Governments are considering public transportation pricing schemes to help with the rising costs of energy and the burden of inflation. Germany tested the low-priced transit tickets that cost only €9 and also cut carbon emissions by 1.8 million tonnes.
Germany has been offering riders very low monthly ticket prices. This applies to all local trains, metros, trams, and buses for 3 months.
The pricing scheme is an effort to promote the use of public transport and ease the burden of high energy costs.
According to a public-transport organisation in Germany, VDV, the scheme was successful.
52+ million people have bought the €9 tickets, which reduced car use and cut carbon emissions by 1.8 million tonnes.
Oliver Wolff, VDV’s CEO said that:
“The 9-euro ticket not only relieved citizens financially but also had a clearly positive effect on the climate.”
Notable Impacts of Low-cost Public Transportation
The discounted ticket is a huge price reduction because monthly tickets for local transport in Berlin costs €107.
Among the new buyers of monthly tickets since June, more than half said the cheaper price was the key incentive for their decision.
The country’s national rail authority, Deutsche Bahn, reported that it has sold 26 million of the low-cost tickets alone. And over the summer months, they saw a 10% increase in public transport passengers.
As such, they called the 9-euro ticket experiment a total success.
The decision to subsidize the tickets comes as Germany continues to see high inflation, which hit around 8% last month.
Months before this scheme, the ridership was on a slight downward trend.
Researchers at the University of Potsdam noted that air pollution levels go down by up to 7% as a result of the low-cost ticket.
They said that their findings may have significant implications on policy and health. Their results show that subsidizing public transportation may be a viable way to lower air pollution, particularly in cities.
That can contribute to the UN’s sustainability goal of creating more resilient, safer, and healthier urban areas.
The paper advocated for affordable public transport to boost “adoption and reduce the financial burden for current users.”
WEF’s report argued that road pricing systems should be designed to account for the economic, environmental, and societal impacts of public road transportation. Incorporating these impacts in individual choices means considering the following:
In the U.S., emissions from transportation account for about 27% of the country’s total emissions, making it the largest contributor.
In the EU, transport footprint has jumped by 33% since 1990 while other sectors have cut down emissions.
As shown in the chart below, light-duty vehicles (passenger cars and vans) are the greatest contributor to EU transport GHG emissions.
The carbon footprint from heavy-duty vehicles (trucks and buses) is #2, followed by marine and aviation.
Transport remains a key challenge to achieving the EU’s climate targets. In fact, an analysis shows that transport alone can emit more than the bloc’s total share of the Paris Agreement’s 1.5°C carbon budget.
And that’s even under an ambitious decarbonization policy scenario.
As EU member states are looking for ways to curb transport emissions, the public transportation pricing scheme in Germany may offer one solution.
But this 9-euro ticket scheme expired at the end of August. Still, many advocates are pushing for an extension. Wolf remarked that:
“All responsible actors should therefore now decide quickly on the continuation and further development of such an offer… If we take the traffic turnaround and climate change seriously, then we have to act now.”
The U.S. Office of the Comptroller of the Currency (OCC) hired its first “climate cop” or chief climate risk officer, Dr. Yue (Nina) Chen to manage climate-related financial risks.
OCC is the federal agency overseeing the largest banks in the U.S.
The banking regulator reinforced its commitment to confront risks associated with climate change by appointing Chen.
OCC believes that climate-related financial risks can affect the safety and soundness of banks through physical and transition risks. This may also impact various sectors of the economy as well as access to financial services.
And so, hiring an officer to police the matter is critical to minimize the said risks.
Climate Change and the Banking Sector
Global warming and extreme weather events put more pressure on banks in figuring out how much money to lend to firms. And pricing those loans becomes even more difficult.
Proponents of climate-driven financial oversight say that a catastrophic weather event causing bigger losses to banks is a big issue. It can threaten the stability of the financial system.
The idea to integrate climate-related risks into financial regulation was from Democratic lawmakers. They have been warning others about the dangers of climate change to markets.
In fact, President Joe Biden assembled a team of climate experts inside the White House. And OCC is one of those agencies involved in this matter.
The Climate Cop
OCC is the chief regulator of about 70% of the assets in the U.S. commercial banking system.
The agency’s role is to ensure that national banks and federal savings associations know their climate-related financial risks. And that they create risk management frameworks to measure, track, and control those risks.
supporting the development and adoption of effective climate risk management practices at banks
Thus, OCC designated one of its bank supervisors last year to serve as a climate risk officer to urge banks to consider climate risks in their operations.
