The carbon asset management market sees the entry of a significant player, Chinese battery technology giant CATL’s (Contemporary Amperex Technology) subsidiary, Contemporary Green Energy (CGE).
CGE specializes in investments, construction, and operations within the new energy sector, particularly in wind and solar energy. It particularly focuses on storage and trading of green power. Additionally, the company provides decarbonization services, including consulting and other carbon reduction solutions to businesses.
Bolstering CATL’s Carbon Reduction Matrix
The creation of a carbon asset management company appears to complement and strengthen CATL‘s existing carbon reduction tool matrix.
The term “carbon assets” refers to new assets generated by China’s national emissions trading scheme. These include various carbon emission quotas, also known as carbon credits, issued by the government and eligible carbon reduction projects, as defined by the China Securities Regulatory Commission (CSRC) industry standards.
The growing interest in carbon asset management is evident in the increasing number of players entering the market. Data shows over 4,800 carbon asset management-related companies in China, with more than 1,100 established in 2023 alone.
Industry experts believe that companies with significant carbon emissions and those engaged in the development or procurement of carbon assets handle substantial capital. Thus, the standardization, systematization, and optimization of carbon asset management become essential.
CATL reported Scope 1 and Scope 2 carbon emissions of 3.24 million tons in 2022, according to its environmental, social, and governance (ESG) report.
To meet Science Based Targets initiative (SBTi) requirements, CATL aims to reduce its carbon emissions by at least 90%. The leading lithium battery company will offset the remaining 10% by purchasing carbon credits to achieve operational carbon neutrality.
CATL announced plans last year to achieve carbon neutrality in its core operations by 2025 and across the value chain by 2035. This suggests significant challenges ahead in meeting carbon reduction targets over the next few years. The battery maker identified what it called 5 key links in its value chain where emissions will be cut:
Mining
Bulk raw materials
Battery materials
Cell manufacturing
Battery systems
Given CATL’s scale, the annual expense on carbon credits for this purpose is expected to be substantial.
CATL’s EV Battery Dominance Amidst Challenges
The global leader in lithium battery production said that 2023 profit reaches $6.3 billion on strong battery sales.
CATL continues to maintain a significant lead in battery manufacturing both globally and within China, the largest electric vehicle (EV) market in the world.
As of November 2023, CATL’s share of the global EV battery market increased to 37.4%, up from 36.9% in October, according to data from SNE Research Inc. BYD Co. held the second position with a market share of 15.7%, taking over LG’s 2nd place in 2022.
Despite its leading position, CATL faces headwinds as the momentum in EV sales begins to slow down.
Elon Musk’s Tesla reported Q4 2023 earnings that failed to meet expectations and cautioned about weaker sales growth in 2024. Additionally, both Volkswagen AG and Renault SA have scaled back their plans to sell shares in their EV businesses.
Similarly, EV production was down in China because of no more state subsidies, causing downward pressure on lithium prices.Lithium is the key element that powers up EV batteries.
Still, CATL remains hopeful on the market’s long-term forecasts, knowing that EV is essential for decarbonization efforts globally.
The same optimism is shared by battery-related companies abroad such as the junior Canadian lithium company, Li-FT Power(LIFT: LIFFF). The company focuses on advancing the exploration and development of high-quality lithium assets in North America.
CATL’s Carbon Asset Strategy
Due to current limitations in decarbonization technology, CATL must offset remaining carbon emissions by buying carbon credits. Establishing a dedicated carbon asset management company aims to rejuvenate carbon credits as assets and enhance their value preservation and appreciation.
Moving towards carbon asset management signifies more than just buying and selling; it involves actively reducing emissions to lower compliance costs, utilizing financial tools effectively, and optimizing resource allocation based on current carbon asset status.
For CATL, establishing a carbon asset management company is likely aimed at fulfilling its own needs. This is especially considering the pressure to reduce emissions following the European Union’s new battery regulation.
At CATL’s home, the carbon market in China has been rapidly expanding and upgrading, with the official restart of CCER in January after nearly 7 years. This expansion resulted in increased activity in carbon credit markets, creating opportunities for development within the carbon asset management sector.
CGE, with 54 subsidiaries, mostly involved in offshore wind power development, serves as a stable source of green power for CATL, presenting a crucial avenue for carbon emissions reduction.
Despite not belonging to the 8 major energy-consuming industries, CATL’s early engagement in carbon trading and its substantial resources position it as a formidable player in the carbon asset management market.
Disclosure: Owners, members, directors, and employees of carboncredits.com have/may have stock or option positions in any of the companies mentioned: LIFFF.
Carboncredits.com receives compensation for this publication and has a business relationship with any company whose stock(s) is/are mentioned in this article.
Additional disclosure: This communication serves the sole purpose of adding value to the research process and is for information only. Please do your own due diligence. Every investment in securities mentioned in publications of carboncredits.com involves risks that could lead to a total loss of the invested capital.
The Canadian Parliament is introducing a new drastic, and highly controversial move against false fossil fuel advertising.
With more and more countries implementing stricter greenhouse gas emissions controls, such as banning future sales of gas-powered vehicles, it could soon no longer matter what pro-fossil fuel supporters advocate for.
The fight against climate change and emissions reductions is being taken up by regulatory bodies and organizations with the power to enforce these new laws and take action against those who break them.
But it didn’t always used to be this way. In fact, big oil fought for a very longtime to conceal, downplay, and outright deny the evidence of the impact that fossil fuels were having on our planet.
Take the picture above, for instance. This newspaper ad ran all the way back in 1991 and was paid for by an organization named “Informed Citizens for the Environment”.
Despite the name, this organization was created by a coalition of the National Coal Association, the Western Fuels Association (another coal supplier), and the Edison Electrical Institute (an association that includes all publicly traded U.S. electric companies).
Also known as the “Information Council for the Environment” or ICE, this group had one simple goal: to “reposition global warming as theory (not fact).”
And that’s not just an assumption either. That’s taken verbatim from one of their own internal documents, seen below:
Source: ICE campaign plan enclosures
This was only the start of what would become a lengthy and drawn-out fight over an inconvenient truth… all for the sake of oil money.
Putting the Gas in Gaslighting
One of the most prominent examples of big oil’s attempt to keep climate change under wraps comes from oil supermajor ExxonMobil.
