Analysts said that a total of 1.2 billion metric tons of carbon credits surplus could flood the market at short notice.
A Trove Research consultant indicated that there’s a market surplus of 600 million MTof carbon credits. These credits have been issued but not retired and enough to meet market demand for about 3.5 years.
There are also another 600 million MT credits that sit in project developers’ accounts. They’re created but lack verification yet from accrediting bodies. And so, these credits are “ghosts” – they’re not in emissions registries but could flood the voluntary market if prices rise.
Guy Turner, Trove Research CEO and founder, said that
“There is 1.2 billion Mt of credits that can be issued today and be provided by existing projects…That can weigh on the market at certain points in time… this could lead to volatility.”
Why Is There A Carbon Credits Surplus?
The excess credit supplies are likely old and may lead to price discounts in voluntary markets. Why is there a surplus?
Trading carbon credits started way back after the ratification of the UN Kyoto Protocol. It’s the first international pact to cut down emissions.
While the trading volume via the regulated market is huge, sizable trading is also happening in the voluntary carbon market (VCM). The momentum behind the VCMs has been strong and trading volume jumped high last year.
In fact, it’s expected to grow from $0.4 billion a year in 2020 to up to $25 billion in 2030 and as much as $480 billion in 2050. The world targets to reach net-zero emissions by 2050.
In 2021, carbon credits for almost one billion tons of CO2 were for sale to would-be carbon offsetters on the VCM. But there have been more sellers than buyers.
Hence, there’s a surplus from old carbon credits. This excess in supply is equal to about 7 to 8 times the present annual demand.
Plus, there are also credits not verified by certifying bodies. They emerge when some project developers didn’t pay their verification fees before issuing the credits. It happens when carbon credit prices are too low.
Turner from Trove Research predicts that spending on carbon credits will jump 20-fold in the next decade.
But there’s a fear that the surplus stocks of ghost carbon credits will meet much of that credit demand.
So What Should Happen?
Some governments review their current carbon credit schemes to weed out the junk. While new rules are being written to ensure the quality and reliability of the credits.
Better yet, investors have to assess first the credits they’re going to buy using a set of criteria. This is important to prevent double-counting for the same credits or buying credits that can’t provide real offsets.
Despite some doubts about the role of carbon credits in offsetting footprint, there are many projects that need them to take off and cut emissions.
Best of all, a lot of companies are committing to report their GHG emissions based on the Science Based Targets initiative’s (SBTi) approach. It’s the go-to standard for corporate emissions reporting.
In the last quarter, over 400 businesses signed up with SBTi. This corresponds to around 370 million metric tons of GHG emissions.
Thus, we can still expect that the reported carbon credits surplus will be actual reductions if more firms and individuals seek to offset their footprint.
Original source: Quantum, Trove Intelligence,|Yale School of the Environment
Elon Musk-funded $100 million XPRIZE Carbon Removal competition revealed its 15 milestone round winners.
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The XPRIZE competition aims to encourage the development of innovative CO2 removal solutions to cut emissions.
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XPRIZE aims to tackle the world’s biggest challenges in exploration, environment, and human equity. It does so by crowdsourcing solutions through large-scale competitions like the Musk Foundation’s’ $100M prize.
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The 15 winning teams will be receiving $1 million each to help advance their projects. The XPRIZE carbon removal competition started last year and will continue until 2025.
The XPRIZE Carbon Removal Competition Mechanics
This XPRIZE carbon removal competition has the biggest collection of carbon removal innovators. The milestone winners are from nine different countries. These are the U.S., the U.K., Canada, Australia, France, Iceland, Kenya, the Netherlands, and the Philippines.
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It’s important to emphasize that these winners are not privileged to win the grand prize. Other groups are still eligible to join until December 2023 and compete for the final prize.
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Essentially, the XPRIZE is not an ideas competition. Rather, it’s an execution and demonstration carbon removal competition. The entire submission and selection process was demanding.
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There were 287 teams out of 1,133 teams that joined the competition that met the eligibility criteria for the Milestone Awards. Then a 70-expert panel screened and judged the proposals for scientific validity.
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Finally, based on a set of criteria, the top 15 teams took home $1M each. The criteria include operations plans, performance data, life cycle analysis, and cost estimates. They also accomplished three major winning points.
They showed that their technologies are capable of removing 1,000 metric tons of CO2 from the air each year.
Demonstrated how much it costs to remove up to 1M metric tons of CO2 a year.
Show that they have a sustainable path to remove carbon at the gigaton scale.
The XPRIZE Carbon Removal Milestone Round Winners
Here’s a quick overview of each of the 15 XPRIZE carbon removal winners:
Calcite from 8 Rivers Capital – USA
8 Rivers Capital created calcite in collaboration with scientific institutes. Calcite uses the natural carbon absorbing abilities of Calcium Hydroxide. Calcite’s process captures CO2 fast at low cost (less than $100 per ton). Calcium hydroxide absorbs CO2 into calcium carbonate crystals same with how concrete dry and absorb CO2 in the process.
