Denmark’s domestic air travel to be carbon neutral by 2030

Denmark plans on voting in a Carbon tax to set a price for carbon emissions against the backdrop of rising global temperatures.

The Danish PM announced in his New Year’s address that by 2025 Denmark would have the opportunity to fly green on a domestic route. And by 2030 all domestic air travel will be carbon neutral.

The PM acknowledges that the task is difficult but not impossible and didn’t specify how air travel was to be carbon neutral.

It is expected this could include a combination of carbon credits and possibly electric-powered aviation for shorter domestic excursions.

Copenhagen plans to become the world’s first carbon-neutral capital city by 2025, with Copenhagen airport becoming emission-free by 2030, and transportation to and from the airport becoming emission-free by 2030.

Elsewhere in Europe, Air France has announced plans to reduce domestic short-haul capacity on some routes, and several airlines have reduced domestic flights.

Sweden has committed to making domestic flights ‘fossil-free’ by 2030. It implemented differentiated landing taxes at major airports starting January 1, 2022, based on the aircraft’s climate impact.

Grasslands: An emerging frontier for nature-based carbon Credits

A few decades into the growth of the carbon market, and most carbon offsets are still nature-based.

Yes, there’s growing interest in removal techniques like CCS (carbon capture and storage) and DAC (direct air capture). But for the foreseeable future, the world of carbon offsets will continue to be dominated by nature-based solutions.

And until very recently, nature-based offsets have meant primarily one thing: trees.

Forestry-based credits – the original carbon offsets

Forest-based credits have been around for decades in one form or another. They began, formally, under the Kyoto Protocol.

The Kyoto framework turned out to be not entirely kind to forestry-based credits themselves, but the idea of using forests to combat greenhouse gas emissions quickly took root.

As with most nature-based carbon credits, forestry credits take two primary forms:

  • Preventing Deforestation
  • Afforestation/Reforestation

Prevent a chunk of the Amazon rainforest from being cut down, and you’ve saved all the carbon dioxide currently trapped in the trunks of those trees.

That’s basic prevention; but in cases where forests existed historically, credits take the form of reforestation. If you’re planting trees where there never really was a forest, that’s afforestation – planting a whole new potential carbon sink.

It’s partly that last idea – afforestation – that has led to increasing scrutiny of the entire idea of forest-based credits.

For years, the logic went something like this:

One tree can absorb anywhere from 400 pounds to 1 ton of atmospheric carbon emissions over the course of its life. Most of that absorption occurs after about 40 years, once the tree reaches maturity.

Extrapolate that out a bit, and you’ve got the potential for hundreds of tonnes of CO2 emissions trapped in every hectare of mature forest. And as an added bonus, the CO2 sequestered in the trunks of the trees remains there in the form of lumber, only gradually being released as trunks and boards decay. 

Given those numbers, an obvious way to fight climate change was to plant empty land to forests. Even other kinds of natural environments – including grasslands – didn’t have the potential biomass and CO2 absorption of forests.

But these days, scientists and market analysts alike are starting to take a closer look at the numbers. After all, trees don’t grow everywhere; does that mean that the only way to fight climate change is to plant every bit of public and private land to trees?

Missing the (climate) forest for the trees

If the only weapon in the offsets arsenal is forests, then we’re in trouble. It would require planting 40 billion trees per year to offset human-caused CO2 emissions at current rates.

That many trees would quickly exhaust available land, and the full effect of those carbon sinks wouldn’t be seen for the better part of four decades.

In addition, a few decades of large-scale tree planting efforts have demonstrated a number of potential drawbacks with forest-based credits. 

Monoculture and improper forest choice

Forests are good, but not all forests are equally good everywhere. Carbon projects that rely on rapid afforestation efforts can fall into the trap of prioritizing tree monocultures – one type of tree, typically rapid-growing, planted in vast plantations.

Planting the wrong kind of tree can further complicate matters, resulting in forests with depleted biodiversity or ones that are poorly suited to a particular climate.

