World Bank affiliate, International Finance Corp (IFC), announced its support for a blockchain-enabled platform to trade carbon credits.
IFC wants to attract more support from institutional investors for climate-friendly projects in emerging markets.
The finance firm believes that blockchain can help boost the use of carbon offsets to a greater extent than traditional markets.
Blockchain-Backed Carbon Credits
A blockchain is a digital database with information that can be publicly shared within a large decentralized network. It has been recently in the spotlight as tokenized carbon credits are on the rise.
Organizations and companies use carbon credits to offset emissions when accounting for their carbon footprint. They are backed by projects that compensate for emissions. Common ones are tree planting and creating renewable energy sources.
A number of technology firms have emerged over the last year to make carbon offsets into digital tokens.
But this market is facing challenges in gaining traction with investors and firms. And that’s mainly due to issues about the origin and environmental benefits of some of the traded credits.
Environmentalists and green groups also criticize blockchain technology as being too energy intensive.
Even the largest carbon credits registry Verra recently announced it will not allow its retired carbon offsets to be tokenized. Verra later opened a public consultation on the tokenization of its credits.
IFC told Reuters that it will only source, tokenize and sell unused carbon credits from a known registry that pass its quality checks.
Last March, the International Emissions Trading Association (IETA) issued guidelines on blockchain use in carbon markets. It aims to establish a functional framework for trading carbon credits.
IFC’s Carbon Opportunities Fund
IFC also launched the Carbon Opportunities Fund to provide the carbon credits on blockchain.
It partners with the following companies in launching the fund:
sustainability finance company Aspiration,
blockchain technology firm Chia Network, and
biodiversity investor Cultivo.
The fund, seeded with $10 million, will buy carbon credits from projects chosen by Aspiration and Cultivo. Blockchain technology from Chia will tokenize those credits which will be tracked by the World Bank’s Climate Warehouse.
The fund has identified 250,000 to 300,000 tonnes of credits to be bought by the end of 2022. It’s looking also conducting due diligence on projects representing 1 million tonnes of credits that will be available in the coming months.
Steve Glickman, president of Aspiration’s international arm noted that:
“It’s going to set a standard and a benchmarking for the market that makes it more likely other institutional capital will come in behind it.”
He further said that only about 10% of carbon credit projects will meet the fund’s criteria.
Carbon credit markets are largely unregulated as governments don’t have standard rules yet on trading credits. But both companies and countries are using offsets as an option to reach net zero emissions targets by 2050. It’s a vital goal to help abate climate change effects.
As per Aspiration’s analysis, only ⅓ of the annual emissions can be reduced by using renewable energy sources and increasing efficiency. It means that a sizable portion of those emissions have to rely on carbon credits to offset.
As the global steel industry strives to achieve net zero, it had many challenges ahead as the industry is the largest emitting manufacturing sector.
Steel generates ~7% of all man-made emissions and 70% of steel production is fueled by coal. “Green Pig Iron” might be one of the ways to lead the industry down the decarbonization path.
But going net zero won’t be cheap. It is estimated that it can cost the steel industry anywhere from $215 to $278 billion. But using green solutions, like biomass, might lower the price in the long term.
Right now, steel costs $726 per metric ton but under green technology, it may go down to below $500.
The steel industry is currently very reliant on coal and green pig iron can offer a solution for the industry to decarbonize.
The Traditional Steelmaking Process
A critical input for construction and engineering, steel is a very important material with over 2 billion tons produced yearly. But this comes at a hefty price for the environment.
Traditional steel production currently emits about 7% of the world’s greenhouse gases into the atmosphere. And 70% of steel production is fueled by coal.
Steelmaking involves several production stages.
In a traditional blast furnace-based process, iron ore is crushed and turned into sinter or pellets. In a separate location, the coal is baked and converted into coke.
Then the ore and coke are mixed with limestone and fed into a large blast furnace with extremely hot air.
Under high temperatures, the burning coke and the mixture produces liquid iron otherwise known as “pig iron”. The molten material then goes into an oxygen furnace.
There, it’ll be blasted with pure oxygen through a water-cooled lance. This process forces off carbon to leave crude steel as a final product.
This traditional steel production method produces CO2 emissions in several ways:
carbon trapped in coke and limestone binds with oxygen in the air and creates CO2 as a byproduct;
fossil fuels are burned to heat the blast furnace; and
coal is also used to power sintering and pelletizing plants, as well as coke ovens, releasing CO2 in the process.