Mobil led a campaign in the mid-90s prior to their merger with Exxon, spending money on an aggressive ad campaign that produced over 50 ads in the ‘90s and 2000s that all questioned the scientific validity of climate change.
Of course, it wasn’t just Exxon and Mobil. One major group lobbying for climate change denial was the Global Climate Coalition (GCC for short).
With members comprised of Phillips, Exxon (later ExxonMobil), the American Petroleum Institute, National Coal Association, Edison Electric Institute, and more, the GCC was one of the loudest voices at the table when it came to climate change, actively lobbying key government officials as well as running vicious ad campaigns and smear attack against climate scientists.
The defeat of former President Clinton’s early 1993 carbon energy tax proposal, part of his plan to reduce U.S. greenhouse gas emissions, is largely attributed to lobbying by the GCC.
Later on, GCC efforts to have the U.S. withdraw from the Kyoto Protocol under President Bush Jr. were successful, with the decision having said to be “… in part based on input from [the GCC]”, according to White House briefing notes.
While the GCC would later disband in 2001 following the United States’ withdrawal from the Kyoto Protocol, big oil’s efforts to detract and downplay climate change would continue well past the turn of the millennium. Their strategy gradually shifted from outright denial, to doubt, to shifting the blame, and finally to greenwashing.
Better Late than Never: The Government Steps In
Remember what was said earlier about how the fight against climate change is now being taken up by regulatory bodies with the power to enforce laws?
Well, it may be a few decades late and much of the damage may already be done, but at least one government is finally taking action: the Canadian one.
In bill C-372 brought to Canada’s House of Commons on February 5th, known as the Fossil Fuel Advertising Act, the government is looking to make it illegal to falsely promote the burning of fossil fuels as a benefit to the public – much as the Canadian parliament did back in 1989 with tobacco.
Those of you reading this who aren’t Canadian may not be aware, but thanks to the efforts of the Canadian government, there are very strict laws regarding tobacco advertising and packaging in Canada.
Take a look at some of these:
Is it enough to keep away the kids who really want to try smoking? Probably not. But peeling away the glamourization and “cool” factor of tobacco and speaking plainly about its health impacts can go a long way towards keeping it out of the hands of the young and impressionable.
In the same way, the Fossil Fuel Advertising Act has a similar aim, which was directly referenced by MP Charlie Angus who developed the bill.
“To claim that there are clean fossil fuels is like saying there are safe cigarettes. We know that is simply not true.”
– Charlie Angus
In the terms of the language of the Bill:
It is prohibited for a person to promote a fossil fuel or the production of a fossil fuel in a manner that is false, misleading or deceptive with respect to or that is likely to create an erroneous impression about the characteristics, health or environmental effects or health or environmental hazards of the fossil fuel, its production or the emissions that result from its production or use.
In simpler terms: no more lying about the health and environmental impacts of fossil fuels.
Failure to do so could result in a fine of up to $1.5 million dollars and potentially even a two-year jail term.
Though this bill hasn’t passed yet and won’t come up for vote until later this fall at the earliest, it’s a strong (if overdue) move from the Canadian government that will hopefully spur other countries to take similar courses of action.
In the meantime, you can check out the bill for yourself here – it’s a short read.
January was surprisingly vibrant, with major companies securing impressive funding rounds of hundreds of millions, defying the typical post-holiday lull. Crunchbase data shows that included in the biggest rounds last month are companies that are into renewable energy and agtech, while investors’ money is also flowing into water tech startups.
An industry report indicates that investment in clean energy technologies and infrastructure is experiencing a substantial surge, surpassing spending on fossil fuels. This trend is driven by growing affordability of clean energy, particularly renewables, and security concerns.
As a result, momentum is building behind more sustainable options in the energy sector. Two companies operating in the sector, Generate Capital and Recurrent Energy, raised the biggest funding per Crunchbase database.
Renewable Energy is Powering the Future
Generate Capital secured a substantial $1.5 billion in funding for renewable energy projects. This San Francisco-based green infrastructure investor and operator had previously raised $1.1 billion early in 2023, following a $1 billion raise in 2021.
The recent round saw contributions from various investors, including the California State Teachers’ Retirement System. Generate specializes in investing in diverse infrastructure projects, ranging from community solar systems to municipal wastewater treatment and electrifying fleets.
Since its inception in 2014, Generate has amassed a total funding of $4.2 billion.
The company specializes in building, owning, operating, and financing sustainable resource infrastructure, focusing on four major categories:
Sustainable Power: This includes energy efficiency and storage, fuel cells, green hydrogen, and solar energy projects.
Sustainable Mobility: Generate engages in developing charging stations, electric and hydrogen vehicles, and sustainable fuels to promote eco-friendly transportation solutions.
Sustainable Water & Waste: Projects under this category span across biogas, renewable natural gas (RNG), precision agriculture, carbon capture and storage, and recycling initiatives.
Sustainable Cities.
Through its diverse portfolio spanning these areas, Generate contributes to the advancement of sustainability across various sectors of the economy.
Another energy startup, Recurrent Energy, headquartered in Austin, Texas, received a noteworthy $500 million preferred equity investment from BlackRock. This recent investment supports Recurrent Energy’s endeavors in utility-scale solar and energy storage project development, ownership, and operations. The fundraising aims to foster the growth of the company’s high-value project development pipeline.
A subsidiary of Canadian Solar, Recurrent Energy will maintain the majority of its shares post-investment. Established in 2006, Recurrent Energy has raised a total of around $1.4 billion in funding.
To date, the company successfully developed 9 gigawatts peak (GWp) of solar energy projects and 3 gigawatt-hours (GWh) of battery storage projects spanning six continents. Around the world, Recurrent has a pipeline of ~25 GWp in solar and 47 GWh in battery storage under development.
Unusually making it to the top list of last month’s fundraising is an agtech startup based in Cambridge, Massachusetts, Inari. The company secured $103 million in funding for its agtech innovations.
Specializing in AI-powered predictive design and multiplex gene editing, Inari focuses on developing higher-yielding seeds with reduced water requirements. The technology particularly targets crops like corn and soybeans.
The biotech company’s process operates within the natural DNA of plants, so modifications are similar to those observed in traditional breeding methods. However, their technology offers significantly greater precision and efficiency, requiring fewer resources and, notably, accelerating the process considerably.
