Japan’s USD$11 Billion Climate Transition Bonds

Saptakee S
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Japan’s USD$11 Billion Climate Transition Bonds

The press release from Japan Climate Transition Bonds Framework under the Ministry of Finance (MoF) states that on July 2, 2024, Japan will launch its inaugural JPY1.6 trillion (USD 11 billion) Climate Transition Bond, dedicated to funding the nation’s extensive Green Transformation (GX) program.

The GX Plan aims to mobilize JPY150 trillion (USD 1 trillion) in public and private investments over the next decade, targeting cutting-edge, sustainable technologies to mitigate domestic emissions. This initiative aligns with Japan’s commitment to achieving its 46% greenhouse gas (GHG) reduction targets by 2030 and becoming carbon neutral by 2050.

Key Initiatives in Japan’s GX Promotion Strategy

As per the Climate Transition Bond Framework, In FY 2021, Japan’s energy self-sufficiency rate was 13.3%. It has been heavily reliant on imported oil, coal, and liquefied natural gas since the Great East Japan Earthquake occurred in 2011.

Achieving Green Transformation (GX) necessitates addressing high-emission sectors.

Emission reduction efforts are crucial for energy transformation in the following sectors:

  • Heavy industries like steel and chemicals, significantly contribute to emissions after distribution.
  • Everyday life sectors include households, transportation, commercial, and educational facilities.

Priority will be given to technologies that efficiently and effectively reduce emissions in each sector. The prime focus will be on those that forge industrial competitiveness and drive economic growth.

Japan’s GX promotion strategy establishes two key initiatives to meet international commitments, ensure a stable energy supply, and realize economic growth.

1. Stable Energy Supply and Decarbonization:

  • Promote energy conservation measures.
  • Transition power sources to improve energy self-sufficiency, focusing on renewable energy and nuclear power.

2. Growth-Oriented Carbon Pricing Concept:

  • Implement and execute bold upfront investment support using instruments such as GX Economy Transition Bonds.
  • Provide incentives for GX investment through carbon pricing.
  • Utilize new financial mechanisms to support the transition.

These initiatives ensure a stable energy supply while advancing toward decarbonization and economic growth.

Image: GX promotion strategy

JAPAN GXsource: Japan Climate Transition Bond Framework

Japan’s Climate Transition Bonds Set New Standards in Sustainable Finance

The press release discreetly mentions that Japan’s Climate Transition Bonds are certified under the Climate Bonds Standard. It assures investors’ adherence to global best practices in environmental objectives.

Sean Kidney, CEO, of Climate Bonds Initiative, said:

“Transition is the theme for the year: corporates, cities and countries need to do transition plans in line with global emission reduction targets; under the Paris Climate Agreement countries are working on ambitious new Nationally Determined Contributions (NDCs) – transition plans – to be tabled at next year’s COP. “This bond shows clearly how governments, and others, can raise funds to invest in that transition. It marks a significant milestone in transition finance.”

The First 55.5% Share

A substantial 55.5% of the bond’s proceeds will fund R&D initiatives. It would focus on renewable energy and hydrogen utilization in steelmaking, to help limit global temperature increases to 1.5°C.

The Second 44.5% Share

The remaining 44.5% will support subsidies for activities like manufacturing electricity storage batteries and implementing energy-efficiency measures in buildings. Notably, the bond explicitly excludes funding for gas-fired power generation or ammonia co-firing in coal-fired plants.

The independent verification report, prepared by the Japan Credit Rating Agency (JCRA), a Climate Bonds Approved Verifier, reinforces the bond’s credibility.

Atsuko Kajiwara, Managing Executive Officer and head of the Sustainable Finance Evaluation Group at JCRA, said:

“Since 2020, JCR has been contributing to the government’s efforts to develop Japan’s transition pathway toward net zero by 2050 and alignment with the Paris Agreement. JCRA hopes the government’s strong initiative will help various Japanese corporates that struggle to find a way to attain both carbon neutrality and business expansion in the coming decades.”

We shall elaborate on the history and additional details of this bond in the next paragraphs.

The development of Climate Transition Bonds (JCTBs) in Japan, IEA Reports

In February 2024, Japan made history by issuing the world’s first sovereign transition bonds—Japan Climate Transition Bonds (JCTBs). The issuance included two tranches of JPY 800 billion (USD 5 billion) each, with tenors of 5 and 10 years. Certified by the Climate Bonds Initiative, these bonds are grounded in Japan’s national transition strategy.

Japan Climate Transition Bond

source: IEA Report 2024

Unlocking the Key Features of JCTBs

Investment Plan

Japan’s Basic Policy for the Realization of Green Transformation, published in February 2023, outlines a detailed investment plan for 22 industrial sectors to achieve carbon neutrality by 2050.

  • Envisions JPY 20 trillion (USD 130 billion) of public capital
  • Aims to generate over JPY 150 trillion (USD 1 trillion) in investment through public and private financing by 2050
  • Includes sector-specific transition roadmaps developed by expert committees

Focus on Nascent Technologies

Over half of the proceeds from JCTBs will be allocated to emerging technologies crucial for the transition.

Innovative Carbon Pricing Approach:

  • Utilizes future carbon pricing revenue for immediate bond repayment
  • Allows for immediate deployment of capital based on assumed future revenue from carbon taxes

Potential for Emerging Markets and Developing Economies (EMDE):

  • Credit Intermediary Role: The government acts as a credit intermediary, enhancing the creditworthiness of corporates and simplifying financing for small-scale projects.
  • Credit Enhancements: For countries with sub-investment-grade credit ratings, additional credit enhancements such as guarantees from Development Finance Institutions (DFIs) may facilitate access to international capital markets.

Japan’s climate transition bonds set a new standard for sovereign transition bonds. This model can guide other nations, especially in emerging markets. Consequently leveraging future carbon pricing revenues and attract significant investment for green transformations.

The Ultimate Guide to Lithium and Lithium Prices

Jennifer L
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The Ultimate Guide to Lithium and Lithium Prices

What is Lithium?

Lithium, hailed as the ‘white gold‘ of modern times, is reshaping battery technology. Known for its lightweight nature, unparalleled electrochemical potential, and high energy density, lithium stands at the forefront of energy storage, driving the global transition to renewable energy. Its journey from a basic mineral to a crucial battery component highlights its pivotal role in technological advancement and sustainable energy solutions.

Amid the push for net zero emissions by 2050, lithium assumes paramount importance. The soaring demand necessitates ramped-up production, urging advancements in mining, refining, and sustainable extraction and processing technologies. 

As nations and industries align towards a greener future, lithium emerges as a linchpin in driving technical innovation and sustainability efforts. But before lithium turns out to be this important, it’s interesting that this unique element has a fascinating origin story. 

Humanity’s interaction with lithium spans just over 200 years. In the 1790s, Brazilian scientist José Bonefácio de Andrada e Silva discovered two new minerals, petalite and spodumene, on the Swedish island of Utö. 

Later, in 1817, Swedish scientist Johan August Arfwedson identified a new element in these minerals. Working in the lab of chemist Baron Jöns Jacob Berzelius, Arfwedson isolated a sulfate that did not contain any known alkali or alkaline earth metals. He named this new element lithium, derived from the Greek word “lithos,” meaning stone, due to its grey, stone-like appearance.

Where Does Lithium Come From?

Some of the lithium found in the rechargeable batteries of our smartphones, laptops, and EVs dates back almost 14 billion years ago.

The lithium cycle begins with magma that contains lithium rising to the Earth’s crust during volcanic activity. This magma cools and crystallizes into rocks such as granites or pegmatites. Over thousands of years, weathering breaks down these rocks, releasing lithium salts that flow into rivers. Most of this dissolved lithium ends up in the oceans. 

However, in some high mountainous regions like the South American Andes, rivers terminate in closed basins. Here, water evaporation leaves behind lithium-enriched brine in salt flats, known as salars.

salt flats or salars

Besides these natural deposits, lithium can also be sourced from oilfield brines, geothermal brines, and clays. Although lithium is not rare, it is highly reactive and never found in its pure form in nature. It ranks as the 33rd most abundant element in the Earth’s crust, with an estimated 98 million tonnes.

What Are The Applications and Uses of Lithium?

Lithium stands out for its extraordinary properties. It is the lightest and least dense solid element on the periodic table, with a standard atomic weight of 6.94. Highly reactive, lithium metal ignites on contact with water, a familiar demonstration in chemistry labs. 

Consequently, it is only found in mineral or salt forms in nature. In its metallic form, lithium is a soft, silvery-grey metal with excellent heat and electric conductivity, making it ideal for storing and transmitting energy.

Lithium is so soft it can be cut with a knife and has one of the lowest melting points (180.5 °C) and boiling points (1,347°C) among metals. Its high electrode potential and low atomic mass provide a high charge and power-to-weight ratio, which makes lithium especially suitable for use in rechargeable batteries.

Lithium Batteries: Powering the Future

A critical element in the production of rechargeable batteries, lithium is vital for electric vehicles (EVs), hybrids, laptops, and mobile phones. Lithium-ion batteries are favored by car manufacturers for their ability to store significant energy in compact spaces and quick recharge capabilities. 

EV batteries

Notably, lithium iron phosphate batteries are esteemed for their safety and durability, making them ideal for stationary storage and secure EV applications.

In the realm of EVs and lithium-ion batteries, two primary types of lithium, lithium carbonate, and lithium hydroxide, dominate. Major lithium producers often supply both variants to meet the demands of EV manufacturers, alongside catering to other industries requiring diverse lithium applications. 

Conversely, smaller lithium companies typically specialize in the production of a single lithium type.

Diverse Applications Beyond Batteries

The versatility of lithium goes beyond battery technology, impacting various sectors that leverage its unique properties. In aerospace, lithium’s lightweight yet robust characteristics enhance fuel efficiency and performance in aircraft and spacecraft. 

Incorporating lithium into glass and ceramics yields stronger, more durable products with enhanced thermal resistance, ideal for sturdier and more efficient cookware, tiles, and household items.

Furthermore, lithium compounds serve as high-temperature lubricants, enduring extreme conditions to ensure smooth operation for heavy machinery and vehicles under intense stress and temperature. This wide array of applications underscores lithium’s pivotal role, not only in driving cleaner energy solutions like electric vehicles but also in propelling manufacturing processes and product functionalities across diverse industries. 

The breadth of its applications underscores global dependence on lithium for technological advancements and sustainability initiatives. But how exactly is lithium produced or mined?

How is Lithium Mined?

Various ways are available to extract lithium, but two major ones exist to produce industrial lithium.

  1. Conventional Lithium Brine Extraction

The majority of commercial lithium production today comes from extracting lithium from underground brine reservoirs, primarily located in the Lithium Triangle of the Andes (Bolivia, Argentina, and Chile) and in China.

li brine recovery

Lithium brine recovery is a straightforward but time-consuming process. Salt-rich water is pumped to the surface and into evaporation ponds. Over months, water evaporates, precipitating various salts and increasing lithium concentration in the remaining brine.

During evaporation, hydrated lime (Ca(OH)2) is added to remove unwanted elements like magnesium and boron. Once lithium concentration is sufficient, the brine is pumped to a recovery facility where the following steps occur:

  • Brine purification to remove contaminants.
  • Chemical treatment to precipitate desirable products and byproducts.
  • Filtration to remove solids.
  • Treatment with soda ash (Na2CO3) to precipitate lithium carbonate (Li2CO3).
  • Washing and drying of lithium carbonate to produce the final product.

