Is Biden’s $8 Billion American Climate Corps Budget Worth It?

President Joe Biden has submitted a request to Congress for $8 billion to fund a New Deal-inspired jobs program, the American Climate Corps, aimed at combating climate change across the United States. 

The proposal, outlined in the president’s 2025 budget, entails allocating the fund over a decade to support the hiring of 50,000 new workers annually by the year 2031. The initiative comes in response to President Biden’s recent pledge to triple the workforce of the American Climate Corps program. It serves as the climate army of the current administration, while opponents call it a “woke and wasteful program”.

In the ongoing battle against climate change, the program emerges as both a beacon of hope and a lightning rod for controversy. Its supporters champion its potential to create jobs and combat environmental challenges. However, critics question its efficacy, funding sources, and long-term impact. 

The program seeks to emulate the spirit of the Green New Deal by providing employment opportunities to young individuals. It garnered support from Democratic lawmakers including Representative Alexandria Ocasio-Cortez and Senator Ed Markey.

About $10 billion initially designated for the program was omitted from President Biden’s landmark climate legislation, the Inflation Reduction Act. However, last September, the White House announced a scaled-back version of the initiative. 

What is the American Climate Corps Program?

Introduced in 2023, the ACC represents the latest initiative aimed at bolstering employment opportunities within the emerging clean energy sector. It was originally envisioned to engage 1.5 million young people.

The program collaborates with federal agencies such as the Department of the Interior, Department of Labor, and Department of Energy, as well as organizations like AmeriCorps, to facilitate recruitment and training processes. It aims to provide training to young  Americans, equipping them with the skills necessary for roles in various areas. These include the following:

  • Restoring coastal wetlands
  • Building community resilience against natural disasters
  • Deploying renewable energy infrastructure, and 
  • Implementing energy-efficient appliances. 

The administration intends to recruit around 20,000 individuals to perform these various roles.

According to the White House, around 50,000 Americans have expressed interest in participating in the job training program. The program offers opportunities for young people to earn $15 per hour while acquiring skills in wildfire prevention, forest management, and other areas.

President Biden’s American Climate Corps draws inspiration from the former Pres. Roosevelt’s Civilian Conservation Corps. It’s a New Deal program launched in 1933 to combat the Dust Bowl and the Great Depression challenges.

American Climate Corps aka Civilian Climate Corps
Civilian Climate Corps

The Pros and Cons of the ACC Program 

However, the new Climate Corps has faced criticism from Congressional Republicans, who are unlikely to approve it in its current form. The conservative think tank Americans for Tax Reform has publicly criticized the program. Grover Norquist, the president of the organization, characterized the program as constructing an “extralegal political machine” using taxpayers’ money.

In gist, here are the benefits and challenges of the current administration’s American Climate Corps program.

The Pros of ACC:

  • Job Creation. The ACC aims to create over 20,000 new jobs by training them in various fields related to climate change mitigation and clean energy.
  • Addressing Climate Change. The program focuses on combating climate change by undertaking tasks such as restoring wetlands, building resilience against natural disasters, deploying renewable energy, and promoting energy-efficient practices.
  • Incentives and Collaboration. It incentivizes participation through programs like AmeriCorps and fosters collaboration between federal agencies, states, labor unions, nonprofits, and private sectors to address the climate crisis.
  • Potential for Economic and Environmental Benefits. The program not only creates job opportunities but also helps in mitigating the effects of climate change. Thus, it can potentially satisfy both economic and environmental objectives.

The Cons of ACC:

  • Dependence on Participation. Success of the program relies on the willingness of young Americans to undergo the necessary training, which may not be universally embraced.
  • Lack of Specifics. There’s criticism regarding the lack of clarity on how the program will effectively combat climate change and reduce emissions, leading to uncertainty about its long-term impact.
  • Political Opposition. Some individuals, particularly Republicans, may oppose the transition to clean energy jobs, which could affect the program’s implementation and support, especially in the context of upcoming elections.
  • Uncertainty of Effectiveness. While the program is seen as a positive initiative, its effectiveness and worthiness of government funding remain uncertain without detailed plans on how it will achieve its goals and address the environmental crisis.

In conclusion, the American Climate Corps Program offers potential benefits such as job creation and climate change mitigation. However, its success hinges on addressing challenges like participation, clarity of objectives, political opposition, and demonstrating effectiveness in achieving its goals. So long it tackles these concerns, the program could be worth funding. 

What’s Inside the US President’s 2025 Budget for Climate?

The Biden-Harris Administration has unveiled the President’s Budget for Fiscal Year 2025, marking a continuation of the administration’s efforts to advance economic growth, address inflation concerns, and bolster key social programs. Notably, the budget outlines a substantial increase of almost $27 billion for climate programs across various US agencies. It also includes funding for international climate finance initiatives. 

One significant aspect of the budget is the Department of Energy’s (DOE) allocation, which sees historic investments aimed at laying the groundwork for a clean and equitable energy economy. These investments are intended to support the United States in achieving its goal of reaching net zero emissions by 2050.

Secretary of Energy Jennifer Granholm emphasized the administration’s aim to create an inclusive clean energy economy that benefits all communities. She remarked that:

“President Biden’s budget request reflects his commitment to building a clean energy future that is made in America, powered by American workers.”

The document outlines how the 2025 budget would address climate crisis through clean energy innovation, resilience, and resource protection. Here are the key budget items and highlights to take note.

Lowering Energy Costs in Rural Areas

The budget aims to build upon the President’s Inflation Reduction Act, aiming to reduce energy expenses for households, expand clean energy initiatives, overhaul rural power production, and generate numerous well-paying jobs across rural America. 

Funding is allocated for loan guarantees for renewable energy systems and energy efficiency enhancements for farmers and small rural enterprises. It also includes support for rural electric loans to promote additional clean energy projects, energy storage, and transmission initiatives.

Investing in Clean Air and Health

The proposed budget allocates $1.5 billion for the Environmental Protection Agency’s Office of Air and Radiation. The goal is to continue the development of national programs, policies, and regulations focused on controlling air pollution and radiation exposure. 

