Who Verifies Carbon Credits?

Simon H
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Who Verifies Carbon Credits?

Here’s a new money-making model for you.

Plant a small forest in your backyard. Call it “afforestation” and “carbon sequestration.” Calculate how many tons of carbon dioxide will be locked away in your forest over its lifetime. Then sell those carbon credits to companies and private entities who are still busy pumping CO2 into the air.

Congratulations, you’ve just marketed carbon offsets!

It’s not quite that easy, of course, but in the race to reduce their carbon footprint, companies are realizing that the carbon offset market is largely unregulated.

The market for carbon offsets is voluntary – there’s no government agency setting a standard emission reduction that must be met for eligible project. There’s not even an established criteria for what makes a viable carbon offset project.

Take a quick scan over the voluntary carbon markets out there and you’ll see a dizzyingly broad range of projects on offer. Renewable energy projects are always popular, as well as projects that lock carbon emissions away. You’ll also find forest management projects. Biogas projects. Water quality projects. The list goes on and on, with some of the projects seeming more and more unrelated to actual greenhouse gas emissions reductions.

A Wild West of Carbon Credits

Technically speaking, carbon credits are government-issued carbon allowances. Under the right conditions, they can be bought and sold in different exchanges. But participation is limited to entities (typically companies) in areas with an Emissions Trading Scheme (ETS). In the US, only California has a state-administered carbon trading program.

That leaves a growing demand for companies to take responsibility for their greenhouse gas emissions, but no formal market to meet that demand.

That’s where the idea of carbon offsets comes in.

Carbon offsets are carbon credits traded on the voluntary market. By investing in carbon reductions projects, companies can “offset” the carbon they produce.

Offsets don’t fall under existing government regulation. They’re an entirely natural market response to a new demand.

But that does raise an important question: who verifies carbon credits?

Without a government regulator, the market is left to sort out its own verification activities. In a new and growing market, that means a lot of uncertainty, but also an immense opportunity for any entity who can oversee other carbon offset providers.

Market-led verification

Think of “third-party verification,” and you probably think of some bureaucratic seal of approval. That’s how most regulation works. Government sets standards, and administers those standards through agencies that police different sectors of the market.

But verification isn’t only about meeting certain regulatory requirements.

Verification ensures that consumers receive proper value for their money.

In the open market, the job of ensuring proper value – verification – often falls to a third party. That third party often has an outsize influence in the development of the broader market, and the voluntary carbon market is no exception.

Carbon credit verification is a rigorous process that involves various steps to ensure the legitimacy of the credits. The verification process typically starts with the project developers who implement carbon reduction activities and generate the credits. They need to provide evidence of the carbon reduction, such as monitoring data, project reports, and other relevant documentation.

Once the project developers have collected the relevant data, it is submitted to a third-party verifier who assesses the data and ensures that the project meets all the requirements of the chosen carbon credit standard. The verifier will also check for any errors or inconsistencies in the data and verify the accuracy of the project report. If the verifier is satisfied that the project meets all the requirements, it issues carbon credits, which can be traded on the carbon market.

Multiple market approaches

Need a carbon offset? You’ll have two options when it comes to purchasing them.

You can buy carbon offsets individually, selecting the offsets and the price you pay for them. Sites like Nori and GoldStandard leave much of the verification process to the consumer. It’s up to you to examine the projects and select the ones you think will provide the greatest impact.

Voluntary offset market sites like these do some verification on their own, of course. By deeming a particular program worthy of being offered on the site, Nori and GoldStandard are implicitly verifying the programs.

Other offset markets provide offsets in a portfolio. By bundling offsets from different projects together, companies like Native can sell a wide range of offsets in one package. It’s a bit of verification through diversification – not every project will be as successful as others in actually reducing CO2 emissions. But by purchasing offsets that cover more than one project, investors can be confident that stronger offsets will offset weaker ones.

Building a new verification ecosystem

But what goes into a carbon offset? Who calculates the tonnes of carbon locked away in a given program? Who measures the carbon emissions reductions?

The smart carbon offset provider realizes that the offset market marks a golden opportunity to establish itself as the ultimate verification tool. Any company that can claim to have the best verification process can position itself to lead the rapidly-growing offset market for years to come.

The proof is in the pudding. The company that can prove its carbon offsets contributed to sustainable development benefits will have a notch in its belt. Anyone who can demonstrate clearly-achieved GHG emission reductions will be able to use that success to attract more investors to its projects.