2. Hard Rock Mining

Hard rock mining, more complex and energy-intensive than brine extraction, involves extracting lithium from minerals such as spodumene, lepidolite, petalite, amblygonite, and eucryptite. Spodumene is the most abundant, providing most of the world’s mineral-derived lithium.

hard rock mining or spodumene

Australia leads in spodumene production, with operations also in Brazil, Portugal, southern Africa, and China. New mines are expected in North America and Finland by 2025. The process involves:

  • Mining and crushing the ore.
  • Roasting at 2012°F (1100°C), cooling to 140°F (65°C), milling, and roasting again with sulfuric acid at 482°F (250°C) (acid leaching).
  • During acid leaching, lithium ions replace hydrogen in the acid, forming lithium sulfate and insoluble residue.
  • Adding lime to remove magnesium.
  • Using soda ash to precipitate lithium carbonate.
  • Lime slurry may adjust pH to neutralize excess acid.

3. New Lithium Production Methods

In the US, commercial-scale lithium production mainly comes from a brine operation in Nevada. However, there’s growing pressure to increase domestic production to secure lithium supplies.

Opportunities for new methods include:

  • Direct lithium extraction from geothermal brines (e.g., Salton Sea, CA) and produced water from shale gas fracking (Texas).
  • Extraction from lithium-bearing clays in Nevada.

Various production methods are being tested, including:

  • Acid leaching with sulfuric and hydrochloric acid.
  • Using hydrated lime to remove impurities and neutralize waste before returning it to the environment.

These innovations aim to enhance domestic lithium production and ensure a stable supply of this critical metal.

What is The Current State of the Lithium Market?

In the rapidly evolving landscape of the lithium market, competition is fierce and dynamics are swiftly changing. With the price of lithium batteries constituting 40% of an electric vehicle’s production costs, major EV manufacturers like Tesla, Ford, and BYD are actively seeking cost-effective alternatives. 

As global aspirations for emission-free transportation by 2050 intensify, about 30 nations have committed to phasing out the sale of new fuel-engine cars, driving demand for critical EV minerals.

China currently leads the lithium battery production market, but the United States and latecomer South Korea are aiming to challenge its dominance. Amid this dynamic environment, understanding the nuances of lithium is crucial. The next sections explore market and price dynamics, the key players, and the outlook associated with the burgeoning lithium industry.

Asia-Pacific’s Dominance and Its Global Impact

The global lithium market has been significantly shaped by the commanding influence of the Asia-Pacific region, spearheaded by economic powerhouses such as China, Japan, and Korea. Recognizing the transformative potential of lithium, especially in battery technology, these nations swiftly invested in the industry, initially targeting consumer electronics and later expanding into EVs.

Their strategic vision included not only production and processing but also the entire lithium supply chain, from extraction to advanced battery manufacturing. This comprehensive approach has granted them considerable leverage over global battery technology trends and pricing dynamics.

In contrast, North America has struggled to keep pace with this rapid progress. Hindered by a fragmented approach and a lack of cohesive strategy and investment, the region’s lithium industry lags behind its Asia-Pacific counterparts. 

This disparity has hindered the development of a robust domestic lithium market in North America. This leaves the region vulnerable to supply fluctuations and pricing determinations driven by Asia-Pacific leaders.

China’s stronghold extends beyond LFP batteries, encompassing lithium-ion battery, cathode, and anode production, as well as lithium, cobalt, and graphite processing and refining. 

Despite efforts by governments in Europe, the United States, and South Korea to develop domestic battery supply chains, the majority of the EV battery supply chain is expected to remain concentrated in China for the foreseeable future, maintaining its lead in global battery production capacity until 2030, as projected by the International Energy Agency (IEA).

The Shifting Trend in Lithium Batteries

Tesla and Ford Motor, along with other major automakers, have embraced lithium iron phosphate (LFP) batteries as a cost-effective alternative for some of their EVs, moving away from cobalt-based and nickel-based lithium-ion batteries prevalent in Europe and the US. LFP batteries, identified as the most economical lithium-ion battery type in 2022, now constitute around 40% of global EV production. Demand for this battery is projected to rise substantially in the coming years. 

Tesla’s shift to LFP batteries at its Shanghai plant since October 2022 signals a broader industry trend. Its peers like Mercedes-Benz Group AG, Volkswagen AG, and Rivian Automotive Inc. also commit to integrating LFPs into their vehicles. 

This shift is largely facilitated by Chinese manufacturers like Contemporary Amperex Technology (CATL) and BYD, which dominate the LFP market, accounting for 99% of global LFP battery production. CATL, in particular, stands as the world’s largest EV battery maker, supplying batteries to Tesla and various other automakers. 

Understanding Lithium Prices: Key Factors and Trends 

The global appetite for lithium has surged, propelled by the burgeoning battery industry and the widespread adoption of lithium-ion batteries in electric vehicles (EVs). This surge in demand casts a glaring spotlight on the current state of lithium supply, underscoring the escalating consumption rates worldwide. 

In this segment, we delve into the intricate dynamics of various factors driving the market, examining how the industry is responding to this mounting need. Key factors such as supply and demand dynamics, mining capacities, geopolitical influences, and technological advancements play pivotal roles in shaping the delicate balance between supply and demand. 

Understanding these factors is crucial for stakeholders in the lithium industry, from miners to battery manufacturers and investors. Here are the primary elements that impact lithium prices:

Navigating the Supply-Demand Dynamics

The lithium market exhibits characteristics of an immature market. The supply swings between deficit and surplus due to strong growth and infrastructure development challenges. 

With rechargeable batteries constituting around 85% of global demand, the surge in EV uptake has led to soaring demand. 

However, the slow pace of infrastructure development has hindered supply growth, resulting in price spikes in 2022. As EV subsidies decrease and prices normalize, we anticipate a controlled decline, settling around $20,000 per tonne by the decade’s end.

Therefore, any imbalance in the supply and demand equation directly affects prices. Any oversupply can depress prices until demand catches up. 

Conversely, a surge in demand, driven by the EV boom, can outpace supply, pushing prices up. This is exactly what happened in November 2022 when a record-breaking lithium price rally happened, reaching over five-fold increase. 

battery grade lithium prices

Unraveling Geopolitical Influences

Geopolitical factors significantly influence the lithium market due to the concentration of lithium reserves in specific regions. Countries like Australia, Chile, and Argentina hold substantial lithium reserves and are major players in the global supply chain. Political stability in these countries is crucial. Any political unrest or policy changes can disrupt supply and affect global prices.

Moreover, government policies regarding mining operations, environmental standards, and export regulations can also impact lithium production and prices. Favorable policies can boost production, while restrictive regulations can hinder it.

International trade policies, including tariffs and trade agreements, further influence the flow of lithium across borders. For example, trade tensions between major economies can lead to tariffs on lithium products, affecting global supply chains and prices.

This is what happen recently with the United States announcing its plan to increase tariffs on Chinese imports, including EVs, batteries, and solar cells. 

Breaking Down Technological Developments

Advancements in technology have a dual impact on lithium prices by affecting both demand and supply. 

  • Battery Technology: Breakthroughs in battery technology can significantly influence lithium demand. The development of alternative battery chemistries, such as solid-state batteries or sodium-ion batteries, could reduce reliance on lithium, potentially decreasing its demand and price. On the other hand, innovations that enhance lithium-ion battery performance can boost demand.
  • Extraction and Processing Technologies: Technological improvements in lithium extraction and processing can increase supply efficiency and reduce production costs. For example, advancements in direct lithium extraction (DLE) techniques can make it easier and more cost-effective to extract lithium from brine resources, positively impacting prices.

Disentangling Environmental Regulations

Environmental considerations are increasingly shaping the lithium market today. 

Stricter environmental regulations on mining practices can limit lithium supply and drive up prices. Mining operations must comply with environmental standards to mitigate their impact on ecosystems and water resources, which can increase operational costs.

Furthermore, the growing emphasis on reducing the environmental footprint of lithium extraction is prompting the industry to adopt greener practices. These sustainable techniques, such as using renewable energy in mining operations and recycling water, may initially increase costs. However, they are expected to lead to long-term sustainability and potentially stabilize prices.

There is also rising pressure from consumers and investors for companies to adhere to environmental, social, and governance (ESG) criteria. Companies that prioritize sustainable and ethical practices may gain a competitive edge, influencing market dynamics and prices.

Quality Challenges in Battery-Grade Lithium Production

As lithium increasingly powers rechargeable batteries, ensuring high-quality lithium products for battery use becomes paramount. Producing battery-grade lithium involves intricate refining processes to meet stringent quality and purity standards. 

New refineries typically start with lower-quality technical-grade lithium, necessitating refining improvements to achieve battery-grade purity. Consequently, despite an overall supply surplus, the battery-grade lithium market may face short-term constraints until refining operations are optimized.

What are the Top Lithium Producing Countries?

In 2023, three countries – Australia, Chile, and China – dominated global lithium production, collectively accounting for 88% of the total output.

top lithium producing countries 2023

Australia: Leading the Charge

Australia stands as the world’s top lithium producer, sourcing the mineral directly from hard-rock mines, particularly spodumene. Over the past decade, Australia witnessed a remarkable surge in production. In 2013, output stood at 13,000 metric tons, soaring to an impressive 86,000 metric tons by 2023.

Chile: Brine Extraction Expert

Chile follows closely behind Australia in lithium production, albeit with more modest growth. The South American nation primarily extracts lithium from brine sources, with production climbing from 13,500 tonnes in 2013 to 44,000 metric tons in 2023.

China: Closing the Gap

China, also harnessing lithium from brine, has been steadily approaching Chile’s production levels. From a modest 4,000 metric tons in 2013, China ramped up domestic production to 33,000 metric tons in 2023. 

Additionally, Chinese companies have expanded their influence in the global lithium market, with three of them ranking among the top lithium mining entities. Tianqi Lithium, the largest among them, holds a significant stake in Greenbushes, the world’s largest hard-rock lithium mine in Australia.

Argentina: A Rising Contender

Argentina emerges as the fourth-largest lithium producer, tripling its output over the past decade. With increased investments from international players, Argentina aims to further enhance its lithium production capacity.

With major producers scaling up to meet the surging demand, particularly from the clean energy sector like electric vehicle batteries, the lithium market recently experienced a surplus. This oversupply led to a significant price collapse of over 80% from the record highs witnessed in late 2022.

How to Invest in Lithium? Stocks, ETFs, and Derivatives

Due to the nascent stage of the lithium market, the range of investment products available is relatively limited compared to other commodities. Nevertheless, investors can still tap into this dynamic market through two primary avenues: lithium stocks and lithium ETFs.

Lithium Stocks:

Investing in individual stocks remains one of the most direct ways to gain exposure to the lithium industry. However, it’s crucial to recognize that stocks serve as proxies for the market’s performance.

The soaring costs of lithium don’t always translate into corresponding increases in lithium stock prices. Establishing new mining operations can be capital-intensive, and ultimately, a stock’s valuation hinges on the company’s financial health. Despite this caveat, lithium stocks have demonstrated robust performance over the past five years. 

Investing in lithium stocks offers several benefits. Firstly, individual lithium stocks provide significant earning potential if the company performs well. Additionally, many lithium stocks pay dividends, offering investors regular income that can be reinvested to bolster portfolio growth. 

Moreover, some lithium producers have alternative revenue streams, which can help mitigate the volatility associated with lithium prices. However, investing in lithium stocks also entails certain risks. For instance, putting all investments into one or two lithium stocks can result in a lack of diversification in the portfolio. 

Furthermore, the return on lithium stocks is heavily dependent on the financial health of the company, necessitating regular updates on the company’s fundamentals and thorough research.

Lithium ETFs

For investors seeking exposure to the lithium market without the time-intensive task of researching individual stocks, lithium exchange-traded funds (ETFs) offer a convenient option. These ETFs track an index composed of a diversified collection of lithium stocks, providing you with instant access to a broad portfolio that includes both lithium producers and manufacturers.