About 70% of the world’s steel is produced this way, generating nearly 2 tons of CO2 for each ton of steel produced.
The remaining 30% is made through electric arc furnaces (EAFs), which emit lower levels of CO2 than blast furnaces.
As steel production is expected to rise by a third by 2050, its environmental burden will also grow. This poses a significant challenge for tackling the climate crisis.
But most companies are not looking at replacing coal in producing pig iron. Some are experimenting with the use of hydrogen or electricity.
But there’s another way that seems to show promising results for greener steelmaking.
The Green Pig Iron Production
Green pig iron is iron ore that has been processed using low emission technologies and inputs. It’s produced without using coal but through the renewable input of biomass called biochar.
Biochar is solid material from waste materials that can store carbon for a very long time.
Using biochar for green pig iron involves fewer production stages. It eliminates the need for sintering and coking. This also makes the technology 10-15% less cost-intensive than traditional blast furnace systems.
Below is a sample process flow in producing green pig iron. It’s from a Nevada-based green pig iron company Magnum.
Iron ore concentrate is mixed with biochar and pelletized. The use of biochar significantly reduces the production footprint.
The pellets were then fed into the rotary kiln where the temperature is very high (1000 Celsius).
As the pellets moved along the kiln, the reduction process took place and DRI (Direct Reduced Iron) was produced.
The DRI was melted in an electric furnace to produce high-quality pig iron
High-grade iron ore is becoming more expensive and scarcer.
Producing green pig iron using biochar can help the iron and steel industry achieve its sectoral 2°C target and hit net zero by 2050.
All plants have the ability to sequester carbon and industrial hemp might be the carbon sequestration king, as it can suck up twice as much as a typical forest.
Industrial hemp also has a super fast-growing cycle versus forests which can take years to take root.
According to a Cambridge University researcher, a hectare of hemp can absorb between 8 – 15 tonnes of CO2. In comparison, forests capture 2 – 6 tonnes only depending on the type of trees, region, etc.
Hemp carbon credits could be on the horizon.
What is Hemp?
Industrial hemp grows extremely fast like a weed and was a cash crop for hundreds of years. Its versatility and hardiness make it useful for numerous biomaterials and resources.
Industrial hemp contains extremely low levels of the chemical compound (THC) which has psychoactive effects and the leaves contain a chemical called CBD (non-psychoactive) that’s touted to treat medical ailments.
The stalk can also be used to make bioplastics, paper, clothing, biofuels, and low-carbon construction materials.
How Hemp Can Reduce Carbon Emissions
The strong, stiff fibers that form the outside of the stem can be a source material to produce bioplastics. These even include automotive parts, wind-turbine blades, and cladding panels.
And the woody inner part of the stem is suitable for making ‘hempcrete’ building blocks. Using hempcrete instead of high-emitting concrete (1 lb of concrete = 1 lb of CO2) can further reduce overall CO2 emissions.
But a lesser-known carbon sequestration potential of hemp is biochar.
Biochar from hemp stalks
Biochar is created through pyrolysis, which heats organic material in the absence of oxygen. This limits the release of carbon back into the atmosphere as microbes find it very tough to break down and using it in the soil can store carbon for a very long time.
Hemp stalk biochar is also environmentally friendly as it is made from plant waste and also helps return carbon to the ground to help other plants grow.
This can be a great option for farmers looking to turn stalks and other plant wastes into sustainable commodities. It can create another revenue stream for them through carbon credits.
Biochar carbon credits sell at a premium and some have recently sold for over $500 per ton of CO2 sequestered.
Carbon markets allow large companies to buy credits from places where carbon is stored like farms to offset their emissions.
There is no standard for hemp carbon sequestration, but companies like US-based Hemp Blockchain are looking to “track and trace” hemp through every stage of production, from seed to the final product.
DeepMarkit announced the receipt of a purchase order (PO) from WILL Solutions for minting 150,000 tokens representing the same amount of GHG reduction.
WILL Solutions is a private Canadian company that has a strong track record in providing community-based climate solutions.
DeepMarkit is in the process of verifying the carbon offsets, which is a condition to completing the minting transaction under the PO’s terms. After verification, WILL Solutions will gain access to and use MintCarbon.io to complete the token minting process.