While no lead investor was specified, notable contributions came from entities like Canada Pension Plan Investment Board and Rivas Capital. Since its founding in 2016, Inari has raised a total of $575 million in funding.
Water Tech Startup’s Thirst for Innovation
Despite a widespread contraction in venture investment globally, funding for startups focusing on water purification and conservation technologies has remained resilient in recent quarters.
An analysis of Crunchbase data reveals that investment in various water industry categories has not dried up. Surprisingly, funding totals for 2023 surpassed those of the more buoyant startup financing climate of 2021. And the trend has continued into this year, showing a robust start in terms of investment in water-related startups.
Source, a company headquartered in Scottsdale, Arizona, specializes in manufacturing solar-powered devices designed to extract drinkable water from the atmosphere.
The startup designs the world’s first renewable drinking water system. Its hydropanel is like a solar panel, but instead of generating energy, it creates clean, safe drinking water without electric hookups or infrastructure.
Established a decade ago, the company has garnered significant investor interest, having raised over $360 million to date. Notably, Breakthrough Energy Ventures is among its leading backers.
Source’s proprietary hydro panels are currently operational in some of the world’s driest regions, generating water from atmospheric humidity. A single Source Hydropanel eliminates the need for 54,000 single-use plastic water bottles over its 15-year lifespan.
January’s robust funding rounds demonstrate a clear shift towards sustainable energy and agtech innovations. Companies like Generate Capital, Recurrent Energy, Inari, and Source are spearheading the charge, backed by significant investments to propel their environmentally conscious solutions forward.
The European Union’s carbon market has recently experienced a significant downturn, with carbon prices hitting a 28-month low. This decline is due to various factors including macroeconomic uncertainties and decreased volatility in global gas and power markets.
Amidst this market turmoil, the EU has unveiled a bold new climate target, aiming to slash greenhouse gas (GHG) emissions by 90% by 2040. Despite initial optimism, analysts predict further bearish trends as economic headwinds persist.
Carbon Crunch: EU’s Carbon Market Saga
The EU carbon prices recently hit a 28-month low, trading at Euros 56.5 per mtCO2e ($60.5/mtCO2e) on Feb. 14, according to data from the Intercontinental Exchange. Comparatively, EU Allowances (EUAs) were at a record high of over Euros 100/mtCO2e around the same time last year.
However, since the 4th quarter of 2023, prices have been on a notable downward trajectory. Analysts attributed that trend to macroeconomic uncertainties, political challenges, and decreased volatility in the global gas and power markets.
The recent weakness in the European carbon market was evident in the EU daily carbon auction, where both prices and demand experienced sharp declines. As shown below, the cleared price for the EUA auction at 56.24 Euros or US$58.45/mtCO2e was the lowest price since Q3 2021.
Traders and analysts anticipate the bearish trend in the EU carbon complex to persist as the region anticipates further economic headwinds in the coming months.
Moreover, a veteran hedge fund investor sees a further slump in European Union carbon permits on the horizon as energy supplies soar and demand remains subdued. Per Lekander, CEO of London-based Clean Energy Transition, said that a flood of renewable power, alongside falling gas prices and a recovery in nuclear and hydro plants will keep the pressure on carbon prices.
Prices have already slumped 30% this year as that combination curbs pollution that’s the basis for demand to buy emissions permits in Europe.
Analysis by S&P Global expects average prices for 2024 to plummet to Eur 63.90/mtCO2e, compared to Eur 85.30/mtCO2e in 2023 and Eur 81.50/mtCO2e in 2022.
Thus, many have revised down their EUA 2024 price forecasts. They attribute the decline to recession concerns and reduced emissions from power and industrial sectors.
EU’s Bold Climate Agenda for 2040
The European Commission unveiled a bold new climate target, setting its sights on slashing the bloc’s GHG emissions by 90% by 2040, relative to 1990 levels.
This ambitious target closely aligns with the recommendations put forth by the European Scientific Advisory Board on Climate Change. The organization advises a reduction of emissions by 90% to 95%.
More notably, this intermediary step serves as a crucial bridge between the EU’s current objectives:
Cutting net emissions by 55% by 2030 and achieving net zero emissions by 2050.
The analysis conducted in the impact assessment of the new proposal indicates that the remaining EU GHG emissions in 2040 should not exceed 850 million metric tons of CO2-equivalent (MtCO2-eq). Meanwhile, carbon removals, facilitated through land-based and industrial carbon removal methods, should aim to reach up to 400 MtCO2.
Achieving this new climate agenda requires a couple of initiatives, including:
This ambitious target is essential to ensure the EU remains aligned with the objectives outlined in the 2015 Paris Agreement. The agreement aims to limit the planet’s long-term average temperature increase to well below 2°C and preferably below 1.5°C.
From Downturn to Turnaround
Moreover, the proposal underscores the economic imperative of addressing climate change, highlighting the potential costs of inaction. Failure to limit global warming to 1.5 degrees Celsius above pre-industrial levels could result in additional costs of 2.4 trillion euros in the EU by 2050, primarily due to the heightened risk of more severe and destructive extreme weather events.
In 2022, the EU made significant strides in reducing GHG emissions, achieving a 33% reduction compared to 1990 levels.
EU CO2 Emissions, 1965-2022
Source: Statista
Additionally, a separate EU document outlines plans to capture and store hundreds of millions of tons of CO2 emissions by 2050, emphasizing the substantial investment required in new technologies to address climate challenges effectively.
However, it’s important to note that the 2040 ambition is currently a non-binding recommendation from the European Commission, intended to initiate political discussions. A formal proposal will only be presented after the elections to the European Parliament.
It remains uncertain how the final decision would impact the European carbon market and prices. Regardless, the EC’s ambitious 2040 climate target underscores the EU’s commitment to addressing climate change and ensuring a sustainable future.
However, it remains imperative for policymakers to translate these goals into concrete actions to mitigate the potential costs of inaction.
HSBC has forged a partnership with Google Cloud to provide financial support to companies dedicated to advancing climate mitigation efforts through technology solutions. This collaboration aims to bolster firms selected by the U.S. tech giant for its Google Cloud Ready-Sustainability (GCR-Sustainability) program.
The GCR-Sustainability initiative is designed to cater to the needs of customers in their environmental, social, and governance (ESG) journeys. It aims to assist companies in achieving various objectives, including reducing carbon emissions, enhancing sustainability throughout supply chains. The program also facilitates the processing of ESG data to gauge performance and identify climate-related risks.