Here are two prominent lithium ETFs:

  • Global X Lithium & Battery Tech ETF (LIT): LIT comprises 39 different lithium and battery stocks. With $4.5 billion in assets under management, this ETF charges an annual fee of 0.75%.
  • Amplify Lithium & Battery Technology ETF (BATT): BATT is solely focused on lithium battery providers. Holding $194 million in assets, this ETF charges an annual fee of 0.59%.

Investing in lithium ETFs presents its own set of benefits. ETFs provide instant diversification across a broad range of lithium-focused stocks, thereby reducing the risk associated with individual stock selection. Also, ETFs spread investment risk across a large portfolio of stocks, making them less risky than individual stocks. 

Furthermore, similar to individual stocks, some lithium ETFs offer dividend schemes, providing investors with the opportunity for positive cash flow. Nevertheless, there are risks associated with investing in lithium ETFs as well. 

For example, during upward trends in the lithium market, returns from ETFs may not be as substantial as those from individual stocks. And take note, ETFs are not free products; providers charge investors a percentage fee for operating and maintaining the ETF.

Direct Investment Through Commodities Market

For those interested in direct investment, lithium can be traded in the commodities market through futures and options. These derivatives allow you to buy and sell access to lithium as a material, though they come with significant risk and volatility, making them unsuitable for inexperienced investors.

Futures Contracts

A futures contract is an agreement to buy or sell a commodity at a future date for a specified price. There are two types:

Standard Futures Contracts: You commit to buying the actual commodity. If you hold the contract until expiration, you must purchase the physical lithium.

Cash Settlement Futures Contracts: Instead of exchanging the physical commodity, the parties settle the contract’s value in cash.

Options Contracts

Options contracts allow you to trade the value of an asset, with the added flexibility of choosing whether to execute the contract at expiration. This differs from futures contracts, which must be executed regardless of market conditions. When buying an options contract, you pay an upfront fee known as a “premium.”

Investing in lithium offers several pathways, including stocks of lithium producers or users, funds that aggregate lithium-related equities, and direct commodity trading through futures and options. Each method carries different levels of risk and complexity, catering to various investor preferences and experience levels.

Who are the Major Lithium Companies? 

1. ALBEMARLE: Market cap: US$14 billion

Albemarle, based in North Carolina, stands as the largest lithium company by market cap and the world’s leading lithium producer, boasting over 7,000 global employees. Following a 2022 realignment, Albemarle now operates two primary business units, with a particular focus on lithium-ion battery and energy transition markets under its Albemarle Energy Storage unit. This division oversees lithium carbonate, hydroxide, and metal production.

With operations spanning Chile, Australia, and the US, Albemarle holds a diverse portfolio of lithium mines and facilities. In Chile, the company produces lithium carbonate at its La Negra conversion plants, leveraging brine from the Salar de Atacama. 

In the US, Albemarle aims to bolster domestic production in line with the Inflation Reduction Act. It owns the Silver Peak lithium brine operations in Nevada’s Clayton Valley, set to double lithium production by 2025. Albemarle received a $90 million critical materials award from the US Department of Defense in September 2023 to enhance domestic lithium production and support the EV battery supply chain. 

Additionally, the company plans to revive the Kings Mountain lithium mine in North Carolina, backed by US government funding. Albemarle also plans to develop the Albemarle Technology Park in North Carolina for advanced R&D in lithium innovation.

2. SQM: Market cap: US$12.07 billion

SQM, a chemicals giant operates in over 20 countries, serving customers across 110 nations. The company’s diverse business areas span lithium, potassium, and specialty plant nutrition.

Primarily operating in Chile, SQM extracts brine from the Salar de Atacama and processes lithium chloride into lithium carbonate and hydroxide at its Salar del Carmen lithium plants near Antofagasta. The company is expanding production at Salar del Carmen from 180,000 MT to 210,000 MT, initiating this year. 

To mitigate environmental impact, SQM announced a $1.5 billion investment in the Salar Futuro project, focusing on advanced evaporation technologies, direct lithium extraction, and a seawater desalination plant.

Despite uncertainty stemming from Chile’s National Lithium Strategy, SQM’s existing contracts, extending through 2030, are expected to be respected by the government. In early 2024, a partnership formed between SQM and state-owned mining company CODELCO, with CODELCO holding a majority control stake.

In Australia, SQM is developing the Mount Holland lithium project, recognized as one of the world’s largest hard-rock deposits, in partnership with Wesfarmers. Anticipating lithium hydroxide production to commence by H1 2025, SQM’s lithium carbonate capacity was projected to reach 210,000 tons by the beginning of 2024.

3. Tianqi Lithium: Market cap: US$10.43 billion

Tianqi Lithium is a subsidiary of Chengdu Tianqi Industry Group based in China. As the world’s largest hard-rock lithium producer, Tianqi Lithium operates assets in Australia, Chile, and China. The company holds a notable stake in SQM, having acquired a 2.1% share in 2016, later increasing it to 23.77%.

In Australia, Tianqi owns the Greenbushes mine, acquired in 2012 through the purchase of Talison Lithium. The company also developed a lithium hydroxide plant in Western Australia’s Kwinana Industrial Area, commencing production in Q3 2019. Subsequent output began in mid-2021. 

Rising lithium prices and its Hong Kong listing in 2022, which raised approximately US$1.7 billion, contributed to Tianqi’s buoyancy. Commercial production at Kwinana’s Train 1 commenced in December 2022, with Train 2 anticipated to start in 2024. Once operational, the hydroxide plant is projected to produce 48,000 MT per year, utilizing lithium from Greenbushes.

In February of the current year, Tianqi Lithium updated its total mineral reserves at Greenbushes to 447 million tonnes, with an average lithium oxide grade of 1.5%, equivalent to about 16 million tonnes of lithium carbonate.

Li producer performance 2019 to 2024

What is In Store for Lithium?

Forecasting lithium supply beyond the end of the decade presents challenges due to limited visibility into existing, planned, and potential projects. While projections until 2030 can be reasonably accurate, the landscape becomes murkier. 

On the demand side, projections suggest that it will tremendously to almost 4 million tonnes, as shown below. But of course, as discussed earlier, various trends impact this demand trajectory. 

lithium demand growth through 2035

Incentive pricing becomes a critical factor in determining the attractiveness of new projects. With an estimated 1.5 million tonnes of supply, the fully allocated cost of lithium would be around $15,000 per tonne, suggesting market pricing would exceed this threshold.

Navigating the Immaturity of the Lithium Market

Forecasting the future of the lithium market is hindered by its relative immaturity. Lack of globally accepted specifications and pricing anchors complicates pricing dynamics. 

Lithium products, akin to specialty chemicals, require precise specifications, yet the industry’s growth trajectory impedes standardization efforts. While greater standardization is anticipated in the future, it will evolve gradually.

According to Bloomberg estimates, demand for lithium-ion batteries will increase tenfold over the next decade. This surge in demand is largely driven by the global commitment of over 100 countries to achieve net zero emissions within the coming decades. 

global li battery demand

As part of this commitment, many nations are turning to the electrification of transportation as a crucial solution to reduce GHG emissions and combat climate change. This shift towards electrification underscores the growing importance of lithium-ion batteries in powering EVs and other clean energy technologies. 

The Role of Partnerships in Shaping the Lithium Industry

In 2022, a significant portion of lithium supply was dominated by a handful of companies. However, future industry dynamics are expected to witness a decline in their market share, as smaller firms expand and new ventures emerge. 

While horizontal integration may not be a prevailing trend, vertical integration is poised to play a pivotal role. Partnerships between miners and refiners offer mutual benefits, enabling risk-sharing and capital investment in new projects. 

Collaborative efforts between upstream and downstream operations enhance expertise, improve margins, and capture a larger market share. Such partnerships, exemplified by ventures like Pilbara Minerals and POSCO in South Korea and SQM and Wesfarmers in Western Australia, are anticipated to become increasingly common in the industry’s future landscape.

Conclusion 

The evolution of lithium, from its discovery over two centuries ago to its pivotal role in powering modern technology, underscores its significance in shaping our present and future. As the world accelerates towards a sustainable energy paradigm, lithium emerges as the linchpin of this transition, fueling advancements in battery technology and driving the proliferation of electric vehicles and renewable energy storage solutions.

Neustark Secures US$69 M from BlackRock and Temasek to Expand Global Carbon Removal Projects

Saptakee S
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Neustark Secures US$69 M from BlackRock and Temasek to Expand Global Carbon Removal Projects

Neustark, the Swizz-based carbon removal solution provider, has raised US$69 M from Decarbonization Partners BlackRock and Temasek. The company intends to use the funds to expand its portfolio of global CDR projects and the overall growth of its team.

Let’s deep dive into the deal in the upcoming content.

Decarbonization Partners: The Investment Catalyst for Neustark

Decarbonization Partners, a collaboration between Singapore-based Temasek and the world’s largest asset manager company BlackRock was launched in 2022. They focus on late-stage venture capital and early-growth private equity. They invest in companies developing technologies to accelerate the global transition to a net zero economy by 2050. Sectors like Carbon Capture, Bio Products, Energy Innovation, Mobility, and Digital Transformation are their major investment partners.

Their press release from April revealed.

“The final closure of $1.40B for its inaugural late-stage venture capital and growth private equity investment fund. The Decarbonization Partners Fund I, surpassed its $1 billion fundraising target.”

Noteworthy, Decarbonization Partners led Neustark’s growth equity round, with participation from climate tech investor Blume Equity. Subsequently, new investors joined Neustark’s existing chain of investors. For instance, UBS, Holcim, Siemens, Verve Ventures, and ACE Ventures are continuing their support.

Meghan Sharp, Global Head & Chief Investment Officer of Decarbonization Partners, said:

“With carbon capture, utilization, and storage being one of our key investment focuses, we believe that we have found a perfect partner to help scale the industry – and ultimately its decarbonization impact – in the years to come. Neustark not only helps organizations integrate carbon removal to address their hard-to-abate emissions, but their solution also contributes to decarbonizing the construction industry.”

Fueling Neustark’s Ambitious Carbon Removal Goals

Neustark is a pioneer in the carbon removal industry. It offers unique solutions to permanently store CO₂ in recycled mineral waste, such as demolished concrete.

IP-protected Carbon Removal Technology

Scientifically speaking, their IP-protected technology captures biogenic CO2 primarily from biogas plants. It is then liquified and transported to recycling sites for construction waste. There, CO2 is injected into concrete granulates or other mineral waste. Consequently, it triggers the mineralization process that permanently binds CO2 to the surfaces and pores of the granules. The carbonated aggregate can then be used for road construction or to produce recycled building materials. This mineralization process securely stores CO2 for hundreds of thousands of years, with minimal risk of reversal.

Moving on, the company is already capturing and storing tons of CO₂ daily with its initial deployments in Switzerland and Europe. Now, the company is ramping up its operations globally.

  • The funding from BlackRock and Temasek fuels its ambitious plans of permanently removing 1MT of CO₂ by 2030 and soaring higher.

Notably, Neustark currently has 40 plants under construction across Europe and has already sold nearly 120,000 tons of carbon removal to date. Their key clients include Microsoft, UBS, and NextGen. All projects receive certification under the Gold Standard, ensuring credible third-party assessment and transparency in performance.

Johannes Tiefenthaler, Co-CEO and Founder at Neustark said:

“We turn the world’s largest waste stream – demolition concrete – into a carbon sink. In the last year, we have already deployed our unique solution at 19 sites. This growth investment will take us into the next exciting phase of our mission, helping us to further scale our impact across Europe, enter new markets in North America and Asia Pacific, and develop new solutions to store even more CO2 in mineral waste streams.”