MintCarbon.io was launched to support and promote reliability and transparency in the rapidly growing voluntary carbon market. It will also assist projects in tokenizing offsets.
The minted carbon offsets are based on the Quebec Sustainable Community Project (QSCP). The project gathers over 850 GHG reduction micro-projects by several small and medium-sized firms from various sectors, non-profit organizations and small municipalities across Quebec.
QSCP is based on the VM0018 methodology certified by Verra. It provides a framework for monitoring, reporting, and verifying emission reductions for group projects.
The project impacts six of the United Nations’ Sustainable Development Goals. The opening of this new distribution channel can increase capital flows to push climate actions even further.
WILL Solutions and DeepMarkit share similar values in the space. They look forward to forming a fruitful relationship while expecting a more positive impact within the community itself.
Malaysia’s stock exchange, Bursa, will open a voluntary carbon market (VCM) exchange by the end of 2022. This will help boost transparency and allow entities to buy carbon credits to offset their emissions.
Bursa Malaysia is the frontline regulator of the Malaysian capital market. It has the duty to maintain a fair and orderly market in the securities and derivatives traded through its facilities.
The new Bursa VCM exchange will boost investments in high-quality offsetting projects such as planting trees or shifting to cleaner fuels.
Bursa Malaysia’s CEO Datuk Muhamad Umar Swift remarked that:
“Stakeholder engagement is key in facilitating greater understanding among industry players to enable their participation in the VCM Exchange… and to meet ESG requirements required by parties such as lending institutions.”
He also added that the VCM exchange can serve as a major lever in realizing Malaysia’s net zero emissions goal. At the same time, it will help support the private sector’s voluntary climate pledges and net zero journey.
The Role of Bursa Malaysia’s VCM
There has been a growing awareness of climate action around the world. In line with this, VCMs have been playing a vital role in financing projects that avoid, reduce, or remove emissions.
Participation in the market will enable entities to offset their carbon footprint and meet their net zero pledges.
Through Bursa Malaysia’s VCM exchange, both sellers and buyers of carbon credits can transact at transparent prices.
Currently, carbon credits are traded in a small yet fast growing market. Bursa Malaysia joins other global exchanges such as CME, ICE and EEX that launched VCM products in recent years.
Bursa plans to offer standardized carbon credit products for trading via a rules-based VCM exchange. That means there’ll be different product categories for the credits both from nature-based solutions and carbon removal technologies.
The exchange will group carbon credits with similar features, with vintages 2016 onwards. Also, it will label products to distinguish carbon credits produced domestically and globally.
Ensuring Carbon Credits Integrity
To ensure the integrity of carbon credits offered via the VCM exchange, Bursa will adopt the Verified Carbon Standard or Verra. It’s a widely known carbon standard in the VCM.
Verra is responsible for issuing about 70% of voluntary carbon credits worldwide.
Bursa stated that:
“Verra has developed transparent, credible and robust methodologies covering a wide array of climate-friendly activities… [these include] nature-based projects, methane avoidance or capture, sustainable agricultural land management, green mobility and others.”
The Malaysian exchange believes that by applying Verra standards, carbon credit projects will be through a robust assessment. This will ensure environmental claims are correctly measured and verified independently. And so greenwashing will not be an issue.
Bursa Malaysia also highlighted that it signed an MOU with Verra last May this year. Their partnership focuses on capacity building.
The Exchange has been engaging with various stakeholders towards the development of a carbon market. They seek to ensure robust participation from different stakeholder groups representing:
By year end, Bursa will sell carbon credits through auction to interested buyers. The auction will enable price discovery for the new carbon credit products listed on the VCM exchange.
The clearing price from the auction will create a baseline demand for carbon credits in the country. This will help provide a reference point for secondary trading for market players.
More importantly, it can offer clear price signals to support the development of domestic carbon credit projects.
Corporate buyers can then use the credits to offset their climate impact together with other carbon reduction efforts to cut their emissions over time.
Interested project developers and project proponents can submit their interest to supply carbon credits for the auction. Corporations can also take part in the auction and buy carbon credits for their offsetting needs.
The U.S. Department of Energy Bioenergy Technologies Office (BETO) has achieved a major milestone in reducing the price of “drop-in” biofuels made from biomass.
