Historical emissions offsets (and Scope 3 sneak preview)

In July 2021, Cloudflare committed to removing or offsetting the historical emissions associated with powering our network by 2025. Earlier this year, after a comprehensive analysis of our records, we determined that our network has emitted approximately 31,284 metric tons (MTs) of carbon dioxide equivalent (CO2e) since our founding.

Today, we are excited to announce our first step toward offsetting our historical emissions by investing in 6,060 MTs’ worth of reforestation carbon offsets as part of the Pacajai Reduction of Emissions from Deforestation and forest Degradation (REDD+) Project in the State of Para, Brazil. The offsets were purchased through our partner 3Degress.

Generally, REDD+ projects attempt to create financial value for carbon stored in forests by using market approaches to compensate landowners for not clearing or degrading forests. From 2007 to 2016, approximately 13% of global carbon emissions from anthropogenic sources were the result of land use change, including deforestation and forest degradation. REDD+ projects are considered a low-cost policy mechanism to reduce emissions and promote co-benefits of reducing deforestation, including biodiversity conservation, sustainable management of forests, and conservation of existing carbon stocks. REDD projects were first recognized as part of the 11th Conference of the Parties (COP) of the United Nations Framework Convention on Climate Change in 2005, and REDD+ was further developed into a broad policy initiative and incorporated in Article 5 of the Paris Agreement.

The Pacajai Project is a Verra verified REDD+ project designed to stop deforestation and preserve local ecosystems. Specifically, to implement sustainable forest management and support socioeconomic development of riverine communities in Para, which is located in Northern Brazil near the Amazon River. The goal of the project is to train village families in land use stewardship to protect the rainforest, as well as agroforestry techniques that will help farmers transition to crops with smaller footprints to reduce the need to burn and clear large sections of adjacent forest.

If you follow sustainability initiatives at Cloudflare, including on this blog, you may know that we have also committed to purchasing renewable energy to account for our annual energy consumption. So how do all of these commitments and projects fit together? What is the difference between renewable energy (credits) and carbon offsets? Why did we choose offsets for our historical emissions? Great questions; here is a quick recap.

Last year, Cloudflare announced two sustainability commitments. First we committed to powering our operations with 100% renewable energy. Meaning, each year we will purchase the same amount of zero emissions energy (wind, solar, etc.) as we consume in all of our data centers and facilities around the world. Matching our energy consumption annually with renewable energy purchases ensures that under carbon accounting standards like the Greenhouse Gas Protocol (GHG), Cloudflare's annual net emissions (or "market-based emissions") from purchased electricity will be zero. This is important because it accounts for about 99.9% of Cloudflare's 2021 emissions.

Renewable energy purchases help make sure Cloudflare accounts for its emissions from purchased electricity moving forward; however, it does not address emissions we generated prior to our first renewable energy purchase in 2018 (what we are calling "historical emissions").

To that end, our second commitment was to "remove or offset all of our historical emissions resulting from powering our network by 2025." For this initiative, we purposefully chose to use carbon removals or offsets, like the Pacajai REDD+ Project, rather than more renewable energy purchases (also called renewable energy credits, renewable energy certificates, or RECs).

Renewable energy certificates (RECs) and carbon offsets are both used by organizations to help mitigate their emissions footprint, but they are fundamentally different instruments.

Renewable energy certificates are created by renewable energy generators, like wind and solar farms, and represent a unit (e.g. 1 megawatt-hour) of low or zero emissions energy delivered to a local power grid. Individuals, organizations, and governments are able to purchase those units of energy, and legally claim their environmental benefits, even if the actual power they consume is from the standard electrical grid.

Source: U.S. Environmental Protection Agency, Offsets and RECs: What's the Difference?

A carbon offset, according to the World Resources Institute (WRI), is "a unit of carbon dioxide-equivalent (CO2e) that is reduced, avoided, or sequestered." Offsets can include a wide variety of projects, including reforestation, procurement of more efficient cookstoves in developing nations, avoidance of methane from municipal solid waste sites, and purchasing electric and hybrid vehicles for public transportation.

