Delays in China Carbon Market Expansion

The designer of China’s carbon market said that expansion into new sectors would be delayed.

China is the world’s biggest source of carbon emissions. In 2021, China’s carbon emissions were over 11.9 billion tons.

New Industries Added to China Carbon Market

Originally, big aluminum and cement producers in China would be part of its carbon market this year. But the country is going to postpone such expansion in 2023 instead.

They are most likely to start trading in China’s carbon market in 2024. By participating in the market, the sectors will meet their carbon emissions allowances.

This delay serves as another blow to the already rough beginning for China. Many consider the nation’s carbon trading system as a game-changer.

In effect, companies have to pay for their carbon emission permits. This is to reduce their carbon pollution and use more efficient fuel.

Effects of Delays in Carbon Market

Since the launch of China’s carbon market last year, it has seen less promising carbon prices. The same is true for carbon trading volumes.

Worse is that there was a crackdown on fabricated data committed by a couple of consulting firms. Regulators have to penalize them for doing such market misconduct. They shamed the companies in the public for committing data fault and negligence.

SinoCarbon, China’s leading verifying entity, is one of those firms. The company defended that they failed to identify faulty reports due to a tight schedule. Add to this the strict pandemic protocols that made the verification process harder.

Since correct data is the lifeline of China’s carbon market, data fraud must not happen again. Otherwise, it will make the expansion even more problematic.

In the meantime, the country’s officials gave a head’s up to focus on coal. This is because energy security is more important than climate issues for Beijing.

In effect, an analyst said that the country would see an increasing carbon emission. And so, it’s the environment that has to pay the price.

The Future of China’s Carbon Market

It was last July 2021 when the carbon market first launched. The carbon trading event largely included the power sector. Big companies in this sector accounted for about 40% of China’s total GHG emissions.

There’s no final date announced when the new sectors can take part in the market. Yet, market regulators expect to see them trading their carbon allowances by 2025. They are also expecting to welcome more firms from other industries.

Market leaders consider this addition essential to the success of China’s carbon market. Still, the series of delays in expansion can also postpone the market’s effectiveness.

In fact, power companies traded only 179 million tons of emissions in 2021. This is very low in comparison with the 4.2 billion tons given to them. Also, the price per ton of carbon emission is too low in China compared with Europe.

So, with very few market players, it will take years before it can help China reduce its carbon emissions.

Singapore and Indonesia Carbon Trading Deal

Singapore and Indonesia have entered into a Memorandum of Understanding (MoU) regarding climate change and carbon credits. 

Currently, Singapore is the center of commodity trading in Asia. Indonesia is among the biggest carbon credit suppliers in the region. It is also home to one of the earth’s biggest rainforests. 

The agreement between the two countries allows them to collaborate on carbon-related projects. Through the deal, they can create projects that boost international carbon markets. As a result, it helps them meet their carbon emission reduction goals. 

Tidbits of Singapore and Indonesia Carbon Trading Deal

The MoU will boost cooperation between Singapore and Indonesia in four major areas:

  • Carbon pricing and markets
  • Nature-based solutions and ecosystem-based approaches
  • Clean technologies and solutions
  • Green and blended finance 

As for blended finance, it refers to a combination of capital sources supporting sustainable projects. Their carbon trading agreement includes developing pilot projects in those areas. It also involves research collaborations and technical exchanges. 

The deal will support research financing solutions in several areas of the industry. These include carbon credit projects, carbon capture and storage, and regional decarbonization.

What The MoU Will Entail

Representatives from both countries show commitment to promoting the goals of the MoU. As proof, they have issued a joint statement that seals their pledge. There will also be annual ministerial meetings and a bilateral Working Group. 

Many stakeholders are involved in Singapore and Indonesia’s carbon trading deal. But government agencies are taking the lead.

For Singapore:

The tie-up will bring more jobs and growth opportunities to Singapore. Also, it will provide greener solutions for a sustainable future. The minister said that it would help the nation achieve its net-zero goals by 2050

For Indonesia:

The success of the MoU will advance Indonesia’s Blended Finance Alliance. It has been developed through the G-20 framework which Indonesia is the leader. Its major task is to gather funds for climate change and UN SDG-related projects. 