Drop-in biofuels are fuels from biomass and other waste carbon sources which can be quickly swapped in place of conventional fossil fuels.
BETO partnered with T2C-Energy, LLC (T2C) to validate the pilot production of drop-in biofuels at a price of under $3 per gallon. This kind of fuel also has 60% lower emissions than petroleum under T2C’s “TRIFTS” system.
BETO and T2C Process
The traditional price of drop-in biofuels has been as too expensive for consumers to afford. So, various efforts have been made to decrease their minimum fuel selling price (MFSP).
The BETO and the T2C partnership has converted anaerobic digester-produced biogas to liquid transportation fuels. The cost is significantly lower than the current diesel price at the pump of ~$5 per gallon (in the US).
The biofuel retail price doesn’t factor in the use of carbon credits from various schemes like the US Renewable Fuel Standard (RFS) and the California Low Carbon Fuels Standard.
According to one study, adjusting the costs of producing biofuels under the RFS RIN (renewable fuel credit) subsidy results in an additional retail price incentive of $0.29/gal.
The TRIFTS process also reduces its biofuel emissions by 130% in comparison to traditional petroleum diesel fuel.
BETO’s efforts to lower the price of drop-in biofuels is part of the Office of Energy Efficiency and Renewable Energy’s goal to decarbonize transportation across all modes.
Previous BETO-funded Small Business Innovation Research awards enabled T2C to bring their technology to pilot scale. It was pivotal in making the biogas production milestone possible.
The TRIFTS process has been tested at the pilot scale since 2018. It uses both CO2 and methane portions of biogas, using around 100% of biogas components as the raw material to produce fuel.
An independent firm verified the technical achievements of the process.
BETO and T2C have been working on projects that advance bioenergy technology to its current state.
Bioenergy Explained: Biofuels from Biomass
Bioenergy is a form of renewable energy that is derived from living organic materials known as biomass. It can be used to make transportation fuels, heat, electricity, and products.
Bioenergy is one way to help meet the world’s demand for energy. It can help in achieving a more sustainable economy by:
Supplying domestic clean energy sources,
Reducing dependence on foreign oil,
Creating new jobs, and
Revitalizing rural economies.
According to the US Department of Energy, the country has the potential to produce 1 billion dry tons of non-food biomass resources annually by 2040. This amount can produce:
50 billion gallons of biofuels
50 billion pounds of bio-based chemicals and bioproducts
85 billion kilowatt-hours of electricity to power 7 million households
1.1 million jobs to the U.S. economy
Bioenergy can also keep $260 billion in the United States saved from not exporting oils. Bioenergy technologies enable the reuse of carbon from biomass and waste streams.
Biomass is a renewable energy resource derived from plant- and algae-based materials that include:
Crop wastes
Forest residues
Purpose-grown grasses
Woody energy crops
Microalgae
Urban wood waste
Food waste
Since it’s a versatile renewable energy source, biomass is useful for plenty of purposes.
Biofuels, renewable transportation fuels that have similar chemical composition with petroleum fuels, are one of them. Using them reduces emissions of vehicles and airplanes.
Biomass can also be a biopower for heat and electricity. Its use can offset the need for carbon fuels in power plants. In a sense, biopower lowers the carbon intensity of generating electricity.
Finally, biomass can also serve as a renewable alternative to fossil fuels in manufacturing bioproducts such as plastics, lubricants, industrial chemicals, and more.
In fact, integrated biorefineries can produce bioproducts alongside biofuels. This co-production offers a more cost-effective and efficient alternative to the use of bioenergy resources.
The revenues earned from this approach can make producing biofuels more less costly, and thus, lowers their prices.
Australia’s climate policy advisory recently suggested the creation of a fully transparent national carbon market. This may open the doors to global carbon trade and hint at a merger of voluntary and compliance markets.
With a recent change in Australia’s federal government, there has been a shift in the country’s position on climate change mitigation.
The new Labor government vowed to cut carbon emissions by 43% below 2005 levels by 2030.
That new target is more ambitious than the opposition’s target of a 26% – 28% reduction over the same period.
This policy shift presents both risks and opportunities for entities doing business as the countries head toward being net zero by 2050.
Australian Voluntary Carbon Credit Scheme Under Scrutiny
One mechanism by which Australian businesses can reduce their emissions is via the Australian Carbon Credit Units (“ACCUs”) scheme. They can earn ACCUs by regenerating forests or buying them on the secondary market to offset their emissions.