HSBC and Google Collab Fuels Climate Solutions
Through the partnership, Google Cloud intends to expand its roster of partnerships within the GCR-Sustainability program. Currently, it features notable companies such as Airbus, Planet Labs, and Watershed, among others, within the next two years.
Furthermore, the collaboration will enable HSBC to allocate funding to selected companies, aligning with its commitment to invest $1 billion in early-stage climate technology ventures. These cover various sectors, including electric vehicles, battery storage, and sustainable food systems, by 2030.
Companies selected to participate in the GCR-Sustainability program undergo a rigorous validation process conducted by Google. The tech giant assesses the quality of the technology under development and its alignment with climate science and expertise.
Google also evaluates the technology’s market traction among customers as part of this process.
Members of the GCR-Sustainability program will gain access to venture debt financing options provided by HSBC’s climate tech finance team. The inaugural financing package under this agreement will be directed to LevelTen Energy, a platform focused on clean energy transactions and data, enabling clients to access renewable transaction infrastructure.
Natalie Blyth, HSBC’s global head of commercial banking sustainability, emphasized the importance of partnerships and innovative financing solutions. This is even more particularly crucial amidst a period of slowing down investment in climate tech startups last year.
In Q3 2023, climate tech startups specializing in carbon and emissions technology secured an impressive $7.6 billion in venture capital (VC) funding. This figure exceeded the sector’s previous record by $1.8 billion, defying the downward trend seen in other sectors.
Blyth further noted that:
“By combining financing support, cloud technologies and connectivity to partners across our combined footprints, we will help climate tech vendors accelerate their growth and develop the solutions we urgently need at scale.”
Empowering Climate Innovators
Justin Keeble, Google Cloud’s managing director for global sustainability, underscored the necessity for technology providers to bring impactful solutions for climate action. Keeble noted that access to finance is crucial for many of these companies, making the partnership with HSBC particularly valuable.
HSBC’s initiative in London builds upon its goal of facilitating $750 billion to $1 trillion of investments and sustainable financing by 2030. Britain’s largest bank unveiled its first net zero transition plan the previous month. The bank disclosed providing $210.7 billion to support environmental and social activities since setting the target in 2020.
The net zero transition plan also outlines HSBC’s intention to gradually decrease financing provided to carbon-intensive sectors, aligning with efforts to limit global temperature rise to below 1.5°C.
The bank has established 2030 targets for industries such as oil and gas, power and utilities, transport, and heavy industry. Thermal coal mining and iron and steel manufacturing are part of the targeted industries. HSBC will disclose its progress towards these targets annually.
Advancing Climate Tech Solutions
The collaboration with Google’s cloud computing division comes on the heels of HSBC’s acquisition of the UK branch of Silicon Valley Bank (SVB) last year, a move facilitated by the UK government to prevent ripple effects in the startup ecosystem.
The availability and impact of venture debt remain significant concerns for policymakers. While SVB played a major role in this space, traditional lenders have been cautious about entering, citing capital risks.
HSBC spokesperson Richards noted that the bank has exceeded internal targets on this front and expressed optimism that the partnership and the launch of HSBC Innovation Banking would expedite progress toward the more ambitious goal of transitioning 1.3 million clients to net zero by 2050.
According to research from the International Energy Agency, almost 50% of the emissions reductions needed to achieve net zero by 2050 will rely on currently unscaled technologies.
HSBC intends to facilitate connections between its existing clients and climate tech firms to facilitate the transition over time.
Keeble emphasized the crucial role of technology and finance in driving climate action, expressing HSBC’s alignment with Google’s perspective that sustainability challenges are fundamentally data challenges.
The collaboration between HSBC and Google Cloud signifies a significant step towards fostering climate tech innovation. Through financing and technological support, they aim to accelerate the development and adoption of impactful solutions, crucial for combating climate change and achieving sustainability goals.
About 23% of global greenhouse gas emissions are now subject to carbon pricing mechanisms, which collectively raised $100 billion in 2022 alone, according to a recent report by the Carbon Market Institute (CMI).
CMI is a member-based institute with over 150 members. They include various stakeholders such as primary producers, carbon project developers, Indigenous organizations, legal and technology firms, insurers, banks, investors, corporate entities, and emission-intensive industries.
Driving Decarbonization: Carbon Markets Surge
In the global battle against climate change, financing the transition to a low-carbon economy is paramount. Carbon markets emerge as a pivotal mechanism in this endeavor, offering a pathway to channel investments towards emission reduction projects.
At the core of these markets is the principle of carbon pricing to incentivize entities to mitigate their carbon footprint.
Janet Hallows, Director of Climate Programmes and Nature-Based Solutions at CMI, emphasizes the pivotal role of a robust global carbon market in channeling finance toward decarbonization initiatives. She said that:
“The new report shows that carbon markets are already driving large amounts of finance to decarbonisation efforts that would otherwise be underfunded, with strong demand for credits resulting in record retirements since 4Q2023.”
The same trend was observed by the Viridios AI’s VCM market report, reporting that retirements rallied in Q4 2023. The Viridios report noted that it’s the second highest quarter on record, despite slow corporate activities. This pattern was carried over into 2024.
Despite current government pledges, the report warns that projected temperature increases still fall between 2.1°C and 2.8°C.
Hallows underscores the potential of carbon markets to help bridge the gap toward a 1.5°C trajectory. But she further emphasizes the need for strengthened integrity measures and enhanced international cooperation.
These sentiments echo recent statements by UN climate change executive secretary Simon Stiell, who highlighted the importance of ambitious actions by key countries to limit temperature rise to 1.5°C. Stiell called for countries responsible for 80% of global GHG emissions to significantly revise their emissions targets by 2025.
According to the report, there’s a total of 73 national and subnational carbon pricing mechanisms in place, raising $100 billion in 2022. For the same year, the voluntary carbon market is valued at $1.87 billion.
Establishing Fair Carbon Pricing at COP29
Furthermore, Stiell advocated for the establishment of a fair global carbon price, traded with integrity, to stimulate investment in renewable energy and foster innovation.
These initiatives are seen as critical steps toward achieving climate goals and will be central topics at the upcoming UN COP29 climate negotiations in November in Azerbaijan.