Carbyon – Netherlands
Carbyon develops a direct air capture (DAC) technology. It also uses a CO2 adsorbing substance with modified fiber membrane that has a huge internal surface and works at very low pressure drops. But its fast swing process allows for a very compact and reproducible machine design. As such, it results in a high CO2 capturing capacity and low manufacturing costs.
Heirloom – USA
Heirloom also offers DAC solution using natural processes and minerals in capturing CO2. Same with some XPRIZE carbon removal winners, its technology enhances the natural process of carbon mineralization. It helps minerals absorb CO2 from the air in days, rather than years.
CarbFix – Iceland
Carbfix speeds up natural processes wherein CO2 dissolves in water and interacts with reactive rock formations to form basalts. These are stable carbonate minerals that provide carbon sink for thousands of years. In this project, 95% of the injected CO2 mineralizes within 2 years, much faster than expected.
Bioeconomy Institute Carbon Removal Team from Iowa State – USA
Bioeconomy Institute takes a systems-wide approach to find environmentally and economically sustainable solutions. In particular, the XPRIZE carbon removal winner will use its prize to advance its use of pyrolysis. The process turns biomass from crop residues into a soil amendment and other goods.
Project Hangar – UK
Project Hajar is a joint project between Mission Zero Technologies and 44.01 that combines DAC with mineralization in geological formations. CO2 is captured from the air and transferred to peridotite underground using renewables. The natural process is then enhanced with the fastest mineral carbonation rates ever known.
Sustaera – USA
Sustaera’s solution is engineered to harness renewable electricity that minimizes new emissions. Its modular DAC system works around the clock in various locations (deserts, savannas, and grasslands). And its carbon-negative technology can capture, sequester, and utilize carbon.
Verdox – USA
Verdox designed an electric system that makes it easier to both soak up the CO2 and squeeze it back out. This DAC design allows for gases to flow through with less resistance, making the process more efficient. This different approach results in more efficient CO2 capture and release using only electricity, less the heat or water.
Global Algae Innovations – USA
Global Algae developed dozens of new technologies that made algae production commercial for food, fuel, and feed. Its patent pending Zobi Harvester technology, for instance, uses advanced membranes and very low energy. It achieves 100% algae harvest efficiency and rid the need for secondary dewatering.
NetZero – France
NetZero turns agricultural residues into biochar, a very stable form of carbon. Through pyrolysis process, biochar gets buried in the soil for good. Biochar is one of only a few long-term sequestration technologies, with high technology readiness level. It also increases crop yields and renewable electricity production from pyrolysis.
PlantVillage from Penn State – USA
PlantVillage created a triple A model – Algorithmic Agricultural Advice – to increase farmer’s yield and profits. The algorithm comes from integration of AI (Nuru), satellite, and unique field force. After inputting farming details, the algorithms then send out advices to farmers via phones, TV, and social networks.
Takachar & Safi Organics – Kenya
Takachar’s technology transforms massive amounts of waste biomass into marketable goods. Its equipment uses a novel concept called oxygen-lean torrefaction. It converts biomass into fuel, fertilizer, and other specialty chemicals. Takachar’s system is thus profitable by reducing the logistics cost of hauling biomass.
Captura – USA
Captura is a team of scientists, engineers, professors, oceanographers and business leaders. They’re developing cost competitive CO2 capture technology that extracts CO2 from oceanwater. It will then contribute gigaton scale of CO2 reductions.Â
Marine Permaculture SeaForestation from the Climate Foundation – USA, the Philippines & Australia
Climate Foundation’s marine permaculture systems consist of floating platforms that use wave energy. The platforms will be placed at a depth of 25 meters, making them safe for navigation and deal with bad weather. Also, they’ll help restore nutrient upwelling to pre-global warming levels by promoting kelp forest.
Planetary Technologies – Canada
Planetary introduces the first Accelerated Carbon Transition (ACT) Platform, addressing many climate issues. In particular, it will remove CO2 and store it for good and convert mine tailings into safe, pure, alkalinity. It will also generate green hydrogen and battery metals that replace fossil fuels.
Carbin Minerals from the University of British Columbia, Vancouver – Canada
This XPRIZE winner optimizes carbon removal in mine tailings via carbon mineralization. The team developed proprietary technologies that speed up CO2 mineralization in ultramafic rocks. It also has the potential for gigaton-scale capture and permanent storage of CO2.
Obviously, the pace and depth of carbon removal initiatives have never been greater. But, the world still needs more and deeper emissions cuts through similar CO2 removal solutions.
EKI Energy Services announced its target to mobilize 1 billion carbon credits by 2027, along with its commitment to be net-zero by 2030.
EKI Energy or EnKing International is an Indian-based carbon credits developer and supplier. It delivers a wide range of services, particularly in the areas of climate change, carbon credits, and sustainability.
EKI help businesses and organizations to achieve their climate ambitions. It does so by offering carbon offsetting, carbon footprinting, and carbon-neutrality.
The developer also provides help with renewable energy and carbon offset standards.
The company also provides counseling on implementing nature-based solutions and generating nature-based credits.
It has traded more than 100 million offsets to date.