Additionally, $8.2 billion is earmarked for the DOE to address legacy waste and contamination in communities. There’s also funding for toxic substances control enforcement by the EPA. These investments are aligned with the Justice40 Initiative, aimed at benefiting disadvantaged communities.

Creating Jobs with Clean Energy Infrastructure

A significant portion of the budget, amounting to $1.6 billion, is designated for the Department of Energy to support clean energy workforce and infrastructure projects nationwide. This includes the following initiatives:

  • Weatherizing and retrofitting homes for low-income individuals ($385M), 
  • Manufacturing clean energy components domestically ($113M), 
  • Transitioning Tribal homes and institutions to renewable energy ($95M), and 
  • Bolstering the resilience of the grid to integrate clean energy sources ($102M). 

These efforts would create employment opportunities while advancing the administration’s climate goals.

Building Clean Energy Innovation Pipeline

The budget further allocates $8.5 billion to DOE for advancing clean energy innovations, targeting areas like offshore wind, industrial heat, sustainable aviation fuel, and grid infrastructure. Over $325 million supports research on sustainable critical minerals and materials essential for clean energy technologies. 

Additionally, $76 million funds methane leak detection technologies, and $150 million supports advanced nuclear reactor demonstrations with high-assay, low-enriched uranium (HALEU). It also provides $30 million to accelerate commercial demonstration projects via national laboratories.

Enhancing Climate Resilience 

The budget proposes an investment of $23 billion in climate adaptation and resilience efforts across the federal government. The focus is on mitigating the impact of extreme weather events fueled by climate change. 

Funding will support initiatives to assist the wildland firefighting workforce, aid farmers, ranchers, and forestland owners in adapting to climate change while conserving natural resources, and advance climate resilience strategies nationwide.

Expanding American Climate Corps (ACC)

Last year, the Administration unveiled the ACC, aiming to mobilize a diverse cohort of over 20,000 workers dedicated to advancing clean energy, conservation, and climate resilience efforts. Now, in 2024, the first cohort of ACC members would embark on their service. 

The budget includes mandatory funding to expand the ACC, aiming to mobilize additional 50,000 ACC members annually by 2031. The ACC aims to train and engage a diverse workforce in projects addressing climate change across communities in the country.

Strengthening Global Climate Leadership 

Apart from domestic investments, the budget seeks to fulfill President Biden’s commitment of $11 billion for international climate finance. It also supports a $3 billion contribution through mandatory funding to finance the Green Climate Fund, building on previous international climate finance efforts undertaken during the administration.

These initiatives underscore the Biden administration’s commitment to addressing climate change through comprehensive domestic and international strategies. Collectively, they aim to drive sustainable economic growth while mitigating the impacts of climate change on communities and ecosystems.

Xpansiv’s 2023 Performance: Driving Transformation in Energy Markets

Xpansiv, a global energy transition market infrastructure provider, just released its 2023 performance to update investors. The results mark another transformative year for the company, recording a massive increase in revenue of 39% despite a low-performing market.

Unprecedented Growth Despite Market Challenges

Xpansiv experienced a remarkable 39% net revenue growth in 2023, primarily attributed to its strategic acquisition of Evolution Markets. Since 2020, the company has sustained an impressive Compound Annual Growth Rate (CAGR) of 165%. 

Xpansiv energy market net revenue trend

Notably, revenue diversification was evident, with electricity accounting for slightly over half of the net revenue, followed by carbon and fuels. 

Xpansiv energy market commodity types

Approximately 60% of the revenue was from execution and advisory services, while the remainder came from tech-enabled Software-as-a-Service (SaaS) revenue across various business segments.

This growth was achieved through careful cost management, focusing on integration and synergies from multiple acquisitions. Notable acquisitions include Evolution Markets brokerage, a marketplace technology team, and a minority stake in Evident, a registry provider. 

Moreover, the strategic focus includes diversifying revenue by strengthening positions in domestic and international renewable energy credit (REC) markets. 

Accomplishments in this area included record REC volume on the CBL exchange, I-REC trading launch, and the integration of the Evident registry. These acquisitions enhance Xpansiv’s platform infrastructure, reinforcing its ability to provide holistic market solutions for the global energy transition.

Xpansiv also aimed to maintain leadership in registry and exchange services for carbon offset markets. However, a slowdown in Voluntary Carbon Markets (VCM) in 2023 posed a challenge, impacting several areas of Xpansiv’s business. This included registry software, exchanges, and brokerage businesses trading in voluntary carbon. 

However, an uptick in activity in December 2023 suggests potential growth in these markets in 2024.

Navigating the Evolving Energy Landscape

The year 2023 witnessed dynamic shifts in environmental commodity markets, signaling an accelerated pace in the global energy transition. In notable achievements, Xpansiv introduced new products on its CBL platform, expanded its registry offerings, and made significant strides in the green hydrogen sector.

In the United States, the renewable energy sector sustained strong momentum throughout 2023, with renewable sources contributing over 20% of the nation’s electricity generation. This growth trajectory was supported by various government initiatives, including the Inflation Reduction Act (IRA) clean tax credits

Trading volumes on Xpansiv’s platform infrastructure reached record highs, impacted by these initiatives and state Renewable Portfolio Standards (RPS) policies. Trading activity reached 2.6 million units, accounting for an 88% increase from 2022. 

US REC CBL trading volumeInternationally, the momentum towards renewable energy adoption surged, with increasing corporate initiatives and regulatory support. There are over 23,000 companies with a total market capitalization of $67 trillion participate in the CDP for environmental disclosure.

Xpansiv responded by diversifying its market offerings to assist clients in meeting global renewable energy commitments. This included the introduction of International Renewable Energy Certificates (I-RECs) and strategic investments in companies such as Evident.

In 2023, the I-REC market saw significant growth, with 283TWh worth of certificates issued, a 42% increase from 2022. Solar and hydro assets drove this expansion, with over 216GW of capacity registered across 48 countries. Demand surpassed supply, with 176 million redemptions, an 81% increase from 2022. I-REC trading on CBL launched successfully in June 2023, with 120,000 I-RECs exchanged by year-end.

