Major Wall Street Firm Buys 1 Million Acres of Forest for Carbon Credits

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Major Wall Street Firm Buys 1 Million Acres of Forest for Carbon Credits

Oak Hill Advisors – a prominent debt investor that manages $52 billion, has teamed up with carbon credits firm Bluesource to purchase one million acres of North American woodlands.

The purchase is valued at $500 million, with the main goal to manage the properties and generate forest offsets.

Adam Kerzner, Senior Partner and Portfolio Manager at Oak Hill, said, “We view this to be an incredibly large opportunity. This transition is happening in real-time, and forestry assets continue to be a measurable way of removing carbon from the atmosphere. We’re excited about the ability to invest in attractive assets while also providing significant environmental benefit.”

Other big companies, such as Microsoft Corp. and BP PLC, are on the hunt for offsets as well – to show investors their commitment towards achieving climate change goals.

Though many companies are developing technology to reduce their emissions or even capture and store their emissions, carbon credits are an effective and immediate way to offset carbon, improve the environment, and even stimulate economic development, which is why interest is at an all-time high.

Last year, BP purchased a controlling stake in Bluesource’s rival Finite Carbon, and J.P. Morgan Asset Management purchased a timberland investment firm as well. Even Weyerhaeuser Co. – one of the largest private U.S. Forest owners and timber producers – will be stepping into the offset industry since the price of carbon credits is more than what they could earn through the timber on specific properties.

According to Kevin Townsend, Bluesource’s Chief Commercial Officer, “The properties we’re looking for are properties that won’t be managed sustainably, that are not going to do sequestration without a sale.”

With the COP26 summit just around the corner, governments and companies alike are working fervently to meet regulations set by the Paris Agreement, and carbon offsets have a significant role to play.

Right now, the global carbon market is expected to reach $22 trillion by 2050.

Diamonds, Sportswear, Concrete, and Sunglasses from Capture Carbon?

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Diamonds, Sportswear, Concrete, and Sunglasses from Capture Carbon?

Concrete, diamonds, sunglasses, sportswear, water pipe coating, and more can all be made using captured carbon.

Companies in this space have raised over $800 million, 3X more than in 2020. And they are just getting started.

Right now, humans release around 50 billion tons of carbon into the atmosphere each year. 10 billion tons will need to be captured annually by 2050.

Reusing carbon can prove to be a beneficial solution for companies, consumers, and the environment alike. Plus, with customers looking for ways to reduce their own carbon footprint, products produced through captured carbon can be a significant selling point.

Combine these efforts with the carbon credit industry, and you have a real solution to fight climate change.

Nicholas Flanders, a co-founder of Twelve, which uses chemical processes to reuse CO2, agrees. He believes recycling carbon is better than storing it underground since “This technology can go toe to toe with fossil fuels” without additional financial incentives to remove carbon.

According to Ryan Shearman, Chief Executive of Aether Diamonds, which grows diamonds in a lab captured by CO2, says that customers “Have demonstrated that they’re willing to pay a bit of a premium.”

Robert Niven, CEO of CarbonCure Technologies, which makes technology that injects CO2 into fresh concrete, and strengthens it by locking in the carbon, sees the same.

“About 90% of our uptake has been from independent concrete producers large and small that are just looking for that competitive edge.”

Consumers want to support environmental initiatives. Many take steps to reduce their footprint each day (such as riding a bike instead of driving a car or purchasing carbon credits to offset airline travel). Others are choosing to only invest in companies that are offsetting and reducing their carbon. Products created through carbon capture would naturally spark their interest.

A Columbia University report released in May shows that all fossil-based products that could use recycled CO2 account for approximately 6.8 billion tons of emissions. As companies find additional ways to utilize carbon instead of emitting it, the world’s net-zero goals could very well become a reality.

Google Goes Green

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Google Goes Green

Google announced earlier this week that it was tweaking it’s search results to reward greener, more environmentally-friendly results.

Google Maps will show low-carbon routes.

Google Maps will show low-carbon routes.

Google Flights will let you compare CO2 emissions as well as overall price.

Google Flights will let you compare CO2 emissions as well as overall price.

These “sustainability initiatives,” as Google calls them, also apply to their “Things to Do” search results as well as simple searches such as for hotels.

These In other words, Google is taking a broad-brush approach that rewards green alternatives across the board.

