China’s Net Zero Pathway Needs $17 Trillion in Investments

Jennifer L
-
0
China’s Net Zero Pathway Needs $17 Trillion in Investments

China needs US$17 trillion in investments to meet its net zero targets and transition to a low-carbon economy, according to a World Bank Group report.

The effects of climate change are threatening China’s densely populated and economically critical low-lying coastal cities. The country is experiencing coastal erosion, saltwater intrusion, storm surges, and coastal flooding.

Without abating those impacts, the World Bank report said that China may experience GDP losses of 0.5% – 2.3% as early as 2030.

The report entitled “Country Climate and Development Report” (CCDR) for China details the essential changes across sectors needed by the country to achieve its national commitments and reach net zero emissions by 2060.

It emphasizes the urgency of the matter for three reasons:

  • China’s massive greenhouse gas emissions
  • Heavy exposure of China’s population and economic infrastructure to climate risks
  • China’s crucial role in global efforts to fight climate change

Why China Has to Transition to a Low Carbon Economy

China is responsible for a third of the world’s GHG and 27% of global CO2.

Achieving its global climate goals will not be possible without China transitioning to a low carbon economy. This calls for a tremendous shift in the nation’s resources and technologies that boost energy efficiency and productivity.

But the country’s advanced technological capabilities may unlock new opportunities for development in China’s journey to net zero.

  • According to the report, China needs as much as US$17 trillion in investments in the power and transport sectors alone for green infrastructure and technology.

Ruth Horowitz, IFC’s Regional Vice President for Asia and the Pacific noted that:

“Given the immense price tag, public investments won’t be sufficient to meet these needs… so China needs policy and regulatory reforms to spur the private sector and fully tap the potential for investment and innovation.”

Private sector participation is indeed vital to China’s net zero goal. And the CCDR underlines the importance of both the public and private sectors working together to tackle it.

The World Bank also outlines several benefits that will enable the most populous nation to turn the climate debacle into an opportunity. These include:

  • Increasing returns on the production and development of low-carbon technologies (e.g. wind and electricity storage);
  • A high domestic savings rate and a leadership position in green finance; and
  • The ability to create high-skilled jobs in high-productivity industries.

Modeling conducted for the report shows that China’s transition would be challenging. It will need decoupling economic growth and emissions at a faster pace and at a lower income level than in advanced economies.

It will also entail major structural changes in China’s economy. Energy, industrial and transport systems, cities, and land use patterns have to undergo dramatic transformations.

However, long-run economic costs are still manageable.

To this end, the CCDR lays out comprehensive policy recommendations that will help China to transition successfully. The sectors covered include the energy, industry, building, agriculture, transport and other sectors.

Below is how China’s pathway to net zero or carbon neutrality looks like for those sectors as per the report’s simulation.

China pathway to net zero

What World Bank Recommends

1: Accelerate the power sector transition with market reforms and investments in renewables

Under this policy package are a set of climate actions. The most critical action is implementing the scale up of solar and wind power generation capacity to 1,700 GW by 2030.

This requires China to add up to 120 GW of solar and wind capacity every year by 2030. That’s 1.5x the annual average during 2016–20 and 20% more than the capacity in 2021.

This recommendation also calls for enhancing the integration of renewables by investing in energy storage.

2: Decarbonize key energy demand sectors — industry and transport

This involves advancing electrification beyond public transport to include private and commercial vehicles. It also calls for scaling up charging infrastructure through private investments.

Currently, electric vehicles in China take up less than 2% of the total fleet and are concentrated in the largest urban areas. So electrification of all types of vehicles are critical for decarbonizing the transport sector.

CCDR also recommends promoting technology development for alternative low-carbon fuels for harder-to-abate sectors. Potential alternatives are green hydrogen and ammonia though they’re not yet commercially viable.

To decarbonize the industry sector, China must place greater attention to circular economy opportunities. They would reduce emissions intensity and help overcome material supply bottlenecks.

3: Enhance climate resilience and low-carbon development in rural landscapes and urban areas

Cities in China play an important role in realizing net zero and development goals. Creating conditions for denser, well-connected, and people-oriented cities is good for the climate.

Also, urban nature-based solutions (NbS) can enhance climate resilience while making cities more livable. Examples of NbS are harnessing wind cooling to deal with urban heat traps and creating integrated green urban spaces to preserve biodiversity.

Estimates suggest the potential to remove at least 768 Mt of CO2e each year by 2030 through NbS in China.

4: Harness markets to drive cost-effective economy-wide abatement and innovation

This policy recommendation suggests expanding the role of carbon pricing.

  • Simulations show that a higher carbon price rising to US$50–75 per ton of carbon by 2030 can help reduce China’s emissions by about 15% – 20%.

To get there, China must strengthen its Emissions Trading System design with pre-announced annual emissions cap reductions. This will allow investors to factor future carbon price increases into their investment decisions today.

Expanding the current ETS in the power sector to other high-carbon sectors such as steel, iron, and cement, and gradually transitioning to absolute emissions caps are also important.

5: Manage transition risks to ensure a just transition

Managing risks involves enhancing labor market flexibility and social safety nets. This can also ensure a seamless labor market adjustment in China.

Some actions that can help lower the costs of adjustments are:

  • Reducing barriers to labor mobility,
  • Reforming the hukou (household registration) system, and
  • Ensuring the portability of social benefits
6: Foster global climate action

With China being the largest source of infrastructure financing in low-income economies, adopting climate-friendly investment practices would amplify global impact.

This entails encouraging Chinese lenders (ex. China Development Bank and China Exim) to adopt clean financing principles – “the Equator principles”. They must also phase out financing of coal and other carbon-intensive infrastructure.

Together, these measures form the critical steps that China should take in charting its pathway to net zero emissions by 2060.

But given the uncertainties involved, the policies and their impacts need monitoring and adaptation over time.

Climate Change History & COP 27: Here’s the Scoop

Jennifer L
-
0
Climate Change History & COP 27: Here’s the Scoop

This November, government officials, business people, and activists alike will come together in Egypt for the 27th United Nations Climate Change Conference, also known as COP27 – short for Conference of the Parties 27. When you search for climate change history, you won’t go by without hearing or knowing about this COP.

The “Parties” referred to in that name are the signatories of the United Nations Framework Convention of Climate Change, which was first established in 1992 at the Earth Summit in Rio de Janeiro.