Potential for rapid degradation

Those factors, in turn, add to the risk of rapid degradation. Forests established as carbon sinks can quickly see all their gains reversed due to disease or wildfires, risks that are increased when compounded by monoculture forestry practices.

One ill-timed forest fire can see all the greenhouse gas reductions of a forestry-based offset literally go up in smoke. 

Displacement

The human factor comes into play as well; to plant new forests, you need land that is currently un-forested. But not all un-forested land is just sitting vacant and empty.

It may be used for agriculture, pastorage, living space, or some mix of all three. Aggressive forestation projects can sometimes lead to the displacement of current populations and the loss of native grasslands.

Criticisms of the over-reliance on forest-based offsets are nothing new. Some of those criticisms have been answered by better and more rigorous offsetting frameworks, from REDD+ to the recent Glasgow Agreement.

But others have begun to look beyond forest-based credits at other widespread ecosystems, and wonder if the old calculations on biomass and potential carbon storage still hold true.

Expanding nature-based offsets: grassland and forestry-based carbon sinks

Current estimates indicate that at the conclusion of the last ice age, the earth’s surface was a little over half forests. That percentage has steadily declined, and the percentage of other common ecosystems has more-or-less increased.

Grasslands, in particular, have always been a major landform. When combined with shrubland and marginal lands, they cover the vast majority of the non-forested surface of the earth.

At first glance, grasslands may not seem like an ideal carbon sink. Trees make sense – tall, towering behemoths with immense amounts of C02 locked away in their trunks. Even the tallest grasses can’t come close, making grassland-based offsets something of an odd choice.

But in recent years, two major factors have begun to transform how offset programs on the voluntary carbon market (VCM) view grasslands.

The secret source of grassland biomass

First, the biomass question. Yes, trees are the more obvious warehouses for CO2, locked away in their towering trunks. Grasses, on the other hand, tend to be short, often without wooden stems that would appear to be a natural repository for CO2. 

A closer look at grasslands reveals that there’s far more going on beneath the surface. Grasses, unlike trees, keep the vast majority of their collective biomass underground in extensive root systems. Add in the tendency for grass to grow in dense concentrations, and the apparent difference in available biomass starts to diminish.

The fact that grasslands lock most of the CO2 they absorb away in underground root systems, rather than visible trunks, gives grassland-based offsets one more key advantage over forest-based offsets; resiliency.

Grasslands: a more resilient offset

Perversely, ongoing climate change increases the demand for forestry-based offsets in both the voluntary and regulatory markets, while also increasing the pressures on those very forests.

Warming forests are more susceptible to disease and insect infestation, degrading the quality of existing forests. And the warming climate, among other factors, has led to the recent significant rise of forest fires.

Fires carry a double punch; by destroying entire forests, they not only remove a carbon sink for future emissions, but they also release tonnes of carbon into the air at once.

Grassland projects, on the other hand, can largely avoid the fire problem. When a grassland burns, the root systems are left largely intact. Grass regrows quickly in most cases, meaning that a burned-off field recovers in a matter of weeks or months, rather than the years and decades it can take a mature forest to re-grow.

Forests may get most of the press, but grasslands are proving to be resilient carbon sinks. A California study examined four scenarios in a warming climate that compared forest resilience to grasslands; in three of the four, grasslands proved to be more resilient in the face of ongoing climate change.

Origins of grassland-based carbon offsets: from protection to restoration

The progression of grassland-based carbon credits on the voluntary markets has followed the same path as forestry-based ones. The first grassland offsets focused on protection and preservation.

A carbon sink saved is one that doesn’t have to be created again in the future. With grasslands, the primary threat is agriculture. 

Agriculture isn’t as bad as paving a field over to make a parking lot, but in terms of CO2 emissions, tilling for crops disturbs the root systems that trap carbon underground. The loss of soil carbon is compounded by the use of carbon-emitting machinery burning fossil fuels. 

To preserve grasslands as-is, offset projects tend to focus first on preventing the conversion of grasslands to tilled fields. Projects take existing grasslands – typically well-established ones – that are under some threat of being converted to a different use, and award credits for landowners who keep them in their current state. 