Google Ads and their Youtube platforms have recently also begun to block ads from parties looking to spread climate change misinformation.

“Google as sustainability leader” is the obvious conclusion, but something has been lost in the shuffle. Like all industry-leading companies, Google is both driving the market and responding to it.

In this case, Google’s own sustainability drives fit in with a broader, consumer-led green initiative that has slowly been building steam.

Green wave, or green-washing?

Before we sink into Google’s own initiatives, there’s an important question to be asked…

  • Are green initiatives, like Google’s, actually helpful?
  • Or are they simply green-washing – attempts to be seen as environmentally impactful without actually changing anything?

The debate divides even the staunchest anti-emissions voices.

Greenpeace condemns carbon offsets which are a key part of many green initiatives (more on that next week).

On the other hand, Greta Thunberg supports them, but the debate over green initiatives illustrates just how contentious – and how important – the issues are.

The debates are public, prolonged, and prolific – and that, more than anything else, is probably a good illustration of how deep the movement goes.

Broader adoption

Green initiatives don’t simply appeal to big companies; over 65% of consumers prioritize green options. 

While that sounds great, the number breaks down a bit – only a quarter of those consumers actually follow through and regularly purchase environmentally-friendly goods.

There’s room for green initiatives to grow – but with over half of consumers at least nominally interested in going green, it’s no wonder that Google took steps to encourage that interest.

Green is Granular: Lessons from Google

So, what can we learn from Google?

Most of the coverage has, quite rightly, focused on the potential benefits stemming directly from Google’s decisions.

  • Google’s own estimates calculate that adding CO2 estimates to Google Flights could save roughly one million tonnes of CO2e per year – the equivalent of 200,000 cars taken off the road. 

That’s still a drop in the bucket compared to the billions of tonnes of CO2 emissions produced annually.

But it’s a sizeable drop nonetheless.

In fact, that’s the main takeaway. Green initiatives work best when they’re granular. Adding a carbon emissions calculator to Google Flights empowers consumers to make a down-to-earth decision.

Commuters can vote with their pocketbooks, using the market to reward lower-carbon flights and punish unnecessarily wasteful ones. It’s a type of Green social credit system.

Google’s changes across the board follow the same model. Maps will show routes that use less fuel and are responsible for lower emissions.

Google’s Shopping results will prioritize products that are energy-efficient, particularly for energy-intensive appliances.

Long-term, Google plans to add comparison tools that can calculate the impact of hybrid and electric vehicles against fossil-fuel counterparts.

In every case, Google appears to be basing its calculations on real-world factors: highways vs side roads, lower inclines routes, newer aircraft against older, less-efficient models. Google wants to “make the sustainable choice the easy choice,” as Sundar Pichai stated in Google’s announcement video.

It’s also the logical choice. Empowering the average consumer is the only way to turn the groundswell of support for green initiatives into a long-lasting green wave – that’s just as true for enterprise-level carbon offsets as it is for your next flight.

Canadian Pension Plan Invests in Carbon Credits

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Canadian Pension Plan Invests in Carbon Credits

The Canadian Pension Plan Investment Board (CPP Investments) and Conservation International announced a new partnership to invest in nature-based climate solutions (including Carbon Credits). This partnership is the first of its kind between a global asset owner and an established NGO.

Their goal is to support the development of high-quality offset projects that will reduce global carbon emissions.  These projects will take place in Brazil, Chile, Columbia, and Peru and span 20 million hectares of land (approximately 49,000,000 acres). This can prevent more than four million metric tons of carbon from being released into the atmosphere each year.

The first project will take place at the Amarakaeri Communal Reserve in Peru.

“We’re very excited to form this unique partnership with Conservation International, one of the world’s leading conservation organizations with a strong scientific focus and operating expertise,” said Bruce Hogg, Managing Director and Head of the Sustainable Energies Group at CCP.

“This new partnership adds to our investments in important and growing industries that help enable the energy evolution through our Innovation, Technologies and Services strategy, in support of our Sustainable Energies program and overall investment mandate.”

All projects will be verified under a United Nations-backed framework called the Reduced Emission from Deforestation and Forest Degradation (REDD+) program.