With all United Nations member states counted amongst its number, UNFCCC membership includes nearly every nation on Earth, including observers like Palestine and the Vatican.

The only entities that aren’t parties to the UNFCCC are unrecognized states like Kosovo, and most notably, Taiwan.

30 years have passed since the UNFCCC was first established. In the time since, what’s been accomplished, and what hasn’t? What will be discussed at COP27, and where will the world go from there?

To answer all these questions and more, let’s step back in time for a summary of how we ended up where we are, outlining a brief history of climate change.

Early Warnings Were Largely Ignored

One of the earliest scientists to foresee the potential impact of humans on climate change was Swedish scientist and Nobel laureate Svante Arrhenius.

A noted chemist of the late 19th and early 20th century, Arrhenius was the first to realize and calculate the impact of atmospheric CO2 on global temperatures – what we now know as the greenhouse effect.

newspaper articles

Newspaper articles from the turn of the century. Source: The Selma Morning Times, 1902; Rodney and Otamatea Times, 1912

The picture to the above left was taken from an article in a newspaper from 1902 and highlights Arrhenius’s original conclusion based on his calculations. The picture to the above right comes from a later article in 1912, first published in an issue of Popular Mechanics.

As you can probably guess, nothing really resulted from these early warnings. The blame for that, however, wasn’t entirely due to willful ignorance or profit-driven motivations.

Simply put, +100 years ago, there was far less CO2 being emitted into the atmosphere than there is today:

GHG emissions since 1750

With the amount of greenhouse gases (GHGs) emissions on an annual basis worldwide at the turn of the 20th century, scientists calculated that it would be several hundred years before these emissions would start to affect the global climate significantly.

What they couldn’t predict, however, was just how quickly the pace of carbon emissions would accelerate.

A century later, CO2 emissions would already be over 13 times what they were when Arrhenius first made his calculations. And accordingly, the several hundred years’ worth of leeway mankind was thought to have would be dramatically reduced.

The Beginnings of Climate Awareness

It would take another half century for scientists to once again bring CO2 emissions to the table.

This time, they would be able to point to a steady rise in atmospheric CO2 levels. They’ll also bring other newfound knowledge, such as the fact that the ocean was less capable of absorbing CO2 than previously thought.

During a special event held on the 100-year anniversary of the American oil industry in 1959, scientist Edward Teller, father of the hydrogen bomb, had some prescient words to share with the several hundred oil tycoons, government representatives, and other scientists in attendance:

“At present the carbon dioxide in the atmosphere has risen by 2 percent over normal. By 1970, it will be perhaps 4 percent, by 1980, 8 percent, by 1990, 16 percent, if we keep on with our exponential rise in the use of purely conventional fuels.

By that time, there will be a serious additional impediment for the radiation leaving the earth. Our planet will get a little warmer. It is hard to say whether it will be two degrees Fahrenheit or only one or five.

But when the temperature does rise by a few degrees over the whole globe, there is a possibility that the icecaps will start melting and the level of the oceans will begin to rise. Well, I don’t know whether they will cover the Empire State Building or not, but anyone can calculate it by looking at the map and noting that the icecaps over Greenland and over Antarctica are perhaps five thousand feet thick.”

There was a little bit of fearmongering in Teller’s statement.

Today, we know that if all the icecaps were to melt, the resulting sea level rise would be around 60-70 meters – a far cry from being able to cover the Empire State Building, which sits at 443 meters.

However, just about all of Manhattan and Brooklyn would sit underwater:

statue of liberty under water

A remarkably accurate rendition of what New York would look like if all the icecaps melted. Source: A.I. Artificial Intelligence, 2001

  • Last year, the world lost 1.2 trillion tons of ice, and the pace at which it’s melting is only accelerating.

The COP26 in Glasgow last year marked the most important event in the history of tackling climate change. It forces organizations and individuals to take emissions reduction to heart.

But let’s leave all that aside for the moment and return to our history lesson on climate change.

Throughout the 60s, many more scientists would come forth with new calculations and warnings about the impacts of CO2 emissions on global temperatures.

In 1969, NATO would become the first entity to attempt to deal with climate change internationally. And while their efforts wouldn’t be very successful, it would mark the start of government regulation aimed at reducing emissions in countries such as Germany.

In the 70s, some anomalously colder weather in conjunction with worries that manmade particulate emissions (smog etc.) were causing a cooling effect resulted in confusion over whether humans were causing the world to heat or cool.

The general scientific consensus was that the evidence was inconclusive and more data was necessary.

But the mainstream media latched onto those few minority scientists who expected imminent global cooling following a series of particularly cold winters in Asia and North America.

This sensationalist reporting would damage the public perception of climate science as it became clear by the 80s that carbon emissions would rapidly outpace particulate emissions. Add to this that the minor global cooling trend of years prior had been reversed.

The First Big Environmental Win – The Montreal Protocol

As a scientific consensus over global warming began to form through the 80s, one of the largest and most coordinated first efforts taken to protect the environment was the regulation and banning of chlorofluorocarbons (CFCs). This is perhaps the first significant mark in the history of climate change.

Previously commonly used as refrigerants and propellants, CFCs were discovered to play a serious role in the depletion of the ozone layer.

The ozone layer is, as its name suggests, a layer of ozone particles surrounding the earth in the upper reaches of its atmosphere. It plays an important role in preventing harmful ultraviolet radiation – the same kind that causes sunburns and skin cancer – from reaching the earth’s surface.

While only tangentially related to climate change, the depletion of the ozone layer may pose considerable danger. It causes increased cancer risks and other harmful effects to plants and animals alike.

The largest visible indicator of ozone depletion was the ozone “hole”, an area of significantly depleted ozone detected above the South Pole. At its lowest point, ozone levels in the Antarctic were up to 70% lower than they were before 1980.

largest ozone hole in south pole
The largest hole detected over the South Pole as of 2006. Source: NASA
The Montreal Protocol was established in 1987 and entered into force in 1989. It has since managed to reverse that trend, a huge achievement recorded on the climate change history front. 

The Protocol has allowed the ozone layer above the South Pole to begin recovering by agreeing to phase out and later ban ozone-harming substances like CFCs and HCFCs.

NASA has since estimated that the ozone hole will be able to return to pre-1980 levels by around 2075. This makes the Montreal Protocol as the first major international success in the history of mitigating climate change.