Hallows emphasizes the urgency of finalizing international carbon market rules at COP29. It’s the key to unlock the full potential of high-integrity carbon credits in accelerating global decarbonization efforts.
These rules, outlined in the Paris Agreement, particularly regarding a centralized global market system, are crucial for countries to strengthen their climate commitments effectively.
The report also highlighted several significant developments in the carbon market space by region and country.
Global Momentum: Regional Developments and Agreements
Canada has introduced draft rules for a cap-and-trade scheme in the oil and gas industry. In South America, Brazil’s Lower House has endorsed a bill similar to that of Canada.
Meanwhile, Turkey plans to launch its emissions trading scheme next year, and China will reintroduce its voluntary carbon crediting scheme.
Additionally, the report identifies 78 bilateral agreements signed by various countries, paving the way for trading emissions reduction units under Article 6.2 of the Paris Agreement. These units are otherwise known as internationally transferred mitigation outcomes, or ITMOs.
In Europe, the bloc is finalizing arrangements for a voluntary certification scheme for carbon removals, expectedly by next month. Over in the UK, the British government plans to introduce a Cross-Border Adjustment Mechanism similar to EU’s CBAM by 2027.
On a regional level, Singapore’s carbon tax scheme now permits liable companies to offset up to 5% of their taxable emissions using international carbon credits.
Australia’s Clean Energy Regulator is collaborating with the Australian Stock Exchange to establish a national carbon exchange. They’re creating a new register for Australian Carbon Credit Units.
The CMI report underscores the pivotal role of carbon pricing mechanisms in financing the transition to a low-carbon economy. With $100 billion raised in 2022 alone, carbon markets are driving significant investments towards decarbonization efforts globally.
In the realm of environmental sustainability and corporate responsibility, the concept of Scope 3 emissions has gained significant attention. Understanding Scope 3 emissions and knowing how to reduce them is crucial for businesses wanting to address their environmental impact.
This comprehensive guide delves into the definition, categories, and methods of identifying Scope 3 emissions and the various means to curb them.
Scope 3 Emissions: What You Need To Know
According to the Greenhouse Gas Protocol, Scope 3 emissions include all indirect emissions that occur in your company’s value chain.
Unlike the other two emissions, Scope 1 (direct emissions from owned or controlled sources) and Scope 2 (indirect emissions from purchased electricity, heat, or steam), Scope 3 emissions capture a broader range of impacts. These emissions are often more challenging to measure and control because of their much diverse and dispersed nature.
Source: GHG Protocol
Scope 3 emissions come under three different categories:
Upstream Emissions: These emissions occur in the supply chain, covering activities such as raw material extraction, production, and transportation of goods and services.
Downstream Emissions: This category involves emissions related to the use, disposal, and end-of-life treatment of a company’s products.
Value Chain Emissions: Encompassing the entire lifecycle of a product or service, value chain emissions include both upstream and downstream impacts.
Identifying Indirect Emissions Sources
Identifying and quantifying Scope 3 emissions is a complex task, but essential for understanding of your company’s carbon footprint. Here are the key steps in identifying indirect emissions sources:
Stakeholder Engagement:
Collaborate with suppliers, customers, and other stakeholders to gather data on emissions throughout the value chain.
Understand the environmental impact of supplier activities, transportation, and end-use of products.
Life Cycle Assessment (LCA):
Conduct a life cycle assessment to analyze the environmental impact of products/services from raw material extraction to end-of-life disposal.
Consider various environmental indicators, such as carbon footprint, water usage, and land use.
Emission Factors and Benchmarks:
Utilize emission factors and industry benchmarks to estimate emissions from specific activities within the value chain.
Compare performance against industry averages to identify areas for improvement.
Technology and Data Solutions:
Leverage advancements in technology, such as data analytics and digital tools, to enhance the accuracy of emission measurements.
Implement robust data management systems to track and report emissions data effectively.
Keep in mind that embracing Scope 3 emissions as a part of your sustainability strategy is not only a corporate responsibility; it’s also a proactive approach towards building a resilient and environmentally conscious business.
These indirect emissions, spanning the entire value chain, contribute substantially to the overall carbon footprint of a company. Most businesses have Scope 3 emissions that are responsible for more than 70% of their total footprint.
Per Wood Mackenzie, value chain emissions account for 80% to 95% of total carbon footprint from oil and gas firms.
Essentially, by tackling Scope 3 emissions, oil and gas firms and other businesses can make meaningful strides toward reducing their ecological footprint and combating climate change. Doing so also enables companies to promote sustainable resource use, from raw material extraction to end-of-life disposal.
Not to mention that many Scope 3 activities do impact biodiversity. Addressing these emissions helps project natural habitats and the diverse species that inhabit them.
Knowing how to reduce your own company’s Scope 3 emissions matters a lot in the view of corporate responsibility and stakeholder expectations. This has never been more important in an era where environmental consciousness is at the forefront.
Additionally, governments and regulatory bodies are placing greater emphasis on how corporations must be responsible for their environmental footprint.
Apart from governments, stakeholders – customers, investors, and employees – are also more concerned with the environmental practices of the companies they engage with. Taking steps to manage Scope 3 emissions fosters trust and enhances the company’s reputation as an environmentally responsible entity.
Most notably, investors are increasingly considering environmental, social, and governance (ESG) factors in their investment decisions. The “E” factor seems to weigh the heaviest at this critical moment when investors made their final choice.
Assessing Scope 3 emissions involves a combination of advanced methodologies, data-driven approaches, and strategic baseline establishment. Establishing baselines, on the other hand, forms the basis for setting realistic emission reduction targets and ensures your company’s commitment to sustainable practices.
Here are some strategies that collectively contribute to effective Scope 3 emission categories management you may consider.
Life Cycle Assessment (LCA): this strategy allows you to quantify the environmental impacts at each stage of your product or service’s life. LCA provides a holistic view, considering raw material extraction, production, transportation, product use, and end-of-life disposal.
For example, the figure below is an overview of LCA for automobiles. Conventionally, the focus was only on CO2 emissions during driving.
Graphic from Horiba.com
Nowadays, however, as required by LCA, it is the manufacturer’s responsibility to reduce environmental impacts at all phases of the product life cycle, from fuel mining and materials procurement to manufacturing, use, disposal, and recycling.