Carbon removals are a type of carbon offsets that involve actual removal of an amount of carbon from the atmosphere. According to WRI, carbon removal projects include "natural strategies like tree restoration and agricultural soil management; high-tech strategies like direct air capture and enhanced mineralization; and hybrid strategies like enhanced root crops, bioenergy with carbon capture and storage, and ocean-based carbon removal."

As the climate crisis accelerates, carbon removals are an increasingly important part of global net zero efforts. For example, a recent analysis by the U.S. National Academy of Sciences and the Intergovernmental Panel on Climate Change (IPCC) found that even with rapid investment in emissions reductions (like increasing renewable energy supply), the United States must remove 2 gigatons of CO2 per year by midcentury to reach net zero.

Source: World Resources Institute, Carbon Removal

RECs, offsets, and removals are all important tools for individuals, organizations, and governments to help lower their emissions footprint, and each has a specific purpose. As the U.S. Environmental Protection Agency puts it, "think of offsets and RECs as two tools in your sustainability tool box — like a hammer and a saw." For example, RECs can only be used to account for emissions from an organization's purchased electricity (Scope 2 emissions). Whereas offsets can be used to account for emissions from combustion engines and other direct emissions (Scope 1), purchased electricity (Scope 2), or carbon emitted by others, including supply chain and logistics emissions (Scope 3). In addition, some sustainability initiatives, like the Science Based Targets Initiative (SBTi) Net-Zero Standard, require the use of removals rather than other types of offsets.

We decided on a combination of offsets and removals for two reasons. The first reason is technical and relates to RECs and vintage years. Every REC produced by a renewable generator must include the date and time it was delivered to the local electrical grid. So, for example, RECs associated with renewable energy generation by a wind facility during the 2022 calendar year are considered 2022 vintage. Most green energy or renewable energy standards require organizations to purchase RECs from the same vintage year as the energy they are seeking to offset. Therefore, finding RECs to account for energy used by our network in 2012 or 2013 would be difficult, if not impossible, and purchasing current year RECs would be inconsistent with most standards.

The second reason we chose offsets and removals is that it gives us more flexibility to support different types of projects. As mentioned above, offset projects can be incredibly diverse and can be purchased all over the world. This gives Cloudflare the opportunity to support a variety of carbon reduction, avoidance, and sequestration projects that also contribute to other sustainable development goals like decent work and economic growth, gender equality and reduced inequalities, and life on land and below water.

Once we decided how we planned to offset our historical emissions, we needed to determine how much to offset. Earlier this year our Infrastructure team led a comprehensive review of all historical asset records to create an annual picture of what hardware we deployed, the number of servers, the energy consumption of each model and configuration, and total energy consumption.

We also cross-checked our hardware deployment records with a review of all of our blog posts and other public statements documenting our network growth over the years. It was actually a pretty interesting exercise. Not only to see the cover art from some of our early blogs (our New Jersey data center announcement is a favorite), but more importantly to relive the amazing growth of our network, step by step, from three data centers in 2010 to more than 275 cities in over 100 countries! Pretty cool.

Finally, we converted those annual energy totals to emissions using a global average emissions factor from the International Energy Agency (IEA).

Energy (kWh) x Emissions Factor (gCO2e/kWh) = Carbon Emissions (gCO2e)

In total, we estimated that based on total power consumption, our network produced 31,284 MTs of CO2e prior to our first renewable energy purchase in 2018. We are proud to invest in offsets to mitigate the first 6,060 MTs this year; only 25,224 MTs to go.

Now that we have a firm understanding, reporting, and accounting for our current and past Scope 1 and Scope 2 emissions — we think it is time to focus on Scope 3.

Cloudflare published its first company-wide emissions inventory in 2020. Since then, we have focused our reporting and mitigating on our Scope 1 and Scope 2 emissions, as required under the GHG Protocol. However, although Scope 3 emissions reporting remains optional, we think it is an increasingly important part of all organizations' responsibility to understand their total carbon footprint.

To that end, earlier this year we started a comprehensive internal assessment of all of our potential Scope 3 emissions sources. Like most things at Cloudflare we are starting with our network. Everything from embodied carbon in the hardware we buy, to shipping and logistics for moving our data center and server equipment around the world, to how we decommission and responsibly dispose of our assets.

Developing processes to quantify those emissions is one of our top objectives for 2023, and we plan to have more information to share soon. Stay tuned!