Dr. Chen’s role is an expansion of that and is crucial in delivering OCC’s functions.
As a climate cop, Chen will oversee the OCC’s new Office of Climate Risk. She will also lead the agency’s climate risk efforts related to supervision, policy, and engagement.
Dr. Chen will focus on developing a new system to assess climate-driven risks to banks. It’s important to figure out how to monitor and manage them.
She will directly report to Hsu. He foretold this move in his speech on the issue.
Hsu said that the appointment of a new climate risk officer will speed up “our internal function into a full-fledged office reporting directly to me”.
He also noted that regulators are starting to consider how testing banks for readiness for climate-related threats could look in the future. He added that:
“With regards to scenario analyses for larger banks, a strong emphasis on diversity of approaches needs to be maintained… With climate-related risks, I believe we are much more exposed to failures of imagination — not asking enough ‘what if?’ questions — than we are to failures of stringency or consistency.”
Dr. Chen’s Background
Dr. Yue Chen has a doctorate in chemical engineering from the Massachusetts Institute of Technology.
She had worked at Goldman Sachs in the Wall Street giant’s asset management business. She was then employed at the Royal Bank of Canada.
OCC’s climate cop is not Chen’s first role as a regulator. She was the executive deputy superintendent in the climate division of New York State’s banking department.
There she “was responsible for integrating climate-related financial risks into supervision of regulated entities,” as per OCC’s statement.
Dr. Chen was also the vice chair of the climate risk steering group at the International Association of Insurance Supervisors.
Under her leadership, the OCC will continue to focus on championing climate risk management frameworks for the federal banking system.
DeepMarkit announced that it is sponsoring and will co-host the Climate Week Blockchain Summit on September 20th.
The event is organized by Flowcarbon and dClimate to occur during Climate Week New York City 2022, the biggest climate event in the world taking place from September 19-25 in NYC.
Climate Week 2022 partners and sponsors include the Climate Group, Estee Lauder Companies, The Climate Pledge, Johnson and Johnson, Google, FedEx, and many more.
Members of the DeepMarkit team will also attend the North America Climate Summit (NACS) organized by the International Emissions Trading Association (IETA) in partnership with International Carbon Action Partnership (ICAP).
The CW Blockchain Summit is a one-day event to be held at Project Farmhouse, a sustainable event center that embodies eco-conscious living.
The event features exclusive leadership panels, keynote speakers, a happy hour event and a dinner.
Meanwhile, the NACS will occur at the Westin New York at Times Square from September 20-22nd. It’s a forum to understand the world’s net zero landscape and clean growth opportunities through interactive sessions and workshops.
There will also be an IETA members nightcap reception happening.
The DeepMarkit team expects to benefit from the event by strengthening existing relationships and sourcing new business development opportunities.
ClimeCo has partnered with Enaleia to tackle plastic pollution in Kenya via a plastic collection project producing plastic credits under Verra.
ClimeCo is a global sustainability company advancing the low-carbon future with market-based solutions. It’s a leading firm in the management and development of environmental commodities.
Enaleia is a non-profit social enterprise addressing two problems for the marine environment – overfishing and plastic pollution. It works with coastal communities and teaches them practices that preserve fish populations while removing piles of plastic from the seas.
ClimeCo’s additional funding will support Enaleia’s newest plastic project in Kenya. This deal between the two companies will produce plastic credits under Verra’s Plastic Program.
ClimeCo, Enaleia, and Plastic Credits
For ClimeCo’s director of Plastic Program, Chris Parker, a plastic credit is:
“… an environmental commodity that represents the collection or recycling of one tonne of plastic material, which companies use in their ESG, CSR, and sustainability programs… Our approach is to create a system solution to the ocean plastic challenge.”
According to a study, humans produced about 460 million tons of plastics in 2019. This rate will grow even more despite the increasing use of plastic recycling technologies.
Some firms are recycling carbon dioxide to make plastics like polymers and earn credits out of it. In fact, ~ 250,000 metric tons of CO2 are being used as a raw material in polymer manufacturing each year.
This forms part of their ESG strategy to make operations become sustainable.
In the case of Enaleia and ClimeCo, plastic credits will be from collecting plastic wastes in vital fishing areas in Kenya.