I-REC issuance and redemption volume

Resurgence and Resilience in Carbon Markets

Despite facing challenges, the VCM experienced a resurgence in the fourth quarter of 2023. Corporate demand for carbon offsets remained robust, leading to record levels of retirements. However, delays in purchases by new market entrants exerted downward pressure on prices and secondary trading volume.

Efforts to bolster market integrity are underway, with initiatives aimed at enhancing climate disclosures and restoring market confidence. These include SEC’s new climate disclosure rule, CFTC’s new proposed guidelines, and ICVCM’s CCP, and CORSIA’s first compliance phase. 

In 2023, CBL achieved volumes of 40.2 million metric tons (Mt), a figure more aligned with 2020’s 31.3 Mt compared to the elevated levels of 2021 and 2022. Xpansiv’s Transaction Services contributed an additional 22.5 Mt of voluntary carbon transactions. 

While initial volume was down, the fourth quarter witnessed a resurgence in trading and retirement activity. In fact, 42% of CBL’s carbon offset volume occurring in Q4 alone. Notably, December set a monthly retirements record of 39 Mt, marking a 20% increase over the previous record set in December 2021. However, low prices significantly impacted carbon finance.

The value of credits traded via CBL plummeted 85% from an all-time high of $795 million in 2022 to $118 million in 2023.

Xpansiv voluntary carbon retirementsThis, in turn, affected broader societal, health, economic, and biodiversity co-benefits delivered by such projects. Yet, with robust fundamentals such as growing corporate demand, evolving registry regulations, and integrity initiatives, there are indications of potential stabilization in asset pricing. 

Derivatives markets also experienced further growth, with trading volume of CBL GEO futures contracts listed by CME Group surpassing 216,000 lots in 2023, up 3% from 2022. The GEO accounted for 52% of the traded volume, and open interest hit a record high in May, exceeding 32,000 lots.

CME Group CBL GEO Futures Contracts

Advancing Towards a Sustainable Future 

Xpansiv’s transaction services arm has also extended its presence in compliance markets across the US, EU, and beyond. Evolution Markets, acquired by Xpansiv, arranged 1.8 billion metric tonnes in transactions in 2023, notably excelling in the EU and UK ETS markets. Xpansiv’s expansion includes the launch of ACCUs and preparations for CORSIA’s compliance phase in 2024.

Looking ahead to 2024, Xpansiv maintains its focus on accelerating the world’s energy transition. Key areas of focus include cementing its role as a global market infrastructure provider, emphasizing the capabilities of EMA, and building product diversity.

The near-record annual retirement volume, substantial increase in companies joining CBL and entering the VCM, along with new data showcasing the superior sustainability performance of companies using carbon credits, all reinforce the significance of corporate sustainability in shaping market dynamics.

Shell to Buy 22,500 Biochar Removal Credits from The Next 150

The Next 150, a prominent carbon removal developer and operator, has inked a significant deal with Shell Environmental Products aimed at accelerating the adoption of biochar technology.

Under their 5-year agreement, the biochar producer will supply Shell with carbon removal credits of up to 22,500 generated from its large-scale facility in Mexico. This agreement represents one of the first transactions involving carbon removal credits from Mexico’s largest biochar project.

Patrick Atanasije Pineda, Managing Partner at The Next 150, expressed enthusiasm about the partnership, noting that:

“Shell Environmental Products’ support marks a significant step forward in our strategy to scale the biochar pathway of carbon removal across Latin America. Large volume as well as long-term offtake agreements from global companies are key to unlocking growth capital and project finance in the global south.”

Accelerating Carbon Removal with Biochar 

Biochar production involves capturing carbon from the atmosphere through photosynthesis by utilizing biomass, such as agricultural waste. This biomass undergoes thermochemical processing to convert it into stable carbon. It can be stored long-term in soil or incorporated into construction materials.

Biochar carbon removal process
Source: Carbonfuture

According to the World Economic Forum, Biochar Carbon Removal (BCR) isn’t just an option for achieving net zero targets—it’s imperative. BCR can remove between 0.44 to 2.62 gigatons of CO2 annually. As such, it can address up to 35% of the carbon removal requirements in scenarios aimed at stabilizing the climate.

Remarkably, biochar receives only about 12% of CDR funding but accounts for 94% of delivered carbon credits in 2023. Moreover, biochar comes at a significantly lower cost compared to other durable CDR approaches. It has an average cost of $179 per ton of CO2, much lower than the $388/ton average CDR price.

In North America, the largest biochar production facility is under construction in Canada. The Port-Cartier facility is the country’s first industrial-scale biochar production plant, representing a great milestone in Canada’s net zero efforts.

The Next 150 current biochar project is undergoing third-party audit and certification with Puro.Earth, a leading platform for engineered carbon removal, majority owned by NASDAQ. 

Shell Environmental Products will proceed to offtake the credits upon approval of the project, solidifying its commitment to environmental sustainability.

Shell Environmental Products operates as a team dedicated to collaborating with clients to integrate carbon credits into their climate strategies. Their primary focus lies in sourcing and trading carbon credits and other environmental products.

The portfolio curated by the team consists of projects aimed at various objectives. These include carbon removal from the atmosphere, emission avoidance, and emission reduction.

GBS Redefines Biochar Removal Solutions

Since its inception in 2023, The Next 150 has made remarkable strides in establishing a fully operational biochar production venture. The Swiss-based carbon removal company is doing it through its subsidiary, GBS (General Biochar Systems). 

GBS’s Guanajuato plant marks the initial phase of their waste-valorization and climate-tech initiatives in Mexico. Using GBS’s advanced pyrolysis process, biochar is created by subjecting biomass to high temperatures in a controlled oxygen-deprived environment, effectively mineralizing its carbon content. 

GBS Pyrolysis machine 1
Image from GBS

The deployment of biochar facilitates carbon removals through its application in long-term storage solutions like sustainable agriculture. With the capacity to process up to 20,000 tons of waste annually, the facility will produce 6,000 tons of biochar alongside byproducts such as bio-oil and hydrogen

Over the next decade, this project is estimated to capture 150,000 tons of CO2 equivalent. If that happens, it would be the largest biochar initiative in Mexico. In comparison, the Canadian biochar facility can capture 75,000 tonnes of CO2 per year.