The pooled funding offers capital for Indonesia’s environmental rehab and restoration projects. The funds will also support the replacement of coal-fired power plants in Indonesia. They will be replaced by renewable energy sources. 

What to Expect

Under this agreement, Singapore and Indonesia are expected to work closely. Their exchanges on carbon trading and carbon pricing are promising. 

Singapore stated that their carbon tax for one ton of carbon emission will increase a lot. So, from $5 this year, it will become $80 by 2030. Likewise, Indonesia has regulations on carbon emission prices and trading carbon. 

SEC Proposed Rule on Carbon Emissions Disclosure

The U.S. Securities and Exchange Commission (SEC) is proposing that all public companies report their carbon emissions.

In general, it will increase the reporting transparency of public corporations. It will help investors know more about how climate risks affect their investments.

What to know about the new rule?

One major mandate is that companies disclose both their Scope 1 and Scope 2 emissions. The same goes for their Scope 3 emissions, if “material”.

Some firms have announced their carbon footprint reduction pledges already. The SEC will mandate them to share how they would achieve such commitments. If corporations set their own carbon price, the SEC will demand them to report about it.

Climate activists are vigilant on carbon offsets strategy for reducing carbon emissions.

How would this impact public companies?

Most companies are already disclosing their carbon emissions in their annual sustainability reports. But significant discrepancies remain.

The former SEC chair Schapiro noted that there are still many big companies that won’t do it unless it’s mandatory. The present SEC chair said that both companies and investors would value the new law.

Companies will need help from climate tech experts for their climate risk reports. This is good news for carbon accounting due to increased carbon emissions reporting.

How important is the disclosed information?

According to SEC, it is the investors that pushed them to draft the rule. They demand better and more transparent climate risk information disclosure. This is because climate change disasters impact the environment.

Likewise, climate risks are also becoming essential for investors to make informed decisions. The information will also show which companies commit to reducing their carbon footprint. The public and investors can put pressure on businesses that are true to their words, not actions.

This rule will make the SEC the leading enforcer of climate-related financial disclosures. The draft proposal will be more likely finalized before this year ends.

For a full overview of the proposed changes Click Here.

 

 

Zero-Methane Emissions Initiative launched by OGCI

Zero-Methane Emissions Initiative launched by The Oil and Gas Climate Initiative (OGCI). The plan is to reach zero methane by 2030.

Bjorn Otto Sverdrup, OGCI Executive Committee Chair, said, “We are calling for an all-in approach that treats methane emissions as seriously as the oil and gas industry already treats safety: we aim for zero, and we will strive to do what is needed to get there.”

OGCI feels removing methane gas from upstream oil and gas will help meet Paris Agreement goals.

Who has committed to the Zero-Methane Emissions Initiative?

Many oil and gas companies have committed to OGCI’s initiative. CEOs across Aramco, BP, Chevron, CNPX, Eni, Equinor, ExxonMobil, Occidental, Petrobras, Repsol, Shell, and Total Energies have signed on.

Per Sverdrup, “We encourage all oil and gas companies to join us in this approach.”

According to the Zero Methane Emissions Initiative, the oil and gas industry can (and should)ane emissions.

To accomplish this, signatories will be transparent. This means they will annually report on their emissions. Companies will also set targets, develop new technology, raise awareness, and improve practices.

These four steps have decreased methane emissions by 30% since 2014!

“We recognize that eliminating methane emissions…represents one of the best short-term opportunities for contributing to climate change mitigation,” said OGCI Chair Bob Dudley.”

What else is the oil and gas industry doing?

First, the oil and gas industry has invested heavily in new tech. Second, the oil and gas industry buys carbon offsets.

Companies buy carbon offsets on the Voluntary Carbon Market (VCM).

One metric ton of carbon equals one carbon offset.

So, when a company buys a carbon offset, they basically “neutralize” one metric ton of carbon. How? Through an environmental project.

Since offset purchases benefit the oil companies and the farmers and landowners completing these projects – it’s a win for all.