With ClimeCo’s funding and the sale of the credits, Enaleia can collect 1,000-3,000 tonnes of plastic a year.
Enaleia works with ClimeCo and the Kwale Recycling Center in Kenya to collect and integrate plastic into the circular economy.
Other professional experts in sustainable development are also taking part in the project.
Plastic Project in Kenya
The Kenya plastic project supports 350+ fishers in Kwale County by empowering them to collect plastic wastes in land and ocean. These include abandoned nets, gear, and marine litter.
Around 20% of ocean plastic is fishing gear.
The number of fishermen will increase to 800 from the coastal communities in the following months.
The collected waste will then go to Kwale Recycling Center. It’s a local collection and recycling company that processes plastics into useful materials and products.
Plastic wastes are recyclable into various consumer goods like clothes, shoes, packaging, bags, rugs, bottles, and more.
The Plastic Credit Model
As per Lefteris Arapakis, Enaleia’s Co-Founder and Director:
“Through the plastic credit model, we can set up large-scale plastic cleanup projects that can create a real impact on our oceans… by empowering the fishing communities at this scale, we can not only clean up significant amounts of plastic but also prevent further ocean plastic pollution…”
Enaleia’s project incentivizes the fishing community to use more sustainable fishing practices. For instance, fishers can reduce overfishing by limiting their activities while collecting plastic.
The project also provides a supplemental income to a community seeing some of the highest poverty rates in Kenya.
Here’s how plastic credit creation works.
Under Verra’s Plastic Program, projects that collect plastic from the environment may be issued Waste Collection Credits (WCCs). Whereas projects that recycle plastic may be issued Waste Recycling Credits (WRCs).
Together, these credits are known as Plastic Credits. They’re confirmed via the project validation and verification process.
Each plastic credit represents one tonne of plastic waste that would otherwise have not been collected or recycled.
The end user can buy and retire plastic credits to offset their plastic waste footprint. All plastic credit issuance and retirement records are available on the Verra Registry.
The ClimeCo and Enaleia project will generate plastic credits called WCCs.
Climate tech firm Patch secured $55 million to scale their business to meet the growing demand for climate action through voluntary carbon markets.
U.S.-based Energize Ventures led the Series B financing round with Singaporean sovereign wealth fund GIC as its new investor. Existing investors that joined include Coatue Management, Version One Ventures, and Andreessen Horowitz.
The fund will be for hiring more staff, expanding into new markets and developing Patch technology.
This latest round brings the company to a total of $80 million in funding to date.
Patch Platform: Bridging Climate & Technology
Climate scientists agreed that reaching global climate goals will need carbon removal to scale 1 million times its current capacity by mid-century.
Removing carbon from the atmosphere is key to fighting climate change. And many businesses are looking to help fund this climate action as part of offsetting their emissions.
This is where Patch comes in, playing a crucial role in bridging climate and technology. Its platform has the ability to embed climate action into each product and service via its API.
The software allows users to build carbon removal directly into their digital products and services to deliver an automated carbon neutralizing experience.
This is ideal for e-commerce and deliveries, as well as for travel and financial service products.
It’s important to get as many firms as possible to take action to reverse climate change. But many are struggling to integrate this into their businesses.
Remarking on this, Patch CEO and co-founder Brennan Spellacy said that:
“At Patch, we are changing that. Our infrastructure lowers the barrier to entry for both businesses and climate project developers looking to enter the carbon market which, in turn, could help unlock 20% of the climate change solution the world so desperately needs…”
With Patch’s platform, businesses of any size and budget can buy carbon credits to tackle their emissions.
The infrastructure transforms a traditionally complex and opaque system for buying carbon credits.
Patch gives entities seeking climate solutions the infrastructure they need to grow and scale their businesses. Its platform also helps facilitate impactful transactions on the VCM.
The market is seen to grow to $50 billion in 2030 and $100 billion by 2050.
For Tyler Lancaster of Energize Ventures who’s joining Patch board of directors, this growth makes “it one of the largest and most paramount markets of our time.”
But today’s carbon credit infrastructure is so fragmented and lacks standardization. This makes it difficult and complex to tap into, according to Lancaster. He added that:
“Patch’s platform provides a much-needed digital backbone that simplifies the transaction complexity of the carbon management ecosystem for both buyers and suppliers… It also increases transparency, and enables the carbon market to scale to meet global climate goals.”
