corporates has been a boon, but it is not enough.