CEP CEP Climate Change Strategy & Carbon Management 2 — Questions and Answers
Question 1: What is the primary purpose of an internal carbon price (ICP) in corporate strategy?
- To pay regulatory carbon taxes
- To incentivize internal emissions reductions by assigning a cost to carbon in business decisions (Correct answer)
- To offset purchased carbon credits
- To report Scope 3 emissions accurately
Correct answer: To incentivize internal emissions reductions by assigning a cost to carbon in business decisions
An internal carbon price assigns a monetary value to carbon emissions within an organization to drive investment decisions and operational changes toward lower-carbon options.
Question 2: Which mechanism under the Paris Agreement allows countries and companies to trade emissions reductions internationally?
- Green Bond Principles
- Article 6 cooperative approaches (Correct answer)
- Renewable Portfolio Standards
- CORSIA aviation offsets
Correct answer: Article 6 cooperative approaches
Paris Agreement Article 6 establishes frameworks for voluntary cooperation between parties to achieve NDCs, including international transfer of mitigation outcomes.
Question 3: What does a 'net zero' target require compared to 'carbon neutrality'?
- Net zero only applies to Scope 1 emissions
- Net zero requires deep emissions cuts across all scopes before using limited offsets, while carbon neutrality can rely heavily on offsets (Correct answer)
- Net zero and carbon neutrality are interchangeable terms
- Net zero requires purchasing renewable energy certificates
Correct answer: Net zero requires deep emissions cuts across all scopes before using limited offsets, while carbon neutrality can rely heavily on offsets
Net zero demands substantial absolute reductions across the value chain with only minimal residual emissions neutralized by permanent removals, whereas carbon neutrality more broadly allows offsetting.
Question 4: What is a Renewable Energy Certificate (REC) used for in corporate sustainability programs?
- Certifying a building's energy efficiency rating
- Representing the environmental attributes of one megawatt-hour of renewable electricity generation (Correct answer)
- Verifying that a company has installed solar panels
- Documenting Scope 1 emission reductions
Correct answer: Representing the environmental attributes of one megawatt-hour of renewable electricity generation
A REC represents proof that one MWh of electricity was generated from a renewable energy source, allowing buyers to claim renewable electricity use for reporting purposes.
Question 5: Which of the following best describes 'physical risks' in TCFD climate risk disclosure?
- Risks from transitioning to electric vehicles
- Risks from climate-related physical events like flooding, drought, or sea-level rise affecting assets and operations (Correct answer)
- Risks from carbon pricing policies
- Reputational risks from greenwashing allegations
Correct answer: Risks from climate-related physical events like flooding, drought, or sea-level rise affecting assets and operations
TCFD physical risks include acute risks (extreme weather events) and chronic risks (long-term shifts like sea-level rise and temperature changes) that can damage assets and disrupt operations.
Question 6: What is the primary role of a carbon offset project under the Verified Carbon Standard (VCS)?
- To eliminate a company's Scope 2 emissions entirely
- To generate verified carbon credits by reducing or removing GHG emissions that would not have occurred otherwise (Correct answer)
- To certify a company as carbon neutral automatically
- To replace Science-Based Targets commitments
Correct answer: To generate verified carbon credits by reducing or removing GHG emissions that would not have occurred otherwise
VCS projects generate Verified Carbon Units (VCUs) by demonstrating real, measurable, and additional GHG reductions or removals beyond business-as-usual baselines.
CEP CEP Climate Change Strategy & Carbon Management 2
What is the primary purpose of an internal carbon price (ICP) in corporate strategy?