| Climate Dividends | Carbon credits | |
|---|---|---|
| Eligible Solutions | Any Solution that avoids or removes CO₂e emissions, not tied to fossil fuels and disclosing its do not significant harm approach. No additionality needed. | Solution that avoids or removes CO₂e emissions, demonstrating its additionality. |
| Legal characteristics | Climate Dividends are a shareholder right, linked to share ownership. | |
| Climate Dividends are extra financial information. | Carbon credits are a fungible asset. They entail a financial flow. | |
| Value | 1 Climate Dividend ⇔ 1 tCO₂e avoided or 1 tCO2e removed. | |
| A Climate Dividend has no direct financial value, it is not an asset, but is extra financial information about the positive climate impact of the activities that issued it. | ||
| The financial value of the share can take into account the fact that this share will enable its owner to receive Climate Dividends. | 1 carbon credit ⇔ 1tCO₂e avoided or 1 tCO₂e removed. | |
| Each credit has its own value, in USD or any other currency. | ||
| Impact measured | Avoided or Removed Emissions assessed in line with the Climate Dividends Protocol. | |
| Based on the comparison between a product carbon footprint (LCA approach based on carbon) of the solution with a reference scenario. | Avoided or Removed Emissions assessed in line with each Carbon Credits Standards. | |
| Depending on the standard, it can be similar to the impact assessment method proposed by the Climate Dividends Protocol (ex: Puro or Riverse standards) but can also differ (especially because not a cradle-to-grave LCA approach). | ||
| Owners | Unless otherwise stated, Climate Dividends are awarded to investors/shareholders. | When issued, carbon credits are awarded to the project developer and can be freely exchanged. The credit is used by its owner by cancelling (sometimes called retiring) the credit on the register so that it can no longer be exchanged. |
| How to use | Climate Dividends cannot be used to compensate/offset a carbon footprint in any case (not by the company generating them nor by the shareholder receiving them). | Carbon credits can be used for offsetting. |
| How to communicate | Climate Dividends owners may communicate on how their investments “contributed to activities that are collectively leading the world towards global net zero”. | |
| They can report Climate Dividends in their CSR or extra financial report or in their carbon footprint under a new category “contribution to global carbon neutrality”. | Carbon credits owned appear in the corporate balance sheet as assets. | |
| Transfer | Climate Dividends cannot be sold nor transferred. |
The shares that grant the right to claim Climate Dividends may be sold or transferred between parties (further detailed in the document) | As assets, carbon credits can be sold and transferred between parties at any time until they are claimed and retired. They can be indefinitely stored by their owners. |
Climate Dividends cover a larger scope
Many climate solutions present a positive net contribution to global carbon neutrality but are not eligible for carbon credits (eg. the sale of bicycles to replace cars or building renovation) because they can’t prove their financial additionality.
A company can develop a climate solution useful for the ecological transition even if it also a financial profitable business model. Climate Dividends are useful to help value and direct investments towards those type of solutions.
Climate Dividends are targeted for equity shareholders
👉 They are the mirror of financial dividends for climate, they meet a need currently unanswered by carbon credits.
Climate Dividends serve to value companies developing climate solutions and the investments supporting them in order to steer investment towards them by linking a company’s positive climate contribution to an equity investment. They are not here to create an additional revenue stream for companies.
As shown in the figue below, today, a company often needs investors to be able to produce and sell its solution. Then it will sell its solution to a customer. It this solution is a climate solution with a decarbonising impact, this sale will enable the company to both make money and have an impact. At the level of the company, it will be able to claim the revenues gained and the avoided/removed emissions enabled.
If the company wants to trace this back to its investors / value it for its investors, for the financial part, it can use financial dividends; whereas for the climate part, nothing was available > now it can distribute climate dividends.
This mechanism also operates if the company, instead of selling a direct climate solution, sells carbon credits. Indeed, those carbon credits are a financial asset that the company uses to make money / increase its revenues and ensure that it can deliver. It’s part of its sale / operational strategy. But then, it remains the same : the company can claim revenues gained and avoided/removed emissions enabled but if it want to trace it back to its investors, it can use financial dividends for the financial part and climate dividends for the climat part.
Double counting already exists everywhere in the carbon accounting. The Scope 3 of some companies is the scope 1 of others. When a company reduces its scope 1 (for eg., the provider), it enables another company (the customer) to reduce its scope 3; hence, both companies count the same ton of CO₂e reduced in their carbon footprint (it is counted twice). Another example is the carbon footprint of companies that is counted twice in their own carbon footprint AND in the carbon footprint of their investors (line 15).