EKI is India’s largest Carbon Asset Management company that handled more than 100 ETS and over 200 voluntary projects.
EKI Energy’s Investment Focus on Carbon Credits
The firm’s target to produce 1 billion carbon credits by 2027 has a big role to meet the world’s need of 58 billion credits a year.
EKI has been identifying projects within and outside Indian territory that cut emissions. The major carbon credit projects it has been supporting include the use of renewables (e.g. solar, wind, and hydro). It also supported plenty of energy efficiency projects.
But with the new pledge of generating around $1 billion carbon credits, it’s largely focused on carbon reduction measures. In particular, the company aims to do backward integration of its carbon credit projects.
It plans to invest in low-cost environmental and community-based energy efficiency projects. Examples are biogas, tree plantation, and its own manufactured Improved CookStoves (ICS).
EKI said that their ICS will allow households to switch to an efficient cooking solution. Each cookstove is about 30% more efficient than traditional mud/stone fire cookstoves.
And so, it leads to a 45%-55% reduction in the use of firewood as fuel. Each of the ICS helps prevent as much as 4,000 kg of CO2 emissions a year.
The company aims to distribute 1.5 million cookstoves in the following year, some are for exports.
Meanwhile, the firm also plans to invest in safe water technology and green hydrogen projects to generate credits.
Below is the EKI’s project portfolio. All these projects are in line with the goals of Kyoto Protocol, Paris Agreement and the UN SDGs.
EKI Energy Investor Report
As per the firm’s CEO,
“Our renewed commitments will enable us to take greater charge of steering the planet to net-zero by becoming a service provider who leads by example to inspire million others in this quest…”
EKI’s “Steering the Planet to Net-Zero”
As the company’s gearing up for COP27 which is about six months from now, it unveils its new brand identity. It’s called “Steering the Planet to Net-Zero”, speeding up its climate action to full blown.
A key component of the firm’s net-zero goals is speed-up its community-based projects.
In fact, the company had signed an agreement with Singapore-led Vitol Asia for distribution of its cookstoves. This project will generate over 11 million carbon offsets.
Moreover, EKI incorporated its associated company – GHG Reduction Technologies Private Ltd. earlier this year. This new entity has one sole task. That’s to fortify EKI Energy’s backward integration of carbon credit supply with its green initiatives.
According to the firm, community upliftment is its core focus area. But it also focuses on providing nature-based solutions (NBS) for companies to help them reduce/offset their emissions.
For instance, it partnered with Shell Overseas and form a joint venture that boost NBS in India. It’s a $1.6 billion investment from JV over a 5-year period to develop 155 million carbon credits.
Finally, EKI announced a renewed structure in line with its net-zero commitment. This includes the establishment of four key business units:
Carbon Credit Portfolio Management,
Environmental Commodity Supply,
Carbon Project investments, and
Net Zero Services & ESG
Other net-zero initiatives by EKI Energy include:
Transitioning to renewables by using solar panels on its corporate office
Introducing its “Green Initiative” policy across business division to reduce paper waste
Introducing Cloud-based applications for reduced data/storage emissions
On top of all these, the firm will focus on its new brand-building initiatives. That includes creating awareness about carbon credits.
Shopify’s commitment to support carbon removal companies has now reached $32 million.
Shopify added nine new companies to its Sustainability Fund. This latest purchases strengthens the company’s position as the biggest carbon removal credits purchaser.
Each of the firms that Shopify had purchased from is working towards a common goal. That’s creating solutions that can make a significant contribution in reversing climate change impact.
Shopify’s new partners are from various industries. These include the following from each respective segment:
Direct Air Capture:Â Noya and Sustaera
Forest: DroneSeed
Mineralization: Carbin Minerals
Product: CarbonBuilt
Soil: Loam
Storage: 44.01
Transportation: Twelve and Remora
They’re now joining 13 other companies that Shopify’s Sustainability Fund has been supporting.
Shopify’s Carbon Removal and Reduction Portfolios
The firm’s Sustainability Fund is split into two key portfolios. These are the Frontier Portfolio and Evergreen Portfolio.
The Frontier Portfolio supports firms that remove carbon from the air and store it for the long term. Shopify is one of the large companies that’s part of the almost $1 billion Frontier fund. It has the same goal of speeding up carbon removal technologies.
While the Evergreen Portfolio funds temporary solutions like nature-based approaches and renewable power.
Here’s the breakdown of Shopify’s Sustainability Fund per carbon removal or reduction category:
Shopify had shown demand for carbon removal where there’s none before within 3 years after the creation of the Fund. More buyers are now entering the market.
Also, carbon removal companies have been scaling their development through Shopify’s funding support. In fact, they are growing their carbon removal capacity by up to 80x and increasing customers by 40x more.
Shopify’s approach on carbon removal purchases through its Sustainability Fund seems to work. It’s doubling down both current carbon reductions and permanent carbon removal initiatives.
But the company acknowledges that it can’t scale up its efforts alone. And so, its recent support of nine new companies is critical to its mission to ramp up carbon removal.
Shopify’s New Carbon Removal Partners
Here’s a sneak peek of each of the climate, tech-driven carbon removal enterprises that Shopify supports.