Dudley went on to say, “The time has come for us to go further, and we believe that the oil and gas industry can and should lead this effort.”

Carbon Credit & Sustainable Asset Stock Exchange to Launch in Rio

Rio de Janeiro is launching a stock exchange for carbon credits and sustainable assets. Rio signed a protocol of intent Tuesday with the Nasdaq and Global Environmental Asset Platform (GEAP).

Rio’s goal is to have a leading role in the green economy. Once approved, they hope to have their Environmental Assets Exchange running soon.

According to Carlos Alberto Reis, former president of the Rio de Janeiro Stock Exchange (BVRJ), the partnership with Nasdaq is “very positive news.”

Ricardo Nogueira, director of the Union of Securities Brokers and Distributers of Rio de Janeiro, agreed.

“Having an environmental asset exchange headquartered in Rio is very good, both economically and institutionally for Rio de Janeiro.”

According to Governor Castro, the government team has worked on this agreement for nearly eight months. The goal is that the carbon stock reaches 73 million tons (or $25 billion).

The importance of carbon credits.

Countries that have reduced their emissions sell carbon credits to other counties that haven’t.

Simply put, one carbon credit is equal to one metric ton of carbon.

While carbon credits aren’t the only way countries can take the necessary steps to fight climate change, it’s a start. Nations typically use any profits to reduce greenhouse gas (GHG) emissions – like reforestation or cover crops.

Rio de Janeiro believes this will help the environment create domestic and international jobs.

According to Secretary of State for Finance Nelson Rocha, “We are going to create a favorable environment for this expansion to take place in the coming years. We want to make Rio a hub (base) for investments in environmental assets.”

Currently, 31% of Rio has natural forests. They expect to increase that coverage by 10% by 2050 by investing $410 million into reforesting projects.

This program will create more than 5,000 jobs.

Rio is actively working towards carbon neutrality – with the goal of 2045.

Net-Zero Framework for Malaysia to be Released this Year

Net-Zero Framework for Malaysia to be Released this Year.

According to Datuk Seri Mustapa Mohamed, Malaysia’s Prime Minister of Economic Affairs, Malaysia is discussing details.

As such, Malaysia is exploring a voluntary carbon market and carbon tax. They are also exploring incentives to expand green technology.

“The details will be out hopefully sometime this year, and that should give us a clearer picture,” said Mustapa.

Malaysia’s ESG goals.

Malaysia wants to reach 30% renewable energy capacity by 2025. They also plan to keep 50% of the nation’s land area as natural forestry.

Their ultimate goal is to reach net-zero emissions by 2050.

Mustapa went on to say that lowering Malaysia’s carbon footprint won’t be easy. However, “To enjoy the benefits of a low carbon path, developing nations such as Malaysia must accelerate its transition to a greener future.”

Malaysia’s Securities Commission is also hoping to drive ESG objectives.

“There have been some positive developments in terms of our ESG compliance as companies have started to realize the importance of ESG,” said Mustapa.

Global net-zero goals.

In 2021, global investments in sustainable funds rose by 53% and totaled $2.7 trillion.

The Voluntary Carbon Market (VCM) boomed as well. Some experts believe it could reach $100 billion by 2030. That’s up from just $300 million in 2018! What’s great about the VCM is that it is open to businesses, non-profits, and individuals alike.

Each offset purchased on the VCM equals one metric ton of carbon “neutralized” through an environmental project.

Though carbon offsets are not the only way to meet net-zero, they certainly play a part. Combine offsets with technological advances, increased regulation, and environmental investments and the future is looking, well – green!

The FTSE4Good Bursa Malaysia Index (which has strict ESG criteria) has over 80 companies.

That figure is up from just 24 in 2014.

So, it appears that companies in Malaysia are on board, too.

Carbon Capture and Sequestration Project Receives $250M in Funding

Summit Carbon Solutions is taking the lead for the most significant carbon capture and sequestration project of its kind – anywhere in the world.

To make this project a reality, Continental Resources has committed $250 million. This will help to fund the project’s development and construction. The funding will happen over the next two years.

How will this carbon capture and sequestration project work?