The image below shows a snapshot of Patch carbon credit platform.
100+ Corporate Customers
For a year, Patch grew its customers 5x more to over 100 companies across all industries. They span from e-commerce to financial services.
Some of the firms that integrate climate action into their business using Patch platform include:
Afterpay: the buy now pay later group
The group said that Patch platform enables thousands of its customers to understand and take action to offset the emissions of their purchases.
European investor EQT
EQT leveraged Patch to place itself at the forefront of climate innovation. It’s using the platform to neutralize its emissions through bold investments in frontier technologies.
Shop Apotheke Europe
One of Europe’s leading e-pharmacies is also using Patch to buy credits to neutralize the firm’s emissions for the first half of 2022. This is part of the company’s robust decoupling strategies.
Restaurant company Just Salad
The food company recently integrated Patch right into its mobile app. This offers customers the ability to neutralize their order’s carbon footprint in an easy swipe.
Patch itself has grown its team very fast by 400% to over 60 employees worldwide in the last year. The tech company had opened a European headquarters in London.
The firm has been attracting top talent from leading tech companies like Shopify, Stripe, and Plaid.
Its latest funding round includes new investors such as B Capital Group, AENU, Blue Impact, Andrew Robb, Frank Slootman, GIC, and MCJ Collective.
The $55 million will put the company on track to deliver a massive climate impact worldwide.
Are you looking to directly reduce your carbon footprint or support projects that cut emissions elsewhere? Then carbon credits allow you to do either of these.
Each credit goes through a general lifecycle process that starts from creation to retirement. Individuals and firms use these credits to voluntarily offset their emissions.
With growing pressure on corporations to take climate action, the VCM demand deems to grow up to 10x over the next 10 years and 30x by 2050 from 2020 value.
As such, we’re also expecting to see more carbon offset project developers enter the market to meet the rising demand.
This calls for a better understanding of the role of developers in the VCM. The same goes for the state of the carbon project developer ecosystem and its maturity level.
Most notably, this article will also shed light on what are the top carbon offset project developers that contribute to the growth of the market. We’ll identify five of them to help you find the best developer you need.
The Role of Carbon Project Developers in the VCM
Delivering the promise of the Paris Agreement calls for adopting more ambitious emission reduction initiatives.
It also requires more commitments to develop carbon offset projects to neutralize unavoidable emissions.
It’s becoming clearer that well-designed VCMs are critical to achieve the Paris Agreement goal. That’s to enable the world to reach net zero emissions by 2050.
And carbon project developers play a central role in the VCM. They are key to delivering its success given the current state of the market and its projection.
Project developers perform several tasks to help ensure the growth of the VCM. These include:
Bearing the financial risks of developing carbon projects
The Current State of Carbon Project Development
Observing the current state of the carbon project development ecosystem reveals a couple of insight.
One of them tells us that the carbon project developer ecosystem remains concentrated by volume into a few players with big portfolios.
Yet, it’s the small and mid-sized carbon project developers holding smaller carbon portfolios that dominate the market.
The difference is so huge that you’d think the developer market remains largely untapped. And it seems to be the case right now.
9 out of the top 10 carbon offset project developers by issued volume are working on large-scale avoided conversion / REDD+ or improved forest management projects.
Another notable observation is the dominance of avoidance carbon offsets, particularly with renewable energy.
Renewable energy developers, which are mostly from India and China, dominate the market by number.
But the recent supply shifts prompt project developers with avoided emissions portfolios to expand into nature-based projects.
However, lack of expertise in nature-based projects may limit developers with removal portfolios producing industrial carbon capture credits.
This may give them higher project development risks like fire.
Lastly, when it comes to type of project, nature-based seems to be dominant.
Almost half of total volumes of credits issued was from nature-based project developers. This result is due to high entry to market barriers.
Most issuances are in the hands of a few large nature-based operators in the Global South.
While the top carbon offset project developers of most improved forest management portfolios are in the U.S. Blue Source and Finite Carbon are the dominant players in this field.
Offset buyer preferences are forcing project developers to shift to nature-based solutions and removal credits.
But with limited new market players, there’s a risk of failing to meet increasing demand. This may further impact the current carbon pricing.
Project developers tend to focus on nature-based avoidance carbon credits. But other types of carbon credit projects are also available to consider for your offsetting needs.
With that being said, here are the top five carbon offset project developers that made it to our list.