It was also notable for just how quickly it was implemented. It only took 14 years from when the ozone hole was first discovered in 1973 to the agreement being passed in 1987.

Read Part 2 Here

Brookfield Invests Billions in Carbon Capture and Decarbonization

Jennifer L
-
0
Brookfield Invests Billions in Carbon Capture and Decarbonization

Brookfield Asset Management is betting its money into the carbon capture sector with plans to invest over $2 billion, while charging the energy transition with nuclear power.

Brookfield expects a lot of new investment opportunities to come from 3 main global trends that they dubbed the “Three D’s” – Digitalization, Decarbonization, and Deglobalization.

The asset manager’s investment in 3 project developers in 2022 alone reached a total of $1.3 billion, believing that many firms will commit to slashing their emissions.

Here are the key highlights of the Toronto-based infrastructure investor’s series of investments under its “decarbonization” trend.

Betting Big on Carbon Capture

This summer saw Brookfield and its $15 billion Global Transition Fund invest billions into carbon capture ventures.

Brookfield’s renewable power and transition group manages $67 billion and runs over 6,000 power plants.

Carbon Transformation by LanzaTech:

The investor recently committed $500 million to LanzaTech, a Chicago-based carbon capture and transformation company. Its plants convert CO2 from industrial emissions into products people use everyday such as perfume, clothes, and fuels.

Brookfield’s investment will be for scaling up LanzaTech’s carbon capture and transformation technology. If milestones are met, the investor said that it’s even ready to pour in another $500 million, making it a billion-dollar investment.

Entropy’s Carbon Capture System:

Earlier this year, the asset manager also invested $300 million in Entropy Inc. It’s a developer of systems that capture CO2 emissions and store it underground.

Alberta-based Entropy is a subsidiary of Canadian oil-and-gas producer Advantage Energy Ltd.

Entropy’s system uses a proprietary solvent to “scrub” the gas from emissions before release into the air. Heat separates the gas from the solvent so that CO2 can be stored underground.

California Resources Corporation and CCS:

After Entropy, Brookfield also pledged $500 million in a joint venture with California Resources Corporation (CRC). The investment will build carbon capture and storage projects in Elk Hills Field.

Brookfield’s initial commitment will de-risk CRC’s projects and promote the decarbonization of California.

  • The initial investments of Brookfield in carbon capture ventures can rise to more than $2 billion as planned projects materialize.

As per Natalie Adomait, a managing partner in Brookfield Renewable,

“We see an immense opportunity both from a financial perspective but also to buy us time in the carbon budget…[for] the cost of other decarbonization technologies to come down… Carbon-capture technology has become proven and well understood so that it can be deployed in a very material way today.”

Adomait further added that the declining costs of carbon capture projects make them economically viable to reduce emissions.

She cited direct air capture (DAC) as one example of carbon-reducing technologies still in development.

More Investments from Private Firms

Private investment firms are also betting on carbon capture infrastructure operators as well as startup companies.

For instance, TPG Inc. invested $300 million in Summit Carbon Solutions LLC. The fund will help build a project serving ethanol producers and other industrial firms in the Midwest.

Likewise, Partners Group Holding AG co-led a $603 million funding in Climeworks, a DAC company that filters CO2 from the air.

  • Meanwhile, research estimates that carbon tech startups received a total of $5.6 billion in investments in the first half of 2022.

Add to this the Inflation Reduction Act that raises carbon capture incentives to $85 per metric ton from $50. With this law, many carbon capture projects are now economically viable at $85.

Yet, few companies have outperformed Brookfield’s bet on the sector so far.

There are plenty of energy transition funds like Brookfield’s Global Transition Fund seeking to invest in well-defined infrastructure investments. But the industry is not there yet.

This calls for partner investors who understand the risks in developing projects. This is where the most recent venture of Brookfield with Cameco comes in.

Charging Energy Transition Through Nuclear Power

With Cameco’s expertise in the nuclear industry and Brookfield Renewable’s expertise in clean energy, their partnership brings nuclear power at the heart of the energy transition.

It also creates a powerful platform for strategic growth across the nuclear sector.

Mark Carney, Brookfield Vice Chair and Head of Transition Investing, said:

“Every credible net-zero pathway relies on significant growth in nuclear power. It is an essential, reliable zero-carbon technology that directly displaces fossil fuels and supports the growth of renewables by providing critical baseload to our grids.”

He also noted that the partnership of Brookfield and Cameco will help drive forward the growth of nuclear power needed for clean energy transition.

Cameco and Brookfield, together with its institutional partners, form a strategic collaboration to acquire Westinghouse, one of the world’s largest nuclear services firms.

Acquiring Westinghouse brings several benefits to the investors and consortium partners. These include the following market trends:

Critical transition technology. Nuclear power is the one of the only zero-emission, baseload sources of electricity currently available at scale.

  • An estimated 400 GW of additional nuclear capacity will be needed by 2050.

Accelerating growth plans. Nuclear power is experiencing a resurgence around the world. 20+ countries are pursuing new projects or plant extensions.

  • More than 60 GW of new-build reactors are expected between 2020-2040.

Energy security. Energy supply chains are under stress due to geopolitical uncertainties. As countries look to boost energy security, demand for a stable supply of nuclear power will grow.

So, besides record financial performance, 2022 has been an active year for Brookfield’s quest to help decarbonize the economy.

New World Bank Trust Fund for Projects that Cut Emissions

Jennifer L
-
0
New World Bank Trust Fund for Projects that Cut Emissions

The World Bank announced that it will launch a new trust fund intended to pool public funds to provide grants for carbon emissions reduction projects.

The grant will include projects that seek to decommission coal-fired power plants.

The World Bank New Trust Fund

David Malpas, the World Bank Group (WBG) President, stated in a post:

“To mobilize the huge funding needed to reduce greenhouse gas emissions, we are presenting this week a new multi-partner fund hosted by the WBG that seeks to catalyze transformative climate action by deploying Results-Based Climate Finance (RBCF) at scale…”

The new facility is dubbed the “Scaling Climate Action by Lowering Emissions” or SCALE. It will be the new umbrella trust fund for the WB’s results-based climate finance projects.

SCALE will bring together funding from the global community, making it available for scalable projects to cut down carbon emissions.