In the voluntary carbon market, better verification leads to demonstrable results. And in a world increasingly aware of environmental damage, demonstrable results will lead to greater sales of carbon offsets.

One example of a company attempting to do just that is Verra.

Verra markets itself not as a seller of carbon offsets, but as a company that provides reliable carbon standards.

What sets Verra and its competitors apart is their efforts to provide internal offset verification services.

In Verra’s case, that means recruiting, training, and maintaining a network of auditors who can follow up on any Verra-approved offset programs. It’s in-house offset project verification, trying to ensure that a ton of carbon offset is an actual ton of carbon gone. That’s easier said than done, and it requires an extensive network.

But with a market growing as rapidly as the carbon offset market, the potential prize is worth it.

What Verra and others are pushing for is the chance to be the de facto verification body for an entire industry.

That push may seem to run against the market, but consumers will have the last word as always. The difference between carbon offset projects may not be apparent immediately, but as the market grows it will be easier to choose offsets based on reputation.

A standard for carbon offsets doesn’t need to be government-issued.

The markets can and will set their own standards.

When to Purchase Carbon Offsets

Simon H
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When to Purchase Carbon Offsets

Carbon credits buyers and investors do not need to know all of the intricacies of how offset methodologies work and how projects are developed. But to buy carbon credits, they should understand the offset lifecycle: how offsets are created and eventually retired.

That will help them determine the type, price, and risk of investment options available them—and whether or not a purchase will help them meet their organization’s emissions reduction goals.

Each new carbon offset has five major points in its lifecycle:

  • Development of a new offset type
  • Selection of an offset methodology
  • Planning of an individual project using that methodology
  • Implementation and verification of the project, registration with a carbon authority, and the beginning of offset issuance
  • Transfer to the purchaser and retirement of the offsets

Each phase represents an opportunity for substantial investment: in new offset technologies, in offset project ideation and development, and in offsets themselves.

Both price and risk begin extremely high, as there is no guarantee emissions will be removed. As the project enters the planning phase, the price falls and terms improve in order to attract investment.

Prices rise again as validation, verification, and registration take place—this means the risk of delivery has decreased and high-quality offsets are more likely. Then prices level off or rise slightly as the risk of double-counting or leakage rises and brokers and retailers take their cut.

Offset purchasers should become familiar with each point on this curve. It will help them determine how to maximize the ROI and other benefits their organization receives in return for offset purchases.

Offset Type Development

Dozens of offset types, such as methane capture from landfills and large hydro projects, have been established over the past thirty years. The two most popular types are currently wind and reforestation.

The problem is that while many types of carbon offsets have proven effective at removing CO2 emissions from the atmosphere, those currently in existence are only stop-gap measures.

For example, to erase the emissions from aviation, the entire United States would need to be planted with trees. That’s why investment in new types of offsets is so vital: the technology that will arrest global warming has likely not been invented yet.

Fortunately, new technologies and methods of removing CO2 emissions from the atmosphere are constantly moving along the timeline above. Experimental types of offsets currently in the funding and research phase include:

  • Accelerating mineral weathering in rocks using electrochemical forces.
  • Genetically engineering phytoplankton to capture CO2 in the ocean.
  • Flooding deserts to create manmade oases that phytoplankton can inhabit.
  • Developing enzymes that capture carbon.

The holy grail of offset development borders on alchemy: turning atmospheric CO2 into a usable product. For example, Coca-Cola has already signed a deal with a company that uses direct air capture of CO2 to make its soft drinks bubbly.

Purchasing carbon credits at this stage is risky:

During type development, there is no guarantee that carbon offsets will be able to be produced from the eventuating invention.

It’s also expensive. Experimental methods of removing carbon from the atmosphere can cost hundreds of dollars per ton during development.

For example, Climeworks—which captures CO2 and sends it to a local greenhouse (the irony!)—says it currently costs about $600 to remove a ton of CO2 using their methods. (Their cost per tonne is expected to drop below $100 within the decade.)

Investing in carbon offsets at this point does not net an organization any real offsets. Rather, it involves investing directly in companies that are working on breakthrough technology for the capture of CO2.