As a second step, grassland carbon credits might be rewarded for agricultural techniques, such as no-till farming, that preserve underground biomass. These techniques are nothing new, although the technology required to accurately monitor underground carbon sequestration is still under development.

The final stage in the development of grassland-based offsets seeks to expand and restore historic grasslands. Typically, this involves converting existing cropland to grassland, or (in some cases) to pastorage or crops such as hay that require less direct planting and tilling.

Advantages of grassland offsets

It’s that last idea – integrating carbon sequestration potential with existing human use – that makes grassland-based offsets so appealing. Forestry-based offsets are often used the same way, with monoculture tree plantations functioning as carbon sinks and then harvested en masse.

Grasslands offer the same cycles of growth and harvest, but with the added benefit that cutting hay in a field does little to disturb the carbon locked away in the soil.

Grassland-based offsets offer the potential to work alongside current human usage in a way most forestry-based offsets cannot. This has given grassland sequestration initiatives key advantages over forestry counterparts.

There’s no need to lock up a chunk of land in a Sitka pine forest for 30 years; instead, farmers and ranchers have the chance to continue using land for pastorage or no-till farming while also selling offset credits on the VCM. 

In short, these credits aren’t necessarily primarily focused on virgin prairie grassland preservation, though some of those efforts might be included. More often, grassland protocols include provisions for livestock grazing or hay-cutting, attempting to create reliable carbon sinks without completely transforming current land use.

This gives most grassland sequestration efforts a community appeal that may not be possible with forestry-based efforts. Well-designed grassland programs openly acknowledge that the co-benefits of such projects include maintaining the key aspects of current communities, such as ranching and farming, rather than asking them to uproot or change lifestyles entirely.

Adjusting rangeland practices to encourage soil health and improve rates of carbon sequestration, while also providing financial incentives, turns out to be an easier pill for many rural communities to swallow.

It’s no coincidence that many of the key drivers behind grassland-based offsets are rural ranching and farming communities, as well as the government agencies tasked with supporting them.

Pilot projects have included partnerships between organizations as varied as Ducks Unlimited and the Climate Action Reserve. One such early program, initiated in 2011, was conducted under the auspices of the USDA. In Canada, key programs have been set up by the Canadian government’s own Agriculture and Agri-food Canada department. 

That level of direct community and government involvement is harder to achieve with forestry-based credits, where tensions between forest preservation and agricultural lifestyles are more direct and harder to resolve.

Benefits of grassland offsets

On the broader VCM, grassland-based offsets provide a number of benefits, including:

Adaptability – Grasslands are variegated, including everything from dense prairies to pastoral cropland, and occur across a variety of climates.

Resilience – Most grasslands have proven to be less susceptible to extreme weather, including prolonged drought and wildfires, which have at times devastated forestry-based credits.

Integration – Many grassland offset projects can be integrated with current farming techniques, including no-till farming and livestock grazing.

Expanding the role of nature-based offsets

Grassland sequestration projects form part of a growing world of nature-based offsets. The image of a pristine forest as the best – or even the only – kind of nature-based offset is rapidly changing.

Forests will continue to play a vital role in the VCM, but nature-based offsets are beginning to grow beyond forestry alone. In addition to grasslands, there’s renewed interest in the peat bogs found around the globe and more traditional wetlands. Frequently, the search for new kinds of natural carbon sinks is spurred on by weaknesses in a forestry-first approach.

In the meantime, grassland conservation provides a uniquely applicable real-world carbon sink, one that many ranchers and farmers in North America and beyond can adapt to comparatively quickly. And the timescale for many of these projects is much faster – years to restore vibrant grasslands, compared to the decades necessary to regrow a forest.

Grassland-based offsets form part of an emerging frontier for carbon sequestration, blending positive climate activism with real-world adaptability. Call it a realpolitik for the VCM, with grasslands at the heart of it all. 