Top Carbon Offset Project Developers
1. BlueSource, now Anew
Formally founded in 2001, Blue Source has a new brand name called Anew after merging with the Element Markets last June. It gets the top one slot when it comes to providing offset credits from improved forest management, carbon capture, and other projects.
It has offices in the U.S., Canada, and Europe, and an environmental commodities portfolio that extends across 5 continents.
Since inception of its legacy companies, Anew has the following achievements:
transacted 150+ million tonnes of carbon
provided 240+ million diesel gallons equivalent of renewable fuels for transportation
developed projects on over 3.5 million acres of forest and farmland
developed 400+ overall projects
Anew’s activities amount to the emissions avoidance of 539 million solar panels generating power for an entire year.
Plus, the firm also developed projects with protocols made via scientific review and public stakeholder processes. Oversight for these projects comes from the top carbon standards, including:
What sets Anew apart from other project developers is that it serves the multiple functions of a broker, trader, retailer and advisor in the carbon space.
Under its core project development expertise, forestry projects, Anew follows these steps for a project to be eligible for offset crediting:
Apart from developing natural climate solutions like forestry projects, Anew also offers the following services and project development:
2. Finite Carbon
Finite Carbon, founded in 2009, is North America’s biggest developer of forest carbon offsets by volume. It focuses mainly on improved forest management projects.
With offices in 7 US states, it combines unparalleled project development experience with extensive carbon market knowledge.
To date, this offset developer is able to achieve the following performance.
The developer generated over ⅓ of all compliance offset supply. It has also delivered 800+ million dollars to landowners.
Unlike other top carbon offset project developers such as Anew, Finite Carbon is working with landowners who have 5,000 acres or more. Anything less than 1,000 acres is not a cost-effective project for the company.
But with its upcoming Core Carbon program, those who own as little as 40 acres can enter the growing carbon offset market.
Its entire offset project development process can take up to 6 months long, depending on several factors. In general, it involves the following processes:
Same with other developers, Finite Carbon pays the capital for each project. And then it collects only a percentage of the carbon offsets once completed.
With its wide coverage, the developer’s projects are in every region and major forest type from the Appalachians to coastal Alaska. Below is its project map showing its forest projects.
If you’re after a project developer that demonstrates expertise in forestry offsets, Finite Carbon should be on your top list.
3. 3Degrees
For over 15 years, 3Degrees has been a pioneer in providing climate solutions. Within that time period in the project development market, the company has achieved these results:
The company also deals with many other carbon offset projects apart from nature-based solutions. They mostly include landfill gas capture projects.
3Degrees’ project development solution is broken down into 5 major phases:
Setting aside its proven track record in the space, what makes 3Degrees stand out from other top carbon offset project developers are a couple of differences. They include the following:
Quality Standards:
3Degrees works with all four of the major internationally-recognized voluntary carbon offset standards. They include Verra, Gold Standard, American Carbon Registry, and Climate Action Reserve. The firm ensures that each project adheres to approved protocols.
Tailored Solutions:
3Degrees help organizations build a portfolio of high-quality projects that are relevant to their business and engage stakeholders.
Portfolio Management:
The project developer takes a holistic approach to portfolio management. It works with clients to balance immediate needs with long-term program goals.
All these enable 3Degrees to be a strategic partner for entities looking to build a portfolio of high-integrity carbon reduction and removal projects. They include opportunities both for long-term and new project development.
4. Forest Carbon
Making it to the top 4 spot, Forest Carbon’s main goal is to restore degraded tropical forest and wetland ecosystems. These projects fall under the broad category of REDD+.
So far, it’s a premium restoration project developer in Southeast Asia. Its projects deliver benefits for local communities, biodiversity and investors.
With offices in Jakarta and Singapore, Forest Carbon’s team is built on a track record of success in the region. The team brings a decade of experience working on the ground, from mapping wetlands and assessing below-ground carbon storage, to winning community support.
The REDD+ developer follows these key project development stages.
Feasibility assessment:
Forest Carbon is on the ground to assess threats to tropical forest ecosystems and develop business models to protect them.
From the dry dipterocarp forests of Malaysia to the carbon-rich peat swamp forests of Indonesia, the developer specializes in assessing these areas. It offers the following major advantages in creating carbon credits from natural climate solutions:
In designing its REDD+ projects, Forest Carbon works exclusively under the Verified Carbon Standard (VCS). It also adopts the Climate Community and Biodiversity Standard.