New partners under Frontier Portfolio:
44.01 (2,882 tons). Injects CO2 into peridotite rock where it mineralizes and stores there for good. Shopify covers the mineralization costs.
Carbin Minerals (200 tons). Optimizes carbon removal in mine tailings for net-negative emissions and metals vital for clean energy. Shopify’s funding supports expensive early testing.
CarbonBuilt (5,200 tons). Creates technology for low-cost, low-carbon concrete products like blocks. Shopify’s multi-year purchase gives a guaranteed revenue stream for concrete producers.
Noya (1,445 tons). Captures CO2 from air moved by existing cooling towers. Shopify’s funding helps Noya to scale up its technology and get more buy-in from others.
Sustaera (5,000 tons). Will create modular direct air capture tech that uses natural materials to suck in CO2. Shopify supports to hasten carbon removal technology deployment.
New partners under Evergreen Portfolio:
DroneSeed (50,000 tons). Reforests 300 acres of land ruined by wildfires in Oregon using drones. Shopify purchased DroneSeed’s biggest Climate Action Reserve-certified carbon offsets.
Loam (7,901 tons). Develops a microbial seed coating that increases carbon in soils for big CO2 removal. Shopify’s purchases help scale up technology and boost trust in soil carbon credits.
Remora (23,166 tons). Captures CO2 from semi-truck tailpipes as they drive and store it for long term. Shopify’s fund helps speed up tech adoption to decarbonize land shipping.
Twelve ($2.5M of E-Jet). Transforms captured CO2 to make E-Jet that uses fuel with an 80%+ lower carbon than fossil fuel jet. Shopify helps E-Jet adoption by commercial airlines and freight carriers.
Shopify chose these carbon removal companies using a set of criteria. These include technology and process, plans to scale, and purchases’ impact.
The company’s purchases will help those startups to speed up adoption of their technological solutions.
Stacy Kauk, Shopify Head of Sustainability, said that purchasing carbon removal credits from startups with new approaches is very essential. It’s as important as buying carbon removal from leading companies with proven technologies.
She further noted that,
“Our dollars will allow them to scale up so they can provide customers with effective and affordable carbon removal solutions… We need as many innovative companies to remove over 200 years of emissions to save our planet.”
Air Company, a carbon technology and design company, has raised $30MM in Series A funding to scale up its carbon conversion technology.
The money lining up to fund early-stage carbon removal technologies is adding up so fast. After the giant tech companies revealed their almost $1 billion fund for carbon removal startups, millions of capital came rushing in.
But what is more interesting is the value created in capturing CO2 and converting it into a product. Just like what Air Company is doing that attracted $30 million capital investment.
Carbon Direct Capital Management led the round along with other venture capital firms. These include Toyota Ventures, JetBlue Technology Ventures, and Parley for the Oceans.
How Air Company’s Carbon Conversion Technology Works
The startup makes carbon-negative alcohols and consumer products out of thin air. It does so through its proprietary technology that transforms CO2 into impurity-free alcohols.
The converted alcohol is then used to make a variety of consumer goods. Some of them are the famous ones like carbon-negative Air Vodka, Air Spray hand sanitizer, and Air Eau de Parfum.
The company is using only three key inputs to create its innovative products – air (CO2), water, and sun. It uses 9% solar energy for the conversion process and 91% wind energy to power its production.
Here’s how Air Company’s carbon conversion technology works:
With its pioneer carbon technology, Air Company made the world’s first alcoholic beverage directly from CO2, Air Vodka.
According to its CEO and Co-founder, Gregory Constantine,
“Our goal is to integrate our carbon technology into every applicable sector to help combat the climate catastrophe… We’ll do this by providing people with a beautiful range of products made from captured CO2.”
Air Company debuted in 2019 and started with its first factory in Brooklyn, New York.
Where Will The Funding Go?
The $30 million growth capital will be for building the Air Company’s third factory. This is to ramp up its carbon conversion technology and CO2-derived alcohol production.
This new state-of-the-art factory will be home for its new commercial-scale carbon technology. By far, it would be the biggest factory to date.
Such scaling up is also part of the firm’s plan to expand into the industrial and aerospace sectors. For instance, it has worked with NASA for space exploration in making sugars and proteins from its CO2-derived alcohols.
Air Company’s pioneering system seems capable of scaling up across industries. If so, its carbon conversion technology can help tackle up to 10.8% of global CO2 emissions. This is roughly more than 4.6 billion tons of CO2 removed and avoided each year.
By using captured carbon and replacing CO2 taken out the ground, Air Company aims to really have an impact in addressing climate change.
By far, Air Company is not the only carbon technology that focuses on how to use captured CO2 to make new products. There are a couple of others, too, recognized by Elon Musk’s $100 million Carbon Removal XPrize.
Examples include SkyNano that is using captured CO2 to make parts of tires and batteries. Another one is DyeCoo that uses reclaimed CO2 to dye textiles, avoiding the use of chemicals.
When these carbon tech startups mature, we can all expect to see a growing sector called “carbon to value”. This space presents a double blow of removing carbon while creating additional value.