The Carbon Credits Act 2011 established the Emissions Reduction Fund (ERF) which set up the ACCU market in 2011. This voluntary carbon market scheme seeks to incentivize entities to cut their footprint with ACCUs.
One ACCU represents one tonne of CO2 or its equivalent that’s avoided or reduced by a project.
Skeptics believe that the voluntary scheme is a scam and a fraud as it lacks additionality for most of the credits. It means projects that generate carbon credits could have been done anyway without carbon financing.
The Emissions Reduction Fund designer Andrew Macintosh conducted several studies claiming that there are grave issues concerning the integrity of the ACCU scheme.
For instance, he estimated the “vast majority” of 30 million credits hadn’t captured any extra carbon than without the credits.
And so, the federal government did an independent inquiry into the ACCUs integrity last July.
The scrutiny of the ACCUs scheme includes looking into:
The governance of the carbon crediting scheme
Whether the methods generating ACCUs meet the Offsets Integrity Standards
The broader impacts of activities incentivized under Australia’s carbon crediting framework
In 2016, a Safeguard Mechanism was established, which allowed regulated emitters either use cleaner technology or buy carbon credits to offset their emissions.
This allows the pollution caps to tighten over time and gives companies time to adjust their operations to cut their emissions. The mechanism also allows firms to offset emissions by buying from other polluters who have extra credits to sell.
Currently, 215 of Australia’s biggest emitters have a cap on pollution accounting for 28% of the entire country’s emissions (501 million tonnes).
Critics claim that setting emissions caps on companies is like a “sneaky carbon tax”. That’s because if emitters exceed their limit, they’re obliged to buy offsets equal to the exceeded emissions. Otherwise, they have to pay penalties.
The safeguard mechanism also set an ambitious goal to spend $20 billion upgrading the electricity grid to cut coal power emissions. This will further increase pollution-free renewable generation to 82% of the grid by 2030.
It is forecasted that companies under the mechanism are expected to spend $1.68 billion on new technologies and carbon offsets.
Climate Change Authority’s Review of International Offsets
The Australian Climate Change Authority believes the publication of a “National Carbon Market Strategy” for Australia that will help ramp up emissions reduction.
The Climate Change Authority also found that the carbon market is fragmented, inefficient, and complicated. As such, the policy body’s CEO Brad Archer remarked that:
“It makes sense – and it is in Australia’s national interest – to play a leading role in the development of a liquid, high integrity and effective global carbon market… Bringing voluntary and compliance carbon markets together could help accelerate global decarbonisation and enhance the integrity of carbon offsets…”
The Authority recommends the government to publish a National Carbon Market Strategy. This particularly includes to:
The Authority also puts forward recommendations for the Government to consider, relating to the following areas:
Summing it all up, Mr. Archer captured the vital point about the merge of both carbon markets in Australia saying that:
“With Australia adopting a more ambitious 2030 emissions reduction target on the way to net zero emissions by 2050, we can turn our minds to how governments and businesses can collaborate to achieve those goals as soon as possible and ensure Australia’s future prosperity.”
Carbon credits, also called carbon offsets, have a crucial role in reaching net zero emissions goals. And while each carbon credit is not created equal, they all start in the same place and go through a similar lifecycle process.
So, whether you’re directly reducing footprint or supporting projects that cut emissions somewhere else, offsets let you do both.
In this article, we’ll explain what happens during the entire carbon credit lifecycle, from point of creation to retirement. We’ll explore where carbon offsets come from and take a look at key players or parties involved.
Understanding the full carbon offset lifecycle will help you navigate the fast-changing carbon market.
Tracing the Lifecycle Stages of a Carbon Credit
A carbon credit is also referred to as a carbon offset in the voluntary carbon market. Individuals or firms can use the credits to voluntarily offset their carbon emissions.
Each credit represents a tonne of carbon reduced or prevented from entering the air.
As such, offsets act as a means that help tackle climate crises while allowing different entities to use them, regardless of location.
The life of a carbon offset goes through four general stages:
Development
Validation/verification
Registration & issuance
Retirement
Let’s trace the lifecycle of a carbon offset credit while identifying the parties involved in each stage.
1. The conception of a carbon offset: Project Developers
Carbon emission reductions happen all the time, but not every reduction qualifies as an offset.