Forest Carbon has designed Indonesia’s first peatland restoration project in Central Kalimantan under VCS. It also did the same with Seima, Cambodia – WCS Restoration Project.
Impact verification:
Forest Carbon is leveraging IoT sensors and machine learning for a project’s robust impact verification.
These IoT sensors monitor water table levels for peatland ecosystems. They also provide fire risk data in real-time in a project dashboard. The data generated make it easier to measure project impact by auditors.
5. C-Quest Capital
C-Quest Capital (CQC) is a social impact project developer that aims to transform the lives of families in poor communities worldwide.
The firm does it by providing access to sustainable energy services and clean energy technologies that reduce emissions.
CQC was founded in 2008 and is headquartered in Washington D.C., USA, with local offices in India, Malawi, Malaysia, Singapore, Cambodia and Australia. Its global teams lead project operations across Sub-Saharan Africa, Central America, and South and Southeast Asia.
The developer creates high impact carbon offset credits under three operational platforms:
Cleaner Cooking,
Efficient Lighting, and
Sustainable Energy (Nature-based Projects).
Together, they form the so-called Transformation Carbon projects. They all comply with specific carbon offset standards. They then go through rigorous 3rd-party assessments by auditors to ensure credits are real and measurable.
Currently, CQC certifies all new projects under the Verra Verified Carbon Standard (VCS) same with other top carbon offset project developers on our list.
Each project is registered onto a cloud-based data management system using Android phones or tablets. Registration involves data collection for monitoring and follow-up.
Doing all these are critical for project evaluation, verification, and improvement.
So, for high integrity and high impact offsets that help the poorest communities, CQC tops this project category.
As you can see, each project developer has its own set of processes when developing a project. But overall, you have to carefully think about the specific results you want to achieve.
They may follow the same offsetting standards but not all carbon offset project developers will make it to the top of our list. You’ll never go wrong with any of them.
Carbon Fund Advisors introduced the Carbon Strategy ETF with NYSE Ticker KARB to provide exposure to global compliance carbon markets.
The Carbon Strategy ETF “KARB”
The Carbon Strategy ETF is an actively managed exchange-traded fund that uses a reference index – the Carbon Streaming BITA Compliance Index.
It’s a rules-based index that tracks the performance of the compliance carbon markets via an allocation into a series of carbon allowance futures.
KARB ETF will hold futures contracts on carbon allowances in emissions trading systems (ETS) in North America and Europe. These particularly include:
European Union Allowances (EUA)
California Carbon Allowances (CCA)
US Regional Greenhouse Gas Initiative (RGGI) CO2 Allowances
United Kingdom Emissions Trading Scheme (“UK ETS”)
The Fund aims to maximize capital appreciation while minimizing the cost of rolling futures.
Apart from providing exposure to regulated carbon markets, KARB ETF may also bring potential appreciation in carbon prices as the world aims to achieve the Paris Agreement goals.
The ETF also seeks to give investors a vehicle to benefit from stricter regulations and reductions in the amount of allowances. This may lead to higher prices.
It may also act as a hedge against climate-related risks. And it can even give investors access to the emerging asset class of carbon.
Compliance Carbon Markets & KARB
Governments and jurisdictions that form the compliance carbon markets created the ETS to put a price on emissions. They’re also to incentivize carbon-intensive industries to cut down their emissions.
ETS is also known as the cap-and-trade program.
As for Tim Collins, Carbon Fund Advisors’ founder and president:
“There is a growing global push to regulate and reduce greenhouse gas emissions in an effort to combat climate change… and ETS can be an effective tool for governments across the globe to achieve their climate goals.”
They’re established by regional, national or subnational jurisdictions to cap total emissions allowed for certain industries.
The cap, or permitted emissions, declines each year to achieve the climate goals of the jurisdiction.
Carbon allowances, also called carbon credits, equal to the emissions cap can either be freely allocated and/or auctioned to emitting companies by the regulating body.
Firms with caps may buy or sell carbon allowances based on their need. For instance, a company with lower emissions can sell their allocated carbon allowances to others with higher emissions.
Tesla is a perfect example for this, earning billions of dollars in regulatory carbon credits sales.
Entities that don’t have enough allowances to offset their emissions at the end of the reporting period will face fines.