The bank also said that the fund would deliver several results, including:

  • Bring new resources to emissions reduction projects in low- and middle-income countries,
  • Help generate larger projects,
  • Generate high-quality carbon credit assets, and
  • Help countries enhance access to international carbon markets.

SCALE is integrated within the WBG’s climate change operations.

Governments can then use the grant for lower carbon development. They may also use it to cover part of the interest payments of emissions reduction projects.

More importantly, countries can leverage SCALE to generate carbon credits that count toward their Nationally Determined Contributions (NDCs) commitments.

They can also trade the verified credits in international carbon markets, both in compliance and voluntary carbon markets.

  • In a sense, the World Bank’s SCALE can help bridge the gap between the demand and supply of high-quality carbon credits, as well as unlock more financing from the private sector.

The trust fund builds on the WBG’s experience of employing RBCF to support developing countries with programs that generate high-integrity emissions reduction credits.

What is Results-Based Climate Finance (RBCF)?

About 95% of international public climate finance is provided upfront before a project becomes operational. On the contrary, RBCF is paid after results are achieved or upon meeting interim milestones.

In other words, RBCF provides grant payments for achieving pre-agreed climate-related results. Verified emissions reductions are an example.

  • Results in RBCF refer to any milestone that indicates progress toward reducing emissions.

According to World Bank:

“Results-based climate payments could accelerate the phase-out of coal-fired power plants by monetizing, in the carbon markets, the Emission Reductions Credits generated by the transition away from coal.”

Also, the bank identified three key areas where RBCF grants are most suitable. They are:

  1. Natural climate solutions based on agriculture, forestry, land use and oceans
  2. Sustainable infrastructure in energy, water, transport, and urban
  3. Fiscal and financial solutions that directly or indirectly mobilize resources for climate actions, such as carbon taxes.

The U.S. Treasury Secretary Janet Yellen urged the World Bank and other multilateral development banks to change their business models.

They have to go beyond the national boundaries of project finance and attract lending to tackle climate change and other pressing global concerns.

The planet’s biggest lender had provided more than $30 billion in RBCF as of June 2022. But it didn’t disclose the estimated size for SCALE.

The organization said that they’re in the process of capitalizing the new trust fund, aiming to launch it at the approaching COP27 in Egypt next month.

Once implemented, SCALE will be a “one-stop shop” for all World Bank-administered RBCF.

Ultimately, it will not just be a source of climate finance but also a tool for policy dialogue and broader engagement to promote low-carbon development.

London Stock Exchange Finally Reveals its VCM Platform

Jennifer L
-
0
London Stock Exchange Finally Reveals its VCM Platform

The London Stock Exchange has finally launched its voluntary carbon market (VCM) rules for entities that seek to raise funds through its listings for climate solutions.

LSE’s announcement came after almost a year since it first revealed that it would create a new market solution to hasten the availability of financing for projects that support the transition to net zero emissions.

The aim it to bring more capital into emissions reduction projects. It will also help scale up the global VCM with the new rules for voluntary carbon credits, also called offsets.

The London Stock Exchange‘s VCM

According to LSE, it’s the first public stock exchange to create this kind of capital raising solution that supports the VCM’s expansion.

The Exchange’s CEO Julia Hoggett said the solution:

“… paves the way for capital at scale to be channeled into a range of climate change mitigation projects… while providing corporates and other investors with net zero commitments with the ability to access a diverse supply of high-quality carbon credits.”

The solution that the LSE VCM offers will enable an entity to use an initial public offering (IPO) to raise capital. The fund will then be put into climate mitigation projects, either nature-based or technology-led.

Moreover, it will also help corporations that want to offset unavoidable emissions as part of their net zero journeys. It will also expose investors to a growing asset class of carbon credits.

There is a growing demand for carbon credits as more businesses vow to reach net zero by 2050. To meet this demand, supply must scale effectively.

And thus, the London Stock Exchange VCM designation was created to support the scaling of the VCMs globally.

What is the LSE VCM designation?

The designation may be applied to qualifying Funds or Operating Companies that are admitted to the Main Market or AIM. They must also invest in climate change mitigation projects that yield carbon credits.

The applicants may invest in those projects entirely or as part of a broader portfolio of climate-aligned assets.

Apart from the existing regulatory requirements, applicants also have to disclose detailed information for the carbon credit projects. This includes the following details:

  • the qualifying bodies whose standards will apply to the projects,
  • project types,
  • expected carbon credit yield, and
  • whether the projects are to meet any of the UN Sustainable Development Goals.

Finally, the VCM designation does not represent a trading venue for carbon credits.

Rather, it’s for the applicant to decide whether to trade carbon credits on a trading platform.

How Does the LSE’s VCM work?

The London Stock Exchange VCM follows the general process of the existing VCMs.

The market platform is available for entities that meet the criteria set out in Schedule 8 of the Admission and Disclosure Standards.

Here are the specific steps that interested entities will go through when dealing with the LSE VCM.

LSE VCM guide infographic

LSE intends to facilitate a deep, liquid venue for the listing of carbon funds. These funds will provide the VCM with a clear price signal and confidence that money can move in and out of investments as needs change.

Upon successful implementation, the platform will enable the development of funds focused on specific project types supported by a new flow of investment from corporates.

This design allows asset managers and owners to have a clearer picture of how effective climate action is within their portfolio companies.

The publication of the final rules comes about a year after LSE announced its intention to form a carbon markets solution at COP26 last year.

So far, it’s the latest among the efforts from around the globe as investors and regulators aim to have robust standards for the fast-growing carbon markets.

Better yet, it’s a response to grave concerns that some projects fail to deliver their promised emissions reductions. By promoting transparency through its admission and disclosure rules, the LSE VCM seeks to fix this issue.

This will build the confidence and liquidity needed for institutional investors to join in scaling up the market.

Is Green Hydrogen Energy of the Future?

Jennifer L
-
0
Is Green Hydrogen Energy of the Future?

The global energy market has become even more unstable and uncertain. Add to this the challenges caused by climate change. To meet future demand, sustainable and affordable energy supplies are a must, raising a question “is green hydrogen energy of the future?”

Recently, hydrogen is leading the debate on clean energy transitions. It has been present at industrial scale worldwide, offering a lot of uses but more so in powering things around us.

In the U.S., hydrogen is used by industry for refining petroleum, treating metals, making fertilizers, as well as processing foods.

Petroleum refineries use it to lower the sulfur content of fuels. NASA has also been using liquid hydrogen since the 1950s as a rocket fuel to explore outer space.