Thus, it should be undertaken by companies that can make use of the possible co-benefits of the eventual offsets (think of Coca-Cola’s uses for the carbon), companies that do not need the offsets for compliance, and companies that want a reputational bump from supporting the development of new technology.

Offset Methodology Selection

Once a carbon offset technology is ready for a new project to be built around it, it requires the creation or selection of an offset methodology, which is a complex set of rules around the creation of that offset.

The methodology provides guardrails for a project developer, outlining what they must do to establish a baseline for the project, determine additionality, calculate project emissions reductions, and monitor external parameters to calculate absolute emission reductions.

Entire libraries of approved methodologies already exist that cover most developed project types. It is up to project developers, though, if they want to create a brand new methodology to get the program approved and moving forward.

That adds a resource-intensive, risky layer to the project, but it can be necessary for offset developers that want to attempt novel project activities.

Investing at this point is an ultra-high-risk, high-reward proposition. If the buyer is heavily involved in the selection or creation of the methodology, it can yield assurances as to the quality of the resulting carbon offsets and their relevance to the buyer’s operations.

That is paired, however, with a long lead time before offset delivery (likely a few years) and a high measure of risk if the methodology is not approved.

This option is for companies that have a lot of time before they need offsets, and have the time to invest in researching new offset projects and building relationships with project developers.

Offset Project Inception: Project Planning, Validation, and Registration

Once a methodology has been chosen, the project developers generate a project plan that assesses the feasibility of the project, its environmental impacts and possible risks to development.

The plan is solidified into a project design document, which outlines the anticipate reduction in emissions from the project, plans for quantifying and monitoring those benefits on an ongoing basis, and proof of additionality for the project.

Independent third-party verifiers examine and approve the project design, ensuring the emissions reductions will actually take place. Then—and only then—can the carbon offset program be registered. This official registration sets the program up to begin issuing carbon offsets.

There are two general options for investment at this stage, both of which involve investing in the project directly:

  • Investing for the right to a specific percentage of the offsets created by the project.
  • Investing for the right to a specific number of offsets created by the project.

The former requires (and enables) much deeper engagement and a broader understanding of the mechanisms of carbon offsets than do later stages.

Investors must be able to evaluate the strengths and weaknesses of specific projects alongside third-party verifiers to decide whether the project is likely to deliver on its plans.

The latter generally looks like an Emission Reduction Purchase Agreement (ERPA). ERPAs take risk away from project developers by letting them pre-sell a specific volume of offsets. In exchange for taking on the delivery risk, buyers or investors get to lock in below-market offset prices.

Both options have a lower cost than later in the development process, and buyers may be able to invest in at-cost offsets. As always, that comes with a price: the offsets will be delivered over time, not all at once, and this type of investment generally requires a long-term agreement (as with an ERPA).

Offset Project Implementation: Verification and Issuance

Projects that have become operational must be monitored over a period of time based on the original methodology and plan. Then, another verification audit process assesses the realness and quality of the claimed reduction in CO2 emissions; these verifications typically occur a year apart.

Once a verification has been passed, the project developer can issue carbon offsets equal to the number of tons of CO2 that were verified to have been captured or reduced.

Those verified offsets are deposited into the project developer’s offset “bank account.” This is where the transition from “project readiness” to “pay for performance” takes place. In other words, those offsets are no longer just theoretical; they are continually being created, and the developer can begin delivering on long-term contracts.

Offset Sale and Transfer

Any offsets that have not been pre-sold become available for direct, one-off purchases from consumers and corporations. While purchasing directly from a project developer can help avoid transaction costs, it is not without its risks—especially in terms of the quality of the offsets.

Since there is no centralized marketplace for the voluntary carbon market, finding buyers remains challenging for project developers and identifying quality offsets is difficult for all but the most knowledgeable buyers.

Thus, three new entities have been created to facilitate the easy purchase of offsets: brokers, exchanges, and retailers.

Brokers have purchased credits from the project developer or an exchange and can transfer them to clients or retire them on their behalf. Brokers can be used to create a diverse basket of offset credits from different projects, different methodologies, and different project types.

Beware that some brokers sell offsets from projects they have directly invested in; while that may reduce fees, it might also make the broker biased toward selling their own offsets, regardless of quality.

Exchanges are places for developers to sell directly to buyers (and for traders to invest in carbon offsets). North America and Europe host a few environmental commodity exchanges that list carbon offsets and facilitate transfers.