This initiative exemplifies the company’s rapid progress and unwavering dedication to providing high-quality carbon removal solutions. As the biochar production venture advances through the certification phase with Puro.Earth, the issuance of the first batch of credits is anticipated by Q3 2024. 

In Europe, a Danish engineering company produces biochar from poop with its groundbreaking biomass treatment technology.

GBS embodies the company’s commitment to making a meaningful and lasting contribution to decarbonization. Looking ahead, it aims to expand its biochar production capacity, adding at least 2 more plants in 2024 and 2025. 

The partnership between The Next 150 and Shell Environmental Products signifies a significant advancement in accelerating the adoption of biochar technology for carbon removal. This collaboration underlines the importance of large-scale, long-term agreements in driving capital and project finance in carbon removal solutions.

Issues Facing US Lithium Projects and Battery Supply Chain Plans Amidst Price Decline

Financing for lithium projects in the United States is facing challenges due to sustained low lithium prices, posing a threat to the development pipeline and potentially hindering President Joe Biden’s ambition to bolster the domestic battery supply chain.

According to the S&P Global Market Intelligence report, there are about 100 lithium mine projects planned across the US. However, the allure of these projects is waning amidst a steep decline in lithium prices. 

US lithium mines and processing facilities

Navigating the Lithium Price Plunge

The sharp price decline has left many investors perplexed, particularly given the projected long-term demand for the mineral. Experts noted that it’s largely attributable to the slowdown in electric vehicle sales growth in China. This is also further compounded by the overall economic slowdown in the Chinese economy.

Market Intelligence data reveals an 81.7% drop in lithium prices from their 2022 peaks. This downturn made many projects less attractive to investors as the prolonged low prices persisted.

Existing US lithium producers, particularly those using brine extraction methods rather than hard rock resources, have managed to weather the price downturn to some extent. 

Current producers have learned to adapt to the changing market conditions. Some employed cost-cutting measures, like what Albemarle did, while others are scaling back on their expansion plans.

However, the impact of the market downturn has been felt more keenly within the pipeline of future lithium output projects.

Additionally, junior companies seeking to develop lithium projects in the US and elsewhere have encountered difficulties securing funding amidst bearish market sentiment due to the price decline.

The financing hurdles confronting US lithium projects underscore the delicate balance between market dynamics and the imperative to strengthen domestic supply chains for critical battery materials. 

Per Market Intelligence data, the price of lithium carbonate ex-works China battery stood at $14,750 per metric ton on March 6, down from its 2022 peak of $79,650/t on Nov. 30. Despite remaining 151.7% higher than the 2020 low of $5,850/t on July 31, current prices are not attractive for launching new projects.

lithium price since 2020 S&P Global

Industry Insights and Uncertainties

The impact of low commodity prices on US lithium projects is significant in project development, particularly among smaller operators. These companies are finding it increasingly difficult to access funding due to concerns over returns.

Still, a junior Canadian lithium company, Li-FT Power (LIFT: LIFFF), remains committed to advancing the exploration and development of high-quality lithium assets in the country. It consolidates and advances hard rock lithium pegmatite projects in known lithium districts in Canada. 

Keith Phillips, the CEO of Piedmont Lithium based in North Carolina, shared insights on lithium mining, describing it as a cyclical industry prone to fluctuations. In an interview, Phillips remarked on the significant downturn in lithium prices, saying:

“With lithium prices down by 90% from a peak 16 months ago, just about every new development project is slowing down, which will lead to another supply crunch.”

The uncertainty surrounding demand poses a significant challenge for the lithium industry. While increased demand for reliable lithium, spurred by the US Inflation Reduction Act, could provide some relief to the industry, there are concerns about the limited progress in the project development due to low prices. 

This issue could potentially undermine the Biden administration’s objectives of reshoring critical supply chains. The IRA’s incentives should be able to adequately address this with proper incentives to promote domestic mining. 

The Role of IRA and Investments

The law’s incentives have attracted massive investment into the US battery supply chain, which was largely underdeveloped before the bill’s passage. Electric vehicles (EVs) that meet specific requirements related to final assembly, critical mineral sourcing, and battery material processing may qualify for a $7,500 tax credit under the IRA.

The rule has led to a notable increase in investments in domestic critical mineral projects by both miners and automakers. For instance, Piedmont Lithium Inc., a US-based lithium producer, was motivated to establish a lithium processing plant in Tennessee. Moreover, its lithium project in North Carolina is also expected to start this year. 

Ford Motor has planned to allocate $3.5 billion to construct a battery plant in Michigan, citing the IRA as a significant factor influencing this decision. Ford has also entered into supply agreements with several lithium companies in countries with free trade agreements with the US. 

This strategic move enables the automaker to incorporate materials from these countries into its vehicle batteries while still qualifying for tax credits under the IRA. Similarly, Tesla Inc., the EV giant, has established supply agreements with multiple miners, including Piedmont and Albemarle. 

Below is the investments to EV supply chain since the IRA has been enacted.

EV supply chain investments since IRA passage

While there’s a strong demand for IRA-compliant material, the supply remains insufficient, according to Benchmark’s Williams. Albemarle CEO Kent Masters echoed this sentiment by expressing doubts about the effectiveness of the IRA in stimulating necessary investments. 

Masters emphasized that the law has not yet succeeded in bridging the pricing gap between China and North America. It means that further measures may be necessary to incentivize investment in domestic lithium production.

Challenges in the US lithium project pipeline amid price declines highlight the balance between market forces and policy incentives. Despite efforts like the Inflation Reduction Act, uncertainties linger. Addressing these challenges is vital for US competitiveness in the global energy transition.

IEA Reveals Global CO2 Emissions Reach Record High in 2023, But Growth Slows

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A recent analysis from the International Energy Agency (IEA) indicates that the growth in global carbon emissions hit record high in 2023 but it moderated compared to the previous year. This is primarily due to the ongoing expansion of renewable energy sources such as solar, wind, and nuclear power.

According to the IEA report, global emissions experienced a modest increase of about 1.1% in 2023, totaling approximately 410 million tons. Ninety percent of these emissions are caused by human activities, now reaching a total of 37.4 billion tonnes. 