This warrants the question: is green hydrogen the energy of the future?

This article will answer the question by discussing hydrogen and its uses, ways of producing it, its different types, and how to make green hydrogen affordable.

Using Hydrogen to Power Things

Hydrogen (H2) is used in a variety of ways to power things up.

Hydrogen fuel cells produce electricity. It reacts with oxygen across an electrochemical cell similar to how a battery works to generate electricity.

But this also produces small amounts of heat and water.

Hydrogen fuel cells are available for various applications.

The small ones can power laptops and cell phones while the large ones can supply power to electric grids, provide emergency power in buildings, and supply electricity to off-grid places.

Burning hydrogen as a power plant fuel is also gaining traction in the U.S. Some plants decided to run on a natural gas-hydrogen fuel mixture in combustion gas turbines.

Examples are the Long Ridge Energy Generation Project in Ohio and the Intermountain Power Agency in Utah.

Finally, there’s also a growing interest in hydrogen use to run vessels. The Energy Policy Act of 1992 considers it an alternative transportation fuel because of its ability to power fuel cells in zero-emission vessels.

A fuel cell can be 2 – 3 times more efficient than an internal combustion engine running on gasoline. Plus, hydrogen can also fuel internal combustion engines.

  • Hydrogen can power cars, supply electricity, and heat homes.

Once produced, H2 generates power in a fuel cell and this emits only water and warm air. Thus, it holds promise for growth in the energy sector.

  • The IEA calculates that hydrogen demand has tripled since the 1970s and projects its continued growth. The volume grew to ~70 million tonnes in 2018 – an increase of 300%.

Such growing demand is due to the need for ammonia and refining activities.

Producing hydrogen is possible using different processes and we’re going to explain the three popular ones.

3 Ways to Produce Hydrogen

The Fischer-Tropsch Process:

The commonly used method in producing hydrogen today is the Fischer-Tropsch (FT) process. Most hydrogen produced in the U.S. (95%) is made this way.

This process converts a mixture of gasses (syngas) into liquid hydrocarbons using a catalyst at the temperature range of 150°C – 300°C.

Fischer-Tropsch Process

In a typical FT application, coal, natural gas, or biomass produces carbon monoxide and hydrogen – the feedstock for FT. This process step is known as “gasification”.

Under the step called the “water-gas shift reaction”, carbon monoxide reacts with steam through a catalyst. This, in turn, produces CO2 and more H2.

In the last process known as “pressure-swing adsorption”, impurities like CO2 are removed from the gas stream. This then leaves only pure hydrogen.

The FT process is endothermic, which means heat is essential to enable the necessary reaction.

The Haber-Bosch Process:

The Haber-Bosch process is also called the Haber ammonia process. It combines nitrogen (N) from the air with hydrogen from natural gas to make ammonia.

The process works under extremely high pressures and moderately high temperatures to force a chemical reaction.

It also uses a catalyst mostly made of iron with a temperature of over 400°C and a pressure of around 200 atmospheres to fix N and H2 together.

The elements then move out of the catalyst and into industrial reactors where they’re eventually converted into ammonia.

But hydrogen can be obtained onsite through methane steam reforming in combination with the water-gas shift reaction. This step is the same as the FT process, but the input is not carbon but nitrogen.

Both the FT and Haber-Bosch are catalytic processes. It means they require high-temperature and high-pressure reactors to produce H2.

While these two methods are proven technologies, they still emit planet-warming CO2. And that’s because most of the current hydrogen production (115 million tonnes) burns fossil fuels as seen in the chart below.

hydrogen application and source

76% of the hydrogen comes from natural gas and 23% stems from coal. Only ~2% of global hydrogen production is from renewable sources.

This present production emits about 830 million tonnes of CO2 each year.

Thus, the need to shift to a sustainable input and production method is evident. This brings us to a modern, advanced way to produce low-carbon hydrogen or green hydrogen.

The Water Electrolysis Method:

With water as an input, hydrogen features both high efficiency in energy conversion and zero pollution as it emits only water as a byproduct.

That’s possible through the water electrolysis method. It’s a promising pathway to achieve efficiently and zero emission H2 production.

Unlike the FT and Haber-Bosch processes, water electrolysis doesn’t involve CO2.

Instead, it involves the decomposition of water (H2O) into its basic components – hydrogen (H2) and oxygen (O2) via passing electric current. Hence, it’s also referred to as the water-splitting electrolysis method.

Water is the ideal source as it only produces oxygen as a byproduct.

water electrolysis method for green hydrogen as energy of future

As shown in the figure above, solar energy is used for decomposing water. Then electrolysis converts the stored electrical energy into chemical energy through the catalyst.

The newly created chemical energy can then be used as fuel or transformed back into electricity when needed.

The hydrogen produced via water electrolysis using a renewable source is called green hydrogen, which is touted as the energy for the future.

But there are two other types of hydrogen, distinguished in color labels – blue and grey.

3 Types of Hydrogen: Grey, Blue, and Green

Though the produced H2 have the same molecules, the source of producing it varies.

And so, the different ‘labels’ of hydrogen represented by the three colors reflect the various ways of producing H2.

Processes that use fossil fuels, and thus emit CO2, without utilizing CCS (Carbon Capture & Storage) technology produce grey hydrogen. This type of H2 is the most common available today.

Both FT and Haber-Bosch processes produce grey hydrogen from natural gas like methane without using CCS. Steam methane reforming process is an example.

  • Under the grey hydrogen label are two other colors – brown (using brown coal or lignite) and black (using black coal).

On the other hand, blue hydrogen uses the same process as grey. However, the carbon emitted is captured and stored, making it an eco-friendly option.

But producing blue H2 comes with technical challenges and more costs to deploy CCS. There’s a need for a pipeline to transport the captured CO2 and store it underground.

What makes green hydrogen the most desirable choice for the future is that it’s processed using a low carbon or renewable energy source. Examples are solar, wind, hydropower, and nuclear.

The water electrolysis method is a perfect example of a process that creates green H2.

In a gist, here’s how the three types of hydrogen differ in terms of input (feedstock) and byproduct, as well as their projected costs per kg of production.

different types of hydrogen

Since the process and the byproduct of producing green hydrogen don’t emit CO2, it’s seen as the energy of the future for the world to hit net zero emissions.