While purchasing offsets in an exchange can be as easy as using Robinhood, it can be difficult to ascertain the exact quality of the offsets.

Retailers sell off-the-shelf carbon credits (just like the old boxes of Microsoft Windows CDs), then retire them on the behalf of the buyer. Retailers have physical ownership of the offset, while brokers and exchanges do not.

Purchasing carbon credits from a retailer offers the same benefits as buying from Best Buy: unlike Amazon, their employees can help companies understand the process of offsetting and what types of offsets are most likely to help meet their goals.

Offset Retirement

Offsets can be sold and resold. With each new transaction, they are transferred into a different account in the offset program’s registry. Those new buyers can hold them, transfer them to another account through a sale, or retire them.

Offsets are retired by “using” them by claiming their verified CO2 reductions against an emissions reduction target. Each carbon offset registry has a retirement process that prevents the offset from being transferred or used again—think of it like a dollar bill being removed from circulation.

Making Your Offset Investment Decision

The opportunities to purchase throughout the carbon credit lifecycle look like this:

Where you choose to invest in the carbon offset lifecycle depends on myriad factors, including:

  • The business goals and expected advantages behind your purchase.
  • How quickly you anticipate needing the offsets to be delivered.
  • The guaranteed quantity of offsets you will need.
  • The price level that can be afforded or that makes the most financial sense.
  • The amount of time and effort available to apply to the offset acquisition.

Answers to each of these questions will guide you toward options that differ in their timing, volume, and price, and your ability to evaluate (or influence) their quality.

China to Make Disclosure of Carbon Emissions

Simon H
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China to Make Disclosure of Carbon Emissions

China intends to make climate and carbon emission information disclosure mandatory in the future. According to central bank Governor, Yi Gang, they have completed some trials with select commercial banks and publicly traded enterprises,

“Our goal is to make a uniformed disclosure standard, and in the future, we will go in the direction of mandatory disclosure of climate-related information,” Yi said during a panel discussion at the Bank for International Settlements’ Green Swan conference.

President Xi Jinping’s vow to make China carbon neutral by 2060 implies that the world’s most polluting country will need to undertake a dramatic transition away from fossil fuels and toward sustainable energy.

The People’s Bank of China (PBOC) is attempting to contribute to this transformation by creating green financing and tackling related financial concerns. According to Yi, the PBOC has undertaken stress tests to analyze climate risks and has offered policy incentives for banks to issue loans for green projects

It is also examining the impact of the economy’s shift to renewable energy on inflation projections, he added.

To reduce emissions, the government is going to require an estimated $343 Billion in annual investment by 2030, rising to over $600 Billion trillion yuan for the three decades running up to 2060.

Adapted from: https://www.bnnbloomberg.ca/china-to-make-climate-information-disclosure-mandatory-yi-says-1.1612748

Highlights of China’s New National Carbon Market

Simon H
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Highlights of China’s New National Carbon Market

On July 16th, the world’s largest producer of greenhouse gas pollution – China, launched a nationwide carbon emissions trading market.

This was a long-awaited move toward combating climate change, and the market aligns the ability to pollute into an allowance that can be purchased and sold. It is one of several measures implemented by the Chinese government in an effort to demonstrate its commitment to drastically decreasing carbon dioxide emissions in the future decades.

Xi Jinping, China’s leader, has vowed to combat climate change and aims to portray his country as an ecologically responsible world power.

Mr. Xi made two landmark climate promises last year.

  1. He promised that China’s carbon dioxide emissions will peak before 2030.
  2. China will attain carbon neutrality before 2060.

He added, implying that the quantity of carbon dioxide gas produced into the environment by China would be offset by techniques such as forest planting.

Mr. Xi’s commitments, if fulfilled, have the potential to make a substantial influence in the world’s efforts to combat climate change.

The Paris Agreement, a worldwide agreement aimed at limiting global warming to less than 1.5 degrees Celsius, would not be achievable unless China and the other major countries move quickly to reduce greenhouse gas emissions.

China’s greenhouse gas output accounted for 27% of global emissions in 2019. That’s more than the combined amount of the next three largest polluters — the United States, the European Union, and India.

Since passing the United States as the leading polluter in 2006, China has faced strong domestic and international pressure to decrease emissions and do more to combat global warming.

