Is the U.S. on Track to Decarbonize Economy?

The recent budget bill passed by the House Ways and Means Committee provides unprecedented funding to do so, but those funds aren’t a guarantee. Once brought to Congress, the funds could very well be cut in half – or more. Even so, the amount would still be the highest level of support thus far by the U.S. government towards the support of an energy transition.

The Democrats believe this energy plan to be one of the most important pieces of climate legislation that Congress has the chance to pass, and they are focused on ensuring that it goes through. With Republicans, and some Democrats, opposed to additional spending, as well as a large American voter base opposed to climate initiatives at large, there may be a long path ahead.

Still – this is a lucrative step and a positive one at that.

If the House and Senate can work out their differences and determine what would drive clean emissions, we may very well see some progress take place.  Among other things, as part of the bill, the Ways and Means Committee would like to extend the current renewable energy tax credits and expand them to new technologies. This can offer a direct-pay option for several tax breaks and provide higher payments to projects completed by union workers.

There is interest in including carbon pricing by the Senate Finance Committee – though not all are on board.

With U.S. President Joe Biden expressing the need for the U.S. to take more drastic action against climate change, and the countries across the globe recommitting to the Paris Agreement, it will be interesting to see what happens next.

Hopefully, Congress can look back on their vote with pride instead of regret.

Ontario Teacher Pension Plans Pathway to Net-Zero by 2050

Ontario Teachers’ have taken their decade-long support for the environment a step further.

Their Pension Plan Board has put 2025 and 2030 targets in place to reduce greenhouse gas emissions. The goal? To achieve net-zero investment activity by 2050.

Here are some of the ways they plan on getting there:

  • Increase investments in clean energy companies that reduce demand for fossil fuels and build a sustainable economy.
  • Pivoting towards green investment asset classes
  • Investing in transition assets to secure reductions in carbon emissions
  • Set their portfolio companies on a clear path to implement net-zero plans & reduce emissions
  • Issuing green bonds & invest proceeds into climate solutions and sustainable companies
  • Set clear climate policies and partner with other industry leaders to effect global change
  • Reporting annually on progress against 2025, 2030, and 2050 targets.

President and CEO Jo Taylor said, “As an active, global investor, we play a critical role in helping accelerate the transition to a net-zero economy. Given the scale and complexity of our investment portfolio, we believe this is an ambitious plan that will meaningfully lower emissions and contribute to the plan’s long-term sustainability.”

As of June, Ontario Teachers’ portfolio included more than C$30B in green investments, such as renewable energy, energy storage, electrification, electricity transmission, energy efficiency, and green real estate. They also have C$5B allocated towards climate and transition solutions.

To think that even more funds will be invested in ESG initiatives is a reason for Canadians and the world to celebrate. Maybe other pension plans in Canada and the United States will follow the Ontario Teachers’ lead. If they do, the world may reach its Paris Agreement targets and begin to see the environment improve.

Ontario Teachers’ currently have C$227.7 billion in net assets (as of June), with 80% managed in-house. The annual total fund net return has been 9.6% since the plan started in 1990.

“Climate change permeates the entire investing landscape. Tackling it requires substantial effort and massive amounts of capital,” said Ziad Hindo, Chief Investment Officer. “By significantly growing our portfolio of green investments and working collaboratively with our portfolio companies to transform their businesses, we can make a positive impact by encouraging an inclusive transition that benefits our people, communities and portfolio companies.”

Opportunities and interest in environmental programs are rising, with global carbon markets expected to hit $22T by 2050. If more pension plans choose to set the same ambitious goals, the world will see real progress.

Ontario Teachers’ have not only set an example for their students about supporting causes you care about, but for the world at large.

Shell Sets Sights on Sustainable Aviation Fuel

Royal Dutch Shell will start producing low-carbon jet fuel by 2025. Currently, aviation accounts for 3% of greenhouse gas emissions across the globe.

Though the aviation industry has wanted to reduce its carbon emissions, it has been a real challenge. There are not many fuel alternatives available that can power jet engines. And, the sustainable aviation fuel (SAF) that is accessible costs about 8x more than standard fuel does. Because of the price and availability, SAF accounts for less than .1% of the fuel being used for planes today.

Regardless, Shell is focused on producing 2 million tons of SAF, which could cut up to 80% of aviation emissions. SAF is made of waste from cooking oil, plants, and animal fats. Shell is working on a synthetic aviation fuel that is made from hydrogen and recycled carbon.

