The Importance of Blue Carbon Credits

Simon H
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The Importance of Blue Carbon Credits

What is Blue Carbon?

Blue carbon credits are created by the growth and conservation of carbon-absorbing plants, such as mangrove forests and their associated marine habitat.

Blue Carbon refers to the carbon stored in coastal ecosystems like mangroves, seagrasses, and salt marshes.

These ecosystems cover just 1% of the ocean floor but can store up to 10 times more carbon per unit area than terrestrial forests.

Blue Carbon is so-called because it is stored in marine or coastal living organisms and the sediments beneath them.

Blue Carbon ecosystems are vital for the health of our planet. They not only store carbon but also provide essential services such as water purification, coastal protection, and habitat for marine life.

Over the past decade scientists have discovered that seagrass meadows, tidal marshes and mangrove forests are among the most intensive carbon sinks in the world. This means blue carbon offsets can remove enormous amounts of greenhouse gases.

A blue carbon offset project should have its carbon credits trade at a premium.

This is because of the large positive second-order effects such as the positive effects on corals, algae, and marine biodiversity (e.g. sharks, whales, sea turtles) that have been so negatively impacted by activities such as over-fishing and farming.

  • Mangroves Store 10x more carbon than terrestrial forests (Source: Kauffman et al, 2018)

Yes, forests can grow in the ocean. Examples include the mangrove forests in sea bays, such as Magdalena Bay in Baja California Sur, Mexico.

Blue Carbon Marvivo Bay Mexico
Image: MarVivo Magdalena Bay Project

Mangroves are trees (about 70 percent underwater, 30 percent above water) that have evolved to be able to survive in flooded coastal environments where sea water meets fresh water and the resulting lack of oxygen makes life impossible for other plants.

  • Mangroves cover just 0.1% of earth’s surface (Source: FAO, 2003)

Mangrove trees create shelter and food for numerous species such as sharks, whales, and sea turtles. Mangrove forests are a valuable marine ecosytem.

Second Order Effects of Blue Carbon Credits

Other positive second-order effects of mangrove forests include their importance as a pollution filter, reducing coastal wave energy and reducing the impacts from coastal storms and extreme events. Blue carbon systems trap sediment which support root systems for plants. This accumulation of sediment over time can enable coastal habitats to keep pace with rising sea levels.

All this can be calculated into insurance premiums, and lower-cost premiums are good for business and residents. These are all free second-order effects. To put it in perspective, natural disasters and extreme weather events created over $270 billion worth of economic losses in 2020. It is absolutely in the best interest of citizens and insurance companies to mitigate the effects of climate change.

Coastal wetlands and mangrove forests will become an ever-increasing sector for carbon credit generation. That is because mangrove forests and coastal wetlands sequester carbon at a rate that is up to ten times greater than mature tropical forests.

Because the carbon is sequestered and stored below water in aquatic forests and wetlands, it is stored for more than ten times longer than in tropical forests.

  • The significant positive second-order effects attributed to each blue carbon credit are why many investors believe it will trade at a premium to other carbon credits.

Blue Carbon and the Food Footprint

There is a land-use carbon footprint of 1440 kg CO2e for every kilogram of beef and 1603 kg CO2e for every kilogram of shrimp produced on lands formerly occupied by mangroves. A typical steak and shrimp cocktail dinner would burden the atmosphere with 816 kg CO2e.

It is estimated that over 1 billion tons of carbon dioxide is released annually from degraded coast ecosystems.

There are around fourteen million hectares of mangrove aquaforests on earth today and they’re under attack by the deforestation practices caused by intense shrimp farming

Are the shrimp you eat part of the problem? Soon, these shrimp will be labeled, and consumers will know and be required to cover the offset costs for the environmental damage.

To put things into perspective, 14 million acres of wetlands will absorb as much carbon out of the atmosphere as if all of California and New York State were covered in Tropical Rainforest.

Think of Blue Carbon as the “high grade” gold mine at the surface.