China’s new carbon emissions market functions by restricting the amount of carbon dioxide that businesses may emit. The aim is to generate competition to push them to become more energy efficient and to embrace clean technologies.

Companies that reduce their carbon footprint can sell unused pollution allowances; those that exceed their emissions allowance may be required to purchase additional permits or pay fines.

Governments can force firms to adopt carbon-cutting technology by auctioning permits and gradually reducing the amount of pollution that they are permitted to emit.

Emissions trading, rather than top-down administrative measures, can be a more effective and flexible instrument for reducing emissions.

China’s carbon market has been in the works for some years.

Over a decade ago, the Chinese government began local experiments of carbon trading and in 2015 planned on developing a national trading scheme. However, the Chinese government has failed to get the conditions perfect for a nationwide launch.

To guarantee that the market works, authorities must correctly measure emissions from industries and plants and then verify that polluters do not cheat by concealing or altering emissions data.

However, with China’s huge industrial base and relatively lax regulation, this has proven to be difficult.

Earlier this month, a company from Inner Mongolia, a province of northern China, that is participating in the new market, was penalized for faking carbon emissions statistics.

The Chinese government first said that the market might include steel production, cement production, and other sectors, as well as power plants.

However, it limited the scope to only coal and gas facilities that provide power and heat – a sector with fewer competitors and therefore simpler to oversee.

China’s coal and gas power sectors covers almost a tenth of total world CO2 emissions.

Other industries may enter the market in the coming years.

The Shanghai Environment and Energy Exchange chose 2,225 power plant operators, many of which are subsidiaries of China’s state-owned power conglomerates, to trade on its platform.

China’s carbon emissions market now dwarfs, Europe’s and California.

These and other carbon trading program may eventually join forces, becoming a possible worldwide market.

For the time being, however, overseas investors and financial firms will be barred from entering China’s carbon market.

However, most experts believe it would take years for China’s program to grow into an effective instrument for reducing emissions.

Adapted from: https://www.nytimes.com/2021/07/16/business/energy-environment/china-carbon-market.html

Worlds First Carbon Neutral Cement Plant Being Built in Sweden

Simon H
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Worlds First Carbon Neutral Cement Plant Being Built in Sweden

Heidelberg Cement has announced intentions to eliminate carbon emissions from a Swedish facility in an effort to decarbonize one of the world’s most polluting sectors.

Cement manufacturing contributes significantly to atmospheric carbon, partly due to the energy required to make the material, but primarily due to the way limestone is processed.

The rock is crushed and burnt to remove calcium, which is the binding agent and primary component in cement, while the undesirable carbon is discharged into the atmosphere.

Globally cement is the source of about 8% of the world’s carbon dioxide (CO2) emissions.

The renovation plans will upgrade Sweden’s 2nd largest source of greenhouse gas emissions.

This upgrade will save 1.8 million tonnes of CO2 per year and the projected upgrade is set to be completed by 2030.

According to the company the exact method used to collect the pollutants is not yet chosen as there are numerous possible technology suppliers to be evaluated first.

But they have ensured that it will use “amine technology” which is a chemical compound that absorb CO2 from gases.

The amine gas treatment process uses aqueous solutions of various alkylamines (known as amines) to dissolve and remove hydrogen sulfide and CO2 from the refinery sour gases.

Although the technique is costly and cannot currently remove 100% of emissions from industry flues, amine methods are used to scrub carbon from manufacturing flues.

Once caught, the CO2 will be buried beneath the North Sea in holes produced by fossil fuel extraction. In a sense the carbon being returned to the same place hydrocarbons were extracted by various oil and gas projects.

Carbon capture and storage refers to the technique of collecting carbon and burying it underground (CCS). Unlike CCS projects that collect carbon from the atmosphere, however, the project will not immediately result in a net reduction in atmospheric CO2.

The facility will continue to be fueled primarily by fossil fuels, implying that the CCS process, if successful, will instead prevent additional emissions from entering the atmosphere.

The project has the potential to be carbon negative since the factory would receive a portion of its energy from burning biomass, which includes carbon that plants have taken from the atmosphere via photosynthesis.

The factory, which provides three-quarters of Sweden’s cement, was scheduled to be upgraded by 2030.

This project follows another carbon-reduction initiative at a Heidelberg Cement factory in Norway, which will serve as a model for the Swedish operation.

Work is currently underway at the first plant to convert the plant using amine technology to capture 400,000 tonnes, or half of the facility’s emissions, beginning in 2024.