Agustin Silvani, Senior Vice President of Conservation Finance at Conservation International, said, “Together with CPP Investments, we’re setting our sights on projects that protect nature, reduce emissions, provide sustainable sources of income for local communities, and at the same time are economically attractive. That’s a win-win-win for companies committed to decarbonization, people, and the planet. Our aim with this partnership is to make carbon markets work for the communities that are helping to protect nature and fight climate change.”

CPP will initially contribute $20 million, and Conservation International, $500,000. They expect to expand the partnership to additional investors over time.

This announcement is significant to the carbon credit industry, which has expanded over the past year alone. Designed to offset carbon emissions, improve the environment, and drive economic development, many see carbon credits as part of the answer to combat climate change.

The global carbon market is expected to reach $22 trillion by 2050.

United Arab Emirates Becomes the First Persian Gulf State to Aim for 2050 Net Zero

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United Arab Emirates Becomes the First Persian Gulf State to Aim for 2050 Net Zero

The United Arab Emirates has become the first Persian Gulf petrostate to Aim for net-zero carbon emissions by 2050. The UAE is among the world’s highest emissions per capita, and has committed over $165 billion towards the transition to clean energy.

Many believe this is a very ambitious plan and can help strengthen the global Net-Zero initiative. It also put additional pressure on Saudi Arabia and others in the region to make a similar vow.

The United Arab Emirates is a member of the OPEC, which has a more optimistic view on the future of oil.

Under a business-as-usual scenario, the cartel believes that demand for fossil fuels will only peak in the 2040s. And the International Energy Agency sees the world consuming up to 24 million barrels of oil per day by 2050, down from approximately 100 million presently, under its scenario for reaching net-zero.

There is a loophole in the UN standards, for net-zero as it only takes into account emissions created “within” a country’s borders and would only include the extraction and processing of exported fuel.

The UAE has no intention of abandoning fossil fuels anytime soon though. The Abu Dhabi National Oil Company (ADNOC), the state energy powerhouse, plans to raise its oil production capacity to 5 million barrels per day within a decade, up from a little over 4 million.

The aim is that these emissions will be offset by absorbing and burying carbon dioxide or growing trees by then.

Despite the UAE’s decades of efforts to diversify the economy, the UAE is strongly reliant on oil and gas exports, which account for over 30% of its GDP.

“The UAE net-zero initiative will provide us with precision and boost our efforts to accelerate the energy transition,” the Department of Energy of Abu Dhabi, the capital, said in a statement.

The new deadline aligns the UAE with the majority of major economies, and scientists believe it provides the world a fighting chance of averting the worst effects of global warming.

The UAE has already begun to improve its environmental status and the International Renewable Energy Agency is headquartered in Abu Dhabi. The city’s $240 billion sovereign wealth fund, Mubadala, has made significant investments in its renewable-energy subsidiary Masdar.

ADNOC has also begun testing shipments of blue hydrogen, a fuel considered critical to the energy transition.

This pledge is the most recent from governments ahead of the United Nations-sponsored COP26, which is being held in Glasgow in early November. This may also help strengthen the UAE’s ambition to host the 2023 climate conference, COP28.

Russia Announces First Carbon Capture Facility

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Russia Announces First Carbon Capture Facility

The Ministry of Science and Higher Education of the Russian Federation announced the creation of Russia’s first-ever carbon capture facility, located in Tomsk off the floodplain of the Ob River.

Additional plans include constructing a carbon farm to develop and test carbon absorption, neutralization, and recycling technologies.

“The Tomsk regional carbon test site will become a part of the test site network created under the order of Vladimir Putin. The network will solve both climate and economic issues,” said Lyudmila Borilo, executive director of the TSU Center of Excellence

This project is the first of its kind in Russia. Russia accounts for 4.6% of the world’s greenhouse gas emissions, behind China, the United States, and India.

The Russian President has also ordered the creation of 80 additional carbon test sites to monitor and study the carbon cycle across different ecosystems. The goal is to assess the natural carbon balance of Russia to implement initiatives that drastically reduce emissions.

According to Borilo, “The numbers are not in our favor. The EU data states that German forests absorb ten times more carbon than the Russian. It is obviously untrue, but we need to prove it. A network monitoring all the country’s major ecosystems will provide the necessary data and prove that Russia, with its natural resources, does an ecosystemic favor to the whole planet. It needs to be counted towards the carbon quota allocation under the Paris treaty.”