That means doing away with fossil fuels or avoiding carbon-intensive processes. And green H2 promises both scenarios.

But the biggest challenge with this green hydrogen is the cost of scaling it up to make it affordable to produce.

Pathways toward Green Hydrogen as the Energy of Future

As projected in the chart above, shifting from grey to green H2 will not likely happen at scale before the 2030s.

The following chart also shows current projections of green hydrogen displacing the blue one.

blue versus green hydrogen as energy of the future

The projections show an exponential growth for H2. What we can think out of this is that green hydrogen will take a central role in the future global energy mix.

  • While it’s technically feasible, cost-competitiveness of green H2 becomes a precondition for its scale up.

Cheap coal and natural gas are readily available. In fact, producing grey hydrogen can go as low as only US$1/kg for regions with low gas or coal prices such as North America, Russia, and the Middle East.

Estimates claim that’s likely the case until at least 2030. Beyond this period, stricter carbon pricing is necessary to promote the development of green H2.

According to a study, blue hydrogen can’t be cost competitive with natural gas without a carbon price. That is due to the efficiency loss in converting natural gas to hydrogen.

In the meantime, the cost of green hydrogen from water electrolysis is more expensive than both grey and blue.

  • Estimates show it to be in the range of US$2.5 – US$6/kg of H2.

That’s in the near-term but taking a long-term perspective towards 2050, innovations and scale-up can help close the gap in the costs of hydrogen.

For instance, the 10x increase in the average unit size of new electrolyzers used in water electrolysis is a sign of progress in scaling up this method.

Estimates show that the cost of green H2 made through water electrolysis will fall below the cost of blue H2 by 2050.

green H2 cost with water electrolysis

More importantly, while capital expenditure (CAPEX) will decline, operation expenditure (OPEX) such as fuel is the biggest chunk of producing green hydrogen.

  • Fuel accounts for about 45% – 75% of the production costs.

And the availability of renewable energy sources affects fuel cost, which is the limiting factor right now.

But the decreasing costs for solar and wind generation may result in low-cost supply for green H2. Technology improvements also boost efficiency of electrolyzers.

Plus, as investments in these renewables continue to grow, so does the chance for a lower fuel cost for making green H2.

  • All these increase the commercial viability of green hydrogen production.

While these pathways are crucial for making green hydrogen, the grey and blue hydrogen productions do still have an important role to play.

They can help develop a global supply chain that enables the sustainability and eventuality of green H2.

When it comes to the current flow of capital in the industry, there have been huge investments made into it.

Investments to Scale Up Green H2 Production

Fulfilling the forecast that green hydrogen will be the energy of the future requires not just billions but trillions of dollars by 2050 – about $15 trillion. It means $800 billion of investments per year.

That’s a lot of money! But that’s not impossible with the amount of capital available in the sector today.

Major oil companies have plans to make huge investments that would make green H2 a serious business.

For instance, India’s fastest-growing diversified business portfolio Adani and French oil major TotalEnergies partnered to invest more than $50 billion over the next 10 years to build a green H2 ecosystem.

An initial investment of $5 billion will develop 4 GW of wind and solar capacity. The energy from these sources will power electrolyzers.

Also, there’s another $36 billion investment in the Asian Renewable Energy Hub led by BP Plc. It’s a project that will build solar and wind farms in Western Australia.

The electricity produced will be used to split water molecules into H2 and O2, generating over a million tons of green H2 each year.

Other large oil firms will follow suit such as Shell. The oil giant decided to also invest in the sector. It’s building the Holland Hydrogen I that’s touted to be Europe’s biggest renewable hydrogen plant.

Green Hydrogen as the Energy of the Future

If the current projections of green hydrogen become a reality, it has the potential to be the key investment for the energy transition.

Macquarie Invests in Carbon Offset Consultancy EP Carbon

Jennifer L
-
0
Macquarie Invests in Carbon Offset Consultancy EP Carbon

Macquarie invested in carbon offset consultancy EP Carbon to advance its voluntary carbon offsets business and support the latter’s expansion.

Macquarie’s “Global Carbon” division provides integrated carbon offsetting solutions across the entire offset lifecycle from generation to retirement. It also offers clients greater access to compliance and voluntary carbon credits.

The company also provides solutions that bring capital to carbon removal and reduction projects across the globe.

Macquarie’s investment in EP Carbon, a US-based carbon offset consultancy firm, seeks to drive climate solutions.

Supporting the Growth of Voluntary Carbon Credits

Macquarie’s investment comes as demand for carbon offset projects is seen to rise even more over the next several years. This is due to the growing corporate pledges to reach net zero emissions.

Companies consider carbon credits, also known as carbon offsets in the voluntary carbon market, as a bridge to reducing their absolute emissions.

Offsets also provide near-term solutions to emissions that are difficult to avoid.

And this is where EP Carbon comes in to deliver those solutions. The firm advises on the feasibility and design of nature-based carbon offset projects.

It also provides leading technical advice in the space including assistance with:

  • geospatial analysis,
  • project risk mitigation, and
  • capacity-building for project implementation.

EP Carbon focuses on forest conservation projects. These projects reduce carbon emissions from forests through sustainable conservation and restoration activities.

The company uses carbon markets to monetize the avoided emissions through healthy forests. Carbon credits fund their conservation efforts while providing a long-term source of revenue.

To date, EP Carbon has the following achievements:

EP carbon achievements

Examples of carbon offset projects that EP Carbon support include:

Speaking for the partnership with Macquarie, Managing Director of EP Carbon Sam Frankel remarked that:

“EP Carbon is a passionate team of foresters, environmental scientists and international development professionals… We’re excited to combine our tested expertise building the highest quality nature-based carbon projects with Macquarie’s comprehensive market insight and global reach…”

He also said that the investment will help them serve more projects, and deliver more climate impact while improving livelihoods.

EP Carbon will use the proceeds from Macquarie’s investment to develop its technology suite further, hire and train carbon technical experts, and fund its new “Toll” service plan.

Driving Climate Solutions

How much Macquarie invests in EP Carbon is not disclosed. But the infusion of capital will help increase access to climate finance.

According to Erik Petersson, the Head of Macquarie’s Global Carbon:

“As a trusted name in the industry, our investment will also deepen the technical decarbonization expertise Macquarie provides its clients as the global energy transition accelerates…”

Macquarie has a proven track record in low-carbon global transition, developing innovative solutions in carbon and emissions.