Before a carbon reduction becomes a carbon offset, it has to meet a set of quality criteria based on methodologies specific to a certain kind of carbon project.
The term “methodologies” may sound complicated. But they refer to the detailed procedures that developers use to quantify a project’s emissions reduction potential.
They’re also known as protocols, the blueprint for how various project metrics are calculated.
Each carbon project is unique, be it renewable energy or agricultural project. And so developers have to take several variables into account when developing them. They begin the process by designing the project and formalizing it in a Project Design Document (PDD).
Using a specific methodology, they then outline the project activities in the PDD. Some of the approved methodologies and protocols include:
American Carbon Registry (ACR) methodologies
Climate Action Reserve (CAR) protocols
Clean Development Mechanism (CDM) methodologies
Verified Carbon Standard (VCS) methodologies
Next, project developers establish a baseline of emissions reduction which is for assessment by a 3rd-party body. This is the 2nd stage of the carbon credit lifecycle explained in the next section.
Once the reduction impact of a project has been assessed (via a certain methodology), the developer now holds the carbon rights to that project.
Of course, the work of a project developer, whether it’s an individual or an organization, doesn’t end there.
They have to register the project with an approved registry like the Verra. This body tracks offset projects and issues their corresponding credits. More on this in the 3rd stage of the lifecycle process.
Project developers also need to conduct regular monitoring and reporting of project activities on the ground.
Monitoring involves keeping track of the updates or progress of the project metrics. While reporting involves preparing the necessary documents about the project.
The second stage in the life of a carbon credit offset is undergoing a validation and verification process. Under this step are two responsible parties.
The Job of 3rd-Party Auditors
The first one is an independent, 3rd-party auditor also called the validation/verification body. This body comprises subject matter experts who can validate a project’s emission reduction claims, both projected and actual achievements.
Essentially, the VVB validates the following elements of a carbon offset project from the developer’s document:
Baseline scenarios
Monitoring process
Methodologies for calculating emission reductions
For example, professional foresters, agriculturalists, or community development experts often audit/validate forest carbon projects. The carbon program standard (e.g. Verra VCS) must accept these auditors to process the registration.
Auditors ensure the integrity and accuracy of the data and information published by the developer on the project. Some of the widely known carbon project auditors are QAS, EPIC Sustainability, First Environment, and SCS Global.
Upon successful completion of the validation, the auditor will issue a validation report and validation statement. These documents confirm that the project has been designed and implemented in accordance with the carbon certification standard.
The Verification Process.
Verification is key when it comes to ensuring that project data reported is true, transparent, and has integrity. In other words, it’s verifying that the project is actually doing what it says it’s doing.
Verifiers have to confirm that a proposed project meets a carbon program’s eligibility criteria. They can then verify by confirming that project monitoring data was collected in accordance with a program’s requirements.
They also verify that the calculations of the project’s emission reductions were done based on the approved methodology/protocol.
The verification process often involves a site visit while monitoring data to confirm that they’re accurate.
After the project has been validated and verified, it’s now ready for registration.
But wait, there’s another key party to consider to ensure the quality of the carbon credit – the carbon ratings agency.
The Role of 3rd-Party Rating Agencies
Carbon rating agencies rate or score the likelihood that the carbon offsets issued via the project have indeed reduced a certain amount of carbon or its equivalent.
Different rating agencies use various frameworks or criteria in providing their scores. Some rate using an alphabetic scale (e.g. BeZero) – AAA, AA, A. Others give their ratings by using the scale of A (highest rate) to D (lowest rate) like how Sylvera does.
Projects must meet specific criteria to be eligible for a rating by an agency. While the criteria may vary, in general, projects must satisfy at least 3 things: carbon score, additionality, and permanence.
Also, rating agencies also require that the project has been audited as part of their scoring framework. Plus, there should be enough information on the project design and monitoring process available to base the ratings on.
Now that it’s officially (and proudly) born, the carbon credit offset can now move on with its life.
3. Carbon offset in action
This stage in the carbon credit lifecycle involves the carbon registries.
Carbon Registries
Registering a carbon offset project in an approved registry is easy if the previous steps above are taken into consideration.
Projects are certified and issued carbon credits called in various names, depending on which registry they’re registered in. For instance, under the Verra VCS program, the credits are called Verified Carbon Units or VCUs.