Emission Factors (EF) and Conversion Coefficients: This method is especially useful when detailed data is not available. You can use standardized emission factors and conversion coefficients relevant to your specific industry to estimate emissions from various sources. This is most particularly applicable when determining power or electricity emissions as explained in this article.
Data Analytics and Technology: You can leverage advanced data analytics and technology solutions to process large datasets and enhance the accuracy of emissions measurements. By using real-time data monitoring and analysis, you will have more informed decision-making and proactive emission management.
Now when it comes to establishing baselines, you have to keep in mind several key steps. Firstly, data collection and inventory entail gathering comprehensive data on all activities within your value chain, including Scope 3 emissions. This detailed inventory forms the foundation for your accurate baselines.
Moreover, stakeholder engagement is essential. It requires you to collaborate with suppliers, customers, and other stakeholders to gather relevant emission information. This involvement ensures you’ll have a comprehensive understanding of the supply chain, enhancing baseline accuracy.
Additionally, benchmarking against industry standards allows you to make a comparison, identifying areas for improvement and setting realistic reduction targets. Setting these targets based on established baselines involves defining ambitious yet achievable goals for different stages of the value chain.
Remember that clear targets will guide your strategies, providing a clear pathway for reducing emissions over time.
Finally, implementing regular monitoring and reporting of emissions data against established baselines is crucial. It will help you ensure accountability and facilitate continuous progress toward your organization’s emission reduction goals.
Steps in establishing baselines to reduce Scope 3 emissions
This time, let’s dig deeper into each of the strategies so you get the clearest picture on how to reduce Scope 3 emissions.
Collaborative Initiatives with Supply Chain Partners
Collaborating with supply chain partners involves engaging both with your suppliers and customers in concerted efforts towards sustainability. This begins with transparent communication and fostering open dialogue with suppliers regarding shared sustainability goals.
A crucial part of this strategy is involving the establishment of initiatives to actively include suppliers in sustainability efforts. A good example of this is the Vietnamese EV company, VinFast’s strategy of establishing its EV battery line and supply chain. The automaker collaborates with battery industry leaders like China’s CATL to develop new battery and EV technologies.
You may also have to integrate sustainability criteria into your procurement processes to ensure that environmental considerations have a key role in supplier selection. This also means establishing emission reduction targets together with your supply chain partners.
That may involve a lot of work as you need to align your goals with theirs for your sustainability strategies to work. But that ensures a more inclusive participation and greater overall success in reducing emissions across the supply chain.
Lastly, don’t forget your customers. Educate them about your company’s sustainability practices and involve them in initiatives to reduce product-related environmental impact. What heavy-equipment manufacturer Komatsu did is a perfect example. It collaborated with its customers in planning, developing, testing, and deploying zero-emissions mining equipment.
Sustainable Procurement Practices
As mentioned earlier, it’s also important to incorporate sustainable procurement practices in reducing environmental footprints in your supply chain. This means selecting suppliers with low emission practices which can substantially contribute to emission reduction efforts. Collaborative goal-setting with suppliers can further strengthen this approach.
For chemical companies, reducing Scope 3 emissions heavily lies in sourcing low-carbon feedstock or increasing the share of recycled or bio-based raw materials. This is possible by partnering with low-carbon or recycled- or bio-based-feedstock suppliers.
For example, specialty-chemical company Unilever partnered with Evonik to scale bio-based raw material for use in dishwasher detergent. The initiative can help lower the carbon intensity of inputs.
But one necessary thing is to assess the environmental impacts in your procurement decisions. Considering the full life cycle of products or services and using tools like LCAs can help you quantify environmental footprints.
By choosing suppliers and products with lower environmental impacts, you minimize your overall environmental footprint, benefiting both the environment and your company’s reputation.
Travel and Transportation Emission Reduction Strategies
Employee travel is a major source of Scope 3 emissions. Encouraging sustainable commuting options like public transportation, carpooling, cycling, or walking reduces emissions from employee travel.
You can do that by providing incentives such as public transportation subsidies or flexible work arrangements to motivate employees. Promoting remote work options also reduces commuting emissions.
Image from Pixabay
Prioritizing virtual meetings and video conferencing reduces the need for travel. When travel is necessary, opting for lower-emission modes like trains or electric vehicles helps.
More importantly, clear guidelines and policies for business travel ensure consistent emission reduction efforts across the organization.
In the SaaS industry, the transition to remote work has profoundly influenced the emissions landscape. Global Workplace Analytics (GWA) reports that if individuals who have the ability to work remotely did so just half of the time, it would lead to a GHG reduction equivalent to removing the entire New York State workforce from commuting permanently.
The leading SaaS provider, Microsoft, is well-known for reducing its Scope 3 emissions, which include data center operations, corporate travel, and employee commuting. The tech giant pledges to achieve carbon negative by 2030 and net zero by 2050. And one crucial strategy to reaching that goal is promoting work-from-home setup to cut commuting emissions.
Implementing Energy Efficiency Measures
Another essential strategy you can employ to reduce your organization’s Scope 3 emissions is adopting energy efficiency measures. Transitioning to renewable energy sources like solar, wind, hydroelectric, or geothermal power enhances energy efficiency and reduces environmental impact.
By investing in renewable energy, you decrease reliance on fossil fuels and contribute to the global shift toward clean energy. Amazon is known for its massive efforts in supporting renewable energy initiatives, investing millions of dollars into them.
Furthermore, it helps significantly if you prioritize investing in energy-efficient technologies that minimize energy consumption and optimize resource use. For instance, upgrading to energy-efficient equipment, such as LED lighting and smart building systems, and instituting energy management systems and audits.
Promoting energy-saving behaviors among employees further enhances efficiency. Embracing these measures reduces operational costs, cuts carbon emissions, and strengthens sustainability efforts.
Employee Engagement and Behavioral Changes
Educating your employees about sustainability issues and their role in mitigating them is crucial. You can conduct workshops, seminars, or informational sessions to raise awareness about environmental challenges and the importance of individual actions.
Providing resources like informational materials or online courses on sustainability topics further empowers employees to make informed decisions.
Doing so can help you encourage sustainable practices in the workplace and foster a culture of sustainability. Common examples of these practices are recycling, reducing waste, and conserving energy.