Its newly formed Global Carbon business will focus on the growing voluntary and emerging carbon markets. It offers a full suite of market-leading investment, supply, and risk management solutions in carbon markets.

In line with companies’ climate commitments, Macquarie invests in carbon reduction and removal projects to help grow the market and drive more climate action.

Its global platform will help EP Carbon deliver a range of services to carbon offset projects around the world.

Macquarie Global Carbon and EP Carbon will work closely together to establish a pipeline of high-quality carbon offsets.

The Algorithm that Keeps Track Circular Cities

Jennifer L
-
0
The Algorithm that Keeps Track Circular Cities

Holcim and Bloomberg Media Studios together created the Circular Cities Barometer – a proprietary algorithm that measures how quick global cities transition from a linear to a circular economy.

In the world’s race to net zero carbon emissions, circular cities play a significant role.

Cities release over 60% of the world’s greenhouse gas emissions, according to the United Nations. But they are also important actors in fighting climate change by adopting a circular economy.

Compared with a linear economy that works around taking, making, and wasting, a circular economy applies the approach of reducing, reusing, and recycling.

The Circular Cities Barometer

To track which cities are circular, the Circular Cities Barometer is using a dozen circularity indicators under four categories.

  • Buildings,
  • Systems,
  • Living, and
  • Leadership

Circular Buildings

As per the International Energy Agency, buildings produce about 40% of annual global CO2 emissions. This is why building cities needs a circular approach to construction.

Under this category are three indicators, namely:

  • Energy Efficiency: The intensity of energy use of a city’s buildings.
  • Urban Temperature: How much higher a city’s temperatures are in comparison to surrounding areas.
  • Building Certification: How many of a city’s buildings are certified as green.

Circular Systems

The U.S. recycling industry processes ~130 million tons of recyclables each year, according to the Bureau of International Recycling. Metrics that monitor the circularity of a city’s systems include:

  • Renewable Energy Consumption: How much of a city’s energy is sourced from renewables.
  • Solid Waste Recycling: How much of a city’s solid waste is diverted from landfills and incineration.
  • Water Recycling: How much of a city’s wastewater is safely treated.

Circular Living

Right now, there are around 4 billion people living in cities. And according to the UN estimates, plus 2.5 billion people will live in urban areas by 2050, making it 6.5 billion in all.

Measuring the circularity of urban living takes into account the following indicators:

  • Green Space: How much of a city has trees and greenery.
  • Transport: How much of a city is within walking distance of public transit.
  • Sharing Economy: How many bike-, e-bike- and scooter-sharing programs exist in a city.

Circular Leadership

Over a thousand cities around the world committed to achieve net zero emissions by 2050. The following metrics measure leadership in the urban areas:

  • The Paris Agreement: Whether a city committed to measures to limit warming to 1.5℃.
  • Policies and Roadmaps: How many commitments and achievements a city has made in the transition to a circular economy.
  • Investment: A city’s financial incentives to adopt renewable energy for transport and buildings.

The City of Seattle

Seattle is the U.S. 15th largest city that outscored other metro areas within the Circular Cities Barometer. It earned the number 1 spot among the 25 cities with a score of 100.

That’s partly due to the fact that the city has been dealing with circularity much longer since 1988. The city has a lofty goal to achieve a 60% recycling rate.

While Seattle failed to hit that target within the set deadline, it was still able to go beyond the 50% national recycling rate required by the federal government in 2021.

Moreover, Washington State’s clean energy legislation in 2019 placed Seattle on a path toward 100% carbon neutrality by 2030. The bill also called for utility firms to get rid of coal energy or fossil fuels by 2025.

More remarkably, the city itself plans to reach net zero by 2050 and drive climate action toward these three major areas:

  • Net zero emission buildings,
  • Zero emission transportation, and
  • Clean energy economic opportunities

Seattle has a robust and popular public transportation system that contributes to its circularity. Add to this the city’s plan to have more green spaces that attract walking and reduce temperatures.

In fact, the King County where Seattle is the seat unveiled its aim to plant 3 million new trees by 2025 and conserve over 6,000 acres of forest. Part of the plan is acquiring new green spaces like the Glendale Forest

At a glance, here’s how the top 1 circular city performs under the Barometer scoring criteria.

seattle circularity category scores

The top 25 cities were from 100 cities worldwide, representing all global regions.

The data for each indicator was normalized in a way that make the comparison “apples to apples.” They are the basis to score each city from 0 to 100 for each of the 12 indicators, each category, and overall circularity.

World’s 1st Enhanced Rock Weathering Methodology Opens for Public Consultation

Jennifer L
-
0
World’s 1st Enhanced Rock Weathering Methodology Opens for Public Consultation

Finnish registry Puro.Earth opens a public consultation for the world’s first Enhanced Rock Weathering (ERW) methodology to generate carbon credits.

ERW processes have been considered for around 30 years to remove carbon dioxide. But they’re not part of the existing carbon crediting programs today.

By including ERW to the list of CO2 removal standards, it can enhance safety and profile of the carbon removal technologies.

It is for these reasons that Puro.earth introduces the ERW carbon crediting methodology and solicits helpful ideas.

The carbon credits produced by ERW projects are called carbon dioxide removal certificates (CORCs). They’re tradable digital asset representing a ton of carbon removed from the air.

What is Enhanced Rock Weathering?

Natural rock weathering is a process that takes several millennia to complete. And so ERW comes in to fast track the slow process during which CO2 reacts with rocks.

enhanced rock weathering process

  • Enhanced Rock Weathering is a way of geochemically sequestering CO2 through natural rock chemical reactions. It aims to permanently remove CO2 from the atmosphere.

This carbon removal technique optimize weathering reactions via three ways:

  • Selecting the most reactive rock types,
  • Increasing the surface area of the rock, and
  • Applying rocks to optimal soils and climatic conditions.

In particular, silicate weathering starts with the reaction between water, CO2 and silicate rocks. CO2 is then removed from the air and converted to bicarbonates or carbonates.

Rocks used for ERW are from the Earth’s crust such as peridotite, basalt, feldspars, among many others.

Puro.earth enhanced rock weathering protocol doesn’t specify or exclude rock types. But it sets limits on acceptable levels of the rock’s toxicity.