Under the Gold Standard offset program, they call carbon credits Verified Emission Reduction or VER. While Climate Action Reserve refers to them as Climate Reserve Tonnes or CRT.
Regardless of their names, registries characterize carbon credit offsets through a number of quality assurance metrics. They’re confirmed via the validation/verification tasks explained in the prior step.
Each offset represents a reduction or removal of one tonne of CO2 equivalent achieved by the project.
The procedures to follow to get a project registered, certified, and issued with credit offsets depend on the specific registry chosen by the developer. The same goes for the rules or requirements provided.
Once the offset credits are issued to a project, they can now be in action. That means developers can look for their buyers in the carbon market.
4. Carbon offset retirement
Carbon offsets are bought by two parties – speculative investors and end buyers.
Heavy industrial emitters are the major buyers of carbon offsets as part of their compliance requirements. But plenty of large firms are also buying because of their climate commitments.
If you prefer to buy offsets directly from project developers, you can do so.
Yet, buyers can also get offsets from brokers, traders, and exchanges. They can then use those offsets to address their current emission reduction measures.
But there’s another way to make money out of trading carbon credits. It’s via speculative marketplace/exchanges and carbon ETFs.
Speculative investors buy offsets through futures contracts with the intention to sell them later at a higher price, hopefully.
Top carbon exchanges include the CME Group, Xpansiv CBL, Climate Impact X, ICE, AirCarbon and Carbon Trade Exchange.
No matter how or where the carbon offsets are bought, once they’re used and reported as emission reduction, they should be retired.
Retirement of offsets also means their death. They should not be around anymore and are not for resale. They must serve their emission reduction purpose only once to avoid double counting.
That also means removing them from the marketplace and labeling them as retired in any records.
A retired carbon credit offset can now say goodbye to its not-so-popular yet critical world of reducing emissions.
If you’re interested to know more about carbon offsets, read our primer here. Or if you want to learn how to make money with them, go over this comprehensive guide.
The world’s largest carbon credit producer, EKI Energy, shares are down over 17% following India’s decision to ban the export of carbon credits.
India recently banned the sale of carbon credits to foreign entities until the nation meets its climate goals.
The Power and Energy Minister Raj Kumar Singh said that:
“Carbon credits are not going to be exported. No question… These credits will have to be generated by domestic companies, bought by domestic companies.”
But the minister didn’t give out details of timelines for when the ban takes effect. He also didn’t disclose when the nation’s domestic carbon market will start.
India’s New Climate Goals
The Indian government is seeking changes to its new energy conservation law to push through energy transition goals to help fight climate change. The legislation mandates the use of non-fossil sources such as green hydrogen, green ammonia, biomass, and ethanol.
At the same time, the country is also aiming to increase the share of clean energy in its electricity mix to 50% by 2030.
Meanwhile, India’s key climate goal is to cut emissions intensity by 45% from 2005 levels by the end of the decade. The nation seeks to cut 1 billion tonnes of emissions by the same period as a first step to reach such goal.
Following Minister Singh’s statement on curbing the export of carbon credits, the shares of EKI Energy Services declined by over 17%.
Indian-based EKI Energy is one of the world’s largest carbon credits developers and suppliers. It is India’s largest carbon asset management company that works in the space of climate change, carbon credit, and sustainability solutions across the globe.
The company provides strategic solutions to help firms achieve their climate ambition. It has traded 100+ million offsets to date. It has also handled over 200 voluntary carbon projects.
The major carbon credit projects EKI supports include the use of renewables (e.g. solar, wind, and hydro). It also supported plenty of energy efficiency projects.
Last April, EKI announced a target to produce 1 billion carbon credits by 2027. This is along its goal to be net-zero by 2030 under a new brand identity called “Steering the Planet to Net-Zero”.
A key component of the firm’s net zero goal is speeding-up its community-based projects. Examples are biogas, tree plantation, and its own manufactured Improved CookStoves (ICS).
Community upliftment is the firm’s core business. But it also focuses on providing nature-based solutions for companies to help reduce their emissions.
EKI’s climate commitment will help India fast track its stride toward net zero.
But speculations abound about the government’s recent carbon credit export ban. Many claim it affected EKI’s shares performance as seen in the chart below.
Shares of EKI Energy slumped as much as 17.3%. The stock is set to further decline for the second day as per Bloomberg.