However, the report highlights that without the deployment of clean energy technologies, emissions would have surged significantly more over the past 5 years. 

From 2019 to 2023, the deployment of solar photovoltaic (PV), wind power, nuclear power, electric cars, and heat pumps has collectively avoided approximately 2.2 billion tons (Gt) of emissions annually. Without these technologies, the global increase in CO2 emissions over the same period would have been more than 3x higher.

change in CO2 emissions due to clean technologies 2019-2023

Additionally, droughts hindered the operation of hydropower plants at full capacity, leading to a reliance on fossil fuels to meet energy demands. This is responsible for almost 40% of the overall increase in emissions, as illustrated below.

change in global CO2 emissions by driver IEA report

How Clean Energy Curbs Emissions Growth

Despite the ongoing increase in emissions, advanced economies achieved a notable milestone by reducing carbon emissions while experiencing GDP growth. This divergence signals a significant departure from the historical trend linking fossil fuel energy development with economic expansion. 

advanced economies CO2 emissions 1973-2023

Moreover, last year marked the first time that over 50% of the electricity generated in advanced economies came from low emissions sources. These remarkable achievements in emissions reduction were largely due to a combination of factors:

  • Extensive deployment of renewables, 
  • The transition from coal to natural gas, 
  • Improvements in energy efficiency, and 
  • Advancements in lower-emissions industrial production processes.

Fatih Birol, the executive director of the IEA, emphasized the resilience of the clean energy transition despite facing various challenges. Birol noted that: 

“The clean energy transition has undergone a series of stress tests in the last five years — and it has demonstrated its resilience… continuing apace and reining in emissions — even with global energy demand growing more strongly in 2023 than in 2022.” 

In the United States, total CO2 emissions stemming from energy combustion experienced a notable decline of 4.1%, equivalent to a reduction of 190 million tonnes (Mt), even as the economy expanded by 2.5%. Notably, the electricity sector accounted for two-thirds of this emissions reduction, indicating significant progress in decarbonizing the power generation sector.

Meanwhile, total CO2 emissions from energy combustion in the EU dropped by almost 9% in 2023 (-220 Mt). Electricity generation from coal decreased by 27% in 2023, while natural gas-based power generation fell by 15%.

Clean Energy Disparities in Developing Economies 

Despite the progress, there remains a stark imbalance in clean energy development, with advanced economies and China dominating the landscape.

According to the report, in 2023, these leading economies accounted for a staggering 90% of new solar photovoltaic (PV) and wind power installations worldwide, along with 95% of electric vehicle (EV) sales. This concentration underscores the need for broader global investment in clean energy, especially in developing and emerging economies.

There exists a significant investment gap, with the UN estimating an annual requirement of about $1.7 trillion in renewables investment for developing countries. Despite this pressing need, the investment inflow into clean energy projects in developing countries falls short. 

In 2022, these nations received only $544 billion in clean energy investment, as per UN data. Addressing this gap and bolstering investment in clean energy infrastructure is paramount to achieving global emission reduction targets.

The Driving Force Behind Emissions Surge

Since the post-pandemic era, coal has emerged as the primary contributor to the surge in global CO2 emissions. Energy combustion emissions have witnessed a notable increase of around 850 million tonnes (Mt) since 2019, with coal emissions alone growing by 900 Mt. 

Meanwhile, gas emissions have experienced a moderate rise, while oil emissions remain slightly below their 2019 levels.

Notably, coal has accounted for around 70% of the upsurge in global carbon emissions from energy combustion in 2023. It contributes to around 270 Mt to the overall emission increase.

change in CO2 emissions by fuel and region 2022-2023 IEA

This trend is particularly pronounced in China and India, where substantial increases in coal combustion emissions were observed, only partially offset by declines in advanced economies.

On the other hand, oil emissions saw an uptick due to the reopening of economic activities in China and the resumption of global aviation, resulting in a global increase of about 95 Mt. In contrast, natural gas emissions witnessed only marginal growth at the global level, indicating a relatively stable trajectory.

Shifting Landscapes: Global Trends in Emissions Contribution

The global emissions landscape is undergoing significant shifts, with notable changes in the contributions of different countries and regions. China, for instance, has emerged as a dominant player, surpassing the combined emissions of advanced economies in 2020 and experiencing a further 15% increase in emissions by 2023. 

India, on the other hand, has overtaken the European Union to become the third-largest emitter globally.

carbon emissions and CO2 per capita by region IEA reportDeveloping Asia now accounts for approximately half of the world’s emissions, marking a substantial increase from previous years. China alone contributes a significant share, responsible for 35% of global CO2 emissions. Interestingly, China’s per capita emissions exceeded those of the advanced economies collectively in 2020 and have continued to rise, now standing 15% higher. 

The IEA findings underscore the resilience of the clean energy transition amid growing carbon emissions but challenges persist, particularly in developing economies. Addressing the gap and bolstering global investment in clean energy infrastructure is critical to meeting emission reduction targets and combating climate change.

Abatable VCM Report Reveals Developer CCP Approval Rates for First Time

According to a recent report by Abatable, a market intelligence and carbon procurement platform, the voluntary carbon market (VCM) stands at a pivotal moment with flourishing activity in the primary market and notable expansion in issuance and projects among the top 25 developers. The market underwent a period of significant change in 2023, marking a transition towards a new era of growth and investment.

Abatable’s VCM Developer Overview

Abatable’s Voluntary Carbon Market Developer Overview | 2023-2024 report highlights the developers that have leveraged the capital influx of 2024 to expand their portfolios. 

The report draws on aggregated data from over 3,000 project developers contributing to the major carbon credit registries. These include Verra’s Verified Carbon Standard (VCS), Gold Standard (GS), Climate Action Reserve (CAR), and American Carbon Registry (ACR).

The report further identifies key market themes to monitor in 2024 and clarifies supply- and demand-side trends. It highlights several crucial factors shaping the market:

  • Divergence among developers regarding quality standards, 
  • Merging of carbon and biodiversity efforts, and 
  • Heightened collaboration on corresponding adjustments. 

These dynamics are poised to exert a substantial influence on the market throughout the year.