And one way to create more value to carbon is by reusing it as an ingredient for materials like cement or consumer goods.
A lot of people and organizations nowadays consider offsetting their emissions by buying carbon credits.
Unfortunately, it’s quite hard to know which carbon credits are effective and which ones aren’t. Also, the quality and price of the carbon reduction or removal processes involved may vary a lot.
Hence, we’d like to address the confusion about this concern through this guide article. It will help potential carbon credit buyers and other people interested in the space.
Why Do We Need to Buy Carbon Credits?
There are approximately 2.5 trillion tons of carbon equivalents released into the atmosphere since humans started emitting CO2. And still, we continue to release 50 billion tons of CO2eq each year, making global warming a dire concern.
So, individual leaders and companies around the world agreed to limit warming to a critical 1.5°C.
Massive GHG emissions reductions are vital so as not to exceed such a limit. Hence, people and businesses are taking drastic decarbonization measures to reduce emissions.
But reductions alone are not enough. We still need to remove a lot of carbon from the air to prevent catastrophic climate change. This entails stopping emissions and removing at least 6 billion tonnes of CO2eq per year by 2050.
The following chart shows how the world can reach net-zero by 2050.
Source: IPCC Climate Change Report
How to Buy Carbon Credits: Compliance vs. Voluntary Carbon Markets
It’s clear that for the world to continue doing business, offsetting emissions either by reduction or removal is a must.
How do you buy carbon offsets for your personal or organizational emissions?
There are two major means to do that. You can buy carbon credits through the compliance/regulated market or the voluntary carbon market (VCM).
Compliance or regulated carbon market
This carbon market is born out of the laws mandating reductions. It’s managed by emission trading systems (ETS) such as the EU ETS.
The compliance carbon market is also called the cap and trade system that dwarfs the size of the VCM. For 2021, the compliance market value hit $851 billion while the VCM reached its target value of $1 billion.
The cap and trade system is well regulated and seems to be more stable than the VCM.
Voluntary carbon market
The VCM has been operating for many years now but it grew so fast due to the Paris Agreement, calling on drastic corporate net-zero pledges.
In fact, governments and corporations had committed over USD 14 trillion in carbon credit sales.
Entities need to do various decarbonization actions to net their emissions to zero. The most common way is to buy carbon credits that correspond to the amount of CO2 emissions reduction allowed.
For the purposes of this guide, we focus on the VCM due to its rapid growth but lack of transparency and confusion in buying carbon offsets in this market.
Purchasing Carbon Credits in the VCM
Issuance of carbon offsets in the VCM is either through the carbon reduction or CO2 removal pathway. Here are the most common pathways for both options of buying carbon credits.
Carbon Reduction Pathway:
Carbon credits issued via this pathway mean the emitted CO2 is still hanging in the air. This is because the carbon offsets include an emission avoidance relative to an entity’s baseline emission. The amount of reduction needed is based on the current total emissions.
There are different types of carbon reduction credits available right now. But here are the three major ones worth considering.
Community-based energy efficiency: bio-based energy sources like biogas and clean cooking solutions.
Renewable energy: replacement for fossil fuel energy sources (hydro, solar, wind, and geothermal).
Unlike carbon credits that reduce emissions through green projects, carbon removal is different. It sucks in CO2 from the air using different processes and stores it underground for good. Hence, the net effect is zero or even negative.
The following are the three common carbon removal types and their corresponding technologies:
Now that the major carbon reduction and removal pathways have been identified, it’s time to learn how to assess them using a set of criteria.
Criteria for Evaluating Different Carbon Credits
There are four evaluation criteria that carbon credit buyers can use to guide their purchasing decision. These are additionality, permanence, measurability, and sustainability.
Let’s break down each criterion and discuss it in detail to guide you well.
Additionality: likelihood to sell the credits
A carbon reduction or removal is “additional” if it would not have happened without the carbon credit market.
This criterion is crucial when evaluating which carbon offsets to buy. It affects the quality of a particular carbon credit. This is because buying credits to offset an entity’s own emissions may only worsen the climate if the reductions are not additional.
An essential concept when considering the additionality of carbon credits is the “likelihood to sell the credits”. It plays a decisive role in implementing the reduction/removal.
There is a catch, however, when determining the additionality of carbon credits. It’s subjective and its determination uses educated predictions only, not solid facts.
As such, deciding on this criterion is uncertain but it’s possible by considering the risk.
How likely is a specific project to be additional?
A project has no additionality if it would have occurred even in the absence of carbon credit. Conversely, it has high additionality likelihood if it will not probably be realized without the carbon credit.
By definition, most carbon removals today have high additionality as they rely on carbon credits to work.
Permanence: duration and risk of leakage
This criterion considers the fact that most CO2 emitted today will not be 100% removed later. About 25% of it stays in the air for over a hundred years.
Thus, buying carbon credits to offset emissions has one major challenge – its effects are very lasting. And so, high-quality credits are the ones that go with reductions/removals that are permanent.