It is important to note that there is an economic factor at play here as well. With pending EU taxes concerning carbon, accurate measuring is needed. Russia could expect to pay billions while losing the ability to export products with a high carbon footprint (such as metal, oil, and wheat).

This is one of the reasons the carbon credit industry is booming – companies need to find ways to offset carbon as quickly as possible.

Regardless of the motive, with China, the EU, the US, and many others focused on reducing carbon through additional regulations, innovative technologies, and carbon offsetting, it feels as if the world is on its way to meeting net-zero goals.

 

Fossil Fuel Industry Benefits From $5.9 Trillion in Subsidies a Year

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Fossil Fuel Industry Benefits From .9 Trillion in Subsidies a Year

The International Monetary Fund has found that the Fossil Fuel industry benefits from $11 million in subsidies per minute. No, you didn’t read that wrong. $11M per minute.

Coal, oil, and gas were subsidized by $5.9 trillion in 2020. At a minimum, prices were 50% below their actual costs for 99% of coal, 52% of diesel, and 47% of natural gas. Two-thirds of the subsidies resulted from 5 countries, which happen to be the top-five carbon producers globally: China, the US, Russia, India, and Japan.

Without action, the IMF expects subsidies to rise to $6.4 trillion by 2025.

If fuel prices that reflected the actual cost were set, global carbon emissions would drop by over a third, helping the world meet its Paris Agreement targets.

With the COP26 summit approaching, IMF researchers believe there is no better time to call for fossil fuel price reform. They feel that ending these subsidies could prevent nearly a million deaths a year from dirty air while raising trillions of dollars for governments across the globe.

According to Ian Parry, the lead author of the IMF report, “Some countries are reluctant to raise energy prices because they think it will harm the poor. But holding down fossil fuel prices is a highly inefficient way to help the poor because most of the benefits accrue to wealthier households. It would be better to target resources towards helping poor and vulnerable people directly.”

“The IMF report is a sobering reading, pointing to one of the major defects of the global economy,” said Maria Pastukhova, at the thinktank e3g. “The IEA’s net-zero roadmap projects that $5T is necessary by 2030 to put the world on the pathway to a climate-safe world. It is maddening to realize the much-needed change could start happening now, if not for governments’ entanglement with the fossil fuels industry in so many major economies.”

Fifty countries have committed to achieving net-zero emissions by 2050. Many are using offsets and implementing new regulations.

Though the carbon credit industry is booming and technological advances are happening, meeting these goals is still a long way away. Removing the subsidies while further expanding the carbon markets and technological innovation can help improve the environment while sparking economic growth.

This report by IMF shows there is still much progress to be made.

KraneShares Announce 2 new Carbon ETF’s – KEUA & KCCA

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KraneShares Announce 2 new Carbon ETF’s – KEUA & KCCA

Based on investor interest in KRBN (KraneShares Global Carbon ETF), the firm has launched two additional carbon allowances-focused ETFs.

“Through the phenomenal success of KRBN, we learned that many of our clients also want targeted exposure to the underlying markets,” said Luke Oliver, managing director and head of strategy at KraneShares.

“KEUA and KCCA provide access to the component carbon allowance markets at various stages of their growth cycle. With these new ETFs, investors can take a customizable precision-approach to invest in carbon markets.”

The KraneShares European Carbon Allowance ETF (KEUA) and the KraneShares California Carbon Allowance ETF (KCCA) are the new funds.

KEUA – Provides exposure to the European Union Allowances cap-and-trade carbon allowance program solely, and is actively managed with a 0.79% expense ratio.

The benchmark for the fund is the IHS Markit Carbon EUA Index, which follows the most-traded EUA futures contracts in the market, which is the oldest and most liquid for carbon allowances.

The market presently covers around 40% of all EU emissions, covering 27 member states as well as Norway, Iceland, and Liechtenstein. In an effort to reach long-term carbon emission targets, the yearly cap reduction was recently boosted from 2.2% to 4.2%.

KCCA– Provides exposure to the California Carbon Allowances cap-and-trade carbon allowance scheme solely, and is actively managed with a 0.79% expense ratio.

The fund’s benchmark is the HIS Markit Carbon CCA Index, which measures the most actively traded CCA futures contracts in a market that covers around 80% of California’s greenhouse gas emissions and has also covered Quebec’s emissions since its expansion in 2014.