The focus of Summit Carbon Solutions will be to capture carbon from 31 ethanol plants. Once captured, the CO2 will be transported through pipelines underground in North Dakota. It will then be stored deep within the earth.

Right now, the project is taking place in Iowa, Nebraska, Minnesota, and North and South Dakota.

Currently, the project will capture over 8 million tons of CO2. However, the project does have a capacity for 12 million metric tons of carbon.

Since it started, Summit Carbon Solutions’ goal is to help ethanol become a net-zero carbon fuel.

“This project will be transformational for the ethanol and agriculture industries and will have a substantial economic impact across the Midwest,” said Bruce Rastetter, CEO of Summit Agricultural Group.

Continental Resources agrees. Its CEO, Bill Berry, said, “Carbon capture will play an integral role in helping reduce global emissions.

“We believe Summit Carbon Solutions has the most capital efficient project to further this goal.”

Summit and Continental should release more information about the project soon.

Per Rastetter, “We have engaged with governors and leaders in all five states involved in the project and are grateful for the exceptional leadership and commitment from each to this initiative.”

“Continental Resources has been in North Dakota for over 25 years. As the state’s largest leaseholder and producer, no company knows the geology better than we do,” said Continental Resources Founder and Chairman Harold Hamm. “We are grateful to North Dakota’s leadership, who has been laying the groundwork for a project like this and leading sequestration for nearly 20 years.”

Carbon Offsets Being Used by Oil & Gas to Decarbonize

Carbon offsets are helping oil and gas companies meet emissions goals.

More than 130 countries have pledged to reach net-zero by 2050. That covers almost 88% of the world’s emissions!

Unfortunately, the oil & gas industry is the most significant polluter. They inject millions of metric tons of carbon into the atmosphere each year.

So, what can the oil & gas industry do?

In addition to investing in new technology to reduce carbon emissions, the oil and gas industry has started to use carbon offsets.

What are carbon offsets?

The Voluntary Carbon Market (VCM) is where companies buy carbon offsets. One carbon offset is equal to one metric ton of carbon. That metric ton of carbon is then “neutralized” through an environmental project.

So, for every carbon offset purchased, one metric ton of carbon is balanced (because of something like reforestation or cover crops – projects that serve as a way to capture carbon).

The VCM has grown substantially over the past year.

Currently, the VCM has a value of $1 billion. This is up from just $300 million in 2018.

Many experts believe the VCM could hit $100 billion by 2030.

The reason why? More and more businesses, non-profits, and individuals alike recognize the role offsets have to play in the fight against climate change.

The oil & gas industry sees an opportunity.

Companies can earn extra revenue for environmental projects by partnering with project developers to develop different projects and produce high-quality offsets.

BP and Shell have started to move into this space. And Eni, TotalEnergies, and Chevron have also begun to move into this space.

While carbon offsets cannot be the only means for the oil and gas industry to lower emissions, it undoubtedly plays a significant role.

As companies take additional steps to improve processes and invest in technologies that reduce or eliminate carbon, net-zero by 2050 starts to seem possible.

Fear, Fire, Foes – and Carbon

How’s this for a week-ending down note: in addition to war in Europe, we could lose the Amazon rainforest, one of the world’s largest natural carbon sinks and a major source of nature-based carbon offsets on the VCM.

More info below.

Rainforest Tipping Point

The rather alarming outlook for the Amazon comes by way of a decades-long study. The concern is that the entire ecosystem is nearing a tipping point, after which even natural disasters – such as fire – can cause irreparable damage to the broader system.

Nothing’s set in stone, of course, and predicting the future of entire ecosystems is notoriously difficult. The concerns for the Amazon are real, however.

Nature Loses, Europe Gains

Could the previous news item have influenced this one? Hard to prove directly, but the facts themselves are straightforward: nature-based carbon offsets had a tough week. Tuesday saw a brutal 16% drop, one of the largest single-day losses, for the leading Nature-Based Carbon Price NGEO. Exact causes for the drop are unknown, but likely due to a combination of bad news on the climate change front and the looming threat of a western recession.