Australia Carbon Prices Increase 180%

The price of carbon is up 180% in Australia.

Research from RepuTex, a carbon market consultancy, believes that Australian Carbon Credit Units (ACCU) could reach $60 per ton.

Right now, the price is $47 per ton.

A limited supply of ACCU’s is the main reason behind the price increase. The Commonwealth’s Emissions Reduction Fund holds a sizeable portion of credits. In fact, 210 million are set for delivery with the Clean Energy Regulator.

Many have asked the Australian government to stabilize the market by increasing the credit supply.

RepuTex executive director, Hugh Grossman, agrees.

If contracts release part of their supply, it will fulfill part of the demand. Plus, it would be better than sellers canceling their contracts.

But this boom is not just happening in Australia. It is happening across the globe.

According to Grossman, “As companies pursue a net-zero pathway, a carbon ‘super cycle’ is almost inevitable, with voluntary demand to outpace supply, driven by a raft of corporate pledges which have come about at a rapid pace.”

In other words, as countries and companies look to reduce their carbon footprint, the carbon marketplace will continue to grow. Supply cannot keep up with demand with only so many credits to buy and projects to offset carbon. Hence the price increase.

Experts recognize that carbon offsets are crucial to fighting climate change. However, some feel that the focus should be on reducing or cutting emissions, not offsetting them. They believe this would reduce the price of offsets and improve the environment long-term.

Australia emits less than 2% of the world’s carbon, but they are the third-largest exporter of fossil fuels.

Australia has pledged to reach net-zero emissions by 2050.

US Bill Could Eliminate Tax Credits for Oil Recovery

Section 45Q of the US Internal Revenue Code offers a tax credit for each metric ton of carbon captured and sequestered.

It ranges from ~$12 up to ~$50 for every ton of carbon captured and stored underground. These credits can be claimed even if the carbon is used to push oil out underground.

California lawmaker Ro Khanna would like to change that.

His new bill is called the “End Polluter Welfare for Enhanced Oil Recovery Act.” If passed, carbon capture used for oil production would no longer receive a tax credit.

Over 95% of carbon capture and storage in the US is used for enhanced oil recovery. So, if Khanna’s bill were to pass, it would affect many companies.

Khanna told Reuters, “We shouldn’t be subsidizing enhanced oil recovery (EOR) if this is going to be increasing carbon.”

Environmentalists agree. In fact, twenty environmental groups have expressed their support for this bill.

They feel this practice defeats the purpose of carbon capture by increasing the use of fossil fuels. In the past, critics had felt this way about carbon offsets too. However, increased regulation and improved verification methods have changed that.

The bill’s co-sponsors include Rail Grijalva of Arizona and Mike Quigley of Illinois. Like Khanna, both are democrats. Grijalva is also chair of the House Natural Resources Committee.

There are deep divisions within the US House and Senate concerning environmental initiatives.

Some senators have discussed eliminating part of 45Q that requires facilities to capture at least 75% of their emissions to qualify for the tax credit. Senator Joe Manchin of West Virginia is said to be part of these discussions.

Khanna believes his senate colleagues are going about this the wrong way and hopes his bill will be adopted into the Senate’s version of the Build Back Better Act (BBBA).

Since Khanna’s bill varies significantly from the 45Q expansion discussed by the house, its chance of being signed into law is slim.

How Carbon Credits Can Increase Land Conservation Efforts

For years, timber harvests and development opportunities have been a source of income for landowners worldwide. Carbon credits are changing that.

One metric ton of carbon is offset from the atmosphere for every carbon credit purchased. This happens through an environmental project, such as reforestation.

The more carbon credits purchased, the greener a company can be – which is why the industry is booming.

But there is another benefit here.

Revenue from carbon offsets could provide $250 billion annually for conservation efforts.

This means landowners can now receive compensation for conserving land instead of destroying it. So, carbon credits may, in fact, encourage conservation.

For land to qualify, it must be at risk of harvest or conversion. Landowners then sign an agreement to ensure they are committed to seeing these environmental projects through.