Original Source: https://www.dezeen.com/2021/07/15/carbon-neutral-cement-plant-slite-heidelbergcement/

7 Key Takeaways from The EU’s New Green Deal

Simon H
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7 Key Takeaways from The EU’s New Green Deal

The European Union has published its strategy for meeting stronger 2030 climate objectives and eventually eliminating emissions by mid-century.

There are hundreds of new measures for lowering carbon across the economy. But here are some major aspects of the so-called “Fit for 55” package the EU’s effort to reduce emissions by at least 55 percent from 1990 levels.

While several years of negotiations are needed before the proposed legislation goes into effect, there are significant changes in the works for individuals and industry.

Here are some of the most significant, ranging from the cost of an airline ticket to the expense of heating your house.

1. System of Emissions Trading – Reduce emissions as soon as possible.

Overview: The EU intends to utilize its world-leading carbon market to reduce emissions sufficiently to meet its new 2030 objective. To that end, it intends to accelerate the rate at which emission caps are reduced each year, requiring businesses, electricity companies, and airlines to reduce their carbon footprint more quickly.

Importance: This will be the most significant revamp of the Emissions Trading System to date, impacting everything from the cost of flights to the cost of your power bill – however there will be a social fund to assist the most vulnerable. Following the announcement of the plans, carbon prices momentarily rose on Wednesday.

2. Mechanism for Adjusting the Carbon Border – Ensure that Europe is not undercut.

Overview: In a world first, the EU intends to charge imports of steel, cement, and aluminum from nations with lower environmental standards. Importers will be required to purchase special certifications at a price linked to the Emissions Trading System, which will essentially be a penalty for bringing in such commodities, which will also include fertilizer and power.

Importance: The EU understands that an ambitious climate strategy has drawbacks, such as making its firms susceptible to competitors outside the EU who are not subject to the same rigorous environmental regulations.

This is an effort to mitigate that danger, and it has global implications, perhaps pushing other nations to increase their own climate efforts. However, the system will be sophisticated in order to maintain compliance with global trade norms, and even the most thorough design will not eliminate the danger of diplomatic schisms with EU trading partners ranging from the United States to Russia or China.

3. Shipping and aviation – Remove exemptions for some of the more polluting industries

Overview: For the first time, the shipping industry will be involved in the Emissions Trading System, while airlines, who are currently participating, will ultimately have to pay for all of the pollution produced by their planes. The Commission also wants to see more sustainable aviation fuel blended into conventional jet fuel, and it is proposing a fuel-tax regime that would impose minimum taxes on both the shipping and aviation sectors.

Importance: Despite the enormous emissions of the transportation industry, shipping and aviation have been mostly spared from the most stringent environmental laws until recently. The new restrictions may be especially difficult for low-cost airlines, and consumers may face increased ticket prices as a result. However, the rules may benefit the region’s rail business as tourists choose for cleaner choices and the budding sustainable-fuel industry.

4. Emissions Regulations for Automobiles – Get rid of the Internal Combustion Engines.

Overview: The EU proposes that emissions from new automobiles decline by 55% by 2030 and reach zero by 2035. This is a considerable tightening of current objectives, which call for a 37.5 percent reduction from 2030, albeit it falls short of the projected 65 percent decrease.

Importance: Passenger vehicles account for around 12% of overall EU CO2 emissions, so reducing that production will be critical to meeting the bloc’s targets.

The legislation will increase demand for electric vehicles, and automakers are preparing. Volkswagen AG, the region’s largest manufacturer.

For example, anticipates that by 2030, more than 70% of its namesake brand sales would be electric. The legislation may help improve infrastructure by requiring member states to construct charging stations at regular intervals along important routes.

5. Renewable Energy Goals – increase % of energy derived from Renewable Sources.

Overview: The EU executive proposes increasing the EU’s renewable’s objective to 40% of the energy mix by the end of the decade, up from the current 32% target. It also intends to increase the use of clean fuels in transportation.

Importance: In order to reach its targets, Europe must increase the proportion of power generated from renewable sources. The new legislation will benefit renewable energy providers, which has already surpassed fossil fuels as the primary power source in Europe’s electric system.

6. Energy Conservation – Conserve More Energy

Overview: The Commission intends to encourage energy efficiency in a variety of industries, ranging from construction and agriculture to transportation and communications. It intends to require all public entities to remodel their facilities in order to spend less energy.