For example, a carbon project that uses a forest to cut down emissions may not be permanent but temporary. This is because when a fire burns down the protected trees, the CO2 will be emitted back into the atmosphere.
Thus, duration and risk level of leakage are the key concepts when considering the permanence of the carbon reduction/removal pathway.
Projects that have no or low leakage risk and last for over a century are highly permanent. But the ones that have a high risk of leakage and effects that stay less than 100 years are temporary.
Measurability: data availability and verification
This third criterion is also important in knowing the quality of carbon credits to buy. The reported reductions must be accurate and verifiable.
In particular, overestimation of GHG reductions should not occur. Otherwise, the measurability of the data won’t be reliable.
When evaluating a project’s measurability, here are the red flags to watch out for:
Overestimation of baseline emissions (reference against which reductions are measured)
Underestimation of actual emissions (results in overestimation of reductions)
Failure to account for projects’ indirect effects or unintended increases (leakage) in emissions
Forward crediting (credits issued for future reductions; may cause over-issuance of carbon credits)
To avoid those undesirable scenarios, it’s critical that project developers track and verify their data. This calls for scientific measurement and data collection verification through standardized processes.
Projects that have no data to verify have poor measurability while those with high-quality and verified data have good measurability.
Scalability: short term vs. long term
Lastly, a carbon reduction or removal project’s scalability depends on several factors. These include CO2 removal capacity, level of readiness for deployment, and cost-effectiveness.
Take for instance the case of direct air capture, a technological carbon removal.
On the contrary, afforestation is both ready to scale and capable of removing CO2 right now. But land availability might be a problem later on. So, evaluating a project’s scalability involves the aspects of short-run and long-run terms.
Projects have high scalability score if they are scalable both in the short-term and long-term. The ones that are scalable only in the short term have poor scalability.
Unfortunately, there’s no single price per ton of CO2eq reduced or removed in the VCM like in the compliance market.
There are various factors that affect the price of credits in the VCM. The two major ones are project costs and the pathway’s value chain. The value chain aspect includes project developers, verification agencies, and the buyer.
Other key price influencers are the demand and supply dynamics. If demand exceeds supply, prices for high-quality carbon credits tend to be high.
Here is our live carbon pricing for the major compliance markets as well as for the big voluntary markets.
The Bottom Line
In summary, this guide focuses on the four quality criteria and the price of carbon credits for reduction and removal projects. These factors are very useful in evaluating which carbon credits to buy.
Yet, other considerations are to make when investing in carbon offsets. Here are some of them:
Credit availability – demand for high-quality credits is more than supply in the VCM right now
Own emission reduction goals – internal net-zero pathways
Other social and environmental impacts – nature protection and community livelihood creation
So obviously, there’s no single way to build a carbon reduction/removal portfolio. There’s a multitude of considerations to think about how and where to buy carbon credits.
But one thing to remember is that the pathways identified are all relevant for the world to be at net-zero.
It’s up to the emitter which ones are the best to invest in and be carbon guilt-free.
WINT Water Intelligence launched a data-based insights tool to help firms cut their water-related carbon emissions.
WINT provides water management and leak-prevention solutions to businesses by using AI and IoT. It caters to commercial facilities, construction sites, and industrial manufacturers.
Its solutions are particularly designed to cut carbon emissions, water waste, and water leakage.
Data-Based Application That Cuts Water-Related Carbon Emissions
WINT’s new app will aid firms to reduce their GHG emissions related to water use in buildings.
The new app gives owners, contractors, and managers vital data to track the CO2 impact of their water use. This water-waste and carbon tracking solution goes with WINT’s advanced analytics.
The resulting tool enables users to address water inefficiencies and decrease water waste. Better yet, it limits the negative impact of water supply on the environment.
The launch of this new carbon tracking app is so timely as the world is in a tight battle over climate change.
Companies across the globe have pledged their goals to be carbon net-zero by 2050. Big reductions in CO2 emissions are a must to avoid the worst effects of global warming.
WINT’s carbon-tracking app allows businesses to manage their water-related carbon emissions. It will also enable them to give stakeholders detailed information about those emissions.
The Need for Buildings to Reduce C02 Emissions
Studies show that there are 60 to 120 pounds of carbon emitted for every 1,000 gallons of water used. This translates to about 7-15 kg for each cubic meter of water.
Moreover, buildings are a primary source of water waste and CO2 emissions. In fact, the building sector contributes a total of 39% (28%+11%) of the annual global CO2 emissions.
The pie chart below represents global CO2 emissions by sector in 2020.
Source: International Energy Agency
As for its water-related carbon emissions, the building sector also contributes a lot.
For instance, a leaking toilet is approximately losing 1 million gallons of water a year. This results in around 4.5 tons of GHG emissions, which is close to a passenger car’s annual emissions.
Now, research suggests that almost 25% of water in buildings goes to waste. This involves all types of buildings (commercial, residential, and industrial). In this case, the global impact of water-related carbon emissions is so huge.
Water waste can be due to leaks, malfunctions, outdated infrastructure, and human errors.
According to WINT’s chief strategy officer, Yaron Dycan,
“Waste and inefficiency in water supply systems are so significant… But they are often an overlooked source of CO2 emissions.”