Trading carbon credits is limited to entities registered in an ETS only. And most investors do not have access to this carbon trading.
Some active futures markets may provide investors with exposure to compliance carbon markets.
Still, the challenges of getting access to derivative markets make direct investments in carbon allowance futures contracts difficult.
This is where the Carbon Strategy ETF offers a potential solution.
The KARB ETF opens the door to invest in a portfolio of carbon credit futures at a time when prices will increase further to meet the Paris Agreement targets.
Also, reduction in the supply of carbon credits each year as the cap declines may lead to higher prices. High carbon prices are crucial to prompt companies to invest in lower emission alternatives.
In fact, carbon prices need to reach $130/ton by 2030 and $250/ton by 2050 to meet net zero ambitions.
Carbon Streaming Corporation holds a 50% equity interest in Carbon Fund Advisors Inc.
As the global economy is racing to net zero emissions, Environmental, Social, and Governmental (ESG) investors are considering how they can measure the Scope 4 emissions into their analysis.
The path to net zero has been the common direction as the world tackles climate change. But taking this road calls for going beyond the common ways of categorizing various emissions into different scopes.
Many are familiar with the Scope 1, 2, and 3 emissions. Yet, we also have to take into account the climate-related benefits of new technologies and products. Or what is otherwise called the Scope 4 emissions.
This new category refers to the emissions saved or avoided for customers/clients due to product performance.
ESG investors are now thinking about factoring this kind of emissions into their portfolio analysis.
Who Should Measure Scope 4?
The first three emissions sources are well-known within the investment world. But Scope 4 emissions emerge as the new disclosure frontier for investors to ponder.
Scope 4 emissions are the avoided emissions happening outside of a product’s life cycle or value chain.
Integrating it is crucial when an investor prefers a holistic approach on a firm’s contribution to Paris Agreement climate goals.
The common examples of companies adopting this new emissions disclosure are in the capital goods sector. They develop and provide a wide range of parts and even automation solutions.
As such, they’re in the position to allow for energy efficiency, green mobility, and decarbonization of electricity systems for a broad range of products.
More significantly, they provide equipment and technological solutions to the end-users of the products. These users are often the largest emitting sectors affected by climate regulations.
Take for instance the case of Schneider Electric, a French company that focuses on digital automation and energy management. Through its variable speed drives (VSDs), the company offers a specific example of generating saved and avoided emissions on electricity use.
Using the VSDs allows customers to save on energy consumption by motors by regulating speed and rotational force.
Most notably, the energy company distinguishes between its saved and avoided emissions per type of product installation. The firm is also using a forward-looking energy mix in calculating Scope 4 emissions.
Plus, it’s even more interesting to note that Schneider Electric reports sales by country. This enables them to adjust for national electricity generation sources. They can also measure different averages for the emissions of purchased electricity by nation and by year.
For example, one of its advanced platforms helped product users to save as much as 134 million metric tonnes of carbon dioxide since 2018. This is equal to the emissions of 28+ million gas-powered passenger cars driven for a year.
Key Barrier in Reporting Scope 4
Apart from a limited method of disclosure, the biggest challenge in reporting Scope 4 emissions is the lack of standardization. This means firms need to have their own way to account for this emission and report any saved or avoided emissions.
But this issue is manageable as Scope 4 emissions are still in its early stage. And given the lack of standards in this field, firms can be transparent in their reporting methods and in auditing their annual reports.
For instance, when reporting saved/avoided emissions, companies must not deduct these from their real emissions to prevent mixing theoretical and real figures.
Rather, firms may apply a ratio approach where they report Scope 1, 2, and 3 emissions over saved/avoided emissions.
How Should Investors Take This?
The world is witnessing great efforts on avoiding emissions via the net zero pledges from corporations. But measuring scope 4 emissions is very new.
So getting consensus on measurement methods and improving transparency in reporting can improve its usefulness to investors.
It can also help bring a consensus among climate standards and bodies as to how to include Scope 4 emissions officially in climate goals. It’s not an official category of the GHG Protocol.
Instead, it represents a theoretical measurement of emissions via a reference scenario only. This often involves comparing products to the average market solution. It’s a solution that’s previously in place or a previous generation of a product.
Measuring this metric enables the economy to appreciate the products’ decarbonization power. It also shows a company’s innovative quality.
Not to mention that the three known emissions scopes have their own limitations, too. They may understate the climate positive value of products.