Moreover, following the highly anticipated release of the Core Carbon Principles (CCPs) by the Integrity Council for the Voluntary Carbon Market (ICVCM) last year, the report provides the inaugural comprehensive evaluation of potential alignment with this groundbreaking quality standard.

For the first time, it reports on the percentage of issuances by developers currently undergoing ICVCM review for CCP approval

Commenting on the findings, Maria Eugenia Filmanovic, Co-Founder of Abatable said,

“While we have seen significant growth and interest in carbon credit initiatives and early indications show a move towards greater market integrity, challenges remain as we navigate the implications of the forthcoming Core Carbon Principles. It is essential for stakeholders to stay informed and proactive in addressing these challenges to ensure the continued effectiveness of the VCM.”

Supply, Demand, & Surplus: Analyzing Key Metrics Shaping the VCM

According to the report, the rise in market surplus resulted in price softening and increased price variability, especially among avoidance credits. Conversely, nature-based removal credits experienced a price increase due to limited supply and robust demand.

carbon credit price per project type Abatable

Despite ongoing challenges in the REDD+ (Reducing Emissions from Deforestation and Forest Degradation) market, the study highlights the continued dominance of REDD+ in the nature-based VCM sector. Seven of the top 10 largest nature-based VCM project developers are actively involved in REDD+ projects.

The market would face growing oversupply in the coming years, the report noted. This trend is due to the substantial projected supply from verified projects or those in the verification pipeline. This is also likely to continue to exert downward pressure on prices unless there’s a significant surge in demand.  

projected carbon credit supply from verified projects 2024-2040

On the supply side, there was a noticeable decrease in the proportion of credits issued by the top 10 developers in terms of issuances, reflecting the entry of new, smaller players into the market.

Additionally, for the 4th consecutive year, over 100 new project developers started issuing credits in 2023. This market development bolsters the existing supply with fresh vintages, as seen below.

credit issuances from developers 2023

There exists a notable opportunity for developers to pivot towards methodologies undergoing approval under the CCPs. Currently, a significant portion of the market comprises credits that are not eligible under CCP criteria.

About 54% of the market’s surplus credits were issued using methodologies currently under CCP review. However, not all of these methodologies are expected to be approved, which will increase the stock of credits that do not meet the market’s new quality baseline.

credit stock by submittal for CCP approval

Buyer Trends and Market Concentration

The Abatable report also spotlights major trends on the buyer side.

In 2023, a record number of unique buyers entered the market and retired credits for the first time. Meanwhile, newcomers are starting cautiously by retiring smaller batches of credits. This influx of new participants reflects a growing interest and engagement in the carbon credit market.

More notably, increased scrutiny of the market in 2023 prompted more buyers to disclose their credit purchasing activities. This resulted in a reduction in the share of non-disclosing parties, from 56% in 2020 down to 44% in 2023.  

However, the market remains largely concentrated among the top 100 buyers. These top carbon credit buyers in 2023 were primarily (60%) from emission-intensive sectors such as energy, surface transport, and aviation. These companies prioritize the mitigation of their existing and future carbon liabilities, driving their active involvement in the market.

sector distribution of top 100 carbon credit buyers 2023As the voluntary carbon market continues to evolve, stakeholders must remain vigilant in addressing challenges while capitalizing on emerging opportunities. With increased scrutiny and growing interest from diverse sectors, the path towards greater market integrity and sustainability is paved with informed decision-making and proactive engagement.

India Challenges EU’s Carbon Border Adjustment Mechanism (CBAM)

As a major player in the global economy, India stands as an integral point of economic development and environmental responsibility. However, India is also the world’s third-largest emitter of CO2, after China and the US.

Studies show emissions could rise to 50% by the year 2030 in India. To counter this effect, a carbon tax has been implemented primarily aimed at reducing emissions and curbing the use of fossil fuels like coal, gas, oil, etc.

India’s proactive engagement in the G20, a response to the challenges posed by carbon emissions, and its collaboration with the EU underscore its commitment to global climate action. However, the overall picture is slightly different than what it seems at the outset.

In a recent development, the EU has decided to impose a carbon tax known as the Carbon Border Adjustment Mechanism (CBAM), effective from January 1, 2026, on the import of 7 carbon-intensive sectors including:

  • Steel products
  • Iron and iron ore concentrates
  • Cement
  • Aluminum products
  • Fertiliser
  • Hydrogen
  • Electrical energy

The CBAM roll out is planned in 4 phases as shown in the following figure:

cbam roadmap

Source: indiabriefing.com

The tariff is as high as 20-35% on imports of these high-carbon goods. And now, India along with other Asian nations, have not taken this decision favourably. Rather, the bloc has strongly objected to the EU’s new, unfair tax policy.

Impact of EU’s Carbon Border Tax (CBT) on India 

Many government officials in India have considered the proposed CBAM as “discriminatory” and a “trade barrier” that would hit not only Indian exports but also those of many other developing nations. The World Trade Organization (WTO) has also raised concerns about the fairness of the EU’s taxation policy when India is already adherent to the Paris climate agreement protocols of becoming carbon neutral by 2070.

In 2022, 27% of India’s exports of iron, steel, and aluminum products worth USD$8.2 billion went to the EU. With this high tax value, the EU’s income is expected to surge by leaps and bounds while disrupting earnings for major Indian conglomerates like Tata Steel, Steel Authority of India, JSW Steel Group and Essar Steel India Limited.

In order to fully grasp the new CBAM tax implications, one only need to examine India’s exports to the EU in a single year (2022) as shown in the chart below.

indian exports to eu in the year 2022

Source: indiabriefing.com

India’s carbon tax rate is currently among the lowest in the world at just USD$1.6 per tonne of CO2 emissions. But The EU’s CBAM is poised to cripple India’s exports of energy-intensive items, including key trade items like steel, aluminum, cement, and fertilizers. The Indian export market is most likely to encounter increased production costs with a drop in demand and competition for their products within the European economy.

[PRESS RELEASE: India’s Green Actions – From Carbon Subsidy to Carbon Tax]

Among all these sectors, the steel industry is the toughest to decarbonize and has the highest carbon intensity, responsible for ~ 8% of global emissions.