ERW as a Carbon Removal Method

ERW is one of the two main types of “carbon mineralization” – a process that turns CO2 into a solid mineral.

The other type involves injecting CO2 deep down the underground where it will be stored for good.

ERW involves finely grinding down rocks to boost their surface area and spreading them over soil. This results in permanent storage of CO2 for over 10,000 years.

As a carbon removal method, ERW offers the following key benefits:

  1. Mineral resources – rock types and application surfaces – are abundant across the globe.
  2. Rock mining, grinding, and spreading are established technologies.
  3. ERW is among the most permanent forms of CO2 removal, with little risks of reversibility.
  4. ERW offers several positive co-benefits in agriculture. For example, enhance agronomic productivity, reduce fertilizer use, and water retention.
  5. Residual rocks from other processes such as mining are useful for ERW approaches to CO2 removal.

For example, a mining giant, BHP, considered enhancing CO2 capture of its nickel mine tailings. The company believes that doing so can offset its entire mining operations emissions.

But at that time, there’s no framework yet for carbon credits using ERW. Neither Verra nor any other 3rd party carbon standards has it in place.

Enter Puro.earth’s ERW framework…

The ERW process is applicable in terrestrial (soils), coastal and aquatic environments.

But the enhanced rock weathering methodology of Puro.earth considers only the terrestrial or land-based application. It doesn’t cover coastal and aquatic areas.

Under the registry’s Puro Standard, weathering in controlled conditions to produce carbonated material falls under its Carbonated Building Material methodology.

Puro.earth’s ERW methodology is a product of a working group of scientific and carbon market experts. They oversee the registry’s CO2 removal protocols.

The team also ensures high carbon credit integrity and science-based principles for the standard.

Moreover, the group has set safeguards and quantification approaches aligned with the latest science. This is to ensure little to no environmental impact, which is vital to promoting ERW to the public.

More importantly, the protocol sets strict thresholds for toxicity levels of the rock in accordance with the EU regulation for inorganic soil improvers shown in the table.

EU threshold for rock toxicity levels

It also requires ERW projects to perform laboratory tests of soil samples to create baselines. Here’s a diagram showing the general processes involved in an ERW project.

ERW project process

With all the safeguards in place, Puro.earth thinks that projects can be designed and implemented safely. The collected data will eventually help improve the framework.

The public consultation period will be open until October 17, 2022.

Levi’s Vows to Reach Net Zero Emissions by 2050

Jennifer L
-
0
Levi’s Vows to Reach Net Zero Emissions by 2050

Levi Strauss showed its commitment to achieve net zero emissions by 2050 under its new slate of sustainability goals detailed in its 2021 Sustainability report.

There are 16 sustainability goals that the giant apparel brand is focusing on under three major pillars – climate, consumption, and community.

They’re the major highlights of Levi’s recent sustainability report.

Commenting on the company’s goals, CEO and President Chip Bergh said that:

“These goals are crucial to the future of our business… By doubling down on sustainability and ESG reporting at Levi Strauss & Co., we are committed to being transparent about our progress on ESG matters and working to address the most pressing challenges of our time…”

A big part of Levi’s goals is to reduce its greenhouse gas emissions and achieve net zero by 2050.

Levi’s Net Zero Goal by 2050

In tackling climate change, the company pledges to face it head-on. Levi’s stated in its report that:

“Reducing our climate footprint across our value chain and galvanizing others for collective action are top priorities… This includes reducing energy use and emissions as well as innovating to reduce freshwater use in our own operations and our supply chain — while striving to protect and restore biodiversity…”

As of 2021, the apparel firm has the following footprint:

Levis emissions 2021

The company seeks to reach its net zero ambition by reducing absolute emissions in all its facilities through these levers:

  • energy reductions,
  • efficiency,
  • onsite renewable energy, and
  • energy attribute credits.

Its operated facilities include 1,083 retail stores in 37 countries and about 80 offices.

To cut down emissions, the company takes on these climate action strategies.

Levis climate action approach

Such climate action targets are absolute rather than compared to net revenues, size or other economic metrics.

Levi’s Climate Goals

Levi’s also detailed its other sustainability goals apart from net zero emissions under the climate pillar. These particularly include the following climate goals against their 2016 baseline:

  • 40% absolute reduction in supply chain (Scope 3) emissions by 2025
  • 90% absolute reduction in GHG emissions associated with all company-operated facilities by 2025
  • 100% renewable electricity in all company-operated facilities by 2025
  • Reduce freshwater use in manufacturing by 50% in areas of high water stress by 2025 against the 2018 baseline
  • Continue to assess and identify material impacts and dependencies on nature across the value chain to implement a comprehensive biodiversity action strategy by 2025

Levi’s plans to submit those goals to SBTi and get its approval in 2023.

2021 Climate Highlights

As of 2021, the San Francisco-based firm was able to achieve 85% renewable electricity use at its company-operated facilities. This is on track to its path towards 100% by 2025.

Electricity makes up 68% of the total Levi’s company-operated energy footprint. So reaching its goal of 100% renewable electricity will significantly reduce the firm’s total emissions.

Here are the other key progress that the firm has accomplished under its near-term climate goals.

levis 2021 climate highlights

In addition, as a crucial part of its energy efficiency measure, Levi’s managed to have the following achievements.

  • Used a solar power array to meet 20% of electrical demand at its Leadership in Energy and Environmental Design (LEED) Platinum-certified distribution center in Nevada. 
  • Development of a new distribution center in Germany with Platinum-level LEED design and Platinum-level WELL certification following the circular design principles. 
  • Incorporated LEED principles for energy, waste management, indoor air quality and water use.

The company was also able to make progress in reducing its absolute emissions through various means.

  • Shipped products using biofuels with net zero carbon emissions (Maersk ECO Delivery)
  • Worked with key suppliers in creating roadmaps detailing climate and water targets and identify solutions
  • Encouraged supplier participation in company programs that promote low carbon solutions

One theme that cuts across all Levi’s sustainability goals is the need for increased partnership across sectors to fight climate change.

In fact, the company is aligning with other brands to work with manufacturing partners and other organizations on climate solutions, be it directly cutting emissions or resorting to carbon offsets.

And so over the past months, Levi’s has been collaborating with partners like Fashion for Good, the Ellen MacArthur Foundation, and Organic Cotton Accelerator to help bring the apparel industry toward more sustainable, circular production.

1...172173174...219Page 173 of 219