Neustark stores around 10kg of CO₂ per ton of demolished concrete. They claim, “One site can do in one hour what 50 trees do in one year.” This is how they make negative emissions.

An example of a remarkable achievement is the large-scale storage plant constructed at a demolition site in Biberist, Switzerland. It’s a collaboration with Alluvia and Vigier Beton Seeland Jura. This plant, with a yearly storage capacity of 1000T of CO₂, has been operational since May 2023.

Financial and Sustainability Highlights of BlackRock and Temasek

BlackRock proudly attributes its success to the trust of its clients and the strong partnerships forged with them.

BlackRocksource: BlackRock

It pursues a sustainability strategy to reduce GHG emissions from its facilities, data centers, and upstream value chains. In 2023, BlackRock made progress by:

  • Employing energy efficiency strategies
  • Achieving 100% renewable electricity match
  • Enhancing SAF and carbon credit procurement processes
  • Establishing a Supplier Sustainability Program

BlackRock’s emissions reduction goals (relative to 2019 baseline):

  • 67% reduction of Scope 1 and 2 emissions by 2030
  • 40% reduction in Scope 3 business travel emissions by 2030
  • Engaging suppliers representing 67% of emissions to set science-aligned goals by 2025

On the other side, Temasek’s S$382b portfolio, as of 31 March 2023, is primarily concentrated in Singapore and the broader Asia region. It spans diverse industries including financial services, transportation & industrials, telecommunications, media & technology, consumer & real estate, and life sciences & agri-food.

It has implemented an internal carbon price of US$50 per tonne of carbon dioxide equivalent (tCO2e), with plans to increase this to $100 tCO2e by 2030. This initiative aims to deepen climate considerations in investment evaluations.

Temaseksource: Temasek

Apart from BlackRock, Temasek has also partnered with GenZero, Climate Impact X, Pentagreen Capital, etc. It has formed a dedicated investment platform with an initial capital commitment of S$5 billion. This platform is designed to accelerate and expand global decarbonization solutions.

Overall, we can infer that with support from BlackRock and Temasek, Neustark can make significant strides in carbon removal through innovative solutions.

The Ultimate Guide to Understanding Carbon Credits

Carbon Credits
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The Ultimate Guide to Understanding Carbon Credits

Carbon Markets 101

A carbon market allows investors and corporations to trade both carbon credits and carbon offsets simultaneously. This mitigates the environmental crisis, while also creating new market opportunities.

New challenges nearly always produce new markets, and the ongoing climate crisis and rising global emissions are no exception.

The renewed interest in carbon markets is relatively new. International carbon trading markets have been around since the 1997 Kyoto Protocols, but the emergence of new regional markets have prompted a surge of investment.

In the United States, no national carbon market exists, and only one state – California – has a formal cap-and-trade program.

The advent of new mandatory emissions trading programs and growing consumer pressure have driven companies to turn to the voluntary market for carbon offsets. Changing public attitudes on climate change and carbon emissions have added a public policy incentive. Despite an ever-shifting background of state, federal, and international regulations, there’s more need than ever for companies and investors to understand carbon credits.

This guide will introduce you to carbon credits and outline the current state of the market. It will also explain how credits and offsets work in currently existing frameworks and highlight the potential for growth.

1. Carbon Credits, Offsets and Markets – An Introduction

The Kyoto Protocol of 1997 and the Paris Agreement of 2015 were international accords that laid out international CO2 emissions goals. With the latter ratified by all but six countries, they have given rise to national emissions targets and the regulations to back them.

With these new regulations in force, the pressure on businesses to find ways to reduce their carbon footprint is growing. Most of today’s interim solutions involve the use of the carbon markets.

What the carbon markets do is turn CO2 emissions into a commodity by giving it a price.

These emissions fall into one of two categories: Carbon credits or carbon offsets, and they can both be bought and sold on a carbon market. It’s a simple idea that provides a market-based solution to a thorny problem.

2. What are carbon credits and carbon offsets?

The terms are frequently used interchangeably, but carbon credits and carbon offsets operate on different mechanisms.

Carbon credits, also known as carbon allowances, work like permission slips for emissions. When a company buys a carbon credit, usually from the government, they gain permission to generate one ton of CO2 emissions. With carbon credits, carbon revenue flows vertically from companies to regulators, though companies who end up with excess credits can sell them to other companies.

Carbon offset projects grouped into two categories

Offsets flow horizontally, trading carbon revenue between companies. When one company removes a unit of carbon from the atmosphere as part of their normal business activity, they can generate a carbon offset. Other companies can then purchase that carbon offset to reduce their own carbon footprint.

Note that the two terms are sometimes used interchangeably, and carbon offsets are often referred to as “offset credits”. Still, this distinction between regulatory compliance credits and voluntary offsets should be kept in mind.

3. How are carbon credits and offsets created?

Credits and offsets form two slightly different markets, although the basic unit traded is the same – the equivalent of one ton of carbon emissions, also known as CO2e.

It’s worth noting that a ton of CO2 does refer to a literal measurement of weight. Just how much CO2 is in a ton?

  • The average American generates 16 tons of CO2e a year through driving, shopping, using electricity and gas at home, and generally going through the motions of everyday life.

To further put that emission in perspective, you would generate one ton of CO2e by driving your average 22 mpg car from New York to Las Vegas.

Carbon credits are issued by national or international governmental organizations. We’ve already mentioned the Kyoto and Paris agreements which created the first international carbon markets.

the state of the paris agreement

In the U.S., California operates its own carbon market and issues credits to residents for gas and electricity consumption.

The number of credits issued each year is typically based on emissions targets. Credits are frequently issued under what’s known as a “cap-and-trade” program. Regulators set a limit on carbon emissions – the cap. That cap slowly decreases over time, making it harder and harder for businesses to stay within that cap.

You can think of carbon credits as a “permission slip” for a company to emit up to a certain set amount of CO2e that year.

Around the world, cap-and-trade programs exist in some form in Canada, the EU, the UK, China, New Zealand, Japan, and South Korea, with many more countries and states considering implementation.

Companies are thus incentivized to reduce the emissions their business operations produce to stay under their caps.

In essence, a cap-and-trade program lessens the burden for companies trying to meet emissions targets in the short term, and adds market incentives to reduce carbon emissions faster.

Carbon offsets work slightly differently…

Organizations with operations that reduce the amount of carbon already in the atmosphere, say by planting more trees or investing in renewable energy, have the ability to issue carbon offsets. The purchase of these offsets is voluntary, which is why carbon offsets form what’s known as the “Voluntary Carbon Market”. However, by buying these carbon offsets, companies can measurably decrease the amount of CO2e they emit even further.

4. What is the carbon marketplace?

When it comes to the sale of carbon credits within the carbon marketplace, there are two significant, separate markets to choose from.

  1. One is a regulated market, set by “cap-and-trade” regulations at the regional and state levels.
  2. The other is a voluntary market where businesses and individuals buy credits (of their own accord) to offset their carbon emissions.

Think of it this way: the regulatory market is mandated, while the voluntary market is optional.

When it comes to the regulatory market, each company operating under a cap-and-trade program is issued a certain number of carbon credits each year. Some of these companies produce less emissions than the number of credits they’re allotted, giving them a surplus of carbon credits.

On the flip side, some companies (particularly those with older and less efficient operations) produce more emissions than the number of credits they receive each year can cover. These businesses are looking to purchase carbon credits to offset their emissions because they must.

how an emission trading system works

Most major companies are doing their part and will or have announced a blueprint to minimize their carbon footprint. However, the amount of carbon credits allocated to them each year (which is based on each business’s size and the efficiency of their operations relative to industry benchmarks)., may not be enough to cover their needs.

Regardless of technological advances, some companies are years away from reducing their emissions substantially. Yet, they still have to keep providing goods and services in order to generate the cash they need to improve the carbon footprint of their operations.

As such, they need to find a way to offset the amount of carbon they’re already emitting.

So, when companies meet their emissions “cap,” they look towards the regulatory market to “trade” so that they can stay under that cap.

Here’s an example:

Let’s say two companies, Company 1 and Company 2, are only allowed to emit 300 tons of carbon.

However, Company 1 is on track to emit 400 tons of carbon this year, while Company 2 will only be emitting 200 tons.

To avoid a penalty comprised of fines and extra taxes, Company 1 can make up for emitting 100 extra tons of CO2e by purchasing credits from Company 2, who has extra emissions room to spare due to producing 100 tons less carbon this year than they were allowed to.

The Difference between the Voluntary and Compliance Markets

The voluntary market works a bit differently. Companies in this marketplace have the opportunity to work with businesses and individuals who are environmentally conscious and are choosing to offset their carbon emissions because they want to. There is nothing mandated here.

It might be an environmentally conscious company that wants to demonstrate that they’re doing their part to protect the environment. Or it can be an environmentally conscious person who wants to offset the amount of carbon they’re putting into the air when they travel.

  • For example: in 2021, the oil giant Shell announced the company aims to offset 120 million tonnes of emissions by 2030

Regardless of their reasoning, companies are looking for ways to participate – and the voluntary carbon market is a way for them to do just that.

Both the regulatory and voluntary marketplaces complement one another in the professional (and the personal) world. They also make the pool of buyers more accessible to farmers, ranchers, and landowners – those whose operations can often generate carbon offsets for sale.

4.1 Top Carbon Companies (Stocks, ETFs)

We list out the top 4 carbon companies of 2023 to watch in this article here. These are arguably the best carbon stocks with world class assets or management teams. We also have a list of highly curated companies to watch out for on our Stocks Watchlist page here.

5. Overall size of carbon offset markets

The voluntary carbon market is difficult to measure. The cost of carbon credits varies, particularly for carbon offsets, since the value is linked closely to the perceived quality of the issuing company. Third-party validators add a level of control to the process, guaranteeing that each carbon offset actually results from real-world emissions reductions, but even so there’s often disparities between different types of carbon offsets.

While the voluntary carbon market was estimated to be worth about $400 million last year, forecasts place the value of the sector between $10-25 billion by 2030, depending on how aggressively countries around the world pursue their climate change targets.

voluntary carbon market value size

Despite the difficulties, analysts agree that participation in the voluntary carbon market is growing rapidly. Even at the rate of growth depicted above, the voluntary carbon market would still fall significantly short of the amount of investment required for the world to fully meet the targets set out by the Paris Agreement.

6. How to produce carbon credits

Many different types of businesses can create and sell carbon credits by reducing, capturing, and storing emissions through different processes.

Some of the most popular types of carbon offsetting projects include:

  • Renewable energy projects,
  • Improving energy efficiency,
  • Carbon and methane capture and sequestration
  • Land use and reforestation.

Renewable energy projects have already existed long before carbon credit markets came into vogue. Many countries in the world are blessed with a natural wealth of renewable energy resources. Countries such as Brazil or Canada that have many lakes and rivers, or nations like Denmark and Germany with lots of windy regions. For countries like these, renewable energy was already an attractive and low-cost source of power generation, and they now provide the added benefit of carbon offset creation.

Energy efficiency improvements complement renewable energy projects by reducing the energy demands of current buildings and infrastructure. Even simple everyday changes like swapping your household lights from incandescent bulbs to LED ones can benefit the environment by reducing power consumption. On a larger scale, this can involve things like renovating buildings or optimizing industrial processes to make them more efficient, or distributing more efficient appliances to the needy.

Carbon and methane capture involves implementing practices that remove CO2 and methane (which is over 20 times more harmful to the environment than CO2) from the atmosphere.

Methane is simpler to deal with, as it can simply be burned off to create CO2. While this sounds counterproductive at first, since methane is over 20 times more harmful to the atmosphere than CO2, converting one molecule of methane to one molecule of CO2 through combustion still reduces net emissions by more than 95%.