Hence, WINT’s data-based tool provides real-time alerts to tackle water inefficiencies and wastes. It does so by integrating the firm’s IoT water-flow analysis devices. It can even shut off water supplies automatically if needed.
As such, it can help owners, developers, and facility managers to cut their water use. And thus, they can also reduce carbon footprint by about 20% – 25%.
The company said that its innovative carbon reporting tool is the first of its kind. And by allowing users to pinpoint waste and keep track of water-related emissions, WINT’s new tool can help meet their carbon goals.
Tesla beat 1st quarter income expectations with more than double previous quarters’ carbon credit sales.
Tesla has been criticized for its previous years’ earnings being dependent on the sales of its carbon credits. These credit sales have been a major driver of Tesla’s profits over the years.
But since it separated reporting its regulatory credits from other sales, it showed that it’s profitable.
The carmaker revealed a big jump in its net income in its latest quarterly report. This is a plus for the company’s reputation as it managed to exceed Wall Street’s estimates. And this is amid the worst supply chain shocks hitting the entire industry right now.
Tesla’s profits on electric vehicles totaled $3.22 a share, beating the $2.27 estimates. Also, actual revenue rose to $18.8billion, higher than $17.9billion estimates.
Most interesting is its $679 million carbon credit sales. It’s more than double the prior quarter’s sales of $314 million and is even much higher than its Q1 2021 sales ($518 million). Its Q2 2021 and Q3 2021 credit sales are $354 million and $279 million, respectively.
The chart below shows Tesla’s regulatory credit sales since Q1 2021.
Tesla’s regulatory carbon credit sales account for over 20% of its profits this quarter. Tesla has warned that carbon credit sales in the future will fluctuate and decline.
Tesla’s Regulatory Carbon Credit Performance
Tesla has earned billions already through its regulatory carbon credit sales. This allows other automakers to meet emissions regulations and avoid billions in fines.
Tesla has been receiving emissions credits from various local regulations sources like California’s ZEV program. These credits are then sold which helps the company’s bottom line.
Tesla has been getting paid by other carmakers for selling its carbon credits for years whose names used to be a secret.
But a report from Bloomberg revealed two famous names. These are General Motors and Fiat Chrysler Automobiles (FCA). About how much exactly they’re buying, it’s between them and Tesla.
So far, it’s only Tesla that’s selling a lot of regulatory credits within the industry. Others even speculated that Volkswagen is also buying credits from Tesla to offset its huge emissions credit shortage in China. While others are striving to be at par with Tesla’s all-electric car production.
What Comes Next For Tesla’s Regulatory Carbon Credits?
Governments are tightening up their regulations to decarbonize the automotive industry. This is because of the urgent need to tackle climate change and the industry’s huge emissions.
In a sense, this seems to drive Tesla’s carbon credit sales further up in the coming years. Plus, the company remains the most-valuable zero-emissions vehicle (ZEV) maker by volume.
Unfortunately, other major automakers are also catching up on their own ZEVs programs. It means that they will rely less on Tesla in meeting the regulatory carbon credit cap.
For instance, Europe’s Stellantis that owns FCA (once Tesla’s biggest buyer of carbon credits) planned to sell more of its own ZEVs.
In fact, it had significant emissions reductions in 2021 with its electrification ramp-up. This involves its battery electric vehicles and low emission vehicle programs.
The European carmaker also pledged to reach net-zero by 2038 through various measures. These include energy efficiency, renewable energies, technological innovations, and carbon capture and storage.
Considering this, it appears that Tesla has to continue its efforts to have more deliveries to its customers and do better in reducing costs.
Still, will Tesla’s carbon reduction initiatives produce more regulatory carbon credits?
Tesla’s Net-Zero Strategy
Tesla’s all-electric car lineup has been helping cut down emissions in the industry. This is a big part of Tesla’s mission to speed up the transition to a sustainable energy ecosystem.
Yet, the carmaker remains less transparent of its decarbonization strategies. It still has not made any public commitment on net-zero or carbon-negative targets.
What is only shared so far is its plans to make EVs more available to consumers by using profits from new models to make subsequent models less costly.
Currently, the carmaker is providing energy generation and storage products using solar power. It also has a network of Supercharger stations for EVs across North America, Europe and Asia. These contribute to Tesla’s regulatory carbon credit generation.
But for its clear and detailed net-zero roadmap like Stellantis has, the public is still waiting for Tesla’s disclosure.
The Architecture for REDD+ Transactions (ART) approved Gabon’s application to its TREES program to create carbon credits.
The National Climate Council of Gabon submitted an application to be part of ART TREES program. It stands for The REDD+ Environmental Excellency Standard.
TREES is ART’s standard for quantifying, monitoring, reporting, and verifying emission reductions and removals from REDD+ activities at a national and jurisdictional level. It helps hasten progress in meeting climate goals in line with the Paris Agreement.
The United Nations Framework Convention on Climate Change (UNFCCC) created the REDD+ framework. It guides activities in the forest sector that reduces emissions from deforestation/degradation.