Efficiency standards will have to be taken into account in public bids, and governments will have to focus on boosting energy savings among vulnerable customers, therefore assisting in the alleviation of energy poverty.

Importance: The EU barely met its 2020 energy efficiency target owing to “exceptional circumstances,” a clear allusion to the pandemic’s economic impact. Current national climate and energy plans for 2030 are insufficient, with 29.4 percent reductions in energy use throughout the continent, falling short of the present EU target of 32.5 percent efficiency.

7. Forestry and Land Use – Absorb more carbon from the atmosphere

Overview: The EU intends to raise the amount of carbon dioxide absorbed by “sinks” like forests and grasslands to 310 million tonnes per year by 2030, up from approximately 270 million tonnes now.

The EU is also developing a system of carbon-removal certificates, which would help reduce agricultural emissions by allowing farmers to offset their pollution.

Importance: The EU understands that it is not only about cutting emissions, but also about absorbing what is currently out there. The ideas would necessitate higher forest protections, but the real cost is very low: between five and ten euros each tonne of CO2 absorbed from the atmosphere.

Adapted from: https://www.bnnbloomberg.ca/the-seven-elements-of-the-eu-green-deal-you-should-care-about-1.1628856

G20 Leaders Discuss Carbon Pricing to Combat Climate Change

Tony S
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G20 Leaders Discuss Carbon Pricing to Combat Climate Change

Carbon Pricing has finally been recognized as a legitimate way to combat climate change by G20 leaders, in a communique released Saturday. Country officials have been slow to release details on directly combatting climate change, mainly due to influence from the Trump administration. However, the “Biden Effect” is coming into play in international climate change decisions resulting in open discussions.

The communique mentioned “the use of carbon pricing mechanisms and incentives” as an appropriate way to combat global warming.  This is the first-time carbon pricing has been mentioned as a solution to climate change according to French finance minister Bruno Le Maire, a staunch supporter of carbon pricing.

Biden is considering different measures to reduce carbon emissions according to U.S. treasury secretary Janet Yellen. One such solution does involve putting a base price on carbon emissions. This price would then act as a baseline for other countries to erect their own carbon pricing methods. This differs from Mr. Le Maire’s idea of having a global floor for all carbon prices throughout the world.

It is still early to see how G20 leaders will proceed in their carbon pricing measures as the EU will introduce tariffs on carbon imports on July 14, the first of its kind in the world. There is a new found optimism from the international community on the use of carbon pricing as a means to combat climate change.

The Unprecedented Boom in the Worlds Largest Carbon Market

Simon H
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The Unprecedented Boom in the Worlds Largest Carbon Market

Earlier this month, the EU’s benchmark carbon price topped 50 Euros for the first time, after hovering around 20 Euros before to the coronavirus outbreak.

This rally shows no signs of stopping according to analysts and traders and some expect it to reach over 100 Euros by year end.

The rally is fueled by the EU’s ambitious climate strategy and greater market financial investment. and warns of  “carbon leakage,” which occurs when businesses shift production (and emissions) elsewhere due to the relative cost of polluting in Europe.

Some at-risk industries have claimed that rising carbon prices will harm their efforts to invest in new technologies, delaying a much-needed industry shift away from fossil fuels. The airline, chemicals, steel and mining industries as being among those most at risk in the coming months.

EU Aluminum Groups Wants Exclusion from Carbon Border Tax

Simon H
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EU Aluminum Groups Wants Exclusion from Carbon Border Tax

European aluminum manufacturers are pushing for their industry to be excluded from the pilot phase of the EU’s carbon border adjustment system.

European Aluminum – which represents smelters and manufacturers, said the tax plan will damage its members and consumers while hastening so-called “carbon leakage” which allows firms to relocate activities outside the EU to evade strict climate regulations.

They are arguing that the proposal will put them at a competitive disadvantage with overseas competitors while doing little to address climate change. The manufacturers believe that the Carbon Border Adjustment Mechanism (CBAM) will promote Chinese and Russian “resource shuffling”. This will allow manufacturers transfer their low-carbon output to Europe while selling their less environmentally friendly output elsewhere in the globe.