It could be stated that the impact of the EU’s CBT on India will depend on the carbon intensity of exported products and their substitutes in the EU market. Products with high carbon intensity will face increased charges and low competition. However, if low-carbon alternatives for Indian products are unavailable in the EU market, the outcome of CBAM on Indian exports might be constrained.

Mr. Piyush Goyal, Commerce and Industry Minister of India has retaliated with his stern statement:

“India will address the problem of CBAM with confidence, and we will find solutions. We will see how we can convert CBAM to our advantage if it comes in. Of course, I will retaliate.”

The Indian government is seeking to file a complaint to the WTO against the EU’s tax policy to protect its domestic exporters and MSMEs. But the war of words doesn’t end there, with EU’s trade chief Valdis Dombrovskis stating:

“The European Commission had designed CBAM carefully so that it was compatible with WTO rules, applying the same carbon price on imported goods as on domestic EU producers”.

Yet, an amicable resolution of the conflict is still ongoing. India and the EU are in talks and are looking for solutions to minimize the impact of CBAM on the Indian carbon market.

READ MORE: Why India’s Path to Net-Zero is Different From Other Super-Emitters

India to Take Proactive Steps to Mitigate EU’s CBAM Fallout

While further developments are expected as this sage continues, the Indian government is already exploring various steps to tackle the potential consequences of the EU’s CBAM.

  1. Developing a robust domestic carbon pricing system to incentivize emission reduction by companies and harmonize with the EU’s carbon goals. Encourage Indian businesses to analyze customs data, purchase and cost records, carbon footprints, transactional models, logistic flows, and overall global value chain. Evaluate the potential effect of CBAM on their operations and call for strategic changes to make Indian businesses more competitive.
  2. Encouraging investment in renewable energy sources like solar and wind power, green hydrogen, and resilient agriculture to diminish carbon emissions. Most importantly, Mr. Piyush Goyal has also asked the automobile industry to boost electric vehicle (EVs) production to promote sustainable growth.
  3. Ramping up domestic capacity and boost investment in carbon capture and storage technologies and mitigate the carbon footprint of heavy industries.

And while the EU’s carbon tax could be challenging for Indian industries, it might also spark a positive change in the Indian carbon market.

As we have seen, the Indian economy is highly resilient and can embrace the “challenge” as an opportunity for a smoother, green energy transition. The leaders of both parties are looking ahead to address the CBAM crisis diplomatically and fulfill their commitment to the Paris Agreement.

FURTHER READING: India Revises Its Carbon Credit Trading Scheme for Voluntary Players

First Ethanol Facility to Issue Carbon Removal Credits

Red Trail Energy, (RTE), in collaboration with Puro.earth, has announced the issuance of carbon dioxide (CO2) removal credits on the Puro Registry. This marks a significant milestone as the first ethanol production facility to generate CO2 Removal Certificates (CORCs) in the voluntary carbon market (VCM)

The initiative also represents the largest durable carbon removal project registered to date. Red Trail Energy will make its CORCs available through its marketing arm, RPMG.

Ethanol’s Environmental Impact: A Corn-Based Revolution

Most of the biofuel produced in the United States is ethanol, derived from corn starch and commonly blended into gasoline. About 98% of gasoline sold in the U.S. contains a 10% ethanol blend.

During the early 2000s, energy policy initiatives aimed to enhance energy independence spurred a significant uptick in domestic ethanol production. From 2000 to 2018, U.S. corn ethanol output surged from 1.5 billion gallons to 16 billion gallons. 

Initial life cycle assessments (LCAs) estimated that U.S. corn ethanol would yield 20% lower GHG emissions compared to gasoline.

LCA of carbon emissions for ethanol
Image from RFA website

The most recent study commissioned by the Department of Energy (DOE), conducted by Argonne National Laboratory in 2021, revealed that U.S. corn ethanol exhibits 44%–52% lower GHG emissions than gasoline. Gasoline has a carbon intensity of about 89.5 grams of CO2e per megajoule (MJ) of energy delivered. 

Argonne’s analysis demonstrated a 20% reduction in carbon emissions from U.S. corn ethanol between 2005 and 2019. This decline can be attributed to advancements in agricultural practices. These include increased corn yields per acre, reduced fertilizer usage, and enhancements in ethanol production processes.

Red Trail Energy’s Pioneering Carbon Capture Efforts

RTE operates a corn ethanol production facility with an annual capacity of 64 million gallons. The CO2 generated during the ethanol fermentation process is captured and stored to prevent its release into the atmosphere. 

RTE’s facility is the first of its kind permitted under state regulations to capture and store CO2 in a Class VI well. It can capture and store approximately 180,000 tons of CO2 annually.

The captured biogenic CO2 is injected into an underground Class VI well located beneath the facility for permanent storage. RTE has implemented continuous efforts to minimize the fossil footprint associated with its main product, biofuel, through energy efficiency measures and sustainable agricultural practices.

Red Trail Energy’s project was in partnership with the clean energy advisory firm EcoEngineers and was registered under the Puro Standard. The standard is the leading crediting platform for engineered carbon removal. 

The carbon removal credits are generated through bioenergy with carbon capture and storage (BECCS) from ethanol production. They adhere to Puro’s Geologically Stored Carbon Methodology. 

Before CORCs issuance, RTE underwent independent verification and met all requirements related to feedstock sustainability, carbon sequestration permanence, and financial additionality.

RTE captures CO2 emitted during the fermentation process at its ethanol plant. Then it sequesters it into a permitted underground Class VI well located approximately 6,500 feet beneath the facility. 

The resulting carbon removal credits will be available as CORCs to support buyers in complementing their emission reduction efforts towards achieving net zero targets.

Jodi Johnson, Chief Executive Officer of Red Trail Energy, expressed pride in achieving this milestone, emphasizing the significance of being among the first bioenergy facilities with BECCS and pioneering the provision of verified CDR credits to the market. 

Antti Vihavainen, Chief Executive Officer of Puro.earth, said:

“The significance of RTE’s CCS project cannot be overstated, as it serves as a compelling demonstration that through stringent methodologies for carbon removal and the financial incentives from CORCs, the vital infrastructure required for large-scale carbon sequestration will materialize.”