For carbon, capture often happens directly at the source, such as from chemical plants or power plants. While the injection of this captured carbon underground has been used for various purposes like enhanced oil recovery for decades already, the idea of storing this carbon long-term, treating it much like nuclear waste, is a newer concept.

Land use and reforestation projects use Mother Nature’s carbon sinks, the trees and soil, to absorb carbon from the atmosphere. This includes protecting and restoring old forests, creating new forests, and soil management.

Plants convert CO2 from the atmosphere into organic matter through photosynthesis, which eventually ends up in the ground as dead plant matter. Once absorbed, the CO2 enriched soil helps restore the soil’s natural qualities – enhancing crop production while reducing pollution.

6.1 Who verifies carbon credits?

Visit our article here on how carbon credits are verified by the market.

7. How companies can offset carbon emissions

There are countless ways for companies to offset carbon emissions.

Though not a comprehensive list, here are some popular practices that typically qualify as offset projects:

  • Investing in renewable energy by funding wind, hydro, geothermal, and solar power generation projects, or switching to such power sources wherever possible.
  • Improving energy efficiency across the world, for instance by providing more efficient cookstoves to those living in rural or more impoverished regions.
  • Capturing carbon from the atmosphere and using it to create biofuel, which makes it a carbon-neutral fuel source.
  • Returning biomass to the soil as mulch after harvest instead of removing or burning. This practice reduces evaporation from the soil surface, which helps to preserve water. The biomass also helps feed soil microbes and earthworms, allowing nutrients to cycle and strengthen soil structure.
  • Promoting forest regrowth through tree-planting and reforestation projects.
  • Switching to alternate fuel types, such as lower-carbon biofuels like corn and biomass-derived ethanol and biodiesel.

If you’re wondering how carbon offset and allotment levels are valued and determined through these processes, take a deep breath. Monitoring emissions and reductions can be a challenge for even the most experienced professional.

Know that when it comes to the regulated and voluntary markets, there are third-party auditors who verify, collect, and analyze data to confirm the validity of each offset project.

However, be careful when shopping online or directly from other businesses – not all offset projects are certified by appropriate third parties, and those that aren’t, generally tend to be of dubious quality.

8. Voluntary vs Compulsory: The biggest difference between credits and offsets

Participation in a cap-and-trade scheme typically isn’t voluntary. Your company either needs to abide by carbon credit limits set by regulators, or no such limits exist. As more and more countries adopt cap-and-trade programs, companies increasingly need to participate in carbon credit programs.

Carbon credits intentionally add an extra onus to businesses. In return, the best cap-and-trade programs provide a clear framework for reducing carbon emissions. Not all programs are created equal, of course, but at their best, carbon credits have a clear impact on total carbon emissions.

In contrast, carbon offsets are a voluntary market.

There’s no regulation that mandates companies to purchase carbon offsets. Doing so is going above and beyond, particularly for companies operating where cap-and-trade programs don’t exist yet. Precisely for that reason, offsets provide a few advantages that credits simply don’t.

9. The Two Types of Global Carbon Markets: Voluntary and Compliance

There’s one more important distinction between carbon credits and carbon offsets:

  • Carbon credits are generally transacted in the carbon compliance market.
  • Carbon offsets are generally transacted in the voluntary carbon market.

Two types of carbon market

Global Compliance Market

The global compliance market for carbon credits is massive. According to Refinitiv the total market size is US$261 billion, representing 10.3Gt CO2 equivalent traded on the compliance markets in 2020. That further jumped to over US$950 billion in 2023 as seen in the chart below.

compliance carbon market transaction value 2023
Source: Katusa Research, Refinitiv, LSEG

Mandatory schemes limiting the amount of greenhouse gases that can be emitted have proliferated—and with them, a fragmented carbon compliance market is developing. For example, the European Union has an Emissions Trading System (ETS) that enables companies to buy carbon credits from other companies.

California runs its own cap-and-trade program, and nine states on the eastern seaboard have formed their own cap-and-trade conglomerate, the Regional Greenhouse Gas Initiative.

Companies with low emissions can sell their extra allowances to larger emitters in a compliance market.

The Voluntary Carbon Market

The voluntary carbon market for offsets is smaller than the compliance market, but expected to grow much bigger in the coming years. It’s open to individuals, companies, and other organizations that want to reduce or eliminate their carbon footprint, but are not necessarily required to by law.

Consumers can purchase offsets for emissions from a specific high-emission activity, such as a long flight, or buy offsets on a regular basis to eliminate their ongoing carbon footprint.

voluntary carbon credit retired and issued 2023
Source: Katusa Research, Refinitiv, LSEG

 

10. Corporate Social Responsibility (CSR)

Consumers are increasingly aware of the importance of carbon emissions. Consequently, they’re increasingly critical of companies that don’t take climate change seriously. By contributing to carbon offset projects, companies signal to consumers and investors that they’re paying more than just lip service to combat climate change. For many companies, the CSR benefit can often outweigh the actual cost of the offset.

11. Opportunity to maximize impact

Not every carbon credit market is created equal, and it’s easy to find flaws even with tightly regulated programs like California’s. Carbon allowances in those markets might not actually be worth as much as they say on the tin, but since participation is mandatory, it’s hard for companies to control their own impact.

In theory, purchasing carbon offsets gives companies a more concrete way to reduce their carbon footprint. After all, carbon credits only deal with future emissions. But, carbon offsets let companies address even their historical emissions of CO2e right away.

Companies can also select the types of projects that provide the greatest impact – like Blue Carbon projects, for example.

Used correctly, carbon offsets are a way for companies to earn extra PR credit and achieve a more measurable reduction in carbon emissions. Since there’s no regulatory body overseeing carbon offsets, standards companies like Verra have become influential in vetting the carbon offsets market.

12. The offset advantage: New revenue streams

There’s one more big advantage of carbon offsets.

If you’re the company selling them, they can be a significant revenue stream! The best example of this is Tesla. Yes, that Tesla, the electric car maker, who sold carbon credits to legacy car manufacturers to the tune of $518 million in just the first quarter of 2021.

That’s a huge deal, and it’s single-handedly keeping Tesla out of the red. If the market for carbon credits continues to go up, and the pricing of credits keeps increasing, Tesla and other environmentally beneficial businesses could reap huge dividends.

13. Do carbon offsets actually reduce emissions?

Both offsets and credits don’t always work as intended. Voluntary carbon offsets rely on a clear link between the activity undertaken and the positive environmental impact.

Sometimes that link is obvious – companies that use carbon capture technology to remove CO2 emissions and lock them away can point to hard numbers.

Other programs, like offsets that promote green tourism or seek to offset the damage of international travel, can be more difficult to measure. The reputation of the organization issuing the credit determines the value of the offset. Reputable carbon offset organizations choose carbon projects carefully and report on them meticulously, and third-party auditors can help ensure such projects measure up to strict standards like those established by UN’s Clean Development Mechanism.

Once properly vetted, “high-quality” offsets represent tangible, measurable amounts of reductions in CO2e emissions that companies can use like they reduced their own greenhouse gas emissions themselves. Though the company has not yet actually reduced their own emissions, the world is just as well off as if the company had actually done so.

This way, the company has bought itself more time to make its operations more environmentally friendly, while as far as the atmosphere is concerned, they already have.

14. Can you purchase carbon offsets as an individual?

Unless you represent a large corporation, you’re unlikely to be able to purchase a carbon offset directly from the source company. For now.

Instead, you’ll need to turn to one of the growing number of third-party companies that function as intermediaries. While this may seem like an added step, these companies offer a few advantages.

The best ones also work as a verification mechanism. They vet and double-check to be sure that the carbon offsets you purchase are, well, actually offsetting carbon.

  • For example: Companies such as Galaxus, which is Switzerland’s #1 online retailer, offers consumers the ability to offset the carbon footprint of their purchase.

galaxus offset carbon purchase

Carbon Footprint Calculator

Many organizations will also provide a carbon footprint calculator. You can use these calculators to determine exactly how many carbon offsets you will need in order to be carbon neutral.

For many investors, carbon offsets are a way to minimize their own carbon footprint and live an environmentally friendly lifestyle. The size of the market and the growing demand for carbon offsets indicate that there’s serious potential for companies that produce carbon credits to see large-scale growth over the next decades.

15. Do I Need Carbon Offsets or Carbon Credits?

Now that you know their differences and what they have in common, here’s how carbon credits and carbon offsets work in the grand, global scheme of emissions reduction.

The government is putting heavy caps on greenhouse gas emissions, meaning that companies will have to reconfigure their operations to reduce emissions as much as possible. Those that cannot be eliminated will have to be accounted for through the purchase of carbon credits.

Ambitious organizations, corporations, and people can purchase carbon offsets to reach net zero or even nullify all previous historical emissions.

Software giant Microsoft (MSFT), for instance, has pledged to be carbon negative by 2030, and to remove all carbon they’ve emitted since their founding by 2050.

So which do you need?

If you’re a corporation, the answer might just be “both” — but it all depends on your business goals, as well as the local regulations where your company operates. If you’re a consumer, carbon credits are likely unavailable to you, but you can still do your part by purchasing carbon offsets.

Returning to the illustration from earlier, our vital, global goal is to both stop dumping chemicals into the metaphorical water supply, and to purify the existing water supply over time. In other words, we need to both drastically reduce CO2 emissions, and work to remove the CO2 currently in the atmosphere if we want to materially reduce pollution.

16. Why should I buy carbon credits?

If you’re a corporation, there are plenty of compelling reasons as to why you should be seriously considering investing in carbon credits and offsets.

If you’re an individual looking to buy carbon credits, you’re likely interested for one of two reasons:

The first reason is that you’re environmentally conscious, and looking to do your part in combatting climate change by offsetting your own greenhouse gas emissions, or those of your family.

If that’s the case, then rest assured – carbon offsets from a reputable vendor such as Native Energy are the perfect way for you to negate your own carbon footprint.

The second reason you’re interested in buying carbon credits is because you think it represents an investment opportunity. The global carbon market grew 20% last year and that strong growth is expected to continue as climate change becomes an increasingly relevant concern to the world at large.

If you fall into the latter category, then head over to our carbon investor centre, where we showcase some of the best investment opportunities in the carbon sector right now.

17. What is Blue Carbon?

Blue Carbon are special carbon credits derived from sites known as blue carbon ecosystems. These ecosystems primarily feature marine forests, such as tidal marshes, mangrove forests and seagrass beds.

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

Mangroves at magdalena bay project carbon credits

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

  • Key Fact: Mangroves cover just 0.1% of earth’s surface

Mangrove trees create shelter and food for numerous species such as sharks, whales, and sea turtles. And thanks to their other second-order effects such as the positive impacts on corals, algae and marine biodiversity that have been so negatively impacted by activities such as over-fishing and farming, mangroves are considered to be extremely valuable marine ecosystems.

Over the past decade scientists have discovered that blue carbon ecosystems like these mangrove forests are among the most intensive carbon sinks in the world.

According to scientific studies, pound for pound, mangroves can store up to 4x more carbon than terrestrial forests.

This means that blue carbon offsets can remove enormous amounts of greenhouse gases relative to the amount of area they occupy. On top of that, they also provide a whole slew of other side benefits to their local ecosystems.

Accordingly, a blue carbon offset project will have its carbon offsets trade at a premium.

18. Second Order Effects of Blue Carbon Credits

Other positive second-order effects of mangrove forests include:

  1. Their importance as a pollution filter,
  2. Reducing coastal wave energy, and
  3. Reducing the impacts from coastal storms and extreme events.

Blue carbon systems also trap sediment, which supports root systems for more plants.

This accumulation of sediment over time can enable coastal habitats to keep pace with rising sea levels.