With the economic value of Blue Carbon credits and the technology that will enable Carbon Rangers to preserve forests and wildlife, expect entrepreneurs to expand the Carbon Ranger program to mangrove forests across the globe. This will be a step forward and a small part of solving the climate emergency.

These are just a few of the examples of how carbon credits will be created to enhance stakeholder capitalism.

The percentage of blue carbon credits trading in the Voluntary Carbon Market (VCM) is still uncertain, but current trends suggest they are set to grow and establish themselves. Investing in blue carbon credits can be more challenging compared to other types of credits, primarily due to the market’s nascent and evolving nature.

However, this also presents an opportunity to support and shape the development of this emerging market. Investing in blue carbon credits not only contributes to environmental goals but also helps accelerate the establishment of a new and impactful sector.

Oceanic Blue Carbon

In addition to coastal blue carbon mentioned above, Oceanic blue carbon is stored deep in the ocean within phytoplankton and other open ocean biota.

The infographic below shows the typical blue carbon ecosystem

Blue Carbon Infographic
Source: Natural Carbon Sinks: Blue Carbon ecosystems in climate change mitigation, 2021

There are many factors that influence carbon capture by blue carbon ecosystems. These include:

  • Location
  • Depth of water
  • Plant species
  • Supply of nutrients

Improving blue carbon ecosystems can significantly improve the livelihoods and cultural practices of local and traditional communities. In addition, restoring blue carbon regions provides enormous biodiversity benefits to both marine and terrestrial species.

– CarbonCredits Editor

 

Carbon Credit Winners

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Carbon Credit Winners

Cryptocurrency gets all the airtime. Pundits argue over whether or not it counts as a “real” currency, while others wax eloquent on the potential uses of blockchain technology in daily life. Bitcoin rises, Bitcoin falls, and altcoins dominate the airwaves.

But lost in the crypto mania is the fact that cryptocurrencies might not even be the hottest emerging market today. That honor falls to something far less glamorous but more far-reaching.

The Law of Unintended Consequences

Carbon credits were hotly debated for years. They still are, but then something unexpected happened.

Governments went forward with a handful of headline programs. Sometimes these were national, like Canada’s, or international, like the EU’s. But for all the fervour over these initiatives, the market did something no one really expected.

It set up its own carbon trading schemes.

These private markets are growing rapidly, right alongside the regulatory programs. Combined, the twin carbon markets have created a new wave of carbon credit winners and losers. This week, we’ll look at the institutions making the most of both kinds of carbon markets.

California

California’s ETS began in 2012. In 2020, it collected $1.7 billion in revenue. That figure doesn’t include credits resold between companies; the actual amount of money changing hands was far higher.

California touts the program as an unmitigated win. $14 billion raised over the lifetime of the program, with billions of dollars reinvested in various climate initiatives. The state claims an overall 13% reduction in carbon emissions  during the lifetime of the program. The state’s economy grew overall during the same period. It’s tough to argue that the two are completely unrelated. Overall emissions reductions involved other factors as well, but the cap-and-trade program played a significant role.

So far, California is a clear carbon credit winner. The bottom-line cost of the program to the consumer is a different story, but the initial success of California’s cap-and-trade means that the program will be a model for other states.

Farmers (at least the big ones)

Trey Hill is a clear carbon credit winner.

To be more specific, Trey Hill made $150,000 for carbon sequestration in his 10,000 acre Maryland farm.

Now, not every farmer will be Trey Hill. He found himself at a lucky intersection. Hill uses old no-till farming methods like planting root crops and cover crops to naturally loosen and protect the soil. His experience led to his being approached by Nori, a Seattle-based startup selling carbon credits.

Nori sold credits for Hill’s carbon sequestration farming methods. In the end, Hill received $15 per tonne of carbon locked away in the ground due to his farming practices, and he came away with an extra $150,000.

Not every farmer will be Trey Hill, but his case is evidence that for innovative and unusual farmers, there will be ample opportunities in the voluntary carbon credit market.

Tesla

Carbon credits made Tesla profitable – not electric vehicles.

Shocking? Perhaps, but there’s no getting around the fact that Tesla walked away with a little over $1.79 billion in carbon credit revenue in 2023.