Driving Carbon Removal Forward

With guidance from EcoEngineers and through Puro.earth, RTE received over 150,000 CO2 Removal Certificates from the initial 14 months of operation of its bioenergy with carbon capture and storage (BECCS) project.

David LaGreca, Managing Director of VCM Services at EcoEngineers, emphasized the importance of supporting high-quality removal programs. This is even crucial in the context of global carbon budgets and the imperative to reduce emissions. 

The Puro.earth’s CORCs indicate durability of carbon sequestration for over 1,000 years, meeting key environmental criteria for permanence. These CORCs are listed in the International Carbon Reduction and Offset Alliance (ICROA)-endorsed Puro Registry. As such, their traceability and transparency throughout their lifecycle, from issuance to retirement, are high.

Sales of CORCs in voluntary markets are crucial for supporting the development of carbon capture and storage (CCS) projects. They also help mitigate financial risks associated with carbon removal initiatives.

The CORCs generated by RTE comply with rigorous scientific and market requirements, including criteria for additionality and permanence. These CORCs can complement other incentives aimed at reducing carbon emissions. 

Red Trail Energy’s collaboration with Puro.earth marks a pivotal moment in ethanol production, pioneering the issuance of carbon removal credits. By capturing and storing biogenic CO2 emissions, Red Trail Energy sets a precedent for sustainable practices, showcasing the vital role of innovative technologies in combating climate change.

SEC Finalizes New Climate Disclosure Rule: Here’s What’s New

The Securities and Exchange Commission (SEC) approved a new rule mandating publicly traded companies to disclose their direct greenhouse gas emissions. The proposal received backing with 3 votes to 2 at a recent SEC meeting. 

The newly passed legislation titled “The Enhancement and Standardization of Climate-Related Disclosures for Investors” also requires US-based companies to disclose details on their use of carbon offsets, including the associated costs if the credits contribute to their emissions reduction targets. They also need to describe how climate change impacts their operations, financial condition, and strategies. 

Moreover, companies must explain the risks and how they’re managing them, such as the impact on revenue and expenses. 

What Emission Scopes Are Mandated?

The original SEC proposal initially required companies to disclose their Scope 1, 2, and 3 emissions. But Scope 3, which garnered controversy, was ultimately excluded in the final rule. 

Scope 1 refers to emissions directly emitted by the company while Scope 2 covers emissions from the fuel and energy purchased by the company. Whereas Scope 3 pertains to emissions generated by customers and suppliers. 

Scope 1 and 2 emissions are mandatory to report on, provided the company considers the information “material” to investors. Having this vital climate-related information will give investors insights to come up with informed decision-making. 

Scope 3 emissions were the subject of significant controversy due to the challenges associated with calculating indirect emissions, which impose the highest compliance costs on companies. Big companies, particularly those in the fossil energy sector, opposed this reporting requirement.

Thus, following an extensive public comment period, which garnered 4,500 letters and 24,000 comments, the requirement to disclose Scope 3 emissions was ultimately dropped.

For the past 2 years, the SEC has been deliberating on formulating standardized requirements for corporate climate disclosure. The goal is to establish a minimum standard for transparency in boardrooms. 

Now, the increased transparency required on the use of offsets would influence future purchases of carbon credits.

According to the final rule, companies will now be obligated to provide a detailed breakdown of the costs associated with carbon credits. Specifically, the approved proposal mandated that:

“The capitalized costs, expenditures expensed, and losses related to carbon offsets and renewable energy credits or certificates (RECs) if used as a material component of a registrant’s plans to achieve its disclosed climate-related targets or goals, disclosed in a note to the financial statements…”

This disclosure requirement is one of 3 main categories of information mandated in the amendments to the SEC’s final rule. 

Unpacking SEC New Rule’s Key Provisions

While it’s essential for every company to thoroughly understand the SEC’s official rule, spanning almost 900 pages, 3 key provisions stand out:

  • “Accelerated filers,” which are companies with publicly traded shares valued at $75 million or more, are mandated to disclose Scope 1 and 2 emissions.
  • Costs stemming from severe weather events and other natural disasters must be disclosed on financial statements.
  • Companies are obligated to disclose both the actual and potential material impacts of climate-related risks on their strategy, business model, and outlook.

The SEC made a significant revision to its earlier draft by removing a requirement to disclose expenditures related to “general energy transition activities” in financial statements. 

Instead, the final rule focuses specifically on disclosing expenditures related to carbon offsets and RECs, as confirmed by SEC officials.

Go over to SEC’s fact sheet that summarizes the specific rules that a registrant has to disclose.

The Commission estimates that around 2,800 companies have to prepare to report on their climate-related financial risks. That’s 40% of the 7,000 US public companies registered with the SEC.

Meanwhile, about 60% of the 900 SEC-registered foreign private issuers may also be subject to the new rule.

Accelerated filers, in particular, need to start disclosing their Scope 1 and Scope 2 emissions in 2026. Below are the compliance dates companies have to keep in mind based on their filer status:

SEC final climate disclosure rule compliance dates
LAF=Large Accelerated Filers, Non-Accelerated Filer (NAF), Smaller Reporting Company (SRC), or Emerging Growth Company (EGC).

Mixed Reactions: The Impact of SEC’s Climate Disclosure Rule

The new climate disclosure rule received both praise and criticism. Former SEC commissioner Allison Herren Lee commented that:

“The new rule, unfortunately, does little to prevent companies from making vague, untested and, most significantly, unsubstantiated, statements about their carbon footprints.”

On the other hand, supporters of the new rule noted that it’s a great milestone. For Lane Jost, head of ESG advisory at Edelman Smithfield, 

“There is ample room to argue the validity of this rule on all sides, but regardless, this is a historic day for enhancing common, comparable, and credible disclosure rules on climate risks for investors and issuers.”

The SEC rule marks a significant addition to the expanding global regulatory landscape for corporate climate disclosures. International companies gear up to comply with Europe’s Corporate Sustainability Reporting Directive, which mandates climate disclosures. And with California’s carbon emissions disclosure requirements introduced last year, the SEC’s rule further underscores the increasing importance of climate-related transparency in corporate reporting.