In addition, because the carbon is sequestered and stored below water in aquatic forests and wetlands, it’s 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 believe they will trade at a premium to other carbon credits.

Blue Carbon and the Food Footprint

There is a land-use carbon footprint of 1,440 kg CO2e for every kilogram of beef and 1,603 kg CO2e for every kilogram of shrimp produced on lands formerly occupied by mangroves. A typical steak and shrimp cocktail dinner would potentially burden the atmosphere with 816 kg CO2e if the ingredients were to come from such sources.

It’s estimated that over 1 billion tons of CO2 is released annually from degrading coastal ecosystems.

There are around 14 million hectares of mangrove aquaforests on Earth today. And many are under attack by the deforestation practices caused by intense shrimp farming

Are the shrimp you eat part of the problem? Soon, these shrimps 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 would 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.

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 ecosystem infographic

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.

Conclusion

Carbon markets provide a crucial mechanism for mitigating the climate crisis by enabling the trade of carbon credits and offsets. This system, which originated with international agreements like the Kyoto Protocol and the Paris Agreement, has evolved to include both regulatory and voluntary markets, each playing a significant role in reducing global emissions.

While carbon credits function within mandatory cap-and-trade programs to control corporate emissions, voluntary carbon offsets offer an avenue for businesses and individuals to proactively reduce their carbon footprint.

The market’s potential for growth is significant, driven by increasing consumer awareness, corporate social responsibility, and innovative solutions like blue carbon projects. These markets not only help manage emissions but also create new revenue streams and investment opportunities, making them a vital component in the global effort to combat climate change.

www.carboncredits.com

Top 3 Nickel Stocks for 2024

Carbon Credits
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Top 3 Nickel Stocks for 2024

A Critical Mineral Analysis

As we edge closer towards a more sustainable world, the demand for nickel is skyrocketing. Nickel’s inherent properties such as strength, ductility, and resistance to heat and corrosion make it indispensable across various industries, notably the production of stainless steel.

But more importantly, nickel plays a pivotal role in the makeup of the lithium-ion batteries used in electric vehicles (EVs). With its key role in clean energy transition, as well as general industrial use, nickel was added to the U.S. government’s critical minerals list in 2022.

This list is the result of the Energy Act of 2020, which defined critical minerals as those:

“essential to the economic or national security of the United States; have a supply chain that is vulnerable to disruption; and serve an essential function in the manufacturing of a product, the absence of which would have significant consequences for the economic or national security of the U.S.”

There’s a lot to chew on there, but in simple terms: critical minerals are those that the U.S. can’t function without, or those that the U.S. depends too much on antagonistic foreign powers for.

It’s not just the U.S., either – several other countries have their own critical minerals lists, such as Canada, the EU, South Korea, and Japan – and they all have nickel on them.

nickel prices

But despite a brief spike in early 2022 when the Russian invasion of Ukraine drove prices up on fears of a potential supply disruption, nickel prices have stayed fairly stable over most of the past decade, generally trading in the band between $10,000-$20,000.

Though nickel is indeed crucial to our net zero future, a healthy surplus of mine supply combined with a global slump in steel demand have offset the strong growth of the EV market (shown below), leading to nickel’s current weak price environment.

increase nickel demand

Still, though the near-term outlook for nickel isn’t strong, the green transition is expected to widen the gap between supply and demand.

International Energy Agency (IEA) Forecast

The International Energy Agency (IEA) has forecasted that at the current pace of development, nickel demand will outstrip supply by roughly 25% in 2030, yielding a more positive long-term nickel prices outlook.

In the meantime, here’s a close look at the top three nickel stocks that are poised to capitalize on this growing demand, with a focus on their production capabilities, market positioning, and forward-looking strategies.

1. Vale S.A. (NYSE: VALE) Market Cap: US$48 Billion

As the world’s second largest producer of nickel in 2023, Vale stands out with operations spanning Brazil, Canada, Indonesia, and New Caledonia.

  • Notably, the company’s Long Harbour nickel processing plant in Canada set a benchmark in low-carbon nickel production, emitting about a third of the industry’s average CO2 levels.

Last year, Vale produced 164,900 tonnes of nickel, 8% lower than the year previous but in line with guidance due to ongoing development at some of its mines.

This scale, combined with its commitment to sustainability, positions Vale robustly in the face of escalating demand, especially from the EV battery sector. The company’s strategy to expand nickel output while adhering to environmental standards makes it a compelling choice for investors focusing on sustainable growth.

The main drawback with Vale lies in the fact that the company is a diversified miner that also produces iron ore and copper. In particular, nickel only represented 8.8% of the company’s operating revenue in 2023.

Still, this inclusion of other business segments isn’t necessarily a bad thing, as it does help lower the risk of the company as an investment. Those looking for a more conservative pick that still retains exposure to the growth of the nickel market can definitely consider Vale as a pick for their portfolios.

Vale S.A.

2. Glencore plc (LON: GLEN | OTC: GLNCY) Market Cap: US$70 Billion

Next on our list is the world’s third-largest producer of nickel, UK-based Glencore. Like Vale, Glencore is a diversified miner that operates in several different markets.

Last year, Glencore produced 97,600 tonnes of nickel. While that only accounted for a modest 4.2% of Glencore’s total revenue for 2023, one thing that sets Glencore apart from Vale is that it’s significantly more diversified than the latter, with an energy segment on top of its metals and minerals segment.

Glencore’s broad mandate combined with its size make it a relatively safe investment, and the company has done very well since the post-COVID market lows. The company has also received positive attention for its very aggressive emissions reduction targets that include a 25% reduction in Scope 1, 2, and 3 emissions by the end of 2030 and a 50% reduction by year-end 2035 against a 2019 baseline.

Many major companies still refuse to even report Scope 3 emissions, let alone set near-term emissions reduction targets for them, so Glencore is definitely ahead of the curve with their climate action plan.

Last but not least, Glencore’s primary listing on the London Stock Exchange makes it easier for Europe-based investors looking for nickel exposure, though the company also has foreign ordinary shares and ADRs listed on the U.S. OTC market.

Glencore

3. Canada Nickel Company (TSXV: CNC | OTC: CNIKF) Market Cap: US$160 Million

Finally, our last company is one for aggressive investors with a healthy appetite for risk, who are looking for more direct exposure to the growth of the nickel market compared to the diversified miners mentioned above.

Canada Nickel is a junior nickel miner based out of – you guessed it, Canada. While this may not seem like it warrants a special mention, it’s worth noting that the U.S. imports over 40% of its nickel from its northern neighbour. This makes Canada an extremely attractive jurisdiction for nickel producers, as a major buying market is only a short hop across the border.

The Crawford Nickel Project

The company has done an excellent job of consolidating nickel projects in the historically prolific Timmins mining camp in Ontario, one of the largest gold mining districts in the world. While nickel has traditionally been mined primarily as a by-product in the area, Timmins has struck proverbial gold with its flagship Crawford Nickel Project.

  • Right now, Crawford is actually the world’s second nickel operation by reserve size. Based on its bankable feasibility study, it’s projected to be the third largest nickel mine in the world in terms of annual production once it’s built.

Currently, Canada Nickel is still finishing the funding and permitting process for Crawford. The final decision on whether or not to build the mine is expected to happen mid next year, with first production expected by year-end 2027 if all goes according to plan.

Though Canada Nickel has acquired a number of other projects in the area, Crawford is definitely the main draw here. It’s expected to be a low-cost mine with robust economics and a lengthy 41-year mine life. The company’s novel approach to carbon storage, integrated into its mine plan, would also make Crawford not just a low-carbon-emission mine, but actually net carbon negative over its lifetime.

As good as all this sounds, however, it’s important to remember that as a junior miner that isn’t even producing any nickel yet, Canada Nickel is a highly speculative investment that should only be considered by investors with high risk tolerance.

While a number of major companies already have their eyes on Canada Nickel, with big names like Agnico Eagle, Samsung, and Anglo American taking significant ownership stakes, there’s no guarantee that Canada Nickel will be able to secure the funding and permits necessary to build a mine at Crawford, or that the company will succeed even if they do.

Still, if you’re looking for an investment with pure play exposure to nickel and have the right risk profile, Canada Nickel is one company you don’t want to miss.

Canada Nickel Company

A Brief Note on Norilsk Nickel (Nornickel)

Now, those of you who’ve looked at the companies above might be wondering something: why wasn’t the world’s largest nickel producer, Norilsk Nickel a.k.a. Nornickel, included?

Unfortunately, despite its attractiveness as the world’s largest nickel producer that’s also the closest thing you can get to a pure play major, there’s one major issue with Nornickel: it’s a Russian company.

Following the Russian invasion of Ukraine in 2022, Nornickel was one of several companies sanctioned by the West, leading to the stock getting delisted from both the American as well as the London stock markets.

As of June 2024, Nornickel is still listed on the Moscow Exchange. However, given that the Russian government has restricted foreign investors in “unfriendly” countries from buying and selling securities on the Moscow Exchange, the company is inaccessible to the average investor for the foreseeable future.

Nickel’s Importance in a Zero Emissions World

The global transition towards renewable energy and the exponential growth of the EV market are key drivers for demand growth for nickel. And lets not forget about lithium’s importance in “lithium ion” batteries along with nickel for new EVs.

RELATED: LiFT Power ($LIFFF), a fast developing North American lithium junior, is worth a look in the lithium space. 

lithium ion

The companies listed above aren’t just mining firms – they’re also strategic players in the global shift towards sustainable energy. Investing in these stocks offers potential exposure to a critical resource that powers both today’s industries and tomorrow’s technologies.

Each company’s focus on expanding production capabilities while maintaining environmental and ethical standards provides a strong foundation for growth.

As the net zero transition continues accelerating the pace of EV adoption and hence the growth of the nickel market, make sure you keep your eyes on these three companies.

$100B Carbon Market Could Drive $700B Annual Investments in Projects

Jennifer L
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$100B Carbon Market Could Drive $700B Annual Investments in Projects

A new report from a carbon rating company, BeZero Carbon, reveals that a $100 billion carbon market could protect 150 million hectares of land, equivalent to the size of Peru, and drive $700 billion annual investments in carbon projects. 

The report, “$100bn for Planet and People,” highlights the potential environmental and economic benefits of a global carbon market of this scale. BeZero also estimates that such a market could support 12.4 million jobs in forestry, nearly 3 million in sustainable agriculture, 310,000 in renewables, and 50,000 in adjacent industries.

Tommy Ricketts, CEO and co-founder of BeZero Carbon, stated: 

“A $100bn project-based carbon market would deliver immense benefits for the planet and people. It means companies spending billions on new technologies and land restoration, supporting more jobs than the oil and gas sector while reducing our global footprint.”

From Forests to Farmlands: Diverse Activities Generating Carbon Credits

Today, over 50 types of activities generate carbon credits, ranging from forestry and mangroves to methane capture and soil carbon sequestration. And the number is steadily increasing. 

Each carbon credit represents one tonne of carbon dioxide or another greenhouse gas equivalent (CO2e) mitigated by a specific activity over a defined period. 

This expanding array of carbon credit-generating activities highlights the versatile approaches available to combat climate change. It underscores the growing importance of the voluntary carbon market (VCM) in global emission reduction efforts.

The market has seen massive growth in 2021 but concerns over carbon credit integrity impacted the market. Issuances have dropped in two consecutive years as shown in the chart below. 

voluntary carbon credit retired and issued 2023

Still, forecasts are positive for the VCM’s growth as the world strives to mitigate climate change and cut carbon emissions.

BloombergNEF projects that the global carbon market will surpass $100 billion by the mid-2030s. The analyst also estimated demand for credits to reach 2.5 billion annually at an average price of $40. 