On a more positive note, the EU ETS price gained 17%, the largest single-day gain ever. That still wasn’t enough to entirely offset the massive 30% drop which occurred after the start of the Ukraine-Russia war, but it highlights the ongoing demand for carbon offsets in the midst of political turmoil and an ongoing energy crisis.

Booming Markets: China Edition

The establishment of China’s own cap-and-trade system was big news for the global carbon market. Now, the program is poised to get even bigger. A recent survey indicated that a number of new sectors are set to join the market, including:

  • Cement
  • Steel
  • Petrocarbon
  • Aviation

That’s not an exhaustive list. As more industries join the scheme, demand for carbon credits will rise, pushing prices higher. Just how high is an open question, but some experts estimate a potential 78% increase by 2025. That’s quite a rapid rate of growth, but it makes a bit of sense: the scheme has only been open since July, but it reported a cumulative trading volume of 186.7 million tonnes in February.

Xpansiv Goals

300% increases in revenue year-on-year are always noteworthy. It’s no surprise that those gains mark an industry leader, whose platform hosts 90% of all transactions on the VCM globally.

And yet, Xpansiv is soon set to get even bigger.

Ahead of its Australian IPO, Xpansiv is raising capital and pursuing M&A. There’s an estimated $2 billion market capitalization looming for them. The best sign? The VCM is set to grow just as quickly as Xpansiv, keeping the gains coming (potentially).

There are billions of dollars at play on the VCM. Xpansiv is aiming for its share and more.

Carbon Fact of the Day:

The Amazon rainforest stores around 123 billion tonnes of CO2, both below and above the ground. That makes it easily one of the largest terrestrial carbon sinks on the planet. More alarmingly, however, some parts of the Amazon have already begun to emit more CO2 than they absorb. This is mostly due to deforestation and burning.

Carbon Farming: Multiple Approaches for Carbon Offsets

Oil and gas producers. Heavy industry. Planes, trains, and automobiles. 

Farming?

The list of the leading sources of CO2 emissions includes one that most people probably wouldn’t put on the list. After all, what does farming have to do with climate change?

Modern Farming: A CO2 Factory

Growing crops, by itself, doesn’t cause any harm. In fact, growing plants of almost any kind are basically practicing small-scale carbon sequestration. That’s because plants use photosynthesis to combine energy from the sun, CO2 from the air, and minerals from the ground to build their basic structure. In doing so, plants form part of the carbon cycle.

When they die, the carbon-based structure of the plants starts to decay. Some of that CO2 is released directly into the air, and some of it can be trapped underground. Grasses and other fast-growing plants extract CO2 quickly and tend to release it quickly when they decompose; trees, like giant hardwoods, can take much longer both to sequester and release carbon. 

carbon farming

So far, so good. Farming relies on growing crops regularly and rapidly – good news for CO2 emissions, right?

Unfortunately, not so much. Industrialized, modern farming employs a number of practices that result in net CO2 emissions. Carbon farming is less of a set of specific practices and more of a broad-level approach to land use.

Multiple Definitions of Carbon Farming

There are a number of approaches that can broadly be referred to as “carbon farming.” Some of them have relatively little to do with agricultural production.

In a very general sense, carbon farming can be thought of in two ways: farming carbon and carbon-friendly farming. 

This article deals primarily with the latter – reducing atmospheric carbon emissions by employing a basket of climate-friendly practices. Both kinds generally deal with agricultural land use reform and changing agronomic practices.

A recent study commissioned by the EU identified five general categories of carbon farming practices that can apply variously to both kinds of carbon farming:

  • peatland rewetting and restoration
  • agroforestry
  • soil organic carbon (SOC) enhancement 
  • livestock and manure management
  • nutrient management on croplands and grasslands

Each category holds immense potential for carbon offsets and credits on the broader carbon market, as well as a range of co-benefits. 

Carbon farming categories

Making Agricultural Carbon-Friendly

Modern agriculture relies on growing crops rapidly, intensively, and repeatedly. In major grain-producing centers, that might look like uniform acres of wheat or corn. In less developed countries, it might mean farmers routinely burning off old crops to prepare fields for new planting.