But according to EKI’s CEO, Manish Dabkara, the company:
“does not foresee the proposed amendments [changes in the bill] to have any impact on the export of credits in the voluntary carbon market… It will help the country to develop a robust carbon market and fast-track its journey to become net-zero”.
Dabkara said that such changes include zero restrictions on the sale of carbon credits developed in India to international global markets.
EKI’s decline in shares of over 17% is the most in three months since May 17.
New opportunities in carbon markets are giving US small landowners alternatives to logging while mitigating climate change.
According to the nonprofit American Forest Foundation, the largest portion of forest land in the United States (39%) is family-owned (properties between 30 – 2,000 acres). The rest are under the government, timber companies, and other entities’ ownership.
In this case, connecting small-scale landowners with carbon markets matters a lot.
In Pennsylvania, logging has been the common option to earn for smallholders to pay for their annual land taxes.
A landowner noted that many see timber as ‘free money up in the woods’. He further said that:
“It’s sort of the culture here. When we bought the property [55 acres behind their rural home in Pennsylvania], everyone was like, ‘Are you going to log it?”
But for him and his wife, they found a different solution – carbon credits.
Paying US Small Landowners for Capturing and Storing Carbon
Forest trees are nature’s technology for removing carbon. They represent the most viable, scalable, and cost-effective way to help address climate change.
That’s why American Forest Foundation developed the Family Forest Carbon Program. It brings together small landowners, companies, and policymakers to improve forest health.
The program seeks to help family forest landowners with as little as 30 acres access the fast-growing carbon markets.
The couple signed a 20-year contract with the program to pay for their work in growing and protecting trees to suck in and store carbon. They’ll receive income through carbon credits sold to companies wanting to reduce their emissions.
These credits are otherwise called carbon offsets – emissions reductions done elsewhere to cover for an entity’s hard-to-abate footprint. Carbon offsets have been a major measure among companies’ net zero emissions targets.
Corporations can gain more value in seeking natural climate solutions like protecting forests, including:
High integrity verified carbon credits generated by American small-scale landowners
An avenue to provide economic support for rural American families and communities
A critical role in improving forest health and wildlife habitat
US small landowners, in turn, will get cash for their efforts in tending forest trees. They can then use the income to cover their tax payments and stay away from logging.
A big concern, however, arises from this logging alternative. It’s the high costs involved (up to $200,000) for project development, its monitoring, and so on.
This is where the model of agricultural coops kicks in to bridge the gap.
US small landowners don’t have the ability to market directly to carbon credit buyers. But they can come together and form an aggregate to access carbon markets.
The approved bill will provide $450 million to help private landowners toward forest management practices with climate benefits. It contains specific provisions on promoting carbon programs like the Family Forest Carbon Program.
Once signed into law, the bill will unlock the power of small forest landowners to fight climate change.
This kind of program will help tip the scales on the value of forests, making standing trees more valuable than harvested timber. Then, in turn, it will guide private landowners to come up with sustainable forest management practices.
As per Sarah Hall-Bagdonas, senior forestry manager for the Family Forest Carbon Program:
“The majority of landowners don’t actually say their number-one interest is in timber but the majority do end up timbering their land… So the voluntary carbon market [VCM] really provides them with another option besides the timber market.”
The VCM value more than doubled to almost $2 billion from 2020 to 2021 as reported by the Ecosystem Marketplace. This growth can be a good opportunity for both timber management and carbon markets to flourish.
Yet, another issue emerges – carbon price.
Logging firm owners believe that the financial incentive to reduce timber harvest and store carbon instead is not enough.
A timber company director said that the carbon price has to be a lot more than its present value. It should be around $30 – $60 per ton of carbon, or 2x – 3x today’s price.
Still, many other US small landowners are also joining the new opportunities that carbon markets offer.
Some of them are not only protecting forest health but also safeguarding biodiversity and rare species. Many are also managing wildfire to protect centuries-old trees that sequester carbon.
With more and more efforts like the American Forest Foundation reaching out to family forest owners, their participation in carbon markets will grow.
Other couples begin the same journey by comparing timber and carbon prices. But some remarked that carbon credits feel like a real opportunity.
Another small landowner couple in western Pennsylvania said that:
“This is the business of conservation that is being sustained, supported by a different type of economy… other than conventional forest products. This is something that’s absolutely new.”
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