How a $100B Market Drives Emission Reductions

The report provided several relevant insights into what the $100 billion carbon credit market could offer. Here are some key findings that the entire sector should know. 

  1. A $100B carbon credit market in the mid-2030s could finance emissions removal projects delivering about 20% of the carbon removals needed for a 1.5-degree Celsius pathway, according to the Paris Agreement. Such a market would focus on projects like reforestation, Direct Air Capture (DAC), and Bioenergy with Carbon Capture and Storage (BECCS). 
  2. The market could drive $700 billion in annual investments into carbon projects, a ratio of 7:1. The revenue from carbon credits makes these projects viable, unlocking essential institutional capital, especially for technologies that need substantial upfront and operational investments like DAC. Without carbon credits, these projects would struggle to attract the necessary funding to reduce and remove carbon emissions effectively.
  3. The report suggests that in a $100B market, retired carbon credits will reduce or remove around 1.2 billion tonnes of CO2e emissions annually. This represents a significant environmental impact, equivalent to about 3% of current global emissions. This is equal to Japan’s annual emissions and one-and-a-half times that of the entire global aviation industry. 
  4. The $100 billion carbon credit market could finance nature-based projects covering around 150 million hectares, equivalent to 30% of global forest loss since 2000 and larger than Peru. These projects, such as afforestation in Brazil, blue carbon in Indonesia, and soil carbon initiatives in the US, support endangered species, protect coastal areas, and improve soil health. 

BeZero $100B carbon credit market report

By preserving and rebuilding diverse ecosystems, carbon credits contribute significantly to global environmental sustainability and biodiversity.

Moreover, these credits, based on conservative risk adjustments, ensure genuine emissions reductions and removals. As such, this underscores their role in mitigating climate change by effectively offsetting substantial amounts of greenhouse gas from various sectors.

Clearing The Path to Expansion

But to achieve a $100 billion market, rapid expansion is needed, addressing recent issues with carbon credit projects and enhancing verification and certification services. The report calls for integrating voluntary carbon credits into compliance markets, clear regulatory definitions, and operationalizing international carbon markets under Article 6 of the Paris Agreement.

The Science Based Targets Initiative (SBTI) is considering allowing carbon credits for companies’ Scope 3 emissions, potentially impacting six gigatonnes of CO2e. If approved, this could value the global carbon market at $100 billion annually.

The report also urges corporates to adopt internal carbon prices and project developers to enhance high-quality project delivery.

While supporters believe this approach could boost investment in carbon removal projects, critics worry it may undermine the integrity of science-based targets and reduce pressure on companies to cut supply chain emissions.

The potential of a $100 billion carbon credit market extends far beyond just economic benefits. By protecting 150 million hectares of land and creating millions of jobs across various sectors, such a market could drive substantial environmental and social progress. Addressing verification and certification challenges, integrating carbon credits into compliance markets, and enhancing high-quality project delivery are crucial steps toward realizing this vision. 

Lithium Prices Fall to 35-Month Low Amid Surging EV Sales

Jennifer L
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Lithium Prices Fall to 35-Month Low Amid Surging EV Sales

Lithium prices plunged below $13,000/ton in June 2024, the lowest in 35 months, according to S&P Global Commodity Insights data. This is despite plug-in electric vehicle (PEV) sales across major markets have surged for the first 5 months. 

Lithium Prices Hit New Lows 

Lithium is the key element in manufacturing electric vehicles. Though lithium prices saw a slight increase in March, they declined in June 2024, driven by anticipated reductions in downstream battery production. The seaborne lithium carbonate CIF Asia price fell to a 35-month low of $12,900 per ton by June 18. 

lithium prices June 2024

Source: S&P Global

Similarly, spodumene prices dropped by 9.5% to $1,050 per pound FOB-Australia, causing the merchant conversion margin to turn negative, averaging minus $118 per ton in June from $7,027 per ton in May.

Further decreases in spodumene prices are needed to prompt new mine-side supply cuts, last seen when prices fell below $900 per ton between mid-January and end-February.

Despite low prices, government interest in securing lithium production remains strong. Indonesia is emerging as a significant player in lithium chemicals production, integrating raw material-to-PEV supply chains. Chengxin started trial lithium chemical production in Indonesia in June, following the shipment of the first spodumene cargo from Port Hedland to Indonesia in May. 

Additionally, the Serbian government is considering greenlighting the Jadar lithium project by Rio Tinto, which was previously halted in January 2022. This project would be Europe’s largest integrated lithium mine-to-refinery operation. It has a capacity of 58,000 metric tons of lithium carbonate, helping meet the EU’s battery metals demand.

And it’s not the EU, the rest of the world is vying for lithium as the global economy is ramping up electrification in transport. 

Government Initiatives and Global Lithium Demand

In May 2024, PEV sales across key markets increased by 14.7% month-over-month and 25.9% year-over-year for the first five months, per S&P Global report. 

China dominated, contributing nearly 90% of this growth, buoyed by new model launches and price discounts. Conversely, Germany and Norway saw declining sales, negatively impacting Europe’s top markets.

PEV sales growth in 2024

Source: S&P Global

In Europe and the US, PEV adoption is stalling due to the higher costs of battery electric vehicles (BEVs) despite brand discounts. Germany’s BEV sales dropped by 15.9% year-over-year after the environmental bonus ended in December 2023. BEV sales in the UK comprised 16% of total car sales but missed the 22% target under the 2024 zero-emissions vehicle mandate. 

In the US, PEV sales have remained at 8%-10% of vehicle sales in 2024, consistent with late 2023 levels. More affordable models, especially in the $20,000 range, are needed to boost uptake in these markets.

From July 4, the EU will impose tariffs on imported BEVs from China, increasing up to 48.1% from the current 10%. The bloc aims to protect the European automotive industry and encourage local BEV production. However, this move might hinder the EV transition. 

Between 2020 and 2023, BEV imports from China to the EU rose sevenfold. They’ve reached over 437,800 units in 2023, representing 28% of the 1.5 million BEVs sold in the bloc. These imports contained significant amounts of lithium carbonate equivalent (21,300 metric tons).

Accordingly, the EV revolution hinges on how the lithium market is moving forward and its forecasts.

Future Outlook for Lithium Market

Lithium prices have not shown signs of sustained recovery as the first half of 2024 ends. China’s reserve-buying of cobalt metal in May provided only short-lived support. Prices reached new multi-year lows in June due to summer’s downturn in battery demand and growing supply. 

So, what’s in store for lithium in the coming months and years?

According to S&P Global lithium market outlook, prolonged low lithium carbonate prices are likely to pressure spodumene prices, potentially leading to further mine supply cuts and project delays. 

Despite strong copper prices supporting cobalt by production and growing mine-side inventory, reduced consumer demand for PEVs has prompted many manufacturers to slow their EV targets and cancel new battery plants, like BMW’s €2 billion contract with Northvolt AB.

Higher import tariffs on China-made BEVs could slow EV transition in the EU and the US by making vehicles more expensive. The outcome of EU-China trade negotiations is crucial, as Europe balances relations with China and the US. The latter’s tax credits and funding attracting investments away from Europe, which is still building its support system.

Market surpluses for lithium would be larger in 2024, with forecasts of 38,000 metric tons LCE. Consequently, the lithium carbonate CIF Asia price forecast has been downgraded by $290/t to $14,129/t.

lithium price forecast 2028

Source: S&P Global

A seasonal recovery in PEV sales is expected from September through year-end, which could narrow market surpluses and support prices. The long-term outlook for PEV uptake remains positive as automakers launch more affordable vehicles in the $20,000 range.

The future of the lithium market remains uncertain, with potential for further supply cuts and project delays. However, the long-term outlook for PEV uptake remains positive as automakers launch more affordable vehicles, potentially narrowing market surpluses and supporting prices.

Howden Pioneers First-of-Its-Kind Carbon Credit Insurance W&I

Jennifer L
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Howden Pioneers First-of-Its-Kind Carbon Credit Insurance W&I

Howden, a London-based insurance intermediary group, has launched the first carbon credits warranty and indemnity (W&I) insurance policy. This policy covers the sale of carbon credits for Mere Plantations’ reafforestation project in Ghana, which rehabilitates degraded forest lands. A leading managing general agent underwrites the policy.

This milestone is pivotal for the voluntary carbon market, as it significantly boosts trust in the quality of carbon credits. It can potentially attract more investors into the market. 

Insurance’s Role in Climate Finance

The insurance sector, one of the largest pools of non-governmental capital globally, is crucial for funding infrastructure projects. In 2017, insurance companies faced $140 billion in climate-related infrastructure losses. 

A climate policy expert, Dr. Leah Stokes projected that the US alone would incur $500 billion in climate disaster costs in 2021. Lloyds of London reported that sea level rise increased Superstorm Sandy’s New York insurance losses by 30%. 

Additionally, over $500 billion of US coastal property could be underwater by 2100. These risks call for sector reform, redirecting trillions towards climate impact reduction. Without a carbon reduction plan, assets may not qualify for insurance coverage.

Additionally, the global economic losses attributed to weather and climate change are exploding. As seen below, it reached almost $1.5 billion between 2010 and 2019 timeline.

climate change cost or losses

The financial world is now recognizing the value of insuring climate-related projects. In 2022, Howden launched the first-ever carbon credit insurance to boost confidence in carbon markets. 

The largest European broker believes the VCM has a vital role in the world’s transition to a low-carbon economy. It just announced its first carbon credits Warranty and Indemnity (W&I) insurance policy for the forestry project of Mere Plantations. The UK-based company manages a teak plantation with 3+ million trees in Ghana, West Africa. 

By employing insurance as a governance tool, the W&I policy enhances the credibility and value of carbon credits. Mere Plantations can now assure buyers that their credits meet stringent environmental, social, and financial standards, supported by an insurance policy that guarantees their authenticity.

Charlie Pool, Head of Carbon Insurance at Howden, emphasized that insurance guarantees the credibility of carbon credits, attracting higher values and encouraging further project development. He further remarked that:

“The carbon markets are the best tool we have for putting a price on emissions. Traditionally held back by poor governance, the voluntary market can now be improved using market-based mechanisms.”

Leveraging Underwriting Expertise for Green Projects

The policy also allows project developers to leverage the underwriting expertise of the M&A insurance market, ensuring confidence in their carbon credit projects’ methodology and implementation. Recognizing this added protection and the high quality of the credits, buyers are willing to pay a premium compared to other reafforestation projects. 

Uniserve, a UK-based logistics company, is the first to purchase these credits.

This development follows other Howden-led initiatives, including the first voluntary carbon credit insurance product in 2022. It has also an insurance product covering carbon dioxide leakage from commercial-scale carbon capture and storage facilities in January 2024.

Mark Hogg, CEO of Mere Plantations, highlighted their mission to make reestablishing degraded forest land a viable commercial enterprise without aid or government intervention. He noted that this insurance offer unlocks the carbon market’s potential, aiding their mission.

Gary Cobbing, Uniserve’s Group Chief Commercial and Operating Officer, expressed confidence in the partnership with Mere Plantations, saying:

“Mere Plantations shares Uniserve’s commitment to sustainability and integrity, making them an ideal source for our investment in carbon credits as part of our ongoing carbon reduction plan.”

The Growing Carbon Credit Insurance Market

Howden isn’t the only big player in the burgeoning carbon credit insurance space. 

A UK-based carbon credit insurance startup Kita Earth offers policies for carbon removal credits. And market experts foresee new players joining soon propelled by the projection that it will become a billion-dollar market. 

According to an industry report, the carbon credit insurance market could reach around $1 billion in annual Gross Written Premium (GWP) by 2030, potentially growing to $10-30 billion by 2050. 

carbon credit insurance market

However, this may underestimate the market’s potential as it focuses only on the VCM and excludes the compliance market. In 2023, global compliance carbon markets were valued at over $900 billion, influenced by policy changes and geopolitical factors. 