Shell’s announcement couldn’t come soon enough. Just last week, the US announced that their goal is to cut greenhouse-gas emissions from aircraft by 20%.  Since Shell – one of the largest oil traders globally – has committed to SAF, it’s safe to say other producers will follow. The US goal could be a reality.

Anna Mascolo, Head of Shell Aviation, said that “Sustainable aviation fuel, whether bio SAF or synthetic SAF, remains the single biggest solution [to meeting emission reduction goals].” Shell’s refinery expects to produce 820,000 tons of fuel, with SAF making up half of that.

With news of warming temperatures and the need for immediate action, this is a step in the right direction. Interest in carbon markets is increasing, offsets are taking the lead, and technological advances (like SAF) are being pushed ahead. Plus, numerous countries have re-committed themselves to the Paris Agreement – an act of solidarity and action.

It seems that change is happening for the better.

Cue cautious optimism.

The World is on a ‘Catastrophic’ Path

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The earth’s temperature is on track to increase heat by 2.7 degrees Celsius (or 36.8 degrees Fahrenheit). UN Chief Antonio Guterres warned that such an increase in temperature would be “catastrophic” and called on the world to act.

If the earth were to increase 2.7 degrees Celsius, Paris climate agreement figures aimed for warming below 2C would be destroyed. Guterres went on to say that “Failure to meet [climate goals] will be measured in the massive loss of lives and livelihoods.”

Unfortunately, many nations have been slow in responding to the Paris agreement, failing to slash emissions or aid climate-vulnerable countries. With temperatures rising, the opportunity to make a difference is starting to close.

In response to these findings, US President Joe Biden said that “We have to act, all of us, we have to act now.” He urged the world to bring its highest ambition to the UN Climate Conference taking place in November.

As of now, the earth’s average temperature will be 1.5C higher around 2030, which is a decade earlier than projected just three years ago. The Organization for Economic Co-operation and Development said they were disappointed in the progress made. UN Climate Chief Patricia Espinosa said that “Overall greenhouse gas emission numbers are moving in the wrong direction.”

If you think about it, the world is already seeing extreme weather patterns that have resulted in the loss of life and property. No country or person is unaffected by climate change. All can see the impact climate change has on their own lives and lives worldwide each day. What more do people need to get on board? Without action, these disasters will only continue to increase.

As discouraging as this news is, hope is not lost. 113 countries – including the US and those within the European Union have updated their pledges, expressing their commitment to carbon neutrality and net-zero emissions.

The carbon market is also expanding, which can reduce emissions and support socio-economic issues – providing companies and individuals alike the opportunity to grow.

As interest in the carbon market increases and more offset projects take place, these figures can improve. However, the fight against climate change can no longer be conducted by a brave few. The world needs to get on board by combating climate change together.

Carbon Markets Propel Forward Expected to Reach $1B in 2021

According to a new report from Ecosystem Marketplace, carbon markets are on track to reach $1B before the end of the year.

This is a 60% increase from last year, driven by companies focused on achieving net-zero emissions.

To meet the Paris Agreement’s 1.5° target, the world will have to cut pollution levels in half by 2030. The goal is to reach net-zero emissions by 2050.

Stephen Donofrio, the report’s lead author, said, “We’re seeing record market volume and value in 2021. The markets are on track to hit $1 billion in transactions this year if current activity levels and growth continue. It’s not just companies buying carbon credits as a small piece of their net-zero corporate strategy.

There’s an increase in speculators purchasing credits. The combined value of those deals is becoming a serious source of finance for green projects around the world.”

To help ensure carbon credit quality and standardization, the Taskforce on Scaling Voluntary Carbon Markets (TSVCM), led by Mark Carney, UN special envoy for climate action and former Governor of the Bank of England, is forming an independent Governance Body.

Annette Nazareth, the Taskforce’s Operation Lead and former SEC commissioner, said, “The new Governance Body being established by TSVCM will play a key role in ensuring the large volume of carbon credits traded are of high quality and integrity.”

Since the supply of environmental projects is tightening, credit prices have gone up. Patrick Maguire, one of the report’s lead authors and Senior Manager of Ecosystem Marketplace, says that “Whether the higher prices will entice new supply to enter the market quickly enough to meet rising demand is still an open question. Most carbon projects typically take years to develop.”

Regardless, the higher prices are great news for project developers, many in Asia, Latin America, and Africa. These projects are sparking development in regions that need it most.

Michael Jenkins, CEO of the nonprofit group Forest Trends, a parent organization of Ecosystem Marketplace, says that the challenge for the voluntary carbon markets is no longer about finding credit buyers. “Now, we all need to guide the markets to deliver the highest quality possible, with the greatest benefit possible for the planet and communities.”

