Spirit’s Carbon Journey, Part 3

Spirit’s Carbon Journey, Part 3

Our calendar year 2022 (CY22) overall emissions increased by about 7%, with the return to office commuting emissions overshadowing the reductions from closing the Austin office. Since the Renewable Energy Certificates (RECs) used to avoid building energy emissions are generally more cost-effective than the carbon credits used to offset our Scope 1 (natural gas combustion for heating and fleet truck emissions) and Scope 3 (business-related travel and commuting) emissions, the overall potential financial impact was projected to be more significant. In light of this, Spirit chose to both diversify the types of carbon offsets purchased and focus on economic efficiencies to improve the bottom-line value of each offset purchased.

In terms of diversification, while continuing to support permanent removal projects with strong additional attributes in the form of biochar credits, Spirit purchased refrigerant emissions avoidance credits in recognition of the continued impact of these sources, especially in developing countries. Since those refrigerants are so harmful from a climate perspective and the programs to collect and safely dispose of them are relatively affordable, these credits are also quite economical on a per metric ton of CO₂e basis. Refrigerant credits support products containing refrigerants that have been banned in North America since the Montreal Protocol. This allows them to be safely disposed of rather than being landfilled where the risk of puncture and gas release is much higher. Although less common in the United States, carbon pollution is global, and the net impact is the same.

By adjusting the ratio of refrigerant credits purchased to biochar credits purchased, Spirit was able to buy offsets for a marginal increase in per credit cost (roughly $21/credit). This allowed Spirit to both address a timely issue of keeping these high impact GHGs from entering the atmosphere while keeping costs lower and providing a better carbon return on investment(cROI). As a result, Spirit was able to continue to cover the higher output of commuting emissions for team members and keep more money on hand to invest back in the business.

Spirit avoided Scope 2 emissions by voluntarily purchasing Renewable Energy Certificates (RECs) for the Texas office’s electricity use and the Denver office’s electricity before relocating to a carbon neutral building; Spirit’s office in Denver is now located in the Alliance Center, where all Scope 2 emissions are offset. The cost of RECs purchased for 2022 emissions did increase from 2021 by approximately 18%, which was deemed acceptable based on average market costs.

RECs are sold as the cost associated with generating 1 MWh of carbon free energy. By purchasing RECs equal to the amount of Spirit’s electricty consumption in Texas, the amount of renewable and low carbon energy in the Texas ERCT subregion energy portfolio (about 26% renewables in wind, solar, biomass and hydro, and 9.5% low carbon in nuclear per the graphic below) is not considered, resulting net renewable generation per MWh consumed of more than 1 MWh of clean energy. However, since the RECs associated with the renewable energy on the grid in Texas are not conveyed to Spirit and may be sold otherwise as part of a green power program or to meet compliance targets, Spirit has no claim to the relatively high percentage of low and no carbon electricity consumed without buying RECs.

Like the RECS purchased in 2021, Spirit’s RECs for 2022 electricity were brokered by ACT and again, supported a combination of wind and solar projects. The timing of REC purchasing is important to properly claim and report acquisition and is a guardrail respected by Spirit. For carbon credits, best practices indicate that carbon credits with vintages of 1 – 3 years should be purchased, meaning that the credit was issued 1 – 3 years prior to purchase. However, with RECs, the timeframe of acquisition is more stringent. To accurately claim RECs, they must be generated 6 months prior to the reporting calendar year, during the reporting calendar year, or 3 months immediately following. This results in a 21-month eligibility period for acquisition and eligibility.

Understanding the variety of characteristics and attributes associated with each carbon credit allows for a more nuanced build-out of an annual carbon credits portfolio. In Spirit’s case, the journey started with landfill gas capture avoidance credits to offset 2019 and 2020 Scope 1-3 emissions, aligning with project experience and a methane focus. For 2021, biochar and green concrete were integrated to explore removal credits with more robust environmental and social attributes. RECs were purchased to cover electricty use and Spirit made the business decision purchase additional credits to cover team member commuting during the pandemic. For 2022, Spirit integrated the purchase of refrigerant carbon credits, focusing on high intensity carbon equivalent emissions in a way that helped to highlight the continuing need to safely dispose of these where they still exist. Though commuting emissions were higher, the lower costs of the refrigerant carbon credits allowed Spirit to continue to cover those for all team members while still being able to purchase some of the more expensive removal credits for the biochar project.

To read more about Spirit’s carbon journey see Part 1 and Part 2