Recognizing and rewarding your employees for their emission reduction efforts reinforces positive behaviors and encourages continuous improvement. You can integrate all these into daily operations and decision-making processes, turning sustainability into a strong organizational culture.
Reporting and Monitoring Progress
Finally, it’s important to set clear Key Performance Indicators (KPIs) for measuring and tracking your company’s sustainability progress. These KPIs should be specific, measurable, achievable, relevant, and time-bound (SMART). Examples include carbon emissions reduction targets, energy efficiency improvements, waste reduction goals, and adoption of renewable energy sources.
By establishing KPIs, you can assess your performance against predetermined baselines and identify areas for improvement. Tech giant Meta is excellent at using KPIs in tracking its sustainability efforts and addressing pertinent issues.
But you also need to maintain regular reporting and transparency practices for accountability and stakeholder engagement. You should provide transparent disclosures on your initiatives, progress, and KPIs through annual reports, websites, or other communication channels.
Additionally, soliciting feedback from stakeholders and incorporating it into your future emission reduction strategies fosters a culture of transparency.
Building a Sustainable Future through Effective Scope 3 Emissions Reduction
So, that’s how you tackle Scope 3 emissions. The measures identified seem to be too much to bear but it’s imperative to build a sustainable future.
By implementing collaborative initiatives with your supply chain partners, you can significantly reduce your company’s indirect environmental impact. Plus, sustainable procurement practices, travel and transportation emission reduction strategies, and employee engagement further contribute to your emission reduction efforts.
And remember to report and monitor your progress, including establishing key performance indicators and maintaining transparency, and track sustainability performance.
By collectively embracing these measures, you won’t only mitigate your business’ environmental footprint but also pave the way for a more sustainable future for the planet.
Elon Musk’s Tesla generated a substantial $1.79 billion from carbon credit sales last year, as revealed in their Q4 2023 and annual financial report, bringing its total earnings from such credits since 2009 to nearly $9 billion.
This revenue comes from trading regulatory credits to other automakers unable to meet emission regulations in the US, Europe, and China.
Tesla continues to profit from the need of its rivals to meet emissions standards. It is a lucrative business that was initially expected to diminish. Since the EV giant incurs minimal additional costs to earn these credits, the sales represent almost pure profit.
This revenue stream has been crucial for Tesla, although the specific recipients of the credits remain undisclosed.
In its recent fourth quarter and annual 2023 filings, the EV maker reported a $433 million income from the sale of carbon credits. That figure represents a 7% decrease year over year (YoY) compared to $467 million earned in Q4 2023.
But the total annual revenue of Tesla from selling carbon credits in 2023 increased to $1.79 billion from $1.78 billion. Yet, that enabled the automaker to reach another record high in 2023.
This sustained revenue may have surprised Tesla, given previous expectations that regulatory credit income would fall as competitors increased EV production.
In 2020, the company’s former CFO Zachary Kirkhorn cautioned investors about relying too heavily on this revenue stream. He forecasted a decline in its significance over time.
However, contrary to expectations, Tesla’s earnings from regulatory carbon credits have not decreased significantly, as last year’s earnings slightly surpassed the previous year’s income.
By providing its peers a mechanism to offset their carbon emissions, Tesla plays a significant role in the carbon credit market.
As the automotive sector seeks to comply with emissions standards set by regulatory bodies, they can purchase carbon credits from Tesla. They can also do the same from other companies that reduce greenhouse gas emissions through renewable energy and other carbon reduction or removal initiatives.
The revenue generated from the sale of carbon credits has become a substantial source of income for the company. In fact, the credits account for a staggering 11% of Tesla’s overall gross margin for the quarter, $4,065 million, down from 25.9% seen in Q4 2022.
Tesla’s total automotive revenues of $21,563 million were up 1% YoY but missed analysts’ estimate of $22,385 million.
Still, the growing carbon credit sales underscores the value of the EV maker’s clean energy initiatives. This is also evidenced by another growing business of the company, energy generation and storage. Its Q4 2023 revenues totaled more than $1.4 million, up from the year-ago earning of $1.3 million.
Given the global focus on reducing carbon emissions and addressing climate change, the demand for carbon credits is expected to increase in the future.
Tesla’s position as a leader in the electric vehicle market and its commitment to sustainable energy place it in a favorable position to continue profiting from the sale of carbon credits in the years to come.
Despite its continued dominance in the U.S. EV market, Tesla faces growing competition, particularly from China’s BYD. The Chinese automaker recently surpassed Tesla as the world’s largest seller of EVs.
BYD’s vehicle production was up substantially last year, almost 2x as high as in 2022, at 3.02 million units. However, around 1.4 million of these vehicles were hybrids, while Tesla produced around 1.84 million all-electric vehicles.
Moreover, some of Tesla’s competitors are scaling back their EV investment plans, with Ford delaying $12 billion in investments. On the other hand, General Motors is reintroducing hybrids to its lineup.
As emissions regulations tighten, the regulatory landscape becomes increasingly challenging.
Europe is imposing stricter car emissions targets starting next year, with even more stringent standards set for 2030 and beyond. The EU sets a 100% emission reduction goal for both cars and vans from 2035 onwards.
Similarly, the United Kingdom has implemented a zero-emission vehicle mandate beginning this year.
At home in the U.S., the government committed $623 million in grants to propel the growth of EVs. The financing was made available through the 2021 Bipartisan Infrastructure Law. The funding aims to make EV chargers more reliable and accessible for American drivers.
Tesla’s lucrative carbon credit sales continue to defy expectations, bolstering its financial performance and solidifying its role in sustainable transportation. And despite growing competition and tightening emissions regulations, Tesla’s position in the EV sector remains robust, fueled by its commitment to clean energy initiatives.
For the first time in Super Bowl history, the massive power needed to host the Big Game over the four-hour contest came from a Nevada solar farm. The enormous Arrow Canyon Solar Project, owned by local utility NV Energy, powered the full game’s estimated 28 megawatt hours during this year’s Super Bowl.
In July of 2023, Allegiant Stadium was awarded LEED Gold Certification by the U.S. Green Building Council. NZero, the first a climate accountability company deploying real-time emissions data collection, independently quantified and verified Allegiant Stadium’s emissions across various scopes for their sustainability initiatives and helped build the roadmap for its net zero goals.