The cap is now set to drop by 4% each year in order to achieve future carbon emission targets, and it has a built-in floor price that increases by 5% per year, plus an inflation adjustment.

 

Both funds may invest in carbon credit futures with different maturity dates than the index, or they may weight futures differently than the index. The fund may trade in CTFC-regulated futures and swaps beyond the CFTC 4.5 limit and is thus classified as a “commodity pool.”

Many countries and regions have implemented carbon-cap-and-trade programs, which limit how much carbon an individual firm can produce before needing to acquire allowances to offset extra emissions.

KraneShares presently invests in markets that have cap-and-trade schemes tied to emissions limits imposed by the Paris Agreement.

By establishing such programs, investors and markets can collaborate to put pressure on corporations to reduce emissions when exceeding the emissions limit becomes increasingly expensive.

Both funds join the increasing array of carbon allowance-focused ETFs, which includes the KRBN, which presently invests in the EU and North American markets, whereas the two new funds will each target a single market.

Formula 1 is Going Net Zero

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Formula 1 is Going Net Zero

Professional motorsports are getting the green light.

First, there was the Formula E (all-electric) series which started in 2014, and now is a FIA World Championship series, making it the first single-seater racing series outside of Formula One to be given world championship status.

Now the clean energy movement has reached the pinnacle of motorsports – F1.

Formula 1 recently announced that they are working on developing a new fuel for its next-generation engines intended to produce the same high-end performance while emitting net zero carbon dioxide.

In 2022 F1 will be using a blended fuel, 90% Fossil fuel, and 10% Ethanol.

This is just the first step in the longer race towards their stated 2030 NetZero goals.

The next major step will begin in 2025 when F1 announced that will begin using 100% “sustainable fuels” for their next-gen engines.

Formula 1 is working with fuel companies to creating the fuel in the quantities needed for the motorsport circuit. Then they plan on scaling up production for wider social use.

The fuel will be lab-created and using components from municipal waste, carbon capture schemes, or non-food biomass. The fuel will be 100% ‘drop in’ meaning that it can still power standard Internal Combustion Engines (ICE).

F1 believes that this 100% sustainable fuel will be available to use in the millions of internal-combustion vehicles still on the roads until the Electric Vehicle market beings to takeover.

This is good news as the full transition to Electric Vehicles will take decades to complete. According to IEA, Electric Vehicles sales are expected to account for 40% of total passenger car sales by 2030, but this will only equate to 13% of the global car fleet.

This new sustainable fuel could be the perfect transitionary fuel source.

Is Rio de Janeiro the Next Carbon Credit Hub?

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Is Rio de Janeiro the Next Carbon Credit Hub?

Over the past several years, Brazil’s image has been tainted through the practice of deforestation. To improve their environmental standing, Rio de Janeiro has made plans to establish a specialized exchange that will trade environmental assets.

According to Chicão Bulhões, Rio de Janeiro’s Secretary for Economic Development, their goal is to create tax incentives to fuel this market, consolidating the world’s most accepted regulatory standards to provide its framework. The plan is to launch by the end of the year.

“Brazil will be one of the biggest players in this market, which, as it is voluntary, has global reach. Companies around the world can buy credits to offset their emissions from anywhere else.”

With the global carbon market anticipated to reach $22 trillion by 2050, the city’s desire to tap into this can drive growth even further.

Bulhões hopes that as companies worldwide purchase credits to offset their own carbon emissions, Rio de Janeiro’s economy will strengthen, all through low-carbon initiatives, such as reforestation, seed, fertilizer production, and more.

The goal of this exchange goes beyond just the carbon credit industry. Bulhões has said they “Want to attract agents interested in trading all environmental assets, such as reverse logistics credits and environmental reserve quotas, which have great potential.”

Rio de Janeiro hosted the ECO 92 meeting that prompted the UN framework on climate change, which resulted in the Kyoto Protocol and the Paris Agreement. The city has celebrated these initiatives every 10 years since. As such, Bulhões believes this credit exchange is the natural next step. He hopes this will expand into Brazil as the country takes measures to combat the damage done to the Amazon rainforest.

In Brazil, the Amazon rainforest lost 10,129 square kilometers in 2019 – an increase of 34% from 2018 – and 11,088 square kilometers in 2020.

 

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