Finally, disclosing Scope 4 emissions doesn’t only favor sustainability reputation but it can also show the real added value a company makes towards its ESG agenda.
DeepMarkit Corp. provided its industry and corporate update to keep shareholders and the media informed about its unique competitive position in a growing asset class.
The recent milestones in the carbon industry include:
Blackstone’s investing $400 million in Xpansiv
BMO purchasing Radicle Group
CPP Investments adding an “Investing in the Potential of Carbon Credits” section to its website; and
Norton Rose Fulbright publishing its “Draft Core Carbon Principles for the Voluntary Carbon Market”
Bloomberg reported that “a record US$1.4 billion poured into climate and carbon-focused startups in the Q2 2022
DeepMarkit’s Competitive Position
DeepMarkit’s overall plan is based on combining the growth of the informal carbon offset market with the maturation of blockchain technology.
The company launched MintCarbon.io to offer a simple onboarding process to users in the VCM to access carbon offsets via blockchain.
The platform’s user-focused service seeks to ensure that carbon offsets that are onboarded are only of the highest quality and have passed third-party checks.
Its focus is to add a project’s story and embed project data within the token for a more robust, project-friendly offering.
Carbon Offsets – A Growing Asset Class
The size of the VCM has grown rapidly in recent years with its value almost quadrupling in 2021 towards US$2 billion.
Also, prices climbed in 2021 ($4.0) by nearly 60% over 2020 ($2.5) to a point not seen since 2013. Looking ahead, the rise in corporate net zero pledges will further drive demand growth and expansion in VCMs.
Global carbon project developer South Pole and agricultural tech company Regrow Ag work together to scale the adoption of regenerative agriculture.
South Pole is a global developer of carbon projects and climate solutions provider with 20 years of experience.
Its project development covers various areas including:
sustainable agriculture
forest conservation
waste management
energy efficiency
renewable energy
The firm also advises thousands of companies on their journey to reach net zero emissions.
The partnership with Regrow Ag will allow South Pole’s projects to get access to the latest scientific and technological best practices for agricultural project monitoring and emissions accounting.
Regrow Ag is a tech company that seeks to boost regenerative agriculture practices and make them available across the globe. It uses science and technology to develop solutions across all aspects of the supply chain, from growers to global food companies.
South Pole’s CEO, Renat Heuberger remarked about the partnership:
“As an early advocate for and developer of agriculture projects that help lower emissions and generate carbon offsets, I am thrilled to see us partnering with Regrow to evolve industry best practices.”
Regrow’s MRV Platform
Measurement, Reporting, and Verification (MRV) is a critical element in climate mitigation efforts. It refers to the multi-step process to measure the number of emissions reduced by a project like reforestation.
The findings are then reported to a 3rd-party that verifies the report so that the results can be certified and carbon credits can be issued.
It seeks to prove that activity has actually avoided or removed emissions. Only by then that those reductions can be converted into credits with monetary value.
In a sense, MRV is the key to unlocking climate finance. It helps carbon project developers, brokers, and buyers ensure the quality of carbon credits.
Regrow’s proprietary MRV platform will enable agriculture projects to scale up by using science and technology in novel ways.
It gives farmers scenario planning tools and measures the environmental impact assessment of practices that are most suitable for their operations.
The MRV tool enhances scalability by reducing the need for manual soil sampling. It also provides a data collection and modeling system that’s replicable on different soil and crop types.
The key aspects of Regrow’s MRV are transparency and quantifiable uncertainty.
Transparency and integrity come with the MRV’s independence. This means it has not been developed by the entities that set credit prices.
Quantifiable uncertainty is the ability to quantify how confident the verification software is in estimating the amount of carbon that the farm’s soil sequesters or stores.
The lower the uncertainty, the more credits can be issued to the farmer.
MRV doesn’t rely on costly field visits and laboratory soil testing. Instead, it takes advantage of the latest tech in farm digitization, remote sensing, and soil modeling.
ICROA-endorsed certification standards recognize the scientific rigor of Regrow’s MRV. These standards include the Climate Action Reserve, one of the best carbon registries.
By using the latest in satellite monitoring and crop detention in regenerative agriculture, Regrow can help South Pole meet the stricter rules of carbon certification standards.
The tech company will do this by:
contributing to the design of South Pole’s project monitoring protocols,
calibrating models for the measurement of carbon stock, and
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