This makes sure that landowners are in it for the long haul. They cannot just sign up and then sell out.

According to the World Economic Forum, forest carbon projects undergo an intense verification process to help meet goals. It takes almost two years before their credits even hit the marketplace. So, the incentive to stick with this long-term is there.

There are decades of research used to let us know just how much carbon can be sequestered through a forest.

Then, a year after landowners sign their agreement, tree growth is checked to see if it is on track with projections. Only then are carbon credits issued.

Critics have always claimed that the lack of oversight within the carbon credit industry was why they could not support it.

However, increased ways to verify carbon sequestration are beginning to change that. Plus, leaders at COP26 have agreed on a global standard, putting many concerns to rest.

As more landowners take on sustainable forest projects, conservation has a chance.

Shell & EKI Energy to Invest $1.6 Billion in Carbon Credits

Royal Dutch Shell has partnered up with EKI Energy from India to develop nature-based solutions for carbon capture.

The JV is expected to invest $1.6 Billion over a 5-year period to develop 155 million Carbon Credits.

EKI Energy, is the largest carbon credit developer and supplier from the developing world. They currently serve over 2,500 corporate customers with ~70% based in India.

The JV will work on conserving, enhancing, and restoring natural ecosystems such as grasslands, wetlands, forests, agriculture, and blue carbon.

Shell has set a target to become a net-zero emission energy business by 2050.

The carbon credits generated from these projects can be used either by Shell for its internal consumption or to sell in the open market.

A carbon credit is a certificate signifying that one tonne of carbon dioxide emission has been reduced from the atmosphere.

This can be done through nature solutions, such as planting trees, or through industrial applications such as using carbon-reducing agents at emission points.

These carbon credits can be traded to help more polluting entities meet increasingly stringent carbon-emission norms.

Shell and EKI have signed on the exclusivity clause in contract to form the JV.

The carbon credits generated from the projects the JV undertakes will be shared in proportion to the investment Shell or EKI makes.

If Shell invests 75% of the capital in a project, it will get 75% of the carbon credits generated from it.

Positive sentiment driving this share is due to the growth of net-zero commitments being made as the world focuses on lowering the carbon footprint.

Increased Demand for Carbon Offsets in Asia

Demand for carbon offsets in Asia is increasing across the global supply chain, IT, and banking industries.

Many companies want to lower their carbon footprint, especially after COP26. One way they are doing this is through the use of carbon offsets.

Carbon offsets are when a company offsets its carbon emissions by buying carbon credits. One metric ton of carbon is offset by an environmental project for every carbon credit bought.

Simply put, one carbon credit equals one metric ton of carbon.

With no global standard, offsets were often criticized. But that has now changed.

At COP26, leaders agreed to:

  • Set a global standard to create, account for, and verify carbon credits. This will help prevent double counting. It will also improve the quality of offset projects.
  • Allow certified emissions reductions (CERs) to be traded through Internationally Transferred Mitigation outcomes (ITMOs).
  • Provide countries with the choice to use or sell offsets to other countries.

With these changes, companies see the potential of the carbon offset industry, causing it to boom. But that isn’t all. Demand for Renewable Energy Certificates (RECs) is increasing as well.

RECs are just like carbon credits – except their focus is on renewable energy. One REC equals one megawatt-hour (MWh) of renewable electricity with RECs.

Singapore-based T-REC.ai is one of eight companies approved by the US to register and verify RECs.  Demand has reached 20 million RECs – accounting for half of the city-state’s power consumption.

However, demand was so high, they could only fulfill orders for 500,000 certificates.

Kang Jen Wee, founder and CEO of the exchange told Reuters that the company was working to register more renewable power suppliers.

Global companies want their suppliers across Asia to purchase RECs to offset emissions. Right now, the price ranges from $3 – $30 per REC.

Kang believes the exchange will grow by 10 million RECs next year. He expects it to reach 100 million by 2025.

Blockchain Carbon Credit Token Lists on Coinbase

Moss (MCO2), a blockchain carbon credit token company, recently listed on one of the world’s largest crypto exchanges, Coinbase.