Some studies have indicated that by 2050, the global carbon market could top $22 trillion. With benefits spanning the environment and socio-economic development, is it any surprise? The carbon market has the potential to combat climate change and support sustainability around the world.

Cannabis Company HEXO Achieves Carbon Neutrality

Canadian-based HEXO Corp. (TSX: HEXO; NASDAQ: HEXO) announced they have reached carbon neutrality, offsetting 100% of their 2020 operational emissions, plus the emissions of their 1,200 employees.

To achieve their carbon-neutrality goal, HEXO partnered with Offsetters. This Vancouver-based organization supports renewable energy and forest carbon projects across the globe.

“At the start of the summer, we pledged that HEXO would not only become carbon neutral, but that we would also offset the personal carbon emissions generated by every one of our employees. Today we are proud to say we have achieved our goal, setting a new standard in sustainability for our industry,” said HEXO Corp. CEO and Co-founder, Sébastien St-Louis. “Consumers and investors demand greater environmental and social integrity from companies. We are proud to share our commitment to sustainability and support our consumers’ ability to purchase products that align with their values.”

HEXO is a leading cannabis producer in Canada and one of the top three in the world. They wanted to focus on offset projects that would support environmental initiatives taking place in Canada and globally.

In Canada, HEXO is supporting the Create Bear Forest Carbon Project. This is the first carbon project in North America on traditional territory, with unextinguished Aboriginal rights and titles. Globally, HEXO is supporting a large-scale solar energy project in Asia and a forest conservation project in South Africa.

In addition to offsetting carbon emissions, HEXO has partnered with Dymapak and Plastic Bank® to offset 63,000 kilograms of plastic. They are also working towards collecting 8,000 kg of ocean-bound plastic, preventing 3.55 million plastic bottles from entering the world’s oceans.

HEXO set this goal for themselves in June and achieved it by September through carbon offsets. They have offset a total of 25,965 tons of carbon. If other companies across Canada and the world followed suit, it is safe to say many more can achieve carbon neutrality.

The carbon market is expected to reach $22T by 2050. Success stories such as HEXO will only increase interest and growth. And, after seeing these results, there is no doubt that offsetting carbon is, and will continue to be, integral in the fight against climate change.

Carbon Capture Companies are sucking up CO2 and Investor Interest

Climeworks, a Swiss-based company that currently owns the world’s largest Direct Air Capture plant, are seeing a boost in interest from governments and investors alike. The reason? We are in a “code-red” climate crisis, and these organizations know it.

In early September, Climeworks opened their new plant, Orca, the largest in the world. It is expected to remove 4,000 tons of carbon from the air annually, using giant fans equipped with filters. Once captured, the carbon is then pumped deep underground, where it is turned to stone.

Last month, Climeworks won a $10 million deal to sell carbon credits to Swiss Re to help the reinsurance giant reach net-zero emissions. Other clients include Microsoft, Stripe, and Audi.

According to Co-Founder and Co-CEO Christoph Gebald, “When we started in 2009, many people were against, or recommended not to proceed with direct air capture. It’s a stark contrast with now.”

With interest in direct capture so high, Climeworks plans to build a second, larger plant in Iceland.

Backers of these technologies say that they need governments to support them through subsidies and fast. The price tag for carbon removal projects is high. Demand is only expected to increase after the U.N. Intergovernmental Panel on Climate change (IPCC) constituted a “code-red for humanity.”

U.S. President Joe Biden has proposed spending $3.5 billion on four different direct-air capture hubs. And, in July, Kansas-based engineering firm Black & Veatch won $2.5 million from the U.S. Department of energy for the research and development of a project using Global Thermostat’s technology to capture 100,000 tons of carbon each year.

Canadian-based company Carbon Engineering is working on a facility to capture up to a million tons of carbon annually in the U.S. They are also working alongside British firm Storegga on a plant in Scotland that could capture between 500,000 and one million tons each year as well.

Between direct air capture and carbon offsets – which are expected to hit $22T by 2050, a net-zero future feels within reach.

Millions May Move Due to Climate Change

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The World Bank’s latest Groundswell report found that over 216 million people could move within their countries by 2050, as they seek refuge due to climate change.

If you are wondering why climate change would cause people to move, you are not alone. Many are confused about how climate change and mass migration relate.

Though they hear about climate change daily, they don’t fully understand how it can impact their lives. So, this report and a previous report by Groundswell are important.

