Lisa McCullough(ELP 2024) | Senior Science Coordinator for Natural Climate Solutions, Conservation International, United States
What is an Internal Carbon Fee Environmental Justice Pledge?
The California Senate Bill 100 and the Inflation Reduction Act pledged to disadvantaged communities 35% and 40%, respectively, of new infrastructure spending. These laws include procedures, structures and political compromises for mobilizing capital for a version of environmental justice in United States infrastructure investment.
U.S. Companies and non-profits should emulate this financing example if they are seeking to scale environmental justice in their strategy. By setting an internal carbon fee (ICF) and pledging 40% or more of ICF funds to development infrastructure for delivering climate adaptation and human rights infrastructure within their networks and supply chains, focusing on including disadvantaged communities where the company has the largest footprint.
| Certain Prerequisites to an Internal Carbon Fee Environmental Justice (ICFEJ) Pledge | 1. Does your company measure its carbon footprint? 2. Does your company have an internal price on carbon? 3. Is the internal price on carbon structured as a carbon fee, producing a source of funds? 4. How are the funds used or invested, and what decision-making body determine their use? 5. How much internal revenue did the carbon fee generate last year? If you don’t have a carbon fee, 6. What was your company’s carbon footprint last year, and what revenue would be generated if the carbon fee were indexed to prevailing carbon abatement (cap and trade or tax) prices? If it were indexed to the social cost of carbon? 7. Would the projected funds available to an ICFEJ (annually or accruing over the years) merit the cost of developing a proposal for an ICFEJ? |
| Proposed Elements of an ICFEJ Pledge | 1. Definition of Community - Are disadvantaged communities in your supply chain geographically dispersed or localized? 2. Definition of Disadvantaged - What variables of disadvantage describe the communities in your supply chain? 3. Beyond-Carbon Consideration of Footprint – What are the known and unknown baselines for externalities of your supply chain? 4. Equity - Which communities are most impacted by externalities of your supply chain? Who will be their voice in developing the pledge and its management plan? 5. What benefits most directly matter to communities impacted by externalities in your supply chain? 6. What are peer-reviewed expert remedies to these carbon and non- carbon externalities? 7. Inclusion, Transparency and Accountability: By whom and by whose criteria will the Pledge’s delivery of impact be evaluated? 8. Based on historical trends and a net-zero plan, what revenue do you expect the fund to generate each year? 9. What is the management and storage plan for the fund, and will it prioritize decentralized or centralized management? 10. What is the timeline of mobilizing the program? 11. What categories of investments and types of benefits would qualify? 12. What is the landscape and scale of public, private and non- governmental partners to be engaged as advisory or implementing partners? 13. What are the options for disbursing the fund? For example: grants, partnerships, endowment, insurance, loans, scholarships, and hiring. 14. What is the overhead cost in time and capital of mobilizing this program under different models? (For example, grant management, due diligence, impact advisory partnership, staff) 15. What is the cost-benefit tradeoff for overhead different management plans and direct community benefit? |
Hypothetical Pledge by Tech Giant could Fund Electrification of Hospitals near Cobalt Mine
Microsoft is an industry leader in internal carbon fees and decarbonization plans and could continue to lead the world by making an Internal Carbon Fee Environmental Justice Pledge for the use of its carbon fee fund, which is aligned with its mission.
The Microsoft Carbon Fee: Theory and Practice reports:
“At Microsoft, one of our goals with our carbon fee model was to demonstrate how internal organizational policy can help mitigate carbon impact. The carbon fee sets a foundation for thinking differently about our business activities.” and “Furthermore, the carbon fee model (with the subsequent investment of the carbon fee funds) can ultimately support the development of….education, healthcare, and other societal challenges.”
In Fiscal Year 2023, Microsoft had a record $211 billion in revenue, over $88 billion in operating income, and 228k employees. Microsoft’s 2024 carbon footprint was roughly 15M metric tons of CO2e.
Health Electrification and Telecommunications Alliance (HETA), implements health facility electrification in the Democratic Republic of Congo (Figure 1A) and according to its publicly reported mission, is seeking private capital co-funding to scale its impact. Cobalt is a key mineral in battery creation, and the Democratic Republic of Congo (DRC) provides half of the world’s cobalt (Figure 2B), including ultimately to Microsoft. According to a 2021 study of rural healthcare facility electrification on the African continent, the Democratic Republic of Congo has the highest continent-wide co-occurrence of non-electrified healthcare facilities and populations living without access to electricity.
Figure 1 A: HETA is scaling healthcare solar panel electrification in certain countries in Sub- Saharan Africa. From HETA Annual Report (hetaglobal.org) B: DRC provides half of the world’s cobalt. Figure from Another Troubling Report of Cobalt Mining in DRC (infocongo.org)
Based on a simplified projection of Microsoft’s carbon footprint, a 1.5% per year pledge of Microsoft’s carbon fee fund over a five-year grant period with HETA would furnish nationwide electrification of healthcare facilities in Democratic Republic of Congo. With an Internal Carbon Fee Environmental Justice Pledge, Microsoft has the opportunity to cement itself as a leader for mobilizing internal organization policy for societal challenges.
| Internal Carbon Fee | Annual Carbon Fee Revenue* | Upfront Cost for Nationwide Healthcare Electrification in DRC ** (USD)*** | Annual ICFEJ Pledge required to fund upfront cost over five year | ICFEJ Pledge required to fund upfront costs in one year | Funds made available by a 40% Annual ICFEJ Pledge |
| $15/tCO2 | $225Me | 110.0 M | 9.8% | <48.9% | $90M |
| $30/tCO2 e | $450M | 110.0 M | 4.9% | 24.4% | $180M |
| $100/tCO 2e | $1.5B | 110.0 M | 1.5% | 7.3% | $600M |
*Based on Microsoft’s FY23 footprint of approximately 15M tCO2e.
** For between 6.5k EUR and 12k EUR per facility, a company can cover the upfront costs of a photovoltaic solar array to electrify a health facility in the heart of DRC’s mining regions. For installing solar panel arrays for all rural, currently non-electrified, DRC healthcare facilities, the total upfront cost would be 100.7M EUR, based on the continent-wide study.
***Exchange Rate used: 1 EUR = 1.09 USD.
Electrification of health facilities does not transform access for disadvantaged communities alone. Traditional medicine, transportation networks, affordability of services, gender roles, and socio-cultural systems weave a network of considerations for reinforcing healthcare access for the disadvantaged communities most affected by the externalities of cobalt mining. These externalities extend beyond and interact with healthcare.
While public health development should not replace transformations of supply chains and labor conditions, locations of artisanal cobalt mines and trading depots overlap with the need for healthcare facility electrification, and these human rights efforts are not mutually exclusive. Within their sphere of solar panel installment, HETA has provided a Toolkit for Equitable Health Facility Electrification.
Microsoft has said in 2023 that addressing human rights concerns in DRC will take a coalition to solve. With an Internal Carbon Fee Environmental Justice Pledge, healthcare facility electrification as an incremental way to deliver human rights may not need to wait.
[Blog image provided by Carbon Herald under the Creative Commons License. All other elements provided by original author, Lisa McCullough. Please contact at lisammccullough@gmail.com (comments and conversation welcome)]