Moss is a Brazilian startup that created the first carbon credit-backed token used to offset greenhouse gas emissions.

Since then, Moss has processed about $20 million in transactions and has assisted in the conservation of ~735 million trees in the Amazon through internationally verified and audited programs.

The MCO2 Token is equal to one carbon credit, or one metric ton of CO2 that is no longer emitted into the atmosphere as a result of REDD and REDD+ (Reducing Emissions from Deforestation and Forest Degradation) program.

MCO2 has already been employed by over 300 companies worldwide. Moss recently provided the offsets for One River Asset Management’s carbon-neutral bitcoin fund.

Moss has also collaborated with Brazil’s largest airline, GOL, to allow its customers to offset their emissions by purchasing the MCO2 token.

Gol has the world’s fifth-largest Boeing fleet and transports over 20 million passengers per year.

This collaboration amounts to more than 2.3 million MCO2 exchanged, or more than 2% of the total volume of carbon credits traded globally each year.

Honeywell Carbon Capture Partnership with University of Texas

Honeywell and the University of Texas at Austin have partnered together to drive down the cost of carbon capture from power plants and heavy industry.

The UT Austin team has created a system that will improve carbon capture performance.

This makes the process more efficient for industries such as steel, cement, chemical plants, coal, natural gas, and bio-energy power plants.

The licensing agreement with Honeywell enables UT Austin to commercially scale & make major contributions toward zero emissions.

The difference between UT Austin’s system and others is that they utilize an advanced solvent. This technology can be used within existing plants or included within new systems.

This can make carbon capture less expensive and more efficient.

Honeywell is capturing, storing, and utilizing approximately 15 million tons of carbon per year – with the potential to capture 40 million tons annually.

They are committed to reaching carbon-neutral operations and facilities by 2035.

Like carbon offset projects, Carbon Capture and Storage projects (CCS) are growing in popularity.

In 2020 alone, CCS projects captured and stored 40 million metric tons of carbon. However, to meet new emissions goals, CCS must increase to 840 million metric tons by 2030.

While increasing CCS project capacity 20x seems like a challenge, partnerships such as Honeywell and UT Austin can help get us there.

UT Austin has been a leader in carbon capture research for more than 20 years.

Wall Street’s Carbon Crisis

A new report shows that Wall Street is the fifth-largest carbon emitter, coming in just after Russia and before Indonesia.

In 2020, 8 of the largest US Banks and 10 of the largest US asset managers financed $2 billion tons of carbon emissions.

Though major corporations have shared their support for net-zero initiatives, the “Wall Street’s Carbon Bubble” report by the Sierra Club and the Center for American Progress (CAP) says it isn’t enough.

Some banks are continuing to fund oil and heavy industries, but many have joined the Glasgow Financial Alliance for Net Zero (GFANZ) to limit their investment in heavy emitters.

“If left unaddressed, climate change could lead to a financial crisis larger than any in living memory,” said Andres Vinelli, vice president of economic policy at CAP.

According to Insurer Swiss Re, the global economy could lose 18% of current GDP by 2048 if no action against climate change is taken. So, whether you are an environmentally-conscious investor or not, there is cause for concern.

The report went on to say that financial institutions across the 20 largest economies have $22 trillion worth of assets within carbon-intensive sectors.

Following the report’s release, SEC Commissioner Caroline Crenshaw acknowledged the concerns expressed but drew attention to actions taken at COP26.

Many public companies have pledged to reach net-zero with world leader support.

However, she did say, “It’s sometimes unclear to me how companies will achieve these goals. Nor is it clear that companies will provide investors with the information they need to assess the merits of these pledges and to monitor their implementation over time.”

Crenshaw added that “metrics calculated using reliable and comparable methodologies that enable investors to decide whether companies mean what they say” will play a significant role moving forward.

The Securities and Exchange Commission is looking at more rigid climate reporting rules from publicly traded companies, including banks.

A ruling could take place as soon as next year.