That’s a full six quarters of profitability, in large part due to ZEV credit.

That ZEV credit is arguably the capstone of California’s cap-and-trade program. Every car maker who sells vehicles in California needs to sell a certain number of Zero Emissions Vehicles; if they don’t sell enough, or if those sales are outweighed by internal combustion engine vehicles, then they need to purchase additional ZEV credits.

So if you’re Tesla, and you sold an estimated 60,000 vehicles in 2023, then you could be sitting on an accumulated pile of ZEV credits.

And by selling those credits, Tesla has powered its way to profitability.

As other car makers roll out their own EVs, Tesla’s margin for massive ZEV credit sales will diminish. But in the meantime, Tesla is a clear winner in California’s carbon credit market.

Voluntary Credit Markets

Nori and GoldStandard allow individuals to purchase carbon credits directly. Each offers a carbon footprint calculator – you can plug in your information and instantly see exactly how much carbon you need to purchase to offset your lifestyle.

Nori was behind the success of Trey HIll’s carbon credit sale, and they’re not alone. These third party carbon credit brokers open the door for individuals to get in on the action. The size of the carbon credit industry is only set to grow from here. Brokers like Nori are set for rapid growth.

There’s another kind of private credit broker as well. Companies like Verra facilitate investment in climate-friendly projects and sell carbon offsets in bulk to corporations and large-scale investors. These brokers also serve as gatekeepers, verifying the quality and effectiveness of the carbon credits they sell.

A quick glance at any of the projects in the offing through these brokers shows just how expansive the carbon credit market is:

  • Carbon sequestration through no-till farming in the USA
  • Wind power projects in India
  • Hydroelectric power in Honduras
  • PET recycling in Romania

That’s a global project list with implications for everything from green energy to agriculture.

And it makes the voluntary market itself the biggest winner of the carbon credit movement.

Next time we’ll look at some of the carbon credit losers, and see what lessons we can glean from their misfortune.

 

Carbon Credit Losers

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Carbon Credit Losers

Combine regulatory carbon credits and voluntary carbon offsets, and you’ve got a brand-new market with explosive potential. But not everyone can, or will, profit from the new markets.

The irony is that many of the carbon credit losers are entities that should seem like a perfect fit for any planet-friendly initiative. Instead, these seemingly-obvious carbon winners are actually losers. Let’s look at the list.

Farmers (small ones)

In the last article, I told you about a farmer who won big due to carbon credits – $150,000 big. But that farmer had a secret ingredient that the vast majority of American farmers simply don’t have.

His farm was a 10,000 acre farm.

The trick is that carbon credits aren’t actually that expensive right now on the voluntary market. His credits sold for a little over $15 a ton, and he sequestered about 8,000 tons of carbon.

The math simply doesn’t work for smaller farms. That means that one prime candidate for the carbon credit movement will likely get bypassed entirely – organic farms.

That’s right. Organic, carbon-conscious farms that go out of their way to be planet-friendly will likely miss out on carbon credits . . . which are designed to reward carbon-conscious companies that are planet-friendly.

Most organic farms simply aren’t big enough to compete for carbon credits at scale. They don’t have enough acreage to hold much interest for the third-party exchanges who coordinate carbon sales. The average size of an organic farm in the US is 285 acres. That’s even less than the average size of a regular farm, at 444 acres.

And it’s less than 0.03% of that 10,000-acre farm that won big. Apply the same percentages to the original $115,000 amount, and your average organic farm in the USA would be eligible to receive roughly $3,500 in carbon credits for projects that are often multi-year undertakings.

Those small farms stand to gain pennies, if anything, while larger corporate farms gobble up the credits. That makes small, organic, low-carbon-emissions farms into carbon credit losers.

Nuclear Power Plants

Nuclear is the obvious answer to so many emissions problems. Need something that will efficiently replace all your natural gas and coal power plants? Go nuclear. Want to provide lots of both blue-collar and white-collar jobs? Go nuclear.

And yeah, want an energy source that is nearly greenhouse gas free? Go nuclear.