Both large- and small-scale intensive farming emits more CO2 than it locks away. Carbon farming tries to reverse that trend.

Some of the changes carbon farming brings are fairly simple. Mulching old crops, rather than burning them, locks away carbon in the soil. Reducing or eliminating tilling keeps that carbon underground for longer. No one practice reverses the CO2 emissions entirely; instead, carbon farming aims to use a basket of approaches to achieve crop production that removes atmospheric carbon.

Benefits and Co-benefits of Carbon Farming

Most carbon offset projects feature the concept of co-benefits – side-effects of the project that are beneficial in ways beyond direct CO2 removal. Carbon farming relies even more heavily on co-benefits than most offset projects.

Carbon farming initiatives such as advanced mulching offer the potential to improve overall soil health. Organic matter in agricultural soils increases with carbon farming. That provides a direct boost to the carbon cycle, but also boosts insect presence and soil organic carbon (SOC), both necessary for healthy soils.

The use of advanced crop rotation and cover crops also provide co-benefits. They may boost biodiversity through increased cover for birds and margin-loving animals. They can also reduce soil erosion as part of a set of agricultural practices aimed at being both productive and environmentally friendly.

Broadly, carbon farming fits under the umbrella of regenerative agriculture; practices designed to make carbon farming more eco-friendly. In some cases, that may also mean changing land use patterns altogether, such as restoring native forests or wetlands. 

Verification and Regulation – A Familiar Problem

Carbon farming faces a number of challenges. Verification and regulation are among the biggest ones. Because carbon farming relies on a number of overlapping approaches, measuring total carbon sequestration and removal becomes increasingly difficult.

Current practices involve estimating the maximum mitigation potential for a given environment and then enacting practices to meet that potential. 

Selling carbon credits on the Voluntary Carbon Market VCM requires measuring exact mitigation, and that poses a problem for carbon farming offsets. In some cases, modeling offset reductions can be used alongside measurement to help give a better picture.

Emerging Issues with Carbon Farming

The voluntary carbon market itself is growing by leaps and bounds. It stands to reason that carbon farming, like all sectors within the VCM, faces its own set of emerging issues. 

Leakage

Leakage occurs when carbon gains in one area are offset by carbon losses in others. Think of leakage as the opposite of co-benefits; practicing no-till farming, for instance, might lead to increased clearing of woodland or wetlands to offset any production loss. Preventing leakage requires carbon farmers to clearly analyze the carbon sequestration potential of any approach they take.

Costs

Not all farming initiatives are created equal. It brings with it two costs which vary between approaches.

Like all climate change mitigation approaches, carbon farming imposes monetary costs. Those costs can be passive: restoring wetlands can take away opportunities for a cash crop. Approaches like no-till farming might also require increased human activity and labor costs. In both cases, achieving climate benefits comes at a real-world cost.

Carbon farming brings the added cost of impacting agricultural productivity. That could include reduced crop yields or, in the case mentioned above, loss of land available for food sources.

Application

The impacts of climate change are felt unevenly; the suitability of CO2 farming approaches is similarly uneven. Degraded soils might not be compatible with some techniques.

Soil carbon sequestration methods may work better with some geographies than others. In some cases, farmers and carbon offset projects need to carefully consider how various carbon sequestration techniques will impact food security and the broader food chain.

Potential

In the EU alone, estimates indicate that carbon farming as a basket of approaches has the potential to mitigate between 9-13% of total EU CO2 emissions, a significant percentage. That maximum mitigation potential positions carbon farming as a key growth sector in the VCM going forward.

The fact that carbon farming applies unevenly may also be a benefit in the short term. Since some aspects can be adopted and measured more easily, there’s an incentive to monetize carbon farming on the VCM quickly. Carbon farming approaches can also satisfy the need for immediate action on climate change and a demonstrable climate impact. 

In short, the very fact that carbon farming means a number of things to different people also means that it is poised to be a key growth sector in the VCM. It can offset potentially huge amounts of atmospheric carbon dioxide, provide immediate climate benefits, and satisfy the continued demand for carbon offsets