The VCM was valued at $2 billion in 2022, but Abatable estimated $10 billion worth of deals that year, suggesting investment was 5x the value of issued carbon credits. A Barclays Special Report predicts the VCM could grow to $250 billion by 2030, although estimates vary widely from $10 billion to $250 billion. 

The report suggests that insurance can offer four key benefits to carbon markets: 

  • Balancing risk and innovation,
  • Boosting confidence,
  • Assessing project risks, and
  • Encouraging risk-taking.

Indeed, the rapidly evolving carbon markets present a complex landscape with unique risks and significant challenges. Introducing insurance mechanisms like that of Howden’s W&I policy can effectively address these risks, enhance investor confidence, and stimulate increased investment. This will enable the markets to scale at the necessary rate to align with global carbon emission reduction targets.

Paladin Energy Offers C$1.14 B to Canada’s Fission Uranium. What does it mean for Uranium Mining?

Saptakee S
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Paladin Energy Offers C$1.14 B to Canada’s Fission Uranium. What does it mean for Uranium Mining?

Australian uranium mining giant Paladin Energy Ltd. has announced a C$1.14 billion ($833 million) all-stock offer to acquire Canadian mining firm Fission Uranium Corp. Using uranium in nuclear power significantly contributes to achieving climate goals by providing reliable energy that reduces the global carbon footprint. Thus, this deal can bring a paradigm shift in uranium mining.

Canada: A Beacon of Nuclear Excellence

The acquisition will grant Paladin control over a top-tier mining project, located in western Canada’s Athabasca Basin, situated in Saskatchewan. This region is rich in high-grade uranium. Fission’s asset is set to begin operations in 2029, with an expected annual production of 9.1 million pounds of uranium over 10 years.

According the Paladin’s press release, the Transaction is targeted to close in the September 2024 quarter on meeting all the conditions under the Agreement. Paladin CEO Ian Purdy, is highly optimistic, noting,

“The rationale is very compelling. We see this as a fantastic asset. Regardless of where the uranium cycle is or how the industry’s doing, the combination of these two companies just makes fundamental sense.”

He further added that Fission is a natural fit for Paladin’s portfolio with the shallow high-grade Patterson Lake South (PLS) project located in Canada’s Athabasca Basin. The addition of PLS creates a leading Canadian development hub alongside Paladin’s Michelin project, with exploration upside across all Canadian properties.

URANIUMsource: Bloomberg

Paladin and Fission Merger Advantages

The merger of Paladin and Fission will establish a leading clean energy company, providing these benefits to shareholders of both companies:

  • Enhanced project development pipeline.
  • Multi-asset production projected by 2029.
  • Diversified presence across top uranium mining regions in Canada, Namibia, and Australia.
  • Increased exposure to favorable long-term uranium market fundamentals.
  • Expanded scale and global profile for Paladin with a TSX listing.

Furthermore, Fission shareholders are poised to benefit directly from the JV. They will get an attractive 30% premium to Fission’s 20-Day Volume-weighted average price (VWAP) and the opportunity to participate in Paladin’s future expansion plans.

Uranium Powerhouse- Paladin’s Path to Global Leadership

Paladin, an ASX 200-listed premier uranium company based in Perth, Western Australia, holds a 75% stake in the Langer Heinrich Mine (LHM) in Namibia. This mine has generated over 43 Mlbs of U3O8 and is poised for a robust return to production. The initial volumes are scheduled to be processed on 30 March 2024. After the Transaction closes, Fission shareholders will hold a 24.0% stake in Paladin. It is expected to have a market value of around US$3.5 billion.

The company boasts a diversified, high-quality uranium exploration and development portfolio in top mining regions, including Canada and Australia.

Paladin is dedicated to reducing carbon emissions and adopting nuclear energy. It supports strong nuclear safeguards for the peaceful use of nuclear materials to generate zero-emissions electricity.

As the Langer Heinrich Mine (LHM) resumes production, it will measure, track and report its emissions. Paladin strongly emphasizes sustainability managing their Scope 1 and Scope 2 carbon emissions.

Notably, Paladin does not face the Scope 3 emissions challenge, as nuclear power plants produce no greenhouse gas emissions during operation. They also predict that LHM’s uranium production will prevent approximately 1.3 BT of CO2 emissions, compared to equivalent coal-fired electricity generation.

Ian Purdy has significantly highlighted that the price of uranium has spiked <3x in the past five years. It surged further following the Russia-Ukraine war, highlighting the urgent need for alternative reactor fuel sources. Thus, he anticipates more uranium deals ahead.

Fission’s Athabasca Basin, a Geographical Bounty

Fission is among several junior mining companies, such as NexGen Energy Ltd. and Denison Mines Corp., developing projects in the Athabasca Basin. This area has become a mining hotspot due to rising supply concerns and increasing global interest in nuclear power as a sustainable alternative to fossil.

Located in Saskatchewan’s Athabasca Basin, PLS is home to the Triple R deposit. It is recognized as the region’s largest high-grade uranium reserve close to the surface. We discovered from the company’s Feasibility Study that Triple R has the potential to become one of the lowest-cost uranium mines globally. It also unveils its unique strategic position along all-weather Highway 955. It traverses the UEX-AREVA Shea Creek deposits and leads to the historical Cluff Lake uranium mine. These advantages make it one of the world’s most productive uranium mining regions.

Fission UraniumSource: Paladin

Due to its shallow nature, the PLS project offers flexibility for development through underground mining, open pit mining, or a hybrid approach. Considering sustainability, , Fission has chosen to pursue an underground-only mining strategy after deep consultation with local communities. This approach allows the company to fully extract the deposit while benefiting from reduced CAPEX and a minimized environmental impact.

Fission CEO Ross McElroy said that while the region holds high concentrations of uranium. Only a few companies have the expertise to explore and develop such projects. Undoubtedly, Paladin is one of them.

He further commented,

“Having worked the majority of my geology career in the Athabasca Basin, I can tell you that it takes a great deal of expertise to properly explore and make discoveries like this one.”

Nvidia Is the World’s Most Valuable Company, Giving Nuclear Power A Big Lift

Jennifer L
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Nvidia Is the World’s Most Valuable Company, Giving Nuclear Power A Big Lift

Nvidia, a leading chipmaker, has seen an extraordinary rise in market value, surpassing Microsoft and Apple, driven by its dominance in AI and accelerated computing. As Nvidia’s stock soars, the energy demands of AI have brought one clean energy into focus as a critical solution for sustainable growth: nuclear power.

Nvidia’s Meteoric Rise and Net Zero Game

In May last year, Nvidia, valued at about $750 billion, announced its first fiscal quarter results for 2024. Revenue grew by 19%, and net income rose by 26%, showing positive but not exceptional performance. What stirred excitement was Nvidia’s forecast for the next quarter, predicting a 65% revenue increase. 

CEO Jensen Huang highlighted the company’s leadership in accelerated computing and generative AI, predicting a significant shift in global data center infrastructure towards these technologies. Investors interpreted this as Nvidia seizing a trillion-dollar opportunity, driving its stock price to record highs.

The following day, Nvidia’s market cap surged by nearly $200 billion, marking the start of an unprecedented rally. By June 2023, Nvidia’s market cap surpassed $1 trillion, reaching $2 trillion on March 1, 2024, and surpassing $3 trillion just over three months later. Recently, after a stock split, Nvidia’s market cap at $3.34 trillion, soared past Microsoft and Apple, making it the world’s most valuable company.

Nvidia most valuable company

Nvidia’s standout metrics include its high gross margin of 78.4% in the latest quarter, compared to 46.6% for Apple and 70.1% for Microsoft. Moreover, Nvidia’s revenue growth over the past year was remarkable at 208%, contrasting with Apple’s 1% decline and Microsoft’s 14% growth, according to Statista.

While investors enjoyed this quick ascent, questions remain about whether Nvidia’s current high valuation would be long-term. More so, some environmental critics are questioning the company’s climate commitments and net zero targets. 

In Nvidia’s FY2023 Corporate Responsibility Report, the company outlines its key sustainability goals and metrics:

  • By the end of fiscal year 2025, and annually thereafter, Nvidia aims to achieve and maintain 100% renewable electricity for its offices and data centers under its operational control.
  • Nvidia’s Blackwell GPUs, introduced in March 2024, are reported to be generally 25x more energy-efficient than traditional CPUs for certain AI and high-performance computing (HPC) workloads.
  • Nvidia technologies currently power 23 of the top 30 systems on the latest Green500 list.

Apart from these, however, there’s no clear net zero strategy outlined in the chipmaker’s report, only Nvidia’s greenhouse gas emissions.

The Environmental Footprint of AI and Chips

Some believe Nvidia is poised at the forefront of the AI boom. And as AI capabilities improve and expand, so does its need for energy to fuel its exponential rise.

Notably, the environmental impact of using chips is well-documented. Researchers from Lancaster University estimate that information and communications technologies, including data centers, contribute between 1.8% and 2.8% of global greenhouse gas emissions. 

The International Energy Agency predicts that the sector’s electricity consumption could double from 2022 to 2026, reaching 4% of global demand, equivalent to Japan’s current energy use. This rising demand has slowed the retirement of coal-fired power plants, according to Bloomberg.

Less understood is how to mitigate the energy and environmental impact of manufacturing advanced chips used in data centers and large AI models.

A chip’s carbon footprint spans its entire production chain, from mining essential metals to using 1000-degree Celsius ovens during fabrication, and its energy use throughout its lifespan.

chip carbon emission sources semiconductor environmental footprint

Advanced chips, which feature wires as thin as 10 nanometers (one-thousandth the diameter of a human hair), require high-energy photons with short wavelengths for fabrication. State-of-the-art lithography processes contribute significantly to the carbon footprint of modern computing.

In an analysis by Gage Hills, Assistant Professor of Electrical Engineering at Harvard John A. Paulson School of Engineering and Applied Sciences, the energy needed to manufacture a computer chip can surpass the amount it consumes over its entire 10-year lifespan. 

Great Power Comes Great Energy Demand

The excitement around AI has further intensified, alongside projections that global spending on AI will exceed $300 billion by 2027. This surge has reignited interest in renewable energy sources to address the soaring demand for power while keeping environmental impact in mind.

More remarkably, it thrust nuclear power into the spotlight as a viable, clean energy source capable of meeting the immense energy demands of making chips and AI infrastructure. The U.S. nuclear fleet would play a crucial role in meeting these rising power needs by 2030. 

  • In Texas alone, data centers have requested the equivalent energy output of 41 nuclear power plants to sustain their operations.

Silicon Valley giants such as Microsoft’s Bill Gates, Amazon’s Jeff Bezos, and numerous venture capital firms have invested in nuclear startups to support their data center operations. OpenAI’s CEO, Sam Altman, underscored the urgency, describing a “desperate need for as much energy as we can manufacture.”

Investors eyeing opportunities in AI typically focus on ETFs containing semiconductor, cloud computing, and cybersecurity firms. However, they also have huge interest in utilities operating nuclear power plants and shares linked to nuclear power generation and its fuel uranium.   

Nuclear power’s appeal lies in its ability to provide compact, reliable, weather-independent electricity through fission, making it ideal for powering AI data centers. This demand is boosting uranium prices worldwide as supply struggles to keep pace.

These developments promise to redefine nuclear energy’s role in the global energy landscape, potentially aiding in significant decarbonization efforts.

Nvidia becoming the world’s most valuable company is further lifting nuclear power up to match the energy demand of the chipmaking industry. Yet, the world is also waiting when, or if, Nvidia will share its net zero strategy.

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