Gabon’s Application to ART TREES Program
Per TREES listing, Gabon presented its first summary on REDD+ safeguards to the UNFCCC. This information covers the period from 2016 to 2020.
Gabon’s application to ART TREES will cover its entire forest in the span of 23.5 million hectares. The historical reference period is from 2013 up to 2017 while its crediting period is from 2018 to 2022.
In connection, Gabon developed a document detailing its Safeguards Information System for REDD+ in 2020. It gathered and collated the information through a national consultation and validation process.
But the country emphasized that its system is not yet fully centralized.
Accepting Gabon into ART TREES makes the total count of jurisdictions listed to 14. While other nations that are part of the program are from Asia, Oceania, Africa, and South America.
The application process starts with submitting the registration documents. Then a third-party verification body will verify them for ART Board’s approval. Once approved, the applying jurisdiction will get its serialized TREES credits from ART.
The carbon credits produced by Gabon’s application to ART TREES are to meet its forest management agreement with Norway.
ART TREES operates within the voluntary carbon market. Within this market, projects that reduce emissions via REDD+ are the most popular.
In fact, they receive the highest prices and represent the biggest share of the market value. The image below represents this. REDD+ refers to nature-based avoidance.
Source: S&P Global
Gabon’s REDD+ Initiative Under CAFI
Gabon made a deal with Norway for $150 million of funding for forest management and conservation activities.
This agreement is under the multi-donor Central African Forest Initiative (CAFI). CAFI supports central African nations with rich forests to pursue climate goals.
In 2019, Gabon and CAFI signed a forest management agreement for a 10-year period. This results in a deal obliging the country to reduce its emissions and increase CO2 absorptions through natural forests.
The government of Norway paid an initial $17 million last June 2021 for emissions cuts in 2016 and 2017 only.
Under CAFI, Gabon was the first African nation to get payments for REDD+ efforts.
Gabon is already absorbing about 140 metric tons of CO2 a year, making it a low deforestation country. Yet, CAFI said that its payment is still not enough for Gabon to unleash its full potential to cut emissions.
This is why new mechanisms are vital to providing incentives for high forest low deforestation (HFLD) countries. And so, Gabon’s application to the ART TREES program offers a good incentive for it to maintain its forest.
Meanwhile, Gabon is creating its national REDD+ registry to track payments from various mechanisms. Also, it has a climate change law requiring that all credits created must enter the registry.
Even if issuances are from voluntary carbon standards like ART TRESS, the government still has full ownership rights to them. This is because REDD+ is an initiative made through national policies and measures.
Conversely, a similar agreement between Norway and Indonesia ended last year due to delayed payment.
The results of UNFCCC’s analysis of the application of Gabon to ART TREES will be up this year and posted on the REDD+ information hub.
South Pole, a Swiss carbon project developer, earned a Unicorn status while partnering with Swisscom.
Unicorn is a term used to refer to startup companies with a value of over $1 billion without going public. Any startup dreams to reach this valuation status and South Pole recently got it.
Carbon offset prices have increased by over 400% in the past year. This boosted the valuation of firms in the space while enticing lots of investments.
Swisscom’s minority investment in South Pole is one of them.
South Pole’s Carbon Project With Swisscom
South Pole started operations in 2006. Since then, it financed about 1,000 emission reduction projects in over 50 countries.
The company said that its founders and staff hold the majority share in the business.
After raising a couple of huge investments this year, the South Pole was able to reach more than $1 billion in value.
Some of them are from Singapore’s Temasek and the US’ Salesforce Ventures in February. And now, the climate solutions company is entering another partnership with Swisscom.
Swisscom is a major telecommunications provider in Switzerland. It took a minority investment in South Pole through a partnership on data digitization and sustainability.
World’s Largest Carbon Project Developer
In 2021 alone, South Pole closed deals to create over 60 new carbon projects worldwide. And it still aims to develop as many or more projects in 2022.
While the company also trades carbon offsets, it’s not its core business. It uses trade only when offloading surplus volumes to intermediaries.
Likewise, it trades to buy certain credits on behalf of its business advisory clients.
Shifting its focus: From trading to providing solutions
Originally, South Pole’s core business was on carbon project development. But in the recent decade, the firm managed to create a massive climate solutions business.
This involves providing advice to about 3,000 companies on how to cut down their emissions.
Renat Heuberger, the company’s CEO, said that,
“The market value was solely in the upstream 16 years ago but it began to shift to the downstream from 2012.”
Currently, each of the two businesses (creating carbon projects and providing climate solutions) takes half of the firm’s activities. So, there’s now a balance between the two income streams.
Earlier this year, the carbon project developer made two key investments that boosted its market value. It acquired Carbonsink in Italy and invested in Sweden’s GoClimate.
The present partnership with Swisscom is on climate solutions. It is to help speed up South Pole’s investments in digitization and let its clients decide on a bigger scale.
Though trading carbon is one of its business activities, the company’s aim is more than that. It plans to focus on climate solutions where long-term investments from companies are pouring in.
After all, the biggest trend right now is investing in massive carbon reduction and removal solutions.
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