But nuclear power suffers from heavy regulations and an incredibly lengthy construction time – from 7-8 years to well over a decade, depending on the country and size of plant.

And with all the emphasis on cutting emissions NOW, nuclear plants will lose out.

Who will buy nuclear carbon credits when they can buy credits from a wind farm or a water reclamation project? Especially when those projects can be ready in a matter of months or a couple of years.

Large nuclear energy plants are a carbon credit loser.

Oil And Natural Gas Companies

Media tends to focus on the continuing massive demand for oil, and then panic that the global economy will never wean itself off fossil fuels.

The fact is, oil and natural gas is already suffering a slow death by a thousand cuts, and carbon credits are one of them.

On the voluntary market, carbon credits are a way for consumers to directly reward renewable energy companies. Think of them as a free-market subsidy, providing an extra income stream for green energy producers. Fossil fuel companies will have to compete with green energy companies that are increasingly profitable and can scale up quickly.

And it isn’t just the carbon credit issue. Automobile companies, under both market and government pressure, are building more electric vehicles and fewer internal combustion engines. Governments like the EU and the UK are taking steps to ban the sale of new internal combustion engine cars as early as 2030, forcing companies to make the shift to electric.

Electric cars are just the tip of the iceberg. Electric cars paved the way for the same technology to be used in boats. As that technology scales up, the demand for fossil fuels will slowly but steadily decrease.

And all along the way, carbon credits will go to green energy initiatives and emissions-reducing projects. Fossil fuel companies will largely lose out on the carbon credit bonanza.

Transparency (at first)

Carbon credits are a new frontier for investors and startups alike. The voluntary carbon offset market is especially wide-open. Right now, nearly any earth-friendly project can start to look like a legitimate offset.

But not all carbon offsets are created equal. Without an external regulator to weigh the impact of one project against another, entities purchasing carbon offsets rely on the trustworthiness of the third-party vendor.

In these early days of the carbon offset markets, there’s less transparency, and less of a chance to accurately determine good projects from bad ones.

As entities develop better metrics to track the effectiveness of carbon offsets, transparency will improve. But for the short term, until the markets adjust, transparency is a carbon credit loser.

Every emerging market opens new vistas to investors.

Find the peaks.

Avoid the valleys – don’t be a carbon credit loser.

 

When to Purchase Carbon Offsets

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When to Purchase Carbon Offsets

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

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

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

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

carbon credit lifecycle

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

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

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

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

Offset Type Development

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

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

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

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

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

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

Purchasing carbon credits at this stage is risky:

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

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

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

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

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

Offset Methodology Selection

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

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

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

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

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

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

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

Offset Project Inception: Project Planning, Validation, and Registration

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

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

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

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

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

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

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

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

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

Offset Project Implementation: Verification and Issuance

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

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

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

Offset Sale and Transfer

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

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

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

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

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

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

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

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

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

Offset Retirement

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

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

Making Your Offset Investment Decision

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

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

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

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

China to Make Disclosure of Carbon Emissions

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China to Make Disclosure of Carbon Emissions

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

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

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

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

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

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

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

Highlights of China’s New National Carbon Market

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Highlights of China’s New National Carbon Market

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

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

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

Mr. Xi made two landmark climate promises last year.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Other industries may enter the market in the coming years.

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

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

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

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

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

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

Worlds First Carbon Neutral Cement Plant Being Built in Sweden

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Worlds First Carbon Neutral Cement Plant Being Built in Sweden

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

7 Key Takeaways from The EU’s New Green Deal

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7 Key Takeaways from The EU’s New Green Deal

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

6. Energy Conservation – Conserve More Energy

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

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

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

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

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

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

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

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

G20 Leaders Discuss Carbon Pricing to Combat Climate Change

Tony S
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G20 Leaders Discuss Carbon Pricing to Combat Climate Change

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

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

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

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

The Unprecedented Boom in the Worlds Largest Carbon Market

Simon H
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The Unprecedented Boom in the Worlds Largest Carbon Market

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

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

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

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

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