You see, climate change doesn’t just affect wildlife and nature. It affects people who live within the environment, too. So, when these changes take place, it upsets the dynamics between populations and their economic development.

Just think, as water becomes less available or crops cannot be produced, people flee. People do not have water for basic needs; farmers do not have water to grow crops. Food becomes scarce, and economic opportunity is limited. Same when an area has rising sea levels or extreme weather – people cannot live where their safety is at risk.

If climate change continues, can you blame people for leaving areas most impacted? Most would have to find somewhere better to live – for the sake of themselves and their families. The trouble is, where will they all go?

According to Groundswell, mass migration patterns will emerge in 2030 and increase in intensity by 2050. Unfortunately, many areas may not have the infrastructure or resources to support these booming populations. This can place existing residents at risk, especially the most vulnerable.

Both Groundswell reports provide policy recommendations that can help regions slow and prepare for migration. However, quick, and targeted action across the globe to combat climate change could reduce these patterns by 80%. And let’s face it – reducing these patterns is really the best option. At the end of the day, people do not want to leave their homes – they just want to have the best lives possible within them.

The report’s lead authors, Kanta Rigaud and Viviane Clement believe there is hope. “Cutting emissions and ensuring that development is green, resilient, and inclusive is at the heart of curbing the human cost of climate change. At the same time, countries can also anticipate and prepare for the drivers of migration…by supporting communities to adapt in place by diversifying livelihoods or by facilitating mobility when needed.”

Carbon offsets may be the best solution. They help reduce carbon within the atmosphere and can boost socio-economic opportunities in areas most at risk.

Based on Groundswell’s latest report, it will be interesting to see how various regions react and prepare. The data is there: climate change is a significant threat to civilization as we know it. We can no longer idly sit by.

The time to act against climate change is now.

1st Carbon Credits Produced by State Run Trees

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The Bluesource/DNR Big Wild Forest Carbon Project will be the first forest in the United States to be state-run and produce carbon credits at the same time.

The forest covers 3.9 million hectares of state-run property in Michigan.

DTE Energy (DTE), the largest power supplier in Michigan, and The Department of Natural Resources (DNR) of Michigan came to an agreement regarding the project.

As a result, DTE will severely reduce its carbon footprint. The DNR will also add around $10 million dollars of revenue streams.

Following the announcement, the Governor of Michigan, Gretchen Whitmer said “To meet our long-term commitment to decarbonization, we need to utilize innovative partnerships to increase revenues for land and climate programs.”

Michigan can increase offsets by producing more carbon credits but also produce further revenue from the sale of carbon credits.

Each tree absorbs up to 48 pounds of carbon emissions. A tree that is 40 years old can store 1 ton of carbon. As a result, 3.9 million hectares of land full of trees would make a significant impact on emissions in Michigan.

DTE is aiming to be carbon neutral by 2050. As well, DTE will start receiving carbon credits in 2022 in exchange for payments to the state of Michigan. With the carbon race heating up, every measure is required.

European Central Bank to Examine Banks’ Expose to Climate Risk

The European Central Bank (ECB) will examine large banks’ trading operations as part of its climate stress tests next year.
 
The ECB, which has not yet disclosed the criteria of its tests. It is expected to include a review of the operational & reputational risks that banks face.
This comes after determining that a review of the loan books alone would not provide enough insight into the exposure to climate change.
 
Inquiring into banks’ trading practices is an additional obstacle for an industry that has already warned that it would be unprepared for next year’s climate stress test.
 
Politicians in Europe want banks to play a crucial role in combating climate change by diverting capital away from polluters.
The ECB is requesting more information than other central banks and has increased pressure on the industry to fulfill the deadline.
 
Banks with carbon-intensive balance sheets may face increased capital requirements. This could in turn reducing their ability to pay dividends.
 
The ECB is also asking banks for data on emissions connected with their revenue. This is an approach that the Bank of England omitted for its climate tests this year due to a lack of relevant data.
 
EU banks will have to estimate the carbon footprints of their interest and fee income. The banks will also have to provide data on their biggest clients that they provide loans to.
 
This additional disclosure is another layer of complication to the procedure. But the extra data is expected to allow the ECB to see what would happen to portfolios if they are subject to the losses of carbon-intense companies.
 
Both the Bank of England and the ECB are encouraging lenders to use a 30-year horizon when analyzing their balance sheets and the risks associated with a transition away from polluting industries.
 
The Bank of England is requiring banks to also assess physical risks such as extreme weather or wildfires over a three-decade horizon.