The CBAM is the centerpiece of the “Fit for 55” package, a levy meant to target imports from countries that have not committed to achieving carbon neutrality by the middle of this century while protecting domestic businesses that are not subject to the same stringent environmental requirements.

The carbon tax on imports is expected to earn about €10 billion per year in revenue. With steel, cement, fertilizers, and aluminum imports all be targeted in a three-year transitional period beginning in 2023.

The CBAM would replace existing mechanisms that attempt to limit carbon leakage under the EU’s emissions trading scheme for these items.

These are free emission permits and, more importantly for the aluminum sector, cash compensation for carbon-related power expenses.

Aluminum produces 6.7 tonnes of CO2 per tonne of metal on average and European aluminum smelters are paid for 75% of their indirect emissions with state aid. They are presently subject to a carbon fee, which is reflected in their power pricing.

Because of Europe’s marginal pricing structure for energy, which is often set by coal-fired power plants, even producers utilizing hydro and nuclear power have to pay.

According to producers, if the existing carbon compensation program is repealed, European smelters would face greater costs, and will put them at a competitive disadvantage to rivals in the rest of the globe. It would also encourage Chinese and Russian producers to simply divert their low-carbon output to Europe, avoiding any CBAM charge, while selling their other products elsewhere in the globe with no impact on their carbon footprint.

Rusal, the world’s largest aluminum producer outside of China, has previously announced intentions to divide its assets into a low-carbon firm aimed at the European market and a new entity geared at the Russian domestic market.

EU To Propose an Overhaul to its Carbon Market, this biggest change since 2005

Simon H
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EU To Propose an Overhaul to its Carbon Market, this biggest change since 2005

This week, the European Union is expected to propose an unprecedented revamp of its carbon market, attempting for the first time to put a price on shipping emissions.

On July 14th, the European Commission, the EU’s executive arm, will present its “green fuel” rule for EU shipping. It is part of a larger reform package aimed at meeting the EU’s revised climate targets.

The EU has committed to reducing net carbon emissions by 55% (when compared to 1990 levels) through to 2030, becoming climate neutral by 2050.

The EU says this will require a 90% reduction in transport emissions over the next three decades.

To meet these aims, the EU intends to undergo the most extensive overhaul of its Emissions Trading System (ETS) since the policy’s inception in 2005. The ETS, which is now the world’s largest carbon trading scheme, is largely expected to expand to cover shipping for the first time.

This has the region’s shipowners worried and according to Lars Robert Pedersen, deputy secretary general of BIMCO, the world’s largest international maritime association, the industry is concerned about the EU’s ambitions.

He claimed that the plan was “not conducive” to international policy, that it would fail to cut regional carbon emissions, and that it would ultimately drain money from the shipping industry that could otherwise be spent on decreasing emissions in the fleet.

An alleged leaked plan for the first-ever rule forcing ships to gradually transition to sustainable marine fuels, surfaces last week.

The EU has stated that action to address EU international emissions from navigation and aviation is “urgently needed,” and attempts to address these issues will aim to increase the production and use of sustainable aviation and maritime fuels.

Pedersen cautioned against panicking over the leaked draught, stressing that it might be altered in the coming days and that there are many more barriers to clear before the proposals become EU policy.

The final revisions would first need to be negotiated by EU member states and the European Parliament, a process that analysts say might take two years.

Shipping, accounts for around 2.5% of worldwide greenhouse gas emissions, is seen as a particularly challenging industry to decarbonize because low-carbon fuels are not generally available at the scale required.

Furthermore, the shipping sector is not the only one that has spoken out against the EU’s proposals.

Industry experts are concerned as the leaked draught does not promote investment in low-carbon fuels like renewable hydrogen and ammonia. Instead, it claims that the proposal favours liquefied natural gas and “questionable” biofuels as alternatives to marine fuel oil.

The European Union’s Emissions Trading System (ETS) is the bloc’s primary mechanism for lowering greenhouse gas emissions that cause climate change. It requires high-polluting industries, ranging from aviation to mining, to purchase carbon credits in order to create a financial incentive for enterprises to pollute less.

However, one issue now plaguing the plan is so-called “carbon leakage,” in which corporations shift output (and emissions) elsewhere due to the relative expense of polluting in Europe.

The EU is intended to solve this issue, potentially introducing the carbon border adjustment mechanism as early as 2023. The strategy aims to level the playing field in terms of carbon emissions by imposing domestic carbon price on imports.

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