Allegiant Stadium and the Las Vegas Raiders built in highly innovative design features, such as solar panels and energy-efficient lighting, further reducing the stadium’s environmental impact. And renewable energy is not the only sustainability measures the group have taken implementing other initiatives as well including:
Food Scrap Collection
Grass Clippings Collection
Rubber Pellet Recycling
Waste Diversion
Understanding the Environmental Impact of Super Bowl LVIII
The Super Bowl is more than just a game; it’s a massive event with far-reaching economic and environmental effects. Beyond the excitement of football, it’s crucial to examine its environmental footprint, including carbon emissions and energy consumption and environmental impact of Super Bowl LVIII in detail.
Benjamin Leffel, an assistant professor of public policy sustainability at the University of Nevada, Las Vegas, highlighted the environmental impact of the Super Bowl. He said that:
“The emissions levels of a mega-event like this from air traffic, and the energy use is at least double in a day than it would be on average.”
The world sport sector is estimated to be responsible for about 50-60 billion tonnes of CO2e per year according to Rapid Transition Alliance, a network of international organizations tackling the climate emergency. Sporting events are responsible for massive levels of emissions like carbon-heavy power-hungry stadiums, unrecyclable garbage, and all the energy required for television and web broadcasts.
Sunday’s game, the celebrations and after-parties will leave a considerable carbon footprint using around 20,000 megawatt-hours of electricity, roughly equal to the power it would take to electrify 46,052 households across the US. Digital advertising during the Super Bowl will further exacerbate environmental concerns, generating substantial carbon emissions. The widespread use of electronic devices during the event also contributed to massive energy consumption.
The NFL’s environmental program, NFL Green, aims to reduce the environmental impact of major events like the Super Bowl. This includes partnerships with sponsors, local committees, and initiatives like e-waste recycling and food donation. However, further efforts to reduce energy consumption and support clean energy initiatives are needed with broader goals for a sustainable future.
Many critics and pundits will see all this as greenwashing. Just think about the thousands of fans, players, and staff that drove or flew in for the game – ahem Taylor Swift – so the Super Bowl still has a considerable carbon footprint.
Yet with the first-ever Green Superbowl in the Solar Stadium won, done and over, its certainly a step in the right direction for the world of sport.
Athian has launched a groundbreaking voluntary livestock carbon insetting marketplace, featuring the first accepted protocol aimed at reducing enteric methane emissions and improving feed utilization using innovative feed management products from Elanco Animal Health. This unique carbon marketplace allows farmers to monetize their greenhouse gas emission reductions.
Athian offers economic incentives for sustainable farming through carbon credits generation. The Indianapolis-based company monetizes the reductions for the beef and dairy farmers by selling those credits. Its platform benefits the global food system sustainability while reducing planet-warming emissions.
Elanco Animal Health is the world’s third largest animal health company. It specializes in innovating and delivering products and services to prevent and treat disease in farm animals and pets.
Livestock Farming’s Green Revolution: Carbon Insetting
Data indicates that animal agriculture contributes to at least 16% of global GHG emissions, leading to deforestation and biodiversity loss. Within livestock emissions, methane, nitrous oxide (N2O), and carbon dioxide are prominent. Methane and N2O are significantly more potent than CO2 in terms of their warming effect.
Livestock supply chains generate GHGs through various means. These include methane production during the digestive process of animals, feed production, management of manure, and energy consumption.
Athian’s platform is the world’s first carbon credit program for livestock. The initiative involves verifying farms, certifying and selling carbon credits within the dairy value chain. This enables dairy farmers of all sizes to implement sustainability interventions, measure their impact, and undergo 3rd-party verification for GHG emissions reductions.
The resulting carbon credits can then be sold in Athian’s livestock carbon insetting marketplace.
Companies in the dairy value chain, such as consumer-packaged goods companies and food retailers, can purchase these carbon credits to contribute to their Scope 3 emissions reduction goals.
This not only provides economic value to farmers through credit sales but also supports the U.S. dairy industry’s progress towards GHG emission neutrality by 2050.
Early last month, the company announced the first sale of carbon credits to Dairy Farmers of America (DFA), the biggest milk marketing cooperative in the U.S.
If the entire U.S. dairy industry adopted this intervention, it could potentially prevent 4.7 million metric tons of carbon emissions annually from enteric, feed, and manure emissions. This underscores the significant contribution that animal agriculture can make toward climate mitigation efforts.
In the long term, the marketplace aims to expand to include other livestock and poultry sectors. Paul Myer, CEO of Athian, emphasizes the uniqueness of their marketplace, being distinct from traditional carbon offsetting platforms as it retains economic and environmental value within the animal protein value chain. He further added that:
“Athian’s first carbon credits for dairy are an exciting and crucial step as they demonstrate the ability to tangibly quantify and verify greenhouse gas emissions reductions and create monetary value for farmers for their efforts.”
While carbon markets are widely known among farmers, only 3% are currently participating, according to a recent USDA survey. Athian’s inset market model, developed in collaboration with recognized supply chain partners, aims to simplify measurement and verification processes, breaking down barriers to entry and expediting progress.
Jeff Simmons, President and CEO of Elanco Animal Health, expressed excitement about Athian’s milestones. He highlighted the potential for farmers to achieve climate-neutral farming and create new value.
Elanco’s focus on delivering enteric methane reduction solutions could significantly impact emissions across the U.S. dairy industry.
Elanco’s UpLook™ tool, designed to measure and monitor GHG emissions using on-farm data and peer-reviewed science, complements Athian’s verification system. This integration helps farmers quantify reduction efforts and certify carbon credits for sale, further incentivizing sustainability practices.
Transforming the Food Chain
Food companies and retailers have publicly committed to collectively reducing over 100 million metric tons of GHG emissions by 2030. Despite progress in corporate goal-setting, reducing Scope 3 emissions, primarily from raw material production like milk, remains a significant challenge.
Athian’s introduction of the insetting livestock carbon credit marketplace offers companies in the animal protein value chain a tangible opportunity to advance their Scope 3 emission reduction objectives.
Athian’s innovative livestock carbon insetting marketplace, in collaboration with Elanco Animal Health, marks a significant milestone in the agricultural sector’s journey towards sustainability. By monetizing greenhouse gas emissions reductions and incentivizing sustainable practices, the platform not only
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Given CATL’s scale, the annual expense on carbon credits for this purpose is expected to be substantial.
